<PAGE> 1
PROSPECTUS SUPPLEMENT
FILED FEBRUARY 9, 1998
PURSUANT TO RULE 424(b)(2)
(FILE NO. 333-1290)
CELLCALL, INC.
1720 Fortune Court, Suite 106
Lexington, Kentucky 40509
February 9, 1998
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders
(the "Meeting") of CellCall, Inc. ("CellCall") to be held at the offices of Hill
& Barlow, a Professional Corporation, 20th Floor, One International Place,
Boston, Massachusetts 02110 at 10:00 a.m., local time, on March 17, 1998.
At the Meeting, you will be asked to consider and vote upon a proposal
to approve an Agreement of Merger and Plan of Reorganization dated April 22,
1997 (the "Merger Agreement") among CellCall, Nextel Communications, Inc., a
Delaware corporation ("Nextel"), Nextel Finance Company, a Delaware corporation
and wholly-owned subsidiary of Nextel ("NFC"), and Bluegrass Acquisition Corp.,
a Delaware corporation and wholly-owned subsidiary of NFC ("Merger Sub"),
pursuant to which, among other things, (a) Merger Sub will merge with and into
CellCall (the "Merger") and (b) outstanding shares of capital stock of CellCall
(the "CellCall Stock") and rights to acquire shares of CellCall Stock will be
converted into rights to receive shares of Class A Common Stock of Nextel.
Details of the foregoing matter are set forth in the accompanying
Prospectus Supplement which you are urged to review carefully. A copy of the
Merger Agreement is attached to the Prospectus Supplement as Appendix A.
Your Board of Directors has carefully considered and approved the
Merger proposal by unanimous vote and has determined that the Merger is fair to,
and in the best interests of, CellCall and its stockholders. Accordingly, the
Board of Directors unanimously recommends that stockholders vote FOR approval of
the Merger Agreement.
It is important that you vote your shares whether or not you plan to
attend the Meeting. To be sure your vote is counted, we urge you to carefully
review the Prospectus Supplement and to vote your shares as you choose. PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE AS
SOON AS POSSIBLE. You may revoke and change your proxy vote at any time prior to
the Meeting, and any such signed, dated and submitted proxy will supersede any
earlier proxy submitted by you. If you attend the Meeting and wish to vote in
person, the ballot that you submit at the Meeting will supersede your proxy.
Thank you for your cooperation.
Very truly yours,
J. P. Harris
Chairman, President and Chief Executive Officer
<PAGE> 2
CELLCALL, INC.
1720 Fortune Court, Suite 106
Lexington, Kentucky 40509
-----------------
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
-----------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Meeting") of CellCall, Inc., a Delaware corporation ("CellCall"), will be held
on March 17, 1998 at 10:00 a.m., local time, at the offices of Hill & Barlow, a
Professional Corporation, 20th Floor, One International Place, Boston,
Massachusetts 02110 for the following purpose:
To consider and vote upon a proposal to approve an Agreement
of Merger and Plan of Reorganization dated April 22, 1997 (the
"Merger Agreement") among CellCall, Nextel Communications,
Inc., a Delaware corporation ("Nextel"), Nextel Finance
Company, a Delaware corporation and wholly-owned subsidiary of
Nextel ("NFC"), and Bluegrass Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of NFC ("Merger Sub"),
pursuant to which, among other things, (a) Merger Sub will
merge with and into CellCall (the "Merger") and (b)
outstanding shares of CellCall capital stock (the "CellCall
Stock") and rights to acquire shares of CellCall Stock will be
converted into rights to receive shares of Class A Common
Stock of Nextel.
The Board of Directors of CellCall (the "CellCall Board") has approved
the Merger proposal by unanimous vote and has determined that the Merger is fair
to, and in the best interests of, CellCall and its stockholders. Accordingly,
the CellCall Board unanimously recommends that you vote FOR approval of the
Merger Agreement.
The CellCall Board has fixed the close of business on February 3, 1998
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Meeting. Accordingly, only stockholders of record of
CellCall Stock at the close of business on that date will be entitled to notice
of, and to the extent any class of CellCall Stock is entitled to vote, to vote
at, the meeting or any adjournment or postponement thereof.
Details of the proposed Merger and other important information
concerning CellCall and Nextel are more fully described in the accompanying
Prospectus Supplement. Whether or not you plan to attend the Meeting, you are
urged to review the Prospectus Supplement carefully and then to complete, sign
and date the enclosed proxy. To avoid unnecessary expense, please mail your
proxy promptly in the enclosed return envelope, which requires no postage if
mailed in the United States.
Stockholders of CellCall have the right to dissent from the Merger and
demand payment of the fair value of their shares of CellCall Stock if the Merger
is consummated. The right of any stockholder to receive such payment is
contingent upon strict compliance with the requirements of the applicable
provisions of Delaware law, which are attached as Appendix B to the accompanying
Prospectus Supplement. Nextel is not obligated to consummate the Merger if,
among other things, any holder of CellCall Stock is entitled to exercise
dissenter's rights under Delaware law.
By order of the Board of Directors,
Luticia C. Shupe
Secretary
Lexington, Kentucky
February 9, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF CELLCALL. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
<PAGE> 3
PROSPECTUS SUPPLEMENT
FILED FEBRUARY 9, 1998
PURSUANT TO RULE 424(b)(2)
(FILE NO. 333-1290)
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 12, 1998) OF
NEXTEL COMMUNICATIONS, INC.
PROXY STATEMENT OF
CELLCALL, INC.
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 17, 1998
This Prospectus Supplement is being furnished to holders of common
stock, par value $.01 per share (the "CellCall Common Stock"), Series A
Preferred Stock, par value $.10 per share (the "Series A Preferred Stock"),
Series B Preferred Stock, par value $.10 per share (the "Series B Preferred
Stock"), and Series C Preferred Stock, par value $.10 per share (the "Series C
Preferred Stock") (collectively the "CellCall Stock"), of CellCall, Inc., a
Delaware corporation ("CellCall"), as a proxy statement in connection with the
solicitation of proxies by the Board of Directors of CellCall (the "CellCall
Board") for use at a Special Meeting of Stockholders (the "Meeting") of CellCall
to be held on March 17, 1998, at the offices of Hill and Barlow, a Professional
Corporation ("Hill & Barlow"), 20th Floor, One International Place, Boston,
Massachusetts 02110, commencing at 10:00 a.m., local time, and at any
postponements or adjournments thereof, for the purpose set forth herein and in
the accompanying Notice of Special Meeting of Stockholders of CellCall. This
Prospectus Supplement together with the Prospectus dated January 12, 1998
delivered herewith (the "Prospectus") constitutes the prospectus of Nextel
Communications, Inc., a Delaware corporation ("Nextel"), with respect to shares
of Class A Common Stock, $.001 par value per share, of Nextel ("Nextel Common
Stock") to be issued in connection with the Merger (as defined below), in
exchange for all of the outstanding shares and rights to acquire shares of
CellCall Stock.
Pursuant to the terms of the Agreement of Merger and Plan of
Reorganization, dated as of April 22, 1997 (the "Merger Agreement"), among
CellCall, Nextel, Nextel Finance Company, a Delaware corporation and a
wholly-owned subsidiary of Nextel ("NFC"), and Bluegrass Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of NFC ("Merger Sub"), among
other things, (a) Merger Sub will merge with and into CellCall, with CellCall
being the surviving corporation (the "Merger") and (b) outstanding shares and
rights to acquire shares of CellCall Stock will be converted into up to an
aggregate of 1,750,000 shares of Nextel Common Stock, subject to adjustment as
provided in the Merger Agreement. Assuming the market value of the Nextel Common
Stock issuable in the Merger exceeds the amounts payable as preferences to
holders of the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock (collectively, the "Preferred Stock"), the shares of
Nextel Common Stock issuable in the Merger will be allocated first to payment of
such preferences and the remainder will be ratably distributed to holders of the
Series A Preferred Stock, Series B Preferred Stock and CellCall Common Stock and
rights to acquire CellCall Common Stock. If the market value of the Nextel
Common Stock issuable in the Merger is less than the amount of the preferences
of the Preferred Stock, the amounts payable in respect of each class of
CellCall Stock will be reduced as provided in the
_________________ (continued on next page)
SEE "RISK FACTORS,"ON PAGE 18 OF THIS PROSPECTUS SUPPLEMENT, FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY CELLCALL STOCKHOLDERS
IN EVALUATING THE MERGER.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus Supplement is February 9, 1998.
<PAGE> 4
Merger Agreement. If the Merger had been consummated on December 31, 1997, the
aggregate market value of the Nextel Common Stock that would have been issuable
in the Merger would have exceeded the preferences of the Preferred Stock. For
an illustration of the number of shares of Nextel Common Stock issuable
pursuant to the Merger Agreement based upon various assumptions, see "Summary -
C. The Merger - Terms of the Merger - Conversion of CellCall Stock in the
Merger." Because the actual market value of the Nextel Common Stock and number
of such shares to be issued in the Merger will be determined at the time of the
closing of the Merger, holders of CellCall Stock will not know at the time of
the Meeting the exact number of shares of Nextel Common Stock they will receive
in the Merger. The number of shares of Nextel Common Stock issuable in the
Merger will also be reduced by the amount of any fractional shares, which will
be paid in cash, unless Nextel, in its sole discretion, determines to round up
such fractional share interests to the nearest whole share.
Outstanding and unexercised options and warrants to purchase shares of
CellCall Stock will be assumed by Nextel upon consummation of the Merger such
that the holder will have the right to purchase the number of shares of Nextel
Common Stock into which the shares of CellCall Common Stock subject to such
options and warrants would have been converted in the Merger and the exercise
price shall be ratably adjusted.
Based upon the number of shares of Nextel Common Stock outstanding on
December 31, 1997, and assuming the consummation of the Merger on such date and
the issuance of 1,750,000 shares of Nextel Common Stock in the Merger, such
shares would have represented less than 1% of the Nextel Common Stock that would
have been outstanding on such date.
Nextel Common Stock is currently approved for quotation on the Nasdaq
Stock Market National Market (the "Nasdaq NM") under the symbol "NXTL." On
February 6, 1998, the reported closing sale price of a share of Nextel Common
Stock on the Nasdaq NM was $27.00.
The Prospectus, this Prospectus Supplement and the related Notice of
Special Meeting and form of proxy are first being mailed on or about February
11, 1998, to CellCall stockholders of record at the close of business on
February 3, 1998 (the "Record Date"). There were 925.1 shares of CellCall Common
Stock, 1,668.92 shares of Series A Preferred Stock, 20,677.79 shares of Series B
Preferred Stock and 52,500 shares of Series C Preferred Stock outstanding at the
close of business on the Record Date. Only CellCall stockholders of record on
the Record Date will be entitled to notice of, and to the extent any class of
CellCall Stock is entitled to vote, to vote at, the Meeting.
Under the Delaware General Corporation Law (the "DGCL") and the
Certificate of Incorporation, as amended, of CellCall (the "CellCall Charter"),
the Merger Agreement must be approved by both: (i) holders of a majority of the
issued and outstanding shares of CellCall Common Stock, Series A Preferred Stock
and Series B Preferred Stock (with such preferred stock being entitled to the
number of votes represented by the number of shares of CellCall Common Stock
into which it is convertible (an "as converted basis")), voting as a class, and
(ii) holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, on an as converted basis, voting
as a class.
2
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY ............................................................................................6
A. THE PARTIES TO THE MERGER........................................................................6
Nextel ...................................................................................6
CellCall ...................................................................................7
B. THE MEETING......................................................................................7
C. THE MERGER.......................................................................................8
Recommendation of the CellCall Board........................................................8
Interests of Certain CellCall Persons in Matters to be Acted Upon...........................8
Terms of the Merger.........................................................................8
Stock Purchase Option Agreement............................................................13
Loan and Option Agreement..................................................................13
Accounting Treatment.......................................................................14
Federal Income Tax Consequences............................................................14
Dissenters' Right of Appraisal.............................................................14
D. SUMMARY FINANCIAL DATA..........................................................................14
E. COMPARATIVE PER SHARE DATA......................................................................15
RISK FACTORS RELATED TO MERGER......................................................................18
Risk to Common Stockholders.......................................................18
Potential Control of CellCall by Nextel if Merger Not Approved....................18
Repayment of Loan to Nextel if Merger Not Approved................................18
THE MEETING.........................................................................................18
THE MERGER..........................................................................................19
Background of Merger.......................................................................19
Reasons of CellCall Board for Approving the Merger; Recommendation of the CellCall Board...21
Reasons of Nextel for Engaging in the Merger...............................................22
Terms of the Merger........................................................................22
Effective Time.............................................................................22
General Effects of the Merger..............................................................22
General....................................................................................22
Conversion of CellCall Stock in the Merger.................................................22
Adjustments to Merger Consideration........................................................24
Fractional Shares..........................................................................26
Assumption of Stock Options................................................................26
Warrants...................................................................................26
Exchange of Certificates...................................................................26
Payment of Dividends .....................................................................26
Limitations on Transferability of Nextel Common Stock......................................27
Hart-Scott-Rodino..........................................................................27
Federal Communications Commission..........................................................27
Representations and Warranties of CellCall.................................................27
Representations and Warranties of Nextel...................................................27
Conditions; Waiver.........................................................................27
No Solicitation............................................................................28
Indemnification Agreements.................................................................28
Participation in FCC Auction...............................................................29
Termination................................................................................29
Agreements with Third Parties..............................................................29
Stock Purchase Option Agreement............................................................30
Loan and Option Agreement..................................................................30
Accounting Treatment.......................................................................31
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
Page
<S> <C>
Federal Income Tax Consequences............................................................31
Dissenters' Right of Appraisal.............................................................32
INTERESTS OF CERTAIN PERSONS IN CELLCALL............................................................34
Interest in Matters to be Acted Upon.......................................................34
Security Ownership of Certain Beneficial Owners and Management.............................34
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF
NEXTEL COMMON STOCK AND CELLCALL STOCK.....................................................37
Introduction...............................................................................37
Authorized Capital Stock...................................................................38
Board or Stockholder Approved Preferred Stock..............................................38
Terms of Nextel Preferred Stock............................................................38
Class A Preferred Stock....................................................................39
Class B Preferred Stock....................................................................39
Class C Preferred Stock....................................................................39
Nextel Series D Preferred Stock............................................................40
Terms of CellCall Preferred Stock..........................................................40
Series A and Series B Convertible Preferred Stock..........................................40
Series C Convertible Preferred Stock.......................................................40
Series D Convertible Preferred Stock.......................................................41
Voting Rights..............................................................................41
Number of Directors........................................................................42
Election of Board of Directors.............................................................42
Vote on Merger, Consolidation or Sale of Substantially All Assets..........................43
Special Meetings of Stockholders...........................................................44
Stockholder Action By Written Consent......................................................44
Amendment of Certificate of Incorporation..................................................44
Amendment of By-Laws.......................................................................45
Certain Limitations Related to the McCaw Transaction.......................................45
Liability and Indemnification of Officers and Directors....................................45
Dissenters' Rights.........................................................................45
Payment of Dividends.......................................................................46
Distributions Upon Liquidation.............................................................46
Compromise and Reorganization..............................................................47
ADDITIONAL INFORMATION CONCERNING CELLCALL..........................................................47
History and Development of Business........................................................47
Competition................................................................................48
Organization...............................................................................48
Employees..................................................................................48
Market and Stockholder Information.........................................................48
Dividends..................................................................................48
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF CELLCALL............................................48
Historical Overview........................................................................48
Results of Operations......................................................................48
Nine Months Ended September 30, 1997 vs. Nine Months Ended September 30, 1996..............48
Year Ended December 31, 1996 vs. Year Ended December 31, 1995..............................49
Year Ended December 31, 1995 vs. Year Ended December 31, 1994..............................50
Liquidity and Capital Resources............................................................50
OTHER MATTERS.......................................................................................51
CERTAIN LEGAL MATTERS...............................................................................51
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
Page
<S> <C>
EXPERTS ............................................................................................51
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF CELLCALL, INC. .......................................F-1
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION......................................................A-1
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW.................................................B-1
</TABLE>
5
<PAGE> 8
SUMMARY
The following summary should be read in conjunction with, and is
qualified in its entirety by, the more detailed information and financial
statements, including the notes thereto, included or incorporated by reference
into this Prospectus Supplement. CellCall stockholders are urged to read this
Prospectus Supplement, including the Merger Agreement, which is attached hereto
as Appendix A, and the Prospectus, in their entirety.
On July 28, 1995, NEXTEL Communications, Inc., a corporation organized
under the laws of the State of Delaware in 1987 ("Old Nextel"), was merged with
ESMR, Inc. ("ESMR"), until then a wholly-owned subsidiary of Motorola, Inc.
("Motorola"). ESMR was the surviving corporation in the merger (the "Motorola
Transaction") and succeeded to Old Nextel's assets and liabilities. ESMR changed
its name to Nextel Communications, Inc., effective upon consummation of the
Motorola Transaction. References herein to Nextel for periods prior to July 28,
1995 refer to Old Nextel as the predecessor to the business and operations of
Nextel. Unless the context requires otherwise, references to Nextel are intended
to include Nextel Communications, Inc. and its consolidated subsidiaries.
Information contained herein gives effect to the acquisition of
approximately 1,220,000 shares of Nextel Common Stock by Digital Radio L.L.C.
(the "McCaw Investor") on April 5, 1995, an additional acquisition of 8,163,265
shares of Nextel's Class A Convertible Redeemable Preferred Stock, par value
$.01 per share (the "Class A Preferred Stock"), and 82 shares of Nextel's Class
B Convertible Preferred Stock, par value $.01 per share (the "Class B Preferred
Stock"), by the McCaw Investor and the consummation of related transactions on
July 28, 1995 (the "McCaw Transaction"), the merger of OneComm Corporation
("OneComm") with and into Nextel on July 28, 1995 (the "OneComm Transaction"),
the consummation of the Motorola Transaction on July 28, 1995, the merger of a
subsidiary of Nextel with American Mobile Systems Incorporated ("AMS") on July
31, 1995 (the "AMS Transaction") and the merger of Dial Page, Inc. ("Dial Page")
with and into Nextel on January 30, 1996 (the "Dial Page Transaction").
A. THE PARTIES TO THE MERGER
NEXTEL
Nextel's business consists principally of providing a wide array of
digital and analog wireless communications services to its customers in the
United States, in each case utilizing frequencies licensed to its subsidiaries
by the Federal Communications Commission ("FCC"). Nextel provides a
differentiated package of integrated digital wireless communications services
under the Nextel brand name to customers of the various networks constructed and
operated by Nextel's subsidiaries in and around major metropolitan population
centers throughout the country. Collectively, Nextel's operations constitute one
of the largest integrated wireless communications networks utilizing a single
digital transmission technology currently offering commercial service in the
United States. Through its digital and analog wireless communications networks,
Nextel is the leading provider of specialized mobile radio ("SMR") wireless
communications services in nearly all 48 states in the continental United States
and in Hawaii. Nextel has significant SMR spectrum holdings in and around every
major business and population center in the country, including all of the top 50
metropolitan market areas in the United States.
Nextel's operating revenues primarily arise from its digital and analog
wireless communications businesses in the United States, particularly the mobile
telephone service and two-way radio service and, to a lesser extent, from sales
and maintenance of related equipment. Nextel's business plans and efforts are to
a large extent directed toward replacing the remaining traditional analog SMR
systems that it currently operates with advanced mobile communications systems
employing digital technology with a multi-site configuration permitting
frequency reuse ("Digital Mobile networks"). A customer using Nextel's Digital
Mobile network is able to access mobile telephone services, two-way dispatch
(marketed as Nextel's Direct Connect(sm) service), paging and alphanumeric
short-messaging service, and in the future is expected to be able to access data
transmission. Nextel is implementing its Digital Mobile networks utilizing
digital technology developed by Motorola (such technology is referred to as the
"integrated Digital Enhanced Network" or "iDEN"). As of September 30, 1997,
Nextel's Digital Mobile networks were operating in major metropolitan market
areas throughout the United States in which approximately 60% of the total
United States population lives or works.
Prior to the second quarter of 1996, Nextel implemented its Digital
Mobile networks in its market areas using Motorola's first generation iDEN
technology. During that time frame, Nextel encountered certain technology and
system performance issues relating primarily to the voice transmission quality
of the mobile telephone service. In response to these issues, Nextel and
Motorola took action on several fronts to address system performance issues in
general, and voice transmission quality concerns in particular. Additionally,
Nextel, together with Motorola, in 1995 began pursuing a program
6
<PAGE> 9
directed toward the development and deployment of modifications to the first
generation iDEN technology platform, which modifications were targeted
specifically at improving the voice transmission quality of the mobile telephone
service. Nextel commenced the full-scale commercial launch of its first Digital
Mobile networks incorporating the modified iDEN technology (referred to herein
as "Reconfigured iDEN") in the Chicago metropolitan market late in the third
quarter of 1996 and has since deployed the Reconfigured iDEN technology
throughout its Digital Mobile networks. As of September 30, 1997, the Company's
Digital Mobile network was operational in markets in which approximately 60% of
the United States population lives or works.
Since December 31, 1994, the number of subscriber units in service on
Nextel's Digital Mobile network has increased significantly, reflecting the
commencement of Digital Mobile network service in certain markets, increased
sales in markets in which Digital Mobile network services are provided and, to a
limited extent, acquisitions. As a result, the number of subscriber units in
service on Nextel's Digital Mobile network increased from 13,500 at December 31,
1994, to 85,000 at December 31, 1995, to 300,300 at December 31, 1996 and to
1,270,700 at December 31, 1997. Nextel's business and marketing strategy for its
Digital Mobile networks continues to be based on, and reflect, a principal focus
on multi-service business users in its markets with Digital Mobile networks.
During 1996 and 1997, Nextel significantly expanded its business
activities to include operations and investments involving wireless
communications service providers outside of the United States that are conducted
under or are coordinated by or through Nextel International, Inc. (formerly
known as McCaw International, Ltd., "Nextel International"), an indirect,
wholly-owned subsidiary of Nextel. With the exception of the equity interests
held by Nextel and by Nextel International in Clearnet Communications, Inc.
("Clearnet"), a major provider of analog and digital SMR wireless communications
services throughout Canada, and the holder of one of the two nationwide 30 MHz
personal communications services ("PCS") licenses awarded in Canada, Nextel
International's subsidiaries or other entities in which Nextel International
holds equity or equivalent interests own and operate wireless communications
systems in Latin America and Asia. Nextel International's operating companies
currently provide a variety of analog or digital wireless communications
services in certain metropolitan areas in Argentina, Brazil, Mexico, the
Philippines and Shanghai, China.
Nextel's principal executive and administrative facility is located at
1505 Farm Credit Drive, McLean, Virginia 22102, and its telephone number is
(703) 394-3000.
CELLCALL
CellCall was incorporated on February 18, 1988 in Kentucky and was
reincorporated in Delaware in 1994.
CellCall provides mobile telephone, fleet dispatch and paging services
using SMR frequencies licensed to CellCall by the FCC. Currently, CellCall
operates a regional analog mobile communications network through approximately
1,100 SMR channels it owns in Kentucky, Ohio, Indiana, Pennsylvania, Tennessee
and Alabama. CellCall derives its operating revenues primarily from its two-way
radio dispatch and mobile telephone service and, to a lesser extent, from sales,
leasing and servicing of related equipment.
Through the date of this Prospectus Supplement, CellCall has completed
multiple acquisitions in each of the following metropolitan areas and
surrounding communities: (i) Cincinnati, Columbus and Dayton, Ohio; (ii)
Indianapolis, Indiana; and (iii) Louisville and Lexington, Kentucky. By
acquiring multiple stations and networks in each of these markets, CellCall has
increased the capacity of its system within the constraints of current SMR
technology, primarily by combining several smaller systems. The consolidation of
a number of systems in each market has allowed CellCall to expand its service
offerings to its customers and realize economies of scale on certain expenses.
CellCall also has acquired SMR channels in Pittsburgh, Pennsylvania; Birmingham
and Huntsville, Alabama; Knoxville, Chattanooga and Johnson City, Tennessee; and
various smaller cities and towns in Indiana and Ohio.
CellCall's corporate offices are located at 1720 Fortune Court, Suite
106, Lexington, Kentucky 40509. Its telephone number is (606) 299-1444.
B. THE MEETING
The Meeting will be held on March 17, 1998 at 10:00 a.m., local time,
at the offices of Hill & Barlow, 20th Floor, One International Place, Boston,
Massachusetts 02110. The purpose of the Meeting is to consider and vote upon a
proposal to approve the Merger Agreement. The CellCall Board has fixed the close
of business on February 3, 1998, as the Record Date for the determination of
stockholders entitled to notice of, and to the extent any class of CellCall
Stock is entitled to vote, to vote at, the Meeting. The presence at the Meeting,
in person or by proxy, of the holders of (i) a majority of the issued and
outstanding
7
<PAGE> 10
shares of CellCall Common Stock, Series A Preferred Stock and Series B Preferred
Stock, on an as converted basis, voting as a class, and (ii) a majority of the
Series A Preferred Stock and Series B Preferred Stock, on an as converted basis,
will constitute a quorum for the transaction of business. Under the DGCL and the
CellCall Charter, the Merger Agreement must be approved by both (i) holders of a
majority of the issued and outstanding shares of CellCall Common Stock, Series A
Preferred Stock and Series B Preferred Stock, on an as converted basis, and (ii)
holders of at least two-thirds of the outstanding shares of Series A Preferred
Stock and Series B Preferred Stock, on an as converted basis, voting as a class.
As of the Record Date, the directors and executive officers of CellCall and
their affiliates beneficially owned approximately 48.6% of the outstanding
shares of CellCall Common Stock and in excess of 97% of the outstanding shares
of each of the Series A Preferred Stock and the Series B Preferred Stock.
Approval of the Merger Agreement by the stockholders of Nextel is not
required by Nextel's Restated Certificate of Incorporation, as amended (the
"Nextel Charter"), Delaware law or the Merger Agreement. NFC, the sole
stockholder of Merger Sub, has approved the Merger Agreement on behalf of Merger
Sub.
C. THE MERGER
RECOMMENDATION OF THE CELLCALL BOARD
The CellCall Board has approved the Merger Agreement by unanimous vote
and has determined that the Merger is fair to, and in the best interests of,
CellCall and its stockholders. For a description of the factors considered by
the CellCall Board in approving the Merger Agreement, see "The Merger--Reasons
of CellCall Board for Approving the Merger; Recommendation of the CellCall
Board." Based upon the factors considered, the CellCall Board unanimously
recommends that CellCall stockholders vote for approval of the Merger Agreement.
INTERESTS OF CERTAIN CELLCALL PERSONS IN MATTERS TO BE ACTED UPON
Certain executive officers and directors of CellCall have interests in
the Merger that differ from those of CellCall stockholders generally as a result
of the preferential returns on Preferred Stock. As a result, such executive
officers and directors could be more likely to favor consummation of the Merger
than stockholders generally. See "Interests of Certain Persons in
CellCall--Interests in Matters to be Acted Upon."
TERMS OF THE MERGER
The following is a summary of certain of the terms and conditions of
the Merger Agreement, a copy of which is attached hereto as Appendix A.
Effective Time. The Merger shall become effective when both (i) the
Merger Agreement is adopted and approved by the stockholders of CellCall in
accordance with the applicable provisions of the DGCL and (ii) a certificate of
merger (the "Certificate of Merger"), executed in accordance with the relevant
provisions of the DGCL, is filed with the Secretary of State of Delaware (the
time the Merger becomes effective being referred to herein as the "Effective
Time of the Merger" or the "Closing").
General Effects of the Merger. At the Effective Time of the Merger,
Merger Sub will merge with and into CellCall, which will be the surviving
corporation (the "Surviving Corporation") and a wholly-owned indirect subsidiary
of Nextel. After the Effective Time of the Merger, the Certificate of
Incorporation and By-laws of Merger Sub as in effect immediately prior thereto
shall constitute the Certificate of Incorporation and By-laws of the Surviving
Corporation.
General. At the Effective Time of the Merger, shares (and rights to
acquire shares) of CellCall Stock outstanding immediately prior to the Effective
Time of the Merger will be canceled and extinguished and be converted
automatically into the right to receive shares of Nextel Common Stock, in
accordance with the Merger Agreement. The Merger Agreement provides that the
number of shares of Nextel Common Stock issuable in respect of CellCall Stock or
rights to acquire CellCall Stock shall be 1,750,000 (the "Nextel Share Base"),
subject to increase only as described under "The Merger - Terms of the Merger
Conversion of CellCall Stock in the Merger - (c) Conversion of CellCall Common
Stock in the event the Residual Amount is Zero" or in the event of changes to
the capitalization of Nextel, and subject to decrease only as described below
(as so adjusted at the Effective Time of the Merger, the "Acquisition Shares").
The Nextel Share Base is subject to reduction to reflect (i) shortfalls
in channels delivered pursuant to the Merger Agreement, (ii) negative cash flow
of CellCall, (iii) negative working capital of CellCall, including a reduction
to reflect a loan
8
<PAGE> 11
made by Nextel to CellCall as described under "The Merger - Loan and Option
Agreement," (iv) transaction costs and severance costs that exceed certain
limits, (v) changes in the terms of the authorized capital stock of Nextel,
dividends paid or share distributions by Nextel and (vi) if at the Effective
Time of the Merger, CellCall does not have cash in an amount equal to the
aggregate exercise price due upon the exercise of derivative securities
exercised prior to the Effective Time of the Merger or has issued any shares of
CellCall Stock in respect of any such derivative securities in a cashless
exercise, the amount of cash that would have been received in respect thereof.
See "The Merger -- Terms of the Merger -- Adjustments to Merger Consideration."
If at the Effective Time of the Merger the Market Value (as defined
below) of the Acquisition Shares is sufficient to pay the liquidation preference
of all then outstanding shares of Preferred Stock, then at the Effective Time of
the Merger: (i) each share of Series A Preferred Stock shall be converted into
the right to receive that number of Acquisition Shares having a Market Value of
$1,000 (the "Series A Preference"); (ii) each share of Series B Preferred Stock
shall be converted into the right to receive that number of Acquisition Shares
having a Market Value of $1,150 (the "Series B Preference"); (iii) each share of
Series C Preferred Stock shall be converted into the right to receive a fraction
of an Acquisition Share the numerator of which is 35,000 plus the number of
shares of Series C Preferred Stock (not to exceed 17,500) designated as
Incentive Shares by the CellCall Board in accordance with the CellCall Charter
("Incentive Shares") determined as of the Closing (see "The Merger - Terms of
the Merger Conversion of CellCall Stock in the Merger") and the denominator of
which is 52,500 (the "Series C Preference," and collectively with the Series A
Preference and the Series B Preference, the "Preferences"); and (iv) each share
of Series A Preferred Stock, Series B Preferred Stock and CellCall Common Stock
and rights to acquire shares of CellCall Common Stock shall also be converted
into the right to receive the number of Acquisition Shares equal to a fraction
the numerator of which is the number of Acquisition Shares remaining after
payment of the Preferences and the denominator of which is the number of
outstanding shares of Series A Preferred Stock (on an as converted basis),
Series B Preferred Stock (on an as converted basis) and CellCall Common Stock
and rights to acquire shares of CellCall Common Stock. The term "Market Price"
means the closing price of one share of Nextel Common Stock as reported on the
Nasdaq NM on the last trading day preceding the Effective Time of the Merger.
The term "Market Value" means the aggregate Market Price of any given number of
shares of Nextel Common Stock. While the CellCall Charter sets forth
designations for the Series D Convertible Preferred Stock, par value $.10 per
share (the "CellCall Series D Preferred Stock"), it is a condition to Nextel's
obligation to consummate the Merger that none of such stock has been issued.
Accordingly, it has been assumed throughout this Prospectus Supplement that no
shares of CellCall Series D Preferred Stock will be issued.
If at the Effective Time of the Merger the Market Value of the
Acquisition Shares is not sufficient to pay the Preferences, then at the
Effective Time of the Merger: (i) Acquisition Shares having a Market Value of
$15,000,000 (or if less than $15,000,000, all of the Acquisition Shares) shall
be allocated among the outstanding shares of Series A Preferred Stock and Series
B Preferred Stock on a pro rata basis in accordance with the respective
liquidation preference thereof; (ii) the remaining Acquisition Shares, if any,
shall be distributed to the holder of the Series C Preferred Stock such that
each share of Series C Preferred Stock shall be converted into a fraction of an
Acquisition Share, the numerator of which is 35,000 plus the number of shares of
Series C Shares (not to exceed 17,500) designated as Incentive Shares (see "The
Merger - Terms of the Merger - Conversion of CellCall Stock in the Merger") and
the denominator of which is 52,500; (iii) the remaining Acquisition Shares, if
any, shall be allocated among the outstanding shares of Series A Preferred Stock
and Series B Preferred Stock on a pro rata basis in accordance with the
respective liquidation preference thereof; and (iv) each share of CellCall
Common Stock shall be converted into the right to receive .01 of a share of
Nextel Common Stock, rounded up to the nearest whole share. See "The Merger
- --Terms of the Merger -- Conversion of CellCall Stock in the Merger."
Conversion of CellCall Stock in the Merger. The following
tables illustrate the number of Acquisition Shares issuable in the Merger, the
Market Value of such shares and the number of shares of Nextel Common Stock
issuable for each share of CellCall Stock based on various assumptions,
including the indicated Market Price. The number of Acquisition Shares issuable
in respect of each class of CellCall capital stock will vary based on the number
of outstanding shares or rights to acquire shares of CellCall Stock at the
Effective Time of the Merger, the Market Price and any adjustments to the Nextel
Share Base. The actual number of shares of Nextel Common Stock that will be
issued in the Merger will be determined at the Effective Time of the Merger. See
"The Merger - Terms of the Merger - Conversion of CellCall Stock in the Merger."
The following table indicates, (i) assuming that the only reductions to
the Nextel Share Base (the "Share Base Reduction") based upon an assigned value
of $16.00 per share of Nextel Common Stock are (A) a reduction of $2,100,000 or
131,250.00 shares due to shortfalls in the channels delivered (which assumes
that CellCall cannot deliver any of the channels subject to finder's preference
claims) and (B) a reduction of $3,160,919 or 197,557.44 shares due to CellCall's
long term liabilities and negative working capital at September 30, 1997,
resulting in an aggregate Share Base Reduction of $5,260,919 or 328,807.44
shares, and (ii) assuming that there are 1,668.92 shares of Series A Preferred
Stock outstanding, 20,677.79 shares of Series B Preferred Stock outstanding,
2,639.33 shares of CellCall Common Stock outstanding or issuable pursuant to
options
9
<PAGE> 12
or warrants and 43,653 shares of Series C Preferred Stock outstanding and
convertible in the Merger (based upon the assumed designation of 8,653 shares of
Series C Preferred as Incentive Shares reflecting the channel reduction assumed
in (i)(A) above), and (iii) based on the assumed Market Prices indicated, the
number of shares of Nextel Common Stock which would be issuable for each share
of CellCall Stock:
ASSUMED NEXTEL MARKET PRICE
<TABLE>
<CAPTION>
$30.00 $27.50 $25.00 $22.50
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Nextel Share Base 1,750,000.00 1,750,000.00 1,750,000.00 1,750,000.00
Less Share Base Reduction ( 328,807.44) ( 328,807.44) ( 328,807.44 ( 328,807.44)
-------------- --------------
Number of Acquisition
Shares 1,421,192.56 1,421,192.56 1,421,192.56 1,421,192.56
Cash Value of
Acquisition Shares $ 42,635,777 $ 39,082,795 $ 35,529,814 $ 31,976,833
Residual Amount per 21.18 18.10 14.39 9.87
share(1)
NUMBER OF SHARES OF NEXTEL
COMMON STOCK FOR EACH SHARE OF:
Series A Preferred Stock:
Preference 33.33 36.36 40.00 44.44
Residual Amount 21.18 18.10 14.39 9.87
-------------- -------------- -------------- --------------
Total 54.51 54.46 54.39 54.31
============== ============== ============== ==============
Series B Preferred Stock:
Preference 38.33 41.82 46.00 51.11
Residual Amount 21.18 18.10 14.39 9.87
-------------- -------------- -------------- --------------
Total 59.51 59.92 60.39 60.98
============== ============== ============== ==============
Series C Preferred Stock 1.00 1.00 1.00 1.00
CellCall Common Stock(2) 21.18 18.10 14.39 9.87
</TABLE>
<TABLE>
<CAPTION>
$20.00 $17.50 $15.00
-------------- -------------- --------------
<S> <C> <C> <C>
Nextel Share Base 1,750,000.00 1,750,000.00 1,750,000.00
Less Share Base Reduction ( 328,807.44) ( 328,807.44) ( 328,807.44)
-------------- -------------- --------------
Number of Acquisition
Shares 1,421,192.56 1,421,192.56 1,421,192.56
Cash Value of
Acquisition Shares $ 28,423,851 $ 24,870,870 $ 21,317,888
Residual Amount per 4.21 0.00 0.00
share(1)
NUMBER OF SHARES OF NEXTEL
COMMON STOCK FOR EACH SHARE OF:
Series A Preferred Stock:
Preference 50.00 54.13 54.13
Residual Amount 4.21 0.00 0.00
-------------- -------------- --------------
Total 54.21 54.13 54.13
============== ============== ==============
Series B Preferred Stock:
Preference 57.50 62.25 62.25
Residual Amount 4.21 0.00 0.00
-------------- -------------- --------------
Total 61.71 62.25 62.25
============== ============== ==============
Series C Preferred Stock 1.00 1.00 1.00
CellCall Common Stock(2) 4.21 .01(3) .01(3)
</TABLE>
(1) Number of shares of Nextel Common Stock remaining after payment of
Preferences divided by the number of CellCall common equivalents
(shares of CellCall Common Stock outstanding or issuable pursuant to
options and warrants and assuming conversion of all outstanding shares
of Series A Preferred Stock and Series B Preferred Stock into CellCall
Common Stock).
(2) Includes rights to acquire CellCall Common Stock.
(3) In the event the Residual Amount is zero, holders of CellCall Common
Stock or rights to acquire such shares will receive .01 of a share of
Nextel Common Stock in respect of such shares.
The following table indicates, (i) giving effect to the assumptions set
forth with respect to the preceding table and (ii) assuming an additional
reduction in the Nextel Share Base of $3,000,000 or 187,500 shares (which has
been assumed for illustrative purposes only to reflect adverse events of which
CellCall's management is currently unaware that would further reduce the Nextel
Share Base), resulting in an aggregate Share Base Reduction of $8,260,919 or
516,307.44 shares (at an assigned value of $16.00 per share), and (iii) based on
the assumed Market Prices indicated, the number of shares of Nextel Common Stock
which would be issuable for each share of CellCall Stock:
10
<PAGE> 13
ASSUMED NEXTEL MARKET PRICE
<TABLE>
<CAPTION>
$30.00 $27.50 $25.00 $22.50 $20.00
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Nextel Share Base 1,750,000.00 1,750,000.00 1,750,000.00 1,750,000.00 1,750,000.00
Less Share Base Reduction (516,307.44) (516,307.44) (516,307.44) (516,307.44) (516,307.44)
-------------- -------------- -------------- -------------- --------------
Number of Acquisition
Shares 1,233,692.56 1,233,692.56 1,233,692.56 1,233,692.56 1,233,692.56
Cash Value of Acquisition
Shares $ 37,010,777 $ 33,926,545 $ 30,842,314 $ 27,758,083 $ 24,673,851
Residual Amount per 13.68 10.60 6.89 2.36 0.00
share(1)
NUMBER OF SHARES OF NEXTEL
COMMON STOCK FOR EACH SHARE OF:
Series A Preferred Stock:
Preference 33.33 36.36 40.00 44.44 46.76
Residual Amount 13.68 10.60 6.89 2.36 0.00
-------------- -------------- -------------- -------------- --------------
Total 47.01 46.96 46.89 46.80 46.76
============== ============== -------------- ============== ==============
Series B Preferred Stock:
Preference 38.33 41.82 46.00 51.11 53.78
Residual Amount 13.68 10.60 6.89 2.36 0.00
-------------- -------------- -------------- -------------- --------------
Total 52.01 52.42 52.89 53.47 53.78
============== ============== ============== ============== ==============
Series C Preferred Stock 1.00 1.00 1.00 1.00 1.00
CellCall Common 13.68 10.60 6.89 2.36 .01(3)
Stock(2)
</TABLE>
<TABLE>
<CAPTION>
$17.50 $15.00
-------------- --------------
<S> <C> <C>
Nextel Share Base 1,750,000.00 1,750,000.00
Less Share Base Reduction (516,307.44) (516,307.44)
-------------- --------------
Number of Acquisition
Shares 1,233,692.56 1,233,692.56
Cash Value of Acquisition
Shares $ 21,589,620 $ 18,505,388
Residual Amount per 0.00 0.00
share(1)
NUMBER OF SHARES OF NEXTEL
COMMON STOCK FOR EACH SHARE OF:
Series A Preferred Stock:
Preference 46.76 46.76
Residual Amount 0.00 0.00
-------------- --------------
Total 46.76 46.76
============== ==============
Series B Preferred Stock:
Preference 53.78 53.78
Residual Amount 0.00 0.00
-------------- --------------
Total 53.78 53.78
============== ==============
Series C Preferred Stock 1.00 1.00
CellCall Common .01(3) .01(3)
Stock(2)
</TABLE>
(1) Number of shares of Nextel Common Stock remaining after payment of
Preferences divided by the number of CellCall common equivalents
(shares of CellCall Common Stock outstanding or issuable pursuant to
options and warrants and assuming conversion of all outstanding shares
of Series A Preferred Stock and Series B Preferred Stock into CellCall
Common Stock).
(2) Includes rights to acquire CellCall Common Stock.
(3) In the event the Residual Amount is zero, holders of CellCall Common
Stock or rights to acquire such shares will receive .01 of a share of
Nextel Common Stock in respect of such shares.
The foregoing tables are presented based on the indicated assumptions
concerning certain reductions to the number of Acquisition Shares and the Market
Price. There can be no assurance as to the aggregate amount of reductions that
will be made to the Acquisition Shares at the Closing nor as to the Market Price
at such time.
Fractional Shares. No fractional share of Nextel Common Stock or
certificates or scrip therefor will be issued as a result of the conversion of
issued and outstanding CellCall Stock into Nextel Common Stock, but in lieu of
each fractional share interest there shall be made a payment in cash therefor,
without interest, at a pro rata price based on the Market Price. Nextel may (in
its sole and absolute discretion) deliver to persons otherwise entitled to
receive fractional share interests a number of whole shares determined by
rounding up to the nearest whole share.
Assumption of Stock Options. Each option to purchase shares of CellCall
Stock outstanding on April 22, 1997 (a "CellCall Stock Option") which remains
outstanding immediately prior to the Effective Time of the Merger will be
converted at the Effective Time of the Merger into an option that may be
exercised only for the number of shares of Nextel Common Stock into which the
shares of CellCall Stock issuable pursuant thereto would have been converted in
the Merger. See "The Merger -- Terms of the Merger -- Assumption of Stock
Options."
Warrants. At the Effective Time of the Merger, outstanding warrants
(the "Warrants") to purchase shares of CellCall Stock shall be assumed by
Nextel. Each Warrant shall thereafter evidence a warrant to purchase the number
of shares of Nextel Common Stock into which the number of shares of CellCall
Stock issuable pursuant to such Warrant would have been converted
11
<PAGE> 14
in the Merger, at an exercise price equal to the amount per share (rounded up to
the next whole cent) arrived at by dividing the aggregate exercise price under
such Warrant by the number of shares of Nextel Common Stock purchasable
thereunder.
Exchange of Certificates. Prior to the Effective Time of the Merger,
Nextel shall designate a bank or trust company to act as exchange agent in the
Merger (the "Exchange Agent"). Promptly after the Effective Time of the Merger,
Nextel shall cause the Exchange Agent to mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time of the
Merger represented outstanding shares of CellCall Stock (the "Certificates"), a
letter of transmittal and instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Nextel Common
Stock and any cash payable in lieu of fractional share interests at a pro rata
price based on the Market Price; provided, however, that Nextel may deliver to
persons otherwise entitled to receive fractional share interests a number of
whole shares, determined by rounding up to the nearest whole share. Upon
surrender to the Exchange Agent of a Certificate or Certificates, together with
a letter of transmittal duly executed, and such other documents as the Surviving
Corporation or the Exchange Agent may reasonably request, a holder of a
Certificate shall be entitled to receive in exchange therefor a portion of
Nextel Common Stock as set forth in the Merger Agreement and any cash payable in
lieu of any fractional share interest (together, the "Merger Consideration").
Subsequent to the Effective Time of the Merger and until surrendered, a holder's
Certificates shall be deemed for all corporate purposes, other than the payment
of dividends, to evidence the number of whole shares of Nextel Common Stock into
which the shares of CellCall Stock formerly evidenced thereby have been
converted by the Merger and the right to receive any cash payable in lieu of any
fractional share interests resulting therefrom.
Payment of Dividends. Unless and until any outstanding Certificates for
shares of CellCall Stock are surrendered, no dividend payable to holders of
record of Nextel Common Stock as of any date subsequent to the Effective Time of
the Merger shall be paid to the holder of any such Certificates, but upon such
surrender of such Certificates there shall be paid to the record holder of the
certificate for Nextel Common Stock issued in exchange therefor the amount of
dividends, if any, but without interest, that have theretofore become payable
subsequent to the Effective Time of the Merger with respect to the number of
whole shares of Nextel Common Stock represented by the certificate issued upon
such surrender and exchange.
Limitations on Transferability of Nextel Common Stock. Shares of Nextel
Common Stock received by certain persons deemed to be "affiliates" of CellCall
for purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"), will be subject to the restrictions imposed by such rule. In
accordance with Rule 145, an affiliate of CellCall receiving Nextel Common Stock
issued in the Merger may not sell such shares except pursuant to the volume and
manner of sale limitations and other requirements specified therein or pursuant
to an effective registration statement under the Securities Act. See "The Merger
- -- Terms of the Merger -- Limitations on Transferability of Nextel Common
Stock."
Hart-Scott-Rodino. The Merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), which provide that certain acquisition transactions (including the
Merger) may not be consummated until certain information has been furnished to
the Antitrust Division of the Department of Justice (the "Antitrust Division")
and the Federal Trade Commission (the "FTC") and certain waiting period
requirements have been satisfied. Nextel and CellCall filed the required
information and were notified of the early termination of the waiting period on
June 27, 1997. Satisfaction of the waiting period requirement will not preclude
the Antitrust Division, the FTC or any other party either before or after the
Effective Time of the Merger from challenging or seeking to delay or enjoin the
Merger on antitrust or other grounds. There can be no assurance that such a
challenge, if made, would not be successful.
Federal Communications Commission. The transfer of control of the
licenses granted by the FCC and held by CellCall and certain pending
applications of CellCall, which will occur as a result of the Merger, is subject
to prior FCC approval pursuant to the requirements of the Communications Act of
1934, as amended (the "Communications Act"), and the rules of the FCC. Although
the relevant applications have been filed with the FCC, there can be no
assurance that the FCC will grant such approval prior to the date of the
Meeting, if at all.
Representations and Warranties. In addition to customary
representations and warranties with regard to corporate organization and
authority and capitalization, the Merger Agreement contains certain
representations and warranties by each of CellCall and Nextel. See "The Merger
- -- Terms of the Merger -- Representations and Warranties of CellCall" and "
- --Representations and Warranties of Nextel."
