MERGER AGREEMENT

Exhibit 10.1

 

Execution Version

 

MERGER AGREEMENT

 

By and Among

 

ATLANTIC TELE-NETWORK, INC.,

 

CW ACQUISITION, LLC,

 

COMMNET WIRELESS, LLC,

 

The Members of Commnet Wireless, LLC,

 

SV VI-B COMMNET COMMON BLOCKER CORP.,

 

SV VI-B COMMNET PREFERRED BLOCKER CORP.,

 

SUMMIT PARTNERS VI(GP), L.P.,

 

SUMMIT VENTURES VI-B, L.P

 

and

 

SUMMIT VENTURES VI-A, L.P, as Holders’ Representative

 

July 26, 2005

Table of Contents

 

 

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MERGER AGREEMENT

 

Merger Agreement, dated as of July 26, 2005, by and among Atlantic Tele-Network, Inc., a Delaware corporation (“ Parent ”), CW Acquisition, LLC, a Delaware limited liability company (“ Merger Sub ”), Commnet Wireless, LLC, a Delaware limited liability company (“ Company ”), each of the members of the Company (each, a “ Holder ”), SV VI-B Commnet Common Blocker Corp., a Delaware corporation (“ Common Blocker ”), SV VI-B Commnet Preferred Blocker Corp., a Delaware corporation (“ Preferred Blocker ”, and together with Common Blocker, the “ Blockers ”), Summit Partners VI(GP), L.P., a Delaware limited partnership (“ Blocker GP ”), Summit Ventures VI-B, L.P, a Delaware limited partnership (“ Blocker Holdco ”) and Summit Ventures VI-A, L.P., a Delaware limited partnership, as representative for the Holders (the “ Holders’ Representative ”).

 

BACKGROUND:

 

WHEREAS, the Company and its Subsidiaries are in the business of owning and operating wireless telecommunications systems;

 

WHEREAS, the respective Managers or Boards of Directors of Parent, the Company and Merger Sub and the requisite members of the Company and Merger Sub each have approved the merger of Merger Sub with and into the Company (the “ Merger ”) upon the terms and subject to the conditions set forth herein;

 

WHEREAS, on the date hereof, each of Brian Schuchman, Lou Tomasetti and Mark Gergel have entered into Employee Agreements with the Company that will become effective on, and subject to, the Closing;

 

WHEREAS, SV VI-B Commnet Holdings, L.P., a Delaware limited partnership (“ Commnet Holdings ”, and together with the Blockers, Blocker GP and Blocker Holdco, the “ Blocker Entities ”) is a member of the Company and a Holder;

 

WHEREAS, the Blockers are the only limited partners in Commnet Holdings, and Blocker GP is the only general partner of Commnet Holdings;

 

WHEREAS, Blocker Holdco holds all of the outstanding Capital Securities of both of the Blockers;

 

WHEREAS, Blocker GP, has determined that it is in the best interests of Commnet Holdings and the Blockers to distribute all of the assets of Commnet Holdings to Preferred Blocker, Common Blocker and Blocker GP prior to the Effective Time, and the Blockers have agreed to such dissolution and liquidation conditioned upon the consummation of the transactions contemplated by this Agreement; and

 

WHEREAS, Parent desires to acquire 100% of the outstanding Capital Securities of Common Blocker in lieu of directly acquiring the membership interests of the Company to be held by Common Blocker at the Effective Time (as hereinafter defined), all upon the terms set forth herein.

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements herein contained and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby, intending to be legally bound, represent, warrant, covenant and agree as follows:

 

ARTICLE 1

DEFINED TERMS

 

Capitalized terms used herein shall have the respective meanings set forth in Appendix A hereto. Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa, and the reference to any gender shall be deemed to include all genders. Unless otherwise defined or the context otherwise clearly requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the Disclosure Schedule hereto. References to “hereof,” “herein” or similar terms are intended to refer to this Agreement as a whole and not a particular section, and references to “this Section” or “this Article” are intended to refer to the entire section or article and not a particular subsection thereof. The word “including” shall not be read restrictively and shall mean “including without limitation” unless otherwise specified.

 

ARTICLE 2

THE MERGER; CONVERSION OF SECURITIES; CLOSING

 

2.1 Merger; Surviving Company .

 

At the Effective Time and in accordance with the provisions of this Agreement and the Delaware Limited Liability Company Act (the “ Act ”), Merger Sub shall be merged with and into the Company, and Merger Sub shall cease to exist. The Company shall be the surviving company in the Merger (hereinafter sometimes called the “ Surviving Company ”) and shall continue its existence under the laws of the State of Delaware, succeeding to all rights, privileges, powers, franchises, assets, liabilities and obligations of Merger Sub in accordance with the provisions of the Act. The name of the Surviving Company shall be “Commnet Wireless, LLC” at and after the Effective Time.

 

2.2 Effective Time .

 

The Merger shall become effective at the time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware (or at such later time as shall be agreed upon by the Holders and Parent and as shall be set forth in such certificate) in accordance with the Act, which Certificate of Merger shall be so filed at the time of the Closing. The date and time when the Merger becomes effective are herein referred to as the “ Effective Time .”

 

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2.3 Status and Conversion of Securities .

 

The manner of converting or canceling the limited liability company interests of the Company and Merger Sub in the Merger shall be as set forth below. At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof:

 

(a) The common units of limited liability company interest in Merger Sub outstanding immediately prior to the Effective Time shall be converted into Common Shares of the Surviving Company as determined by the Parent, and Parent shall be admitted to the Surviving Company as a member thereof. Immediately following the Merger, Parent will own and hold all of the Capital Securities of the Surviving Company that are not held by BAS or Common Blocker.

 

(b) In exchange for the Membership Interests held by each Holder (other than BAS and Common Blocker) immediately prior to the Effective Time, all of which are set forth on Appendix B hereto, each Holder shall be entitled to receive a portion of the Final Purchase Price in accordance with the “Proceeds” schedule set forth on Schedule 2.3(b) (Schedule 2.3 shows only a pro forma estimate of the distribution of proceeds, and the numbers on such Schedule will change to reflect the Estimated Purchase Price before Closing and the Final Purchase Price thereafter), which schedule has been determined by the Holders to properly describe the amounts that will be payable at the Closing to each Holder pursuant to Section 8.01 of the Second Amended and Restated Operating Agreement of the Company, dated as of December 22, 2003, as amended prior to the date hereof (the “ Operating Agreement ”). In lieu of receiving a portion of the cash to which it would otherwise be entitled, immediately upon the Effective Time, (i) BAS will be issued Common Shares of the Surviving Company representing 5% of the aggregate (fully diluted) number of Capital Securities of the Surviving Company in exchange for 335 of his Class B Common Units (the “ Rollover Units ”) and (ii) Common Blocker will be issued Common Shares of the Surviving Company in exchange for all of its Class A Common Units in the Company (“ Blocker Common Units ”). The Common Shares issued upon the exchange of the Rollover Units shall have an aggregate Deemed Contribution Account (as defined in the Amended and Restated Operating Agreement) equal to the proceeds that would otherwise have been payable hereunder on account of the Rollover Units. The Common Shares issued upon the exchange of the Blocker Common Units will have an aggregate Deemed Contribution Account equal to the Original Blocker Stock Price. All Holders (other than BAS and Common Blocker) will receive only cash in the Merger and will cease to be members of the Company immediately upon the Effective Time, will not be members of the Surviving Company and will cease to have rights under the Operating Agreement or the Amended and Restated Operating Agreement.

 

2.4 Purchase Price; Adjustments .

 

(a) Base Purchase Price . The aggregate purchase price to be paid to the Holders on account of the Merger and to Blocker Holdco and the other Holders on account of the purchase of all of the capital stock of Common Blocker is $53,050,000 (the “ Base Purchase Price ”), subject to adjustment as set forth below.

 

(b) Adjustments . The Base Purchase Price will be decreased by the sum of: (i) an amount equal to the greater of any Cash Deficit and any Working Capital Shortfall, plus (ii) the amount of any Excess Debt, plus (iii) the amount of any Net Worth Shortfall, plus (iv) the amount of the Tail Insurance Premium, plus (v) the amount of the Raymond James Fee. The Base Purchase Price will be increased by the sum of (i) the amount of any Working Capital Excess, plus (ii) the amount of any Debt Reduction, plus (iii) the amount of any Gross-Up Amount. Such adjustments shall be determined as follows or, with regard to the Gross-Up Amount, as provided for in Section 2.11 of this Agreement:

 

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(i) Working Capital Excess or Shortfall . If the Company’s Working Capital on the Closing Date (the “ Closing Working Capital ”) is less than $3,000,000, then the difference between the Closing Working Capital and $3,000,000 shall be the “ Working Capital Shortfall ”. If the Company’s Closing Working Capital is more than $6,000,000, then the difference between the Closing Working Capital and $6,000,000 shall be the “ Working Capital Excess ”. To the extent that the Closing Working Capital is equal to or greater than $3,000,000 and less than or equal to $6,000,000 (the “ Non-Adjustment Range ”), then there will be neither a Working Capital Shortfall nor a Working Capital Excess.

