TERMINATION AND MUTUAL RELEASE AGREEMENT
Exhibit 99.4
EXECUTION COPY
This TERMINATION AND MUTUAL RELEASE AGREEMENT (this “Agreement”) is made as of July 27, 2009
by and among CORVINA HOLDINGS LIMITED, a company incorporated in the British Virgin Islands
(“Virgin”), Virgin Mobile USA, Inc., a Delaware corporation (the “Corporation”), and Sprint Nextel
Corporation, a Kansas corporation (“Parent”). The Corporation, Virgin and Parent are hereinafter
individually referred to as a “Party” and collectively referred to as the “Parties.”
WHEREAS, the Corporation and Virgin entered into a tax receivable agreement dated as of
October 16, 2007 (the “Tax Receivable Agreement”);
WHEREAS, concurrently with the execution of this Agreement, Parent, Sprint Mozart, Inc. and
the Corporation are entering into an Agreement and Plan of Merger, dated as of the date hereof (the
“Merger Agreement”);
WHEREAS, the Parties wish to enter into this Agreement and effectuate a mutual release in
connection with the respective obligations assumed by each Party pursuant to the terms of the Tax
Receivable Agreement; and
WHEREAS, the Parties are entering into this Agreement concurrently with the execution and
delivery of the Merger Agreement, it being acknowledged and agreed that the rights and obligations
hereunder shall be conditioned upon the consummation of the Closing (as defined in the Merger
Agreement).
NOW, THEREFORE, in consideration of the mutual covenants in this Agreement and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
1. Termination; Termination Payment. (a) On the first business day that is at least two days
after the Closing Date (as defined in the Merger Agreement) (the “TRA Termination Date”), the Tax
Receivable Agreement shall be terminated and shall have no further force and effect by mutual
agreement of the Parties.
(b) As consideration for the agreements set forth herein and the release of the Corporation
contained in Section 3, Parent agrees to contribute to the Corporation, and the Corporation agrees
to pay to Virgin on the TRA Termination Date, $48,750,000 reduced by any and all amounts that the
Company pays to Virgin (including amounts deemed paid through withholding, if any) pursuant to the
Tax Receivable Agreement before the TRA Termination Date (the “Termination Amount”), as follows:
(i) On the TRA Termination Date, Parent shall contribute the Termination Amount to the
Corporation either in, at Parent’s option, (1) immediately available funds or (2) immediately
available funds sufficient to satisfy amounts required to be deducted or withheld pursuant to
Section 1(e), if any, and the remainder in an amount (the “Stock Payment
Amount”) in the equivalent value of shares of Series 1 voting common stock, par value $2.00
per share, of Parent (“Parent Common Stock”), the number of which shall be determined by (x)
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dividing the Stock Payment Amount by the Average Parent Stock Price (as defined in the Merger
Agreement), and (y) rounding down to the nearest whole share; and
(ii) immediately thereafter, the Corporation shall pay to Virgin in immediately available
funds or Parent Common Stock, as applicable, the Termination Amount, reduced by amounts, if any,
withheld pursuant to Section 1(e). If the Termination Amount is being paid in Parent Company Stock
and an amount is deducted or withheld pursuant to Section 1(e), the number of shares delivered in
payment of the remaining Termination Amount shall be reduced by the amount deducted or withheld
divided by the Average Parent Stock Price.
Parent shall notify Virgin in writing whether it intends to pay the Termination Amount in cash or
in Parent Common Stock no later than five (5) business days prior to the Effective Time (as defined
in the Merger Agreement). If Parent fails to deliver such written notice in a timely manner, Parent
shall be deemed to have elected to pay such amount in cash.
(c) If Parent elects to contribute Parent Common Stock to the Corporation as provided in
Section 1(b), the Parties agree to treat such contribution for U.S. federal income tax purposes
(and any relevant state and local income tax purposes) as if (i) Parent contributed cash to the
Corporation in an amount equal to the Stock Payment Amount, and (ii) the Corporation used such
contributed cash to purchase such Parent Common Stock.
