EXHIBIT NO. (2)(b)
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INVESTMENT AGREEMENT
AMONG
SPRINT CORPORATION,
A KANSAS CORPORATION
SPRINT COMMUNICATIONS COMPANY L.P.,
A DELAWARE LIMITED PARTNERSHIP
DOLPHIN, INC.,
A DELAWARE CORPORATION
DOLPHIN SUB, INC.,
A DELAWARE CORPORATION
AND
EARTHLINK NETWORK, INC.,
A DELAWARE CORPORATION.
DATED AS OF FEBRUARY 10, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE OFFER AND FINANCING..................................................... 2
1.01. The Offer...................................................................... 2
1.02. Company Actions................................................................ 3
1.03. Issuance of Convertible Preferred Stock........................................ 4
1.04. Marketing Agreement............................................................ 5
1.05. Convertible Debt Financing..................................................... 5
1.06. Merger of Newco Sub into the Company and Conversion of
Company into Newco Stock..................................................... 6
1.07. Governance Agreement and Stockholders Agreement................................ 7
1.08. Registration Rights Agreement.................................................. 8
1.09. Closing........................................................................ 8
ARTICLE II CONDITIONS TO OFFER AND CLOSING............................................. 12
2.01. Mutual Conditions to Offer..................................................... 12
2.02. Conditions to Offer for Benefit of Sprint and Sprint L.P....................... 13
2.03. Conditions to Offer for Benefit of the Company, Newco, and Newco Sub........... 15
2.04. Condition to Closing of All Parties............................................ 16
ARTICLE III REPRESENTATIONS AND WARRANTIES.............................................. 17
3.01. Representations and Warranties of the Company.................................. 17
3.02. Representations and Warranties of Newco and Newco Sub.......................... 24
3.03. Representations and Warranties of Sprint and Sprint L.P........................ 27
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS AND OF THE COMPANY.................31
4.01. Conduct of Business............................................................ 31
4.02. Access to Property and Information............................................. 33
4.03. Public Disclosure.............................................................. 33
4.04. HSR Act Filings................................................................ 33
4.05. Information.................................................................... 34
4.06. Further Assurances............................................................. 34
4.07. No Solicitation................................................................ 34
4.08. Efforts Regarding Outstanding Warrants and Other Dilutable Securities.......... 35
ARTICLE V ADDITIONAL AGREEMENTS....................................................... 36
5.01. Reasonable Efforts; Notification............................................... 36
5.02. Fees and Expenses.............................................................. 37
5.03. Stockholder Litigation......................................................... 37
5.04. Nasdaq Listing................................................................. 37
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5.05. Confidentiality................................................................37
5.06. No Acceleration of Options or Termination Payments.............................38
5.07. Amortization and Writeoffs of Goodwill and Assets..............................38
5.08. Maintaining SIP Subscribers at Newco...........................................38
5.09. Certification of SIP Subscribers...............................................38
ARTICLE VI TERMINATION, AMENDMENT AND WAIVER...........................................39
6.01. Termination....................................................................39
6.02. Effect of Termination..........................................................40
ARTICLE VII MISCELLANEOUS...............................................................40
7.01. Notices........................................................................41
7.02. Entire Agreement...............................................................42
7.03. Waiver, Amendment, Etc.........................................................42
7.04. Successors and Assigns.........................................................42
7.05. Governing Law..................................................................43
7.06. Severability...................................................................43
7.07. Counterparts...................................................................43
7.08. Headings.......................................................................43
7.09. No Third-Party Beneficiaries...................................................43
7.10. Interpretation.................................................................43
7.11. Inclusion of Information in Schedules..........................................44
7.12. Exclusive Jurisdiction and Consent to Service of Process.......................44
7.13. Amendment......................................................................44
7.14. Survival.......................................................................44
7.15. WAIVER OF JURY TRIAL...........................................................44
ARTICLE VIII DEFINITIONS.................................................................45
Definitions...........................................................................45
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PAGE
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EXHIBITS:
A - Form of Certificate of Designation
B - Form of Master Assignment
C - Network Agreement
D - Marketing Agreement
E - Credit Agreement
F - Agreement and Plan of Merger
G - Governance Agreement
H - Stockholder's Agreement
I - Registration Rights Agreement
J - Agreement To Vote
K - Agreement to Vote and Tender Stock
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INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT dated as of February 10, 1998 (this "Agreement"),
among Sprint Corporation, a Kansas corporation ("Sprint"), Sprint Communications
Company L.P., a Delaware limited partnership ("Sprint L.P."), EarthLink Network,
Inc., a Delaware corporation (the "Company"), Dolphin, Inc., a Delaware
corporation ("Newco"), and Dolphin Sub, Inc., a Delaware corporation and a
wholly-owned subsidiary of Newco ("Newco Sub").
WHEREAS, the respective Boards of Directors of Sprint, the General Partner
of Sprint L.P., Newco and the Company have determined to enter into a strategic
relationship in the area of Internet access and related services and Sprint and
Sprint L.P. will make investments in Newco and the Company in connection with
the Merger of Newco Sub and the Company in order to enhance the capabilities for
growth and financial and strategic success;
WHEREAS, Sprint proposes to make a tender offer (as it may be amended from
time to time as permitted under this Agreement, with the Company's consent if
required hereby, the "Offer") to purchase 1,250,000 shares of Common Stock for
an aggregate cash consideration of $56,250,000 and at a price per share of
Common Stock of $45 net to each seller in cash (such price, as may hereafter be
changed, the "Offer Price"), upon the terms and subject to the conditions set
forth in this Agreement; and the Board of Directors of the Company has approved
the Offer and the other transactions contemplated hereby and is recommending
that the Company's stockholders who wish to receive cash for their shares of
Common Stock accept the Offer;
WHEREAS, immediately following the closing of the Offer, Sprint L.P.
proposes to purchase 4,102,941 shares of Series A Convertible Preferred Stock,
par value $.01 per share of Newco (the "Convertible Preferred Stock") in
exchange for (i) an aggregate cash consideration of $23,750,000, (ii) the
assignment to Newco of 100% of the Sprint Internet Passport Subscribers, and
(iii) entering into a network agreement whereby Newco and the Company will
utilize Sprint L.P.'s long-distance network under specified terms and
conditions;
WHEREAS, Sprint, Sprint L.P., the Company and Newco will enter into a
marketing agreement whereby Newco and the Company will utilize the Sprint brand
under specified terms and conditions and will, inter alia, have the right to use
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Sprint L.P. distribution channels under specified terms and conditions and agree
to sell certain Sprint L.P. products;
WHEREAS, Sprint shall provide Newco and the Company, as co-borrowers, with
up to $25 million of Convertible Senior Debt financing on or after the Closing,
with such amount to increase to up to $100 million over time (the "Convertible
Debt Financing"), such indebtedness to be evidenced by one or more Convertible
Senior Promissory Note(s) (the "Convertible Notes") and to be subject to the
terms and conditions of the Credit Agreement;
WHEREAS, the closing of the acquisition of the Convertible Preferred Stock
and the other transactions referred to above other than the Offer shall take
place concurrently with the merger of
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Newco Sub into the Company (the "Merger") and the conversion of each share of
the Company's outstanding Common Stock into one share of Newco common stock, par
value $.01 per share ("Newco Common Stock") pursuant to the Merger, in each case
upon the terms and subject to the conditions set forth in this Agreement and/or
the Ancillary Agreements (as defined below);
WHEREAS, to induce Sprint and Sprint L.P. to enter into this Agreement and
the Ancillary Agreements, and to consummate the transactions contemplated
thereby, (i) the Voting Stockholders have executed and delivered to Sprint and
Sprint L.P. the Agreement to Vote Stock, (ii) the Tendering Stockholders have
executed and delivered to Sprint and Sprint L.P. the Agreement to Vote and
Tender Stock, and (iii) certain stockholders have entered into a Stockholders
Agreement with Sprint and Sprint L.P.; and
WHEREAS, Sprint, Sprint L.P., the Company, Newco and Newco Sub desire to
make certain representations, warranties, covenants and agreements and also to
prescribe various conditions in connection with the transactions contemplated
hereby;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and in the Ancillary
Agreements, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
ARTICLE I
THE OFFER AND FINANCING
SECTION 1.01 The Offer. (a) Subject to the provisions of this Agreement,
as promptly as practicable, but in no event later than five business days after
the date of this Agreement, Sprint shall commence the Offer. The obligation of
Sprint to commence the Offer and accept for payment, and pay for, any shares of
Common Stock tendered pursuant to the Offer shall be subject to the conditions
set forth in Sections 2.01, 2.02 and 2.03 (or written waivers as set forth
therein) and to the terms and conditions of this Agreement. Sprint may not
consummate the Offer prior to March 20, 1998, modify or amend the terms of the
Offer, terminate the Offer other than in accordance with the terms hereof or
extend the Offer beyond June 15, 1998 (the earlier of June 15, 1998 or the date
of acceptance for payment of the shares of Common Stock tendered pursuant to the
Offer is hereinafter referred to as the "Expiration Date") in any such case
without the prior written consent of the Company (such consent to be authorized
by the Board of Directors of the Company). Subject to the terms and conditions
thereof, the Offer shall expire at midnight New York City time on the date that
is 20 business days from the date the Offer is first published, sent or given to
holders of Common Stock; provided, however, that without the Company's consent,
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Sprint may (i) extend the Offer, if at the scheduled expiration date of the
Offer any of the conditions to Sprint's obligation to accept for payment, and
pay for, shares of Common Stock shall not have been satisfied or waived, until
such time as such conditions are satisfied or waived, (ii) extend the Offer for
any period required by any rule, regulation, interpretation or position of the
SEC applicable to the Offer and (iii) extend
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the Offer for any reason on one occasion for an aggregate period of not more
than 5 business days beyond the latest expiration date that would otherwise be
permitted under clause (i) or (ii) of this sentence but in no event may the
Offer extend beyond the Expiration Date.
(b) On the date of commencement of the Offer, Sprint shall file with the
SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which
shall contain an offer to purchase and a related letter of transmittal and
summary advertisement (such Schedule 14D-1 and the documents included therein
pursuant to which the Offer will be made, together with any supplements or
amendments thereto, the "Offer Documents"). Sprint agrees that the Offer
Documents shall comply as to form in all material respects with the Exchange Act
and that the Offer Documents on the date first published, sent or given to the
Company's stockholders shall not 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, except that no representation is made by Sprint
or Sprint L.P. with respect to information supplied by the Company, Newco or
Newco Sub specifically for inclusion in the Offer Documents. Each of the
Parties agrees promptly to correct any information provided by it for use in the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and Sprint further agrees to take
all steps necessary to amend or supplement the Offer Documents and to cause the
Offer Documents as so amended or supplemented to be filed with the SEC and to be
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable Federal securities laws. The Company and its counsel
shall be given a reasonable opportunity to review the Offer Documents and all
amendments and supplements thereto prior to their filing with the SEC or
dissemination to stockholders of the Company. Sprint agrees to provide the
Company and its counsel any comments that Sprint or its counsel may receive from
the SEC or its staff with respect to the Offer Documents promptly after the
receipt of such comments.
SECTION 1.02 Company Actions. (a) The Company hereby approves of and
consents to the Offer and the other transactions contemplated hereby and by the
Ancillary Agreements and the Company, Newco and Newco Sub represent and warrant
that the Boards of Directors of the Company, Newco and Newco Sub at meetings
duly called and held, duly and unanimously adopted resolutions, as appropriate,
approving this Agreement, the Ancillary Agreements, the Offer and the issuance
of the Convertible Preferred Stock to Sprint L.P. and the Convertible Notes to
Sprint as contemplated hereby, determining that this Agreement and the
transactions contemplated hereby and by the Ancillary Agreements, including the
Offer and the acquisition of the Convertible Preferred Stock, are fair to, and
in the best interests of, the Company's stockholders and recommending that those
stockholders who wish to receive cash for their shares of Common Stock, accept
the Offer and tender their shares pursuant to the Offer. The Company represents
that its Board of Directors has received the opinion of Deutsche Xxxxxx Xxxxxxxx
Inc. that the transactions contemplated by this Agreement, when taken together,
are fair, from a financial point of view, to the Company's stockholders and that
a complete and correct signed copy of such opinion has been delivered by the
Company to Sprint.
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(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-
9 with respect to the Offer (such Schedule 14D-9, as amended from time to time,
the "Schedule 14D-9") containing the recommendation described in paragraph (a)
of this Section 1.02 and shall mail the Schedule 14D-9 to the stockholders of
the Company. The Company agrees that the Schedule 14D-9 shall comply as to form
in all material respects with the requirements of the Exchange Act and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not 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, except that no representation is
made by the Company with respect to information supplied by Sprint or Sprint
L.P. specifically for inclusion in the Schedule 14D-9. Each of the Company,
Newco and Newco Sub agrees promptly to correct any information provided by it
for use in the Schedule 14D-9 if and to the extent that such information shall
have become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and
to cause the Schedule 14D-9 as so amended or supplemented to be filed with the
SEC and disseminated to the Company's stockholders, in each case as and to the
extent required by applicable Federal securities laws. Sprint and its counsel
shall be given a reasonable opportunity to review the Schedule 14D-9 and all
amendments and supplements thereto prior to their filing with the SEC or
dissemination to stockholders of the Company. The Company agrees to provide
Sprint and its counsel in writing with any comments the Company or its counsel
may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer, the Company shall cause its transfer
agent to furnish Sprint promptly with mailing labels containing the names and
addresses of the record holders of Common Stock as of a recent date and of those
persons becoming record holders subsequent to such date, together with copies of
all lists of stockholders, security position listings and computer files and all
other information in the Company's possession or control regarding the
beneficial owners of Common Stock, and shall furnish to Sprint such information
and assistance (including updated lists of stockholders, security position
listings and computer files) as Sprint may reasonably request to facilitate
communication of the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents, Sprint and its agents shall hold in confidence
the information contained in any such labels, listings and files, will use such
information only in connection with the Offer and the other transactions
contemplated hereby and, if this Agreement shall be terminated, will deliver,
and will use their best efforts to cause their agents to deliver, to the Company
all copies of such information then in their possession or control.
SECTION 1.03 Issuance of Convertible Preferred Stock. Newco agrees to
issue to Sprint L.P., and Sprint L.P. agrees to acquire from Newco, 4,102,941
shares of Convertible Preferred Stock having the voting powers, preferences and
other rights set forth in the form of Certificate of Designation, Preferences
and Rights attached hereto as Exhibit A ("Certificate of Designation") and which
is to be filed with the Delaware Secretary of State on or prior to the Closing
Date, for the "Preferred Stock Consideration," which shall be delivered at the
Closing for the duly authorized and
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executed certificates evidencing such shares. The Preferred Stock Consideration
shall consist of the following:
(i) cash in the amount of $23,750,000, which payment shall be made
by wire transfer of immediately available funds pursuant to the wire
transfer instructions to be provided to Sprint L.P. by a duly authorized
officer of Newco at least 72 hours prior to the Closing;
(ii) all of the right, title and interest of Sprint L.P. in and to
all agreements with SIP Subscribers and all rights to provide Internet
access services to the SIP Subscribers after the Closing Date, as evidenced
by the Master Assignment and Assumption Agreement in the form attached
hereto as Exhibit B (the "Master Assignment"), which (A) shall have a
Schedule A attached thereto showing the number and identity of SIP
Subscribers as of a date no earlier than 10 days prior to the Closing Date,
(B) shall include the obligations to be assumed by Newco at the Closing to
continue the performance of all of such agreements after the Closing Date,
and (C) shall be executed and delivered by the Parties thereto on the
Closing Date; and
(iii) the right to utilize a minimum and maximum number of ports on
Sprint L.P.'s long-distance network specified, along with the pricing and
other terms and conditions set forth, in the Network Agreement attached
hereto as Exhibit C ("Network Agreement"), which shall be executed and
delivered by the Parties thereto on the date hereof, but which shall not
become effective until the Closing and then only if all of the applicable
conditions to Closing have been satisfied or waived.
