SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
SPRINT CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
LOGO
, 1995
Dear Stockholder:
On behalf of the Board of Directors and Management, I cordially invite you to
attend a Special Meeting of Stockholders of Sprint Corporation to be held at
A.M., local time, on , 1995, at the Sprint World
Headquarters, 2330 Shawnee Mission Parkway, Westwood, Kansas.
At this meeting, you will be asked to consider three proposals relating to an
investment in Sprint of up to an estimated $4.2 billion in the aggregate by
France Telecom (FT) and Deutsche Telekom AG (DT). PLEASE NOTE THAT UNLESS ALL
THREE PROPOSALS ARE APPROVED BY STOCKHOLDERS, NONE WILL BE IMPLEMENTED. The
Board of Directors, Management and I believe that this investment presents a
unique opportunity to enhance stockholder value. Your vote on the enclosed
proxy card is requested in support of the three proposals.
The investment by FT and DT would result in FT and DT owning voting
securities representing approximately 20% of Sprint's outstanding voting
shares. Concurrently with the investment, Sprint, FT and DT would form a joint
venture to provide seamless global telecommunications services to business,
consumer and carrier markets worldwide.
The terms of the securities to be issued to FT and DT would entitle FT and DT
to proportionate representation on the Sprint Board of Directors. FT and DT
would also have disapproval rights with respect to certain Sprint transactions
(for example, major acquisitions or divestitures) for a period of years. The
Board of Directors believes these rights are commensurate with the size of FT's
and DT's investment in Sprint, the premium being paid to acquire Sprint shares
and FT's and DT's strategic relationship with Sprint.
Details of the three proposals are set forth in the accompanying Proxy
Statement. We urge you to read the entire Proxy Statement carefully. For the
reasons set forth in the Proxy Statement, the Board of Directors recommends
that stockholders vote for each of the three investment proposals. We believe
the investment and the related joint venture will create value for the
stockholders. In the opinion of Dillon, Read & Co. Inc., Sprint's financial
advisor, the investment is fair, from a financial point of view, to Sprint and
its stockholders.
PLEASE SIGN, DATE AND PROMPTLY RETURN YOUR PROXY CARD IN THE ENCLOSED
ENVELOPE.
On behalf of Management and the Board of Directors, thank you for your
cooperation and continued support.
Sincerely,
SPRINT CORPORATION
P.O. BOX 11315
KANSAS CITY, MISSOURI 64112
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1995
TO THE STOCKHOLDERS OF SPRINT CORPORATION:
A special meeting (the "Special Meeting") of the stockholders of Sprint
Corporation ("Sprint") will be held at the corporate headquarters of Sprint,
2330 Shawnee Mission Parkway, Westwood, Kansas, on , ,
1995, at a.m. (local time) to consider and vote upon three proposals (the
"Investment Proposals") related to the Investment Agreement, dated as of July
31, 1995, among Sprint, France Telecom ("FT") and Deutsche Telekom AG ("DT"),
as it may be amended from time to time (the "Investment Agreement"). The three
Investment Proposals are summarized as follows:
1. To approve and adopt the Investment Agreement and the performance by
Sprint of all transactions and acts on the part of Sprint contemplated
under the Investment Agreement (Proposal No. 1), including, among other
things:
(i) the issuance to FT and DT (and/or to certain of their designated
subsidiaries) of shares of Sprint's Class A Common Stock, par value
$2.50 per share (the "Class A Common Stock"), which Class A Common
Stock will be issued (x) when Sprint has either effected or abandoned a
proposed spin-off of its cellular operations (the "Cellular Spin-Off"),
the average closing market price of shares of Sprint's Common Stock,
par value $2.50 per share (the "Sprint Common Stock"), has traded at or
above a certain threshold as provided in the Investment Agreement, and
certain other conditions to closing have been satisfied or waived,
and/or (y) upon conversion of the Class A Preference Stock (as defined
below);
(ii) the issuance to FT and DT (and/or to certain of their designated
subsidiaries) of shares of Sprint's Class A Preference Stock, par value
$1.00 per share (the "Class A Preference Stock" and, together with the
Class A Common Stock, the "Class A Stock"), if at the time the
conditions to the initial and, if applicable, subsequent closings of
the investment by FT and DT (and/or certain of their designated
subsidiaries) are otherwise satisfied or waived either Sprint has not
effected or abandoned the Cellular Spin-Off or the average closing
market price of Sprint Common Stock has not traded at or above a
certain threshold as provided in the Investment Agreement, which Class
A Preference Stock will be convertible into Class A Common Stock in
accordance with Sprint's Articles of Incorporation (the "Articles of
Incorporation"), as amended by the Charter Amendments (as defined
below) ; and
(iii) the issuance of shares of Sprint Common Stock upon the
conversion of shares of Class A Stock in accordance with the Articles
of Incorporation as amended by the Charter Amendments.
2. To approve and adopt certain amendments to the Articles of
Incorporation and to Sprint's Bylaws (the "Bylaws") (Proposal No. 2). The
amendments to the Articles of Incorporation (the "Charter Amendments"), if
adopted, will, among other things:
(i) increase the number of authorized shares of capital stock of
Sprint;
(ii) establish the terms of the Class A Stock, which terms will
include class voting rights to disapprove certain specified
transactions and matters and to elect a certain number of directors of
Sprint;
(iii) permit the redemption of shares of Sprint Common Stock and, in
certain circumstances, Class A Stock to the extent necessary to allow
Sprint to comply with Section 310 of the U.S. Communications Act of
1934, as amended;
1
(iv) provide that if Sprint determines to effect certain types of
transactions involving a change of control of Sprint, it will conduct
such transactions in accordance with reasonable procedures to be
determined by the Sprint Board of Directors and permit FT and DT to
participate in the process on a basis no less favorable than that
granted any other participant;
(v) revise certain provisions relating to the removal of directors;
and
(vi) revise the "greenmail" provisions in ARTICLE EIGHTH of the
Articles of Incorporation to provide that the affirmative vote of
Sprint stockholders which would otherwise be required by such
provisions will not be required in connection with purchases,
redemptions or other acquisitions by Sprint of capital stock of Sprint
held by FT, DT, certain of their designated subsidiaries or certain
other qualified holders of the Class A Stock pursuant to the Investment
Agreement, the Stockholders' Agreement to be entered into pursuant to
the Investment Agreement, and the Articles of Incorporation as amended
by the Charter Amendments.
The amendments to the Bylaws, if adopted, will, among other things,
(i) accommodate the establishment of the Class A Stock and the
directors elected by the holders of the Class A Stock;
(ii) add a new provision requiring a majority of the members of the
Sprint Board of Directors to be "Independent Directors"; and
(iii) add a new provision requiring stockholder proposals to be
delivered to the Corporate Secretary within a certain time period prior
to a meeting of stockholders in order to be eligible for presentation
at such meeting.
3. To approve and adopt for purposes of Kansas Statutes Annotated
Sections 17-1286 et seq. (the "Control Share Acquisitions Statute") the
plan of FT, DT and certain of their subsidiaries to make a "control share
acquisition" (within the meaning of the Control Share Acquisitions Statute)
falling in the range of one-fifth or more, but less than one-third, of the
voting power of Sprint, as contemplated or permitted by the Investment
Agreement, the other agreements to be executed pursuant to the Investment
Agreement and the Charter Amendments and as contemplated by the "acquiring
person statement" (as defined in the Control Share Acquisitions Statute)
delivered to Sprint (the "Control Share Acquisitions Plan") and, in
accordance with Section 17-1294 of the Control Share Acquisitions Statute,
to accord the shares acquired pursuant to the Control Share Acquisitions
Plan the full voting rights that those shares would be entitled to exercise
pursuant to the Articles of Incorporation, as amended by the Charter
Amendments, notwithstanding the limitations imposed under the Control Share
Acquisitions Statute (Proposal No. 3).
THE APPROVAL AND ADOPTION OF EACH INVESTMENT PROPOSAL IS CONTINGENT ON THE
APPROVAL AND ADOPTION OF ALL THREE INVESTMENT PROPOSALS. UNLESS ALL THREE
INVESTMENT PROPOSALS ARE APPROVED AND ADOPTED BY THE STOCKHOLDERS AT THE
SPECIAL MEETING, NONE WILL BE EFFECTED BY SPRINT.
The close of business on , 1995, has been designated as the record
date for the determination of stockholders entitled to notice of and to vote at
the Special Meeting or any adjournments or postponements thereof. A complete
list of stockholders entitled to vote at the Special Meeting will be maintained
at Sprint's corporate headquarters at 2330 Shawnee Mission Parkway, Westwood,
Kansas, for a period of 10 days prior to the Special Meeting.
By order of the Board of Directors
Don A. Jensen
Vice President and Secretary
Westwood, Kansas
, 1995
2
YOUR VOTE IS IMPORTANT
The affirmative vote of a majority of the outstanding shares of Sprint
Common Stock and all classes of Sprint Preferred Stock entitled to general
voting power ("Sprint Voting Stock") that are present at the Special
Meeting, voting together as a single class, is necessary for the approval
and adoption of Proposal No. 1. The affirmative vote of a majority of the
outstanding shares of Sprint Voting Stock, voting together as a single
class, and the affirmative vote of a majority of the outstanding shares of
Sprint Common Stock, voting as a separate class, are necessary for the
approval and adoption of Proposal No. 2. The vote necessary to approve and
adopt Proposal No. 3 is the affirmative vote of (i) a majority of the
outstanding shares of Sprint Voting Stock; and (ii) a majority of the
outstanding shares of Sprint Voting Stock, excluding any shares of Sprint
Voting Stock held by (x) FT, DT or any member of a group with FT and DT that
makes or proposes to make a "control share acquisition" (as defined in the
Control Share Acquisitions Statute), (y) officers of Sprint and (z)
employees of Sprint who are also directors of Sprint. We consider the vote
of each stockholder important, whatever the number of shares held. If you
are unable to attend the Special Meeting in person, please sign, date and
return your proxy in the enclosed envelope at your earliest convenience. The
prompt return of your proxy will save expense to your company.
THE BOARD OF DIRECTORS REQUESTS THE EXECUTION AND PROMPT RETURN OF THE
ACCOMPANYING PROXY.
3
TABLE OF CONTENTS
PAGE
-----
SUMMARY.................................................................. i
The Special Meeting.................................................... i
Investment Proposals................................................... ii
Description of Investment Proposals.................................. ii
Background of and Reasons for Investment Proposals................... iii
Recommendations of the Sprint Board.................................. v
Opinion of Financial Advisor......................................... vi
Use of Proceeds...................................................... vi
Source of Funds...................................................... vi
Certain Considerations............................................... vi
Regulatory Approvals................................................. vii
Investment Agreement and Related Investment Documents.................. vii
In General........................................................... vii
Purchase and Sale of Class A Stock................................... vii
Terms of the Class A Stock........................................... ix
In General......................................................... ix
Board Representation............................................... ix
Disapproval Rights................................................. ix
Conversion of Class A Common Stock; Termination of Fundamental
Rights............................................................ xi
Standstill Agreement................................................. xi
Transfer Restrictions; Rights of First Offer and First Refusal;
Registration Rights................................................. xi
Change of Control Provisions......................................... xii
Equity Purchase Rights............................................... xii
Right of First Offer with Respect to Long Distance Assets............ xiii
Certain Covenants in the Investment Agreement........................ xiii
Conditions to the First Closing...................................... xiii
Conditions to Article IV Closing..................................... xiv
Termination of the Investment Agreement.............................. xiv
Charter Amendments and Bylaw Amendments................................ xv
Approval of Control Share Acquisitions Plan............................ xvi
The Joint Venture...................................................... xvii
In General........................................................... xvii
Business of the Joint Venture........................................ xvii
Joint Venture Structure.............................................. xviii
Management and Control............................................... xviii
Effect of Change of Control; Transactions with Major Competitors..... xix
Global Backbone Network.............................................. xix
Initial Contributions; Additional Capital Contributions.............. xix
Other Activities of the Joint Venture Parties and the Joint Venture.. xix
Transfer of Venture Interests........................................ xx
Dispute Resolution/Deadlock Procedures............................... xx
Plan Actions and GBN Special Matters................................. xx
Termination of the Joint Venture..................................... xxi
Joint Venture Closing Conditions..................................... xxi
Intellectual Property and Trademark License Agreements............... xxi
Services Agreements.................................................. xxi
Price Range of Sprint Common Stock..................................... xxii
THE SPECIAL MEETING...................................................... 1
Proxy Solicitation..................................................... 1
i
Purpose of the Special Meeting.......................................... 1
Date, Time and Place; Record Date....................................... 1
Votes Required; Quorum; Absence of Dissenters' Rights................... 2
Proxies; Revocability of Proxies........................................ 2
Voting by Participants in Certain Plans................................. 3
INVESTMENT PROPOSALS...................................................... 3
Description of Investment Proposals..................................... 3
Background of and Reasons for Investment Proposals...................... 5
Recommendations of the Sprint Board..................................... 8
Opinion of Financial Advisor............................................ 9
Use of Proceeds......................................................... 13
Source of Funds......................................................... 13
Certain Considerations.................................................. 14
Antitakeover Impact................................................... 14
Disapproval Rights.................................................. 14
Certain Changes of Control.......................................... 14
Effect on the Joint Venture....................................... 14
Effect on Potential Transactions by Sprint........................ 15
Exclusionary Tender Offer........................................... 15
Right of First Offer with Respect to Long Distance Assets........... 16
Authorization of Additional Shares of Capital Stock................. 16
Existing Provisions in the Articles of Incorporation and the Bylaws. 16
Board Representation; Disapproval Rights.............................. 16
FCC Redemption Provision; Possible Redemption of Shares Held by
Aliens............................................................... 17
Major Competitors..................................................... 18
Limits on Sprint's Ability to Pursue Certain Opportunities............ 18
Ownership of FT by the French Government and of DT by Germany; Effect
of Privatization..................................................... 19
Possible Dilutive Effects............................................. 19
Interests of Certain Persons in the Transaction....................... 20
Regulatory Approvals.................................................... 21
In General............................................................ 21
United States Communications Act...................................... 22
United States Antitrust Laws.......................................... 23
U.S. State Regulatory Approvals....................................... 24
Exon-Florio Amendment................................................. 24
Defense Investigative Service......................................... 24
European Union Competition Regulations................................ 25
Regulatory Approvals in France and Germany............................ 25
Regulatory Approvals Relating to Atlas................................ 25
INVESTMENT AGREEMENT AND RELATED INVESTMENT DOCUMENTS..................... 26
In General.............................................................. 26
Purchase and Sale of Class A Stock...................................... 26
In General............................................................ 26
Purchase of Class A Common Stock at the First Closing................. 27
Purchase of Class A Preference Stock at the First Closing............. 28
Calculation of the Cellular Spin-Off Reduction Factor................. 28
Purchase of Class A Preference Stock at an Additional Preference Stock
Closing.............................................................. 29
Purchase of Class A Preference Stock at the Supplemental Preference
Stock Closing........................................................ 30
Purchase of Class A Common Stock at the Deferred Common Stock Closing. 30
Purchase of Optional Shares........................................... 31
Adjustments with Respect to the Shares of Class A Stock to be
Purchased............................................................ 32
Effect of Conversion.................................................. 32
ii
Assignment............................................................ 32
Terms of the Class A Stock.............................................. 32
In General............................................................ 32
Board Representation.................................................. 33
Disapproval Rights.................................................... 34
Certain Business Transactions....................................... 34
Governing Documents, Etc............................................ 35
Long Distance Assets................................................ 35
Major Competitors................................................... 36
Conversion of Class A Common Stock; Termination of Fundamental Rights. 36
Conversion Following Reduction in Ownership......................... 36
Conversion Following Breach of Certain Related Investment Documents. 36
Conversion Following Failure to Purchase Class A Common Stock....... 37
Conversion Following Breach of the Joint Venture Agreement.......... 37
Conversion Following Change of Control.............................. 38
Conversion Following Failure to Maintain Ownership Ratios........... 38
Conversion Following Transfers of Class A Stock to Persons Other
Than FT, DT, a Qualified Subsidiary or a Qualified Stock Purchaser. 38
Conversion Following Actions by Qualified Stock Purchasers.......... 38
Effect of Conversion of Class A Common Stock or Termination of
Fundamental Rights................................................. 39
Conversion in Connection With An Exclusionary Tender Offer.......... 39
Conversion of Sprint Common Stock into Class A Stock.................. 39
Terms of the Class A Common Stock....................................... 40
Dividends............................................................. 40
Liquidation Rights.................................................... 40
Voting Rights......................................................... 40
Anti-Dilution Provisions.............................................. 40
Terms of the Class A Preference Stock................................... 41
Dividends............................................................. 41
Liquidation Rights.................................................... 42
Voting Rights......................................................... 42
Anti-Dilution Provisions.............................................. 42
Conversion and Redemption............................................. 42
Timing of Conversion................................................ 42
Conversion Price.................................................... 43
Conversion Following Certain Events Under the Sprint Rights Plan.... 44
Redemption.......................................................... 44
Standstill Agreement.................................................... 45
Acquisition Restrictions.............................................. 45
Standstill Covenants.................................................. 46
Quorum................................................................ 47
Remedies for Breaches................................................. 47
Transfer Restrictions................................................... 48
Limitations on Transfer............................................... 48
Right of First Offer.................................................. 48
Right of First Refusal................................................ 49
Closing of Right of First Offer and Refusal........................... 49
Termination of Transfer Restrictions.................................. 50
Registration Rights..................................................... 51
Change of Control Provisions............................................ 52
iii
Definition of Change of Control....................................... 52
Participation by FT and DT Upon Decision by the Sprint Board to Sell
Sprint............................................................... 53
Effect of Change of Control on the Joint Venture, Special Rights of FT
and DT, Transfer Restrictions and Standstill Provisions.............. 53
Effect of Exclusionary Tender Offer................................... 53
Equity Purchase Rights.................................................. 53
In General............................................................ 53
Major Issuances....................................................... 54
Major Competitors..................................................... 54
Right of First Offer with Respect to Long Distance Assets............... 55
Certain Covenants....................................................... 56
Conduct of Sprint's Business.......................................... 56
Access to Information................................................. 57
No Solicitation....................................................... 57
Conduct of Cellular Business.......................................... 58
Application of Anti-Takeover Statutes................................. 58
Conditions to the First Closing......................................... 58
Conditions to Article IV Closing........................................ 60
Termination of the Investment Agreement................................. 61
"Fair Price" Provisions................................................. 62
Sprint Rights Plan...................................................... 62
CHARTER AMENDMENTS AND BYLAW AMENDMENTS................................... 62
Charter Amendments...................................................... 63
Increase in Number of Authorized Shares............................... 63
In General.......................................................... 63
Reasons for and Effects of the Increase of Authorized Capital Stock. 63
Creation of Class A Stock............................................. 64
Possible Redemption of Shares of Sprint Common Stock Held by Aliens... 64
In General.......................................................... 64
Reasons for and Effects of the FCC Redemption Provision............. 65
"Greenmail" Provisions................................................ 65
Removal of Directors.................................................. 66
In General.......................................................... 66
Removal of Ordinary Directors....................................... 66
Removal of Class A Directors........................................ 66
Provisions Relating to Amendment of the Bylaws........................ 66
Amendments to Sprint Bylaws............................................. 66
APPROVAL OF CONTROL SHARE ACQUISITIONS PLAN............................... 68
The Joint Venture....................................................... 70
In General............................................................ 70
Business of the Joint Venture......................................... 70
Joint Venture Structure............................................... 71
Management and Control................................................ 71
The Global Venture Board............................................ 71
The Global Venture Committee........................................ 72
The Global Venture Office........................................... 72
Performance of Certain Functions.................................... 73
Governing Boards of the Regional Operating Groups and the GBN Group. 73
Increased Control Over the Joint Venture by Sprint and Sprint Sub or
FT, DT and Atlas................................................... 74
Effect of Change of Control........................................... 75
Effect of Acquisition by a Major Competitor........................... 75
Acquisition of Interest in Sprint by a Major Competitor of FT/DT.... 75
iv
Sale of Assets by Atlas to a Major Competitor of Sprint.............. 75
Sale of Interests in FT or DT to Major Competitors of Sprint......... 75
Business Plans......................................................... 76
Global Backbone Network................................................ 76
Initial Contributions; Additional Capital Contributions................ 76
Other Activities of the Joint Venture Parties and the Joint Venture.... 77
Noncompetition....................................................... 77
Noncompetition Exceptions............................................ 78
Transfer of Venture Interests.......................................... 78
Dispute Resolution/Deadlock Procedures................................. 78
Plan Actions and GBN Special Matters................................... 79
Termination of the Joint Venture....................................... 80
Events of Termination................................................ 80
Rights of the Joint Venture Parties Upon Termination................. 80
Termination Upon Funding Default, Non-Funding Default or Event of
Bankruptcy........................................................ 80
Termination Upon Burdensome Condition, Impasse or Mutual Consent... 81
Transition Plan.................................................... 81
Joint Venture Closing Conditions....................................... 81
Intellectual Property and Trademark License Agreements ................ 83
In General........................................................... 83
Intellectual Property License Agreements............................. 83
Trademark License Agreements......................................... 83
Termination.......................................................... 84
Services Agreements.................................................... 84
In General........................................................... 84
Scope of Services.................................................... 84
Pricing.............................................................. 84
Term and Termination................................................. 85
Other Related Joint Venture Documents.................................. 85
INFORMATION CONCERNING SPRINT.............................................. 85
Beneficial Security Ownership............................................ 85
Antitakeover Provisions Applicable to Sprint............................. 86
In General............................................................. 86
Sprint Preferred Stock................................................. 86
"Fair Price" Provisions................................................ 86
"Greenmail Provisions"................................................. 87
Classified Board....................................................... 87
Provisions Relating to Stockholder Meetings............................ 87
Sprint Rights Plan..................................................... 88
Business Combination Statute........................................... 89
Control Share Acquisitions Statute..................................... 89
INFORMATION CONCERNING FT, DT AND ATLAS.................................... 89
Information Concerning FT................................................ 89
Information Concerning DT................................................ 89
Information Concerning Atlas............................................. 90
INDEPENDENT AUDITORS....................................................... 90
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING OF SPRINT STOCKHOLDERS....... 90
METHOD AND COST OF PROXY SOLICITATION...................................... 90
v
INCORPORATION OF DOCUMENTS BY REFERENCE................................... 91
INDEX OF DEFINED TERMS.................................................... 92
EXHIBITS
A--Opinion of Financial Advisor
B--Investment Agreement
C--Standstill Agreement
D--Composite Articles of Incorporation
E--Composite Bylaws
F--Acquiring Person Statement
vi
SUMMARY
The following summary (the "Summary") of the information in this proxy
statement (the "Proxy Statement") is not intended to be complete and is
qualified in its entirety by the more detailed information appearing elsewhere
in this Proxy Statement and the Exhibits to this Proxy Statement or
incorporated herein by reference. Cross references in the Summary are to the
captions of sections of this Proxy Statement unless otherwise indicated.
Stockholders are urged to read this Proxy Statement and the Exhibits to this
Proxy Statement in their entirety.
THE SPECIAL MEETING
This Proxy Statement is provided to the stockholders of Sprint Corporation, a
Kansas corporation ("Sprint"), in connection with a special meeting of the
Sprint stockholders and any adjournments or postponements thereof (the "Special
Meeting"). The Board of Directors of Sprint (the "Sprint Board") is soliciting
proxies hereby for use at the Special Meeting. See "The Special Meeting--Proxy
Solicitation" and "--Proxies; Revocability of Proxies."
At the Special Meeting, Sprint stockholders eligible to vote will be asked to
consider and vote upon the approval and adoption of the three investment
proposals described in this Proxy Statement (the "Investment Proposals"). See
"Investment Proposals--Description of Investment Proposals." The Special
Meeting is scheduled to be held at a.m., local time, on ,
, 1995, at Sprint's corporate headquarters, 2330 Shawnee Mission
Parkway, Westwood, Kansas. The Sprint Board has fixed the close of business on
, 1995 as the record date for the determination of holders of Sprint
capital stock entitled to notice of and to vote at the Special Meeting. See
"The Special Meeting--Date, Time and Place; Record Date."
The affirmative vote of a majority of the outstanding shares of Sprint's
Common Stock, par value $2.50 per share (the "Sprint Common Stock"), Sprint
Preferred Stock-First Series, Convertible, Sprint Preferred Stock-Second
Series, Convertible and Sprint Preferred Stock-Fifth Series (collectively, the
"Sprint Voting Stock") that are present at the Special Meeting, voting together
as a single class, is necessary for the approval and adoption of Proposal No.
1. The affirmative vote of a majority of the outstanding shares of Sprint
Voting Stock, voting together as a single class, and the affirmative vote of a
majority of the outstanding shares of Sprint Common Stock, voting as a separate
class, are necessary for the approval and adoption of Proposal No. 2. The vote
necessary to approve and adopt Proposal No. 3 is the affirmative vote of (i) a
majority of the outstanding shares of Sprint Voting Stock; and (ii) a majority
of the outstanding shares of Sprint Voting Stock, excluding any shares of
Sprint Voting Stock held by (x) France Telecom ("FT"), Deutsche Telekom AG
("DT") or certain of their designated subsidiaries or any member of a group
with FT, DT and such subsidiaries that makes or proposes to make a Control
Share Acquisition (as defined in "Approval of Control Share Acquisitions
Plan"), (y) officers of Sprint and (z) employees of Sprint who are also
directors of Sprint. Each share of Sprint Voting Stock is entitled to one vote.
See "The Special Meeting--Votes Required; Quorum; Absence of Dissenters'
Rights."
Each of FT and DT has represented and warranted in the Investment Agreement,
dated as of July 31, 1995, among Sprint, FT and DT, as it may be amended from
time to time (the "Investment Agreement"), that as of the date of the
Investment Agreement neither it nor any of its "affiliates" (as defined in the
Investment Agreement) "beneficially owns" (as so defined) any shares of capital
stock of Sprint. In addition, each of FT and DT has agreed in the Standstill
Agreement, dated as of July 31, 1995, among Sprint, FT and DT (the "Standstill
Agreement"), not to, and to cause its affiliates not to, acquire any Sprint
voting securities prior to the earlier of the Investment Completion Date (as
defined in "Investment Agreement and Related Investment Documents--Purchase and
Sale of Class A Stock--Purchase of Optional Shares") or the Section 3(b)(v)
Conversion Date (as defined in "Investment Agreement and Related Investment
Documents--Standstill Agreement--Acquisition Restrictions") other than as a
result of purchases from Sprint pursuant to the Investment Agreement. See "The
Special Meeting--Votes Required; Quorum; Absence of Dissenters' Rights."
i
THE APPROVAL AND ADOPTION OF EACH INVESTMENT PROPOSAL IS CONTINGENT ON THE
APPROVAL AND ADOPTION OF ALL THREE INVESTMENT PROPOSALS. UNLESS ALL THREE
INVESTMENT PROPOSALS ARE APPROVED AND ADOPTED BY THE STOCKHOLDERS AT THE
SPECIAL MEETING, NONE WILL BE EFFECTED BY SPRINT.
INVESTMENT PROPOSALS
Description of Investment Proposals. The Investment Proposals relate to the
transactions and acts contemplated to be performed on the part of Sprint
pursuant to the Investment Agreement and consist of three interrelated
proposals.
The first proposal (Proposal No. 1) is the approval and adoption of the
Investment Agreement and the performance by Sprint of all transactions and acts
on the part of Sprint contemplated under the Investment Agreement, including,
among other things:
(i) the issuance to FT and DT (and/or to certain of their designated
subsidiaries) of shares of Sprint's Class A Common Stock, par value $2.50
per share (the "Class A Common Stock"), which Class A Common Stock will be
issued (x) when Sprint has either effected or abandoned a proposed spin-off
of its cellular operations (the "Cellular Spin-Off"), the average closing
market price of Sprint Common Stock has traded at or above a certain
threshold as provided in the Investment Agreement, and certain other
conditions to closing have been satisfied or waived, and/or (y) upon
conversion of the Class A Preference Stock (as defined below);
(ii) the issuance to FT and DT (and/or to certain of their designated
subsidiaries) of shares of Sprint's Class A Preference Stock, par value
$1.00 per share (the "Class A Preference Stock" and, together with the
Class A Common Stock, the "Class A Stock"), if, at the time the conditions
to the initial and, if applicable, subsequent closings of the investment by
FT and DT (and/or certain of their designated subsidiaries) are otherwise
satisfied or waived, either Sprint has not effected or abandoned the
Cellular Spin-Off or the average closing market price of Sprint Common
Stock has not traded at or above a certain threshold as provided in the
Investment Agreement, which Class A Preference Stock will be convertible
into Class A Common Stock in accordance with Sprint's Articles of
Incorporation (the "Articles of Incorporation"), as amended by the Charter
Amendments (as defined below); and
(iii) the issuance of shares of Sprint Common Stock upon the conversion
of shares of Class A Stock in accordance with the Articles of
Incorporation, as amended by the Charter Amendments.
See "Investment Agreement and Related Investment Documents."
The second proposal (Proposal No. 2) is the approval and adoption of certain
amendments (the "Charter Amendments") to the Articles of Incorporation and
certain amendments (the "Bylaw Amendments") to Sprint's Bylaws (the "Bylaws").
The Charter Amendments, if adopted, will, among other things:
(i) increase the number of authorized shares of capital stock of Sprint;
(ii) establish the terms of the Class A Stock, which terms will include
class voting rights to disapprove certain specified transactions and
matters and to elect a certain number of directors of Sprint;
(iii) permit the redemption of shares of Sprint Common Stock and, in
certain circumstances, Class A Stock to the extent necessary to allow
Sprint to comply with Section 310 of the U.S. Communications Act of 1934,
as amended (the "Communications Act");
(iv) provide that if Sprint determines to effect certain types of
transactions involving a Change of Control (as defined in "Investment
Agreement and Related Investment Documents--Change of Control Provisions--
Definition of Change of Control") of Sprint, it will conduct such
transactions in accordance with reasonable procedures to be determined by
the Sprint Board and permit FT and DT to participate in the process on a
basis no less favorable than that granted any other participant;
(v) revise certain provisions in ARTICLE FIFTH of the Articles of
Incorporation relating to the removal of directors; and
ii
(vi) revise the "greenmail" provisions in ARTICLE EIGHTH of the Articles
of Incorporation to provide that the affirmative vote of Sprint
stockholders which would otherwise be required by such provisions will not
be required in connection with purchases, redemptions or other acquisitions
by Sprint of capital stock of Sprint held by FT, DT, certain of their
designated subsidiaries or certain other qualified holders of the Class A
Stock pursuant to the Investment Agreement, the Stockholders' Agreement to
be entered into pursuant to the Investment Agreement (the "Stockholders'
Agreement") and the Articles of Incorporation as amended by the Charter
Amendments.
See "Charter Amendments and Bylaw Amendments--Charter Amendments."
The Bylaw Amendments, if adopted, will, among other things,
(i) accommodate the establishment of the Class A Stock and the directors
elected by the holders of the Class A Stock;
(ii) add a new provision requiring a majority of the members of the
Sprint Board to be Independent Directors (as defined in "Investment
Proposals--Description of Investment Proposals"); and
(iii) add a new provision requiring stockholder proposals to be delivered
to the Corporate Secretary within a certain time period prior to a meeting
of stockholders in order to be eligible for presentation at such meeting.
See "Charter Amendments and Bylaw Amendments--Amendments to Sprint Bylaws."
The third proposal (Proposal No. 3) is the approval and adoption for purposes
of Kansas Statutes Annotated Sections 17-1286 et seq. (the "Control Share
Acquisitions Statute") of the plan of FT, DT and certain of their subsidiaries
to make a "control share acquisition" within the meaning of the Control Share
Acquisitions Statute, falling in the range of one-fifth or more, but less than
one-third, of the voting power of Sprint, as contemplated or permitted by the
Investment Agreement, the other agreements to be executed pursuant to the
Investment Agreement (the "Related Investment Documents"), and the Charter
Amendments and as contemplated by the "acquiring person statement" (as defined
in the Control Share Acquisitions Statute) delivered to Sprint (the "Control
Share Acquisitions Plan") and, in accordance with Section 17-1294 of the
Control Share Acquisitions Statute, to accord the shares acquired pursuant to
the Control Share Acquisitions Plan the full voting rights that those shares
would be entitled to exercise pursuant to the Articles of Incorporation as
amended by the Charter Amendments, notwithstanding the limitations imposed
under the Control Share Acquisitions Statute. See "Approval of Control Share
Acquisitions Plan."
The initial investment by FT and DT (and/or certain of their designated
subsidiaries) in Class A Stock will occur concurrently with the formation by
Sprint, Sprint Global Venture, Inc., a wholly owned subsidiary of Sprint
("Sprint Sub"), Atlas S.A. (a company to be owned 50% by FT and 50% by DT
("Atlas")), FT and DT of a global alliance that will provide international
data, voice and video services for multinational companies and business
customers, international services for consumers, initially based on card
services for travelers, and "carrier's carrier" services (the "Joint Venture").
The initial investment by FT and DT and the closing of the formation of the
Joint Venture will be consummated as soon as practicable following the
satisfaction or waiver of certain closing conditions, including receipt of all
required governmental approvals (the date of the closing of the initial
investment is referred to herein as the "Initial Issuance Date"). See
"Investment Proposals--Description of Investment Proposals."
Background of and Reasons for the Investment Proposals
Dramatic changes have occurred in the telecommunications industry in recent
years due to the opening to competition of global telecommunications markets
and increased competition and technological advances. As capabilities and
competition have expanded, customer expectations have become more
sophisticated. In addition, many customers now have a global presence and are
seeking a single-source provider for all of their global telecommunications
needs. Sprint's management believes that Sprint must be able to meet the needs
of customers on a global basis in order to remain competitive.
iii
For several years, Sprint has explored ways in which it can satisfy the needs
of existing and future customers throughout the world, including multinational
corporations, other large users, corporate and business customers and
international travelers, by providing seamless global telecommunications
services. Sprint's management believes that meeting the global needs of such
customers requires capabilities that are beyond the geographic coverage, know-
how and resources of any single telecommunications provider acting alone.
Accordingly, Sprint has been increasing its global presence through
relationships and alliances with, or investments in, other telecommunications
companies in various parts of the world that have assets and operations that
complement those of Sprint. Sprint has sought partners which share a common
vision of the future and of the opportunities which can be realized for their
customers and themselves by undertaking joint activity to create a global
organization.
Sprint's management believes that a global alliance with strong international
partners represents the best structure to take advantage of new opportunities
as they arise and to compete more effectively, both in the United States and
worldwide. Sprint has also been willing to consider a substantial equity
investment in Sprint by prospective global telecommunications partners that
otherwise satisfies Sprint's long term objectives. Sprint has considered such
an investment because it believes that the increase in its available cash and
access to capital that would result from such an investment would enhance its
ability to make the expenditures necessary to take advantage of strategic
opportunities, including Sprint's partnership with three of the largest cable
television companies in the United States.
In late 1993, members of senior management of each of Sprint, FT and DT began
discussing the possibility of a strategic alliance among Sprint, FT and DT.
From time to time throughout the period from late 1993 to June 1994, members of
senior management of Sprint, FT and DT continued discussing the possibility of
various forms of strategic alliances, including a substantial equity investment
in Sprint by FT and DT coupled with the formation of a joint venture by Sprint,
FT and DT. During the period that Sprint was considering a strategic alliance
with FT and DT, Sprint also continued to explore the possibility of various
forms of strategic alliances with other major international telecommunications
providers.
At a June 13, 1994 meeting of the Sprint Board, the Sprint Board authorized
the officers to enter into a memorandum of understanding (the "Memorandum of
Understanding") contemplating the transactions which ultimately were provided
for in the Investment Agreement, the Related Investment Documents, the
agreement relating to the formation of the Joint Venture (the "Joint Venture
Agreement") and the documents to be executed pursuant to the Joint Venture
Agreement (the "Related Joint Venture Documents"). On June 14, 1994, Sprint, FT
and DT executed the Memorandum of Understanding.
During the negotiation of definitive agreements, Sprint also pursued an
unrelated transaction which culminated in the announcement on October 25, 1994
of a major strategic alliance and joint venture (the "Sprint Telecommunications
Venture") with Tele-Communications, Inc., Comcast Corporation and Cox
Communications, Inc., three of the largest cable television companies in the
United States, for the purpose of entering the local and wireless
telecommunications business on a national basis. Moreover, during the third and
fourth quarters of 1994, one of Sprint's principal competitors, AT&T Corp.,
began an aggressive marketing campaign which, together with the generally
competitive conditions in the long distance industry, resulted in lower growth
in Sprint's long distance business in the last half of 1994 than had generally
been anticipated. Subsequent to the announcement of the Sprint
Telecommunications Venture and through the next few months, Sprint Common Stock
traded at a lower level than it had following execution of the Memorandum of
Understanding.
As a result, principals of Sprint, FT and DT, together with their financial
and legal advisors, negotiated various changes to the terms of the investment
by FT and DT (and/or certain of their designated subsidiaries) in Sprint (the
"Investment"). The principal change was the establishment of a "collar"
mechanism by which the consideration to be paid in connection with the
Investment will in most cases depend upon the average closing market price of
Sprint Common Stock over a period prior to the Investment instead of fixed
prices as originally contemplated by the Memorandum of Understanding.
iv
In addition, in early 1995, Sprint's management began consideration of the
Cellular Spin-Off to Sprint stockholders. The Cellular Spin-Off, if
consummated, would result in a reduction of the market price of Sprint Common
Stock because Sprint stockholders would receive a separate distribution of
value consisting of the common stock of Sprint's cellular operations and the
two stocks would then trade separately. Depending on the timing of the
Investment, the Cellular Spin-Off would affect the investment price through the
application of the "collar" mechanism referred to above. Furthermore, FT and DT
expressed the desire, in any event, not to participate in such a spin-off.
Therefore, the principals of Sprint, FT and DT, together with their financial
and legal advisors, negotiated additional provisions to the Investment
Agreements and the Related Investment Documents to provide for an appropriate
adjustment in the investment price in the case of the Cellular Spin-Off as well
as mechanisms to handle any issues created by the timing of the Cellular Spin-
Off as related to the timing of the Investment.
On June 22, 1995, Sprint, FT and DT entered into the Joint Venture Agreement
and certain related documents and entered into a Memorandum pursuant to which
they approved drafts of the Investment Agreement and the Related Investment
Documents, subject to certain revisions being made to such drafts to reflect
the pricing principles the parties had reached. Thereafter, Sprint, FT and DT
negotiated and prepared revisions to the drafts of the Investment Agreement and
the Related Investment Documents as provided for in the Memorandum of June 22,
1995. Sprint, FT and DT executed the Investment Agreement and the Standstill
Agreement both dated as of July 31, 1995. See "Investment Proposals--Background
of and Reasons for the Investment Proposals."
Recommendations of the Sprint Board. THE SPRINT BOARD HAS REVIEWED AND
CONSIDERED THE TERMS AND CONDITIONS OF THE INVESTMENT PROPOSALS AND HAS
DETERMINED THAT THE INVESTMENT PROPOSALS ARE FAIR TO, AND ARE ADVISABLE AND IN
THE BEST INTERESTS OF, SPRINT AND ITS STOCKHOLDERS. ACCORDINGLY, THE SPRINT
BOARD HAS UNANIMOUSLY APPROVED THE INVESTMENT PROPOSALS AND RECOMMENDS THAT
SPRINT STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE INVESTMENT
PROPOSALS.
In approving the Investment Proposals and in recommending that Sprint
stockholders approve and adopt the Investment Proposals, the Sprint Board
considered several factors, including the following:
. the substantial increase in Sprint's equity that will occur as a result
of the Investment and the belief that such substantial increase will
improve Sprint's access to the capital markets, enhance its competitive
position in the telecommunications industry in the United States and
throughout the world and enhance its ability to make the expenditures
necessary to take advantage of strategic opportunities;
. the consideration to be paid in connection with the purchase of shares of
Class A Stock pursuant to the Investment Agreement, the timing of the
Investment and the impact that the Cellular Spin-Off will have on the
price and timing of the Investment;
. the terms of the Investment Agreement and the Related Investment
Documents, the Charter Amendments, the Bylaw Amendments, the Joint
Venture Agreement and the Related Joint Venture Documents;
. the potential operational and economic benefits of participating in the
Joint Venture with FT, DT and Atlas;
. the belief that the strategic and competitive position of Sprint in the
United States and throughout the world will be significantly enhanced in
comparison to what could be achieved by Sprint alone or through
alternative ventures or alliances;
. the financial strength of FT and DT and their market presence in their
home countries;
. the degree of independence that Sprint will retain following the
consummation of the transactions contemplated by the Investment Agreement
and the Related Investment Documents (the "Investment Transactions");
v
. the possible dilution in earnings per share with respect to the Sprint
Common Stock resulting from the Investment Transactions;
. the opinion of Dillon, Read & Co. Inc. ("Dillon Read") to the effect that
the consideration to be paid in connection with the Investment is fair,
from a financial point of view, to Sprint;
. the possible impact of the Investment Transactions and the transactions
contemplated by the Joint Venture Agreement and the Related Joint Venture
Documents (the "Joint Venture Transactions" and, together with the
Investment Transactions, the "Transactions") on existing relationships
and ventures of Sprint;
. certain possible implications of two stockholders collectively owning a
significant minority interest in Sprint; and
. the factors described under "Investment Proposals--Certain
Considerations."
See "Investment Proposals--Recommendations of the Sprint Board," "--Opinion of
Financial Advisor," and "--Certain Considerations."
Opinion of Financial Advisor. Dillon Read has delivered to the Sprint Board
its written opinion (confirming its oral opinion delivered to the Sprint Board
on June 13, 1994) dated the date of this Proxy Statement to the effect that, as
of the date of such written opinion, and based upon the assumptions made,
matters considered and limits on the review undertaken, all of which are set
forth in such opinion, the consideration to be paid in connection with the
Investment is fair, from a financial point of view, to Sprint. The full text of
the opinion of Dillon Read dated as of the date of this Proxy Statement is
attached as Exhibit A to this Proxy Statement. Sprint stockholders are urged to
read this opinion carefully and in its entirety. For additional information
concerning the assumptions made, matters considered and limits on the review
undertaken by Dillon Read in rendering its opinion and the fees received and to
be received by it, see "Investment Proposals--Opinion of Financial Advisor."
Use of Proceeds. Under the terms of the Investment Agreement, the proceeds
from the sale of the Class A Stock (the "Proceeds") may be used for the
repayment of indebtedness, funding Sprint's investment in the entities
comprising the Joint Venture (the "JV Entities"), and other corporate purposes
as determined by the Sprint Board. Sprint anticipates that a significant
portion of the Proceeds will initially be used to repay debt consisting of
commercial paper and bank loans. At September 22, 1995, approximately $2.5
billion principal amount of commercial paper and bank loans was outstanding at
interest rates ranging from 5.75% to 6.18%. Approximately $943 million of such
debt was incurred to fund Sprint's investment in the Sprint Telecommunications
Venture. The balance of the Proceeds will be available to Sprint for general
corporate purposes and to pursue strategic investments and acquisitions.
Pending such use, the funds may be invested in short-term securities. See
"Investment Proposals--Use of Proceeds."
Source of Funds. Each of FT and DT (and/or their respective designated
subsidiaries) will require funds in an aggregate of up to $2.1 billion
(depending on the market price of Sprint Common Stock and whether the Cellular
Spin-Off is effected) to purchase shares of Class A Stock. FT has informed
Sprint that it expects that such funds will be provided by cash on hand,
borrowings or other sources, or a combination thereof. DT has informed Sprint
that it expects that such funds will be provided by cash flow from current
operations. The obligations of FT and DT under the Investment Agreement are not
conditioned upon the ability of FT or DT to finance the investment. According
to FT's 1994 Annual Report, at December 31, 1994, FT had consolidated gross
assets of 433.1 billion French francs and equity of 136.3 billion French francs
(U.S. $81.1 billion and U.S. $25.5 billion, respectively, using the exchange
rate of U.S. $.18730 to 1 French franc quoted in The Wall Street Journal of
January 3, 1995 as prevailing on December 30, 1994) before appropriation.
According to DT's 1994 Annual Report, at December 31, 1994, DT had total assets
of about 166 billion Deutschemarks and total liabilities (exclusive of capital,
reserves, and provisions) of about 125 billion Deutschemarks (equal to
approximately $107.5 billion and approximately $80.7 billion, respectively, at
the exchange rate of 1.5488 Deutschemarks per U.S. $1.00 prevailing on December
31, 1994).
Certain Considerations. While the Sprint Board is of the opinion that the
Investment Proposals are in the best interests of Sprint and its stockholders,
Sprint stockholders should consider the following effects in evaluating the
Investment Proposals: (i) certain anti-takeover effects on Sprint that would
result from the
vi
Transactions, including the ability of the holders of the Class A Stock (the
"Class A Holders") to disapprove certain business combinations, certain rights
of FT, DT and the other Class A Holders resulting from a Change of Control of
Sprint, the ability of the Class A Holders to require Sprint in certain
circumstances to purchase shares of Class A Stock in connection with certain
tender offers, FT's and DT's right of first offer with respect to long distance
assets of Sprint, and the authorization of additional shares of Sprint capital
stock, (ii) the rights of the Class A Holders to elect representatives on the
Sprint Board and to disapprove certain significant actions by Sprint and the
possibility that the Class A Holders may have interests that diverge or even
conflict with those of Sprint, (iii) the redemption provisions included in the
Charter Amendments, which would enable Sprint to redeem outstanding shares of
Sprint Common Stock and, in certain circumstances, Class A Stock to the extent
necessary to allow Sprint to comply with Section 310 of the Communications Act,
(iv) limits on the ability of Sprint to enter into certain types of
transactions with certain competitors of FT, DT or the Joint Venture, (v)
limits on Sprint's ability to pursue certain business opportunities with
persons other than FT, DT or Atlas, and (vi) certain implications arising from
FT currently being wholly owned by the Republic of France and from the shares
of DT currently being wholly owned by the Federal Republic of Germany and the
effect of any possible privatization of FT or DT. See "Investment Proposals--
Certain Considerations."
Regulatory Approvals. Each of Sprint, FT and DT generally is obligated to
make all necessary filings in connection with the Transactions under the
Communications Act, the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), applicable U.S. state telecommunications regulatory
laws, and applicable European Union ("EU") competition laws and French and
German laws and to use its reasonable efforts to obtain all required regulatory
approvals. Sprint, FT and DT have also filed a voluntary notification under
Section 721 of the Defense Production Act of 1950, as amended, and Sprint has
filed with the Defense Investigative Service necessary documents to demonstrate
that foreign ownership, control or influence of Sprint will not result from the
Investment Transactions. In addition, the formation by FT and DT of Atlas,
which is a condition to the consummation of the Transactions, is subject to
numerous regulatory approvals, including approvals under the laws of France,
Germany, certain other European countries and the EU. Each of FT and DT has
undertaken to make all necessary filings in connection with the formation of
Atlas under applicable laws and generally is obligated to use its reasonable
efforts to obtain all required regulatory approvals for the formation of Atlas.
There can be no assurance that Sprint, FT and DT will obtain in a timely
manner all necessary regulatory approvals or other regulatory actions that are
required to form Atlas or consummate the Transactions. Furthermore, it is
possible that any one or more of such regulatory approvals or other actions
that have not already been received or taken may be denied or may be
conditioned on material modifications being made to the Transactions or the
receipt of undertakings from Sprint, FT or DT which a party is unwilling to
accept. See "Investment Proposals--Regulatory Approvals."
INVESTMENT AGREEMENT AND RELATED INVESTMENT DOCUMENTS
In General. Sprint, FT and DT entered into the Investment Agreement effective
as of July 31, 1995. The Sprint Board reserves its right, pursuant to the
Investment Agreement, to (i) amend any provision of the Investment Agreement or
any Related Investment Document in accordance with its terms (with the
agreement of FT and DT) without Sprint stockholder approval before or after
approval of the Investment Proposals by Sprint stockholders for any reason,
including in order to obtain receipt of necessary regulatory approvals in a
timely manner, and (ii) terminate the Investment Agreement in accordance with
its terms notwithstanding stockholder approval.
Purchase and Sale of Class A Stock. Except as described below, and subject to
the terms and conditions of the Investment Agreement, FT and DT (and/or certain
of their designated subsidiaries) will purchase from Sprint on the Initial
Issuance Date an aggregate of 86,236,036 shares of Class A Common Stock,
representing in the aggregate approximately 20% of the outstanding shares of
Sprint Common Stock and Class A Common Stock after giving effect to such
issuance. If the Cellular Spin-Off has been abandoned, the purchase price of
the Class A Common Stock will be between $47.225 and $48.704 per share if the
average closing market
vii
price of the Sprint Common Stock for the 20 trading days ended 15 trading days
before the Initial Issuance Date is at or above $34.982 per share (yielding
proceeds to Sprint of between $4.1 billion and $4.2 billion in the aggregate).
If the Cellular Spin-Off has occurred, certain specified adjustments will be
made to the purchase price of the Class A Common Stock and to the $34.982 per
share threshold to reflect the fact that the Cellular Spin-Off has taken place.
See "Investment Agreement and Related Investment Documents--Purchase and Sale
of Class A Stock."
The closing of the purchase of the Class A Common Stock may be deferred and
an interim investment by FT and DT (and/or certain of their designated
subsidiaries) in Class A Preference Stock will be made, however, if the average
closing market price of the Sprint Common Stock (the "First Closing Average
Sprint Price") for the 20 trading day period ended 15 trading days prior to the
first closing of the sale of Class A Stock to FT and DT (the "First Closing")
is not at or above $34.982 per share (or a lower specified threshold if the
Cellular Spin-Off has occurred) or if the Cellular Spin-Off has not been
consummated or has not been abandoned prior to the First Closing. If Class A
Preference Stock is purchased at the First Closing, FT and DT will purchase
Class A Preference Stock having a liquidation value which, in the aggregate, is
between $1.5 billion and $3.0 billion, as determined pursuant to the Investment
Agreement. If the average closing market price of Sprint Common Stock for 20
consecutive trading days has reached or reaches an agreed threshold per share
and the Cellular Spin-Off has been consummated or abandoned, the Class A
Preference Stock would automatically convert into Class A Common Stock and FT
and DT would purchase the balance of the shares of Class A Common Stock in
accordance with the Investment Agreement at a subsequent closing (the "Deferred
Common Stock Closing"), unless FT and DT elect to defer conversion of the Class
A Preference Stock in accordance with the Articles of Incorporation as amended
by the Charter Amendments because the Conversion Price (as defined in
"Investment Agreement and Related Investment Documents--Terms of the Class A
Stock") is in excess of 135% of the average closing market price of Sprint
Common Stock for the 20 trading days ended on the 10th business day prior to
the date established for such conversion.
The Investment Agreement also provides that, if FT and DT purchase only $1.5
billion of Class A Preference Stock at the First Closing because the First
Closing Average Sprint Price is below the specified threshold, FT and DT will
purchase additional shares of Class A Preference Stock at one or more
subsequent closings (each, an "Additional Preference Stock Closing") if
thereafter the average closing market price of Sprint Common Stock for a 20
consecutive day trading period exceeds the specified threshold and the Cellular
Spin-Off has not been consummated or abandoned. Such purchases would be in an
amount having a liquidation value which in the aggregate is between $0.5
billion and $1.5 billion (as determined by Sprint). In addition, as described
in the preceding paragraph, FT and DT may elect to defer conversion of the
Class A Preference Stock into Class A Common Stock, and in such event they will
be required to purchase additional shares of Class A Preference Stock at a
"Supplemental Preference Stock Closing." FT and DT (and/or certain of their
designated subsidiaries) will also be entitled to purchase certain additional
shares of Class A Stock based on the number of additional shares of Sprint
Common Stock issued after June 14, 1994. Shares of Class A Preference Stock
issued to FT and DT (and/or certain of their designated subsidiaries), if any,
will be convertible into shares of Class A Common Stock in accordance with the
Articles of Incorporation as amended by the Charter Amendments.
Finally, if the average closing price of the Sprint Common Stock for a 20
trading day period is below $34.982 per share (or a lower specified threshold
if the Cellular Spin-Off has occurred), Sprint may elect (but is not obligated)
to (i) sell shares of Class A Common Stock at 135% of such average price if the
Cellular Spin-Off has been consummated or abandoned, or (ii) sell shares of
Class A Preference Stock with a Conversion Price equal to 135% of such average
price if the Cellular Spin-Off has not been consummated or abandoned. In
addition, if such average price is below $34.982 per share (or a lower
specified threshold if the Cellular Spin-Off has occurred), FT and DT may elect
(but are not obligated) to (i) purchase shares of Class A Common Stock at
$47.225 per share if the Cellular Spin-Off has been abandoned, (ii) purchase
shares of Class A Common Stock at $47.225 per share minus a specified
adjustment factor if the Cellular Spin-Off has been consummated, or (iii)
purchase shares of Class A Preference Stock with a Conversion Price fixed at
$47.225 per share if the Cellular Spin-Off has not been consummated or
abandoned. If Class A Preference
viii
Stock is issued in these circumstances, once the Cellular Spin-Off has been
consummated or abandoned, the Class A Preference Stock would convert into Class
A Common Stock and FT and DT would purchase the balance of the shares of Class
A Common Stock, in each case at the Conversion Price so fixed (subject to a
specified adjustment factor if the Cellular Spin-Off has been consummated). See
"Investment Agreement and Related Investment Documents--Purchase and Sale of
Class A Stock."
Unless conversion is deferred by FT and DT as described above, if shares of
Class A Preference Stock remain outstanding after the 60th day following the
fifth anniversary of the Initial Issuance Date, each outstanding share of Class
A Preference Stock must be redeemed by Sprint within five business days after
such date. However, if Sprint fails to comply with its obligation to redeem
such shares within five business days after the 60th day following such fifth
anniversary, the Class A Preference Stock thereafter will be convertible at the
election of the Class A Holders at a Conversion Price equal to 135% of the
average closing price of the Sprint Common Stock for the 20 trading days ended
on the trading day that is five trading days prior to such conversion.
Terms of the Class A Stock.
In General. The terms of the Class A Common Stock generally will be
equivalent on a per share basis to the terms of the Sprint Common Stock except
for its special voting and other rights discussed below. The terms of the Class
A Preference Stock generally will be identical to the terms of the Class A
Common Stock with respect to rights to representation on the Sprint Board and
disapproval rights, but will differ from the Class A Common Stock in other
respects, such as the right to receive dividends, liquidation rights, voting
rights and protection from dilution. See "Investment Agreement and Related
Investment Documents--Terms of the Class A Stock."
Board Representation. Beginning on the Initial Issuance Date, the Class A
Holders, as a general rule, will be entitled to representation on the Sprint
Board equal to the percent of the Sprint voting power owned by the Class A
Holders, rounded up or down to the nearer whole number of directors. In
addition, for so long as it is necessary in order to allow FT or DT to receive
certain benefits under relevant tax treaties between the United States and
France and between the United States and Germany, respectively, the Class A
Holders will be entitled to elect not less than 20% of the Sprint Board at any
time when the actual percentage of Sprint voting power owned by the Class A
Holders is at least 20%. Moreover, the Class A Holders are entitled to elect a
minimum of two directors generally so long as the percentage of Sprint voting
power owned by them, plus the percentage they are committed to purchase
(collectively, the "Committed Percentage"), is at least 10% or if the Committed
Percentage is below 10% for less than 180 consecutive days in certain
circumstances or is below 10% for a specified period of time following a
transaction resulting in the issuance of 30% or more of Sprint voting power (a
"Major Issuance"). In addition, the Class A Holders will be entitled to elect a
minimum of two directors until the Investment Completion Date, so long as $1.5
billion of the Class A Preference Stock (or a lesser amount which may result
from a required sale by the Class A Holders to Sprint of Class A Preference
Stock pursuant to the Stockholders' Agreement in order for Sprint to comply
with Section 310 of the Communications Act) is outstanding. The Class A
Holders, collectively, will be entitled to one representative on each committee
of the Sprint Board, subject to certain limited exceptions. See "Investment
Agreement and Related Investment Documents--Terms of the Class A Stock--Board
Representation." The foregoing rights are subject to termination in certain
circumstances as discussed in this Proxy Statement. See "Investment Agreement
and Related Investment Documents--Terms of the Class A Stock--Conversion of
Class A Common Stock; Termination of Fundamental Rights."
Disapproval Rights. For a period of two years after the Initial Issuance
Date, Sprint may not undertake any of the following transactions if such
transactions are disapproved by the Class A Holders (through action by the
holders of a majority of the shares of Class A Stock):
(i) subject to certain exceptions, any transaction or series of related
transactions resulting in divestitures of assets with a fair market value
in excess of 20% of Sprint's market capitalization as of the date of the
definitive agreement with respect to the last such related divestiture;
(ii) subject to certain exceptions, any transaction or series of related
transactions (including a merger or other business combination) resulting
in the acquisition for cash or debt securities having a maturity
ix
of less than one year of (x) Core Businesses (as defined in "Investment
Agreement and Related Investment Documents--Terms of the Class A Stock--
Disapproval Rights") the cost of which exceeds 20% of Sprint's market
capitalization immediately prior to the date of the definitive agreement
with respect to the last such related acquisition, or (y) businesses other
than Core Businesses, the cost of which exceeds 5% of Sprint's market
capitalization immediately prior to the date of the definitive agreement
with respect to the last such related acquisition;
(iii) the issuance by Sprint of any capital stock or debt with class
voting rights and disapproval rights which are in scope and duration as
extensive as or more extensive than the rights granted to the Class A
Holders;
(iv) the declaration of extraordinary cash dividends or cash
distributions to stockholders of Sprint during any one year in excess of 5%
of the market capitalization of Sprint (if the Investment Completion Date
has not occurred by the end of such two-year period, the Class A Holders
will continue to have the right to disapprove such extraordinary cash
dividends or cash distributions until the Investment Completion Date);
(v) any merger or other business combination in which Sprint is not the
surviving parent corporation; and
(vi) any Major Issuance.
Beginning two years after the Initial Issuance Date, Sprint may take any of
the foregoing actions despite the disapproval of such action by FT and DT.
However, if despite such disapproval by both FT and DT, Sprint nevertheless
takes any of the actions described in clauses (i), (ii), (iii), (iv) or (vi)
above following the second anniversary, but prior to the fifth anniversary, of
the Initial Issuance Date, the transfer restrictions described below applicable
to the Class A Stock (except for restrictions on transfers to large holders)
will be terminated, unless in the case of a Major Issuance the Class A Holders
have exercised certain equity purchase rights in respect of such Major
Issuance. See "Investment Agreement and Related Investment Documents--Transfer
Restrictions."
Moreover, during the five-year period following the Initial Issuance Date,
any Major Issuance will require the approval of two-thirds of the Independent
Directors, and after such five-year period will require the approval of a
majority of the Independent Directors.
In addition, as long as any shares of Class A Stock are outstanding, the
Class A Holders are entitled to disapprove certain fundamental business
transactions proposed to be effected by Sprint and certain changes to the
governing documents of Sprint, including (i) amendments to the Articles of
Incorporation as amended by the Charter Amendments, the Bylaws as amended by
the Bylaw Amendments or Sprint's rights plan (the "Sprint Rights Plan") that
would adversely affect the rights of the Class A Holders under the Articles of
Incorporation as amended by the Charter Amendments or the Bylaws as amended by
the Bylaw Amendments; (ii) issuance by Sprint of any securities (including
pursuant to a merger or other business combination) with more than one vote per
share; (iii) any merger or other business combination involving Sprint that
results in a Change of Control, unless the surviving corporation expressly
assumes all of Sprint's obligations to the Class A Holders with respect to the
assets of Sprint related to its long distance business ("Long Distance Assets")
and all of the provisions of the Registration Rights Agreement to be entered
into by FT, DT and Sprint (the "Registration Rights Agreement") and agrees to
be bound by the rights of FT, DT and their affiliates to control the Joint
Venture following certain occurrences; and (iv) any merger or other business
combination involving Sprint that does not result in a Change of Control,
unless Sprint survives as the parent entity, or the surviving corporation
expressly assumes all of Sprint's obligations in respect of the rights of the
Class A Holders granted pursuant to the Articles of Incorporation as amended by
the Charter Amendments, the Bylaws as amended by the Bylaw Amendments, the
Stockholders' Agreement and the Registration Rights Agreement. See "Investment
Agreement and Related Investment Documents--Terms of the Class A Stock--
Disapproval Rights--Governing Documents, Etc."
Until the earliest of (i) the fifth anniversary of the Initial Issuance Date,
(ii) the date on which the ownership by FT and DT of the Long Distance Assets
is no longer prohibited by Section 310 of the
x
Communications Act, (iii) the date on which FT, DT or Atlas elects to accept
Sprint's offer to sell all of the Venture Interests (as defined in "The Joint
Venture--In General") of Sprint and its affiliates following a Change of
Control, and (iv) the date on which Sprint or Sprint Sub exercises its right to
sell all of the Venture Interests of Sprint and its affiliates to FT, DT and
Atlas following a Change of Control (such period, the "Initial Period"), the
sale of a Cumulative (as defined in "Investment Agreement and Related
Investment Documents--Terms of the Class A Stock--Disapproval Rights--Long
Distance Assets") amount of 5% or more of the fair market value of Long
Distance Assets may not be consummated by Sprint if it is disapproved by the
Class A Holders. See "Investment Agreement and Related Investment Documents--
Terms of the Class A Stock--Disapproval Rights--Long Distance Assets."
During the ten-year period following the Initial Issuance Date, any action
taken or transaction entered into by Sprint that would result in, or is taken
for the purpose of encouraging or facilitating, certain competitors of FT, DT
or the Joint Venture owning 10% or more of the outstanding Sprint voting power
may not be undertaken if it is disapproved by the Class A Holders, unless such
transaction is a Strategic Merger (as defined in "Investment Agreement and
Related Investment Documents--Change of Control Provisions--Definition of
Change of Control").
Conversion of Class A Common Stock; Termination of Fundamental Rights. Under
certain circumstances and subject to certain exceptions, shares of Class A
Common Stock will automatically convert into shares of Sprint Common Stock or,
if any shares of Class A Preference Stock are outstanding, the rights of the
holders of the Class A Preference Stock to elect directors and exercise
disapproval rights and the right of FT and DT to participate in a proposed
Change of Control (the "Fundamental Rights") associated with such Class A
Preference Stock will terminate. These circumstances include (i) reduction in
the Committed Percentage of the Class A Holders below certain specified levels
and, in certain circumstances, for certain periods of time, (ii) breach of
certain provisions of the Investment Agreement or certain of the Related
Investment Documents by the Class A Holders, (iii) breach of certain provisions
of the Joint Venture Agreement by FT, DT, Atlas or any qualifying subsidiary of
FT, DT or Atlas which owns interests in the JV Entities (collectively, the
"FT/DT Parties") , (iv) occurrence of a Change of Control, (v) failure of FT
and DT to maintain certain ratios with respect to their ownership of Class A
Stock, and (vi) unauthorized transfers of Class A Stock.
Standstill Agreement. As a condition to entering into the Investment
Agreement, FT, DT and Sprint have entered into the Standstill Agreement, which
imposes restrictions on the ability of FT and DT and their respective
"affiliates" and "associates" (as defined in the Standstill Agreement) to
acquire additional Sprint voting power that would result in FT, DT and their
respective affiliates and associates beneficially owning more than 20% of
Sprint's voting power during the first fifteen years following the date of the
Standstill Agreement and more than 30% of Sprint's voting power thereafter,
subject to certain limited exceptions. In addition, the Standstill Agreement
imposes restrictions on the ability of FT, DT and their respective affiliates
and associates to initiate or participate in proposals with respect to the
control of Sprint. See "Investment Agreement and Related Investment Documents--
Standstill Agreement."
Transfer Restrictions; Rights of First Offer and First Refusal; Registration
Rights. The Stockholders' Agreement will contain certain restrictions on the
right of the Class A Holders to transfer equity securities of Sprint. During
the period ending five years after the Initial Issuance Date, the Class A
Holders generally will be prohibited from transferring any equity securities of
Sprint to any person other than FT, DT or a Qualified Subsidiary (as defined in
"Investment Proposals--Certain Considerations--Certain Changes of Control--
Effect on Potential Transactions by Sprint") or, in certain limited situations,
a Qualified Stock Purchaser. Thereafter, any sale by the Class A Holders of
equity securities of Sprint to a third party will be subject to the rights of
first offer and first refusal specified in the Stockholders' Agreement. See
"Investment Agreement and Related Investment Documents--Transfer Restrictions--
Right of First Offer" and "--Right of First Refusal." Sprint and each Class A
Holder also will be parties to the Registration Rights Agreement, which will
provide the Class A Holders with certain registration rights in certain
circumstances to the extent that transfers of equity interests are permitted
under the Stockholders' Agreement. See "Investment Agreement and Related
Investment Documents--Registration Rights."
xi
Change of Control Provisions. In the case of a Change of Control resulting
from a determination by the Sprint Board to sell all or substantially all of
the assets of Sprint (or not to oppose a third-party tender offer for more than
35% of the Sprint voting power) or to sell control of Sprint or to effect a
merger or other business combination, the result of which is a 35% or larger
stockholder (other than FT, DT or any of their Qualified Subsidiaries) in the
resulting entity (such a Change of Control is referred to herein as an
"Acquisition Proposal"), the Class A Holders generally will have the right to
sell their shares of Class A Stock in such transaction free of any restriction
on transfer (except for transfers to large holders) set forth in the
Stockholders' Agreement. See "Investment Agreement and Related Investment
Documents--Change of Control Provisions--Effect of Change of Control on the
Joint Venture, Special Rights of FT and DT, Transfer Restrictions and
Standstill Provisions."
If Sprint determines to effect an Acquisition Proposal, FT and DT will have
the right to participate in that process on a basis no less favorable than that
granted any other participant. See "Investment Agreement and Related Investment
Documents--Change of Control Provisions--Participation by FT and DT Upon
Decision by the Sprint Board to Sell Sprint."
In addition, if a third party makes a tender offer for not less than 35% of
the Sprint voting power and the terms of such tender offer do not permit the
Class A Holders to sell an equal or greater percentage of their shares as the
other stockholders of Sprint are collectively permitted to sell, then upon the
purchase by such third party in the tender offer of 35% or more of the Sprint
voting power, the Class A Holders may require Sprint to purchase at the tender
offer price the capital stock that such holders were unable to tender on the
same basis as the other stockholders, unless such holders are entitled to
receive publicly traded securities or cash in a business combination
transaction required to be effected within 90 days after the close of the
tender offer. See "Investment Agreement and Related Investment Documents--
Change of Control Provisions--Effect of Exclusionary Tender Offer." Finally, in
the case of a Change of Control, the FT/DT Parties will obtain rights which
will give them greater control over the Joint Venture. See "The Joint Venture--
Effect of Change of Control."
Equity Purchase Rights. Under the Stockholders' Agreement, following the
Investment Completion Date and for so long as the Committed Percentage of the
Class A Holders is not less than 10% for more than a specified period and
unless such right is otherwise terminated, each of the Class A Holders will
have the right, subject to certain restrictions, to maintain its proportionate
ownership of Sprint's voting power (based on its Committed Percentage) through
the exercise of certain purchase rights in respect of new issuances of voting
power of Sprint. See "Investment Agreement and Related Investment Documents--
Equity Purchase Rights."
If the Committed Percentage of the Class A Holders is diluted to less than
10% of the outstanding Sprint voting power as a result of a Major Issuance, the
Class A Holders will be entitled to (i) exercise certain proportional equity
purchase rights to purchase shares from Sprint to increase their ownership of
the outstanding Sprint voting power or (ii) increase their ownership to 10% of
the outstanding Sprint voting power through open market purchases or purchases
from third parties. See "Investment Agreement and Related Investment
Documents--Equity Purchase Rights--Major Issuances."
During the ten-year period following the Initial Issuance Date, if Sprint
consummates a Strategic Merger as a result of which (as defined in "Investment
Agreement and Related Investment Documents--Terms of the Class A Stock--
Disapproval Rights--Major Competitors") holds 20% or more of the outstanding
Sprint voting power, (i) the Class A Holders will have certain equity purchase
rights to match the ownership level of such Major Competitor, (ii) the Class A
Holders will have certain types of rights equal to the rights granted by Sprint
to such Major Competitor, regardless of whether FT or DT exercises its right to
increase its ownership, and (iii) if such Major Competitor has been granted
rights by Sprint equivalent or superior to the Minority Rights (as defined in
"Investment Proposals--Certain Considerations--Major Competitors"), the FT/DT
Parties will obtain rights which will give them greater control over the JV
Entities until the fifth anniversary of such transaction. See "Investment
Agreement and Related Investment Documents--Equity Purchase Rights--Major
Competitors."
xii
Right of First Offer with Respect to Long Distance Assets. Under the
Stockholders' Agreement, following the Initial Period and prior to the tenth
anniversary of the Initial Issuance Date, if a disposition of Long Distance
Assets by Sprint would result in the disposition of a Cumulative amount of 30%
or more of the fair market value of Long Distance Assets since the date of the
Investment Agreement, the Class A Holders will have a right of first offer with
respect to the assets of which Sprint proposes to dispose, unless such right of
first offer has been otherwise terminated. In addition, if Sprint proposes to
effect a disposition of Long Distance Assets such that it would no longer hold
51% or more of the Long Distance Assets, then Sprint would be required to offer
to sell at least 51% of the Long Distance Assets to the Class A Holders. These
provisions do not apply to Liens (as defined in "Investment Agreement and
Related Investment Documents-- Right of First Offer with Respect to Long
Distance Assets") granted on Long Distance Assets below certain thresholds or
to transfers of Long Distance Assets to entities in which Sprint has certain
specified levels of control. Subject to certain exceptions, the granting by
Sprint of a Lien on any Long Distance Assets is prohibited unless Sprint enters
into an agreement with each creditor which is the beneficiary of any such Lien
which provides that, prior to any foreclosure, FT and DT will have the option
to either purchase the subject Long Distance Assets free and clear of such Lien
or to pay the creditor all amounts due it which are secured by such Lien and
become subrogated to such creditor.
Certain Covenants. Under the Investment Agreement, Sprint has generally
agreed that from the date of the Investment Agreement until the Initial
Issuance Date (the "Pre-Closing Period") it will conduct its business in a
manner which is not materially inconsistent with the scope and nature of its
business on the date of the Investment Agreement and as described in this Proxy
Statement, and it will provide FT and DT, upon reasonable notice, with full and
complete access to such financial, operating and other information as FT and DT
may reasonably request. Sprint has agreed, during the Pre-Closing Period, not
to (i) redeem, repurchase or otherwise acquire shares representing in excess of
50% of Sprint voting power as of the date of the Investment Agreement, (ii)
amend the Articles of Incorporation or the Bylaws so as to adversely affect the
rights of FT or DT under the Investment Agreement and the Related Investment
Documents or (iii) propose any plan involving complete or partial dissolution
of Sprint. Sprint has also agreed to refrain, prior to the Initial Issuance
Date, from solicitation or negotiation of Acquisition Proposals or Alternative
Transactions (as defined in "Investment Agreement and Related Investment
Documents--Certain Covenants in the Investment Agreement--No Solicitation")
and, until the approval of the Investment Proposals by Sprint stockholders, to
refrain from any substantive negotiations relating to matters with respect to
which the Class A Holders would have special approval rights, unless Sprint
first notifies the Class A Holders of such negotiations and the Class A Holders
fail to notify Sprint of their objection to the negotiations. Upon receipt of
an Acquisition Proposal, the Sprint Board may determine to enter into
negotiations with respect to such proposal upon a determination that such
action is in the best interests of Sprint stockholders.
In addition, Sprint has agreed to conduct its cellular operations in the
ordinary course and to comply with certain additional covenants prior to, and
in connection with, the Cellular Spin-Off. Sprint has also agreed not to
undertake any other spin-off, split-off or similar transaction without causing
the spun-off entity to enter into an agreement with the Class A Holders similar
to the Investment Agreement and Related Investment Documents on terms no less
favorable to FT and DT than those contained in the Investment Agreement and the
Related Investment Documents. The Cellular Spin-Off does not require the
approval of FT and DT.
Conditions to the First Closing. The obligations of each of Sprint, FT and DT
to consummate the Investment Transactions are subject to the fulfillment or
waiver by the relevant party or parties of the following conditions, among
others, on or prior to the Initial Issuance Date:
(i) the waiting period under the HSR Act shall have expired without the
imposition of any Burdensome Condition (as defined in "Investment
Proposals--Regulatory Approvals--In General");
(ii) the relevant EU authorities shall have exempted the Joint Venture
Transactions and, if necessary, the Investment Transactions from the
operation of Article 85(1) of the Treaty of Rome, without the imposition of
any Burdensome Condition;
xiii
(iii) an FCC Order (as defined in "Investment Agreement and Related
Investment Documents--Conditions to the First Closing") shall have been
obtained, without the imposition of a Burdensome Condition;
(iv) FT shall have received the approval of the French minister in charge
of economic affairs and finance and the French minister in charge of posts
and telecommunications to carry out the Transactions, without the
imposition of a Burdensome Condition;
(v) either (A) DT shall have received the approval of the German Cartel
Office to carry out the Transactions, without the imposition of a
Burdensome Condition, or (B) the exemption referred to in clause (ii) above
shall have been obtained;
(vi) all other material governmental approvals required to be obtained to
consummate the Transactions shall have been obtained;
(vii) the Sprint stockholders shall have duly approved the Investment
Proposals; and
(viii) the closing of the formation of the Joint Venture (the "Venture
Closing") shall have occurred simultaneously with the closing of those
Investment Transactions to occur on the Initial Issuance Date.
In addition to the foregoing, the obligations of FT and DT are subject to the
following conditions, among others: (i) no Major Competitor of FT/DT shall have
acquired shares of Sprint representing greater than 10% of the outstanding
Sprint voting power, if such shares were acquired as a result of a transaction
with Sprint or one in which Sprint otherwise has taken steps for the purpose of
encouraging or facilitating such acquisition, (ii) no Change of Control shall
have occurred, and (iii) the Charter Amendments shall have been filed and
become effective, and the Bylaw Amendments shall have become effective.
There can be no assurance that each of the conditions to the consummation of
the closing of the transactions to occur on the Initial Issuance Date will be
satisfied or waived prior to December 31, 1995, the date after which each of
Sprint, FT and DT has the right, subject to the terms of the Investment
Agreement, to terminate the Investment Agreement if the Initial Issuance Date
has not occurred, other than as a result of the failure of the party seeking
termination to perform its obligations under the Investment Agreement and the
Related Investment Documents. See "Investment Agreement and Related Investment
Documents--Termination of the Investment Agreement." In particular, Sprint
cannot predict whether all applicable regulatory approvals or other regulatory
actions will be forthcoming. See "Investment Proposals--Regulatory Approvals."
Conditions to Article IV Closing. The conditions to the obligations of each
party to consummate the transactions contemplated by the Investment Agreement
at an Additional Preference Stock Closing, the Supplemental Preference Stock
Closing, or the Deferred Common Stock Closing are significantly more limited
than the conditions to the First Closing. See "Investment Agreement and Related
Investment Documents--Conditions to Article IV Closing."
Termination of the Investment Agreement. The Investment Agreement may be
terminated and the transactions contemplated thereby may be abandoned at any
time prior to the Initial Issuance Date (whether before or after the Special
Meeting) by mutual consent of Sprint, FT and DT. In addition, the Investment
Agreement may be terminated by any of Sprint, FT or DT if:
(i) the Initial Issuance Date does not occur on or before December 31,
1995, without fault of the party seeking termination;
(ii) it has become impossible for any condition precedent to its
obligations under the Investment Agreement or the Related Investment
Documents to be satisfied, without fault of the party seeking termination;
(iii) any of the other parties materially breaches its representations
and warranties contained in the Investment Agreement and the Related
Investment Documents and fails to cure such breach within a specified time
period;
xiv
(iv) the Sprint Board fails to recommend the Investment Proposals to the
Sprint stockholders or withdraws or qualifies its recommendation;
(v) the Sprint stockholders fail to approve the Investment Proposals; or
(vi) the Joint Venture Agreement is terminated in accordance with its
terms.
In addition, either FT or DT may terminate the Investment Agreement if:
(i) a Change of Control occurs;
(ii) Sprint undertakes substantive negotiations, or provides information
with respect to, an Alternative Transaction, unless FT and DT fail upon
notice to object to such action;
(iii) prior to the approval of the Investment Proposals by the Sprint
stockholders, the Sprint Board or any committee thereof is notified of
Sprint's involvement in negotiations with respect to an action the
consummation of which would be prohibited by the Investment Agreement and
the Sprint Board or such committee does not instruct Sprint to discontinue
such negotiations, unless FT and DT fail upon notice to object to such
negotiations; or
(iv) the Sprint Board or any committee thereof is notified of Sprint's
involvement in negotiations relating to an Acquisition Proposal and the
Sprint Board or such committee does not instruct Sprint to discontinue such
negotiations, unless FT and DT fail upon notice to object to such
negotiations.
If the Investment Agreement is terminated because the Sprint Board has
withdrawn or adversely qualified its recommendation of the Investment Proposals
after receiving an Acquisition Proposal or it is terminated in the
circumstances described in clauses (i), (ii) or (iv) immediately above, Sprint
shall promptly reimburse each of FT and DT for their reasonable out-of-pocket
expenses (including attorneys fees) incurred by it relating to the Transactions
up to a maximum amount of $15 million for each of FT and DT. See "Investment
Agreement and Related Investment Documents--Termination of the Investment
Agreement."
CHARTER AMENDMENTS AND BYLAW AMENDMENTS
The consummation of the Investment Transactions is conditioned on stockholder
approval of the Charter Amendments and the Bylaw Amendments. The Charter
Amendments, if approved and adopted by Sprint stockholders, will increase the
authorized capital stock of Sprint (including the number of authorized shares
of Sprint Common Stock) and establish the terms of the Class A Stock. See
"Investment Agreement and Related Investment Documents--Terms of the Class A
Stock." The Charter Amendments also will permit the redemption of shares of the
Sprint Common Stock or, in certain circumstances, the Class A Stock if
necessary to comply with Section 310 of the Communications Act. In addition,
the Charter Amendments will revise certain provisions in the Articles of
Incorporation relating to removal of directors. The Charter Amendments will
also revise the "greenmail" provisions contained in ARTICLE EIGHTH of the
Articles of Incorporation to provide that the affirmative vote of the Sprint
stockholders which would otherwise be required will not be required in
connection with purchases, redemptions or other acquisitions by Sprint of
capital stock of Sprint held by FT, DT or certain of their designated
subsidiaries or other qualified holders pursuant to the Investment Agreement,
the Stockholders' Agreement or the Articles of Incorporation as amended by the
Charter Amendments and will add provisions that will require Sprint to conduct
certain types of transactions involving a Change of Control in accordance with
reasonable procedures and permit FT and DT to participate in the process on a
basis no less favorable than that granted any other participant. The Sprint
Board reserves the right, at any time prior to the filing of the Charter
Amendments with the Secretary of State of the State of Kansas, to abandon such
proposed amendments without further action by the stockholders, notwithstanding
authorization of the Charter Amendments by the Sprint stockholders, in
connection with the termination of the Investment Agreement or otherwise. See
"Charter Amendments and Bylaw Amendments."
The Bylaw Amendments, if approved and adopted by Sprint stockholders, will be
effective upon the Initial Issuance Date. Many of the amendments reflect the
establishment of the Class A Stock and the
xv
directors to be elected by the Class A Holders. The Bylaw Amendments also add a
provision that requires a majority of the members of the Sprint Board to be
Independent Directors and a provision that requires stockholder proposals to be
delivered to the Corporate Secretary within a certain time period prior to a
meeting of stockholders in order to be eligible for presentation at such
meeting. Finally, certain of the Bylaw Amendments update the Bylaws consistent
with the practices of Sprint or eliminate minor inconsistencies in the existing
Bylaws. See "Charter Amendments and Bylaw Amendments--Amendments to Sprint
Bylaws." The Sprint Board reserves the right, at any time prior to the Initial
Issuance Date, to abandon such proposed amendments without further action by
the stockholders, notwithstanding authorization of the Bylaw Amendments by the
Sprint stockholders, in connection with the termination of the Investment
Agreement or otherwise.
APPROVAL OF CONTROL SHARE ACQUISITIONS PLAN
The Control Share Acquisitions Statute applies to the acquisition of shares
of a Kansas corporation by a person (a "Control Share Acquiring Person") which,
except for the limitations imposed under the Control Share Acquisitions
Statute, would entitle the Control Share Acquiring Person after such
acquisition, directly or indirectly, alone or as part of a group, to exercise,
or direct the exercise of, voting power in the election of directors of such
corporation falling within any of the following ranges:
(i) 20% or more but less than 33 1/3%,
(ii) 33 1/3% or more but less than or equal to 50%, or
(iii) more than 50%.
Acquisitions subject to this provision ("Control Share Acquisitions") include
those made within a period of 120 days or made pursuant to a plan to make a
Control Share Acquisition. Under the Control Share Acquisitions Statute,
"Control Shares" are those shares that, when added to all other shares
previously owned by the Control Share Acquiring Person, would make the
aggregate shares owned by such Control Share Acquiring Person fall within the
applicable range of voting power. Control Shares acquired in a Control Share
Acquisition have the same voting rights as were accorded the shares before the
Control Share Acquisition only to the extent such voting rights are approved by
the stockholders of the issuing corporation. Accordingly, unless the Control
Share Acquisition is duly approved by a stockholder vote as described herein,
the Control Shares will lose their voting rights. An acquisition may be
exempted from the Control Share Acquisitions Statute provided that a charter or
bylaw provision is adopted for such purpose prior to the Control Share
Acquisition. The Articles of Incorporation and the Bylaws contain no such
provisions.
Shares acquired directly from Sprint are not subject to the Control Share
Acquisitions Statute and therefore purchases made directly from Sprint would
not require stockholder approval. However, the plan of FT, DT and certain of
their subsidiaries named in the Acquiring Person Statement (as defined below)
to purchase Sprint stock as contemplated or permitted by the Investment
Agreement, the Related Investment Documents, and the Charter Amendments and as
contemplated by the Acquiring Person Statement (the "Control Share Acquisitions
Plan") carries with it the possibility of making purchases of Sprint stock in
the open market or from third parties under certain circumstances (see
"Investment Agreement and Related Investment Documents--Equity Purchase
Rights--Major Issuances" and "--Standstill Agreement"). These purchases would
be subject to the Control Share Acquisitions Statute in the absence of approval
of the Control Share Acquisitions Plan by the Sprint stockholders. If the
Control Share Acquisitions Plan is duly approved by Sprint stockholders, FT, DT
and certain of their subsidiaries named in the Acquiring Person Statement will
be entitled, subject to the restrictions contained in the Standstill Agreement
and the Sprint Rights Plan, to make open market purchases or purchases from
third parties which, when aggregated with the shares to be purchased pursuant
to the Investment Agreement, equal or exceed 20%, and the ownership and voting
power of FT, DT and such subsidiaries could decline below 20% and subsequently
increase up to an amount less than 33 1/3% without the need for a further
stockholder vote to retain full voting rights with
xvi
respect to all of their shares. If the Control Share Acquisitions Plan is
approved, FT, DT and such subsidiaries could transfer their shares to another
person without triggering the application of the Control Share Acquisitions
Statute so long as such acquisition did not cause the acquiror's aggregate
voting power to equal or exceed 33 1/3%. See "Approval of Control Share
Acquisitions Plan."
The Control Share Acquisitions Statute gives Sprint, within certain time
limitations, various redemption rights if there is a stockholder vote as to the
grant of voting rights and such grant is not approved, or if an acquiring
person statement is not delivered to Sprint within 10 days following a Control
Share Acquisition. Accordingly, FT and DT have delivered to Sprint an acquiring
person statement, dated , 1995 (the "Acquiring Person Statement"), a
copy of which is attached as Exhibit F to this Proxy Statement, pursuant to
Section 17-1291 of the Control Share Acquisitions Statute, stating their
proposal to make a Control Share Acquisition of Sprint voting securities.
Sprint, its directors, officers and affiliates expressly disclaim any
responsibility for, and make no representation as to, the completeness or
accuracy of the information set forth in the Acquiring Person Statement.
THE SPRINT BOARD HAS UNANIMOUSLY APPROVED THE CONTROL SHARE ACQUISITIONS PLAN
AND RECOMMENDS THAT IN ACCORDANCE WITH SECTION 17-1294 OF THE CONTROL SHARE
ACQUISITIONS STATUTE, SPRINT STOCKHOLDERS APPROVE THE CONTROL SHARE
ACQUISITIONS PLAN FOR PURPOSES OF THE CONTROL SHARE ACQUISITIONS STATUTE AND
ACCORD THE SHARES DESCRIBED IN SUCH PLAN THE FULL VOTING RIGHTS THAT SUCH
SHARES WOULD BE ENTITLED TO EXERCISE PURSUANT TO THE ARTICLES OF INCORPORATION
AS AMENDED BY THE CHARTER AMENDMENTS, NOTWITHSTANDING THE LIMITATIONS IMPOSED
UNDER THE CONTROL SHARE ACQUISITIONS STATUTE.
THE JOINT VENTURE
In General. As summarized above under "Investment Proposals--Background of
and Reasons for Investment Proposals," the transactions contemplated by the
Investment Agreement are one part of a proposed strategic alliance among
Sprint, FT, DT and Atlas. Sprint, Sprint Sub, FT and DT have entered, and,
subject to certain conditions, Atlas will enter, into the Joint Venture
Agreement to form the Joint Venture for the purpose of providing global
telecommunications services to corporate, consumer and "carrier's carrier"
markets. Atlas, FT, DT, Sprint and Sprint Sub are collectively referred to as
the "Joint Venture Parties."
The closing of those Investment Transactions to occur on the Initial Issuance
Date is conditioned on the Venture Closing, and the Venture Closing is
conditioned on the occurrence of the closing of such Investment Transactions.
The terms of the Joint Venture Agreement and the Related Joint Venture
Documents can be modified by agreement of the Joint Venture Parties. Such
modification would not require the consent of Sprint stockholders, and Sprint
does not anticipate that it would solicit such consent.
Business of the Joint Venture. The Joint Venture Parties have agreed to form
the Joint Venture to be the principal embodiment and global reference point of
their international telecommunications activities. The long-term objective of
Sprint, Sprint Sub, FT, DT and Atlas is for the Joint Venture to provide a full
range of telecommunications services on a global basis. However, the business
of the Joint Venture (the "Joint Venture Business") initially will consist of
the provision of (i) global international data, voice and video business
services for multinational companies and business customers; (ii) international
services for consumers, initially based on card services for travelers; and
(iii) a "carrier's carrier" business which will provide certain transport
services for Sprint, FT, DT, Atlas and other carriers. In addition, the Joint
Venture may offer telecommunications equipment and make investments in National
Operations (as defined below) and Public Telephone Operators (as defined
below). FT, DT and their subsidiaries (other than Atlas and its
xvii
subsidiaries) will be non-exclusive distributors of the services of the Joint
Venture (the "Joint Venture Services") in France and Germany, and Sprint and
its subsidiaries will be the exclusive distributors of the Joint Venture
Services in the United States. The Joint Venture will also be a non-exclusive
sales representative for the Joint Venture Parties' calling card and collect
calling services, switched and dedicated transit carrier services, certain
corporate voice services and international private line services. The Joint
Venture will not provide local telephone services, wireless services or non-
telecom information technology services.
To the extent permitted by law, the scope of the Joint Venture Business may
be expanded or otherwise altered over time within the scope of the
international telecommunications services business. However, any determination
to expand the Joint Venture Business would depend on a number of factors, which
could include developments in the telecommunications industry and the
technology employed in and available to the telecommunications industry, legal
and regulatory considerations and other business factors. The Joint Venture
will operate in a highly competitive and regulated environment, and there is no
assurance that the Joint Venture will achieve the current objectives of Sprint
or that the Joint Venture Business will not materially change.
Joint Venture Structure. The ownership and management structure of the Joint
Venture as described in this Proxy Statement is subject to change for business,
tax or other reasons. FT, DT and their respective subsidiaries (other than
Atlas and its subsidiaries) each will be non-exclusive distributors of the
Joint Venture Services in France and Germany and Sprint and its subsidiaries
will be the exclusive distributor of the Joint Venture Services in the United
States. The Joint Venture Services will be distributed in the rest of Europe
(other than France and Germany) by a group of JV Entities (each, a "ROE Entity"
and, collectively, the "Rest of Europe Group" or "ROE Group") and in the rest
of the world (other than Europe and the United States) by a separate group of
JV Entities (each, a "ROW Entity" and, collectively, the "Rest of World Group"
or "ROW Group" and, together with the ROE Group, the "Regional Operating
Groups"). The Joint Venture Parties also may form an additional group of JV
Entities (each, a "GBN Entity" and, collectively, the "GBN Group") to own and
operate a global transmission network (the "Global Backbone Network") over
which the Joint Venture Services and other traffic will be routed as agreed by
the Joint Venture Parties, subject to applicable law and to existing
arrangements of the Joint Venture Parties. Each of Sprint Sub and Atlas
initially will own, directly or indirectly, 50% of the outstanding voting
equity of the parent entity of each of the ROW Group and the GBN Group. Sprint
Sub and Atlas initially will own, directly or indirectly, 33 1/3% and 66 2/3%,
respectively, of the voting equity of the parent entity of the ROE Group. See
"The Joint Venture--Joint Venture Structure."
Management and Control. The Joint Venture Parties will form the "Global
Venture Board," the "Global Venture Committee" and the "Global Venture Office."
In general, actions of the Global Venture Board, the Global Venture Committee
and the Global Venture Office must be decided by unanimous vote. Among other
things, the Global Venture Board will be responsible for establishing certain
policies, strategies and standards for the conduct of the Joint Venture
Business (the "Global Policies") and for monitoring (i) the compliance by the
Regional Operating Groups and the GBN Group with their business plans, the
Global Policies and the strategic plan for the Joint Venture, and (ii) subject
to certain exceptions, the conformity of the operations of FT, DT, Atlas,
Sprint and Sprint Sub related to the Joint Venture Business with the strategic
plan for the Joint Venture and the Global Policies. With the exception of
certain matters as to which the Global Venture Board will have authority and
responsibility, the purpose of the Global Venture Board will be to establish
and resolve matters of policy and not the management of the JV Entities, which
will be effected by the governing boards and the management of the JV Entities
in accordance with the Global Policies and the business plans of such JV
Entities. The Global Venture Committee will have such authority and
responsibilities as may be delegated to it by the Global Venture Board and the
Global Venture Office will have such authority and responsibilities as may be
delegated to it by the Global Venture Board or the Global Venture Committee.
See "The Joint Venture--Management and Control--The Global Venture Board," "--
The Global Venture Committee" and "--The Global Venture Office."
Sprint Sub and Atlas will each be entitled to elect two of the four voting
members of the governing board of the parent entity of each of the ROW Group
and GBN Group. Sprint Sub will be entitled to elect two, and Atlas will be
entitled to elect or direct the election of four, of the voting members of the
governing board
xviii
of the parent entity of the ROE Group. Certain members of the governing boards
of the parent entity of each of the ROW Group, the GBN Group and the ROE Group
will be the same persons. In general, the affirmative vote of at least a
majority of the voting members of the governing board of the parent entity of
each of the ROW Group, the ROE Group and the GBN Group is required for such
entity to take action. However, subject to certain exceptions, certain actions
require unanimous approval of the governing boards of the parent entity of each
of the ROW Group, the ROE Group and the GBN Group. See "The Joint Venture--
Management and Control--Governing Boards of the Regional Operating Groups and
the GBN Group."
Under certain circumstances, either Sprint and Sprint Sub (the "Sprint
Parties"), on the one hand, or the FT/DT Parties, on the other hand, may obtain
rights which will give them greater control over the Joint Venture through
increased representation on the Global Venture Board, the Global Venture
Committee and the Global Venture Office, as well as on the governing board of
each JV Entity. See "The Joint Venture--Management and Control--Increased
Control Over the Joint Venture by the Sprint Parties or the FT/DT Parties."
Effect of Change of Control; Transactions with Major Competitors. The
occurrence of a Change of Control or certain transactions with Major
Competitors of FT/DT or Sprint will, subject to certain conditions, give one or
more Joint Venture Parties rights with respect to the Joint Venture, including
the right to sell their interests in the Joint Venture ("Venture Interests") to
certain other Joint Venture Parties, the right to purchase the Venture
Interests of certain other Joint Venture Parties, and rights which will give
them greater control over the Joint Venture. See "The Joint Venture--Effect of
Change of Control."
Global Backbone Network. The Joint Venture Services and other traffic will be
progressively routed over the Global Backbone Network to the extent appropriate
and as agreed by the Joint Venture Parties in light of the regulatory
environment and existing commercial arrangements to which any of them are a
party. Until such time as the Joint Venture Parties agree that such activities
are to be conducted by the GBN Group, certain or all operational aspects of the
business of the Global Backbone Network will be conducted by the ROW Group and
the ROE Group. See "The Joint Venture--Global Backbone Network."
Initial Contributions; Additional Capital Contributions. At the Venture
Closing, each of the Joint Venture Parties will contribute or otherwise make
available to the appropriate JV Entities certain of its assets presently used
in conducting its telecommunications businesses outside of its respective home
country. In connection with these initial contributions, the JV Entities will
assume certain liabilities associated with such contributed assets. A mechanism
will be provided by which the respective contributions of the Joint Venture
Parties will be adjusted, if necessary, so as to preserve the intended
respective ownership interests in the JV Entities.
Subject to certain exceptions, the governing board of any JV Entity may
require each shareholder of such JV Entity to make additional capital
contributions to such JV Entity. If any shareholder of a JV Entity fails to
make its additional capital contribution within the required time period, the
shareholder which has not so defaulted may contribute the defaulted amount to
such JV Entity. During a subsequent cure period, the defaulting shareholder may
cure its default. The ownership records of the JV Entity will be adjusted to
reflect the changes in the ownership interests of the non-defaulting
shareholder and the defaulting shareholder. The adjustment in ownership
interests generally will not affect the Joint Venture Parties' respective
governance rights. However, the non-defaulting shareholder may in certain
circumstances obtain rights which will give it greater control over the Joint
Venture. See "The Joint Venture--Initial Contributions; Additional Capital
Contributions."
Other Activities of the Joint Venture Parties and the Joint Venture. Each of
the Joint Venture Parties has agreed to be bound, for the duration of the
existence of the Joint Venture, by the terms of a noncompetition provision
contained in the Joint Venture Agreement. Subject to certain exceptions, no
Joint Venture Party or any of its affiliates may either directly or indirectly
offer, produce, provide, sell, promote, distribute or market any Competing
Services (as defined in "The Joint Venture--Other Activities of the Joint
Venture Parties and the Joint Venture--Noncompetition") or invest in any person
that offers Competing Services.
xix
Subject to certain exceptions, no Joint Venture Party or any of its affiliates
may (i) offer national long distance services in competition with a National
Operation or Public Telephone Operator which is affiliated with the Joint
Venture; (ii) invest in any person (other than a Public Telephone Operator)
that offers such competing national long distance services; (iii) invest in any
National Operation that has an alliance with a major competitor of the Joint
Venture; or (iv) invest in any National Operation or Public Telephone Operator
if a competitor of the Joint Venture is a Material Participant (defined in the
Joint Venture Agreement to be generally a person that has a greater than 20%
holding in an entity that has voting securities held by at least 500
shareholders or a greater than 10% holding in an entity with fewer than 500
shareholders) in such National Operation or Public Telephone Operator at the
time of investment. A Joint Venture Party and its affiliates may separately
invest in any other National Operation after first offering to the Joint
Venture the opportunity to invest in such National Operation, and may, after
consultation with the other Joint Venture Parties, separately invest in any
other Public Telephone Operator after determining in its sole discretion
whether to offer to the Joint Venture or to any other Joint Venture Party the
opportunity to participate in such investment.
As defined in the Joint Venture Agreement, a "National Operation" is any
entity or group of entities engaged primarily in providing national long
distance services, irrespective of the technology used in providing such
services, and a "Public Telephone Operator" is an entity providing national
telecommunications services which is or has been in the past at least 90% owned
by any governmental authority.
Transfer of Venture Interests. Subject to certain exceptions, a Joint Venture
Party generally is not permitted to make any transfer of any Venture Interests
for a period of ten years following the Venture Closing, or to make any
transfer of any Venture Interests to any Major Competitor of Sprint or the
Joint Venture, in the case of a transfer of Venture Interests by the FT/DT
Parties, or to any Major Competitor of FT, DT or the Joint Venture, in the case
of a transfer of Venture Interests by the Sprint Parties. Following the period
ending ten years after the Venture Closing, the Joint Venture Parties may
transfer Venture Interests to persons other than Major Competitors, subject to
a right of first refusal in favor of the Sprint Parties (in the case of
transfers proposed by the FT/DT Parties) and the FT/DT Parties (in the case of
transfers proposed by the Sprint Parties).
Dispute Resolution/Deadlock Procedures. In certain situations, the Global
Venture Board, the Global Venture Committee, the Global Venture Office or the
respective governing boards of the JV Entities may be unable to reach agreement
by the requisite vote on a matter. The Joint Venture Agreement contains a
mechanism for the resolution of such deadlocks by providing for the referral of
such matters to other entities for resolution. Certain deadlocks ("Special
Deadlock Matters"), if unresolved, will allow a Joint Venture Party to declare
an "Impasse," which can lead to the termination of the Joint Venture. For a
period of three years commencing on the date of the Venture Closing, however,
no failure of the Global Venture Board to resolve any deadlock relating to a
Special Deadlock Matter will result in the right of any Joint Venture Party to
declare an Impasse unless such Special Deadlock Matter results from a deadlock
relating to funding commitments. See "The Joint Venture--Dispute
Resolution/Deadlock Procedures."
Plan Actions and GBN Special Matters. If the Global Venture Committee and the
Global Venture Board fail to resolve a disagreement which relates to any
business, strategic, capital, operating, marketing or technology plan within
the scope of the international telecommunications services business within
Canada, Mexico or any other country in the Americas which accedes to the North
American Free Trade Agreement or a substantially similar agreement (a "NAFTA
Plan Action"), a disagreement which relates to such matters within the
territory of the ROE Group (a "ROE Plan Action") or a disagreement relating to
the expansion of the capacity of the Global Backbone Network which requires
additional investment not provided for in the most recent business plan of the
GBN Group (a "GBN Special Matter"), Sprint, with respect to a NAFTA Plan Action
or a GBN Special Matter, or Atlas, with respect to a ROE Plan Action or a GBN
Special Matter, may elect to carry out such activity upon which there is a
deadlock for a certain period. See "The Joint Venture--Plan Actions and GBN
Special Matters."
xx
Termination of the Joint Venture. The Joint Venture may be terminated in
certain circumstances. For purposes of this discussion, "Party" means Sprint
and Sprint Sub, on the one hand, and FT, DT and Atlas, on the other hand.
Events giving rise to a right to termination include (i) a funding default by a
Party, (ii) certain material non-funding defaults by a Party under the Joint
Venture Agreement, the Related Joint Venture Documents, the Investment
Agreement or the Standstill Agreement, (iii) the occurrence of a bankruptcy or
similar event with respect to a Party or its affiliate, (iv) the imposition by
a court or other governmental authority of a Burdensome Condition on Sprint,
FT, DT or Atlas, (v) the declaration of an Impasse, and (vi) mutual consent of
the Parties. See "The Joint Venture--Termination of the Joint Venture--Events
of Termination."
Upon termination due to a funding default, material non-funding default or a
bankruptcy, the Party which has not defaulted or which has not suffered the
bankruptcy, as the case may be, will generally have the right to purchase the
Venture Interests of the other Party, subject, in the case of such default or
bankruptcy with respect to FT or DT, to the right of the other of such European
Parties to purchase the Venture Interests of the defaulting European Party
before Sprint will have the right to purchase the Venture Interests of the
FT/DT Parties. If the termination results from the occurrence of a regulatory
action imposing a Burdensome Condition, the declaration of an Impasse or by
mutual consent, the Joint Venture will be terminated according to certain
"buy/sell" arrangements. See "The Joint Venture--Termination of the Joint
Venture--Rights of the Joint Venture Parties Upon Termination."
The Joint Venture Agreement contemplates that the Joint Venture Parties will
agree on a plan (the "Transition Plan") which will govern the rights and
obligations of the Joint Venture Parties under the Related Joint Venture
Documents following an event of termination described above or following the
withdrawal of a Joint Venture Party from the Joint Venture. The Transition Plan
is intended to ensure that the successor to the Joint Venture Business or the
remaining Joint Venture Parties, as the case may be, will continue to supply
services to the customers of the Joint Venture without interruption. The
Transition Plan will address the effect of the termination of the Joint Venture
on the noncompetition provisions contained in the Joint Venture Agreement and
on the Intellectual Property License Agreements and the Trademark License
Agreements (each as defined in "The Joint Venture--Intellectual Property and
Trademark License Agreements--In General") and the Services Agreements (as
defined in "The Joint Venture--Services Agreements--In General").
Joint Venture Closing Conditions. The obligations of the Joint Venture
Parties to effect the Venture Closing are subject to various conditions which
include, in addition to certain other customary closing conditions, receipt of
any required governmental approvals. There can be no assurance that each of the
conditions to the Venture Closing will be satisfied. In particular, there can
be no assurance that Sprint, FT and DT will obtain in a timely manner all
necessary regulatory approvals that are required to consummate the Joint
Venture Transactions. Furthermore, it is possible that any one or more of such
regulatory approvals or other regulatory actions that have not already been
received or taken may be denied or may be conditioned on material modifications
being made to the Joint Venture Transactions or the receipt of undertakings
from Sprint, FT, DT or Atlas which a party is unwilling to accept. See "The
Joint Venture--Joint Venture Closing Conditions."
Intellectual Property and Trademark License Agreements. Sprint, Atlas, FT and
DT and certain of the their respective affiliates and certain of the JV
Entities will enter into agreements governing the licensing of technology and
trademarks and certain other matters. See "The Joint Venture--Intellectual
Property and Trademark License Agreements."
Services Agreements. Sprint, Sprint Sub, Atlas, FT and DT and certain of
their affiliates will enter into certain agreements with certain of the JV
Entities within the ROW Group and the ROE Group pursuant to which the parties
to such agreements will provide to one another support in connection with the
provisioning, marketing and sale of Joint Venture Services. See "The Joint
Venture--Services Agreements."
xxi
PRICE RANGE OF SPRINT COMMON STOCK
The following table sets forth, for the periods indicated, the range of high
and low sales prices of the Sprint Common Stock, as reported on the New York
Stock Exchange Composite Tape:
PERIOD HIGH LOW
------ ------ ------
1993:
First Quarter............................................. 31 3/4 25 1/2
Second Quarter............................................ 35 3/8 29 1/2
Third Quarter............................................. 37 1/2 33 1/2
Fourth Quarter............................................ 40 1/4 31 3/8
1994:
First Quarter............................................. 38 1/8 32 1/2
Second Quarter............................................ 40 1/8 33 1/4
Third Quarter............................................. 40 1/8 34 1/8
Fourth Quarter............................................ 38 7/8 26 1/8
1995:
First Quarter............................................. 31 7/8 25 7/8
Second Quarter............................................ 35 7/8 30 3/8
Third Quarter through September 25........................ 36 7/8 32 5/8
Closing Price on:
June 13, 1994(1)..................................... 39 7/8
June 14, 1994(2)..................................... 37 1/8
June 21, 1995(3)..................................... 34 5/8
June 22, 1995(4)..................................... 34 7/8
September 25, 1995................................... 35 5/8
- --------
(1) The last trading day before Sprint, FT and DT publicly announced the
signing of the Memorandum of Understanding.
(2) The day Sprint, FT and DT publicly announced the signing of the Memorandum
of Understanding.
(3) The last trading day before Sprint, FT, and DT publicly announced the
signing of the Joint Venture Agreement and the reaching of an agreement
regarding the terms of the Investment.
(4) The day Sprint, FT and DT publicly announced the signing of the Joint
Venture Agreement and the reaching of an agreement regarding the terms of
the Investment.
Holders of Sprint Common Stock are entitled to receive such dividends as may
be lawfully declared by the Sprint Board. If declared by the Sprint Board,
dividends on Sprint Common Stock are usually paid quarterly at the end of
March, June, September and December. The exact record date and date of payment
are set by the Sprint Board. Quarterly dividends of $0.25 per share were paid
by Sprint in each quarterly period during 1993 and 1994 and the first two
quarters of 1995. A quarterly dividend of $0.25 per share has been declared for
the third quarter of 1995.
xxii
SPRINT CORPORATION
P. O. BOX 11315
KANSAS CITY, MISSOURI 64112
----------------
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
, 1995
----------------
THE SPECIAL MEETING
PROXY SOLICITATION
This Proxy Statement (the "Proxy Statement") is provided to the stockholders
of Sprint Corporation, a Kansas corporation ("Sprint"), in connection with a
special meeting of Sprint stockholders and any adjournments or postponements
thereof (the "Special Meeting"). The Board of Directors of Sprint (the "Sprint
Board") is soliciting proxies hereby for use at the Special Meeting. A form of
proxy is being provided to Sprint stockholders with this Proxy Statement.
Information with respect to the execution and the revocation of proxies is
provided under "--Proxies; Revocability of Proxies." This Proxy Statement and a
form of proxy are first being mailed on or about , 1995, to
stockholders of record at the close of business on the Record Date (as defined
below).
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, Sprint stockholders eligible to vote will be asked to
consider and vote upon the approval and adoption of the three investment
proposals described in this Proxy Statement (the "Investment Proposals"). See
"Investment Proposals--Description of Investment Proposals."
THE SPRINT BOARD HAS DETERMINED THAT THE INVESTMENT PROPOSALS ARE FAIR TO,
AND ARE ADVISABLE AND IN THE BEST INTERESTS OF, SPRINT AND ITS STOCKHOLDERS.
ACCORDINGLY, THE SPRINT BOARD HAS UNANIMOUSLY APPROVED THE INVESTMENT PROPOSALS
AND RECOMMENDS THAT SPRINT STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE
INVESTMENT PROPOSALS. SEE "INVESTMENT PROPOSALS--RECOMMENDATIONS OF THE SPRINT
BOARD."
DATE, TIME AND PLACE; RECORD DATE
The Special Meeting is scheduled to be held at a.m., local time, on
, , 1995, at Sprint's corporate headquarters, 2330 Shawnee
Mission Parkway, Westwood, Kansas. The Sprint Board has fixed the close of
business on , 1995 as the record date (the "Record Date") for the
determination of holders of Sprint Voting Stock (as defined below) entitled to
notice of and to vote at the Special Meeting. On , 1995, there were
shares of Sprint's Common Stock, par value $2.50 per share (the
"Sprint Common Stock"), shares of the Preferred Stock-First Series,
Convertible of Sprint ("Sprint First Series"), shares of the
Preferred Stock-Second Series, Convertible of Sprint ("Sprint Second Series")
and 95 shares of the Preferred Stock-Fifth Series of Sprint ("Sprint Fifth
Series"), in each case outstanding and entitled to vote. The Sprint Common
Stock, the Sprint First Series, the Sprint Second Series and the Sprint Fifth
Series are sometimes herein collectively referred to as "Sprint Voting Stock."
VOTES REQUIRED; QUORUM; ABSENCE OF DISSENTERS' RIGHTS
Each share of Sprint Voting Stock is entitled to one vote. The affirmative
vote of a majority of the outstanding shares of Sprint Voting Stock that are
present at the Special Meeting, voting together as a single class, is necessary
for the approval and adoption of Proposal No. 1. The affirmative vote of a
majority of the outstanding shares of Sprint Voting Stock, voting together as a
single class, and the affirmative vote of a majority of the outstanding shares
of Sprint Common Stock, voting as a separate class, are necessary for the
approval and adoption of Proposal No. 2. The vote necessary to approve and
adopt Proposal No. 3 is the affirmative vote of (i) a majority of the
outstanding shares of Sprint Voting Stock; and (ii) a majority of the
outstanding shares of Sprint Voting Stock, excluding any shares of Sprint
Voting Stock held by (x) France Telecom ("FT"), Deutsche Telekom AG ("DT") or
certain of their designated subsidiaries or any member of a group with FT, DT
and such subsidiaries that makes or proposes to make a Control Share
Acquisition (as defined in "Approval of Control Share Acquisitions Plan"), (y)
officers of Sprint and (z) employees of Sprint who are also directors of
Sprint.
Each of FT and DT has represented and warranted in the Investment Agreement,
dated as of July 31, 1995, among Sprint, FT and DT, as it may be amended from
time to time (the "Investment Agreement") that as of the date of the Investment
Agreement neither it nor any of its "affiliates" (as defined in the Investment
Agreement) "beneficially owns" (as so defined) any shares of capital stock of
Sprint. In addition, each of FT and DT has agreed in the Standstill Agreement,
dated as of July 31, 1995 among Sprint, FT and DT (the "Standstill Agreement"),
not to, and to cause its affiliates not to, acquire any Sprint voting
securities prior to the earlier of the Investment Completion Date (as defined
in "Investment Agreement and Related Investment Documents--Purchase and Sale of
Class A Stock--Purchase of Optional Shares") or the Section 3(b)(v) Conversion
Date (as defined in "Investment Agreement and Related Investment Documents--
Standstill Agreement--Acquisition Restrictions") other than as a result of
purchases from Sprint pursuant to the Investment Agreement.
THE APPROVAL AND ADOPTION OF EACH INVESTMENT PROPOSAL IS CONTINGENT ON THE
APPROVAL AND ADOPTION OF ALL THREE INVESTMENT PROPOSALS. UNLESS ALL THREE
INVESTMENT PROPOSALS ARE APPROVED AND ADOPTED BY THE STOCKHOLDERS AT THE
SPECIAL MEETING, NONE WILL BE EFFECTED BY SPRINT.
Holders of record of Sprint Voting Stock at the close of business on the
Record Date are entitled to vote on the proposals to be presented to
stockholders at the Special Meeting. The presence, either in person or by
proxy, of the holders of a majority of the outstanding shares of Sprint Voting
Stock and the holders of a majority of the outstanding shares of Sprint Common
Stock is necessary to constitute a quorum at the Special Meeting. Shares of
Sprint Voting Stock represented by a properly signed, dated and returned proxy
will be treated as present at the Special Meeting for purposes of determining a
quorum, without regard to whether the proxy is marked as casting a vote or
abstaining. See "--Proxies; Revocability of Proxies."
Stockholders are not entitled to appraisal or dissenters' rights in respect
of the Investment Proposals.
PROXIES; REVOCABILITY OF PROXIES
If a stockholder attends the Special Meeting, he or she may vote by ballot.
However, many Sprint stockholders may be unable to attend the Special Meeting.
Therefore, the Sprint Board is soliciting proxies so that each holder of shares
of Sprint Voting Stock at the close of business on the Record Date has the
opportunity to vote on the proposals to be considered at the Special Meeting.
When a proxy card is returned properly signed and dated, the shares represented
thereby will be voted in accordance with the instructions on the proxy card. If
a stockholder does not return a signed proxy card, his or her shares will not
be voted unless the stockholder attends the Special Meeting and votes in
person. Stockholders are urged to mark the box on the proxy card to indicate
how their shares are to be voted. If a stockholder returns a signed proxy card,
but does not indicate how his or her shares are to be voted and does not
indicate that such stockholder
2
is abstaining, the shares represented by the proxy card will be voted "FOR"
approval and adoption of the Investment Proposals. A proxy submitted by a
holder of Sprint Voting Stock may indicate that all or a portion of the Sprint
Voting Stock represented by such proxy is not being voted by such holder. This
could occur, for example, when a broker or other nominee fails to receive
specific instructions as to voting from one or more beneficial owners of Sprint
Voting Stock held by such broker or nominee, because such broker or nominee is
not permitted to vote such Sprint Voting Stock on any of the Investment
Proposals in the absence of specific instructions from the beneficial owner.
The Sprint Voting Stock subject to any such proxy that is not being voted will
have the effect of having been voted "AGAINST" Proposals No. 2 and 3, since the
approval of Proposals No. 2 and 3 requires the affirmative vote of a majority
of the outstanding shares of Sprint Voting Stock in the aggregate and (in the
case of Proposal No. 2) a majority of the outstanding shares of Sprint Common
Stock voting separately as a class. Abstentions will have the same effect as
votes "AGAINST" all three of the Investment Proposals.
The proxy card also confers discretionary authority on the individuals
appointed by the Sprint Board and named on the proxy card to vote the shares
represented thereby on any other matter that is properly presented for action
at the Special Meeting. Further, a vote "FOR" the approval and adoption of the
Investment Proposals also constitutes a vote to grant authority to adjourn the
Special Meeting from time to time if the holders of such proxies deem it
advisable under the circumstances. However, no proxies instructing that they be
voted "AGAINST", or "ABSTAIN" from voting on, the Investment Proposals will be
voted in favor of any such adjournment.
Any Sprint stockholder who executes and returns a proxy card may revoke such
proxy at any time before it is voted by (i) notifying in writing the Corporate
Secretary of Sprint at 2330 Shawnee Mission Parkway, Westwood, Kansas 66205,
(ii) granting a subsequent proxy, or (iii) appearing in person and voting at
the Special Meeting. Attendance at the Special Meeting will not in and of
itself constitute revocation of a proxy.
VOTING BY PARTICIPANTS IN CERTAIN PLANS
Participants in the Sprint Retirement Savings Plan and the Sprint Retirement
Savings Plan for Bargaining Unit Employees will receive cards with voting
instructions to the trustees of the plans as to the voting of shares of Sprint
Common Stock held in the plans. The trustees will vote shares of Sprint Common
Stock allocated to participants' accounts in the same manner as instructed by
participants, but will not vote shares of Sprint Common Stock allocated to
participants' accounts for which they do not receive instructions. The trustees
will vote all unallocated shares held in the trusts in the same proportions as
instructions received for allocated shares.
Participants in the Centel Retirement Savings Plan for Bargaining Unit
Employees and the Centel Employees' Stock Ownership Plan who have Sprint Common
Stock in their plan accounts also will receive a form to be used to instruct
the trustees how to vote such shares. The plans provide that each of the
trustees will vote such shares as instructed, and will vote shares of Sprint
Common Stock held in participants' accounts for which it does not receive
instructions in the same proportions as it votes the shares of Sprint Common
Stock for which it does receive instructions.
INVESTMENT PROPOSALS
THE APPROVAL AND ADOPTION OF EACH INVESTMENT PROPOSAL IS CONTINGENT ON THE
APPROVAL AND ADOPTION OF ALL THREE INVESTMENT PROPOSALS. UNLESS ALL THREE
INVESTMENT PROPOSALS ARE APPROVED AND ADOPTED BY THE STOCKHOLDERS AT THE
SPECIAL MEETING, NONE WILL BE EFFECTED BY SPRINT.
DESCRIPTION OF INVESTMENT PROPOSALS
The Investment Proposals relate to the transactions and acts contemplated to
be performed on the part of Sprint pursuant to the Investment Agreement and
consist of three interrelated proposals.
3
First, Sprint stockholders are being asked to approve and adopt the
Investment Agreement and the performance by Sprint of all transactions and acts
on the part of Sprint contemplated under the Investment Agreement (Proposal No.
1), including, among other things:
(i) the issuance to FT and DT (and/or to certain of their designated
subsidiaries) of shares of Sprint's Class A Common Stock, par value $2.50
per share (the "Class A Common Stock"), which Class A Common Stock will be
issued (x) when Sprint has either effected or abandoned a proposed spin-off
of its cellular operations (the "Cellular Spin-Off"), the average closing
market price of Sprint Common Stock has traded at or above a certain
threshold as provided in the Investment Agreement, and certain other
conditions to closing have been satisfied or waived, and/or (y) upon
conversion of the Class A Preference Stock (as defined below);
(ii) the issuance to FT and DT (and/or to certain of their designated
subsidiaries) of shares of Sprint's Class A Preference Stock, par value
$1.00 per share (the "Class A Preference Stock" and, together with the
Class A Common Stock, the "Class A Stock"), if, at the time the conditions
to the initial and, if applicable, subsequent closings of the investment by
FT and DT (and/or certain of their designated subsidiaries) are otherwise
satisfied or waived, either Sprint has not effected or abandoned the
Cellular Spin-Off or the average closing market price of Sprint Common
Stock has not traded at or above a certain threshold as provided in the
Investment Agreement, which Class A Preference Stock will be convertible
into Class A Common Stock in accordance with Sprint's Articles of
Incorporation (the "Articles of Incorporation"), as amended by the Charter
Amendments (as defined below); and
(iii) the issuance of shares of Sprint Common Stock upon the conversion
of shares of Class A Stock in accordance with the Articles of
Incorporation, as amended by the Charter Amendments.
Second, Sprint stockholders are being asked to approve and adopt certain
amendments (the "Charter Amendments") to the Articles of Incorporation and
certain amendments (the "Bylaw Amendments") to Sprint's Bylaws (the "Bylaws")
(Proposal No. 2). The Charter Amendments, if adopted, will, among other things:
(i) increase the number of authorized shares of capital stock of Sprint;
(ii) establish the terms of the Class A Stock, which terms will include
class voting rights to disapprove certain specified transactions and
matters and to elect a certain number of directors of Sprint;
(iii) permit the redemption of shares of Sprint Common Stock and, in
certain circumstances, Class A Stock to the extent necessary to allow
Sprint to comply with Section 310 of the U.S. Communications Act of 1934,
as amended (the "Communications Act");
(iv) provide that if Sprint determines to effect certain types of
transactions involving a Change of Control (as defined in "Investment
Agreement and Related Investment Documents--Change of Control Provisions--
Definition of Change of Control") of Sprint, it will conduct such
transactions in accordance with reasonable procedures to be determined by
the Sprint Board and permit FT and DT to participate in the process on a
basis no less favorable than that granted any other participant;
(v) revise certain provisions in ARTICLE FIFTH of the Articles of
Incorporation relating to the removal of directors; and
(vi) revise the "greenmail" provisions in ARTICLE EIGHTH of the Articles
of Incorporation to provide that the affirmative vote of Sprint
stockholders which would otherwise be required by such provisions will not
be required in connection with purchases, redemptions or other acquisitions
by Sprint of capital stock of Sprint held by FT, DT, certain of their
designated subsidiaries or certain other qualified holders of the Class A
Stock pursuant to the Investment Agreement, the Stockholders' Agreement to
be entered into pursuant to the Investment Agreement (the "Stockholders'
Agreement"), in substantially the form of Exhibit D to the Investment
Agreement, and the Articles of Incorporation as amended by the Charter
Amendments.
4
The Bylaw Amendments, if adopted, will, among other things:
(i) accommodate the establishment of the Class A Stock and the directors
(the "Class A Directors") elected by the holders of the Class A Stock (the
"Class A Holders");
(ii) add a new provision requiring a majority of the members of the
Sprint Board to be Independent Directors (as defined below); and
(iii) add a new provision requiring stockholder proposals to be delivered
to the Corporate Secretary within a certain time period prior to a meeting
of stockholders in order to be eligible for presentation at such meeting.
An "Independent Director" is a member of the Sprint Board who (i) is not a
current or former officer or an employee of Sprint, any Class A Holder or any
of their respective subsidiaries, (ii) does not, in addition to such person's
role as a member of the Sprint Board, act on a regular basis, either
individually or as a member or representative of an organization, serving as a
professional adviser, legal counsel or consultant to Sprint, any Class A Holder
or any of their respective subsidiaries, if in the opinion of the Nominating
Committee of the Sprint Board (the "Nominating Committee") such relationship is
material to Sprint, any Class A Holder, the organization so represented or such
Board member, and (iii) does not represent, and is not a member of the
immediate family of, a person described in clause (i) or (ii). A person who is
described by one or more of clauses (i), (ii) and (iii) and who is a partner,
officer or director of any organization that has customary commercial,
industrial, banking or underwriting relationships with Sprint, any Class A
Holder or any of their respective subsidiaries, that are carried on in the
ordinary course of business on an arms-length basis may qualify as an
Independent Director unless otherwise determined by the Nominating Committee.
Finally, Sprint stockholders are being asked to approve and adopt for
purposes of Kansas Statutes Annotated Sections 17-1286 et seq. (the "Control
Share Acquisitions Statute") the plan of FT, DT and certain of their
subsidiaries to make a Control Share Acquisition falling in the range of one-
fifth or more, but less than one-third, of the voting power of Sprint, as
contemplated or permitted by the Investment Agreement, the other agreements to
be executed pursuant to the Investment Agreement (the "Related Investment
Documents"), and the Charter Amendments and as contemplated by the Acquiring
Person Statement (as defined in "Approval of Control Share Acquisitions Plan")
delivered to Sprint (the "Control Share Acquisitions Plan") and, in accordance
with Section 17-1294 of the Control Share Acquisitions Statute, to accord the
shares acquired pursuant to the Control Share Acquisitions Plan the full voting
rights that those shares would be entitled to exercise pursuant to the Articles
of Incorporation, as amended by the Charter Amendments, notwithstanding the
limitations imposed under the Control Share Acquisitions Statute (Proposal No.
3).
The initial investment by FT and DT (and/or certain of their designated
subsidiaries) in Class A Stock will occur concurrently with the formation by
Sprint, Sprint Global Venture, Inc., a wholly owned subsidiary of Sprint
("Sprint Sub"), Atlas S.A. (a company to be owned 50% by FT and 50% by DT
("Atlas")), FT and DT of a global alliance that will provide international
data, voice and video services for multinational companies and business
customers, international services for consumers, initially based on card
services for travelers, and "carrier's carrier" services (the "Joint Venture").
The initial investment by FT and DT and the closing of the formation of the
Joint Venture (the "Venture Closing") will be consummated as soon as
practicable following the satisfaction or waiver of certain closing conditions,
including receipt of all required governmental approvals (the date of the
closing of the initial investment is referred to herein as the "Initial
Issuance Date").
BACKGROUND OF AND REASONS FOR INVESTMENT PROPOSALS
Dramatic changes have occurred in the telecommunications industry in recent
years due to the opening to competition of global telecommunications markets
and increased competition and technological advances. As capabilities and
competition have expanded, customer expectations have become more
sophisticated. In addition, many customers now have a global presence and are
seeking a single-source provider for all of their global telecommunications
needs. Sprint's management believes that Sprint must be able to meet the needs
of customers on a global basis in order to remain competitive.
5
For several years, Sprint has explored ways in which it can satisfy the needs
of existing and future customers throughout the world, including multinational
corporations, other large users, corporate and business customers and
international travelers, by providing seamless global telecommunications
services. Sprint's management believes that meeting the global needs of such
customers requires capabilities that are beyond the geographic coverage, know-
how and resources of any single telecommunications provider acting alone.
Accordingly, Sprint has been increasing its global presence through
relationships and alliances with, or investments in, other telecommunications
companies in various parts of the world that have assets and operations that
complement those of Sprint. Sprint has sought partners which share a common
vision of the future and of the opportunities which can be realized for their
customers and themselves by undertaking joint activity to create a global
organization.
Sprint has formed a joint venture with Alcatel N.V., a company based in
France, to form a communications systems joint venture to become a world
supplier of systems for public and private wide area data networks. Sprint also
has entered into an alliance with Call-Net, a Canadian long-distance company,
pursuant to which Call-Net gained exclusive Canadian rights to Sprint's long-
distance technology and trademarks in exchange for Sprint's receiving an equity
interest in Call-Net. Sprint and Telefonos de Mexico, S.A. de C.V. have entered
into an alliance to provide cross-border services between Mexico and the United
States. Sprint has also made an investment in the Iridium joint venture
sponsored by Motorola and agreed to be the managing partner of the Iridium
system's North American gateway. The Iridium joint venture has been formed to
establish a satellite-based, worldwide wireless personal communications
network.
Sprint's management believes that the trend toward opening telecommunications
markets to competition will continue. Already, in many countries licenses for
telecommunications services have been awarded to entities other than the
traditional provider. Much of this activity has been concentrated in the
wireless telecommunications sector, but increasingly long-distance (including
voice, data and other services) and local services are becoming more
competitive. In countries such as the United Kingdom, Chile and, recently,
Mexico, competition in the long-distance business is or soon will be in place.
Moreover, under current European Union rules and directives, all member states
must open their domestic telecommunications markets to competition by January
1, 1998. In addition, as a part of the process, a number of government owned
telecommunications companies have been or are being privatized.
Sprint's management believes that a global alliance with strong international
partners represents the best structure to take advantage of new opportunities
as they arise and to compete more effectively, both in the United States and
worldwide. Sprint has also been willing to consider a substantial equity
investment in Sprint by prospective global telecommunications partners which
otherwise satisfies Sprint's long term objectives. Sprint has considered such
an investment because it believes that the increase in its available cash and
access to capital that would result from such an investment would enhance its
ability to make the expenditures necessary to take advantage of strategic
opportunities, including Sprint's partnership with three of the largest cable
television companies in the United States. Furthermore, Sprint believes that a
large investment by FT and DT will help assure that the interests of FT and DT
are aligned with the interests of Sprint.
In late 1993, members of senior management of each of Sprint, FT and DT began
discussing the possibility of a strategic alliance among Sprint, FT and DT. In
early 1994, Sprint retained Dillon, Read & Co. Inc. ("Dillon Read") to provide
financial advice and assistance in connection with any possible transaction
with FT and DT. From time to time throughout the period from late 1993 to June
1994, members of senior management of Sprint, FT and DT continued discussing
the possibility of various forms of strategic alliances, including a
substantial equity investment in Sprint by FT and DT coupled with the formation
of a joint venture by Sprint, FT and DT. The Sprint Board was kept apprised
throughout this period of the status and content of the discussions with FT and
DT. In February 1994, Sprint, FT and DT executed a confidentiality agreement,
and after the execution of such agreement, Sprint, FT and DT shared with each
other certain information relevant to the evaluation of a possible alliance.
6
During the period that Sprint was considering a strategic alliance with FT
and DT, Sprint continued to explore the possibility of various forms of
strategic alliances with other major international telecommunications
providers. Discussions were held between members of senior management of Sprint
and certain other international companies regarding possible alliances, joint
ventures and direct investments, and the Sprint Board was periodically informed
by senior management as to the status and content of such discussions. Sprint
believes that the alternative strategic alliances considered during such period
would not have been as advantageous to Sprint as the proposed transactions with
FT and DT are expected to be because of, among other reasons, the financial
strength of FT and DT and their market presence in their home countries, the
fact that Sprint will have significant governance rights with respect to the
Joint Venture, the substantial agreement among Sprint, FT and DT as to the
scope, strategy and control of the Joint Venture, and the terms of the
Investment. The United States, France and Germany are home to almost half of
the world's multinational companies, providing the Joint Venture with a strong
base from which to extend its services to customers worldwide.
At a June 13, 1994 meeting of the Sprint Board, Sprint's senior management
and financial advisors made detailed presentations concerning a proposed equity
investment by FT and DT in Sprint, a proposed joint venture among FT, DT and
Sprint and certain related transactions. The presentation of Sprint's financial
advisor, Dillon Read, included a review of its work performed through the date
of the meeting for the purpose of valuing the shares of Sprint to be acquired
by FT and DT. At such meeting, the Sprint Board authorized the officers to
enter into a memorandum of understanding (the "Memorandum of Understanding")
contemplating the transactions that were ultimately provided for in the
Investment Agreement, the Related Investment Documents, the agreement relating
to the formation of the Joint Venture (the "Joint Venture Agreement") and the
documents to be executed pursuant to the Joint Venture Agreement (the "Related
Joint Venture Documents"). On June 14, 1994, Sprint, FT and DT executed the
Memorandum of Understanding.
After the execution of the Memorandum of Understanding, Sprint, FT and DT
began negotiating and preparing definitive agreements relating to the
transactions contemplated by the Memorandum of Understanding. At meetings of
the Sprint Board held on August 9, 1994, October 11, 1994, December 13, 1994,
February 18, 1995 and April 18, 1995, members of senior management of Sprint
briefed the Sprint Board on the status and content of the negotiations with FT
and DT.
During the negotiation of the definitive agreements, Sprint also pursued an
unrelated transaction which culminated in the announcement on October 25, 1994
of a major strategic alliance and joint venture (the "Sprint Telecommunications
Venture") with Tele-Communications, Inc., Comcast Corporation and Cox
Communications, Inc., three of the largest cable television companies in the
United States, for the purpose of entering the local and wireless
telecommunications business on a national basis. Moreover, during the third and
fourth quarters of 1994, one of Sprint's principal competitors, AT&T Corp.,
began an aggressive marketing campaign which, together with the generally
competitive conditions in the long distance industry, resulted in lower growth
in Sprint's long distance business in the last half of 1994 than had generally
been anticipated. After the announcement of the Sprint Telecommunications
Venture and through the next few months, the per share price of Sprint Common
Stock, which had traded in a range of 33 1/2 to 40 1/8 following the execution
of the Memorandum of Understanding, declined to a trading range of 25 7/8 to 33
3/4 during the period from October 26, 1994 through April 30, 1995. While the
definitive agreements were being negotiated, FT and DT indicated to Sprint
that, due to the decline in the price of Sprint Common Stock, they could have
substantial difficulties in obtaining approval of the Investment from their
respective owners unless the terms were changed so as to ensure that the
premium paid by FT and DT over the market price of Sprint Common Stock did not
exceed a certain maximum.
As a result, principals of Sprint, FT and DT, together with their financial
and legal advisors, conducted negotiations concerning various changes to the
terms of the investment to be made by FT and DT (and/or certain of their
designated subsidiaries) in Sprint pursuant to the Investment Agreement (the
"Investment"). The principal change was the establishment of a "collar"
mechanism by which the consideration to be paid in connection with the
Investment would in most cases be based upon the average closing market price
of
7
Sprint Common Stock over a period prior to the Investment instead of fixed
prices as originally contemplated by the Memorandum of Understanding. In
addition, the changes also provided for the Investment to be made generally in
a single tranche, as opposed to the two separate tranches contemplated by the
Memorandum of Understanding. See "Investment Agreement and Related Investment
Documents--Purchase and Sale of Class A Stock." During the period following the
execution of the Memorandum of Understanding, principals of Sprint, FT and DT,
together with their financial advisors, also conducted negotiations concerning
the relative values of the assets to be contributed by each of the parties to
the Joint Venture upon its formation.
In addition, in early 1995, Sprint's management began consideration of the
Cellular Spin-Off. The Cellular Spin-Off, if consummated, would result in a
reduction of the market price of Sprint Common Stock because Sprint
stockholders would receive a separate distribution of value consisting of the
common stock of Sprint's cellular operations and the two stocks would then
trade separately. Depending on the timing of the Investment, the Cellular Spin-
Off would affect the investment price through the application of the "collar"
mechanism referred to above. Furthermore, FT and DT expressed the desire, in
any event, not to participate in such a spin-off. Therefore, the principals of
Sprint, FT and DT, together with their financial and legal advisors, conducted
negotiations concerning additional provisions in the Investment Agreement and
the Related Investment Documents to provide for an appropriate adjustment to
the investment price and thresholds in the case of the Cellular Spin-Off as
well as mechanisms to handle any issues created by the timing of the Cellular
Spin-Off as related to the timing of the Investment. See "Investment Agreement
and Related Investment Documents--Purchase and Sale of Class A Stock."
At a meeting of the Sprint Board on June 13, 1995, senior management made
detailed presentations concerning the Investment, the Joint Venture and certain
related transactions. At the meeting, the Sprint Board unanimously approved the
Investment Agreement, the Joint Venture Agreement and other related agreements
and the transactions contemplated thereby, and determined that the transactions
provided for in such agreements are advisable and in the best interests of
Sprint and its stockholders.
On June 22, 1995, Sprint, FT and DT entered into the Joint Venture Agreement
and certain related documents and entered into a Memorandum pursuant to which
they approved drafts of the Investment Agreement and the Related Investment
Documents, subject to certain revisions being made to such drafts to reflect
the pricing principles the parties had reached. Thereafter, Sprint, FT and DT
negotiated and prepared revisions to the drafts of the Investment Agreement and
the Related Investment Documents as provided for in the Memorandum of June 22,
1995. Sprint, FT and DT executed the Investment Agreement and the Standstill
Agreement both dated as of July 31, 1995.
RECOMMENDATIONS OF THE SPRINT BOARD
THE SPRINT BOARD HAS REVIEWED AND CONSIDERED THE TERMS AND CONDITIONS OF THE
INVESTMENT PROPOSALS AND HAS DETERMINED THAT THE INVESTMENT PROPOSALS ARE FAIR
TO, AND ARE ADVISABLE AND IN THE BEST INTERESTS OF, SPRINT AND ITS
STOCKHOLDERS. ACCORDINGLY, THE SPRINT BOARD HAS UNANIMOUSLY APPROVED THE
INVESTMENT PROPOSALS AND RECOMMENDS THAT SPRINT STOCKHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE INVESTMENT PROPOSALS.
In approving the Investment Proposals and in recommending that Sprint
stockholders approve and adopt the Investment Proposals, the Sprint Board
considered several factors, including the following:
. the substantial increase in Sprint's equity that will occur as a result
of the Investment and the belief that such substantial increase will
improve Sprint's access to the capital markets, enhance its competitive
position in the telecommunications industry in the United States and
throughout the world and enhance its ability to make the expenditures
necessary to take advantage of strategic opportunities, including
Sprint's partnership with three of the largest cable television companies
in the United States;
8
. the consideration to be paid in connection with the purchase of shares of
Class A Stock pursuant to the Investment Agreement, the timing of the
Investment and the impact that the Cellular Spin-Off will have on the
price and timing of the Investment;
. the terms of the Investment Agreement and the Related Investment
Documents, the Charter Amendments, the Bylaw Amendments, the Joint
Venture Agreement and the Related Joint Venture Documents;
. the potential operational and economic benefits of participating in the
Joint Venture with FT, DT and Atlas, including (i) the anticipated
enhancement of Sprint's international presence, and (ii) the potential
efficiencies and economies of scale associated with the Joint Venture
that are expected to enable Sprint to better serve its multinational
customers by providing a greater variety of services at competitive
prices;
. the belief that the strategic and competitive position of Sprint in the
United States and throughout the world will be significantly enhanced in
comparison to what could be achieved by Sprint alone or through other
available international ventures or alliances that Sprint could pursue
alternatively;
. the financial strength of FT and DT and their market presence in their
home countries;
. the degree of independence that Sprint will retain following the
consummation of the transactions contemplated by the Investment Agreement
and the Related Investment Documents (the "Investment Transactions");
. the possible dilution in earnings per share with respect to the Sprint
Common Stock resulting from the Investment Transactions;
. the opinion of Dillon Read to the effect that the consideration to be
paid in connection with the Investment is fair, from a financial point of
view, to Sprint (see "--Opinion of Financial Advisor" below);
. the possible impact of the Investment Transactions and the transactions
contemplated by the Joint Venture and the Related Joint Venture Documents
(the "Joint Venture Transactions" and, together with the Investment
Transactions, the "Transactions") on existing relationships and ventures
of Sprint;
. certain possible implications of two stockholders collectively owning a
significant minority interest in Sprint, including the conflicts of
interest that might arise and the potential discouraging effect on other
transactions that might result from such shareholding; and
. the factors described below under "--Certain Considerations."
The Sprint Board reserves the right, pursuant to the Investment Agreement, to
(i) amend the provisions of the Investment Agreement and the Related Investment
Documents in all respects in accordance with their terms (with the agreement of
FT and DT) and without stockholder approval before or after approval and
adoption of the Investment Proposals by Sprint stockholders, and (ii) terminate
the Investment Agreement in accordance with its terms notwithstanding
stockholder approval. In addition, approval of the Charter Amendments by the
stockholders shall be deemed also to constitute approval of a resolution
authorizing the Sprint Board, at any time prior to the filing of the Charter
Amendments with the Secretary of State of the State of Kansas (the "Secretary
of State"), to abandon the Charter Amendments, and approval of the Bylaw
Amendments by the stockholders shall be deemed to constitute approval of a
resolution authorizing the Sprint Board, at any time prior to the Initial
Issuance Date, to abandon the Bylaw Amendments, in each case notwithstanding
the approval of the Charter Amendments and the Bylaw Amendments by the
stockholders.
OPINION OF FINANCIAL ADVISOR
Dillon Read has delivered a written opinion to the Sprint Board that, as of
the date of this Proxy Statement, the consideration to be paid in connection
with the Investment is fair, from a financial point of view, to Sprint. No
limitations were imposed by the Sprint Board upon Dillon Read with respect to
the investigations made or procedures followed by Dillon Read in rendering its
opinion.
9
The full text of the opinion of Dillon Read dated as of the date of this
Proxy Statement, which sets forth the assumptions made, matters considered and
limits on the review undertaken, is attached as Exhibit A to this Proxy
Statement. Sprint stockholders are urged to read this opinion in its entirety.
Dillon Read's opinion is directed only to the consideration to be paid in
connection with the Investment and does not constitute a recommendation to any
Sprint stockholder as to how such stockholder should vote at the Special
Meeting. The summary of the opinion of Dillon Read set forth in this Proxy
Statement is qualified in its entirety by reference to the full text of such
opinion.
In rendering its opinion, Dillon Read, among other things, (i) reviewed the
Investment Agreement, the Charter Amendments, the Bylaw Amendments, the Related
Investment Documents (or the forms thereof in the case of Related Investment
Documents which have not yet been executed), the Joint Venture Agreement and
the Related Joint Venture Documents (or the forms thereof in the case of
Related Joint Venture Documents which have not yet been executed), (ii)
analyzed certain historical business and financial information relating to
Sprint, including Annual Reports to Stockholders and Annual Reports on Form 10-
K for the five fiscal years ended December 31, 1994 and Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1995 and June 30, 1995, (iii)
reviewed certain internal financial analyses and forecasts for Sprint prepared
by its management, (iv) reviewed publicly available financial and stock market
data of certain companies deemed comparable to significant components of
Sprint's business, (v) reviewed the reported price and trading activity for
Sprint Common Stock, (vi) compared the financial terms of the Investment to
other comparable minority investments in other public companies, (vii) analyzed
the earnings and cash flow characteristics of the respective assets to be
contributed to the Joint Venture by Sprint and FT and DT, (viii) considered the
pro forma effect of the Investment on Sprint's capitalization, certain credit
statistics, earnings, cash flow and book value, (ix) reviewed this Proxy
Statement and (x) conducted such other financial studies, analyses and
investigations as it deemed appropriate. Dillon Read also held discussions with
members of the senior management of Sprint regarding the business operations,
financial condition, future prospects and strategic objectives of Sprint, both
on a stand alone basis and with respect to the Joint Venture.
In rendering its opinion, Dillon Read also took into consideration the view
of Sprint's senior management that business opportunities and operational
benefits will be derived by Sprint from the Investment and the Joint Venture.
Dillon Read also took into account the possible effects of certain provisions
of the Investment Agreement, the Related Investment Documents, the Charter
Amendments and the Joint Venture Agreement on the ability of Sprint to enter
into business combinations and effect the disposition of certain assets.
Dillon Read relied without independent verification upon the accuracy and
completeness of all of the financial and other information it reviewed for
purposes of its opinion. Dillon Read also relied upon the management of Sprint
as to the reasonableness and achievability of the financial and operating
forecasts (and the assumptions and bases therefor) provided to Dillon Read and
assumed that such forecasts reflected the best currently available estimates
and judgments of management. Dillon Read did not make an independent evaluation
or appraisal of the assets and liabilities of Sprint. In rendering its opinion,
Dillon Read was not authorized by the Sprint Board to solicit any other
potential investors in Sprint. Further, it is the understanding of Dillon Read,
based upon discussions with senior management and counsel to Sprint and its
review of the Investment Agreement and the Related Investment Documents, that
FT and DT will not acquire control of the management of Sprint as a result of
the Investment.
In connection with rendering its written opinion on , 1995 (which
confirmed the conclusions of Dillon Read's oral opinion delivered to the Sprint
Board on June 13, 1994), Dillon Read performed certain financial and
comparative analyses which were included in Dillon Read's presentations made to
the Sprint Board on June 13, 1994 and have subsequently been updated and
modified to reflect the final terms of the Investment Agreement and the Related
Investment Documents and other developments since such date. The following is a
brief summary of the material analyses performed by Dillon Read in arriving at
its opinion but does not purport to be a complete description of the analyses
performed by Dillon Read for such purposes.
Discounted Cash Flow Analysis. Dillon Read performed a discounted cash flow
valuation of Sprint by separately analyzing its long distance, local telephone,
cellular and distribution and publishing segments based
10
upon underlying projections of revenue growth, depreciation, amortization,
operating margin and capital expenditures as provided in Sprint's strategic
plan and based upon discussions with Sprint management. Utilizing these
projections, Dillon Read discounted to the present (i) the projected stream of
unlevered after-tax cash flows to the year 2004 for each segment and (ii) the
projected terminal value of each segment at such year. After subtracting net
debt from the results, Dillon Read arrived at estimated low and high total
equity values for Sprint, excluding the realization of any estimated financial
effects or synergies from the Investment or the Joint Venture, of approximately
$ billion and $ billion ($ and $ per share, assuming million
shares of Sprint Common Stock outstanding), respectively. Such range of values
included a valuation of Sprint's 40% interest in the Sprint Telecommunications
Venture based on the cumulative amount of capital invested in the Sprint
Telecommunications Venture as of June 30, 1995. The Sprint Telecommunications
Venture was valued on such basis primarily due to the extremely early stage of
evolution of this particular segment of Sprint's operations as well as the fact
that there are currently no comparable companies in the market which can be
used as proxies for valuation. As of June 30, 1995 the Sprint
Telecommunications Venture, as a consolidated operating entity, had no
operating revenues or significant assets other than licenses to provide
Personal Communications Services in specific United States geographic regions.
Comparable Public Company Analysis. Dillon Read separately analyzed the
market capitalization and market equity multiples of comparable long distance
service, local telephone service, cellular telephone service, and electronics
distribution companies, namely (i) ALC Communications Corporation, AT&T Corp.,
MCI Communications Corporation ("MCI"), LCI International Corp., WorldCom,
Inc., and ACC Corp., in the long distance service industry, (ii) the seven
regional bell operating companies, GTE Corporation, Cincinnati Bell, Lincoln
Telecommunications Company, Frontier Corporation and Southern New England
Telecommunications Corporation, in the local telephone service industry, (iii)
Commnet Cellular, Cellular Communications, Inc., Cellular Communications of
Puerto Rico, Inc., Contel Cellular, LIN Broadcasting, Palmer Wireless, AirTouch
Communications, Inc., U.S. Cellular and Vanguard Cellular, in the cellular
telephone service industry, and (iv) Anthem Electronics, Inc., Arrow
Electronics, Avnet, Inc., Bell Industries, Inc., Marshall Industries, Inc.,
Pioneer-Standard Electronics, Inc. and Wyle Laboratories, Inc. in the
electronics distribution industry. Such data and ratios included the latest
twelve months price/earnings ratio, the market value of net assets per cellular
customer (in the case of the cellular companies) and per access line (in the
case of the local telephone companies) and the total market value of net assets
to revenues, operating profit and operating cash flow ratios. Applying such
analyses and considering the differences in the location, size and other
financial and operating characteristics of the markets within each separate
sector served by Sprint, Dillon Read prepared a valuation analysis by valuing
Sprint's operating sectors other than cellular based primarily on multiples of
operating income and operating cash flow, and valued Sprint's cellular business
primarily by using assumed per cellular customer values and multiples of future
cash flow. The foregoing analysis resulted in low and high equity values
imputed to Sprint of approximately $ billion to $ billion ($ to $
per share), respectively. Such range of values included the cumulative amount
of capital invested by Sprint in the Sprint Telecommunications Venture as of
June 30, 1995. No public company utilized as a comparison is identical to
Sprint or the particular business segment for which a comparison is being made.
An analysis of the results of such a comparison is not mathematical; rather it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies and other
factors that could affect the public trading value of the comparable companies
to which Sprint and its business segments are being compared.
Premium to Market Analysis. Dillon Read compared the maximum premium of 35%
implied by the Investment (i.e., the premium associated with a purchase of
shares of Class A Common Stock at $47.225 per share if the average closing
price is equal to the lower threshold of $34.982 per share), as well as the
range of premiums of 35% to 25% inherent in the $47.225 per share price, to
comparable transactions in the telecommunications and other industries in which
public companies have sold a minority stake of their common equity. The 35%
maximum premium is higher than the average premiums paid in the transactions
reviewed by Dillon Read where certain public companies sold a minority equity
stake ranging from 5% to 20% of their common equity, with the exception of
Henkel KGaA's acquisition of an 11.8% stake in Ecolab
11
Inc. Dillon Read also reviewed four transactions where public companies sold in
privately negotiated transactions an approximately 20% common equity stake to
other companies: British Telecommunications plc's ("BT") acquisition of a 20%
common equity stake in MCI, British Telecom USA Holdings, Inc.'s ("BT USA")
acquisition of a 19.7% common equity stake in McCaw Cellular Communications
Inc. ("McCaw"), AT&T Corp.'s acquisition of a 20% common equity stake in Sun
Microsystems, Inc., and British Airways Plc's acquisition of a 20% common
equity stake in USAir Group, Inc. The premium paid by BT USA in its acquisition
of 19.7% of McCaw is higher than the maximum 35% premium implied by the
Investment. The premiums based on the previous day's close, the previous week's
average close and the previous month's average close paid in the other
transactions are, on average, lower than the maximum 35% premium implied by the
Investment, but in most cases higher than the 25% minimum premium implied by
the $47.225 per share price (i.e., the premium associated with a purchase of
Class A Common Stock at $47.225 per share if the average closing price is equal
to the upper threshold of $37.780 per share). Dillon Read believes that the
most comparable transaction is the acquisition of a 20% common equity stake by
BT of MCI. The premiums paid by BT based on the previous day's close, the
previous week's average close and the previous month's average close of MCI's
stock price were 24%, 25%, and 30%, respectively. The premium analysis
described above would apply equally to the purchase of shares of Class A Common
Stock following the Cellular Spin-Off, since the 25% to 35% premiums implied by
the Investment are retained following the Cellular Spin-Off due to the
adjustments made to the purchase price and the specified thresholds.
Due to the number of factors which affect a company's stock price, Dillon
Read believes that the premium to market analysis is less precise than the
other analyses performed. An analysis of the results of premium comparisons is
not mathematical; rather it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies analyzed and other factors that could affect the premium to market
price that was paid for these companies in the transactions that are being
compared to the Investment.
Other Considerations. Dillon Read also analyzed the financial impact on
Sprint of the Investment with respect to its income and cash flow statements
and balance sheet. This analysis showed that holders of Sprint Common Stock
prior to the Investment will, as a result of the Investment by FT and DT, incur
a dilution in earnings per share based upon Sprint's internal projections for
1996 and 1997 of approximately % and % respectively (assuming the
repayment of debt at a % pre-tax interest rate and excluding the impact of
the expected results of the Joint Venture), assuming that FT and DT purchase
86,236,036 shares of Class A Common Stock on December 31, 1995 at a price of
$47.225 per share and that the Cellular Spin-Off had not occurred as of such
date. Depending on the circumstances, the issuance of the Class A Preference
Stock could have a dilutive effect on earnings per share, but it is not
expected that any such dilution would exceed the dilution which may result from
the issuance of the Class A Common Stock. Sprint stockholders would incur a
similar dilution in earnings per share assuming that the Investment takes place
at a price below $47.225 due to any adjustment resulting from the Cellular
Spin-Off (assuming values for the Cellular and Wireless Communications Services
Division of Sprint (the "Cellular and Wireless Division") of $ to $ ,
net of an assumed $1 billion of debt on the Cellular and Wireless Division). In
either event, Sprint's debt to capitalization ratio, its earnings before
interest, taxes, depreciation and amortization to interest ratio and its
earnings before interest and taxes to interest ratio would improve as a result
of the Investment.
The summary set forth above does not purport to be a complete description of
the analyses performed by Dillon Read. Dillon Read believes that its analyses
and the summary set forth above must be considered as a whole and that
selecting portions of its analyses or of the above summary, without considering
all factors and analyses, could create an incomplete view of the processes
underlying the analyses performed by Dillon Read in connection with its
opinion. In performing its analyses, Dillon Read made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Sprint. The analyses
performed by Dillon Read are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, analyses relating to the values of
businesses do not purport to be appraisals or to reflect the prices at which
businesses actually may be sold.
12
Dillon Read is an investment banking firm engaged, among other things, in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities and private placements. The
Sprint Board selected Dillon Read as its financial advisor because it is an
internationally recognized investment banking firm and the principals of Dillon
Read have substantial experience in transactions similar to this transaction
and are familiar with Sprint and its business. Dillon Read has from time to
time rendered various investment banking services to Sprint, including services
as managing underwriter of public offerings of certain securities of Sprint.
Pursuant to the terms of an engagement letter dated June 13, 1994, Sprint to
date has paid Dillon Read $ for acting as financial advisor in
connection with the Transactions, including rendering its opinion. This amount
is to be deducted from a fee equal to % of the aggregate amount of
consideration committed to be paid to Sprint in connection with the Investment
Transactions, payable at the time of the initial investment by FT and DT. No
additional fees will be paid to Dillon Read for its opinion. Whether or not the
Transactions are consummated, Sprint has also agreed to reimburse Dillon Read
for its reasonable out-of-pocket expenses, including all reasonable fees and
disbursements to counsel, and to indemnify Dillon Read and certain related
persons against certain liabilities relating to or arising out of its
engagement, including certain liabilities under federal securities laws. Dillon
Read will not be additionally compensated for any solicitation of proxies by
such firm on behalf of Sprint.
USE OF PROCEEDS
Under the terms of the Investment Agreement, the proceeds from the sale of
the Class A Stock (the "Proceeds") may be used for the repayment of
indebtedness, funding Sprint's investment in the entities comprising the Joint
Venture (the "JV Entities"), and other corporate purposes as determined by the
Sprint Board. Sprint anticipates that a significant portion of the Proceeds
will initially be used to repay debt consisting of commercial paper and bank
loans. At September 22, 1995, approximately $2.5 billion principal amount of
commercial paper and bank loans was outstanding at interest rates ranging from
5.75% to 6.18%. Approximately $943 million of such debt was incurred to fund
Sprint's investment in the Sprint Telecommunications Venture and approximately
$986 million was incurred in the payment at maturity and the redemption prior
to maturity of long term debt in 1994 and 1995. The balance of the Proceeds
will be available to Sprint for general corporate purposes and to pursue
strategic investments and acquisitions. Pending such use, the funds may be
invested in short-term securities.
Sprint does not currently have any firm commitments or understandings
regarding the use of the Proceeds other than reducing debt. Sprint anticipates,
however, that it will utilize the Proceeds (i) in connection with the Sprint
Telecommunications Venture; (ii) to pursue, through ventures, acquisitions or
otherwise, the development of Sprint's global telecommunications business; and
(iii) to pursue, through ventures, acquisitions or otherwise, opportunities in
other emerging telecommunications markets.
The intended use of the Proceeds is expected to initially dilute the per
share earnings of Sprint after giving effect to the sale of Class A Stock.
There can be no assurance that Sprint will be successful in its efforts to
utilize the Proceeds in a manner that contributes to the profitable growth of
its business or that will not dilute the per share earnings or equity of Sprint
in the long term. In addition, the Class A Holders, for a period of time after
the Initial Issuance Date, will have the right to disapprove acquisitions of
businesses or assets by Sprint for cash or debt securities having a maturity of
less than one year if such acquisitions involve amounts in excess of specified
percentages of Sprint's market capitalization. See "Investment Agreement and
Related Investment Documents--Terms of the Class A Stock--Disapproval Rights."
SOURCE OF FUNDS
Each of FT and DT will require funds in an aggregate of up to $2.1 billion
(depending on the market price of Sprint Common Stock and whether the Cellular
Spin-Off is effected) to purchase its share of the
13
Class A Stock. FT has informed Sprint that it expects that such funds will be
provided by cash on hand, borrowings or other sources, or a combination
thereof. DT has informed Sprint that it expects that such funds will be
provided by cash flow from current operations. The obligations of FT and DT
under the Investment Agreement are not conditioned upon the ability of FT or DT
to finance the Investment. According to FT's 1994 Annual Report, at December
31, 1994, FT had consolidated gross assets of 433.1 billion French francs and
equity of 136.3 billion French francs (U.S. $81.1 billion and U.S. $25.5
billion, respectively, using the exchange rate of U.S. $.18730 to 1 French
franc quoted in The Wall Street Journal of January 3, 1995 as prevailing on
December 30, 1994) before appropriation. According to DT's 1994 Annual Report,
at December 31, 1994, DT had total assets of about 166 billion Deutschemarks
and total liabilities (exclusive of capital, reserves, and provisions) of about
125 billion Deutschemarks (equal to approximately U.S. $107.5 billion and
approximately U.S. $80.7 billion, respectively, at the exchange rate of 1.5488
Deutschemarks per U.S. $1.00 prevailing on December 31, 1994).
CERTAIN CONSIDERATIONS
While the Sprint Board is of the opinion that the Investment Proposals are
fair to, and their approval and adoption is advisable and in the best interests
of, Sprint and its stockholders, Sprint stockholders should consider the
following possible considerations in evaluating the Investment Proposals.
Antitakeover Impact.
Disapproval Rights. The Class A Holders will be entitled to disapprove
certain business combinations involving Sprint. See "Investment Agreement and
Related Investment Documents--Terms of the Class A Stock--Disapproval Rights."
Such disapproval rights could deter third party takeover proposals and could
also reduce the price that a third party is willing to pay to acquire control
of Sprint.
Certain Changes of Control.
Effect on the Joint Venture. The development and operation of the Joint
Venture is expected to involve significant commercial interdependence and
cooperation among Sprint, Sprint Sub, FT, DT and Atlas. Each of Sprint, Sprint
Sub, FT, DT and Atlas will, through the Joint Venture, receive access to
certain intellectual property of the other parties, and the governing boards of
the JV Entities will consist of representatives of Sprint, FT, DT and Atlas.
