EXHIBIT 2.1
CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 4, 1999
BETWEEN
MCI WORLDCOM, INC.
and
SPRINT CORPORATION
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TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1 The Merger......................................................1
1.2 Closing.........................................................1
1.3 Effective Time..................................................2
1.4 Effects of the Merger...........................................2
1.5 Articles of Incorporation.......................................2
1.6 By-Laws.........................................................2
1.7 Certain Surviving Corporation Matters...........................2
1.8 Effect on Capital Stock.........................................3
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Agent..................................................7
2.2 Exchange Procedures.............................................7
2.3 Distributions with Respect to Unexchanged Shares................8
2.4 No Further Ownership Rights in Sprint Capital Stock.............8
2.5 No Fractional Shares of MCI WorldCom Capital Stock..............8
2.6 No Liability....................................................9
2.7 Lost Certificates...............................................9
2.8 Withholding Rights..............................................9
2.9 Stock Transfer Books...........................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Sprint.......................10
(a) Organization, Standing and Power...................10
(b) Capital Structure..................................10
(c) Authority; No Conflicts............................12
(d) Reports and Financial Statements...................13
(e) Information Supplied...............................14
(f) Litigation.........................................14
(g) Compliance with Applicable Laws....................14
(h) State Takeover Statutes; Approvals.................15
(i) Intellectual Property; Year 2000...................15
(j) Absence of Certain Changes or Events...............16
(k) Vote Required......................................16
(l) Sprint Rights Agreement............................16
(m) Brokers or Finders.................................17
(n) Opinion of Financial Advisor.......................17
(o) Absence of Changes in Sprint's Benefit Plans.......17
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(p) ERISA Compliance; No Parachute Payments............17
(q) Taxes..............................................18
3.2 Representations and Warranties of MCI WorldCom.................19
(a) Organization, Standing and Power...................20
(b) Capital Structure..................................20
(c) Authority; No Conflicts............................21
(d) Reports and Financial Statements...................22
(e) Information Supplied...............................22
(f) Litigation.........................................23
(g) Compliance with Applicable Laws....................23
(h) State Takeover Statutes; Approvals.................23
(i) Intellectual Property; Year 2000...................23
(j) Absence of Certain Changes or Events...............24
(k) Vote Required......................................25
(l) MCI WorldCom Rights Agreement......................25
(m) Brokers or Finders.................................25
(n) Opinion of Financial Advisor.......................25
(o) ERISA Compliance...................................25
(p) Taxes..............................................26
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of Sprint............................................28
(a) Ordinary Course....................................28
(b) Dividends; Changes in Share Capital................28
(c) Issuance of Securities.............................28
(d) Governing Documents................................29
(e) No Acquisitions....................................29
(f) No Dispositions....................................29
(g) Indebtedness; Investments..........................29
(h) New Line of Business; Capital Expenditures.........30
(i) Tax-Free Qualification.............................30
(j) Other Actions......................................30
(k) Accounting Methods.................................30
(l) Representations and Warranties.....................30
(m) Authorization of the Foregoing.....................30
4.2 Covenants of MCI WorldCom......................................30
(a) Ordinary Course....................................31
(b) Dividends; Changes in Share Capital................31
(c) No Acquisitions....................................31
(d) No Dispositions....................................32
(e) Tax-Free Qualification.............................32
(f) Other Actions......................................32
(g) Representations and Warranties.....................32
(h) Authorization of the Foregoing.....................32
4.3 Control of Other Party's Business..............................32
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of the Form S-4 and the Joint Proxy
Statement/Prospectus; Stockholders Meetings..................32
5.2 Access to Information..........................................34
5.3 Reasonable Best Efforts........................................34
5.4 No Solicitation by Sprint......................................36
5.5 No Solicitation by MCI WorldCom................................38
5.6 Sprint Stock Options...........................................40
5.7 Employee Matters...............................................42
5.8 Fees and Expenses..............................................43
5.9 Indemnification, Exculpation and Insurance.....................44
5.10 Sprint Rights Agreement........................................45
5.11 MCI WorldCom Rights Agreement..................................45
5.12 Public Announcements...........................................45
5.13 Listing........................................................45
5.14 Redemption of Sprint Second Series Preferred Stock.............45
5.15 Affiliate Letter...............................................46
5.16 Tax Treatment..................................................46
5.17 Assumption Agreement and Supplemental Indentures...............46
5.18 Other Actions..................................................46
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger.....47
(a) Stockholder Approvals..............................47
(b) No Injunctions or Restraints; Illegality...........47
(c) FCC and Public Utility Commission Approvals........47
(d) HSR Act............................................47
(e) EU Antitrust.......................................47
(f) Nasdaq Listing.....................................47
(g) Effectiveness of the Form S-4......................48
6.2 Additional Conditions to Obligations of MCI WorldCom...........48
(a) Representations and Warranties.....................48
(b) Performance of Obligations of Sprint...............48
(c) Tax Opinion........................................48
(d) No Material Adverse Change.........................48
6.3 Additional Conditions to Obligations of Sprint.................49
(a) Representations and Warranties.....................49
(b) Performance of Obligations of MCI WorldCom.........49
(c) Tax Opinion........................................49
(d) No Material Adverse Change.........................49
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ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination....................................................49
7.2 Effect of Termination..........................................51
7.3 Amendment......................................................51
7.4 Extension; Waiver; Consent.....................................51
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements.....52
8.2 Notices........................................................52
8.3 Interpretation.................................................53
8.4 Counterparts...................................................53
8.5 Entire Agreement; No Third Party Beneficiaries.................53
8.6 Governing Law..................................................54
8.7 Severability...................................................54
8.8 Assignment.....................................................54
8.9 Submission to Jurisdiction; Waivers............................54
8.10 Enforcement.......... .........................................54
8.11 Definitions......... ..........................................55
Exhibit A Amendments to Articles of Incorporation of MCI WorldCom
Exhibit B Amendments to By-laws of MCI WorldCom
Annex 1 Certain Matters Relating to Surviving Corporation
Appendix 1 Form of MCI WorldCom Tax Opinion
Appendix 2 Form of Sprint Tax Opinion
Appendix 3 Form of MCI WorldCom Representations Letter
Appendix 4 Form of Sprint Representations Letter
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GLOSSARY OF DEFINED TERMS
Definition Location of Definition
Adjusted Option............................................ ss.5.6(a)
Agreement.................................................. Preamble
Average Price.............................................. ss. 8.11(n)
Benefit Plans.............................................. ss. 8.11(a)
Blue Sky Laws.............................................. ss. 3.1(c)
Board of Directors......................................... ss. 8.11(b)
Business Day............................................... ss. 8.11(c)
Certificate................................................ ss. 1.8(c)
Class A Holder............................................. ss. 8.11(d)
Closing.................................................... ss. 1.2
Closing Date............................................... ss. 1.2
Code....................................................... Recitals
Communications Act......................................... ss. 3.1(c)
Confidentiality Agreement.................................. ss. 5.2
DOJ........................................................ ss. 5.3(b)
Effective Time............................................. ss. 1.3
ERISA...................................................... ss. 3.1(p)
Exchange Act............................................... ss. 3.1(c)
Exchange Agent............................................. ss. 2.1
Expenses................................................... ss. 5.8(a)
FCC........................................................ ss. 3.1(c)
Fifth Series Preferred Merger Consideration................ ss. 1.8(b)
First Series Preferred Merger Consideration................ ss. 1.8(b)
FON Exchange Ratio......................................... ss. 8.11(l)
FON Stock Merger Consideration............................. ss. 1.8(b)
Form S-4................................................... ss. 5.1(a)
GBCC....................................................... ss. 1.1
Georgia Certificate of Merger.............................. ss. 1.3(b)
Governmental Entity........................................ ss. 3.1(c)
HSR Act.................................................... ss. 3.1(c)
Intellectual Property Rights............................... ss. 3.1(i)
Joint Proxy Statement/Prospectus........................... ss. 5.1(a)
Kansas Certificate of Merger............................... ss. 1.3(a)
KGCC....................................................... ss. 1.1
Knowledge.................................................. ss. 8.11(e)
Liens...................................................... ss. 3.1(b)
Material Adverse Change.................................... ss. 8.11(f)
Material Adverse Effect.................................... ss. 8.11(f)
Material Investment........................................ ss. 8.11(g)
MCI WorldCom............................................... Preamble
MCI WorldCom Acquisition Agreement......................... ss. 5.5(b)
MCI WorldCom Applicable Period............................. ss. 5.5(a)
MCI WorldCom Capital Stock................................. ss. 1.8(a)
MCI WorldCom Common Stock.................................. ss. 1.8(b)
MCI WorldCom Common Stock Option Shares.................... ss. 5.6(a)
MCI WorldCom Competing Proposal............................ ss. 5.5(a)
MCI WorldCom Consolidated Group............................ ss. 3.2(p)
MCI WorldCom Disclosure Schedule........................... ss. 3.2
MCI WorldCom Dissenting Shares............................. ss. 1.8(f)
MCI WorldCom Filed SEC Reports............................. ss. 3.2
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Definition Location of Definition
MCI WorldCom 1998 10-K..................................... ss. 3.2(b)
MCI WorldCom PCS Stock..................................... ss. 1.8(a)
MCI WorldCom Permits....................................... ss. 3.2(g)
MCI WorldCom Relevant Stock................................ ss. 5.16
MCI WorldCom Rights........................................ ss. 3.2(b)
MCI WorldCom Rights Agreement.............................. ss. 3.2(b)
MCI WorldCom SEC Reports................................... ss. 3.2(d)
MCI WorldCom Series B Preferred Stock...................... ss. 3.2(b)
MCI WorldCom Series C Preferred Stock...................... ss. 3.2(b)
MCI WorldCom Series DT Common Stock........................ ss. 1.8(a)
MCI WorldCom Series FT Common Stock........................ ss. 1.8(a)
MCI WorldCom Series 2 Common Stock......................... ss. 1.8(a)
MCI WorldCom Series 3 Common Stock......................... ss. 1.8(a)
MCI WorldCom Series 1 PCS Stock............................ ss. 1.8(a)
MCI WorldCom Series 2 PCS Stock............................ ss. 1.8(a)
MCI WorldCom Series 3 PCS Stock............................ ss. 1.8(a)
MCI WorldCom Series 1 Preferred Stock...................... ss. 1.8(a)
MCI WorldCom Series 5 Preferred Stock...................... ss. 1.8(a)
MCI WorldCom Series 7 Preferred Stock...................... ss. 1.8(a)
MCI WorldCom Shareholders Meeting.......................... ss. 5.1(c)
MCI WorldCom Stock Issuance................................ ss. 3.2(k)
MCI WorldCom Superior Proposal............................. ss. 5.5(a)
MCI WorldCom Voting Debt................................... ss. 3.2(b)
Merger..................................................... Recitals
Merger Consideration....................................... ss. 1.8(b)
Nasdaq..................................................... ss. 8.11(n)
NYSE....................................................... ss. 3.1(c)
PCS Exchange Ratio......................................... ss. 8.11(m)
PCS Stock Merger Consideration............................. ss. 1.8(b)
Person..................................................... ss. 8.11(i)
Preferred Stock Merger Consideration....................... ss. 1.8(b)
PUCs....................................................... ss. 3.1(c)
Regulation 4064/89......................................... ss. 3.1(c)
Regulatory Law............................................. ss. 5.3(c)
Required Approval.......................................... ss. 5.3(a)
Required Consents.......................................... ss. 3.1(c)
Required MCI WorldCom Vote................................. ss. 3.2(k)
Required Sprint Vote....................................... ss. 3.1(k)
Rule 145................................................... ss. 5.15
SEC........................................................ ss. 3.1(d)
Securities Act............................................. ss. 3.1(c)
Series DT Merger Consideration............................. ss. 1.8(b)
Series FT Merger Consideration............................. ss. 1.8(b)
Series 1 FON Merger Consideration.......................... ss. 1.8(b)
Series 3 FON Merger Consideration.......................... ss. 1.8(b)
Series 1 PCS Merger Consideration.......................... ss. 1.8(b)
Series 2 PCS Merger Consideration.......................... ss. 1.8(b)
Series 3 PCS Merger Consideration.......................... ss. 1.8(b)
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Definition Location of Definition
Seventh Series Preferred Merger Consideration.............. ss. 1.8(b)
Significant Subsidiary..................................... ss. 8.11(j)
Sprint..................................................... Preamble
Sprint Acquisition Agreement............................... ss. 5.4(b)
Sprint Affiliate Letter.................................... ss. 5.15
Sprint Applicable Period................................... ss. 5.4(a)
Sprint Capital Stock....................................... ss. 1.8(b)
Sprint Class A Common Stock................................ ss. 1.8(b)
Sprint Common Stock........................................ ss. 1.8(b)
Sprint Competing Proposal.................................. ss. 5.4(a)
Sprint Consolidated Group.................................. ss. 3.1(q)
Sprint Conversion Securities .............................. ss. 1.8(b)
Sprint Disclosure Schedule................................. ss. 3.1
Sprint Dissenting Shares................................... ss. 1.8(e)
Sprint Fifth Series Preferred Stock........................ ss. 1.8(b)
Sprint Filed SEC Reports................................... ss. 3.1
Sprint First Series Preferred Stock........................ ss. 1.8(b)
Sprint FON Stock........................................... ss. 1.8(b)
Sprint 1998 10-K........................................... ss. 3.1(b)
Sprint PCS Stock........................................... ss. 1.8(b)
Sprint Permits............................................. ss. 3.1(g)
Sprint Preferred Stock..................................... ss. 1.8(b)
Sprint Rights.............................................. ss. 3.1(b)
Sprint Rights Agreement.................................... ss. 3.1(b)
Sprint SEC Reports......................................... ss. 3.1(d)
Sprint Second Series Preferred Stock....................... ss. 1.8(b)
Sprint Series DT Common Stock.............................. ss. 1.8(b)
Sprint Series FT Common Stock.............................. ss. 1.8(b)
Sprint Series 1 FON Stock.................................. ss. 1.8(b)
Sprint Series 2 FON Stock.................................. ss. 1.8(b)
Sprint Series 3 FON Stock.................................. ss. 1.8(b)
Sprint Series 1 PCS Stock.................................. ss. 1.8(b)
Sprint Series 2 PCS Stock.................................. ss. 1.8(b)
Sprint Series 3 PCS Stock.................................. ss. 1.8(b)
Sprint Seventh Series Preferred Stock...................... ss. 1.8(b)
Sprint Stock Option Plans.................................. ss. 3.1(b)
Sprint Stock Options....................................... ss. 3.1(b)
Sprint Stockholders Meeting................................ ss. 5.1(b)
Sprint Superior Proposal................................... ss. 5.4(a)
Sprint Voting Debt......................................... ss. 3.1(b)
Subsidiary................................................. ss. 8.11(k)
Surviving Corporation...................................... ss. 1.1
taxes...................................................... ss. 3.1(q)
Termination Date........................................... ss. 7.1(b)
Termination Fee............................................ ss. 5.8(b)
the other party............................................ ss. 8.11(h)
Transition Period.......................................... ss. 5.7(a)
U.S. GAAP.................................................. ss. 3.1(d)
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Definition Location of Definition
Violation.................................................. ss. 3.1(c)
Warrants................................................... ss. 3.1(b)
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AGREEMENT AND PLAN OF MERGER, dated as of October 4, 1999 (this
"Agreement"), between MCI WORLDCOM, INC., a Georgia corporation ("MCI
WorldCom"), and SPRINT CORPORATION, a Kansas corporation ("Sprint").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of MCI WorldCom and
Sprint have each determined that the merger of Sprint with and into MCI
WorldCom (the "Merger") is in the best interests of their respective
stockholders, such Boards of Directors have adopted resolutions approving the
Merger and recommending that their respective stockholders adopt and approve
this Agreement, and the Board of Directors of Sprint has also determined that
the terms of the Merger are fair to holders of Sprint FON Stock, taken as a
separate class, and holders of Sprint PCS Stock, taken as a separate class,
upon the terms and subject to the conditions set forth in this Agreement,
pursuant to which each outstanding share of capital stock of Sprint issued and
outstanding immediately prior to the Effective Time, other than shares owned
or held by MCI WorldCom or Sprint and other than Dissenting Shares, will be
converted into the right to receive the applicable Merger Consideration as set
forth in Section 1.8;
WHEREAS, MCI WorldCom and Sprint desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby and also to prescribe various conditions to
the transactions contemplated hereby; and
WHEREAS, MCI WorldCom and Sprint intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Kansas General Corporation
Code (the "KGCC") and the Georgia Business Corporation Code (the "GBCC"),
Sprint shall be merged with and into MCI WorldCom at the Effective Time.
Following the Merger, the separate corporate existence of Sprint shall cease
and MCI WorldCom shall continue as the surviving corporation (the "Surviving
Corporation").
1.2 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., New York City time, on the second Business Day after the
satisfaction or (subject to applicable law) waiver of the conditions
(excluding conditions that, by their terms, cannot be satisfied until the
Closing Date) set forth in Article VI (the "Closing
2
Date"), unless another time or date is agreed to in writing by the parties
hereto. The Closing shall be held at the offices of Cravath, Swaine & Xxxxx,
Worldwide Plaza, 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, unless another
place is agreed to in writing by the parties hereto.
1.3 Effective Time. As soon as practicable following the Closing,
the parties shall (a) (i) file a certificate of merger (the "Kansas
Certificate of Merger") in such form as is required by and executed in
accordance with the relevant provisions of the KGCC and (ii) make all other
filings or recordings required under the KGCC, and (b) (i) file a certificate
of merger (the "Georgia Certificate of Merger") in such form as is required by
and executed in accordance with the relevant provisions of the GBCC and (ii)
make all other filings or recordings required under the GBCC. The Merger shall
become effective upon the later to occur of the filing of (i) the Kansas
Certificate of Merger with the Kansas Secretary of State and (ii) the Georgia
Certificate of Merger with the Georgia Secretary of State, or at such
subsequent time as MCI WorldCom and Sprint shall agree and be specified in the
Kansas Certificate of Merger and the Georgia Certificate of Merger (the date
and time the Merger becomes effective being the "Effective Time").
1.4 Effects of the Merger. At and after the Effective Time, the
Merger will have the effects set forth in the KGCC and GBCC. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time,
all the property, rights, privileges, powers and franchises of Sprint shall be
vested in the Surviving Corporation, and all debts, liabilities and duties of
Sprint shall become the debts, liabilities and duties of the Surviving
Corporation. Without limiting the generality of the foregoing, at the
Effective Time, the Surviving Corporation hereby expressly assumes all of
Sprint's obligations in respect of the rights of the Class A Holders granted
pursuant to Sprint's articles of incorporation, under Sprint's by-laws and
under the Amended and Restated Stockholders' Agreement, the Master
Restructuring and Investment Agreement and the Amended and Restated
Registration Rights Agreement, in each case between Sprint, on the one hand,
and France Telecom and Deutsche Telekom AG, on the other hand.
1.5 Articles of Incorporation. The articles of incorporation of MCI
WorldCom, as in effect immediately prior to the Effective Time, shall be
amended as of the Effective Time as described in Exhibit A hereto and, as so
amended, such articles of incorporation shall be the articles of incorporation
of the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
1.6 By-Laws. The by-laws of MCI WorldCom, as in effect immediately
prior to the Effective Time, shall be amended as of the Effective Time as
described in Exhibit B hereto and, as so amended, such by-laws shall be the
by-laws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
1.7 Certain Surviving Corporation Matters. MCI WorldCom and Sprint
shall cause the matters set forth in Annex 1 hereto regarding the Surviving
Corporation to be effected as of the Effective Time.
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1.8 Effect on Capital Stock.
(a) As contemplated by Exhibit A, at the Effective Time, the
articles of incorporation of MCI WorldCom will be amended to provide for the
creation of the following series of capital stock of:
(i) Class A Common Stock, Series FT, par value $2.50 per share (the
"MCI WorldCom Series FT Common Stock");
(ii) Class A Common Stock, Series DT, par value $2.50 per share (the
"MCI WorldCom Series DT Common Stock");
(iii) Common Stock, Series 2, par value $0.01 per share (the "MCI
WorldCom Series 2 Common Stock");
(iv) Common Stock, Series 3, par value $0.01 per share (the "MCI
WorldCom Series 3 Common Stock");
(v) PCS Common Stock, Series 1, par value $1.00 per share (the "MCI
WorldCom Series 1 PCS Stock");
(vi) PCS Common Stock, Series 2, par value $1.00 per share (the "MCI
WorldCom Series 2 PCS Stock");
(vii) PCS Common Stock, Series 3, par value $1.00 per share (the
"MCI WorldCom Series 3 PCS Stock" and, together with the MCI WorldCom
Series 1 PCS Stock and the MCI WorldCom Series 2 PCS Stock, the "MCI
WorldCom PCS Stock");
(viii) Series 1 Preferred Stock, par value $0.01 per share (the "MCI
WorldCom Series 1 Preferred Stock");
(ix) Series 5 Preferred Stock, par value $0.01 per share (the "MCI
WorldCom Series 5 Preferred Stock");
(x) Series 7 Preferred Stock, par value $0.01 per share (the "MCI
WorldCom Series 7 Preferred Stock"); and
(xi) Series 8 Junior Participating Preferred Stock, par value $0.01
per share.
