<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACTION OF 1934
Date of Report (Date of earliest event reported): February 10, 1998
EARTHLINK NETWORK, INC.
------------------------------------------------------
(Exact Name of registrant as Specified in its Charter)
DELAWARE 000-20799 95-4481766
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
3100 NEW YORK DRIVE, SUITE 210, PASADENA, CA 91107
- -------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (626) 296-2400
NOT APPLICABLE
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
On February 10, 1998, EarthLink Network, Inc. (the "Company"), Sprint
Corporation ("Sprint"), an affiliate of Sprint, Sprint Communications Company
L.P. ("Sprint L.P."), and an entity created by the Company, Dolphin, Inc.
("Newco"), entered into an Investment Agreement (the "Investment Agreement").
The Investment Agreement contemplates a strategic relationship in the area of
Internet access and related services, and addresses the terms and conditions of
a proposed investment by Sprint in the Company and related transactions.
Pursuant to the Investment Agreement, Sprint proposes to make a tender offer to
purchase 1,250,000 shares of Common Stock of the Company, $.01 par value
("Common Stock"), for an aggregate cash consideration of $56,250,000, at a price
per share of Common Stock of $45 net to each seller in cash (the "Offer"), upon
the terms and subject to the conditions set forth in the Investment Agreement.
The Board of Directors of the Company has approved the Offer and the other
transactions contemplated by the Investment Agreement, and recommends that the
Company's stockholders who wish to receive cash for their shares of Common Stock
accept the Offer.
Immediately following the closing of the Offer, Sprint L.P. proposes to
purchase 4,102,941 shares of Series A Convertible Preferred Stock, par value
$.01 per share of Newco (the "Convertible Preferred Stock"), in exchange for (i)
aggregate cash consideration of $23,750,000, (ii) the assignment to Newco of
100% of Sprint L.P.'s "Sprint Internet Passport" subscribers and (iii) entering
into a network agreement whereby Newco and the Company will utilize Sprint's
long-distance network under specified terms and conditions. In addition, Sprint
will enter into a marketing and distribution agreement whereby Newco and the
Company will utilize the Sprint brand under specified terms and conditions and
will, among other things, have the right to use Sprint distribution channels
under specified terms and conditions and agree to sell certain Sprint products.
Sprint will also provide Newco and the Company, as co-borrowers, with up to
$25,000,000 of convertible senior debt financing on or after the closing of the
transaction, with such amount to increase to up to $100,000,000 over time, such
indebtedness to be evidenced by one or more Convertible Senior Promissory Notes
(the "Convertible Notes").
The closing of the acquisition of the Convertible Preferred Stock and the
other transactions referred to above other than the Offer will take place
concurrently with a merger of a wholly-owned subsidiary of Newco into the
Company (the "Merger"), and the conversion of each share of Common Stock
outstanding into one share of common stock of Newco, par value $.01 per share
("Newco Common Stock") pursuant to the Merger, in each case upon the terms and
subject to the conditions set forth in the Investment Agreement and the
ancillary agreements. Upon consummation of the Merger, the Company, as the
corporation surviving the Merger, will be a wholly-owned subsidiary of Newco.
Newco will make application to have the Newco Common Stock included in The
Nasdaq National Market.
Consummation of the Offer and the other transactions contemplated by the
Investment Agreement and the ancillary agreements is subject to certain
conditions, including (i) expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and (ii) the approval by
the Company's stockholders of the Merger, the issuance and sale of the
Convertible Preferred Stock, the Convertible Notes and the Newco Common Stock
issuable upon conversion of the Convertible Preferred Stock and the Convertible
Notes and any related
<PAGE>
matters that must be approved by the holders of Common Stock or Newco Common
Stock in order for the transactions contemplated by the Investment Agreement or
any ancillary agreement to be consummated (collectively, the "Company
Stockholder Vote Matters").
To induce Sprint and Sprint L.P. to enter into the Investment Agreement and
the ancillary agreements, and to consummate the transactions contemplated
thereby, certain stockholders of the Company executed and delivered to Sprint
and Sprint L.P. an Agreement to Vote Stock, which obligates the parties thereto
to vote shares of Common Stock held by them in favor of the Company Stockholder
Vote Matters, and certain other stockholders of the Company executed and
delivered to Sprint and Sprint L.P. an Agreement to Vote and Tender Stock, which
obligates the parties thereto to tender shares of Common Stock held by them to
Sprint and to vote such stock in favor of the Company Stockholder Vote Matters.
In connection with the Investment Agreement, the Company, Newco, Sprint and
Sprint L.P. entered into a Governance Agreement, which will take effect upon the
closing of the transactions contemplated by the Investment Agreement. The
Governance Agreement establishes certain terms and conditions concerning the
corporate governance of Newco upon consummation of the transactions contemplated
by the Investment Agreement, the acquisition and disposition of equity
securities of Newco by Sprint, Sprint L.P. and any of their respective
affiliates (collectively, "Affiliated Equity Holders"), the rights of Sprint to
make offers to purchase all of the outstanding securities of Newco not owned by
Affiliated Equity Holders and the rights of the Board of Directors of Newco to
receive and entertain offers to effect "business combinations" (as defined in
the Governance Agreement). The Company and certain of its stockholders have
entered into a Stockholders' Agreement with Sprint and Sprint L.P., which
obligates such stockholders, under certain terms and conditions described
therein, to take action in support of the Company's obligations to Sprint and
Sprint L.P. under the Governance Agreement.
The Offer and the other transactions contemplated by the Investment
Agreement and the ancillary agreements are expected to be consummated during the
second quarter of 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED:
Not Applicable
(B) THE FOLLOWING PRO FORMA FINANCIAL INFORMATION AND EXHIBITS ARE FILED
AS PART OF THIS REPORT:
Not Applicable
(C) EXHIBITS
The following exhibits are filed herewith in accordance with the
provisions of Item 601 of Regulation S-K.
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
2.1 Investment Agreement dated as of February 10, 1998, among Sprint
Corporation, a Kansas corporation, Sprint Communications Company
L.P., a Delaware limited partnership, Dolphin, Inc., a Delaware
corporation, Dolphin Sub, Inc., a Delaware corporation, and
EarthLink Network, Inc., a Delaware corporation.
10.1 Governance Agreement, dated as of February 10, 1998, among Sprint
Corporation, a Kansas corporation, Sprint Communications Company
L.P., a Delaware limited partnership, Dolphin, Inc., a Delaware
corporation, and EarthLink Network, Inc., a Delaware corporation.
10.2 Proposed form of Certificate of Designation, Preferences and Rights
of Series A Convertible Preferred Stock of Dolphin, Inc.
10.3 Credit Agreement, dated as of February 10, 1998, between Dolphin,
Inc., a Delaware corporation, and EarthLink Network, Inc., a
Delaware corporation, as Borrowers, and Sprint Corporation, a
Kansas corporation, as Lender.
99.1 Registration Rights Agreement, dated as of February 10, 1998, among
Dolphin, Inc., a Delaware corporation, Sprint Corporation, a Kansas
corporation, and Sprint Communications Company L.P., a Delaware
limited partnership.
99.2 Stockholders' Agreement, dated as of February 10, 1998, among
EarthLink Network, Inc., a Delaware corporation, Dolphin, Inc., a
Delaware corporation, Sprint Corporation, a Kansas corporation,
Sprint Communications Company L.P., a Delaware limited partnership,
and the persons identified on Schedule I thereto.
99.3 Agreement to Vote Stock, dated as of February 10, 1998, among the
Granting Stockholders named on Schedule A thereto, Sprint
Corporation, a Kansas corporation and Sprint Communications Company
L.P., a Delaware limited partnership.
99.4 Agreement to Vote and Tender Stock, dated as of February 10, 1998,
among the Granting Stockholders named on Schedule A thereto, Sprint
Corporation, a Kansas corporation and Sprint Communications
Company, L.P., a Delaware limited partnership.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EARTHLINK NETWORK, INC.
/s/ Charles G. Betty
Date: February 13, 1998 -------------------------------------
Charles G. Betty,
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
2.1 Investment Agreement dated as of February 10, 1998, among Sprint
Corporation, a Kansas corporation, Sprint Communications Company
L.P., a Delaware limited partnership, Dolphin, Inc., a Delaware
corporation, Dolphin Sub, Inc., a Delaware corporation, and
EarthLink Network, Inc., a Delaware corporation.
10.1 Governance Agreement, dated as of February 10, 1998, among Sprint
Corporation, a Kansas corporation, Sprint Communications Company
L.P., a Delaware limited partnership, Dolphin, Inc., a Delaware
corporation, and EarthLink Network, Inc., a Delaware corporation.
10.2 Proposed form of Certificate of Designation, Preferences and Rights
of Series A Convertible Preferred Stock of Dolphin, Inc.
10.3 Credit Agreement, dated as of February 10, 1998, between Dolphin,
Inc., a Delaware corporation, and EarthLink Network, Inc., a
Delaware corporation, as Borrowers, and Sprint Corporation, a
Kansas corporation, as Lender.
99.1 Registration Rights Agreement, dated as of February 10, 1998, among
Dolphin, Inc., a Delaware corporation, Sprint Corporation, a Kansas
corporation, and Sprint Communications Company L.P., a Delaware
limited partnership.
99.2 Stockholders' Agreement, dated as of February 10, 1998, among
EarthLink Network, Inc., a Delaware corporation, Dolphin, Inc., a
Delaware corporation, Sprint Corporation, a Kansas corporation,
Sprint Communications Company L.P., a Delaware limited partnership,
and the persons identified on Schedule I thereto.
99.3 Agreement to Vote Stock, dated as of February 10, 1998, among the
Granting Stockholders named on Schedule A thereto, Sprint
Corporation, a Kansas corporation and Sprint Communications
Company, L.P., a Delaware limited partnership.
99.4 Agreement to Vote and Tender Stock, dated as of February 10, 1998,
among the Granting Stockholders named on Schedule A thereto, Sprint
Corporation, a Kansas corporation and Sprint Communication Company,
L.P., a Delaware limited partnership.
<PAGE>
EXHIBIT NO. 2.1
================================================================================
INVESTMENT AGREEMENT
AMONG
SPRINT CORPORATION,
A KANSAS CORPORATION
SPRINT COMMUNICATIONS COMPANY L.P.,
A DELAWARE LIMITED PARTNERSHIP
DOLPHIN, INC.,
A DELAWARE CORPORATION
DOLPHIN SUB, INC.,
A DELAWARE CORPORATION
AND
EARTHLINK NETWORK, INC.,
A DELAWARE CORPORATION.
DATED AS OF FEBRUARY 10, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE OFFER AND FINANCING..................................................... 2
1.01. The Offer...................................................................... 2
1.02. Company Actions................................................................ 3
1.03. Issuance of Convertible Preferred Stock........................................ 4
1.04. Marketing Agreement............................................................ 5
1.05. Convertible Debt Financing..................................................... 5
1.06. Merger of Newco Sub into the Company and Conversion of
Company into Newco Stock..................................................... 6
1.07. Governance Agreement and Stockholders Agreement................................ 7
1.08. Registration Rights Agreement.................................................. 8
1.09. Closing........................................................................ 8
ARTICLE II CONDITIONS TO OFFER AND CLOSING............................................. 12
2.01. Mutual Conditions to Offer..................................................... 12
2.02. Conditions to Offer for Benefit of Sprint and Sprint L.P....................... 13
2.03. Conditions to Offer for Benefit of the Company, Newco, and Newco Sub........... 15
2.04. Condition to Closing of All Parties............................................ 16
ARTICLE III REPRESENTATIONS AND WARRANTIES.............................................. 17
3.01. Representations and Warranties of the Company.................................. 17
3.02. Representations and Warranties of Newco and Newco Sub.......................... 24
3.03. Representations and Warranties of Sprint and Sprint L.P........................ 27
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS AND OF THE COMPANY.................31
4.01. Conduct of Business............................................................ 31
4.02. Access to Property and Information............................................. 33
4.03. Public Disclosure.............................................................. 33
4.04. HSR Act Filings................................................................ 33
4.05. Information.................................................................... 34
4.06. Further Assurances............................................................. 34
4.07. No Solicitation................................................................ 34
4.08. Efforts Regarding Outstanding Warrants and Other Dilutable Securities.......... 35
ARTICLE V ADDITIONAL AGREEMENTS....................................................... 36
5.01. Reasonable Efforts; Notification............................................... 36
5.02. Fees and Expenses.............................................................. 37
5.03. Stockholder Litigation......................................................... 37
5.04. Nasdaq Listing................................................................. 37
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.05. Confidentiality................................................................37
5.06. No Acceleration of Options or Termination Payments.............................38
5.07. Amortization and Writeoffs of Goodwill and Assets..............................38
5.08. Maintaining SIP Subscribers at Newco...........................................38
5.09. Certification of SIP Subscribers...............................................38
ARTICLE VI TERMINATION, AMENDMENT AND WAIVER...........................................39
6.01. Termination....................................................................39
6.02. Effect of Termination..........................................................40
ARTICLE VII MISCELLANEOUS...............................................................40
7.01. Notices........................................................................41
7.02. Entire Agreement...............................................................42
7.03. Waiver, Amendment, Etc.........................................................42
7.04. Successors and Assigns.........................................................42
7.05. Governing Law..................................................................43
7.06. Severability...................................................................43
7.07. Counterparts...................................................................43
7.08. Headings.......................................................................43
7.09. No Third-Party Beneficiaries...................................................43
7.10. Interpretation.................................................................43
7.11. Inclusion of Information in Schedules..........................................44
7.12. Exclusive Jurisdiction and Consent to Service of Process.......................44
7.13. Amendment......................................................................44
7.14. Survival.......................................................................44
7.15. WAIVER OF JURY TRIAL...........................................................44
ARTICLE VIII DEFINITIONS.................................................................45
Definitions...........................................................................45
</TABLE>
ii
<PAGE>
PAGE
----
EXHIBITS:
A - Form of Certificate of Designation
B - Form of Master Assignment
C - Network Agreement
D - Marketing Agreement
E - Credit Agreement
F - Agreement and Plan of Merger
G - Governance Agreement
H - Stockholder's Agreement
I - Registration Rights Agreement
J - Agreement To Vote
K - Agreement to Vote and Tender Stock
iii
<PAGE>
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT dated as of February 10, 1998 (this "Agreement"),
among Sprint Corporation, a Kansas corporation ("Sprint"), Sprint Communications
Company L.P., a Delaware limited partnership ("Sprint L.P."), EarthLink Network,
Inc., a Delaware corporation (the "Company"), Dolphin, Inc., a Delaware
corporation ("Newco"), and Dolphin Sub, Inc., a Delaware corporation and a
wholly-owned subsidiary of Newco ("Newco Sub").
WHEREAS, the respective Boards of Directors of Sprint, the General Partner
of Sprint L.P., Newco and the Company have determined to enter into a strategic
relationship in the area of Internet access and related services and Sprint and
Sprint L.P. will make investments in Newco and the Company in connection with
the Merger of Newco Sub and the Company in order to enhance the capabilities for
growth and financial and strategic success;
WHEREAS, Sprint proposes to make a tender offer (as it may be amended from
time to time as permitted under this Agreement, with the Company's consent if
required hereby, the "Offer") to purchase 1,250,000 shares of Common Stock for
an aggregate cash consideration of $56,250,000 and at a price per share of
Common Stock of $45 net to each seller in cash (such price, as may hereafter be
changed, the "Offer Price"), upon the terms and subject to the conditions set
forth in this Agreement; and the Board of Directors of the Company has approved
the Offer and the other transactions contemplated hereby and is recommending
that the Company's stockholders who wish to receive cash for their shares of
Common Stock accept the Offer;
WHEREAS, immediately following the closing of the Offer, Sprint L.P.
proposes to purchase 4,102,941 shares of Series A Convertible Preferred Stock,
par value $.01 per share of Newco (the "Convertible Preferred Stock") in
exchange for (i) an aggregate cash consideration of $23,750,000, (ii) the
assignment to Newco of 100% of the Sprint Internet Passport Subscribers, and
(iii) entering into a network agreement whereby Newco and the Company will
utilize Sprint L.P.'s long-distance network under specified terms and
conditions;
WHEREAS, Sprint, Sprint L.P., the Company and Newco will enter into a
marketing agreement whereby Newco and the Company will utilize the Sprint brand
under specified terms and conditions and will, inter alia, have the right to use
----- ----
Sprint L.P. distribution channels under specified terms and conditions and agree
to sell certain Sprint L.P. products;
WHEREAS, Sprint shall provide Newco and the Company, as co-borrowers, with
up to $25 million of Convertible Senior Debt financing on or after the Closing,
with such amount to increase to up to $100 million over time (the "Convertible
Debt Financing"), such indebtedness to be evidenced by one or more Convertible
Senior Promissory Note(s) (the "Convertible Notes") and to be subject to the
terms and conditions of the Credit Agreement;
WHEREAS, the closing of the acquisition of the Convertible Preferred Stock
and the other transactions referred to above other than the Offer shall take
place concurrently with the merger of
1
<PAGE>
Newco Sub into the Company (the "Merger") and the conversion of each share of
the Company's outstanding Common Stock into one share of Newco common stock, par
value $.01 per share ("Newco Common Stock") pursuant to the Merger, in each case
upon the terms and subject to the conditions set forth in this Agreement and/or
the Ancillary Agreements (as defined below);
WHEREAS, to induce Sprint and Sprint L.P. to enter into this Agreement and
the Ancillary Agreements, and to consummate the transactions contemplated
thereby, (i) the Voting Stockholders have executed and delivered to Sprint and
Sprint L.P. the Agreement to Vote Stock, (ii) the Tendering Stockholders have
executed and delivered to Sprint and Sprint L.P. the Agreement to Vote and
Tender Stock, and (iii) certain stockholders have entered into a Stockholders
Agreement with Sprint and Sprint L.P.; and
WHEREAS, Sprint, Sprint L.P., the Company, Newco and Newco Sub desire to
make certain representations, warranties, covenants and agreements and also to
prescribe various conditions in connection with the transactions contemplated
hereby;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and in the Ancillary
Agreements, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
ARTICLE I
THE OFFER AND FINANCING
SECTION 1.01 The Offer. (a) Subject to the provisions of this Agreement,
as promptly as practicable, but in no event later than five business days after
the date of this Agreement, Sprint shall commence the Offer. The obligation of
Sprint to commence the Offer and accept for payment, and pay for, any shares of
Common Stock tendered pursuant to the Offer shall be subject to the conditions
set forth in Sections 2.01, 2.02 and 2.03 (or written waivers as set forth
therein) and to the terms and conditions of this Agreement. Sprint may not
consummate the Offer prior to March 20, 1998, modify or amend the terms of the
Offer, terminate the Offer other than in accordance with the terms hereof or
extend the Offer beyond June 15, 1998 (the earlier of June 15, 1998 or the date
of acceptance for payment of the shares of Common Stock tendered pursuant to the
Offer is hereinafter referred to as the "Expiration Date") in any such case
without the prior written consent of the Company (such consent to be authorized
by the Board of Directors of the Company). Subject to the terms and conditions
thereof, the Offer shall expire at midnight New York City time on the date that
is 20 business days from the date the Offer is first published, sent or given to
holders of Common Stock; provided, however, that without the Company's consent,
-------- -------
Sprint may (i) extend the Offer, if at the scheduled expiration date of the
Offer any of the conditions to Sprint's obligation to accept for payment, and
pay for, shares of Common Stock shall not have been satisfied or waived, until
such time as such conditions are satisfied or waived, (ii) extend the Offer for
any period required by any rule, regulation, interpretation or position of the
SEC applicable to the Offer and (iii) extend
2
<PAGE>
the Offer for any reason on one occasion for an aggregate period of not more
than 5 business days beyond the latest expiration date that would otherwise be
permitted under clause (i) or (ii) of this sentence but in no event may the
Offer extend beyond the Expiration Date.
(b) On the date of commencement of the Offer, Sprint shall file with the
SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which
shall contain an offer to purchase and a related letter of transmittal and
summary advertisement (such Schedule 14D-1 and the documents included therein
pursuant to which the Offer will be made, together with any supplements or
amendments thereto, the "Offer Documents"). Sprint agrees that the Offer
Documents shall comply as to form in all material respects with the Exchange Act
and that the Offer Documents on the date first published, sent or given to the
Company's stockholders shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by Sprint
or Sprint L.P. with respect to information supplied by the Company, Newco or
Newco Sub specifically for inclusion in the Offer Documents. Each of the
Parties agrees promptly to correct any information provided by it for use in the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and Sprint further agrees to take
all steps necessary to amend or supplement the Offer Documents and to cause the
Offer Documents as so amended or supplemented to be filed with the SEC and to be
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable Federal securities laws. The Company and its counsel
shall be given a reasonable opportunity to review the Offer Documents and all
amendments and supplements thereto prior to their filing with the SEC or
dissemination to stockholders of the Company. Sprint agrees to provide the
Company and its counsel any comments that Sprint or its counsel may receive from
the SEC or its staff with respect to the Offer Documents promptly after the
receipt of such comments.
SECTION 1.02 Company Actions. (a) The Company hereby approves of and
consents to the Offer and the other transactions contemplated hereby and by the
Ancillary Agreements and the Company, Newco and Newco Sub represent and warrant
that the Boards of Directors of the Company, Newco and Newco Sub at meetings
duly called and held, duly and unanimously adopted resolutions, as appropriate,
approving this Agreement, the Ancillary Agreements, the Offer and the issuance
of the Convertible Preferred Stock to Sprint L.P. and the Convertible Notes to
Sprint as contemplated hereby, determining that this Agreement and the
transactions contemplated hereby and by the Ancillary Agreements, including the
Offer and the acquisition of the Convertible Preferred Stock, are fair to, and
in the best interests of, the Company's stockholders and recommending that those
stockholders who wish to receive cash for their shares of Common Stock, accept
the Offer and tender their shares pursuant to the Offer. The Company represents
that its Board of Directors has received the opinion of Deutsche Morgan Grenfell
Inc. that the transactions contemplated by this Agreement, when taken together,
are fair, from a financial point of view, to the Company's stockholders and that
a complete and correct signed copy of such opinion has been delivered by the
Company to Sprint.
3
<PAGE>
(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-
9 with respect to the Offer (such Schedule 14D-9, as amended from time to time,
the "Schedule 14D-9") containing the recommendation described in paragraph (a)
of this Section 1.02 and shall mail the Schedule 14D-9 to the stockholders of
the Company. The Company agrees that the Schedule 14D-9 shall comply as to form
in all material respects with the requirements of the Exchange Act and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Sprint or Sprint
L.P. specifically for inclusion in the Schedule 14D-9. Each of the Company,
Newco and Newco Sub agrees promptly to correct any information provided by it
for use in the Schedule 14D-9 if and to the extent that such information shall
have become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and
to cause the Schedule 14D-9 as so amended or supplemented to be filed with the
SEC and disseminated to the Company's stockholders, in each case as and to the
extent required by applicable Federal securities laws. Sprint and its counsel
shall be given a reasonable opportunity to review the Schedule 14D-9 and all
amendments and supplements thereto prior to their filing with the SEC or
dissemination to stockholders of the Company. The Company agrees to provide
Sprint and its counsel in writing with any comments the Company or its counsel
may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer, the Company shall cause its transfer
agent to furnish Sprint promptly with mailing labels containing the names and
addresses of the record holders of Common Stock as of a recent date and of those
persons becoming record holders subsequent to such date, together with copies of
all lists of stockholders, security position listings and computer files and all
other information in the Company's possession or control regarding the
beneficial owners of Common Stock, and shall furnish to Sprint such information
and assistance (including updated lists of stockholders, security position
listings and computer files) as Sprint may reasonably request to facilitate
communication of the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents, Sprint and its agents shall hold in confidence
the information contained in any such labels, listings and files, will use such
information only in connection with the Offer and the other transactions
contemplated hereby and, if this Agreement shall be terminated, will deliver,
and will use their best efforts to cause their agents to deliver, to the Company
all copies of such information then in their possession or control.
SECTION 1.03 Issuance of Convertible Preferred Stock. Newco agrees to
issue to Sprint L.P., and Sprint L.P. agrees to acquire from Newco, 4,102,941
shares of Convertible Preferred Stock having the voting powers, preferences and
other rights set forth in the form of Certificate of Designation, Preferences
and Rights attached hereto as Exhibit A ("Certificate of Designation") and which
is to be filed with the Delaware Secretary of State on or prior to the Closing
Date, for the "Preferred Stock Consideration," which shall be delivered at the
Closing for the duly authorized and
4
<PAGE>
executed certificates evidencing such shares. The Preferred Stock Consideration
shall consist of the following:
(i) cash in the amount of $23,750,000, which payment shall be made
by wire transfer of immediately available funds pursuant to the wire
transfer instructions to be provided to Sprint L.P. by a duly authorized
officer of Newco at least 72 hours prior to the Closing;
(ii) all of the right, title and interest of Sprint L.P. in and to
all agreements with SIP Subscribers and all rights to provide Internet
access services to the SIP Subscribers after the Closing Date, as evidenced
by the Master Assignment and Assumption Agreement in the form attached
hereto as Exhibit B (the "Master Assignment"), which (A) shall have a
Schedule A attached thereto showing the number and identity of SIP
Subscribers as of a date no earlier than 10 days prior to the Closing Date,
(B) shall include the obligations to be assumed by Newco at the Closing to
continue the performance of all of such agreements after the Closing Date,
and (C) shall be executed and delivered by the Parties thereto on the
Closing Date; and
(iii) the right to utilize a minimum and maximum number of ports on
Sprint L.P.'s long-distance network specified, along with the pricing and
other terms and conditions set forth, in the Network Agreement attached
hereto as Exhibit C ("Network Agreement"), which shall be executed and
delivered by the Parties thereto on the date hereof, but which shall not
become effective until the Closing and then only if all of the applicable
conditions to Closing have been satisfied or waived.
SECTION 1.04 Marketing Agreement. The Marketing Agreement attached
hereto as Exhibit D shall be executed and delivered by the Parties thereto on
the date hereof, and pursuant to which (A) Newco and the Company shall have the
right to utilize certain distribution channels of Sprint L.P., and the Parties
shall provide certain cooperation and support to each other in specified
marketing matters, and (B) Newco and the Company shall be granted a license
requiring the use of the Sprint brand in conjunction with the Company's brand,
in each case upon the terms and subject to conditions set forth in the Marketing
Agreement, but which Agreement shall not become effective until the Closing and
then only if all of the applicable conditions to Closing have been satisfied or
waived.
SECTION 1.05 Convertible Debt Financing. Sprint agrees to make advances
of funds to Newco and the Company, as co-borrowers, in the amounts and at the
times specified in, and subject to the terms and conditions set forth in, the
Credit Agreement attached hereto as Exhibit E (the "Credit Agreement"), (A)
which shall be executed and delivered by the Parties thereto on the date hereof,
but which shall not become effective until the Closing and then only if all of
the applicable conditions to the Closing have been satisfied or waived, and (B)
advances thereunder shall be evidenced by one or more Convertible Notes which
shall be convertible into Newco Common Stock, a form of which Convertible Note
is attached to the Credit Agreement.
5
<PAGE>
SECTION 1.06 Merger of Newco Sub into the Company and Conversion of
Company Stock into Newco Stock. (a) The Company, Newco and Newco Sub shall duly
execute and deliver on the date hereof the Agreement and Plan of Merger among
them attached hereto as Exhibit F, but which shall not become effective until
the Closing, and pursuant to which, inter alia, at the Closing, (i) Newco Sub
----- ----
shall be merged with and into the Company and the Company shall be the surviving
corporation (the "Surviving Corporation"), (ii) the certificate of incorporation
and bylaws of Newco Sub shall be the certificate of incorporation and bylaws of
the Surviving Corporation, (iii) except as disclosed in Schedule 1.06 hereto;
the certificate of incorporation and bylaws of Newco shall be identical to the
certificate of incorporation and bylaws of the Company, (iv) the directors and
officers of the Company shall be the directors and officers of Newco until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with Newco's certificate of
incorporation and bylaws, except that the two directors elected by the holders
of the Convertible Preferred Stock shall be elected immediately following the
Closing and (v) each outstanding share of Common Stock of the Company shall be
converted into one share of Newco Common Stock.
(b) Subject to the provisions of this Agreement, as promptly as
practicable, the Company, Newco and Newco Sub shall prepare and file with the
SEC a proxy statement relating to a special meeting of the Company's
stockholders (the "Special Meeting") to be held in connection with the Merger
(the "Proxy Statement") that will serve as the prospectus included as Part I of
a registration statement on Form S-4 (the "S-4") to be filed by Newco with the
SEC to register the Newco Common Stock to be issued in the Merger by Newco. The
Proxy Statement and S-4 shall also seek approval by the Company's stockholders
of (i) the issuance and sale of the Convertible Preferred Stock, the Convertible
Notes, and the Newco Common Stock issuable upon conversion of the Convertible
Preferred Stock and/or the Convertible Notes, (ii) the other transactions
contemplated by this Agreement and the Ancillary Agreements, and (iii) any
related matters that must be approved by the holders of Common Stock or Newco
Common Stock in order for the transactions contemplated by the Investment
Agreement or any Ancillary Agreement to be consummated (the matters referred to
in clauses (i), (ii) and (iii) together with approval of the Merger, the
"Company Stockholder Vote Matters"). Each of the Company, Newco and Newco Sub
shall use all reasonable efforts to (i) have the S-4 declared effective under
the Securities Act as promptly as practicable after such filing, and (ii) to
cause the Proxy Statement to be mailed to all stockholders of the Company at the
earliest practicable date. The Company, Newco and Newco Sub agree that the S-4
and the Proxy Statement shall comply as to form in all material respects with
the Securities Act and the Exchange Act and shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by the Company, Newco or Newco Sub with respect to any
information supplied by Sprint specifically for inclusion in the S-4 and the
Proxy Statement. Each of the Parties agrees promptly to correct any information
provided by it for use in the S-4 and the Proxy Statement if and to the extent
that such information shall have become false or misleading in any material
respect, and the Company, Newco and Newco Sub further agree to take all steps
necessary to amend or supplement the S-4 and the Proxy Statement and to cause
the S-4 and the Proxy Statement as so amended or supplemented to be filed with
the SEC and to cause the Proxy Statement to be disseminated to the Company's
6
<PAGE>
stockholders, in each case as and to the extent required by applicable Federal
securities laws. Sprint and its counsel shall be given a reasonable opportunity
to review the S-4 and the Proxy Statement and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to stockholders of
the Company. The Company, Newco and Newco Sub agree to provide Sprint and its
counsel any comments that the Company, Newco and Newco Sub or its counsel may
receive from the SEC or its staff with respect to the S-4 and the Proxy
Statement promptly after the receipt of such comments.
(c) The Company shall call the Special Meeting to be held as promptly as
practicable after the date hereof for the purpose of voting upon the Company
Stockholder Vote Matters. Subject to Section 4.07(a), the Company will, through
its Board of Directors, recommend that its stockholders vote their shares in
favor of the approval of the Company Stockholder Vote Matters and shall use its
reasonable best efforts to obtain approval and adoption by the Company's
stockholders of the Company Stockholder Vote Matters. The Company and Sprint
shall coordinate and cooperate with respect to the timing of the Special Meeting
and shall use all reasonable efforts to hold such meeting as soon as practicable
after the date hereof. Newco shall (i) cause Newco Sub promptly to submit this
Agreement and the transactions contemplated hereby for approval and adoption by
Newco as its sole stockholder by written consent or stockholder vote, (ii)
authorize and cause an officer of Newco to vote Newco's shares of Newco Sub for
adoption and approval of, or act by written consent to adopt and approve, this
Agreement and the Ancillary Agreements and the transactions contemplated hereby
and thereby, and (iii) take all additional actions as the sole stockholder of
Newco Sub necessary to adopt and approve this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby. Newco will, on
or prior to the Closing Date, execute and deliver to Sprint and the Company a
written consent by the sole stockholder of Newco (i) approving this Agreement,
the Ancillary Agreements and the transactions contemplated hereby and thereby,
and (ii) authorizing the taking of all additional actions as the sole
stockholder of Newco necessary to adopt and approve this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby.
SECTION 1.07 Governance Agreement and Stockholders Agreement.
(a) Sprint, Sprint L.P., Newco and the Company shall execute and
deliver on the date hereof the Governance Agreement attached hereto as
Exhibit G to establish therein certain terms and conditions concerning the
corporate governance of Newco, the acquisition of Newco's equity securities
by Sprint and its Affiliates, and the rights of Sprint to make offers to
purchase all of the outstanding securities not owned by Sprint and its
Affiliates and the rights of the Board of Directors of Newco to receive
offers to effect business combinations, which agreement shall not become
effective until the Closing.
(b) Sprint, Sprint L.P., Newco, the Company and the stockholders of
the Company identified on a schedule to the following agreement shall
execute and deliver on the date hereof a Stockholders' Agreement attached
hereto as Exhibit H to effectuate the intent and provisions of the
Governance Agreement and to provide for certain rights and obligations
7
<PAGE>
of such parties with respect to the voting and disposition of equity
securities of Newco, which agreement shall not become effective until the
Closing.
SECTION 1.08 Registration Rights Agreement. Sprint, Sprint L.P. and
Newco shall execute and deliver on the date hereof the Registration Rights
Agreement attached hereto as Exhibit I with respect to the rights of Sprint and
its Affiliates in connection with public offerings and sales of Newco Common
Stock acquired in the Merger, through conversion of the Convertible Preferred
Stock or the Convertible Notes, pursuant to the Governance Agreement or
otherwise, which agreement shall not become effective until the Closing.
SECTION 1.09 Closing. (a) Closing Date and Location. The closing of the
transactions contemplated by Sections 1.03., 1.04., 1.05., 1.06., 1.07., and
1.08. (the "Closing") shall be held at the offices of Stinson, Mag & Fizzell,
P.C., 1201 Walnut, Suite 2900, Kansas City, Missouri 64106, immediately
following, and subject only to, the acceptance for payment of shares of Common
Stock pursuant to the Offer, or at such other date, time or place as the parties
may mutually agree. The date on which the Closing shall occur is hereinafter
referred to as the "Closing Date."
(b) Deliveries by Newco and Newco Sub. At the Closing, Newco and Newco Sub
shall take the following actions:
(i) deliver to Sprint L.P. duly executed certificates evidencing
4,102,941 shares of Convertible Preferred Stock in exchange for the
Preferred Stock Consideration;
(ii) deliver to Sprint L.P. a duly executed and delivered instrument
acknowledging receipt of payment of the cash portion of the Preferred Stock
Consideration;
(iii) deliver to Sprint and Sprint L.P. each of the Ancillary
Agreements to which either of them is a party, which shall have been duly
executed and delivered by them;
(iv) deliver to Sprint and Sprint L.P. a certificate on behalf of
Newco and Newco Sub signed by a duly authorized executive officer, dated as
of the Closing Date, certifying the fulfillment of the conditions set forth
in Sections 2.02(d) and (e);
(v) deliver to Sprint and Sprint L.P. the legal opinion of Hunton &
Williams, counsel to the Company, Newco and Newco Sub, dated as of the
Closing Date, in form and substance reasonably satisfactory to Sprint and
Sprint L.P.;
(vi) deliver to Sprint and Sprint L.P. a Certificate of the
Secretary of Newco (A) as to true and complete copies of the certificate of
incorporation, bylaws and resolutions of the Board of Directors authorizing
the execution, delivery and performance of this Agreement and each of the
Ancillary Agreements to which it is a party and the transactions
contemplated hereby and thereby, (B) certifying that the execution,
delivery and performance of this Agreement and each of the Ancillary
Agreements and the transactions contemplated hereby and thereby were duly
and validly approved by the sole stockholder of Newco, and (C) as to
8
<PAGE>
incumbency of the Newco officers executing the Agreement and each of the
Ancillary Agreements to which it is a party;
(vii) deliver to Sprint and Sprint L.P. the certificate of
incorporation of Newco and all amendments to date, certified by the
Delaware Secretary of State, as of a date not earlier than three (3)
business days prior to the Closing Date;
(viii) deliver to Sprint and Sprint L.P. a Long Form Certificate of
Good Standing from the Delaware Secretary of State certifying that Newco is
in good standing, as of a date not earlier than three (3) business days
prior to the Closing Date;
(ix) deliver to Sprint and Sprint L.P. the SEC Order of
Effectiveness with respect to the S-4 if then in the possession of the
Company or Newco;
(x) deliver to Sprint and Sprint L.P. a Certificate of the
Secretary of Newco Sub (A) as to true and complete copies of the
certificate of incorporation, bylaws and resolutions of the Board of
Directors authorizing the execution, delivery and performance of this
Agreement and each of the Ancillary Agreements to which it is a party and
the transactions contemplated hereby and thereby, (B) certifying that the
execution, delivery and performance of this Agreement and each of the
Ancillary Agreements to which it is a party and the transactions
contemplated hereby and thereby were duly and validly approved by Newco as
the sole stockholder of Newco Sub, and (C) as to incumbency of the Newco
Sub officers executing this Agreement and each of the Ancillary Agreements
to which it is a party;
(xi) deliver to Sprint and Sprint L.P. the certificate of
incorporation of Newco Sub and all amendments to date, certified by the
Delaware Secretary of State, as of a date not earlier than three (3)
business days prior to the Closing Date; and
(xii) deliver to Sprint and Sprint L.P. a Long Form Certificate of
Good Standing from the Delaware Secretary of State certifying that Newco
Sub is in good standing, as of a date not later than three (3) business
days prior to the Closing Date.
(c) Deliveries by the Company. At the Closing, the Company shall deliver
to Sprint and Sprint L.P. the following:
(i) each of the Ancillary Agreements to which the Company is a
party, which shall have been duly executed and delivered by it;
(ii) a certificate on behalf of the Company signed by a duly
authorized executive officer, dated as of the Closing Date, certifying the
fulfillment of the conditions set forth in Sections 2.02(d) and (e);
9
<PAGE>
(iii) the legal opinion of Hunton & Williams, counsel to the Company,
Newco and Newco Sub dated as of the Closing Date, in form and substance
reasonably satisfactory to Sprint and Sprint L.P.;
(iv) a Certificate of the Secretary of the Company (A) as to true
and complete copies of the certificate of incorporation, bylaws and
resolutions of the Board of Directors authorizing the execution, delivery
and performance of this Agreement and each of the Ancillary Agreements to
which it is a party and the transactions contemplated hereby and thereby,
(B) certifying that the execution, delivery and performance of this
Agreement and each of the Ancillary Agreements and the transactions
contemplated hereby and thereby were duly and validly approved by the
stockholders of the Company, and (C) as to incumbency of the Company
officers executing the Agreement and each of the Ancillary Agreements to
which it is a party;
(v) the certificate of incorporation of the Company and all
amendments to date, certified by the Delaware Secretary of State, as of a
date not later than three (3) business days prior to the Closing Date;
(vi) a Long Form Certificate of Good Standing from the Delaware
Secretary of State certifying that the Company is in good standing, as of a
date not later than three (3) business days prior to the Closing Date;
(vii) the Certificate of Inspector of Election in connection with the
Special Meeting.
(d) Deliveries by Sprint. At the Closing, Sprint shall deliver to the
Company, Newco and Newco Sub the following:
(i) each of the Ancillary Agreements to which Sprint is a party,
which shall have been duly executed and delivered by it;
(ii) a certificate on behalf of Sprint signed by a duly authorized
executive officer, dated as of the Closing Date, certifying the fulfillment
of the conditions set forth in Sections 2.03(b), (c) and (e);
(iii) the legal opinion of Stinson, Mag & Fizzell, P.C., counsel to
Sprint and Sprint L.P., dated as of the Closing Date, in form and substance
reasonably satisfactory to Newco and the Company.
(iv) a Certificate of Secretary of Sprint (A) as to true and
complete copies of the articles of incorporation, bylaws and resolutions of
the Board of Directors authorizing the execution, delivery and performance
of this Agreement and each of the Ancillary Agreements to which it is a
party and the transactions contemplated hereby and thereby, and (B) as to
10
<PAGE>
incumbency of the Sprint officers executing this Agreement and each of the
Ancillary Agreements to which it is a party; and
(v) a Long Form Certificate of Good Standing from the Kansas
Secretary of State certifying that Sprint is in good standing, as of a date
not later than three (3) business days prior to the Closing Date.
(e) Deliveries by Sprint L.P. At the Closing, Sprint L.P. shall deliver
to the Company, Newco and Newco Sub the following:
(i) the cash portion of the Preferred Stock Consideration to Newco
by wire transfer of immediately available funds pursuant to wire transfer
instructions from a duly authorized officer of Newco;
(ii) each of the Ancillary Agreements to which Sprint L.P. is a
party, which shall have been duly executed and delivered by it;
(iii) a certificate on behalf of Sprint L.P. signed by a duly
authorized executive officer, dated as of the Closing Date, certifying the
fulfillment of the conditions set forth in Sections 2.03(b) and (c);
(iv) the legal opinion of Stinson, Mag & Fizzell, P.C., counsel to
Sprint and Sprint L.P., dated as of the Closing Date, in form and substance
reasonably satisfactory to Newco and the Company;
(v) a Certificate of Secretary of Sprint L.P. (A) as to true and
complete copies of the limited partnership agreement of Sprint L.P. and
resolutions of the Board of Directors of the General Partner of Sprint L.P.
authorizing the execution, delivery and performance of this Agreement and
each of the Ancillary Agreements to which it is a party and the
transactions contemplated hereby and thereby, and (B) as to incumbency of
the Sprint L.P. officers executing this Agreement and each of the Ancillary
Agreements to which it is a party; and
(vi) a Long Form Certificate of Good Standing from the Delaware
Secretary of State certifying that Sprint L.P. is in good standing, as of a
date not later than three (3) business days prior to the Closing Date.
11
<PAGE>
ARTICLE II
CONDITIONS TO OFFER AND CLOSING
SECTION 2.01 Mutual Conditions to Offer. Sprint shall not, and shall have
no obligation to, accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Sprint's obligation to pay for or return tendered shares of Common Stock
after the termination or withdrawal of the Offer), pay for any shares of Common
Stock tendered pursuant to the Offer unless the following conditions are
satisfied on or prior to the Offer Acceptance Time (or waived in a writing
executed by Sprint, Sprint L.P., Newco, Newco Sub and the Company).
(a) Minimum Tender Condition. At least 1,250,000 shares of Common
Stock shall have been validly tendered and not withdrawn prior to the
expiration of the Offer (the "Minimum Tender Condition").
(b) Waiting Periods. The filing and waiting period requirements of
the HSR Act relating to the Offer, the Preferred Stock Consideration and
the Merger shall have been complied with and there shall be no action taken
or instituted by the Department of Justice, the Federal Trade Commission or
by any other Governmental Entity to delay or otherwise enjoin the
transactions contemplated by this Agreement and by the Ancillary Agreements
and the waiting period applicable under the HSR Act shall have expired or
received early termination.
(c) Other Approvals. In addition to the filing and expiration of the
waiting period contemplated by Section 2.01(b), all authorizations,
consents, orders or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any Governmental Entity, the
failure to obtain which would have a Material Adverse Effect on Sprint,
Sprint L.P. and their respective Subsidiaries, the Company or Newco and
Newco Sub, in each case, taken as a whole, shall have been filed, occurred
or been obtained.
(d) Form S-4. The S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(e) Actions, Suits or Proceedings. There shall not be Threatened or
pending by any Governmental Entity any Action which has a reasonable
likelihood of success, and there shall not be pending by any other Person
any Action which has a substantial likelihood of success, (i) seeking to
restrain or prohibit the acquisition by Sprint of any shares of Common
Stock or any Convertible Notes or the acquisition by Sprint L.P. of any
shares of Convertible Preferred Stock, the making or consummation of the
Offer or the performance by any of the Parties hereto of any of the other
transactions contemplated by this Agreement or any of the Ancillary
Agreements, or seeking to obtain from the Company, Newco, Sprint or Sprint
L.P. any damages that are material in relation to Sprint, Newco or the
Company and their respective subsidiaries taken as a whole, (ii) seeking to
impose limitations on the ability of
12
<PAGE>
Sprint or Sprint L.P. to acquire or hold, or exercise full rights of
ownership of, any shares of Common Stock accepted for payment by Sprint
pursuant to the Offer or any shares of Convertible Preferred Stock, any
Convertible Notes or any Common Stock received upon conversion of either
thereof, including, without limitation, the right to vote such Common
Stock, Newco Common Stock and Convertible Preferred Stock on all matters
properly presented to the stockholders of the Company or Newco, as the case
may be, (iii) seeking to prohibit any Party from exercising any of its
material rights under this Agreement or any Ancillary Agreement; or (iv)
seeking to prohibit or limit the ownership or operation by any Party or its
respective Subsidiaries of a material portion of the business or assets of
such Party on a consolidated basis, or to compel any Party to dispose of or
hold separate any material portion of the business or assets of such Party
on a consolidated basis, as a result of the Offer or any of the other
transactions contemplated by this Agreement or the Ancillary Agreements.
