TABLE OF CONTENTS

 

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ARTICLE I	THE OFFER AND THE MERGER		2
Section 1.1.	The Offer		2
Section 1.2.	Company Actions		4
Section 1.3.	Directors		5
Section 1.4.	The Merger		6
Section 1.5.	Effective Time; Closing		7
Section 1.6.	Effect of the Merger		7
Section 1.7.	Conversion of Company Common Stock		7
Section 1.8.	Dissenting Shares		8
Section 1.9.	Stock Options and Restricted Stock		8
Section 1.10.	Surrender of Shares of Company Common Stock; Stock Transfer Books		9
Section 1.11.	Top-Up Option		11
ARTICLE II	THE SURVIVING CORPORATION		12
Section 2.1.	Certificate of Incorporation		12
Section 2.2.	Bylaws		13
Section 2.3.	Directors and Officers		13
ARTICLE III	REPRESENTATIONS AND WARRANTIES OF THE COMPANY		13
Section 3.1.	Organization and Standing		13
Section 3.2.	Capitalization		14
Section 3.3.	Authority for Agreement		15
Section 3.4.	No Conflict		15
Section 3.5.	Required Filings and Consents		16
Section 3.6.	Compliance		17
Section 3.7.	Licenses and Permits		17
Section 3.8.	Reports; Financial Statements; Internal Controls		18
Section 3.9.	Absence of Certain Changes or Events		19
Section 3.10.	Taxes		20
Section 3.11.	Title to Assets		21
Section 3.12.	Change of Control Agreements		21
Section 3.13.	Litigation		22
Section 3.14.	Contracts and Commitments		22
Section 3.15.	Information Supplied		23
Section 3.16.	Employee Benefit Plans		23
Section 3.17.	Labor and Employment Matters		24
Section 3.18.	Environmental Compliance		25
Section 3.19.	Intellectual Property		25
Section 3.20.	Undisclosed Liabilities		26
Section 3.21.	Brokers		27
Section 3.22.	Related Party Transactions		27
Section 3.23.	Anti-Takeover Provisions		27

 

 

Section 3.24.	Company Indentures		27
Section 3.25.	Disclaimer		28
ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER		28
Section 4.1.	Organization and Standing		28
Section 4.2.	Authority for Agreement; Enforceability		28
Section 4.3.	No Conflict		29
Section 4.4.	Required Filings and Consents		29
Section 4.5.	Information Supplied		29
Section 4.6.	Brokers		29
Section 4.7.	No Prior Activities		30
Section 4.8.	Available Funds		30
Section 4.9.	Ownership of Company Common Stock; Affiliates and Associates		30
Section 4.10.	Disclaimer		30
ARTICLE V	COVENANTS		30
Section 5.1.	Conduct of the Business Pending the Merger		30
Section 5.2.	Access to Information; Confidentiality		32
Section 5.3.	Notification of Certain Matters		33
Section 5.4.	Further Assurances		34
Section 5.5.	Board Recommendations		36
Section 5.6.	Stockholder Litigation		37
Section 5.7.	Indemnification		37
Section 5.8.	Public Announcements		39
Section 5.9.	Acquisition Proposals		39
Section 5.10.	Stockholders’ Meeting; Proxy Statement		40
Section 5.11.	Director Resignations		42
Section 5.12.	Benefits Continuation; Severance		42
Section 5.13.	Section 16		44
Section 5.14.	Rule 14d-10(d) Matters		44
ARTICLE VI	CONDITIONS		44
Section 6.1.	Conditions to the Obligation of Each Party		44
ARTICLE VII	TERMINATION, AMENDMENT AND WAIVER		45
Section 7.1.	Termination		45
Section 7.2.	Effect of Termination		46
Section 7.3.	Amendments		47
Section 7.4.	Waiver		47
ARTICLE VIII	GENERAL PROVISIONS		48
Section 8.1.	No Third Party Beneficiaries		48
Section 8.2.	Entire Agreement		48
Section 8.3.	Succession and Assignment		48
Section 8.4.	Counterparts		48
Section 8.5.	Governing Law; Venue; Service of Process, Waiver of Jury Trial		48
Section 8.6.	Severability		49

 

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Section 8.7.	Specific Performance		49
Section 8.8.	Construction		49
Section 8.9.	Non-Survival of Representations and Warranties and Agreements		50
Section 8.10.	Certain Definitions		50
Section 8.11.	Fees and Expenses		50
Section 8.12.	Notices		50
Section 8.13.	Cross-References to Certain Terms Defined Elsewhere in This Agreement		51
EXHIBITS
Exhibit A	Conditions to the Offer
Exhibit B	Certificate of Incorporation
Exhibit C	Bylaws

 

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AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of October 18, 2009, by and among SPRINT NEXTEL CORPORATION, a Kansas corporation (“ Parent ”), IRELAND ACQUISITION CORPORATION, a Delaware corporation (“ Buyer ”) and wholly owned subsidiary of Parent, and IPCS, INC., a Delaware corporation (the “ Company ”).

 

W I T N E S S E T H:

 

WHEREAS, the parties to this Agreement desire to effect the acquisition of the Company by Buyer;

 

WHEREAS, in furtherance of the foregoing, Parent shall cause Buyer to make a tender offer to purchase for cash all the outstanding shares of common stock of the Company, par value $0.01 per share (the “ Company Common Stock ”), at a price per share of Company Common Stock of $24.00 (such amount, or any other higher amount per share of Company Common Stock paid pursuant to the Offer and this Agreement, the “ Offer Price ”) subject to any required withholding Taxes as described in Section 1.10(e) and without interest, on the terms and subject to the conditions of this Agreement (as it may be amended from time to time as permitted under this Agreement, the “ Offer ”);

 

WHEREAS, also in furtherance of the foregoing, upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the “ DGCL ”), following the consummation of the Offer, Buyer shall merge with and into the Company (the “ Merger ”) in accordance with the provisions of the DGCL, with the Company as the surviving corporation;

 

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent’s entering into this Agreement, certain stockholders of the Company have entered into a stockholders agreement, dated as of the date hereof (the “ Stockholders Agreement ”), pursuant to which, among other things, such stockholders have agreed to tender their shares of Company Common Stock pursuant to the Offer and to vote their respective shares of Company Common Stock in favor of the Merger, subject to the terms and conditions contained therein;

 

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent’s and the Company’s entering into this Agreement, Parent and the Company and certain of their respective subsidiaries have entered into a settlement agreement and mutual release, dated as of the date hereof (the “ Settlement Agreement ”), pursuant to which, among other things, the parties thereto have agreed to compromise and settle certain claims among them, subject to the terms and conditions contained therein;

 

WHEREAS, the Board of Directors of the Company has unanimously approved this Agreement, the Offer, the Merger and the transactions contemplated hereby , which approval was based in part on (1) the opinion of UBS Securities LLC (“ UBS ”), an independent financial advisor to the Board of Directors of the Company, that, based on the assumptions, qualifications and limitations contained therein, the Offer Price  to be received by the holders of Company

 

 

Common Stock in the Offer is, as of the date of such opinion, fair, from a financial point of view, to such holders,  and (2) the opinion of Morgan Stanley & Co. Incorporated (“ Morgan Stanley ” and, together with UBS, the “ Independent Advisors ”), an independent financial advisor to the Board of Directors of the Company, that based on the assumptions, qualifications and limitations contained therein, the consideration to be received by the Company’s stockholders for their shares of Company Common Stock pursuant to this Agreement is, as of the date of such opinion, fair, from a financial point of view, to those stockholders; and

 

WHEREAS, the Board of Directors of the Company has unanimously (i) determined that this Agreement and the other transactions contemplated hereby, including the Offer and the Merger, are fair to and in the best interests of the Company and the holders of shares of Company Common Stock (the “ Company Stockholders ”), (ii) approved and declared advisable this Agreement and the Settlement Agreement and the transactions contemplated hereby and thereby, including the Offer and the Merger and (iii) recommended that the Company Stockholders accept the Offer, tender their shares of Company Common Stock pursuant to the Offer and, to the extent applicable, adopt this Agreement and approve the Merger.