Accordingly, the Joint Venture Agreement provides for certain protection upon a
Change of Control. Upon the occurrence of a Change of Control, FT, DT, Atlas
and their qualifying subsidiaries that own interests in the JV Entities
(collectively, the "FT/DT Parties") will obtain rights which will give them
greater control over the Joint Venture. See "The Joint Venture--Management and
Control--Increased Control over the Joint Venture by the Sprint Parties or the
FT/DT Parties."
Following a Change of Control, Sprint, Sprint Sub and their qualifying
subsidiaries which own interests in the JV Entities (the "Sprint Parties") may
at any time, by written notice to the FT/DT Parties, offer to sell to them all,
but not less than all, of the interests in the JV Entities (the "Venture
Interests") owned by the Sprint Parties for cash at the Appraised Value (as
defined in "The Joint Venture--Effect of Change of Control") of such interests.
If the FT/DT Parties do not accept such offer, the FT/DT Parties will lose the
rights which give them greater control over the Joint Venture. In addition,
during the two-year period commencing on the fifth anniversary of the
occurrence of a Change of Control, the Sprint Parties will have the right to
require the FT/DT Parties to purchase all, but not less than all, of the
Venture Interests owned by Sprint for cash at the Appraised Value of such
interests. See "The Joint Venture--Effect of Change of Control."
If Sprint elects to sell all of its Venture Interests following a Change of
Control, Sprint would cease to have the advantages afforded it as a participant
in the Joint Venture. Should Sprint, in the alternative, elect not to sell,
Sprint will effectively become a passive investor in the Joint Venture, unable
to exercise control over its management. Either option could have a material
adverse effect on Sprint, particularly if the strategic and operational
significance of participation in the Joint Venture to Sprint increases over
time as is currently anticipated by Sprint.
14
Effect on Potential Transactions By Sprint. Under the Charter Amendments, so
long as shares of Class A Stock are outstanding, the Class A Holders will have
the right to disapprove any merger or other business combination resulting in a
Change of Control unless the surviving corporation expressly assumes certain of
the obligations to the Class A Holders with respect to the assets of Sprint
related to the long distance business of Sprint (the "Long Distance Assets")
under the Charter Amendments and the Stockholders' Agreement and all of the
provisions of the Registration Rights Agreement to be entered into by FT, DT
and Sprint (the "Registration Rights Agreement") and agrees to be bound by
certain provisions of the Joint Venture Agreement relating to the ability of
the FT/DT Parties to obtain increased control over the Joint Venture. In
addition, so long as shares of Class A Stock are outstanding, if Sprint
determines to sell all or substantially all of its assets or not to oppose a
third-party tender, exchange or other purchase offer for more than 35% of
Sprint's voting power or to sell control of Sprint or to effect a merger or
other business combination, the result of which would be a 35% or larger
stockholder (other than FT and DT and certain majority-owned subsidiaries of FT
and/or DT which satisfy certain criteria ("Qualified Subsidiaries")) in the
resulting entity (an "Acquisition Proposal"), Sprint will be required under the
Charter Amendments and the Stockholders' Agreement to conduct such transaction
in accordance with reasonable procedures to be determined by the Sprint Board,
and permit FT and DT to participate in that process on a basis no less
favorable than that granted any other participant. See "Investment Agreement
and Related Investment Documents--Change of Control Provisions--Participation
by FT and DT Upon Decision by the Sprint Board to Sell Sprint." These
provisions could deter third party takeover proposals.
In addition, if Sprint decides to proceed with a transaction involving an
Acquisition Proposal, if a Change of Control involving hostile action occurs or
if there is an acquisition by a person other than the Class A Holders of more
than 20% of Sprint's voting power, each of the Class A Holders will have the
right to transfer its shares free of certain of the restrictions on transfer
set forth in the Stockholders' Agreement, unless Sprint exercises the right it
will have in certain circumstances to elect to redeem all of the outstanding
shares of Class A Preference Stock at a time when the price at which each share
of Class A Preference Stock will convert into Class A Common Stock has not yet
been fixed. Upon such a transfer, the shares of Class A Stock will
automatically convert to shares of Sprint Common Stock. The ability of the
Class A Holders to transfer shares of Class A Stock free of the transfer
restrictions could adversely affect the price of the Sprint Common Stock.
Finally, if a Change of Control occurs, the Class A Holders will not be
obligated to proceed with additional purchases of Class A Stock. See
"Investment Agreement and Related Investment Documents--Conditions to the First
Closing" and "--Conditions to Article IV Closing."
Exclusionary Tender Offer. Under the Charter Amendments, in addition to the
rights of the Class A Holders upon a Change of Control, if the Sprint Board
determines not to oppose a tender offer by a person other than FT, DT or their
respective affiliates for 35% or more of Sprint voting power which does not
permit the Class A Holders to sell an equal or greater percentage of their
shares as the other holders of Sprint voting securities are permitted to sell
(an "Exclusionary Tender Offer"), the Class A Holders will have the right (but
not the obligation) to cause the conversion into Sprint Common Stock of all or
part of the shares of Class A Stock held by the Class A Holders. Upon such
election each share of Class A Common Stock so designated shall automatically
convert into one duly issued, fully paid and nonassessable share of Sprint
Common Stock and each share of Class A Preference Stock shall convert into a
number of shares of Sprint Common Stock determined in accordance with the
Charter Amendments. See "Investment Agreement and Related Investment
Documents--Terms of the Class A Stock." Because a third party effecting an
Exclusionary Tender Offer could be required to purchase such shares from the
Class A Holders in order to achieve such third party's desired level of
ownership of Sprint Common Stock, this provision could deter third party
takeover proposals and could also reduce the price that a third party is
willing to pay to acquire control of Sprint.
In the event of an Exclusionary Tender Offer in which the Class A Holders do
not elect to convert their shares of Class A Stock into Sprint Common Stock as
described above, upon the completion of the purchase
15
by a third party of securities representing not less than 35% of the Sprint
voting power in such Exclusionary Tender Offer, the Class A Holders will, under
the Stockholders' Agreement, have the option to require Sprint to purchase at
the tender offer price all, but not less than all, of the shares that they were
unable to tender on the same basis as the other stockholders, unless under the
terms of the tender offer such Class A Holders are entitled to receive publicly
traded securities and/or cash in an equivalent amount in a business combination
transaction required to be effected within 90 days after the consummation of
the tender offer. Because Sprint may be required to redeem Class A Stock at the
tender offer price, or the third party making such tender offer may be
compelled to purchase such shares at the tender offer price to avoid such
redemption, this provision could deter third party takeover proposals and could
also reduce the price that a third party is willing to pay to acquire control
of Sprint. See "Investment Agreement and Related Investment Documents--Change
of Control Provisions--Effect of Exclusionary Tender Offer."
Right of First Offer with Respect to Long Distance Assets. Until the earliest
of (i) the fifth anniversary of the Initial Issuance Date, (ii) the date on
which the ownership by FT and DT of the Long Distance Assets is no longer
prohibited by Section 310 of the Communications Act, (iii) the date on which
the FT/DT Parties elect to accept the offer of the Sprint Parties to sell all
of their Venture Interests following a Change of Control, and (iv) the date on
which the Sprint Parties exercise their right to sell all of their Venture
Interests to the FT/DT Parties following a Change of Control (such period, the
"Initial Period"), no sale of Long Distance Assets with a Cumulative (as
defined in "Investment Agreement and Related Investment Documents--Terms of the
Class A Stock--Disapproval Rights--Long Distance Assets") fair market value
equal to or in excess of 5% of the fair market value of the Long Distance
Assets may be consummated by Sprint if it is disapproved by the Class A
Holders. Following the Initial Period and prior to the tenth anniversary of the
Initial Issuance Date (unless an event described in clause (iii) or (iv) above
has occurred), subject to certain exceptions, FT and DT will under the
Stockholders' Agreement have a right of first offer with respect to proposed
dispositions by Sprint of Long Distance Assets with a Cumulative fair market
value equal to or in excess of 30% of the fair market value of the Long
Distance Assets. The existence of these rights could deter third party takeover
proposals to the extent such proposals would involve a sale of the Long
Distance Assets. See "Investment Agreement and Related Investment Documents--
Disapproval Rights--Long Distance Assets" and "--Right of First Offer with
Respect to Long Distance Assets."
Authorization of Additional Shares of Capital Stock. The authorization of
additional shares of capital stock pursuant to the Charter Amendments also may
have certain antitakeover effects. See "Charter Amendments and Bylaw
Amendments--Charter Amendments--Increase in Number of Authorized Shares."
Existing Provisions in the Articles of Incorporation and the Bylaws. In
addition to the Charter Amendments and the Bylaw Amendments, certain existing
provisions of the Articles of Incorporation and the Bylaws and certain
provisions of the Kansas General Corporation Code (the "KGCC") may discourage
tender offers or takeover attempts. See "Information Concerning Sprint--
Antitakeover Provisions Applicable to Sprint."
Board Representation; Disapproval Rights. As a general rule, beginning on the
Initial Issuance Date, the Class A Holders will be entitled to representation
on the Sprint Board that is roughly proportionate to the percent of the Sprint
voting power owned by the Class A Holders. For example, if the full investment
in Class A Common Stock is made on the Initial Issuance Date and assuming the
size of the Sprint Board is fifteen, the holders of the Class A Common Stock
would initially elect three of fifteen directors. Moreover, the Class A Holders
are entitled to elect a minimum of two directors generally so long as the
percentage of Sprint voting power owned by them, plus the percentage they are
committed to purchase (collectively, and determined on a basis that includes as
outstanding the shares they are committed to purchase, the "Committed
Percentage"), is 10% or greater, or if the Class A Preference Stock is
outstanding and the Investment Completion Date has not occurred, as long as the
Class A Holders own Class A Preference Stock with a liquidation value of at
least $1.5 billion (or a lesser amount which may result from a required sale by
the Class A Holders of Class A Preference Stock pursuant to the Stockholders'
Agreement in order for Sprint to comply with Section 310 of the Communications
Act). See "Investment Agreement and Related Investment Documents--Terms of the
Class A Stock--Board Representation."
16
Pursuant to the terms of the Class A Stock, the Class A Holders will have the
right for specified periods of time to disapprove the taking of certain actions
by Sprint. These disapproval rights may limit the ability of Sprint to engage
in certain business transactions or make certain changes to its governing
documents. These rights will include the right to disapprove certain
transactions relating to the Long Distance Assets, transactions resulting in
the issuance of 30% or more of Sprint voting power (a "Major Issuance") and
certain transactions involving competitors of FT, DT or the Joint Venture. See
"Investment Agreement and Related Investment Documents--Terms of the Class A
Stock--Disapproval Rights."
In electing directors and voting their shares of Class A Stock with respect
to other matters and exercising disapproval rights and all other rights of the
Class A Holders pursuant to the Charter Amendments, the Investment Agreement
and the Stockholders' Agreement, FT and DT may have interests that diverge from
or even conflict with those of Sprint. The Charter Amendments provide that the
shares of Class A Common Stock will convert into shares of Sprint Common Stock
(or, if any shares of Class A Preference Stock are outstanding, the right of
the holders of the Class A Preference Stock to elect directors, the disapproval
rights of the Class A Holders, and the right of FT and DT to participate in the
procedures relating to a Change of Control (collectively, the "Fundamental
Rights") associated with such shares will terminate) if, among other things,
(i) the ownership of the Class A Holders in Sprint falls below certain
specified thresholds (and, in certain circumstances, remains below such
thresholds for certain periods of time), or (ii) subject to certain exceptions,
any of the FT/DT Parties is found to have breached certain specified provisions
of the Investment Agreement, the Related Investment Documents, the Joint
Venture Agreement or the Related Joint Venture Documents. See "Investment
Agreement and Related Investment Documents--Terms of the Class A Stock--
Conversion of the Class A Common Stock; Termination of Fundamental Rights."
Such potential conflicts of interest also are addressed by (a) provisions of
the Stockholders' Agreement relating to the role of the Class A Directors in
making determinations with respect to certain matters considered by the Sprint
Board following termination of the Joint Venture (see "Investment Agreement and
Related Investment Documents--Terms of the Class A Stock--Board
Representation"), and (b) the constraints placed on FT and DT under the
Standstill Agreement. See "Investment Agreement and Related Investment
Documents--Standstill Agreement--Standstill Covenants."
FCC Redemption Provision; Possible Redemption of Shares Held by Aliens. The
Charter Amendments would, among other things, allow Sprint to redeem
outstanding shares of Sprint Common Stock and, in certain circumstances, Class
A Stock if necessary to comply with the foreign ownership limitations set forth
in Section 310 of the Communications Act (such provision of the Charter
Amendments is referred to as the "FCC Redemption Provision"). Section 310 of
the Communications Act currently provides, among other things, that, absent an
order of the Federal Communications Commission (the "FCC") expressly permitting
a higher level of foreign ownership, if more than 25% of Sprint's capital stock
is owned of record or voted by Aliens, the FCC may revoke certain licenses if
it finds that such revocation is in the public interest. "Alien" means
"aliens," "their representatives," "a foreign government or representatives
thereof" or "any corporation organized under the laws of a foreign country," as
those terms are used in Section 310 of the Communications Act.
Based upon the results of a survey of Sprint's public stockholders as of May
31, 1994 conducted in a manner that the FCC has previously found to be
acceptable for such survey, and assuming that FT and DT had then been issued
shares of Class A Common Stock representing 20% of the Sprint voting power
outstanding after such issuance, the aggregate foreign ownership of Sprint's
outstanding capital stock (including shares owned by FT and DT) at such time
would have equaled 24.97 percent, plus or minus 1.67 percent (at a survey
confidence level of 97.5 percent). Although Sprint has filed a Petition for
Declaratory Ruling with the FCC requesting, among other things, that the FCC
permit up to 28% of Sprint's capital stock to be owned by Aliens, Sprint cannot
predict whether the FCC will grant such request. See "--Regulatory Approvals--
United States Communications Act").
If at any time following the Initial Issuance Date the percentage of Sprint's
outstanding capital stock owned by Aliens were to exceed 25% or such greater
percentage as may be permitted by an FCC order or otherwise, under the FCC
Redemption Provision Sprint could redeem shares of Sprint Common Stock and
17
Class A Stock held by Aliens, except that Class A Stock may only be redeemed at
a time when, and to the extent that, the percentage of Sprint voting power held
by the Class A Holders exceeds 20%. Sprint Common Stock may be redeemed
pursuant to the FCC Redemption Provision at a price equal to the fair market
value of such shares, except that (i) the redemption price in respect of any
shares purchased by any Alien after , 1995 and within one year of the
redemption date will not (unless otherwise determined by the Sprint Board)
exceed the purchase price paid for such shares by such person and (ii) the
redemption price payable to the Class A Holders will be governed by the
provisions described in "Charter Amendments and Bylaw Amendments--Charter
Amendments--Possible Redemption of Shares of Sprint Common Stock and Class A
Stock Held by Aliens." If Sprint were to redeem shares of Sprint Common Stock
and Class A Stock in order to comply with Section 310 of the Communications
Act, the shares to be redeemed would be selected in a manner determined by the
Sprint Board, which may include selection first of the most recently purchased
shares, selection by lot or selection in any other manner determined by the
Sprint Board to be equitable, provided that the Sprint Board would, to the
fullest extent permitted by law, redeem shares of Sprint Common Stock before
redeeming shares of Class A Stock. See "Charter Amendments and Bylaw
Amendments--Charter Amendments--Possible Redemption of Shares of Sprint Common
Stock and Class A Stock Held by Aliens."
The operation of the FCC Redemption Provision could cause stockholders who
are Aliens to dispose of shares of Sprint Common Stock at a time when such
stockholders would not otherwise desire to effect such a disposition. In
addition, the FCC Redemption Provision could have an adverse effect on the
price of Sprint Common Stock to the extent that Aliens are discouraged from
purchasing or holding shares of Sprint Common Stock due to these provisions.
See "Charter Amendments and Bylaw Amendments--Charter Amendments--Possible
Redemption of Shares of Sprint Common Stock and Class A Stock Held by Aliens"
and "--Regulatory Approvals--United States Communications Act."
Major Competitors. During the ten-year period following the Initial Issuance
Date, Sprint may not consummate any transaction or take any other action that
would result in, or is taken for the purpose of encouraging or facilitating, a
Major Competitor of FT/DT (as defined in "Investment Agreement and Related
Investment Documents--Terms of the Class A Stock--Disapproval Rights--Major
Competitors") having, or being granted by Sprint, any right, permission or
approval to acquire (other than pursuant to a Strategic Merger (as defined in
"Investment Agreement and Related Investment Documents--Change of Control
Provisions--Definition of Change of Control")) 10% or more of the outstanding
Sprint voting power if such transaction or action is disapproved by the Class A
Holders. If the transaction or action involves a Strategic Merger, the Class A
Holders must be accorded certain rights if upon the consummation of such
transaction a Major Competitor of FT/DT holds 20% or more of the outstanding
Sprint voting power. In addition, if such Major Competitor has been granted
rights by Sprint equivalent or superior to the board representation rights of
the Class A Holders, the disapproval rights of the Class A Stock, the rights
with respect to major competitors, the right of first offer with respect to
Long Distance Assets, the equity purchase rights of the Class A Holders, and
the protections provided to the Class A Holders in the event of a Change of
Control or Exclusionary Tender Offer (collectively, the "Minority Rights"),
then for a period of five years following the date of closing of such
transaction, the FT/DT Parties will obtain rights which will give them greater
control over the Joint Venture. See "Investment Agreement and Related
Investment Documents--Disapproval Rights--Major Competitors."
Limits on Sprint's Ability to Pursue Certain Opportunities. By entering into
the Investment Agreement, the Related Investment Documents, the Joint Venture
Agreement and the Related Joint Venture Documents, Sprint will be limited in
its ability to pursue certain opportunities with parties other than FT, DT and
Atlas. The disapproval rights of the Class A Holders either restrict the
ability of Sprint to enter into certain transactions or require Sprint to
provide certain rights to the Class A Holders in connection therewith. In
addition, the Investment Agreement and the Joint Venture Agreement contain
provisions that will restrict the ability of Sprint to enter into certain
transactions with Major Competitors of FT/DT. See "Investment Agreement and
Related Investment Documents--Terms of the Class A Stock--Disapproval Rights--
Major Competitors." Moreover, the Joint Venture Agreement specifies whether FT,
DT, Atlas or Sprint may
18
provide services and products offered by the Joint Venture in each part of the
world. As a result, Sprint's ability to take advantage of an opportunity to
offer such services or products directly or through arrangements with a third
party is restricted. See "The Joint Venture--Joint Venture Structure." The
Joint Venture Agreement also contains certain noncompetition provisions
applicable to Sprint. See "The Joint Venture--Other Activities of the Joint
Venture Parties and the Joint Venture--Noncompetition." If Sprint determines to
terminate the Joint Venture, the Sprint Parties could be required to sell their
interests in the Joint Venture to the FT/DT Parties, resulting in the loss by
Sprint of certain of its international businesses. Sprint may subsequently be
limited in its ability to engage in similar businesses. See "The Joint
Venture--Termination of the Joint Venture."
Ownership of FT by the Republic of France and of DT by the Federal Republic
of Germany; Effect of Privatization. The Republic of France is currently the
owner of FT, and the Federal Republic of Germany is currently the sole
shareholder of DT. The Republic of France and the Federal Republic of Germany
may have interests that diverge from or even conflict with those of Sprint and
may seek to influence the exercise by FT or DT, as the case may be, of its
disapproval rights and other rights under the Investment Agreement, the Related
Investment Documents, the Charter Amendments, the Joint Venture Agreement and
the Related Joint Venture Documents, including in a manner that could be
inconsistent with the interests of Sprint and the other Sprint stockholders.
See "--Board Representation; Disapproval Rights." In addition, although each of
FT and DT is subject to certain restrictions with respect to a sale of its
voting securities to a Major Competitor of Sprint (see "The Joint Venture--
Effect of Acquisition by a Major Competitor--Sale of Interests in FT or DT to a
Major Competitor of Sprint"), the Republic of France and the Federal Republic
of Germany may sell their voting securities of FT or DT, as the case may be, to
purchasers of their choosing, which may include Major Competitors of Sprint.
Moreover, the Republic of France and the Federal Republic of Germany could also
privatize FT or DT, as the case may be (see "Information Concerning FT, DT and
Atlas"). Changes in the French or German government or changes in the policies
of those governments could also occur. No assurances can be given that any such
privatization or change in ownership, government or policy would not result in
the Republic of France or the Federal Republic of Germany seeking to affect or
otherwise result in changes to (i) the business strategies of FT or DT, as the
case may be, including changes that de-emphasize its international pursuits,
(ii) the manner in which FT or DT, as the case may be, exercises its
disapproval rights and other rights under the Investment Agreement, the Related
Investment Documents, the Charter Amendments, the Joint Venture Agreement and
the Related Joint Venture Documents, or (iii) FT's or DT's, as the case may be,
relationship with Sprint.
Possible Dilutive Effects. The Investment Agreement contemplates the issuance
by Sprint of a substantial amount of Class A Stock. This issuance will dilute
the voting rights of existing holders of Sprint Common Stock and will have the
effect of diluting the ownership interests of the existing holders of Sprint
Common Stock. In addition, as described in "--Opinion of Financial Advisor,"
based on certain assumptions, the Investment will result in short-term dilution
in the earnings per share of Sprint. The Class A Common Stock will share
ratably in dividends and liquidating distributions with Sprint Common Stock and
the dividends on the Class A Preference Stock will in most circumstances be
based on the dividend paid on the Sprint Common Stock. In addition, following
the Investment Completion Date, for so long as the Class A Holders maintain an
aggregate Committed Percentage of at least 10%, the Class A Holders will have
the right, unless such right has been terminated in certain circumstances,
subject to certain restrictions, to maintain their proportionate ownership of
Sprint's equity securities through the exercise of certain equity purchase
rights in respect of new issuances of voting securities of Sprint and options,
warrants, rights and other securities convertible into or exchangeable for such
voting securities. See "Investment Agreement and Related Investment Documents--
Equity Purchase Rights." The issuance of additional securities pursuant to the
exercise of such purchase rights may also have the dilutive effects described
above on the current holders of Sprint Common Stock.
19
Interests of Certain Persons in the Transaction. FT and DT have agreed with
Sprint that so long as the Joint Venture is in effect, FT and DT will cause to
be elected to the governing board of Atlas a candidate designated by Sprint and
reasonably acceptable to FT and DT. Sprint expects to initially designate
to the Atlas governing board.
Under Sprint's employee stock option plans, Sprint grants options to purchase
Sprint Common Stock to executives and key employees of Sprint and its
subsidiaries at 100% of the market value of the shares subject to the options
on the date of grant. The options become exercisable by the optionee over a
period of years; generally, 25% of the total number of shares subject to an
option become exercisable one year from date of grant and 25% on each of the
three succeeding anniversaries, although some grants are subject to a different
vesting schedule. Each grant contains a provision that, with certain limited
exceptions, if a "person" (as defined in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act) of securities
of Sprint representing 20% or more of the Sprint voting power, all options
outstanding for more than one year immediately vest and become exercisable.
With respect to grants made after June 14, 1994 (the date of the Memorandum of
Understanding), the Investment Transactions were excepted from this provision.
In addition, under the Sprint Long-Term Stock Incentive Program, which was
approved by Sprint stockholders in 1989, each director of Sprint who is not
also an employee of Sprint is granted an option to purchase 2,000 shares of
Sprint Common Stock each year on the date of the annual stockholders meeting.
500 of the shares subject to each option become exercisable on December 31 of
the year of grant and 500 on December 31 of each of the three succeeding years.
Any option outstanding for more than one year becomes immediately exercisable
in the event a person becomes the beneficial owner of securities of Sprint
representing 20% or more of the Sprint voting power.
At such time as FT and DT and their affiliates and associates become the
beneficial owners of 20% of the Sprint voting power, the relevant provisions
described above under Sprint's employee stock option plans and Long-Term Stock
Incentive Program will be triggered and all outstanding options subject to
these provisions which have not previously vested will become exercisable. At
August 31, 1995, there were a total of 479,000 shares covered by options
subject to these provisions and held by directors and executive officers of
Sprint that had not vested. These options had exercise prices ranging from
$24.0625 per share to $36.6875 per share and become exercisable at various
times commencing December 31, 1995 and ending December 31, 1998. At August 31,
1995, one former executive officer held options for 13,750 shares subject to
these provisions. These options had exercise prices of either $30.8125 per
share or $36.6875 per share and become exercisable at various times commencing
February 11, 1996 and ending February 11, 1998.
Under Sprint's Restricted Stock Plan, Sprint grants awards of Sprint Common
Stock to certain key executives of Sprint and its subsidiaries. The grantee is
entitled to vote the shares of stock received and to
receive dividends on the shares of stock, but may not dispose of the shares for
a period of time. Certain grants contain a provision similar to the one
contained in the option grants which specifies that, if a person becomes the
beneficial owner of securities of Sprint representing 20% or more of the Sprint
voting power, and if the grantee of the restricted stock is terminated within
one year of such event, the restrictions on the divestiture of the restricted
shares lapse. At August 31, 1995, there were an aggregate of 43,500 shares held
by executive officers that were subject to restrictions on divestiture which
would lapse if the provision is triggered. If the provision is not triggered,
the restrictions lapse at various times beginning November 9, 1995 and ending
July 7, 1998.
Sprint has contingency employment agreements with four of its executive
officers that provide for separation pay and benefits if employment is
involuntarily terminated during a three year period following the date a person
acquires beneficial ownership of securities representing 20% or more of the
Sprint voting power. Benefits include monthly salary payments for 35 months (or
until the officer reaches age 65 if this occurs earlier) and three payments
each equal to the highest short-term plus the highest long-term incentive
20
compensation awards received during the three years preceding termination. In
addition, life, disability, medical and dental insurance coverages will be
provided for 35 months, retirement benefits will be determined assuming three
years of additional service and no early retirement pension reduction will be
imposed. If any excise tax is imposed on the separation pay and benefits, the
agreements provide that Sprint will make the executive whole with respect to
any additional taxes due.
REGULATORY APPROVALS
In General. Each of Sprint, FT and DT has undertaken in the Investment
Agreement and the Joint Venture Agreement, as applicable, to make all necessary
filings relating to the Investment Transactions and the Joint Venture
Transactions under the Communications Act, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), applicable U.S. state
telecommunications regulatory laws, applicable European Union ("EU")
competition laws and applicable French and German laws and generally each is
obligated to use its reasonable efforts to furnish, as promptly as practicable,
all information and documents reasonably required to obtain approvals under
such laws and to otherwise cooperate in all reasonable respects with the
applicable regulatory authorities in order to obtain all required regulatory
approvals in as expeditious a manner as possible. Sprint, FT and DT also filed
a voluntary notification under Section 721 of the Defense Production Act of
1950, as amended (the "Exon-Florio Amendment"), and Sprint has filed with the
Defense Investigative Service necessary documents to demonstrate that foreign
ownership, control or influence ("FOCI") of Sprint will not result from the
Investment Transactions.
In addition, the formation by FT and DT of Atlas is a condition to the
consummation of the Transactions. Each of FT and DT generally is obligated to
make all necessary filings in connection with the formation of Atlas under
applicable laws, including EU competition laws and French and German laws, and
to use its reasonable efforts to obtain all required regulatory approvals for
the formation of Atlas.
There can be no assurance that FT and DT will be able to obtain all necessary
regulatory approvals or other regulatory actions that are required to form
Atlas, or that Sprint, FT and DT will be able to obtain all necessary
regulatory approvals or other regulatory actions that are required to
consummate the Transactions. Furthermore, it is possible that any one or more
of such regulatory approvals or other regulatory actions may impose conditions
on Sprint, FT or DT or may be conditioned on material modifications being made
to the terms of the Transactions or the receipt of undertakings from Sprint, FT
or DT. Each of Sprint, FT and DT has agreed to use its respective reasonable
efforts to resolve such objections, if any, as the applicable regulatory
authorities may assert with respect to the Transactions.
If any proceeding is instituted challenging the Transactions, Sprint, FT and
DT have agreed to consult promptly with each other to determine the most
appropriate response to such proceeding and to cooperate in all reasonable
respects with any party subject to such proceeding, provided that the decision
whether to initiate, and the control of, any proceeding involving any party
will remain within the sole discretion of such party. Generally, none of the
parties is required to agree to or comply with a "Burdensome Condition" which
affects such party directly or indirectly. Although there are certain
differences between the definition used in the Investment Agreement and the
definition used in the Joint Venture Agreement, a "Burdensome Condition" is
defined generally to mean any requirement or condition that (i) imposes any
material limitation on the ability or right of Sprint, FT, DT or any of their
respective subsidiaries to hold, or requires any of them to dispose of, any
material interest in any material portion of the assets of Sprint, FT or DT and
their respective subsidiaries, as the case may be, taken as a whole, (ii)
imposes any material limitation on the ability or right of Sprint, FT, DT or
any of their respective subsidiaries to conduct any business (other than the
Transactions or the transactions contemplated in connection with the formation
of Atlas) which has been publicly announced and which is material to Sprint, FT
or DT and their respective subsidiaries, as the case may be, taken as a whole,
(iii) materially limits the ability of Sprint, Sprint Sub, FT, DT or Atlas to
acquire or hold, or requires any of them to dispose of, any material interest
in the GBN Group or a Regional
21
Operating Group (each as defined in "The Joint Venture--Joint Venture
Structure"), (iv) materially limits the ability or right of Sprint, Sprint Sub,
FT, DT or Atlas to exercise its governance rights with respect to the Joint
Venture or any of the JV Entities, (v) otherwise would have a material adverse
effect on the Joint Venture or would be materially adverse to the ability of
Sprint, Sprint Sub, FT, DT or Atlas to receive the economic benefits of the
Joint Venture, (vi) materially limits the ability or right of either FT or DT
to acquire or hold or dispose of any shares of Class A Stock, (vii) materially
limits the ability or right of FT or DT to exercise its rights relating to, or
receive the economic benefits of, the Investment, (viii) materially and
adversely affects the ability of Sprint, FT or DT to perform its obligations
under, or puts in doubt in any material respect the validity of, the Investment
Agreement, the Related Investment Documents, the Bylaws as amended by the Bylaw
Amendments or the Articles of Incorporation as amended by the Charter
Amendments, (ix) otherwise would have a material adverse effect on Sprint, FT
or DT and its respective subsidiaries taken as a whole, or (x) in the case of
FT and DT, would affect materially and adversely the intrinsic value of an
investment in Sprint's equity securities.
Subject to applicable law, if the Sprint stockholders approve the Investment
Proposals, the Sprint Board reserves the right to amend the Investment
Agreement, the Related Investment Documents, the Joint Venture Agreement and
the Related Joint Venture Documents, with the agreement of FT and DT, without
further stockholder action and for any reason, including in order to obtain
receipt of necessary regulatory approvals in a timely manner.
United States Communications Act. Certain subsidiaries of Sprint hold radio
licenses granted by the FCC that are material to the business of Sprint and its
subsidiaries. Section 310(b)(4) of the Communications Act permits the FCC to
revoke such licenses if, among other things, more than 25% of the capital stock
of Sprint is owned of record or voted by Aliens and the FCC finds that the
public interest would be served by such revocation. Section 310(d) of the
Communications Act requires FCC approval prior to the transfer of control of
any entity such as Sprint which owns subsidiaries which hold common carrier
radio licenses.
On October 14, 1994, Sprint, FT and DT filed a petition for declaratory
relief with the FCC requesting written confirmation from the FCC that (i) the
Investment Transactions do not result in a transfer of control within the
meaning of Section 310(d) of the Communications Act, (ii) a level of foreign
ownership in Sprint of up to 28% is not inconsistent with the public interest,
and (iii) the Investment Transactions are not otherwise inconsistent with the
public interest.
A number of interested parties, primarily competitors of Sprint and potential
competitors of the Joint Venture, filed comments in opposition to Sprint's
petition with the FCC on November 11, 1994. In their comments, AT&T Corp., MCI
and BT North America Inc. urge the FCC to adopt a reciprocal market access test
in assessing the transactions and to delay approval of Sprint's petition until
French and German markets are open to competition. Sprint filed its reply to
these comments with the FCC on December 5, 1994.
On August 4, 1995, the FCC, by public notice, asked for supplemental comment
by interested parties on the Investment Agreement, the Related Investment
Documents and the Joint Venture Agreement. On September 1, 1995, supplemental
comments were filed with the FCC, again primarily by competitors of Sprint and
potential competitors of the Joint Venture. These supplemental comments reflect
positions similar to those contained in the opposing comments filed in November
1994. Sprint, FT and DT submitted reply comments on September 15, 1995.
On February 17, 1995, the FCC released a Notice of Proposed Rulemaking
("NPRM") in which it sought to clarify policies governing the participation of
foreign carriers in the U.S. telecommunications
22
market. Under the proposed policies, the FCC may, among other things, condition
foreign carrier entry into the U.S market through ownership of domestic holders
of FCC licenses upon whether U.S. carriers enjoy "effective market access" in
the foreign carrier's home market. Adoption of the policies outlined in the
NPRM may affect the manner in which the FCC assesses the Transactions under the
Communications Act. However, the NPRM is still pending and there is no
assurance that the FCC will or will not adopt the proposed policies or that, if
adopted, the policies would or would not apply to Sprint or materially affect
the Transactions.
While Sprint believes that the Investment, and the resulting foreign
ownership in Sprint, is consistent with the public interest and does not
require approval pursuant to Section 310(d), Sprint cannot predict the outcome
of the petition filed with the FCC nor can it predict with any certainty the
timing of receipt of approvals or the type and extent of the conditions which
may be imposed by the FCC. Failure to obtain the requested ruling could have an
adverse impact on the ability of Sprint, FT and DT to consummate the Investment
Transactions. Note in this context that in 1994, the FCC approved the
acquisition of 20% of MCI by British Telecommunications Plc, raising the
permitted level of foreign investment in MCI to 28%. In August 1995, the FCC
granted MCI's request to allow foreign ownership of MCI to rise to 35% from its
former limit of 28%.
United States Antitrust Laws. Under the HSR Act and the rules promulgated
thereunder by the Federal Trade Commission (the "FTC"), the Transactions may
not be consummated until notifications have been given and certain information
has been furnished to the FTC and the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the applicable waiting period has
expired or been terminated. On July 18 and 19, 1994, Sprint, FT and DT filed
notification and report forms under the HSR Act with the FTC and the Antitrust
Division relating to the Transactions. On August 18, 1994, the Antitrust
Division, as part of its investigation and review of the Transactions, issued a
second request for information to Sprint, FT and DT. On July 13, 1995, Sprint
reached agreement with the Antitrust Division concerning the Transactions. The
agreement with the Antitrust Division, which takes the form of a consent
decree, was filed with the U.S. District Court for the District of Columbia on
July 18, 1995.
Until such time as the consent decree is entered by the court and becomes
legally binding, the parties must abide by the terms and procedures outlined in
the Antitrust Procedures and Penalties Act (the "APPA"). As required under the
APPA, the text of the consent decree must be submitted for public comments
prior to the entry of the consent decree by the court. During this public
comment period, which lasts until October 23, 1995, interested parties may
submit comments on the proposed consent decree to the Antitrust Division. At
the end of the period, the Antitrust Division will file these comments along
with its response contained in the Federal Register with the court.
The consent decree will then be considered by the court. Pursuant to the
APPA, the court must determine that the entry of the consent decree in the form
of a final judgment is in the public interest (as defined by 15 U.S.C.
(S)16(e)). To this end, the court may hold hearings and may take testimony
before finalizing its determination. Once it has completed its inquiry, it is
possible that the court may refuse to enter the judgment or require material
modifications to it.
Although the consent decree does not become binding upon Sprint and the Joint
Venture until it is approved by the court in the form of a final judgment,
Sprint has agreed to abide, and to cause each JV Entity upon its formation to
abide, by its terms following the Initial Issuance Date. The Antitrust Division
has the right to withdraw from the consent decree at any time prior to entry of
the final judgment by the court.
The consent decree imposes certain restrictions and conditions on Sprint and
the Joint Venture and is structured in two phases. Phase I of the consent
decree is the period of time from the Initial Issuance Date until
liberalization of the French and German telecommunications markets. During
Phase I, Sprint and the
23
Joint Venture cannot: (i) acquire on discriminatory terms monopoly products or
services from FT in France or DT in Germany for service between the United
States and France or the United States and Germany; (ii) own monopoly assets of
FT in France or DT in Germany, but can lease and be non-exclusive sales agents
or resellers of FT and DT monopoly services in France or Germany; (iii) own or
control FT or DT public data networks in France or Germany; or (iv) be
improperly cross-subsidized by the monopoly businesses of FT or DT. In
addition, the Joint Venture must be a separate entity with separate accounting
systems. Moreover, during Phase I, Sprint is prohibited from accepting
telecommunications traffic from FT and DT other than in a manner consistent
with the proportionate return commitment of FT and DT and the policies of the
FCC concerning proportionate return. Sprint is also prohibited from accepting
or benefitting from any alteration in methodology by which FT or DT calculates
proportionate return traffic among U.S. international telecommunications
providers if the change in methodology either substantially favors Sprint with
respect to all other such providers or if inconsistent with the policies of the
FCC. In order to implement these requirements, Sprint must on a quarterly basis
disclose to the Antitrust Division certain information concerning its
correspondent telecommunications traffic.
Phase II of the consent decree also takes effect upon the Initial Issuance
Date and lasts for five years after the conclusion of Phase I, which is
dependent upon liberalization of the French and German telecommunications
markets. During Phase II, Sprint and the Joint Venture may not (i) provide
telecommunications services in the United States which make use of FT services
in France (or between the United States and France) or DT services in Germany
(or between the United States and Germany) unless they disclose interconnection
prices, terms and conditions, correspondent rates and return traffic
methodology, capacity, provisioning and restoration intervals, and discounts
and material network changes; (ii) receive from FT or DT any non-public
proprietary or pricing information about other U.S. carriers; or (iii) offer
services between the United States and France or Germany unless other U.S.
carriers are able to obtain licenses in France and Germany to provide such
services.
U.S. State Regulatory Approvals. The investment by FT and DT in Sprint does
not constitute a change of control of Sprint under the laws of the states in
which Sprint has operations. Therefore, no state regulatory agencies ("PUCs")
need to approve the Investment Transactions. Nevertheless, Sprint notified all
state PUCs and offered to provide any relevant information of interest and, in
response to the requests of certain PUCs, made certain filings. Certain PUCs
issued letters or orders confirming the absence of any change of control. No
state requests or proceedings are outstanding.
Exon-Florio Amendment. The Exon-Florio Amendment empowers the President of
the United States to prohibit or suspend an acquisition of, or investment in, a
U.S. company by a non-U.S. person if the President finds, after investigation,
credible evidence that the non-U.S. person might take action which threatens to
impair the national security of the United States and that other provisions of
existing law do not provide adequate and appropriate authority to protect the
national security. The Exon-Florio Amendment permits parties which it might
affect to submit voluntarily notification to the Chairman of the Committee on
Foreign Investment in the United States ("CFIUS"). Any determination that an
investigation is called for must be made within 30 days of such notice. Sprint,
FT and DT jointly notified CFIUS in writing of the Investment Transactions on
November 4, 1994, and received notification from CFIUS on December 6, 1994 that
no further action in respect of such transactions would be taken under the
Exon-Florio Amendment.
Defense Investigative Service. Certain of Sprint's subsidiaries hold
Department of Defense ("DOD") facility security clearances issued under the DOD
Industrial Security Program ("DISP"). The DISP requires that corporations
maintaining facility security clearances be effectively insulated from FOCI.
Defense Investigative Service ("DIS") is the governmental entity responsible
for enforcement of the DISP to prevent unauthorized access to classified and
controlled unclassified information and to avoid foreign influence over the
business or management of corporations maintaining facility security clearances
in a manner that either could result in the compromise of classified or
controlled unclassified information or could adversely affect
24
the performance of contracts requiring access to classified or controlled
unclassified information. Sprint has submitted to DIS a proposal to negate any
potential FOCI issues generated by the Investment Agreement. This proposal
includes arrangements that would restrict FT and DT, including FT's and DT's
representatives on the Sprint Board, from access to classified and controlled
unclassified information. While Sprint anticipates that it will reach an
agreement with DIS based on its proposal, there can be no assurance that such
an agreement will be achieved. Contracts involving access to classified or
controlled unclassified information comprise an extremely small percentage of
Sprint's current revenue base, however, and Sprint's conclusion of an agreement
with DIS is not a condition for consummation of the Transactions.
European Union Competition Regulations. Article 85 of the Treaty of Rome
("Article 85") prohibits parties from entering into agreements or arrangements
which restrict competition and affect trade between European Community member
states unless such agreements or arrangements are exempted by the relevant EU
authorities. A violation of Article 85 exposes the parties to, among other
things, the risk of substantial fines from the EU and the risk of third party
actions for injunctions or damages. On June 29, 1995, Sprint, FT and DT
notified the EU of the Transactions in an application for negative clearance
(that Article 85 does not apply) or exemption (that Article 85 applies but the
agreement meets the requirements for exemption because it is not unduly
restrictive) under Article 85.
Regulatory Approvals in France and Germany. The Transactions must receive the
approval of the French minister in charge of economic affairs and finance and
the French minister in charge of posts and telecommunications. The parties also
must formally notify the German Cartel Office of the Joint Venture
Transactions, and may not consummate such transactions until either the German
Cartel Office has notified the parties that it will not prohibit the Joint
Venture Transactions or until a certain period of time has elapsed following
the notification to the German Cartel Office referred to above. Any violation
of such prohibition may result in fines and/or other remedies. However, if the
EU exempts the Joint Venture Transactions from Article 85, the German Cartel
Office must observe that decision to the extent of its scope. The parties have
informed the German Cartel Office regarding the Joint Venture Transactions, but
pending a reaction from the EU have not yet made the formal notification
referred to above.
Regulatory Approvals Relating to Atlas. The formation of Atlas, which is a
condition to the consummation of the Transactions, and certain transactions
relating to the involvement of Atlas in the Joint Venture are subject to
numerous regulatory approvals, including, among others (i) certain approvals
under applicable national antitrust and/or merger control laws of France,
Germany and certain other European countries, (ii) approval by the French
minister in charge of economic affairs and the French minister in charge of
posts and telecommunications of the transfer of shares of a subsidiary of FT to
Atlas, (iii) approvals required to permit certain public services to be
performed by Atlas, and (iv) certain rulings under the French tax code.
The Atlas transaction is also subject to approval under EU competition
regulations. On December 16, 1994, FT and DT notified the relevant EU
authorities of the Atlas transaction in an application for negative clearance
or exemption under Article 85. After completing a preliminary assessment of
Atlas, EU competition authorities issued a "warning letter" to FT and DT on May
23, 1995 which identified a number of competitive concerns and indicated a
preliminary intention to disapprove the transaction. In June 1995, FT and DT
offered several modifications to the Atlas transaction that alleviated some of
the EU's concerns. On July 18, 1995, EU competition authorities provided to FT
and DT a memorandum which identified several competitive concerns with the
Transactions and with the relationship between the Joint Venture and Atlas. In
order to eliminate these concerns, the EU may require certain modifications to
the Transactions or impose other requirements on the Joint Venture, FT, DT,
Atlas or Sprint before approving the Transactions. On September 15, 1995, FT
and DT filed initial responses to the EU concerns. At that time, FT and DT also
offered to support certain actions to liberalize their respective
telecommunications markets. No assurance as to the final outcome of the EU
approvals process can be given.
25
INVESTMENT AGREEMENT AND
RELATED INVESTMENT DOCUMENTS (PROPOSAL NO. 1)
IN GENERAL
The holders of the Sprint Voting Stock are being asked to approve and adopt
the Investment Agreement and the performance by Sprint of all transactions and
acts on the part of Sprint contemplated under the Investment Agreement,
including the issuance to FT and DT of shares of Class A Common Stock and/or
Class A Preference Stock, and the issuance of any shares of Sprint Common Stock
that would be issued upon the conversion of the shares of Class A Stock. The
following is a summary of certain provisions of the Investment Agreement, which
is attached as Exhibit B to this Proxy Statement and is incorporated by
reference herein, certain provisions of the Standstill Agreement, which is
attached as Exhibit C to this Proxy Statement and is incorporated by reference
herein, and certain of the other Related Investment Documents, which are
attached hereto as exhibits to the Investment Agreement. Such summary is
qualified in its entirety by reference to the Investment Agreement and such
Related Investment Documents.
The Sprint Board reserves the right, pursuant to the Investment Agreement, to
amend any provisions of the Investment Agreement or the Related Investment
Documents (with the agreement of FT and DT) in all respects in accordance with
their terms and without stockholder approval before or after approval of the
Investment Proposals by Sprint stockholders. The Sprint Board also reserves the
right to terminate the Investment Agreement or the Related Investment Documents
in accordance with their terms notwithstanding stockholder approval thereof.
PURCHASE AND SALE OF CLASS A STOCK
In General. The Investment Agreement contemplates that FT and DT will
purchase Class A Common Stock on the Initial Issuance Date under the
circumstances described below in "--Purchase of Class A Common Stock at the
First Closing." Subject to the satisfaction of certain conditions, an interim
investment in Class A Preference Stock will be made instead if the average
closing market price of the Sprint Common Stock (the "First Closing Average
Sprint Price") for the 20 trading day period ended 15 trading days prior to the
first closing of the purchase and sale of Class A Stock to FT and DT (the
"First Closing") is not at or above $34.982 or if the Cellular Spin-Off has not
been consummated or abandoned prior to the First Closing. See "--Purchase of
Class A Preference Stock at the First Closing." The Investment Agreement also
anticipates that if FT and DT purchase shares of Class A Preference Stock at
the First Closing they will, under certain circumstances, purchase additional
shares of Class A Stock at one or more subsequent closings. See "--Purchase of
Class A Preference Stock at an Additional Preference Stock Closing," "--
Purchase of Class A Preference Stock at the Supplemental Preference Stock
Closing" and "--Purchase of Class A Common Stock at the Deferred Common Stock
Closing." Following the Investment Completion Date, FT and DT will also be
entitled to purchase certain additional shares of Class A Stock based on the
number of additional shares of Sprint Common Stock or other Sprint voting
securities issued after June 14, 1994. See
"--Purchase of Optional Shares." If shares of Class A Preference Stock are
issued to FT and DT in any of such circumstances, such shares will be
convertible into shares of Class A Common Stock as described in
"--Terms of the Class A Stock--Terms of the Class A Preference Stock--
Conversion and Redemption." The closing of each purchase of Class A Stock is
subject to the satisfaction or waiver of certain conditions. See "--Conditions
to the First Closing" and "--Conditions to Article IV Closing."
On July 28, 1995, Sprint announced that the Sprint Board had decided to
pursue the Cellular Spin-Off. In the recent FCC auction of PCS licenses, the
Sprint Telecommunications Venture won rights to several markets which overlap
service territories operated by the Cellular and Wireless Division. Under FCC
rules, Sprint is required to divest or reduce its cellular operations in
certain markets to clear conflicts with the PCS licenses awarded to the Sprint
Telecommunications Venture. The resolution of these licensing conflicts is
expected to be accomplished through the Cellular Spin-Off. The Cellular Spin-
Off is expected to be completed during the first six months of 1996 and is
subject to a favorable ruling by the Internal Revenue Service as to
26
the tax-free nature of the Cellular Spin-Off, receipt of applicable regulatory
and other governmental approvals and final approval by the Sprint Board.
If the Cellular Spin-Off is consummated, the price to be paid by FT and DT
for the Class A Stock and the relevant thresholds will be reduced to reflect
the fact that an investment in Sprint will no longer include an investment in
those assets which are spun off. FT and DT will not be receiving stock of the
spun off entity ("Spinco"). The amount of such reduction will be based on a per
share reduction factor described below (the "Cellular Spin-Off Reduction
Factor"). See "--Calculation of the Cellular Spin-Off Reduction Factor."
Unless otherwise agreed by the parties, the First Closing will occur ten
business days after the date on which all of the conditions precedent to such
closing are satisfied or waived (except conditions to be satisfied concurrently
with the First Closing), except that if the Cellular Spin-Off occurs fewer than
35 trading days before the date on which the First Closing is otherwise
scheduled to occur, the First Closing will instead occur on the 35th trading
day after the Cellular Spin-Off. See "Investment Agreement and Related
Investment Documents--Conditions to the First Closing."
Purchase of Class A Common Stock at the First Closing. At the First Closing,
FT and DT will purchase an aggregate of 86,236,036 shares of Class A Common
Stock if:
(i) (x) at least 35 trading days prior to the First Closing the Cellular
Spin-Off has occurred or (y) Sprint has notified FT and DT at least ten
business days prior to the First Closing that it has abandoned the Cellular
Spin-Off, and
(ii) (x) the First Closing Average Sprint Price is at or above $34.982
or, if the Cellular Spin-Off has occurred, $34.982 less 96.30% of the
Cellular Spin-Off Reduction Factor (the "New Lower Threshold Sprint Price")
or (y) Sprint or FT and DT elect that FT and DT will purchase Class A
Common Stock in the circumstances and on the terms described below.
If Sprint has delivered notice to FT and DT that it has abandoned the
Cellular Spin-Off, the per share price which FT and DT will pay for shares of
Class A Common Stock at the First Closing will be:
(i) $47.225, if the First Closing Average Sprint Price is at or above
$34.982 and at or below $37.780 (the "Sprint Price Range") or if the First
Closing Average Sprint Price is below $34.982 and FT and DT elect prior to
the First Closing to purchase such shares at $47.225,
(ii) the lesser of (x) 125% of the First Closing Average Sprint Price and
(y) $48.704, if the First Closing Average Sprint Price is above $37.780, or
(iii) 135% of the First Closing Average Sprint Price (the "First Closing
Minimum Price"), if the First Closing Average Sprint Price is below $34.982
and Sprint has elected to issue such shares of Class A Common Stock at the
First Closing Minimum Price.
If the Cellular Spin-Off has occurred, the per share price which FT and DT
will pay for shares of Class A Common Stock at the First Closing will be:
(i) $47.225 less 130% of the Cellular Spin-Off Reduction Factor (the
"First Closing New Target Price"), if (x) the First Closing Average Sprint
Price is at or above the New Lower Threshold Sprint Price and at or below
$37.780 less 104% of the Cellular Spin-Off Reduction Factor (the "New Upper
Threshold Sprint Price"), or (y) the First Closing Average Sprint Price is
below the New Lower Threshold Sprint Price and FT and DT elect prior to the
First Closing to purchase such shares at the First Closing New Target
Price,
(ii) the lesser of (x) 125% of the First Closing Average Sprint Price and
(y) $48.704 less 125% of the Cellular Spin-Off Reduction Factor, if the
First Closing Average Sprint Price is above the New Upper Threshold Sprint
Price, or
27
(iii) the First Closing Minimum Price, if the First Closing Average
Sprint Price is below the New Lower Threshold Sprint Price and Sprint has
elected to issue such shares of Class A Common Stock at the First Closing
Minimum Price.
Purchase of Class A Preference Stock at the First Closing. FT and DT will
purchase shares of Class A Preference Stock rather than shares of Class A
Common Stock at the First Closing if (i) the Cellular Spin-Off has occurred or
Sprint has abandoned the Cellular Spin-Off, but the First Closing Average
Sprint Price is below $34.982 per share (if the Cellular Spin-Off has been
abandoned) or the New Lower Threshold Sprint Price (if the Cellular Spin-Off
has occurred) and neither FT and DT nor Sprint has made an election to cause
the purchase and sale of Class A Common Stock as described in "--Purchase of
Class A Common Stock at the First Closing" or (ii) the Cellular Spin-Off has
not occurred or been abandoned.
If the Cellular Spin-Off has not occurred and Sprint has not abandoned the
Cellular Spin-Off and if (i) the First Closing Average Sprint Price is within
the Sprint Price Range or (ii) the First Closing Average Sprint Price is below
$34.982 and FT and DT have elected to purchase shares of Class A Preference
Stock with a conversion price (the "Conversion Price") fixed at $47.225, then
such shares of Class A Preference Stock will be purchased at a per share price,
and have a per share liquidation value, of $47.225 and an aggregate purchase
price and liquidation value of up to $3.0 billion. Sprint may elect that FT and
DT purchase less than $3.0 billion, but not less than $2.0 billion, of Class A
Preference Stock. Such shares of Class A Preference Stock will have a
Conversion Price fixed at $47.225.
If the Cellular Spin-Off has not occurred and Sprint has not abandoned the
Cellular Spin-Off, and if the First Closing Average Sprint Price is above
$37.780, then such shares of Class A Preference Stock will be purchased at a
per share price, and have a per share liquidation value, of $47.225 and an
aggregate purchase price and liquidation value of $3.0 billion. Sprint may
elect that FT and DT purchase less than $3.0 billion, but not less than $2.0
billion, of Class A Preference Stock. Such shares will have a Conversion Price
fixed at the lesser of (i) 125% of the First Closing Average Sprint Price and
(ii) $48.704.
If the Cellular Spin-Off has not occurred, Sprint has not abandoned the
Cellular Spin-Off, the First Closing Average Sprint Price is below $34.982 and
Sprint has elected to sell such shares of Class A Preference Stock with a
Conversion Price fixed at the First Closing Minimum Price, then such shares of
Class A Preference Stock will be purchased at a price per share, and have a per
share liquidation value, of $47.225 and an aggregate purchase price and
liquidation value of $3.0 billion. Sprint may elect that FT and DT purchase
less than $3.0 billion, but not less than $2.0 billion, of the Class A
Preference Stock. Such shares will have a Conversion Price fixed at the First
Closing Minimum Price.
Finally, if (i) the Cellular Spin-Off has not occurred and Sprint has not
abandoned the Cellular Spin-Off, the First Closing Average Sprint Price is
below $34.982 and neither FT and DT nor Sprint has made an election with
respect to the Conversion Price to be fixed for such shares or (ii) the
Cellular Spin-Off has occurred or been abandoned, but the First Closing Average
Sprint Price is below the New Lower Threshold Sprint Price or the Lower
Threshold Sprint Price, as the case may be, and neither FT and DT nor Sprint
has made an election with respect to the Conversion Price to be fixed for such
shares, then such shares of Class A Preference Stock will be purchased at a
price per share, and have a per share liquidation value, of $47.225 and an
aggregate purchase price and liquidation value of $1.5 billion. Such shares
will be convertible at a Conversion Price to be fixed at a later time in
accordance with the Articles of Incorporation as amended by the Charter
Amendments. See "--Terms of the Class A Stock--Terms of the Class A Preference
Stock--Conversion and Redemption."
Calculation of the Cellular Spin-Off Reduction Factor. The Cellular Spin-Off
Reduction Factor will vary based on the average closing price of a share of
common stock of Spinco for the first 20 consecutive trading days on which such
shares are traded "regular way" after the Cellular Spin-Off multiplied by the
quotient of (i) the number of such shares of common stock of Spinco outstanding
immediately following the Cellular Spin-Off divided by (ii) the number of
shares of Sprint Common Stock outstanding immediately following
28
the Cellular Spin-Off (the "Adjusted Cellular Price"). The Cellular Spin-off
Reduction Factor will be based on the Adjusted Cellular Price and will be
calculated as set forth in the following table:
ADJUSTED CELLULAR PRICE CELLULAR SPIN-OFF REDUCTION FACTOR
----------------------- ----------------------------------
Adjusted Cellular Price $5.75 plus the excess of the Ad-
greater than $8.25 justed Cellular Price over $8.25
Adjusted Cellular Price $5.25 plus 50% of the excess of
greater than $7.25 but not more the Adjusted Cellular Price over
than $8.25 $7.25
Adjusted Cellular Price $5.25
not less than $3.25 or more than
$7.25
Adjusted Cellular Price $5.25 minus 50% of the excess of
less than $3.25 but not less than $3.25 over the Adjusted Cellular
$2.25 Price
Adjusted Cellular Price $4.75 minus the excess of $2.25
less than $2.25 over the Adjusted Cellular Price
The Cellular Spin-Off Reduction Factor determined as set forth in the above
table will be subject to further adjustment in certain circumstances. If the
amount of indebtedness per share of common stock of Spinco outstanding
immediately after the Cellular Spin-Off exceeds $2.955, the dollar amounts set
forth in the above table (other than the Adjusted Cellular Price) will be
reduced dollar-for-dollar by such excess. If $2.955 exceeds such indebtedness,
each such dollar amount will be increased dollar-for-dollar by such excess. If
the Cellular and Wireless Division effects acquisitions or dispositions after
June 22, 1995 and prior to the Cellular Spin-Off, such dollar amounts will be
increased by the per share amount by which the aggregate purchase prices paid
by the Cellular and Wireless Division for such acquisitions exceed the
aggregate value of sales prices received by the Cellular and Wireless Division
in connection with such dispositions. If the amount of such sales prices
received exceeds the amount of such purchase prices paid, such dollar amounts
will be decreased by the per share amount of such difference. The dollar
amounts in this paragraph will be further adjusted if the number of shares of
common stock of Spinco outstanding immediately after the Cellular Spin-Off
differs from the number of shares of Sprint Common Stock outstanding
immediately after the Cellular Spin-Off.
Purchase of Class A Preference Stock at an Additional Preference Stock
Closing. If (i) FT and DT have purchased shares of Class A Preference Stock at
the First Closing but the Conversion Price was not fixed at the First Closing,
(ii) the Conversion Price of such shares thereafter becomes fixed in accordance
with the Articles of Incorporation as amended by the Charter Amendments (see
"--Terms of the Class A Stock--Terms of the Class A Preference Stock--
Conversion and Redemption"), and (iii) the Cellular Spin-Off has not occurred
and Sprint has not abandoned the Cellular Spin-Off, then each of FT and DT,
subject to satisfaction of certain conditions, will purchase from Sprint
additional shares of Class A Preference Stock. Such shares will have a per
share liquidation value of $47.225 and an aggregate liquidation value of $1.5
billion. Sprint may determine that the aggregate liquidation value will be less
than $1.5 billion, but not less than $0.5 billion. FT and DT will purchase such
shares at a price equal to their liquidation value, and such shares will be
convertible at the Conversion Price fixed in accordance with the Articles of
Incorporation as amended by the Charter Amendments.
The purchase of such shares of Class A Preference Stock will occur at one or
more closings (each, an "Additional Preference Stock Closing"). Unless
otherwise agreed by the parties, the first Additional Preference Stock Closing
will occur ten business days after the later of (i) the date on which the
Conversion Price is fixed and (ii) the date on which all of the conditions
precedent to such closing have been satisfied or waived (except conditions to
be satisfied concurrently with such closing). See "Investment Agreement and
Related Investment Documents--Conditions to Article IV Closing." Sprint will
determine when the subsequent Additional Preference Stock Closings, if any,
will occur, but unless otherwise agreed by the parties none may occur (i) more
than one year after the first Additional Preference Stock Closing, (ii) more
than five
29
years and sixty days after the First Closing (subject to certain limited
exceptions), (iii) after the Cellular Spin-Off has occurred, or (iv) after
Sprint has abandoned the Cellular Spin-Off.
If FT and DT are obligated to purchase shares of Class A Preference Stock at
an Additional Preference Stock Closing, Sprint may, not later than five
business days after the date on which the Conversion Price first becomes fixed,
notify FT and DT of the number of Additional Preference Stock Closings that are
to occur. Sprint may not elect that more than one Additional Preference Stock
Closing occur unless the aggregate liquidation value of the Class A Preference
Stock to be purchased at all such closings exceeds $500 million, and in no
event may Sprint elect that more than three Additional Preference Stock
Closings occur. In addition, the aggregate liquidation value of the Class A
Preference Stock to be purchased at the first Additional Preference Stock
Closing must be at least $500 million and the aggregate liquidation value of
the Class A Preference Stock to be purchased at any subsequent Additional
Preference Stock Closing must be at least $100 million. Finally, if there are
three Additional Preference Stock Closings, the shares to be purchased at the
second and third Additional Preference Stock Closings must have identical
aggregate liquidation values.
Purchase of Class A Preference Stock at the Supplemental Preference Stock
Closing. If FT and DT elect to defer conversion of the Class A Preference Stock
in accordance with the Articles of Incorporation as amended by the Charter
Amendments because the Conversion Price is in excess of 135% of the average
closing market price of Sprint Common Stock for the twenty trading days ended
on the tenth business day prior to the date established for the conversion of
Class A Preference Stock into Class A Common Stock (the "Conversion Date") (see
"--Terms of the Class A Stock--Terms of the Class A Preference Stock--
Conversion and Redemption"), then FT and DT, subject to satisfaction of certain
conditions, will purchase from Sprint additional shares of Class A Preference
Stock having an aggregate liquidation value equal to the excess of (i) the
product of 86,236,036 and the per share Conversion Price of the outstanding
Class A Preference Stock over (ii) the aggregate liquidation value of the
shares of Class A Preference Stock previously purchased. The purchase price of
each such share will be equal to its liquidation value of $47.225 per share.
Unless otherwise agreed by the parties, the closing of the purchase of such
shares of Class A Preference Stock (the "Supplemental Preference Stock
Closing") will occur ten business days after the later of (i) the date on which
the election to defer conversion pursuant to the Articles of Incorporation as
amended by the Charter Amendments is made and (ii) the date on which all of the
conditions precedent to such closing have been satisfied or waived (except
conditions to be satisfied concurrently with such closing). See "Investment
Agreement and Related Investment Documents--Conditions to Article IV Closing."
Unless otherwise agreed by the parties, the Supplemental Preference Stock
Closing may not occur more than five years and 60 days after the First Closing
(subject to certain limited exceptions).
Purchase of Class A Common Stock at the Deferred Common Stock Closing. If (i)
FT and DT have purchased shares of Class A Preference Stock at the First
Closing, (ii) the Cellular Spin-Off has occurred or been abandoned, (iii) the
conditions to the establishment of the Conversion Date have been satisfied,
(iv) the shares of Class A Preference Stock are to be converted on the
Conversion Date, and (v) such conversion has not been deferred by FT and DT as
described above, then FT and DT (subject to satisfaction of certain conditions)
will purchase from Sprint additional shares of Class A Common Stock equal to
the excess of (i) 86,236,036 shares over (ii) the sum of (x) the number of
shares of Class A Common Stock issued upon conversion of the outstanding shares
of Class A Preference Stock and (y) the number of shares of Class A Common
Stock that would have been issued in respect of shares of Class A Preference
Stock previously purchased but which have been transferred to persons other
than the Class A Holders or redeemed. The purchase price of each such share
will be the Conversion Price at which shares of Class A Preference Stock were
converted into shares of Class A Common Stock.
Unless otherwise agreed by the parties, the closing of the purchase of such
shares of Class A Common Stock (the "Deferred Common Stock Closing") will occur
on the later of (i) the Conversion Date and (ii) the date on which all of the
conditions precedent to such closing have occurred. See "Investment Agreement
and
30
Related Investment Documents--Conditions to Article IV Closing." Unless
otherwise agreed by the parties, the Deferred Common Stock Closing may not
occur more than five years and 60 days after the First Closing (subject to
certain limited exceptions) or fewer than 30 business days after the Cellular
Spin-Off.
Purchase of Optional Shares. Each of FT and DT will have the right, but not
the obligation, to purchase from Sprint additional shares (the "Optional
Shares") of either (i) Class A Common Stock, if Sprint has previously issued
Class A Common Stock (the date on which such Class A Common Stock was first
issued being referred to as the "Class A Common Issuance Date"), or (ii) Class
A Preference Stock, if the Supplemental Preference Stock Closing has occurred.
The number of Optional Shares that each of FT and DT will be entitled to
purchase at the closing for such shares (the "Optional Shares Closing") will be
equal to one-half of the number of shares of Class A Common Stock equal to, or
one-half the number of additional shares of Class A Preference Stock
convertible into a number of additional shares of Class A Common Stock equal
to, 25% of the number of shares of Sprint Common Stock issued after June 14,
1994 and on or prior to the date of the Supplemental Preference Stock Closing
or the Class A Common Issuance Date, whichever occurs first (the "Investment
Completion Date").
Shares of Class A Preference Stock purchased at the Optional Shares Closing
will have a per share liquidation value equal to their per share purchase price
and, upon the issuance of such shares at the Optional Shares Closing, the
Conversion Price will be adjusted as described in "--Terms of the Class A
Stock--Terms of the Class A Preference Stock--Conversion and Redemption."
With respect to shares of Sprint Common Stock issued after June 14, 1994 and
on or prior to the Investment Completion Date, other than those shares of
Sprint Common Stock issued in respect of stock options, warrants or other
rights (except rights issued pursuant to the rights plan of Sprint ("Sprint
Rights Plan") in existence on or before the Initial Issuance Date (including
any such shares issued pursuant to employee benefit plans) or upon the
conversion of any securities outstanding on or before the Initial Issuance
Date, the purchase price of the Optional Shares will be based on the weighted
average per unit price paid for such Sprint Common Stock.
With respect to shares of Sprint Common Stock issued after June 14, 1994 and
on or prior to the Initial Issuance Date in respect of stock options, warrants
or other rights (except rights issued pursuant to the Sprint Rights Plan) in
existence on or before the Initial Issuance Date (including any such shares
issued pursuant to employee benefit plans) or upon the conversion of any
securities outstanding on or before the Initial Issuance Date, the per share
purchase price of the Optional Shares will be based on the higher of (i) the
per share price at which Class A Common Stock was issued and sold to FT and DT
at the Class A Common Issuance Date or at which Class A Preference Stock was
issued at the Supplemental Preference Stock Closing and (ii) the weighted
average per unit price paid for such Sprint Common Stock. Notwithstanding the
foregoing, the purchase price for Optional Shares purchased with respect to
"Excess Shares" will be based on the weighted average per unit price paid for
such Excess Shares. "Excess Shares" means those shares of Sprint Common Stock
issued after the date of the Investment Agreement and on or prior to the
Initial Issuance Date (other than pursuant to employee benefit plans) in
respect of the exercise of rights to purchase Sprint Common Stock or similar
instruments (except rights issued pursuant to the Sprint Rights Plan) issued
after the date of the Investment Agreement and on or prior to the Initial
Issuance Date that, when aggregated with all other shares of Sprint Common
Stock which are issued after the date of the Investment Agreement in respect of
the exercise of such rights issued after the date of the Investment Agreement
and on or prior to the Initial Issuance Date, exceed 5% of the number of shares
of Sprint Common Stock outstanding on the date of the Investment Agreement.
If after June 14, 1994 and on or prior to the Investment Completion Date
Sprint issues voting securities other than Sprint Common Stock or Class A
Stock, FT and DT will be entitled to purchase a number of additional Optional
Shares of Class A Stock representing 25% of the votes represented by such
Sprint voting securities. The purchase price per share for such Class A Stock
will be based on the market price per share of the Sprint Common Stock on the
date or dates on which such Sprint voting securities are issued.
31
Sprint must notify FT and DT within 10 business days after the Investment
Completion Date of the number of Optional Shares which they are entitled to
purchase. Each of FT and DT may exercise its right to purchase any or all of
the Optional Shares by so notifying Sprint prior to the tenth business day
following Sprint's delivery of such notice to FT and DT, which notice by FT and
DT will constitute a binding commitment to make such purchase, subject to
satisfaction of certain conditions. Unless otherwise agreed by the parties, the
Optional Shares Closing will occur on the 30th business day after FT and DT
notify Sprint of the number of Optional Shares which they elect to purchase.
The conditions to the Optional Shares Closing are substantially identical to
those described in "Investment Agreement and Related Investment Documents--
Conditions to Article IV Closing." If the Optional Shares Closing does not
occur prior to the 60th day following the Investment Completion Date, the Class
A Holders may elect to be released from all obligations to purchase Optional
Shares, notwithstanding delivery of any notice from FT and DT of their intent
to make such purchase.
Adjustments with Respect to the Shares of Class A Stock to be Purchased. The
number of shares of Class A Stock to be purchased by FT and DT and the purchase
price for such shares will be adjusted to reflect any stock split, subdivision,
stock dividend or other reclassification, consolidation or combination of
Sprint voting securities or similar action or transaction occurring between
June 14, 1994 and the Investment Completion Date. No such adjustment will be
made in respect of the Cellular Spin-Off. In addition, the number of shares of
Class A Stock to be purchased by FT and DT will be reduced by the minimum
number of shares, if any, necessary to ensure that after the Investment
Completion Date FT and DT will own in the aggregate no more than 20% of the sum
of (i) the outstanding voting power of Sprint and (ii) the voting power of
Sprint which FT and DT have committed to purchase.
Effect of Conversion. If after the Initial Issuance Date, the Fundamental
Rights shall have terminated as to all outstanding shares of Class A Preference
Stock, or all outstanding shares of Class A Common Stock shall have converted
into Sprint Common Stock (see "--Terms of the Class A Stock--Conversion of
Class A Common Stock; Termination of Fundamental Rights"), each share of Class
A Common Stock to have been issued by Sprint shall instead be issued as one
share of Sprint Common Stock, and shares of Class A Preference Stock shall
instead be issued as shares of Sprint Common Stock.
Assignment. Each of FT and DT will have the right to assign the Investment
Agreement and the rights, interests or obligations thereunder, or to delegate
performance thereunder, to one or more Qualified Subsidiaries, in which case FT
or DT, as the case may be, and such Qualified Subsidiary shall be jointly and
severally liable for all of its obligations under the Investment Agreement. An
assignment of the right to purchase shares of capital stock of Sprint under the
Investment Agreement shall be permitted to be made to a Qualified Subsidiary
only if each such Qualified Subsidiary is identified in the Acquiring Person
Statement delivered by FT and DT pursuant to the Control Share Acquisitions
Statute and all information required by the Control Share Acquisitions Statute
with respect to each such Qualified Subsidiary is included in such Acquiring
Person Statement. In addition, any such assignment shall be effective only if
FT and DT disclose to Sprint the identity of the shareholders of such Qualified
Subsidiary and such Qualified Subsidiary agrees to be bound by the terms and
conditions of (i) the Investment Agreement and a standstill agreement and (ii)
if such assignment is made after the Initial Issuance Date, the Stockholders'
Agreement, a confidentiality agreement and the Registration Rights Agreement,
upon the purchase by such Qualified Subsidiary of Class A Stock under the
Investment Agreement.
TERMS OF THE CLASS A STOCK
In General. The terms of the Class A Common Stock generally will be
equivalent on a per share basis to the terms of the Sprint Common Stock except
for the special voting and other rights of the Class A Common Stock described
below. The terms of the Class A Preference Stock generally will be identical to
the terms of the Class A Common Stock with respect to rights to representation
on the Sprint Board and disapproval rights, but will differ from the Class A
Common Stock in other respects, such as the right to receive dividends,
liquidation rights, voting rights and protection from dilution. See "--Terms of
the Class A Common Stock"
32
and "--Terms of the Class A Preference Stock." FT and DT will be issued shares
of Class A Stock rather than Sprint Common Stock primarily to enable FT and DT
to elect directly their designees to the Sprint Board and to exercise certain
disapproval rights in their capacity as stockholders. The Class A Holders, like
all holders of other capital stock of Sprint, are not entitled to preemptive
rights with respect to their capital stock of Sprint. The Class A Holders will,
however, be entitled in certain circumstances to exercise equity purchase
rights. See "--Equity Purchase Rights."
Board Representation. Beginning on the Initial Issuance Date, the Class A
Holders will be entitled to representation on the Sprint Board equal to the
percent of the Sprint voting power owned by the Class A Holders, rounded up or
down to the nearer whole number of directors. In addition, for so long as it is
necessary in order to allow FT or DT to receive certain benefits under relevant
tax treaties between the United States and France and between the United States
and Germany, respectively, the Class A Holders will be entitled to elect not
less than 20% of the members of the Sprint Board at any time when their actual
percentage of Sprint voting power is at least 20%. Moreover, the Class A
Holders will be entitled to elect a minimum of two directors so long as their
Committed Percentage does not fall below 10% due to transfers by Class A
Holders or below 10% for 180 consecutive days due to circumstances other than
such transfers or, if the Committed Percentage is below 10% for 180 consecutive
days following a Major Issuance, until the latest of (i) three years after the
consummation of such Major Issuance, (ii) three years after the first closing
of a purchase of Class A Stock to occur after the Conversion Price is fixed if
Class A Preference Stock has been issued (the "Fixed Closing Date"), and (iii)
the Investment Completion Date. See "--Equity Purchase Rights." In addition,
until the Investment Completion Date, so long as the aggregate liquidation
value of the outstanding Class A Preference Stock is at least $1.5 billion (or
a lesser amount resulting from a purchase by Sprint of shares of Class A
Preference Stock pursuant to the Stockholders' Agreement in order for Sprint to
comply with Section 310 of the Communications Act), the Class A Holders will be
entitled to elect a minimum of two directors. If at any time following the
Initial Issuance Date the Class A Holders are entitled to elect a number of
additional directors which exceeds the number of vacancies on the Sprint Board,
the total number of directors on the Sprint Board shall automatically increase
to such number as is necessary to enable the Class A Holders to elect the
number of additional directors to which they are entitled. The foregoing rights
are subject to termination as discussed below. See "--Conversion of Class A
Common Stock; Termination of Fundamental Rights."
If any time after the termination of Fundamental Rights as to all outstanding
shares of Class A Preference Stock (see "--Conversion of Class A Common Stock;
Termination of Fundamental Rights"), Sprint shall not have declared and paid
all accrued and unpaid dividends on the Class A Preference Stock for four
consecutive quarterly dividend periods (see "--Terms of the Class A Preference
Stock--Dividends"), then the holders of the Class A Preference Stock will have
the exclusive right, voting separately as a class, to elect two directors until
all such accrued and unpaid dividends have been paid.
If the Joint Venture Agreement is terminated, Sprint may exclude the Class A
Directors from deliberations of the Sprint Board that a majority of the
Independent Directors believe involve (i) sensitive information relating to
Sprint and its relationship to FT or DT or Sprint's activities that are
competitive with the activities of FT or DT or (ii) matters in which such Class
A Directors or the Class A Holders otherwise have conflicts of interest with
Sprint.
The Charter Amendments require that (i) Sprint limit the number of non-U.S.
directors who are not designated by the Class A Holders if necessary in order
to permit the Class A Holders under applicable law to have the representation
on the Sprint Board discussed above and (ii) a majority of the members of the
Sprint Board must be Independent Directors.
Unless prohibited by law or the rules of the New York Stock Exchange (the
"NYSE"), the Class A Holders will be entitled to one representative on each
committee of the Sprint Board. After examining the relevant circumstances, the
NYSE has indicated that it would be opposed to the Class A Holders having a
representative on the Audit Committee of the Sprint Board.
33
Disapproval Rights.
Certain Business Transactions. The Class A Holders will have the right to
disapprove the following actions by Sprint until the second anniversary of the
Initial Issuance Date (through action by the holders of a majority of the
shares of Class A Stock):
(i) any transaction or series of related transactions resulting in
divestitures of assets with a fair market value in excess of 20% of
Sprint's market capitalization as of the date of the definitive agreement
relating to the last such divestiture, with the exception of:
(A) transfers to joint ventures approved by FT and DT prior to the
Initial Issuance Date;
(B) transfers of assets to (x) any entity in exchange for equity
interests in such entity if, after such transfer, Sprint owns at least
a 51% ownership and voting interest in such entity or (y) any joint
venture that is an operating joint venture that is not controlled by
any of its participants and in which (1) Sprint has the right, acting
alone, to disapprove certain specified material business decisions and
(2) Major Competitors of the Joint Venture do not in the aggregate own
more than 20% of the equity interests or voting power of such entity;
(C) swaps of local telecommunications or cellular properties for
similar properties;
(D) transfers of assets to Sprint or to any subsidiary of Sprint;
(E) spin-offs of equity interests in a wholly-owned subsidiary of
Sprint to the stockholders of Sprint, so long as, with respect to a
spin-off occurring after the Initial Issuance Date, the Class A Holders
receive securities in the spun-off entity with rights no less favorable
to the Class A Holders than those granted to the Class A Holders
pursuant to the Articles of Incorporation as amended by the Charter
Amendments and the Bylaws as amended by the Bylaw Amendments;
(F) the Cellular Spin-Off (unless Sprint has abandoned the Cellular
Spin-Off);
(G) transfers of assets in connection with certain outsourcing
transactions (the transactions set forth in clauses (A) through (G)
above are referred to as "Exempt Asset Divestitures"); or
(H) Exempt Long Distance Asset Divestitures (as defined in "--Right
of First Offer with Respect to Long Distance Assets");
(ii) any transaction or series of related transactions (including a
merger or other business combination), other than Exempt Asset Divestitures
and Exempt Long Distance Asset Divestitures, resulting in the acquisition
for cash or debt securities having a maturity of less than one year of:
(A) businesses in the fields of telecommunications and information
technology and applications, and equipment, software applications and
related consumer and business services, including value-added consumer
and business services generated through underlying telecommunications
services using all technology and physical transport, network
intelligence and software applications and cable television (but not
including any programming or content-related activities with respect
thereto) ("Core Businesses"), the purchase price of which exceeds 20%
of Sprint's market capitalization immediately prior to such
acquisition; or
(B) businesses other than Core Businesses, the purchase price of
which exceeds 5% of Sprint's market capitalization immediately prior to
such acquisition, provided that if such businesses other than Core
Businesses are to be obtained in a transaction in which Core Businesses
will also be obtained and the ratio of the fair market value of the
Core Businesses to be acquired to the fair market value of the other
businesses to be acquired exceeds 1.75 to 1, then the Class A Holders
will not be entitled to disapprove such transaction except as set forth
in clause (ii)(A) above;
(iii) the issuance by Sprint of any capital stock or debt with class
voting rights and certain disapproval rights which are in scope and
duration as extensive as or more extensive than the rights granted to the
Class A Holders;
(iv) the declaration of extraordinary cash dividends or cash
distributions to stockholders of Sprint during any one year in excess of 5%
of the market capitalization of Sprint (if the Investment Completion Date
has not occurred by the end of such two-year period, the Class A Holders
will continue to have
34
the right to disapprove such dividends or distributions until the
occurrence of the Investment Completion Date);
(v) any merger or other business combination in which Sprint is not the
surviving parent corporation; and
(vi) any Major Issuance.
Beginning two years after the Initial Issuance Date, Sprint may take any of
the foregoing actions despite the disapproval of such action by FT and DT.
However, if despite such disapproval Sprint nevertheless takes any of the
actions described in clauses (i), (ii), (iii), (iv) or (vi) above following the
second anniversary, but prior to the fifth anniversary, of the Initial Issuance
Date, the transfer restrictions described below applicable to the Class A Stock
(other than those restrictions relating to transfers to a holder of more than
5% of the outstanding Sprint voting power) will be terminated, unless in the
case of a Major Issuance the Class A Holders have exercised certain equity
purchase rights in respect of such Major Issuance. See "Investment Agreement
and Related Investment Documents--Transfer Restrictions."
In addition, during the five-year period following the Initial Issuance Date,
a Major Issuance will require the approval of two-thirds of the Independent
Directors, and after such five-year period will require the approval of a
majority of the Independent Directors as long as any shares of Class A Stock
are outstanding.
Governing Documents, Etc. The Class A Holders will have the right to
disapprove the following actions until no shares of Class A Stock are
outstanding:
(i) amendments to the Articles of Incorporation or Bylaws or the Sprint
Rights Plan that would adversely affect the rights of the Class A Holders
under the Articles of Incorporation as amended by the Charter Amendments or
the Bylaws as amended by the Bylaw Amendments;
(ii) issuance by Sprint of any capital stock or debt (including pursuant
to a merger or other business combination) with more than one vote per
share or otherwise having supervoting powers;
(iii) any merger or other business combination involving Sprint that
results in a Change of Control, unless the surviving corporation expressly
(x) assumes all of Sprint's obligations to the Class A Holders with respect
to Long Distance Assets (see "--Long Distance Assets") and all of the
provisions of the Registration Rights Agreement and (y) agrees to be bound
by the rights of FT, DT and their affiliates to exercise greater control
over the Joint Venture following certain occurrences (see "The Joint
Venture--Management and Control--Increased Control Over the Joint Venture
by the Sprint Parties or the FT/DT Parties");
(iv) any merger or other business combination involving Sprint that does
not result in a Change of Control, unless (x) Sprint survives as the parent
entity, or (y) the surviving corporation expressly assumes all of Sprint's
obligations in respect of the rights of the Class A Holders granted
pursuant to the Articles of Incorporation as amended by the Charter
Amendments, the Bylaws as amended by the Bylaw Amendments, the
Stockholders' Agreement and the Registration Rights Agreement; and
(v) if any shares of Class A Preference Stock are outstanding, the
issuance by Sprint of shares of Sprint Preferred Stock which have rights to
the payment of dividends or the distribution of assets upon the
liquidation, dissolution or winding up of Sprint senior to such rights of
the Class A Preference Stock.
Long Distance Assets. During the Initial Period, no sale of Long Distance
Assets, other than an Exempt Long Distance Asset Divestiture, with a fair
market value in excess of 5% (Cumulative) of the fair market value of the Long
Distance Assets may be consummated by Sprint if it is disapproved by the Class
A Holders. As used herein, the term "Cumulative" means a percentage
representing the aggregate fair market value of all Long Distance Assets
previously sold or proposed to be sold in the transaction for which such
calculation is being made, divided by the fair market value of Long Distance
Assets existing on the date of the definitive agreement with respect to such
transaction.
35
Major Competitors. Although there are certain differences between the
definition used in the Investment Agreement and the definition used in the
Joint Venture Agreement, a "Major Competitor of FT/DT" is defined generally as
a company which materially competes with a major portion of the
telecommunications services business of FT, DT or Atlas in Europe or the
business of the Joint Venture, or a company which has taken substantial steps
to become such a Major Competitor. During the ten-year period following the
Initial Issuance Date, Sprint may not consummate any transaction or take any
other action that would result in, or is taken for the purpose of encouraging
or facilitating, a Major Competitor of FT/DT having, or being granted by
Sprint, any right, permission or approval to acquire (other than pursuant to a
Strategic Merger) 10% or more of the outstanding Sprint voting power if such
transaction or action is disapproved by the Class A Holders.
Conversion of Class A Common Stock; Termination of Fundamental Rights. Under
certain circumstances, shares of Class A Common Stock will automatically
convert into shares of Sprint Common Stock, or, if any shares of Class A
Preference Stock are outstanding, the Fundamental Rights will terminate.
Conversion Following Reduction in Ownership. If, after the Investment
Completion Date, the aggregate Committed Percentage of the Class A Holders is
below 10% for more than 180 consecutive days other than due to sales by the
Class A Holders, each outstanding share of Class A Common Stock will
automatically convert into one share of Sprint Common Stock or, if shares of
Class A Preference Stock are outstanding, the Fundamental Rights will
terminate, unless the Committed Percentage falls below 10% for more than 180
consecutive days due to a Major Issuance, in which case the Class A Common
Stock will not convert or the Fundamental Rights will not terminate, as the
case may be, until the latest of (i) three years after the consummation of such
Major Issuance, (ii) three years after the Fixed Closing Date, and (iii) the
Investment Completion Date. If after the Investment Completion Date the
Committed Percentage falls below 10% due to a sale by the Class A Holders, each
outstanding share of Class A Common Stock will automatically and immediately
convert into one share of Sprint Common Stock or, if any shares of Class A
Preference Stock are outstanding, the Fundamental Rights will immediately
terminate. Moreover, if prior to the Investment Completion Date the Class A
Holders own in the aggregate less than $1.5 billion of Class A Preference Stock
due to a transfer of such Class A Preference Stock by the Class A Holders
(other than a transfer required by Sprint to comply with Section 310 of the
Communications Act), the Fundamental Rights will terminate.
Conversion Following Breach of Certain Related Investment Documents. Except
as described below, each outstanding share of Class A Common Stock will convert
into one share of Sprint Common Stock or, if any shares of Class A Preference
Stock are outstanding, the Fundamental Rights will terminate, if (i) FT, DT or
any Qualified Subsidiary breaches in any material respect its obligations with
respect to transfers of Class A Stock to large stockholders, (ii) FT, DT or any
Qualified Subsidiary breaches in any material respect any other restriction on
the transfer of Class A Stock or (iii) FT, DT or any Qualified Subsidiary
breaches its obligations under certain specified provisions of the Standstill
Agreement or under any standstill agreement into which such Qualified
Subsidiary has entered (a "Qualified Subsidiary Standstill Agreement"), as the
case may be.
When a breach described in the preceding paragraph occurs, the breaching
Class A Holders must indicate to Sprint which of the following actions they
will take with respect to such breach. First, the breaching Class A Holders may
indicate that they intend to cure such breach (except for breaches of the
Standstill Agreement or a Qualified Subsidiary Standstill Agreement which occur
in the context of an effort to change or influence the control of Sprint) in
which case no conversion of Class A Common Stock into Sprint Common Stock or
termination of Fundamental Rights will occur unless the breach is not cured
within a specified time period. Second, the breaching Class A Holders may
indicate that they intend to dispute the existence of such breach, in which
case no conversion of Class A Common Stock into Sprint Common Stock or
termination of Fundamental Rights will occur until a final nonappealable order
of a court is issued finding
36
that such breach occurred and, if applicable, was not cured. Upon the issuance
of an order of a lower court finding that a breach has occurred, certain of the
Minority Rights will be suspended. In addition, with respect to breaches
described in clause (i) in the preceding paragraph, certain Minority Rights
will be suspended until the cure has been effected or, if the existence of the
breach is disputed, until such time as the court finds no breach has occurred.
Finally, the breaching Class A Holders may admit that such breach occurred and,
if applicable, cannot be cured, in which case each outstanding share of Class A
Common Stock will immediately convert into one share of Sprint Common Stock or,
if any shares of Class A Preference Stock are outstanding, the Fundamental
Rights will terminate. If the breaching Class A Holders fail within the
applicable time period to indicate either an intent to cure a breach or to
dispute the existence of such breach, such Class A Holders will be deemed to
have admitted such breach and its inability to be cured.
The Class A Holders will not have the right to cure a breach of the
Standstill Agreement or a Qualified Subsidiary Standstill Agreement which
occurs in the context of an effort to change or influence the control of
Sprint. The Class A Holders will, however, have the right to dispute the
existence of such a breach, in which case no conversion of Class A Common Stock
into Sprint Common Stock or termination of Fundamental Rights will occur until
a final nonappealable order of a court is issued finding that such breach
occurred. Pending the entering of such an order, certain Minority Rights will
be suspended. If the Class A Holders do not dispute the existence of such a
breach, each outstanding share of Class A Common Stock will immediately convert
into one share of Sprint Common Stock or, if any shares of Class A Preference
Stock are outstanding, the Fundamental Rights will terminate.
Conversion Following Failure to Purchase Class A Stock. The Fundamental
Rights associated with any outstanding Class A Preference Stock will terminate
if any Class A Holder fails to purchase Class A Stock at any closing at which
it is required to effect such a purchase.
Conversion Following Breach of the Joint Venture Agreement. Except as
described below, each outstanding share of Class A Common Stock will
automatically convert into one share of Sprint Common Stock or, if any shares
of Class A Preference Stock are outstanding, the Fundamental Rights will
immediately terminate, if (i) the Sprint Parties receive the right to control
the management of the Joint Venture as a result of the sale by Atlas of all or
a substantial part of its telecommunications assets used to provide services to
the Joint Venture to a Major Competitor of Sprint (see "The Joint Venture--
Effect of Acquisition by a Major Competitor--Sale of Assets by Atlas to a Major
Competitor of Sprint") or as a result of certain breaches of the Joint Venture
Agreement or the Related Joint Venture Documents or (ii) the Joint Venture is
terminated due to certain actions by the FT/DT Parties. Although there are
certain differences between the definition used in the Investment Agreement and
the definition used in the Joint Venture Agreement, a "Major Competitor of
Sprint" is defined generally as a company which materially competes with a
major portion of the telecommunications services business of Sprint in North
America or the business of the Joint Venture or a company which has taken
substantial steps to become such a Major Competitor.
If the Joint Venture is terminated due to certain actions on the part of the
Sprint Parties or if the FT/DT Parties receive the right to control the
management of the Joint Venture due to certain breaches of the Joint Venture
Agreement by the Sprint Parties, each share of Class A Common Stock outstanding
will automatically convert into one share of Sprint Common Stock on the third
anniversary of such termination or, if any shares of Class A Preference Stock
are outstanding, the Fundamental Rights will terminate on such third
anniversary. If the Joint Venture is terminated for reasons other than those
described in the preceding paragraph or the preceding sentence, (i) on the date
of such termination the Minority Rights of the Class A Holders, other than
rights to representation on the Sprint Board and with respect to certain
matters relating to the governing documents and related matters of Sprint, will
immediately terminate and (ii) on the third anniversary of such termination of
the Joint Venture, each share of Class A Common Stock outstanding will
automatically convert into one share of Sprint Common Stock or, if any shares
of Class A Preference Stock are outstanding, all of the remaining Fundamental
Rights will terminate.
37
Conversion Following Change of Control. Upon the occurrence of a Change of
Control (other than a Change of Control arising from a change in the identity
of a majority of the Sprint Board due to (i) a proxy contest; (ii) the election
of directors by the holders of the Sprint Preferred Stock; or (iii) an
unauthorized tender offer not approved by a majority of the Independent
Directors), the Minority Rights, except for rights as to Long Distance Assets
and rights to participate in a Change of Control, will terminate. Sprint is
obligated in such a situation to negotiate in good faith with any potential
acquiror of control to provide the Class A Holders with rights equivalent to
the rights of the Class A Holders to representation on the Sprint Board. Upon
such Change of Control, the Class A Holders will have the right, but not the
obligation, to cause the conversion of their Class A Stock into Sprint Common
Stock.
Conversion Following Failure to Maintain Ownership Ratios. If the ratio of
the number of shares of Class A Stock held by either of FT or DT and its
Qualified Subsidiaries to the number held by the other of FT or DT and its
Qualified Subsidiaries exceeds 50/50 prior to the Investment Completion Date
for more than 60 days after notice from Sprint to FT and DT, each share of
Class A Common Stock outstanding will automatically convert into one share of
Sprint Common Stock or, if any shares of Class A Preference Stock are
outstanding, the Fundamental Rights will terminate. Following the Investment
Completion Date, such ratio may not exceed 60/40.
Conversion Following Transfers to Persons Other Than FT, DT, a Qualified
Subsidiary or a Qualified Stock Purchaser. If any shares of Class A Stock are
transferred (other than pursuant to a transfer to FT, DT, a Qualified
Subsidiary or a Qualified Stock Purchaser (as defined in "--Standstill
Agreement--Acquisition Restrictions") in accordance with the Stockholders'
Agreement) without the approval of Sprint, the shares of Class A Stock so
transferred will automatically convert into shares of Sprint Common Stock.
Conversion Following Actions by Qualified Stock Purchasers. If a Qualified
Stock Purchaser becomes a Major Competitor of Sprint, the shares of Class A
Common Stock owned by such Qualified Stock Purchaser will immediately convert
into Sprint Common Stock or, if any shares of Class A Preference Stock are
owned by such Qualified Stock Purchaser, the Fundamental Rights associated with
such Class A Preference Stock will terminate. In addition, if such Qualified
Stock Purchaser (i) breaches in any material respect its obligations with
respect to transfers of Class A Stock to large stockholders, (ii) breaches in
any material respect any other restrictions on the transfer of Class A Stock or
(iii) breaches its obligations under certain specified provisions of a
standstill agreement into which such Qualified Stock Purchaser has entered in
accordance with the Standstill Agreement (a "Qualified Stock Purchaser
Standstill Agreement"), the shares of Class A Common Stock owned by such
Qualified Stock Purchaser will immediately convert into Sprint Common Stock or,
if any shares of Class A Preference Stock are owned by such Qualified Stock
Purchaser, the Fundamental Rights associated with such Class A Preference Stock
will terminate.
When a breach described in the second sentence of the preceding paragraph
occurs, the breaching Qualified Stock Purchaser must indicate to Sprint which
of the following actions it will take with respect to such breach. First, the
breaching Qualified Stock Purchaser may indicate that it intends to cure such
breach (except for breaches of its Qualified Stock Purchaser Standstill
Agreement which occur in the context of an effort to change or influence the
control of Sprint), in which case no conversion of Class A Common Stock owned
by such Qualified Stock Purchaser into Sprint Common Stock or termination of
Fundamental Rights associated with Class A Preference Stock owned by such
Qualified Stock Purchaser will occur unless the breach is not cured within a
specified time period. Second, the breaching Qualified Stock Purchaser may
indicate that it intends to dispute the existence of such breach, in which case
no conversion of Class A Common Stock owned by such Qualified Stock Purchaser
into Sprint Common Stock or termination of Fundamental Rights associated with
Class A Preference Stock owned by such Qualified Stock Purchaser will occur
until a final, nonappealable order of a court is issued finding that such
breach occurred and, if applicable, was not cured. Upon the issuance of an
order of a lower court finding that a breach has occurred, certain of the
Minority Rights will be suspended. In addition, with respect to those breaches
described in clause (i) in the preceding paragraph which relate to the
obligations of the Qualified Stock Purchaser with respect to sales of Class A
Stock to large stockholders, certain Minority Rights will be suspended until
the
38
cure has been effected or, if the existence of the breach is disputed, until
such time as the court finds no breach has occurred. Finally, the breaching
Qualified Stock Purchaser may admit that such breach occurred and, if
applicable, cannot be cured, in which case each outstanding share of Class A
Common Stock owned by such Qualified Stock Purchaser will immediately convert
into one share of Sprint Common Stock or, if any shares of Class A Preference
Stock are owned by such Qualified Stock Purchaser, the Fundamental Rights
associated with such shares of Class A Preference Stock will terminate. If such
Qualified Stock Purchaser fails within the applicable time period to indicate
either an intent to cure a breach or to dispute the existence of such breach,
such Qualified Stock Purchaser will be deemed to have admitted such breach and
its inability to be cured.
A Qualified Stock Purchaser will not have the right to cure a breach of its
Qualified Stock Purchaser Standstill Agreement which occurs in the context of
an effort to change or influence the control of Sprint. A Qualified Stock
Purchaser will, however, have the right to dispute the existence of such a
breach, in which case no conversion of Class A Common Stock owned by such
Qualified Stock Purchaser into Sprint Common Stock or termination of
Fundamental Rights associated with Class A Preference Stock owned by such
Qualified Stock Purchaser will occur until a final nonappealable order of a
court is issued finding that such breach occurred. Pending the entering of such
an order, certain Minority Rights will be suspended. If a Qualified Stock
Purchaser does not dispute the existence of such a breach, each outstanding
share of Class A Common Stock owned by such Qualified Stock Purchaser will
immediately convert into one share of Sprint Common Stock or, if any shares of
Class A Preference Stock are owned by such Qualified Stock Purchaser, the
Fundamental Rights associated with such shares of Class A Preference Stock will
terminate.
Effect of Conversion of Class A Common Stock or Termination of Fundamental
Rights. The shares of Class A Stock issued by Sprint pursuant to the Investment
Agreement, the Stockholders' Agreement or the Articles of Incorporation as
amended by the Charter Amendments subsequent to a conversion of all of the
shares of Class A Common Stock into Sprint Common Stock or a termination of the
Fundamental Rights will automatically convert into shares of Sprint Common
Stock.
A conversion of Class A Common Stock into Sprint Common Stock or termination
of Fundamental Rights will in most circumstances cause the termination of
rights of FT and DT under the Stockholders' Agreement with respect to (a)
dispositions of Long Distance Assets, (b) Changes of Control, (c) equity
purchase rights, (d) holdings by Major Competitors, (e) Major Issuances, and
(f) certain other matters. In addition, certain of the foregoing rights will be
suspended if there is a suspension of the Fundamental Rights.
Conversion in Connection With An Exclusionary Tender Offer. If the Sprint
Board determines not to oppose an Exclusionary Tender Offer by a person other
than FT, DT or their respective affiliates, and the terms of such tender offer
do not permit the Class A Holders to sell an equal or greater percentage of
their shares of Class A Stock as the other stockholders of Sprint are permitted
to sell in such tender offer, the Class A Holders may require Sprint to convert
certain of their shares of Class A Stock into Sprint Common Stock. See "--Terms
of the Class A Stock."
Conversion of Sprint Common Stock into Class A Stock. Unless the Fundamental
Rights have been terminated with respect to all outstanding shares of Class A
Preference Stock, (i) following the Class A Common Issuance Date and until the
conversion of all of the shares of Class A Common Stock into shares of Sprint
Common Stock, each share of Sprint Common Stock acquired by a Class A Holder
will automatically convert into one share of Class A Common Stock on the date
of such acquisition, and (ii) following the occurrence of the Supplemental
Preference Stock Closing and prior to the Class A Common Issuance Date, each
share of Sprint Common Stock acquired by a Class A Holder will automatically
convert into that number of shares of Class A Preference Stock equal to the
quotient of (x) the number of shares of Class A Preference Stock outstanding
immediately prior to such acquisition divided by (y) the number of shares of
Class A Common Stock or Sprint Common Stock into which such previously
outstanding shares of Class A Preference Stock would at such time be
convertible at the then applicable Conversion Price.
39
Terms of the Class A Common Stock.
Dividends. The Class A Holders will be entitled to receive, when, as and if
declared by the Sprint Board, dividends on the shares of Class A Common Stock
in an amount per share equal to the per share amount of any dividend paid on
the Sprint Common Stock, payable on the same date of payment as the
corresponding dividend on the Sprint Common Stock. If Sprint pays any dividend
on the Sprint Common Stock in shares of Sprint Common Stock or effects a
subdivision, combination or consolidation of the outstanding shares of Sprint
Common Stock into a greater or lesser number of shares of Sprint Common Stock,
Sprint will declare and pay an equivalent dividend per share on the Class A
Common Stock payable in shares of Class A Common Stock or effect an equivalent
subdivision or combination or consolidation of the outstanding shares of Class
A Common Stock into a greater or lesser number of shares of Class A Common
Stock. The holders of the Sprint Common Stock are entitled to similar rights
when and if the Sprint Board declares dividends with respect to the Class A
Common Stock.
Liquidation Rights. In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of Sprint, after payment or provision for payment of
the debts and other liabilities of Sprint, including the liquidation
preferences of any existing series of preferred or preference stock of Sprint
then outstanding, the holders of the Class A Common Stock and the holders of
the Sprint Common Stock will share ratably in any remaining assets of Sprint.
Voting Rights. Except as may otherwise be required by law, and except in
connection with the election of directors and the exercise of certain
disapproval rights (see "--Terms of the Class A Stock--Disapproval Rights"),
each share of Class A Common Stock will be entitled to one vote on each matter
in respect of which the holders of shares of Sprint Common Stock are entitled
to vote, and the holders of shares of the Class A Common Stock will vote
together as a single class with the holders of shares of the Sprint Common
Stock and all other classes or series of Sprint capital stock which have
general voting power. No holder of capital stock of Sprint, including the Class
A Holders, is entitled to cumulative voting of his or her shares of capital
stock in the election of members of the Sprint Board.
If (i) FT, DT, any Qualified Subsidiary, any holder (other than FT, DT or
certain financial institutions) of equity interests in a Qualified Subsidiary
(a "Strategic Investor") or any Qualified Stock Purchaser breaches certain
provisions of the Standstill Agreement, a Qualified Subsidiary Standstill
Agreement, a Strategic Investor standstill agreement or a Qualified Stock
Purchaser Standstill Agreement, as the case may be, or (ii) a governmental
authority of France or Germany or any other entity controlled by either such
governmental authority, or any entity in which FT, DT and their respective
affiliates and associates, individually or in the aggregate, own more than 35%
of the voting power, takes an action which if taken by FT or DT would violate
certain of such provisions, then FT and its Qualified Subsidiaries (except in
the case of a breach arising from the action of certain affiliates of DT), DT
and its Qualified Subsidiaries (except in the case of a breach arising from the
action of certain affiliates of FT) and each Qualified Stock Purchaser will not
be entitled to vote any of their shares of capital stock of Sprint with respect
to any matter arising from or relating to such breach.
Anti-Dilution Provisions. Sprint may not effect any reclassification,
subdivision or combination of the outstanding Class A Common Stock unless at
the same time the Sprint Common Stock is reclassified, subdivided or combined
so that the holders of the Sprint Common Stock remain entitled, in the
aggregate, to voting power of Sprint representing the same percentage relative
to the Class A Common Stock as was represented by the Sprint Common Stock
immediately prior to such reclassification, subdivision or combination. Holders
of Class A Common Stock have identical anti-dilution protection if such
modifications are made to the Sprint Common Stock. In connection with such a
reclassification, subdivision or combination of the Sprint Common Stock, Sprint
would also be required to maintain all of the rights provided to the Class A
Holders in the Articles of Incorporation as amended by the Charter Amendments.
40
In addition, in the case of any consolidation or merger of Sprint with or
into any other entity (other than any merger or consolidation which does not
result in any reclassification, conversion, exchange or cancellation of the
Sprint Common Stock) or any other reclassification of the Sprint Common Stock
into any other form of capital stock of Sprint, each holder of Class A Common
Stock will have the right to convert each share of Class A Common Stock held by
it into the kind and amount of shares of stock and other securities and
property which such Class A Holder would have been entitled to receive in such
merger, consolidation or reclassification had such Class A Holder converted its
shares of Class A Common Stock into Sprint Common Stock immediately prior to
such merger, consolidation or reclassification.
Terms of the Class A Preference Stock.
Dividends. The holders of shares of Class A Preference Stock, in preference
to the holders of Sprint Common Stock and of any other outstanding junior
capital stock, but after payment of dividends to holders of shares of all
series of Sprint Preferred Stock that are not specifically made junior to or
made to rank on a parity with the Class A Preference Stock in the payment of
dividends, shall be entitled to receive, when and if declared by the Sprint
Board, quarterly dividends in an amount per share equal to:
(i) if the Conversion Price has been fixed but the Investment Completion
Date has not yet occurred, the aggregate per share amount of all dividends
and distributions declared on the Sprint Common Stock since the immediately
preceding dividend payment date for the Class A Preference Stock (other
than extraordinary dividends and distributions), multiplied by $47.225 and
divided by the Conversion Price at the time in effect,
(ii) if the Conversion Price has been fixed and the Investment Completion
Date has occurred, the aggregate per share amount of dividends declared on
the Sprint Common Stock since the immediately preceding dividend payment
date for the Class A Preference Stock (or, with respect to the first
dividend payment date after the Investment Completion Date, since the
Investment Completion Date) multiplied by the aggregate amount paid by the
Class A Holders for all outstanding shares of Class A Preference Stock,
including any shares of Class A Preference Stock converted from any other
form of Sprint capital stock, divided by the number of shares of Class A
Preference Stock outstanding (such aggregate amount paid divided by the
number of shares outstanding being referred to herein as the "Liquidation
Preference") and divided by the Conversion Price at the time in effect, or
(iii) if the Conversion Price has not yet been fixed, (x) during the
first two years following the Initial Issuance Date, the greater of (A)
$0.25 per share per quarter and (B) the per share dividend on Sprint Common
Stock, in each case multiplied by 43,118,018 and divided by the number of
shares of Class A Preference Stock then outstanding and (y) following the
second anniversary of the Initial Issuance Date, the one month London
Interbank Offered Rate in effect on the date such dividend begins to
accrue, plus 12.5 basis points.
The Class A Preference Stock will rank junior to any series of Preferred
Stock in the payment of dividends, unless any such series of Preferred Stock is
specifically made to rank junior or on a parity with the Class A Preference
Stock in the payment of dividends. With respect to shares of Class A Preference
Stock outstanding for less than a full dividend payment period, the dividend
paid with respect to such shares will be equal to the dividend paid with
respect to such entire dividend payment period times a fraction the numerator
of which will be the number of days during such period that such shares are
outstanding and the denominator of which will be the number of days during such
period.
At any time when dividends or distributions payable on the Class A Preference
Stock are in arrears, and until all accrued and unpaid dividends on shares of
Class A Preference Stock have been paid in full, Sprint may not declare or pay
dividends or make any other distributions with respect to any shares of capital
stock ranking junior to the Class A Preference Stock. During such time, Sprint
will also be prohibited from declaring or paying dividends or making any other
distributions with respect to any capital stock ranking on a parity with the
Class A Preference Stock, except for dividends paid ratably on the Class A
Preference Stock and all such parity stock in proportion to the total amounts
to which the holders of all such shares are then
41
entitled. In addition, Sprint would be prohibited from redeeming or otherwise
acquiring for consideration shares of any capital stock which is junior to the
Class A Preference Stock, subject to certain limited exceptions.
Liquidation Rights. In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of Sprint, the holders of any series of Preferred
Stock of Sprint which has not been specifically made to rank junior or on a
parity with the Class A Preference Stock in the distribution of assets upon
liquidation, dissolution or winding-up of Sprint will be entitled to receive
their liquidation preferences before any distributions are made to the holders
of the Class A Preference Stock. No distribution may be made to the holders of
shares of capital stock junior to the Class A Preference Stock until the
holders of the Class A Preference Stock, other than shares of Class A
Preference Stock acquired by the Class A Holders upon conversion of shares of
Sprint Common Stock pursuant to the Articles of Incorporation as amended by the
Charter Amendments ("Converted Preference Stock"), have received the
Liquidation Preference per share of Class A Preference Stock. The Converted
Preference Stock shall, immediately prior to such liquidation, dissolution or
winding-up, automatically convert back into the number of shares of Sprint
Common Stock which were converted into Converted Preference Stock pursuant to
the Articles of Incorporation as amended by the Charter Amendments. See "--
Terms of the Class A Stock--Conversion of Sprint Common Stock into Class A
Stock".
Voting Rights. Except as may otherwise be required by law, and except in
connection with the election of directors and the exercise of certain
disapproval rights (see "--Disapproval Rights"), the shares of Class A
Preference Stock will be entitled to the number of votes (i) if the Conversion
Price has been fixed, equal to the number of shares of Class A Common Stock
into which the then outstanding shares of Class A Preference Stock would, at
the time of determination, be convertible or (ii) if the Conversion Price has
not yet been fixed, the number of shares of Class A Common Stock into which the
then outstanding shares of Class A Preference Stock would be convertible
determined as if the Conversion Price had been fixed on the Initial Issuance
Date at the First Closing Minimum Price.
If the Fundamental Rights are terminated and Sprint has not declared and paid
dividends on the Class A Preference Stock as provided for in the Charter
Amendments for four consecutive quarterly periods, then, in addition to any
other voting rights which the holders of the Class A Preference Stock may have,
such holders will have the exclusive right, voting separately as a class, to
elect two Sprint directors. Such right will continue until all such dividends
have been paid, at which time the terms of the directors so elected will
terminate.
Anti-Dilution Provisions. In addition to the rights of all Class A Holders
described under "--Terms of the Class A Common Stock--Anti-Dilution
Provisions," in the case of any consolidation or merger of Sprint with or into
any other entity (other than any merger or consolidation which does not result
in any reclassification, conversion, exchange or cancellation of the Sprint
Common Stock) or any other reclassification of the Sprint Common Stock, the
holders of Class A Preference Stock will be entitled to receive preferred or
preference stock in Sprint or the ultimate parent entity of any successor with
rights no less favorable than those to which they were entitled as holders of
the Class A Preference Stock prior to such merger, consolidation or
reclassification.
Conversion and Redemption.
Timing of Conversion. Subject to the ability described below of the Class A
Holders to elect to defer conversion if the Conversion Price is in excess of
135% of the then market price of Sprint Common Stock, shares of Class A
Preference Stock will automatically convert into Class A Common Stock (or if
the Fundamental Rights have terminated as to all outstanding shares of Class A
Preference Stock, into Sprint Common Stock) at the applicable Conversion Price
on a Conversion Date that is the latest of (i) the earliest of (x) 35 trading
days after the Cellular Spin-Off occurs, (y) 30 days after the abandonment of
the Cellular
42
Spin-Off and (z) 60 days after the fifth anniversary of the Initial Issuance
Date and (ii) five business days after the date on which the Conversion Price
becomes fixed (as described below). However, if the Conversion Price has not
been fixed by the fifth anniversary of the Initial Issuance Date and Sprint has
not redeemed such shares of Class A Preference Stock within five business days
after the 60th day following such fifth anniversary, the Class A Preference
Stock shall be convertible only at the election of the Class A Holders to
effect a conversion at a Conversion Price equal to 135% of the average closing
price of the Sprint Common Stock for the 20 trading days ended on the trading
day that is five trading days prior to such conversion.
Notwithstanding the foregoing, if after the Cellular Spin-Off occurs shares
of Class A Preference Stock which were previously not convertible because the
Cellular Spin-Off had not yet occurred otherwise would be converted as
described herein at a Conversion Price equal to or greater than 135% of the
average closing market price of Sprint Common Stock (the "Average Sprint
Price") for the 20 trading days ended on the 10th business day prior to the
Conversion Date, the Class A Holders may elect to defer such conversion until
the first business day following the 30th business day after the occurrence of
a period of 20 trading days in which the Conversion Price is less than 135% of
the Average Sprint Price over such period or until the Class A Holders shall
otherwise elect to convert at the Conversion Price calculated as described in
"--Conversion Price."
Conversion Price. Each share of Class A Preference Stock will convert, at
such time as described above, into a number of shares of Class A Common Stock
equal to the Liquidation Preference of a share of Class A Preference Stock
divided by the Conversion Price as determined according to the following
principles. If the First Closing Average Sprint Price is within the Sprint
Price Range, the Conversion Price shall be fixed at the First Closing at
$47.225. If the First Closing Average Sprint Price is above $37.780, the
Conversion Price shall be fixed at the First Closing at the lesser of (x) 125%
of the First Closing Average Sprint Price and (y) $48.704. If the First Closing
Average Sprint Price is below $34.982, the Conversion Price may be fixed at the
First Closing at either (i) 135% of the First Closing Average Sprint Price if
Sprint elects to fix the Conversion Price at this price or (ii) $ 47.225 if FT
and DT elect to fix the Conversion Price at this price.
If the First Closing Average Sprint Price is below $34.982 and no election
has been made by Sprint or FT and DT as described above, then if prior to the
second anniversary of the Initial Issuance Date the Cellular Spin-Off has
occurred and the Average Sprint Price for any period of 20 consecutive trading
days following the Cellular Spin-Off has been at or above the New Lower
Threshold Sprint Price, the Conversion Price shall be fixed on the day
following the end of such 20-day period at the New Target Price. "New Target
Price" means $47.225 minus the Spin-Off Reduction Factor, provided that, if the
Cellular Spin-Off does not occur prior to the First Closing and the First
Closing Average Sprint Price is within the Sprint Price Range, the New Target
Price will be $47.225 minus the product of (i) the quotient of $47.225 divided
by such First Closing Average Sprint Price, multiplied by (ii) the Cellular
Spin-Off Reduction Factor. Notwithstanding the foregoing, however, if the
Cellular Spin-Off has not occurred prior to the second anniversary of the
Initial Issuance Date and the Average Sprint Price during any 20 trading day
period which begins on or after the 19th trading day before the Cellular Spin-
Off occurs or which ends on or before the 18th trading day after the Cellular
Spin-Off occurs (the "Spin-Off Trading Period") has been at or above the
quotient of (x) the sum of (i) the product of $34.982 multiplied by the number
of days prior to the day on which the Cellular Spin-Off is to occur during any
Spin-Off Trading Period and (ii) the product of the New Lower Threshold Sprint
Price multiplied by the number of days beginning on and including the day on
which the Cellular Spin-Off is to occur in such Spin-Off Trading Period,
divided by (y) 20, the Conversion Price will be fixed at the New Target Price.
If prior to the second anniversary of the Initial Issuance Date the Cellular
Spin-Off has not occurred and the Average Sprint Price for any period of 20
consecutive trading days is at or above $34.982, the Conversion Price shall be
fixed on the day following the end of such 20 day period at $47.225.
At any time prior to the second anniversary of the Initial Issuance Date, if
the Cellular Spin-Off has occurred, (i) FT and DT may elect to fix the
Conversion Price at the New Target Price and (ii) Sprint may elect to fix the
Conversion Price at 135% of the Average Sprint Price for the 20 consecutive day
trading period ended five days before the date of such election. In addition,
at any time prior to the second anniversary
43
of the Initial Issuance Date, if the Cellular Spin-Off has not occurred, (i) FT
and DT may elect to fix the Conversion Price at $47.225 and (ii) Sprint may
elect to fix the Conversion Price at 135% of the Average Sprint Price for the
20 consecutive day trading period ended five days before the date of such
election.
If neither the Cellular Spin-Off nor the conversion of the Class A Preference
Stock into Class A Common Stock or Common Stock has occurred prior to the
second anniversary of the Initial Issuance Date and the Conversion Price has
not previously been fixed, the Conversion Price will become fixed automatically
on such second anniversary at 135% of the Average Sprint Price for the 20
consecutive day trading period ended five business days before the second
anniversary of the Initial Issuance Date; provided that if such Average Sprint
Price is below $32.641, Sprint may elect to defer the fixing of the Conversion
Price for three additional years so that if, at any time during these three
years (assuming no Cellular Spin-Off), the Average Sprint Price for a 20
consecutive day trading period shall be at least equal to $32.641, the
Conversion Price shall be fixed at 93.308% of the Target Price. The "Target
Price" is $47.225 per share. If the Cellular Spin-Off occurs during this three-
year period, the Conversion Price will be fixed at 93.308% of the New Target
Price if the Average Sprint Price for a 20 consecutive day trading period
beginning after the date of the Cellular Spin-Off reaches 93.308% of the New
Lower Threshold Sprint Price. In addition, during this three-year period,
Sprint may at any time elect to cause the Conversion Price to be fixed at 135%
of the Average Sprint Price for the 20 trading days ended five business days
before the date of such election and FT and DT may elect to cause the
Conversion Price to be fixed at 93.308% of the Target Price.
If, prior to such second anniversary, the Cellular Spin-Off has occurred but
the conversion of shares of Class A Preference Stock has not taken place and
the Conversion Price has not previously been fixed, the Conversion Price will
become fixed automatically on such second anniversary at 135% of the Average
Sprint Price for the 20 consecutive day trading period ended five business days
before the second anniversary of the Initial Issuance Date; provided that if
such Average Sprint Price is below 93.308% of the New Lower Threshold Sprint
Price, Sprint may elect to defer the fixing of the Conversion Price for three
additional years so that if, at any time during these three years the Average
Sprint Price shall be at least equal to 93.308% of the New Lower Threshold
Sprint Price, the Conversion Price shall be fixed at 93.308% of the New Target
Price. During this three-year period, Sprint may at any time cause the
Conversion Price to be fixed at 135% of the Average Sprint Price for the 20
trading days ended five business days before the date of such election and FT
and DT may elect to cause the Conversion Price to be fixed at 93.308% of the
New Target Price.
If the Conversion Price has been fixed before the Cellular Spin-Off Date,
effective at the date of the Cellular Spin-Off, the Conversion Price will be
re-fixed pursuant to a formula to reflect the Cellular Spin-Off. The Conversion
Price will also be adjusted to reflect the purchase price of any additional
shares of Class A Preference Stock acquired by FT and DT (i) at an Optional
Shares Closing, (ii) pursuant to their equity purchase rights under the
Stockholders' Agreement or (iii) pursuant to the automatic conversion of Common
Stock into Class A Stock under the Charter Amendments.
Conversion Following Certain Events Under the Sprint Rights Plan. If (i) a
public announcement is made that any person (other than Sprint, the Class A
Holders and certain specified persons), together with all affiliates and
associates of such person, is the beneficial owner of 20% or more of the shares
of Sprint Common Stock and Class A Common Stock outstanding or (ii) any person
(other than Sprint and certain specified persons) makes a tender or exchange
offer, if upon consummation of such offer such person would beneficially own
20% or more of the shares of Sprint Common Stock and Class A Common Stock
outstanding, in each case other than as a result of an action by any Class A
Holder, the holders of a majority of the outstanding shares of Class A
Preference Stock may elect that, immediately prior to the date on which the
Rights under the Sprint Rights Plan are to detach and become exercisable (see
"Information Concerning Sprint--Antitakeover Provisions Applicable to Sprint--
Sprint Rights Plan") as a result of the actions described in clause (i) or
(ii), each share of Class A Preference Stock will convert at a Conversion Price
equal to $47.225 per share into shares of Class A Common Stock.
Redemption. Unless conversion is deferred as described under "--Timing of
Conversion," if shares of Class A Preference Stock remain outstanding after the
60th day following the fifth anniversary of the Initial
44
Issuance Date, each outstanding share of Class A Preference Stock must be
redeemed by Sprint for cash at the Liquidation Preference within five business
days after such date. However, if Sprint fails to comply with its obligation to
redeem such shares within five business days after the 60th day following such
fifth anniversary, the Class A Preference Stock thereafter will be convertible
at the election of the Class A Holders at a Conversion Price equal to 135% of
the Average Sprint Price for the 20 trading days ended on the trading day that
is five trading days prior to such conversion.
STANDSTILL AGREEMENT
Acquisition Restrictions. Under the Standstill Agreement, subject to certain
exceptions described below, each of FT and DT has agreed that it will not, and
will cause each of its respective affiliates and associates not to, directly or
indirectly, acquire, offer to acquire, or agree to acquire, by purchase or
otherwise, beneficial ownership of any Sprint Common Stock, Class A Common
Stock or any other voting securities of Sprint at any time prior to the earlier
of (i) the Investment Completion Date and (ii) the date on which FT and DT
elect to effect the conversion of all of their outstanding shares of Class A
Preference Stock into Class A Common Stock or Sprint Common Stock after the
60th day after the fifth anniversary of the Initial Issuance Date (the "Section
3(b)(v) Conversion Date"), in each case other than purchases from Sprint
pursuant to the Investment Agreement. Moreover, subject to the exceptions
described below, each of FT and DT have agreed that it will not, and will cause
each of its respective affiliates and associates not to, directly or
indirectly, acquire, offer to acquire, or agree to acquire by purchase or
otherwise, beneficial ownership of any Sprint voting securities on or following
the Section 3(b)(v) Conversion Date. The term "associate" generally has the
meaning ascribed to such term in Rule 12b-2 under the Exchange Act, except that
such definition has been limited with respect to the "associates" of FT and DT
for purposes of the Standstill Agreement.
The Standstill Agreement provides that, unless the Section 3(b)(v) Conversion
Date has occurred, then, subject to certain exceptions described below, each of
FT and DT, commencing on the Investment Completion Date and prior to the
fifteenth anniversary of the date of the Standstill Agreement (the "Initial
Standstill Period"), will not, and will cause each of its respective affiliates
and associates not to, directly or indirectly, acquire, offer to acquire, or
agree to acquire, by purchase or otherwise, beneficial ownership of any Sprint
voting securities such that the Sprint voting securities beneficially owned in
the aggregate by FT and DT and their respective affiliates and associates
(including all Sprint voting securities the beneficial ownership of which any
of FT and DT or any of their respective affiliates is committed to acquire or
has the right to acquire (or to commit to acquire) under the Investment
Agreement) would represent in the aggregate more than 20% of the outstanding
Sprint voting securities (the "Initial Percentage Limitation").
Subject to certain exceptions described below, and subject also to the Sprint
Rights Plan, following the Initial Standstill Period, unless the Section
3(b)(v) Conversion Date has occurred, then each of FT and DT will not, and will
cause each of its respective affiliates and associates not to, directly or
indirectly, acquire, offer to acquire, or agree to acquire, by purchase or
otherwise, beneficial ownership of any additional Sprint voting securities such
that the Sprint voting securities beneficially owned in the aggregate by FT and
DT, and their respective affiliates and associates (including all Sprint voting
securities the beneficial ownership of which any of FT and DT or any of their
respective affiliates is committed to acquire or has the right to acquire (or
to commit to acquire) under the Investment Agreement) would represent in the
aggregate more than the lesser of (i) 30% of the outstanding Sprint voting
securities and (ii) that percentage of outstanding Sprint voting securities
equal to 80% of the Foreign Ownership Limitation (as defined below) (the
"Subsequent Percentage Limitation," and together with the Initial Percentage
Limitation, the "Percentage Limitations"). For purposes of the Standstill
Agreement, the "Foreign Ownership Limitation" means the maximum aggregate
percentage of the Sprint voting securities that may be owned of record or voted
by Aliens under Section 310(b)(4) of the Communications Act, without such
ownership or voting resulting in the possible loss, or possible failure to
secure the renewal or reinstatement, of any license or franchise of any
governmental authority held by Sprint or any of its affiliates to conduct any
portion of the business of Sprint or such affiliate, as such maximum aggregate
percentage may be increased from time to time by amendments to Section 310 or
by actions of the FCC.
45
Under the Standstill Agreement, FT and DT and their respective affiliates
generally will be permitted, subject to the Sprint Rights Plan, to increase
their beneficial ownership beyond the applicable Percentage Limitation to the
extent required to match the percentage ownership of Sprint voting securities
owned by any other shareholder, provided that the beneficial ownership of FT
and DT and their respective affiliates does not exceed 80% of the Foreign
Ownership Limitation. In addition, neither FT nor DT shall be deemed in
violation of the beneficial ownership restriction if the beneficial ownership
of Sprint voting securities by FT and DT exceeds the applicable Percentage
Limitation solely due to (i) an acquisition of Sprint voting securities by
Sprint, unless FT and DT have previously been notified of such acquisition, or
(ii) purchases by FT and DT of voting securities in reliance on information
regarding the number of outstanding voting securities of Sprint provided by
Sprint to FT and DT, unless FT and DT have previously been notified that such
information is incorrect.
If an acquisition by FT or DT or their respective affiliates and associates
of beneficial ownership of additional Sprint voting securities otherwise
permitted by the Standstill Agreement is prohibited because it would result in
FT or DT and their respective affiliates and associates beneficially owning a
percentage of the outstanding Sprint voting securities greater than that
percentage equal to 80% of the Foreign Ownership Limitation, then in accordance
with the terms of the Stockholders' Agreement, FT and DT may assign their
rights to purchase the additional shares of Sprint voting securities they would
otherwise be entitled to purchase under the Standstill Agreement to an entity
that FT and DT reasonably believe has the legal and financial ability to
purchase such shares and that would not be an Alien or a Major Competitor of
Sprint or of the Joint Venture immediately following such purchase (a
"Qualified Stock Purchaser"). Such Qualified Stock Purchaser will be required
prior to and as a condition to the effectiveness of such acquisition to execute
a Qualified Stock Purchaser Standstill Agreement.
Standstill Covenants. The Standstill Agreement provides that, from the date
thereof, each of FT and DT will not, and will cause each of its respective
affiliates and associates not to, directly or indirectly, unless specifically
requested in writing in advance by the Chairman of the Sprint Board or the
Sprint Board and except as expressly permitted or provided for in the
Investment Agreement, the Related Investment Documents, the Joint Venture
Agreement or the Related Joint Venture Documents:
(i) effect, seek, offer, propose or cause or participate in, or assist
any other person to effect, seek, offer or propose or participate in (a)
any acquisition of beneficial ownership of Sprint voting securities which
would result in FT and DT and any of their respective affiliates and
associates (individually or collectively) exceeding the applicable
Percentage Limitation, (b) any tender or exchange offer, merger,
consolidation, share exchange or business combination involving Sprint or
any material portion of its business or any purchase of all or any
substantial part of the assets of Sprint or any material portion of its
business, (c) any recapitalization, restructuring, liquidation, dissolution
or other extraordinary transaction with respect to Sprint or any material
portion of its business or (d) any "solicitation" of "proxies" with respect
to Sprint or any of its affiliates or any action resulting in such person
becoming a "participant" in any "election contest" (as such terms are used
in the proxy rules of the Securities and Exchange Commission (the "SEC"));
(ii) propose any matter for submission to a vote of stockholders of
Sprint or any of its affiliates; provided that the foregoing shall not
restrict the manner in which the Class A Directors may (a) vote on any
matter submitted to the Sprint Board or (b) participate in deliberations or
discussions of the Sprint Board in their capacity as members of the Sprint
Board and in no other capacity;
(iii) form, join or in any way participate in a "group" (as such term is
used in Section 13(d)(3) of the Exchange Act) with respect to any Sprint
voting securities;
(iv) grant any proxy with respect to any Sprint voting securities to any
person not designated by Sprint;
(v) deposit any Sprint voting securities in a voting trust or subject any
Sprint voting securities to any arrangement or agreement with respect to
the voting of such Sprint voting securities or other agreement having
similar effect;
46
(vi) execute any written stockholder consent with respect to Sprint or
any of its affiliates, other than in connection with (a) the election of
Class A Directors, (b) the exercise of the disapproval rights of the Class
A Holders or (c) any vote by the Class A Holders with respect to which the
Class A Holders are entitled to vote as a class;
(vii) take any other action to seek to affect the control of the
management of Sprint or the Sprint Board or the management or Board of
Directors of any of its affiliates; provided that the foregoing shall not
restrict the manner in which the Class A Directors may (a) vote on any
matter submitted to the Sprint Board or (b) participate in deliberations or
discussions of the Sprint Board in their capacity as members of the Sprint
Board and in no other capacity;
(viii) enter into any discussions, negotiations, arrangements or
understandings with any person other than FT, DT and their affiliates,
associates, directors, officers, employees, agents or advisors with respect
to any of the foregoing, or advise, assist, encourage or influence others
to take any action with respect to any of the foregoing;
(ix) disclose to any person other than FT, DT and their affiliates,
associates, directors, officers, employees, agents or advisors any
intention, plan or arrangement inconsistent with the foregoing or with the
restrictions on transfer contained in the Stockholders' Agreement, or form
any intention which would require any such disclosure to be made in any
filing with a government authority or in a public announcement; or
(x) request Sprint or any of its affiliates (or any of their respective
officers, directors, representatives, affiliates or associates) to waive,
amend or modify any provision of the Standstill Agreement or the articles
of incorporation or the bylaws of Sprint or any of its affiliates.
Each of FT and DT may issue press releases and other communications in the
ordinary course relating to its investment in Sprint after using reasonable
efforts to consult with Sprint as to the content of such communications.
However, neither FT nor DT nor any of their respective affiliates or associates
may make any communication with respect to matters described in clauses (i),
(ii), (iii), (vii), (viii) or (ix) above without the prior consent of the
Chairman of the Sprint Board or the Sprint Board.
FT and DT have agreed to cause each Qualified Subsidiary which acquires any
shares of Class A Stock to execute a Qualified Subsidiary Standstill Agreement
prior to and as a condition to the effectiveness of such acquisition. FT and DT
shall cause each person other than FT, DT or a Strategic Investor who acquires
an equity interest in a Qualified Subsidiary to execute a standstill agreement
prior to and as a condition to the effectiveness of such acquisition. FT and DT
have agreed to cause each Qualified Stock Purchaser which acquires any shares
of Class A Stock to execute a standstill agreement prior to and as a condition
to the effectiveness of such acquisition.
Quorum. FT and DT agree in the Standstill Agreement to use reasonable efforts
to ensure that they and their respective affiliates and associates owning
Sprint voting securities will be present, in person or by proxy, at all
meetings of stockholders of Sprint so that all Sprint voting securities
beneficially owned by FT and DT and their respective affiliates and associates
shall be counted for purposes of determining the presence of a quorum.
Remedies for Breaches. Under the Standstill Agreement, any transfers of
equity interests which would result in FT, DT or any of their respective
affiliates or associates being in violation of the Standstill Agreement are
null and void, and Sprint is entitled to instruct any transfer agent for the
equity interests of Sprint to refuse to honor such transfers. In addition, a
breach of certain covenants in the Standstill Agreement may also result in a
loss of voting rights by either or both of FT and DT, depending on the
circumstances, with respect to any matter or proposal arising from, relating to
or involving such breach, and the conversion (after, as the case may be,
opportunities to cure or dispute) of each outstanding share of Class A Common
Stock into one share of Sprint Common Stock or, if any shares of Class A
Preference Stock are outstanding, the termination (after, as the case may be,
opportunities to cure or dispute) of the Fundamental Rights with
47
respect to such Preference Stock. See "--Terms of the Class A Stock--Conversion
of Class A Stock; Termination of Fundamental Rights--Conversion Following
Breach of Certain Related Investment Documents" and "--Terms of the Class A
Stock--Terms of the Class A Common Stock--Voting Rights."
TRANSFER RESTRICTIONS
Limitations on Transfer. Pursuant to the Stockholders' Agreement, the Class A
Holders will agree not to transfer any equity interests in Sprint until the
fifth anniversary of the Initial Issuance Date, except for transfers to FT, DT,
Qualified Subsidiaries, and in certain circumstances, Qualified Stock
Purchasers. Any Qualified Subsidiary to which shares of Class A Stock are to be
transferred must execute and deliver a Qualified Subsidiary Standstill
Agreement, and any Qualified Stock Purchaser to which shares of Class A Stock
are to be transferred must execute and deliver a standstill agreement. See
"Standstill Agreement--Standstill Covenants." Each such Qualified Subsidiary
and Qualified Stock Purchaser also will be required to enter into a
confidentiality agreement. In addition, each Strategic Investor will be
required to enter into a standstill agreement containing standstill
arrangements consistent with those to which FT and DT are subject. See "--
Standstill Agreement--Standstill Covenants."
After the general prohibition on transfers is no longer applicable, until
such time as the sum of (i) the Committed Percentage of the Class A Holders and
(ii) the percentage of the Sprint voting power represented by Sprint voting
securities which the Class A Holders have the right to commit to purchase
pursuant to the Investment Agreement and the Stockholders' Agreement is less
than 3 1/2% of the outstanding Sprint voting power for more than 150 days, no
Class A Holder may make any transfer to, or resulting in, a holder of more than
5% of the Sprint voting power, other than in an underwritten public offering.
In connection with any such public offering, a Class A Holder may not to the
best of its knowledge (i) sell more than 2% of the outstanding Sprint voting
power to any person or group that, prior to such sale, owned 3% or more of such
Sprint voting power, (ii) sell more than 5% of the outstanding Sprint voting
power to any person or group or (iii) sell to a person or group required under
Section 13(d) of the Exchange Act to file a Schedule 13D with respect to Sprint
(a "Schedule 13D Filer") or to a person or group who, as a result of such sale,
would become a Schedule 13D Filer.
So long as the sum of (i) the Committed Percentage of the Class A Holders and
(ii) the percentage of the Sprint voting power which the Class A Holders have
the right to commit to purchase pursuant to the Investment Agreement and the
Stockholders' Agreement is greater than 5%, but less than 9% (immediately
following a transfer of shares of Class A Stock by the Class A Holders) or 10%
(for more than 150 days immediately following the issuance of additional Sprint
voting securities other than pursuant to a Major Issuance), no Class A Holder
may transfer shares of Class A Stock representing more than 1% of the Sprint
voting power to any one person or group of persons in any transaction or series
of transactions, except in connection with a public offering, or transfer
shares other than in a public offering to any Major Competitor of Sprint.
Right of First Offer. If a Class A Holder proposes to transfer shares (each
such Class A Holder being a "Transferring Stockholder") of Class A Stock,
Sprint Common Stock or any other Sprint voting securities (including securities
convertible into Sprint voting securities or options or other rights to
purchase Sprint voting securities) ("Shares") in a public offering of Shares (a
"Public Offering") pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act") or in a brokers'
transaction within the meaning of Rule 144 of the Securities Act (a "Brokers'
Transaction"), it must first deliver written notice (the "Public Sale Notice")
to Sprint of the number and class of Shares to be sold (the "Offered Shares"),
the market price per share on the date of such notice (the "First Offer Price")
and the planned date for the initial filing to be made with the SEC relating to
the proposed Public Offering or the first date on which it is proposed that a
Class A Holder consummate Brokers' Transactions as to any securities (either
such date the "Planned Date"). Upon receipt of the Public Sale Notice, Sprint
shall have the right to purchase all, but not less than all, of the Offered
Shares at the First Offer Price, such right to be exercised
48
within ten business days following delivery of the Public Sale Notice (the
"First Notice Period"). If Sprint does not exercise its purchase right or
exercises such right but fails to close within the Purchase Closing Period (as
defined below in "--Closing of Right of First Offer and Refusal"), the
Transferring Stockholder may sell the Offered Shares, (i) in the case of a
Public Offering, subject to the provisions below, or (ii) in the case of
Brokers' Transactions, if Sprint does not exercise its purchase option, within
45 days after the First Notice Period or, if Sprint has exercised its purchase
right and has failed to close before the expiration of the Purchase Closing
Period, within 45 days after the expiration of the Purchase Closing Period.
If a Transferring Stockholder proposes to transfer Shares in a Public
Offering and Sprint has not exercised its purchase rights with respect to the
Offered Shares within the First Notice Period, then on the seventh business day
prior to the Planned Date, such Transferring Stockholder shall deliver to
Sprint a written offer (the "Second Offer") to sell to Sprint the Offered
Shares at the market price per share of the Sprint Common Stock on the business
day immediately preceding such seventh business day (the "Second Offer Price"),
except that no Second Offer need be made if the Second Offer Price would be
more than 90 percent of the First Offer Price. Sprint shall have 24 hours (the
"Second Notice Period") in which to deliver to such Transferring Stockholder
written notice of its decision to accept the Second Offer (a "Buy Notice"). If
a Buy Notice is not timely delivered to such Transferring Stockholder or Sprint
does not close the purchase of the Offered Shares before the expiration of the
Purchase Closing Period, such Transferring Stockholder may transfer the Offered
Shares at any time prior to (i) if the Buy Notice is not timely delivered, 45
days after the Planned Date or, (ii) if Sprint has accepted the Second Offer
and has failed to close the purchase of the Offered Shares before the
expiration of the Purchase Closing Period, 45 days after the expiration of the
Purchase Closing Period. The Transferring Stockholder may delay for a
reasonable period its offering beyond such 45 day period because of marketing
considerations, but if it delays such offering for more than 10 business days
after such 45 day period, the Offered Shares shall again be subject to Sprint's
purchase rights set forth in the preceding paragraph and this paragraph.
Right of First Refusal. With respect to all other transfers of Shares not
prohibited by the Stockholders' Agreement, the Transferring Stockholder must
first deliver written notice (a "Private Sale Notice") to Sprint describing the
number and class of Shares to be transferred (the "Subject Shares"), a price
per share (the "Proposed Price") and other terms determined by the Transferring
Stockholder (the "Proposed Terms"). Upon receipt of the Private Sale Notice,
Sprint shall have the right to purchase all, but not less than all, of the
Subject Shares at the Proposed Price and in accordance with the Proposed Terms
for a period of ten business days. If Sprint fails to exercise such right or
fails to close the purchase of the Subject Shares within the Purchase Closing
Period, then such Transferring Stockholder may sell all of the Subject Shares
to any one or more persons that would be eligible pursuant to Rule 13d-1(b)
under the Exchange Act to file a Schedule 13G with respect to Sprint if such
person owned Sprint voting securities representing five percent or more of the
Sprint voting power (an "Eligible Purchaser"), at the Proposed Price and in
accordance with the Proposed Terms or at a better price and on more favorable
terms to the Transferring Stockholder. Such sale must occur (i) if Sprint has
failed to exercise such right, within 180 days after delivery of the Private
Sale Notice to Sprint, or, (ii) if Sprint has exercised its purchase rights but
has failed to close within the Purchase Closing Period, within 180 days after
the Purchase Closing Period. Sprint has a similar right of first refusal,
subject to similar procedures, with respect to a proposed transfer of Shares in
response to a bona fide offer by a purchaser that is not an Eligible Purchaser.
Closing of Right of First Offer or Refusal. The closing of purchases of
Shares by Sprint pursuant to its right of first offer or right of first refusal
shall take place within (i) 45 days in the case of purchases by Sprint or any
assignee or (ii) 180 days in the case of purchases by an assignee if all
required governmental approvals necessary to permit such closing by such
assignee have not been obtained within such 45-day period (such applicable
period the "Purchase Closing Period"). Sprint or its assignee shall deliver to
such Transferring Stockholder an amount (the "Purchase Price") in cash or in
cash and securities of Sprint or such assignee as follows: (i) if the Purchase
Price is less than $200 million, payment of the entire Purchase Price shall be
made by wire transfer of immediately available funds, (ii) if the purchase
price is between $200 million and $500
49
million, payment of $200 million of the Purchase Price shall be made by wire
transfer of immediately available funds and the remainder of the purchase price
shall be paid one-half by notes maturing in one year and one-half by notes
maturing in two years and (iii) if the Purchase Price exceeds $500 million,
payment of $200 million of the Purchase Price shall be made by wire transfer of
immediately available funds and the remainder of the Purchase Price shall be
paid one-third in notes maturing in one year, one-third in notes maturing in
two years and one-third in notes maturing in three years. Such notes will be
designed, taking into account the likely manner and timing of resale, to sell
at a price equal to their principal amount ("Sprint Eligible Notes").
All Sprint Eligible Notes will bear interest from their respective dates of
issuance. Sprint may not issue Sprint Eligible Notes at any time when the debt
ratings on the debt instruments of Sprint most similar to the Sprint Eligible
Notes (or of the Sprint Eligible Notes, if rated prior to their issuance) are
not investment grade.
Termination of Transfer Restrictions. The transfer restrictions (other than
those relating to transfers to a greater than 5% holder of the outstanding
Sprint voting power) and the rights of first offer and first refusal with
respect to transfers of Sprint Common Stock, Class A Stock and other Sprint
voting securities will terminate:
(i) if the Joint Venture is terminated due to a material breach by
Sprint,
(ii) on the first anniversary of a termination of the Joint Venture for
any reason other than a material breach by Sprint or the FT/DT Parties,
(iii) if Sprint has breached certain specified material provisions in the
Investment Agreement or the Related Investment Documents,
(iv) if Sprint proceeds with a transaction involving an Acquisition
Proposal,
(v) if the Class A Holders own shares (together with those they are
committed to acquire or have the right to commit to acquire) (A)
representing less than 10% of the outstanding Sprint Common Stock and the
Class A Common Stock for 150 days if the ownership of the Class A Holders
is below such level due to share issuances by Sprint (other than a Major
Issuance), or (B) representing less than 9% of the outstanding Sprint
Common Stock and the Class A Common Stock if the ownership of the Class A
Holders is below such level due to sales of shares of Class A Common Stock
by the Class A Holders; provided that Sprint's right of first offer shall
continue until the Class A Holders own (or are committed to acquire or have
the right to commit to acquire) shares representing less than 5% of the
Sprint voting power,
(vi) if the Class A Holders own shares (together with those they are
committed to acquire or have the right to commit to acquire) representing
less than 10% of the outstanding Sprint Common Stock and Class A Common
Stock as a result of a Major Issuance and the Class A Holders fail to
exercise their rights to purchase additional Class A Common Stock in
connection with such Major Issuance (see "--Equity Purchase Rights--Major
Issuance"),
(vii) if there is a greater than 20% holder of voting securities of
Sprint (other than the Class A Holders) or there is a Change of Control, or
(viii) unless, in the case of a Major Issuance, the Class A Holders
exercise certain equity purchase rights (see "--Equity Purchase Rights--
Major Issuance"), if Sprint undertakes certain transactions between the
second anniversary and the fifth anniversary of the Initial Issuance Date
notwithstanding the disapproval of FT and DT.
While shares of Class A Preference Stock are outstanding and the Conversion
Price has not yet been fixed, if the event described in clause (iii) above
occurs, the holders of a majority of the Class A Preference Stock may deliver
notice to Sprint electing either that (x) the transfer restrictions are of no
further force and effect and each share of Class A Preference Stock transferred
thereafter will convert upon such transfer at the Target Price into shares of
Sprint Common Stock or (y) Sprint will redeem each share of Class A Preference
Stock for cash at a per share price equal to its Liquidation Preference on the
90th day following
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the delivery of such notice. If the event described in clause (iv) above
occurs, the Class A Holders may deliver a notice to Sprint electing either that
(x) upon delivery of such notice, the transfer restrictions will cease to be of
further force and effect, and each share of Class A Preference Stock
transferred thereafter will convert upon such transfer at the Target Price into
shares of Sprint Common Stock or (y) on the 31st day following delivery of such
notice, the transfer restrictions will cease to be of further force and effect
and each share of Class A Preference Stock transferred thereafter will convert
upon such transfer at 135% of the average closing market price of Sprint Common
Stock for the 20 consecutive trading day period ended prior to the date of
determination (the "Minimum Price") into shares of Sprint Common Stock,
provided that Sprint will have the option to redeem each share of Class A
Preference Stock for cash at the Liquidation Preference on the 90th day
following the delivery of such notice, in lieu of releasing the transfer
restrictions and having such shares convert at the Minimum Price. If any of the
other events described in the preceding paragraph shall occur, the holders of a
majority of the Class A Preference Stock may deliver a notice to Sprint
electing that, upon delivery of such notice, the transfer restrictions cease to
be of further force and effect and each share of Class A Preference Stock
transferred thereafter will convert upon such transfer at the Target Price into
shares of Sprint Common Stock.
If Sprint fails to redeem all of the outstanding shares of Class A Preference
Stock whenever required by the Articles of Incorporation as amended by the
Charter Amendments, such shares may be transferred without any restriction
(other than restrictions on transfers to large holders) and upon such transfer
will convert at the Minimum Price into shares of Sprint Common Stock.
REGISTRATION RIGHTS
The Class A Holders have been granted certain registration rights by Sprint
pursuant to the Registration Rights Agreement. The holders of a majority of the
Class A Stock will be entitled to demand one registration in any 12-month
period, up to a maximum of seven registrations. Sprint will be responsible for
the registration expenses in connection with the first five of such
registrations; the holders of the Class A Stock requesting registration will be
responsible for the registration expenses in connection with the remaining two
registrations. Sprint is not required to effect any registration unless the
market value of the Class A Stock requested to be registered exceeds $200
million. The holders of the Class A Stock will also have the right to
participate in all registrations of Sprint Common Stock by Sprint on behalf of
itself or any other party, other than registrations on Forms S-4 or S-8,
registrations in connection with an exchange offer or offerings solely to
Sprint's existing stockholders or pursuant to dividend reinvestment plans or
dividend reinvestment and stock purchase plans.
The Registration Rights Agreement provides that if the managing or lead
underwriter determines that the number of securities requested to be registered
in a demand registration exceeds the number which can be sold in such offering
within a price range acceptable to the Class A Holders requesting registration,
Sprint will either (i) include all of the Class A Stock requested to be
registered before it includes any of the securities that Sprint desires to
include in the registration or (ii) include the Class A Stock and the
securities Sprint desires to be registered on a pro rata basis. In either case,
securities requested to be registered by third parties will be included after
the Class A Stock. In the event that Sprint elects to include securities it
desires to be registered on a pro rata basis with the securities requested to
be registered by the Class A Holders and the managing or lead underwriter
continues to determine that the number of securities to be included in the
registration exceeds the number which can be sold within a price range
acceptable to the Class A Holders participating in the registration, such
registration shall not be counted toward the seven demand registrations.
If the Class A Holders have requested inclusion in a registration on behalf
of Sprint and the managing or lead underwriter determines that the number of
securities requested to be included in the registration exceeds the number that
can be sold within a price range acceptable to Sprint, Sprint has the right to
include all securities proposed to be registered by it before including any
securities requested to be included by the Class A Holders. If the registration
is a registration on behalf of third parties, Sprint may include, after the
securities of such third parties, the securities it proposes to include on a
pro rata basis with the Class A Holders unless it has an equal or better
priority with the third party, in which case it may include the securities it
proposes to include prior to the securities requested to be included by the
Class A Holders.
51
Sprint has agreed not to effect another public offering or sale of its equity
securities (or securities convertible into or exchangeable or exercisable for
any of such securities) for a period beginning 10 days before and ending 90
days after the effectiveness of a demand registration initiated by the Class A
Holders or a registration initiated by Sprint or a third party in which the
Class A Holders participate, except for those in connection with (i)
registrations on Forms S-4 or S-8, (ii) sales upon exercise or exchange, by the
holder thereof, of options, warrants or convertible securities, (iii) any other
agreement to issue such securities in effect on the date on which the Class A
Holders notify Sprint of the exercise of their registration rights, (iv) any
acquisition or similar transaction, and (v) any dividend reinvestment plan,
dividend reinvestment and stock purchase plan, or employee benefit plan (if
necessary for such plan to fulfill its funding obligations in the ordinary
course).
In the case of a demand registration, the managing or lead underwriter or
underwriters must be of internationally recognized standing and selected by the
Class A Holders who hold a majority of the securities proposed to be registered
with the approval of Sprint, which approval may not be unreasonably withheld.
Sprint has also agreed to file all reports required to be filed by it under
the Securities Act and the Exchange Act and shall take such further action as
any Class A Holder may reasonably request, all to the extent required from time
to time to enable such holder to sell Class A Stock without registration under
the Securities Act pursuant to Rule 144 or any similar rule hereafter adopted
by the SEC.
The Registration Rights Agreement provides that Sprint will indemnify the
selling Class A Holders, and that the selling Class A Holders will indemnify
Sprint, against certain liabilities and expenses, including liabilities under
the Securities Act, or will contribute to payments that the other may be
required to make in respect thereof on the basis of the relative fault of the
indemnified and indemnifying parties.
If the Class A Stock is converted into Sprint Common Stock (see "--Terms of
the Class A Stock--Conversion of the Class A Stock; Termination of Fundamental
Rights"), the Class A Holders generally will be entitled to the same rights
under the Registration Rights Agreement with respect to the shares of Sprint
Common Stock into which the shares of Class A Stock are converted as those
rights to which they are entitled with respect to the Class A Stock.
CHANGE OF CONTROL PROVISIONS
Definition of Change of Control. As used herein, a "Change of Control" means:
(i) a decision by the Sprint Board to sell control of Sprint or not to
oppose a third party tender offer for Sprint voting securities representing
more than 35% of the Sprint voting power; or
(ii) a change in the identity of a majority of the Sprint Board due to
(x) a proxy contest (or the threat to engage in a proxy contest) or the
election of directors by the holders of Sprint Preferred Stock; or (y) any
unsolicited tender, exchange or other purchase offer which has not been
approved by a majority of the Independent Directors,
except that neither a Strategic Merger nor any transaction between Sprint and
FT and/or DT shall be deemed to be a Change of Control. A "Strategic Merger"
generally is a merger or other business combination (i) in which the Class A
Holders are entitled to retain or receive, as the case may be, voting equity
securities of the surviving parent entity in exchange for their Class A Stock,
with an aggregate fair market value equal to at least 75% of the sum of (x) the
fair market value of all consideration which such Class A Holders have a right
to receive with respect to such merger or other business combination and (y) if
Sprint is the surviving parent entity, the fair market value of the equity
securities of the surviving parent entity which the Class A Holders are
entitled to retain, (ii) immediately after which the surviving parent entity is
an entity with voting securities registered pursuant to Section 12(b) or 12(g)
of the Exchange Act or which otherwise has any class or series of its voting
equity securities held by at least 500 holders and (iii) immediately after
which no person or group (other than the Class A Holders) owns voting
securities of such surviving parent entity with votes equal to more than 35% of
the voting power of such surviving parent entity.
52
Participation by FT and DT Upon Decision by the Sprint Board to Sell Sprint.
If Sprint determines to effect an Acquisition Proposal, Sprint will conduct
such transaction in accordance with reasonable procedures to be determined by
the Sprint Board and permit the Class A Holders to participate in that process
on a basis no less favorable than that granted any other participant.
Effect of Change of Control on the Joint Venture, Special Rights of FT and
DT, Transfer Restrictions and Standstill Provisions. In the case of a Change of
Control, the FT/DT Parties will obtain rights that will give them greater
control over the Joint Venture, provided that if, at any time following such
Change of Control, the Sprint Parties offer to sell all of their Venture
Interests to the FT/DT Parties at a price equal to the Appraised Value thereof,
and the FT/DT Parties decline such offer, then, at such time, such rights will
terminate. During the two-year period beginning on the fifth anniversary of the
consummation of a Change of Control, the Sprint Parties will have the right to
require the FT/DT Parties to purchase all of the Venture Interests of the
Sprint Parties at the Appraised Value of such Venture Interests. If the FT/DT
Parties accept such offer or such right is exercised by the Sprint Parties, the
disapproval rights of the Class A Holders with respect to the Long Distance
Assets of Sprint will terminate.
In the case of a Change of Control resulting from the consummation of a
transaction involving an Acquisition Proposal, each of the Class A Holders will
have the right to convert and sell its shares of Class A Common Stock in such
transaction free of any restriction on transfer (other than restrictions on
transfers to large holders) or other restriction set forth in the Stockholders'
Agreement. If Sprint determines to effect such a transaction in accordance with
the reasonable procedures determined as set forth above with a party other than
FT or DT (see "--Participation by FT and DT Upon Decision by the Sprint Board
to Sell Sprint"), then the provisions of the Standstill Agreement will
terminate. Sprint's obligations in respect of the Joint Venture will continue
in full force and effect after any such transaction.
Effect of Exclusionary Tender Offer. If the Sprint Board determines not to
oppose an Exclusionary Tender Offer, the Class A Holders shall have the right
to cause the conversion of certain shares of Class A Stock designated by the
Class A Holders into Sprint Common Stock. Upon such election each share of
Class A Common Stock so designated shall automatically convert into one duly
issued, fully paid and non-assessable share of Sprint Common Stock and each
share of Class A Preference Stock shall convert into a number of shares of
Sprint Common Stock in accordance with the provisions for conversion of Class A
Preference Stock into Class A Common Stock set forth in the Charter Amendments.
See "Terms of the Class A Stock--Terms of the Class A Preference Stock."
In the event of an Exclusionary Tender Offer in which the Class A Holders do
not elect to convert their shares of Class A Stock into Sprint Common Stock as
described above, upon the completion of the purchase by a third party of
securities representing not less than 35% of the voting power of Sprint in such
Exclusionary Tender Offer, the Class A Holders shall, under the Stockholders'
Agreement, have the option to require Sprint to purchase at the tender offer
price all but not less than all of the shares that they were unable to tender
on the same basis as the other stockholders, unless under the terms of the
tender offer such Class A Holders are entitled to receive publicly traded
securities or cash in an equivalent amount in a business combination
transaction required to be effected within 90 days after the close of the
tender offer.
EQUITY PURCHASE RIGHTS
In General. Following the Investment Completion Date, the Class A Holders
will have the right under the Stockholders' Agreement, based upon their
Committed Percentage, to acquire shares of Class A Stock upon the issuance by
Sprint of any new voting stock after the Initial Issuance Date (including upon
the exercise of options or warrants or the conversion of Sprint's securities
into Sprint Common Stock or pursuant to the Sprint Rights Plan, provided that
the Rights Plan has not been triggered by any action on the part of a Class A
Holder) generally at, if Sprint Common Stock was issued, the weighted average
price paid for such shares of Sprint Common Stock or, if Sprint voting stock
other than Sprint Common Stock was issued, at the market price of a share of
Sprint Common Stock at the date of such issuance. The equity purchase rights of
53
the Class A Holders under the Stockholders' Agreement may be suspended by
Sprint for so long as the number of Sprint voting securities beneficially owned
by the Class A Holders exceeds the applicable Percentage Limitation as set
forth in the Standstill Agreement.
The equity purchase rights described in the foregoing paragraph must be
exercised by the Class A Holder by written notice to Sprint within 30 days of
the date of the post-issuance notice of the issuance of shares by Sprint which
gives rise to such equity purchase rights. Payment by the Class A Holder for
shares to be purchased in respect of the exercise of such rights will be made
as follows. If the aggregate purchase price with respect to the shares of Class
A Stock to be acquired by the Class A Holders is less than $200 million, then
payment will be made in cash within 30 days of the date of exercise of such
right. If the aggregate purchase price with respect to such shares of Class A
Stock to be acquired is between $200 million and $500 million, $200 million of
such purchase price will be paid in cash within 30 days of the exercise of such
right. The remainder of such purchase price will be paid in two equal annual
installments beginning on the date which is one year from the date of such
purchase. The obligation to pay such installments will be evidenced by
marketable notes issued by the Class A Holder. Such notes will be designed,
taking into account the likely manner and timing of resale, to sell at par
value ("Class A Holder Eligible Notes"). If the aggregate purchase price
exceeds $500 million, the first $200 million of such purchase price will be
paid in cash within 30 days. The remainder of such purchase price will be paid
in three equal annual installments beginning on the date which is one year from
the date of the exercise of such right. The obligation to pay such installments
will be evidenced by Class A Holder Eligible Notes.
All amounts paid will include interest from the date of the exercise of the
right which gives rise to such payment. Class A Holder Eligible Notes may not
be issued at any time when the debt ratings on the debt instruments of the
Class A Holder most similar to such notes (or of such notes, if rated prior to
their issuance) are not investment grade, provided that this restriction will
only apply if debt instruments of the Class A Holder are generally rated by
established rating services.
Each of FT and DT may suffer adverse tax consequences if at any time its
ownership of Sprint voting power falls below 10%. Accordingly, the
Stockholders' Agreement contains a mechanism whereby the equity purchase rights
of the Class A Holders will be automatically exercised and Sprint will
immediately issue to FT and DT the shares of Class A Stock which they are
entitled to purchase pursuant to such rights.
Major Issuances. If the Committed Percentage of the Class A Holders is
diluted to less than 10% as a result of a Major Issuance, the Class A Holders
shall be entitled, in addition to any equity purchase rights described above,
during the three-year period following the consummation of such Major Issuance
to increase their Committed Percentage to 10% of the outstanding Sprint voting
power if within 180 days after such Major Issuance (or, if Class A Preference
Stock is outstanding and if the Fixed Closing Date has not yet occurred, within
180 days of the Fixed Closing Date), the Class A Holders enter into a binding
commitment with Sprint to increase their interest to 10% of the outstanding
Sprint voting power through purchases from third parties. Unless the Minority
Rights of the Class A Holders have been terminated, if the Class A Holders do
not so commit, the Class A Holders will continue to have the right to elect two
members of the Sprint Board until the later of (i) the date on which the Class
A Holders no longer own Class A Preference Stock with a liquidation value of at
least $1.5 billion (or a lesser amount resulting from a purchase by Sprint of
shares of Class A Preference Stock pursuant to the Stockholders' Agreement in
order for Sprint to comply with Section 310 of the Communications Act) and (ii)
the end of the three-year period following the consummation of such Major
Issuance (or, if any shares of Class A Preference Stock are outstanding and the
Fixed Closing Date has not yet occurred, the end of the three-year period
following the Fixed Closing Date).