(f) No Injunctions or Restraints. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced
or issued by any Governmental Entity or other legal restraint or
prohibition (x) preventing the consummation of the Merger or any of the
other transactions contemplated hereby or by the Ancillary Agreements that
are to occur by the Closing shall be in effect or, (y) applicable to the
Offer or the issuance of shares of Convertible Preferred Stock, any
Convertible Notes or any Newco Common Stock received upon conversion of
either thereof having any of the consequences described in clauses (i)
through (iv) of Section 2.01(e) shall be in effect; provided, however, that
-------- -------
prior to invoking this condition, each Party shall use all reasonable
efforts to have any such decree, ruling, injunction or order vacated,
except as otherwise contemplated by this Agreement.
(g) Stockholder Approval. The holders of Common Stock of the Company
shall have approved the Company Stockholder Vote Matters.
(h) Termination of Agreement. This Agreement shall not have
terminated in accordance with its terms prior to the Expiration Date.
SECTION 2.02 Conditions to Offer for Benefit of Sprint and Sprint L.P.
Sprint shall have no obligation to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Sprint's obligation to pay for or return tendered
shares of Common Stock after the termination or withdrawal of the Offer), pay
for any shares of Common Stock tendered pursuant to the Offer unless the
following conditions are satisfied on or prior to the Offer Acceptance Time (or
waived in a writing executed by Sprint and Sprint L.P.).
(a) Approval of the Board of Directors. (i) The Board of Directors of
the Company or Newco shall not have withdrawn or modified in a manner
adverse to Sprint or Sprint L.P. its approval of the Offer or the other
transactions contemplated by this Agreement or the Ancillary Agreements, or
approved any Acquisition Proposal or approved the solicitation of
additional Acquisition Proposals, (ii) the Company shall not have entered
into
13
<PAGE>
any agreement with respect to any Acquisition Proposal, or (iii) the Board
of Directors of the Company or Newco or any committee thereof shall not
have resolved to take any of the foregoing actions referred to in (i) or
(ii) above.
(b) Execution, Delivery, Effectiveness and Satisfaction of Ancillary
Agreements. Each of the Company, Newco and Newco Sub shall have executed
and delivered to Sprint and Sprint L.P., as the case may be, each Ancillary
Agreement to which it is a party. Each Ancillary Agreement shall be in
full force and effect and all of the terms and conditions of each such
Ancillary Agreement shall be satisfied in all material respects.
(c) Stockholder Agreements. (i) Each of (A) the stockholders named on
Schedule A of the Stockholders Agreement, and (B) each of Garry Betty,
Brinton Young, Robert Kavner and Chip Lacy, shall have executed, and
delivered to Sprint the Stockholders Agreement in the form attached hereto
as Exhibit H, including the Irrevocable Proxies related thereto (the
"Stockholders Agreement"), (ii) each of the Voting Stockholders shall have
executed and delivered to Sprint the Agreement To Vote Stock (the
"Agreement to Vote"), in the form attached hereto as Exhibit J, and (iii)
each of the Tendering Stockholders shall have executed and delivered to
Sprint the Agreement to Vote and Tender Stock (the "Agreement to Vote and
Tender"), in the form attached hereto as Exhibit K. The Stockholders
Agreement, each Agreement to Vote and each Agreement to Vote and Tender, to
the extent necessary to approve the Company Stockholder Vote Matters, shall
be in full force and effect and all of the terms and conditions of such
agreements shall be satisfied in all material respects.
(d) Representations and Warranties. The representations and
warranties of the Company, Newco and Newco Sub shall be true and correct
(i) as of the date referred to in any representation or warranty that
addresses a matter as of a particular date, or (ii) as to all other
representations and warranties, as of the date of this Agreement and as of
the Offer Acceptance Time; unless, in either the case of clause (i) or
(ii), the inaccuracies under such representations and warranties, would
not, individually or in the aggregate, (x) have a Material Adverse Effect
on the Company or Newco, (y) materially impair the ability of the Company,
Newco and Newco Sub to enter into and perform this Agreement or any
Ancillary Agreement to which any of them is a Party and their respective
obligations thereunder, or (z) materially reduce Sprint's expected
ownership interest in Newco by virtue of material inaccuracies in the
representations and warranties set forth in Section 3.01(c) hereof, in each
case without giving effect to any supplement to any schedule to this
Agreement or to any Ancillary Agreement (provided, however, that any
-------- -------
supplement must be objected to before the earlier of the Offer Acceptance
Time or 10 Business Days from the date of delivery thereof). Sprint and
Sprint L.P. shall also have each received a separate certificate to such
effect dated the Offer Acceptance Date and executed by the chief executive
officer and chief financial officer of each of the Company, Newco and Newco
Sub, in each such case without giving effect to any supplement to any
Schedule to this Agreement or to any Ancillary Agreement.
14
<PAGE>
(e) Performance of Obligations and Covenants of the Company, Newco
and Newco Sub. Each of the Company, Newco and Newco Sub shall have
performed in all material respects all of the respective obligations and
covenants required to be performed or complied with by them under this
Agreement and each of the Ancillary Agreements at or prior to the time of
the Closing.
(f) Legal Opinions. Sprint shall have received the legal opinion of
Hunton & Williams, dated as of the Closing Date, counsel to Newco, Newco
Sub, and the Company in form and substance reasonably satisfactory to
Sprint and Sprint L.P.
(g) Amendments and Modifications of Warrants and other Dilutable
Securities. There shall not be any warrants to purchase Common Stock or
other Dilutable Securities of the Company outstanding on the Closing Date
which could be exercised on the Closing Date (assuming the expiration of
any applicable vesting periods or the satisfaction of any other conditions
to conversion, exchange, exercise or issuance) into a number of shares of
Common Stock which, in the aggregate, would constitute more than 8% of the
shares of Common Stock outstanding immediately prior to the Closing, which,
upon or after the Merger will be convertible into or exchangeable for or
give the right to acquire Common Stock or other voting securities of the
Company, and the Company shall have provided copies of all amendments or
other modifications of any Warrants and other Dilutable Securities obtained
by the Company pursuant to Section 4.08.
SECTION 2.03 Conditions to Offer for Benefit of the Company, Newco, and
Newco Sub. Sprint shall not accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sprint's obligation to pay for or return tendered shares of Common
Stock after the termination or withdrawal of the Offer), pay for any shares of
Common Stock tendered pursuant to the Offer unless the following conditions are
satisfied on or prior to the Offer Acceptance Time (or waived in a writing
executed by Newco, Newco Sub and the Company).
(a) Approval, Execution, Delivery, Effectiveness and Satisfaction of
Ancillary Agreements. (i) The Board of Directors of Sprint, and the Board
of Directors of the General Partners of Sprint L.P. shall not have
withdrawn or modified in a manner adverse to Newco or the Company their
approval of the Offer or the other transactions contemplated by this
Agreement or the Ancillary Agreements, or approved any Acquisition Proposal
or approved the solicitation of additional Acquisition Proposals, (ii)
Sprint shall not have entered into any agreement with respect to any
Acquisition Proposal, or (iii) the Board of Directors of Sprint, or the
Board of Directors of the General Partner of Sprint L.P., or any committee
thereof shall not have resolved to take any of the foregoing actions
referred to in (i) or (ii) above. Sprint and Sprint L.P. shall have
executed and delivered to the Company, Newco and Newco Sub, as the case may
be, and performed each Ancillary Agreement to which it is a party. Each
Ancillary Agreement shall be in full force and effect and all of the terms
and conditions of each such Ancillary Agreement shall be satisfied in all
material respects.
15
<PAGE>
(b) Representations and Warranties. The representations and
warranties of Sprint and Sprint L.P. shall be true and correct (i) as of
the date referred to in any representation or warranty that addresses a
matter as of a particular date, or (ii) as to all other representations and
warranties, as of the date of this Agreement and as of the Offer Acceptance
Time; unless, in either the case of clause (i) or (ii), the inaccuracies
under such representations and warranties, would not, individually or in
the aggregate, (x) have a Material Adverse Effect on Sprint or Sprint L.P.,
or (y) materially impair the ability of Sprint and Sprint L.P. to enter
into and perform this Agreement or any Ancillary Agreement to which any of
them is a Party and their respective obligations thereunder, in each case
without giving effect to any supplement to any schedule to this Agreement
or to any Ancillary Agreement (provided, however, that any supplement must
-------- -------
be objected to before the earlier of the Offer Acceptance Time or 10
Business Days from the date of delivery thereof). The Company, Newco, and
Newco Sub shall have each received a separate certificate to such effect
dated the Offer Acceptance Date and executed by a duly authorized executive
officer of each of Sprint and Sprint L.P., in each case without giving
effect to any supplement to any Schedule to this Agreement or to any
Ancillary Agreement.
(c) Performance of Obligations and Covenants. Sprint shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement and each of the Ancillary Agreements
to be performed or complied with by Sprint by the time of the Closing.
(d) Legal Opinion. The Company, Newco and Newco Sub shall have
received the legal opinion of Stinson, Mag & Fizzell, P.C., counsel to
Sprint and Sprint L.P., dated as of the Closing Date, in form and substance
reasonably satisfactory to Newco and the Company.
(e) Sprint Acquisition Proposal. Sprint shall not have entered into
an agreement providing for a transaction contemplated by an Acquisition
Proposal, nor shall it have consummated any such transaction, nor shall
Sprint have received any Acquisition Proposal (i) recommended by the Board
of Directors of Sprint, or (ii) if not so recommended, which the Board of
Directors of the Company reasonably determines in good faith upon
consultation with its outside financial advisors is reasonably likely to be
consummated.
SECTION 2.04 Condition to Closing of All Parties. The obligations of
Sprint, Sprint L.P., Newco, Newco Sub and the Company to consummate the
transactions contemplated to occur at the Closing other than the Offer are
subject to the satisfaction of the condition that Sprint shall have accepted for
payment shares of Common Stock pursuant to the Offer in accordance with this
Agreement (the "Offer Acceptance Condition").
16
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Company. Except as
disclosed in the schedules attached to this Agreement setting forth exceptions
to the Company's representations and warranties set forth herein (the "Company
Disclosure Schedules"), the Company represents and warrants to Sprint and Sprint
L.P. as set forth below. The Company Disclosure Schedules will be arranged in
sections corresponding to sections of this Agreement to be modified thereby.
(a) Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has all requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a Material Adverse Effect on the Company. The
Company has made available to Sprint for its review complete and correct
copies of its certificate of incorporation and bylaws, in each case as
amended to the date of this Agreement.
(b) Subsidiaries and Joint Ventures. The Company does not have any
Subsidiaries. The Company does not have the right to acquire an equity
interest in any corporation, partnership, limited liability company, joint
venture, business trust or any other entity, except for Newco and Newco Sub
pursuant to the Merger.
(c) Capital Structure. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock and 10,000,000 shares of
preferred stock, par value $0.01 per share. At the close of business on
January 31, 1998, (i) 11,293,394 shares of Common Stock and no shares of
preferred stock of the Company were issued and outstanding, (ii) no shares
of Common Stock were held by the Company in its treasury, (iii) 1,072,012
shares of Common Stock were reserved for issuance pursuant to outstanding
stock options granted under the 1995 Stock Option Plan to purchase shares
of Common Stock ("Employee Stock Options") and an additional 96,158 shares
of Common Stock were available for the grant of Employee Stock Options
pursuant to such plan (and upon approval by the Company's stockholders of a
pending proposal there will be 600,000 additional shares of Common Stock as
to which options can be granted under the 1995 Stock Option Plan), (iv) no
shares of Common Stock were reserved for issuance pursuant to outstanding
stock options granted under the Directors Stock Option Plan to purchase
shares of Common Stock ("Director Stock Options") and an additional 62,500
shares of Common Stock were available for the grant of Director Stock
Options pursuant to such plan, (v) 391,500 shares of Common Stock were
reserved for issuance pursuant to the Company's convertible note with UUNET
17
<PAGE>
Technologies, Inc., and (vi) 887,647 shares of Common Stock were reserved
for issuance upon the exercise of outstanding warrants. Except as set forth
above or as otherwise expressly provided herein, at the close of business
on January 31, 1998, no shares of capital stock or other voting securities
of the Company were issued, reserved for issuance or outstanding and except
as set forth on Schedule 3.01(c), there are not any phantom stock or other
contractual rights the value of which is determined in whole or in part by
the value of any capital stock of the Company ("Stock Equivalents"). There
are no outstanding stock appreciation rights ("SARs") with respect to
Common Stock that were not granted in tandem with a related Employee Stock
Option. When issued and sold to Sprint, the Convertible Preferred Stock and
the Convertible Notes will be duly authorized, validly issued, fully paid
and non-assessable and free and clear of all Liens. The Newco Common Stock
issued upon conversion of the Convertible Preferred Stock and the
Convertible Notes, will be duly authorized, validly issued, fully paid and
nonassessable and free and clear of all Liens. Other than this Agreement
and the Ancillary Agreements, the Convertible Preferred Stock and the
Convertible Notes are not, and the Newco Common Stock issuable upon
conversion of the Convertible Preferred Stock and the Convertible Notes
will not be, subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding restricting or
otherwise relating to the voting or disposition of the Convertible
Preferred Stock or the Convertible Notes. All outstanding shares of capital
stock of the Company are, and all shares that may be issued pursuant to any
stock plans and the other agreements and instruments listed above will be,
when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Except as set forth above and in
Schedule 3.01(c), and as otherwise expressly set forth in this Agreement,
and except for changes since January 31, 1998 resulting from the grant or
exercise of Employee Stock Options, Director Stock Options, or warrants and
the conversion of notes described in clauses (v) and (vi) above, as of the
date of this Agreement, there are not any securities, options, warrants,
calls, rights to purchase, rights of first refusal, securities convertible
into or exchangeable for voting securities, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
Subsidiaries is a party or by which any of them is bound obligating the
Company to issue, deliver or sell or create, or cause to be issued,
delivered or sold or created, additional shares of capital stock or other
voting securities or Stock Equivalents of the Company or obligating the
Company to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking
(collectively referred to as "Dilutable Securities"). As of the date of
this Agreement, there are not any outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company, except pursuant to existing employee
arrangements.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and the
Ancillary Agreements and, subject, with respect to consummation of the
Merger, to prior approval of the Merger by the stockholders of the Company,
Newco and Newco Sub, as appropriate, in accordance with the
18
<PAGE>
Delaware General Corporation Law ("DGCL"), to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements. Except as set
forth on Schedule 3.01(d), the execution and delivery by the Company of
this Agreement and each Ancillary Agreement to which it is a party and the
consummation by it of the transactions contemplated by this Agreement and
the Ancillary Agreements have been duly authorized by all necessary
corporate action on the part of the Company, subject, with respect to
consummation of the Merger, to prior approval of the Merger by the
stockholders of the Company, Newco and Newco Sub, as appropriate, in
accordance with the DGCL. This Agreement and the Ancillary Agreements to
which it is party have been duly executed and delivered by each of the
Company, Newco and Newco Sub, as appropriate, and, subject, with respect to
consummation of the Merger, to approval of the Merger by the stockholders
of the Company in accordance with DGCL, and assuming this Agreement and the
Ancillary Agreements constitute the valid and binding agreements of Sprint,
constitute valid and binding obligations of each of them enforceable
against the Company, Newco, and Newco Sub, respectively, in accordance with
their respective terms, except to the extent that the enforcement of this
Agreement or the Ancillary Agreements may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and (ii)
general principles of equity regardless of whether enforceability is
considered in a proceeding in equity or at law. Except as set forth on
Schedule 3.01(d), the execution and delivery of this Agreement and the
Ancillary Agreements by the Company did not, and the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements,
and compliance with the provisions of the Marketing Agreement and the
Network Agreement, without obtaining the consent of any third party will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss
by the Company of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of the Company under, (i) the
certificate of incorporation or bylaws of the Company, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit or license applicable to the Company or its
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any Law applicable to the
Company or its respective properties or assets, other than, in the case of
clauses (ii), (iii) and (iv), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) have a
Material Adverse Effect on the Company, (y) materially impair the ability
of the Company to perform its obligations under this Agreement or any
Ancillary Agreement to which it is a party or (z) prevent the consummation
of any of the transactions contemplated by this Agreement or any of the
Ancillary Agreements. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by the Company in connection with the execution and delivery of
this Agreement and the Ancillary Agreements or the consummation by the
Company of the transactions contemplated by this Agreement and the
Ancillary Agreements, except for (i) the filing of a premerger notification
and report form by the Company under the HSR Act and the expiration of the
applicable waiting period or early termination thereof and, (ii) the filing
with the SEC of (w) the Proxy Statement, (x) the S-4,
19
<PAGE>
(y) a solicitation/recommendation statement on Schedule 14D-9 and (z) such
reports under Sections 12 and 13(a) of the Exchange Act as may be required
in connection with this Agreement, the Ancillary Agreements and the
transactions contemplated by this Agreement and the Ancillary Agreements,
(iii) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware, and (iv) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as are set forth on
Schedule 3.01(d).
(e) SEC Documents; Undisclosed Liabilities. The Company has filed all
required reports, schedules, forms, statements and other documents with the
SEC since the filing of its initial registration statement with respect to
its initial public offering which was declared effective on January 22,
1997 (the "SEC Documents" which are deemed to include such registration
statement). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, applicable to such SEC Documents, and
none of the SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has
filed all exhibits to its SEC documents required by Item 601 of SEC
Regulation S-K or which would have been required to be filed if there were
no exclusions or exceptions in paragraph (b)(10) of such Item 601. The
financial statements of the Company included in the SEC Documents comply as
to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC and SEC Regulations S-X) applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto) and fairly present the financial position of the Company as of the
dates thereof and its statements of operations, stockholders equity and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal, recurring year-end audit adjustments). Except as set
forth in the SEC Documents filed and publicly available prior to the date
of this Agreement ("Company Filed SEC Documents"), as of the date hereof,
the Company has no liabilities or obligations of any nature (whether
accrued, contingent, absolute, determined, determinable or otherwise),
other than (i) liabilities provided for in the Company's unaudited balance
sheet included in the Company's Quarterly Report on Form 10-Q for its third
fiscal quarter ("Unaudited Balance Sheet"), dated as of September 30, 1997
(the "Unaudited Balance Sheet Date"), (ii) liabilities and obligations
incurred in the Ordinary Course of Business since the Unaudited Balance
Sheet Date, and (iii) liabilities and obligations under this Agreement and
the Ancillary Agreements.
(f) Absence of Certain Changes or Events. Except as disclosed in
Schedule 3.01(f) or as reflected in Section 3.01(c), the Company Filed SEC
Documents, or except as contemplated by this Agreement, since the Unaudited
Balance Sheet Date, the Company has conducted its business only in the
Ordinary Course of Business and (i) there has not occurred any transaction,
or condition (financial or otherwise) of any character (whether or not in
the Ordinary Course of Business), event or change (including the incurrence
of any
20
<PAGE>
liabilities of any nature, whether or not accrued, contingent or otherwise)
having individually or in the aggregate, a Material Adverse Effect on the
Company, and (ii) the Company has not taken any action that would have been
prohibited under Section 4.01 hereof as if the Agreement had been in effect
on the date of such action.
(g) Litigation. Except as disclosed in the Company Filed SEC
Documents or as set forth on Schedule 3.01(g), there is no suit, action or
proceeding pending or, to the Knowledge of the Company, Threatened against
the Company that, individually or in the aggregate, would have a Material
Adverse Effect on the Company.
(h) Benefit Plans.
(i) Schedule 3.01(h) hereto contains a true and complete list
of each Benefit Plan. With respect to each Benefit Plan, the Company
has made available to Sprint a true and correct copy of (a) the most
recent annual report (Form 5500) filed with the IRS, if any, (b) the
plan document, (c) any summary plan description relating to such
Benefit Plan, and (d) each trust agreement and group annuity contract,
if any, relating to such Benefit Plan.
(ii) With respect to the Benefit Plans, individually and in the
aggregate, no event has occurred, and to the Company's Knowledge,
there exists no present condition or set of circumstances in
connection with which the Company is now subject to, or could
reasonably be expected to be subject to, any liability under ERISA,
the Code, or any other applicable Law, except liability for benefit
claims and funding obligations or contributions payable in the
ordinary course, and to the Company's Knowledge each of the Benefit
Plans has at all times in all material respects been in compliance
with and administered in accordance with its terms, the applicable
provisions of ERISA, the Code or any other applicable Law.
(iii) Each of the Benefit Plans and related trusts that is
intended to be qualified in form under Section 401(a) and tax exempt
under Section 501(a) of the Code, respectively, has been determined by
the IRS to so qualify under the Code and, to the Company's Knowledge,
nothing has occurred since such determination to cause any of such
Benefit Plans not to qualify under Section 401(a) or any of such
related trusts not to be tax exempt under Section 501(a) of the Code
other than the effective date of certain amendments of the Code and
ERISA, the remedial amendment period for which has not expired.
(iv) With respect to the Benefit Plans, individually and in the
aggregate, all required reports and descriptions have been
appropriately filed and distributed to the extent ERISA, the Code or
applicable Law requires.
(v) With respect to the Benefit Plans, individually and in the
aggregate, there has been no prohibited transaction within the meaning
of Section 406 of ERISA
21
<PAGE>
or Section 4975 of the Code involving the Company, and there is no
action, suit, grievance, arbitration or other claim with respect to
the administration or investment of assets of the Benefit Plans (other
than routine claims for benefits made in the ordinary course) pending,
or to the Company's Knowledge, Threatened, and to the Company's
Knowledge there is no present condition or set of circumstances which
could reasonably be expected to give rise to any such action, suit,
grievance, arbitration or other claim.
(vi) Neither the Company nor any corporation, trade or business
which is affiliated with the Company, in the manner described in
Section 414(b), (c), (m) and (o) of the Code or Section 4001(a)(14) of
ERISA, has ever sponsored, or made or been obligated to make
contributions to, (i) any defined benefit pension plan subject to
Title IV of ERISA or any plan subject to the minimum funding standards
under Section 412 of the Code or Section 302 of ERISA; or (ii) any
nonqualified deferred compensation plan or arrangement, including,
without limitation, any plans providing for post employment benefits
such as life or health insurance or any other benefits.
(i) Taxes. Except as set forth on Schedule 3.01(i), the Company has
timely filed all Returns and reports required to be filed by it on or
before the date hereof, except where failure to timely file would not have
a Material Adverse Effect on the Company. All such Returns are complete
and accurate except where the failure to be complete or accurate would not
have a Material Adverse Effect on the Company. The Company has paid or has
set up an adequate reserve for the payment of all Taxes shown as due on
such Returns, except where the failure to do so would not have a Material
Adverse Effect on the Company. The Unaudited Balance Sheet contains an
adequate reserve for all Taxes payable by the Company accrued through the
Unaudited Balance Sheet Date. Except as set forth on Schedule 3.01(i), no
deficiencies for any Taxes have been asserted, proposed or assessed against
the Company in writing that have not been paid or otherwise settled or
reserved against, except for deficiencies the assertion, proposing or
assessment of which would not have a Material Adverse Effect on the
Company, and no waivers of the time to assess any such Taxes are pending.
There are no material Liens for Taxes (other than for current taxes not yet
due and payable) on the assets of the Company.
(j) Voting Requirements. The only vote of the holders of any class or
series of the Company's capital stock that is necessary to approve this
Agreement, the Ancillary Agreements or the transactions contemplated by
this Agreement and the Ancillary Agreements is (i) the affirmative vote by
a majority of the votes cast by the holders of Common Stock entitled to
vote with respect to the issuance and sale of the Convertible Preferred
Stock and Convertible Notes, as may be required by paragraph (i) of NASD
Rule 4460, and (ii) the affirmative vote by the holders of a majority of
the outstanding shares of Common Stock entitled to vote with respect to the
Merger, as required by Section 251 of the DGCL.
22
<PAGE>
(k) Brokers. No broker, investment banker, financial advisor or other
person, other than Deutsche Morgan Grenfell Inc., the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission, in connection with
the transactions contemplated by this Agreement and the Ancillary
Agreements, based upon arrangements made by or on behalf of the Company
(except as set forth on Schedule 3.01(k)).
(l) Compliance with Laws. The Company has in effect all approvals,
authorizations, certificates, filings, franchises, licenses, notices,
permits, variances, exemptions, orders and rights ("Permits") necessary for
it to own, lease or operate its properties and assets and to carry on its
business as now conducted, and there has not occurred any default under any
Permit, except for the absence of Permits and for defaults under Permits
that, individually or in the aggregate, have not had a Material Adverse
Effect on the Company. Except as disclosed in the Company Filed SEC
Documents, the Company is in compliance with all applicable Law, except
where failures to so comply, individually or in the aggregate, would not
have a Material Adverse Effect on the Company. Except as set forth in
Schedule 3.01(l) hereto or as described in Company Filed SEC Documents
filed prior to the date hereof, as of the date of this Agreement, no
investigation or review by any Governmental Entity with respect to the
Company is pending or, to the Company's Knowledge, Threatened, other than,
in each case, those the outcome of which would not have a Material Adverse
Effect on the Company.
(m) Environmental Matters. The Company is and at all times has been
in full compliance with, and has not been and is not in violation of or
liable under, any Environmental Law (which compliance includes the
possession by the Company of all Permits required under applicable
Environmental Law and compliance with the terms and conditions thereof),
except for such failure to be in compliance which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. There
are no pending or, to the Company's Knowledge, Threatened claims, orders,
notices, administrative or judicial actions, or Encumbrances, relating to
environmental, health, and safety liabilities arising under or pursuant to
any federal, state or local Environmental Laws, with respect to or
affecting any of the properties and assets (whether real, personal, or
mixed) in which the Company has an interest, except for any such claim,
order, notice, administrative or judicial action, Encumbrance or other
restriction that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(n) Intellectual Property. The Company owns sufficient right, title
and interest in and to, or has valid licenses of sufficient scope and
duration for, all patents, patent rights, copyrights, trademarks, service
marks, trade names, software, trade secrets, confidential information and
other intellectual property material to the operation of the business of
the Company as currently conducted or
23
<PAGE>
proposed to be conducted (the "Intellectual Property Assets") and as
presently proposed to be conducted. The Intellectual Property Assets are
free and clear of all Liens which would materially impair the Company's
ability to use the Intellectual Property Assets in the business of the
Company as currently conducted or proposed to be conducted. The Company has
granted to no third party any rights in and to the Intellectual Property
Assets except for distribution rights, OEM rights, end user licenses and
rights to reproduce certain of the Intellectual Property Assets in the
Ordinary Course of Business in connection with the marketing and
distribution of the Company's product and service offerings, and which
individually and in the aggregate would not have a Material Adverse Effect.
Except as set forth on Schedule 3.01(n), none of the Intellectual Property
Assets owned or licensed by the Company infringes, or conflicts with, or to
the Company's Knowledge, is alleged to infringe upon or conflict with the
intellectual property rights of any third party, which infringement or
alleged infringement could have a Material Adverse Effect. The Company has
no Knowledge that any of its employees performing or managing key functions
of the Company is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to
any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to promote the
interests of the Company or that would conflict with the Company's business
as proposed to be conducted. To the Company's Knowledge, neither the
execution nor delivery of this Agreement or any Ancillary Agreement, nor
the conduct of the Company's business by the employees of the Company, nor
the conduct of the Company's business as proposed, will conflict with or
result in a breach of the terms, conditions or provisions of, or constitute
a default under, any contract, covenant or instrument under which any of
such employees is now obligated, which conflict or breach would have a
Material Adverse Effect. The Company does not presently utilize or intend
to utilize any inventions of any of its employees (or people it currently
intends to hire) made prior to their employment by the Company. To the
Company's Knowledge, any software owned by the Company, and any software
used independently by the Company and owned by third parties and licensed
to the Company is, in all material respects, Year 2000 Compliant. "Year
2000 Compliant" means (i) the software is capable of correctly processing,
providing and receiving date data within and between the twentieth and
twenty-first century (including accounting for all required leap year
calculations); and (ii) all date fields in the software use four digit year
fields.
(o) Certain Payments. Neither the Company, nor any of its directors,
officers, agents, or employees, or to the Company's Knowledge, any other
Person associated with or acting for or on behalf of the Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to
pay for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect
of the Company or any Affiliate of the Company, (b) established or
maintained any fund or asset that has not been appropriately recorded in
the books and records of the Company, which in the case of either clause
(a) or (b) would be in violation of Law or would have a Material Adverse
Effect.
SECTION 3.02 Representations and Warranties of Newco and Newco Sub. Newco
and Newco Sub represent and warrant to Sprint and Sprint L.P., jointly and
severally, as follows:
24
<PAGE>
(a) Organization, Standing and Power. Newco and Newco Sub were each
incorporated under the DGCL on January 30, 1997 and neither of them has
engaged in any business, owns any property or assets (except for $10 in
cash received by Newco for the issuance of 10 shares of its common stock to
its sole stockholder (which is not the Company or an Affiliate of the
Company) and $10 in cash received by Newco Sub for the issuance of 10
shares of its common stock to Newco, which in each case represents all of
their outstanding shares of capital stock) or is a party to any agreement,
except for this Agreement. Each of Newco and Newco Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated. Newco will, immediately following
the Merger, be duly qualified or licensed to do business and be in good
standing in each jurisdiction in which the nature of the business conducted
or the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to
be so qualified or licensed (individually or in the aggregate) would not
have a Material Adverse Effect on Newco immediately following the Merger.
Each of Newco and Newco Sub has made available to Sprint for its review
complete and correct copies of its certificate of incorporation and bylaws,
in each case as amended to the date of this Agreement.
(b) Authority; Noncontravention. Each of Newco and Newco Sub has the
requisite corporate power and authority to enter into this Agreement and
the Ancillary Agreements and, subject, with respect to consummation of the
Merger, to approval of the Merger by the stockholders of the Company, Newco
and Newco Sub in accordance with the DGCL, to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements. Except as set
forth on Schedule 3.02(b), the execution and delivery by each of Newco and
Newco Sub of this Agreement and each Ancillary Agreement to which it is a
party and the consummation by each of them of the transactions contemplated
by this Agreement and the Ancillary Agreements have been duly authorized by
all necessary corporate action on the part of Newco and Newco Sub,
respectively, subject, with respect to consummation of the Merger, to prior
approval of the Merger by the stockholders of the Company, Newco and Newco
Sub in accordance with DGCL. This Agreement and the Ancillary Agreements to
which it is party have been duly executed and delivered by each of Newco
and Newco Sub and, subject, with respect to consummation of the Merger, to
prior approval of the Merger by the stockholders of the Company, Newco and
Newco Sub in accordance with DGCL, and assuming this Agreement and the
Ancillary Agreements constitute the valid and binding agreements of Sprint
and the Company, constitute valid and binding obligations of each of them
enforceable against Newco and Newco Sub, respectively, in accordance with
their respective terms, except to the extent that the enforcement hereof
and thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity
regardless of whether enforceability is considered in a proceeding in
equity or at law. Except as set forth on Schedule 3.02(b), the execution
and delivery of this Agreement and the Ancillary Agreements by Newco and
Newco Sub did not, and the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements and compliance
25
<PAGE>
with the provisions of the Marketing Agreement and the Network Agreement
without obtaining the consent of any third party will not, conflict with,
or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss by Newco or Newco
Sub of a material benefit under, or result in the creation of any Lien upon
any of the properties or assets of Newco or Newco Sub under, (i) the
certificate of incorporation or bylaws of Newco or Newco Sub, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit or license applicable to Newco or Newco Sub
or their respective assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any Law applicable to
Newco or Newco Sub or their respective assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, defaults, rights or
Liens that individually or in the aggregate would not (x) have a Material
Adverse Effect on Newco or Newco Sub, (y) materially impair the ability of
Newco and Newco Sub to perform its obligations under this Agreement or any
Ancillary Agreement to which it is a party or (z) prevent the consummation
of any of the transactions contemplated by this Agreement or any of the
Ancillary Agreements. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by Newco or Newco Sub in connection with the execution and
delivery of this Agreement and the Ancillary Agreements or the consummation
by Newco and Newco Sub of the transactions contemplated by this Agreement
and the Ancillary Agreements, except for (i) the filing with the SEC of (i)
the S-4, (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, and (iii) such other consents, approvals,
orders, authorizations, registrations, declarations and filings as are set
forth on Schedule 3.02(b).
(c) Litigation. There is no suit, action or proceeding pending or, to
the Knowledge of Newco or Newco Sub, Threatened against Newco or Newco Sub.
(d) Voting Requirements. The only vote of the holders of any class or
series of the capital stock of Newco and Newco Sub that is necessary to
approve this Agreement, the Ancillary Agreements or the transactions
contemplated by this Agreement and the Ancillary Agreements is the
affirmative vote by the holders of a majority of their respective
outstanding shares of common stock entitled to vote with respect to the
Merger, as required by Section 251 of the DGCL.
(e) Brokers. No broker, investment banker, financial advisor or other
person, other than Deutsche Morgan Grenfell Inc., the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the transactions contemplated by this Agreement and the Ancillary
Agreements based upon arrangements made by or on behalf of Newco and Newco
Sub.
(f) Compliance with Laws. Newco and Newco Sub will, immediately
following the Merger, have all Permits necessary for them to own, lease or
operate the properties and assets now owned by the Company and to carry on
the business now conducted by the
26
<PAGE>
Company, except for such Permits, the absence of which would not have,
individually or in the aggregate, a Material Adverse Effect on Newco and
Newco Sub, taken as a whole.
SECTION 3.03 Representations and Warranties of Sprint and Sprint L.P..
Sprint and Sprint L.P., jointly and severally, represent and warrant to the
Company, Newco and Newco Sub as follows:
(a) Organization, Standing and Power. Sprint is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated. Sprint L.P. is a limited
partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized. Each of Sprint and
Sprint L.P. has all requisite power and authority to own, lease and operate
their respective properties and to carry on their respective businesses as
now being conducted. Each of Sprint and Sprint L.P. and each of their
respective Significant Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) could not reasonably be expected to have a Material Adverse
Effect on Sprint or Sprint L.P. and their respective Subsidiaries, taken as
a whole. Sprint has made available to the Company, Newco and Newco Sub for
their review complete and correct copies of its certificate of
incorporation and bylaws. Sprint L.P. has made available to the Company,
Newco and Newco Sub for their review a complete and correct copy of its
constitutive documents.
(b) Subsidiaries. A schedule to Sprint's Annual Report on Form 10-K
for 1996 lists each Significant Subsidiary of Sprint. All the outstanding
shares of capital stock of each Significant Subsidiary that is a
corporation have been validly issued and are fully paid and nonassessable
and are not subject to any options or other rights to acquire any such
shares.
(c) Authority; Noncontravention. Sprint has the requisite corporate
power and authority, and Sprint L.P. has the requisite power and authority,
to enter into this Agreement and the Ancillary Agreements and to consummate
the transactions contemplated by this Agreement and the Ancillary
Agreements. The execution and delivery by Sprint and Sprint L.P. of this
Agreement and each Ancillary Agreement to which it is a party and the
consummation by it of the transactions contemplated by this Agreement and
the Ancillary Agreements have been duly authorized by, in the case of
Sprint, all necessary corporate action, and in the case of Sprint L.P., all
necessary action of the limited partnership and its general partner. This
Agreement and the Ancillary Agreements to which Sprint or Sprint L.P. is
party have been duly executed and delivered by Sprint and Sprint L.P. and,
assuming this Agreement and the Ancillary Agreements constitute the valid
and binding agreements of the Company, Newco and Newco Sub, constitute
valid and binding obligations enforceable against Sprint and Sprint L.P. in
accordance with their respective terms, except to the extent
27
<PAGE>
that the enforcement of this Agreement or the Ancillary Agreements may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity regardless of whether
enforceability is considered in a proceeding in equity or at law. Except as
set forth on Schedule 3.03(c), the execution and delivery of this Agreement
and the Ancillary Agreements by Sprint and Sprint L.P. did not, and the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements and compliance with the provisions of the Marketing
Agreement and the Network Agreement without obtaining the consent of any
third party will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or to loss by Sprint, Sprint L.P. or any of Sprint's Significant
Subsidiaries, of a material benefit under, or result in the creation of any
Lien upon any of the properties or assets of Sprint or Sprint L.P. under,
(i) the certificate of incorporation or bylaws of Sprint or the comparable
charter or organizational documents of Sprint L.P. or any of Sprint's
Significant Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit or
license applicable to Sprint, Sprint L.P. or any of Sprint's Significant
Subsidiaries or their respective properties or assets or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Sprint, Sprint L.P. or any of Sprint's Significant
Subsidiaries or their respective properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) have a
Material Adverse Effect on Sprint, Sprint L.P. and Sprint's Subsidiaries,
taken as a whole, (y) materially impair the ability of Sprint or Sprint
L.P. to perform their respective obligations under this Agreement or any
Ancillary Agreement to which it is a party or (z) prevent the consummation
of any of the transactions contemplated by this Agreement or any of the
Ancillary Agreements. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Sprint or Sprint L.P. or any of Sprint's
Significant Subsidiaries in connection with the execution and delivery of
this Agreement and the Ancillary Agreements or the consummation by Sprint
or Sprint L.P. of the transactions contemplated by this Agreement and the
Ancillary Agreements, except for (i) the filing of a premerger notification
and report form by Sprint or Sprint L.P. under the HSR Act and the
expiration of the applicable waiting period or early termination thereof
and, (ii) the filing with the SEC of (x) a tender offer statement on
Schedule 14D-1 and (y) such reports under Sections 12 and 13(a) of the
Exchange Act as may be required in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated by this Agreement
and the Ancillary Agreements, and (iii) such other consents, approvals,
orders, authorizations, registrations, declarations and filings as are set
forth on Schedule 3.03(c).
(d) Brokers. No broker, investment banker, financial advisor or other
person, other than SBC Warburg Dillon Read, Inc. the fees and expenses of
which will be paid by Sprint, is entitled to any broker's, finder's,
financial advisor's or other similar fee or
28
<PAGE>
commission in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements based upon arrangements made by or
on behalf of Sprint or Sprint L.P.
(e) Ownership of Common Stock. As of the date of this Agreement,
neither Sprint nor Sprint L.P. beneficially owns any shares of Common
Stock.
(f) Investment Intent. Sprint is purchasing the Convertible Notes for
advances under the Credit Agreement, and Sprint L.P. is purchasing the
Convertible Preferred Stock in exchange for the Preferred Stock
Consideration, in each case for their own account for investment and not
with a present view to, or for sale in connection with, any distribution
thereof in violation of the Securities Act. The certificates evidencing the
Convertible Preferred Stock, the Convertible Notes and any shares of Common
Stock issued upon conversion of the Convertible Preferred Stock or the
Convertible Notes shall bear substantially the following legend (modified
accordingly in the case of the Convertible Notes) until such time as there
is a sale or transfer in accordance with this Agreement and the Ancillary
Agreements or the termination thereof:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THE
DISPOSITION AND VOTING OF SUCH SHARES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THE INVESTMENT AGREEMENT DATED AS OF
FEBRUARY 10, 1998, AMONG THE COMPANY, SPRINT, SPRINT L.P.,
NEWCO, AND NEWCO SUB AND THE GOVERNANCE AGREEMENT DATED AS
OF FEBRUARY 10, 1998, AMONG THE COMPANY, SPRINT, SPRINT
L.P., AND NEWCO, AND NEWCO RESERVES THE RIGHT TO REFUSE THE
TRANSFER OF SUCH SHARES UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH
CONDITIONS WILL BE FURNISHED BY NEWCO TO THE HOLDER HEREOF
UPON WRITTEN REQUEST AND WITHOUT CHARGE. THESE SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED EXCEPT IN ACCORDANCE THEREWITH."
(g) Acquisition for Investment and Rule 144. Sprint and Sprint L.P.
understand that the shares of Convertible Preferred Stock issued to them
pursuant to the Agreement ("Sprint Shares") and Sprint understands that the
Convertible Notes issued to Sprint pursuant to the Credit Agreement will
not be registered under the Securities Act by reason of a specific
exemption from the registration provision of the Securities Act which
depends upon, among other things, the bona fide nature of their investment
intent as expressed herein. Except as otherwise provided in Section
3.03(i), Sprint and Sprint L.P. acknowledge that the Sprint Shares and the
Convertible Notes must be held indefinitely unless they are subsequently
29
<PAGE>
registered under the Securities Act or an exemption from such registration
is available. Sprint and Sprint L.P. have been advised or are aware of the
provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions. Sprint and Sprint L.P. are aware that
the certificates representing the Sprint Shares, and that the Convertible
Notes, will bear such legends relating to restrictions on resale under the
Securities Act as provided in Section 3.01(f) and Newco under certain
conditions may issue instructions to its stock transfer agent to stop the
transfer of the Sprint Shares and the Convertible Notes unless made in
accordance with this Agreement or any Ancillary Agreement.
(h) Legal Investment. The purchase of the Convertible Preferred Stock
by Sprint L.P. and the purchase of Convertible Notes by Sprint hereunder is
legally permitted by all applicable Law and all consents, approvals,
authorizations of or designations, declarations or filings in connection
with the valid execution and delivery of this Agreement by Sprint and
Sprint L.P. or the purchase of the Convertible Preferred Stock by Sprint
L.P. and the Convertible Notes by Sprint have been obtained, or will be
obtained prior to the Closing Date.
(i) Purchase Entirely for Own Account. Sprint is purchasing the
Convertible Notes for advances under the Credit Agreement, and Sprint L.P.
is purchasing the Convertible Preferred Stock in exchange for the Preferred
Stock Consideration, in each case for their own account and not as a
nominee or agent, and not with a view to the resale or distribution of any
part thereof, except for transfers permitted by this Agreement. Neither
Sprint L.P. nor Sprint has any present intention of selling, granting any
participation in, or otherwise distributing the Convertible Preferred Stock
or the Convertible Notes. Neither Sprint nor Sprint L.P. has any contract,
undertaking, agreement or arrangement with any Person to sell, transfer or
grant participations to such Person or to any third person with respect to
the Convertible Preferred Stock or the Convertible Notes. Notwithstanding
any other provision of this Agreement, Sprint and Sprint L.P. shall be
permitted to transfer the Convertible Preferred Stock, the Convertible
Notes and the Newco Common Stock issued upon conversion thereof to any
Affiliate of Sprint or Sprint L.P. without an opinion of counsel, without
registration under the Securities Act or any state securities law, and
without the consent of Newco, provided that any such Affiliate who acquires
--------
such Convertible Preferred Stock, Convertible Notes or Newco Common Stock
agrees in writing to be subject to the applicable requirements of this
Section 3.03 and any restrictions on transfer contained in any of the
Ancillary Agreements to the same extent as if such Affiliate were the
original purchaser thereof.
(j) Agreements with SIP Subscribers. Sprint L.P. has previously
furnished to each of the Company, Newco and Newco Sub the form of agreement
between Sprint L.P. and the SIP Subscribers governing the receipt of
internet access services from Sprint L.P. ("SIP Agreements"). Sprint L.P.
has complied in all material respects with all applicable terms and
requirements of the SIP Agreements. As of the date hereof, Sprint has
approximately 130,000 SIP Subscribers who are subject to SIP Agreements.
Except as set forth in Schedule 3.03(j), the SIP Agreements are assignable
to Newco in accordance with this Agreement and are enforceable against
Sprint L.P. in accordance with their respective terms, except to the
30
<PAGE>
extent enforcement thereof may be limited by: (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principals of
equity, regardless of whether enforceability is considered in a proceeding
in equity or at law; provided, however, that the SIP Agreements are subject
-------- -------
to immediate termination by unilateral action of the SIP Subscribers.