SECTION 1.04 Marketing Agreement. The Marketing Agreement attached
hereto as Exhibit D shall be executed and delivered by the Parties thereto on
the date hereof, and pursuant to which (A) Newco and the Company shall have the
right to utilize certain distribution channels of Sprint L.P., and the Parties
shall provide certain cooperation and support to each other in specified
marketing matters, and (B) Newco and the Company shall be granted a license
requiring the use of the Sprint brand in conjunction with the Company's brand,
in each case upon the terms and subject to conditions set forth in the Marketing
Agreement, but which Agreement shall not become effective until the Closing and
then only if all of the applicable conditions to Closing have been satisfied or
waived.
SECTION 1.05 Convertible Debt Financing. Sprint agrees to make advances
of funds to Newco and the Company, as co-borrowers, in the amounts and at the
times specified in, and subject to the terms and conditions set forth in, the
Credit Agreement attached hereto as Exhibit E (the "Credit Agreement"), (A)
which shall be executed and delivered by the Parties thereto on the date hereof,
but which shall not become effective until the Closing and then only if all of
the applicable conditions to the Closing have been satisfied or waived, and (B)
advances thereunder shall be evidenced by one or more Convertible Notes which
shall be convertible into Newco Common Stock, a form of which Convertible Note
is attached to the Credit Agreement.
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SECTION 1.06 Merger of Newco Sub into the Company and Conversion of
Company Stock into Newco Stock. (a) The Company, Newco and Newco Sub shall duly
execute and deliver on the date hereof the Agreement and Plan of Merger among
them attached hereto as Exhibit F, but which shall not become effective until
the Closing, and pursuant to which, inter alia, at the Closing, (i) Newco Sub
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shall be merged with and into the Company and the Company shall be the surviving
corporation (the "Surviving Corporation"), (ii) the certificate of incorporation
and bylaws of Newco Sub shall be the certificate of incorporation and bylaws of
the Surviving Corporation, (iii) except as disclosed in Schedule 1.06 hereto;
the certificate of incorporation and bylaws of Newco shall be identical to the
certificate of incorporation and bylaws of the Company, (iv) the directors and
officers of the Company shall be the directors and officers of Newco until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with Newco's certificate of
incorporation and bylaws, except that the two directors elected by the holders
of the Convertible Preferred Stock shall be elected immediately following the
Closing and (v) each outstanding share of Common Stock of the Company shall be
converted into one share of Newco Common Stock.
(b) Subject to the provisions of this Agreement, as promptly as
practicable, the Company, Newco and Newco Sub shall prepare and file with the
SEC a proxy statement relating to a special meeting of the Company's
stockholders (the "Special Meeting") to be held in connection with the Merger
(the "Proxy Statement") that will serve as the prospectus included as Part I of
a registration statement on Form S-4 (the "S-4") to be filed by Newco with the
SEC to register the Newco Common Stock to be issued in the Merger by Newco. The
Proxy Statement and S-4 shall also seek approval by the Company's stockholders
of (i) the issuance and sale of the Convertible Preferred Stock, the Convertible
Notes, and the Newco Common Stock issuable upon conversion of the Convertible
Preferred Stock and/or the Convertible Notes, (ii) the other transactions
contemplated by this Agreement and the Ancillary Agreements, and (iii) any
related matters that must be approved by the holders of Common Stock or Newco
Common Stock in order for the transactions contemplated by the Investment
Agreement or any Ancillary Agreement to be consummated (the matters referred to
in clauses (i), (ii) and (iii) together with approval of the Merger, the
"Company Stockholder Vote Matters"). Each of the Company, Newco and Newco Sub
shall use all reasonable efforts to (i) have the S-4 declared effective under
the Securities Act as promptly as practicable after such filing, and (ii) to
cause the Proxy Statement to be mailed to all stockholders of the Company at the
earliest practicable date. The Company, Newco and Newco Sub agree that the S-4
and the Proxy Statement shall comply as to form in all material respects with
the Securities Act and the Exchange Act and shall not 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, except that no
representation is made by the Company, Newco or Newco Sub with respect to any
information supplied by Sprint specifically for inclusion in the S-4 and the
Proxy Statement. Each of the Parties agrees promptly to correct any information
provided by it for use in the S-4 and the Proxy Statement if and to the extent
that such information shall have become false or misleading in any material
respect, and the Company, Newco and Newco Sub further agree to take all steps
necessary to amend or supplement the S-4 and the Proxy Statement and to cause
the S-4 and the Proxy Statement as so amended or supplemented to be filed with
the SEC and to cause the Proxy Statement to be disseminated to the Company's
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stockholders, in each case as and to the extent required by applicable Federal
securities laws. Sprint and its counsel shall be given a reasonable opportunity
to review the S-4 and the Proxy Statement and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to stockholders of
the Company. The Company, Newco and Newco Sub agree to provide Sprint and its
counsel any comments that the Company, Newco and Newco Sub or its counsel may
receive from the SEC or its staff with respect to the S-4 and the Proxy
Statement promptly after the receipt of such comments.
(c) The Company shall call the Special Meeting to be held as promptly as
practicable after the date hereof for the purpose of voting upon the Company
Stockholder Vote Matters. Subject to Section 4.07(a), the Company will, through
its Board of Directors, recommend that its stockholders vote their shares in
favor of the approval of the Company Stockholder Vote Matters and shall use its
reasonable best efforts to obtain approval and adoption by the Company's
stockholders of the Company Stockholder Vote Matters. The Company and Sprint
shall coordinate and cooperate with respect to the timing of the Special Meeting
and shall use all reasonable efforts to hold such meeting as soon as practicable
after the date hereof. Newco shall (i) cause Newco Sub promptly to submit this
Agreement and the transactions contemplated hereby for approval and adoption by
Newco as its sole stockholder by written consent or stockholder vote, (ii)
authorize and cause an officer of Newco to vote Newco's shares of Newco Sub for
adoption and approval of, or act by written consent to adopt and approve, this
Agreement and the Ancillary Agreements and the transactions contemplated hereby
and thereby, and (iii) take all additional actions as the sole stockholder of
Newco Sub necessary to adopt and approve this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby. Newco will, on
or prior to the Closing Date, execute and deliver to Sprint and the Company a
written consent by the sole stockholder of Newco (i) approving this Agreement,
the Ancillary Agreements and the transactions contemplated hereby and thereby,
and (ii) authorizing the taking of all additional actions as the sole
stockholder of Newco necessary to adopt and approve this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby.
SECTION 1.07 Governance Agreement and Stockholders Agreement.
(a) Sprint, Sprint L.P., Newco and the Company shall execute and
deliver on the date hereof the Governance Agreement attached hereto as
Exhibit G to establish therein certain terms and conditions concerning the
corporate governance of Newco, the acquisition of Newco's equity securities
by Sprint and its Affiliates, and the rights of Sprint to make offers to
purchase all of the outstanding securities not owned by Sprint and its
Affiliates and the rights of the Board of Directors of Newco to receive
offers to effect business combinations, which agreement shall not become
effective until the Closing.
(b) Sprint, Sprint L.P., Newco, the Company and the stockholders of
the Company identified on a schedule to the following agreement shall
execute and deliver on the date hereof a Stockholders' Agreement attached
hereto as Exhibit H to effectuate the intent and provisions of the
Governance Agreement and to provide for certain rights and obligations
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of such parties with respect to the voting and disposition of equity
securities of Newco, which agreement shall not become effective until the
Closing.
SECTION 1.08 Registration Rights Agreement. Sprint, Sprint L.P. and
Newco shall execute and deliver on the date hereof the Registration Rights
Agreement attached hereto as Exhibit I with respect to the rights of Sprint and
its Affiliates in connection with public offerings and sales of Newco Common
Stock acquired in the Merger, through conversion of the Convertible Preferred
Stock or the Convertible Notes, pursuant to the Governance Agreement or
otherwise, which agreement shall not become effective until the Closing.
SECTION 1.09 Closing. (a) Closing Date and Location. The closing of the
transactions contemplated by Sections 1.03., 1.04., 1.05., 1.06., 1.07., and
1.08. (the "Closing") shall be held at the offices of Xxxxxxx, Mag & Fizzell,
P.C., 0000 Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxxxxxxx 00000, immediately
following, and subject only to, the acceptance for payment of shares of Common
Stock pursuant to the Offer, or at such other date, time or place as the parties
may mutually agree. The date on which the Closing shall occur is hereinafter
referred to as the "Closing Date."
(b) Deliveries by Newco and Newco Sub. At the Closing, Newco and Newco Sub
shall take the following actions:
(i) deliver to Sprint L.P. duly executed certificates evidencing
4,102,941 shares of Convertible Preferred Stock in exchange for the
Preferred Stock Consideration;
(ii) deliver to Sprint L.P. a duly executed and delivered instrument
acknowledging receipt of payment of the cash portion of the Preferred Stock
Consideration;
(iii) deliver to Sprint and Sprint L.P. each of the Ancillary
Agreements to which either of them is a party, which shall have been duly
executed and delivered by them;
(iv) deliver to Sprint and Sprint L.P. a certificate on behalf of
Newco and Newco Sub signed by a duly authorized executive officer, dated as
of the Closing Date, certifying the fulfillment of the conditions set forth
in Sections 2.02(d) and (e);
(v) deliver to Sprint and Sprint L.P. the legal opinion of Hunton &
Xxxxxxxx, counsel to the Company, Newco and Newco Sub, dated as of the
Closing Date, in form and substance reasonably satisfactory to Sprint and
Sprint L.P.;
(vi) deliver to Sprint and Sprint L.P. a Certificate of the
Secretary of Newco (A) as to true and complete copies of the certificate of
incorporation, bylaws and resolutions of the Board of Directors authorizing
the execution, delivery and performance of this Agreement and each of the
Ancillary Agreements to which it is a party and the transactions
contemplated hereby and thereby, (B) certifying that the execution,
delivery and performance of this Agreement and each of the Ancillary
Agreements and the transactions contemplated hereby and thereby were duly
and validly approved by the sole stockholder of Newco, and (C) as to
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incumbency of the Newco officers executing the Agreement and each of the
Ancillary Agreements to which it is a party;
(vii) deliver to Sprint and Sprint L.P. the certificate of
incorporation of Newco and all amendments to date, certified by the
Delaware Secretary of State, as of a date not earlier than three (3)
business days prior to the Closing Date;
(viii) deliver to Sprint and Sprint L.P. a Long Form Certificate of
Good Standing from the Delaware Secretary of State certifying that Newco is
in good standing, as of a date not earlier than three (3) business days
prior to the Closing Date;
(ix) deliver to Sprint and Sprint L.P. the SEC Order of
Effectiveness with respect to the S-4 if then in the possession of the
Company or Newco;
(x) deliver to Sprint and Sprint L.P. a Certificate of the
Secretary of Newco Sub (A) as to true and complete copies of the
certificate of incorporation, bylaws and resolutions of the Board of
Directors authorizing the execution, delivery and performance of this
Agreement and each of the Ancillary Agreements to which it is a party and
the transactions contemplated hereby and thereby, (B) certifying that the
execution, delivery and performance of this Agreement and each of the
Ancillary Agreements to which it is a party and the transactions
contemplated hereby and thereby were duly and validly approved by Newco as
the sole stockholder of Newco Sub, and (C) as to incumbency of the Newco
Sub officers executing this Agreement and each of the Ancillary Agreements
to which it is a party;
(xi) deliver to Sprint and Sprint L.P. the certificate of
incorporation of Newco Sub and all amendments to date, certified by the
Delaware Secretary of State, as of a date not earlier than three (3)
business days prior to the Closing Date; and
(xii) deliver to Sprint and Sprint L.P. a Long Form Certificate of
Good Standing from the Delaware Secretary of State certifying that Newco
Sub is in good standing, as of a date not later than three (3) business
days prior to the Closing Date.
(c) Deliveries by the Company. At the Closing, the Company shall deliver
to Sprint and Sprint L.P. the following:
(i) each of the Ancillary Agreements to which the Company is a
party, which shall have been duly executed and delivered by it;
(ii) a certificate on behalf of the Company signed by a duly
authorized executive officer, dated as of the Closing Date, certifying the
fulfillment of the conditions set forth in Sections 2.02(d) and (e);
9
(iii) the legal opinion of Hunton & Xxxxxxxx, counsel to the Company,
Newco and Newco Sub dated as of the Closing Date, in form and substance
reasonably satisfactory to Sprint and Sprint L.P.;
(iv) a Certificate of the Secretary of the Company (A) as to true
and complete copies of the certificate of incorporation, bylaws and
resolutions of the Board of Directors authorizing the execution, delivery
and performance of this Agreement and each of the Ancillary Agreements to
which it is a party and the transactions contemplated hereby and thereby,
(B) certifying that the execution, delivery and performance of this
Agreement and each of the Ancillary Agreements and the transactions
contemplated hereby and thereby were duly and validly approved by the
stockholders of the Company, and (C) as to incumbency of the Company
officers executing the Agreement and each of the Ancillary Agreements to
which it is a party;
(v) the certificate of incorporation of the Company and all
amendments to date, certified by the Delaware Secretary of State, as of a
date not later than three (3) business days prior to the Closing Date;
(vi) a Long Form Certificate of Good Standing from the Delaware
Secretary of State certifying that the Company is in good standing, as of a
date not later than three (3) business days prior to the Closing Date;
(vii) the Certificate of Inspector of Election in connection with the
Special Meeting.
(d) Deliveries by Sprint. At the Closing, Sprint shall deliver to the
Company, Newco and Newco Sub the following:
(i) each of the Ancillary Agreements to which Sprint is a party,
which shall have been duly executed and delivered by it;
(ii) a certificate on behalf of Sprint signed by a duly authorized
executive officer, dated as of the Closing Date, certifying the fulfillment
of the conditions set forth in Sections 2.03(b), (c) and (e);
(iii) the legal opinion of Xxxxxxx, Mag & Fizzell, P.C., counsel to
Sprint and Sprint L.P., dated as of the Closing Date, in form and substance
reasonably satisfactory to Newco and the Company.
(iv) a Certificate of Secretary of Sprint (A) as to true and
complete copies of the articles of incorporation, bylaws and resolutions of
the Board of Directors authorizing the execution, delivery and performance
of this Agreement and each of the Ancillary Agreements to which it is a
party and the transactions contemplated hereby and thereby, and (B) as to
10
incumbency of the Sprint officers executing this Agreement and each of the
Ancillary Agreements to which it is a party; and
(v) a Long Form Certificate of Good Standing from the Kansas
Secretary of State certifying that Sprint is in good standing, as of a date
not later than three (3) business days prior to the Closing Date.