Conditions; Waiver. The obligations of Nextel and CellCall to
consummate, or cause to be consummated, the Merger are subject to the
satisfaction or waiver of certain conditions, including the approval of the
Merger Agreement by holders of the requisite shares of CellCall Stock. See "The
Merger -- Terms of the Merger -- Conditions; Waiver."
12
<PAGE> 15
No Solicitation. CellCall has agreed, subject to certain exceptions,
that prior to the Effective Time of the Merger, CellCall and its representatives
shall not, directly or indirectly, encourage (including by way of furnishing
information), solicit, initiate, participate in or otherwise be a party to any
discussions or negotiations with any corporation, partnership, person or other
entity or group concerning any transaction involving the sale of the business or
assets of CellCall, the merger or consolidation of CellCall or any other similar
transaction involving CellCall or its businesses. Promptly upon receiving any,
or any information about any, inquiry, request or proposal from or contact by
any person with respect to any sale, merger, consolidation or other similar
transaction, CellCall shall advise Nextel of such inquiry, request, proposal or
contact and provide Nextel all relevant information with respect thereto.
Indemnification Agreements. It is a condition to Nextel's obligation to
consummate the Merger that Nextel shall have received executed agreements from
CellCall stockholders holding at least 90% of the CellCall Stock, indemnifying
Nextel and its subsidiaries and affiliates from certain claims, damages, losses
or liabilities. See "The Merger -- Terms of the Merger -- Indemnification
Agreements."
Participation in FCC Auction. CellCall and Nextel agreed to form a
consortium to participate in the recently concluded 800 MHz SMR block license
auction established by the FCC in the First Report and Order, PR Docket No.
93-144, released December 15, 1995 (the "Auction") for block licenses in certain
Bureau of Economic Analysis Economic Areas (each, an "EA") identified in the
Merger Agreement ("Overlap EAs"). Rather than creating a separate entity to
administer auction participation solely in the Overlap EAs, a subsidiary of
Nextel was formed to participate in the Auction in EAs throughout the United
States, including the Overlap EAs. Bidding in the Auction closed on December 8,
1997, and the Nextel subsidiary was awarded the rights to block licenses in each
of the Overlap EAs. Nextel is entitled to the right to all channels included in
these block licenses, subject to the option of CellCall, under certain
circumstances in the event the Merger is not consummated, to purchase certain
channels in any Overlap EA for the price paid by Nextel. See "The Merger --
Terms of the Merger -- Participation in FCC Auction."
Termination. The Merger Agreement may be terminated and the
transactions contemplated thereby abandoned by mutual written consent of
CellCall and Nextel authorized by their respective Boards of Directors at any
time prior to the Closing, by written notice by either party to the other upon
the occurrence of certain events, including the failure of the Merger to occur
by April 22, 1998, provided other conditions set forth in the Merger Agreement
are met. See "The Merger -- Terms of the Merger -- Termination."
Agreements With Third Parties. Nextel's obligation to consummate the
Merger is conditioned upon receipt of agreements from certain third parties. See
"The Merger -- Terms of the Merger -- Agreements with Third Parties."
STOCK PURCHASE OPTION AGREEMENT
Concurrently with the execution of the Merger Agreement, holders at
that date of a majority of the issued and outstanding CellCall Common Stock and
all of the Preferred Stock entered into agreements pursuant to which NFC may
acquire 66% of the outstanding CellCall Stock in certain events, including the
failure of the requisite holders of CellCall Stock to approve the Merger
Agreement. See "The Merger -- Stock Purchase Option Agreement."
LOAN AND OPTION AGREEMENT
On November 21, 1997, CellCall and a subsidiary of Nextel ("Nextel
Sub") entered into a Loan and Option Agreement (the "Loan Agreement") pursuant
to which Nextel Sub agreed to loan CellCall up to an aggregate of $2,357,250.
Pursuant to the terms of the Loan Agreement, disbursements thereunder were made
solely for the purpose of permitting CellCall to purchase certain SMR licenses
that were subject to option agreements pursuant to which CellCall had the right
to purchase certain channels (the "Option Channels") and are evidenced by a
promissory note issued by CellCall and payable to Nextel Sub (the "Note").
Through the date hereof, CellCall has borrowed $2,086,750 of the amount
available pursuant to the Loan Agreement to purchase Option Channels. Assuming
consummation of the Merger, the Nextel Share Base will be reduced to reflect
amounts disbursed under the Loan Agreement together with interest. In the event
the Merger is not consummated, principal and interest due under the Note must be
repaid to Nextel Sub, and, upon any failure of CellCall to make any payments due
to Nextel Sub under the Loan Agreement, Nextel Sub shall have the option to
purchase any or all of the Option Channels from CellCall. See "The Merger --Loan
and Option Agreement."
13
<PAGE> 16
ACCOUNTING TREATMENT
The Merger is expected to be accounted for under the "purchase
acquisition" method of accounting in accordance with generally accepted
accounting principles ("GAAP"). Under the "purchase acquisition" method, any
amount paid over the fair market value of the acquired company's assets is
reflected on the buyer's balance sheet as goodwill. See "The Merger--Accounting
Treatment."
FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a reorganization under Section
368(a) of the Internal Revenue Code (the "Code"), in which case no gain or loss
generally would be recognized by the stockholders of CellCall on the exchange of
their shares of CellCall Stock in the Merger (except with respect to any cash
received by such stockholders in lieu of fractional shares).
Treatment of the Merger as a tax-free reorganization under the Code is
not a condition to the obligations of Nextel or CellCall to consummate the
Merger. No rulings have been (or will be) requested from the Internal Revenue
Service with respect to any tax matters, and no opinions regarding tax matters
are required in connection with the Merger. If the Merger is not treated as a
reorganization under the Code or it is later determined that the Merger did not
qualify as a reorganization under the Code, the CellCall stockholders would
recognize taxable gain or loss in the Merger equal to the difference between the
fair market value of the Nextel Common Stock they received and their tax basis
in the CellCall Stock. Each CellCall stockholder should consult his own tax
advisor concerning the tax consequences of the Merger in his particular
individual circumstances. See "The Merger -- Federal Income Tax Consequences."
DISSENTERS' RIGHT OF APPRAISAL
The holders of shares of CellCall Stock who vote against or abstain
from voting on approval and adoption of the Merger and file a demand for
appraisal prior to the Meeting have the right to obtain a cash payment from the
Surviving Corporation for the "fair value" of their shares of CellCall Stock
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger). In order to exercise such rights, a holder of shares
of CellCall Stock must comply with the requirements set forth in Section 262 of
the DGCL, the full text of which is set forth as Appendix B to this Prospectus
Supplement. Nextel is not obligated to consummate the Merger if, among other
things, any holder of CellCall Stock is entitled to exercise dissenter's rights
under the DGCL. See "The Merger - Dissenters' Right of Appraisal."
D. SUMMARY FINANCIAL DATA
CELLCALL, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for
the periods indicated should be read in conjunction with the consolidated
financial statements, related notes and other financial information concerning
CellCall appearing elsewhere herein. The financial information for the years
ended December 31, 1994, 1995 and 1996 has been derived from the audited
consolidated financial statements of CellCall. The report (which contains an
explanatory paragraph indicating conditions exist that raise substantial doubt
about CellCall's ability to continue as a going concern, as discussed in Note 12
to the consolidated financial statements) of Potter & Company LLP, independent
certified public accountants, with respect to the years ended December 31, 1994,
1995 and 1996 is presented elsewhere herein. See "Experts." The financial
information for the nine months ended September 30, 1996 and 1997 is derived
from the unaudited financial statements of CellCall and, in the opinion of
CellCall, includes all adjustments, consisting of normal accruals, considered
necessary for a fair presentation of such information. The results of operations
for interim periods are not necessarily indicative of the results to be expected
for the full year. See "Index to Financial Statements."
14
<PAGE> 17
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
--------- ----------- ----------- ----------- -----------
INCOME STATEMENT DATA(1):
Revenues:
<S> <C> <C> <C> <C> <C>
Radio Service $ 507,513 $ 1,262,059 $ 2,311,437 $ 2,635,786 $ 2,862,625
Equipment, Sales &
Maintenance 101,629 575,004 1,980,683 2,771,639 3,170,257
--------- ----------- ----------- ----------- -----------
Total Revenues 609,142 1,837,063 4,292,120 5,407,425 6,032,882
Expenses:
Cost of Sales 175,700 657,645 1,845,777 2,439,976 2,659,264
Selling 102,206 416,201 502,414 416,731 499,588
General and
Administrative 588,604 1,419,673 2,588,729 2,217,534 2,604,362
Depreciation and
Amortization 285,926 892,372 2,198,195 2,333,704 2,337,643
Loss on Expired Purchase
Option 0 250,000 410,837 0 0
--------- ----------- ----------- ----------- -----------
Loss from Operations (543,294) (1,798,828) (3,253,832) (2,000,520) (2,067,975)
Interest Income 14,775 64,506 76,067 21,576 19,542
Interest Expense (262,473) (304,654) (1,090,657) (1,242,229) (1,012,170)
Other Income 0 0 0 71,592(2) 0
--------- ----------- ----------- ----------- -----------
Net Loss (790,992) (2,038,976) (4,268,422) (3,149,581) (3,060,603)
========= =========== =========== =========== ===========
Net Loss per Share (3) (3) (3) (3) (3)
Number of Shares Used (3) (3) (3) (3) (3)
in Computation
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
INCOME STATEMENT DATA(1):
Revenues:
Radio Service $ 2,130,336 $ 2,124,874
Equipment, Sales &
Maintenance 2,243,857 1,802,079
----------- -----------
Total Revenues 4,374,193 3,926,953
Expenses:
Cost of Sales 1,814,389 1,636,963
Selling 358,141 332,410
General and
Administrative 2,029,130 1,857,993
Depreciation and
Amortization 1,623,215 1,576,235
Loss on Expired Purchase
Option 0 0
----------- -----------
Loss from Operations (1,450,682) (1,476,648)
Interest Income 15,675 9,961
Interest Expense (952,871) (168,740)
Other Income 511 7,822
----------- -----------
Net Loss (2,387,367) (1,627,605)
=========== ===========
Net Loss per Share (3) (3)
Number of Shares Used (3) (3)
in Computation
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER
------------------ 30,
1992 1993 1994 1995 1996 1997
--------- ---------- ------------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash
Equivalents 581,682 6,741,402 1,360,736 697,217 373,427 442,925
Current Assets 701,915 7,080,604 1,944,754 1,507,707 1,373,905 1,151,155
Intangible Assets, Net 338,323 7,274,070 12,271,018 11,431,362 10,945,506 10,452,377
Total Assets 2,380,270 19,135,903 19,364,054 16,838,958 14,903,423 13,220,023
Long-Term Obligations 2,360,680 921,313 1,311,706 1,426,035 41,056 8,461
Stockholders' Equity (247,783) 9,494,599 5,226,177 2,077,696 10,535,555 8,907,950
(Deficit)
</TABLE>
(1) See Note 2 to the Notes to CellCall's consolidated financial
statements for the year ended December 31, 1996 for a description of
acquisitions.
(2) Other income in 1995 reflects debt forgiveness on negotiated legal
fees associated with previous acquisitions and refunds of over billed
telephone interconnect expenses.
(3) Net loss per common share is not meaningful due to the limited number
of shares of common stock, adjusted to reflect a 100-for-1 reverse
stock split in 1995, outstanding during the period and therefore is not
presented. The weighted average number of common shares outstanding
during the period does not include common equivalent shares since their
effect would be anti-dilutive.
E. COMPARATIVE PER SHARE DATA
The following tables set forth certain per share data for Nextel and
CellCall on a historical and pro forma combined basis, giving effect to the
Merger using the purchase method of accounting, as well as equivalent pro forma
per share data for CellCall. The unaudited pro forma combined per share data
provided below is not necessarily indicative of the results of operations or the
financial position which would have occurred had the Merger been consummated on
the indicated dates or which may be attained in the future and should be read in
conjunction with the historical consolidated financial statements of Nextel,
which are incorporated by reference in the Prospectus, and the historical
consolidated financial statements of CellCall
15
<PAGE> 18
appearing elsewhere herein. The unaudited pro forma combined per share data
below is shown for illustrative purposes only and assumes a Market Price of
$25.00 and an exchange ratio of 14.39 resulting in the anticipated issuance of
1,421,193 shares of Nextel Common Stock to CellCall stockholders based on the
assumptions set forth in the second paragraph under "Summary - C. The Merger -
Conversion of CellCall Stock in the Merger." The actual number of shares of
Nextel Common Stock to be issued to CellCall stockholders, and the related
exchange ratio, will be determined as of the Closing Date. See "The Merger -
Terms of the Merger - Conversion of CellCall Stock in the Merger."
NEXTEL COMMUNICATIONS, INC. - HISTORICAL
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
<S> <C> <C>
Per Share Data:
Book Value.................................................. $ 11.02 $ 8.85
Cash Dividends Declared..................................... $ -- $ --
Net Loss Attributable to Common Stockholders................ $ 2.50 $ 3.28
</TABLE>
CELLCALL, INC. - HISTORICAL
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
<S> <C> <C>
Per Share Data:
Book Value.................................................. $(16,387.30) $(35,957.44)
Cash Dividends Declared..................................... $ -- $ --
Net Loss Attributable to Common Stockholders................ $ 3,363.30 $ 2,616.73
</TABLE>
NEXTEL COMMUNICATIONS, INC. AND
CELLCALL, INC. - PRO FORMA COMBINED
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
<S> <C> <C>
Per Share Data:
Book Value.................................................. $ 11.11 $ 8.94
Cash Dividends Declared..................................... $ -- $ --
Net Loss Attributable to Common Stockholders................ $ 2.50 $ 3.27
</TABLE>
16
<PAGE> 19
CELLCALL, INC. - EQUIVALENT PRO FORMA
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
<S> <C> <C>
Per Share Data:
Book Value..................................... $159.84 $128.59
Cash Dividends Declared........................ $ -- $ --
Net Loss Attributable to Common Stockholders... $ 35.94 $47.10
</TABLE>
17
<PAGE> 20
RISK FACTORS RELATED TO MERGER
RISK TO COMMON STOCKHOLDERS
In the event the Market Value of the Acquisition Shares is not in
excess of the Preferences, each share of CellCall Common Stock shall be
converted into a right to receive shares of Nextel Common Stock at an exchange
ratio of 100 shares of CellCall Common Stock for 1 share of Nextel Common Stock.
In such event, there can be no assurance that the value of the Nextel Common
Stock issuable to holders of CellCall Common Stock would equal or exceed the
value of the CellCall Common Stock.
POTENTIAL CONTROL OF CELLCALL BY NEXTEL IF MERGER NOT APPROVED
In the event the Merger is not approved by the stockholders of
CellCall, Nextel may exercise its option to purchase 66% of the shares of
CellCall Stock. In such event, Nextel would have the ability to exert
significant influence over, or control, most of the aspects of CellCall's
business. See "The Merger -- Stock Purchase Option Agreement."
REPAYMENT OF LOAN TO NEXTEL IF MERGER NOT APPROVED
Pursuant to the Loan Agreement, Nextel Sub has agreed to loan CellCall
up to an aggregate of $2,357,250 to fund the purchase of the Option Channels. In
the event the Merger Agreement is terminated, such amount must be repaid within
a period not to exceed 90 days. In the event CellCall fails to timely repay the
indebtedness when due, Nextel may elect to acquire from CellCall the Option
Channels purchased therewith. If Nextel does not elect to acquire such channels,
CellCall would be required to repay the loan. See "The Merger -- Loan and Option
Agreement." There can be no assurance that CellCall could obtain the necessary
financing to repay the loan on acceptable terms, if at all.
FOR A DISCUSSION OF ADDITIONAL RISK FACTORS THAT MAY AFFECT THE VALUE
OF THE NEXTEL COMMON STOCK AND THEREFORE SHOULD BE CONSIDERED BY CELLCALL
STOCKHOLDERS BEFORE VOTING ON THE MERGER, SEE "RISK FACTORS" IN THE PROSPECTUS
DELIVERED HEREWITH.
THE MEETING
This Prospectus Supplement is being furnished in connection with the
solicitation of proxies by the CellCall Board for the Meeting to be held on
March 17, 1998 at 10:00 a.m., local time, at the offices of Hill & Barlow, 20th
Floor, One International Place, Boston, Massachusetts 02110. The purpose of the
Meeting is to consider and vote upon a proposal to approve the Merger Agreement.
Any CellCall stockholder who has previously delivered a properly executed proxy
may revoke such proxy at any time before its exercise. A proxy may be revoked
either by (i) delivering to the Secretary of CellCall prior to the Meeting
either a written revocation of such proxy or a duly executed proxy bearing a
later date or (ii) attending the Meeting and voting in person, regardless of
whether a proxy has previously been given. All valid, unrevoked proxies will be
voted as directed. In the absence of contrary directions, proxies will be voted
in favor of the proposal set forth in the Notice of Special Meeting. The
CellCall Board has fixed the close of business on February 3, 1998, as the
Record Date for the determination of stockholders entitled to notice of, and to
the extent any class of CellCall Stock is entitled to vote, to vote at, the
Meeting. The presence at the Meeting, in person or proxy, of the holders of (i)
a majority of the issued and outstanding shares of CellCall Common Stock, Series
A Preferred Stock and Series B Preferred Stock, on an as converted basis, and
(ii) a majority of the Series A Preferred Stock and Series B Preferred Stock, on
an as converted basis, will constitute a quorum for the transaction of business.
Abstentions will be counted in determining whether a quorum is present, will be
considered present and entitled to vote, and will thus have the effect of a
negative vote. The Merger Agreement must be approved by both (i) holders of a
majority of the issued and outstanding shares of CellCall Common Stock, Series A
Preferred Stock and Series B Preferred Stock, on an as converted basis, voting
as a class, and (ii) holders of at least two-thirds of the outstanding shares of
Series A Preferred Stock and Series B Preferred Stock, on an as converted basis,
voting as a class. As of the Record Date, there were (i) 925.1 shares of
CellCall Common Stock outstanding, each share of which is entitled to one vote
on all matters on which stockholders may vote, (ii) 1,668.92 shares of Series A
Preferred Stock outstanding entitled to one vote per share on an as converted
basis and (iii) 20,677.79 shares of Series B Preferred Stock outstanding
entitled to one vote per share on an as converted basis. As of the Record Date,
the directors and executive officers of CellCall and their affiliates
beneficially owned approximately 48.6% of the outstanding shares of CellCall
Common Stock and in excess of 97% of the outstanding shares of each series of
the Series A Preferred Stock and the Series B Preferred Stock.
18
<PAGE> 21
Approval of the Merger Agreement by the stockholders of Nextel is not
required by the Nextel Charter, Delaware law or the Merger Agreement. NFC, the
sole stockholder of Merger Sub, has approved the Merger Agreement on behalf of
Merger Sub.
THE MERGER
BACKGROUND OF MERGER
CellCall was formed in 1988 and grew through grants of licenses from
the FCC and business acquisitions. In 1993, after CellCall had established its
operations and customer base, CellCall's management began exploring alternatives
for enhancing stockholder value, including an initial public offering of
CellCall's capital stock and/or locating a strategic business partner, with the
objectives of accelerating CellCall's growth, expanding the geographic footprint
of its networks and obtaining access to greater capital resources.
In 1993, CellCall engaged Merrill Lynch & Company to conduct a private
placement of CellCall debt securities and warrants for CellCall Common Stock,
and anticipated that it might engage in an initial public offering of the
CellCall Common Stock the following year. Due to market considerations, CellCall
abandoned this plan prior to the proposed private placement. Later that year,
CellCall engaged Salomon Brothers to investigate opportunities for the sale of
CellCall or an interest in CellCall, whether through a merger, a sale of assets
or a sale of equity interests.
Throughout late 1993 and 1994, CellCall engaged in substantive
discussions with five companies in the telecommunications industry regarding a
potential business combination. These companies included three larger public
companies, including Nextel, and two privately-held companies of comparable size
to CellCall. CellCall's negotiations with these companies reached various stages
of commitment but all eventually terminated, either because of disagreement on
valuation or because the company with which CellCall was negotiating was
acquired by Nextel.
Nextel and CellCall have been engaged in similar, and at times
competitive, business activities and have been aware of one another since
CellCall's formation. At various times over the past several years,
representatives of Nextel and CellCall have met in the course of their business
activities and have had general discussions concerning their respective
businesses and prospects. As the industry began to consolidate, these
conversations turned toward possible business combinations between the two
companies.
In May 1994, the discussions became more specific when representatives
of Nextel and CellCall met and exchanged draft documents regarding a possible
merger between a Nextel subsidiary and CellCall. Nextel conducted some
preliminary due diligence on CellCall's business at that time. The parties
ceased negotiations in late June 1994, however, primarily because the parties
were unable to reach agreement on valuation.
In late 1995, the FCC announced that an auction of channels in the 800
MHz frequency range would be held. The auction would require CellCall to bid
against larger companies like Nextel for channels in the markets in which it
operated. CellCall's management was concerned that CellCall might not be able to
compete effectively in the auction because it had fewer cash resources than many
larger companies, and therefore began to reconsider the advisability of a merger
with a larger company.
In September 1996, J.P. Harris, the Chairman and Chief Executive
Officer of CellCall, approached John Willmoth, Vice President of Strategy for
Nextel, about the possibility of a business combination between the two
companies. Because the companies were familiar with one another and had
previously engaged in merger discussions, they were soon able to reach an
agreement in principle as to the basic terms of the transaction, which were set
forth in a letter dated November 14, 1996 from Mr. Willmoth to Mr. Harris. This
agreement in principle, among other things, provided for a tax-free merger of
CellCall with a Nextel subsidiary; the issuance to CellCall stockholders of a
maximum of 1,750,000 shares of Nextel Common Stock; delivery of 95% of the
channels held by CellCall in identified metropolitan statistical areas (each, an
"MSA"), with a reduction in the purchase price for each channel by which
CellCall was below such target in any particular MSA; a reduction in the
purchase price for CellCall liabilities in excess of its assets; and the
assumption by Nextel of CellCall's contingent obligations related to licenses
and assets not owned by CellCall at the time of consummation of a transaction.
Nextel enclosed a due diligence checklist with the letter, requesting copies of
or access to various CellCall records and documents and other information about
CellCall's financial condition and operations.
On November 27, 1996, the first draft of the merger agreement was
distributed by Jones, Day, Reavis & Pogue, counsel to Nextel ("Jones, Day"), to
CellCall and its representatives, including Hill & Barlow.
19
<PAGE> 22
Thereafter, the parties engaged periodically in discussions with
respect to whether CellCall's stockholders would be required to be parties to
the agreement, as Nextel was interested in obtaining assurance that the
transaction would occur, and the scope of any indemnification obligation of the
stockholders.
On February 11, 1997, CellCall sent its comments to the draft merger
agreement to Nextel. The main outstanding business issues identified were
determining: (i) channel value, (ii) adjustments to the merger consideration to
reflect cash flow and working capital deficiencies; (iii) the channel delivery
test; (iv) escrow provisions; (v) stockholder liability; (vi) CellCall's
representations, including financial statement representations; (vii)
registration requirements; and (viii) indemnification.
Thereafter, the parties agreed that the merger agreement would be
executed by CellCall and would be subject to stockholder approval by CellCall
stockholders, but Nextel and CellCall would negotiate a mechanism to protect
Nextel in the event CellCall failed to obtain stockholder approval of the
transaction. To obtain such protection, Nextel proposed that it would be granted
an option pursuant to which (i) Nextel or a direct or indirect subsidiary would
have the right to purchase from CellCall licenses and associated repeater
equipment for 25 discrete channels (selected by Nextel) in each of the
Cincinnati, Columbus, Indianapolis, Louisville and Lexington markets for an
aggregate purchase price of $2 million in cash and (ii) CellCall would agree to
exchange all remaining "upper 200" SMR channels in all markets for the same
number of "other" SMR channels from Nextel.
The CellCall Board met via teleconference on March 21, 1997, at which
time the progress of the merger negotiations was discussed, as well as
outstanding business issues regarding indemnification of Nextel by CellCall
stockholders under the agreement and the proposal by Nextel regarding an option
to acquire certain channels.
On April 1, 1997, Thomas J. Sidman, General Counsel of Nextel, Frank
Ciavarella, Special Counsel -- Mergers and Acquisitions of Nextel, Messrs.
Willmoth and Harris and a representative of Hill & Barlow met via telephone
conference to discuss Nextel's proposed option to acquire certain channels from
CellCall in the event the merger were not consummated. The parties agreed that
in lieu of such proposal, stockholders of CellCall would commit to sell to
Nextel up to 66% of the CellCall Stock (the "stock purchase option") if the
merger agreement were not approved by the requisite vote of CellCall
stockholders.
On April 4, 1997, the members of the CellCall Board held a
teleconference to discuss the progress of the merger negotiations, particularly
the stock purchase option proposal. In addition, on that date the CellCall Board
approved by unanimous written consent the authorization and issuance of Series C
Preferred Stock to Mr. Harris in exchange for 450 shares of CellCall Common
Stock. The CellCall Board determined that the exchange transaction was in the
best interests of CellCall and its stockholders because Mr. Harris would be
instrumental in completing the transaction and the structure of the Incentive
Shares would provide additional incentive to Mr. Harris to assure the minimum
adjustment to the merger consideration with respect to the channel delivery and
working capital requirements, thus protecting the value to the stockholders.
On April 9, 1997, during a conference call among Messrs. Willmoth and
Ciavarella, Max Fainberg, Manager of Corporate Strategy for Nextel, a
representative of Jones, Day, Mr. Harris and representatives of Hill & Barlow,
the parties discussed certain third-party releases; the type of consideration to
be paid to CellCall option holders; payment of certain of CellCall's outstanding
debts after consummation of the merger; termination at closing of all
outstanding registration rights agreements pertaining to CellCall Stock; and the
advisability of the proposed stock purchase option to enable Nextel to buy 66%
of the CellCall Stock in the event that CellCall's stockholders failed to
approve the merger agreement.
During a subsequent conference call on April 14, 1997 among the same
individuals, the parties further discussed the form of consideration to be
received by holders of CellCall Stock and optionees; the nature of the events
that would trigger Nextel's option pursuant to the stock purchase option
agreement; and CellCall's intention to circulate the stock purchase option
agreement and the merger agreement to the CellCall Board the following day.
On April 16, 1997, the draft merger agreement and a memorandum
summarizing the major features of the proposed merger agreement and stock
purchase option agreement were distributed to the CellCall Board by Hill &
Barlow.
On April 17, 1997, the CellCall Board unanimously approved the terms of
the merger agreement between Nextel and CellCall, and holders of a majority of
the issued and outstanding shares of CellCall Common Stock and all of the shares
of Preferred Stock entered into the stock purchase option agreement. The
CellCall Board authorized the execution of the merger agreement by the officers
of CellCall upon correction of certain factual issues pertinent to the schedules
thereto.
20
<PAGE> 23
On April 17 and April 18, 1997, the parties reviewed the schedules to
the merger agreement.
The Merger Agreement was executed by the parties on April 22, 1997.
REASONS OF CELLCALL BOARD FOR APPROVING THE MERGER; RECOMMENDATION OF THE
CELLCALL BOARD
The CellCall Board has determined that the Merger is fair to, and in
the best interests of, CellCall and its stockholders. The CellCall Board
considered the following material factors in approving the terms of the Merger
Agreement:
(1) As a result of the Merger, CellCall will benefit by
becoming part of Nextel, which has the largest geographic footprint of
any SMR wireless communications provider in the United States.
(2) The CellCall Board reviewed the historical and current
financial condition, results of operations, prospects and businesses of
CellCall and Nextel before and after giving effect to the Merger.
(3) The Merger will benefit CellCall's business and operations
by providing greater economies of scale as part of Nextel.
(4) The Merger will provide CellCall's stockholders with an
equity interest in a larger, higher growth wireless communications
provider with stronger capitalization and with depth of management and
technical personnel.
(5) It is expected that the Merger will afford CellCall's
stockholders the opportunity to receive Nextel Common Stock in a
tax-free transaction.
(6) The Merger is expected to benefit CellCall's subscribers
because of greater channel capacity, expanded features with digital
build-out and extended roaming capabilities.
(7) CellCall will have greater ability to access capital as
part of Nextel in order to accomplish a digital build-out in markets
within CellCall's geographic footprint.
(8) CellCall is limited in its ability to compete effectively
with other wireless communications providers, including Nextel,
cellular providers and PCS providers with greater access to capital.
(9) The CellCall Board believes the consideration to be
received by CellCall's stockholders pursuant to the Merger Agreement is
fair from a financial point of view to CellCall's stockholders.
The CellCall Board also took into account the following negative
aspects of the Merger Agreement:
(1) The Nextel Share Base limits the number of shares of
Nextel Common Stock that CellCall's stockholders will receive in the
Merger.
(2) Possible decreases in the Nextel Share Base resulting from
various possible adjustments may decrease the number of shares of
Nextel Common Stock that CellCall's stockholders will receive in the
Merger.
(3) CellCall's ability to expand its business is limited by
the terms of the Merger Agreement and in the event that the Merger is
not consummated, CellCall's business could be adversely affected.
(4) The Merger Agreement requires that stockholders holding at
least 90% in interest in CellCall Stock provide indemnification for
breaches of CellCall's representations and warranties set forth in the
Merger Agreement.
After taking into consideration the factors described above, the
CellCall Board on April 17, 1997 unanimously approved the Merger Agreement. In
view of the wide variety of factors considered in its evaluation of the Merger
Agreement and the Merger, the CellCall Board did not find it practicable to, and
did not, quantify or otherwise attempt to assign relative weights to specific
factors considered in reaching its determination.
21
<PAGE> 24
made BASED UPON THE FACTORS CONSIDERED, THE CELLCALL BOARD UNANIMOUSLY
RECOMMENDS THAT CELLCALL STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
REASONS OF NEXTEL FOR ENGAGING IN THE MERGER
The Board of Directors of Nextel (the "Nextel Board") believes that the
acquisition of CellCall will expand its overall spectrum position in the markets
in which CellCall operates and will add spectrum in certain additional markets
and, accordingly, will be beneficial to obtaining key objectives of Nextel's
business plan.
TERMS OF THE MERGER
The following is a summary of certain of the terms and conditions of
the Merger Agreement, a copy of which is attached hereto as Appendix A, which is
hereby incorporated by reference herein.
Effective Time. The Merger shall become effective when both (i) the
Merger Agreement is adopted and approved by the stockholders of CellCall in
accordance with the applicable provisions of the DGCL and (ii) the Certificate
of Merger, executed in accordance with the relevant provisions of the DGCL, is
filed with the Secretary of State of Delaware (the time the Merger becomes
effective being referred to herein as the "Effective Time of the Merger" or the
"Closing").
General Effects of the Merger. At the Effective Time of the Merger,
Merger Sub will merge with and into CellCall, which will be the Surviving
Corporation and a wholly-owned indirect subsidiary of Nextel. After the
Effective Time of the Merger, the Certificate of Incorporation and By-laws of
Merger Sub as in effect immediately prior thereto shall constitute the
Certificate of Incorporation and By-laws of the Surviving Corporation.
General. At the Effective Time of the Merger, shares (and rights to
acquire shares) of CellCall Stock shall be converted into shares (and rights to
acquire shares) of Nextel Common Stock in the following manner: each share of
CellCall Common Stock and Preferred Stock outstanding immediately prior to the
Effective Time of the Merger will be canceled and extinguished and be converted
automatically into the right to receive shares of Nextel Common Stock, in
accordance with the Merger Agreement. The Merger Agreement sets forth (i) the
total number of outstanding shares of CellCall Stock on the date of the Merger
Agreement (the "Benchmark Shares") and (ii) the total number of shares of
CellCall Stock issuable upon exercise of warrants or options or upon exchange or
conversion of convertible instruments (the "Benchmark Derivatives" and
collectively with the Benchmark Shares, the "CellCall Share Base") on such date.
The maximum number of shares of Nextel Common Stock to be issued at the
Effective Time of the Merger, with respect to the CellCall Share Base, together
with any CellCall Stock, or options, warrants, convertible or exchangeable
instruments or other commitments to issue CellCall Stock outstanding at the
Effective Time of the Merger that are not Benchmark Shares or Benchmark
Derivatives (such additional CellCall Stock or issuance commitments, the
"Dilutive CellCall Common Equivalents" and together with the CellCall Share
Base, the "Actual CellCall Common Equivalents") shall be 1,750,000 (the "Nextel
Share Base") subject to increase only as described under "-Conversion of
CellCall Stock in the Merger -- (c) Conversion of CellCall Common Stock in the
event the Residual Amount is Zero" or in the event of certain changes to the
capitalization of Nextel, and to decrease only as described below (as so
adjusted at the Effective Time of the Merger, the "Acquisition Shares").
The Nextel Share Base is subject to reduction to reflect (i) shortfalls
in channels delivered pursuant to the Merger Agreement, (ii) negative cash flow
of CellCall, (iii) negative working capital of CellCall, (iv) transaction costs
and severance costs that exceed certain limits, (v) changes in the terms of the
authorized capital stock of Nextel, dividends paid or share distributions by
Nextel and (vi) if at the Effective Time of the Merger, CellCall does not have
cash in an amount equal to the aggregate exercise price due upon the exercise of
Benchmark Derivatives exercised prior to the Effective Time of the Merger or has
issued any shares of CellCall Stock in respect of any Benchmark Derivatives in a
cashless exercise, the amount of cash that would have been received in respect
thereof. In addition, the Nextel Share Base will be reduced to reflect a loan
made by Nextel to CellCall as described under "- Loan and Option Agreement."
Conversion of CellCall Stock in the Merger. The following summarizes
the terms of the Merger Agreement related to the conversion of CellCall Stock
into Nextel Common Stock.
(a) Conversion of CellCall Stock in the event the Market Value of the
Acquisition Shares is sufficient to satisfy all Preferences. If the Acquisition
Shares have a Market Value that is at least equal to the sum of the Preferences,
then, at the Effective Time of the Merger:
22
<PAGE> 25
(i) each share of Series A Preferred Stock shall be
converted into (x) that number of shares of Nextel Common Stock having
a Market Value equal to the Series A Preference, plus (y) the Residual
Amount (as such term is defined below), if any;
(ii) each share of Series B Preferred Stock shall be
converted into (x) that number of shares of Nextel Common Stock having
a Market Value equal to the Series B Preference, plus (y) the Residual
Amount, if any;
(iii) each share of Series C Preferred Stock shall be
converted into that number of shares of Nextel Common Stock equal to a
fraction, the numerator of which is 35,000 plus the number of shares of
Series C Preferred Stock (not to exceed 17,500) designated as Incentive
Shares as described below and the denominator of which is 52,500; and
(iv) each share of CellCall Common Stock shall be
converted into the Residual Amount, if any, subject to the limitations
described under " (c) -- Conversion of CellCall Common Stock in the
event the Residual Amount is Zero."
As used herein, the following terms have the following meanings:
"Aggregate Series A Preference" means the product obtained by
multiplying the Series A Preference by the number of shares of Series A
Preferred Stock.
"Aggregate Series B Preference" means the product obtained by
multiplying the Series B Preference by the number of shares of Series B
Preferred Stock.
"Aggregate Series C Preference" means the product obtained by
multiplying the Series C Preference by the number of shares of Series C
Preferred Stock.
"Residual Amount" means the number of shares of Nextel Common Stock
obtained by dividing (i) the number of Acquisition Shares, less both (x) the
number of shares of Nextel Common Stock having a Market Value equal to the sum
of the Aggregate Series A Preference and the Aggregate Series B Preference, and
(y) the number of shares of Nextel Common Stock used to satisfy the Series C
Preference, by (ii) the Actual CellCall Common Equivalents, less 35,000 plus the
number of Incentive Shares.
"Incentive Shares" means up to 17,500 shares of the Series C Preferred
Stock designated as such as of the Closing by the CellCall Board pursuant to the
terms of the CellCall Charter. The number of shares of Series C Preferred Stock
to be designated Incentive Shares shall be determined by subtracting the sum of
(a) $2,700,000 less the adjustments due to shortfalls in channels delivered
divided by $237.36 and (b) $400,000 less the adjustment for negative working
capital, if any, divided by $65.31, from 17,500.
(b) Conversion of CellCall Preferred Stock in the event the Market
Value of the Acquisition Shares is not sufficient to satisfy all Preferences. If
the Acquisition Shares have a Market Value that is not at least equal to the
Preferences, then, at the Effective Time of the Merger:
(i) (x) each share of Series A Preferred Stock shall be
converted into that number of shares of Nextel Common Stock having a
Market Value determined by multiplying the Series A Preference by a
fraction, the numerator of which is the lesser of $15,000,000 and the
Market Value of the Acquisition Shares and the denominator of which is
the sum of the Aggregate Series A Preference plus the Aggregate Series
B Preference, and (y) each share of Series B Preferred Stock shall be
converted into that number of shares of Nextel Common Stock having a
Market Value determined by multiplying the Series B Preference by a
fraction, the numerator of which is the lesser of $15,000,000 and the
Market Value of the Acquisition Shares and the denominator of which is
the sum of the Aggregate Series A Preference plus the Aggregate Series
B Preference (collectively, the "Senior Preference").
(ii) if the Market Value of the Acquisition Shares exceeds
$15,000,000 (i.e., fewer than all of the Acquisition Shares are needed
to be issued in satisfaction of the Senior Preference), then each share
of Series C Preferred Stock shall be converted into that number of
shares of Nextel Common Stock equal to the Series C Preference
multiplied by a fraction, the numerator of which is the lesser of
52,500 and that number of Acquisition Shares remaining after payment of
the Senior Preference and the denominator of which is 52,500.
23
<PAGE> 26
(iii) if the Acquisition Shares both have a Market Value
which exceeds $15,000,000 and includes an additional number of shares
of Nextel Common Stock sufficient to satisfy the full amount of the
Aggregate Series C Preference, then, in addition to the Senior
Preference, (x) each share of Series A Preferred Stock shall be
converted into that number of additional shares of Nextel Common Stock
having a Market Value determined by multiplying the Series A Preference
by a fraction, the numerator of which is the Market Value of the
Acquisition Shares which remain after payment of the Senior Preference
and conversion of the Series C Preferred Stock, and the denominator of
which is the sum of the Aggregate Series A Preference plus the
Aggregate Series B Preference; and (y) each share of Series B Preferred
Stock shall be converted into that number of additional shares of
Nextel Common Stock having a Market Value determined by multiplying the
Series B Preference by a fraction, the numerator of which is the Market
Value of the Acquisition Shares which remain after payment of the
Senior Preference and conversion of the Series C Preferred Stock, and
the denominator of which is the sum of the Aggregate Series A
Preference plus the Aggregate Series B Preference.
(c) Conversion of CellCall Common Stock in the event the Residual
Amount is Zero. If the Residual Amount is zero, each share of CellCall Common
Stock shall be converted into a right to receive shares of Nextel Common Stock
at an exchange ratio of 100 to 1 (100 shares of CellCall Common Stock for 1
share of Nextel Common Stock) (the "Exchange Ratio"), provided that in lieu of
fractional share interests to persons otherwise entitled to receive such
fractional share interests, Nextel shall deliver to such persons a number of
whole shares, determined by rounding up to the nearest whole share.
Adjustments to Merger Consideration. Pursuant to the terms of the
Merger Agreement, the consideration to be received by CellCall stockholders in
the Merger will be adjusted under certain circumstances, as follows:
(a) Nextel Share Base Adjusted for Channels Not Delivered. If at
the time of the Closing the number of Channels Delivered (as herein defined) by
CellCall is (i) less than 95% of the number of Channels identified in the Merger
Agreement in any MSA identified in the Merger Agreement (each such MSA, a
"Shortfall Market"), or (ii) fewer than 228 Channels in all market areas not
identified in the Merger Agreement (each such Channel, a "Non-core Market
Channel"), then (A) for each Shortfall Market the Channel value set forth in the
Merger Agreement for that Shortfall Market shall be multiplied by the difference
between 95% of the number of Channels set forth in the Merger Agreement for that
Shortfall Market minus the number of Channels Delivered in that Shortfall Market
and (B) for the Non-core Market Channels, the shortfall, if any, between 228 and
the number of Non-core Market Channels Delivered shall be multiplied by $3,000
(the product of each calculation, a "Market Adjustment"). The number of shares
of Nextel Common Stock equal to (i) the sum of all such Market Adjustments, if
any, divided by (ii) $16.00, shall be subtracted from the Nextel Share Base.
Each channel that has extended implementation authority identified in
the Merger Agreement (an "Extended Implementation Channel") that has a deadline
for construction on or after June 30, 1998, will be deemed constructed as
required by the Merger Agreement for purposes of determining whether such
Extended Implementation Channel is Delivered regardless of when the date of the
Closing occurs, so long as any postponements of the date of the Closing are not
caused by the action or inaction of CellCall.
A "Channel" shall be "Delivered" by CellCall if at the Effective Time
of the Merger: (i) the FCC license for such channel has been granted to CellCall
or a CellCall subsidiary by a Final Order (as defined herein); (ii) except for
Option Channels, there is a Final Order approving a transfer of control of that
license to Nextel; (iii) for those Channels that are not Extended Implementation
Channels, if unconstructed or deconstructed, there are at least 180 days
remaining before the construction or reconstruction deadline applicable to that
channel; (iv) in the case of a channel counted towards or applicable to an MSA
market target, such channel is located within 25 miles of the core of the
applicable MSA (except for those Channels identified in the Merger Agreement to
which the 25-mile limit shall not apply); (v) in the case of a channel counted
towards or applicable to an MSA market target, there is no co-channel license
located within 55 miles of the channel, except for co-channel licenses that are
CellCall, CellCall subsidiaries or licenses controlled by Nextel; (vi) the
channel is a land mobile 800 MHz frequency, being one of the 430 frequencies
allocated for SMR; (vii) the channel is granted pursuant to a primary license;
(viii) in the case of a channel counted towards or applicable to an MSA market
target, such channel is a discrete frequency within the applicable market and
not subject to any cross border frequency sharing or channel coordination or
similar arrangement, taking into account all frequencies deemed Delivered
pursuant to the Merger Agreement in that market; (ix) the license for or
including the channel is not subject to (A) any agreement to be sold to a third
party, or (B) any option or right of first refusal in favor of any third party;
(x) there is no contract right of any third party or FCC order otherwise
encumbering or limiting the use of the license; (xi) except for Option Channels,
no consideration is due to any person in connection with the channel; and (xii)
the channel is not subject to any finders' preference action (other than the
pending appeal of a favorable FCC Ruling) or otherwise included within any
proceeding commenced or assessed by a
24
<PAGE> 27
third party (other than Nextel) or any regulatory agency, including, without
limitation, the FCC, that could result in a take-back, termination, cancellation
or nonrenewal of the relevant licenses.
Option Channels shall be deemed Delivered provided (i) such channels
meet all the conditions set forth in the preceding paragraph, and (ii)
applications for transfer of any such Option Channels from the option holder to
CellCall and from CellCall to Nextel are on file with the FCC at Closing. The
number of shares of Nextel Common Stock equal to (i) the sum of all amounts paid
or payable to any third party upon exercise of any option to acquire any Option
Channel (including any management payments owed which have not previously been
paid), if any, plus any amounts paid to third parties by CellCall as
contemplated by the Merger Agreement to resolve any finders' preferences, short
space or other conflicts relating to any SMR Channel, divided by (ii) $16.00,
shall be subtracted from the Nextel Share Base. The Merger Agreement also
identifies those options that CellCall will not exercise at any time and for
which no adjustments for amounts payable thereunder will be effected.
(b) Adjustment for Negative Cash Flow. If Adjusted EBITDA Earnings for
the six-month period immediately preceding the Effective Time of the Merger is
negative, that amount shall be annualized (i.e. doubled) to equal the loss that
CellCall would have experienced in a twelve-month period at that rate of loss,
and the number of shares of Nextel Common Stock equal to (i) such annualized
amount, divided by (ii) $16.00, shall be subtracted from the Nextel Share Base.
"Adjusted EBITDA Earnings" means CellCall's earnings from continuing operations
as shown on the unaudited consolidated financial statements that are prepared by
CellCall in the ordinary course of business consistent with past practice, (a)
before interest expense, taxes, depreciation, amortization, other income and
expense, all determined in accordance with past practices, to the extent
consistent with GAAP, (b) without reduction for Severance Costs (as herein
defined) and (c) without reduction for Transaction Costs (as herein defined).
(c) Adjustment for Negative Working Capital. Based on the unaudited
consolidated balance sheet of CellCall as of the month-end preceding the
Effective Time of the Merger prepared by CellCall in the ordinary course of
business, consistent with past practices, if the working capital (as herein
defined) of CellCall is negative, the number of shares of Nextel Common Stock
equal to (i) the negative amount of such working capital, divided by (ii)
$16.00, shall be subtracted from the Nextel Share Base. "Working capital" means
the result obtained by subtracting current liabilities from current assets, with
certain adjustments set forth in the Merger Agreement.
(d) Adjustment for Option/Warrant Exercise. If at the Effective Time of
the Merger, CellCall (on a consolidated basis) does not have cash in an amount
equal to the aggregate exercise price or other consideration due upon exercise,
exchange or conversion under the terms of the Benchmark Derivatives (as those
instruments were in effect on the date of the Merger Agreement) exercised prior
to the Effective Time of the Merger, or has issued any shares of CellCall Stock
in respect of any Benchmark Derivatives in any cashless exercise transaction,
the Nextel Share Base shall be reduced by that number of shares of Nextel Common
Stock equal to (i) the difference between the amount of cash that should have
been received upon such exercise and the actual amount of cash received upon
such exercise and held at the Effective Time of the Merger, divided by (ii)
$16.00.
(e) Adjustment for Transaction Costs and Severance Costs. To the extent
the amount of (i) the reasonable accounting, legal, filing, printing and
financial advisory fees and expenses associated with the Merger Agreement and
the transactions contemplated thereby (the "Transaction Costs") incurred by
CellCall exceed $300,000 or (ii) the amounts paid or to be paid to CellCall
executives as severance as a result of the Merger (the "Severance Costs") exceed
$265,000, then that number of shares of Nextel Common Stock equal to (A) the
combined amount of such excess Transaction Costs and such excess Severance Costs
divided by (B) $16.00, shall be subtracted from the Nextel Share Base.
(f) Other Adjustments. In the event of any change in the terms of the
authorized capital stock of Nextel (other than a change solely in the number of
shares), or the declaration or payment of any share dividend or share
distribution by Nextel to its stockholders, or any distribution of cash,
property or securities by Nextel to its stockholders (other than regular
quarterly cash dividends payable out of earnings), or any split,
reclassification, recapitalization, subdivision or exchange in respect of the
outstanding stock of Nextel, then appropriate adjustments shall be made to the
number of shares of Nextel Common Stock issuable in the Merger, to place each of
Nextel, NFC and Merger Sub, CellCall and the holders of CellCall Stock in the
same posture as if the Effective Time of the Merger had occurred immediately
prior to the occurrence of the event giving rise to such adjustment. Further, in
the event of any change in the terms of the authorized capital stock of
CellCall, or any distribution of securities by CellCall to its stockholders, or
any split, reclassification, recapitalization, subdivision or exchange in
respect of the outstanding stock of CellCall, appropriate adjustments shall be
made to place each of Nextel, Merger Sub, CellCall and the holders of CellCall
Stock in the same posture as if the Effective Time of the Merger had occurred
immediately prior to the occurrence of the event giving rise to such adjustment.
No adjustment shall be made
25
<PAGE> 28
pursuant to the preceding sentence for redemptions, repurchases or other
cancellation or retirement of outstanding shares of CellCall Stock or rights to
acquire shares of CellCall Stock.