 

(ii) Indebtedness Reduction or Excess . If the Company’s aggregate Indebtedness on the Closing Date (the “ Closing Indebtedness ”) is more than $5,738,818, then the difference between the Closing Indebtedness and $5,738,818 shall be the “ Excess Debt ”. If the Closing Indebtedness is less than $5,738,818, then the difference between the Closing Indebtedness and $5,738,818 shall be the “ Debt Reduction ”.

 

(iii) Cash Deficit . The amount by which the Company’s aggregate cash on hand (excluding the proceeds of any sales of assets or Capital Securities outside the Ordinary Course of Business, but including the Great Western Sale Proceeds) on the Closing Date (the “ Closing Cash Amount ”) is less than $500,000, if any, shall be the “ Cash Deficit ”.

 

(iv) Minimum Net Worth . If the consolidated Net Worth of the Company on the Closing Date (the “ Closing Net Worth ”) is less than $25,000,000, then the difference between such Closing Net Worth and $25,000,000 shall be the “ Net Worth Shortfall ”.

 

(v) Any impact on Working Capital resulting from expenditures due and made, or properly recorded, prior to Closing on items specifically covered in the 2005 capital expenditure expansion budget attached hereto as Schedule 2.4(b)(v) will be reversed for purposes of calculating Closing Working Capital.

 

(vi) Any impact on Working Capital resulting from the continuation of insurance coverage pursuant to Section 6.9 will be reversed for purposes of calculating Closing Working Capital.

 

(vii) Any adjustments between the Estimated Purchase Price and Final Purchase Price will be applied ratably between the amounts paid for the Membership Interests and common stock of the Common Blocker.

 

2.5 Estimated Purchase Price . Not less than five (5) Business Days prior to the Effective Time, the Company will prepare and deliver to Parent and Holders’ Representative a closing statement (the “ Estimated Closing Purchase Price Certificate ”) setting forth the calculation of the Company’s good faith estimate of the Base Purchase Price as adjusted in accordance with Section 2.4(b) (the “ Estimated Purchase Price ”), including a detailed presentation of the calculations of each component of the adjustments to the Base Purchase Price in accordance with Section 2.4(b), which Estimated Closing Purchase Price Certificate shall be prepared in accordance with GAAP on a basis consistent with past practice (the “ Accounting Procedures ”).

 

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An example of the calculation of the Estimated Purchase Price based on the Company’s May 31, 2005 balance sheet is attached hereto as Schedule 2.5 . The Estimated Closing Purchase Price Certificate will also include a completed Schedule 2.3(b). The portion of Schedule 2.3(b) that shows the amount that would be attributable to the Capital Securities of the Company to be held by Common Blocker immediately prior to the Effective Time shall be referred to as the “ Original Blocker Stock Price ”.

 

2.6 Final Determination of Purchase Price .

 

(a) Within 45 days following the Closing, Parent shall prepare and deliver to Holders’ Representative a final unaudited consolidated balance sheet for the Company as of the Closing Date prepared in accordance with GAAP on a basis consistent with past practice (the “ Closing Balance Sheet ”). The Closing Balance Sheet shall be accompanied by Parent’s certificate (the “ Purchase Price Adjustment Certificate ”) setting forth Parent’s detailed calculations, derived from the Closing Balance Sheet, of the Base Purchase Price as adjusted in accordance with Section 2.4(b) and the differences, if any, between such calculations and the Estimated Purchase Price. Holders’ Representative may dispute amounts reflected on the Closing Balance Sheet and the calculations set forth on the Purchase Price Adjustment Certificate by notifying Parent in writing on or before the 30 ^th day following its receipt thereof, which notice shall specify each item in dispute and the amount thereof, and shall set forth in reasonable detail the basis for each such dispute. In the event Holders’ Representative so notifies Parent of any such dispute, Holders’ Representative and Parent shall work together in good faith to resolve such dispute. In the event Parent and Holders’ Representative are unable to resolve such dispute within 30 days following Holders’ Representative notifying Parent of a dispute, Parent or Holders’ Representative shall submit a list of the disputed amounts and any related issues to the Company’s auditors at Ernst and Young LLP (who will serve as experts and not as arbitrators on the disputes submitted for resolution) (the “ Accountants ”) for resolution. Parent and the Holders’ Representative shall cause the Accountants to agree to resolve the disputed issues as promptly as possible, and in no event later than 30 days following submission to the Accountants. The decision of the Accountants shall be final and binding as to the matter(s) submitted to the Accountants for resolution. The costs of the Accountants shall be borne by the party (either Parent or the Holders) whose determination of the disputed issues was farthest from the determination made by the Accountants, or equally by Parent and the Holders if the determination by the Accountants is equidistant between the determinations of the parties. The Closing Balance Sheet, the Purchase Price Adjustment Certificate and the calculation of the adjustments to the Base Purchase Price in accordance with Section 2.4(b) shall be deemed final for all purposes hereof upon the earliest to occur of (i) the failure by Holders’ Representative to notify Parent of a dispute with respect thereto in accordance with this Section 2.6(a) within 30 days of the receipt by Holders’ Representative of the Closing Balance Sheet and Purchase Price Adjustment Certificate and (ii) the resolution of all disputes arising in accordance with this Section 2.6(a) either by Parent and Holders’ Representative or the Accountants, in which case the Closing Balance Sheet, the Purchase Price Adjustment Certificate and the calculation of the adjustments to the Base Purchase Price in accordance with Section 2.4(b) shall be as determined in accordance with such resolution of all such disputes (the Base Purchase Price, as adjusted in accordance with Section 2.4(b) as set forth in the Purchase Price Adjustment Certificate and in accordance with the resolution of any disputes arising with respect thereto under this Section 2.6(a) is referred to as the “ Final Purchase Price ”).

 

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(b) If (i) the Final Purchase Price is greater than the Estimated Purchase Price, then the Parent or the Company shall remit to the Holders’ Representative for distribution to the Holders a cash payment equal to the sum of the Final Purchase Price minus the Estimated Purchase Price, or (ii) the Final Purchase Price is less than the Estimated Purchase Price, then the Holders shall remit to Parent an amount of cash equal to the sum of the Estimated Purchase Price minus the Final Purchase Price. The Parent and the Holders’ Representative shall jointly notify the Escrow Agent as soon as practicable upon the final determination of the Final Purchase Price and shall direct the Escrow Agent with regard to the disbursement of the True-Up Escrow Amount in accordance with such final determination.

 

2.7 Closing . Subject to the terms and conditions hereof, the closing of the Merger (the “ Closing ”) will occur, effective as of 12:01 a.m., at the offices of Edwards & Angell, LLP, 101 Federal Street, Boston, Massachusetts 02110 not later than the fifth (5 ^th ) Business Day after all of the conditions to Closing set forth in Article 7, other than those that by their nature are to be satisfied concurrently with the Closing, have been satisfied or, to the extent permissible by Law, waived. The date on which the Closing occurs is referred to as the “ Closing Date .” At the Closing, the Company shall execute a certificate of merger (the “ Certificate of Merger ”) and cause the Certificate of Merger to be delivered in escrow to Parent. At the Closing, each of the parties shall deliver such instruments and documents as are required in Article 7 of this Agreement. At the Effective Time, the Parent shall make the following disbursements:

 

(a) the Parent shall disburse the Debt Repayment Amount by wire transfer of immediately available funds to such account (or accounts) in the United States as shall be set forth in the Payoff Letters;

 

(b) the Parent shall disburse to the Escrow Agent, the Indemnity Escrow Amount and the True-Up Escrow Amount;

 

(c) the Parent shall disburse to Raymond James, the Raymond James Fee; and

 

(d) the Parent shall disburse to the Holders and Blocker Holdco the Estimated Purchase Price, less the Indemnity Escrow Amount and less the True-Up Escrow Amount (such aggregate amount, the “ Closing Payment ”), by wire transfer of immediately available funds to such account (or accounts) in the United States in the exact amounts as the Holders’ Representative shall designate in written instructions (the “ Payment Instructions ”) to Parent not later than two (2) Business Days prior to the Closing.