(e) Deliveries by Sprint L.P. At the Closing, Sprint L.P. shall deliver
to the Company, Newco and Newco Sub the following:
(i) the cash portion of the Preferred Stock Consideration to Newco
by wire transfer of immediately available funds pursuant to wire transfer
instructions from a duly authorized officer of Newco;
(ii) each of the Ancillary Agreements to which Sprint L.P. is a
party, which shall have been duly executed and delivered by it;
(iii) a certificate on behalf of Sprint L.P. signed by a duly
authorized executive officer, dated as of the Closing Date, certifying the
fulfillment of the conditions set forth in Sections 2.03(b) and (c);
(iv) the legal opinion of Xxxxxxx, Mag & Fizzell, P.C., counsel to
Sprint and Sprint L.P., dated as of the Closing Date, in form and substance
reasonably satisfactory to Newco and the Company;
(v) a Certificate of Secretary of Sprint L.P. (A) as to true and
complete copies of the limited partnership agreement of Sprint L.P. and
resolutions of the Board of Directors of the General Partner of Sprint L.P.
authorizing the execution, delivery and performance of this Agreement and
each of the Ancillary Agreements to which it is a party and the
transactions contemplated hereby and thereby, and (B) as to incumbency of
the Sprint L.P. officers executing this Agreement and each of the Ancillary
Agreements to which it is a party; and
(vi) a Long Form Certificate of Good Standing from the Delaware
Secretary of State certifying that Sprint L.P. is in good standing, as of a
date not later than three (3) business days prior to the Closing Date.
11
ARTICLE II
CONDITIONS TO OFFER AND CLOSING
SECTION 2.01 Mutual Conditions to Offer. Sprint shall not, and shall have
no obligation to, accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Sprint's obligation to pay for or return tendered shares of Common Stock
after the termination or withdrawal of the Offer), pay for any shares of Common
Stock tendered pursuant to the Offer unless the following conditions are
satisfied on or prior to the Offer Acceptance Time (or waived in a writing
executed by Sprint, Sprint L.P., Newco, Newco Sub and the Company).
(a) Minimum Tender Condition. At least 1,250,000 shares of Common
Stock shall have been validly tendered and not withdrawn prior to the
expiration of the Offer (the "Minimum Tender Condition").
(b) Waiting Periods. The filing and waiting period requirements of
the HSR Act relating to the Offer, the Preferred Stock Consideration and
the Merger shall have been complied with and there shall be no action taken
or instituted by the Department of Justice, the Federal Trade Commission or
by any other Governmental Entity to delay or otherwise enjoin the
transactions contemplated by this Agreement and by the Ancillary Agreements
and the waiting period applicable under the HSR Act shall have expired or
received early termination.
(c) Other Approvals. In addition to the filing and expiration of the
waiting period contemplated by Section 2.01(b), all authorizations,
consents, orders or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any Governmental Entity, the
failure to obtain which would have a Material Adverse Effect on Sprint,
Sprint L.P. and their respective Subsidiaries, the Company or Newco and
Newco Sub, in each case, taken as a whole, shall have been filed, occurred
or been obtained.
(d) Form S-4. The S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(e) Actions, Suits or Proceedings. There shall not be Threatened or
pending by any Governmental Entity any Action which has a reasonable
likelihood of success, and there shall not be pending by any other Person
any Action which has a substantial likelihood of success, (i) seeking to
restrain or prohibit the acquisition by Sprint of any shares of Common
Stock or any Convertible Notes or the acquisition by Sprint L.P. of any
shares of Convertible Preferred Stock, the making or consummation of the
Offer or the performance by any of the Parties hereto of any of the other
transactions contemplated by this Agreement or any of the Ancillary
Agreements, or seeking to obtain from the Company, Newco, Sprint or Sprint
L.P. any damages that are material in relation to Sprint, Newco or the
Company and their respective subsidiaries taken as a whole, (ii) seeking to
impose limitations on the ability of
12
Sprint or Sprint L.P. to acquire or hold, or exercise full rights of
ownership of, any shares of Common Stock accepted for payment by Sprint
pursuant to the Offer or any shares of Convertible Preferred Stock, any
Convertible Notes or any Common Stock received upon conversion of either
thereof, including, without limitation, the right to vote such Common
Stock, Newco Common Stock and Convertible Preferred Stock on all matters
properly presented to the stockholders of the Company or Newco, as the case
may be, (iii) seeking to prohibit any Party from exercising any of its
material rights under this Agreement or any Ancillary Agreement; or (iv)
seeking to prohibit or limit the ownership or operation by any Party or its
respective Subsidiaries of a material portion of the business or assets of
such Party on a consolidated basis, or to compel any Party to dispose of or
hold separate any material portion of the business or assets of such Party
on a consolidated basis, as a result of the Offer or any of the other
transactions contemplated by this Agreement or the Ancillary Agreements.
(f) No Injunctions or Restraints. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced
or issued by any Governmental Entity or other legal restraint or
prohibition (x) preventing the consummation of the Merger or any of the
other transactions contemplated hereby or by the Ancillary Agreements that
are to occur by the Closing shall be in effect or, (y) applicable to the
Offer or the issuance of shares of Convertible Preferred Stock, any
Convertible Notes or any Newco Common Stock received upon conversion of
either thereof having any of the consequences described in clauses (i)
through (iv) of Section 2.01(e) shall be in effect; provided, however, that
-------- -------
prior to invoking this condition, each Party shall use all reasonable
efforts to have any such decree, ruling, injunction or order vacated,
except as otherwise contemplated by this Agreement.
(g) Stockholder Approval. The holders of Common Stock of the Company
shall have approved the Company Stockholder Vote Matters.
(h) Termination of Agreement. This Agreement shall not have
terminated in accordance with its terms prior to the Expiration Date.
SECTION 2.02 Conditions to Offer for Benefit of Sprint and Sprint L.P.
Sprint shall have no obligation to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Sprint's obligation to pay for or return tendered
shares of Common Stock after the termination or withdrawal of the Offer), pay
for any shares of Common Stock tendered pursuant to the Offer unless the
following conditions are satisfied on or prior to the Offer Acceptance Time (or
waived in a writing executed by Sprint and Sprint L.P.).
(a) Approval of the Board of Directors. (i) The Board of Directors of
the Company or Newco shall not have withdrawn or modified in a manner
adverse to Sprint or Sprint L.P. its approval of the Offer or the other
transactions contemplated by this Agreement or the Ancillary Agreements, or
approved any Acquisition Proposal or approved the solicitation of
additional Acquisition Proposals, (ii) the Company shall not have entered
into
13
any agreement with respect to any Acquisition Proposal, or (iii) the Board
of Directors of the Company or Newco or any committee thereof shall not
have resolved to take any of the foregoing actions referred to in (i) or
(ii) above.
(b) Execution, Delivery, Effectiveness and Satisfaction of Ancillary
Agreements. Each of the Company, Newco and Newco Sub shall have executed
and delivered to Sprint and Sprint L.P., as the case may be, each Ancillary
Agreement to which it is a party. Each Ancillary Agreement shall be in
full force and effect and all of the terms and conditions of each such
Ancillary Agreement shall be satisfied in all material respects.
(c) Stockholder Agreements. (i) Each of (A) the stockholders named on
Schedule A of the Stockholders Agreement, and (B) each of Xxxxx Xxxxx,
Xxxxxxx Xxxxx, Xxxxxx Xxxxxx and Xxxx Xxxx, shall have executed, and
delivered to Sprint the Stockholders Agreement in the form attached hereto
as Exhibit H, including the Irrevocable Proxies related thereto (the
"Stockholders Agreement"), (ii) each of the Voting Stockholders shall have
executed and delivered to Sprint the Agreement To Vote Stock (the
"Agreement to Vote"), in the form attached hereto as Exhibit J, and (iii)
each of the Tendering Stockholders shall have executed and delivered to
Sprint the Agreement to Vote and Tender Stock (the "Agreement to Vote and
Tender"), in the form attached hereto as Exhibit K. The Stockholders
Agreement, each Agreement to Vote and each Agreement to Vote and Tender, to
the extent necessary to approve the Company Stockholder Vote Matters, shall
be in full force and effect and all of the terms and conditions of such
agreements shall be satisfied in all material respects.
(d) Representations and Warranties. The representations and
warranties of the Company, Newco and Newco Sub shall be true and correct
(i) as of the date referred to in any representation or warranty that
addresses a matter as of a particular date, or (ii) as to all other
representations and warranties, as of the date of this Agreement and as of
the Offer Acceptance Time; unless, in either the case of clause (i) or
(ii), the inaccuracies under such representations and warranties, would
not, individually or in the aggregate, (x) have a Material Adverse Effect
on the Company or Newco, (y) materially impair the ability of the Company,
Newco and Newco Sub to enter into and perform this Agreement or any
Ancillary Agreement to which any of them is a Party and their respective
obligations thereunder, or (z) materially reduce Sprint's expected
ownership interest in Newco by virtue of material inaccuracies in the
representations and warranties set forth in Section 3.01(c) hereof, in each
case without giving effect to any supplement to any schedule to this
Agreement or to any Ancillary Agreement (provided, however, that any
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supplement must be objected to before the earlier of the Offer Acceptance
Time or 10 Business Days from the date of delivery thereof). Sprint and
Sprint L.P. shall also have each received a separate certificate to such
effect dated the Offer Acceptance Date and executed by the chief executive
officer and chief financial officer of each of the Company, Newco and Newco
Sub, in each such case without giving effect to any supplement to any
Schedule to this Agreement or to any Ancillary Agreement.
14
(e) Performance of Obligations and Covenants of the Company, Newco
and Newco Sub. Each of the Company, Newco and Newco Sub shall have
performed in all material respects all of the respective obligations and
covenants required to be performed or complied with by them under this
Agreement and each of the Ancillary Agreements at or prior to the time of
the Closing.
(f) Legal Opinions. Sprint shall have received the legal opinion of
Hunton & Xxxxxxxx, dated as of the Closing Date, counsel to Newco, Newco
Sub, and the Company in form and substance reasonably satisfactory to
Sprint and Sprint L.P.
(g) Amendments and Modifications of Warrants and other Dilutable
Securities. There shall not be any warrants to purchase Common Stock or
other Dilutable Securities of the Company outstanding on the Closing Date
which could be exercised on the Closing Date (assuming the expiration of
any applicable vesting periods or the satisfaction of any other conditions
to conversion, exchange, exercise or issuance) into a number of shares of
Common Stock which, in the aggregate, would constitute more than 8% of the
shares of Common Stock outstanding immediately prior to the Closing, which,
upon or after the Merger will be convertible into or exchangeable for or
give the right to acquire Common Stock or other voting securities of the
Company, and the Company shall have provided copies of all amendments or
other modifications of any Warrants and other Dilutable Securities obtained
by the Company pursuant to Section 4.08.
SECTION 2.03 Conditions to Offer for Benefit of the Company, Newco, and
Newco Sub. Sprint shall not accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sprint's obligation to pay for or return tendered shares of Common
Stock after the termination or withdrawal of the Offer), pay for any shares of
Common Stock tendered pursuant to the Offer unless the following conditions are
satisfied on or prior to the Offer Acceptance Time (or waived in a writing
executed by Newco, Newco Sub and the Company).
(a) Approval, Execution, Delivery, Effectiveness and Satisfaction of
Ancillary Agreements. (i) The Board of Directors of Sprint, and the Board
of Directors of the General Partners of Sprint L.P. shall not have
withdrawn or modified in a manner adverse to Newco or the Company their
approval of the Offer or the other transactions contemplated by this
Agreement or the Ancillary Agreements, or approved any Acquisition Proposal
or approved the solicitation of additional Acquisition Proposals, (ii)
Sprint shall not have entered into any agreement with respect to any
Acquisition Proposal, or (iii) the Board of Directors of Sprint, or the
Board of Directors of the General Partner of Sprint L.P., or any committee
thereof shall not have resolved to take any of the foregoing actions
referred to in (i) or (ii) above. Sprint and Sprint L.P. shall have
executed and delivered to the Company, Newco and Newco Sub, as the case may
be, and performed each Ancillary Agreement to which it is a party. Each
Ancillary Agreement shall be in full force and effect and all of the terms
and conditions of each such Ancillary Agreement shall be satisfied in all
material respects.
15
(b) Representations and Warranties. The representations and
warranties of Sprint and Sprint L.P. shall be true and correct (i) as of
the date referred to in any representation or warranty that addresses a
matter as of a particular date, or (ii) as to all other representations and
warranties, as of the date of this Agreement and as of the Offer Acceptance
Time; unless, in either the case of clause (i) or (ii), the inaccuracies
under such representations and warranties, would not, individually or in
the aggregate, (x) have a Material Adverse Effect on Sprint or Sprint L.P.,
or (y) materially impair the ability of Sprint and Sprint L.P. to enter
into and perform this Agreement or any Ancillary Agreement to which any of
them is a Party and their respective obligations thereunder, in each case
without giving effect to any supplement to any schedule to this Agreement
or to any Ancillary Agreement (provided, however, that any supplement must
-------- -------
be objected to before the earlier of the Offer Acceptance Time or 10
Business Days from the date of delivery thereof). The Company, Newco, and
Newco Sub shall have each received a separate certificate to such effect
dated the Offer Acceptance Date and executed by a duly authorized executive
officer of each of Sprint and Sprint L.P., in each case without giving
effect to any supplement to any Schedule to this Agreement or to any
Ancillary Agreement.
(c) Performance of Obligations and Covenants. Sprint shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement and each of the Ancillary Agreements
to be performed or complied with by Sprint by the time of the Closing.
(d) Legal Opinion. The Company, Newco and Newco Sub shall have
received the legal opinion of Xxxxxxx, Mag & Fizzell, P.C., counsel to
Sprint and Sprint L.P., dated as of the Closing Date, in form and substance
reasonably satisfactory to Newco and the Company.
(e) Sprint Acquisition Proposal. Sprint shall not have entered into
an agreement providing for a transaction contemplated by an Acquisition
Proposal, nor shall it have consummated any such transaction, nor shall
Sprint have received any Acquisition Proposal (i) recommended by the Board
of Directors of Sprint, or (ii) if not so recommended, which the Board of
Directors of the Company reasonably determines in good faith upon
consultation with its outside financial advisors is reasonably likely to be
consummated.
SECTION 2.04 Condition to Closing of All Parties. The obligations of
Sprint, Sprint L.P., Newco, Newco Sub and the Company to consummate the
transactions contemplated to occur at the Closing other than the Offer are
subject to the satisfaction of the condition that Sprint shall have accepted for
payment shares of Common Stock pursuant to the Offer in accordance with this
Agreement (the "Offer Acceptance Condition").
16
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Company. Except as
disclosed in the schedules attached to this Agreement setting forth exceptions
to the Company's representations and warranties set forth herein (the "Company
Disclosure Schedules"), the Company represents and warrants to Sprint and Sprint
L.P. as set forth below. The Company Disclosure Schedules will be arranged in
sections corresponding to sections of this Agreement to be modified thereby.
(a) Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has all requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a Material Adverse Effect on the Company. The
Company has made available to Sprint for its review complete and correct
copies of its certificate of incorporation and bylaws, in each case as
amended to the date of this Agreement.
(b) Subsidiaries and Joint Ventures. The Company does not have any
Subsidiaries. The Company does not have the right to acquire an equity
interest in any corporation, partnership, limited liability company, joint
venture, business trust or any other entity, except for Newco and Newco Sub
pursuant to the Merger.