Fractional Shares. No fractional share of Nextel Common Stock or
certificates or scrip therefor will be issued as a result of the conversion of
issued and outstanding CellCall Stock into Nextel Common Stock, but in lieu of
each fractional share interest there shall be made a payment in cash therefor,
without interest, at a pro rata price based on the Market Price. Nextel may (in
its sole and absolute discretion) deliver to persons otherwise entitled to
receive fractional share interests a number of whole shares, determined by
rounding up to the nearest whole share.
Assumption of Stock Options. Each CellCall Stock Option outstanding
immediately prior to the Effective Time of the Merger shall be converted at the
Effective Time of the Merger into an option that may be exercised only for
shares of Nextel Common Stock as follows: (i) if the Residual Amount is greater
than zero, each CellCall Stock Option shall at the Effective Time of the Merger
become an option to purchase a number of shares of Nextel Common Stock equal to
the amount arrived at by multiplying the number of shares of CellCall Stock
subject to such option immediately prior to the Effective Time of the Merger, by
the Residual Amount, and the exercise price per share of Nextel Common Stock at
which each such CellCall Stock Option is exercisable shall be the amount
(rounded up to the next whole cent) arrived at by dividing the exercise price
per share of CellCall Common Stock at which such CellCall Stock Option is
exercisable immediately prior to the Effective Time of the Merger by the
Residual Amount; or (ii) if the Residual Amount is zero, each such CellCall
Stock Option shall at the Effective Time of the Merger become an option to
purchase a number of shares of Nextel Common Stock equal to the amount arrived
at by multiplying the number of shares of CellCall Stock subject to such option
immediately prior to the Effective Time of the Merger, by the Exchange Ratio and
the exercise price per share of Nextel Common Stock at which each such CellCall
Stock Option is exercisable shall be the amount (rounded up to the next whole
cent) arrived at by dividing the exercise price per share of CellCall Common
Stock at which such CellCall Stock Option is exercisable immediately prior to
the Effective Time of the Merger by the Exchange Ratio. Notwithstanding the
foregoing, Nextel shall not issue or pay for any fractional share otherwise
issuable upon any exercise by any holder of CellCall Stock Options that are so
converted, and provided, however, that in the case of each CellCall Stock Option
which is an incentive stock option, the Residual Amount shall be adjusted for
such option, if necessary, so as not to constitute a modification, extension or
renewal of the option, within the meaning of Section 424(h) of the Code.
Warrants. At the Effective Time of the Merger, outstanding Warrants to
purchase shares of CellCall Stock shall be assumed by Nextel. Each Warrant shall
thereafter evidence a warrant to purchase the number of shares of Nextel Common
Stock into which the number of shares of CellCall Stock issuable pursuant to
such Warrant would have been converted in the Merger, at an exercise price equal
to the amount per share (rounded up to the next whole cent) arrived at by
dividing the aggregate exercise price under such Warrant by the number of shares
of Nextel Common Stock purchasable thereunder.
Exchange of Certificates. Prior to the Effective Time of the Merger,
Nextel shall designate a bank or trust company to act as the Exchange Agent in
the Merger. Promptly after the Effective Time of the Merger, Nextel shall cause
the Exchange Agent to mail to each holder of record of Certificates that
immediately prior to the Effective Time of the Merger represented outstanding
shares of CellCall Stock, a letter of transmittal and instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Nextel Common Stock and any cash payable in lieu of
fractional share interests at a pro rata price based on the Market Price;
provided, however, that Nextel may deliver to persons otherwise entitled to
receive fractional share interests a number of whole shares, determined by
rounding up to the nearest whole share. Upon surrender to the Exchange Agent of
a Certificate or Certificates, together with a letter of transmittal duly
executed, and such other documents as the Surviving Corporation or the Exchange
Agent may reasonably request, a holder of a Certificate shall be entitled to
receive the Merger Consideration. Subsequent to the Effective Time of the Merger
and until surrendered, a holder's Certificates for CellCall Stock shall be
deemed for all corporate purposes, other than the payment of dividends, to
evidence the number of whole shares of Nextel Common Stock into which the shares
of CellCall Stock formerly evidenced thereby have been converted by the Merger
and the right to receive any cash payable in lieu of any fractional share
interests resulting therefrom.
Payment of Dividends Unless and until any outstanding Certificates for
shares of CellCall Stock are surrendered, no dividend payable to holders of
record of Nextel Common Stock as of any date subsequent to the Effective Time of
the Merger shall be paid to the holder of any such Certificates, but upon such
surrender of such Certificates there shall be paid to the record holder of the
certificate for Nextel Common Stock issued in exchange therefor the amount of
dividends, if any, but without interest, that have theretofore become payable
subsequent to the Effective Time of the Merger with respect to the number of
whole shares of Nextel Common Stock represented by the certificate issued upon
such surrender and exchange.
26
<PAGE> 29
Limitations on Transferability of Nextel Common Stock. Shares of Nextel
Common Stock received by certain persons deemed to be "affiliates" of CellCall
for purposes of Rule 145 under the Securities Act will be subject to the
restrictions imposed by such rule. In accordance with Rule 145, an affiliate of
CellCall receiving Nextel Common Stock issued in the Merger may not sell such
shares except pursuant to the volume and manner of sale limitations and other
requirements specified therein or pursuant to an effective registration
statement under the Securities Act. It is a condition to the obligation of
Nextel to consummate the Merger that Nextel shall have received from each
affiliate of CellCall a letter confirming that such person will not sell or
otherwise dispose of the shares of Nextel Common Stock received by such person
as a result of the Merger other than in compliance with Rule 145 or pursuant to
a registration statement or pursuant to any other available exemptions from the
registration requirements of the Securities Act. In general, directors, officers
and substantial beneficial owners of a corporation's securities may be deemed to
be "affiliates" of a corporation.
Hart-Scott-Rodino. The Merger is subject to the requirements of the HSR
Act, which provide that certain acquisition transactions (including the Merger)
may not be consummated until certain information has been furnished to the
Antitrust Division and the FTC and certain waiting period requirements have been
satisfied. Nextel and CellCall filed the required information and material with
the Antitrust Division and the FTC and were notified of the early termination of
the waiting period on June 27, 1997. Satisfaction of the waiting period
requirement will not preclude the Antitrust Division, the FTC or any other party
either before or after the Effective Time of the Merger from challenging or
seeking to delay or enjoin the Merger on antitrust or other grounds. There can
be no assurance that such a challenge, if made, would not be successful.
Federal Communications Commission. The transfer of control of the
licenses granted by the FCC and held by CellCall and certain pending
applications of CellCall, which will occur as a result of the Merger, is subject
to prior FCC approval pursuant to the requirements of the Communications Act and
the rules of the FCC. Although the relevant applications have been filed with
the FCC, there can be no assurance that the FCC will grant such approval prior
to the date of the Meeting, if at all.
Representations and Warranties of CellCall. In addition to customary
representations and warranties with regard to corporate organization and
authority and capitalization, the Merger Agreement contains representations and
warranties by CellCall regarding (i) compliance with laws; (ii) absence of
conflicts with any applicable laws, rules or regulations of any tribunal,
charter documents or any other agreement, indenture or other instruments; (iii)
litigation matters; (iv) intellectual property matters; (v) insurance matters;
(vi) assets; (vii) financial statements; (viii) liabilities; (ix) transactions
not in the ordinary course of business; (x) capital projects; (xi) tax matters;
(xii) bank accounts and employee matters; (xiii) title to real and personal
property; (xiv) absence of defaults under material contracts; (xv) documents
related to issuances of CellCall securities; (xvi) brokers; (xvii) special
contractual liabilities and warranty matters; (xiii) title to real and personal
property; (xviii) employee benefit matters; (xix) regulatory matters, including
representations as to channel position; (xx) accuracy of information provided in
the disclosure schedules to the Merger Agreement; (xxi) accuracy of information
provided by CellCall for inclusion in the registration statement filed with the
Securities and Exchange Commission (the "Commission") in connection with the
Merger (the "Registration Statement"); and (xxii) customers.
Representations and Warranties of Nextel. In addition to customary
representations and warranties with regard to corporate organization and
authority and capitalization, the Merger Agreement contains representations and
warranties by Nextel and Merger Sub regarding (i) absence of conflicts with any
applicable laws, rules or regulations of any tribunal, charter documents, or any
agreement, indenture or other instruments; (ii) documents filed by Nextel with
the Commission; and (iii) accuracy of information provided by Nextel for
inclusion in the Registration Statement.
Conditions; Waiver. The obligations of Nextel and CellCall to
consummate, or cause to be consummated, the Merger are subject to the
satisfaction or waiver of the following conditions: (i) the approval of the
Merger Agreement and the transactions referred to therein by the stockholders of
CellCall; (ii) the expiration or termination of all waiting periods under the
HSR Act; (iii) the procurement of all necessary approvals, clearances and
consents of governmental and regulatory authorities and certain approvals and
consents of third parties required in connection with the Merger (including all
required FCC approvals and consents, which shall be deemed to be obtained only
when they have become Final Orders); (iv) the absence of certain legal or
regulatory proceedings with respect to the Merger; (v) the effectiveness of the
Registration Statement under the Securities Act and the absence of a stop order
suspending such effectiveness or any threat with respect thereto and the
registration or exemption from registration of shares of Nextel Common Stock
under all applicable blue sky laws; and (vi) the listing or approval for listing
upon notice of issuance of the shares of Nextel Common Stock issuable in the
Merger by the Nasdaq NM.
27
<PAGE> 30
The obligation of Nextel to consummate, or cause to be consummated, the
transactions contemplated by the Merger Agreement is subject to the satisfaction
or waiver of the following additional conditions: (i) the representations and
warranties of CellCall shall be true and correct and each of the covenants and
agreements of CellCall to be performed as of or prior to the Closing shall have
been performed; (ii) receipt of a certificate signed by CellCall's President
certifying that certain conditions to the Merger have been fulfilled; (iii)
receipt of certain legal opinions from counsel to CellCall; (iv) FCC action on
CellCall's filing(s) for rejustification of its extended implementation
authority; (v) absence of any liabilities or obligations of CellCall except
Permitted Liabilities (as defined in the Merger Agreement); (vi) receipt of
letters from Potter & Company LLP addressed to Nextel regarding information
about CellCall included in the Registration Statement; (vii) receipt of
CellCall's audited financial statements; (viii) receipt of letters from
affiliates of CellCall regarding compliance with Rule 145; (ix) no stockholder
of CellCall shall be entitled to exercise dissenter's or appraisal rights under
the DGCL; (x) CellCall's sole ownership of certain subsidiaries; (xi) receipt of
a release and termination agreement from each CellCall stockholder related to
certain preemptive and registration rights; (xii) receipt of indemnification
agreements from stockholders of CellCall holding at least 90% of the CellCall
Stock; (xiii) receipt of a non-competition agreement from J. P. Harris; (xiv)
receipt of certain agreements from third parties as described under "-
Agreements With Third Parties"; and (xv) receipt of a certificate signed by
CellCall's Treasurer regarding the number of shares of Series C Preferred Stock
that are Incentive Shares as of the Closing.
The obligation of CellCall to consummate the transactions contemplated
by the Merger Agreement is subject to the satisfaction or waiver of the
following additional conditions: (i) the representations and warranties of
Nextel shall be true and correct, and each of the covenants and agreements of
Nextel to be performed as of or prior to the Closing shall have been duly
performed; (ii) receipt of a certificate signed by an officer of Nextel
certifying that certain conditions to the Merger have been fulfilled; and (iii)
receipt of a legal opinion from counsel to Nextel.
No Solicitation. CellCall has agreed, subject to certain exceptions,
that prior to the Effective Time of the Merger, CellCall and its representatives
shall not, directly or indirectly, encourage (including by way of furnishing
information), solicit, initiate, participate in or otherwise be a party to any
discussions or negotiations with any corporation, partnership, person or other
entity or group concerning any transaction involving the sale of the business,
assets or any securities of CellCall, the merger or consolidation of CellCall or
any other similar transaction involving CellCall or its businesses. Promptly
upon receiving any, or any information about any, inquiry, request or proposal
from or contact by any person with respect to any sale, merger, consolidation or
other similar transaction, CellCall shall advise Nextel of such inquiry,
request, proposal or contact and provide Nextel all relevant information with
respect thereto.
Indemnification Agreements. It is a condition to Nextel's obligation to
consummate the Merger that Nextel shall have received executed indemnification
agreements from CellCall stockholders holding at least 90% of the CellCall
Stock, on a fully diluted basis. Each CellCall stockholder that executes such an
indemnification agreement (each, an "Indemnifying Stockholder") will agree to
indemnify and hold Nextel and its subsidiaries and affiliates (including,
without limitation, CellCall) and its and their officers, directors and
employees (but excluding the historic officers and directors of CellCall prior
to the Effective Time of the Merger) (each, a "Beneficiary") from and against
such Indemnifying Stockholder's pro rata portion of any and all claims, damages,
losses or liabilities (including reasonable attorneys' fees and expenses) (the
"Losses") incurred by any Beneficiary resulting from: (a) liabilities of
CellCall which are not disclosed to Nextel in writing prior to the Effective
Time of the Merger (other than "Permitted Liabilities," as defined in the Merger
Agreement); (b) claims arising out of the operation of CellCall's business prior
to the Effective Time of the Merger; (c) breach or inaccuracy of a
representation or warranty of CellCall contained in the Merger Agreement; or (d)
failure of CellCall to perform any agreement or covenant required by the Merger
Agreement to be performed by CellCall.
The obligation of an Indemnifying Stockholder to make any payment in
connection with such indemnity obligation shall not arise until Losses, in the
aggregate, exceed $125,000, but once such Losses exceed $125,000, Nextel shall
be entitled to recover from each such Indemnifying Stockholder, such
Indemnifying Stockholder's pro rata portion of all Losses in excess of $125,000
up to an aggregate of $7,500,000 of Losses. Any claim for indemnity must be made
by giving notice no later than 18 months after the Effective Time of the Merger.
The Indemnifying Stockholders, in the aggregate, shall be obligated to
pay all Losses (subject to the threshold and maximum amounts described in the
preceding paragraph) but any individual Indemnifying Stockholder shall only be
required to bear and pay his, her or its pro rata share of Losses. The pro rata
share shall be determined by dividing such Indemnifying Stockholder's percentage
equity interests in CellCall, on a fully-diluted basis, by the aggregate
percentage equity interests in CellCall on a fully-diluted basis of all
Indemnifying Stockholders.
28
<PAGE> 31
Participation in FCC Auction. CellCall and Nextel agreed to form a
consortium to participate in the recently concluded 800 MHz SMR block license
auction established by the FCC in the First Report and Order, PR Docket No.
93-144, released December 15, 1995 (the "Auction") for block licenses in certain
Bureau of Economic Analysis Economic Areas (each, an "EA") identified in the
Merger Agreement ("Overlap EAs"). Rather than creating a separate entity to
administer auction participation solely in the Overlap EAs, a subsidiary of
Nextel was formed to participate in the Auction in EAs throughout the United
States, including the Overlap EAs. The Nextel subsidiary determined and
controlled all aspects of the bidding strategy and participation (including
without limitation determining the amount of the bids to be submitted, the EAs
in which to bid and whether to top competing bids) and funded all bids. CellCall
agreed not to bid for block licenses in EAs outside of the Overlap EAs; Nextel
was free to bid for block licenses outside of the Overlap EAs either
individually or in consortia formed with other parties, without reference to the
procedures agreed to by Nextel and CellCall in the Overlap EAs. Bidding in the
Auction closed on December 8, 1997, and the Nextel subsidiary was awarded the
rights to block licenses in each of the Overlap EAs. Nextel is entitled to the
right to all channels included in these block licenses, subject to the option of
CellCall, under certain circumstances in the event the Merger is not
consummated, to purchase certain channels in any Overlap EA for the price paid
by Nextel.
Termination. The Merger Agreement may be terminated and the
transactions contemplated thereby abandoned: (i) by mutual written consent of
CellCall and Nextel authorized by their respective Boards of Directors, at any
time prior to the Closing; (ii) prior to the Closing, by written notice to
CellCall from Nextel authorized by the Nextel Board, if (A) there is a material
breach of any representation, warranty, covenant or agreement on the part of
CellCall or any subsidiary, or if a representation or warranty of CellCall shall
be untrue in any material respect (a "Terminating CellCall Breach"), except
that, if such Terminating CellCall Breach is curable by CellCall through the
exercise of its reasonable best efforts, then, for up to 30 days, but only as
long as CellCall continues to exercise such reasonable best efforts, Nextel may
not terminate the Merger Agreement, (B) any governmental or regulatory consent
or approval required for consummation of the transactions contemplated by the
Merger Agreement is denied by or in a final order or other final action issued
or taken by the appropriate governmental or regulatory authority, agency or
similar body or (C) consummation of any of the transactions contemplated by the
Merger Agreement is enjoined, prohibited or otherwise restrained by the terms of
a final, non-appealable order or judgment of a court of competent jurisdiction;
(iii) prior to the Closing, by written notice to Nextel from CellCall authorized
by the CellCall Board, if (A) there is a material breach of any representation,
warranty, covenant or agreement on the part of Nextel set forth in the Merger
Agreement, or if a representation or warranty of Nextel shall be untrue in any
material respect, except that, if such Terminating Nextel Breach is curable by
Nextel through the exercise of its reasonable best efforts then for up to 30
days, but only as long as Nextel continues to exercise such reasonable best
efforts, CellCall may not terminate the Merger Agreement, (B) any governmental
or regulatory consent or approval required for consummation of the transactions
contemplated by the Merger Agreement is denied by or in a final order or other
final action issued or taken by the appropriate governmental or regulatory
authority, agency or similar body, or (C) consummation of any of the
transactions contemplated by the Merger Agreement is enjoined, prohibited or
otherwise restrained by the terms of a final, non-appealable order or judgment
of a court of competent jurisdiction; or (iv) by either Nextel or CellCall if
the Merger shall not have been consummated on or before the first anniversary of
the Merger Agreement (provided the terminating party is not otherwise in
material breach of any of its representations, warranties, covenants or
agreements contained in the Merger Agreement).
Agreements with Third Parties. Nextel's obligation to consummate the
Merger is conditioned upon receipt of agreements from certain third parties as
summarized below.
(a) Agreement with Sirrom. Prior to the Merger, Nextel must receive an
agreement, in form and substance reasonably satisfactory to Nextel, from Sirrom
Capital L.P., a Tennessee limited partnership ("Sirrom"), providing, among other
things, for (i) the release by Sirrom of all claims Sirrom may have against
CellCall; (ii) Sirrom's consent to (A) the Merger and (B) the repayment of that
certain Secured Promissory Note, dated as of November 4, 1994, in the aggregate
amount of $1,000,000 (the "Secured Note"), immediately following consummation of
the Merger; (iii) the termination of each of the Security Agreement and the Loan
Agreement, dated as of November 4, 1994, each as between Sirrom and CellCall;
and (iv) an acknowledgment from Sirrom that Nextel may prepay the Secured Note
without restriction or penalty and that, upon such prepayment, all liens
associated with the above-referenced Security Agreement and Loan Agreement shall
be released.
(b) Agreement with Magold Parties. Prior to the Merger, Nextel must
receive an agreement, in form and substance reasonably satisfactory to Nextel,
from Raymond J. Magold, Phyllis B. Magold and Raymond J. Magold, as custodian
for Jacqueline R. Magold and Darlene M. Magold (collectively, the "Magold
Parties"), providing, among other things, for (i) the release by the Magold
Parties of any claims the Magold Parties may have against CellCall; (ii) the
Magold Parties' consent to the repayment of that certain Convertible
Subordinated Note, dated as of May 2, 1994 in the principal amount of $500,000
(the "Magold Note") immediately following consummation of the Merger and an
acknowledgment from
29
<PAGE> 32
the Magold Parties that Nextel may prepay the Magold Note without restriction or
penalty; and (iii) representations and covenants from the Magold Parties that
the Magold Parties have not exercised and will not exercise their right to
convert the Magold Note into shares of CellCall Series D Preferred Stock.
(c) Agreements with Raymond James and Brenner Securities. Prior to the
Merger, Nextel must receive agreements, in form and substance satisfactory to
Nextel, that each of Raymond James and Associates, Inc. and Brenner Securities
Corporation consent to the issuance of an amended warrant for shares of CellCall
Common Stock replacing their respective existing Warrants.
(d) Agreement with Vine. Prior to the Merger, Nextel must receive an
agreement, in form and substance reasonably satisfactory to Nextel, from Vine
Street Trust Company ("Vine"), providing, among other things, for (i) the
release by Vine of all claims Vine may have against CellCall; (ii) Vine's
consent to (A) the Merger and (B) the repayment of any indebtedness owed by
CellCall to Vine (the "Line of Credit") immediately following consummation of
the Merger; (iii) the termination of each of the Security Agreement and the Loan
Agreement, dated as of March 10, 1995, between Vine and CellCall; and (iv) an
acknowledgment from Vine that Nextel may prepay the Line of Credit without
restriction or penalty and that, upon such prepayment, all liens associated with
the above-referenced Loan Agreement and Security Agreement shall be released or
CellCall shall have paid all outstanding indebtedness under the Line of Credit
in full and shall have caused the termination of all agreements with, and liens
in favor of, Vine.
STOCK PURCHASE OPTION AGREEMENT
Concurrently with the execution of the Merger Agreement, holders at
that date of a majority of the issued and outstanding CellCall Common Stock and
all of the Preferred Stock entered into a Stock Purchase Option Agreement (the
"Option Agreement") with NFC, pursuant to which NFC was granted an option (the
"Option") to purchase all of each such stockholder's right, title and interest
in such stockholder's shares of CellCall Stock under certain circumstances. The
purchase price per share payable upon exercise of the Option is an amount in
cash equal to the market price, determined on the last trading day preceding the
date of the occurrence of a "Triggering Event," as defined in the Merger
Agreement and described below, of the shares of Nextel Common Stock into which
such shares of CellCall Stock subject to such exercise would have been converted
had the Merger been consummated on such trading day in accordance with the terms
of the Merger Agreement, assuming all applicable governmental approvals had been
obtained as of such date.
The Option may be exercised by NFC for a period of 90 days from any
Triggering Event, for any 66% of the shares of CellCall Stock (on a fully
diluted basis), provided that NFC shall first purchase all of the shares of
CellCall Stock, if any, that are voted in favor of the Merger pro rata from the
applicable CellCall stockholders.
Under the Option Agreement, a "Triggering Event" is either of the
following:
(a) the Merger Agreement is not approved by the CellCall stockholders
within 60 days after the post-effective amendment of which this Prospectus
Supplement is a part is declared effective (for any reason other than a material
breach by Nextel or its subsidiaries of any of their respective obligations
under the Merger Agreement); or
(b) CellCall shall, or shall enter any agreement to, (i) merge or
consolidate with another entity or (ii) sell, dispose of, liquidate or encumber
any of its assets to or for the benefit of another Person, other than in the
ordinary course of business.
LOAN AND OPTION AGREEMENT
On November 21, 1997, CellCall and Nextel Sub entered into the Loan
Agreement pursuant to which Nextel Sub agreed to loan CellCall up to an
aggregate of $2,357,250. Pursuant to the terms of the Loan Agreement,
disbursements thereunder were made solely for the purpose of permitting CellCall
to purchase the Option Channels and are evidenced by the Note issued by CellCall
and payable to Nextel Sub. Through the date hereof, CellCall has borrowed
$2,086,750 of the amount available pursuant to the Loan Agreement to purchase
Option Channels. Simple interest on the principal balance of the Note is
calculated on a 360-day year at an annual rate of 10%. At the Effective Time of
the Merger, the number of shares of Nextel Common Stock equal to (a) the
principal balance of the Note, plus accrued interest thereon, outstanding at the
Effective Time of the Merger divided by (b) $16.00 shall be subtracted from the
Nextel Share Base. Nextel Sub's obligation to lend money to CellCall pursuant to
the Loan Agreement terminates on the earlier of the Effective Time of the Merger
or the date of any "Event of Default" (as hereafter defined) and, upon the
occurrence of an Event of Default, the Note and all interest accrued thereon
shall become immediately due and payable. An "Event of Default" is defined in
the Loan
30
<PAGE> 33
Agreement as (i) termination of the Merger Agreement; (ii) the failure of
CellCall to perform under the Loan Agreement; or (iii) the bankruptcy of
CellCall or similar events.
The principal balance of the Loan and all accrued interest (the "Loan
Termination Balance") shall be payable by CellCall to Nextel Sub as follows: (a)
in one payment to be made within ten days of any termination of the Merger
Agreement arising out of any breach or nonperformance on the part of CellCall;
(b) in one payment to be made within 90 days of any termination of the Merger
Agreement arising solely out of any breach or nonperformance on the part of
either NFC, Merger Sub or Nextel; or (c) in one payment to be made within 30
days of any other termination of the Merger Agreement.
Upon any failure by CellCall to make any payment due to Nextel Sub
under the Loan Agreement, Nextel Sub shall have the option to purchase any or
all of the Option Channels theretofore purchased by CellCall and for which a
disbursement under the Loan Agreement was made, and the Loan Termination Balance
will be reduced by the amount of such disbursement (and any interest
attributable thereto) made with respect to such Option Channel(s) purchased by
Nextel Sub (if any).
ACCOUNTING TREATMENT
The Merger is expected to be accounted for under the "purchase
acquisition" method of accounting in accordance with GAAP. Under the "purchase
acquisition" method, any amount paid over the fair market value of the acquired
company's assets is reflected on the buyer's balance sheet as goodwill.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations of the Merger that are generally applicable to CellCall
stockholders. This discussion is based on currently existing provisions of the
Code, existing and proposed regulations promulgated under the Code by the
Treasury Department ("Treasury Regulations") and current administrative rulings
and court decisions, all of which are subject to change. Any such change, which
may or may not be retroactive, could alter the tax consequences to Merger Sub,
NFC, Nextel, CellCall or the CellCall stockholders as described herein.
The Merger has been structured with the intent that it be treated as a
reorganization for federal income tax purposes so that no gain or loss will be
recognized by the CellCall stockholders upon consummation of the Merger, except
with respect to cash received in lieu of fractional shares. It is expected that
at the Closing, CellCall will receive a written opinion (the "Tax Opinion") of
Hill & Barlow, substantially to the effect that, on the basis of certain facts
and representations, the following are the federal income tax consequences of
the Merger:
(1) The Merger will constitute a reorganization in accordance with
Section 368(a) of the Code and Nextel, NFC and CellCall will each be a "party to
the reorganization" within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by the CellCall stockholders
upon their receipt in the Merger of the Nextel Common Stock solely in exchange
for their CellCall Stock;
(3) Each CellCall stockholder's aggregate tax basis in the Nextel
Common Stock to be received (including fractional share interests deemed
received) in the Merger will be the same as the aggregate tax basis (determined
at the time of the Merger) that such stockholder had in the CellCall Stock
exchanged for such Nextel Common Stock;
(4) Each CellCall stockholder's holding period of the Nextel Common
Stock to be received (including the fractional share interests deemed received)
in the Merger will include the holding period of the CellCall Stock exchanged
for the Nextel Common Stock, provided that the stockholder's CellCall Stock was
held as a capital asset at the time of the Merger;
(5) CellCall will not recognize income, gain or loss as a result of the
Merger; and
(6) A CellCall stockholder who receives cash in the Merger in lieu of a
fractional share of Nextel Common Stock will be treated as if the fractional
share were distributed in the Merger and then as having received a cash
distribution in redemption of such fractional share, resulting in income, gain
or loss upon receipt of such cash that will be taxed as provided in Section 302
of the Code.
31
<PAGE> 34
In connection with the Tax Opinion, Hill & Barlow will make such
factual assumptions as are customary in similar tax opinions. The Tax Opinion
cannot be relied upon if any such factual assumption is, or later becomes,
inaccurate. No ruling from the Internal Revenue Service concerning the tax
consequences of the Merger has been (or will be) requested, and the Tax Opinion
will not be binding upon the Internal Revenue Service or the courts. If the
Merger is consummated and it is later determined that the Merger did not qualify
as a reorganization under the Code, the CellCall stockholders would recognize
taxable gain or loss in the Merger equal to the difference between the fair
market value of the Nextel Common Stock they received and their tax basis in the
CellCall Stock.
The foregoing summary of material federal income tax consequences is
not intended to constitute advice regarding the federal income tax consequences
of the Merger to any holder of CellCall Stock. This summary does not discuss tax
consequences under the laws of foreign, state or local governments or of any
other jurisdiction or tax consequences to categories of stockholders that may be
subject to special rules, such as foreign persons, tax-exempt entities,
insurance companies, financial institutions and traders or dealers in stocks or
securities. In addition, the foregoing may not be applicable to a holder of
shares of CellCall Stock who received such shares as employee compensation or
pursuant to the exercise of an employee stock option. Each holder of CellCall
Stock is urged to consult its own tax advisors as to the specific consequences
of the Merger, including the applicable federal, state, local and foreign tax
consequences to them of the Merger in light of their particular circumstances.
DISSENTERS' RIGHT OF APPRAISAL
In accordance with Section 262 of the DGCL ("Section 262"), if the
proposed Merger is approved and consummated, holders of shares of CellCall Stock
who neither vote for nor consent in writing to the Merger will have the right to
receive the "fair value" of their shares of CellCall Stock in cash (exclusive of
any element of value arising from the accomplishment or expectation of the
Merger), as judicially determined if they fully comply with the provisions of
Section 262. It is, however, a condition to Nextel's obligation to consummate
the Merger that no holder of shares of CellCall Stock is entitled to exercise
dissenter's or appraisal rights under the DGCL. Accordingly, if a stockholder
asserts appraisal rights, he or she may not be entitled to the benefit of the
procedures described below because the Merger may not be consummated, unless
Nextel decides to waive such condition to its obligation to consummate the
Merger.
The following is a brief summary of the procedures set forth in Section
262 which are required to be followed by holders of shares of CellCall Stock who
wish to dissent from the Merger and demand their statutory appraisal rights.
This summary is qualified in its entirety by reference to Section 262, the
complete text of which is attached to this Prospectus Supplement as Appendix B.
Holders of shares of CellCall Stock who desire to exercise appraisal rights of
dissenting stockholders with respect to the Merger are advised to seek
independent counsel. This Prospectus Supplement constitutes notice to holders of
shares of CellCall Stock concerning the availability of appraisal rights under
Section 262. Under Section 262, a holder of record wishing to assert appraisal
rights must hold shares of CellCall Stock on the date of making a demand for
appraisal rights with respect to such shares and must continuously hold such
shares through the Effective Time of the Merger.
Holders of record of shares of CellCall Stock who desire to exercise
their appraisal rights must satisfy all of the conditions of Section 262. A
written demand for appraisal of shares of CellCall Stock must be filed with
CellCall before the taking of the vote on the Merger. This written demand for
appraisal of shares of CellCall Stock must be in addition to and separate from
any abstention or any vote, in person or by proxy, cast against approval of the
Merger.
NEITHER VOTING AGAINST, ABSTAINING FROM VOTING, OR FAILING TO VOTE ON
THE ADOPTION OF THE MERGER WILL CONSTITUTE A DEMAND FOR APPRAISAL WITHIN THE
MEANING OF SECTION 262.
Holders of shares of CellCall Stock electing to exercise their
appraisal rights under Section 262 must NOT vote for adoption of the Merger. If
a holder of shares of CellCall Stock returns a signed proxy but does not specify
therein a vote AGAINST adoption of the Merger or an instruction to abstain, the
proxy will be voted FOR adoption of the Merger, which will have the effect of
waiving the appraisal rights of that holder of shares of CellCall Stock.
Abstaining from voting or voting against the adoption of the Merger will NOT
constitute a waiver of such stockholder's appraisal rights.
A demand for appraisal must be executed by or for the holder of record
of shares of CellCall Stock as to which appraisal is demanded as such
stockholder's name appears on the certificate representing such shares of
CellCall Stock. If such shares of CellCall Stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, such
32
<PAGE> 35
demand must be executed by or for the appropriate fiduciary. If such shares of
CellCall Stock are owned of record by or for more than one person, as in a joint
tenancy or tenancy in common, such demand must be executed by all joint owners
of such shares. An authorized agent, including an agent for two or more joint
owners, may execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner and expressly disclose the
fact that, in exercising the demand, he or she is acting as agent for the
identified record owner.
A record owner, such as a broker, who holds shares of CellCall Stock as
a nominee for others, may exercise rights of appraisal with respect to the
shares held for all or less than all beneficial owners of shares as to which he
or she is the record owner. In such case, the written demand submitted by such
broker as record owner must set forth the number of shares of CellCall Stock
covered by such demand. If the number of shares is not expressly stated, the
demand will be presumed to cover all shares of CellCall Stock outstanding and
held in the name of such record owner.
Holders of shares of CellCall Stock (or, if different, record owners
acting on behalf of such stockholders) who elect to exercise appraisal rights
should mail or deliver a written demand to: CellCall, Inc., 1720 Fortune Court,
Suite 106, Lexington, Kentucky 40509, Attention: Secretary. The written demand
for appraisal should specify the record holder's name and mailing address, the
number and type of shares of CellCall Stock owned, and that such holder is
thereby demanding appraisal of his or her shares. Within ten days after the
Effective Time of the Merger, CellCall must provide notice of the Effective Time
of the Merger to all holders of shares of CellCall Stock who have complied with
Section 262 and have not voted for approval of the Merger.
Within 120 days after the Effective Time of the Merger, either CellCall
or any holder of shares of CellCall Stock who has complied with the required
conditions of Section 262 may file a petition in the Delaware Court of Chancery
(the "Chancery Court") demanding a determination of the fair value of the shares
of CellCall Stock owned by the dissenting stockholders. CellCall has no present
intention to file such petition if demand for appraisal is made.
Upon the filing of any petition by a stockholder in accordance with
Section 262, service of a copy will be made upon CellCall which will, within 20
days after service, file in the office of the Register of the Chancery Court in
which the petition was filed, a duly verified list containing the names and
addresses of all CellCall stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by CellCall. The Register of the Chancery Court, if so ordered by the
Chancery Court, will give notice of the time and place fixed for the hearing of
such petition by registered or certified mail to CellCall and to the
stockholders shown on the list at the addresses therein stated, and notice will
also be given by publishing a notice at least one week before the day of the
hearing in a newspaper of general circulation published in the City of
Wilmington, Delaware, or such publication as the Chancery Court deems advisable.
The forms of the notices by mail and by publication must be approved by the
Chancery Court, and the costs thereof shall be borne by CellCall.
If a petition for an appraisal is timely filed, after a hearing on such
petition the Chancery Court will determine which stockholders are entitled to
appraisal rights and will appraise the shares of CellCall Stock owned by such
stockholders and determine the fair value of such shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest to be paid, if any, upon the amount so
determined to be the fair value.
In determining fair value, the Chancery Court is to take into account
all relevant factors. In Weinberger v. UOP, Inc., decided February 1, 1983, the
Delaware Supreme Court expanded the considerations that could be taken into
account in determining fair value in an appraisal proceeding, stating that
"proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered, and that "fair price obviously requires consideration of all
relevant factors involving the value of a company . . . ." The Delaware Supreme
Court stated that, in making a determination of fair value, the agency or court
determining the value must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which could
be ascertained as of the date of the merger and which throw any light on future
prospects of the merging corporation. Section 262 provides that fair value is to
be "exclusive of any element of value arising from the accomplishment or
expectation of the merger." In Weinberger, the Delaware Supreme Court held that
"elements of future value, including the nature of the enterprise, which are
known or susceptible to proof as of the date of the merger and not the product
of speculation, may be considered."
HOLDERS OF SHARES OF CELLCALL STOCK CONSIDERING SEEKING APPRAISAL
SHOULD KEEP IN MIND THAT THE FAIR VALUE OF THEIR SHARES OF CELLCALL STOCK
DETERMINED UNDER SECTION 262 COULD BE MORE, THE SAME, OR LESS THAN THE MERGER
CONSIDERATION THEY ARE TO RECEIVE PURSUANT TO THE MERGER AGREEMENT IF THEY DO
NOT SEEK APPRAISAL OF THEIR SHARES.
33
<PAGE> 36
The cost of the appraisal proceeding may be determined by the Chancery
Court and taxed against the parties as the Chancery Court deems equitable in the
circumstances. Upon application of a dissenting holder of shares of CellCall
Stock, the Chancery Court may order that all or a portion of the expenses
incurred by any such dissenting stockholder in connection with the appraisal
proceeding, including without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all
shares of CellCall Stock entitled to appraisal. In the absence of such a
determination or assessment, each party bears his own expenses.
Any holder of shares of CellCall Stock who has duly demanded appraisal
in compliance with Section 262 will not, after the Effective Time of the Merger,
be entitled to vote for any purpose the shares of CellCall Stock subject to such
demand or to receive payment of dividends or other distributions on such shares,
except for dividends or distributions payable to holders of shares of CellCall
Stock of record at a date prior to the Effective Time of the Merger.
At any time within 60 days after the Effective Time of the Merger, any
holder of shares of CellCall Stock who has demanded appraisal of the fair value
thereof has the right to withdraw his or her demand for appraisal and to accept
the terms offered in the Merger; after this period, such stockholder may
withdraw his or her demand for appraisal only with the consent of the Surviving
Corporation. If no petition for appraisal is filed with the Chancery Court
within 120 days after the Effective Time of the Merger, the rights of holders of
shares of CellCall Stock to appraisal will cease and all such stockholders will
be entitled to receive the consideration offered per share of CellCall Stock as
provided for in the Merger Agreement.
BECAUSE CELLCALL HAS NO OBLIGATION TO FILE SUCH A PETITION, AND HAS NO
PRESENT INTENTION TO DO SO, ANY HOLDER OF SHARES OF CELLCALL STOCK WHO DESIRES
SUCH A PETITION TO BE FILED IS ADVISED TO FILE IT ON A TIMELY BASIS. No petition
timely filed in the Chancery Court demanding appraisal may be dismissed as to
any holder of shares of CellCall Stock without the approval of the Chancery
Court, and such approval may be conditioned upon such terms as the Chancery
Court deems just.
THE SUMMARY SET FORTH ABOVE DOES NOT PURPORT TO BE A COMPLETE STATEMENT
OF THE PROVISIONS OF THE DGCL RELATING TO THE RIGHTS OF DISSENTING HOLDERS OF
SHARES OF CELLCALL STOCK AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
APPLICABLE SECTIONS OF THE DGCL, WHICH ARE INCLUDED AS APPENDIX B TO THIS
PROSPECTUS SUPPLEMENT. HOLDERS OF SHARES OF CELLCALL STOCK INTENDING TO EXERCISE
THEIR DISSENTERS' RIGHTS ARE URGED TO REVIEW CAREFULLY APPENDIX B AND TO CONSULT
WITH LEGAL COUNSEL SO AS TO BE IN STRICT COMPLIANCE THEREWITH.
INTERESTS OF CERTAIN PERSONS IN CELLCALL
INTEREST IN MATTERS TO BE ACTED UPON
Certain executive officers and directors of CellCall have interests in
the Merger that differ from those of CellCall stockholders generally. In
particular, under the terms of the CellCall Charter upon consummation of the
Merger, certain investment partnerships holding shares of CellCall Stock and
Jack Loperena, a director of CellCall who personally holds shares of CellCall
Stock, will each be entitled to the preferential payments related to their
Preferred Stock. Each of Richard M. Burnes, Jr., Stephen F. Gormley, Joseph T.
McCullen, Jr., J. Donald McLemore, Jr., Peter A. Schober and James F. Wade is a
member of the CellCall Board and serves as general partner of at least one of
such investment partnerships.
In addition, Mr. Harris, the Chief Executive Officer of CellCall, as
the holder of 100% of the issued and outstanding shares of Series C Preferred
Stock of CellCall, is entitled upon consummation of the Merger to a preferential
payment of one share of Nextel Common Stock for each share of Series C Preferred
Stock, subject to certain reductions for downward adjustments to the Merger
Consideration, pursuant to the terms of the CellCall Charter. See "Comparison of
Rights of Holders of Shares of Each of Nextel Common Stock and CellCall Stock -
Terms of CellCall Preferred Stock - Series C Convertible Preferred Stock."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 3, 1998, certain
information with respect to all stockholders known to CellCall to beneficially
own more than 5% of any class of CellCall capital stock and information with
respect to any class of CellCall capital stock beneficially owned by each
director of CellCall, the Chief Executive Officer of CellCall, and all directors
and executive officers of CellCall as a group. Except as otherwise indicated,
the stockholders listed in the table
34
<PAGE> 37
have sole voting and investment powers with respect to CellCall capital stock
owned by them and beneficial ownership is determined in accordance with rules of
the Commission.
<TABLE>
<CAPTION>
Name and Address of Number of Percent
Title of Class Beneficial Owner Issued Shares Of Class
- -------------- ---------------- ------------- --------
<S> <C> <C> <C>
Common Stock Jack Loperena 450.00 48.64%
2764 West Athens
Fresno, CA 93711
Common Stock Sirrom Capital L.P. 465.10 50.28%
Two Embarcadero Center
Suite 650
San Francisco, CA 94111
Series A Preferred Jack Loperena 561.96 33.672%
Stock 2764 West Athens
Fresno, CA 93711
Series A Preferred The Southern Venture Fund 1,106.96 66.328%
Stock Limited Partnership
c/o Massey Burch Capital Corp.
310 25th Avenue North, Suite 103
Nashville, TN 37203
Series A Preferred J. Donald McLemore, Jr. 1,106.96(1) 66.328%
Stock c/o Massey Burch Capital Corp.
310 25th Avenue North, Suite 103
Nashville, TN 37203
Series B Preferred Richard M. Burnes, Jr. 3,114.98(2) 15.065%
Stock c/o Charles River Ventures
Bay Colony Corporate Center
1000 Winter Street, Suite 3300
Waltham, MA 02154
Series B Preferred The Charles River Partnership VI 2,647.74 12.805%
Stock c/o Charles River Ventures
Bay Colony Corporate Center
1000 Winter Street, Suite 3300
Waltham, MA 02154
Series B Preferred Stephen F. Gormley 7,787.51(3) 37.661%
Stock c/o Media/Communications
Partners
75 State Street, Suite 2500
Boston, MA 02109
Series B Preferred Joseph T. McCullen, Jr. 2,336.24(4) 11.298%
Stock c/o Morgan, Holland Ventures
Corporation
One Liberty Square
Boston, MA 02109
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
Name and Address of Number of Percent
Title of Class Beneficial Owner Issued Shares Of Class
- -------------- ---------------- ------------- --------
<S> <C> <C> <C>
Series B Preferred J. Donald McLemore, Jr. 3,136.10(5) 15.167%
Stock c/o Massey Burch Capital Corp.
310 25th Avenue North, Suite 103
Nashville, TN 37203
Series B Preferred Media/Communications Partners II 7,476.00 36.155%
Stock Limited Partnership
c/o Media/Communications
Partners
75 State Street, Suite 2500
Boston, MA 02109
Series B Preferred Morgan, Holland Fund II, L.P. 2,336.24(6) 11.298%
Stock c/o Morgan, Holland Ventures
Corporation
One Liberty Square
Boston, MA 02109
Series B Preferred Peter A. Schober 3,021.98(7) 14.615%
Stock c/o MVP Ventures
45 Milk Street, 19th Floor
Boston, MA 02109
Series B Preferred The Southern Venture Fund 3,136.10 15.167%
Stock Limited Partnership
c/o Massey Burch Capital Corp.
310 25th Avenue North, Suite 103
Nashville, TN 37203
Series B Preferred James F. Wade 7,787.51(8) 37.661%
Stock c/o Media/Communications
Partners
75 State Street, Suite 2500
Boston, MA 02109
Series C Preferred J. P. Harris 52,500.00 100%
Stock c/o CellCall, Inc.
1720 Fortune Court, Suite 106
Lexington, KY 40509
Common Stock All directors and executive officers 450.00 48.64%
as a group (8 persons)
Series A Preferred All directors and executive officers 1,668.92(1) 100%
Stock as a group (8 persons)
Series B Preferred All directors and executive officers 20,197.40(2) 97.678%
Stock as a group (8 persons) (3)(4)(5)
(7)(8)
Series C Preferred All directors and executive officers 52,500.00 100%
Stock as a group (8 persons)
</TABLE>
36
<PAGE> 39
(1) Includes 1,106.96 shares owned by the Southern Venture Fund Limited
Partnership, of which Mr. McLemore is a general partner. Mr. McLemore
shares voting and investment power with respect to such shares;
however, he disclaims beneficial ownership of such shares except as to
his proportionate partnership interest therein.
(2) Includes 2,647.74 shares owned by The Charles River Partnership VI
("CRP VI") and 467.24 shares owned by The Charles River Partnership
VI-A ("CRP VI-A"). Mr. Burnes is a general partner of Charles River VI
GP, the general partner of CRP VI and CRP VI-A, and shares voting and
investment power with respect to such shares; however, he disclaims
beneficial ownership of such shares except as to his proportionate
partnership interests therein.
(3) Includes 241.42 shares owned by Media/Communications Investors Limited
Partnership ("M/C Investors"), 70.09 shares owned by Chestnut Street
Partners, Inc. ("Chestnut") and 7,476.00 shares owned by
Media/Communications Partners II Limited Partnership ("M/C Partners").
Mr. Gormley is the 100% shareholder of M/C Investors General Partner-S,
Inc., which is a general partner of M/C Investors; is a director and
vice president of Chestnut; and is the 100% shareholder of M/C II
General Partner-S, Inc., which is a general partner of M/CP II, L.P.,
which is the general partner of M/C Partners. Mr. Gormley shares voting
and investment power with respect to all such shares; however, he
disclaims beneficial ownership of such shares except as to his
proportionate partnership interests therein.
(4) Includes 23.36 shares held by Gilde Investment Fund, B.V. ("Gilde") as
to which Mr. McCullen, in his capacity as a general partner of Morgan,
Holland Fund II, L.P. ("Morgan, Holland"), holds an unlimited power of
attorney with respect to voting and investment and 2,312.88 shares
owned by Morgan, Holland, of which Mr. McCullen is a general partner.
Mr. McCullen shares voting and investment power with respect to all
such shares; however, he disclaims beneficial ownership of the shares
held by Gilde and of the shares held by Morgan, Holland except as to
his proportionate partnership interest therein.
(5) Includes 3,136.10 shares owned by the Southern Venture Fund Limited
Partnership, of which Mr. McLemore is a general partner. Mr. McLemore
shares voting and investment power with respect to such shares;
however, he disclaims beneficial ownership of such shares except as to
his proportionate partnership interest therein.
(6) Includes 23.36 shares held by Gilde, as to which Mr. McCullen, in his
capacity as a general partner of Morgan, Holland, holds an unlimited
power of attorney with respect to voting and investment.
(7) Includes 775.86 shares owned by Chestnut III Limited Partnership, as to
which Mr. Schober is a general partner; 539.69 shares owned by Chestnut
Capital International III Limited Partnership, as to which Mr. Schober
is a general partner; 798.81 shares owned by Late Stage Fund 1990
Limited Partnership, as to which Mr. Schober is a general partner;
896.00 shares owned by Late Stage Fund 1991 Limited Partnership, as to
which Mr. Schober is a general partner; and 11.62 shares owned by MVP
Investors, L.P., as to which Mr. Schober is a general partner. Mr.
Schober shares voting and investment power with respect to such shares;
however, he disclaims beneficial ownership of such shares except as to
his proportionate partnership interests therein.