(k) Financial Capability. Sprint has sufficient funds available to
finance the Offer and the other transactions contemplated by this Agreement
and the Ancillary Agreements, and is not engaged in any financing activity,
the consummation of which would be necessary in order for Sprint to
consummate the Offer and the other transactions contemplated by this
Agreement and the Ancillary Agreements.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS AND
OF THE COMPANY
SECTION 4.01 Conduct of Business. (a) Conduct of Business by the
Company. During the period from the date of this Agreement to the Closing Date,
the Company shall carry on its business in accordance with applicable Laws and
in the usual, regular and Ordinary Course in substantially the same manner as
heretofore conducted and, to the extent consistent therewith, use all reasonable
efforts to preserve intact its current business organization, keep available the
services of its current officers and employees and preserve its relationships
with customers, suppliers, licensors, licensees, distributors, joint venturers
and others having business dealings with it, except to the extent that the
failure to do so would not have a Material Adverse Effect on the Company.
Without limiting the generality of the foregoing, except as contemplated by this
Agreement, during the period from the date of this Agreement to the Closing
Date, the Company shall not, without obtaining the prior written consent of
Sprint, undertake any of the following:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of any of its capital stock, (y) split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (z) purchase, redeem
or otherwise acquire any shares of capital stock of the Company or any
other equity securities of the Company or any rights, warrants or
options to acquire, or convert into or exchange for, any such shares
or other equity securities, except for Employee Stock Options, shares
repurchased or redeemed pursuant to any existing arrangements with
existing employees;
(ii) except as set forth in subsection (iv) hereof below, issue,
deliver, sell, pledge or otherwise encumber any shares of capital
stock, any other voting securities or any securities convertible into
or exchangeable for, or any rights, warrants or options to acquire,
any such shares, voting securities or convertible or exchangeable
31
<PAGE>
securities (other than (x) the issuance of new Employee Stock Options
or Director Stock Options under existing Benefit Plans or Common Stock
upon the exercise or conversion of Employee Stock Options or Director
Stock Options, warrants or convertible notes outstanding on the date
of this Agreement and in accordance with their present terms, and (y)
the issuance and sale of the Convertible Preferred Stock and the
Convertible Notes in accordance with the terms hereof);
(iii) any amendment to the certificate of incorporation or
bylaws of the Company;
(iv) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the
stock or assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof if the consideration paid by the
Company in such transaction is in the form of an issuance of capital
stock or Dilutable Securities which in the aggregate are in excess of
the Issuance Percentage Limitation or (y) any assets that are
material, individually or in the aggregate, to the Company;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its Intellectual
Property Assets or any other properties or assets if, as a result
thereof, the Company would suffer a Material Adverse Effect;
(vi) (A) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities
of the Company, guarantee any debt securities of another Person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing, except for short-
term borrowings incurred in the Ordinary Course of Business or which
do not exceed $10 million in the aggregate, or (B) make any loans,
advances or capital contributions to, or investments in, any other
Person other than (1) pursuant to existing contractual rights and (2)
non-material loans or advances to employees in the Ordinary Course of
Business;
(vii) make or agree to make any new capital expenditures or
expenditures (other than capital expenditures which are contained in a
duly approved budget of the Company as of the date hereof), which, are
in excess of $5 million in the aggregate.
(viii) change any accounting policy or procedure, other than any
changes required by GAAP or applicable SEC accounting policy;
(ix) fail to maintain its books, accounts and records in any
manner other than the usual, regular and ordinary manner, on a basis
consistent with prior years and in a business-like manner in
accordance with sound commercial practice;
32
<PAGE>
(x) fail to timely file all tax returns and reports required to
be filed with any Governmental Entity; or
(xi) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. The Company, Newco, Newco Sub, Sprint and Sprint L.P.
shall not, and Sprint shall not permit any of its Subsidiaries to, take any
action that would result in (i) any of the representations and warranties of
such party set forth in this Agreement or the Ancillary Agreements that are
qualified as to materiality becoming untrue, (ii) any of such representations
and warranties that are not so qualified becoming untrue in any material respect
or (iii) any of the conditions set forth in Article II not being satisfied. Each
of the Parties agrees to and shall use its respective commercially reasonable
efforts to cause the conditions for the respective benefit of the other Parties
hereto and set forth in Article II to be satisfied.
(c) Advice of Changes. Each of the Parties shall promptly notify the other
Parties of any change or event having a Material Adverse Effect on the other
Parties. If a Party provides notice to the other Parties of a change or event
having a Material Adverse Effect on the other Parties, and as to any of the
other Parties that fails to deliver notice within five (5) business days to such
notifying Party of its intention to not Close as a result of such change or
event, then such Party failing to deliver such notice shall be deemed to have
waived such change or event.
SECTION 4.02 Access to Property and Information. Sprint, Sprint L.P. and
their counsel, accountants, auditors and representatives shall have full access
during normal business hours to the facilities of the Company and to its books,
records, Contracts and documents concerning its business, assets and properties
that may reasonably be requested, provided that such inspections will not
--------
unreasonably disrupt the Company's business or employees and the Company
receives reasonable advance notice of such inspections.
SECTION 4.03 Public Disclosure. No public release or announcement of the
transactions contemplated by this Agreement or any of the Ancillary Agreements
or related discussions or negotiations shall be made without advance approval
thereof by Sprint, the Company and Newco, except as may be required by Law or
legal process, in which case the other Parties shall receive prior notification
and opportunity for review before release.
SECTION 4.04 HSR Act Filings. As soon as practicable, the Company and
Sprint shall each file completed notification reports under the HSR Act, in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements and will cooperate with each other in attempting to secure
a waiver of the applicable waiting periods under such Act, and, upon the request
of either the Federal Trade Commission or the United States Department of
Justice, will supply such agency with any additional requested information as
expeditiously as possible.
33
<PAGE>
SECTION 4.05 Information. Each Party will promptly inform the other party
in writing of (i) any litigation commenced against such Party in respect of the
transactions contemplated by this Agreement or any Ancillary Agreement, or (ii)
any material litigation commenced against such Party which would have a Material
Adverse Effect on such Party and its Subsidiaries taken as a whole.
SECTION 4.06 Further Assurances. Each Party shall each execute and
deliver or cause to be executed and delivered such further instruments of
transfer, assignment and conveyance and take such other action as may be
reasonably required to more effectively carry out the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements.
SECTION 4.07 No Solicitation. (a) The Company shall not and shall not
authorize or permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of, the Company to, (i)
solicit or initiate, or encourage the submission of, any Acquisition Proposal,
or approve or authorize any of the foregoing, or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to expedite any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal; provided, however, that to the extent required by
-------- -------
the fiduciary obligations of the Board of Directors of the Company, as
determined in good faith by the Board of Directors based on the advice of
outside counsel, the Company may, (A) in response to an unsolicited request
therefor, furnish information with respect to the Company to any person pursuant
to a customary confidentiality agreement and discuss such information with such
person, (B) upon receipt by the Company of an Acquisition Proposal, following
delivery to Sprint of the notice required pursuant to Section 4.07(b),
participate in negotiations regarding such Acquisition Proposal, and (C) modify
or withdraw the recommendation to accept the Offer contemplated by Section
1.02(a) or its recommendation that the stockholders of the Company vote in favor
of the Company Stockholder Vote Matters as contemplated by Section 1.06(c).
(b) The Company shall (i) promptly notify Sprint of (A) the existence of
any request for confidential information with respect to, or the receipt of, any
Acquisition Proposal, (B) any inquiry or discussions with respect to, or which
could reasonably be expected to lead to, any Acquisition Proposal, (C) the
execution of a confidentiality agreement with respect to an Acquisition
Proposal, (D) the furnishing of any information in contemplation of an
Acquisition Proposal, whether or not pursuant to a confidentiality agreement,
(ii) describe the terms and conditions of any Acquisition Proposal in reasonable
detail, and (iii) furnish to Sprint all information made available to any Person
making the Acquisition, or contemplating the making of an Acquisition Proposal,
subject to a customary confidentiality agreement.
(c) The Company shall not take any action that would enhance the ability
of any other Person proposing an Acquisition Proposal to obtain the approval of
the Company's stockholders or otherwise consummate such Acquisition Proposal
(including granting any approval pursuant to Section 203 of the DGCL) without
also taking a comparable action that would similarly enhance the ability of
Sprint to obtain any necessary approval of the Company's stockholders of, and
otherwise to consummate, the transactions contemplated by this Agreement and the
Ancillary Agreements or
34
<PAGE>
an alternative transaction initiated by Sprint and concurrently withdrawing any
impediments thereto that do not similarly impede such other Person.
(d) Nothing contained in this Section 4.07 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule 14e-2
under the Exchange Act.
SECTION 4.08 Efforts Regarding Outstanding Warrants and Other Dilutable
Securities. Prior to the Closing, the Company will use its commercially
reasonable efforts to cause each of the Warrants and other Dilutable Securities
of the Company outstanding on the Closing Date to be amended or otherwise
modified so that such Warrants and other Dilutable Securities would be
thereafter only convertible into, exchangeable for or give the right to acquire
a number of shares of Newco Common Stock equal to the number of shares of Common
Stock into which such are convertible, exchangeable or exercisable. The Company
shall, at any time reasonably requested by Sprint, update Sprint with respect to
(i) any warrants or other Dilutable Securities of the Company that will be
convertible into, exchangeable for, or given the right to acquire Common Stock
or other voting securities of the Company after the Merger, and (ii) the
Company's progress in obtaining amendments or modifications to each of the
agreements and/or instruments governing and/or evidencing such warrants and/or
Dilutable Securities in order to ensure that such warrants and/or Dilutable
Securities will be convertible into, exchangeable for, or given the right to
acquire solely the same respective number of shares of Newco Common Stock after
the Merger.
ARTICLE V
ADDITIONAL AGREEMENTS
35
<PAGE>
SECTION 5.01 Reasonable Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the Parties shall
use all commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement and the Ancillary Agreements, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if any)
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or any of the Ancillary
Agreements or the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement and the Ancillary Agreements.
In connection with and without limiting the foregoing, the Company, Newco and
their respective Boards of Directors shall (i) take all action requested by
Sprint or Sprint L.P. reasonably necessary so that no state takeover statute of
the States of California or Delaware or similar statute or regulation in such
states is or becomes applicable to this Agreement, the Ancillary Agreements or
any transaction contemplated by this Agreement or the Ancillary Agreements and
(ii) if any state takeover statute of the States of California or Delaware or
similar statute or regulation in such states becomes applicable to this
Agreement, any Ancillary Agreement or any transaction contemplated by this
Agreement or any Ancillary Agreement, take all action reasonably requested by
Sprint or Sprint L.P. and within the Company's or Newco's power to permit the
transactions contemplated by this Agreement and the Ancillary Agreements to be
consummated as promptly as practicable on the terms contemplated by this
Agreement and the Ancillary Agreements and otherwise take such actions as are
reasonably requested by Sprint or Sprint L.P. and within the Company's or
Newco's power to minimize the effect of such statute or regulation on the
transactions contemplated by this Agreement and the Ancillary Agreements.
Notwithstanding the foregoing, the Board of Directors of the Company shall not
be prohibited from taking any action permitted by Section 4.07.
(b) Each Party shall give prompt notice to the other parties, of (i) any
representation or warranty made by it contained in this Agreement or any
Ancillary Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect, subject to such qualification, or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure of that Party to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement or any Ancillary
Agreement (including the Knowledge of Sprint of any circumstance or condition
that could reasonably be expected to render Sprint to be unable to satisfy the
condition set forth in Section 2.03(e)); provided, however, that no such
-------- -------
notification shall affect the representations, warranties, covenants or
agreements of the Parties or the conditions to the obligations of the Parties
under this Agreement or the Ancillary Agreements.
36
<PAGE>
SECTION 5.02 Fees and Expenses. Except as provided below, all fees and
expenses incurred in connection with the Offer, this Agreement and the
transactions contemplated by this Agreement and the Ancillary Agreements shall
be paid by the Party incurring such fees or expenses, whether or not the Offer,
the sale of the Convertible Preferred Stock or the Convertible Notes, or the
other transactions contemplated by this Agreement or any Ancillary Agreement on
the terms contemplated hereby or thereby is consummated; provided, however, that
-------- -------
one-half of the reasonable out-of-pocket expenses incurred by the Company in
preparing the Proxy Statement and S-4, printing and mailing the Proxy Statement,
the SEC filing fees for the S-4 and in holding the Special Meeting shall be paid
by Sprint.
SECTION 5.03 Stockholder Litigation. The Company shall give Sprint prompt
notice of any stockholder litigation against the Company and its directors
relating to the transactions contemplated by this Agreement and the Ancillary
Agreements; provided, however, that no settlement of any such litigation shall
-------- -------
be agreed to until the Company has consulted with Sprint.
SECTION 5.04 Nasdaq Listing. The Company shall use its best efforts to
cause the Newco Common Stock to be included in The Nasdaq National Market after
the Closing.
SECTION 5.05 Confidentiality. Prior to the date of this Agreement, and
between the date of this Agreement and until the earlier of the Closing Date or
the termination of this Agreement, and thereafter in accordance with the
Ancillary Agreements and the transactions and ongoing business conducted by the
Parties as contemplated hereby and thereby, the Parties have provided, or shall
provide, one another with information which is protected, secret, non-public or
proprietary in nature ("Confidential Information"); provided, however, that the
-------- -------
term Confidential Information shall not include information which: (a) is or
becomes publicly available other than as a result of a disclosure by the
disclosing Party or its representatives, (b) is or becomes available to the
receiving Party on a nonconfidential basis from a source (other than the
disclosing Party or its representatives) which, to the receiving Party's
knowledge after due inquiry, is not prohibited from disclosing such information
to the receiving Party by a legal, contractual or fiduciary obligation to the
disclosing Party, (c) is independently developed by the receiving Party without
use of the Confidential Information, or (d) is already known by the receiving
Party. Each Party agrees to (i) hold confidential, to protect, and not to
disclose except on a need-to-know basis to its directors, officers, employees,
agents, financial advisors and legal counsel, all Confidential Information
provided to it by any other Party to this Agreement or any Ancillary Agreement,
and except as otherwise required by Law or legal process, or (ii) to use
Confidential Information for any purpose other than to the extent necessary to
evaluate and enforce its rights under this Agreement and any Ancillary
Agreement. The covenants set forth in this Section 5.05 shall remain in effect
until the Closing Date and so long thereafter as any Ancillary Agreement remains
in effect. If this Agreement is terminated prior to consummation of the
transactions contemplated hereby or by any Ancillary Agreement, then each Party
shall return all documents and other material, whether or not confidential,
provided to it pursuant to this Agreement by or on behalf of any other Party to
this Agreement. The foregoing obligations of confidentiality, non-disclosure
and limited use shall be in effect for a period of three years beyond such
termination. During such period, none of the Parties shall use any of the
Confidential Information received from
37
<PAGE>
any other Party to the detriment of such other Party. Notwithstanding any other
provision of this Section 5.05, each Party shall have the right to retain and to
use any Confidential Information to the extent necessary to evaluate and enforce
its rights under this Agreement or any Ancillary Agreement.
SECTION 5.06 No Acceleration of Options or Termination Payments. (a) The
Company shall, prior to the Closing, amend, or cause to be amended, (i) the 1995
Stock Option Plan and, if necessary, any options granted thereunder, (ii) the
employment agreement with Charles G. Betty and any other employment agreements
with officers, directors or employees of the Company, (iii) any other plan,
agreement, arrangement or understanding giving rise to any options, warrants or
any other rights to purchase capital stock of the Company are granted or issued,
(iv) any plan, agreement, arrangement or understanding pursuant to which any
termination or severance pay or other compensation of any officer, director or
employee of the Company is or may become due, in order, in any such case, to
ensure that none of the transactions contemplated by this Agreement or any of
the Ancillary Agreements (including, without limitation, conversion of the
Convertible Preferred Stock and/or the Convertible Notes) will, constitute a
"change of control," or any similar event or occurrence within the meaning of
any such term or any similar term contained in any of the foregoing, or
otherwise cause or result in the acceleration of the vesting of such options or
rights or of the time at which such options or rights are permitted to be
exercised, or the acceleration of the right to receive termination or severance
pay or other compensation, in any such case either alone or together with any
other event or occurrence, such as the termination or constructive termination
of employment of any officer, director or employee of the Company.
SECTION 5.07 Amortization and Writeoffs of Goodwill and Assets. The
Company and Newco agree that none of the goodwill, or other tangible or
intangible assets acquired pursuant to, the transactions contemplated by this
Agreement or any Ancillary Agreement shall be amortized or written off other
than on a straight line basis of equal amounts taken over a period of no less
than 24 months commencing with the Closing Date, except for any such amount
which, individually or in the aggregate, is not material.
SECTION 5.08 Maintaining SIP Subscribers at Newco. The Company and Newco
agree that all of the SIP Subscribers assigned to Newco at the Closing shall be
maintained as customers of Newco and not the Company for a period of at least
two years after the Closing Date (unless such customers terminate their customer
agreement with Newco on their own initiative); provided, however, that such
-------- -------
customers may be serviced by the Company pursuant to an agreement to do so
containing terms and conditions as would be obtained by Persons dealing at arms
length. During the period commencing on the Closing Date and continuing until
the 31st day after the Closing Date, Newco shall not (i) discontinue or modify,
or publicly announce the discontinuance or modification, of the current $5.00
credit program (i.e., whereby SIP Subscribers are entitled to a $5.00 credit
upon certain circumstances set forth in the terms and conditions governing such
program), or (ii) make any change or modification to any other term or condition
of the SIP Agreement which is reasonably likely to result in a reduction in the
number of SIP Subscribers within the aforementioned time period.
SECTION 5.09 Certification of SIP Subscribers.
38
<PAGE>
(a) On or before the 15th day following the Closing Date, Sprint L.P.
shall prepare and deliver to the Company a schedule certified by a duly
authorized executive officer showing (i) the number and identity of the SIP
Subscribers assigned to the Company at Closing pursuant to Section 1.03(ii)
who have paid pursuant to the SIP Agreements at any time on or prior to the
Closing Date and (ii) the number and identity of SIP Subscribers assigned
to the Company at Closing pursuant to Section 1.03(ii) who had not paid
pursuant to the SIP Agreements at any time on or prior to the Closing Date.
For purposes of this Section 5.09, a SIP Subscriber shall be deemed to have
paid on the date of receipt of payment or upon which the subscriber's
credit card is billed by Sprint L.P., the Company or Newco, as the case may
be.
(b) On or before the 45th day following the Closing Date, Newco shall
prepare and deliver to Sprint L.P. a schedule (the "SIP True-Up
Certificate") certified by its chief financial officer showing (i) the
number and identity of the SIP Subscribers who have paid pursuant to SIP
Agreements at any time on or prior to the 31st day after the Closing Date
("Paid SIP Subscribers") and (ii) the number and identity of the SIP
Subscribers who have not paid pursuant to SIP Agreements at any time on
prior to the 31st day after the Closing Date. The Parties agree to
cooperate and to provide such further information as may be reasonably
requested to verify the matters covered by the SIP True-Up Certificate,
with such mutually agreed upon number of Paid SIP Subscribers referred to
as the "Final Number of Paid SIP Subscribers."
(c) If the Final Number of Paid SIP Subscribers is less than 130,000,
then Sprint L.P. shall forfeit to Newco a number of shares of Convertible
Preferred Stock equal to the product of (i) five shares of Convertible
Preferred Stock, times (ii) 130,000 minus the Final Number of Paid SIP
Subscribers, with such product referred to as the "Number of Forfeited
Shares of Convertible Preferred Stock." Sprint L.P. shall deliver to Newco
the stock certificate evidencing its shares of Convertible Preferred Stock
originally issued to it on the Closing Date (the "Number of Original Shares
of Convertible Preferred Stock"), together with duly executed stock power
transferring to Newco the Number of Forfeited Shares of Convertible
Preferred Stock and Newco shall thereupon issue to Sprint L.P. a balance
certificate evidencing a number of shares of Convertible Preferred Stock
equal to the difference between the Number of Original Shares of
Convertible Preferred Stock and the Number of Forfeited Shares of
Convertible Preferred Stock.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01 Termination. (a) Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated, and the transactions
contemplated hereby or by any Ancillary Agreement abandoned, at any time prior
to the Closing Date:
39
<PAGE>
(i) by mutual written consent of all of the Parties;
(ii) by any of the Parties if the Offer shall not have been
consummated on or before the Expiration Date;
(iii) by Sprint and Sprint L.P. if any of the conditions set forth in
Sections 2.01 or 2.02 shall have become incapable of fulfillment, and shall
not have been waived by Sprint and Sprint L.P.; or
(iv) by the Company, Newco and Newco Sub if (x) any of the
conditions set forth in Sections 2.01 or 2.03 shall have become incapable
of fulfillment, and shall not have been waived by the Company, Newco and
Newco Sub, or (y) Sprint shall have failed to commence the Offer within
five business days following the date of initial public announcement of the
Offer;
provided, however, that the Party seeking termination pursuant to clause (ii),
- -------- -------
(iii) or (iv) is not in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or any Ancillary
Agreement.
(b) In the event of termination by any of the Parties pursuant to this
Section 6.01, written notice thereof shall forthwith be given to the other
Parties and the transactions contemplated by this Agreement and the Ancillary
Agreements shall be terminated, without further action by any Party.
SECTION 6.02 Effect of Termination. Each Party's right of termination
under Section 6.01 is in addition to any other rights it may have under this
Agreement, any Ancillary Agreement or otherwise, and the exercise of a right of
termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 6.01 (other than those obligations set forth in
Sections 5.02 and 5.05 which shall continue to apply upon termination of this
Agreement prior to the consummation of the transactions contemplated by this
Agreement or by any Ancillary Agreement, all further obligations of the Parties
under this Agreement and any Ancillary Agreement will terminate; provided,
--------
however, that if this Agreement is terminated by a Party because of fraud or a
- -------
willful and material breach of the Agreement or any Ancillary Agreement by any
other Party or because one or more of the conditions to the terminating party's
obligations under this Agreement is not satisfied as a result of any other
Party's fraud or willful and material failure to comply with its obligations
under this Agreement or any Ancillary Agreement, the terminating Party's right
to pursue all legal remedies will survive such termination unimpaired.
ARTICLE VII
MISCELLANEOUS
40
<PAGE>
SECTION 7.01 Notices. Unless otherwise provided herein, any notice,
request, waiver, instruction, consent or document or other communication
required or permitted to be given by this Agreement shall be effective only if
it is in writing and (a) delivered by hand or sent by certified mail, return
receipt requested, (b) if sent by a nationally-recognized overnight delivery
service with delivery confirmed, or (c) if telexed or telecopied, with receipt
confirmed as follows:
The Company: 3100 New York Drive
Pasadena, California 91107
Attn: President and CEO
Telecopy No.: (626) 296-4161
with a copy to: Hunton & Williams
NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Scott M. Hobby, Esq.
Telecopy No.: (404) 888-4190
Newco and Newco Sub: 3100 New York Drive
Pasadena, California 91107
Attn: President and CEO
Telecopy No.: (626) 296-4161
with a copy to: Hunton & Williams
NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Scott M. Hobby, Esq.
Telecopy No.: (404) 888-4190
Sprint: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Chief Financial Officer
Telecopy No.: (913) 624-8426
with a copy to: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Corporate Secretary
Telecopy No.: (913) 624-8233
with an additional copy to: Stinson, Mag & Fizzell, P.C.
1201 Walnut, Suite 2800
P.O. Box 419251
41
<PAGE>
Kansas City, Missouri 64141-6251
Attn: John A. Granda, Esq.
Telecopy No.: (816) 691-3495
The Parties shall promptly notify each other of any change in their respective
addresses or facsimile numbers or of the Person or office to receive notices,
requests or other communications under this Section 7.02. Notice shall be
deemed to have been given as of the date when so personally delivered, when
actually delivered by the U.S. Postal Service at the proper address, the next
day when delivered during business hours to an overnight delivery service
properly addressed or when receipt of a telex or telecopy is confirmed, as the
case may be, unless the sending party has actual Knowledge that such notice was
not received by the intended recipient.
SECTION 7.02 Entire Agreement. This Agreement and, upon execution by all
Parties thereto, the Ancillary Agreements, together with the respective
Schedules and Exhibits hereto and thereto, embody the entire agreement and
understanding of the Parties in respect to the matters contemplated hereby and
thereby and supersede and render null and void all other prior agreements and
understandings, written and oral, with respect to the subject matters hereof and
thereof, provided that this provision shall not abrogate any other written
--------
agreement among the Parties executed simultaneously with this Agreement. No
Party shall be liable or bound to any other Party in any manner by any promises,
conditions, representations, warranties, covenants, agreements and
understandings, except as specifically set forth herein or therein.
SECTION 7.03 Waiver, Amendment, Etc. Except as otherwise permitted in
this Agreement, this Agreement may not be amended or supplemented, unless set
forth in a writing signed by, and delivered to, all the Parties.
Except as otherwise permitted in this Agreement, the terms or conditions of
this Agreement may not be waived unless set forth in a writing signed by the
Party entitled to the benefits thereof. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of such provision at
any time in the future or a waiver of any other provision hereof. The rights
and remedies of the Parties are cumulative and not alternative. Except as
otherwise provided in this Agreement, neither the failure nor any delay by any
Party in exercising any right, power or privilege under this Agreement, or any
of the other Ancillary Agreements or the documents referred to in this Agreement
or therein will operate as a waiver of such right, power or privilege, and no
single or partial exercise of any such right, power or privilege will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege.
SECTION 7.04 Successors and Assigns. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned or
transferred, in whole or in part, by any of the Parties without the prior
written consent of the other Parties; provided, however, that such assignment or
-------- -------
transfer may be made by (i) Sprint to any of its Affiliates, or (ii) pursuant to
any merger or sale of substantially all of the assets or stock of Sprint or such
Affiliates (or any transaction having such effect) that is pursuant to an
agreement entered into after the Closing Date. Subject to the
42
<PAGE>
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 7.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflict of laws principles.
SECTION 7.06 Severability. If any term or provision of this Agreement or
the Ancillary Agreements or the application thereof to either party or set of
circumstances shall, in any jurisdiction and to any extent, be finally held
invalid or unenforceable, such term or provision shall only be ineffective as to
such jurisdiction, and only to the extent of such invalidity or
unenforceability, without invalidating or rendering unenforceable any other
terms or provisions of this Agreement or the Ancillary Agreements or under any
other circumstances, and the parties shall negotiate in good faith a substitute
provision which comes as close as possible to the invalidated or unenforceable
term or provision, and which puts each party in a position as nearly comparable
as possible to the position it would have been in but for the finding of
invalidity or unenforceability, while remaining valid and enforceable.
SECTION 7.07 Counterparts. This Agreement may be executed in one or more
counterparts each of which when so executed and delivered shall for all purposes
be deemed to be an original but all of which, when taken together, shall
constitute one and the same Agreement.
SECTION 7.08 Headings. The table of contents, captions and headings used
in this Agreement or any Ancillary Agreements are inserted for convenience only
and shall not be deemed to constitute part of this Agreement or any Ancillary
Agreements or to affect the construction or interpretation hereof.
SECTION 7.09 No Third-Party Beneficiaries. Nothing in this Agreement or
any Ancillary Agreements, express or implied, shall create or confer upon any
Person (including but not limited to any employees), other than the Parties or
their respective successors and permitted assigns, any legal or equitable
rights, remedies, obligations, liabilities or claims under or with respect to
this Agreement or any Ancillary Agreements, except as expressly provided herein.
SECTION 7.10 Interpretation. (a) Unless specifically stated otherwise,
references to Articles, Sections, Exhibits and Schedules refer to Articles,
Sections, Exhibits and Schedules in this Agreement. References to "includes"
and "including" mean "includes without limitation" and "including without
limitation."
(b) Each Party is a sophisticated legal entity that was advised by
experienced counsel and, to the extent it deemed necessary, other advisors in
connection with this Agreement and the Ancillary Agreements. Accordingly, each
Party hereby acknowledges that no Party has relied or will rely in respect of
this Agreement or any Ancillary Agreements or the transactions contemplated
hereby or thereby upon any document or written or oral information previously
furnished to or discovered by it or its representatives, other than this
Agreement or any Ancillary Agreements or the documents and instruments delivered
at the Closing.
43
<PAGE>
(c) No provision of this Agreement or any Ancillary Agreement shall be
interpreted in favor of, or against, any of the Parties by reason of the extent
to which any such Party or its counsel participated in the drafting thereof or
by reason of the extent to which any such provision is inconsistent with any
prior draft hereof or thereof.
SECTION 7.11 Inclusion of Information in Schedules. The inclusion of any
information in any disclosure schedule (i) shall not be deemed an admission that
any such information is material for purposes of the representation and warranty
to which it relates or any other representation and warranty or for any other
purpose related to the Agreement or any Ancillary Agreement or the transactions
contemplated hereby or thereby, including, without limitation, for purposes of
any covenants, closing conditions or any other remedies the Parties may have,
and (ii) shall not be used or interpreted in any manner to create a standard of
materiality for any such purpose.
SECTION 7.12 Exclusive Jurisdiction and Consent to Service of Process.
The Parties agree that any Action arising out of or relating to this Agreement,
the Ancillary Agreements or the transactions contemplated hereby or thereby
shall be brought by the Parties only in a Delaware state court or a federal
court sitting in that state, which shall be the exclusive venue of any such
Action. Each Party waives any objection which such party may now or hereafter
have to the laying of venue of any such Action, and irrevocably consents and
submits to the jurisdiction of any such court (and the appropriate appellate
courts) in any such Action. Any and all service of process and any other notice
in any such Action shall be effective against such Party when transmitted in
accordance with Section 7.01. Nothing contained herein shall be deemed to affect
the right of any Party to serve process in any manner permitted by Law.
SECTION 7.13 Amendment. No amendment, modification or alteration of the
terms or provisions of this Agreement or any Ancillary Agreement, including any
Schedules and Exhibits hereto or thereto, shall be binding unless the same shall
be in writing and duly executed by the Party against whom such amendment,
modification or alteration is sought to be enforced.
SECTION 7.14 Survival. Except for the covenants or agreements set forth
in Article V or any other covenants or agreements contained in this Agreement or
any Ancillary Agreements which shall continue after the Closing, the
representations, warranties, agreements and covenants in this Agreement, or in
the Schedules, Exhibits hereto, and in certificates delivered at the Closing,
shall not survive after the Closing; provided, however, that with respect to
-------- -------
claim(s) for fraud and/or willful and material breach(es) hereof, all such
representations, warranties, agreements and covenants shall survive the Closing,
and continue for 24 months, except for any agreement or covenant which by its
terms continues in effect for a longer or shorter time period, and shall in no
way be affected by any investigation of the subject matter thereof made by or on
behalf of any Party or any information capable of being acquired by any Party.
SECTION 7.15 WAIVER OF JURY TRIAL. THE COMPANY, NEWCO, NEWCO SUB, SPRINT
AND SPRINT L.P. HEREBY IRREVOCABLY AND
44
<PAGE>
UNCONDITIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY
ACTION INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR THE RELATIONSHIP ESTABLISHED
HEREUNDER OR THEREUNDER.
ARTICLE VII
DEFINITIONS
Definitions. For purposes of this Agreement, the terms set forth below
shall have the following meanings:
"Acquisition Proposal" means any proposal for a tender or exchange
offer, a merger, consolidation or other business combination,
recapitalization, liquidation, dissolution or similar transaction involving
a Party or any proposal or offer to acquire in any manner, directly or
indirectly, a material equity interest in, or a material amount of voting
securities (with the acquisition of beneficial ownership of 15% or more of
a Party's voting securities being deemed to be material for this purpose)
or assets of, a Party, other than the transactions contemplated by this
Agreement and the Ancillary Agreements.
"Action" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any Government Entity.
"Affiliate" means, with respect to any Person, or any other Person
controlling, controlled by, or under common control with such Person. For
purposes of this Agreement, the term "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with" as used
with respect to any Person) means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of such Person whether through ownership of voting securities, by
contract or otherwise.
"Agreement" means this Agreement, together with the Schedules and
Exhibits hereto.
"Agreement and Plan of Merger" means the Agreement and Plan of Merger
among Newco, Newco Sub and the Company, dated as of the date hereof,
setting forth, inter alia, the terms and conditions of the merger of Newco
----- ----
Sub into the Company, a copy of which is attached to the Agreement as
Exhibit F.
"Agreement to Vote" means the Agreement To Vote Stock, a copy of which
is attached to the Agreement as Exhibit J, executed in favor of Sprint by
Voting Stockholders in connection with the Offer and the other transactions
contemplated hereby and by the Ancillary Agreements.
45
<PAGE>
"Agreement to Vote and Tender" means the Agreement to Vote and Tender
Stock, a copy of which is attached to the Agreement as Exhibit K, executed
in favor of Sprint by the Tendering Stockholders in connection with the
Offer and the other transactions contemplated hereby and by the Ancillary
Agreements.
"Ancillary Agreements" means any and all of the Certificate of
Designation, the Governance Agreement, the Master Assignment, the Marketing
Agreement, the Network Services Agreement, the Registration Rights
Agreement, the Credit Agreement, the Stockholders Agreement, the Agreement
and Plan of Merger, the Agreement to Vote and the Agreement to Vote and
Tender.
"Benefit Plan" means pension, retirement, savings, profit sharing,
deferred compensation, incentive compensation, stock option, severance or
termination pay, medical, dental, life or other insurance, disability or
other written employee benefit plan, program, agreement or arrangement
maintained, sponsored or contributed to by the Company, whether covering
employees of the Company, former employees of the Company, or directors or
former directors of the Company (including, but not limited to, any
"Employee Benefit Plan," as defined in Section 3(3) of ERISA).
"Certificate of Designation" shall have the meaning set forth in
Section 1.03.
"Closing" shall have the meaning set forth in Section 1.09.
"Closing Date" shall have the meaning set forth in Section 1.09.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $.01 per share, of
the Company.
"Company Filed SEC Documents" shall mean the SEC Documents of the
Company filed and publicly available prior to the date of this Agreement.
"Company's Knowledge" means the actual knowledge of any of the
executive officers and directors (excluding John W. Sidgmore) of Company
without any duty to inquire or attribution of knowledge from any other
Person to the persons in such capacities.
"Company Stockholder Vote Matters" shall have the meaning set forth in
Section 1.06(b).
"Confidential Information" shall have the meaning set forth in Section
5.05.
"Contract" means all contracts, agreements, instruments, leases,
licenses, commitments and arrangements.
46
<PAGE>
"Convertible Debt Financing" shall have the meaning set forth in the
fifth WHEREAS paragraph of the preamble to this Agreement.
"Convertible Notes" shall have the meaning set forth in the fifth
WHEREAS paragraph of the preamble to this Agreement.
"Convertible Preferred Stock" means the Series A Convertible Preferred
Stock, par value $.01 per share, of Newco.
"Credit Agreement" means the Credit Agreement dated as of the date
hereof among Sprint, Newco and the Company whereby Sprint agrees to provide
Newco and the Company, as co-borrowers, with the Convertible Debt
Financing, a copy of which is attached to the Agreement as Exhibit E.
"DGCL" means the Delaware General Corporate Law, title 8 of the
Delaware Code.
"Dilutable Securities" shall have the meaning set forth in Section
3.01(c).
"Director Stock Options" shall have the meaning set forth in Section
3.01(c).
"Dollars" or "$" means lawful currency of the United States.
"Employee Stock Options" shall have the meaning set forth in Section
3.01(c).
"Encumbrance" means any charge, claim, community property interest,
equitable interest Lien, Tax lien, option, pledge, security interest, right
of first refusal or restriction of any kind, including any restriction on
transfer, receipt of income or exercise of any other attribute of
ownership.
"Environment" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
"Environmental Law" means any Law that requires or relates to
protection of human health or the Environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder as in effect
at the applicable time.
"Expiration Date" shall have the meaning set forth in Section 1.01.
47
<PAGE>
"GAAP" shall mean Generally Accepted Accounting Principles, as in
effect on the date of this Agreement. All references herein to financial
statements prepared in accordance with GAAP shall mean in accordance with
GAAP consistently applied throughout the periods to which reference is
made.
"Governance Agreement" shall mean the Governance Agreement, dated as
of the date hereof, among Sprint, Sprint L.P., the Company and Newco, a
copy of which is attached to the Agreement as Exhibit G.
"Governmental Entity" means any federal, state, foreign or local
government, any of its subdivisions, administrative agencies, authorities,
commissions, boards or bureaus, any federal, state, foreign or local court
or tribunal and any arbitrator.
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
release, storage, transfer, transportation, treatment, or use (including
any withdrawal or other use of groundwater) of Hazardous Materials in, on,
under, about, or from the facilities or any part thereof into the
Environment.
"Hazardous Materials" means any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined to
be, hazardous, radioactive, or toxic or a pollutant or a contaminant under
or pursuant to any Environmental Law, including any mixture or solution
thereof, and specifically including petroleum and all derivatives thereof
or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the regulations promulgated thereunder.
"Intellectual Property Assets" includes all marks, patent rights,
copyrights and trade secrets of the Company.
"IRS" means the United States Internal Revenue Service.
"Issuance Percentage Limitation" means the lesser of (a) 20%, or (b)
the percentage of shares of outstanding Common Stock which if issued, and
after taking into effect such issuance, would cause the total number of
shares of Common Stock subject to (i) all irrevocable proxies granted in
favor of Sprint to vote "for" the Company Stockholder Vote Matters, and
(ii) votes "for" the Company Stockholder Vote Matters pursuant to
Agreements to Vote to constitute, in the aggregate, less than 51% of the
outstanding shares of Common Stock. For purposes of this definition,
"outstanding shares of Common Stock" shall be calculated on a fully diluted
basis, excluding any Dilutable Securities which are not or will not be
vested or otherwise exercisable on or prior to the Offer Acceptance Time.
48
<PAGE>
"Knowledge" means the actual knowledge of any of the executive
officers and directors of the Parties without any duty to inquire or
attribution of knowledge from any other Person to the persons in such
capacities.
"Law" means any federal, state, local, municipal, foreign,
international, multinational, or other judicial or administrative order,
judgment, decree, constitution, law, ordinance, common law of California
and Delaware, regulation, statute, or treaty.
"Lien" means any lien, pledge, security interest or Encumbrance
whatsoever, mortgage, deed of trust, security interest, retention of title
agreement, easement, encroachment, condition, reservation, covenant, lis
pendens lien, claim of lien, adverse claim, or restriction on attributes of
ownership.
"Marketing Agreement" means the Marketing and Distribution Agreement,
dated as of the date hereof, among Sprint, Sprint L.P., Newco and the
Company, whereby Sprint, Sprint L.P., Newco and the Company agree to
provide certain cooperation and support to each other in specified
marketing matters and Sprint L.P. grants Newco the right to utilize certain
distribution channels of Sprint L.P., a copy of which is attached to the
Agreement as Exhibit D.
"Master Assignment" means the Master Assignment and Assumption
Agreement, dated as of the date hereof, between Sprint L.P. and Newco, by
which Sprint L.P. grants to Newco all of the right, title and interest of
Sprint L.P. in and to all agreements with SIP Subscribers and all rights to
provide Internet access services to the SIP Subscribers after the Closing
Date and Newco assumes all of the obligations to continue the performance
of such agreements after the Closing Date, a copy of which is attached to
the Agreement as Exhibit B.
"Material Adverse Effect" means any change or effect having a material
adverse effect (or any development as to which there is a substantial
likelihood, insofar as can be foreseen, that would have such an effect) on
the business, properties, assets, condition (financial or otherwise), or
results of operations of the Company, Newco, Newco Sub, Sprint, Sprint L.P.
and Sprint's Subsidiaries.
"Merger" means the merger of Newco Sub into the Company in accordance
with the terms and conditions set forth in the Agreement and Plan of
Merger.
"Minimum Tender Condition" shall have the meaning set forth in Section
2.01(a).
"Network Agreement" means the Network Agreement, dated as of the date
hereof, among Sprint L.P., Newco and the Company, which grants Newco and
the Company the right to use a minimum and maximum number of ports on
Sprint L.P.'s long-distance network, along with pricing and other terms set
forth therein, a copy of which is attached to the Agreement as Exhibit C.
49
<PAGE>
"Newco Common Stock" shall have the meaning set forth in the sixth
WHEREAS paragraph of the preamble of this Agreement.
"Offer" shall have the meaning set forth in the second WHEREAS
paragraph of the preamble to this Agreement.
"Offer Acceptance Condition" shall have the meaning set forth in
Section 2.04.
"Offer Acceptance Time" means the date and time upon which Sprint
accepts for payment shares of Common Stock pursuant to the Offer.
"Offer Documents" shall have the meaning set forth in Section 1.01(b).
"Offer Price" shall have the meaning set forth in the second WHEREAS
paragraph of the preamble to this Agreement.
"Ordinary Course of Business" means an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of
such Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority);
"Paid SIP Subscribers" shall have the meaning set forth in Section
5.09(b).
"Party" means any Person that is a signatory to this Agreement.
"Permits" shall have the meaning set forth in Section 3.01(l).
"Person" means any natural person, corporation, partnership, limited
liability company, trust, unincorporated organization or other entity.
"Preferred Stock Consideration" shall have the meaning set forth in
Section 1.03.
"Proxy Statement" shall have the meaning set forth in Section 1.06(b).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated as of the date hereof, among Newco, Sprint and Sprint
L.P., a copy of which is attached hereto as Exhibit I.
"Returns" means all tax returns that must be filed with any federal,
state or local taxing authority.
50
<PAGE>
"S-4" shall have the meaning set forth in Section 1.06(b).
"SARs" means stock appreciation rights.
"SEC" means the Securities and Exchange Commission and the staff
thereof.
"SEC Documents" shall have the meaning set forth in Section 3.01(e).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder as in effect at the applicable
time.
"Significant Subsidiary" means any Subsidiary of a Party that
constitutes a significant subsidiary within the meaning of Rule 1-02 of
Regulation S-X of the SEC.
"SIP Agreements" means the agreements between Sprint L.P. and the SIP
Subscribers governing the receipt of Internet access from Sprint L.P.
"SIP Subscriber" shall mean a registered customer of Sprint L.P.'s
"Sprint Internet Passport" service, regardless of whether on an hourly
payment plan or a fixed payment plan, and regardless of whether in an
initial introductory period.
"Special Meeting" shall have the meaning set forth in Section 1.05(b).
"Sprint Shares" shall have the meaning set forth in Section 3.03(g)
"Stock Equivalents" shall have the meaning set forth in Section
3.01(c).
"Stockholders Agreement" means the Stockholders Agreement, dated as of
the date hereof, among Sprint and certain stockholders of the Company, a
copy of which is attached to the Agreement as Exhibit H.
"Subsidiary" shall mean a Person, the equity of which is at least 50%
owned by another Person.
"Surviving Corporation" shall have the meaning set forth in Section
1.05(a).
"Tax" or "Taxes" means all income, profits, franchise, gross receipts,
capital, sales, use, withholding, value added, ad valorem, transfer,
employment, social security, disability, occupation, property, severance,
production, excise and other taxes, duties and similar governmental charges
and assessments imposed by or on behalf of any Governmental Entity
(including interest and penalties thereon).
51
<PAGE>
"Tendering Stockholders" means the holders of Common Stock who are
identified in Schedule 1 to the Agreement to Vote and Tender.
"Threatened" means any demand or statement that has been made in
writing that would lead a prudent person to conclude that a claim,
proceeding, dispute, Action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
"Unaudited Balance Sheet" means the Unaudited Consolidated Balance
Sheet of the Company dated at the Unaudited Balance Sheet Date.
"Unaudited Balance Sheet Date" means September 30, 1997.
"Voting Stockholders" means the holders of Common Stock who are
identified in Schedule 1 to the Agreement to Vote.
52
<PAGE>
IN WITNESS WHEREOF, the Parties have caused their respective duly
authorized officers to execute this Agreement as of the day and year first above
written.
SPRINT CORPORATION
By: /s/ Theodore H. Schell
------------------------------------
Name: Theodore H. Schell
Title: Vice President - Strategic
Planning and Corporate
Development
SPRINT COMMUNICATIONS COMPANY L.P.
By: US Telecom, Inc., General Partner.
By: /s/ Don A. Jensen
------------------------------------
Name: Don A. Jensen
Title: Vice President and
Secretary
EARTHLINK NETWORK, INC.
By: /s/ Charles G. Betty
------------------------------------
Name: Charles G. Betty
Title: President & CEO
DOLPHIN, INC.