(c) Capital Structure. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock and 10,000,000 shares of
preferred stock, par value $0.01 per share. At the close of business on
January 31, 1998, (i) 11,293,394 shares of Common Stock and no shares of
preferred stock of the Company were issued and outstanding, (ii) no shares
of Common Stock were held by the Company in its treasury, (iii) 1,072,012
shares of Common Stock were reserved for issuance pursuant to outstanding
stock options granted under the 1995 Stock Option Plan to purchase shares
of Common Stock ("Employee Stock Options") and an additional 96,158 shares
of Common Stock were available for the grant of Employee Stock Options
pursuant to such plan (and upon approval by the Company's stockholders of a
pending proposal there will be 600,000 additional shares of Common Stock as
to which options can be granted under the 1995 Stock Option Plan), (iv) no
shares of Common Stock were reserved for issuance pursuant to outstanding
stock options granted under the Directors Stock Option Plan to purchase
shares of Common Stock ("Director Stock Options") and an additional 62,500
shares of Common Stock were available for the grant of Director Stock
Options pursuant to such plan, (v) 391,500 shares of Common Stock were
reserved for issuance pursuant to the Company's convertible note with UUNET
17
Technologies, Inc., and (vi) 887,647 shares of Common Stock were reserved
for issuance upon the exercise of outstanding warrants. Except as set forth
above or as otherwise expressly provided herein, at the close of business
on January 31, 1998, no shares of capital stock or other voting securities
of the Company were issued, reserved for issuance or outstanding and except
as set forth on Schedule 3.01(c), there are not any phantom stock or other
contractual rights the value of which is determined in whole or in part by
the value of any capital stock of the Company ("Stock Equivalents"). There
are no outstanding stock appreciation rights ("SARs") with respect to
Common Stock that were not granted in tandem with a related Employee Stock
Option. When issued and sold to Sprint, the Convertible Preferred Stock and
the Convertible Notes will be duly authorized, validly issued, fully paid
and non-assessable and free and clear of all Liens. The Newco Common Stock
issued upon conversion of the Convertible Preferred Stock and the
Convertible Notes, will be duly authorized, validly issued, fully paid and
nonassessable and free and clear of all Liens. Other than this Agreement
and the Ancillary Agreements, the Convertible Preferred Stock and the
Convertible Notes are not, and the Newco Common Stock issuable upon
conversion of the Convertible Preferred Stock and the Convertible Notes
will not be, subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding restricting or
otherwise relating to the voting or disposition of the Convertible
Preferred Stock or the Convertible Notes. All outstanding shares of capital
stock of the Company are, and all shares that may be issued pursuant to any
stock plans and the other agreements and instruments listed above will be,
when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Except as set forth above and in
Schedule 3.01(c), and as otherwise expressly set forth in this Agreement,
and except for changes since January 31, 1998 resulting from the grant or
exercise of Employee Stock Options, Director Stock Options, or warrants and
the conversion of notes described in clauses (v) and (vi) above, as of the
date of this Agreement, there are not any securities, options, warrants,
calls, rights to purchase, rights of first refusal, securities convertible
into or exchangeable for voting securities, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
Subsidiaries is a party or by which any of them is bound obligating the
Company to issue, deliver or sell or create, or cause to be issued,
delivered or sold or created, additional shares of capital stock or other
voting securities or Stock Equivalents of the Company or obligating the
Company to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking
(collectively referred to as "Dilutable Securities"). As of the date of
this Agreement, there are not any outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company, except pursuant to existing employee
arrangements.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and the
Ancillary Agreements and, subject, with respect to consummation of the
Merger, to prior approval of the Merger by the stockholders of the Company,
Newco and Newco Sub, as appropriate, in accordance with the
18
Delaware General Corporation Law ("DGCL"), to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements. Except as set
forth on Schedule 3.01(d), the execution and delivery by the Company of
this Agreement and each Ancillary Agreement to which it is a party and the
consummation by it of the transactions contemplated by this Agreement and
the Ancillary Agreements have been duly authorized by all necessary
corporate action on the part of the Company, subject, with respect to
consummation of the Merger, to prior approval of the Merger by the
stockholders of the Company, Newco and Newco Sub, as appropriate, in
accordance with the DGCL. This Agreement and the Ancillary Agreements to
which it is party have been duly executed and delivered by each of the
Company, Newco and Newco Sub, as appropriate, and, subject, with respect to
consummation of the Merger, to approval of the Merger by the stockholders
of the Company in accordance with DGCL, and assuming this Agreement and the
Ancillary Agreements constitute the valid and binding agreements of Sprint,
constitute valid and binding obligations of each of them enforceable
against the Company, Newco, and Newco Sub, respectively, in accordance with
their respective terms, except to the extent that the enforcement of this
Agreement or the Ancillary Agreements may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and (ii)
general principles of equity regardless of whether enforceability is
considered in a proceeding in equity or at law. Except as set forth on
Schedule 3.01(d), the execution and delivery of this Agreement and the
Ancillary Agreements by the Company did not, and the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements,
and compliance with the provisions of the Marketing Agreement and the
Network Agreement, without obtaining the consent of any third party will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss
by the Company of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of the Company under, (i) the
certificate of incorporation or bylaws of the Company, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit or license applicable to the Company or its
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any Law applicable to the
Company or its respective properties or assets, other than, in the case of
clauses (ii), (iii) and (iv), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) have a
Material Adverse Effect on the Company, (y) materially impair the ability
of the Company to perform its obligations under this Agreement or any
Ancillary Agreement to which it is a party or (z) prevent the consummation
of any of the transactions contemplated by this Agreement or any of the
Ancillary Agreements. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by the Company in connection with the execution and delivery of
this Agreement and the Ancillary Agreements or the consummation by the
Company of the transactions contemplated by this Agreement and the
Ancillary Agreements, except for (i) the filing of a premerger notification
and report form by the Company under the HSR Act and the expiration of the
applicable waiting period or early termination thereof and, (ii) the filing
with the SEC of (w) the Proxy Statement, (x) the S-4,
19
(y) a solicitation/recommendation statement on Schedule 14D-9 and (z) such
reports under Sections 12 and 13(a) of the Exchange Act as may be required
in connection with this Agreement, the Ancillary Agreements and the
transactions contemplated by this Agreement and the Ancillary Agreements,
(iii) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware, and (iv) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as are set forth on
Schedule 3.01(d).
(e) SEC Documents; Undisclosed Liabilities. The Company has filed all
required reports, schedules, forms, statements and other documents with the
SEC since the filing of its initial registration statement with respect to
its initial public offering which was declared effective on January 22,
1997 (the "SEC Documents" which are deemed to include such registration
statement). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, applicable to such SEC Documents, and
none of the SEC Documents contained any untrue statement of a material fact
or omitted to state a 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 Company has
filed all exhibits to its SEC documents required by Item 601 of SEC
Regulation S-K or which would have been required to be filed if there were
no exclusions or exceptions in paragraph (b)(10) of such Item 601. The
financial statements of the Company included in the SEC Documents comply as
to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC and SEC Regulations S-X) applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto) and fairly present the financial position of the Company as of the
dates thereof and its statements of operations, stockholders equity and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal, recurring year-end audit adjustments). Except as set
forth in the SEC Documents filed and publicly available prior to the date
of this Agreement ("Company Filed SEC Documents"), as of the date hereof,
the Company has no liabilities or obligations of any nature (whether
accrued, contingent, absolute, determined, determinable or otherwise),
other than (i) liabilities provided for in the Company's unaudited balance
sheet included in the Company's Quarterly Report on Form 10-Q for its third
fiscal quarter ("Unaudited Balance Sheet"), dated as of September 30, 1997
(the "Unaudited Balance Sheet Date"), (ii) liabilities and obligations
incurred in the Ordinary Course of Business since the Unaudited Balance
Sheet Date, and (iii) liabilities and obligations under this Agreement and
the Ancillary Agreements.
(f) Absence of Certain Changes or Events. Except as disclosed in
Schedule 3.01(f) or as reflected in Section 3.01(c), the Company Filed SEC
Documents, or except as contemplated by this Agreement, since the Unaudited
Balance Sheet Date, the Company has conducted its business only in the
Ordinary Course of Business and (i) there has not occurred any transaction,
or condition (financial or otherwise) of any character (whether or not in
the Ordinary Course of Business), event or change (including the incurrence
of any
20
liabilities of any nature, whether or not accrued, contingent or otherwise)
having individually or in the aggregate, a Material Adverse Effect on the
Company, and (ii) the Company has not taken any action that would have been
prohibited under Section 4.01 hereof as if the Agreement had been in effect
on the date of such action.
(g) Litigation. Except as disclosed in the Company Filed SEC
Documents or as set forth on Schedule 3.01(g), there is no suit, action or
proceeding pending or, to the Knowledge of the Company, Threatened against
the Company that, individually or in the aggregate, would have a Material
Adverse Effect on the Company.
(h) Benefit Plans.
(i) Schedule 3.01(h) hereto contains a true and complete list
of each Benefit Plan. With respect to each Benefit Plan, the Company
has made available to Sprint a true and correct copy of (a) the most
recent annual report (Form 5500) filed with the IRS, if any, (b) the
plan document, (c) any summary plan description relating to such
Benefit Plan, and (d) each trust agreement and group annuity contract,
if any, relating to such Benefit Plan.
(ii) With respect to the Benefit Plans, individually and in the
aggregate, no event has occurred, and to the Company's Knowledge,
there exists no present condition or set of circumstances in
connection with which the Company is now subject to, or could
reasonably be expected to be subject to, any liability under ERISA,
the Code, or any other applicable Law, except liability for benefit
claims and funding obligations or contributions payable in the
ordinary course, and to the Company's Knowledge each of the Benefit
Plans has at all times in all material respects been in compliance
with and administered in accordance with its terms, the applicable
provisions of ERISA, the Code or any other applicable Law.
(iii) Each of the Benefit Plans and related trusts that is
intended to be qualified in form under Section 401(a) and tax exempt
under Section 501(a) of the Code, respectively, has been determined by
the IRS to so qualify under the Code and, to the Company's Knowledge,
nothing has occurred since such determination to cause any of such
Benefit Plans not to qualify under Section 401(a) or any of such
related trusts not to be tax exempt under Section 501(a) of the Code
other than the effective date of certain amendments of the Code and
ERISA, the remedial amendment period for which has not expired.
(iv) With respect to the Benefit Plans, individually and in the
aggregate, all required reports and descriptions have been
appropriately filed and distributed to the extent ERISA, the Code or
applicable Law requires.
(v) With respect to the Benefit Plans, individually and in the
aggregate, there has been no prohibited transaction within the meaning
of Section 406 of ERISA
21
or Section 4975 of the Code involving the Company, and there is no
action, suit, grievance, arbitration or other claim with respect to
the administration or investment of assets of the Benefit Plans (other
than routine claims for benefits made in the ordinary course) pending,
or to the Company's Knowledge, Threatened, and to the Company's
Knowledge there is no present condition or set of circumstances which
could reasonably be expected to give rise to any such action, suit,
grievance, arbitration or other claim.
(vi) Neither the Company nor any corporation, trade or business
which is affiliated with the Company, in the manner described in
Section 414(b), (c), (m) and (o) of the Code or Section 4001(a)(14) of
ERISA, has ever sponsored, or made or been obligated to make
contributions to, (i) any defined benefit pension plan subject to
Title IV of ERISA or any plan subject to the minimum funding standards
under Section 412 of the Code or Section 302 of ERISA; or (ii) any
nonqualified deferred compensation plan or arrangement, including,
without limitation, any plans providing for post employment benefits
such as life or health insurance or any other benefits.
(i) Taxes. Except as set forth on Schedule 3.01(i), the Company has
timely filed all Returns and reports required to be filed by it on or
before the date hereof, except where failure to timely file would not have
a Material Adverse Effect on the Company. All such Returns are complete
and accurate except where the failure to be complete or accurate would not
have a Material Adverse Effect on the Company. The Company has paid or has
set up an adequate reserve for the payment of all Taxes shown as due on
such Returns, except where the failure to do so would not have a Material
Adverse Effect on the Company. The Unaudited Balance Sheet contains an
adequate reserve for all Taxes payable by the Company accrued through the
Unaudited Balance Sheet Date. Except as set forth on Schedule 3.01(i), no
deficiencies for any Taxes have been asserted, proposed or assessed against
the Company in writing that have not been paid or otherwise settled or
reserved against, except for deficiencies the assertion, proposing or
assessment of which would not have a Material Adverse Effect on the
Company, and no waivers of the time to assess any such Taxes are pending.
There are no material Liens for Taxes (other than for current taxes not yet
due and payable) on the assets of the Company.
(j) Voting Requirements. The only vote of the holders of any class or
series of the Company's capital stock that is necessary to approve this
Agreement, the Ancillary Agreements or the transactions contemplated by
this Agreement and the Ancillary Agreements is (i) the affirmative vote by
a majority of the votes cast by the holders of Common Stock entitled to
vote with respect to the issuance and sale of the Convertible Preferred
Stock and Convertible Notes, as may be required by paragraph (i) of NASD
Rule 4460, and (ii) the affirmative vote by the holders of a majority of
the outstanding shares of Common Stock entitled to vote with respect to the
Merger, as required by Section 251 of the DGCL.
22
(k) Brokers. No broker, investment banker, financial advisor or other
person, other than Deutsche Xxxxxx Xxxxxxxx Inc., the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission, in connection with
the transactions contemplated by this Agreement and the Ancillary
Agreements, based upon arrangements made by or on behalf of the Company
(except as set forth on Schedule 3.01(k)).
(l) Compliance with Laws. The Company has in effect all approvals,
authorizations, certificates, filings, franchises, licenses, notices,
permits, variances, exemptions, orders and rights ("Permits") necessary for
it to own, lease or operate its properties and assets and to carry on its
business as now conducted, and there has not occurred any default under any
Permit, except for the absence of Permits and for defaults under Permits
that, individually or in the aggregate, have not had a Material Adverse
Effect on the Company. Except as disclosed in the Company Filed SEC
Documents, the Company is in compliance with all applicable Law, except
where failures to so comply, individually or in the aggregate, would not
have a Material Adverse Effect on the Company. Except as set forth in
Schedule 3.01(l) hereto or as described in Company Filed SEC Documents
filed prior to the date hereof, as of the date of this Agreement, no
investigation or review by any Governmental Entity with respect to the
Company is pending or, to the Company's Knowledge, Threatened, other than,
in each case, those the outcome of which would not have a Material Adverse
Effect on the Company.
(m) Environmental Matters. The Company is and at all times has been
in full compliance with, and has not been and is not in violation of or
liable under, any Environmental Law (which compliance includes the
possession by the Company of all Permits required under applicable
Environmental Law and compliance with the terms and conditions thereof),
except for such failure to be in compliance which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. There
are no pending or, to the Company's Knowledge, Threatened claims, orders,
notices, administrative or judicial actions, or Encumbrances, relating to
environmental, health, and safety liabilities arising under or pursuant to
any federal, state or local Environmental Laws, with respect to or
affecting any of the properties and assets (whether real, personal, or
mixed) in which the Company has an interest, except for any such claim,
order, notice, administrative or judicial action, Encumbrance or other
restriction that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(n) Intellectual Property. The Company owns sufficient right, title
and interest in and to, or has valid licenses of sufficient scope and
duration for, all patents, patent rights, copyrights, trademarks, service
marks, trade names, software, trade secrets, confidential information and
other intellectual property material to the operation of the business of
the Company as currently conducted or
23
proposed to be conducted (the "Intellectual Property Assets") and as
presently proposed to be conducted. The Intellectual Property Assets are
free and clear of all Liens which would materially impair the Company's
ability to use the Intellectual Property Assets in the business of the
Company as currently conducted or proposed to be conducted. The Company has
granted to no third party any rights in and to the Intellectual Property
Assets except for distribution rights, OEM rights, end user licenses and
rights to reproduce certain of the Intellectual Property Assets in the
Ordinary Course of Business in connection with the marketing and
distribution of the Company's product and service offerings, and which
individually and in the aggregate would not have a Material Adverse Effect.