Major Competitors. Until the tenth anniversary of the Initial Issuance Date,
if a Major Competitor of FT/DT obtains securities representing 20% or more of
the Sprint voting power as a result of a Strategic Merger, the Class A Holders
shall have the right to commit within the later of (a) 30 days after the
consummation of such Strategic Merger and (b) 30 days following the Fixed
Closing Date, to purchase from Sprint or its successor in the Strategic Merger,
and Sprint or such successor will be obligated to sell to the
54
Class A Holders after the Investment Completion Date, a number of shares of
Class A Stock such that the aggregate percentage ownership of the Class A
Holders shall be equal to the percentage ownership interest of such Major
Competitor following consummation of such Strategic Merger. If the Class A
Holders do not so elect, (i) Sprint will take all actions necessary to lift all
restrictions imposed by Sprint on the ability of the Class A Holders to
purchase shares from third parties, (ii) Sprint will be obligated to ensure
that the Class A Holders will have rights (other than rights deriving solely
from the number of shares of Sprint voting securities owned) in scope and
duration at least as extensive as certain rights granted by Sprint to such
Major Competitor, regardless of whether the Class A Holders exercise their
right to increase their ownership, and (iii) if such Major Competitor has been
granted rights by Sprint equivalent or superior to the Minority Rights of the
Class A Holders under the Investment Agreement, then for a period of five years
following the date of closing of such transaction, the FT/DT Parties will
obtain rights which will give them greater control over the Joint Venture. See
"The Joint Venture--Management and Control--Increased Control Over the Joint
Venture by the Sprint Parties or the FT/DT Parties."
RIGHT OF FIRST OFFER WITH RESPECT TO LONG DISTANCE ASSETS.
Following the Initial Period and prior to the tenth anniversary of the
Initial Issuance Date, if a disposition of 30% (Cumulative) or more of the fair
market value of the Long Distance Assets or a disposition of 30% (Cumulative)
or more of the equity in Long Distance Assets is disapproved by the Class A
Holders, Sprint may nevertheless effect such disposition. Before Sprint
consummates such disposition (other than one as a result of which Sprint would
no longer own 51% or more of the Long Distance Assets or the equity in Long
Distance Assets, in which case see below), FT and DT will have a right of first
offer with respect to the assets or equity of which Sprint proposes to dispose.
FT and DT will have up to 150 days after receipt by FT and DT of notice of the
proposed transfer to exercise their right to purchase such assets or equity at
the same price and on the same terms as those of the proposed disposition. If
FT and DT fail to exercise their purchase rights, Sprint must enter into a
binding agreement to sell such assets or equity within 150 days. If Sprint
enters into such a binding agreement in a timely manner, there is no time limit
on Sprint's ability to close the transaction contemplated by such agreement. If
Sprint does not obtain a binding agreement within such time (or if Sprint
abandons such sale as described below), Sprint may not effect a transaction
involving substantially identical assets for one year from the date of the
offer which resulted in the failed transaction.
In connection with such a disposition, for so long as the restrictions
contained in Section 310 of the Communications Act apply (see "Investment
Proposals--Regulatory Approvals--United States Communications Act"), FT and DT
will have the right to assign their right to purchase as a result of the
exercise of their right of first offer to a purchaser meeting certain
qualifications (a "Qualified LD Purchaser"). If FT and DT elect to assign their
right to purchase, they must disclose the identity of the proposed assignee and
certain other information regarding the proposed assignment to Sprint prior to
such assignment. Upon disclosure to Sprint of such information regarding a
proposed assignment, Sprint may elect to abandon the sale which gave rise to
such right in FT and DT. In this event, Sprint may not thereafter sell such
assets or equity or substantially identical assets to such Qualified LD
Purchaser or any other person within one year following such abandonment.
In addition, if Sprint proposes to effect a disposition of assets or equity
such that it would no longer hold 51% or more of the Long Distance Assets or
the equity in Long Distance Assets, then FT and DT would have the right to
purchase at least 51% of the Long Distance Assets or the equity in Long
Distance Assets pursuant to the Stockholders' Agreement. This right to purchase
operates in the same manner as the right of first offer described above.
The provisions set forth above with respect to Long Distance Assets and
equity in Long Distance Assets will not apply to the following transactions and
such transactions will not count toward the thresholds set forth above:
(i) the granting of any mortgage, pledge, security interest, lien or
charge of any kind (a "Lien") on any Long Distance Assets;
55
(ii) any other transfer of Long Distance Assets meeting the following
criteria (each, an "Exempt Long Distance Asset Divestiture"):
(a) contributions or sales of assets to joint ventures in which,
among other things, not more than 20% of the aggregate voting power is
owned by Major Competitors of FT or DT or Major Competitors of the
Joint Venture and in connection with which Sprint undertakes efforts to
align such joint venture with the activities of the Joint Venture and,
in the case of joint ventures to which Sprint's primary contribution is
Long Distance Assets or equity interests in Long Distance Assets, in
which Sprint maintains certain levels of voting power;
(b) transfers to entities 70% or more of the voting power and equity
interests in which are owned by Sprint and in which no Major Competitor
of FT or DT owns more than 20% of the voting power and equity
interests;
(c) transfers pursuant to an underwritten, widely-distributed public
offering at the conclusion of which Sprint owns at least 51% of the
equity interests and voting power of the entity that owns the Long
Distance Assets;
(d) disposition of unnecessary Long Distance Assets in the ordinary
course of business and sale-leasebacks and similar financing
transactions which leave Sprint in possession and control of the Long
Distance Assets which are the subject of such transaction;
(e) transfers of Long Distance Assets between Sprint and its
subsidiaries;
(f) transfers of Long Distance Assets to FT or DT pursuant to the
Stockholders' Agreement;
(g) any spin-off of equity interests of a wholly-owned subsidiary
which owns Long Distance Assets, provided the Class A Holders receive
securities of the spun-off interests of a separate class with rights no
less favorable to the Class A Holders than their rights under the
Articles of Incorporation as amended by the Charter Amendments and the
Bylaws as amended by the Bylaw Amendments; and
(h) transfers of Long Distance Assets to third parties who enter into
outsourcing contracts with Sprint to provide services of substantially
the same nature as the services associated with the use of such Long
Distance Assets prior to such transfer and on commercially reasonable
terms, provided that the term of the contract is at least as long as
the average useful life of the Long Distance Assets transferred and
that such transfer does not materially and adversely affect the
operation of the long distance business of Sprint.
The granting by Sprint of a Lien on any Long Distance Asset, other than (i) a
purchase money security interest with a term no longer than the estimated
useful life of the Long Distance Asset, (ii) Liens securing accounts receivable
and (iii) Liens securing other indebtedness for borrowed money provided that
the amount of such indebtedness, when added to the aggregate amount of purchase
money indebtedness, does not secure debt exceeding 30% of the total book value
of the Long Distance Assets, constitutes a "Lien Transfer." Under the
Investment Agreement, Sprint is not permitted to undertake a Lien Transfer
unless it enters into an agreement with each creditor which is the beneficiary
of any Lien relating to the Lien Transfer (a "Lien Creditor") which provides
that, prior to any foreclosure upon the Long Distance Assets, FT and DT will
have the option to either (i) purchase the Long Distance Assets in question at
fair market value free and clear of the Lien or (ii) pay the Lien Creditor all
amounts due to it which are secured by the Lien and become subrogated to the
claims of the Lien Creditor against Sprint.
CERTAIN COVENANTS IN THE INVESTMENT AGREEMENT
Conduct of Sprint's Business. Pursuant to the Investment Agreement, Sprint
has generally agreed that from the date of the Investment Agreement until the
Initial Issuance Date (the "Pre-Closing Period"), Sprint
56
will conduct its operations and its subsidiaries' operations in a manner not
materially inconsistent with the scope and nature of such business on the date
of the Investment Agreement and as described in this Proxy Statement.
Exceptions to this requirement include certain permitted divestitures of long
distance and other assets and the Cellular Spin-Off. Sprint has agreed not to
(i) redeem, repurchase or otherwise acquire in excess of 50% of the aggregate
Sprint voting power outstanding on the date of the Investment Agreement, (ii)
amend or propose to amend the Articles of Incorporation or Bylaws in any manner
that would adversely affect the consummation of the Investment Transactions or
the rights of FT and DT, (iii) propose any plan involving complete or partial
dissolution of Sprint or (iv) take any action which would be subject to the
disapproval rights of the Class A Holders. See "--Terms of the Class A Stock--
Disapproval Rights."
Access to Information. Pursuant to the Investment Agreement, Sprint has
agreed generally that during the Pre-Closing Period, Sprint will, and will
cause its subsidiaries and its and their directors, officers, employees and
agents to, afford to FT and DT and their advisors, officers, employees and
agents, upon reasonable notice, full and complete access to properties, books,
records and contracts and will furnish to FT and DT and their advisors all such
financial, operating and other information as FT and DT and their advisors may
reasonably request in connection with the Investment Transactions, subject in
all respects to the provisions of the confidentiality agreement entered into by
Sprint, FT and DT in connection with the negotiation and preparation of the
Memorandum of Understanding.
No Solicitation. Sprint has agreed that during the Pre-Closing Period,
neither Sprint nor any of its subsidiaries or affiliates and its or their
respective directors, officers, employees, representatives or agents will (i)
solicit an Acquisition Proposal or enter into any substantive negotiations with
any third party in response to an Acquisition Proposal unless the Sprint Board
determines in good faith that it is in the best interest of Sprint stockholders
to engage in such substantive negotiations, after considering the benefits to
Sprint of the Transactions and the potential impact of such negotiations on the
Transactions, or (ii) solicit any proposal from or enter into any substantive
negotiations with any third party with respect to any commercial or other
arrangement or relationship similar to and inconsistent with the arrangements
and relationships contemplated by the Investment Agreement and the Joint
Venture Agreement (an "Alternative Transaction") or give any access to company
information not customarily disclosed publicly in connection with any
Alternative Transaction.
Sprint has also agreed in the Investment Agreement that (i) before approval
of the Investment Proposals by the Sprint stockholders, it will not continue
any substantive negotiations relating to matters with respect to which the
Class A Holders would have special disapproval rights, without first notifying
FT and DT of such negotiations and failing to receive notice from FT and DT
within five business days of their disapproval of the negotiations and (ii)
Sprint will notify each of FT and DT promptly of any discussions, inquiries or
negotiations relating to a potential Acquisition Proposal or Alternative
Transaction.
Sprint has also agreed in the Investment Agreement that prior to the
Investment Completion Date, Sprint will not undertake any spin-off, split-off
or other distribution to any of its stockholders of equity interests of a
subsidiary of Sprint other than the Cellular Spin-off, provided that Sprint
will be permitted to undertake such a transaction prior to the Investment
Completion Date if Sprint, FT and DT negotiate in good faith an investment
agreement with respect to the spun-off entity (a "Spin-Off Investment
Agreement") containing terms which are no less favorable to FT and DT than
those set forth in the Investment Agreement and are able to reach agreement
regarding any necessary or advisable modifications to the Investment Agreement,
the Stockholders' Agreement and the Articles of Incorporation as amended by the
Charter Amendments in connection with such transaction. In addition, under the
Stockholders' Agreement, prior to consummating any spin-off involving an Exempt
Long Distance Asset Divestiture, Sprint shall cause the entity whose equity
interests are to be distributed in such spin-off to (i) execute a Spin-Off
Investment Agreement with FT and DT if such spin-off occurs after the Initial
Issuance Date and before the later to occur of the date of the Optional Shares
Closing and the Investment Completion Date, (ii) execute agreements with each
of FT and DT no less favorable to FT and DT than the Registration Rights
Agreement, the Standstill Agreement and the confidentiality agreements to be
entered into by each of FT and DT (together
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with the Spin-Off Investment Agreement, the "Principal Investment Documents")
and (iii) adopt bylaws no less favorable to FT and DT than the Bylaws as
amended by the Bylaw Amendments. Following the expiration of a reasonable time
provided to FT and DT to review and approve such Principal Investment
Documents, each of FT and DT shall execute the Spin-Off Investment Agreement
and the other Principal Investment Documents, provided that if FT and DT do not
execute such Principal Investment Documents, Sprint shall nonetheless have the
right to proceed with such spin-off and Sprint shall have no obligation to
provide to such Class A Holders securities of such spun-off entity with rights
no less favorable to the Class A Holders than those applicable to the Class A
Stock.
Conduct of Cellular Business. Except for transactions in furtherance of the
Cellular Spin-Off or those required by law, consented to by FT and DT or set
forth in a schedule of permitted actions, Sprint is required, until the earlier
of the Cellular Spin-Off or the abandonment of the Cellular Spin-Off, (i) to
conduct its cellular operations in the ordinary course consistent with past
practices, except for acquisitions or dispositions which do not cause the
number of customers of the Cellular and Wireless Division when the Cellular
Spin-Off occurs to vary by more than 10% from the number of customers of the
Cellular and Wireless Division at June 22, 1995; (ii) to refrain from engaging
in any transaction the performance of which would occur in whole or in part
after the Cellular Spin-Off on less than arms-length terms, except to the
extent that such transactions are immaterial or are approved by the Sprint
Board; (iii) to refrain from entering into any guarantee of the liabilities of
the Cellular and Wireless Division or Spinco other than guarantees of purchase
money indebtedness or other non-financial indebtedness that, individually and
in the aggregate, do not exceed $5 million and (iv) to enter into a tax sharing
and indemnification agreement with Spinco in connection with the Cellular Spin-
Off which will allocate between Sprint and Spinco any tax liability arising
from the failure of the Cellular Spin-Off to constitute a tax-free distribution
and will provide for the indemnification by Sprint of Spinco for tax
liabilities relating to distributions of Spinco common stock to Aliens and
certain transactions occurring before the Cellular Spin-Off.
Application of Anti-Takeover Statutes. Sprint has agreed that it will not
take any action to cause the provisions of Sections 17-12,100 et seq. of the
KGCC (the "Business Combination Statute") restricting "business combinations"
with "interested stockholders" (each as defined in the Business Combination
Statute) or the provisions of the Control Share Acquisitions Statute to apply
to FT or DT by virtue of the Investment Transactions and will use reasonable
efforts to avoid to the extent possible the application to FT or DT of any
"fair price," "moratorium," "control share acquisition," "business
combination," "shareholder protection" or similar anti-takeover statutes or
regulations promulgated under Kansas law after the date of the Investment
Agreement.
CONDITIONS TO THE FIRST CLOSING
The obligations of each of Sprint, FT and DT to consummate the Investment
Transactions at the Initial Issuance Date are subject to the fulfillment or
waiver by the relevant party or parties of the following conditions, among
others:
(i) the waiting period under the HSR Act shall have expired or been
terminated without the imposition of any Burdensome Condition;
(ii) the relevant EU authorities shall have exempted the Joint Venture
Transactions and, if necessary, the Investment Transactions, from the
operation of Article 85(1) of the Treaty of Rome, without the imposition of
any Burdensome Condition, or each party shall have determined that such
exemption will be granted in a reasonable time and without the imposition
of a Burdensome Condition;
(iii) an FCC Order (as defined below) shall have been obtained without
the imposition of a Burdensome Condition;
(iv) FT shall have received the approval of the French minister in charge
of economic affairs and finance and the French minister in charge of posts
and telecommunications to carry out the Transactions without the imposition
of a Burdensome Condition;
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(v) either (A) DT shall have received the approval of the German Cartel
Office to carry out the Transactions without the imposition of a Burdensome
Condition, or (B) the exemption referred to in clause (ii) above shall have
been obtained;
(vi) all other material governmental approvals required to be obtained to
consummate the Transactions shall have been obtained;
(vii) no government order shall have been entered enjoining consummation
of the Investment Transactions or putting in doubt the validity of the
Investment Agreement or the Related Investment Documents in any material
respect;
(viii) the Sprint stockholders shall have duly approved the Investment
Proposals;
(ix) the representations and warranties of Sprint (in the case of the
condition in favor of FT and DT) and FT and DT (in the case of the
condition in favor of Sprint) made pursuant to the Investment Agreement and
the Related Investment Documents shall be true and correct in all material
respects at and as of the date of the Investment Agreement and at and as of
the Initial Issuance Date as if such representations and warranties were
made at and as of the Initial Issuance Date, except for representations and
warranties that relate solely to a date prior to the Initial Issuance Date
and except to the extent otherwise contemplated by the Investment
Agreement, the Related Investment Documents, the Articles of Incorporation
as amended by the Charter Amendments, the Joint Venture Agreement and the
Related Joint Venture Documents;
(x) Sprint (in the case of the condition in favor of FT and DT) and FT
and DT (in the case of the condition in favor of Sprint) shall have duly
performed and complied in all material respects with each agreement,
covenant and condition in the Investment Agreement and in each Related
Investment Document required to be performed or complied with by it on or
prior to the Initial Issuance Date;
(xi) no proceeding shall be pending or threatened that (a) restrains,
prohibits, prevents or materially changes, or presents a substantial
possibility of restraining, prohibiting, preventing or materially changing,
the terms of the Investment Transactions, or (b) presents a substantial
possibility of resulting in material damages to such party or its
subsidiaries or imposing a Burdensome Condition as to such party or Atlas,
in each case arising from the Investment Transactions; and
(xii) the conditions to the Venture Closing shall have been fulfilled or
validly waived and the Venture Closing shall have occurred simultaneously
with the closing of those Investment Transactions to occur on the Initial
Issuance Date.
It is also a condition to the First Closing that Sprint shall have been
advised by the NYSE that the Sprint Common Stock will continue to be listed on
the NYSE after (i) the issuance and sale of the Class A Stock, and (ii) the
effectiveness of the provisions of the Investment Agreement and the Related
Investment Documents. By letter to Sprint dated August 3, 1995, the NYSE
indicated to Sprint that the rights of the Class A Holders are not inconsistent
with the voting rights policy of the NYSE.
In addition to the foregoing, the obligations of FT and DT are subject to the
following additional conditions, among others: (i) no Major Competitor of FT/DT
shall have acquired Sprint voting power, if (x) such stock was acquired as a
result of a transaction with Sprint, and following such transaction such Major
Competitor owns greater than 10% of the Sprint voting power, or (y) Sprint
otherwise has taken steps for the purpose of encouraging or facilitating an
acquisition by such a Major Competitor of greater than 10% of the Sprint voting
power (including, without limitation, by any waiver, amendment or termination
of the Sprint Rights Plan), (ii) no Change of Control shall have occurred,
(iii) the Charter Amendments shall have been filed and become effective and the
Bylaw Amendments shall have become effective, and (iv) the Sprint Common Stock
issuable upon conversion of the Class A Stock shall have been duly authorized
and reserved for issuance by Sprint and listed on the NYSE subject to official
notice of issuance.
59
"FCC Order" generally means a written determination approving the
consummation of the Transactions or stating that no such approval is required,
which is received from (i) the FCC itself, or (ii) the staff of the FCC and is
no longer subject to further administrative review by the FCC.
There can be no assurance that each of the conditions to the consummation of
the closing of those Investment Transactions to occur on the Initial Issuance
Date will be satisfied prior to December 31, 1995, the date after which each of
Sprint, FT and DT has the right to terminate the Investment Agreement if the
Initial Issuance Date has not occurred by then, other than as a result of the
failure of the party seeking termination to perform its obligations under the
Investment Agreement and the Related Investment Documents. See "--Termination
of the Investment Agreement."
CONDITIONS TO ARTICLE IV CLOSING
The obligation of each party to consummate the transactions contemplated by
the Investment Agreement at an Additional Preference Stock Closing, the
Supplemental Preference Stock Closing, or the Deferred Common Stock Closing
(each an "Article IV Closing") is subject to the condition that no governmental
authority shall have taken any action which enjoins, restrains or prohibits
consummation of the Investment Transactions or puts in doubt the validity of
the Investment Agreement or any Related Investment Document in any material
respect.
In addition to the foregoing, the obligations of FT and DT at an Article IV
Closing are subject to the following additional conditions:
(i) the representations and warranties of Sprint in the Investment
Agreement relating to (a) Sprint's good standing under the laws of Kansas
and authority thereunder to take the necessary actions required under the
Investment Agreement and the Related Investment Documents, (b) Sprint's
capital stock, (c) the validity of any shares of capital stock to be issued
in connection with the Article IV Closing and (d) the corporate authority
of Sprint under Kansas law to enter into the Investment Agreement and the
Related Investment Documents shall be materially correct as of the date of
the Investment Agreement and the date of the Article IV Closing;
(ii) the representations and warranties of Sprint in the Investment
Agreement relating to the accuracy of various filings with the SEC and the
absence of certain material changes in the business of Sprint since the
date of such filings shall be materially correct as of the date of the
Investment Agreement;
(iii) Sprint shall have performed and complied in all material respects
with its obligations (a) under the Investment Agreement relating to the
nonapplicability to FT and DT of state takeover statutes, (b) under the
Articles of Incorporation as amended by the Charter Amendments relating to
the Sprint Common Stock and the Class A Stock and (c) under the
Stockholders' Agreement relating to provisions concerning dispositions of
Long Distance Assets, a Change of Control, equity purchase rights, holdings
by Major Competitors and those covenants relating to reservation and
availability of Sprint Common Stock, procedures for redemption, Major
Issuances, spin-offs and FCC licenses; and
(iv) a Change of Control shall not have occurred.
In addition to the foregoing, the obligations of Sprint at an Article IV
Closing are subject to the following additional conditions:
(i) the respective representations and warranties of each of FT and DT in
the Investment Agreement relating to (a) authority to consummate the
Investment Transactions, (b) the appropriate authorization and legality of
the execution and performance of the Investment Agreement and the Related
Investment Documents, (c) the purchase of shares for its own account rather
than for resale and (d) with respect to FT only, the lack of sovereign
immunity for each of its subsidiaries, shall be materially correct as of
the date of the Investment Agreement and the date of the Article IV
Closing; and
60
(ii) each of DT and FT shall have performed and complied in all material
respects with its obligations (a) under the Investment Agreement to
purchase shares of Class A Stock, (b) under the Stockholders' Agreement
relating to transfer restrictions and joint action by FT and DT, (c) under
the Standstill Agreement relating to acquisition restrictions and other
restrictions and (d) under its respective confidentiality agreement.
In the case of the failure to satisfy certain conditions to an Article IV
Closing which may be cured without adversely affecting the rights of the other
party, the Investment Agreement provides for a delay in the Article IV Closing
of not more than 180 days. In certain cases involving a dispute as to whether a
condition has been satisfied, the Article IV Closing in question may be delayed
up to 90 days following the final judicial resolution of the dispute.
TERMINATION OF THE INVESTMENT AGREEMENT
The Investment Agreement may be terminated and the Investment Transactions
may be abandoned at any time prior to the Initial Issuance Date (whether before
or after the Special Meeting) by mutual consent of Sprint, FT and DT. In
addition, the Investment Agreement may be terminated by any of Sprint, FT or DT
if:
(i) the Initial Issuance Date does not occur on or before December 31,
1995, other than as a result of the failure of the party seeking
termination to perform its obligations under the Investment Agreement and
the Related Investment Documents;
(ii) it has become impossible for any condition precedent to its
obligations under the Investment Agreement or the Related Investment
Documents to be satisfied, provided that such condition precedent has
become impossible to satisfy other than as a result of the failure of the
party seeking termination to perform its obligations under the Investment
Agreement or the Related Investment Documents;
(iii) there is a material breach by FT or DT (in the case of a
termination by Sprint) or Sprint (in the case of a termination by FT or DT)
of its representations and warranties contained in the Investment Agreement
and the Related Investment Documents, which breach is not cured within 30
days after written notice given by the party seeking termination;
(iv) the Sprint Board fails to recommend the Investment Proposals to the
Sprint stockholders or withdraws or qualifies its recommendation;
(v) the Sprint stockholders fail to approve the Investment Proposals; or
(vi) the Joint Venture Agreement is terminated in accordance with its
terms.
In addition, either FT or DT may terminate the Investment Agreement if:
(i) a Change of Control occurs;
(ii) Sprint, any subsidiary or affiliate of Sprint or any director,
officer, employee, representative or agent of Sprint solicits an
Alternative Transaction, discloses nonpublic information to any person in
connection with an Alternative Transaction or enters into substantive
negotiations with any third party relating to an Alternative Transaction,
unless prior to such time both FT and DT have failed to notify Sprint of
their disapproval;
(iii) prior to the approval of the Investment Proposals by the Sprint
stockholders, the Sprint Board or any committee thereof is notified during
any meeting of substantive negotiations with respect to any action the
consummation of which would be subject to a disapproval right under the
Articles of Incorporation as amended by the Charter Amendments and the
Sprint Board or such committee has not instructed that Sprint discontinue
such negotiations, unless prior to such time both FT and DT have failed to
notify Sprint of their disapproval; or
(iv) the Sprint Board or any committee thereof is notified during any
meeting of negotiations involving Sprint relating to an Acquisition
Proposal, and the Sprint Board or such committee has not
61
instructed that Sprint discontinue such negotiations, unless prior to such
time both FT and DT shall have failed to notify Sprint of their
disapproval.
If the Investment Agreement is terminated because the Sprint Board has
withdrawn or adversely qualified its recommendation of the Investment Proposals
after receiving an Acquisition Proposal or it is terminated in the
circumstances described in clauses (i), (ii) or (iv) immediately above, Sprint
shall promptly reimburse each of FT and DT for their reasonable out-of-pocket
expenses (including attorneys fees) incurred by it relating to the Transactions
up to a maximum amount of $15 million for each of FT and DT.
"FAIR PRICE" PROVISIONS
As described more fully in "Information Concerning Sprint--Antitakeover
Provisions Applicable to Sprint--"Fair Price' Provisions," certain transactions
contemplated by the Investment Agreement, the Related Investment Documents, the
Charter Amendments, the Joint Venture Agreement and the Related Joint Venture
Documents will be subject to approval by Continuing Directors (as defined in
"Information Concerning Sprint--Antitakeover Provisions Applicable to Sprint--
"Fair Price' Provisions") pursuant to ARTICLE SEVENTH of the Articles of
Incorporation. The Stockholders' Agreement requires Sprint to maintain at least
seven Continuing Directors on the Sprint Board at all times.
SPRINT RIGHTS PLAN
In connection with the Transactions, the Sprint Rights Plan has been amended
to provide for Rights to attach to the Class A Common Stock and to assure that
the Investment Transactions will not cause the Rights to detach and become
exercisable. Such amendment provides generally that actions of FT, DT and their
respective affiliates which would otherwise cause the Rights to detach and
become exercisable will not do so unless such actions also violate the
Standstill Agreement. Such amendment did not require the approval of Sprint
stockholders. See "Information Concerning Sprint--Antitakeover Provisions
Applicable to Sprint--Sprint Rights Plan."
CHARTER AMENDMENTS AND BYLAW AMENDMENTS (PROPOSAL NO. 2)
The consummation of the Investment Transactions is conditioned upon the
approval of the Charter Amendments by the Sprint stockholders and the filing of
the Charter Amendments with the Secretary of State. Sprint stockholders are
being asked to approve the Charter Amendments substantially in a form that
would amend the Articles of Incorporation to read in its entirety as set forth
on Exhibit D. The following, together with the description of the terms of the
Class A Stock contained in "Investment Agreement and Related Investment
Documents--Terms of the Class A Stock," constitutes a summary of certain
provisions of the Charter Amendments, which is qualified in its entirety by
reference to Exhibit D.
Approval of the Charter Amendments by the stockholders also shall be deemed
to constitute approval of a resolution authorizing the Sprint Board, at any
time prior to the filing of the Charter Amendments with the Secretary of State,
to abandon such proposed amendments without further action by the stockholders,
notwithstanding approval of the Charter Amendments by Sprint stockholders, in
connection with the termination of the Investment Agreement or otherwise.
Furthermore, Sprint does not intend to file the Charter Amendments with the
Secretary of State until the Initial Issuance Date. Subsequent to the filing of
the Charter Amendments with the Secretary of State, subject to the approval of
such amendments by the Sprint Board, the Class A Holders will be able to amend
certain provisions of the Articles of Incorporation as amended by the Charter
Amendments which relate solely to the Class A Stock by a vote of two-thirds of
the outstanding Class A Stock and without any vote by the holders of any other
capital stock of Sprint.
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CHARTER AMENDMENTS
Increase in Number of Authorized Shares
In General. The Articles of Incorporation currently authorize Sprint to issue
520,000,000 shares of capital stock. Of the shares of capital stock currently
authorized, 500,000,000 shares are designated as Sprint Common Stock and
20,000,000 shares are designated as Sprint Preferred Stock. The Charter
Amendments would increase the total number of shares of capital stock which
Sprint has the authority to issue to 2,020,000,000 shares, and such shares
would be divided into four classes: 1,000,000,000 shares would be designated as
Sprint Common Stock, 500,000,000 shares would be designated as Class A Common
Stock, 500,000,000 shares would be designated as Class A Preference Stock and
20,000,000 shares would be designated as Sprint Preferred Stock.
Reasons for and Effects of the Increase of Authorized Capital Stock. In
addition to authorizing the Class A Stock, the Charter Amendments would
increase the number of authorized shares of Sprint Common Stock. Of the
500,000,000 shares of Sprint Common Stock currently authorized, as of the
Record Date shares were outstanding and an additional
shares of Sprint Common Stock were reserved for issuance pursuant to employee
benefit plans, Sprint's Dividend Reinvestment Plan and the conversion of
securities convertible into Sprint Common Stock. Furthermore, following the
Initial Issuance Date, Sprint will be required to reserve sufficient shares of
Class A Stock for issuance to FT and DT, and for each share of Class A Stock
issued or reserved for issuance, Sprint will be required to reserve shares of
Sprint Common Stock for issuance upon conversion of the Class A Stock. Assuming
the issuance of shares of Class A Stock on the Initial Issuance
Date, Sprint would have fewer than million authorized, unissued and
unreserved shares of Sprint Common Stock following the Initial Issuance Date
unless the number of authorized shares of Sprint Common Stock is increased.
Accordingly, following the Initial Issuance Date, Sprint could not engage in a
transaction requiring the issuance of a number of shares of Sprint Common Stock
greater than million without obtaining stockholder approval for the
authorization of the excess at the time.
The Sprint Board believes that it is in the best interests of Sprint and its
stockholders to increase the number of authorized shares of Sprint Common Stock
so that a sufficient number of additional shares of Sprint Common Stock will be
available from time to time in connection with possible future financing
programs, stock dividends, acquisitions, stock option and other employee
benefit plans and other general corporate purposes. Having such additional
authorized shares of Sprint Common Stock available for issuance in the future
will give Sprint greater flexibility and allow additional shares of Sprint
Common Stock, in excess of the number of such shares presently authorized, to
be issued without the expense and delay of a special meeting of stockholders
unless such meeting is required for the particular transaction by applicable
law or regulations or the rules of any stock exchange on which the shares of
Sprint Common Stock may then be listed or quoted.
Stockholders will have no equity purchase or similar rights with respect to
any issuance of the newly authorized Class A Stock. As discussed in "The
Investment Proposals--Certain Considerations--Possible Dilutive Effects," the
issuance of additional shares of Class A Stock will have the effect of diluting
the ownership and voting rights of the existing Sprint Common Stock.
The issuance of additional shares of Sprint Common Stock could also be used
to discourage an unsolicited takeover proposal. For example, shares of Sprint
Common Stock could, subject to the rights of the Class A Holders (see
"Investment Agreement and Related Investment Documents--Terms of the Class A
Stock--Disapproval Rights"), be privately placed with purchasers who would be
likely to support the Sprint Board in opposing a hostile takeover bid. Although
the Sprint Board is required to make any determination to issue such stock
based on its judgment as to the best interests of the Sprint stockholders, the
Sprint Board could act in a manner which would discourage an acquisition
attempt or other transaction which some, or a majority, of the stockholders
might believe to be in their best interests. The Sprint Board
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does not at present intend to seek stockholder approval prior to any issuance
of authorized stock, unless otherwise required by law, the Articles of
Incorporation as amended by the Charter Amendments or the NYSE.
Creation of Class A Stock
The Charter Amendments would establish the terms of the Class A Stock,
including voting rights, and also would supplement the terms of the Sprint
Common Stock in order to set forth the rights of the holders of the Sprint
Common Stock in relation to those of the holders of the Class A Stock. See
"Investment Agreement and Related Investment Documents--Terms of the Class A
Stock."
Possible Redemption of Shares of Sprint Common Stock and Class A Stock Held by
Aliens
In General. The FCC Redemption Provision provides that outstanding shares of
Sprint Common Stock held by Aliens and, in certain circumstances, Class A Stock
held by Aliens may be redeemed by action of the Sprint Board to the extent
necessary, in the judgment of the Sprint Board, to comply with Section 310 of
the Communications Act. Shares of Class A Stock may be redeemed only if, and
only to the extent that, the outstanding shares of Class A Stock represent
votes constituting greater than 20% of the aggregate voting power of Sprint
immediately prior to the time of such redemption. In addition, prior to
redeeming shares of Class A Stock, Sprint is required under the Stockholders'
Agreement to consult in good faith with the Class A Holders to consider
alternatives to redemption, and Sprint may not redeem such shares unless the
Independent Directors determine in good faith that, after considering all
reasonable alternatives, the failure to redeem such shares would have a
material adverse effect on Sprint.
If Class A Preference Stock is outstanding, the Charter Amendments do not
authorize Sprint to use the FCC Redemption Provision to redeem shares of Class
A Preference Stock to the extent such redemption would result in the Class A
Holders owning shares of Class A Preference Stock with an aggregate liquidation
value of less than $1.5 billion. However, under the Stockholders' Agreement, to
the extent the Class A Preference Stock represents more than 20% of the Sprint
voting power, Sprint may require the Class A Holders to sell to Sprint such
number of shares of Class A Preference Stock as in the reasonable good faith
judgment of the Sprint Board is necessary to comply with the requirements of
Section 310 of the Communications Act, even if such sale would result in the
Class A Preference Stock having an aggregate liquidation value of less than
$1.5 billion.
The FCC Redemption Provision provides that, subject to any additional or
different rights of a particular Alien pursuant to any contract or arrangement
between such Alien and Sprint, (i) the redemption price of any shares so
redeemed (except with respect to shares of Class A Stock, as provided below)
will equal the market price of such shares, provided that the redemption price
payable to any Alien who purchased such shares after , 199 , and
within one year of the redemption date, will not (unless otherwise determined
by the Sprint Board) exceed the purchase price paid by such Alien for such
shares; (ii) the redemption price may be paid in cash or debt or equity
securities of Sprint or any of its subsidiaries or any combination thereof (any
such securities being referred to herein as "Redemption Securities"); (iii) the
Redemption Securities, together with any cash to be paid as part of the
redemption price, in the opinion of any nationally recognized investment
banking firm selected by the Sprint Board, will have a value, at the time
notice of redemption is given, at least equal to the applicable redemption
price; and (iv) if less than all the shares held by Aliens are to be redeemed,
the shares to be redeemed shall be selected in a manner determined by the
Sprint Board which may include selection first of the most recently purchased
shares, selection by lot or selection in any other manner determined by the
Sprint Board to be equitable.
The redemption price of any shares of Class A Common Stock shall be equal to
the greater of (i) the market price of a share of Sprint Common Stock on the
date of redemption and (ii) the weighted average price paid by the Class A
Holders for the Class A Common Stock together with a stock appreciation factor
64
thereon at an annual rate of 3.88% calculated from the date of purchase of such
Class A Common Stock through the date of redemption, provided that the
redemption price for any shares of Class A Common Stock redeemed after the
third anniversary of the Investment Completion Date shall be the market price
of a share of Sprint Common Stock on the date of redemption. The redemption
price of any Class A Preference Stock shall be equal to its Liquidation
Preference. Under certain circumstances, the redemption price for shares of
Class A Stock redeemed from FT and DT will be increased so as to indemnify
against withholding taxes, if any, payable in connection with such redemption.
As permitted by the Charter Amendments, the Stockholders' Agreement provides
that, to the fullest extent legally permissible, Sprint must first designate
for redemption securities other than shares of Class A Stock held by the Class
A Holders. At least thirty days' written notice of the redemption date must be
given to the record holders of the shares selected to be redeemed (unless
waived in writing by any such record holder). The redemption date, however, may
be the date on which written notice is given to record holders if the cash or
Redemption Securities necessary to effect the redemption have been deposited in
trust for the benefit of such record holders and subject to immediate
withdrawal by them upon surrender of the stock certificates for their shares to
be redeemed.
The FCC Redemption Provision also allows Sprint to require any person that is
a holder of record of Sprint Common Stock or Class A Stock or that Sprint knows
to have, or has reasonable cause to believe has, beneficial ownership of Sprint
Common Stock or Class A Common Stock either to certify that no Sprint Common
Stock or Class A Stock as to which such person has record or beneficial
ownership is beneficially owned by an Alien or to certify as to the number of
shares of Common Stock or Class A Stock owned beneficially or of record by such
person that are owned beneficially or of record by an Alien. If any holder of
Sprint Common Stock or Class A Stock fails to provide such a certificate when
requested by Sprint to do so, Sprint may, in its sole discretion, presume that
the Sprint Common Stock or Class A Common Stock in question is, or is not,
beneficially owned by Aliens.
Reasons for and Effects of the FCC Redemption Provision. The FCC Redemption
Provision is being proposed in order to assure that Sprint will be able to
comply with the foreign ownership provisions contained in Section 310 of the
Communications Act. Section 310 of the Communications Act currently provides
that, absent an FCC order expressly permitting a higher level of foreign
ownership, if more than 25% of Sprint's capital stock is owned of record or
voted by Aliens, the FCC may revoke certain licenses that are material to the
business of Sprint and its subsidiaries.
Based upon the results of a survey of Sprint's public stockholders as of May
31, 1994 conducted in a manner that the FCC has previously found to be
acceptable for such surveys, and assuming that FT and DT had then been issued
shares of Class A Common Stock representing 20% of the outstanding shares of
Sprint voting securities after giving effect to such issuance, the aggregate
foreign ownership of Sprint's outstanding capital stock (including shares owned
by FT and DT) at such time would have equaled 24.97%, plus or minus 1.67% (at a
survey confidence level of 97.5%). Although Sprint has filed a Petition for
Declaratory Ruling with the FCC requesting, among other things, that the FCC
permit up to 28% of Sprint's capital stock to be owned by Aliens, there can be
no assurance that the FCC will grant such request. See "Investment Proposals--
Regulatory Approvals--United States Communications Act." If at any time
following the Initial Issuance Date, the percentage of Sprint's outstanding
capital stock owned by Aliens were to exceed 25% or such greater percentage as
may be set forth in an FCC order, under the FCC Redemption Provision, Sprint
could redeem shares of Sprint Common Stock or Class A Stock held by Aliens in
the manner and at the redemption prices described above. Consequently, the FCC
Redemption Provision could have an adverse effect on the price of the Sprint
Common Stock.
"Greenmail" Provisions
In order to avoid the payment of "greenmail" by Sprint, ARTICLE EIGHTH of the
Articles of Incorporation requires the affirmative vote of a majority of the
Sprint voting power to approve any purchase
65
by Sprint of any Sprint equity security at above-market prices from an
Interested Securityholder (defined generally as any person who beneficially
owns, directly or indirectly, five percent or more of the class of securities
to be acquired) who has owned such securities for less than two years. The
Charter Amendments will revise the "greenmail" provisions to provide that the
affirmative vote of the Sprint stockholders other than FT, DT and their
affiliates which would otherwise be required by such provisions will not be
required in connection with purchases, redemptions or other acquisitions by
Sprint of capital stock of Sprint held by FT, DT, any Qualified Subsidiary or
any Qualified Stock Purchaser pursuant to the Investment Agreement, the
Stockholders' Agreement and the Articles of Incorporation as amended by the
Charter Amendments.
Removal of Directors
In General. The Articles of Incorporation currently contain provisions with
respect to the removal of directors. The Charter Amendments would establish
removal provisions with respect to the Class A Directors. See "Investment
Agreement and Related Investment Documents--Terms of the Class A Stock--Board
Representation."
Removal of Ordinary Directors. The Articles of Incorporation currently
provide that any director of Sprint elected to one of the three staggered
classes of the Sprint Board may be removed from office, but only for cause and
only by the affirmative vote of the holders of a majority of the outstanding
shares (considered as one class) entitled to elect such director. The Charter
Amendments will provide that the holders of the Class A Stock will not be
entitled to vote with respect to the election or removal of directors other
than the Class A Directors.
Removal of Class A Directors. The Charter Amendments will amend the Articles
of Incorporation to provide that any Class A Director may be removed from
office with or without cause by the affirmative vote of the holders of a
majority of the outstanding shares of Class A Stock voting separately as a
class or with cause by the affirmative vote of the holders of two-thirds of the
outstanding shares of Sprint voting power voting as a single class.
Provisions Relating to Amendment of the Bylaws
The Charter Amendments would add a provision stating that holders of a
majority of the shares of Class A Stock, voting separately as a class, must
approve any amendment of the Bylaws relating to the calling of meetings of
stockholders, procedures for the nomination of directors, procedures regarding
stockholder proposals, the votes represented by each share of voting securities
issued by Sprint, the quorum for the transaction of business at stockholders
meetings, notice of meetings of the Sprint Board and committees of the Sprint
Board, the quorum for the transaction of business at meetings of the Sprint
Board, indemnification of officers and directors, the composition and quorum
required for the Executive Committee of the Sprint Board (the "Executive
Committee"), the composition of other committees of the Sprint Board, the
declaration of dividends out of the net income or earned surplus of Sprint, and
the amendment of the Bylaws.
AMENDMENTS TO SPRINT BYLAWS
The consummation of the Investment Transactions is also conditioned upon the
approval of the Bylaw Amendments by the Sprint stockholders. Sprint
stockholders are being asked to approve the Bylaw Amendments substantially in a
form that would amend the Bylaws to read in their entirety as set forth in
Exhibit E. The following constitutes a summary of certain provisions of the
Bylaw Amendments, which is qualified in its entirety by reference to Exhibit E.
Approval of the Bylaw Amendments by the stockholders also shall be deemed to
constitute approval of a resolution authorizing the Sprint Board, at any time
prior to the Initial Issuance Date, to abandon such proposed amendments without
further action by the stockholders, notwithstanding approval of the Bylaw
Amendments by the Sprint stockholders, in connection with the termination of
the Investment Agreement or otherwise.
66
The Bylaw Amendments, if approved by the Stockholders, will be effective upon
the Initial Issuance Date. Many of the amendments reflect the establishment of
the Class A Stock and the Class A Directors. The Bylaw Amendments also add a
provision that requires a majority of the members of the Sprint Board to be
Independent Directors and a provision that requires stockholder proposals to be
delivered to the Corporate Secretary within a certain time period prior to a
meeting of stockholders in order to be eligible for presentation at such
meeting. Finally, certain of the Bylaw Amendments update the Bylaws consistent
with the practices of Sprint or eliminate minor inconsistencies in the existing
Bylaws.
Because the Charter Amendments provide that the holders of the Class A Stock
elect Class A Directors and can take certain other actions separately as a
class, the Bylaw Amendments specify how special meetings of one or more classes
of capital stock may be called (Section 2, Article III), how nominations of
Class A Directors and other directors are to be made (Section 4, Article III),
the number of votes represented by each share of Class A Stock (Section 8,
Article III), and the quorum required for purposes of electing Class A
Directors, electing directors other than Class A Directors, and for other
purposes (Section 9, Article III). The Bylaw Amendments also provide that at
least one Class A Director will be a member of the Executive Committee (Section
12, Article IV) and a member of all other committees formed by the Sprint Board
except (i) any committee established pursuant to provisions of any law relating
to national security, (ii) any committee where membership would be prohibited
by law or the NYSE or (iii) the Compensation Committee if the Sprint Board
determines that a Class A Director would not be disinterested for purposes of
determining certain forms of executive compensation (Section 12, Article IV).
The NYSE has informed Sprint that no Class A Director may be a member of the
Audit Committee of the Sprint Board.
The Bylaw Amendments require that all nominees qualify as Independent
Nominees (defined as nominees who, if elected, would be Independent Directors)
unless nominated by the Class A Holders or nominated by the holders of the
Preferred Stock under those circumstances where the holders of Preferred Stock
have special voting rights to elect directors, provided that a nominee need not
be an Independent Nominee if the election of such nominee would not result in
less than a majority of the Sprint Board being Independent Directors (Section
4, Article III).
The Bylaw Amendments contain a new provision that requires that, for business
to be properly brought before a meeting by a stockholder, the stockholder must
have given notice to the Corporate Secretary of Sprint not less than 50 days
nor more than 75 days prior to the meeting unless less than 65 days' notice or
prior disclosure of the date of the meeting is given to stockholders. In that
event, the notice to the Corporate Secretary must be received no later than the
close of business on the 15th day following the day on which notice of the date
of the meeting was mailed or public disclosure was made, whichever occurs
first. The notice to the Corporate Secretary must contain a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business, the name and record address of the stockholder, the
class and number of shares of stock of Sprint beneficially owned by the
stockholder and any material interest of the stockholder in the business
(Section 5, Article III). This provision is not meant to preclude stockholders
from submitting proposals to be included in Sprint's proxy statements and
stockholders may continue to request inclusion of a proposal pursuant to the
Exchange Act. See "Stockholder Proposals for 1996 Annual Meeting of Sprint
Stockholders."
The Bylaw Amendments require that notice of annual and special meetings of
stockholders be mailed at least 20 days before the date of the meeting as
opposed to 10 days under the current Bylaws (Section 3, Article III). The Bylaw
Amendments provide that notice of meetings of the Sprint Board and any
committee of the Sprint Board must be sent by a means reasonably calculated to
be received at least seven days prior to the meeting, except that notice of
special meetings can be on shorter notice, and except that Class A Directors
who receive notice less than six days before a meeting may participate in the
meeting by conference telephone or similar communications equipment (Section 5,
Article IV). The current Bylaws require notice of board meetings to be mailed
ten days prior to the date fixed for the meeting, or such lesser notice may be
given as the person or persons calling the meeting deem necessary or
appropriate. The current Bylaws do not
67
specifically address notice of committee meetings or participation in meetings
by telephone or other communications equipment. The Bylaw Amendments also make
it clear that members of the Executive Committee may participate in meetings of
the Executive Committee by means of conference telephone or similar
communications equipment (Section 11, Article IV).
Section 8, Article IV of the current Bylaws, which states that vacancies on
the Sprint Board may be filled by the remaining directors, is deleted by the
Bylaw Amendments because the filling of vacancies is provided for in the
Charter Amendments. Section 2, Article VI of the current Bylaws, which concerns
the establishment of bank and trust accounts for the funds of the corporation
and the withdrawal of funds from those accounts is deleted because the
establishment of bank accounts and the withdrawal of funds from those accounts
is governed by the fiscal policies adopted by the Sprint Board.
The current Bylaws require that the Chairman of the Board and the President
of Sprint be members of the Sprint Board; the Bylaw Amendments require that
only the Chairman of the Board be a member of the Sprint Board (Section 2,
Article V). The current Bylaws limit the liability of directors, officers,
employees and agents of Sprint for actions taken or omitted to be taken in
those capacities if the individual exercised the same degree of care and skill
as a prudent man would have exercised under the circumstances in the conduct of
his own affairs or took of omitted to take such action in reliance upon advice
of counsel for Sprint or information furnished by officers of employees of
Sprint which the individual had reasonable grounds to believe. The Bylaw
Amendments delete this provision but retain indemnification provisions that are
consistent with Kansas Statutes Annotated Section 17-6305 (Section 10, Article
IV).
The Bylaw Amendments would amend the provisions relating to amendment of the
Bylaws by (i) eliminating the requirement that notice advising of each specific
amendment of the Bylaws by the Sprint Board be given to each stockholder having
voting rights within 30 days after the date of such amendment and (ii) adding a
provision that the holders of a majority of the Class A Common Stock, voting
separately as a class, must approve any amendment of the Bylaws relating to the
calling of meetings of stockholders, procedures for the nomination of
directors, procedures regarding stockholder proposals, the votes represented by
each share of Sprint voting securities, the quorum for the transaction of
business at stockholders meetings, notice of meetings of the Sprint Board and
committees of the Sprint Board, the quorum for the transaction of business at
meetings of the Sprint Board, indemnification of officers and directors, the
composition and quorum required for the Executive Committee, the composition of
other committees of the Sprint Board, the declaration of dividends out of the
net income or earned surplus of Sprint, and the amendment of the Bylaws
(Section 1 and 2, Article VII).
APPROVAL OF CONTROL SHARE ACQUISITIONS PLAN (PROPOSAL NO. 3)
The Control Share Acquisitions Statute applies to the acquisition of shares
of a Kansas corporation by a person (a "Control Share Acquiring Person") which,
except for the limitations imposed under the Control Share Acquisitions
Statute, would entitle the Control Share Acquiring Person after such
acquisition, directly or indirectly, alone or as part of a group, to exercise,
or direct the exercise of, voting power in the election of directors of such
corporation falling within any of the following ranges:
(i) 20% or more but less than 33 1/3%,
(ii) 33 1/3% or more but less than or equal to 50%, or
(ii) more than 50%.
Acquisitions subject to this provision ("Control Share Acquisitions") include
those made within a period of 120 days or made pursuant to a plan to make a
Control Share Acquisition. Under the Control Share Acquisitions Statute,
"Control Shares" are those shares that, when added to all other shares
previously owned by the Control Share Acquiring Person, would make the
aggregate shares owned by such Control Share Acquiring Person fall within the
applicable range of voting power. Control Shares acquired in a Control Share
68
Acquisition have the same voting rights as were accorded the shares before the
Control Share Acquisition only to the extent such voting rights are approved by
the stockholders of the issuing corporation. Accordingly, unless the Control
Share Acquisition is duly approved by a stockholder vote as described herein,
the Control Shares will lose their voting rights. An acquisition may be
exempted from the Control Share Acquisitions Statute provided that a charter or
bylaw provision is adopted for such purpose prior to the Control Share
Acquisition. The Articles of Incorporation and the Bylaws contain no such
provision.
Shares acquired directly from Sprint are not subject to the Control Share
Acquisitions Statute and therefore the purchases to be made directly from
Sprint would not require stockholder approval. However, the Control Share
Acquisitions Plan carries with it the possibility of making purchases of Sprint
stock in the open market or from third parties under certain circumstances (see
"--Terms of the Class A Stock--Equity Purchase Rights--Major Issuances" and "--
Standstill Agreement"). These purchases would be subject to the Control Share
Acquisitions Statute in the absence of approval of the Control Share
Acquisitions Plan by Sprint stockholders. If the Control Share Acquisitions
Plan is duly approved by Sprint stockholders, FT, DT and certain of their
subsidiaries named in the Acquiring Person Statement will be entitled, subject
to the restrictions contained in the Standstill Agreement and the Sprint Rights
Plan, to make open market purchases or purchases from third parties which, when
aggregated with the shares to be purchased pursuant to the Investment
Agreement, equal or exceed 20%, and the ownership and voting power of FT, DT
and such subsidiaries could decline below 20% and subsequently increase up to
an amount less than 33 1/3%, in each case without the need for a further
stockholder vote to retain full voting rights with respect to all of their
shares. If the Control Share Acquisitions Plan is approved, FT, DT and such
subsidiaries could transfer their shares to another person without triggering
the application of the Control Share Acquisitions Statute so long as such
acquisition did not cause the acquiror's aggregate voting power to equal or
exceed 33 1/3%.
The Control Share Acquisitions Statute gives Sprint, within certain time
limitations, various redemption rights if there is a stockholder vote as to the
grant of voting rights and such grant is not approved, or if an acquiring
person statement is not delivered to Sprint within 10 days following a Control
Share Acquisition. Accordingly, FT and DT have delivered to Sprint an Acquiring
Person's statement, dated , 1995 (the "Acquiring Person Statement"), a
copy of which is attached as Exhibit F to this Proxy Statement, pursuant to
Section 17-1291 of the Control Share Acquisitions Statute, stating their
proposal to make a Control Share Acquisition of Sprint voting securities.
Sprint, its directors, officers and affiliates expressly disclaim any
responsibility for, and make no representation as to, the completeness or
accuracy of the information set forth in the Acquiring Person Statement.
Under the Control Share Acquisitions Statute, the votes necessary to
authorize the voting rights of any Control Shares of Sprint are the affirmative
vote of (i) a majority of the outstanding shares of Sprint voting securities,
and (ii) a majority of the outstanding shares of Sprint voting securities,
excluding any shares (defined as "interested shares" by the Control Share
Acquisitions Statute) of Sprint voting securities held by (x) the person or
members of the group that makes or proposes to make the Control Share
Acquisition; (y) officers of Sprint and (z) employees of Sprint who are also
directors of Sprint. Each of FT and DT has represented and warranted in the
Investment Agreement that neither it nor any of its affiliates beneficially
owns any shares of capital stock of Sprint. In addition, each of FT and DT has
agreed in the Standstill Agreement not to acquire any Sprint voting securities
prior to the earlier of the Investment Completion Date or the Section 3(b)(v)
Conversion Date other than as a result of purchases from Sprint pursuant to the
Investment Agreement. Sprint's directors who are also employees and its
officers owned in the aggregate no more than shares as of the Record
Date. These shares, representing approximately % of the shares of Sprint
voting securities outstanding on the Record Date, are "interested shares" for
purposes of the Control Share Acquisitions Statute. None of the outstanding
shares of Sprint's capital stock are entitled to vote as a separate class on
the Control Share Acquisition.
The Control Share Acquisitions Statute provides that if voting rights are
accorded to Control Shares which result in the Control Share Acquiring Person
having a majority voting power, then minority
69
stockholders will have dissenters' rights. Because the Control Shares to be
acquired by FT and DT will not account for a majority of Sprint voting power,
no appraisal or dissenters' rights will be available with respect to the
Control Share Acquisition.
THE SPRINT BOARD HAS UNANIMOUSLY APPROVED THE CONTROL SHARE ACQUISITIONS PLAN
OF FT AND DT AND CERTAIN OF THEIR QUALIFIED SUBSIDIARIES AND RECOMMENDS THAT IN
ACCORDANCE WITH SECTION 17-1294 OF THE CONTROL SHARE ACQUISITIONS STATUTE AS
SET FORTH IN PROPOSAL NO. 3, SPRINT STOCKHOLDERS APPROVE THE CONTROL SHARE
ACQUISITIONS PLAN FOR PURPOSES OF THE CONTROL SHARE ACQUISITIONS STATUTE AND
ACCORD THE SHARES DESCRIBED IN SUCH PLAN THE FULL VOTING RIGHTS THAT SUCH
SHARES WOULD BE ENTITLED TO EXERCISE PURSUANT TO THE ARTICLES OF INCORPORATION
AS AMENDED BY THE CHARTER AMENDMENTS, NOTWITHSTANDING THE LIMITATIONS IMPOSED
UNDER THE CONTROL SHARE ACQUISITIONS STATUTE.
THE JOINT VENTURE
IN GENERAL
As described above under "Investment Proposals--Background of and Reasons for
Investment Proposals," the Investment Transactions are one part of a proposed
strategic alliance among Sprint, FT and DT. In addition to the Investment
Transactions, Sprint, Sprint Sub, FT and DT have entered into the Joint Venture
Agreement to form the Joint Venture for the purpose of providing global
telecommunications services to corporate, consumer and "carrier's carrier"
markets. Subject to the receipt of all necessary governmental approvals, FT and
DT are required to cause Atlas to execute the Joint Venture Agreement once it
has been formed (Atlas, FT, DT, Sprint and Sprint Sub are collectively referred
to as the "Joint Venture Parties").
Sprint has agreed to (i) ensure that Sprint Sub and its personnel are as
fully committed to the success of the Joint Venture as is Sprint, (ii) devote
sufficient resources to Sprint Sub and any other subsidiary of Sprint which may
in the future hold Venture Interests so that they can comply fully with their
respective obligations under the Joint Venture Agreement and the Related Joint
Venture Documents and (iii) cause Sprint Sub and each such other subsidiary to
fulfill its obligations under the Joint Venture Agreement and the Related Joint
Venture Documents. FT and DT have each agreed to (i) ensure that Atlas and its
personnel are as fully committed to the success of the Joint Venture as are FT
and DT, (ii) devote sufficient resources to Atlas and any other subsidiary of
FT or DT which may in the future hold Venture Interests so that they can comply
with their respective obligations under the Joint Venture Agreement and certain
of their obligations under the Related Joint Venture Documents and (iii) cause
Atlas and each such other subsidiary to fulfill their respective obligations
under the Joint Venture Agreement and certain of their obligations under the
Related Joint Venture Documents. The First Closing under the Investment
Agreement is conditioned on the occurrence of the Venture Closing, and the
Venture Closing is conditioned on the occurrence of the First Closing under the
Investment Agreement.
Certain terms of the Joint Venture Agreement and the Related Joint Venture
Documents are summarized below. A copy of the Joint Venture Agreement has been
filed as an exhibit to Sprint's Quarterly Report on Form 10-Q for the quarter
ending June 30, 1995. The terms of the Joint Venture Agreement and the Related
Joint Venture Documents can be modified (including to provide for one or more
additional participants in the Joint Venture) by agreement of the Joint Venture
Parties. Such modification would not require the consent of Sprint
stockholders, and Sprint does not anticipate that it would solicit such
consent.
BUSINESS OF THE JOINT VENTURE
The Joint Venture Parties have agreed to form the Joint Venture to be the
principal embodiment and global reference point of their international
telecommunications activities. The long-term objective of Sprint,
70
Sprint Sub, FT, DT and Atlas is for the Joint Venture to provide a full range
of telecommunications services on a global basis. However, the business of the
Joint Venture (the "Joint Venture Business") initially will consist of the
provision of (i) international data, voice and video business services for
multinational companies and business customers; (ii) international services for
consumers, initially based on card services for travelers; and (iii) a
"carrier's carrier" business which will provide certain transport services for
Sprint, FT, DT and Atlas and other carriers. In addition, the Joint Venture may
offer telecommunications equipment and make investments in National Operations
(as defined below under "--Other Activities of the Joint Venture Parties and
the Joint Venture--Noncompetition") and Public Telephone Operators (as so
defined). FT, DT and their subsidiaries (other than Atlas and its subsidiaries)
will be non-exclusive distributors of the services of the Joint Venture (the
"Joint Venture Services") in France and Germany, and Sprint and its
subsidiaries will be the exclusive distributors of such services in the United
States. The Joint Venture will also be a non-exclusive sales representative for
the Joint Venture Parties' calling cards and collect calling services, switched
and dedicated transit carrier services, certain corporate voice services and
international private line services. The Joint Venture will not provide local
telephone services, wireless services or non-telecom information technology
services.
To the extent permitted by law, the Joint Venture Business may be expanded or
otherwise altered within the scope of the international telecommunications
services business over time. Any determination to expand the Joint Venture
Business would depend on a number of factors, which could include developments
in the telecommunications industry and the technology employed in and available
to the telecommunications industry, legal and regulatory considerations and
other business factors. The Joint Venture will operate in a highly competitive
and regulated environment, and there is no assurance that the Joint Venture
will achieve the current objectives of Sprint or that the Joint Venture
Business will not materially change.
JOINT VENTURE STRUCTURE
The ownership and management structure of the Joint Venture as described in
this Proxy Statement is subject to change for business, tax or other reasons.
FT, DT and their respective subsidiaries (other than Atlas and its
subsidiaries) will each be non-exclusive distributors of the Joint Venture
Services in France and Germany and Sprint will be the exclusive distributor of
the Joint Venture Services in the United States. The Joint Venture Services
will be distributed in Europe (other than France and Germany) by a group of JV
Entities (each, a "ROE Entity" and, collectively, the "Rest of Europe Group" or
"ROE Group") and in the rest of the world (other than Europe and the United
States) by a separate group of JV Entities (each, a "ROW Entity" and,
collectively, the "Rest of World Group" or "ROW Group," and together with the
ROE Group, the "Regional Operating Groups"). In addition to the Regional
Operating Groups, the Joint Venture Parties may form an additional group of JV
Entities (each, a "GBN Entity" and, collectively, the "GBN Group"), which will
own and operate the global transmission network (the "Global Backbone Network")
over which the Joint Venture Services and other traffic will be routed as
agreed by the Joint Venture Parties, subject to applicable law and to existing
arrangements of the Joint Venture Parties.
Each of Sprint Sub and Atlas initially will own, directly or indirectly, 50%
of the outstanding voting equity of the parent entity of each of the ROW Group
and the GBN Group following the Venture Closing. Sprint Sub and Atlas initially
will own, directly or indirectly, 33 1/3% and 66 2/3%, respectively, of the
outstanding voting equity of the parent entity of the ROE Group.
MANAGEMENT AND CONTROL
The Global Venture Board. Among other things, the "Global Venture Board" for
the Joint Venture will be responsible for establishing certain policies,
strategies and standards for the conduct of the Joint Venture Business (the
"Global Policies") and for monitoring (i) the compliance by the Regional
Operating Groups and the GBN Group with their business plans, the Global
Policies and the strategic plan of the Joint Venture (the "Global Venture
Strategic Plan"), and (ii) subject to certain exceptions, the conformity of the
operations
71
related to the Joint Venture Business of FT, DT, Atlas, Sprint and Sprint Sub
with the Global Venture Strategic Plan and the Global Policies. In addition,
the Global Venture Board will have authority and responsibility over certain
specified matters relating to the conduct of the Joint Venture Business,
including (i) until the Venture Closing, planning and preparing for the
formation of the Joint Venture, (ii) final approval of each Global Venture
Strategic Plan, (iii) inclusion of new participants in the Joint Venture, (iv)
formation of certain JV Entities, (v) subject to certain limitations,
determining the timing of and manner in which new international
telecommunications services will be provided by the Joint Venture, (vi)
adopting marketing, business development, accounting, employee compensation and
other principles for the Joint Venture, (vii) resolving deadlocks relating to
the conduct of the business of the Joint Venture, (viii) approval of any
investment by a JV Entity in a National Operation or Public Telephone Operator,
(ix) approval of any agreement between a JV Entity and a National Operation or
Public Telephone Operator pursuant to which such National Operation or Public
Telephone Operator becomes affiliated with the Joint Venture, (x) selection of
certified public accountants for the JV Entities and (xi) any other matters
assigned to the Global Venture Board pursuant to the Joint Venture Agreement or
any Related Joint Venture Document.
With the exception of its authority and responsibility over certain specified
matters, the purpose of the Global Venture Board will be to establish and
resolve matters of policy and not the management of the JV Entities, which
management will be effected by the governing boards and the management of each
JV Entity in accordance with the Global Policies and the business plans of such
JV Entities.
The Global Venture Board will have three voting members, and each of Sprint,
FT and DT will appoint one such member. Except in certain situations described
below, the presence of each voting member is required to constitute a quorum
for the transaction of any business by the Global Venture Board, and no action
may be taken by the Global Venture Board without the affirmative vote of all of
the voting members of the Global Venture Board present at a duly constituted
meeting. See "--Effect of Change of Control" and "--Dispute Resolution/Deadlock
Procedures."
The Global Venture Committee. The "Global Venture Committee" for the Joint
Venture will consist of six voting members, two of which will be designated by
each of the voting members on the Global Venture Board. The chief executive
officer of the ROW Group and the two co-chief executive officers of Atlas will
be nonvoting members of the Global Venture Committee. Except in certain
situations described below, the presence of each voting member is required to
constitute a quorum for the transaction of any business by the Global Venture
Committee, and no action may be taken by the Global Venture Committee without
the affirmative vote of all of the voting members present at a duly constituted
meeting. See "--Effect of Change of Control" and "--Dispute Resolution/Deadlock
Procedures."
The Global Venture Committee will have such authority and responsibilities as
may be delegated to it by the Global Venture Board. The Global Venture Board
may not delegate to the Global Venture Committee its authority and
responsibilities with respect to final approval of the Global Venture Strategic
Plan and inclusion of new participants in the Joint Venture.
The Global Venture Office. The "Global Venture Office" for the Joint Venture
will consist of three voting members, which will be the chief executive officer
of the ROW Group and the two co-chief executive officers of Atlas. Except in
certain situations described below, the presence of each voting member is
required to constitute a quorum for the transaction of any business by the
Global Venture Office, and no action may be taken by the Global Venture Office
without the affirmative vote of all of the voting members present at a duly
constituted meeting. See "--Effect of Change of Control" and "--Dispute
Resolution/Deadlock Procedures."
The Global Venture Office will have such authority and responsibilities as
may be delegated to it by the Global Venture Board or the Global Venture
Committee. The Global Venture Board may not delegate to the Global Venture
Office its authority and responsibilities with respect to final approval of the
Global Venture Strategic Plan, inclusion of new participants in the Joint
Venture, determining the timing of and manner in
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which international telecommunications services will be provided by the Joint
Venture, adopting the Global Policies or approval of any agreement between a JV
Entity and a National Operation or Public Telephone Operator pursuant to which
such National Operation or Public Telephone Operator becomes affiliated with
the Joint Venture. The Global Venture Committee may not delegate to the Global
Venture Office any authority and responsibilities delegated to the Global
Venture Committee by the Global Venture Board with respect to determining the
timing of and manner in which international telecommunications services will be
provided by the Joint Venture, adopting the Global Policies or approval of any
agreement between a JV Entity and a National Operation or Public Telephone
Operator pursuant to which such National Operation or Public Telephone Operator
becomes affiliated with the Joint Venture.
Performance of Certain Functions. The Joint Venture Parties have allocated to
the ROW Group and the ROE Group responsibilities with respect to certain
"global functions." Product management and marketing (consumer customers),
strategic planning, information technology and platforms, network operations
and service centers, human resources, legal and regulatory and
communications/public relations have been allocated to the ROW Group, and
product management and marketing (business and carrier customers), network
planning, finance and global account management have been allocated to the ROE
Group. For each global function, the responsibility for regional implementation
in the territory of the ROE Group will be allocated to the ROE Group and in the
territory of the ROW Group will be allocated to the ROW Group. Atlas will
perform the global functions and certain specified regional functions allocated
to the ROE Group pursuant to an agreement between Atlas and the ROE Group (the
"Atlas/ROE Services Agreement") to be entered into on or prior to the date of
the Venture Closing.
Governing Boards of the Regional Operating Groups and the GBN Group. The
governing boards of each ROW Entity and each GBN Entity will have four voting
members and two nonvoting members. Sprint Sub will have the right to elect two
voting members of the governing boards of each ROW Entity and each GBN Entity,
and Atlas will have the right to elect two voting and two nonvoting members of
each of the governing boards of such entities. The governing board of each ROE
Entity will have six voting members. Sprint Sub will have the right to elect
two of such voting members and Atlas will have the right to elect or direct the
election of four of such voting members. Certain members of the governing
boards of the ROW Entities, the GBN Entities and the ROE Entities will be the
same persons.
Except in certain situations discussed below (see "--Effect of Change of
Control" and "--Dispute Resolution/Deadlock Procedures"), the presence of at
least one voting member elected by each of Sprint Sub and Atlas is required to
constitute a quorum for the transaction of any business by the governing boards
of each of the ROW Entities, the ROE Entities and the GBN Entities. In general,
the affirmative vote of at least a majority of the voting members of the
governing board of each ROW Entity, ROE Entity and GBN Entity is required for
such entity to take action. However, subject to certain exceptions, the
following actions require unanimous approval on the part of the governing
boards of the ROW Entities, the ROE Entities and the GBN Entities:
(i) final approval of a business plan with respect to the ROW Group, the
ROE Group or the GBN Group;
(ii) approval of certain transactions with a value above certain
thresholds between any ROW Entity, ROE Entity or GBN Entity, on the one
hand, and Sprint, FT, DT or Atlas or any of their respective affiliates, on
the other;
(iii) changes in share capitalization of any ROW Entity, ROE Entity or
GBN Entity or any subsidiary of any such entity;
(iv) admission to any ROW Entity, ROE Entity or GBN Entity of any person
other than the Joint Venture Parties or certain of their subsidiaries or,
except as specifically provided in the Joint Venture Agreement or the
constituent documents of such entity or any shareholders agreement
applicable to such entity, the issuance of any equity interest in such
entity;
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(v) any amendment to the constituent documents of any ROW Entity, ROE
Entity or GBN Entity;
(vi) material decisions regarding technology or network architecture that
would have a material effect on the ability of the JV Entities to provide
seamless global telecommunication services in accordance with the terms of
the Joint Venture Agreement and the Related Joint Venture Documents;
(vii) formation of any ROW Entity, ROE Entity or GBN Entity unless
otherwise permitted by the constituent documents of such entity or any
shareholders agreement applicable to such entity;
(viii) subject to certain exceptions, voluntary dissolution or winding-up
of any ROW Entity, ROE Entity or GBN Entity or any subsidiary of any such
entity, or voluntary initiation by and with respect to any such entity or
any subsidiary of such entity of bankruptcy or similar proceedings;
(ix) subject to certain exceptions, the declaration or payment of any
dividend or other distribution by any ROW Entity, ROE Entity or GBN Entity
or the redemption, retirement, purchase or other acquisition of any equity
interests in any such entity;
(x) any amendment to any Related Joint Venture Document to which any ROW
Entity, ROE Entity or GBN Entity is a party;
(xi) subject to certain exceptions, approval of the terms and conditions
of any agreement pursuant to which an entity formed to conduct a NAFTA Plan
Action, a ROE Plan Action or a GBN Special Matter (each as defined in "--
Plan Actions and GBN Special Matters"), or a National Operation or a Public
Telephone Operator becomes affiliated with the Joint Venture and to which
any ROW Entity, ROE Entity or GBN Entity is a party, and any material
amendment of the terms and conditions of such an agreement; and
(xii) any action described in any Related Joint Venture Document or other
agreement relating to the Joint Venture to which a ROW Entity, ROE Entity
or GBN Entity is a party which expressly requires such action to be
approved by unanimous action of the governing board of such entity.
In addition to the foregoing, unanimous approval of the governing board of
the parent entity of the ROW Group (the "ROW Board") or the governing board of
the parent entity of the ROE Group (the "ROE Board"), as the case may be, is
required for an investment by any ROW Entity or ROE Entity in a National
Operation or a Public Telephone Operator, and the ROW Board must unanimously
approve the terms and conditions of any management agreement with Sprint or any
of its affiliates pursuant to which one or more ROW Entities agree to manage
any international telecommunications business of Sprint or its affiliates not
transferred to a JV Entity.
Increased Control Over the Joint Venture by the Sprint Parties or the FT/DT
Parties. In situations described in "Investment Agreement and Related
Investment Documents--Change of Control Provisions--Effect of Change of Control
on the Joint Venture, Special Rights of FT and DT, Transfer Restrictions and
Standstill Provisions," "Investment Agreement and Related Investment
Documents--Equity Purchase Rights--Major Competitors," "--Effect of Change of
Control," "--Effect of Acquisition by a Major Competitor--Acquisition of
Interest in Sprint by a Major Competitor of FT/DT," "--Acquisition of Interest
in Atlas by a Major Competitor of Sprint" and "--Initial Contributions;
Additional Capital Contributions," or upon the occurrence of a Funding Default
(as defined in "--Initial Contributions; Additional Capital Contributions") or
a Non-Funding Default or an Event of Bankruptcy (each as defined in "--
Termination of the Joint Venture--Events of Termination"), either the Sprint
Parties or the FT/DT Parties, as the case may be, will obtain rights to greater
control over the Joint Venture and such greater control will include the right
to elect a majority of the members of each of the Global Venture Board, the
Global Venture Committee, the Global Venture Office and the governing board of
the parent entity of each of the ROW Group and the GBN Group. Certain limited
protection will be provided to the parties which do not have such increased
control in that certain actions may only be taken during the time such
increased control is in effect by a unanimous vote of the Global Venture Board
or the applicable governing board, as the case may be.
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EFFECT OF CHANGE OF CONTROL
As discussed above, upon the occurrence of a Change of Control, the FT/DT
Parties will obtain rights which will give them greater control over the Joint
Venture. See "--Management and Control--Increased Control Over the Joint
Venture by the Sprint Parties or the FT/DT Parties." Following a Change of
Control, the Sprint Parties may at any time, by written notice to the FT/DT
Parties, offer to sell to them all, but not less than all, of the Venture
Interests of the Sprint Parties for cash at the Appraised Value of such Venture
Interests. For purposes of the Joint Venture Agreement the "Appraised Value" of
a business or the interest of a person in a business means the total amount in
U.S. dollars which a willing buyer would pay to a willing seller for such
business or interest, taking into account assumed liabilities, determined as a
whole (and, in the case of a business, as a going concern) in an arms' length
negotiated transaction without undue time constraints, as determined by an
investment banking firm of international standing. If the FT/DT Parties do not
accept such offer within 90 days, the FT/DT Parties will lose the rights which
give them greater control over the Joint Venture. In addition, during the two-
year period commencing on the fifth anniversary of the occurrence of a Change
of Control, the Sprint Parties will have the right to require the FT/DT Parties
to purchase all, but not less than all, of the Venture Interests owned by the
Sprint Parties for cash at the Appraised Value of such interests.
EFFECT OF ACQUISITION BY A MAJOR COMPETITOR
Acquisition of Interest in Sprint by a Major Competitor of FT/DT. For ten
years after the Venture Closing, if Sprint undertakes a Strategic Merger which
results in a Major Competitor of FT/DT holding 20% or more of Sprint voting
power and such Major Competitor has been granted rights by Sprint equivalent or
superior to FT's and DT's Minority Rights, then for a period of five years
following the date of closing of such transaction, FT, DT and Atlas will obtain
rights which will give them greater control over the Joint Venture. See "--
Management and Control--Increased Control Over the Joint Venture by the Sprint
Parties or the FT/DT Parties." During the sixty day period following the fifth
anniversary of the date of the closing of such transaction, the FT/DT Parties
may transfer all, but not less than all, of their Venture Interests free of
certain of the restrictions on the transfer of such interests which would
otherwise be applicable. See "--Transfer of Venture Interests."
Sale of Assets by Atlas to a Major Competitor of Sprint. If within five years
after the Venture Closing Atlas sells all or a substantial part of its
telecommunications assets used to provide services to the Joint Venture to a
Major Competitor of Sprint, then for a period of five years following the date
of closing of such transaction, the Sprint Parties will obtain rights which
will give them greater control over the Joint Venture. See "--Management and
Control--Increased Control Over the Joint Venture by the Sprint Parties or the
FT/DT Parties." During the sixty day period following the fifth anniversary of
the date of the closing of such transaction, the Sprint Parties may transfer
all, but not less than all, of their Venture Interests free of certain of the
restrictions on the transfer of such interests which would otherwise be
applicable. See""--Transfer of Venture Interests."
Sale of Interests in FT or DT to Major Competitors of Sprint.
If and when FT is not subject to French government direction as to the
issuance and sale of its voting stock, FT will not, for a period of ten years
after the Venture Closing, knowingly issue or sell voting securities to a Major
Competitor of Sprint that would result in such Major Competitor owning 10% or
more of FT's voting securities. DT will not for a period of ten years after the
Venture Closing, unless requested to do so by the German government at a time
when the German government controls DT, knowingly issue or sell any of its
voting securities to a Major Competitor of Sprint that owns, or that would as a
result of such issuance or sale own, 10% or more of the voting securities of
DT. France and Germany may, however, sell shares of voting stock of FT or DT,
as the case may be, held by it to purchasers of its choosing, including to
Major Competitors of Sprint.
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BUSINESS PLANS
The Joint Venture Agreement requires each of the Regional Operating Groups
and the GBN Group to prepare an annual business plan each year. Subject to
certain exceptions, if a deadlock at a governing board with respect to a
portion of a proposed business plan results in the failure to adopt a business
plan before the beginning of the fiscal year to which such business plan
relates, the portion of the then most recent business plan for such Regional
Operating Group or the GBN Group that relates to the same subject matter to
which such deadlock relates will apply and otherwise such proposed business
plan will be implemented as agreed upon. See--"Dispute Resolution/Deadlock
Procedures."
If no funding commitment has been made with respect to a fiscal year as to
which a business plan has not been agreed upon, and a deadlock arises due to a
failure of the governing board of the relevant JV Entity to approve a proposed
funding commitment, then the funding commitments contained in the business plan
for such Regional Operating Group or the GBN Group for the prior fiscal year
will apply to such fiscal year. In addition, if such deadlock is a Special
Deadlock Matter (as defined in "--Dispute Resolution/Deadlock Procedures"), and
each of the shareholders of the relevant JV Entity give written notification to
the governing board of such JV Entity of their binding commitment to extend its
funding commitment for the prior fiscal year until the end of the next
succeeding fiscal year, such funding commitment will be so extended.
GLOBAL BACKBONE NETWORK
The Joint Venture Services and other traffic will be progressively routed
over the Global Backbone Network to the extent appropriate and as agreed by the
Joint Venture Parties in light of the regulatory environment and existing
commercial arrangements to which any of them is a party. Until such time as the
Joint Venture Parties agree that such activities are to be conducted by the GBN
Group, certain or all operational aspects of the business of the Global
Backbone Network will be conducted by the ROW Group and the ROE Group.
INITIAL CONTRIBUTIONS; ADDITIONAL CAPITAL CONTRIBUTIONS
At the Venture Closing, each of the Joint Venture Parties will, and will
cause their affiliates to, contribute or otherwise make available to the JV
Entities certain specified assets presently used in the telecommunications
businesses of Sprint, FT, DT and Atlas conducted outside of the United States,
France and Germany (such contributed assets collectively are referred to as the
"Contributed Assets"). In connection with these initial contributions, the JV
Entities will assume certain liabilities associated with the Contributed
Assets.
An agreement with respect to the assets to be contributed to the Joint
Venture (the "Master Transfer Agreement") will contain a mechanism to balance
the respective contributions of the Joint Venture Parties with the intended
respective ownership interests of the Joint Venture Parties in the JV Entities.
If any adjustment is necessary, the adjustment must be paid in cash by the
Joint Venture Party or Parties whose asset contributions have an agreed value
which is less than the intended ownership interests of such Joint Venture Party
or Parties in such JV Entity, except in certain circumstances where such
adjustment will be made by delivery by FT and DT to the Joint Venture of
interest-bearing notes, the issuance by the Joint Venture to Sprint of
preferred equity interests, the transfer by Sprint to the Joint Venture of
liabilities or any combination of the foregoing.
Sprint has agreed that on the date of the Venture Closing it will, and it
will cause its affiliates to, transfer any and all Venture Interests received
by it or its affiliates in exchange for the Contributed Assets to Sprint Sub.
Similarly, FT and DT also have agreed that on the date of the Venture Closing
they will, and will cause their affiliates to, transfer any and all Venture
Interests received by them or their affiliates in exchange for the Contributed
Assets to Atlas. Although FT and DT have indicated that they intend to hold
their Venture Interests through Atlas, the Joint Venture Agreement permits FT
and DT, subject to certain restrictions, to hold their Venture Interests
themselves or through subsidiaries other than Atlas meeting certain
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qualifications. Likewise, while Sprint has indicated that it intends to hold
its Venture Interests through Sprint Sub, the Joint Venture Agreement permits
Sprint, subject to certain restrictions, to hold its Venture Interests itself
or through subsidiaries other than Sprint Sub meeting certain qualifications.
Following the Venture Closing, and except with respect to actions relating to
initiatives undertaken independently by a Joint Venture Party in accordance
with the procedures for NAFTA Plan Actions, ROE Plan Actions and GBN Special
Matters (see "--Plan Actions and GBN Special Matters"), the governing board of
any JV Entity may require each shareholder of such entity to make additional
capital contributions to such JV Entity in such amounts and at such times as
set forth in the business plan of such JV Entity (an "Additional Capital
Call"). If any shareholder of a JV Entity (the "Defaulting Shareholder") fails
to make its additional capital contribution within the required period (a
"Funding Breach"), and fails to cure such Funding Breach within 30 days, then a
funding default ("Funding Default") shall have occurred. The non-defaulting
shareholder (the "Non-Defaulting Shareholder"), in addition to its other
contractual remedies, during the 90 days following such Funding Breach will
have the right to contribute the defaulted amount to such JV Entity and/or
obtain rights which will give it greater control over the Joint Venture (see
"--Management and Control--Increased Control Over the Joint Venture by the
Sprint Parties or the FT/DT Parties"). During a subsequent cure period, the
Defaulting Shareholder will have the option to cure its Funding Default.
If the Non-Defaulting Shareholder elects to contribute the defaulted amount,
or the Defaulting Shareholder subsequently elects to cure its breach, the
ownership records of the JV Entity will be adjusted to reflect the changes in
the ownership interests of the Non-Defaulting Shareholder and the Defaulting
Shareholder, in accordance with principles to be established prior to the
Venture Closing. The adjustment in ownership interests will not affect the
Joint Venture Parties' respective governance rights. The Non-Defaulting
Shareholder may, however, obtain rights which will give it greater control over
the Joint Venture.
OTHER ACTIVITIES OF THE JOINT VENTURE PARTIES AND THE JOINT VENTURE
Noncompetition. Each of the Joint Venture Parties has agreed to be bound, for
the duration of the existence of the Joint Venture, by the terms of certain
noncompetition provisions contained in the Joint Venture Agreement. Subject to
several exceptions, no Joint Venture Party or any of its affiliates (except for
certain affiliates as discussed in the following section) may either directly
or indirectly offer, produce, provide, sell, promote, distribute or market any
Competing Services or invest in any person that offers Competing Services.
"Competing Services" includes (i) certain enumerated services, (ii) any
services within the scope of the international telecommunications services
business offered pursuant to a NAFTA Plan Action in the NAFTA Countries or a
ROE Plan Action in the territory of the ROE Group, and (iii) any services
substantially similar to, or substitutable for or competing with, the foregoing
services. In addition, with certain exceptions, no senior officer of FT, DT and
Sprint will be permitted to be involved in the management of Major Competitors
of Sprint, in the case of FT, DT or Atlas, or Major Competitors of FT/DT, in
the case of Sprint or Sprint Sub. Subject to certain exceptions, no Joint
Venture Party or any of its affiliates may offer national long distance
services in competition with a National Operation or Public Telephone Operator
which is affiliated with the Joint Venture ("Competing LD Services"); invest in
any person (other than a Public Telephone Operator) that offers Competing LD
Services; invest in any National Operation that has an alliance with a major
competitor of the Joint Venture; or invest in any National Operation or Public
Telephone Operator if a competitor of the Joint Venture is a material
participant (a person that generally has a greater than 20% holding in an
entity that has voting securities held by at least 500 shareholders or a
greater than 10% holding in an entity with fewer than 500 shareholders) in such
National Operation or Public Telephone Operator at the time of investment. A
Joint Venture Party and its affiliates may separately invest in any other
National Operation after first offering to the Joint Venture the opportunity to
invest in such National Operation, and may, after consulting with the Joint
Venture, separately invest in any Public Telephone Operator after determining
in its sole discretion whether to offer to the Joint Venture or to any other
Joint Venture Party the opportunity to participate in such investment. Any
Joint Venture Party investing in a National Operation or Public Telephone
Operator is obligated to use commercially reasonable efforts to cause such
National Operation or Public Telephone Operator to become affiliated with the
Joint Venture. As
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defined in the Joint Venture Agreement, a "National Operation" is any entity or
group of entities engaged primarily in providing national long distance
services, irrespective of the technology used in providing such services, and a
"Public Telephone Operator" is an entity providing national telecommunications
services which is or has been in the past at least 90% owned by any
governmental authority.
Subject to certain exceptions, if an affiliate of a Joint Venture Party in
which such Joint Venture Party has an equity interest representing 20% or more
(but not more than 50%) of the aggregate voting power (i) offers Competing
Services or Competing LD Services or (ii) invests in any person that offers
Competing Services or Competing LD Services, the representatives unrelated to
such Joint Venture Party on the Global Venture Board may require such Joint
Venture Party to use commercially reasonable efforts to cause such affiliate to
transfer to the Joint Venture the assets used to offer such Competing Services
or Competing LD Services or to sell to the Joint Venture such Joint Venture
Party's equity interest in such affiliate.
Noncompetition Exceptions. The noncompetition provisions will not prohibit
certain activities by the Joint Venture Parties, including (i) actions taken to
comply with applicable law, (ii) certain new investments in entities which
compete with the Joint Venture below certain revenue thresholds and the
continued holding of interests in entities which begin to compete with the
Joint Venture as a result of an expansion of an existing activity of such
entity or of the Joint Venture (subject in certain situations to a requirement
that the Joint Venture Party transfer the business which competes with the
Joint Venture to the Joint Venture or otherwise divest such interest), (iii)
continued ownership in specified "excluded businesses", (iv) conducting certain
specified "non-exclusive" businesses, (v) the offer of certain de minimis
services which compete with the Joint Venture, (vi) any and all activities
relating to bilateral correspondent relationships and bilateral facilities to
the extent not inconsistent with the Services Agreement relating to the
provision of certain route planning, traffic coordination and carrier relations
functions to FT, DT and Sprint, (vii) the ownership of not more than 5% of the
securities of a publicly owned entity which competes with the Joint Venture,
(viii) ownership in an investment fund or plan investing on behalf of employees
of the Joint Venture Parties, (ix) continued ownership of assets to be
transferred to the Joint Venture at a later date, (x) Franco-German traffic
carried out by FT, DT or their subsidiaries, (xi) distribution of Joint Venture
Services by a Joint Venture Party in its home country, (xii) the offer by a
Joint Venture Party of "Principal Products" (see "--Services Agreements--Scope
of Services"), (xiii) continued ownership by a Joint Venture Party of an
interest in an entity which is spun off from one of the Joint Venture Parties
and is not controlled by such party and (xiv) certain other limited activities
in connection with the conduct of specified businesses of FT, DT and Sprint. In
addition, the noncompetition provisions provide that unsolicited requests by
customers for services provided by the Joint Venture will be fulfilled by the
Joint Venture Parties instead of by the Joint Venture, subject to certain
procedures.
TRANSFER OF VENTURE INTERESTS
A Joint Venture Party generally is not permitted, subject to certain limited
exceptions, to transfer any Venture Interests (i) for a period of ten years
following the Venture Closing without first obtaining the consent of the other
Joint Venture Parties, (ii) when it has committed and there continues to exist
a Funding Default or a Non-Funding Default (as defined in "--Termination of the
Joint Venture--Events of Termination"), or (iii) to any Major Competitor of
Sprint, in the case of a transfer of Venture Interests by the FT/DT Parties, or
to any Major Competitor of FT/DT, in the case of a transfer of Venture
Interests by the Sprint Parties (see also "--Effect of Acquisition by a Major
Competitor") unless Sprint (in the case of transfers proposed by the FT/DT
Parties) or FT, DT and Atlas (in the case of transfers proposed by the Sprint
Parties) comply with certain right of first refusal procedures.
DISPUTE RESOLUTION/DEADLOCK PROCEDURES
In certain situations, the respective governing boards of the JV Entities may
be unable to reach agreement by the requisite vote on a matter (a "Deadlock")
(see "--Management and Control"). Deadlocks occurring at a governing board of a
JV Entity may be referred to the Global Venture Committee for resolution.
Deadlocks occurring at the Global Venture Office may also be referred to the
Global Venture
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Committee for resolution. Deadlocks occurring at or considered by the Global
Venture Committee will be reconsidered at one or more subsequent meetings of
the Global Venture Committee and, if still unable to be resolved within a
specified time period, will be automatically and immediately referred to the
Global Venture Board for resolution.
If a Deadlock occurs at the Global Venture Board with respect to any agenda
item originally considered by the Global Venture Board, such Deadlock will be
reconsidered at one or more subsequent meetings of the Global Venture Board. If
a Deadlock considered by the Global Venture Board cannot be resolved by the
Global Venture Board within the relevant time period specified for the
resolution of a Deadlock of such type, and such Deadlock relates to approval by
the Global Venture Board of the Global Venture Strategic Plan, approval by the
ROW Board of the business plan of the ROW Group, approval by the ROE Board of
the business plan of the ROE Group, or, following the third anniversary of the
Venture Closing, appointment or removal of the chief executive officer of the
ROW Group (a "Special Deadlock Matter"), any Joint Venture Party within 180
days of the end of such period may declare an impasse (an "Impasse") unless (i)
the Global Venture Board members have agreed in writing that an Impasse may not
be declared with respect to such matter or (ii) prior to such declaration the
Joint Venture Parties have reached agreement with respect to such matter.
Following the declaration of an Impasse, the Sprint Parties or the FT/DT
Parties may dissolve such Impasse by accepting the position of the other with
respect to such matter. If unresolved, an Impasse can lead to the termination
of the Joint Venture. However, for a period of three years commencing on the
date of the Venture Closing, no failure of the Global Venture Board to resolve
any deadlock relating to a Special Deadlock Matter will result in the right of
any Joint Venture Party to declare an Impasse unless such Special Deadlock
Matter relates to a funding commitment.
If a Deadlock considered by the Global Venture Board cannot be resolved by
the Global Venture Board within the relevant period and such Deadlock does not
relate to a Special Deadlock Matter, then such Deadlock will be referred back
to the entity at which it originated. If such Deadlock is referred back to the
governing board of a JV Entity and such Deadlock relates to a potential GBN
Special Matter, NAFTA Plan Action or ROE Plan Action such Deadlock may be
declared to be a GBN Special Matter, a NAFTA Plan Action or a ROE Plan Action.
See "--Plan Actions and GBN Special Matters."
If a Deadlock occurs at the Global Venture Board and such Deadlock relates to
a Special Deadlock Matter and (i) such Deadlock arose solely from the failure
to adopt the Global Venture Strategic Plan because of a disagreement relating
to a matter concerning Canada, Mexico or any other country in the Americas
which accedes to the North American Free Trade Agreement or a substantially
similar agreement (each, a "NAFTA Country"); or (ii) such Deadlock arose solely
from the failure to adopt the Global Venture Strategic Plan because of a
disagreement relating to a matter concerning the territory of the ROE Group,
then, in the case of a Deadlock described in clause (i), any representative of
the Sprint Parties on the ROW Board, or, in the case of a Deadlock described in
clause (ii), any representative of the FT/DT Parties on the ROE Board, may
request that such Deadlock be resolved as a potential NAFTA Plan Action or ROE
Plan Action, in which event such Deadlock will be referred to the Global
Venture Committee. Such Deadlock will then be resolved in accordance with the
procedures provided for in the Joint Venture Agreement for the resolution of
such Deadlocks.
PLAN ACTIONS AND GBN SPECIAL MATTERS
If the Global Venture Committee and the Global Venture Board fail to resolve
a Deadlock which relates to any business, strategic, capital, operating,
marketing or technology plan within the scope of the international
telecommunications services business relating to a NAFTA Country (a "NAFTA Plan
Action"), a Deadlock which relates to such matters relating to the territory of
the ROE Group (a "ROE Plan Action") or a Deadlock relating to the expansion of
the capacity of the Global Backbone Network which requires additional
investment not provided for in the most recent business plan (a "GBN Special
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Matter"), Sprint, with respect to a NAFTA Plan Action or a GBN Special Matter,
or Atlas, with respect to a ROE Plan Action or a GBN Special Matter, may elect
to carry out such activity as to which there is a Deadlock (but only for a
period of two years in the case of a NAFTA Plan Action or a ROE Plan Action).
In the case of a NAFTA Plan Action or a ROE Plan Action, such activity must
be carried out through a separately held subsidiary of the party proposing such
activity, if it can be accounted for separately, or otherwise through a JV
Entity. If such activity is carried out through a separately held subsidiary,
such subsidiary must enter into an agreement to become affiliated with the
appropriate JV Entities. During a two-year period, the party opposing such
activity may cause it to be purchased by the Joint Venture. In the case of a
GBN Special Matter, the activity must be capable of being accounted for
separately, and must be carried out through a separately held subsidiary of the
party proposing such activity. Such subsidiary must enter into an agreement to
become affiliated with the appropriate JV Entities. During a two-year period,
the party opposing such activity may cause it to be purchased by the Joint
Venture. If at the end of such two-year period a NAFTA Plan Action or a ROE
Plan Action has not been purchased by the Joint Venture, it will be
reconsidered by the Global Venture Board. If the Global Venture Board is unable
to resolve the Deadlock with respect to such NAFTA Plan Action or ROE Plan
Action, either the Sprint Parties or the FT/DT Parties may declare an Impasse,
which can lead to termination of the Joint Venture. See "--Termination of the
Joint Venture--Events of Termination."
TERMINATION OF THE JOINT VENTURE
Events of Termination. The Joint Venture may be terminated in the
circumstances described below. The rights and obligations of the parties upon
termination will depend on the nature of the event which brought about such
termination. See "--Rights of the Joint Venture Parties Upon Termination." For
purposes of this section entitled "--Termination of the Joint Venture," "Party"
means Sprint and Sprint Sub, on the one hand, and FT, DT and Atlas, on the
other hand. Events giving rise to a right to termination include the following:
(i) a Funding Default which is not cured within one year (see "--Initial
Contributions; Additional Capital Contributions" and "--Dispute
Resolution/Deadlock Procedures"), following which the non-defaulting Party
may deliver to the other Party a notice of termination (a "Termination
Notice");
(ii) a material non-funding default by a Party under the Joint Venture
Agreement, following a finding by an arbitral tribunal that such a breach
has occurred and a subsequent failure by the breaching Party to cease the
violative conduct or to comply in all material respects with the terms and
conditions of an award of such tribunal, or certain specified breaches of
the Investment Agreement or the Standstill Agreement (each of the
foregoing, a "Non-Funding Default"), following which the non-defaulting
Party may deliver a Termination Notice to the other Party;
(iii) the bankruptcy of a Party or certain other events similar to an
event of bankruptcy (an "Event of Bankruptcy"), following which the other
Party may deliver a Termination Notice to such Party;
(iv) any court or other governmental authority takes any action relating
to the Joint Venture which imposes a Burdensome Condition on Sprint, Sprint
Sub, FT, DT or Atlas, following which such Party may deliver a Termination
Notice to the other Party;
(v) any Party declares an Impasse (see "--Dispute Resolution/Deadlock
Procedures") that is not dissolved in accordance with the Joint Venture
Agreement, following which any Party may deliver a Termination Notice to
the other Party; or
(vi) Sprint, Sprint Sub, FT, DT and Atlas mutually agree to terminate the
Joint Venture, following which any Party may deliver a Termination Notice
to the other Party.
Rights of the Joint Venture Parties Upon Termination.
Termination Upon Funding Default, Non-Funding Default or Event of Bankruptcy.
Subject to the following paragraph, a Party delivering a Termination Notice due
to the occurrence of a Funding Default, Non-Funding Default or Event of
Bankruptcy will have the option to purchase all, but not less than all, of
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the Venture Interests of the defaulting Party or bankrupt Party. If the Party
delivering the Termination Notice elects to purchase the defaulting Party's
Venture Interests after a Funding Default or a Non-Funding Default, the
purchase price will be 75% of the Appraised Value of the defaulting Party's
Venture Interests. If the Party delivering the Termination Notice elects to
purchase the defaulting Party's Venture Interests following an Event of
Bankruptcy, the purchase price will be 100% of the Appraised Value of the
defaulting Party's Venture Interests.
If the Termination Notice is due to the occurrence of a Funding Default, Non-
Funding Default or Event of Bankruptcy of FT or DT (the "Defaulting FT/DT
Party"), the other of FT and DT (the "Non-Defaulting FT/DT Party") will have
the right to purchase all of the Venture Interests of the Defaulting FT/DT
Party. If the Non-Defaulting FT/DT Party elects not to purchase the Defaulting
FT/DT Party's Venture Interests, Sprint will have the right to purchase all of
the Venture Interests of FT, DT and Atlas. If such right to purchase is the
result of a Funding Default or a Non-Funding Default, the purchase price will
be 75% of the Appraised Value of the Venture Interests of the Defaulting FT/DT
Party and 100% of the Appraised Value of the Venture Interests of the Non-
Defaulting FT/DT Party. If such right to purchase is the result of an Event of
Bankruptcy, the purchase price will be 100% of the Appraised Value of the
Venture Interests of FT, DT and Atlas.
Termination Upon Burdensome Condition, Impasse or Mutual Consent. If a Party
delivers a Termination Notice due to the occurrence of a regulatory action
imposing a Burdensome Condition, an Impasse or mutual consent of the Joint
Venture Parties, the Joint Venture will be terminated according to the
following arrangements. The Parties will exchange sealed statements indicating
whether each is willing to buy the Venture Interests of the other. If both the
Sprint Parties and the FT/DT Parties indicate that they wish to buy the other's
interests, then the Parties will undertake a bidding process to determine who
will purchase the other's Venture Interests. If both the Sprint Parties and the
FT/DT Parties indicate that they wish to sell their respective Venture
Interests, then the Joint Venture Parties will engage an independent investment
banking firm to advise them regarding how they can recognize maximum value for
their Venture Interests. If either the Sprint Parties or the FT/DT Parties wish
to sell their Venture Interests and the other wish to buy such Venture
Interests, the Sprint Parties and the FT/DT Parties will negotiate in an effort
to reach an agreement as to the price to be paid for such Venture Interests. If
an agreement cannot be reached within 60 days, such Venture Interests will be
sold at their Appraised Value.
Transition Plan. The Joint Venture Agreement contemplates that the Joint
Venture Parties will agree on a plan (the "Transition Plan") which will govern
the rights and obligations of the Joint Venture Parties under the Related Joint
Venture Documents following an event of termination described above. The
Transition Plan is intended to ensure that the successor to the Joint Venture
Business will continue to supply services to the customers of the Joint Venture
without interruption. The Transition Plan will address the effect of the
termination of the Joint Venture on the noncompetition provisions contained in
the Joint Venture Agreement and on the Intellectual Property License Agreements
and the Trademark License Agreements (each as defined in "The Joint Venture--
Intellectual Property and Trademark License Agreements--In General") and the
Services Agreements (as defined in "The Joint Venture--Services Agreements--In
General").
JOINT VENTURE CLOSING CONDITIONS
The obligations of each of Sprint, Sprint Sub, FT, DT and Atlas to effect the
Venture Closing are subject to various conditions, which include the following:
(i) the receipt of certain specified governmental approvals, including
(A) the waiting period under the HSR Act shall have expired or been
terminated, without the imposition of a Burdensome Condition;
(B) the granting of an exemption by the relevant EU authorities of
the Joint Venture Agreement and the Related Joint Venture Documents and
the Joint Venture Transactions from Article 85(1) of the Treaty of
Rome, without the imposition of a Burdensome Condition, or a
determination by each Joint Venture Party that such exemption will be
granted in a reasonable time and without the imposition of a Burdensome
Condition;
81
(C) FT shall have received the approvals of the French minister in
charge of economic affairs and finance and the French minister in
charge of posts and telecommunications to carry out the Joint Venture
Transactions, without the imposition of a Burdensome Condition;
(D) either (x) DT shall have received the approval of the German
Cartel Office to carry out the Joint Venture Transactions, without the
imposition of a Burdensome Condition, or (y) the exemption referred to
in clause (B) above shall have been obtained;
(E) an FCC Order shall have been obtained, without the imposition of
a Burdensome Condition;
(F) the granting of an exemption by the relevant EU authorities of
the documents relating to the Atlas joint venture (the "Atlas Joint
Venture Documents") and the transactions contemplated thereby (the
"Atlas Transactions") from Article 85(1) of the Treaty of Rome, without
the imposition of a Burdensome Condition, or a determination by each
Joint Venture Party that such exemption will be granted in a reasonable
time without the imposition of a Burdensome Condition;
(G) the obtaining of all other material governmental approvals
required to consummate the Joint Venture Transactions and the
expiration of all applicable pre-consummation waiting periods;
(H) the obtaining of certain additional specified governmental
approvals required in connection with the Atlas Transactions;
(I) the absence of an injunction prohibiting the consummation of the
Atlas Transactions or putting into doubt the validity of any of the
Atlas Joint Venture Documents; and
(J) the absence of any action by any governmental authority to
rescind or withdraw any of the foregoing approvals, or to rescind the
termination of the review and investigation under Exon-Florio, or to
modify any such approvals or any determination with respect to the
investigation under Exon-Florio in a manner that would impose a
Burdensome Condition;
(ii) the absence of any injunction enjoining, restraining or prohibiting
the consummation of the Joint Venture Transactions or putting into doubt
the validity of the Joint Venture Agreement or certain of the Related Joint
Venture Documents;
(iii) satisfaction of the conditions to the First Closing under the
Investment Agreement and occurrence of the First Closing under the
Investment Agreement simultaneously with the Venture Closing;
(iv) execution of certain of the Related Joint Venture Documents;
(v) agreement as to the business plans for the Regional Operating Groups;
(vi) the representations and warranties of FT, DT and Atlas (in the case
of the condition to the obligations of Sprint and Sprint Sub) and Sprint
and Sprint Sub (in the case of the condition to the obligations of FT, DT
and Atlas) set forth in the Joint Venture Agreement and the Related Joint
Venture Documents being true and correct in all material respects, in each
case as of the date of the Joint Venture Agreement and as of the date of
the Venture Closing as if made on and as of such date, except for
representations and warranties that relate solely to a date prior to the
date of the Venture Closing;
(vii) the performance and compliance in all material respects by FT, DT
and Atlas (in the case of the condition to the obligations of Sprint and
Sprint Sub) and Sprint and Sprint Sub (in the case of the condition to the
obligations of FT, DT and Atlas) with all agreements, covenants and
conditions contained in the Joint Venture Agreement and the Related Joint
Venture Documents that are required to be performed or complied with by
such party or parties on or before the Venture Closing;
(viii) the absence of any material adverse change in the business or
financial condition of the international telecommunications services
business of Sprint and Sprint Sub (in the case of the condition to the
obligations of FT, DT and Atlas), or FT and DT (in the case of the
condition to the obligations of Sprint and Sprint Sub), in each case taken
as a whole; and
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(ix) the absence of any pending or threatened proceeding that restrains,
prohibits, prevents or materially changes, or presents a substantial
possibility of restraining, prohibiting, preventing or materially changing,
the terms of the Joint Venture Transactions or the Atlas Transactions, or
presents a substantial possibility of resulting in material damages to, or
imposing a Burdensome Condition upon, Sprint or Sprint Sub (in the case of
the condition to the obligations of Sprint and Sprint Sub) or FT or DT (in
the case of the condition to the obligations of FT, DT and Atlas) in
connection with the Joint Venture Transactions or the Atlas Transactions.
There can be no assurance that each of the conditions to the Venture Closing
will be satisfied. In particular, Sprint cannot predict whether all applicable
regulatory approvals or other regulatory actions will be forthcoming.
INTELLECTUAL PROPERTY AND TRADEMARK LICENSE AGREEMENTS
In General. At the time of the Venture Closing, Sprint, Atlas, FT and DT and
certain of their respective affiliates (the "Licensors") and certain of the JV
Entities will enter into (i) intellectual property license agreements governing
the licensing of technology and certain other matters (the "Intellectual
Property License Agreements"), and (ii) trademark license agreements governing
the licensing of trademarks and certain other matters (the "Trademark License
Agreements").
Intellectual Property License Agreements. At the time of the Venture Closing,
the Licensors will grant to the JV Entities nonexclusive, nontransferable
(except as expressly provided for in the Intellectual Property License
Agreements) license rights in the JV Entities' respective territories to use or
modify identified technical information and the intellectual property rights
subsisting therein (collectively, the "Licensed Technical Information") owned
by or licensed to the Licensors for the JV Entities to conduct the Joint
Venture Business. Such license rights will be granted in return for customary
market rate royalties to be negotiated on an arm's length basis. Such license
rights will also permit the JV Entities to sublicense the Licensed Technical
Information to certain other JV Entities, affiliated National Operations or
affiliated Public Telephone Operators, and to the other Licensors to the extent
necessary to conduct the Joint Venture Business. All such licenses and
sublicenses will be subject to any restrictions of third party licensors of the
Licensed Technical Information.
In general, any substantial improvement, revisions or derivative works made
from the Licensed Technical Information will remain the property of the
creating party, subject to the rights of the owner or licensor of any
underlying Licensed Technical Information. Minor improvements and derivative
works created by the JV Entities will be licensed to the owner, licensor or
sublicensor of the underlying Licensed Technical Information, and minor
improvements and derivative works created by a Licensor will be licensed to the
JV Entities to which the underlying Licensed Technical Information is licensed.
Under the Intellectual Property License Agreements, each of the Licensors
licensing the Licensed Technical Information and each of the JV Entities will
provide each other with access to certain additional technical information,
including any of the above-mentioned substantial improvements, revisions or
derivative works of Licensed Intellectual Property, relevant to the Joint
Venture Business. The Intellectual Property License Agreements will further
provide that, except as provided otherwise in such agreements, the party to
which such access is provided may elect to have such additional technical
information licensed to it on terms substantially similar to the terms set
forth in the Intellectual Property License Agreements.
Trademark License Agreements. At the time of the Venture Closing, the
Licensors will grant to the JV Entities nonexclusive, nontransferable (except
as expressly provided for in the Trademark License Agreements) license rights
in the JV Entities' respective territories to use those identified trademarks
(collectively, the "Trademarks") owned or licensed by the Licensors in
connection with the marketing, promotion, advertisement, distribution, sale and
lease of certain identified products and services relating to the Joint Venture
Business. Such license rights will be granted in return for customary market
rate royalties to be negotiated on an arm's length basis. All such licenses
will be subject to any restrictions of third party licensors of the Trademarks.
The JV Entities will be required to adhere to certain quality standards and
83
specifications established by the Licensors (and that may be modified by the
Licensors subject to reasonable approval rights of the licensees) and such
Licensors will be permitted to conduct inspections to ensure that such quality
standards are maintained.
Under the Trademark License Agreements, each of the JV Entities will also
grant to each of the Licensors and each of the other JV Entities an option to
acquire a nonexclusive license to use such JV Entity's trademarks in connection
with the conduct of the Joint Venture Business. Such licenses will be granted
on terms substantially similar to the terms set forth in the Trademark License
Agreements.
Termination. The rights of the Licensors and the JV Entities with respect to
the Intellectual Property License Agreements and the Trademark License
Agreements upon termination of the Joint Venture will be set forth in the
Transition Plan. See "--Termination of the Joint Venture--Transition Plan."
SERVICES AGREEMENTS
In General. At the time of the Venture Closing, Sprint, Sprint Sub, Atlas, FT
and DT and certain of their affiliates will enter into certain agreements (the
"Services Agreements") with certain of the ROW Entities and ROE Entities (the
"ROW/ROE Entities") pursuant to which the parties will provide to one another
comprehensive support in connection with the provisioning, marketing and sale
of Joint Venture Services.
Scope of Services. Among other things, Atlas and Sprint Sub will be appointed
non-exclusive suppliers of telecommunications and related services to the
ROW/ROE Entities, the ROW/ROE Entities will be appointed non-exclusive sales
representatives for FT, DT and Sprint in connection with the sale of certain
products of FT, DT and Sprint (the "Principal Products") outside the home
countries of FT, DT and Sprint, FT and DT will be appointed the non-exclusive
resellers of the Joint Venture Services within France and Germany, Sprint will
be appointed the exclusive reseller of the Joint Venture Services in the United
States, and the ROW/ROE Entities will provide certain route planning, traffic
coordination and carrier relations functions to FT, DT and Sprint in respect of
the latters' international bilateral telephone circuits. The ROW/ROE Entities
may request telecommunications services required to create or provide a Joint
Venture Service from Atlas and Sprint Sub. In turn, Atlas and Sprint Sub will
be responsible for arranging for the supply by FT, DT and Sprint of any such
services that they themselves cannot provide. Such services will include the
provision of leased lines, operator services, call transport, sourcing and
terminating traffic and the provisioning of toll-free and local access lines.
The parties to the Services Agreements will also assume mutual obligations for
the marketing, network and technical support of the Joint Venture Services and
the Principal Products.
Under the Services Agreements, the ROW/ROE Entities will be obligated to
purchase services required to create or provide Joint Venture Services from
Atlas and Sprint Sub, provided Atlas or Sprint Sub can provide the service on
terms, including price, specifications and availability, that equal or are
superior to those offered by third parties. The ROW/ROE Entities may, but are
not obligated to, purchase telecommunications and related services from Atlas
and Sprint Sub that are not required to create or provide a Joint Venture
Service. Atlas and Sprint Sub must provide, or arrange for the provision by FT,
DT or Sprint of, telecommunications services required to create or provide a
Joint Venture Service, subject to available capacity, unless such services can
be obtained from third parties on comparable terms. Atlas and Sprint Sub will
have no obligation to provide, or arrange for the provision of, services that
are not required to create or provide a Joint Venture Service except, for a
period of three years, certain miscellaneous administrative services such as
accounting, external relations, legal and data processing services.
Pricing. In cases where telecommunications services are otherwise sold in
commercially significant quantities by a Joint Venture Party to unrelated third
parties, all such services provided by such Joint Venture Party under the
Services Agreements will be priced on the basis of the most favorable terms
charged by such provider to third parties under comparable circumstances. In
cases where telecommunications services are not sold in commercially
significant quantities to third parties, such services will be sold by such
Joint Venture Party under the Services Agreements on the basis of arm's length
pricing using full cost reimbursement or another arm's length pricing principle
agreed upon by the parties.
84
Term and Termination. With the exception of certain miscellaneous
administrative services which may be terminated three years after the Venture
Closing, the terms of the Services Agreements will be open ended. The Services
Agreements will contain customary default and termination provisions. The
rights of the parties to the Services Agreements with respect to such
agreements upon termination of the Joint Venture will be set forth in the
Transition Plan. See "--Termination of the Joint Venture--Transition Plan."
OTHER RELATED JOINT VENTURE DOCUMENTS
In addition to the Intellectual Property License Agreements, the Trademark
License Agreements and the Services Agreements, one or more of the Joint
Venture Parties will enter into the following agreements on or prior to the
date of the Venture Closing: an agreement as to the transfer of employees to
the Joint Venture and related matters, the Master Transfer Agreement and
certain related transfer agreements, the shareholders agreements to be entered
into by the shareholders of each of the ROW Group, the ROE Group and the GBN
Group, the constituent documents of the ROW Entities, the ROE Entities and the
GBN Entities, the confidentiality agreement among the Joint Venture Parties,
the Atlas/ROE Services Agreement and an agreement as to certain tax matters.
There can be no assurance that the terms of any of the Related Joint Venture
Documents will not differ materially from any description thereof herein. Also,
there can be no assurance that definitive agreements will be reached with
respect to any of the Related Joint Venture Documents.
INFORMATION CONCERNING SPRINT
BENEFICIAL SECURITY OWNERSHIP
The following table states the number of shares of Sprint Common Stock
beneficially owned, as of August 31, 1995, by (i) each director of Sprint, and
(ii) all directors and executive officers of Sprint, as a group. The number of
shares beneficially owned by all directors and executive officers as a group
represented less than one percent of the votes entitled to be cast by holders
of Sprint Voting Stock. Except as otherwise indicated, each individual named
has sole investment and voting power with respect to the securities shown.
NUMBER
NAME OF SHARES
---- ---------
DuBose Ausley............................................ 46,792(1)
Warren L. Batts.......................................... 11,500(1)
Ruth M. Davis............................................ 12,569(1)
William T. Esrey......................................... 718,618(1)(2)
Donald J. Hall........................................... 30,700(1)
Harold S. Hook........................................... 26,500(1)
Robert E.R. Huntley...................................... 27,043(1)
Ronald T. LeMay.......................................... 225,739(1)
Linda Koch Lorimer....................................... 41,026(1)
Charles H. Price, II..................................... 12,900(1)(2)
Frank E. Reed............................................ 41,275(1)
Charles E. Rice.......................................... 13,500(1)
Stewart Turley........................................... 13,900(1)
All directors and executive officers as a group (26
persons)................................................ 2,093,672(1)(2)
- --------
(1) Includes shares which may be acquired upon the exercise of stock options
exercisable on or within sixty days after August 31, 1995, under Sprint's
stock option plans as follows: 39,519, 10,500, 10,500, 419,601, 10,500,
10,500, 24,106, 160,590, 39,519, 10,500, 39,519, 10,500 and 10,500 shares
for Mr. Ausley, Mr. Batts, Dr. Davis, Messrs. Esrey, Hall, Hook, Huntley,
LeMay, Ms. Lorimer, Messrs. Price, Reed, Rice and Turley, respectively, and
1,379,541 for all directors and executive officers as a group.
(2) Includes shares held by or for the benefit of family members in which
beneficial ownership has been disclaimed: 14,802 shares held in trust for
Mr. Esrey's children, 1,000 shares held by Mr. Price's wife and 30,171
shares held by or for the benefit of family members for all directors and
executive officers as a group.
85
At August 31, 1995, the Sprint Retirement Savings Plan held of record
approximately 5.13% of the outstanding Sprint Common Stock; the shares held in
this plan are voted by the participants in the plan (see "The Special Meeting--
Voting by Participants in Certain Plans"). Sprint also believes that, at August
31, 1995, Oppenheimer & Co. L.P. beneficially owned approximately 5.4% of the
outstanding Sprint Common Stock. Sprint is not aware of any other person (from
statements on Schedules 13D and 13G filed with the SEC) which owned, as of
August 31, 1995, more than 5% of the Sprint Common Stock. If the Investment
Transactions are consummated, FT, DT and their respective affiliates will
collectively become the largest single beneficial owner of Sprint voting power.
ANTITAKEOVER PROVISIONS APPLICABLE TO SPRINT
In General. Certain provisions of the Articles of Incorporation, the Bylaws
and Kansas law may discourage tender offers or takeover attempts with respect
to Sprint. In addition to the existing provisions described herein, certain
provisions of the Charter Amendments, the Investment Agreement, the
Stockholders' Agreement and the other Related Investment Documents and the
Joint Venture Agreement and the Related Joint Venture Documents would diminish
the likelihood that a third party would attempt a takeover of Sprint. See
"Investment Proposals--Certain Considerations--Antitakeover Impact."
Sprint Preferred Stock. The Articles of Incorporation currently authorize the
issuance by the Sprint Board, without the necessity of further notice or
authorization by the stockholders, of up to 20,000,000 shares of Sprint
Preferred Stock. To date, the Sprint Board has authorized the issuance of five
series of Preferred Stock, including 1,742,853 shares of the Sprint First
Series, 8,758,472 shares of the Sprint Second Series, 400,000 shares of
Preferred Stock-Third Series (the "Sprint Third Series"), 2,500,000 shares of
Preferred Stock-Fourth Series (the "Sprint Fourth Series") and 95 shares of the
Sprint Fifth Series. As of August 31, 1995, 6,598,580 shares of the Sprint
Preferred Stock were unissued, unreserved and available for issuance. The
Charter Amendments would increase the authorized shares of the Sprint Fourth
Series to 6,250,000 shares, which would reduce the number of shares of Sprint
Preferred Stock that are unissued, unreserved and available for issuance to
2,848,580 shares. The unissued and unreserved Sprint Preferred Stock may be
issued from time to time in one or more series and may have such voting powers,
preferences and relative rights, designations, qualifications and limitations
as the Sprint Board may fix by resolution at the time of issuance. The unissued
and unreserved Sprint Preferred Stock could be used to deter or discourage an
unsolicited attempt by another person or entity to acquire control of Sprint.
Such stock could be issued, for example, with voting or conversion privileges
intended to make an acquisition of Sprint more difficult or more costly. The
Charter Amendments will not affect the number of authorized shares of Sprint
Preferred Stock.
"Fair Price" Provisions. The Articles of Incorporation contain a provision
(ARTICLE SEVENTH ) to the effect that certain business combinations must be
approved by the affirmative vote of the holders of 80% of the outstanding
shares entitled to vote in an election of directors. Transactions subject to
such approval (each a "Fair Price Business Combination") include mergers,
consolidations, sales or other dispositions of assets valued at $1 million or
more, and issuances of securities valued at $1 million or more, between, or
otherwise involving, Sprint or any of its subsidiaries and any Interested
Stockholder (defined generally as the direct or indirect beneficial owner of
10% or more of the capital stock of Sprint) or an affiliate of an Interested
Stockholder, certain liquidations or dissolutions of Sprint and certain
reclassifications of securities or recapitalizations of Sprint. These
provisions do not apply if (i) the transaction has been approved by a majority
of directors ("Continuing Directors") who were directors prior to the time the
Interested Stockholder attained such status (or certain successors of such
directors) and who are unaffiliated with the Interested Stockholder if such
approval is obtained at a meeting at which at least seven Continuing Directors
are present, or (ii) the Fair Price Business Combination is a merger or
consolidation and the cash or fair market value of the property, securities or
other consideration to be received by Sprint stockholders is not less than the
highest price per share paid by the Interested Stockholder for its holdings of
Sprint capital stock. Certain transactions contemplated by the Investment
Agreement, the Related Investment Documents, the Charter Amendments, the Joint
Venture Agreement and the Related Joint Venture Documents, such as
86
certain sales of additional equity securities to FT and DT and certain sales of
assets of Sprint to FT and DT, will be subject to approval by Continuing
Directors. The Stockholders' Agreement requires Sprint to maintain at least
seven Continuing Directors on the Sprint Board at all times.
"Greenmail" Provisions. In order to avoid the payment of "greenmail" by
Sprint, the Articles of Incorporation contain a provision (ARTICLE EIGHTH) that
requires the affirmative vote of a majority of the Sprint voting power to
approve any purchase, redemption or other acquisition by Sprint of any capital
stock of Sprint at above-market prices from an Interested Securityholder
(defined generally as any person who beneficially owns, directly or indirectly,
five percent or more of the class of securities to be acquired) who has owned
such securities for less than two years. Shares beneficially owned by the
Interested Securityholder are excluded from this computation. This requirement
for stockholder approval does not apply to a tender or exchange offer made on
the same terms to all holders of such securities. The Charter Amendments will
revise the "greenmail" provisions to provide that the affirmative vote of the
Sprint stockholders other than FT, DT and their affiliates which would
otherwise be required by such provisions will not be required in connection
with purchases, redemptions or other acquisitions by Sprint of Sprint capital
stock held by FT, DT, Qualified Subsidiaries or Qualified Stock Purchasers
pursuant to the Investment Agreement, the Stockholders' Agreement and the
Articles of Incorporation as amended by the Charter Amendments. See "Charter
Amendments and Bylaw Amendments--Charter Amendments--'Greenmail' Provisions."
Classified Board. Prior to the implementation of the Charter Amendments, the
Articles of Incorporation provide that the number of directors shall not be
less than nine or more than eighteen, as may be determined by the Sprint Board.
The Sprint Board currently has fixed the number of directors at thirteen,
classified into three classes of directors, each of which serves for a three-
year term. The effect of these provisions, even in the absence of the adoption
of the Investment Proposals, may be to prevent a holder of a large block of
voting shares from gaining control of the Sprint Board for at least two
successive annual meetings. Under the Articles of Incorporation, a director may
be removed only for cause and then only by the affirmative vote of the holders
of a majority of the shares entitled to vote in an election of directors.
Vacancies created by an increase in the size of the Sprint Board or for any
other reason may be filled by the remaining directors then in office; provided
that if the vacancy occurs as a result of an increase in the size of the Sprint
Board the directors electing such members must constitute a majority of the
Sprint Board.
The provision for a classified Sprint Board, together with the limitation on
removal of directors, make it more difficult to remove directors, and
ultimately incumbent management, even if a majority of stockholders desire to
do so, particularly if the only reason for the proposed removal may be
stockholder dissatisfaction with the performance of the incumbent directors. A
person who has gained as much as majority voting control of Sprint will be
unable to gain immediate control of the Sprint Board unless such person can
obtain sufficient additional votes to amend various provisions of the Articles
of Incorporation and the Bylaws, and even then, under the KGCC, an amendment to
the Articles of Incorporation may only be presented to stockholders for
approval if adopted and declared advisable by the then-sitting Sprint Board.
Provisions Relating to Stockholder Meetings. Under the Bylaws, a special
meeting of stockholders may be called only by the Chairman of the Sprint Board,
the President or the Sprint Board or at the request of the holders of a
majority of the shares of stock issued and outstanding and entitled to vote.
The Bylaws require that notice of proposed nominations by stockholders for the
election of directors be given to the Corporate Secretary of Sprint not less
than 50 days nor more than 75 days prior to the meeting of the stockholders for
the election of directors, unless less than 65 days' notice or prior public
disclosure of the date of the meeting is made or given to the stockholders, in
which case notice must be given to the Corporate Secretary of Sprint no later
than the close of business on the fifteenth day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was
made, whichever first occurs. The provision also requires that such notice must
contain certain information (a) about each proposed nominee, including (i)
name, age and business and residence addresses, (ii) principal occupation or
employment, (iii) the class and number of shares of capital stock of Sprint
beneficially owned by such person and (iv) any other information
87
relating to the person that is required to be disclosed in solicitations for
proxies for the election of directors pursuant to Regulation 14A under the
Exchange Act, and (b) about the stockholder giving the notice, including (i)
the name and record address of such stockholder and (ii) the class and number
of shares of capital stock of Sprint beneficially owned by such stockholder.
This advance notice provision is not applicable to nominations made by the
Sprint Board. This advance notice requirement, by regulating nominations from
the floor at any meeting of stockholders, affords management the opportunity to
consider the qualifications of the proposed non-management nominees and, to the
extent deemed necessary or desirable by management, inform the stockholders
about such qualifications in Sprint's proxy statement for the annual meeting.
The Bylaw Amendments contain a new provision that requires that, for business
to be properly brought before a meeting by a stockholder, the stockholder must
have given notice to the Corporate Secretary of Sprint not less than 50 days
nor more than 75 days prior to the meeting unless less than 65 days' notice or
prior disclosure of the date of the meeting is given to stockholders. In that
event, the notice to the Corporate Secretary must be received no later than the
close of business on the 15th day following the day on which notice of the date
of the meeting was mailed or public disclosure was made, whichever occurs
first. The notice to the Corporate Secretary must contain a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business, the name and record address of the stockholder, the
class and number of shares of stock of Sprint beneficially owned by the
stockholder and any material interest of the stockholder in the business. See
"Charter Amendments and Bylaw Amendments--Amendments to Sprint Bylaws."
Sprint Rights Plan. On August 8, 1989, the Sprint Board adopted the Sprint
Rights Plan pursuant to which Sprint distributed a dividend of one right (a
"Right") to purchase certain shares of capital stock of Sprint under certain
circumstances, for each outstanding share of Sprint Common Stock. As a
consequence of a 2-for-1 stock split in late 1989, each outstanding share of
Sprint Common Stock is currently entitled to one-half of a Right. The Rights
are currently traded with the Sprint Common Stock and detach and become
exercisable only if, in a transaction not approved by the Sprint Board, a
person or entity acquires 20% or more of the outstanding shares of Sprint
Common Stock or announces a tender offer the consummation of which would result
in ownership by a person or group of 20% or more of such shares. In connection
with the Transactions, the Rights Agreement has been amended to provide for
Rights to attach to the Class A Common Stock and to assure that the Investment
Transactions will not cause the Rights to detach and become exercisable. Such
amendment provides generally that actions of FT, DT and their respective
affiliates which would otherwise cause the Rights to detach and become
exercisable will not do so unless such actions also violate the Standstill
Agreement. See "Investment Agreement and Related Investment Documents--Sprint
Rights Plan."
Once the Rights detach and become exercisable, unless subsequently redeemed,
each Right then entitles its holder to purchase one one-hundredth of a share of
the Sprint Fourth Series for an exercise price of $235, subject to certain
adjustments. If Sprint is involved in a merger or other business combination
transaction after the Rights become exercisable, each Right will entitle its
holder to purchase, for the Right's exercise price, a number of the acquiring
or surviving company's shares of common stock having a market value equal to
twice the exercise price. Sprint will be entitled to redeem the Rights at $.01
per Right at any time until ten business days following a public announcement
that a person or group of persons has acquired beneficial ownership of 20% or
more of the outstanding shares of Sprint Common Stock (or in excess of the
shares permitted to be acquired under the Standstill Agreement, in the case of
FT and DT). The terms of the Sprint Rights Plan may be amended by the Sprint
Board without the consent of the holders of the Rights. The Rights will expire
on September 8, 1999, unless earlier redeemed by Sprint. The Sprint Rights Plan
was not intended to deter all takeover bids for Sprint and will not do so. For
example, the Sprint Rights Plan does not foreclose an attractive offer to
acquire all the Sprint Common Stock at the same price or transactions approved
by the Sprint Board. To the extent an acquiror is discouraged by the Sprint
Rights Plan from acquiring an equity position in Sprint, stockholders may be
deprived from receiving a premium for their shares. The issuance of additional
shares of Sprint Common Stock or Class A Common Stock prior to the time the
Rights become exercisable will result in an increase in the number of Rights
outstanding.
88
Business Combination Statute. Section 17-12,101 of the Business Combination
Statute limits business combinations (as defined in Section 17-12,100 of the
Business Combination Statute) between corporations and interested stockholders.
However, Section 17-12,101 of the Business Combination Statute exempts from the
provisions of the Business Combination Statute business combinations with
interested stockholders who became such in a transaction approved by the board
of directors. Accordingly, this statute will not apply to the Investment
Transactions.
Control Share Acquisitions Statute. For a description of the Control Share
Acquisitions Statute and the actions being taken with respect thereto in
connection with the Investment Proposals, see "Approval of Control Share
Acquisitions Plan."
INFORMATION CONCERNING FT, DT AND ATLAS
INFORMATION CONCERNING FT
FT is an exploitant public organized under the laws of the Republic of
France. FT is owned entirely by the Republic of France. The principal office of
FT is located at 6 place d'Alleray, 75505 Paris Cedex 15, France. According to
FT's 1994 Annual Report, FT had 1994 consolidated annual revenues of 142.6
billion French francs and net income of 9.9 billion French francs (equal to
approximately U.S. $26.7 billion and U.S. $1.8 billion, respectively, using the
exchange rate of U.S. $.18730 to 1 French franc quoted in The Wall Street
Journal of January 3, 1995 as prevailing on December 30, 1994). With these
revenues and income, and almost 32 million telephone lines in service, FT is
among the world's largest telecommunications operators. FT provides businesses
and consumers with, among other products and services, local and long distance
telephone services, leased lines, customized data networks, and wireless and
cable television services. Copies of FT's annual report may be obtained by
writing France Telecom, DG-DPF-SBF-B3, 6 place d'Alleray, 75505 Paris Cedex 15,
France.
According to publicly available reports, the French government has from time
to time considered the possible privatization of FT, and the French government
may consider such privatization in the future. Such privatization could take a
number of forms, including the sale of a minority interest in FT pursuant to a
public offering or to one or more private parties. There can be no assurances
regarding whether FT will or will not be privatized or, if such privatization
is effected, the form which any such privatization would take.
INFORMATION CONCERNING DT
DT is an Aktiengesellschaft organized under the laws of the Federal Republic
of Germany. DT's shares are owned entirely by the Federal Republic of Germany.
The principal office of DT is located at Friederich-Ebert-Allee 140, D-53113
Bonn, Germany. According to DT's 1994 Annual Report, with 1994 annual revenues
of 61.2 billion Deutschemarks and profits on ordinary activities of 7.1 billion
Deutschemarks (equal to approximately U.S. $39.51 billion and approximately
U.S. $4.58 billion, respectively, at the exchange rate of 1.5488 Deutschemarks
per U.S. $1.00 prevailing on December 31, 1994), DT is among Europe's largest
telecommunications companies. DT and its subsidiaries and affiliates provide
products and services including local and long-distance telephone calls within
Germany, international telephone calls to and from Germany, text and data
transmission, mobile telecommunications, and cable television services. Further
information regarding DT can be obtained from its Press and Corporate
Communications Department, P.O. Box 2000, D-53105, Bonn, Germany (Telephone:
+49-228-181-4949).
Earlier in 1995, DT announced its intention to consider increasing its share
capital by up to 50% by issuing new shares of its common stock that would be
traded on various national and/or international stock exchanges. Such a capital
increase, sometimes referred to as the "privatization" of DT, would be
permitted under the German Posts and Telecommunications Reorganization Act of
September 14, 1994. If DT increases its share capital by the full 50% permitted
by such Act, and if DT's current shareholder, the Federal Republic
89
of Germany, does not participate in the capital increase, the shareholding of
the Federal Republic of Germany in DT would decrease to 66 2/3% following such
capital increase. The Federal Republic of Germany has previously announced its
intention not to participate in the capital increase but to remain a majority
shareholder of DT for the time being. Although DT has already taken certain
preparatory steps toward issuing new shares of its capital stock, it has not
yet decided to go forward with an increase in its share capital. DT presently
expects to make such a decision either later in 1995 or in the first half of
1996. No assurances can be given that DT will go forward with a capital
increase, either on the terms originally announced or at all, or that the
expected conditions precedent to such a share issuance (including, among
others, a satisfactory resolution of negotiations with the SEC regarding DT's
accounting practices) can be satisfied.
INFORMATION CONCERNING ATLAS
In December 1993, FT and DT entered into a memorandum of understanding
pursuant to which they agreed to establish a joint venture company known as
"Atlas." FT and DT anticipate establishing Atlas in order, among other things,
to provide certain telecommunications and related services to multinational
companies and to corporate and business customers. In accordance with a joint
venture agreement entered into in December 1994, FT and DT would form Atlas as
a societe anonyme under the laws of Belgium. The establishment of Atlas is
subject, among other things, to the receipt of regulatory approvals necessary
both for the formation of Atlas and for the conduct of its anticipated
business. See "Investment Proposals--Regulatory Approvals--Regulatory Approvals
Relating to Atlas." No assurance as to the outcome of the Atlas approvals
process can be given.
INDEPENDENT AUDITORS
The consolidated financial statements and related schedule of Sprint
appearing in Sprint's Annual Report (Form 10-K) for the year ended December 31,
1994, and incorporated herein by reference have been audited by Ernst & Young
LLP, independent auditors, as stated in their report thereon included therein
and incorporated herein by reference, which, as to the year 1992, is based in
part on the report of Arthur Andersen L.L.P., independent auditors.
Representatives of Ernst & Young LLP will attend the Special Meeting and will
have an opportunity to make a statement and to respond to appropriate questions
from stockholders.
STOCKHOLDER PROPOSALS FOR
1996 ANNUAL MEETING OF SPRINT STOCKHOLDERS
Stockholder proposals intended to be presented at the 1996 Annual Meeting of
Stockholders of Sprint must be received by the Corporate Secretary at Sprint's
principal office, 2330 Shawnee Mission Parkway, Westwood, Kansas, no later than
November 15, 1995, to be eligible for inclusion in Sprint's proxy statement and
form of proxy for that meeting.
METHOD AND COST OF PROXY SOLICITATION
The cost of soliciting proxies will be borne by Sprint and will consist of
expenses of printing, postage and handling, including the reasonable out-of-
pocket expenses of brokerage houses, custodians, nominees and fiduciaries
incurred in sending this Proxy Statement and other proxy materials to, and
obtaining instructions relating to such materials from, beneficial owners of
stock. Sprint stockholder proxies may be solicited by directors, officers,
regular employees or the financial advisor of Sprint, in person, by letter or
by telephone or telegram. In addition, Sprint has retained D.F. King & Co.,
Inc. to assist in the solicitation of proxies. It is estimated that its fees
for services to Sprint will not exceed $9,500 plus expenses.
90
INCORPORATION OF DOCUMENTS BY REFERENCE
This Proxy Statement incorporates certain information by reference which is
not presented herein or delivered herewith. This information is contained in
documents that are available upon request from the Investor Relations
Department, Sprint Corporation, 2330 Shawnee Mission Parkway, Westwood, Kansas
66205, telephone number (913) 624-3344. In order to ensure timely delivery of
these documents, any request should be made by , 1995.
Sprint hereby undertakes to provide without charge to each person, including
any beneficial owner of Sprint capital stock, to whom a copy of this Proxy
Statement has been delivered, upon the written or oral request of any such
person, by first class mail or other equally prompt means within one business
day of receipt of such request, a copy of any and all of the documents referred
to below which have been or may be incorporated herein by reference, other than
exhibits to such documents, unless such exhibits are specifically incorporated
therein by reference. Requests for such documents should be directed to the
department indicated in the immediately preceding paragraph.
This Proxy Statement incorporates by reference the financial statements,
supplementary financial information and management's discussion and analysis of
financial condition and results of operations regarding Sprint included in
Sprint's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, its Quarterly Report on Form 10-Q for the quarter ended March 31, 1995,
its Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, as
amended, and all subsequent Quarterly reports on Form 10-Q filed by Sprint
before the date of the Special Meeting. This Proxy Statement also incorporates
by reference Sprint's Current Reports on Form 8-K dated March 27 and June 22,
1995 and any other Current reports on Form 8-K filed by Sprint before the date
of the Special Meeting.
All information appearing in this Proxy Statement or in any document
incorporated herein by reference is not necessarily complete and is qualified
in its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference and should
be read together with such information and documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed document that is deemed to be
incorporated herein by reference modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
91
INDEX OF DEFINED TERMS
DEFINED TERMS PAGE
- ------------- ----
Acquiring Person Statement................................................. 69
Acquisition Proposal....................................................... 15
Additional Capital Call.................................................... 77
Additional Preference Stock Closing........................................ 29
Adjusted Cellular Price.................................................... 29
Alien...................................................................... 17
Alternative Transaction.................................................... 57
Antitrust Division......................................................... 23
APPA....................................................................... 23
Appraised Value............................................................ 75
Article IV Closing......................................................... 60
Article 85................................................................. 25
Articles of Incorporation.................................................. 4
Atlas...................................................................... 5
Atlas Joint Venture Documents.............................................. 82
Atlas/ROE Service Agreement................................................ 73
Atlas Transactions......................................................... 82
Average Sprint Price....................................................... 43
Brokers' Transaction....................................................... 48
BT......................................................................... 12
BT USA..................................................................... 12
Burdensome Condition....................................................... 21
Business Combination Statute............................................... 58
Buy Notice................................................................. 49
Bylaw Amendments........................................................... 4
Bylaws..................................................................... 4
Cellular and Wireless Division............................................. 12
Cellular Spin-Off.......................................................... 4
Cellular Spin-Off Reduction Factor......................................... 27
CFIUS...................................................................... 24
Change of Control.......................................................... 52
Charter Amendments......................................................... 4
Class A Common Issuance Date............................................... 31
Class A Common Stock....................................................... 4
Class A Directors.......................................................... 5
Class A Holder Eligible Notes.............................................. 54
Class A Holders............................................................ 5
Class A Preference Stock................................................... 4
Class A Stock.............................................................. 4
Committed Percentage....................................................... 16
Communications Act......................................................... 4
Competing LD Services...................................................... 77
Competing Services......................................................... 77
Continuing Directors....................................................... 86
Contributed Assets......................................................... 76
Control Share Acquiring Person............................................. 68
Control Share Acquisition.................................................. 68
Control Share Acquisitions Plan............................................ 5
Control Share Acquisitions Statute......................................... 5
92
DEFINED TERMS PAGE
- ------------- ----
Conversion Date............................................................ 30
Conversion Price........................................................... 28
Converted Preference Stock................................................. 42
Core Businesses............................................................ 34
Cumulative................................................................. 35
Deadlock................................................................... 78
Defaulting FT/DT Party..................................................... 81
Defaulting Shareholder..................................................... 77
Deferred Common Stock Closing.............................................. 30
Dillon Read................................................................ 6
DIS........................................................................ 24
DISP....................................................................... 24
DOD........................................................................ 24
DT......................................................................... 2
Eligible Purchaser......................................................... 49
EU......................................................................... 21
Event of Bankruptcy........................................................ 80
Exclusionary Tender Offer.................................................. 15
Executive Committee........................................................ 66
Exempt Asset Divestitures.................................................. 34
Exempt Long Distance Asset Divestiture..................................... 56
Excess Shares.............................................................. 31
Exchange Act............................................................... 20
Exon-Florio Amendment...................................................... 21
Fair Price Business Combination............................................ 86
FCC........................................................................ 17
FCC Order.................................................................. 60
FCC Redemption Provision................................................... 17
First Closing.............................................................. 26
First Closing Average Sprint Price......................................... 26
First Closing Minimum Price................................................ 27
First Closing New Target Price............................................. 27
First Offer Price.......................................................... 48
First Notice Period........................................................ 49
Fixed Closing Date......................................................... 33
FOCI....................................................................... 21
Foreign Ownership Limitation............................................... 45
FT......................................................................... 2
FT/DT Parties.............................................................. 14
FTC........................................................................ 23
Fundamental Rights......................................................... 17
Funding Breach............................................................. 77
Funding Default............................................................ 77
GBN Entity................................................................. 71
GBN Group.................................................................. 71
GBN Special Matter......................................................... 79
Global Backbone Network.................................................... 71
Global Policies............................................................ 72
Global Venture Board....................................................... 72
Global Venture Committee................................................... 72
Global Venture Strategic Plan.............................................. 72
93
DEFINED TERMS PAGE
- ------------- ----
Global Venture Office...................................................... 72
HSR Act.................................................................... 21
Impasse.................................................................... 79
Independent Director....................................................... 5
Independent Nominees....................................................... 67
Initial Issuance Date...................................................... 5
Initial Percentage Limitation.............................................. 45
Initial Period............................................................. 16
Initial Standstill Period.................................................. 45
Intellectual Property License Agreements................................... 83
Investment................................................................. 7
Investment Agreement....................................................... 2
Investment Completion Date................................................. 31
Investment Proposals....................................................... 1
Investment Transactions.................................................... 9
Joint Venture.............................................................. 5
Joint Venture Agreement.................................................... 7
Joint Venture Business..................................................... 71
Joint Venture Parties...................................................... 70
Joint Venture Services..................................................... 71
Joint Venture Transactions................................................. 9
JV Entities................................................................ 13
KGCC....................................................................... 16
Licensed Technical Information............................................. 83
Licensors.................................................................. 83
Lien....................................................................... 55
Lien Creditor.............................................................. 56
Lien Transfer.............................................................. 56
Liquidation Preference..................................................... 41
Long Distance Assets....................................................... 15
Major Competitor of FT/DT.................................................. 36
Major Competitor of Sprint................................................. 37
Major Issuance............................................................. 17
Master Transfer Agreement.................................................. 76
McCaw...................................................................... 12
MCI........................................................................ 12
Memorandum of Understanding................................................ 7
Minority Rights............................................................ 18
NAFTA Country.............................................................. 79
NAFTA Plan Action.......................................................... 79
National Operation......................................................... 77
New Lower Threshold Sprint Price........................................... 27
New Target Price........................................................... 43
New Upper Threshold Sprint Price........................................... 27
Nominating Committee....................................................... 5
Non-Defaulting FT/DT Party................................................. 81
Non-Defaulting Shareholder................................................. 77
Non-Funding Default........................................................ 80
NPRM....................................................................... 22
NYSE....................................................................... 33
Offered Shares............................................................. 48
94
DEFINED TERMS PAGE
- ------------- ----
Optional Shares............................................................ 31
Optional Shares Closing.................................................... 31
Percentage Limitations..................................................... 45
Planned Date............................................................... 48
Pre-Closing Period......................................................... 56
Principal Investment Documents............................................. 58
Principal Products......................................................... 84
Private Sale Notice........................................................ 49
Proceeds................................................................... 13
Proposed Price............................................................. 49
Proposed Terms............................................................. 49
Proxy Statement............................................................ 1
Public Offering............................................................ 48
Public Sale Notice......................................................... 48
Public Telephone Operator.................................................. 78
Purchase Closing Period.................................................... 49
Purchase Price............................................................. 49
PUCs....................................................................... 24
Qualified LD Purchaser..................................................... 55
Qualified Stock Purchaser.................................................. 46
Qualified Stock Purchaser Standstill Agreement............................. 38
Qualified Subsidiary....................................................... 15
Qualified Subsidiary Standstill Agreement.................................. 36
Record Date................................................................ 1
Redemption Securities...................................................... 64
Regional Operating Groups.................................................. 71
Registration Rights Agreement.............................................. 15
Related Investment Documents............................................... 5
Related Joint Venture Documents............................................ 7
Right...................................................................... 88
Rest of Europe Group....................................................... 71
Rest of World Group........................................................ 71
ROE Board.................................................................. 74
ROE Entity................................................................. 71
ROE Group.................................................................. 71
ROE Plan Action............................................................ 79
ROW Board.................................................................. 74
ROW Entity................................................................. 71
ROW Group.................................................................. 71
ROW/ROE Entities........................................................... 84
Schedule 13D Filer......................................................... 48
SEC........................................................................ 46
Second Notice Period....................................................... 49
Second Offer............................................................... 49
Second Offer Price......................................................... 49
Secretary of State......................................................... 9
Section 3(b)(v) Conversion Date............................................ 45
Securities Act............................................................. 48
Services Agreements........................................................ 84
Shares..................................................................... 48
Special Deadlock Matter.................................................... 79
95
DEFINED TERMS PAGE
- ------------- ----
Special Meeting............................................................ 1
Spinco..................................................................... 27
Spin-Off Investment Agreement.............................................. 57
Spin-Off Trading Period.................................................... 43
Sprint..................................................................... 1
Sprint Board............................................................... 1
Sprint Common Stock........................................................ 1
Sprint Eligible Notes...................................................... 50
Sprint Fifth Series........................................................ 1
Sprint First Series........................................................ 1
Sprint Fourth Series....................................................... 86
Sprint Parties............................................................. 14
Sprint Price Range......................................................... 27
Sprint Rights Plan......................................................... 31
Sprint Second Series....................................................... 1
Sprint Sub................................................................. 5
Sprint Telecommunications Venture.......................................... 7
Sprint Third Series........................................................ 86
Sprint Voting Stock........................................................ 1
Standstill Agreement....................................................... 2
Stockholders' Agreement.................................................... 4
Strategic Investor......................................................... 39
Strategic Merger........................................................... 52
Subject Shares............................................................. 49
Subsequent Percentage Limitation........................................... 45
Supplemental Preference Stock Closing...................................... 30
Target Price............................................................... 44
Termination Notice......................................................... 80
Trademark License Agreements............................................... 83
Trademarks................................................................. 83
Transactions............................................................... 9
Transferring Stockholder................................................... 48
Transition Plan............................................................ 81
Venture Closing............................................................ 5
Venture Interests.......................................................... 14
96
EXHIBIT A
Opinion of Financial Advisor
, 1995
Board of Directors
Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Gentlemen and Madam:
We understand that Sprint Corporation ("Sprint") and France Telecom ("FT")
and Deutsche Telekom AG ("DT") have entered into an Investment Agreement dated
as of July 31, 1995 (the "Investment Agreement") pursuant to which Sprint will
issue to FT and DT (and/or certain of their designated subsidiaries) 86,236,036
shares of Class A Common Stock, par value $2.50 per share ("Class A Common
Stock"), of Sprint, representing in total approximately 20% of the shares of
Sprint common stock to be outstanding following such issuance, as determined
based on the amount of Sprint common stock outstanding as of June 14, 1994 (as
further described below, the "Investment"). If the previously announced tax
free spin-off by Sprint of its cellular operations (the "Cellular Spin-Off")
has been abandoned, the purchase price of the Class A Common Stock will be
between $47.225 and $48.704 per share if the average closing market price of
the Common Stock, par value $2.50 per share ("Sprint Common Stock"), of Sprint
for the 20 consecutive trading days ended 15 trading days before the initial
closing of the Investment (the "First Closing") is at or above $34.982 per
share. If the Cellular Spin-Off has occurred, certain specified adjustments
will be made to the purchase price of the Class A Common Stock and to the
$34.982 per share threshold to reflect the fact that the Cellular Spin-Off has
taken place, since FT and DT have elected not to receive shares of the spun-off
entity in the Cellular Spin-Off.
The closing of the purchase of the Class A Common Stock may be deferred and
an interim investment by FT and DT (and/or certain of their designated
subsidiaries) in Class A Preference Stock, par value $1.00 per share ("Class A
Preference Stock"), of Sprint will be made, however, if the average closing
market price of the Sprint Common Stock (the "First Closing Average Sprint
Price") for the 20 consecutive trading day period ended 15 trading days prior
to the First Closing is not at or above $34.982 per share (or a lower specified
threshold if the Cellular Spin-Off has occurred) or if the Cellular Spin-Off
has not been consummated or has not been abandoned prior to the First Closing.
If Class A Preference Stock is purchased at the First Closing, FT and DT will
purchase Class A Preference Stock having a liquidation value which, in the
aggregate, is between $1.5 billion and $3.0 billion, as determined pursuant to
the Investment Agreement. If the average closing market price of Sprint Common
Stock for 20 consecutive trading days has reached or reaches an agreed
threshold per share and the Cellular Spin-Off has been consummated or
abandoned, the Class A Preference Stock would automatically convert into Class
A Common Stock and FT and DT would purchase the balance of the shares of Class
A Common Stock in accordance with the Investment Agreement at a subsequent
closing, subject to the right of FT and DT to defer such conversion in certain
limited circumstances.
The Investment Agreement also provides that, if FT and DT purchase only $1.5
billion of Class A Preference Stock at the First Closing because the First
Closing Average Sprint Price is below the specified threshold, FT and DT will
purchase additional shares of Class A Preference Stock at one or more
subsequent closings if thereafter the average closing market price of Sprint
Common Stock for a 20 consecutive day trading period exceeds the specified
threshold and the Cellular Spin-Off has not been consummated or has not been
abandoned. Such purchases would be in an amount having a liquidation value
which in the aggregate is between $0.5 billion and $1.5 billion (as determined
by Sprint). In addition, under certain limited circumstances FT and DT may
elect to defer conversion of the Class A Preference Stock into Class A Common
Stock, and in such event they will be required to purchase additional shares of
Class A Preference Stock at a supplemental preference stock closing. Shares of
Class A Preference Stock issued to FT and DT (and/or certain of their
designated subsidiaries), if any, will be convertible into shares of Class A
Common Stock. The dividend rate on the Class A Preference will vary depending
on whether the conversion price has been fixed.
A-1
Finally, if the average closing price of the Sprint Common Stock for a
consecutive 20 trading day period is below $34.982 per share (or a lower
specified threshold if the Cellular Spin-Off has occurred), Sprint may elect
(but is not obligated) to (i) sell shares of Class A Common Stock at 135% of
such average price if the Cellular Spin-Off has been consummated or abandoned,
or (ii) sell shares of Class A Preference Stock with a conversion price equal
to 135% of such average price if the Cellular Spin-Off has not been consummated
or has not been abandoned. In addition, if such average price is below $34.982
per share (or a lower specified threshold if the Cellular Spin-Off has
occurred), FT and DT may elect (but are not obligated) to (i) purchase shares
of Class A Common Stock at $47.225 per share if the Cellular Spin-Off has been
abandoned, (ii) purchase shares of Class A Common Stock at $47.225 per share
minus a specified adjustment factor if the Cellular Spin-Off has been
consummated, or (iii) purchase shares of Class A Preference Stock with a
conversion price fixed at $47.225 per share if the Cellular Spin-Off has not
been consummated or has not been abandoned. If Class A Preference Stock is
issued in these circumstances, once the Cellular Spin-Off has been consummated
or abandoned, the Class A Preference Stock would convert into Class A Common
Stock and FT and DT would purchase the balance of the shares of Class A Common
Stock, in each case at the conversion price so fixed (subject to a specified
adjustment factor if the Cellular Spin-Off has been consummated).
We also understand that in connection with the Investment, Sprint, FT and DT
have entered into an agreement dated as of June 22, 1995 (the "Joint Venture
Agreement") establishing an international joint venture among the three parties
(the "Joint Venture"). In establishing the Joint Venture, the three parties
will each contribute certain specific assets which will comprise its initial
operations.
You have asked us whether, in our opinion, the consideration to be paid in
connection with the Investment is fair, from a financial point of view, to
Sprint.
In arriving at our opinion, we have, among other things (i) reviewed the
Investment Agreement, the amendments to Sprint's Articles of Incorporation and
Bylaws contemplated by the Investment Agreement, the other agreements to be
executed pursuant to the Investment Agreement (the "Related Investment
Documents") (or the forms thereof in the case of Related Investment Documents
which have not yet been executed), the Joint Venture Agreement and the other
agreements to be executed pursuant to the Joint Venture Agreement (the "Related
Joint Venture Documents") (or the forms thereof in the case of the Related
Joint Venture Documents which have not yet been executed), (ii) analyzed
certain historical business and financial information relating to Sprint,
including Annual Reports to Stockholders and Annual Reports on Form 10-K for
the five fiscal years ended December 31, 1994 and Quarterly Reports on Form 10-
Q for the quarters ended March 31, 1995 and June 30, 1995, (iii) reviewed
certain internal financial analyses and forecasts for Sprint prepared by its
management, (iv) reviewed publicly available financial and stock market data of
certain companies we deemed comparable to significant components of Sprint's
business, (v) reviewed the reported price and trading activity for Sprint
Common Stock, (vi) compared the financial terms of the Investment to other
comparable minority investments in other public companies, (vii) analyzed the
earnings and cash flow characteristics of the respective assets to be
contributed to the Joint Venture by Sprint and FT and DT, (viii) considered the
pro forma effect of the Investment on Sprint's capitalization, certain credit
statistics, earnings, cash flow and book value, (ix) reviewed the Proxy
Statement dated , and (x) conducted such other financial studies, analyses
and investigations as we deemed appropriate. We also held discussions with
members of the senior management of Sprint regarding the business operations,
financial condition, future prospects and strategic objectives of Sprint, both
on a stand alone basis and with respect to the Joint Venture. In rendering our
opinion we have also taken into consideration Sprint senior management's view
that business opportunities and operational benefits will be derived by Sprint
from the Investment and the Joint Venture. We have also taken into account the
possible effects of certain provisions of the Investment Agreement, the Related
Investment Documents, the amendments to Sprint's Articles of Incorporation
contemplated by the Investment Agreement, and the Joint Venture Agreement on
the ability of Sprint to enter into business combinations and effect the
disposition of certain assets.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. We also relied upon the management of Sprint as to
the reasonableness and achievability of the financial and operating forecasts
(and
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the assumptions and bases therefor) provided to us and assumed that such
forecasts reflected the best currently available estimates and judgments of
management. We did not make an independent evaluation or appraisal of the
assets and liabilities of Sprint. In rendering our opinion we were not
authorized by the Board of Directors of Sprint to solicit any other potential
investors in Sprint. Further, it is our understanding, based upon discussions
with senior management and counsel to Sprint and our review of the Investment
Agreement and the Related Investment Documents that FT and DT will not acquire
control of the management of Sprint as a result of the Investment.
We have provided Sprint with certain investment banking services from time to
time and have acted as its financial advisor in connection with the Investment
Agreement. In addition, we have acted as a financial advisor to Sprint in
connection with the Cellular Spin-Off. Dillon Read is a full service securities
firm and in the course of normal trading activities may from time to time
effect transactions and hold positions in the securities of Sprint.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the consideration to be paid in connection with the Investment is
fair, from a financial point of view, to Sprint.
Very truly yours,
Dillon, Read & Co. Inc.