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements contained in this Agreement and intending to be legally bound hereby, the parties agree as follows:

 

ARTICLE I

THE OFFER AND THE MERGER

 

Section 1.1.                                    The Offer .

 

(a)                                   Subject to the provisions of this Agreement, as promptly as practicable but in no event later than October 28, 2009, Buyer shall, and Parent shall cause Buyer to, commence the Offer within the meaning of the applicable rules and regulations of the Securities and Exchange Commission (the “ SEC ”).  The obligations of Buyer to, and of Parent to cause Buyer to, accept for payment, and pay for, any shares of Company Common Stock tendered pursuant to the Offer shall be subject only to the conditions set forth in Exhibit A .  The initial expiration date of the Offer shall be the 20th business day following the commencement of the Offer (determined using Rule 14d-1(g)(3) of the SEC).  Buyer expressly reserves the right to waive any condition to the Offer or modify the terms of the Offer, except that, without the consent of the Company, Buyer shall not (i) reduce the number of shares of Company Common Stock subject to the Offer, (ii) reduce the Offer Price, (iii) amend or waive the Minimum Tender Condition, (iv) add to the conditions set forth in Exhibit A or modify any condition set forth in Exhibit A , (v) extend the Offer (except as set forth in the following two sentences),  (vi) change the form of consideration payable in the Offer or (vii) otherwise amend or modify the Offer in any manner adverse to the holders of Company Common Stock (it being agreed that a waiver by Buyer of any condition, in its sole discretion, shall not be deemed to be adverse to the holders of Company Common Stock).  Notwithstanding the foregoing, but subject to the terms and conditions contained herein, Buyer may, but shall not be obligated to, without the consent of the Company, (i) extend the Offer if, at the scheduled expiration date of the Offer, any of the conditions to Buyer’s obligation to purchase shares of Company Common Stock are not satisfied, until such time as such conditions are satisfied or waived, in increments of not more than five business days

 

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each, (ii) extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer and (iii) extend the Offer for a period of time not to exceed ten business days if, at the scheduled expiration date of the Offer, the Board of Directors of the Company shall have withdrawn, qualified or modified, or proposed publicly to withdraw, qualify or modify, its approval or recommendation of the Offer or the Merger; provided, however , that if at the scheduled expiration date of the Offer (A) the only condition to Buyer’s obligation to purchase shares of Company Common Stock that is not satisfied is the condition set forth in clause (g) of Exhibit A  (the “ Outstanding Condition ”) and (B) none of the matters set forth in the foregoing clauses (ii) or (iii) are applicable, then (x) Buyer shall be permitted to extend the Offer for up to two additional five business day periods (but in no event to a date later than the business day immediately prior to the Outside Date) as contemplated by the foregoing clause (i) (the last of such periods being, the “ Final Extension Period ”) in order to provide additional time for the Outstanding Condition to be satisfied and (y) if the Outstanding Condition is not satisfied by the last day of the Final Extension Period then (1) if so directed by Buyer, the Company will abandon the license or authorization that is the subject of the Outstanding Condition and (2) Buyer shall waive the Outstanding Condition and consummate the Offer on the last day of the Final Extension Period (assuming that all other conditions on Exhibit A remain satisfied at such time).    In addition, if at the otherwise scheduled expiration date of the Offer any condition to the Offer is not satisfied, Buyer shall, and Parent shall cause Buyer to, extend the Offer at the request of the Company for such periods as the Company may request; provided that Parent and Buyer shall not be obligated to extend the Offer beyond January 31, 2010 (the “ Outside Date ”), provided further that if on January 31, 2010, all of the conditions set forth in Exhibit A are satisfied or waived other than any condition set forth in clause (f) or clause (g) of Exhibit A, the Outside Date shall be March 15, 2010.  In addition, Buyer may and, if requested by the Company, Buyer shall, make available a “subsequent offering period”, in accordance with Rule 14d-11 of the SEC, of not less than 10 business days. On the terms and subject to the conditions of the Offer and this Agreement, Buyer shall, and Parent shall cause Buyer to, accept for payment and pay for all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer promptly after the expiration of the Offer.  Notwithstanding the foregoing, if at any time consummation of the Offer is not practicable due to (A) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market or (B) the declaration of any banking moratorium or any suspension of payments in respect of banks or any material limitation (whether or not mandatory) on the extension of credit by lending institutions in the United States, consummation of the Offer will be delayed until such time as such events no longer make it impracticable to consummate the Offer.  Buyer shall not terminate the Offer prior to any scheduled expiration date without the prior written consent of the Company, except if this Agreement is terminated pursuant to Article VII.  If this Agreement is terminated pursuant to Article VII, Buyer shall, and Parent shall cause Buyer to, promptly (and in any event within 24 hours of such termination) terminate the Offer and shall not acquire any shares of Company Common Stock pursuant thereto.  If the Offer is terminated by Buyer, or this Agreement is terminated prior to the acquisition of shares of Company Common Stock in the Offer, Buyer shall promptly return, and shall cause any depositary acting on behalf of Buyer to return, in accordance with applicable Law, all tendered shares of Company Common Stock that have not then been purchased in the Offer to the registered holders thereof.

 

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(b)                                  On the date of commencement of the Offer, Parent and Buyer shall file with the SEC a Tender Offer Statement on Schedule TO with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and such other ancillary documents pursuant to which the Offer will be made (such Schedule TO and the documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto and such other ancillary documents, the “ Offer Documents ”).  The Offer Documents will contain all information which is required to be included therein in accordance with the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and the rules and regulations thereunder and any other applicable Laws.  For purposes of this Agreement, “ Law ” means any United States federal, state or local or any foreign statute, law, rule, regulation, ordinance, code, order, judgment, decree or any other requirement or rule of law. Each of Parent, Buyer and the Company shall promptly correct any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and each of Parent and Buyer shall take all steps necessary to amend or supplement the Offer Documents and to cause the Offer Documents as so amended or supplemented to be filed with the SEC and to be disseminated to the Company Stockholders, in each case as and to the extent required by applicable federal securities Laws and any other applicable Laws.  The Company and its counsel shall be given the opportunity to review and comment on the Offer Documents and any supplements or amendments thereto prior to the filing thereof with the SEC and Parent and Buyer shall give due consideration to any such comments proposed by the Company.  Parent and Buyer shall provide the Company and its counsel in writing with any comments Parent, Buyer or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments.

 

(c)                                   Parent shall provide or cause to be provided to Buyer on a timely basis the funds necessary to purchase any shares of Company Common Stock that Buyer becomes obligated to purchase pursuant to the Offer.

 

Section 1.2.                                    Company Actions .

 

(a)                                   The Company hereby consents to the Offer, and on the date the Offer Documents are filed with the SEC, the Company shall simultaneously file with the SEC a Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to time, the “ Schedule 14D-9 ”) describing the recommendations referred to in Section 3.3(b) and shall mail the Schedule 14D-9 to the Company Stockholders.  Each of the Company, Parent and Buyer shall promptly correct any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company shall take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to the Company Stockholders, in each case as and to the extent required by applicable federal securities Laws and any other applicable Laws.  Parent and Buyer and their counsel shall be given the opportunity to review and comment on the Schedule 14D-9 and any supplements or amendments thereto prior to the filing thereof with the SEC and the Company shall give due consideration to any such comments proposed by Parent and Buyer.  The Company shall provide Parent and its counsel in writing with any comments or other communications the Company or its counsel may

 

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receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments or other communications.

 

(b)                                  Parent and Buyer will take all steps necessary to cause the Offer Documents to be disseminated to the Company Stockholders in accordance with applicable state and federal Laws.  In connection with the Offer, the Company shall cause its transfer agent to furnish Buyer promptly, but in any event within three business days after the date of this Agreement, with mailing labels containing the names and addresses of the record holders of Company Common Stock as of a recent date and of those persons becoming record holders subsequent to such date, together with copies of all lists of stockholders, security position listings and computer files and all other information in the Company’s possession or control regarding the beneficial owners of Company Common Stock, and shall furnish to Buyer such information and assistance (including updated lists of stockholders, security position listings and computer files) as Parent may reasonably request in communicating the Offer to the Company Stockholders.  Subject to the requirements of applicable Law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer, Parent and Buyer shall, and shall cause their agents to, hold in confidence the information contained in any such labels, listings and files, shall use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, shall, upon request, promptly deliver to the Company all copies of such information then in their possession or under their control.