(8) Includes 241.42 shares owned by M/C Investors, 70.09 shares owned by
Chestnut and 7,476.00 shares owned by M/C Partners. Mr. Wade is the
100% shareholder of M/C Investors General Partner-J, Inc., which is a
general partner of M/C Investors; is a director and vice president of
Chestnut; and is the 100% shareholder of M/C II General Partner-J,
Inc., which is a general partner of M/CP II, L.P., which is the general
partner of M/C Partners. Mr. Wade shares voting and investment power
with respect to all such shares; however, he disclaims beneficial
ownership of such shares except as to his proportionate partnership
interests therein.
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF
NEXTEL COMMON STOCK AND CELLCALL STOCK
INTRODUCTION
CellCall and Nextel are each incorporated under the laws of the state
of Delaware. The holders of shares of CellCall Stock, whose rights as
stockholders are currently governed by Delaware law, the CellCall Charter and
by-laws of CellCall (the "CellCall By-laws"), will, upon the exchange of their
shares pursuant to the Merger, become holders of shares of Nextel Common Stock,
and their rights as such will be governed by Delaware law, the Nextel Charter,
and the by-laws of Nextel (the "Nextel By-laws"). Summarized below are the
material differences between the rights of holders of shares of CellCall
37
<PAGE> 40
Stock and the rights of holders of shares of Nextel Common Stock resulting from
differences in their governing documents and the application of Delaware law
thereto.
Nextel and holders of shares of its capital stock have entered into
certain agreements that may affect the rights of holders of shares of Nextel
Common Stock under its charter documents and Delaware law. Pursuant to such
agreements, certain significant holders have under certain circumstances certain
rights to designate nominees to be elected to the Nextel Board. See "-- Election
of Board of Directors." In addition, the equity securities issued to the McCaw
Investor in the McCaw Transaction, and the agreements relating to such
transaction, grant to the McCaw Investor certain rights generally relating to
corporate governance topics, including rights to designate a number of directors
to the Nextel Board and rights of such directors to representation on the
Operations Committee of the Nextel Board. See "--Terms of Nextel Preferred
Stock."
The following summary does not purport to be a complete statement of
the rights of holders of shares of Nextel Common Stock under applicable Delaware
law, the Nextel Charter and the Nextel By-laws or a comprehensive comparison
with the rights of the holders of shares of CellCall Stock under applicable
Delaware law, the CellCall Charter and the CellCall Bylaws, or a complete
description of the specific provisions referred to herein. This summary is
qualified in its entirety by reference to the DGCL and the governing corporate
instruments of Nextel and CellCall, to which holders of shares of CellCall Stock
are referred.
AUTHORIZED CAPITAL STOCK
The DGCL requires that a corporation's certificate of incorporation set
forth the total number of shares of all classes of stock which the corporation
has authority to issue and a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof. The CellCall Charter provides that CellCall has authority to issue
150,000 shares of capital stock divided into five classes as follows: (i) 40,000
shares of CellCall Common Stock and (ii) 110,000 shares of Preferred Stock, of
which 1,669 shares have been designated as Series A Preferred Stock, 25,500
shares have been designated as Series B Preferred Stock, 52,500 shares have been
designated as Series C Preferred Stock and 256 shares have been designated as
CellCall Series D Preferred Stock. The Nextel Charter provides that Nextel has
authority to issue 613,883,948 shares of capital stock divided into six classes
as follows: (i) 515,000,000 shares of Nextel Class A Common Stock, (ii)
35,000,000 shares of Nextel Class B Non-Voting Common Stock, par value $.001 per
share (the "Non-Voting Common Stock"), (iii) 26,941,933 shares of Class A
Preferred Stock, (iv) 82 shares of Class B Preferred Stock, (v) 26,941,933
shares of Class C Convertible Redeemable Preferred Stock, par value $.01 per
share ("Class C Preferred Stock"), (vi) 1,600,000 shares of 13% Series D
Exchangeable Preferred Stock (the "Nextel Series D Preferred Stock") and (vii)
8,400,000 shares of Preferred Stock, par value $.01 per share (the "Nextel
Undesignated Preferred Stock"). The rights, preferences, privileges and
restrictions of Nextel's Class A Preferred Stock, Class B Preferred Stock, Class
C Preferred Stock and Nextel Series D Preferred Stock are summarized in "--
Terms of Nextel Preferred Stock." The rights, preferences, privileges and
restrictions of CellCall's Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and CellCall Series D Preferred Stock are summarized in
" -- Terms of CellCall Preferred Stock."
BOARD OR STOCKHOLDER APPROVED PREFERRED STOCK
The DGCL permits a corporation's certificate of incorporation to allow
its board of directors to issue, without stockholder approval, series of
preferred or preference stock and to designate their rights, preferences,
privileges and restrictions. Although the Nextel Charter grants such power to
the Nextel Board with respect to the Nextel Undesignated Preferred Stock, there
are at present no shares of such Nextel Undesignated Preferred Stock outstanding
or subject to any issuance commitment. The CellCall Charter also grants such
power to the CellCall Board; however, there are at present no shares of
undesignated CellCall Preferred Stock outstanding or subject to any issuance
commitment.
TERMS OF NEXTEL PREFERRED STOCK
Pursuant to the terms of the McCaw Securities Purchase Agreement,
Nextel issued to the McCaw Investor 8,163,265 shares of Class A Preferred Stock,
each with a stated value of $36.75 per share, which shares are convertible into
an equal number of shares of Class C Preferred Stock (such shares of Class A
Preferred Stock and any shares of Class C Preferred Stock issued upon conversion
being convertible into approximately 24,500,000 shares of Nextel Common Stock in
the aggregate), and 82 shares of Class B Preferred Stock, convertible into an
equal number of shares of Nextel Common Stock. In addition, Nextel has issued
shares of the Nextel Series D Preferred Stock. Certain of the significant terms
of each class of preferred stock are summarized below.
38
<PAGE> 41
Class A Preferred Stock. The Class A Preferred Stock is the primary
mechanism for providing the McCaw Investor with the economic benefits and
corporate governance rights contemplated by the McCaw Securities Purchase
Agreement. Holders of Class A Preferred Stock, voting separately as a class, are
entitled to elect three members of the Nextel Board or, if greater than three,
that number of directors (rounded up to the nearest whole number) equal to 25%
of the entire Nextel Board (the "Class A Directors"), subject to the termination
of such rights if the McCaw Investor's equity interest in Nextel falls below
specified levels. For so long as the Operations Committee of the Nextel Board
(the "Operations Committee") is in existence, the McCaw Investor is entitled to
have a majority of the members of the Operations Committee be Class A Directors
or directors designated by the McCaw Investor pursuant to the terms of the Class
B Preferred Stock or the McCaw Securities Purchase Agreement. With respect to
matters other than the election of directors, shares of Class A Preferred Stock
vote together as a class with shares of Nextel Common Stock and each such share
of Class A Preferred Stock is entitled to a number of votes equal to the number
of shares of Nextel Common Stock into which such share is convertible.
Each share of Class A Preferred Stock is convertible at the election of
the holder thereof into three shares of Nextel Common Stock, subject to certain
adjustments. Upon the occurrence of certain events, the shares of Class A
Preferred Stock are automatically converted into shares of Nextel Common Stock.
In addition, shares of Class A Preferred Stock are automatically converted into
shares of Class C Preferred Stock on a one-for-one basis upon the occurrence of
certain events including certain reductions in the McCaw Investor's ownership
interest below specified levels and foreclosure by a secured party upon shares
of Class A Preferred Stock pledged to such secured party. Shares of Class A
Preferred Stock are also redeemable at the option of Nextel upon the occurrence
of certain events constituting a Change in Control (as defined in the terms of
the Nextel Charter creating and authorizing issuance of the Class A Preferred
Stock) at a redemption price equal to the stated value of the Class A Preferred
Stock plus the amount of any accrued or declared but unpaid dividends thereon.
The Operations Committee consists of five members, three of whom are
entitled to be selected from among the McCaw Investor's representatives on the
Nextel Board as described above. The Operations Committee has the authority to
formulate key aspects of Nextel's business strategy, including decisions
relating to the technology used by Nextel (subject to existing equipment
purchase agreements), acquisitions, the creation and approval of operating and
capital budgets and marketing and strategic plans, approval of financing plans,
endorsement of nominees to the Nextel Board and nomination and oversight of
certain executive officers. The Nextel Board, by a majority vote, may override
actions taken or proposed by the Operations Committee, although doing so would
give rise to a $25,000,000 liquidated damages payment to the McCaw Investor, the
commencement of accrual of a 12% dividend payable on the stated value of all
outstanding shares of Class A Preferred Stock (an aggregate stated value of
approximately $300,000,000) and the immediate vesting of the options granted
pursuant to the McCaw Incentive Option Agreement. However, the Nextel Board, by
a defined super-majority vote, retains the power to override actions taken or
proposed by the Operations Committee without triggering the obligation to make a
liquidated damages payment, or to commence dividend accruals with respect to the
Class A Preferred Stock or to accelerate the vesting of the options granted
pursuant to the McCaw Incentive Option Agreement. In addition, the Nextel Board
also may act to terminate the Operations Committee, although such action by the
Nextel Board would, in certain circumstances, result in the obligation to make
such a liquidated damages payment and result in the commencement of such
dividend accrual and the accelerated vesting of the related options. The McCaw
Securities Purchase Agreement, the Nextel Charter and the Nextel By-laws also
delineate a number of circumstances, chiefly involving or resulting from certain
events with respect to the McCaw Investor or Craig O. McCaw, in which the
Operations Committee could be terminated but such liquidated damages payment,
dividend accrual and vesting of options would not be required. Except for the
accrual of the 12% dividend in the circumstances described above, shares of
Class A Preferred Stock are entitled to dividends only to the extent declared or
paid with respect to Nextel Common Stock in amounts equal to the amounts that
would be received had the Class A Preferred Stock been converted into Nextel
Common Stock. Upon liquidation, dissolution or winding up of Nextel, the holders
of Class A Preferred Stock are entitled to receive a liquidation preference
equal to the stated value of the Class A Preferred Stock plus any accrued but
unpaid dividends thereon.
Class B Preferred Stock. The purpose of the Class B Preferred Stock is
to provide a protection for the McCaw Investor's right to proportionate
representation on the Nextel Board (to the extent not provided by the McCaw
Investor's ownership of Class A Preferred Stock) and to establish a mechanism
for the payment of the liquidated damages payment contemplated by the McCaw
Securities Purchase Agreement in the event that the Nextel Board takes certain
actions with respect to the Operations Committee that give rise to such payment.
Shares of Class B Preferred Stock are automatically converted on a one-for-one
basis to shares of Nextel Common Stock if the McCaw Investor's equity interest
in Nextel falls below specified levels or if certain transfers of Class B
Preferred Stock occur.
Class C Preferred Stock. The purpose of the Class C Preferred Stock is
to protect the economic attributes of the Class A Preferred Stock in the event
that certain events resulting in the termination of the corporate governance
rights associated with the Class A Preferred Stock occur. The terms of the Class
C Preferred Stock are substantially the same as
39
<PAGE> 42
the terms of the Class A Preferred Stock except that holders of Class C
Preferred Stock have no special voting rights in the election of directors
(including the appointment of directors to the Operations Committee) and are not
entitled to the 12% dividend in the circumstances in which shares of Class A
Preferred Stock would be entitled to such dividend.
Nextel Series D Preferred Stock. The Nextel Series D Preferred Stock
ranks on a parity with the Class A Preferred Stock, the Class B Preferred Stock
and the Class C Preferred Stock, except that Nextel Series D Preferred Stock is
junior with respect to dividend accruals and payments on the Class A Preferred
Stock and the $25,000,000 cash payment on the Class B Preferred Stock that are
described above, which are required upon certain occurrences. Dividends on the
Nextel Series D Preferred Stock are cumulative at 13% per annum and are payable
quarterly in cash or, on or prior to July 15, 2002, at the sole option of
Nextel, in additional shares of Nextel Series D Preferred Stock. The Nextel
Series D Preferred Stock is mandatorily redeemable on July 15, 2009 and may be
redeemed at the option of Nextel in whole or in part after December 15, 2005
and, in certain circumstances, after July 15, 2002 at specified redemption
prices. The Nextel Series D Preferred Stock is also exchangeable, in whole but
not in part, at the option of Nextel at any time after December 15, 2005 and in
certain circumstances sooner, into Nextel subordinated debentures.
TERMS OF CELLCALL PREFERRED STOCK
CellCall has issued a total of 22,346.71 shares of Series A Preferred
Stock and Series B Preferred Stock in connection with certain venture capital
investments in CellCall. CellCall has also issued 52,500 shares of Series C
Preferred Stock to Mr. Harris, its Chairman, President and Chief Executive
Officer. In addition, CellCall has designated the CellCall Series D Preferred
Stock for issuance upon conversion of the Magold Note, which was issued to the
Magold Parties in connection with CellCall's acquisition of Electro Comm
Columbus Corp. None of the CellCall Series D Preferred Stock has been issued,
and it is a condition to Nextel's obligation to consummate the Merger that the
Magold Parties agree not to convert the Magold Note into such shares. Certain of
the significant terms of each series of preferred stock are summarized below.
Series A and Series B Convertible Preferred Stock. There are 1,668.92
shares of Series A Preferred Stock and 20,667.79 shares of Series B Preferred
Stock issued and outstanding. The Series A Preferred Stock and Series B
Preferred Stock (together, the "Series A and B Preferred Stock") vote as a class
on an as converted basis with respect to certain corporate actions specified in
the CellCall Charter, including the Merger Agreement. In the event of a
liquidation, dissolution, distribution or sale of assets, or winding up of
CellCall, the holders of Series A Preferred Stock are entitled to a preferential
distribution of cash or property with a value of $1,000 per share and the
holders of Series B Preferred Stock are entitled to a preferential distribution
of $1,150 per share, which preferences shall be paid, up to a maximum aggregate
distribution of $15,000,000 to all holders of Series A Preferred Stock and
Series B Preferred Stock, before any distribution to the holders of Series C
Preferred Stock or CellCall Common Stock. If there is cash or property remaining
after payment of the Series C Preference, the remainder of the Aggregate Series
A Preference and the Aggregate Series B Preference shall be paid before payment
of any amounts to the holders of CellCall Common Stock. Upon the merger or
consolidation of CellCall into or with any other corporation, such as the Merger
with Nextel, whereby the holders of all of the voting power of CellCall
immediately before such transaction will not hold more than 50% of the voting
power of the surviving entity, the allocation of any cash, securities or other
property into which shares of capital stock of CellCall are to be converted
shall be made in accordance with the preferential distributions described in the
preceding sentence as if such merger or consolidation were a liquidation of
CellCall, unless the holders of two-thirds of the combined outstanding shares of
the Series A and B Preferred Stock, as a class, expressly waive such rights in
writing. If there are insufficient funds or property to pay the Aggregate Series
A Preference and the Aggregate Series B Preference, then all of the assets of
the corporation shall be distributed ratably among the holders of the Series A
and B Preferred Stock.
Each share of the Series A and B Preferred Stock is convertible to
CellCall Common Stock on a one-for-one basis, subject to adjustment upon certain
specified events. The Series A and B Preferred Stock shall be converted
automatically into shares of CellCall Common Stock upon a qualified initial
public offering of CellCall Common Stock. The Series A and B Preferred Stock
have no preference with respect to dividends, except that the holders of such
Series A and B Preferred Stock are entitled to receive dividends on a parity
with CellCall Common Stock, if and when dividends are declared and paid with
respect to the CellCall Common Stock, on an as converted basis.
Series C Convertible Preferred Stock. There are 52,500 shares of Series
C Preferred Stock authorized, issued and outstanding. Each share of Series C
Preferred Stock is convertible into 0.04285714 share of CellCall Common Stock at
the option of the holder, or automatically upon (1) the closing of a qualified
initial public offering of CellCall Common Stock, (2) any event, other than the
closing of a merger of CellCall into or with a company whose shares are publicly
traded on a recognized stock exchange or over-the-counter or an affiliate of
such a company, which entitles the holders of Series A and
40
<PAGE> 43
Series B Preferred Stock to a preferential distribution of assets, or (3) upon
the affirmative vote of a majority of the CellCall Board. Upon the merger of
CellCall with a publicly traded company, after payment of all amounts due to
creditors and of the Aggregate Series A Preference and the Aggregate Series B
Preference (up to $15,000,000), each share of Series C Preferred Stock up to
35,000 shares shall be converted into one share of the common stock of such
publicly traded company and each additional share of Series C Preferred Stock
designated as an Incentive Share by the CellCall Board (up to 17,500 shares,
which shall be determined by subtracting the sum of (a) $2,700,000 less the
adjustments due to shortfalls in channels delivered divided by $237.36 and (b)
$400,000 less the adjustment for negative working capital, if any, divided by
$65.31, from 17,500) shall be converted into one share of such common stock.
Series D Convertible Preferred Stock. The CellCall Series D Preferred
Stock, upon issuance, would have identical rights, preferences, and
characteristics as the Series A and Series B Preferred Stock, with a conversion
formula as specified in the Magold Note. None of the CellCall Series D Preferred
Stock has been issued, and it is a condition to Nextel's obligation to
consummate the Merger that the Magold Parties agree not to convert the Magold
Note into such shares.
VOTING RIGHTS
The DGCL states that, unless a corporation's certificate of
incorporation or by-laws specifies otherwise, (i) each share of its capital
stock is entitled to one vote, (ii) a majority of voting power of the shares
entitled to vote, present in person or represented by proxy, shall constitute a
quorum at a stockholders meeting and (iii) in all matters other than the
election of directors, the affirmative vote of the majority of the voting power
of shares, present in person or represented by proxy at the meeting and entitled
to vote on the subject matter, shall be the act of the stockholders. Each share
of CellCall Common Stock has one vote on all matters to be voted on by the
holders of the CellCall Common Stock. The Series A and B Preferred Stock have
the voting rights required by the DGCL and on all matters submitted to a vote of
the stockholders of CellCall, each share of Series A Preferred Stock and Series
B Preferred Stock is entitled to cast the number of votes equal to the number of
shares of CellCall Common Stock which would be issuable upon conversion of such
share (including any fractional share) as of the record date for determining
eligibility to vote. Further, CellCall may not take the following actions
without the affirmative vote or consent of holders of at least two-thirds of the
outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
voting as a class: (i) increase the aggregate number of authorized shares of
Series A Preferred Stock or Series B Preferred Stock; (ii) except as otherwise
provided, effect an exchange, reclassification or cancellation of all or part of
the shares of Series A Preferred Stock or Series B Preferred Stock; (iii) except
as otherwise provided, effect an exchange or create a right of exchange of all
or part of the shares of another class or series into the shares of Series A
Preferred Stock or Series B Preferred Stock or all or part of the shares of any
previously designated series of Series A Preferred Stock or Series B Preferred
Stock into the shares of any other previously designated series; (iv) except as
otherwise provided, create a class or series of shares having rights,
preferences or privileges prior to or on parity with any of the shares of Series
A Preferred Stock or Series B Preferred Stock; (v) amend the CellCall Charter in
any way if such amendment would change, alter, cancel or impair the preferences
or rights (including the conversion privilege) of the Series A Preferred Stock
or Series B Preferred Stock; or (vi) consolidate or merge with or into, or
transfer all or substantially all of CellCall's property, assets or business to,
any other person or entity (except a merger with another entity in which
CellCall is the surviving entity and which does not adversely affect the rights
of the holders of Series A Preferred Stock or Series B Preferred Stock or a
merger or consolidation in which holders of the Series A Preferred Stock or
Series B Preferred Stock receive payment in full of their respective preference
amount), liquidate, dissolve or wind up the affairs of CellCall. The Series C
Preferred Stock has no voting rights, except as provided by the DGCL.
As described in "-- Terms of Nextel Preferred Stock," holders of shares
of Nextel Class A Preferred Stock and Class B Preferred Stock issued in the
McCaw Transaction are entitled to elect a number of directors to the Nextel
Board.
Except as required by law with respect to shares of each of Class A
Preferred Stock, Class B Preferred Stock and Class C Preferred Stock, and except
with respect to matters as to which shares of Class A Preferred Stock and Class
B Preferred Stock will vote separately as a class, the holders of shares of
Nextel Common Stock are entitled to one vote per share on all matters to be
voted on by the stockholders of Nextel. The holders of shares of Nextel
Non-Voting Common Stock have no right to vote on any matters to be voted on by
the stockholders of Nextel, except that the holders of shares of Nextel
Non-Voting Common Stock have the right to vote as a separate class (with each
share having one vote) on any merger, consolidation, reorganization or
reclassification of Nextel or its shares of capital stock, any amendment to the
Nextel Charter or any liquidation, dissolution or winding up of Nextel (each
such event being a "Fundamental Change"), but only in which shares of Nextel
Non-Voting Common Stock would be treated differently than shares of Nextel
Common Stock. Holders of Nextel Non-Voting Common Stock are not entitled to such
a class vote with regard to a Fundamental Change in which the only difference in
such treatment is that the holders of shares of Nextel Common Stock would be
entitled to receive equity securities with full voting rights and the holders of
shares of Nextel Non-Voting Common Stock would be
41
<PAGE> 44
entitled to receive equity securities which have voting rights substantially
identical to the voting rights of shares of Nextel Non-Voting Common Stock and
which are convertible upon any Voting Conversion Event (as defined below), on a
share for share basis, into the voting securities to which the holders of the
shares of Nextel Common Stock are entitled, but which are otherwise identical to
such voting securities.
Shares of Nextel Non-Voting Common Stock can be converted into shares
of Nextel Common Stock if such shares are being or have been distributed,
disposed of or sold (or are expected to be distributed, disposed of or sold) in
connection with a Voting Conversion Event. A "Voting Conversion Event" is
defined as (i) any public offering or public sale of securities of Nextel
(including a public offering registered under the Securities Act and a public
sale pursuant to Rule 144 or any similar rule then in force), (ii) any sale of
securities of Nextel to a person or group of persons (as used here and
subsequently in this paragraph, within the meaning of the Exchange Act) if,
after such sale, such person or group of persons in the aggregate would own or
control securities which possess in the aggregate the ordinary voting power to
elect a majority of the members of the Nextel Board if such sale had been
approved by the Nextel Board or a committee thereof, (iii) any sale of
securities of Nextel to a person or group of persons if, after such sale, such
person or group of persons in the aggregate would own or control securities of
Nextel (excluding any shares of Nextel Non-Voting Common Stock being converted
and disposed of in connection with such Voting Conversion Event) that possess in
the aggregate the ordinary voting power to elect a majority of the members of
the Nextel Board, (iv) any sale of securities of Nextel to a person or group of
persons if, after such sale, such person or group of persons would not, in the
aggregate, own, control or have the right to acquire more than two percent of
the outstanding securities of any class of voting securities of Nextel and (v)
any distribution, disposition or sale of any securities of Nextel to a person or
group of persons in connection with a merger, consolidation or similar
transaction if, after such transaction, such person or group of persons would
own or control securities which constitute in the aggregate the ordinary voting
power to elect a majority of the surviving corporation's directors, provided the
transaction had been approved by the Nextel Board or a committee thereof. If any
shares of Nextel Non-Voting Common Stock are converted into shares of Nextel
Common Stock in connection with a Voting Conversion Event and any such shares of
Nextel Common Stock are not actually distributed, disposed of or sold pursuant
to such Voting Conversion Event, such shares of Nextel Common Stock that were
not so distributed, disposed of or sold shall be promptly converted back into
the same number of shares of Nextel Non-Voting Common Stock.
Holders of the Nextel Series D Preferred Stock have no voting rights
except as provided by law or by the Nextel Charter; provided however, that in
the event of certain defaults, such holders will have the right to elect two
directors to the Nextel Board. See "-- Election of Board of Directors."
NUMBER OF DIRECTORS
Under the DGCL, unless a corporation's certificate of incorporation
specifies the number of directors, such number shall be fixed by, or in the
manner provided in, its by-laws. If a corporation's certificate of incorporation
expressly authorizes its board of directors to amend its by-laws, its board of
directors may change the authorized number of directors by an amendment to the
corporation's by-laws, if fixed therein, or in such manner as is provided
therein. If such certificate of incorporation specifies the number of directors,
the number of directors can only be changed by amending the certificate of
incorporation.
The CellCall Charter provides that the number of the board of directors
shall be fixed from time to time exclusively by the CellCall Board pursuant to a
resolution adopted by a majority of the total number of directors. The CellCall
By-laws currently provide that the number of members of the board of directors
shall be not less than one. The Nextel By-laws provide that the number of
members of the Nextel Board shall be established from time to time by resolution
of the Nextel Board or by the stockholders. Nextel is a party to certain
agreements with certain of its stockholders that entitle specified stockholders
to name certain nominees to be elected to the Nextel Board and might require
Nextel to increase the size of the Nextel Board. See "-- Election of Board of
Directors." Pursuant to the terms of the McCaw Securities Purchase Agreement,
Nextel cannot increase the size of the Nextel Board to be greater than 16
members.
The number of directors on the CellCall Board is currently eight and on
the Nextel Board is currently ten.
ELECTION OF BOARD OF DIRECTORS
The DGCL provides that a corporation's directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at a meeting and entitled to vote on the election of directors. Additionally,
with respect to Nextel, shares of Class A Preferred Stock and Class B Preferred
Stock have certain rights to vote separately as a class to elect members of the
Nextel Board. See "-- Terms of Nextel Preferred Stock." Under the DGCL,
stockholders of a
42
<PAGE> 45
corporation cannot elect directors by cumulative voting unless the corporation's
certificate of incorporation so provides. Neither the CellCall Charter nor the
Nextel Charter provides for cumulative voting. See "-- Voting Rights."
Nextel has entered into agreements with certain stockholders that
permit such stockholders to designate nominees to be elected to the Nextel Board
and certain employment agreements with its key executives that contemplate the
election of such executives to the Nextel Board. Pursuant to the Stock Purchase
Agreement (the "Matsushita Stock Purchase Agreement"), dated as of December 9,
1991, by and between Nextel and Matsushita Communication Industrial Co., Ltd.
("Matsushita"), Nextel agreed that Matsushita would be entitled to designate one
member of the Nextel Board if at the time of such appointment Matsushita or its
affiliates own more than 1,500,000 shares of Nextel Common Stock. Each of the
Matsushita Stock Purchase Agreement and the Stock Purchase Agreement (the "NTT
Stock Purchase Agreement") dated as of January 20, 1994 between Nextel and
Nippon Telephone and Telegraph Corporation, respectively, provides that Nextel
will, among other things (i) include the person(s) designated to become a Nextel
Board member under the terms of such agreement (the "Designees") to the slate of
nominees proposed to Nextel's stockholders for election to the Nextel Board, and
recommend to the stockholders the Designees' election to the Nextel Board and
(ii) during any period prior to such election, increase the size of the Nextel
Board to create a vacancy for such Designees and promptly appoint such Designees
to the Nextel Board. Pursuant to the Agreement and Plan of Contribution, dated
August 4, 1994, as amended, relating to the Motorola Transaction (the "Motorola
Agreement"), Motorola is entitled to designate two directors, although currently
Motorola has only designated one such director. The terms of the Motorola
Agreement contemplate that Motorola may grant to certain transferees acquiring
shares of Nextel Common Stock from it the right to designate not more than one
additional nominee to the Nextel Board pursuant to each such agreement. Pursuant
to the McCaw Securities Purchase Agreement, the McCaw Investor is currently
entitled to nominate three designees for appointment to the Nextel Board in
order to bring its total representation on the Nextel Board to not less than
25%.
In addition, pursuant to certain terms of the understanding between
Nextel and an affiliate of Craig O. McCaw relating to an option to acquire
25,000,000 shares of Nextel Common Stock at any time through July 28, 1998 (the
"New Option"), one direct transferee designated by the holder of the New Option,
an affiliate of Craig O. McCaw, will be entitled to designate one nominee for
election to the Nextel Board subject to certain conditions. In the event that
dividends on the Nextel Series D Preferred Stock are not paid for four
consecutive quarters or six quarters (whether or not consecutive) or upon
certain other events (including failure to pay the mandatory redemption price
when due), then the number of directors constituting the Nextel Board will be
adjusted to permit the holders of the majority of the then outstanding Nextel
Series D Preferred Stock, voting separately as a class, to elect two directors.
Finally, the employment agreements between Nextel and each of Messrs. Morgan
O'Brien and Brian McAuley contemplate that they will serve as members of the
Nextel Board, but in the case of Mr. McAuley, his agreement was effectively
amended to reflect his resignation as a director of Nextel in January 1997.
CellCall has entered into an Amended and Restated Shareholders
Agreement dated March 9, 1993, as amended, with The Southern Venture Fund
Limited Partnership, The Charles River Partnership VI, Media/Communications
Partners II Limited Partnership, Morgan, Holland II, L.P., business entities
affiliated with such entities, J. P. Harris and Jack Loperena (the "Shareholders
Agreement"). The Shareholders Agreement provides that the parties shall
cooperate to elect eight directors, including a designee of each of certain
parties to the agreement, an individual elected by the majority of the
shareholders as a group, and Messrs. Harris and Loperena, to the CellCall Board
and any executive committee thereof.
The DGCL permits, but does not require, the adoption of a "classified"
board of directors with staggered terms under which part of the board of
directors is elected each year for a maximum term of three years. In general,
under the DGCL, any or all of the directors of a corporation may be removed,
with or without cause, by vote of the holders of a majority of the shares then
entitled to vote at an election of directors, except that the DGCL authorizes
removal of a member of a classified board by the stockholders only for cause.
Neither the CellCall Charter nor the CellCall By-laws provides for such
a "classified" board. The Nextel Charter divides the members of the Nextel Board
into three classes, as nearly equal in number as possible. Each class of
directors is elected for a staggered three-year term to the Nextel Board. The
McCaw Investor has the right, as holder of all outstanding shares of Class A
Preferred Stock, to elect not less than 25% of the total number of members of
the Nextel Board (or three directors, if greater), and thereafter to vote to
remove, replace or re-elect any such director.
VOTE ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS
The DGCL generally requires approval of any merger, consolidation or
sale of substantially all the assets of a corporation at a meeting of
stockholders by vote of the holders of a majority of all outstanding shares of
the corporation
43
<PAGE> 46
entitled to vote thereon. The certificate of incorporation of a Delaware
corporation may provide for a greater vote. The Nextel Charter does not contain
such a provision. The CellCall Charter requires the affirmative vote or consent
of the holders of at least two-thirds of the outstanding shares of Series A and
Series B Preferred Stock, voting as a class on an as converted basis, to approve
any consolidation, merger, transfer of substantially all of its property, assets
or business, liquidation, dissolution or winding up of its affairs.
SPECIAL MEETINGS OF STOCKHOLDERS
Under the DGCL, special stockholder meetings of a corporation may be
called by its board of directors and by any person or persons authorized to do
so by its certificate of incorporation or by-laws. Under the CellCall By-laws,
special meetings of the stockholders for any purpose or purposes, unless
otherwise prescribed by statute or by the CellCall Charter, may be called at any
time by the CellCall Board or by a committee of the CellCall Board which has
been duly designated by the CellCall Board and whose powers and authority, as
expressly provided in a resolution of the CellCall Board, include the power to
call such meetings, but such special meetings may not be called by any other
person or persons. The notice to stockholders of a special meeting shall state
the purpose or purposes of such meeting.
Under the Nextel By-laws, special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the Nextel
Charter, may be called by the President and shall be called by the President or
Secretary at the request in writing of a majority of the Nextel Board or at the
request in writing of stockholders owning a majority of the capital stock of
Nextel issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Under the DGCL, any action by a corporation's stockholders must be
taken at a meeting of such stockholders, unless a consent in writing setting
forth the action so taken is signed by the stockholders having not less than the
minimum number of votes necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted. Actions by
written consent, however, may not be taken if otherwise provided in the
certificate of incorporation. The CellCall By-laws follow the DGCL regarding
stockholder action by written consent. If such action is taken without a meeting
by less than unanimous written consent, the CellCall By-laws require that prompt
notice be given to CellCall stockholders who did not consent in writing. The
Nextel Charter provides that, subject to certain rights granted to any class or
series of stock having a preference over shares of Nextel Common Stock (the
shares of Class A Preferred Stock, Class B Preferred Stock and Class C Preferred
Stock have the right, as to matters upon which they are entitled to vote
separately as a class, to take such action by written consent in lieu of a
meeting) and Non-Voting Common Stock, any action required or permitted to be
taken by Nextel stockholders must be effected at a duly called annual or special
meeting of such stockholders and may not be effected by any consent in writing
of such stockholders.
AMENDMENT OF CERTIFICATE OF INCORPORATION
The DGCL allows amendment of a corporation's certificate of
incorporation if its board of directors adopts a resolution setting forth the
amendment proposed, declaring its advisability, and the stockholders thereafter
approve such proposed amendment either at a special meeting called by the board
for the purpose of approval of such amendment by the stockholders or, if so
directed by the board, at the next annual stockholders' meeting. At any such
meeting, the proposed amendment generally must be approved by a majority of the
outstanding shares entitled to vote. The holders of the outstanding shares of a
class are entitled to vote as a separate class upon a proposed amendment,
whether or not entitled to vote thereon by the certificate of incorporation, if
the amendment would increase or decrease the aggregate number of authorized
shares of such class, increase or decrease the par value of the shares of such
class or alter or change the powers, preferences or special rights of the shares
of such class so as to affect them adversely. If any proposed amendment would
alter or change the powers, preferences or special rights of one or more series
of any class so as to affect them adversely, but not affect the entire class,
then only the shares of the series so affected by the amendment will be
considered a separate class for the purposes of a vote on the amendment. Under
the DGCL, a corporation's certificate of incorporation also may require, for
action by the board or by the holders of any class or series of voting
securities, the vote of a greater number or proportion than is required by the
DGCL and the provision of the certificate of incorporation requiring such
greater vote cannot be altered, amended or repealed except by such greater vote.
The Nextel Charter does not contain provisions requiring a vote greater
than that specified in the DGCL to amend the Nextel Charter. The CellCall
Charter requires the affirmative vote or consent of the holders of at least
two-thirds of the outstanding shares of Series A and B Preferred Stock, voting
as a class, to amend the CellCall Charter in any way if such
44
<PAGE> 47
amendment would change, alter, cancel or impair the preferences or rights
(including the conversion privilege) of the Series A Preferred Stock or Series B
Preferred Stock.
AMENDMENT OF BY-LAWS
Under the DGCL, the power to adopt, amend or repeal a corporation's
by-laws resides with the stockholders entitled to vote thereon, and with the
directors of such corporation if such power is conferred upon the board of
directors by the certificate of incorporation. The Nextel Charter authorizes the
Nextel Board to make, alter, amend or repeal the Nextel By-laws without any
action on the part of the stockholders. The CellCall Charter authorizes the
CellCall Board to make, alter or repeal the CellCall By-laws, but the CellCall
stockholders may make additional CellCall By-laws and may alter or repeal any
CellCall By-laws whether adopted by them or not.
CERTAIN LIMITATIONS RELATED TO THE MCCAW TRANSACTION
With respect to certain provisions of the Nextel Charter and the Nextel
By-laws amended upon consummation of the McCaw Transaction, any future actions
proposed to be taken in the nature of modifications to or affecting such
provisions may require the consent, approval or vote of the McCaw Investor
and/or its affiliates, in addition to any other required Nextel stockholder or
Nextel Board action.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The DGCL provides that a corporation may limit or eliminate a
director's personal liability for monetary damages to the corporation or its
stockholders, except for liability (i) for any breach of the director's duty of
loyalty to such corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for paying a dividend or approving a stock repurchase in violation of
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. The Nextel Charter and the CellCall
Charter and CellCall By-laws provide that, to the full extent provided by law, a
director will not be personally liable for monetary damages to such corporation
or its stockholders for or with respect to any acts or omissions in the
performance of his or her duties as a director of such corporation.
Under the DGCL, directors and officers as well as other individuals may
be indemnified against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation as a derivative action) if
they acted in a manner they reasonably believed to be in, or not opposed to, the
best interest of the corporation, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. The CellCall Charter and the CellCall By-laws, the Nextel Charter and
the Nextel By-laws provide to directors and officers indemnification to the full
extent provided by law, thereby affording the directors and officers of CellCall
and Nextel the protections available to directors and officers of Delaware
corporations.
Article VII of the Nextel By-laws also provides that expenses incurred
by a person in defending a civil or criminal action, suit or proceeding by
reason of the fact that he or she is or was a director or officer shall be paid
in advance of the final disposition of such action, suit or proceeding, upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he or she is not entitled
to be indemnified by Nextel as authorized by relevant Delaware law.
Section 6.2 of the CellCall By-laws provides that expenses incurred
(including attorneys' fees) by any director or officer in defending a civil or
criminal action, suit or proceeding in advance of its final disposition shall be
paid by CellCall upon receipt of an undertaking by or on behalf of the person
who is a party to such action, suit or proceeding by reason of the fact that he
or she is or was a director or officer of CellCall, or was serving at the
request of CellCall as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, to repay such amount if
it shall ultimately be determined he or she is not entitled to be indemnified by
CellCall as authorized in the CellCall Charter.
DISSENTERS' RIGHTS
Under the DGCL, a stockholder of a corporation participating in certain
merger and similar transactions may, under certain circumstances, receive cash
in the amount of the fair value of such holder's shares (as determined by a
court) in lieu of the consideration such holder would otherwise receive in the
merger or similar transaction. Unless a corporation's certificate of
incorporation provides otherwise, the DGCL does not require that such
dissenters' rights of appraisal be
45
<PAGE> 48
afforded with respect to a merger or consolidation (i) to stockholders of a
corporation, the shares of which are either listed on a national securities
exchange or the Nasdaq NM or widely held (by more than 2,000 stockholders), if
the stockholders of such corporation receive only shares of the surviving
corporation or of a listed or widely held corporation (plus cash in lieu of any
fractional shares), or (ii) to stockholders of a corporation surviving a merger,
if no vote of such stockholders is required to approve the merger because,
pursuant to Section 251(f) of the DGCL, the agreement of merger does not amend
the certificate of incorporation of the surviving corporation, each share of
stock of the surviving corporation outstanding immediately prior to the
effective date of the merger is to be identical to outstanding or treasury
shares of the surviving corporation after the effective date of the merger and
the number of shares of common stock into which securities to be issued in the
merger can be converted does not exceed 20% of the shares of common stock of the
surviving corporation outstanding immediately prior to the merger. The Nextel
Charter does not provide for appraisal rights and thus holders of shares of
Nextel Common Stock (in light of the fact that such shares are traded on the
Nasdaq NM), may not be entitled to appraisal rights in certain circumstances.
The CellCall Charter does not provide or expressly eliminate or limit appraisal
rights to holders of CellCall.
PAYMENT OF DIVIDENDS
The DGCL permits the payment of dividends and the redemption of shares
out of paid-in, earned or other surplus. Under the DGCL, if a dividend is paid
out of capital surplus, stockholders need not be so notified, and dividends may
also be paid out of net profits for the fiscal year in which declared or out of
net profits for the preceding fiscal year, even if the corporation surplus
accounts show a deficit.
Holders of Preferred Stock do not have any preference with respect to
dividends, except that the holders of Preferred Stock shall be entitled to
receive dividends on a parity with CellCall Common Stock, if and when dividends
are declared and paid with respect to the CellCall Common Stock with the holder
of each share of Preferred Stock being entitled to receive the same dividend
amount as is received by the holder of a number of shares of CellCall Common
Stock which would be issuable upon conversion of such share of Preferred Stock.
Dividends paid other than out of the earned surplus of the corporation shall be
deemed to be distributions by the corporation. CellCall has not paid any
dividends on CellCall Common Stock in the past and has no plan to pay any
dividends on such stock for the foreseeable future.
Shares of Nextel Preferred Stock are entitled to the dividend rights
and preferences summarized above under the heading "-- Terms of Nextel Preferred
Stock." In addition (but subject to such preferred stock dividend rights and
preferences), the Nextel Charter provides that the Nextel Board may declare and
pay dividends on shares of Nextel Common Stock and NonVoting Common Stock
(collectively, the "Nextel Capital Stock"), payable in cash, or otherwise, only
after payment in full of, or the setting apart for payment in full of, dividends
declared upon shares of Nextel Preferred Stock at the time outstanding, to the
extent of any preference to which such stock is entitled, for all present and
past dividend periods, and after compliance with the provisions for any sinking
or purchase fund or funds for any shares of any series of Nextel Preferred
Stock. The holders of shares of Nextel Preferred Stock will not be entitled to
share in such dividends paid to holders of shares of Nextel Capital Stock,
subject to the provisions of the resolution or resolutions creating any series
of Nextel Preferred Stock. If dividends are declared on the shares of Nextel
Capital Stock which are payable in shares of Nextel Capital Stock, dividends
will be declared which are payable at the same rate on shares of both classes of
Nextel Capital Stock. However, such dividends payable in shares of Nextel Common
Stock will be payable only to holders of shares of Nextel Common Stock and such
dividends payable in shares of NonVoting Common Stock will be payable only to
holders of shares of Non-Voting Common Stock.
DISTRIBUTIONS UPON LIQUIDATION
The Nextel Charter provides that in the event of any liquidation,
dissolution or winding up of Nextel or upon the distribution of the assets of
Nextel, all assets and funds of Nextel remaining (after the payment to the
holders of shares of Nextel Preferred Stock of the full preferential amounts to
which they shall be entitled pursuant to the Nextel Charter and/or the
resolution or resolutions creating any series thereof) shall be divided and
distributed among the holders of shares of Nextel Capital Stock ratably, except
as may otherwise be provided in any such resolution or resolutions.
In general upon the liquidation, dissolution, distribution of assets,
sale of substantially all of the assets or winding up of CellCall, after payment
in full of all amounts due and owing to creditors, the holders of Preferred
Stock shall receive distributions in accordance with their respective
liquidation preferences and any remaining assets shall be distributed ratably to
the holders of the Series A Preferred Stock, Series B Preferred Stock and
CellCall Common Stock. Unless waived by the holders of two-thirds of the
outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
generally upon
46
<PAGE> 49
the merger of CellCall into or with any other corporation (such as the proposed
Merger), the capital stock of CellCall shall be converted as if such merger were
a liquidation of CellCall.
COMPROMISE AND REORGANIZATION
The DGCL permits a corporation to provide in its certificate of
incorporation that whenever a compromise or arrangement is proposed between the
corporation and its creditors or any class of creditors and/or stockholders or
any class of stockholders, a Delaware court of equitable jurisdiction may, upon
appropriate application, order a meeting of such creditors or class of creditors
and/or stockholders or class of stockholders. If a majority in number
representing three-fourths in value of such creditors or class of creditors,
and/or of such stockholders or class or stockholders, agrees to any compromise
or arrangement and to any reorganization of the corporation as a consequence of
such compromise or arrangement, such compromise or arrangement and such
reorganization shall, if sanctioned by the court to which application was made,
be binding on all such creditors or class of creditors, and/or all such
stockholders or class of stockholders and the corporation. The Nextel Charter
does not contain such a provision. The CellCall Charter contains such a
provision.
ADDITIONAL INFORMATION CONCERNING CELLCALL
HISTORY AND DEVELOPMENT OF BUSINESS
CellCall was incorporated on February 18, 1988 in Kentucky and was
reincorporated in Delaware in 1994. CellCall's corporate offices are located at
1720 Fortune Court, Suite 106, Lexington, Kentucky 40509. Its telephone number
is (606) 299-1444.
CellCall provides mobile telephone, fleet dispatch and paging services
using SMR frequencies licensed to CellCall by the FCC. Currently, CellCall
operates regional analog mobile communications networks through approximately
1,100 SMR channels it owns in Kentucky, Ohio, Indiana, Pennsylvania, Tennessee
and Alabama. CellCall derives its operating revenues primarily from its two-way
radio dispatch and mobile telephone service, and, to a lesser extent, from
sales, leasing and servicing of related equipment. Its customers include
transportation, construction, service, delivery-related and other small
businesses which need to provide their employees with the ability to communicate
rapidly with one another through the operation of mobile dispatch fleets.
CellCall's SMR systems operate in the 800 MHz frequency range, the same
band used by cellular mobile telephone systems. Historically, the SMR industry
has been a two-way radio dispatch service providing private communications
between a base site and one or more mobile radio units. An SMR system typically
consists of between five and 20 SMR channels which are "trunked" together to
permit the system automatically to route calls to the first available open
channel. An SMR operator has exclusive use of the channels used on its system
within its transmitting area. The signal emitted by a high-power SMR repeater
station transmitter generally will cover a radius of approximately 20 to 35
miles from the transmitter site, depending on the topography of the service
area.
In 1989, CellCall filed applications with the FCC for SMR channels in
Lexington, Kentucky. CellCall obtained the licenses and implemented its first
network, which commenced operations in January 1990, in Lexington. In November
1992 and March 1993, CellCall completed its first major acquisitions of existing
SMR operations in Cincinnati, Ohio and Louisville, Kentucky, which acquisitions
added over 75 channels to CellCall's network. Subsequently, in June 1993 and
November 1993, CellCall acquired four additional operations, gaining further
channels in Cincinnati and Louisville, and adding systems in Dayton, Ohio and
Indianapolis, Indiana. In May 1994, CellCall acquired all of the issued and
outstanding stock of Electro Comm Columbus Corporation, an Ohio corporation
("Electro Comm"), which it continues to operate as a wholly-owned subsidiary.
Through this acquisition CellCall added 40 channels to its network, and also
acquired Electro Comm's existing sales and service employees and facilities.
By acquiring multiple stations and networks in each of these
metropolitan market areas and the surrounding communities, CellCall has
increased the capacity of its system within the constraints of current SMR
technology, primarily by combining several smaller systems. The consolidation of
a number of systems in each market has allowed CellCall to expand its service
offerings to its customers and realize economies of scale on certain expenses.
CellCall also has acquired over 100 single channel SMR channels in the
southeastern and midwestern United States, including in Pittsburgh,
Pennsylvania; Birmingham and Huntsville, Alabama; Knoxville, Chattanooga and
Johnson City, Tennessee; and various smaller cities and towns in Indiana and
Ohio. CellCall's acquisitions were funded primarily by raising over $20,000,000
in equity capital from 1990 through 1994.
47
<PAGE> 50
COMPETITION
CellCall's management believes that competition is moderate, but
increasing, among wireless communications providers in the regions CellCall
serves. CellCall competes against both analog and digital cellular and PCS
operators, including CellularOne/GTE, BellSouth Mobility, Airtouch, Ameritech
and Sprint Spectrum, in each of its markets. Because of the increase in wireless
communications carriers, many of CellCall's competitors have been lowering their
prices to attract new customers, making it more difficult for CellCall to
compete effectively.
ORGANIZATION
CellCall is centrally organized and conducts most administrative
functions, as well as certain marketing and customer service and support
functions, from its corporate headquarters in Lexington.
CellCall has established four branch offices in strategic locations
throughout its network to market CellCall's products and services and to offer
customer support. These offices serve as CellCall's key contact with the end
users of its network services. CellCall's direct sales and service forces are
located in Lexington and Louisville, Kentucky and Cincinnati and Columbus, Ohio.
Branch managers participate in an incentive-based compensation program, and
salespersons are compensated by salary plus commissions.
EMPLOYEES
As of December 31, 1997, CellCall had 31 employees. CellCall leases
office space for its headquarters in Lexington and its branch offices and owns
no real estate.
MARKET AND STOCKHOLDER INFORMATION
No established public trading market exists for shares of CellCall
Stock. On the Record Date, there were three holders of record of the CellCall
Common Stock, two holders of record of the Series A Preferred Stock, 20 holders
of record of the Series B Preferred Stock and one holder of record of the Series
C Preferred Stock. No shares of CellCall's Series D Preferred Stock were
outstanding on the Record Date.