 

In addition, the Parent shall cause the Surviving Company to issue to BAS and Common Blocker Common Shares in the Surviving Company in accordance with Section 2.3(b) hereof. Upon receipt of evidence that the Closing Payment has been disbursed to the account (or accounts) designated in the Payment Instructions, the Company shall release the Certificate of Merger from escrow, and Parent shall file the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the Act. The Parent and the Company shall have no obligation with regard to the delivery of the Closing Payment or any other amount of the Final Purchase Price to the Holders and Blocker Holdco except to deliver all such amounts to the Holders and Blocker Holdco in accordance with the Payment Instructions.

 

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2.8 Operating Agreement . At the Effective Time, without any further action by any Person, the Operating Agreement, as in effect at the Effective Time, shall be amended and restated as set forth in Exhibit A (the “ Amended and Restated Operating Agreement ”).

 

2.9 Officers and Managers . From and after the Effective Time, the officers and managers set forth in the Amended and Restated Operating Agreement shall be the officers and managers of the Surviving Company, each to hold office in accordance with the Amended and Restated Operating Agreement.

 

2.10 Escrows .

 

(a) To secure the Holders’ indemnification obligations under Article 8, Parent will withhold from the Estimated Purchase Price and will deliver to the Escrow Agent, the Indemnity Escrow Amount. The Escrow Agent shall hold and distribute such funds in accordance with the terms of the Indemnity Escrow Agreement. On the first anniversary of the Closing Date, the Indemnity Escrow Amount will be released to Holders’ Representative for distribution to the Holders; provided, however, that if there are any asserted but unresolved claims for indemnity by Parent as of the first anniversary, the full amount of such claims will be retained and held in escrow in accordance with the Indemnity Escrow Agreement until such claims are finally resolved, at which time such amounts will be disbursed to Parent and the Holders’ Representative (for distribution to the Holders) in such relative amounts as will give effect to the final resolution of such claims.

 

(b) To secure the Holders’ obligations under this Article 2 with regard to the determination of the Final Purchase Price and the adjustments to be made pursuant to Section 2.6, Parent will withhold from the Estimated Purchase Price, and shall deliver to the Escrow Agent, the True-Up Escrow Amount. The Escrow Agent shall hold and distribute such funds in accordance with the True-Up Escrow Agreement. Any amounts owed to Parent due to a post-closing adjustment to be made pursuant to Section 2.6 shall be paid to Parent out of the True-Up Escrow Amount. Upon determination of the Final Purchase Price pursuant to Section 2.6, the True-Up Escrow Amount will be released to Holders’ Representative for distribution to the Holders, subject to all amounts due to Parent in accordance therewith being paid. The Holders shall be responsible to pay Parent any amounts owed to Parent in excess of the True-Up Escrow Amount. In the event that the Holders fail to pay Parent any such amount, Parent shall have the option to require that such amount be paid to Parent out of the Indemnity Escrow Amount.

 

2.11 Consideration Allocation . Within 45 days of the date hereof, Parent shall prepare and deliver to the Holders’ Representative a written allocation of the Final Purchase Price among the assets of the Company and further among the assets of the Company’s Subsidiaries that are treated as disregarded entities for U.S. federal Tax Law, pursuant to Sections 755 and 1060 of the Code, as the case may be, and other applicable provisions of the Code and Treasury Regulations thereunder (the “Consideration Allocation”). If the Consideration Allocation proposed by Parent would result in the recognition of ordinary income for Tax purposes (excluding amounts of ordinary income that are treated as compensation to employees of the Company, the “Ordinary Income Amount”) of more than $2,500,000 in the aggregate for all Holders, and Parent does not irrevocably offer to pay to the Holders as an increase in the Base

 

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Purchase Price at the Closing an amount (the “Gross Up Amount”) equal to 28% of the excess of (a) the Ordinary Income Amount over (b) $2,500,000, then the Holders’ Representative will have the right to terminate this Agreement in accordance with Section 10.1(f). If the Holders’ Representative does not terminate this Agreement, the Consideration Allocation shall be binding on the parties unless the Holders’ Representative objects to such Consideration Allocation within 15 days after receipt of such written allocation. The Consideration Allocation agreed to as set forth above shall be subject to adjustments to reflect purchase price adjustments. If the Parent and the Holders’ Representative reconcile their differences as to the allocation of the Final Purchase Price, the Consideration Allocation shall be adjusted accordingly. If the Parent and the Holders’ Representative are unable to reconcile any differences within 20 days after the Holders’ Representative notifies the Parent of its objections, then the Consideration Allocation shall be submitted to an independent accounting firm for final determination (the “Independent Accounting Firm”), and the Consideration Allocation shall be deemed adjusted in accordance with the determination of the Independent Accounting Firm and shall become binding upon the parties hereto. The costs and expenses of the Independent Accounting Firm shall be apportioned equally between the Company and the Holders. Any costs owed by Holders on account thereof and not paid by them in a timely manner will, if the Parent so elects, be paid to the Surviving Company from the True-Up Escrow Amount. The Consideration Allocation shall be made in accordance with applicable U.S. federal Tax Law. The Consideration Allocation shall be adjusted as necessary to take into account any payments, including contingent payments, appropriately treated as purchase price pursuant to U.S. federal Tax Law and any analogous provision of foreign, state or local Law. To the extent that any adjustments to the Consideration Allocation are made prior to Closing that result in a lower Ordinary Income Amount, then such adjustments shall be taken into account in determining any portion of the Gross Up Amount to be paid by Parent as part of the Estimated Purchase Price and the Final Purchase Price. Each of the parties hereto agrees to file all Tax Returns and make all other necessary filings consistent with the Consideration Allocation, as adjusted pursuant to the provisions of this paragraph. No party hereto will take any position inconsistent with the Consideration Allocation on any Tax Return or in any audit or judicial or administrative proceedings before any Taxing Authority or court of law (except to the extent otherwise required by a “final determination” within the meaning of the Code).

 

2.12 Transactions Prior to the Effective Time . At the Closing, but immediately prior to the Effective Time, the following transactions (the “ Pre-Merger Transactions ”) shall occur in the order presented:

 

(a) Blocker GP shall cause Commnet Holdings to liquidate and distribute all of the Membership Interests held by Commnet Holdings to Preferred Blocker, Common Blocker and Blocker GP in accordance with the allocation on Schedule 2.12(a) , (and Blocker GP shall provide Parent with an updated and final copy of Schedule 2.12(a) not less than three (3) Business Days prior to the Effective Time).

 

(b) Upon receipt of Membership Interests in accordance with Section 2.12(a), Blocker Holdco, Common Blocker, Preferred Blocker and Blocker GP shall be deemed Holders under this Agreement.

 

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(c) Blocker Holdco shall sell and transfer to each Holder that is not a Summit Entity, and each such non-Summit Holder shall purchase from Blocker Holdco its pro-rata share of all issued and outstanding common stock of Common Blocker in accordance with the allocation and for the purchase price specified on Schedule 2.12(c) . Such purchase price shall be paid out of the proceeds to be received by the Holders hereunder at Closing, and has been taken into account in determining the amounts payable to each of the Holders (other than the Summit Entities) pursuant to Schedule 2.3(b) .

 

(d) Each Holder holding stock of Common Blocker (which will include Blocker Holdco but not the other Summit Entities) shall then sell and transfer to Parent, and Parent shall purchase all issued and outstanding common stock of Common Blocker held by the Holders in accordance with the allocation specified on Schedule 2.12(d) for an aggregate purchase price equal to the Original Blocker Stock Price less $950,000. Immediately following the transfer of such common stock to Parent, Common Blocker shall cease to be treated as a Holder for all purposes hereunder.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

 

The Company hereby represents and warrants to Parent as follows:

 

3.1 Organization and Business; Power and Authority; Effect of Transaction .

 

(a) Each of the Company and the Company’s Subsidiaries (which, for the purposes of this Article 3 shall include each of the Wholly-Owned Subsidiaries, the Majority-Owned Subsidiaries and the Company Affiliates) is a limited liability company duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, has all requisite power and authority to own or hold under lease its properties and to conduct its business as now conducted and is duly qualified and in good standing as a foreign entity in each other jurisdiction in which the character of the property owned or leased by it or the nature of its business or operations requires such qualification, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.