By: /s/ Charles G. Betty
------------------------------------
Name: Charles G. Betty
Title: President & CEO
DOLPHIN SUB, INC.
By: /s/ Charles G. Betty
------------------------------------
Name: Charles G. Betty
Title: President & CEO
SIGNATURE PAGE FOR INVESTMENT AGREEMENT
53
<PAGE>
EXHIBIT NO. 10.1
EXECUTION COPY
THIS GOVERNANCE AGREEMENT, dated as of February 10, 1998 (this
"Agreement"), is entered into by and among SPRINT CORPORATION, a Kansas
corporation ("Sprint"), SPRINT COMMUNICATIONS COMPANY L.P., a Delaware limited
partnership ("Sprint L.P."), DOLPHIN, INC., a Delaware corporation ("Newco"),
and EARTHLINK NETWORK, INC., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Sprint and the Company
have determined to enter into a strategic relationship in the area of Internet
access and related services and Sprint will make investments in Newco and the
Company in connection with the Merger (as defined below) of Newco Sub, Inc., a
Delaware corporation ("Newco Sub"), and the Company in order to enhance the
capabilities for growth and financial and strategic success;
WHEREAS, pursuant to an Investment Agreement, dated as of February 10,
1998, among Sprint, Sprint L.P., the Company, Newco and Newco Sub (the
"Investment Agreement"), Sprint proposes to make a tender offer (as it may be
amended from time to time as permitted under the Investment Agreement, with the
Company's consent, if required under the Investment Agreement, the "Tender
Offer") to purchase 1,250,000 shares of Common Stock for an aggregate cash
consideration of $56,250,000 and at a price per share of Common Stock of $45 net
to each seller in cash (such price, as may hereafter be changed, the "Tender
Offer Price"), upon the terms and subject to the conditions set forth in the
Investment Agreement; and the Board of Directors of the Company has approved the
Tender Offer and the other transactions contemplated by the Investment Agreement
and is recommending that the Company's stockholders who wish to receive cash for
their shares of Common Stock accept the Tender Offer;
WHEREAS, immediately following the closing of the Tender Offer, Sprint
L.P. proposes to purchase 4,102,941 shares of Series A Convertible Preferred
Stock, par value $.01 per share of Newco (the "Series A Stock") in exchange for
(i) an aggregate cash consideration of $23,750,000, (ii) the assignment to Newco
of 100% of the Sprint Internet Passport Subscribers, and (iii) entering into a
network agreement whereby Newco and the Company will utilize Sprint L.P.'s long-
distance network under specified terms and conditions;
WHEREAS, Sprint L.P. will enter into a marketing agreement whereby
Newco and the Company will utilize the Sprint brand under specified terms and
conditions and will, inter alia, have the right to use Sprint L.P. distribution
----- ----
channels under specified terms and conditions and agree to sell certain Sprint
L.P. products;
WHEREAS, pursuant to the Investment Agreement certain stockholders of
the Company have (i) executed and delivered to Sprint and Sprint L.P. an
Agreement to Vote Stock, (ii) executed and delivered to Sprint and Sprint L.P.
an Agreement to Vote and Tender Stock, and (iii) entered into a Stockholders
Agreement with Sprint and Sprint L.P.;
1
<PAGE>
WHEREAS, Sprint shall provide Newco and the Company, as co-borrowers,
with up to $25 million of Convertible Senior Debt financing on or after the
Closing, with such amount to increase to up to $100 million over time (the
"Convertible Debt Financing"), such indebtedness to be evidenced by one or more
Convertible Senior Promissory Note(s) (the "Convertible Notes), and to be
subject to the terms and conditions of the Credit Agreement;
WHEREAS, the closing of the acquisition of the Series A Stock and the
other transactions referred to above other than the Tender Offer shall take
place concurrently with the merger of Newco Sub into the Company (the "Merger")
and the conversion of each share of the Company's outstanding Common Stock into
one share of Newco common stock, par value $.01 per share ("Newco Common
Stock"), pursuant to the Merger, in each case upon the terms and subject to the
conditions set forth in any applicable Ancillary Agreement;
WHEREAS, Sprint, Sprint L.P., the Company and Newco desire to make
certain representations, warranties, covenants and agreements and also to
prescribe various conditions in connection with the transactions contemplated by
this Agreement;
WHEREAS, Sprint, Sprint L.P., Newco and the Company desire to
establish in this Agreement certain terms and conditions concerning the
corporate governance of Newco, the acquisition and disposition of Equity
Securities by the Affiliated Equity Holders, the rights of Sprint to make offers
to purchase all of the outstanding securities of Newco not owned by Affiliated
Equity Holders and the rights of the Board of Directors of Newco to receive and
entertain offers to effect Business Combinations, all as more particularly
described herein; and
WHEREAS, Sprint and Sprint L.P. are prepared to ensure that the voting
agreements made by each of them pursuant to this Agreement are fulfilled by
giving the Company and Newco, or either of them, an Irrevocable Proxy (coupled
with an interest).
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. Definitions. As used in this Agreement, the following
-----------
terms shall have the following meanings:
"Acquisition Proposal" means any proposal for a tender or exchange
--------------------
offer, a merger, consolidation, share exchange or other business combination, in
which Newco is a constituent party to the merger, consolidation, share exchange
or combination, or a sale of securities (other than Transaction Securities),
recapitalization, liquidation, dissolution or similar transaction involving
Newco or any proposal or offer to acquire in any manner, directly or indirectly,
a material equity interest in, or a material amount of voting securities (with
the
2
<PAGE>
acquisition of beneficial ownership of 20% or more of the Voting Equity
Securities of Newco being deemed to be material for this purpose) or assets of,
Newco, other than the transactions contemplated by this Agreement with respect
to Affiliated Equity Holders effected in accordance with this Agreement. A
Material Sale will constitute an Acquisition Proposal.
"Affiliate" has the meaning assigned to such term in the Investment
---------
Agreement.
"Affiliated Equity Holders" means Sprint, Sprint L.P. and any of
-------------------------
their respective Affiliates (exclusive of the Company, Newco and Newco's
Subsidiaries) that, as of any relevant date of determination, are holders of
Equity Securities.
"Alternative Securities" means a new series of Preferred Stock having
----------------------
terms that are structured and priced in the same manner as the terms of the
Series A Stock (including, without limitation, date of allowable optional
redemption, dividend rate, liquidation value, redemption value, conversion
premium and conversion rate), provided, that, all of such terms are determined,
-------- ----
if applicable, by reference to the Average Stock Price for the 30 trading days
prior to the date of issuance of such Alternative Securities.
"Ancillary Agreements" has the meaning assigned to such term in the
--------------------
Investment Agreement, but for purposes of this Agreement shall also include the
Investment Agreement.
"Associate" has the same meaning as in Rule 12b-2 promulgated under
---------
the Exchange Act.
"Available Top-Up Shares" means, in respect of any issuance of
-----------------------
Transaction Securities, the number of shares of Common Stock underlying Equity
Securities that Sprint may purchase from Newco pursuant to Section 3.01(d)
hereof following an issuance of Transaction Securities, determined as follows:
Available Top-Up Shares = (x) (1/(1-SPI) - 1),
where x equals the number of Transaction Securities issued in such transaction
and SPI equals Sprint's Percentage Interest expressed as a decimal carried to
the third place. As permitted in Section 3.01(e) hereof, Available Top-Up
Shares may, at Sprint's discretion, to the extent indicated in such section, be
in the form of shares of Newco Common Stock or Alternative Securities
convertible into an equivalent number of shares of Newco Common Stock.
"Average Stock Price" means an average of the closing sales prices of
-------------------
a share of Newco Common Stock for a specified period as reported by the
principal securities market or exchange on which such stock is then traded.
"Beneficial Owner" shall be a Person who shall be deemed to
----------------
"beneficially own" any securities:
(a) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable
3
<PAGE>
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants, options
or otherwise;
(b) which such Person or any such Person's Affiliates or Associates,
directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 under the
Exchange Act as such Rule is in effect on the date of this Agreement),
including pursuant to any agreement, arrangement or understanding, whether
or not in writing; provided, however, that a Person shall not be deemed the
-------- -------
"Beneficial Owner" of, or to "beneficially own," any security under this
subparagraph (b) as a result of an agreement, arrangement or understanding
to vote such security if such agreement, arrangement or understanding
arises solely from a revocable proxy given in response to a public proxy or
consent solicitation made by Newco or the Company pursuant to, and in
accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act; or
(c) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has an agreement,
arrangement or understanding (whether or not in writing), for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (b)) or disposing of any voting
securities of Newco or the Company; provided, however, that nothing in this
-------- -------
subparagraph (c) shall cause a person engaged in business as an underwriter
of securities to be the "Beneficial Owner" of, or to "beneficially own,"
any securities acquired through such person's participation in good faith
in a firm commitment underwriting under the Act until the expiration of 40
days after the date of such acquisition.
"Board" or "Board of Directors" means the Board of Directors of Newco
----- ------------------
except where the context requires otherwise.
"Business Combination" means a transaction, undertaken in any form
--------------------
whatsoever, involving (i) the purchase or acquisition of Equity Securities if
the consummation of such transaction would result in the purchaser beneficially
owning 35% or more of the Equity Securities outstanding, or (ii) a merger,
consolidation, combination, share exchange, reorganization or other
extraordinary transaction with respect to Newco in which, upon consummation
thereof, the shareholders or owners of the other entity that is a party thereto,
or the controlling Persons thereof, would acquire beneficial ownership of 50% or
more of the Equity Securities outstanding. A Significant Sale will constitute a
Business Combination. A Business Combination shall not include (A) transactions
contemplated by this Agreement with respect to Affiliated Equity Holders
effected in accordance with this Agreement or (B) any acquisition of beneficial
ownership of Equity Securities resulting from the formation of a "group," as
defined in Rule 13d-5(b) of the Exchange Act, without the occurrence of any
transaction that would otherwise constitute a Business Combination.
4
<PAGE>
"Certificate of Designation" means the Certificate of Designation of
--------------------------
Rights, Preferences and Privileges for the Series A Stock.
"Closing" shall have the meaning given to such term in the Investment
-------
Agreement.
"Common Stock" means the common stock, $.01 par value, of the Company.
------------
"Company" means EarthLink Network, Inc., a Delaware corporation, and
-------
any successor thereto.
"Conversion Ratio" means, with respect to (i) the Series A Stock, the
----------------
quotient of the "Liquidation Value" divided by the "Conversion Price," as those
terms are defined in the Certificate of Designation, assuming the acceleration
of the full amount of the Liquidation Accretion Dividends as contemplated by the
last sentence of Section 3(a)(i) of the Certificate of Designation, (ii) any
other class or series of Preferred Stock, the conversion ratio pertaining to
such class or series, as in effect on the date of determination, and (iii) the
Convertible Notes, the "Conversion Price" for each such note as defined in the
Credit Agreement, as in effect on the date of determination.
"Convertible Notes" shall have the meaning set forth in the Recitals
-----------------
to this Agreement.
"Dilution Factor" means, in respect of any issuance of Transaction
---------------
Securities, a fraction expressed as a decimal carried to the third place, equal
to one minus the quotient of the number of Transaction Securities issued divided
by the total number of shares of Newco Common Stock outstanding on a Fully-
Diluted Basis, after giving effect to such issuance of Transaction Securities.
"Director" means a member of the Board of Directors.
--------
"Discriminatory Transaction" means any transaction or other corporate
--------------------------
action (other than those specifically contemplated by the express terms of this
Agreement and other than those imposed, without the happening of a contingency,
on each other stockholder on an equal basis) which would (i) impose limitations
on the legal rights of any Affiliated Equity Holder as a stockholder of Newco,
including, without limitation, any action which would impose restrictions based
upon the size of security holding, the business in which a securityholder is
engaged or other considerations applicable to any Affiliated Equity Holder and
not to stockholders generally, (ii) deny any benefit to any Affiliated Equity
Holder, proportionately as a holder of any class of Voting Equity Securities,
that is made available to other holders of any class of Voting Equity
Securities, or (iii) otherwise materially adversely discriminate against any
such Affiliated Equity Holders as stockholders of Newco; provided, however, that
-------- -------
(v) under no circumstances shall the adoption and implementation by Newco of a
Stockholders' Right Plan (commonly known as a "poison pill") be deemed to be a
Discriminatory Transaction if such plan would be permitted under Section 4.07
hereof; (w) subject to the proviso in the last sentence of Section 2.04 hereof,
the adoption and implementation of a classified Board of Directors through
5
<PAGE>
an amendment to Newco's Certificate of Incorporation and Bylaws shall not be
deemed to be a Discriminatory Transaction; (x) under no circumstances shall a
Business Combination be deemed to be a Discriminatory Transaction if in such
Business Combination (A) neither the Liquidation Value nor the Conversion Price
of the Series A Stock is changed, and (B) upon consummation of such Business
Combination, the automatic conversion of all outstanding shares of Series A
Stock into shares of Newco Common Stock thereupon and, if applicable, the
acceleration of the full amount of the Liquidation Accretion Dividends as
contemplated by the last sentence of Section 3(a)(i) of the Certificate of
Designation, the holders of Series A Stock shall be offered the right to receive
consideration at the same times (except for any differences in the times at
which such holders receive such consideration that occur because of the
application of the HSR Act (or any applicable waiting periods thereunder) to the
conversion of the Series A Stock into Newco Common Stock), and in the same
amount and the same form per share as all other holders of Newco Common Stock;
(y) it shall not be a Discriminatory Transaction for Newco to take action or
omit to take action having any of the consequences identified under (i), (ii)
and (iii) above to the extent that any such consequence occurs as a result of a
material breach or violation by any Affiliated Equity Holder of this Agreement;
and (z) the execution by Newco, the Company or any Significant Subsidiary of a
definitive agreement with respect to a Business Combination, which agreement is
consistent with the requirements of Section 4.03(c) hereof, shall not be a
Discriminatory Transaction.
"Effectiveness of this Agreement" means such time as this Agreement
-------------------------------
becomes effective, if ever, pursuant to Section 7.01 hereof.
"Equity Security" means (i) any Newco Common Stock, (ii) any debt or
---------------
equity securities of Newco convertible into or exchangeable for Newco Common
Stock or other Voting Equity Securities, (iii) any options, rights or warrants
(or any other similar securities) issued by Newco to acquire Newco Common Stock
or other Voting Equity Securities or (iv) any security issuable in connection
with any stock split, stock dividend, recapitalization or other similar
transaction in which securities are issued on a proportionate basis to all
holders of a class of Equity Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
"Fair Private Market Value" means the aggregate private market equity
-------------------------
value (including control premium) that an unrelated third party would pay if it
were to acquire all of Newco's outstanding Equity Securities (including Equity
Securities held by Affiliated Equity Holders) in an arm's-length transaction,
assuming (i) that all credible buyers are given an equal opportunity by Newco to
make and effectuate an Acquisition Proposal, (ii) the absence of any commercial
relations between Newco and the Company, on the one hand, and Sprint and its
Affiliates, on the other hand, and (iii) the absence of any ownership stake in
Newco by Affiliated Equity Holders. The Fair Private Market Value shall be
determined in accordance with Section 4.02 hereof.
6
<PAGE>
"Fully-Diluted Basis," with reference to the number of shares of Newco
-------------------
Common Stock outstanding at any time, means the number of shares of Newco Common
Stock outstanding at that time, plus the number of shares of Newco Common Stock
into which or for which all options (both vested and unvested), warrants, rights
and other Equity Securities convertible into or exchangeable for Newco Common
Stock may be exercised, converted or exchanged for shares of Newco Common Stock
at the appropriate Conversion Ratio.
"Higher Threshold" means 20% at Closing, and as thereafter adjusted
----------------
following any issuance of Transaction Securities by multiplying the Higher
Threshold in effect prior to such issuance, expressed as a decimal carried to
the third place, by the Dilution Factor; provided, that, if following such
-------- ----
issuance of Transaction Securities, a Primary Share Offer is made by Newco
pursuant to Section 3.01(d) hereof, the Higher Threshold shall immediately be
increased, but never above .200, to H\2,\ which is to be determined as
follows:
H\2\= ((x/y) (H\0\- H\1\)) + H\1\
where:
x = the number of shares offered to Sprint pursuant to a Primary Share
Offer;
y = the number of Available Top-Up Shares;
H\0\ = .200; and
H\1\ = the Higher Threshold in effect after the issuance of Transaction
Securities.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended, and the regulations promulgated thereunder.
"Independent Director" means a Director of Newco (i) who is not and
--------------------
has never been an officer or employee of Newco, any Affiliate or Associate of
Newco or of an entity that derived 5% or more of its revenues or earnings in any
of its three most recent fiscal years from transactions involving Newco or any
Affiliate or Associate of Newco, (ii) who is not and has never been an officer,
employee or director of Sprint, any Affiliate or Associate of Sprint or an
entity that derived more than 5% of its revenues or earnings in any of its three
most recent fiscal years from transactions involving Sprint or any Affiliate or
Associate of Sprint and (iii) who has no affiliation, compensation, consulting
or contracting arrangement with Newco, Sprint or their respective Affiliates or
Associates or any other entity such that a reasonable person would regard such
Director as likely to be unduly influenced by management of Newco, the Company
or Sprint, respectively, or their respective Affiliates or Associates, but shall
not include any Investor Director or Management Director.
"Intervening Offer" means an Offer for aggregate consideration
-----------------
reasonably determined in good faith by the Board of Directors to be in excess of
the aggregate consideration proposed to be paid by Sprint in a Sprint Offer or a
Qualified Offer, as applicable. An Intervening Offer shall be reflected in a
form of definitive agreement which the offeror is
7
<PAGE>
prepared to execute. The conditions to consummation of an Intervening Offer and
the representations, warranties and covenants set forth in the Intervening Offer
shall be customary for a transaction of that type. In evaluating whether an
Offer shall qualify as an Intervening Offer, the Board of Directors shall, in
reliance upon the advice of its financial advisors, reasonably and in good faith
(i) value any securities or other non-cash property constituting all or a
portion of the aggregate consideration comprising such Intervening Offer and
(ii) take into consideration in its evaluation of such Intervening Offer the
effect of any financing contingency upon the likelihood of such Intervening
Offer being consummated.
"Investment Agreement" has the meaning set forth in the Recitals to
--------------------
this Agreement.
"Investor Director" means a Director who is designated for such
-----------------
position by Sprint in accordance with Section 2.01.
"Irrevocable Proxy" means the Irrevocable Proxy granted by each of
-----------------
Sprint and Sprint L.P. in the form attached hereto.
"Lower Threshold" means 10% at Closing, and as thereafter adjusted
---------------
following any issuance of Transaction Securities by multiplying the Lower
Threshold in effect prior to such issuance, expressed as a decimal carried to
the third place, by the Dilution Factor; provided, that, if following such
-------- ----
issuance of Transaction Securities, a Primary Share Offer is made by Newco
pursuant to Section 3.01(d) hereof, the Lower Threshold shall immediately be
increased, but never above .100, to L\2,\ which is to be determined as follows:
L\2\ = ((x/y) (L\0\- L\1\)) + L\1\
where:
x = the number of shares offered to Sprint pursuant to a Primary Share
Offer;
y = the number of Available Top-Up Shares;
L\0\ = .100; and
L\1\ = the Lower Threshold in effect after the issuance of Transaction
Securities.
"Management Director" means a Director who is also an employee of the
-------------------
Company or Newco or any other Director designated as such by the Board of
Directors (or any nominating committee thereof) in accordance with Section 2.01.
"Market Capitalization" shall mean, as of any given date, the total
---------------------
market value of Newco, determined by multiplying the number of shares of Newco
Common Stock outstanding on a Fully-Diluted Basis by the Market Price as of that
date.
8
<PAGE>
"Market Price" means the closing sale price of a share of Newco Common
------------
Stock on a given date as reported by the principal securities market or exchange
on which such stock is traded.
"Material Sale" means any proposal involving the sale of assets of
-------------
Newco or any Subsidiary or the sale of capital stock of any Subsidiary by Newco,
in any such case, for which the consideration proposed to be paid in such
transaction represents 20% or more of the Market Capitalization on the date that
Newco receives such proposal.
"Newco" means Newco, Inc., a Delaware corporation and any successors
-----
thereto.
"Newco Common Stock" means the common stock, par value, .01 per share
------------------
of Newco.
"Newco Outstanding Stock Report" means a report provided by Newco to
------------------------------
Sprint pursuant to Section 6.02(a) hereof.
"New Security" means any Equity Security issued by Newco; provided,
------------ --------
that, "New Security" shall not include (i) any Equity Securities issuable upon
- ----
exercise or conversion of any exercisable or convertible Equity Security, (ii)
any Equity Securities issuable in connection with any stock split, stock
dividend, recapitalization or other similar transaction with respect to
outstanding Equity Securities in which such securities are issued to all
stockholders of Newco on a proportionate basis, (iii) the first 1,000,000 shares
of Newco Common Stock (primary shares, as adjusted for any stock splits effected
after the Closing), sold by Newco after the date hereof (exclusive of shares
issued pursuant to the Merger), which number shall be reduced on a share-for-
share basis for any shares of Common Stock of the Company issued after the date
hereof and prior to Closing (exclusive of shares of Common Stock issued by the
Company pursuant to the exercise of options, warrants or other rights or
convertible securities to purchase such Common Stock), (iv) any Equity
Securities issued or granted to employees or directors of, or consultants to,
Newco pursuant to any employee benefit plan or arrangement, and (v) any Equity
Securities issued to Affiliated Equity Holders.
"Non-Recommended Third-Party Offer" has the meaning given to such term
---------------------------------
in Section 4.03(a)(ii) hereof.
"Offer" means a bona fide, written offer from any Person other than an
-----
Affiliated Equity Holder to effect a Business Combination.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a limited liability company, a business or other trust, an
incorporated or unincorporated organization, a government or any department or
agency thereof.
"Postponement Right" has the meaning given to such term in Section
------------------
4.02(b) hereof.
9
<PAGE>
"Preferred Stock" means any shares of Preferred Stock issued by Newco,
---------------
including without limitation, shares of Series A Stock.
"Primary Share Offer" means an offer made by Newco to Sprint pursuant
-------------------
to Section 3.01(d) hereof to purchase Available Top-Up Shares following an
issuance of Transaction Securities.
"Pro Rata Share" means a fraction, expressed as a decimal, carried to
--------------
the third place, (i) the numerator of which shall be the sum of (A) the number
of shares of Newco Common Stock owned by Affiliated Equity Holders at Closing
and (B) the number of shares of Newco Common Stock into which Equity Securities
owned by Affiliated Equity Holders are convertible at the applicable Conversion
Ratio at Closing, and (ii) the denominator of which shall be the total number of
shares of Newco Common Stock outstanding at Closing on a Fully-Diluted Basis,
plus 1,000,000 less any Transaction Securities issued between the date of this
Agreement and Closing. The Pro Rata Share shall be held constant, except that
if indebtedness is incurred pursuant to the Credit Agreement, then both the
numerator and denominator used to recalculate Pro Rata Share shall increase by
the number of Equity Securities created by the incurrence of such indebtedness.
The Parties acknowledge that the Pro Rata Share, as of the date hereof, equals
.278, subject to adjustment as set forth above.
"Qualified Offer" means an offer made by an Affiliated Equity Holder
---------------
to acquire all of the Equity Securities not already owned by Affiliated Equity
Holders at a price per share in excess of the equivalent per share price set
forth in a Third-Party Offer or an Intervening Offer, as the case may be. A
Qualified Offer shall be reflected in a form of definitive agreement which
Sprint is prepared to execute. The conditions to consummation of the Qualified
Offer and the representations, warranties and covenants set forth in the
Qualified Offer shall be customary for transactions in which a similarly
situated stockholder offers to purchase all of the equity securities (capital
stock and any securities that represent rights to purchase such stock) not held
by such stockholder and may not, in any event, in the reasonable judgment of the
Board of Directors exercised in good faith, be more onerous in any material
respect than those set forth in the Third-Party Offer or the Intervening Offer,
as the case may be. In the evaluating whether an offer shall qualify as a
Qualified Offer, the Board of Directors shall, in reliance upon the advice of
its financial advisors, reasonably and in good faith take into consideration in
its evaluation of such Qualified Offer the effect of any financing contingency
upon the likelihood of such Qualified Offer being consummated.
"Recommended Third-Party Offer" has the meaning given to such term in
-----------------------------
Section 4.03(a)(i) hereof.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated as of the date hereof, by and among Sprint, Sprint L.P. and
Newco.
"Right to Offer Period" shall have the meaning given to such term in
---------------------
Section 4.02(a) hereof.
"SEC" means the Securities and Exchange Commission.
---
10
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations thereunder.
"Series A Stock" means the Series A Convertible Preferred Stock of
--------------
Newco.
"Significant Sale" means the sale of assets of Newco or any Subsidiary
----------------
or the sale of capital stock of any Subsidiary by Newco, in any such case, for
which the consideration proposed to be paid in such transaction represents 35%
or more of the Market Capitalization on the date that Newco agrees to such sale.
"Significant Subsidiary" means, with reference to any person, a
----------------------
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X
promulgated by the SEC.
"Specified Number of Equity Securities," as it applies to the Voting
--------------------------------------
Equity Securities owned by Affiliated Equity Holders and required pursuant to
Section 4.02(e) or Section 4.03(d) hereof to be sold by Affiliated Equity
Holders or voted by Affiliated Equity Holders, shall equal (i) in respect of a
tender offer, as of a date immediately prior to the closing of the tender offer,
the quotient of the number of shares of Voting Equity Securities owned by
Unaffiliated Equity Holders validly tendered into such transaction and accepted
for payment thereunder divided by the total number of shares of Voting Equity
Securities owned by Unaffiliated Equity Holders and (ii) in respect of a
stockholder vote, as of the date of such vote, the quotient of the number of
shares of Voting Equity Securities owned by Unaffiliated Equity Holders voted in
favor of the matter divided by the total number of shares of Voting Equity
Securities owned by Unaffiliated Equity Holders; in either case multiplied by
the number of shares of Voting Equity Securities owned by Affiliated Equity
Holders on the expiration date of the tender offer or on the record date for the
stockholders' meeting with respect to the stockholder vote, as applicable;
provided, that, the Affiliated Equity Holders shall have no obligation to effect
- -------- ----
a conversion on or before the expiration of the tender offer or the record date
in order to tender or vote such Equity Securities.
"Standstill Provisions" shall have the meaning given to such term in
---------------------
Section 7.01 hereof.
"Sprint Offer" has the meaning given to such term in Section 4.02(b)
------------
hereof.
"Sprint Ownership Report" means a report provided by Sprint to Newco
-----------------------
pursuant to Section 6.02(b) hereof.
"Sprint's Percentage Interest" means the percentage of Equity
----------------------------
Securities owned by Affiliated Equity Holders, determined by converting the
following fraction into a decimal carried to the third place, (i) the numerator
of which shall be the sum of (A) the number of shares of Newco Common Stock
owned by Affiliated Equity Holders and (B) the number of shares of Newco Common
Stock into which Equity Securities owned by Affiliated Equity Holders are
convertible at the applicable Conversion Ratio, and (ii) the denominator of
which shall be the total number of shares of Newco Common Stock outstanding on a
Fully-Diluted Basis plus that portion of the 1,000,000 shares of Newco Common
Stock discussed in the definition of "Pro
11
<PAGE>
Rata Share" which has not yet been issued as of the date of calculation. In
determining the total number of shares of Newco Common Stock outstanding on a
Fully-Diluted Basis, Sprint shall be entitled to rely on capitalization
information to be provided by Newco in the most recent Newco Stock Ownership
Report. Notwithstanding any other provision of this Agreement to the contrary,
Sprint shall not be obligated under this Agreement to sell or otherwise dispose
of any Equity Securities to reduce Sprint's Percentage Interest below the Pro
Rata Share in the event that the Sprint's Percentage Interest exceeds the Pro
Rata Share due solely to a repurchase or redemption of Equity Securities by
Newco, the effectuation by Newco of a reverse stock split, recapitalization,
reclassification or other action reducing the number of Equity Securities.
"Subsidiary" has the same meaning as in Rule 12b-2 promulgated under
----------
the Exchange Act.
"Tender Offer" has the meaning set forth in the Recitals to this
------------
Agreement.
"Third-Party Offer" has the meaning given to such term in Section 4.03
-----------------
hereof.
"Top-Up Threshold" means a decimal, carried to the third place,
----------------
determined at Closing to be equal to the Pro Rata Share less .100, subject to
subsequent adjustment (i) for adjustments to the Pro Rata Share in accordance
with the penultimate sentence of the definition thereof and (ii) upon the
issuance of Transaction Securities, by multiplying the Top-Up Threshold in
effect prior to such issuance by the Dilution Factor; provided, that, if,
-------- ----
following such issuance of Transaction Securities, a Primary Share Offer is made
by Newco pursuant to Section 3.01(d) hereof, the Top-Up Threshold shall
immediately be increased to T\2,\ which is to be determined as follows:
T\2\ = ((x/y) (T\0\ - T\1\)) + T\1\
where:
x = the number of shares offered to Sprint pursuant to a Primary Share
Offer;
y = the number of Available Top-Up Shares;
T\0\ = the Pro Rata Share at Closing less .100; and
T\1\ = the Top-Up Threshold in effect after the issuance of a Transaction
Securities.
"Total Voting Power" means the aggregate number of votes entitled to
------------------
be voted generally in an election of Directors of Newco by all of the
outstanding Voting Equity Securities.
"Transaction Securities" means New Securities of Newco or Common Stock
----------------------
of the Company that are issued pursuant to or in connection with any joint
venture, strategic alliance, acquisition, tender or exchange offer, merger,
combination or purchase of all or substantially all of the assets of another
entity effected by Newco or the Company in which or in connection with which
securities of Newco or the Company are issued other than solely for cash. The
number of Transaction Securities issued in any such transaction shall be
determined based
12
<PAGE>
on the number of shares of Newco Common Stock on a Fully-Diluted Basis
underlying such New Securities.
"Unaffiliated Equity Holders" means, as of any relevant date of
---------------------------
determination, all holders of Equity Securities other than Affiliated Equity
Holders.
"Underwriting Discount" means, with respect to a Primary Share Offer,
---------------------
an amount equal to the underwriting discount applied in the most recent
underwritten offering of Newco Common Stock (including an underwritten offering
simultaneous with such Primary Share Offer).
"Voting Equity Securities" means Equity Securities of Newco that, at
------------------------
the date of such determination, entitle the holders thereof to vote generally in
any election of Directors.
"Voting Power" means the ability to vote or to control, directly or
------------
indirectly, by proxy or otherwise, the vote of any Voting Equity Securities.
"Window Period" shall have the meaning given to such term in Section
-------------
3.01(d) hereof.
"13D Group" means any group of Persons formed for the purpose of
---------
acquiring, holding, voting or disposing of Voting Equity Securities which would
be required under Section 13(d) of the Exchange Act to file a statement on
Schedule 13D with the SEC as a "person" within the meaning of Section 13(d)(3)
of the Exchange Act, and Rule 13d-5 under the Exchange Act, if such group
beneficially owned Voting Equity Securities representing more than 5% of any
class of Voting Equity Securities then outstanding. The agreements contemplated
by this Agreement and the Ancillary Agreements shall be deemed not to result in
the formation of a 13D Group.
ARTICLE II
CORPORATE GOVERNANCE
--------------------
SECTION 2.01. Composition of the Board of Directors. The fundamental
-------------------------------------
policies and strategic direction of Newco, the Company and any Significant
Subsidiary shall be determined by their respective Boards of Directors. The
composition of each of the Board of Directors of Newco, the Company or any
Significant Subsidiary and manner of selecting members thereof shall be as
follows:
(a) At and after the Effectiveness of this Agreement, each of the
Board of Directors shall be comprised of not more than 11 Directors.
(b) Immediately following the Effectiveness of this Agreement, Newco
and the Company shall elect to their respective Boards of Directors, and shall
thereafter cause to be elected to the Board of Directors of any Significant
Subsidiaries of Newco, two individuals, each of whom shall be designated as an
Investor Director by Sprint. Following the Effectiveness of this Agreement, the
current Directors of the Company listed under the heading of
13
<PAGE>
"Management Directors" in Schedule 2.01 shall be deemed to be Management
Directors of Newco and the current Directors of the Company listed under the
heading "Independent Directors" in Schedule 2.01 shall be deemed to be
Independent Directors of Newco, in each case until the expiration of the term of
their respective elections (or any earlier termination, resignation or removal).
If Newco, the Company or any Significant Subsidiary shall have a Strategic
and Business Planning Committee (or other committee responsible for strategic
and business planning) or a Finance Committee (or other committee responsible
for finance) during the time when Sprint shall have a right to designate one or
more Investor Directors hereunder, Sprint shall be entitled to appoint one
Investor Director to each such committee. If there is no such committee, Sprint
shall have a reasonable opportunity to review and discuss Newco's strategic and
business plans and financing plans with management of Newco prior to the
submission of any such plans to the Board of Newco, the Company or any
Significant Subsidiary. Sprint shall also have the right to appoint one Investor
Director to each of the other committees of the Board, except as otherwise
provided in this paragraph and except for appointments to any existing committee
of the Board if the scope of authority of such committee is not hereafter
expanded. Sprint shall receive copies of all information and materials provided
to the directors of Newco, the Company and any Significant Subsidiary or to
committee members, except for information and materials provided to a committee
that an Investor Director is prohibited from participating in as set forth in
this paragraph, at the time such information and materials are provided to such
directors. Notwithstanding the foregoing, nothing set forth herein shall entitle
any Investor Director to participate on any committee of the Board of Directors
of Newco, the Company or any Significant Subsidiary created for the purpose of
considering a Business Combination, an Acquisition Proposal, a Sprint Offer or a
Qualified Offer, or to participate in the Board's deliberations with respect to
any of the foregoing.
(c) Except as otherwise provided herein, and except at any time in
which the holders of Series A Stock are entitled to elect any directors of Newco
pursuant to Section 7(b) of the Certificate of Designation, in which case
paragraphs (b), (d) and (e) of this Section 2.01 will not be effective as to
Newco, from and after the Effectiveness of this Agreement, Sprint shall have the
right to designate two Investor Directors, each of whom shall be nominated by
the Board of Directors or any nominating committee thereof.
(d) Notwithstanding anything in the foregoing paragraph (c) to the
contrary, if at the end of any three consecutive months, (i) Sprint's Percentage
Interest shall be less than the Higher Threshold, Sprint shall promptly take
action to cause one of its Investor Directors to resign from the Boards of
Directors of Newco, the Company and any Significant Subsidiary, or (ii) Sprint's
Percentage Interest shall be less than the Lower Threshold, Sprint shall
promptly take action to cause any and all remaining Investor Directors elected
pursuant to Section 2.01(b) or Section 7(b) of the Certificate of Designation,
as the case may be, to resign from the Boards of Directors of Newco, the Company
or any Significant Subsidiary; and, upon the resignation of each respective
Investor Director, Sprint shall forever cease to have any rights to designate
any such Investor Director position pursuant to the terms of this Agreement or
the Certificate of Designation.
14
<PAGE>
(e) Except as otherwise provided in paragraph (d) above, Sprint shall
have the right to designate any replacement for an Investor Director designated
for nomination or nominated in accordance with this Section 2.01 upon the death,
resignation, retirement, disqualification or removal from office for other cause
of such Director. The Boards of Directors of Newco, the Company and any
Significant Subsidiary shall elect each person so designated.
SECTION 2.02. Solicitation and Voting of Shares. (a) Newco shall use
---------------------------------
its best efforts to solicit from the stockholders of Newco eligible to vote for
the election of Directors proxies in favor of the nominees selected in
accordance with Section 2.01.
(b) In any election of Directors or any meeting of the stockholders
of Newco called expressly for the removal of Directors, so long as the Board of
Directors includes (and will include after any such removal) any number of
Investor Directors contemplated by Section 2.01, Affiliated Equity Holders shall
be present for purposes of establishing a quorum and shall vote all their shares
of Voting Equity Securities (i) in favor of any nominee or Director selected in
accordance with Section 2.01 (including any nominee designated as a "Management
Director" or an "Independent Director" and any successor thereto) and (ii)
otherwise against the removal of any Director selected in accordance with
Section 2.01 (including any nominee designated as a "Management Director" or an
"Independent Director" and any successor thereto). Subject to Section 4.02(e),
Section 4.03(d) and the terms of the Irrevocable Proxy, in any other matter
submitted to a vote of the stockholders of the Company, Sprint may vote any or
all of its Voting Equity Securities in accordance with the terms thereof.
(c) The Affiliated Equity Holders will, and will cause any of their
Affiliates (other than Newco, the Company and its Subsidiaries) who are
permitted transferees of the Affiliated Equity Holders' rights under this
Agreement to, take all action as stockholders of Newco as necessary to effect
the provisions of this Agreement.
SECTION 2.03. Enforcement of this Agreement. A majority of the
-----------------------------
Directors, excluding the Investor Directors, shall have full and complete
authority on behalf of Newco to enforce the terms of this Agreement.
SECTION 2.04. Certificate of Incorporation and By-laws. Newco and
----------------------------------------
Sprint shall take or cause to be taken all lawful action necessary to ensure at
all times that Newco's Certificate of Incorporation and By-laws are not at any
time inconsistent with the provisions of this Agreement. At Sprint's request,
the Board of Directors shall adopt (and if necessary submit and recommend for
approval by stockholders) other amendments to Newco's Certificate of
Incorporation or By-laws reasonably necessary to implement the provisions of
this Agreement. Nothing set forth herein shall preclude the Board of Directors
from proposing to the stockholders and, upon their approval of such proposal,
implementing, a classified Board of Directors, provided, that, each Investor
-------- ----
Director must be placed in a different class of Directors.
SECTION 2.05. Advisors. If appropriate under the circumstances of a
--------
given situation, the Independent Directors may retain, at the cost and expense
of Newco or the Company, services of an investment banking firm of national
reputation of their choice and one law firm of their choice to advise them in
their capacity as Independent Directors with respect to
15
<PAGE>
any matter on which the Independent Directors, as a group, are required or
permitted to act hereunder.
SECTION 2.06. Investor Director Concurrence. From the Closing Date
-----------------------------
through the date this Agreement is terminated in accordance with Section 7.01
hereof, and for the duration of any period in which Sprint's Percentage Interest
is greater than the Lower Threshold, neither the Board of Directors of Newco nor
the Board of Directors of any Significant Subsidiary shall take, authorize or
permit any of the following actions without the concurrence of all Investor
Directors serving in such capacity at that time:
(a) The execution or performance of any Discriminatory Transaction;
(b) The issuance of any class or series of capital stock of Newco
that provides for voting rights in excess of one vote per share;
(c) The dissolution or liquidation (or adoption of a plan of
dissolution or liquidation) of Newco or any Subsidiary thereof; the commencement
by Newco or any Subsidiary thereof of any suit, case, proceeding or other action
(i) in bankruptcy under the federal bankruptcy or other laws relating to
bankruptcy, insolvency, reorganization or relief of debtors seeking to
adjudicate Newco or any Subsidiary thereof a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding up, liquidation, dissolution,
composition or relief with respect to Newco or any Subsidiary thereof; or (ii)
seeking appointment of a receiver, trustee, custodian or other similar official
for Newco or any Subsidiary thereof, or (iii) seeking to make a general
assignment for the benefit of creditors of Newco, provided, however, that to the
-------- -------
extent required by the fiduciary obligations of the Board of Directors,
exercised in good faith upon the advice of its outside counsel, Newco or any
Subsidiary thereof may undertake the actions set forth in this subsection (c)
without the concurrence of the Investor Directors;
(d) The conduct by Newco or any Significant Subsidiary of its
business substantially outside its current general field of enterprise; or
(e) The issuance of Transaction Securities representing (i) in any
twelve-month period, in one or more transactions, 50% or more of the number of
shares of Newco Common Stock outstanding on a Fully-Diluted Basis prior to
giving effect to such issuances, or (ii) in any one transaction, 35% or more of
the number of shares of Newco Common Stock outstanding on a Fully-Diluted Basis
prior to giving effect to such issuance.
ARTICLE III
EQUITY PURCHASES FROM THE COMPANY
---------------------------------
SECTION 3.01. Subscription Rights. (a) So long as Sprint's
-------------------
Percentage Interest is greater than the Top-Up Threshold, the Affiliated Equity
Holders, collectively, shall have the rights provided for in this Section 3.01.
16
<PAGE>
(b) Notwithstanding any provision to the contrary contained herein,
Sprint may effect its rights pursuant to this Section 3.01 by making purchases
of Equity Securities at any time from any Person other than Newco so long as
after giving effect to such purchases, Sprint's Percentage Interest is less than
or equal to the Pro Rata Share.
(c) If the Board of Directors proposes to issue New Securities (other
than New Securities that are Transaction Securities) at such time as Sprint's
Percentage Interest is greater than the Top-Up Threshold, Newco shall provide
written notice to Sprint (the "Subscription Notice") of its intent to effect
such issuance at least five business days prior to the date on which the meeting
of the Board is held to authorize the issuance of such New Securities. The
Subscription Notice shall set forth (i) the number of New Securities proposed to
be issued and the terms of such New Securities, (ii) the consideration (or
manner of determining the consideration by reference to the market price), if
any, for which such New Securities are proposed to be issued and the terms of
payment, (iii) the number of New Securities Sprint shall be entitled to purchase
in compliance with the provisions of this Section 3.01 and the purchase price
(or manner of determining the consideration by reference to the market price)
and form of consideration therefor and (iv) the proposed date of issuance of
such New Securities. For a period of ten business days after the receipt by
Sprint of the Subscription Notice, Sprint shall have the right to purchase the
Pro Rata Share of such issuance and shall notify Newco in writing, within such
time period whether it elects to purchase all or any portion of the Equity
Securities offered to Sprint pursuant to the Subscription Notice. If Sprint
shall elect to purchase any such New Securities, such securities which it shall
have elected to purchase shall be issued and sold to Sprint by Newco at the same
times and on the same terms and conditions as the New Securities are issued and
sold to third parties (except that, if such New Securities are issued for
consideration other than cash, Sprint shall pay the lower of (x) the same
purchase price per share and other terms, including the same form of
consideration paid by the Purchaser for the New Securities or (y) the fair
market value per share thereof, determined by an independent appraiser mutually
selected by Newco and Sprint), in either case, times the number of shares Sprint
is entitled to purchase; provided, however, that if Sprint's purchase of such
-------- -------
Equity Securities would, in the opinion of its counsel, give rise to the
application of waiting periods under the HSR Act, Sprint shall be obligated to
consummate such purchase as soon as practicable after the applicable waiting
period has elapsed or terminated on an unconditional basis, and Sprint shall,
during such time, diligently and in good faith seek expiration or termination of
the applicable waiting period. If, for any reason, the issuance of New
Securities to third parties is not consummated, Sprint's right to purchase its
Pro Rata Share of such issuance shall lapse, subject to Sprint's ongoing
subscription right with respect to issuances of New Securities at later dates or
times.
(d) (i) At such time as Newco, acting in good faith on the basis of
the most recent Sprint Ownership Report provided pursuant to Section 6.02(b)
hereof, determines that Sprint's Percentage Interest has decreased by .05 or
more, after giving effect to any and all Primary Share Offers, solely as a
result of issuances of Transaction Securities, Newco shall promptly notify
Sprint of such event in writing, but in any event not later than the due date of
the next Newco Outstanding Stock Report.
17
<PAGE>
(ii) Not later than the second anniversary of Sprint's receipt
of such notice (the "Window Period"), Newco shall be obligated to make written
offers for Sprint to purchase (each, a "Primary Share Offer"), in the aggregate
on the basis of all such Primary Share Offers made in the Window Period, not
less than the sum of the number of Available Top-Up Shares resulting from all
issuances of Transaction Securities that have collectively caused Sprint's
Percentage Interest to have decreased by .05 or more (the "Aggregate Number of
Top-Up Shares") at a purchase price equal to the Average Stock Price for the 10
trading days prior to the date of issuance, less the Underwriting Discount.
Sprint may accept a Primary Share Offer within five business days of its receipt
thereof by giving written notice to Newco of its desire to do so, specifying
(subject to Section 3.01(e) hereof) the number and form of shares of Equity
Securities of Newco Sprint is willing to purchase pursuant to such Primary Share
Offer, and such transaction shall be consummated in accordance with such notice
within three business days of Newco's receipt thereof. The Aggregate Number of
Top-Up Shares will be reduced by the number of shares offered to Sprint in the
Primary Share Offer.