The foregoing series of capital stock, together with the series and
classes of capital stock of MCI WorldCom authorized as of the date hereof, are
hereby collectively referred to as "MCI WorldCom Capital Stock".
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(b) At the Effective Time by virtue of the Merger and without any
action on the part of the holder thereof (in each of the following cases other
than such shares owned or held by MCI WorldCom or Sprint, which shall
automatically be retired and shall cease to exist, and no consideration shall
be delivered in exchange therefor, and other than Dissenting Shares):
(i) each share of Class A Common Stock, par value $2.50 per share,
of Sprint ("Sprint Series FT Common Stock") issued and outstanding
immediately prior to the Effective Time will be converted into the right
to receive one share of MCI WorldCom Series FT Common Stock (the "Series
FT Merger Consideration");
(ii) each share of Class A Common Stock, Series DT, par value $2.50
per share, of Sprint ("Sprint Series DT Common Stock" and, together with
the Sprint Series FT Common Stock, the "Sprint Class A Common Stock")
issued and outstanding immediately prior to the Effective Time will be
converted into the right to receive one share of MCI WorldCom Series DT
Common Stock (the "Series DT Merger Consideration");
(iii) each share of Series 1 FON Stock, par value $2.00 per share,
of Sprint ("Sprint Series 1 FON Stock") issued and outstanding
immediately prior to the Effective Time will be converted into the right
to receive that number of shares of common stock, par value $0.01 per
share, of MCI WorldCom ("MCI WorldCom Common Stock") equal to the FON
Exchange Ratio (the "Series 1 FON Merger Consideration");
(iv) each share of Series 3 FON Stock, par value $2.00 per share, of
Sprint ("Sprint Series 3 FON Stock" and, together with the Sprint Series
1 FON Stock and the Series 2 FON Stock, par value $2.00 per share, of
Sprint ("Sprint Series 2 FON Stock") (the "Sprint FON Stock"), issued and
outstanding immediately prior to the Effective Time will be converted
into the right to receive a number of shares of MCI WorldCom Series 3
Common Stock equal to the FON Exchange Ratio (the "Series 3 FON Merger
Consideration");
(v) each share of Series 1 PCS Stock, par value $1.00 per share, of
Sprint ("Sprint Series 1 PCS Stock") issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive
(A) one share of MCI WorldCom Series 1 PCS Stock and (B) that number of
shares of MCI WorldCom Common Stock equal to the PCS Exchange Ratio
(collectively, the "Series 1 PCS Merger Consideration");
(vi) each share of Series 2 PCS Stock, par value $1.00 per share, of
Sprint ("Sprint Series 2 PCS Stock") issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive
(A) one share of MCI WorldCom Series 2 PCS Stock and (B) a number of
shares of MCI WorldCom Series 2 Common Stock equal to the PCS Exchange
Ratio (collectively, the "Series 2 PCS Merger Consideration");
(vii) each share of Series 3 PCS Stock, par value $1.00 per share,
of Sprint ("Sprint Series 3 PCS Stock" and, together with the Sprint
Series 1 PCS Stock and the Sprint Series 2 PCS Stock, the "Sprint PCS
Stock") issued and
5
outstanding immediately prior to the Effective Time will be converted
into the right to receive (A) one share of MCI WorldCom Series 3 PCS
Stock and (B) a number of shares of MCI WorldCom Series 3 Common Stock
equal to the PCS Exchange Ratio (collectively, the "Series 3 PCS Merger
Consideration" and, together with the Series 1 PCS Merger Consideration
and the Series 2 PCS Merger Consideration, the "PCS Stock Merger
Consideration");
(viii) each share of Preferred Stock-First Series, Convertible,
without par value, of Sprint ("Sprint First Series Preferred Stock")
issued and outstanding immediately prior to the Effective Time will be
converted into the right to receive one share of MCI WorldCom Series 1
Preferred Stock, (the "First Series Preferred Merger Consideration");
(ix) each share of Preferred Stock-Second Series, Convertible,
without par value, of Sprint ("Sprint Second Series Preferred Stock")
shall have been redeemed by Sprint prior to the Effective Time pursuant
to Section 5.14;
(x) each share of Preferred Stock-Fifth Series, without par value,
of Sprint ("Sprint Fifth Series Preferred Stock") issued and outstanding
immediately prior to the Effective Time will be converted into the right
to receive one share of MCI WorldCom Series 5 Preferred Stock (the "Fifth
Series Preferred Merger Consideration"); and
(xi) each share of Preferred Stock-Seventh Series, Convertible,
without par value, of Sprint ("Sprint Seventh Series Preferred Stock"
and, together with the Sprint First Series Preferred Stock, the Sprint
Second Series Preferred Stock and the Sprint Fifth Series Preferred
Stock, the "Sprint Preferred Stock") issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive
one share of MCI WorldCom Series 7 Preferred Stock (the "Seventh Series
Preferred Merger Consideration").
The Sprint Class A Common Stock, the Sprint FON Stock and the Sprint
PCS Stock are referred to herein collectively as the "Sprint Common Stock".
The Sprint Common Stock and the Sprint Preferred Stock are referred to herein
collectively as the "Sprint Capital Stock". Shares of Sprint Capital Stock
that are convertible by the holders thereof or by Sprint into a different
class or series of Sprint Capital Stock pursuant to the terms of Sprint's
articles of incorporation are referred to herein collectively as the "Sprint
Conversion Securities".
The Series 1 FON Merger Consideration and the Series 3 FON Merger
Consideration are referred to herein collectively as the "FON Stock Merger
Consideration". The First Series Preferred Merger Consideration, the Fifth
Series Preferred Merger Consideration and the Seventh Series Preferred Merger
Consideration are referred to collectively herein as the "Preferred Stock
Merger Consideration". The Series FT Merger Consideration, the Series DT
Merger Consideration, the FON Stock Merger Consideration, the PCS Stock Merger
Consideration and the Preferred Stock Merger Consideration are referred to
herein collectively as the "Merger Consideration".
(c) As a result of the Merger and without any action on the part of
the holders thereof, at the Effective Time, all shares of Sprint Capital Stock
shall cease to be outstanding and shall be canceled and retired and shall
cease to exist, and each holder of
6
a certificate which immediately prior to the Effective Time represented any
such shares of Sprint Capital Stock (a "Certificate") shall thereafter cease
to have any rights with respect to such shares of Sprint Capital Stock, except
the right to receive the applicable Merger Consideration and any cash in lieu
of fractional shares of applicable MCI WorldCom Capital Stock to be issued in
consideration therefor and any dividends or other distributions to which
holders of Sprint Capital Stock become entitled all in accordance with Article
II upon the surrender of such certificate.
(d) Each share of Sprint Capital Stock issued and owned or held by
MCI WorldCom or Sprint at the Effective Time shall, by virtue of the Merger,
cease to be outstanding and shall be canceled and retired and no stock of MCI
WorldCom or other consideration shall be delivered in exchange therefor.
(e) (i) Notwithstanding anything in this Agreement to the contrary
and unless provided for by applicable law, shares of Sprint Series FT Common
Stock, Sprint Series DT Common Stock, Sprint Series 3 FON Stock, Sprint Series
2 PCS Stock, Sprint Series 3 PCS Stock, Sprint Fifth Series Preferred Stock
and Sprint Seventh Series Preferred Stock that are issued and outstanding
immediately prior to the Effective Time and that are owned by stockholders who
have properly perfected their rights of appraisal within the meaning of
Section 17-6712 of the KGCC (the "Sprint Dissenting Shares") shall not be
converted into the right to receive the Series FT Merger Consideration, the
Series DT Merger Consideration, the Series 3 FON Merger Consideration, the
Series 2 PCS Merger Consideration, the Series 3 PCS Merger Consideration, the
Fifth Series Preferred Merger Consideration and the Seventh Series Preferred
Merger Consideration, respectively, unless and until such stockholders shall
have failed to perfect their right of payment under applicable law, but,
instead, the holders thereof shall be entitled to payment of the appraised
value of such Sprint Dissenting Shares in accordance with Section 17-6712 of
the KGCC. If any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such right of appraisal, each share of Sprint
Series FT Common Stock, Sprint Series DT Common Stock, Sprint Series 3 FON
Stock, Sprint Series 2 PCS Stock, Sprint Series 3 PCS Stock, Sprint Fifth
Series Preferred Stock and Sprint Seventh Series Preferred Stock held by such
stockholder shall thereupon be deemed to have been converted into the right to
receive and become exchangeable for, at the Effective Time, the Series FT
Merger Consideration, the Series DT Merger Consideration, the Series 3 FON
Merger Consideration, the Series 2 PCS Merger Consideration, the Series 3 PCS
Merger Consideration, the Fifth Series Preferred Merger Consideration and the
Seventh Series Preferred Merger Consideration, respectively, in the manner
provided for in Section 1.8(b).
(ii) Sprint shall give MCI WorldCom (A) prompt notice of any
objections filed pursuant to Section 17-6712 of the KGCC received by Sprint,
withdrawals of such objections and any other instruments served in connection
with such objections pursuant to the KGCC and received by Sprint and (B) the
opportunity to direct all negotiations and proceedings with respect to
objections under the KGCC consistent with the obligations of Sprint
thereunder. Sprint shall not, except with the prior written consent of MCI
WorldCom, (x) make any payment with respect to any such objection, (y) offer
to settle or settle any such objection or (z) waive any failure to timely
deliver a written objection in accordance with the KGCC.
(f) (i) Notwithstanding anything in this Agreement to the contrary
and unless provided for by applicable law, holders of shares of MCI WorldCom
Series B
7
Preferred Stock that are issued and outstanding immediately prior to the
Effective Time and that are owned by stockholders who have properly perfected
their rights of appraisal within the meaning of Section 14-2-1301 et seq. of
the GBCC (the "MCI WorldCom Dissenting Shares") shall be entitled to payment
of the fair value of such MCI WorldCom Dissenting Shares determined in
accordance with Section 14-2-1301 et seq. of the GBCC. If any such holder
shall have failed to perfect or shall have effectively withdrawn or lost such
right of appraisal, each share of MCI WorldCom Series B Preferred Stock held
by such stockholder shall thereupon be deemed to remain issued and outstanding
and unchanged as a validly issued, fully paid and nonassessable share of
capital stock of the Surviving Corporation.
(ii) MCI WorldCom shall give Sprint (A) prompt notice of MCI
WorldCom's receipt of any notice of intent to demand payment pursuant to
Section 14-2- 1301 et seq. of the GBCC, withdrawals of such notice and any
other instruments served in connection with such notice pursuant to the GBCC
and received by MCI WorldCom and (B) the opportunity to direct all
negotiations and proceedings with respect to such notice under the GBCC
consistent with the obligations of MCI WorldCom thereunder.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Agent. Prior to the Effective Time, MCI WorldCom shall
appoint The Bank of New York or another commercial bank or trust company
reasonably satisfactory to Sprint to act as exchange agent hereunder for the
purpose of exchanging Certificates for the applicable Merger Consideration
(the "Exchange Agent"). At or prior to the Effective Time, MCI WorldCom shall
deposit with the Exchange Agent, in trust for the benefit of holders of shares
of Sprint Capital Stock, certificates representing the applicable MCI WorldCom
Capital Stock issuable pursuant to Section 1.8 in exchange for outstanding
shares of Sprint Capital Stock in the Merger pursuant to Section 1.8. MCI
WorldCom agrees to make available to the Exchange Agent from time to time as
needed, cash sufficient to pay cash in lieu of fractional shares pursuant to
Section 2.5 and any dividends and other distributions pursuant to Section 2.3.
2.2 Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of a Certificate (i) a letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent, and which letter shall be in such form and have such other
provisions as MCI WorldCom may reasonably specify and (ii) instructions for
effecting the surrender of such Certificates in exchange for the applicable
Merger Consideration. Upon surrender of a Certificate to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate,
if it is a Certificate for Sprint Capital Stock shall be entitled to receive
in exchange therefor (A) one or more shares of applicable MCI WorldCom Capital
Stock representing, in the aggregate, the whole number of shares that such
holder has the right to receive pursuant to Section 1.8, and (B) a check in
the amount equal to the cash that such holder has the right to receive
pursuant to the provisions of this Article II including cash in lieu of any
fractional shares
8
of applicable MCI WorldCom Capital Stock pursuant to Section 2.5 and any
dividends or other distributions pursuant to Section 2.3, and in each case the
Certificate so surrendered shall forthwith be canceled. No interest will be
paid or will accrue on any cash payable pursuant to Section 2.3 or Section
2.5. In the event of a transfer of ownership of Sprint Capital Stock which is
not registered in the transfer records of Sprint, one or more shares of
applicable MCI WorldCom Capital Stock evidencing, in the aggregate, the proper
number of shares of applicable MCI WorldCom Capital Stock and a check in the
proper amount of cash in lieu of any fractional shares of applicable MCI
WorldCom Capital Stock pursuant to Section 2.5 and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.3, may be
issued with respect to such Sprint Capital Stock to such a transferee if the
Certificate representing such shares of Sprint Capital Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer taxes
have been paid.
2.3 Distributions with Respect to Unexchanged Shares. No dividends
or other distributions declared or made with respect to shares of MCI WorldCom
Capital Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of MCI
WorldCom Capital Stock that such holder would be entitled to receive upon
surrender of such Certificate and no cash payment in lieu of fractional shares
of MCI WorldCom Capital Stock shall be paid to any such holder pursuant to
Section 2.5 until such holder shall surrender such Certificate in accordance
with Section 2.2. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to such holder of
shares of MCI WorldCom Capital Stock issuable in exchange therefor, without
interest, (a) promptly after the time of such surrender, the amount of any
cash payable in lieu of fractional shares of MCI WorldCom Capital Stock to
which such holder is entitled pursuant to Section 2.5 and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of MCI WorldCom Capital
Stock and (b) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
such surrender and a payment date subsequent to such surrender payable with
respect to such shares of MCI WorldCom Capital Stock.
2.4 No Further Ownership Rights in Sprint Capital Stock. All shares
of MCI WorldCom Capital Stock issued and cash paid upon conversion of shares
of Sprint Capital Stock in accordance with the terms of Article I and this
Article II (including any cash paid pursuant to Section 2.3 or 2.5) shall be
deemed to have been issued or paid in full satisfaction of all rights
pertaining to the shares of Sprint Capital Stock, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by Sprint on such shares of Sprint Capital Stock which
remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Sprint Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this
Article II.
2.5 No Fractional Shares of MCI WorldCom Capital Stock. (a) No
certificates or scrip or shares of MCI WorldCom Capital Stock representing
fractional shares of MCI WorldCom Capital Stock shall be issued upon the
surrender for exchange
9
of Certificates and such fractional share interests will not entitle the owner
thereof to vote or to have any rights of a shareholder of MCI WorldCom or a
holder of shares of MCI WorldCom Capital Stock.
(b) Notwithstanding any other provision of this Agreement, each
holder of shares of Sprint Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of
applicable MCI WorldCom Capital Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to the product of (i) such fractional
part of a share of applicable MCI WorldCom Capital Stock multiplied by (ii)
the per share closing price of applicable MCI WorldCom Common Stock quoted on
Nasdaq on the Closing Date. The fractional share interests of MCI WorldCom
Capital Stock will be aggregated, and no recordholder of Sprint Capital Stock
will receive cash in an amount equal to or greater than the value of one full
share of MCI WorldCom Capital Stock determined as of the Effective Time.
2.6 No Liability. None of Sprint, MCI WorldCom, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of
any Merger Consideration, any dividends or distributions with respect thereto
or any cash in lieu of fractional shares of applicable MCI WorldCom Capital
Stock, in each case delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificate shall not have
been surrendered prior to three years after the Effective Time (or immediately
prior to such earlier date on which any Merger Consideration, any dividends or
distributions payable to the holder of such Certificate or any cash payable in
lieu of fractional shares of MCI WorldCom Capital Stock pursuant to this
Article II, would otherwise escheat to or become the property of any
Governmental Entity), any such Merger Consideration, dividends or
distributions in respect thereof or such cash shall, to the extent permitted
by applicable law, be delivered to MCI WorldCom, upon demand, and any holders
of Sprint Capital Stock who have not theretofore complied with the provisions
of this Article II shall thereafter look only to MCI WorldCom for satisfaction
of their claims for such Merger Consideration, dividends or distributions in
respect thereof or such cash.
2.7 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will deliver in exchange for such lost, stolen
or destroyed Certificate the applicable Merger Consideration with respect to
the shares of Sprint Capital Stock formerly represented thereby, any cash in
lieu of fractional shares of MCI WorldCom Capital Stock, and unpaid dividends
and distributions on shares of MCI WorldCom Capital Stock deliverable in
respect thereof, pursuant to this Agreement.
2.8 Withholding Rights. The Surviving Corporation shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of shares of Sprint Capital Stock such amounts as
it is required to deduct and withhold with respect to the making of such
payment under the Code and the rules and regulations promulgated thereunder,
or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Corporation
10
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Sprint Capital Stock in
respect of which such deduction and withholding was made by the Surviving
Corporation.
2.9 Stock Transfer Books. At the close of business, New York City
time, on the day the Effective Time occurs, the stock transfer books of Sprint
shall be closed and there shall be no further registration of transfers of
shares of Sprint Capital Stock thereafter on the records of Sprint. From and
after the Effective Time, the holders of Certificates shall cease to have any
rights with respect to such shares of Sprint Capital Stock formerly
represented thereby, except as otherwise provided herein or by law. On or
after the Effective Time, any Certificates presented to the Exchange Agent or
MCI WorldCom for any reason shall be converted into the Merger Consideration
with respect to the shares of Sprint Capital Stock formerly represented
thereby, any cash in lieu of fractional shares of MCI WorldCom Capital Stock
to which the holders thereof are entitled pursuant to Section 2.5 and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Sprint. Except as disclosed in
the Sprint SEC Reports filed and publicly available prior to the date of this
Agreement (the "Sprint Filed SEC Reports") or as set forth in the Sprint
Disclosure Schedule delivered by Sprint to MCI WorldCom prior to the execution
of this Agreement (the "Sprint Disclosure Schedule"), Sprint represents and
warrants to MCI WorldCom as follows:
(a) Organization, Standing and Power. Each of Sprint and its
Significant Subsidiaries is a corporation or other legal entity duly organized
or formed, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate,
partnership or similar power and authority to own, lease and operate its
properties and to carry on its business as now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary other than in such jurisdictions where the
failure so to qualify or to be in good standing is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Sprint.
The copies of the articles of incorporation and by-laws of Sprint which were
previously furnished to MCI WorldCom are true, complete and correct copies of
such documents as in effect on the date of this Agreement.