-------------------------------------
A-3
EXHIBIT B
INVESTMENT AGREEMENT
AMONG
SPRINT CORPORATION,
FRANCE TELECOM
AND
DEUTSCHE TELEKOM AG
DATED AS OF JULY 31, 1995
B-1
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS..................................................... 5
ARTICLE II PURCHASE AND SALE OF SHARES.................................... 23
Section 2.1. First Closing............................................ 23
Section 2.2. Additional Preference Stock Closing...................... 26
Section 2.3. Supplemental Preference Stock Closing.................... 28
Section 2.4. Deferred Common Stock Closing............................ 28
Section 2.5. Purchases of Optional Shares............................. 29
Section 2.6. Antidilution............................................. 31
Section 2.7. Reduction of Purchased Shares............................ 31
Section 2.8. Effect of Conversion..................................... 31
ARTICLE III CONDITIONS TO THE FIRST CLOSING............................... 32
Section 3.1. Conditions to Each Party's Obligations................... 32
Section 3.2. Conditions to the Buyers' Obligations.................... 33
Section 3.3. Conditions to the Company's Obligations.................. 35
ARTICLE IV CONDITIONS TO AN ADDITIONAL PREFERENCE STOCK CLOSING,
SUPPLEMENTAL PREFERENCE STOCK CLOSING AND
DEFERRED COMMON STOCK CLOSING................................. 35
Section 4.1. Condition to Each Party's Obligations.................... 35
Section 4.2. Conditions to the Buyers' Obligations.................... 36
Section 4.3. Conditions to the Company's Obligations.................. 37
Section 4.4. Effect of Certain Breaches............................... 38
ARTICLE V CONDITIONS TO THE OPTIONAL SHARES CLOSING....................... 38
Section 5.1. Condition to Each Party's Obligations.................... 38
Section 5.2. Conditions to the Buyers' Obligations.................... 38
Section 5.3. Conditions to the Company's Obligations.................. 40
Section 5.4. Effect of Certain Breaches............................... 41
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 41
Section 6.1. Organization, Qualification, Etc......................... 41
Section 6.2. Capital Stock and Other Matters.......................... 41
Section 6.3. Validity of Shares....................................... 42
Section 6.4. Corporate Authority; No Violation........................ 42
Section 6.5. Company Reports and Financial Statements................. 43
Section 6.6. Absence of Certain Changes or Events..................... 43
Section 6.7. Investigations; Litigation............................... 43
Section 6.8. Proxy Statement; Other Information....................... 44
Section 6.9. Certain Tax Matters...................................... 44
Section 6.10. Amendments of the Rights Agreement....................... 44
Section 6.11. Other Registration Rights................................ 44
Section 6.12. Takeover Statutes........................................ 44
Section 6.13. Vote Required; Board Recommendation...................... 45
Section 6.14. Long Distance Business................................... 45
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE BUYERS.................. 45
Section 7.1. Representations and Warranties of FT..................... 45
Section 7.2. Representations and Warranties of DT..................... 47
B-2
PAGE
----
ARTICLE VIII COVENANTS OF THE COMPANY.................................... 48
Section 8.1. Conduct of Business by the Company...................... 48
Section 8.2. Access and Information.................................. 49
Section 8.3. No Solicitation, Etc.................................... 49
Section 8.4. Stockholders Approval................................... 50
Section 8.5. Proxy Statement Filings................................. 50
Section 8.6. Use of Proceeds......................................... 50
Section 8.7. Advice of Changes....................................... 50
Section 8.8. No Action Relating to Takeover Statutes; Applicability
of Future Statutes and Regulations..................... 51
Section 8.9. Spin-offs............................................... 51
Section 8.10. Conduct of Business of Cellular......................... 51
ARTICLE IX OTHER AGREEMENTS.............................................. 52
Section 9.1. Information for Inclusion in the Proxy Statement........ 52
Section 9.2. Further Assurances...................................... 53
Section 9.3. Public Announcements.................................... 53
Section 9.4. Notification............................................ 54
Section 9.5. Brokers or Finders...................................... 54
Section 9.6. Notice of Proposals Regarding Acquisition Transactions.. 54
Section 9.7. Execution of Standstill Agreement....................... 55
Section 9.8. Confidentiality Agreements.............................. 55
Section 9.9. Actions by FT and DT in Connection with the Cellular
Spin-off............................................... 55
Section 9.10. Adjustment Certificates................................. 55
ARTICLE X TERM AND TERMINATION........................................... 55
Section 10.1. Termination............................................. 55
Section 10.2. Reimbursement of Expenses............................... 57
ARTICLE XI MISCELLANEOUS................................................. 57
Section 11.1. Survival of Representations and Warranties.............. 57
Section 11.2. Assignment.............................................. 58
Section 11.3. Entire Agreement........................................ 58
Section 11.4. Expenses................................................ 59
Section 11.5. Waiver, Amendment, Etc.................................. 59
Section 11.6. Binding Agreement; No Third Party Beneficiaries......... 59
Section 11.7. Notices................................................. 59
Section 11.8. GOVERNING LAW; DISPUTE RESOLUTION;
EQUITABLE RELIEF....................................... 60
Section 11.9. Severability............................................ 61
Section 11.10. Translation............................................. 61
Section 11.11. Table of Contents; Headings; Counterparts............... 62
Section 11.12. Waiver of Immunity...................................... 62
Section 11.13. Continuing Director Approval............................ 62
Section 11.14. Currency................................................ 62
EXHIBIT A--Form of Qualified Subsidiary Standstill Agreement
EXHIBIT B--Form of Registration Rights Agreement
EXHIBIT C--Form of Standstill Agreement
EXHIBIT D--Form of Stockholders' Agreement
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EXHIBIT E--Form of Strategic Investor Standstill Agreement
EXHIBIT F--Matters to be addressed by Company Counsel Opinions (First Closing)
EXHIBIT G--Matters to be addressed by FT Counsel Opinions (First Closing)
EXHIBIT H--Matters to be addressed by DT Counsel Opinions (First Closing)
EXHIBIT I--Matters to be addressed by Company General Counsel Opinion (Article
IV Closing)
EXHIBIT J--Matters to be addressed by Company General Counsel Opinion (Optional
Shares Closing)
EXHIBIT K--Form of Assumption Agreement
SCHEDULE A--Associate Positions of FT
SCHEDULE B--Associate Positions of DT
SCHEDULE C--Permitted Cellular Actions
B-4
INVESTMENT AGREEMENT
Investment Agreement, dated as of July 31, 1995 (the "Agreement"), among
Sprint Corporation, a corporation organized under the laws of Kansas (the
"Company"); France Telecom, an exploitant public formed under the laws of
France ("FT"); and Deutsche Telekom AG, an Aktiengesellschaft formed under the
laws of Germany ("DT").
RECITALS
Whereas, the Company, Sprint Global Venture, Inc., a wholly-owned subsidiary
of the Company ("Sprint Sub"), FT and DT have agreed to form a joint venture
(the "Joint Venture") to provide telecommunications services as provided in the
Joint Venture Agreement, dated as of June 22, 1995, among FT, DT, the Company
and Sprint Sub (the "Joint Venture Agreement") and to pursue various
telecommunications opportunities around the world as further provided therein;
and
Whereas, FT and DT (each a "Buyer") desire to purchase certain shares of
capital stock from the Company and the Company desires to sell such shares to
FT and DT, all in accordance with the terms and conditions hereof.
Now, Therefore, in consideration of the mutual covenants and obligations set
forth herein, each of FT, DT and the Company (each a "Party") agrees as
follows:
ARTICLE I
DEFINITIONS
The following capitalized terms used in this Agreement shall have the
following meanings:
"Acquiring Person Statement" has the meaning set forth in Section 6.8(a)
hereof.
"Acquisition" means the acquisition by Cellular of assets (which may include
the acquisition of the common equity interests in a Person) that constitute a
business that, prior to such acquisition, has been operated as a company or a
division or has otherwise been operated as a separate business.
"Acquisition Proposal" has the meaning specified in Section 8.3(a) hereof.
"Additional Preference Stock Closing" has the meaning specified in Section
2.2(b) hereof.
"Additional Preference Stock Closing Date" has the meaning set forth in
Section 2.2(b) hereof.
"Additional Preference Stock Closing Notice" has the meaning set forth in
Section 2.2(c) hereof.
"Adjusted Cellular Price" means the Average Cellular Price multiplied by the
Capitalization Ratio.
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by, or is under common Control with, such Person, provided that (a)
no JV Entity shall be deemed an Affiliate of any Party unless (i) FT, DT and
Atlas own a majority of the Voting Power of such JV Entity and the Company does
not have the Tie-Breaking Vote (as defined in Section 18.1 of the Joint Venture
Agreement), or (ii) FT, DT or Atlas has the Tie-Breaking Vote; (b) FT, DT and
the Company shall not be deemed Affiliates of each other; (c) Atlas shall be
deemed an Affiliate of FT and DT; and (d) the term "Affiliate" shall not
include any Governmental Authority of France or Germany or any other Person
Controlled, directly or indirectly, by any such Governmental Authority, except
in each case for FT, DT, Atlas and any other Person directly, or indirectly
through one or more intermediaries, Controlled by FT, DT or Atlas.
B-5
"Amendment" means a Certificate of Amendment to the Articles, satisfactory in
form and substance to each Party.
"Applicable Law" means all applicable provisions of all (a) constitutions,
treaties, statutes, laws (including common law), rules, regulations, ordinances
or codes of any Governmental Authority, and (b) orders, decisions, injunctions,
judgments, awards and decrees of any Governmental Authority.
"Articles" means the Articles of Incorporation of the Company, as amended or
supplemented from time to time.
"Article IV Closing" has the meaning specified in Section 4.1 hereof.
"Associate" has the meaning ascribed to such term in Rule 12b-2 under the
Exchange Act, provided that when used to indicate a relationship with FT or DT
or their respective Subsidiaries or Affiliates, the term "Associate" shall mean
(a) in the case of FT, any Person occupying any of the positions listed on
Schedule A hereto, and (b) in the case of DT, any Person occupying any of the
positions listed on Schedule B hereto, provided, further, that, in each case,
no Person occupying any such position described in clause (a) or (b) hereof
shall be deemed an "Associate" of FT or DT, as the case may be, unless the
Persons occupying all such positions described in clauses (a) and (b) hereof
Beneficially Own, in the aggregate, more than 0.2% of the Voting Power of the
Company.
"Atlas" means the company to be formed as a societe anonyme under the laws of
Belgium pursuant to the Joint Venture Agreement, dated as of December 15, 1994,
between FT and DT, as amended.
"Average Cellular Price" means, subject to adjustment as provided in the
Class A Provisions, the average of the Closing Prices of a share of Cellular
Common Stock for the 20 consecutive Trading Days on which such shares are
traded "regular way" starting on the first such Trading Day after the Cellular
Spin-off Date.
"Average Price" means, as to a security, the average of the Closing Prices of
a security for the 20 consecutive Trading Days ending on the fifteenth Trading
Day prior to the date of determination or ending on such other date specified
herein.
"Average Sprint Price" means, subject to adjustment as provided in the Class
A Provisions, the Average Price of a share of Common Stock at the date of
determination specified herein. For purposes of this definition, if any portion
of the relevant determination period occurs prior to the Cellular Spin-off and
the Closing Price of Common Stock on any Trading Day during the determination
period is quoted "ex" the distribution of Cellular Common Stock, the Closing
Price of the Common Stock for such Trading Day will be adjusted by adding the
product of the Closing Price of the Cellular Common Stock for such Trading Day
multiplied by the Capitalization Ratio.
"Beneficial Owner" (including, with its correlative meanings, "Beneficially
Own" and "Beneficial Ownership"), with respect to any securities, means any
Person which:
(a) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to acquire (whether such right is exercisable
immediately or only after the passage of time) such securities pursuant to
any agreement, arrangement or understanding (whether or not in writing),
including, without limitation, pursuant to this Agreement and the
Stockholders' Agreement, or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise;
(b) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to vote or dispose of (whether such right is
exercisable immediately or only after the passage of time) or "beneficial
ownership" of (as determined pursuant to Rule 13d-3 under the Exchange Act
but including all such securities which a Person has the right to acquire
beneficial ownership of whether or not such right is exercisable within the
60-day period specified therein) such securities, including pursuant to any
agreement, arrangement or understanding (whether or not in writing); or
B-6
(c) has, or any of whose Affiliates or Associates has, any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting or disposing of any securities which are
Beneficially Owned, directly or indirectly, by any other Person (or any
Affiliate thereof),
provided that Class A Stock and Common Stock held by one of FT or DT or its
Affiliates or Associates shall not also be deemed to be Beneficially Owned by
the other of FT or DT or its Affiliates or Associates.
"Board of Directors" means the board of directors of the Company.
"Burdensome Condition" means any requirement or condition that: (a) imposes
any material limitation on the ability or right of any Party or any of their
respective Subsidiaries to hold, or requires any Party or any of their
respective Subsidiaries to dispose of, any material interest in any material
portion of the assets of such Party, as the case may be, and its respective
Subsidiaries taken as a whole; (b) imposes any material limitation on the
ability or right of any Party or any of their respective Subsidiaries to
conduct any business (other than the investment contemplated by this Agreement,
the Transactions or the Atlas Transactions (each as defined in the Joint
Venture Agreement)) which such Party or any of their respective Subsidiaries
has publicly announced as of the date hereof an intention to conduct and which
business is material in relation to such Party, as the case may be, and its
respective Subsidiaries, taken as a whole; (c) materially limits the ability or
right of any Party, Sprint Sub or Atlas to acquire or hold, or requires any
Party, Sprint Sub or Atlas to dispose of, any material interest in the GBN
Group or a Regional Operating Group (each as defined in the Joint Venture
Agreement); (d) materially limits the ability or right of any Party, Sprint Sub
or Atlas to exercise its governance rights with respect to the Joint Venture or
any of the JV Entities; (e) otherwise would have a Material Adverse Effect on
the Joint Venture or would be materially adverse to the ability of any Party,
Sprint Sub or Atlas to receive the economic benefits of the Joint Venture; (f)
materially limits the ability or right of either FT or DT to acquire or hold or
dispose of any shares of Class A Stock; (g) materially limits the ability or
right of FT or DT to exercise its rights relating to, or receive the economic
benefits of, the investment pursuant to this Agreement, the Other Agreements,
the Bylaws as amended by the Bylaws Amendment or the Articles as amended by the
Amendment; (h) materially and adversely affects the ability of any Party to
perform its obligations under, or puts in doubt in any material respect the
validity of, this Agreement, the Other Agreements, the Bylaws as amended by the
Bylaws Amendment or the Articles as amended by the Amendment; (i) otherwise
would have a Material Adverse Effect on such Party and its Subsidiaries taken
as a whole; or (j) in the case of a Buyer, would affect materially and
adversely the intrinsic value of an investment in the Company's equity
securities (provided that a change in the Market Price of the Company's equity
securities arising from any such requirement or condition shall not, in and of
itself, be deemed to affect materially and adversely the intrinsic value of an
investment in the Company's equity securities) (any of the foregoing, a
"Burdensome Condition"), provided that if each Party affected, directly or
indirectly, by any condition or requirement (or, in the case of a Subsidiary so
affected, the Parent or Parents thereof that are a Party or Parties) provides a
notice to each other Party stating that such condition or requirement shall no
longer be deemed a Burdensome Condition, such condition or requirement shall no
longer be deemed a Burdensome Condition for any purpose under this Agreement
and provided, further, that no Party may declare a Burdensome Condition under
clause (b) if such material limitation is imposed pursuant to Section 310(b) of
the Communications Act due to the investment contemplated by this Agreement and
such material limitation would not be imposed but for the investment
contemplated by this Agreement. For purposes of this definition, no Qualified
Subsidiary or Qualified Stock Purchaser shall be deemed to be a "Party."
"Business Combination Statute" shall have the meaning set forth in Section
3.2(e) hereof.
"Business Day" means any day other than a day on which commercial banks in
The City of New York, Paris, France, or Frankfurt am Main, Germany, are
required or authorized by law to be closed.
"Buyer" has the meaning set forth in the second WHEREAS clause.
"Bylaws" means the Bylaws of the Company, as amended or supplemented from
time to time.
B-7
"Bylaws Amendment" means an amendment to the Bylaws, satisfactory in form and
substance to each Party.
"Capitalization Ratio" means the quotient of the number of shares of Cellular
Common Stock outstanding immediately following the Cellular Spin-off, divided
by the number of shares of Common Stock outstanding immediately following the
Cellular Spin-off.
"Cellular" means (a) until immediately prior to the Cellular Spin-off Date,
the Cellular and Wireless Division, (b) immediately prior to the Cellular Spin-
off Date, the direct or indirect wholly owned subsidiary of the Company owning
the assets of the Cellular and Wireless Division, the shares of which
subsidiary are to be distributed to the Company's stockholders in connection
with the Cellular Spin-off, and (c) on and after the Cellular Spin-off Date,
such company, provided that the term "Cellular" shall not include any assets
retained by the Company after the Cellular Spin-off Date.
"Cellular and Wireless Division" means the Cellular and Wireless
Communications Services Division of the Company.
"Cellular Common Stock" means the shares of common stock of Cellular.
"Cellular Guarantee" means any liability, contingent or otherwise, of the
Company or any of its Affiliates (other than Cellular, the Subsidiaries of
Cellular and any Affiliates Controlled by Cellular) to make any payment with
respect to, or cause performance of, any indebtedness or lease, purchase or
other obligation of Cellular that is to be paid, discharged or otherwise
performed after the Cellular Spin-off Date, including without limitation,
liabilities and obligations such as keepwell agreements and arrangements to
make payments for services irrespective of the non-delivery of such services.
"Cellular Liabilities" means all liabilities and obligations of any nature of
Cellular and, as to periods when Cellular is operated as a division of the
Company, all liabilities and obligations of the Company whether known or
unknown, absolute, accrued, contingent or otherwise, and whether due or to
become due, arising out of or directly relating to the operation of Cellular's
business.
"Cellular Spin-off" means the distribution by the Company on a pro rata basis
to the holders of the Common Stock of shares of Cellular Common Stock
representing all of the common equity of Cellular.
"Cellular Spin-off Date" means the date on which shares of Cellular Common
Stock are distributed to the holders of Common Stock.
"Cellular Spin-off Reduction Factor" means, subject to adjustment as provided
in the Class A Provisions, (a) $5.25, if the Adjusted Cellular Price is not
less than $3.25 or more than $7.25, or (b) if the Adjusted Cellular Price is
more than $7.25 but not more than $8.25, $5.25 plus 50% of the difference
between the Adjusted Cellular Price and $7.25, or (c) if the Adjusted Cellular
Price is more than $8.25, $5.75 plus the difference between the Adjusted
Cellular Price and $8.25, or (d) if the Adjusted Cellular Price is less than
$3.25 but not less than $2.25, $5.25 minus 50% of the difference between $3.25
and the Adjusted Cellular Price or (e) if the Adjusted Cellular Price is below
$2.25, $4.75 minus the difference between $2.25 and the Adjusted Cellular
Price. Notwithstanding the foregoing, (i) if the Net Cellular Indebtedness
immediately after the Cellular Spin-off exceeds $2.955, each dollar amount set
forth in the first sentence of this definition (other than the Adjusted
Cellular Price) shall be reduced dollar-for-dollar by such excess; (ii) if
$2.955 exceeds the Net Cellular Indebtedness, each such dollar amount shall be
increased dollar-for-dollar by such excess; and (iii) if Cellular has effected
any Acquisition and/or Disposition after June 22, 1995 and prior to the
Cellular Spin-off Date, such dollar amounts shall be increased by the Net
Cellular Acquisition Amount, if positive, and decreased by the absolute value
of the Net Cellular Acquisition Amount, if negative.
"Cellular System" means a domestic public cellular radio telecommunications
service system licensed under Part 22 of the rules of the FCC, as amended from
time to time.
B-8
"Change of Control" means a:
(a) decision by the Board of Directors to sell Control of the Company or
not to oppose a third party tender offer for Voting Securities of the
Company representing more than 35% of the Voting Power of the Company; or
(b) change in the identity of a majority of the Directors due to (i) a
proxy contest (or the threat to engage in a proxy contest) or the election
of Directors by the holders of Preferred Stock; or (ii) any unsolicited
tender, exchange or other purchase offer which has not been approved by a
majority of the Independent Directors,
provided that a Strategic Merger shall not be deemed to be a Change of Control
and, provided, further, that any transaction between the Company and FT and DT
or otherwise involving FT and DT and any of their direct or indirect
Subsidiaries which are party to a Contract therefor shall not be deemed to be a
Change of Control.
"Class A Common Issuance Date" means the date the Company first issues shares
of Class A Common Stock.
"Class A Common Stock" means the Class A Common Stock of the Company.
"Class A Conversion Shares" means the shares of Class A Common Stock or
Common Stock into which the then outstanding shares of Class A Preference Stock
(or, as the case may be, a specified number of shares of Class A Preference
Stock) would, at the time of determination, be convertible at the then
applicable Conversion Price if the conditions to establishment of the
Conversion Date had been met.
"Class A Holders" means the holders of the Class A Stock.
"Class A Preference Stock" means the Class A Preference Stock of the Company.
"Class A Provisions" means that portion of Paragraph 7 of the Amendment
entitled "GENERAL PROVISIONS RELATING TO CLASS A STOCK."
"Class A Stock" means the Class A Common Stock or, if shares of the Class A
Preference Stock are outstanding, the Class A Preference Stock.
"Closing Price" means, with respect to a security on any day, the last sale
price, regular way, or in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if such security is not listed or admitted to trading on such
exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the security is listed or admitted to trading or, if the
security is not listed or admitted to trading on any national securities
exchange, the last quoted sale price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use, or, if on any such date such security
is not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
security selected in good faith by the Board of Directors. If the security is
not publicly held or so listed or publicly traded, "Closing Price" means the
Fair Market Value of such security.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock of the Company.
"Communications Act" means the Communications Act of 1934, as amended, and
the rules and regulations from time to time promulgated thereunder. Any
reference to a particular section of the Communications Act shall refer to such
section as the same may be hereafter renumbered or otherwise amended.
B-9
"Company" has the meaning set forth in the preamble.
"Company Disclosure Schedule" means the disclosure schedule of the Company
delivered to FT and DT on the date hereof.
"Continuing Director" means any Director who is unaffiliated with the Buyers
and their "affiliates" and "associates" (as each such term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as in effect on October 1,
1982) and was a Director prior to the time that any Buyer or any such affiliate
or associate became an Interested Stockholder (as such term is defined in the
Fair Price Provisions) and any successor of a Continuing Director if such
successor is not affiliated with any such Interested Stockholder and is
recommended or elected to succeed a Continuing Director by a majority of
Continuing Directors, provided that such recommendation or election shall only
be effective if made at a meeting of Directors at which at least seven
Continuing Directors are present.
"Contract" means any loan or credit agreement, note, bond, indenture,
mortgage, deed of trust, lease, franchise, contract, or other agreement,
obligation, instrument or binding commitment of any nature.
"Control" means, with respect to a Person or Group, any of the following:
(a) ownership by such Person or Group of Votes entitling it to exercise
in the aggregate more than 35 percent of the Voting Power of the entity in
question; or
(b) possession by such Person or Group of the power, directly or
indirectly, (i) to elect a majority of the board of directors (or
equivalent governing body) of the entity in question; or (ii) to direct or
cause the direction of the management and policies of or with respect to
the entity in question, whether through ownership of securities, by
contract or otherwise.
"Control Share Acquisitions Plan" means the plan of FT and DT and, if
applicable, certain of their Qualified Subsidiaries identified and described in
the Acquiring Person Statement to make a control share acquisition, within the
meaning of the Kansas Control Share Acquisitions Statute, for one-fifth or
more, but less than one-third, of all the voting power of the Company,
evidenced by this Agreement and the Stockholders' Agreement.
"Conversion Date" has the meaning specified in Section 3(a)(i) of the Class A
Provisions.
"Conversion Price" means the applicable conversion price for shares of Class
A Preference Stock provided for in Section 3(b) of the Class A Provisions.
"Core Business" means all businesses in the fields of telecommunications and
information technology and applications, and equipment, software applications
and consumer and business services related thereto or making use of the
technology thereof, including value-added consumer and business services
generated through or as a result of underlying telecommunications services
using all technology (voice, data and image) and physical transport, network
intelligence, and software applications, and cable television (but not
including any programming or content-related activities with respect thereto).
"Damages" has the meaning specified in Section 11.1 hereof.
"Deferred Common Stock Closing" has the meaning specified in Section 2.4(b)
hereof.
"Deferred Common Stock Closing Date" has the meaning specified in Section
2.4(b) hereof.
"Director" means a member of the Board of Directors.
"Disclosure Schedules" means the Company Disclosure Schedule, the FT
Disclosure Schedule and the DT Disclosure Schedule.
B-10
"Disposition" means the disposition by Cellular of assets (which may include
the disposition of the common equity interests in a Person) that constitute a
business that, prior to such disposition, has been operated as a company or a
division or has otherwise been operated as a separate business.
"DT" has the meaning set forth in the preamble.
"DT Disclosure Schedule" means the disclosure schedule of DT delivered to the
Company on the date hereof.
"DT Investor Confidentiality Agreement" means the confidentiality agreement
between the Company and DT, reasonably satisfactory in form and substance to
each Party.
"ESMR" means any commercial mobile radio service and the resale of such
service, of the type authorized under the rules for Specialized Mobile Radio
Services designated under Subpart S of Part 90 of the FCC's rules or similar
Applicable Laws of any other country in effect on the date hereof, including
the networking, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"Europe" means the current geographic area covered by the following countries
and territories located on the European continent, plus, in the case of France,
its territories and possessions located outside the European continent:
Albania, Andorra, Austria, Belgium, Bosnia-Hercegovina, Bulgaria, Croatia,
Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar,
Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania,
Luxembourg, Macedonia, Malta, Monaco, Montenegro, Netherlands, Norway, Poland,
Portugal, Romania, San Marino, Serbia, Slovakia, Slovenia, Spain, Sweden,
Switzerland, Turkey, Ukraine, United Kingdom, and Vatican City.
"Excess Shares" has the meaning set forth in Section 2.5(a)(i) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated from time to time thereunder.
"Exempt Asset Divestitures" mean, with respect to the Company and its
Subsidiaries:
(a) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) to joint ventures approved by FT and DT prior to the
Initial Issuance Date;
(b) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) to (i) any entity in exchange for equity interests in
such entity if, after such transaction, the Company owns at least 51
percent of both the Voting Power and equity interests in such entity or
(ii) any joint venture that is an operating joint venture not controlled by
any of its principals and in which (x) the Company has the right, acting
alone, to disapprove (and thereby prohibit) decisions relating to
acquisitions and divestitures involving more than 20 percent of the Fair
Market Value of such entity's assets, mergers, consolidations and
dissolution or liquidation of such entity and the adoption of such entity's
business plan and (y) Major Competitors of the Joint Venture do not in the
aggregate own more than 20% of the equity interests or Voting Power;
(c) transactions in which the Company exchanges one or more (i) local
exchange telephone businesses for one or more such businesses or (ii)
public cellular or wireless radio telecommunications service systems for
one or more such systems, provided that the Company shall not, directly or
indirectly, receive cash in any such transaction in an amount greater than
20 percent of the Fair Market Value of the property or properties
Transferred by it;
(d) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) by the Company to any of its Subsidiaries, or by any
of its Subsidiaries to the Company or any other Subsidiary of the Company;
(e) (i) any Spin-off of equity interests of a wholly-owned Subsidiary
that is not a Subsidiary which, directly or indirectly, owns Long Distance
Assets (for purposes of this definition, the "Spun-off Entity"),
B-11
provided that, in the case of a Spin-off that is consummated following the
Initial Issuance Date, the Class A Holders receive securities in the Spun-
off Entity of a separate class with rights no less favorable to the Class A
Holders than those applicable to the Class A Stock set forth in the
Articles and the Bylaws, or (ii) the Cellular Spin-off, unless a Notice of
Abandonment has been delivered;
(f) Transfers of assets (other than Long Distance Assets) of the Company
or any of its Subsidiaries that are primarily or exclusively used in
connection with providing information technology or data processing
functions or services (collectively, for purposes of this definition, the
"IT Assets"), to any Person that regularly provides information technology
or data processing functions or services on a commercial basis, in
connection with a contractual arrangement (for purposes of this definition,
an "IT Service Contract") pursuant to which such Person undertakes to
provide information technology or data processing functions or services to
the Company or any of its Subsidiaries of substantially the same nature as
the services associated with the use of such assets prior to such Transfer
and upon commercially reasonable terms to the Company as determined in good
faith by the Company, provided that (i) the term of such IT Service
Contract shall be for a period at least as long as the weighted average
useful life of such assets, or the Company or such Subsidiary shall have
the right to cause such IT Service Contract to be renewed or extended for a
period at least as long as such weighted average useful life upon
commercially reasonable terms to the Company as determined in good faith by
the Company, and (ii) the Transfer of such assets will not materially and
adversely affect the operation of the Company; or
(g) Transfers of assets (other than Long Distance Assets or IT Assets) of
the Company or any of its Subsidiaries to any Person in connection with any
contractual arrangement (for purposes of this definition, a "Non-IT Service
Contract") pursuant to which such Person undertakes to provide services to
the Company or any of its Subsidiaries of substantially the same nature as
the services associated with the use of such assets prior to such Transfer
and upon commercially reasonable terms to the Company as determined in good
faith by the Company, provided, that (i) the Fair Market Value of such
assets, together with the Fair Market Value of assets of the Company
Transferred to such Person or other Persons in related transactions, do not
represent more than five percent of the Fair Market Value of the assets of
the Company, (ii) the Transfer of such assets will not materially and
adversely affect the operation of the Company, and (iii) the term of such
Non-IT Service Contract shall be for a period at least as long as the
weighted average useful life of the assets so Transferred or the Company or
such Subsidiary has the right to cause such Non-IT Service Contract to be
renewed or extended for a period at least as long as such weighted average
useful life upon commercially reasonable terms to the Company as determined
in good faith by the Company.
"Exempt Long Distance Asset Divestitures" mean, with respect to the Company
and its Subsidiaries:
(a) Transfers of Long Distance Assets to a Qualified Joint Venture;
(b) Transfers of Long Distance Assets to any entity if the Company and
its Subsidiaries after such transaction own at least 70 percent of both the
Voting Power and equity interests of such entity, provided that if a Major
Competitor of FT or DT or of the Joint Venture holds equity interests in
such entity, such Major Competitor's equity interest and Votes in such
entity as a percentage of the Voting Power of such entity shall not,
directly or indirectly, exceed 20 percent;
(c) Transfers of Long Distance Assets pursuant to an underwritten,
widely-distributed public offering at the conclusion of which the Company
and its Subsidiaries shall own at least 51 percent of both the Voting Power
and equity interests in the entity that owns such Long Distance Assets;
(d) Transfers in the ordinary course of business of Long Distance Assets
determined by the Company to be unnecessary for the orderly operation of
the Company's business, and sale-leasebacks of Long Distance Assets and
similar financing transactions after which the Company and its Subsidiaries
continue in possession and control of the Long Distance Assets involved in
such transaction;
(e) Transfers of Long Distance Assets by the Company to any of its
Subsidiaries, or by any of its Subsidiaries to the Company or any other
Subsidiary of the Company;
B-12
(f) Transfers of Long Distance Assets to FT or DT or any assignee thereof
pursuant to the Stockholders' Agreement;
(g) any Spin-off of equity interests of a wholly-owned Subsidiary which,
directly or indirectly, owns Long Distance Assets (for purposes of this
definition, the "Spun-off Entity"), provided that the Class A Holders
receive securities in the Spun-off Entity of a separate class with rights
no less favorable to the Class A Holders than those applicable to the Class
A Stock set forth in the Articles and the Bylaws;
(h) Transfers of Long Distance Assets of the Company or any of its
Subsidiaries that are primarily or exclusively used in connection with
providing information technology or data processing functions or services
(collectively, for purposes of this definition the "IT Assets"), to any
Person that regularly provides information technology or data processing
functions or services on a commercial basis, in connection with a
contractual arrangement (for purposes of this definition, an "IT Service
Contract") pursuant to which such Person undertakes to provide information
technology or data processing functions or services to the Company or any
of its Subsidiaries of substantially the same nature as the services
associated with the use of such Long Distance Assets prior to such Transfer
and upon commercially reasonable terms to the Company as determined in good
faith by the Company, provided that (i) the term of such IT Service
Contract shall be for a period at least as long as the weighted average
useful life of such Long Distance Assets, or the Company or such Subsidiary
shall have the right to cause such IT Service Contract to be renewed or
extended for a period at least as long as such weighted average useful life
upon commercially reasonable terms to the Company as determined in good
faith by the Company, and (ii) the Transfer of such Long Distance Assets
will not materially and adversely affect the operation of the Long Distance
Business. Any such IT Service Contract involving Transfers of Long Distance
Assets, including any renewal or extension thereof, shall be deemed to be a
Long Distance Asset; or
(i) Transfers of Long Distance Assets (other than IT Assets) of the
Company or any of its Subsidiaries to any Person in connection with any
contractual arrangement (for purposes of this definition, a "Non-IT Service
Contract") pursuant to which such Person undertakes to provide services to
the Company or any of its Subsidiaries of substantially the same nature as
the services associated with the use of such Long Distance Assets prior to
such Transfer and upon commercially reasonable terms to the Company as
determined in good faith by the Company, provided that (i) the Fair Market
Value of such Long Distance Assets, together with the Fair Market Value of
Long Distance Assets Transferred to such Person or other Persons in related
transactions, do not represent more than three percent of the Fair Market
Value of the Long Distance Assets of the Company, (ii) the Transfer of such
Long Distance Assets will not materially and adversely affect the operation
of the Long Distance Business, and (iii) the term of such Non-IT Service
Contract shall be for a period at least as long as the weighted average
useful life of the Long Distance Assets so Transferred or the Company or
such Subsidiary has the right to cause such Service Contract to be renewed
or extended for a period at least as long as such weighted average useful
life upon commercially reasonable terms to the Company as determined in
good faith by the Company. Any such Non-IT Service Contract involving
Transfers of Long Distance Assets, including any renewal or extension
thereof, shall be deemed to be a Long Distance Asset.
"Existing Confidentiality Agreement" means the Confidentiality Agreement,
among the Company, FT and DT, dated as of February 2, 1994.
"Exon-Florio" means Section 721 of the Defense Production Act of 1950, as
amended, and the rules promulgated thereunder.
"Extraordinary Dividend" means, with respect to capital stock of the Company,
a cash dividend or other cash distribution thereon, other than (a) a regular
periodic dividend payable in cash; or (b) a dividend payable in accordance with
the terms of the Preferred Stock or the Class A Preference Stock.
"Fair Market Value" means, with respect to any asset, shares or other
property, the cash price at which a willing seller would sell and a willing
buyer would buy such asset, shares or other property in an arm's-
B-13
length negotiated transaction without undue time restraints, as determined in
good faith by a majority of the Independent Directors as certified in a
resolution delivered to all of the Class A Holders.
"Fair Price Provisions" means ARTICLE SEVENTH of the Articles, and any
successor provision thereto.
"FCC" means the Federal Communications Commission.
"First Closing" has the meaning specified in Section 2.1(a) hereof.
"First Closing Company Notice" has the meaning specified in Section 2.1(a)
hereof.
"First Closing FT/DT Notice" has the meaning specified in Section 2.1(a)
hereof.
"First Closing Notice" means either a First Closing Company Notice or a First
Closing FT/DT Notice.
"Fix" or "Fixed" means in relation to the Conversion Price, the initial
establishment of the Conversion Price in accordance with Section 3(b) of the
Class A Provisions.
"Fixed Closing Date" means the date of the first closing to occur hereunder
after the date on which the Conversion Price is Fixed.
"France" means the Republic of France, including French Guiana, Guadeloupe,
Martinique and Reunion, and its territories and possessions.
"French Translation Law" means the loi n(degrees) 94-665 du 4 aout 1994
relative a l'emploi de la langue francaise.
"FT" has the meaning set forth in the preamble.
"FT Disclosure Schedule" means the disclosure schedule of FT delivered to the
Company on the date hereof.
"FT Investor Confidentiality Agreement" means the confidentiality agreement
between the Company and FT, reasonably satisfactory in form and substance to
each party.
"FT Law and Decrees" means (a) Loi n(degrees) 90-568 du 2 juillet 1990
relative a l'organisation du service public de la poste et des
telecommunications (as amended by Loi n(degrees) 91-1406 du 31 decembre 1991
portant diverses dispositions d'ordre social), (b) Decret n(degrees) 90-1112 du
12 decembre 1990 portant statut de France Telecom (as amended by Decret
n(degrees) 95-460 du 25 avril 1995 modifiant le decret n(degrees) 90-1112 du 12
decembre 1990 portant statut de France Telecom), (c) Decret n(degrees) 90-1213
du 29 decembre 1990 relatif au cahier des charges de France Telecom et au code
des postes et telecommunications, and (d) Decret n(degrees) 94-185 du 24
fevrier 1994 approuvant une modification du cahier des charges de France
Telecom.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Germany" means the Federal Republic of Germany.
"German Fee Regulations" has the meaning specified in Section 10.2 hereof.
"Governmental Approval" means any consent, waiver, grant, concession or
License of, registration or filing with, or declaration, report or notice to,
any Governmental Authority.
"Governmental Authority" means any federation, nation, state, sovereign, or
government, any federal, supranational, regional, state or local political
subdivision, any governmental or administrative body,
B-14
instrumentality, department or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission or other similar dispute resolving
panel or body, and any other entity exercising executive, legislative,
judicial, regulatory or administrative functions of a government, provided that
the term "Governmental Authority" shall not include FT, DT, Atlas or any of
their respective Subsidiaries.
"Group" means any group within the meaning of Section 13(d)(3) of the
Exchange Act.
"HSR Act" has the meaning specified in Section 3.1(a) hereof.
"Independent Director" means any member of the Board of Directors who (a) is
not an officer or employee of the Company, or any Class A Holder, or any of
their respective Subsidiaries, (b) is not a former officer of the Company, or
any Class A Holder, or any of their respective Subsidiaries, (c) does not, in
addition to such person's role as a Director, act on a regular basis, either
individually or as a member or representative of an organization, serving as a
professional adviser, legal counsel or consultant to the Company, or any Class
A Holder, or their respective Subsidiaries, if, in the opinion of the
Nominating Committee of the Board of Directors of the Company (the "Nominating
Committee") or the Board of Directors if a Nominating Committee is not in
existence, such relationship is material to the Company, any Class A Holder, or
the organization so represented or such person, and (d) does not represent, and
is not a member of the immediate family of, a person who would not satisfy the
requirements of the preceding clauses (a), (b) and (c) of this sentence. A
person who has been or is a partner, officer or director of an organization
that has customary commercial, industrial, banking or underwriting
relationships with the Company, any Class A Holder, or any of their respective
Subsidiaries, that are carried on in the ordinary course of business on an
arms-length basis and who otherwise satisfies the requirements set forth in
clauses (a), (b), (c) and (d) of the first sentence of this definition, may
qualify as an Independent Director, unless, in the opinion of the Nominating
Committee or the Board of Directors if a Nominating Committee is not in
existence, such person is not independent of the management of the Company, or
any Class A Holder, or any of their respective Subsidiaries, or the
relationship would interfere with the exercise of independent judgment as a
member of the Board of Directors. A person who otherwise satisfies the
requirements set forth in clauses (a), (b), (c) and (d) of the first sentence
of this definition and who, in addition to fulfilling the customary director's
role, also provides additional services directly for the Board of Directors and
is separately compensated therefor, would nonetheless qualify as an Independent
Director. Notwithstanding anything to the contrary contained in this
definition, each Director as of the date hereof who is not an executive officer
of the Company shall be deemed to be an Independent Director hereunder.
"Initial Conversion Price" means the Conversion Price first Fixed.
"Initial Issuance Date" means the first date that any shares of Class A Stock
are issued.
"Investment Completion Date" means the date of the Supplemental Preference
Stock Closing or the Class A Common Issuance Date, whichever shall first occur.
"Joint Venture" has the meaning specified in the first WHEREAS clause.
"Joint Venture Agreement" has the meaning specified in the first WHEREAS
clause.
"Joint Venture Documents" mean the Joint Venture Agreement and the other
Operative Agreements (as defined in the Joint Venture Agreement).
"JV Entity" has the meaning set forth in the Joint Venture Agreement.
"Kansas Control Share Acquisitions Statute" means Kan. Stat. Ann. Section 17-
1286 et seq. (1988).
"License" means any license, ordinance, authorization, permit, certificate,
variance, exemption, order, franchise or approval, domestic or foreign.
B-15
"Lien" means any mortgage, pledge, security interest, adverse claim,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
similar Applicable Law of any jurisdiction) or any other type of preferential
arrangement for the purpose, or having the effect, of protecting a creditor
against loss or securing the payment or performance of an obligation.
"Lien Transfer" shall mean the granting of any Lien on any Long Distance
Asset, other than:
(a) a Lien securing purchase money indebtedness that does not have a term
longer than the estimated useful life of the Long Distance Asset subject to
such Lien;
(b) Liens or other comparable arrangements relating to the financing of
accounts receivable; and
(c) Liens securing any other indebtedness for borrowed money, provided
that (i) the amount of such indebtedness, when added to the aggregate
amount of purchase money indebtedness referred to in clause (a) above, does
not exceed 30% of the total book value of the Long Distance Assets as at
the date of the most recently published balance sheet of the Company, (ii)
the indebtedness secured by such Liens is secured only by Liens on Long
Distance Assets, (iii) the face amount of such indebtedness does not exceed
the book value of the Long Distance Assets subject to such Liens, and (iv)
such indebtedness is for a term no longer than the estimated useful life of
the Long Distance Assets subject to such Liens.
"Liquidation Preference" has the meaning set forth in the Class A Provisions.
"Local Exchange Division" means the Local Communications Services Division of
the Company.
"Long Distance Assets" means:
(a) the assets reflected in the Company's balance sheet for the year
ended December 31, 1994 as included in the Long Distance Division;
(b) any assets acquired by the Company or any of its Subsidiaries
following December 31, 1994 that are reflected in the Company's balance
sheet as included in the Long Distance Division;
(c) any assets of the Company or any of its Subsidiaries that are not
reflected in the Company's balance sheet for the year ended December 31,
1994 as included in the Long Distance Division, which after December 31,
1994 are transferred by the Company or any of its Subsidiaries to, or
reclassified by the Company or any of its Subsidiaries as part of, the Long
Distance Division;
(d) any assets acquired by the Company after December 31, 1994 that are
used or held for use primarily for the benefit of the Long Distance
Business; and
(e) any assets referred to in clauses (a) through (c) above that are used
or held for use primarily for the benefit of the Long Distance Business
which are transferred or reclassified by the Company or any of its
Subsidiaries outside of the Long Distance Division, but which continue to
be owned by the Company or any of its Subsidiaries;
provided that the term "Long Distance Assets" shall not include (i) any assets
that are used or held for use primarily for the benefit of any Non-Long
Distance Business, or (ii) any other assets reflected in the Company's balance
sheet for the year ended December 31, 1994 as included in the Cellular and
Wireless Division or the Local Exchange Division (other than as such assets in
the Cellular and Wireless Division or the Local Exchange Division may be
transferred or reclassified in accordance with paragraph (c) of this
definition).
"Long Distance Business" means all long distance telecommunications
activities and services of the Company and its Subsidiaries at the relevant
time, including (but not limited to) all long distance transport services,
switching and value-added services for voice, data, video and multimedia
transmission, migration paths and intelligent overlapping architectures,
provided that the term "Long Distance Business" shall not include any
activities or services primarily related to any Non-Long Distance Business.
B-16
"Long Distance Division" means the Long Distance Communications Services
Division of the Company.
"Lower Threshold Sprint Price" means $34.982 (subject to adjustment as
provided in the Class A Provisions).
"Major Competitor" means (a) with respect to FT or DT, a Person that
materially competes with a major portion of the telecommunications services
business of FT or DT in Europe, or a Person that has taken substantial steps to
become such a Major Competitor and which FT or DT has reasonably concluded, in
its good faith judgment, will be such a competitor in the near future in France
or Germany, provided that FT and/or DT furnish in writing to the Company
reasonable evidence of the occurrence of such steps; (b) with respect to the
Company, a Person that materially competes with a major portion of the
telecommunications services business of the Company in North America, or a
Person that has taken substantial steps to become such a Major Competitor and
which the Company has reasonably concluded, in its good faith judgment, will be
such a competitor in the near future in the United States of America, provided
that the Company furnish in writing to each Class A Holder reasonable evidence
of the occurrence of such steps; and (c) with respect to the Joint Venture, a
Person that materially competes with a major portion of the telecommunications
services business of the Joint Venture, or a Person that has taken substantial
steps to become such a Major Competitor and which FT, DT or the Company has
reasonably concluded, in its good faith judgment, will be such a competitor in
the near future, provided that FT, DT or the Company furnish in writing to each
other Party reasonable evidence of the occurrence of such steps.
"Market Price" means, with respect to a security on any date, the Closing
Price of such security on the Trading Day immediately prior to such date. The
Market Price shall be deemed to be equal to (a) in the case of a share of Class
A Common Stock, the Market Price of a Share of Common Stock; and (b) in the
case of a Share of Class A Preference Stock, the Liquidation Preference. The
Market Price of any options, warrants, rights or other securities convertible
into or exercisable for Class A Common Stock (except for the Class A Preference
Shares) shall be equal to the Market Price of options, warrants, rights or
other securities convertible into or exercisable for Common Stock upon the same
terms and otherwise containing the same terms as such options, warrants, rights
or other securities convertible into or exercisable for Class A Common Stock.
"Material Adverse Effect" means, with respect to any Person, the effect of
any event, occurrence, fact, condition or change that is materially adverse to
the business, operations, results of operations, financial condition, assets or
liabilities of such Person.
"Maximum Price" means, subject to adjustment as provided in the Class A
Provisions, the lesser of (a) 125% of the Average Sprint Price for the relevant
period provided for herein and (b) $48.704.
"Minimum Price" means, subject to adjustment as provided in the Class A
Provisions, 135% of the Average Sprint Price for the relevant period provided
for herein.
"MSA" means a "Metropolitan Statistical Area," as such term is defined and
modified from time to time by the FCC for purposes of Cellular System
licensing.
"NASDAQ" means the National Association of Securities Dealers, Inc. Automated
Quotations System.
"Net Cellular Acquisition Amount" means, subject to adjustment as provided in
the Class A Provisions, the difference, which may be a negative number, of the
aggregate Purchase Prices paid by Cellular for Acquisitions after June 22,
1995, minus the aggregate value of the Sales Prices received by Cellular in
connection with Dispositions after June 22, 1995, such difference to be
calculated on a per share basis using the number of outstanding shares of
Common Stock immediately after the Cellular Spin-off Date.
"Net Cellular Indebtedness" means, subject to adjustment as provided in the
Class A Provisions, the amount of indebtedness for borrowed money of Cellular
outstanding immediately after the Cellular Spin-off Date, minus the amount of
Cellular's cash at such time, such amount to be calculated on a per share basis
using the number of outstanding shares of Common Stock immediately after the
Cellular Spin-off Date.
B-17
"New Lower Threshold Sprint Price" means, subject to adjustment as provided
in the Class A Provisions, the Lower Threshold Sprint Price minus 96.30% of the
Cellular Spin-off Reduction Factor.
"New Maximum Price" means, subject to adjustment as provided in the Class A
Provisions, (a) if the Cellular Spin-off Date occurs prior to the First
Closing, the lesser of (i) 125% of the Average Sprint Price for the relevant
period specified herein and (ii) $48.704 minus 125% of the Cellular Spin-off
Reduction Factor, and (b) if the Cellular Spin-off Date occurs after the First
Closing, the Maximum Price minus the product of (i) the lesser of (x) 1.25 and
(y) the quotient of $48.704 divided by such Average Sprint Price used in
calculating such Maximum Price, multiplied by (ii) the Cellular Spin-off
Reduction Factor.
"New Minimum Price" means, subject to adjustment as provided in the Class A
Provisions, the Minimum Price minus 135% of the Cellular Spin-off Reduction
Factor.
"New Sprint Price Range" means, subject to adjustment as provided in the
Class A Provisions, from and including the New Lower Threshold Sprint Price to
and including the New Upper Threshold Sprint Price.
"New Target Price" means, subject to adjustment as provided in the Class A
Provisions, the Target Price minus 130% of the Cellular Spin-off Reduction
Factor, provided that, if the Cellular Spin-off Date does not occur prior to
the First Closing and the Average Sprint Price determined at the date of the
First Closing is within the Sprint Price Range, the New Target Price shall be
the Target Price minus the product of (a) the quotient of $47.225 divided by
such Average Sprint Price, multiplied by (b) the Cellular Spin-off Reduction
Factor.
"New Upper Threshold Sprint Price" means, subject to adjustment as provided
in the Class A Provisions, $37.780 minus 104% of the Cellular Spin-off
Reduction Factor.
"New York Stock Exchange" means The New York Stock Exchange, Inc.
"Non-Long Distance Business" means (a) the ownership of any equity or other
interests in the Joint Venture or any of the JV Entities; the enforcement or
performance of any of the rights or obligations of the Company or any
Subsidiary of the Company pursuant to the Joint Venture Agreement; or any
activities or services of the Joint Venture or any of the JV Entities; (b) the
Triple Play Activities; (c) any activities or services primarily related to the
provision of subscriber connections to a local exchange or switch providing
access to the public switched telephone network; (d) any activities or services
primarily related to the provision of exchange access services for the purpose
of originating or terminating long distance telecommunications services; (e)
any activities or services primarily related to the resale by the Local
Exchange Division of long distance telecommunications services of the Company
or other carriers; (f) any activities or services primarily related to the
provision of inter-LATA long distance telecommunications services that are
incidental to the local exchange services business of the Local Exchange
Division; (g) any activities or services primarily related to the provision of
intra-LATA long distance telecommunications services; (h) any activities or
services (whether local, intra-LATA or inter-LATA) primarily related to the
provision of cellular, PCS, ESMR or paging services, mobile telecommunications
services or any other voice, data or voice/data wireless services, whether
fixed or mobile, or related to telecommunications services provided through
communications satellite systems (whether low, medium or high orbit systems);
and (i) the use of the "Sprint" brand name or any other brand names, trade
names or trademarks owned or licensed by the Company or any of its
Subsidiaries.
"North America" shall mean the current geographic area covered by the
following countries: Canada, the United States of Mexico and the United States
of America.
"Notice of Abandonment" has the meaning specified in Section 2.1(b)(i)
hereof, provided that if the Cellular Spin-off Date does not occur on or prior
to the fifth anniversary of the Initial Issuance Date, the Company shall be
conclusively deemed to have delivered a Notice of Abandonment on such fifth
anniversary.
B-18
"Optional Shares" has the meaning specified in Section 2.5(a) hereof.
"Optional Shares Closing" has the meaning specified in Section 2.5(c) hereof.
"Other Agreements" mean the Registration Rights Agreement, the Standstill
Agreement, the Stockholders' Agreement, the FT Investor Confidentiality
Agreement and the DT Investor Confidentiality Agreement.
"Parent" has the meaning specified in the definition of "Subsidiary".
"Party" has the meaning set forth in the paragraph following the second
WHEREAS clause.
"Passive Financial Institution" means a bank (or comparable financial
institution), insurance company, pension or retirement fund that acquires
Voting Securities or other equity interests in a Qualified Subsidiary without
the purpose or effect of changing or influencing the control of the Qualified
Subsidiary or the Company, nor in connection with or as a participant in any
transaction having such purpose or effect, provided that the term "Passive
Financial Institution" shall not include any Major Competitor of the Company or
of the Joint Venture.
"PCS" means a radio communications system of the type authorized under the
rules for broadband personal communications services designated as Subpart E of
Part 24 of the FCC's rules or similar Applicable Laws of any other country,
including the network, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"Percentage Ownership Interest" means, with respect to any Person, that
percentage of the Voting Power of the Company represented by Votes associated
with the Voting Securities of the Company owned of record by such Person or by
its nominees.
"Person" means an individual, a partnership, an association, a joint venture,
a corporation, a business, a trust, any entity organized or existing under
Applicable Law, an unincorporated organization or any Governmental Authority.
"POPs" means, with respect to Cellular, the sum of the products of (a) the
percentage ownership interest held by Cellular in each entity licensed or
designated to receive a license by the FCC to construct or operate a Cellular
System for a particular MSA or MSAs and/or RSA or RSAs, and (b) the number of
residents of such MSAs and/or RSAs, as the case may be (as reflected in the
figures obtained in the census conducted by the U.S. Census Bureau in 1990).
"Preferred Stock" means any series of Preferred Stock of the Company, but
shall not include the Class A Preference Stock.
"Proceeding" means any action, litigation, suit, proceeding or formal
investigation or review of any nature, civil, criminal, regulatory or
otherwise, before any Governmental Authority.
"Proposals" mean (a) the proposal for the stockholders of the Company to
approve this Agreement and the performance by the Company of all transactions
and acts on the part of the Company contemplated under this Agreement and the
Other Agreements, including the authorization and issuance of shares of the
Company's capital stock pursuant to this Agreement, the Stockholders' Agreement
and the Articles as amended by the Amendment, (b) the proposal for the
stockholders of the Company to approve and adopt the Amendment and the Bylaws
Amendment, and (c) the proposal for the stockholders of the Company to (i)
approve for purposes of the Kansas Control Share Acquisitions Statute the
Control Share Acquisitions Plan, and (ii) accord such shares acquired pursuant
to the Control Share Acquisitions Plan voting rights in accordance with Section
17-1294 of the Kansas Control Share Acquisitions Statute.
"Proxy Statement" means the notices of meeting, proxy statement, forms of
proxy and any accompanying letters to stockholders to be distributed by the
Company in connection with the Proposals or any schedules or exhibits required
to be filed with the SEC in connection therewith.
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"Purchase Price" means, as to Acquisitions by Cellular, the amount paid in
cash plus the Fair Market Value of non-cash consideration paid to effect such
Acquisition, provided that any indebtedness assumed by Cellular shall not be
included in the Purchase Price paid in respect of any Acquisition to the extent
that it is included in Net Cellular Indebtedness.
"Qualified Joint Venture" has the meaning set forth in Article I of the
Stockholders' Agreement.
"Qualified Subsidiary" means any Person which
(a) is a Subsidiary of either FT or DT or an entity that would be such a
Subsidiary if FT's and DT's aggregate ownership in such entity were held
individually by one of FT or DT, provided that until the second anniversary
of the Initial Issuance Date, no Voting Securities of such entity may be
Beneficially Owned by a Major Competitor of the Company or of the Joint
Venture, and thereafter no such Major Competitor or Major Competitors may,
individually or in the aggregate, Beneficially Own Voting Securities
representing ten percent or more of the Voting Power of such entity, and
provided, further, that if the Voting Securities of such entity owned
directly by FT and DT or indirectly through Wholly-Owned Subsidiaries of
either of them are entitled to a number of Votes representing in the
aggregate less than 80 percent of the Voting Power of such entity, then:
(i) the Voting Securities owned directly by FT and DT and Wholly-
Owned Subsidiaries, plus Voting Securities, if any, owned by Passive
Financial Institutions, must in the aggregate be entitled to a number
of Votes representing at least 80 percent of the Voting Power of such
entity; and
(ii) FT and DT and Wholly-Owned Subsidiaries must in the aggregate
directly own Voting Securities entitled to a number of Votes
representing more than 50 percent of the Voting Power of, and more than
50 percent of the outstanding equity interests in, such entity; and
(b) has (i) entered into a Qualified Subsidiary Standstill Agreement and
a confidentiality agreement satisfactory in form and substance to each
Party, and (ii) (x) caused all holders of any of its equity interests
(other than FT, DT and Passive Financial Institutions) (each a "Strategic
Investor") to enter into a Strategic Investor Standstill Agreement and (y)
caused all holders of any of its equity interests (other than FT and DT) to
enter into a confidentiality agreement satisfactory in form and substance
to each Party.
"Qualified Subsidiary Standstill Agreement" means a Qualified Subsidiary
Standstill Agreement between the Company and a Qualified Subsidiary,
substantially in the form of Exhibit A attached hereto.
"Registration Rights Agreement" means the Registration Rights Agreement,
among the Company, FT and DT, dated the Initial Issuance Date, substantially in
the form of Exhibit B attached hereto, as it may be amended or supplemented
from time to time.
"Rights" has the meaning set forth in Section 2.5(a)(i) hereof.
"Rights Agreement" means the Rights Agreement, dated as of August 8, 1989,
between the Company and UMB Bank, n.a., as amended on June 4, 1992 and as of
July 31, 1995, and as it may be amended or supplemented from time to time.
"RSA" means a "Rural Service Area," as such term is defined and modified from
time to time by the FCC for purposes of Cellular System licensing.
"Sales Prices" means, as to any Disposition by Cellular, the amount received
in cash plus the Fair Market Value of non-cash consideration received to effect
such Disposition, provided that any indebtedness assumed or retained by
Cellular shall not be deducted from the Sales Price to the extent that it is
included in Net Cellular Indebtedness.
"Schedule of Permitted Cellular Actions" has the meaning specified in Section
8.10 hereof.
"SEC" means the United States Securities and Exchange Commission.
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"SEC Documents" has the meaning specified in Section 6.5(a) hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated from time to time thereunder.
"Shares" means (a) shares of Class A Stock, Common Stock or any other Voting
Securities of the Company, (b) securities of the Company convertible into
Voting Securities of the Company and (c) options, warrants or other rights to
acquire such Voting Securities, but in the case of this clause (c), excluding
any rights of the Class A Holders or FT and DT to acquire Voting Securities of
the Company pursuant to the Stockholders' Agreement and this Agreement (but not
excluding any Voting Securities received upon the exercise of such rights).
"Spin-off" means any spin-off or other pro rata distribution of equity
interests of a wholly-owned direct or indirect Subsidiary of the Company to the
stockholders of the Company, provided that the term "Spin-off" shall not
include the Cellular Spin-off unless a Notice of Abandonment has been
delivered.
"Spin-off Investment Agreement" shall have the meaning set forth in Section
7.10(a) of the Stockholders' Agreement.
"Sprint Price Range" means from and including the Lower Threshold Sprint
Price to and including the Upper Threshold Sprint Price.
"Sprint Sub" has the meaning set forth in the first WHEREAS clause.
"Standstill Agreement" means the Standstill Agreement, among the Company, FT
and DT, dated as of the date hereof, substantially in the form of Exhibit C
attached hereto, as it may be amended or supplemented from time to time.
"Stockholders' Agreement" means the Stockholders' Agreement, among the
Company, FT and DT, dated as of the Initial Issuance Date, substantially in the
form of Exhibit D hereto (and all exhibits thereto), as it may be amended or
supplemented from time to time.
"Stockholders' Meeting" has the meaning specified in Section 8.4 hereof.
"Strategic Investor" has the meaning specified in the definition of
"Qualified Subsidiary".
"Strategic Investor Standstill Agreement" means the Strategic Investor
Standstill Agreement, between the Company and a Strategic Investor,
substantially in the form of Exhibit E attached hereto.
"Strategic Merger" means a merger or other business combination involving the
Company (a) in which the Class A Holders are entitled to retain or receive, as
the case may be, voting equity securities of the surviving parent entity in
exchange for or in respect of (by conversion or otherwise) such Class A Stock,
with an aggregate Fair Market Value equal to at least 75% of the sum of (i) the
Fair Market Value of all consideration which such Class A Holders have a right
to receive with respect to such merger or other business combination, and (ii)
if the Company is the surviving parent entity, the Fair Market Value of the
equity securities of the surviving parent entity which the Class A Holders are
entitled to retain, (b) immediately after which the surviving parent entity is
an entity whose voting equity securities are registered pursuant to Section
12(b) or Section 12(g) of the Exchange Act or which otherwise has any class or
series of its voting equity securities held by at least 500 holders and (c)
immediately after which no Person or Group (other than the Class A Holders)
owns Voting Securities of such surviving parent entity with Votes equal to more
than 35 percent of the Voting Power of such surviving parent entity.
"Subsidiary" means, with respect to any Person (the "Parent"), any other
Person in which the Parent, one or more direct or indirect Subsidiaries of the
Parent, or the Parent and one or more of its direct or indirect
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Subsidiaries (a) have the ability, through ownership of securities individually
or as a group, ordinarily, in the absence of contingencies, to elect a majority
of the directors (or individuals performing similar functions) of such other
Person, and (b) own more than 50% of the equity interests, provided that Atlas
shall be deemed to be a Subsidiary of each of FT and DT.
"Supplemental Preference Stock Closing" has the meaning set forth in Section
2.3 hereof.
"Supplemental Preference Stock Closing Date" has the meaning set forth in
Section 2.3(b) hereof.
"Surviving Representations" has the meaning set forth in Section 11.1 hereof.
"Target Price" means $47.225 (subject to adjustment as provided in the Class
A Provisions).
"Taxes" means all federal, state, local and foreign income, profits,
franchise, sales, use, occupancy, property, transfer, withholding, payroll,
receipts, excise and other taxes, fees, duties and governmental charges
(including interest, additions thereto and penalties thereon) whether or not
based in whole or in part on income.
"Third Party Approval" means any consent, waiver, grant, concession, license,
authorization, permit, franchise or approval of, or notice to, any Person other
than a Governmental Authority.
"Trading Day" means, with respect to any security, any day on which the
principal national securities exchange on which such security is listed or
admitted to trading, or NASDAQ, if such security is listed or admitted to
trading thereon, is open for the transaction of business (unless such trading
shall have been suspended for the entire day) or, if such security shall have
been not listed or admitted to trading on any national securities exchange or
NASDAQ, any day other than a Saturday, Sunday, or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
"Transfer" means any act pursuant to which, directly or indirectly, the
ownership of the assets or securities in question is sold, transferred,
conveyed, delivered or otherwise disposed, but shall not include (a) any grant
of Liens, (b) any conversion or exchange of any security of the Company
pursuant to a merger or other business combination involving the Company, (c)
any transfer of ownership of assets to the surviving entity in a Strategic
Merger or pursuant to any other merger or other business combination not
prohibited by the Class A Provisions, or (d) any foreclosure or other execution
upon any of the assets of the Company or any of its Subsidiaries other than
foreclosures resulting from Lien Transfers.
"Triple Play Activities" means (a) the ownership of any equity or other
interests in MajorCo, L.P. or any of its successors or Affiliates; the
enforcement or performance of any of the rights or obligations of the Company
or any Subsidiary of the Company pursuant to the Agreement of Limited
Partnership of MajorCo, L.P. or any other agreement or arrangement contemplated
thereby, except to the extent relating to the provision of services by the
Company as the long distance telecommunications provider to MajorCo, L.P.; or
any activities or services of MajorCo, L.P. or any of its successors or
Affiliates; (b) the ownership of any equity or other interests in any Teleport
Entity (as that term is defined in the Contribution Agreement (the
"Contribution Agreement"), dated as of March 28, 1995, by and among TCI Network
Services, Comcast Telephony Services, Cox Telephony Partnership, MajorCo, L.P.
and NewTelco, L.P.); or any activities or services of any Teleport Entity or
any of their respective successors or Affiliates; and (c) the ownership of any
equity or other interests in PhillieCo, L.P., or any of its successors or
Affiliates; the enforcement or performance of any of the rights or obligations
of the Company or any Subsidiary of the Company pursuant to the Amended and
Restated Agreement of Limited Partnership of PhillieCo, L.P., dated as of
February 17, 1995, or any other agreement or arrangement contemplated thereby,
except to the extent relating to the provision of services by the Company as
the long distance telecommunications provider to PhillieCo, L.P.; or any
activities or services of PhillieCo, L.P. or any of its successors or
Affiliates.
"Upper Threshold Sprint Price" means, subject to adjustment as provided in
the Class A Provisions, $37.780.
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"Vote" means, with respect to any entity, the ability to cast a vote at a
stockholders', members' or comparable meeting of such entity with respect to
the election of directors, managers or other members of such entity's governing
body, or the ability to cast a general partnership or comparable vote, provided
that with respect to the Company only, the term "Vote" means the ability to
exercise general voting power (as opposed to the exercise of special voting or
disapproval rights such as those set forth in the Class A Provisions) with
respect to matters other than the election of directors at a meeting of the
stockholders of the Company.
"Voting Power" means, with respect to any entity as at any date, the
aggregate number of Votes outstanding as at such date in respect of such
entity.
"Voting Securities" means, with respect to an entity, any capital stock or
debt securities of such entity if the holders thereof are ordinarily, in the
absence of contingencies, entitled to a Vote, even though the right to such
Vote has been suspended by the happening of such a contingency, and in the case
of the Company, shall include, without limitation, the Common Stock and the
Class A Stock, but shall not include any shares issued pursuant to the Rights
Agreement to the extent such issuance is caused by action of a Class A Holder.
"Weighted Average Price" means the weighted average per unit price paid by
the purchasers of any capital stock, debt instrument or security of the
Company. In determining the price of shares of Common Stock or Class A Common
Stock issued upon the conversion or exchange of securities or issued upon the
exercise of options, warrants or other rights, the consideration for such
shares shall be deemed to include the price paid to purchase the convertible
security or the warrant, option or other right, plus any additional
consideration paid upon conversion or exercise. If any portion of the price
paid is not cash, the Independent Directors (acting by majority vote) shall
determine in good faith the Fair Market Value of such non-cash consideration.
If any new shares of Common Stock are issued together with other shares or
securities or distributions of other assets of the Company for consideration
which covers both the new shares and such other shares, securities or other
assets, the portion of such consideration allocable to such new shares shall be
determined in good faith by the Independent Directors (acting by majority
vote), in each case as certified in a resolution sent to all Class A Holders.
"Wholly-Owned Subsidiaries" means companies or other business organizations
all of the outstanding Voting Securities of which are owned, directly or
indirectly, by either or both of FT and DT, other than any de minimis ownership
required by Applicable Law.
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1. First Closing. (a) (i) The Parties shall schedule the first
closing of the purchase and sale of shares of Class A Stock hereunder (the
"First Closing") for the tenth Business Day after all the conditions set forth
in Article III are reasonably expected to be satisfied, except for conditions
to be satisfied concurrently with the First Closing. Prior to scheduling the
date of the First Closing, the Parties shall consult with regard to the status
of such conditions with a view to determining when they will be satisfied. The
First Closing shall take place ten Business Days after the date on which all
conditions set forth in Article III are satisfied (except for those conditions
to be satisfied concurrently with the First Closing), provided that the Company
shall retain discretion over the timing of the Cellular Spin-off, and if the
Cellular Spin-off Date shall occur less than 35 Trading Days before the date on
which the First Closing is otherwise scheduled to occur, the First Closing
shall instead occur on the 35th Trading Day after the Cellular Spin-off Date,
and provided, further, that the First Closing may take place at such other date
and time as the Parties shall agree in writing.
(ii) When pursuant to paragraph (b) of this Section 2.1 or Section 3(b) of
the Class A Provisions, the Company, on the one hand, or FT and DT, on the
other hand, may make an election with respect to the purchase price of the
shares of Class A Common Stock to be purchased at the First Closing or the
Initial
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Conversion Price of shares of Class A Preference Stock to be purchased at the
First Closing, such election shall be made by notice delivered by the Company
to FT and DT, or by FT and DT to the Company, as the case may be, at least five
Business Days (or in the case of a First Closing FT/DT Notice delivered
pursuant to Section 2.1(b)(ii)(I)(B) hereof, at least seven Business Days)
prior to the date of the First Closing (such notice being referred to herein as
a "First Closing Company Notice" or "First Closing FT/DT Notice", as the case
may be), provided that the Company may only deliver such a First Closing
Company Notice if a majority of the Continuing Directors shall have first
approved (unless such approval is not required pursuant to Section 11.13), at a
meeting of Directors at which at least seven Continuing Directors are present,
the setting of the purchase price of the shares of Class A Common Stock to be
purchased at the First Closing or the Fixing of the Initial Conversion Price of
the shares of Class A Preference Stock to be purchased at the First Closing, as
the case may be, by the Company as provided in Section 3(b) of the Class A
Provisions. If both the Company, on the one hand, and FT and DT, on the other,
deliver First Closing Notices, the First Closing Notice first delivered in
accordance with Section 11.7 hereof shall be operative and the second shall be
of no force or effect.
(b) Upon the terms and subject to the conditions of this Agreement, the
Company shall issue, sell and deliver to each of FT and DT, and each of FT and
DT, severally and not jointly, shall purchase and accept, shares of Class A
Common Stock or Class A Preference Stock, as the case may be, at the First
Closing as set forth below in this Section 2.1:
(i) FT and DT shall purchase 86,236,036 shares of Class A Common Stock
(subject to adjustment as provided in Sections 2.6 and 2.7 hereof) at the
applicable price specified below in this Section 2.1(b)(i) and determined
at the date of the First Closing, if at least 35 Trading Days prior to the
date of the First Closing, the Cellular Spin-off Date shall have occurred
or the Company shall have notified FT and DT that the Company has abandoned
the Cellular Spin-off (a "Notice of Abandonment") at least ten Business
Days before the First Closing, as follows:
(x) if the Company shall have timely delivered a Notice of
Abandonment to FT and DT, the purchase price of such shares of Class A
Common Stock shall be:
(I) the Target Price, if (A) the Average Sprint Price determined
at the date of the First Closing is within the Sprint Price Range,
or (B) such Average Sprint Price is below the Lower Threshold Sprint
Price and FT and DT have timely delivered to the Company a First
Closing FT/DT Notice specifying their election to purchase such
shares of Class A Common Stock at the Target Price;
(II) the Maximum Price (determined with reference to such Average
Sprint Price), if such Average Sprint Price is above the Upper
Threshold Sprint Price; or
(III) the Minimum Price (determined with reference to such Average
Sprint Price), if such Average Sprint Price is below the Lower
Threshold Sprint Price and the Company shall have timely delivered
to FT and DT a First Closing Company Notice specifying its election
to issue and sell such shares of Class A Common Stock at such
Minimum Price; or
(y) if the Cellular Spin-off Date has occurred, the purchase price of
such shares of Class A Common Stock shall be:
(I) the New Target Price, if (A) such Average Sprint Price is
within the New Sprint Price Range, or (B) such Average Sprint Price
is below the New Lower Threshold Sprint Price and FT and DT have
timely delivered to the Company a First Closing FT/DT Notice
specifying their election to purchase such shares of Class A Common
Stock at the New Target Price;
(II) the New Maximum Price (determined with reference to such
Average Sprint Price), if such Average Sprint Price is above the New
Upper Threshold Sprint Price; or
(III) the Minimum Price (determined with reference to such Average
Sprint Price), if such Average Sprint Price is below the New Lower
Threshold Sprint Price and the Company has
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timely delivered to FT and DT a First Closing Company Notice
specifying its election to issue and sell such shares of Class A
Common Stock at such Minimum Price.
(ii) FT and DT shall purchase shares of Class A Preference Stock if (x)
the Cellular Spin-off Date has occurred or a Notice of Abandonment has been
delivered, but the Average Sprint Price determined at the date of the First
Closing is below the New Lower Threshold Sprint Price or the Lower
Threshold Sprint Price, as the case may be, and neither FT and DT, on the
one hand, nor the Company, on the other hand, have timely delivered a First
Closing Notice, or (y) the Cellular Spin-off Date has not occurred and the
Company has not timely delivered a Notice of Abandonment, as follows, all
such shares of Class A Preference Stock to be purchased for a price equal
to their liquidation value:
(I) if the Cellular Spin-off Date has not occurred and the Company
has not timely delivered a Notice of Abandonment and if (A) such
Average Sprint Price is within the Sprint Price Range or (B) such
Average Sprint Price is below the Lower Threshold Sprint Price and FT
and DT shall have timely delivered to the Company a First Closing FT/DT
Notice specifying their election to purchase shares of Class A
Preference Stock with an Initial Conversion Price equal to the Target
Price in accordance with this clause (I), such shares of Class A
Preference Stock shall be purchased at a per share price, and have a
per share liquidation value, equal to the Target Price and shall have
an aggregate liquidation value (and purchase price) of $3.0 billion (or
such lesser amount not less than $2.0 billion, as determined by the
Company upon notice to FT and DT not later than five Business Days
prior to the First Closing), such shares to have an Initial Conversion
Price equal to the Target Price;
(II) if the Cellular Spin-off Date has not occurred and the Company
has not timely delivered a Notice of Abandonment and if such Average
Sprint Price is above the Upper Threshold Sprint Price, such shares of
Class A Preference Stock will be purchased at a per share price, and
have a per share liquidation value, equal to the Target Price and shall
have an aggregate liquidation value (and purchase price) of $3.0
billion (or such lesser amount not less than $2.0 billion as determined
by the Company upon notice to FT and DT not later than five Business
Days prior to the First Closing), such shares to have an Initial
Conversion Price equal to the Maximum Price (determined with reference
to such Average Sprint Price);
(III) if the Cellular Spin-off Date has not occurred, the Company has
not timely delivered a Notice of Abandonment, such Average Sprint Price
is below the Lower Threshold Sprint Price and the Company has timely
delivered to FT and DT a First Closing Company Notice specifying its
election to issue and sell such shares of Class A Preference Stock with
an Initial Conversion Price equal to the Minimum Price (determined with
reference to such Average Sprint Price) in accordance with this clause
(III), such shares of Class A Preference Stock shall be purchased at a
per share price, and have a per share liquidation value, equal to the
Target Price and shall have an aggregate liquidation value (and
purchase price) of $3.0 billion (or such lesser amount not less than
$2.0 billion as determined by the Company upon notice to FT and DT not
later than five Business Days prior to the First Closing), such shares
to have an Initial Conversion Price equal to such Minimum Price; or
(IV) if (A) the Cellular Spin-off Date has not occurred and the
Company has not timely delivered a Notice of Abandonment, such Average
Sprint Price is below the Lower Threshold Sprint Price, and neither the
Company, on the one hand, nor FT and DT on the other hand, have timely
delivered a First Closing Notice, or (B) the conditions described in
Section 2.1(b)(ii)(x) are satisfied, such shares of Class A Preference
Stock shall be purchased at a per share price, and have a per share
liquidation value equal to the Target Price, and shall have an
aggregate liquidation value (and purchase price) of $1.5 billion, such
shares to be convertible as provided in Section 3 of the Class A
Provisions,
the purchase price in each case payable as provided in this Section 2.1. The
Company may only deliver the notice referenced in clause (I), (II) or (III) of
this Section 2.1(b)(ii) decreasing the aggregate liquidation value of the
shares of Class A Preference Stock to be purchased if a majority of the
Continuing Directors shall
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have first approved (unless such approval is not required pursuant to Section
11.13 hereof), at a meeting of Directors at which at least seven Continuing
Directors are present, so decreasing the aggregate liquidation value of the
shares of Class A Preference Stock to be purchased at the First Closing in
accordance with such notice.
(c) The First Closing shall take place at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York, at 10:00 a.m., New York City
time, on the date determined in accordance with Section 2.1(a)(i) hereof.
(i) At the First Closing, the Company shall deliver, or cause to be
delivered, the following to each of FT and DT:
(x) certificates representing one-half of the shares of Class A
Common Stock or Class A Preference Stock, as the case may be, to be
purchased at the First Closing, in the name of FT or DT, as the case
may be, against payment of the purchase price therefor, as provided
below; and
(y) the opinions, certificates, agreements and other documents
required to be delivered by the Company pursuant to Article III.
(ii) At the First Closing, each of FT and DT shall deliver the following
to the Company:
(x) cash in the amount of one-half of the purchase price provided for
in Section 2.1(b) hereof, in each case by wire transfer of immediately
available funds to an account designated by the Company at least five
Business Days prior to the Initial Issuance Date; and
(y) the opinions, certificates, agreements and other documents
required to be delivered by FT or DT, as the case may be, pursuant to
Article III.
(iii) The purchase of shares of capital stock by FT and DT pursuant to
this Section 2.1 shall be consummated concurrently, and no purchase of
shares by FT or DT pursuant to this Section 2.1 shall be made unless and
until the concurrent purchase by the other Party is so effected.
Section 2.2. Additional Preference Stock Closing. (a) If (i) FT and DT shall
have purchased shares of Class A Preference Stock at the First Closing pursuant
to Section 2.1(b)(ii)(IV)(A) hereof, (ii) the Conversion Price of such shares
thereafter becomes Fixed, and (iii) the Cellular Spin-off Date has not occurred
and the Company has not delivered a Notice of Abandonment, then, upon the terms
and subject to the conditions of this Agreement, the Company shall issue, sell
and deliver to each of FT and DT, and each of FT and DT, severally and not
jointly, shall purchase and accept, the number of additional shares of Class A
Preference Stock determined in accordance with the following sentence. Such
shares shall have a per share liquidation value equal to the Target Price and
an aggregate liquidation value of $1.5 billion (or such amount not less than
$0.5 billion, as determined by the Company and set forth in the Additional
Preference Stock Closing Notice) and shall be purchased at one Additional
Preference Stock Closing (or such greater number of Additional Preference Stock
Closings, not to exceed three, as determined by the Company and set forth in
the Additional Preference Stock Closing Notice). Such shares of Class A
Preference Stock shall be purchased for a purchase price equal to their
liquidation value, the purchase price in each case payable as provided in this
Section 2.2. No Party shall have any obligations under this Section 2.2
following the occurrence of the Cellular Spin-off Date or the delivery of a
Notice of Abandonment.
(b) Each closing (each, an "Additional Preference Stock Closing") of the
purchase of such shares of Class A Preference Stock shall take place at the
offices of Debevoise & Plimpton, 875 Third Avenue, New York, New York, at 10:00
a.m., New York City time, on the date (the "Additional Preference Stock Closing
Date") which (i) in the case of the first Additional Preference Stock Closing,
shall be the tenth Business Day after the later of (x) the date the Conversion
Price of the Class A Preference Stock becomes Fixed and (y) the date all of the
conditions in respect of the Additional Preference Stock Closing set forth in
Article IV have been fulfilled or waived (except for such conditions to be
fulfilled concurrently with the Additional Preference Stock Closing), and (ii)
in the case of any subsequent Additional Preference Stock Closing, the date
therefor set forth in the Additional Preference Stock Closing Notice, provided
that no Additional Preference Stock
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Closing shall take place (w) more than one year after the first Additional
Preference Stock Closing, (x) more than five years and 60 days after the
Initial Issuance Date (as such period may be extended pursuant to the provisos
to Sections 4.2(a), 4.2(b), 4.3(a) and 4.3(b) hereof), (y) after the occurrence
of the Cellular Spin-off Date or (z) after delivery by the Company of a Notice
of Abandonment, and provided, further, that any Additional Preference Stock
Closing may take place at such other date and time as the Parties shall agree
in writing.
(i) At each Additional Preference Stock Closing, the Company shall
deliver, or cause to be delivered, the following to each of FT and DT:
(x) certificates representing one-half of the shares of Class A
Preference Stock to be purchased at such Additional Preference Stock
Closing in the name of FT or DT, respectively, against payment of the
purchase price therefor, as provided below; and
(y) the certificates and other documents required to be delivered by
the Company pursuant to Article IV.
(ii) At each Additional Preference Stock Closing, each of FT and DT shall
deliver the following to the Company:
(x) cash in the amount of one-half of the purchase price for the
shares of Class A Preference Stock being purchased at such Additional
Preference Stock Closing, such cash to be delivered by wire transfer of
immediately available funds to an account designated by the Company at
least five Business Days prior to the date of such Additional
Preference Stock Closing; and
(y) the certificates and other documents required to be delivered by
FT or DT, as the case may be, pursuant to Article IV.
(iii) The purchase of shares of Class A Preference Stock by FT and DT
pursuant to this Section 2.2 shall be consummated concurrently, and no
purchase of shares by FT or DT pursuant to this Section 2.2 shall be deemed
to be effected unless and until the concurrent purchase by the other Party
is so effected.
(c) If FT and DT have purchased shares of Class A Preference Stock at the
First Closing pursuant to Section 2.1(b)(ii)(IV)(A) hereof, the Company may,
not later than five Business Days after the date on which the Conversion Price
of such shares first becomes Fixed, deliver to FT and DT a notice (the
"Additional Preference Stock Closing Notice") specifying
(i) the number of Additional Preference Stock Closings scheduled to
occur, provided that
(x) no more than one Additional Preference Stock Closing shall be
scheduled to occur unless the aggregate liquidation value of the Shares
to be issued and delivered at all Additional Preference Stock Closings
exceeds $500 million, and
(y) there shall not be more than three Additional Preference Stock
Closings,
(ii) if more than one Additional Preference Stock Closing is scheduled,
the date of each subsequent Additional Preference Stock Closing, provided
that no Additional Preference Stock Closing may occur more than one year
after the date of the first Additional Preference Stock Closing, and
(iii) if more than one Additional Preference Stock Closing is scheduled,
the liquidation value of the Shares to be issued and delivered at each
Additional Preference Stock Closing, provided, further, that
(x) the aggregate liquidation value of the Shares purchased at the
first Additional Preference Stock Closing shall be at least $500
million,
(y) the aggregate liquidation value of the Shares to be purchased at
any subsequent Additional Preference Stock Closing shall be at least
$100 million, and
(z) if there are three Additional Preference Stock Closings, the
Shares to be purchased at the second and third Additional Preference
Stock Closings must have identical aggregate liquidation values,
provided that the Company may only deliver such Additional Preference
Stock Closing
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Notice with respect to a decrease in the aggregate liquidation value of
the shares of Class A Preference Stock to be purchased at the
Additional Preference Stock Closing or Closings if a majority of the
Continuing Directors shall have first approved (unless such approval is
not required pursuant to Section 11.13), at a meeting of Directors at
which at least seven Continuing Directors are present, such decrease in
the aggregate liquidation value of the shares of Class A Preference
Stock to be purchased at the Additional Preference Stock Closing or
Closings.
Section 2.3. Supplemental Preference Stock Closing. (a) If the Class A
Holders make an election to defer conversion of the Class A Preference Stock in
accordance with Section 3(a)(iii) of the Class A Provisions, the Company shall
issue, sell and deliver to each of FT and DT, and each of FT and DT, severally
and not jointly, shall purchase and accept, additional shares of Class A
Preference Stock with an aggregate liquidation value equal to the excess of (i)
the product of 86,236,036 (subject to adjustment as provided in Sections 2.6
and 2.7 hereof) and the per share Conversion Price over the (ii) aggregate
liquidation value of the shares of Class A Preference Stock previously
purchased (whether or not such Shares have been Transferred or redeemed). The
purchase price of each such additional share shall be equal to its liquidation
value.
(b) A closing (the "Supplemental Preference Stock Closing") of the purchase
of such shares of Class A Preference Stock shall take place at the offices of
Debevoise & Plimpton, 875 Third Avenue, New York, New York, at 10:00 a.m., New
York City time, on the date (the "Supplemental Preference Stock Closing Date")
which is the tenth Business Day after the later of (i) the date of the election
specified in Section 3(a)(iii) of the Class A Provisions and (ii) the date all
of the conditions in respect of the Supplemental Preference Stock Closing set
forth in Article IV have been fulfilled or waived (except for such conditions
to be fulfilled concurrently with the Supplemental Preference Stock Closing),
provided that the Supplemental Preference Stock Closing shall not take place
more than five years and 60 days after the date of the First Closing (as such
period may be extended pursuant to the provisos to Sections 4.2(a), 4.2(b),
4.3(a) and 4.3(b) hereof) and that the Supplemental Preference Stock Closing
may take place at such other date and time as the Parties shall agree in
writing.
(i) At the Supplemental Preference Stock Closing, the Company shall
deliver, or cause to be delivered, the following to each of FT and DT:
(x) certificates representing one-half of the shares of Class A
Preference Stock to be purchased at the Supplemental Preference Stock
Closing in the name of FT or DT, respectively, against payment of the
purchase price therefor, as provided below; and
(y) the certificates and other documents required to be delivered by
the Company pursuant to Article IV.
(ii) At the Supplemental Preference Stock Closing, each of FT and DT
shall deliver the following to the Company:
(x) cash in the amount of one-half of the purchase price for such
shares of Class A Preference Stock being purchased, such cash to be
delivered by wire transfer of immediately available funds to an account
designated by the Company at least five Business Days prior to the
Supplemental Preference Stock Closing Date; and
(y) the certificates and other documents required to be delivered by
FT or DT, as the case may be, pursuant to Article IV.
(iii) The purchase of shares of Class A Preference Stock by FT and DT
pursuant to this Section 2.3 shall be consummated concurrently, and no
purchase of shares by FT or DT pursuant to this Section 2.3 shall be deemed
to be effected unless and until the concurrent purchase by the other Party
is so effected.
Section 2.4. Deferred Common Stock Closing. (a) If (i) FT and DT shall have
purchased shares of Class A Preference Stock at the First Closing, (ii) the
Cellular Spin-off Date shall have occurred or the Company
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shall have delivered a Notice of Abandonment, (iii) the conditions to the
establishment of the Conversion Date (as defined in the Articles) have been
satisfied, (iv) the shares of Class A Preference Stock are to be converted on
the Conversion Date pursuant to the Class A Provisions, and (v) such conversion
has not been deferred as contemplated by Section 2.3 hereof, then, upon the
terms and subject to the conditions of this Agreement, the Company shall issue,
sell (if applicable) and deliver to each of FT and DT, and each of FT and DT,
severally and not jointly, shall purchase and accept a number of shares of
Class A Common Stock equal to the excess of (i) 86,236,036 shares (subject to
adjustment as provided in Section 2.6 or 2.7) over (ii) the sum of (x) the
number of such shares issued upon conversion of the outstanding shares of Class
A Preference Stock, and (y) the number of shares that would have been issued in
respect of shares of Class A Preference Stock previously purchased but which
have been Transferred to Persons other than Class A Holders or redeemed, for a
per share purchase price equal to the Conversion Price at which such shares of
Class A Preference Stock were so converted into shares of Class A Common Stock,
the purchase price payable as provided in this Section 2.4.
(b) A closing (the "Deferred Common Stock Closing") of the purchase of shares
of Class A Common Stock pursuant to this Section 2.4 shall take place at the
offices of Debevoise & Plimpton, 875 Third Avenue, New York, New York, at 10:00
a.m., New York City time, on the date (the "Deferred Common Stock Closing
Date") which is the later of (i) the Conversion Date, and (ii) the date all of
the conditions set forth in Article IV have been fulfilled or waived, provided
that the Deferred Common Stock Closing shall not take place more than five
years and 60 days after the date of the First Closing (as such period may be
extended pursuant to the provisos to Sections 4.2(a), 4.2(b), 4.3(a) and 4.3(b)
hereof) or fewer than 30 Business Days after the date of the Cellular Spin-off,
if any, by the Company, and provided, further, that the Deferred Common Stock
Closing may take place at such other date and time as the Parties shall agree
in writing.
(i) At the Deferred Common Stock Closing, the Company shall deliver, or
cause to be delivered, the following to each of FT and DT:
(x) certificates representing one-half of the shares of Class A
Common Stock to be purchased at the Deferred Common Stock Closing, in
the name of FT or DT, respectively, against payment of the purchase
price therefor, as provided below;
(y) certificates representing the shares of Class A Common Stock to
be delivered by the Company to FT and DT upon the conversion of the
Class A Preference Stock if the Deferred Common Stock Closing shall
take place on the Conversion Date; and
(z) the certificates and other documents required to be delivered by
the Company pursuant to Article IV.
(ii) At the Deferred Common Stock Closing, each of FT and DT shall
deliver the following to the Company:
(x) certificates representing the outstanding shares of Class A
Preference Stock for conversion if the Deferred Common Stock Closing
shall take place on the Conversion Date and cash in the amount of one-
half of the purchase price for the shares being purchased, such cash to
be delivered by wire transfer of immediately available funds to an
account designated by the Company at least five Business Days prior to
the Deferred Common Stock Closing Date; and
(y) the certificates and other documents required to be delivered by
FT or DT, as the case may be, pursuant to Article IV.
(iii) The purchase of shares of Class A Common Stock by FT and DT
pursuant to this Section 2.4 shall be consummated concurrently, and no
purchase of shares by FT or DT pursuant to this Section 2.4 shall be deemed
to be effected unless and until the concurrent purchase by the other Party
is so effected.
Section 2.5. Purchases of Optional Shares. (a) Upon the terms and subject to
the conditions of this Agreement, each of FT and DT shall have the right (but
not the obligation) to purchase from the Company, and the Company shall issue,
sell and deliver to each of FT and DT, as the case may be, shares ("Optional
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Shares") of either Class A Common Stock, if the Class A Common Issuance Date
has occurred, or Class A Preference Stock, if the Supplemental Preference Stock
Closing has occurred, in a number equal to up to one-half of:
(i) that number of additional shares of Class A Common Stock equal to, or
Class A Preference Stock with a related number of Class A Conversion Shares
equal to, 25% of the number of (x) shares of Common Stock issued by the
Company after June 14, 1994 and on or prior to the Investment Completion
Date but excluding shares of Common Stock issued in respect of the exercise
of stock options, warrants or other rights (except rights issued pursuant
to the Rights Agreement) in existence on or before the Initial Issuance
Date (including any issued pursuant to employee benefit plans) or upon the
conversion of any securities outstanding on or before the Initial Issuance
Date, for a per share purchase price equal to (A) in the case of Class A
Common Stock, the Weighted Average Price for such Common Stock, and (B) in
the case of Class A Preference Stock, the product of the Weighted Average
Price for such Common Stock multiplied by the number of Class A Conversion
Shares related to one share of Class A Preference Stock outstanding
immediately prior to such purchase and (y) shares of Common Stock issued by
the Company after June 14, 1994 and on or prior to the Initial Issuance
Date in respect of the exercise of stock options, warrants or other rights
(except rights issued pursuant to the Rights Agreement) in existence at any
time on or before the Initial Issuance Date (including any issued pursuant
to employee benefit plans) or upon the conversion of any securities
outstanding on or before the Initial Issuance Date, for a per share
purchase price equal to, (A) in the case of Class A Common Stock, the
higher of the price at which Class A Common Stock was issued and sold to FT
and DT at the Class A Common Issuance Date and the Weighted Average Price
for such Common Stock, and (B) in the case of Class A Preference Stock, the
higher of (I) the price at which Class A Preference Stock was sold to FT
and DT at the Supplemental Preference Stock Closing, and (II) the product
of the Weighted Average Price for such Common Stock multiplied by the
number of Class A Conversion Shares related to one share of Class A
Preference Stock outstanding immediately prior to such purchase, provided
that, notwithstanding clause (y) above, shares of Class A Stock purchased
hereunder with respect to the issuance of Excess Shares shall be purchased
for a per share purchase price equal to (A) in the case of Class A Common
Stock, the Weighted Average Price for such Excess Shares, and (B) in the
case of Class A Preference Stock, the product of the Weighted Average Price
for such Excess Shares multiplied by the number of Class A Conversion
Shares related to one share of Class A Preference Stock outstanding
immediately prior to such purchase. As used in this clause (i), "Excess
Shares" means those shares of Common Stock issued by the Company after the
date hereof and on or prior to the Initial Issuance Date (other than
pursuant to employee benefit plans) in respect of the exercise of rights
("Rights") to purchase Common Stock or similar instruments (except rights
issued pursuant to the Rights Agreement) issued after the date hereof and
on or prior to the Initial Issuance Date that, when aggregated with all
other shares of Common Stock which have been issued by the Company after
the date hereof in respect of the exercise of Rights issued after the date
hereof and on or prior to the Initial Issuance Date, exceed five percent of
the number of shares of Common Stock outstanding on the date hereof
(adjusted to reflect any stock split, subdivision, stock dividend or other
reclassification, consolidation or combination of the Company's Voting
Securities after the date hereof); and
(ii) if after June 14, 1994 and on or prior to the Investment Completion
Date the Company shall have issued or shall issue Voting Securities other
than Common Stock or Class A Stock, a number of additional shares of Class
A Stock sufficient for such additional shares of Class A Stock to represent
25% of the Votes represented by such Voting Securities, such Class A Stock
to be purchased for a per share purchase price equal to (A) in the case of
Class A Common Stock, the Market Price of a share of Common Stock on the
date or dates such Voting Securities are issued, and (B) in the case of
Class A Preference Stock, the product of the Market Price of a share of
Common Stock on the date or dates such Voting Securities are issued,
multiplied by the number of Class A Conversion Shares related to one share
of Class A Preference Stock outstanding immediately prior to such purchase,
provided that shares of Class A Preference Stock purchased at the Optional
Shares Closing shall have a per share liquidation value equal to their per
share purchase price.
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(b) Within ten Business Days following the Investment Completion Date, the
Company shall deliver to each of FT and DT written notice of the number of
Optional Shares they are entitled to purchase, setting forth in reasonable
detail a description of the issuances of Voting Securities that gave rise to FT
and DT's right to purchase the Optional Shares and the basis for its
computation of the price per share of Common Stock associated with each
Optional Share. Each of FT and DT may exercise its right to purchase any or all
of the Optional Shares by written notice delivered to the Company prior to the
tenth Business Day after the Company's delivery of such notice (the "Notice of
Exercise") setting forth the number of Optional Shares that it wishes to
purchase and the related per share price or prices for such Optional Shares.
The Notice of Exercise shall constitute a binding commitment on the part of the
Buyer in question to purchase such Optional Shares upon the terms set forth in
this Agreement.
(c) The closing (the "Optional Shares Closing") of the purchase and sale of
the Optional Shares, if any, shall take place at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York at 10:00 a.m., New York City
time, on the thirtieth Business Day after the Company's receipt of the notice
described in clause (b), or at such other date and time as the Parties shall
agree in writing, provided that, if the Optional Shares Closing shall not have
occurred prior to the 60th day following the Investment Completion Date, the
Class A Holders may, upon written notice delivered to the Company, be released
from all obligations to purchase Shares pursuant to this Section 2.5,
notwithstanding any delivery of the Notice of Exercise.
(i) At the Optional Shares Closing, the Company shall deliver, or cause
to be delivered, the following to each of FT and DT:
(x) certificates representing the number of Optional Shares to be
purchased by FT or DT, respectively, in the name of FT or DT, as the
case may be, against payment of the purchase price therefor; and
(y) the certificates and other documents required to be delivered by
the Company pursuant to Article V.
(ii) At the Optional Shares Closing, each of FT and DT shall deliver the
following to the Company:
(x) cash in the amount of the aggregate purchase price for the
Optional Shares to be purchased by it, by wire transfer of immediately
available funds to an account designated by the Company at least five
Business Days prior to the date of the Optional Shares Closing; and
(y) the certificates and other documents required to be delivered by
FT or DT, as the case may be, pursuant to Article V.
Section 2.6. Antidilution. The number of shares of Class A Stock to be
purchased by the Buyers hereunder, and, in accordance with the Class A
Provisions, the purchase price therefor and the dollar amounts used in
calculating the foregoing, shall be adjusted to reflect any stock split,
subdivision, stock dividend, or other reclassification, consolidation or a
combination of the Voting Securities of the Company or similar action or
transaction in each case occurring during the period beginning June 14, 1994
and ending on the Investment Completion Date, provided that no adjustment shall
be made under this Section 2.6 in respect of the Cellular Spin-off.
Section 2.7. Reduction of Purchased Shares. The number of shares of Class A
Stock to be purchased by FT and DT hereunder shall be reduced by the minimum
number of shares, if any, necessary so that, following the Investment
Completion Date, FT and DT and their respective Affiliates shall Beneficially
Own in the aggregate 20% of the sum of (a) the aggregate number of Votes of the
Company outstanding at that time and (b) the aggregate number of Votes
represented by the Voting Securities which FT and DT and their respective
Affiliates have committed to purchase from the Company. Any reduction in shares
pursuant to this Section 2.7 shall be borne one-half by each of FT and DT.
Section 2.8. Effect of Conversion. If after the Initial Issuance Date, the
Fundamental Rights (as such term is defined in the Stockholders' Agreement)
shall have terminated as to all outstanding shares of Class A
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Preference Stock, or all outstanding shares of Class A Common Stock shall have
converted into Common Stock, in each case pursuant to Section 7 of the Class A
Provisions, each share of Class A Stock to have been issued by the Company
pursuant to this Agreement shall (i) in the case of shares of Class A Common
Stock, instead be issued as one duly issued, fully paid and nonassessable share
of Common Stock, and (ii) in the case of shares of Class A Preference Stock,
instead be issued as that number of duly issued, fully paid and nonassessable
shares of Common Stock equal to the number of related Class A Conversion Shares
immediately prior to such issuance.
ARTICLE III
CONDITIONS TO THE FIRST CLOSING
Section 3.1. Conditions to Each Party's Obligations. The obligation of each
Party to consummate the transactions contemplated hereby at the First Closing
is subject to the fulfillment of each of the following conditions on or prior
to the Initial Issuance Date:
(a) All notifications required pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), to carry
out the transactions contemplated by this Agreement or by the Other
Agreements shall have been made, and the applicable waiting period and any
extensions thereof shall have expired or been terminated, without the
imposition of any Burdensome Condition.
(b) (i) The Commission of the European Communities, pursuant to Article
85(3) of the Treaty of Rome, shall have granted an exemption which exempts
the Joint Venture Documents and the transactions contemplated thereby (and,
if necessary, this Agreement and each Other Agreement, and the transactions
contemplated hereby and thereby) from the operation of Article 85(1) of the
Treaty of Rome, without the imposition of any Burdensome Condition, or (ii)
each Party shall have determined, in its individual and sole discretion,
that it is satisfied that such exemption will be granted in a reasonable
time and without the imposition of a Burdensome Condition.
(c) FT shall have received the approval of the French minister in charge
of economic affairs and finance (ministre charge de l'economie et des
finances) and the French minister in charge of posts and telecommunications
(ministre charge des postes et des telecommunications) to carry out the
transactions contemplated hereby, and by the Other Agreements and the Joint
Venture Documents, without the imposition of a Burdensome Condition.
(d) Either (i) DT shall have received the approval of the
Bundeskartellamt to carry out the transactions contemplated hereby, and by
the Other Agreements and the Joint Venture Documents, without the
imposition of a Burdensome Condition, or (ii) the exemption referred to in
clause (b)(i) of this Section 3.1 shall have been obtained.
(e) All other Governmental Approvals required to be obtained to
consummate the transactions contemplated by this Agreement, the Other
Agreements and the Joint Venture Documents shall have been obtained, and
all other applicable pre-consummation waiting periods shall have expired,
except for Governmental Approvals and waiting periods the failure of which
to obtain or satisfy would not, individually or in the aggregate, be
reasonably likely to impose a Burdensome Condition or materially and
adversely affect the ability of any Party to perform its obligations
hereunder or under the Other Agreements.
(f) No order of any Governmental Authority (including a court order)
shall have been entered that enjoins, restrains or prohibits consummation
of the transactions contemplated by this Agreement or the Other Agreements,
or puts in doubt the validity of this Agreement or the Other Agreements in
any material respect.
(g) No action shall have been taken by any Governmental Authority to
rescind or withdraw any of the Governmental Approvals described or referred
to in this Section 3.1 or to rescind the termination of the review and
investigation of the transactions contemplated by this Agreement and the
Other Agreements under Exon-Florio, and no action shall have been taken to
modify any such Governmental Approvals or any determination with respect to
the investigation under Exon-Florio in a manner that would impose a
Burdensome Condition.
B-32
(h) The stockholders of the Company shall have duly approved the
Proposals by the requisite vote at the Stockholders' Meeting.
(i) The Company shall have been advised by the New York Stock Exchange
that the Common Stock will continue to be listed on the New York Stock
Exchange after (i) the issuance and sale of the Class A Common Stock and/or
the Class A Preference Stock and (ii) the effectiveness of the provisions
of this Agreement, the Other Agreements and the Amendment.
(j) The conditions to closing set forth in Article 13 of the Joint
Venture Agreement shall have been fulfilled or validly waived and the
"Closing" as such term is defined in the Joint Venture Agreement shall have
occurred simultaneously with the First Closing.
(k) (i) An effective written order or other final action from the FCC
(either in the first instance or upon review or reconsideration) affirming
that (x) the transactions contemplated by this Agreement and the Other
Agreements do not result in a transfer of control within the meaning of
Section 310(d) of the Communications Act; (y) a level of foreign ownership
in the Company of up to 28 percent is not inconsistent with the public
interest; and (z) the transactions contemplated by this Agreement and the
Other Agreements are not otherwise inconsistent with the public interest,
or an effective written order or other final action by the FCC (either in
the first instance or upon review or reconsideration) to the effect that no
such approval is required; or
(ii) an effective written order from, or other final action taken by, the
FCC pursuant to delegated authority (either in the first instance or upon
review or reconsideration) affirming that (x) the transactions contemplated
by this Agreement and the Other Agreements do not result in a transfer of
control within the meaning of Section 310(d) of the Communications Act; (y)
a level of foreign ownership in the Company of up to 28 percent is not
inconsistent with the public interest; and (z) the transactions
contemplated by this Agreement and the Other Agreements are not otherwise
inconsistent with the public interest, or an effective written order from,
or other final action taken by, the FCC pursuant to delegated authority
(either in the first instance or upon review or reconsideration) to the
effect that no such approval is required, which order or final action shall
no longer be subject to further administrative review;
shall have been obtained, and shall not have been revoked or stayed as of
the Initial Issuance Date, and such order or final action shall not impose
any Burdensome Condition, provided that any Party may waive the requirement
that any such order or final action contain the provision described in
clause (y) of subsection (k)(i) or (k)(ii) of this Section 3.1 and such
waiver shall be binding upon all Parties. For purposes of Section
3.1(k)(ii), an order from, or other final action taken by, the FCC pursuant
to delegated authority shall be deemed no longer subject to further
administrative review:
(x) if no petition for reconsideration or application for review by
the FCC of such order or final action has been filed within thirty days
after the date of public notice of such order or final action, as such
30-day period is computed and as such date is defined in Sections 1.104
and 1.4 (or any successor provisions), as applicable, of the FCC's
rules, and the FCC has not initiated review of such order or final
action on its own motion within forty days after the date of public
notice of the order or final action, as such 40-day period is computed
and such date is defined in Sections 1.117 and 1.4 (or any successor
provisions) of the FCC's rules; or
(y) if any such petition for reconsideration or application for
review has been filed, or, if the FCC has initiated review of such
order or final action on its own motion, the FCC has issued an
effective written order or taken final action to the effect set forth
in clause (i) above.
Section 3.2. Conditions to the Buyers' Obligations. The obligation of each
Buyer to consummate the transactions contemplated hereby at the First Closing
is subject to the fulfillment of each of the following conditions on or prior
to the Initial Issuance Date:
(a) The representations and warranties of the Company made pursuant to
this Agreement and the Other Agreements shall be true and correct in all
material respects at and as of the date hereof and at
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and as of the Initial Issuance Date as if such representations and
warranties were made at and as of the Initial Issuance Date except for
representations and warranties that relate solely to a date prior to the
Initial Issuance Date and except to the extent contemplated or permitted by
this Agreement, the Other Agreements, the Articles as amended by the
Amendment or the Joint Venture Documents.
(b) The Company shall have duly performed and complied in all material
respects with each agreement, covenant and condition herein and in each
Other Agreement required to be performed or complied with by it on or prior
to the Initial Issuance Date.
(c) No Proceeding shall be pending or threatened that (i) restrains,
prohibits, prevents or materially changes, or presents a substantial
possibility of restraining, prohibiting, preventing or materially changing,
the terms of the transactions contemplated by this Agreement or the Other
Agreements or (ii) presents a substantial possibility of resulting in
material Damages to FT or DT or their Subsidiaries, or imposing a
Burdensome Condition as to FT or DT or Atlas, in each case arising from
such transactions. For purposes of this Section 3.2(c), the term "material
Damages" shall mean Damages material to any Buyer and its Subsidiaries
taken as a whole or material in relation to the amount to be invested by
such Buyer in the Company pursuant to this Agreement.
(d) The Company shall have delivered to each of the Buyers a certificate,
dated the Initial Issuance Date, signed by a duly authorized senior officer
certifying that the conditions specified in Sections 3.2(a), (b) and (c)
(as to Proceedings involving the Company) have been fulfilled.
(e) The Board of Directors shall have taken appropriate action so that
the provisions of Kan. Stat. Ann. Section 17-12,101 (1994) (the "Business
Combination Statute") restricting "business combinations" with "interested
stockholders" (each as defined in Kan. Stat. Ann. Section 17-12,100 (1994))
will not apply to FT, DT or any Person who as of the date hereof is an
Affiliate of FT or DT with respect to the purchase and sale of shares of
capital stock of the Company pursuant to this Agreement.
(f) Each of the Buyers shall have received opinions, dated as of the
Initial Issuance Date, from counsel to the Company reasonably satisfactory
to the Buyers which address favorably the matters set forth in Exhibit F
and which are in form and substance reasonably satisfactory to the Buyers.
(g) The Common Stock issuable upon conversion of the Class A Stock shall
have been duly authorized and reserved for issuance by the Company, and
listed on the New York Stock Exchange, subject to official notice of
issuance.
(h) The Company shall have duly executed and delivered the following:
(i) the Stockholders' Agreement;
(ii) the Registration Rights Agreement;
(iii) the FT Investor Confidentiality Agreement; and
(iv) the DT Investor Confidentiality Agreement.
(i) The Amendment shall have been duly adopted pursuant to the applicable
provisions of the General Corporation Code of the State of Kansas and filed
with the appropriate Kansas Governmental Authorities, and shall be in full
force and effect.
(j) The Company shall have duly adopted the Bylaws Amendment and such
amended terms shall be in full force and effect.
(k) No Major Competitor of FT or DT or of the Joint Venture shall have
acquired Voting Securities of the Company, if (i) such Voting Securities
were acquired as a result of a transaction with the Company, and following
such transaction such Major Competitor possesses a Percentage Ownership
Interest in the Company greater than ten percent, or (ii) the Company
otherwise has taken steps for the purpose of encouraging or facilitating an
acquisition by such a Major Competitor of a Percentage Ownership Interest
in the Company greater than ten percent (including, without limitation, by
any waiver, amendment or termination of the Rights Agreement). No Change of
Control shall have occurred.
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Section 3.3. Conditions to the Company's Obligations. The obligation of the
Company to consummate the transactions contemplated hereby at the First Closing
is subject to the fulfillment of each of the following conditions on or prior
to the Initial Issuance Date:
(a) The representations and warranties of each of the Buyers made
pursuant to this Agreement and the Other Agreements shall be true and
correct in all material respects at and as of the date hereof, and at and
as of the Initial Issuance Date as if such representations and warranties
were made at and as of the Initial Issuance Date except for representations
and warranties that relate solely to a date prior to the Initial Issuance
Date and except to the extent contemplated or permitted by this Agreement,
the Other Agreements, the Articles as amended by the Amendment or the Joint
Venture Documents.
(b) FT and DT and each of their respective Affiliates shall have duly
performed and complied in all material respects with each agreement,
covenant and condition herein and in each Other Agreement required to be
performed or complied with by it on or prior to the Initial Issuance Date.
(c) No Proceeding shall be pending or threatened that (i) restrains,
prohibits, prevents or materially changes, or presents a substantial
possibility of restraining, prohibiting, preventing or materially changing,
the terms of the transactions contemplated by this Agreement or the Other
Agreements, or (ii) presents a substantial possibility of resulting in
material Damages to the Company or its Subsidiaries, or imposing a
Burdensome Condition as to the Company or Sprint Sub, in each case arising
from such transactions. For purposes of this Section 3.3(c), the term
"material Damages" shall mean Damages material to the Company and its
Subsidiaries taken as a whole or material in relation to the amount to be
invested in the Company pursuant to this Agreement.
(d) Each Buyer shall have delivered to the Company a certificate, dated
the Initial Issuance Date, signed by a duly authorized senior officer,
certifying that the conditions specified in Sections 3.3(a), (b) and (c)
(as to Proceedings involving such Buyer) have been fulfilled.
(e) The Company shall have received opinions, dated as of the Initial
Issuance Date, from: (i) counsel to FT reasonably satisfactory to the
Company which address favorably the matters set forth in Exhibit G and
which are in form and substance reasonably satisfactory to the Company, and
(ii) counsel to DT reasonably satisfactory to the Company which address
favorably the matters set forth in Exhibit H and which are in form and
substance reasonably satisfactory to the Company.
(f) Each Buyer shall have duly executed and delivered the following:
(i) the Stockholders' Agreement; and
(ii) the Registration Rights Agreement.
(g) FT shall have duly executed and delivered the FT Investor
Confidentiality Agreement.
(h) DT shall have duly executed and delivered the DT Investor
Confidentiality Agreement.
ARTICLE IV
CONDITIONS TO AN ADDITIONAL PREFERENCE STOCK CLOSING, SUPPLEMENTAL
PREFERENCE STOCK CLOSING AND DEFERRED COMMON STOCK CLOSING
Section 4.1. Condition to Each Party's Obligations. The obligation of each
Party to consummate the transactions contemplated hereby at an Additional
Preference Stock Closing, Supplemental Preference Stock Closing, or Deferred
Common Stock Closing (each an "Article IV Closing") is subject to the
fulfillment of the condition that, on or prior to the date of the Article IV
Closing in question, no order of any Governmental Authority (including a court
order) shall have been entered that enjoins, restrains or prohibits
consummation of the transactions contemplated by this Agreement or the Other
Agreements or puts in doubt the validity of this Agreement or the Other
Agreements in any material respect, provided that, if such an order is entered,
the date of the Article IV Closing in question shall be delayed for a period of
not more than one year from
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the date on which such Article IV Closing would have occurred but for such
order (but not beyond the end of such one-year period), if during such time any
Party shall be appealing, challenging or otherwise attempting to resolve such
order in a diligent manner, provided, further, that the purchase price for
shares sold at such Article IV Closing shall be that which would have obtained
if no such order had been entered and such Article IV Closing had taken place
on the date on which it would have taken place but for such order.
Section 4.2. Conditions to the Buyers' Obligations. The obligation of each
Buyer to consummate the transactions contemplated hereby at an Article IV
Closing is subject to the fulfillment of each of the following conditions on or
prior to the date of such Article IV Closing:
(a) The representations and warranties of the Company set forth in:
(i) Sections 6.1, 6.2(a), 6.3 and 6.4 shall be true and correct in
all material respects at and as of the date hereof and at and as of the
date of such Article IV Closing as if such representations and
warranties were made at and as of such date except (x) with respect to
representations and warranties that relate solely to a date prior to
such date, and were true and correct in all material respects on such
prior date, and (y) to the extent contemplated or permitted by this
Agreement, the Other Agreements, the Articles as amended by the
Amendment or the Joint Venture Documents; and
(ii) the first two sentences of Section 6.5(a) (as to SEC Documents
filed prior to the Initial Issuance Date) and Section 6.6 (but in the
case of Section 6.6 only as to changes prior to the Initial Issuance
Date, but after the later of (x) the end of the quarter covered by the
last Quarterly Report on Form 10-Q of the Company filed prior to the
Initial Issuance Date, and (y) the end of the year covered by the last
Annual Report on Form 10-K of the Company filed prior to the Initial
Issuance Date) shall be true and correct in all material respects at
and as of the date hereof, except to the extent such failure to be true
and correct does not relate to, and is not reasonably likely to relate
to, a material adverse change in the business, operations, results of
operations, financial condition, assets or liabilities of the Company
compared to the last to be filed prior to the Initial Issuance Date of
the Annual Report on Form 10-K of the Company or the Quarterly Report
on Form 10-Q of the Company;
provided that if this condition fails to be satisfied, and such failure is
capable of being cured without adversely affecting in any material respect
the Buyers or their rights hereunder (other than as to the timing of such
Article IV Closing) or under the Other Agreements, the Articles as amended
by the Amendment or the Bylaws as amended by the Bylaws Amendment, or there
is a dispute as to whether such condition has been satisfied, the date of
the Article IV Closing in question may be delayed by the Company (i) for a
period of not more than 180 days from the date such Article IV Closing
would have occurred but for the failure of such condition to be satisfied,
if during such time the Company is attempting in a diligent manner to cause
such condition to be satisfied, or (ii) in the case of such a dispute until
the later to occur of (x) 90 days following the rendering of an order of a
court of competent jurisdiction to the effect that such condition involved
in such dispute was not satisfied, if during such 90-day period the Company
is attempting in a diligent manner to cause such condition to be satisfied,
and (y) 90 days following the rendering of a final and non-appealable
judgment of a court of competent jurisdiction following an appeal or
related action with respect to such order (if such judgment is to the
effect that such condition involved in such dispute was satisfied at or
prior to the end of the 90-day period provided in the immediately preceding
clause (x)), if the Company shall be prosecuting such appeal in a diligent
manner, provided, further, that the purchase price for shares sold at such
Article IV Closing shall be that which would have obtained but for the
delay pursuant to the proviso to this Section 4.2(a).
(b) The Company shall have performed and complied in all material
respects with its obligations under Section 8.8 of this Agreement; Article
FIFTH of the Articles as amended by the Amendment (to the extent such
Article relates to the rights of the holders of Class A Stock); the Class A
Provisions; and Articles III, IV, V and VI, and Sections 7.1, 7.4, 7.8,
7.10 and 7.11 of the Stockholders' Agreement,
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provided, that, if this condition fails to be satisfied, and such failure
is capable of being cured without adversely affecting in any material
respect the Buyers or their rights hereunder (other than as to the timing
of such Article IV Closing) or under the Other Agreements, the Articles as
amended by the Amendment or the Bylaws as amended by the Bylaws Amendment,
or there is a dispute as to whether such condition has been satisfied, the
date of such Article IV Closing may be delayed by the Company (i) for a
period of not more than 180 days from the date such Article IV Closing
would have occurred but for the failure of such condition to be satisfied,
if during such time the Company is attempting in a diligent manner to cause
such condition to be satisfied, or (ii) in the case of such a dispute until
the later to occur of (x) 90 days following the rendering of an order of a
court of competent jurisdiction to the effect that such condition involved
in such dispute was not satisfied, if during such 90-day period the Company
is attempting in a diligent manner to cause such condition to be satisfied,
and (y) 90 days following the rendering of a final and non-appealable
judgment of a court of competent jurisdiction following an appeal or
related action with respect to such order (if such judgment is to the
effect that such condition involved in such dispute was satisfied at or
prior to the end of the 90-day period provided in the immediately preceding
clause (x)), if the Company shall be prosecuting such appeal in a diligent
manner, provided, further, that the purchase price for shares sold at such
Article IV Closing shall be that which would have obtained but for the
delay pursuant to the proviso to this Section 4.2(b).
(c) There shall not have occurred a Change of Control.
(d) The Company shall have delivered to the Buyers a certificate, dated
the date of such Article IV Closing, signed by a duly authorized senior
officer of the Company, certifying that the conditions specified in Section
4.2(a), (b) and (c) have been fulfilled.
(e) Each of the Buyers shall have received an opinion, dated the date of
such Article IV Closing, from the General Counsel of the Company which
addresses favorably the matters set forth in Exhibit I and which is in form
and substance reasonably satisfactory to the Buyers.
Section 4.3. Conditions to the Company's Obligations. The obligation of the
Company to consummate the transactions contemplated hereby at an Article IV
Closing is subject to the fulfillment of each of the following conditions on or
prior to the date of such Article IV Closing:
(a) The respective representations and warranties of each of the Buyers
set forth in Sections 7.1(a), 7.1(b), 7.1(e), 7.1(g), 7.2(a), 7.2(b) and
7.2(e) shall be true and correct in all material respects at and as of the
date hereof, and at and as of the date of the Article IV Closing in
question as if such representations and warranties were made at and as of
such date except (i) with respect to representations and warranties that
relate solely to a date prior to such date and were true and correct in all
material respects on such prior date, and (ii) to the extent contemplated
or permitted by this Agreement, the Other Agreements or the Articles as
amended by the Amendment, provided that, if this condition fails to be
satisfied, and such failure is capable of being cured without adversely
affecting in any material respect the Company or its rights hereunder
(other than as to the timing of such Article IV Closing) or under the Other
Agreements, the Articles as amended by the Amendment or the Bylaws as
amended by the Bylaws Amendment, or there is a dispute as to whether such
condition has been satisfied, the date of such Article IV Closing may be
delayed by the relevant Buyer (i) for a period of not more than 180 days
from the date such Article IV Closing would have occurred but for the
failure of such condition to be satisfied, if during such time the relevant
Buyer is attempting in a diligent manner to cause such condition to be
satisfied, or (ii) in the case of such a dispute until the later to occur
of (x) 90 days following the rendering of an order of a court of competent
jurisdiction to the effect that such condition involved in such dispute was
not satisfied, if during such 90-day period the relevant Buyer is
attempting in a diligent manner to cause such condition to be satisfied,
and (y) 90 days following the rendering of a final and non-appealable
judgment of a court of competent jurisdiction following an appeal or
related action with respect to such order (if such judgment is to the
effect that such condition involved in such dispute was satisfied at or
prior to the end of the 90-day period provided in the immediately preceding
clause (x)), if the relevant Buyer shall be prosecuting such appeal in a
diligent manner, provided, further, that the purchase price for shares sold
at such Article IV Closing shall be that which would have obtained but for
the delay pursuant to the proviso to this Section 4.3(a).
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(b) Each Buyer shall have performed and complied in all material respects
with its obligations under Article II of this Agreement; Article II and
Section 7.5 of the Stockholders' Agreement; Sections 2.1, 3.1 and 3.2(b) of
the Standstill Agreement; and the FT Investor Confidentiality Agreement (in
the case of FT) or the DT Investor Confidentiality Agreement (in the case
of DT), provided that, if this condition fails to be satisfied, and such
failure is capable of being cured without adversely affecting in any
material respect the Company or its rights hereunder (other than as to the
timing of such Article IV Closing) or under the Other Agreements, the
Articles as amended by the Amendment or the Bylaws as amended by the Bylaws
Amendment, or there is a dispute as to whether such condition has been
satisfied, the date of such Article IV Closing may be delayed by the
relevant Buyer (i) for a period of not more than 180 days from the date
such Article IV Closing would have occurred but for the failure of such
condition to be satisfied, if during such time the relevant Buyer is
attempting in a diligent manner to cause such condition to be satisfied, or
(ii) in the case of such a dispute until the later to occur of (x) 90 days
following the rendering of an order of a court of competent jurisdiction to
the effect that such condition involved in such dispute was not satisfied,
if during such 90-day period the relevant Buyer is attempting in a diligent
manner to cause such condition to be satisfied, and (y) 90 days following
the rendering of a final and non-appealable judgment of a court of
competent jurisdiction following an appeal or related action with respect
to such order (if such judgment is to the effect that such condition
involved in such dispute was satisfied at or prior to the end of the 90-day
period provided in the immediately preceding clause (x)), if the relevant
Buyer shall be prosecuting such appeal in a diligent manner, provided,
further, that the purchase price for shares sold at such Article IV Closing
shall be that which would have obtained but for the delay pursuant to the
proviso to this Section 4.3(b).
(c) Each Buyer shall have delivered to the Company a certificate, signed
by a duly authorized senior officer, dated the date of such Article IV
Closing, certifying that the conditions specified in Section 4.3(a) and (b)
have been fulfilled.
Section 4.4. Effect of Certain Breaches. Except as set forth in Sections 4.2,
4.3 and 10.1, no breach of the representations, warranties, covenants or
agreements contained in this Agreement or any of the Other Agreements shall
affect the obligations of the Parties to consummate the purchase and sale of
capital stock of the Company at any Article IV Closing, provided that this
sentence shall not affect any other rights, liabilities, duties or obligations
of the Parties arising under this Agreement, any of the Other Agreements or any
of the Joint Venture Documents as a result of such breach.
ARTICLE V
CONDITIONS TO THE OPTIONAL SHARES CLOSING
Section 5.1. Condition to Each Party's Obligations. The obligation of each
Party to consummate the transactions contemplated hereby at the Optional Shares
Closing is subject to the fulfillment of the condition that, on or prior to the
date of the Optional Shares Closing, no order of any Governmental Authority
(including a court order) shall have been entered that enjoins, restrains or
prohibits consummation of the transactions contemplated by this Agreement or
the Other Agreements or puts in doubt the validity of this Agreement or the
Other Agreements in any material respect, provided that, if such an order is
entered, the date of the Optional Shares Closing shall be delayed for a period
of not more than one year from the date on which the Optional Shares Closing
would have occurred but for such order (but not beyond the end of such one-year
period), if during such time any Party shall be appealing, challenging or
otherwise attempting to resolve such order in a diligent manner.
Section 5.2. Conditions to the Buyers' Obligations. The obligation of each
Buyer to consummate the transactions contemplated hereby at the Optional Shares
Closing is subject to the fulfillment of each of the following conditions on or
prior to the date of the Optional Shares Closing:
(a) The representations and warranties of the Company set forth in:
(i) Sections 6.1, 6.2(a), 6.3 and 6.4 shall be true and correct in
all material respects at and as of the date hereof and at and as of the
date of the Optional Shares Closing as if such representations
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and warranties were made at and as of the date of the Optional Shares
Closing except (x) with respect to representations and warranties that
relate solely to a date prior to the date of the Optional Shares
Closing, and were true and correct in all material respects on such
prior date, and (y) to the extent contemplated or permitted by this
Agreement, the Other Agreements or the Articles as amended by the
Amendment or the Joint Venture Documents; and
(ii) the first two sentences of Section 6.5(a) (as to SEC Documents
filed prior to the Initial Issuance Date) and Section 6.6 (but in the
case of Section 6.6 only as to changes prior to the Initial Issuance
Date, but after the later of (x) the end of the quarter covered by the
last Quarterly Report on Form 10-Q of the Company filed prior to the
Initial Issuance Date, and (y) the end of the year covered by the last
Annual Report on Form 10-K of the Company filed prior to the Initial
Issuance Date) shall be true and correct in all material respects at
and as of the date hereof, except to the extent such failure to be true
and correct does not relate to, and is not reasonably likely to relate
to, a material adverse change in the business, operations, results of
operations, financial condition, assets or liabilities of the Company
compared to the last to be filed prior to the Initial Issuance Date of
the Annual Report on Form 10-K of the Company or the Quarterly Report
on Form 10-Q of the Company;
provided that if this condition fails to be satisfied, and such failure is
capable of being cured without adversely affecting in any material respect
the Buyers or their rights hereunder (other than as to the timing of the
Optional Shares Closing) or under the Other Agreements, the Articles as
amended by the Amendment or the Bylaws as amended by the Bylaws Amendment,
or there is a dispute as to whether this condition has been satisfied, the
date of the Optional Shares Closing may be delayed by the Company (i) for a
period of not more than 180 days from the date the Optional Shares Closing
would have occurred but for the failure of such condition to be satisfied,
if during such time the Company is attempting in a diligent manner to cause
all such conditions to be satisfied, or (ii) in the case of such a dispute,
until the later to occur of (x) 90 days following the rendering of an order
of a court of competent jurisdiction to the effect that such condition
involved in such dispute was not satisfied, if during such 90-day period
the Company is attempting in a diligent manner to cause such condition to
be satisfied, and (y) 90 days following the rendering of a final and non-
appealable judgment of a court of competent jurisdiction following an
appeal or related action with respect to such order (if such judgment is to
the effect that such condition involved in such dispute was satisfied at or
prior to the end of the 90-day period in the immediately preceding clause
(x)), if the Company shall be prosecuting such appeal in a diligent manner,
provided, further, that the purchase price for Shares sold at the Optional
Shares Closing shall be that which would have been obtained but for the
delay pursuant to the proviso to this Section 5.2(a).
(b) The Company shall have performed and complied in all material
respects with its obligations under Section 8.8 of this Agreement; Article
FIFTH of the Articles as amended by the Amendment (to the extent such
Article relates to the rights of the holders of Class A Stock); that
portion of Article SIXTH of the Articles as amended by the Amendment
entitled "General Provisions Relating to Class A Stock"; and Articles III,
IV, V and VI, and Sections 7.1, 7.4, 7.8, 7.10 and 7.11 of the
Stockholders' Agreement, provided that, if this condition fails to be
satisfied, and such failure is capable of being cured without adversely
affecting in any material respect the Buyers or their rights hereunder
(other than as to the timing of the Optional Shares Closing) or under the
Other Agreements, the Articles as amended by the Amendment or the Bylaws as
amended by the Bylaws Amendment, or there is a dispute as to whether such
condition has been satisfied, the date of the Optional Shares Closing may
be delayed by the Company (i) for a period of not more than 180 days from
the date the Optional Shares Closing would have occurred but for the
failure of such condition to be satisfied, if during such time the Company
is attempting in a diligent manner to cause such condition to be satisfied,
or (ii) in the case of such a dispute until the later to occur of (x) 90
days following the rendering of an order of a court of competent
jurisdiction to the effect that such condition involved in such dispute was
not satisfied, if during such 90-day period the Company is attempting in a
diligent manner to cause such condition to be satisfied, and (y) 90 days
following the rendering of a final and non-appealable judgment of a court
of competent jurisdiction following an appeal or related action with
respect to such order (if such judgment is to the
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effect that such condition involved in such dispute was satisfied at or
prior to the end of the 90-day period provided in the immediately preceding
clause (x)), if the Company shall be prosecuting such appeal in a diligent
manner, provided, further, that the purchase price for Shares sold at the
Optional Shares Closing shall be that which would have been obtained but
for the delay pursuant to the proviso to this Section 5.2(b).
(c) There shall not have occurred a Change of Control.
(d) The Company shall have delivered to each of the Buyers a certificate,
dated the date of the Optional Shares Closing, signed by a duly authorized
senior officer of the Company, certifying that the conditions specified in
Section 5.2(a), (b) and (c) have been fulfilled.
(e) Each of the Buyers shall have received an opinion, dated as of the
date of the Optional Shares Closing, from the General Counsel of the
Company which addresses favorably the matters set forth in Exhibit J and
which is in form and substance reasonably satisfactory to the Buyers.
Section 5.3. Conditions to the Company's Obligations. The obligation of the
Company to consummate the transactions contemplated hereby at the Optional
Shares Closing is subject to the fulfillment of each of the following
conditions on or prior to the date of the Optional Shares Closing:
(a) The respective representations and warranties of each of the Buyers
set forth in Sections 7.1(a), 7.1(b), 7.1(e), 7.1(g), 7.2(a), 7.2(b) and
7.2(e) shall be true and correct in all material respects at and as of the
date hereof, and on and as of the date of the Optional Shares Closing as if
such representations and warranties were made at and as of the date of the
Optional Shares Closing except (i) with respect to representations and
warranties that relate solely to a date prior to the date of the Optional
Shares Closing and were true and correct in all material respects on such
prior date, and (ii) to the extent contemplated or permitted by this
Agreement, the Other Agreements or the Articles as amended by the
Amendment, provided that, if this condition fails to be satisfied, and such
failure is capable of being cured without adversely affecting in any
material respect the Company or its rights hereunder (other than as to the
timing of the Optional Shares Closing) or under the Other Agreements, the
Articles as amended by the Amendment or the Bylaws as amended by the Bylaws
Amendment, or there is a dispute as to whether such condition has been
satisfied, the date of the Optional Shares Closing may be delayed by the
relevant Buyer (i) for a period of not more than 180 days from the date the
Optional Shares Closing would have occurred but for the failure of such
condition to be satisfied, if during such time the relevant Buyer is
attempting in a diligent manner to cause such condition to be satisfied, or
(ii) in the case of such dispute as to whether such condition has been
satisfied, until the later to occur of (x) 90 days following the rendering
of an order of a court of competent jurisdiction to the effect that such
condition involved in such dispute was not satisfied, if during such 90-day
period the relevant Buyer is attempting in a diligent manner to cause such
condition to be satisfied, and (y) the rendering of a final and non-
appealable judgment of a court of competent jurisdiction following an
appeal or related action with respect to such order (if such judgment is to
the effect that such condition involved in such dispute was satisfied at or
prior to the end of the 90-day period provided in the immediately preceding
clause (x)), if the relevant Buyer shall be prosecuting such appeal in a
diligent manner, provided, further, that the purchase price for Shares sold
at the Optional Shares Closing shall be that which would have been obtained
but for the delay pursuant to the proviso to this Section 5.3(a).
(b) Each Buyer shall have performed and complied in all material respects
with its obligations under Article II of this Agreement; Article II and
Section 7.5 of the Stockholders' Agreement; Sections 2.1, 3.1 and 3.2(b) of
the Standstill Agreement; and the FT Investor Confidentiality Agreement (in
the case of FT) or the DT Investor Confidentiality Agreement (in the case
of DT), provided that, if this condition fails to be satisfied, and such
failure is capable of being cured without adversely affecting in any
material respect the Company or its rights hereunder (other than as to the
timing of the Optional Shares Closing) or under the Other Agreements, the
Articles as amended by the Amendment or the Bylaws as amended by the Bylaws
Amendment, or there is a dispute as to whether such condition has been
satisfied, the date of the Optional Shares Closing may be delayed by the
relevant Buyer (i) for a period of not more
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than 180 days from the date the Optional Shares Closing would have occurred
but for the failure of such condition to be satisfied, if during such time
the relevant Buyer is attempting in a diligent manner to cause such
condition to be satisfied, or (ii) in the case of such a dispute until the
later to occur of (x) 90 days following the rendering of an order of a
court of competent jurisdiction to the effect that such condition involved
in such dispute was not satisfied, if during such 90-day period the
relevant Buyer is attempting in a diligent manner to cause such condition
to be satisfied, and (y) 90 days following the rendering of a final and
non-appealable judgment of a court of competent jurisdiction following an
appeal or related action with respect to such order (if such judgment is to
the effect that such condition involved in such dispute was satisfied at or
prior to the end of the 90-day period provided in the immediately preceding
clause (x)), if the relevant Buyer shall be prosecuting such appeal in a
diligent manner, provided, further, that the purchase price for Shares sold
at the Optional Shares Closing shall be that which would have been obtained
but for the delay pursuant to the proviso to this Section 5.3(b).
(c) Each Buyer shall have delivered to the Company a certificate, signed
by a duly authorized senior officer, dated the date of the Optional Shares
Closing, certifying that the conditions specified in Section 5.3(a) and (b)
have been fulfilled.
Section 5.4. Effect of Certain Breaches. Except as set forth in Sections 5.2,
5.3 and 10.1, no breach of the representations, warranties, covenants or
agreements contained in this Agreement or any of the Other Agreements shall
affect the obligations of the Parties to consummate the purchase and sale of
the Optional Shares at the Optional Shares Closing, provided, that this
sentence shall not affect any other rights, liabilities, duties or obligations
of the Parties arising under this Agreement, any of the Other Agreements or any
of the Joint Venture Documents as a result of such breach.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of FT and DT as follows:
Section 6.1. Organization, Qualification, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Kansas. The Company has all requisite corporate power and authority
to: (a) enter into this Agreement and each Other Agreement, (b) subject to
approval by the stockholders of the Company and to the filing of the Amendment,
issue and sell (or deliver upon conversion, as the case may be) shares of Class
A Common Stock, Class A Preference Stock and Common Stock to the Buyers
pursuant to this Agreement, the Stockholders' Agreement and the Articles as
amended by the Amendment and comply with its obligations under this Agreement
and each Other Agreement, and (c) own, lease and operate its properties and
assets and to carry on in all material respects its business as now being
conducted and proposed to be conducted as shall be described in the Proxy
Statement. The copies of the Articles and the Bylaws, which have been delivered
previously to each Buyer, are complete and correct and in full force and
effect, in each case on the date hereof.
Section 6.2. Capital Stock and Other Matters. (a) Section 6.2 of the Company
Disclosure Schedule sets forth the authorized capital stock of the Company, the
number of each class of shares issued and outstanding, the number of each class
of shares reserved for issuance pursuant to convertible securities, options and
other agreements, and the number of each class of shares held by the Company in
its treasury or held by its Subsidiaries, at June 14, 1994 and as at a date
which is no more than ten Business Days prior to the date hereof (the
"Capitalization Date"). The Company has issued no more than 150,000 shares of
Common Stock and no shares of Preferred Stock between the Capitalization Date
and the date hereof. No bonds, debentures, notes or other indebtedness of the
Company or any of its Subsidiaries having the right to vote (or convertible
into securities having the right to vote) on any matters on which holders of
shares of capital stock of the Company may vote were issued or outstanding on
June 14, 1994 or are issued and outstanding on the date hereof. All of the
issued and outstanding shares of the Company's capital stock are validly
issued, fully paid and nonassessable. No holder of the outstanding shares of
the Company's capital stock is entitled to preemptive rights with respect to
any issuance of shares of Class A Common Stock.
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(b) No class of capital stock is entitled to preemptive rights. Except as set
forth in Section 6.2 of the Company Disclosure Schedule, there are no
stockholder agreements, voting trusts or other Contracts to which the Company
is a party or by which it is bound relating to the voting or transfer of any
shares or units of any Voting Securities of the Company.
Section 6.3. Validity of Shares. Subject to obtaining the approval of the
stockholders of the Company specified in Section 8.4 hereof and to the filing
of the Amendment with the appropriate Kansas Governmental Authorities, when the
shares of Class A Common Stock and Class A Preference Stock, as the case may
be, are issued and delivered, or any shares of Common Stock are sold and
delivered, in each case against payment therefor (or upon conversion, as the
case may be) at the relevant closing as provided hereby, each such share shall
be validly issued, free of any Lien (other than any Lien arising due to action
or inaction of any of the Buyers), fully paid and a non- assessable share of
capital stock of the Company.
Section 6.4. Corporate Authority; No Violation. (a) The execution, delivery
and performance of this Agreement and each Other Agreement, and the
consummation of the transactions contemplated hereby and thereby (including,
without limitation, the issuance and sale of the Company's capital stock) have
been duly authorized by all requisite corporate action on the part of the
Company, subject to obtaining the approval of the stockholders of the Company
specified in Section 8.4 hereof and to the filing of the Amendment with the
appropriate Kansas Governmental Authorities and, assuming that, with respect
solely to those provisions of this Agreement, the Stockholders' Agreement and
the Amendment that require explicitly the receipt of Continuing Director
approval for the performance of obligations or consummation of transactions on
the part of the Company hereunder or thereunder, Continuing Director approval
is obtained in the manner provided herein or therein. Upon the execution and
delivery of this Agreement and each Other Agreement by the Company, each such
agreement will constitute a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
(b) Neither the execution, delivery and performance by the Company of this
Agreement and each Other Agreement, the adoption of the Bylaws Amendment and
the adoption and filing of the Amendment nor the consummation by the Company of
the transactions contemplated hereby or thereby will: (i) subject to the
approval of the Proposals by the stockholders of the Company and the filing of
the Amendment with the appropriate Kansas Governmental Authorities, violate or
conflict with any provision of the Articles or Bylaws, assuming that, with
respect solely to those provisions of this Agreement, the Stockholders'
Agreement and the Amendment that require explicitly the receipt of Continuing
Director approval for the performance of obligations or consummation of
transactions on the part of the Company hereunder or thereunder, Continuing
Director approval is obtained in the manner provided herein or therein; (ii)
require any Governmental Approvals or Third Party Approvals, except (x) as set
forth in Section 6.4 of the Company Disclosure Schedule or (y) where the
failure to so obtain, make or file such Governmental Approvals or Third Party
Approvals, individually or in the aggregate, is not reasonably likely to have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole or
adversely affect in any material respect the Company's ability to perform its
obligations hereunder or under the Other Agreements; (iii) except as set forth
in Section 6.4 of the Company Disclosure Schedule, result in a default (or an
event that, with notice or lapse of time or both, would become a default) or
give rise to any right of termination by any third party, cancellation,
amendment or acceleration of any obligation or the loss of any benefit under,
or result in the creation of any Lien on any of the assets or properties of the
Company or any of its Subsidiaries pursuant to, any Contract to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any of their respective assets or properties is bound,
except for any such defaults, terminations, cancellations, amendments,
accelerations, losses, or Liens that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole or adversely affect in any material respect the
Company's ability to perform its obligations hereunder or under the Other
Agreements; or (iv) except as set forth in Section 6.4 of the Company
Disclosure Schedule, violate or conflict with any Applicable Law applicable to
the Company or any of its Subsidiaries, or any of
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the properties, businesses, or assets of any of the Company or any of its
Subsidiaries, except violations and conflicts that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole or adversely affect in any
material respect the Company's ability to perform its obligations hereunder or
under the Other Agreements.
Section 6.5. Company Reports and Financial Statements. (a) The Company has
previously made available to FT and DT complete and correct copies of each: (i)
annual report on Form 10-K for the Company; (ii) quarterly report on Form 10-Q
for the Company; (iii) definitive proxy statement for the Company; (iv) current
report on Form 8-K for the Company; and (v) other form, report, schedule and
statement, in the case of each of clauses (i), (ii), (iii), (iv) and (v) filed
by the Company with the SEC under the Exchange Act since January 1, 1993
(collectively, the "SEC Documents"). As of their respective dates, each of the
SEC Documents complied (or will comply) in all material respects with the
requirements of the Exchange Act to the extent applicable to such SEC Document,
and none of such SEC Documents (as of their respective dates) contained (or
will contain) an untrue statement of a material fact or omitted (or will omit)
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except as the same was corrected or superseded in a
subsequent document duly filed with the SEC, that has been delivered to the
Buyers. Since January 1, 1993, the Company has timely filed all reports and
registration statements and made all filings required to be filed under the
Exchange Act with the SEC under the rules and regulations of the SEC.
(b) The audited consolidated financial statements and unaudited consolidated
interim financial statements included in the SEC Documents (including any
related notes) fairly present the financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the results of operations
and changes in cash flows for the periods specified, subject, where
appropriate, to normal year-end audit adjustments, in each case in accordance
with past practice and GAAP applied on a consistent basis during the periods
involved (except as otherwise stated therein). Except as and to the extent set
forth in the SEC Documents or Section 6.5 of the Company Disclosure Schedule,
since March 31, 1995, the Company and its Subsidiaries have incurred no
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise) other than liabilities and obligations that, individually and in the
aggregate, are not reasonably likely to have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole or materially and adversely
affect the Company's ability to perform its obligations hereunder or under the
Other Agreements.
Section 6.6. Absence of Certain Changes or Events. Except as set forth in
Section 6.6 of the Company Disclosure Schedule, since March 31, 1995 there has
not been, occurred or arisen any change in the business, financial condition or
results of operations of the Company and its Subsidiaries taken as a whole,
other than as a result of changes in general business conditions or legal or
regulatory changes affecting the U.S. telecommunications industry generally
(including the effect on competition resulting therefrom) or actions by
competitors, having a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole or any change that adversely affects in any
material respect the Company's ability to perform its obligations hereunder or
under the Other Agreements.
Section 6.7. Investigations; Litigation. Except as set forth in Section 6.7
of the Company Disclosure Schedule, or as the Company has previously advised
the Buyers in writing on or prior to the date hereof, there is no Proceeding
pending, or to the best of the Company's knowledge, threatened against or
relating to the Company or any of its Subsidiaries at law or in equity that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole or
adversely affect in any material respect the Company's ability to perform its
obligations hereunder or under the Other Agreements. There is no judgment,
decree, injunction, rule or order of any Governmental Authority outstanding
against the Company or any of its Subsidiaries that, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole or adversely affect in any
material respect the Company's ability to perform its obligations hereunder or
under the Other Agreements.
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Section 6.8. Proxy Statement; Other Information. (a) None of the information
included, or incorporated by reference, in the Proxy Statement or any amendment
or supplement thereto, will at the time of the mailing of the definitive Proxy
Statement, and at the time of the Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading, provided
that the foregoing shall not apply to any investment bank's fairness opinion
included therein and that no representation is made by the Company with respect
to (i) information provided by FT or DT or their Affiliates in writing
specifically for inclusion, or incorporation by reference, in the Proxy
Statement, (ii) any information set forth in the acquiring person statement
delivered by FT, DT and any of their Affiliates pursuant to Section 17-1291 of
the Kansas Control Share Acquisitions Statute (the "Acquiring Person
Statement"), or (iii) any representations or warranties made by FT or DT in any
agreement that is included as a schedule or exhibit to the Proxy Statement. The
Proxy Statement, at the time of mailing and at the time of the Stockholders'
Meeting, will comply in all material respects with the provisions of the
Exchange Act.
(b) All documents that the Company is responsible for filing with any
Governmental Authority in connection with the transactions contemplated hereby
other than those described in Section 6.8(a) have complied and will comply in
all material respects with Applicable Law. All information supplied or to be
supplied by the Company in any document filed with any Governmental Authority
in connection with the transactions contemplated hereby or by the Other
Agreements will be, at the time of filing, true and correct in all material
respects, except where the failure to be true and correct, individually or in
the aggregate, would not be reasonably likely to have a Material Adverse Effect
on the Company and its Subsidiaries taken as a whole and would not adversely
affect in any material respect the consummation of the transactions
contemplated by this Agreement or any Other Agreement.
Section 6.9. Certain Tax Matters. To the best of the Company's knowledge and
belief, it is reasonable to assert that the Company is not a United States Real
Property Holding Corporation, as that term is defined under Section 897 of the
Code and the regulations promulgated thereunder.
Section 6.10. Amendments of the Rights Agreement. The Board of Directors has
taken all necessary action to amend the Rights Agreement to provide that the
ownership by FT, DT and their respective Affiliates and Associates of all of
the Voting Securities permitted to be owned by them under Sections 2.1(a)(i),
2.1(a)(ii) and 2.3 of the Standstill Agreement (but not Sections 2.1(a)(iii) or
2.2 thereof or Section 2.3 thereof to the extent based upon an applicable
Percentage Limitation (as defined in the Standstill Agreement) as determined by
Section 2.1(a)(iii) or 2.2 thereof) will not result in FT, DT or any of their
respective Affiliates or Associates (as such terms are defined in the Rights
Agreement) being deemed an Acquiring Person (as such term is defined in the
Rights Agreement) or result in the occurrence of a Stock Acquisition Date,
Distribution Date, Section 11(a)(ii) Event or Section 13 Event (as such terms
are defined in the Rights Agreement).
Section 6.11. Other Registration Rights. The Company has not granted, and has
not agreed to grant, any demand or incidental registration rights to any Person
other than (a) rights to be granted pursuant to the Registration Rights
Agreement, and (b) rights that will not adversely affect the registration
rights to be granted to the Buyers in the Registration Rights Agreement.
Section 6.12. Takeover Statutes. The Board of Directors has taken appropriate
action so that the provisions of the Business Combination Statute will not,
prior to the termination of this Agreement, apply to FT, DT or any Person who
as of the date hereof is an Affiliate of FT or DT. Subject to the approval of
the stockholders of the Company specified in Section 8.4 hereof, the ownership
by FT and DT and any Qualified Subsidiary identified in the Acquiring Person
Statement of shares of the Company's capital stock representing in the
aggregate less than one-third of the voting power of the Company (assuming for
purposes of the Kansas Control Share Acquisitions Statute that none of FT, DT,
any Qualified Subsidiary identified in the Acquiring Person Statement, or their
respective affiliates and associates (as each such term is defined in the
Kansas Control Share Acquisitions Statute), acquires any Voting Securities
other than as contemplated or permitted
B-44
by this Agreement, any Other Agreement, or the Amendment, or owned, directly or
indirectly, or had or exercised the power to vote or direct the vote of, in
each case alone or as part of a group, any Voting Securities as of the date of
this Agreement or at the time of the vote contemplated by Section 6.13 hereof)
will not result in a loss of voting rights with respect to such shares due to
the Kansas Control Share Acquisitions Statute. No other "fair price,"
"moratorium," "control share acquisition," "business combination," "shareholder
protection" or similar anti-takeover statute or regulation enacted under the
Applicable Laws of any state of the United States of America will apply to this
Agreement or any Other Agreement, or the transactions contemplated hereby or
thereby (assuming that none of FT, DT and their respective Affiliates
Beneficially Own any Voting Securities as of the date hereof and that none of
such Persons acquires any Voting Securities other than as contemplated or
permitted by this Agreement, any Other Agreement or the Amendment) except for
statutes or regulations the failure of the Company with which to comply would
not have a material adverse effect on (a) the transactions contemplated in this
Agreement or any Other Agreement, (b) the ability of the Buyers to exercise
fully their rights under this Agreement or any Other Agreement or the
Amendment, or (c) the intrinsic value of an investment in the Company's equity
securities (provided that a change in the Market Price of the Company's equity
securities shall not, in and of itself, be deemed to have a material adverse
effect on the intrinsic value of an investment in the Company's equity
securities).
Section 6.13. Vote Required; Board Recommendation. The only votes of the
stockholders of the Company required under Kansas law and the Articles and
Bylaws to approve the transactions contemplated by this Agreement and by the
Other Agreements are (a) the affirmative vote of the holders of a majority of
the outstanding shares of the Common Stock, the Preferred Stock-First Series,
the Preferred Stock-Second Series and the Preferred Stock-Fifth Series of the
Company, voting together as a single class, (b) the affirmative vote of the
holders of a majority of the outstanding shares of the Common Stock, voting as
a single class, and (c) in the case of clause (c) of the definition of
"Proposals," the affirmative vote of the holders of a majority of such
outstanding shares, but excluding all "interested shares" within the meaning of
Section 17-1288 of the Kansas Control Share Acquisitions Statute (assuming for
the purposes of the Kansas Control Share Acquisitions Statute that none of FT,
DT and their respective affiliates and associates (as each such term is defined
in the Kansas Control Share Acquisitions Statute) owned, directly or
indirectly, or had or exercised the power to vote or direct the vote of, in
each case alone or as part of a group, any Voting Securities as of the date
hereof or at the time of the vote contemplated by this Section 6.13 and that
none of such Persons acquires any Voting Securities other than as contemplated
or permitted by this Agreement, any Other Agreement or the Amendment). The
Board of Directors has unanimously determined that the Proposals are advisable
and in the best interests of the stockholders of the Company.
Section 6.14. Long Distance Business. There are no assets in the Local
Exchange Division, the Cellular and Wireless Division or any other division of
the Company other than the Long Distance Division which are primarily used, or
held primarily for use, in or for the benefit of the Long Distance Business,
except for assets that in the aggregate are not material to the operation of
the Long Distance Business.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
Section 7.1. Representations and Warranties of FT. FT represents and warrants
to, and covenants with, the Company as follows:
(a) FT is an exploitant public validly existing under the laws of the
Republic of France, and has all requisite power and authority to: (i) enter
into this Agreement and each Other Agreement, (ii) purchase the shares of
the Company's capital stock as provided herein, and in the Stockholders'
Agreement and the Articles as amended by the Amendment, and (iii) comply
with its obligations under this Agreement and each Other Agreement.
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(b) (i) The execution, delivery and performance of this Agreement and
each Other Agreement, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by all requisite action on
the part of FT. Upon the execution and delivery of this Agreement and each
Other Agreement by FT, each such agreement will constitute a legal, valid
and binding agreement of FT, enforceable against FT in accordance with its
terms.
(ii) Neither the execution, delivery and performance by FT of this
Agreement and each Other Agreement, nor the consummation by FT of the
transactions contemplated hereby or thereby will: (w) violate or conflict
with any provision of the FT Law and Decrees; (x) require any Governmental
Approvals or Third Party Approvals, except (A) as set forth in Section
7.1(b) of the FT Disclosure Schedule or (B) where the failure to so obtain,
make or file such Governmental Approvals or Third Party Approvals is not
reasonably likely to affect adversely in any material respect FT's ability
to perform its obligations hereunder or under the Other Agreements; (y)
result in a default (or an event that, with notice or lapse of time or
both, would become a default) under any Contract to which FT or any of its
Subsidiaries is a party, or by which FT or any of its Subsidiaries or any
of their respective assets or properties is bound, except for any such
defaults that, individually or in the aggregate, are not reasonably likely
to affect adversely in any material respect FT's ability to perform its
obligations hereunder or under the Other Agreements; or (z) violate or
conflict with Applicable Law applicable to FT or any of its Subsidiaries,
or any of the properties, businesses, or assets of FT or any of its
Subsidiaries, except violations and conflicts that, individually or in the
aggregate, are not reasonably likely to affect adversely in any material
respect FT's ability to perform its obligations hereunder or under the
Other Agreements.
(c) Except as set forth in Section 7.1(c) of the FT Disclosure Schedule,
there is no Proceeding pending or, to the best of FT's knowledge,
threatened against or relating to FT or any of its Subsidiaries at law or
in equity that, individually or in the aggregate, is reasonably likely to
affect adversely in any material respect FT's ability to perform its
obligations hereunder or under the Other Agreements. There is no judgment,
decree, injunction, rule or order of any Governmental Authority outstanding
against FT or any of its Subsidiaries that, individually or in the
aggregate, is reasonably likely to adversely affect in any material respect
FT's ability to perform its obligations hereunder or under the Other
Agreements.
(d) All documents that FT is responsible for filing with any Governmental
Authority in connection with the transactions contemplated hereby or by
each Other Agreement have complied and will comply in all material respects
with Applicable Law. All information supplied or to be supplied by FT in
any document filed with any Governmental Authority in connection with the
transactions contemplated hereby or by the Other Agreements will be, at the
time of filing, true and correct in all material respects, except where the
failure to be true and correct, individually or in the aggregate, would not
adversely affect in any material respect the consummation of the
transactions contemplated by this Agreement or any Other Agreement.
(e) FT is purchasing the shares of the Company's capital stock to be
purchased by it pursuant to this Agreement and the Stockholders' Agreement
for its own account for investment, and not with a view to the distribution
of such shares or any part thereof. FT is a party to no Contract with any
Person for resale of such shares in connection with such a distribution. FT
acknowledges that the offering of the shares pursuant to this Agreement and
the Stockholders' Agreement will not be registered under the Securities Act
or under any state securities or blue sky law or the securities laws of any
other country, on the grounds (with respect to the Securities Act and such
state securities or blue sky laws) that the offering and sale of shares of
capital stock contemplated by this Agreement and the Stockholders'
Agreement are exempt from registration pursuant to exceptions available
under such laws, and that the Company's reliance upon such exemptions is
predicated upon FT's representations set forth in this Agreement and the
Stockholders' Agreement. FT understands that the shares of the Company's
capital stock purchased by it pursuant to this Agreement and the
Stockholders' Agreement may not be sold or transferred unless such shares
are subsequently registered under the Securities Act and/or applicable
state securities or blue sky laws or any applicable securities laws of any
other country or an exemption from such registration is available.
B-46
(f) Except for such rights as may be conferred on FT as contemplated by
this Agreement and the Other Agreements, as of the date hereof, neither FT
nor any of its Affiliates Beneficially Owns, directly or indirectly, any
shares of capital stock of the Company.
(g) No Subsidiary of FT is entitled to any immunity on the grounds of
sovereignty or otherwise (including, without limitation, pursuant to the
Foreign Sovereign Immunities Act, 28 U.S.C. (P)1602 et seq.), based upon
its status as an agency or instrumentality of government, from any legal
action, suit or proceeding or from set off or counterclaim, from the
jurisdiction of any competent court described in Section 11.8, from service
of process, from attachment prior to judgment, from attachment in aid of
execution of a judgment, from execution pursuant to a judgment or arbitral
award, or from any other legal process in any jurisdiction, in each case
relating to this Agreement or any Other Agreement.
(h) FT has delivered to the Company a copy of its annual report for the
year ended December 31, 1994.
Section 7.2. Representations and Warranties of DT. DT represents and warrants
to, and covenants with, the Company as follows:
(a) DT is an Aktiengesellschaft duly formed and validly existing under
the laws of Germany, and has all requisite corporate power and authority
to: (i) enter into this Agreement and each of the Other Agreements, (ii)
purchase the shares of the Company's capital stock as provided herein, and
in the Stockholders' Agreement and the Articles as amended by the Amendment
and (iii) comply with its obligations under this Agreement and each Other
Agreement.
(b) (i) The execution, delivery and performance of this Agreement and
each Other Agreement, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by all requisite corporate
action on the part of DT. Upon the execution and delivery of this Agreement
and each Other Agreement by DT, each such agreement will constitute a
legal, valid and binding agreement of DT, enforceable against DT in
accordance with its terms.
(ii) Neither the execution, delivery and performance by DT of this
Agreement and each of the Other Agreements, nor the consummation by DT of
the transactions contemplated hereby or thereby, will (w) violate or
conflict with any provision of the Satzung or other governing documents of
DT or any of its Subsidiaries; (x) require any Governmental Approvals or
Third Party Approvals, except (A) as set forth in Section 7.2(b) of the DT
Disclosure Schedule or (B) where the failure to so obtain, make or file
such Governmental Approvals or Third Party Approvals, individually or in
the aggregate, is not reasonably likely to affect adversely in any material
respect DT's ability to perform its obligations hereunder or under the
Other Agreements; (y) result in a default (or an event that, with notice or
lapse of time or both, would become a default) under any Contract to which
DT or any of its Subsidiaries is a party, or by which DT or any of its
Subsidiaries or any of their respective assets or properties is bound,
except for any such defaults that, individually or in the aggregate, are
not reasonably likely to affect adversely in any material respect DT's
ability to perform its obligations hereunder or under the Other Agreements;
or (z) violate or conflict with any Applicable Law applicable to DT or any
of its Subsidiaries, or any of the properties, businesses, or assets of DT
or any of its Subsidiaries, except violations and conflicts that,
individually or in the aggregate, are not reasonably likely to affect
adversely in any material respect DT's ability to perform its obligations
hereunder or under the Other Agreements.
(c) Except as set forth in Section 7.2(c) of the DT Disclosure Schedule,
there is no Proceeding pending or, to the best of DT's knowledge,
threatened against or relating to DT or any of its Subsidiaries at law or
in equity that, individually or in the aggregate, is reasonably likely to
affect adversely in any material respect DT's ability to perform its
obligations hereunder or under the Other Agreements. There is no judgment,
decree, injunction, rule or order of any Governmental Authority outstanding
against DT or any of its Subsidiaries that, individually or in the
aggregate, is reasonably likely to adversely affect in any material respect
DT's ability to perform its obligations hereunder or under the Other
Agreements.
B-47
(d) All documents that DT is responsible for filing with any Governmental
Authority in connection with the transactions contemplated hereby have
complied and will comply in all material respects with Applicable Law. All
information supplied or to be supplied by DT in any document filed with any
Governmental Authority in connection with the transactions contemplated
hereby or by the Other Agreements will be, at the time of filing, true and
correct in all material respects, except where the failure to be true and
correct, individually or in the aggregate, would not adversely affect in
any material respect the consummation of the transactions contemplated by
this Agreement or any Other Agreement.
(e) DT is purchasing the shares of the Company's capital stock to be
purchased by it pursuant to this Agreement and the Stockholders' Agreement
for its own account for investment, and not with a view to the distribution
of such shares or any part thereof. DT is a party to no Contract with any
Person for resale of such shares in connection with such a distribution. DT
acknowledges that the offering of the shares pursuant to this Agreement and
the Stockholders' Agreement will not be registered under the Securities Act
or under any state securities or blue sky law or the securities laws of any
other country, on the grounds (with respect to the Securities Act and such
state securities or blue sky laws) that the offering and sale of shares of
capital stock contemplated by this Agreement and the Stockholders'
Agreement are exempt from registration pursuant to exceptions available
under such laws, and that the Company's reliance upon such exemptions is
predicated upon DT's representations set forth in this Agreement and the
Stockholders' Agreement. DT understands that the shares of the Company's
capital stock purchased by it pursuant to this Agreement and the
Stockholders' Agreement may not be sold or transferred unless such shares
are subsequently registered under the Securities Act and/or applicable
state securities or blue sky laws or any applicable securities laws of any
other country or an exemption from such registration is available.
(f) Except for such rights as may be conferred on DT as contemplated by
this Agreement and the Other Agreements, as of the date hereof neither DT
nor any of its Affiliates Beneficially Owns, directly or indirectly, any
shares of capital stock of the Company.
(g) DT has delivered to the Company a copy of its annual report for the
year ended December 31, 1994.
ARTICLE VIII
COVENANTS OF THE COMPANY
Section 8.1. Conduct of Business by the Company. Except to the extent that
each of the Buyers otherwise consents in writing, or as otherwise contemplated
by this Agreement, the Other Agreements or the Joint Venture Documents, until
the First Closing:
(a) The Company shall, and shall cause each of its Subsidiaries to,
conduct its operations so that the conduct of business of the Company and
its Subsidiaries, taken as a whole, is not materially inconsistent with the
scope and nature of such business on the date hereof and as shall be
described in the Proxy Statement; provided that this Section 8.1(a) shall
not prohibit the Company or any of its Subsidiaries from (i) engaging in
any activity relating to a Core Business (whether or not the Company as of
the date of this Agreement is engaged in such activity or such Core
Business), (ii) effecting any Exempt Asset Divestiture or any Exempt Long
Distance Asset Divestiture (except for a transaction described in clause
(g) of the definition of Exempt Long Distance Asset Divestiture) or (iii)
effecting the Cellular Spin-off or any transaction permitted by Section
8.10 hereof. The Company shall consult with each of the Buyers in good
faith prior to undertaking any material action that would reasonably be
viewed as outside the ordinary course of the Company's and its
Subsidiaries' business.