 

Section 1.3.                                    Directors .

 

(a)                                   Promptly after the acceptance for payment of shares of Company Common Stock tendered pursuant to the Offer representing at least a majority of the outstanding shares of Company Common Stock on a fully diluted basis (the time of such acceptance being, “ Appointment Time ”) and, from time to time thereafter, as shares of Company Common Stock are accepted for payment by Buyer, Buyer shall be entitled to designate such number of members of the Board of Directors of the Company (the “ Buyer Designees ”), rounded up to the nearest whole number, as will give Buyer representation on the Board of Directors of the Company equal to the product of the total number of members of the Board of Directors of the Company (after giving effect to any increase in the number of the directors elected pursuant to this sentence) multiplied by the percentage that the number of shares of Company Common Stock beneficially owned by Parent or Buyer at such time (including shares of Company Common Stock so accepted for payment) bears to the total number of shares of Company Common Stock then outstanding.  In furtherance thereof, the Company shall, upon the request of, and as specified by, Buyer, promptly either increase the size of the Board of Directors of the Company or secure the resignations of such number of the Company’s incumbent directors, or both, as is necessary to enable Buyer Designees to be so elected or appointed to the Board of Directors of the Company and the Company shall take all actions available to the Company to cause Buyer Designees to be so elected or appointed. At such time, if requested by Buyer, the Company shall also take all action necessary to cause persons designated by Buyer to constitute at least the same percentage (rounded up to the next whole number) as is on the Board of Directors of the Company of each committee of the Board of Directors of the Company, to the extent permitted by applicable Law and the rules of any stock exchange or trading market on which the Company Common Stock is listed and traded. The provisions of this Section 1.3 are in addition to and shall

 

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not limit any rights which Buyer, Parent or any of their affiliates (as such term is defined in Rule 405 promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”)) may have as a holder or beneficial owner of shares of Company Common Stock as a matter of applicable Law with respect to the election of directors or otherwise.

 

(b)                                  The Company’s obligation to appoint the Buyer Designees to the Board of Directors of the Company in accordance with Section 1.3(a) shall be subject to Section 14(f) of the Exchange Act. The Company shall take all actions required in order to fulfill its obligations under Section 1.3(a), including mailing to its stockholders the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder as part of the Schedule 14D-9; provided , however , that Parent and Buyer shall supply to the Company in writing prior to the filing with the SEC of the Schedule 14D-9 any information with respect to Parent and Buyer and Buyer Designees to the extent required by such Section 14(f) and Rule 14f-1.

 

(c)                                   Notwithstanding the provisions of this Section 1.3, the parties hereto shall use their respective reasonable best efforts to ensure that at least two of the members of the Board of Directors of the Company shall, at all times following the Appointment Time and prior to the Effective Time, be directors of the Company who (i) were directors of the Company on the date hereof, (ii) are not officers of the Company and (iii) are independent directors for purposes of continuing listing requirements of NASDAQ (the “ Continuing Directors ”); provided , however , that, if at any time there shall be in office less than two Continuing Directors for any reason, the Board of Directors of the Company shall cause the person meeting the foregoing criteria and designated by the remaining Continuing Director to fill such vacancy and such person shall be deemed to be a Continuing Director for all purposes of this Agreement, or if no Continuing Directors then shall remain, the other directors of the Company then in office shall designate two persons meeting the foregoing criteria to fill such vacancies who will not be directors, officers, employees or affiliates of Parent or Buyer and such persons shall be deemed to be Continuing Directors for all purposes of this Agreement.  From and after the time, if any, that Buyer Designees constitute a majority of the Board of Directors of the Company and prior to the Effective Time, subject to the terms hereof, any amendment or modification of this Agreement, any termination of this Agreement by the Company, any extension of time for performance of any of the obligations of Parent or Buyer hereunder, any waiver of any condition to the Company’s obligations hereunder or any of the Company’s rights hereunder and any other action of the Company hereunder which adversely affects the Company Stockholders (other than Parent or Buyer) may be effected only if (in addition to the approval of the Board of Directors of the Company as a whole) there are in office one or more Continuing Directors and such action is approved by a majority of the Continuing Directors then in office.  Following the Appointment Time and prior to the Effective Time, neither Parent nor Buyer shall take any other action to remove any Continuing Director.

 

Section 1.4.                                    The Merger .  Upon the terms and subject to the conditions of this Agreement, and in accordance with the DGCL, at the Effective Time, Buyer shall be merged with and into the Company.  As a result of the Merger, the separate corporate existence of Buyer shall cease and the Company shall continue as the surviving corporation following the Merger (the “ Surviving Corporation ”).  The corporate existence of the Company, with all its purposes, rights, privileges, franchises, powers and objects, shall continue unaffected and unimpaired by the Merger and, as the Surviving Corporation, it shall be governed by the DGCL.

 

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Section 1.5.                                    Effective Time; Closing .  As promptly as practicable (and in any event within five business days) after the satisfaction or waiver of the conditions set forth in Article VI (other than those conditions which by their terms can only be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing), the parties shall cause the Merger to be consummated by filing a certificate of merger or a certificate of ownership and merger, as applicable (the “ Certificate of Merger ”), with the Secretary of State of the State of Delaware and by making all other filings or recordings required under the DGCL in connection with the Merger, in such form as is required by, and executed in accordance with the relevant provisions of, the DGCL.  The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware, or at such other time (but not earlier than the time that the Certificate of Merger is filed) as the parties agree shall be specified in the Certificate of Merger (the date and time the Merger becomes effective, the “ Effective Time ”).  On the date of such filing, a closing (the “ Closing ”) shall be held at 10:00 a.m. Eastern time, at the offices of King & Spalding LLP, 1180 Peachtree Street, Atlanta, Georgia 30309, or at such other time and location as the parties shall otherwise agree.

 

Section 1.6.                                    Effect of the Merger.   At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Buyer shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and Buyer shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

 

Section 1.7.                                    Conversion of Company Common Stock .  At the Effective Time, by virtue of the Merger and without any action on the part of Buyer, the Company or the holders of any of the securities described in this Section 1.7:

 

(a)                                           Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares canceled pursuant to Section 1.7(b) and Dissenting Shares, if any) shall be canceled and, by virtue of the Merger and without any action on the part of the holder thereof, shall be converted automatically into the right to receive the Offer Price (the “ Merger Consideration ”), subject to any required withholding Taxes as described in Section 1.10(e) and without interest, payable to the holder of such share of Company Common Stock,  upon surrender of the certificate that formerly evidenced such share of Company Common Stock in the manner provided in Section 1.10;

 

(b)                                          Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time that is owned by Parent or Buyer and each share of Company Common Stock that is owned by the Company as treasury stock shall be canceled and retired and cease to exist and no payment or distribution shall be made with respect thereto;

 

(c)                                           All shares of the Company Common Stock converted pursuant to Section 1.7(a) shall no longer be outstanding and shall automatically be canceled and retired and cease to exist, and each holder of a certificate (“ Certificate ”)

 

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representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration in accordance with Section 1.7(a); and

 

(d)                                          Each share of common stock, par value $0.01 per share, of Buyer issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation and shall constitute the only outstanding shares of capital stock of the Surviving Corporation.

 

Section 1.8.                                    Dissenting Shares .