(iii) If Newco, acting in good faith on the basis of the most
recent Sprint Ownership Report provided pursuant to Section 6.02(b) hereof,
determines that Sprint's Percentage Interest has decreased by .10 or more solely
as a result of the issuance of Transaction Securities, after giving effect to
any and all Primary Share Offers, Newco shall promptly notify Sprint of such
event in writing, but in any event not later than the due date of the next Newco
Outstanding Stock Report. In such event, the Window Period shall be accelerated
such that Newco shall be obligated to make one or more Primary Share Offers with
respect to not less than the Aggregate Number of Top-Up Shares, as then
calculated, at the earlier of (i) the expiration of the Window Period, as
determined above, or (ii) six months after the date Sprint receives the
foregoing notice from Newco.
(iv) Notwithstanding anything contained in this Agreement to the
contrary, in no event whatsoever shall Newco be obligated to make Sprint a
Primary Share Offer that, after giving effect to such transaction, would cause
Sprint's Percentage Interest to exceed the Pro Rata Share.
(e) In respect of a purchase of New Securities pursuant to Section
3.01(c) or 3.01(d) hereof, Sprint may, at its option, by notice given to Newco
at the time Sprint provides notice of its intention to purchase New Securities
pursuant to either of such sections, acquire such shares in the form of
Alternative Securities (to the extent set forth below) convertible into the
applicable number of shares of Newco Common Stock, assuming the acceleration of
the full amount of any liquidation accretion dividends with respect to such
Alternative Securities, consistent with the acceleration contemplated by the
last sentence of Section 3(a)(i) of the Certificate of Designation. Sprint's
purchase of New Securities in the form of Alternative Securities shall be
limited as follows:
(i) From the Closing to the second anniversary thereof, Sprint may
purchase not more than 75% of any issuance of New Securities in the
form of Alternative Securities;
18
<PAGE>
(ii) After the second anniversary of the Closing until the third
anniversary thereof, Sprint may purchase not more than 66.67% of any
issuance of New Securities in the form of Alternative Securities; and
(iii) After the third anniversary of the Closing, Newco shall have no
obligation to issue New Securities in the form of Alternative
Securities.
SECTION 3.02. Issuance and Delivery of New Securities and Voting
--------------------------------------------------
Equity Securities. Newco represents, warrants and covenants to Sprint that (i)
- -----------------
upon issuance, all of the shares of New Securities or Alternative Securities
sold to Sprint pursuant to this Article III shall be duly authorized, validly
issued, fully paid and nonassessable and will be approved (if outstanding
securities of Newco of the same type are at the time already approved) for
quotation on the Nasdaq National Market or for quotation or listing on the
principal trading market for the securities of Newco at the time of issuance and
(ii) upon delivery of such shares, such shares shall be free and clear of all
claims, liens, encumbrances, security interests and charges of any nature and
shall not be subject to any preemptive right of any stockholder of Newco or any
other rights to purchase or vote such shares or any power of attorney with
respect thereto, except as may be set forth in this Agreement and the Investment
Agreement. Each share issued or delivered by Newco hereunder shall bear the
legend set forth in Section 3.03 of the Investment Agreement.
ARTICLE IV
----------
PURCHASES OF ADDITIONAL EQUITY SECURITIES; BUSINESS COMBINATIONS
----------------------------------------------------------------
SECTION 4.01. General Standstill Obligations. Subject to the
------------------------------
following provisions and except for (i) purchases of shares made by Sprint
permitted under the provisions of Section 3.01, or (ii) offers, purchases and
other matters effected by Sprint in accordance with the provisions of Section
4.02 or Section 4.03 hereof, none of the Affiliated Equity Holders will, nor
will any Affiliated Equity Holders authorize any of their agents or
representatives to, without prior written consent of the Board of Directors of
Newco, directly or indirectly, acting alone or in concert with other Persons:
(a) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any Equity Securities or direct or
indirect rights to acquire any Equity Securities, or any equity securities of
any Subsidiary of Newco, material assets of Newco or any Subsidiary or division
of Newco or of any successor or controlling Person of any of the foregoing,
except for its right to convert Series A Stock, Alternative Securities, the
Convertible Notes or other Equity Securities, and to receive stock dividends,
stock splits and other distributions of Equity Securities;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of proxies to vote (as such terms are used in the rules of the
SEC), or seek to advise or influence any person or entity with respect to the
voting of any Voting Equity Securities of Newco, except for any solicitation of
proxies to vote or related communications made in response to a proxy
19
<PAGE>
contest by a third party in connection with offers made by Sprint in accordance
with Section 4.02 or Section 4.03 hereof;
(c) make any public announcement with respect to, or submit a
proposal for, or offer to effect (with or without conditions) any purchase of a
significant portion of the assets of Newco or any Subsidiary or division of
Newco, any tender or exchange offer for any of the Equity Securities of Newco or
a merger, consolidation, combination, share exchange, reorganization or other
extraordinary transaction involving Newco or any of its Equity Securities or
assets or any Subsidiary of Newco or any of such Subsidiary's equity securities
or assets, or otherwise make any Acquisition Proposal, except for any
announcement required in connection with Section 4.02 or Section 4.03 hereof;
(d) form, join or in any way participate in a "group" as defined in
Rule 13d-5(b) under the Exchange Act in connection with any of the foregoing,
except as contemplated by any Ancillary Agreement; or
(e) request Newco or any of its representatives, directly or
indirectly, to amend or waive any provision of this Section 4.01.
Sprint will promptly advise Newco of any inquiry or proposal made to
it with respect to any of the foregoing and describe, in reasonable detail, the
terms and conditions thereof.
Notwithstanding any other provision of this Agreement to the contrary,
in the event that, following termination of this Agreement pursuant to Section
7.01 hereof, but at such time as Sprint shall still be subject to this Section
4.01, Newco receives either (i) a Recommended Third-Party Offer or (ii) a Non-
Recommended Third-Party Offer, which the Board of Directors of Sprint reasonably
determines in good faith upon consultation with independent legal counsel and
its outside financial advisors is reasonably likely to be consummated, Sprint
shall be temporarily released from its obligations under this Section 4.01
insofar as necessary to permit Sprint to present an offer directly to the Board
of Directors. Such release shall survive for so long as such Third-Party Offer
remains outstanding or is consummated or abandoned.
If any agent or representative of an Affiliated Equity Holder shall
violate any provision of this Section 4.01 by purchasing Equity Securities for
the account of any Affiliated Equity Holder or take any other action in
violation of this Section 4.01 for or on behalf of any Affiliated Equity Holder,
each Affiliated Equity Holder shall, within 14 days of becoming aware of such
violation, take such action as is necessary to remedy such violation, including
selling all Equity Securities purchased in violation of this Section 4.01, and,
upon effecting such remedy, such violation shall not be deemed to be a breach of
this Agreement.
SECTION 4.02. Sprint Right to Offer. (a) Following the 39-month
---------------------
anniversary of Closing and prior to the 63-month anniversary of Closing (such
period, the "Right to Offer Period"), Sprint shall have the right to offer to
purchase all, but not less than all, of the outstanding Equity Securities that
it does not already own at a per share price equal to the per share price
determined by dividing the Fair Private Market Value by the total number of
shares of Newco Common Stock outstanding on a Fully-Diluted Basis. The Fair
Private Market Value shall be determined in accordance with Section 4.02(b).
During any time in which Sprint shall be permitted to make an offer under this
Section 4.02(a), Newco shall make available to Sprint such information regarding
the business, properties, assets, condition (financial or otherwise) or results
of operations of Newco, the Company and their Significant Subsidiaries
reasonably requested by Sprint, subject to Sprint entering into a customary
confidentiality agreement with respect to all such information.
(b) (i) In the event Sprint wishes to exercise its right to offer
with respect to all, but not less than all, of the outstanding Equity Securities
that it does not already own, as set forth in Section 4.02(a) hereof, Sprint
shall approach the Board of Directors with an offer in
20
<PAGE>
writing (the "Sprint Offer"), which shall include the price per share Sprint is
willing to pay based on the definition of Fair Private Market Value and describe
in reasonable detail such other terms and conditions of the Sprint Offer. A
Sprint Offer shall not be subject to any financing contingency. A Sprint Offer
shall be reflected in a form of definitive agreement which Sprint is prepared to
execute. The conditions to consummation of the Sprint Offer and the
representations and warranties set forth in the Sprint Offer shall be reasonable
and customary for transactions in which a similarly situated stockholder offers
to purchase all of the Equity Securities not held by such stockholder or its
Affiliates.
(ii) The Board of Directors of Newco shall have a one-time right,
exercisable by written notice to Sprint given within 14 days after the receipt
of the Sprint Offer, to postpone the making of that offer for nine months (the
"Postponement Right"); provided, that, the Board of Directors may not exercise
-------- ----
the Postponement Right in connection with a Sprint Offer made pursuant to
Section 4.03(b) or Section 4.04(b) hereof. Upon exercise of the Postponement
Right, Sprint shall withdraw the Sprint Offer, in which case it may not exercise
its right to offer under this Section 4.02 for a period of nine months following
the date of exercise of the Postponement Right; provided, however, that (A) in
--------- -------
that event, the Right to Offer Period shall be extended to the 72-month
anniversary of Closing and (B) the Postponement Right shall not limit Sprint's
right to respond to a Third-Party Offer as set forth in Section 4.03 hereof.
(iii) The Board of Directors of Newco and Sprint shall negotiate the
amount of the Fair Private Market Value to be paid pursuant to the Sprint Offer
in good faith and Sprint shall not make any public announcements relating to
this offer without the prior written consent of the Board unless required by law
or legal process. In the event the two parties are unable to agree on the
amount of the Fair Private Market Value within 30 days after submission of the
Sprint Offer to the Board, the parties shall agree to be bound to the valuation
arrived at pursuant to the following formula:
(A) Two appraisals shall be made by recognized investment
banks, one selected by each of Sprint and Newco (the "Initial
Values");
(B) If the lower of the Initial Values is more than 10% less
than the higher of the Initial Values, a third independent valuation
will be made by an investment bank selected jointly by Sprint and
Newco (the "Independent Valuation"). Otherwise, the Fair Private
Market Value shall be the average of the Initial Values; and
(C) If the Independent Valuation is greater than or less
than the average of the Initial Values by more than 5%, the Fair
Private Market Value shall be deemed to equal the average of the two
closest valuations. If the Independent Valuation does not differ by
such amount, the Independent Valuation shall be the Fair Private
Market Value.
(c) Upon the determination of the amount of the Fair Private Market
Value, Sprint shall be obligated to commence and effectuate the Sprint Offer,
provided, however, that Sprint shall have a one-time right ("Walk-Away Right"),
- -------- -------
exercisable by written notice to Newco
21
<PAGE>
given within 14 days after the receipt of the determination of Fair Private
Market Value, to determine not to proceed to make such Sprint Offer; provided,
--------
further, however, that Sprint may not exercise the Walk-Away Right in connection
- -------
with a Sprint Offer made pursuant to Section 4.03(b) or Section 4.04(b) hereof.
If Sprint does not exercise such Walk-Away Right, the Board of Directors shall,
if an Intervening Offer is not then outstanding, (i) support the Sprint Offer by
approving and recommending it to Newco stockholders and (ii) cause Newco to take
all steps reasonable and necessary to facilitate consummation of such Sprint
Offer. If Sprint exercises such Walk-Away Right, all Affiliated Equity Holders,
Newco, the Company and all of their officers, directors, employees,
representatives and agents shall be obligated to protect and hold in strict
confidence the amount of the Fair Private Market Value determined as set forth
above unless disclosure thereof is required by law or legal process.
(d) [Reserved.]
(e) (i) At such time as a Third-Party Offer shall constitute an
Intervening Offer, (A) Sprint shall be released from its obligation to commence
and effectuate the Sprint Offer, and (B) Newco shall be released from its
obligation to support and facilitate consummation of the Sprint Offer.
Notwithstanding the foregoing, Sprint shall be entitled, at any time prior to
consummation of the Intervening Offer, to make a Qualified Offer. In such
event, the most recent Third-Party Offer shall cease to constitute an
Intervening Offer.
(ii) If an Intervening Offer is undertaken, in whole or in part, in
the form of a tender offer, at the consummation of such tender offer, the
offeror shall have an option, exercisable for a period of 20 days following the
consummation of such tender offer, to purchase from all Affiliated Equity
Holders, at the tender offer price, in the aggregate, the Specified Number of
Equity Securities less the number of Equity Securities that have already been
tendered by the Affiliated Equity Holders.
(iii) If, in the event of an Intervening Offer, such offer, a
Business Combination underlying such offer or any related matter that must be
approved by the stockholders of Newco in order for such offer to be effectuated
is brought before the stockholders of Newco for their consideration and
approval, Sprint and Sprint L.P. shall be obligated, in the event a Qualified
Offer has not been made within five days prior to the date of the stockholders'
meeting, to cast (or to cause to be cast by their Affiliated Equity Holders) in
favor of the Intervening Offer, the Business Combination or any such related
matter such number of votes as is equal to the Specified Number of Equity
Securities, provided, that, such Business Combination does not constitute a
-------- ----
Discriminatory Transaction.
(f) None of the Affiliated Equity Holders shall be entitled to
exercise rights of appraisal under Section 262 of the Delaware General
Corporation Law (or any successor thereto) as to any of the Equity Securities
owned by them in respect of any Business Combination effected in connection with
an Intervening Offer.
SECTION 4.03. Third-Party Offers. (a) Newco shall promptly provide
------------------
to Sprint written notice (the "Offer Notice") of its receipt of an Offer and, in
reasonable detail, the proposed terms thereof. Upon receipt of such Offer, the
Board of Directors shall determine that:
22
<PAGE>
(i) such Offer is in the best interests of Newco's stockholders and
that it intends to recommend such Offer to the stockholders (a "Recommended
Third-Party Offer");
(ii) such Offer is not in the best interests of Newco's stockholders
and that it intends not to recommend such Offer to the stockholders or no
position is taken with respect thereto under Rule 14e-2 of the Exchange Act
within 10 business days of the Board's receipt thereof (a "Non-Recommended
Third-Party Offer" and, together with a Recommended Third-Party Offer, a "Third-
Party Offer"); or
(iii) insufficient information exists on which to base any such
recommendation, in which event the Board may take such action as it deems
necessary or advisable to develop such additional information; provided, that,
-------- ----
if upon developing such additional information, the Board decides to recommend
or not to recommend such Offer to the stockholders, then it shall promptly
notify Sprint of such decision and, at such time, the Offer shall be deemed a
Recommended Third-Party Offer or a Non-Recommended Third-Party Offer, as
appropriate.
(b) For a period of ten days following the giving of the Offer Notice,
Newco may not enter into a definitive agreement with respect to the Offer. Upon
receipt of such Offer Notice, Sprint shall be released from its obligations
under Section 4.01 insofar as necessary to permit Sprint, subject to the terms
and conditions of this Agreement and if an Intervening Offer is not then
outstanding, to make, pursue and consummate a Sprint Offer. However, Newco shall
not be obligated to deem a bona fide, written offer from any Person other than
an Affiliated Equity Holder to effect a Business Combination to be an Offer and
to provide the Offer Notice required by Section 4.03(a) until the earlier of (i)
the date on which Newco determines that such offer meets the requirements of an
Offer and that Newco intends to pursue such Offer with the objective of having
it become a Recommended Third-Party Offer, or (ii) ten days after the date Newco
receives such offer, unless previously rejected by Newco.
(c) In the case of an Offer that is a Recommended Third-Party Offer,
Sprint shall have the option to make a Qualified Offer, and Newco shall not
adopt any takeover defenses (unless amended or waived to permit Sprint to make a
Qualified Offer), enter into any agreement or take any other action if such
action would, in either case, materially impair Sprint's ability to make and
consummate a Qualified Offer or materially increase Sprint's costs of
consummating such Qualified Offer; provided, however, that, notwithstanding the
-------- -------
foregoing, Newco shall be permitted to enter into a definitive agreement with
respect to a Recommended Third-Party Offer that provides for a termination fee
not to exceed 3% of the consideration to be received per share of Newco Common
Stock multiplied by the number of shares of Newco Common Stock outstanding on a
Fully-Diluted Basis (less the number of shares beneficially owned by the
offering party), plus customary fees and expenses, except that the definitive
agreement with respect to such Recommended Third-Party Offer shall provide that
such fee shall not be payable by Sprint if it makes a Qualified Offer within 72
hours of the first public announcement of such Recommended Third-Party Offer
(provided, that, there are at least two business days within such period). In
- --------- ----
the case of an Offer that is a Non-Recommended Third-Party Offer, Sprint shall
have the option to make a Qualified Offer, but only if the Board of Directors of
Sprint reasonably determines in good faith upon consultation with independent
legal
23
<PAGE>
counsel and its outside financial advisors that the conditions to the Non-
Recommended Third-Party Offer are reasonably likely to be satisfied and the
offer consummated.
If Sprint has the option to make a Qualified Offer and does so more
than five days prior to the date of a stockholders meeting held to consider a
Third-Party Offer or an Intervening Offer, the Board of Directors shall, if an
Intervening Offer is not then outstanding, (i) support the Qualified Offer by
approving and recommending it to Newco's stockholders and (ii) cause Newco to
take all steps reasonable and necessary to facilitate the consummation of the
Qualified Offer.
(d) (i) At such time as a Third-Party Offer made subsequent to a
Qualified Offer shall constitute an Intervening Offer, Newco's obligations to
support and facilitate a Qualified Offer as set forth in Section 4.03(c) above
shall terminate and Newco shall be free to consider and act upon such
Intervening Offer. Notwithstanding the foregoing, Sprint shall be entitled, at
any time prior to consummation of the Intervening Offer, to make another
Qualified Offer. In the event Sprint makes such Qualified Offer, the most
recent Third-Party Offer shall cease to constitute an Intervening Offer.
(ii) If a Recommended Third-Party Offer or an Intervening Offer, as
the case may be, is undertaken, in whole or in part, in the form of a tender
offer, at the consummation of such tender offer, the offeror shall have an
option, exercisable for a period of 20 days following the consummation of such
tender offer, to purchase from any Affiliated Equity Holder, at the tender offer
price, the Specified Number of Equity Securities less the number of Equity
Securities that have already been tendered by the Affiliated Equity Holders.
(iii) If, in the event of a Recommended Third-Party Offer or an
Intervening Offer, as the case may be, such offer, a Business Combination
underlying the such offer or any related matter that must be approved by the
stockholders of Newco in order for the offer to be effectuated is brought before
the stockholders of Newco for their consideration and approval, Sprint and
Sprint L.P. shall be obligated, in the event a Qualified Offer has not been made
within five days prior to the date of the stockholders' meeting, to cast (or to
cause to be cast by their Affiliated Equity Holders) in favor of the Recommended
Third-Party Offer or the Intervening Offer, as applicable, the Business
Combination or any such related matter such number of votes as is equal to the
Specified Number of Equity Securities, provided, that, such Business Combination
-------- ----
does not constitute a Discriminatory Transaction.
(e) None of the Affiliated Equity Holders shall be entitled to
exercise rights of appraisal under Section 262 of the Delaware General
Corporation Law (or any successor thereto) as to any of the Equity Securities
owned by them in respect of any Business Combination effected in connection with
a Recommended Third-Party Offer or an Intervening Offer.
SECTION 4.04. Solicitation of Offers.
----------------------
(a) From the Closing Date until the earlier of the 27-month
anniversary of Closing or the termination of this Agreement in accordance with
its terms, Newco shall not and shall not authorize or permit any officer,
director or employee of, or any investment banker,
24
<PAGE>
attorney or other advisor or representative of, Newco or its Affiliates, to, (i)
solicit or initiate, or encourage the submission of, any Acquisition Proposal,
or (ii) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action to expedite
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal; provided, however, that to the
-------- -------
extent required by the fiduciary obligations of the Board of Directors, as
determined in good faith by the Board based on the advice of outside counsel,
Newco may (A) in response to any unsolicited request therefor, furnish
information with respect to Newco or any Subsidiary to any person pursuant to a
customary confidentiality agreement and discuss such information with such
person, (B) upon receipt by Newco of an Acquisition Proposal, following delivery
to Sprint of the notice required pursuant to Section 4.05, participate in
negotiations regarding such Acquisition Proposal, and (C) enter into an
agreement respecting such Acquisition Proposal or enter into any related
agreements or take any other action ancillary thereto, which agreements or
actions are consistent with the requirements of Section 4.03(c) hereof.
(b) After the 27-month anniversary of Closing until the earlier of the
39-month anniversary of Closing or the termination of this Agreement in
accordance with its terms, Newco shall not, and shall not authorize or permit
any officer, director or employee of, or any attorney or other advisor or
representative of, Newco or its Affiliates, to take any of the actions limited
by Section 4.04(a) except through an investment banking firm formally engaged by
Newco (or actively working with Newco) for such purpose; provided, that, 30 days
-------- ----
prior to so engaging an investment banking firm for that purpose or to the
commencement of such work, Newco shall notify Sprint of its intention to effect
such engagement or commence such work, and Sprint shall be permitted to prepare
and make a Sprint Offer as defined in Section 4.02(b) hereof for so long as such
investment banking firm remains engaged by, or is working for, Newco for that
specific purpose; provided, that, subject to the terms and conditions of the
-------- ----
Sprint Offer and if an Intervening Offer is not then outstanding, Sprint will
pursue any Sprint Offer made pursuant hereto for so long as necessary to permit
such Sprint Offer to be consummated. Newco shall furnish Sprint with copies of
all information provided by Newco to such investment banking firm at the time
such information is provided to such investment banking firm, subject to Sprint
entering into a customary confidentiality agreement with respect to such
information.
(c) [Reserved.]
(d) Nothing contained in this Section 4.04 shall (i) prohibit Newco
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2 under the Exchange Act or (ii) preclude Newco or the Board from giving due
consideration or responding to any Acquisition Proposal if the failure to so
respond would, in the judgment of the Board of Directors, exercised in good
faith upon the advice of Newco's outside legal counsel, cause the Board to be in
violation of its fiduciary duties to the holders of Equity Securities.
(e) Nothing contained in this Section 4.04 shall adversely affect
Sprint's right to respond to a Third-Party Offer under Section 4.03 hereof,
including Sprint's unwillingness to provide a Sprint Offer under Section 4.04(b)
above.
25
<PAGE>
SECTION 4.05. Notice. The Board of Directors of Newco shall (i)
------
promptly notify Sprint in writing of (A) its receipt of an Acquisition Proposal,
(B) any inquiries or discussions that may reasonably be expected to lead to an
Acquisition Proposal, (C) the execution by Newco of a confidentiality agreement
with respect to an Acquisition Proposal, or (D) the furnishing of any
confidential information in contemplation of an Acquisition Proposal, whether or
not pursuant to a confidentiality agreement; (ii) describe the terms and
conditions of any Acquisition Proposal in reasonable detail; (iii) provide to
Sprint copies of any definitive agreements with respect to any Acquisition
Proposal and any confidentiality agreements with respect thereto; and (iv)
subject to Sprint's obligation to hold such information in strict confidence
(except as required by law or legal process), make available to Sprint all
information made available to the party making the Acquisition Proposal at the
same time it is provided to such party.
SECTION 4.06. Break-Up Fee. Upon consummation of an Intervening
------------
Offer, Newco shall be obligated to pay Sprint a termination fee equal to 3% of
the aggregate consideration to have been paid in the Sprint Offer or the
Qualified Offer to Unaffiliated Equity Holders plus reasonable fees and
expenses.
SECTION 4.07. Takeover Defenses. Newco shall not take any action or
-----------------
omit to take an action, and shall cause its Significant Subsidiaries or any of
its or their respective officers, directors, employees, representatives and
agents to take no action or omit to take action, that would result in (i) any
Affiliated Equity Holder being deemed an "acquiring person" or similar
designation under any Stockholders' Rights Plan (commonly known as a "poison
pill") or otherwise being adversely affected by such plan, (ii) any Affiliated
Equity Holder being prejudiced by Newco through its action or its failure to act
under any applicable state takeover statute, including Section 203 of the
Delaware General Corporation Law, or (iii) otherwise causing any takeover
defense to materially impair or obstruct, or prevent (either legally or
financially) the exercise by any Affiliated Equity Holder of rights granted
pursuant to this Article IV; provided, however, that (A) Newco may take action
-------- -------
or omit to take action having any such consequence to the extent that such
consequence occurs upon a material breach or violation by any Affiliated Equity
Holder of this Agreement and (B) the execution by Newco, the Company or any
Significant Subsidiary of a definitive agreement in respect of a Business
Combination that is consistent with the requirements of Section 4.03(c) hereof
shall not be deemed to have the effects described in this Section 4.07.
ARTICLE V
TRANSFER OF EQUITY SECURITIES
-----------------------------
SECTION 5.01. Transfer of Equity Securities. (a) None of the
-----------------------------
Affiliated Equity Holders shall, directly or indirectly, sell, transfer or
otherwise dispose of any Equity Securities except (i) pursuant to a registered
underwritten public offering in accordance with the Registration Rights
Agreement, (ii) in accordance with Rule 144 promulgated under the Securities
Act, (iii) to any direct or indirect Subsidiary of Sprint and (iv) in a
transaction effected in accordance with the so-called "Section 4(1 1/2)"
exemption under the Securities Act.
26
<PAGE>
(b) Subject to the provisions of Section 4.02(e), 4.03(d) and 4.04(b)
hereof, and notwithstanding the permissive aspects of items (i) through (iv) of
Section 5.01(a) hereof, none of the Affiliated Equity Holders shall, directly or
indirectly, sell, transfer or otherwise dispose of any interest in any Equity
Securities to any purchaser or group (within the meaning of Rule 13d-5(b) under
the Exchange Act) of purchasers, if, after giving effect to such sale, such
purchaser or group of purchasers would, to Sprint's knowledge, own, or have the
right to acquire, 5% or more of the Equity Securities then outstanding, except
to any Person that is not obligated (or would not, by virtue of such purchase,
reasonably be anticipated to be obligated) to file a Schedule 13D with the SEC
pursuant to each of paragraphs (b) and (e) of Rule 13d-1 under the Exchange Act.
(c) None of the Affiliated Equity Holders shall sell, transfer or
otherwise dispose of any of the capital stock of any Subsidiary of such
Affiliated Equity Holder that owns Equity Securities, except to another
Subsidiary of Sprint, and then only if such Subsidiary complies with the
transfer and assignment provisions of Section 7.05 hereof.
(d) Purported transfers of Equity Securities that are not in
compliance with this Article V shall be of no force or effect.
(e) Notwithstanding the foregoing, sales, transfers and dispositions
among a group consisting only of Affiliated Equity Holders shall not constitute
a breach of this Section 5.01, provided that each of such Affiliated Equity
Holders complies with the transfer and assignment provisions of Section 7.05
hereof.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
SECTION 6.01. Representations and Warranties. Each of Sprint and
------------------------------
Sprint L.P. represents and warrants to the Company and Newco as follows:
(a) Sprint is a corporation, and Sprint L.P. is a partnership, that is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or organized and has the power and
authority to execute, deliver and perform this Agreement and to grant the
Irrevocable Proxy.
(b) Each of this Agreement and the Irrevocable Proxy has been duly
executed and delivered by each of Sprint and Sprint L.P., and constitutes a
valid and binding agreement or irrevocable proxy (coupled with an interest),
respectively, and is enforceable in accordance with its respective terms, except
to the extent that the enforcement of this Agreement or the Irrevocable Proxy
may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity regardless of whether
enforceability is considered in a proceeding in equity or at law.
(c) The execution and delivery of this Agreement and of the
Irrevocable Proxy did not, and the performance thereof, without obtaining the
consent of any third party will not,
27
<PAGE>
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under (i) in the case of Sprint, the certificate of
incorporation or bylaws of Sprint, (ii) in the case of Sprint L.P., the
partnership agreement of Sprint L.P., (iii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit or
license applicable to either Sprint or Sprint L.P. or any of the Equity
Securities owned by either, or (iv) any federal, state, local, municipal,
foreign, international, multinational or other judicial or administrative order,
judgment, decree, constitution, law ordinance, common law of Delaware or Kansas,
regulation, statute or treaty applicable to either of Sprint or Sprint L.P. or
any of the Equity Securities owned by either. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity (as defined in the Investment Agreement) or any party to a contract is
required by or with respect to either Sprint or Sprint L.P. or in connection
with the execution and delivery of this Agreement or the applicable Irrevocable
Proxy.
(d) Except as set forth in this Agreement and the Ancillary
Agreements, none of the Equity Securities owned by either of Sprint or Sprint
L.P. is subject to (i) any preemptive rights, (ii) right of first refusal, (iii)
right to purchase, acquire or vote, (iv) power of attorney, or (v) any other
right.
(e) Each of Sprint and Sprint L.P. has the sole power, right and
authority to vote and to tender the Equity Securities beneficially owned by it
in accordance with the terms of this Agreement and the Irrevocable Proxy.
(f) Each of Sprint and Sprint L.P. will take all action necessary to
cause other Affiliated Equity Holders bound by the terms of this Agreement to
abide by the terms of this Agreement.
SECTION 6.02. Stock Ownership Reports. The following informational
-----------------------
reporting requirements shall apply during the term of this Agreement:
(a) Newco Stock Report. Newco shall provide to Sprint in writing a
------------------
monthly report (the "Newco Outstanding Stock Report") setting forth certain
information and data pertaining to Newco for each calendar month (a "Month"),
which shall be delivered to Sprint on or before the 15th day of the next
following month (a "Report Delivery Date"). The Newco Outstanding Stock Report
shall be reasonable in detail and shall clearly set forth all of the following
information:
(i) the number of New Securities issued by Newco during the
Month;
(ii) the number of New Securities issued by Newco as Transaction
Securities during the Month;
(iii) the total number of shares of Newco Common Stock
outstanding on the last day of the Month;
(iv) the total number of shares of Newco Common Stock, on a Fully-
Diluted Basis, outstanding on the last day of the Month; and
28
<PAGE>
(v) the total number of Available Top-Up Shares issuable in respect of
Transaction Securities issued in the Month and Newco's calculation of the
Dilution Factor with respect to any such issuance of Transaction Securities.
(b) Sprint Ownership Report. Sprint shall provide to Newco in writing
-----------------------
a monthly report setting forth certain information and data pertaining to the
ownership of Equity Securities of Newco by Affiliated Equity Holders (the
"Sprint Ownership Report"), which shall be delivered to Newco on or before the
Report Delivery Date; provided, however, that Sprint's only obligation with
-------- -------
respect to furnishing a Sprint Ownership Report for a month in which no
ownership changes occurred shall be to notify Newco in writing of that fact.
The Sprint Ownership Report shall be reasonable in detail and shall clearly set
forth in reasonable detail all of the following information:
(i) the number of shares of Equity Securities of Newco bought
and sold in accordance with the terms of the Governance Agreement during such
Month;
(ii) Sprint's calculation of the number of Available Top-Up
shares with respect to issuances of Transactional Securities, as of the last day
of the Month; and
(iii) Sprint's calculation of Sprint's Percentage Interest as of
the last day of the Month.
(c) Each Newco Outstanding Stock Report and Sprint Ownership Report
(individually, a "Report" and together, the "Reports") shall state the month to
which it applies, and shall be signed by an authorized officer of the applicable
party. Newco represents and warrants that each Newco Outstanding Stock Report
shall be true and correct in all material respects on the Report Delivery Date.
Sprint represents and warrants that each Sprint Ownership Report shall be true
and correct in all material respects on the Report Delivery Date. If a Report
is determined to be incorrect in any respect at any time after delivery to the
other party, the submitting party must resubmit a true and accurate replacement
Report which identifies all such corrections; provided, however, that the
-------- -------
submission of any replacement Report or the failure of any Party to submit such
replacement Report shall not constitute a waiver by any other Party hereto of
any substantive rights otherwise existing under this Agreement.
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 7.01. Effectiveness; Termination; Survival. (a) This
------------------------------------
Agreement shall become effective at the Closing. This Agreement shall terminate
at the earliest of the following to occur: (i) the termination of the
Investment Agreement in accordance with its terms; (ii) such time as Sprint's
Percentage Interest is greater than 90% or less than the Lower Threshold; (iii)
the expiration of the Sprint Right to Offer Period; (iv) the first date on which
any Person or 13D Group (other than Affiliated Equity Holders) is determined (A)
to beneficially own or control more than 35% of the Equity Securities
outstanding by virtue of the acquisition of such securities pursuant to a Third-
Party Offer if the rights granted and process contemplated by Article IV hereof
have been effected in accordance with the terms thereof or (B) to beneficially
29
<PAGE>
own or control 50% or more of the Voting Equity Securities outstanding; (v) upon
the termination of the Marketing Agreement in accordance with Sections
24(b)(ii), 24(c), 24(d)(i), or 24(d)(ii) thereof; or (vi) upon the exercise by
any "Holder" of "Registrable Securities" under the Registration Rights Agreement
of registration rights (demand or incidental) held by Person thereunder.
(b) Notwithstanding the termination of this Agreement as set forth in
Section 7.01(a) above, until the sixth anniversary of the Closing Date and
thereafter for so long as Sprint's Percentage Interest is greater than the Lower
Threshold, then Sprint shall still be subject to the restrictions set forth in
Sections 4.01 and 5.01 hereof (the "Standstill Provisions") and, for so long as
Sprint's Percentage Interest remains greater than the Lower Threshold, Sprint
shall still have rights pursuant to this Agreement under Section 2.01 (subject
to termination of such rights by virtue of Section 2.01(d)) and Section 3.01(b).
In such event, the Standstill Provisions, Section 2.01, Section 3.01(b), Article
VII and any definition or definitional provision of any of the foregoing
provisions of this Agreement shall remain in full force and effect until such
time as Sprint's Percentage Interest is less than the Lower Threshold (provided,
--------
that, the use of any such definitions for such limited purpose shall not give
- ----
rise to any of the substantive rights or obligations that relate to such
definitions); provided, however, that during any period in which the Standstill
-------- -------
Provisions survive, Sprint and its Affiliates may directly approach the Board of
Directors of Newco in order to make an offer to effect a Business Combination.
SECTION 7.02. Notices. Unless otherwise provided herein, any notice,
-------
request, waiver, instruction, consent or document or other communication
required or permitted to be given by this Agreement shall be effective only if
it is in writing and (a) delivered by hand or sent by certified mail, return
receipt requested, (b) if sent by a nationally-recognized overnight delivery
service with delivery confirmed, or (c) if telexed or telescoped, with receipt
confirmed as follows:
The Company: 3100 New York Drive
Pasadena, California 91107
Attn.: President and CEO
Telecopy No.: 626/296-4161
With a copy to: Hunton & Williams
NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Scott M. Hobby, Esq.
Telecopy No.: (404) 888-4190
Newco and Newco Sub: 3100 New York Drive
Pasadena, California 91107
Attn: President and CEO
Telecopy No.: 626/296-4161
30
<PAGE>
with a copy to: Hunton & Williams
NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Scott M. Hobby, Esq.
Telecopy No.: (404) 888-4190
Sprint: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Chief Financial Officer
Telecopy No.: (913) 624-8426
with a copy to: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Corporate Secretary
Telecopy No.: (913) 624-8233
with an additional
copy to: Stinson, Mag & Fizzell, P.C.
1201 Walnut, Suite 2800
P.O. Box 419251
Kansas City, Missouri 64141-6251
Attn: John A. Granda, Esq.
Telecopy No.: (816) 691-3495
The parties hereto ("Parties") shall promptly notify each other of any change in
their respective addresses or facsimile numbers or of the Person or office to
receive notices, requests or other communications under this Section 7.02.
Notice shall be deemed to have been given as of the date when so personally
delivered, when actually delivered by the U.S. Postal Service at the proper
address, the next day when delivered during business hours to an overnight
delivery service properly addressed or when receipt of a telex or telecopy is
confirmed, as the case may be, unless the sending party has actual Knowledge
that such notice was not received by the intended recipient.
SECTION 7.03. Entire Agreement. This Agreement and, upon execution
----------------
by all Parties thereto, the Investment Agreement and the Ancillary Agreements,
together with the respective Schedules and Exhibits hereto and thereto, embody
the entire agreement and understanding of the Parties in respect to the matters
contemplated hereby and thereby and supersedes and renders null and void all
other prior agreements and understandings, written and oral, with respect to the
subject matter hereof and thereof, provided, that, this provision shall not
-------- ----
abrogate any other written agreement between the Parties executed simultaneously
with this Agreement. No Party shall be liable or bound to any other Party in
any manner by any promises, conditions, representations, warranties, covenants,
agreements and understandings, except as specifically set forth herein or
therein.
31
<PAGE>
SECTION 7.04. Waiver. Except as otherwise permitted in this
------
Agreement, the terms or conditions of this Agreement may not be waived unless
set forth in a writing signed by the Party entitled to the benefits thereof. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of such provision at any time in the future or a waiver of
any other provision hereof. The rights and remedies of the Parties are
cumulative and not alternative. Except as otherwise permitted in this
Agreement, neither the failure nor any delay by any Party in exercising any
right, power or privilege under this Agreement, any of the Ancillary Agreements
or the documents referred to in this Agreement or therein will operate as a
waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege.
SECTION 7.05. Successors and Assigns. Neither this Agreement nor any
----------------------
of the rights, interests or obligations under this Agreement shall be assigned
or transferred, in whole or in part, by any of the Parties without the prior
written consent of the other Parties; provided, however, that such assignment or
-------- -------
transfer may be made by (i) by Sprint or Sprint L.P. to any of their respective
Affiliates who are "controlled" (as such term is defined in Rule 12b-2
promulgated pursuant to the Exchange Act) by Sprint or Sprint L.P., or (ii)
pursuant to any merger or sale of substantially all of the assets of Sprint or
such Affiliates (or any transaction having such effect) that is pursuant to an
agreement entered into after the Closing; provided, however, that, in either
-------- -------
such case, before such assignment may take effect, the proposed successor or
assignee agrees in writing to be bound by all of the provisions hereof and
executes an Irrevocable Proxy. 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. Any attempted
assignment in violation of this Section 7.05 shall be void.
SECTION 7.06. Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the laws of the State of Delaware, without
regard to conflict of laws principles.
SECTION 7.07. Severability. If any term or provision of this
------------
Agreement or the application thereof to either party or set of circumstances
shall, in any jurisdiction and to any extent, be finally held invalid or
unenforceable, such term or provision shall only be ineffective as to such
jurisdiction, and only to the extent of such invalidity or unenforceability,
without invalidating or rendering unenforceable any other terms or provisions of
this Agreement or under any other circumstances, and the Parties shall negotiate
in good faith a substitute provision which comes as close as possible to the
invalidated or unenforceable term or provision, and which puts each party in a
position as nearly comparable as possible to the position it would have been in
but for the finding of invalidity or unenforceability, while remaining valid and
enforceable.
SECTION 7.08. Counterparts. This Agreement may be executed in one or
------------
more counterparts each of which when so executed and delivered shall for all
purposes be deemed to be an original but all of which, when taken together,
shall constitute one and the same Agreement.
32
<PAGE>
SECTION 7.09. Headings. The table of contents, captions and headings
--------
used in this Agreement are inserted for convenience only and shall not be deemed
to constitute part of this Agreement or to affect the construction or
interpretation hereof.
SECTION 7.10. No Third-Party Beneficiaries. Nothing in this
----------------------------
Agreement or any Ancillary Agreements, express or implied, shall create or
confer upon any Person (including but not limited to any employees), other than
the Parties or their respective successors and permitted assigns, any legal or
equitable rights, remedies, obligations, liabilities or claims under or with
respect to this Agreement except as expressly provided herein.
SECTION 7.11. Interpretation. (a) Unless specifically stated
--------------
otherwise, references to Articles, Sections, Exhibits and Schedules refer to
Articles, Sections, Exhibits and Schedules in this Agreement. References to
"includes" and "including" mean "includes without limitation" and "including
without limitation."
(b) Each Party is a sophisticated legal entity that was advised by
experienced counsel and, to the extent it deemed necessary, other advisors in
connection with this Agreement. Accordingly, each Party hereby acknowledges
that no Party has relied or will rely in respect of this Agreement or the
transactions contemplated hereby upon any document or written or oral
information previously furnished to or discovered by it or its representatives,
other than this Agreement or the documents and instruments delivered at the
Closing.
(c) No provision of this Agreement shall be interpreted in favor of,
or against, either of the Parties by reason of the extent to which either such
Party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
SECTION 7.12. Inclusion of Information in Schedules. The inclusion
-------------------------------------
of any information in any disclosure schedule (i) shall not be deemed an
admission that any such information is material for purposes of the
representation and warranty to which it relates or any other representation and
warranty or for any other purpose related to this Agreement or any Ancillary
Agreement or the transactions contemplated hereby or thereby, including, without
limitation, for purposes of any covenants, closing conditions or any other
remedies the Parties may have, and (ii) shall not be used or interpreted in any
manner to create a standard of materiality for any such purpose.
SECTION 7.13. Exclusive Jurisdiction and Consent to Service of
------------------------------------------------
Process. The Parties agree that any legal action arising out of or relating to
- -------
this Agreement or the transactions contemplated hereby or thereby shall be
instituted by the Parties only in a Delaware state court or a federal court
sitting in that state, which shall be the exclusive venue of any such action.
Each Party waives any objection which such party may now or hereafter have to
the laying of venue of any such action, and irrevocably consents and submits to
the jurisdiction of any such court (and the appropriate appellate courts) in any
such action. Any and all service of process and any other notice in any such
action shall be effective against such Party when transmitted in accordance with
Section 7.02. Nothing contained herein shall be deemed to affect the right of
any Party to serve process in any manner permitted by applicable law.
33
<PAGE>
SECTION 7.14. Amendment. No amendment, modification or alteration of
---------
the terms or provisions of this Agreement or any Ancillary Agreement, including
any Schedules and Exhibits hereto or thereto, shall be binding unless the same
shall be in writing and duly executed by the Party against whom such amendment,
modification or alteration is sought to be enforced.
SECTION 7.15. Survival. All of the representations, warranties,
--------
covenants and agreements set forth in this Agreement shall survive the Closing.
SECTION 7.16. WAIVER OF JURY TRIAL. THE COMPANY, NEWCO, SPRINT AND
--------------------
SPRINT L.P. HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT THAT IT MAY
HAVE TO A TRIAL BY JURY IN ANY ACTION INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR
THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
SECTION 7.17. Specific Performance. The Parties agree that immediate
--------------------
irreparable damages for which there is no adequate remedy at law would occur in
the event that any provision of this Agreement is not performed in accordance
with the specific terms hereof or is otherwise breached. It is accordingly
agreed that in the event of a failure by a party to perform its obligations
under this Agreement, the non-breaching Party shall be entitled to specific
performance through injunctive relief to prevent breaches of the provisions of
this Agreement and to enforce specifically the provisions of this Agreement in
any action instituted in any court having subject matter jurisdiction, in
addition to any other remedy to which such Party may be entitled, at law or in
equity.
SECTION 7.18. Voting Agreement; Proxy. (a) To the extent this
-----------------------
Agreement constitutes a voting agreement in accordance with Section 218(c) of
the Delaware General Corporation Law, it is intended to comply therewith and be
enforceable thereunder. The voting obligations of Sprint under this Agreement,
including without limitation, those set forth in Sections 2.02, 4.02 and 4.03
hereof, shall be irrevocable.
(b) In order to ensure that the voting agreements set forth in
Sections 2.02, 4.02 and 4.03 hereof will be fulfilled, each of Sprint and Sprint
L.P. agrees to grant, and concurrently with the execution of this Agreement
hereby grants, to the Company and Newco, or either of them, an Irrevocable
Proxy, coupled with an interest, with respect to (a) the matters contemplated by
Section 2.02 hereof, all of the Equity Securities owned by Affiliated Equity
Holders and (b) with respect to the matters contemplated by Section 4.02 or
Section 4.03 hereof, the Specified Number of Equity Securities covered by such
voting agreements which Sprint or Sprint L.P. beneficially owns, as determined
under Rule 13d-3 of the Exchange Act, in each such case, for and in the name,
place and stead of such stockholder or any of its Affiliated Equity Holders, at
any annual or special meeting of the holders of Newco Common Stock and at any
adjournment or postponement thereof, or pursuant to any consent in lieu of a
meeting. The Irrevocable Proxy granted by each of the Sprint and Sprint L.P.
constitutes the valid and effective
34
<PAGE>
irrevocable proxy, coupled with an interest, of each of Sprint and Sprint L.P.
in respect of the Equity Securities beneficially owned by each of them, within
the meaning of Section 212(e) of the Delaware General Corporation Law; revokes
any proxy or proxies or powers of attorney heretofore given by either of them in
respect of such Equity Securities; shall remain in full force and effect and is
and shall be irrevocable until the termination of this Agreement and is coupled
with an interest and an integral part of the benefits and obligations of each of
Sprint and Sprint L.P. and the rights and benefits of the Company and Newco.