 

(b) The Company has all requisite power and authority necessary to enable it to execute and deliver, and to perform its obligations under, this Agreement and to consummate the Merger; and the execution, delivery and performance by the Company, of this Agreement and any other agreements to be executed by the Company in connection herewith and the consummation of the Merger have been duly authorized by all requisite action on the part of the Company and its members and managers. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be subject to bankruptcy, moratorium, insolvency, reorganization, voidable preference, fraudulent conveyance and other similar Laws affecting the rights or remedies of creditors and obligations of debtors generally and except as the same may be subject to the effect of general principles of equity.

 

(c) Neither the execution and delivery by the Company of this Agreement, nor the consummation of the Merger by the Company will result in the creation of any Lien, other than a Permitted Lien, upon any of the Assets, or will conflict with or result in a breach or violation of

 

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any term, condition or provision of or termination of, or otherwise give any other Person the right to terminate, or constitute a default, event of default or an event that, with notice, lapse of time or both, would constitute a default or event of default under the terms of, or require giving notice to, or the consent, authorization or approval of, any Person or Governmental Authority, except for the notices, consents, authorizations and approvals set forth in Section 3.1(c) of the Disclosure Schedule (collectively the “ Required Consents ”), under:

 

(i) any Organizational Document of the Company or the Company’s Subsidiaries;

 

(ii) any Law applicable to the Company or the Company’s Subsidiaries;

 

(iii) any Material Contract to which the Company or any of the Company’s Subsidiaries is a party or by which they are bound; or

 

(iv) any Governmental Authorization;

 

(d) Section 3.1(d) of the Disclosure Schedule sets forth a list of all of the Organizational Documents and other agreements that relate in any way to the ownership, control or governance of each of the Company and its Subsidiaries. The Company has heretofore delivered to the Parent true, correct and complete copies of each of such documents. Other than such documents, there are no documents or other agreements relating to the ownership, control or governance of the Company or its Subsidiaries.

 

3.2 Capitalization; Investments .

 

(a) The Company has authorized the following Capital Securities: (i) 9,821.94 Preferred Units, (ii) 2,940 Class A Common Units, (iii) 3,060 Class B Common Units and (iv) 1,058 Class C Common Units. All of the Preferred Units, Class A Common Units and Class B Common Units, and 706 of the Class C Common Units are, and immediately prior to the Effective Time will be, issued and outstanding, and no other Capital Securities or other limited liability company interests in the Company are, or immediately prior to the Effective Time will be, authorized, issued or outstanding. The ownership of all such Units is as set forth on Appendix B hereto. All of the issued and outstanding Capital Securities of the Company are duly authorized, validly issued, fully paid and nonassessable and were issued in accordance with all applicable federal and state securities Laws.

 

(b) Except as set forth in Section 3.2(b) of the Disclosure Schedule, none of the Company or any of its Subsidiaries directly or indirectly (i) owns, of record or beneficially, any outstanding Capital Securities or other interests in any Person or (ii) controls any other Person. Section 3.2(b) of the Disclosure Schedule sets forth for each Subsidiary of the Company (i) its name and jurisdiction of formation and (ii) the amount and type of issued and outstanding Capital Securities (together with the names of the holders thereof and the amount held by each such holder). All of the issued and outstanding Capital Securities of each Subsidiary of the Company are duly authorized, validly issued, fully paid and nonassessable and were issued in accordance with all applicable federal and state securities Laws. The Company or one or more of its Subsidiaries, as applicable, has good and valid title to all of the issued and outstanding Capital Securities of each of the Company’s Subsidiaries that are shown in Section 3.2(b) of the

 

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Disclosure Schedule as held by the Company or one of its Subsidiaries, in each case free and clear of all Liens. The Company has good and valid title to the issued and outstanding Capital Securities of Pacificom held by the Company, free and clear of all Liens.

 

(c) Except as set forth in Section 3.2(c)(i) of the Disclosure Schedule there are no outstanding Liens, obligations, restrictions, options, warrants, calls, convertible securities or other rights, agreements, arrangements or commitments of any kind that have been issued, made or granted to any Person relating to the Capital Securities of the Company or any Subsidiary, or obligating the Company or any of its Subsidiaries to issue or sell any Capital Securities in, the Company or any of its Subsidiaries to any Person. Except as set forth in Section 3.2(c)(ii) of the Disclosure Schedule, there are no outstanding Contractual Obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Capital Securities of, or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person. Other than as set forth in Section 3.2(c)(iii) of the Disclosure Schedule, there are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of the Capital Securities of the Company or any Subsidiary.

 

(d) Except as set forth in Section 3.2(d) of the Disclosure Schedule, with regard to each of the Company’s Subsidiaries, (i) the Company (or one of its Subsidiaries) has made all capital contributions or other payments that it is required to make to such Subsidiary under any Contracts (including the Organizational Documents of any Subsidiary) or Laws, (ii) no such Subsidiary can require the Company to make any further contribution or other payment without the Company’s consent, (iii) no other member of a Subsidiary or any other Person has any right to acquire the Company’s Capital Securities or other interest in such Subsidiary or to require the Company to acquire such Person’s Capital Securities or other interest in the Subsidiary, and (iv) no other member of a Subsidiary or any other Person has any right to require the Company to participate in any sale of, or other transaction relating to, any of the Subsidiaries.

 

(e) The Company has delivered to the Parent true, correct and complete copies of the minutes, resolutions and consents of the Company and each Subsidiary through the date hereof, none of which minutes, resolutions or consents have been rescinded.

 

(f) The Company has a valid contractual right to receive any amounts that would otherwise be payable to Brian Schuchman, Robert E. Haver and Charles M. Many as a result of their ownership of Commnet PCS, LLC, which represents 75% of the membership interests therein.

 

3.3 Financial Statements; Undisclosed Liability; No Material Adverse Effect; Absence of Changes .

 

(a) Attached as Section 3.3(a) of the Disclosure Schedule are the following financial statements:

 

(i) The audited financial statements of the Company for the period from January 29, 2002 through December 31, 2002, and for the twelve-month periods ended December 31, 2003 and December 31, 2004 (the “ Audited Financial Statements ”); and

 

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(ii) The consolidated unaudited financial statements of the Company for the five (5) month period ending on May 31, 2005 (the “ Interim Financial Statements ” and together with the Audited Financial Statements, the “ Financial Statements ”).

 

(b) The Financial Statements have been prepared from the books and records of the Company in accordance with GAAP consistently applied, and maintained throughout the periods indicated, and present fairly in all respects the financial condition of the Company and the Company’s Subsidiaries as at their respective dates and the results of operations for the periods covered thereby, except that the Interim Financial Statements do not include (x) footnotes and the disclosures required therein or (y) such exceptions as would apply as a result of normal year-end adjustments.

 

(c) The books of account and other financial records of the Company and the Subsidiaries: (i) are complete and correct, and do not contain or reflect any inaccuracies or discrepancies and (ii) have been maintained in accordance with good business and accounting practices.

 

(d) Except as set forth on Section 3.3(d) of the Disclosure Schedule, there exist no liabilities, whether known, unknown, due or to become due, absolute, contingent (in any way), accrued or matured, of the Company or any of its Subsidiaries that would be required to be reflected in a consolidated balance sheet prepared in accordance with GAAP, other than (i) liabilities that are reflected, reserved for or disclosed in the balance sheet set forth in the Interim Financial Statements (the “ Interim Balance Sheet ”), and (ii) liabilities incurred in the Ordinary Course of Business since the date of the Interim Balance Sheet.

 

(e) Except as set forth on Section 3.3(e) of the Disclosure Schedule or on the Interim Balance Sheet, none of the Company or its Subsidiaries has any Indebtedness.

 

(f) Except as set forth on Section 3.3(f) of the Disclosure Schedule, since December 31, 2004, each of the Company and its Subsidiaries has conducted its business only in the Ordinary Course of Business, and there has not occurred with respect to either the Company or any of its Subsidiaries:

 

(i) any material revaluation of any of their Assets; or

 

(ii) any sale, lease, license, pledge, disposal of, encumbrance of or transfer of any of their properties or Assets with a fair market value, individually or in the aggregate, in excess of $50,000;

 

(iii) any Material Adverse Effect;

 

(iv) any transaction other than in the Ordinary Course of Business or any transaction with any of their Affiliates or any of their officers, directors, managers or employees;

 

(v) any material damage, destruction or casualty loss with respect to their Assets;

 

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(vi) any waiver of any material rights, whether or not in the Ordinary Course of Business;

 

(vii) any distribution or any dividend or other payment to any of their members other than distributions or dividends paid to the Company;

 

(viii) any prepayment (other than scheduled payments of interest and principal required under any Contracts governing Indebtedness) of any Indebtedness;

 

(ix) any issuance or redemption of any Capital Securities;

 

(x) any acceleration of accounts receivable or delay in accounts payable other than in the Ordinary Course of Business; or

 

(xi) any agreement or understanding to do any of the foregoing.