DIVIDENDS
CellCall has not paid dividends on its capital stock to date and has no
plans to do so prior to consummation of the Merger.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF CELLCALL
HISTORICAL OVERVIEW
CellCall has grown since its inception in 1988 through acquisitions and
internal growth. In 1993 and 1994, CellCall completed acquisitions in Ohio,
Kentucky, Indiana, Pennsylvania, Tennessee and Alabama, including the
acquisition of its wholly-owned subsidiary, Electro Comm. With the exception of
the acquisition of Electro Comm, these acquisitions were structured as purchases
of assets, including FCC licenses, related property and equipment and customer
lists. CellCall's acquisition program has been funded primarily through the
private placement of equity and convertible debt securities, most of which have
been converted to equity securities, and bank financing. CellCall made no
acquisitions in 1996 or 1997, except that in November and December 1997,
CellCall exercised options to purchase 128 SMR licenses located throughout its
footprint.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997 vs. Nine Months Ended September
30, 1996
Total revenues for the nine months ended September 30, 1997 decreased
approximately 10.2% to $3,927,000, compared to $4,374,000 for the nine months
ended September 30, 1996. This decrease was due primarily to decreased equipment
sales and maintenance revenues resulting from reduced sales and service staffs.
48
<PAGE> 51
Cost of sales for the nine months ended September 30, 1997 decreased
approximately 9.8% to $1,637,000, compared to $1,814,000 for the nine months
ended September 30, 1996. This decrease was due primarily to a decrease in
equipment sales but was offset partially by an increase in telephone
interconnect expenses.
Selling, general and administrative expenses for the nine months ended
September 30, 1997 decreased approximately 8.2% to $2,190,000, compared to
$2,387,000 for the nine months ended September 30, 1996. The decrease was due
primarily to a reduction in sales and administrative personnel and related
expenses. Other general and administrative expenses decreased due to cost
cutting efforts by CellCall, which were offset partially by increased legal fees
related to the proposed Merger with Nextel and regarding FCC licenses.
Depreciation and amortization for the nine months ended September 30,
1997 decreased approximately 2.9% to $1,576,000, compared to $1,623,000 for the
nine months ended September 30, 1996. The decrease was due primarily to fixed
assets becoming fully depreciated with no large capital outlays being made in
the past several years. Several intangibles (other than FCC licenses) also
became fully amortized in 1997.
Interest income for the nine months ended September 30, 1997 decreased
approximately 37.5% to $10,000, compared to $16,000 for the nine months ended
September 30, 1996. The decrease was due to CellCall's increased use of cash in
1997 to fund its operations.
Interest expense for the nine months ended September 30, 1997 decreased
approximately 82.3% to $169,000 compared to $953,000 for the nine months ended
September 30, 1996. This decrease was related directly to the conversion of
short-term subordinated promissory notes to shares of Series B Preferred Stock
on September 30, 1996.
Other net income for the nine months ended September 30, 1997 increased
to $8,000, compared to $1,000 for the nine months ended September 30, 1996. The
increase was due to rebates earned by CellCall that did not occur during the
previous year.
Year Ended December 31, 1996 vs. Year Ended December 31, 1995
Total revenues for the year ended December 31, 1996 increased
approximately 11.6% to $6,033,000, compared to $5,407,000 for the year ended
December 31, 1995. This increase was primarily due to increases in radio service
revenue and equipment sales reflecting the addition of 3,200 radio units during
1996 while the percentage of customers leaving the network stayed below 1%.
Cost of sales for the year ended December 31, 1996 increased
approximately 9.0% to $2,659,000, compared to $2,440,000 for the year ended
December 31, 1995, due primarily to an increase in equipment sales and a modest
increase in site-related costs, including telephone interconnect and rental
expenses.
Selling, general and administrative expenses for the year ended
December 31, 1996 increased approximately 17.8% to $3,104,000, compared to
$2,634,000 for the year ended December 31, 1995. This increase was due primarily
to higher commission and advertising costs related to increased sales and, to a
lesser extent, costs associated with additional employees and typical annual
salary increases.
Depreciation and amortization for the year ended December 31, 1996
increased by approximately 0.2% to $2,338,000, compared to $2,334,000 for the
year ended December 31, 1995. The increase was minimal because CellCall made no
large asset or intangible purchases during the year; however, some assets became
fully depreciated during the year.
Interest income for the year ended December 31, 1996 decreased
approximately 9.4% to $20,000, compared to $22,000 for the year ended December
31, 1995 due to CellCall's increased use of cash for funding operations in 1996.
Interest expense for the year ended December 31, 1996 decreased
approximately 18.5% to $1,012,000, compared to $1,242,000 for the year ended
December 31, 1995, reflecting primarily the conversion of short-term
subordinated promissory notes to shares of Series B Preferred Stock on September
30, 1996.
49
<PAGE> 52
Year Ended December 31, 1995 vs. Year Ended December 31, 1994
Total revenues for the year ended December 31, 1995 increased
approximately 26.0% to $5,407,000, compared to $4,292,000 for the year ended
December 31, 1994. This increase resulted from an increase in equipment sales
and radio service revenue, which in turn was due primarily to the full-year
impact of CellCall's acquisition of Electro Comm in 1994.
Costs of sales for the year ended December 31, 1995 increased to
$2,440,000, compared to $1,846,000 for the year ended December 31, 1994. The
increase of approximately 32.2% was due to the growth in sales and the increase
in system expenses attributed to a full year of operations from acquisitions in
1994 and 1993.
Selling, general and administrative expenses for the year ended
December 31, 1995 declined approximately 14.8% to $2,634,000, compared to
$3,091,000 for the year ended December 31, 1994. The decrease was due primarily
to the decrease in administrative costs associated with acquisitions made in
1994 and the decrease in selling expenses resulting from reduced personnel
costs.
Depreciation and amortization for the year ended December 31, 1995
increased approximately 6.2% to $2,334,000, compared to $2,198,000 for the year
ended December 31, 1994, reflecting the acquisitions made in 1994 and capital
expenditures made during the year for the build-out of CellCall's analog
network.
The loss from operations declined approximately 38.5% for the reasons
indicated above and also because there were no write-offs of purchase options
during 1995 compared to a $411,000 loss for the year ended December 31, 1994,
relating to a potential acquisition during 1994.
Interest income for the year ended December 31, 1995 decreased
approximately 71.6% to $22,000, compared to $76,000 for the year ended December
31, 1994. The decrease was due to the utilization of cash to fund acquisitions
made in 1994.
Interest expense for the year ended December 31, 1995 increased
approximately 13.9% to $1,242,000, compared to $1,091,000 for the year ended
December 31, 1994, reflecting increased interest expense attributable to
increased borrowings to fund capital expenditures and acquisitions.
Other net income for the year ended December 31, 1995 was $72,000.
There was no other net income for the year ended December 31, 1994. Other net
income for 1995 reflects debt forgiveness on negotiated legal fees associated
with previous acquisitions and the refunds of telephone interconnect expenses
that were overbilled by the utility company.
LIQUIDITY AND CAPITAL RESOURCES
CellCall had net losses of approximately $1,628,000 for the nine months
ended September 30, 1997, and $3,061,000 and $3,150,000 for the years ended
December 31, 1996 and December 31, 1995, respectively. During these periods
CellCall produced earnings before interest, taxes, depreciation and amortization
expenses.
Working capital deficit was approximately $3,152,000, $2,953,000 and
$11,828,000 at September 30, 1997 and December 31, 1996 and 1995, respectively.
The improvement in 1996 was due primarily to the conversion into Series B
Preferred Stock of short-term subordinated promissory notes payable to
stockholders. The working capital deficits at September 30, 1997 and December
31, 1996 resulted from amounts due on purchase agreements for SMR licenses and
the current portion of long term debt.
Pursuant to the terms of the Loan Agreement entered into between
CellCall and Nextel on November 21, 1997, Nextel has agreed to loan CellCall up
to an aggregate of $2,357,250 for the purpose of permitting CellCall to
complete the purchase of certain of these SMR licenses. In August 1997 CellCall
obtained an extension of the $500,000 Magold Note originally due in May 1997.
The extended due date will be the earlier of the Effective Time of the Merger
or June 1, 1998. CellCall is also in the process of obtaining an extension of
the $1,000,000 Secured Note payable to Sirrom originally due in November 1997.
See "The Merger - Terms of the Merger - Agreements with Third Parties."
Although CellCall believes that it can sustain cash flow sufficient to
fund its operations in 1998, CellCall will have to rely on external sources of
funds for acquisition costs and any other expenditures related to a proposed
digital build-out of its SMR system. There can be no assurance that CellCall can
obtain funds for its capital expenditures on attractive terms.
50
<PAGE> 53
At September 30, 1997, the Preferred Stock was entitled to a
liquidation preference of $25,448,000, which exceeded the total shareholders'
equity of $8,908,000. As a result, there was no shareholders' equity available
to the CellCall Common Stock at September 30, 1997.
CellCall has not consistently generated pretax income and the potential
future tax benefits of the deferred tax assets, primarily net operating loss
carryforwards, may not be realized. Accordingly, a valuation allowance has been
provided equal to the net deferred tax assets related to these potential future
tax benefits.
OTHER MATTERS
The management of CellCall knows of no other matters that may come
before the Meeting. However, if matters other than those referred to above
should properly come before the Meeting, it is the intention of the persons
named on the enclosed form of proxy to vote such proxy in accordance with their
best judgment.
CERTAIN LEGAL MATTERS
Certain tax matters in connection with the Merger have been passed upon
for CellCall by Hill & Barlow.
EXPERTS
The CellCall consolidated balance sheets as of December 31, 1996 and
1995, and the consolidated statements of operations, changes in shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1996, included in this Prospectus Supplement, have been included herein in
reliance on the report (which contains an explanatory paragraph indicating
conditions exist that raise substantial doubt about CellCall's ability to
continue as a going concern, as discussed in Note 12 to the consolidated
financial statements) of Potter & Company, LLP, independent accountants, given
on the authority of that firm as experts in accounting and auditing.
51
<PAGE> 54
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF
CELLCALL, INC.
<TABLE>
<S> <S>
Report of Independent Auditors.................................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and December 31, 1995....... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1996,
1995 and 1994............................................................... F-5
Consolidated Statements of Shareholders' Equity for the Years Ended December 31,
1996, 1995 and 1994......................................................... F-6
Consolidated Statements of Cash Flow for the Years Ended December 31, 1996,
1995 and 1994............................................................... F-8
Notes to Consolidated Financial Statements...................................... F-9
Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996
(unaudited)................................................................. F-22
Consolidated Statements of Operations for the Nine Months Ended September 30,
1997 and 1996 (unaudited)................................................... F-24
Consolidated Statements of Shareholders' Equity for the Nine Months Ended
September 30, 1997 (unaudited).............................................. F-25
Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
1997 and 1996 (unaudited)................................................... F-26
Notes to Consolidated Interim Financial Statements.............................. F-27
</TABLE>
F-1
<PAGE> 55
[Potter & Company, LLP Letterhead]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
and Shareholders
CellCall, Inc.
Lexington, Kentucky
We have audited the accompanying consolidated balance sheets of CellCall, Inc.
(a Delaware corporation) and subsidiary as of December 31, 1996 and 1995, and
the related consolidated statements of operations, changes in shareholders'
equity and cash flows for the years ended December 31, 1996, 1995 and 1994.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CellCall, Inc. and
subsidiary as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for the years ended December 31, 1996, 1995 and 1994, in
conformity with generally accepted accounting principles.
The accompanying financial statements were prepared assuming that the Company
will continue as a going concern. As discussed in Note 12 to the financial
statements, the Company's recurring losses from operations and cash used in
operating activities raise substantial doubt about its ability to continue as a
going concern. Management's plans concerning these matters are also described in
Note 12. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
/s/ POTTER & COMPANY, LLP
POTTER & COMPANY, LLP
Lexington, Kentucky
December 31, 1997
<PAGE> 56
CELLCALL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
A S S E T S
-----------
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 373,427 $ 697,217
Accounts receivable, net of allowance for
doubtful accounts of $64,785 and $81,546
in 1996 and 1995, respectively 606,592 380,644
Inventories 352,127 388,451
Prepaid expenses 41,759 41,395
------------ ------------
Total current assets 1,373,905 1,507,707
------------ ------------
Property and equipment:
Mobile communications network equipment 6,175,480 6,064,151
Leased subscriber equipment 1,374,440 1,360,885
Office furniture and equipment 360,002 287,102
Leasehold improvements 32,554 26,828
Vehicles 59,383 59,936
------------ ------------
8,001,859 7,798,902
Less accumulated depreciation 5,433,813 4,052,053
------------ ------------
Net property and equipment 2,568,046 3,746,849
------------ ------------
Intangible assets:
FCC licenses and contracts 12,348,815 11,990,521
Customer lists 579,303 579,305
Non-compete agreements 397,338 397,338
Goodwill 202,583 202,583
Deferred financing costs 62,150 62,150
------------ ------------
13,590,189 13,231,897
Less accumulated amortization 2,644,683 1,800,535
------------ ------------
Net intangible assets 10,945,506 11,431,362
------------ ------------
Other assets:
Option payments for acquisitions in progress 0 136,000
Other assets 15,966 17,040
------------ ------------
Total other assets 15,966 153,040
------------ ------------
Total assets $ 14,903,423 $ 16,838,958
============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 57
<TABLE>
<CAPTION>
L I A B I L I T I E S
---------------------
1996 1995
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 202,192 $ 272,679
Accrued expenses 267,633 158,024
Purchase agreements payable 2,287,250 2,063,901
Deferred revenue 68,411 71,009
Short-term borrowings, related parties 0 10,730,962
Notes payable 1,494,856 27,773
Obligations under capital leases 6,470 10,879
------------ ------------
Total current liabilities 4,326,812 13,335,227
------------ ------------
Long-term liabilities:
Notes payable 37,151 1,426,035
Obligations under capital leases 3,905 0
------------ ------------
Total long-term liabilities 41,056 1,426,035
------------ ------------
Total liabilities 4,367,868 14,761,262
------------ ------------
Commitments and contingencies
S H A R E H O L D E R S' E Q U I T Y
------------------------------------
Preferred stock, $.10 par value, 60,000 shares
authorized:
Series A, stated at liquidation preference 1,668,920 1,668,920
Series B, stated at liquidation preference 23,779,452 12,260,990
Common stock, $.01 par value, 40,000 shares
authorized, 910 shares issued and outstanding 9 9
Additional paid-in capital - common stock 231,091 231,091
Additional paid-in capital - common stock warrants 166,686 166,686
Accumulated deficit (15,310,603) (12,250,000)
------------ ------------
Total shareholders' equity 10,535,555 2,077,696
------------ ------------
Total liabilities and shareholders' equity $ 14,903,423 $ 16,838,958
============ ============
</TABLE>
F-4
<PAGE> 58
CELLCALL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Radio service revenue $ 2,862,625 $ 2,635,786 $ 2,311,437
Equipment sales and maintenance 3,170,257 2,771,639 1,980,683
------------ ------------ ------------
Total revenue 6,032,882 5,407,425 4,292,120
------------ ------------ ------------
Cost of sales:
Cost of radio service revenue 1,036,781 953,758 776,801
Cost of equipment sales
and maintenance 1,622,483 1,486,218 1,068,976
------------ ------------ ------------
Total cost of sales 2,659,264 2,439,976 1,845,777
------------ ------------ ------------
Gross profit 3,373,618 2,967,449 2,446,343
------------ ------------ ------------
Operating expenses:
Selling 499,588 416,731 502,414
General and administrative 2,604,362 2,217,534 2,588,729
Depreciation and amortization 2,337,643 2,333,704 2,198,195
Loss on expired purchase option 0 0 410,837
------------ ------------ ------------
Total operating expenses 5,441,593 4,967,969 5,700,175
------------ ------------ ------------
Loss from operations (2,067,975) (2,000,520) (3,253,832)
------------ ------------ ------------
Other income (expense):
Interest income 19,542 21,576 76,067
Interest expense (1,012,170) (1,242,229) (1,090,657)
Other, net 0 71,592 0
------------ ------------ ------------
Total other income (expense) (992,628) (1,149,061) (1,014,590)
------------ ------------ ------------
Net loss $ (3,060,603) $ (3,149,581) $ (4,268,422)
============ ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 59
CELLCALL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock
Series A Series B
---------------------- --------------------------
Shares Amount Shares Amount
------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994 166,892 $ 1,668,920 1,066,173 $ 12,260,990
Year ended December 31, 1994:
Conversion of no par to $.01
par value common stock
Net loss
------- ----------- ---------- ------------
Balance, December 31, 1994 166,892 1,668,920 1,066,173 12,260,990
Year ended December 31, 1995:
100-for-1 reverse stock split (165,223) (1,055,511)
Exercise of stock options
Net loss
------- ----------- ---------- ------------
Balance, December 31, 1995 1,669 1,668,920 10,662 12,260,990
Year ended December 31, 1996:
Conversion of short-term borrowings
to equity 10,016 11,518,462
Net loss
------- ----------- ---------- ------------
Balance, December 31, 1996 1,669 $ 1,668,920 20,678 $ 23,779,452
======= =========== ========== ============
</TABLE>
See accompanying notes.
F-6
<PAGE> 60
<TABLE>
<CAPTION>
Additional
Additional Paid-in
Paid-in Capital
Capital Common Total Share-
Common Stock Accumulated holders'
Common Stock Stock Warrants Deficit Equity
--------------------- ---------- ------------- --------------- ---------------
Shares Amount
------- ---------
<S> <S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 90,000 $ 230,000 $ 0 $ 166,686 $ (4,831,997) $ 9,494,599
Year ended December 31, 1994:
Conversion of no par to $.01
par value common stock (229,100) 229,100 0
Net loss (4,268,422) (4,268,422)
------- --------- ---------- ------------- --------------- ---------------
Balance, December 31, 1994 90,000 900 229,100 166,686 (9,100,419) 5,226,177
Year ended December 31, 1995:
100-for-1 reverse stock split (89,100) (891) 891 0
Exercise of stock options 10 1,100 1,100
Net loss (3,149,581) (3,149,581)
------- --------- ---------- ------------- --------------- ---------------
Balance, December 31, 1995 910 9 231,091 166,686 (12,250,000) 2,077,696
Year ended December 31, 1996:
Conversion of short-term borrowings
to equity 11,518,462
Net loss (3,060,603) (3,060,603)
------- --------- ---------- ------------- --------------- ---------------
Balance, December 31, 1996 910 $ 9 $231,091 $ 166,686 $ (15,310,603) $ 10,535,555
======= ========= ========== ============= =============== ===============
</TABLE>
F-7
<PAGE> 61
CELLCALL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,060,603) $(3,149,581) $ (4,268,422)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,337,643 2,333,704 2,198,195
Accrued interest added to notes payable and
amortization of discount on long-term debt 861,282 1,085,811 940,323
Provision for bad debts 31,734 29,434 86,867
Gain on disposal of intangible assets 0 (41,011) 0
Loss on expired purchase option 0 0 410,837
(Increase) decrease in assets:
Accounts receivable (257,682) (78,689) (302,490)
Inventories 36,324 (154,783) (73,365)
Prepaid expenses (364) (22,434) 44,172
Other assets 1,074 (1,136) 818
Increase (decrease) in liabilities:
Accounts payable (70,487) (49,959) 202,789
Accrued expenses 109,609 (671,280) 83,620
Purchase agreements payable 0 (214,500) 0
Deferred revenue (2,598) 6,504 35,356
------------ ----------- ------------
Net cash used in operating activities (14,068) (927,920) (641,300)
------------ ----------- ------------
Cash flows from investing activities:
Purchase of fixed assets (310,264) (245,874) (1,961,349)
Additions to FCC licenses and contracts 0 (28,064) 0
Purchase of SMR companies 0 0 (3,441,441)
------------ ----------- ------------
Net cash used in investing activities (310,264) (273,938) (5,402,790)
------------ ----------- ------------
Cash flows from financing activities:
Proceeds from short-term borrowings 0 500,000 750,000
Proceeds from notes payable 59,914 93,191 0
Proceeds from issuance of common stock 0 1,100 0
Principal payments on notes payable (47,691) (17,715) (6,714)
Principal payments on obligations under
capital leases (11,681) (38,237) (79,862)
------------ ----------- ------------
Net cash provided by financing activities 542 538,339 663,424
------------ ----------- ------------
Net decrease in cash (323,790) (663,519) (5,380,666)
Cash and cash equivalents, beginning of year 697,217 1,360,736 6,741,402
------------ ----------- ------------
Cash and cash equivalents, end of year $ 373,427 $ 697,217 $ 1,360,736
============ =========== ============
Supplemental disclosures of cash flow information:
Cash payments for:
Interest $ 146,430 $ 155,988 $ 171,637
============ =========== ============
</TABLE>
See accompanying notes.
F-8
<PAGE> 62
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of CellCall, Inc. (the Company)
is presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's management
who is responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
Nature of Operations:
CellCall, Inc. offers mobile telephone and fleet dispatch services via
Specialized Mobile Radio (SMR) to markets in Central and Northern Kentucky,
Central and Southern Ohio and Indianapolis, Indiana under licenses issued by the
Federal Communications Commission (FCC). The Company also engages in sales,
service and leasing of mobile radio equipment.
Principles of Consolidation:
The consolidated financial statements include the accounts of CellCall, Inc. and
its wholly owned subsidiary, Electro Comm Columbus, Corp., Inc. All material
intercompany balances and transactions have been eliminated.
Use of Estimates:
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities and reported
revenues and expenses. Actual results could differ from those estimates.
Method of Accounting:
The Company's financial information is reported using the accrual basis of
accounting. Under this basis, revenues are recognized as earned and expenses are
recognized when incurred.
Cash Equivalents:
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.
Fair Value of Financial Instruments:
The carrying amount of cash, receivables, accounts payable and short-term
borrowings approximates their fair value because of their short-term nature. The
carrying value of long-term debt approximates fair value based on discounting
the projected cash flows using market rates available for similar maturities.
Allowance for Doubtful Accounts:
The Company provides an allowance for doubtful accounts receivable based on
historical collection experience and a review of the current status of existing
receivables.
F-9
<PAGE> 63
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventories:
Inventories include mobile radio equipment and related supplies held for resale
and are stated at the lower of cost (first-in, first-out method) or market.
Fixed Assets:
Fixed assets are recorded at cost. Capitalized leased equipment is stated at the
lower of the present value of the future minimum lease payments or the fair
value of the leased equipment at the inception of the lease. Depreciation is
provided using the straight-line method over periods ranging from two to five
years, which represents the estimated useful lives of the assets or, for
capitalized lease equipment, the lesser of the lease terms or the estimated
useful lives of the assets. Depreciation expense totaled $1,490,350, $1,495,403,
and $1,401,119, for 1996, 1995 and 1994, respectively.
Intangible Assets:
Intangible assets are stated at cost and are amortized on a straight-line basis.
Costs are assigned to FCC issued licenses and contracts primarily as a result of
business acquisitions and are being amortized over an estimated life of twenty
years. Amortization does not begin until the acquisition is complete or the
assets are placed into service.
Non-compete agreements are amortized over the life of the agreements, ranging
from two to five years. Costs assigned to customer lists purchased in business
combinations are being amortized over an estimated useful life of five years and
the excess of cost over fair value of companies acquired (goodwill) is being
amortized over twenty years. Deferred financing costs represent costs associated
with debt financing and are amortized over the five-year term of the related
borrowings.
Long-Lived Assets:
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-lived Assets to Be
Disposed of". Long-lived assets and identifiable intangibles to be held and used
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Management considers assets to
be impaired if the carrying values of the long-lived assets exceed the estimated
undiscounted future cash flows expected to result from use of the assets and
their eventual disposition. If impairment is deemed to exist, the assets will be
written down to fair value. The Company determined that as of December 31, 1996,
there had been no impairment in the carrying value of long-lived assets.
Revenue Recognition:
Revenue is recognized for air-time and other services over the period earned and
for sales of equipment when delivered.
F-10
<PAGE> 64
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes:
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes.
Deferred taxes are recognized for operating losses that are available to offset
future taxable income. Deferred taxes are also recognized for differences
between the basis of assets and liabilities for financial statements and income
tax purposes. The differences relate primarily to depreciable assets (use of
different depreciation methods and lives for financial statements and income tax
purposes), intangible assets (use of different amortization lives for financial
statement and income tax purposes) and allowance for doubtful receivables
(deducted for financial statement purposes but not for income tax purposes). The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be deductible or taxable when the assets
and liabilities are recovered or settled. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized. Deferred tax assets and liabilities are also adjusted for the effects
of changes in tax laws and rates on the date of enactment.
Advertising:
Advertising costs, which are principally included in selling expense, are
expensed as incurred. Advertising expense was $38,634, $18,905, and $42,462 for
1996, 1995 and 1994, respectively.
Stock Options Issued to Employees:
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" on January 1, 1996 for financial note
disclosure purposes and will continue to apply the intrinsic value method of
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" for financial reporting purposes.
Loss per Share of Common Stock:
Due to the limited number of shares of common stock outstanding during 1996,
1995 and 1994, the loss per share of common stock is not considered meaningful.
Accordingly, no amounts have been presented.
Concentration of Credit Risk:
The Company's financial instruments exposed to concentrations of credit risk
consist primarily of cash and cash equivalents and trade accounts receivable.
The Company places its cash and temporary cash investments with high credit
quality institutions. At times such investments may be in excess of the $100,000
FDIC insurance limit. At December 31, 1996 and 1995, the uninsured cash balance
totaled $262,235 and $304,567, respectively, at one financial institution.
The Company also grants credit to its customers during the normal course of
business. The Company routinely assesses the financial strength of its customers
and does not require collateral or other security to support financial
instruments subject to credit risk.
F-11
<PAGE> 65
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Disclosure of Noncash Activities:
During 1996, the Company converted $11,518,462 of short-term subordinated
promissory notes payable to equity (See Note 4).
During 1996 and 1994, the Company incurred liabilities for acquired SMR licenses
in the amounts of $229,349 and $1,565,401, respectively. Previous option
payments of $136,000 and $710,000 were also applied to acquired SMR licenses in
1996 and 1994, respectively.
During 1996, certain property and equipment was acquired through capital leases
for $22,056. Other property and equipment, in the amount of $26,484, was
transferred from fixed assets to inventory.
During 1994, the Company issued a $500,000 convertible subordinated note, which
was discounted to $405,660 (See Note 5), and incurred additional liabilities
totaling $600,000 related to the acquisition of the Columbus, Ohio operations
(See Note 2).
NOTE 2 - ACQUISITIONS
During 1994, the Company acquired certain assets of SMR companies. The
acquisitions were accounted for using the purchase method of accounting.
Accordingly, the results of operations for the acquired companies are included
in the Company's statement of operations from the date of acquisition. Summary
information regarding the acquisitions is as follows:
<TABLE>
<CAPTION>
Location of Business Approximate
Assets Acquired Acquisition Date Acquisition Costs
----------------------------- ---------------- -----------------
<S> <C> <C>
Cincinnati and Columbus, Ohio January 1994 $ 450,000
Lexington, Kentucky January 1994 250,000
Louisville, Kentucky January 1994 165,000
Louisville, Kentucky April 1994 175,000
Columbus, Ohio May 1994 3,405,660
Indianapolis, Indiana June 1994 375,000
Other Various 2,650,480
------------
$ 7,471,140
============
The costs were allocated based upon the fair value of assets as follows:
FCC licenses and contracts $ 6,934,847
Customer lists 36,293
Covenants not to compete 25,000
Property and equipment 475,000
------------
$ 7,471,140
============
</TABLE>
F-12
<PAGE> 66
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 3 - CASH AND CASH EQUIVALENTS
Cash and cash equivalents at December 31, 1996 and 1995, included a bank
repurchase agreement invested in U.S. Government securities in the amount of
$25,000 and $165,000, respectively.
NOTE 4 - SHORT-TERM BORROWINGS - RELATED PARTIES
At December 31, 1995, the Company had short-term subordinated promissory notes
payable to shareholders, bearing interest at 12%, of $10,730,962, which included
$1,980,961 of accrued interest. On September 30, 1996, the promissory notes were
converted into 10,016 shares of the Company's Series B Preferred Stock. On the
date of conversion, the notes payable balance was $11,518,462, which included
$2,768,461 of accrued interest. (See Note 8). The weighted average interest rate
on short-term borrowings at December 31, 1995 was 12%.
NOTE 5 - NOTES PAYABLE
Notes payable at December 31 consist of the following:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
$1,000,000 note payable to a third party, with interest at 12.75% payable
monthly, net of unamortized discount of $45,367 and $77,595
for 1996 and 1995, respectively (A) $ 954,633 $ 922,405
$500,000 convertible subordinated note payable, with interest at 4.00%
payable quarterly, net of unamortized discount of $10,325 and $44,072
for 1996 and 1995, respectively (B) 489,675 455,928
Notes payable to a bank at prime (prime rate was 8.25% at December 31,
1996) plus 1.5%, secured by various equipment, due at
various dates through January 1999 87,699 75,475
------------ -----------
Total notes payable 1,532,007 1,453,808
Current portion 1,494,856 27,773
------------ -----------
Long-term portion $ 37,151 $ 1,426,035
============ ===========
</TABLE>
(A) The note payable to a third party bears interest at an effective rate
of approximately 18.5%. Amortization of the discount included in
interest expense in 1996, 1995 and 1994 was $32,228, $27,209 and
$22,971, respectively. The outstanding balance under the note was due
November 1997. The Company is in the process of obtaining an extension
for this note at an interest rate of 12.75% per annum pending the
outcome of the proposed merger discussed in Note 13. The note will be
due the earlier of the effective time of the merger or March 1, 1998.
In connection with this extension, the third party also exercised
detachable stock warrants allowing it to purchase 465.10 shares of the
Company's common stock at $1.00 a share (See Note 8). The loan is
collateralized by substantially all of the assets of the
F-13
<PAGE> 67
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 5 - NOTES PAYABLE (CONTINUED)
Company and contains restrictive covenants which, among other things,
limit the payment of dividends and debt the Company can incur and
requires the timely filing of financial information with the lender.
At December 31, 1996, the Company was not in compliance with certain
covenants contained in its loan agreement. Subsequent to year end, the
third party has waived compliance with these covenants for 1996.
(B) The convertible subordinated note payable bears interest at an effective
rate of 12%. Amortization of the discount included in interest expense in
1996, 1995 and 1994 was $33,747, $50,286 and $49,770, respectively. The
outstanding balance under the note was due in May 1997. In August 1997,
the lender agreed to extend the due date for this note pending the outcome
of the proposed merger discussed in Note 13. The extended note will bear
interest at 10% and will be due the earlier of the effective time of the
merger or June 1, 1998. At any time on or before the maturity date, the
note and all accrued interest due thereon may be converted into fully paid
and nonassessable shares of Series D preferred stock (See Note 8) at a
conversion factor of $2,200 per share.
Current maturities of notes payable at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1997 $ 1,494,856
1998 35,395
1999 1,756
------------
$ 1,532,007
============
</TABLE>
NOTE 6 - LEASES
The Company leases certain facilities, equipment and automobiles under
noncancelable capital and operating leases with original lease terms ranging
from three to five years. Certain leases contain provisions such as contingent
rental payments, renewal options or purchase options.
Future minimum payments under noncancelable operating leases and the present
value of future minimum capital lease payments are as follows:
F-14
<PAGE> 68
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 6 - LEASES -(CONTINUED)
<TABLE>
<CAPTION>
Year Ending Capital Operating
December 31, Leases Leases
----------- --------- -----------
<S> <C> <C>
1997 $ 7,540 $ 816,368
1998 4,183 572,312
1999 0 371,864
2000 0 197,081
2001 0 71,068
--------- -----------
11,723 $ 2,028,693
Less amounts representing interest 1,348 ===========
Present value of minimum lease payments ---------
under capital leases 10,375
Current portion 6,470
---------
Long-term portion $ 3,905
=========
</TABLE>
Rent expense, including amounts incurred under short-term leases, totaled
$907,822, $874,871 and $673,829 in 1996, 1995 and 1994, respectively.
At December 31, 1996 and 1995, $21,756 and $325,493, respectively, of
capitalized leased equipment, net of $2,416 and $292,885, respectively, of
accumulated amortization, are included in fixed assets. Depreciation of assets
subject to capital leases is included with depreciation expense.
NOTE 7 - INCOME TAXES
The Company's deferred tax assets relate principally to a net operating loss
carryforward.
Deferred tax assets, deferred tax liabilities and the deferred tax asset
valuation allowances at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Intangibles $ 7,432 $ 15,204
Allowance for bad debts 25,914 34,453
Net operating loss carryforwards 5,959,266 5,102,401
----------- -----------
5,992,612 5,152,058
Deferred tax liabilities:
Fixed assets (180,408) (335,616)
----------- -----------
Total net deferred tax assets 5,812,204 4,816,442
Valuation allowance (5,812,204) (4,816,442)
=========== ===========
Net deferred tax assets $ 0 $ 0
=========== ===========
</TABLE>
F-15
<PAGE> 69
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 7 - INCOME TAXES -(CONTINUED)
The Company has approximately $15,000,000 in net operating loss carryforwards
which expire in years through 2011. Due to the net operating loss carryforwards,
no provision for income taxes was recorded in 1996, 1995 and 1994. The deferred
tax asset valuation allowance increased by $995,762, $1,318,751 and $1,878,038
in 1996, 1995 and 1994, respectively.
NOTE 8 - CAPITAL STOCK
Preferred and Common Stock:
On May 2, 1994, the Company reincorporated in Delaware by means of a merger into
a wholly owned subsidiary Delaware corporation. The event was treated as a
pooling of interest and there was no ownership change. Under the new Certificate
of Incorporation, the Company was authorized to issue 40,000 shares of $.01 par
value common stock and 60,000 shares of $.10 par value preferred stock. In April
1997, the new Certificate of Incorporation was amended to increase the
authorized shares of $.10 par value preferred stock to 110,000 shares. The
amended Certificate of Incorporation also provides for the designation of the
following series of preferred stock:
<TABLE>
<CAPTION>
Shares
------
<S> <C>
Series A Convertible Preferred Stock 1,669
Series B Convertible Preferred Stock 25,500
Series C Convertible Preferred Stock 52,500
Series D Convertible Preferred Stock 256
</TABLE>
The holders of Series A, B, and D preferred stock have voting rights. The holder
of Series C preferred stock has no voting rights. The holders of all preferred
stock are entitled to receive dividends at the discretion of the Board of
Directors on a pro rata basis with the holders of the common stock on an as
converted basis. In the event of the Company's dissolution or other distribution
(excluding dividends paid out of earned surplus) or transfer of substantially
all of the Company's assets, the holders of Series A and B preferred stock have
the right to receive a preferential distribution before any distribution to the
holders of the Series C and D preferred stock or common stock of up to $1,000
and $1,150, respectively, per share (up to a maximum aggregate distribution of
$15,000,000 - the senior preference cap). If the senior preference cap is
exceeded, the balance of the $1,000 and the $1,150 per share (the junior
preference) is payable to the holders of Series A and B preferred stock,
respectively, after payment of the preferential payment due to the holder of
Series C preferred stock described in the next paragraph.
In the event of a merger with a company whose shares are publicly traded, the
holders of Series C preferred stock receive a preferential distribution of one
share of the publicly traded stock for each share of Series C preferred stock,
subject to specified adjustments, before payment of the junior preference or any
distribution to the holders of the Series D preferred stock or common stock.
F-16
<PAGE> 70
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 8 - CAPITAL STOCK (CONTINUED)
After payment in full of amounts due to the Series A, B and C preferred stock,
the holders of the Series D preferred stock shall receive a preferential
distribution from the assets of the Company of cash or property having a value
per share equal to the amount per share actually divided into the "conversion
amount" upon conversion of the subordinated promissory note of the Company (See
Note 5) in the principal amount of $500,000 ($489,675 discount value at December
31, 1996). Any remaining assets would then be distributed pro rata among the
holders of the Series A and B preferred stock, and the common stock. At the
option of the respective holders, and at the discretion of the Board of
Directors solely with respect to the Series C preferred stock, the Series A, B,
C and D preferred stock may be converted to common stock based upon a conversion
formula contained in the Company's Certificate of Incorporation.
On September 30, 1996, the Company converted short-term subordinated promissory
notes payable to shareholders plus the related accrued interest on the notes in
the total amount of $11,518,462 into 10,016.06 shares of the Company's Series B
preferred stock (See Note 4).
At December 31, 1996 and 1995, no shares of Series C or D preferred stock had
been issued. Subsequent to December 31,1996, 52,500 shares of Series C preferred
stock were issued under a stock exchange agreement with a certain shareholder in
exchange for 450 shares of the Company's issued and outstanding common stock.
Common Stock Warrants:
During 1992, the Company issued a note payable to a third party containing
detachable stock warrants allowing the holder to purchase 132.50 shares of the
Company's common stock. Under the note payable agreement, the Company may be
required to issue additional warrants to purchase up to 332.60 shares of the
common stock, contingent upon the debt remaining outstanding at various dates
during the term of the note. During 1996, 1995 and 1993, the Company issued
additional warrants to purchase 80.04, 53.36 and 132.50 shares of common stock,
respectively. The warrants are exercisable at $1.00 a share. In connection with
the extension of the due date for this note, as discussed in Note 5, the third
party exercised the detachable stock warrants in October 1997 and purchased
465.10 shares of the Company's common stock for $1.00 a share.
The Company also entered into an agreement with a third party whereby the
Company, in exchange for receiving services in obtaining equity financing,
issued warrants which would allow the holder to purchase 401.96 shares of the
Company's common stock. The warrants are exercisable at $1,150 a share and
expire October 2003.
Stock Option Plan:
The Company sponsors a fixed employee stock-based compensation plan (the Plan)
whereby, at the discretion of the Board of Directors (the Board), the Company
may grant both qualified and nonqualified stock options to certain key employees
of the Company. Under the Plan, the Company may grant options for up to 3,500
shares of common stock. The exercise price for the qualified stock option is
determined by the Board at the time the option is granted, but in no event is
less than the fair market value of the Company's common stock at the date of
grant, as
F-17
<PAGE> 71
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 8 - CAPITAL STOCK (CONTINUED)
determined by the Board. The exercise price for nonqualified options shall not
be less than 85% of the fair market value per share of the common stock on the
date of the grant. The options expire ten years from the date of the grant and
generally vest over a two to three-year period of service beginning as of the
date of grant. No options were granted and no compensation cost was recognized
during 1996, 1995 or 1994.
The summary of the options granted and exercisable at December 31, 1996 is as
follows:
<TABLE>
<CAPTION>
Number Exercise Shares Vested
---------------------------------------------------------------
of Price Per 1991 1992 1993 1994 1995
---- ---- ---- ---- ----
Options Share
------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Options granted:
1990 102.50 $ 110 30.75 30.75 41.00
1992 755.00 110 18.34 222.67 276.67 237.32
1993 1,405.00 110 468.33 468.33 468.34
----------- --------- ---------- ---------- ---------- -----------
Outstanding
December 31, 1993
and 1994 (1,556.84
exercisable at
December 31, 1994) 2,262.50 110 30.75 49.09 732.00 745.00 705.66
Exercised,
December 31, 1995 (10.00) 110 (5.00) (5.00)
----------- --------- ---------- ---------- ---------- -----------
Outstanding and
exercisable
December 31, 1995 2,252.50 110 30.75 49.09 727.00 740.00 705.66
Expired,
December 31, 1996 (30.00) 110 (10.00) (10.00) (10.00)
----------- --------- ---------- ---------- ---------- -----------
Outstanding and
exercisable,
December 31, 1996 2,222.50 110 30.75 49.09 717.00 730.00 695.66
========= ========== ========== ========== ===========
Balance in reserve 1,267.50
-----------
3,490.00
===========
</TABLE>
An additional 1,137.50 of options outstanding and exercisable at December 31,
1996 expired in January and February 1997.
F-18
<PAGE> 72
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 8 - CAPITAL STOCK (CONTINUED)
Following is a summary of the status of fixed options outstanding at December
31, 1996:
<TABLE>
<CAPTION>
Outstanding Options Exercisable Options
---------------------------------------------------- ---------------------------------
Weighted
Average Weighted Weighted
Exercise Remaining Average Average
Options Price Contractual Exercise Exercise
Granted Range Number Life Price Number Price
------- -------- --------- ----------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
1990 $ 110 102.50 3.83 $ 110 102.50 $ 110
1992 $ 110 755.00 5.50 $ 110 755.00 $ 110
1993 $ 110 1,365.00 6.61 $ 110 1,365.00 $ 110
</TABLE>
NOTE 9 - RETIREMENT PLAN
Effective January 1, 1996, the Company adopted a 401(k) deferred compensation
plan. All employees are eligible to participate in the plan as long as they are
at least 21 years of age and have completed one year of employment, which is
defined as at least 1,000 hours of service. Under the provisions of the plan,
the Company may elect to make matching contributions up to 10% of the first 6%
of compensation deferred and contributed annually by each employee. Company
contributions to this plan totaled $3,218 for the year ended December 31, 1996
and were charged to expense.
NOTE 10 - PURCHASE AGREEMENTS PAYABLE
During 1994 and 1993, the Company entered into agreements with several SMR
licensees to obtain their licenses. The Company paid a portion of the purchase
price upon signing the purchase agreements and the remainder is due at the time
the license is transferred into the Company's name. At December 31,1996 and
1995, the Company has a liability of $2,287,250 and $2,063,901, respectively,
related to these purchase agreements.
In connection with the proposed merger discussed in Note 13, the Company
borrowed $2,086,750 from Nextel Communications, Inc. in November and December
1997 to complete the purchase of these licenses. Payments totaling $1,993,750
were made in November and December 1997.
NOTE 11 - REGULATORY CONTINGENCIES
The construction, operation and transfer of control to SMR systems are regulated
by the FCC. The FCC issued a Notice of Proposed Rule Making effecting the rules
governing wide-area SMR operators, such as CellCall, on June 6, 1993. On August
9, 1994, the FCC adopted the Third Report and Order mandated by the 1993 Budget
Reconciliation Act calling for conforming rules for all commercial wireless
carriers -- cellular, Personal Communication Services and SMR -- and auction of
wide-area SMR licenses, among other things.
F-19
<PAGE> 73
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 11 - REGULATORY CONTINGENCIES-(CONTINUED)
A Further Notice of Proposed Rule Making (FNPRM) was issued on October 4, 1994
requesting comments on the structure of wide-area SMR license auctions and the
effect on existing SMR licensees. The FCC commented, in the notice, that
incumbent licensees should be protected in existing service areas and allowed to
negotiate with the wide-area SMR licensee to swap frequencies, merge, sell or to
develop other arrangements on a voluntary basis. On December 15, 1995, the FCC
adopted a rulemaking clarifying some of the FNPRM issues and, concurrently
therewith, issued a Second FNPRM requesting comments on the remaining issues.
The new rules provide for the auction of geographic-area based SMR licenses on
an Economic Area basis in an auction which the FCC conducted in late 1997.
Management believes that the ultimate outcome of the FCC's rules will not have a
material impact on the carrying value of the Company's intangible assets.
The FCC has allocated a specific number of frequencies in the 800/900 MHZ radio
spectrum bands for use by SMR systems, and issues licenses to the extent there
are available frequencies. The Company is party to various finder's preference
requests filed with the FCC involving approximately six percent of the channels
licensed to the Company. The finder's preference requests are at various stages
in the FCC's administrative process. Management cannot predict the final
disposition of these proceedings, but believes that the outcome of these matters
will not have a material impact upon the Company's financial position or results
of operations. Accordingly, the accompanying financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
NOTE 12 - GOING CONCERN
As shown in the accompanying financial statements, in 1996, 1995 and 1994,
respectively, the Company incurred net losses of $3,060,603, $3,149,581 and
$4,268,422 and used cash in operating activities of $14,068, $927,920 and
$641,300. These conditions create an uncertainty about the Company's ability to
continue as a going concern.
During 1996, the Company took the following actions to reduce costs and improve
results of operations. First, the Company reviewed and reduced certain general
and administrative costs. Second, the Company converted certain short-term
borrowings to equity (See Note 4). These steps combined with the current year
growth in revenues succeeded in reducing the cash used in operating activities
from $927,920 in 1995 to $14,068 in 1996.
The Company's ability to continue as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a timely
basis or to obtain additional financing or refinancing as may be required to
ultimately attain successful operations. The accompanying financial statements
do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
F-20
<PAGE> 74
CELLCALL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 13 - SUBSEQUENT EVENT
On April 22, 1997, the Company entered into an agreement of merger and plan of
reorganization with Nextel Communications, Inc. (Nextel) whereby the Company
would become a wholly owned subsidiary of Nextel. The merger is subject to
regulatory and shareholder approval.
Under the terms of the proposed merger, all CellCall preferred and common stock
will be exchanged for up to 1,750,000 shares of Nextel common stock in
accordance with a specified conversion formula. Outstanding options and warrants
to purchase shares of CellCall common stock will be assumed by Nextel and
converted into rights to purchase shares of Nextel common stock in accordance
with the specified conversion formula.
In connection with the above agreement of merger, the CellCall shareholders have
entered into a stock purchase option agreement to grant Nextel an option to
acquire all of the issued and outstanding capital stock of CellCall should the
Company fail to comply with certain terms of the merger agreement or the
stockholders fail to approve the merger agreement. The option may be exercised
for any sixty-six percent of the outstanding CellCall shares. The exercise price
shall be paid in cash and be equal to the market price of the Nextel acquisition
shares, as defined in the merger agreement, into which the CellCall shares would
have been converted had the merger been consummated.
In connection with this proposed merger, the Company obtained a commitment from
Nextel in November 1997 to borrow up to $2,357,250 to complete the purchase of
the licenses discussed in Note 10. Under the terms of this agreement, Nextel
advanced $2,086,750 to the Company in November and December 1997. The note bears
interest at the rate of 10% per annum. In the event of termination of the merger
agreement, the outstanding principal and interest will be due in one payment
within ten, thirty or ninety days depending upon the circumstances of
termination. Failure by CellCall to make any payment due to Nextel will give
Nextel the option to purchase any or all of the licenses purchased by CellCall
with the above proceeds.
F-21
<PAGE> 75
CELLCALL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
(Unaudited)
A S S E T S
-----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 442,925 $ 373,427
Accounts receivable, net of allowance for
doubtful accounts of $44,466 at September
30, 1997 and $64,785 at December 31, 1996 276,882 606,592
Inventories 391,173 352,127
Prepaid expenses 40,175 41,759
---------------- ---------------
Total current assets 1,151,155 1,373,905
---------------- ---------------
Property and equipment:
Mobile communications network equipment 6,187,346 6,175,480
Leased subscriber equipment 1,352,997 1,374,440
Office furniture and equipment 361,698 360,002
Leasehold improvements 32,554 32,554
Vehicles 70,039 59,383
---------------- ---------------
8,004,634 8,001,859
Less accumulated depreciation 6,404,109 5,433,813
---------------- ---------------
Net property and equipment 1,600,525 2,568,046
---------------- ---------------
Intangible assets:
FCC licenses and contracts 12,418,815 12,348,815
Customer Lists 579,303 579,303
Non-compete agreements 397,338 397,338
Goodwill 202,583 202,583
Deferred financing costs 62,150 62,150
---------------- ---------------
13,660,189 13,590,189
Less accumulated amortization 3,207,812 2,644,683
---------------- ---------------
Net intangible assets 10,452,377 10,945,506
---------------- ---------------
Other assets:
Option payments for acquisitions in process 0 0
Other Assets 15,966 15,966
---------------- ---------------
Total other assets 15,966 15,966
---------------- ---------------
Total assets $ 13,220,023 $ 14,903,423
================ ===============
</TABLE>
See accompanying notes.