(b) Capital Structure. (i) As of September 30, 1999, the authorized
capital stock of Sprint consisted of (A) 100,000,000 shares of Sprint Series
FT Common Stock, of which 43,118,018 shares were outstanding, (B) 100,000,000
shares of Sprint Series DT Common Stock, of which 43,118,018 shares were
outstanding, (C) 2,500,000,000 shares of Sprint Series 1 FON Stock, of which
696,949,268 shares were outstanding, (D) 500,000,000 shares of Sprint Series 2
FON Stock, of which no shares were outstanding, (E) 1,200,000,000 shares of
Sprint Series 3 FON Stock, of which 88,111,036 shares were outstanding, (F)
1,250,000,000 shares of Sprint Series 1 PCS Stock, of which 198,422,792 shares
were outstanding, (G) 500,000,000 shares of Sprint Series 2 PCS Stock, of
which 219,393,844 shares were outstanding,
11
(H) 600,000,000 shares of Sprint Series 3 PCS Stock, of which 13,089,418
shares were outstanding, and (I) 20,000,000 shares of Preferred Stock, without
par value, of which (I) 1,742,853 shares have been designated as Sprint First
Series Preferred Stock, of which 36,150 shares were outstanding, (II)
8,758,472 shares have been designated as Sprint Second Series Preferred Stock,
of which 219,045 shares were outstanding, (III) 95 shares have been designated
as Sprint Fifth Series Preferred Stock, of which 95 shares were outstanding,
(IV) 1,500,000 shares of Preferred Stock-Sixth Series, Junior Participating,
without par value, have been designated and reserved for issuance upon
exercise of the rights (the "Sprint Rights") distributed to holders of Sprint
FON Stock and Sprint Class A Common Stock pursuant to the Rights Agreement
dated as of November 23, 1998, between Sprint and UMB Bank, N.A., as rights
agent (the "Sprint Rights Agreement"), (V) 1,250,000 shares of Preferred
Stock-Eighth Series, Junior Participating, without par value, have been
designated and reserved for issuance upon exercise of the Sprint Rights
distributed to holders of Sprint PCS Stock and Sprint Class A Common Stock
pursuant to the Sprint Rights Agreement and (VI) 300,000 shares have been
designated as Sprint Seventh Series Preferred Stock, of which 246,766 shares
were outstanding. As of September 30, 1999, 2,409,990 shares of Sprint Series
1 FON Stock and 67,927 shares of Sprint Series 1 PCS Stock were held by Sprint
in its treasury. Since September 30, 1999 to the date of this Agreement, there
have been no issuances of shares of the capital stock of Sprint or any other
securities of Sprint other than issuances of shares (and accompanying Sprint
Rights) pursuant to options or rights outstanding as of September 30, 1999
under the Benefit Plans of Sprint or pursuant to the conversion of the Sprint
Conversion Securities. All issued and outstanding shares of the capital stock
of Sprint are duly authorized, validly issued, fully paid and nonassessable,
and no class of capital stock is entitled to preemptive rights. There were
outstanding as of September 30, 1999 no options, warrants or other rights to
acquire capital stock from Sprint other than (v) shares of Sprint Capital
Stock issuable upon conversion of the Sprint Conversion Securities, (w)
12,452,831 shares of Sprint Series 2 PCS Stock reserved for future issuance
upon the exercise of warrants ("Warrants") issued pursuant to the terms of the
Warrant Agreements, each dated as of November 23, 1998 between Sprint, on the
one hand, and Cox Teleport Partners, Inc., Xxx Communications, Inc., Comcast
Telephony Services Holdings, Inc., TCI Wireless Holdings, Inc. and TCI
Spectrum Investment, Inc., on the other hand, (x) the Sprint Rights, (y)
options representing in the aggregate the right to purchase 54,628,805 shares
of Sprint FON Stock and 21,525,703 shares of Sprint PCS Stock under Sprint's
1985 Stock Option Plan, Sprint's 1990 Stock Option Plan, Sprint's Management
Incentive Stock Option Plan, Sprint's 1997 Long-Term Stock Incentive Program,
Sprint's Long-Term Incentive Compensation Plan, the Amended and Restated
Centel Director Stock Option Plan and the Amended and Restated Centel Stock
Option Plan (collectively with Sprint's 1990 Restricted Stock Plan, the
"Sprint Stock Option Plans"), and (z) rights to purchase shares of Sprint
Common Stock under Sprint's Employees Stock Purchase Plan. Sprint has
delivered to MCI WorldCom a complete and correct list, as of September 30,
1999, of the number of shares of Sprint Common Stock subject to outstanding
stock option or other rights to purchase or receive Sprint Common Stock
granted under (i) the Sprint Stock Option Plans (collectively, "Sprint Stock
Options") and (ii) the Warrants and the exercise prices thereof. No options or
warrants or other rights to acquire capital stock from Sprint have been issued
or granted since September 30, 1999 to the date of this Agreement.
12
(ii) As of the date of this Agreement, no bonds, debentures, notes
or other indebtedness of Sprint having the right to vote on any matters on
which stockholders may vote ("Sprint Voting Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 3.1(b) and as
contemplated by Section 5.6, as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Sprint or any of its
Subsidiaries is a party or by which any of them is bound obligating Sprint or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of Sprint or any of its Subsidiaries or obligating Sprint or any of
its Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. As of the date of this Agreement, there are no outstanding
obligations of Sprint or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Sprint or any of its
Subsidiaries.
(iv) Exhibit 21 to Sprint's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (the "Sprint 1998 10-K"), sets forth each
Significant Subsidiary of Sprint as of the date hereof. As of the date hereof,
all the outstanding shares of capital stock of, or other equity interests in,
each Significant Subsidiary of Sprint have been validly issued and are fully
paid and nonassessable and are owned directly or indirectly by Sprint, free
and clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens") and free of
any restriction on the right to vote, sell or otherwise dispose of such
capital stock or other ownership interests. Except for the capital stock or
other ownership interests of its Subsidiaries, as of the date hereof, Sprint
does not beneficially own directly or indirectly any capital stock, membership
interest, partnership interest, joint venture interest or other equity
interest in any Person which constitutes a Material Investment.
(c) Authority; No Conflicts. (i) Sprint has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby, subject in the case of the consummation of
the Merger to the adoption of this Agreement by the Required Sprint Vote. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Sprint, subject to the adoption of this
Agreement by the Required Sprint Vote. This Agreement has been duly executed
and delivered by Sprint and constitutes a valid and binding agreement of
Sprint, enforceable against it in accordance with its terms.
(ii) The execution and delivery of this Agreement do not or will
not, as the case may be, and the consummation of the Merger and the other
transactions contemplated hereby will not, subject to the adoption of this
Agreement by the Required Sprint Vote, conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, amendment,
cancelation or acceleration of any obligation or the loss of a material
benefit under, or the creation of a lien, pledge, security interest, charge or
other encumbrance on any assets (any such conflict, violation, default, right
of termination, amendment, cancelation or acceleration, loss or creation, a
"Violation") pursuant to: (A) any provision of the articles of incorporation
or by-laws of Sprint or the governing documents of any Subsidiary of Sprint,
or (B) except as is not reasonably likely, individually or in the
13
aggregate, to have a Material Adverse Effect on Sprint and subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below,
any loan or credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Sprint or any Subsidiary of Sprint or their
respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national, state,
municipal or local government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing,
importing or other governmental or quasi-governmental authority, including the
European Union (a "Governmental Entity"), is required by or with respect to
Sprint or any Subsidiary of Sprint in connection with the execution and
delivery of this Agreement by Sprint or the consummation of the Merger and the
other transactions contemplated hereby, except for those required under or in
relation to (A) the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act"),
and Council Regulation (EEC) No. 4064/89 ("Regulation 4064/89"), (B) the
Communications Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Communications Act"), and any other rules,
regulations, practices and policies promulgated by the Federal Communications
Commission ("FCC"), (C) state securities or "blue sky" laws (the "Blue Sky
Laws"), (D) the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), (E) the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"), (F) the KGCC with respect to the filing of
the Kansas Certificate of Merger and the GBCC with respect to the filing of
the Georgia Certificate of Merger, (G) laws, rules, regulations, practices and
orders of any state public service commissions ("PUCs"), foreign
telecommunications regulatory agencies or similar state or foreign regulatory
bodies, (H) rules and regulations of the New York Stock Exchange, Inc.
("NYSE"), (I) antitrust or other competition laws of other jurisdictions, and
(J) such consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain is not
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on Sprint. Consents, approvals, orders, authorizations,
registrations, declarations and filings required under or in relation to any
of the foregoing clauses (A) through (G) and clause (I) are hereinafter
referred to as "Required Consents".
(d) Reports and Financial Statements. Sprint has filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the Securities and Exchange Commission (the "SEC") since January 1, 1998
(collectively, including all exhibits thereto, the "Sprint SEC Reports"). No
Significant Subsidiary of Sprint is required to file any form, report or other
document with the SEC. None of the Sprint SEC Reports when filed contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in the Sprint
SEC Reports presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of
Sprint and its Subsidiaries as of the respective dates or for the respective
periods set forth therein, all in
14
conformity with United States generally accepted accounting principles ("U.S.
GAAP") consistently applied during the periods involved except as otherwise
noted therein, and subject, in the case of the unaudited interim financial
statements, to normal and recurring year-end adjustments. All of such Sprint
SEC Reports, as of their respective dates (and as of the date of any amendment
to the respective Sprint SEC Report), complied as to form in all material
respects with the applicable requirements of the Securities Act and the
Exchange Act.
(e) Information Supplied. (i) None of the information supplied or to
be supplied by Sprint for inclusion or incorporation by reference in (A) the
Form S-4 to be filed with the SEC by MCI WorldCom in connection with the
issuance of the MCI WorldCom Capital Stock in the Merger will, at the time the
Form S-4 becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
(B) the Joint Proxy Statement/Prospectus included in the Form S-4 related to
the Sprint Stockholders Meeting and the MCI WorldCom Shareholders Meeting and
the MCI WorldCom Capital Stock to be issued in the Merger will, on the date it
is first mailed to Sprint stockholders or MCI WorldCom shareholders or at the
time of the Sprint Stockholders Meeting or the MCI WorldCom Shareholders
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 light of the circumstances under which they were made,
not misleading. The Joint Proxy Statement/Prospectus will comply as to form in
all material respects with the requirements of the Exchange Act.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(e), no representation or warranty is made by Sprint with respect to
statements made or incorporated by reference in the Form S-4 or the Joint
Proxy Statement/Prospectus based on information supplied by MCI WorldCom for
inclusion or incorporation by reference therein.
(f) Litigation. There is no suit, action, proceeding, claim or
investigation pending or, to the Knowledge of Sprint, threatened against or
affecting Sprint or any of its Subsidiaries that is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Sprint
nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Sprint or any of its
Subsidiaries having, or that is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Sprint.
(g) Compliance with Applicable Laws. Sprint and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities which are required for the operation of
the business of Sprint and its Subsidiaries taken as a whole (the "Sprint
Permits"), except where the failure to have any such Sprint Permits is not
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on Sprint. Sprint and its Subsidiaries are in compliance with
the terms of the Sprint Permits and all applicable statutes, laws, ordinances,
rules and regulations, except where the failure so to comply is not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
Sprint. Subject to obtaining the Required Consents, the Merger, in and of
itself, would not cause the revocation or cancelation of any Sprint Permit
that is reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on Sprint.
15
(h) State Takeover Statutes; Approvals. Each of the Board of
Directors of Sprint (including the disinterested directors thereof) and the
Capital Stock Committee of such Board of Directors has approved and
recommended the terms of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement and such approval of the
Board of Directors of Sprint constitutes approval of the Merger and the other
transactions contemplated by this Agreement by the Board of Directors of
Sprint to the extent applicable under the provisions of Section 17-1286 et
seq. and Section 17-12,100 et seq. of the KGCC and Article Seventh of Sprint's
articles of incorporation and represents all the action necessary to ensure
that Section 17-1286 et seq. and Section 17-12,100 et seq. of the KGCC and
Article Seventh of Sprint's articles of incorporation do not apply to MCI
WorldCom in connection with the Merger and the other transactions contemplated
by this Agreement. No other Kansas or Georgia state takeover statute is
applicable to Sprint in connection with this Agreement, the Merger or the
other transactions contemplated hereby. Other than those that have been made
prior to the date hereof, no approval or determination of the Board of
Directors of Sprint or any committee thereof is required with respect to any
class or series of Sprint Capital Stock or under Sprint's articles of
incorporation, by-laws or governance policies to approve this Agreement or any
of the transactions contemplated hereby.
(i) Intellectual Property; Year 2000. (i) Sprint and its
Subsidiaries own, or are validly licensed or otherwise have the right to use,
all patents, patent rights, trademarks, trade secrets, trade names, service
marks, copyrights and other proprietary intellectual property rights and
computer programs (the "Intellectual Property Rights") used in the business of
Sprint and its Subsidiaries, except for such Intellectual Property Rights the
failure of which to own, license or otherwise have the right to use is not
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on Sprint.
(ii) To the Knowledge of Sprint, neither Sprint nor any of its
Subsidiaries has interfered with, infringed upon, misappropriated or otherwise
come into conflict with any Intellectual Property Rights or other proprietary
information of any other Person, except for any such interference,
infringement, misappropriation or other conflict which is not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
Sprint. To the Knowledge of Sprint, neither Sprint nor any of its Subsidiaries
has received any written charge, complaint, claim, demand or notice alleging
any such interference, infringement, misappropriation or other conflict
(including any claim that Sprint or any such Subsidiary must license or
refrain from using any Intellectual Property Rights or other proprietary
information of any other Person) which has not been settled or otherwise fully
resolved, except with respect to any such interference, infringement,
misappropriation or other conflict which is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Sprint.
To the Knowledge of Sprint, no other Person has interfered with, infringed
upon, misappropriated or otherwise come into conflict with any Intellectual
Property Rights of Sprint or any of its Subsidiaries, except for any such
interference, infringement, misappropriation or other conflict which is not
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on Sprint.
(iii) As of the date of this Agreement, Sprint and its Subsidiaries
have undertaken a concerted effort to ensure that all of the computer
software, computer firmware, computer hardware, and other similar or related
items of automated, computerized, and/or software system(s) that are to be
used or relied on by Sprint or any
16
of its Subsidiaries in the conduct of their respective businesses will not
malfunction, will not cease to function, will not generate incorrect data, and
will not provide incorrect results when processing, providing and/or receiving
(i) date-related data into and between the years 1999 and 2000 and (ii)
date-related data in connection with any valid date in the twentieth and
twenty-first centuries. As of the date of this Agreement, Sprint reasonably
believes that such effort will be successful.
(j) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, since June 30, 1999, Sprint and its Subsidiaries have conducted their
business only in the ordinary course, and there has not been (i) any Material
Adverse Change in Sprint, (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any of Sprint's capital stock, other than regular quarterly cash
dividends of $0.125 per share of Sprint FON Stock and a corresponding cash
dividend on the Class A Common Stock and dividends payable on Sprint Preferred
Stock in accordance with their terms as of the date of this Agreement, (iii)
any split, combination or reclassification of any of Sprint's capital stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of Sprint's capital
stock, (iv) (A) any granting by Sprint or any of its Subsidiaries to any
current or former director, executive officer or other key employee of Sprint
or its Subsidiaries of any increase in compensation, bonus or other benefits,
except for normal increases in the ordinary course of business consistent with
past practice or as was required under any employment agreements in effect as
of the date of the most recent audited financial statements included in the
Sprint Filed SEC Reports, (B) any granting by Sprint or any of its
Subsidiaries to any such current or former director, executive officer or key
employee of any increase in severance or termination pay or (C) any entry by
Sprint or any of its Subsidiaries into, or any amendment of, any employment,
deferred compensation, consulting, severance, termination or indemnification
agreement with any such current or former director, executive officer or key
employee, other than in the ordinary course of business consistent with past
practice, (v) except insofar as may be required by a change in U.S. GAAP, any
change in accounting methods, principles or practices by Sprint materially
affecting its consolidated financial position or consolidated results of
operations or (vi) except insofar as MCI WorldCom has given its consent, which
consent shall not be unreasonably withheld or delayed, any tax election (or
settlement or compromise of any material income tax liability) that is
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on Sprint.
(k) Vote Required. The affirmative vote of the holders of shares
representing a majority of the total voting power of Sprint Common Stock and
Sprint Preferred Stock entitled to vote at the Sprint Stockholders Meeting to
adopt this Agreement voting together as a single class (the "Required Sprint
Vote") is the only vote or approval of the holders of any class or series of
capital stock of Sprint necessary to adopt this Agreement and to approve the
transactions contemplated hereby.
(l) Sprint Rights Agreement. No amendment to the Sprint Rights
Agreement is required to be made by Sprint in connection with the approval,
execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
17
(m) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person on behalf of Sprint is or will be
entitled to any broker's or finder's fee or any other similar commission or
fee in connection with any of the transactions contemplated by this Agreement,
except Warburg Dillon Read LLC, whose fees and expenses will be paid by Sprint
in accordance with Sprint's agreement with such firm, based upon arrangements
made by or on behalf of Sprint and previously disclosed to MCI WorldCom.
(n) Opinion of Financial Advisor. Sprint has received the opinion of
Warburg Dillon Read LLC, dated the date of this Agreement, to the effect that,
as of such date, (i) the FON Exchange Ratio is fair, from a financial point of
view, to the holders of each series of Sprint FON Stock, (ii) the PCS Stock
Merger Consideration is fair, from a financial point of view, to the holders
of each series of Sprint PCS Stock, (iii) the Series DT Merger Consideration
is fair, from a financial point of view, to holders of the Sprint Series DT
Common Stock, (iv) the Series FT Merger Consideration is fair, from a
financial point of view, to holders of the Sprint Series FT Common Stock and
(v) the Merger Consideration applicable to the Sprint Common Stock is fair,
from a financial point of view, to the holders of Sprint Common Stock taken as
a whole, a copy of which opinion will promptly be made available to MCI
WorldCom.
(o) Absence of Changes in Sprint's Benefit Plans. Except as
expressly permitted by this Agreement, since the date of the most recent
audited financial statements included in the Sprint Filed SEC Reports, there
has not been any adoption or amendment in any material respect by Sprint or
any of its Subsidiaries of any of Sprint's Benefit Plans, or any material
change in any actuarial or other assumption used to calculate funding
obligations with respect to any Sprint pension plans, or any material change
in the manner in which contributions to any Sprint pension plans are made or
the basis on which such contributions are determined other than a change
required under the terms of such plans as in effect on the date hereof or as
required by applicable law.
(p) ERISA Compliance; No Parachute Payments. (i) With respect to
Sprint's Benefit Plans, no liability has been incurred and to the Knowledge of
Sprint there exists no condition or circumstances in connection with which
Sprint or any of its Subsidiaries could be subject to any liability that is
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on Sprint, in each case under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Code or any other applicable
law.
(ii) Each of Sprint's Benefit Plans has been administered in
accordance with its terms, except for any failures so to administer any such
Benefit Plan that are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on Sprint. Sprint, its Subsidiaries and all
Sprint's Benefit Plans are in compliance with the applicable provisions of
ERISA, the Code and all other applicable laws and the terms of all applicable
collective bargaining agreements, except for any failures to be in such
compliance that are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on Sprint.
(iii) None of Sprint or any of its Subsidiaries sponsors or
contributes to any of Sprint's Benefit Plans that is subject to Title IV of
ERISA.
18
(iv) Sprint and its Subsidiaries are in compliance with all Federal,
state, local and foreign requirements regarding employment, except for any
failures to comply that are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Sprint. As of the date of this
Agreement, there is no labor dispute, strike or work stoppage against Sprint
or any of its Subsidiaries pending or, to the Knowledge of Sprint, threatened
which may interfere with the respective business activities of Sprint or any
of its Subsidiaries, except where such dispute, strike or work stoppage is not
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on Sprint. As of the date of this Agreement, to the Knowledge
of Sprint, none of Sprint, any of its Subsidiaries or any of their respective
representatives or employees has committed any unfair labor practice in
connection with the operation of the respective businesses of Sprint or any of
its Subsidiaries, and there is no action, charge or complaint against Sprint
or any of its Subsidiaries by the National Labor Relations Board or any
comparable Governmental Entity pending or threatened in writing, in each case
except where such practices, actions, charges or complaints are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
Sprint.
(v) No employee of Sprint or its Subsidiaries will be entitled to
any additional benefits or any acceleration of the time of payment or vesting
of any benefits under any of Sprint's Benefit Plans as a result of the
transactions contemplated by this Agreement. No amount payable, or economic
benefit provided, by Sprint or its Subsidiaries (including any acceleration of
the time of payment or vesting of any benefit) could be considered an "excess
parachute payment" under Section 280G of the Code. No Person is entitled to
receive any additional payment from Sprint or its Subsidiaries or any other
Person in the event that the excise tax of Section 4999 of the Code is imposed
on such Person.
(q) Taxes. (i) (A) Each of Sprint and its Subsidiaries and each
Sprint Consolidated Group has timely filed or has caused to be timely filed
all material tax returns and reports required to be filed by it or requests
for extensions to file such returns or reports have been timely filed, granted
and have not expired, (B) all tax returns and reports filed by Sprint and each
of its Subsidiaries and each Sprint Consolidated Group are complete and
accurate in all respects and (C) Sprint and each of its Subsidiaries and each
Sprint Consolidated Group has paid (or Sprint or another member of such Sprint
Consolidated Group has paid on its behalf) all taxes shown as due on such
returns and reports, and the reserve for current taxes shown on the most
recent financial statements contained in the Sprint Filed SEC Reports (in
addition to any reserve for deferred taxes established to reflect timing
differences between book and tax income) is adequate to cover all taxes
payable by Sprint and its Subsidiaries and each Sprint Consolidated Group for
all taxable periods and portions thereof through the date of such financial
statements, except for any such failure to file, incompleteness or inaccuracy,
failure to pay, or inadequacy of such reserve, that is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Sprint.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed in writing against Sprint or any of its Subsidiaries or any Sprint
Consolidated Group that are not adequately reserved for, except for
deficiencies that are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on Sprint, and no requests for waivers of
the time to assess any such taxes have been granted or are pending (other than
with respect to years that are currently under examination by the
19
Internal Revenue Service or other applicable taxing authorities). The statute
of limitations on assessment or collection of any Federal taxes due from
Sprint and its Subsidiaries has expired for all taxable years of Sprint and
each of its Subsidiaries through 1985. The Federal income tax returns of
Sprint and each of its Subsidiaries have been examined by and settled with the
Internal Revenue Service for all years through 1987.