(d) The Parties agree that (i) consistent with the Tax Receivable Agreement, the payment
provided for in Section 1(b) shall be treated as additional consideration for the Virgin
Contribution (as defined in the Tax Receivable Agreement), and (ii) as provided in Section 483 of
the U.S. Internal Revenue Code (“Code”), a portion of such payment shall be treated as interest for
U.S. federal income tax purposes (“Imputed Interest”).
(e) Subject to the second sentence of Section 1(h), if the Corporation’s payment of the
Termination Amount to Virgin (including, without limitation, any Imputed Interest) is subject to
any applicable withholding tax in any taxing jurisdiction, (i) the Corporation will pay to the
relevant taxing authority the full amount required to be deducted or withheld from the payment,
(ii) any amount so deducted or withheld and paid to the relevant taxing authority shall be treated
for all purposes of this Agreement as having been paid to Virgin, and (iii) the Corporation shall
provide evidence of the amount so deducted or withheld to Virgin to the extent that such evidence
is available.
(f) The Corporation agrees that (i) on or prior to the Closing Date (as defined in the Merger
Agreement), it will provide to Parent and Virgin a statement, complying with U.S. Treas. Reg.
Section 1.897-2(g)(1)(ii) and -2(h), that the interests in Investments (as defined in the Tax
Receivables Agreement) were not U.S. real property interests as of the date of the Virgin
Contribution (as defined in the Tax Receivables Agreement) and (ii) the Corporation shall comply
with the notice requirements of U.S. Treas. Reg. Section 1.897-2(h).
(g) On or prior to the Closing Date (as defined in the Merger Agreement), Virgin shall provide
Parent with an IRS Form W-8BEN certifying that Virgin is not a “United
States person” for purposes of Section 881(c)(2)(B)(ii) of the Code.
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(h) Prior to the TRA Termination Date, Virgin will provide to Parent and the Corporation a
copy of a memorandum of law from Xxxxx Xxxx & Xxxxxxxx LLP to Virgin, reasonably satisfactory to
Parent and the Corporation, to the effect that the payment of Imputed Interest should qualify for
exemption from United States withholding tax liability under Section 881(c) of the Code. Parent
and Corporation agree that, if Virgin has provided a copy of such memorandum and the Form W-8BEN to
Parent and the Corporation prior to the TRA Termination Date, then, in reliance on the statement
described in Section 1(f), neither of them will withhold any tax imposed by any tax jurisdiction
with respect to the payment of the Termination Amount to Virgin (including, without limitation,
Imputed Interest) absent a change in applicable law after the date hereof.
(i) The Corporation agrees that (i) on or prior to the Closing Date (as defined in the Merger
Agreement), it will provide to Virgin a statement, complying with U.S. Treas. Reg. Section
1.897-2(g)(1)(ii), that the interests in the Corporation are not U.S. real property interests and
(ii) it shall comply with the notice requirements of U.S. Treas. Reg. Section 1.897-2(h).
2. Indemnification With Respect to Withholding Taxes. (a) Virgin hereby indemnifies Parent
and the Corporation for any and all liability (including any interest, penalties, or additions to
tax) arising as a result of a failure to withhold tax on Imputed Interest, including any costs or
expenses (including, without limitation, reasonable expenses of investigation and attorneys’ fees
and expenses) arising out of or incident to the imposition, assessment, or assertion of such
withholding tax.
(b) Parent and the Corporation agree to give prompt notice to Virgin of any assertion of such
tax by a taxing jurisdiction, or the commencement of any audit, suit, action, or proceeding (each,
a “Proceeding”) in respect of which such indemnity may be sought hereunder and will give Virgin
such information with respect thereto as Virgin may reasonably request.