F-22
<PAGE> 76
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
(Unaudited)
L I A B L I T I E S
-------------------
<S> <C> <C>
Current Liabilities:
Accounts Payable $ 106,015 $ 202,192
Accrued Expenses 291,328 267,633
Purchase agreements payable 2,312,250 2,287,250
Deferred revenues 64,000 68,411
Short-term borrowings, related parties 0 0
Notes payable 1,524,966 1,494,856
Obligations under capital leases 5,053 6,470
---------------- ---------------
Total current liabilities 4,303,612 4,326,812
---------------- ---------------
Long-term liabilities:
Notes payable 8,461 37,151
Obligations under capital leases 0 3,905
---------------- ---------------
Total long-term liabilities 8,461 41,056
---------------- ---------------
Total liabilities 4,312,073 4,367,868
---------------- ---------------
Commitments and contingencies
S H A R E H O L D E R S' E Q U I T Y
--------------------------------------
Preferred stock, $.10 par value, 60,000 shares
authorized, 22,347 shares issued and outstanding:
Series A, stated at liquidation preference 1,668,920 1,668,920
Series B, stated at liquidation preference 23,779,452 23,779,452
Series C, stated at liquidation preference 0 0
Common stock, $.01 par value, 40,000
shares authorized; 460 shares issued and
outstanding at September 30, 1997, 910 shares
issued and outstanding at December 31, 1996 5 9
Additional paid-in-capital - common stock 231,095 231,091
Additional paid-in-capital - common stock warrants 166,686 166,686
Accumulated deficit (16,938,208) (15,310,603)
---------------- ---------------
Total shareholders' equity 8,907,950 10,535,555
---------------- ---------------
Total liabilities and shareholders' equity $ 13,220,023 $ 14,903,423
================ ===============
</TABLE>
F-23
<PAGE> 77
CELLCALL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS For the Nine Months
Ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues:
Radio service revenue $ 2,124,874 $ 2,130,336
Equipment sales and maintenance 1,802,079 2,243,857
----------- -----------
Total revenue 3,926,953 4,374,193
----------- -----------
Cost of sales:
Cost of radio service revenue 741,061 681,803
Cost of equipment sales and maintenance 895,902 1,132,586
----------- -----------
Total cost of sales 1,636,963 1,814,389
----------- -----------
Gross profit 2,289,990 2,559,804
----------- -----------
Operating expenses:
Selling 332,410 358,141
General and administrative 1,857,993 2,029,130
Depreciation and amortization 1,576,235 1,623,215
----------- -----------
Total operating expenses 3,766,638 4,010,486
----------- -----------
Loss from operations (1,476,648) (1,450,682)
Other income (expense):
Interest income 9,961 15,675
Interest expense (168,740) (952,871)
Other, net 7,822 511
----------- -----------
Total other income (expense) (150,957) (936,685)
----------- -----------
Net loss $(1,627,605) $(2,387,367)
=========== ===========
</TABLE>
See accompanying notes.
F-24
<PAGE> 78
CELLCALL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock Preferred Stock
Series A Series B Series C Common Stock
----------------- ------------------- --------------- -----------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ --------- ------ ----------- ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 1,669 $1,668,920 20,678 $23,779,452 0 $ 0 910 $ 9
Period ended September 30, 1997:
Conversion of $.01 par value common
stock to preferred stock series C 52,500 (450) (4)
Net loss for the nine months ended September 30, 1997
------ ---------- ------ ----------- ------ ------- ---------------
Balance, September 30, 1997 1,669 $1,668,920 20,678 $23,779,452 52,500 $ 0 460 $ 5
====== ========== ====== =========== ====== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
Additional
Additional Paid-in
Paid-in Capital Total Share-
Capital Common holders'
Common Stock Accumulated Equity
Stock Warrants Deficit (Deficit)
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1997 $ 231,091 $ 166,686 $(15,310,603) $ 10,535,555
Period ended September 30, 1997:
Conversion of $.01 par value common
stock to preferred stock series C 4 0
Net loss for the nine months ended September 30, 1997 (1,627,605) (1,627,605)
---------- ---------- ------------ ------------
Balance, September 30, 1997 $ 231,095 $ 166,686 $(16,938,208) $ 8,907,950
========== ========== ============ ============
</TABLE>
See accompanying notes.
F-25
<PAGE> 79
CELLCALL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,627,605) $(2,387,367)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,576,235 1,623,215
Accrued interest added to notes payable and
amortization of discount on long-term debt 38,342 833,651
Provision for bad debts 6,744 18,500
(Increase) decrease in:
Accounts receivable 336,454 (158,978)
Inventories (39,046) (44,704)
Prepaid expenses 1,584 (3,758)
Other assets 1,526
Increase (decrease) in:
Accounts payable (96,177) (30,500)
Accrued expenses 23,695 124,129
Deferred revenue (4,411) 5,380
----------- -----------
Net cash provided by (used in)
operating activities 215,815 (18,906)
----------- -----------
Cash flows from investing activities:
Purchase of fixed assets (58,954) (282,534)
Additions to FCC licenses and contracts (45,000)
----------- -----------
Net cash used in investing activities (103,954) (282,534)
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable 59,914
Principal payments on notes payable (37,958) (36,342)
Principal payments on obligations under
capital leases (4,405) (7,395)
----------- -----------
Net cash provided by (used in)
financing activities (42,363) 16,177
----------- -----------
Net increase (decrease) in cash 69,498 (285,263)
Cash and cash equivalents, beginning of period 373,427 697,217
----------- -----------
Cash and cash equivalents, end of period $ 442,925 $ 411,954
=========== ===========
Supplemental disclosures of cash flow information: Cash payments for:
Interest $ 130,398 $ 119,220
=========== ===========
</TABLE>
See accompanying notes.
F-26
<PAGE> 80
CELLCALL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED
SEPTEMBER 30, 1997 AND 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements include the
accounts of CellCall, Inc. (the "Company") and its wholly owned subsidiary,
Electro Comm Columbus, Corp., Inc. All material intercompany balances and
transactions have been eliminated.
The unaudited interim consolidated financial statements reflect, in the opinion
of management, all adjustments necessary for fair statement of the results of
the Company's operations for the interim periods presented. These include only
normal recurring adjustments.
These financial statements should be read in conjunction with the Company's
annual financial statements for the year ended December 31, 1996. Accordingly,
disclosures that would substantially duplicate the disclosure contained in the
audited financial statements for December 31, 1996, have been omitted.
NOTE 2 - DISCLOSURE OF NONCASH ACTIVITIES
During 1997, the Company incurred a liability of $30,000 to acquire SMR
licenses.
F-27
<PAGE> 81
APPENDIX A
AGREEMENT OF MERGER
<PAGE> 82
[EXECUTION COPY]
AGREEMENT OF MERGER
AND PLAN OF REORGANIZATION
by and among
NEXTEL COMMUNICATIONS, INC.,
NEXTEL FINANCE COMPANY,
BLUEGRASS ACQUISITION CORP.
and
CELLCALL, INC.
dated as of
April 22, 1997
<PAGE> 83
AGREEMENT OF MERGER
AND PLAN OF REORGANIZATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PLAN OF REORGANIZATION......................................................................................... 1
AGREEMENT .................................................................................................... 1
ARTICLE I. CONVERSION OF CELLCALL STOCK INTO NEXTEL COMMON
STOCK; TREATMENT OF OPTIONS AND WARRANTS................................................ 1
1.1 Conversion of Shares.................................................................... 1
1.2 Adjustment for Channels Not Delivered................................................... 5
1.3 Adjustment for Negative Cash Flow....................................................... 7
1.4 Adjustment for Negative Working Capital................................................. 7
1.5 Adjustment for Option/Warrant Exercise.................................................. 8
1.6 Adjustment for Transaction Costs and Severance
Costs................................................................................... 8
1.7 Nextel Share Price...................................................................... 8
1.8 Other Adjustments....................................................................... 8
1.9 Terms of the Merger..................................................................... 9
1.10 Effective Time; Effects of the Merger................................................... 9
1.11 Certificate of Incorporation and Bylaws................................................. 10
1.12 Directors and Officers.................................................................. 10
1.13 Exchange Agent.......................................................................... 10
1.14 Surrender of Certificates and Delivery of
Merger Consideration.................................................................... 10
1.15 No Fractional Shares.................................................................... 12
1.16 Rights of Holders of Certificates....................................................... 12
1.17 Assumption of Stock Options............................................................. 13
1.18 Warrants................................................................................ 15
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF CELLCALL........................................................ 15
2.1 Corporate Organization.................................................................. 15
2.2 Subsidiaries and Other Entities......................................................... 16
2.3 Corporate Authorization................................................................. 16
2.4 Capital Stock........................................................................... 17
2.5 Options and Warrants.................................................................... 17
2.6 Compliance with Laws.................................................................... 18
2.7 No Conflict............................................................................. 19
2.8 Litigation.............................................................................. 19
2.9 Insurance............................................................................... 20
2.10 Intellectual Property................................................................... 20
2.11 Assets.................................................................................. 20
2.12 Financial Statements.................................................................... 21
2.13 Liabilities............................................................................. 21
2.14 Transactions Not in the Ordinary Course................................................. 22
</TABLE>
- i -
<PAGE> 84
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
2.15 Capital Projects........................................................................ 22
2.16 Taxes................................................................................... 22
2.17 Bank Accounts; Employees................................................................ 23
2.18 Real Estate............................................................................. 23
2.19 Title to Properties..................................................................... 24
2.20 Contracts............................................................................... 24
2.21 Brokers................................................................................. 25
2.22 Special Liabilities; Warranties......................................................... 25
2.23 Employee Benefit Matters................................................................ 25
2.24 Materially Correct...................................................................... 27
2.25 Information............................................................................. 28
2.26 Regulatory Matters...................................................................... 28
2.27 Customers............................................................................... 31
ARTICLE III. REPRESENTATIONS AND WARRANTIES
OF NEXTEL AND MERGER SUB........................................... 32
3.1 Corporate Organization; Authorization................................................... 32
3.2 Capital Stock........................................................................... 32
3.3 Common Stock............................................................................ 33
3.4 No Conflict............................................................................. 33
3.5 Information............................................................................. 33
3.6 Information in Registration Statement................................................... 34
ARTICLE IV. COVENANTS OF CELLCALL............................................................................. 34
4.1 Conduct of Business..................................................................... 34
4.2 Preservation of Business................................................................ 35
4.3 Inspection.............................................................................. 35
4.4 Antitrust Filing........................................................................ 35
4.5 Commercially Reasonable Efforts......................................................... 35
4.6 Affiliates.............................................................................. 36
4.7 Update Information...................................................................... 36
4.8 Participation in Auctions............................................................... 36
4.9 SEC Registration........................................................................ 38
4.10 Stockholder Approval.................................................................... 39
ARTICLE V. COVENANTS OF NEXTEL................................................................................ 40
5.1 Antitrust Filing........................................................................ 40
5.2 Registration Statement.................................................................. 40
5.3 Current Public Information.............................................................. 41
5.4 Employee Matters........................................................................ 41
ARTICLE VI. JOINT COVENANTS................................................................................... 41
6.1 Confidentiality......................................................................... 41
6.2 Standstill Agreement.................................................................... 42
6.3 Trading Prohibitions.................................................................... 42
6.4 Substitute of Subsidiary................................................................ 42
6.5 Support of Transactions................................................................. 43
6.6 Cooperation Concerning Extended Implementation
Channels................................................................................ 43
</TABLE>
- ii -
<PAGE> 85
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6.7 Tax Treatment of Merger................................................................ 43
ARTICLE VII. CLOSING......................................................................................... 43
7.1 Filing................................................................................. 43
7.2 Closing................................................................................ 43
ARTICLE VIII. CONDITIONS TO OBLIGATIONS...................................................................... 44
8.1 Conditions to Obligations of Nextel and,
CellCall............................................................................... 44
8.2 Conditions to Obligations of Nextel.................................................... 45
8.3 Conditions to the Obligations of CellCall.............................................. 47
ARTICLE IX. TERMINATION/EFFECTIVENESS........................................................................ 48
9.1 Termination............................................................................ 48
9.2 Effect................................................................................. 49
ARTICLE X. MISCELLANEOUS..................................................................................... 49
10.1 Waiver................................................................................. 49
10.2 Notices................................................................................ 50
10.3 Assignment............................................................................. 51
10.4 Rights of Third Parties................................................................ 51
10.5 Reliance............................................................................... 51
10.6 Expenses............................................................................... 51
10.7 Construction........................................................................... 51
10.8 Captions; Counterparts................................................................. 52
10.9 Entire Agreement....................................................................... 52
10.10 Amendments............................................................................. 52
10.11 Publicity.............................................................................. 52
</TABLE>
- iii -
<PAGE> 86
DEFINITIONS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Adjusted EBITDA Earnings...................................................................................... 7
Affiliate..................................................................................................... 23
Affiliates.................................................................................................... 41
Aggregate Series A Preference................................................................................. 2
Aggregate Series B Preference................................................................................. 2
Aggregate Series C Preference................................................................................. 2
Agreement..................................................................................................... 1
Asset List.................................................................................................... 20
Awarded License............................................................................................... 37
By-Laws....................................................................................................... 10
CellCall...................................................................................................... 26
CellCall...................................................................................................... 1
CellCall/CellCall Subs........................................................................................ 22
CellCall Cure Period.......................................................................................... 48
CellCall Management Agreement................................................................................. 28
CellCall Option Plans......................................................................................... 13
CellCall Stock Options........................................................................................ 13
CERCLA........................................................................................................ 19
Certificate of Incorporation.................................................................................. 10
Certificate of Merger......................................................................................... 9
Certificates.................................................................................................. 10
Channel....................................................................................................... 6
Closing....................................................................................................... 44
Code.......................................................................................................... 1
Communications Act............................................................................................ 31
Constituent Corporations...................................................................................... 10
Contaminants.................................................................................................. 19
Current Payables.............................................................................................. 21
Defined Benefit Plan.......................................................................................... 25
Defined Contribution Plan..................................................................................... 25
Delivered..................................................................................................... 6
EA............................................................................................................ 36
EA Auction.................................................................................................... 36
Effective Time................................................................................................ 9
Effective Time................................................................................................ 1
Employee Plan................................................................................................. 26
ERISA......................................................................................................... 25
ESMR.......................................................................................................... 30
Excess Parachute Payments..................................................................................... 27
Exchange Agent................................................................................................ 10
FCC........................................................................................................... 28
FCC License................................................................................................... 28
Fiduciaries................................................................................................... 26
Final Order................................................................................................... 44
GAAP.......................................................................................................... 8
GCL........................................................................................................... 9
Hazardous Substances.......................................................................................... 19
</TABLE>
- iv -
<PAGE> 87
<TABLE>
<CAPTION>
Page
----
<S> <C>
HSR Act....................................................................................................... 35
Incentive Shares.............................................................................................. 1
Market Adjustment............................................................................................. 5
Market Price.................................................................................................. 2
Market Value.................................................................................................. 2
Material...................................................................................................... 33
Merger........................................................................................................ 1
Merger Consideration.......................................................................................... 11
Merger Sub.................................................................................................... 1
MSA........................................................................................................... 5
Multiemployer Plan............................................................................................ 25
Multiple Employer Plan........................................................................................ 25
Nextel........................................................................................................ 1
Nextel Cure Period............................................................................................ 49
Nextel Plan................................................................................................... 14
Nextel Reports................................................................................................ 33
Nextel Share Price............................................................................................ 8
NFC........................................................................................................... 1
Non-core Market Channel....................................................................................... 5
Option Channels............................................................................................... 6
Overlap EAs................................................................................................... 36
Permitted Liabilities......................................................................................... 22
Permitted Liens............................................................................................... 24
Pollutants.................................................................................................... 19
Potentially Responsible Party................................................................................. 19
Residual Amount............................................................................................... 2
Securities Act................................................................................................ 14
Senior Preference............................................................................................. 2
Series A Preference........................................................................................... 2
Series A Preferred............................................................................................ 2
Series B Preference........................................................................................... 2
Series B Preferred............................................................................................ 2
Series C Preference........................................................................................... 2
Series C Preferred............................................................................................ 2
Shortfall Market.............................................................................................. 5
SMR........................................................................................................... 6
SMR License................................................................................................... 28
SMR System.................................................................................................... 28
SMR Units..................................................................................................... 28
STA........................................................................................................... 29
States........................................................................................................ 21
Subsidiaries.................................................................................................. 15
Surviving Corporation......................................................................................... 9
Terminating CellCall Breach................................................................................... 48
Terminating Nextel Breach..................................................................................... 49
Third-Party Management Agreement.............................................................................. 29
Voting Stock.................................................................................................. 33
Warrants...................................................................................................... 15
Welfare Benefit Fund.......................................................................................... 26
</TABLE>
- v -
<PAGE> 88
ANNEXES
Annex A - Form of Rule 145 Letter
Annex B - Form of Release
Annex C - Form of Indemnification Agreement
Annex D - Form of J. P. Harris Non-Competition Agreement
<PAGE> 89
AGREEMENT OF MERGER
AND PLAN OF REORGANIZATION
This Agreement of Merger and Plan of Reorganization (this "Agreement"),
dated as of April 22, 1997, is among NEXTEL COMMUNICATIONS, INC., a Delaware
corporation ("Nextel"), NEXTEL FINANCE COMPANY, a Delaware corporation and a
wholly owned subsidiary of Nextel ("NFC"), BLUEGRASS ACQUISITION CORP., a
Delaware corporation and a wholly owned subsidiary of NFC ("Merger Sub"), and
CELLCALL, INC., a Delaware corporation ("CellCall").
PLAN OF REORGANIZATION
Nextel, through NFC and Merger Sub, and CellCall intend to enter into a
tax-free plan of reorganization under the Internal Revenue Code of 1986, as
amended (the "Code").
The plan of reorganization will consist of the merger of Merger Sub
with and into CellCall, with CellCall being the surviving corporation. This
merger (the "Merger") will be consummated in accordance with the terms and
conditions hereof and will be consummated at the "Effective Time" as defined
herein.
Nextel has caused NFC to form Merger Sub solely for the purpose of
consummating the Merger.
Concurrently with, and as a condition to, the execution of this
Agreement, NFC and the stockholders of CellCall are entering into a Stock
Purchase Option Agreement, which provides, among other things, that NFC may,
under certain circumstances set forth therein, purchase 66% of the outstanding
capital stock of CellCall.
AGREEMENT
In order to consummate the plan of reorganization, and in consideration
of the mutual agreements hereinafter contained, Nextel, NFC, Merger Sub and
CellCall agree as follows:
ARTICLE I. CONVERSION OF CELLCALL STOCK INTO NEXTEL COMMON
STOCK; TREATMENT OF OPTIONS AND WARRANTS
1.1 Conversion of Shares.
(a) For purposes of this Section, the following terms
shall have the following indicated meanings:
A-1
<PAGE> 90
(i) "Incentive Shares" shall mean the shares of
Series C Preferred designated as such by the Board of Directors of CellCall, in
accordance with Article IV, Section III(A)(2) of the Certificate of Amendment to
the Certificate of Incorporation of CellCall attached hereto as Schedule 1.1.
(ii)"Market Price" shall mean the closing price of
one share of Nextel Common Stock as reported on the NASDAQ National Market on
the last trading day preceding the Effective Time.
(iii) "Market Value" shall mean the aggregate
Market Price of any given number of shares of Nextel Common Stock.
(iv)"Residual Amount" shall mean the number of
shares of Nextel Common Stock obtained by dividing (x) Acquisition Shares, less
both (1) that number of shares of Nextel Common Stock having a Market Value
equal to the sum of the Aggregate Series A Preference and the Aggregate Series B
Preference, and (2) that number of shares of Nextel Common Stock used to satisfy
the Series C Preference, by (y) the Actual CellCall Common Equivalents, less the
number of shares of Series C Preferred.
(v)"Senior Preference" shall mean the Market Value
of the shares of Nextel Common Stock into which the shares of Series A Preferred
and Series B Preferred shall be converted at the Effective Time, pursuant to
Section 1.1(d)(i).
(vi)"Series A Preferred", "Series B Preferred" and
"Series C Preferred" shall mean the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, respectively, of CellCall, outstanding
immediately prior to the Effective Time.
(vii) "Series A Preference" shall mean the sum of
One Thousand Dollars ($1,000) and the "Aggregate Series A Preference" shall mean
the product obtained by multiplying the Series A Preference by the number of
shares of Series A Preferred.
(viii) "Series B Preference" shall mean the sum of
One Thousand One Hundred and Fifty Dollars ($1,150) and the "Aggregate Series B
Preference" shall mean the product obtained by multiplying the Series B
Preference by the number of shares of Series B Preferred.
(ix) "Series C Preference" shall mean the number
of shares of Nextel Common Stock into which each share of Series C Preferred
would be converted at the Effective Time, pursuant to Section 1.1(c)(iii), and
the "Aggregate Series C Preference" shall
A-2
<PAGE> 91
mean the product obtained by multiplying the Series C Preference by the number
of shares of Series C Preferred.
(b) Each share of common stock, par value $.01 per
share, and preferred stock, par value $.10 per share, of CellCall (the "CellCall
Common Stock" and the "CellCall Preferred Stock" respectively, and together, the
"CellCall Stock"), outstanding immediately prior to the Effective Time will be
canceled and extinguished and be converted automatically into the right to
receive shares of Nextel Common Stock, in accordance with this Article I. On the
date hereof, (i) the total number of shares of outstanding CellCall Stock are
set forth in Section 2.4 of the Agreement (the "Benchmark Shares"), and (ii) the
total number of shares of CellCall Stock issuable upon exercise of warrants or
options, or upon exchange or conversion of convertible instruments (excluding
shares issuable upon conversion of the CellCall Preferred Stock) (regardless of
whether they are on the date hereof "in the money") are set forth on Schedule
2.5 (the "Benchmark Derivatives" and collectively with the Benchmark shares, the
"CellCall Share Base"). The CellCall Share Base does not include (A) any
treasury shares, or (B) any other shares, rights to acquire shares or other
issuance commitments for shares of CellCall Stock that are not set forth in
Section 2.4 or Schedule 2.5, as the case may be. The maximum number of shares of
Nextel Common Stock to be issued hereunder at the Effective Time with respect to
(A) the CellCall Share Base (without adjustment of or to any instrument that may
have expired without exercise, exchange or conversion into CellCall Stock), and
(B) any CellCall Stock, or options, warrants, convertible or exchangeable
instruments or other commitments to issue CellCall Stock outstanding at the
Effective Time that are not Benchmark Shares or Benchmark Derivatives (such
additional CellCall Stock or issuance commitments, the "Dilutive CellCall Common
Equivalents" and together with the CellCall Share Base (without adjustment for
any instrument that may have expired without exercise, exchange or conversion
into CellCall Stock), the "Actual CellCall Common Equivalents")) shall be
1,750,000 (the "Nextel Share Base"), subject to increase only in accordance with
Section 1.1(d)(iv) or in the event of changes to the capitalization of Nextel in
accordance with Section 1.8, and to decrease only as set forth in Sections 1.2,
1.3, 1.4, 1.5, 1.6 or 1.8 (as so adjusted at the Effective Time, the
"Acquisition Shares").
(c) If the Acquisition Shares have a Market Value
that is at least equal to the sum of the Aggregate Series A Preference plus the
Aggregate Series B Preference and include an additional number of shares of
Nextel Common Stock sufficient to satisfy the Aggregate Series C Preference,
then, at the Effective Time:
A-3
<PAGE> 92
(i) each share of Series A Preferred shall be
converted into (x) that number of shares of Nextel Common Stock having a Market
Value equal to the Series A Preference, plus (y) the Residual Amount, if any;
(ii) each share of Series B Preferred shall be
converted into (x) that number of shares of Nextel Common Stock having a Market
Value equal to the Series B Preference, plus (y) the Residual Amount, if any;
(iii) each share of Series C Preferred shall be
converted into that number of shares of Nextel Common Stock equal to a fraction,
the numerator of which is 35,000 plus the number of Incentive Shares (not to
exceed 17,500) determined as of the Closing, and the denominator of which is
52,500; and
(iv) each share of CellCall Common Stock shall be
converted into the Residual Amount, if any, subject to Section 1.1(d)(iv), if
applicable.
(d) If the Acquisition Shares have a Market Value
that is not both at least equal to the sum of the Aggregate Series A Preference
plus the Aggregate Series B Preference and include an additional number of
shares of Nextel Common Stock, sufficient to satisfy the Aggregate Series C
Preference, then, at the Effective Time:
(i) (x) each share of Series A Preferred shall be
converted into that number of shares of Nextel Common Stock having a Market
Value determined by multiplying the Series A Preference by a fraction, the
numerator of which is the lesser of $15,000,000 and the Market Value of the
Acquisition Shares and the denominator of which is the sum of the Aggregate
Series A Preference plus the Aggregate Series B Preference, and (y) each share
of Series B Preferred shall be converted into that number of shares of Nextel
Common Stock having a Market Value determined by multiplying the Series B
Preference by a fraction, the numerator of which is the lesser of $15,000,000
and the Market Value of the Acquisition Shares and the denominator of which is
the sum of the Aggregate Series A Preference plus the Aggregate Series B
Preference.
(ii) If the Market Value of the Acquisition Shares
exceeds $15,000,000 (i.e., fewer than all of the Acquisition Shares are needed
to be issued in satisfaction of the Senior Preference), then each share of
Series C Preferred shall be converted into that number of shares of Nextel
Common Stock equal to the Series C Preference multiplied by a fraction, the
numerator of which is the lesser of 52,500 and that number of Acquisition
A-4
<PAGE> 93
Shares remaining after payment of the Senior Preference and the denominator of
which is 52,500.
(iii) If the Acquisition Shares both have a
Market Value which exceeds $15,000,000 and include an additional number of
shares of Nextel Common Stock sufficient to satisfy the full amount of the
Aggregate Series C Preference, then, in addition to the Senior Preference, (x)
each share of Series A Preferred shall be converted into that number of
additional shares of Nextel Common Stock having a Market Value determined by
multiplying the Series A Preference by a fraction, the numerator of which is the
Market Value of the Acquisition Shares which remain after payment of the Senior
Preference and conversion of the Series C Preferred, and the denominator of
which is the sum of the Aggregate Series A Preference plus the Aggregate Series
B Preference; and (y) each share of Series B Preferred shall be converted into
that number of additional shares of Nextel Common Stock having a Market Value
determined by multiplying the Series B Preference by a fraction, the numerator
of which is the Market Value of the Acquisition Shares which remain after
payment of the Senior Preference and conversion of the Series C Preferred, and
the denominator of which is the sum of the Aggregate Series A Preference plus
the Aggregate Series B Preference.
(iv) If the Residual Amount is zero, each share of
CellCall Common Stock shall be converted into a right to receive shares of
Nextel Common Stock at an exchange ratio of 100 to 1 (100 shares of CellCall
Common Stock for 1 share of Nextel Common Stock) (the "Exchange Ratio"),
provided that in lieu of fractional share interests to persons otherwise
entitled to receive such fractional share interests pursuant to this Section
1.1(d)(iv), Nextel shall deliver to such persons a number of whole shares,
determined by rounding up to the nearest whole share, and thereupon shall be
relieved of any obligation under Section 1.15 hereof to make cash payments to
such persons in lieu of any fractional share interests.
1.2 Adjustment for Channels Not Delivered.
(a) If at the time of the Closing (as defined herein) the
number of Channels Delivered by CellCall is (i) less than 95% of the number of
Channels set forth on Schedule 1.2 in any metropolitan statistical area ("MSA")
identified on Schedule 1.2 (each such MSA, a "Shortfall Market"), or (ii) fewer
than 228 Channels in all market areas not listed on Schedule 1.2 (each such
Channel, a "Non-core Market Channel"), then (A) for each Shortfall Market the
Channel value set forth on Schedule 1.2 for that Shortfall Market shall be
multiplied by the difference between 95% of the number of Channels set forth on
Schedule 1.2 for that Shortfall Market minus the number of Channels Delivered in
that
A-5
<PAGE> 94
Shortfall Market and (B) for the Non-core Market Channels, the shortfall, if
any, between 228 and the number of Non-core Market Channels Delivered shall be
multiplied by $3,000 (the product of each calculation, a "Market Adjustment").
The number of shares of Nextel Common Stock equal to (i) the sum of all such
Market Adjustments, if any, divided by (ii) the Nextel Share Price, shall be
subtracted from the Nextel Share Base.
(b) If the FCC (as defined herein) responds to CellCall's
filings for rejustification of its extended implementation authority by granting
CellCall a deadline for construction of any Channel that had extended
implementation authority before June 30, 1998 (an "Unfavorable FCC Response")
then, although each extended implementation channel identified on Schedule 2.26
("Extended Implementation Channel") that received an Unfavorable FCC Response
will be deemed constructed as required by clause 1.2(d)(iii) for purposes of
determining whether such Extended Implementation Channels are Delivered and will
be counted toward the Channel targets set forth on Schedule 1.2(a), that number
of shares of Nextel Common Stock equal to (i) the product of $6,000 multiplied
by the number of Extended Implementation Channels receiving an Unfavorable FCC
Response, divided by (ii) the Nextel Share Price, will be subtracted from the
Nextel Share Base.
(c) If the FCC responds to CellCall's filings for
rejustification of its extended implementation authority by granting CellCall a
deadline for construction of any Extended Implementation Channel on or after
June 30, 1998, that Extended Implementation Channel will be deemed constructed
as required by clause 1.2(d)(iii) for purposes of determining whether such
Extended Implementation Channel is Delivered regardless of when the date of the
Closing occurs, so long as any postponements of the date of the Closing are not
caused by the action or inaction of CellCall.
(d) A "Channel" shall be "Delivered" by CellCall if at the
Effective Time: (i) the FCC license for such channel has been granted to
CellCall or a CellCall Subsidiary by a Final Order (as defined herein); (ii)
except for Option Channels (as defined herein), there is a Final Order approving
a transfer of control of that license to Nextel; (iii) for those Channels that
are not Extended Implementation Channels, if unconstructed or deconstructed,
there are at least 180 days remaining before the construction or reconstruction
deadline applicable to that channel; (iv) in the case of a channel counted
towards or applicable to an MSA market target, such channel is located within 25
miles of the core of the applicable MSA (except for those Channels set forth on
Schedule 1.2(d) to which the 25-mile limit shall not apply); (v) in the case of
a channel counted towards or
A-6
<PAGE> 95
applicable to an MSA market target, there is no co-channel license located
within 55 miles of the channel, except for co-channel licenses that are
CellCall, CellCall Subsidiaries, or licenses controlled by Nextel; (vi) the
channel is a land mobile 800 MHz frequency, being one of the 430 frequencies
allocated for specialized mobile radio ("SMR"), (vii) the channel is granted
pursuant to a primary license; (viii) in the case of a channel counted towards
or applicable to an MSA market target, such channel is a discrete frequency
within the applicable market and not subject to any cross border frequency
sharing or channel coordination or similar arrangement, taking into account all
frequencies deemed Delivered pursuant to this Agreement in that market; (ix) the
license for or including the channel is not subject to (A) any agreement to be
sold to a third party, or (B) any option or right of first refusal in favor of
any third party; (x) there is no contract right of any third party or FCC order
otherwise encumbering or limiting the use of the license; (xi) except for Option
Channels, no consideration is due to any person in connection with the channel;
and (xii) the channel is not subject to any finders' preference action (other
than the pending appeal of a favorable FCC Ruling) or otherwise included within
any proceeding commenced or assessed by a third party (other than Nextel) or any
regulatory agency, including, without limitation, the FCC, that could result in
a take-back, termination, cancellation or nonrenewal of the relevant licenses.
(e) Schedule 1.2(e) sets forth the SMR Channels subject to
option agreements pursuant to which CellCall has the option to purchase such
channels ("Option Channels"). Such Option Channels shall be deemed Delivered
provided (i) such channels meet all the conditions of the foregoing Section
1.2(d), and (ii) applications for transfer of any such Option Channels from the
option holder to CellCall and from CellCall to Nextel are on file with the FCC
at Closing. The number of shares of Nextel Common Stock equal to (i) the sum of
all amounts paid or payable to any third party upon exercise of any option to
acquire any Option Channel (including any management payments owed which have
not previously been paid), if any, plus any amounts paid to third parties by
CellCall as contemplated by Section 4.1(iii) of this Agreement, divided by (ii)
the Nextel Share Price, shall be subtracted from the Nextel Share Base. Schedule
1.2(e) also identifies those options that CellCall will not exercise at any time
and for which no adjustments for amounts payable thereunder will be effected.
1.3 Adjustment for Negative Cash Flow. If Adjusted EBITDA Earnings for
the six-month period immediately preceding the Effective Time is negative, that
amount shall be annualized (i.e. doubled) to equal the loss that CellCall would
have experienced in a 12-month period at that rate of loss, and the number of
shares
A-7
<PAGE> 96
of Nextel Common Stock equal to (i) such annualized amount, divided by (ii) the
Nextel Share Price, shall be subtracted from the Nextel Share Base. "Adjusted
EBITDA Earnings" means CellCall's earnings from continuing operations as shown
on the unaudited consolidated financial statements that are prepared by CellCall
in the ordinary course of business consistent with past practice, (a) before
interest expense, taxes, depreciation, amortization, other income and expense,
all determined in accordance with past practices, to the extent consistent with
GAAP (as herein defined), (b) without reduction for Severance Costs (as herein
defined) and (c) without reduction for Transaction Costs (as herein defined).
1.4 Adjustment for Negative Working Capital.
(a) Based on the unaudited consolidated balance sheet of
CellCall as of the month-end preceding the Effective Time prepared by CellCall
in the ordinary course of business, consistent with past practices, if the
working capital (as herein defined) of CellCall is negative, the number of
shares of Nextel Common Stock equal to (i) the negative amount of such working
capital, divided by (ii) the Nextel Share Price, shall be subtracted from the
Nextel Share Base.
(b) For the purposes of this Section, working capital
shall mean the result obtained by subtracting current liabilities from current
assets; provided that, (i) the long term portion of the long term debt of
CellCall shall be included in the current liabilities and the calculation of the
Sirrom (as hereafter defined) contra account will be excluded from current
liabilities (thus increasing current liabilities); (ii) discounts on notes
payable shall be excluded from the current liabilities (thus increasing current
liabilities); (iii) reasonable accounting, legal, filing, printing and financial
advisory fees and expenses associated with the Agreement and the transactions
contemplated hereby that (A) were paid on or before the period reflected on the
First Quarter Balance Sheet (as herein defined), and (B) have not been paid on
or before the period reflected on the First Quarter Balance Sheet (regardless
whether GAAP would reflect them as current liabilities as of that date)
(collectively, the "Transaction Costs") shall be excluded from the current
liabilities; (iv) all amounts paid or to be paid or other value given to
CellCall executives as severance whether pursuant to existing commitments or
otherwise as a result of the Merger and change of control effected thereby
(regardless whether GAAP would reflect them as current liabilities as of that
date) (the "Severance Costs") shall be excluded from the current liabilities;
(v) any cash received upon the exercise of any Benchmark Derivatives (as those
instruments were in effect on the date hereof) prior to the Effective Time will
be excluded from current
A-8
<PAGE> 97
assets; and (vi) any amounts paid or payable upon exercise of any options for
which a deduction from the Nextel Share Base is effected pursuant to Section
1.2(e) shall be excluded from the current liabilities; and (vii) any amounts
relating to the Sirrom (as hereafter defined) contra account will be excluded
from current liabilities (thus increasing current liabilities). The terms used
in this Section shall have the meaning given to those terms in current use in
the accounting profession in the United States under Generally Accepted
Accounting Principles ("GAAP").
1.5 Adjustment for Option/Warrant Exercise. If at the Effective Time,
CellCall (on a consolidated basis) does not have cash in an amount equal to the
aggregate exercise price or other consideration due upon exercise, exchange or
conversion under the terms of the Benchmark Derivatives (as those instruments
were in effect on the date hereof) exercised prior to the Effective Time, or has
issued any shares of CellCall Stock in respect of any Benchmark Derivatives in
any cashless exercise transaction, the Nextel Share Base shall be reduced by
that number of shares of Nextel Common Stock equal to (i) the difference between
the amount of cash that should have been received upon such exercise and the
actual amount of cash received upon such exercise and held at the Effective
Time, divided by (ii) the Nextel Share Price.
1.6 Adjustment for Transaction Costs and Severance Costs. To the extent
the amount of (i) the Transaction Costs exceed $300,000 or (ii) the Severance
Costs exceed $265,000, then that number of shares of Nextel Common Stock equal
to (X) the combined amount of such excess Transaction Costs and such excess
Severance Costs divided by (Y) the Nextel Share Price, shall be subtracted from
the Nextel Share Base.
1.7 Nextel Share Price. As used in this Agreement, the "Nextel Share
Price" shall be $16.00.
1.8 Other Adjustments. Nextel and CellCall agree that in the event of
any change in the terms of the authorized capital stock of Nextel (other than a
change solely in the number of shares), or the declaration or payment of any
share dividend or share distribution by Nextel to its stockholders, or any
distribution of cash, property or securities by Nextel to its stockholders
(other than regular quarterly cash dividends payable out of earnings), or any
split, reclassification, recapitalization, subdivision or exchange in respect of
the outstanding stock of Nextel, then appropriate adjustments shall be made to
the number of shares of Nextel Common Stock issuable in the Merger, as set forth
in Section 1.1, to place each of Nextel, NFC, and Merger Sub, CellCall and the
holders of CellCall Stock in the same posture as if the Effective Time had
occurred immediately prior to the occurrence of the event giving rise to such
A-9
<PAGE> 98
adjustment. Further, Nextel and CellCall agree that in the event of any change
in the terms of the authorized capital stock of CellCall, or any distribution of
securities by CellCall to its stockholders, or any split, reclassification,
recapitalization, subdivision or exchange in respect of the outstanding stock of
CellCall, appropriate adjustments shall be made to place each of Nextel, Merger
Sub, CellCall and the holders of CellCall Stock in the same posture as if the
Effective Time had occurred immediately prior to the occurrence of the event
giving rise to such adjustment. No adjustment shall be made pursuant to the
preceding sentence for redemptions, repurchases or other cancellation or
retirement of outstanding shares of CellCall Stock or rights to acquire shares
of CellCall Stock.
1.9 Terms of the Merger. Upon the terms and subject to the conditions
set forth herein, and in accordance with the General Corporation Law of the
State of Delaware ("GCL"), as soon as practicable following the satisfaction
(or, to the extent permitted, the waiver) of the conditions set forth in Article
VIII, Merger Sub and CellCall shall cause a Certificate of Merger (the
"Certificate of Merger") to be executed and filed with the Secretary of State of
Delaware as provided in Section 251 of the GCL. The Certificate of Merger shall
provide that Merger Sub shall be merged with and into CellCall. Following the
Merger, CellCall shall continue as the surviving corporation (the "Surviving
Corporation").
1.10 Effective Time; Effects of the Merger. The Merger shall become
effective when both (a) this Agreement shall be adopted and approved by the
stockholders of CellCall in accordance with the applicable provisions of the GCL
and (b) the Certificate of Merger, executed in accordance with the relevant
provisions of the GCL, is filed with the Secretary of State of Delaware (the
time the Merger becomes effective being referred to as the "Effective Time").
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time: the separate existence of Merger Sub shall cease; the Surviving
Corporation shall possess all assets and property of every description, and all
interests therein, wherever located, and the rights, privileges, immunities,
powers, franchises and authority, of a public as well as of a private nature, of
each of Merger Sub and CellCall (the "Constituent Corporations"); all
obligations belonging to or due each of the Constituent Corporations shall be
vested in, and become the obligations of, the Surviving Corporation without
further act or deed; title to any real estate or any interest therein vested in
either of the Constituent Corporations shall not revert or in any way be
impaired by reason of the Merger; all rights of creditors and all liens upon any
property of any of the Constituent Corporations shall be preserved unimpaired,
and the Surviving Corporation shall be liable for all
A-10
<PAGE> 99
of the obligations of each of the Constituent Corporations; and any claim
existing, or action or proceeding pending, by or against either of the
Constituent Corporations may be prosecuted to judgment with right of appeal, as
if the Merger had not taken place.
1.11 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of Merger Sub as in effect immediately preceding the Effective
Time shall constitute the Certificate of Incorporation of the Surviving
Corporation (the "Certificate of Incorporation") within the meaning of GCL
Section 104. The By-Laws of Merger Sub as in effect immediately preceding the
Effective Time shall constitute the By-Laws of the Surviving Corporation (the
"By-Laws") until amended in accordance with applicable law and the Certificate
of Incorporation.
1.12 Directors and Officers. The directors and officers of Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation at the Effective Time and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Certificate of Incorporation and
By-Laws of the Surviving Corporation, or as otherwise provided by law.
1.13 Exchange Agent. Prior to the Effective Time, Nextel shall
designate a bank or trust company to act as exchange agent in the Merger (the
"Exchange Agent"). Prior to the Effective Time, Nextel shall contribute to NFC
the shares of Nextel Common Stock necessary to make payment for each share of
the capital stock of CellCall being converted by reason of the Merger.
Immediately thereafter, NFC shall contribute such shares of Nextel Common Stock
to Merger Sub and Merger Sub will immediately prior to or at the Effective Time
deliver to the Exchange Agent such shares of Nextel Common Stock to be used as
consideration in the Merger.
1.14 Surrender of Certificates and Delivery of Merger Consideration.
(a) Promptly after the Effective Time, Nextel shall cause the
Exchange Agent to mail to each holder of record of a certificate or certificates
that immediately prior to the Effective Time represented outstanding shares of
CellCall Stock (the "Certificates") (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in form approved by CellCall, Nextel and the
Exchange Agent) and (ii) instructions for use in effecting the surrender of the
A-11
<PAGE> 100
Certificates in exchange for certificates representing shares of Nextel Common
Stock and cash for fractional shares, if any, in accordance with Section 1.15.
Upon surrender to the Exchange Agent of a Certificate or Certificates, together
with a letter of transmittal duly executed (in the approved form), and such
other documents as the Surviving Corporation or the Exchange Agent may
reasonably request, a holder of a Certificate shall be entitled to receive in
exchange therefor a portion of Nextel Common Stock as set forth in Section 1.1,
as adjusted pursuant to this Article I (the "Merger Consideration").
(b) The stock transfer books of CellCall shall be closed
at the Effective Time and no transfer of capital stock of CellCall outstanding
prior to the Effective Time shall be registered on the stock transfer books of
the Surviving Corporation. If Nextel Common Stock is to be issued to a person
other than the person in whose name the Certificates are registered, it shall be
a condition of issuance that the Certificates surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such issuance shall pay all transfer and other taxes required by reason of the
receipt by a person other than the registered holder of the Certificates
surrendered, or establish to the reasonable satisfaction of the Surviving
Corporation or the Exchange Agent that such tax has been paid or is not
applicable.
(c) At any time following ninety days after the Effective
Time, Nextel shall be entitled to require the Exchange Agent to deliver to
Nextel any Nextel Common Stock which had been made available to the Exchange
Agent by or on behalf of Nextel or the Surviving Corporation and which has not
been disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to Nextel (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the Nextel
Common Stock payable upon due surrender of their Certificates. Notwithstanding
the foregoing, Nextel shall not be liable to a holder of Certificates for
amounts delivered to a public official pursuant to any applicable abandoned
property, escheat or similar laws. Nextel shall pay all charges and expenses,
including fees and expenses of the Exchange Agent, incurred by any party in
connection with the exchange of shares hereunder.
(d) If any Certificates shall not have been surrendered
prior to one year 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 unit or agency), the payment in respect
of such Certificates shall, to the extent permitted by applicable
A-12
<PAGE> 101
law, become the property of Nextel, free and clear of all claims of interest of
any person previously entitled thereto.
(e) Certificates, if and when presented to the Exchange
Agent or the Surviving Corporation after the Effective Time, shall be cancelled
and exchanged for the consideration provided for, and in accordance with, the
procedures set forth in this Section.
1.15 No Fractional Shares. Notwithstanding any other provision of this
Agreement (but subject to Section 1.1(d)(iv) and the final sentence of this
Section 1.15), no fractional share of Nextel Common Stock or certificates or
scrip therefor shall be issued as a result of the conversion of issued and
outstanding capital stock of CellCall into Nextel Common Stock, but in lieu of
each fractional interest there shall be made a payment in cash therefor, without
interest, at a pro rata price based on the Market Price. The Surviving
Corporation shall provide (or shall cause one or more of its Affiliates to
provide) the Exchange Agent with sufficient cash to make such payments, and,
thereafter, the Surviving Corporation shall cause the Exchange Agent to make
such payments to the holders of Certificates in cash, without interest, on the
surrender of their Certificates. Wherever in this Agreement it is contemplated
that, in connection with the Merger, cash payment shall be made in lieu of
fractional share interests to persons otherwise entitled to receive such
fractional share interests, Nextel may (in its sole and absolute discretion)
deliver to such persons a number of whole shares, determined by rounding up to
the nearest whole share, and thereupon shall be relieved of any obligation
hereunder to make cash payments to such persons in lieu of any fractional share
interests.
1.16 Rights of Holders of Certificates.
(a) At the Effective Time, the holders of Certificates for
shares of capital stock of CellCall (other than certificates representing shares
held in CellCall's treasury, which shall be automatically cancelled pursuant to
the Merger) shall cease to have any rights as stockholders of CellCall, and
their sole rights shall pertain to the shares of Nextel Common Stock into which
their shares of CellCall capital stock shall have been converted by the Merger.
After the Effective Time, each holder of outstanding Certificates for shares of
capital stock of CellCall shall be entitled upon surrender of the same duly
transmitted to the Exchange Agent to receive in exchange therefor certificates
representing the number of whole shares of Nextel Common Stock into which such
holder's shares of capital stock of CellCall shall have been converted by the
Merger, plus (if applicable) cash in lieu of fractional shares.
A-13
<PAGE> 102
(b) Pending surrender and exchange under this Agreement, a
holder's Certificates for capital stock of CellCall shall be deemed for all
corporate purposes, other than the payment of dividends, to evidence the number
of whole shares of Nextel Common Stock into which such shares have been
converted by the Merger and, subject to the last sentence of Section 1.15, the
right to receive cash for any fractional interests resulting therefrom. Subject
to Section 1.1(d)(iv) and Section 1.14(d), unless and until any outstanding
Certificates for shares of CellCall capital stock are surrendered, no dividend
(stock or cash) payable to holders of record of Nextel Common Stock as of any
date subsequent to the Effective Time shall be paid to the holder of any such
Certificate, but upon such surrender of such Certificates there shall be paid to
the record holder of the certificate for Nextel Common Stock issued in exchange
therefor, the amount of dividends but without interest, that have theretofore
become payable subsequent to the Effective Time with respect to the number of
whole shares of Nextel Common Stock represented by the certificate issued upon
such surrender and exchange.
1.17 Assumption of Stock Options.
(a) Schedule 2.5 sets forth a list of each stock option
outstanding on the date of this Agreement, whether or not fully exercisable
(collectively, the "CellCall Stock Options"), to purchase CellCall Common Stock
heretofore granted or assumed by CellCall pursuant to any stock option, stock
purchase or similar plan adopted, assumed or maintained at any time by CellCall,
any of its controlled Affiliates or any of their respective predecessors in
interest, including but not limited to the CellCall 1993 Stock Plan, each as in
effect on the date of this Agreement (collectively the "CellCall Option Plans").