Except as set forth on Schedule 3.01(n), none of the Intellectual Property
Assets owned or licensed by the Company infringes, or conflicts with, or to
the Company's Knowledge, is alleged to infringe upon or conflict with the
intellectual property rights of any third party, which infringement or
alleged infringement could have a Material Adverse Effect. The Company has
no Knowledge that any of its employees performing or managing key functions
of the Company is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to
any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to promote the
interests of the Company or that would conflict with the Company's business
as proposed to be conducted. To the Company's Knowledge, neither the
execution nor delivery of this Agreement or any Ancillary Agreement, nor
the conduct of the Company's business by the employees of the Company, nor
the conduct of the Company's business as proposed, will conflict with or
result in a breach of the terms, conditions or provisions of, or constitute
a default under, any contract, covenant or instrument under which any of
such employees is now obligated, which conflict or breach would have a
Material Adverse Effect. The Company does not presently utilize or intend
to utilize any inventions of any of its employees (or people it currently
intends to hire) made prior to their employment by the Company. To the
Company's Knowledge, any software owned by the Company, and any software
used independently by the Company and owned by third parties and licensed
to the Company is, in all material respects, Year 2000 Compliant. "Year
2000 Compliant" means (i) the software is capable of correctly processing,
providing and receiving date data within and between the twentieth and
twenty-first century (including accounting for all required leap year
calculations); and (ii) all date fields in the software use four digit year
fields.
(o) Certain Payments. Neither the Company, nor any of its directors,
officers, agents, or employees, or to the Company's Knowledge, any other
Person associated with or acting for or on behalf of the Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to
pay for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect
of the Company or any Affiliate of the Company, (b) established or
maintained any fund or asset that has not been appropriately recorded in
the books and records of the Company, which in the case of either clause
(a) or (b) would be in violation of Law or would have a Material Adverse
Effect.
SECTION 3.02 Representations and Warranties of Newco and Newco Sub. Newco
and Newco Sub represent and warrant to Sprint and Sprint L.P., jointly and
severally, as follows:
24
(a) Organization, Standing and Power. Newco and Newco Sub were each
incorporated under the DGCL on January 30, 1997 and neither of them has
engaged in any business, owns any property or assets (except for $10 in
cash received by Newco for the issuance of 10 shares of its common stock to
its sole stockholder (which is not the Company or an Affiliate of the
Company) and $10 in cash received by Newco Sub for the issuance of 10
shares of its common stock to Newco, which in each case represents all of
their outstanding shares of capital stock) or is a party to any agreement,
except for this Agreement. Each of Newco and Newco Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated. Newco will, immediately following
the Merger, be duly qualified or licensed to do business and be in good
standing in each jurisdiction in which the nature of the business conducted
or the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to
be so qualified or licensed (individually or in the aggregate) would not
have a Material Adverse Effect on Newco immediately following the Merger.
Each of Newco and Newco Sub has made available to Sprint for its review
complete and correct copies of its certificate of incorporation and bylaws,
in each case as amended to the date of this Agreement.
(b) Authority; Noncontravention. Each of Newco and Newco Sub has the
requisite corporate power and authority to enter into this Agreement and
the Ancillary Agreements and, subject, with respect to consummation of the
Merger, to approval of the Merger by the stockholders of the Company, Newco
and Newco Sub in accordance with the DGCL, to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements. Except as set
forth on Schedule 3.02(b), the execution and delivery by each of Newco and
Newco Sub of this Agreement and each Ancillary Agreement to which it is a
party and the consummation by each of them of the transactions contemplated
by this Agreement and the Ancillary Agreements have been duly authorized by
all necessary corporate action on the part of Newco and Newco Sub,
respectively, subject, with respect to consummation of the Merger, to prior
approval of the Merger by the stockholders of the Company, Newco and Newco
Sub in accordance with DGCL. This Agreement and the Ancillary Agreements to
which it is party have been duly executed and delivered by each of Newco
and Newco Sub and, subject, with respect to consummation of the Merger, to
prior approval of the Merger by the stockholders of the Company, Newco and
Newco Sub in accordance with DGCL, and assuming this Agreement and the
Ancillary Agreements constitute the valid and binding agreements of Sprint
and the Company, constitute valid and binding obligations of each of them
enforceable against Newco and Newco Sub, respectively, in accordance with
their respective terms, except to the extent that the enforcement hereof
and thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity
regardless of whether enforceability is considered in a proceeding in
equity or at law. Except as set forth on Schedule 3.02(b), the execution
and delivery of this Agreement and the Ancillary Agreements by Newco and
Newco Sub did not, and the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements and compliance
25
with the provisions of the Marketing Agreement and the Network Agreement
without obtaining the consent of any third party will not, conflict with,
or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss by Newco or Newco
Sub of a material benefit under, or result in the creation of any Lien upon
any of the properties or assets of Newco or Newco Sub under, (i) the
certificate of incorporation or bylaws of Newco or Newco Sub, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit or license applicable to Newco or Newco Sub
or their respective assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any Law applicable to
Newco or Newco Sub or their respective assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, defaults, rights or
Liens that individually or in the aggregate would not (x) have a Material
Adverse Effect on Newco or Newco Sub, (y) materially impair the ability of
Newco and Newco Sub to perform its obligations under this Agreement or any
Ancillary Agreement to which it is a party or (z) prevent the consummation
of any of the transactions contemplated by this Agreement or any of the
Ancillary Agreements. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by Newco or Newco Sub in connection with the execution and
delivery of this Agreement and the Ancillary Agreements or the consummation
by Newco and Newco Sub of the transactions contemplated by this Agreement
and the Ancillary Agreements, except for (i) the filing with the SEC of (i)
the S-4, (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, and (iii) such other consents, approvals,
orders, authorizations, registrations, declarations and filings as are set
forth on Schedule 3.02(b).
(c) Litigation. There is no suit, action or proceeding pending or, to
the Knowledge of Newco or Newco Sub, Threatened against Newco or Newco Sub.
(d) Voting Requirements. The only vote of the holders of any class or
series of the capital stock of Newco and Newco Sub that is necessary to
approve this Agreement, the Ancillary Agreements or the transactions
contemplated by this Agreement and the Ancillary Agreements is the
affirmative vote by the holders of a majority of their respective
outstanding shares of common stock entitled to vote with respect to the
Merger, as required by Section 251 of the DGCL.
(e) Brokers. No broker, investment banker, financial advisor or other
person, other than Deutsche Xxxxxx Xxxxxxxx Inc., the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the transactions contemplated by this Agreement and the Ancillary
Agreements based upon arrangements made by or on behalf of Newco and Newco
Sub.
(f) Compliance with Laws. Newco and Newco Sub will, immediately
following the Merger, have all Permits necessary for them to own, lease or
operate the properties and assets now owned by the Company and to carry on
the business now conducted by the
26
Company, except for such Permits, the absence of which would not have,
individually or in the aggregate, a Material Adverse Effect on Newco and
Newco Sub, taken as a whole.
SECTION 3.03 Representations and Warranties of Sprint and Sprint L.P..
Sprint and Sprint L.P., jointly and severally, represent and warrant to the
Company, Newco and Newco Sub as follows:
(a) Organization, Standing and Power. Sprint is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated. Sprint L.P. is a limited
partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized. Each of Sprint and
Sprint L.P. has all requisite power and authority to own, lease and operate
their respective properties and to carry on their respective businesses as
now being conducted. Each of Sprint and Sprint L.P. and each of their
respective Significant Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) could not reasonably be expected to have a Material Adverse
Effect on Sprint or Sprint L.P. and their respective Subsidiaries, taken as
a whole. Sprint has made available to the Company, Newco and Newco Sub for
their review complete and correct copies of its certificate of
incorporation and bylaws. Sprint L.P. has made available to the Company,
Newco and Newco Sub for their review a complete and correct copy of its
constitutive documents.
(b) Subsidiaries. A schedule to Sprint's Annual Report on Form 10-K
for 1996 lists each Significant Subsidiary of Sprint. All the outstanding
shares of capital stock of each Significant Subsidiary that is a
corporation have been validly issued and are fully paid and nonassessable
and are not subject to any options or other rights to acquire any such
shares.
(c) Authority; Noncontravention. Sprint has the requisite corporate
power and authority, and Sprint L.P. has the requisite power and authority,
to enter into this Agreement and the Ancillary Agreements and to consummate
the transactions contemplated by this Agreement and the Ancillary
Agreements. The execution and delivery by Sprint and Sprint L.P. of this
Agreement and each Ancillary Agreement to which it is a party and the
consummation by it of the transactions contemplated by this Agreement and
the Ancillary Agreements have been duly authorized by, in the case of
Sprint, all necessary corporate action, and in the case of Sprint L.P., all
necessary action of the limited partnership and its general partner. This
Agreement and the Ancillary Agreements to which Sprint or Sprint L.P. is
party have been duly executed and delivered by Sprint and Sprint L.P. and,
assuming this Agreement and the Ancillary Agreements constitute the valid
and binding agreements of the Company, Newco and Newco Sub, constitute
valid and binding obligations enforceable against Sprint and Sprint L.P. in
accordance with their respective terms, except to the extent
27
that the enforcement of this Agreement or the Ancillary Agreements may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity regardless of whether
enforceability is considered in a proceeding in equity or at law. Except as
set forth on Schedule 3.03(c), the execution and delivery of this Agreement
and the Ancillary Agreements by Sprint and Sprint L.P. did not, and the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements and compliance with the provisions of the Marketing
Agreement and the Network Agreement without obtaining the consent of any
third party will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or to loss by Sprint, Sprint L.P. or any of Sprint's Significant
Subsidiaries, of a material benefit under, or result in the creation of any
Lien upon any of the properties or assets of Sprint or Sprint L.P. under,
(i) the certificate of incorporation or bylaws of Sprint or the comparable
charter or organizational documents of Sprint L.P. or any of Sprint's
Significant Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit or
license applicable to Sprint, Sprint L.P. or any of Sprint's Significant
Subsidiaries or their respective properties or assets or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Sprint, Sprint L.P. or any of Sprint's Significant
Subsidiaries or their respective properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) have a
Material Adverse Effect on Sprint, Sprint L.P. and Sprint's Subsidiaries,
taken as a whole, (y) materially impair the ability of Sprint or Sprint
L.P. to perform their respective obligations under this Agreement or any
Ancillary Agreement to which it is a party or (z) prevent the consummation
of any of the transactions contemplated by this Agreement or any of the
Ancillary Agreements. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Sprint or Sprint L.P. or any of Sprint's
Significant Subsidiaries in connection with the execution and delivery of
this Agreement and the Ancillary Agreements or the consummation by Sprint
or Sprint L.P. of the transactions contemplated by this Agreement and the
Ancillary Agreements, except for (i) the filing of a premerger notification
and report form by Sprint or Sprint L.P. under the HSR Act and the
expiration of the applicable waiting period or early termination thereof
and, (ii) the filing with the SEC of (x) a tender offer statement on
Schedule 14D-1 and (y) such reports under Sections 12 and 13(a) of the
Exchange Act as may be required in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated by this Agreement
and the Ancillary Agreements, and (iii) such other consents, approvals,
orders, authorizations, registrations, declarations and filings as are set
forth on Schedule 3.03(c).
(d) Brokers. No broker, investment banker, financial advisor or other
person, other than SBC Warburg Dillon Read, Inc. the fees and expenses of
which will be paid by Sprint, is entitled to any broker's, finder's,
financial advisor's or other similar fee or
28
commission in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements based upon arrangements made by or
on behalf of Sprint or Sprint L.P.
(e) Ownership of Common Stock. As of the date of this Agreement,
neither Sprint nor Sprint L.P. beneficially owns any shares of Common
Stock.
(f) Investment Intent. Sprint is purchasing the Convertible Notes for
advances under the Credit Agreement, and Sprint L.P. is purchasing the
Convertible Preferred Stock in exchange for the Preferred Stock
Consideration, in each case for their own account for investment and not
with a present view to, or for sale in connection with, any distribution
thereof in violation of the Securities Act. The certificates evidencing the
Convertible Preferred Stock, the Convertible Notes and any shares of Common
Stock issued upon conversion of the Convertible Preferred Stock or the
Convertible Notes shall bear substantially the following legend (modified
accordingly in the case of the Convertible Notes) until such time as there
is a sale or transfer in accordance with this Agreement and the Ancillary
Agreements or the termination thereof:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THE
DISPOSITION AND VOTING OF SUCH SHARES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THE INVESTMENT AGREEMENT DATED AS OF
FEBRUARY 10, 1998, AMONG THE COMPANY, SPRINT, SPRINT L.P.,
NEWCO, AND NEWCO SUB AND THE GOVERNANCE AGREEMENT DATED AS
OF FEBRUARY 10, 1998, AMONG THE COMPANY, SPRINT, SPRINT
L.P., AND NEWCO, AND NEWCO RESERVES THE RIGHT TO REFUSE THE
TRANSFER OF SUCH SHARES UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH
CONDITIONS WILL BE FURNISHED BY NEWCO TO THE HOLDER HEREOF
UPON WRITTEN REQUEST AND WITHOUT CHARGE. THESE SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED EXCEPT IN ACCORDANCE THEREWITH."
(g) Acquisition for Investment and Rule 144. Sprint and Sprint L.P.
understand that the shares of Convertible Preferred Stock issued to them
pursuant to the Agreement ("Sprint Shares") and Sprint understands that the
Convertible Notes issued to Sprint pursuant to the Credit Agreement will
not be registered under the Securities Act by reason of a specific
exemption from the registration provision of the Securities Act which
depends upon, among other things, the bona fide nature of their investment
intent as expressed herein. Except as otherwise provided in Section
3.03(i), Sprint and Sprint L.P. acknowledge that the Sprint Shares and the
Convertible Notes must be held indefinitely unless they are subsequently
29
registered under the Securities Act or an exemption from such registration
is available. Sprint and Sprint L.P. have been advised or are aware of the
provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions. Sprint and Sprint L.P. are aware that
the certificates representing the Sprint Shares, and that the Convertible
Notes, will bear such legends relating to restrictions on resale under the
Securities Act as provided in Section 3.01(f) and Newco under certain
conditions may issue instructions to its stock transfer agent to stop the
transfer of the Sprint Shares and the Convertible Notes unless made in
accordance with this Agreement or any Ancillary Agreement.
(h) Legal Investment. The purchase of the Convertible Preferred Stock
by Sprint L.P. and the purchase of Convertible Notes by Sprint hereunder is
legally permitted by all applicable Law and all consents, approvals,
authorizations of or designations, declarations or filings in connection
with the valid execution and delivery of this Agreement by Sprint and
Sprint L.P. or the purchase of the Convertible Preferred Stock by Sprint
L.P. and the Convertible Notes by Sprint have been obtained, or will be
obtained prior to the Closing Date.