(iii) Neither Sprint nor any of its Subsidiaries has taken or has
agreed to take any action or has any Knowledge of any fact, agreement, plan or
other circumstance that is reasonably likely to prevent the Merger from
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code.
(iv) Neither Sprint nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (A) in the two
years prior to the date of this Agreement or (B) in a distribution which could
otherwise constitute part of a "plan" or series of "related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
(v) Sprint does not believe that it is a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code, although it has not determined or established whether it will be a
United States real property holding corporation in the future.
(vi) Sprint has "nexus" for state tax law purposes in Kansas and
Pennsylvania.
(vii) As used in this Agreement, "taxes" shall include all (A)
Federal, state, local or foreign income tax, property, sales, excise or other
taxes or similar governmental charges, including any interest, penalties or
additions with respect thereto, (B) liability for the payment of the amounts
described in clause (A) as a result of being a member of an affiliated,
consolidated, combined or unitary group, and (C) liability for the payment of
any amounts as a result of being a party to any tax sharing agreement or as a
result of any express or implied obligation to indemnify any other Person with
respect to the payment of any amounts of the type described in clause (A) or
(B).
(viii) As used in this Agreement, "Sprint Consolidated Group" means
any affiliated group within the meaning of Section 1504(a) of the Code, in
which Sprint (or any Subsidiary of Sprint) is or has ever been a member or any
group of corporations with which Sprint files, has filed or is or was required
to file an affiliated, consolidated, combined, unitary or aggregate tax
return.
3.2 Representations and Warranties of MCI WorldCom. Except as
disclosed in the MCI WorldCom SEC Reports filed and publicly available prior
to the date of this Agreement (the "MCI WorldCom Filed SEC Reports") or as set
forth in the
20
MCI WorldCom Disclosure Schedule delivered by MCI WorldCom to Sprint prior to
the execution of this Agreement (the "MCI WorldCom Disclosure Schedule"), MCI
WorldCom represents and warrants to Sprint as follows:
(a) Organization, Standing and Power. Each of MCI WorldCom and its
Significant Subsidiaries is a corporation or other legal entity duly organized
or formed, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate,
partnership or similar power and authority to own, lease and operate its
properties and to carry on its business as now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary other than in such jurisdictions where the
failure so to qualify or to be in good standing is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on MCI
WorldCom. The copies of the articles of incorporation and by-laws of MCI
WorldCom which were previously furnished to Sprint are true, complete and
correct copies of such documents as in effect on the date of this Agreement.
(b) Capital Structure. (i) As of September 30, 1999, the authorized
capital stock of MCI WorldCom consisted of (A) 5,000,000,000 shares of MCI
WorldCom Common Stock of which 1,880,219,054 shares were outstanding and (B)
50,000,000 shares of Preferred Stock, par value $0.01 per share, of which (1)
94,992 shares have been designated as Series A 8% Cumulative Convertible
Preferred Stock, of which no shares were outstanding, (2) 15,000,000 shares
have been designated Series B Convertible Preferred Stock ("MCI WorldCom
Series B Preferred Stock"), of which 11,190,244 shares were outstanding, (3)
3,750,000 shares have been designated Series C $2.25 Cumulative Convertible
Exchangeable Preferred Stock ("MCI WorldCom Series C Preferred Stock"), of
which no shares were outstanding, and (4) 5,000,000 shares have been
designated Series 3 Junior Participating Preferred Stock and reserved for
issuance upon exercise of the rights (the "MCI WorldCom Rights") distributed
to holders of MCI WorldCom Common Stock pursuant to the Rights Agreement dated
as of August 25, 1996, as amended, between MCI WorldCom and The Bank of New
York, as rights agent (the "MCI WorldCom Rights Agreement"). As of September
30, 1999, 4,510,211 shares of MCI WorldCom Common Stock were held by MCI
WorldCom in its treasury. Since September 30, 1999 to the date of this
Agreement, there have been no issuances of shares of the capital stock of MCI
WorldCom or any other securities of MCI WorldCom other than issuances of
shares (and accompanying MCI WorldCom Rights) pursuant to options or rights
outstanding as of September 30, 1999 under the Benefit Plans of MCI WorldCom
or pursuant to MCI WorldCom's acquisition of SkyTel Communications, Inc. All
issued and outstanding shares of the capital stock of MCI WorldCom are duly
authorized, validly issued, fully paid and nonassessable, and no class of
capital stock is entitled to preemptive rights. There were outstanding as of
September 30, 1999 no options, warrants or other rights to acquire capital
stock from MCI WorldCom other than pursuant to MCI WorldCom's pending
acquisitions as of such date. MCI WorldCom's Benefit Plans and MCI WorldCom's
convertible preferred stock. No options or warrants or other rights to acquire
capital stock from MCI WorldCom have been issued or granted since September
30, 1999 to the date of this Agreement other than pursuant to MCI WorldCom's
acquisition of SkyTel Communications, Inc. or pursuant to MCI WorldCom's
Benefit Plans. The shares of MCI WorldCom Capital Stock to be issued pursuant
to this Agreement, when issued in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable, and no Person will have
any
21
preemptive right, subscription right or other purchase right in respect
thereof other than pursuant to agreements with Sprint or any of its
Subsidiaries as in effect on the date hereof.
(ii) As of the date of this Agreement, no bonds, debentures, notes
or other indebtedness of MCI WorldCom having the right to vote on any matters
on which shareholders may vote ("MCI WorldCom Voting Debt") are issued or
outstanding.
(iii) Except as otherwise set forth in this Section 3.2(b), as of
the date of this Agreement, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which MCI WorldCom or any of its Subsidiaries is a party or by which any of
them is bound obligating MCI WorldCom or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares
of capital stock or other voting securities of MCI WorldCom or any of its
Subsidiaries or obligating MCI WorldCom or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of this
Agreement, there are no outstanding obligations of MCI WorldCom or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of MCI WorldCom or any of its Subsidiaries.
(iv) Exhibit 21 to MCI WorldCom's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (the "MCI WorldCom 1998 10-K"), sets forth
each Significant Subsidiary of MCI WorldCom as of the date hereof. As of the
date hereof, all the outstanding shares of capital stock of, or other equity
interests in, each Significant Subsidiary of MCI WorldCom have been validly
issued and are fully paid and nonassessable and are owned directly or
indirectly by MCI WorldCom, free and clear of all Liens and free of any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests. Except for the capital stock or other
ownership interests of its Subsidiaries, as of the date hereof, MCI WorldCom
does not beneficially own directly or indirectly any capital stock, membership
interest, partnership interest, joint venture interest or other equity
interest in any Person which constitutes a Material Investment.
(c) Authority; No Conflicts. (i) MCI WorldCom has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby, subject in the case of the approval of
this Agreement and the MCI WorldCom Stock Issuance to obtaining the Required
MCI WorldCom Vote. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of MCI WorldCom, subject to the
approval of this Agreement and the MCI WorldCom Stock Issuance by the Required
MCI WorldCom Vote. This Agreement has been duly executed and delivered by MCI
WorldCom and constitutes a valid and binding agreement of MCI WorldCom,
enforceable against it in accordance with its terms.
(ii) The execution and delivery of this Agreement do not or will
not, as the case may be, and the consummation of the Merger and the other
transactions contemplated hereby will not, subject to the approval of this
Agreement and the MCI WorldCom Stock Issuance by the Required MCI WorldCom
Vote, conflict with, or result in, a Violation pursuant to: (A) any provision
of the articles of incorporation or by-laws of MCI WorldCom or the governing
documents of any Subsidiary of MCI WorldCom, or
22
(B) except as is not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on MCI WorldCom and subject to obtaining or
making the consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (iii) below, any loan or
credit agreement, note, mortgage, bond, indenture, lease, benefit plan or
other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to MCI WorldCom or any Subsidiary of MCI WorldCom or their
respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
by or with respect to MCI WorldCom or any Subsidiary of MCI WorldCom in
connection with the execution and delivery of this Agreement by MCI WorldCom
or the consummation of the Merger and the other transactions contemplated
hereby, except for (A) those required under or in relation to the rules and
regulations of Nasdaq, (B) the Required Consents and (C) such consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to make or obtain is not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect on MCI WorldCom.
(d) Reports and Financial Statements. MCI WorldCom has filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC since January 1, 1998 (collectively, including all exhibits
thereto, the "MCI WorldCom SEC Reports"). No Significant Subsidiary of MCI
WorldCom is required to file any form, report or other document with the SEC.
None of the MCI WorldCom SEC Reports when filed contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the
financial statements (including the related notes) included in the MCI
WorldCom SEC Reports presents fairly, in all material respects, the
consolidated financial position and consolidated results of operations and
cash flows of MCI WorldCom and its Subsidiaries as of the respective dates or
for the respective periods set forth therein, all in conformity with U.S. GAAP
consistently applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial
statements, to normal and recurring year-end adjustments. All of such MCI
WorldCom SEC Reports, as of their respective dates (and as of the date of any
amendment to the respective MCI WorldCom SEC Report), complied as to form in
all material respects with the applicable requirements of the Securities Act
and the Exchange Act.
(e) Information Supplied. (i) None of the information supplied or to
be supplied by MCI WorldCom for inclusion or incorporation by reference in (A)
the Form S-4 will, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and (B) the Joint Proxy
Statement/Prospectus will, on the date it is first mailed to Sprint
stockholders or MCI WorldCom shareholders or at the time of the Sprint
Stockholders Meeting or the MCI WorldCom Shareholders 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 light of the circumstances under which they were made, not
misleading. The Form S-4 and the Joint Proxy Statement/Prospectus will comply
as to form in all material respects with the requirements of the Securities
Act and the Exchange Act.
23
(ii) Notwithstanding the foregoing provisions of this Section
3.2(e), no representation or warranty is made by MCI WorldCom with respect to
statements made or incorporated by reference in the Form S-4 or the Joint
Proxy Statement/Prospectus based on information supplied by Sprint for
inclusion or incorporation by reference therein.
(f) Litigation. There is no suit, action, proceeding, claim or
investigation pending or, to the Knowledge of MCI WorldCom, threatened against
or affecting MCI WorldCom or any of its Subsidiaries that is reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
MCI WorldCom nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against MCI WorldCom or any
of its Subsidiaries having, or that is reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on MCI WorldCom.
(g) Compliance with Applicable Laws. MCI WorldCom and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
registrations and approvals of all Governmental Entities which are required
for the operation of the business of MCI WorldCom and its Subsidiaries taken
as a whole (the "MCI WorldCom Permits"), except where the failure to have any
such MCI WorldCom Permits is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on MCI WorldCom. MCI WorldCom and
its Subsidiaries are in compliance with the terms of the MCI WorldCom Permits
and all applicable statutes, laws, ordinances, rules and regulations, except
where the failure so to comply is not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on MCI WorldCom. Subject to
obtaining the Required Consents, the Merger, in and of itself, would not cause
the revocation or cancelation of any MCI WorldCom Permit that is reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
MCI WorldCom.
(h) State Takeover Statutes; Approvals. The Board of Directors of
MCI WorldCom has approved and recommended the terms of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby
(including the amendments to MCI WorldCom's articles of incorporation
contemplated hereby) and such approval of the Board of Directors of MCI
WorldCom constitutes approval of the Merger and the other transactions
contemplated hereby (including the amendments to MCI WorldCom's articles of
incorporation contemplated hereby) by the Board of Directors of MCI WorldCom
to the extent applicable under Article Eleven of MCI WorldCom's articles of
incorporation and represents all the action necessary to ensure that Article
Eleven of MCI WorldCom's articles of incorporation does not apply to Sprint in
connection with the Merger and the other transactions contemplated hereby. No
Georgia or Kansas state takeover statute (including Section 14-2-1110 et seq.
and Section 14-2-1131 et seq. of the GBCC) is applicable to MCI WorldCom in
connection with this Agreement, the Merger or the other transactions
contemplated by this Agreement. Other than those that have been made prior to
the date hereof, no approval or determination of the Board of Directors of MCI
WorldCom or any committee thereof is required with respect to any class or
series of MCI WorldCom Capital Stock or under MCI WorldCom's articles of
incorporation or by-laws to approve this Agreement or any of the transactions
contemplated hereby.
(i) Intellectual Property; Year 2000. (i) MCI WorldCom and its
Subsidiaries own, or are validly licensed or otherwise have the right to use,
all
24
Intellectual Property Rights used in the business of MCI WorldCom and its
Subsidiaries, except for such Intellectual Property Rights the failure of
which to own, license or otherwise have the right to use is not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
MCI WorldCom.
(ii) To the Knowledge of MCI WorldCom, neither MCI WorldCom nor any
of its Subsidiaries has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property Rights or other
proprietary information of any other Person, except for any such interference,
infringement, misappropriation or other conflict which is not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
MCI WorldCom. To the Knowledge of MCI WorldCom, neither MCI WorldCom nor any
of its Subsidiaries has received any written charge, complaint, claim, demand
or notice alleging any such interference, infringement, misappropriation or
other conflict (including any claim that MCI WorldCom or any such Subsidiary
must license or refrain from using any Intellectual Property Rights or other
proprietary information of any other Person) which has not been settled or
otherwise fully resolved, except with respect to any such interference,
infringement, misappropriation or other conflict which is not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
MCI WorldCom. To the Knowledge of MCI WorldCom, no other Person has interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights of MCI WorldCom or any of its Subsidiaries,
except for any such interference, infringement, misappropriation or other
conflict which is not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on MCI WorldCom.
(iii) As of the date of this Agreement, MCI WorldCom and its
Subsidiaries have undertaken a concerted effort to ensure that all of the
computer software, computer firmware, computer hardware, and other similar or
related items of automated, computerized, and/or software system(s) that are
to be used or relied on by MCI WorldCom or any of its Subsidiaries in the
conduct of their respective businesses will not malfunction, will not cease to
function, will not generate incorrect data, and will not provide incorrect
results when processing, providing and/or receiving (i) date-related data into
and between the years 1999 and 2000 and (ii) date-related data in connection
with any valid date in the twentieth and twenty-first centuries. As of the
date of this Agreement, MCI WorldCom reasonably believes that such effort will
be successful.
(j) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, since June 30, 1999, MCI WorldCom and its Subsidiaries have conducted
their business only in the ordinary course, and there has not been (i) any
Material Adverse Change in MCI WorldCom, (ii) until the date of this
Agreement, any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of MCI
WorldCom's capital stock, other than dividends payable on MCI WorldCom's
preferred stock in accordance with their terms as of the date of this
Agreement, (iii) until the date of this Agreement, any split, combination or
reclassification of any of MCI WorldCom 's capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of MCI WorldCom's capital stock, (iv)
until the date of this Agreement, except insofar as may be required by a
change in U.S. GAAP, any change in accounting methods, principles or practices
by MCI WorldCom materially affecting its consolidated financial position or
consolidated results of operations or (v) until the date
25
of this Agreement, except insofar as Sprint has given its consent, which
consent shall not be unreasonably withheld or delayed, any tax election (or
settlement or compromise of any material income tax liability) that is
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on MCI WorldCom.
(k) Vote Required. The affirmative vote (the "Required MCI WorldCom
Vote") of (i) holders of shares of MCI WorldCom Common Stock and MCI WorldCom
Series B Preferred Stock representing a majority of all the votes entitled to
be cast at a meeting of the holders of outstanding shares of capital stock of
MCI WorldCom, voting as a single voting group, is the only vote of the holders
of any class or series of MCI WorldCom capital stock necessary to approve the
Merger (which would include the amendment to MCI WorldCom's articles of
incorporation contemplated hereby) and (ii) a majority of the total votes cast
by the holders of shares of MCI WorldCom Common Stock is the only vote of the
holders of any class or series of capital stock of MCI WorldCom necessary to
approve, in accordance with the applicable rules of Nasdaq, the issuance (the
"MCI WorldCom Stock Issuance") of MCI WorldCom Capital Stock pursuant to the
Merger.
(l) MCI WorldCom Rights Agreement. No amendment to the MCI WorldCom
Rights Agreement is required to be made by MCI WorldCom in connection with the
approval, execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
(m) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person on behalf of MCI WorldCom is or will
be entitled to any broker's or finder's fee or any other similar commission or
fee in connection with any of the transactions contemplated by this Agreement,
except Xxxxxxx Xxxxx Xxxxxx Inc., whose fees and expenses will be paid by MCI
WorldCom in accordance with MCI WorldCom's agreement with such firm, based
upon arrangements made by or on behalf of MCI WorldCom and previously
disclosed to Sprint.
(n) Opinion of Financial Advisor. MCI WorldCom has received the
opinion of Xxxxxxx Xxxxx Barney Inc., dated the date of this Agreement, to the
effect that, as of such date, the FON Exchange Ratio and the PCS Stock Merger
Consideration are fair, from a financial point of view, to MCI WorldCom, a
copy of which opinion will promptly be made available to Sprint.
(o) ERISA Compliance. (i) With respect to MCI WorldCom's Benefit
Plans, no liability has been incurred and to the Knowledge of MCI WorldCom
there exists no condition or circumstances in connection with which MCI
WorldCom or any of its Subsidiaries could be subject to any liability that is
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on MCI WorldCom, in each case under ERISA, the Code or any
other applicable law.
(ii) Each of MCI WorldCom's Benefit Plans has been administered in
accordance with its terms, except for any failures so to administer any such
Benefit Plan that are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on MCI WorldCom. MCI WorldCom, its
Subsidiaries and all MCI WorldCom's Benefit Plans are in compliance with the
applicable provisions of ERISA, the Code and all other applicable laws and the
terms of all applicable collective bargaining agreements, except for any
failures to be in such compliance that are not
26
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on MCI WorldCom.
(iii) None of MCI WorldCom or any of its Subsidiaries sponsors or
contributes to any of MCI WorldCom's Benefit Plans that is subject to Title IV
of ERISA.
(iv) MCI WorldCom and its Subsidiaries are in compliance with all
Federal, state, local and foreign requirements regarding employment, except
for any failures to comply that are not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on MCI WorldCom. As of the
date of this Agreement, there is no labor dispute, strike or work stoppage
against MCI WorldCom or any of its Subsidiaries pending or, to the Knowledge
of MCI WorldCom, threatened which may interfere with the respective business
activities of MCI WorldCom or any of its Subsidiaries, except where such
dispute, strike or work stoppage is not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on MCI WorldCom. As of the
date of this Agreement, to the Knowledge of MCI WorldCom, none of MCI
WorldCom, any of its Subsidiaries or any of their respective representatives
or employees has committed any unfair labor practice in connection with the
operation of the respective businesses of MCI WorldCom or any of its
Subsidiaries, and there is no action, charge or complaint against MCI WorldCom
or any of its Subsidiaries by the National Labor Relations Board or any
comparable Governmental Entity pending or threatened in writing, in each case
except where such practices, actions, charges or complaints are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
MCI WorldCom.
(v) No employee of MCI WorldCom or its Subsidiaries will be entitled
to any additional benefits or any acceleration of the time of payment or
vesting of any benefits under any of MCI WorldCom's Benefit Plans as a result
of the transactions contemplated by this Agreement, except to the extent that
such benefits, acceleration or vesting are not reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect on MCI WorldCom. No
amount payable, or economic benefit provided, by MCI WorldCom or its
Subsidiaries (including any acceleration of the time of payment or vesting of
any benefit) could be considered an "excess parachute payment" under Section
280G of the Code, except to the extent that, if such payment or benefit was an
"excess parachute payment", such payment or benefit is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on MCI
WorldCom. No Person is entitled to receive any additional payment from MCI
WorldCom or its Subsidiaries or any other Person in the event that the excise
tax of Section 4999 of the Code is imposed on such Person, except to the
extent that any such additional payment is not reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect on MCI WorldCom.