Schedule 2.5 also sets forth with respect to each CellCall Stock Option the
option exercise price, the number of shares subject to the option, any related
stock appreciation rights, the dates of grant, vesting, exercisability and
expiration of the option and whether the option is an incentive stock option or
a non-qualified stock option. All rights under the CellCall Stock Options shall
be treated as provided in this Section 1.17, and to the extent the terms of the
CellCall Option Plans and/or of any related agreements are inconsistent with the
treatment to be accorded to the CellCall Stock Options pursuant to this Section
1.17, then CellCall shall cause the CellCall Option Plans and/or any related
agreements with affected participants to be amended, and all required third
party, governmental and regulatory body consents or approvals to such amendments
to be procured, such that all such inconsistencies shall be eliminated by the
Effective Time.
A-14
<PAGE> 103
(b) Each CellCall Stock Option outstanding immediately
prior to the Effective Time shall be converted at the Effective Time into an
issued and outstanding option of Nextel so that from and after the Effective
Time, each such CellCall Stock Option may be exercised only for shares of Nextel
Common Stock as follows: (i) if the Residual Amount is greater than zero, each
CellCall Stock Option shall at the Effective Time become an option to purchase a
number of shares of Nextel Common Stock equal to the amount arrived at by
multiplying the number of shares of CellCall Stock subject to such option
immediately prior to the Effective Time, by the Residual Amount, and the
exercise price per share of Nextel Common Stock at which each such CellCall
Stock Option is exercisable shall be the amount (rounded up to the next whole
cent) arrived at by dividing the exercise price per share of CellCall Common
Stock at which such CellCall Stock Option is exercisable immediately prior to
the Effective Time by the Residual Amount; or, (ii) if the Residual Amount is
zero, each such CellCall Stock Option shall at the Effective Time become an
option to purchase a number of shares of Nextel Common Stock equal to the amount
arrived at by multiplying the number of shares of CellCall Stock subject to such
option immediately prior to the Effective Time, by the Exchange Ratio and the
exercise price per share of Nextel Common Stock at which each such CellCall
Stock Option is exercisable shall be the amount (rounded up to the next whole
cent) arrived at by dividing the exercise price per share of CellCall Common
Stock at which such CellCall Stock Option is exercisable immediately prior to
the Effective Time by the Exchange Ratio. Notwithstanding the foregoing, Nextel
shall not issue or pay for any fractional share otherwise issuable upon any
exercise by any holder of CellCall Stock Options that are so converted, and
provided, however, that in the case of each CellCall Stock Option which is an
incentive stock option, the Residual Amount shall be adjusted for such option,
if necessary, so as not to constitute a modification, extension or renewal of
the option, within the meaning of Section 424(h) of the Code. All CellCall Stock
Options converted into issued and outstanding options of Nextel pursuant to the
preceding sentence, except those CellCall Stock Options held by directors who
are not also employees or consultants of CellCall or any of its subsidiaries,
shall be so converted into issued and outstanding options under Nextel's Amended
and Restated Incentive Equity Plan, as amended May 13, 1996 (the "Nextel Plan").
(c) The Board of Directors of CellCall and/or of the
Surviving Corporation, as appropriate, shall take such action as may be required
under the CellCall Option Plans and the Compensation Committee of the Board of
Directors of Nextel shall take such action as may be required under the Nextel
Plan to effectuate the foregoing. Prior to the Effective Time, Nextel shall
reserve for issuance the number of shares of Nextel Common
A-15
<PAGE> 104
Stock necessary to satisfy the obligations of Nextel under this Section 1.17 and
within five (5) business days after the Effective Time, Nextel shall register
such shares pursuant to the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act"). Prior to the
Effective Time, CellCall, and thereafter the Surviving Corporation, as may be
appropriate, shall take such actions as are necessary to effect the provisions
of this Section 1.17 and to preserve for the holders of CellCall Stock Options
the benefits to be provided pursuant to this Section 1.17. Notwithstanding
anything in this Section 1.17(c), neither CellCall nor Nextel shall have any
liability for failing to take (or to cause to be taken) actions in respect of
any stock option plan or related agreement that would violate (in any material
respect) the terms thereof or would be prohibited by applicable law.
1.18 Warrants. Schedule 2.5 sets forth a list of CellCall's outstanding
warrants (the "Warrants") to purchase shares of CellCall Stock, which Warrants
shall be assumed by Nextel. Each Warrant shall thereafter evidence a warrant to
purchase the number of shares of Nextel Common Stock into which the number of
shares of CellCall Common Stock issuable pursuant to such Warrant would have
been converted in the Merger (under either Section 1.1(c)(iv) or Section
1.1(d)(iv)), as the case may be, at an exercise price equal to the amount per
share (rounded up to the next whole cent) arrived at by dividing the aggregate
exercise price under such Warrant by the number of shares of Nextel Common Stock
purchasable thereunder.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF CELLCALL
CellCall represents and warrants to Nextel that:
2.1 Corporate Organization.
(a) CellCall has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware and has the corporate power and authority to own or lease its
properties and to conduct its business as it has been and is now being
conducted. The copies of the Certificate of Incorporation of CellCall and the
Certificate of Amendment thereto attached to this Agreement as Schedule 1.1,
certified by the Secretary of the State of Delaware, and its By-Laws, certified
by the Secretary of CellCall, previously delivered by CellCall to Nextel, are
true, correct and complete.
(b) The subsidiaries of CellCall are listed on the Schedules
with reference to this Section (collectively, the "Subsidiaries"). Each of the
Subsidiaries has been duly incorporated and is validly existing as a corporation
in good
A-16
<PAGE> 105
standing under the laws of the state of its incorporation, as set forth on the
Schedules with reference to this Section and has the corporate power and
authority to own or lease its properties and to conduct its business as it has
been and is now being conducted. The copies of the Certificate of Incorporation
(or equivalent) of each Subsidiary, certified by the Secretary of State of the
state of its incorporation, and its By-Laws, certified by such Subsidiary's
Secretary, previously delivered by CellCall to Nextel, are true, correct and
complete.
(c) CellCall and each Subsidiary are duly licensed or
qualified and in good standing as a foreign corporation in all jurisdictions
identified on the Schedules with reference to this Section and such
jurisdictions are the only ones in which their ownership of property or the
character of their activities is such as to require them to be so licensed or
qualified and in which the failure to be so licensed or qualified would have a
material adverse effect on the business or properties of CellCall or any of its
Subsidiaries.
2.2 Subsidiaries and Other Entities.
(a) All the outstanding capital stock of each Subsidiary
is duly authorized, validly issued, fully paid and nonassessable. CellCall owns
all the issued and outstanding capital stock of each Subsidiary. Except as set
forth on Schedule 2.2, CellCall holds all the issued and outstanding capital
stock of each Subsidiary free and clear of any mortgage, pledge, security
interest, encumbrance, lien, claim or charge of any kind. As of the Closing,
CellCall shall hold all the issued and outstanding capital stock of each
Subsidiary free and clear of any mortgage, pledge, security interest,
encumbrance, lien, claim or charge of any kind.
(b) There are no warrants, options, subscriptions, other
convertible instruments, and no commitments, obligations, or agreement (whether
firm or conditional) pursuant to which CellCall or any Subsidiary is or may be
obligated to issue, transfer, deliver or sell shares of capital stock of any
Subsidiary or other securities of any Subsidiary.
(c) Except for the Subsidiaries, none of CellCall or the
Subsidiaries has any direct or indirect subsidiaries, nor do any of them own,
directly or indirectly, any partnership, equity, profit, participation or
similar ownership interest in any corporations, partnerships, joint ventures,
trusts, unincorporated organizations, associations or similar entities.
(d) CellCall has not had and currently does not have any
claims against the Magold Parties (as herein defined) or any
A-17
<PAGE> 106
affiliates thereof, under any indemnification provision or otherwise, arising
out of or relating to the Share Purchase Agreement among Raymond J. Magold,
Phyllis B. Magold and Raymond J. Magold as Custodian for Jacqueline R. Magold
and Darlene M. Magold, respectively, (collectively, the "Magold Parties") and
CellCall, dated as of May 2, 1994.
2.3 Corporate Authorization.
(a) The Board of Directors of CellCall, by unanimous vote
of all directors at a meeting duly called and held, has determined that the
Merger is fair to and in the best interests of the stockholders of CellCall.
(b) CellCall has all necessary corporate power and
authority to enter into this Agreement and to perform all of the obligations to
be performed by it hereunder. The execution, delivery and performance of this
Agreement by CellCall has been duly authorized by CellCall, and, upon the
execution and delivery hereof by, respectively, Nextel, NFC and Merger Sub, this
Agreement will constitute the valid and legally binding obligation of CellCall,
enforceable against CellCall in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, reorganization,
insolvency or other similar laws affecting creditors' rights generally, by
equitable principles of general applicability with respect to the availability
of equitable remedies, or by public policies applicable to securities laws.
2.4 Capital Stock. The entire authorized capital stock of CellCall
consists solely of 40,000 shares of CellCall Common Stock, par value $.01 per
share, of which 910 shares are issued and outstanding, and 110,000 shares of
Preferred Stock, $.10 par value per share, of which 1,669 shares of Series A
Preferred Stock, par value $0.10 per share, are known and designated, 1,668.92
of which are issued and outstanding, 25,500 shares of Series B Preferred Stock,
$.10 par value per share, are known and designated, of which 20,677.79 shares
are issued and outstanding, 52,500 shares of Series C Preferred Stock, $.10 par
value, are known and designated, all of which are issued and outstanding and 256
shares of Series D Preferred Stock, $.10 par value, are known and designated,
none of which are issued and outstanding, all as set forth (including the
ownership thereof) on Schedule 2.4. All of the outstanding shares of CellCall
Stock (and any shares issuable pursuant to presently outstanding options and
warrants, if exercised and purchased at the applicable exercise price) were duly
authorized and will be, when issued and the option price paid (if applicable),
validly issued, fully paid and nonassessable. Except as set forth in Schedule
2.4 (all of which restrictions shall be terminated prior to Closing), none of
the capital stock
A-18
<PAGE> 107
or other securities of CellCall is entitled or subject to preemptive rights or
registration rights. The authorization or consent of no person is required in
order to consummate the transactions contemplated herein by virtue of any such
person having an equitable or beneficial interest in the CellCall Stock. There
are not now, and at the Effective Time there will not be, any voting trusts or
other agreements or understandings to which CellCall is a party or is bound with
respect to the voting of CellCall Stock, except for that certain Amended and
Restated Stockholders Agreement, dated as of March 9, 1993, which shall be
terminated at the Closing. All outstanding shares of CellCall Stock were
offered, sold and issued in compliance with all applicable laws and regulations,
including, without limitations federal and state securities laws. Except as set
forth in the Schedules with reference to this Section, since December 31, 1996,
no stockholder of CellCall has entered into any transaction (or agreement
relating to any transaction) with CellCall or any other stockholder of CellCall
relating in any manner to any of the transactions contemplated in this
Agreement.
2.5 Options and Warrants. CellCall has set forth on the Schedules with
reference to this Section all warrants, options, subscriptions and other
convertible instruments or agreements pursuant to which CellCall was obligated
as of the date hereof to issue, transfer, deliver or sell shares of CellCall
Stock and the exercise or purchase price of each such warrant, option,
subscription, convertible instrument or agreement. Except as set forth in the
Schedules with reference to this Section, as of the date hereof, no options or
warrants to purchase shares of CellCall Stock have ever been granted, except for
employee options that have been exercised or have terminated without exercise
prior to the date hereof, pursuant to the terms of the respective CellCall
Option Plans. Except as set forth in the Schedules with reference to this
Section, as of the date hereof, there were no commitments or obligations of
CellCall, either firm or conditional, to issue, deliver or sell, whether under
offers, stock option agreements, stock bonus agreements, stock purchase plans,
incentive compensation plans, warrants, conversion rights or otherwise, any
authorized but unissued shares, or treasury shares, of CellCall Common Stock or
other securities of CellCall.
2.6 Compliance with Laws. Except as set forth in the Schedules with
reference to this Section, (i) neither CellCall nor any Subsidiary is currently
in violation (nor is any of them currently liable or otherwise currently
responsible with respect to prior violations) of any statute, law or regulation
applicable to any of their presently or formerly owned properties or to the
conduct of their current or past businesses; (ii) none of the processes
followed, results obtained, services provided or products made, modified or
installed by any of them (in the
A-19
<PAGE> 108
ordinary course of their businesses or otherwise), or by any managers with
respect to SMR Licenses (as defined herein) held by any of CellCall or its
Subsidiaries (pursuant to Third Party Management Agreements (as defined herein)
or otherwise) or by CellCall or its Subsidiaries in the management or operation
of SMR Licenses managed by any of them (pursuant to CellCall Management
Agreements or otherwise), violate any statute, law or regulation applicable
thereto; (iii) none of (a) the businesses of CellCall or any Subsidiary, (b) the
processes, results, services or products performed, sold or otherwise made
available by CellCall or any Subsidiary, (c) the processes, results, services or
products performed, sold or otherwise made available by any manager with respect
to SMR Licenses held by CellCall or any Subsidiary (pursuant to Third Party
Management Agreements or otherwise) or (d) the processes, results, services or
products performed, sold or otherwise made available by CellCall or any
Subsidiary in the management or operation of SMR Licenses managed by any of them
(pursuant to CellCall Management Agreements or otherwise) violates any
applicable law or regulation relating to air, water or noise pollution or
employee health and safety or the production, storage, labeling, transportation
or disposition of solid waste or hazardous or toxic substances; (iv) CellCall,
its Subsidiaries, each of the managers with respect to SMR Licenses held by
CellCall or a Subsidiary, and CellCall and its Subsidiaries in their capacities
as managers under CellCall Management Agreements, has each timely obtained all
licenses and permits and timely filed all reports required to be filed under any
such applicable laws or regulations; (v) neither CellCall, its Subsidiaries nor
any other person has stored, dumped or otherwise disposed of any chemical
substances, including any "Hazardous Substances," "Pollutants" or "Contaminants"
(as such terms are defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA")) on, beneath or
about any of the properties of CellCall or its Subsidiaries; (vi) none of
CellCall, its Subsidiaries or any of their respective managers (with respect to
SMR Licenses held by CellCall or a Subsidiary) has received written notice that
it is a "potentially responsible party" under any environmental law or of any
violation of any environmental, zoning or other land use ordinance, law or
regulation relating to the operation of its or their businesses, or to any of
the processes followed, results obtained, services provided or products made,
modified or installed (in the ordinary course of its or their businesses or
otherwise), including, but not limited to, the Toxic Substances Control Act of
1976, as amended, the Resource Conservation Recovery Act of 1976, as amended,
the Clean Air Act, as amended, the Federal Water Pollution Control Act, as
amended, CERCLA or the Occupational Safety and Health Act of 1970, as amended,
nor are CellCall and any Subsidiary aware of any such violation. CellCall has
listed in the Schedules with reference to this Section all environmental
A-20
<PAGE> 109
reports known to CellCall or its Subsidiaries relating to any owned or leased
real property of CellCall or its Subsidiaries and has previously delivered to
Nextel a true, correct and complete copy of each report so listed.
2.7 No Conflict. Except as set forth in the Schedules with reference to
this Section, the execution and delivery of this Agreement by CellCall and the
consummation by CellCall of the transactions contemplated hereby do not, and
will not constitute an event which, after notice or lapse of time or both would
(a) violate any provision of, or result in the breach of, or accelerate or
permit the acceleration of the performance required by: (i) the terms of, any
applicable law, rule or regulation of any governmental body, (ii) the
Certificate of Incorporation or By-Laws of CellCall or any Subsidiary; (iii) any
indenture, material agreement, or other material instrument to which CellCall or
any Subsidiary is a party or by which CellCall or any Subsidiary may be bound;
or (iv) any order, judgment or decree applicable to any of them, or (b)
terminate or result in the termination of any indenture, material agreement or
other material instrument, or result in the creation of any lien, charge or
encumbrance upon any of the properties or assets of CellCall or any Subsidiary
under any agreement to which any of them is a party.
2.8 Litigation. Except as set forth in the Schedules with reference to
this Section, there are no actions, suits, proceedings, claims or investigations
formally instituted and pending or, to the knowledge of CellCall and its
Subsidiaries, threatened against or specifically affecting CellCall or any
Subsidiary or involving any of their properties or assets, at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any arbitration panel or alternative dispute resolution body. Except as set
forth in such Schedule, neither CellCall nor any Subsidiary is subject to or is
in default under, any order, writ, injunction or decree of any court or Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, or any arbitration panel or alternative dispute
resolution body.
2.9 Insurance. Set forth in the Schedules with reference to this
Section is a list of (a) all insurance policies held by CellCall or any
Subsidiary (indicating the insurer, type, amount and term of coverage,
deductible, description of vehicles, latest property insurable values by
location (100% replacement value), workers' compensation payroll (separately for
clerical, sales and technical employees), and additional named insureds with
respect to each such policy); and (b) all claims pending under any of such
insurance policies. Except as set forth in such Schedule, all of
A-21
<PAGE> 110
these policies are in full force and effect and all premiums due thereon have
been paid or accrued and there are no retroactive experience-based premium
adjustment features in any policy.
2.10 Intellectual Property. Except for the name of CellCall and except
as set forth in the Schedules with reference to this Section, there are no
patents or patent applications; trademarks, service marks, trade dress, trade
names, corporate names or any applications to register any of the foregoing
marks or names; copyrights or copyright registrations; or any licenses, other
than software licenses acquired solely through the purchase of the underlying
software, to or from third parties with respect to any of the foregoing
(including, without limiting the generality of the foregoing, all computer
software, data and documentation) relating to CellCall's or the Subsidiaries'
business as now conducted or as presently proposed to be conducted. Except as
set forth in the Schedules with reference to this Section, (i) neither of
CellCall nor any Subsidiary has infringed, misappropriated or otherwise
conflicted with any proprietary rights of any third parties; (ii) CellCall is
not aware of any infringement, misappropriation or conflict which will occur as
a result of the continued operation of CellCall's or the Subsidiaries' business
as now conducted or as presently proposed to be conducted; and (iii) neither
CellCall nor any Subsidiary has received any notices of any infringement or
misappropriation from any third party.
2.11 Assets. CellCall has delivered to Nextel a Schedule (which makes
reference to this Section) that lists all fixed capital assets owned by CellCall
(including, without limitation, all repeater and ancillary equipment necessary
for the operation of the business of CellCall, all assets located at each site,
all office equipment and furniture owned by CellCall and all other material
tangible assets owned by CellCall) including, without limitation, all such
assets that are included under the heading Plant, Property and Equipment on the
First Quarter Balance Sheet (as hereafter defined) (the "Asset List"). The
assets on the Asset List include substantially all of the tangible assets
presently used by CellCall in the conduct of its business in Alabama, Indiana,
Kentucky, Ohio, Pennsylvania and Tennessee (collectively, the "States").
2.12 Financial Statements. Attached hereto as Schedule 2.12 are the
following financial statements (including any notes thereto) of CellCall, all of
which have been prepared in accordance with GAAP consistently applied throughout
the periods involved and present fairly in all material respects the
consolidated financial position of CellCall and its Subsidiaries, at the dates
stated in such financial statements and the results of their operations for the
periods stated therein (subject in the
A-22
<PAGE> 111
case of the financial statements referenced in paragraph (b) to the absence of
notes and to normal year-end adjustments):
(a) a Consolidated Balance Sheet at December 31, 1996, and
a Consolidated Statement of Operations, Statement of Stockholders' Equity and
Consolidated Statement of Cash Flows for the year ended December 31, 1996; and
(b) a Consolidated Balance Sheet at March 31, 1997 (the
"First Quarter Balance Sheet") and a Consolidated Statement of Operations, and a
Consolidated Statement of Cash Flows for the three months ended March 31, 1997.
2.13 Liabilities. CellCall and its Subsidiaries do not have any
liability or obligation, secured or unsecured (whether accrued, absolute,
contingent or otherwise), except:
(i) trade payables and accrued expenses incurred
in the ordinary course of business and consistent with past
practices for which the stated due date has not passed
("Current Payables");
(ii) those liabilities or obligations (for which
the stated due date has not passed) relating to operating contracts or
leases entered into in the ordinary course of business consistent with
past practice;
(iii) liabilities and obligations of the type
shown on the First Quarter Balance Sheet and any increase in the amount
of such liabilities after March 31, 1997 was either (1) consented to in
writing by Nextel, or (2) incurred by CellCall or any Subsidiary in the
ordinary course of business after such date; and
(iv) other liabilities or obligations that do not
exceed $10,000 individually and do not exceed $50,000 in the aggregate
or that are set forth in the Schedules with reference to this Section
specifically identified and agreed to by Nextel as Permitted
Liabilities for purposes of this Agreement (and, to the extent
reasonably ascertainable, have been identified by type, source and
dollar amount) (the liabilities and obligations described in this
clause and clauses (i) through (iv) above, collectively, the "Permitted
Liabilities").
2.14 Transactions Not in the Ordinary Course. Except as set forth on
the Schedules with reference to this Section, during the period commencing March
31, 1997 and ending on the date of this Agreement, neither CellCall nor any
Subsidiary has (a) incurred any liability or obligation not in the ordinary
A-23
<PAGE> 112
course of business or entered into any transaction other than in the ordinary
course of business, the value of which did not exceed $10,000 individually and
$50,000 in the aggregate; (b) declared or made any payment or distribution to
stockholders or other holders of equity or other similar ownership or
participation interests, including stock splits, stock dividends and profit
distributions, or purchased or redeemed any shares or other equity or other
similar ownership or participation interests except as provided for in this
Agreement; (c) mortgaged, pledged or subjected to lien, charge or any other
encumbrance, any of its assets, tangible or intangible; (d) sold or transferred,
or agreed to sell or transfer, or acquired or agreed to acquire any SMR
Licenses; (e) sold or transferred any of its other assets, tangible or
intangible, except in the ordinary course of business, the value of which did
not exceed $10,000 individually and $50,000 in the aggregate; (f) cancelled any
debts or claims except in each case in the ordinary course of business; (g)
increased the rate of compensation of any officer or of any employee receiving
(giving effect to such increase) more than $50,000.00 per annum or paid or
declared any bonus (excluding fixed-formula compensation incentive payments such
as may be paid to certain sales employees from time to time); (h) agreed to or
amended or instituted any employment contract, bonus plan, stock option plan,
profit sharing plan, pension plan, retirement plan or other similar arrangement
or plan.
2.15 Capital Projects. Set forth in the Schedules with reference to
this Section is a description of all capital projects currently committed for or
authorized by CellCall for (i) SMR Systems (as defined herein) and (ii) all
other capital projects involving the expenditure of more than $10,000 in any
single case or more than $50,000 in the aggregate.
2.16 Taxes. Except as set forth in the Schedules with reference to this
Section, the Subsidiaries have been included in a consolidated Federal income
tax return filed by CellCall. Except as set forth in the Schedules with
reference to this Section, (i) CellCall, on behalf of itself and its
Subsidiaries (collectively, "CellCall/CellCall Subs"), has accurately prepared
and has duly and timely filed with all appropriate Federal, foreign, state and
local governmental agencies, all tax returns and reports required to be filed by
it; (ii) such returns accurately reflect all payments and distributions made by
any Subsidiary to CellCall or any of CellCall's affiliates and required to be
reflected on such returns; (iii) all taxes owed or withheld, or which may be
claimed to be owed or required to be withheld, to or for the benefit of any
governmental agency for or with respect to the periods covered by such returns
and reports or with respect to any period (or portions thereof) ending at or
before the Closing, and all interest, penalties, assessments and
A-24
<PAGE> 113
deficiencies connected therewith, have been or will be timely paid in full or
provided for in full; (iv) CellCall/CellCall Subs has not executed or filed with
any taxing authority any agreement extending the period for assessment or
collection of any taxes; (v) CellCall/CellCall Subs is not a party to any
pending audit, inquiry, action or proceeding, nor has CellCall/CellCall Subs
been notified of the inception of any such audit, inquiry, action or proceeding
by any Federal, foreign, state or local governmental entity or municipality or
subdivision thereof or any authority, department, commission, board, bureau,
agency, court or instrumentality for the assessment or collection of taxes; (vi)
no deficiency or assessment notices or reports or statements of tax due have
been received by CellCall/CellCall Subs in respect of any of its tax returns;
and (vii) the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will have no material effect upon the tax
treatment of any previously consummated transaction in which CellCall acquired
all or any part of the assets or capital stock of another entity.
2.17 Bank Accounts; Employees. Set forth in the Schedules with
reference to this Section is a complete list of (a) all banks in which CellCall
or any Subsidiary has an account or safe deposit box and the names of all
persons authorized to draw thereon or have access thereto; (b) the current fixed
annual rate of compensation (plus total cash compensation broken down between
fixed and bonus components for fiscal year 1996) as of the date of such list for
each of the five (5) then highest paid employees of CellCall and each Subsidiary
for the current fiscal year and a summary of the basis on which each such person
is compensated if such basis is other than exclusively a fixed salary rate; (c)
the names of all persons holding powers of attorney from CellCall and each
Subsidiary and a summary statement of the terms thereof; and (d) the name of
each person who is an "affiliate" of CellCall for purposes of Rule 145 under the
Securities Act.
2.18 Real Estate. The Schedules with reference to this Section list all
real estate, real estate options and leaseholds owned or held by CellCall or any
Subsidiary. Except as set forth on the Schedules with reference to this Section,
there are no title defects, issues of validity or enforceability, deficiencies
in rights of possession or use or similar matters relating to or affecting any
real estate owned or leased, or which is subject to an option to buy, sell or
lease, of or by CellCall or any Subsidiary. Except for Permitted Liens (as
defined herein), CellCall or a Subsidiary, as the case may be, has good and
marketable title in fee simple to all real estate owned by it and good leasehold
interests in all of its leaseholds, none of which interests will be materially
and adversely affected by the transactions contemplated hereby, and each lease
with an initial term of more than one year is, to the knowledge of CellCall and
A-25
<PAGE> 114
its Subsidiaries, enforceable against the lessor thereunder and CellCall or its
Subsidiary, as the case may be, enjoys quiet possession of all leaseholds.
2.19 Title to Properties. Each of CellCall and its Subsidiaries has
good title to all of its personal properties and assets, tangible and intangible
(including, without limitation, those on the Asset List). Except for liens or
encumbrances set forth in the Schedules with reference to this Section (which
identifies those that will be removed prior to the Closing), none of such
properties or assets is subject to any lien or encumbrance other than (a) any
liens securing Current Payables, (b) any liens or encumbrances connected with
operating leases entered into in the ordinary course of business consistent with
past practice, (c) such other encumbrances that do not secure indebtedness and
do not materially detract from the value of, or interfere with the present or
future use of, the property subject thereto and affected thereby or otherwise
materially impair the business, financial condition, results of operations or
operations of CellCall and its Subsidiaries, taken as a whole, or (d) as
otherwise disclosed to and approved by Nextel in writing (collectively,
"Permitted Liens").
2.20 Contracts. Except as set forth in the Schedules with reference to
this Section, neither CellCall nor any Subsidiary (nor any of their properties)
is a party to or bound by any (a) agreement or other arrangement not made in the
ordinary course of business, involving payments or receipts in excess of $10,000
individually or more than $50,000 in the aggregate; (b) employment or consulting
contract; (c) contract with any labor union; (d) employee bonus, pension,
profit-sharing, retirement, stock purchase or other benefit or welfare plan or
agreement; (e) lease or management agreement relating to the use or operation of
an SMR Channel; (f) other lease with respect to real property or, with respect
to personal property, involving lease payments in excess of $20,000 per annum or
$50,000 in the aggregate, whether as lessor or lessee; (g) contract or
commitment for the purchase of raw materials or supplies or the sale of products
involving more than $10,000 per annum or $50,000 in the aggregate; (h)
indenture, agreement, note, mortgage, guaranty or other writing which evidences
or relates to any loan of money to, or indebtedness for money borrowed by,
CellCall or any Subsidiary; (i) license agreement or other contract or agreement
relating to patents, trademarks, trade names, techniques or copyrights or
applications for any thereof, inventions, trade secrets or other proprietary
know-how or technical assistance; (j) any loan to officers, directors or
employees of CellCall or any Subsidiary (all of which loans will be repaid in
full by the Closing); or (k) any agreement relating to any direct or indirect
acquisition of SMR Licenses in the case of any of the foregoing, whether written
or oral (and, in
A-26
<PAGE> 115
the case of oral commitments, with CellCall providing an accurate written
summary of all material terms to Nextel). Except as set forth in such Schedule,
to the knowledge of CellCall, neither CellCall nor any Subsidiary, nor any other
party thereto, is in default under the terms of any commitments described in
Subsections (a) through (k) of this Section.
2.21 Brokers. Neither CellCall nor any Subsidiary has directly or
indirectly dealt with anyone acting in the capacity of a finder or broker and
none of them has incurred nor will they incur any obligation for any finder's or
broker's fee or commission in connection with this Agreement or the Merger.
2.22 Special Liabilities; Warranties. Except as set forth on the
Schedules with reference to this Section, (i) neither CellCall nor any
Subsidiary has any liability under any contracts under which the consideration
to be paid or received by CellCall or a Subsidiary is determined in whole or in
part based on profits or operating results, nor are there any contingent
payments owing to any person in connection with the acquisition of any business,
entity, frequency or channel by CellCall or a Subsidiary; (ii) neither CellCall
nor any Subsidiary has extended any warranties to their respective customers,
except those that each of them is authorized to extend on behalf of product
manufacturers; (iii) neither CellCall nor any Subsidiary is now subject to any
outstanding, pending or, to the knowledge of CellCall, threatened claims based
on warranty coverage; and (iv) there are no pending or threatened claims by any
manufacturer or vendor of equipment to disallow or invalidate manufacturers'
warranty coverage.
2.23 Employee Benefit Matters. Except as set forth on the Schedules
with reference to any particular subsection of this Section, to the knowledge of
CellCall:
(a) CellCall does not have and never has had any
obligation to contribute to any "multiemployer plan" (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or
any "multiple employer plan" described in Section 210(a) of ERISA or Section
413(c) of the Code. CellCall does not maintain, contribute to, or have any
liability under or with respect to any plan or arrangement, whether or not
terminated, which provides or provided medical, health, life insurance of other
welfare-type benefits for current or future retired or terminated employees
(except for limited continued medical benefit coverage required to be provided
under Section 4980B of the Code or as required under applicable state law).
CellCall does not maintain, contribute to or have any liability under or with
respect to any employee plan which is a "defined benefit plan" (as defined in
Section 3(35) of ERISA),
A-27
<PAGE> 116
whether or not terminated. CellCall does not maintain, contribute to or have any
liability under or with respect to any employee plan which is a "defined
contribution plan" (as defined in Section 3(34) of ERISA), whether or not
terminated.
(b) CellCall does not maintain, contribute to or have any
liability under or with respect to any plan or arrangement providing benefits to
current or former employees or directors, including any bonus plan, plan for
deferred compensation, employee health or other welfare benefit plan or other
arrangement, whether or not terminated (any such plan or arrangement, an
"Employee Plan"). For purposes of this Section 2.23, "CellCall" includes all
organizations that now are or that have been, within the past six years, under
common control with CellCall pursuant to Section 414(b) or (c) of the Code.
CellCall previously has delivered to Nextel true, complete and correct copies of
each of the Employee Plans, including all amendments thereto, and any other
documents or other instruments relating thereto reasonably requested by Nextel.
(c) All Employee Plans are being, and have been,
maintained, operated and administered in all material respects in accordance
with their respective terms and in compliance with all applicable laws.
(d) No Employee Plan is funded through a "welfare benefit
fund" as defined in Section 419(e) of the Code.
(e) There have been no prohibited transactions or breaches
of any of the duties imposed on "fiduciaries" (within the meaning of Section
3(21) of ERISA) by ERISA with respect to any Employee Plan that could result in
CellCall or any Subsidiary becoming liable directly or indirectly (by
indemnification or otherwise) for any material excise tax, penalty or other
liability under ERISA or the Code.
(f) There are no actions or claims pending or, to the
knowledge of CellCall or any Subsidiary, threatened, with respect to any
Employee Plan (other than routine claims for benefits), and there are no
investigations or audits of any Employee Plan by any governmental authority
currently pending and there have been no such investigations or audits that have
been concluded that resulted in any liability of CellCall and its Subsidiaries
that has not been fully discharged.
(g) All (i) insurance premiums required to be paid with
respect to, (ii) benefits, expenses, and other amounts due and payable under,
and (iii) contributions, transfers, or payments required to be made to, any
Employee Plan have been paid. With respect to any insurance policy providing
funding for benefits
A-28
<PAGE> 117
under any Employee Plan, (x) there is no liability of CellCall and its
Subsidiaries, in the nature of a retroactive or retrospective rate adjustment,
loss sharing arrangement, or other actual or contingent liability, nor would
there be any such liability if such insurance policy was terminated on the date
hereof, and (y) no insurance company issuing any such policy is in receivership,
conservatorship, liquidation or similar proceeding and, to the knowledge of
CellCall and its Subsidiaries, no such proceedings with respect to any insurer
are imminent.
(h) Each Employee Plan that is a group health plan subject
to Section 4980B of the Code (or which was subject to Section 162(k) of the
Code) has been operated in material compliance with the continuation coverage
requirements of Section 4980B of the Code and Section 162(k) of the Code, as
applicable, and Part 6 of Subtitle B of Title I of ERISA.
(i) Each Employee Plan that is subject to Section
1862(b)(1) of the Social Security Act has been operated in compliance with the
secondary payer requirements of Section 1862(b)(1) of such Act.
(j) The execution, delivery and performance of this
Agreement will not, solely in and of itself, (i) constitute a stated triggering
event under any Employee Plan that will result in any payment (whether of
severance pay or otherwise) becoming due from CellCall or any Subsidiary to any
present or former officer, employee, director, shareholder or consultant, or
former employee (or dependents of any thereof), or (ii) accelerate the time of
payment or vesting, or increase the amount, of compensation due to any employee,
officer, director, shareholder or consultant of CellCall or any Subsidiary.
(k) Neither CellCall nor any Subsidiary has agreed or
committed to make any amendments to any of the Employee Plans not already
embodied in the documents comprising any such Employee Plan, other than any
amendments required by law.
(l) All contributions, transfers, and payments by CellCall
or any Subsidiary in respect of any Employee Plan have been or are fully
deductible under the Code.
(m) CellCall's financial statements at and for the three
months ended March 31, 1997 contain and, at and for the period ending on the
Closing, will contain adequate accruals for (i) bonuses, sales commissions and
vacation pay earned but not received as of such dates and (ii) incurred or
continuing but unpaid claims under Employee Plans not funded by insurance.
A-29
<PAGE> 118
(n) No Employee Plan provides benefits to any individual
who is not a current or former employee of CellCall or a Subsidiary, or the
dependents or other beneficiaries of any such individual.
(o) No "excess parachute payments" within the meaning of
Section 280G of the Code will be made in connection with or as a result of the
Merger (without regard to whether any such payment might be reasonable
compensation for personal services performed or to be performed in the future).
2.24 Materially Correct. Article II of this Agreement together with the
Schedules referenced herein does not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
disclosures contained therein in the light of the circumstances under which they
are made, not misleading.
2.25 Information. CellCall has delivered to Nextel on or prior to the
date hereof all private placement, confidential offering or similar memoranda
and other offering or solicitation materials used at any time by CellCall or
anyone acting on its behalf in connection with any offer or sale of securities
of CellCall.
2.26 Regulatory Matters.
(a) Definitions. For purposes of this Agreement, the
following terms shall have the indicated meanings:
"FCC" shall mean the Federal Communications Commission
or any successor thereto.
"FCC License" shall mean any paging, mobile telephone,
SMR or other license, permit, consent, certificate of compliance, franchise,
approval or authorization of any type granted or issued by the FCC, including,
without limitation, any of the foregoing authorizing the acquisition,
construction or operation of an SMR System (as defined herein), radio paging
system or other radio communications system.
"CellCall Management Agreement" shall mean any
management or other agreement (other than a loading agreement) pursuant to which
CellCall or a Subsidiary agrees to manage or to perform other services (other
than loading) with respect to SMR Licenses held by another person in exchange
for either the right to receive a portion of the revenues derived from such SMR
Licenses or the right to purchase such SMR Licenses or any loading agreement
pursuant to which such Subsidiary is loading SMR Licenses held by another person
in exchange for either the right
A-30
<PAGE> 119
to receive a portion of the revenues derived from such SMR Licenses in excess of
25% of the aggregate revenues derived from such SMR Licenses or the right to
purchase such SMR Licenses.
"SMR License" shall mean an FCC License authorizing
the construction, ownership and operation of an SMR system in the 800 or 900 MHz
band issued pursuant to 47 CFR Part 90 of the Rules and Regulations of the FCC.
"SMR System" shall mean an SMR system licensed under
47 CFR Part 90 of the Rules and Regulations of the FCC.
"SMR Units" shall mean the number of mobile and
control stations (within the meaning of 47 CFR Part 90 of the Rules and
Regulations of the FCC) subscribing to SMR Systems licensed to or managed by
CellCall or a Subsidiary excluding, however, any such units which are subject to
a Third-Party Management Agreement if the respective third party has a right to
purchase the SMR Licenses which are subject to such Third-Party Management
Agreement.
"Third-Party Management Agreement" shall mean any
management or other agreement (other than a loading agreement) pursuant to which
a person (other than CellCall or a Subsidiary) is managing SMR Licenses held by
CellCall or a Subsidiary or any loading agreement pursuant to which a person
(other than CellCall or a Subsidiary) is loading SMR Licenses held by CellCall
or a Subsidiary in exchange for the right to receive a portion of the revenues
derived from such SMR Licenses in excess of 25% of the aggregate revenues
derived from such SMR Licenses.
(b) License Information. Schedule 2.26 sets forth a true
and complete list of the following information for each FCC License issued to or
operated by CellCall or its Subsidiaries (including all FCC Licenses subject to
a CellCall Management Agreement):
(i) for all FCC Licenses (including all SMR Licenses),
the name of the licensee, the name of the seller(s), the call sign, the
transmitter location (by site coordinates and city), the category or
type of service (e.g., paging, SMR, etc.), the frequency or frequencies
authorized, and operating entity;
(ii) in the case of SMR Licenses, the number of
channels authorized, the number of channels constructed, whether the
license is for a conventional or trunked SMR System, the applicable
loading date, whether the SMR License is subject to a Finders
Preference, whether the SMR License is operating under Special
Temporary Operating Authority ("STA") and the applicable STA expiration
date, and whether
A-31
<PAGE> 120
the SMR License is managed by CellCall pursuant to a CellCall
Management Agreement or by any other persons pursuant to a Third-Party
Management Agreement;
(iii) each holder of any such FCC License that is
neither wholly owned by CellCall nor owned entirely by unaffiliated
persons and managed by CellCall; and
(iv) for all FCC Licenses (including SMR Licenses),
whether such FCC Licenses are subject to rights of first refusal,
options and other such rights or obligations in existence on the date
hereof, including, without limitation, entitlements to acquire
additional ownership interests, which may affect the ownership
interests of CellCall.
(c) Condition of Systems. All of the properties, equipment
and systems owned and/or operated by CellCall and related to the FCC licenses
set forth on Schedule 2.26 are, and, to the knowledge of CellCall, any such
properties, equipment and systems added in connection with any contemplated
system expansion or construction prior to the Closing will be, in compliance
with all standards or rules imposed by any governmental agency or authority
(including, without limitation, the FCC, the Federal Aviation Administration and
(if applicable), any public utilities commission or other state or local
governments or instrumentalities) applicable to CellCall or its operation of the
properties, equipment and systems or as imposed under any agreements with
customers. All of the systems, and to CellCall's knowledge, all of the equipment
owned and/or operated by CellCall, are in good repair and working order,
ordinary wear and tear excepted.
(d) Fees; License Compliance. CellCall has paid all
franchise, license or other fees and charges which have become due in respect of
its business and has made appropriate provision as is required by generally
accepted accounting principles, consistently applied, for any such fees and
charges which have accrued. Except as set forth in Schedule 2.26, CellCall has
duly secured all necessary permits, licenses, consents and authorizations from,
and has filed all required registrations, applications, reports and other
documents with, the FCC and, if applicable, any public utilities commission and
other entity exercising jurisdiction over the SMR businesses, radio paging
businesses and other radio communications businesses of CellCall or the
construction of delivery systems therefor, as such businesses are currently
conducted. CellCall or a Subsidiary holds or has the contractual right to obtain
the FCC Licenses specified on Schedule 2.26 and, except as indicated in such
Schedule, all such FCC Licenses are valid and in full force and
A-32
<PAGE> 121
effect without conditions except for such conditions as are stated on the FCC
License or as are generally applicable to holders of similarly situated FCC
Licenses. CellCall has filed with the FCC prior to any applicable deadline a
complete and accurate application for rejustification of any unconstructed or
deconstructed FCC License related to previously granted or requested wide area
Enhanced Specialized Mobile Radio ("ESMR") licenses. Except as set forth on
Schedule 2.26, with regard to FCC Licenses related to wide area ESMR
frequencies, neither CellCall nor any of its Subsidiaries is subject to a short
space agreement or any other agreement, FCC waiver or otherwise applicable
regulations encumbering or limiting the use of such FCC License. Except as set
forth on Schedule 2.26, all applicable loading requirements with respect to any
SMR Licenses listed on such Schedule have been met and CellCall has taken every
reasonable action to cause the same to be loaded in compliance with FCC
regulations. Except as set forth on Schedule 2.26, to the knowledge of CellCall
no event has occurred and is continuing which could (i) result in the
revocation, termination or adverse modification of any FCC License listed on
such Schedule or (ii) materially and adversely affect any rights of CellCall
thereunder. Except as indicated on Schedule 2.26, CellCall has no reason to
believe and no knowledge that all of the FCC Licenses specified on Schedule 2.26
will not be renewed in the ordinary course. Except with regard to any planned
enhanced SMR Systems of CellCall and except as shown on Schedule 2.26, CellCall
has sufficient time, materials, equipment, contract rights and other required
resources to complete, in a timely fashion and in full, construction of all the
SMR Systems, radio paging and other radio communications systems associated with
the FCC Licenses listed on Schedule 2.26 in compliance with all applicable
technical standards and construction requirements and deadlines. Except as set
forth on Schedule 2.26, the current ownership and operation by CellCall of such
SMR Systems, radio paging and other radio communications systems comply with the
Communications Act of 1934, as amended (the "Communications Act"), and all
applicable rules, regulations and policies of the FCC.
(e) Management Agreements. Set forth on Schedule 2.26(e)
is a complete and correct list of all CellCall Management Agreements (and
associated option agreements, if any) and Third-Party Management Agreements to
which CellCall or any Subsidiary is a party that correctly identifies the
manager under each such agreement and the holder of the SMR Licenses which are
the subject of such agreements, the transmitter locations (by address), and
number of channels covered by such SMR Licenses, the term of such agreements,
any options or calls (and the respective option or call prices as well as the
time period in which any option or call must be exercised or made) in favor of
any party to such agreements to purchase or sell any interest in such SMR
A-33
<PAGE> 122
Licenses and the respective fees or revenues payable or receivable under any
such agreements. Except as set forth on Schedule 2.26(e), the terms of all such
CellCall Management Agreements and Third-Party Management Agreements and the
operation of each SMR System pursuant thereto comply with the Communications Act
and all applicable rules, regulations and policies of the FCC. Except as set
forth on Schedule 2.26(e), none of the channels licensed to CellCall or its
Subsidiaries are subject to a Third Party Management Agreement. Each CellCall
Management Agreement includes an option allowing CellCall or a Subsidiary to
purchase the channels that are subject to that agreement and no such option will
be adversely affected by the Merger.
(f) Discrete Frequency Application. CellCall has delivered
to Nextel a true and correct copy of each Request for Rule Waiver and related
digital mobile system application and each general cover letter related to an
ESMR application, as filed with the FCC, and any correspondence relating to any
frequency sent to the FCC and all supplemental or related materials filed or
sent in connection therewith by or on behalf of CellCall, all materials
submitted to the FCC and/or to CellCall in connection therewith by any third
party, and any written communication issued by the FCC or any FCC staff member
in response to, or otherwise in connection with, any of the foregoing.
2.27 Customers. The customer list previously provided to Nextel by
CellCall on computer disk is a true and complete list of the names of the
current customers of CellCall as of the date indicated therein and except as
indicated therein, to the best of CellCall's knowledge, no such customer is
simultaneously being claimed as a customer for radio services of any reseller or
agent of CellCall.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
OF NEXTEL AND MERGER SUB
Nextel and Merger Sub, jointly and severally, represent and warrant to
CellCall that:
3.1 Corporate Organization; Authorization.
(a) Each of Nextel, NFC and Merger Sub has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Delaware and has the corporate power and authority to own
or lease its properties and to conduct its business as it is now being
conducted. Each of Nextel, NFC and the Merger Sub are duly licensed or qualified
and in good standing as a foreign corporation in all jurisdictions in which
their ownership of property or the character of their
A-34
<PAGE> 123
activities is such as to require them to be so licensed or qualified and in
which the failure to be so licensed or qualified would have a material adverse
effect on the business or properties of Nextel, NFC or the Merger Sub.
(b) Each of Nextel, NFC and Merger Sub has all necessary
corporate power and authority to enter into this Agreement and to perform all of
the obligations to be performed by it hereunder. The execution, delivery and
performance of this Agreement by Nextel, NFC and Merger Sub have been duly
authorized by Nextel, NFC and Merger Sub, respectively, and upon the execution
and delivery hereof by Nextel and Merger Sub, this Agreement will constitute the
valid and legally binding obligations of Nextel and Merger Sub, enforceable
against each of them in accordance with its terms.
3.2 Capital Stock. The entire authorized capital stock of Nextel
consists solely of (a) 515,000,000 shares of Nextel Common Stock, of which
211,374,665 shares were issued and outstanding as of December 31, 1996, (b)
35,000,000 shares of Class B Non-Voting Common Stock, par value $.001 per share,
of which 17,830,000 shares were issued and outstanding as of December 31, 1996,
(c) 10,000,000 shares of preferred stock, par value $.01 per share, of which (i)
8,163,265 Class A shares, (ii) 82 Class B shares and (iii) no other preferred
shares of any other Class were issued and outstanding as of December 31, 1996.
At the Effective Time, the shares of Nextel Common Stock issued by reason of the
Merger will be duly authorized, validly issued, fully paid and nonassessable,
and their issuance in connection with the Merger will be registered under the
Securities Act and registered or exempt from registration under applicable state
securities laws and such shares of Nextel Common Stock will be listed on the
Nasdaq NM. At the Effective Time, Nextel will have a sufficient number of
authorized but unissued shares of Nextel Common Stock reserved under the Nextel
Plan for issuance upon conversion and exercise of the CellCall Stock Options and
the Warrants.
3.3 Common Stock. At the Closing, the shares of Nextel Common Stock
issued by reason of the Merger will be duly authorized, validly issued, fully
paid and nonassessable, will be registered under the Securities Act, and will be
"voting stock" within the meaning of Section 368(a)(1)(B) of the Code.