(i) Purchase Entirely for Own Account. Sprint is purchasing the
Convertible Notes for advances under the Credit Agreement, and Sprint L.P.
is purchasing the Convertible Preferred Stock in exchange for the Preferred
Stock Consideration, in each case for their own account and not as a
nominee or agent, and not with a view to the resale or distribution of any
part thereof, except for transfers permitted by this Agreement. Neither
Sprint L.P. nor Sprint has any present intention of selling, granting any
participation in, or otherwise distributing the Convertible Preferred Stock
or the Convertible Notes. Neither Sprint nor Sprint L.P. has any contract,
undertaking, agreement or arrangement with any Person to sell, transfer or
grant participations to such Person or to any third person with respect to
the Convertible Preferred Stock or the Convertible Notes. Notwithstanding
any other provision of this Agreement, Sprint and Sprint L.P. shall be
permitted to transfer the Convertible Preferred Stock, the Convertible
Notes and the Newco Common Stock issued upon conversion thereof to any
Affiliate of Sprint or Sprint L.P. without an opinion of counsel, without
registration under the Securities Act or any state securities law, and
without the consent of Newco, provided that any such Affiliate who acquires
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such Convertible Preferred Stock, Convertible Notes or Newco Common Stock
agrees in writing to be subject to the applicable requirements of this
Section 3.03 and any restrictions on transfer contained in any of the
Ancillary Agreements to the same extent as if such Affiliate were the
original purchaser thereof.
(j) Agreements with SIP Subscribers. Sprint L.P. has previously
furnished to each of the Company, Newco and Newco Sub the form of agreement
between Sprint L.P. and the SIP Subscribers governing the receipt of
internet access services from Sprint L.P. ("SIP Agreements"). Sprint L.P.
has complied in all material respects with all applicable terms and
requirements of the SIP Agreements. As of the date hereof, Sprint has
approximately 130,000 SIP Subscribers who are subject to SIP Agreements.
Except as set forth in Schedule 3.03(j), the SIP Agreements are assignable
to Newco in accordance with this Agreement and are enforceable against
Sprint L.P. in accordance with their respective terms, except to the
30
extent enforcement thereof may be limited by: (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principals of
equity, regardless of whether enforceability is considered in a proceeding
in equity or at law; provided, however, that the SIP Agreements are subject
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to immediate termination by unilateral action of the SIP Subscribers.
(k) Financial Capability. Sprint has sufficient funds available to
finance the Offer and the other transactions contemplated by this Agreement
and the Ancillary Agreements, and is not engaged in any financing activity,
the consummation of which would be necessary in order for Sprint to
consummate the Offer and the other transactions contemplated by this
Agreement and the Ancillary Agreements.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS AND
OF THE COMPANY
SECTION 4.01 Conduct of Business. (a) Conduct of Business by the
Company. During the period from the date of this Agreement to the Closing Date,
the Company shall carry on its business in accordance with applicable Laws and
in the usual, regular and Ordinary Course in substantially the same manner as
heretofore conducted and, to the extent consistent therewith, use all reasonable
efforts to preserve intact its current business organization, keep available the
services of its current officers and employees and preserve its relationships
with customers, suppliers, licensors, licensees, distributors, joint venturers
and others having business dealings with it, except to the extent that the
failure to do so would not have a Material Adverse Effect on the Company.
Without limiting the generality of the foregoing, except as contemplated by this
Agreement, during the period from the date of this Agreement to the Closing
Date, the Company shall not, without obtaining the prior written consent of
Sprint, undertake any of the following:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of any of its capital stock, (y) split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (z) purchase, redeem
or otherwise acquire any shares of capital stock of the Company or any
other equity securities of the Company or any rights, warrants or
options to acquire, or convert into or exchange for, any such shares
or other equity securities, except for Employee Stock Options, shares
repurchased or redeemed pursuant to any existing arrangements with
existing employees;
(ii) except as set forth in subsection (iv) hereof below, issue,
deliver, sell, pledge or otherwise encumber any shares of capital
stock, any other voting securities or any securities convertible into
or exchangeable for, or any rights, warrants or options to acquire,
any such shares, voting securities or convertible or exchangeable
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securities (other than (x) the issuance of new Employee Stock Options
or Director Stock Options under existing Benefit Plans or Common Stock
upon the exercise or conversion of Employee Stock Options or Director
Stock Options, warrants or convertible notes outstanding on the date
of this Agreement and in accordance with their present terms, and (y)
the issuance and sale of the Convertible Preferred Stock and the
Convertible Notes in accordance with the terms hereof);
(iii) any amendment to the certificate of incorporation or
bylaws of the Company;
(iv) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the
stock or assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof if the consideration paid by the
Company in such transaction is in the form of an issuance of capital
stock or Dilutable Securities which in the aggregate are in excess of
the Issuance Percentage Limitation or (y) any assets that are
material, individually or in the aggregate, to the Company;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its Intellectual
Property Assets or any other properties or assets if, as a result
thereof, the Company would suffer a Material Adverse Effect;
(vi) (A) 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 the Company, guarantee any debt securities of another Person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing, except for short-
term borrowings incurred in the Ordinary Course of Business or which
do not exceed $10 million in the aggregate, or (B) make any loans,
advances or capital contributions to, or investments in, any other
Person other than (1) pursuant to existing contractual rights and (2)
non-material loans or advances to employees in the Ordinary Course of
Business;
(vii) make or agree to make any new capital expenditures or
expenditures (other than capital expenditures which are contained in a
duly approved budget of the Company as of the date hereof), which, are
in excess of $5 million in the aggregate.
(viii) change any accounting policy or procedure, other than any
changes required by GAAP or applicable SEC accounting policy;
(ix) fail to maintain its books, accounts and records in any
manner other than the usual, regular and ordinary manner, on a basis
consistent with prior years and in a business-like manner in
accordance with sound commercial practice;
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(x) fail to timely file all tax returns and reports required to
be filed with any Governmental Entity; or
(xi) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. The Company, Newco, Newco Sub, Sprint and Sprint L.P.
shall not, and Sprint shall not permit any of its Subsidiaries to, take any
action that would result in (i) any of the representations and warranties of
such party set forth in this Agreement or the Ancillary Agreements that are
qualified as to materiality becoming untrue, (ii) any of such representations
and warranties that are not so qualified becoming untrue in any material respect
or (iii) any of the conditions set forth in Article II not being satisfied. Each
of the Parties agrees to and shall use its respective commercially reasonable
efforts to cause the conditions for the respective benefit of the other Parties
hereto and set forth in Article II to be satisfied.
(c) Advice of Changes. Each of the Parties shall promptly notify the other
Parties of any change or event having a Material Adverse Effect on the other
Parties. If a Party provides notice to the other Parties of a change or event
having a Material Adverse Effect on the other Parties, and as to any of the
other Parties that fails to deliver notice within five (5) business days to such
notifying Party of its intention to not Close as a result of such change or
event, then such Party failing to deliver such notice shall be deemed to have
waived such change or event.
SECTION 4.02 Access to Property and Information. Sprint, Sprint L.P. and
their counsel, accountants, auditors and representatives shall have full access
during normal business hours to the facilities of the Company and to its books,
records, Contracts and documents concerning its business, assets and properties
that may reasonably be requested, provided that such inspections will not
--------
unreasonably disrupt the Company's business or employees and the Company
receives reasonable advance notice of such inspections.
SECTION 4.03 Public Disclosure. No public release or announcement of the
transactions contemplated by this Agreement or any of the Ancillary Agreements
or related discussions or negotiations shall be made without advance approval
thereof by Sprint, the Company and Newco, except as may be required by Law or
legal process, in which case the other Parties shall receive prior notification
and opportunity for review before release.
SECTION 4.04 HSR Act Filings. As soon as practicable, the Company and
Sprint shall each file completed notification reports under the HSR Act, in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements and will cooperate with each other in attempting to secure
a waiver of the applicable waiting periods under such Act, and, upon the request
of either the Federal Trade Commission or the United States Department of
Justice, will supply such agency with any additional requested information as
expeditiously as possible.
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SECTION 4.05 Information. Each Party will promptly inform the other party
in writing of (i) any litigation commenced against such Party in respect of the
transactions contemplated by this Agreement or any Ancillary Agreement, or (ii)
any material litigation commenced against such Party which would have a Material
Adverse Effect on such Party and its Subsidiaries taken as a whole.
SECTION 4.06 Further Assurances. Each Party shall each execute and
deliver or cause to be executed and delivered such further instruments of
transfer, assignment and conveyance and take such other action as may be
reasonably required to more effectively carry out the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements.
SECTION 4.07 No Solicitation. (a) The Company shall not and shall not
authorize or permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of, the Company to, (i)
solicit or initiate, or encourage the submission of, any Acquisition Proposal,
or approve or authorize any of the foregoing, or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to expedite any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal; provided, however, that to the extent required by
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the fiduciary obligations of the Board of Directors of the Company, as
determined in good faith by the Board of Directors based on the advice of
outside counsel, the Company may, (A) in response to an unsolicited request
therefor, furnish information with respect to the Company to any person pursuant
to a customary confidentiality agreement and discuss such information with such
person, (B) upon receipt by the Company of an Acquisition Proposal, following
delivery to Sprint of the notice required pursuant to Section 4.07(b),
participate in negotiations regarding such Acquisition Proposal, and (C) modify
or withdraw the recommendation to accept the Offer contemplated by Section
1.02(a) or its recommendation that the stockholders of the Company vote in favor
of the Company Stockholder Vote Matters as contemplated by Section 1.06(c).
(b) The Company shall (i) promptly notify Sprint of (A) the existence of
any request for confidential information with respect to, or the receipt of, any
Acquisition Proposal, (B) any inquiry or discussions with respect to, or which
could reasonably be expected to lead to, any Acquisition Proposal, (C) the
execution of a confidentiality agreement with respect to an Acquisition
Proposal, (D) the furnishing of any information in contemplation of an
Acquisition Proposal, whether or not pursuant to a confidentiality agreement,
(ii) describe the terms and conditions of any Acquisition Proposal in reasonable
detail, and (iii) furnish to Sprint all information made available to any Person
making the Acquisition, or contemplating the making of an Acquisition Proposal,
subject to a customary confidentiality agreement.
(c) The Company shall not take any action that would enhance the ability
of any other Person proposing an Acquisition Proposal to obtain the approval of
the Company's stockholders or otherwise consummate such Acquisition Proposal
(including granting any approval pursuant to Section 203 of the DGCL) without
also taking a comparable action that would similarly enhance the ability of
Sprint to obtain any necessary approval of the Company's stockholders of, and
otherwise to consummate, the transactions contemplated by this Agreement and the
Ancillary Agreements or
34
an alternative transaction initiated by Sprint and concurrently withdrawing any
impediments thereto that do not similarly impede such other Person.
(d) Nothing contained in this Section 4.07 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule 14e-2
under the Exchange Act.
SECTION 4.08 Efforts Regarding Outstanding Warrants and Other Dilutable
Securities. Prior to the Closing, the Company will use its commercially
reasonable efforts to cause each of the Warrants and other Dilutable Securities
of the Company outstanding on the Closing Date to be amended or otherwise
modified so that such Warrants and other Dilutable Securities would be
thereafter only convertible into, exchangeable for or give the right to acquire
a number of shares of Newco Common Stock equal to the number of shares of Common
Stock into which such are convertible, exchangeable or exercisable. The Company
shall, at any time reasonably requested by Sprint, update Sprint with respect to
(i) any warrants or other Dilutable Securities of the Company that will be
convertible into, exchangeable for, or given the right to acquire Common Stock
or other voting securities of the Company after the Merger, and (ii) the
Company's progress in obtaining amendments or modifications to each of the
agreements and/or instruments governing and/or evidencing such warrants and/or
Dilutable Securities in order to ensure that such warrants and/or Dilutable
Securities will be convertible into, exchangeable for, or given the right to
acquire solely the same respective number of shares of Newco Common Stock after
the Merger.
ARTICLE V
ADDITIONAL AGREEMENTS
35
SECTION 5.01 Reasonable Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the Parties shall
use all commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement and the Ancillary Agreements, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if any)
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or any of the Ancillary
Agreements or the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement and the Ancillary Agreements.
In connection with and without limiting the foregoing, the Company, Newco and
their respective Boards of Directors shall (i) take all action requested by
Sprint or Sprint L.P. reasonably necessary so that no state takeover statute of
the States of California or Delaware or similar statute or regulation in such
states is or becomes applicable to this Agreement, the Ancillary Agreements or
any transaction contemplated by this Agreement or the Ancillary Agreements and
(ii) if any state takeover statute of the States of California or Delaware or
similar statute or regulation in such states becomes applicable to this
Agreement, any Ancillary Agreement or any transaction contemplated by this
Agreement or any Ancillary Agreement, take all action reasonably requested by
Sprint or Sprint L.P. and within the Company's or Newco's power to permit the
transactions contemplated by this Agreement and the Ancillary Agreements to be
consummated as promptly as practicable on the terms contemplated by this
Agreement and the Ancillary Agreements and otherwise take such actions as are
reasonably requested by Sprint or Sprint L.P. and within the Company's or
Newco's power to minimize the effect of such statute or regulation on the
transactions contemplated by this Agreement and the Ancillary Agreements.
Notwithstanding the foregoing, the Board of Directors of the Company shall not
be prohibited from taking any action permitted by Section 4.07.
(b) Each Party shall give prompt notice to the other parties, of (i) any
representation or warranty made by it contained in this Agreement or any
Ancillary Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect, subject to such qualification, or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure of that Party to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement or any Ancillary
Agreement (including the Knowledge of Sprint of any circumstance or condition
that could reasonably be expected to render Sprint to be unable to satisfy the
condition set forth in Section 2.03(e)); provided, however, that no such
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notification shall affect the representations, warranties, covenants or
agreements of the Parties or the conditions to the obligations of the Parties
under this Agreement or the Ancillary Agreements.
36
SECTION 5.02 Fees and Expenses. Except as provided below, all fees and
expenses incurred in connection with the Offer, this Agreement and the
transactions contemplated by this Agreement and the Ancillary Agreements shall
be paid by the Party incurring such fees or expenses, whether or not the Offer,
the sale of the Convertible Preferred Stock or the Convertible Notes, or the
other transactions contemplated by this Agreement or any Ancillary Agreement on
the terms contemplated hereby or thereby is consummated; provided, however, that
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one-half of the reasonable out-of-pocket expenses incurred by the Company in
preparing the Proxy Statement and S-4, printing and mailing the Proxy Statement,
the SEC filing fees for the S-4 and in holding the Special Meeting shall be paid
by Sprint.
SECTION 5.03 Stockholder Litigation. The Company shall give Sprint prompt
notice of any stockholder litigation against the Company and its directors
relating to the transactions contemplated by this Agreement and the Ancillary
Agreements; provided, however, that no settlement of any such litigation shall
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be agreed to until the Company has consulted with Sprint.
SECTION 5.04 Nasdaq Listing. The Company shall use its best efforts to
cause the Newco Common Stock to be included in The Nasdaq National Market after
the Closing.