(p) Taxes. (i) (A) Each of MCI WorldCom and its Subsidiaries and
each MCI WorldCom Consolidated Group has timely filed or has caused to be
timely filed all material tax returns and reports required to be filed by it
or requests for extensions to file such returns or reports have been timely
filed, granted and have not expired, (B) all tax returns and reports filed by
MCI WorldCom and each of its Subsidiaries and each MCI WorldCom Consolidated
Group are complete and accurate in all respects and (C) MCI WorldCom and each
of its Subsidiaries and each MCI WorldCom Consolidated Group has paid (or MCI
WorldCom or another member of such MCI WorldCom Consolidated
27
Group has paid on its behalf) all taxes shown as due on such returns and
reports, and the reserve for current taxes shown on the most recent financial
statements contained in the MCI WorldCom Filed SEC Reports (in addition to any
reserve for deferred taxes established to reflect timing differences between
book and tax income) is adequate to cover all taxes payable by MCI WorldCom
and its Subsidiaries and each MCI WorldCom Consolidated Group for all taxable
periods and portions thereof through the date of such financial statements,
except for any such failure to file, incompleteness or inaccuracy, failure to
pay, or inadequacy of such reserve, that is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on MCI
WorldCom.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed in writing against MCI WorldCom or any of its Subsidiaries or any MCI
WorldCom Consolidated Group that are not adequately reserved for, except for
deficiencies that are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on MCI WorldCom and no requests for waivers
of time to assess any such taxes have been granted or are pending (other than
with respect to years that are currently under examination by the Internal
Revenue Service or other applicable taxing authorities). The statute of
limitations on assessment or collection of any Federal taxes due from MCI
WorldCom and its Subsidiaries has expired for all taxable years of MCI
WorldCom and each of its Subsidiaries through 1987. The Federal income tax
returns of MCI WorldCom and each of its Subsidiaries have been examined by and
settled with the Internal Revenue Services for all years through 1987.
(iii) Neither MCI WorldCom nor any of its Subsidiaries has taken or
has agreed to take any action or has any Knowledge of any fact, agreement,
plan or other circumstance that is reasonably likely to prevent the Merger
from qualifying as a "reorganization" within the meaning of Section 368(a) of
the Code.
(iv) Neither MCI WorldCom nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (A) in
the two years prior to the date of this Agreement or (B) in a distribution
which could otherwise constitute part of a "plan" or series of "related
transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(v) MCI WorldCom does not believe that it is a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code, although it has not determined or established whether it will be a
United States real property holding corporation in the future.
(vi) As used in this Agreement, "MCI WorldCom Consolidated Group"
means any affiliated group within the meaning of Section 1504(a) of the Code,
in which MCI WorldCom (or any Subsidiary of MCI WorldCom) is or has ever been
a member or any group of corporations with which MCI WorldCom files, has filed
or is or was required to file an affiliated, consolidated, combined, unitary
or aggregate tax return.
28
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of Sprint. During the period from the date of this
Agreement and continuing until the Effective Time, Sprint agrees as to itself
and its Subsidiaries that (except as expressly contemplated, permitted or
required by this Agreement or as otherwise indicated on the Sprint Disclosure
Schedule or to the extent that MCI WorldCom shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed):
(a) Ordinary Course. Except to the extent not reasonably practicable
in light of the announcement or existence of this Agreement and the
transactions contemplated hereby, Sprint shall, and shall cause its
Subsidiaries taken as a whole to, carry on its business in the usual, regular
and ordinary course in all material respects, in substantially the same manner
as heretofore conducted, and shall use all reasonable efforts to maintain its
rights and franchises and preserve its relationships with customers, suppliers
and others having business dealings with it with the objective to minimize the
impairment of its ongoing business; provided, however, that no action by
Sprint or its Subsidiaries with respect to matters specifically addressed by
any other provisions of this Section 4.1 or Section 4.1 of the Sprint
Disclosure Schedule shall be deemed a breach of this Section 4.1(a) unless
such action would constitute a breach of one or more of such other provisions.
(b) Dividends; Changes in Share Capital. Sprint shall not, and shall
not permit any of its Subsidiaries to, and shall not propose to, (i) declare
or pay any dividends on or make other distributions in respect of any of its
capital stock, except (A) Sprint may continue the declaration and payment of
regular quarterly cash dividends not in excess of $0.125 per share of Sprint
FON Stock (and any corresponding cash dividends on shares held by the Class A
Holders) and regular dividends required by the terms of the Sprint Preferred
Stock as in effect on the date hereof, in each case with usual record and
payment dates for such dividends in accordance with Sprint's past practice and
(B) dividends by wholly owned Subsidiaries of Sprint to its parent, (ii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, except for any such transaction
by a wholly owned Subsidiary of Sprint which remains a wholly owned Subsidiary
after consummation of such transaction, or (iii) repurchase, redeem or
otherwise acquire any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock except for
the purchase from time to time by Sprint of Sprint Common Stock (and the
associated Sprint Rights) in the ordinary course of business consistent with
past practice in connection with the Sprint Benefit Plans and the terms of the
Sprint Conversion Shares as in effect on the date hereof and except for the
redemption of the Sprint Second Series Preferred Stock pursuant to Section
5.14.
(c) Issuance of Securities. Sprint shall not, and shall not permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of its capital stock of any
class, any Sprint Voting Debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such
shares or Sprint Voting Debt, or enter into any agreement with respect to any
of the foregoing, other than (i) the issuance of Sprint Common Stock (and the
associated
29
Sprint Rights) upon the exercise of stock options or in connection with rights
under other stock-based benefits plans, to the extent such options or rights
are outstanding on the date hereof in accordance with their present terms or
upon the exercise of the stock options issued pursuant to clause (vi) below,
(ii) the issuance of Sprint Capital Stock upon the conversion of Sprint
Conversion Securities pursuant to the terms thereof as in effect on the date
hereof, (iii) the issuance of Sprint PCS Stock pursuant to the exercise of
Warrants pursuant to the terms of the Warrant Agreements as in effect on the
date hereof, (iv) issuances by a wholly owned Subsidiary of Sprint of capital
stock to such Subsidiary's parent, (v) issuances in accordance with the Sprint
Rights Agreement, (vi) issuances of stock options in connection with regular
option grants by Sprint or issuances of stock options for new hires or
issuances of restricted stock, in each case in the ordinary course of business
and consistent with past practice pursuant to the Sprint Benefit Plans, (vii)
the issuance of shares of Sprint Capital Stock pursuant to purchase rights or
preemptive rights held by stockholders of Sprint under the terms of the
instruments or agreements as in effect on the date hereof pursuant to which
such shares were issued, (viii) the issuance of Sprint Capital Stock pursuant
to acquisitions permitted under Section 4.1(e) hereof or under Section 4.1 of
the Sprint Disclosure Schedule or (ix) as provided in Section 5.7 of the
Sprint Disclosure Schedule.
(d) Governing Documents. Except to the extent required to comply
with their respective obligations hereunder, required by law or required by
the rules and regulations of the NYSE, Sprint shall not amend its articles of
incorporation or by-laws.
(e) No Acquisitions. Sprint shall not, and shall not permit any of
its Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets;
provided, however, that the foregoing shall not prohibit (i) acquisitions of
assets used in the operations of the business of Sprint and its Subsidiaries
in the ordinary course of business consistent with past practice, (ii)
internal reorganizations or consolidations involving existing Subsidiaries of
Sprint or (iii) the creation of new Subsidiaries of Sprint organized to
conduct or continue activities otherwise permitted by this Agreement, so long
as any action otherwise permitted by this proviso could not reasonably be
expected to result in (A) any of the conditions to the Merger set forth in
Article VI not being satisfied or (B) a material delay in the satisfaction of
any such conditions.
(f) No Dispositions. Other than (i) in the ordinary course of
business consistent with past practice and, in any event, which are not
material, individually or in the aggregate, to Sprint and its Subsidiaries
taken as a whole or (ii) internal reorganizations or consolidations involving
existing Subsidiaries of Sprint, Sprint shall not, and shall not permit any of
its Subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree
to sell, lease, encumber or otherwise dispose of (including by way of a
spin-off or similar transaction), any of its assets.
(g) Indebtedness; Investments. Sprint shall not, and shall not
permit any of its Subsidiaries to, (i) incur any indebtedness for borrowed
money or guarantee any such indebtedness of another Person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
Sprint or any of its Subsidiaries, guarantee any debt securities of another
Person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another Person (other than any wholly
30
owned Subsidiary) or enter into any arrangement having the economic effect of
any of the foregoing, except for (A) short-term borrowings, senior bank or
similar bank financing or, subject to prior consultation with MCI WorldCom,
any other indebtedness incurred by Sprint or any of its Subsidiaries with a
maturity date not to exceed five years from the date of its original issuance
(provided that the consummation of this Agreement or any of the transactions
contemplated hereby shall not give rise to, cause or result in, a default or
event of default under the agreement or instrument governing any such
indebtedness or, an obligation to pay any amount thereunder solely as a result
of the consummation of this Agreement or any of the transactions contemplated
hereby) incurred in the ordinary course of business consistent with past
practice (or to refund existing or maturing indebtedness) and (B) intercompany
indebtedness between Sprint and any of its wholly owned Subsidiaries or
between such wholly owned Subsidiaries, (ii) make any loans or advances to any
other Person, other than (A) employee loans or advances made by Sprint in the
ordinary course of business consistent with past practice and (B) loans or
advances made between Sprint and any of its wholly owned Subsidiaries or
between such wholly owned Subsidiaries, or (iii) investments in any Person
other than (A) investments in wholly owned Subsidiaries and (B) investments in
the ordinary course of business consistent with past practice and, in any
event, which are not material, individually or in the aggregate, to Sprint.
(h) New Line of Business; Capital Expenditures. Sprint shall not,
and shall not permit any of its Subsidiaries to, (i) enter into any new
material line of business outside its Core Businesses (as defined in Sprint's
articles of incorporation) or (ii) incur or commit to any capital expenditures
other than capital expenditures incurred or committed to in the ordinary
course of business and which are not in excess of the amounts set forth in
Section 4.1(h) of the Sprint Disclosure Schedule.
(i) Tax-Free Qualification. Sprint shall not, and shall not permit
any of its Subsidiaries to, take any action that would prevent or impede the
Merger from qualifying as a reorganization under Section 368 of the Code.
(j) Other Actions. Sprint shall not, and shall not permit any of its
Subsidiaries to, take any action that would, or that could reasonably be
expected to, result in (i) any of the conditions to the Merger set forth in
Article VI not being satisfied or (ii) a material delay in the satisfaction of
any such conditions.
(k) Accounting Methods. Except as disclosed in the Sprint Filed SEC
Reports, or as required by a Governmental Entity, Sprint shall not make any
material change in its methods of accounting in effect at December 31, 1998,
except as required by changes in U.S. GAAP as concurred in by Sprint's
independent auditors. Sprint shall not change its fiscal year.
(l) Representations and Warranties. Sprint shall not take any action
that would cause the representations and warranties set forth in Section
3.1(j) to no longer be true and correct.
(m) Authorization of the Foregoing. Sprint shall not, and shall not
permit any of its Subsidiaries to, authorize, commit or agree to take any of
the foregoing actions.
4.2 Covenants of MCI WorldCom. During the period from the date of
this Agreement and continuing until the Effective Time, MCI WorldCom agrees as
to
31
itself and its Subsidiaries that (except as expressly contemplated, permitted
or required by this Agreement or as otherwise indicated on the MCI WorldCom
Disclosure Schedule or to the extent that Sprint shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed):
(a) Ordinary Course. Except to the extent not reasonably practicable
in light of the announcement or existence of this Agreement and the
transactions contemplated hereby, MCI WorldCom shall, and shall cause its
Subsidiaries taken as a whole to, carry on its business in the usual, regular
and ordinary course in all material respects, in substantially the same manner
as heretofore conducted, and shall use all reasonable efforts to maintain its
rights and franchises and preserve its relationships with customers, suppliers
and others having business dealings with it with the objective to minimize the
impairment of its ongoing business; provided, however, that no action by MCI
WorldCom or its Subsidiaries with respect to matters specifically addressed by
any other provisions of this Section 4.2 shall be deemed a breach of this
Section 4.2(a) unless such action would constitute a breach of one or more of
such other provisions.
(b) Dividends; Changes in Share Capital. MCI WorldCom shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to,
repurchase, redeem or otherwise acquire any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock
except for the purchase from time to time by MCI WorldCom of MCI WorldCom
Capital Stock (and the associated MCI WorldCom Rights) in the ordinary course
of business consistent with past practice in connection with share options,
share incentive schemes, profit sharing schemes or other benefit plans of MCI
WorldCom or repurchases of shares of MCI WorldCom Common Stock in open market
or privately negotiated transactions. In the event MCI WorldCom changes (or
establishes a record date for changing) the number of shares of MCI WorldCom
Common Stock issued and outstanding prior to the Effective Time as a result of
a stock split, stock dividend, recapitalization, subdivision,
reclassification, combination, exchange of shares or similar transaction with
respect to the outstanding MCI WorldCom Common Stock and the record date
therefor shall be prior to the Effective Time, the applicable Merger
Consideration shall be appropriately adjusted to reflect such stock split,
stock dividend, recapitalization, subdivision, reclassification, combination,
exchange of shares or similar transaction. In addition, in the event MCI
WorldCom pays (or establishes a record date for payment of) any dividend on,
or makes any other distribution in respect of, MCI WorldCom Common Stock, the
applicable Merger Consideration shall be appropriately adjusted to reflect
such dividend or distribution. Without limiting the foregoing, the issuance of
MCI WorldCom Rights pursuant to the MCI WorldCom Rights Agreement in respect
of each share of MCI WorldCom PCS Stock shall not cause, or result in, any
adjustment pursuant to this Section 4.2(b).
(c) No Acquisitions. MCI WorldCom shall not, and shall not permit
any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or all
or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, in any event (i) with a value in excess of
an amount equal to 20% of the market capitalization of MCI WorldCom, for any
one acquisition and 30% thereof for all acquisitions before the Closing, in
each case as determined on the date of its entering into an agreement therefor
or (ii) that could reasonably be expected to result in (A) any of the
conditions to the Merger set forth in
32
Article VI not being satisfied or (B) a material delay in the satisfaction of
any such conditions. MCI WorldCom shall not, and shall not permit any of its
Subsidiaries to, enter into any new material line of business outside its
existing core businesses.
(d) No Dispositions. MCI WorldCom shall not, and shall not permit
any of its Subsidiaries to, sell, lease, encumber or otherwise dispose of all
or substantially all of any material line of business for MCI WorldCom and its
Subsidiaries taken as a whole.
(e) Tax-Free Qualification. MCI WorldCom shall not and shall not
permit any of its Subsidiaries to, take any action that would prevent or
impede the Merger from qualifying as a reorganization under Section 368 of the
Code.
(f) Other Actions. MCI WorldCom shall not, and shall not permit any
of its Subsidiaries to, take any action that would, or could reasonably be
expected to, result in (i) any of the conditions to the Merger set forth in
Article VI not being satisfied or (ii) a material delay in the satisfaction of
such conditions.
(g) Representations and Warranties. MCI WorldCom shall not take any
action that would cause the representations and warranties set forth in
Section 3.2(j)(i) to no longer be true and correct.
(h) Authorization of the Foregoing. MCI WorldCom shall not, and
shall not permit any of its Subsidiaries to, authorize, commit or agree to
take, any of the foregoing actions.
4.3 Control of Other Party's Business. Nothing contained in this
Agreement shall give Sprint, directly or indirectly, the right to control or
direct MCI WorldCom's operations prior to the Effective Time. Nothing
contained in this Agreement shall give MCI WorldCom, directly or indirectly,
the right to control or direct Sprint's operations prior to the Effective
Time. Prior to the Effective Time, each of Sprint and MCI WorldCom shall
exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over its respective operations.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of the Form S-4 and the Joint Proxy
Statement/Prospectus; Stockholders Meetings. (a) As promptly as practicable
following the date hereof, MCI WorldCom and Sprint shall jointly prepare and
file with the SEC preliminary proxy materials and any amendments or
supplements thereto which shall constitute the joint proxy
statement/prospectus (such proxy statement/prospectus, and any amendments or
supplements thereto, the "Joint Proxy Statement/Prospectus") and MCI WorldCom
shall prepare and file with the SEC the Registration Statement on Form S-4
with respect to the issuance of MCI WorldCom Capital Stock in the Merger (the
"Form S-4") in which the Joint Proxy Statement/Prospectus will be included as
a prospectus. The Form S-4 and the Joint Proxy Statement/Prospectus shall
comply as to form in all material respects with the applicable provisions of
the Securities Act and the Exchange Act. Each of MCI WorldCom and Sprint shall
use all reasonable efforts to have the
33
Form S-4 declared effective under the Securities Act as promptly as
practicable after filing with the SEC and to keep the Form S-4 effective as
long as is necessary to consummate the Merger. The parties shall promptly
provide copies to and consult with each other and prepare written responses
with respect to any written comments received from the SEC with respect to the
Form S-4 and the Joint Proxy Statement/Prospectus and promptly advise the
other party of any oral comments received from the SEC. MCI WorldCom agrees
that none of the information supplied or to be supplied by MCI WorldCom for
inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the Sprint Stockholders Meeting or the MCI
WorldCom Shareholders Meeting, will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Sprint agrees that none of the
information supplied or to be supplied by Sprint for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing thereof and at the
time of the Sprint Stockholders Meeting or the MCI WorldCom Shareholders
Meeting, will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. For purposes of the foregoing, it is understood and agreed
that information concerning or related to MCI WorldCom and the MCI WorldCom
Shareholders Meeting will be deemed to have been supplied by MCI WorldCom and
information concerning or related to Sprint and the Sprint Stockholders
Meeting shall be deemed to have been supplied by Sprint. No amendment or
supplement to the information supplied by Sprint for inclusion in the Joint
Proxy Statement/Prospectus shall be made without the approval of Sprint, which
approval shall not be unreasonably withheld or delayed.
(b) Sprint shall, as promptly as practicable following the execution
of this Agreement, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Sprint Stockholders Meeting") for the purpose of
obtaining the Required Sprint Vote with respect to the transactions
contemplated by this Agreement, shall use its reasonable best efforts, subject
to Section 5.4, to solicit the adoption of this Agreement by the Required
Sprint Vote and, subject to Section 5.4, the Board of Directors of Sprint
shall recommend adoption of this Agreement by the stockholders of Sprint.
Without limiting the generality of the foregoing but subject to its rights
pursuant to Sections 5.4 and 7.1(e), Sprint agrees that its obligations
pursuant to the first sentence of this Section 5.1(b) shall not be affected by
the commencement, public proposal, public disclosure or communication to
Sprint of any Sprint Acquisition Proposal.
(c) MCI WorldCom shall, as promptly as practicable following the
execution of this Agreement, duly call, give notice of, convene and hold a
meeting of its shareholders (the "MCI WorldCom Shareholders Meeting") for the
purpose of obtaining the Required MCI WorldCom Vote with respect to the
transactions contemplated by this Agreement, shall use its reasonable best
efforts, subject to Section 5.5, to solicit the approval of this Agreement by
the Required MCI WorldCom Vote and, subject to Section 5.5, the Board of
Directors of MCI WorldCom shall recommend the approval of this Agreement by
the shareholders of MCI WorldCom. Without limiting the generality of the
foregoing but subject to its rights pursuant to Sections 5.5 and 7.1(f), MCI
WorldCom agrees that its obligations pursuant to the first sentence of this
Section 5.1(c)
34
shall not be affected by the commencement, public proposal, public disclosure
or communication to MCI WorldCom of any MCI WorldCom Acquisition Proposal.
(d) The Sprint Stockholders Meeting and the MCI WorldCom
Shareholders Meeting shall take place on the same date, to the extent
practicable; provided that, notwithstanding anything in this Agreement,
neither such meeting shall take place earlier than the 121st day following the
date of this Agreement.
5.2 Access to Information. Upon reasonable notice, each of MCI
WorldCom and Sprint shall, and shall cause its Subsidiaries to, afford to the
other party and to the officers, employees, accountants, counsel, financial
advisors and other representatives of such other party reasonable access
during normal business hours, during the period prior to the Effective Time,
to all its properties, books, contracts, commitments and records and, during
such period, each of MCI WorldCom and Sprint shall, and shall cause its
Subsidiaries to, furnish promptly to the other party consistent with its legal
obligations, all other information concerning its business, properties and
personnel as such other party may reasonably request; provided, however, that
each of MCI WorldCom and Sprint may restrict the foregoing access to the
extent that (i) a Governmental Entity requires either party or any of its
Subsidiaries to restrict access to any properties or information reasonably
related to any such contract on the basis of applicable laws and regulations
with respect to national security matters or (ii) in the reasonable judgment
of such party, any law, treaty, rule or regulation of any Governmental Entity
applicable to such party requires it or its Subsidiaries to restrict access to
any properties or information. The parties will hold any such information in
confidence to the extent required by, and in accordance with, the provisions
of the letter dated September 22, 1999, between Sprint and MCI WorldCom (the
"Confidentiality Agreement"). Any investigation by MCI WorldCom or Sprint
shall not affect the representations and warranties of Sprint or MCI WorldCom,
as the case may be.