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SPRINT CORPORATION
By: /s/ Theodore H. Schell
--------------------------------------
Name: Theodore H. Schell
Title: Vice President - Strategic Planning
and Corporate Development
SPRINT COMMUNICATIONS COMPANY L.P.
By: U.S. Telecom, Inc., General Partner
By: /s/ Don A. Jensen
--------------------------------------
Name: Don A. Jensen
Title: Vice President and Secretary
EARTHLINK NETWORK, INC.
By: /s/ Charles G. Betty
--------------------------------------
Name: Charles G. Betty
Title: President and CEO
NEWCO, INC.
By: /s/ Charles G. Betty
--------------------------------------
Name: Charles G. Betty
Title: President and CEO
[SIGNATURE PAGE FOR GOVERNANCE AGREEMENT]
36
<PAGE>
SCHEDULE 2.01 TO
THE GOVERNANCE AGREEMENT
Board of Directors
------------------
Management Directors
- --------------------
Sky D. Dayton
C. Garry Betty
Independent Directors
- ---------------------
Sidney Azeez
Robert M. Kavner
Linwood A. Lacy, Jr.
Paul McNulty
Kevin M. O'Donnell
John W. Sidgmore
Reed E. Slatkin
<PAGE>
IRREVOCABLE PROXY COUPLED WITH AN INTEREST
The undersigned hereby irrevocably appoint(s) EarthLink Network, Inc., a
Delaware corporation ("EarthLink Network"), or Newco, Inc., a Delaware
corporation ("Newco"), or either of them, as the proxy of the undersigned and
hereby grant(s) to EarthLink Network or Newco this irrevocable proxy coupled
with an interest ("Irrevocable Proxy") with respect to the following Equity
Securities of the undersigned or any Affiliated Equity Holder of the undersigned
that the undersigned owns of record or otherwise has the right to vote, with all
power and authority to vote and to execute and deliver written consents, in each
case in accordance with the terms of Sections 2.02, 4.02 and 4.03 of the
Governance Agreement to the extent specified below:
(a) With respect to any matter contemplated by Section 2.02 of that
certain Governance Agreement dated February 10, 1998 (the "Governance
Agreement") by and among EarthLink Network, Newco, Sprint Corporation and
Sprint Communications Company L.P., as to all Equity Securities owned by
the undersigned or by any Affiliated Equity Holder of the undersigned;
(b) With respect to any matter contemplated by Section 4.02 or Section
4.03 of the Governance Agreement, as to the Specified Number of Equity
Securities owned by the undersigned or by any Affiliated Equity Holder of
the undersigned;
in each case, in the name, place and stead of the undersigned, and at any annual
or special meeting of stockholders of EarthLink Network or Newco or at any
adjournment or postponement thereof, or as to any action that can be taken by
written consent; and in each case to the same extent and with the same effect as
the undersigned might or could do under any applicable law or regulation
governing the rights and powers of stockholders of a Delaware corporation,
irrespective of whether the undersigned is present at such meeting.
This Irrevocable Proxy constitutes a valid and effective irrevocable
proxy coupled with an interest of EarthLink Network and Newco in the Equity
Securities, within the meaning of Section 212(e) of the Delaware General
Corporation Law, of the undersigned in respect of the foregoing Equity
Securities and revokes any proxy or proxies heretofore given by the undersigned
in respect of any such Equity Securities. This Irrevocable Proxy shall remain
in full force and effect and be irrevocable until termination of the Governance
Agreement. Unless otherwise defined herein, all capitalized terms shall have
the meanings ascribed to them in the Governance Agreement.
<PAGE>
Until such time as the Governance Agreement is terminated, this Irrevocable
Proxy shall continue to cover all Equity Securities sold, transferred or
otherwise disposed of after the date hereof other than in accordance with the
terms and provisions of the Governance Agreement.
Dated: February , 1998 SPRINT CORPORATION
---
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
SPRINT COMMUNICATIONS COMPANY L.P.
By: U.S. Telecom, Inc.
By:
--------------------------------------
General Partner
STATE OF )
) ss.
COUNTY OF )
---------
Sworn to and subscribed before me this ___ day of February, 1998 and
acknowledged before me as being the free act and deed of the above
signatory(ies).
--------------------------------------
Notary Public
My Commission expires:
---------------------
[SIGNATURE PAGE FOR IRREVOCABLE PROXY WITH AN INTEREST]
<PAGE>
EXHIBIT NO. 10.2
DOLPHIN, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK
___________________
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
___________________
Dolphin, Inc. (the "Corporation"), certifies that pursuant to the authority
contained in Article IV of its Certificate of Incorporation, and in accordance
with the provisions of Section 151 of the General Corporation Law of the State
of Delaware, its Board of Directors has adopted the following resolution
creating a series of the Preferred Stock, $.01 par value, designated as Series A
Convertible Preferred Stock:
RESOLVED, that a series of the class of Preferred Stock, $.01 par value, of
the Corporation be hereby created, and that the designation and amount thereof
and the voting powers, preferences, and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are set forth in this Certificate of
Designation, Preferences and Rights of Series A Convertible Preferred Stock (the
"Certificate of Designation") as follows:
1. Designation and Amount. Preferred Stock of the Corporation created
----------------------
and authorized for issuance hereby shall be designated as "Series A Convertible
Preferred Stock" (herein referred to as "Series A Preferred Stock"), having a
par value per share equal to $.01, and the number of shares constituting such
series shall be 10,000,000. The Corporation shall only originally issue shares
of Series A Preferred Stock to Sprint Corporation, a Kansas corporation, and its
successors and Affiliates.
2. Rank. The Series A Preferred Stock shall, with respect to dividend
----
rights and rights upon liquidation, winding up or dissolution, whether voluntary
or involuntary, rank prior to the Common Stock (as defined in Section 10 hereof)
and all classes or series of preferred stock, preference stock or any other
capital stock or equity securities of the Corporation, whether now issued or
hereafter created. All equity securities of the Corporation to which the Series
A Preferred Stock ranks prior, including the Common Stock, are collectively
referred to herein as the "Junior Securities."
<PAGE>
3. Dividend Provisions.
-------------------
(a) Dividends.
---------
(i) Mandatory PIK Dividends. On and before the fifth anniversary
of the Purchase Date, the Corporation shall pay, and the holders of
outstanding shares of Series A Preferred Stock ("Holders") shall be
entitled to receive on each Dividend Payment Date, a dividend on each
share of Series A Preferred Stock at a rate per annum equal to three
percent (3.00%) of the Liquidation Value (as then increased, as
provided in Section 4(a)) per share of Series A Preferred Stock,
accruable and compounded quarterly on each of the Dividend Accrual
Dates, which dividend shall be in the form of an increase in the
Liquidation Value in such amount (each such increase is referred to as
a "Liquidation Accretion Dividend"). All dividends shall accrue
quarterly in arrears and shall compound on each Dividend Accrual Date,
commencing on the first Dividend Accrual Date after the date of
issuance of the applicable shares of Series A Preferred Stock. The
Board of Directors shall declare and pay such accrued dividends on
each Dividend Payment Date and the Corporation shall take all further
actions necessary to cause such dividend to be paid to the Holders in
the form and manner prescribed herein. Notwithstanding the foregoing,
upon the first date of the consummation of a Business Combination, or
an Optional Redemption by the Corporation pursuant to Section 6(a),
the Corporation shall pay, and the Holders of outstanding shares of
Series A Preferred Stock shall be entitled to receive, a dividend on
each share of Series A Preferred Stock in the form of an aggregate
increase in the Liquidation Value in an amount equal to the amount by
which the Liquidation Value would have increased pursuant to this
Section 3(a)(i) if such Holder had held such shares of Series A
Preferred Stock, until the first Dividend Payment Date on or following
the fifth anniversary of the Purchase Date.
(ii) Cash Dividends. After the fifth anniversary of the Purchase
Date, the Corporation shall pay, and the Holders of outstanding shares
of Series A Preferred Stock shall be entitled to receive, when, as and
if declared by the Board of Directors, out of funds legally available
therefor, cumulative dividends on each share of Series A Preferred
Stock at a rate per annum equal to three percent (3.00%) of the
Liquidation Value per share of Series A Preferred Stock, accruable
quarterly on each of the Dividend Accrual Dates, payable only in cash;
provided, however, that after the twentieth anniversary of the
Purchase Date, the Corporation shall pay, and the Holders of
outstanding shares of Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, cumulative dividends on each share
of Series A Preferred Stock at a rate per annum equal to 8% of the
Liquidation Value per share of Series A Preferred Stock, accruable
quarterly on each of the Dividend Accrual Dates, payable only in cash,
which rate shall increase by 200 basis points on each anniversary of
the Closing Date thereafter, but not to exceed a maximum rate of 12%.
All cash dividends shall be cumulative, whether or not declared, on a
daily basis from the fifth anniversary of the
2
<PAGE>
Purchase Date or the date of issuance, whichever is later, and shall
accrue quarterly in arrears on each Dividend Accrual Date, commencing
on the first Dividend Accrual Date after the fifth anniversary of the
Purchase Date or the date of issuance, whichever is later. The Board
of Directors shall declare and pay such accrued dividends at such time
and to the extent permitted by law.
(iii) General Provisions. Each distribution in the form of a
cash dividend shall be payable to Holders of record as they appear on
the stock books of the Corporation on such record date, not less than
10 nor more than 60 days preceding the relevant Dividend Payment Date,
as shall be fixed by the Board of Directors of the Corporation. For
any period during which any share of Series A Preferred Stock is
outstanding less than a full quarterly dividend period ending on a
Dividend Accrual Date, the dividends payable shall be computed on the
basis of a 360 day year consisting of twelve 30-day months and the
actual number of days elapsed in the period for which the dividends
are payable. If any Dividend Payment Date for a dividend payable in
cash occurs on a day that is not a Business Day, any accrued dividends
otherwise payable on such Dividend Payment Date shall be paid on the
next succeeding Business Day.
(b) Certain Other Non-Cash Distributions. If the Corporation shall at
------------------------------------
any time, or from time to time, after the Purchase Date, declare, order,
pay or make a dividend or other distribution (including, without
limitation, any distribution or issuance of stock or other securities or
property or rights or warrants to subscribe for securities of the
Corporation or any of its Subsidiaries by way of dividend or spinoff or
rights to purchase Common Stock or other Junior Securities) on its Common
Stock, other than (i) dividends payable in cash in an aggregate amount in
any fiscal year which, when declared, are not expected to exceed the net
income of the Corporation during such year from continuing operations
before extraordinary items, as determined in accordance with generally
accepted accounting principles consistently applied in accordance with past
practice, or (ii) any dividend or distribution described in Section
5(c)(i), Section 5(c)(ii) or Section 5(c)(iii), then, and in each such case
(a "Triggering Distribution"), each Holder of shares of Series A Preferred
Stock shall be entitled to receive from the Corporation, with respect to
the shares of Series A Preferred Stock held by such Holder, the same
dividend or distribution that such Holder would have received if
immediately prior to the earlier of such Triggering Distribution or any
record date therefor (i) a Business Combination had occurred causing the
last sentence of Section 3(a)(i) to be effected, and (ii) such Holder
converted all of such Holder's shares of Series A Preferred Stock into
shares of Common Stock. Any such dividend, distribution or issuance shall
be declared, ordered, paid or made on the Series A Preferred Stock at the
same time such dividend, distribution or issuance is declared, ordered,
paid or made on the Common Stock.
(c) Limitation on Dividends and Other Distributions. Unless full
-----------------------------------------------
cumulative dividends, if any, accrued on all outstanding shares of the
Series A Preferred Stock have been or contemporaneously are declared and
paid for all periods prior to and ending on the most recent Dividend
Accrual Date, no dividend shall be declared or paid or set aside for
payment
3
<PAGE>
or other distribution declared or made upon the Junior Securities (other
than a dividend or distribution paid solely in shares of, or warrants,
rights or options solely exercisable for or convertible into, Junior
Securities), nor shall any Junior Securities be redeemed, purchased or
otherwise acquired for any consideration, nor may any moneys be paid to or
made available for a sinking fund for the redemption of any shares of any
such securities, by the Corporation (other than redemptions and purchases
pursuant to or in accordance with agreements between the Corporation and
its or its subsidiaries' directors, officers and key employees), except by
conversion into or exchange for Junior Securities.
4. Liquidation Preference.
----------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation ("Liquidation Event"), the
Holders of Series A Preferred Stock then outstanding shall be entitled to
receive, prior and in preference to any distribution of any of the assets
of the Corporation to the holders of Common Stock and other Junior
Securities by reason of their ownership thereof, an amount per share equal
to the sum of (i) the average of the Closing Price per share of Common
Stock for the 30 Trading Days immediately preceding the Purchase Date (the
"Average Stock Price") for each outstanding share of Series A Preferred
Stock, (ii) the amount of all Liquidation Accretion Dividends that have
been paid pursuant to Section 3(a)(i) (including an amount equal to a
prorated dividend pursuant to Section 3(a)(i) for the period from the
Dividend Accrual Date immediately preceding the date of the Liquidation
Event through the date of the Liquidation Event), and (iii) all
accumulations of accrued but unpaid dividends payable in cash pursuant to
Section 3(a)(ii) on each share of Series A Preferred Stock (including an
amount equal to a prorated dividend pursuant to Section 3(a)(ii) for the
period from the Dividend Accrual Date immediately prior to the receipt of
such sum to the date of receipt of such sum), with the sum of the amounts
referred to in clauses (i), (ii) and (iii) referred to herein as the
"Liquidation Value". The schedule of (i) the amount of the applicable
Liquidation Accretion Dividend for each Share of Series A Preferred Stock
for each Dividend Payment Date therefor, and (ii) the cumulative amount of
the Liquidation Value for each Share of Series A Preferred Stock, as of
each Dividend Payment Date, is as follows:
<TABLE>
<CAPTION>
Amount of Applicable Quarterly Liquidation
Dividend Payment Date for Accretion Dividend for Each Share of Cumulative Liquidation Value for
Quarter Series A Preferred Stock Each Share of Series A Preferred Stock
- ------------------------- -------------------------------------------- --------------------------------------
<S> <C> <C>
1
2
3
4
5
6
7
8
9
10
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Amount of Applicable Quarterly Liquidation
Dividend Payment Date for Accretion Dividend for Each Share of Cumulative Liquidation Value for
Quarter Series A Preferred Stock Each Share of Series A Preferred Stock
- ------------------------- -------------------------------------------- --------------------------------------
<S> <C> <C>
11
12
13
14
15
16
17
18
19
20
</TABLE>
If upon the occurrence of such Liquidation Event, the assets and funds
are not sufficient to pay in full the liquidation payments payable to the
Holders of the Series A Preferred Stock, then the Holders of outstanding
shares of Series A Preferred Stock shall share ratably in such distribution
of assets. Except as provided in this Section 4(a), Holders of Series A
Preferred Stock shall not be entitled to any additional distribution upon
the occurrence of a Liquidation Event.
(b) After the distribution described in Section 4 (a) has been paid,
the remaining assets of the Corporation available for distribution to
shareholders shall be distributed among the holders of Junior Securities in
accordance with their respective rights thereto.
(c) Neither the consolidation, merger, Business Combination or any
other form of business combination of the Corporation with or into any
other person or entity, nor the sale, lease, exchange, conveyance or
disposition of all or substantially all of the assets of the Corporation to
persons or entities other than the holders of Junior Securities shall be
deemed to be a Liquidation Event for purposes of this Section 4.
5. Conversion. The Holders of the Series A Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
(a) Optional Conversion Rights and Automatic Conversion.
---------------------------------------------------
(i) Each share of Series A Preferred Stock shall be convertible,
at the option of the Holder thereof, at any time after the first
anniversary of the Purchase Date, at the office of the Corporation or
any transfer agent for the Series A Preferred Stock, into such number
of validly issued, fully paid and nonassessable shares of Common
Stock, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever,
as is determined by dividing the Liquidation Value by the Conversion
Price at the time in effect for such share; provided, however, that,
notwithstanding any other provision hereof to the contrary, conversion
of all outstanding shares of Series A Preferred Stock shall be
required in
5
<PAGE>
the event of consummation of a Business Combination. The Conversion
Price per share for shares of Series A Preferred Stock shall be (i)
for the period from the Purchase Date through the Dividend Accrual
Date immediately after the fifth anniversary of the Purchase Date, the
product of (A) the Average Stock Price, times (B) 116.118%, and (ii)
thereafter, the Conversion Price then in effect shall be increased at
a rate per annum equal to six percent (6%) thereof, accruable
quarterly, and in each case the Conversion Price shall be subject to
adjustment, from time to time as set forth in Section 5(c).
(ii) Upon conversion of any Series A Preferred Stock, payment
shall be made for (A) dividends under Section 3(a)(i) on each
converted share of Series A Preferred Stock in an amount equal to a
prorated Liquidation Accretion Dividend for the period from the
Dividend Accrual Date immediately prior to the date of conversion to
such conversion date, and (B) unpaid dividends under Section 3(b)
resulting from events described therein and occurring prior to the
date of conversion.
(b) Mechanics of Conversion. If the Holder of shares of Series A
-----------------------
Preferred Stock desires to exercise such right of conversion, such Holder
shall give written notice to the Corporation (the "Conversion Notice") of
that Holder's election to convert a stated whole number of shares of Series
A Preferred Stock (the "Conversion Shares") into shares of Common Stock,
and surrender to the Corporation, at its principal office or at such other
office or agency maintained by the Corporation for such purpose, such
Holder's certificate or certificates evidencing such Conversion Shares. The
Conversion Notice shall also contain a statement of the name or names (with
addresses) in which the certificate or certificates for Common Stock shall
be issued. Notwithstanding the foregoing, the Corporation shall not be
required to issue any certificates to any person other than the Holder
thereof unless the Corporation has obtained reasonable assurance that such
transaction is exempt from the registration requirements of, or is covered
by an effective registration statement under, the Securities Act of 1933,
as amended (the "Act"), and all applicable state securities laws,
including, if necessary in the reasonable judgment of the Corporation or
its legal counsel, receipt of an opinion to such effect from counsel
reasonably satisfactory to the Corporation. In no event would such opinion
be required if the shares of Common Stock could, upon conversion, be resold
pursuant to Rule 144 or Rule 144A under the Act. As promptly as
practicable, and in any event within five business days, after the receipt
of the Conversion Notice and the surrender of the certificate or
certificates representing the Conversion Shares, the Corporation shall
issue and deliver, or cause to be delivered, to the Holder of the
Conversion Shares or his nominee or nominees, (i) a certificate or
certificates for the number of shares of Common Stock issuable upon the
conversion of such Conversion Shares and (ii) if less than the full number
of shares of Series A Preferred Stock evidenced by the surrendered
certificate or certificates are being converted, a new certificate or
certificates, of like tenor, evidencing the number of shares evidenced by
such surrendered certificate or certificates less the number of Conversion
Shares. Such conversion shall be deemed to have been effected as of the
close of business on the date the Corporation received the Conversion
Notice and the certificate or certificates representing the Conversion
Shares, and the person
6
<PAGE>
or persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the holder or holders of
record of such shares of Common Stock as of the close of business on such
date, provided, however, that if such conversion by a Holder of Series A
Preferred Stock would give rise to the waiting period of the HSR Act, such
conversion shall not be effective and shall be contingent upon (i) the
expiration or termination of such waiting period, and (ii) the absence of
any action taken or instituted by the Department of Justice, the Federal
Trade Commission or any other governmental entity by the expiration or
termination of such waiting period to delay, enjoin or place conditions on
such conversion.
(c) Conversion Price Adjustments of Preferred Stock.
-----------------------------------------------
(i) If the Corporation should at any time or from time to time
after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common
Stock, then, as of such record date (or, if no record date is fixed,
as of the close of business on the date on which the Board of
Directors adopts the resolution relating to such dividend,
distribution, split or subdivision), the Conversion Price shall be
decreased to equal the product of the Conversion Price in effect
immediately prior to such date multiplied by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding
immediately prior thereto and the denominator of which shall be the
number of shares of Common Stock outstanding immediately thereafter.
(ii) If the number of shares of Common Stock outstanding at any
time or from time to time after the Purchase Date is decreased by a
combination of the outstanding shares of Common Stock, then following
such combination, the Conversion Price shall be increased to equal the
product of the Conversion Price in effect immediately prior thereto
multiplied by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior thereto and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately thereafter. So long as any shares of Series A
Preferred Stock are outstanding, the Corporation shall not combine any
shares of Common Stock unless it likewise combines all shares of
Common Stock.
(iii) If the Corporation shall at any time and from time to time
after the Purchase Date issue rights or warrants to all holders of the
Common Stock entitling such holders to subscribe for or purchase
Common Stock at a price per share less than the Current Market Price
per share of the Common Stock on the record date for the determination
of stockholders entitled to receive such rights or warrants, then, and
in each such case, the number of shares of Common Stock into which
each share of Series A Preferred Stock is convertible shall be
adjusted so that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of
7
<PAGE>
shares of Common Stock determined by multiplying the number of shares
of Common Stock into which such share was convertible on the day
immediately prior to such record date by a fraction, (A) the numerator
of which is the sum of (1) the number of shares of Common Stock
outstanding on such record date and (2) the number of additional
shares of Common Stock which such rights or warrants entitle holders
of Common Stock to subscribe for or purchase ("Offered Shares"), and
(B) the denominator of which is the sum of (1) the number of shares of
Common Stock outstanding on the record date and (2) a fraction, (x)
the numerator of which is the product of the number of Offered Shares
multiplied by the subscription or purchase price of the Offered Shares
and (y) the denominator of which is the Current Market Price per share
of Common Stock on such record date. Such adjustment shall become
effective immediately after such record date.
(ii) If the Corporation shall be a party to any transaction,
including any capital reorganization, reclassification or
recapitalization involving the Common Stock of the Corporation (other
than (A) a transaction described in clauses (i) and (ii) of this
Section 5(c) or in Section 3(b) or (B) a consummated Business
Combination), or some other form of transaction (other than a
consummated Business Combination) in which the previously outstanding
shares of Common Stock shall be changed into or, pursuant to the
operation of law or the terms of the transaction to which the
Corporation is a party, exchanged, or would have been changed or
exchanged as required by the Certificate of Incorporation if such
Common Stock were outstanding, for different securities of the
Corporation or common stock or other securities of another corporation
or interests in a non-corporate entity (such other corporation or non-
corporate entity is referred to herein as the "Surviving Entity") or
other property (including cash) or any combination of the foregoing,
then, as a condition to the consummation of such transaction, lawful
and adequate provision shall be made whereby the Holders of the Series
A Preferred Stock shall thereafter have the right to receive, in lieu
of the shares of Common Stock of the Corporation immediately
theretofore receivable with respect to the conversion of such shares
of Series A Preferred Stock, such shares of stock or securities (such
stock and securities are referred to herein as the "Surviving Entity
Securities") or assets as would have been issued or payable with
respect to or in exchange for the shares of Common Stock which such
holders would have held had the shares of Series A Preferred Stock
been converted immediately prior to such transaction. In any such
case, appropriate provisions shall be made with respect to the rights
and interests of the Holders of the Series A Preferred Stock to the
end that such conversion rights (including, without limitation,
provisions for adjustment of the Conversion Price) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares
of Surviving Entity Securities or assets thereafter deliverable upon
the exercise thereof.
(d) Stock Transfer Taxes. The issuance of stock certificates upon
--------------------
the conversion of the Series A Preferred Stock shall be made without charge
to the converting Holder for any tax in respect of such issuance. The
Corporation shall not, however, be required to pay
8
<PAGE>
any tax which may be payable in respect of any transfer involved in the
issuance and delivery of shares in any name other than that of the Holder
of such shares of Series A Preferred Stock converted, and the Corporation
shall not be required to issue or deliver any such stock certificate unless
and until the person or persons requesting the issuance thereof shall have
paid to the Corporation the amount of such tax, if any.
(e) No Fractional Shares: Certificate as to Adjustments.
---------------------------------------------------
(i) No fractional shares shall be issued upon conversion of the
Series A Preferred Stock, and the number of shares of Common Stock to
be issued shall be rounded to the nearest whole share.
(ii) Upon the occurrence of each adjustment or readjustment of
the Conversion Price of Series A Preferred Stock pursuant to this
Section 5, the Corporation, at its expense, shall promptly compute
such adjustment or readjustment in accordance with the terms hereof
and prepare and furnish to each Holder of Series A Preferred Stock a
certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is
based. The Corporation shall, upon the written request at any time of
any Holder of Series A Preferred Stock, furnish or cause to be
furnished to such Holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price at the time in
effect, and (C) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the
conversion of a share of Series A Preferred Stock.
(f) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the Holders of any class of securities for the
purpose of determining the Holders thereof who are entitled to receive any
dividend (other than a cash dividend or a Liquidation Accretion Dividend)
or other distribution, any right or warrant to subscribe for, purchase or
otherwise acquire any shares of stock or any class of any other securities
or property, or to receive any other right (including, without limitation,
making a dividend or other distribution of any rights under a stockholder
rights plan (sometimes known as a "poison pill" plan), whether now existing
or hereafter created), the Corporation shall mail to each Holder of Series
A Preferred Stock, at least 20 days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution, right or warrant, and the amount
and character of such dividend, distribution, right or warrant. The
Corporation shall not issue such dividend, distribution, right or warrant
described herein or in Section 5(c)(iii), or consummate any Business
Combination, or any reorganization, reclassification or recapitalization
described in Section 5(c)(iv), unless it provides the Holders of the Series
A Preferred Stock at least 20 days advance written notice thereof.
(g) Reservation of Securities Issuable upon Conversion. The
--------------------------------------------------
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common
9
<PAGE>
Stock, solely for the purpose of effecting the conversion of the shares of
the Series A Preferred Stock, free from any preemptive right or other
obligation, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of
the Series A Preferred Stock; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series A Preferred Stock,
in addition to such other remedies as shall be available to the Holder of
such Series A Preferred Stock, the Corporation will take such corporate
action as may be necessary to increase its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for such
purposes. The Corporation shall prepare and shall use commercially
reasonable efforts to obtain and keep in force such governmental or
regulatory permits or other authorizations as may be required by law, and
shall comply with all requirements as to registration, qualification or
listing of the Common Stock in order to enable the Corporation to lawfully
issue and deliver to each Holder of record of Series A Preferred Stock such
number of shares of its Common Stock as shall from time to time be
sufficient to effect the conversion of all Series A Preferred Stock then
outstanding and convertible into shares of Common Stock, including, without
limitation, compliance with the filing and waiting period requirements of
the HSR Act.
(h) Notices. Any notice required by the provisions of this Section 5
-------
to be given to the Holders of shares of Series A Preferred Stock shall only
be effective upon receipt and may be given by personal delivery, U.S.
certified mail, return receipt requested, or by a nationally recognized
overnight delivery service (e.g., United Parcel Service or Federal
Express), delivery or postage prepaid and addressed to each Holder of
record at his address appearing on the books of this Corporation (and, in
the case of any Holder that is a corporation ore other entity, to the
attention of the President).
6. Redemption.
----------
(a) Optional Redemption. The Series A Preferred Stock may be redeemed
-------------------
(subject to (i) the right of any or all shares of Series A Preferred Stock
to be converted into Common Stock at any time prior to the Redemption Date
(as defined in Section 6(b)), and (ii) subject to the restrictions
described in this Section 6(a) and the legal availability of funds
therefor) at any time after the third anniversary of the Purchase Date, at
the Corporation's option, in whole or in part, in the manner provided in
Section 6(b), at a redemption price per share of Series A Preferred Stock
(expressed as a percentage of the Liquidation Value, which includes the
full accelerated amount of the Liquidation Accretion Dividends as
prescribed by Section 3(a)(i)) set forth above), if redeemed during the 12-
month period beginning on the anniversary date of the Purchase Date of each
of the years set forth below:
10
<PAGE>
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001 103%
2002 102%
2003 101%
Thereafter 100%
</TABLE>
In the event a redemption of less than all of the outstanding shares of
Series A Preferred Stock pursuant to this Section 6(a), the Corporation
shall effect such redemption either prorata according to the number of
shares held by each Holder of shares of Series A Preferred Stock, or by
lot, in each case, as may be determined by the Corporation in its sole
discretion.
(b) Procedures for Redemption.
-------------------------
(i) At least 30 days and not more than 60 days prior to the date
fixed for any redemption of the Series A Preferred Stock, written
notice (the "Redemption Notice") shall be given by first-class mail,
postage prepaid, to each Holder of record on the record date fixed for
such redemption (the "Redemption Date") of the Series A Preferred
Stock at such Holder's address as the same appears on the stock
register of the Corporation, provided that no failure to give such
notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Series A Preferred Stock
to be redeemed except as to the Holder or Holders to whom the
Corporation has failed to give said notice or except as to the Holder
or Holders whose notice was defective; provided, further, that the
Corporation may withdraw such Redemption Notice and thereby have no
obligation to consummate the redemption described therein at any time
prior to the third day prior to the Redemption Date set forth therein
by providing written notice of such withdrawal to each Holder who
received such Redemption Notice. The Redemption Notice shall state:
(1) the redemption price;
(2) whether all or less than all the outstanding shares of
the Series A Preferred Stock are to be redeemed and the total
number of shares of the Series A Preferred Stock being redeemed;
(3) the number of shares of Series A Preferred stock held,
as of the appropriate record date, by the Holder that the
Corporation intends to redeem;
(4) the Redemption Date;
(5) that the Holder is to surrender to the Corporation, at
the place or places where certificates for shares of Series A
Preferred Stock are to be
11
<PAGE>
surrendered for redemption, in the manner and at the price
designated, Holder's certificate or certificates representing the
shares of Series A Preferred Stock to be redeemed; and
(6) that cash dividends on the shares of the Series A
Preferred Stock to be redeemed shall cease to accrue on such
Redemption Date unless the Corporation defaults in the payment of
the redemption price.
(ii) Each Holder of Series A Preferred Stock shall surrender
the certificate or certificates representing such shares of Series A
Preferred Stock to the Corporation, duly endorsed, in the manner and
at the place designated in the Redemption Notice and on the Redemption
Date. The full redemption price for such shares of Series A Preferred
Stock shall be payable in cash to the person whose name appears on
such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired. In the event
that less than all of the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(iii) Unless the Corporation defaults in the payment in full of
the applicable redemption price, cash dividends on the shares of
Series A Preferred Stock called for redemption shall cease to accrue
and accumulate on the Redemption Date, and the Holders of such
redeemed shares shall cease to have any further rights with respect
thereto from and after the Redemption Date, other than the right to
receive the redemption price on the Redemption Date, without interest.
7. Voting Rights. (a) The Holders of shares of Series A Preferred Stock
-------------
shall not be entitled to any voting rights, except as hereinafter provided in
Section 7(b) and Section 8 or as otherwise provided by law or by that certain
Governance Agreement between the Corporation, Steven, Steven L.P. and Flipper,
Inc., a Delaware corporation, dated the Purchase Date (the "Governance
Agreement"). Notwithstanding any other provision of this Section 7 or Section 8,
the Holders of shares of Series A Preferred Stock shall not be entitled to any
voting rights hereunder with respect to a Business Combination which is not a
Discriminatory Transaction (as defined in the Governance Agreement).
(b) Election of Directors.
---------------------
(i) Except as otherwise provided herein, at all times from and
after the Purchase Date, the Holders of shares of Series A Preferred
Stock shall have the right to elect two (2) of the directors of the
Corporation (the "Investor Directors").
(ii) Notwithstanding anything in the Section 7(b)(i) to the
contrary, if at the end of any three consecutive months, (A) Steven's
Percentage Interest shall be less than the Higher Threshold, the
Holders shall promptly take action to cause one of its Investor
Directors to resign from the Board, or (B) Steven's Percentage
Interest shall
12
<PAGE>
be less than the Lower Threshold, the Holders shall promptly take
action to cause any and all remaining Investor Directors to resign
from the Board; and, upon resignation of each respective Investor
Director, the Holders of shares of Series A Preferred Stock shall
forever cease to have any voting rights with respect to the election
of that director.
(iii) Except as otherwise provided in Section 7(b)(ii), the
Holders of Series A Preferred Stock shall have the right to elect any
replacement for an Investor Director designated for nomination or
nominated in accordance with this Section 7(b) upon the death,
resignation, retirement, disqualification or removal from office for
other cause of such Director.
8. Protective Provisions.
---------------------
(a) Class Voting. So long as shares of Series A Preferred Stock are
------------
outstanding, this Corporation shall not, without first obtaining the
approval (by vote or written consent) of the Holders of sixty-six and two-
thirds percent (66 2/3%) of the then outstanding shares of Series A
Preferred Stock (voting as a class):
(i) alter or change the rights, preferences or privileges of
the shares of Series A Preferred Stock so as to affect adversely the
shares;
(ii) increase the number of authorized shares of Series A
Preferred Stock, or create any new series of stock or any other
securities convertible into equity securities of the Corporation
having a preference over, or being on a parity with, the Series A
Preferred Stock with respect to voting, dividends, distribution of
assets upon liquidation, dissolution, winding up or otherwise or
conversion rights;
(iii) amend the Certificate of Incorporation, Bylaws or other
organizational documents of the Corporation or take any action or
enter into any other agreements which, prohibit or materially conflict
with the Corporation's obligations hereunder with respect to the
Holders of Series A Preferred Stock; or
(iv) engage in a Liquidation Event.
(b) No Impairment. The Corporation will not, by amendment of its
-------------
Certificate of Incorporation, Bylaws or other organizational documents or
through any reorganization, reclassification, recapitalization, Liquidation
Event, issue or sale of securities or any other voluntary action by the
Corporation, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will
at all times in good faith assist in the carrying out of all the provisions
of this Certificate of Designation, and in the taking of all such action as
may be necessary or appropriate in order to protect the conversion and
other rights of the Holders of the Series A Preferred Stock against
impairment; provided, however, that the protection provided by this Section
8(b) shall
13
<PAGE>
not apply to a Business Combination in which (i) neither the Liquidation
Value nor the Conversion Price of the Series A Preferred Stock is changed,
and (ii) the Holders of Series A Preferred Stock shall be entitled to
receive consideration at the same time, and in the same amount and in the
same form per share, as if each share of Series A Preferred Stock had been
converted into Common Stock immediately prior to such Business Combination,
after giving effect to the acceleration of the full amount of all of the
Liquidation Accretion Dividends as contemplated by the last sentence of
Section 3(a)(i). Without limiting the foregoing, but subject to the proviso
in the immediately preceding sentence, the Corporation will not effect any
transaction described in this Section 8(b), the result of which is to
adversely affect any of the rights of Holders of Common Stock relative to
the rights of Holders of any other securities other than the Series A
Preferred Stock.
(c) Tolling of Automatic Conversion and Other Time periods for HSR
--------------------------------------------------------------
Compliance. Notwithstanding any other provision of this Certificate of
----------
Designation, until such time as the filing and waiting period requirements
of the HSR Act relating to the conversion of any of the shares of Series A
Preferred Stock pursuant to Section 5 shall have been complied with, if
any, and there shall be no action taken or instituted by the United States
Department of Justice or the United States Federal Trade Commission to
delay, enjoin or impose conditions on such conversion, and such waiting
period applicable under the HSR Act shall have expired or received early
termination: (i) there shall be no automatic conversion of the Series A
Preferred Stock into Common Stock, (ii) the Redemption Date shall be
automatically extended for a period of five Business Days beyond the latest
date contemplated by the first sentence of Section 6(b)(i) (as so extended,
the "Extended Redemption Date") and each Holder of shares of Series A
Preferred Stock shall be entitled to convert any or all of such shares into
Common Stock prior to the Extended Redemption Date, and (iii) each other
date or event that would otherwise impair any right to convert the Series A
Preferred Stock into Common Stock or otherwise impair the rights of the
Series A Preferred Stock shall be tolled until 10 days after the expiration
or early termination of all waiting periods under the HSR Act; provided,
however, that no cash dividends shall accrue during the period after the
date originally set for redemption pursuant to Section 6. Any Holder who
is required to comply with the filing and waiting period requirements of
the HSR Act with respect to the conversion of any shares of Series A
Preferred Stock shall use commercially reasonable efforts to cause such
filing to be made as soon as practicable after such Holder has provided
notice of its intention to convert such shares of Series A Preferred Stock
and to diligently and in good faith pursue expiration or termination of
the waiting period of the HRS Act.
9. Stockholder Rights Plan. Notwithstanding any other provision of this
-----------------------
Certificate of Designation to the contrary, if the Corporation shall adopt a
stockholders rights plan (sometimes known as a "poison pill" plan), and shall
declare, order, pay or make a dividend or other distribution of rights
thereunder with respect to the Common Stock (whether or not separate from the
Common Stock), each Holder of shares of Series A Preferred Stock shall be
entitled to receive from the Corporation, upon conversion of such shares of
Series A Preferred Stock into Common Stock pursuant to Section 5, all of the
rights distributed under such plan (but without any limitation or restriction or
the exercise of such rights that are not also applicable to holders of Common
Stock)
14
<PAGE>
fully and to the same extent as if immediately prior to the earlier of such
distribution or any record date therefor (i) the Liquidation Value of such
shares of Series A Preferred Stock had then increased by the full amount of all
Liquidation Accretion Dividends payable as if such shares of Series A Preferred
Stock had been held through and including the first Dividend Payment Date on or
following the fifth anniversary of the Purchase Date, and (ii) such Holder had
then converted all of such Holder's shares of Series A Preferred Stock into
shares of Common Stock. The preceding sentence shall provide the exclusive
protection under this Certificate of Designation to the Holders of the Series A
Preferred Stock (including any adjustments that would otherwise be required by
Section 5(c)) with respect to the subject matter of the immediately preceding
sentence.
10. Status of Converted Stock. In the event any shares of Series A
-------------------------
Preferred Stock shall be converted pursuant to Section 5 hereof, the shares so
converted shall be canceled and thereupon restored to the status of authorized
but unissued Preferred Stock undesignated as to class or series.
11. Certain Definitions. For purposes of this Certificate of Designation,
-------------------
Preferences and Rights of Series A Preferred Stock, unless the context otherwise
requires:
(i) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Exchange Act
as such Rule is in effect on the Purchase Date.
(ii) A Person shall be deemed to "beneficially own," any
securities:
(A) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options,
or otherwise;
(B) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 under the Exchange Act as such Rule is in
effect on the date of this Agreement), including pursuant to any
agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the
-------- -------
"Beneficial Owner" of, or to "beneficially own," any security
under this subparagraph (B) as a result of an agreement,
arrangement or understanding to vote such security if such
agreement, arrangement or understanding arises solely from a
revocable proxy given in response to a public proxy or consent
solicitation made by the Corporation pursuant to, and in
accordance with, the applicable provisions of the General Rules
and Regulations under the Exchange Act; or
15
<PAGE>
(C) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding
(whether or not in writing), for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (B)) or disposing of any
voting securities of the Corporation; provided, however, that
-------- -------
nothing in this subparagraph (C) shall cause a person engaged in
business as an underwriter of securities to be the "Beneficial
Owner" of, or to "beneficially own," any securities acquired
through such person's participation in good faith in a firm
commitment underwriting under the Act until the expiration of 40
days after the date of such acquisition.
(iii) "Business Combination" shall have the meaning set forth in
the Governance Agreement.
(iv) "Business Day" means any day other than a Saturday, Sunday
or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(v) "Closing Price" per share of Common Stock on any date
shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if
the Common Stock is not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, if such shares of
Common Stock are not listed or admitted to trading on such exchange,
as reported on the Nasdaq National Market, or if not quoted on the
Nasdaq National Market, the last quoted sale price or, if not so
quoted, the average of the high bid and low asked prices in the over-
the-counter market, as reported by Nasdaq or such other system then in
use, or, if on any such date the Common Stock is not quoted by any
such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common
Stock selected by the Board of Directors. If the Common Stock is not
publicly held or so listed or publicly traded, "Closing Price" shall
mean the Fair Market Value per share as determined in good faith by
the Board of Directors of the Corporation.
(vi) "Common Stock" shall mean the Corporation's authorized
Common Stock, $.01 par value, as constituted on the Purchase Date, and
any stock into which such Common Stock may thereafter be changed or
reclassified, including, without
16
<PAGE>
limitation, any Surviving Entity Securities; provided, however, that
if Common Stock is changed or reclassified into more than one class or
series of equity securities, the term "Common Stock" shall refer to
the class or series of such equity securities having the greatest
general voting power in the election of directors of the Corporation
as compared to the other classes or series of equity securities.
(vii) "Corporation" means Dolphin, Inc., a Delaware corporation,
together with any successors of the Corporation, whether by merger,
consolidation or otherwise, including without limitation a Surviving
Entity.
(viii) "Current Market Price" per share of Common Stock on any
date shall be deemed to be the Closing Price per share of Common Stock
on the Trading Day immediately prior to such date.
(ix) "Dividend Accrual Date" shall mean each anniversary date
of the Purchase Date and the dates three months, six months and nine
months of each year thereafter, beginning with the date three months
after the Purchase Date, or at such additional times and for such
interim periods, if any, as determined by the Board of Directors.
(x) "Dividend Payment Date" shall mean with respect to
dividends under Section 3(a)(i), the Dividend Accrual Date, and with
respect to dividends under Section 3(a)(ii), the date established by
the Board of Directors for the payment of all or part of the accrued
dividends on the Series A Preferred Stock.
(xi) "Equity Security" means (i) any Common Stock, (ii) any
debt or equity securities of the Corporation convertible into or
exchangeable for Common Stock or other Equity Securities of the
Corporation that grant the right to vote generally in the election of
directors ("Voting Equity Securities"), (iii) any options, rights or
warrants (or any other similar securities) issued by the Corporation
to acquire Common Stock or other Voting Equity Securities or (iv) any
security issuable in connection with any stock split, stock dividend,
recapitalization or other similar transaction in which securities are
issued on a proportionate basis to all holders of a class of Equity
Securities.
(xii) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and in effect on the Purchase Date.
(xiii) "Fair Market Value" means the amount which a willing buyer
would pay a willing seller in an arm's-length transaction.
(xiv) "Higher Threshold" shall have the meaning set forth in the
Governance Agreement.
17
<PAGE>
(xv) "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the regulations promulgated
thereunder.
(xvi) "Lower Threshold" shall have the meaning set forth in the
Governance Agreement.
(xvii) "Person" means any individual, firm, corporation,
partnership, limited liability company or other entity, and shall
include any successor (by merger or otherwise) of such entity.
(xviii) "Purchase Date" means the date of the Closing as defined
in the Governance Agreement.
(xix) "Steven's Percentage Interest" shall have the meaning set
forth in the Governance Agreement.
(xx) "Subsidiary" of any person means any corporation or other
entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by
such person.
(xxi) "Trading Day" means a day on which the principal national
securities exchange Nasdaq or other securities market on which the
Common Stock is listed or admitted to trading is open for the
transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, any day other
than a Saturday, Sunday, or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive
order to close.
IN WITNESS WHEREOF, the Corporation has caused the foregoing certificate to
be signed on ________________________, 1998.
DOLPHIN, INC.
By: ________________________________________
Charles G. Betty, President
18
<PAGE>
EXHIBIT NO. 10.3
================================================================================
CREDIT AGREEMENT
BETWEEN
DOLPHIN, INC.
AND
EARTHLINK NETWORK, INC.