(b) The Company shall not redeem, repurchase or otherwise acquire, or
permit any Subsidiary to redeem, repurchase or otherwise acquire, Voting
Securities of the Company (including any securities convertible or
exchangeable into such Voting Securities) in excess of Voting Securities
representing 50% of the aggregate Votes of the Voting Securities of the
Company as of the date hereof, except as required by the terms of the
securities of the Company outstanding on the date hereof or as contemplated
by any employee benefit plans.
B-48
(c) The Company shall not amend or propose to amend the Articles or
Bylaws in any manner that would adversely affect the consummation of the
transactions contemplated by, or otherwise adversely affect the rights of
the Buyers under, this Agreement, each Other Agreement, the Articles as
proposed to be amended by the Amendment and the Bylaws as proposed to be
amended by the Bylaws Amendment, nor shall it permit any of its
Subsidiaries to amend or propose to amend the articles of incorporation or
bylaws of any such Subsidiary, in any manner that would adversely affect
the consummation of the transactions contemplated by, or otherwise
adversely affect the rights of the Buyers under, this Agreement and each
Other Agreement.
(d) The Company shall not authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation or dissolution
of the Company; provided that this Section 8.1(d) shall not prohibit the
Company or any of its Subsidiaries from effecting any Exempt Asset
Divestiture or any Exempt Long Distance Asset Divestiture (except for a
transaction described in clause (g) of the definition of Exempt Long
Distance Asset Divestiture).
(e) Without limiting the foregoing, the Company shall not undertake any
action or transaction described in Sections 4, 5 and 6(a) of the Class A
Provisions.
Section 8.2. Access and Information. Until the First Closing, the Company
shall provide to the Buyers and their representatives upon reasonable notice,
during mutually agreeable hours, full and complete access during normal
business hours to its properties, personnel, books, records and Contracts and
those of its Subsidiaries and shall furnish or make available all such
information and documents relating to its properties and business and those of
its Subsidiaries as the Buyers may reasonably request, unless and to the extent
that, in connection with a Contract between the Company or any Subsidiary of
the Company and any Governmental Authority, such Governmental Authority
requires the Company or any of its Subsidiaries to restrict access to any
properties or information reasonably related to such Contract on the basis of
Applicable Law with respect to national security matters, and unless and to the
extent that Applicable Law otherwise requires the Company to restrict FT's and
DT's access to any properties or information, provided that any such
investigation by the Buyers shall be conducted in such a manner as not to
interfere unreasonably with the business or operations of the Company or any of
its Subsidiaries; and the Company shall use its reasonable efforts to cause
Ernst & Young or its successor to give to any independent public accountants
engaged by the Buyers full access to its books, records and work papers
relating to the Company and its Affiliates, subject to the execution by FT and
DT of such agreement as the Company and Ernst & Young may reasonably request as
a condition to such access. All confidential information provided to the Buyers
pursuant to this Section will be subject to the Existing Confidentiality
Agreement. Notwithstanding the foregoing, FT and DT may not have access to (a)
information or documents subject to existing confidentiality restrictions with
any third party without the approval of the third party, or (b) information or
documents subject to attorney/client privilege.
Section 8.3. No Solicitation, Etc. (a) Until the First Closing, neither the
Company nor any of its Subsidiaries or Affiliates nor any of their respective
officers, directors, employees, agents or representatives (including, without
limitation, investment bankers, attorneys and accountants) shall, directly or
indirectly, (i) solicit any proposal involving a transaction of the kind
described in Section 8 of the Class A Provisions (an "Acquisition Proposal") or
(ii) enter into substantive negotiations with any third party in response to an
Acquisition Proposal unless the Board of Directors determines in good faith
that it is in the best interests of the Company's stockholders to engage in
such substantive negotiations (after considering the benefits to the Company of
the transactions contemplated by this Agreement and the Joint Venture Agreement
and the potential impact of such negotiations on such transactions).
(b) Until the First Closing, neither the Company nor any of its
Subsidiaries or Affiliates nor any of their respective officers, directors,
employees, agents or representatives (including, without limitation,
investment bankers, attorneys and accountants) shall, directly or
indirectly (i) solicit any proposal involving any commercial or other
arrangements or relationships in nature and scope similar to the
arrangements and relationships contemplated by this Agreement or the Joint
Venture Agreement if
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inconsistent with the purposes and scope of this Agreement and the Joint
Venture (an "Alternative Transaction"), (ii) disclose directly or
indirectly any information not customarily disclosed publicly concerning
its business and properties to, or afford any access to its properties,
books and records to, any Person in connection with any possible
Alternative Transaction or (iii) enter into substantive negotiations with
any third party relating to an Alternative Transaction.
(c) Until the approval by the stockholders of the Company of the
Proposals shall have been obtained as contemplated by Section 8.4 hereof,
if the Board of Directors or any committee thereof is notified during any
meeting of the Board of Directors or such committee of substantive
negotiations with respect to any transaction or action whose consummation
would be prohibited by Section 8.1(e) hereof, the Company shall discontinue
such negotiations, unless prior to such time the Company shall have
notified each of FT and DT of its desire that such negotiations continue
(and shall have provided each of FT and DT with a description in reasonable
detail of the transaction or action that is the subject of such
negotiations) and both FT and DT shall have failed to notify the Company of
their disapproval of such negotiations within five Business Days after
receipt by each of FT and DT of the Company's notice.
(d) Until the First Closing, the Company shall notify each of FT and DT
promptly if any discussions or negotiations are sought to be initiated, any
inquiry or proposal is made, or any such information is requested, with
respect to a potential Acquisition Proposal or an Alternative Transaction.
Section 8.4. Stockholders Approval. Unless the Board of Directors determines
in good faith, after receipt of written advice from the Company's outside
counsel as to the nature and scope of the Directors' fiduciary duties, that it
would be inconsistent with the Directors' fiduciary duties to the Company and
to the Company's stockholders under Applicable Law not to withdraw or change
such recommendation, the Board of Directors shall (a) as soon as practicable
after the date hereof, in accordance with Applicable Law, take all steps
necessary to call, give notice of, convene and hold a special meeting of its
stockholders for the purpose of voting upon the Proposals (the "Stockholders'
Meeting"), (b) recommend to the stockholders of the Company the adoption and
approval of the Proposals and (c) use its reasonable efforts to obtain the
necessary approvals by the Company's stockholders of the Proposals.
Section 8.5. Proxy Statement Filings. (a) As promptly as practicable after
the date hereof, the Company shall prepare and, after consultation with each of
FT and DT, file the Proxy Statement with the SEC pursuant to the Exchange Act,
and, after consultation with each of FT and DT, shall respond promptly to any
comments made by the SEC with respect to the Proxy Statement and any
preliminary version thereof, and at the earliest practical time shall mail such
Proxy Statement to the stockholders entitled to vote at the Stockholders'
Meeting.
(b) If at any time after the mailing of the definitive Proxy Statement and
prior to the Stockholders' Meeting any event should occur that results in the
Proxy Statement containing an untrue statement of a material fact or omitting
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they are
made, not misleading, or that otherwise should be described in an amendment or
supplement to the Proxy Statement, the Company shall promptly notify the Buyers
of the occurrence of such event and then promptly prepare, file and clear with
the SEC and mail to the Company's stockholders each such amendment or
supplement.
Section 8.6. Use of Proceeds. The proceeds of the transactions contemplated
herein may be used for the repayment of indebtedness, funding the Company's
investment in the JV Entities and other corporate purposes as determined by the
Board of Directors.
Section 8.7. Advice of Changes. Until the First Closing, the Company shall
promptly advise the Buyers orally and in writing of any change or event known
to the Chief Executive Officer or any Executive Vice President of the Company
which such Person in his reasonable good faith judgment believes has had or is
likely to have, either individually or together with other changes or events, a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
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Section 8.8. No Action Relating to Takeover Statutes; Applicability of Future
Statutes and Regulations. The Company shall (a) take no action, by resolution
of its Board of Directors or otherwise, to cause the Business Combination
Statute or the provisions of the Kansas Control Share Acquisitions Statute to
apply to FT, DT or their respective Affiliates by virtue of the transactions
contemplated by this Agreement, any Other Agreement or the Amendment; and (b)
use reasonable efforts to avoid (to the extent possible) the application of any
"fair price," "moratorium," "control share acquisition," "business
combination," "shareholder protection" or similar anti-takeover statute or
regulation promulgated under Kansas law after the date hereof to FT, DT or
their respective Affiliates by virtue of the transactions contemplated by this
Agreement, any Other Agreement or the Amendment.
Section 8.9. Spin-offs. (a) Prior to the Investment Completion Date, the
Company shall not undertake any Spin-off, split-off or other distribution to
any of its stockholders of equity interests of a Subsidiary of the Company
other than the Cellular Spin-off prior to delivery of a Notice of Abandonment,
provided that if the Company proposes to undertake a transaction described in
the preceding sentence prior to the Investment Completion Date, the Parties
shall negotiate in good faith a Spin-off Investment Agreement and any necessary
or advisable modifications to this Agreement, the Stockholders' Agreement and
the Amendment (or the Articles as amended by the Amendment; as the case may be)
in connection with such transaction, and the Company shall be permitted,
subject to the rights of the Class A Holders set forth in Section 7.10 of the
Stockholders' Agreement, to undertake such transaction, only if the Parties are
able to reach agreement regarding such modifications.
(b) Between the Investment Completion Date and the earlier of the date of the
Optional Shares Closing and 60 days after the Investment Completion Date, the
Company shall not effect any Spin-off, split-off or other distribution to any
of its stockholders of any equity interests of any Subsidiary of the Company.
(c) Nothing in this Agreement, any Other Agreement or the Amendment shall
prohibit the Company from effecting the Cellular Spin-off prior to delivery of
the Notice of Abandonment.
Section 8.10. Conduct of Business of Cellular. (a) Except (v) for the
Cellular Spin-off, (w) for any financings or refinancings in contemplation of
the Cellular Spin-off, (x) as set forth in the Schedule of Permitted Cellular
Actions attached as Schedule C hereto, (y) as otherwise may be necessary to
comply with an order, rule or other requirement of the FCC, or (z) as otherwise
may be consented to in writing by the Buyers, until the earlier of (A) the
occurrence of the Cellular Spin-off Date, and (B) the delivery of a Notice of
Abandonment:
(i) The Company shall cause the business of Cellular to be conducted only
in the ordinary course of business consistent with past practices (except
for any internal reorganization of Cellular that the Company believes in
good faith is appropriate in connection with the Cellular Spin-off),
provided that nothing in this Agreement, the Other Agreements or the
Amendment shall prohibit the Company from effecting any Acquisitions or
Dispositions with respect to Cellular so long as the number of POPs of
Cellular at the Cellular Spin-off Date do not vary by more than 10% from
the number of POPs of Cellular at June 22, 1995.
(ii) Neither the Company nor any of its Affiliates (other than Cellular
and the Subsidiaries and Affiliates Controlled by Cellular) shall engage in
any transaction (including, without limitation, the purchase, sale,
transfer or exchange of assets or the rendering of any service) with
Cellular that is to be performed, in whole or in part, after the Cellular
Spin-off Date, except upon terms that following the Cellular Spin-off Date
are no less favorable to the Company or such an Affiliate of the Company
than those that might, in the good faith judgment of the Company, be
obtained in an arms' length transaction at the time from Persons which are
not the Company or such an Affiliate of the Company, other than
transactions that individually and in the aggregate are immaterial to the
value of Cellular, provided that the transactions between the Company and
Cellular that are to be performed, in whole or in part, after the Cellular
Spin-off Date (other than any transactions that individually and in the
aggregate are immaterial to the value of Cellular) shall be approved by the
Board of Directors.
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(iii) The Company shall not enter into any Cellular Guarantee in respect
of any Cellular Liabilities other than guarantees of purchase money
indebtedness or other non-financial indebtedness that, individually and in
the aggregate, do not exceed $5 million. Cellular shall assume or retain
all Cellular Liabilities incurred by the Company or its Subsidiaries in
connection with the conduct of the business of Cellular prior to the
Cellular Spin-off Date, other than (i) liabilities that are in the
aggregate immaterial to the Company and to Cellular, and (ii) indebtedness
for borrowed money, it being understood that the Company may establish the
amount of indebtedness for borrowed money, if any, to be borne by Cellular
in connection with the Cellular Spin-off.
(iv) In connection with the Cellular Spin-off, the Company and Cellular
shall enter into a Tax Sharing and Indemnification Agreement which will
include, among other things, the following provisions: (i) in the event
that the Cellular Spin-off fails to constitute a tax-free distribution
under section 355 of the Code, Taxes resulting from such failure (including
the liability of the Company or Cellular arising from Taxes imposed on
shareholders of the Company to the extent any shareholders successfully
seek recourse against the Company or Cellular on account of such failure)
will be allocated between the Company and Cellular in such a manner as will
take into account the extent to which each contributed to such failure, and
the Company and Cellular will indemnify and hold harmless the other from
and against the Taxes so allocated to the indemnifying party; (ii)(x) the
Company will agree to be responsible for, and to indemnify and hold
Cellular and the Cellular Affiliates harmless from and against, Taxes in an
amount up to $25 million arising from the recognition of gain upon a
distribution of Cellular Common Stock to non-U.S. persons pursuant to
section 367(e) of the Code in connection with the Cellular Spin-off and
from the transfer of assets and liabilities by the Company and the Sprint
Affiliates to Cellular and the Cellular Affiliates in connection with the
Cellular Spin-off, and (y) Cellular will agree to be responsible for, and
to indemnify and hold the Company and the Sprint Affiliates harmless from
and against, Taxes in excess of $25 million arising from such recognition
of gain and such transfer of assets and liabilities as described in
subclause (x) of this clause (ii); (iii) with respect to Taxes other than
those to which clauses (i) and (ii) above apply, Cellular will agree to be
responsible for, and to indemnify and hold the Company and the Sprint
Affiliates harmless from and against, any liability for Taxes of or
relating to Cellular or the Cellular Affiliates or their assets or the
operation of their businesses for periods up to and including the Cellular
Spin-off Date (including Taxes attributable to any deferred intercompany
transactions or excess loss accounts that are recognized as a result of the
Cellular Spin-off or any transfer of any asset or liability in connection
therewith); and, (iv) with respect to Taxes other than those to which
clauses (i), (ii) and (iii) above apply, the Company will agree to be
responsible for, and to indemnify and hold Cellular and the Cellular
Affiliates harmless from and against, any liability for Taxes of or
relating to the Company or the Sprint Affiliates or their assets or the
operation of their businesses (A) for periods up to and including the
Cellular Spin-off Date, and (B) for periods after the Cellular Spin-off
Date and imposed on Cellular or the Cellular Affiliates under section
1.1502-6 of the Treasury regulations or any comparable provision of any
applicable state, local or foreign tax law. For purposes of this Section
8.10(a)(iv), the term "Cellular Affiliates" shall mean all direct and
indirect parents and Subsidiaries, if any, of Cellular immediately after
the Cellular Spin-off, and the term "Sprint Affiliates" shall mean all
direct and indirect parents and Subsidiaries, if any, of the Company
immediately after the Cellular Spin-off.
(b) The Company shall not have any liability for any breach of any of the
covenants or agreements set forth in this Section 8.10 if the Company shall
have delivered a Notice of Abandonment.
ARTICLE IX
OTHER AGREEMENTS
Section 9.1. Information for Inclusion in the Proxy Statement. Each of FT and
DT shall provide such information regarding itself and its Affiliates
(including, without limitation, such information necessary to describe in
sufficient detail the Control Share Acquisitions Plan) as may reasonably be
requested by the
B-52
Company for inclusion in the Proxy Statement, and each of FT and DT will
deliver as promptly as practicable after the date hereof to the Company an
Acquiring Person Statement in compliance with Section 17-1291 of the Kansas
Control Share Acquisitions Statute. The information provided by FT and DT for
inclusion in the Proxy Statement and the information contained in the Acquiring
Person Statement will not contain any material misstatement of fact or omit to
state any material fact necessary to make the statements, in the light of the
circumstances under which they are made, not misleading. All statements
included in the Proxy Statement relating to FT or DT shall be subject to the
approval of FT and DT, such approval not to be unreasonably withheld. If, at
any time after the mailing of the definitive Proxy Statement and prior to the
Stockholders' Meeting, any event should occur that results in the information
supplied by FT, DT or their respective Affiliates for inclusion in the Proxy
Statement or the information contained in the Acquiring Person Statement
containing an untrue statement of a material fact or omitting to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading, FT and DT shall promptly notify the Company of the occurrence of
such event.
Section 9.2. Further Assurances. (a) Each Party shall (i) execute and deliver
such additional instruments and other documents, and (ii) use its reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary under Applicable Law to consummate the transactions
contemplated hereby and by the Other Agreements and to satisfy the applicable
conditions to closing hereunder.
(b) Each of the Parties agrees to make all filings with Governmental
Authorities required in connection with the transactions contemplated by this
Agreement and the Other Agreements, including all filings necessary to obtain
the Governmental Approvals described in Sections 3.1(a), (b), (c), (d), (e) and
(k) of this Agreement as promptly as practicable after the date of this
Agreement and to use its reasonable efforts to furnish or cause to be
furnished, as promptly as practicable, all information and documents reasonably
required to obtain such approvals and shall otherwise cooperate in all
reasonable respects with the applicable Governmental Authorities to obtain any
required Governmental Approvals in as expeditious a manner as possible.
(c) Each of the Parties shall use its reasonable efforts to resolve such
objections, if any, as any Governmental Authority may assert with respect to
this Agreement and the Other Agreements and the transactions contemplated
hereby and thereby under Applicable Laws, including requesting reconsideration
(which may be initiated by the Party affected thereby or requested by any other
Party) of any adverse ruling of any Governmental Authority and taking
administrative appeals, if available and reasonably likely to result in a
reversal of such adverse ruling. If any Proceeding is instituted by any Person
challenging this Agreement, the Other Agreements or the transactions
contemplated hereby or thereby, the Parties shall promptly consult with each
other to determine the most appropriate response to such Proceeding and shall
cooperate in all reasonable respects with any Party subject to any such
Proceeding, provided that the decision whether to initiate, and the control of,
any Proceeding involving any Party shall remain within the sole discretion of
such Party.
(d) FT shall comply, to the extent permitted by Applicable Law of France,
with final and nonappealable discovery orders rendered by a court of competent
jurisdiction as provided in Section 11.8 hereof or in any corresponding section
of any Other Agreement, and shall take such reasonable action as appropriate in
order to permit FT to so comply with such orders.
(e) DT shall comply, to the extent permitted by Applicable Law of Germany,
with final and nonappealable discovery orders rendered by a court of competent
jurisdiction as provided in Section 11.8 hereof or in any corresponding section
of any Other Agreement, and shall take such reasonable action as appropriate in
order to permit DT to so comply with such orders.
Section 9.3. Public Announcements. In addition to any obligations under the
Standstill Agreement, the Parties shall use reasonable efforts to consult in
good faith with each other with a view to agreeing upon any press release or
public announcement relating to the transactions contemplated hereby or by the
Other Agreements prior to the consummation thereof.
B-53
Section 9.4. Notification. Each Party shall notify each other Party of the
occurrence or nonoccurrence of any event known to a senior officer of such
Party which in such Person's reasonable good faith judgment has caused or is
likely to cause:
(a) any covenant or agreement of such Party contained herein not to be
performed or complied with in any material respect, or any condition set
forth in Article III to become incapable of being fulfilled, in each case
until the First Closing (except as provided in clauses (b), (c) and (d)
below);
(b) any covenant or agreement of such Party set forth in Section 2.2, 2.3
or 2.4 of this Agreement not to be performed or complied with in any
material respect, or any condition set forth in Article IV to become
incapable of being fulfilled, in each case until the relevant Article IV
Closing;
(c) any covenant or agreement of such Party set forth in Section 2.5 of
this Agreement not to be performed or complied with in any material
respect, or any condition set forth in Article V to become incapable of
being fulfilled, in each case until the Optional Shares Closing; or
(d) any covenant or agreement of such Party set forth in Sections 8.8,
9.2, 9.3, 11.2 or 11.12 of this Agreement not to be performed or complied
with in any material respect, in each case for so long as shares of Class A
Stock are outstanding;
provided that the delivery of any notice pursuant to this Section 9.4 will not
cure such breach or noncompliance or limit or otherwise affect the remedies
available hereunder to any Party, and provided, further, that, with respect to
any representation or warranty, no Party shall have any liability for a breach
of this Section 9.4, if the claim with respect to such breach is made at a time
when the representation or warranty to which it relates does not continue to
survive as provided in Section 11.1 hereof.
Section 9.5. Brokers or Finders. (a) Other than Dillon, Read & Co. Inc., no
Person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee as a result of any action by the Company or any of
its Affiliates in connection with the transactions contemplated by this
Agreement and the Other Agreements. The Company agrees to indemnify and hold
harmless each of FT and DT from and against any and all claims, liabilities and
obligations (including attorneys' fees (but not including the portion of any
such fees determined pursuant to the German Fee Regulations) and disbursements
of counsel) with respect to any such fees asserted by any Person as a result of
any action by the Company or any of its Affiliates in connection with the
transactions contemplated by this Agreement and the Other Agreements.
(b) Other than Goldman, Sachs & Co., no Person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee as a result of
any action by FT or any of its Affiliates in connection with the transactions
contemplated by this Agreement and the Other Agreements. FT agrees to indemnify
and hold the Company harmless from and against any and all claims, liabilities
and obligations (including attorneys' fees and disbursements of counsel) with
respect to any such fees asserted by any Person as a result of any actions by
FT or its Affiliates in connection with the transactions contemplated by this
Agreement and the Other Agreements.
(c) Other than Goldman, Sachs & Co., no Person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee as a result of
any action by DT or any of its Affiliates in connection with the transactions
contemplated by this Agreement and the Other Agreements. DT agrees to indemnify
and hold the Company harmless from and against any and all claims, liabilities
and obligations (including attorneys' fees and disbursements of counsel) with
respect to any such fees asserted by any Person as a result of any actions by
DT or its Affiliates in connection with the transactions contemplated by this
Agreement and the Other Agreements.
Section 9.6. Notice of Proposals Regarding Acquisition Transactions. Until
the First Closing, each of FT and DT shall promptly notify the Company if any
inquiries or proposals are received by, any information is requested from, or
any negotiations or discussions are sought to be initiated or continued with,
FT or DT or any of their respective Affiliates regarding any Acquisition
Proposal involving the Company or any purchase of any of the shares of capital
stock of the Company Beneficially Owned by FT, DT or any of their respective
Affiliates (whether by way of a tender offer or exchange offer or otherwise).
B-54
Section 9.7. Execution of Standstill Agreement. Concurrently with the
execution of this Agreement, each Party shall execute the Standstill Agreement.
Section 9.8. Confidentiality Agreements. As soon as reasonably practicable
after the date hereof but prior to the Initial Issuance Date, the Parties shall
negotiate in good faith to reach mutual agreement regarding the definitive
terms and conditions of the FT Investor Confidentiality Agreement and the DT
Investor Confidentiality Agreement.
Section 9.9. Actions by FT and DT in Connection with the Cellular Spin-off.
Upon the request of the Company, by notice given not fewer than ten Business
Days prior to the planned date of the Cellular Spin-off, each of FT and DT
shall represent and warrant to the Company that, to the best of their
knowledge, on or prior to the Cellular Spin-off Date they do not have a plan to
purchase Common Stock from any officer or director of the Company or from any
shareholder of the Company owning more than one percent of the outstanding
capital stock of the Company. The above representation and warranty shall
survive until the applicable statute of limitations pursuant to the Code
(including any extension thereof) for the taxable year of the Company including
the Cellular Spin-off expires.
Section 9.10. Adjustment Certificates. From time to time, at the request of
FT or DT, the Company shall, within 20 Business Days of the date of the request
therefor, deliver to each Class A Holder a certificate signed by a duly
authorized officer of the Company setting forth any adjustment pursuant to the
Class A Provisions or the Stockholders' Agreement, as the case may be, to the
Adjusted Cellular Price, the Net Cellular Acquisition Amount, the Net Cellular
Indebtedness, the Average Sprint Price, the Average Cellular Price, the Lower
Threshold Sprint Price, the New Lower Threshold Sprint Price, the Upper
Threshold Sprint Price, the New Upper Threshold Sprint Price, the Second
Anniversary Threshold Sprint Price (as such term is defined in the Class A
Provisions), the Target Price, the New Target Price, the Minimum Price, the New
Minimum Price, the Maximum Price, the New Maximum Price, the Cellular Spin-off
Reduction Factor, the Dividend Factor (as such term is defined in the Class A
Provisions), the conversion ratio expressed in Section 3(c)(ii) of that portion
of ARTICLE SIXTH entitled GENERAL PROVISIONS RELATING TO COMMON STOCK AND CLASS
A STOCK, the Modified Lower Threshold (as such term is defined in the Class A
Provisions), and the Modified New Lower Threshold (as such term is defined in
the Articles), as the case may be, and showing in reasonable detail the facts
upon which such adjustment or adjustments are based.
ARTICLE X
TERM AND TERMINATION
Section 10.1. Termination. (a) This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Initial Issuance Date (whether before or after the Stockholders' Meeting):
(i) by FT, DT or the Company, if the First Closing has not been
consummated on or before December 31, 1995 other than as a result of the
failure of the Party seeking to terminate this Agreement to perform its
obligations under this Agreement or the Other Agreements;
(ii) by FT or DT:
(1) upon the occurrence of a Change of Control,
(2) if the Company or any of its Subsidiaries or Affiliates, or any
of their respective officers, directors, employees, agents or
representatives (including, without limitation, investment bankers,
attorneys and accountants), undertakes any action prohibited by clause
(b) of Section 8.3, unless prior to such time the Company shall have
notified each of FT and DT of its desire that such Person or Persons
undertake such action (and shall have provided each of FT and DT with a
description in reasonable detail of the action proposed, the Person or
Persons involved, and the transaction or proposal to which it relates)
and both FT and DT shall have failed to notify the Company of their
disapproval of such action within five Business Days after receipt by
both FT and DT of the Company's notice,
B-55
(3) until the approval of the Proposals by the stockholders of the
Company shall have been obtained as contemplated by Section 8.4 hereof,
if the Board of Directors or any committee thereof is notified during
any meeting of the Board of Directors or any committee thereof of
substantive negotiations with respect to any transaction or action
whose consummation would be prohibited by Section 8.1(e) hereof, and
the Board of Directors or such committee has not instructed that the
Company discontinue such negotiations, unless prior to such time the
Company shall have notified each of FT and DT of its desire that such
negotiations continue (and shall have provided each of FT and DT with a
description in reasonable detail of the transaction or action that is
the subject of such negotiations) and both FT and DT shall have failed
to notify the Company of their disapproval of such negotiations within
five Business Days after receipt by both FT and DT of the Company's
notice,
(4) if the Board of Directors or any committee thereof is notified
during any meeting of the Board of Directors or such committee of
negotiations involving the Company and any Person relating to an
Acquisition Proposal and the Board of Directors or such committee has
not instructed that the Company discontinue such negotiations, unless
prior to such time the Company shall have notified each of FT and DT of
its desire that such negotiations continue (and shall have provided
each of FT and DT with a description in reasonable detail of the scope
and substance of the negotiations and the Acquisition Proposal to which
they relate) and both FT and DT shall have failed to notify the Company
of their disapproval of such negotiations within five Business Days
after receipt by both FT and DT of the Company's notice,
(5) if the Board of Directors shall have withdrawn or qualified or
resolved to withdraw or qualify in any manner that is adverse to FT or
DT, its recommendation or approval of the Proposals, provided, that for
purposes of this clause (5) and clause (3) of Section 10.1(a)(iii), if
the Board of Directors continues its recommendation and approval of the
Proposals, but reflects in its recommendation additional information,
inclusion of such additional information, in and of itself, shall not
be deemed to be a qualification that is adverse to FT or DT,
(6) if it has become impossible for any condition precedent to its
obligations under this Agreement or the Other Agreements to be
satisfied, provided that such condition precedent has become impossible
to satisfy other than as a result of the failure of FT or DT to perform
its obligations under this Agreement or the Other Agreements,
(7) if there is a material breach by the Company of its
representations and warranties contained in this Agreement and the
Other Agreements, which breach is not cured within 30 days after
written notice by FT or DT of such breach, or
(8) if the stockholders of the Company fail to approve the Proposals
by the requisite vote at the Stockholders' Meeting;
(iii) by the Company:
(1) if it has become impossible for any condition precedent to its
obligations under this Agreement or the Other Agreements to be
satisfied, provided that such condition precedent has become impossible
to satisfy other than as a result of the failure of the Company to
perform its obligations under this Agreement or the Other Agreements,
(2) if there is a material breach by FT or DT of its representations
and warranties contained in this Agreement and the Other Agreements,
which breach is not cured within 30 days after written notice by the
Company of such breach,
(3) if, in accordance with Section 8.4 hereof, the Board of Directors
of the Company fails to recommend or withdraws or qualifies its
recommendation to the stockholders of the Proposals, or
(4) if the stockholders of the Company fail to approve the Proposals
by the requisite vote at the Stockholders' Meeting;
(iv) by the Company, FT or DT, if the Joint Venture Agreement shall have
been terminated in accordance with the terms thereof; or
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(v) by consent in writing of all of the Parties.
(b) If this Agreement is terminated pursuant to Section 10.1(a), written
notice thereof shall forthwith be given by the terminating Party to the other
Parties hereto, and this Agreement shall terminate without further action by
any of the Parties hereto. Any termination of this Agreement as provided herein
shall be without prejudice to the rights of any Party hereto arising out of
breach by any other Party of any representation, warranty, covenant or
agreement contained in this Agreement. Notwithstanding any such termination,
the provisions of Sections 10.1(b), 10.2, 11.8, 11.10 and 11.12 of this
Agreement, the Existing Confidentiality Agreement and the Standstill Agreement
shall survive such termination in accordance with their terms.
Section 10.2. Reimbursement of Expenses. If this Agreement is terminated (a)
pursuant to clauses (1), (2) or (4) of Section 10.1(a)(ii) or (b) pursuant to
clause (5) of Section 10.1(a)(ii) if the Board of Directors shall have
withdrawn or qualified or resolved to withdraw or qualify its recommendation or
approval of the Proposals after receiving an Acquisition Proposal, in addition
to any other remedies the Buyers may have hereunder, at law, in equity or
otherwise, the Company shall promptly reimburse each of FT and DT for their
actual reasonable out-of-pocket expenses (including attorneys' fees, but
notwithstanding the foregoing, not including the portion of any fees determined
pursuant to the Bundesgebuhrenordnung fur Rechtsanwalte vom 26. Juli 1957
(BGBl) I S. 907 (as it or any successor provision is from time to time in
effect) (the "German Fee Regulations")) incurred by it relating to the
transactions contemplated by this Agreement, the Other Agreements and the Joint
Venture Documents up to a maximum aggregate amount of $15 million for each of
FT and DT, as set forth on a certificate or certificates executed by an officer
of each of FT and DT describing such expenses in reasonable detail.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Survival of Representations and Warranties. (a) The
representations and warranties made by (i) the Company in Sections 6.1 through
6.4, the first two sentences of Section 6.5(a) and Section 6.6 (but, in the
case of Section 6.6, only to the extent that a change described in such Section
relates to a Material Adverse Effect on the Company and its Subsidiaries taken
as a whole that existed on the Initial Issuance Date, but arose after the later
of (x) the date of the end of the quarter covered by the last Quarterly Report
on Form 10-Q of the Company filed prior to the Initial Issuance Date and (y)
the date of the end of the year covered by the last Annual Report on Form 10-K
of the Company filed prior to the Initial Issuance Date) of this Agreement, and
(ii) the Buyers in Sections 7.1 and 7.2 of this Agreement (the "Surviving
Representations") will survive until the earlier to occur of (x) 15 months
after the date of the First Closing and (y) 90 days after the publication of
the results of the first full audit of the consolidated financial statements of
the Company and its Subsidiaries by the Company's independent auditors
following the First Closing, such financial statements to include a balance
sheet and statements of income and cash flows as of a date following the
Initial Issuance Date and to be prepared in accordance with GAAP applied on a
consistent basis with the financial statements included in the SEC Documents.
The Company shall have the right to cause its independent auditors to conduct
such an audit at any time after the Initial Issuance Date. No action may be
brought with respect to a breach of any Surviving Representation after such
time unless, prior to such time, the Party seeking to bring such an action has
notified the other Parties of such claim, specifying in reasonable detail the
nature of the loss suffered. The representations and warranties provided in
Sections 6.9 (as of the date hereof and as of the Initial Issuance Date) and
7.1(g) shall survive without limitation as to time, and the representation and
warranty provided in Section 9.9 hereof shall survive for the time period
provided therein. None of the other representations and warranties made by any
Party in this Agreement or any Other Agreement or in any certificate or
document delivered pursuant hereto or thereto prior to or on the Initial
Issuance Date shall survive the First Closing. None of the representations and
warranties made by any Party in this Agreement or any Other Agreement or in any
certificate or document delivered pursuant hereto or thereto at the Optional
Shares Closing or Article IV Closing shall survive such Optional Shares Closing
or
B-57
Article IV Closing, as the case may be, provided that if any certificate or
document delivered pursuant hereto, or any portion thereof, pertains to a
Surviving Representation, such certificate or document, or such portion
thereof, shall survive until the Surviving Representation to which it pertains
shall no longer survive as provided herein.
(b) The Buyers shall be entitled to recovery with respect to breaches of the
Surviving Representations and to the representation and warranty provided in
Section 6.9 made by the Company pursuant to this Agreement (and in any
certificate pertaining to any such representation) only if the aggregate amount
of loss, liability or damage (including reasonable attorneys' fees (but not
including the portion of any fees determined pursuant to the German Fee
Regulations) and other costs and expenses) (collectively, "Damages") incurred
or sustained by the Buyers arising from or relating to such breaches, in the
aggregate, exceeds $100,000,000. The Company shall be entitled to recovery with
respect to breach of the Surviving Representations and the representation and
warranty provided in Section 9.9 made by the Buyers pursuant to this Agreement
(and in any certificate pertaining to any such representation) only if the
aggregate amount of Damages sustained by the Company arising from or relating
to such breaches exceeds $100,000,000. The Company shall not incur any
liability under the representation and warranty provided in Section 6.9 or
under any certificate pertaining to such representation (even if the Company
turns out in fact to be a U.S. real property holding corporation), provided
that such representation and warranty is made to the best of the Company's
knowledge and belief.
Section 11.2. Assignment. No Party will assign this Agreement or any rights,
interests or obligations hereunder, or delegate performance of any of its
obligations hereunder, without the prior written consent of each other Party,
provided that each of the Buyers may assign this Agreement, or part or all of
its rights, interests or obligations hereunder, or delegate performance
hereunder, to one or more Qualified Subsidiaries, in which case (i) such Buyer
and such Qualified Subsidiary or Subsidiaries shall be jointly and severally
liable for all of such Buyer's obligations hereunder, (ii) such Buyer shall act
as agent for such Qualified Subsidiary in connection with the receipt or giving
of any and all notices or approvals under this Agreement or the Other
Agreements and the Articles as amended by the Amendment, and (iii) such Buyer
shall not cause or permit any such Subsidiary to lose its status as a Qualified
Subsidiary at any time when such Subsidiary owns Shares, and provided, further,
that an assignment of the right to purchase Shares under this Agreement shall
be permitted to be made to a Qualified Subsidiary or Qualified Subsidiaries
only if each such Subsidiary is identified in the Acquiring Person Statement
contemplated by Section 6.8 hereof and all information required by the Kansas
Control Share Acquisitions Statute with respect to each such Subsidiary is
included in such Acquiring Person Statement. Any assignment of this Agreement
or any rights, interests or obligations hereunder to a Qualified Subsidiary
made pursuant to this Section 11.2 shall be effective only if (a) the Buyers
disclose to the Company the identity of the shareholders of such Qualified
Subsidiary and (b) such Qualified Subsidiary agrees to be bound by the terms
and conditions of (i) this Agreement and a Qualified Subsidiary Standstill
Agreement, and (ii) if such assignment is made after the Initial Issuance Date,
the Stockholders' Agreement, a Qualified Subsidiary Confidentiality Agreement
and the Registration Rights Agreement upon the purchase by such Qualified
Subsidiary of Class A Stock hereunder, in each case pursuant to an instrument
of assumption substantially in the form of Exhibit K hereto, and such Qualified
Subsidiary shall become a party to each such agreement assumed thereby.
Section 11.3. Entire Agreement. This Agreement, including the Disclosure
Schedules, the Exhibits attached hereto, and the Other Agreements embody the
entire agreement and understanding of the Parties in respect of the subject
matter contained herein, provided that this provision shall not abrogate (a)
any other written agreement between the Parties executed simultaneously with
this Agreement, (b) the letter agreement referred to in Section 11.4 hereof, or
(c) the understanding set forth in Item 1 of Schedule 2 to that certain
memorandum dated June 22, 1995 among the Company, FT and DT. This Agreement
supersedes all prior agreements and understandings between the Parties with
respect to such subject matter, except as so provided in the preceding
sentence.
B-58
Section 11.4. Expenses. Except as expressly otherwise provided in Section
10.2 of this Agreement and that certain letter agreement dated as of June 22,
1995 among the Company, FT and DT regarding expenses incurred in the
translation of this Agreement and certain related documents to comply with the
French Translation Law, each Party and each of its Affiliates will bear its own
expenses (including the fees and expenses of any attorneys, accountants,
investment bankers, brokers, or other Persons engaged by it) incurred in
connection with the preparation, negotiation, authorization, execution and
delivery hereof and each Other Agreement to which it or any of its Affiliates
is a party, and the transactions contemplated hereby and thereby.
Section 11.5. Waiver, Amendment, Etc. This Agreement may not be amended or
supplemented, and, except to the extent permitted by Section 3.1(k) and with
respect to any Burdensome Condition affecting a particular Party, no waivers of
or consents to departures from the provisions hereof shall be effective, unless
set forth in a writing signed by, and delivered to, all the Parties. No failure
or delay of any Party in exercising any power or right under this Agreement
will operate as a waiver thereof, nor will any single or partial exercise of
any right or power, or any abandonment or discontinuance of steps to enforce
such right or power, preclude any other or further exercise thereof or the
exercise of any other right or power.
Section 11.6. Binding Agreement; No Third Party Beneficiaries. This Agreement
will be binding upon and inure to the benefit of the Parties and their
successors (including, without limitation, any successor of FT in a
privatization) and permitted assigns. Nothing expressed or implied herein is
intended or will be construed to confer upon or to give to any third party any
rights or remedies by virtue hereof. In the event of a reorganization of FT
pursuant to, as a result of or in connection with, a privatization, the
corporation or other entity formed to continue the business activities of FT
shall assume the rights and obligations of FT under this Agreement and the
Other Agreements.
Section 11.7. Notices. All notices and other communications required or
permitted by this Agreement shall be made in writing in the English language
and any such notice or communication shall be deemed delivered when delivered
in person, transmitted by telex or telecopier, or seven days after it has been
sent by air mail, as follows:
FT:
6 place d'Alleray
75505 Paris Cedex 15
France
Attn: Executive Vice President, International
Tel: (33-1) 44-44-19-94
Fax: (33-1) 46-54-53-69
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
U.S.A.
Attn: Louis Begley, Esq.
Tel: (212) 909-6273
Fax: (212) 909-6836
DT:
Friedrich-Ebert-Allee 140
D-53113 Bonn
Germany
Tel: 49-228-181-9000
Fax: 49-228-181-8970
Attn: Chief Executive Officer
B-59
with a copy to:
Mayer, Brown & Platt
2000 Pennsylvania Avenue, N.W.
Suite 6500
Washington, D.C. 20006
U.S.A.
Attn: Werner Hein, Esq.
Tel: (202) 778-8726
Fax: (202) 861-0473
Sprint:
2330 Shawnee Mission
Parkway, East Wing
Westwood, Kansas 66205
U.S.A.
Attn: General Counsel
Tel: (913) 624-8440
Fax: (913) 624-8426
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
U.S.A.
Attn: Bruce N. Hawthorne, Esq.
Tel: (404) 572-4903
Fax: (404) 572-5146
The Parties shall promptly notify each other in the manner provided in this
Section 11.7 of any change in their respective addresses. A notice of change of
address shall not be deemed to have been given until received by the addressee.
Communications by telex or telecopier also shall be sent concurrently by mail,
but shall in any event be effective as stated above.
Section 11.8. GOVERNING LAW; DISPUTE RESOLUTION; EQUITABLE RELIEF. (a) THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW).
(b) EACH PARTY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT OR
PROCEEDING AGAINST IT WITH RESPECT TO ITS OBLIGATIONS OR LIABILITIES UNDER OR
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT BY SUCH
PARTY ONLY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK OR, IN THE EVENT (BUT ONLY IN THE EVENT) SUCH COURT DOES NOT HAVE SUBJECT
MATTER JURISDICTION OVER SUCH ACTION, SUIT OR PROCEEDING, IN THE COURTS OF THE
STATE OF NEW YORK SITTING IN THE CITY OF NEW YORK, AND EACH PARTY HEREBY
IRREVOCABLY ACCEPTS AND SUBMITS TO THE JURISDICTION OF EACH OF THE AFORESAID
COURTS IN PERSONAM, WITH RESPECT TO ANY SUCH ACTION, SUIT OR PROCEEDING
(INCLUDING, WITHOUT LIMITATION, CLAIMS FOR INTERIM RELIEF, COUNTERCLAIMS,
ACTIONS WITH MULTIPLE DEFENDANTS AND ACTIONS IN WHICH SUCH PARTY IS IMPLIED).
EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO
A JURY TRIAL IN ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO, OR
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
B-60
(c) EACH OF FT AND DT HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM (IN
SUCH CAPACITY, THE "PROCESS AGENT"), WITH AN OFFICE AT 1633 BROADWAY, NEW YORK,
NEW YORK, 10019 AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, FOR AND ON ITS
BEHALF SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY LEGAL ACTION OR
PROCEEDINGS WITH RESPECT TO THIS AGREEMENT AND THE OTHER AGREEMENTS, AND SUCH
SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT,
PROVIDED THAT IN THE CASE OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY
EFFECTING SUCH SERVICE SHALL ALSO DELIVER A COPY THEREOF TO FT AND DT IN THE
MANNER PROVIDED IN SECTION 11.7. FT AND DT SHALL TAKE ALL SUCH ACTION AS MAY BE
NECESSARY TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO APPOINT
ANOTHER AGENT SO THAT FT AND DT WILL AT ALL TIMES HAVE AN AGENT FOR SERVICE OF
PROCESS FOR THE ABOVE PURPOSES IN NEW YORK, NEW YORK. IN THE EVENT OF THE
TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS AND BUSINESS OF THE PROCESS
AGENT TO ANY OTHER CORPORATION BY CONSOLIDATION, MERGER, SALE OF ASSETS OR
OTHERWISE, SUCH OTHER CORPORATION SHALL BE SUBSTITUTED HEREUNDER FOR THE
PROCESS AGENT WITH THE SAME EFFECT AS IF NAMED HEREIN IN PLACE OF CT
CORPORATION SYSTEM. EACH OF FT AND DT FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED AIRMAIL, POSTAGE
PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN THIS AGREEMENT, SUCH SERVICE
OF PROCESS TO BE EFFECTIVE UPON ACKNOWLEDGMENT OF RECEIPT OF SUCH REGISTERED
MAIL. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW. EACH OF FT AND DT EXPRESSLY
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS INTENDED TO BE IRREVOCABLE UNDER THE
LAWS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA.
(d) EACH PARTY AGREES THAT MONEY DAMAGES WOULD NOT BE A SUFFICIENT REMEDY FOR
THE OTHER PARTIES FOR ANY BREACH OF THIS AGREEMENT BY IT, AND THAT IN ADDITION
TO ALL OTHER REMEDIES THE OTHER PARTIES MAY HAVE, THEY SHALL BE ENTITLED TO
SPECIFIC PERFORMANCE AND TO INJUNCTIVE OR OTHER EQUITABLE RELIEF AS A REMEDY
FOR ANY SUCH BREACH. EACH PARTY AGREES NOT TO OPPOSE THE GRANTING OF SUCH
RELIEF IN THE EVENT A COURT DETERMINES THAT SUCH A BREACH HAS OCCURRED, AND TO
WAIVE ANY REQUIREMENT FOR THE SECURING OR POSTING OF ANY BOND IN CONNECTION
WITH SUCH REMEDY.
Section 11.9. Severability. The invalidity or unenforceability of any
provision hereof in any jurisdiction will not affect the validity or
enforceability of the remainder hereof in that jurisdiction or the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction. To the extent permitted by Applicable Law, each Party waives any
provision of law that renders any provision hereof prohibited or unenforceable
in any respect. If any provision of this Agreement is held to be unenforceable
for any reason, it shall be adjusted rather than voided, if possible, in order
to achieve the intent of the Parties to the extent possible.
Section 11.10. Translation. (a) The Parties have negotiated both this
Agreement and the Memorandum of Understanding, dated June 14, 1994 (the "MOU"),
among each of the Parties, in the English language, and have prepared
successive drafts and the definitive texts of the MOU and this Agreement in the
English language. For purposes of complying with the French Translation Law,
the Parties have prepared a French version of this Agreement, which French
version was executed and delivered simultaneously with the execution and
delivery of the English version hereof, such English version having likewise
been executed and delivered. The Parties deem the French and English versions
of this Agreement to be equally authoritative.
B-61
(b) The Parties acknowledge that the Amendment, the Bylaws Amendment, the
Qualified Stock Purchaser Standstill Agreement (as such term is defined in the
Stockholders' Agreement), the Company Stock Payment Notes (as such term is
defined in the Stockholders' Agreement) and the Company Eligible Notes (as such
term is defined in the Stockholders' Agreement), and any draft forms thereof,
are not required to be translated into the French language to comply with the
French Translation Law.
Section 11.11. Table of Contents; Headings; Counterparts. The table of
contents and the headings in this Agreement are for convenience of reference
only and will not affect the construction of any provisions hereof. This
Agreement may be executed in one or more counterparts, each of which when so
executed and delivered will be deemed an original but all of which will
constitute one and the same Agreement.
Section 11.12. Waiver of Immunity. Each of FT and DT agrees that, to the
extent that it or any of its property is or becomes entitled at any time to any
immunity on the grounds of sovereignty or otherwise based upon its status as an
agency or instrumentality of government from any legal action, suit or
proceeding or from set off or counterclaim relating to this Agreement from the
jurisdiction of any competent court described in Section 11.8, from service of
process, from attachment prior to judgment, from attachment in aid of execution
of a judgment, from execution pursuant to a judgment or arbitral award, or from
any other legal process in any jurisdiction, it, for itself and its property
expressly, irrevocably and unconditionally waives, and agrees not to plead or
claim, any such immunity with respect to such matters arising with respect to
this Agreement or the subject matter hereof (including any obligation for the
payment of money). Each of FT and DT agrees that the waiver in this provision
is irrevocable and is not subject to withdrawal in any jurisdiction or under
any statute, including the Foreign Sovereign Immunities Act, 28 U.S.C. (P)1602
et seq. The foregoing waiver shall constitute a present waiver of immunity at
any time any action is initiated against FT or DT with respect to this
Agreement.
Section 11.13. Continuing Director Approval. Where Continuing Director
approval is otherwise explicitly required under this Agreement with respect to
a transaction or determination on the part of the Company, such approval shall
not be required if (a) the Fair Price Provisions have been deleted in their
entirety, (b) the Fair Price Provisions have been modified so as explicitly not
to apply to any Class A Holder, or they have been modified in a manner
reasonably satisfactory to FT and DT so as explicitly not to apply to any
transactions with any Class A Holder contemplated by this Agreement, the
Stockholders' Agreement or the Other Investment Documents (as such term is
defined in the Stockholders' Agreement) or the Articles as amended by the
Amendment, (c) the transaction in question is not a "Business Combination"
within the meaning of the Fair Price Provisions, or (d) the Class A Holder that
is a party to the transaction, along with its Affiliates (as such term is
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as in effect
on October 1, 1982) and Associates (as such term is defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as in effect on October 1, 1982), is not
an "Interested Stockholder" or an "Affiliate" of an "Interested Stockholder"
within the meaning of the Fair Price Provisions. Where this Agreement provides
that Continuing Director approval is explicitly required to undertake a
transaction or make a determination on the part of the Company, the Company
shall not undertake such transaction or make such determination unless it first
delivers a certificate, signed by a duly authorized officer of the Company, to
each of FT and DT certifying that such approval either has been obtained or is
not required as set forth in the preceding sentence, and FT and DT shall be
entitled to rely on such certificate.
Section 11.14. Currency. All amounts payable under this Agreement and the
Other Agreements shall be payable in U.S. dollars.
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In Witness Whereof, the Parties have caused this Agreement to be duly
executed as of the date first above written.
Sprint Corporation
/s/ W. T. Esrey
By: _________________________________
Name: William T. Esrey
Title: Chairman and Chief
Executive Officer
France Telecom
/s/ Charles Rozmaryn
By: _________________________________
Name: Charles Rozmaryn
Title: Directeur General
Deutsche Telekom AG
/s/ Ron Sommer
By: _________________________________
Name: Dr. Ron Sommer
Title: Vorsitzender des Vorstandes
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EXHIBIT A
TO THE
INVESTMENT AGREEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM OF QUALIFIED SUBSIDIARY
STANDSTILL AGREEMENT
[EXHIBIT INTENTIONALLY OMITTED]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BA-1
EXHIBIT B
TO THE
INVESTMENT AGREEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
AMONG
FRANCE TELECOM,
DEUTSCHE TELEKOM AG
AND
SPRINT CORPORATION
DATED AS OF , 199
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
PAGE
----
Section 1. Registration under the Securities Act......................... 3
1.1. Registration on Request....................................... 3
1.2. Incidental Registration....................................... 5
1.3. Registration Procedures....................................... 6
1.4. Delay of Filing or Sales...................................... 8
1.5. Underwritten Offerings........................................ 9
1.6. Preparation; Reasonable Investigation......................... 10
1.7. Indemnification............................................... 10
1.8. Effect of Other Agreements Among the Parties Hereto........... 12
Section 2. Definitions................................................... 12
Section 3. Miscellaneous................................................. 13
3.1. Rule 144...................................................... 13
3.2. Additional Parties............................................ 13
3.3. Notices....................................................... 13
3.4. Waiver, Amendment, etc........................................ 14
3.5. Binding Agreement; No Third Party Beneficiaries............... 15
3.6. Governing Law; Dispute Resolution; Equitable Relief........... 15
3.7. Severability.................................................. 16
3.8. Translation................................................... 16
3.9. Table of Contents; Headings; Counterparts..................... 16
3.10. Entire Agreement.............................................. 16
3.11. Waiver of Immunity............................................ 16
3.12. Currency...................................................... 17
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REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, dated as of , 199 (the Agreement),
among France Telecom, an exploitant public organized under the laws of France
(FT); Deutsche Telekom AG, an Aktiengesellschaft organized under the laws of
Germany (DT); and Sprint Corporation, a corporation organized under the laws of
Kansas (the "Company").
RECITALS
Whereas, each of the Company, Sprint Global Venture, Inc., a wholly-owned
subsidiary of the Company (Sprint Sub), FT and DT have formed a joint venture
to provide telecommunications services as provided in the Joint Venture
Agreement, dated as of June 22, 1995, among Sprint Sub, FT, DT and the Company,
and to pursue various telecommunications opportunities around the world as
further provided therein;
Whereas, pursuant to the Investment Agreement, dated as of July 31, 1995,
among FT, DT and the Company (the Investment Agreement), FT and DT are
purchasing from the Company shares of Class A Stock of the Company; and
Whereas, the parties hereto have determined that it is in their best
interests that they enter into this Agreement providing for certain rights and
restrictions with respect to the shares of Class A Stock owned by FT and DT and
any Qualified Subsidiaries or Qualified Stock Purchasers and certain related
rights and obligations of the Company.
Now, Therefore, in consideration of the mutual covenants and obligations set
forth herein, each of FT, DT and the Company agrees as follows:
Section 1. Registration under the Securities Act.
Section 1.1. Registration on Request. (a) Request. Subject to Article II of
the Stockholders' Agreement, at any time, upon the written request of the
holders of a majority of the Eligible Securities then outstanding requesting
that the Company effect the registration under the Securities Act of a
specified number of Eligible Securities, the Company shall promptly give
written notice of such requested registration to all holders of Eligible
Securities and thereupon the Company shall use its reasonable efforts to effect
the registration under the Securities Act of the Eligible Securities which the
Company has been so requested to register by the Selling Stockholders, for
disposition for cash in accordance with the intended method or methods of
disposition specified by the Selling Stockholders (which method of disposition
shall be in accordance with the registration requirements of the United States
securities laws), provided that (i) the Company shall not be required to effect
any registration pursuant to this Section 1.1 if during the twelve-month period
immediately preceding such request for registration the Company has previously
effected a registration pursuant to this Section 1.1, (ii) subject to Section
1.1(g), the Company shall not be required to effect any registration pursuant
to this Section 1.1 after five registrations requested by holders of Eligible
Securities pursuant to this Section 1.1 shall have been effected unless, as to
no more than two additional registrations, the holders of a majority of the
Eligible Securities then outstanding deliver at any time a notice to the effect
that such holders agree to pay all Registration Expenses in connection with
such additional two registrations; provided, however, that if the Company
proposes to redeem pursuant to Section 2 of that portion of ARTICLE SIXTH of
the Articles entitled "GENERAL PROVISIONS RELATING TO ALL STOCK" shares of
Class A Stock from the Class A Holders in an amount in excess of 0.25% of the
Voting Securities of the Company, and the Selling Stockholders sell such shares
pursuant to Section 2.11 or 7.4 of the Stockholders' Agreement in a registered
offering pursuant to which the Selling Stockholders have exercised a demand
registration right, such registration shall not count toward the maximum number
of registrations provided in this clause (ii) to the proviso to Section 1.1(a),
(iii) the Company shall not be obligated to cause any special audit to be
undertaken with any such registration, and (iv) the Company shall not be
required to effect any registration requested by
BB-3
holders of Eligible Securities pursuant to this Section 1.1 unless the
aggregate market value of all Eligible Securities so requested to be registered
exceeds $200 million on the date of delivery of the request for registration
(based on the average closing price per share of Common Stock on the preceding
ten Business Days).
(b) Withdrawal. The Selling Stockholders shall have the right to request
withdrawal of any registration statement filed pursuant to this Section 1.1
(and the Company shall so withdraw such registration statement) so long as such
registration statement has not become effective, provided that, in such case,
such Selling Stockholder shall pay all related out-of-pocket Registration
Expenses reasonably incurred by the Company unless a registration statement
shall be effected pursuant to this Section 1.1 within 270 days after such
withdrawal. The Selling Stockholders, in accordance with Section 2.5 of the
Stockholders' Agreement, at any time and from time to time, may change the
Planned Date of any registration statement to any date not more than 120 days
after the original Planned Date with respect to such registration statement.
(c) Effective Registration Statement. A registration requested pursuant to
this Section 1.1 shall not be deemed to be effected (i) if a registration
statement with respect thereto shall not have become effective under the
Securities Act (including, without limitation, because of a withdrawal of such
registration statement by the Selling Stockholders prior to the effectiveness
thereof pursuant to Section 1.1(b) hereof), (ii) if, after it has become
effective, such registration is interfered with for any reason by any stop
order, injunction or other order or requirement of the Commission or any other
Governmental Authority, and the result of such interference is to prevent the
Selling Stockholders from disposing of more than one-third of the Eligible
Securities proposed to be sold in accordance with the intended methods of
disposition or the Company exercises its rights under Section 1.4 and the
result is a delay in the proposed distribution of any Eligible Securities in
excess of 120 days and the Selling Stockholders determine not to sell Eligible
Securities pursuant to such registration as a result of such delay, or (iii) if
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with any underwritten offering shall not
be satisfied or waived with the consent of the Selling Stockholders holding
two-thirds of the Eligible Securities that were to have been sold thereunder,
other than as a result of any breach by any Selling Stockholder or any
underwriter of its obligations thereunder or hereunder.
(d) Registration Statement Form. Registration statements filed under this
Section 1.1 shall be on such form of the Commission as shall be selected by the
Company, and as shall permit the disposition of the subject Eligible Securities
for cash in accordance with the intended method or methods of disposition
specified by the Selling Stockholders. The Selling Stockholders may propose
that the Company include in a registration statement additional information or
material specified by any Selling Stockholder and the Company shall make a good
faith determination whether to include such information or material in such
registration statement.
(e) Expenses. Except as otherwise provided herein, the Company shall pay all
Registration Expenses in connection with any registration requested pursuant to
this Section 1.1 and shall pay such other expenses if and to the extent
required by Section 2.5 of the Stockholders' Agreement.
(f) Selection of Underwriters. If a registration pursuant to this Section 1.1
relates to an underwritten offering, the managing or lead underwriter or
underwriters shall be an underwriter or underwriters of internationally
recognized standing selected by the Selling Stockholders holding a majority of
the Eligible Securities proposed to be registered, with the approval of the
Company, which approval shall not be unreasonably withheld.
(g) Priority in Requested Registrations. If a registration pursuant to this
Section 1.1 involves an underwritten offering, and the managing or lead
underwriter or underwriters shall advise the Selling Stockholders in writing (a
copy of which shall be provided to the Company by the Selling Stockholders)
that, in its or their opinion, the number of securities requested to be
included in such registration by the Selling Stockholders, the Company and any
other Person exceeds the number which can be sold in such offering
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within a price range acceptable to the Selling Stockholders, the Company shall
include in such registration the number of securities that the Selling
Stockholders are so advised can be sold in such offering, as follows: (i) (x)
first, the Eligible Securities proposed to be included by the Selling
Stockholders, (y) second, the securities requested to be included in such
registration by the Company unless otherwise provided in an agreement between
the Company and another Person or Persons, and (z) third, the securities of any
other Person or Persons proposed to be included in such registration, in
accordance, as to the priorities among such other Persons, with the rights
contained in the respective agreements into which such Persons and the Company
have entered, or (ii) at the option of the Company, (x) first, the Eligible
Securities proposed to be included by the Selling Stockholders and the
securities requested to be included in such registration by the Company, each
pro rata in accordance with the number of Eligible Securities proposed to be
included by the Selling Stockholders and the number of securities so proposed
to be included by the Company, respectively, and (y) second, the securities of
any other Person or Persons proposed to be included in such registration, in
accordance, as to the priorities among such other Persons, with the rights
contained in the respective agreements into which such Persons and the Company
have entered, provided, if the Company selects the option set forth in clause
(ii), such registration shall not count toward the maximum number of
registrations provided in Section 1.1(a)(ii) if due to the Company's
participation on a pro rata basis with the Selling Stockholders, the managing
or lead underwriter or underwriters determines in its good faith judgment that
the number of securities requested to be included in such registration by the
Selling Stockholders and the Company exceeds the number which can be sold in
such offering within a price range acceptable to the Selling Stockholders.
(h) Inconsistent Rights. The Company shall not grant to any holder of its
securities any registration rights inconsistent with the provisions of this
Section 1.1.
Section 1.2 Incidental Registration. (a) Right to Include Eligible
Securities. If the Company at any time proposes to register any shares of its
Common Stock or other common equity securities under the Securities Act (other
than by a registration on Form S-4 or S-8 or any successor or similar forms or
filed in connection with an exchange offer or any offering of securities solely
to the Company's existing stockholders or otherwise pursuant to a dividend
reinvestment plan or a dividend reinvestment and stock purchase plan, and other
than pursuant to Section 1.1) for sale pursuant to an underwritten public
offering or other similarly organized selling effort, whether or not for sale
for its own account, the Company shall give prompt written notice to each
holder of Eligible Securities of its intention to do so and of the rights of
such holders under this Section 1.2. Upon the written request of any holder of
Eligible Securities made within 30 days after the delivery of any such notice
(which request shall specify the Eligible Securities intended to be disposed of
by any holder thereof), the Company shall use its reasonable efforts to effect
the registration under the Securities Act of all Eligible Securities which the
Company has been so requested to register by the Selling Stockholders, to the
extent required to permit the disposition for cash (in accordance with the
intended methods thereof specified by the Selling Stockholders, which method of
disposition shall be in accordance with United States securities laws) of the
Eligible Securities so to be registered. If, at any time after giving written
notice of its intention to register any such securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to each Selling Stockholder and,
thereupon, (i) in the case of a determination not to register, the Company need
not register any Eligible Securities in connection with such registration (but
shall, in such case, pay the reasonable fees and expenses of counsel to the
Selling Stockholders (excluding the portion of any fees determined pursuant to
the German Fee Regulations) unless the Company effects a similar registration
to which Sections 1.1 or 1.2 applies within 270 days of the Company's election
not to register), without prejudice, however, to the rights of the holders of
Eligible Securities (including the Selling Stockholders) to request that such
registration be effected as a registration under Section 1.1, and (ii) in the
case of a determination to delay registering, the Company may delay registering
any Eligible Securities for the same period as the delay in registering such
other securities. No registration effected under this Section 1.2 shall relieve
the Company of its obligation to effect any registration upon request under
Section 1.1.
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(b) Priority in Incidental Registrations. If a registration pursuant to this
Section 1.2 involves an underwritten offering, and the managing or lead
underwriter or underwriters shall advise the Company in writing (a copy of
which shall be provided by the Company to each Person requesting registration
of Eligible Securities or other securities of the Company), that, in its or
their opinion, the number of securities requested and otherwise proposed to be
included in such registration exceeds the number that can be sold in such
offering within a price range acceptable to the Company, the Company shall
include in such registration, up to the number of securities that the Company
is so advised can be sold in such offering, (i) if the registration is a
primary registration on behalf of the Company, (x) first, the securities
proposed to be included by the Company and (y) second, the Eligible Securities
requested to be included in such registration by the Selling Stockholders and
the securities of other Persons requested to be included in such registration,
each pro rata in accordance with the number of securities proposed to be
included by such other Persons and the number of Eligible Securities so
requested to be included, respectively; and (ii) if the registration is a
secondary registration on behalf of a Person or Persons other than the Company
or a holder of Eligible Securities, (x) first, the securities proposed to be
included by such other Person or Persons (unless, the Company shall have
negotiated an equal or better priority with such Person or Persons), (y)
second, the securities of the Company and the Eligible Securities requested to
be included in such registration by the Selling Stockholders, each pro rata in
accordance with the number of securities proposed to be registered by the
Company and the number of Eligible Securities so requested to be included,
respectively (unless the Company has negotiated an equal or better priority
with such other Person or Persons, in which case the securities proposed to be
included by the Company shall have higher priority than the Eligible Securities
proposed to be included by the Selling Shareholders), and (z) third, the
securities of any other Persons requested to be included in such registration
in accordance with the rights contained in the respective agreements into which
such Persons and the Company have entered. Notwithstanding the aforesaid, if at
any time the Company proposes to effect a registration under this Section 1.2
the Selling Stockholders are entitled to effect a disposition of Eligible
Securities pursuant to Rule 144(k) (or any successor provision) under the
Securities Act, the aforesaid priorities shall be changed so that the Eligible
Securities proposed to be included by the Selling Stockholders shall have the
lowest priority of all securities proposed to be registered in such
registration.
(c) Inconsistent Rights. The Company shall not grant to any holder of its
securities any registration rights inconsistent with the provisions of this
Section 1.2.
(d) Expenses. Except as otherwise provided in this Agreement, the Company
shall pay all Registration Expenses in connection with any registration
requested pursuant to this Section 1.2.
(e) Selection of Underwriters. If an incidental registration pursuant to this
Section 1.2 involves an underwritten offering, the managing or lead underwriter
or underwriters shall be selected by the Company.
Section 1.3. Registration Procedures. If and whenever the Company is required
to use its reasonable efforts to effect the registration of any Eligible
Securities under the Securities Act as provided in Sections 1.1 and 1.2, the
Company shall as expeditiously as possible:
(a) prepare and as soon thereafter as possible file with the Commission
the requisite registration statement to effect such registration and
thereafter use its reasonable efforts to cause such registration statement
to become effective, provided that before filing such registration
statement or any amendments thereto, the Company shall furnish to the
counsel to the Selling Stockholders copies of all such documents proposed
to be filed, which documents will be subject to the review of such counsel;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
continuously effective for a period of either (i) not less than 120 days
(subject to extension pursuant to the last paragraph of this Section 1.3)
or, if such registration statement relates to an underwritten offering,
such longer period as in the opinion of counsel for the underwriters a
prospectus is required by law to be delivered in connection with sales of
securities by an underwriter or dealer; or (ii) such shorter period as is
required for the disposition of all of the securities covered by such
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registration statement in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement (but in any event not before the expiration of any longer period
of effectiveness required under the Securities Act), and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all of
such securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement;
(c) furnish to each seller of securities covered by such registration
statement such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act,
and such other documents in order to facilitate the disposition of such
securities owned by such seller in accordance with such seller's intended
method of disposition, as such seller may reasonably request, but only
during such time as the Company shall be required under the provisions
hereof to cause such registration statement to remain current;
(d) use its reasonable efforts to register or qualify securities covered
by such registration statement under such other securities or blue sky laws
of such jurisdictions in the United States as each seller thereof shall
reasonably request, to keep such registration or qualification in effect
for so long as such registration statement remains in effect, and to take
any other action which may be reasonably necessary to enable such seller to
consummate the disposition in such jurisdictions in the United States of
the securities owned by such seller, provided that the Company shall not
for any such purpose be required to (i) qualify generally to do business as
a foreign corporation in any jurisdiction where it would not otherwise be
required to qualify but for the requirements of this subsection (d), (ii)
consent to general service of process in any such jurisdiction, (iii)
subject itself to taxation in any such jurisdiction or (iv) conform its
capitalization or the composition of its assets at the time to the
securities or blue sky laws of such jurisdiction;
(e) use its reasonable efforts to cause all securities covered by such
registration statement to be registered with or approved by such other
United States Governmental Authorities as may be necessary by virtue of the
business and operations of the Company to enable the sellers to consummate
the disposition thereof;
(f) use its reasonable efforts to furnish to each Selling Stockholder a
signed counterpart, addressed to such Selling Stockholder (and the
underwriters, if any), of
(i) an opinion of counsel for the Company, dated the effective date
of such registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and substance
to such Selling Stockholder, and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and substance
to such Selling Stockholder, signed by the independent public
accountants who have certified the Company's financial statements
included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities;
(g) furnish to each such Selling Stockholder at least five Business Days
prior to the filing thereof a copy of any amendment or supplement to such
registration statement or prospectus (other than any amendment or
supplement in the form of a filing which the Company is required to make
pursuant to the Exchange Act) and not file any such amendment or supplement
to which any such Selling
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Stockholder shall have reasonably objected on the grounds that, in the
opinion of counsel to such Selling Stockholder, such amendment or
supplement does not comply in all material respects with the requirements
of the Securities Act;
(h) notify each Selling Stockholder, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the discovery of the happening of any event as a
result of which, the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
under which they were made, and at the request of any such Selling
Stockholder promptly prepare and furnish to such Selling Stockholder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
(i) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
a period of at least twelve months beginning after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act;
(j) use its reasonable efforts to provide customary assistance to the
underwriters in their selling efforts and presentations to prospective
investors; and
(k) use its reasonable efforts to cause all such Eligible Securities
covered by such registration statement to be listed on a national
securities exchange or on the National Association of Securities Dealers,
Inc. National Market System (if such Eligible Securities are not already so
listed), and on each other securities exchange on which similar securities
issued by the Company are then listed, if the listing of such Eligible
Securities is then permitted under the rules of such exchange.
The Company may require each Selling Stockholder to furnish the Company in
writing for inclusion in the registration statement such information regarding
such Selling Stockholder and the distribution of such Eligible Securities being
sold as the Company may from time to time reasonably request.
Each Selling Stockholder agrees by becoming a holder of Eligible Securities
that upon receipt of any notice from the Company of the happening of any event
of the kind described in subsection (h) of this Section 1.3, such Selling
Stockholder shall forthwith discontinue such Selling Stockholder's disposition
of Eligible Securities pursuant to the registration statement relating to such
Eligible Securities until such Selling Stockholder's receipt of the copies of
the supplemented or amended prospectus contemplated by subsection (h) of this
Section 1.3 and, if so directed by the Company, such Selling Stockholder shall
use its reasonable efforts to deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Selling Stockholder's
possession, of the prospectus relating to such Eligible Securities current at
the time of receipt of such notice. If the Company shall give any such notice,
the applicable time period mentioned in subsection (b) of this Section 1.3
during which a registration statement is to remain effective shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to subsection (h) of this Section 1.3, to and
including the date when each Selling Stockholder shall have received the copies
of the supplemented or amended prospectus contemplated by subsection (h) of
this Section 1.3.
Section 1.4. Delay of Filing or Sales. (a) The Company shall have the right,
upon giving notice to the Selling Stockholders of the exercise of such right,
to delay filing a registration statement or to require such Selling
Stockholders not to sell any Eligible Securities pursuant to a registration
statement for a period of 270 days from the date on which such notice is given,
or such shorter period of time as may be specified in such
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notice or in a subsequent notice delivered by the Company to such effect prior
to or during the effectiveness of the registration statement, if (i) the
Company is engaged in or proposes to engage in discussions or negotiations with
respect to, or has proposed or taken a substantial step to commence, or there
otherwise is pending, any merger, acquisition, other form of business
combination, divestiture, tender offer, financing or other transaction, or
there is an event or state of facts relating to the Company, in each case which
is material to the Company (any such negotiation, step, event or state of facts
being herein called a "Material Activity"), (ii) such Material Activity would,
in the opinion of counsel for the Company, require disclosure so as to permit
the Eligible Securities to be sold in compliance with law, and (iii) such
disclosure would, in the reasonable judgment of the Company, be adverse to its
interests, provided that the Company shall have no right to delay the filing of
a registration statement or the selling of Eligible Securities if at any time
during the twelve months preceding the date on which such notice was given the
Company had delayed either the filing of a registration statement that included
Eligible Securities pursuant to Section 1.1(a) or the selling of Eligible
Securities pursuant to a registration statement filed in accordance with
Section 1.1(a).
(b) The Company shall have no obligation to include in any notice
contemplated by Section 1.4(a) any reference to or description of the facts
based upon which the Company is delivering such notice. The Company shall pay
all Registration Expenses and all reasonable fees and expenses of counsel for
the Selling Stockholders (excluding the portion of any fees determined pursuant
to the German Fee Regulations) with respect to any registration of Eligible
Securities or sales thereof that has been delayed for more than 90 days
pursuant to this Section 1.4, unless the Company effects a similar registration
to which Section 1.1 or 1.2 applies within 270 days of the first delivery of a
notice contemplated by Section 1.4(a).
Section 1.5. Underwritten Offerings. (a) Requested Underwritten Offerings. If
requested by the underwriters of any underwritten offering of Eligible
Securities pursuant to a registration requested under Section 1.1, the Company
shall enter into an underwriting agreement with such underwriters for such
offering. Such agreement shall be reasonably satisfactory in substance and form
to each Selling Stockholder, the Company and the underwriters and shall contain
representations, warranties, indemnities and agreements customarily included by
an issuer in underwriting agreements with respect to secondary distributions,
including, without limitation, indemnities to the effect and to the extent
provided in Section 1.7. The Selling Stockholders shall be parties to such
underwriting agreement and may, at their option, require that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
Selling Stockholders.
(b) Incidental Underwritten Offerings. If the Company at any time proposes to
register any of its Common Stock or other common equity securities under the
Securities Act as contemplated by Section 1.2 and such securities are to be
distributed by or through one or more underwriters, the Company shall, if
requested by the Selling Stockholders as provided in Section 1.2 and subject to
the provisions of Section 1.2(b), use its reasonable efforts to arrange for
such underwriters to include those Eligible Securities designated by the
Selling Stockholders among the securities to be distributed by such
underwriters. The Selling Stockholders shall be parties to the underwriting
agreement between the Company and such underwriters.
(c) Holdback Agreements. (i) Each holder of Eligible Securities agrees by
becoming a holder of such Eligible Securities not to effect any public sale or
distribution of any equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, including
a sale pursuant to Rule 144 under the Securities Act (or any similar provision
then in force), during the ten days before and the 90 days after any
underwritten registration pursuant to Section 1.1 or 1.2 has become effective,
except as part of such underwritten registration.
(ii) The Company agrees not to effect any public sale or distribution of its
equity securities or securities convertible into or exchangeable or exercisable
for any of such securities during the ten days before and the 90 days after any
underwritten registration pursuant to Section 1.1 or 1.2 has become effective,
except as part of such underwritten registration and except pursuant to (v)
registrations on Form S-4 or S-8, or any successor or similar forms thereto or
otherwise pursuant to a dividend reinvestment plan or a dividend reinvestment
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and stock purchase plan; (w) sales upon exercise or exchange, by the holder
thereof, of options, warrants or convertible securities; (x) any other
agreement to issue equity securities or securities convertible into or
exchangeable or exercisable for any of such securities in effect on the date
the Selling Stockholders deliver to the Company the request to register, or
include in a registration, Eligible Securities under Section 1.1 or Section
1.2, as the case may be; (y) any acquisition or similar transaction; and (z)
any dividend reinvestment plan or employee benefit plan (if necessary for such
plan to fulfill its funding obligations in the ordinary course).
Section 1.6. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement in which the Selling Stockholders include Eligible
Securities in such registration, the Company shall (a) give the Selling
Stockholders, their underwriters, if any, and their respective advisors and
counsel the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto (other than any amendment or
supplement in the form of a filing which the Company is required to make
pursuant to the Exchange Act), (b) give the Selling Stockholders and their
respective advisors and counsel such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Selling Stockholders' counsel, to
conduct a reasonable investigation within the meaning of the Securities Act,
and (c) consult with the Selling Stockholders concerning the selection of
underwriter's counsel for such offering and registration.
Section 1.7. Indemnification. (a) Indemnification by the Company. In the
event of any registration of any securities of the Company under the Securities
Act pursuant to Section 1.1 or 1.2, the Company shall, and hereby does,
indemnify and hold harmless each Selling Stockholder, its directors, officers,
employees, agents and advisors, and each other Person, if any, who controls
such Selling Stockholder within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which each such
Person may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained (x) in any registration statement under which such securities
were registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein or used in connection
with the offering of securities covered thereby, or any amendment or
supplement thereto, or (y) in any application or other document or
communication (in this Section 1.7 collectively called an "application")
executed by or on behalf of the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order
to qualify any securities covered by such registration statement under the
"blue sky" or securities laws thereof, or
(ii) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading,
and the Company will reimburse such Person for any reasonable legal or any
other expenses (excluding the portion of any legal fees determined pursuant to
the German Fee Regulations) incurred by it in connection with investigating or
defending any such loss, claim, liability, action or proceeding, provided that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement, or omission or alleged omission, made in such registration
statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement, or in any application, in reliance upon
and in conformity with written information prepared and furnished to the
Company by any Selling Stockholder or, in the case of a registration under
Section 1.1 hereof, any underwriter specifically for use in the preparation
thereof and provided, further, that the Company shall not be liable to
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any Person who participates as an underwriter (other than the Selling
Stockholders insofar as they may be deemed underwriters within the meaning of
the Securities Act) in any such registration or any other Person who controls
such underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure
to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of the securities to such Person if such statement or
omission was timely corrected in such final prospectus. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of any such Person and shall survive the transfer of such securities by
such Person. The Company shall not be obligated to pay the fees and expenses of
more than one counsel or firm of counsel for all parties indemnified in respect
of a claim for each jurisdiction in which such counsel is required unless a
conflict of interest exists between such indemnified party and any other
indemnified party in respect of such claim.
(b) Indemnification by the Selling Stockholders. The Company may require, as
a condition to including any Eligible Securities held by a Selling Stockholder
in any registration statement filed pursuant to Sections 1.1 and 1.2, that the
Company shall have received an undertaking satisfactory to it from such Selling
Stockholder, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in subsection (a) of this Section 1.7) the Company, each
director, officer, employee, agent and advisor of the Company and each other
Person, if any, who controls the Company within the meaning of the Securities
Act, with respect to any untrue statement or alleged untrue statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any application, if such untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information prepared and furnished
to the Company by such Selling Stockholder specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement, or such application.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director,
officer, employee, agent, advisor or controlling Person and shall survive the
transfer of such securities by such Selling Stockholder. The indemnity provided
by each Selling Stockholder under this Section 1.7(b) shall be only with
respect to its own misstatements and omissions and not with respect to those of
any other seller or prospective seller of securities, and not jointly and
severally, and shall be limited in amount to the net amount of proceeds
received by such Selling Stockholder from the sale of Eligible Securities
pursuant to such registration statement.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party of
notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subsections of this Section 1.7, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subsections of this Section 1.7, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless a conflict
of interest between such indemnified and indemnifying parties exists in respect
of such claim, the indemnifying party shall be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, if the indemnifying party is entitled to do so hereunder, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
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(d) Other Remedies. If for any reason the indemnity set forth in the
preceding subsections of this Section 1.7 is unavailable, or is insufficient to
hold harmless an indemnified party, other than by reason of the exceptions
provided therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and the indemnified
party on the other hand in connection with the offering of securities and the
statements or omissions or alleged statements or omissions which resulted in
such loss, claim, damage, or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statements or omissions.
No party shall be liable for contribution under this subsection (d) except to
the extent and under such circumstances as such party would have been liable to
indemnify under this Section 1.7 if such indemnification were enforceable under
applicable law.
Section 1.8. Effect of Other Agreements Among the Parties Hereto. Nothing in
this Agreement shall be construed to alter in any manner whatsoever any rights
or obligations of the Company, FT, DT, any Qualified Subsidiary or any
Qualified Stock Purchaser contained in any other agreement among such Persons
entered into concurrently herewith, including, but not limited to, the
restrictions on transfer of shares of capital stock of the Company contained in
Article II of the Stockholders' Agreement and the provisions of Section 7.5(a)
of the Stockholders' Agreement. In addition, any sales of Eligible Securities
made pursuant to this Agreement shall be effected only in strict accordance
with Article II and Section 7.5(a) of the Stockholders Agreement.
Section 2. Definitions. Capitalized terms used herein and not defined in this
Section 2 shall have the meanings set forth in the Stockholders' Agreement,
dated , among FT, DT and the Company. As used herein, the following terms
have the following respective meanings:
Commission: The Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act.
Eligible Securities: (a) shares of Common Stock held by a party to this
Agreement (other than the Company) acquired prior to the conversion of all
shares of Class A Stock into shares of Common Stock, or termination of the
Fundamental Rights, in each case pursuant to Section 7 of the Class A
Provisions and without violating Article 2 of the Standstill Agreement; (b)
shares of Common Stock into which shares of Class A Stock held by a party
to this Agreement (other than the Company) may be converted, provided that
for all purposes under this Agreement, the holders of such shares of Class
A Stock shall be deemed to be the holders of such shares of Common Stock
into which such shares of Class A Stock may be converted; and (c) any
securities issued or issuable with respect to such Class A Stock or such
Common Stock by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise. As to any particular Eligible
Securities, once issued such securities shall cease to be Eligible
Securities when (i) a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and
such securities shall have been disposed of, (ii) they shall have been
distributed to the public pursuant to Rule 144 (or any successor
provisions) under the Securities Act, (iii) they shall have been otherwise
transferred (except transfers to a Qualified Subsidiary or Qualified Stock
Purchaser), new certificates for them not bearing a legend restricting
further transfer shall have been delivered by the Company and subsequent
disposition of them shall not require registration or qualification of them
under the Securities Act or any state securities or blue sky law then in
force, or (iv) they shall have ceased to be outstanding.
Exchange Act: The Securities Exchange Act of 1934, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time.
German Fee Regulations: The Bundesgebuhrenordnung fur Rechtsanwalte vom
26. Juli 1957 (BGBl) I S. 907 (as it or any successor provision may be in
effect from time to time).
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Registration Expenses: All expenses incident to the Company's performance
of or compliance with Sections 1.1, 1.2 and 1.3 hereof, including, without
limitation, (a) all registration, filing and NASD fees, (b) all fees and
expenses of complying with securities or blue sky laws, (c) all word
processing, duplicating and printing expenses, (d) messenger and delivery
expenses, (e) the reasonable fees and disbursements of counsel for the
Company (excluding the portion of any fees determined pursuant to the
German Fee Regulations) and of its independent public accountants,
including the expenses of any "comfort" letters required by or incident to
such performance and compliance, (f) premiums and other costs of policies
of insurance against liabilities arising out of the public offering of the
Eligible Securities being registered (if the Company elects to obtain any
such insurance), and (g) any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions, provided, that (i) except as
otherwise specifically provided herein, fees and disbursements of counsel
to one or more Selling Stockholders and (ii) transfer taxes shall not be
included as Registration Expenses and shall not be paid by the Company.
Securities Act: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time.
Selling Stockholders: Holders of Eligible Securities that with respect to
a particular registration have delivered to the Company a request to
register, or include in a registration, Eligible Securities held by them
under Section 1.1 or Section 1.2 of this Agreement.
Section 3. Miscellaneous.
Section 3.1. Rule 144. The Company shall file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, shall, upon the request of any holder of
Eligible Securities, make publicly available other information) and shall take
such further action as any holder of Eligible Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Eligible Securities without registration under the Securities Act pursuant
to (a) Rule 144 under the Securities Act, as such Rule may be amended from time
to time, or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Eligible Securities, the Company
shall deliver to such holder a written statement as to whether it has complied
with such requirements.
Section 3.2. Additional Parties. Upon the Transfer of any shares of Class A
Stock to a Qualified Subsidiary or Qualified Stock Purchaser in accordance with
the terms of the Stockholders' Agreement, such Qualified Subsidiary or
Qualified Stock Purchaser shall become a party to this Agreement by agreeing in
writing to be bound by the terms and conditions of this Agreement pursuant to
an instrument of assumption in the form of Exhibit B to the Stockholders'
Agreement, in the case of a Qualified Subsidiary, or an instrument of
assumption in the form of Exhibit C to the Stockholders' Agreement, in the case
of a Qualified Stock Purchaser, and shall thereby be deemed a holder of
Eligible Securities for the purposes of this Agreement.
Section 3.3. Notices. All notices and other communications required or
permitted by this Agreement shall be made in writing in the English language
and any such notice or communication shall be deemed delivered when delivered
in person, transmitted by telex or telecopier, or seven days after it has been
sent by air mail, as follows:
FT: 6 place d'Alleray
75505 Paris Cedex 15
France
Attn: Executive Vice President,
International
Tel: (33-1) 44-44-19-94
Fax: (33-1) 46-54-53-69
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with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
U.S.A.
Attn: Louis Begley, Esq.
Tel: (212) 909-6273
Fax: (212) 909-6836
DT: Friedrich-Ebert-Allee 140
D-53113 Bonn
Germany
Attn: Chief Executive Officer
Tel: 49-228-181-9000
Fax: 49-228-181-8970
with a copy to:
Mayer, Brown & Platt
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
U.S.A.
Attn: Werner Hein, Esq.
Tel: (202) 778-8726
Fax: (202) 861-0473
Company: 2330 Shawnee Mission
Parkway, East Wing
Westwood, Kansas 66205
U.S.A.
Attn: General Counsel
Tel: (913) 624-8440
Fax: (913) 624-8426
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
U.S.A.
Attn: Bruce N. Hawthorne, Esq.
Tel: (404) 572-4903
Fax: (404) 572-5146
The parties to this Agreement shall promptly notify each other in the manner
provided in this Section 3.3 of any change in their respective addresses. A
notice of change of address shall not be deemed to have been given until
received by the addressee. Communications by telex or telecopier also shall be
sent concurrently by mail, but shall in any event be effective as stated above.
Section 3.4. Waiver, Amendment, etc. This Agreement may not be amended or
supplemented, and no waivers of or consents to departures from the provisions
hereof shall be effective, unless set forth in a writing signed by, and
delivered to, all the parties hereto. No failure or delay of any party in
exercising any power or right under this Agreement will operate as a waiver
thereof, nor will any single or partial exercise of any right or power, or any
abandonment or discontinuance of steps to enforce such right or power, preclude
any other or further exercise thereof or the exercise of any other right or
power.
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Section 3.5. Binding Agreement; No Third Party Beneficiaries. This Agreement
will be binding upon and inure to the benefit of the parties hereto and their
successors (including, without limitation, any successor of FT in a
privatization) and permitted assigns. Except as set forth herein and by
operation of law, no party to this Agreement may assign or delegate all or any
portion of its rights, obligations or liabilities under this Agreement without
the prior written consent of each other party to this Agreement. Nothing
expressed or implied herein is intended or shall be construed to confer upon or
give to any third party any rights or remedies by virtue hereof. In the event
of a reorganization of FT pursuant to, as a result of or in connection with, a
privatization, the corporation or other entity formed to continue the business
activities of FT shall assume the rights and obligations of FT under this
Agreement.
Section 3.6. Governing Law; Dispute Resolution; Equitable Relief. (A) THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW).
(B) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS AND AGREES THAT ANY
LEGAL ACTION, SUIT OR PROCEEDING AGAINST IT WITH RESPECT TO ITS OBLIGATIONS OR
LIABILITIES UNDER OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL
BE BROUGHT BY SUCH PARTY ONLY IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK OR, IN THE EVENT (BUT ONLY IN THE EVENT) SUCH
COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION OVER SUCH ACTION, SUIT OR
PROCEEDING, IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY,
AND EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY ACCEPTS AND SUBMITS TO THE
JURISDICTION OF EACH OF THE AFORESAID COURTS IN PERSONAM, WITH RESPECT TO ANY
SUCH ACTION, SUIT OR PROCEEDING. EACH PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO A JURY TRIAL IN ANY LEGAL
ACTION, SUIT OR PROCEEDING WITH RESPECT TO, OR ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT. EACH OF FT AND DT HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM (IN SUCH CAPACITY, THE "PROCESS AGENT"), WITH AN OFFICE AT
1633 BROADWAY, NEW YORK, NEW YORK 10019, AS ITS DESIGNEE, APPOINTEE AND AGENT
TO RECEIVE, FOR AND ON ITS BEHALF SERVICE OF PROCESS IN SUCH JURISDICTION IN
ANY LEGAL ACTION OR PROCEEDINGS WITH RESPECT TO THIS AGREEMENT, AND SUCH
SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT,
PROVIDED THAT IN THE CASE OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY
EFFECTING SUCH SERVICE SHALL ALSO DELIVER A COPY THEREOF TO FT AND DT IN THE
MANNER PROVIDED IN SECTION 3.3. FT AND DT SHALL TAKE ALL SUCH ACTION AS MAY BE
NECESSARY TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO APPOINT
ANOTHER AGENT SO THAT FT AND DT WILL AT ALL TIMES HAVE AN AGENT FOR SERVICE OF
PROCESS FOR THE ABOVE PURPOSES IN NEW YORK, NEW YORK. IN THE EVENT OF THE
TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS AND BUSINESS OF THE PROCESS
AGENT TO ANY OTHER CORPORATION BY CONSOLIDATION, MERGER, SALE OF ASSETS OR
OTHERWISE, SUCH OTHER CORPORATION SHALL BE SUBSTITUTED HEREUNDER FOR THE
PROCESS AGENT WITH THE SAME EFFECT AS IF NAMED HEREIN IN PLACE OF CT
CORPORATION SYSTEM. EACH OF FT AND DT FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED AIRMAIL, POSTAGE
PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN THIS AGREEMENT, SUCH SERVICE
OF PROCESS TO BE EFFECTIVE UPON ACKNOWLEDGMENT OF RECEIPT OF SUCH REGISTERED
MAIL. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW. EACH OF FT
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AND DT EXPRESSLY ACKNOWLEDGES THAT THE FOREGOING WAIVER IS INTENDED TO BE
IRREVOCABLE UNDER THE LAWS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF
AMERICA.
(C) EACH PARTY HERETO AGREES THAT MONEY DAMAGES WOULD NOT BE A SUFFICIENT
REMEDY FOR THE OTHER PARTIES HERETO FOR ANY BREACH OF THIS AGREEMENT BY IT, AND
THAT IN ADDITION TO ALL OTHER REMEDIES THE OTHER PARTIES HERETO MAY HAVE, THEY
SHALL BE ENTITLED TO SPECIFIC PERFORMANCE AND TO INJUNCTIVE OR OTHER EQUITABLE
RELIEF AS A REMEDY FOR ANY SUCH BREACH. EACH PARTY HERETO AGREES NOT TO OPPOSE
THE GRANTING OF SUCH RELIEF IN THE EVENT A COURT DETERMINES SUCH A BREACH HAS
OCCURRED, AND TO WAIVE ANY REQUIREMENT FOR THE SECURING OR POSTING OF ANY BOND
IN CONNECTION WITH SUCH REMEDY.
Section 3.7. Severability. The invalidity or unenforceability of any
provision hereof in any jurisdiction will not affect the validity or
enforceability of the remainder hereof in that jurisdiction or the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction. To the extent permitted by applicable law, each party hereto
waives any provision of law that renders any provision hereof prohibited or
unenforceable in any respect. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the parties to this Agreement to
the extent possible.
Section 3.8. Translation. The parties have negotiated both this Agreement and
the Memorandum of Understanding, dated June 14, 1994 (the "MOU"), among each of
the parties, in the English language, and have prepared successive drafts and
the definitive texts of the MOU and this Agreement in the English language. For
purposes of complying with the loi n 94-665 du 4(degrees) aout 1994 relative a
l'emploi de la langue francaise, the parties hereto have prepared a French
version of this Agreement, which French version was executed and delivered
simultaneously with the execution and delivery of the English version hereof,
such English version having likewise been executed and delivered. The parties
deem the French and English versions of this Agreement to be equally
authoritative.
Section 3.9. Table of Contents; Headings; Counterparts. The table of contents
and the headings in this Agreement are for convenience of reference only and
will not affect the construction of any provisions hereof. This Agreement may
be executed in one or more counterparts, each of which when so executed and
delivered will be deemed an original but all of which will constitute one and
the same Agreement.
Section 3.10. Entire Agreement. This Agreement embodies the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein, provided that this provision shall not abrogate any other
written agreement between the parties executed simultaneously with this
Agreement. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
Section 3.11. Waiver of Immunity. Each of FT and DT agrees that, to the
extent that it or any of its property is or becomes entitled at any time to any
immunity on the grounds of sovereignty or otherwise based upon its status as an
agency or instrumentality of government from any legal action, suit or
proceeding or from set off or counterclaim relating to this Agreement from the
jurisdiction of any competent court described in Section 3.6, from service of
process, from attachment prior to judgment, from attachment in aid of execution
of a judgment, from execution pursuant to a judgment or an arbitral award or
from any other legal process in any jurisdiction, it, for itself and its
property expressly, irrevocably and unconditionally waives, and agrees not to
plead or claim, any such immunity with respect to such matters arising with
respect to this Agreement or the subject matter hereof or thereof (including
any obligation for the payment of money). Each of FT and DT agrees that the
waiver in this provision is irrevocable and is not subject to withdrawal in any
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jurisdiction or under any statute, including the Foreign Sovereign Immunities
Act, 28 U.S.C. (P) 1602 et seq. The foregoing waiver shall constitute a present
waiver of immunity at any time any action is initiated against FT or DT with
respect to this Agreement.
Section 3.12. Currency. All amounts payable under this Agreement shall be
payable in U.S. dollars.
In Witness Whereof, the parties have caused this Agreement to be executed and
delivered as of the date first above written.
Sprint Corporation
By: _________________________________
Title:
France Telecom
By: _________________________________
Title:
Deutsche Telekom AG
By: _________________________________
Title:
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EXHIBIT C
TO THE
INVESTMENT AGREEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM OF STANDSTILL AGREEMENT
[INCLUDED AS EXHIBIT C TO THIS PROXY STATEMENT]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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EXHIBIT D
TO THE
INVESTMENT AGREEMENT
STOCKHOLDERS' AGREEMENT
AMONG
FRANCE TELECOM,
DEUTSCHE TELEKOM AG
AND
SPRINT CORPORATION
DATED AS OF , 1995
BD-1
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS.................................................... 4
ARTICLE II RESTRICTIONS ON TRANSFER OF SHARES............................ 23
Section 2.1. General Transfer Restrictions......................... 23
Section 2.2. Transfers to Qualified Subsidiaries................... 23
Section 2.3. Other Transfers Prior to the Fifth Anniversary........ 24
Section 2.4. Other Transfers....................................... 24
Section 2.5. Company Rights to Purchase............................ 25
Section 2.6. Termination of Transfer Restrictions; Mandatory
Redemption of Class A Preference Stock............... 29
Section 2.7. Notice of Certain Actions............................. 30
Section 2.8. Restrictive Legends................................... 30
Section 2.9. Reorganization, Reclassification, Merger,
Consolidation or Disposition of Shares............... 32
Section 2.10. Strategic Mergers; Business Combinations; Company
Tender for Shares.................................... 32
Section 2.11. Effect of Proposed Redemption......................... 32
ARTICLE III PROVISIONS CONCERNING DISPOSITION OF LONG DISTANCE ASSETS.... 32
Section 3.1. Offers to FT and DT................................... 32
Section 3.2. Assignment of Rights.................................. 34
Section 3.3. Timing of Disposition................................. 35
Section 3.4. Method of Purchase.................................... 35
Section 3.5. Termination of Rights................................. 35
ARTICLE IV PROVISIONS CONCERNING CHANGE OF CONTROL....................... 36
Section 4.1. Sale of Assets or Control............................. 36
Section 4.2. Required Share Purchases.............................. 36
ARTICLE V EQUITY PURCHASE RIGHTS......................................... 36
Section 5.1. Right to Purchase..................................... 36
Section 5.2. Notice................................................ 38
Section 5.3. Manner of Exercise; Manner of Payment................. 38
Section 5.4. Adjustments........................................... 38
Section 5.5. Closing of Purchases.................................. 38
Section 5.6. Terms of Payment...................................... 39
Section 5.7. Suspension of Equity Purchase Rights.................. 39
ARTICLE VI HOLDINGS BY MAJOR COMPETITORS................................. 40
ARTICLE VII COVENANTS.................................................... 40
Section 7.1. Reservation and Availability of Capital Stock......... 40
Section 7.2. Assignee Purchasers................................... 40
Section 7.3. Automatic Exercise of Rights; Method of Purchase...... 41
Section 7.4. Procedures for Redemption............................. 42
Section 7.5. Joint Action by FT and DT............................. 43
Section 7.6. Compliance with Tax Laws.............................. 43
Section 7.7. Compliance with Security Requirements................. 43
Section 7.8. Major Issuances....................................... 44
Section 7.9. Participation by Class A Directors in Certain
Circumstances........................................ 44
Section 7.10. Spin-offs............................................. 44
Section 7.11. FCC Licenses.......................................... 45
Section 7.12. Issuance of Class A Stock............................. 45
BD-2
PAGE
----
Section 7.13. Defeasance of Fifth Series............................ 45
Section 7.14. Continuing Directors.................................. 45
Section 7.15. Long Distance Business................................ 46
Section 7.16. Intellectual Property................................. 46
Section 7.17. Rights Plan Events.................................... 46
ARTICLE VIII TERMINATION OF CERTAIN RIGHTS............................... 46
ARTICLE IX TAX INDEMNIFICATION........................................... 47
Section 9.1. Indemnification for Company Purchase.................. 47
Section 9.2. Indemnification for Supplementary Payments............ 47
Section 9.3. Rebate of Indemnity................................... 48
Section 9.4. Exclusions from Indemnity............................. 48
Section 9.5. Consequences of Assignment............................ 49
Section 9.6. Verification.......................................... 49
Section 9.7. Contest Rights........................................ 50
ARTICLE X U.S. REAL PROPERTY TAX MATTERS................................. 50
Section 10.1. Notification.......................................... 50
Section 10.2. Control of FIRPTA Determination....................... 50
Section 10.3. Issuance of Certification; Related Matters............ 51
Section 10.4. Advisory Costs........................................ 51
Section 10.5. Indemnity............................................. 51
Section 10.6. Contest Rights........................................ 52
ARTICLE XI MISCELLANEOUS................................................. 52
Section 11.1. Notices............................................... 52
Section 11.2. Waiver, Amendment, etc................................ 53
Section 11.3. No Partnership........................................ 54
Section 11.4. Binding Agreement; Assignment; No Third Party
Beneficiaries........................................ 54
Section 11.5. GOVERNING LAW; DISPUTE RESOLUTION; EQUITABLE RELIEF... 55
Section 11.6. Severability.......................................... 55
Section 11.7. Translation........................................... 55
Section 11.8. Table of Contents; Headings; Counterparts............. 55
Section 11.9. Entire Agreement...................................... 55
Section 11.10. Waiver of Immunity.................................... 56
Section 11.11. Board Membership...................................... 56
Section 11.12. Effect of Conversion.................................. 56
Section 11.13. Continuing Director Approval.......................... 56
EXHIBIT A--Form of Class A Holder Eligible Note
EXHIBIT B--Form of Qualified Subsidiary Assumption Agreement
EXHIBIT C--Form of Qualified Stock Purchaser Assumption Agreement
EXHIBIT D--Non-Real Property Assets
SCHEDULE A--List of FT Associate Positions
SCHEDULE B--List of DT Associate Positions
BD-3
STOCKHOLDERS' AGREEMENT
Stockholders' Agreement, dated as of , 1995 (the "Agreement"), among
France Telecom, an exploitant public organized under the laws of France ("FT");
Deutsche Telekom AG, an Aktiengesellschaft organized under the laws of Germany
("DT"); and Sprint Corporation, a corporation organized under the laws of
Kansas (the "Company").
RECITALS
Whereas, each of the Company, Sprint Global Venture, Inc., a wholly-owned
Subsidiary of the Company ("Sprint Sub"), FT and DT have agreed to form a joint
venture to provide telecommunications services as provided in the Joint Venture
Agreement dated as of June 22, 1995, among Sprint Sub, FT, DT and the Company
(the "Joint Venture Agreement"), and to pursue various telecommunications
opportunities around the world as further provided therein;
Whereas, pursuant to the Investment Agreement, dated as of July 31, 1995,
among FT, DT and the Company (including all schedules thereto, and as may be
amended from time to time, the "Investment Agreement"), FT and DT collectively
are purchasing from the Company shares of its capital stock as provided in the
Investment Agreement; and
Whereas, the parties hereto have determined that it is in their best
interests that they enter into this Agreement providing for certain rights and
restrictions with respect to the shares of Class A Stock owned by FT and DT and
their permitted transferees and certain related rights and obligations of the
Company, FT and DT.
Now, Therefore, in consideration of the mutual covenants and obligations set
forth herein, each of FT, DT and the Company agrees as follows:
ARTICLE I
DEFINITIONS
The following capitalized terms used in this Agreement will have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by, or is under common Control with, such Person, provided that (a)
no JV Entity shall be deemed an Affiliate of any party hereto unless (i) FT, DT
and Atlas own a majority of the Voting Power of such JV Entity and the Company
does not have the Tie-Breaking Vote, or (ii) FT, DT or Atlas has the Tie-
Breaking Vote; (b) FT, DT and the Company shall not be deemed Affiliates of
each other; (c) Atlas shall be deemed an Affiliate of FT and DT; and (d) the
term "Affiliate" shall not include any Governmental Authority of France or
Germany or any other Person Controlled, directly or indirectly, by any such
Governmental Authority, in each case except for FT, DT, Atlas and any other
Person directly, or indirectly through one or more intermediaries, Controlled
by FT, DT or Atlas.
"Alien" means "aliens", "their representatives", "a foreign government or
representatives thereof" or "any corporation organized under the laws of a
foreign country" as such terms are used in Section 310(b)(4) of the
Communications Act of 1934, as amended, or as hereafter may be amended, or any
successor provision of law.
"Amendment" means the Certificate of Amendment to the Articles of
Incorporation adopted and filed pursuant to Section 3.2(i) of the Investment
Agreement.
"Applicable Law" means all applicable provisions of all (a) constitutions,
treaties, statutes, laws (including common law), rules, regulations, ordinances
or codes of any Governmental Authority, and (b) orders, decisions, injunctions,
judgments, awards and decrees of any Governmental Authority.
BD-4
"Applicable Ratio" shall have the meaning set forth in Section 7.5(a) hereof.
"Articles" means the Articles of Incorporation of the Company, as amended or
supplemented from time to time.
"Assignment Notice" shall have the meaning set forth in Section 3.2 hereof.
"Associate" has the meaning ascribed to such term in Rule 12b-2 under the
Exchange Act, provided that when used to indicate a relationship with FT or DT
or their respective Subsidiaries or Affiliates, the term "Associate" shall mean
(a) in the case of FT, any Person occupying any of the positions listed on
Schedule A hereto, and (b) in the case of DT, any Person occupying any of the
positions listed on Schedule B hereto, provided, further, that, in each case,
no Person occupying any such position described in clause (a) or (b) hereof
shall be deemed an "Associate" of FT or DT, as the case may be, unless the
Persons occupying all such positions described in clauses (a) and (b) hereof
Beneficially Own, in the aggregate, more than 0.2% of the Voting Power of the
Company.
"Atlas" means the company [formed] [to be formed] as a societe anonyme under
the laws of Belgium pursuant to the Joint Venture Agreement, dated as of
December 15, 1994, between FT and DT, as amended.
"Basis Windfall" shall have the meaning set forth in Section 9.3 hereof.
"Beneficial Owner" (including, with its correlative meanings, "Beneficially
Own" and "Beneficial Ownership"), with respect to any securities, means any
Person which:
(a) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to acquire (whether such right is exercisable
immediately or only after the passage of time) such securities pursuant to
any agreement, arrangement or understanding (whether or not in writing)
including, without limitation, pursuant to the Investment Agreement and
this Agreement, or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise;
(b) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to vote or dispose of (whether such right is
exercisable immediately or only after the passage of time) or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 under the
Exchange Act but including all such securities which a Person has the right
to acquire beneficial ownership of whether or not such right is exercisable
within the 60-day period specified therein) such securities, including
pursuant to any agreement, arrangement or understanding (whether or not in
writing); or
(c) has, or any of whose Affiliates or Associates has, any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting or disposing of any securities which are
Beneficially Owned, directly or indirectly, by any other Person (or any
Affiliate thereof),
provided that Class A Stock and Common Stock held by one of FT or DT or its
Affiliates shall not also be deemed to be Beneficially Owned by the other of FT
or DT or its Affiliates.
"Board of Directors" means the board of directors of the Company.
"Brokers' Transactions" means brokers' transactions within the meaning of
Rule 144 of the Securities Act, or any successor rule.
"Business Day" means any day other than a day on which commercial banks in
The City of New York, Paris, France, or Frankfurt am Main, Germany, are
required or authorized by law to be closed.
"Buyers" shall have the meaning set forth in the Investment Agreement.
"Buy Notice" shall have the meaning set forth in Section 2.5(b) hereof.
BD-5
"Bylaws" means the Bylaws of the Company, as amended or supplemented from
time to time.
"Cellular" means (a) until immediately prior to the Cellular Spin-off Date,
the Cellular and Wireless Division, (b) immediately prior to the Cellular Spin-
off Date, the direct or indirect wholly owned subsidiary of the Company owning
the assets of the Cellular and Wireless Division, the shares of which
subsidiary are to be distributed to the Company's stockholders in connection
with the Cellular Spin-off, and (c) on and after the Cellular Spin-off Date,
such company, provided that the term "Cellular" shall not include any assets
retained by the Company after the Cellular Spin-off Date.
"Cellular and Wireless Division" means the Cellular and Wireless
Communications Services Division of the Company.
"Cellular Spin-off" shall have the meaning set forth in Article I of the
Investment Agreement.
"Change in Law" shall have the meaning set forth in Section 10.2(b) hereof.
"Change of Control" means a:
(a) decision by the Board of Directors to sell Control of the Company or
not to oppose a third party tender offer for Voting Securities of the
Company representing more than 35% of the Voting Power of the Company; or
(b) change in the identity of a majority of the Directors due to (i) a
proxy contest (or the threat to engage in a proxy contest) or the election
of Directors by the holders of Preferred Stock; or (ii) any unsolicited
tender, exchange or other purchase offer which has not been approved by a
majority of the Independent Directors,
provided that a Strategic Merger shall not be deemed to be a Change of Control
and, provided, further, that any transaction between the Company and FT and DT
or otherwise involving FT and DT and any of their direct or indirect
Subsidiaries which are parties to a Contract therefor shall not be deemed to be
a Change of Control.
"Class A Action" means action by the holders of a majority of the shares of
Class A Stock taken by a vote at either a regular or special meeting of the
stockholders of the Company or of the Class A Holders or by written consent
delivered to the Secretary of the Company.
"Class A Common Issuance Date" means the date the Company first issues shares
of Class A Common Stock.
"Class A Common Stock" means the Class A Common Stock of the Company.
"Class A Conversion Shares" means the shares of Class A Common Stock or
Common Stock into which the then outstanding shares of Class A Preference Stock
(or, as the case may be, a specified number of shares of Class A Preference
Stock) would, at the time of determination, be convertible at the then
applicable Conversion Price if the conditions to establishment of the
Conversion Date had been met.
"Class A Director" means any Director elected by the Class A Holders pursuant
to Section 2(a) of ARTICLE FIFTH of the Articles, appointed by Class A
Directors pursuant to Section 4(b) of ARTICLE FIFTH of the Articles, or elected
by the Class A Holders pursuant to Section 3(d) of the Class A Provisions.
"Class A Holder Eligible Notes" means notes of a Class A Holder issued
pursuant to Section 5.6, substantially in the form of Exhibit A attached
hereto, made payable to the Company which, in the written opinion of an
investment banking firm of recognized international standing addressed to the
Company and reasonably satisfactory to the Company, would sell, at the date of
their issuance, at a price equal to their principal amount (taking into account
the likely manner and timing of resale by the Company), provided
BD-6
that no note of any Class A Holder shall be deemed to be a Class A Holder
Eligible Note (a) if such Class A Holder's debt instruments are at that time
rated by Moody's Investors Service, Inc., Standard and Poor's Corporation or
Duff & Phelps Credit Rating Co., and if it is to be issued at a time when such
Class A Holder's debt instruments comparable to the note proposed to be a Class
A Holder Eligible Note (or, if rated, such note itself) do not possess at least
two of the three following ratings: Baa3 or better (or a comparable rating if
the rating system is changed) by Moody's Investors Service, Inc.; BBB- or
better (or a comparable rating if the rating system is changed) by Standard and
Poor's Corporation; and BBB- or better (or a comparable rating if the rating
system is changed) by Duff & Phelps Credit Rating Co., and (b) unless
nationally-recognized counsel shall have delivered an opinion in form and
substance reasonably satisfactory to each payee that such notes are enforceable
obligations of such Class A Holder in accordance with the terms thereof, and
provided, further, that no note issued by any Qualified Subsidiary shall be
deemed to be a Class A Holder Eligible Note unless FT or DT, as the case may
be, shall have executed a guarantee with respect to the obligations of such
Qualified Subsidiary thereunder, satisfactory in form and substance to the
Company.
"Class A Holders" means FT, DT and any Qualified Subsidiary to which shares
of Class A Stock or Common Stock have been transferred in accordance with
Section 2.2 hereof or which purchases such shares pursuant to the Investment
Agreement, and any Qualified Stock Purchaser that acquires shares of Class A
Stock pursuant to Article VI or Section 5.1 of this Agreement or pursuant to
Section 2.2(b) of the Standstill Agreement (and shall include such Persons even
after all of the shares of Class A Stock have been converted into Common Stock
of the Company or the Fundamental Rights have terminated as to all outstanding
shares of Class A Preference Stock).
"Class A Preference Stock" means the Class A Preference Stock of the Company.
"Class A Provisions" means that portion of ARTICLE SIXTH of the Articles
entitled "GENERAL PROVISIONS RELATING TO CLASS A STOCK".
"Class A Stock" means the Class A Common Stock or, if shares of Class A
Preference Stock are outstanding, the Class A Preference Stock.
"Closing Price" means, with respect to a security on any day, the last sale
price, regular way, or in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on The New York Stock
Exchange, Inc. or, if such security is not listed or admitted to trading on
such exchange as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the security is listed or admitted to trading or, if the
security is not listed or admitted to trading on any national securities
exchange, the last quoted sale price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use, or, if on any such date such security
is not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
security selected in good faith by the Board of Directors. If the security is
not publicly held or so listed or publicly traded, "Closing Price" means the
Fair Market Value of such security.
"Code" means the U.S. Internal Revenue Code of 1986, as amended.
"Committed Percentage" means, as to any Class A Holder, the percentage
obtained by dividing the aggregate number of Votes represented or to be
represented by the Voting Securities of the Company (a) owned of record by such
Class A Holder or by its nominees, and (b) which such Class A Holder has
committed to the Company to purchase pursuant to Sections 7.3 and 7.8 or
Articles V and VI hereof and pursuant to Article II of the Investment
Agreement, by the sum of (i) the Voting Power of the Company and (ii) the Votes
to be represented by any Voting Securities of the Company such Class A Holder
has committed to the Company to purchase from the Company pursuant to Article V
or VI or Section 7.3 hereof and Article II of the Investment Agreement.
BD-7
"Common Stock" means the Common Stock of the Company.
"Company" shall have the meaning set forth in the preamble.
"Company Eligible Notes" means notes of the Company (or its permitted
assignee pursuant to Section 2.5), satisfactory in form and substance to the
Company, FT and DT, made payable to the Transferring Stockholder, or Class A
Holder as provided in Section 2.6(b)(ii) hereof, which, in the written opinion
of an investment banking firm of recognized international standing addressed to
the Transferring Stockholder, or Class A Holder as provided in Section
2.6(b)(ii) hereof, and reasonably satisfactory to such Transferring Stockholder
or Class A Holder, as the case may be, would sell, at the date of their
issuance, at a price equal to their principal amount (taking into account the
likely manner and timing of resale by such Transferring Stockholder or Class A
Holder, as the case may be), provided that no note of the Company (or its
permitted assignee pursuant to Section 2.5) shall be deemed to be a Company
Eligible Note (a) if it is to be issued at a time when the Company's (or such
assignee's) debt instruments comparable to the notes proposed to be a Company
Eligible Note (or such note itself) do not possess at least two of the three
following ratings: Baa3 or better (or a comparable rating if the rating system
is changed) by Moody's Investors Service, Inc.; BBB- or better (or a comparable
rating if the rating system is changed) by Standard and Poor's Corporation; and
BBB- or better (or a comparable rating if the rating system is changed) by Duff
& Phelps Credit Rating Co., and (b) unless nationally-recognized counsel shall
have delivered an opinion in form and substance reasonably satisfactory to each
payee that such notes are enforceable obligations of the Company (or such
assignee) in accordance with the terms thereof.
"Company Purchase" shall have the meaning set forth in Section 9.1 hereof.
"Company Stock Payment Notes" shall have the meaning set forth in Section 7.3
hereof.
"Company Tax Payment" shall have the meaning set forth in Section 9.3 hereof.
"Continuing Director" means any Director who is unaffiliated with the Buyers
and their "affiliates" and "associates" (as each such term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as in effect on October 1,
1982) and was a Director prior to the time that any Buyer or any such affiliate
or associate became an Interested Stockholder (as such term is defined in the
Fair Price Provisions), and any successor of a Continuing Director if such
successor is not affiliated with any such Interested Stockholder and is
recommended or elected to succeed a Continuing Director by a majority of
Continuing Directors, provided that such recommendation or election shall only
be effective if made at a meeting of Directors at which at least seven
Continuing Directors are present.
"Contract" means any loan or credit agreement, note, bond, indenture,
mortgage, deed of trust, lease, franchise, contract, or other agreement,
obligation, instrument or binding commitment of any nature.
"Control" means, with respect to a Person or Group, any of the following:
(a) ownership by such Person or Group of Votes entitling it to exercise
in the aggregate more than 35 percent of the Voting Power of the entity in
question; or
(b) possession by such Person or Group of the power, directly or
indirectly, (i) to elect a majority of the board of directors (or
equivalent governing body) of the entity in question; or (ii) to direct or
cause the direction of the management and policies of or with respect to
the entity in question, whether through ownership of securities, by
contract or other-wise.
"Conversion Date" has the meaning specified in the Class A Provisions.
"Conversion Price" means the applicable conversion price for shares of Class
A Preference Stock provided for in Section 3(b) of the Class A Provisions.
BD-8
"Corporation Joint Venture Termination" means any of the following:
(a) the sale of Venture Interests by a Sprint Party pursuant to Section
20.5(a) of the Joint Venture Agreement; or
(b) the receipt by the FT/DT Parties of the Tie-Breaking Vote due to a
Funding Default, Material Non-Funding Default or Bankruptcy (as such terms
are defined in the Joint Venture Agreement) on the part of any of the
Sprint Parties.
"Director" means a member of the Board of Directors.
"DT" shall have the meaning specified in the preamble.
"DT Investor Confidentiality Agreement" shall have the meaning set forth in
the Investment Agreement.
"Eligible Purchaser" shall have the meaning set forth in Section 2.5(c)(i)
hereof.
"Equity Purchase Price" shall have the meaning set forth in Section 5.5(b)
hereof.
"Equity Purchase Right" shall have the meaning set forth in Section 5.1
hereof.
"ESMR" means any commercial mobile radio service, and the resale of such
service, of the type authorized under the rules for Specialized Mobile Radio
Services designated under Subpart S of Part 90 of the FCC's rules or similar
Applicable Laws of any other country in effect on the date hereof, including
the networking, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"Europe" means the current geographic area covered by the following countries
and territories located on the European continent, plus in the case of France,
its territories and possessions located outside the European continent:
Albania, Andorra, Austria, Belgium, Bosnia-Hercegovina, Bulgaria, Croatia,
Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar,
Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania,
Luxembourg, Macedonia, Malta, Monaco, Montenegro, Netherlands, Norway, Poland,
Portugal, Romania, San Marino, Serbia, Slovakia, Slovenia, Spain, Sweden,
Switzerland, Turkey, Ukraine, United Kingdom, and Vatican City.
"Excess Shares" shall have the meaning set forth in Section 5.1 hereof.
"Excess Taxes" shall have the meaning set forth in Section 9.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC from time to time promulgated thereunder.
"Exempt Asset Divestitures" mean, with respect to the Company and its
Subsidiaries:
(a) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) to joint ventures approved by FT and DT prior to the
Initial Issuance Date;
(b) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) to (i) any entity in exchange for equity interests in
such entity if, after such transaction, the Company owns at least 51
percent of both the Voting Power and equity interests in such entity or
(ii) any joint venture that is an operating joint venture not controlled by
any of its principals and in which (x) the Company has the right, acting
alone, to disapprove (and thereby prohibit) decisions relating to
acquisitions and divestitures involving more than 20 percent of the Fair
Market Value of such entity's assets, mergers, consolidations and
dissolution or liquidation of such entity and the adoption of such entity's
business plan and (y) Major Competitors of the Joint Venture do not in the
aggregate own more than 20% of the equity interests or Voting Power;
(c) transactions in which the Company exchanges one or more (i) local
exchange telephone businesses for one or more such businesses or (ii)
public cellular or wireless radio telecommunications
BD-9
service systems for one or more such systems, provided that the Company
shall not, directly or indirectly, receive cash in any such transaction in
an amount greater than 20 percent of the Fair Market Value of the property
or properties Transferred by it;
(d) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) by the Company to any of its Subsidiaries, or by any
of its Subsidiaries to the Company or any other Subsidiary of the Company;
(e) (i) any Spin-off of equity interests of a wholly-owned Subsidiary
that is not a Subsidiary which, directly or indirectly, owns Long Distance
Assets (for purposes of this definition, the "Spun-off Entity"), provided
that the Class A Holders receive securities in the Spun-off Entity of a
separate class with rights no less favorable to the Class A Holders than
those applicable to the Class A Stock set forth in the Articles and the
Bylaws, or (ii) the Cellular Spin-off, unless a Notice of Abandonment (as
defined in the Investment Agreement) has been delivered;
(f) Transfers of assets (other than Long Distance Assets) of the Company
or any of its Subsidiaries that are primarily or exclusively used in
connection with providing information technology or data processing
functions or services (collectively, for purposes of this definition, the
"IT Assets"), to any Person that regularly provides information technology
or data processing functions or services on a commercial basis, in
connection with a contractual arrangement (for purposes of this definition,
an "IT Service Contract") pursuant to which such Person undertakes to
provide information technology or data processing functions or services to
the Company or any of its Subsidiaries of substantially the same nature as
the services associated with the use of such assets prior to such Transfer
and upon commercially reasonable terms to the Company as determined in good
faith by the Company, provided that (i) the term of such IT Service
Contract shall be for a period at least as long as the weighted average
useful life of such assets, or the Company or such Subsidiary shall have
the right to cause such IT Service Contract to be renewed or extended for a
period at least as long as such weighted average useful life upon
commercially reasonable terms to the Company as determined in good faith by
the Company, and (ii) the Transfer of such assets will not materially and
adversely affect the operation of the Company; or
(g) Transfers of assets (other than Long Distance Assets or IT Assets) of
the Company or any of its Subsidiaries to any Person in connection with any
contractual arrangement (for purposes of this definition, a "Non-IT Service
Contract") pursuant to which such Person undertakes to provide services to
the Company or any of its Subsidiaries of substantially the same nature as
the services associated with the use of such assets prior to such Transfer
and upon commercially reasonable terms to the Company as determined in good
faith by the Company, provided, that (i) the Fair Market Value of such
assets, together with the Fair Market Value of assets of the Company
Transferred to such Person or other Persons in related transactions, do not
represent more than five percent of the Fair Market Value of the assets of
the Company, (ii) the Transfer of such assets will not materially and
adversely affect the operation of the Company, and (iii) the term of such
Non-IT Service Contract shall be for a period at least as long as the
weighted average useful life of the assets so Transferred or the Company or
such Subsidiary has the right to cause such Non-IT Service Contract to be
renewed or extended for a period at least as long as such weighted average
useful life upon commercially reasonable terms to the Company as determined
in good faith by the Company.
"Exempt Long Distance Asset Divestitures" mean, with respect to the Company
and its Subsidiaries:
(a) Transfers of Long Distance Assets to a Qualified Joint Venture;
(b) Transfers of Long Distance Assets to any entity if the Company and
its Subsidiaries after such transaction own at least 70 percent of both the
Voting Power and equity interests of such entity, provided that if a Major
Competitor of FT or DT or the Joint Venture holds equity interests in such
entity, such Major Competitor's equity interests and Votes in such entity
as a percentage of the Voting Power of such entity shall not, directly or
indirectly, exceed 20 percent;
(c) Transfers of Long Distance Assets pursuant to an underwritten,
widely-distributed public offering at the conclusion of which the Company
and its Subsidiaries shall own at least 51 percent of both the Voting Power
and equity interests in the entity that owns such Long Distance Assets;
BD-10
(d) Transfers in the ordinary course of business of Long Distance Assets
determined by the Company to be unnecessary for the orderly operation of
the Company's business, and sale-leasebacks of Long Distance Assets and
similar financing transactions after which the Company and its Subsidiaries
continue in possession and control of the Long Distance Assets involved in
such transaction;
(e) Transfers of Long Distance Assets by the Company to any of its
Subsidiaries, or by any of its Subsidiaries to the Company or any other
Subsidiary of the Company;
(f) Transfers of Long Distance Assets to FT or DT or any assignee thereof
pursuant to this Agreement;
(g) any Spin-off of equity interests of a wholly-owned Subsidiary which,
directly or indirectly, owns Long Distance Assets (for purposes of this
definition, the "Spun-off Entity"), provided that the Class A Holders
receive securities in the Spun-off Entity of a separate class with rights
no less favorable to the Class A Holders than those applicable to the Class
A Stock set forth in the Articles and the Bylaws;
(h) Transfers of Long Distance Assets of the Company or any of its
Subsidiaries that are primarily or exclusively used in connection with
providing information technology or data processing functions or services
(collectively, for purposes of this definition, the "IT Assets"), to any
Person that regularly provides information technology or data processing
functions or services on a commercial basis, in connection with a
contractual arrangement (for purposes of this definition, an "IT Service
Contract") pursuant to which such Person undertakes to provide information
technology or data processing functions or services to the Company or any
of its Subsidiaries of substantially the same nature as the services
associated with the use of such Long Distance Assets prior to such Transfer
and upon commercially reasonable terms to the Company as determined in good
faith by the Company, provided that (i) the term of such IT Service
Contract shall be for a period at least as long as the weighted average
useful life of such Long Distance Assets, or the Company or such Subsidiary
shall have the right to cause such IT Service Contract to be renewed or
extended for a period at least as long as such weighted average useful life
upon commercially reasonable terms to the Company as determined in good
faith by the Company, and (ii) the Transfer of such Long Distance Assets
will not materially and adversely affect the operation of the Long Distance
Business. Any such IT Service Contract involving Transfers of Long Distance
Assets, including any renewal or extension thereof, shall be deemed to be a
Long Distance Asset; or
(i) Transfers of Long Distance Assets (other than IT Assets) of the
Company or any of its Subsidiaries to any Person in connection with any
contractual arrangement (for purposes of this definition "Non-IT Service
Contract") pursuant to which such Person undertakes to provide services to
the Company or any of its Subsidiaries of substantially the same nature as
the services associated with the use of such Long Distance Assets prior to
such Transfer and upon commercially reasonable terms to the Company as
determined in good faith by the Company, provided, that (i) the Fair Market
Value of such Long Distance Assets, together with the Fair Market Value of
Long Distance Assets Transferred to such Person or other Persons in related
transactions, do not represent more than three percent of the Fair Market
Value of the Long Distance Assets of the Company, (ii) the Transfer of such
Long Distance Assets will not materially and adversely affect the operation
of the Long Distance Business, and (iii) the term of such Non-IT Service
Contract shall be for a period at least as long as the weighted average
useful life of the Long Distance Assets so Transferred or the Company or
such Subsidiary has the right to cause such Service Contract to be renewed
or extended for a period at least as long as such weighted average useful
life upon commercially reasonable terms to the Company as determined in
good faith by the Company. Any such Non-IT Service Contract involving
Transfers of Long Distance Assets, including any renewal or extension
thereof, shall be deemed to be a Long Distance Asset.
"Exercise Amount" shall have the meaning set forth in Section 7.3 hereof.
"Fair Market Value" means, with respect to any asset, shares or other
property, the cash price at which a willing seller would sell and a willing
buyer would buy such asset, shares or other property in an arms-length
BD-11
negotiated transaction without undue time restraints, as determined in good
faith by a majority of the Independent Directors as certified in a resolution
delivered to all of the Class A Holders.
"Fair Price Provisions" means ARTICLE SEVENTH of the Articles, and any
successor provision thereto.
"FCC" means the Federal Communications Commission.
"FCC Order" means, with respect to any proposed Transfer of Long Distance
Assets by the Company, either:
(a) an effective written order or other final action from the FCC (either
in the first instance or upon review or reconsideration) either declaring
that FT and DT are not prohibited by Section 310 from owning such Long
Distance Assets or stating that no such declaration is required, and as to
which no Proceeding shall be pending or threatened that presents a
substantial possibility of resulting in a reversal thereof; or
(b) an effective written order from, or other final action taken by, the
FCC pursuant to delegated authority (either in the first instance or upon
review or reconsideration) either declaring that FT and DT are not
prohibited by Section 310 from owning such Long Distance Assets, or stating
that no such declaration is required, which order or final action shall no
longer be subject to further administrative review, and as to which no
Proceeding shall be pending or threatened that presents a substantial
possibility of resulting in a reversal thereof;
For purposes of clause (b) of this definition, an order from, or other
final action taken by, the FCC pursuant to delegated authority shall be
deemed no longer subject to further administrative review:
(x) if no petition for reconsideration or application for review by
the FCC of such order or final action has been filed within thirty days
after the date of public notice of such order or final action, as such
30-day period is computed and as such date is defined in Sections 1.104
and 1.4 (or any successor provisions), as applicable, of the FCC's
rules, and the FCC has not initiated review of such order or final
action on its own motion within forty days after the date of public
notice of the order or final action, as such 40-day period is computed
and such date is defined in Sections 1.117 and 1.4 (or any successor
provisions) of the FCC's rules; or
(y) if any such petition for reconsideration or application for
review has been filed, or, if the FCC has initiated review of such
order or final action on its own motion, the FCC has issued an
effective written order or taken final action to the effect set forth
in clause (a) above.
"FIRPTA Determination" means with respect to any sale, exchange (including a
deemed exchange) or other disposition by a Class A Holder of Shares, a
determination as to whether the Company is a "United States Real Property
Holding Corporation" within the meaning of Section 897 of the Code and the
regulations thereunder (or any successor provision).
"FIRPTA Tax" shall have the meaning set forth in Section 10.5 hereof.
"First Notice Period" shall have the meaning set forth in Section 2.5(a)
hereof.
"First Offer Price" shall have the meaning set forth in Section 2.5(a)
hereof.
"Fix" or "Fixed" means, in relation to the Conversion Price, the initial
establishment of the Conversion Price in accordance with Section 3(b) of the
Class A Provisions.
"Fixed Closing Date" means the date of the first closing to occur under the
Investment Agreement after the date on which the Conversion Price is Fixed.
BD-12
"Formula Price" means, as to a share of Class A Common Stock, a per share
price equal to the greater of (a) the Market Price of a share of Common Stock
on the date of sale of such share, and (b) an amount equal to the Weighted
Average Price paid by the Class A Holders for the Class A Common Stock together
with a stock appreciation factor thereon (calculated on the basis of a 365-day
year) at the rate of 3.88% through and including the date of such redemption,
such stock appreciation factor to be calculated, on an annual compounding
basis, from the date of purchase of such Class A Common Stock until the date of
redemption.
"France" means the Republic of France, including French Guiana, Guadeloupe,
Martinique and Reunion, and its territories and possessions.
"FT" shall have the meaning specified in the preamble.
"FT Investor Confidentiality Agreement" shall have the meaning specified in
the Investment Agreement.
"FT/DT Joint Venture Termination" means any of the following:
(a) the sale of Venture Interests by an FT/DT Party pursuant to Section
20.5(b), 20.5(c) or 20.5(d) of the Joint Venture Agreement; or
(b) the receipt by the Sprint Parties of the Tie-Breaking Vote due to a
Funding Default, Material Non-Funding Default or Bankruptcy (as such terms
are defined in the Joint Venture Agreement) on the part of any of the FT/DT
Parties.
"FT/DT Party" shall have the meaning set forth in the Joint Venture
Agreement.
"FT/DT Weighted Purchase Price" means (a) prior to the Class A Common
Issuance Date, the conversion price of the Class A Preference Stock in effect
from time to time, adjusted in accordance with the Class A Provisions solely
with respect to shares of Class A Preference Stock purchased from the Company
pursuant to this Agreement and the Investment Agreement, and (b) on and after
the Class A Common Issuance Date, the Weighted Average Price paid by FT, DT,
their respective Qualified Subsidiaries and any Qualified Stock Purchasers for
shares of Class A Common Stock, calculated solely with respect to shares of
Class A Common Stock (or shares of Class A Preference Stock which have been
converted into shares of Class A Common Stock) purchased from the Company
pursuant to this Agreement and the Investment Agreement.
"Fundamental Rights" means the rights of the holders of Class A Preference
Stock to elect Directors pursuant to ARTICLE FIFTH of the Articles, and the
rights of the holders of Class A Preference Stock provided in Sections 4, 5, 6
and 8 of the Class A Provisions.
"Germany" means the Federal Republic of Germany.
"Governmental Approval" means any consent, waiver, grant, concession or
License of, registration or filing with, or declaration, report or notice to,
any Governmental Authority.
"Governmental Authority" means any federation, nation, state, sovereign, or
government, any federal, supranational, regional, state or local political
subdivision, any governmental or administrative body, instrumentality,
department or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission or other similar dispute resolving panel or body,
and any other entity exercising executive, legislative, judicial, regulatory or
administrative functions of a government, provided that the term "Governmental
Authority" shall not include FT, DT, Atlas or any of their respective
Subsidiaries.
"Group" means any group within the meaning of Section 13(d)(3) of the
Exchange Act.
"Indemnitee" shall have the meaning set forth in Section 9.1 hereof.
BD-13
"Independent Director" means any member of the Board of Directors who (a) is
not an officer or employee of the Company, or any Class A Holder, or any of
their respective Subsidiaries, (b) is not a former officer of the Company, or
any Class A Holder, or any of their respective Subsidiaries, (c) does not, in
addition to such person's role as a Director, act on a regular basis, either
individually or as a member or representative of an organization, serving as a
professional adviser, legal counsel or consultant to the Company, or any Class
A Holder, or their respective Subsidiaries, if, in the opinion of the
Nominating Committee of the Board of Directors of the Company (the "Nominating
Committee") or the Board of Directors if a Nominating Committee is not in
existence, such relationship is material to the Company, any Class A Holder, or
the organization so represented or such person, and (d) does not represent, and
is not a member of the immediate family of, a person who would not satisfy the
requirements of the preceding clauses (a), (b) and (c) of this sentence. A
person who has been or is a partner, officer or director of an organization
that has customary commercial, industrial, banking or underwriting
relationships with the Company, any Class A Holder, or any of their respective
Subsidiaries, that are carried on in the ordinary course of business on an
arms-length basis and who otherwise satisfies the requirements set forth in
clauses (a), (b), (c) and (d) of the first sentence of this definition, may
qualify as an Independent Director, unless, in the opinion of the Nominating
Committee or the Board of Directors if a Nominating Committee is not in
existence, such person is not independent of the management of the Company, or
any Class A Holder, or any of their respective Subsidiaries, or the
relationship would interfere with the exercise of independent judgment as a
member of the Board of Directors. A person who otherwise satisfies the
requirements set forth in clauses (a), (b), (c) and (d) of the first sentence
of this definition and who, in addition to fulfilling the customary director's
role, also provides additional services directly for the Board of Directors and
is separately compensated therefor, would nonetheless qualify as an Independent
Director. Notwithstanding anything to the contrary contained in this
definition, each Director as of the date of the execution of the Investment
Agreement who is not an executive officer of the Company shall be deemed to be
an Independent Director hereunder.
"Initial Issuance Date" means the first date that any shares of Class A Stock
are issued.
"Investment Agreement" shall have the meaning set forth in the second WHEREAS
clause.
"Investment Completion Date" means the date of the Supplemental Preference
Stock Closing (as defined in the Investment Agreement) or the Class A Common
Issuance Date, whichever shall first occur.
"Joint Venture" means the joint venture formed by FT, DT, Sprint Sub and the
Company as provided in the Joint Venture Agreement.
"Joint Venture Agreement" shall have the meaning set forth in the first
WHEREAS clause.
"JV Entity" shall have the meaning set forth in the Joint Venture Agreement.
"LD Disapproval Notice" shall have the meaning set forth in Section 3.1(d)
hereof.
"LD Option Period" shall have the meaning set forth in Section 3.1(d) hereof.
"LD Sale Notice" shall have the meaning set forth in Section 3.1(c) hereof.
"License" means any license, ordinance, authorization, permit, certificate,
variance, exemption, order, franchise or approval, domestic or foreign.
"Lien" means any mortgage, pledge, security interest, adverse claim,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
similar Applicable Law of any jurisdiction) or any other type of preferential
arrangement for the purpose, or having the effect, of protecting a creditor
against loss or securing the payment or performance of an obligation.
BD-14
"Lien Transfer" shall mean the granting of any Lien on any Long Distance
Asset, other than:
(a) a Lien securing purchase money indebtedness that does not have a term
longer than the estimated useful life of the Long Distance Asset subject to
such Lien;
(b) Liens or other comparable arrangements relating to the financing of
accounts receivable; and
(c) Liens securing any other indebtedness for borrowed money, provided
that (i) the amount of such indebtedness, when added to the aggregate
amount of purchase money indebtedness referred to in clause (a) above, does
not exceed 30% of the total book value of the Long Distance Assets as at
the date of the most recently published balance sheet of the Company, (ii)
the indebtedness secured by such Liens is secured only by Liens on Long
Distance Assets, (iii) the face amount of such indebtedness does not exceed
the book value of the Long Distance Assets subject to such Liens, and (iv)
such indebtedness is for a term no longer than the estimated useful life of
the Long Distance Assets subject to such Liens.
"Liquidation Preference" shall have the meaning set forth in the Class A
Provisions.
"Local Exchange Division" means the Local Communications Services Division of
the Company.
"Long Distance Assets" means:
(a) the assets reflected in the Company's balance sheet for the year
ended December 31, 1994 as included in the Long Distance Division;
(b) any assets acquired by the Company or any of its Subsidiaries
following December 31, 1994 that are reflected in the Company's balance
sheet as included in the Long Distance Division;
(c) any assets of the Company or any of its Subsidiaries that are not
reflected in the Company's balance sheet for the year ended December 31,
1994 as included in the Long Distance Division, which after December 31,
1994 are transferred by the Company or any of its Subsidiaries to, or
reclassified by the Company or any of its Subsidiaries as part of, the Long
Distance Division;
(d) any assets acquired by the Company after December 31, 1994 that are
used or held for use primarily for the benefit of the Long Distance
Business; and
(e) any assets referred to in clauses (a) through (c) above that are used
or held for use primarily for the benefit of the Long Distance Business
which are transferred or reclassified by the Company or any of its
Subsidiaries outside of the Long Distance Division, but which continue to
be owned by the Company or any of its Subsidiaries;
provided that the term "Long Distance Assets" shall not include (i) any assets
that are used or held for use primarily for the benefit of any Non-Long
Distance Business, or (ii) any other assets reflected in the Company's balance
sheet for the year ended December 31, 1994 as included in the Cellular and
Wireless Division or the Local Exchange Division (other than as such assets in
the Cellular and Wireless Division or the Local Exchange Division may be
transferred or reclassified in accordance with paragraph (c) of this
definition).
"Long Distance Business" means all long distance telecommunications
activities and services of the Company and its Subsidiaries at the relevant
time, including (but not limited to) all long distance transport services,
switching and value-added services for voice, data, video and multimedia
transmission, migration paths and intelligent overlapping architectures,
provided that the term "Long Distance Business" shall not include any
activities or services primarily related to any Non-Long Distance Business.
"Long Distance Division" means the Long Distance Communications Services
Division of the Company.
"Major Competitor" means (a) with respect to FT or DT, a Person that
materially competes with a major portion of the telecommunications services
business of FT or DT in Europe, or a Person that has taken substantial steps to
become such a Major Competitor and which FT or DT has reasonably concluded, in
its
BD-15
good faith judgment, will be such a competitor in the near future in France or
Germany, provided that FT and/or DT furnish in writing to the Company
reasonable evidence of the occurrence of such steps; (b) with respect to the
Company, a Person that materially competes with a major portion of the
telecommunications services business of the Company in North America, or a
Person that has taken substantial steps to become such a Major Competitor and
which the Company has reasonably concluded, in its good faith judgment, will be
such a competitor in the near future in the United States of America, provided
that the Company furnish in writing to each Class A Holder reasonable evidence
of the occurrence of such steps; and (c) with respect to the Joint Venture, a
Person that materially competes with a major portion of the telecommunications
services business of the Joint Venture, or a Person that has taken substantial
steps to become such a Major Competitor and which FT, DT or the Company has
reasonably concluded, in its good faith judgment, will be such a competitor in
the near future, provided that FT, DT or the Company furnish in writing to each
other party hereto reasonable evidence of the occurrence of such steps.
"Major Issuance" means any transaction, including, but not limited to, a
merger or business combination, resulting, directly or indirectly, in the
issuance (or sale from treasury) in connection with such transaction of Voting
Securities of the Company with a number of Votes equal to or greater than 30
percent of the Voting Power of the Company immediately prior to such issuance.
"Mandatory Payment Amount" shall have the meaning set forth in Section
7.3(c)(ii) hereof.
"Market Price" means, with respect to a security on any date, the Closing
Price of such security on the Trading Day immediately prior to such date. The
Market Price shall be deemed to be equal to (a) in the case of a share of Class
A Common Stock, the Market Price of a share of Common Stock; and (b) in the
case of a share of Class A Preference Stock, the Liquidation Preference. The
Market Price of any options, warrants, rights or other securities convertible
into or exercisable for Class A Common Stock (except for the Class A Preference
Stock) shall be equal to the Market Price of options, warrants, rights or other
securities convertible into or exercisable for Common Stock upon the same terms
and otherwise containing the same terms as such options, warrants, rights or
other securities convertible into or exercisable for Class A Common Stock.
"Material Adverse Effect" means, with respect to any Person, the effect of
any event, occurrence, fact, condition or change that is materially adverse to
the business, operations, results of operations, financial condition, assets or
liabilities of such Person.
"NASDAQ" means the National Association of Securities Dealers, Inc. Automated
Quotations System.
"Non-Long Distance Business" means (a) the ownership of any equity or other
interests in the Joint Venture or any of the JV Entities; the enforcement or
performance of any of the rights or obligations of the Company or any
Subsidiary of the Company pursuant to the Joint Venture Agreement; or any
activities or services of the Joint Venture or any of the JV Entities; (b) the
Triple Play Activities; (c) any activities or services primarily related to the
provision of subscriber connections to a local exchange or switch providing
access to the public switched telephone network; (d) any activities or services
primarily related to the provision of exchange access services for the purpose
of originating or terminating long distance telecommunications services; (e)
any activities or services primarily related to the resale by the Local
Exchange Division of long distance telecommunications services of the Company
or other carriers; (f) any activities or services primarily related to the
provision of inter-LATA long distance telecommunications services that are
incidental to the local exchange services business of the Local Exchange
Division; (g) any activities or services primarily related to the provision of
intra-LATA long distance telecommunications services; (h) any activities or
services (whether local, intra-LATA or inter-LATA) primarily related to the
provision of cellular, PCS, ESMR or paging services, mobile telecommunications
services or any other voice, data or voice/data wireless services, whether
fixed or mobile, or related to telecommunications services provided through
communications satellite systems (whether low, medium or high orbit systems);
and (i) the use of the "Sprint" brand name or any other brand names, trade
names or trademarks owned or licensed by the Company or any of its
Subsidiaries.
BD-16
"North America" means the current geographic area covered by the following
countries: Canada, the United States of Mexico and the United States of
America.
"Notifying Class A Holder" shall have the meaning set forth in Section 10.2
hereof.
"Offered Shares" shall have the meaning set forth in Section 2.5(a) hereof.
"Option Shares" shall have the meaning set forth in Section 5.2 hereof.
"Optional Shares" shall have the meaning set forth in Section 2.5(a) of the
Investment Agreement.
"Optional Shares Closing" shall have the meaning set forth in Section 2.5(c)
of the Investment Agreement.
"Other Investment Documents" means the Investment Agreement, the Standstill
Agreement, the FT Investor Confidentiality Agreement, the DT Investor
Confidentiality Agreement, any Qualified Subsidiary Standstill Agreement, the
Registration Rights Agreement, any Qualified Subsidiary Confidentiality
Agreement, any standstill agreement entered into by a holder of equity
interests of a Qualified Subsidiary pursuant to the Standstill Agreement or any
confidentiality agreement entered into by a holder of equity interests of a
Qualified Subsidiary pursuant to the FT Investor Confidentiality Agreement or
the DT Investor Confidentiality Agreement.
"Other Purchaser" shall have the meaning set forth in Section 2.5(c)(ii)
hereof.
"Passive Financial Institution" means a bank (or comparable financial
institution), insurance company, pension or retirement fund that acquires
Voting Securities or other equity interests in a Qualified Subsidiary without
the purpose or effect of changing or influencing the control of the Qualified
Subsidiary or the Company, nor in connection with or as a participant in any
transaction having such purpose or effect, provided that the term "Passive
Financial Institution" shall not include any Major Competitor of the Company or
the Joint Venture.
"PCS" means a radio communications system of the type authorized under the
rules for broadband personal communications services designated as Subpart E of
Part 24 of the FCC's rules or similar Applicable Laws of any other country,
including the network, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"Percentage Ownership Interest" means, with respect to any Person, that
percentage of the Voting Power of the Company represented by Votes associated
with the Voting Securities of the Company owned of record by such Person or by
its nominees.
"Person" means an individual, a partnership, an association, a joint venture,
a corporation, a business, a trust, any entity organized or existing under
Applicable Law, an unincorporated organization or any Governmental Authority.
"Planned Date" means the planned date for the initial filing of a
registration statement with the SEC relating to a proposed Public Offering or
the first date on which it is proposed that a Class A Holder consummate
Brokers' Transactions as to any securities.
"Preferred Stock" means any series of Preferred Stock of the Company, but
shall not include the Class A Preference Stock.
"Principal Investment Documents" shall have the meaning set forth in Section
7.10 hereof.
"Private Offer Notice Period" shall have the meaning set forth in Section
2.5(c)(i) hereof.
BD-17
"Private Sale Notice" shall have the meaning set forth in Section 2.5(c)(i)
hereof.
"Proceeding" means any action, litigation, suit, proceeding or formal
investigation or review of any nature, civil, criminal, regulatory or
otherwise, before any Governmental Authority.
"Proposed Price" shall have the meaning set forth in Section 2.5(c)(i)
hereof.
"Proposed Terms" shall have the meaning set forth in Section 2.5(c)(i)
hereof.
"Public Offering" means an underwritten public offering of securities of the
Company pursuant to an effective registration statement under the Securities
Act.
"Public Sale Notice" shall have the meaning set forth in Section 2.5(a)
hereof.
"Qualified Joint Venture" means any operating joint venture of which not more
than 20% in the aggregate of the Voting Power or outstanding equity interests
thereof are owned by Major Competitors of FT or DT or of the Joint Venture, and
that
(a) has received contributions of assets by the other participants
therein which are predominately of a nature similar or complementary to the
Long Distance Assets contributed by the Company;
(b) owns assets that are available for use by the Company on a basis
which is no less favorable than that which is afforded to other
participants in such joint venture;
(c) would treat the Joint Venture, as a customer of the joint venture, no
less favorably than other similarly situated customers;
(d) is operated in a manner not inconsistent with the policies of the
Joint Venture; and
(e) as to which the Company undertakes to use commercially reasonable
efforts to align the activities of such joint venture with those of the
Joint Venture, including, without limitation, to use commercially
reasonable efforts to cause such joint venture to become a distributor of
the services falling within the scope of the Joint Venture (if so selected
by the Joint Venture), to align the joint venture's network technology with
the network technology of the Joint Venture, and to use the Joint Venture's
services to the maximum extent practicable,
provided that, in addition to the requirements set forth above, a joint venture
shall not be deemed to be a Qualified Joint Venture if the predominant
contribution of the Company to such joint venture is Long Distance Assets
comprising the transport media, associated switching, electronic transmissions
equipment, systems and operating software comprising the Company's long
distance telecommunications network ("Critical Long Distance Assets"), unless
the Company owns a majority of the equity interests and the Voting Power of
such joint venture; and provided, further, that with respect to a joint venture
in which the predominant contribution of the Company is Long Distance Assets
that are not Critical Long Distance Assets, such joint venture shall not be
deemed to be a Qualified Joint Venture unless such joint venture is either (i)
Controlled by the Company or (ii) not Controlled by any of its participants,
but in which the Company has the contractual or other legal right, acting
alone, to disapprove (and thereby prohibit) decisions relating to acquisitions
and divestitures involving more than 20 percent of the Fair Market Value of
such joint venture's assets, mergers, consolidations and dissolution or
liquidation of such joint venture, and the adoption of such joint venture's
business plan.
"Qualified LD Purchaser" means, for any Transfer of Long Distance Assets, a
purchaser that (a) has the legal and financial ability to buy such Long
Distance Assets proposed to be sold and (b) would not be a Major Competitor of
the Company based on the businesses to be retained by the Company following the
Transfer of such Long Distance Assets.
"Qualified Stock Purchaser" means a Person that (a) FT and DT reasonably
believe has the legal and financial ability to purchase shares of Class A Stock
from the Company in accordance with Article VI of this
BD-18
Agreement or to purchase shares in accordance with Section 2.2 of the
Standstill Agreement and (b) would not be a Major Competitor of the Company or
of the Joint Venture immediately following such purchase.
"Qualified Stock Purchaser Standstill Agreement" shall mean a standstill
agreement between the Company, the Qualified Stock Purchaser and the Person or
Persons, if any, which, directly or indirectly, ultimately Control a Qualified
Stock Purchaser, satisfactory in form and substance to each party hereto.
"Qualified Subsidiary" means any Person which
(a) is a Subsidiary of either FT or DT or an entity that would be such a
Subsidiary if FT's and DT's aggregate ownership in such entity were held
individually by one of FT or DT, provided that until the second anniversary
of the Initial Issuance Date, no Voting Securities of such entity may be
Beneficially Owned by a Major Competitor of the Company or of the Joint
Venture, and thereafter no such Major Competitor or Major Competitors may,
individually or in the aggregate, Beneficially Own Voting Securities
representing ten percent or more of the Voting Power of such entity, and
provided, further, that if the Voting Securities of such entity owned
directly by FT and DT or indirectly through Wholly-Owned Subsidiaries of
either of them are entitled to a number of Votes representing in the
aggregate less than 80 percent of the Voting Power of such entity, then:
(i) the Voting Securities owned by FT and DT and Wholly-Owned
Subsidiaries, plus Voting Securities, if any, owned by Passive
Financial Institutions must in the aggregate be entitled to a number of
Votes representing at least 80 percent of the Voting Power of such
entity; and
(ii) FT and DT and Wholly-Owned Subsidiaries must in the aggregate
own Voting Securities entitled to a number of Votes representing more
than 50 percent of the Voting Power of, and more than 50 percent of the
outstanding equity interests in, such entity; and
(b) has (i) entered into a Qualified Subsidiary Standstill Agreement and
a confidentiality agreement satisfactory in form and substance to each
party hereto and (ii) (x) caused all holders of any of its equity interests
(other than FT, DT and Passive Financial Institutions) (each such other
holder being a "Strategic Investor") to enter into a Strategic Investor
Standstill Agreement and (y) caused all holders of any of its equity
interests (other than FT and DT) to enter into a confidentiality agreement
satisfactory in form and substance to each party hereto.
"Qualified Subsidiary Standstill Agreement" shall have the meaning set forth
in the Investment Agreement.
"Redemption Securities" means any debt or equity securities of the Company,
any of its Subsidiaries, or any combination thereof having such terms and
conditions as shall be approved by the Board of Directors and which, together
with any cash to be paid as part of the redemption price pursuant to subsection
(b) of Section 2 of the provisions of ARTICLE SIXTH of the Articles entitled
GENERAL PROVISIONS RELATING TO ALL STOCK or Section 3(a)(i) of the Class A
Provisions, in the opinion of an investment banking firm of recognized national
standing selected by the Board of Directors (which may be a firm which provides
other investment banking, brokerage or other services to the Company), have a
Market Price, at the time notice of redemption is given pursuant to subsection
(d) of Section 2 of the provisions of ARTICLE SIXTH of the Articles entitled
GENERAL PROVISIONS RELATING TO ALL STOCK or Section 3(a)(i) of the Class A
Provisions, at least equal to the redemption price required to be paid by such
Section 2 or Section 3(a)(i) of the Class A Provisions.
"Refusal Notice" shall have the meaning set forth in Section 2.5(c)(ii)
hereof.
"Refusal Price" shall have the meaning set forth in Section 2.5(c)(ii)
hereof.
"Refusal Shares" shall have the meaning set forth in Section 2.5(c)(ii)
hereof.
"Refusal Terms" shall have the meaning set forth in Section 2.5(c)(ii)
hereof.
BD-19
"Registration Rights Agreement" means the Registration Rights Agreement,
dated the date hereof, among the Company, FT and DT, as it may be amended or
supplemented from time to time.
"Requested Sale Supplementary Payment" shall have the meaning set forth in
Section 3(a)(i) of the Class A Provisions.
"Required Sale Notice" shall have the meaning set forth in Section 7.4(d)(i)
hereof.
"Restricted Period" shall have the meaning set forth in Section 3.1(a)
hereof.
"Rights" shall have the meaning set forth in Section 5.1(c) hereof.
"Rights Agreement" means the Rights Agreement, dated as of August 8, 1989,
between the Company and UMB Bank, n.a., as amended on June 4, 1992 and as of
July 31, 1995, as it may be amended or supplemented from time to time.
"SEC" means the United States Securities and Exchange Commission.
"Second Notice Period" shall have the meaning set forth in Section 2.5(b)
hereof.
"Second Offer" shall have the meaning set forth in Section 2.5(b) hereof.
"Second Offer Price" shall have the meaning set forth in Section 2.5(b)
hereof.
"Section 310" means Section 310(b) of the Communications Act of 1934, as
amended (or any successor provision of law).
"Section 9.2 Excess Taxes" shall have the meaning set forth in Section 9.2
hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
"Shares" means (a) shares of Class A Stock, Common Stock or any other Voting
Securities of the Company, (b) securities of the Company convertible into
Voting Securities of the Company and (c) options, warrants or other rights to
acquire such Voting Securities, but in the case of this clause (c) excluding
any rights of the Class A Holders or FT and DT to acquire Voting Securities of
the Company pursuant to the Investment Agreement and this Agreement (but not
excluding any Voting Securities received upon the exercise of such rights).
"Specified Long Distance Assets" shall have the meaning set forth in Section
3.1(c) hereof.
"Spin-off" means any spin-off or other pro rata distribution of equity
interests of a wholly-owned direct or indirect Subsidiary of the Company to the
stockholders of the Company, provided that the term "Spin-off" shall not
include the Cellular Spin-off unless a Notice of Abandonment has been
delivered.
"Spin-Off Investment Agreement" shall have the meaning set forth in Section
7.10(a)(i) hereof.
"Sprint Party" shall have the meaning set forth in the Joint Venture
Agreement.
"Sprint Sub" shall have the meaning set forth in the first WHEREAS clause.
"Standstill Agreement" means the Standstill Agreement, dated as of July 31,
1995, among the Company, FT and DT, as it may be amended or supplemented from
time to time.
"Strategic Investor Standstill Agreement" shall have the meaning set forth in
the Investment Agreement.
BD-20
"Strategic Merger" means a merger or other business combination involving the
Company (a) in which the Class A Holders are entitled to retain or receive, as
the case may be, voting equity securities of the surviving parent entity in
exchange for or in respect of (by conversion or otherwise) such Class A Stock,
with an aggregate Fair Market Value equal to at least 75% of the sum of (i) the
Fair Market Value of all consideration which such Class A Holders have a right
to receive with respect to such merger or other business combination, and (ii)
if the Company is the surviving parent entity, the Fair Market Value of the
equity securities of the surviving parent entity which the Class A Holders are
entitled to retain, (b) immediately after which the surviving parent entity is
an entity whose voting equity securities are registered pursuant to Section
12(b) or Section 12(g) of the Exchange Act or which otherwise has any class or
series of its voting equity securities held by at least 500 holders and (c)
immediately after which no Person or Group (other than the Class A Holders)
owns Voting Securities of such surviving parent entity with Votes equal to more
than 35 percent of the Voting Power of such surviving parent entity.
"Subject Shares" shall have the meaning set forth in Section 2.5(c)(i)
hereof.
"Subsidiary" means, with respect to any Person (the "Parent"), any other
Person in which the Parent, one or more direct or indirect Subsidiaries of the
Parent, or the Parent and one or more of its direct or indirect Subsidiaries
(a) have the ability, through ownership of securities individually or as a
group, ordinarily, in the absence of contingencies, to elect a majority of the
directors (or individuals performing similar functions) of such other Person,
and (b) own more than 50% of the equity interests, provided that Atlas shall be
deemed to be a Subsidiary of each of FT and DT.
"Supervisory Board" means, as the case may be, the board of directors of FT,
the Aufsichtsrat of DT, or an analogous body in the case of a Qualified Stock
Purchaser or Qualified LD Purchaser.
"Supplementary Payment" shall have the meaning set forth in Section
7.4(d)(iii) hereof.
"Surplus Shares" shall have the meaning set forth in Section 7.4(d)(i)
hereof.
"Surplus Shares Sale" shall have the meaning set forth in Section 7.4(d)(i)
hereof.
"Third Party Approval" means any consent, waiver, grant, concession, license,
authorization, permit, certificate, exemption, franchise or approval of,
registration or filing with, or declaration, report or notice to any Person
other than a Governmental Authority.
"Tie-Breaking Vote" shall have the meaning set forth in Section 18.1(a) of
the Joint Venture Agreement and shall include any successor provision thereto.
"Total Realized Amount" shall have the meaning set forth in Section
7.4(d)(iii) hereof.
"Trading Day" means, with respect to any security, a day on which the
principal national securities exchange on which such security is listed or
admitted to trading, or NASDAQ, if such security is listed or admitted to
trading thereon, is open for the transaction of business (unless such trading
shall have been suspended for the entire day) or, if such security is not
listed or admitted to trading on any national securities exchange or NASDAQ,
any day other than a Saturday, Sunday, or a day on which banking institutions
in the State of New York are authorized or obligated by law or executive order
to close.
"Transfer" means any act pursuant to which, directly or indirectly, the
ownership of the assets or securities in question is sold, transferred,
conveyed, delivered or otherwise disposed, but shall not include (a) any grant
of Liens, (b) any conversion or exchange of any security of the Company
pursuant to a merger or other business combination involving the Company, (c)
any transfer of ownership of assets to the surviving entity in a Strategic
Merger, or pursuant to any other merger or other business combination not
prohibited by the Class A Provisions, or (d) any foreclosure or other execution
upon any of the assets of the Company or any of its Subsidiaries other than
foreclosures resulting from Lien Transfers.
BD-21
"Transfer Restrictions" means those restrictions on Transfer of Shares set
forth in Sections 2.2, 2.3 and 2.5 hereof.
"Transferring Stockholder" shall have the meaning set forth in Section 2.4
hereof.