3.4 No Conflict. The execution and delivery of this Agreement by
Nextel, NFC and Merger Sub and the consummation of the transactions contemplated
hereby do not and will not violate any provision of, or result in the breach of,
or accelerate or permit the acceleration of the performance required by the
terms of, any applicable law, rule or regulation of any governmental body, the
Amended and Restated Certificate of Incorporation or the
A-35
<PAGE> 124
Amended and Restated By-Laws of Nextel, or the Certificate of Incorporation or
the By-Laws of each of NFC and Merger Sub or any agreement, indenture or other
instrument to which Nextel, NFC, or Merger Sub is a party or by which Nextel,
NFC, or Merger Sub may be bound, or of any order, judgment or decree applicable
to it, or terminate or result in the termination of any such agreement,
indenture or instrument, or result in the creation of any lien, charge or
encumbrance upon any of the properties or assets of Nextel, NFC, or Merger Sub
under any agreement to which either of them is a party, or constitute an event
which, after notice or lapse of time or both, would result in any such
violation, breach, acceleration, termination or creation of a lien, charge or
encumbrance, except where any such violation, breach, acceleration, termination
or creation would not have a material adverse effect on the business, financial
condition, results of operations, liabilities or assets of Nextel and its
subsidiaries, taken as a whole, or would not impair Nextel's, NFC's or Merger
Sub's ability to perform, in any material respect, its obligations under this
Agreement or any other document or instrument to which Nextel, NFC or Merger Sub
is a party in connection with the transactions contemplated herein.
3.5 Information. Nextel has delivered to CellCall each registration
statement, schedule, report, proxy statement or information statement it has
filed with the SEC from January 1, 1997 to the date of this Agreement,
including, without limitation, Nextel's Annual Report on Form 10-K for the year
ended December 31, 1996 (collectively, the "Nextel Reports"). As of the date of
this Agreement, the Nextel Reports, taken as a whole and taken together with any
other information previously furnished by Nextel to CellCall (except for any
forecasts or projections or forward-looking estimates or similar predictive
information contained therein), did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. As used in this Section, "material" means
material to the business, financial condition, results of operations,
liabilities or assets of Nextel and its subsidiaries, taken as a whole. The
representation made in this Section shall also be deemed to be made by Nextel to
CellCall immediately prior to the Closing, but with reference to all information
furnished by Nextel to CellCall prior to the Closing.
3.6 Information in Registration Statement. The information included in
the Registration Statement referred to in Section 5.2 of this Agreement, does
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
A-36
<PAGE> 125
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE IV. COVENANTS OF CELLCALL
4.1 Conduct of Business. From the date of this Agreement until the
earlier of Effective Time or the termination or expiration of this Agreement,
CellCall shall conduct its business, and shall cause each Subsidiary to conduct
such Subsidiary's business, only in the ordinary course and shall use its
commercially reasonable efforts to preserve intact the business organization of
CellCall and its Subsidiaries, to keep available the services of the present
officers and employees of CellCall and its Subsidiaries (except for retirements,
dismissals and other terminations in the ordinary course of business) and to
preserve the present relationships of CellCall and its Subsidiaries with
customers, suppliers and other persons or entities having significant business
relations therewith. Without limiting the generality of the foregoing, neither
CellCall nor any Subsidiary shall, without the written consent of Nextel: (i)
dispose or contract to dispose of any SMR Channels or FCC Licenses, or any
option to acquire any SMR Channel or FCC Licenses, except as may occur as a
result of an FCC enforcement action or otherwise required under law; (ii) except
as set forth on a Schedule that refers to this Section, dispose of or contract
to dispose of any other assets, tangible or intangible, except in the ordinary
course of business, consistent with past practice and, with respect to capital
assets, in connection with the replacement of the asset being disposed of; (iii)
acquire or contract to acquire any SMR Channels or FCC Licenses or any rights to
acquire any SMR Channels or FCC Licenses or acquire or contract to acquire,
directly or indirectly, any interest in an entity that has any interest in SMR
Channels or FCC Licenses, except that CellCall may expend up to $10,000 on
average per SMR Channel to resolve any finders preference, short space or other
conflicts relating to any such SMR Channel in order to comply with the delivery
requirements of Section 1.2(d), with any such amounts so expended to be deducted
from the Nextel Share Base as contemplated by Section 1.2(e); (iv) voluntarily
incur any absolute or contingent debt obligation except in the ordinary course
of business under currently existing lines of credit; (v) enter into any lease
or contract for the purchase or sale of real estate or of any interest therein;
(vi) encumber any property or other asset except for encumbrances constituting
Permitted Liens or encumbrances of which Nextel is promptly notified in writing
and which will be removed prior to the Closing; (vii) declare or pay any
dividend or purchase or redeem any of its shares, notes or other securities or
make any other distribution to shareholders; (viii) other than in accordance
with normal compensation adjustment policies (all of
A-37
<PAGE> 126
which, including year-end bonuses, are included in the Schedules), increase the
rate of remuneration to any of its directors, officers, employees or other
representatives, or agree to do so or fail to pay any year-end bonuses then owed
included on such Schedule prior to the Effective Time; (ix) adopt any new or
amend any existing employee benefit plan or any employment agreement or amend
any CellCall Stock Option once implemented except as set forth in Section
1.17(a); (x) form or cause to be formed any subsidiary; (xi) issue, sell,
distribute or dispose of any shares, notes or other securities of CellCall or
commit itself to do so; (xii) make any commitments for capital improvements;
(xiii) fail to keep its properties insured substantially to the same extent as
they are currently insured; or (xiv) enter into any pricing arrangement with any
customer that differs materially from CellCall's standard pricing arrangements.
4.2 Preservation of Business. From the date of this Agreement until the
earlier of the Effective Time or the termination or expiration of this
Agreement, CellCall shall, and shall cause each Subsidiary to, use all
commercially reasonable efforts to preserve intact its business organization and
to preserve its goodwill as to customers, suppliers and others having business
relations with it.
4.3 Inspection. From the date of this Agreement until the earlier of
the Effective Time or the termination or expiration of this Agreement, CellCall
shall, and shall cause each Subsidiary to, permit representatives of Nextel,
during normal business hours, to examine CellCall's and each Subsidiary's
properties, books, contracts, tax returns and other records, and shall furnish
such representatives with all such information concerning such affairs as they
may reasonably request.
4.4 Antitrust Filing. In connection with the transactions contemplated
by this Agreement, CellCall (and, to the extent required, its affiliates) shall
promptly file or cause to be filed any reports, documents, filings or other data
required to be filed by CellCall pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") and the rules and regulations
promulgated thereunder, and shall use its best efforts to respond as promptly as
practicable to all inquiries received for additional information or
documentation.
4.5 Commercially Reasonable Efforts. CellCall shall, and shall cause
each Subsidiary to, use its commercially reasonable efforts (i) to obtain prior
to Closing all of the SMR licenses or applications being sought by CellCall
and/or a Subsidiary that are on file with and pending approval from the FCC
prior to Closing, including all frequencies or applications pending as of the
date hereof for wide area ESMR filings and all finder's preference
A-38
<PAGE> 127
applications, and (ii) to obtain as promptly as practicable and in any event
prior to Closing all FCC approvals or consents necessary to permit the
consummation of the transactions contemplated by this Agreement.
4.6 Affiliates. CellCall shall use its commercially reasonable efforts
to cause each person who is an "affiliate" of CellCall for purposes of Rule 145
under the Securities Act to deliver to Nextel prior to the date the stockholders
of CellCall approve the Merger, an agreement substantially in the form attached
hereto as Annex A.
4.7 Update Information. Not earlier than ten (10) and not less than
five (5) days before the date scheduled for Closing, CellCall shall correct and
supplement in writing any information furnished on Schedules that, to the
knowledge of CellCall, is incorrect or incomplete (or otherwise expressly
contemplated by Article II of this Agreement), and shall promptly furnish such
corrected and supplemented information to Nextel, so that such information shall
be correct and complete at the time such updated information is so provided.
Thereafter, to the Closing, CellCall shall notify Nextel in writing of any
changes or supplements to the updated information needed, to the knowledge of
CellCall, to make such information correct and complete at all times to the
Closing. It is agreed that the furnishing of such corrected and supplemental
information, in and of itself, shall not create any presumption that such
information constitutes or evidences the existence of a material change or any
breach or violation by CellCall of any provision of this Agreement.
4.8 Participation in Auctions.
(a) Definitions. For purposes of this Section, the
following terms shall have the following indicated meanings:
(i) "EA" means Bureau of Economic Analysis Economic
Area, the defined market-based service areas in which blocks of SMR spectrum are
proposed to be assigned pursuant to the EA Auction.
(ii) "EA Auction" means the 800 MHz SMR block license
auction established by the FCC in the First Report and Order, PR Docket No.
93-144, released December 15, 1995.
(iii) "Overlap EAs" means the following EAs:
Cincinnati (49), Columbus (50), Dayton (51), Indianapolis (67), Lexington (47)
and Louisville (70).
(b) Formation of Consortium. In the event that, pursuant
to FCC rules, the filing deadline for eligibility to
A-39
<PAGE> 128
participate in the EA Auction occurs prior to the earlier of the Effective Time
or the expiration or termination of this Agreement, CellCall and Nextel or a
designated subsidiary (hereinafter referred to as "Nextel") shall form a
consortium to participate in bidding in the EA Auction for block licenses in the
Overlap EAs. Nextel shall determine and control all aspects of the consortium's
bidding strategy and participation (including, without limitation, determining
the amount of the joint bids to be submitted by the consortium, the EAs in which
to bid, and whether to top competing bids) and shall be responsible for funding
100% of the consortium's bids. Neither party shall bid for block licenses in the
Overlap EAs except via the consortium and CellCall shall not bid for block
licenses in EAs outside of the Overlap EAs. Nextel shall be free to bid for
block licenses outside of the Overlap EAs individually or in consortia formed
with other parties, and without reference to the consortium procedures set forth
herein.
(c) Awarded Channels. Nextel shall be entitled to retain
the right to all channels included in block licenses in the consortium awarded
pursuant to the EA Auction, if any (each, an "Awarded License") subject to the
CellCall purchase option hereinafter described. In the event of the termination
or expiration of this Agreement prior to the Effective Time but after the
formation of the consortium, CellCall shall have the right to purchase an
aggregate of twenty (20) channels in each Overlap EA in which an Awarded License
is granted (but no more than twenty (20) channels in any Overlap EA),
exercisable by written notice to Nextel within thirty (30) days after the later
of (i) such expiration or termination, and (ii) the grant of the Awarded License
to the consortium; provided that (A) the consortium is granted Awarded
License(s) including more than twenty (20) channels in the Overlap EA with
respect to which CellCall wishes to exercise its purchase option; and (B)
disaggregation of channels included in licenses granted pursuant to the EA
Auction is permitted under FCC rules. The purchase price payable to Nextel upon
the exercise of such option shall be an amount in cash equal to the auction bid
price paid by the consortium for such channels. The channels sold to CellCall
upon an exercise of the purchase option shall be chosen by Nextel and shall be
contiguous channels included in an Awarded License. The parties shall use all
reasonable efforts to effect the assignment to CellCall of any channels with
respect to which the purchase option is exercised (including, without
limitation, cooperation in the submission of applications for the assignment or
transfer of control of subject channels required under applicable FCC rules)
promptly following such exercise. Such purchase option is applicable only to the
rights to use of spectrum in the Overlap EAs which may be obtained by the
consortium in the EA Auction (if any), and shall not apply to existing channel
holdings of Nextel or its subsidiaries or
A-40
<PAGE> 129
channel holdings that Nextel or its subsidiaries may acquire other than as an
Awarded License in the EA Auction.
(d) Further Assurances; Regulatory Compliance. The
provisions of this Agreement reflect the intention of the parties with respect
to their participation in the EA Auction, but such provisions are based on
certain assumptions regarding the procedures and rules adopted by the FCC
pursuant to which the EA Auction will be conducting (including, without
limitation, the permissibility of parties bidding jointly via a consortium for
block licenses in specified EAs, but individually and without reference to the
consortium in other EAs). If, however, such procedures and rules vary from those
assumed by the parties hereto, such that the provisions of this Agreement are
inapposite or otherwise unworkable, the parties agree to negotiate in good faith
to amend this Agreement in order to provide an alternate manner of cooperating
in their participation in the EA Auction or in the Overlap EAs to carry out the
intent of the parties set forth herein. Notwithstanding the foregoing, if any
provision herein does not comport with regulations adopted by the FCC, such
provisions will be null and void. The parties will extend all reasonable good
faith efforts to act in conformance with the intent of this Agreement but under
no circumstances will this Agreement be interpreted as requiring either party to
take any action prohibited, or fail to take any action required, by FCC
regulations.
4.9 SEC Registration. (a) CellCall shall use its reasonable best
efforts to, and shall use its reasonable best efforts to cause each Subsidiary
to, furnish to Nextel such information about CellCall and each Subsidiary
(including their respective affiliates) as may be necessary to enable Nextel to
prepare and file with the Securities and Exchange Commission (the "SEC") a
post-effective amendment to its Registration Statement on Form S-4 under the
Securities Act, in respect of the Nextel Common Shares to be issued by reason of
the Merger (such registration statement and post-effective amendment thereto
and, the prospectus included therein, in each case together with any further
amendments or supplements thereto, the "Registration Statement"). CellCall shall
use its reasonable best efforts so that the CellCall Information (as defined
below) included in the Registration Statement shall not, at the time the
Registration Statement is declared effective, at the time the prospectus is
first mailed to CellCall's stockholders, or at the time the stockholders of
CellCall approve the Merger, contain any untrue statement of a material fact,
omit to state any material fact required to be stated therein, or omit any
material fact necessary in order to make the statements therein not misleading.
If at any time prior to the Effective Time any event or circumstance should come
to the attention of CellCall with respect to the CellCall
A-41
<PAGE> 130
Information which is required to be set forth in an amendment or supplement to
the Registration Statement, CellCall will immediately notify Nextel and shall
assist Nextel in appropriately amending or supplementing the Registration
Statement in the manner contemplated in Section 5.2. An amendment or supplement
may be accomplished, to the extent permitted by law, rule or regulation, by
including such information in a filing under the Exchange Act (as hereinafter
defined) that is incorporated by reference into the Registration Statement. The
Registration Statement insofar as it relates to information concerning CellCall,
its Subsidiaries, or any of their respective businesses, assets, directors,
officers or shareholders that is supplied by CellCall for inclusion in the
Registration Statement, including incorporation by reference to SEC filings (the
"CellCall Information"), will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act; except that CellCall shall have no liability or obligation for any
information other than the CellCall Information.
(b) CellCall shall instruct its accountants to deliver and
shall use its reasonable best efforts to cause its accountants, Potter & Company
LLP, to deliver to Nextel letters dated at the time the Registration Statement
becomes effective and as of the Closing, addressed to Nextel, each containing
such matters as are customarily contained in auditors' letters regarding
information about CellCall and its Subsidiaries expressly for inclusion in the
Registration Statement, and in a form and substance reasonably satisfactory to
Nextel.
4.10 Stockholder Approval. After the Registration Statement has become
effective, CellCall shall use its reasonable best efforts to promptly furnish a
copy of the prospectus to each stockholder of CellCall and to obtain promptly
any approvals of the stockholders of CellCall required in connection with the
transactions contemplated by this Agreement.
4.11 Restraint on Solicitations. From the date of this Agreement until
the Effective Time, neither CellCall nor any of its directors, officers,
employees, representatives or agents, shall directly or indirectly, encourage,
solicit, initiate, participate in or otherwise be a party to any discussions or
negotiations with any corporation, partnership, person or other entity or group
concerning any transaction involving the sale of the business or assets of
CellCall, the sale of any securities of CellCall, the merger or consolidation of
CellCall, or any other similar transaction involving CellCall or its businesses.
Promptly upon receiving any, or any information about any, inquiry, request or
proposal from or contact by any person with respect to any sale, merger,
consolidation or other similar transaction, CellCall shall advise Nextel of such
inquiry,
A-42
<PAGE> 131
request, proposal or contact and provide Nextel all relevant information
thereabout.
4.12 Delivery of Audited Financial Statements. CellCall shall use its
commercially reasonable efforts to provide Nextel as soon as practicable after
the date hereof a Consolidated Balance Sheet at December 31, 1996, and a
Consolidated Statement of Operations, Statement of Stockholders' Equity and
Consolidated Statement of Cash Flows for the year ended December 31, 1996
audited by and accompanied by the report of Potter & Company LLP (the "Audited
Financial Statements").
ARTICLE V. COVENANTS OF NEXTEL
5.1 Antitrust Filing. In connection with the transactions contemplated
by this Agreement, Nextel shall promptly file or cause to be filed any reports,
documents, filings or other data required to be filed by Nextel pursuant to the
HSR Act and the rules and regulations promulgated thereunder, and shall use its
best efforts to respond as promptly as practicable to all inquiries received for
additional information or documentation.
5.2 Registration Statement. (a) Nextel shall use its reasonable best
efforts to maintain the effectiveness of its Registration Statement on Form S-4
under the Securities Act and use its reasonable best efforts to cause the
post-effective amendment thereto to become effective as promptly as practicable,
and shall use its reasonable best efforts to take any action required to be
taken to comply in all material respects with any applicable federal or state
securities laws in connection with the issuance of Nextel Common Stock in the
Merger; except that such covenant of Nextel is made, as to those portions of the
Registration Statement containing or required to contain CellCall Information,
assuming and relying on timely and full compliance with Section 4.9.
(b) Nextel shall use its reasonable best efforts so that the
information included in the Registration Statement, including SEC filings
incorporated by reference therein, shall not, at the time the post-effective
amendment to the Registration Statement is declared effective, at the time the
prospectus contained therein is first mailed to CellCall's stockholders or at
the time the stockholders of CellCall approve the Merger, 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 not
misleading; except that such covenant of Nextel is made, as to those portions of
the Registration Statement containing or required to contain CellCall
Information, assuming and relying on timely and full compliance
A-43
<PAGE> 132
with Section 4.9 hereof. If at any time prior to the Effective Time, any event
or circumstance should come to the attention of Nextel which is required to be
set forth in an amendment or supplement to the Registration Statement, Nextel
will use its reasonable best efforts to appropriately amend or supplement the
Registration Statement. An amendment or supplement may be accomplished, to the
extent permitted by law, rule or regulation, by including such information in a
filing under the Exchange Act that is incorporated by reference into the
Registration Statement.
(c) The Registration Statement and all other documents
required to be filed by Nextel with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act; except that Nextel shall have no liability or obligation for any CellCall
Information.
5.3 Current Public Information. Nextel shall use commercially
reasonable efforts to file all reports required to be filed by it under the
Securities Act or the Securities Exchange Act of 1934 and the rules and
regulations adopted by the SEC thereunder (the "Exchange Act") and shall use all
reasonable efforts to take such further action as may be necessary to ensure
that the requirements of Rule 144(c) under the Securities Act are satisfied such
as to enable any "affiliates" of CellCall (for purposes of Rule 145 under the
Securities Act) to offer or sell the shares of Nextel Common Stock received by
them in the Merger pursuant to paragraph (d) of Rule 145 (subject to compliance
with the provisions of paragraphs (e), (f) and (g) of Rule 144).
5.4 Employee Matters. Schedule 5.4 sets forth the name, title and
salary of each employee of CellCall and its Subsidiaries and identifies any
bonus or other performance-based compensation to which any such employee is
entitled during the current fiscal year or received during the prior fiscal
year. Any individual who is employed by CellCall at the Effective Time whose
employment with the Surviving Corporation (and all affiliates of the Surviving
Corporation) is involuntarily terminated by the Surviving Corporation or an
affiliate without cause (as defined below) during the six-month period
immediately after the Effective Time (y) shall receive a severance payment,
subject to applicable withholding and other taxes, in an amount equal to (i)
three (3) times such employee's monthly salary, plus (ii) an additional week's
salary for each twelve-month period that such employee had been employed by
CellCall. For purposes of this Section, termination without cause shall mean the
termination of any employee's employment with the Surviving Corporation and all
affiliates of the Surviving Corporation other than a termination for one or more
of the following reasons: (i) willful, knowing
A-44
<PAGE> 133
and intentional violation of an express direction or rule or regulation of
general application; (ii) theft, misappropriation or embezzlement of the
employer's funds; (iii) conviction of a felony; or (iv) repeated and consistent
failure to be present at work during regular hours without a valid reason
therefor.
ARTICLE VI. JOINT COVENANTS
6.1 Confidentiality.
(a) Except (i) for the use of information as required in
connection with Nextel's Registration Statement, (ii) for any other governmental
filing required in order to complete the transactions contemplated herein, and
(iii) as Nextel and CellCall may agree or consent in writing, all information
received by CellCall and Nextel and their respective representatives pursuant to
the terms of this Agreement shall be kept in strictest confidence by the
receiving party and its representatives. If the transactions contemplated hereby
shall fail to be consummated, all copies of documents or extracts thereof
containing information and data as to one of the other parties, including all
information prepared by the receiving party or such receiving party's
representatives, shall be turned over to the party furnishing same, except that
such information prepared by the receiving party or such receiving party's
representatives may be destroyed at the option of the receiving party, with
notice of such destruction (or return) to be confirmed in writing to the
disclosing party. Any information not so destroyed (or returned) will remain
subject to these confidentiality provisions (notwithstanding any termination of
this Agreement) until the second anniversary of the date of this Agreement.
(b) The foregoing confidentiality provisions shall not
apply to such portions of the information received which (i) are or become
generally available to the public through no action by the receiving party or by
such party's representatives or (ii) are or become available to the receiving
party on a nonconfidential basis from a source, other than the disclosing party
or its representatives, which the receiving party believes, after reasonable
inquiry, is not prohibited from disclosing such portions to it by a contractual,
legal or fiduciary obligation, and shall not apply to any disclosure by Nextel
of any information disclosed by CellCall, so long as such disclosure occurs
after the Closing.
6.2 Standstill Agreement. From the date hereof until the
Effective Time, neither CellCall, nor any representatives of CellCall, acting on
its behalf or in concert with it, will directly or indirectly (i) acquire, or
offer, propose or agree to
A-45
<PAGE> 134
acquire, by purchase or otherwise, any Nextel Common Stock, or (ii) participate
in or encourage the formation of any partnership, syndicate or other group which
owns or seeks or offers to acquire beneficial ownership of, any Nextel Common
Stock.
6.3 Trading Prohibitions. CellCall hereby acknowledges that as a result
of disclosures by Nextel contemplated under this Agreement, CellCall and its
affiliates may, from time to time, have material, non-public information
concerning Nextel and other companies. CellCall confirms that it and its
affiliates are aware and CellCall has advised its representatives that (i) the
United States securities laws may prohibit a person who has material, non-public
information from purchasing or selling securities of any company to which such
information relates, and (ii) material non-public information shall not be
communicated to any other person except as permitted herein.
6.4 Substitute of Subsidiary. Nextel has the option to substitute any
wholly-owned direct or indirect subsidiary of Nextel either for NFC or Merger
Sub in connection with the Merger, provided that such substitution does not
adversely affect the interests of CellCall or its stockholders. If Nextel makes
such an election, each reference to NFC or Merger Sub, as applicable, herein
shall be deemed to refer to the new subsidiary.
6.5 Support of Transactions. Nextel, CellCall and their respective
controlled affiliates shall each (i) use his or its reasonable best efforts to
assemble, prepare and file any information (and, as needed, to supplement such
information) as may be reasonably necessary to obtain as promptly as practicable
all governmental and regulatory consents required under Article VIII, (ii) exert
his or its reasonable best efforts to obtain all material consents and approvals
of third parties that either of Nextel, CellCall or their respective affiliates
are responsible to obtain in order to consummate the Merger, (iii) take such
other action as may reasonably be necessary or as another party may reasonably
request to satisfy the conditions of Article VIII or otherwise to comply with
this Agreement, and (iv) provide the other parties, and such other party's
employees, officers, accountants, lawyers, financial advisors and other
representatives with access to its personnel, properties, business and records
under all reasonable circumstances.
6.6 Cooperation Concerning Extended Implementation Channels. Nextel,
CellCall and their respective controlled affiliates agree to cooperate and to
use their respective best efforts to achieve the maximum amount of time from the
FCC for construction of the Extended Implementation Channels. Accordingly,
CellCall agrees to present reasonably in advance of any proposed filing with the
FCC a draft for review by Nextel and
A-46
<PAGE> 135
either (i) to make such changes as are proposed by Nextel or (ii) to discuss any
changes proposed by Nextel that will not be made in the filing. Further, Nextel,
CellCall and their respective controlled affiliates shall cooperate with regard
to any design, engineering, zoning, equipment selection or construction efforts
to achieve construction of such Extended Implementation Channels as economically
as possible and in full compliance with all applicable rules and regulations of
the FCC.
6.7 Tax Treatment of Merger. Each party agrees to report the Merger on
all tax returns and other filings as a tax-free reorganization under Section
368(b) of the Code, except where, in the opinion of tax counsel to such party,
there is not "substantial authority," as defined in Section 6662 of the Code, to
support such a position.
ARTICLE VII. CLOSING
7.1 Filing. As soon as all of the conditions set forth in Article VIII
of this Agreement have either been fulfilled or waived, the Boards of Directors
of Nextel, NFC, Merger Sub and CellCall hereby direct their officers forthwith
to file and record all relevant documents with the appropriate government
officials to effectuate the Merger.
7.2 Closing. The Closing shall, unless another date or place is agreed
to in writing by the parties hereto, take place at a location and time mutually
agreed upon by Nextel and CellCall at the earliest practicable date, and such
date, time and location shall be confirmed in writing by such parties not less
than ten (10) days prior to the scheduled date of the Closing. The term
"Closing," when used in this Agreement, means the Effective Time.
ARTICLE VIII. CONDITIONS TO OBLIGATIONS
8.1 Conditions to Obligations of Nextel and, CellCall. The obligations
of Nextel, NFC, Merger Sub, and CellCall to consummate, or cause to be
consummated, the Merger are subject to the satisfaction of the following
conditions, any one or more of which may be waived in writing by such parties:
(a) All waiting periods under the HSR Act and the
regulations promulgated thereunder applicable to the Merger shall have expired
or been terminated.
(b) All necessary approvals, clearances and consents of
governmental and regulatory authorities required to be procured by Nextel and
CellCall in connection with the Merger (including
A-47
<PAGE> 136
all required FCC approvals and consents, which shall be deemed to be obtained
for purposes of this Agreement only when they have become Final Orders), and all
material approvals and consents of third parties that are required to be
obtained in connection with the transactions contemplated by this Agreement or
the Merger Agreement, shall have been procured. Any consent or approval granted
or an order entered by the FCC shall be a "Final Order" when a sufficient number
of days shall have elapsed from the date of entry or grant thereof without the
filing of any adverse request, petition or appeal by any party or third party or
by the FCC (on its own motion) with respect to such consent, approval or order,
or any aspect or portion thereof, or any resubmissions of any applications or
requests for any of such consents, approvals or orders, or, if challenged, that
such consent, approval or order (or affected aspects or portions thereof) shall
have been reaffirmed or upheld and the applicable period for seeking further
administrative or judicial review shall have expired without the filing of any
action, petition or request for further review.
(c) There shall not be in force any order or decree,
statute, rule or regulation nor shall there be on file any complaint by a
governmental agency seeking an order or decree, restraining, enjoining or
prohibiting the consummation of the Merger, and neither Nextel nor NFC nor
Merger Sub nor CellCall nor any of its Subsidiaries shall have received notice
from any governmental agency that it has determined to institute any suit or
proceeding to restrain or enjoin the consummation of the Merger or to nullify or
render ineffective this Agreement if consummated, or to take any other action
which would result in the prohibition or material change in the Merger.
(d) Nextel's Registration Statement on Form S-4 relating
to the Nextel Common Shares to be issued by reason of the Merger and the
post-effective amendment thereto, shall be effective under the Securities Act,
and no stop order suspending such effectiveness shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
Securities and Exchange Commission.
(e) The shares of Nextel Common Stock issuable in the
Merger shall have been listed or approved for listing upon notice of issuance by
the Nasdaq NM.
8.2 Conditions to Obligations of Nextel. The obligation of Nextel to
consummate, or cause to be consummated, the transactions contemplated by this
Agreement is subject to the satisfaction of the following additional conditions,
any one or more of which may be waived in writing by Nextel:
A-48
<PAGE> 137
(a) Each of the representations and warranties of CellCall
contained in this Agreement shall be true and correct in all material respects
both on the date hereof and as of the Closing, as if made anew at and as of that
time, and each of the covenants and agreements of CellCall and its Subsidiaries
to be performed as of or prior to the Closing shall have been duly performed,
except in each case for changes after the date hereof which are contemplated or
expressly permitted by this Agreement.
(b) CellCall shall have delivered to Nextel a certificate
signed by its President, dated the Closing, certifying, in form reasonably
satisfactory to Nextel and to its counsel that, to the best of the knowledge and
belief of such officer, the conditions specified in Section 8.1 as they relate
to CellCall and in subsections 8.2(a), (c), (e), (f), (h) and (i) have been
fulfilled.
(c) The stockholders of CellCall shall have taken all
necessary action to authorize, approve and adopt the Merger and all other
transactions referred to in this Agreement.
(d) Nextel shall have received opinions, dated the
Closing, from Paul, Hastings, Janofsky & Walker and from Hill & Barlow, a
Professional Corporation, each reasonably satisfactory in form and substance to
Nextel.
(e) The FCC shall have acted on CellCall's filing(s) for
rejustification of its extended implementation authority.
(f) CellCall shall have no liabilities or obligations
except Permitted Liabilities.
(g) Nextel shall have received from each "affiliate" of
CellCall (as defined in Rule 145 under the Securities Act) a Rule 145 letter in
the form of Annex A.
(h) No stockholder of CellCall shall be entitled to
exercise dissenter's or appraisal rights under the GCL.
(i) CellCall shall be the sole owner of each entity listed
on Schedule 2.2.
(j) Nextel shall have received an executed release as set
forth in the form of Annex B to this Agreement from each of the stockholders of
CellCall together with agreements in form and substance to Nextel's reasonable
satisfaction, terminating each of the Registration Rights Agreement, dated as of
March 9, 1993, as amended July 17, 1993, the Amended and Restated Stockholders
Agreement dated as of March 9, 1993 and any other registration right or
preemptive right set forth on Schedule 2.4 hereof.
A-49
<PAGE> 138
(k) Nextel shall have received executed indemnification
agreements in the form of Annex C to this Agreement from stockholders of
CellCall holding (on a fully diluted basis) 90% of the CellCall Stock.
(l) Nextel shall have received a Non-Competition Agreement
in substantially the form of Annex D from J.P. Harris.
(m) Nextel shall have received an agreement, in form and
substance reasonably satisfactory to Nextel, from Sirrom Capital L.P., a
Tennessee limited partnership ("Sirrom"), providing, among other things, for (i)
the release by Sirrom of all claims Sirrom may have against CellCall, (ii)
Sirrom's consent to (A) the Merger, (B) the assumption of that certain Secured
Promissory Note, dated as of November 4, 1994, in the aggregate amount of
$1,000,000 (the "Secured Note"), by Nextel and (C) the issuance of an amended
warrant for shares of CellCall Common Stock replacing its existing Warrant,
(iii) the termination of each of the Security Agreement and the Loan Agreement,
dated as of November 4, 1994, all as between Sirrom and CellCall, and (iv) an
acknowledgment from Sirrom that Nextel may prepay the Secured Note without
restriction or penalty and that, upon such prepayment, all liens associated with
the above-referenced Loan Agreement and Security Agreement shall be released.
(n) Nextel shall have received an agreement, in form and
substance reasonably satisfactory to Nextel, from the Magold Parties, providing,
among other things, for (i) the release by the Magold Parties of any claims the
Magold Parties may have against CellCall, (ii) the Magold Parties' consent to
the assumption by Nextel of that certain Convertible Subordinated Note, dated as
of May 2, 1994 in the principal amount of $500,000 (the "Magold Note") and an
acknowledgment from the Magold Parties that Nextel may prepay the Magold Note
without restriction or penalty, and (iii) representations and covenants from the
Magold Parties that the Magold Parties have not exercised and will not exercise
their right to convert the Magold Note into shares of Series D Preferred Stock,
par value $.10, of CellCall.
(o) Nextel shall have received an agreement, in form and
substance satisfactory to Nextel, that Raymond James and Associates, Inc., a
Florida corporation, consents to the issuance of an amended warrant for shares
of CellCall Common Stock replacing its existing Warrant.
(p) Nextel shall have received an agreement, in form and
substance satisfactory to Nextel, that Brenner Securities Corporation, a
Delaware corporation, consents to the issuance of an amended warrant for shares
of CellCall Common Stock replacing its existing Warrant.
A-50
<PAGE> 139
(q) Nextel shall have received letters from Potter &
Company LLP, dated as of the date the post-effective amendment to the
Registration Statement becomes effective and as of the Closing, addressed to
Nextel, containing such matters as are customarily contained in auditors'
letters regarding information about CellCall and its Subsidiaries expressly for
inclusion in the Registration Statement, in form and substance reasonably
satisfactory to Nextel.
(r) At the time the post-effective amendment to the
Registration Statement becomes effective, and also at the Closing, CellCall and
its Subsidiaries shall have furnished to Nextel certificates, dated as of said
times and signed by its President, to the effect that to the best of the
knowledge and belief of such person the material contained in the Registration
Statement which relates to CellCall and its Subsidiaries, contains, as of the
date of each of such certificates, no material misstatement
(s) Nextel shall have received the Audited Financial
Statements.
(t) Nextel shall have received an agreement, in form and
substance reasonably satisfactory to Nextel, from Vine Street Trust Company
("Vine"), providing, among other things, for (i) the release by Vine of all
claims Vine may have against CellCall, (ii) Vine's consent to (A) the Merger and
(B) the assumption of any indebtedness owed by CellCall to Vine (the "Line of
Credit") by Nextel, (iii) the termination of each of the Security Agreement and
the Loan Agreement, dated as of March 10, 1995, between Vine and CellCall, and
(iv) an acknowledgment from Vine that Nextel may prepay the Line of Credit
without restriction or penalty and that, upon such prepayment, all liens
associated with the above-referenced Loan Agreement and Security Agreement shall
be released; or, CellCall shall have paid off the Line of Credit in full and
shall have caused the termination of all agreements with, and liens in favor of,
Vine.
(u) Nextel shall have received a certificate of CellCall,
signed by its Treasurer and dated the Closing Date, certifying as to the number
of shares of Series C Preferred Stock which are Incentive Shares as of such
date.
8.3 Conditions to the Obligations of CellCall. The obligation of
CellCall to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following additional conditions, any one or
more of which may be waived in writing by CellCall:
(a) Each of the representations and warranties of Nextel
contained in this Agreement shall be true and correct in
A-51
<PAGE> 140
all material respects both on the date hereof and as of the Closing, as if made
anew at and as of that time, and each of the covenants and agreements of Nextel
to be performed as of or prior to the Closing shall have been duly performed,
except in each case for changes after the date hereof which are contemplated or
expressly permitted by this Agreement.
(b) Nextel shall have delivered to CellCall a certificate
signed by an officer of Nextel, dated the Closing, certifying, in form
reasonably satisfactory to CellCall and its counsel, to the effect that to the
best of the knowledge and belief of such officer, the conditions specified in
Section 8.1 as they relate to Nextel and in Section 8.3(a) have been fulfilled.
(c) CellCall shall have received an opinion, dated the
Closing, from Jones, Day, Reavis & Pogue reasonably satisfactory in form and
substance to CellCall.
ARTICLE IX. TERMINATION/EFFECTIVENESS
9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned:
(a) By mutual written consent of CellCall and Nextel
authorized by their respective Boards of Directors, at any time prior to the
Closing.
(b) Prior to the Closing, by written notice to CellCall
from Nextel authorized by the Board of Directors of Nextel, if (i) there is a
material breach of any representation, warranty, covenant or agreement on the
part of CellCall or any Subsidiary set forth in this Agreement, or if a
representation or warranty of CellCall shall be untrue in any material respect,
in either case such that the condition specified in Sections 8.8(a) or 8.8(b)
would not be satisfied at Closing (a "Terminating CellCall Breach"), except
that, if such Terminating CellCall Breach is curable by CellCall through the
exercise of its reasonable best efforts, then, for up to thirty (30) days, but
only as long as CellCall continues to exercise such reasonable best efforts,
Nextel may not terminate this Agreement under this Section 9.1(b)(i) (the number
of days elapsed prior to any such cure, the "CellCall Cure Period"), (ii) any
governmental or regulatory consent or approval required for consummation of the
transactions contemplated hereby is denied by or in a final order or other final
action issued or taken by the appropriate governmental or regulatory authority,
agency or similar body or (iii) consummation of any of the transactions
contemplated hereby is enjoined, prohibited or otherwise restrained by the terms
of a
A-52
<PAGE> 141
final, non-appealable order or judgment of a court of competent jurisdiction.
(c) Prior to the Closing, by written notice to Nextel from
CellCall authorized by its Board of Directors, if (i) there is a material breach
of any representation, warranty, covenant or agreement on the part of Nextel set
forth in this Agreement, or if a representation or warranty of Nextel shall be
untrue in any material respect, in either case such that the condition specified
in Sections 8.3(a) or 8.3(b) would not be satisfied at Closing (a "Terminating
Nextel Breach"), except that, if such Terminating Nextel Breach is curable by
Nextel through the exercise of its reasonable best efforts then for up to 30
days, but only as long as Nextel continues to exercise such reasonable best
efforts, CellCall may not terminate this Agreement under this Section 9.1(c)(i)
(the number of days elapsed prior to any such cure, the "Nextel Cure Period"),
(ii) any governmental or regulatory consent or approval required for
consummation of the transactions contemplated hereby is denied by or in a final
order or other final action issued or taken by the appropriate governmental or
regulatory authority, agency or similar body, or (iii) consummation of any of
the transactions contemplated hereby is enjoined, prohibited or otherwise
restrained by the terms of a final, non-appealable order or judgment of a court
of competent jurisdiction.
(d) By either Nextel or CellCall if the Merger shall not
have been consummated on or before the first anniversary of this Agreement
(provided the terminating party is not otherwise in material breach of any of
its representations, warranties, covenants or agreements continued in this
Agreement).
9.2 Effect. Any termination of this Agreement, however effected, shall
not release either Nextel or CellCall from any liability or other consequences
arising from any breach or violation by any such party of the terms of this
Agreement prior to the effective time of such termination, nor shall any such
termination release any party from its obligations or duties under this
Agreement which, by their terms and/or expressed intent, may require performance
subsequent to any such termination, and all provisions of this Agreement which
set forth such obligations or duties (including, without limitation, Section 6.1
and, to the extent provided therein, in Section 10.6) and such other general or
procedural provisions which may be relevant to any attempt to enforce such
obligations or duties, shall survive any such termination of this Agreement
until such obligations or duties shall have been performed or discharged in
full.
A-53
<PAGE> 142
ARTICLE X. MISCELLANEOUS
10.1 Waiver. Any party to this Agreement may, at any time prior to the
Closing, by action taken by its Board of Directors, or officers thereunto duly
authorized, waive any of the terms or conditions of this Agreement or agree to
an amendment or modification to this Agreement by an agreement in writing
executed in the same manner (but not necessarily by the same persons) as this
Agreement.
10.2 Notices. All notices and other communications among the parties
shall be in writing and shall be deemed to have been duly given when (i)
delivered in person, or (ii) five days after posting in the United States mail
having been sent registered or certified mail return receipt requested, or (iii)
delivered by telecopy, and promptly confirmed by delivery in person or post as
aforesaid in each case, with postage prepaid, addressed as follows:
(a) If to Nextel, NFC or the Merger Sub, to:
Nextel Communications, Inc.
1505 Farm Credit Drive
Suite 100
McLean, Virginia 22102
Attention: John Willmoth
Telephone No.: (703) 394-3000
Telecopier No.: (703) 394-3001
with a copy (which shall
not constitute notice) to:
Nextel Communications, Inc.
1505 Farm Credit Drive
Suite 100
McLean, Virginia 22102
Attention: General Counsel
Telephone No.: (703) 394-3000
Telecopier No.: (703) 394-3001
(b) If to CellCall, to:
CellCall, Inc.
1720 Fortune Court
Suite 106
Lexington, Kentucky 40509
Attention: J. P. Harris
Telephone No.: (606) 299-1444
Telecopier No.: (606) 299-0404
A-54
<PAGE> 143
with a copy (which shall
not constitute notice) to:
Hill & Barlow, a Professional Corporation
One International Place
Boston, Massachusetts 02110
Attention: Thomas C. Chase, Esq.
Telephone No.: (617) 428-3000
Telecopier No.: (617) 428-3500
or to such other address or addresses as the parties may from time to time
designate in writing.
10.3 Assignment. Except as provided in Section 6.4, no party hereto
shall assign this Agreement or any part hereof without the prior written consent
of the other parties. Except as otherwise provided herein, this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.
10.4 Rights of Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto, or any subsidiary of Nextel
joining this Agreement under the circumstances described in Section 6.4, any
right or remedies under or by reason of this Agreement.
10.5 Reliance. Each of the parties to this Agreement shall be deemed to
have relied upon the accuracy of the written representations and warranties made
to it in or pursuant to this Agreement, notwithstanding any investigations
conducted by or on its behalf or notice, knowledge or belief to the contrary.
10.6 Expenses. Nextel shall bear its own expenses incurred in
connection with this Agreement and the transactions herein contemplated whether
or not such transactions shall be consummated, including, without limitation,
all fees of its legal counsel and accountants. CellCall, its Subsidiaries and
each stockholder of CellCall shall bear their own legal, financial advisory and
accounting fees and expenses incurred in connection with this Agreement and the
transactions herein contemplated if such transactions shall be consummated. In
no event will the expenses borne by CellCall and the Subsidiaries include
expenses incurred by any CellCall stockholders or the officers and directors of
CellCall and its Subsidiaries in connection with the transactions herein
contemplated.
10.7 Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware. Unless otherwise stated,
references to Sections, Articles or
A-55
<PAGE> 144
Annexes refer to the Sections, Articles and Annexes to this Agreement.
10.8 Captions; Counterparts. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
10.9 Entire Agreement. This Agreement (together with the Schedules to
this Agreement), constitutes the entire agreement among the parties and
supersedes any other agreements, whether written or oral, that may have been
made or entered into by or among Nextel or its subsidiaries and CellCall or its
Subsidiaries or by any Director or Directors or officer or officers of such
parties relating to the transactions contemplated hereby, or incident hereto. No
representations, warranties, covenants, understandings, agreements, oral or
otherwise, relating to the transactions contemplated by this Agreement exist
between the parties except as expressly set forth in this Agreement.
10.10 Amendments. This Agreement may be amended or modified in whole or
in part, only by a duly authorized agreement in writing executed in the same
manner as this Agreement and which makes reference to this Agreement.
10.11 Publicity. All press releases or other public communications of
any nature whatsoever relating to the transactions contemplated by this
Agreement, and the method of the release for publication thereof, shall be
subject to the prior mutual approval of Nextel and CellCall which approval shall
not be unreasonably withheld by any party; provided, however, that, subject to
compliance with Section 6.1, nothing herein shall prevent any party from
publishing such press releases or other public communications as such party may
consider necessary in order to satisfy such party's legal or contractual
obligations.
A-56
<PAGE> 145
IN WITNESS WHEREOF the parties have hereunto caused
this Agreement to be duly executed as of the date first above
written.
NEXTEL COMMUNICATIONS, INC.
By: /s/ John H. Willmoth
________________________
Name: John H. Willmoth
Title: Vice President
NEXTEL FINANCE COMPANY
By: /s/ John H. Willmoth
________________________
Name: John H. Willmoth
Title: Vice President
BLUEGRASS ACQUISITION CORP.
By: /s/ John H. Willmoth
________________________
Name: John H. Willmoth
Title: Vice President
CELLCALL, INC.
By: /s/ J.P. Harris
________________________
Name: J.P. Harris
Title: Chairman/CEO
A-57
<PAGE> 146
APPENDIX B
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
Section 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000
holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation
surviving a merger if the merger did not require for its approval the
vote of the stockholders of the surviving corporation as provided in
subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares
of any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of merger or
consolidation pursuant to Sections 251, 252, 254, 257, 258, 263
and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock
or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities
exchange or designated as a national market system security on
an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs
a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs
a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title
is not owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
B-1
<PAGE> 147
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was
such on the record date for such meeting with respect to shares for
which appraisal rights are available pursuant to subsection (b) or (c)
hereof that appraisal rights are available for any or all of the shares
of the constituent corporations, and shall include in such notice a
copy of this section. Each stockholder electing to demand the appraisal
of his shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal
of his shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares. A
proxy or vote against the merger or consolidation shall not constitute
such a demand. A stockholder electing to take such action must do so by
a separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
Section 228 or Section 253 of this title, each constituent corporation,
either before the effective date of the merger or consolidation or
within ten days thereafter, shall notify each of the holders of any
class or series of stock of such constituent corporation who are
entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all
shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of
the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the
date of mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such
demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send
a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series of
stock of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice to
all such holders on or within 10 days after such effective date;
provided, however that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only
be sent to each stockholder who is entitled to appraisal rights and who
has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall
be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date.
If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the
day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from
B-2
<PAGE> 148
the corporation surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted in favor of the
merger or consolidation and with respect to which demands for appraisal have
been received and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days after his written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares reached by the surviving or resulting corporation. If the petition shall
be filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
as the Court deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs thereof shall be borne
by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock of the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section , or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any
B-3
<PAGE> 149
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
B-4
<PAGE> 150
CELLCALL, INC.
Proxy Card for
Special Meeting of Stockholders
March 17, 1998
Record Date: February 3, 1998
THIS PROXY IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF CELLCALL, INC.
The undersigned stockholder of CellCall, Inc., a Delaware corporation
(the "Company"), hereby constitutes and appoints J.P. Harris and Valerie L.
Andrews as attorneys and proxies of the undersigned, with power of substitution
to each attorney and substitute appointed with such power, for and in the name
of the undersigned to vote and act, as directed below and with discretionary
authority as to any other matters which may properly come before the meeting, at
a Special Meeting of Stockholders of the Company to be held at the offices of
Hill & Barlow, a Professional Corporation, One International Place, Boston,
Massachusetts 02110 at 10:00 a.m. on March 17, 1998, and at any postponement or
adjournment thereof, upon and in respect of all shares of stock in the Company
held by the undersigned, with all power the undersigned would possess if
personally present at the meeting. The Special Meeting has been called for the
purpose of voting on an Agreement of Merger and Plan of Reorganization dated
April 22, 1997 (the "Merger Agreement") among the Company, Nextel
Communications, Inc., Nextel Finance Company, Inc. and Bluegrass Acquisition
Corp., in accordance with and as more fully described in the Prospectus
Supplement dated February 9, 1998, which, together with the Prospectus dated
January 12, 1998, is being mailed on February 11, 1998 to all stockholders of
record on February 3, 1998, receipt of which is acknowledged. If fewer than all
of said attorneys or substitutes shall be present and acting at any session of
said meeting, then the one or more present shall have and may exercise all the
powers granted herein to said attorneys. All proxies heretofore made by the
undersigned in favor of others than the attorneys and proxies above named are
hereby revoked. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR APPROVAL
OF THE MERGER AGREEMENT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
MERGER AGREEMENT.
<PAGE> 151
/X/ PLEASE MARK VOTE
AS IN THIS SAMPLE
To approve the Merger Agreement among the Company, Nextel Communications, Inc.,
NFC Finance Company, Inc. and Bluegrass Acquisition Corp. dated April 22, 1997.
For Against Abstain
/ / / / / /
/ / MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
Please sign exactly as your name(s) is printed hereon. When signing as
attorney-in-fact, executor, administrator, trustee or guardian, please give
title.
Date___________________________
_______________________________ _________________________________________
Printed Name Signature
Number of shares: Please sign exactly as your name appears
Class/Series: to the left.