 

3.4 Title to and Condition of Assets .

 

(a) The Company and its Subsidiaries have good, valid and marketable title, or a valid leasehold interest, as applicable, to all of their Assets, including all properties and assets reflected in the Interim Balance Sheet and not sold, retired or otherwise disposed of since the date thereof in the Ordinary Course of Business, free and clear of all Liens except for Permitted Liens and except for the Liens listed in Section 3.4(a)(i) of the Disclosure Schedules, all of which will be discharged on or before the Closing. Except as set forth in Section 3.4(a)(ii) of the Disclosure Schedules, the Assets include all rights, assets and property necessary to the continued operation of the Business by the Company and its Subsidiaries after the Closing in the manner operated by the Company and its Subsidiaries during the 12-month period preceding the date of this Agreement. No Person other than the Company and its Subsidiaries owns, leases, licenses or otherwise has any options or rights of any kind in or to the Assets or the Business. All Assets owned or leased by the Company and its Subsidiaries and used in the Business are in their possession and subject to their control or accessible through rights granted under the Site Leases and Tower Leases.

 

(b) All buildings, structures (including tower structures), facilities, fixtures, equipment and other tangible Assets, including all network equipment, are in good working condition and repair, subject to normal wear and maintenance, are fit for their intended purposes, are usable in the Ordinary Course of Business, are located, to the Company’s Knowledge, such that they are not encroaching on the property or rights of any Person, and conform in all respects to any applicable Laws and Governmental Authorizations relating to their construction, use and operation.

 

(c) Since December 31, 2004, each of the Company and its Subsidiaries has maintained and operated its Assets in the Ordinary Course of Business.

 

(d) All of the assets, tangible or intangible, and rights of the Predecessor Companies relating to the roaming business have been properly assigned, transferred, contributed or otherwise granted to the Company, either directly or through a merger (though such rights and assets may have been assigned or distributed thereafter to one of the Company’s Subsidiaries or otherwise sold or transferred by the Company or one of the Company’s Subsidiaries).

 

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3.5 Real Property .

 

(a) Neither the Company nor any of its Subsidiaries owns, or has previously owned, any real property.

 

(b) Section 3.5(b) of the Disclosure Schedule (hereinafter referred to as the “ Master Real Estate Schedule ”) includes a list of all real property subject to leases that the Company or any of its Subsidiaries are party to, including the Site Leases and Tower Leases (collectively, the “ Leased Property ”), together with the name of the lessor or sublessor or lessee or sublessee, as applicable, the date of the lease agreement and any amendments, the lease term, the obligations of the lessee thereunder and an indication of the use of such property.

 

(c) Except as otherwise set forth in Section 3.5(c) of the Disclosure Schedule:

 

(i) each of the leases entered into by the Company or any of its Subsidiaries has been duly authorized, executed and delivered by the Company or a Subsidiary and each of the other parties thereto, and is a legal, valid and binding obligation of the Company or one of its Subsidiaries, and, to the Company’s Knowledge, each of the other parties thereto, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, moratorium, insolvency, reorganization and other applicable Laws affecting the rights and remedies of creditors and obligations of debtors generally and except as the same may be subject to the effect of general principles of equity;

 

(ii) the Company or one of its Subsidiaries has an operable leasehold interest in and to the Leased Property, and has access to its Assets located on the Leased Property as provided in the applicable Site Lease or Tower Lease;

 

(iii) true, accurate and complete copies of each of the Site Leases, Tower Leases and other leases set forth in the Master Real Estate Schedule have been provided to the Parent;

 

(iv) neither the Company nor any of its Subsidiaries nor any other party to any such lease, has violated in any respect any provision of, or committed or failed to perform any act that, with or without notice, lapse of time or both, would constitute a breach under the provisions of any lease, including a Site Lease or Tower Lease;

 

(v) none of the Holders, the Company or any of the Company’s Subsidiaries has received any written correspondence or notice from any counterparty to a lease giving notice of an intention to terminate such agreement or of an intention not to renew any such agreement following the expiration of the current term;

 

(vi) neither the Company nor any Subsidiary has received any notice of, or has knowledge of, (i) any non-compliance with applicable building codes (including failure to obtain required construction permits), zoning regulations, occupational health and

 

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safety Laws or any other Laws applicable to, or (ii) any condemnation or eminent domain proceedings with respect to, any parcel of Leased Property or the Company’s or its Subsidiary’s use or occupancy thereof;

 

(vii) the Company or one of its Subsidiaries has obtained required construction permits with respect to any construction of a tower by the Company or one of its Subsidiaries on the Leased Property;

 

(viii) neither the Company nor any of its Subsidiaries is party to any management, franchise, license or other agreement for the management of operations at any other location; and

 

(ix) all tower structures and other improvements on each Tower Site are in compliance in all material respects with all applicable title covenants, conditions, restrictions and reservations and all applicable Laws, including the National Historic Preservation Act.

 

(d) Except as set forth in Section 3.5(d) of the Disclosure Schedule, (a) the utility services currently available to each Tower Site are adequate for the present use of each such site by the Company and its Subsidiaries, and are being supplied by utility companies with the necessary utilities for the present use of each such site by the Company and its Subsidiaries, and no action is pending or to Company’s Knowledge threatened that, individually or in the aggregate, would have the effect of terminating or limiting such utility services, and (b) the Company or one of its Subsidiaries has obtained all easements and rights-of-way that are reasonably necessary for ingress and egress to and from each Tower Site that is the subject of a Site Lease, and no action is pending or to Company’s Knowledge threatened, nor to Company’s Knowledge is any Event existing or potentially existing, which, individually or in the aggregate, could have the effect of terminating or limiting such access.

 

3.6 Compliance with Governmental Authorizations and Applicable Law .

 

(a) Section 3.6(a)(i) of the Disclosure Schedule sets forth (i) all of the FCC Authorizations and (ii) all other Governmental Authorizations, together with any amendments thereto, in each case held by the Company or any of its Subsidiaries. The Company has provided to, or made available to, Parent or its legal counsel, all Governmental Authorizations of the Company and the Company’s Subsidiaries, and any amendments thereto. Except as otherwise shown in Section 3.6(a)(ii) of the Disclosure Schedule, all roaming revenues shown on the Financial Statements are derived, directly or indirectly, from the FCC Authorizations.

 

(b) Except as set forth in Section 3.6(b)(i) of the Disclosure Schedule, the Company and each Subsidiary holds (and is the sole holder of) all Governmental Authorizations, including all FCC Authorizations, required under applicable Law for the lawful conduct of their respective businesses and the Business in the Ordinary Course of Business. Except as set forth in Section 3.6(b)(ii) of the Disclosure Schedule, all such Governmental Authorizations are valid and in full force and effect, and the Company and its Subsidiaries are in material compliance with all Governmental Authorizations, including without limitation all lighting and marking requirements imposed by the FAA and FCC. All such Governmental Authorizations are renewable by their

 

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terms or in the Ordinary Course of Business without the need to comply with any qualification procedures not generally applicable to holders of such licenses or to pay any amounts other than routine filing and regulatory fees. None of the FCC Authorizations will be, or could be reasonably expected to be, adversely affected by the consummation of the Merger or of any action taken in connection therewith. All reports, registrations, filings, forms and statements required to be filed by the Company or one of its Subsidiaries with all Governmental Authorities, including the FCC and the FAA, with respect to the lawful conduct of their respective businesses have been filed. Each of such reports, registrations, filings, forms and statements, when filed, complied as to form with, and the requirements of, the applicable Governmental Authorities, or in the event of any non-compliance with respect thereto, such non-compliance has been cured prior to the date hereof. All fees, charges, assessments, duties, levies or other payments required to be paid by the Company or any of its Subsidiaries to any Governmental Authority, including the FCC and the FAA, have been paid. No such Governmental Authorization is the subject of any pending or, to Company’s Knowledge, threatened challenge or proceeding to revoke or terminate any such Governmental Authorization, or to fine or admonish the Company or one of its Subsidiaries. Except as set forth in Section 3.6(b)(iii) of the Disclosure Schedule, none of the FCC Authorizations are subject to being acquired by any other Person without the consent of the Company or one of its Subsidiaries.