"Treaty Benefit" means:
(a) the 5% rate of dividend withholding (or any successor rate applicable
to non-portfolio investments);
(b) the exemption from income tax with respect to dividends paid or
profits distributed by the Company;
(c) the exemption from income tax with respect to gains or profits
derived from the sale, exchange, or disposal of stock in the Company; or
(d) the exemption from taxes on capital with respect to stock in the
Company;
under, in the case of (a), (b), (c) and (d) above, either (i) the relevant
income tax treaty between the United States and France, in the case of FT,
and the United States and Germany, in the case of DT, or (ii) any
provisions of French statutory law, in the case of FT, or German statutory
law, in the case of DT, which refers to, or is based on or derived from,
any provision of such treaty, or
(e) any other favorable treaty benefit or statutory benefit, that
specifically requires the ownership of a certain amount of voting power or
voting interest in the Company, under a provision of the relevant income
tax treaty between the United States and France or the statutory laws of
France, in the case of FT, or the relevant income tax treaty between the
United States and Germany or the statutory laws of Germany, in the case of
DT, provided that the chief tax officer of FT or DT certifies that such
benefit is reasonably expected to provide to FT or DT, as the case may be,
combined tax savings in the year such certification is made and in future
years of at least U.S. $15 million.
"Triple Play Activities" means (a) the ownership of any equity or other
interests in MajorCo, L.P. or any of its successors or Affiliates; the
enforcement or performance of any of the rights or obligations of the Company
or any Subsidiary of the Company pursuant to the Agreement of Limited
Partnership of MajorCo, L.P. or any other agreement or arrangement contemplated
thereby, except to the extent relating to the provision of services by the
Company as the long distance telecommunications provider to MajorCo, L.P.; or
any activities or services of MajorCo, L.P. or any of its successors or
Affiliates; (b) the ownership of any equity or other interests in any Teleport
Entity (as that term is defined in the Contribution Agreement (the
"Contribution Agreement"), dated as of March 28, 1995, by and among TCI Network
Services, Comcast Telephony Services, Cox Telephony Partnership, MajorCo, L.P.
and NewTelco, L.P.); or any activities or services of any Teleport Entity or
any of their respective successors or Affiliates; and (c) the ownership of any
equity or other interests in PhillieCo, L.P., or any of its successors or
Affiliates; the enforcement or performance of any of the rights or obligations
of the Company or any Subsidiary of the Company pursuant to the Amended and
Restated Agreement of Limited Partnership of PhillieCo, L.P., dated as of
February 17, 1995, or any other agreement or arrangement contemplated thereby,
except to the extent relating to the provision of services by the Company as
the long distance telecommunications provider to PhillieCo, L.P.; or any
activities or services of PhillieCo, L.P. or any of its successors or
Affiliates.
"Unrelated Party Sale" shall have the meaning set forth in Section 9.1
hereof.
"Venture Interests" shall have the meaning set forth in the Joint Venture
Agreement.
"Vote" means, with respect to any entity, the ability to cast a vote at a
stockholders', members' or comparable meeting of such entity with respect to
the election of directors, managers or other members of such entity's governing
body, or the ability to cast a general partnership or comparable vote, provided
that with respect to the Company only, the term "Vote" means the ability to
exercise general voting power (as opposed to the exercise of special voting or
disapproval rights such as those set forth in the Class A
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Provisions) with respect to matters other than the election of directors at a
meeting of the stockholders of the Company.
"Voting Power" means, with respect to any entity as at any date, the
aggregate number of Votes outstanding as at such date in respect of such
entity.
"Voting Securities" means, with respect to an entity, any capital stock or
debt securities of such entity if the holders thereof are ordinarily, in the
absence of contingencies, entitled to a Vote, even though the right to such
Vote has been suspended by the happening of such a contingency, and in the case
of the Company, shall include, without limitation, the Common Stock and the
Class A Stock, but shall not include any shares issued pursuant to the Rights
Agreement to the extent such issuance is caused by action of a Class A Holder.
"Weighted Average Price" means the weighted average per unit price paid by
the purchasers of any capital stock, debt instrument or security of the
Company. In determining the price of shares of Common Stock or Class A Common
Stock issued upon the conversion or exchange of securities or issued upon the
exercise of options, warrants or other rights, the consideration for such
shares shall be deemed to include the price paid to purchase the convertible
security or the warrant, option or other right, plus any additional
consideration paid upon conversion or exercise. If any portion of the price
paid is not cash, the Independent Directors (acting by majority vote) shall
determine in good faith the Fair Market Value of such non-cash consideration.
If any new shares of Common Stock are issued together with other shares or
securities or distributions of other assets of the Company for consideration
which covers both the new shares and such other shares, securities or other
assets, the portion of such consideration allocable to such new shares shall be
determined in good faith by the Independent Directors (acting by majority
vote), in each case as certified in a resolution sent to all Class A Holders.
"Wholly-Owned Subsidiaries" means companies or other business organizations
all of the outstanding Voting Securities of which are owned, directly or
indirectly, by either or both of FT and DT, other than any de minimis ownership
required by Applicable Law.
"Windfall Benefit" shall have the meaning set forth in Section 9.2 hereof.
ARTICLE II
RESTRICTIONS ON TRANSFER OF SHARES
Section 2.1. General Transfer Restrictions. The right of Class A Holders to
Transfer any Shares is restricted as provided in Article II of this Agreement,
and no Transfer of Shares by any Class A Holder may be effected except in
compliance with this Article II. Any attempted or actual Transfer by a Class A
Holder of Shares in violation of this Agreement shall be of no effect and null
and void and shall not be recorded on the stock transfer books of the Company.
Section 2.2. Transfers to Qualified Subsidiaries. Subject in each case to
compliance with Applicable Law and the receipt of any necessary material
Governmental Approvals, a Class A Holder may without restriction Transfer
Shares to Qualified Subsidiaries or FT or DT (each, for the purposes of this
Section 2.2, a "Transferee") in accordance with this Section 2.2, provided
that, in the case of each Transfer to a Qualified Subsidiary, each Class A
Holder having an equity interest in such Qualified Subsidiary shall (a) be
liable for the performance by such Qualified Subsidiary of its obligations
under this Agreement and any Other Investment Documents to which such Qualified
Subsidiary is or becomes a party, (b) act as agent for such Qualified
Subsidiary in connection with the receipt or giving of any and all notices or
approvals under this Agreement and any such Other Investment Documents and (c)
not cause or permit any such Subsidiary to lose its status as a Qualified
Subsidiary at any time when such Subsidiary owns Shares. At least ten days
prior to any proposed Transfer to a Transferee, the transferring Class A Holder
shall notify the Company of its intent to make such Transfer, such notice to
state the name and address of the Transferee (and the identity
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of the shareholders of such Transferee and the relationship of the Transferee
to the transferring Class A Holder), the proposed date of such Transfer, the
number and class of Shares to be Transferred and the proposed terms of such
Transfer. Any Transfer made pursuant to this Section 2.2 shall be effective
only if the Transferee shall agree in writing to be bound by the terms and
conditions of this Agreement pursuant to an instrument of assumption
substantially in the form of Exhibit B hereto and such Transferee thereby shall
become a party to this Agreement.
Section 2.3. Other Transfers Prior to the Fifth Anniversary. Until the fifth
anniversary of the Initial Issuance Date, Shares shall not be Transferred by a
Class A Holder except as provided in Section 2.2.
Section 2.4. Other Transfers. After Section 2.3 hereof shall no longer apply
or shall be terminated pursuant to Section 2.6, but subject to the Company's
rights under Section 2.5, each Class A Holder may Transfer Shares (each such
Class A Holder being a "Transferring Stockholder") without restriction,
provided that, with respect to any such Transfer:
(a) a Transfer in a single transaction or a series of related
transactions of Shares may be made to a Person or Group (other than a
Qualified Subsidiary or Subsidiaries or FT or DT) that Beneficially Owns
Voting Securities with a number of Votes representing greater than five
percent of the Voting Power of the Company immediately following such
Transfer or Transfers only in connection with a Public Offering in which:
(i) the Transferring Stockholder does not, to the best of its
knowledge, Transfer a number of Shares representing more than two
percent of the Voting Power of the Company to a Person or Group that,
prior to such Transfer, Beneficially Owned Voting Securities entitled
to a number of Votes representing three percent or more of the Voting
Power of the Company;
(ii) the Transferring Stockholder does not, to the best of its
knowledge, Transfer in a single transaction or a series of related
transactions to a Person or Group a number of Shares representing more
than five percent of the Voting Power of the Company; and
(iii) the Transferring Stockholder does not, to the best of its
knowledge, Transfer in a single transaction or series of related
transactions Shares to a Person or Group that is required under Section
13(d) of the Exchange Act to file a Schedule 13D with respect to the
Company (a "Schedule 13D Filer") or, as a result of such Transfer, will
become a Schedule 13D Filer,
provided that such Transferring Stockholder shall have notified the
managing or coordinating underwriter or underwriters participating in such
Public Offering of the restrictions set forth in clauses (i), (ii) and
(iii) and provided, further, that, in determining the best knowledge of a
Transferring Stockholder, such holder may rely on written certification
received from such managing or coordinating underwriters or from purchasers
of shares in such Public Offering, unless such holder has actual knowledge
to the contrary; and
(b) the restrictions contained in Section 2.4(a) shall continue until
such time as the sum of (A) the aggregate Committed Percentage of the Class
A Holders, and (B) the percentage of Voting Power of the Company
represented by Voting Securities which the Class A Holders have the right
to commit to purchase pursuant to Sections 7.3 and 7.8 and Articles V and
VI of this Agreement and Article II of the Investment Agreement, falls
below three and one-half percent for more than 150 consecutive days after
the rights to commit to purchase provided in Article V have expired.
(c) For so long as the sum of (i) the aggregate Committed Percentage of
the Class A Holders, and (ii) the percentage of Voting Power of the Company
which the Class A Holders have the right to commit to purchase pursuant to
Sections 7.3 and 7.8 and Articles V and VI of this Agreement and Article II
of the Investment Agreement is greater than five percent, but less than
nine percent (if the events described in clause (ii) of Section 2.6(e)
shall have occurred) or ten percent (if the events described in clause (i)
of Section 2.6(e) shall have occurred), no Class A Holder or Holders may
Transfer Shares representing in excess of one percent of the outstanding
Voting Power of the Company to any one Person or Group in any transaction
or series of related transactions, except in connection with a Public
Offering as provided
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in Section 2.4(a), or Transfer Shares other than in a Public Offering to
any Major Competitor of the Company.
Section 2.5. Company Rights to Purchase. (a) If a Transferring Stockholder
proposes to Transfer Shares in a Public Offering or in Brokers Transactions,
such Transferring Stockholder shall first deliver written notice (the "Public
Sale Notice") to the Company of such Transferring Stockholder's desire to
effect such Transfer setting forth in reasonable detail (i) the number and
class of Shares to be sold (the "Offered Shares"), (ii) the Market Price per
share (or, if Class A Preference Stock is proposed to be Transferred, per
number of Class A Conversion Shares related to the shares of Class A Preference
Stock in question) on the date of the Public Sale Notice (the "First Offer
Price"), (iii) the Planned Date of such Transfer, and (iv) any other material
proposed terms of the Transfer. Upon receipt of the Public Sale Notice, the
Company shall have the right to purchase all, but not less than all, of the
Offered Shares at the First Offer Price, as adjusted to comply with the
requirements of Article IX, such right to be exercised within ten Business Days
following delivery of the Public Sale Notice to the Company (the "First Notice
Period"). The Public Sale Notice shall constitute an offer to the Company (or
its assignee, as provided below), which shall be irrevocable during the First
Notice Period, to sell to the Company or its assignee the Offered Shares upon
the terms provided in this Section 2.5(a) and the Public Sale Notice. The
Company shall exercise such right to purchase by delivering written notice to
such Transferring Stockholder at any time during the First Notice Period
setting forth its irrevocable commitment to purchase such Offered Shares
subject to receipt of any required material Third Party Approvals or
Governmental Approvals (the same to be specified in reasonable detail in such
notice), compliance with Applicable Law and the absence of any injunction or
similar legal order preventing such transaction, provided that the Company
shall not be permitted to deliver such notice (and accordingly may not purchase
the Offered Shares) unless a majority of the Continuing Directors shall have
first approved (unless such approval is not required under Section 11.13), at a
meeting of Directors at which at least seven Continuing Directors are present,
such purchase of the Offered Shares. The Company may assign its rights to
purchase the Offered Shares under this Section 2.5(a) to any Person who is not
a Major Competitor of FT or DT or of the Joint Venture. If the Company does not
exercise such right, or the Company or its assignee does not close the purchase
of the Offered Shares within the time periods provided in Section 2.5(d), such
Transferring Stockholder may, to the extent not otherwise prohibited under this
Article II, sell the Offered Shares, subject to compliance with Applicable Law
and receipt of any required material Third Party Approvals or Governmental
Approvals (x) in the case of a Public Offering, subject to subsection (b) of
this Section 2.5, or (y) in the case of Brokers' Transactions within 45 days
after the end of the First Notice Period or 45 days after the applicable date
provided in Section 2.5(d) if the Company has exercised its rights under this
Section 2.5(a) and the Company or its assignee has failed to close the purchase
of the Offered Shares within the time periods provided in Section 2.5(d). Any
Offered Shares to have been sold in Brokers' Transactions that continue to be
held by the Transferring Stockholder following the expiration of such period
shall again be subject to the provisions of this Article II.
(b) If a Transferring Stockholder proposes to Transfer Shares in a Public
Offering, on the seventh Business Day prior to the Planned Date, such
Transferring Stockholder shall deliver to the Company a written offer (the
"Second Offer") to sell to the Company the Offered Shares at the Market Price
per share (or per number of Class A Conversion Shares related to each Class A
Preference Share, as the case may be), as adjusted to comply with the
requirements of Article IX, of the Common Stock on the Business Day immediately
preceding such seventh Business Day (such Market Price, the "Second Offer
Price"), provided that no Second Offer need be made if the Second Offer Price
would be more than 90 percent of the First Offer Price and provided, further,
that, prior to making a Second Offer, any Transferring Stockholder may, in its
complete discretion, change the Planned Date to a date not later than 120 days
after the original Planned Date. The Company shall have 24 hours (the "Second
Notice Period") in which to deliver to such Transferring Stockholder written
notice of its decision to accept the Second Offer (a "Buy Notice"), provided
that the Company shall not be permitted to deliver such Buy Notice (and
accordingly may not purchase the Offered Shares) unless a majority of the
Continuing Directors shall have first approved (unless such approval is not
required under Section 11.13), at a meeting of Directors at which at least
seven Continuing Directors
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are present, such purchase of the Offered Shares. The Second Offer shall
constitute an offer to the Company or its assignee, as provided below, which
shall be irrevocable during such Second Notice Period, to sell to the Company
or its assignee such Offered Shares upon the terms set forth in this Section
2.5(b) and the Second Offer. Delivery of a Buy Notice to such Transferring
Stockholder shall constitute an irrevocable commitment on the part of the
Company to purchase such Offered Shares upon the terms set forth in this
Section 2.5(b) (subject to the receipt of any required material Third Party
Approvals or Governmental Approvals (the same to be specified in reasonable
detail in such Buy Notice), compliance with Applicable Law and the absence of
any injunction or similar legal order preventing such transaction), and to
reimburse such Transferring Stockholder for all of its reasonable out-of-pocket
expenses incurred in connection with such Transfer, including the reasonable
fees and expenses of its advisors and legal counsel, upon receipt of a
certificate of such Transferring Stockholder setting forth in reasonable detail
such out-of-pocket expenses. The Company may assign its rights to purchase the
Offered Shares under this Section 2.5(b) to any Person who is not a Major
Competitor of FT or DT or the Joint Venture. If a Buy Notice is not timely
delivered to such Transferring Stockholder, or the Company or its assignee does
not close the purchase of the Offered Shares within the applicable time period
provided in Section 2.5(d), such Transferring Stockholder shall have no
obligation to sell the Offered Shares to the Company, and subject to compliance
with Applicable Law and the receipt of any required material Third Party
Approvals or Governmental Approvals, may, to the extent not otherwise
prohibited under this Article II, Transfer the Offered Shares at any time prior
to 45 days after the Planned Date or the applicable date provided in Section
2.5(d) if the Company has accepted the Second Offer and the Company or its
assignee has failed to close the purchase of the Offered Shares within the time
period provided in Section 2.5(d), provided that the Transferring Stockholder
may delay for a reasonable period its offering beyond such 45th date if it
determines in good faith that such a delay is advisable because of marketing
considerations or because the registration statement pursuant to which such
Offered Shares are registered has not yet been declared effective, provided,
further, that, if such offering is delayed for longer than ten Business Days
after such 45th date, the Offered Shares shall again be subject to the
Company's purchase rights under this paragraph (b) and the obligations of the
Class A Holders to make a Second Offer. Any Offered Shares which continue to be
held by the Transferring Stockholder following the applicable period shall
again be subject to the provisions of this Article II.
(c) If a Transferring Stockholder proposes to Transfer Shares in a
transaction not covered by Section 2.2, 2.5(a) or 2.5(b) and otherwise
permitted by this Article II,
(i) such Transferring Stockholder shall first deliver written notice (a
"Private Sale Notice") to the Company stating that such Transferring
Stockholder proposes to effect such Transfer, such notice to describe in
reasonable detail (x) the number and class of Shares to be Transferred (the
"Subject Shares"), (y) a price per share (the "Proposed Price") and (z)
other material terms of such Transfer determined by such Transferring
Stockholder in its sole discretion (the "Proposed Terms"). Upon receipt of
the Private Sale Notice, the Company shall have the right to purchase all,
but not less than all, of the Subject Shares at the Proposed Price, as
adjusted to comply with the requirements of Article IX, and in accordance
with the Proposed Terms for a period of ten Business Days (the "Private
Offer Notice Period"). The Private Sale Notice shall constitute an offer to
the Company or its assignee, as provided below, which is irrevocable during
such Private Offer Notice Period, to sell to the Company or its assignee
such Subject Shares upon the terms set forth in this Section 2.5(c)(i) and
the Private Sale Notice. The Company may exercise such right by delivering
written notice to such Transferring Stockholder at any time during the
Private Offer Notice Period setting forth its irrevocable commitment to
purchase such Subject Shares at the Proposed Price, as adjusted to comply
with the requirements of Article IX, in accordance with the Proposed Terms
subject to receipt of any required material Third Party Approvals or
Governmental Approvals (the same to be specified in reasonable detail in
such notice), compliance with Applicable Law and the absence of any
injunction or similar order preventing such transaction, provided that the
Company shall not be permitted to deliver such notice (and accordingly may
not purchase the Subject Shares) unless a majority of the Continuing
Directors shall have first approved (unless such approval is not required
under Section 11.13), at a meeting of Directors at which at least
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seven Continuing Directors are present, such purchase of the Subject
Shares. The Company may assign its rights to purchase the Subject Shares
under this Section 2.5(c)(i) to any Person who is not a Major Competitor of
FT or DT or of the Joint Venture. If the Company fails to exercise such
right, or the Company or its assignee does not close the purchase of the
Subject Shares within the applicable time period provided in Section
2.5(d), then such Transferring Stockholder, subject to compliance with
Applicable Law and receipt of any required material Third Party Approvals
or Governmental Approvals, may, to the extent not otherwise prohibited
under this Article II, sell all of the Subject Shares to any one or more
Eligible Purchasers at the Proposed Price (taking into account any
adjustments thereto which may have been made to comply with the
requirements of Article IX) and in accordance with the Proposed Terms (or
at a better price and on terms more favorable to such Transferring
Stockholder) within 180 days after delivery of the Private Sale Notice to
the Company or 180 days after the applicable date provided in Section
2.5(d) if the Company has exercised its rights under this Section 2.5(c)(i)
and the Company or its assignee has failed to close the purchase of the
Subject Shares within the time period provided in Section 2.5(d). Any
Subject Shares which continue to be held by the Transferring Stockholder
following such periods shall again be subject to the provisions of this
Article II. For purposes of this Section 2.5, the term "Eligible Purchaser"
shall mean a Person or Group that would be eligible pursuant to Rule 13d-
1(b) under the Exchange Act to file a Schedule 13G with respect to the
Company if such Person or Group Beneficially Owned Voting Securities
representing five percent or more of the Voting Power of the Company; and
(ii) if a Transferring Stockholder proposes to Transfer Shares pursuant
to a bona fide offer to purchase Shares from a purchaser that is not an
Eligible Purchaser (an "Other Purchaser"), prior to such Transferring
Stockholder's accepting such offer, such Transferring Stockholder shall
first deliver notice thereof (a "Refusal Notice") to the Company and to
each other Class A Holder, setting forth in reasonable detail, (w) the
number and class of Shares to be Transferred (the "Refusal Shares"), (x)
the price per share of such bona fide offer (the "Refusal Price"), (y) the
other material terms of such bona fide offer (the "Refusal Terms"), and (z)
the identity of the offeror. Upon receipt of such notice, the Company shall
have the right to purchase all, but not less than all, of the Refusal
Shares upon the Refusal Terms, subject to receipt of any required material
Third Party Approvals or Governmental Approvals (the same to be specified
in reasonable detail in the Company's notice described in this paragraph),
compliance with Applicable Law and the absence of any injunction or similar
legal order preventing such transaction, at the Refusal Price, as adjusted
to comply with the requirements of Article IX. The Refusal Notice shall
constitute an offer to the Company or its assignee, as provided below,
which is irrevocable during the period described in the next sentence, to
sell to the Company or its assignee the Refusal Shares upon the terms set
forth in this Section 2.5(c)(ii) and the Refusal Notice. The Company shall
have ten Business Days after receipt of such notice in which to exercise
such right by delivering written notice stating its irrevocable commitment
to so exercise to the Transferring Stockholder, provided that the Company
shall not be permitted to deliver such notice (and accordingly may not
purchase the Refusal Shares) unless a majority of the Continuing Directors
shall have first approved (unless such approval is not required under
Section 11.13), at a meeting of Directors at which at least seven
Continuing Directors are present, such purchase of the Refusal Shares. The
Company may assign its rights to purchase the Refusal Shares under this
Section 2.5(c)(ii) to any Person who is not a Major Competitor of FT or DT
or of the Joint Venture. If the Company fails to exercise such right, or
the Company or its assignee does not close the purchase of the Refusal
Shares within the applicable time period provided in Section 2.5(d), then
such Transferring Stockholder, subject to compliance with Applicable Law
and receipt of any required material Third Party Approvals or Governmental
Approvals, may, to the extent not otherwise prohibited under this Article
II, sell all of the Refusal Shares to the Other Purchaser at the Refusal
Price (taking into account any adjustments thereto which may have been made
to comply with the requirements of Article IX) and in accordance with the
Refusal Terms (or at a better price and upon terms more favorable to such
Transferring Stockholder) within 180 days following delivery of such notice
to the Company or 180 days after the date provided in Section 2.5(d) if the
Company has exercised its rights under this Section 2.5(c)(ii) and the
Company or its
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assignee has failed to close the purchase of the Refusal Shares within the
applicable time period provided in Section 2.5(d). Any Refusal Shares which
continue to be held by the Transferring Stockholder following such period
shall again be subject to the provisions of this Article II.
(d) The closing of purchases of Shares pursuant to this Section 2.5 shall
take place within (i) 45 days in the case of purchases by the Company or an
assignee, or (ii) 180 days in the case of purchases by an assignee if all
required Governmental Approvals necessary to permit such closing by such
assignee have not been obtained within such 45-day period, after the exercise
of the Company's right to purchase at the offices of Debevoise & Plimpton, 875
Third Avenue, New York, New York, at 10:00 a.m., New York time, or at such
other date, time or place as the Company and the Transferring Stockholder may
otherwise agree.
(i) At such closing,
(x) the Transferring Stockholder shall (A) sell, transfer and deliver
to the Company or its assignee all of its right, title and interest in
and to the Shares to be purchased by the Company or its assignee free
and clear of Liens, (B) deliver to the Company or its assignee a
certificate or certificates representing such Shares duly endorsed in
blank or accompanied by stock transfer powers duly endorsed in blank
together with evidence of payment of any applicable stock transfer
taxes and (C) deliver to the Company or its assignee an executed
written representation of such Transferring Stockholder, in form and
substance reasonably satisfactory to the Company or its assignee,
representing that (1) such Transferring Stockholder is validly existing
and has validly authorized such Transfer, (2) such Transfer does not
violate or otherwise conflict with the organizational documents of such
Transferring Stockholder or require any material Third Party Approval
or Governmental Approval on the part of such Transferring Stockholder
which has not yet been obtained and (3) the Transferring Stockholder
shall Transfer the Shares to be purchased free and clear of all Liens
arising due to the action or inaction of such Transferring Stockholder;
and
(y) the Company or its assignee shall deliver to such Transferring
Stockholder an amount (the "Purchase Price") in cash or in cash and
securities of the Company, as hereinafter provided, equal to the
product of (A) the First Offer Price, the Second Offer Price, the
Proposed Price or the Refusal Price, as the case may be, in each case
as adjusted to comply with the requirements of Article IX; and (B) the
number of Shares to be acquired by the Company or its assignee.
(ii) Payment of the Purchase Price shall be made as follows:
(x) If the Purchase Price is less than $200 million, payment of the
entire Purchase Price shall be made by wire transfer of immediately
available funds to such bank and account as such Transferring
Stockholder shall designate.
(y) If the Purchase Price is $200 million or greater, but less than
or equal to $500 million, payment of $200 million of the Purchase Price
shall be made by wire transfer of immediately available funds to such
bank and account as such Transferring Stockholder shall designate, an
amount equal to one-half of the difference between the Purchase Price
and $200 million (for purposes of this Section 2.5, the "One-Half
Quantity") shall be paid in Company Eligible Notes maturing one year
from the date of such closing; and an amount equal to the One-Half
Quantity shall be paid in Company Eligible Notes maturing two years
from the date of such closing. The principal of any such Company
Eligible Notes shall be adjusted to comply with the requirements of
Article IX such that the Transferring Stockholder receives principal in
an amount equal to the One-Half Quantity on each of the first and
second anniversaries of such closing.
(z) If the Purchase Price exceeds $500 million, payment of $200
million of the Purchase Price shall be made by wire transfer of
immediately available funds to such bank and account as such
Transferring Stockholder shall designate, an amount equal to one-third
of the difference between the Purchase Price and $200 million (for
purposes of this Section 2.5, the "One-Third Quantity") shall be paid
in Company Eligible Notes maturing one year from the date of such
closing; an amount equal to the One-Third Quantity shall be paid in
Company Eligible Notes maturing two years from
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the date of such closing; and an amount equal to the One-Third Quantity
shall be paid in Company Eligible Notes maturing three years from the
date of such closing. The principal of any such Company Eligible Notes
shall be adjusted to comply with the requirements of Article IX such
that the Transferring Stockholder receives principal in an amount equal
to the One-Third Quantity on each of the first, second and third
anniversaries of such closing.
Section 2.6. Termination of Transfer Restrictions; Mandatory Redemption of
Class A Preference Stock. (a) At any time after the earlier of the Class A
Common Issuance Date and the date when the Conversion Price shall have been
Fixed, the Transfer Restrictions shall terminate and cease to be of further
force and effect hereunder (but the provisions of Section 2.4 shall continue):
(i) if there is a Corporation Joint Venture Termination;
(ii) upon the first anniversary of a sale of all of the Venture Interests
of the Sprint Parties or the FT/DT Parties pursuant to Section 17.2, 17.3,
17.4, 19.3, 20.6 or 20.11 of the Joint Venture Agreement or upon the first
anniversary of the date on which the Joint Venture is otherwise terminated,
in each case, other than pursuant to (x) an FT/DT Joint Venture Termination
or (y) a Corporation Joint Venture Termination;
(iii) if the Company has breached in any material respect its obligations
under Article III, IV, V, and VI; Section 7.1, 7.4, 7.8, 7.10 or 7.11 of
this Agreement; Section 8.8 of the Investment Agreement; Article FIFTH of
the Articles (to the extent such Article relates to the rights of the
holders of Class A Stock); or the Class A Provisions, provided, that, if
the Company so breaches any of these obligations, and such breach is
capable of being cured without adversely affecting in any material respect
the Class A Holders or their rights hereunder or under the Other Investment
Documents (other than as to the timing of the Optional Shares Closing or an
Article IV Closing, as the case may be), the Articles or the Bylaws, (x)
the date of termination of the Transfer Restrictions shall be delayed for a
period of not more than 180 days from the date of such breach, or, in the
case of a dispute as to whether such a breach has occurred, for 90 days
following the rendering of an order of a court of competent jurisdiction in
connection therewith, in either case if during such time the Company is
attempting in a diligent manner to cause such breach to be cured and (y)
the Transfer Restrictions shall not terminate if such breach is cured
within the applicable period;
(iv) if the Company shall have determined to proceed with a transaction
described in Section 4.1 hereof;
(v) at any time after the Investment Completion Date, if the sum of (x)
the aggregate Committed Percentage of the Class A Holders, and (y) the
percentage of Voting Power of the Company represented by Voting Securities
which the Class A Holders have the right to commit to purchase pursuant to
Sections 7.3 and 7.8 and Articles V and VI of this Agreement and Section
2.5 of the Investment Agreement, falls below (1) ten percent for more than
150 consecutive days, immediately after the issuance of additional Voting
Securities of the Company other than pursuant to a Major Issuance; or (2)
nine percent, immediately after a Transfer of Shares by Class A Holders,
provided that the rights of the Company contained in Sections 2.5(a) and
2.5(b) hereof shall, in either case, continue until the sum of (I) the
aggregate Committed Percentage of the Class A Holders, and (II) the
percentage of Voting Power of the Company represented by Voting Securities
which the Class A Holders have the right to commit to purchase pursuant to
Sections 7.3 and 7.8 and Articles V and VI of this Agreement and Article II
of the Investment Agreement, falls below five percent;
(vi) at any time after the Investment Completion Date, if the sum of (x)
the aggregate Committed Percentage of the Class A Holders, and (y) the
percentage of Voting Power of the Company represented by Voting Securities
which the Class A Holders have the right to commit to purchase pursuant to
Sections 7.3 and 7.8 and Articles V and VI of this Agreement and Section
2.5 of the Investment Agreement, falls below ten percent as a result of a
Major Issuance and the Class A Holders (1) furnish in writing to the
Company a written binding election not to exercise their rights to purchase
Class A Common Stock from the Company pursuant to Section 7.8 with respect
to such transaction and, for 180
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days following the date of such Major Issuance, not to make open market
purchases pursuant to Section 7.8 that would result in the Class A Holders
having an aggregate Committed Percentage of ten percent or more, or (2)
fail to exercise their rights to purchase Class A Common Stock from the
Company pursuant to Section 7.8 with respect to such transaction and to
exercise their rights to commit to make open market purchases pursuant to
Section 7.8, within the prescribed time periods;
(vii) if a Person other than a Class A Holder shall acquire a Percentage
Ownership Interest greater than 20 percent or there is a Change of Control
within the meaning of clause (b) of such definition;
(viii) unless all of the outstanding shares of Class A Common Stock have
been converted into shares of Common Stock, the Fundamental Rights as to
all outstanding shares of Class A Preference Stock have terminated, or the
rights of the Class A Holders under Section 4 of the Class A Provisions are
suspended pursuant to clauses (ii) or (iii) of Section 7(b) of the Class A
Provisions, if, between the second and fifth anniversaries of the Initial
Issuance Date, the Company or any of its Subsidiaries, as the case may be,
shall take or engage in, directly or indirectly, any of the actions
described in Section 4(a)(i), 4(a)(ii), 4(a)(iii) or 4(a)(iv) of the Class
A Provisions, notwithstanding a written notice signed by FT and DT
expressing disapproval thereof delivered to the Company within 30 days of
delivery of the notice from the Company relating thereto as provided in
Section 2.7; or
(ix) if the Class A Holders elect to be released from the Transfer
Restrictions pursuant to Section 7.8(a) hereof.
(b) While shares of Class A Preference Stock are outstanding, but prior to
the time the Conversion Price shall have been Fixed,
(i) if the event described in Section 2.6(a)(iii) shall occur, the Class
A Holders may make the election provided in Section 7(n)(i) of the Class A
Provisions.
(ii) if the event described in Section 2.6(a)(iv) shall occur, the Class
A Holders may make the election provided in Section 7(f)(ii)(y)(B) of the
Class A Provisions.
(iii) if any of the events described in Section 2.6(a) (other than
clauses (iii) or (iv) thereof) shall occur, the Class A Holders may make
the election provided in Section 7(n)(ii) of the Class A Provisions.
(c) If the Company fails to redeem all of the outstanding shares of Class A
Preference Stock when required pursuant to Section 3(c), 7(f) or 7(n) of the
Class A Provisions, in addition to whatever other rights and remedies the Class
A Holders may have, hereunder or otherwise, such Shares may be transferred
without any restriction provided for in this Article II other than the
restrictions set forth in Section 2.4 hereof, and in accordance with Section
7(o) of the Class A Provisions.
(d) The Transfer Restrictions shall cease to be of further force and effect
as provided in Section 7(f) and 7(n) of the Class A Provisions.
Section 2.7. Notice of Certain Actions. Unless all of the outstanding shares
of Class A Common Stock have been converted into shares of Common Stock, the
Fundamental Rights have terminated as to all outstanding shares of Class A
Preference Stock, or the rights of the Class A Holders under Section 4 of the
Class A Provisions are suspended pursuant to clause (ii) or (iii) of Section
7(b) of the Class A Provisions, for a period of three years following the date
which is two years after the Initial Issuance Date, at least 40 days prior to
(a) the Company or any of its Subsidiaries taking or engaging in, directly or
indirectly, any of the actions described in Sections 4(a)(i) and 4(a)(ii) of
the Class A Provisions, or (b) the Company taking or engaging in, directly or
indirectly, any of the transactions described in Sections 4(a)(iii) and
4(a)(iv) of the Class A Provisions, the Company shall provide each Class A
Holder with notice of such proposed transaction.
Section 2.8. Restrictive Legends. (a) A copy of this Agreement shall be filed
with the Secretary of the Company and kept with the records of the Company.
Upon original issuance thereof and until such time as the same is no longer
required hereunder or under Applicable Law, any certificate issued representing
any of the shares of Class A Stock or any other Shares held by the Class A
Holders (including, without limitation,
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all certificates issued upon Transfer or in exchange thereof or substitution
therefor) shall bear the following restrictive legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF ("TRANSFERRED") UNLESS AND UNTIL REGISTERED UNDER
THE ACT OR UNLESS SUCH TRANSFER IS EXEMPT FROM REGISTRATION OR IS OTHERWISE
IN COMPLIANCE WITH THE ACT.
THE TRANSFER OF THE SHARES EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE
RESTRICTIONS ON TRANSFER PROVIDED FOR IN THE STOCKHOLDERS' AGREEMENT, DATED
, 1995, AMONG SPRINT CORPORATION, FRANCE TELECOM AND DEUTSCHE
TELEKOM AG, AS FROM TIME TO TIME IN EFFECT, A COPY OF WHICH IS ON FILE AT
THE EXECUTIVE OFFICES OF SPRINT CORPORATION AND WILL BE FURNISHED WITHOUT
CHARGE TO THE HOLDER OF SUCH SHARES UPON WRITTEN REQUEST TO SPRINT
CORPORATION. NO SUCH TRANSFER WILL BE EFFECTIVE UNLESS AND UNTIL THE TERMS
AND CONDITIONS OF SUCH STOCKHOLDERS' AGREEMENT HAVE BEEN COMPLIED WITH IN
FULL AND NO PERSON MAY REQUEST SPRINT CORPORATION TO RECORD THE TRANSFER OF
ANY SHARES IF SUCH TRANSFER IS IN VIOLATION OF SUCH STOCKHOLDERS'
AGREEMENT.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
VOTING PROVIDED FOR IN THE STOCKHOLDERS' AGREEMENT AND NO VOTE OF SUCH
SHARES THAT CONTRAVENES SUCH AGREEMENT SHALL BE EFFECTIVE.
(b) The certificates representing Shares owned by the Class A Holders
(including, without limitation, all certificates issued upon Transfer or in
exchange thereof or substitution therefor) shall also bear any legend required
under any other Applicable Laws, including state securities or blue sky laws.
(c) The Company may make a notation on its records or give instructions to
any transfer agents or registrars for the Shares owned by the Class A Holders
in order to implement the restrictions on Transfer set forth in this Article
II.
(d) FT and DT shall submit all certificates representing Shares held by FT,
DT or any of their respective Affiliates, and shall use commercially reasonable
efforts to cause all other Class A Holders to submit all such certificates, to
the Company so that the legend or legends required by this Section 2.8 may be
placed thereon.
(e) The Company shall not incur any liability for any delay in recognizing
any Transfer of Shares if the Company in good faith reasonably believes that
such Transfer may have been or would be in violation of the provisions of
Applicable Law or this Agreement.
(f) After such time any of the legends described in this Section 2.8 are no
longer required on any certificate or certificates representing Shares owned by
the Class A Holders, upon the request of FT or DT or such other Class A Holder
the Company will cause such certificate or certificates to be exchanged for a
certificate or certificates that do not bear such legend.
(g) No Class A Holder may pledge Shares except to a Person that is a bona
fide financial institution. Prior to the consummation of a pledge of Shares by
a Class A Holder, such Class A Holder shall deliver, or shall cause such
prospective pledgee to deliver, an acknowledgment that such pledgee has
examined the legend set forth in Section 2.8(a) and understands and agrees that
any rights it has with respect to the Shares are subject to those of the
Company set forth in this Agreement, including agreeing that (i) no foreclosure
on such Shares shall be effected except as permitted by, and in accordance
with, the terms of this Agreement, and (ii) under no circumstances shall such
pledgee be entitled to exercise voting rights, consent rights or
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disapproval rights with respect to such Shares, except for the right to vote as
a holder of shares of Common Stock if such pledgee owns such Shares after a
foreclosure conducted in accordance with the terms hereof.
Section 2.9. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Shares. The pro-visions of this Article II shall apply, to the
fullest extent set forth herein, with respect to the Shares and to any and all
equity securities of the Company or any successor or assign of the Company
(whether by merger, consolidation, sale of assets or otherwise), or any other
securities of such entity which have, or which may be converted or exercised to
acquire securities which will have, a Vote, that in each case may be issued in
respect of, in exchange for, or in substitution of such Shares, including,
without limitation, in connection with any stock dividends, splits, reverse
splits, combinations, reclassifications, recapitalizations, mergers,
consolidations and the like occurring after the date hereof.
Section 2.10. Strategic Mergers; Business Combinations; Company Tender for
Shares. Notwithstanding anything in this Article II to the contrary, the
restrictions on Transfer set forth in this Article II (not including Section
2.9) shall not apply to any conversion or exchange of Shares in connection with
a Strategic Merger or any other merger or other business combination not
prohibited by the Class A Provisions or a Transfer into a tender offer made by
the Company for Shares.
Section 2.11. Effect of Proposed Redemption. Following the third anniversary
of the Investment Completion Date, the Company shall, prior to redeeming any
Shares pursuant to Section 2 of that portion of ARTICLE SIXTH of the Articles
entitled "GENERAL PROVISIONS RELATING TO ALL STOCK," provide the Class A
Holders with notice of its intention to so redeem such Shares, which notice
shall set forth the number of such Shares held by the Class A Holders which are
proposed to be redeemed. For a period of 120 days thereafter (as extended day
for day for each day that such sales are actually delayed during such time
period because (i) the Shares proposed to be redeemed cannot be sold due to the
anti-fraud rules of the U.S. securities laws, or (ii) the Company has delayed a
proposed registration of such Shares in accordance with Section 1.4 of the
Registration Rights Agreement), the Class A Holders shall be entitled, on a pro
rata basis in accordance with their respective Committed Percentages, to sell
free of the restrictions on Transfer set forth in Section 2.3 hereof (but
subject to the provisions of Sections 2.4 and 2.5 hereof) that number of Shares
in the aggregate which the Company has proposed to redeem from the Class A
Holders. Notwithstanding the foregoing, the Company may elect to redeem Shares
held by the Class A Holders during such 120-day period (as so extended) by
paying to the Class A Holders the Market Price (as defined in Section 2 of that
portion of ARTICLE SIXTH of the Articles entitled "GENERAL PROVISIONS RELATING
TO ALL STOCK") (which if the Company has so elected to redeem during such 120-
day period (as so extended) shall be modified in accordance with Article IX).
ARTICLE III
PROVISIONS CONCERNING DISPOSITION OF LONG DISTANCE ASSETS
Section 3.1. Offers to FT and DT. (a) Subject to Section 3.5 of this
Agreement, (i) after the first to occur of (x) the fifth anniversary of the
date of this Agreement and (y) such time as (I) legislation shall have been
enacted repealing Section 310, (II) an FCC Order shall have been issued or
(III) outside counsel to the Company with a nationally-recognized expertise in
telecommunications regulatory matters delivers to each of FT and DT a legal
opinion in form and substance reasonably satisfactory to each of FT and DT to
the effect that Section 310 does not prohibit FT or DT from owning the Long
Distance Assets proposed to be Transferred by the Company, and prior to the
earliest to occur of (x) the tenth anniversary of the date of this Agreement,
(y) the delivery by FT, DT or any of their Affiliates (or a Permitted Designee
(as such term is defined in the Joint Venture Agreement)) of a notice pursuant
to Section 17.2(b) of the Joint Venture Agreement indicating the agreement to
purchase all of the Sprint Venture Interests (as such term is defined in the
Joint Venture Agreement) following an offer by the Company or Sprint Sub
pursuant to Section 17.2(a) of the Joint Venture Agreement, and (z) the
delivery by the Company and/or Sprint Sub of a notice pursuant
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to Section 17.3(a) of the Joint Venture Agreement exercising the put right to
sell all of their Sprint Venture Interests (as such term is defined in the
Joint Venture Agreement) to FT, DT and Atlas (or a Permitted Designee (as such
term is defined in the Joint Venture Agreement)), or (ii) during any time in
which the rights provided to the Class A Holders under Section 4(b) of the
Class A Provisions would be in effect but for the fact that they have been
suspended pursuant to Sections 7(b)(ii) or (iii) of the Class A Provisions
(each such period described in clause (i) and clause (ii) being a "Restricted
Period"), and subject to the right of first offer in favor of FT and DT set
forth in Section 3.1(c) hereof, if the Company or any of its Subsidiaries
proposes to Transfer (except in a Lien Transfer, an Exempt Long Distance Asset
Divestiture or in a sale of all or substantially all of the Company's assets),
in a transaction or a series of related transactions, Long Distance Assets with
the effect that the Company and its Subsidiaries would no longer own 51 percent
or more of the Fair Market Value of the Long Distance Assets owned by them
prior thereto (calculated as at the date the Company or such Subsidiary enters
into a definitive agreement to effect such Transfer), then the Company must
deliver an LD Sale Notice in which it offers to sell at least 51 percent of the
Fair Market Value of the Long Distance Assets (calculated as of such date) (and
any liabilities to be assumed by the transferee in connection therewith) to FT
and DT, in the manner provided in Section 3.1(c), provided that the Company
shall not be permitted to deliver such LD Sale Notice (and accordingly may not
proceed with such Transfer) unless a majority of the Continuing Directors shall
have first approved (unless such approval is not required pursuant to Section
11.13), at a meeting of Directors at which at least seven Continuing Directors
are present, a Transfer to FT and DT of the Specified Long Distance Assets at
the price and upon the terms and conditions set forth in the LD Sale Notice.
(b) Subject to Section 3.5 of this Agreement, during a Restricted Period, the
Company and its Subsidiaries shall not undertake a Lien Transfer unless each
creditor or other party which is the beneficiary of any Lien relating to such
Lien Transfer (a "Lien Creditor") and the Company execute a legally binding
instrument in favor of each of FT and DT in form and substance reasonably
satisfactory to each of FT and DT providing that at least 45 days prior to any
foreclosure or other execution upon the Long Distance Assets subject to such
Lien, such Lien Creditor and the Company shall provide each of FT and DT with
notice of such foreclosure or other execution, such notice to constitute an
exclusive and, subject to Section 3.2, irrevocable offer (i) for the Company to
sell to FT and DT all of such Long Distance Assets at a price equal to the Fair
Market Value of such assets, free and clear of any Lien relating to such Lien
Transfer, and upon other customary terms and conditions, or (ii) at FT's and
DT's option, to permit FT and/or DT to pay to such Lien Creditor all amounts
due to it which are secured by such Lien, in which case (x) such Lien Creditor
shall release such Lien, (y) FT and DT shall be subrogated to the claims of the
Lien Creditor against the Company and shall have all rights of such Lien
Creditor against the Company and in respect of such Lien, and (z) the Company
shall grant, and take all action necessary to perfect, a Lien in favor of FT
and DT in the Long Distance Assets subject to such Lien Transfer, securing the
Company's obligations subrogated to FT and DT, provided that the Company shall
not be permitted to undertake any such Lien Transfer unless a majority of the
Continuing Directors shall have first approved (unless such approval is not
required under Section 11.13), at a meeting of Directors at which at least
seven Continuing Directors are present, each of the documents and transactions
contemplated by this sentence. FT and DT may exercise their rights hereunder by
delivering a notice to the Company at any time prior to any such foreclosure or
execution, setting forth which right it wishes to exercise. If FT and DT
exercise their rights under clause (i) of the preceding sentence, the
provisions of Sections 3.2 and 3.4 of this Agreement shall apply mutatis
mutandis. For purposes of this Section 3.1(b), the Fair Market Value of any
Long Distance Assets shall be the value of such assets, without regard to the
effect of the Liens constituting the Lien Transfer in question, but considering
all other Liens on such assets and any other relevant factors, as determined by
an investment banking or appraisal firm of internationally recognized standing
reasonably satisfactory to the Company and FT and DT, the cost of which shall
be borne by the Company.
(c) Subject to Section 3.5 of this Agreement, during a Restricted Period, if
the Company or any of its Subsidiaries shall propose to Transfer (other than in
a Lien Transfer, an Exempt Long Distance Asset Divestiture or in a sale of all
or substantially all of the Company's assets), in a transaction or a series of
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related transactions, Long Distance Assets with a Fair Market Value (calculated
as at the date the Company or such Subsidiary enters into a definitive
agreement to effect such Transfer) that, when aggregated with the Fair Market
Value of all Long Distance Assets previously so Transferred after the date of
the Investment Agreement (calculated in each case as of the date the Company or
such Subsidiary entered into a definitive agreement to Transfer such Long
Distance Assets), equals or exceeds 30 percent of the Fair Market Value of the
Long Distance Assets of the Company and its Subsidiaries taken as a whole
(calculated as at the date the Company or such Subsidiary enters into a
definitive agreement to effect such Transfer), the Company shall first deliver
written notice (the "LD Sale Notice") to each of FT and DT stating that the
Company proposes to effect such a Transfer and setting forth in reasonable
detail (i) the Long Distance Assets proposed to be Transferred (the "Specified
Long Distance Assets"), (ii) the price which the Company expects to receive for
such assets and (iii) the other material terms and conditions of Transfer
(including the assumption of liabilities, if any, by the transferee in
connection therewith), provided that the Company shall not be permitted to
deliver such LD Sale Notice (and accordingly may not proceed with such
Transfer) unless a majority of the Continuing Directors shall have first
approved (unless such approval is not required pursuant to Section 11.13), at a
meeting of Directors at which at least seven Continuing Directors are present,
a Transfer to FT and DT of the Specified Long Distance Assets at the price and
upon the terms and conditions set forth in the LD Sale Notice. The Company
shall be entitled to effect such proposed Transfer on terms no less favorable
to the Company than as set forth in the LD Sale Notice unless within 30 days of
the delivery of the LD Sale Notice to FT and DT, both FT and DT notify the
Company in writing of their disapproval of such Transfer.
(d) Upon receipt of notice to the Company that both FT and DT have
disapproved of such Transfer (an "LD Disapproval Notice"), unless the Company
abandons the proposed Transfer and notifies each of FT and DT of such
abandonment within thirty Business Days of delivery of an LD Disapproval Notice
(in which case the provisions of this Article III shall apply to any subsequent
Transfer of the Specified Long Distance Assets), FT and DT, or a Qualified LD
Purchaser (in the case of an assignment pursuant to Section 3.2) shall have the
exclusive and, subject to Section 3.2, irrevocable right to purchase all, but
not less than all, of the Specified Long Distance Assets at the price and upon
the terms and conditions (including the assumption of liabilities, if any, by
the transferee in connection therewith) set forth in the LD Sale Notice. FT and
DT, or a Qualified LD Purchaser (in case of an assignment pursuant to Section
3.2), may exercise the right described in this Section 3.1(d) by delivering
notice to the Company setting forth their irrevocable binding commitment to
purchase the Specified Long Distance Assets at the price and on the terms and
conditions set forth in the LD Sale Notice, subject to compliance with
Applicable Laws and the receipt of all required material Third Party Approvals
and Governmental Approvals. Such notice must be delivered within 90 days after
the date of receipt of the LD Sale Notice, such period to be extended to the
earlier to occur of (i) five Business Days following the latest to occur of the
next regularly scheduled meetings of the Supervisory Boards of FT, DT and any
Qualified LD Purchaser (in case of such an assignment), and (ii) 150 days
following the date of receipt of the LD Sale Notice described above (such
period, the "LD Option Period").
Section 3.2. Assignment of Rights. At any time during the LD Option Period,
upon 45 days' notice (an "Assignment Notice") to the Company, FT and DT may
assign the rights described in Section 3.1(c) to one or more Qualified LD
Purchasers, provided that FT and DT shall disclose to the Company the identity
of each Qualified LD Purchaser and such other relevant information regarding
each such Qualified LD Purchaser as the Company may reasonably request prior to
assignment of such right. The Company, in its sole discretion, may abandon any
Transfer described in its LD Sale Notice delivered pursuant to Section 3.1(c)
upon notice to each of FT and DT within 15 days after delivery of an Assignment
Notice, in which case the rights described in Sections 3.1(c) and (d) shall
automatically be rescinded and of no effect notwithstanding FT's and DT's
acceptance thereof, but in such event the Company may not thereafter sell the
Specified Long Distance Assets to such Qualified LD Purchaser and may not offer
to engage in a transaction involving Long Distance Assets substantially
identical to the Specified Long Distance Assets for a period of one year
following such abandonment. Any such subsequent transaction within a Restricted
Period shall be subject to this Article III.
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Section 3.3. Timing of Disposition. If FT and DT fail to exercise the rights
described in Sections 3.1(c) and (d), the Company may proceed to Transfer the
Specified Long Distance Assets, provided that it enters into a legally binding
agreement, subject to standard terms and conditions for a purchase contract for
assets of the type to be Transferred, to Transfer the Specified Long Distance
Assets upon terms no less favorable to the Company than those described in the
LD Sale Notice delivered pursuant to Section 3.1 within 150 days after the end
of the LD Option Period. If the Company does not obtain such a binding
agreement within such time (or if it abandons such Transfer pursuant to Section
3.2), the Company may not engage in a transaction involving substantially
identical Long Distance Assets for one year from the date of the LD Sale
Notice. Any such subsequent transaction within a Restricted Period shall be
subject to this Article III.
Section 3.4. Method of Purchase. If FT and DT, or a Qualified LD Purchaser,
as the case may be, exercise the right provided in Section 3.1, the closing of
the purchase of the Specified Long Distance Assets shall take place within 90
days after the date of exercise of such option, at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York, at 10:00 a.m., New York time,
or at such other date, time or place as the Company and FT and DT, or the
Qualified LD Purchaser, as the case may be, may agree, subject to the receipt
of all necessary material Governmental Approvals, material Third Party
Approvals and, if required by Applicable Law, approval of the stockholders of
the Company. At such closing, the Company shall deliver to FT and DT, or the
Qualified LD Purchaser, as the case may be, bills of sale, assignments,
endorsements, releases and such other documents and instruments as may be
necessary, or, as determined by counsel to FT and DT, or the Qualified LD
Purchaser, as the case may be, appropriate, to convey and vest in the buyer,
title to each of the Specified Long Distance Assets to the extent, and in
conformity with the terms of such sale, each as specified in the LD Sale
Notice. Simultaneously therewith, FT and DT, or the Qualified LD Purchaser, as
the case may be, shall deliver to the Company, by wire transfer of immediately
available funds to such bank and account as the Company may designate, a cash
amount equal to the purchase price of the Specified Long Distance Assets, as
set forth in the Company's LD Sale Notice delivered pursuant to Section 3.1(b).
In addition to any other obligations which FT and DT may have at such closing,
if a Qualified LD Purchaser is to purchase Specified Long Distance Assets at
such closing, FT and DT shall certify to the Company that such Qualified LD
Purchaser meets the qualifications set forth in this Agreement for being a
Qualified LD Purchaser as of the date of such closing. If, notwithstanding the
relevant parties' reasonable efforts, the required approvals described in this
Section 3.4 have not been received or the parties have not waived the
requirement for any such approvals at the time the closing is scheduled to
occur hereunder, the closing shall be postponed up to 180 days following the
date of such originally scheduled closing or such other time as the parties to
such transaction may agree. If by such time all such approvals have not been
obtained or the requirement for any such approvals waived by the parties to
such transaction, the rights of FT, DT and any Qualified LD Purchaser to
purchase such Specified Long Distance Assets shall terminate and the Company
shall be entitled to proceed with the proposed Transfer of such assets on the
terms set forth in the LD Sale Notice.
Section 3.5. Termination of Rights. Unless earlier terminated pursuant to
Article VIII(b) hereof, the rights provided in this Article III and Section
7.15 hereof shall terminate, and cease to be of any further force or effect,
(a) upon the termination of the Fundamental Rights as to all outstanding shares
of Class A Preference Stock or upon the conversion of all of the outstanding
shares of Class A Common Stock into Common Stock, in either case pursuant to
Section 7(a) (or if all of such Fundamental Rights would have been so
terminated or such shares would have been so converted except for the proviso
thereto), 7(b), 7(c) or 7(g) of the Class A Provisions, (b) after the
Investment Completion Date, if the aggregate Committed Percentage of the Class
A Holders shall be below ten percent for more than 180 consecutive days
following a Major Issuance, (c) upon a sale of all of the Venture Interests of
the Sprint Parties or the FT/DT Parties pursuant to Section 17.2, 17.3, 17.4,
19.3, 20.6 or 20.11 of the Joint Venture Agreement or on the date the Joint
Venture is other-wise terminated, in each case other than due to an FT/DT Joint
Venture Termination or a Corporation Joint Venture Termination, or (d) prior to
the Investment Completion Date, if the outstanding Class A Preference Stock has
an aggregate liquidation value of less than $1.5 billion as a result of a
Transfer of shares of Class A Preference Stock by a Class A Holder (other than
a Transfer contemplated
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by Section 7.4(b)(i)(y) hereof). In addition, any rights provided in this
Article III and Section 7.15 hereof shall be suspended and may not be exercised
during any period of time in which the rights provided to the Class A Holders
under Section 4(b) of the Class A Provisions are suspended pursuant to clause
(iv) of Section 7(b) of the Class A Provisions.
ARTICLE IV
PROVISIONS CONCERNING CHANGE OF CONTROL
Section 4.1. Sale of Assets or Control. So long as shares of Class A Stock
are outstanding, but subject to Article VIII of this Agreement, if the Company
determines to sell all or substantially all of the assets of the Company or not
to oppose a tender offer by a Person other than any Class A Holder or Holders
for Voting Securities of the Company representing more than 35 percent of the
Voting Power of the Company or to sell Control of the Company or to effect a
merger or other business combination, which would result in a Person (other
than FT or DT or any of their Qualified Subsidiaries) holding Voting Securities
of the resulting entity representing 35 percent or more of the Voting Power of
such entity, the Company shall conduct such transaction in accordance with
reasonable procedures to be determined by the Board of Directors, and permit FT
and DT to participate in that process on a basis no less favorable than that
granted any other participant.
Section 4.2. Required Share Purchases. If a Person other than FT, DT or any
of their respective Affiliates makes a tender offer for Voting Securities of
the Company representing not less than 35 percent of the Voting Power of the
Company and the terms of such tender offer do not permit the Class A Holders to
sell an equal or greater percentage of their Shares as the other holders of
Voting Securities of the Company are permitted to sell taking into account any
proration, then upon the purchase by such Person of securities representing not
less than 35 percent of the Voting Power of the Company in such tender offer,
FT, DT and their Qualified Subsidiaries, as a group, shall have the option,
exercisable upon delivery of written notice to the Company (or its successor)
at any time within 30 days after the termination of the period during which
tenders may be made into such tender offer, to sell to the Company, at a price
per share (or, if the tender offer period terminates, shares of Class A
Preference Stock are outstanding and the Investment Completion Date has not
occurred, at a price per number of shares of Class A Preference Stock equal to
the price per share that would apply to shares of Common Stock that would be
issuable in respect of the related Class A Conversion Shares (assuming that, if
the Conversion Price shall not have been Fixed, the Conversion Price is equal
to the Target Price)) equal to the price per share of Common Stock offered
pursuant to the tender offer, all but not less than all, of the Shares that
they were unable to tender on the same basis as the other shareholders,
provided, that the Class A Holders shall have no rights pursuant to this
Section 4.2 if, at the date of termination of the period during which tenders
may be made into such tender offer, the Class A Holders have a right to receive
in exchange for all the shares of Class A Stock publicly traded securities with
an aggregate Fair Market Value, and/or cash in an amount, not less than the
aggregate price per share of Common Stock (or per that number of related Class
A Conversion Shares, as the case may be) paid pursuant to the tender offer in a
back-end transaction required to be effected within 90 days after the close of
the tender offer.
ARTICLE V
EQUITY PURCHASE RIGHTS
Section 5.1. Right to Purchase. Following the Investment Completion Date, and
except as provided in Section 5.7 hereof, each Class A Holder shall have the
right (an "Equity Purchase Right") to purchase from the Company (on a pro rata
basis reflecting the respective ownership of shares of Class A Stock):
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(a) except under the circumstances described in clauses (b) and (c)
below, if after the Investment Completion Date, the Company shall issue (or
sell from treasury) shares of Common Stock (including, without limitation,
any shares issued upon (i) the exercise of stock options, warrants or other
rights not issued pursuant to the Rights Agreement or in respect of options
or other contractually binding rights under employee benefit plans,
arrangements or contracts or (ii) the conversion or exchange of any
securities) other than upon the conversion or exchange of the Class A
Preference Stock or the Class A Common Stock, that number of additional
shares of Class A Preference Stock (if Class A Preference Stock shall then
be outstanding) or Class A Common Stock (if no Class A Preference Stock
shall then be outstanding) sufficient for the Class A Holders to maintain
their aggregate Committed Percentage as in effect immediately prior to the
issuance of such shares, such Shares to be purchased at a per share
purchase price equal to (x) in the case of Class A Common Stock, the
Weighted Average Price paid for such shares of Common Stock whose issuance
gave rise to such Equity Purchase Right, and (y) in the case of the Class A
Preference Stock, the product of the Weighted Average Price paid for such
shares of Common Stock multiplied by the number of Class A Conversion
Shares related to one share of Class A Preference Stock outstanding
immediately prior to such purchase;
(b) if after the Investment Completion Date the Company shall issue (or
sell from treasury) Voting Securities other than Common Stock, or issue
shares of Common Stock pursuant to employee benefit plans, arrangements or
contracts (other than in respect of the exercise of stock options, warrants
or other rights (except rights issued pursuant to the Rights Agreement) in
existence at any time on or before the Investment Completion Date
(including pursuant to employee benefit plans)) or upon the conversion of
any securities outstanding on or before the Investment Completion Date
other than upon the conversion or exchange of the Class A Preference Stock
or the Class A Common Stock, that number of additional shares of Class A
Preference Stock (if the Class A Preference Stock shall then be
outstanding) or Class A Common Stock (if no Class A Preference Stock shall
then be outstanding) sufficient for the Class A Holders to maintain their
aggregate Committed Percentage as in effect immediately prior to the
issuance of such Voting Securities, such Shares to be purchased at a per
share purchase price equal to (i) in the case of the Class A Common Stock,
the Market Price of a share of Common Stock on the date of the issuance
which gave rise to such Equity Purchase Right and (ii) in the case of the
Class A Preference Stock, the product of the Market Price of a share of
Common Stock on such date of issuance, multiplied by the number of Class A
Conversion Shares related to one share of Class A Preference Stock
outstanding immediately prior to such purchase; and
(c) if after the Investment Completion Date, the Company shall issue (or
sell from treasury) shares of Common Stock in respect of the exercise of
stock options, warrants or other rights (except rights issued pursuant to
the Rights Agreement) in existence at any time on or before the Investment
Completion Date (including pursuant to employee benefit plans) or upon the
conversion of any securities outstanding on or before the Investment
Completion Date other than upon the conversion or exchange of the Class A
Preference Stock or the Class A Common Stock, that number of additional
shares of Class A Preference Stock (if the Class A Preference Stock shall
then be outstanding) or Class A Common Stock (if no Class A Preference
Stock shall then be outstanding) sufficient for the Class A Holders to
maintain their aggregate Committed Percentage as in effect immediately
prior to the issuance of such Voting Securities, such Shares to be
purchased at a per share purchase price equal to (i) in the case of Class A
Common Stock, the FT/DT Weighted Purchase Price; and (ii) in the case of
Class A Preference Stock, the product of the FT/DT Weighted Purchase Price
multiplied by the number of Class A Conversion Shares related to such share
of Class A Preference Stock outstanding immediately prior to such purchase,
provided that Shares purchased hereunder with respect to the issuance of
Excess Shares shall be purchased for a per share purchase price equal to
(x) in the case of Class A Common Stock, the Weighted Average Price for
such Excess Shares and (y) in the case of Class A Preference Stock, the
product of the Weighted Average Price for such Excess Shares multiplied by
the number of Class A Conversion Shares related to one share of Class A
Preference Stock outstanding immediately prior to such purchase. As used
herein, "Excess Shares" means those shares of Common Stock issued by the
Company after the date of the Investment Agreement (other than pursuant to
employee benefit plans) in
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respect of the exercise of rights ("Rights") to purchase Common Stock or
similar instruments (except rights issued pursuant to the Rights Agreement)
issued after the date of the Investment Agreement and on or prior to the
Investment Completion Date that, when aggregated with all other shares of
Common Stock which have been issued by the Company after the date of the
Investment Agreement in respect of the exercise of Rights issued after the
date of the Investment Agreement and on or prior to the Investment
Completion Date, exceed five percent of the number of shares of Common
Stock outstanding on the date of the Investment Agreement (adjusted to
reflect any stock split, subdivision, stock dividend or other
reclassification, consolidation or combination of the Company's Voting
Securities after the date of the Investment Agreement).
Section 5.2. Notice. The Company shall deliver to each Class A Holder (a)
written notice of the proposed issuance of any Voting Securities after the
Investment Completion Date not less than 15 days prior to such issuance, such
notice to describe in reasonable detail the expected Weighted Average Price for
such Voting Securities and contain the calculation thereof and (b) written
notice of the issuance of such Voting Securities within five days after such
issuance, such notice to describe in reasonable detail the Weighted Average
Price, Market Price or FT/DT Weighted Purchase Price for such Voting Securities
and contain the calculation thereof, provided that no such notices need be
given in respect of the issuance of shares of Common Stock to the holders of
securities of the Company in accordance with the terms thereof or grants or
exercises pursuant to qualified or non-qualified employee benefit plans,
arrangements or contracts, in each case as outstanding on the Initial Issuance
Date or dividend reinvestment plans or dividend reinvestment and stock purchase
plans or, in the case of securities issued after, and qualified or non-
qualified employee benefit plans, arrangements and contracts adopted after,
such date, if and only if the Class A Holders have been given written notice of
the issuance of such securities or the adoption of such plans, arrangements and
con-tracts thirty days prior to the date of such issuance or adoption (such
shares of Common Stock collectively hereinafter referred to as the "Option
Shares"). The Company shall deliver to each Class A Holder, on the tenth
Business Day of each calendar quarter following the Investment Completion Date,
written notice of the issuance during the preceding calendar quarter of (i)
Option Shares, such notice to describe in reasonable detail the Weighted
Average Price, Market Price or FT/DT Weighted Purchase Price for such Option
Shares and contain the calculation thereof and the securities or plans,
arrangements or contracts to which they relate and (ii) shares of Class A Stock
to each Class A Holder pursuant to Section 7.3(c) hereof, such notice to set
forth the purchase price for such shares of Class A Stock and the calculation
thereof.
Section 5.3. Manner of Exercise; Manner of Payment. The Class A Holders may
exercise their Equity Purchase Rights by written notice to the Company
delivered prior to the thirtieth day after the date of the related post-
issuance notice provided for in Section 5.2 hereof, or as provided in Section
7.3, as the case may be. Payment for the additional Shares purchased or
subscribed for by Class A Holders which exercise their Equity Purchase Rights
shall be made as provided in Section 5.6 hereof or as otherwise may be agreed
by the Company and the exercising Class A Holder or Holders. The total number
of Shares issuable upon such exercise shall be issued and delivered to the
appropriate Class A Holder against delivery to the Company of the cash and any
notes therefor as provided in Section 5.6 hereof or as otherwise may be agreed
by the Company and the exercising Class A Holder or Holders.
Section 5.4. Adjustments. If the Class A Holders, upon exercise of their
Equity Purchase Rights, are issued Shares on a date after the date the related
Voting Securities are issued (a) the per share purchase price paid by the Class
A Holders shall be reduced to reflect the Fair Market Value of any dividend or
distribution made in respect of each such Voting Security prior to such
issuance and (b) such purchase price and the number of Shares purchased shall
be appropriately adjusted to reflect any stock split, stock dividend or other
combination or reclassification of the Common Stock, Class A Preference Stock
or Class A Common Stock, as the case may be, during such time.
Section 5.5. Closing of Purchases. The closing of purchases of Shares
pursuant to the exercise of Equity Purchase Rights by the exercising Class A
Holder shall take place on a date specified by the exercising Class
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A Holder, which date shall be within 30 days after the exercise of such Equity
Purchase Rights, at the offices of Debevoise & Plimpton, 875 Third Avenue, New
York, New York, at 10:00 a.m., New York City time, or at such other date, time
or place as the Company and such exercising Class A Holder may otherwise agree.
At such closing:
(a) the Company shall deliver, or cause to be delivered, to such
exercising Class A Holder, certificates representing the shares of Class A
Stock to be purchased by such exercising Class A Holder, in the name of
such holder, against payment of the purchase price therefor, as provided
below;
(b) such exercising Class A Holder shall deliver to the Company an amount
(the "Equity Purchase Price") equal to the product of (i) the applicable
price per share determined pursuant to Section 5.1 of this Agreement and
(ii) the number of Shares to be acquired by such exercising Class A Holder.
Section 5.6. Terms of Payment. Payment for Shares purchased from the Company
pursuant to Section 5.1 hereof or Article VI hereof shall be made as follows:
(a) if the aggregate amount to be paid to the Company is less than $200
million, payment shall be made by the Class A Holder, or Qualified Stock
Purchaser or Purchasers, as the case may be, in cash by wire transfer to
such account as the Company may reasonably designate;
(b) if the amount to be paid to the Company is equal to or greater than
$200 million and less than $500 million, not less than $200 million shall
be paid in cash by the Class A Holders, or Qualified Stock Purchaser or
Purchasers, as the case may be, by wire transfer to such account as the
Company may reasonably designate and the remainder, if any, shall be paid
in two equal annual installments beginning on the first anniversary of the
date of such purchase, the respective obligations of the Class A Holders,
or Qualified Stock Purchaser or Purchasers, as the case may be, to pay such
installments to be evidenced by Class A Holder Eligible Notes; or
(c) if the amount to be paid to the Company is equal to or greater than
$500 million, not less than $200 million shall be paid in cash by the Class
A Holders, or Qualified Stock Purchaser or Purchasers, as the case may be,
by wire transfer to such account as the Company may reasonably designate
within 30 days after such date of notice, and the remainder shall be paid
in Class A Holder Eligible Notes of the Class A Holders, or Qualified Stock
Purchaser or Purchasers, as the case may be, one-third of such amount in
Class A Holder Eligible Notes maturing within one year after the date of
such purchase, one-third of such amount in Class A Holder Eligible Notes
maturing within two years of such date, and one-third of such amount in
Class A Holder Eligible Notes maturing within three years of such date.
Section 5.7. Suspension of Equity Purchase Rights. If at any time (a) the
number of Voting Securities of the Company Beneficially Owned in the aggregate
by FT, DT and their Affiliates and Associates exceeds the applicable Percentage
Limitation as set forth in the Standstill Agreement (without regard to Section
2.3 of such agreement), or (b) the number of Voting Securities of the Company
Beneficially Owned in the aggregate by any Qualified Stock Purchaser and its
Affiliates and Associates exceeds the applicable Percentage Limitation as set
forth in the Qualified Stock Purchaser Standstill Agreement applicable to such
Qualified Stock Purchaser (without regard to Section 2.2 of such agreement),
the Company may by giving notice to the Class A Holders whose aggregate
Beneficial Ownership exceeds such applicable Percentage Limitation specified in
clauses (a) and (b) of this Section 5.7 suspend the right of such Class A
Holders to purchase additional shares of Class A Stock pursuant to this
Agreement or otherwise until such time as any such purchase (including any
purchase pursuant to Section 7.3 hereof) would not result in the aggregate
Beneficial Ownership of the affected Class A Holders exceeding such Percentage
Limitation applicable to such Class A Holders.
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ARTICLE VI
HOLDINGS BY MAJOR COMPETITORS
Until the tenth anniversary of the Initial Issuance Date, if a Major
Competitor of FT or DT or of the Joint Venture obtains a Percentage Ownership
Interest of 20 percent or more as a result of a Strategic Merger, the Class A
Holders shall have the right to commit within the later of (a) 30 days
following the consummation of such Strategic Merger, and (b) 30 days following
the Fixed Closing Date to purchase from the Company (or its successor in such
Strategic Merger) and, upon such commitment, the Company or such successor
shall be obligated to sell to the Class A Holders after the Investment
Completion Date, subject to Applicable Law and the receipt of any required
material Governmental Approvals, a number of shares of Class A Preference Stock
(if the Class A Preference Stock shall then be outstanding) or Class A Common
Stock (if no Class A Preference Stock shall then be outstanding) such that the
aggregate Committed Percentage of the Class A Holders shall be equal to the
Percentage Ownership Interest of such Major Competitor of FT or DT following
consummation of such Strategic Merger, such Shares to be purchased at a per
share price equal to (i) in the case of Class A Common Stock, the Weighted
Average Price paid by such Major Competitor; and (ii), in the case of Class A
Preference Stock, the product of such Weighted Average Price and the number of
Class A Conversion Shares related to one share of Class A Preference Stock
outstanding immediately prior to the date of such purchase, provided that to
the extent the purchase of Shares pursuant to this Article VI would violate the
provisions of Section 310, the Class A Holders shall have the right to assign
to one or more non-Alien Qualified Stock Purchasers the right to purchase such
Shares from the Company if such Class A Holders assigning such rights to a non-
Alien Qualified Stock Purchaser cause such Qualified Stock Purchaser to execute
an undertaking in accordance with Section 7.2 of this Agreement. Shares
purchased from the Company pursuant to this Article VI shall be purchased and
paid in accordance with Sections 5.4, 5.5 and 5.6 of this Agreement, mutatis
mutandis, provided that if the Class A Holders exercise their rights to
purchase Shares from the Company hereunder on or before the date on which they
are required to notify the Company of the exercise of their right to purchase
Optional Shares pursuant to Section 2.5 of the Investment Agreement, such
Shares shall be purchased at a closing to occur concurrently with the Optional
Shares Closing.
ARTICLE VII
COVENANTS
Section 7.1. Reservation and Availability of Capital Stock. The Company
covenants and agrees that it will cause to be reserved and kept available, out
of the aggregate of its authorized but unissued shares of Class A Common Stock,
Class A Preference Stock and Common Stock and its issued shares of Common Stock
held in its treasury, for the purpose of effecting the conversion of shares of
Common Stock, Class A Preference Stock and Class A Common Stock contemplated
under the Articles, the full number of shares of (a) Common Stock then
deliverable upon the conversion of all outstanding shares of Class A Common
Stock and Class A Preference Stock, (b) Class A Common Stock then deliverable
upon the conversion of all outstanding shares of Class A Preference Stock, and
(c) Class A Common Stock and Class A Preference Stock then deliverable upon
conversion of all of the shares of Common Stock, in the case of each of clauses
(a), (b) and (c) that the Class A Holders are permitted to acquire hereunder
and under the Investment Agreement, the Articles and the Standstill Agreement.
Section 7.2. Assignee Purchasers. As a condition to the assignment of rights
to purchase shares of Class A Preference Stock or Class A Common Stock to a
Qualified Stock Purchaser pursuant to Article VI hereof or pursuant to the
Standstill Agreement, FT and DT shall cause such Qualified Stock Purchaser to
agree in writing to be bound by the terms and conditions of this Agreement and
a Qualified Stock Purchaser Standstill Agreement pursuant to an instrument of
assumption substantially in the form of Exhibit C hereto and such Qualified
Stock Purchaser thereby shall become a party to this Agreement.
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Section 7.3. Automatic Exercise of Rights; Method of Purchase. (a) From and
after the Investment Completion Date, the Class A Holders, at their option, may
lend to the Company, and the Company shall borrow, in the aggregate up to an
amount specified in writing from time to time to the Company by the Class A
Holders, which amount has been determined in good faith by the Class A Holders
to be reasonably necessary to cover the purchase price payable by them in
connection with their exercise of equity purchase rights pursuant to Section
5.1 with respect to Option Shares to be issued during the succeeding three-
month period (the "Exercise Amount"), and from time to time at the option of
the Class A Holders, the Class A Holders may lend to the Company, and the
Company shall borrow from the Class A Holders in the aggregate (pro rata from
each Class A Holder in accordance with its relative Committed Percentage at the
time of such borrowing), an amount equal to the difference between the Exercise
Amount and the amount then outstanding on such loans from the Class A Holders.
All loans hereunder shall be evidenced by notes ("Company Stock Payment Notes")
satisfactory in form and substance to each party hereto.
(b) For so long as the Class A Holders are entitled to purchase Shares
pursuant to Section 5.1, subject to subsections (c), (e) and (f) of this
Section 7.3, each Class A Holder holding a Company Stock Payment Note hereby
agrees to exercise its rights to purchase from the Company, and shall so
purchase and the Company shall sell, shares of Class A Preference Stock (or, if
no shares of Class A Preference Stock shall then be outstanding, Class A Common
Stock) pursuant to Section 5.1 hereof upon, and simultaneously with, any
issuance of Option Shares.
(c) For so long as the Class A Holders are entitled to purchase Shares
pursuant to Section 5.1, subject to subsections (e) and (f) of this Section
7.3, contemporaneously with each issuance of Option Shares,
(i) the Company shall either (A) deliver, or cause to be delivered, to
each Class A Holder a stock certificate bearing the legends set forth in
Section 2.8 of this Agreement, registered in the name of such Class A
Holder on the stock ledger of the Company and representing the number of
Shares which such Class A Holder is entitled to purchase pursuant to
Section 5.1 hereof as a result of such issuance of Option Shares, or (B)
cause the Company's transfer agent to reflect on its books and records the
ownership by such Class A Holder of an additional number of Shares
representing the number of Shares which such Class A Holder is entitled to
purchase pursuant to Section 5.1 hereof as a result of such issuance of
Option Shares; and
(ii) pursuant to the terms of the Company Stock Payment Notes, (x) the
Company shall repay (in accordance with the procedures set forth in clause
(y), below) a portion of the principal of such Company Stock Payment Notes
equal to the amount of the purchase price for such Shares (as determined in
accordance with Section 5.1 hereof) (a "Mandatory Payment Amount"),
provided that the Company shall hold such Mandatory Payment Amount in trust
for the benefit of such exercising Class A Holder, subject to clause (y)
below, and (y) simultaneously with such payment, the Company shall apply
such Mandatory Payment Amount to the payment of such purchase price,
provided that no such purchase of Shares shall occur if the unpaid principal
amount of Company Stock Payment Notes held by the exercising Class A Holder
represents insufficient funds to pay such purchase price in its entirety, in
which case no reduction in the unpaid principal amount of the Company Stock
Payment Notes held by such exercising Class A Holder shall occur.
(d) Subject to subsections (c), (e) and (f), the provisions of this Section
7.3 shall be deemed to comply with all the requirements of Article V hereof
with respect to the exercise of such rights relating to the issuance by the
Company of Option Shares and no further notices must be delivered or action be
taken pursuant to this Agreement on the part of any of the Class A Holders or
the Company in order to effectuate the exercise of such rights.
(e) This Section 7.3 shall become immediately inoperative and of no force and
effect with respect to any Class A Holder (i) upon delivery by such Class A
Holder to the Company of a notice to that effect, or (ii) if, with respect to
such Class A Holder, ownership of at least 10% of the Voting Securities of the
Company by
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such Class A Holder is not a necessary condition or sufficient condition to
obtaining a Treaty Benefit, as determined in a manner identical to that set
forth in Sections 2(a)(iii)(2), (3), (4) and (5) of ARTICLE FIFTH of the
Articles with respect to the termination of the provisions of Section
2(a)(iii)(1) of such ARTICLE FIFTH provided that this Section 7.3 thereafter
shall become operative and of full force and effect with respect to such Class
A Holder (i) if this Section 7.3 is not at that time of no force and effect
pursuant to clause (ii) of this Section 7.3(e), upon delivery by such Class A
Holder to the Company of a notice to that effect or (ii) if, with respect to
such Class A Holder, ownership of at least 10% of the Voting Securities of the
Company by such Class A Holder is a necessary condition or sufficient condition
to obtaining a Treaty Benefit, as determined in a manner identical to that set
forth in Sections 2(a)(iii)(2), (3), (4) and (5) of ARTICLE FIFTH of the
Articles with respect to the termination of the provisions of Section
2(a)(iii)(1) of such ARTICLE FIFTH.
(f) The rights and obligations of the Class A Holders and the Company under
this Section 7.3 shall terminate upon the conversion of all outstanding shares
of Class A Common Stock or the termination of the Fundamental Rights as to all
outstanding shares of Class A Preference Stock, as the case may be, as provided
in Section 7 of the Class A Provisions, provided that such termination shall
not affect any rights of the Class A Holders to payment under any Company Stock
Payment Notes then outstanding.
Section 7.4. Procedures for Redemption. (a) If the aggregate percentage of
Shares Beneficially Owned by the Class A Holders is less than the percentage
permitted under Section 310 to be Beneficially Owned by Aliens, the Company
will not redeem any Shares Beneficially Owned by the Class A Holders pursuant
to ARTICLE SIXTH, GENERAL PROVISIONS RELATING TO ALL STOCK, Section 2 of the
Articles, provided that notwithstanding the foregoing, the Company may, after
consultation in good faith with each of the Class A Holders to consider
alternatives to such redemption, redeem Shares Beneficially Owned by the Class
A Holders if and to the extent that the outstanding shares of such Class A
Preference Stock, or Class A Common Stock, as the case may be, represent Votes
constituting greater than 20% of the aggregate Voting Power of the Company at
such time, and if, after considering all reasonable alternatives, the failure
to redeem such Shares would have a material adverse effect on the Company as
reflected in a resolution certified to the Class A Holders by a determination
made in good faith by the Independent Directors.
(b) (i) If at any time the Company should invoke its right to redeem its
capital stock, the Company shall unless prohibited by Applicable Law first
designate for redemption capital stock other than shares of Class A Stock,
before designating for redemption any shares of Class A Stock, provided that
prior to the Fixed Closing Date (x) the Company shall have no right to redeem
shares of Class A Preference Stock pursuant to the Articles to the extent that
such redemption would reduce the aggregate liquidation value represented by the
outstanding Class A Preference Stock to below $1.5 billion, but (y) in such
circumstance, if the Votes represented by the outstanding Class A Preference
Stock exceed 20% of the aggregate Voting Power of the Company, the Company
shall have the right to purchase from the Class A Holders for a per share price
equal to the Liquidation Preference thereof (as adjusted to comply with the
requirements of Article IX hereof) such number of shares of Class A Preference
Stock as in the reasonable good faith judgment of the Board of Directors is
necessary to comply with the requirements of Section 310, provided that (a) the
Company may purchase Shares only to the extent the outstanding Class A
Preference Stock represents in excess of 20% of the aggregate Voting Power of
the Company, (b) this Agreement, the Investment Agreement and the Articles as
amended by the Amendment shall be modified so as to maintain the rights of the
Parties hereunder and thereunder (including, without limitation, appropriate
modifications for durations of disapproval rights) and (c) the Company shall
not purchase any Shares from the Class A Holders pursuant to this clause (y)
unless a majority of the Continuing Directors shall have first approved (unless
such approval is not required pursuant to Section 11.13), at a meeting of
Directors at which at least seven Continuing Directors are present, such
purchase of Class A Preference Stock from the Class A Holders.
(ii) If the Company issues Redemption Securities in full or partial payment
of the redemption price for shares of Class A Stock in a circumstance in which
Section 7.4(b)(i) hereof or Section 2(f) of ARTICLE
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SIXTH of the Articles entitled "GENERAL PROVISIONS RELATING TO ALL STOCK"
requires adjustment under Article IX of this Agreement, then principal payments
under such Redemption Securities shall be adjusted to comply with the
requirements of Article IX such that the Class A Holders shall receive an
amount equal to the principal amount of such Redemption Securities.
(c) The Company shall take all reasonable measures to permit the Class A
Holders to obtain or maintain their Percentage Ownership Interest in accordance
with Applicable Laws of the United States, including applying for a waiver of
the restrictions on Alien ownership set forth in Section 310 if there is a
reasonable possibility of obtaining such a waiver.
(d) (i) On or prior to the third anniversary of the Investment Completion
Date, the Company shall have the right, at any time during which the Company
has the right pursuant to Section 7.4(a) hereof to redeem shares of Class A
Preference Stock or Class A Common Stock, as the case may be, in accordance
with Section 2 of that portion of ARTICLE SIXTH of the Articles entitled
"GENERAL PROVISIONS RELATING TO ALL STOCK" and following a determination by the
Board of Directors that such redemption is necessary or advisable to comply
with the requirements of Section 310, to deliver a notice (a "Required Sale
Notice") to the Class A Holders requiring them to sell (a "Surplus Shares
Sale") that number of shares of Class A Stock (the "Surplus Shares") necessary
so that, immediately following such Surplus Shares Sale, the aggregate
Percentage Ownership Interest of the Class A Holders shall be 20% or such
greater percentage specified in such notice as being necessary or advisable for
the Class A Holders to attain in order to comply with the requirements of
Section 310.
(ii) Upon receipt of the Required Sale Notice, the Class A Holders shall sell
the Surplus Shares in third party or open market sales. The Surplus Shares Sale
shall be conducted as promptly as practicable following receipt of the Required
Sale Notice, but in no event later than 120 days following the date of receipt
thereof, as extended day for day for each day that such sales are actually
delayed during such time period because (i) the Surplus Shares cannot be sold
due to the anti-fraud rules of the U.S. securities laws, or (ii) the Company
has delayed a proposed registration of the Surplus Shares in accordance with
Section 1.4 of the Registration Rights Agreement.
(iii) Each Class A Holder selling Surplus Shares shall, promptly upon the
conclusion of the Surplus Shares Sale, deliver to the Company a notice stating
that such Surplus Shares Sale has been concluded and indicating the total
amount of consideration received therefrom (the "Total Realized Amount") for
the Surplus Shares sold in such sale. Following receipt of such notice, the
Company shall pay (a "Supplementary Payment") to each Class A Holder selling
Surplus Shares the excess, if any, of the aggregate Formula Price applicable to
such Surplus Shares over the Total Realized Amount (in each case as modified to
comply with the requirements of Section 9.2).
Section 7.5. Joint Action by FT and DT. (a) The ratio of the aggregate
Percentage Ownership Interest of one of FT or DT (and its Qualified
Subsidiaries) to the aggregate Percentage Ownership Interest of the other of FT
or DT (and its Qualified Subsidiaries) (i) until the Investment Completion Date
shall be 1 to 1, and (ii) thereafter shall not be greater than 3 to 2 (in each
case, the "Applicable Ratio").
(b) FT and DT shall vote, and shall cause each of their respective Qualified
Subsidiaries to vote, all shares of Class A Stock held by them as a single
block on all matters.
Section 7.6. Compliance with Tax Laws. FT and DT shall furnish the Company or
its paying agent any certification, information return, documentation or other
form that they are entitled to furnish and that is required under Applicable
Law to establish the applicability of, or relief or exemption from, United
States withholding taxes.
Section 7.7. Compliance with Security Requirements. To the extent that, in
connection with a United States government contract, an agency of the United
States government or a contractor requires the Company
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to restrict access to any properties or information reasonably related to such
contract on the basis of Applicable Law with respect to United States national
security matters and to the extent that other Applicable Law requires the
Company to restrict access to any properties or information and, in accordance
with such restrictions, access to certain properties or information may not be
given to any Director elected by the Class A Holders without appropriate
security clearance, such Director will not be given access to such properties
or information and may not participate in deliberations of the Board of
Directors or the board of directors of any of the Company's Subsidiaries in
which such information with respect to such properties is disclosed. Any such
exclusion shall be reflected accurately in the minutes of such deliberations.
Without limiting the generality of the foregoing, no Class A Director shall (i)
have access to classified information or controlled unclassified information
entrusted to the Company except as permissible under the United States
Department of Defense Industrial Security Program (the "DISP") and applicable
United States laws and regulations, (ii) either seek or accept classified
information or controlled unclassified information entrusted to the Company,
except as permissible under the DISP or applicable United States laws and
regulations, or (iii) fail to advise any committee established by the Company
to monitor compliance with national security matters promptly if such Class A
Director reasonably believes any violations or attempted violations of, or
actions inconsistent with, Applicable Laws or contractual provisions relating
to national security matters have occurred.
Section 7.8. Major Issuances. (a) At least 90 days before the consummation,
directly or indirectly, by the Company of any Major Issuance to be effected on
or after the second anniversary of the Initial Issuance Date and prior to the
fifth anniversary of the Initial Issuance Date, the Company shall deliver to
each Class A Holder a notice of such proposed Major Issuance. If there is a
written notice signed by FT and DT disapproving such proposed Major Issuance
within 75 days of the delivery of such notice and the Company nevertheless
effects such Major Issuance, the Class A Holders may elect to be released from
the Transfer Restrictions or elect after the earlier of the Fixed Closing Date
and the Investment Completion Date, to maintain an aggregate Committed
Percentage of at least ten percent as provided in subsection (b) of this
Section 7.8.
(b) If the aggregate Committed Percentage of the Class A Holders falls below
ten percent because of a Major Issuance, in addition to Equity Purchase Rights
(if applicable) and the rights under Section 2.5 of the Investment Agreement
(if applicable), within the later of (i) 180 days after such Major Issuance,
and (ii) 180 days after the Fixed Closing Date, the Class A Holders may deliver
to the Company a written notice in which each Class A Holder commits to the
Company to purchase from third parties, within three years after the later of
such notice or the Investment Completion Date, a number of shares of Common
Stock sufficient to increase the aggregate Committed Percentage of all Class A
Holders to at least ten percent based on the Voting Power of the Company as at
the date of such notice.
(c) Upon delivery of notice to the Company by each of the Class A Holders
following a Major Issuance committing each such Class A Holder not to exercise
its Equity Purchase Rights in respect of a Major Issuance or its related rights
provided in subsection (b) of this Section 7.8, the Class A Holders shall
automatically and with-out any further action on their part be released from
the Transfer Restrictions.
Section 7.9. Participation by Class A Directors in Certain Circumstances. If
the Joint Venture Agreement is terminated, the Company may exclude the Class A
Directors from deliberations of the Board of Directors that a majority of the
Independent Directors, in their good faith judgment, believe involve (a)
sensitive information relating to the Company and its relationship to FT or DT
or the Company's activities that are competitive with the activities of FT or
DT, or (b) matters in which such Class A Directors or the Class A Holders
otherwise have conflicts of interest with the Company. Any such exclusion shall
be reflected accurately in the minutes of such deliberations.
Section 7.10. Spin-offs. Prior to consummating any Exempt Long Distance Asset
Divestiture (before the end of the Restricted Period described in Section
3.1(a)(i) hereof) or Exempt Asset Divestiture (before the second anniversary of
the Initial Issuance Date) in each case involving a Spin-off,
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(a) the Company shall cause the entity whose equity interests are to be
distributed in such Spin-off to
(i) if such Spin-off occurs after the Initial Issuance Date and
before the later to occur of the date of the Optional Shares Closing
and the Investment Completion Date, execute an investment agreement (or
its equivalent) with respect to the spun-off entity (the "Spin-Off
Investment Agreement") with FT, DT and any of its Qualified
Subsidiaries that are party to the Investment Agreement at the time of
such Spin-off containing terms which are no less favorable to FT and DT
than those set forth in the Investment Agreement;
(ii) execute agreements with each of FT, DT and their respective
Qualified Subsidiaries at the time of such Spin-off no less favorable
to FT and DT than this Agreement, the Registration Rights Agreement,
the Standstill Agreement, the FT Investor Confidentiality Agreement and
the DT Investor Confidentiality Agreement (the "Principal Investment
Documents"); and
(iii) adopt bylaws no less favorable to FT and DT than the Bylaws.
(b) each of FT, DT and their respective Qualified Subsidiaries that are
Class A Holders shall have been afforded a reasonable opportunity (and in
no event less than 90 days) to review and approve such Principal Investment
Documents, following delivery of such documents prepared in substantial
conformity with the requirements of this Section 7.10, provided that,
unless FT, DT and their respective Qualified Subsidiaries shall have
delivered a notice to the Company, prior to the end of the forty-fifth day
following delivery of such documents, stating that such documents were not
prepared in substantial conformity with the requirements of this Section
7.10, such documents shall be deemed to have been prepared in substantial
conformity with this Section 7.10.
Following the expiration of the period provided in clause (b) of this Section
7.10, each of FT, DT and their respective Qualified Subsidiaries shall execute
and deliver the Spin-Off Investment Agreement (if applicable) and such
Principal Investment Documents, provided that if each such party does not so
execute and deliver such Principal Investment Documents, the Company shall
nonetheless have the right to proceed with such Spin-off and the Company shall
have no obligation to provide to such Class A Holders securities of such Spin-
off Entity with rights no less favorable to the Class A Holders than those
applicable to the Class A Stock set forth in the Articles and the Bylaws. The
rights and obligations of the parties hereto under this Section 7.10 shall be
suspended or terminate, and cease to be of any further force or effect, (a)
with respect to any proposed Spin-off of a Subsidiary of the Company which,
directly or indirectly, owns Long Distance Assets, upon the suspension or
termination, as the case may be, of the rights of the Class A Holders under
Article III hereof; and (b) with respect to any proposed Spin-off of a
Subsidiary of the Company other than a Subsidiary which, directly or
indirectly, owns Long Distance Assets, upon the suspension or termination, as
the case may be, of the rights of the Class A Holders pursuant to Article VIII
hereof.
Section 7.11. FCC Licenses. The Company shall not hold directly any Licenses
from the FCC, if the holding of such Licenses by the Company would result in a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
Section 7.12. Issuance of Class A Stock. So long as the Class A Holders own
any shares of Class A Stock, the Company shall not issue any shares of Class A
Stock to any Person other than FT, DT, their respective Qualified Subsidiaries
and Qualified Stock Purchasers.
Section 7.13. Defeasance of Fifth Series. If at any time following the
Initial Issuance Date, the consolidated net worth of the Company and its
Subsidiaries taken as a whole, determined in accordance with Generally Accepted
Accounting Principles as applied in the Company's most recent financial
statements included in a filing with the SEC, shall be less than $1 billion,
the Company shall defease the Fifth Series of the Preferred Stock, by any means
reasonably acceptable to FT and DT.
Section 7.14. Continuing Directors. The Company shall maintain at least seven
Continuing Directors on the Board of Directors at all times.
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Section 7.15. Long Distance Business. Except as otherwise required or
permitted by this Agreement, the Other Investment Documents, the Articles as
amended by the Amendment or the Joint Venture Documents, the Company shall not
hold in the Local Exchange Division, the Cellular and Wireless Division or any
other division of the Company other than the Long Distance Division assets
which are primarily used, or held primarily for use, in or for the benefit of
the Long Distance Business, except for assets that in the aggregate are not
material to the operation of the Long Distance Business.
Section 7.16. Intellectual Property. In any sale of 51% of the Fair Market
Value of the Long Distance Assets required by the last sentence of Section
3.1(a) hereof, the Company shall use its reasonable efforts to grant to such
Person a non-exclusive, perpetual and worldwide license upon commercially
reasonable terms to use all intellectual property not included in the
definition of Long Distance Assets owned or licensed by the Company which is
reasonably necessary to utilize fully the Long Distance Assets so purchased;
provided, however, that the Company shall have no obligation to license the
"Sprint" brand name or any other brand names, tradenames or trademarks owned or
licensed by the Company or any of its Subsidiaries.
Section 7.17. Rights Plan Events. The notice described in Section 7(p) of the
Class A Provisions, upon the Distribution Date (as defined in the Rights
Agreement), shall constitute an irrevocable and continuing waiver of any right
that FT, DT or the Class A Holders may have to disapprove the Cellular Spin-off
under this Agreement, the Articles, the Other Investment Documents or any
document or agreement relating thereto. If such notice is delivered, then
within 90 days following the Distribution Date the Company and the Class A
Holders shall execute a Spin-off Investment Agreement and Principal Investment
Documents with respect to the Cellular Spin-off in accordance with Section 7.10
hereof, mutatis mutandis.
ARTICLE VIII
TERMINATION OF CERTAIN RIGHTS
(a) The rights of the Class A Holders under Articles IV, V and VI and
Sections 7.3, 7.4, 7.8, 7.11 and 7.13 hereof shall terminate:
(i) if at any time after the Investment Completion Date, the aggregate
Committed Percentage of the Class A Holders is below ten percent (x) for
more than 180 consecutive days or (y) immediately following a Transfer of
Class A Stock by a Class A Holder;
(ii) upon the conversion of all of the outstanding shares of Class A
Common Stock into shares of Common Stock or a termination of the
Fundamental Rights as to all outstanding shares of Class A Preference
Stock, in either case pursuant to Sections 7(b), 7(c), 7(d) or 7(g) of the
Class A Provisions;
(iii) upon a sale of all of the Venture Interests of the Sprint Parties
or the FT/DT Parties pursuant to Section 17.2, 17.3, 17.4, 19.3, 20.6 or
20.11 of the Joint Venture Agreement or on the date on which the Joint
Venture is otherwise terminated, in each case other than due to an FT/DT
Joint Venture Termination or a Corporation Joint Venture Termination,
provided that the rights of the Class A Holders under Sections 7.3, 7.8(b)
and 7.13 hereof and Article V hereof shall terminate on the third
anniversary of the date of such sale or termination;
(iv) upon the consummation of a transaction involving a Change of Control
within the meaning of clause (a) of the definition of Change of Control; or
(v) if at any time prior to the Investment Completion Date, the aggregate
liquidation value of the Class A Preference Stock is less than $1.5 billion
as a result of a Transfer of shares of Class A Preference Stock by a Class
A Holder (other than a Transfer contemplated by Section 7.4(b)(i)(y)
hereof).
(b) The rights of the Class A Holders under Articles III, IV, V and VI
hereof, and Sections 7.3, 7.8, 7.13 and 7.15 hereof, shall terminate upon (i)
the conversion of all of the outstanding shares of Class A Common Stock into
shares of Common Stock or (ii) the termination of the Fundamental Rights as to
all
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outstanding shares of Class A Preference Stock, in either case pursuant to
Section 7(h) of the Class A Provisions.
(c) The rights of the Class A Holders under Articles IV and VI hereof and
Sections 7.4, 7.8, 7.11 and 7.13 hereof shall be suspended and may not be
exercised during any period of time in which the rights provided to the Class A
Holders under Sections 4 (except Sections 4(a)(iii) and 4(c)), 5, 6, 7 and 8 of
the Class A Provisions are suspended pursuant to Section 7(b) of the Class A
Provisions.
(d) The rights of a Qualified Stock Purchaser under Articles IV, V and VI
hereof and Sections 7.3, 7.4, 7.8, 7.11 and 7.13 hereof shall terminate upon
(i) the conversion of the outstanding shares of Class A Common Stock owned by
such Qualified Stock Purchaser into Common Stock or, (ii) the termination of
the Fundamental Rights as to the shares of Class A Preference Stock owned by
such Qualified Stock Purchaser, in either case pursuant to Section 7(k) of the
Class A Provisions, and the rights of a Qualified Stock Purchaser under
Articles IV and VI hereof and Sections 7.4, 7.8, 7.11 and 7.13 hereof shall be
suspended and may not be exercised during any period of time in which the
rights provided to such Qualified Stock Purchaser under Sections 4 (except
Sections 4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions are
suspended pursuant to Section 7(k) of the Class A Provisions.
ARTICLE IX
TAX INDEMNIFICATION
Section 9.1. Indemnification for Company Purchase. If the Company purchases
Shares held by a Class A Holder under Section 2.5 or 7.4 of this Agreement or
Section 2(f) of that portion of ARTICLE SIXTH of the Articles entitled "GENERAL
PROVISIONS RELATING TO ALL STOCK" or Section 3(a) of the Class A Provisions (a
"Company Purchase") in the context where such Sections provide that such
purchase price or redemption price be modified in accordance with this Article
IX and as a result thereof such Class A Holder (together with any Class A
Holder described in Section 9.2, an "Indemnitee") incurs U.S. federal income
taxes in excess of the U.S. federal income taxes it would have incurred had it
sold such Shares to a third party unrelated to the Company or its Affiliates at
the applicable price set forth in such Section or Article (such sale to an
unrelated third party, an "Unrelated Party Sale" and such excess U.S. federal
income taxes, "Excess Taxes"), the Company shall indemnify and hold harmless
such Indemnitee on an after-tax basis from and against such Excess Taxes. For
purposes of the preceding sentence, the taxes that would have been incurred in
an Unrelated Party Sale shall be net of any refund of Taxes that would have
been obtained had withholding under Section 1445 of the Code (or any successor
provision) applied to such Unrelated Party Sale. If Excess Taxes are imposed
through withholding at the source, the Company shall pay, in connection with
the applicable Company Purchase, such additional amounts as may be necessary
such that after deduction or withholding of all such Excess Taxes (including
taxes imposed on such additional amounts), the Indemnitee receives the amount
it would have received had no such Excess Taxes been imposed. The Company shall
promptly furnish to the applicable Indemnitee an appropriate receipt for the
payment of any taxes imposed through withholding.
Section 9.2. Indemnification for Supplementary Payments. If the Company makes
a Supplementary Payment to a Class A Holder in respect of Shares disposed of
pursuant to Section 7.4(d) of this Agreement or a Requested Sale Supplementary
Payment pursuant to Section 3(a) of the Class A Provisions and as a result
thereof such Class A Holder incurs taxes in connection with the transaction
contemplated in such Section 7.4(d) or such Section 3(a), as the case may be,
in excess of the taxes it would have incurred had such Class A Holder sold such
Shares in an Unrelated Party Sale for the Formula Price in the case of a
transaction contemplated by Section 7.4 or for the aggregate Liquidation
Preference of such Shares in the case of a transaction contemplated by such
Section 3(a) (such excess taxes, "Section 9.2 Excess Taxes"), the Company shall
indemnify and hold harmless such Class A Holder on an after-tax basis from and
against such Section 9.2 Excess Taxes. For purposes of the preceding sentence,
the taxes that would have been incurred in an
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Unrelated Party Sale at the Formula Price or at the aggregate Liquidation
Preference, as the case may be, shall be net of any refund of taxes that would
have been obtained had withholding under Section 1445 of the Code (or any
successor provision) applied to such Unrelated Party Sale.
Section 9.3. Rebate of Indemnity. Within nine months after the end of each of
the five consecutive taxable years of an Indemnitee starting with the taxable
year in which the Company has paid any amounts pursuant to Sections 9.1 or 9.2
in respect of such Indemnitee (a "Company Tax Payment"), such Indemnitee shall
determine whether it is in a better after-tax economic position as a result of
such Company Tax Payment than it would have been in had such Indemnitee (a) in
the case of a Company Tax Payment pursuant to Section 9.1, sold the Shares
purchased by the Company in an Unrelated Party Sale or (b) in the case of a
Company Tax Payment pursuant to Section 9.2, sold the Shares disposed of
pursuant to Section 7.4(d) of this Agreement or Section 3(a) of the Class A
Provisions, as the case may be, in an Unrelated Party Sale at the Formula Price
in the case of a disposition pursuant to Section 7.4(d) or at the aggregate
Liquidation Preference of such Shares in the case of a disposition pursuant to
such Section 3(a) (the amount of such difference in after-tax economic
positions under the preceding clauses (a) or (b), a "Windfall Benefit"). The
applicable Indemnitee shall promptly thereafter pay to the Company all or a
portion of such Windfall Benefit so that, after taking into account all prior
such payments and the tax consequences of making all such payments, such
Indemnitee is in the same after-tax economic position that it would have been
in had it (a) in the case of a Company Tax Payment pursuant to Section 9.1,
sold the Shares purchased by the Company in an Unrelated Party Sale or (b) in
the case of a Company Tax Payment pursuant to Section 9.2, sold the Shares
disposed of pursuant to Section 7.4(d) of this Agreement in an Unrelated Party
Sale at the Formula Price, or at the aggregate Liquidation Preference of such
Shares in the case of a disposition pursuant to Section 3(a) of the Class A
Provisions. In the case of a Windfall Benefit relating to an increase in the
tax basis in shares of Class A Stock of an Indemnitee attributable to a Company
Tax Payment (such Windfall Benefit, a "Basis Windfall"), the preceding sentence
shall be applied without regard to the five year time limitation contained in
the first sentence of this paragraph, provided, however, that no Indemnitee
shall be required after the five year limit contained in the first sentence of
this paragraph to pay any amount to the Company on account of such Basis
Windfall unless the Company notifies such Indemnitee in writing of the
existence of such Basis Windfall within three months after the date such
Indemnitee disposes of Shares in a transaction in which such Basis Windfall
results in a savings of U.S. taxes. In no event shall the amount payable by any
Indemnitee to the Company under this paragraph exceed the amount of the Company
Tax Payment. If any applicable Indemnitee subsequently determines (within five
years after the end of the taxable year of the Company in which the Indemnitee
has paid a Windfall Benefit to the Company) that the amount of such Windfall
Benefit has been reduced because of an audit adjustment, disallowance of tax
credits, a carryback or carryforward of losses or credits or for any other
reason, the Company shall promptly after notification thereof make a
reconciling payment to such Indemnitee in an amount necessary so that such
Indemnitee is in the same after-tax economic position, after taking into
account the tax consequences of such reconciling payment, that such Indemnitee
would have been in had it (a) in the case of a Company Tax Payment pursuant to
Section 9.1, sold the Shares purchased by the Company in an Unrelated Party
Sale or (b) in the case of a Company Tax Payment pursuant to Section 9.2, sold
the Shares disposed of pursuant to Section 7.4(d) of this Agreement or Section
3(a) of the Class A Provisions in an Unrelated Party Sale at the Formula Price
in the case of a disposition pursuant to such Section 7.4(d) or the aggregate
Liquidation Preference of such Shares in the case of a disposition pursuant to
such Section 3(a).
Section 9.4. Exclusions from Indemnity. Notwithstanding Sections 9.1 and 9.2,
the Company shall not be required to indemnify an Indemnitee under this
Agreement for any portion of Excess Taxes or Section 9.2 Excess Taxes to the
extent that such portion would not be imposed on such Indemnitee but for one or
more of the following events:
(a) the failure of such Indemnitee to qualify for the benefits of the
applicable income tax treaty between the United States and the country of
the Indemnitee's residence;
(b) the failure of such Indemnitee to supply the Company with any form or
other similar document that it is entitled to supply and that is required
to obtain or claim available benefits of an applicable
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income tax treaty or relief that may be provided under the Code with
respect to Excess Taxes or Section 9.2 Excess Taxes, provided, that this
Section 9.4(b) shall not apply unless the Company requests from such
Indemnitee such form or similar document in writing within a reasonable
period of time before the relevant Company Purchase, Supplementary Payment
or Requested Sale Supplementary Payment takes place;
(c) the imposition of Excess Taxes or Section 9.2 Excess Taxes on a
transferee or assignee of an original Class A Holder's Shares, but only to
the extent the amount of Excess Taxes or Section 9.2 Excess Taxes required
to be paid by the Company exceeds the amount of Excess Taxes or Section 9.2
Excess Taxes that would have been required to be paid by the Company absent
any transfer of such original Class A Holder's Shares, provided, that this
Section 9.4(c) shall not apply if the transferee or assignee is a Qualified
Subsidiary and has held such Shares for at least six months prior to the
date such Qualified Subsidiary first undertook those discussions or
negotiations that resulted in the Company's right to purchase such Shares
pursuant to Section 2.5, has held such Shares prior to the date that the
FCC has requested that the Company reduce its foreign ownership pursuant to
Section 310 in the case of a transaction under Section 7.4, or in the case
of a transaction under Section 3(a) of the Class A Provisions has held such
shares prior to the earlier of (x) the date on which all conditions
necessary to establish the Conversion Date as a date certain pursuant to
Section 3(a) of the Class A Provisions have been satisfied, and (y) the
date on which the Company notifies each of FT and DT in good faith that it
is reasonably likely that upon conversion, the shares of Class A Preference
Stock will convert into Class A Common Stock or Common Stock representing
in excess of 20% of the Voting Power of the Company (for purposes of this
Section 9.4(c), a Share received upon a conversion shall be considered held
by a Qualified Subsidiary during the period such Qualified Subsidiary held
the Share that was surrendered in connection with such conversion);
(d) penalties arising solely from actions taken by such Indemnitee in
connection with unrelated transactions; and
(e) the Excess Taxes or Section 9.2 Excess Taxes are imposed on the
Company Purchase, Supplementary Payment or Requested Sale Supplementary
Payment solely because such Indemnitee conducts unrelated activities in the
United States sufficient to cause such Indemnitee to be treated as engaged
in a trade or business in the United States for U.S. federal income tax
purposes and such Indemnitee's income or gain from the Company Purchase,
Supplementary Payment or Requested Sale Supplementary Payment to be treated
as effectively connected with that U.S. trade or business.
Section 9.5. Consequences of Assignment. If the Company assigns to a third
party its rights hereunder to effect a Company Purchase, the Company shall
remain liable (and such third party shall not be liable) under the provisions
of this Article with respect to the purchase, Supplementary Payment or
Requested Sale Supplementary Payment by the third party (taking into account
the actual tax effect to the Indemnitee of such third party purchase or
Supplementary Payment or Requested Sale Supplementary Payment in determining
the taxes incurred in excess of the taxes the Indemnitee would have incurred
had the shares been sold in an Unrelated Party Sale), and the "Excess Taxes"
and Section 9.2 Excess Taxes in such determination shall be computed by taking
into account not only U.S. taxes but also any taxes imposed by any other
jurisdiction to the extent such taxes would not have been imposed absent such
an assignment.
Section 9.6. Verification. The chief tax officer of any party hereto making
or seeking a payment pursuant to this Article IX shall furnish to the other
applicable party hereto a written statement describing in reasonable detail the
taxes which are the subject of such payment and the computation of the amount
so payable. In case of any dispute among the applicable parties hereto
regarding the amount of any payment under this Article IX, the applicable
parties shall negotiate in good faith to resolve such dispute. Notwithstanding
Section 11.5(b) of this Agreement, if such dispute cannot be resolved by the
parties hereto, then such dispute shall be referred to an independent
accounting firm of international standing reasonably acceptable to the parties
hereto in question. The decision of such accounting firm shall be conclusive
absent manifest error. The cost of employing such accounting firm shall be
borne in equal parts by the parties to such dispute.
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Section 9.7. Contest Rights. (a) Each Indemnitee shall exert its best efforts
to inform the Company, either orally or in writing, of any requests received by
such Indemnitee for information from, or potential claims by, the U.S. Internal
Revenue Service regarding the U.S. taxation of a Company Purchase,
Supplementary Payment or Requested Sale Supplementary Payment.
(b) If the Company provides an Indemnitee with a written statement regarding
the manner in which the Company shall characterize a Company Purchase,
Supplementary Payment or Requested Sale Supplementary Payment for U.S. Federal
income tax purposes, such Indemnitee shall thereafter treat such Company
Purchase, Supplementary Payment or Requested Sale Supplementary Payment for
U.S. Federal income tax purposes in a manner consistent with such
characterization by the Company, provided that such Indemnitee shall have no
such obligation of consistent characterization if such Indemnitee receives an
opinion from U.S. tax counsel of national standing to the effect that such
characterization by the Indemnitee lacks substantial authority.
(c) If an Indemnitee receives written notice from the U.S. Internal Revenue
Service (including, without limitation, in a preliminary or "30-day" letter)
that such Indemnitee is liable for Excess Taxes or Section 9.2 Excess Taxes,
such Indemnitee shall promptly notify the Company in writing of such fact and
shall permit the Company to assume control over the handling, disposition and
settlement of the Excess Taxes issue or Section 9.2 Excess Taxes issue at the
examination, administrative and judicial levels in the U.S. Such Indemnitee
shall be entitled to participate in all meetings with the U.S. Internal Revenue
Service relating to the Excess Taxes issue or Section 9.2 Excess Taxes issue
and to review and consult on all submissions to the U.S. Internal Revenue
Service or any court with respect to the Excess Taxes issue or Section 9.2
Excess Taxes issue. Such Indemnitee shall cooperate with the Company, as
reasonably requested, in connection with any such examination or administrative
or judicial proceedings, including, without limitation, by way of signing and
filing protests, petitions, notices of appeal and court pleadings and executing
powers of attorney to enable the Company to represent the interests of the
Indemnitee in, and to assume control over, relevant examinations or proceedings
insofar as they relate to Excess Taxes or Section 9.2 Excess Taxes; provided,
however, that expenses incurred by such Indemnitee in connection with actions
taken at the request of the Company shall be reimbursed to such Indemnitee by
the Company on an after-tax basis. The Company shall be entitled to employ
counsel of its choice in connection with any of the matters described in this
Article and shall bear all expenses associated with the employment of such
counsel. The provisions of this paragraph shall also apply to a claim for
refund of Excess Taxes or Section 9.2 Excess Taxes paid or withheld.
Notwithstanding the foregoing provisions of this Section 9.7(c), if the Company
assumes control over an Excess Taxes issue or Section 9.2 Excess Taxes issue at
the examination, administrative or judicial levels, the Company shall not be
entitled to settle or compromise any such claim except upon the written consent
of the applicable Indemnitee. If an applicable Indemnitee fails to grant such
consent, the Company shall not be required to pay any amounts in excess of the
amount it would have paid had such Indemnitee consented to such settlement or
compromise, and such Indemnitee shall bear any further cost or expense of
contesting such Excess Taxes issue or Section 9.2 Excess Taxes issue.
ARTICLE X
U.S. REAL PROPERTY TAX MATTERS
Section 10.1. Notification. The Company shall notify each Class A Holder
whenever a FIRPTA Determination shall be required under the applicable rules of
the Code and regulations thereunder. Such notification shall, to the extent
practical, be made sufficiently far in advance of any date on which the actions
described in Section 10.3 will be necessary so as to allow for reasonable time
for the performance of the legal, accounting and valuation analyses described
in this Article X.
Section 10.2. Control of FIRPTA Determination. If one or more Class A Holders
notify the Company that they desire to control a FIRPTA Determination (each a
"Notifying Class A Holder"):
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(a) the Company shall cooperate fully with such Notifying Class A Holders
and their legal, accounting and valuation advisors with respect to such
FIRPTA Determination. Such cooperation shall include making available
information and knowledgeable personnel as reasonably requested as well as
making reasonable representations necessary for such advisors to render
their opinions and judgments described in this Article X, to the extent
that the Company may make such representations in its good faith judgment.
The Company shall not, however, be obligated to make any representations as
to the fair market value of assets; and
(b) the Company shall for purposes of such FIRPTA Determination classify
as non-real property each of the assets identified as non-real property on
Exhibit D, provided that there has been no change in law, official
interpretation or guidance (a "Change in Law") with respect to such
classification occurring after the date hereof. The Company and the
Notifying Class A Holders shall endeavor to agree as to the classification
of any assets not described as non-real property on Exhibit D (and as to
any assets so described but as to which there has been a Change in Law)
but, in the absence of such agreement, the Company shall accept the
reasonable opinion (containing analysis, if appropriate) of nationally
recognized accountants or tax counsel chosen by such Notifying Class A
Holders as to whether it is reasonable to assert that a given asset should
or should not be considered to constitute real property for purposes of
such FIRPTA Determination.
Section 10.3. Issuance of Certification; Related Matters. In connection with
any FIRPTA Determination referred to in Section 10.2, the Company shall, upon
the presentation by the Notifying Class A Holders of a reasonable opinion
(containing analysis, if appropriate) of nationally recognized accountants or
tax counsel to the effect that it is reasonable to assert that the Company is
not, and has not at any time during the preceding five years (or shorter period
during which any such Notifying Class A Holders held Shares) been, a U.S. real
property holding corporation as defined under the Code and the regulations
thereunder and as tested on the determination dates described in U.S. Treasury
Regulation Section 1.897-2(c) (or any successor provision):
(a) in the case of a disposition by a Notifying Class A Holder of Shares
to a third party (related or unrelated), issue the statement described in
U.S. Treasury Regulation (S) 1.897-2 (or any successor provision)
indicating that the Shares do not constitute a U.S. real property interest
(as defined in the Code and the regulations thereunder) and timely provide
appropriate notice to the U.S. Internal Revenue Service; and
(b) in the case of any redemption or exchange (including a deemed
exchange) by the Company of Shares held by any such Notifying Class A
Holders, comply with all requirements described in this Article X and
refrain from withholding any U.S. tax from the proceeds of such redemption
or exchange pursuant to Section 1445 of the Code (or any successor
provision).
In rendering any opinion described in this Section 10.3, the accountants or
tax counsel for the Notifying Class A Holders shall be entitled to rely in
their discretion upon advice of nationally recognized valuation experts as they
deem appropriate and upon information and representations provided by the
Company pursuant to this Article X.
Section 10.4. Advisory Costs. The Company shall pay 50% of all reasonable
costs of legal, accounting and valuation services incurred by any Notifying
Class A Holder in connection with any FIRPTA Determination.
Section 10.5. Indemnity. Each Notifying Class A Holder with respect to any
FIRPTA Determination shall severally, but not jointly, reimburse the Company on
an after-tax basis for (a) any tax under Section 897 of the Code or any
successor provision (a "FIRPTA Tax") of such Notifying Class A Holder that the
U.S. Internal Revenue Service collects from the Company, including any
applicable interest and penalties imposed with respect to such FIRPTA Tax, and
(b) any FIRPTA Tax (including applicable interest and penalties) of the third
party described in Section 10.3(a) collected from or imposed on the Company, or
any penalties or interest imposed directly on the Company, with respect to such
Notifying Class A Holder, but in
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the case of clause (b) of this Section 10.5, such reimbursement obligation
shall apply only to taxes, interest and penalties arising as a result of the
Company's taking any action under Section 10.2(b) or Section 10.3 hereof with
respect to such Notifying Class A Holder based upon the opinion provided by
such Notifying Class A Holder pursuant to Section 10.2 or 10.3.
Section 10.6. Contest Rights. (a) The Company shall exert its best efforts to
inform each Class A Holder, either orally or in writing, of any requests
received by the Company for information from, or potential claims by, the U.S.
Internal Revenue Service regarding any matter that could result in liability to
any Class A Holder under Section 10.5 hereof.
(b) If the Company receives written notice from the U.S. Internal Revenue
Service (including, without limitation, in a preliminary or "30-day" letter)
regarding any item for which any Class A Holder may be liable under Section
10.5 hereof, the Company shall promptly notify such Class A Holder in writing
of such fact and shall permit the Class A Holders so notified to assume control
over the handling, disposition and settlement of any such matter at the
examination, administrative and judicial levels. The Company shall be entitled
to participate in all meetings with the U.S. Internal Revenue Service relating
to such issue and to review and consult on all submissions to the U.S. Internal
Revenue Service or any court with respect to any such issue. The Company shall
cooperate with such Class A Holders, as reasonably requested, in connection
with any such examination or administrative or judicial proceedings, including,
without limitation, by way of signing and filing protests, petitions, notices
of appeal and court pleadings and executing powers of attorney to enable such
Class A Holders to represent the interests of the Company in, and to assume
control over, relevant examinations or proceedings insofar as they relate to
the issues described in this Article; provided, however, that expenses incurred
by the Company in connection with actions taken at the request of the Class A
Holders shall be reimbursed to the Company by such Class A Holders on an after-
tax basis. The Class A Holders shall be entitled to employ counsel of their
choice in connection with any of the matters described in this Article X and
shall bear all expenses associated with the employment of such counsel. The
provisions of this paragraph shall also apply to any claim for a refund of
taxes paid or withheld in connection with the matters described in this Article
X. Notwithstanding the foregoing provisions of this Section 10.6(b), if any
Class A Holders assume control over any issue concerning the liability of the
Company described in this Article at the examination, administrative or
judicial levels, such Class A Holders shall not be entitled to settle or
compromise any such claim except upon the written consent of the Company. If
the Company fails to grant such consent, such Class A Holders shall not be
required to pay any amounts pursuant to Section 10.5 in excess of the amounts
they would have paid had the Company consented to such settlement or
compromise, and the Company shall bear any further cost or expense of
contesting any such issue.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Notices. All notices and other communications required or
permitted by this Agreement shall be made in writing in the English language
and any such notice or communication shall be deemed delivered when delivered
in person, transmitted by telex or telecopier, or seven days after it has been
sent by air mail, as follows:
FT:
6 place d'Alleray
75505 Paris Cedex 15
France
Attn: Executive Vice President, International
Tel: (33-1) 44-44-19-94
Fax: (33-1) 46-54-53-69
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with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
U.S.A.
Attn: Louis Begley, Esq.
Tel: (212) 909-6273
Fax: (212) 909-6836
DT:
Friedrich-Ebert-Allee 140
D-53113 Bonn
Germany
Attn: Chief Executive Officer
Tel: 49-228-181-9000
Fax: 49-228-181-8970
with a copy to:
Mayer, Brown & Platt
2000 Pennsylvania Avenue, N.W.
Suite 6500
Washington, D.C. 20006
Attn: Werner Hein, Esq.
Tel: (202) 778-8726
Fax: (202) 861-0473
Sprint:
2330 Shawnee Mission
Parkway, East Wing
Westwood, Kansas 66205
U.S.A.
Attn: General Counsel
Tel: (913) 624-8440
Fax: (913) 624-8426
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
U.S.A.
Attn: Bruce N. Hawthorne, Esq.
Tel: (404) 572-4903
Fax: (404) 572-5146
The parties to this Agreement shall promptly notify each other in the manner
provided in this Section 11.1 of any change in their respective addresses. A
notice of change of address shall not be deemed to have been given until
received by the addressee. Communications by telex or telecopier also shall be
sent concurrently by mail, but shall in any event be effective as stated above.
Section 11.2. Waiver, Amendment, etc. This Agreement may not be amended or
supplemented, and no waivers of or consents to departures from the provisions
hereof shall be effective, unless set forth in a writing signed by, and
delivered to, all the parties hereto. No failure or delay of any party in
exercising any power or right under this Agreement will operate as a waiver
thereof, nor will any single or partial exercise of any right or power, or any
abandonment or discontinuance of steps to enforce such right or power, preclude
any other or further exercise thereof or the exercise of any other right or
power.
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Section 11.3. No Partnership. This Agreement is not intended, nor should
anything herein be construed, to create the relationship of partners, joint
venturers, principal and agent, or other fiduciary relationship among the Class
A Holders and the Company. Except as expressly set forth herein, none of the
Class A Holders will have any authority to represent or to bind the other Class
A Holder or Holders or the Company in any manner whatsoever, and each Class A
Holder will be solely responsible and liable for its own acts.
Section 11.4. Binding Agreement; Assignment; No Third Party Beneficiaries.
This Agreement will be binding upon and inure to the benefit of the parties
hereto and their successors (including, without limitation, any successor of FT
in a privatization) and permitted assigns. Except as set forth herein and by
operation of law, no party to this Agreement may assign or delegate all or any
portion of its rights, obligations or liabilities under this Agreement without
the prior written consent of each other party to this Agreement. Nothing
expressed or implied herein is intended or will be construed to confer upon or
to give to any third party any rights or remedies by virtue hereof. In the
event of a reorganization of FT pursuant to, as a result of or in connection
with, a privatization, the corporation or other entity formed to continue the
business activities of FT shall assume the rights and obligations of FT under
this Agreement.
Section 11.5. GOVERNING LAW; DISPUTE RESOLUTION; EQUITABLE RELIEF. (a) THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW).
(b) EXCEPT AS PROVIDED IN ARTICLE IX HEREOF, EACH PARTY TO THIS AGREEMENT
IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT OR PROCEEDING BY IT
AGAINST ANY OF THE OTHER PARTIES WITH RESPECT TO ITS RIGHTS, OBLIGATIONS OR
LIABILITIES UNDER OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL
BE BROUGHT BY SUCH PARTY ONLY IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK OR, IN THE EVENT (BUT ONLY IN THE EVENT) SUCH
COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION OVER SUCH ACTION, SUIT OR
PROCEEDING, IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY,
AND EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY ACCEPTS AND SUBMITS TO THE
JURISDICTION OF EACH OF THE AFORESAID COURTS IN PERSONAM, WITH RESPECT TO ANY
SUCH ACTION, SUIT OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, CLAIMS FOR
INTERIM RELIEF, COUNTERCLAIMS, ACTIONS WITH MULTIPLE DEFENDANTS AND ACTIONS IN
WHICH SUCH PARTY IS IMPLIED). EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT THAT IT MAY HAVE TO A JURY TRIAL IN ANY LEGAL ACTION, SUIT OR
PROCEEDING WITH RESPECT TO, OR ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT. EACH OF FT AND DT HEREBY IRREVOCABLY DESIGNATES CT CORPORATION
SYSTEM (IN SUCH CAPACITY, THE "PROCESS AGENT"), WITH AN OFFICE AT 1633
BROADWAY, NEW YORK, NEW YORK 10019, AS ITS DESIGNEE, APPOINTEE AND AGENT TO
RECEIVE, FOR AND ON ITS BEHALF SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY
LEGAL ACTION OR PROCEEDINGS WITH RESPECT TO THIS AGREEMENT, AND SUCH SERVICE
SHALL BE DEEMED COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT, PROVIDED
THAT IN THE CASE OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY
EFFECTING SUCH SERVICE SHALL ALSO DELIVER A COPY THEREOF TO FT AND DT IN THE
MANNER PROVIDED IN SECTION 11.1. FT AND DT SHALL TAKE ALL SUCH ACTION AS MAY BE
NECESSARY TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO APPOINT
ANOTHER AGENT SO THAT FT AND DT WILL AT ALL TIMES HAVE AN AGENT FOR SERVICE OF
PROCESS FOR THE ABOVE PURPOSES IN NEW YORK, NEW YORK. IN THE EVENT OF THE
TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS AND BUSINESS OF THE PROCESS
AGENT TO ANY OTHER CORPORATION BY CONSOLIDATION, MERGER, SALE OF ASSETS OR
OTHERWISE,
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SUCH OTHER CORPORATION SHALL BE SUBSTITUTED HEREUNDER FOR THE PROCESS AGENT
WITH THE SAME EFFECT AS IF NAMED HEREIN IN PLACE OF CT CORPORATION SYSTEM. EACH
OF FT AND DT FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED AIRMAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS
ADDRESS SET FORTH IN THIS AGREEMENT, SUCH SERVICE OF PROCESS TO BE EFFECTIVE
UPON ACKNOWLEDGMENT OF RECEIPT OF SUCH REGISTERED MAIL. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW. EACH OF FT AND DT EXPRESSLY ACKNOWLEDGES THAT THE FOREGOING
WAIVER IS INTENDED TO BE IRREVOCABLE UNDER THE LAWS OF THE STATE OF NEW YORK
AND OF THE UNITED STATES OF AMERICA.
(c) EACH PARTY HERETO AGREES THAT MONEY DAMAGES WOULD NOT BE A SUFFICIENT
REMEDY FOR THE OTHER PARTIES HERETO FOR ANY BREACH OF THIS AGREEMENT BY IT, AND
THAT IN ADDITION TO ALL OTHER REMEDIES THE OTHER PARTIES HERETO MAY HAVE, THEY
SHALL BE ENTITLED TO SPECIFIC PERFORMANCE AND TO INJUNCTIVE OR OTHER EQUITABLE
RELIEF AS A REMEDY FOR ANY SUCH BREACH. EACH PARTY HERETO AGREES NOT TO OPPOSE
THE GRANTING OF SUCH RELIEF IN THE EVENT A COURT DETERMINES THAT SUCH A BREACH
HAS OCCURRED, AND TO WAIVE ANY REQUIREMENT FOR THE SECURING OR POSTING OF ANY
BOND IN CONNECTION WITH SUCH REMEDY.
Section 11.6. Severability. The invalidity or unenforceability of any
provision hereof in any jurisdiction will not affect the validity or
enforceability of the remainder hereof in that jurisdiction or the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction. To the extent permitted by Applicable Law, each party hereto
waives any provision of Applicable Law that renders any provision hereof
prohibited or unenforceable in any respect. If any provision of this Agreement
is held to be unenforceable for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties to this
Agreement to the extent possible.
Section 11.7. Translation. The parties hereto have negotiated both this
Agreement and the Memorandum of Understanding, dated June 14, 1994 (the "MOU"),
among each of the parties hereto, in the English language, and have prepared
successive drafts and the definitive texts of the MOU and this Agreement in the
English language. For purposes of complying with the loi n(degrees) 94-665 du 4
aout 1994 relative a emploi de la langue francaise, the parties hereto have
prepared a French version of this Agreement, which French version was executed
and delivered simultaneously with the execution and delivery of the English
version hereof, such English version having likewise been executed and
delivered. The parties deem the French and English versions of this Agreement
to be equally authoritative.
Section 11.8. Table of Contents; Headings; Counterparts. The table of
contents and the headings in this Agreement are for convenience of reference
only and will not affect the construction of any provisions hereof. This
Agreement may be executed in one or more counterparts, each of which when so
executed and delivered will be deemed an original but all of which will
constitute one and the same Agreement.
Section 11.9. Entire Agreement. This Agreement and the Other Investment
Documents embody the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein, provided that this provision
shall not abrogate (a) any other written agreement between the parties hereto,
executed simultaneously with this Agreement, or (b) the understanding set forth
in Item 1 of Schedule 2 to that certain memorandum dated June 22, 1995 among
the Company, FT and DT. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter, except
as so provided in the preceding sentence.
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Section 11.10. Waiver of Immunity. Each of FT and DT agrees that, to the
extent that it or any of its property is or becomes entitled at any time to any
immunity on the grounds of sovereignty or otherwise based upon its status as an
agency or instrumentality of government from any legal action, suit or
proceeding or from set off or counterclaim relating to this Agreement from the
jurisdiction of any competent court described in Section 11.5, from service of
process, from attachment prior to judgment, from attachment in aid of execution
of a judgment, from execution pursuant to a judgment or an arbitral award or
from any other legal process in any jurisdiction, it, for itself and its
property expressly, irrevocably and unconditionally waives, and agrees not to
plead or claim, any such immunity with respect to such matters arising with
respect to this Agreement or the subject matter hereof or thereof (including
any obligation for the payment of money). Each of FT and DT agrees that the
waiver in this provision is irrevocable and is not subject to withdrawal in any
jurisdiction or under any statute, including the Foreign Sovereign Immunities
Act, 28 U.S.C. (P) 1602 et seq. The foregoing waiver shall constitute a present
waiver of immunity at any time any action is initiated against FT or DT with
respect to this Agreement.
Section 11.11. Board Membership. (a) FT confirms that its present intention
is to nominate its Chairman of the Board to be a Class A Director.
(b) DT confirms that its present intention is to nominate its
Vorstandsvorsitzender to be a Class A Director.
Section 11.12. Effect of Conversion. (a) If all of the shares of Class A
Common Stock shall have been converted into Common Stock or if there is a
termination of Fundamental Rights as to all outstanding shares of Class A
Preference Stock, in either case pursuant to Section 7 of the Class A
Provisions, each share of Class A Stock to have been issued by the Company
thereafter pursuant to this Agreement shall (i) in the case of Class A Common
Stock, instead be issued as one duly issued, fully paid and nonassessable share
of Common Stock, and (ii) in the case of Class A Preference Stock, instead be
issued as that number of duly issued, fully paid and nonassessable shares of
Common Stock equal to the number of Class A Conversion Shares related to one
share of Class A Preference Stock outstanding immediately prior to the date of
issuance.
(b) If all of the shares of Class A Common Stock held by a Qualified Stock
Purchaser shall have been converted into Common Stock or if there is a
termination of Fundamental Rights as to shares of Class A Preference Stock
owned by such Qualified Stock Purchaser, in either case pursuant to Section 7
of the Class A provisions, each share of Class A Stock to have been issued by
the Company to such Qualified Stock Purchaser pursuant to this Agreement shall
(i) in the case of Class A Common Stock, instead be issued as one duly issued,
fully paid and nonassessable share of Common Stock, and (ii) in the case of
Class A Preference Stock, instead be issued as that number of duly issued,
fully paid and nonassessable shares of Common Stock equal to the number of
Class A Conversion Shares related to one share of Class A Preference Stock
outstanding immediately prior to the date of issuance.
Section 11.13. Continuing Director Approval. Where Continuing Director
approval is otherwise explicitly required under this Agreement with respect to
a transaction or determination on the part of the Company, such approval shall
not be required if (a) the Fair Price Provisions have been deleted in their
entirety, (b) the Fair Price Provisions have been modified so as explicitly not
to apply to any Class A Holder, or they have been modified in a manner
reasonably satisfactory to FT and DT so as explicitly not to apply to any
transactions with any Class A Holder contemplated by this Agreement or by the
Other Investment Documents or the Articles as amended by the Amendment, (c) the
transaction in question is not a "Business Combination" within the meaning of
the Fair Price Provisions, or (d) the Class A Holder that is a party to the
transaction, along with its Affiliates (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as in effect on October 1, 1982) and
Associates (as such term is defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as in effect on October 1, 1982), is not an "Interested
Stockholder" or an "Affiliate" of an "Interested Stockholder" within the
meaning of the Fair Price Provisions. Where this Agreement provides that
Continuing Director approval is explicitly required to undertake a transaction
or make a determination on the part of the Company, the Company shall not
undertake such transaction or
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make such determination unless it first delivers a certificate, signed by a
duly authorized officer of the Company, to each of FT and DT, certifying that
such approval either has been obtained or is not required as set forth in the
preceding sentence, and FT shall be entitled to rely on such certificate.
In Witness Whereof, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
Sprint Corporation
By: _________________________________
Name:
Title:
France Telecom
By: _________________________________
Name:
Title:
Deutsche Telekom AG
By: _________________________________
Name:
Title:
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EXHIBIT C
STANDSTILL AGREEMENT
This Standstill Agreement (this "Agreement") dated as of July 31, 1995 by and
among Sprint Corporation, a corporation formed under the laws of Kansas
("Sprint"), France Telecom, an exploitant public formed under the laws of
France ("FT"), and Deutsche Telekom AG, an Aktiengesellschaft formed under the
laws of Germany ("DT");
WITNESSETH:
Whereas, Sprint, FT and DT have entered into that certain Investment
Agreement dated as of the date hereof (the "Investment Agreement") pursuant to
which FT and DT have agreed to purchase shares of capital stock of Sprint; and
Whereas, as a condition to its entering into the Investment Agreement, Sprint
has required that FT and DT enter into this Agreement, which contains certain
restrictions on purchases of Sprint capital stock by FT and DT and their
respective Affiliates and Associates and certain other limitations on FT and DT
and their respective Affiliates and Associates.
Now, Therefore, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein and in the Other
Agreements, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of FT, DT and Sprint (each a
"Party"), intending to be legally bound, hereby agrees as follows:
ARTICLE 1.
DEFINITIONS AND CONSTRUCTION
Section 1.1. Certain Definitions. As used in this Agreement, the following
terms shall have the meanings specified below:
"Acquisition Proposal" shall have the meaning set forth in Section 8.3(a) of
the Investment Agreement.
"Affiliate" shall mean, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by, or is under common Control with, such Person, provided that (a)
no JV Entity shall be deemed an Affiliate of any Party unless (i) FT, DT and
Atlas own a majority of the Voting Power of such JV Entity and Sprint does not
have the Tie-Breaking Vote (as defined in Section 18.1 of the Joint Venture
Agreement), (ii) FT, DT or Atlas has the Tie-Breaking Vote or (iii) FT, DT or
any of their Affiliates cause such JV Entity to acquire Beneficial Ownership of
any Sprint equity securities; (b) FT, DT and Sprint shall not be deemed
Affiliates of each other; (c) Atlas shall be deemed an Affiliate of FT and DT;
and (d) the term "Affiliate" shall not include any Government Affiliate.
"Aggregate Foreign Ownership Limitation" shall mean the maximum aggregate
percentage of equity interests of Sprint that may be Owned of Record or Voted
by Aliens under Section 310(b)(4) of the Communications Act, without such
ownership or voting resulting in the possible loss, or possible failure to
secure the renewal or reinstatement, of any license or franchise of any
Governmental Authority held by Sprint or any of its Affiliates to conduct any
portion of the business of Sprint or such Affiliate, as such maximum aggregate
percentage may be increased from time to time by amendments to such section or
by waivers granted to Sprint by the FCC or by other determinations of the FCC,
provided that if Section 310(b)(4) is repealed or otherwise made inapplicable
to the ownership of Sprint capital stock by FT and DT, there shall be no
Aggregate Foreign Ownership Limitation.
C-1
"Aliens" shall mean "aliens," "their representatives," "a foreign government
or representatives thereof" or "any corporation organized under the laws of a
foreign country" as such terms are used in Section 310(b)(4) of the
Communications Act.
"Applicable Law" shall mean all applicable provisions of all (a)
constitutions, treaties, statutes, laws (including common law), rules,
regulations, ordinances or codes of any Governmental Authority, and (b) orders,
decisions, injunctions, judgments, awards and decrees of any Governmental
Authority.
"Articles" shall mean the Articles of Incorporation of Sprint, as amended or
supplemented from time to time.
"Associate" shall have the meaning ascribed to such term in Rule 12b-2 under
the Exchange Act, provided that when used to indicate a relationship with FT or
DT or their respective Subsidiaries or Affiliates, the term "Associate" shall
mean (a) in the case of FT, any Person occupying the positions listed on
Schedule A hereto, and (b) in the case of DT, any Person occupying the
positions listed on Schedule B hereto, provided, further, that, in each case,
no Persons occupying any such positions described in clause (a) or (b) hereof
shall be deemed an "Associate" of FT or DT, as the case may be, unless the
Persons occupying all such positions described in clauses (a) and (b) hereof
Beneficially Own, in the aggregate, securities representing more than 0.2% of
the Voting Power of the Company.
"Atlas" shall mean the company to be formed as a societe anonyme under the
laws of Belgium pursuant to the Joint Venture Agreement, dated as of December
15, 1994, as amended, between FT and DT.
"Beneficial Owner" (including, with its correlative meanings, "Beneficially
Own" and "Beneficial Ownership"), with respect to any securities, shall mean
any Person which:
(a) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to acquire (whether such right is exercisable
immediately or only after the passage of time) such securities pursuant to
any agreement, arrangement or understanding (whether or not in writing),
including pursuant to the Investment Agreement and the Stockholders'
Agreement, or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise;
(b) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to vote or dispose of (whether such right is
exercisable immediately or only after the passage of time) or "beneficial
ownership" of (as determined pursuant to Rule 13d-3 under the Exchange Act
as in effect on the date hereof but including all such securities which a
Person has the right to acquire beneficial ownership of, whether or not
such right is exercisable within the 60-day period specified therein) such
securities, including pursuant to any agreement, arrangement or
understanding (whether or not in writing); or
(c) has, or any of whose Affiliates or Associates has, any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting or disposing of any securities which are
Beneficially Owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof),
provided that Class A Stock and Common Stock held by one of FT or DT or its
Affiliates or Associates shall not also be deemed to be Beneficially Owned by
the other of FT or DT or its Affiliates or Associates.
"Business Day" shall have the meaning set forth in Article I of the
Investment Agreement.
"Change of Control" shall have the meaning set forth in Article I of the
Investment Agreement.
"Class A Common Stock" shall mean the Class A Common Stock of Sprint.
"Class A Preference Stock" shall mean the Class A Preference Stock of Sprint.
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"Class A Stock" shall mean the Class A Common Stock or, if shares of the
Class A Preference Stock are outstanding, the Class A Preference Stock.
"Class A Provisions" shall mean that portion of ARTICLE SIXTH of the Articles
entitled "GENERAL PROVISIONS RELATING TO CLASS A STOCK," which will be included
in an amendment to the Articles to be filed on or before the First Closing.
"Common Stock" shall mean the Common Stock, par value U.S. $2.50 per share,
of Sprint.
"Communications Act" shall mean the United States Communications Act of 1934
and the rules and regulations thereunder.
"Control" (including, with its correlative meanings, "Controlled by" and
"under common Control with") shall mean, with respect to a Person or Group:
(a) ownership by such Person or Group of Votes entitling it to exercise
in the aggregate more than 50 percent of the Voting Power of the entity in
question; or
(b) possession by such Person or Group of the power, directly or
indirectly, (i) to elect a majority of the board of directors (or
equivalent governing body) of the entity in question; or (ii) to direct or
cause the direction of the management and policies of or with respect to
the entity in question, whether through ownership of securities, by
contract or otherwise.
"DT" shall have the meaning set forth in the introductory paragraph of this
Agreement.
"DT Investor Confidentiality Agreement" shall have the meaning set forth in
Article I of the Investment Agreement.
"Exchange Act" shall mean the United States Securities Exchange Act of 1934
and the rules and regulations thereunder.
"FCC" shall mean the United States Federal Communications Commission.
"First Closing" shall have the meaning set forth in Section 2.1(a) of the
Investment Agreement.
"France" shall mean the Republic of France, including French Guiana,
Guadeloupe, Martinique and Reunion, and its territories and possessions.
"FT" shall have the meaning set forth in the introductory paragraph of this
Agreement.
"FT Investor Confidentiality Agreement" shall have the meaning set forth in
Article I of the Investment Agreement.
"Germany" shall mean the Federal Republic of Germany.
"Government Affiliate" shall mean any Governmental Authority of France or
Germany or any other Person Controlled, directly or indirectly (other than by
virtue of a government's inherent regulatory or statutory powers to control
persons or entities within its jurisdiction), by any such Governmental
Authority, provided that FT, DT, Atlas and any other Person directly, or
indirectly through one or more intermediaries, Controlled by FT, DT or Atlas
shall not be Government Affiliates.
"Governmental Authority" shall mean any federation, nation, state, sovereign,
or government, any federal, supranational, regional, state, local or political
subdivision, any governmental or administrative body, instrumentality,
department or agency or any court, administrative hearing body, arbitration
tribunal, commission or other similar dispute resolving panel or body, and any
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of a government, provided that the term "Governmental
Authority" shall not include FT, DT or Atlas or any of their respective
Subsidiaries.
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"Group" shall mean any group within the meaning of Section 13(d)(3) of the
Exchange Act as in effect on the date hereof.
"Initial Percentage Limitation" shall have the meaning set forth in Section
2.1(a)(ii), as adjusted pursuant to Section 2.2(a).
"Initial Standstill Period" shall have the meaning set forth in Section
2.1(a)(ii).
"Investment Agreement" shall have the meaning set forth in the Recitals.
"Investment Completion Date" shall have the meaning set forth in Article I of
the Investment Agreement.
"Joint Venture" shall have the meaning set forth in Article I of the
Investment Agreement.
"Joint Venture Agreement" shall mean that certain Joint Venture Agreement,
dated as of June 22, 1995, among FT, DT, Sprint and Sprint Global Venture, Inc.
"Joint Venture Documents" shall have the meaning set forth in Article I of
the Investment Agreement.
"JV Entity" shall have the meaning set forth in Article I of the Investment
Agreement.
"Largest Other Holder" shall mean the Other Holder, if any, who Beneficially
Owns a larger percentage of the Outstanding Sprint Voting Securities than any
other Person, provided that, for purposes of this definition, FT, DT, their
Affiliates and Associates and Qualified Stock Purchasers shall be considered a
single Person.
"Major Competitor" shall have the meaning set forth in Article I of the
Investment Agreement.
"Other Agreements" shall mean the Investment Agreement, the Stockholders'
Agreement, the Registration Rights Agreement, the FT Investor Confidentiality
Agreement and the DT Investor Confidentiality Agreement.
"Other Holder" shall mean any Person other than (i) FT, DT, any of their
respective Affiliates or Associates or any Qualified Stock Purchaser, (ii)
Sprint, (iii) any Subsidiary of Sprint, (iv) any employee benefit plan of
Sprint or of any Subsidiary of Sprint, or (v) any Person organized, appointed
or established by Sprint or any Subsidiary of Sprint for or pursuant to the
terms of any such plan.
"Outstanding Sprint Voting Securities" shall mean the Sprint Voting
Securities outstanding as of any particular date, plus all Sprint Voting
Securities which as of such date any of FT or DT or any of their respective
Affiliates is committed to acquire from Sprint or has the right to acquire (or
to commit to acquire) from Sprint pursuant to the Investment Agreement and the
Stockholders' Agreement.
"Owned of Record or Voted by" shall have the meaning specified in Section
310(b)(4) of the Communications Act and published interpretations thereof by
the FCC and the U.S. federal courts.
"Passive Financial Institution" shall mean a bank (or comparable financial
institution), insurance company, pension or retirement fund which acquires
Voting Securities or other equity interests in a Qualified Subsidiary not with
the purpose or effect of changing or influencing the control of the Qualified
Subsidiary or Sprint, nor in connection with or as a participant in any
transaction having such purpose or effect; provided that the term "Passive
Financial Institution" shall not include any Major Competitor of Sprint or of
the Joint Venture.
"Percentage Limitation" shall have the meaning set forth in Section
2.1(a)(iii), as adjusted pursuant to Section 2.2(a).
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"Percentage Limitation Adjustment Event" shall mean the acquisition by an
Other Holder of Beneficial Ownership of Outstanding Sprint Voting Securities in
excess of the applicable Percentage Limitation, unless any of FT, DT or any
Qualified Subsidiary shall have breached any of the provisions of Section 3.1
or 3.2 of this Agreement or any corresponding provision of any Qualified
Subsidiary Standstill Agreement and such breach resulted in, or was intended to
facilitate, such Other Holder's acquisition of Beneficial Ownership of
Outstanding Sprint Voting Securities in excess of the applicable Percentage
Limitation.
"Percentage Ownership Interest" shall mean, with respect to any Person, that
percentage of the Voting Power of Sprint represented by Votes associated with
the Sprint Voting Securities owned of record by such Person or by its nominees.
"Person" shall mean an individual, a partnership, an association, a joint
venture, a corporation, a business, a trust, any entity organized under
Applicable Law, an unincorporated organization or any Governmental Authority.
"Qualified Stock Purchaser" shall have the meaning set forth in Article I of
the Stockholders' Agreement.
"Qualified Stock Purchaser Standstill Agreement" shall mean a Standstill
Agreement in form and substance satisfactory to Sprint, FT and DT.
"Qualified Subsidiary" shall have the meaning set forth in Article I of the
Investment Agreement.
"Qualified Subsidiary Standstill Agreement" shall mean a Standstill Agreement
in the form of Exhibit A.
"Registration Rights Agreement" shall have the meaning set forth in Article I
of the Investment Agreement.
"Related Company" shall mean any Person not Controlled by FT or DT, but in
which FT, DT and their respective Affiliates and Associates, individually or in
the aggregate, directly or indirectly through one or more intermediaries, own
securities entitling them to exercise in the aggregate more than 35 percent of
the Voting Power of such Person.
"SEC" shall mean the United States Securities and Exchange Commission.
"Section 3(b)(v) Conversion" shall mean the conversion of all of the
outstanding shares of Class A Preference Stock into Class A Common Stock or
Common Stock pursuant to Section 3(b)(v) of the Class A Provisions.
"Section 3(b)(v) Conversion Date" shall mean the date of the Section 3(b)(v)
Conversion.
"Sprint" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"Sprint Rights Plan" shall mean the Rights Agreement dated as of August 8,
1989, as amended, between Sprint and UMB Bank, n.a., as rights agent.
"Sprint Voting Securities" shall mean the Common Stock, the Class A Stock and
any other securities of Sprint having the right to Vote.
"Stockholders' Agreement" shall have the meaning set forth in Article I of
the Investment Agreement.
"Strategic Investor" shall mean any Person which owns directly any equity
interests in a Qualified Subsidiary, other than FT, DT, any wholly owned
Subsidiary of FT or DT or a Passive Financial Institution.
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"Strategic Investor Standstill Agreement" shall mean a Standstill Agreement
in the form of Exhibit B.
"Strategic Merger" shall have the meaning set forth in Article I of the
Investment Agreement.
"Subsequent Percentage Limitation" shall have the meaning set forth in
Section 2.1(a)(iii), as adjusted pursuant to Section 2.2(a).
"Subsidiary" shall mean, with respect to any Person (the "Parent"), any other
Person in which the Parent, one or more Subsidiaries of the Parent, or the
Parent and one or more of its Subsidiaries (a) have the ability, through
ownership of securities individually or as a group, ordinarily, in the absence
of contingencies, to elect a majority of the directors (or individuals
performing similar functions) of such other Person, and (b) own more than 50%
of the equity interests, provided that Atlas shall be deemed to be a Subsidiary
of each of FT and DT.
"Vote" shall mean, as to any entity, the ability to cast a vote at a
stockholders' or comparable meeting of such entity with respect to the election
of directors or other members of such entity's governing body, provided that
with respect to Sprint only, the term "Vote" shall mean the ability to exercise
general voting power (as opposed to the exercise of special voting or
disapproval rights such as those set forth in the Class A Provisions) with
respect to matters other than the election of directors at a meeting of the
stockholders of Sprint and shall include the aggregate number of Votes
represented by all Sprint Voting Securities which as of such date any of FT or
DT or any of their respective Affiliates is committed to acquire from Sprint or
has the right to acquire (or to commit to acquire) from Sprint pursuant to the
Investment Agreement and the Stockholders' Agreement.
"Voting Power" shall mean, as to any entity as at any date, the aggregate
number of Votes outstanding as at such date in respect of such entity plus, in
the case of Sprint, the aggregate number of Votes represented by all Sprint
Voting Securities which as of such date any of FT or DT or any of their
respective Affiliates is committed to acquire from Sprint or has the right to
acquire (or to commit to acquire) from Sprint pursuant to the Investment
Agreement and the Stockholders' Agreement.
Section 1.2. Interpretation and Construction of this Agreement. The
definitions in Section 1.1 shall apply equally to both the singular and plural
forms of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
"include," "includes" and "including" shall be deemed to be followed by the
phrase "without limitation." All references herein to Articles, Sections and
Exhibits shall be deemed to be references to Articles and Sections of, and
Exhibits to, this Agreement unless the context shall otherwise require. The
headings of the Articles and Sections are inserted for convenience of reference
only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. Unless the context shall otherwise require or
provide, any reference to any agreement or other instrument or statute or
regulation is to such agreement, instrument, statute or regulation as amended
and supplemented from time to time (and, in the case of a statute or
regulation, to any successor provision).
ARTICLE 2.
RESTRICTIONS ON ACQUISITION OF VOTING SECURITIES BY
FT, DT AND THEIR AFFILIATES AND ASSOCIATES
Section 2.1. Acquisition Restrictions.
(a) Subject to Sections 2.2, 2.3 and 2.4, each of FT and DT agrees that it
will not, and will cause each of its respective Affiliates and Associates not
to, directly or indirectly, acquire, offer to acquire, or agree to acquire, by
purchase or otherwise, Beneficial Ownership of:
(i) any Sprint Voting Securities at any time prior to the earlier of (A)
the Investment Completion Date, and (B) the Section 3(b)(v) Conversion
Date, in each case other than as a result of purchases from Sprint
pursuant to the Investment Agreement;
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(ii) if a Section 3(b)(v) Conversion has not occurred, any Sprint Voting
Securities on or following the Investment Completion Date and prior
to the fifteenth anniversary of the date hereof (the "Initial
Standstill Period"), if as a result the Votes represented by the
Sprint Voting Securities Beneficially Owned in the aggregate by FT,
DT and their respective Affiliates and Associates would represent in
the aggregate more than 20% of the Voting Power represented by the
Outstanding Sprint Voting Securities (the "Initial Percentage
Limitation");
(iii) if a Section 3(b)(v) Conversion has not occurred, any Sprint Voting
Securities following the Initial Standstill Period, if as a result
the Votes represented by the Sprint Voting Securities Beneficially
Owned in the aggregate by FT, DT and their respective Affiliates
and Associates would represent in the aggregate more than 30% of
the Voting Power represented by the Outstanding Sprint Voting
Securities (the "Subsequent Percentage Limitation"; the Initial
Percentage Limitation and the Subsequent Percentage Limitation, as
the case may be, also being referred to as the "Percentage
Limitations"), provided that the Sprint Voting Securities
Beneficially Owned in the aggregate by FT and DT and their
respective Affiliates and Associates may not at any time exceed 80%
of the Aggregate Foreign Ownership Limitation;
(iv) if a Section 3(b)(v) Conversion has occurred, any Sprint Voting
Securities on or following the Section 3(b)(v) Conversion Date; or
(v) any Sprint nonvoting equity securities following the date hereof.
(b) In addition to any other restrictions contained herein or in the Joint
Venture Documents, the Parties agree that none of the Parties will cause any JV
Entity to, directly or indirectly, acquire, offer to acquire, or agree to
acquire, by purchase or otherwise, Beneficial Ownership of any equity
securities of Sprint.
Section 2.2. Exception to Purchase Restrictions.
(a) Subject to Section 2.4, if a Percentage Limitation Adjustment Event shall
occur, then the applicable Percentage Limitation shall be increased to the
extent necessary so that Sections 2.1(a)(ii) and 2.1(a)(iii) do not prohibit
FT, DT and their respective Affiliates from acquiring Beneficial Ownership of
additional Sprint Voting Securities such that the Votes represented by the
Sprint Voting Securities Beneficially Owned in the aggregate by FT, DT and
their respective Affiliates and Associates and any Qualified Stock Purchasers
would be equal to (but no greater than) the Votes represented by the Sprint
Voting Securities Beneficially Owned by the Largest Other Holder, after giving
effect to any dilution to such holder resulting from the operation of the
Sprint Rights Plan, provided that the Sprint Voting Securities Beneficially
Owned in the aggregate by FT and DT and their respective Affiliates may not at
any time exceed 80% of the Aggregate Foreign Ownership Limitation.
(b) Subject to Section 2.4, if an acquisition by FT, DT or any of their
respective Affiliates or Associates of Beneficial Ownership of additional
Sprint Voting Securities otherwise permitted by Section 2.1(a)(iii) or 2.2(a)
is prohibited thereunder due to the proviso at the end of such Section, then FT
or DT may assign to one or more non-Alien Qualified Stock Purchasers in
accordance with Section 7.2 of the Stockholders' Agreement their rights under
Section 2.1(a)(iii) or 2.2(a) to purchase in the aggregate the number of shares
of Sprint Voting Securities which equals the number of shares of Sprint Voting
Securities the purchase of which is prohibited by the proviso at the end of
Section 2.1(a)(iii) or Section 2.2(a), as the case may be.
Section 2.3. Effect of Action by Sprint.
(a) Subject to Section 2.3(b), neither FT nor DT shall be deemed in violation
of this Article 2 if the Beneficial Ownership of Sprint Voting Securities by
FT, DT and their respective Affiliates and Associates exceeds the applicable
Percentage Limitation (i) solely as a result of an acquisition of Sprint Voting
Securities by Sprint that, by reducing the number of Outstanding Sprint Voting
Securities, increases the proportionate number of Sprint Voting Securities
Beneficially Owned by FT, DT and their respective Affiliates and Associates, or
(ii) because FT, DT or their respective Affiliates or Associates purchase
shares in excess of the applicable Percentage Limitation in reliance on
information regarding the number of outstanding shares of Sprint provided
directly to any of FT, DT and their respective Affiliates and Associates by
Sprint in response to a request for such information by any of FT, DT and their
respective Affiliates and Associates immediately prior to such purchase.
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(b) Notwithstanding Section 2.3(a), the applicable Percentage Limitation
shall be deemed exceeded if (i) in the case of Section 2.3(a)(i), FT, DT or any
of their respective Affiliates or Associates acquires Beneficial Ownership of
any additional Sprint Voting Securities after it has been notified of an
acquisition of Sprint Voting Securities by Sprint, or (ii) in the case of
Section 2.3(a)(ii), FT, DT or any of their respective Affiliates or Associates
acquires Beneficial Ownership of additional Sprint Voting Securities after it
has been notified that the information regarding the number of outstanding
shares previously provided to it was incorrect and it has been provided by
Sprint with correct information, unless in the case of clause (i) or (ii):
(x) upon the acquisition of Beneficial Ownership of such additional
Sprint Voting Securities, FT, DT and their respective Affiliates and
Associates do not Beneficially Own in the aggregate more than the
applicable Percentage Limitation, or
(y) subject to the rights of Sprint in Section 5.7 of the Stockholders'
Agreement, such acquisition is effected pursuant to (A) the exercise of
equity purchase rights by FT or DT pursuant to the Stockholders' Agreement,
or (B) market purchases which are made solely in lieu of the exercise of
equity purchase rights by FT or DT pursuant to the Stockholders' Agreement
following the issuance of securities by Sprint, so long as (1) either (I)
FT or DT, as the case may be, has irrevocably waived its rights to exercise
the equity purchase rights in respect of which such market purchases are
made in lieu thereof, or (II) the time period for the exercise of such
equity purchase rights has expired without the exercise of such rights, and
(2) following such market purchases, the Percentage Ownership Interest of
FT, DT and their respective Affiliates and Associates does not exceed the
Percentage Ownership Interest of FT, DT and their respective Affiliates and
Associates which would have been in effect had FT, DT and their respective
Affiliates exercised such equity purchase rights.
