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