5.3 Reasonable Best Efforts. (a) Subject to the terms and conditions
of this Agreement, each party hereto will use its reasonable best efforts to
(i) take, or cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to consummate the Merger and the other transactions contemplated
by this Agreement as soon as practicable after the date hereof and (ii) obtain
and maintain all approvals, consents, waivers, registrations, permits,
authorizations, clearances and other confirmations required to be obtained
from any third party and/or any Governmental Entity that are reasonably
necessary to consummate the Merger and the transactions contemplated hereby
(each a "Required Approval"). In furtherance and not in limitation of the
foregoing, each party hereto agrees to make, as promptly as practicable, to
the extent it has not already done so, (i) an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby (which filing shall be made in any event
within five Business Days of the date hereof), (ii) appropriate filings with
the FCC and PUCs with respect to the transactions contemplated hereby, (iii)
appropriate filings with the European Commission in accordance with applicable
competition, merger control, antitrust or similar laws within the time periods
specified thereunder, and (iv) all necessary filings with other Governmental
Entities relating to the Merger, and, in each case, to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the such laws and to use reasonable best efforts to
cause the expiration or termination of the applicable waiting periods under
the HSR Act and the receipt of Required Approvals under such other laws as
soon as
35
practicable. Notwithstanding the foregoing, nothing in this Section 5.3 shall
require, or be deemed to require, (i) MCI WorldCom or Sprint to agree to or
effect any divestiture or take any other action if doing so would,
individually or in the aggregate, reasonably be expected to materially impair
the parties' ability to achieve the overall benefits expected, as of the date
hereof, to be realized from the consummation of the Merger or (ii) MCI
WorldCom or Sprint to agree to or effect any divestiture or take any other
action that is not conditional on the consummation of the Merger.
(b) Each of MCI WorldCom and Sprint shall, in connection with the
efforts referenced in Section 5.3(a) to obtain all Required Approvals, use its
reasonable best efforts to (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a
private party; (ii) promptly inform the other party of any communication
received by such party from, or given by such party to, the FCC, PUCs, the
Antitrust Division of the Department of Justice (the "DOJ") or any other
Governmental Entity and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any
of the transactions contemplated hereby, and (iii) permit the other party to
review any communications given by it to, and consult with each other in
advance to the extent practicable of any meeting or conference with, the FCC,
PUCs, the DOJ or any such other Governmental Entity or, in connection with any
proceeding by a private party, with any other Person, and to the extent
permitted by the FCC, PUCs, the DOJ or such other applicable Governmental
Entity or other Person, give the other party the opportunity to attend and
participate in such meetings and conferences.
(c) In furtherance and not in limitation of the covenants of the
parties contained in Sections 5.3(a) and 5.3(b), if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law, or if any
statute, rule, regulation, executive order, decree, injunction or
administrative order is enacted, entered, promulgated or enforced by a
Governmental Entity which would make the Merger or the transactions
contemplated hereby illegal or would otherwise prohibit or materially impair
or delay the consummation of the Merger or the transactions contemplated
hereby, each of MCI WorldCom and Sprint shall cooperate in all respects with
each other and use its respective reasonable best efforts to contest and
resist any such action or proceeding and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order, whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents or
restricts consummation of the Merger or the transactions contemplated by this
Agreement and to have such statute, rule, regulation, executive order, decree,
injunction or administrative order repealed, rescinded or made inapplicable.
Notwithstanding the foregoing or any other provision of this Agreement,
nothing in this Section 5.3 shall limit a party's right to terminate this
Agreement pursuant to Section 7.1(b) or 7.1(c) so long as such party has up to
then complied in all respects with its obligations under this Section 5.3. For
purposes of this Agreement, "Regulatory Law" means the Xxxxxxx Act, as
amended, the Xxxxxxx Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, the Federal Communications Act, as amended,
Regulation 4064/89, and all other Federal, state and foreign, if any,
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines and other laws that are designed or intended to regulate mergers,
acquisitions or other business combinations.
36
(d) Sprint and its Board of Directors shall, if any state takeover
statute or similar statute becomes applicable to this Agreement, the Merger or
any other transactions contemplated hereby or thereby, take all action
reasonably necessary to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable
on the terms contemplated hereby or thereby and otherwise to minimize the
effect of such statute or regulation on this Agreement, the Merger and the
other transactions contemplated hereby.
(e) MCI WorldCom and its Board of Directors shall, if any state
takeover statute or similar statute becomes applicable to this Agreement, the
Merger or any other transactions contemplated hereby, to the extent legally
permissible take all action reasonably necessary to ensure that the Merger and
the other transactions contemplated by this Agreement may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise to
minimize the effect of such statute or regulation on this Agreement, the
Merger and the other transactions contemplated hereby.
5.4 No Solicitation by Sprint. (a) Sprint shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any of its
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
Subsidiaries to, directly or indirectly through another Person, (i) solicit,
initiate or knowingly encourage (including by way of furnishing information),
or knowingly take any other action to facilitate, the making of any proposal
that constitutes a Sprint Competing Proposal or (ii) participate in any
discussions or negotiations regarding any Sprint Competing Proposal; provided,
however, that if, at any time during the period commencing on the 61st day
after the date hereof and ending on the date the Required Sprint Vote is
obtained (the "Sprint Applicable Period"), the Board of Directors of Sprint,
in the exercise of its fiduciary duties, determines in good faith, after
consultation with outside counsel, that to do otherwise would not be in the
best interests of Sprint's stockholders, Sprint and its representatives may,
in response to a Sprint Superior Proposal which did not result from a breach
of this Section 5.4(a), and subject to providing prior or contemporaneous
notice of its decision to take such action to MCI WorldCom, (x) furnish
information with respect to Sprint and its Subsidiaries to any Person making a
Sprint Superior Proposal pursuant to a customary confidentiality agreement (as
determined by Sprint after consultation with its outside counsel) and (y)
participate in discussions or negotiations regarding such Sprint Superior
Proposal. This Section 5.4 is subject to Section 5.4 of the Sprint Disclosure
Schedule. For purposes of this Agreement, "Sprint Competing Proposal" means
any bona fide proposal or offer from any Person relating to any direct or
indirect acquisition or purchase of 20% or more of the assets of Sprint and
its Subsidiaries, taken as a whole, or 20% or more of the combined voting
power of the shares of Sprint Common Stock, any tender offer or exchange offer
that if consummated would result in any Person beneficially owning 20% or more
of the combined voting power of the shares of Sprint Common Stock, or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Sprint or any of its Subsidiaries
in which the other party thereto or its stockholders will own 20% or more of
the combined voting power of the parent entity resulting from any such
transaction, other than the transactions contemplated by this Agreement. For
purposes of this Agreement, a "Sprint Superior Proposal" means (i) any
proposal made by a third party relating to any direct or indirect acquisition
or purchase of 50% or more of the assets of Sprint and its Subsidiaries, taken
as a whole, or 50% or more of the combined voting power of the shares of
Sprint Common Stock, any tender offer or
37
exchange offer that if consummated would result in any Person beneficially
owning 50% or more of the combined voting power of the shares of Sprint Common
Stock or any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Sprint or any of its
Subsidiaries in which the other party thereto or its stockholders will own 40%
or more of the combined voting power of the parent entity resulting from any
such transaction and (ii) otherwise on terms which the Board of Directors of
Sprint determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation), taking into account
the Person making the proposal and the legal, financial, regulatory and other
aspects of the proposal deemed appropriate by the Board of Directors of
Sprint, (x) would be more favorable than the Merger to Sprint's stockholders
taken as a whole, (y) is reasonably capable of being completed and (z) for
which financing, to the extent required, is then committed or is reasonably
capable of being obtained by such third party.
(b) Neither the Board of Directors of Sprint nor any committee
thereof shall (i) withdraw, or propose publicly to withdraw, in a manner
adverse to MCI WorldCom, the approval or recommendation by such Board of
Directors or such committee of the Merger or this Agreement, (ii) subject to
Section 5.4(d), modify, or propose publicly to modify, in a manner adverse to
MCI WorldCom, the approval or recommendation by such Board of Directors or
such committee of the Merger or this Agreement, (iii) approve or recommend, or
propose publicly to approve or recommend, any Sprint Competing Proposal or
(iv) approve or recommend, or propose to approve or recommend, or execute or
enter into, any letter of intent, agreement in principle, merger agreement,
acquisition agreement, option agreement or other similar agreement or propose
publicly or agree to do any of the foregoing (each, a "Sprint Acquisition
Agreement") related to any Sprint Competing Proposal. Notwithstanding the
foregoing, during the Sprint Applicable Period, in response to a Sprint
Superior Proposal which did not result from a breach of Section 5.4(a), if the
Board of Directors of Sprint, in the exercise of its fiduciary duties,
determines in good faith, after consultation with outside counsel, that to do
otherwise would not be in the best interests of Sprint's stockholders, the
Board of Directors of Sprint may (x) modify or propose publicly to modify, in
a manner adverse to MCI WorldCom, the approval or recommendation of the Merger
or this Agreement by the Board of Directors of Sprint and/or (y) terminate
this Agreement (and concurrently with or after such termination, if it so
chooses, cause Sprint to enter into any Sprint Acquisition Agreement with
respect to any Sprint Superior Proposal), but, in the case of clause (y), only
at a time that is during the Sprint Applicable Period and is after the fourth
Business Day (or the second calendar day in the case of a material amendment
to a Sprint Superior Proposal) following MCI WorldCom's receipt of written
notice advising MCI WorldCom that the Board of Directors of Sprint is prepared
to accept a Sprint Superior Proposal (or any material amendment thereto),
specifying the material terms and conditions of such Sprint Superior Proposal
(or any material amendment thereto) and identifying the Person making such
Sprint Superior Proposal (or any material amendment thereto).
(c) In addition to the obligations of Sprint set forth in paragraphs
(a) and (b) of this Section 5.4, Sprint shall promptly advise MCI WorldCom of
any Sprint Competing Proposal or any inquiry or request for information
relating thereto, the material terms and conditions of such request or Sprint
Competing Proposal and the identity of the Person making such request or
Sprint Competing Proposal. Sprint will promptly keep MCI WorldCom reasonably
informed of the status (including amendments) of any such request or Sprint
Competing Proposal.
38
(d) Nothing contained in this Section 5.4 shall prohibit Sprint from
taking and disclosing to its stockholders a position contemplated by Rule
14d-9 or 14e-2 promulgated under the Exchange Act or from making any
disclosure to Sprint's stockholders if, in the good faith judgment of the
Board of Directors of Sprint, after consultation with outside counsel, failure
so to disclose would be inconsistent with its obligations under applicable
law; provided, however, that, subject to Section 5.4(b), neither Sprint nor
its Board of Directors nor any committee thereof shall withdraw, or propose
publicly to withdraw, its position with respect to this Agreement or the
Merger or approve or recommend, or propose publicly to approve or recommend, a
Sprint Competing Proposal.
5.5 No Solicitation by MCI WorldCom. (a) MCI WorldCom shall not, nor
shall it permit any of its Subsidiaries to, nor shall it authorize or permit
any of its directors, officers or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by it
or any of its Subsidiaries to, directly or indirectly through another Person,
(i) solicit, initiate or knowingly encourage (including by way of furnishing
information), or knowingly take any other action to facilitate, the making of
any proposal that constitutes an MCI WorldCom Competing Proposal or (ii)
participate in any discussions or negotiations regarding any MCI WorldCom
Competing Proposal; provided, however, that if, at any time during the period
commencing on the 61st day after the date hereof and ending on the date
Required MCI WorldCom Vote is obtained (the "MCI WorldCom Applicable Period"),
the Board of Directors of MCI WorldCom, in the exercise of its fiduciary
duties, determines in good faith, after consultation with outside counsel,
that to do otherwise would not be in the best interests of MCI WorldCom's
shareholders, MCI WorldCom and its representatives may, in response to an MCI
WorldCom Superior Proposal which did not result from a breach of this Section
5.5(a), and subject to providing prior or contemporaneous notice of its
decision to take such action to Sprint, (x) furnish information with respect
to MCI WorldCom and its Subsidiaries to any Person making an MCI WorldCom
Superior Proposal pursuant to a customary confidentiality agreement (as
determined by MCI WorldCom after consultation with its outside counsel) and
(y) participate in discussions or negotiations regarding such MCI WorldCom
Superior Proposal. For purposes of this Agreement, "MCI WorldCom Competing
Proposal" means any bona fide proposal or offer from any Person relating to
any direct or indirect acquisition or purchase of 20% or more of the assets of
MCI WorldCom and its Subsidiaries, taken as a whole, or 20% or more of the
combined voting power of the shares of MCI WorldCom Common Stock, any tender
offer or exchange offer that if consummated would result in any Person
beneficially owning 20% or more of the combined voting power of the shares of
MCI WorldCom Common Stock, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
MCI WorldCom or any of its Subsidiaries in which the other party thereto or
its shareholders will own 20% or more of the combined voting power of the
shares of the parent entity resulting from any such transaction, other than
the transactions contemplated by this Agreement. For purposes of this
Agreement, an "MCI WorldCom Superior Proposal" means (i) (A) any proposal made
by a third party relating to any direct or indirect acquisition or purchase of
50% or more of the assets of MCI WorldCom and its Subsidiaries, taken as a
whole, or 50% or more of the combined voting power of the shares of MCI
WorldCom Common Stock, any tender offer or exchange offer that if consummated
would result in any Person beneficially owning 50% or more of the combined
voting power of the shares of MCI WorldCom Common Stock, or (B) any merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving
39
MCI WorldCom or any of its Subsidiaries in which (1) the other party thereto
or its shareholders will own 50% or more of the combined voting power of the
shares of the parent entity resulting from any such transaction and (2)
representatives of such other party shall represent a majority of the Board of
Directors of such parent entity, and (ii) otherwise on terms which the Board
of Directors of MCI WorldCom determines in its good faith judgment (based on
the advice of a financial advisor of nationally recognized reputation), taking
into account the Person making the proposal and the legal, financial,
regulatory and other aspects of the proposal deemed appropriate by the Board
of Directors of MCI WorldCom, (x) would be more favorable than the Merger to
MCI WorldCom's shareholders taken as a whole, (y) is reasonably capable of
being completed and (z) for which financing, to the extent required, is then
committed or is reasonably capable of being obtained by such third party.
(b) Neither the Board of Directors of MCI WorldCom nor any committee
thereof shall (i) withdraw, or propose publicly to withdraw, in a manner
adverse to Sprint, the approval or recommendation by such Board of Directors
or such committee of the Merger or this Agreement, (ii) subject to Section
5.5(d), modify, or propose publicly to modify, in a manner adverse to Sprint,
the approval or recommendation by such Board of Directors or such committee of
the Merger or this Agreement, (iii) approve or recommend, or propose publicly
to approve or recommend, any MCI WorldCom Competing Proposal or (iv) approve
or recommend, or propose to approve or recommend, or execute or enter into,
any letter of intent, agreement in principle, merger agreement, acquisition
agreement, option agreement or other similar agreement or propose publicly or
agree to do any of the foregoing (each, an "MCI WorldCom Acquisition
Agreement") related to any MCI WorldCom Competing Proposal. Notwithstanding
the foregoing, during the MCI WorldCom Applicable Period, in response to an
MCI WorldCom Superior Proposal which did not result from a breach of Section
5.5(a), if the Board of Directors of MCI WorldCom, in the exercise of its
fiduciary duties, determines in good faith, after consultation with outside
counsel, that to do otherwise would not be in the best interests of MCI
WorldCom's shareholders, the Board of Directors of MCI WorldCom may (x) modify
or propose publicly to modify, in a manner adverse to Sprint, the approval or
recommendation of the Merger or this Agreement by the Board of Directors of
MCI WorldCom and/or (y) terminate this Agreement (and concurrently with or
after such termination, if it so chooses, cause MCI WorldCom to enter into any
MCI WorldCom Acquisition Agreement with respect to any MCI WorldCom Superior
Proposal), but, in the case of clause (y), only at a time that is during the
MCI WorldCom Applicable Period and is after the fourth Business Day (or the
second calendar day in the case of a material amendment to an MCI WorldCom
Superior Proposal) following Sprint's receipt of written notice advising
Sprint that the Board of Directors of MCI WorldCom is prepared to accept an
MCI WorldCom Superior Proposal (or any material amendment thereto), specifying
the material terms and conditions of such MCI WorldCom Superior Proposal (or
any material amendment thereto) and identifying the Person making such MCI
WorldCom Superior Proposal (or any material amendment thereto).
(c) In addition to the obligations of MCI WorldCom set forth in
paragraphs (a) and (b) of this Section 5.5, MCI WorldCom shall promptly advise
Sprint of any MCI WorldCom Competing Proposal or any inquiry or request for
information relating thereto, the material terms and conditions of such
request or MCI WorldCom Competing Proposal and the identity of the Person
making such request or MCI WorldCom Competing Proposal. MCI WorldCom will
promptly keep Sprint reasonably
40
informed of the status (including amendments) of any such request or MCI
WorldCom Competing Proposal.
(d) Nothing contained in this Section 5.5 shall prohibit MCI
WorldCom from taking and disclosing to its shareholders a position
contemplated by Rule 14d-9 or 14e-2 promulgated under the Exchange Act or from
making any disclosure to MCI WorldCom's shareholders if, in the good faith
judgment of the Board of Directors of MCI WorldCom, after consultation with
outside counsel, failure so to disclose would be inconsistent with its
obligations under applicable law; provided, however, that, subject to Section
5.5(b), neither MCI WorldCom nor its Board of Directors nor any committee
thereof shall withdraw, or propose publicly to withdraw, its position with
respect to this Agreement or the Merger or approve or recommend, or propose
publicly to approve or recommend, an MCI WorldCom Competing Proposal.
5.6 Sprint Stock Options. (a) As soon as practicable following the
date of this Agreement, the Board of Directors of Sprint (or, if appropriate,
any committee administering the Sprint Stock Option Plans) shall adopt such
resolutions or take such other actions as may be required to effect the
following:
(i) adjust the terms of all outstanding Sprint Stock Options (each,
as so adjusted, an "Adjusted Option"), whether vested or unvested, as
necessary to provide that, at the Effective Time, each Sprint Stock
Option outstanding immediately prior to the Effective Time shall be
amended and converted, on the same terms and conditions as were
applicable under such Sprint Stock Option, as follows:
(A) each Sprint Stock Option to acquire shares of Sprint FON
Stock will be converted into an option to acquire the number of
shares of MCI WorldCom Common Stock determined by multiplying the
number of shares of Sprint FON Stock subject to such Sprint Stock
Option by the FON Exchange Ratio (rounded up to the nearest whole
share) at an exercise price determined by dividing the exercise
price set forth in such Sprint Stock Option by the FON Exchange
Ratio (rounded up to the nearest whole cent); and
(B) each Sprint Stock Option to acquire shares of any class of
Sprint PCS Stock will be converted into an option to acquire:
(x) an equivalent number of shares of MCI WorldCom
Series 1 PCS Stock at the same exercise price as the
exercise price for such Sprint PCS Stock plus
(y) an amount of MCI WorldCom Common Stock for no
additional consideration equal to the number of shares of
such Sprint PCS Stock subject to such Sprint Stock Option
multiplied by the PCS Exchange Ratio, (rounded up to the
nearest whole share) (the "MCI WorldCom Common Stock
Option Shares"), where such option shall automatically be
exercised (as part of the exercise of the option to
acquire MCI WorldCom Series 1 PCS Stock described in the
preceding clause (x)) for a number of shares of MCI
WorldCom Common Stock each time that such option to
41
acquire MCI WorldCom Series 1 PCS Stock is exercised, and
where the number of shares of MCI WorldCom Common Stock to
be acquired upon such exercise shall:
(1) equal "Z" (rounded up to the nearest whole
share), where "Z" equals (i) the number of shares of
MCI WorldCom Series 1 PCS Stock to be acquired
pursuant to such exercise of such option multiplied
by (ii) the PCS Exchange Ratio; or
(2) equal the number of shares of MCI WorldCom
Common Stock which remain subject to such option, if
such exercise is for all the shares of MCI WorldCom
Series 1 PCS Stock which remain subject to such
option;
; provided, however, that the maximum number of shares of
MCI WorldCom Common Stock issuable pursuant to all such
exercises of an Adjusted Option described in this Section
5.6(a)(i)(B) shall not in the aggregate exceed the number
of MCI WorldCom Common Stock Option Shares; and
(ii) make such other changes to the Sprint Stock Option Plans as MCI
WorldCom and Sprint may agree are appropriate to give effect to the Merger.