(c) Virgin may, at its own expense, assume the defense of any such Proceeding before the
Internal Revenue Service with respect to such liability; provided that (i) Virgin’s counsel is
reasonably satisfactory to Parent and the Corporation, (ii) Virgin shall thereafter consult with
Parent and the Corporation upon their reasonable request for such consultation from time to time
with respect to such proceeding and (iii) Virgin shall not agree to any settlement with respect to
such liability if such settlement could adversely affect the tax liability of Parent, the
Corporation or any of their affiliates without the prior written consent of Parent and the
Corporation, not to be unreasonably withheld or delayed. If Virgin assumes such defense, (i)
Parent and the Corporation shall have the right (but not the duty) to participate in the defense
thereof and to employ counsel, at their own expense, separate from the counsel employed by Virgin,
(ii) Virgin shall not assert that the liability, or any portion thereof, with respect to which
Parent and the Corporation seek indemnification is not subject to indemnification, and (iii) at the
conclusion of such defense, Virgin shall pay on behalf of Parent and the Corporation all amounts of
withholding tax and additions thereto that Parent or the Corporation are required to pay. If
litigation with respect to such withholding tax is instituted in any court, such litigation shall
be conducted solely in the name of Virgin, and not in the name of either the Corporation or Parent.
If Virgin elects not to assume or not to continue the defense of
the Proceeding, then Virgin shall pay on behalf of Parent and the Corporation all amounts of
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withholding tax and additions thereto that the taxing jurisdiction has asserted to be due, or such
lesser amount as is required to be paid.
3. Mutual Release. In consideration of the mutual agreements herein contained, upon payment
in full to Virgin of the consideration set forth in Section 1(b) and termination of the Tax
Receivable Agreement, (a) the Corporation will thereupon be deemed for all purposes except to claim
indemnification pursuant to Section 2, to have fully, finally and forever released, discharged and
waived against Virgin any and all civil actions, causes of action, claims, costs of suit,
counterclaims, debts, demands, judgments, liabilities, obligations, actions for legal fees, rights,
in law or in equity, known or unknown, asserted or not, existing or not, of whatever kind or
nature, in any jurisdiction, including in arbitration proceedings or any other forum, under the
laws of any jurisdiction or under international law, which have arisen or may arise in the future
in connection with or relating to the Tax Receivable Agreement by or on behalf of Virgin and (b)
Virgin will thereupon be deemed for all purposes to have fully, finally and forever released,
discharged and waived against the Corporation any and all civil actions, causes of action, claims,
costs of suit, counterclaims, debts, demands, judgments, liabilities, obligations, actions for
legal fees, rights, in law or in equity, known or unknown, asserted or not, existing or not, of
whatever kind or nature, in any jurisdiction, including in arbitration proceedings or any other
forum, under the laws of any jurisdiction or under international law, which have arisen or may
arise in the future in connection with or relating to the Tax Receivable Agreement by or on behalf
of the Corporation. For all purposes of this Agreement, the term “Corporation” and “Virgin” will be
deemed to include any and all of their respective affiliates, subsidiaries, agents, assigns,
attorneys, directors, employees, officers, owners, parents, partners, representatives, members,
shareholders, heirs, auditors, consultants, predecessors, divisions, managers, trustees and
advisors (including past, present and future of any and all of the foregoing).
4. Representations and Warranties. Each of the Parties represents and warrants to the others
that:
(a) It is duly organized and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation. It has full power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the agreements contemplated
hereby.
(b) The execution and delivery by it of this Agreement, the performance by it of its
obligations hereunder and the consummation by it of the agreements contemplated hereby have been
duly and validly authorized by it and no other actions or proceedings on the part of it or any
stockholder thereof are necessary to authorize the execution and delivery by it of this Agreement,
the performance by it of its obligations hereunder or the consummation by it of the agreements
contemplated hereby.
(c) This Agreement has been duly executed and delivered by it and, assuming this Agreement
constitutes a valid and binding obligation of the other parties hereto, constitutes a legal, valid
and binding obligation of it, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar laws affecting
the rights of creditors generally and the availability of equitable remedies
(regardless of whether such enforceability is considered in a proceeding in equity or at law).
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5. Effectiveness; Termination of this Agreement. This Agreement shall become effective upon
execution and delivery. This Agreement shall terminate only upon a termination of the Merger
Agreement prior to the Effective Time.
6. Governing Law; Resolution of Disputes. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
(b) All disputes, controversies or claims arising out of or relating to this Agreement shall
be finally settled in accordance with the terms set forth in Section 7.08 of the Tax Receivable
Agreement, which by this reference are incorporated herein.
7. 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 all Parties need not sign the same counterpart. Delivery of an executed signature
page to this Agreement by facsimile transmission shall be as effective as delivery of a manually
signed counterpart of this Agreement.
8. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, between the Parties with respect to the
subject matter hereof.
9. 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 so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the Parties 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.
10. Notice. All notices, requests, claims, demands and other communications hereunder shall
be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by
delivery in person, by facsimile or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to the Corporation, to:
Virgin Mobile USA, Inc.
00 Xxxxxxxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Telecopy: (000) 000-0000
Confirmation: (000) 000-0000
00 Xxxxxxxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Telecopy: (000) 000-0000
Confirmation: (000) 000-0000
with a copy to (which shall not constitute notice):
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Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(T) (000) 000-0000
(F) (000) 000-0000
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(T) (000) 000-0000
(F) (000) 000-0000
Attention: Xxxx X. Xxxxx
Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
If to Virgin, to:
Corvina Holdings Limited
c/o Virgin USA, Inc.
00 Xxxxxxxx Xxxxxx, 0xx xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Confirmation: (000) 000-0000
c/o Virgin USA, Inc.
00 Xxxxxxxx Xxxxxx, 0xx xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Confirmation: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(T) (000) 000-0000
(F) (000) 000-0000
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(T) (000) 000-0000
(F) (000) 000-0000
Attention: Xxxx X. Xxxxx
Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
and
VML Tax Department
Virgin Management Limited
00 Xxxxx Xxxxx,
Xxxxxx X0 0XX
Xxxxxx Xxxxxxx
Virgin Management Limited
00 Xxxxx Xxxxx,
Xxxxxx X0 0XX
Xxxxxx Xxxxxxx
and
Macfarlanes
00 Xxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Attention: DAG/HSEB
00 Xxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Attention: DAG/HSEB
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If to Parent, to:
Sprint Nextel Corporation
0000 Xxxxxx Xxxxxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: General Counsel
Facsimile: 000-000-0000
0000 Xxxxxx Xxxxxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: General Counsel
Facsimile: 000-000-0000
and
Sprint Nextel Corporation
0000 Xxxxxx Xxxxxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: President — Strategic Planning and Corporate Initiatives
Facsimile: 000-000-0000
0000 Xxxxxx Xxxxxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: President — Strategic Planning and Corporate Initiatives
Facsimile: 000-000-0000
with a copy to (which shall not constitute notice):
King & Spalding LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Telecopier: (000) 000-0000
Attention: E. Xxxxxxx Xxxxx, II
Xxxx X. Xxxxxxx
Attention: E. Xxxxxxx Xxxxx, II
Xxxx X. Xxxxxxx
11. Amendments; Waivers; Successors; No Third Party Beneficiaries. (a) No provision of this
Agreement may be amended unless such amendment is approved in writing by Parent, the Corporation
and Virgin. No provision of this Agreement may be waived unless such waiver is in writing and
signed by the Party against whom the waiver is to be effective.
(b) All of the terms and provisions of this Agreement shall be binding upon, shall inure to
the benefit of and shall be enforceable by the Parties and their respective successors, assigns,
heirs, executors, administrators and legal representatives, 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. The Corporation shall require and cause
any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all
or substantially all of the business or assets of the Corporation, by written agreement, expressly
to assume and agree to perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform if no such succession had taken place.
12. Titles and Subtitles. The titles of the sections of this Agreement are for convenience
of reference only and are not to be considered in construing this Agreement.
[Signature Pages to Follow]
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IN WITNESS WHEREOF, the Parties to this Agreement have executed this Agreement as of the date
first written above.
| VIRGIN MOBILE USA, INC. |
||||
| /s/ Xxxxxx X. Xxxxxxxx | ||||
| By: Xxxxxx X. Xxxxxxxx | ||||
| Title: | Chief Executive Officer | |||
| CORVINA HOLDINGS LIMITED |
||||
| /s/ Xxxx Xxxxx | ||||
| By: Xxxx Xxxxx | ||||
| Title: | Director | |||
| SPRINT NEXTEL CORPORATION |
||||
| /s/ Xxxxx X. Xxxxx | ||||
| By: Xxxxx X. Xxxxx | ||||
| Title: | President — Strategic Planning and Corporate Initiatives |
|||