Section 2.4. Sprint Rights Plan.
(a) Notwithstanding the provisions of Sections 2.1 and 2.2, each of FT and DT
agrees that it will not, and will cause each of its respective Affiliates not
to, directly or indirectly, acquire, offer to acquire, or agree to acquire, by
purchase or otherwise, Beneficial Ownership of any Sprint Voting Securities if
such acquisition would result in FT or DT or any of their respective Affiliates
being deemed an Acquiring Person (as such term is defined in the Sprint Rights
Plan) or result in the occurrence of a Stock Acquisition Date, Distribution
Date, Section 11(a)(ii) Event or Section 13 Event (as such terms are defined in
the Sprint Rights Plan).
(b) If the Sprint Board of Directors amends or waives the provisions of the
Sprint Rights Plan in such a manner to permit an Other Holder to acquire
Beneficial Ownership of Sprint Voting Securities having Votes in excess of the
applicable Percentage Limitation without such acquisition resulting in the
Other Holder being deemed an Acquiring Person or resulting in the occurrence of
a Stock Acquisition Date, Distribution Date, Section 11(a)(ii) Event or Section
13 Event or makes any other changes to the Sprint Rights Plan which would
permit any Other Holder to own Sprint Voting Securities having Votes in excess
of the applicable Percentage Limitation without triggering adverse consequences
under the Sprint Rights Plan to such Other Holder, then Sprint will amend or
waive the provisions of the Sprint Rights Plan so that the Sprint Rights Plan
does not impose any prohibition (including any prohibition on the ownership of
Voting Securities), on FT, DT and their respective Affiliates and Associates
which is more restrictive than the restrictions imposed on any Other Holder.
ARTICLE 3.
OTHER STANDSTILL PROVISIONS; QUORUM
Section 3.1. Standstill Covenants. Each of FT and DT agrees that it will not,
and it will cause each of its respective Affiliates and Associates not to,
directly or indirectly, alone or in concert with others (including with any
Government Affiliate, Related Company or Qualified Stock Purchaser), unless
specifically requested in writing by the Chairman of Sprint or by a resolution
of a majority of the directors of Sprint, take any of the actions set forth
below, except to the extent expressly permitted or provided for by the Other
Agreements and the Joint Venture Documents:
(a) effect, seek, offer, propose (whether publicly or otherwise) or cause
or participate in, or assist any other Person to effect, seek, offer or
propose (whether publicly or otherwise) or participate in:
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(i) any acquisition of Beneficial Ownership of Sprint Voting
Securities or other equity interests in Sprint which would result in a
breach of Article 2 of this Agreement;
(ii) any tender or exchange offer, merger, consolidation, share
exchange or business combination involving Sprint or any material
portion of its business or any purchase of all or any substantial part
of the assets of Sprint or any material portion of its business,
provided that nothing in this clause (ii) shall prohibit discussions by
the Parties in connection with the conduct of the business of the JV
Entities in the manner contemplated by the Joint Venture Documents or
in connection with offers by FT or DT to purchase equity interests
owned by Sprint in the JV Entities;
(iii) any recapitalization, restructuring, liquidation, dissolution
or other extraordinary transaction with respect to Sprint or any
material portion of its business, provided that nothing in this clause
(iii) shall prohibit discussions by the Parties in connection with the
conduct of the business of the JV Entities or in connection with offers
by FT or DT to purchase equity interests owned by Sprint in the JV
Entities; or
(iv) any "solicitation" of "proxies" (as such terms are used in the
proxy rules of the SEC but without regard to the exclusion set forth in
Section 14a-1(l)(2)(iv) from the definition of "solicitation") with
respect to Sprint or any of its Affiliates or any action resulting in
such Person becoming a "participant" in any "election contest" (as such
terms are used in the proxy rules of the SEC) with respect to Sprint or
any of its Affiliates;
(b) propose any matter for submission to a vote of stockholders of Sprint
or any of its Affiliates; provided that nothing in this Section 3.1(b)
shall restrict the manner in which the members of the Board of Directors of
Sprint elected by the holders of Class A Stock may (i) vote on any matter
submitted to such Board, or (ii) participate in deliberations or
discussions of such Board (including making suggestions and raising issues
to the Board, so long as such actions do not otherwise violate any other
provision of this Section 3.1 or Section 3.2) in their capacity as members
of such Board and in no other capacity, including any capacity such persons
serving as directors otherwise may have as a director, officer, employee,
agent or representative of any other Person, including any holder of Class
A Stock;
(c) form, join or participate in a Group with respect to any Sprint
Voting Securities (other than any Group whose members consist solely of FT,
DT, any of their respective Affiliates and Associates and any Qualified
Subsidiaries);
(d) grant any proxy with respect to any Sprint Voting Securities to any
Person not designated by Sprint, except for proxies granted to FT or DT or
Qualified Subsidiaries or to individuals who are officers, employees or
regular agents or advisors of FT or DT or Qualified Subsidiaries who have
received specific instructions from FT, DT or Qualified Subsidiaries, as
the case may be, as to the voting of such Sprint Voting Securities with
respect to the matter or matters for which the proxy is granted;
(e) deposit any Sprint Voting Securities in a voting trust or subject any
Sprint Voting Securities to any arrangement or agreement with respect to
the voting of such Sprint Voting Securities or other agreement having
similar effect, except for agreements solely among FT, DT and any Qualified
Subsidiary;
(f) execute any written stockholder consent with respect to Sprint,
except for written consents executed by such Persons as holders of the
Class A Stock in connection with (i) the election of Class A Directors (as
defined in the Articles), (ii) the approval or disapproval of a Subject
Event, Major Issuance or Major Competitor Transaction (each as defined in
the Articles) during the period in which the holders of the Class A Stock
are entitled to exercise disapproval rights with respect to such matter, or
(iii) any vote by the holders of the Class A Stock with respect to which
such holders are entitled to vote as a class;
(g) take any other action to seek to affect the control of the management
or Board of Directors of Sprint or any of its Affiliates; provided that
nothing in this Section 3.1(g) shall restrict the manner in which the
members of the Board of Directors of Sprint elected by the holders of Class
A Stock may (i) vote on any matter submitted to such Board, or (ii)
participate in deliberations or discussions of such
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Board (including making suggestions and raising issues to the Board, so
long as such actions do not otherwise violate any other provision of this
Section 3.1 or Section 3.2) in their capacity as members of such Board and
in no other capacity, including any capacity such persons serving as
directors otherwise may have as a director, officer, employee, agent or
representative of any other Person, including any holder of Class A Stock;
(h) enter into any discussions, negotiations, arrangements or
understandings with any Person (including any Government Affiliate, Related
Company or Qualified Stock Purchaser) other than FT, DT, their Affiliates,
Associates and their respective directors, officers, employees, agents or
advisors with respect to any of the foregoing, or advise, assist, encourage
or seek to persuade others to take any action with respect to any of the
foregoing;
(i) disclose to any Person (including any Government Affiliate, Related
Company or Qualified Stock Purchaser) other than FT, DT, their Affiliates,
Associates and their respective directors, officers, employees, agents or
advisors any intention, plan or arrangement inconsistent with the foregoing
or with the restrictions on transfer set forth in Article II of the
Stockholders' Agreement or form any such intention which would result in
FT, DT or any of their respective Affiliates or Associates being required
to make any such disclosure in any filing with a Governmental Authority or
being required by Applicable Law to make a public announcement with respect
thereto; or
(j) request Sprint or any of its Affiliates, directors, officers,
employees, representatives, advisors or agents, directly or indirectly, to
amend or waive in any material respect this Agreement (including this
Section 3.1(j)) or the articles of incorporation or the bylaws of Sprint or
any of its Affiliates.
Section 3.2. Press Releases, Etc. by FT and DT.
(a) Subject to Section 3.2(b), each of FT and DT may issue such press
releases and make such other public communications to the financial community
and to its stockholders and such other public statements made in the ordinary
course relating to its investment in Sprint, in each case as it reasonably
deems appropriate and customary. Prior to making any such press release or
other communication, FT and DT will use reasonable efforts to consult with
Sprint in good faith regarding the form and content of any such communication,
and FT and DT will use reasonable efforts to coordinate any such communication
with any decisions reached by Sprint with respect to disclosures relating to
such matters.
(b) Notwithstanding the provisions of Section 3.2(a), unless required by
Applicable Law, neither FT nor DT, nor any of their respective Affiliates or
Associates, may make any press release, public announcement or other
communication with respect to any of the matters described in Sections 3.1(a),
3.1(b), 3.1(c), 3.1(g), 3.1(h) or 3.1(j) without the prior written consent of
the Chairman of Sprint or by a resolution of a majority of the directors of
Sprint. Nothing in this Section 3.2 shall permit FT or DT to take any action
which would otherwise violate any provision contained in Section 3.1.
Section 3.3. Voting of Sprint Voting Securities. Except as set forth in
Sections 3.1(d), 3.1(e) and 3.1(f), nothing in Section 3.1 shall restrict the
manner in which FT, DT and their respective Affiliates may vote their Sprint
Voting Securities.
Section 3.4. Quorum. Each of FT and DT shall use reasonable efforts to ensure
that they shall be present, and shall use reasonable efforts to cause their
respective Affiliates and Associates owning Sprint Voting Securities to be
present, in each case, in person or by proxy, at all meetings of stockholders
of Sprint so that all Sprint Voting Securities Beneficially Owned by FT and DT
and their respective Affiliates and Associates shall be counted for purposes of
determining the presence of a quorum at such meeting.
Section 3.5. Notice of Proposals Regarding Acquisition Transactions. Each of
FT and DT agrees that it will notify Sprint promptly if any inquiries or
proposals which FT or DT reasonably believes are of substance are received by,
any information is exchanged with respect to, or any negotiations or
substantive discussions are initiated or continued with, FT or DT or any of
their respective Affiliates regarding any Acquisition Proposal involving Sprint
or any purchase of any of the shares of capital stock of Sprint Beneficially
Owned by FT, DT or any of their respective Affiliates pursuant to a tender
offer or exchange offer.
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ARTICLE 4.
OBLIGATIONS OF OTHER ENTITIES
Section 4.1. Qualified Subsidiaries. FT and DT shall cause each Person which,
as a result of the acquisition of Beneficial Ownership of any Sprint Voting
Securities, would become a Qualified Subsidiary to execute a Qualified
Subsidiary Standstill Agreement prior to and as a condition to the
effectiveness of such acquisition.
Section 4.2. Strategic Investors. FT and DT shall cause each Person which, as
a result of an acquisition of Beneficial Ownership of any equity interest in a
Qualified Subsidiary, would become a Strategic Investor (and any Person who
Beneficially Owns more than 35% of the Voting Power, or otherwise Controls,
such acquiring Person) to execute a Strategic Investor Standstill Agreement
prior to and as a condition to the effectiveness of such acquisition.
ARTICLE 5.
MISCELLANEOUS
Section 5.1. Termination. The provisions of this Agreement shall terminate
(a) on the second anniversary of the date of the termination of the Investment
Agreement but only if such agreement is terminated prior to the First Closing,
or (b) if the Company proceeds with a transaction involving a Change of Control
following the process described in Section 4.1 of the Stockholders' Agreement.
Any termination of the Agreement as provided herein shall be without prejudice
to the rights of any Party arising out of the breach by any other Party of any
provision of this Agreement.
Section 5.2. Notices. All notices and other communications required or
permitted by this Agreement shall be made in writing in the English language
and any such notice or communication shall be deemed delivered when delivered
in person, transmitted by telex or telecopier, or seven days after it has been
sent by air mail, as follows:
FT:
6 place d'Alleray
75505 Paris Cedex 15
France
Attention: Executive Vice President, International
Tel: (33-1) 44-44-19-94
Fax: (33-1) 46-54-53-69
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
U.S.A.
Attention: Louis Begley, Esq.
Tel: (212) 909-6273
Fax: (212) 909-6836
DT:
Friedrich-Ebert-Allee 140
D-53113 Bonn
Germany
Attention: Chief Executive Officer
Tel: 49-228-181-9000
Fax: 49-228-181-8970
C-11
with a copy to:
Mayer, Brown & Platt
2000 Pennsylvania Avenue, N.W.
Suite 6500
Washington, D.C. 20006
U.S.A.
Attention: Werner Hein, Esq.
Tel: (202) 778-8726
Fax: (202) 861-0473
Sprint:
2330 Shawnee Mission Parkway
East Wing
Westwood, Kansas 66205
U.S.A.
Attention: General Counsel
Tel: (913) 624-8440
Fax: (913) 624-8426
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
U.S.A.
Attention: Bruce N. Hawthorne, Esq.
Tel: (404) 572-4903
Fax: (404) 572-5146
The Parties shall promptly notify each other in the manner provided in this
Section 5.2 of any change in their respective addresses. A notice of change of
address shall not be deemed to have been given until received by the addressee.
Communications by telex or telecopier also shall be sent concurrently by mail,
but shall in any event be effective as stated above.
Section 5.3. Assignment. No Party will assign this Agreement or any rights,
interests or obligations hereunder, or delegate performance of any of its
obligations hereunder, without the prior written consent of each other Party.
Section 5.4. Entire Agreement. This Agreement, including the Exhibits
attached hereto, embodies the entire agreement and understanding of the Parties
in respect of the subject matter contained herein, provided that this provision
shall not abrogate any other written agreement between the Parties executed
simultaneously with this Agreement. This Agreement supersedes all prior
agreements and understandings between the Parties with respect to such subject
matter.
Section 5.5. Waiver, Amendment, etc. This Agreement may not be amended or
supplemented, and no waivers of or consents to departures from the provisions
hereof shall be effective, unless set forth in a writing signed by, and
delivered to, all the Parties. No failure or delay of any Party in exercising
any power or right under this Agreement will operate as a waiver thereof, nor
will any single or partial exercise of any right or power, or any abandonment
or discontinuance of steps to enforce such right or power, preclude any other
or further exercise thereof or the exercise of any other right or power.
Section 5.6. Binding Agreement; No Third Party Beneficiaries. This Agreement
will be binding upon and inure to the benefit of the Parties and their
successors (including any successor of FT in a privatization) and permitted
assigns. Nothing expressed or implied herein is intended or will be construed
to confer upon
C-12
or to give to any third party any rights or remedies by virtue hereof. In the
event of a reorganization of FT pursuant to, as a result of or in connection
with, a privatization, the corporation or other entity formed to continue the
business activities of FT shall assume the rights and obligations of FT under
this Agreement.
Section 5.7. Governing Law; Dispute Resolution; Equitable Relief.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK (REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW).
(b) EACH PARTY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT OR
PROCEEDING AGAINST IT WITH RESPECT TO ITS OBLIGATIONS OR LIABILITIES UNDER OR
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT ONLY IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR, IN
THE EVENT (BUT ONLY IN THE EVENT) SUCH COURT DOES NOT HAVE SUBJECT MATTER
JURISDICTION OVER SUCH ACTION, SUIT OR PROCEEDING, IN THE COURTS OF THE STATE
OF NEW YORK SITTING IN THE CITY OF NEW YORK, AND EACH PARTY HEREBY IRREVOCABLY
ACCEPTS AND SUBMITS TO THE JURISDICTION OF EACH OF THE AFORESAID COURTS IN
PERSONAM, WITH RESPECT TO ANY SUCH ACTION, SUIT OR PROCEEDING (INCLUDING CLAIMS
FOR INTERIM RELIEF, COUNTERCLAIMS, ACTIONS WITH MULTIPLE DEFENDANTS AND ACTIONS
IN WHICH SUCH PARTY IS IMPLED). EACH PARTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT THAT IT MAY HAVE TO A JURY TRIAL IN ANY LEGAL ACTION, SUIT OR
PROCEEDING WITH RESPECT TO, OR ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT.
(c) EACH OF FT AND DT HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM (IN
SUCH CAPACITY, THE "PROCESS AGENT"), WITH AN OFFICE AT 1633 BROADWAY, NEW YORK,
NEW YORK 10019, AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, FOR AND ON ITS
BEHALF SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY LEGAL ACTION OR
PROCEEDINGS WITH RESPECT TO THIS AGREEMENT, AND SUCH SERVICE SHALL BE DEEMED
COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT, PROVIDED THAT IN THE CASE
OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY EFFECTING SUCH SERVICE
SHALL ALSO DELIVER A COPY THEREOF TO FT AND DT IN THE MANNER PROVIDED IN
SECTION 5.2. FT AND DT SHALL TAKE ALL SUCH ACTION AS MAY BE NECESSARY TO
CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO APPOINT ANOTHER AGENT
SO THAT FT AND DT WILL AT ALL TIMES HAVE AN AGENT FOR SERVICE OF PROCESS FOR
THE ABOVE PURPOSES IN NEW YORK, NEW YORK. IN THE EVENT OF THE TRANSFER OF ALL
OR SUBSTANTIALLY ALL OF THE ASSETS AND BUSINESS OF THE PROCESS AGENT TO ANY
OTHER CORPORATION BY CONSOLIDATION, MERGER, SALE OF ASSETS OR OTHERWISE, SUCH
OTHER CORPORATION SHALL BE SUBSTITUTED HEREUNDER FOR THE PROCESS AGENT WITH THE
SAME EFFECT AS IF NAMED HEREIN IN PLACE OF CT CORPORATION SYSTEM. EACH OF FT
AND DT FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED AIRMAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS
SET FORTH IN THIS AGREEMENT, SUCH SERVICE OF PROCESS TO BE EFFECTIVE UPON
ACKNOWLEDGMENT OF RECEIPT OF SUCH REGISTERED MAIL. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW. EACH OF FT AND DT EXPRESSLY ACKNOWLEDGES THAT THE FOREGOING
WAIVER IS INTENDED TO BE IRREVOCABLE UNDER THE LAWS OF THE STATE OF NEW YORK
AND OF THE UNITED STATES OF AMERICA.
C-13
(d) EACH PARTY AGREES THAT MONEY DAMAGES WOULD NOT BE A SUFFICIENT REMEDY FOR
THE OTHER PARTIES FOR ANY BREACH OF THIS AGREEMENT BY IT, AND THAT IN ADDITION
TO ALL OTHER REMEDIES THE OTHER PARTIES MAY HAVE, THEY SHALL BE ENTITLED TO
SPECIFIC PERFORMANCE AND TO INJUNCTIVE OR OTHER EQUITABLE RELIEF AS A REMEDY
FOR ANY SUCH BREACH. EACH PARTY AGREES NOT TO OPPOSE THE GRANTING OF SUCH
RELIEF IN THE EVENT A COURT DETERMINES THAT SUCH BREACH HAS OCCURRED, AND
AGREES TO WAIVE ANY REQUIREMENT FOR THE SECURING OR POSTING OF ANY BOND IN
CONNECTION WITH SUCH REMEDY.
Section 5.8. Severability. The invalidity or unenforceability of any
provision hereof in any jurisdiction will not affect the validity or
enforceability of the remainder hereof in that jurisdiction or the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction. To the extent permitted by Applicable Law, each Party waives any
provision of Applicable Law that renders any provision hereof prohibited or
unenforceable in any respect. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the Parties to the extent possible.
Section 5.9. Translation. The parties hereto have negotiated both this
Agreement and the Memorandum of Understanding, dated June 14, 1994 (the "MOU"),
among each of the parties hereto, in the English language, and have prepared
successive drafts and the definitive texts of the MOU and this Agreement in the
English language. For purposes of complying with loi n(degrees) 94-665 du 4
aout 1994 relative a l'emploi de la langue francaise, the parties hereto have
prepared a French version of this Agreement, which French version was executed
and delivered simultaneously with the execution and delivery of the English
version hereof. The parties deem the French and English versions of this
Agreement to be equally authoritative.
Section 5.10. Counterparts. This Agreement may be executed in one or more
counterparts each of which when so executed and delivered will be deemed an
original but all of which will constitute one and the same Agreement.
Section 5.11. Waiver of Immunity. Each of FT and DT agrees that, to the
extent that it or any of its property is or becomes entitled at any time to any
immunity on the grounds of sovereignty or otherwise based upon its status as an
agency or instrumentality of government from any legal action, suit or
proceeding or from setoff or counterclaim relating to this Agreement from the
jurisdiction of any competent court, from service of process, from attachment
prior to judgment, from attachment in aid of execution of a judgment, from
execution pursuant to a judgment or arbitral award or from any other legal
process in any jurisdiction, it, for itself and its property expressly,
irrevocably and unconditionally waives, and agrees not to plead or claim, any
such immunity with respect to such matters arising with respect to this
Agreement or the subject matter hereof (including any obligation for the
payment of money). Each of FT and DT agrees that the waiver in this provision
is irrevocable and is not subject to withdrawal in any jurisdiction or under
any statute, including the Foreign Sovereign Immunities Act, 28 U.S.C. (S)1602,
et seq. The foregoing waiver shall constitute a present waiver of immunity at
any time any action is initiated against FT or DT with respect to this
Agreement.
Section 5.12. Remedies. In addition to any other remedies which may be
available to Sprint (including any remedies which Sprint may have at law or in
equity):
(a) Each of FT and DT agrees that Sprint shall have no obligation to
honor transfers of Sprint Voting Securities or other equity interests in
Sprint to FT, DT or any of their respective Affiliates or Associates which
would cause any of FT, DT and their respective Affiliates or Associates to
Beneficially Own Sprint Voting Securities or other equity interests in
Sprint in violation of this Agreement, any such transfers shall be void and
of no effect, and Sprint shall be entitled to instruct any transfer agent
or agents for the equity interests in Sprint to refuse to honor such
transfers; and
C-14
(b) FT and DT acknowledge the provisions set forth in Section 5 of that
portion of ARTICLE SIXTH of the Articles entitled "GENERAL PROVISIONS
RELATING TO ALL STOCK," Section 7(b) of the Class A Provisions, and Section
3.5 and Article VIII of the Stockholders' Agreement relating to the
consequences of a breach of certain provisions of this Agreement or any
Qualified Subsidiary Standstill Agreement or to the consequences of certain
actions taken by a Government Affiliate, Qualified Stock Purchaser,
Strategic Investor or Related Company.
In Witness Whereof, Sprint, FT and DT have caused their respective duly
authorized officers to execute this Agreement as of the day and year first
above written.
Sprint Corporation
/s/ W. T. Esrey
By: _________________________________
William T. Esrey
Chairman and Chief Executive
Officer
France Telecom
/s/ Charles Rozmaryn
By: _________________________________
Charles Rozmaryn
Directeur General
Deutsche Telekom AG
/s/ Ron Sommer
By: _________________________________
Dr. Ron Sommer
Vorsitzender des Vorstandes
C-15
EXHIBIT D
++COMPOSITE++
ARTICLES OF INCORPORATION
OF
SPRINT CORPORATION
++MARKED TO SHOW CHANGES EFFECTED BY THE CHARTER AMENDMENTS++
++Additions to current Articles of Incorporation effected by the Charter
Amendments are shown by italics. Deletions from current Articles of
Incorporation effected by the Charter Amendments are shown by strike out.++
FIRST
The name of the corporation is SPRINT CORPORATION.
SECOND
**That this corporation is organized for profit, and that the purposes for
which it is formed are:**
**The construction and maintenance of a telephone line; the construction and
maintenance of a telegraph line; the supply of water to the public; the
manufacture and supply of gas or the supply of light or heat to the public by
other means; the production and supply of light, heat or power by electricity;
the construction and maintenance of sewers; the transaction of any
manufacturing, mining, mechanical, chemical or mercantile and agricultural
implements or produce business, either separately or combined; and the powers
(but not by way of limitation) to convey gas in pipes; to lend and borrow money
that may be necessary and proper in connection with the conduct of its
business; to hold, purchase, mortgage or otherwise convey such real and
personal estate as the purposes of the corporation shall require; and also
take, hold and convey such other property, real, personal or mixed, as shall be
requisite for such corporation to acquire in order to obtain or secure the
payment of any indebtedness or liability due to or belonging to the
corporation; to sell, real, mixed or personal property which may be proper for
the conduct of its business; to carry on its business outside of, as well as
within the state, and to purchase, hold, sell, transfer, mortgage, pledge or
otherwise dispose of the shares of, capital stock of, or any bonds, securities
or evidences of indebtedness created by any other corporation or corporations
of any state, or the United States, or any other country, nation or government,
which corporation shall be incorporated for the accomplishment of the same or
similar purposes as the corporation incorporated hereunder or shall be
incorporated for purposes, the accomplishment of which would be incidental to
or would aid or facilitate the accomplishment of the purposes for which the
corporation incorporated hereunder shall have been formed, and to exercise all
rights, powers and privileges of ownership of such stock or securities; to do
any and all other acts or things necessary, proper and incidental to the
conduct of its business and incidental to the accomplishment of the purposes
for which this corporation may be formed.**
++That this Corporation is organized for profit, and that the purposes for
which it is formed are:++
++The construction and maintenance of a telephone line; the construction and
maintenance of a telegraph line; and the powers (but not by way of limitation)
to enter into joint ventures (whether incorporated or unincorporated),
partnerships and other forms of business relationships with public operators,
governmental agencies, governmental instrumentalities, corporations,
partnerships and other organizations, entities or persons (whether domestic or
foreign) for the construction, leasing, ownership, operation and maintenance of
telecommunications and other information transmission networks and all
businesses related thereto, both++
D-1
++domestically and abroad, and to provide voice, data and other communications
and information services to any person or entity; to lend and borrow money that
may be necessary and proper in connection with the conduct of its business; to
hold, purchase, mortgage or otherwise convey such real and personal estate as
the purposes of this Corporation shall require; and also take, hold and convey
such other property, real, personal or mixed, as shall be requisite for this
Corporation to acquire in order to obtain or secure the payment of any
indebtedness or liability due to or belonging to this Corporation; to sell
real, mixed or personal property which may be proper for the conduct of its
business; to carry on its business outside of, as well as within, the state,
and to purchase, hold, sell, transfer, mortgage, pledge or otherwise dispose of
the shares of capital stock of, or any bonds, securities or evidences of
indebtedness created by any other corporation or corporations of any state, or
the United States, or any other country, nation or government, which
corporation shall be incorporated for the accomplishment of the same or similar
purposes as this Corporation or shall be incorporated for purposes, the
accomplishment of which would be incidental to or would aid or facilitate the
accomplishment of the purposes for which this Corporation shall have been
formed, and to exercise all rights, powers and privileges of ownership of such
stock or securities; to do any and all other acts or things necessary, proper
and incidental to the conduct of its business and incidental to the
accomplishment of the purposes for which this Corporation may be formed; and to
engage in any other lawful act or activity for which corporations may be
organized under the Kansas General Corporation Code (the "General Corporation
Code").++
THIRD
The Corporation's registered office is located at 2330 Shawnee Mission
Parkway, Westwood, Johnson County, Kansas 66205; Mr. J. Richard Devlin is the
registered agent at said address.
FOURTH
The Corporation shall have perpetual existence.
FIFTH
**1. The number of Directors of this Corporation shall not be less than nine
(9) nor more than eighteen (18) as may be determined from time to time by the
affirmative vote of the majority of the Board of Directors. The Directors shall
be divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of Directors constituting the entire Board of Directors. At the 1983
annual meeting of stockholders, Class I Directors shall be elected for a one-
year term, Class II Directors for a two-year term and Class III Directors for a
three-year term. At each succeeding annual meeting of stockholders beginning in
1984, successors to the class of Directors whose term expires at that annual
meeting shall be elected for a three-year term. A Director shall hold office
until the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office.**
**If the number of Directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of Directors in each
class as nearly equal as possible, and any additional Director of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class,
but in no case will a decrease in the number of Directors shorten the term of
any incumbent Director. Any Director elected to fill a vacancy not resulting
from an increase in the number of Directors shall have the same remaining term
as that of his predecessor. Any vacancy on the Board of Directors that results
from an increase in the number of Directors may be filled by the affirmative
vote of a majority of the Board of Directors then in office, and any other
vacancy occurring on the Board of Directors may be filled by the affirmative
vote of a majority of the Directors then in office, although less than a
quorum, or by a sole remaining Director.**
D-2
**Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect Directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of these Articles of Incorporation applicable thereto, and such Directors
so elected shall not be divided into classes pursuant to this ARTICLE FIFTH
unless expressly provided by such terms.**
**2. Except to the extent prohibited by law, the Board of Directors shall have
the right (which, to the extent exercised, shall be exclusive) to establish the
rights, powers, duties, rules and procedures that from time to time shall
govern the Board of Directors and each of its members, including without
limitation the vote required for any action by the Board of Directors, and that
from time to time shall affect the Directors' power to manage the business and
affairs of the Corporation; and no Bylaw shall be adopted by stockholders which
shall impair or impede the implementation of the foregoing.**
**3. A Director may be removed only for cause; such removal for cause may be
effected only by the affirmative vote of the holders of a majority of shares
entitled to vote in an election of Directors. No Director so removed may be
reinstated so long as the cause for removal continues to exist.**
++1. Number of Directors; Increases in Number of Directors. (a) The number of
Directors shall not be less than ten nor more than 20 (unless increased to more
than 20 pursuant to subsection (b) of this Section 1 or Section 6(e) of this
ARTICLE FIFTH) as may be determined from time to time by the affirmative vote
of the majority of the Board of Directors or as provided in subsection (b) of
this Section 1 or in Section 6(e) of this ARTICLE FIFTH.++
++(b) If at any time following the Initial Issuance Date, the Class A Holders
are entitled to elect a number of Directors pursuant to Section 2(a) of this
ARTICLE FIFTH or Section 3(d) of the Class A Provisions that exceeds the sum of
the number of Directors elected by the Class A Holders then serving on the
Board of Directors and the number of vacancies on the Board of Directors which
the Directors elected by the Class A Holders or the Class A Holders are
entitled to fill, the total number of Directors shall automatically and without
further action be increased by the smallest number necessary to enable the
Class A Holders (and the Directors elected by the Class A Holders in the case
of vacancies) to elect the number of Directors that the Class A Holders are
entitled to elect pursuant to such Section 2(a) or Section 3(d) of the Class A
Provisions.++
++2. Election of Directors. (a) Election of Directors by Class A Holders. (i)
Except as otherwise provided in Sections 7(b), 7(f) and 7(k) of the Class A
Provisions, after the Initial Issuance Date, the Class A Holders shall have the
right, voting separately as a class, to elect a number of Directors equal to
the greater of (x) two and (y) the product (rounded to the nearest whole number
if such product is not a whole number) of (I) the aggregate Percentage
Ownership Interests of the Class A Holders and (II) the total number of
Directors, provided that so long as Section 310 of the Communications Act of
1934, as amended (or any successor provision of law) ("Section 310"), remains
in effect, under no circumstances shall (A) the Class A Holders have the right
to elect Aliens as Directors such that the total number of Aliens so elected by
them would exceed the maximum percentage of the total number of Directors of
this Corporation permitted under Section 310 to be Aliens or (B) the total
number of Directors elected by the Class A Holders and serving on the Board of
Directors exceed the maximum percentage of the total Directors of this
Corporation permitted under Section 310 to be elected by shareholders that are
Aliens. Such Directors elected by the Class A Holders shall not be divided into
classes.++
++(ii) Upon the first to occur of (A) the conversion of all outstanding shares
of Class A Common Stock into Common Stock pursuant to Section 7 of the Class A
Provisions, (B) the redemption of all of the outstanding shares of Class A
Preference Stock, and (C) the termination of the Fundamental Rights as to all
outstanding shares of Class A Preference Stock pursuant to Section 7 of the
Class A Provisions, the term of office of all Class A Directors then in office
shall thereupon terminate, the vacancy or vacancies resulting from such
termination shall be filled by the remaining Directors then in office, acting
by majority vote of such remaining++
D-3
++Directors, and the Director or Directors so elected to fill such vacancy or
vacancies shall not be treated hereunder or under the Bylaws of this
Corporation as Class A Directors. If at any time the number of Directors that
the Class A Holders have the right to elect pursuant to this Section 2(a) shall
decrease other than as set forth in the preceding sentence, and the Class A
Holders shall not have removed or caused to resign, in either case effective
not later than the fifteenth day following the event that resulted in such
decrease, a number of Class A Directors so that the total number of Directors
elected by the Class A Holders then in office does not exceed the number
provided in the first sentence of Section 2(a)(i), then the terms of office of
all Class A Directors shall terminate on such fifteenth date. The vacancy or
vacancies resulting from such termination of the terms of the Class A Directors
shall be filled as follows: (A) the vacancy or vacancies equal to the number of
Directors that the Class A Holders then have the right to elect pursuant to
this Section 2(a) (after giving effect to the decrease referred to in the
preceding sentence) shall be filled as provided in Section 4(b) of this ARTICLE
FIFTH, and (B) the remaining vacancy or vacancies shall be filled by the
remaining Directors other than Class A Directors then in office, acting by
majority vote of such remaining Directors, and the Director or Directors so
elected to fill such vacancy or vacancies shall not be treated hereunder or
under the Bylaws as Class A Directors.++
++(iii) (1) Notwithstanding anything to the contrary in this Section 2, but
subject to paragraphs (2), (3), (4) and (5) of this Section 2(a)(iii) and the
proviso set forth at the end of the first sentence of Section 2(a)(i) of this
ARTICLE FIFTH (the "Section 2(a) Proviso"), if the aggregate Percentage
Ownership Interest of the Class A Holders is 20% or greater, the Class A
Holders at all times shall have the right to elect not less than 20% of the
total number of Directors, provided that, if the Section 2(a) Proviso prevents
the Class A Holders from electing at least 20% of the total number of Directors
under such circumstances, this Corporation shall increase the total number of
Directors to a number not greater than 20 if such increase would enable the
Class A Holders to elect at least 20% of the total number of Directors as
increased.++
++(2) The provisions of Section 2(a)(iii)(1) of this ARTICLE FIFTH (the
"Section 2(a)(iii)(1) Provisions") shall terminate and be of no force and
effect (a "Nullification") unless reinstated in accordance with Section
2(a)(iii)(5), if either:++
++(A) this Corporation delivers an opinion of nationally-recognized U.S. tax
counsel to the effect that the Section 2(a)(iii)(1) Provisions are,
with respect to both FT and DT, either not a Necessary Condition or not
a Sufficient Condition to secure any Treaty Benefit and within 90 days
of the delivery of such opinion by this Corporation there is not
delivered to this Corporation by FT or DT an opinion of nationally-
recognized U.S. tax counsel concluding that such provisions are a
Necessary Condition and a Sufficient Condition for either FT or DT to
secure a Treaty Benefit, or++
++(B) this Corporation provides written notice to FT and DT in which it
agrees to accord FT and DT those Treaty Benefits to which FT and DT
would be entitled if the Section 2(a)(iii)(1) Provisions were in effect
(the "Continuing Treaty Benefits") and to indemnify FT and DT on an
after-tax basis against (a) any liability arising out of according FT
and DT Continuing Treaty Benefits to the extent such liability would
not arise if the Section 2(a)(iii)(1) Provisions were in effect and (b)
the loss of those Continuing Treaty Benefits that this Corporation
cannot directly accord; provided that this Corporation by written
notice to FT and DT may revoke and withdraw such agreement to accord
such Treaty Benefits and to provide such indemnification following the
date of such notice and upon delivery of such notice the Section
2(a)(iii)(1) Provisions shall again become effective. Notwithstanding
any revocation or withdrawal pursuant to the proviso contained in the
immediately preceding sentence, this Corporation shall continue to
indemnify FT and DT on an after-tax basis against any loss of Treaty
Benefits to which FT or DT, as the case may be, would have been
entitled had the Nullification described in this Section
2(a)(iii)(2)(B) not taken place.++
++If a Nullification occurs under the provisions of paragraph (A) of this
Section 2(a)(iii)(2), then after the date of any such Nullification, and until
such time as a change in facts or Applicable Law requires a different result,
this Corporation shall accord FT and DT Treaty Benefits under the relevant
treaties between the United States and France and the United States and
Germany, but only to the extent FT or DT, as the case may be, would have been
entitled to claim such benefits had such Nullification not occurred.++
D-4
++(3) In addition to its rights under Section 2(a)(iii)(2), this Corporation
shall have the right, from time to time after the Investment Completion Date,
to deliver to each of FT and DT a written notice requesting that the chief tax
officer of each of FT and DT certify that FT, in the case of the request
furnished to FT, and DT, in the case of the request furnished to DT, is
eligible to claim at least one Treaty Benefit, and that such chief tax officer
provide this Corporation with other facts and information reasonably requested
by this Corporation that are reasonably necessary for this Corporation to
determine whether the Section 2(a)(iii)(1) Provisions are a Sufficient
Condition or a Necessary Condition to secure at least one Treaty Benefit.
Unless within 60 days of delivery of any such request, either FT or DT delivers
such requested certificate to this Corporation, and provides such requested
facts or information, the Section 2(a)(iii)(1) Provisions shall terminate and
be of no force or effect, unless reinstated in accordance with Section
2(a)(iii)(5).++
++(4) If FT and DT determine, after the Investment Completion Date, that the
Section 2(a)(iii)(1) Provisions are, with respect to both FT and DT, either not
a Necessary Condition or not a Sufficient Condition to secure at least one
Treaty Benefit, FT and DT shall deliver to this Corporation a certification to
such effect, and the Section 2(a)(iii)(1) Provisions shall terminate and be of
no force or effect, unless reinstated in accordance with Section 2(a)(iii)(5).++
++(5) Each of FT and DT shall have the right, at any time after the date the
Section 2(a)(iii)(1) Provisions are nullified pursuant to paragraph (A) (but
not paragraph (B)) of clause (2) or clause (3) or (4) of this Section
2(a)(iii), to deliver to this Corporation a certificate signed by the chief tax
officer of either FT or DT to the effect that FT or DT, as the case may be, is
eligible to claim a Treaty Benefit and an opinion of nationally-recognized U.S.
tax counsel to the effect that the Section 2(a)(iii)(1) Provisions are again a
Necessary Condition and a Sufficient Condition for any of FT or DT to secure a
Treaty Benefit. Upon the delivery of any such certificate and opinion, the
Section 2(a)(iii)(1) Provisions shall again become effective unless and until
they become ineffective pursuant to the other provisions of this Section
2(a)(iii).++
++(6) For purposes of this Section 2(a)(iii), the term "FT" shall include any
Qualified Subsidiary of FT organized under the laws of France and the term "DT"
shall include any Qualified Subsidiary of DT organized under the laws of
Germany.++
++(7) The Section 2(a)(iii)(1) Provisions shall be a "Necessary Condition"
with respect to any Treaty Benefit if FT or DT would not be entitled to claim
such Treaty Benefit unless such Section 2(a)(iii)(1) Provisions are in effect.++
++(8) The Section 2(a)(iii)(1) Provisions shall be a "Sufficient Condition"
with respect to any Treaty Benefit if FT and DT will otherwise fulfill all
other relevant conditions to claiming such Treaty Benefit if the Section
2(a)(iii)(1) Provisions are in effect.++
++(b) Election of Directors by Other Holders. (i) Subject to clause (ii)
below, the holders of Common Stock shall have the right to elect that number of
Directors equal to the excess of (x) the total number of Directors over (y) the
sum of the number of Directors the Class A Holders are entitled to elect and the
number of Directors, if any, that the holders of Preferred Stock, voting
separately by class or series, are entitled to elect in accordance with the
provisions of ARTICLE SIXTH of these Articles of Incorporation. The Class A
Holders shall have no right to vote for Directors under this Section 2(b)(i).++
++(ii) So long as Section 310 remains in effect, under no circumstances shall
an Alien Director elected by the holders of Common Stock be qualified to serve
as a Director if the number of Aliens who would then be serving as members of
the Board of Directors, including such elected Alien, would constitute more
than the maximum number of Aliens permitted by Section 310 on the Board of
Directors.++
++(iii) The Directors (other than the Directors elected by the Class A Holders
and any Directors elected by the holders of any one or more classes or series
of Preferred Stock having the right, voting separately by class or series, to
elect Directors) shall be divided into three classes, designated Class I, Class
II and Class III, with the++
D-5
++term of office of one class expiring each year. The number of Class I, Class
II and Class III Directors shall consist, as nearly as practicable, of one third
of the total number of Directors (other than the Directors elected by the Class
A Holders and any Directors elected by the holders of any one or more classes or
series of Preferred Stock having the right, voting separately by class or
series, to elect Directors). At each annual meeting of stockholders of this
Corporation after the Initial Issuance Date, successors to the class of
Directors whose term expires at that annual meeting shall be elected for a
three-year term.++
++(iv) Whenever the holders of any one or more classes or series of Preferred
Stock shall have the right, voting separately by class or series, to elect
Directors at an annual or special meeting of stockholders, the election, term
of office, filling of vacancies and other features of such directorships shall
be governed by the terms of these Articles of Incorporation applicable thereto,
and such Directors so elected shall not be divided into classes pursuant to
this ARTICLE FIFTH unless expressly provided by such terms.++
++3. Change in Number of Directors. If the number of Directors (other than
Directors elected by Class A Holders and any Directors elected by the holders
of any one or more classes or series of Preferred Stock having the right,
voting separately by class or series, to elect Directors) is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of Directors in each class as nearly equal as possible.++
++4. Term of Office. (a) Each Director shall be elected for a three year term.
A Director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify to
serve, subject to prior death, resignation, retirement, disqualification or
removal from office.++
++(b) Any vacancy on the Board of Directors (whether resulting from an
increase in the total number of Directors, the departure of one of the Directors
or otherwise) may be filled by the affirmative vote of a majority of the
Directors elected by the same class or classes of stockholders which would be
entitled to elect the Director who would fill such vacancy if the annual meeting
of stockholders of this Corporation were held on the date on which such vacancy
occurred, provided that at any time when there is only one such Director so
elected and then serving, such Director may fill such vacancy and, provided,
further, that at any time when there are no such Directors then serving, the
stockholders of the class or classes entitled to elect the Director who will
fill such vacancy shall have the right to fill such vacancy and, provided,
further, that, so long as any Class A Stock is outstanding, any vacancy to be
filled by the Director or Directors elected by the holders of Common Stock may
not be filled with a Person who, upon his election, would not be an Independent
Director or would be an Alien, as the case may be, if the effect of such
election would be that less than a majority of the Board of Directors following
such election would be Independent Directors, or that the number of Aliens who
would then be serving on the Board of Directors would constitute more than the
maximum number of Aliens permitted on the Board of Directors under Section
310.++
++(c) Any additional Director of any class elected to fill a vacancy resulting
from an increase in the number of Directors of such class shall hold office for
a term that shall coincide with the remaining term of the Directors of that
class, but, except as provided in Section 2(a)(ii) of this ARTICLE FIFTH, in no
case will a decrease in the number of Directors shorten the term of any
incumbent Director. Any Director elected to fill a vacancy not resulting from
an increase in the number of Directors shall have the same remaining term as
that of his predecessor.++
++5. Rights, Powers, Duties, Rules and Procedures; Amendment of Bylaws. (a)
Except to the extent prohibited by law or as set forth in these Articles of
Incorporation or the Bylaws, the Board of Directors shall have the right
(which, to the extent exercised, shall be exclusive) to establish the rights,
powers, duties, rules and procedures that from time to time shall govern the
Board of Directors and each of its members, including, without limitation, the
vote required for any action by the Board of Directors, and that from time to
time shall affect the Directors' power to manage the business and affairs of
this Corporation. No Bylaw shall be adopted by stockholders which shall impair
or impede the implementation of the foregoing.++
D-6
++(b) The Board of Directors is expressly authorized and empowered, in the
manner provided in the Bylaws of this Corporation, to adopt, amend and repeal
the Bylaws of this Corporation in any respect to the full extent permitted by
the General Corporation Code not inconsistent with the laws of the General
Corporation Code or with these Articles of Incorporation, provided that the
following provisions of the Bylaws may not be amended, altered, repealed or
made inoperative or ineffective by adoption of other provisions to the Bylaws
without the affirmative vote of the holders of record of a majority of the
shares of Class A Stock then outstanding, voting separately as a class, at any
annual or special meeting of stockholders, the notice of which shall have
specified or summarized the proposed amendment, alteration or repeal of the
Bylaws: ARTICLE III, SECTIONS 2, 4, 5, 8 AND 9; ARTICLE IV, SECTIONS 5, 6, 10,
11 AND 12; ARTICLE VI, SECTION 1; AND ARTICLE VII, SECTIONS 1 AND 2.++
++6. Removal; Changes in Status; Preferred Stock Directors. (a) Except as
provided in paragraphs (c) or (d) of this Section 6, a Director (other than a
Director elected by the Class A Holders or by the holders of any class or
series of Preferred Stock having the right, voting separately by class or
series, to elect Directors) may be removed only for cause. No Director so
removed may be reinstated for so long as the cause for removal continues to
exist. Such removal for cause may be effected only by the affirmative vote of
the holders of a majority of shares of the class or classes of stockholders
which were entitled to elect such Director.++
++(b) A Director elected by the holders of the Class A Stock may be removed
with or without cause. If removed for cause, no Director so removed may be
reinstated for so long as the cause for removal continues to exist. Removal may
be effected with or without cause by the affirmative vote of the holders of a
majority of shares of Class A Stock or with cause by the affirmative vote of
the holders of two-thirds of the shares of the Common Stock, the Class A Stock
and other capital stock of this Corporation entitled to general voting power,
voting together as a single class.++
++(c) If a Director elected by the holders of Common Stock who was not, at the
time of his election to the Board of Directors, an Alien, subsequently becomes
an Alien, the effect of which would be that the number of Aliens who would then
be serving as members of the Board of Directors, including the Director who
changed status, would constitute more than the maximum number of Aliens
permitted on the Board of Directors under Section 310, such Director shall upon
his change in status automatically and without further action be removed from
the Board of Directors.++
++(d) So long as any Class A Stock is outstanding, if an Independent Director
elected by the holders of Common Stock subsequently ceases to be an Independent
Director, the effect of which would be that the Independent Directors who would
then be serving as members of the Board of Directors would not constitute a
majority of the Board of Directors, such Director shall automatically and
without further action upon his change in status be removed from the Board of
Directors.++
++(e) (i) So long as any Class A Stock is outstanding, if a Director elected
by the holders of any class or series of Preferred Stock having the right,
voting separately by class or series, to elect Directors (a "Preferred Stock
Director") is an Alien, or after election becomes an Alien, the effect of which
would be that the number of Aliens who would then be serving as members of the
Board of Directors (including such Preferred Stock Director) would constitute
more than the maximum number of Aliens permitted on the Board of Directors under
Section 310, the total number of Directors shall automatically and without
further action be increased by the smallest number necessary to enable the Class
A Holders (and the Directors elected by the Class A Holders in the case of
vacancies) to elect Aliens as Directors to the fullest extent that the Class A
Holders are entitled to elect Directors pursuant to Section 2(a) of this ARTICLE
FIFTH without violating the requirements of Section 310.++
++(ii) So long as any Class A Stock is outstanding, if a Preferred Stock
Director is not an Independent Director, or after election ceases to be an
Independent Director, the effect of which would be that the Independent
Directors who would then be serving as members of the Board of Directors would
not constitute a++
D-7
++majority of the Board of Directors, the total number of Directors shall
automatically and without further action be increased by the smallest number
necessary so that the number of Directors then serving who are not Independent
Directors (including such Preferred Stock Director and any vacancies which the
holders of Class A Stock have a right to fill) constitute less than a majority
of the Board of Directors.++
++7. Definitions. Certain capitalized terms used in this ARTICLE FIFTH without
definition shall have the meanings set forth in Section 12 of the Class A
Provisions.++
SIXTH
**The total number of shares of capital stock which may be issued by the
Corporation is 520,000,000, of which 500,000,000 shares shall be Common Stock
of the par value of $2.50 per share and 20,000,000 shares shall be Preferred
Stock (herein referred to as the "Preferred Stock") without par value.**
++The total number of shares of capital stock which may be issued by this
Corporation is 2,020,000,000, of which 500,000,000 shares shall be Class A
Common Stock with a par value of $2.50 per share (hereinafter, the "Class A
Common Stock"); 1,000,000,000 shares shall be Common Stock with a par value of
$2.50 per share (hereinafter, the "Common Stock"); 500,000,000 shares shall be
Class A Preference Stock with a par value of $1.00 per share (hereinafter, the
"Class A Preference Stock"); and 20,000,000 shares shall be Preferred Stock
(herein referred to as the "Preferred Stock," such term not to include the Class
A Preference Stock) without par value.++
GENERAL PROVISIONS RELATING TO ALL STOCK
**No holder of shares of any class of this Corporation or holder of any
security or obligation convertible into shares of any class of this Corporation
shall have any preemptive right whatsoever to subscribe for, purchase or
otherwise acquire shares of this Corporation of any class, whether now or
hereafter authorized. Stockholders of the Corporation shall not be entitled to
cumulative voting of their shares in elections of Directors.**
++1. Preemptive Rights; Cumulative Voting. No holder of shares of capital
stock of any class of this Corporation or holder of any security or obligation
convertible into shares of capital stock of any class of this Corporation shall
have any preemptive right whatsoever to subscribe for, purchase or otherwise
acquire shares of capital stock of any class of this Corporation, whether now or
hereafter authorized; provided that this provision shall not prohibit this
Corporation from granting, contractually or otherwise, to any such holder, the
right to purchase additional securities of this Corporation. Stockholders of
this Corporation shall not be entitled to cumulative voting of their shares in
elections of Directors.++
++2. Redemption of Shares Held by Aliens. Notwithstanding any other provision
of these Articles of Incorporation to the contrary, outstanding shares of Common
Stock and Class A Stock Beneficially Owned by Aliens may be redeemed by this
Corporation, by action duly taken by the Board of Directors (with the approval
of a majority of the Continuing Directors (as defined in ARTICLE SEVENTH) at a
meeting at which at least seven Continuing Directors are present, except that no
such approval of the Continuing Directors shall be required if (i) the Fair
Price Provisions have been deleted in their entirety, (ii) the Fair Price
Provisions have been modified so as explicitly not to apply to any Class A
Holder, or they have been modified in a manner reasonably satisfactory to FT and
DT so as explicitly not to apply to any transactions with any Class A Holder
contemplated under these Articles of Incorporation, (iii) the transaction in
question is not a "Business Combination" within the meaning of the Fair Price
Provisions, or (iv) the Class A Holder that is a party to the++
D-8
++transaction, along with its Affiliates (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as in effect on October 1, 1982)
and Associates (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as in effect on October 1, 1982), is no longer an
"Interested Stockholder" or "Affiliate" of an "Interested Stockholder" within
the meaning of the Fair Price Provisions), to the extent necessary or
advisable, in the judgment of the Board of Directors, for this Corporation or
any of its Subsidiaries to comply with the requirements of Section 310 (each
of (i) through (iv), a "Fair Price Condition"), provided that shares of Class
A Stock only may be redeemed if, and only to the extent that, the outstanding
shares of Class A Stock represent Votes constituting greater than 20% of the
aggregate Voting Power of this Corporation immediately prior to the time of
such redemption. The terms and conditions of such redemption shall be as
follows, subject in any case to any other rights of a particular Alien or of
this Corporation pursuant to any contract or agreement between such Alien and
this Corporation:++
++(a) except as provided in Section 2(f), the redemption price of the
shares to be redeemed pursuant to this Section 2 of these GENERAL
PROVISIONS RELATING TO ALL STOCK of ARTICLE SIXTH shall be equal to the
Market Price of such shares on the third Business Day prior to the date
notice of such redemption is given pursuant to subsection (d) of this
Section 2, provided that, except as provided in clause (f), below, such
redemption price as to any Alien who purchased such shares of Common Stock
after , 1995/1/ and within one year prior to the Redemption Date shall
not (unless otherwise determined by the Board of Directors) exceed the
purchase price paid by such Alien for such shares;++
++(b) the redemption price of such shares may be paid in cash, Redemption
Securities or any combination thereof;++
++(c) if less than all of the shares Beneficially Owned by Aliens are to be
redeemed, the shares to be redeemed shall be selected in such manner as
shall be determined by the Board of Directors, which may include selection
first of the most recently purchased shares thereof, selection by lot or
selection in any other manner determined by the Board of Directors to be
equitable, provided that this Corporation shall in all cases be entitled to
redeem shares of Common Stock Beneficially Owned by Aliens prior to
redeeming any shares of Class A Common Stock Beneficially Owned by Aliens;++
++(d) this Corporation shall give notice of the Redemption Date at least 30
days prior to the Redemption Date to the record holders of the shares
selected to be redeemed (unless waived in writing by any such holder) by
delivering a written notice by first class mail, postage pre-paid, to the
holders of record of the shares selected to be redeemed, addressed to such
holders at their last address as shown upon the stock transfer books of
this Corporation (each such notice of redemption specifying the date fixed
for redemption, the redemption price, the place or places of payment and
that payment will be made upon presentation and surrender of the
certificates representing such shares), provided that the Redemption Date
may be the date on which written notice shall be given to record holders if
the cash or Redemption Securities necessary to effect the redemption shall
have been deposited in trust for the benefit of such record holders and
subject to immediate withdrawal by them upon surrender of the stock
certificates for their shares to be redeemed;++
++(e) on the Redemption Date, unless this Corporation shall have defaulted
in paying or setting aside for payment the cash or Redemption Securities
payable upon such redemption, any and all rights of Aliens in respect of
shares so redeemed (including without limitation any rights to vote or
participate in dividends), shall cease and terminate, and from and after
such Redemption Date such Aliens shall be entitled only to receive the cash
or Redemption Securities payable upon redemption of the shares to be
redeemed; and++
++(f) such other terms and conditions as the Board of Directors shall
determine to be equitable, provided that, if any shares of Class A Stock
are redeemed pursuant to this Section 2 of these GENERAL PROVISIONS
RELATING TO ALL STOCK of ARTICLE SIXTH, the redemption price of any such
shares redeemed shall be a per share price equal to (i) in the case of
Class A Common Stock the greater of (A) the Market Price of a share of
Common Stock on the Redemption Date and (B) the Weighted Average Price paid
by the Class A Holders for the Class A Common Stock together with a stock
appreciation factor thereon (calculated on the basis of a 365-day year) at
the rate of 3.88% through and including the++
- --------
/1/Date of Proxy Statement to be inserted.
D-9
++Redemption Date, such stock appreciation factor to be calculated, on an
annual compounding basis, from the date of purchase of such Class A Common
Stock until the Redemption Date (the "Alternative Price"), and (ii) in the
case of Class A Preference Stock, its Liquidation Preference, provided,
that if this Corporation redeems any shares of Class A Common Stock after
the third anniversary of the Investment Completion Date, the redemption
price of any such shares redeemed shall be the Market Price of a share of
Common Stock on the Redemption Date. The redemption price to be paid to the
Class A Holders shall be modified in accordance with Article IX of the
Stockholders' Agreement if either (i) such redemption is effected on or
prior to the third anniversary of the Investment Completion Date, or (ii)
such redemption is effected within the 120-day period described in the last
sentence of Section 2.11 of the Stockholders' Agreement (as such period may
be extended pursuant thereto) following an election by this Corporation to
redeem shares in accordance with such Section.++
++Any notice that is mailed as herein provided shall be conclusively presumed
to have been duly given, whether or not the holder of shares to be redeemed
received such notice, provided that all notices to be given to the Class A
Holders shall be made and deemed delivered in accordance with Section 13 of the
Class A Provisions; and failure to give such notice by mail, or any defect in
such notice, to holders of shares designated for redemption shall not affect
the validity of the proceedings for the redemption of any other shares.++
++3. Beneficial Ownership Inquiry. (a) This Corporation may by written notice
require a Person that is a holder of record of Common Stock or Class A Stock or
that this Corporation knows to have, or has reasonable cause to believe has,
Beneficial Ownership of Common Stock or Class A Stock to certify that, to the
knowledge of such Person:++
++(i) no Common Stock or Class A Stock as to which such Person has record
ownership or Beneficial Ownership is Beneficially Owned by Aliens; or++
++(ii) the number and class or series of shares of Common Stock or Class A
Stock owned of record or Beneficially Owned by such Person that are owned
of record or Beneficially Owned by Persons that are Aliens are as set forth
in such certificate.++
++(b) With respect to any Common Stock or Class A Stock identified by such
Person in response to Section 3(a)(ii) above, this Corporation may require such
Person to provide such further information as this Corporation may reasonably
require in order to implement the provisions of Section 2 of these GENERAL
PROVISIONS RELATING TO ALL STOCK of ARTICLE SIXTH.++
++(c) For purposes of applying Section 2 of these GENERAL PROVISIONS RELATING
TO ALL STOCK of ARTICLE SIXTH with respect to any Common Stock or Class A
Stock, in the event of the failure of any Person to provide the certificate or
other information to which this Corporation is entitled pursuant to this
Section, this Corporation in its sole discretion may presume that the Common
Stock or Class A Stock in question is, or is not, Beneficially Owned by
Aliens.++
++4. Factual Determinations. The Board of Directors shall have the power and
duty to construe and apply the provisions of Sections 2 and 3 of these GENERAL
PROVISIONS RELATING TO ALL STOCK of ARTICLE SIXTH and, with respect to shares
of Common Stock, to make all determinations necessary or desirable to implement
such provisions, including but not limited to: (a) the number of shares of
Common Stock that are Beneficially Owned by any Person; (b) whether a Person is
an Alien; (c) the application of any other definition of these Articles of
Incorporation to the given facts; and (d) any other matter relating to the
applicability or effect of Section 2 of these GENERAL PROVISIONS RELATING TO
ALL STOCK of ARTICLE SIXTH.++
++5. Loss of Voting Rights. If (a) there is a breach by FT, DT, any Qualified
Subsidiary, any Strategic Investor or any Qualified Stock Purchaser of any of
the provisions of Sections 3.1(a) or 3.2(b) (as it relates to matters described
in Section 3.1(a)) of the Standstill Agreement or any corresponding provision
of any Qualified Subsidiary Standstill Agreement, Strategic Investor Standstill
Agreement or Qualified Stock Purchaser Standstill Agreement, (b) there is a
willful breach in any material respect by FT, DT, any Qualified Subsidiary,++
D-10
++any Strategic Investor or any Qualified Stock Purchaser of any provision of
Section 3.1 (other than Section 3.1(a)) of the Standstill Agreement or any
corresponding provision of any Qualified Subsidiary Standstill Agreement,
Strategic Investor Standstill Agreement or Qualified Stock Purchaser Standstill
Agreement, or (c) a Government Affiliate or Related Company (each as defined in
the Standstill Agreement) takes an action which if taken by FT or DT would
violate Sections 3.1 or 3.2(b) (as it relates to matters other than those
described in Section 3.1(a)) of the Standstill Agreement, then FT and its
Qualified Subsidiaries (except in the case of a breach arising from the action
of a Government Affiliate of Germany, a Related Company of DT or a Strategic
Investor in a Qualified Subsidiary of DT in which FT is not an investor), DT
and its Qualified Subsidiaries (except in the case of a breach arising from the
action of a Government Affiliate of France, a Related Company of FT or a
Strategic Investor in a Qualified Subsidiary of FT in which DT is not an
investor) and each Qualified Stock Purchaser shall not be entitled to vote any
of their shares of capital stock of this Corporation with respect to any matter
or proposal arising from, relating to or involving, such breach or action, and
no such purported vote by such Class A Holders on such matter shall be
effective or shall be counted.++
++6. Definitions. Certain capitalized terms used in these GENERAL PROVISIONS
RELATING TO ALL STOCK without definition shall have the meanings set forth in
Section 12 of the provisions of ARTICLE SIXTH entitled GENERAL PROVISIONS
RELATING TO CLASS A STOCK.++
++GENERAL PROVISIONS RELATING TO COMMON STOCK
AND CLASS A STOCK++
++1. Except as expressly set forth in ARTICLE FIFTH of these Articles of
Incorporation or in the provisions of ARTICLE SIXTH entitled GENERAL PROVISIONS
RELATING TO ALL STOCK and GENERAL PROVISIONS RELATING TO CLASS A STOCK, each
share of Common Stock and each share of Class A Common Stock shall be entitled
to one Vote, and the shares of Class A Preference Stock shall be entitled to
the number of Votes equal to the number of Class A Conversion Shares or, if the
Conversion Price has not yet been Fixed, the number of Class A Conversion
Shares determined as if the Conversion Price had been Fixed on the Initial
Issuance Date at the Minimum Price, on all matters in respect of which the
holders of Common Stock are entitled to vote, and the Class A Holders and the
holders of Common Stock shall vote together with the holders of all other
classes or series of capital stock which have general voting power on all such
matters as a single class.++
++2. Dividends shall be declared and paid only out of net income or earned
surplus of this Corporation.++
++3. (a) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of this Corporation, after payment or provision for payment of
the debts and other liabilities of this Corporation, including the liquidation
preferences of any series of Preferred Stock and of the Class A Preference
Stock, the holders of Class A Common Stock and the holders of Common Stock
shall be entitled to share ratably in the remaining net assets of this
Corporation.++
++(b) The Class A Preference Stock shall rank junior to any series of
Preferred Stock in the payment of dividends and the distribution of assets upon
the liquidation, dissolution or winding-up of this Corporation, unless any such
series of Preferred Stock is specifically made junior to or to rank on a parity
with the Class A Preference Stock in the payment of dividends or the
distribution of assets upon liquidation, dissolution or winding-up of this
Corporation. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of this Corporation, no holder of shares of Class A
Preference Stock shall receive any distributions or payments with respect to
such shares unless prior thereto holders of all series of Preferred Stock, which
have not been specifically made junior to or to rank on a parity with the Class
A Preference Stock in the distribution of assets upon liquidation, dissolution
or winding-up of this Corporation, shall have received with respect to each
share of such Preferred Stock the amounts to be paid with respect to such share
upon the liquidation, dissolution or winding-up of this Corporation as provided
in ARTICLE SIXTH of these Articles of Incorporation.++
D-11
++(c) In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of this Corporation, (i) no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding-up) to the Class A Preference Stock, unless prior thereto
the holders of shares of Class A Preference Stock shall have received with
respect to all outstanding shares of Class A Preference Stock (other than
Section 7(i) Preference Shares), the Adjusted Aggregate Liquidation Preference,
and (ii) the Section 7(i) Preference Shares shall, immediately prior to such
liquidation, dissolution or winding-up, automatically convert (without the
payment of any consideration) into that number of duly issued, fully paid and
nonassessable shares of Common Stock equal to the number of shares of Common
Stock purchased by the Class A Holders and converted into shares of Class A
Preference Stock pursuant to Section 7(i) of the Class A Provisions, for an
aggregate conversion price equal to the Section 7(i) Aggregate Purchase Price.++
++(d) Neither the merger nor consolidation of this Corporation, nor the
Transfer of all or part of its assets, shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding-up of this Corporation within
the meaning of this clause 3.++
GENERAL PROVISIONS RELATING TO COMMON STOCK
**Each share of the Common Stock shall be entitled to one vote on all matters.
Dividends shall be declared and paid only out of net income or earned surplus
of the Corporation.**
++1. Dividends. The holders of the Common Stock shall be entitled to receive,
when and if declared by the Board of Directors out of funds legally available
therefor, dividends in respect of the Common Stock equivalent on a per share
basis to those payable on the Class A Common Stock. Dividends on the Common
Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Class A Common Stock and shall be in an
amount per share equal to the full per share amount of any cash dividend paid on
shares of Class A Common Stock, plus the full per share amount (payable in kind)
of any noncash dividend paid on shares of Class A Common Stock, provided that if
this Corporation shall declare and pay any dividends on shares of Class A Common
Stock payable in shares of Class A Common Stock, or in options, warrants or
rights to acquire shares of Class A Common Stock, or in securities convertible
into or exchangeable for shares of Class A Common Stock, then in each case, this
Corporation shall declare and pay, at the same time that it declares and pays
any such dividend, an equivalent dividend per share on the Common Stock payable
in shares of Common Stock, or options, warrants or rights to acquire shares of
Common Stock, or securities convertible into or exchangeable for shares of
Common Stock.++
++2. No Dilution or Impairment. No reclassification, subdivision or
combination of the outstanding shares of Class A Stock shall be effected
directly or indirectly (including, without limitation, any reclassification,
subdivision or combination effected pursuant to a consolidation, merger or
liquidation) unless at the same time the Common Stock is reclassified,
subdivided or combined so that the holders of the Common Stock are entitled, in
the aggregate, to Voting Power representing the same percentage of the Voting
Power of this Corporation relative to the Class A Stock as was represented by
the shares of Common Stock outstanding immediately prior to such
reclassification, subdivision or combination, subject to the limitations,
restrictions and conditions on such rights contained herein.++
++GENERAL PROVISIONS RELATING TO CLASS A STOCK++
++1. Rights and Privileges. (a) Except as otherwise set forth in ARTICLE FIFTH
of these Articles of Incorporation, that portion of ARTICLE SIXTH entitled
GENERAL PROVISIONS RELATING TO ALL STOCK, or the Class A Provisions, the
holders of Class A Common Stock shall be entitled to all of the rights++
D-12
++and privileges pertaining to the ownership of Common Stock without any
limitations, prohibitions, restrictions or qualifications whatsoever, and shall
be entitled to such other rights and privileges as are expressly set forth in
ARTICLE FIFTH of these Articles of Incorporation, that portion of ARTICLE SIXTH
entitled GENERAL PROVISIONS RELATING TO ALL STOCK or in the Class A
Provisions.++
++(b) Except as otherwise set forth in ARTICLE FIFTH of these Articles of
Incorporation, that portion of ARTICLE SIXTH entitled GENERAL PROVISIONS
RELATING TO ALL STOCK, or in the Class A Provisions, the holders of Class A
Preference Stock shall be entitled to all of the rights and privileges to which
Kansas law accords a separate class of preferred stock, without any
limitations, prohibitions, restrictions or qualifications whatsoever, and shall
be entitled to such other rights and privileges as are expressly set forth in
ARTICLE FIFTH of these Articles of Incorporation, that portion of ARTICLE SIXTH
entitled GENERAL PROVISIONS RELATING TO ALL STOCK or in the Class A
Provisions.++
++2. Dividends. (a) (i) The holders of shares of Class A Common Stock shall be
entitled to receive, when and if declared by the Board of Directors out of
funds legally available therefor, dividends in respect of the Class A Common
Stock equivalent on a per share basis to those payable on the Common Stock.
Dividends on the Class A Common Stock shall be payable on the same date fixed
for the payment of the corresponding dividend on shares of Common Stock and
shall be in an amount per share equal to the full per share amount of any cash
dividend paid on shares of Common Stock, plus the full per share amount
(payable in kind) of any non-cash dividend paid on shares of Common Stock.++
++(ii) The holders of shares of Class A Preference Stock, in preference to the
holders of Common Stock and of any other outstanding junior capital stock
(including any series of Preferred Stock which is specifically made junior to
the Class A Preference Stock in the payment of dividends), but after payment of
dividends to holders of shares of all series of Preferred Stock that are not
specifically made junior to or made to rank on a parity with the Class A
Preference Stock in the payment of dividends, shall be entitled to receive,
when and if declared by the Board of Directors out of funds legally available
therefor, quarterly dividends payable in cash on the first day of January,
April, July and October in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date" and each such quarter a "Dividend
Payment Period"), commencing on the first Quarterly Dividend Payment Date after
the Initial Issuance Date, in an amount per share (rounded to the nearest cent)
equal to (x) if the Conversion Price has not yet been Fixed, (1) during the
first two years following the Initial Issuance Date, the greater of (A) the
Minimum Dividend Amount per share of Class A Preference Stock multiplied by
43,118,018 and divided by the number of shares of Class A Preference Stock then
outstanding, and (B) the Per Share Common Dividend (as defined below)
multiplied by the Dividend Factor divided by the number of shares of Class A
Preference Stock then outstanding, and (2) following the second anniversary of
the Initial Issuance Date, an identical amount per Dividend Payment Period
resulting in an annual dividend rate equal to 12.5 basis points over the
Applicable LIBOR Rate, (y) if the Conversion Price has been Fixed but the
Investment Completion Date has not occurred, the aggregate per share amount of
all dividends and distributions (other than Extraordinary Dividends and other
dividends or distributions that result in an adjustment pursuant to the Class A
Provisions and other than a dividend payable in shares of Cellular Common Stock
in connection with the Cellular Spin-off if it occurs prior to the delivery of
a Notice of Abandonment)(the "Per Share Common Dividend"), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the
Initial Issuance Date, in each case multiplied by a fraction, the numerator of
which shall be $47.225 and the denominator of which shall be the Conversion
Price at the time in effect, or (z) if the Investment Completion Date has
occurred, the aggregate per share amount of all dividends (including, without
limitation, all non-cash dividends except for dividends described in clause
(iii), below) declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the Investment Completion Date, in each case
multiplied by a fraction, the numerator of which shall be the Liquidation
Preference of a share of Class A Preference Stock and the denominator of which
shall be the Conversion Price at the time in effect. With respect to shares of
Class A Preference Stock outstanding for less than a full Dividend Payment
Period, the dividend paid with respect to++
D-13
++such shares shall be equal to the dividend paid with respect to such entire
Dividend Payment Period times a fraction the numerator of which shall be the
number of days during such Dividend Payment Period that such shares were
outstanding and the denominator shall be the number of days during such
Dividend Payment Period.++
++(iii) If this Corporation shall declare and pay any dividend on shares of
Common Stock payable in shares of Common Stock, or in options, warrants or
rights to acquire shares of Common Stock, or in securities convertible into or
exchangeable for shares of Common Stock, then in each case, this Corporation
shall declare and pay, at the same time that it declares and pays any such
dividend, an equivalent dividend per share on the Class A Common Stock.++
++(b) Dividends under Section 2(a)(ii) of the Class A Provisions shall begin
to accrue and be cumulative on outstanding shares of Class A Preference Stock
from the Initial Issuance Date. Accrued but unpaid dividends shall accumulate
but shall not bear interest. Dividends paid on the shares of Class A Preference
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a share-by-
share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Class A Preference Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 30 days
prior to the date fixed for the payment thereof.++
++(c) Notwithstanding any other provision of this Section 2, the holders of
shares of Class A Preference Stock shall not be entitled to receive shares,
other equity interests of any direct or indirect Subsidiary of this Corporation
or cash or other property distributed to the holders of Common Stock in
connection with the Cellular Spin-off.++
++3. Other Class A Preference Stock Terms. (a) (i) Except as otherwise
provided in clause (iii) below, all of the outstanding shares of Class A
Preference Stock shall automatically convert, without the requirement of any
payment by the Class A Holders, upon the date (the "Conversion Date") that is
the later of (A) the earliest of (I) 35 Trading Days after the Cellular Spin-off
Date, (II) 30 days after the date on which this Corporation has delivered a
notice to each Class A Holder that the Cellular Spin-off has been abandoned (a
"Notice of Abandonment"), and (III) the 60th day after the fifth anniversary of
the Initial Issuance Date, and (B) five Business Days after the date on which
the Conversion Price becomes Fixed, into that number of validly issued, fully
paid and nonassessable shares of Class A Common Stock or, if the Fundamental
Rights shall have terminated as to all outstanding shares of Class A Preference
Stock, Common Stock, equal to the quotient of the aggregate of the Liquidation
Preference of the outstanding shares of Class A Preference Stock divided by the
applicable Conversion Price specified in Section 3(b); provided that, if the
Conversion Price has not been Fixed by the fifth anniversary of the Initial
Issuance Date, the Class A Preference Stock shall only be convertible pursuant
to Section 3(b)(v) of the Class A Provisions. In addition, shares of Class A
Preference Stock shall convert, without the requirement of any payment by the
Class A Holders, as otherwise provided in these Class A Provisions. To the
extent any such conversion would result in the Class A Holders that are Aliens
owning securities with Votes constituting in the aggregate more than 20% of the
Voting Power of this Corporation outstanding at that time, such number of shares
of Class A Preference Stock as may be required so that the 20% level is not
exceeded shall, at the election of this Corporation, effected by delivery of a
notice to each Class A Holder at least five Business Days prior to the
Conversion Date, be either (a) redeemed by this Corporation within ten Business
Days of the delivery of such notice in cash and/or Redemption Securities in an
amount equal to the Liquidation Preference of such shares as modified to comply
with the requirements of Article IX of the Stockholders' Agreement, or (b) sold
by such Class A Holders in third party or open market sales (a "Requested
Sale"), provided that this Corporation shall not be permitted to so redeem
shares of Class A Preference Stock unless a majority of the Continuing Directors
shall have first approved, at a meeting at which at least seven Continuing
Directors are present, such redemption, unless a Fair Price Condition has been
satisfied. In the case of any Requested Sale, the Class A Holders shall sell
such Shares, as promptly as practicable following receipt of the notice referred
to in the immediately preceding sentence, but in no event later than 120 days
following the receipt thereof, as extended day-for-day for each day that such
sales are++
D-14
++actually delayed during such time period because (A) the Requested Sale cannot
be effected due to the anti-fraud rules of the U.S. securities laws, or (B)
this Corporation has delayed a proposed registration of such shares in
accordance with Section 1.4 of the Registration Rights Agreement. Each Class A
Holder shall, promptly upon the conclusion of such Requested Sale, deliver to
this Corporation a notice stating that such Requested Sale has been concluded
and indicating the total amount of consideration received therefrom (the "Total
Requested Sale Proceeds"). Following receipt of such notice, this Corporation
shall promptly pay (a "Requested Sale Supplementary Payment") to each Class A
Holder the excess, if any, of the aggregate Liquidation Preference of such
shares sold by such Class A Holder over the Total Requested Sale Proceeds (in
each case as modified to comply with the requirements of Section 9.2 of the
Stockholders' Agreement).++
++(ii) At any time on or after the Conversion Date, any holder of a
certificate or certificates representing shares of Class A Preference Stock may
surrender such certificates at the principal office of this Corporation (or at
any other location designated by both this Corporation and the Class A Holders),
which certificate or certificates, if this Corporation shall so require, shall
be duly endorsed to this Corporation or in blank, or accompanied by proper
instruments of transfer to this Corporation. This Corporation shall, as soon as
practicable after such deposit of a certificate or certificates evidencing
shares of Class A Preference Stock and compliance with any other conditions
herein contained, deliver at such office (or such other location) to the person
for whose account such certificate or certificates were so surrendered, or to
the nominee or nominees of such person, a certificate or certificates evidencing
the number of shares of Class A Common Stock or Common Stock, as the case may
be, to which such person shall be entitled as aforesaid. The conversion of the
shares of Class A Preference Stock shall be deemed to have been made, for all
purposes, as of the Conversion Date without regard to the date of the surrender
of the certificates for shares of Class A Preference Stock, and the person or
persons entitled to receive the Class A Common Stock or Common Stock, as the
case may be, deliverable upon conversion of such Class A Preference Stock shall
be treated for all purposes as the record holder or holders of such Class A
Common Stock or Common Stock, as the case may be, on the Conversion Date.++
++(iii) Notwithstanding anything to the contrary in this Section 3(a), if
after the Cellular Spin-off Date shares of Class A Preference Stock that
previously were not convertible because the Cellular Spin-off Date had not
occurred otherwise would be converted pursuant to this Section 3(a) into Class A
Common Stock or Common Stock at a Conversion Price greater than 135% of the
Average Sprint Price for the 20 Trading Days ended on the tenth Business Day
prior to the Conversion Date, the Class A Holders may elect, by delivery of a
notice to this Corporation executed by or on behalf of all Class A Holders, at
least two Business Days prior to the Conversion Date, to defer such conversion
until the first Business Day following the thirtieth day after the occurrence of
a period of 20 Trading Days in which the Conversion Price is less than or equal
to 135% of the Average Sprint Price over such period or until the Class A
Holders shall otherwise elect, by delivery of a notice to this Corporation
executed by or on behalf of each Class A Holder, to convert ten Business Days
after delivery of such notice the shares of Class A Preference Stock at the
Conversion Price set forth in Section 3(b) without regard to this clause (iii).
If the Class A Holders elect to defer conversion in accordance with this Section
3(a)(iii), the shares of Class A Preference Stock shall not be subject to
conversion pursuant to Section 3(b)(v) or redemption pursuant to Section 3(c).++
++(b) The Conversion Price of the Class A Preference Stock shall initially be
established at the time and at the price set forth below in this Section 3(b)
(such Conversion Price to be subject in each case to adjustment as provided in
the Class A Provisions):++
++(i) If the Average Sprint Price determined at the Initial Issuance Date
is within the Sprint Price Range, the Conversion Price shall be Fixed on
the Initial Issuance Date at the Target Price.++
++(ii) If the Average Sprint Price determined at the Initial Issuance Date
is above the Upper Threshold Sprint Price, the Conversion Price shall be
Fixed on the Initial Issuance Date at the Maximum Price (determined by
reference to such Average Sprint Price).++
++(iii) If the Average Sprint Price determined at the Initial Issuance Date
is below the Lower Threshold Sprint Price,++
++(x) the Conversion Price shall be Fixed on the Initial Issuance Date
at the Minimum Price if this Corporation has elected, by delivery of a
notice to each of FT and DT at least five Business Days++
D-15
++before the Initial Issuance Date, to establish the Conversion Price at
the Minimum Price (determined by reference to such Average Sprint
Price), and the Conversion Price shall be Fixed on the Initial Issuance
Date at the Target Price if FT and DT have elected, by delivery at
least five Business Days before the Initial Issuance Date, of a notice
to this Corporation executed by each of FT and DT, to establish the
Conversion Price at the Target Price, the first such notice delivered
to be effective, provided that this Corporation may only deliver such a
notice if a majority of the Continuing Directors shall have first
approved, at a meeting at which at least seven Continuing Directors are
present, Fixing the Conversion Price on the Initial Issuance Date at
the Minimum Price, unless a Fair Price Condition has been satisfied;++
++(y) if no timely election has been made by this Corporation or by FT
and DT as contemplated by clause (x) above, and++
++(1) if, prior to the second anniversary of the Initial Issuance
Date, the Cellular Spin-off Date has occurred and the Average Sprint
Price for any period of 20 consecutive Trading Days following the
Cellular Spin-off Date has been at or above the New Lower Threshold
Sprint Price, the Conversion Price shall, effective on the first day
following the end of such 20-day period, be Fixed at the New Target
Price, provided that if the Cellular Spin-off Date shall have
occurred prior to the second anniversary of the Initial Issuance
Date and the Average Sprint Price during any Spin-off Trading Period
is at or above the Modified Lower Threshold, the Conversion Price
shall be Fixed, effective on the first day following such Spin-off
Trading Period, at the New Target Price;++
++(2) if, prior to the second anniversary of the Initial Issuance
Date, the Cellular Spin-off Date has not occurred and the Average
Sprint Price for any period of 20 consecutive Trading Days has been
at or above the Lower Threshold Sprint Price, the Conversion Price
shall be Fixed on the day following the end of such 20-day period at
the Target Price;++
++(3) at any time prior to the second anniversary of the Initial
Issuance Date, (i) if the Cellular Spin-off Date has occurred, this
Corporation or the Class A Holders, by notice delivered, in the case
of this Corporation to each Class A Holder, and in the case of the
Class A Holders, to this Corporation by or on behalf of each Class A
Holder, the first such notice delivered to be effective, may elect
to Fix the Conversion Price, effective on the date of such notice,
at (A) if the Class A Holders make such election, the New Target
Price or (B) if this Corporation makes such election, the Minimum
Price (determined by reference to such Average Sprint Price for the
20 consecutive Trading Day period ended five days before the date of
such election, provided that, if the Cellular Spin-off Date has
occurred fewer than 25 Trading Days prior to the delivery of such
notice, the Conversion Price shall be determined by reference to
such Average Sprint Price for the 20 consecutive Trading Day period
beginning on the Trading Day following the Cellular Spin-off Date
and the Conversion Date shall be Fixed five days after the end of
such 20-day period), provided that this Corporation may only deliver
such a notice if a majority of the Continuing Directors shall have
first approved, at a meeting at which at least seven Continuing
Directors are present, Fixing the Conversion Price on the date of
such notice at the Minimum Price, unless a Fair Price Condition has
been satisfied; and (ii) if the Cellular Spin-off Date has not
occurred, either this Corporation or the Class A Holders, by notice
delivered, in the case of this Corporation, to each Class A Holder,
and in the case of the Class A Holders, to this Corporation by or on
behalf of each Class A Holder, the first such notice delivered to be
effective, may elect to Fix the Conversion Price, effective on the
date of such notice, at (A) if the Class A Holders make such
election, the Target Price, or (B) if this Corporation makes such
election, the Minimum Price (determined by reference to the Average
Sprint Price for the 20 consecutive Trading Day period ended five
days before the date of such election), provided that this
Corporation may only deliver such a notice if a majority of the
Continuing Directors shall have first approved, at a meeting at
which at least seven Continuing Directors are present, Fixing the
Conversion Price on the date of such notice at the Minimum Price,
unless a Fair Price Condition has been satisfied;++
D-16
++(4) (A) if neither the Cellular Spin-off Date nor the conversion
of all of the outstanding Class A Preference Stock into Class A
Common Stock or Common Stock has occurred prior to the second
anniversary of the Initial Issuance Date and the Conversion Price
has not previously been Fixed, the Conversion Price will,
automatically on such second anniversary, become Fixed at the
Minimum Price, determined by reference to the Average Sprint Price
for the 20 consecutive Trading Days ended five Business Days before
such second anniversary; provided that, if such Average Sprint Price
is then below the Second Anniversary Lower Threshold Sprint Price,
this Corporation may elect to defer the Fixing of the Conversion
Price, by notice delivered to each Class A Holder within such five
Business Day period, so that if, at any time during the following
three years, the Average Sprint Price shall be at least the Second
Anniversary Lower Threshold Sprint Price (if the Cellular Spin-off
Date shall not have occurred) or 93.308% of the New Lower Threshold
Sprint Price (if the Cellular Spin-off Date shall have so occurred),
the Conversion Price shall be Fixed at 93.308% of the Target Price
(if the Cellular Spin-off Date shall not have so occurred) and
93.308% of the New Target Price (if the Cellular Spin-off Date shall
have so occurred), provided that if the Cellular Spin-off Date shall
have occurred prior to the fifth anniversary of the Initial Issuance
Date and the Average Sprint Price during any Spin-off Trading Period
is at or above the Modified New Lower Threshold, the Conversion
Price shall be Fixed, effective on the day following such Spin-off
Trading Period, at 93.308% of the New Target Price. At any time
during such three year period, this Corporation may elect, by notice
delivered to each Class A Holder, to cause the Conversion Price to
be Fixed, effective on the date of such notice, at the Minimum Price
(determined by reference to the Average Sprint Price for the 20
Trading Days ended five Business Days before the date of such
election, provided that, if the Cellular Spin-off Date shall occur
during the last 20 Trading Day period before the second anniversary
of the Initial Issuance Date, all calculations to have been based
upon such period under this clause (A) shall be deferred until the
first 20 consecutive Trading Day Period after the Cellular Spin-off
Date, on which such calculations shall be then based), provided that
this Corporation may only deliver such a notice if a majority of the
Continuing Directors shall have first approved, at a meeting at
which at least seven Continuing Directors are present, Fixing the
Conversion Price on the date of such notice at the Minimum Price,
unless a Fair Price Condition has been satisfied, and FT and DT may
elect by notice delivered to this Corporation by or on behalf of
each Class A Holder to cause the Conversion Price to be Fixed,
effective on the date of such notice, at a price equal to 93.308% of
the Target Price, the first such notice to be effective;++
++(B) if, prior to such second anniversary, the Cellular Spin-off
Date has occurred, but the conversion of all of the outstanding
shares of Class A Preference Stock has not taken place and the
Conversion Price has not previously been Fixed, the Conversion Price
will, automatically on such second anniversary, become Fixed at the
Minimum Price, determined by reference to the Average Sprint Price
for the 20 consecutive Trading Days ended five Business Days before
the second anniversary of the Initial Issuance Date, provided that
if such Average Sprint Price is then below 93.308% of the New Lower
Threshold Sprint Price, this Corporation may elect to defer the
Fixing of the Conversion Price by notice delivered to each Class A
Holder within such five Business Day period so that if, at any time
during the following three years, the Average Sprint Price shall be
at least equal to 93.308% of the New Lower Threshold Sprint Price,
the Conversion Price will be Fixed at 93.308% of the New Target
Price. At any time during such three year period, this Corporation
may elect by notice delivered to each Class A Holder at any time
after the fifth Business Day following the end of the 20 Trading Day
period starting on the first Trading Day following the Cellular
Spin-off Date, to cause the Conversion Price to be Fixed, effective
on the date of such notice, at the Minimum Price (determined by
reference to the Average Sprint Price for the 20 Trading Days ended
five Business Days before the date of such election), provided that
this Corporation may only deliver such a notice if a majority of the
Continuing Directors shall have first approved, at a meeting at
which at least seven Continuing Directors are present,
Fixing the Conversion Price on the date of such notice at the
Minimum Price, unless a Fair Price++
D-17
++Condition has been satisfied, and the Class A Holders may elect, by
notice to that effect delivered to this Corporation by or on behalf
of each Class A Holder, at any time to cause the Conversion Price to
be Fixed effective on the date of such notice, at a price equal to
93.308% of the New Target Price, the first such notice delivered to
be effective.++
++(iv) If the Conversion Price has been Fixed before the Cellular Spin-off
Date, effective at the Cellular Spin-off Date, the Conversion Price fixed
with reference to the Maximum Price, Minimum Price or Target Price, as the
case may be, automatically and without notice, will be re-fixed with
reference to the New Maximum Price, New Minimum Price or New Target Price,
respectively, the calculation of such New Minimum Price or such New Maximum
Price to be based on the Average Sprint Price used to calculate the related
Maximum Price or Minimum Price, as the case may be.++
++(v) If the Conversion Price has not been Fixed by a date which is five
years after the Initial Issuance Date and this Corporation shall not have
redeemed all of the outstanding shares of Class A Preference Stock as
required under Section 3(c), the Class A Preference Stock shall be
convertible only at the election of the Class A Holders made at any time
after the end of ten Business Days after the 60th day after such fifth
anniversary, by notice to that effect delivered to this Corporation by or
on behalf of each Class A Holder, such conversion to occur five Business
Days after delivery of such notice, at a Conversion Price equal to 135% of
the Average Sprint Price for the 20 Trading Days ended on the Trading Day
five Trading Days prior to such conversion.++
++(vi) Upon the issuance of shares of Class A Preference Stock at the
Optional Shares Closing (as defined in the Investment Agreement) or as
provided in Section 7(i) of the Class A Provisions or Article V or VI of
the Stockholders' Agreement, the Conversion Price shall be adjusted further
to be the quotient of (x) the sum of (I) the number of outstanding shares
of Class A Preference Stock prior to such issuance times the Conversion
Price of such shares prior to this adjustment and (II) the number of such
shares received upon such issuance times the purchase price thereof,
divided by (y) the total number of shares of Class A Preference Stock
outstanding after such issuance.++
++(vii) In addition to any other adjustments provided for in the Class A
Provisions,++
++(x) the Conversion Price and, as appropriate, the per share dollar
amounts reflected in or used in calculating the Adjusted Cellular
Price, the Net Cellular Acquisition Amount, the Net Cellular
Indebtedness, the Average Sprint Price, the Average Cellular Price, the
Lower Threshold Sprint Price, the New Lower Threshold Sprint Price, the
Upper Threshold Sprint Price, the New Upper Threshold Sprint Price, the
Second Anniversary Lower Threshold Sprint Price, the Target Price, the
New Target Price, the Minimum Price, the New Minimum Price, the Maximum
Price, the New Maximum Price, the Modified Lower Threshold, the
Modified New Lower Threshold, and the Cellular Spin-off Reduction
Factor shall be adjusted to reflect any stock split, subdivision, stock
dividend payable in shares of Common Stock or other reclassification,
consolidation or combination of this Corporation's Voting Securities or
similar action or transaction undertaken after June 14, 1994, provided
that no such adjustment shall be made to the Average Sprint Price, the
Average Cellular Price, the Minimum Price or the New Minimum Price with
respect to events described in this clause (x) which occur prior to the
beginning of the measurement period with respect to such price, and
provided, further, that no adjustment shall be made under this
subsection (vii)(x) in respect of the Cellular Spin-off or any Spin-
off.++
++(y) the Conversion Price and, as appropriate, the per share dollar
amounts reflected in or used in calculating the Lower Threshold Sprint
Price, the New Lower Threshold Sprint Price, the Upper Threshold Sprint
Price, the New Upper Threshold Sprint Price, the Second Anniversary
Lower Threshold Sprint Price, the Target Price, the New Target Price,
the Minimum Price, the New Minimum Price, the Modified Lower Threshold,
the Modified New Lower Threshold, the Maximum Price and the New Maximum
Price shall be adjusted to reflect any Extraordinary Dividend or
Dividends and any non-cash dividend or distribution (except as
described in clause (x) and except for++
D-18
++dividends or distributions of equity securities of any Subsidiary of
this Corporation pursuant to a Spin-off or the Cellular Spin-off) paid
on or with respect to shares of Common Stock, or any reorganization or
reclassification pursuant to which holders of Common Stock receive
cash, property or (except as described in clause (x), above) securities
of this Corporation, in each case occurring after June 22, 1995, as
follows, provided that no such adjustment shall be made to the Minimum
Price or the New Minimum Price with respect to events described in this
clause (y) which occur prior to the determination of such price:++
++(A) if such dividend, distribution or event occurs on or prior to
the date the Conversion Price is Fixed,++
++(1) the Target Price, the Maximum Price, the New Target Price,
the Minimum Price, the New Minimum Price and the New Maximum
Price shall be decreased dollar for dollar by the amount of cash
and the Fair Market Value of all non-cash property or securities
distributed with respect to a share of Common Stock (the "Per
Share Distributed Value");++
++(2) the Lower Threshold Sprint Price and the New Lower
Threshold Sprint Price shall be decreased by the Per Share
Distributed Value divided by 1.35; and++
++(3) the Upper Threshold Sprint Price and the New Upper
Threshold Sprint Price shall be decreased by the Per Share
Distributed Value divided by 1.25; and++
++(B) if such dividend, distribution or event occurs after the date
the Conversion Price is Fixed, the Conversion Price shall be
decreased by subtracting an amount equal to the Per Share
Distributed Value.++
++(c) Unless the Class A Holders have exercised their option to defer
conversion of the Class A Preference Stock pursuant to Section 3(a)(iii), each
outstanding share of Class A Preference Stock shall be redeemed by this
Corporation within five Business Days after the 60th day following the fifth
anniversary of the Initial Issuance Date for cash at a redemption price per
share equal to its Liquidation Preference (such price, the "Class A Preference
Redemption Price"), such payment to be delivered to each Class A Holder no
later than five Business Days after such redemption, provided that the failure
to so redeem at such time shall not preclude this Corporation from so redeeming
at any time thereafter.++
++(d) If any time after the termination of Fundamental Rights as to all
outstanding Shares of Class A Preference Stock, this Corporation shall not have
declared and paid all accrued and unpaid dividends on the Class A Preference
Stock as provided in Section 2 of the Class A Provisions for four consecutive
Quarterly Dividend Payment Dates, then, in addition to any other voting rights
provided in these Articles of Incorporation, the holders of the Class A
Preference Stock shall have the exclusive right, voting separately as a class,
to elect two Directors. The right of the holders of the Class A Preference
Stock to elect the Class A Directors pursuant to this Section 3(d) shall
continue until all such accrued and unpaid dividends shall have been paid. At
such time, the terms of the Class A Directors shall terminate. At any time when
the holders of the Class A Preference Stock shall have thus become entitled to
elect Class A Directors, a special meeting of the Class A Holders shall be
called for the purpose of electing such Class A Directors, to be held within 30
days after the right of the holders of the Class A Preference Stock to elect
such Class A Directors shall arise, upon notice given in the manner provided by
law or the Bylaws of this Corporation for giving notice of a special meeting of
the Class A Holders (provided, however, that such a special meeting shall not
be called if the annual meeting of stockholders is to convene within said 30
days). At any such special meeting or at any annual meeting at which the Class
A Holders shall be entitled to elect Class A Directors, the holders of a
majority of the then outstanding Class A Preference Stock present in person or
by proxy shall be sufficient to constitute a quorum for the election of such
directors. The persons elected by the holders of the Class A Preference Stock
at any meeting in accordance with the terms of the preceding sentence shall
become Class A Directors on the date of such election.++
++(e) Whenever quarterly dividends or other dividends or distributions payable
on the Class A Preference Stock as provided in Section 2 of the Class A
Provisions are in arrears, thereafter and until all accrued and++
D-19
++unpaid dividends and distributions, whether or not declared, on shares of
Class A Preference Stock outstanding shall have been paid in full, this
Corporation shall not:++
++(i) declare or pay dividends or make any other distributions on any
shares or stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding-up) to the Class A Preference Stock;++
++(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding-up) with the Class A Preference Stock
except dividends paid ratably on the Class A Preference Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled; or++
++(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock junior (either as to dividends or upon liquidation, dissolution
or winding-up) to the Class A Preference Stock, provided that,
notwithstanding the foregoing, this Corporation may at any time redeem,
purchase or otherwise acquire shares of stock of any such class junior as
to either or both dividends or upon liquidation, dissolution or winding-up,
in exchange for, or out of the net cash proceeds from the substantially
simultaneous sale of, other shares of stock of any class which is also
junior as to either or both dividends or upon liquidation, dissolution or
winding-up, as the case may be.++
++(f) This Corporation shall not permit any Subsidiary of this Corporation to
purchase or otherwise acquire for consideration any shares of stock of this
Corporation unless this Corporation could, under Section 3(e), above, purchase
or otherwise acquire such shares at such time and in such manner.++
++4. Special Rights to Disapprove Certain Actions. At least 40 days prior to
the occurrence of a Subject Event (as defined below), this Corporation shall
deliver to each Class A Holder a notice (a "Notice") of such proposed Subject
Event, setting forth in reasonable detail the nature of such proposed Subject
Event. This Corporation shall thereafter be entitled to effect such proposed
Subject Event unless within 30 days of delivery of such Notice there shall have
been a Class A Action exercising the special rights of the Class A Holders to
disapprove such Subject Event, provided that the Class A Holders shall have no
special right to disapprove any action (x) which this Corporation is required
to take to comply with its obligations or exercise its rights under the
Investment Agreement, the Stockholders' Agreement, the Standstill Agreement,
the Registration Rights Agreement or the Joint Venture Agreement or any
document executed pursuant to any such agreement or the Class A Provisions, or
(y) taken to comply with Applicable Law or the rules of any exchange or market
system on which securities of this Corporation may be traded, and provided,
further, that any action to be taken by this Corporation in reliance on clause
(y) of the foregoing proviso is the only action commercially reasonably
available to this Corporation to effect such compliance, as certified to the
Class A Holders by resolution of the Independent Directors. For purposes of
these Articles, the term "Subject Event" means only the following transactions
and only if such transactions are consummated within the respective time
periods indicated below:++
++(a) Until the second anniversary of the Initial Issuance Date or, in the
case of clause (iv) below, the later of (x) the second anniversary of the
Initial Issuance Date and (y) the Investment Completion Date:++
++(i) any transaction or series of related transactions (other than
Exempt Asset Divestitures or Exempt Long Distance Asset Divestitures)
that results, directly or indirectly, in Transfers of assets of this
Corporation or its Subsidiaries with an aggregate Fair Market Value
(calculated in the case of each Transfer as at the date this
Corporation or any such Subsidiary enters into a definitive agreement
to effect such Transfer) of more than 20 percent of Market
Capitalization (calculated (x) in the case of a single transaction as
at the date this Corporation or any such Subsidiary enters into a
definitive agreement to effect such Transfer and (y) in the case of a
series of related transactions, as at the date this Corporation or any
such Subsidiary enters into a definitive agreement to effect the last
of such Transfers);++
++(ii) any transaction or series of related transactions (including,
without limitation, mergers, purchases of stock or assets, joint
ventures or other acquisitions), but excluding any transaction++
D-20
++constituting an Exempt Asset Divestiture or Exempt Long Distance Asset
Divestiture, resulting, directly or indirectly, in the acquisition by
this Corporation or its Subsidiaries for cash or debt securities
maturing in less than one year from the date of issuance of (x) assets
constituting or predominantly used in Core Businesses ("Core Business
Assets") for a purchase price or, in the case of a series of related
transactions, an aggregate purchase price that exceeds 20 percent of
Market Capitalization (calculated as at the date this Corporation or
any such Subsidiary enters into a definitive agreement to effect such
transaction or, in the case of a series of related transactions, as at
the date this Corporation or any such Subsidiary enters into a
definitive agreement to effect the last of such related transactions)
or (y) other assets for a purchase price or, in the case of a series of
related transactions, for an aggregate purchase price that exceeds five
percent of Market Capitalization (calculated as at the date this
Corporation or any such Subsidiary enters into a definitive agreement
to effect such transaction or, in the case of a series of related
transactions, as at the date this Corporation or any such Subsidiary
enters into a definitive agreement to effect the last of such related
transactions), provided that, if any such other assets are proposed to
be obtained in the course of a proposed transaction in which both Core
Business Assets and other assets are to be acquired and the ratio of
the fair market value of the Core Business Assets to be acquired to the
fair market value of the other assets to be acquired exceeds 1.75 to 1,
then the holders of the Class A Stock shall not be entitled to
disapproval rights with respect to such transaction except as provided
in clause (x) of this Section 4(a)(ii);++
++(iii) issuance by this Corporation of any capital stock or debt
(including, without limitation, direct or indirect issuances such as
pursuant to mergers and other business combinations) with both (x) a
class vote to elect one or more Directors and (y) rights with respect
to dispositions of Long Distance Assets or other assets, or share
issuances, which rights are in scope and duration as extensive as or
more extensive than the comparable related rights granted to the Class
A Holders in these Articles of Incorporation or in the Stockholders'
Agreement, provided that this Section 4(a)(iii) shall not apply to the
extent that (a) such rights are required by Applicable Law, (b) the
holders of any series of Preferred Stock have the right, voting
separately as a class, to elect a number of Directors of this
Corporation upon the occurrence of a default in payment of dividends or
redemption price, or (c) such rights described in clause (y) are
granted in connection with borrowings and are reflected in a loan
agreement, credit agreement, trust indenture or similar agreement or
instrument;++
++(iv) declaration of any Extraordinary Dividends during any one year
that, individually or in the aggregate, exceed five percent of Market
Capitalization as at the Business Day immediately preceding the
declaration of the last such dividend or distribution (other than in
connection with transactions within the meaning of clause (e) of the
definition of Exempt Asset Divestitures or clause (g) of the definition
of Exempt Long Distance Asset Divestitures); or++
++(v) any merger or other business combination in which this
Corporation is not the surviving parent corporation.++
++(b) Until the earliest of (i) the fifth anniversary of the Initial
Issuance Date, (ii) such time as (A) legislation has been enacted repealing
Section 310, (B) an FCC Order shall have been issued, or (C) outside
counsel to this Corporation with a nationally recognized expertise in
telecommunications regulatory matters delivers to each of FT and DT a legal
opinion, addressed to each of them, in form and substance reasonably
satisfactory to FT and DT, to the effect that Section 310 does not prohibit
FT and DT from owning the Long Distance Assets proposed to be Transferred
by this Corporation, (iii) the delivery by FT, DT, Atlas or any of their
Affiliates (or a Permitted Designee (as such term is defined in the Joint
Venture Agreement)) of a notice pursuant to Section 17.2(b) of the Joint
Venture Agreement indicating the agreement to purchase all of the Sprint
Venture Interests (as such term is defined in the Joint Venture Agreement)
following an offer by this Corporation or Sprint Sub pursuant to Section
17.2(a) of the Joint Venture Agreement, and (iv) the delivery by this
Corporation and/or Sprint Sub of a notice pursuant to Section 17.3(a) of
the Joint Venture Agreement exercising the put right to sell all of their
Sprint Venture Interests (as such term is defined in the Joint Venture
Agreement) to FT, DT and Atlas (or a Permitted Designee++
D-21
++(as such term is defined in the Joint Venture Agreement)), a direct or
indirect Transfer (other than in connection with an Exempt Long Distance
Asset Divestiture) after the Initial Issuance Date by this Corporation or
its Subsidiaries of Long Distance Assets with a Fair Market Value
(calculated as at the date this Corporation or any such Subsidiary enters
into a definitive agreement to effect such Transfer) that, when aggregated
with the Fair Market Value of all other Long Distance Assets Transferred by
this Corporation or its Subsidiaries since the Initial Issuance Date (other
than in Exempt Long Distance Asset Divestitures) (calculated in each case
as at the date this Corporation or any such Subsidiary enters into a
definitive agreement to effect each such respective Transfer) exceeds five
percent of the Fair Market Value of the Long Distance Assets of this
Corporation and its Subsidiaries, on a consolidated basis (calculated as at
the date this Corporation or any such Subsidiary enters into a definitive
agreement to effect the last such Transfer).++
++(c) Except as otherwise provided in Section 7 of the Class A Provisions,
for so long as any shares of Class A Stock are outstanding:++
++(i) any amendment to these Articles of Incorporation, the Bylaws or
the Rights Agreement that would adversely affect the rights of the
Class A Holders under these Articles of Incorporation or the Bylaws;++
++(ii) issuance by this Corporation (including, without limitation,
pursuant to mergers or other business combinations) of any series or
class of capital stock or debt security with Supervoting Powers;++
++(iii) any merger or other business combination involving this
Corporation that results directly or indirectly in a Change of Control,
unless the surviving corporation expressly (x) assumes all of this
Corporation's obligations in respect of the rights of the Class A
Holders under Section 4(b) of the Class A Provisions and the provisions
of Article III of the Stockholders' Agreement (except, in each case, as
they may be otherwise terminated pursuant to the Class A Provisions or
the Stockholders' Agreement) and all of the provisions of the
Registration Rights Agreement and (y) agrees to be bound by any
applicable Tie-Breaking Vote in accordance with Articles 17 and 18 of
the Joint Venture Agreement;++
++(iv) any merger or other business combination involving this
Corporation that does not result directly or indirectly in a Change of
Control unless:++
++(x) this Corporation survives as the parent entity; or++
++(y) the surviving corporation expressly assumes all of this
Corporation's obligations in respect of the rights of the Class A
Holders granted pursuant to these Articles of Incorporation and the
Class A Provisions and under the Bylaws, the Stockholders' Agreement
and the Registration Rights Agreement; or++
++(v) if any shares of Class A Preference Stock are outstanding,
issuance by this Corporation of shares of Preferred Stock which have
rights to the payment of dividends or the distribution of assets upon
the liquidation, dissolution or winding up of this Corporation senior
to such rights of the Class A Preference Stock.++
++5. Special Rights Regarding Major Issuances. At least 90 days before the
consummation, directly or indirectly, by this Corporation of any Major Issuance
prior to the second anniversary of the Initial Issuance Date, this Corporation
shall deliver to each Class A Holder a notice of such proposed Major Issuance.
This Corporation shall be entitled to effect such proposed Major Issuance (upon
receipt of the requisite approval of the Board of Directors described below)
unless within 75 days of the delivery of such notice there shall have been a
Class A Action exercising the special rights of the Class A Holders to
disapprove such Major Issuance. In addition, so long as any Class A Stock is
outstanding, prior to effecting any Major Issuance:++
++(a) occurring on or prior to the fifth anniversary of the Initial
Issuance Date, this Corporation shall obtain the prior approval of two-
thirds of the Independent Directors by resolution, certified to the Class A
Holders; and++
++(b) occurring after the fifth anniversary of the Initial Issuance Date,
this Corporation shall obtain the prior approval of a majority of the
Independent Directors.++
D-22
++6. Special Rights Regarding Holdings by Major Competitors of FT or DT. (a)
Until the tenth anniversary of the Initial Issuance Date, at least 90 days
prior to consummating any transaction or taking any other action that, directly
or indirectly, would result in, or is taken for the purpose of encouraging or
facilitating, a Major Competitor of FT or DT or of the Joint Venture having, or
being granted by this Corporation any right, permission or approval to acquire
(other than pursuant to a Strategic Merger), a Percentage Ownership Interest of
ten percent or more (a "Major Competitor Transaction"), this Corporation shall
provide each Class A Holder with notice of such Major Competitor Transaction in
the manner set forth in Subsection (c) below and, if there is a Class A Action
exercising the special rights of the Class A Holders to disapprove such Major
Competitor Transaction within 75 days of the delivery of such notice, this
Corporation shall not consummate such Major Competitor Transaction.++
++(b) Until the tenth anniversary of the Initial Issuance Date, if a Major
Competitor of FT or DT or of the Joint Venture obtains a Percentage Ownership
Interest of 20 percent or more as a result, directly or indirectly, of a
Strategic Merger:++
++(i) if the Class A Holders have not made the commitment described in
Article VI of the Stockholders' Agreement, this Corporation (or its
successor in such Strategic Merger) shall, subject to the provisos of
Sections 2.1(a)(iii) and 2.2(a) of the Standstill Agreement, nonetheless
take all action necessary or advisable to lift all restrictions,
contractual or otherwise, imposed by this Corporation or such successor on
the ability of the Class A Holders, at any time after the Class A Common
Issuance Date, to purchase shares of Common Stock or other Voting
Securities from third parties sufficient to permit the Class A Holders to
have a Percentage Ownership Interest equal to that of the Major Competitor
of FT or DT or of the Joint Venture; and++
++(ii) this Corporation shall ensure that the Class A Holders have rights
with regard to (w) a class vote to elect Directors, (x) class approval and
disapproval rights, (y) any other special rights in respect of the business
or operations of this Corporation and (z) any rights to receive special
dividends, distributions or other rights from this Corporation, which are
in scope and duration at least as extensive as any rights granted by this
Corporation to such Major Competitor of FT or DT or of the Joint Venture
(other than rights deriving solely from the number of Voting Securities
owned), regardless of whether or not the Class A Holders purchase any
additional Voting Securities.++
++(c) Until the tenth anniversary of the Initial Issuance Date, this
Corporation shall deliver to each Class A Holder notice of its intent to issue
Voting Securities in a Major Competitor Transaction to any Major Competitor of
FT or DT or of the Joint Venture at least 30 days prior to such issuance, such
notice to contain a complete and correct description in reasonable detail of
the transaction in question, including, without limitation, the purchase price
for such securities, the nature of such securities, the identity of the Major
Competitor of FT or DT or of the Joint Venture and the rights (contractual and
other) this Corporation would grant such Major Competitor. This Corporation
shall also deliver to each Class A Holder notice of any such issuance within
five days after it occurs, such notice to contain a description of the
transaction in question and be accompanied by complete and correct copies of
all agreements, instruments and written understandings of this Corporation, its
Subsidiaries and Affiliates and such Major Competitor of FT or DT or of the
Joint Venture and the Subsidiaries and Affiliates of such Major Competitor
executed in respect of such transaction.++
++7. Conversion of Shares; Termination of Fundamental Rights. (a) Failure to
Maintain Ownership. If, after the Investment Completion Date, the aggregate
Committed Percentage of the Class A Holders shall be below ten percent (i) for
more than 180 consecutive days or (ii) immediately following a Transfer of
Class A Stock by a Class A Holder, each outstanding share of Class A Common
Stock shall automatically convert (without the payment of any consideration)
into one duly issued, fully paid and nonassessable share of Common Stock, or if
any shares of Class A Preference Stock are outstanding, the Fundamental Rights
shall terminate as to all outstanding shares of Class A Preference Stock, such
conversion or termination to take place on the next Business Day following the
end of such 180-day period in the case of clause (i) or on the date of such
Transfer in the case of clause (ii), provided that, if the aggregate Committed
Percentage of the Class A Holders shall fall++
D-23
++below ten percent for more than 180 consecutive days following the later of
the Fixed Closing Date and the date of a Major Issuance as a result of the
consummation of such Major Issuance, then unless all of the outstanding shares
of Class A Common Stock shall have been converted earlier, or the Fundamental
Rights shall have previously terminated as to all outstanding shares of Class A
Preference Stock, in each case pursuant to this Section 7 of the Class A
Provisions, (x) the Class A Common Stock shall not convert into Common Stock,
or the Fundamental Rights shall not terminate, as the case may be, until the
last to occur of (i) the third anniversary of the date of such Major Issuance,
(ii) the third anniversary of the Fixed Closing Date and (iii) the Investment
Completion Date, and (y) the Class A Holders shall continue to be entitled to
elect Directors pursuant to ARTICLE FIFTH of these Articles of Incorporation
until the last to occur of (i) the third anniversary of the date of such Major
Issuance, (ii) the third anniversary of the Fixed Closing Date, and (iii) the
Investment Completion Date, but (z) after the last to occur of the expiration
of 180 days following the Fixed Closing Date, 180 days following the date of
such Major Issuance, and the Investment Completion Date, the Class A Holders
shall no longer have their rights under Sections 4, 5, 6, 7 and 8 of the Class
A Provisions, and provided, further, that such conversion shall not be
considered to be an acquisition of Common Stock for purposes of Section 7(i) of
the Class A Provisions.++
++(b) FT/DT Joint Venture Termination; Material Breach of Investment
Documents. (i) Each outstanding share of Class A Common Stock shall
automatically convert (without the payment of any consideration) into one duly
issued, fully paid and nonassessable share of Common Stock and, if any shares of
Class A Preference Stock are outstanding, the Fundamental Rights shall terminate
as to all outstanding shares of Class A Preference Stock, if:++
++(t) the Sprint Parties receive the Tie-Breaking Vote pursuant to Section
17.5 of the Joint Venture Agreement;++
++(u) there is an FT/DT Joint Venture Termination;++
++(v) FT or DT or any Qualified Subsidiary breaches in any material respect
its obligations under Section 2.4 of the Stockholders' Agreement;++
++(w) FT or DT or any Qualified Subsidiary breaches in any material respect
its obligations under Article II (other than Section 2.4) of the
Stockholders' Agreement;++
++(x) FT, DT or any Qualified Subsidiary breaches any of the provisions of
Article 2 (other than Section 2.1(b)) of the Standstill Agreement or any
corresponding provision of any Qualified Subsidiary Standstill Agreement;++
++(y) FT, DT or any Qualified Subsidiary breaches any of the provisions of
Sections 3.1 or 3.2 of the Standstill Agreement or any corresponding
provisions of any Qualified Subsidiary Standstill Agreement, in each case
in a Control Context, or otherwise breaches Sections 3.1(a)(ii), (iii) or
(iv) or Section 3.1(g) of the Standstill Agreement or any corresponding
provision of any Qualified Subsidiary Standstill Agreement; or++
++(z) FT, DT or any Qualified Subsidiary breaches any of the provisions of
Sections 3.1 (except Section 3.1(a)(ii), (iii) or (iv), or Section 3.1(g))
or 3.2 of the Standstill Agreement or any corresponding provisions of any
Qualified Subsidiary Standstill Agreement, in each case other than in a
Control Context;++
++provided that, with respect to an alleged breach of the type described in
clauses (v), (w), (x), (y) or (z) above, the Class A Holders alleged to have
committed such breach (the "Breaching Holders") shall deliver a notice++
++(I) except with respect to a breach of the type described in clause
(y) above, in accordance with clauses (ii)(x) or (iii)(x) below, in
which case no conversion of the Class A Common Stock or termination of
the Fundamental Rights as to all outstanding shares of Class A
Preference Stock, as the case may be, shall take place unless such
breach fails to be cured within the time provided for cure in such
clause (ii) or (iii), as the case may be;++
++(II) in accordance with clauses (ii)(y), (iii)(y) or (iv) below, in
which case no conversion of the Class A Common Stock or termination of
the Fundamental Rights, as the case may be, shall take++
D-24
++place until there is issued a final nonappealable decision or order of
a court of competent jurisdiction finding that such breach has occurred
and, if applicable, was not cured within the time provided for cure in
clauses (ii) or (iii) below, as the case may be; or++
++(III) admitting that such a breach has occurred, and (if applicable)
cannot be cured within the time periods provided for cure in clauses
(ii) or (iii) below, in which case each outstanding share of Class A
Common Stock shall automatically convert (without the payment of any
consideration) into one duly issued, fully paid and nonassessable share
of Common Stock or the Fundamental Rights shall terminate as to all
outstanding shares of Class A Preference Stock, as the case may be, in
each case upon delivery of such notice; and++
++provided, further, that if the Breaching Holders fail to perform the actions
described in clauses (I) or (II) above within the time periods provided for
performing such actions in clauses (ii), (iii) or (iv) below, they shall be
deemed to have taken the action described in clause (III) above.++
++(ii) For any alleged breach of the type described in clauses (w), (x) or (z)
of clause (i) above, the Breaching Holders shall have the right, within five
Business Days after the date (for purposes of this clause (ii), the "Breach
Notice Date") that notice of such breach is delivered to each Breaching Holder
by this Corporation, to deliver to this Corporation a notice either:++
++(x) committing to effect a cure as soon as practical, in which case the
Breaching Holders shall effect such cure as soon as practical, but in no
event later than the 20th Business Day from the Breach Notice Date (or,
with respect to an alleged breach of clauses (w) or (x), if such cure
cannot be effected within such time period due to the anti-fraud rules of
the U.S. securities laws, such longer period as is reasonably necessary to
cure such breach in a manner consistent with such rules), provided that++
++(I) the Breaching Holders shall have no right to cure unless such
breach is susceptible to cure;++
++(II) such cure period shall continue only for so long as each
Breaching Holder shall be undertaking to effect such a cure in a
diligent manner;++
++(III) with respect to an alleged breach of clause (i)(x) above, this
Corporation shall have the right at any time after the end of such 20-
day period to purchase such number of shares of Common Stock or Class A
Stock, as the case may be, as is necessary to return the Class A
Holders to the ownership level permitted by the Standstill Agreement or
a Qualified Subsidiary Standstill Agreement, as the case may be, at a
price equal to the lower of (A) the Market Price for such shares at the
time of such redemption and (B) the price paid by the Breaching Holders
for such shares, provided that this Corporation may only exercise such
right if a majority of the Continuing Directors shall have first
approved, at a meeting at which at least seven Continuing Directors are
present, such a purchase of Shares, unless a Fair Price Condition has
been satisfied; and++
++(IV) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or++
++(y) disputing that such a breach has occurred, provided that during such
time as the most recent decision or order of a court of competent
jurisdiction is to the effect that such breach has occurred and was not
cured within the time provided for cure in clause (x) of this clause (ii),
the rights provided to the Class A Holders under Sections 4 (except
4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and the right
to elect members of the Board of Directors of the holders of the Class A
Stock under ARTICLE FIFTH of these Articles of Incorporation shall be
suspended and may not be exercised by the Class A Holders.++
++(iii) For any alleged breach of the type described in clause (i)(v) above,
the Breaching Holders shall have the right, within five Business Days after the
date (for purposes of this clause (iii), the "Breach Notice Date")++
D-25
++that notice of such breach is delivered to each Breaching Holder by this
Corporation, to deliver to this Corporation a notice either:++
++(x) committing to effect a cure as soon as practical, in which case the
Breaching Holders shall effect such cure as soon as practical, but in no
event later than the 20th Business Day from the Breach Notice Date (or, if
such cure cannot be effected within such time period due to the anti-fraud
rules of the U.S. securities laws, such longer period as is reasonably
necessary to cure such breach in a manner consistent with such rules),
provided that++
++(I) the Breaching Holders shall have no right to cure unless such
breach is susceptible to cure;++
++(II) such cure period shall continue only for so long as each
Breaching Holder shall be undertaking to effect such a cure in a
diligent manner; and++
++(III) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or++
++(y) disputing that such a breach has occurred;++
++provided that, in each case, from the Breach Notice Date until the earlier
to occur of the cure of such breach and the issuance of a decision or order
of a court of competent jurisdiction finding that such breach has not
occurred or was cured within the time provided for cure in clause (x) of
this clause (iii), the rights provided to the Class A Holders under
Sections 4 (except 4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A
Provisions and the right to elect members of the Board of Directors of the
holders of the Class A Stock under ARTICLE FIFTH of these Articles of
Incorporation shall be suspended and may not be exercised by the Class A
Holders; and provided, further, that following such decision or order, such
rights shall be suspended during such time as the most recent decision or
order of a court of competent jurisdiction is to the effect that such
breach has occurred and was not cured within the time provided for cure in
clause (x) of this clause (iii).++
++(iv) For any alleged breach of the type described in clause (i)(y) above,
the Breaching Holders shall have the right, within five Business Days after the
date (for purposes of this clause (iv), the "Breach Notice Date") that notice of
such breach is delivered to each Breaching Holder by this Corporation, to
deliver to this Corporation a notice disputing that such a breach has occurred,
provided that from the Breach Notice Date until the issuance of a decision or
order of a court of competent jurisdiction finding that such breach has not
occurred, the rights provided to the Class A Holders under Sections 4 (except
4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and the right to
elect members of the Board of Directors of the holders of the Class A Stock
under ARTICLE FIFTH of these Articles of Incorporation shall be suspended and
may not be exercised by the Class A Holders; and provided, further, that
following such decision or order, such rights shall be suspended during such
time as the most recent decision or order of a court of competent jurisdiction
is to the effect that such breach has occurred.++
++(v) For purposes of this Section 7(b), an alleged breach shall be deemed to
have occurred in a Control Context if the action or actions alleged to have
given rise to such breach were taken in the context of efforts by any Class A
Holder or any other Person having the purpose or effect of changing or
influencing the control of this Corporation.++
++(vi) No conversion pursuant to this Section 7(b) shall be considered an
acquisition for purposes of Section 7(i) of the Class A Provisions.++
++(c) Failure to Purchase at Closings; Class A Preference Stock Ownership. The
Fundamental Rights shall terminate as to all outstanding shares of Class A
Preference Stock if (i) FT or DT or any Qualified Subsidiary which is a party
to the Investment Agreement breaches its obligation to purchase shares of
Common Stock or Class A Stock, as the case may be, under the Investment
Agreement at an Additional Preference Stock Closing, a Supplemental Preference
Stock Closing or a Deferred Common Stock Closing, as such terms are defined in
the Investment Agreement, or (ii) if, prior to the Investment Completion Date,
the outstanding shares of Class A Preference Stock have an aggregate
liquidation value of less than $1.5 billion as a result of a Transfer of++
D-26
++shares of Class A Preference Stock by a Class A Holder (other than a Transfer
contemplated by Section 7.4(b)(i)(y) of the Stockholders' Agreement);++
++(d) Corporation Joint Venture Termination. Unless the Class A Common Stock
shall have been converted earlier or the Fundamental Rights shall have been
terminated earlier as to all outstanding shares of Class A Preference Stock, in
each case pursuant to this Section 7 of the Class A Provisions, if there is a
Corporation Joint Venture Termination, each outstanding share of Class A Common
Stock shall automatically convert (without the payment of any consideration)
into one duly issued, fully paid and nonassessable share of Common Stock or the
Fundamental Rights shall terminate as to all outstanding shares of Class A
Preference Stock, as the case may be, in each case on the third anniversary of
the date of such Corporation Joint Venture Termination, provided that any such
conversion shall not be considered to be an acquisition of Common Stock for
purposes of Section 7(i) of the Class A Provisions.++
++(e) Other Joint Venture Termination. If (i) there is a sale of all the
Venture Interests of the Sprint Parties or the FT/DT Parties pursuant to
Section 17.2, 17.3, 17.4, 19.3, 20.6 or 20.11 of the Joint Venture Agreement or
(ii) the Joint Venture is otherwise terminated, in each case other than due to
(i) an FT/DT Joint Venture Termination or (ii) a Corporation Joint Venture
Termination:++
++(x) on the date of such termination, the rights provided to the Class A
Holders in Sections 4 (except Sections 4(c)(i) and 4(c)(iii)), 5 and 6 of
the Class A Provisions shall terminate; and++
++(y) unless the Class A Common Stock shall have been converted, or the
Fundamental Rights shall have been terminated earlier as to all outstanding
shares of Class A Preference Stock, as the case may be, in each case
pursuant to this Section 7 of the Class A Provisions, each outstanding
share of Class A Common Stock shall automatically convert (without the
payment of any consideration) into one duly issued, fully paid and
nonassessable share of Common Stock or those Fundamental Rights which have
not been terminated earlier as to all outstanding shares of Class A
Preference Stock pursuant to clause (x) shall terminate, as the case may
be, in each case on the third anniversary of the date of such termination,
provided that any such conversion shall not be considered to be an
acquisition of Common Stock for purposes of Section 7(i) of the Class A
Provisions.++
++(f) Change of Control. If there is a Change of Control within the meaning of
clause (a) of the definition of Change of Control, (i) the rights provided to
the Class A Holders in ARTICLE FIFTH of these Articles of Incorporation, and
Sections 4 (except Sections 4(b), 4(c)(iii) (as to rights provided under
Section 4(b)) and 4(c)(iv) (as to rights provided under Section 4(b)), 5 and 6
of the Class A Provisions shall terminate upon the consummation of the
transactions contemplated thereby, provided that, prior to such consummation,
this Corporation shall engage in good faith negotiations with any potential
acquiror of Control to provide the Class A Holders with rights equivalent to
those provided in ARTICLE FIFTH of these Articles of Incorporation and (ii)
all, but not less than all, of the Class A Holders shall have the right (but
not the obligation) to deliver to this Corporation a written notice upon which
delivery (x) if Class A Common Stock is then outstanding, each outstanding
share of Class A Common Stock shall automatically convert (without the payment
of any consideration) into one duly issued, fully paid and nonassessable share
of Common Stock or (y) if Class A Preference Stock is then outstanding, (A) if
at the time of delivery of such notice the Conversion Price has been Fixed, the
Transfer Restrictions shall cease to be of further force and effect, and each
share of Class A Preference Stock Transferred thereafter (other than to a
Qualified Subsidiary or Class A Holder) shall convert at the applicable
Conversion Price (without the payment of any consideration) into that number of
duly issued, fully paid and nonassessable shares of Common Stock equal to the
number of related Class A Conversion Shares, or (B) if at the time of delivery
of such notice the Conversion Price has not been Fixed, the Class A Holders may
deliver a notice to this Corporation electing either that (x) upon delivery of
such notice, the Transfer Restrictions shall cease to be of further force and
effect, and each share of Class A Preference Stock Transferred thereafter
(other than to a Qualified Subsidiary or Class A Holder) shall convert upon
such Transfer at the Target Price (without the payment of consideration) into
that number of duly issued, fully paid and nonassessable shares of Common Stock
equal to the number of related Class A Conversion Shares, or (y) on the 31st
day following delivery of such notice, the Transfer Restrictions cease to be of
further force and effect,++
D-27
++and each share of Class A Preference Stock Transferred thereafter (other than
to a Qualified Subsidiary or Class A Holder) shall convert upon such Transfer
at the Minimum Price at the date of such Transfer (without the payment of
consideration) into that number of duly issued, fully paid and nonassessable
shares of Common Stock equal to the number of related Class A Conversion
Shares, provided that this Corporation may elect within 30 days after the
delivery of notice by the Class A Holders hereunder to the effect specified in
this clause (y), in lieu of releasing the Transfer Restrictions and having such
Shares convert at the Minimum Price, to have this Corporation redeem each share
of Class A Preference Stock for cash at a per share price equal to its
Liquidation Preference on the 90th day following the delivery of such notice,
provided, further, that (i) if this Corporation's notes at the date of delivery
of such notice fulfill the requirements set forth in the proviso to the
definition of "Corporation Eligible Notes," this Corporation may, upon delivery
of a notice to each Class A Holder no fewer than ten Business Days prior to
such 90th day, in lieu of redeeming the Class A Preference Stock for cash,
issue to each Class A Holder a Corporation Eligible Note in an amount equal to
the aggregate Liquidation Preference attributable to the shares of Class A
Preference Stock held by such Class A Holder maturing at the earlier of (A)
three years from the date of issuance, and (B) five years from the Initial
Issuance Date, and (ii) this Corporation shall not be permitted to elect the
option to redeem set forth in the first proviso unless a majority of the
Continuing Directors shall have first approved, at a meeting at which at least
seven Continuing Directors are present, such redemption, unless a Fair Price
Condition has been satisfied. Any such conversion of Class A Stock pursuant to
this clause (f) shall not be considered to be an acquisition of Common Stock
for purposes of Section 7(i) of the Class A Provisions.++
++(g) Unequal Ownership. (i) If the ratio (the "Ownership Ratio") of the
Percentage Ownership Interest of either FT or DT to the Percentage Ownership
Interest of the other exceeds the Applicable Ratio for 60 consecutive days
following a notice of such event delivered by this Corporation to each of FT
and DT, each share of Class A Common Stock, if any, shall automatically convert
(without the payment of any consideration) into one duly issued, fully paid and
nonassessable share of Common Stock or the Fundamental Rights shall terminate
as to all outstanding shares of Class A Preference Stock, as the case may be,
provided that any such conversion shall not be considered to be an acquisition
of Common Stock for purposes of Section 7(i) of the Class A Provisions.++
++(ii) For purposes of calculating the Ownership Ratio, FT and DT shall be
deemed to own shares of Class A Stock owned by a Qualified Subsidiary as
follows:++
++(x) if only one of FT or DT owns, directly or indirectly, Votes in such
Qualified Subsidiary, FT or DT, as the case may be, shall be deemed to own
all of the shares of Class A Stock owned by such Qualified Subsidiary; and++
++(y) if both FT and DT own, directly or indirectly, Votes in such
Qualified Subsidiary, each of FT and DT shall be deemed to own its
respective Applicable Percentage of the shares of Class A Stock owned by
such Qualified Subsidiary. As used herein, the "Applicable Percentage"
shall mean the percentage of the equity interests of such Qualified
Subsidiary owned, directly or indirectly, by FT or DT, as the case may be.++
++(h) Unauthorized Transfers. Unless approved by this Corporation, upon any
Transfer of shares of Class A Stock (other than a Transfer to a Qualified
Subsidiary, a Qualified Stock Purchaser or to FT or DT, in each case which
Transfer is effected in accordance with the provisions of Article II of the
Stockholders' Agreement), (i) in the case of a Transfer of Class A Common
Stock, each share of Class A Common Stock so Transferred shall automatically
convert (without the payment of any consideration) into one duly issued, fully
paid and nonassessable share of Common Stock as of the date of such Transfer
and (ii) in the case of a Transfer of Class A Preference Stock, (x) if at the
date of Transfer the Conversion Price has been Fixed, each share of Class A
Preference Stock so Transferred shall automatically convert (without the
payment of any consideration) into that number of duly issued, fully paid and
nonassessable shares of Common Stock equal to the number of related Class A
Conversion Shares, or (y) if at the date of Transfer the Conversion Price has
not been Fixed, each share of Class A Preference Stock so Transferred shall
automatically convert at the Target Price (without the payment of any
consideration) into that number of duly issued, fully paid and nonassessable
shares of++
D-28
++Common Stock equal to the number of related Class A Conversion Shares,
provided that no conversion of Class A Stock pursuant to this Section 7(h) shall
be considered to be an acquisition of Common Stock for purposes of Section 7(i)
of the Class A Provisions.++
++(i) Conversion of Common Stock into Class A Stock. Unless the Fundamental
Rights shall have been previously terminated as to all outstanding shares of
Class A Preference Stock, (i) following the Class A Common Issuance Date and
until the conversion of all of the shares of Class A Common Stock pursuant to
this Section 7, each share of Common Stock acquired by a Class A Holder shall
automatically convert (without the payment of any consideration) into one duly
issued, fully paid and nonassessable share of Class A Common Stock at the date
of such acquisition; and (ii) following the date of the Supplemental Preference
Stock Closing and prior to the Class A Common Issuance Date, each share of
Common Stock acquired by a Class A Holder shall automatically convert (without
payment of any consideration) into that number of duly issued, fully paid and
nonassessable shares of Class A Preference Stock at the date of such purchase
equal to the quotient of (A) the number of shares of Class A Preference Stock
outstanding immediately prior to such acquisition, divided by (B) the number of
Class A Conversion Shares associated with such outstanding shares of Class A
Preference Stock.++
++(j) Notice of Conversion; Exchange of Stock Certificates; Effect of
Conversion of all Class A Stock, etc. (i) Immediately upon the conversion of
shares of Class A Stock into shares of Common Stock, or shares of Common Stock
into shares of Class A Stock, as the case may be and in each case pursuant to
this Section 7 (the shares of Class A Stock or shares of Common Stock so
converted hereinafter referred to as the "Converted Shares"), the rights of the
holders of such Converted Shares, as such, shall cease and the holders thereof
shall be treated for all purposes as having become the record owners of the
shares of Class A Stock or Common Stock, as the case may be, issuable upon such
conversion (the "New Shares"), provided that such Persons shall be entitled to
receive when paid any dividends declared on the Converted Shares as of a record
date preceding the time the Converted Shares were converted (the "Conversion
Time") and unpaid as of the Conversion Time. If the stock transfer books of
this Corporation shall be closed at the Conversion Time, such Person or Persons
shall be deemed to have become such holder or holders of record of the New
Shares at the opening of business on the next succeeding day on which such
stock transfer books are open.++
++(ii) As promptly as practicable after the Conversion Time, upon the delivery
to this Corporation of the certificates formerly representing Converted Shares,
this Corporation shall deliver or cause to be deliv-ered, to or upon the
written order of the record holder of such certificates, a certificate or
certificates representing the number of duly issued, fully paid and
nonassessable New Shares into which the Converted Shares formerly represented
by such certificates have been converted in accordance with the provisions of
this Section 7.++
++(iii) This Corporation shall pay all United States federal, state or local
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of New Shares upon the conversion of Converted Shares
pursuant to this Section 7, provided that this Corporation shall not be
required to pay any tax which may be payable in respect of any registration of
Transfer involved in the issue or delivery of New Shares in a name other than
that of the registered holder of shares converted or to be converted, and no
such issue or delivery shall be made unless and until the person requesting
such issue has paid to this Corporation the amount of any such tax or has
established, to the satisfaction of this Corporation, that such tax has been
paid.++
++(iv) This Corporation shall at all times reserve and keep available, out of
the aggregate of its authorized but unissued Class A Common Stock, Class A
Preference Stock and Common Stock and its issued Common Stock held in its
treasury, for the purpose of effecting the conversion of the Common Stock,
Class A Preference Stock and Class A Common Stock contemplated hereby, the full
number of shares of Common Stock then deliverable upon the conversion of all
outstanding shares of Class A Stock, and the full number of shares of Class A
Stock that would be deliverable upon conversion of all of the shares of Common
Stock and Class A Preference Stock the Class A Holders are permitted to acquire
hereunder and under the Investment Agreement, the Stockholders' Agreement and
the Standstill Agreement.++
D-29
++(v) Following conversion of all outstanding shares of Class A Common Stock
into shares of Common Stock pursuant to this Section 7 of the Class A
Provisions, this Corporation shall not, directly or indirectly, issue, or sell
from the treasury, any shares of Class A Common Stock. Following conversion of
all outstanding shares of Class A Preference Stock into shares of Class A
Common Stock (or Common Stock, as the case may be) this Corporation shall not,
directly or indirectly, issue, or sell from the treasury, any shares of Class A
Preference Stock.++
++(k) Class A Stock Held by Qualified Stock Purchasers. (i) If any Qualified
Stock Purchaser shall become a Major Competitor of this Corporation or of the
Joint Venture, on the date the writing referred to in the definition of Major
Competitor in Section 12 of these Class A Provisions is delivered to each Class
A Holder, each share of Class A Common Stock owned by such Qualified Stock
Purchaser shall automatically convert (without the payment of any
consideration) into one duly issued, fully paid and nonassessable share of
Common Stock, or if shares of Class A Preference Stock are outstanding, the
Fundamental Rights shall terminate as to the particular shares of Class A
Preference Stock owned by such Qualified Stock Purchaser.++
++(ii) Each outstanding share of Class A Common Stock owned by a Qualified
Stock Purchaser shall automatically convert (without the payment of any
consideration) into one duly issued, fully paid and nonassessable share of
Common Stock, or if shares of Class A Preference Stock are outstanding, the
Fundamental Rights shall terminate as to the particular shares of Class A
Preference Stock owned by such Qualified Stock Purchaser, in each case if:++
++(v) such Qualified Stock Purchaser breaches in any material respect its
obligations under Section 2.4 of the Stockholders' Agreement;++
++(w) such Qualified Stock Purchaser breaches in any material respect its
obligations under Article II (other than Section 2.4) of the Stockholders'
Agreement;++
++(x) such Qualified Stock Purchaser breaches any of the provisions of
Article 2 of the Qualified Stock Purchaser Standstill Agreement;++
++(y) such Qualified Stock Purchaser breaches any of the provisions of
Section 3.1 or 3.2 of the Qualified Stock Purchaser Standstill Agreement in
a Control Context, or such Qualified Stock Purchaser otherwise breaches
Sections 3.1(a)(ii), (iii) or (iv) or Section 3.1(g) of the Qualified Stock
Purchaser Standstill Agreement; or++
++(z) such Qualified Stock Purchaser breaches any of the provisions of
Sections 3.1 (except Section 3.1(a)(ii), (iii) or (iv), or Section 3.1(g))
or 3.2 of the Qualified Stock Purchaser Standstill Agreement, in each case
other than in a Control Context;++
++provided, that such Qualified Stock Purchaser shall deliver a notice++
++(I) except with respect to a breach of the type described in clause (y)
above, in accordance with clauses (iii)(x) or (iv)(x) below, in which case
no conversion of the Class A Common Stock owned by such Qualified Stock
Purchaser shall take place and the Fundamental Rights shall not terminate
as to the particular shares of Class A Preference Stock owned by such
Qualified Stock Purchaser unless such breach fails to be cured within the
time provided for cure in such clause (iii) or (iv), as the case may be;++
++(II) in accordance with clauses (iii)(y), (iv)(y) or (v) below, in which
case no conversion of the Class A Common Stock owned by such Qualified
Stock Purchaser shall take place and the Fundamental Rights shall not
terminate as to the particular shares of Class A Preference Stock owned by
such Qualified Stock Purchaser until there is issued a final nonappealable
decision or order of a court of competent jurisdiction finding that such
breach has occurred and, if applicable, was not cured within the time
provided for cure in clauses (iii) or (iv) below, as the case may be; or++
++(III) admitting that such a breach has occurred, and (if applicable)
cannot be cured within the time periods provided for cure in clauses (iii)
or (iv) below, in which case each outstanding share of Class A Common Stock
owned by such Qualified Stock Purchaser shall automatically convert
(without the payment of any consideration) into one duly issued, fully paid
and nonassessable share of Common Stock upon++
D-30
++delivery of such notice, or if shares of Class A Preference Stock are
outstanding, the Fundamental Rights shall terminate as to the particular
shares of Class A Preference Stock owned by such Qualified Stock Purchaser;
and++
++provided, further, that if such Qualified Stock Purchaser fails to perform the
actions described in clauses (I) or (II) above within the time periods provided
for performing such actions in clauses (iii), (iv) or (v) below, it shall be
deemed to have taken the action described in clause (III) above.++
++(iii) For any alleged breach of the type described in clauses (w), (x) or
(z) of clause (ii) above, such Qualified Stock Purchaser shall have the right,
within five Business Days after the date (for purposes of this clause (iii),
the "Breach Notice Date") that notice of such breach is delivered to such
Qualified Stock Purchaser by this Corporation, to deliver to this Corporation a
notice either:++
++(x) committing to effect a cure as soon as practical, in which case such
Qualified Stock Purchaser shall effect such cure as soon as practical, but
in no event later than the 20th Business Day from the Breach Notice Date
(or, with respect to an alleged breach of clauses (w) or (x), if such cure
cannot be effected within such time period due to the anti-fraud rules of
the U.S. securities laws, such longer period as is reasonably necessary to
cure such breach in a manner consistent with such rules), provided that++
++(I) such Qualified Stock Purchaser shall have no right to cure unless
such breach is susceptible to cure;++
++(II) such cure period shall continue only for so long as such
Qualified Stock Purchaser shall be undertaking to effect such a cure in
a diligent manner;++
++(III) with respect to an alleged breach of clause (ii)(x) above, this
Corporation shall have the right at any time after the end of such 20-
day period to purchase such number of shares of Class A Stock as is
necessary to return such Qualified Stock Purchaser to the ownership
level permitted by the Qualified Stock Purchaser Standstill Agreement,
at a price equal to the lower of (A) the Market Price for such Shares
at the time of such redemption and (B) the price paid by such Qualified
Stock Purchaser for such Shares, provided that this Corporation may
only exercise such right if a majority of the Continuing Directors
shall have first approved, at a meeting at which at least seven
Continuing Directors are present, such a purchase of Shares, unless a
Fair Price Condition has been satisfied; and++
++(IV) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or++
++(y) disputing that such a breach has occurred, provided that during such
time as the most recent decision or order of a court of competent
jurisdiction is to the effect that such breach has occurred and was not
cured within the time provided for cure in clause (x) of this clause (iii),
the rights provided to such Qualified Stock Purchaser under Sections 4
(except 4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and
the right of such Qualified Stock Purchaser to elect members of the Board
of Directors as a holder of the Class A Common Stock under ARTICLE FIFTH of
these Articles of Incorporation shall be suspended and may not be exercised
by such Qualified Stock Purchaser.++
++(iv) For any alleged breach of the type described in clause (ii)(v) above,
such Qualified Stock Purchaser shall have the right, within five Business Days
after the date (for purposes of this clause (iv), the "Breach Notice Date")
that notice of such breach is delivered to such Qualified Stock Purchaser by
this Corporation, to deliver to this Corporation a notice either:++
++(x) committing to effect a cure as soon as practical, in which case such
Qualified Stock Purchaser shall effect such cure as soon as practical, but
in no event later than the 20th Business Day from the Breach Notice Date
(or, if such cure cannot be effected within such time period due to the
anti-fraud rules of the U.S. securities laws, such longer period as is
reasonably neces-sary to cure such breach in a manner consistent with such
rules), provided that++
++(I) such Qualified Stock Purchaser shall have no right to cure unless
such breach is susceptible to cure;++
D-31
++(II) such cure period shall continue only for so long as such
Qualified Stock Purchaser shall be undertaking to effect such a cure in
a diligent manner; and++
++(III) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or++
++(y) disputing that such a breach has occurred;++
++provided that, in each case, from the Breach Notice Date until the earlier to
occur of the cure of such breach and the issuance of a decision or order of a
court of competent jurisdiction finding that such breach has not occurred or
was cured within the time provided for cure in clause (x) of this clause (iv),
the rights provided to such Qualified Stock Purchaser under Sections 4 (except
4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and the right of
such Qualified Stock Purchaser to elect members of the Board of Directors as a
holder of the Class A Common Stock under ARTICLE FIFTH of these Articles of
Incorporation shall be suspended and may not be exercised by such Qualified
Stock Purchaser; and provided, further, that following such decision or order,
such rights shall be suspended during such time as the most recent decision or
order of a court of competent jurisdiction is to the effect that such breach
has occurred and was not cured within the time provided for cure in clause (x)
of this clause (iv).++
++(v) For any alleged breach of the type described in clause (ii)(y) above,
such Qualified Stock Purchaser shall have the right, within five Business Days
after the date (for purposes of this clause (v), the "Breach Notice Date") that
notice of such breach is delivered to such Qualified Stock Purchaser by this
Corporation, to deliver to this Corporation a notice disputing that such a
breach has occurred, provided that from the Breach Notice Date until the
issuance of a decision or order of a court of competent jurisdiction finding
that such breach has not occurred, the rights provided to such Qualified Stock
Purchaser under Sections 4 (except 4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the
Class A Provisions and the right of such Qualified Stock Purchaser to elect
members of the Board of Directors as a holder of the Class A Common Stock under
ARTICLE FIFTH of these Articles of Incorporation shall be suspended and may not
be exercised by such Qualified Stock Purchaser and provided, further, that
following such decision or order, such rights shall be suspended during such
time as the most recent decision or order of a court of competent jurisdiction
is to the effect that such breach has occurred.++
++(vi) For purposes of this Section 7(k), an alleged breach shall be deemed to
have occurred in a Control Context if the action or actions alleged to have
given rise to such breach were taken in the context of efforts by such
Qualified Stock Purchaser or any other Person having the purpose or effect of
changing or influencing the control of this Corporation.++
++(vii) No conversion pursuant to this Section 7(k) shall be considered an
acquisition for purposes of Section 7(i) of the Class A Provisions.++
++(l) Effect of Conversion or Termination of Fundamental Rights. Following the
earlier of (i) conversion of all of the shares of Class A Common Stock pursuant
to this Section 7 and (ii) a termination of the Fundamental Rights as to all
outstanding shares of Class A Preference Stock, each share of Class A Stock
issued by this Corporation pursuant to the Investment Agreement, the
Stockholders' Agreement or these Articles of Incorporation shall automatically
convert (without the payment of any consideration) into one duly issued, fully
paid and nonassessable share of Common Stock, provided that such conversion
shall not be considered an acquisition of Common Stock for purposes of Section
7(i) of the Class A Provisions.++
++(m) Exclusionary Tender Offer. If the Board of Directors shall determine not
to oppose a tender offer by a Person other than FT, DT or any of their
respective Affiliates for Voting Securities of this Corporation representing
not less than 35 percent of the Voting Power of this Corporation, and the terms
of such tender offer do not permit the Class A Holders to sell an equal or
greater percentage of their Shares as the other holders of Voting Securities of
this Corporation are permitted to sell taking into account any proration, all,
but not less than all, of the Class A Holders shall have the right (but not the
obligation) to deliver to this Corporation a written notice requesting (x) if
Class A Common Stock is then outstanding, conversion of certain shares of
Class++
D-32
++A Common Stock designated by the Class A Holders into Common Stock, upon which
delivery each share of Class A Common Stock so designated in such notice shall
automatically convert (without the payment of any consideration) into one duly
issued, fully paid and nonassessable share of Common Stock, and (y) if Class A
Preference Stock is then outstanding, (A) if at the time of delivery of the
notice the Conversion Price has been Fixed, conversion of certain shares of
Class A Preference Stock designated by the Class A Holders into Common Stock,
upon which delivery each share of Class A Preference Stock so designated shall
convert (without the payment of any consideration) into that number of duly
issued, fully paid and nonassessable shares of Common Stock equal to the number
of related Class A Conversion Shares, or (B) if at the time of delivery of the
notice the Conversion Price has not been Fixed, conversion at the Target Price
of certain shares of Class A Preference Stock designated by the Class A Holders
into Common Stock, upon which delivery each share of Class A Preference Stock
so designated shall convert (without the payment of any consideration) at the
Target Price into that number of duly issued, fully paid and nonassessable
shares of Common Stock equal to the number of related Class A Conversion
Shares, provided that (i) conversion pursuant to this clause (m) shall not be
considered to be an acquisition of Common Stock for purposes of Section 7(i) of
the Class A Provisions, (ii) unless the Class A Common Stock shall have
otherwise been converted into Common Stock, or the Fundamental Rights shall
have been terminated as to all outstanding shares of Class A Preference Stock,
in each case pursuant to Section 7 of these Class A Provisions upon or prior to
the consummation or abandonment of the transaction contemplated by such tender
offer, immediately following the consummation of such transaction or the
delivery by this Corporation to each Class A Holder of a notice that such
transaction has been abandoned, each share of Common Stock, if any, held by a
Class A Holder shall automatically reconvert (without the payment of any
consideration) into one duly issued, fully paid and nonassessable share of
Class A Common Stock (if Class A Common Stock was outstanding immediately prior
to delivery of the notice) or that number of duly issued, fully paid and
nonassessable shares of Class A Preference Stock on the same basis as shares of
Class A Preference initially converted into Common Stock (if Class A Preference
Stock was outstanding immediately prior to delivery of the notice); and (iii)
only those shares of Class A Common Stock or Class A Preference Stock, as the
case may be, related to shares of Common Stock that were not so reconverted
shall be deemed for any purpose under these Articles, the Stockholders'
Agreement, the Investment Agreement, the Standstill Agreement, the Registration
Rights Agreement, or any agreement or document related thereto to have been
converted into Common Stock pursuant to this Section 7(m) of the Class A
Provisions, and the Class A Common Stock or Class A Preference Stock so
reconverted, as the case may be, shall be deemed to have been at all times
outstanding shares of Class A Common Stock or Class A Preference Stock, as the
case may be.++
++(n) Events under the Stockholders' Agreement. While shares of Class A
Preference Stock are outstanding, but prior to the time the Conversion Price
shall have been Fixed,++
++(i) if the event described in Section 2.6(a)(iii) of the Stockholders'
Agreement shall occur and not have been cured within the time period
specified therein, the holders of a majority of the Class A Preference
Stock may deliver a notice of election to this Corporation within 20
Business Days following the date that such cure period has lapsed (or such
earlier date that this Corporation provides notice to each of FT and DT
that it will not effect such cure) electing either that (x) upon delivery
of such notice, the Transfer Restrictions cease to be of further force and
effect, and each share of Class A Preference Stock Transferred thereafter
(other than to a Qualified Subsidiary or Class A Holder) convert upon such
Transfer at the Target Price (without the payment of consideration) into
that number of duly issued, fully paid and nonassessable shares of Common
Stock equal to the number of related Class A Conversion Shares, or (y) this
Corporation redeem each share of Class A Preference Stock for cash at a per
share price equal to its Liquidation Preference on the 90th day following
the delivery of such notice, provided that this Corporation, if it disputes
that such a breach has occurred, shall not be obligated to so redeem the
Class A Stock until the earlier of the date the parties agree that a breach
described in Section 2.6(a)(iii) of the Stockholders' Agreement has
occurred and the date of a final, nonappealable judgment of a court of
competent jurisdiction to the effect that such a breach has occurred (in
which case the amount to be paid shall include interest at a rate equal to
12.5 basis points over the Applicable LIBOR Rate, less any dividends paid
or payable on the Class A Preference Stock with respect to such period,
from the 90th day following the initial++
D-33
++court judgment until the date of payment), provided, further, that if the
Class A Holders elect the redemption option provided in the preceding
clause (y), this Corporation may in lieu of such redemption, by notice
delivered to the Class A Holders prior to (A) if this Corporation is
contesting that such a breach has occurred, the expiration of the 90th day
following the initial court judgment, or (B) if this Corporation is not so
contesting, the 30th day following delivery of a notice of election by the
Class A Holders hereunder, elect to cause the Transfer Restrictions to
cease to be of further force and effect, and each share of Class A
Preference Stock Transferred thereafter (other than to a Qualified
Subsidiary or Class A Holder) to convert upon such Transfer at the Minimum
Price at the date of such Transfer (without payment of any consideration)
into that number of duly issued, fully paid and nonassessable shares of
Common Stock equal to the number of related Class A Conversion Shares,
provided that this Corporation shall be deemed to have made this election
unless, prior to the expiration of the time periods set forth in the
preceding clauses (A) and (B), as the case may be, a majority of the
Continuing Directors shall have approved, at a meeting at which at least
seven Continuing Directors are present, the redemption option set forth in
clause (y) above, unless a Fair Price Condition has been satisfied.++
++(ii) if any of the events described in Section 2.6(a) of the
Stockholders' Agreement (other than clause (iii) or (iv) thereof) shall
occur, the holders of a majority of the Class A Preference Stock may
deliver a notice of election to this Corporation electing that, upon
delivery of such notice, the Transfer Restrictions cease to be of further
force and effect, and each share of Class A Preference Stock Transferred
thereafter (other than to a Qualified Subsidiary or Class A Holder) convert
upon such Transfer at the Target Price (without the payment of
consideration) into that number of duly issued, fully paid and
nonassessable shares of Common Stock equal to the number of related Class A
Conversion Shares.++
++(o) Transfers if Not Redeemed. Each Share of Class A Preference Stock
Transferred pursuant to Section 2.6(c) of the Stockholders' Agreement shall
automatically convert (without the payment of any consideration) at the Minimum
Price on the date of such Transfer into that number of duly issued, fully paid
and nonassessable Shares of Common Stock equal to the number of related Class A
Conversion Shares, provided that such conversion shall not be considered an
acquisition of Common Stock for purposes of Section 7(i) of the Class A
Provisions.++
++(p) Events under Rights Agreement. If there shall occur a Stock Acquisition
Date (as defined in the Rights Agreement) or an event described in clause (ii)
of Section 3(a) of the Rights Agreement (without regard to the ten business day
period (or such longer period as the Board shall determine) described therein),
in each case other than due to an action on the part of any Class A Holder, the
holders of a majority of the outstanding shares of Class A Preference Stock may
deliver a notice of election to this Corporation electing that, immediately
prior to the Distribution Date (as defined in the Rights Agreement), each share
of Class A Preference Stock shall convert at the Target Price (without the
payment of any consideration) into that number of duly issued, fully paid and
nonassessable shares of Class A Common Stock equal to the number of related
Class A Conversion Shares.++
++8. Change of Control Procedures. As long as shares of Class A Stock are
outstanding, but subject to Sections 7(a), (b), (f) and (k) of the Class A
Provisions, if this Corporation, directly or indirectly, (a) determines to sell
all or substantially all of the assets of this Corporation, (b) determines not
to oppose a third-party tender, exchange or other purchase offer for Voting
Securities with a number of Votes in excess of 35 percent of the Voting Power
of this Corporation, (c) determines to effect a merger or other business
combination involving this Corporation that would result in a Person (other
than any Class A Holder) holding Voting Securities of the resulting entity
representing 35 percent or more of the Voting Power of such entity or (d)
otherwise determines to sell Control of this Corporation, this Corporation
shall conduct such transaction in accordance with reasonable procedures to be
determined by the Board of Directors, and permit FT and DT to participate in
that process on a basis no less favorable than that granted any other
participant.++
++9. No Dilution or Impairment. (a) After the Class A Common Issuance Date, no
reclassification, subdivision or combination of the outstanding shares of
Common Stock shall be effected directly or indirectly++
D-34
++(including without limitation any reclassification, subdivision or combination
effected pursuant to a consolidation, merger or liquidation) unless at the same
time the Class A Common Stock is reclassified, subdivided, combined or
consolidated so that the holders of the Class A Common Stock (i) are entitled,
in the aggregate, to a number of Votes representing the same percentage of the
Voting Power of this Corporation relative to the Common Stock as were
represented by the shares of Class A Common Stock outstanding immediately prior
to such reclassification, subdivision or combination and (ii) maintain all of
the rights associated with the Class A Common Stock set forth in these Articles
of Incorporation, including without limitation the right to receive dividends
and other distributions (including liquidating and other distributions) that
are equivalent to those payable per share in respect of shares of Common Stock,
subject to the limitations, restrictions and conditions on such rights
contained herein.++
++(b) Without limiting the generality of the foregoing, in the case of any
consolidation or merger of this Corporation with or into any other entity
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of the Common Stock) or any reclassification of the
Common Stock into any other form of capital stock of this Corporation, whether
in whole or in part, each Class A Holder shall, after such consolidation,
merger or reclassification, have the right (but not the obligation), by notice
delivered to this Corporation or any successor thereto within 90 days after the
consummation of such consolidation, merger or reclassification, to (i) in the
case of Class A Common Stock, convert each share of Class A Common Stock held
by it into the kind and amount of shares of stock and other securities and
property which such Class A Holder would have been entitled to receive upon
such consolidation, merger, or reclassification if such Class A Holder had
converted its shares of Class A Common Stock into Common Stock immediately
prior to such merger, consolidation or reclassification or (ii) in the case of
Class A Preference Stock, receive preferred or preference stock of this
Corporation or the ultimate parent entity of any successor thereto with rights
no less favorable to the Class A Holders than those applicable to the Class A
Preference Stock (including, without limitation, the right to receive dividends
and liquidating and other distributions) set forth in these Articles of
Incorporation, the Bylaws, the Investment Agreement, the Stockholders'
Agreement and the Registration Rights Agreement. This Corporation shall not
effect, directly or indirectly, any such reclassification, subdivision or
combination of outstanding shares of Common Stock unless it delivers to the
Class A Holders written notice of its intent to take such action at least ten
Business Days before taking such action.++
++(c) The conversion ratio expressed in Section 3(c)(ii) of the portion of
ARTICLE SIXTH entitled GENERAL PROVISIONS RELATING TO COMMON STOCK AND CLASS A
STOCK and the Dividend Factor shall be adjusted to reflect any stock split,
subdivision, stock dividend, or other reclassification, consolidation or a
combination of this Corporation's Voting Securities or similar action or
transaction undertaken after June 22, 1995, provided that no adjustment shall
be made under this Section 9(c) in respect of the Cellular Spin-off or any
Spin-off.++
++10. Class Voting. Except as otherwise provided in Section 2(a) of ARTICLE
FIFTH or in the Class A Provisions, the Class A Holders shall not have, nor be
entitled to, a class vote with respect to any matter to be voted on by the
stockholders of this Corporation.++
++11. Amendment of Class A Provisions and ARTICLE FIFTH. The Class A
Provisions and Section 2(a)(iii) of ARTICLE FIFTH of these Articles of
Incorporation may be amended in any manner which would not materially alter or
change the powers, preferences or rights of the holders of shares of the Common
Stock or Preferred Stock so as to affect such powers, preferences or rights
adversely, by the Board of Directors of this Corporation with the affirmative
vote of only the holders of at least two-thirds of the outstanding shares of
Class A Stock, voting together as a single class, and without the affirmative
vote of the holders of shares of the Common Stock or the Preferred Stock. Upon
the retirement of shares of Class A Stock, (i) such shares shall not resume the
status of authorized and unissued shares of that class, (ii) such shares shall
not be reissued, and (iii) upon the execution, acknowledgment and filing of a
certificate in accordance with Kan. Stat. Ann. (S) 17-6003 and (S) 17-6603 (or
any successor provisions) stating that the reissuance of such shares is
prohibited, identifying the shares and reciting their retirement, then the
filing of such certificate shall have the effect of amending these Articles of
Incorporation so as to reduce accordingly the number of authorized shares of
Class A Common++
D-35
++Stock or Class A Preference Stock, as the case may be, or if such retired
shares constitute all of the authorized shares of such class, then the filing
of such certificate shall have the effect of amending these Articles of
Incorporation automatically so as to eliminate all references to such class of
stock therefrom.++
++12. Definitions. For purposes of ARTICLE FIFTH of these Articles of
Incorporation, the provisions of ARTICLE SIXTH of these Articles of
Incorporation entitled GENERAL PROVISIONS RELATING TO ALL STOCK, GENERAL
PROVISIONS RELATING TO COMMON STOCK AND CLASS A STOCK, GENERAL PROVISIONS
RELATING TO COMMON STOCK, and the Class A Provisions:++
++"Acquisition" shall mean the acquisition by Cellular of assets (which may
include the acquisition of the common equity interests in a Person) that
constitute a business that, prior to such acquisition, has been operated as a
company or a division or has otherwise been operated as a separate business.++
++"Adjusted Aggregate Liquidation Preference" shall mean the difference
between (a) the aggregate of the Liquidation Preference of the outstanding
shares of Class A Preference Stock (including Section 7(i) Preference Shares
whether or not converted pursuant to Section 3(c)(ii) of the Class A
Provisions), minus (b) the Section 7(i) Aggregate Purchase Price.++
++"Adjusted Cellular Price" shall mean, subject to adjustment as provided in
the Class A Provisions, the Average Cellular Price multiplied by the
Capitalization Ratio.++
++"Affiliate" shall mean, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by, or is under common Control with, such Person, provided that (a)
no JV Entity shall be deemed an Affiliate of any Class A Holder or this
Corporation unless (i) FT, DT and Atlas own a majority of the Voting Power of
such JV Entity and this Corporation does not have the Tie-Breaking Vote (as
defined in Section 18.1 of the Joint Venture Agreement), or (ii) FT, DT or
Atlas has the Tie-Breaking Vote; (b) FT, DT and this Corporation shall not be
deemed Affiliates of each other; (c) Atlas shall be deemed an Affiliate of FT
and DT; and (d) the term "Affiliate" shall not include any Governmental
Authority of France or Germany or any other Person Controlled, directly or
indirectly, by any such Governmental Authority except in each case for FT, DT,
Atlas and any other Person directly, or indirectly through one or more
intermediaries, Controlled by FT, DT or Atlas.++
++"Alien" shall mean "aliens", "their representatives", "a foreign government
or representatives thereof" or "any corporation organized under the laws of a
foreign country" as such terms are used in Section 310(b)(4) of the
Communications Act of 1934, as amended, or as hereafter may be amended, or any
successor provision of law.++
++"Applicable LIBOR Rate" shall mean the one-month London Interbank Offered
Rate (the "Quoted Rate") listed in the "Money Rates Box" of The Wall Street
Journal (New York Edition) (or any successor publication) on the day on which
such interest is to begin to accrue, provided that if such day is a day on
which the Quoted Rate is not listed in The Wall Street Journal (New York
Edition) (or such successor publication) or The Wall Street Journal (New York
Edition) (or such successor publication) is not published, the Applicable LIBOR
Rate shall be the Quoted Rate on the most recent day prior to such date on
which a Quoted Rate is listed in The Wall Street Journal (New York Edition) (or
such successor publication).++
++"Applicable Ratio" shall have the meaning set forth in Section 7.5(a) of the
Stockholders' Agreement.++
++"Associate" shall have the meaning ascribed to such term in Rule 12b-2 under
the Exchange Act, provided that when used to indicate a relationship with FT or
DT or their respective Subsidiaries or Affiliates, the term "Associate" shall
mean (a) in the case of FT, any Person occupying any of the positions listed on
Schedule A to the Stockholders' Agreement and (b) in the case of DT, any Person
occupying any of the positions listed on Schedule B to the Stockholders'
Agreement, provided, further, that, in each case, no Person occupying any such
position described in clause (a) or (b) hereof shall be deemed an "Associate"
of FT or DT, as the case may be,++
D-36
++unless the Persons occupying all such positions described in clauses (a) and
(b) hereof Beneficially Own, in the aggregate, more than 0.2% of the Voting
Power of the Company.++
++"Atlas" shall mean the company [formed] [to be formed] as a societe anonyme
under the laws of Belgium pursuant to the Joint Venture Agreement, dated as of
December 15, 1994, between FT and DT, as amended.++
++"Average Cellular Price" shall mean, subject to adjustment as provided in
the Class A Provisions, the average of the Closing Prices of a share of Cellular
Common Stock for the 20 consecutive Trading Days on which such shares are traded
"regular way" starting on the first such Trading Day after the Cellular Spin-off
Date.++
++"Average Price" shall mean, as to a security, the average of the Closing
Prices of a security for the 20 consecutive Trading Days ending on the