(b) The adjustments provided in this Section 5.6 with respect to any
Sprint Stock Options to which Section 421(a) of the Code applies shall be and
are intended to be effected in a manner which is consistent with Section
424(a) of the Code.
(c) Prior to the Effective Time, MCI WorldCom shall take all
necessary actions (including, if required to comply with Section 162(m) of the
Code (and the regulations thereunder) or applicable law or rule of Nasdaq,
obtaining the approval of its shareholders at the next regularly scheduled
annual meeting of MCI WorldCom following the Effective Time) to assume as of
the Effective Time all obligations undertaken by, or on behalf of, Sprint
under Section 5.6(a) and to adopt at the Effective Time the Sprint Stock
Option Plans and each Adjusted Option and to take all other action called for
in this Section 5.6, including the reservation, issuance and listing of MCI
WorldCom Capital Stock in a number at least equal to the number of shares of
MCI WorldCom Common Stock that will be subject to the Adjusted Options.
(d) As soon as practicable following the Effective Time, MCI
WorldCom shall prepare and file with the SEC a registration statement on Form
S-8 (or another appropriate form) registering a number of shares of MCI
WorldCom Common Stock equal to the number of shares subject to the Adjusted
Options. Such registration statement shall be kept effective (and the current
status of the prospectus or prospectuses required thereby shall be maintained)
at least for so long as any Adjusted Options or any unsettled awards granted
under the Sprint Stock Option Plans after the Effective Time may remain
outstanding.
(e) As soon as practicable after the Effective Time, MCI WorldCom
shall deliver to the holders of the Sprint Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective Sprint Stock
Option Plans and the agreements
42
evidencing the grants of such Sprint Stock Options and that such Sprint Stock
Options and agreements shall be assumed by MCI WorldCom and shall continue in
effect on the same terms and conditions (subject to the adjustments required
by this Section 5.6 after giving effect to the Merger).
(f) Except as otherwise expressly provided in this Section 5.6 and
except to the extent required under the respective terms of the Sprint Stock
Options, all restrictions or limitations on transfer and vesting with respect
to the Sprint Stock Options awarded under the Sprint Stock Option Plans or any
other plan, program or arrangement of Sprint or any of its Subsidiaries, to
the extent that such restrictions or limitations shall not have already
lapsed, and all other terms thereof, shall remain in full force and effect
with respect to such options after giving effect to the Merger and the
assumption by MCI WorldCom as set forth above.
5.7 Employee Matters. (a) During the one-year period following the
Effective Time (the "Transition Period"), MCI WorldCom shall maintain employee
benefit plans, programs and policies for the employees of Sprint and its
Subsidiaries which, in the aggregate, are substantially comparable to the
employee benefit plans, programs and policies provided by Sprint and its
Subsidiaries before the Effective Time (other than Sprint's Employees Stock
Purchase Plan). Furthermore, no employee of Sprint or a Subsidiary of Sprint
shall have his or her base hourly rate of pay, base salary or bonus
opportunity reduced during the Transition Period except to the extent such
reduction is called for as a result of a violation of MCI WorldCom's generally
applicable policies or a failure to satisfy MCI WorldCom's generally
applicable performance standards for similarly situated MCI WorldCom
employees. The participant accounts in each unfunded plan, program or policy
of Sprint and each Subsidiary of Sprint which are designed to track the
performance of Sprint Capital Stock but which only pay benefits in cash shall
be converted at the Effective Time to accounts which track the performance of
the corresponding MCI WorldCom Capital Stock based upon the principles set
forth in this Agreement for converting Sprint Capital Stock to MCI WorldCom
Capital Stock except that there shall be no rounding up or down as part of
such conversions.
(b) During the one-year period following the Transition Period, the
employees of Sprint and each Subsidiary of Sprint shall be eligible to
participate in employee benefit plans, programs and policies which, in the
aggregate, are substantially comparable to the employee benefit plans,
programs and policies maintained by MCI WorldCom for similarly situated
employees. Each employee of Sprint and each Subsidiary of Sprint shall receive
full credit under each applicable MCI WorldCom plan, program or policy for his
or her service as an employee of Sprint and any Subsidiary of Sprint on the
same basis that he or she would have received such credit if such service had
been completed as an employee of MCI WorldCom for purposes of satisfying any
service requirement to participate in such plan, program or policy (including
any plan, program or policy which provides post-retirement medical benefits)
and any service requirement to receive a non-forfeitable interest in the
benefits under such plan, program or policy. Furthermore, if any such MCI
WorldCom plan, program or policy has any active employment requirements,
pre-existing condition requirements, co-pay, coinsurance or deductible
requirements in effect for a year and an employee of Sprint or a Subsidiary of
Sprint had satisfied (or had made payments towards satisfying) such
requirements for a part of such year as a participant in a Sprint plan,
program or policy, such employee shall receive full credit for satisfying (or
for payments made towards satisfying) such requirements in the MCI WorldCom
plan, program or policy for such
43
year when he or she begins to participate in such plan, program or policy and
any such co-pay, coinsurance or deductible requirements for such year under
the MCI WorldCom plan, program or policy shall be no greater than the co-pay,
coinsurance or deductible requirement under the Sprint plan, program or policy
for such year.
(c) MCI WorldCom and Sprint will implement the provisions relating
to Sprint employee matters set forth in Section 5.7 of the Sprint Disclosure
Schedule.
5.8 Fees and Expenses. (a) Whether or not the Merger is consummated,
all Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses, except
Expenses incurred in connection with the filing, printing and mailing of the
Form S-4 and the Joint Proxy Statement/Prospectus (including SEC filing fees)
and the filing fees for the premerger notification and report forms under the
HSR Act and for filings with the European Commission, which shall be shared
equally by MCI WorldCom and Sprint. As used in this Agreement, "Expenses"
includes all out-of-pocket expenses (including all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing of the Form S-4 and
the Joint Proxy Statement/Prospectus and the solicitation of stockholder
approvals and all other matters related to the transactions contemplated
hereby.
(b) If (1) prior to the date the Required Sprint Vote is obtained a
Sprint Competing Proposal shall have been made to Sprint or any of its
Subsidiaries or shall have been made directly to the stockholders of Sprint
generally or any Person shall have publicly announced an intention (whether or
not conditional) to make a Sprint Competing Proposal and thereafter this
Agreement is terminated by either MCI WorldCom or Sprint pursuant to Section
7.1(b) without a Sprint Stockholders Meeting having occurred or 7.1(d)(i) or
(2) this Agreement is terminated (i) by Sprint pursuant to Section 7.1(e) or
(ii) by MCI WorldCom pursuant to Section 7.1(j), then Sprint shall promptly,
but in no event later than the date of such termination, pay MCI WorldCom a
fee equal to $2.5 billion (the "Termination Fee"), payable by wire transfer of
same day funds; provided, however, that no Termination Fee shall be payable to
MCI WorldCom pursuant to clause (1) or (2)(ii) of this paragraph (b) unless
and until within 12 months of such termination Sprint or any of its
Subsidiaries enters into any Sprint Acquisition Agreement with respect to, or
approves or consummates, any Sprint Competing Proposal (for the purposes of
the foregoing proviso the term "Sprint Competing Proposal" shall mean a Sprint
Superior Proposal pursuant to clause (i) (without giving effect to clause
(ii)) of the definition thereof in Section 5.4(a), in which event the
Termination Fee shall be payable upon the first to occur of such events.
Sprint acknowledges that the agreements contained in this Section 5.8(b) are
an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, MCI WorldCom would not enter into this Agreement;
accordingly, if Sprint fails promptly to pay the amount due pursuant to this
Section 5.8(b), and, in order to obtain such payment, MCI WorldCom commences a
suit which results in a judgment against Sprint for the fee set forth in this
Section 5.8(b), Sprint shall pay to MCI WorldCom its costs and expenses
(including attorneys' fees and expenses) in connection with such suit,
together with interest on the amount of the fee at the prime rate of Citibank,
N.A. in effect on the date such payment was required to be made.
44
(c) If (1) prior to the date the Required MCI WorldCom Vote is
obtained an MCI WorldCom Competing Proposal shall have been made to MCI
WorldCom or any of its Subsidiaries or shall have been made directly to the
shareholders of MCI WorldCom generally or any Person shall have publicly
announced an intention (whether or not conditional) to make an MCI WorldCom
Competing Proposal and thereafter this Agreement is terminated by either MCI
WorldCom or Sprint pursuant to Section 7.1(b) without an MCI WorldCom
Shareholders Meeting having occurred or 7.1(d)(ii) or (2) this Agreement is
terminated (i) by MCI WorldCom pursuant to Section 7.1(f) or (ii) by Sprint
pursuant to Section 7.1(i), then MCI WorldCom shall promptly, but in no event
later than the date of such termination, pay Sprint the Termination Fee,
payable by wire transfer of same day funds; provided, however, that no
Termination Fee shall be payable to Sprint pursuant to clause (1) or (2)(ii)
of this paragraph (c) unless and until within 12 months of such termination
MCI WorldCom or any of its Subsidiaries enters into any MCI WorldCom
Acquisition Agreement with respect to, or approves or consummates, any MCI
WorldCom Competing Proposal (for the purposes of the foregoing proviso the
term "MCI WorldCom Competing Proposal" shall mean an MCI WorldCom Superior
Proposal pursuant to clause (i) (without giving effect to clause (ii)) of the
definition thereof in Section 5.5(a), in which event the Termination Fee shall
be payable upon the first to occur of such events. MCI WorldCom acknowledges
that the agreements contained in this Section 5.8(c) are an integral part of
the transactions contemplated by this Agreement, and that, without these
agreements, Sprint would not enter into this Agreement; accordingly, if MCI
WorldCom fails promptly to pay the amount due pursuant to this Section 5.8(c),
and, in order to obtain such payment, Sprint commences a suit which results in
a judgment against MCI WorldCom for the fee set forth in this Section 5.8(c),
MCI WorldCom shall pay to Sprint its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank, N.A. in effect on the date
such payment was required to be made.
5.9 Indemnification, Exculpation and Insurance. (a) MCI WorldCom
agrees that all rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the Effective Time now existing in
favor of the current or former directors or officers of Sprint and its
Subsidiaries as provided in their respective articles of incorporation or
by-laws (or comparable organizational documents) and any indemnification
agreements of Sprint, the existence of which does not constitute a breach of
this Agreement, shall be assumed by MCI WorldCom, as the Surviving Corporation
in the Merger, without further action, as of the Effective Time and shall
survive the Merger and shall continue in full force and effect in accordance
with their terms.
(b) In the event that MCI WorldCom or any of its successors or
assigns (i) consolidates with or merges into any other Person and is not the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, proper provision will be
made so that the successors and assigns of MCI WorldCom assume the obligations
set forth in this Section 5.9.
(c) For six years after the Effective Time, MCI WorldCom shall
maintain in effect Sprint's current directors' and officers' liability
insurance covering acts or omissions occurring prior to the Effective Time
with respect to those Persons who are currently covered by Sprint's directors'
and officers' liability insurance policy on terms
45
with respect to such coverage and amount no less favorable than those of such
policy in effect on the date hereof; provided, however, that in no event shall
MCI WorldCom be required to expend in any one year an amount in excess of 200%
of the annual premiums currently paid by Sprint for such insurance; and,
provided, further, that if the annual premiums of such insurance coverage
exceed such amount, MCI WorldCom shall be obligated to obtain a policy with
the greatest coverage available for such amount.
5.10 Sprint Rights Agreement. The Board of Directors of Sprint shall
take all action to the extent necessary (including amending the Sprint Rights
Agreement) in order to render the Sprint Rights inapplicable to the Merger and
the other transactions contemplated by this Agreement. Except in connection
with the foregoing sentence or, with respect to a Sprint Superior Proposal,
concurrently with or after a termination of this Agreement by Sprint in
accordance with Section 5.4(b), the Board of Directors of Sprint shall not,
without the prior written consent of MCI WorldCom, (a) amend the Sprint Rights
Agreement or (b) take any action with respect to, or make any determination
under, the Sprint Rights Agreement, including a redemption of the Sprint
Rights, in each case in order to facilitate a Sprint Competing Proposal.
5.11 MCI WorldCom Rights Agreement. The Board of Directors of MCI
WorldCom shall take all action to the extent necessary (including amending the
MCI WorldCom Rights Agreement) in order to render the MCI WorldCom Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement. Except in connection with the foregoing sentence or, with respect
to an MCI WorldCom Superior Proposal, concurrently with or after a termination
of this Agreement by MCI WorldCom in accordance with Section 5.5(b), the Board
of Directors of MCI WorldCom shall not, without the prior written consent of
Sprint, (a) amend the MCI WorldCom Rights Agreement or (b) take any action
with respect to, or make any determination under, the MCI WorldCom Rights
Agreement, including a redemption of the MCI WorldCom Rights, in each case in
order to facilitate an MCI WorldCom Competing Proposal. Notwithstanding the
foregoing, MCI WorldCom may amend the MCI WorldCom Rights Agreement to effect
a transaction permitted by Section 4.2(c) of this Agreement.
5.12 Public Announcements. Sprint and MCI WorldCom shall use all
reasonable efforts to develop a joint communications plan and each party shall
use all reasonable efforts (i) to ensure that all press releases and other
public statements with respect to the transactions contemplated hereby shall
be consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with
respect to this Agreement or the transactions contemplated hereby.
5.13 Listing. MCI WorldCom shall use its reasonable best efforts to
cause the shares of MCI WorldCom Common Stock, MCI WorldCom Series 1 PCS Stock
and MCI WorldCom Series 1 Preferred Stock to be issued in the Merger to be
approved for quotation on Nasdaq, subject to official notice of issuance.
5.14 Redemption of Sprint Second Series Preferred Stock. Prior to
the Effective Time, Sprint shall have redeemed all the issued and outstanding
shares of Sprint Second Series Preferred Stock in accordance with the terms of
Sprint's articles of incorporation.
46
5.15 Affiliate Letter. On or prior to the date of the Sprint
Stockholders Meeting, Sprint will deliver to MCI WorldCom a letter (the
"Sprint Affiliate Letter") identifying all Persons who are, or may be,
"affiliates" of Sprint for purposes of Rule 145 under the Securities Act
("Rule 145"). On or prior to the Closing Date, Sprint will use its reasonable
efforts to deliver on behalf of each Person identified as an "affiliate" in
the Sprint Affiliate Letter a written agreement in connection with
restrictions on affiliates under Rule 145.
5.16 Tax Treatment. Each of MCI WorldCom and Sprint shall use
reasonable efforts to cause the Merger to qualify as a "reorganization" under
the provisions of Section 368 of the Code and to obtain the opinions of
counsel referred to in Sections 6.2(c) and 6.3(c), including the execution of
the letters of representation referred to therein updated as necessary. Sprint
and MCI WorldCom and their respective Subsidiaries shall treat the MCI
WorldCom Common Stock, MCI WorldCom PCS Stock, MCI WorldCom Series FT Common
Stock, MCI WorldCom Series DT Common Stock, MCI WorldCom Series 2 Common Stock
and MCI WorldCom Series 3 Common Stock (together, the "MCI WorldCom Relevant
Stock") received in the Merger by holders of Sprint Common Stock as property
permitted to be received under Section 354 of the Code without the recognition
of gain. Each of Sprint and MCI WorldCom covenants and agrees to, and agrees
to cause its affiliates to, vigorously and in good faith defend all challenges
to the treatment of the reorganization as described in this Section 5.16,
including any such challenge to the treatment of the MCI WorldCom Relevant
Stock as property permitted to be received under Section 354 of the Code
without the recognition of gain. Each of Sprint and MCI WorldCom agrees that
if it becomes aware of any such fact or circumstance that is reasonably likely
to prevent the Merger from qualifying as a reorganization described in Section
368(a) of the Code, including any such fact or circumstance that is reasonably
likely to prevent the MCI WorldCom Relevant Stock from being treated as
property permitted to be received under Section 354 of the Code without the
recognition of gain, it will promptly notify the other party in writing.
5.17 Assumption Agreement and Supplemental Indentures. Prior to or
at the Effective Time, MCI WorldCom will execute and deliver (a) a written
instrument to Sprint evidencing its obligation to deliver to each holder of a
warrant granted pursuant to one of the Warrant Agreements other securities,
cash or other assets as such holder may be entitled to purchase and the other
obligations under the applicable Warrant Agreement, and (b) a supplemental
indenture to each of the trustees with respect to the indentures named in
Section 5.17 of the Sprint Disclosure Schedule, in form satisfactory to each
such trustee, as required under such indentures.
5.18 Other Actions. Sprint will use reasonable efforts to cooperate
with any request by MCI WorldCom to transfer certain assets of Sprint to any
Subsidiary of Sprint, so long as such transfer(s) (a) would be permitted by
applicable regulations, laws and contracts, (b) would not, individually or in
the aggregate, adversely affect Sprint and (c) would be executed by Sprint at
any time (as determined by Sprint) prior to the Effective Time.
47
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligations of Sprint and MCI WorldCom to effect the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. (i) Sprint shall have obtained the
Required Sprint Vote and (ii) MCI WorldCom shall have obtained the Required
MCI WorldCom Vote.
(b) No Injunctions or Restraints; Illegality. No Laws shall have
been adopted or promulgated, and no temporary restraining order, preliminary
or permanent injunction or other order issued by a court or other Governmental
Entity of competent jurisdiction shall be in effect, having the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger;
provided, however, that the provisions of this Section 6.1(b) shall not be
available to any party whose failure to fulfill its obligations pursuant to
Section 5.3 shall have been the cause of, or shall have resulted in, such
order or injunction.
(c) FCC and Public Utility Commission Approvals. All approvals for
the Merger from the FCC and from the PUCs shall have been obtained other than
those the failure of which to be obtained would not, individually or in the
aggregate, reasonably be expected to materially impair the parties' ability to
achieve the overall benefits expected, as of the date hereof, to be realized
from the consummation of the Merger; provided, however, that the provisions of
this Section 6.1(c) shall not be available to any party whose failure to
fulfill its obligations pursuant to Section 5.3 shall have been the cause of,
or shall have resulted in, such failure.
(d) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired; provided, however, that the provisions of this Section 6.1(d)
shall not be available to any party whose failure to fulfill its obligations
pursuant to Section 5.3 shall have been the cause of, or shall have resulted
in, the failure to obtain such termination or expiration.
(e) EU Antitrust. MCI WorldCom and Sprint shall have received in
respect of the Merger and any matters arising therefrom: confirmation by way
of a decision from the Commission of the European Union under Regulation
4064/89 (with or without the initiation of proceedings under Article 6(1)(c)
thereof) that the Merger and any matters arising therefrom are compatible with
the common market; provided, however, that the provisions of this Section
6.1(e) shall not be available to any party whose failure to fulfill its
obligations pursuant to Section 5.3 shall have been the cause of, or shall
have resulted in, the failure to obtain such confirmation.
(f) Nasdaq Listing. The shares of MCI WorldCom Common Stock, MCI
WorldCom Series 1 PCS Stock and MCI WorldCom Series 1 Preferred Stock to be
issued in the Merger shall have been approved for quotation on Nasdaq, subject
to official notice of issuance.
48
(g) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act. No stop order
suspending the effectiveness of the Form S-4 shall have been issued by the SEC
and no proceedings for that purpose shall have been initiated or threatened by
the SEC.
6.2 Additional Conditions to Obligations of MCI WorldCom. Other than
as set forth in the Sprint Disclosure Schedule, the obligations of MCI
WorldCom to effect the Merger are subject to the satisfaction of, or waiver by
MCI WorldCom, on or prior to the Closing Date of the following additional
conditions:
(a) Representations and Warranties. (i) Each of the representations
and warranties (other than as set forth in Section 3.1(b)(i), (ii) and (iii))
of Sprint set forth in this Agreement shall be true and correct on the date of
this Agreement, and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as
of such date), except for changes expressly permitted under Article IV and
except where the failure of such representations and warranties to be so true
and correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect" set forth therein), individually or in the
aggregate, does not have, and is not reasonably likely to have, a Material
Adverse Effect on Sprint, and (ii) the representations and warranties of
Sprint set forth in Section 3.1(b)(i), (ii) and (iii) shall be true and
correct in all material respects on the date of this Agreement, and as of the
Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), except
for changes expressly permitted under Article IV. MCI WorldCom shall have
received a certificate of the chief executive officer and the chief financial
officer of Sprint to such effect.
(b) Performance of Obligations of Sprint. Sprint shall have
performed or complied in all material respects with all material agreements
and covenants required to be performed by it or complied with under this
Agreement at or prior to the Closing Date. MCI WorldCom shall have received a
certificate of the chief executive officer and the chief financial officer of
Sprint to such effect.