 

(a)                                           Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and which are held by the Company Stockholders who have demanded and perfected their demands for appraisal of such shares of Company Common Stock in the time and manner provided in Section 262 of the DGCL and, as of the Effective Time, have neither effectively withdrawn nor lost their rights to such appraisal and payment under the DGCL (the “ Dissenting Shares ”) shall not be converted as described in Section 1.7(a), but shall, by virtue of the Merger, be entitled to only such rights as are granted by Section 262 of the DGCL; provided , however , that if such holder shall have failed to perfect or shall have effectively withdrawn or lost such holder’s right to appraisal and payment under the DGCL, such holder’s shares of Company Common Stock shall thereupon be deemed to have been converted, at the Effective Time, as described in Section 1.7(a), as applicable, into the right to receive the Merger Consideration set forth in such provisions, without any interest thereon.

 

(b)                                          The Company shall give Parent (i) prompt notice of any demands for appraisal pursuant to Section 262 of the DGCL received by the Company, withdrawals of such demands, and any other instruments served pursuant to the DGCL with respect to demands for appraisal and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL.  The Company shall not, except with the prior written consent of Parent or as otherwise required by applicable Law, make any payment with respect to any such demands for appraisal or offer to settle or settle any such demands.

 

Section 1.9.                                    Stock Options and Restricted Stock .

 

(a)                                           The Company shall ensure that all outstanding options to acquire Company Common Stock (the “ Company Options ”) granted under the Horizon PCS, Inc. Amended and Restated 2004 Stock Incentive Plan and the iPCS, Inc. Third Amended and Restated 2004 Long-Term Incentive Plan (the “ Company Stock Option Plans ”) that are not exercised prior to the Appointment Time shall terminate and be canceled at the Appointment Time, and the Surviving Corporation shall pay such holder, immediately after the Effective Time, in exchange for the cancellation of such holder’s Company Options, an amount in cash determined by multiplying (a) the excess, if any, of the Merger Consideration over the applicable exercise price per share of the Company

 

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Option by (b) the number of shares of Company Common Stock such holder had the right to purchase at the Appointment Time, less any withholding Taxes as described in Section 1.10(e) and without interest.  The parties agree that the Appointment Time shall constitute a change in control for purposes of the Company Stock Plans; provided , however , that for purposes of this Section 1.9(a), no holder’s right to exercise a Company Option shall accelerate and fully vest at the Appointment Time unless he or she is employed (either as an employee, director or consultant) by the Company or a Subsidiary at the Appointment Time unless otherwise required by the terms of any award agreement evidencing a Company Stock Option or any Employment Agreement between the Company (or any of its affiliates) and an optionholder.  The committee for each of the Company Stock Option Plans shall not exercise any discretion to take any action with respect to any Company Option except for the action expressly called for in this Section 1.9(a).

 

(b)                                          Immediately after the Appointment Time, each outstanding share of restricted common stock of the Company granted under the Company Stock Option Plans (“ Restricted Stock ”), the restrictions of which have not lapsed immediately prior to the Appointment Time, shall become fully vested; provided , however , the committee for each of the Company Stock Option Plans shall not exercise any discretion to take any action with respect to any Restricted Stock.

 

Section 1.10.                              Surrender of Shares of Company Common Stock; Stock Transfer Books .

 

(a)                                           Prior to the Effective Time, Parent shall designate a bank or trust company, reasonably acceptable to the Company, to act as agent (the “ Paying Agent ”) for the Company Stockholders to receive the funds necessary to make the payments to the Company Stockholders pursuant to Section 1.7 upon surrender of the Company Stockholders’ Certificates.  Parent shall, at or prior to the Effective Time, deposit with the Paying Agent the aggregate Merger Consideration to be paid in respect of the shares of Company Common Stock (the “ Fund ”).  The Fund shall be invested by the Paying Agent as directed by Parent.  Any net profit resulting from, or interest or income produced by, such investments, shall be payable to Parent.  Parent shall replace any monies lost through any investment made pursuant to this Section 1.10(a).  The Paying Agent shall make the payments provided in Section 1.7.

 

(b)                                          Promptly after the Effective Time, Parent shall cause to be mailed to each person who was, at the Effective Time, a holder of record of shares of Company Common Stock entitled to receive the Merger Consideration pursuant to Section 1.7 (i) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent) and (ii) instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal.  Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive, in exchange therefor, the Merger Consideration for each share of each series of Company Common Stock formerly evidenced by such Certificate, and such Certificate

 

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shall then be canceled.  Until so surrendered, each such Certificate shall, at and after the Effective Time, represent for all purposes only the right to receive such Merger Consideration.  No interest shall accrue or be paid to any beneficial owner of shares of Company Common Stock or any holder of any Certificate with respect to the Merger Consideration payable upon the surrender of any Certificate.  If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered on the stock transfer books of the Company, it shall be a condition of payment that the Certificate so surrendered shall be endorsed in blank or to the Paying Agent or otherwise be in proper form for transfer, in the sole discretion of the Paying Agent, and that the person requesting such payment shall have paid all transfer and other Taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of Parent that such Taxes either have been paid or are not applicable.  If any Certificate shall have been lost, stolen or destroyed, upon making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration such holder is entitled to receive pursuant to Section 1.7.

 

(c)                                           At any time following the date that is six months after the Effective Time, Parent shall be entitled to require the Paying Agent to deliver to it any portion of the Fund that had been made available to the Paying Agent and not disbursed to the Company Stockholders (including all interest and other income received by the Paying Agent in respect of all amounts held in the Fund or other funds made available to it), and thereafter each such holder shall be entitled to look only to Parent (subject to abandoned property, escheat and other similar Laws), and only as general creditors thereof, with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by such holder.  If any Certificates representing shares of Company Common Stock shall not have been surrendered immediately prior to such date on which the Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity, any such cash, shares, dividends or distributions payable in respect of such Certificate shall become the property of Parent, free and clear of all claims or interest of any person previously entitled thereto.  Notwithstanding the foregoing, none of the Surviving Corporation, Parent, Buyer or the Paying Agent shall be liable to any Company Stockholder for any Merger Consideration delivered in respect of such share of Company Common Stock to a public official pursuant to any abandoned property, escheat or other similar Law.

 

(d)                                          At the Effective Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of shares of Company Common Stock on the records of the Company.  From and after the Effective Time, except for Parent and Buyer, the Company Stockholders holding shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Common Stock except as otherwise provided herein or by applicable Law, and the Merger Consideration paid

 

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pursuant to this Article I upon the surrender or exchange of Certificates shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock theretofore represented by such Certificates.

 

(e)                                           Parent, Buyer, the Surviving Corporation and the Paying Agent, as the case may be, shall be entitled to deduct and withhold from the Merger Consideration and any other amount otherwise payable pursuant to this Agreement to any Company Stockholder or any holder of a Company Option or Restricted Stock (each, a “ Payee ”) such amounts that Parent, Buyer, the Surviving Corporation or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986 (the “ Code ”), the rules and regulations promulgated thereunder or any provision of state, local or foreign Tax Law.  Any amounts so withheld shall be treated for all purposes of this Agreement as having been paid to Payee.

 

Section 1.11.                         Top-Up Option .

 

(a)                                           The Company hereby grants to the Buyer an irrevocable option (the “ Top-Up Option ”), exercisable only upon the terms and subject to the conditions set forth herein, to purchase at the Offer Price an aggregate number of shares of Company Common Stock (the “ Top-Up Shares ”) equal to the lowest number of shares of Company Common Stock that, when added to the number of shares of Company Common Stock owned by Parent, Buyer and their affiliates at the time of such exercise, shall constitute one share of Company Common Stock more than 90% of the outstanding shares of Company Common Stock on a fully diluted basis; provided, however , that in no event shall the Top-Up Option be exercisable for a number of shares of Company Common Stock in excess of the number of authorized but unissued shares of Company Common Stock as of immediately prior to the issuance of the Top-Up Shares (giving effect to shares of Company Common Stock reserved for issuance under all outstanding stock options, restricted stock and any other rights to acquire Company Common Stock as if such shares of Company Common Stock were outstanding); provided further, that the Top-Up Option shall terminate upon the earlier of: (x) the fifth business day after the later of (1) the expiration date of the Offer and (2) the expiration of any “subsequent offering period”; and (y) the termination of this Agreement in accordance with its terms. The Top-Up Option shall not be exercisable until such time as Buyer shall have accepted for payment the shares of Company Common Stock tendered pursuant to the Offer and all shares tendered in any “subsequent offering period” and in no event shall the Top-Up Option be exercisable if the Minimum Tender Condition shall have been waived.