AS BORROWERS,
AND
SPRINT CORPORATION
AS LENDER
DATED AS OF FEBRUARY 10, 1998
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<C>
<S>
ARTICLEI I DEFINITIONS................................................................2
1.01. Definitions................................................................2
ARTICLE II THE CREDITS 11
2.01. Advances...................................................................11
2.02. Facility Termination Date..................................................11
2.03. Minimum Amount of Each Advance............................................ 12
2.04. Commitment Increases...................................................... 12
2.05. Borrowing Notices for New Advances........................................ 12
2.06. Rates Applicable After an Event of Default................................ 13
2.07. Method of Payment......................................................... 13
2.08. Notes..................................................................... 13
2.09. Interest Rate; Interest Payment Dates; Interest and Fee Basis............. 13
2.10. Waivers; Special Agreements of Borrowers.................................. 13
ARTICLE III CONVERSION AND PREPAYMENT................................................ 14
3.01. Conversion................................................................ 14
3.02. No Impairment............................................................. 18
3.03. Stock Transfer Taxes...................................................... 18
3.04. No Fractional Shares: Certificate as to Adjustments....................... 19
3.05. Notices of Record Date.................................................... 19
3.06. Reservation of Securities Issuable upon Conversion........................ 19
3.07. Prepayment................................................................ 20
3.08. Mandatory Prepayments..................................................... 20
3.09. Stockholder Rights Plan................................................... 20
3.10. Tolling of Automatic Conversion and Other Time periods for HSR Compliance 21
ARTICLE IV ADVANCE CONDITIONS........................................................ 21
ARTICLE V REPRESENTATIONS AND WARRANTIES............................................ 22
5.01. Organization, Standing and Power.......................................... 22
5.02. Subsidiaries and Joint Ventures........................................... 22
5.03. Authority; Noncontravention............................................... 23
5.04. Taxes..................................................................... 23
5.05. Compliance with Laws...................................................... 23
5.06. Environmental Matters..................................................... 24
5.07. Intellectual Property..................................................... 24
5.08. Certain Payments.......................................................... 25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI COVENANTS.................................................................... 25
6.01. Financial Reporting........................................................... 25
6.02. Subsidiaries as Borrowers; Use of Proceeds.................................... 27
6.03. Notice of Default............................................................. 27
6.04. Conduct of Business; Merger, Sale of Assets, Etc.............................. 27
6.05. Taxes......................................................................... 28
6.06. Insurance..................................................................... 28
6.07. Compliance with Laws.......................................................... 28
6.08. Maintenance of Properties..................................................... 28
6.09. Inspection.................................................................... 28
6.10. Investments and Purchases..................................................... 28
6.11. Liens......................................................................... 29
6.12. Affiliates.................................................................... 30
6.13. Environmental Matters......................................................... 30
6.14. Change in Corporate Structure; Fiscal Year.................................... 30
6.15. Inconsistent Agreements....................................................... 31
6.16. Indebtedness.................................................................. 31
6.17. ERISA Compliance.............................................................. 31
ARTICLE VII EVENTS OF DEFAULT......................................................... 32
7.01................................................................................... 32
7.02................................................................................... 32
7.03................................................................................... 32
7.04................................................................................... 32
7.05................................................................................... 33
7.06................................................................................... 33
7.07................................................................................... 33
7.08................................................................................... 33
7.09................................................................................... 33
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES............................ 33
ARTICLE IX SETOFF...................................................................... 34
ARTICLE X BENEFIT OF AGREEMENT; ASSIGNMENTS............................................. 35
10.01. Successors and Assigns........................................................ 35
10.02. Assignments by Sprint......................................................... 35
10.03. Dissemination of Information.................................................. 36
ARTICLE XI MISCELLANEOUS ............................................................... 36
11.01. Notices....................................................................... 36
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
11.02. Entire Agreement............................................................... 37
11.03. Waiver......................................................................... 37
11.04. Governing Law.................................................................. 38
11.05. Severability................................................................... 38
11.06. Counterparts................................................................... 38
11.07. Headings....................................................................... 38
11.08. No Third-Party Beneficiaries................................................... 38
11.09. Interpretation................................................................. 38
11.10. Inclusion of Information in Schedules.......................................... 39
11.11. Amendment...................................................................... 39
11.12. Joint and Several Obligations of Borrowers..................................... 39
11.13. Effectiveness of Agreement..................................................... 39
11.14. Reliance on Investment Agreement............................................... 39
11.15. Exclusive Jurisdiction and Consent to Service of Process....................... 39
11.16. WAIVER OF JURY TRIAL........................................................... 41
</TABLE>
iii
<PAGE>
PAGE
----
EXHIBITS
- --------
Exhibit A (Section 1) Convertible Senior Promissory Note
Exhibit B (Section 6.1(d)) Compliance Certificate
Exhibit C ( Section 6.2(a)) Agreement to Add Borrower
Exhibit D (Section 10.2.1) Assignment Agreement
SCHEDULES
- ---------
Schedule 6.10 - Investments
Schedule 6.11 - Liens
Schedule 6.12 - Certain Affiliate Agreements
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of February 10, 1998, is between Dolphin,
Inc., a Delaware corporation ("Newco"), and EarthLink Network, Inc., a Delaware
corporation (the "Company"), and Sprint Corporation, a Kansas corporation
("Sprint"), as lender.
WHEREAS, the respective Boards of Directors of Sprint, the general partner
of Sprint Communications L.P., a Delaware limited partnership ("Sprint L.P.")
and the Company have determined to enter into a strategic relationship in the
area of Internet access and related services and Sprint and Sprint L.P. will
make investments in Newco and the Company in connection with the Merger (as
defined below) of Newco Sub, Inc., a Delaware corporation and wholly-owned
subsidiary of Newco ("Newco Sub") and the Company in order to enhance the
capabilities for growth and financial and strategic success;
WHEREAS, Sprint, Sprint L.P., the Company, Newco and Newco Sub have entered
into an Investment Agreement as of the date hereof (the "Investment Agreement")
contemplating that strategic alliance and addressing the terms and conditions of
such investment and related transactions;
WHEREAS, Sprint proposes to make a tender offer (as it may be amended from
time to time as permitted under the Investment Agreement, with the Company's
consent if required thereby, the "Offer") to purchase 1,250,000 shares of common
stock, par value $.01 per share, of the Company (the "Company Common Stock"),
for an aggregate cash consideration of $56,250,000 and at a price per share of
Company Common Stock of $45 net to each seller in cash (such price, as may
hereafter be changed, the "Offer Price"), upon the terms and subject to the
conditions set forth in the Investment Agreement; and the Board of Directors of
the Company has approved the Offer and the other transactions contemplated by
the Investment Agreement and is recommending that the Company's stockholders who
wish to receive cash for their shares of Company Common Stock accept the Offer;
WHEREAS, immediately following the closing of the Offer, Sprint L.P.
proposes to purchase 4,102,941 shares of Series A Convertible Preferred Stock,
par value $.01 per share of Newco (the "Convertible Preferred Stock") in
exchange for (i) an aggregate cash consideration of $23,750,000, (ii) the
assignment to Newco of 100% of the Sprint Internet Passport Subscribers, and
(iii) entering into a network agreement whereby Newco and the Company will
utilize Sprint's long-distance network under specified terms and conditions;
WHEREAS, Sprint, Sprint L.P., the Company and Newco will enter into a
marketing agreement whereby Newco and the Company will utilize the Sprint brand
under specified terms and conditions and will, inter alia, have the right to use
----- ----
Sprint L.P. distribution channels under specified terms and conditions and agree
to sell certain Sprint L.P. products;
1
<PAGE>
WHEREAS, Sprint shall provide Newco and the Company, as co-borrowers, with
up to $25 million of Convertible Senior Debt financing (the "Convertible Debt
Financing") on or after the Closing, with such amount to increase to up to $100
million over time, such indebtedness to be evidenced by one or more Notes;
WHEREAS, the closing of the acquisition of the Convertible Preferred Stock
and the other transactions referred to above other than the Offer shall take
place concurrently with the merger of Newco Sub into the Company (the "Merger")
and the conversion of each outstanding share of Company Common Stock into one
share of Newco Common Stock, par value $.01 per share ("Newco Common Stock')
pursuant to the Merger, in each case upon the terms and subject to the
conditions set forth in the Investment Agreement and/or the Ancillary
Agreements;
WHEREAS, to induce Sprint and Sprint L.P. to enter into the Investment
Agreement and the Ancillary Agreements, and to consummate the transactions
contemplated thereby, (i) certain stockholders of the Company have entered into
a Stockholders' Agreement with Sprint and Sprint L.P., and (ii) certain other
stockholders have granted to Sprint agreements to vote and/or tender their
shares of Company Common Stock in connection with the transactions contemplated
by the Investment Agreement;
WHEREAS, each Borrower hereunder recognizes and acknowledges that this
Agreement, the Investment Agreement and the Ancillary Agreements, and the
Advances made hereunder to such Borrower and to Affiliates of such Borrower,
serve to benefit, directly or indirectly, such Borrower; and
WHEREAS, Newco intends to make the credit facility provided for in this
Agreement and Advances thereunder available to its Subsidiaries for working
capital and other purposes permitted hereunder.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the Investment Agreement
and in the Ancillary Agreements, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Definitions as used in this Agreement:
"Action" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Entity.
2
<PAGE>
"Advance" means a borrowing hereunder.
"Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as amended,
as such Rule is in effect on the Closing Date.
"Aggregate Available Commitment" means, at any time, the Aggregate
Commitment at such time, minus the aggregate amount of all Advances.
-----
"Aggregate Commitment" means the total amount which Sprint is obligated to
advance under Section 2.04 below
------------
"Agreement" means this Credit Agreement, as it may be amended, modified or
restated and in effect from time to time.
"Ancillary Agreements" is defined in Article VIII of the Investment
Agreement.
"Authorized Officer" means any of the chairman, chief executive officer or
chief financial officer of the Borrowers, or any other officer of the Borrowers
they or any of them designate to Sprint.
"Average Market Price" means the average of the Closing Prices for the 30
Trading Days immediately preceding an Advance.
"Bankruptcy Code" means Title 11, United States Code, sections 101 et seq.,
-- ---
as the same may be amended from time to time, and any successor thereto or
replacement therefor which may be hereafter enacted.
"Borrower" means each of Newco and the Company and any Subsidiary added as
a "Borrower" under Section 6.02(a).
---------------
"Borrower Filed SEC Documents" is defined in Section 6.01.
------------
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.05.
------------
"Business Day" means with respect to any borrowing or payment, a day (other
than a Saturday or Sunday) on which banks generally are open in Kansas City,
Missouri for the conduct of substantially all of their commercial lending
activities.
"Business Combination" shall have the same meaning as given such term in
the Governance Agreement.
3
<PAGE>
"Capitalized Lease" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with GAAP.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.
"Closing" shall have the same meaning as given such term in the Investment
Agreement.
"Closing Price" per share of Common Stock on any date shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities exchange,
if such shares of Common Stock are not listed or admitted to trading on such
exchange, as reported on the NASDAQ National Market, or if not quoted on the
NASDAQ National Market, the last quoted sale price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by NASDAQ or such other system then in use, or, if on any such date the
Common Stock is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors. If the Common Stock is
not publicly held or so listed or publicly traded, "Closing Price" shall mean
the Fair Market Value per share as determined in good faith by the Board of
Directors.
"Code" means the Internal Revenue Code of 1986.
"Common Stock" shall mean Newco's authorized Common Stock, $.01 par value,
as constituted on the Closing Date, and any stock into which such Common Stock
may thereafter be changed or reclassified, including, without limitation, any
Surviving Entity Securities; provided, however, that if Common Stock is changed
or reclassified into more than one class or series of equity securities, the
term "Common Stock" shall refer to the class or series of such equity securities
having the greatest general voting power in the election of directors of Newco
as compared to the other classes or series of equity securities.
"Company" has the meaning set forth in the recitals.
"Condemnation" is defined in Section 7.08.
------------
4
<PAGE>
"Consolidated" or "consolidated", when used in connection with any
calculation, means a calculation to be determined on a consolidated basis (as
determined in accordance with GAAP) for Newco.
"Consolidated Person" means, for the taxable year of reference, each Person
which is a member of the affiliated group of which Newco is a member if
consolidated returns are or shall be filed for such affiliated group for federal
income tax purposes or any combined or unitary group of which Newco is a member
for state income tax purposes.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any operating agreement or take-or-
pay contract or application for a letter of credit.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with Newco or any of its Subsidiaries and after giving effect
to the transactions contemplated by the Investment Agreement and the Ancillary
Agreements, are treated as a single employer under Section 414 of the Code.
"Conversion Rights," "Conversion Notice," "Conversion Amount," and
"Conversion Price" are defined in Section 3.01.
------------
"Current Market Price" per share of Newco Common Stock on any date shall be
deemed to be the Closing Price per share of Newco Common Stock on the Trading
Day immediately prior to such date, except that "Current Market Price" for
purposes of an adjustment resulting from a Spin-Off under Section 3.01(c)(v)
------------------
shall mean the average Closing Price for the 20 Trading Days following the 10th
Trading Day following the effective date of any Spin-Off, as defined in Section
-------
3.01(c)(v).
- ----------
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"Encumbrance" means any charge, claim, community property interest,
equitable interest lien, tax lien, option, pledge, security interest, right of
first refusal or restriction of any kind, including any restriction on transfer,
receipt of income or exercise of any other attribute of ownership.
"Environment" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
5
<PAGE>
"Environmental Law" means any Law that requires or relates to protection of
human health or the Environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" is defined in Article VII.
"Facility Termination Date" is defined in Section 2.02.
------------
"Fair Market Value" means the amount which a willing buyer would pay a
willing seller in an arm's-length transaction.
"Fiscal Quarter" means one of the four consecutive three-month accounting
periods beginning on the first day of each Fiscal Year.
"Fiscal Year" means the twelve-month accounting period ending on December
31 of each year.
"Foreign Entity" means any Person that is not a resident of the United
States or organized under the laws of the United States or any state thereof or
any Person that has property equal to a Substantial Portion located outside the
United States.
"GAAP" means generally accepted accounting principles, consistently
applied.
"Governance Agreement" means the Governance Agreement, dated as of the date
hereof, among Sprint, Sprint L.P., the Company and Newco.
"Governmental Entity" means any federal, state, foreign or local
government, any of its subdivisions, administrative agencies, authorities,
commissions, boards or bureaus, any federal, state, foreign or local court or
tribunal and any arbitrator.
"Holder" is defined in Section 3.01.
------------
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Indebtedness" of a Person means such Person's (a) obligations for borrowed
money, (b) obligations representing the deferred purchase price of Property or
services (other than accounts payable arising in the ordinary course of such
Person's business), (c) obligations, whether or not assumed, secured by Liens or
payable out of the proceeds or production from Property now or hereafter owned
or acquired by such Person, (d) obligations which are evidenced by notes,
acceptances, or other instruments, (e) Capitalized Lease Obligations, (f)
Contingent Obligations, and
6
<PAGE>
(g) repurchase obligations or liabilities of such Person with respect to
accounts receivable or notes receivable sold by such Person.
"Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business), or contribution of capital by such Person
to any other Person or any investment in, or purchase or other contribution of,
the stock, partnership interests, notes, debentures or other securities of any
other Person made by such Person valued at historical cost.
"Investment Agreement" is defined in the recitals hereof.
"Knowledge" means the actual knowledge of any of the executive officers and
directors of the Parties (except in respect of the Company, John W. Sidgmore)
without any duty to inquire or attribution of knowledge from any other Person to
the persons in such capacities.
"Law" means any federal, state, local, municipal, foreign, international,
multinational, or other judicial or administrative order, judgment, decree,
constitution, law, ordinance, common law of California and Delaware, regulation,
statute, or treaty.
"Lien" means any lien, pledge, claim, security interest or Encumbrance
whatsoever, mortgage, deed of trust, security interest (including any
Capitalized Lease or other title retention agreement), charge, pledge, retention
of title agreement, easement, encroachment, condition, reservation, covenant,
lis pendens lien, claim of lien, adverse claim, restriction on attributes of
ownership, or other Encumbrance affecting title.
"Loan" means the aggregate of all Advances.
"Loan Documents" means this Agreement, the Notes, and the other documents
and agreements contemplated by this Agreement and executed by any Borrower in
favor of Sprint in connection with this Agreement.
"Margin Stock" has the meaning assigned to that term under Regulation G of
the Board of Governors of the Federal Reserve.
"Marketing Agreement" means the Marketing and Distribution Agreement, dated
as of the date hereof, among Sprint L.P., Newco and the Company.
"Material Adverse Effect" means any change or effect having a material
adverse effect (or any development as to which there is a substantial
likelihood, insofar as can be foreseen, would have such an effect) on the
business, properties, assets, condition (financial or otherwise), or results of
operations of Newco, the Company and their Subsidiaries taken as a whole.
7
<PAGE>
"Multiemployer Plan" means a Plan coming within Section 4001(a)(3) of
ERISA.
"Net Income" means, for any computation period, with respect to Newco on a
consolidated basis with its Subsidiaries (other than any Subsidiary which is
restricted from declaring or paying dividends or otherwise advancing funds to
its parent whether by contract or otherwise), cumulative net income earned
during such period in accordance with GAAP.
"Note" and "Notes" means one or more of the Convertible Senior Promissory
Notes substantially in the form attached hereto as Exhibit A each evidencing an
Advance (including any such Convertible Senior Promissory Notes issued in
exchange or substitution).
"Obligations" means all unpaid principal of and accrued and unpaid interest
on the Notes, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of a Borrower to Sprint or any indemnified
party hereunder arising under any of the Loan Documents.
"Ordinary Course of Business" means an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of
such Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority);
"Party" and "Parties" shall mean individually a party to this Agreement and
collectively all of the parties to this Agreement.
"Payment Date" means the fifteenth day of each January, April, July and
October and any other date on which any payment of principal and/or interest is
due hereunder or under any Note.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" means any natural person, corporation, limited liability company,
firm, joint venture, partnership, association, enterprise, trust or other entity
or organization, or any government or political subdivision or any agency,
department, division or instrumentality of any of the foregoing.
"Plan" means an employee pension benefit plan, as defined in Section 3(2)
of ERISA, as to which Newco or any member of the Controlled Group has any
liability.
"Prime Rate" means the interest rate from time to time on corporate loans
at large U.S. money center commercial banks (as published from time to time in
The Wall Street Journal under the caption "Money Rates - Prime Rates"). In the
event that such rate is no longer published in The Wall Street Journal as
contemplated by this definition, then the reference rate of interest or formula,
8
<PAGE>
identified in a written notice from Sprint to Newco, that is substantially
similar to the reference rate contemplated by this definition shall be used.
"Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
"Purchase" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which Newco or any of its
Subsidiaries (a) acquires any going business or all or substantially all of the
assets of any other Person, whether through purchase of assets, merger or
otherwise, or (b) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary voting
power for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority in interest (by
percentage or voting power) of the outstanding interests of any other Person.
"Release" is defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. (S) 9601 et seq.
-- ---
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event; provided, that a failure to meet the minimum
--------
funding standard of Section 412 of the Code and of Section 302 of ERISA shall be
a Reportable Event regardless of the issuance of any such waiver of the notice
requirement in accordance with Section 4043(a) of ERISA.
"Returns" means all tax returns that must be filed with any federal, state
or local taxing authority.
"SEC" means the Securities and Exchange Commission of the United States
Government.
"Single Employer Plan" means a Plan subject to Title IV of ERISA, other
than a Multiemployer Plan.
"Sprint" means Sprint Corporation, a Kansas corporation and its successors
and assigns.
"Stockholders' Equity" means stockholders' equity of Newco determined in
accordance with GAAP.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.
9
<PAGE>
"Substantial Portion" means, with respect to the Property of Newco and its
Subsidiaries, Property which (a) represents more than 15% of the consolidated
assets of Newco, as would be shown in the consolidated financial statements of
Newco as at the end of the Fiscal Quarter next preceding the date on which such
determination is made, or (b) is responsible for more than 15% of the
consolidated net sales or of the Net Income of Newco for the 12-month period
ending as of the end of the Fiscal Quarter next preceding the date of
determination.
"Surviving Entity" and "Surviving Entity Securities" are defined in Section
-------
3.01(c)(iv) hereof.
- ----------
"Tax" or "Taxes" means all income, profits, franchise, gross receipts,
capital, sales, use, withholding, value added, ad valorem, transfer, employment,
social security, disability, occupation, property, severance, production, excise
and other taxes, duties and similar governmental charges and assessments imposed
by or on behalf of any Governmental Entity (including interest and penalties
thereon).
"Termination Event" means, with respect to a Plan which is subject to Title
IV of ERISA, (a) a Reportable Event, (b) the withdrawal of Newco or any other
member of the Controlled Group from such Plan during a plan year in which Newco
or any other member of the Controlled Group was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4066 of
ERISA, (c) the termination of such Plan or the filing of a notice of intent to
terminate such Plan under Section 4041 of ERISA, or (d) the institution by the
PBGC of proceedings to terminate such Plan or the occurrence of any event or
condition which constitutes grounds under Section 4042 of ERISA for the
termination of, or appointment of a trustee to administer, such Plan.
"Threatened" means any demand or statement that has been made in writing
that would lead a prudent person to conclude that a claim, proceeding, dispute,
Action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"Total Liabilities" means all liabilities of Newco, on a consolidated
basis, reflected on a balance sheet prepared in accordance with GAAP, including
all Indebtedness.
"Trading Day" means a day on which the principal national securities
exchange, NASDAQ or other securities market on which Newco Common Stock is
listed or admitted to trading is open for the transaction of business or, if
Newco Common Stock is not listed or admitted to trading on any national
securities exchange, any day other than a Saturday, Sunday, or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
"Unfunded Liability" means the amount (if any) by which the present value
of all vested and unvested accrued benefits under a Single Employer Plan exceeds
the fair market value of assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plan using PBGC actuarial
assumptions for single employer plan terminations.
10
<PAGE>
Any capitalized terms appearing herein and not otherwise defined shall have
the meaning ascribed to them in the Investment Agreement.
ARTICLE II
THE CREDITS
SECTION 2.01. Advances. (a) From and after the Closing, but prior to the
Facility Termination Date, Sprint agrees, on the terms and subject to the
conditions set forth in this Agreement, to make Advances to the Borrowers from
time to time in amounts not to exceed the Aggregate Available Commitment
existing at such time. Although the Borrowers may obtain multiple Advances
hereunder, this is not a revolving line of credit and Advances may not be repaid
and re-advanced. Prepayment may only be made in accordance with Sections 3.07
-------------
and 3.08.
- --------
(b) The Borrowers, jointly and severally, agree that if at any time the
outstanding balance of the Loan exceeds the Aggregate Commitment, the Borrowers
shall repay immediately the then outstanding Loan balance in such amount as is
necessary to eliminate such excess.
(c) The Borrowers' obligation to pay the principal of, and interest on,
each Advance shall be evidenced by a Note executed by the Borrowers in the
principal amount equal to such Advance and dated the date of such Advance. Each
Borrower's joint and several obligations as co-maker of each Note shall exist
regardless of which Borrower actually receives the applicable Advance.
Each Advance shall mature, and the principal amount thereof and any unpaid
accrued interest thereon shall be due and payable, on the 5/th/ anniversary of
the Borrowing Date for such Advance (or as otherwise provided in the related
Note or in Section 3.08).
------------
SECTION 2.02. Facility Termination Date. The Facility Termination Date is
the date after which Sprint is no longer obligated to make Advances hereunder
and shall occur upon the first to occur of the following:
(a) The 5/th/ anniversary of the Closing;
(b) Acceleration by Sprint in accordance with the provisions of Article
VIII;
(c) Consummation of a Business Combination; or
(d) Termination of the Marketing Agreement other than a termination by
Sprint under Section 24(b)(ii) thereof and other than a termination by
the Company under Section 24(c), 24(d)(i) and 24(d)(ii) thereof.
11
<PAGE>
Such termination of the credit facility shall not affect in any way Sprint's
rights, including the Conversion Rights and rights to accelerate the Loans,
under this Agreement and the Notes.
SECTION 2.03. Minimum Amount of Each Advance. Each Advance shall be in the
minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess
thereof); provided, however, that any Advance may be in the amount of the
-------- -------
Aggregate Available Commitment.
SECTION 2.04. Commitment Increases. Sprint shall not be obligated to make
any Advance prior to the Closing. From and after the Closing the "Aggregate
Commitment" shall be $25,000,000 and shall be automatically increased by the
following amounts on the following dates:
<TABLE>
<CAPTION>
Aggregate
Date Increase Commitment
---- -------- ----------
<S> <C> <C>
1/st/ Anniversary of Closing $25,000,000 $ 50,000,000
2/nd/ Anniversary of Closing $25,000,000 $ 75,000,000
3/rd/ Anniversary of Closing $25,000,000 $100,000,000
</TABLE>
SECTION 2.05. Borrowing Notices for New Advances. Newco shall give Sprint
irrevocable notice containing the following information (a "Borrowing Notice")
----------------
not later than 10:00 a.m. (Kansas City time) at least ten (10) Business Days and
not more than twenty (20) Business Days before the proposed Borrowing Date of
each Advance:
(a) the proposed Borrowing Date, which shall be a Business Day, of
such Advance;
(b) the aggregate amount of such Advance;
(c) a statement to the effect that all of the representations and
warranties of each Borrower contained herein are true and correct (i) as of
the date referred to in any representation or warranty that addresses a
matter as of a particular date and (ii) as to all other representations and
warranties as of the date of such Borrowing Notice, unless in either the
case of clause (i) or (ii), the inaccuracies under such representations and
warranties would not, individually or in the aggregate, have a Material
Adverse Effect; and
(d) a description of any Default that exists as to which the proviso
of clause (g) in Article IV may apply.
Subject to the terms hereof and subject to the satisfaction of the conditions
set forth in Article IV, Sprint shall, not later than noon (Kansas City time) on
----------
each Borrowing Date, make available to Newco immediately available funds in the
amount of the Advance requested to be made on such Borrowing Date.
12
<PAGE>
SECTION 2.06. Rates Applicable After an Event of Default. During the
continuance of an Event of Default, Sprint may, at its option, by notice to the
Borrowers (which notice may be revoked at the option of Sprint), declare that
for the duration of time during which such Event of Default shall be continuing,
the outstanding balance of the Loan shall bear a floating rate of interest equal
to the Prime Rate, as in effect from time to time, plus five percent (5%) per
annum calculated for actual days elapsed on the basis of a 360-day year.
SECTION 2.07. Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction or counterclaim, in immediately
available funds to Sprint pursuant to wire transfer instructions provided to the
Borrowers by a duly authorized executive officer of Sprint, or absent such
instructions, at Sprint's address specified pursuant to Section 11.01, on the
-------------
date when due. If the Borrowers shall be required by law to deduct any such
amounts from or in respect of any sum payable hereunder to Sprint, then the sum
payable hereunder shall be increased so that, after making all required
deductions, Sprint receives an amount equal to the sum it would have received
had no such deduction been made, and the Borrowers, jointly and severally, shall
indemnify Sprint for taxes, assessments and governmental charges imposed by any
jurisdiction on account of amounts paid or payable pursuant to this sentence.
Within 30 days after the date of any payment of any such amount withheld by
either Borrower in respect of any payment to Sprint, such Borrower shall furnish
to Sprint the original or certified copy of a receipt evidencing payment
thereof.
SECTION 2.08. Notes. Upon receipt of a Borrowing Notice, Sprint shall
deliver to the Borrowers a Note for execution by the Borrowers; provided,
--------
however, that Sprint may refuse to deliver such Note if Sprint is not obligated
- -------
to make an Advance hereunder.
SECTION 2.09. Interest Rate; Interest Payment Dates; Interest and Fee
Basis. Interest on principal shall be payable at a rate equal to six percent
(6%) per annum, provided, however, such interest rate may be increased as
provided in this Agreement under certain circumstances to a floating rate equal
to five percent (5%) above the Prime Rate. Interest accrued on each Advance
shall be payable on each Payment Date, commencing with the first Payment Date to
occur after the Borrowing Date, on any date on which principal is prepaid,
whether due to acceleration or otherwise, and at maturity. Interest shall be
calculated for actual days elapsed on the basis of a 360-day year. Interest
shall be payable for the day an Advance is made but not for the day of any
payment on the amount paid if payment is received prior to noon (Kansas City
time) at the place of payment. If any payment of principal of or interest on an
Advance shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment.
SECTION 2.10. Waivers; Special Agreements of Borrowers. Each Borrower
warrants to Sprint that it has adequate means to obtain from the other Borrower,
on a continuing basis, information concerning the financial condition of such
other Borrower, and that it is not relying on Sprint to provide such
information, now or in the future. Each Borrower hereby waives any act or
omission of Sprint (except acts or omissions in bad faith) that materially
increases the scope of such
13
<PAGE>
Borrower's risk, including negligent administration of the loan. As a condition
of payment or performance by either Borrower, Sprint is not required to seek to
enforce any remedies against the other Borrower or any other party liable to
Sprint on account of the Obligations; nor is Sprint required to seek to enforce
or resort to any remedies with respect to any Lien granted to Sprint by the
other Borrower or any other party on account of the Obligations. This Agreement
and the Notes shall remain fully enforceable against a Borrower irrespective of
any defenses which the other Borrower may assert with respect to the
Obligations, including failure of consideration, breach of warranty, fraud,
payment, statute of frauds, bankruptcy, lack of legal capacity, statute of
limitations, lender liability, accord and satisfaction and usury.
ARTICLE III
CONVERSION AND PREPAYMENT
SECTION 3.01. Conversion. Sprint or a permitted assignee (in either case,
a "Holder") of a Note shall have conversion rights as follows (the "Conversion
Rights"):
(a) Optional Conversion Rights and Automatic Conversion.
(i) Each Note shall be convertible, in whole or in part, at
the option of the Holder thereof, at any time, and from time to time,
at the office of Newco into such number of validly issued, fully paid
and nonassessable shares of Newco Common Stock, free and clear of all
Liens of any kind or nature whatsoever, as is determined by dividing
the outstanding principal balance of such Note at the time of such
conversion, or the part thereof converted by the Holder, by the
Conversion Price per share at the time in effect for such Note;
provided, however, any such conversion shall be in the following
minimum amounts ("Minimum Conversion Amounts"): (1) If the aggregate
principal amount of the Notes outstanding at the time of such
conversion is less than $5,000,000 then the Minimum Conversion Amount
is such aggregate principal amount; or (2) If the aggregate principal
amount of the Notes is more than $5,000,000, then the Minimum
Conversion Amount is equal to $5,000,000 plus such multiples of
$1,000,000 as the Holder may elect. The Conversion Price per share for
each Note shall be an amount equal to 130% times the Average Market
Price of the Newco Common Stock, calculated with reference to the
related Borrowing Date, which amount shall be inserted in each Note at
the time of its original issuance in the appropriate space identifying
the Conversion Price of such Note, subject to adjustment as
hereinafter provided. It is understood that the Conversion Price for
each Note, if there is more than one Note, may be different. The
Conversion Price for each Note shall be subject to adjustment, from
time to time as set forth in Section 3.01(c).
---------------
14
<PAGE>
(ii) Upon conversion of all or part of the then outstanding
principal balance of a Note, payment shall be made for all accrued but
unpaid interest on that portion of such Note converted through the
date of conversion.
(b) Mechanics of Conversion. If the Holder of a Note desires to
exercise such right of conversion, such Holder shall give written notice to
Newco (the "Conversion Notice") of that Holder's election to convert a
stated amount of the principal balance (the "Conversion Amount") into
shares of Newco Common Stock, and surrender to Newco, at its principal
office or at such other office or agency maintained by Newco for such
purpose, the originally executed Note evidencing such Conversion Amount.
The Conversion Notice shall also contain a statement of the name or names
(with addresses) in which the certificate or certificates for Newco Common
Stock shall be issued. Notwithstanding the foregoing, Newco shall not be
required to issue any certificates to any person other than the Holder of
the converted Note unless Newco has obtained reasonable assurance that such
transaction is exempt from the registration requirements of, or is covered
by an effective registration statement under, the Securities Act of 1933,
as amended (the "Act"), and all applicable state securities laws,
including, if necessary in the reasonable judgment of Newco or its legal
counsel, receipt of an opinion to such effect from counsel reasonably
satisfactory to Newco. In no event would such opinion be required if the
shares of Newco Common Stock could, upon conversion, be resold pursuant to
Rule 144 or Rule 144A under the Act. Promptly as practicable, and in any
event within five business days (subject to the last sentence of Section
3.01(c)(v)), after the receipt of the Conversion Notice and the surrender
of the Note evidencing at least the Conversion Amount, Newco shall issue
and deliver, or cause to be delivered, to the Holder of such Note or his
nominee or nominees, (i) a certificate or certificates for the number of
shares of Newco Common Stock issuable upon the conversion of such
Conversion Amount and (ii) if the Conversion Amount is less than the total
outstanding principal balance of the converted Note which is surrendered, a
new Note, of like tenor, evidencing the remaining portion of the
outstanding principal balance which is not converted. Such conversion
shall be deemed to have been effected as of the close of business on the
date Newco received the Conversion Notice and the originally executed Note
representing at least the Conversion Amount, and the person or persons
entitled to receive the shares of Newco Common Stock issuable upon
conversion shall be treated for all purposes as the holder or holders of
record of such shares of Newco Common Stock as of the close of business on
such date.
(c) Conversion Price Adjustments.
(i) If Newco should at any time or from time to time after the
date of the Advance evidenced by a Note fix a record date for the
effectuation of a split or subdivision of the outstanding shares of
Newco Common Stock or the determination of holders of Newco Common
Stock entitled to receive a dividend or other distribution payable in
additional shares of Newco Common Stock, then, as of such record date
(or, if no record date is fixed, as of the close of business on the
date on
15
<PAGE>
which the Board of Directors of Newco adopts the resolution relating
to such dividend, distribution, split or subdivision), the Conversion
Price for such Note shall be decreased to equal the product of the
Conversion Price in effect immediately prior to such date for such
Note multiplied by a fraction, the numerator of which shall be the
number of shares of Newco Common Stock outstanding immediately prior
thereto and the denominator of which shall be the number of shares of
Newco Common Stock outstanding immediately thereafter.
(ii) If the number of shares of Newco Common Stock outstanding
at any time or from time to time after the date of the Advance
evidenced by a Note is decreased by a combination of the outstanding
shares of Newco Common Stock, then following such combination, the
Conversion Price shall be increased to equal the product of the
Conversion Price in effect immediately prior thereto for such Note
multiplied by a fraction, the numerator of which shall be the number
of shares of Newco Common Stock outstanding immediately prior thereto
and the denominator of which shall be the number of shares of Newco
Common Stock outstanding immediately thereafter. So long as any of the
Notes are outstanding, Newco shall not combine any shares of Newco
Common Stock unless it likewise combines all shares of Newco Common
Stock.
(iii) If Newco shall at any time and from time to time after the
date of the Advance evidenced by a Note issue rights or warrants to
all holders of the Newco Common Stock entitling such holders to
subscribe for or purchase Newco Common Stock at a price per share less
than the Current Market Price per share of the Newco Common Stock on
the record date for the determination of stockholders entitled to
receive such rights or warrants, then, and in each such case, the
Conversion Price shall be adjusted so that the Holder of such Note
shall be entitled to receive, upon the conversion thereof, the number
of shares of Newco Common Stock determined by multiplying the number
of shares of Newco Common Stock into which such Note was convertible
on the day immediately prior to such record date by a fraction, (A)
the numerator of which is the sum of (1) the number of shares of Newco
Common Stock outstanding on such record date and (2) the number of
additional shares of Newco Common Stock which such rights or warrant
entitle holders of Common Stock to subscribe for or purchase ("Offered
Shares"), and (B) the denominator of which is the sum of (1) the
number of shares of Newco Common Stock outstanding on the record date
and (2) a fraction, (x) the numerator of which is the product of the
number of Offered Shares multiplied by the subscription or purchase
price of the Offered Shares and (y) the denominator of which is the
Current Market Price per share of Newco Common Stock on such record
date. Such adjustment shall become effective immediately after such
record date.
(iv) If Newco shall be a party to any transaction, including
any capital reorganization or reclassification of the Newco Common
Stock (other than a
16
<PAGE>
transaction described in clauses (i), (ii) and (v) of this Section
-------
3.01(c)), or consolidation or merger of Newco, or the sale or
--------
conveyance of all or substantially all of its assets in which the
previously outstanding shares of Newco Common Stock shall be changed
into or, pursuant to the operation of law or the terms of the
transaction to which Newco is a party, exchanged, or would have been
changed or exchanged as required by the Certificate of Incorporation
if such Newco Common Stock were outstanding, for different securities
of Newco or common stock or other securities of another company or
interests in a non-corporate entity (such other company or non-
corporate entity is referred to herein as the "Surviving Entity") or
other property (including cash) or any combination of the foregoing,
then, as a condition to the consummation of such transaction, lawful
and adequate provision shall be made whereby each Holder of a Note
shall thereafter have the right to receive, in lieu of the shares of
Newco Common Stock immediately theretofore receivable with respect to
the conversion of such Holder's Note, such shares of stock or
securities (such stock and securities are referred to herein as the
"Surviving Entity Securities") or assets as are issued or are payable
with respect to or in exchange for the shares of Newco Common Stock
which such Holder would have held had his Note been converted in full
immediately prior to such transaction. In any such case, appropriate
provisions shall be made with respect to the rights and interests of
each Holder of a Note to the end that such conversion rights
(including, without limitation, provisions for adjustment of the
Conversion Price) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of Surviving Entity Securities
or assets thereafter deliverable upon the exercise thereof.
(v) If Newco shall at any time or from time to time after the
date of an Advance declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of stock
or other securities or property or rights or warrants to subscribe for
securities of Newco or any of its Subsidiaries by way of dividend) on
Newco Common Stock, other than (x) regular quarterly dividends payable
in cash or extraordinary cash dividends in an aggregate amount not to
exceed in any Fiscal Quarter an amount equal to 6.25% of the Net
Income for the twelve-month period ending on the day immediately
preceding the first day of such Fiscal Quarter, (y) shares of Newco
Common Stock which are referred to in clause (i) of this Section
-------
3.01(c), or (z) rights or warrants which are referred to in clause
------
(iii) of this Section 3.01(c), then, as a condition to the
--------------
consummation of such dividend or distribution, the Conversion Price of
each Note shall be adjusted so that the Holder of each Note shall be
entitled to receive, upon the conversion of the Note, the number of
shares of Common Stock determined by multiplying (1) the number of
shares of Newco Common Stock into which such share was convertible on
the day immediately prior to the record date fixed for the
determination of stockholders entitled to receive such dividend or
distribution by (2) a fraction, the numerator of which shall be the
Current Market Price per share of Newco Common Stock as of the third
Trading Day prior to such record date, and the denominator of which
shall be such Current Market
17
<PAGE>
Price per share of Newco Common Stock less the Fair Market Value per
share of Newco Common Stock (as determined in good faith by the Board
of Directors of Newco, a certified resolution with respect to which
shall be mailed to each Holder of a Note) of such dividend or
distribution; provided, however, that in the event of a distribution
-------- -------
of shares of capital stock of a Subsidiary of Newco (a "Spin-Off")
made to holders of shares of Newco Common Stock, the numerator of such
fraction shall be the sum of the Current Market Price per share of
Newco Common Stock and the Current Market Price of the number of
shares (or the fraction of a share) of capital stock of the Subsidiary
which is distributed in such Spin-Off in respect of one share of Newco
Common Stock and the denominator of which shall be the Current Market
Price per share of Newco Common Stock. An adjustment made pursuant to
this clause (v) shall be made upon the opening of business on the next
Business Day following the date on which any such dividend or
distribution is paid and shall be effective retroactively to such time
immediately after the close of business on the record date fixed for
the determination of stockholders entitled to receive such dividend or
distribution; provided, however, if the proviso in the foregoing
-------- -------
sentence applies, then such adjustment shall be made and be effective
as of the 30th Trading Day after the effective date of such Spin-Off,
and in the event all or part of this Note is converted after the
record date for such Spin-Off but prior to the 30th Trading Day after
the effective date of the Spin-Off, Newco will deliver to the holder
of this Note in accordance with Section 3.01(b) that number of shares
---------------
which would be issued prior to the appropriate adjustment, and issue
the additional number of shares which would be issuable as a result of
the applicable adjustment pursuant to this clause (v) within 35
Trading Days after the effective date of such Spin-Off.
SECTION 3.02. No Impairment. Newco will not, by amendment of its
Certificate of Incorporation, Bylaws or other organizational documents or
through any reorganization, reclassification, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by Newco but will at all
times in good faith assist in the carrying out of all the provisions of Section
-------
3.01 and in the taking of all such action as may be necessary or appropriate in
- ----
order to protect the Conversion Rights of each Holder of the Notes against
impairment. Without limiting the foregoing, Newco will not effect any
transaction described in this Section 3.02, the result of which is to adversely
------------
affect any of the rights of holders of Newco Common Stock relative to the rights
of holders of any other securities of Newco other than the Notes.
SECTION 3.03. Stock Transfer Taxes. The issuance of stock certificates
upon the conversion of a Note shall be made without charge to the Holder thereof
for any tax in respect of such issuance. Newco shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of shares in any name other than that of the Holder of the
applicable Note, and Newco shall not be required to issue or deliver any such
stock
18
<PAGE>
certificate unless and until the person or persons requesting the issuance
thereof shall have paid to Newco the amount of such tax, if any.
SECTION 3.04. No Fractional Shares: Certificate as to Adjustments. (a) No
fractional shares shall be issued upon conversion of a Note, and the number of
shares of Common Stock to be issued shall be rounded to the nearest whole share.
(b) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of a Note pursuant to Section 3.01(c), Newco, at its expense,
---------------
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to the Holder of each Note a certificate
setting forth such adjustment or readjustment for such Holder's Note and showing
in detail the facts upon which such adjustment or readjustment is based. Newco
shall, upon the written request at any time by a Holder of a Note, furnish or
cause to be furnished to such Holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price at the time in effect for
such Note, and (C) the number of shares of Newco Common Stock and the amount, if
any, of other property which at the time would be received upon the total
conversion of such Note.
SECTION 3.05. Notices of Record Date. In the event of any taking by Newco
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock or any class of any other
securities or property, or to receive any other right, Newco shall mail to each
Holder of the Notes, at least ten (10) Business Days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right. Newco shall not issue rights
or warrants described in Section 3.01(c)(iii), consummate any reorganization,
--------------------
reclassification, consolidation, merger or sale described in Section
-------
3.01(c)(iv), or dividend or distribution described in Section 3.01(c)(v), unless
- ----------- ------------------
it provides each Holder of the Notes at least ten (10) Business Days advance
notice thereof.
SECTION 3.06. Reservation of Securities Issuable upon Conversion. Newco
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Notes, free from any preemptive right or other obligation, such number of
its shares of Newco Common Stock as shall from time to time be sufficient to
effect the conversion of all of the outstanding principal balance of the Notes
issued under this Agreement; and if at any time the number of authorized but
unissued shares of Newco Common Stock shall not be sufficient to effect the
conversion of all of the outstanding principal balance of the Notes issued under
this Agreement, in addition to such other remedies as shall be available to the
Holders of the Notes, Newco will take such corporate action as may be necessary
to increase its authorized but unissued shares of Newco Common Stock to such
number of shares as shall be sufficient for such purposes. Newco shall prepare
and shall use its best efforts to obtain and keep in force such governmental or
regulatory permits or other authorizations as may be required by law, and shall
comply with all requirements as to registration, qualification or listing of the
Newco Common Stock in order to enable Newco to lawfully issue and deliver to the
Holders of the Notes such number
19
<PAGE>
of shares of its Newco Common Stock as shall from time to time be sufficient to
effect the conversion of all of the outstanding principal balance of the Notes
issued under this Agreement.
SECTION 3.07. Prepayment. From and after the date which is 42 months after
the Borrowing Date applicable to a Note, the Borrowers shall have the right to
prepay such Note, upon not less than thirty (30) nor more than sixty (60) days'
prior notice setting forth the amount (each prepayment shall be made in the
minimum amount of $5,000,000 and in $1,000,000 increments over the minimum
amount) that it wishes to prepay of such Note and the date of such prepayment
("Prepayment Notice"). In the event that the Borrowers prepay a Note in part,
the Borrowers shall execute and deliver to Holder a new Note in a principal
amount equal to the principal remaining outstanding. Delivery of a Prepayment
Notice shall not affect Holder's right to convert any such Note, in whole or in
part, prior to the date set for prepayment.