fifteenth Trading Day prior to the date of determination or ending on such
other date specified herein.++
++"Average Sprint Price" shall mean, subject to adjustment as provided in the
Class A Provisions, the Average Price of a share of Common Stock at the date of
determination specified herein. For purposes of this definition, if any portion
of the relevant determination period occurs prior to the Cellular Spin-off and
the Closing Price of Common Stock on any Trading Day during the determination
period is quoted "ex" the distribution of Cellular Common Stock, the Closing
Price of the Common Stock for such Trading Day will be adjusted by adding the
product of the Closing Price of the Cellular Common Stock for such Trading Day
multiplied by the Capitalization Ratio.++
++"Beneficial Owner" (including, with its correlative meanings, "Beneficially
Own" and "Beneficial Ownership"), with respect to any securities, shall mean
any Person which:++
++(a) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to acquire (whether such right is exercisable
immediately or only after the passage of time) such securities pursuant to
any agreement, arrangement or understanding (whether or not in writing),
including, without limitation, pursuant to the Investment Agreement and the
Stockholders' Agreement, or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise;++
++(b) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to vote or dispose of (whether such right is
exercisable immediately or only after the passage of time) or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 under the
Exchange Act but including all such securities which a Person has the right
to acquire beneficial ownership of whether or not such right is exercisable
within the 60-day period specified therein) such securities, including
pursuant to any agreement, arrangement or understanding (whether or not in
writing); or++
++(c) has, or any of whose Affiliates or Associates has, any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting or disposing of any securities which are
Beneficially Owned, directly or indirectly, by any other Person (or any
Affiliate thereof),++
++provided that Class A Stock and Common Stock held by one of FT or DT or its
Affiliates shall not also be deemed to be Beneficially Owned by the other of FT
or DT or its Affiliates.++
++"Board of Directors" shall mean the board of directors of this
Corporation.++
++"Business Day" shall mean any day other than a day on which commercial banks
in The City of New York, Paris, France, or Frankfurt am Main, Germany, are
required or authorized by law to be closed.++
++"Buyers" shall have the meaning set forth in the Investment Agreement.++
++"Bylaws" shall mean the Bylaws of this Corporation as amended or
supplemented from time to time.++
++"Capitalization Ratio" shall mean the quotient of the number of shares of
Cellular Common Stock outstanding immediately following the Cellular Spin-off,
divided by the number of shares of Common Stock immediately following the
Cellular Spin-off.++
D-37
++"Cellular" shall mean (a) until immediately prior to the Cellular Spin-off
Date, the Cellular and Wireless Division, (b) immediately prior to the Cellular
Spin-off Date, the direct or indirect wholly owned subsidiary of this
Corporation owning the assets of the Cellular and Wireless Division, the shares
of which subsidiary are to be distributed to this Corporation's stockholders in
connection with the Cellular Spin-off, and (c) on and after the Cellular Spin-
off Date, such company, provided that the term "Cellular" shall not include any
assets retained by this Corporation after the Cellular Spin-off Date.++
++"Cellular and Wireless Division" shall mean the Cellular and Wireless
Communications Services Division of this Corporation.++
++"Cellular Common Stock" shall mean the shares of common stock of Cellular.++
++"Cellular Spin-off" shall mean the distribution by this Corporation on a pro
rata basis to the holders of the Common Stock of shares of Cellular Common
Stock representing all of the common equity of Cellular.++
++"Cellular Spin-off Date" shall mean the date on which shares of Cellular
Common Stock are distributed to the holders of Common Stock.++
++"Cellular Spin-off Reduction Factor" shall mean, subject to adjustment as
provided in the Class A Provisions, (a) $5.25, if the Adjusted Cellular Price
is not less than $3.25 or more than $7.25, or (b) if the Adjusted Cellular
Price is more than $7.25 but not more than $8.25, $5.25 plus 50% of the
difference between the Adjusted Cellular Price and $7.25, or (c) if the
Adjusted Cellular Price is more than $8.25, $5.75 plus the difference between
the Adjusted Cellular Price and $8.25, or (d) if the Adjusted Cellular Price is
less than $3.25 but not less than $2.25, $5.25 minus 50% of the difference
between $3.25 and the Adjusted Cellular Price or (e) if the Adjusted Cellular
Price is below $2.25, $4.75 minus the difference between $2.25 and the Adjusted
Cellular Price. Notwithstanding the foregoing, (i) if the Net Cellular
Indebtedness immediately after the Cellular Spin-off exceeds $2.955, each
dollar amount set forth in the first sentence of this definition (other than
the Adjusted Cellular Price) shall be reduced dollar-for-dollar by such excess;
(ii) if $2.955 exceeds the Net Cellular Indebtedness, each such dollar amount
shall be increased dollar-for-dollar by such excess; and (iii) if Cellular has
effected any Acquisition and/or Disposition after June 22, 1995 and prior to
the Cellular Spin-off Date, such dollar amounts shall be increased by the Net
Cellular Acquisition Amount, if positive, and decreased by the absolute value
of the Net Cellular Acquisition Amount, if negative.++
++"Change of Control" shall mean a:++
++(a) decision by the Board of Directors to sell Control of this
Corporation or not to oppose a third party tender offer for Voting
Securities of this Corporation representing more than 35% of the Voting
Power of this Corporation; or++
++(b) change in the identity of a majority of the Directors due to (i) a
proxy contest (or the threat to engage in a proxy contest) or the election
of Directors by the holders of Preferred Stock; or (ii) any unsolicited
tender, exchange or other purchase offer which has not been approved by a
majority of the Independent Directors,++
++provided that a Strategic Merger shall not be deemed to be a Change of Control
and provided, further, that any transaction between this Corporation and FT and
DT or otherwise involving FT and DT and any of their direct or indirect
Subsidiaries which are party to a Contract therefor shall not be deemed to be a
Change of Control.++
++"Class A Action" shall mean action by the holders of a majority of the
shares of Class A Stock taken by a vote at either a regular or special meeting
of the stockholders of this Corporation or of the holders of the Class A Stock
or by written consent delivered to the Secretary of this Corporation.++
++"Class A Common Issuance Date" shall mean the date this Corporation first
issues shares of Class A Common Stock.++
D-38
++"Class A Common Stock" shall have the meaning set forth in ARTICLE SIXTH of
these Articles of Incorporation.++
++"Class A Conversion Shares" shall mean, the shares of Class A Common Stock
or Common Stock into which the then outstanding shares of Class A Preference
Stock (or, as the case may be, a specified number of shares of Class A
Preference Stock) would, at the time of determination, be convertible at the
then applicable Conversion Price if the conditions to establishment of the
Conversion Date had been met.++
++"Class A Director" shall mean any Director elected by the Class A Holders
pursuant to Section 2(a) of ARTICLE FIFTH of these Articles of Incorporation,
appointed by Class A Directors pursuant to Section 4(b) of ARTICLE FIFTH of
these Articles of Incorporation, or elected by the Class A Holders pursuant to
Section 3(d) of the Class A Provisions.++
++"Class A Holders" shall mean (a) the holders of the Class A Stock or the
Class A Preference Stock, as the case may be, and (b) any Qualified Stock
Purchaser who has executed with this Corporation a Qualified Stock Purchaser
Assumption Agreement (as such term is defined in the Stockholders' Agreement),
for so long as such Person holds Class A Preference Stock or Class A Common
Stock.++
++"Class A Preference Stock" shall have the meaning set forth in ARTICLE SIXTH
of these Articles of Incorporation.++
++"Class A Provisions" shall mean the portion of ARTICLE SIXTH of these
Articles of Incorporation entitled GENERAL PROVISIONS RELATING TO CLASS A
STOCK.++
++"Class A Stock" shall mean the Class A Common Stock or, if shares of Class A
Preference Stock are outstanding, the Class A Preference Stock.++
++"Closing Price" shall mean, with respect to a security on any day, the last
sale price, regular way, or in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on The New York Stock
Exchange, Inc. or, if such security is not listed or admitted to trading on
such exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the security is listed or admitted to trading or, if the
security is not listed or admitted to trading on any national securities
exchange, the last quoted sale price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use, or, if on any such date such security
is not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
security selected in good faith by the Board of Directors. If the security is
not publicly held or so listed or publicly traded, "Closing Price" shall mean
the Fair Market Value of such security.++
++"Committed Percentage" shall mean, as to any Class A Holder, the percentage
obtained by dividing the aggregate number of Votes represented or to be
represented by the Voting Securities of this Corporation (a) owned of record by
such Class A Holder or by its nominees; and (b) which such Class A Holder has
committed to this Corporation to purchase pursuant to Articles V and VI and
Sections 7.3 and 7.8 of the Stockholders Agreement and Article II of the
Investment Agreement, by the sum of (i) the Voting Power of this Corporation,
plus (ii) the Votes to be represented by any Voting Securities of this
Corporation such Class A Holder has committed to this Corporation to purchase
from this Corporation pursuant to Articles V and VI and Section 7.3 of the
Stockholders' Agreement and Article II of the Investment Agreement.++
++"Continuing Director" shall have the meaning set forth in the Fair Price
Provisions.++
++"Contract" shall mean any loan or credit agreement, note, bond, indenture,
mortgage, deed of trust, lease, franchise, contract, or other agreement,
obligation, instrument or binding commitment of any nature.++
D-39
++"Control" shall mean, with respect to a Person or Group, any of the
following:++
++(a) ownership by such Person or Group of Votes entitling it to exercise
in the aggregate more than 35 percent of the Voting Power of the entity in
question; or++
++(b) possession by such Person or Group of the power, directly or
indirectly, (i) to elect a majority of the board of directors (or
equivalent governing body) of the entity in question; or (ii) to direct or
cause the direction of the management and policies of or with respect to
the entity in question, whether through ownership of securities, by
contract or otherwise.++
++"Conversion Date" shall have the meaning set forth in Section 3(a)(i) of the
Class A Provisions.++
++"Conversion Price" shall have the meaning set forth in Section 3(b) of the
Class A Provisions.++
++"Core Businesses" shall mean all businesses in the fields of
telecommunications and information technology and applications, and equipment,
software applications and consumer and business services related thereto or
making use of the technology thereof, including value-added consumer and
business services generated through or as a result of underlying
telecommunications services using all technology (voice, data and image) and
physical transport, network intelligence, and software applications, and cable
television (but not including any programming or content-related activities
with respect thereto).++
++"Corporation Eligible Notes" shall mean notes of this Corporation,
substantially in the form of "Company Eligible Notes" as provided in the
Stockholders' Agreement, made payable to a Class A Holder as provided in
Sections 7(f) and 7(n) of the Class A Provisions, which, in the written opinion
of an investment banking firm of recognized international standing addressed to
the Class A Holder and reasonably satisfactory to such Class A Holder, would
sell, at the date of their issuance, at a price equal to their principal amount
(taking into account the likely manner and timing of resale by such Class A
Holder), provided that no note of this Corporation shall be deemed to be a
Corporation Eligible Note (a) if it is to be issued at a time when this
Corporation's debt instruments comparable to the notes proposed to be a
Corporation Eligible Note (or such note itself) do not possess at least two of
the three following ratings: Baa3 or better (or a comparable rating if the
rating system is changed) by Moody's Investors Service, Inc.; BBB- or better
(or a comparable rating if the rating system is changed) by Standard and Poor's
Corporation; and BBB- or better (or a comparable rating if the rating system is
changed) by Duff & Phelps Credit Rating Co., and (b) unless nationally-
recognized counsel shall have delivered an opinion in form and substance
reasonably satisfactory to each payee that such notes are enforceable
obligations of this Corporation in accordance with the terms thereof.++
++"Corporation Joint Venture Termination" shall mean any of the following:++
++(a) the sale of Venture Interests by a Sprint Party pursuant to Section
20.5(a) of the Joint Venture Agreement; or++
++(b) the receipt by the FT/DT Parties of the Tie-Breaking Vote due to a
Funding Default, Material Non-Funding Default or Bankruptcy (as such terms
are defined in the Joint Venture Agreement) on the part of any of the
Sprint Parties.++
++"Director" shall mean a member of the Board of Directors.++
++"Disposition" means the disposition by Cellular of assets (which may include
the disposition of common equity interests in a Person) that constitute a
business that, prior to such disposition, has been operated as a company or a
division or has otherwise been operated as a separate business.++
++"Dividend Factor" shall mean 43,118,018, as adjusted as provided in Section
9(c) of the Class A Provisions.++
++"DT" shall mean Deutsche Telekom AG, an Aktiengesellschaft formed under the
laws of Germany.++
++"ESMR" shall mean any commercial mobile radio service, and the resale of
such service, of the type authorized under the rules for Specialized Mobile
Radio Services designated under Subpart S of Part 90 of the FCC's rules or
similar Applicable Laws of any other country in effect on the date hereof,
including the networking, marketing, distribution, sales, customer interface and
operations functions relating thereto.++
D-40
++"Europe" shall mean the current geographic area covered by the following
countries and territories located on the European continent, plus, in the case
of France, its territories and possessions located outside the European
continent: Albania, Andorra, Austria, Belgium, Bosnia-Hercegovina, Bulgaria,
Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Gibraltar, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein,
Lithuania, Luxembourg, Macedonia, Malta, Monaco, Montenegro, Netherlands,
Norway, Poland, Portugal, Romania, San Marino, Serbia, Slovakia, Slovenia,
Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, and Vatican City.++
++"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the United States Securities and Exchange
Commission promulgated thereunder.++
++"Exempt Asset Divestitures" shall mean, with respect to this Corporation and
its Subsidiaries:++
++(a) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) to joint ventures approved by FT and DT prior to the
Initial Issuance Date;++
++(b) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) to (i) any entity in exchange for equity interests in
such entity if, after such transaction, this Corporation owns at least 51
percent of both the Voting Power and equity interests in such entity or
(ii) any joint venture that is an operating joint venture not controlled by
any of its principals and in which (x) this Corporation has the right,
acting alone, to disapprove (and thereby prohibit) decisions relating to
acquisitions and divestitures involving more than 20 percent of the Fair
Market Value of such entity's assets, mergers, consolidations and
dissolution or liquidation of such entity and the adoption of such entity's
business plan, and (y) Major Competitors of the Joint Venture do not in the
aggregate own more than 20% of the equity interests or Voting Power; or++
++(c) transactions in which this Corporation exchanges one or more (i)
local exchange telephone businesses for one or more such businesses or (ii)
public cellular or wireless radio telecommunications service systems for
one or more such systems, provided that this Corporation shall not,
directly or indirectly, receive cash in any such transaction in an amount
greater than 20 percent of the Fair Market Value of the property or
properties Transferred by it;++
++(d) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) by this Corporation to any of its Subsidiaries, or by
any of its Subsidiaries to this Corporation or any other Subsidiary of this
Corporation;++
++(e) (i) any Spin-off of equity interests of a wholly-owned Subsidiary
that is not a Subsidiary which, directly or indirectly, owns Long Distance
Assets (for purposes of this definition, the "Spun-off Entity"), provided
that, in the case of a Spin-off which is consummated following the Initial
Issuance Date, the Class A Holders receive securities in the Spun-off
Entity of a separate class with rights no less favorable to the Class A
Holders than those applicable to the Class A Stock set forth in these
Articles of Incorporation and the Bylaws, or (ii) the Cellular Spin-off,
unless a Notice of Abandonment has been delivered;++
++(f) Transfers of assets (other than Long Distance Assets) of this
Corporation or any of its Subsidiaries that are primarily or exclusively
used in connection with providing information technology or data processing
functions or services (collectively, for purposes of this definition, the
"IT Assets") to any Person that regularly provides information technology
or data processing functions or services on a commercial basis, in
connection with a contractual arrangement (for purposes of this definition,
an "IT Service Contract") pursuant to which such Person undertakes to
provide information technology or data processing functions or services to
this Corporation or any of its Subsidiaries of substantially the same
nature as the services associated with the use of such assets prior to such
Transfer and upon commercially reasonable terms to this Corporation as
determined in good faith by this Corporation, provided that (i) the term of
such IT Service Contract shall be for a period at least as long as the
weighted average useful life of such assets, or this Corporation or such
Subsidiary shall have the right to cause such IT Service Contract to be
renewed or extended for a period at least as long as such weighted average
useful life upon commercially reasonable terms to this Corporation as
determined in good faith by this Corporation, and (ii) the Transfer of such
assets will not materially and adversely affect the operation of this
Corporation; or++
D-41
++(g) Transfers of assets (other than Long Distance Assets or IT Assets) of
this Corporation or any of its Subsidiaries to any Person in connection
with any contractual arrangement (for purposes of this definition, a "Non-
IT Service Contract") pursuant to which such Person undertakes to provide
services to this Corporation or any of its Subsidiaries of substantially
the same nature as the services associated with the use of such assets
prior to such Transfer and upon commercially reasonable terms to this
Corporation as determined in good faith by this Corporation, provided, that
(i) the Fair Market Value of such assets, together with the Fair Market
Value of assets of this Corporation Transferred to such Person or other
Persons in related transactions, do not represent more than five percent of
the Fair Market Value of the assets of this Corporation, (ii) the Transfer
of such assets will not materially and adversely affect the operation of
this Corporation, and (iii) the term of such Non-IT Service Contract shall
be for a period at least as long as the weighted average useful life of the
assets so Transferred or this Corporation or such Subsidiary has the right
to cause such Non-IT Service Contract to be renewed or extended for a
period at least as long as such weighted average useful life upon
commercially reasonable terms to this Corporation as determined in good
faith by this Corporation.++
++"Exempt Long Distance Asset Divestitures" shall mean, with respect to this
Corporation and its Subsidiaries:++
++(a) Transfers of Long Distance Assets to a Qualified Joint Venture;++
++(b) Transfers of Long Distance Assets to any entity if this Corporation
and its Subsidiaries after such transaction own at least 70 percent of both
the Voting Power and equity interests of such entity, provided that if a
Major Competitor of FT or DT or of the Joint Venture holds equity interests
in such entity, such Major Competitor's equity interests and Votes in such
entity as a percentage of the Voting Power of such entity shall not,
directly or indirectly, exceed 20 percent;++
++(c) Transfers of Long Distance Assets pursuant to an underwritten,
widely-distributed public offering at the conclusion of which this
Corporation and its Subsidiaries shall own at least 51 percent of both the
Voting Power and equity interests in the entity that owns such Long
Distance Assets;++
++(d) Transfers in the ordinary course of business of Long Distance Assets
determined by this Corporation to be unnecessary for the orderly operation
of this Corporation's business, and sale-leasebacks of Long Distance Assets
and similar financing transactions after which this Corporation and its
Subsidiaries continue in possession and control of the Long Distance Assets
involved in such transaction;++
++(e) Transfers of Long Distance Assets by this Corporation to any of its
Subsidiaries, or by any of its Subsidiaries to this Corporation or any
other Subsidiary of this Corporation;++
++(f) Transfers of Long Distance Assets to FT or DT or any assignee thereof
pursuant to the Stockholders' Agreement;++
++(g) any Spin-off of equity interests of a wholly-owned Subsidiary which,
directly or indirectly, owns Long Distance Assets (for purposes of this
definition, the "Spun-off Entity"), provided that the Class A Holders
receive securities in the Spun-off Entity of a separate class with rights
no less favorable to the Class A Holders than those applicable to the Class
A Stock set forth in these Articles of Incorporation and the Bylaws;++
++(h) Transfers of Long Distance Assets of this Corporation or any of its
Subsidiaries that are primarily or exclusively used in connection with
providing information technology or data processing functions or services
(collectively, for purposes of this definition, the "IT Assets") to any
Person that regularly provides information technology or data processing
functions or services on a commercial basis, in connection with a
contractual arrangement (for purposes of this definition, an "IT Service
Contract") pursuant to which such Person undertakes to provide information
technology or data processing functions or services to this Corporation or
any of its Subsidiaries of substantially the same nature as the services
associated with the use of such Long Distance Assets prior to such Transfer
and upon commercially reasonable terms to this Corporation as determined in
good faith by this Corporation, provided that (i) the term of such IT
Service Contract shall be for a period at least as long as the weighted
average useful life of such Long Distance++
D-42
++Assets, or this Corporation or such Subsidiary shall have the right to
cause such IT Service Contract to be renewed or extended for a period at
least as long as such weighted average useful life upon commercially
reasonable terms to this Corporation as determined in good faith by this
Corporation, and (ii) the Transfer of such Long Distance Assets will not
materially and adversely affect the operation of the Long Distance
Business. Any such IT Service Contract involving Transfers of Long Distance
Assets, including any renewal or extension thereof, shall be deemed to be a
Long Distance Asset; or++
++(i) Transfers of Long Distance Assets (other than IT Assets) of this
Corporation or any of its Subsidiaries to any Person in connection with any
contractual arrangement (for purposes of this definition, a "Non-IT Service
Contract") pursuant to which such Person undertakes to provide services to
this Corporation or any of its Subsidiaries of substantially the same
nature as the services associated with the use of such Long Distance Assets
prior to such Transfer and upon commercially reasonable terms to this
Corporation as determined in good faith by this Corporation, provided, that
(i) the Fair Market Value of such Long Distance Assets, together with the
Fair Market Value of Long Distance Assets Transferred to such Person or
other Persons in related transactions, do not represent more than three
percent of the Fair Market Value of the Long Distance Assets of this
Corporation, (ii) the Transfer of such Long Distance Assets will not
materially and adversely affect the operation of the Long Distance
Business, and (iii) the term of such Non-IT Service Contract shall be for a
period at least as long as the weighted average useful life of the Long
Distance Assets so Transferred or this Corporation or such Subsidiary has
the right to cause such Service Contract to be renewed or extended for a
period at least as long as such weighted average useful life upon
commercially reasonable terms to this Corporation as determined in good
faith by this Corporation. Any such Non-IT Service Contract involving
Transfers of Long Distance Assets, including any renewal or extension
thereof, shall be deemed to be a Long Distance Asset.++
++"Extraordinary Dividend" shall mean, with respect to capital stock of this
Corporation, a cash dividend or other cash distribution, other than (a) a
regular periodic dividend payable in cash; or (b) a dividend payable in
accordance with the terms of the Preferred Stock or the Class A Preference
Stock.++
++"Fair Market Value" shall mean, with respect to any asset, shares or other
property, the cash price at which a willing seller would sell and a willing
buyer would buy such asset, shares or other property in an arm's-length
negotiated transaction without undue time restraints, as determined in good
faith by a majority of the Independent Directors as certified in a resolution
delivered to all of the Class A Holders.++
++"Fair Price Condition" shall have the meaning set forth in that section of
ARTICLE SIXTH of these Articles of Incorporation entitled GENERAL PROVISIONS
RELATING TO ALL STOCK.++
++"Fair Price Provisions" shall mean ARTICLE SEVENTH of these Articles of
Incorporation, and any successor provision thereto.++
++"FCC" shall mean the Federal Communications Commission.++
++"FCC Order" shall mean, with respect to any proposed Transfer of Long
Distance Assets by this Corporation, either:++
++(a) an effective written order or other final action from the FCC (either
in the first instance or upon review or reconsideration) either declaring
that FT and DT are not prohibited by Section 310 from owning such Long
Distance Assets or stating that no such declaration is required, and as to
which no Proceeding shall be pending or threatened that presents a
substantial possibility of resulting in a reversal thereof; or++
++(b) an effective written order from, or other final action taken by, the
FCC pursuant to delegated authority (either in the first instance or upon
review or reconsideration) either declaring that FT and DT are not
prohibited by Section 310 from owning such Long Distance Assets, or stating
that no such declaration is required, which order or final action shall no
longer be subject to further administrative review, and as to which no
Proceeding shall be pending or threatened that presents a substantial
possibility of resulting in a reversal thereof;++
D-43
++For purposes of clause (b) of this definition, an order from, or other final
action taken by, the FCC pursuant to delegated authority shall be deemed no
longer subject to further administrative review:++
++(x) if no petition for reconsideration or application for review by the FCC
of such order or final action has been filed within thirty days after
the date of public notice of such order or final action, as such 30-day
period is computed and as such date is defined in Sections 1.104 and
1.4 (or any successor provisions), as applicable, of the FCC's rules,
and the FCC has not initiated review of such order or final action on
its own motion within forty days after the date of public notice of the
order or final action, as such 40-day period is computed and such date
is defined in Sections 1.117 and 1.4 (or any successor provisions) of
the FCC's rules; or++
++(y) if any such petition for reconsideration or application for review has
been filed, or, if the FCC has initiated review of such order or final
action on its own motion, the FCC has issued an effective written order
or taken final action to the effect set forth in clause (a) above.++
++"Fix" or "Fixed" shall mean, in relation to the Conversion Price, the
initial establishment of the Conversion Price in accordance with Section 3(b) of
the Class A Provisions.++
++"Fixed Closing Date" means the date of the first closing to occur under the
Investment Agreement after the date on which the Conversion Price is Fixed.++
++"France" shall mean the Republic of France, including French Guiana,
Guadeloupe, Martinique and Reunion, and its territories and possessions.++
++"FT" shall mean France Telecom, an exploitant public formed under the laws
of France.++
++"FT/DT Joint Venture Termination" shall mean any of the following:++
++(a) the sale of Venture Interests by an FT/DT Party pursuant to Section
20.5(b), 20.5(c) or 20.5(d) of the Joint Venture Agreement; or++
++(b) the receipt by the Sprint Parties of the Tie-Breaking Vote due to a
Funding Default, Material Non-Funding Default or Bankruptcy (as such terms
are defined in the Joint Venture Agreement) on the part of any of the FT/DT
Parties.++
++"FT/DT Party" shall have the meaning set forth in the Joint Venture
Agreement.++
++"Fundamental Rights" means the rights of holders of Class A Preference Stock
to elect Directors and the rights of the holders of Class A Preference Stock
provided in Sections 4, 5, 6 and 8 of the Class A Provisions.++
++"Germany" shall mean the Federal Republic of Germany.++
++"Governmental Authority" shall mean any federation, nation, state,
sovereign, or government, any federal, supranational, regional, state or local
political subdivision, any governmental or administrative body, instrumentality,
department or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission or other similar dispute resolving panel or body,
and any other entity exercising executive, legislative, judicial, regulatory or
administrative functions of a government, provided that the term "Governmental
Authority" shall not include FT, DT, Atlas or any of their respective
Subsidiaries.++
++"Group" shall mean any group within the meaning of Section 13(d)(3) of the
Exchange Act.++
++"Independent Director" shall mean any member of the Board of Directors who
(a) is not an officer or employee of this Corporation, or any Class A Holder,
or any of their respective Subsidiaries, (b) is not a former officer of this
Corporation, or any Class A Holder, or any of their respective Subsidiaries,
(c) does not, in addition to such person's role as a Director, act on a regular
basis, either individually or as a member or representative of an organization,
serving as a professional adviser, legal counsel or consultant to this
Corporation, or any Class++
D-44
++A Holder, or their respective Subsidiaries, if, in the opinion of the
Nominating Committee of the Board of Directors of this Corporation (the
"Nominating Committee") or the Board of Directors if a Nominating Committee is
not in existence, such relationship is material to this Corporation, any Class
A Holder, or the organization so represented or such person, and (d) does not
represent, and is not a member of the immediate family of, a person who would
not satisfy the requirements of the preceding clauses (a), (b) and (c) of this
sentence. A person who has been or is a partner, officer or director of an
organization that has customary commercial, industrial, banking or underwriting
relationships with this Corporation, any Class A Holder, or any of their
respective Subsidiaries, that are carried on in the ordinary course of business
on an arms-length basis and who otherwise satisfies the requirements set forth
in clauses (a), (b), (c) and (d) of the first sentence of this definition, may
qualify as an Independent Director, unless, in the opinion of the Nominating
Committee or the Board of Directors if a Nominating Committee is not in
existence, such person is not independent of the management of this
Corporation, or any Class A Holder, or any of their respective Subsidiaries, or
the relationship would interfere with the exercise of independent judgment as a
member of the Board of Directors. A person who otherwise satisfies the
requirements set forth in clauses (a), (b), (c) and (d) of the first sentence
of this definition and who, in addition to fulfilling the customary director's
role, also provides additional services directly for the Board of Directors and
is separately compensated therefor, would nonetheless qualify as an Independent
Director. Notwithstanding anything to the contrary contained in this
definition, each Director as of the date of the execution of the Investment
Agreement who is not an executive officer of this Corporation shall be deemed
to be an Independent Director hereunder.++
++"Initial Issuance Date" shall mean the first date that any shares of Class A
Stock are issued.++
++"Investment Agreement" shall mean the Investment Agreement, dated as of July
31, 1995, among FT, DT and this Corporation (and all exhibits and schedules
thereto), as it may be amended or supplemented from time to time.++
++"Investment Completion Date" shall mean the date of the Supplemental
Preference Stock Closing (as such term is defined in the Investment Agreement)
or the Class A Common Issuance Date, whichever shall first occur.++
++"Investment Documents" means the Investment Agreement and the Stockholders'
Agreement.++
++"Joint Venture" shall mean the joint venture formed by FT, DT, this
Corporation and Sprint Sub, as provided in the Joint Venture Agreement.++
++"Joint Venture Agreement" shall mean the Joint Venture Agreement, dated as
of June 22, 1995 among FT, DT, Sprint Sub, and this Corporation.++
++"JV Entity" shall have the meaning set forth in the Joint Venture
Agreement.++
++"Lien" shall mean any mortgage, pledge, security interest, adverse claim,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
similar Applicable Law of any jurisdiction) or any other type of preferential
arrangement for the purpose, or having the effect, of protecting a creditor
against loss or securing the payment or performance of an obligation.++
++"Lien Transfer" shall mean the granting of any Lien on any Long Distance
Asset, other than:++
++(a) a lien securing purchase money indebtedness that does not have a term
longer than the estimated useful life of such Long Distance Asset;++
++(b) Liens or other comparable arrangements relating to the financing of
accounts receivable; and++
++(c) Liens securing any other indebtedness for borrowed money, provided
that (i) the amount of such indebtedness, when added to the aggregate
amount of purchase money indebtedness referred to in clause (a) above, does
not exceed 30% of the total book value of the Long Distance Assets as at
the date of the most recently published balance sheet of this Corporation,
(ii) the indebtedness secured by such Liens is secured only by Liens on
Long Distance Assets, (iii) the face amount of such indebtedness does not
exceed++
D-45
++the book value of the Long Distance Assets subject to such Liens, and (iv)
such indebtedness is for a term no longer than the estimated useful life of
the Long Distance Assets subject to such Liens.++
++"Liquidation Preference" shall mean, at a date of determination, the
quotient of (a) the sum of (i) the products of (x) each share of Class A
Preference Stock (other than Section 7(i) Preference Shares or shares of Class A
Preference Stock purchased from this Corporation at the Optional Shares Closing
(as such term is defined in the Investment Agreement) or pursuant to Article V
or VI of the Stockholders' Agreement), times (y) the liquidation value thereof
for each such share, (ii) the aggregate purchase price of shares of Class A
Preference Stock purchased from this Corporation at the Optional Shares Closing
or pursuant to Article V or VI of the Stockholders' Agreement, and (iii) the
Section 7(i) Aggregate Purchase Price, divided by (b) the number of shares of
Class A Preference Stock outstanding, in each case immediately prior to the
date of determination, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, on such date of determination.++
++"Local Exchange Division" shall mean the Local Communications Services
Division of this Corporation.++
++"Long Distance Assets" shall mean:++
++(a) the assets reflected in this Corporation's balance sheet for the year
ended December 31, 1994 as included in the Long Distance Division;++
++(b) any assets acquired by this Corporation or any of its Subsidiaries
following December 31, 1994 that are reflected in this Corporation's
balance sheet as included in the Long Distance Division;++
++(c) any assets of this Corporation or any of its Subsidiaries that are
not reflected in this Corporation's balance sheet for the year ended
December 31, 1994 as included in the Long Distance Division, which after
December 31, 1994 are transferred by this Corporation or any of its
Subsidiaries to, or reclassified by this Corporation or any of its
Subsidiaries as part of, the Long Distance Division;++
++(d) any assets acquired by this Corporation after December 31, 1994 that
are used or held for use primarily for the benefit of the Long Distance
Business; and++
++(e) any assets referred to in clauses (a) through (c) above that are used
or held for use primarily for the benefit of the Long Distance Business
which are transferred or reclassified by this Corporation or any of its
Subsidiaries outside of the Long Distance Division, but which continue to
be owned by this Corporation or any of its Subsidiaries;++
++provided that the term "Long Distance Assets" shall not include (i) any assets
that are used or held for use primarily for the benefit of any Non-Long
Distance Business, or (ii) any other assets reflected in this Corporation's
balance sheet for the year ended December 31, 1994 as included in the Cellular
and Wireless Division or the Local Exchange Division (other than as such assets
in the Cellular and Wireless Division or the Local Exchange Division may be
transferred or reclassified in accordance with paragraph (c) of this
definition).++
++"Long Distance Business" shall mean all long distance telecommunications
activities and services of this Corporation and its Subsidiaries at the
relevant time, including (but not limited to) all long distance transport
services, switching and value-added services for voice, data, video and
multimedia transmission, migration paths and intelligent overlapping
architectures, provided that the term "Long Distance Business" shall not
include any activities or services primarily related to any Non-Long Distance
Business.++
++"Long Distance Division" shall mean the Long Distance Communications
Services Division of this Corporation.++
++"Lower Threshold Sprint Price" shall mean $34.982 (subject to adjustment as
provided in the Class A Provisions).++
++"Major Competitor" shall mean (a) with respect to FT or DT, a Person that
materially competes with a major portion of the telecommunications services
business of FT or DT in Europe or a Person that has taken substantial steps to
become such a Major Competitor and which FT or DT has reasonably concluded, in
its good faith judgment, will be such a competitor in the near future in France
or Germany, provided that FT++
D-46
++and/or DT furnish in writing to this Corporation reasonable evidence of the
occurrence of such steps; (b) with respect to this Corporation, a Person that
materially competes with a major portion of the telecommunications services
business of this Corporation in North America, or a Person that has taken
substantial steps to become such a Major Competitor and which this Corporation
has reasonably concluded, in its good faith judgment, will be such a competitor
in the near future in the United States of America provided that this
Corporation furnish in writing to each Class A Holder reasonable evidence of
the occurrence of such steps; and (c) with respect to the Joint Venture, a
Person that materially competes with a major portion of the telecommunications
services business of the Joint Venture, or a Person that has taken substantial
steps to become such a Major Competitor and which FT, DT or this Corporation
has reasonably concluded, in its good faith judgment, will be such a competitor
in the near future, provided that FT, DT or this Corporation furnish in writing
to the other two of them reasonable evidence of the occurrence of such steps.++
++"Major Competitor Transaction" shall have the meaning set forth in Section
6(a) of the Class A Provisions.++
++"Major Issuance" shall mean any transaction, including, but not limited to,
a merger or business combination, resulting, directly or indirectly, in the
issuance (or sale from treasury) in connection with such transaction of Voting
Securities of this Corporation with a number of Votes equal to or greater than
30 percent of the Voting Power of this Corporation immediately prior to such
issuance.++
++"Market Capitalization" shall mean, with respect to this Corporation at any
date, the sum of the average Market Price over the immediately preceding 20
Business Days of each share of outstanding capital stock of this Corporation,
securities convertible into such capital stock and options, warrants or other
rights to acquire such capital stock.++
++"Market Price" shall mean with respect to a security on any date, the
Closing Price of such security on the Trading Day immediately prior to such
date. The Market Price shall be deemed to be equal to (a) in the case of a share
of Class A Common Stock, the Market Price of a share of Common Stock; and (b) in
the case of a share of Class A Preference Stock, the Liquidation Preference. The
Market Price of any options, warrants, rights or other securities convertible
into or exercisable for Class A Common Stock (except for the Class A Preference
Stock) shall be equal to the Market Price of options, warrants, rights or other
securities convertible into or exercisable for Common Stock upon the same terms
and otherwise containing the same terms as such options, warrants, rights or
other securities convertible into or exercisable for Class A Common Stock.++
++"Maximum Price" shall mean, subject to adjustment as provided in the Class A
Provisions, the lesser of (a) 125% of the Average Sprint Price for the relevant
trading period provided for herein and (b) $48.704.++
++"Minimum Dividend Amount" shall mean $0.25 per share per quarter.++
++"Minimum Price" shall mean, subject to adjustment as provided in the Class A
Provisions, 135% of the Average Sprint Price for the relevant period as
provided for herein.++
++"Modified Lower Threshold" shall mean, subject to adjustment as provided in
the Class A Provisions, the quotient of (A) the sum of (i) the product of the
Lower Threshold Sprint Price multiplied by that number of days prior to the
Cellular Spin-off Date in any Spin-off Trading Period and (ii) the product of
the New Lower Threshold Sprint Price multiplied by that number of days
beginning on and including the Cellular Spin-off Date in such Spin-off Trading
Period, divided by (B) 20.++
++"Modified New Lower Threshold" shall mean, subject to adjustment as provided
in the Class A Provisions, the quotient of (A) the sum of (i) the product of
the Second Anniversary Lower Threshold Sprint Price multiplied by that number
of days prior to the Cellular Spin-off Date in any Spin-off Trading Period and
(ii) the product of 93.308% of the New Lower Threshold Sprint Price multiplied
by that number of days beginning on and including the Cellular Spin-off Date in
such Spin-off Trading Period, divided by (B) 20.++
++"NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotations System.++
D-47
++"Net Cellular Acquisition Amount" shall mean, subject to adjustment as
provided in the Class A Provisions, the difference, which may be a negative
number, of the aggregate Purchase Prices paid by Cellular for Acquisitions
after June 22, 1995, minus the aggregate value of the Sales Prices received by
Cellular in connection with Dispositions after June 22, 1995, such difference
to be calculated on a per share basis using the number of outstanding shares of
Common Stock immediately after the Cellular Spin-off Date.++
++"Net Cellular Indebtedness" shall mean, subject to adjustment as provided in
the Class A Provisions, the amount of indebtedness for borrowed money of
Cellular outstanding immediately after the Cellular Spin-off Date, minus the
amount of Cellular's cash at such time, such amount to be calculated on a per
share basis using the number of outstanding shares of Common Stock immediately
after the Cellular Spin-off Date.++
++"New Lower Threshold Price" shall mean, subject to adjustment as provided in
the Class A Provisions, the Lower Threshold Sprint Price minus .9630 times the
Cellular Spin-off Reduction Factor.++
++"New Maximum Price" shall mean, subject to adjustment as provided in the
Class A Provisions, (a) if the Cellular Spin-off Date occurs prior to the First
Closing for the relevant period specified herein, the lesser of (i) 125% of the
Average Sprint Price for the relevant period specified herein and (ii) $48.704
minus 125% of the Cellular Spin-off Reduction Factor and (b) if the Cellular
Spin-off Date occurs after the First Closing, the Maximum Price minus the
product of (i) the lesser of (x) 1.25 and (y) the quotient of $48.704 divided
by the Average Sprint Price used in calculating such Maximum Price, multiplied
by (ii) the Cellular Spin-off Reduction Factor.++
++"New Minimum Price" shall mean, subject to adjustment as provided in the
Class A Provisions, the Minimum Price minus 135% of the Cellular Spin-off
Reduction Factor.++
++"New Target Price" shall mean, subject to adjustment as provided in the
Class A Provisions, the Target Price minus 130% of the Cellular Spin-off
Reduction Factor, provided that, if the Cellular Spin-off Date does not occur
prior to the Initial Issuance Date and the Average Sprint Price determined at
the Initial Issuance Date is within the Sprint Price Range, the New Target Price
shall be the Target Price minus the product of (a) the quotient of $47.225
divided by such Average Sprint Price, multiplied by (b) the Cellular Spin-off
Reduction Factor.++
++"New Upper Threshold Sprint Price" shall mean, subject to adjustment as
provided in the Class A Provisions, the Upper Threshold Sprint Price minus 1.04
times the Cellular Spin-off Reduction Factor.++
++"Non-Long Distance Business" shall mean (a) the ownership of any equity or
other interests in the Joint Venture or any of the JV Entities; the enforcement
or performance of any of the rights or obligations of this Corporation or any
Subsidiary of this Corporation pursuant to the Joint Venture Agreement; or any
activities or services of the Joint Venture or any of the JV Entities; (b) the
Triple Play Activities; (c) any activities or services primarily related to the
provision of subscriber connections to a local exchange or switch providing
access to the public switched telephone network; (d) any activities or services
primarily related to the provision of exchange access services for the purpose
of originating or terminating long distance telecommunications services; (e)
any activities or services primarily related to the resale by the Local
Exchange Division of long distance telecommunications services of this
Corporation or other carriers; (f) any activities or services primarily related
to the provision of inter-LATA long distance telecommunications services that
are incidental to the local exchange services business of the Local Exchange
Division; (g) any activities or services primarily related to the provision of
intra-LATA long distance telecommunications services; (h) any activities or
services (whether local, intra-LATA or inter-LATA) primarily related to the
provision of cellular, PCS, ESMR or paging services, mobile telecommunications
services or any other voice, data or voice/data wireless services, whether
fixed or mobile, or related to telecommunications services provided through
communications satellite systems (whether low, medium or high orbit systems);
and (i) the use of the "Sprint" brand name or any other brand names, trade
names or trademarks owned or licensed by this Corporation or any of its
Subsidiaries.++
++"North America" shall mean the current geographic area covered by the
following countries: Canada, the United States of Mexico and the United States
of America.++
D-48
++"Notice of Abandonment" shall have the meaning set forth in Section 3(a)(i)
of the Class A Provisions, provided that if the Cellular Spin-off Date does not
occur on or prior to the fifth anniversary of the Initial Issuance Date, the
Company shall be conclusively deemed to have delivered a Notice of Abandonment
on such fifth anniversary.++
++"PCS" shall mean a radio communications system of the type authorized under
the rules for broadband personal communications services designated as Subpart
E of Part 24 of the FCC's rules or similar Applicable Laws of any other
country, including the network, marketing, distribution, sales, customer
interface and operations functions relating thereto.++
++"Percentage Ownership Interest" shall mean, with respect to any Person, that
percentage of the Voting Power of this Corporation represented by Votes
associated with the Voting Securities of this Corporation owned of record by
such Person or by its nominees.++
++"Per Share Common Dividend" shall have the meaning set forth in Section
2(a)(ii) of the Class A Provisions.++
++"Per Share Distributed Value" shall have the meaning set forth in Section
3(b)(vii) of the Class A Provisions.++
++"Person" shall mean an individual, a partnership, an association, a joint
venture, a corporation, a business, a trust, any entity organized or existing
under Applicable Law, an unincorporated organization or any Governmental
Authority.++
++"Preferred Stock" shall have the meaning set forth in ARTICLE SIXTH of these
Articles of Incorporation.++
++"Preferred Stock Director" shall have the meaning set forth in ARTICLE FIFTH
of these Articles of Incorporation.++
++"Proceeding" shall mean any action, litigation, suit, proceeding or formal
investigation or review of any nature, civil, criminal, regulatory or
otherwise, before any Governmental Authority.++
++"Purchase Price" shall mean, as to Acquisitions by Cellular, the amount paid
in cash plus the Fair Market Value of non-cash consideration paid to effect
such Acquisition, provided that indebtedness assumed by Cellular shall not be
included in the Purchase Price paid in respect of any Acquisition to the extent
that it is included in Net Cellular Indebtedness.++
++"Qualified Joint Venture" shall have the meaning set forth in Article I of
the Investment Agreement.++
++"Qualified Stock Purchaser" shall mean a Person that (a) FT and DT
reasonably believe has the legal and financial ability to purchase shares of
Class A Stock from this Corporation in accordance with Article VI of the
Stockholders' Agreement and (b) would not be a Major Competitor of this
Corporation or of the Joint Venture immediately following such purchase.++
++"Qualified Stock Purchaser Standstill Agreement" shall have the meaning set
forth in the Standstill Agreement.++
++"Qualified Subsidiary" shall have the meaning set forth in the Investment
Agreement.++
++"Qualified Subsidiary Standstill Agreement" shall have the meaning set forth
in the Investment Agreement.++
++"Redemption Date" shall mean the date fixed by the Board of Directors for
the redemption of any shares of capital stock of this Corporation pursuant to
Section 2 of the provisions of ARTICLE SIXTH of these Articles of Incorporation
entitled GENERAL PROVISIONS RELATING TO ALL STOCK.++
D-49
++"Redemption Securities" shall mean any debt or equity securities of this
Corporation, any of its Subsidiaries, or any combination thereof having such
terms and conditions as shall be approved by the Board of Directors and which,
together with any cash to be paid as part of the redemption price pursuant to
subsection (b) of Section 2 of the provisions of ARTICLE SIXTH of these
Articles of Incorporation entitled GENERAL PROVISIONS RELATING TO ALL STOCK or
Section 3(a)(i) of the Class A Provisions, in the opinion of an investment
banking firm of recognized national standing selected by the Board of Directors
(which may be a firm which provides other investment banking, brokerage or
other services to this Corporation), have a Market Price, at the time notice of
redemption is given pursuant to subsection (d) of Section 2 of the provisions
of ARTICLE SIXTH of these Articles of Incorporation entitled GENERAL PROVISIONS
RELATING TO ALL STOCK of Section 3(a)(i) of the Class A Provisions, at least
equal to the redemption price required to be paid by subsection (a) of such
Section 2 or Section 3(a)(i) of the Class A Provisions.++
++"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated the Initial Issuance Date, among FT, DT and this Corporation,
as it may be amended or supplemented from time to time.++
++"Requested Sale" shall have the meaning set forth in Section 3(a)(i) of the
Class A Provisions.++
++"Rights Agreement" shall mean the Rights Agreement, dated as of August 8,
1989, between this Corporation and UMB Bank, n.a., as amended on June 4, 1992
and as of July 31, 1995, and as it may be amended or supplemented from time to
time.++
++"Sales Price" shall mean, as to any Disposition by Cellular, the amount
received in cash plus the Fair Market Value of non-cash consideration received
to effect such Disposition, provided that any indebtedness assumed or retained
by Cellular shall not be deducted from the Sales Price to the extent that it is
included in Net Cellular Indebtedness.++
++"Second Anniversary Lower Threshold Sprint Price" shall mean, subject to
adjustment as provided in the Class A Provisions, $32.641.++
++"Section 310" shall have the meaning set forth in Section 2(a) of ARTICLE
FIFTH of these Articles of Incorporation.++
++"Section 7(i) Aggregate Purchase Price" means the aggregate purchase price
paid for shares of Common Stock purchased by the Class A Holders which are
converted into Class A Preference Stock pursuant to Section 7(i) of the Class A
Provisions.++
++"Section 7(i) Preference Shares" shall mean shares of Class A Preference
Stock acquired by the Class A Holders upon conversion of shares of Common Stock
pursuant to Section 7(i) of the Class A Provisions.++
++"Shares" shall mean (a) shares of Class A Stock, Common Stock or any other
Voting Securities of this Corporation, (b) securities of this Corporation
convertible into Voting Securities of this Corporation and (c) options,
warrants or other rights to acquire such Voting Securities, but in the case of
clause (c) excluding any rights of the Class A Holders or FT and DT to acquire
Voting Securities of this Corporation pursuant to the Investment Agreement and
the Stockholders' Agreement (but not excluding any Voting Securities received
upon the exercise of such rights).++
++"Spin-off" shall mean any spin-off or other pro rata distribution of equity
interests of a wholly-owned direct or indirect Subsidiary of this Corporation
to the stockholders of this Corporation, provided that the term "Spin-off"
shall not include the Cellular Spin-off unless a Notice of Abandonment has been
delivered.++
++"Spin-off Trading Period" shall mean any 20 consecutive Trading Day period
which begins on or after the 19th Trading Day before the Cellular Spin-off Date
or which ends on or before the 18th Trading Day after the Cellular Spin-off
Date.++
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++"Sprint Party" shall have the meaning set forth in the Joint Venture
Agreement.++
++"Sprint Price Range" shall mean from and including the Lower Threshold
Sprint Price to and including the Upper Threshold Sprint Price.++
++"Sprint Sub" shall mean Sprint Global Venture, Inc.++
++"Standstill Agreement" shall mean the Standstill Agreement, dated as of July
31, 1995, among FT, DT and this Corporation, as it may be amended or
supplemented from time to time.++
++"Stockholders' Agreement" shall mean the Stockholders' Agreement, dated as
of the Initial Issuance Date, among FT, DT and this Corporation (and all
exhibits thereto), as it may be amended or supplemented from time to time.++
++"Strategic Investor" shall have the meaning set forth in the Investment
Agreement.++
++"Strategic Merger" shall mean a merger or other business combination
involving this Corporation (a) in which the Class A Holders are entitled to
retain or receive, as the case may be, voting equity securities of the
surviving parent entity in exchange for or in respect of (by conversion or
otherwise) such Class A Stock, with an aggregate Fair Market Value equal to at
least 75% of the sum of (i) the Fair Market Value of all consideration which
such Class A Holders have a right to receive with respect to such merger or
other business combination, and (ii) if this Corporation is the surviving
parent entity, the Fair Market Value of the equity securities of the surviving
parent entity which the Class A Holders are entitled to retain, (b) immediately
after which the surviving parent entity is an entity whose voting equity
securities are registered pursuant to Section 12(b) or Section 12(g) of the
Exchange Act or which otherwise has any class or series of its voting equity
securities held by at least 500 holders and (c) immediately after which no
Person or Group (other than the Class A Holders) owns Voting Securities of such
surviving parent entity with Votes equal to more than 35 percent of the Voting
Power of such surviving parent entity.++
++"Subsidiary" shall mean, with respect to any Person (the "Parent"), any
other Person in which the Parent, one or more direct or indirect Subsidiaries of
the Parent, or the Parent and one or more of its direct or indirect Subsidiaries
(a) have the ability, through ownership of securities individually or as a
group, ordinarily, in the absence of contingencies, to elect a majority of the
directors (or individuals performing similar functions) of such other Person,
and (b) own more than 50% of the equity interests, provided that Atlas shall be
deemed to be a Subsidiary of each of FT and DT.++
++"Supervoting Powers" shall mean, as to the capital stock and debt securities
of this Corporation:++
++(a) Common Stock entitled to more than one Vote per share (other than
pursuant to the Rights Agreement); or++
++(b) Voting Securities of this Corporation other than Common Stock
entitled to a number of Votes per share or unit, as the case may be,
greater than the quotient of (i) the price per share or unit, as the case
may be, at which such security will be issued by this Corporation divided
by (ii) the Market Price per share of Common Stock on the date of issuance.++
++"Target Price" shall mean $47.225 (subject to adjustment as provided in the
Class A Provisions).++
++"Tie-Breaking Vote" shall have the meaning set forth in Section 18.1(a) of
the Joint Venture Agreement, and shall include any successor provision
thereto.++
++"Total Requested Sale Proceeds" shall have the meaning set forth in Section
3(a)(i) of the Class A Provisions.++
++"Trading Day" shall mean, with respect to any security, any day on which the
principal national securities exchange on which such security is listed or
admitted to trading or NASDAQ, if such security is listed or admitted to
trading thereon, is open for the transaction of business (unless such trading
shall have been suspended for the entire day) or, if such security is not
listed or admitted to trading on any national securities exchange or NASDAQ,
any day other than a Saturday, Sunday, or a day on which banking institutions
in the State of New York are authorized or obligated by law or executive order
to close.++
D-51
++"Transfer" shall mean any act pursuant to which, directly or indirectly, the
ownership of the assets or securities in question is sold, transferred,
conveyed, delivered or otherwise disposed, but shall not include (a) any grant
of Liens, (b) any conversion or exchange of any security of this Corporation
pursuant to a merger or other business combination involving this Corporation,
(c) any transfer of ownership of assets to the surviving entity in a Strategic
Merger or pursuant to any other merger or other business combination not
prohibited by the Class A Provisions, or (d) any foreclosure or other execution
upon any of the assets of this Corporation or any of its Subsidiaries other
than foreclosures resulting from Lien Transfers.++
++"Treaty Benefit" shall mean:++
++(a) the 5% rate of dividend withholding (or any successor rate applicable
to non-portfolio investments);++
++(b) the exemption from income tax with respect to dividends paid or profits
distributed by this Corporation;++
++(c) the exemption from income tax with respect to gains or profits derived
from the sale, exchange, or disposal of stock in this Corporation; or++
++(d) the exemption from taxes on capital with respect to stock in this
Corporation;++
++under, in the case of (a), (b), (c) and (d) above, either (i) the relevant
income tax treaty between the United States and France, in the case of FT,
and the United States and Germany, in the case of DT, or (ii) any
provisions of French statutory law, in the case of FT, or German statutory
law, in the case of DT, which refers to, or is based on or derived from,
any provision of such treaty, or++
++(e) any other favorable treaty benefit or statutory benefit, that
specifically requires the ownership of a certain amount of voting power
or voting interest in this Corporation, under a provision of the
relevant income tax treaty between the United States and France or the
statutory laws of France, in the case of FT, or the relevant income tax
treaty between the United States and Germany or the statutory laws of
Germany, in the case DT, provided that the chief tax officer of FT or
DT certifies that such benefit is reasonably expected to provide to FT
or DT, as the case may be, combined tax savings in the year such
certification is made and in future years of at least U.S. $15 million.++
++"Triple Play Activities" shall mean (a) the ownership of any equity or other
interests in MajorCo, L.P. or any of its successors or Affiliates; the
enforcement or performance of any of the rights or obligations of this
Corporation or any Subsidiary of this Corporation pursuant to the Agreement of
Limited Partnership of MajorCo, L.P. or any other agreement or arrangement
contemplated thereby, except to the extent relating to the provision of
services by this Corporation as the long distance telecommunications provider
to MajorCo, L.P.; or any activities or services of MajorCo, L.P. or any of its
successors or Affiliates; (b) the ownership of any equity or other interests in
any Teleport Entity (as that term is defined in the Contribution Agreement (the
"Contribution Agreement"), dated as of March 28, 1995, by and among TCI Network
Services, Comcast Telephony Services, Cox Telephony Partnership, MajorCo, L.P.
and NewTelco, L.P.); or any activities or services of any Teleport Entity or
any of their respective successors or Affiliates; and (c) the ownership of any
equity or other interests in PhillieCo, L.P., or any of its successors or
Affiliates; the enforcement or performance of any of the rights or obligations
of this Corporation or any Subsidiary of this Corporation pursuant to the
Amended and Restated Agreement of Limited Partnership of PhillieCo, L.P., dated
as of February 17, 1995, or any other agreement or arrangement contemplated
thereby, except to the extent relating to the provision of services by this
Corporation as the long distance telecommunications provider to PhillieCo,
L.P.; or any activities or services of PhillieCo, L.P. or any of its successors
or Affiliates.++
++"Upper Threshold Sprint Price" shall mean, subject to adjustment as provided
in the Class A Provisions, $37.780.++
++"Venture Interests" shall have the meaning set forth in the Joint Venture
Agreement.++
++"Vote" shall mean, with respect to any entity, the ability to cast a vote at
a stockholders', members' or comparable meeting of such entity with respect to
the election of directors, managers or other members of such entity's governing
body, or the ability to cast a general partnership or comparable vote, provided
that with respect to this Corporation only, the term "Vote" shall mean the
ability to exercise general voting power (as opposed to++
D-52
++the exercise of special voting or disapproval rights such as those set forth
in the Class A Provisions) with respect to matters other than the election of
directors at a meeting of the stockholders of this Corporation.++
++"Voting Power" shall mean, with respect to any entity as at any date, the
aggregate number of Votes outstanding as at such date in respect of such
entity.++
++"Voting Securities" shall mean, with respect to an entity, any capital stock
or debt securities of such entity if the holders thereof are ordinarily, in the
absence of contingencies, entitled to a Vote, even though the right to such
Vote has been suspended by the happening of such a contingency, and in the case
of this Corporation, shall include, without limitation, the Common Stock and
the Class A Stock, but shall not include any shares issued pursuant to the
Rights Agreement to the extent such issuance is caused by action of a Class A
Holder.++
++"Weighted Average Price" shall mean the weighted average per unit price paid
by the purchasers of any capital stock, debt instrument or security of this
Corporation. In determining the price of shares of Common Stock or Class A
Common Stock issued upon the conversion or exchange of securities or issued
upon the exercise of options, warrants or other rights, the consideration for
such shares shall be deemed to include the price paid to purchase the
convertible security or the warrant, option or other right, plus any additional
consideration paid upon conversion or exercise. If any portion of the price
paid is not cash, the Independent Directors (acting by majority vote) shall
determine in good faith the Fair Market Value of such non-cash consideration.
If any new shares of Common Stock are issued together with other shares or
securities or other assets of this Corporation for consideration which covers
both the new shares and such other shares, securities or other assets, the
portion of such consideration allocable to such new shares shall be determined
in good faith by the Independent Directors (acting by majority vote), in each
case as certified in a resolution sent to all Class A Holders.++
++13. Notices. All notices made by this Corporation pursuant to the Class A
Provisions shall be made in writing and any such notice shall be deemed
delivered when the same has been delivered in person to, or transmitted by
telex or telecopier to, or seven days after it has been sent by air mail to the
addresses of, all of the Class A Holders as indicated on the stock transfer
books of this Corporation. Communications by telex or telecopier also shall be
sent concurrently by air mail, but shall in any event be effective as stated
above.++
++14. No Other Beneficiaries. The Class A Provisions are intended for the
benefit of the Class A Holders only, and nothing in the Class A Provisions is
intended or will be construed to confer upon or to give any third party or
other stockholder of this Corporation any rights or remedies by virtue hereof.
Any term of the Class A Provisions may be waived by the holders of at least
two-thirds of the outstanding shares of Class A Stock, voting together as a
single class.++
GENERAL PROVISIONS RELATING TO PREFERRED STOCK
1. The Preferred Stock may be issued from time to time in one or more series,
each of such series to have such voting powers (full or limited or without
voting powers) designation, preferences and relative, participating, optional
or other special rights and qualifications, limitations or restrictions thereof
as are stated and expressed herein, or in a resolution or resolutions providing
for the issue of such series adopted by the Board of Directors as hereinafter
provided.
2. Authority is hereby granted to the Board of Directors, subject to the
provisions of this ARTICLE SIXTH, to create one or more series of Preferred
Stock and, with respect to each series, to fix or alter as permitted by law, by
resolution or resolutions providing for the issue of such series:
(a) the number of shares to constitute such series and distinctive
designation thereof;
(b) the dividend rate on the shares of such series, the dividend payment
dates, the periods in respect of which dividends are payable ("dividend
periods") whether such dividends shall be cumulative, and if
cumulative, the date or dates from which dividends shall accumulate;
D-53
(c) whether or not the shares of such series shall be redeemable, and, if
redeemable, on what terms, including the redemption prices which the
shares of such series shall be entitled to receive upon the redemption
thereof;
(d) whether or not the shares of such series shall be subject to the
operation of retirement or sinking funds to be applied to the purchase
or redemption of such shares for retirement and, if such retirement or
sinking fund or funds be established, the annual amount thereof and the
terms and provisions relative to the operation thereof;
(e) whether or not the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation and the conversion price or prices or rate or rates, or the
rate or rates at which such exchange may be made, with such
adjustments, if any, as shall be stated and expressed or provided in
such resolution or resolutions;
(f) the voting power, if any, of the shares of such series; and
(g) such other terms, conditions, special rights and protective provisions
as the Board of Directors may deem advisable.
3. No dividend shall be declared and set apart for payment on any series of
Preferred Stock in respect of any dividend period unless there shall likewise
be or have been paid, or declared and set apart for payment, on all shares of
Preferred Stock of each other series entitled to cumulative dividends at the
time outstanding which rank equally as to dividends with the series in
question, dividends ratably in accordance with the sums which would be payable
on the said shares through the end of the last preceding dividend period if all
dividends were declared and paid in full.
4. If upon any dissolution of the Corporation, the assets of the Corporation
distributable among the holders of any one or more series of Preferred Stock
which are (i) entitled to a preference over the holders of the Common Stock
upon such dissolution, and (ii) rank equally in connection with any such
distribution, shall be insufficient to pay in full the preferential amount to
which the holders of such shares shall be entitled, then such assets, or the
proceeds thereof, shall be distributed among the holders of each such series of
the Preferred Stock ratably in accordance with the sums which would be payable
on such distribution if all sums payable were discharged in full.
5. In the event that the Preferred Stock of any series shall be redeemable,
then, at the option of the Board of Directors, the Corporation may at such time
or times as may be specified by the Board of Directors as provided in paragraph
(c) of Section 2 of this ARTICLE SIXTH redeem all, or any number less than all,
of the outstanding shares of such series at the redemption price thereof and on
the other terms fixed herein or by the Board of Directors as provided in said
paragraph (c) (the sum so payable upon any redemption of Preferred Stock being
herein referred to as the "redemption price").
PREFERRED STOCK-FIRST SERIES, CONVERTIBLE
AMOUNT
The number of shares to constitute the initial series of Preferred Stock
shall be 1,742,853 and the designation thereof shall be Preferred Stock-First
Series (hereafter "First Series").
DIVIDENDS
Holders of shares of the First Series will be entitled to receive cumulative
cash dividends at the quarterly rate of $.22 1/2 per share for six consecutive
quarters commencing in September, 1967 (the specific date to coincide with the
date the Corporation pays its third quarter Common Stock dividend); thereafter
the cumulative quarterly dividend rate will be $.37 1/2 per share. All such
payments will be made out of funds
D-54
legally available for the payment of such dividends, when and as declared,
before any distribution shall be made on the Corporation's Common Stock.
CONVERSION RIGHTS
The holders of shares of the First Series may convert any or all of said
shares into Common Stock at any time after December 7, 1989, on the basis of
three (3) shares of the Common Stock of the Corporation for each share of the
First Series. Such ratio is herein referred to as the "conversion rate."
The conversion rate shall be subject to the following adjustments:
A. In case the Corporation shall (i) pay a dividend in Common Stock or (ii)
subdivide the outstanding shares of Common Stock into a greater number
of shares of Common Stock or combine the outstanding shares of Common
Stock into a smaller number of shares of Common Stock, the conversion
rate in effect immediately prior to such stock dividend, subdivision or
combination shall be proportionately increased or decreased as the case
may be.
B. No such adjustment shall be required, however, if the aggregate number
of shares of Common Stock issued as dividends on the Common Stock since
the most recent previous adjustment does not exceed 5% of the total
number of shares of Common Stock outstanding; provided, however, that
when the aggregate number of shares of Common Stock issued as dividends
since the most recent previous adjustment shall exceed the foregoing 5%,
the conversion rate shall be increased in proportion to the same
percentage or ratio that the aggregate of all such dividends in shares
of Common Stock since the most recent previous adjustment bears to the
total number of shares of Common Stock outstanding.
C. In the event the Corporation shall fix a record date for the purpose of
determining the holders of shares of Common Stock entitled to receive
any dividend in Common Stock, the conversion rate or any subsequent
conversion rate in effect immediately prior to the record date fixed for
the determination of shareholders entitled to such dividend shall be
proportionately increased (subject to the limitation of subparagraph (B)
above) and such adjustment will become effective immediately after the
opening of business on the day following such record date.
D. The conversion rate shall not be adjusted by reason of: (i) the issuance
of shares pursuant to options and stock purchase agreements granted or
entered into with officers or employees of the Corporation; and (ii) the
issuance of shares for cash or in exchange for assets or stock of
another company.
E. Any adjustment in the conversion rate as herein provided shall be to the
nearest, or if there shall be no nearest, then to the next lower, one-
hundredth of a share of Common Stock, and shall remain in effect until
further adjustment as required hereunder.
F. In case the Corporation shall be recapitalized, or shall be consolidated
with or merged into, or shall sell or transfer its property and assets
as, or substantially as, an entirety to any other corporation, proper
provisions shall be made as a part of the terms of such
recapitalization, consolidation, merger, sale or transfer whereby the
holder of any shares of the First Series at the time outstanding
immediately prior to such event shall thereafter be entitled to such
conversion rights, with respect to securities of the Corporation
resulting from such recapitalization, consolidation or merger, or to
which such sale or transfer shall be made, as shall be substantially
equivalent to the conversion rights herein provided for.
G. No fraction of a share of Common Stock shall be issued upon any
conversion. In lieu of the fraction of a share to which the holder of
shares of the First Series surrendered for conversion would otherwise be
entitled, such holder shall receive, as soon as practicable after the
date of conversion, an amount in cash equal to the same fraction of the
market value of a full share of Common Stock. For the purposes of this
subparagraph, the market value of a share of Common Stock shall be the
last recorded sale price of such a share on the New York Stock Exchange
on the day immediately
D-55
preceding the date upon which such shares of such series are surrendered
for conversion, or if there be no such recorded sale price on such date,
the last quoted bid price per share of Common Stock on such Exchange at
the close of business on such date.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of the Corporation
the holders of the First Series will be entitled to receive out of the assets
of the Corporation available for distribution to stockholders, before any
distribution of the assets shall be made to the holders of Common Stock, the
sum of $42.50 per share if such liquidation is voluntary and the sum of $40.00
per share if such liquidation is involuntary, plus in each case any accumulated
unpaid dividends. If upon any liquidation, dissolution or winding up of the
Corporation the amounts payable with respect to the Preferred Stock are not
paid in full, the holders of the Preferred Stock will share ratably in any
distribution of assets in proportion to the full preferential amounts to which
they are entitled.
REDEMPTION
The First Series may be redeemed by the Corporation after July 1, 1972, at
any time or from time to time, upon at least thirty days' prior notice, at the
redemption price of $42.50 per share, plus any accumulated unpaid dividends. If
less than all the outstanding First Series is to be redeemed, the shares to be
redeemed shall be determined in such manner as may be prescribed by the Board
of Directors. Shares so redeemed shall be retired and not reissued.
VOTING RIGHTS
Each holder of the First Series will be entitled to one (1) vote for each
share held.
If six quarterly dividends on any series of the Preferred Stock are in
arrears, the number of directors of the Corporation shall be increased by two
(2) and the holders of all the Preferred Stock voting as a class will be
entitled to elect two (2) directors until all arrears in dividends have been
paid.
Consent of the holders of at least two-thirds of the then outstanding
Preferred Stock of all classes will be necessary to: (a) authorize any stock
ranking either as to payment of dividend or distribution of assets prior to the
First Series or any other Preferred Stock then outstanding or (b) amend, alter,
or change in any material respect prejudicial to the holders thereof the
preferences of any then outstanding Preferred Stock.
Consent of the holders of a majority of the then outstanding Preferred Stock
of all classes will be necessary to: (a) increase the authorized amount of the
Preferred Stock or (b) create any other class of stock ranking on a parity with
the Preferred Stock.
PREEMPTIVE RIGHTS
No holder of Preferred Stock will have any preemptive rights.
LISTING
The Corporation intends to apply for listing on the New York Stock Exchange,
subject to the approval of that Exchange, of its First Series.
D-56
PREFERRED STOCK-SECOND SERIES, CONVERTIBLE
AMOUNT, RANK AND DESIGNATION
The amount of shares to constitute the Second Series of Preferred Stock shall
be 8,758,472 shares plus such an additional amount, if any, as shall be
required under the Agreement and Plan of Merger between the Company and
Carolina Telephone and Telegraph Company dated as of July 18, 1968. The
designation thereof shall be "Preferred Stock-Second Series, Convertible"
(hereinafter "Second Series"). Shares of the Second Series shall rank on a
parity with shares of the First Series of the Preferred Stock as to dividends
and upon liquidation and shall have a preference over the shares of the Common
Stock and any other class or series of stock ranking junior to the Second
Series as to dividends or upon liquidation.
DIVIDENDS
Holders of shares of the Second Series will be entitled to receive cumulative
cash dividends each calendar quarter payable in March, June, September and
December of each year, at the following rates: $.31 1/4 per share for the eight
(8) consecutive quarters beginning with the quarter ending March 31, 1969
through the quarter ending December 31, 1970; $.34 3/8 per share for eight (8)
quarters beginning with the quarter ending March 31, 1971 through the quarter
ending December 31, 1972; and $.37 1/2 per share in each quarter thereafter.
All such payments will be made out of funds legally available for the payment
of such dividends, when and as declared by the Board of Directors of the
Corporation. Before any dividends on the Common Stock or any other class or
series of stock of the Corporation ranking junior to the Second Series as to
dividends shall be paid or declared and set apart for payment, the holders of
shares of the Second Series shall be entitled to receive the full accumulated
cash dividends for all quarterly dividend periods ending on or before the date
on which any dividend on any such class or series of stock ranking junior to
the Second Series as to dividends or upon liquidation is declared or is to be
paid.
CONVERSION RIGHTS
The holders of shares of the Second Series may convert any or all of said
shares into Common Stock at any time after December 7, 1989, on the basis of
two and one-half (2 1/2) shares of the Common Stock of the Corporation for each
one share of the Second Series. Such ratio is herein referred to as the
"conversion rate." In case of the redemption of any shares of the Second
Series, such right of conversion shall cease and terminate as to the shares
duly called for redemption, at the close of business on the date fixed for
redemption, unless default shall be made in the payment of the redemption
price. Upon conversion the Corporation shall make no payment or adjustment on
account of dividends accrued or in arrears on the Second Series surrendered for
conversion.
The conversion rate in effect at any time shall be subject to adjustment as
follows:
A. In case the Corporation shall (i) declare a dividend on its Common Stock in
shares of its capital stock, (ii) subdivide its outstanding shares of
Common Stock, (iii)combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue any shares by reclassification of
its shares of Common Stock (including any reclassification in connection
with a consolidation or merger in which the Corporation is the continuing
corporation), at the conversion rate in effect at the time of the record
date for such dividend or of the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so that
the holder of any shares of the Second Series surrendered for conversion
after such time shall be entitled to receive the number of shares which he
would have owned or have been entitled to receive had such shares of the
Second Series been converted immediately prior to such time. Such
adjustment shall be made successively whenever any event listed above shall
occur.
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B. In case the Corporation shall fix a record date for the issuance of
rights or warrants to all holders of its Common Stock entitling them
(for a period expiring within 45 days after such record date) to
subscribe for or purchase shares of Common Stock at a price per share
less than the current market price per share of Common Stock (as defined
in Paragraph D below) on such record date, the conversion rate after
such record date shall be determined by multiplying the conversion rate
in effect immediately prior to such record date by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding
on such record date plus the number of additional shares of Common Stock
to be offered for subscription or purchase, and of which the denominator
shall be the number of shares of Common Stock outstanding on such record
date plus the number of shares of Common Stock which the aggregate
offering price (without deduction for expenses or commissions of any
kind) of the total number of shares so to be offered would purchase at
such current market price. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such rights
or warrants are not so issued, the conversion rate shall again be
adjusted to be the conversion rate which would then be in effect if such
record date had not been fixed.
C. In case the Corporation shall fix a record date for the making of a
distribution to all holders of its Common Stock (including any such
distribution made in connection with a consolidation or merger in which
the Corporation is the continuing corporation) of evidences of its
indebtedness or assets (excluding dividends paid in, or distributions
of, cash) or subscription rights or warrants (excluding those referred
to in Paragraph B above), the conversion rate after such record date
shall be determined by multiplying the conversion rate in effect
immediately prior to such record date by a fraction, of which the
numerator shall be the current market price per share of Common Stock
(as defined in Paragraph D below) on such record date, and of which the
denominator shall be such current market price per share of Common
Capital Stock, less the fair market value (as determined by the Board of
Directors whose determination shall be conclusive, and described in a
statement filed with the transfer agent or agents for the Second Series
and with the principal office of the Corporation) of the portion of the
assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to one share of Common Stock.
Such adjustment shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the
conversion rate shall again be adjusted to the conversion rate which
would then be in effect if such record date had not been fixed.
D. For the purpose of any computation under Paragraphs B and C above, the
current market price per share of Common Stock on any record date shall
deemed to be the average of the daily closing prices for the 30
consecutive business days commencing 45 business days before such date.
The closing price for each day shall be the last sale price regular way
or, in case no such sale takes place on such day, the mean between the
closing bid and asked prices regular way, in either case on the New York
Stock Exchange.
E. The conversion rate shall not be adjusted by reason of: (i) the issuance
of shares pursuant to options and stock purchase agreements granted or
entered into with officers or employees of the Corporation; and (ii) the
issuance of shares for cash (except as provided in Paragraph B above) or
in exchange for assets or stock of another company.
F. Any adjustment in the conversion rate as herein provided shall be to the
nearest, or if there shall be no nearest, then to the next lower, one-
hundredth of a share of Common Stock, and shall remain in effect until
further adjustment as required hereunder.
G. In case the Corporation shall be recapitalized, or shall be consolidated
with or merged into, or shall sell or transfer its property and assets
as, or substantially as, an entirety to any other corporation, proper
provisions shall be made as a part of the terms of such
recapitalization, consolidation, merger, sale or transfer whereby the
holder of any shares of the Second Series at the time outstanding
immediately prior to such event shall thereafter be entitled to such
conversion rights,
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with respect to securities of the Corporation resulting from such
recapitalization, consolidation or merger or to which such sale or
transfer shall be made, as shall be substantially equivalent to the
conversion rights herein provided for.
H. No fraction of a share of Common Stock shall be issued upon any
conversion. In lieu of the fraction of a share to which the holder of
shares of the Second Series surrendered for conversion would otherwise
be entitled, such holder shall receive, as soon as practicable after the
date of conversion, an amount in cash equal to the same fraction of the
market value of a full share of Common Stock. For the purposes of this
subparagraph, the market value of a share of Common Stock shall be the
last recorded sale price of such a share on the New York Stock Exchange
on the day immediately preceding the date upon which such shares of such
series are surrendered for conversion, or if there be no such recorded
sale price on such day, the last quoted bid price per share of Common
Stock on such Exchange at the close of business on such date.
I. Whenever there shall be an adjustment in the conversion rate as provided
by the foregoing, the Corporation will file with each transfer agent for
shares of the Second Series a certificate signed by the President or the
chief financial or accounting officer of the Corporation, setting forth
in reasonable detail the calculation of the adjustment, and shall mail
to each holder of record thereof, a notice describing the adjustment and
stating the applicable record or effective date therefor, at least 20
days prior thereto.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of the Corporation
the holders of the Second Series will be entitled to receive out of the assets
of the Corporation available for distribution to stockholders, before any
distribution of the assets shall be made to the holders of the Common Stock or
any other class or series of stock ranking junior to the Second Series either
as to dividends or upon liquidation the sum of $35.42 per share if such
liquidation is voluntary and the sum of $33.33 per share if such liquidation is
involuntary, plus in each case any accumulated unpaid dividends (whether or not
declared), to the end of the current quarterly dividend period in which the
payment is made. If upon any liquidation, dissolution or winding up of the
Corporation the amounts payable with respect to the Second Series and any other
series of Preferred Stock which ranks on a parity with the Second Series are
not paid in full, the holders of the Second Series and such parity Preferred
Stock will share ratably in any distribution of assets in proportion to the
full preferential amounts to which they are entitled.
REDEMPTION
Subject to the provisions herein and in the charter contained, the Second
Series may be redeemed by the Corporation after December 31, 1975, at any time
or from time to time, upon at least thirty days' prior notice, at the
redemption price of $50.00 per share, plus any accumulated unpaid dividends
(whether or not declared), to the end of the current quarterly dividend period
in which the payment is made. If less than all the outstanding Second Series is
to be redeemed, the shares to be redeemed shall be selected by lot, in such
equitable manner as may be prescribed by the Board of Directors. Shares so
redeemed shall be retired and not reissued.
RESERVATION OF SHARES
The Corporation shall at all times keep available and reserved the number of
shares of its Common Stock required for conversion of the outstanding and any
reserved shares of the Second Series.
CERTAIN PROTECTIVE PROVISIONS
If at any time the full cumulative dividends on shares of the Second Series
have not been paid or declared and set aside for payment for the current and
all past quarterly dividend periods, the Corporation (a) will not declare, or
pay, or set apart for payment any dividends or make any distribution, on any
other class or series of stock of the Corporation ranking junior to the Second
Series whether as to dividends or upon liquidation;
D-59
(b) will not redeem, purchase or otherwise acquire, or permit any subsidiary to
purchase or otherwise acquire, any shares of any junior class or series if the
Corporation shall be in default with respect to any dividend payable on shares
of the Second Series, provided that notwithstanding the foregoing, the
Corporation may at any time redeem, purchase or otherwise acquire shares of
stock of any such junior class in exchange for, or out of the net cash proceeds
from the substantially simultaneous sale of, other shares of stock of any
junior class; and (c) will not redeem pursuant to redemption rights in the
terms of such stock any stock ranking on a parity with the Second Series unless
at the same time it redeems all the shares of the Second Series.
Unless the consent of all or a greater number of such shares is required by
law, the consent of the holders of at least two-thirds ( 2/3) of the then
outstanding shares of the Second Series shall be necessary in order to
liquidate or dissolve the Corporation voluntarily or by any other means
involving the vote or consent of any stockholders of the Corporation.
Unless the consent of all or a greater number of such shares is required by
law, consent of the holders of at least two-thirds ( 2/3) of the then
outstanding aggregate number of shares of the Second Series and each other
series of the Preferred Stock whose terms provide for such consent, taken
together, will be necessary to: (a) authorize (by whatever means) any stock
ranking either as to payment of dividends or distribution of assets prior to
the Second Series or any other Preferred Stock then outstanding; or (b)
authorize any merger or consolidation (or transfer of all or substantially all
of the assets of the Corporation in a transaction contemplating in substance
and effect the exchange of shares of the Preferred Stock for stock of another
corporation) unless the surviving, resulting or other corporation in such
transaction shall have authorized no stock ranking prior to the Preferred Stock
as to dividends or upon liquidation (unless such stock is a stock substantially
the same as, and to be exchanged for, stock of the Corporation previously
authorized pursuant to the preceding clause (a)); or (c) amend, alter, or
change in any material respect adverse to the holders thereof the preferences
of any then outstanding Preferred Stock; provided that in case of any such
action described in the preceding clauses (a), (b) and (c) which, in any
material respect, is adverse to the Second Series as a series and is not a term
generally applicable to and with the same relative effect upon all series, the
consent of the holders of two-thirds ( 2/3) of the then outstanding shares of
the Second Series will be required.
Unless the consent of all or a greater number of such shares is required by
law, consent of the holders of a majority of the then outstanding aggregate
number of shares of the Second Series and each other series of the Preferred
Stock whose terms provide for such consent, taken together, will be necessary
to: (a) increase the authorized amount of the Preferred Stock; (b) authorize
any merger or consolidation (or transfer of all or substantially all the assets
of the Corporation to another corporation contemplating in substance and effect
the exchange of shares of the Preferred Stock for stock of another corporation)
unless the surviving, resulting or other corporation in such transaction shall
have no greater authorized amount of stock ranking on a parity with the
Preferred Stock as to payment of dividends or upon liquidation than was
authorized by the Corporation immediately prior to such transaction; or (c)
create any other class of stock ranking on a parity with the Preferred Stock as
to dividends or upon liquidation.
VOTING RIGHTS
Each holder of the Second Series will be entitled to one (1) vote for each
share held, and, in addition to the other class and series voting rights of the
shares of the Second Series, shall have general voting power, share for share,
with the Common Stock of the Corporation and any other shares having general
voting power.
If six quarterly dividends on any series of the Preferred Stock are in
arrears, the number of directors of the Corporation shall be increased by two
(2) and the holders of all the Preferred Stock voting as a class will be
entitled to elect two (2) directors until all arrears in dividends have been
paid. The Corporation will promptly take all such action as shall be necessary
to permit such election to occur promptly after such arrearage occurs.
D-60
PREFERRED STOCK-THIRD SERIES
(1) Designation; Number of Shares. The series shall be designated as
Preferred Stock-Third Series, 7 3/4%, Cumulative, and shall consist of 400,000
shares. The shares of said series are hereinafter sometimes called the "Third
Series Shares."
(2) Dividends. The holders of the Third Series Shares shall be entitled to
receive, as and when declared by the Board of Directors, out of funds legally
available for the payment of dividends, cumulative dividends at the rate of
$7.75 per share per annum. Such dividends shall be cumulative from the date on
which the Third Series Shares are originally issued and shall be payable on
June 1, 1973, for the period commencing on such date of original issuance and
ending on said June 1, and thereafter quarterly on September 1, 1973, December
1, 1973, and on the first day of each March, June, September, and December
thereafter.
(3) Optional Redemption. The Third Series Shares shall be redeemable at the
option of the Corporation, upon at least thirty (30) days prior written notice
addressed to each registered holder of Third Series Shares at his address
appearing in the stock records of the Corporation, at any time after March 1,
1974 as a whole, or from time to time in part, at the following redemption
prices per share if redeemed during the twelve-month period ending on the first
day of March,
REDEMPTION
YEAR PRICE
- ---- ----------
1975............ $107.49
1976............ 107.23
1977............ 106.97
1978............ 106.71
1979............ 106.45
1980............ 106.19
1981............ 105.93
1982............ 105.67
1983............ 105.41
1984............ 105.15
1985............ 104.89
1986............ 104.63
1987............ 104.37
1988............ 104.11
1989............ 103.85
REDEMPTION
YEAR PRICE
- ---- ----------
1990............ $103.59
1991............ 103.33
1992............ 103.07
1993............ 102.81
1994............ 102.55
1995............ 102.29
1996............ 102.03
1997............ 101.77
1998............ 101.51
1999............ 101.25
2000............ 101.00
2001............ 100.75
2002............ 100.50
2003............ 100.25
and at $100.00 per share if redeemed at any time after March 1, 2003, plus, in
each case, an amount equal to dividends accrued thereon to the redemption date;
provided, however, that prior to March 1, 1983, no Third Series Shares shall be
redeemed pursuant to this paragraph (3) if (a) such redemption is part of a
refunding or anticipated refunding operation involving the application,
directly or indirectly, of borrowed funds having an interest cost to the
Company, computed in accordance with generally accepted accounting principles,
of less than 7 3/4% per annum, or of preferred stock having an annual dividend
cost of less than 7 3/4% per annum of the greater of (i) the price paid to the
Corporation therefor or (ii) the amount payable thereon in the event of
involuntary liquidation, or (b) such redemption is part of a refunding or
anticipated refunding operation involving the application, directly or
indirectly, of the proceeds of the issuance of any shares of common stock of
the Corporation within two years prior to or following the date of such
redemption.
(4) Sinking Fund. As a sinking fund for the retirement of the Third Series
Shares, when, as, and if directed by resolution of the Board of Directors and
subject to any applicable restrictions of law, on March 1, 1978, and on each
March 1 thereafter (so long as any of the Third Series Shares are outstanding)
to and including March 1, 2007, the Corporation shall redeem 12,000 of the
Third Series Shares (or the number of the Third Series Shares then outstanding
if less than 12,000), and on March 1, 2008 (if any of the Third Series Shares
remain outstanding) the Corporation shall redeem all of the Third Series Shares
then
D-61
outstanding, at a price of $100 per share, plus, in each case, an amount equal
to dividends accrued thereon to the redemption date. The obligation of the
Corporation to make such redemption shall be cumulative so that if the full
number of shares required to be redeemed on any March 1 are not so redeemed,
the redemption shall be made thereafter as soon as funds become available
therefor. In no event, however, shall any Third Series Shares be called for
redemption for the sinking fund unless and until full cumulative dividends on
all outstanding shares of all series of Preferred Stock of the Corporation
(except any series of such Preferred Stock ranking as to dividends or assets
junior to the Third Series Shares), other than the shares previously or then to
be called for redemption, shall have been paid or declared and set apart for
payment for all past quarterly dividend periods and for all current quarterly
dividend periods ending on or before the redemption date. The Corporation may
at its option, upon notice as provided in paragraph (3) above, on March 1, 1978
and on each March 1 thereafter to and including March 1, 2007, redeem 12,000 of
the Third Series Shares, or any lesser number of said shares which is an
integral multiple of 1,000, in addition to shares then to be redeemed for the
sinking fund pursuant to this paragraph (4), at a price of $100 per share,
plus, in each case, an amount equal to dividends accrued thereon to the
redemption date, which privilege shall be noncumulative. No redemption of the
Third Series Shares, pursuant to paragraph (3) above or the next preceding
sentence of this paragraph (4), nor any purchase or other acquisition of any
Third Series Shares by the Corporation, shall constitute a retirement of such
shares in lieu of or as a credit against any sinking fund retirement required
by this paragraph (4).
(5) Liquidation. In the event of any liquidation, dissolution or winding-up
of the Corporation, the holders of the Third Series Shares shall be entitled to
receive out of the assets of the Corporation available for distribution to
stockholders, before any distribution of the assets shall be made to the
holders of the Common Stock or any other class or series of stock ranking as to
dividends or assets junior to the Third Series Shares, an amount, in the case
of voluntary liquidation, dissolution or winding-up, equal to the redemption
price specified in paragraph (3) above applicable on the date of such voluntary
liquidation, dissolution or winding-up, and, in the case of involuntary
liquidation, dissolution, or winding-up, $100 per share, plus, in the case of
each share (whether on voluntary or involuntary liquidation, dissolution or
winding-up), an amount equal to the dividends accrued or unpaid thereon,
whether or not declared, to the date fixed for payment. If upon any
liquidation, dissolution or winding-up of the Corporation, the amounts payable
with respect to the Third Series Shares and any other series of Preferred Stock
of the Corporation which ranks on a parity with the Third Series Shares are not
paid in full, the holders of the Third Series Shares and such parity Preferred
Stock shall share ratably in any distribution of assets in proportion to the
full preferential amounts to which they are entitled.
(6) Ranking. The Third Series Shares shall rank equally with the Preferred
Stock-First Series, Convertible, and the Preferred Stock-Second Series,
Convertible, of the Corporation with respect to priority in the payment of
dividends and in the distribution of assets upon any liquidation, whether
voluntary or involuntary. If at any time the full cumulative dividends on the
Third Series Shares have not been paid or declared and set aside for payment
for the current and all past quarterly dividend periods, or the Corporation
shall not have redeemed all Third Series Shares theretofore required to be
redeemed, the Corporation will not (a) declare or pay, or set aside for
payment, any dividends, or make any distribution, on its Common Stock or any
other stock ranking as to dividends or assets junior to the Third Series
Shares, or (b) redeem, purchase or otherwise acquire, or permit any Subsidiary
to purchase or otherwise acquire, any shares of Common Stock or any such other
junior stock. In no event shall any dividend be paid on any shares of any
series of Preferred Stock (other than the Preferred Stock-First Series and
Preferred Stock-Second Series) ranking equally with the Third Series Shares
until all Third Series Shares required to be redeemed on or before the
applicable dividend payment date have been redeemed.
(7) No Conversion or General Voting Rights. The Third Series Shares shall not
be convertible into or exchangeable for other securities of the Corporation.
The Third Series Shares shall not be entitled to voting rights of any kind
whatsoever, except only as and when and to the extent required by law, and
except for the special voting rights specified in paragraphs (8) and (9) below.
D-62
(8) Voting Rights if Dividend or Sinking Fund Arrearage. If six (6) quarterly
dividends on any series of the Preferred Stock of the Corporation are in
arrears, or if any sinking fund payment on any series of the Preferred Stock of
the Corporation has been in arrears for more than one year, the number of
Directors of the Corporation shall be increased by two (2) and the holders of
all series of the Preferred Stock of the Corporation outstanding, voting as a
class, shall be entitled to elect two (2) Directors until all arrears in
dividends and sinking fund payments have been paid. At any time after the right
to elect two Directors of the Corporation shall arise, the Secretary of the
Corporation shall call a special meeting of the holders of the Preferred Stock
for the purpose of electing such Directors, to be held within 40 days after
such right arises. Such meeting shall be held at such place as shall be
specified in the notice and upon the notice provided in the by-laws of the
Corporation for the holding of special meetings of stockholders. If such
meeting shall not be so called within 30 days after such right arises, then the
holders of record of at least 5% of any series of Preferred Stock then
outstanding may designate in writing one of their number to call such meeting,
and the person so designated shall call such meeting at the place and upon the
notice above provided, and for that purpose shall have access to the stock
books of the Corporation. At any meeting at which the holders of the Preferred
Stock shall have the right to vote for the election of such two Directors, the
holders of 33 1/3% of the then outstanding Preferred Stock present in person or
represented by proxy shall be sufficient to constitute a quorum of said class
for the election of such two Directors and the vote of the holders of a
plurality of the Preferred Stock so present shall be sufficient to elect such
two Directors.
(9) Protective Provisions. So long as any of the Third Series Shares is
outstanding, the Corporation shall not:
(A) Without the affirmative vote or written consent of the holders of at
least two-thirds ( 2/3) of the Third Series Shares then outstanding, issue
any additional shares of Preferred Stock of any series unless Consolidated
Net Income for any twelve (12) consecutive calendar months within the
fifteen (15) calendar months immediately preceding such issue was at least
four (4) times the annual dividend requirement on all shares of Preferred
Stock of the Corporation to be outstanding immediately after such issuance;
(B) Without the affirmative vote or written consent of the holders of at
least two-thirds ( 2/3) of the Third Series Shares then outstanding (a)
authorize any stock ranking prior to the Third Series Shares in the payment
of dividends or in the distribution of assets upon liquidation, (b)
authorize any merger or consolidation (or transfer of all or substantially
all of the assets of the Corporation in a transaction contemplating in
substance and effect the exchange of shares of the Preferred Stock for
stock of another corporation) unless the surviving, resulting or other
corporation in such transaction shall have authorized no stock ranking
prior to the Third Series Shares in the payment of dividends or in the
distribution of assets upon liquidation (unless such stock is a stock
substantially the same as, and to be exchanged for, stock of the
Corporation previously authorized pursuant to the clause (a) above); or (c)
amend, alter or change in any material respect adverse to the holders
thereof the rights or preferences of the Third Series Shares; provided,
however, that without the affirmative vote or written consent of the
holders of at least 76% of the Third Series Shares then outstanding the
Corporation shall not reduce the dividend rate on the Third Series Shares
or change the provisions of the first two sentences of paragraph (4) above
in any material respect adverse to the holders of the Third Series Shares;
and
(C) Without the affirmative vote or written consent of the holders of at
least a majority of the then outstanding aggregate number of Third Series
Shares and each other series of the Preferred Stock whose terms provide for
such vote or consent, taken together, (a) increase the authorized amount of
the Preferred Stock of the Corporation, (b) create any other class of stock
ranking on a parity with the Preferred Stock of the Corporation in the
payment of dividends or in the distribution of assets upon liquidation, or
(c) authorize any merger or consolidation (or transfer of all or
substantially all the assets of the Corporation to another corporation
contemplating in substance and effect the exchange of shares of the
Preferred Stock for stock of another corporation) unless the surviving,
resulting or other corporation in such transaction shall have no greater
authorized amount of stock ranking on a parity
D-63
with the Preferred Stock in the payment of dividends or in the distribution
of assets upon liquidation than was authorized by the Corporation
immediately prior to such transaction.
(10) Status of Redeemed or Reacquired Shares. All Third Series Shares
redeemed and otherwise reacquired by the Corporation shall be canceled. Such
shares shall be restored to the status of authorized but unissued shares of the
Corporation's Preferred Stock, but shall not be reissued as Third Series
Shares.
(11) Definitions. As used in paragraph (9)(A) above, the following terms
shall have the following meanings:
(A) "Consolidated Net Income" shall mean consolidated gross revenues of
the Corporation and its Subsidiaries less all operating and non-operating
expenses of the Corporation and its Subsidiaries including all charges of a
proper character (including current and deferred taxes on income, provision
for taxes on unremitted foreign earnings which are included in gross
revenues, and current additions to reserves), but not including in gross
revenues any gains (net of expenses and taxes applicable thereto) in excess
of losses resulting from the sale, conversion or other disposition of
capital assets (i.e., assets other than current assets), any gains
resulting from the write-up of assets, any earnings of any corporation
acquired by the Corporation or any Subsidiary through purchase, merger or
consolidation or otherwise for any year prior to the year of acquisition,
or any equity in any Subsidiary at the date of acquisition over the cost of
the investment in such Subsidiary; all determined in accordance with
generally accepted accounting principles, including the making of
appropriate deductions for minority interests, if any, in Subsidiaries.
(B) "Subsidiary" shall mean any corporation at least a majority of the
stock of which having general voting rights is, at the time as of which any
election is being made, owned by the Corporation either directly or through
Subsidiaries.
PREFERRED STOCK - FOURTH SERIES
(1) Designation and Amount. The shares of such Series shall be designated as
"Preferred Stock--Fourth Series, Junior Participating" (hereafter "Fourth
Series") and the number of shares constituting such series shall be **two and
one-half million (2,500,000)** ++six million two hundred fifty thousand
(6,250,000)++.
(2) Dividends. **The dividend rate on the shares of the Fourth Series shall be
for each quarterly dividend (hereinafter referred to as a "quarterly dividend
period"), which quarterly dividend periods shall commence on January 1, April
1, July 1 and October 1 in each year (or in the case of original issuance, from
the date of original issuance) and shall end on and include the day next
preceding the first date of the next quarterly dividend period, at a rate per
quarterly dividend period (rounded to the nearest cent) equal to the greater of
(a) $10.00 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in cash, based upon the fair
market value at the time the non-cash dividend or other distribution is
declared as determined in good faith by the Board of Directors) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared (but not withdrawn) on the Common
Stock, par value $2.50 per share, of the Corporation (the "Common Stock")
during the immediately preceding quarterly dividend period, or, with respect to
the first quarterly dividend period, since the first issuance of any share or
fraction of a share of the Fourth Series.** ++The dividend rate on the shares of
the Fourth Series shall be for each quarterly dividend (hereinafter referred to
as a "quarterly dividend period"), which quarterly dividend periods shall
commence on January 1, April 1, July 1 and October 1 in each year (or in the
case of original issuance, from the date of original issuance) and shall end on
and include the day next preceding the first date of the next quarterly
dividend period, at a rate per quarterly dividend period (rounded to the
nearest cent) equal to the greater of (a) $10.00 or (b) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in cash, based upon the++
D-64
++fair market value at the time the non-cash dividend or other distribution is
declared as determined in good faith by the Board of Directors) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or Class A Common Stock, as the case may be, or a subdivision of
the outstanding shares of Common Stock or Class A Common Stock, as the case may
be (by reclassification or otherwise), declared (but not withdrawn) on the
Common Stock of the Corporation or the Class A Common Stock of the Corporation,
as the case may be, during the immediately preceding quarterly dividend period,
or, with respect to the first quarterly dividend period, since the first
issuance of any share or fraction of a share of the Fourth Series.++ In the
event this Company shall at any time after August 12, 1986 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of the Fourth Series were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(3) Voting Rights. Except as prescribed by law and in addition to the rights
provided for in ARTICLE SIXTH of the Articles of Incorporation of the
Corporation, as amended, and subject to the provision for adjustment
hereinafter set forth, the holders of the Fourth Series shall be entitled to
100 votes for each share held and shall be entitled to exercise such voting
rights with the holders of Common Stock, without distinction as to class, at
any annual or special meeting of stockholders for the election of directors and
on any other matter coming before such meeting. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the number of votes per share to which
holders of shares of the Fourth Series were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(4) Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the shares of the Fourth Series as provided in Section (2) are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of the Fourth Series
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends (except a dividend payable in Common
Stock and/or any other class of stock ranking junior to the shares of
the Fourth Series) on, make any other distributions on, or redeem or
purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the shares of the Fourth Series;
(ii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the shares of the Fourth
Series, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Shares
of the Fourth Series; or
(iii) purchase or otherwise acquire for consideration any shares of
the Fourth Series, or any shares of stock ranking on a parity with the
shares of the Fourth Series, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the
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respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this
Section (4), purchase or otherwise acquire such shares at such time and in
such manner.
(5) Reacquired Shares. Any shares of the Fourth Series purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Serial Preferred
Stock and may be reissued as part of a new series of Serial Preferred Stock to
be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
(6) Liquidation, Dissolution or Winding Up. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of the shares of the Fourth Series shall be entitled to receive the
greater of (a) $100.00 per share, plus accrued dividends to the date of
distribution, whether or not earned or declared, or (b) an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Stock. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of the Fourth Series were entitled
immediately prior to such event pursuant to clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(7) Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of the Fourth
Series shall at the same time be similarly exchanged or changed in an amount
per share (subject to the provision for adjustment hereinafter set forth) equal
to 100 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of the Fourth Series
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(8) Ranking. The shares of the Fourth Series shall rank junior to all other
series of the Corporation's Serial Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
(9) Fractional Shares. Shares of the Fourth Series may be issued in fractions
of a share which shall entitle the holder, in proportion to such holder's
fractional shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Shares
of the Fourth Series.
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PREFERRED STOCK - FIFTH SERIES
(1) Designation; Number of Shares; Stated Value. The Series shall be
designated as Preferred Stock-Fifth Series (the "Fifth Series") and shall
consist of ninety-five (95) shares. The shares of such series are hereinafter
sometimes called the "Fifth Series Shares." The stated value of the Fifth
Series Shares shall be One Hundred Thousand Dollars ($100,000) per share.
(2) Dividends. The rate of dividends upon the Fifth Series Shares (which
shall be cumulative from the date of issue) and the time of payment thereof
shall be 6.00% of the stated value per share per annum, payable quarterly on
the last days of January, April, July and October in each year.
(3) Rank. The Fifth Series Shares shall rank on a parity with shares of the
First Series, Second Series and Third Series of the Preferred Stock as to
dividends and upon liquidation.
(4) Voting Rights. Holders of Fifth Series Shares will be entitled to one
vote for each share held and will be entitled to exercise such voting rights
together with the holders of Common Stock of the Corporation, without
distinction as to class. If no dividends or less than full cumulative dividends
on the Fifth Series Shares shall have been paid for each of four consecutive
dividend periods, or if arrearages in the payment of dividends on the Fifth
Series Shares shall have cumulated to an amount equal to full cumulative
dividends on the Fifth Series Shares for six quarterly dividend periods, the
holders of the Fifth Series Shares shall, at all meetings held for the election
of Directors until full cumulative dividends for all past quarterly dividend
periods and the current quarterly dividend period on the Fifth Series Shares
shall have been paid or declared and set apart for payment, possess voting
power, acting alone, to elect the smallest number constituting a majority of
the Directors then to be elected. The Corporation will promptly take all such
action as shall be necessary to permit such election to occur promptly after
such arrearage occurs.
(5) Non-Convertible. The Fifth Series Shares shall not be convertible into or
exchangeable for stock of any other class or classes of the Corporation.
(6) Repurchase by the Corporation. Upon six months' prior written notice, the
holders of the Fifth Series Shares may tender all and not less than all of the
Fifth Series Shares to the Corporation for purchase at a price per share equal
to the stated value of One Hundred Thousand Dollars ($100,000) per share plus
accrued dividends to the date of repurchase by the Company (the Purchase
Price). Upon such proper tender of all shares of the Fifth Series Shares by the
holders, the Corporation shall purchase the Fifth Series Shares at the Purchase
Price.
(7) Tender Procedures. The Fifth Series Shares will not be deemed tendered
unless and until the certificate or certificates therefor have been received by
the Corporation or the bank or trust company designated for the purpose and, if
payment upon acceptance of tender thereof is to be made other than to the
record holders, such certificate or certificates have been duly endorsed and
are in proper form for transfer, with all transfer taxes due in respect thereof
paid or provided for.
(8) Redemption. If the holders have not theretofore tendered the Fifth Series
Shares to the Corporation for purchase pursuant to paragraphs 6 and 7 hereof by
March 14, 2003, then the Corporation shall redeem all of the outstanding Fifth
Series Shares at the Purchase Price on a date set forth in written notice to
the holders as the redemption date (the Redemption Date). The Corporation shall
give notice of such redemption not less than thirty (30) days prior to the
Redemption Date, by mail to the holders of record of the outstanding shares at
their respective addresses then appearing on the books of the Corporation. At
any time before the Redemption Date, the Corporation may deposit in trust the
funds necessary for such redemption with a bank or trust company to be
designated in the notice of redemption, doing business in the City of Chicago
and State of Illinois or in the City and State of New York, and having capital,
surplus and undivided profits aggregating $25,000,000. In the event such
deposit is made so that the deposited funds shall be forthwith available to the
holders of the shares to be redeemed upon surrender of the certificates
evidencing
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such shares, then, upon the giving of the notice of such redemption, as
hereinabove provided, or upon the earlier delivery to such bank or trust
company of irrevocable authorization and direction so to give such notice, all
shares with respect to the redemption of which such deposit shall have been
made and the giving of such notice effected shall, whether or not the
certificates for such shares shall be surrendered for cancellation, be deemed
to be no longer outstanding for any purpose and all rights with respect to such
shares shall thereupon cease and terminate, except only the right of the
holders of the certificates for such shares to receive, out of the funds so
deposited in trust, from and after the time of such deposit, the amount payable
upon the redemption thereof, without interest.
(9) Cancelled Shares. The Fifth Series Shares, purchased upon tender or
redeemed as herein provided, shall be cancelled and upon such cancellation
shall be deemed to be authorized and unissued shares of Preferred Stock,
without par value, of the Corporation but shall not be reissued as shares of
the same or any theretofore outstanding series.
(10) Default. Default by the Corporation in complying with the provisions of
paragraph 6 or 8 hereof shall preclude the declaration or the payment of
dividends or the making of any other distribution whatsoever upon the Common
Stock of the Corporation (other than a distribution in shares of its Common
Stock) until the Corporation shall have cured such default by depositing the
funds necessary therefor in the manner and upon the terms herein provided. The
holders of the Fifth Series Shares shall not be entitled to apply to any court
of law or equity for a money judgment or remedy on account of any such default
other than to restrain the Corporation from the actions specified above upon
the Common Stock of the Corporation until such default shall have been cured;
and
(11) Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Corporation the holders of the Fifth Series will be entitled
to receive out of the assets of the Corporation available for distribution to
stockholders, before any distribution of the assets shall be made to the
holders of Common Stock, the sum of $100,000 per share, plus an amount equal to
cumulative dividends accrued and unpaid thereon to the date of distribution to
holders of the Fifth Series. If upon any liquidation, dissolution or winding up
of the Corporation the amounts payable with respect to the Fifth Series and any
other series of Preferred Stock which ranks on a parity with the Fifth Series
are not paid in full, the holders of the Fifth Series and such parity Preferred
Stock will share ratably in any distribution of assets in proportion to the
full preferential amounts to which they are entitled.
SEVENTH
1. In addition to any affirmative vote required by law or these Articles of
Incorporation, and except as expressly provided in section 2 of this ARTICLE
SEVENTH, the affirmative vote of the holders of eighty (80) percent of the
outstanding shares of the Corporation entitled to vote in an election of
Directors shall be required for the approval or authorization of any Business
Combination (as hereinafter defined).
2. The provisions of section 1 of this ARTICLE SEVENTH shall not be
applicable if:
A. The Business Combination shall have been approved by a majority of the
Continuing Directors (as hereinafter defined); provided, however, that such
approval shall only be effective if obtained at a meeting of Directors at
which at least seven Continuing Directors are present; or
B. The Business Combination is a merger or consolidation and the cash or
Fair Market Value (as hereinafter defined) of the property, securities or
other consideration to be received per share by the stockholders of each
class of stock of the Corporation in the Business Combination, if
applicable, is not less than the highest per share price paid by the
Interested Stockholder (as hereinafter defined), with appropriate
adjustments for stock splits, stock dividends and like distributions, in
the acquisition by the Interested Stockholder of any of its holdings of
each class of the Corporation's capital stock.
3. For purposes of this ARTICLE SEVENTH:
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A. The term "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any subsidiary
of the Corporation with (a) any Interested Stockholder or (b) any other
corporation (whether or not itself an Interested Stockholder) which is,
or after such merger or consolidation would be, an Affiliate (as
defined on October 1, 1982 in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) of an Interested
Stockholder;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the Corporation or any subsidiary of the
Corporation that have an aggregate Fair Market Value of $1,000,000 or
more;
(iii) the issuance or transfer by the Corporation or any subsidiary
of the Corporation (in one transaction or a series of transactions) of
any securities of the Corporation or any subsidiary of the Corporation
to any Interested Stockholder or any Affiliate of any Interested
Stockholder in exchange for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market Value of
$1,000,000 or more;
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested Stockholder;
or
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate of any Interested
Stockholder.
B. The term "Continuing Director" shall mean any member of the Board of
Directors of the Corporation who is unaffiliated with the Interested
Stockholder and was a member of the Board of Directors prior to the time
that the Interested Stockholder became an Interested Stockholder, and any
successor of a Continuing Director if the successor is unaffiliated with
the Interested Stockholder and is recommended or elected to succeed a
Continuing Director by a majority of Continuing Directors, provided that
such recommendation or election shall only be effective if made at a
meeting of Directors at which at least seven Continuing Directors are
present.
C. The term "Fair Market Value" shall mean:
(i) in the case of stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a share of
such stock on the Composite Tape for New York Stock Exchange-listed
stocks, or, if such stock is not quoted on the Composite Tape, on the
New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered
under the Exchange Act on which such stock is listed, or, if such stock
is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30-day period
preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then
in use, or if no such quotations are available, the fair market value
on the date in question of a share of such stock as determined in good
faith by a majority of Continuing Directors, provided that such
determination shall only be effective if made at a meeting of Directors
at which at least seven Continuing Directors are present; or
(ii) in the case of property or securities other than cash or stock,
the fair market value of such property or securities on the date in
question as determined in good faith by a majority of
D-69
Continuing Directors, provided that such determination shall only be
effective if made at a meeting of Directors at which at least seven
Continuing Directors are present.
D. The term "Interested Stockholder" shall mean and include any
individual, corporation, partnership or other person or entity which,
together with its Affiliates and "Associates" (as defined on October 1,
1982 in Rule 12b-2 under the Exchange Act), "Beneficially Owns" (as defined
on October 1, 1982 in Rule 13d-3 under the Exchange Act) in the aggregate
ten percent or more of the outstanding shares of the Corporation entitled
to vote in an election of Directors, and any Affiliate or Associate of any
such individual, corporation, partnership or other person or entity.
EIGHTH
**1. Prevention of "Greenmail." Any direct or indirect purchase or other
acquisition by the Corporation of any Equity Security (as hereinafter defined)
of any class at a price above Market Price (as hereinafter defined) from any
Interested Securityholder (as hereinafter defined) who has beneficially owned
any Equity Security of the class to be purchased for less than two years prior
to the date of such purchase or any agreement in respect thereof shall, except
as hereinafter expressly provided, require the affirmative vote of the holders
of at least a majority of the voting power of the then outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors (the "Voting Stock"), excluding Voting Stock beneficially owned by
such Interested Securityholder, voting together as a single class (it being
understood that for the purposes of this ARTICLE EIGHTH, each share of the
Voting Stock shall have the number of votes granted to it pursuant to ARTICLE
SIXTH of this certificate of incorporation). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or any agreement with any national
securities exchange, or otherwise, but no such affirmative vote shall be
required with respect to any purchase or other acquisition of securities made as
part of a tender or exchange offer by the Corporation to purchase securities of
the same class made on the same terms to all holders of such securities and
complying with the applicable requirements of the Securities Exchange Act of
1934 and the rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations).**
++1. Prevention of "Greenmail." Any direct or indirect purchase or other
acquisition by this Corporation of any Equity Security (as hereinafter defined)
of any class at a price above Market Price (as hereinafter defined) from any
Interested Securityholder (as hereinafter defined) who has beneficially owned
any Equity Security of the class to be purchased for less than two years prior
to the date of such purchase or any agreement in respect thereof shall, except
as hereinafter expressly provided, require the affirmative vote of the holders
of at least a majority of the voting power of the then outstanding shares of
capital stock of this Corporation entitled to vote generally in the election of
directors (the "Voting Stock"), excluding Voting Stock beneficially owned by
such Interested Securityholder, voting together as a single class (it being
understood that for the purposes of this ARTICLE EIGHTH, each share of the
Voting Stock shall have the number of votes granted to it pursuant to ARTICLE
SIXTH of this Certificate of Incorporation). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law or any agreement with any national
securities exchange, or otherwise, but (i) no such affirmative vote shall be
required with respect to any purchase, redemption or other acquisition by this
Corporation of capital stock from FT, DT, any Qualified Subsidiary or any
Qualified Stock Purchaser pursuant to the provisions of the Investment
Documents (as such term is defined in Section 12 of the provisions of ARTICLE
SIXTH of these Articles of Incorporation entitled GENERAL PROVISIONS RELATING
TO CLASS A STOCK) or these Articles of Incorporation, and (ii) no such
affirmative vote shall be required with respect to any purchase or other
acquisition of securities made as part of a tender or exchange offer by this
Corporation to purchase securities of the same class made on the same terms to
all holders of such securities and complying with the applicable requirements
of the Securities Exchange Act of 1934 and the rules and regulations thereunder
(or any subsequent provisions replacing such Act, rules or regulations).++
2. Certain Definitions. For the purposes of this ARTICLE EIGHTH:
A. A "person" shall mean any individual, firm, corporation or other
entity.
D-70
B. "Interested Securityholder" shall mean any person (other than the
Corporation or any corporation of which a majority of any class of Equity
Security is owned, directly or indirectly, by the Corporation) who or
which:
(i) is the beneficial owner, directly or indirectly, of 5% or more of
the class of securities to be acquired; or
(ii) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 5% or more of the class of
securities to be acquired; or
(iii) is an assignee or has otherwise succeeded to any shares of the
class of securities to be acquired which were at any time within the
two-year period immediately prior to the date in question beneficially
owned by an Interested Securityholder, if such assignment or succession
shall have occurred in the course of a transaction or transactions not
involving a public offering within the meaning of the Securities Act of
1933, as amended.
C. A person shall be a "beneficial owner" of any security of any class of
the Corporation:
(i) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has (a)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (b) any right to vote
pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any security of
any class of the Corporation.
D. For the purposes of determining whether a person is an Interested
Securityholder pursuant to paragraph B of this Section 2, the relevant
class of securities outstanding shall be deemed to comprise all such
securities deemed owned through application of paragraph C of this Section
2, but shall not include other securities of such class which may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
E. "Affiliate" or "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on October 1, 1982.
F. "Equity Security" shall have the meaning ascribed to such term in
Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on
January 1, 1985.
G. "Market Price" shall mean the highest closing sale price during the
thirty-day period immediately preceding the date in question, of a share of
any Equity Security on the Composite Tape for New York Stock Exchange
issues or, if such Equity Security is not quoted on the Composite Tape or
is not listed on such Exchange, on the principal United States security
exchange registered under the Securities Exchange Act of 1934, as amended,
on which such Equity Security is listed, or, if such Equity Security is not
listed on any such exchange, the highest closing bid quotation with respect
to a share of such Equity Security during the thirty-day period preceding
the date in question on the National Association of Securities Dealers,
Inc. Automated Quotations System or any system then in use, or, if no such
quotations are available, the fair market value on the date in question of
a share of such Equity Security.
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3. Compliance. The Board of Directors of the Corporation shall have the power
to determine the application of, or compliance with, this ARTICLE EIGHTH,
including, without limitation: (i) whether a person is an Interested
Securityholder; (ii) whether a person is a beneficial owner of any Equity
Security; and (iii) the Market Price of any Equity Security. Any decision or
action taken by the Board of Directors arising out of or in connection with the
construction, interpretation and effect of this ARTICLE EIGHTH shall lie within
its absolute discretion and shall be conclusive and binding, except in
circumstances involving bad faith.
NINTH
No Director of the Corporation shall be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty by such
Director as a Director; provided, however, that this ARTICLE NINTH shall not
eliminate or limit the liability of a Director to the extent provided by
applicable law (i) for any breach of the Director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 51 of the General Corporation Code of the State of Kansas, or
(iv) for any transaction from which the Director derived an improper personal
benefit. No amendment to or repeal of this ARTICLE NINTH shall apply to or have
any effect on the liability or alleged liability of any Director of the
Corporation for or with respect to any acts or omissions of such Director
occurring prior to such amendment or repeal.
D-72
NOTE: ALL TYPE WITHIN ** DELIMITERS APPEARS AS STRUCK-OUT TEXT.
ALL TYPE WITHIN ++ DELIMITERS APPEARS AS ITALIC TEXT.
EXHIBIT E
++COMPOSITE++
SPRINT CORPORATION
BYLAWS
++MARKED TO SHOW CHANGES EFFECTED BY THE BYLAW AMENDMENTS++
++Additions to current Bylaws effected by the Bylaw Amendments are shown by
italics. Deletions from current Bylaws effected by the Bylaw Amendments are
shown by strike out++.
ARTICLE I
NAME AND LOCATION
Section 1. The name of the Corporation shall be the name set forth in the
Articles of Incorporation.
Section 2. The principal office of the Corporation is located at 2330
**Johnson Drive** ++Shawnee Mission Parkway++, Westwood, Kansas.
Section 3. Other offices for the transaction of business of the Corporation
may be located at such place in Kansas or elsewhere as the Board of Directors
may from time to time determine.
ARTICLE II
CAPITAL STOCK
Section 1. All certificates of stock shall be signed by the Chairman of the
Board of Directors, the President or a Vice President and **the Treasurer or an
Assistant Treasurer, or** the Secretary or an Assistant Secretary, and sealed
with the corporate seal.
Section 2. Transfers of stock shall be made on the books of the Corporation
upon the surrender of the old certificate properly endorsed, and said old
certificate shall be cancelled **and affixed to the appropriate stub in the
stock book** before a new certificate is issued.
Section 3. A new certificate of stock may be issued in the place of any
certificate theretofore issued, alleged to have been lost or destroyed, and the
**directors** ++Corporation++ may, in **their** ++its++ discretion, require the
owner of the lost or destroyed certificate, or its legal representative, to give
a bond sufficient to indemnify the **company or the corporation**
++Corporation++ against any claim that may be made against it on account of the
alleged loss of any certificate.
Section 4. No holder of shares of any class of this Corporation, or holder of
any securities or obligations convertible into shares of any class of this
Corporation, shall have any preemptive right whatsoever to subscribe for,
purchase or otherwise acquire shares of this Corporation of any class, whether
now or hereafter authorized++; provided, however, that nothing in SECTION 4
shall prohibit the Corporation from granting, contractually or otherwise, to any
such holder, the right to purchase additional securities of the Corporation.++
ARTICLE III
++STOCKHOLDERS' MEETINGS++
Section 1. The annual meeting of the stockholders of the Corporation shall be
held on the third Tuesday of April in each year, either within or without the
State of Kansas, as may from time to time be determined by the Board of
Directors. At such meeting the stockholders shall elect directors in the manner
provided in the Articles of Incorporation of the Corporation. The stockholders
may transact such other business at such annual meetings as may properly come
before the meeting.
E-1
Section 2. A special meeting of the **stockholders** ++holders of any one or
more classes of the capital stock of the Corporation entitled to vote as a class
or classes with respect to any matter, as required by law or as provided in the
Articles of Incorporation,++ may be called at any time and place by the
Chairman, the President or the Board of Directors, and shall be called by the
Chairman, the President or the Secretary on the written request of the holders
of record of a majority of the shares of stock ++of such class or classes++
issued and outstanding and entitled to vote.
Section 3. Notice of the time and place of all annual meetings and of the
time, place and purpose of all special meetings ++(other than meetings of the
holders of the Class A Stock separately as a class)++ shall be mailed by the
Secretary to each stockholder at his last known post office address ++as it
appears on the records of the Corporation++ at least **ten (10)** ++twenty (20)
++ days before the date set for such meeting.
Section 4. **Nominations of persons for election to the Board of the
Corporation at a meeting of the stockholders may be made by or at the direction
of the Board of Directors or may be made at a meeting of stockholders by any
stockholder of the Corporation entitled to vote for the election of Directors
at the meeting who complies with the notice procedures set forth in this
SECTION 4 of ARTICLE III.** ++Nominations of persons for election to the Board
of the Corporation at a meeting of the stockholders may be made by or at the
direction of the Board of Directors or may be made (a) in the case of persons
to be elected by stockholders other than the holders of Class A Stock, at a
meeting of stockholders by any stockholder of the Corporation who is not a
holder of shares of Class A Stock and who is entitled to vote for the election
of Directors at the meeting, and (b) in the case of persons to be elected by
the holders of shares of Class A Stock as provided for in the Articles of
Incorporation of the Corporation (the "Class A Directors"), at a meeting of
stockholders by any holder of shares of Class A Stock, in each case in
compliance with the notice procedures set forth in this SECTION 4 of ARTICLE
III.++ Such nominations, other than those made by or at the direction of the
Board, shall be made pursuant to timely notice in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than fifty (50) days nor more than seventy-five (75) days prior to the
meeting; provided, however, that in the event that less than sixty-five (65)
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so
received no later than the close of business on the fifteenth (15th) day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs. Such stockholder's
notice to the Secretary shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a Director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
person and (iv) any other information relating to the person that is required
to be disclosed in solicitations for proxies for election of Directors pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as amended; and
(b) as to the stockholder giving the notice (i) the name and record address of
the stockholder and (ii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as Director of the Corporation. **No person shall be
eligible for election as a Director of the Corporation at a meeting of the
stockholders unless nominated in accordance with the procedures set forth
herein. The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure and the defective nomination shall be disregarded.** ++No
person shall be eligible for election as a Director of the Corporation at a
meeting of the stockholders (a) unless such person has been nominated in
accordance with the procedures set forth herein; and (b) unless nominated by
holders of the Class A Stock or the Preferred Stock, such person is an
Independent Nominee, as hereinafter defined, provided that nominees need not be
Independent Nominees if election of such nominees would not result in less than
a majority of the Board of Directors following such election being Independent
Directors (as such term is defined in the Articles of Incorporation of the
Corporation). If the facts warrant, the Chairman of the meeting shall determine
and declare to the meeting that a nomination does not satisfy one or both of
the requirements set forth in clauses (a)++
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++and (b) of the preceding sentence and the defective nomination shall be
disregarded. As used herein, "Independent Nominee" means a person who, if
elected, would be an Independent Director as such term is defined in the
Articles of Incorporation of the Corporation. Nothing in this SECTION 4 shall
be construed to affect the requirements for proxy statements of the
Corporation under Regulation 14A of the Exchange Act.++
++Section 5. At any meeting of the stockholders (other than a separate meeting
of the holders of the Class A Stock), only such business shall be conducted as
shall have been properly brought before the meeting. To be properly brought
before a meeting (other than a separate meeting of the holders of the Class A
Stock), business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors,
(b) otherwise properly brought before the meeting by or at the direction of
the Board of Directors, or (c) otherwise properly brought before the meeting
by a stockholder. For business to be properly brought before a meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice
shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than fifty (50) days nor more than
seventy-five (75) days prior to the meeting; provided, however, that in the
event that less than sixty-five (65) days' notice or prior public disclosure
of the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received no later than the close of
business on the fifteenth (15th) day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made,
whichever first occurs. Such stockholder's notice to the Secretary shall set
forth (a) as to each matter the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting, and (b)
as to the stockholder giving the notice (i) the name and record address of the
stockholder, (ii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder and (iii) any
material interest of the stockholder in such business. No business shall be
conducted at a meeting of the stockholders (other than a separate meeting of
the holders of the Class A Stock) unless proposed in accordance with the
procedures set forth herein. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the foregoing procedure and such
business shall not be transacted. To the extent this SECTION 5 shall be deemed
by the Board of Directors or the Securities and Exchange Commission, or
finally adjudged by a court of competent jurisdiction, to be inconsistent with
the right of stockholders to request inclusion of a proposal in the
Corporation's proxy statement pursuant to Rule 14a-8 promulgated under the
Securities Exchange Act of 1934, as amended, such rule shall prevail.++
Section **5** ++6++. The Chairman of the Board of Directors, or in his
absence the President, or in his absence or inability to act, a Vice President
shall preside at all stockholders' meetings ++(other than meetings of the
holders of the Class A Stock separately as a class)++.
Section **6** ++7++. **At each meeting of the stockholders, each stockholder
shall be entitled to cast one vote for each share of stock standing of record,
on the books of the Corporation, in his name, and may cast such vote either in
person or by proxy. The proxies shall be in writing, filed with the Secretary of
the meeting, and by him entered or recorded in the minutes of such meeting.**
++Except as otherwise provided in the Articles of Incorporation of the
Corporation, at each meeting of the stockholders, each stockholder shall be
entitled to cast one vote for each share of voting stock standing of record on
the books of the Corporation, in his name, and may cast such vote either in
person or by proxy. All proxies shall be in writing and filed with the Secretary
of the meeting.++ **No stock shall be voted by any person unless the same has
been standing in the name of such person at least twenty (20) days prior to the
annual election, as provided by the statutes of Kansas, or as provided by any
subsequent statute of Kansas.**
Section **7** ++8++. **Each stockholder shall have the right to vote, in
person or by proxy, a number of votes equal to the number of shares of stock
owned by the stockholder for each Director to be elected.** ++Except as
otherwise provided in the Articles of Incorporation of the Corporation, each
stockholder other than a holder of shares of Class A Stock shall have the right
to vote, in person or by proxy, a number of votes equal to the number of shares
of stock owned by the stockholder for each Director to be elected (other than
those to be elected by the++
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++holders of shares of Class A Stock as provided for in the Articles of
Incorporation of the Corporation). Each holder of shares of Class A Stock shall
have the right to vote, in person or by proxy, a number of votes equal to the
number of shares of Class A Stock owned by such holder (or such other number of
votes as may be provided in the Articles of Incorporation of the Corporation)
for each director to be elected by the holders of Class A Stock as provided for
in the Articles of Incorporation of the Corporation.++ Stockholders shall not be
entitled to cumulative voting of their shares in elections of Directors.
Section **8** ++9++. **A quorum for the transaction of business at any such
meeting shall consist of a number of stockholders owning a majority of the
issued and outstanding stock, but the stockholders present at any meeting
thereof, less than a quorum, may adjourn the meeting from day to day or to a
future date.** ++At any meeting held for the purpose of electing directors, (i)
the presence in person or by proxy of the holders of at least a majority of the
then outstanding shares of Class A Stock shall be required and be sufficient to
constitute a quorum of such class for the election by such class of Class A
Directors and (ii) the presence in person or by proxy of the holders of at least
a majority of the then outstanding voting shares of the Corporation other than
the Class A Stock shall be required and be sufficient to constitute a quorum for
the election of directors other than Class A Directors. At any such meeting or
adjournment thereof the absence of a quorum of the holders of Class A Stock
shall not prevent the election of directors other than Class A Directors, and
the absence of a quorum of the holders of voting shares other than Class A Stock
shall not prevent the election of Class A Directors. At a meeting held for any
purpose other than the election of directors, shares representing a majority of
the votes entitled to be cast on such matter, present in person or represented
by proxy, shall constitute a quorum. In the absence of the required quorum at
any meeting of stockholders, a majority of such holders present in person or by
proxy shall have the power to adjourn the meeting, from time to time, without
notice (except as required by law) other than an announcement at the meeting,
until a quorum shall be present.++
Section **9** ++10++. At each of the annual stockholders' meetings, one of the
executive officers of the **company** ++Corporation++ shall submit a statement
of the business done during the preceding year, together with a report of the
general financial condition of the Corporation **and of the condition of its
tangible property**.
ARTICLE IV
DIRECTORS
Section 1. The business and property of the Corporation shall be managed by a
Board consisting of such number of Directors as is determined from time to time
in accordance with the provisions of the Articles of Incorporation of the
Corporation. The Board of Directors may elect one of their number to act as
Chairman of the Board.
Section 2. Each Director upon his election shall qualify by filing his
written acceptance with the Secretary or an Assistant Secretary ++and by
fulfilling any prerequisite to qualification that may be set forth in the
Articles of Incorporation of the Corporation.++
Section 3. The annual meeting of the directors shall be held immediately
after the adjournment of each annual meeting of the stockholders and in the
event a quorum is not present, said meeting shall be held within ten days after
adjournment upon proper notice by the Chairman of the Board of Directors, the
President or a Vice President.
Section 4. Special meetings of the Board of Directors may be called at any
time or place by the Chairman of the Board or by the President, and in the
absence or inability of either of them to act, by a Vice President, and may
also be called by any two members of the Board. By unanimous consent of the
directors, special meetings of the Board may be held without notice, at any
time and place.
Section 5. **Notice of all regular and special meetings of the Board of
Directors shall be mailed to each director by the Secretary, at least ten (10)
days previous to the time fixed for such meeting, or such notice**
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**may be given by telephone, telegraph or telex to each director at least
twenty-four (24) hours previous to the time fixed for such meeting, or on such
shorter notice as the person or persons calling the meeting may deem necessary
or appropriate in the circumstances.** ++Notice of all regular and special
meetings of the Board of Directors or the Executive Committee or any committee
established pursuant to SECTION 12 of ARTICLE IV (an "Other Committee") shall be
sent to each Director or member of such committee, as the case may be, by the
Secretary, by a means reasonably calculated to be received at least seven (7)
days prior to the time fixed for such meeting, or notice of special meetings of
the Board of Directors or the Executive Committee or any Other Committee may be
given by telephone, telegraph, telefax or telex to each Director or member of
such committee, as the case may be, at least twenty-four (24) hours prior to the
time fixed for such meeting, or on such shorter notice as the person or persons
calling the meeting may reasonably deem necessary or appropriate in the
circumstances. To the extent provided in the notice of the meeting or as
otherwise determined by the Chairman of the Board or the Board of Directors,
Directors may participate in any regular or special meeting by means of
conference telephone or similar communications equipment which allows all
persons participating in such meeting to hear each other, and participation in
such meeting by means of such a device shall constitute presence in person at
such meeting. In addition, Class A Directors who have not received notice of any
special meeting of the Board of Directors or the Executive Committee or any
Other Committee, as the case may be, at least six (6) days prior to the time
fixed for such meeting may participate in such meeting by means of conference
telephone or similar communications equipment which allows all persons
participating in such meeting to hear each other, and participation in such
meeting by means of such a device shall constitute presence in person at such
meeting.++
Section 6. Except as otherwise provided in the Articles of Incorporation of
the Corporation, a quorum for the transaction of business at any meeting of the
directors shall consist of a majority of the members of the Board, but the
directors present, although less than a quorum, shall have the power to adjourn
the meeting from time to time or to some future date.
Section 7. The directors shall elect **or appoint** the officers of the
Corporation and fix their salaries. Such election **or appointment** shall be
made at the Directors' meeting following each annual stockholders' meeting.
**Section 8. Vacancies in the Board of Directors may be filled by the
remaining directors at any regular or special Directors' meeting.**
Section **9** ++8++. The Board of Directors from time to time, as they may
deem proper, shall have authority to appoint a general manager, counsel or
attorneys and other employees for such length of time and upon such terms and
conditions and at such salaries as they may deem necessary and/or advisable.
Section **10** ++9++. The members of the Board of Directors shall receive
compensation for their services in such amount as may be reasonable and proper
and consistent with the time and service rendered. The members of the Board of
Directors shall receive the reasonable expenses necessarily incurred in the
attendance of meetings and in the transaction of business for the Corporation.
Section **11** ++10++.
**(a) Limitation of Liability. No person shall be liable to the Corporation
for any loss or damage suffered by it on account of any action taken or
omitted to be taken by him as a director, officer, employee or agent of
the Corporation in good faith, if such person (1) exercised or used the
same degree of care and skill as a prudent man would have exercised or
used under the circumstances in the conduct of his own affairs, or (2)
took or omitted to take such action in reliance upon advice of counsel
for the Corporation or upon statements made or information furnished by
officers or employees of the Corporation which he had reasonable
grounds to believe.**
**(b)**++(a)++ Indemnification.
(1) Actions Other Than Those by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any
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threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by
or in the right of the Corporation) by reason of the fact that **he**
++such person++ is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by **him** ++such person++ in connection
with such action, suit or proceeding if **he** ++such person++ acted in
good faith and in a manner **he** ++such person++ reasonably believed to
be in or not opposed to the best interests of the Corporation (or such
other corporation or organization), and, with respect to any criminal
action or proceeding, had no reasonable cause to believe **his** ++such
person's++ conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which **he** ++such person++ reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that
**his** ++such person's++ conduct was unlawful.
(2) Action by or in the Right of the Corporation. The Corporation shall
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit
by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that **he** ++such person++ is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by **him** ++such person++ in
connection with the defense or settlement of such action or suit if
**he** ++such person++ acted in good faith and in a manner **he** ++such
person++ reasonably believed to be in or not opposed to the best
interests of the Corporation (or such other corporation or organization)
and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged
to be liable **for negligence or misconduct in the performance of his
duty** to the Corporation (or such other corporation or organization)
unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for
such expenses which such court shall deem proper.
(3) Successful Defense of Action. Notwithstanding, and without limitation
of, any other provision of this SECTION **11** ++10++, to the extent
that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraph (1) or (2) of this sub-Section
**(b)** ++(a)++, or in defense of any claim, issue or matter therein,
**he** ++such director, officer, employee or agent++ shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by **him** ++such person++ in connection therewith.
(4) Determination Required. Any indemnification under paragraph (1) or (2)
of this sub-Section **(b)** ++(a)++ (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because **he** ++such director,
officer, employee or agent++ has met the applicable standard of conduct
set forth in said paragraph. Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the particular action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii) by the
stockholders.
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(5) Advance of Expenses. Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding **as authorized
by the Board of Directors in the specific case** upon receipt of a
satisfactory undertaking by or on behalf of the director, officer,
employee or agent to repay such amount **unless** ++if++ it shall
ultimately be determined that **he** ++such person++ is ++not++ entitled
to be indemnified by the Corporation as authorized in this sub-Section
**(b)** ++(a)++.
**(c)** ++(b)++ Insurance. The Corporation may, when authorized by the Board of
Directors, purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against **him**
++such person++ and incurred by **him** ++such person++ in any such
capacity, or arising out of **his** ++such person's++ status as such,
whether or not the Corporation would **be required** ++have the power++ to
indemnify him against such liability under the provisions of sub-Section
**(b)** ++(a)++. The risks insured under any insurance policies purchased
and maintained on behalf of any person as aforesaid or on behalf of the
Corporation shall not be limited in any way by the terms of this SECTION
**11** ++10++ and to the extent compatible with the provisions of such
policies, the risks insured shall extend to the fullest extent permitted
by law, common or statutory.
**(d)** ++(c)++ Nonexclusivity; Duration. **The indemnifications, rights, and
limitations of liability provided by this SECTION 11 shall not be
deemed exclusive of any other indemnifications, rights or limitations
of liability to which any person may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors, or
otherwise, either as to action in his official capacity or as to action
in another capacity while holding office, and they shall continue
although such person has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his heirs, executors and
administrators. The authorization to purchase and maintain insurance
set forth in sub-Section (c) shall likewise not be deemed exclusive.**
++The indemnifications and rights provided by, or granted pursuant to,
this SECTION 10 shall not be deemed exclusive of any other
indemnifications, rights or limitations of liability to which any
person may be entitled under any Bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise, either as to action in such
person's official capacity or as to action in another capacity while
holding office, and they shall continue although such person has ceased
to be a director, officer, employee or agent and shall inure to the
benefit of such person's heirs, executors and administrators. The
authorization to purchase and maintain insurance set forth in sub-
Section (b) shall likewise not be deemed exclusive.++
Section **12** 11. **The Chief Executive Officer of the Corporation, together
with not more than six additional Directors selected by the Board at the regular
annual meeting of the Directors, shall constitute an Executive Committee of the
Board of Directors.** ++The Chief Executive Officer of the Corporation, together
with no more than five additional Directors, elected by stockholders other than
holders of shares of Class A Stock, and at least one Class A Director selected
by the holders of a majority of the shares of Class A Stock, shall constitute an
Executive Committee of the Board of Directors.++ The Executive Committee between
regular meetings of the Board of Directors shall manage the business and
property of the Corporation and shall have the same power and authority as the
Board of Directors; provided, however, the Executive Committee shall not act
(other than to make recommendations) in those cases where it is provided by law
or by the **Charter** ++Articles of Incorporation++ of the Corporation that any
vote or action in order to bind the Corporation shall be taken by the Directors.
++Members of the Executive Committee may participate in any meeting of the
Executive Committee by means of conference telephone or similar communications
equipment which allows all persons participating in the meeting to hear each
other, and participation in a meeting by means of such a device shall constitute
presence in person at such meeting.++
The Executive Committee shall keep a record of its proceedings and may hold
meetings upon one (1) day's written notice or upon waiver of notice signed by
the members either before or after said Executive Committee meeting.
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**A majority of the Executive Committee shall constitute a quorum for the
transaction of business at any meeting for which written notice has been given
to all members or for which notice has been waived by all members.** ++A
majority of the Executive Committee shall constitute a quorum for the
transaction of business at any meeting for which notice has been given to all
members in accordance with ARTICLE IV, SECTION 5 hereof or for which notice has
been waived by all members.++
++Section 12. If the Board of Directors shall form any committee other than
the Executive Committee, such committee shall have at least one member who is
a Class A Director; provided, however, that no Class A Director shall be a
member of (i) any committee established pursuant to the provisions of any law
relating to the national security of the United States, (ii) any committee the
membership on which by such a director would be prohibited by any law or by
the rules of the New York Stock Exchange or (iii) the compensation committee,
if the Board of Directors determines that such a director would not be
considered a "disinterested person" within the meaning of Rule 16b-3(c)(2)(i)
promulgated under the Securities Exchange Act of 1934, as amended. Any
committee so formed, to the extent provided in the resolution of the Board of
Directors pursuant to which it was formed or in the Bylaws or pursuant to the
statutes of Kansas, shall have and may exercise all the powers and authority
of the Board of Directors.++
ARTICLE V
OFFICERS
Section 1. The officers of this Corporation shall be a Chairman of the Board
of Directors, a President, as many Vice Presidents as the Board of Directors may
from time to time deem advisable and one or more of which may be designated
Executive Vice President ++or Senior Vice President++, a Secretary, a Treasurer,
and such Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time deem advisable, and such other officers as the
Board of Directors may from time to time deem advisable and designate. The
Chairman of the Board of Directors **and the President** shall be **members**
++a member++ of and be elected by the Board of Directors. All other officers
shall be elected by the Board of Directors. All officers shall hold office until
their respective successors are elected and shall have qualified. Any two of
said offices may be held by one person except the office of President and Vice
President.
Section 2. The Chairman of the Board of Directors shall preside at all
meetings of the Directors and stockholders at which he is present and shall
have such other duties, power and authority as may be prescribed by the Board
of Directors from time to time. The Board of Directors may designate the
Chairman of the Board as the Chief Executive Officer of the Corporation with
all of the powers otherwise conferred upon the President of the Corporation
under these **bylaws** ++Bylaws++, or it may, from time to time, divide the
responsibilities, duties and authority for the general control and management
of the Corporation's business and affairs between the Chairman of the Board
and the President.
Section 3. Unless the Board of Directors otherwise provides, the President
shall be the Chief Executive Officer of the Corporation with such general
executive powers and duties of supervision and management as are usually
vested in such office and shall perform such other duties as are authorized by
the Board of Directors. The Chairman of the Board or the President shall sign
**all** contracts, certificates and other instruments of the Corporation as
authorized by the Board of Directors. If the Chairman of the Board is
designated as the Chief Executive Officer of the Corporation, the President
shall perform such duties as may be delegated to him by the Board of Directors
and as are conferred by law exclusively upon such office.
Section 4. A Vice President shall have right and power to perform all duties
and exercise all authority of the President, in case of absence of the
President or upon vacancy in the office of President, and shall have all power
and authority usually enjoyed by a person holding the office of Vice
President.
Section 5. The Secretary shall issue notices of all directors' and
stockholders' meetings, and shall attend and keep the minutes of the same;
shall have charge of all corporate books, records and papers; shall be
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custodian of the corporate seal; shall attest with his signature, which may be
a facsimile signature if authorized by the Board of Directors, and impress
with the corporate seal, all stock certificates and written contracts of the
Corporation; and shall perform all other duties as are incident to his office.
Any Assistant Secretary, in the absence or inability of the Secretary, shall
perform all duties of the Secretary and such other duties as may be required.
Section 6. The Treasurer shall have custody of all money and securities of
the Corporation and shall give bond in such sum and with such sureties as the
directors may specify, conditioned upon the faithful performance of the duties
of his office. He shall keep regular books of account and shall submit them,
together with all his **vouchers, receipts,** records and other papers, to the
directors for their examination and approval annually; and semi-annually, or
when directed by the Board of Directors, he shall submit to each director a
statement of the condition of the business and accounts of the Corporation;
and shall perform all such other duties as are incident to his office. An
Assistant Treasurer, in the absence or inability of the Treasurer, shall
perform all the duties of the Treasurer and such other duties as may be
required.
Section 7. Any officer or employee of the Corporation shall give such bond
for the faithful performance of his duties in such sum, as and when the Board
of Directors may direct.
ARTICLE VI
DIVIDENDS **AND FINANCE**
Section 1. Dividends shall be paid out of the net income or earned surplus
of the Corporation, determined after making proper provision for required
sinking fund deposits for debt obligations and proper provisions for working
capital and such reserves as may be required by good and generally accepted
accounting practice, when declared from time to time by resolution of the
Board of Directors. No such dividends shall be declared or paid which will
impair the capital of the Corporation.
**Section 2. The funds of the Corporation shall be deposited in such banks or
trust companies as the directors shall designate and shall be withdrawn only
upon checks, drafts or orders signed in the name of the Corporation by the
President, Treasurer, or such other officer or combinations thereof as the
Board of Directors may authorize from time to time.**
ARTICLE VII
AMENDMENTS
Section 1. **Except as otherwise provided in the Articles of Incorporation of
the Corporation, these bylaws may be amended, altered or repealed by the Board
of Directors, subject to the power of stockholders to amend, alter or repeal
the bylaws; provided, however, that notice advising of each specific amendment
of the bylaws by the Board of Directors shall be given to each stockholder
having voting rights within thirty (30) days after the date of such amendment
by the Board, such notice to be in writing and mailed to the last known post
office address of such stockholders within the thirty-day period; or these
bylaws shall be amended in such other manner as may from time to time be
authorized by the laws of the State of Kansas.** ++Except as otherwise provided
in the Articles of Incorporation of the Corporation and SECTION 2 of this
ARTICLE VII, the Bylaws may be amended, altered or repealed by the Board of
Directors, subject to the power of stockholders to amend, alter or repeal the
Bylaws; or the Bylaws shall be amended in such other manner as may from time to
time be authorized by the laws of the State of Kansas.++
++Section 2. The following provisions of the Bylaws may not be amended,
altered, repealed or made inoperative or ineffective by adoption of other
provisions to the Bylaws without the affirmative vote of the holders of record
of a majority of the shares of Class A Stock then outstanding, voting
separately as a class, at any++
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++annual or special meeting of stockholders, the notice of which shall have
specified or summarized the proposed amendment, alteration or repeal of the
Bylaws: ARTICLE III, SECTIONS 2, 4, 5, 8 and 9; ARTICLE IV, SECTIONS 5, 6, 10,
11 and 12; ARTICLE VI, SECTION 1; and ARTICLE VII, SECTIONS 1 and 2.++
ARTICLE VIII
CORPORATE SEAL
Section 1. The corporate seal of this Corporation shall have inscribed
thereon the name of the Corporation and its state of incorporation and the
words, "Seal--Incorporated 1938".
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NOTE: ALL TYPE WITHIN ** DELIMITERS APPEARS AS STRUCK-OUT TEXT.
ALL TYPE WITHIN ++ DELIMITERS APPEARS AS ITALIC TEXT.
EXHIBIT F
ACQUIRING PERSON STATEMENT
DELIVERED TO
SPRINT CORPORATION
BY
FRANCE TELECOM
DEUTSCHE TELEKOM AG
[EXISTING QUALIFIED SUBSIDIARIES]
(ACQUIRING PERSONS)
PURSUANT TO KANSAS STATUTES ANNOTATED SECTION 17-1291
This acquiring person statement is being delivered to Sprint Corporation, a
Kansas corporation ("Sprint"), pursuant to Kansas Statutes Annotated Section
17-1291 (the "Acquiring Person Statement") by France Telecom, an exploitant
public formed under the laws of France ("FT"), and Deutsche Telekom AG, an
Aktiengesellschaft formed under the laws of Germany ("DT"), and [list each
existing Qualified Subsidiary (collectively, the "Existing Qualified
Subsidiaries")] (FT, DT and the Existing Qualified Subsidiaries collectively
may be referred to herein as the "Acquiring Persons") and relates to the plan
(the "Control Share Acquisitions Plan") for the proposed acquisition by the
Acquiring Persons of shares of Common Stock of Sprint as contemplated by this
Acquiring Person Statement and as contemplated and permitted by the terms of
the Investment Agreement dated as of July 31, 1995 among Sprint, FT and DT (the
"Investment Agreement"), the Related Investment Documents and the Charter
Amendments (collectively, the "Purchase Documents"), subject to the conditions
set forth in such documents, which documents are incorporated herein by
reference and made a part hereof. Copies of such documents are on file at
Sprint and available without charge to each stockholder who so requests. For a
description of the procedure for requesting such documents, see "Incorporation
of Documents by Reference" contained in the Proxy Statement to which this
Acquiring Person Statement is an Exhibit (the "Proxy Statement"). Unless
otherwise defined herein, all capitalized terms used herein shall have the
meanings ascribed to them in the Proxy Statement. The Common Stock to be
acquired by the Acquiring Persons is in addition to the Class A Common Stock
and Class A Preference Stock to be purchased by the Acquiring Persons directly
from Sprint pursuant to the Investment Agreement and will convert into Class A
Common Stock or Class A Preference Stock, as the case may be, to be held by one
or more Acquiring Persons. For a description of such conversion, see
"Investment Agreement and Related Documents--Conversion of Sprint Common Stock
into Class A Stock" contained in the Proxy Statement.
ITEM 1. IDENTITY OF THE ACQUIRING PERSONS AND MEMBERS OF THEIR GROUP.
Kansas Statutes Annotated Section 17-1291 requires that an acquiring person
statement set forth "the identity of the acquiring person and each other member
of any group of which the person is a part for purposes of determining control
shares." The Acquiring Persons listed herein constitute such acquiring persons;
other Qualified Subsidiaries that FT or DT may from time to time cause to exist
and to hold shares of Class A Stock subsequent to the date hereof, and
Qualified Stock Purchasers (as described herein) may constitute other members
of such group.
In addition to the Existing Qualified Subsidiaries listed herein, additional
Qualified Subsidiaries may exist from time to time, as defined and described in
the Investment Agreement as in effect on the date hereof. As contemplated and
permitted by the Purchase Documents, the Acquiring Persons may transfer shares
of Class A Common Stock or Class A Preference Stock, as the case may be, to
Qualified Subsidiaries, as defined and described in the Investment Agreement
and such Qualified Subsidiaries may purchase shares of Common
F-1
Stock of Sprint from third parties to cause the aggregate ownership to attain a
level of up (i.e., "Top-Up") to twenty percent of the aggregate voting power of
Sprint (and may in certain circumstances exceed twenty percent of the aggregate
voting power of Sprint). Furthermore, as contemplated by the Purchase
Documents, in certain circumstances, FT or DT may assign to Qualified Stock
Purchasers (as defined in the Stockholders' Agreement) the rights to purchase
shares of Common Stock of Sprint to Top-Up to the aggregate voting power of
Sprint owned by a person who holds a larger aggregate percentage of voting
power of Sprint than the aggregate percentage of voting power of Sprint held by
FT, DT and their respective affiliates and associates.
The information set forth under the captions "Information Concerning FT, DT
and Atlas," "Investment Agreement and Related Investment Documents--Purchase
and Sale of Class A Stock--Assignment," "Investment Agreement and Related
Investment Documents--Conversion of Class A Stock," "Investment Agreement and
Related Investment Documents--Standstill Agreement," "Investment Agreement and
Related Investment Documents--Transfer Restrictions," and "Investment Agreement
and Related Investment Documents--Equity Purchase Rights" of the Proxy
Statement is incorporated herein by reference.
ITEM 2. DELIVERY OF ACQUIRING PERSON STATEMENT.
This Acquiring Person Statement is given pursuant to Kansas Statutes
Annotated Sections 17-1286 to 17-1298 as in effect on the date hereof (the
"Control Share Acquisitions Statute"). The Acquiring Persons hereby request
that the voting rights to be accorded to the shares to be acquired pursuant to
the Control Share Acquisitions Plan that is the subject of this Acquiring
Person Statement be considered at the special meeting of the stockholders of
Sprint, which is to be held pursuant to the Proxy Statement.
ITEM 3. OWNERSHIP OF SHARES.
As of the date hereof, none of the Acquiring Persons owns any shares of
Sprint, directly or indirectly, and it is contemplated that no additional
Qualified Subsidiaries and no Qualified Stock Purchasers will own such shares
when identified.
ITEM 4. RANGE OF VOTING POWER.
The Acquiring Persons, as described in this Acquiring Person Statement and in
accordance with and as contemplated and permitted in the Purchase Documents,
may acquire voting shares of Sprint which, when added to all other voting
shares of Sprint owned by the Acquiring Persons, or in respect to which such
Acquiring Persons may exercise or direct the exercise of voting power, would
entitle such Acquiring Persons immediately after the acquisition of shares,
directly or indirectly, alone or as a part of a group, to exercise or direct
the exercise of the voting power of Sprint in the election of directors which
would fall within the range of one-fifth or more, but less than one-third, of
the voting power of Sprint, which is the range described in subsection (a) of
Section 17-1286 of the Control Share Acquisitions Statute.
ITEM 5. TERMS OF THE PROPOSED CONTROL SHARE ACQUISITION.
It is proposed that the Acquiring Persons acquire from third parties voting
shares of Sprint which, when added to all other voting shares of Sprint owned
by the Acquiring Persons, or in respect to which such Acquiring Persons may
exercise or direct the exercise of voting power, would entitle such Acquiring
Persons immediately after the acquisition of shares, directly or indirectly,
alone or as part of a group, to exercise or direct the exercise of the voting
power of Sprint in the election of directors which would fall within the range
of one-fifth or more, but less than one-third, of the voting power of Sprint as
described in this Acquiring Person Statement and as contemplated and permitted
by the terms of the respective Purchase Documents. The information set forth
under the captions "Investment Agreement and Related Investment Documents--
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Equity Purchase Rights--Major Issuances," "Investment Agreement and Related
Investment Documents-- Equity Purchase Rights--Major Competitors," "Investment
Agreement and Related Investment Documents--Standstill Agreement" of the Proxy
Statement is incorporated herein by reference.
In addition, as permitted by the Standstill Agreement and the Qualified
Subsidiary Standstill Agreement, as the case may be, the Acquiring Persons have
the right to purchase shares of Common Stock of Sprint from third parties to
Top-Up to twenty percent of the aggregate voting power of Sprint (and may in
certain circumstances exceed twenty percent of the aggregate voting power of
Sprint). See "Investment Agreement and Related Investment Documents--Standstill
Agreement" in the Proxy Statement.
ITEM 6. REPRESENTATIONS OF LEGALITY; FINANCIAL CAPACITY.
The Acquiring Persons hereby represent that the proposed control share
acquisition will not be contrary to law and that they have the financial
capacity to make such proposed control share acquisition. The information set
forth under the captions "Investment Proposals--Regulatory Approvals,"
"Investment Proposals--Source of Funds" and "Information Concerning FT, DT and
Atlas" of the Proxy Statement is incorporated herein by reference. [Information
is also required for the Existing Qualified Subsidiaries]
Date: , 1995 France Telecom
By: _________________________________
Name:
Title:
Date: , 1995 Deutsche Telekom AG
By: _________________________________
Name:
Title:
Date: , 1995 [Existing Qualified Subsidiaries]
By: _________________________________
Name:
Title:
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SPRINT CORPORATION
P.O. BOX 11315, KANSAS CITY, MISSOURI 64112
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE SPECIAL
MEETING ON , 1995
The undersigned hereby appoints W.T. Esrey, J.R. Devlin and A.B. Krause, and
each of them, with full power of substitution as proxies, to vote all the
shares of Common and Preferred Stock of Sprint Corporation which the
undersigned is entitled to vote at the Special Meeting of Stockholders to be
held , 1995, and any adjournment or postponement thereof.
The Board of Directors recommends a vote FOR the following proposals:
1. To approve and adopt the Investment Agreement dated as of July 31, 1995
among Sprint Corporation, France Telecom and Deutsche Telekom AG and the
transactions contemplated by the Investment Agreement.
FOR [_] AGAINST [_] ABSTAIN [_]
2. To approve and adopt the Charter Amendments and the Bylaw Amendments
contemplated by the Investment Agreement.
FOR [_] AGAINST [_] ABSTAIN [_]
3. To approve and adopt the Control Share Acquisitions Plan and to accord to
the shares acquired pursuant to such plan full voting rights.
FOR [_] AGAINST [_] ABSTAIN [_]
The proxies are authorized to vote in their discretion upon such other matters
as may properly come before the meeting.
(Please sign on reverse side)
This Proxy, if signed and returned, will be voted as specified on the reverse
side. If no specifications are made, your shares will be voted FOR approval and
adoption of each of the three proposals and the transactions contemplated
thereby. A majority of said proxies, or any substitute or substitutes, who
shall be present and act at the meeting (or if only one shall be present and
act, then that one) shall have all the powers of said proxies hereunder.
DATE _________________________, 1995
PLEASE _____________________________
SIGN Signature
HERE
________________________________
Signature
Please sign exactly as name
appears. If shares are held
jointly, any one of the joint
owners may sign. Attorneys-in-fact,
executors, administrators,
trustees, guardians or corporation
officers should indicate the
capacity in which they are signing.
PLEASE SIGN, DATE, AND MAIL THIS
PROXY PROMPTLY whether or not you
expect to attend the meeting. You
may nevertheless vote in person if
you do attend.
NOTE: ALL TYPE WITHIN ** DELIMITERS APPEARS AS STRUCK-OUT TEXT.
ALL TYPE WITHIN ++ DELIMITERS APPEARS AS ITALIC TEXT.