 

(b)                                          The parties shall cooperate to ensure that the issuance of the Top-Up Shares is accomplished consistent with all applicable legal requirements of all Governmental Entities, including compliance with an applicable exemption from registration of the Top-Up Shares under the Securities Act.

 

(c)                                           To exercise the Top-Up Option, the Buyer shall send to the Company a written notice (a “ Top-Up Exercise Notice ”) specifying (i) the number of shares of Company Common Stock that shall be owned by Parent, Buyer and their affiliates immediately preceding the purchase of the Top-Up Shares and (ii) the place, time

 

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and date (which date shall be no later than the fifth business day following the date of the Top-Up Exercise Notice) for the closing of the purchase and sale of the Top-Up Shares (the “ Top-Up Closing ”). The Company shall, promptly after receipt of the Top-Up Exercise Notice, deliver a written notice to the Buyer confirming the number of Top-Up Shares and the aggregate purchase price therefor (the “ Top-Up Notice Receipt ”). At the Top-Up Closing, the Buyer shall pay the Company, in the manner set forth in Section 1.11(d) hereof, the aggregate price required to be paid for the Top-Up Shares, in an aggregate principal amount equal to that specified in the Top-Up Notice Receipt, and the Company shall cause to be issued and delivered to the Buyer a certificate or certificates representing the Top-Up Shares or, at the Buyer’s request or otherwise if the Company does not then have certificated shares of Company Common Stock, the applicable number of uncertificated shares represented by book entry (“ Book-Entry Shares ”). Such certificates or Book-Entry Shares may include any legends that are required by applicable Law.

 

(d)                                          Buyer may pay the Company the aggregate price required to be paid for the Top-Up Shares either (i) entirely in cash or (ii) at Buyer’s election, by (x) paying in cash an amount equal to not less than the aggregate par value of the Top-Up Shares and (y) executing and delivering to the Company a promissory note having a principal amount equal to the balance of the aggregate purchase price pursuant to the Top-Up Option less the amount paid in cash pursuant to the preceding clause (x) (a “ Promissory Note ”). Any such Promissory Note shall be full recourse against Parent and the Buyer and (i) shall bear interest at the rate of 2% per annum, (ii) shall mature on the first anniversary of the date of execution and delivery of such Promissory Note and (iii) may be prepaid, in whole or in part, without premium or penalty.

 

(e)                                           Parent and Buyer acknowledge that the shares of Company Common Stock which Buyer may acquire upon exercise of the Top-Up Option shall not be registered under the Securities Act and shall be issued in reliance upon an exemption for transactions not involving a public offering. Parent and Buyer represent and warrant to the Company that Buyer is, or shall be upon any purchase of Top-Up Shares, an “ accredited investor ,” as defined in Rule 501 of Regulation D under the Securities Act. Buyer agrees that the Top-Up Option, and the Top-Up Shares to be acquired upon exercise of the Top-Up Option, if any, are being and shall be acquired by Buyer for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof (within the meaning of the Securities Act).

 

ARTICLE II

THE SURVIVING CORPORATION

 

Section 2.1.                               Certificate of Incorporation .  The certificate of incorporation of the Surviving Corporation shall be amended as of the Effective Time to be substantially the same as the certificate of incorporation attached hereto as Exhibit B , until the same shall thereafter be altered, amended or repealed in accordance with applicable Law or such certificate of incorporation.

 

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Section 2.2.                               Bylaws .  The bylaws of the Surviving Corporation shall be amended as of the Effective Time to be substantially the same as the bylaws attached hereto as Exhibit C , until the same shall thereafter be altered, amended or repealed in accordance with applicable Law, the certificate of incorporation of the Surviving Corporation or such bylaws.

 

Section 2.3.                               Directors and Officers .  From and after the Effective Time, until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified in accordance with applicable Law, (a) the directors of Buyer at the Effective Time shall be the directors of the Surviving Corporation and (b) the officers of Buyer at the Effective Time shall be the officers of the Surviving Corporation.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as disclosed in (a) a publicly available final registration statement, prospectus, report, form, schedule or proxy statement filed since January 1, 2009 by the Company with the SEC pursuant to the Securities Act or the Exchange Act (collectively, the “ Company SEC Reports ”) and prior to the date hereof, but excluding any risk factor disclosure contained in any such Company SEC Report under the heading “Risk Factors” or “Forward-Looking Statements” or similar heading, or (b) the disclosure letter (the “ Company Disclosure Letter ”) delivered by the Company to the other parties hereto concurrently with the execution of this Agreement (which letter sets forth items of disclosure with specific reference to the particular Section or subsection of this Agreement to which the information in the Company Disclosure Letter relates; provided, however , that any information set forth in one section of the Company Disclosure Letter will be deemed to apply to each other Section or subsection of this Agreement to which its relevance is reasonably apparent; provided, further , that, notwithstanding anything in this Agreement to the contrary, the inclusion of an item in such letter as an exception to a representation or warranty will not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has had or would reasonably be expected to have a Material Adverse Effect), the Company represents and warrants to each of the other parties as follows:

 

Section 3.1.                               Organization and Standing .  Each of the Company and each direct or indirect subsidiary of the Company (a “ Subsidiary ”) (a) is a corporation, limited liability company or partnership duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization or formation, (b) has full corporate or other power and authority to own, lease and operate its properties and assets and to conduct its business as presently conducted and (c) is duly qualified or licensed to do business as a foreign corporation or other entity and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where failure to have such approvals or to be so qualified or licensed has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  The Company has furnished or made available to Parent true and complete copies of the Company’s certificate of incorporation (the “ Company Certificate of Incorporation ”) and the Company’s bylaws (the “ Company Bylaws ”) and the certificate of incorporation and bylaws (or equivalent organizational documents) of each Subsidiary, each as

 

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amended to date.  Such certificates of incorporation and bylaws (or equivalent organizational documents) are in full force and effect, and neither the Company nor any Subsidiary is in violation of any provision of its certificate of incorporation or bylaws (or equivalent organizational documents).

 

Section 3.2.                               Capitalization .  The authorized capital stock of the Company consists of 75,000,000 shares of Company Common Stock and 25,000,000 shares of preferred stock, par value $0.01 per share (the “ Company Preferred Stock ”).  As of October 13, 2009 with respect to subsections (a) and (b) of this sentence and as of the date hereof for all other subsections of this sentence, (a) 17,262,954 shares of Company Common Stock are issued and outstanding, all of which are validly issued, fully paid and nonassessable and free of preemptive rights, (b) 689,263 shares of Company Common Stock (which are included in clause (a)) are held in the treasury of the Company, (c) 1,701,736 Company Options are outstanding pursuant to the Company Stock Option Plans, each such option entitling the holder thereof to purchase one share of Company Common Stock, (d) no shares of Company Preferred Stock are issued and outstanding, (e) 143,850 shares of Restricted Stock (which are included in clause (a)) are issued and outstanding and (f) no shares of Company Common Stock are reserved for issuance upon exercise of outstanding stock options or otherwise, except for shares reserved for issuance pursuant to Company Options.  During the period from October 13, 2009 through the date of this Agreement, the Company has not issued or redeemed any shares of Company Common Stock except pursuant to a previously announced 10b5-1 plan of the Company.  Section 3.2 of the Company Disclosure Letter sets forth a true and complete list of the outstanding Company Options, with the exercise price of each such Company Option.  Except as set forth above, there are no options, warrants, convertible securities, subscriptions, stock appreciation rights, phantom stock plans or stock equivalents or other rights, agreements, arrangements or commitments (contingent or otherwise) of any character issued or authorized by the Company or any Subsidiary relating to the issued or unissued capital stock of the Company or any Subsidiary or obligating the Company or any Subsidiary to issue or sell any shares of capital stock of, or options, warrants, convertible securities, subscriptions or other equity interests in, the Company or any Subsidiary.  All shares of Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be duly authorized, validly issued, fully paid and nonassessable.  There are no outstanding contractual obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any shares of Company Common Stock or any capital stock of any Subsidiary or to pay any dividend or make any other distribution in respect thereof or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any person.  Each outstanding share of capital stock of each Subsidiary is duly authorized, validly issued, fully paid and nonassessable and free of any preemptive rights.  The Company owns (either directly or indirectly) beneficially and of record all of the issued and outstanding capital stock of each Subsidiary, free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company’s or such other Subsidiary’s voting rights, charges and other encumbrances of any nature whatsoever and does not own an equity interest in any other corporation, partnership or entity, other than in the Subsidiaries.  No bonds, debentures, notes or other indebtedness of the Company or the Subsidiaries having the right to vote on any matter on which stockholders may vote are issued or outstanding.