(c) Tax Opinion. MCI WorldCom shall have received from Cravath,
Swaine & Xxxxx, counsel to MCI WorldCom, on the date on which the Form S-4 is
declared effective by the SEC and on the Closing Date, a written opinion dated
as of such date stating that: (i) the Merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code, (ii) MCI
WorldCom and Sprint will each be a "party" to that reorganization within the
meaning of Section 368(b) of the Code and (iii) the issuance of the MCI
WorldCom Relevant Stock to the holders of the Sprint Common Stock in the
Merger will not result in MCI WorldCom's recognizing an amount of income or
gain or being subject to an amount of tax, in each case that individually or
in the aggregate, is reasonably likely to have a Material Adverse Effect on
MCI WorldCom. In rendering such opinions, counsel to MCI WorldCom shall be
entitled to rely upon representations of officers of MCI WorldCom and Sprint
substantially in the form of Appendices 3 and 4, respectively, and updated as
necessary. The opinions shall be in substantially the same form as Appendix 1.
(d) No Material Adverse Change. Since the date of this Agreement,
there shall not have been any Material Adverse Change in Sprint.
49
6.3 Additional Conditions to Obligations of Sprint. The obligations
of Sprint to effect the Merger are subject to the satisfaction of, or waiver
by Sprint, on or prior to the Closing Date of the following additional
conditions:
(a) Representations and Warranties. (i) Each of the representations
and warranties (other than as set forth in Section 3.2(b)(i), (ii) and (iii))
of MCI WorldCom set forth in this Agreement shall be true and correct on the
date of this Agreement and as of the Closing Date, as if made at and as of
such time (except to the extent expressly made as of an earlier date, in which
case as of such date), except for changes expressly permitted under Article IV
and except where the failure of such representations and warranties to be so
true and correct (without giving effect to any limitation as to "materiality"
or "Material Adverse Effect" set forth therein), individually or in the
aggregate, does not have, and is not reasonably likely to have, a Material
Adverse Effect on MCI WorldCom, and (ii) the representations and warranties of
MCI WorldCom set forth in Section 3.2(b)(i), (ii) and (iii) shall be true and
correct in all material respects on the date of this Agreement, and as of the
Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date). Sprint
shall have received a certificate of the chief executive officer and the chief
financial officer of MCI WorldCom to such effect.
(b) Performance of Obligations of MCI WorldCom. MCI WorldCom shall
have performed or complied in all material respects with all material
agreements and covenants required to be performed by it or complied with under
this Agreement at or prior to the Closing Date. Sprint shall have received a
certificate of the chief executive officer and the chief financial officer of
MCI WorldCom to such effect.
(c) Tax Opinion. Sprint shall have received from King & Spalding,
counsel to Sprint, on the date on which the Form S-4 is declared effective by
the SEC and on the Closing Date, a written opinion dated as of such date
stating that: (i) the Merger will qualify as a "reorganization" within the
meaning of Section 368(a) of the Code, (ii) Sprint and MCI WorldCom will each
be a "party" to that reorganization within the meaning of Section 368(b) of
the Code and (iii) the MCI WorldCom Relevant Stock received in the Merger by
holders of Sprint Common Stock is property permitted to be received under
Section 354 of the Code without the recognition of gain. In rendering such
opinions, counsel to Sprint shall be entitled to rely upon representations of
officers of MCI WorldCom and Sprint substantially in the form of Appendices 3
and 4, respectively, and updated as necessary. The opinions shall be in
substantially the same form as Appendix 2.
(d) No Material Adverse Change. Since the date of this Agreement,
there shall not have been any Material Adverse Change in MCI WorldCom.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, by action taken or authorized by the Board of Directors
of the
50
terminating party or parties, and except as provided below, whether before or
after approval of the matters presented in connection with the Merger by the
stockholders of Sprint or MCI WorldCom:
(a) By mutual written consent of MCI WorldCom and Sprint, by action
of their respective Boards of Directors;
(b) By either Sprint or MCI WorldCom if the Effective Time shall not
have occurred on or before December 31, 2000 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this
Section 7.1(b) shall not be available to any party whose failure to fulfill
any obligation under this Agreement (including Section 5.3) has caused, or
resulted in, the failure of the Effective Time to occur on or before the
Termination Date;
(c) By either Sprint or MCI WorldCom if any Governmental Entity (i)
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other action
shall have become final and nonappealable or (ii) shall have failed to issue
an order, decree or ruling or to take any other action (which order, decree,
ruling or other action the parties shall have used their reasonable best
efforts to obtain, in accordance with Section 5.3), in each case (i) and (ii)
which is necessary to fulfill the conditions set forth in Sections 6.1(c), (d)
and (e), as applicable, and such denial of a request to issue such order,
decree, ruling or take such other action shall have become final and
nonappealable; provided, however, that the right to terminate this Agreement
under this Section 7.1(c) shall not be available to any party whose failure to
comply with Section 5.3 has caused or resulted in such action or inaction;
(d) By either Sprint or MCI WorldCom if (i) the approval by the
stockholders of Sprint required for the consummation of the Merger shall not
have been obtained by reason of the failure to obtain the Required Sprint Vote
at a duly held Sprint Stockholders Meeting or at any adjournment or
postponement thereof or (ii) the approval by the shareholders of MCI WorldCom
required for the consummation of the Merger shall not have been obtained by
reason of the failure to obtain the Required MCI WorldCom Vote at a duly held
MCI WorldCom Shareholders Meeting or at any adjournment or postponement
thereof;
(e) By Sprint in accordance with Section 5.4(b); provided that, in
order for the termination of this Agreement pursuant to this paragraph (e) to
be deemed effective, Sprint shall have complied with the notice provisions of
Section 5.4 and shall have paid the Termination Fee in accordance with Section
5.8(b);
(f) By MCI WorldCom in accordance with Section 5.5(b); provided
that, in order for the termination of this Agreement pursuant to this
paragraph (f) to be deemed effective, MCI WorldCom shall have complied with
the notice provisions of Section 5.5 and shall have paid the Termination Fee
in accordance with Section 5.8(c);
(g) By Sprint, if MCI WorldCom shall have breached or failed to
perform any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 6.3(a) or (b) and (B)
has not been or is incapable of being
51
cured by MCI WorldCom within 45 calendar days after its receipt of written
notice thereof from Sprint;
(h) By MCI WorldCom, if Sprint shall have breached or failed to
perform any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 6.2(a) or (b) and (B)
has not been or is incapable of being cured by Sprint within 45 calendar days
after its receipt of written notice thereof from MCI WorldCom;
(i) By Sprint, in the event that MCI WorldCom takes any action set
forth in Section 5.5(b)(x); or
(j) By MCI WorldCom, in the event that Sprint takes any action set
forth in Section 5.4(b)(x).
Notwithstanding anything else contained in this Agreement, the right
to terminate this Agreement under this Section 7.1 shall not be available to
any party (a) that is in material breach of its obligations hereunder or (b)
whose failure to fulfill its obligations or to comply with its covenants under
this Agreement has been the cause of, or resulted in, the failure to satisfy
any condition to the obligations of either party hereunder.
7.2 Effect of Termination. In the event of termination of this
Agreement by either Sprint or MCI WorldCom as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of MCI WorldCom or Sprint or their respective directors
or officers except with respect to Section 3.1(m), Section 3.2(m), the second
sentence of Section 5.2, Section 5.8, this Section 7.2 and Article VIII.
Termination of this Agreement will not relieve a breaching party from
liability for any willful and material breach by such party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
7.3 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of Sprint and MCI WorldCom, but, after any such
approval, no amendment shall be made which by law or in accordance with the
rules of any relevant stock exchange requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.4 Extension; Waiver; Consent. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with or give a consent under any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension, waiver or consent shall be valid only if set forth in a
written instrument signed on behalf of such party in its sole discretion. The
failure of any party to this Agreement
52
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements. None
of the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein that by their terms apply or
are to be performed in whole or in part after the Effective Time and this
Article VIII.
8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the tenth
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid. All notices
hereunder shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice:
(a) if to MCI WorldCom, to
MCI WORLDCOM, Inc
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx, Esq.
Facsimile No.: 000-000-0000
MCI WORLDCOM, Inc
00000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xx. Xxxxx, XX 00000
Attention: P. Xxxxx Xxxxxxxxx, Esq.
Facsimile No.: 000-000-0000
53
with a copy to
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx X. Xxxxxxxx, III, Esq.
Facsimile No.: 212-474-3700
(b) if to Sprint, to
Sprint Corporation
0000 Xxxxxxx Xxxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
Attention: J. Xxxxxxx Xxxxxx, Esq.
Facsimile No.: 000-000-0000
with a copy to
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
C. Xxxxxxx Xxxxxx, Esq.
Facsimile No.: 000-000-0000
8.3 Interpretation. When a reference is made in this Agreement to
Sections, exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents, glossary of defined terms and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries. (a) This
Agreement and the Confidentiality Agreement constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
54
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 5.9 (which is intended to be for the benefit of
the Persons covered thereby and may be enforced by such Persons) or as
provided in Section 5.7 of the Sprint Disclosure Schedule.
8.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, except that the Merger
shall be governed by the laws of the State of Kansas and the laws of the State
of Georgia.
8.7 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise),
without the prior written consent of the other party, and any attempt to make
any such assignment without such consent shall be null and void. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
8.9 Submission to Jurisdiction; Waivers. Each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of any Delaware
state court or any Federal court located in the State of Delaware in the event
any dispute arises out of or under or relates to this Agreement or any of the
transactions contemplated hereby and agrees, to the extent that such party is
not resident in the State of Delaware, to irrevocably appoint CSC The United
States Corporation Company as its agent for service of process, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, (c) agrees that it will
not bring any action, suit or proceeding arising out of or under or relating
to this Agreement or any of the transactions contemplated hereby, in any court
other than any Delaware state court or any Federal court located in the State
of Delaware and (d) waives any right to trial by jury with respect to any
action, suit or proceeding arising out of or under or relating to this
Agreement or any of the transactions contemplated hereby. Each of the parties
hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of or under or
relating to this Agreement or any of the transactions contemplated hereby in
any Delaware state court or any Federal court located in the State of
Delaware, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient
forum.
8.10 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in
55
accordance with their specific terms. It is accordingly agreed that the
parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.11 Definitions. As used in this Agreement:
(a) "Benefit Plans" means, with respect to any Person, each employee
benefit plan, program, arrangement and contract (including any "employee
benefit plan" (as defined in ERISA) and any bonus, deferred compensation,
stock bonus, stock purchase, restricted stock, stock option, employment,
termination, stay agreement or bonus, change in control and severance plan,
program, arrangement and contract) all of the foregoing in effect on the date
of this Agreement, to which such Person is a party, which is maintained or
contributed to by such Person, or with respect to which such Person could
incur material liability under Section 4069, 4201 or 4212(c) of ERISA.
(b) "Board of Directors" means the Board of Directors of any
specified Person or any committee thereof.
(c) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York.
(d) "Class A Holder" has the meaning ascribed thereto in Sprint's
articles of incorporation.
(e) "Knowledge" of any Person that is not an individual means, with
respect to any specific matter, the actual knowledge of such Person's
executive officers and other officers having primary responsibility for such
matter.
(f) "Material Adverse Effect" or "Material Adverse Change" means,
with respect to any entity, any adverse change, circumstance or effect that,
individually or in the aggregate with all other adverse changes, circumstances
and effects, is or is reasonably likely to be materially adverse to the
business, financial condition or results of operations of such entity and its
Subsidiaries taken as a whole, other than any change, circumstance or effect
(i) relating to or resulting from the economy or securities markets in
general, (ii) relating to or resulting from the industries in which MCI
WorldCom or Sprint operate and not uniquely relating to MCI WorldCom or Sprint
or (iii) resulting from the announcement or the existence of this Agreement
and the transactions contemplated hereby.
(g) "Material Investment" means (a) as to Sprint, any Person which
Sprint directly or indirectly holds the stock of, or other ownership interest
in, provided that the lesser of the fair market value and the book value of
such stock or interest exceeds $250 million, excluding any Person that is a
wholly owned Subsidiary of Sprint; and (b) as to MCI WorldCom, any Person
which MCI WorldCom directly or indirectly holds the stock of, or other
ownership interest in, provided that the lesser of the fair market value and
the book value of such stock or interest exceeds $250 million, excluding any
Person that is a wholly owned Subsidiary of MCI WorldCom.
(h) "the other party" means, with respect to Sprint, MCI WorldCom
and means, with respect to MCI WorldCom, Sprint.
56
(i) "Person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act).
(j) "Significant Subsidiary" has the meaning ascribed thereto in
Rule 1-02(w) of Regulation S-X of the SEC.
(k) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by
such party or any Subsidiary of such party do not have a majority of the
voting interests in such partnership) or (ii) at least a majority of the
securities or other interests of which having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries.
57
(l) "FON Exchange Ratio" means the quotient (rounded to the nearest
1/10,000) determined by dividing $76 by the Average Price; provided that the
FON Exchange Ratio shall not be less than .9400 or greater than 1.2228.
(m) "PCS Exchange Ratio" means .1547.
(n) "Average Price" means the average (rounded to the nearest
1/10,000) of the volume weighted averages (rounded to the nearest 1/10,000) of
the trading prices of MCI WorldCom Common Stock on The Nasdaq National Market
("Nasdaq"), as reported by Bloomberg Financial Markets (or such other source
as the parties shall agree in writing), for the 15 trading days randomly
selected by lot by MCI WorldCom and Sprint together from the 30 consecutive
trading days ending on the third trading day immediately preceding the
Effective Time.
IN WITNESS WHEREOF, MCI WorldCom and Sprint have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
MCI WORLDCOM, INC.,
by /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
SPRINT CORPORATION,
by /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chairman and Chief
Executive Officer
EXHIBIT A TO
THE MERGER AGREEMENT
Amendments to
Articles of Incorporation of MCI WorldCom
The provisions of Sprint's articles of incorporation relating to
Sprint Capital Stock (including the certificate of designations filed with
respect to the Sprint Seventh Series Preferred Stock and all of the rights of
the Class A Holders under Sprint's articles of incorporation) will be
incorporated into MCI WorldCom's articles of incorporation mutatis mutandis
with respect to all MCI WorldCom Capital Stock to be authorized in connection
with the Merger, except that:
(i) references therein to Sprint shall be references to MCI WorldCom;
(ii) references therein to Sprint Series 1 FON Stock shall be references
to MCI WorldCom Common Stock;
(iii) each of the MCI WorldCom Series B Preferred Stock and the MCI
WorldCom Series C Preferred Stock and any other class or series of
convertible preferred stock of MCI WorldCom will be convertible
solely into MCI WorldCom Common Stock and will be attributed solely
to the MCI WorldCom FON Group (as such term will be defined in the
form of Restated Articles of Incorporation described below);
(iv) the Number Of Shares Issuable With Respect To The FON Group
Intergroup Interest (as such term will be defined in the form of
Restated Articles of Incorporation described below) will initially
be an amount equal to such number as reflected in the Sprint FON
Stock at the Effective Time;
(v) the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The FON Group (capitalized terms used but not otherwise
defined in this Exhibit A shall have the meaning ascribed to it in
Sprint's articles of incorporation as in effect on the date hereof)
will be adjusted to initially equal the sum of (A) the product of
the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The FON Group determined immediately prior to the
Effective Time and the FON Exchange Ratio and (B) the product of the
Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The PCS Group determined immediately prior to the
Effective Time and the PCS Exchange Ratio;
(vi) the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The PCS Group will initially equal the Number Of Shares
Issuable With Respect To The Old Class A Equity Interest In The PCS
Group determined immediately prior to the Effective Time;
(vii) the Number Of Shares Issuable With Respect To The Class A--Series
DT Equity Interest In The FON Group will be adjusted to initially
equal the sum of (A) the product of the Number Of Shares Issuable
With Respect To The Class A--Series DT Equity Interest In The FON
Group determined immediately prior to the Effective Time and the FON
Exchange Ratio and (B) the product of the Number Of Shares Issuable
With Respect To The
2
Class A--Series DT Equity Interest In The PCS Group determined
immediately prior to the Effective Time and the PCS Exchange Ratio;
and
(viii) the Number Of Shares Issuable With Respect To The Class A--Series DT
Equity Interest In The PCS Group will initially equal the Number Of
Shares Issuable With Respect To The Class A--Series DT Equity
Interest In The PCS Group determined immediately prior to the
Effective Time.
The MCI WorldCom articles of incorporation shall also be amended to
increase the amount of MCI WorldCom Capital Stock authorized for issuance as
follows: 7,500,000,000 shares of common stock of MCI WorldCom and 75,000,000
shares of preferred stock of MCI WorldCom.
The MCI WorldCom articles of incorporation shall also be amended to
allow the Board of Directors of the Surviving Corporation to designate series
of common stock as well as preferred stock.
MCI WorldCom and Sprint shall cause such provisions to be reflected
in a form of Restated Articles of Incorporation of MCI WorldCom prior to the
effectiveness of the Form S-4 and, once completed, shall constitute and
replace this Exhibit A for all purposes as if such Restated Articles of
Incorporation had been attached to this Agreement as of the date hereof, as
evidenced by the Exhibit A attached to the form of this Agreement which is
included as part of the Joint Proxy Statement/Prospectus.
MCI WorldCom agrees that, at the Closing, MCI WorldCom's articles of
incorporation shall not contain any provisions inconsistent with the
provisions described in this Exhibit A or otherwise impairing the rights or
relative position of the holders of capital stock as described in this Exhibit
A.
EXHIBIT B TO
THE MERGER AGREEMENT
Amendments to By-laws of MCI WorldCom
The by-laws of the Surviving Corporation will be MCI WorldCom's by-
laws as in effect immediately prior to the Effective Time, which will be
amended to incorporate the provisions in Sprint's by-laws relating to (i) the
Capital Stock Committee and (ii) the rights of the Class A Holders.
MCI WorldCom and Sprint shall cause such provisions to be reflected
in a form of Restated By-laws of MCI WorldCom prior to the effectiveness of
the Form S-4 and, once completed, shall constitute and replace this Exhibit B
for all purposes as if such Restated By-laws had been attached to this
Agreement as of the date hereof, as evidenced by the Exhibit B attached to the
form of this Agreement which is included as part of the Joint Proxy
Statement/Prospectus.
MCI WorldCom agrees that, at the Closing, MCI WorldCom's by-laws
shall not contain any provisions inconsistent with the provisions described in
this Exhibit B or otherwise impairing the rights or relative position of the
holders of capital stock described in this Exhibit B.
ANNEX 1 TO
THE MERGER AGREEMENT
Certain Matters Relating to Surviving Corporation
BOARD OF DIRECTORS
The By-laws of the Surviving Corporation will provide that the Board
of Directors of the Surviving Corporation will consist of 16 members, 10 of
whom shall be designated by MCI WorldCom and six of whom shall be designated
by Sprint.
If Deutsche Telekom AG and/or France Telecom shall become entitled
to designate one or more directors, the number of members of the Board of
Directors of the Surviving Corporation will be increased by one to accommodate
one Deutsche Telekom AG or France Telecom designee and any additional
director(s) so designated by Deutsche Telekom AG and/or France Telecom shall
be treated as having been designated by Sprint; provided that if Deutsche
Telekom AG and/or France Telecom shall be entitled to designate more than two
directors, MCI WorldCom shall increase the size of the Board of Directors in
order to permit each of MCI WorldCom and Sprint to designate such additional
directors to maintain the same proportion of MCI WorldCom and Sprint designees
on the Board of Directors as described above.
Prior to the Effective Time, each party will designate in writing
the individual directors that it is entitled to designate to the Board of
Directors as provided above.
TRACKING STOCK POLICIES; TAX SHARING AGREEMENT
As of the Effective Time, MCI WorldCom shall adopt Tracking Stock
Policies identical to the Sprint Tracking Stock Policies as in effect on the
date hereof and will assume the related Tax Sharing Agreement dated as of
November 23, 1998.
MCI WorldCom agrees that, at the Closing, no other policies shall
have been adopted by MCI WorldCom which are inconsistent with such Tracking
Stock Policies or otherwise impair the relative position of the holders of
capital stock as set forth in such Tracking Stock Policies.
MCI WORLDCOM SHAREHOLDER RIGHTS PLAN
As of the Effective Time, MCI WorldCom shall modify the terms of the
MCI WorldCom shareholder rights plan in a manner to take into account (i) the
creation of the PCS stock and (ii) the rights of the holders of Sprint Class A
Common Stock set forth in Sprint's shareholder rights plan as in effect on the
date hereof.