 

(c) Except as set forth in Section 3.6(c) of the Disclosure Schedule, the Company and each of its Subsidiaries is in material compliance with all applicable Laws. Except as otherwise described in Section 3.6(c) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is in breach or violation of, or default in the performance, observance or fulfillment of, any applicable Law relating to the Company or any of the Company’s Subsidiaries, nor has any of the Holders, the Company or the Company’s Subsidiaries received any written or, to Company’s Knowledge, oral notice from any Governmental Authority alleging any such breach, violation or default.

 

(d) The Company and its Subsidiaries have accurately reported all revenue in compliance with FCC Laws (i) for universal service purposes, and (ii) pertaining to federal funds and regulatory fees, including, but not limited to, telecommunications relay service, local number portability, number administration, and the FCC annual regulatory fee, and have timely paid all amounts due and payable with respect to all such programs and fees.

 

(e) Except as set forth in Section 3.6(e) of the Disclosure Schedule, the operations of the Company and its Subsidiaries (including, without limitation, all switches) are fully compliant with the Laws related to the Communications Assistance for Law Enforcement Act of 1994 (CALEA) and E911 regulations in all locations where E911 regulations have been implemented. The switches operated by the Company and its Subsidiaries are CALEA-capable from a software standpoint and are either equipped with all hardware for compliance with current CALEA requirements or deployed in a manner to facilitate CALEA hardware upgrades without significant downtime.

 

(f) The Company and its Subsidiaries: (i) are in compliance with Sections 24.239-253 of the FCC Rules; (ii) are not in receipt of any notice of microwave relocation liability; and (iii) know of no set of facts which would give rise to such liability.

 

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(g) The Company and its Subsidiaries are in compliance with the Local TV Act and all Laws related thereto.

 

3.7 Related Transactions .

 

(a) Except as set forth in Section 3.7(a) of the Disclosure Schedule, none of Holders or any of their Affiliates (other than the Company and its Subsidiaries) is a party to any Contract with the Company or its Subsidiaries.

 

(b) Except as set forth in Section 3.7(b) of the Disclosure Schedule, none of the officers, directors, managers or employees of the Company or the Company’s Subsidiaries (i) has outstanding any Indebtedness or similar obligations to the Company or any of its Subsidiaries, (ii) owns any direct or indirect interest in, or is a manager, director, officer, employee, partner, or consultant of, any competitor, supplier, customer, distributor, lessor, tenant, creditor or debtor of the Company or any of its Subsidiaries, (iii) has any interest in any Asset, or (iv) otherwise is a party to any Contract with the Company or any of its Subsidiaries, except for normal compensation for services as an officer, manager, director or employee thereof. Except as set forth in Section 3.7(b) of the Disclosure Schedule, none of the Holders or the officers, directors or managers of Holders owns any direct or indirect interest in, or is a manager, director, officer, employee, partner, or consultant of, any competitor, supplier, customer, distributor, lessor, tenant, creditor or debtor of the Company or any of its Subsidiaries.

 

3.8 Tax Matters . Each of the Company and its Subsidiaries has timely filed all Tax Returns required to be filed, and all Taxes owed (whether or not shown or required to be shown on such Tax Returns) have been paid or remitted. All such Tax Returns were true, complete and correct and were prepared in accordance with applicable Law. No portion of any Tax Return is currently the subject of any audit or Legal Action by any Taxing Authority, and no such audit or Legal Action is to Company’s Knowledge threatened. Neither the Company nor any of its Subsidiaries is currently the beneficiary of any extension of time within which to file any Tax Return, and neither the Company nor any of its Subsidiaries has waived any statute of limitation with respect to any Tax or agreed to any extension of time with respect to a Tax assessment or deficiency. There are no Tax Liens (other than Liens for Taxes not yet due and payable) on any of the Assets that will not be paid prior to Closing or, to Company’s Knowledge, any Lien, action, suit, proceeding, investigation, audit, examination or assessment with regard to any Taxes. No claim has ever been made by a Governmental Authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that the Company or any of its Subsidiaries is or may be subject to taxation by that jurisdiction. The Company and each of its Subsidiaries has withheld and paid all Taxes required to be withheld and paid in connection with any amounts paid to any employee, independent contractor, creditor, stockholder or other third party and has collected and remitted or will remit all required sales, use, goods and services or other commodity Taxes. The amount established as an accrual for Taxes (aside from any reserve for deferred Taxes established to reflect timing differences between book and Tax accrual) on the Interim Financial Statements (as opposed to the notes thereto) is sufficient, as computed in accordance with GAAP, for the payment of all unpaid Taxes of the Company and its Subsidiaries, whether or not disputed, for all periods ended on and prior to the date thereof. Since December 31, 2004, neither the Company nor any of its Subsidiaries has incurred any liabilities for Taxes other than in the Ordinary Course of Business. The Company has delivered

 

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to Parent correct and complete copies of all federal, state and local income Tax Returns filed with respect to the Company and its Subsidiaries for taxable periods ending on or after December 31, 2003. Neither the Company nor any of its Subsidiaries will be required as a result of a change in accounting method for any period ending on or before the Closing Date to include any adjustment under Section 481 of the Code (or any similar provision of state, local or foreign income tax law) in income for any period ending after the Closing Date, and there is no application pending with any Governmental Authority requesting permission for any changes in any of the accounting methods of the Company or any of its Subsidiaries for Tax purposes. No Governmental Authority has proposed any such adjustment or change in accounting method. Neither the Company nor any of its Subsidiaries has entered into any Tax allocation, sharing or indemnification agreement with any party. Since its formation, each of the Company and its Subsidiaries has been treated as a disregarded entity or partnership for purposes of federal, state and local income tax laws and, accordingly, has not been subject to federal, state or local tax based on gross or net income. The Company has not taken any action which would result in the inclusion of any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) ”closing agreement” as described in Code section 7121 (or any corresponding or similar provision of state, local, or foreign income tax law); (ii) installment sale or open transaction disposition made on or prior to the Closing Date; or (iii) prepaid amount received on or prior to the Closing Date.

 

3.9 Broker or Finder . Except as set forth in Section 3.9 of the Disclosure Schedule, no Person assisted in or brought about the negotiation of this Agreement or the Merger in the capacity of broker, agent or finder or in any similar capacity on behalf of any of the Holders, the Company or any of its Subsidiaries.

 

3.10 Environmental Matters .

 

(a) Except as set forth in such Section 3.10(a) of the Disclosure Schedule:

 

(i) Neither the Company nor any of its Subsidiaries has been notified in writing that the Company or one of Company’s Subsidiaries is a “potentially responsible party” under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Resource Conservation Recovery Act, as amended, or any similar state Law;

 

(ii) None of the Company or Company’s Subsidiaries has entered into or received any consent decree, compliance order or administrative order issued pursuant to any Environmental Law;

 

(iii) None of the Company or Company’s Subsidiaries is a party in interest or in default under any Judgment issued pursuant to any Environmental Law;

 

(iv) Each of the Company and its Subsidiaries is in compliance with, and has obtained, all Environmental Permits and none of the Holders, the Company or any of the Company’s Subsidiaries has received any written notice that any Environmental Permit is not in full force and effect;

 

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(v) (A) to the Company’s Knowledge, there are no Hazardous Materials on, at, in or under any property currently or formerly leased by the Company, any other property, (I) that requires or, upon notification to a Governmental Authority, would require, remediation under Environmental Law that could reasonably be expected to affect the Company or any of its Subsidiaries, or (II) that could reasonably be expected to result in liability of or costs to the Company or any of its Subsidiaries under Environmental Law, and (B) the operations of the Company and its Subsidiaries have not, and do not currently, involve the generation, transportation, treatment, recycling or disposal of, hazardous waste, as defined under any Environmental Law, except for amounts that would qualify a Person as a small quantity generator or a conditionally exempt small quantity generator under any Environmental Law or that otherwise would not reasonably be expected to result in liability or costs to the Company or any of its Subsidiaries;

 

(vi) each of the Company and its Subsidiaries is in compliance with all Environmental Laws, and is not the subject of any pending or, to Company’s Knowledge, threatened, Legal Action with respect to violations or breaches of any Environmental Law; and

 

(vii) to Company’s Knowledge, no violations of Environmental Laws have been committed by the owner of (or any other Person at) any Leased Property.

 

(b) Copies of all environmental studies, surveys and reports in the possession or control of Holders, the Company or the Company’s Subsidiaries, with respect to Company, the Company’s Subsidiaries, the Tower Sites or the related tower structures, together with all agreements between Company or any of the Company’s Subsidiaries, on the one hand, and the U.S. Environmental Protection Agency or any other similar Governmental Authority, on the other hand, have been made available to Parent.