 

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Section 3.3.                               Authority for Agreement .

 

(a)                                           The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to obtaining necessary stockholder approval, to consummate the Merger and the other transactions contemplated by this Agreement.  The execution, delivery and performance by the Company of this Agreement, and the consummation by the Company of the Merger and the other transactions contemplated by this Agreement have been duly authorized by all necessary corporate action (including the unanimous approval of the Board of Directors of the Company), and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement (other than, with respect to the Merger, the adoption of this Agreement by the affirmative vote of holders of a majority of the voting power of the then issued and outstanding shares of Company Common Stock and the filing and recordation of the Certificate of Merger as required by the DGCL).  This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Buyer, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.  The affirmative vote of holders of a majority of the issued and outstanding shares of Company Common Stock is the only vote of the Company’s equity holders necessary to adopt this Agreement and approve the Merger and the other transactions contemplated by this Agreement.

 

(b)                                          At a meeting duly called and held on October 18, 2009, the Board of Directors of the Company unanimously (i) determined that this Agreement and the other transactions contemplated hereby, including the Offer and the Merger, are, on the terms and subject to the conditions contained herein, fair to and in the best interests of, the Company Stockholders, (ii) approved, authorized and declared advisable this Agreement and approved and authorized the Merger and the other transactions contemplated hereby and (iii) resolved to recommend that the Company Stockholders accept the Offer, tender their shares of Company Common Stock pursuant to the Offer and, to the extent applicable, adopt this Agreement. UBS has delivered to the Board of Directors of the Company its opinion, dated as of the date of this Agreement, that based on the assumptions, qualifications and limitations contained therein, the Offer Price to be received by the holders of Company Common Stock in the Offer is, as of the date of such opinion, fair, from a financial point of view, to such holders.  Morgan Stanley has delivered to the Board of Directors of the Company its opinion, dated as of the date of this Agreement, that based on the assumptions, qualifications and limitations contained therein, the consideration to be received by the Company’s stockholders for their shares of Company Common Stock pursuant to this Agreement is, as of the date of such opinion, fair, from a financial point of view, to those stockholders.  Correct and complete copies of the UBS and Morgan Stanley fairness opinions have been delivered to Parent.

 

Section 3.4.                               No Conflict .  The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company and the consummation of the Merger and the other transactions contemplated by this Agreement and the Stockholders Agreement will not, (a) conflict with or violate the Company Certificate of Incorporation or the Company Bylaws or equivalent organizational documents of any of the Subsidiaries, (b) subject to Section 3.5, conflict with or violate any Law applicable to the

 

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Company or any of the Subsidiaries or by which any property or asset of the Company or any of the Subsidiaries is bound or affected, or (c) result in a breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, give to others any right of termination, amendment, acceleration or cancellation of, result in triggering any payment or other obligations, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any of the Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries or any property or asset of any of them is bound or affected, except in the case of clauses (b) and (c) above for any such conflicts, violations, breaches, defaults or other occurrences that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  “ Material Adverse Effect ” shall mean, with respect to the Company, any change, event or effect that, when taken together with all other adverse changes, events or effects that have occurred, (i) is or would reasonably be expected to be materially adverse to the business, results of, operations or financial condition of the Company and the Subsidiaries taken as a whole ( provided, however , that with respect to this clause (i), Material Adverse Effect will be deemed not to include effects to the extent resulting from (A) changes, after the date hereof, in (x) U.S. generally accepted accounting principles (“ GAAP ”), (y) the accounting rules and regulations of the SEC or (z) Law, (B) the public announcement of the Offer or the Merger, (C) any action or failure to act by Parent or any of its affiliates under agreements between Parent or any of its affiliates, on the one hand, and the Company or any of the Subsidiaries, on the other hand, (D) failure of the Company to meet any internal or published projections, forecasts or estimates of revenues or earnings or published industry analyst expectations of financial performance (it being understood that the underlying cause of any such failure shall not be included within the exception contained in this clause (D)), (E) any action taken, or failure to act, by Parent or any of its affiliates, (F) changes in or relating to the United States economy or United States financial, credit or securities markets in general, (G) changes in or relating to the industries in which the Company or the Subsidiaries operate or the markets for any of such entity’s products or services in general or (H) acts of war, armed hostility or terrorism, which changes in the case of clauses (F), (G) and (H) do not affect the Company or any Subsidiary to a materially disproportionate degree relative to other entities operating in such markets or industries or serving such markets) or (ii) does or would reasonably be expected to prevent or materially delay the performance by the Company of any of its obligations under this Agreement and to consummate the Offer or the Merger or the other transactions contemplated by this Agreement.

 

Section 3.5.                               Required Filings and Consents .  The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any United States federal, state or local or any foreign government or any court, administrative or regulatory agency or commission or other governmental authority or agency, domestic or foreign (a “ Governmental Entity ”) or any consent, approval or authorization of, or notification to, any other person, except (a) for applicable requirements, if any, of the Exchange Act, including the filing of the Schedule 14D-9 and, if required by applicable Law, a Proxy Statement relating to the adoption by the Company Stockholders of this Agreement, (b) for applicable requirements, if any, of state securities or “blue sky” Laws (“ Blue Sky Laws ”) and filing and recordation of the Certificate of Merger as required by the DGCL, (c) for those required by the

 

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Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “ HSR Act ”), (d) for those required by the Federal Communications Commission or any successor entity (the “ FCC ”) under the Communications Act of 1934 and the rules, regulations and policies of the FCC promulgated thereunder (the “ FCC Filings ”), (e) for such filings and approvals as are required to be made or obtained with or from any state public service or public utility commission or similar state regulatory bodies in connection with the consummation of the Merger and the other transactions contemplated by this Agreement and (f) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 3.6.                               Compliance .  Subject to Section 3.7, each of the Company and the Subsidiaries has been operated at all times in compliance with all Laws applicable to the Company or any of the Subsidiaries or by which any property, business or asset of the Company or any of the Subsidiaries is bound or affected, except for any such failures to comply or violations that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 3.7.                               Licenses and Permits .

 

(a)                                           Neither the Company nor any of the Subsidiaries has any Licenses or authorizations issued or granted by the FCC other than the License granted by the FCC under call sign KNLF580 (BTA080 Chillicothe, OH) (the “ FCC License ”) and the International Section 214 authorization (File Number ITC-214-19970306-00135).

 

(b)                                          The Company and each of the Subsidiaries each has all governmental permits, licenses, franchises, variances, exemptions, orders issued or granted by a Governmental Entity and all other authorizations, consents, certificates of public convenience and/or necessity and approvals issued or granted by a Governmental Entity (collectively, “ Licenses ”) necessary to conduct its business as presently conducted, except those the absence of which have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (the “ Company Material Licenses ”).  Each Company Material License is listed on Section 3.7(b) of the Company Disclosure Letter.