SECTION 5.05 Confidentiality. Prior to the date of this Agreement, and
between the date of this Agreement and until the earlier of the Closing Date or
the termination of this Agreement, and thereafter in accordance with the
Ancillary Agreements and the transactions and ongoing business conducted by the
Parties as contemplated hereby and thereby, the Parties have provided, or shall
provide, one another with information which is protected, secret, non-public or
proprietary in nature ("Confidential Information"); provided, however, that the
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term Confidential Information shall not include information which: (a) is or
becomes publicly available other than as a result of a disclosure by the
disclosing Party or its representatives, (b) is or becomes available to the
receiving Party on a nonconfidential basis from a source (other than the
disclosing Party or its representatives) which, to the receiving Party's
knowledge after due inquiry, is not prohibited from disclosing such information
to the receiving Party by a legal, contractual or fiduciary obligation to the
disclosing Party, (c) is independently developed by the receiving Party without
use of the Confidential Information, or (d) is already known by the receiving
Party. Each Party agrees to (i) hold confidential, to protect, and not to
disclose except on a need-to-know basis to its directors, officers, employees,
agents, financial advisors and legal counsel, all Confidential Information
provided to it by any other Party to this Agreement or any Ancillary Agreement,
and except as otherwise required by Law or legal process, or (ii) to use
Confidential Information for any purpose other than to the extent necessary to
evaluate and enforce its rights under this Agreement and any Ancillary
Agreement. The covenants set forth in this Section 5.05 shall remain in effect
until the Closing Date and so long thereafter as any Ancillary Agreement remains
in effect. If this Agreement is terminated prior to consummation of the
transactions contemplated hereby or by any Ancillary Agreement, then each Party
shall return all documents and other material, whether or not confidential,
provided to it pursuant to this Agreement by or on behalf of any other Party to
this Agreement. The foregoing obligations of confidentiality, non-disclosure
and limited use shall be in effect for a period of three years beyond such
termination. During such period, none of the Parties shall use any of the
Confidential Information received from
37
any other Party to the detriment of such other Party. Notwithstanding any other
provision of this Section 5.05, each Party shall have the right to retain and to
use any Confidential Information to the extent necessary to evaluate and enforce
its rights under this Agreement or any Ancillary Agreement.
SECTION 5.06 No Acceleration of Options or Termination Payments. (a) The
Company shall, prior to the Closing, amend, or cause to be amended, (i) the 1995
Stock Option Plan and, if necessary, any options granted thereunder, (ii) the
employment agreement with Xxxxxxx X. Xxxxx and any other employment agreements
with officers, directors or employees of the Company, (iii) any other plan,
agreement, arrangement or understanding giving rise to any options, warrants or
any other rights to purchase capital stock of the Company are granted or issued,
(iv) any plan, agreement, arrangement or understanding pursuant to which any
termination or severance pay or other compensation of any officer, director or
employee of the Company is or may become due, in order, in any such case, to
ensure that none of the transactions contemplated by this Agreement or any of
the Ancillary Agreements (including, without limitation, conversion of the
Convertible Preferred Stock and/or the Convertible Notes) will, constitute a
"change of control," or any similar event or occurrence within the meaning of
any such term or any similar term contained in any of the foregoing, or
otherwise cause or result in the acceleration of the vesting of such options or
rights or of the time at which such options or rights are permitted to be
exercised, or the acceleration of the right to receive termination or severance
pay or other compensation, in any such case either alone or together with any
other event or occurrence, such as the termination or constructive termination
of employment of any officer, director or employee of the Company.
SECTION 5.07 Amortization and Writeoffs of Goodwill and Assets. The
Company and Newco agree that none of the goodwill, or other tangible or
intangible assets acquired pursuant to, the transactions contemplated by this
Agreement or any Ancillary Agreement shall be amortized or written off other
than on a straight line basis of equal amounts taken over a period of no less
than 24 months commencing with the Closing Date, except for any such amount
which, individually or in the aggregate, is not material.
SECTION 5.08 Maintaining SIP Subscribers at Newco. The Company and Newco
agree that all of the SIP Subscribers assigned to Newco at the Closing shall be
maintained as customers of Newco and not the Company for a period of at least
two years after the Closing Date (unless such customers terminate their customer
agreement with Newco on their own initiative); provided, however, that such
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customers may be serviced by the Company pursuant to an agreement to do so
containing terms and conditions as would be obtained by Persons dealing at arms
length. During the period commencing on the Closing Date and continuing until
the 31st day after the Closing Date, Newco shall not (i) discontinue or modify,
or publicly announce the discontinuance or modification, of the current $5.00
credit program (i.e., whereby SIP Subscribers are entitled to a $5.00 credit
upon certain circumstances set forth in the terms and conditions governing such
program), or (ii) make any change or modification to any other term or condition
of the SIP Agreement which is reasonably likely to result in a reduction in the
number of SIP Subscribers within the aforementioned time period.
SECTION 5.09 Certification of SIP Subscribers.
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(a) On or before the 15th day following the Closing Date, Sprint L.P.
shall prepare and deliver to the Company a schedule certified by a duly
authorized executive officer showing (i) the number and identity of the SIP
Subscribers assigned to the Company at Closing pursuant to Section 1.03(ii)
who have paid pursuant to the SIP Agreements at any time on or prior to the
Closing Date and (ii) the number and identity of SIP Subscribers assigned
to the Company at Closing pursuant to Section 1.03(ii) who had not paid
pursuant to the SIP Agreements at any time on or prior to the Closing Date.
For purposes of this Section 5.09, a SIP Subscriber shall be deemed to have
paid on the date of receipt of payment or upon which the subscriber's
credit card is billed by Sprint L.P., the Company or Newco, as the case may
be.
(b) On or before the 45th day following the Closing Date, Newco shall
prepare and deliver to Sprint L.P. a schedule (the "SIP True-Up
Certificate") certified by its chief financial officer showing (i) the
number and identity of the SIP Subscribers who have paid pursuant to SIP
Agreements at any time on or prior to the 31st day after the Closing Date
("Paid SIP Subscribers") and (ii) the number and identity of the SIP
Subscribers who have not paid pursuant to SIP Agreements at any time on
prior to the 31st day after the Closing Date. The Parties agree to
cooperate and to provide such further information as may be reasonably
requested to verify the matters covered by the SIP True-Up Certificate,
with such mutually agreed upon number of Paid SIP Subscribers referred to
as the "Final Number of Paid SIP Subscribers."
(c) If the Final Number of Paid SIP Subscribers is less than 130,000,
then Sprint L.P. shall forfeit to Newco a number of shares of Convertible
Preferred Stock equal to the product of (i) five shares of Convertible
Preferred Stock, times (ii) 130,000 minus the Final Number of Paid SIP
Subscribers, with such product referred to as the "Number of Forfeited
Shares of Convertible Preferred Stock." Sprint L.P. shall deliver to Newco
the stock certificate evidencing its shares of Convertible Preferred Stock
originally issued to it on the Closing Date (the "Number of Original Shares
of Convertible Preferred Stock"), together with duly executed stock power
transferring to Newco the Number of Forfeited Shares of Convertible
Preferred Stock and Newco shall thereupon issue to Sprint L.P. a balance
certificate evidencing a number of shares of Convertible Preferred Stock
equal to the difference between the Number of Original Shares of
Convertible Preferred Stock and the Number of Forfeited Shares of
Convertible Preferred Stock.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01 Termination. (a) Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated, and the transactions
contemplated hereby or by any Ancillary Agreement abandoned, at any time prior
to the Closing Date:
39
(i) by mutual written consent of all of the Parties;
(ii) by any of the Parties if the Offer shall not have been
consummated on or before the Expiration Date;
(iii) by Sprint and Sprint L.P. if any of the conditions set forth in
Sections 2.01 or 2.02 shall have become incapable of fulfillment, and shall
not have been waived by Sprint and Sprint L.P.; or
(iv) by the Company, Newco and Newco Sub if (x) any of the
conditions set forth in Sections 2.01 or 2.03 shall have become incapable
of fulfillment, and shall not have been waived by the Company, Newco and
Newco Sub, or (y) Sprint shall have failed to commence the Offer within
five business days following the date of initial public announcement of the
Offer;
provided, however, that the Party seeking termination pursuant to clause (ii),
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(iii) or (iv) is not in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or any Ancillary
Agreement.
(b) In the event of termination by any of the Parties pursuant to this
Section 6.01, written notice thereof shall forthwith be given to the other
Parties and the transactions contemplated by this Agreement and the Ancillary
Agreements shall be terminated, without further action by any Party.
SECTION 6.02 Effect of Termination. Each Party's right of termination
under Section 6.01 is in addition to any other rights it may have under this
Agreement, any Ancillary Agreement or otherwise, and the exercise of a right of
termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 6.01 (other than those obligations set forth in
Sections 5.02 and 5.05 which shall continue to apply upon termination of this
Agreement prior to the consummation of the transactions contemplated by this
Agreement or by any Ancillary Agreement, all further obligations of the Parties
under this Agreement and any Ancillary Agreement will terminate; provided,
--------
however, that if this Agreement is terminated by a Party because of fraud or a
-------
willful and material breach of the Agreement or any Ancillary Agreement by any
other Party or because one or more of the conditions to the terminating party's
obligations under this Agreement is not satisfied as a result of any other
Party's fraud or willful and material failure to comply with its obligations
under this Agreement or any Ancillary Agreement, the terminating Party's right
to pursue all legal remedies will survive such termination unimpaired.
ARTICLE VII
MISCELLANEOUS
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SECTION 7.01 Notices. Unless otherwise provided herein, any notice,
request, waiver, instruction, consent or document or other communication
required or permitted to be given by this Agreement shall be effective only if
it is in writing and (a) delivered by hand or sent by certified mail, return
receipt requested, (b) if sent by a nationally-recognized overnight delivery
service with delivery confirmed, or (c) if telexed or telecopied, with receipt
confirmed as follows:
The Company: 0000 Xxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: President and CEO
Telecopy No.: (000) 000-0000
with a copy to: Hunton & Xxxxxxxx
NationsBank Plaza, Suite 4100
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx X. Hobby, Esq.
Telecopy No.: (000) 000-0000
Newco and Newco Sub: 0000 Xxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: President and CEO
Telecopy No.: (000) 000-0000
with a copy to: Hunton & Xxxxxxxx
NationsBank Plaza, Suite 4100
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx X. Hobby, Esq.
Telecopy No.: (000) 000-0000
Sprint: Sprint Corporation
0000 Xxxxxxx Xxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
Attn: Chief Financial Officer
Telecopy No.: (000) 000-0000
with a copy to: Sprint Corporation
0000 Xxxxxxx Xxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
Attn: Corporate Secretary
Telecopy No.: (000) 000-0000
with an additional copy to: Xxxxxxx, Mag & Fizzell, P.C.
1201 Walnut, Suite 2800
P.O. Box 419251
41
Kansas City, Missouri 64141-6251
Attn: Xxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
The Parties shall promptly notify each other of any change in their respective
addresses or facsimile numbers or of the Person or office to receive notices,
requests or other communications under this Section 7.02. Notice shall be
deemed to have been given as of the date when so personally delivered, when
actually delivered by the U.S. Postal Service at the proper address, the next
day when delivered during business hours to an overnight delivery service
properly addressed or when receipt of a telex or telecopy is confirmed, as the
case may be, unless the sending party has actual Knowledge that such notice was
not received by the intended recipient.
SECTION 7.02 Entire Agreement. This Agreement and, upon execution by all
Parties thereto, the Ancillary Agreements, together with the respective
Schedules and Exhibits hereto and thereto, embody the entire agreement and
understanding of the Parties in respect to the matters contemplated hereby and
thereby and supersede and render null and void all other prior agreements and
understandings, written and oral, with respect to the subject matters hereof and
thereof, provided that this provision shall not abrogate any other written
--------
agreement among the Parties executed simultaneously with this Agreement. No
Party shall be liable or bound to any other Party in any manner by any promises,
conditions, representations, warranties, covenants, agreements and
understandings, except as specifically set forth herein or therein.
SECTION 7.03 Waiver, Amendment, Etc. Except as otherwise permitted in
this Agreement, this Agreement may not be amended or supplemented, unless set
forth in a writing signed by, and delivered to, all the Parties.
Except as otherwise permitted in this Agreement, the terms or conditions of
this Agreement may not be waived unless set forth in a writing signed by the
Party entitled to the benefits thereof. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of such provision at
any time in the future or a waiver of any other provision hereof. The rights
and remedies of the Parties are cumulative and not alternative. Except as
otherwise provided in this Agreement, neither the failure nor any delay by any
Party in exercising any right, power or privilege under this Agreement, or any
of the other Ancillary Agreements or the documents referred to in this Agreement
or therein will operate as a waiver of such right, power or privilege, and no
single or partial exercise of any such right, power or privilege will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege.
SECTION 7.04 Successors and Assigns. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned or
transferred, in whole or in part, by any of the Parties without the prior
written consent of the other Parties; provided, however, that such assignment or
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transfer may be made by (i) Sprint to any of its Affiliates, or (ii) pursuant to
any merger or sale of substantially all of the assets or stock of Sprint or such
Affiliates (or any transaction having such effect) that is pursuant to an
agreement entered into after the Closing Date. Subject to the
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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.
SECTION 7.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflict of laws principles.
SECTION 7.06 Severability. If any term or provision of this Agreement or
the Ancillary Agreements or the application thereof to either party or set of
circumstances shall, in any jurisdiction and to any extent, be finally held
invalid or unenforceable, such term or provision shall only be ineffective as to
such jurisdiction, and only to the extent of such invalidity or
unenforceability, without invalidating or rendering unenforceable any other
terms or provisions of this Agreement or the Ancillary Agreements or under any
other circumstances, and the parties shall negotiate in good faith a substitute
provision which comes as close as possible to the invalidated or unenforceable
term or provision, and which puts each party in a position as nearly comparable
as possible to the position it would have been in but for the finding of
invalidity or unenforceability, while remaining valid and enforceable.
SECTION 7.07 Counterparts. This Agreement may be executed in one or more
counterparts each of which when so executed and delivered shall for all purposes
be deemed to be an original but all of which, when taken together, shall
constitute one and the same Agreement.
SECTION 7.08 Headings. The table of contents, captions and headings used
in this Agreement or any Ancillary Agreements are inserted for convenience only
and shall not be deemed to constitute part of this Agreement or any Ancillary
Agreements or to affect the construction or interpretation hereof.
SECTION 7.09 No Third-Party Beneficiaries. Nothing in this Agreement or
any Ancillary Agreements, express or implied, shall create or confer upon any
Person (including but not limited to any employees), other than the Parties or
their respective successors and permitted assigns, any legal or equitable
rights, remedies, obligations, liabilities or claims under or with respect to
this Agreement or any Ancillary Agreements, except as expressly provided herein.
SECTION 7.10 Interpretation. (a) Unless specifically stated otherwise,
references to Articles, Sections, Exhibits and Schedules refer to Articles,
Sections, Exhibits and Schedules in this Agreement. References to "includes"
and "including" mean "includes without limitation" and "including without
limitation."
(b) Each Party is a sophisticated legal entity that was advised by
experienced counsel and, to the extent it deemed necessary, other advisors in
connection with this Agreement and the Ancillary Agreements. Accordingly, each
Party hereby acknowledges that no Party has relied or will rely in respect of
this Agreement or any Ancillary Agreements or the transactions contemplated
hereby or thereby upon any document or written or oral information previously
furnished to or discovered by it or its representatives, other than this
Agreement or any Ancillary Agreements or the documents and instruments delivered
at the Closing.
43
(c) No provision of this Agreement or any Ancillary Agreement shall be
interpreted in favor of, or against, any of the Parties by reason of the extent
to which any such Party or its counsel participated in the drafting thereof or
by reason of the extent to which any such provision is inconsistent with any
prior draft hereof or thereof.
SECTION 7.11 Inclusion of Information in Schedules. The inclusion of any
information in any disclosure schedule (i) shall not be deemed an admission that
any such information is material for purposes of the representation and warranty
to which it relates or any other representation and warranty or for any other
purpose related to the Agreement or any Ancillary Agreement or the transactions
contemplated hereby or thereby, including, without limitation, for purposes of
any covenants, closing conditions or any other remedies the Parties may have,
and (ii) shall not be used or interpreted in any manner to create a standard of
materiality for any such purpose.