 

3.11 No Insolvency . None of the Company or any of the Company’s Subsidiaries is, or immediately prior to or immediately following the Merger will be, insolvent as determined under any applicable bankruptcy, insolvency, fraudulent conveyance or similar Laws of any applicable jurisdiction.

 

3.12 Insurance . The Company and its Subsidiaries maintain policies of title, liability, property and casualty, fire, worker’s compensation and other forms of insurance (including bonds) and which insure against risks and liabilities to an extent and in a manner customary in the wireless telecommunications industry. Section 3.12(a) of the Disclosure Schedule sets forth each insurance policy under which the Company or any of its Subsidiaries maintains or is a beneficiary. All premiums payable under each such policy have been duly paid to date and each such insurance policy or binder is in full force and effect. None of the Company or its Subsidiaries is in default with respect to any provision of any of such insurance policies. Except as set forth in Section 3.12(b) of the Disclosure Schedule, none of the Company and its Subsidiaries have been refused any insurance coverage by any insurance carrier to which they have applied for insurance during the past three years. Neither the Company nor any of its Subsidiaries has received or given written notice of cancellation with respect to any one of the insurance policies listed on Section 3.12(a) of the Disclosure Schedule. The execution and

 

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delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in any violation of or default or loss of any benefit (including the right to receive payment of any claim) under, or permit the termination of, any of the policies listed in Section 3.12(a) of the Disclosure Schedule.

 

3.13 Accounts Receivable Aging . Section 3.13 of the Disclosure Schedule sets forth a true, complete and accurate list as of the end of the month immediately preceding the date hereof of the total amounts of Company’s and the Company’s Subsidiaries’ accounts receivable and the aging of such accounts receivable based on the following schedule: 0-30 days, 31-60 days, 61-90 days and over 90 days. All accounts receivable set forth on the Interim Balance Sheet and all subsequent balance sheets and reports required to be delivered pursuant to this Agreement are or will be valid and genuine, have arisen or will arise solely out of bona fide sales and deliveries of goods, performance of services and other business transactions in the Ordinary Course of Business. Reserves for doubtful accounts have been provided for in the Interim Financial Statements in accordance with GAAP and consistent with the Ordinary Course of Business. To the Company’s Knowledge, there are no Events or circumstances that will, or could reasonably be expected to, cause such reserves to be inadequate to cover expected collection losses.

 

3.14 Contracts .

 

(a) Except as set forth in Section 3.14(a) of the Disclosure Schedule, none of the Company or its Subsidiaries is bound by (i) any Contract that was entered into other than in the Ordinary Course of Business, (ii) any Contract that contains restrictions with respect to payment of dividends or any other distribution in respect of its capital stock, partnership interests or limited liability company interests, (iii) any Contract relating to capital expenditures in excess of $50,000 (either individually or in the aggregate), (iv) any Contract relating to Indebtedness, (v) any loan or advance by such Person to, or investment by such Person in, any Person (other than a Subsidiary), and any Contract relating to the making of any such loan, advance or investment, (vi) any guarantee or other contingent liability in respect of any Indebtedness or obligation of any Person, (vii) any management, service, employment, consulting or any other similar type Contract requiring payment of salary or fees, (viii) any Contract limiting the ability of the Company or any of its Subsidiaries to engage in any line of business or to compete with any Person, (ix) any warranty, guaranty or similar undertaking with respect to contractual performance extended by the Company or any of its Subsidiaries other than in the Ordinary Course of Business, (x) any commission, representative, distributorship or sales agency Contract, (xi) any collective bargaining agreement with any labor union or other representative of employees, (xii) any Contract that governs any joint venture, partnership or other cooperative arrangement or any other relationship involving a sharing of profits, (xiii) any Contract that would result in the merger with or into or consolidation into, or the acquisition of all or substantially all of the assets of, another Person (other than this Agreement), (xiv) any Contract with any Governmental Authority, (xv) any Contract providing for the sale, assignment, license or other disposition of any Asset with a value in excess of $100,000 or of any right of the Company or any of its Subsidiaries, including any Company Intellectual Property, (xvi) any Contract granting a Lien (other than Permitted Liens) upon any Asset owned by the Company or one of its Subsidiaries, (xvii) any Contract which calls for the payment by or on behalf of the Company or any of its Subsidiaries in excess of $100,000 per annum, or the delivery by the Company or any of its Subsidiaries of goods or services with a fair market value in excess of

 

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$100,000 per annum, or provides for the Company or any of its Subsidiaries to receive any payments in excess of, or any property with a fair market value in excess of $100,000 per annum, (xviii) any Contract to manage any real property, (xix) any Contract to provide an indemnification to any other Person, other than Contracts with suppliers, distributors, sales representatives and customers entered into in the Ordinary Course of Business or indemnification provided in connection with any real property lease or in connection with personal property leases entered into in the Ordinary Course of Business, (xx) Tower Leases, (xxi) Site Leases, (xxii) any roaming Contract with any of the customers identified in Section 3.14(d) of the Disclosure Schedule, (xxiii) any Contract for any charitable or political contribution or (xxiv) any amendment, modification or supplement in respect of any of the foregoing (each of (i)-(xxiv), a “ Material Contract ”).

 

(b) Except as otherwise set forth in Section 3.14(b) of the Disclosure Schedule, each Material Contract is in full force and effect and there exists no breach by the Company or any of its Subsidiaries or, to Company’s Knowledge, any Event that, with the giving of notice, the lapse of time or the happening of any further Event, could become a default by the Company or any of its Subsidiaries thereunder. To the Company’s Knowledge, no other party to any Material Contract is in breach thereof and no Event has occurred that, with the giving of notice, the lapse of time or the happening of any further Event, could become a default by such other party thereunder.

 

(c) Prior to the date hereof, the Company has made available to Parent correct and complete copies of all Material Contracts.

 

(d) Section 3.14(d) of the Disclosure Schedule sets forth the five (5) largest customers of the Company and its Subsidiaries (in terms of roaming revenue generated on a consolidated basis), in each case for the five months ended May 31, 2005 and the dollar amounts of revenues attributable to such customers for such period. The relationships of the Company and its Subsidiaries with such customers are good commercial working relationships and no such customer has canceled or otherwise terminated, or, threatened in writing to cancel or otherwise terminate, its relationship with the Company or any of its Subsidiaries, as applicable, or has during the last twelve (12) months decreased or limited materially or threatened to decrease or limit materially, its purchases of, or payments for, services from the Company or its Subsidiaries and, to the Company’s Knowledge, no such customer is expected to so decrease or limit materially its purchases of, or payments for, services from the Company and its Subsidiaries, as applicable. The Company has not, and no Person acting on the Company’s behalf has, provided to the Company’s customers any material contract terms (including pricing) or other confidential information related to any of the Company’s or its Subsidiaries contractual relationships with its other customers.

 

(e) The Company and its Subsidiaries have complied with all build-out requirements as set forth in any of the Material Contracts or other Contracts of the Company and its Subsidiaries, and none of them are at risk of having any of their FCC Authorizations repurchased or forfeited as a result of any breach of a Contract.

 

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3.15 Legal Actions .

 

Except as set forth in Section 3.15(a) of the Disclosure Schedule, there is no Legal Action pending, or to Company’s Knowledge, threatened, nor, to the Company’s Knowledge, has any Event occurred that could reasonably be expected to be the basis for any Legal Action, (a) against any Holders that would prevent any Holder or the Company from consummating the Merger, or (b) against the Company or its Subsidiaries or (as relating to the Business) any of their key employees. Except as set forth in Section 3.15(b) of the Disclosure Schedule, there are no outstanding Judgments, settlement agreements or similar orders by which the Company, its Subsidiaries or any of their respective assets or properties, are bound.

 

3.16 Employee Benefit Plans .

 

(a) Section 3.16(a) of the Disclosure Schedule contains a true and complete list of each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), including, without limitation, multiemployer plans within the meaning of ERISA section 3(37)), and all stock purchase, stock option, restricted stock and other equity compensation plan, severance, employment, change-in-control, statutory fringe benefit, bonus, incentive, deferred compensation and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, that is sponsored, maintained or contributed to by the Company or its Subsidiaries and under which any employee or former employee of the Company or its Subsidiaries has any present or future right to benefits sponsored or maintained by the Company or its Subsidiaries or under which the Company or its Subsidiaries has any present or future liability. All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the “ Employee Plans ”.

 

(b) With respect to each Employee Plan, the Holders have provided or made available to the Parent a complete copy (or, to the extent no such copy exists, an accurate description) thereof and, to the extent applicable: (i) any related trust agreement or other funding instrument; (ii) the most recent determination letter, if applicable; (iii) any summary plan description and any subsequent summaries of modifications; and (iv) for the two most recent years (A) the Form 5500 and attached schedules, (B) audited financial statements and (C) actuarial valuation reports.