 

(c)                                           Each of the Company and the Subsidiaries is in compliance with (i) its obligations under each of the Company Licenses and (ii) the rules and regulations of the Governmental Entity issuing such Company Licenses, except, in either case, for such failures to be in compliance as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  There is no pending or, to the Knowledge of the Company, threatened by or before the FCC, the Federal Aviation Administration (the “ FAA ”) or any other Governmental Entity, any proceeding, notice of violation, order of forfeiture or complaint or investigation against the Company or any of the Subsidiaries relating to any of the Company Material Licenses, except as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  The term “ Company Licenses ” means, to the extent not otherwise Company Material Licenses, all Licenses issued or granted to the Company or any of the Subsidiaries by a Governmental Entity of any state of the United

 

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States regulating telecommunications businesses and all Licenses issued or granted to the Company or any of the Subsidiaries by foreign Governmental Entities regulating telecommunications businesses.  For purposes of this Agreement, the term “ Knowledge ” means the actual knowledge of the following officers of the Company:  Tim Yager (President and Chief Executive Officer), Steb Chandor (Executive Vice President, Chief Financial Officer and Assistant Secretary), Conrad Hunter (Executive Vice President and Chief Operating Officer), Jeff Baker (Vice President - Finance), James Ingold (Controller), John Peterman (Senior Vice President of Sales), David Zylka (Senior Vice President of Engineering and Network Operations) and Brian O’Neil (Senior Vice President, General Counsel and Secretary).

 

Section 3.8.                               Reports; Financial Statements; Internal Controls .

 

(a)                                           The Company and each of the Subsidiaries have timely filed all reports, registrations, schedules, forms, statements and other documents, together with any amendments required to be made with respect thereto (each, a “ Report ”), that they were required to file since January 1, 2007 with (i) the FCC, (ii) the SEC, (iii) any state or other federal regulatory authority (other than any taxing authority, which is dealt with exclusively in Section 3.10) and (iv) any foreign regulatory authority (other than any taxing authority, which is dealt with exclusively in Section 3.10), and have paid all fees and assessments due and payable in connection therewith, except in each case where the failure to file such Report, or to pay such fees and assessments, has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  No Report of the Company made with the SEC, as of the date of such Report, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances in which they were made, not misleading, except that information as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier date.  Since January 1, 2007, as of their respective dates, all Reports of the Company made with the SEC complied as to form in all material respects with the applicable requirements of the Securities Act, the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “ SOX Act ”) and the rules and regulations thereunder with respect thereto.  No executive officer of the Company has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the SOX Act, and, to the Knowledge of the Company, no enforcement action has been initiated against the Company by the SEC relating to disclosures contained in any Report of the Company made with the SEC.

 

(b)                                          The Company has previously made available to Parent copies of (i) the consolidated balance sheet of the Company and the Subsidiaries as of December 31, 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2008, as reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, including any amendments thereto filed with the SEC (collectively, the “ Company 2008 10-K ”), filed with the SEC under the Exchange Act, accompanied by the audit report by Deloitte & Touche LLP, the independent registered public accounting

 

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firm with respect to the Company for such periods (such balance sheets and statements, the “ Audited Company Financial Statements ”) and (ii) the unaudited consolidated balance sheet of the Company and the Subsidiaries as of June 30, 2009 and the related consolidated statements of operations, stockholders’ equity and cash flows for the six-month period ended June 30, 2009, as reported in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, including any amendments (collectively, the “ Company 10-Q ”) (such balance sheets and statements, the “ Unaudited Company Financial Statements ” and, together with the Audited Company Financial Statements, the “ Company Financial Statements ”).  The consolidated balance sheets of the Company (including the related notes, where applicable) included in the Company Financial Statements fairly present in all material respects the consolidated financial position of the Company and the Subsidiaries as of the dates thereof, and the other financial statements included in the Company Financial Statements (including the related notes, where applicable) fairly present in all material respects the consolidated results of the operations and changes in stockholders’ equity and cash flows of the Company and the Subsidiaries for the respective fiscal periods therein set forth, subject in the case of the Unaudited Company Financial Statements to any year-end audit adjustments that are consistent with past experience; each of such statements (including the related notes, where applicable) complies in all material respects with the published rules and regulations of the SEC with respect thereto; and each of the Company Financial Statements (including the related notes, where applicable) has been prepared in all material respects in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto.

 

(c)                                           The Company and the Subsidiaries have designed and maintain a system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting.  The Company (i) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information required to be disclosed by the Company in the Reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and (ii) has disclosed, based on its most recent evaluation of such disclosure controls and procedures prior to the date hereof, to the Company’s auditors and the audit committee of the Board of Directors of the Company (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information and (B) any identified fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

 

Section 3.9.                               Absence of Certain Changes or Events .  Except as contemplated by this Agreement, (a) since December 31, 2008, there has not been any event or occurrence of any condition that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (b) since December 31, 2008 through the date of this Agreement,

 

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the Company and the Subsidiaries have conducted their respective businesses in all material respects in the ordinary course and consistent with prior practice and there has not been (i) any declaration, setting aside or payment of any dividend or any other distribution with respect to any of the capital stock of the Company or any Subsidiary, (ii) any material change in accounting methods, principles or practices employed by the Company, (iii) any material change in the Company’s internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act), (iv) any action of the type described in Section 5.1(b) or Section 5.1(c) that had such action been taken after the date of this Agreement would be in violation of any such Section or (v) any adoption of, or any amendment to, any plan or agreement which provides for any payments as a result of a change in control of the Company or a termination of employment by any employee of the Company.

 

Section 3.10.                         Taxes .  (a) The Company and each of the Subsidiaries have timely filed all material Tax Returns required to be filed by any of them; (b) all such Tax Returns are true, correct and complete in all material respects; (c) all Taxes of the Company and the Subsidiaries that are (i) shown as due on such Tax Returns, (ii) otherwise due and payable or (iii) claimed or asserted by any Governmental Entity to be due, have been paid, except for those Taxes being contested in good faith and for which adequate reserves have been established in the Company Financial Statements; (d) there are no liens for any Taxes upon the assets of the Company or any of the Subsidiaries, other than statutory liens for real estate Taxes not yet due and payable and liens for Taxes contested in good faith; (e) the Company does not have any Knowledge of any proposed or threatened Tax claims or assessments that, if upheld, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (f) neither the Company nor any of the Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency; (g) the Company and each Subsidiary has withheld and paid over to the relevant Governmental Entity all Taxes required to have been withheld and paid in connection with payments to employees, independent contractors, creditors, stockholders or other third parties, except for such Taxes that individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect; (h) except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, the unpaid Taxes of the Company and the Subsidiaries did not exceed the accrual for Tax liability (disregarding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the balance sheet in the most recent Company Financial Statement (disregarding any notes thereto); (i) neither the Company nor any Subsidiary (A) has been a member of any other affiliated group filing a consolidated federal income Tax Return (except the affiliated group of which the Company is the common parent) or (B) has any liability for the Taxes of any person under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise; (j) all Tax Returns filed by or on behalf of the Company or any Subsidiary have been examined by the relevant Governmental Entity or the statute of limitations with respect to such Tax Returns has expired; (k)  no claim has been made by any Governmental Entity in a jurisdiction in which the Company or any of the Subsidiaries does not file a Tax Return that the Company or any of the Subsidiaries is or may be subject to Tax by such jurisdiction; (l) neither the Company nor any Subsidiary is a party to or bound by any Tax allocation or sharing agreement; (m) no closing agreement pursuant to Section 7121 of the Code (or any similar provision of state, local or foreign Tax law), private letter rulings, technical advice memoranda or similar agreement or ruling has been entered into

 

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by or with respect to the Company or any of the Subsidiaries; (n) neither the Company nor any of the Subsidiaries is a party to any agreement, contract, arrangement or plan that has resulted or could result, separately or in the aggregate, in the payment of any amount that will not be fully deductible as a result of Section 162(m) of the Code (or any corresponding provision of state, local or foreign Tax law); (o) neither the Company nor any Subsidiary has entered into, or otherwise participated (directly or indirectly) in, any “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4(b) or has received a written opinion from a Tax advisor that was intended to provide protection against a Tax penalty; and (p) the Company has not made any distribution of stock, and no distribution of stock of the Company has been made, in a transaction described in Section 355 of the Code.  For purposes of this Agreement, “ Tax ” (and, with correlative meaning, “ Taxes ”) means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, premium, withholding, alternative or added minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty or addition thereto, whether disputed or not, imposed by any Governmental Entity; and “ Tax Return ” means any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including any information return, claim for refund, amended return or declaration of estimated Tax.