SECTION 7.12 Exclusive Jurisdiction and Consent to Service of Process.
The Parties agree that any Action arising out of or relating to this Agreement,
the Ancillary Agreements or the transactions contemplated hereby or thereby
shall be brought by the Parties only in a Delaware state court or a federal
court sitting in that state, which shall be the exclusive venue of any such
Action. Each Party waives any objection which such party may now or hereafter
have to the laying of venue of any such Action, and irrevocably consents and
submits to the jurisdiction of any such court (and the appropriate appellate
courts) in any such Action. Any and all service of process and any other notice
in any such Action shall be effective against such Party when transmitted in
accordance with Section 7.01. Nothing contained herein shall be deemed to affect
the right of any Party to serve process in any manner permitted by Law.
SECTION 7.13 Amendment. No amendment, modification or alteration of the
terms or provisions of this Agreement or any Ancillary Agreement, including any
Schedules and Exhibits hereto or thereto, shall be binding unless the same shall
be in writing and duly executed by the Party against whom such amendment,
modification or alteration is sought to be enforced.
SECTION 7.14 Survival. Except for the covenants or agreements set forth
in Article V or any other covenants or agreements contained in this Agreement or
any Ancillary Agreements which shall continue after the Closing, the
representations, warranties, agreements and covenants in this Agreement, or in
the Schedules, Exhibits hereto, and in certificates delivered at the Closing,
shall not survive after the Closing; provided, however, that with respect to
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claim(s) for fraud and/or willful and material breach(es) hereof, all such
representations, warranties, agreements and covenants shall survive the Closing,
and continue for 24 months, except for any agreement or covenant which by its
terms continues in effect for a longer or shorter time period, and shall in no
way be affected by any investigation of the subject matter thereof made by or on
behalf of any Party or any information capable of being acquired by any Party.
SECTION 7.15 WAIVER OF JURY TRIAL. THE COMPANY, NEWCO, NEWCO SUB, SPRINT
AND SPRINT L.P. HEREBY IRREVOCABLY AND
44
UNCONDITIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY
ACTION INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR THE RELATIONSHIP ESTABLISHED
HEREUNDER OR THEREUNDER.
ARTICLE VII
DEFINITIONS
Definitions. For purposes of this Agreement, the terms set forth below
shall have the following meanings:
"Acquisition Proposal" means any proposal for a tender or exchange
offer, a merger, consolidation or other business combination,
recapitalization, liquidation, dissolution or similar transaction involving
a Party or any proposal or offer to acquire in any manner, directly or
indirectly, a material equity interest in, or a material amount of voting
securities (with the acquisition of beneficial ownership of 15% or more of
a Party's voting securities being deemed to be material for this purpose)
or assets of, a Party, other than the transactions contemplated by this
Agreement and the Ancillary Agreements.
"Action" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any Government Entity.
"Affiliate" means, with respect to any Person, or any other Person
controlling, controlled by, or under common control with such Person. For
purposes of this Agreement, the term "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with" as used
with respect to any Person) means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of such Person whether through ownership of voting securities, by
contract or otherwise.
"Agreement" means this Agreement, together with the Schedules and
Exhibits hereto.
"Agreement and Plan of Merger" means the Agreement and Plan of Merger
among Newco, Newco Sub and the Company, dated as of the date hereof,
setting forth, inter alia, the terms and conditions of the merger of Newco
----- ----
Sub into the Company, a copy of which is attached to the Agreement as
Exhibit F.
"Agreement to Vote" means the Agreement To Vote Stock, a copy of which
is attached to the Agreement as Exhibit J, executed in favor of Sprint by
Voting Stockholders in connection with the Offer and the other transactions
contemplated hereby and by the Ancillary Agreements.
45
"Agreement to Vote and Tender" means the Agreement to Vote and Tender
Stock, a copy of which is attached to the Agreement as Exhibit K, executed
in favor of Sprint by the Tendering Stockholders in connection with the
Offer and the other transactions contemplated hereby and by the Ancillary
Agreements.
"Ancillary Agreements" means any and all of the Certificate of
Designation, the Governance Agreement, the Master Assignment, the Marketing
Agreement, the Network Services Agreement, the Registration Rights
Agreement, the Credit Agreement, the Stockholders Agreement, the Agreement
and Plan of Merger, the Agreement to Vote and the Agreement to Vote and
Tender.
"Benefit Plan" means pension, retirement, savings, profit sharing,
deferred compensation, incentive compensation, stock option, severance or
termination pay, medical, dental, life or other insurance, disability or
other written employee benefit plan, program, agreement or arrangement
maintained, sponsored or contributed to by the Company, whether covering
employees of the Company, former employees of the Company, or directors or
former directors of the Company (including, but not limited to, any
"Employee Benefit Plan," as defined in Section 3(3) of ERISA).
"Certificate of Designation" shall have the meaning set forth in
Section 1.03.
"Closing" shall have the meaning set forth in Section 1.09.
"Closing Date" shall have the meaning set forth in Section 1.09.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $.01 per share, of
the Company.
"Company Filed SEC Documents" shall mean the SEC Documents of the
Company filed and publicly available prior to the date of this Agreement.
"Company's Knowledge" means the actual knowledge of any of the
executive officers and directors (excluding Xxxx X. Xxxxxxxx) of Company
without any duty to inquire or attribution of knowledge from any other
Person to the persons in such capacities.
"Company Stockholder Vote Matters" shall have the meaning set forth in
Section 1.06(b).
"Confidential Information" shall have the meaning set forth in Section
5.05.
"Contract" means all contracts, agreements, instruments, leases,
licenses, commitments and arrangements.
46
"Convertible Debt Financing" shall have the meaning set forth in the
fifth WHEREAS paragraph of the preamble to this Agreement.
"Convertible Notes" shall have the meaning set forth in the fifth
WHEREAS paragraph of the preamble to this Agreement.
"Convertible Preferred Stock" means the Series A Convertible Preferred
Stock, par value $.01 per share, of Newco.
"Credit Agreement" means the Credit Agreement dated as of the date
hereof among Sprint, Newco and the Company whereby Sprint agrees to provide
Newco and the Company, as co-borrowers, with the Convertible Debt
Financing, a copy of which is attached to the Agreement as Exhibit E.
"DGCL" means the Delaware General Corporate Law, title 8 of the
Delaware Code.
"Dilutable Securities" shall have the meaning set forth in Section
3.01(c).
"Director Stock Options" shall have the meaning set forth in Section
3.01(c).
"Dollars" or "$" means lawful currency of the United States.
"Employee Stock Options" shall have the meaning set forth in Section
3.01(c).
"Encumbrance" means any charge, claim, community property interest,
equitable interest Lien, Tax lien, option, pledge, security interest, right
of first refusal or restriction of any kind, including any restriction on
transfer, receipt of income or exercise of any other attribute of
ownership.
"Environment" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
"Environmental Law" means any Law that requires or relates to
protection of human health or the Environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder as in effect
at the applicable time.
"Expiration Date" shall have the meaning set forth in Section 1.01.
47
"GAAP" shall mean Generally Accepted Accounting Principles, as in
effect on the date of this Agreement. All references herein to financial
statements prepared in accordance with GAAP shall mean in accordance with
GAAP consistently applied throughout the periods to which reference is
made.
"Governance Agreement" shall mean the Governance Agreement, dated as
of the date hereof, among Sprint, Sprint L.P., the Company and Newco, a
copy of which is attached to the Agreement as Exhibit G.
"Governmental Entity" means any federal, state, foreign or local
government, any of its subdivisions, administrative agencies, authorities,
commissions, boards or bureaus, any federal, state, foreign or local court
or tribunal and any arbitrator.
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
release, storage, transfer, transportation, treatment, or use (including
any withdrawal or other use of groundwater) of Hazardous Materials in, on,
under, about, or from the facilities or any part thereof into the
Environment.
"Hazardous Materials" means any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined to
be, hazardous, radioactive, or toxic or a pollutant or a contaminant under
or pursuant to any Environmental Law, including any mixture or solution
thereof, and specifically including petroleum and all derivatives thereof
or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the regulations promulgated thereunder.
"Intellectual Property Assets" includes all marks, patent rights,
copyrights and trade secrets of the Company.
"IRS" means the United States Internal Revenue Service.
"Issuance Percentage Limitation" means the lesser of (a) 20%, or (b)
the percentage of shares of outstanding Common Stock which if issued, and
after taking into effect such issuance, would cause the total number of
shares of Common Stock subject to (i) all irrevocable proxies granted in
favor of Sprint to vote "for" the Company Stockholder Vote Matters, and
(ii) votes "for" the Company Stockholder Vote Matters pursuant to
Agreements to Vote to constitute, in the aggregate, less than 51% of the
outstanding shares of Common Stock. For purposes of this definition,
"outstanding shares of Common Stock" shall be calculated on a fully diluted
basis, excluding any Dilutable Securities which are not or will not be
vested or otherwise exercisable on or prior to the Offer Acceptance Time.
48
"Knowledge" means the actual knowledge of any of the executive
officers and directors of the Parties without any duty to inquire or
attribution of knowledge from any other Person to the persons in such
capacities.
"Law" means any federal, state, local, municipal, foreign,
international, multinational, or other judicial or administrative order,
judgment, decree, constitution, law, ordinance, common law of California
and Delaware, regulation, statute, or treaty.
"Lien" means any lien, pledge, security interest or Encumbrance
whatsoever, mortgage, deed of trust, security interest, retention of title
agreement, easement, encroachment, condition, reservation, covenant, lis
pendens lien, claim of lien, adverse claim, or restriction on attributes of
ownership.
"Marketing Agreement" means the Marketing and Distribution Agreement,
dated as of the date hereof, among Sprint, Sprint L.P., Newco and the
Company, whereby Sprint, Sprint L.P., Newco and the Company agree to
provide certain cooperation and support to each other in specified
marketing matters and Sprint L.P. grants Newco the right to utilize certain
distribution channels of Sprint L.P., a copy of which is attached to the
Agreement as Exhibit D.
"Master Assignment" means the Master Assignment and Assumption
Agreement, dated as of the date hereof, between Sprint L.P. and Newco, by
which Sprint L.P. grants to Newco all of the right, title and interest of
Sprint L.P. in and to all agreements with SIP Subscribers and all rights to
provide Internet access services to the SIP Subscribers after the Closing
Date and Newco assumes all of the obligations to continue the performance
of such agreements after the Closing Date, a copy of which is attached to
the Agreement as Exhibit B.
"Material Adverse Effect" means any change or effect having a material
adverse effect (or any development as to which there is a substantial
likelihood, insofar as can be foreseen, that would have such an effect) on
the business, properties, assets, condition (financial or otherwise), or
results of operations of the Company, Newco, Newco Sub, Sprint, Sprint L.P.
and Sprint's Subsidiaries.
"Merger" means the merger of Newco Sub into the Company in accordance
with the terms and conditions set forth in the Agreement and Plan of
Merger.
"Minimum Tender Condition" shall have the meaning set forth in Section
2.01(a).
"Network Agreement" means the Network Agreement, dated as of the date
hereof, among Sprint L.P., Newco and the Company, which grants Newco and
the Company the right to use a minimum and maximum number of ports on
Sprint L.P.'s long-distance network, along with pricing and other terms set
forth therein, a copy of which is attached to the Agreement as Exhibit C.
00
"Xxxxx Xxxxxx Xxxxx" shall have the meaning set forth in the sixth
WHEREAS paragraph of the preamble of this Agreement.
"Offer" shall have the meaning set forth in the second WHEREAS
paragraph of the preamble to this Agreement.
"Offer Acceptance Condition" shall have the meaning set forth in
Section 2.04.
"Offer Acceptance Time" means the date and time upon which Sprint
accepts for payment shares of Common Stock pursuant to the Offer.
"Offer Documents" shall have the meaning set forth in Section 1.01(b).
"Offer Price" shall have the meaning set forth in the second WHEREAS
paragraph of the preamble to this Agreement.
"Ordinary Course of Business" means an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of
such Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority);
"Paid SIP Subscribers" shall have the meaning set forth in Section
5.09(b).
"Party" means any Person that is a signatory to this Agreement.
"Permits" shall have the meaning set forth in Section 3.01(l).
"Person" means any natural person, corporation, partnership, limited
liability company, trust, unincorporated organization or other entity.
"Preferred Stock Consideration" shall have the meaning set forth in
Section 1.03.
"Proxy Statement" shall have the meaning set forth in Section 1.06(b).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated as of the date hereof, among Newco, Sprint and Sprint
L.P., a copy of which is attached hereto as Exhibit I.
"Returns" means all tax returns that must be filed with any federal,
state or local taxing authority.
50
"S-4" shall have the meaning set forth in Section 1.06(b).
"SARs" means stock appreciation rights.
"SEC" means the Securities and Exchange Commission and the staff
thereof.
"SEC Documents" shall have the meaning set forth in Section 3.01(e).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder as in effect at the applicable
time.
"Significant Subsidiary" means any Subsidiary of a Party that
constitutes a significant subsidiary within the meaning of Rule 1-02 of
Regulation S-X of the SEC.
"SIP Agreements" means the agreements between Sprint L.P. and the SIP
Subscribers governing the receipt of Internet access from Sprint L.P.
"SIP Subscriber" shall mean a registered customer of Sprint L.P.'s
"Sprint Internet Passport" service, regardless of whether on an hourly
payment plan or a fixed payment plan, and regardless of whether in an
initial introductory period.
"Special Meeting" shall have the meaning set forth in Section 1.05(b).
"Sprint Shares" shall have the meaning set forth in Section 3.03(g)
"Stock Equivalents" shall have the meaning set forth in Section
3.01(c).
"Stockholders Agreement" means the Stockholders Agreement, dated as of
the date hereof, among Sprint and certain stockholders of the Company, a
copy of which is attached to the Agreement as Exhibit H.
"Subsidiary" shall mean a Person, the equity of which is at least 50%
owned by another Person.
"Surviving Corporation" shall have the meaning set forth in Section
1.05(a).
"Tax" or "Taxes" means all income, profits, franchise, gross receipts,
capital, sales, use, withholding, value added, ad valorem, transfer,
employment, social security, disability, occupation, property, severance,
production, excise and other taxes, duties and similar governmental charges
and assessments imposed by or on behalf of any Governmental Entity
(including interest and penalties thereon).
51
"Tendering Stockholders" means the holders of Common Stock who are
identified in Schedule 1 to the Agreement to Vote and Tender.
"Threatened" means any demand or statement that has been made in
writing that would lead a prudent person to conclude that a claim,
proceeding, dispute, Action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
"Unaudited Balance Sheet" means the Unaudited Consolidated Balance
Sheet of the Company dated at the Unaudited Balance Sheet Date.
"Unaudited Balance Sheet Date" means September 30, 1997.
"Voting Stockholders" means the holders of Common Stock who are
identified in Schedule 1 to the Agreement to Vote.
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IN WITNESS WHEREOF, the Parties have caused their respective duly
authorized officers to execute this Agreement as of the day and year first above
written.
SPRINT CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Vice President - Strategic
Planning and Corporate
Development
SPRINT COMMUNICATIONS COMPANY L.P.
By: US Telecom, Inc., General Partner.
By: /s/ Xxx X. Xxxxxx
------------------------------------
Name: Xxx X. Xxxxxx
Title: Vice President and
Secretary
EARTHLINK NETWORK, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President & CEO
DOLPHIN, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President & CEO
DOLPHIN SUB, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President & CEO
SIGNATURE PAGE FOR INVESTMENT AGREEMENT
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