 

(c) (i) Except for any act or failure to act that is not reasonably likely to result in a liability to the Company or its Subsidiaries, each Employee Plan has been established and administered in accordance with its terms, and is in compliance with the applicable provisions of ERISA, the Code and other applicable laws, rules and regulations; (ii) each Employee Plan which is intended to be qualified within the meaning of Code section 401(a) is so qualified and has received a favorable determination letter as to its qualification, and has been timely amended for tax Law changes commonly known as “GUST” or “EGTRRA”, and nothing has occurred, whether by action or failure to act, that could reasonably be expected to cause the loss of such qualification; (iii) no event has occurred and no condition exists that would subject the Company or its Subsidiaries, either directly or by reason of their affiliation with any member of their “ Controlled Group ” (defined as any organization which is a member of a controlled group of organizations within the meaning of Code sections 414(b), (c), (m) or (o)), to any tax, fine, lien,

 

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penalty or other liability imposed by ERISA, the Code or other applicable laws, rules and regulations; (iv) no Employee Plan provides retiree welfare benefits and neither the Company nor its Subsidiaries have any obligations to provide any retiree welfare benefits except as required under Section 4980B of the Code or similar state Law; and (v) neither the Company, its Subsidiaries nor any member of their Controlled Group has engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA.

 

(d) None of the Employee Plans is subject to Title IV of ERISA (including, without limitation, any multiemployer plan within the meaning of ERISA section 4001(a)(3)) or the minimum funding requirements of Code section 412 or ERISA section 302 and none of the Company, its Subsidiaries or any member of their Controlled Group has incurred any liability under Title IV of ERISA which remains unsatisfied.

 

(e) With respect to any Employee Plan, (i) no actions, suits or claims (other than routine claims for benefits in the Ordinary Course of Business) are pending or, to the Company’s Knowledge, threatened, (ii) no facts or circumstances exist that could reasonably be expected to give rise to any such actions, suits or claims and (iii) no administrative investigation, audit or other administrative proceeding by the Department of Labor, the Pension Benefit Guaranty Corporation, the Internal Revenue Service or other governmental agencies are pending, in progress or, to Company’s Knowledge, threatened.

 

(f) Except as set forth in Section 3.16(f) of the Disclosure Schedule, all contributions, premiums or payments required to be made with respect to any Employee Plan have been made on or before their due dates. All such contributions that have been fully deducted for income tax purposes have not been challenged or disallowed by any government entity and no fact or event exists which could give rise to any such challenge or disallowance. All employee contributions have been timely made in accordance with Department of Labor Regulation 29 C.F.R. Section 2510.3-102.

 

(g) Except as set forth in Section 3.16(g) of the Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will (i) result in a material payment (including, without limitation, severance, unemployment compensation or otherwise) becoming due from the Company under any Employee Plan to any employee or former employee; (ii) materially increase any benefit otherwise payable under any Employee Plan; or (iii) accelerate the time of payment or vesting, or increase the amount of, any compensation due to any individual.

 

3.17 Employment-Related Matters .

 

(a) Section 3.17(a) of the Disclosure Schedule sets forth a list of the names, titles, position and annual rates of compensation (including base salary, bonus opportunity, commission and other incentive pay, if any) of the employees, officers or directors of the Company and the Company’s Subsidiaries.

 

(b) Except as set forth in Section 3.17(b) of the Disclosure Schedule, (1) neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or other

 

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Contract with any labor organization or other representative of any employees of the Company or its Subsidiaries, nor is any such Contract presently being negotiated; (2) to Company’s Knowledge, no campaigns are being conducted to solicit cards from any of the employees of the Company or its Subsidiaries to authorize representation by any labor organization, and no such campaigns have been conducted within the past three years; (3) no labor strike, slowdown, work stoppage, dispute, lockout or other labor controversy is in effect or, to Company’s Knowledge threatened, and neither the Company nor any of its Subsidiaries has experienced any such labor controversy within the past three years; (4) no unfair labor practice charge or complaint is pending or, to Company’s Knowledge, threatened against the Company or any of its Subsidiaries or any of their officers or employees; (5) no grievance or arbitration proceeding is pending or, to Company’s Knowledge, threatened against the Company or any of its Subsidiaries or any of their officers or employees; (6) no action, complaint, charge, inquiry, proceeding or, to the Company’s Knowledge, investigation by or on behalf of any employee, prospective employee, former employee, labor organization or other representative of the employees of the Company or any of its Subsidiaries is pending or, to Company’s Knowledge, threatened against the Company or any of its Subsidiaries or any of their officers or employees; (7) neither the Company nor any of its Subsidiaries is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to its employees or its employment practices; (8) the Company and each of its Subsidiaries is in compliance with all applicable Laws, Contracts, policies, plans, and programs relating to employment, employment practices, compensation, benefits, hours, terms and conditions of employment, and the termination of employment, including but not limited to any obligations pursuant to the Worker Adjustment and Retraining Notification Act of 1988 (“ WARN ”) or similar Laws; and (9) neither the Company nor any of its Subsidiaries is liable for any severance pay or other payments to any employee or former employee arising from the termination of employment, nor will the Company or any of its Subsidiaries have any liability under any benefit or severance policy, practice, agreement, plan, or program which exists or arises, or may be deemed to exist or arise, under any applicable law or otherwise, as a result of or in connection with the transactions contemplated hereunder or the termination of any of the employees of the Company or any of its Subsidiaries on or prior to the Closing Date; and (10) neither the Company nor any of its Subsidiaries has closed any plant or facility, effectuated any layoffs of employees or implemented any early retirement program within the past three years, nor has the Company or any of its Subsidiaries planned or announced any such action or program for the future.

 

3.18 Intellectual Property .

 

(a) Section 3.18(a)(i) of the Disclosure Schedule sets forth all Intellectual Property owned by the Company and/or its Subsidiaries which is issued by, registered or filed with, or has been submitted to, any Governmental Authority, all unregistered Company Intellectual Property, and all license, consent or other agreements concerning Company Intellectual Property to which the Company or one of its Subsidiaries is a party (other than “shrink-wrapped”, “off-the-shelf” or perpetual paid-up software licenses or software licenses implied by the sale of the product licensed to the Company or any of it Subsidiaries for which the Company and its Subsidiaries collectively pay an annual fee of less than $25,000) (“ IP Licenses ”). Except as disclosed on Section 3.18(a)(ii) of the Disclosure Schedule, the Company and/or its Subsidiaries owns or has the right to use all Intellectual Property necessary for the Company and each of its Subsidiaries to conduct its business in the Ordinary Course of Business, free of all Liens other than Permitted Liens.

 

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(b) Except as disclosed on Section 3.18(b) of the Disclosure Schedule, (i) to the Company’s Knowledge, all of the registered Company Intellectual Property is valid, enforceable and unexpired; (ii) there have been no claims made in writing, or to Company’s Knowledge, threatened against the Company asserting that the Company Intellectual Property infringes or misappropriates the rights of others, and to Company’s Knowledge, the Company Intellectual Property is not being infringed or misappropriated by others; (iii) no Legal Action or judgment has been rendered, or, to Company’s Knowledge, is threatened, that seeks to cancel, limit or challenge the validity, enforceability, ownership or use of any Company Intellectual Property, and the Holders know of no valid basis for same; (iv) the Company or one of its Subsidiaries has taken reasonable steps to protect, maintain, and secure all confidential and proprietary information included in the Company Intellectual Property; (v) no party to an IP License is, or is alleged to be, in breach or default thereunder; and (vi) the Merger shall not impair the rights of the Company or its Subsidiaries under, or cause any party to breach or default under any IP License, or cause additional fees to be due thereunder.

 

3.19 Banking . Section 3.19 of the Disclosure Schedule contains a true and complete list of the names and locations of all financial institutions at which the Company and its Subsidiaries maintain a checking account, deposit account, securities account, safety deposit box or other deposit or safekeeping arrangement the numbers or other identification of all such accounts and arrangements.

 

3.20 Questionable Payments . Neither the Company nor any of its Subsidiaries has, in connection with their respective businesses, (a) made or paid for any unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (b) made any direct or indirect unlawful payments to government officials or employees (whether of the United States or otherwise) from corporate funds, (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets, (d) made any false or fictitious entries on the books of account of the Company or its Subsidiaries, or (e) made or received any bribe, rebate, payoff, inf