 

Section 3.11.                         Title to Assets .  The Company and each of the Subsidiaries have good and marketable title to, or a valid leasehold interest in, all of their real and personal properties and assets reflected in the Company 2008 10-K or acquired after December 31, 2008 (other than assets disposed of since December 31, 2008 in the ordinary course of business consistent with past practice) or otherwise used in the conduct of business of the Company and the Subsidiaries, in each case free and clear of all title defects, liens, encumbrances and restrictions, except for (a) liens, encumbrances or restrictions that secure indebtedness that are reflected in the Company 10-Q; (b) liens for Taxes accrued but not yet payable; (c) liens arising as a matter of Law in the ordinary course of business with respect to obligations incurred after December 31, 2008; provided that the obligations secured by such liens are not delinquent; and (d) such title defects, liens, encumbrances and restrictions, if any, as individually or in the aggregate, have not had, and would not reasonably be expected to have a Material Adverse Effect (each a “ Company Permitted Lien ”).  The Company and each of the Subsidiaries either own, or have valid leasehold interests in, all properties and assets used by them in the conduct of their business, except where the absence of such ownership or leasehold interest has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 3.12.                         Change of Control Agreements .  Neither the execution and delivery of this Agreement nor the consummation of the Merger or the other transactions contemplated by this Agreement, will (either alone or in conjunction with any other event) result in, cause the accelerated vesting or delivery of, or increase the amount or value of, any payment or benefit to any director, officer or employee of the Company.  Without limiting the generality of the foregoing, no amount paid or payable by the Company in connection with or by reason of the Merger or the other transactions contemplated by this Agreement, including accelerated vesting of options (either solely as a result thereof or as a result of such transactions in conjunction with any other event) will be an “excess parachute payment” within the meaning of Section 280G of the Code.

 

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Section 3.13.                         Litigation .  Section 3.13 of the Company Disclosure Letter sets forth a true, correct and complete list of all claims, suits, actions, governmental investigations, indictments or administrative, arbitration or other legal proceedings (“ Litigation ”) pending or, to the Knowledge of the Company, threatened against the Company or any of the Subsidiaries.  No Litigation pending or, to the Knowledge of the Company, threatened against the Company or any of the Subsidiaries has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  Except for such matters which have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there are no judgments, orders, injunctions, decrees, stipulations or awards (whether rendered by a court, administrative agency, or by arbitration, pursuant to a grievance or other procedure) against or relating to the Company or any of the Subsidiaries.

 

Section 3.14.                         Contracts and Commitments .

 

(a)                                           As of the date of this Agreement, neither the Company nor any of the Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral) (i) that is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated under the Securities Act) to be performed after the date of this Agreement that has not been filed or incorporated by reference in the Reports filed prior to the date hereof, (ii) that materially restricts the conduct of any material line of business by the Company, or the ability of the Company to operate in any geographic area or upon consummation of the Merger will materially restrict the ability of the Surviving Corporation to engage in any line of business material to the Company or to operate in any geographical area, (iii) with or to a labor union or guild (including any collective bargaining agreement), (iv) relating to the borrowing of money or any guarantee in respect of any indebtedness of any person (other than the endorsement of negotiable instruments for collection in the ordinary course of business), (v) that extends “most favored nations” or similar pricing to the counterparty to such contract or (vi) between the Company and any of the Subsidiaries, on the one hand, and any of the Company’s stockholders (in their capacity as such), on the other hand.  In addition, neither the Company nor any of the Subsidiaries is a party to or bound by any written employment contract (“ Employment Agreements ”).  Each contract, arrangement, commitment or understanding of the type described in the preceding two sentences of this Section 3.14(a), whether or not set forth in the Company Disclosure Letter, is referred to as a “ Material Contract ,” and neither the Company nor any of the Subsidiaries has Knowledge of any violation of any Material Contract by any of the other parties thereto that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(b)                                          With such exceptions that have not had, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) each Material Contract is valid and binding on the Company or the applicable Subsidiary, as applicable, and is in full force and effect, (ii) the Company or the applicable Subsidiary has performed all obligations required to be performed by it to date under each Material Contract, and (iii) no event or condition exists that constitutes or, after notice or lapse of time or both, will constitute, a default on the part of the Company or any of the Subsidiaries under any such Material Contract.

 

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Section 3.15.                         Information Supplied .  Neither the Schedule 14D-9 nor the proxy statement to be mailed to the Company Stockholders in connection with the meeting (the “ Stockholders’ Meeting ”) to be called to consider the Merger (the “ Proxy Statement ”) (nor the information supplied or to be supplied by or on behalf of the Company for the inclusion or incorporation by reference in the Offer Documents) will, at the date such documents are first published, sent or delivered to Company Stockholders or, unless promptly corrected, at any time during the pendency of the Stockholders’ Meeting, as the case may be, 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 made therein, in the light of the circumstances under which they were made, not misleading.  The Schedule 14D-9 and the Proxy Statement filed with the SEC will comply as to form in all material respects with the requirements of the Exchange Act.  Notwithstanding the foregoing, no representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Buyer for inclusion or incorporation by reference in the foregoing documents.

 

Section 3.16.                         Employee Benefit Plans .  All employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ ERISA ”)) and all other agreements, plans, programs and policies which provide compensation or benefits to current or former employees or directors or independent contractors of the Company or any of the Subsidiaries and with respect to which the Company or any Subsidiary has any material liability, whether contingent or otherwise, and all Employment Agreements, separation agreements and other agreements which provide for change in control payments or benefits under or with respect to which the Company or any of its Subsidiaries has any liability (individually a “ Company Benefit Plan ” and collectively the “ Company Benefit Plans ”), are identified in Section 3.16 of the Company Disclosure Letter by the name shown on their plan documents, and there are no Company Benefit Plans other than the Company Benefit Plans identified in Section 3.16 of the Company Disclosure Letter.  A true and complete copy of each Company Benefit Plan as currently in effect, any related trust agreement, any ERISA required summary plan description and any Form 5500 filed for 2008, 2007 and 2006 (together with all related schedules, exhibits and attachments) have been made available to Parent.  No Company Benefit Plan is subject to Title IV of ERISA or Code Section 412.  Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (a) each Company Benefit Plan complies by its terms and in its operation with all the applicable requirements of ERISA, the Code (including Section 409A of the Code) and other applicable Law, (b) no Company Benefit Plan is under audit or investigation by any government agency and to the Knowledge of the Company no such audit or investigation is pending or threatened, (c) each Company Benefit Plan intended to be qualified under Section 401(a) of the Code is so qualified, and each such plan has received a favorable determination letter from the Internal Revenue Service or a favorable opinion letter from the Internal Revenue Service regarding the status of such plan as an approved prototype plan, (d) neither the Company nor any of the Subsidiaries nor any ERISA Affiliate has any liability, contingent or otherwise, under any benefit plan that is subject to Title IV of ERISA or Section 412 of the Code or is described in Section 413 of the Code or Section 3(37) or Section 3(40) of ERISA, (e) neither any Company Benefit Plan nor the Company nor any Subsidiary or ERISA Affiliate has any liability under Chapter 43 of the Code or Section 409 or Section 502(i) of ERISA which has not been satisfied in full or, to the Knowledge of the Company, has engaged in any transaction that would reasonably be expected to result in any such liability, (f) all contributions which are required under the terms of any Company Benefit Plan or ERISA or the

 

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Code or other applicable Law have been timely made in full on or before the deadline for making such contributions, (g) there is no Litigation against or otherwise involving any of the Company Benefit Plans and no Litigation (excluding claims for benefits incurred in the ordinary course of Company Benefit Plan activities) has been brought against or with respect to any such Company Benefit Plan and, to the Knowledge of the Company, no such Litigation is pending or threatened and (h) except as required by Law, neither the Company nor any of the Subsidiaries has any liability, contingent or otherwise, under any Company Benefit Plan to pr