SECTION 3.08. Mandatory Prepayments. (a) Newco or the Company shall, as
the case may be, notify Sprint that it intends to enter into a Business
Combination or that a Business Combination may occur at least thirty (30) days
prior to consummation of such proposed Business Combination, setting forth in
such notice all the material facts relating to the Business Combination. Prior
to the consummation of such Business Combination, the Holders shall continue to
have the right to convert the Notes as herein provided. From and after the
consummation of such Business Combination and for a thirty (30) day period
thereafter, the Holders shall have the right to require the Borrowers to prepay
all principal and accrued interest on the Notes (calculating accrued interest to
the date of such prepayment), plus an amount equal to 1% of the principal amount
of such Notes. Such mandatory prepayment shall be made on or before the tenth
day after notice is given by Sprint to the Borrowers demanding such prepayment.
(b) In the event the Facility Termination Date occurs pursuant to Section
2.02(d), then each of the Notes outstanding hereunder shall be required to be
prepaid, without the necessity of any notice or demand by Sprint or any Holder,
on or before the first Business Day following the end of one year after such
Facility Termination Date.
(c) The foregoing provisions of this Section 3.08 shall not affect in any
------------
way the obligation of the Borrowers to pay any Note on its maturity date if such
maturity date is earlier than the required prepayment date.
SECTION 3.09. Stockholder Rights Plan. Notwithstanding any other provision
of this Agreement to the contrary, if Newco shall adopt a stockholders rights
plan (sometimes known as a "poison pill" plan), and shall declare, order, pay or
make a dividend or other distribution of rights thereunder with respect to the
Newco Common Stock (whether or not separate from the Newco Common Stock), each
Holder of a Note shall be entitled to receive from Newco, upon conversion of
such Note into Newco Common Stock pursuant to Article III, all of the rights
distributed under such plan (but without any limitation or restriction on the
exercise of such rights) fully and to the same extent as if immediately prior to
the earlier of such distribution or any record date therefor such Holder had
converted all of such Holder's outstanding principal balance on the Notes into
shares of
20
<PAGE>
Newco Common Stock. The preceding sentence shall provide the exclusive
protection under this Agreement to the Holders of the Notes (including
adjustments that would otherwise be required by Section 3.01(c)) with respect to
the subject matter of the immediately preceding sentence.
SECTION 3.10. Tolling of Automatic Conversion and Other Time periods for
HSR Compliance. Notwithstanding any other provision of this Agreement to the
contrary, until such time as the filing and waiting period requirements of the
HSR Act relating to the conversion of any of the Notes into Common Stock
pursuant to Article III shall have been complied with, if any, and there shall
be no action taken or instituted by the United States Department of Justice or
the United States Federal Trade Commission to delay, enjoin or impose conditions
on such conversion, and such waiting period applicable under the HSR Act shall
have expired or received early termination: (i) the date for any prepayments
pursuant to Section 3.07 or 3.08 shall be automatically extended for a period of
--------------------
five (5) Business Days beyond the date of expiration or early termination of the
waiting period of the HSR Act (as so extended, the "Extended Redemption Date")
and each Holder of Notes shall be entitled to convert any or all of the
outstanding principal balance of such Notes into Common Stock prior to the
Extended Redemption Date; and (ii) each other date or event that would otherwise
impair any right to convert the Notes into Common Stock or otherwise impair the
rights of the Notes shall be tolled until the Extended Redemption Date. Any
Holder of Notes who is required to comply with the filing and waiting period
requirements of the HSR Act with respect to the conversion of any Notes shall
use commercially reasonable efforts to cause such filing to be made as soon as
practicable after such Holder has provided notice of its intention to convert
such Notes and to diligently and in good faith pursue expiration or termination
of the waiting period of the HSR Act, provided no conditions are imposed on
Sprint.
ARTICLE IV
ADVANCE CONDITIONS
Sprint shall not be required to make a requested Advance, if on the
proposed Borrowing Date for such Advance:
(a) There is then outstanding any "Recommended Third Party Offer," as
such term is defined in the Governance Agreement;
(b) All representations and warranties of the Borrowers contained
herein are not true and correct (i) as of the date referred to in any
representation or warranty that addresses a matter as of a particular date
and (ii) as to all other representations and warranties as of the date of
such proposed Advance, unless, in either the case of clause (i) or (ii),
the inaccuracy of such representations and warranties would not,
individually or in the aggregate, have a Material Adverse Effect;
21
<PAGE>
(c) The Average Market Price of the Newco Common Stock is less than
$13.00 (adjusted after the date hereof for any stock split, stock dividend
or other subdivision or combination of the Newco Common Stock);
(d) A Borrowing Notice shall not have been properly submitted with
respect to such Advance;
(e) A duly executed Note representing the Advance has not been
received by Sprint;
(f) The Facility Termination Date shall have occurred; or
(g) A Default or Event of Default has occurred and is continuing or
will exist as a result of the requested Advance; provided, however, this
clause (g) shall not apply to any Default, the facts of which have been
specifically disclosed to Sprint in the Borrowing Notice for such Advance
and as to which Sprint has, within five (5) Business Days after Sprint's
receipt of the Borrowing Notice, neither advised the Borrowers of its
intent to declare an Event of Default nor, advised the Borrowers that it
intends to exercise its rights in this clause (g) and not make the
requested Advance (as is Sprint's right, exercising such right in its sole
discretion).
Each Borrowing Notice with respect to each such Advance shall constitute a
representation and warranty by the Borrowers that the conditions contained in
this Article IV have been satisfied. Sprint may require a duly completed
compliance certificate (dated the Borrowing Date) in substantially the form of
Exhibit B hereto as a condition to making an Advance.
- ---------
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Organization, Standing and Power. Each of the Borrowers is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of the Borrowers is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a Material Adverse Effect.
SECTION 5.02. Subsidiaries and Joint Ventures. No Borrower has any
Subsidiary that is not also a Borrower hereunder or has the right to acquire an
equity interest in any corporation,
22
<PAGE>
partnership, limited liability company, joint venture, business trust or any
other entity, except to the extent any such interest may be acquired under
Section 6.10 hereof.
- ------------
SECTION 5.03. Authority; Noncontravention. Each Borrower has the requisite
corporate power and authority to enter into this Agreement and perform its
obligations hereunder and under the Loan Documents and the same have been duly
authorized by all necessary corporate action on the part of such Borrower, and
assuming this Agreement constitutes the valid and binding agreement of Sprint,
constitute valid and binding obligations of such Borrower enforceable against
such Borrower, in accordance with its terms, except to the extent that the
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
regardless of whether enforceability is considered in a proceeding in equity or
at law. The execution and delivery of this Agreement by each Borrower did not,
and the consummation of the transactions contemplated by this Agreement will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss by such Borrower of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of such Borrower under, (i) the certificate of
incorporation or bylaws of such Borrower, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit or
license applicable to such Borrower or its properties or assets or (iii) subject
to the governmental filings and other matters referred to in the following
sentence, any law applicable to such Borrower or its respective properties or
assets, other than, in the case of clauses (ii), (iii) and (iv), any such
conflicts, violations, defaults, rights or Liens that individually or in the
aggregate would not (x) have a Material Adverse Effect, (y) materially impair
the ability of such Borrower to perform its obligations under this Agreement or
(z) prevent the consummation of any of the transactions contemplated by this
Agreement.
SECTION 5.04. Taxes. Except as set forth on Schedule 5.04, each Borrower
has timely filed all Returns and reports required to be filed by it, except
where failure to timely file would not have a Material Adverse Effect. All such
Returns and reports are complete and accurate except where the failure to be
complete or accurate would not have a Material Adverse Effect. Each Borrower has
paid or has set up an adequate reserve for the payment of all Taxes shown as due
on such Returns except where the failure to do so would not have a Material
Adverse Effect. Except as set forth on Schedule 5.04, no deficiencies for any
Taxes have been asserted, proposed or assessed against any Borrower that have
not been paid or otherwise settled or reserved against, except for deficiencies
the assertion, proposing or assessment of which would not have a Material
Adverse Effect, and no requests for waivers of the time to assess any such taxes
are pending. There are no material Liens for Taxes (other than for current taxes
not yet due and payable) on the assets of any Borrower.
SECTION 5.05. Compliance with Laws. Each Borrower has in effect all
permits from approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits, variances, exemptions, orders and rights ("Permits")
necessary for it to own, lease or operate its properties and assets and to carry
on its business as now conducted, and there has not occurred any default under
any Permit, except for the absence of Permits and for defaults under Permits
that, individually or in
23
<PAGE>
the aggregate, have not had a Material Adverse Effect. Except as disclosed in
the Borrower Filed SEC Documents, such Borrower is in compliance with all
applicable Law, except where failures to so comply, individually or in the
aggregate, would not have a Material Adverse Effect.
SECTION 5.06. Environmental Matters. Each Borrower is and at all times has
been in full compliance with, and has not been and is not in violation of or
liable under, any Environmental Law (which compliance includes the possession by
such Borrower of all Permits required under applicable Environmental Law and
compliance with the terms and conditions thereof), except for such failure to be
in compliance which, individually or in the aggregate, would not have a Material
Adverse Effect. There are no pending or, to the Knowledge of any Borrower,
Threatened claims, orders, notices, administrative or judicial actions, or
Encumbrances, relating to environmental, health, and safety liabilities arising
under or pursuant to any federal, state or local Environmental Laws, with
respect to or affecting any of the properties and assets (whether real,
personal, or mixed) in which such Borrower has an interest, except for any such
claim, order, notice, administrative or judicial action, Encumbrance or other
restriction that would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 5.07. Intellectual Property. Each Borrower owns sufficient right,
title and interest in and to, or has valid licenses of sufficient scope and
duration for, all patents, patent rights, copyrights, trademarks, service marks,
trade names, software, trade secrets, confidential information and other
intellectual property material to the operation of the business of such Borrower
as currently conducted or proposed to be conducted (the "Intellectual Property
Assets") and as proposed to be conducted. The Intellectual Property Assets are
free and clear of all Liens which would materially impair such Borrower's
ability to use the Intellectual Property Assets in the business of such Borrower
as currently conducted or proposed to be conducted. No Borrower has granted any
third party any rights in and to the Intellectual Property Assets except for
distribution rights, OEM rights, end user licenses and rights to reproduce
certain of the Intellectual Property Assets in the Ordinary Course of Business
in connection with the marketing and distribution of such Borrower's product and
service offerings, and which individually and in the aggregate would not have a
Material Adverse Effect. Except as set forth on Schedule 5.8, no Intellectual
Property Assets of any Borrower infringes, or conflicts with, or to the
Knowledge of any Borrower, is alleged to infringe upon or conflict with the
intellectual property rights of any third party. No Borrower has Knowledge that
any of its employees performing or managing key functions of such Borrower is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of such Borrower or that would
conflict with such Borrower's business as proposed to be conducted. To the
Knowledge of any Borrower, neither the execution nor delivery of this Agreement,
nor the carrying on of any Borrower's business by the employees of such
Borrower, nor the conduct of the business of any Borrower as proposed, will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees is now obligated, which conflict or breach would have a
Material Adverse Effect. No Borrower utilizes or intends to
24
<PAGE>
utilize any inventions of any of its employees (or people it currently intends
to hire) made prior to their employment by such Borrower.
SECTION 5.08. Certain Payments. No Borrower, or any of the directors,
officers, agents, or employees of any Borrower, or to the Knowledge of any
Borrower, any other Person associated with or acting for or on behalf of any
Borrower, has directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of a Borrower or any
Affiliate of a Borrower, (b) established or maintained any fund or asset that
has not been appropriately recorded in the books and records of the Borrower,
which in the case of either clause (a) or (b) would be in violation of Law or
would have a Material Adverse Effect.
ARTICLE VI
COVENANTS
So long as any Note remains unpaid, unless Sprint shall otherwise consent
in writing:
SECTION 6.01. Financial Reporting. Newco will maintain, for itself and
each Subsidiary, a system of accounting established and administered in
accordance with GAAP, and furnish to Sprint:
(a) Within five (5) days after its filing with the SEC, and in any
event within 120 days after the close of each Fiscal Year, an unqualified
audit report certified by independent certified public accountants (which
shall be a "Big Six" accounting firm, or another nationally recognized
accounting firm), prepared in accordance with GAAP on a consolidated and
consolidating basis (consolidating statements need not be certified by such
accountants), including balance sheets as of the end of such period and
related statements of income and cash flows, accompanied by (i) any
management letter prepared by said accountants, (ii) a certificate of said
accountants that, in the course of the examination necessary for their
certification of the foregoing, they have obtained no knowledge of any
Default or Event of Default, or if, in the opinion of such accountants, any
Default or Event of Default shall exist, stating the nature and status
thereof, and (iii) a letter from said accountants addressed to Sprint
acknowledging that Sprint is extending credit in primary reliance on such
financial statements and authorizing such reliance. Newco hereby
authorizes Sprint to communicate directly with such accountants following
the occurrence of a Default or Event of Default.
(b) Within five (5) days after its filing with the SEC, and in any
event within 65 days after the close of the first three Fiscal Quarters of
each Fiscal Year, consolidated and consolidating unaudited balance sheets
as at the close of each such period and consolidated and consolidating
statements of income and cash flows for the period from the beginning of
25
<PAGE>
such Fiscal Year to the end of such Fiscal Quarter, all certified by its
chief financial officer to have been prepared in accordance with GAAP
(other than the absence of notes to financial statements and subject to
normal recurring year-end audit adjustments).
(c) As soon as available, but in any event not later than 15 days
before the end of each Fiscal Year, beginning with Fiscal Year 1998, a copy
of the plan and forecast (including a projected consolidated and
consolidating balance sheet, income statement and cash flow statement) of
Newco and its Subsidiaries for the next Fiscal Year.
(d) Together with the financial statements required by clauses (a)
-----------
and (b) above, a compliance certificate in substantially the form of
---
Exhibit B hereto signed by its chief financial officer showing the
---------
calculations necessary to determine compliance with this Agreement and
stating that no Default or Event of Default exists and no Business
Combination has occurred, or if any Default or Event of Default exists,
stating the nature and status thereof.
(e) Within 270 days after the close of each Fiscal Year, a statement
of the Unfunded Liabilities of each Single Employer Plan, certified by an
actuary enrolled under ERISA.
(f) As soon as possible and in any event within ten (10) days after
Newco knows that any event has occurred which is a Termination Event with
respect to any Plan which is subject to Title IV of ERISA, a statement,
signed by the chief financial officer of Newco, describing said Termination
Event and any action which Newco proposes to take with respect thereto.
(g) As soon as possible and in any event within ten (10) days after
receipt by Newco, a copy of (i) any notice, claim, complaint or order to
the effect that Newco or any of its Subsidiaries is or may be liable to any
Person as a result of the release by Newco, any of its Subsidiaries, or any
other Person of any Hazardous Materials into the environment or requiring
that action be taken by Newco to respond to or clean up a Release of
Hazardous Materials into the environment, and (ii) any notice, complaint or
citation alleging any violation of any environmental law or environmental
permit by Newco or any of its Subsidiaries. Within ten (10) days after
Newco or any Subsidiary having Knowledge of the proposal, enactment or
promulgation of any environmental law which would have a Material Adverse
Effect, Newco shall provide Sprint with written notice thereof.
(h) Promptly upon the furnishing thereof to the stockholders of
Newco, copies of all financial statements, reports and proxy statements so
furnished.
(i) Promptly, and in any event within five (5) days after the filing
thereof, copies of any reports which Newco or any of its Subsidiaries files
with the SEC.
26
<PAGE>
(j) Promptly, and in any event within ten (10) days after learning
thereof, notification of (i) any tax assessment, demand, notice of proposed
deficiency or notice of deficiency received by Newco or any other
Consolidated Person or (ii) the filing of any tax Lien or commencement of
any judicial proceeding by or against any such Consolidated Person, if any
such assessment, demand, notice, Lien or judicial proceeding relates to tax
liabilities in excess of $1,000,000.
(k) Such other information (including non-financial information) as
Sprint may from time to time reasonably request.
Each Borrower shall file, on a timely basis, all reports, schedules, forms,
statements and other documents that are required to be filed with the SEC
("Borrower Filed SEC Documents"). As of their respective dates, the Borrower
Filed SEC Documents will comply in all material respects with the requirements
of the Securities Act of 1933 or the Securities and Exchange Act of 1934, as the
case may be, applicable to such Borrower Filed SEC Documents, and none of the
Borrower Filed SEC Documents will contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
SECTION 6.02. Subsidiaries as Borrowers; Use of Proceeds. (a) Prior to or
simultaneously with any Person (other than a Foreign Entity), becoming a
Subsidiary of a Borrower the Borrower agrees to cause such Person to enter into
an agreement with Sprint pursuant to which such Person shall be added as a party
hereto and a "Borrower" hereunder, such agreement to be substantially in the
form of Exhibit B hereto.
(b) The Borrowers will use the proceeds of the Advances to meet the
working capital needs of the Borrowers. No Borrower will use any of the proceeds
of the Advances to purchase or carry any Margin Stock.
SECTION 6.03. Notice of Default. The Borrowers will give prompt notice in
writing to Sprint of the occurrence of any Default or Event of Default and of
any other development relating to any Borrower, financial or other, which would
have a Material Adverse Effect.
SECTION 6.04. Conduct of Business; Merger, Sale of Assets, Etc. (a) Each
Borrower will carry on and conduct its business in generally the same manner and
in generally the same fields of enterprise as it is presently conducted and to
do all things necessary to remain duly incorporated, validly existing and in
good standing as a domestic corporation in its jurisdiction of incorporation
and, except where the failure to do so would not have a Material Adverse Effect,
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
(b) No Borrower shall sell, transfer, lease or otherwise dispose of any of
its Property which, when taken together with all other Property of the Borrowers
disposed of during the twelve
27
<PAGE>
month period ending with the month in which such disposition occurs, constitutes
a Substantial Portion.
SECTION 6.05. Taxes. Each Borrower will timely file complete and correct
United States federal and applicable foreign, state and local tax returns
required by applicable law and pay when due all taxes, assessments and
governmental charges and levies upon it or its income, profits or Property,
except those which are being diligently contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside.
SECTION 6.06. Insurance. Each Borrower will maintain with financially
sound and reputable insurance companies insurance on all its Property in such
amounts and covering such risks as is consistent with sound business practice,
and Newco will furnish to Sprint upon request full information as to the
insurance carried.
SECTION 6.07. Compliance with Laws. Each Borrower will comply with all
laws, rules, regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject, the failure to comply with which would have a
Material Adverse Effect.
SECTION 6.08. Maintenance of Properties. Each Borrower will do all things
necessary to maintain, preserve, protect and keep its Property in good repair,
working order and condition, and make all necessary and proper repairs, renewals
and replacements so that its business carried on in connection therewith may be
properly conducted at all times.
SECTION 6.09. Inspection. Each Borrower will permit Sprint, by its
representatives and agents, to inspect any of the Property, corporate books and
financial records of each Borrower, to examine and make copies of the books of
accounts and other financial records of each Borrower, and to discuss the
affairs, finances and accounts of each Borrower with, and to be advised as to
the same by, their respective officers at such reasonable times and intervals as
Sprint may designate; provided, that if a Default has occurred and is
--------
continuing, each Borrower shall permit Sprint or its representatives and agents,
to exercise the inspection rights set forth above during normal business hours
without limitation, whether by reason of a Borrower's claims of inconvenience,
interruption of business operations or otherwise, so long as no Default has
occurred and is continuing, no such action shall unreasonably and in a material
fashion interfere with the normal business operations of a Borrower. Each
Borrower will keep or cause to be kept, appropriate records and books of account
in which complete entries are to be made reflecting its business and financial
transactions, such entries to be made in accordance with GAAP.
SECTION 6.10. Investments and Purchases. No Borrower will make or suffer
to exist any Investments or commitments therefor, or become or remain a partner
in any partnership or joint venture, or make any Purchase of any Person, except:
(a) Obligations that have a term of one year or less or are fully
guaranteed by the United States of America;
28
<PAGE>
(b) Commercial paper rated A-l or better by Standard and Poor's
Rating Group or P-l or better by Moody's Investors Service, Inc.;
(c) Demand deposit accounts maintained in the ordinary course of
business;
(d) Certificates of deposit issued by and time deposits with
commercial banks (whether domestic or foreign) having capital and surplus
in excess of $100,000,000;
(e) Repurchase agreements issued by any commercial bank or trust
company organized under the laws of the United States or any state thereof
having capital and surplus in excess of $100,000,000 and whose commercial
paper (or that of its parent corporation) is rated A-1 or better by
Standard & Poor's Ratings Group or P-1 or better by Moody's Investors
Service, Inc.;
(f) Investments in existence on the date hereof and described in
Schedule 6.10 hereto; and
-------------
(g) Subject to Section 6.10(h) hereof, Investments in Borrowers; and
---------------
(h) Any other Investment which, when aggregated with all other
Investments made under this clause (h), does not exceed $20,000,000,
provided that no more than $5,000,000 of such Investments in the aggregate
shall be made in one or more Foreign Entities.
SECTION 6.11. Liens. No Borrower will create, incur, or suffer to exist
any Lien in, of or on the Property of such Borrower, except:
(a) Liens for taxes, assessments or governmental charges or levies on
its Property if the same shall not at the time be delinquent or thereafter
can be paid without penalty, or are being contested in good faith and by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books;
(b) Liens imposed by law, such as landlords', carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more
than 60 days past due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books;
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation;
29
<PAGE>
(d) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not
in any material way adversely affect the marketability of the same or
interfere with the use thereof in the business of any Borrower;
(e) Capitalized Leases, whether currently existing or hereafter
created, under which the Capitalized Lease Obligations do not exceed in the
aggregate (i) $56,250,000 in 1998, (ii) $90,000,000 in 1999, (iii)
$100,000,000 in 2000, and (iv) $150,000,000 thereafter; and
(f) All other Liens securing Indebtedness (other than Capitalized
Lease Obligations) which does not exceed in the aggregate (i) $30,000,000
in 1998, (ii) $45,000,000 in 1999, (iii) $60,000,000 in 2000, and (iv)
$90,000,000 thereafter.
SECTION 6.12. Affiliates. No Borrower shall enter into any transaction
(including, without limitation, the purchase or sale of any Property or service)
with, or make any payment or transfer to, any other Affiliate (other than
another Borrower) except (a) pursuant to the agreements described in the
Prospectus included in Newco's registration statement declared effective by the
SEC on January 22, 1997, (b) where expressly permitted, or (c) in the Ordinary
Course of Business and pursuant to the reasonable requirements of such
Borrower's business and upon fair and reasonable terms no less favorable to such
Borrower than such Borrower would obtain in a comparable arms-length
transaction.
SECTION 6.13. Environmental Matters. Each Borrower shall (a) at all times
materially comply with all applicable Environmental Laws and (b) take any and
all remedial actions as are required by Environmental Laws in response to the
Release of any Hazardous Materials on, under or about any real property owned,
leased or operated by such Borrower. In the event that a Borrower undertakes any
remedial action with respect to any Hazardous Material on, under or about any
real property, such Borrower shall conduct and complete such remedial action in
compliance with all applicable Environmental Laws, except when such Borrower's
liability for such Release of any Hazardous Material is being contested in good
faith by such Borrower and appropriate reserves therefor have been established.
If Sprint at any time has a reasonable basis to believe that there may be a
material violation of any Environmental Law by any Borrower, a Release of a
material amount of Hazardous Materials on any real property owned, leased or
operated by a Borrower or a Release of a material amount of Hazardous Materials
from such real property onto real property adjacent to such real property, then
the Borrowers shall, upon the request of Sprint, provide Sprint with all such
reports, certificates, engineering studies and other written material or data
relating thereto as Sprint may reasonably require which shall be maintained as
confidential by Sprint to the fullest extent authorized by law.
SECTION 6.14. Change in Corporate Structure; Fiscal Year. No Borrower
shall (a) permit any amendment or modification to be made to its certificate of
incorporation or bylaws which is adverse to the interests of Sprint or (b)
subject to Sprint's consent (which consent shall not be
30
<PAGE>
unreasonably withheld), change its Fiscal Year to end on any date other than
December 31 of each year.
SECTION 6.15. Inconsistent Agreements. No Borrower shall enter into any
indenture, agreement, instrument or other arrangement which contains any
provision which would be violated or breached by the making of Advances or by
the performance by any Borrower of any of such Borrower's obligations under any
Loan Document, the Investment Agreement or any Ancillary Agreement.
SECTION 6.16. Indebtedness. Newco shall not permit its consolidated
Indebtedness as of any date during a Fiscal Year identified below (including the
aggregate of Capitalized Lease Obligations and other Indebtedness secured by
Liens limited by Section 6.11(e) and (f)) to exceed the greater of (a) the
amount listed below opposite such Fiscal Year and (b) four and one-half (4 1/2)
times EBITDA for the latest period of four (4) fiscal quarters ended prior to
the date of determination:
<TABLE>
<CAPTION>
DURING FISCAL YEAR AMOUNT
------------------ ------
<S> <C>
1998 $ 75,000,000
1999 150,000,000
2000 200,000,000
2001 and beyond 300,000,000
</TABLE>
As used herein, "EBITDA" means Net Income for a specified period, plus the sum
of the amounts equal to the interest expense, the provision for taxes based on
income and the depreciation and amortization expense deducted in determining
such Net Income.
SECTION 6.17. ERISA Compliance. With respect to any Plan, no Borrower
shall:
(a) engage in any "prohibited transaction" (as such term is defined
in Section 406 of ERISA or Section 4975 of the IRC) for which a civil
penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section
4975 of the IRC in excess of $1,000,000 is imposed;
(b) incur any "accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA) in excess of $1,000,000, whether or not
waived, or permit any Unfunded Liability in excess of $1,000,000, to exist
for more than 30 days after learning thereof;
(c) permit the occurrence of any Termination Event which results in a
liability to a Borrower or any other member of the Controlled Group in
excess of $1,000,000;
31
<PAGE>
(d) fail to make any contribution or payment to any Multiemployer
Plan which either Borrower or any other member of the Controlled Group is
required to make under any agreement relating to such Multiemployer Plan or
Title IV of ERISA which results in a liability in excess of $1,000,000; or
(e) permit the establishment or amendment of any Plan or fail to
comply with the applicable provisions of ERISA and the IRC with respect to
any Plan which would result in liability to a Borrower or any other member
of the Controlled Group which, individually or in the aggregate, would have
a Material Adverse Effect.
ARTICLE VII
EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall constitute
an Event of Default:
SECTION 7.01. Any representations or warranties of the Borrowers made or
deemed made by or on behalf of a Borrower to Sprint under or in connection with
this Agreement, or in any certificate or information delivered in connection
with this Agreement or any other Loan Document are not true and correct (i) as
of the date referred to in such representations or warranties that addresses a
matter as of a particular date and (ii) as to all other representations and
warranties as of the date of such representation or warranty, except in either
the case of clause (i) or (ii), if the inaccuracy of such representations and
warranties would not in the aggregate have a Material Adverse Effect.
SECTION 7.02. Nonpayment of (a) principal of any Note within fourteen (14)
days after the same becomes due, or (b) interest upon a Note or obligations
under any of the Loan Documents within fourteen (14) days after the same becomes
due.
SECTION 7.03. The breach by a Borrower of any of the terms or provisions
of Sections 6.02, 6.14, 6.15 or 6.16.
------------- ---- ---- ----
SECTION 7.04. The breach by a Borrower (other than a breach which
constitutes a Default under Section 7.01, 7.02 or 7.03) of any of the terms or
------------ ---- ----
provisions of this Agreement, Sections 5.07 or 5.08 of the Investment Agreement,
or Articles II, III or IV of the Governance Agreement, or any material breach by
a Borrower of any terms or provisions of the Registration Rights Agreement (as
defined in the Investment Agreement), in any such case, which is not remedied
within forty-five (45) days after written notice to Newco from Sprint; provided,
however, such forty-five (45) day period shall be reduced to a fifteen (15) day
period for any breach under Section 6.10 or Section 6.12.
------------ ------------
32
<PAGE>
SECTION 7.05. The default by a Borrower in the performance of any term,
provision or condition contained in any agreement or agreements under which any
Indebtedness aggregating in excess of $5,000,000 was created or is governed, or
the occurrence of any other event or existence of any other condition, the
effect of any of which is to cause, or to permit the holder or holders of such
Indebtedness to cause, such Indebtedness to become due prior to its stated
maturity; or any such Indebtedness of a Borrower shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled payment)
prior to the stated maturity thereof.
SECTION 7.06. A Borrower shall (a) have an order for relief entered with
respect to it under the Federal bankruptcy laws as now or hereafter in effect,
(b) make an assignment for the benefit of creditors, (c) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any Substantial Portion of
its Property, (d) institute any proceeding seeking an order for relief under the
Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate
it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, (e) take any corporate action to authorize or effect any of the
foregoing actions set forth in this Section 7.06, (f) fail to contest in good
------------
faith any appointment or proceeding described in Section 7.07 or (g) become
------------
unable to pay, not pay, or admit in writing its inability to pay, its debts
generally as they become due.
SECTION 7.07. Without the application, approval or consent of a Borrower,
a receiver, trustee, examiner, liquidator or similar official shall be appointed
for a Borrower or any Substantial Portion of its Property, or a proceeding
described in Section 7.06(d) shall be instituted against a Borrower, and such
---------------
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of ninety (90) consecutive days.
SECTION 7.08. Any court, government or governmental agency shall condemn,
seize or otherwise appropriate, or take custody or control of (each a
"Condemnation"), all or any portion of the Property of a Borrower which, when
------------
taken together with all other Property of the Borrowers so condemned, seized,
appropriated, or taken custody or control of, during the twelve-month period
ending with the month in which any such Condemnation occurs, constitutes a
Substantial Portion.
SECTION 7.09. A Borrower shall fail within thirty (30) days to pay, bond
or otherwise discharge any judgments or orders for the payment of money in an
aggregate amount in excess of $1,000,000, which are not stayed on appeal or
otherwise being appropriately contested in good faith.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
33
<PAGE>
If any Event of Default described in Section 7.06 or 7.07 occurs with
------------ ----
respect to a Borrower, the obligations of Sprint to make Advances hereunder
shall automatically terminate and the Obligations shall immediately become due
and payable without any election or action on the part of Sprint. If any other
Event of Default occurs, Sprint may terminate or suspend the obligations of
Sprint to make Advances hereunder, or declare the Obligations to be due and
payable, or both, whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which each of the Borrowers hereby expressly waives.
Within ten (10) Business Days after acceleration of the maturity of the
Obligations or termination of the obligations of Sprint to make Advances
hereunder as a result of any Event of Default (other than any Event of Default
as described in Section 7.06 or 7.07 with respect to a Borrower) and before any
------------ ----
judgment or decree for the payment of the Obligations due shall have been
obtained or entered, Sprint may (in its sole discretion), by notice to the
Borrowers, rescind and annul such acceleration and/or termination.
ARTICLE IX
SETOFF
In addition to, and without limitation of, any rights of Sprint under
applicable law, if any Default or Event of Default or Business Combination
occurs, any and all deposits (including all account balances, whether
provisional or final and whether or not collected or available) and any other
Indebtedness at any time held or owing by Sprint or any Affiliate of Sprint to
or for the credit or account of any Borrower may be offset and applied toward
the payment of the Obligations owing to Sprint or such Affiliate of Sprint,
whether or not the Obligations, or any part hereof, shall then be due or have
matured; provided, however, the foregoing shall not apply to any Business
Combination unless at least ten days prior to such offset or applications,
Sprint has given notice to the Borrowers that a prepayment is being required
under Section 3.08(a).
34
<PAGE>
ARTICLE X
BENEFIT OF AGREEMENT; ASSIGNMENTS
SECTION 10.01. Successors and Assigns. The terms and provisions of the
Loan Documents shall be binding upon and inure to the benefit of the Borrowers
and Sprint and their respective successors and assigns, except that (a) the
Borrowers shall not have the right to assign any rights or obligations under the
Loan Documents, and (b) any assignment by Sprint must be made in compliance with
Section 10.02. Any assignee or transferee of any Note agrees by acceptance
- -------------
thereof to be bound by all the terms and provisions of the Loan Documents. Any
request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the holder of the Note, shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any note or notes issued in exchange therefor.
SECTION 10.02. Assignments by Sprint.
10.02.1. Assignments of this Agreement and the Obligations
-------------------------------------------------
Thereunder. An Assignment or transfer of this Agreement may be made without the
- ----------
prior consent of the Borrowers (i) by Sprint to any of its Affiliates, provided
that any such assignment or transfer to such Affiliate shall not release Sprint
from the obligations of Sprint under this Agreement, or (ii) pursuant to any
merger or sale of substantially all of the assets or stock of Sprint or such
Affiliates (or any transaction having such effect) that is pursuant to an
agreement entered into after the Closing Date and pursuant to which in the case
of a purchase of substantially all of the assets or stock of Sprint or such
Affiliates, the party purchasing such assets or stock of Sprint or such
Affiliates assumes the obligations of Sprint under this Agreement.
10.02.2. Transfers of the Notes. Sprint may in accordance with
----------------------
applicable law and without the prior consent of the Borrowers, at any time,
transfer and assign all or part of the Notes to one or more Persons
("Transferees"). In the case of such an assignment or transfer, Sprint shall
surrender the Notes subject to such assignment to the Borrowers prior to the
transfer and assignment being effective and the Borrowers shall, simultaneously
with such surrender, reissue and deliver new Notes in the same aggregate
outstanding principal amount as the surrendered Note in the name of such holders
as requested by Sprint. On or after the effective date of such transfer and
assignment, (a) each such Transferee shall acquire all of the rights of Sprint
in the Notes assigned to such Transferee, and (b) Sprint shall remain subject to
the Aggregate Commitment and Loans.
10.02.3. Administration. As a condition to any transfer or
--------------
assignment of the Notes pursuant to Section 10.02.2, each Transferee shall
appoint Sprint (or any other Person to whom this Agreement has been assigned in
accordance with Section 10.02.1 or with the consent of the Borrowers) (the
"Agent") to act as agent of such Transferee, provided that the Agent shall not
have a fiduciary relationship in respect of the Borrowers or any Transferee of
the Notes. The Agent shall exclusively exercise such powers under this
Agreement as are specifically delegated to Sprint by the terms hereof, including
the right to receive notices, requests, waivers, instructions, information
35
<PAGE>
regarding the Borrowers, consents and other documents which the Borrowers may be
required to deliver pursuant to this Agreement. The Agent shall have no implied
duties to the Transferees, or any obligation to the Transferees to take any
action thereunder.
SECTION 10.03. Dissemination of Information. Each Borrower authorizes
Sprint to disclose to any Person to whom this Agreement is being assigned
pursuant to Section 10.02.1 or Transferees under Section 10.02.2 any and all
information in Sprint's possession concerning the creditworthiness of the
Borrowers, subject however, to Sprint obtaining an appropriate confidentiality
agreement respecting such information.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices. Unless otherwise provided herein, any notice,
request, waiver, instruction, consent or document or other communication
required or permitted to be given by this Agreement shall be effective only if
it is in writing and (a) delivered by hand or sent by certified mail, return
receipt requested, (b) if sent by a nationally-recognized overnight delivery
service with delivery confirmed, or (c) if telexed or telecopied, with receipt
confirmed as follows:
The Borrowers: 3100 New York Drive
Pasadena, California 91107
Attn: President and CEO
Telecopy No.: (626) 296-4161
with a copy to: Hunton & Williams
NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Scott M. Hobby, Esq.
Telecopy No.: (404) 888-4190
Sprint: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Chief Financial Officer
Telecopy No.: (913) 624-8426
with a copy to: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Senior Vice President and
Treasurer
36
<PAGE>
Telecopy No.: (913) 624-8426
with additional copies to: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Vice President and Assistant
Treasurer
Telecopy No.: (913) 624-8252
Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Corporate Secretary
Telecopy No.: (913) 624-8233
The Parties shall promptly notify each other of any change in their respective
addresses or facsimile numbers or of the Person or office to receive notices,
requests or other communications under this Section 11.01. Notice shall be
-------------
deemed to have been given as of the date when so personally delivered, when
actually delivered by the U.S. Postal Service at the proper address, the next
day when delivered during business hours to an overnight delivery service
properly addressed or when receipt of a telex or telecopy is confirmed, as the
case may be, unless the sending party has actual Knowledge that such notice was
not received by the intended recipient.
SECTION 11.02. Entire Agreement. This Agreement together with all
Schedules and Exhibits hereto, embody the entire agreement and understanding of
the Parties in respect to the matters contemplated hereby and supersedes and
renders null and void all other prior agreements and understandings, written and
oral, with respect to the subject matters hereof, provided that this provision
--------
shall not abrogate any other written agreement between the Parties executed
simultaneously with this Agreement. No Party shall be liable or bound to any
other Party in any manner by any promises, conditions, representations,
warranties, covenants, agreements and understandings, except as specifically set
forth herein or therein.
SECTION 11.03. Waiver. Except as otherwise permitted in this Agreement,
the terms or conditions of this Agreement may not be waived unless set forth in
a writing signed by the Party entitled to the benefits thereof. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of such provision at any time in the future or a waiver of any other
provision hereof. The rights and remedies of the Parties are cumulative and not
alternative. Except as otherwise provided in this Agreement, neither the
failure nor any delay by any Party in exercising any right, power or privilege
under this Agreement, or the documents referred to in this Agreement or therein
will operate as a waiver of such right, power or privilege, and no single or
partial exercise of any such right, power or privilege will preclude any other
or further exercise of such right, power or privilege or the exercise of any
other right, power or privilege.
37
<PAGE>
SECTION 11.04. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflict of laws principles.
SECTION 11.05. Severability. If any term or provision of this Agreement
or the application thereof to either party or set of circumstances shall, in any
jurisdiction and to any extent, be finally held invalid or unenforceable, such
term or provision shall only be ineffective as to such jurisdiction, and only to
the extent of such invalidity or unenforceability, without invalidating or
rendering unenforceable any other terms or provisions of this Agreement or under
any other circumstances, and the parties shall negotiate in good faith a
substitute provision which comes as close as possible to the invalidated or
unenforceable term or provision, and which puts each party in a position as
nearly comparable as possible to the position it would have been in but for the
finding of invalidity or unenforceability, while remaining valid and
enforceable.
SECTION 11.06. Counterparts. This Agreement may be executed in one or
more counterparts each of which when so executed and delivered shall for all
purposes be deemed to be an original but all of which, when taken together,
shall constitute one and the same Agreement.
SECTION 11.07. Headings. The table of contents, captions and headings
used in this Agreement are inserted for convenience only and shall not be deemed
to constitute part of this Agreement or to affect the construction or
interpretation hereof.
SECTION 11.08. No Third-Party Beneficiaries. Nothing in this Agreement,
express or implied, shall create or confer upon any Person (including but not
limited to any employees), other than the Parties or their respective successors
and permitted assigns, any legal or equitable rights, remedies, obligations,
liabilities or claims under or with respect to this Agreement, except as
expressly provided herein.
SECTION 11.09. Interpretation. (a) Unless specifically stated otherwise,
references to Articles, Sections, Exhibits and Schedules refer to Articles,
Sections, Exhibits and Schedules in this Agreement. References to "includes"
and "including" mean "includes without limitation" and "including without
limitation." Whenever the context may require, any pronoun shall include the
corresponding masculine feminine and neuter forms. Unless the context shall
otherwise require or provide, any reference to any agreement or other instrument
or statute or regulation is to such agreement, instrument statute or regulation
as amended and supplemented from time to time (and, in the case of a statute or
regulation, to any successor provision).
(b) Each Party is a sophisticated legal entity that was advised by
experienced counsel and, to the extent it deemed necessary, other advisors in
connection with this Agreement. Accordingly, each Party hereby acknowledges
that no Party has relied or will rely in respect of this Agreement or the
transactions contemplated hereby upon any document or written or oral
information previously furnished to or discovered by it or its representatives,
other than this Agreement or the documents and instruments delivered at the
Closing.
38
<PAGE>
(c) No provision of this Agreement shall be interpreted in favor of, or
against, any of the Parties by reason of the extent to which any such Party or
its counsel participated in the drafting thereof or by reason of the extent to
which any such provision is inconsistent with any prior draft hereof or thereof.
SECTION 11.10. Inclusion of Information in Schedules. The inclusion of
any information in any Schedule (i) shall not be deemed an admission that any
such information is material for purposes of the representation and warranty to
which it relates or any other representation and warranty or for any other
purpose related to this Agreement or the transactions contemplated hereby,
including for purposes of any covenants, closing conditions or any other
remedies the Parties may have, and (ii) shall not be used or interpreted in any
manner to create a standard of materiality for any such purpose.
SECTION 11.11. Amendment. No amendment, modification or alteration of the
terms or provisions of this Agreement, including any Schedules and Exhibits
hereto or thereto, shall be binding unless the same shall be in writing and duly
executed by the Party against whom such amendment, modification or alteration is
sought to be enforced.
SECTION 11.12. Joint and Several Obligations of Borrowers. Each and
every agreement and obligation of Newco or any Borrower under this Agreement,
any Note or any other Loan Document shall be the joint and several obligation of
each Borrower.
SECTION 11.13. Effectiveness of Agreement. This Agreement shall become
effective at the Closing, provided that this Agreement shall terminate upon the
termination of the Investment Agreement pursuant to Section 6.01(a) thereof.
---------------
SECTION 11.14. Reliance on Investment Agreement. The Borrowers recognize
and acknowledge that in entering into this Agreement Sprint is relying on each
and every representation and warranty made by the Borrowers to Sprint in the
Investment Agreement as of the Closing.
SECTION 11.15. EXCLUSIVE JURISDICTION AND CONSENT TO SERVICE OF PROCESS.
THE PARTIES AGREE THAT ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE NOTES, THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
INSTITUTED IN A FEDERAL COURT SITTING IN DELAWARE OR STATE COURT SITTING IN
DELAWARE, WHICH SHALL BE THE EXCLUSIVE VENUE OF ANY SUCH ACTION. EACH PARTY
WAIVES ANY OBJECTION WHICH SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH ACTION, AND IRREVOCABLY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT (AND THE APPROPRIATE APPELLATE COURTS) IN ANY
SUCH ACTION. ANY AND ALL SERVICE OF PROCESS AND ANY OTHER NOTICE IN ANY SUCH
ACTION SHALL BE EFFECTIVE AGAINST SUCH PARTY WHEN TRANSMITTED IN ACCORDANCE WITH
SECTION 11.01. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO AFFECT
- -------------
39
<PAGE>
THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
[THE BALANCE OF THIS PAGE LEFT BLANK INTENTIONALLY]
40
<PAGE>
SECTION 11.16. WAIVER OF JURY TRIAL. THE BORROWERS AND SPRINT HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE), INCLUDING ANY CLAIM,
COUNTERCLAIM, CROSS-CLAIM, DEFENSE, OR AFFIRMATIVE DEFENSE, IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.
THIS IS THE FINAL EXPRESSION OF THE CREDIT AGREEMENT BETWEEN THE BORROWERS, AS
DEBTORS, AND SPRINT, AS LENDER. THIS CREDIT AGREEMENT MAY NOT BE CONTRADICTED BY
EVIDENCE OF ANY PRIOR ORAL CREDIT AGREEMENT OR OF A CONTEMPORANEOUS ORAL CREDIT
AGREEMENT BETWEEN THE PARTIES.
Newco: Sprint: THS
------------ ------------
Initials Initials
The Company:
-----------
Initials
IN WITNESS WHEREOF, Newco, the Company and Sprint have executed this
Agreement as of the date first above written.
DOLPHIN, INC.
By: /s/ Charles G. Betty
---------------------------------------
Print Name: Charles G. Betty
-------------------------------
Title: President & CEO
------------------------------------
EARTHLINK NETWORK, INC.
By: /s/ Charles G. Betty
---------------------------------------
Print Name: Charles G. Betty
-------------------------------
Title: President & CEO
------------------------------------
SPRINT CORPORATION
By: /s/ Theodore H. Schell
---------------------------------------
Print Name: Theodore H. Schell
-------------------------------
Title: Vice President - Strategic Planning
------------------------------------
and Corporate Development
SIGNATURE PAGE FOR CREDIT AGREEMENT
<PAGE>
EXHIBIT A
---------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE OFFERED OR SOLD UNLESS REGISTERED PURSUANT TO THE
PROVISIONS OF SUCH ACT OR AN EXEMPTION FROM REGISTRATION THEREFROM IS AVAILABLE.
NEWCO SHALL NOT BE REQUIRED TO ISSUE ANY CERTIFICATES TO ANY PERSON UPON
CONVERSION OF THIS NOTE OTHER THAN TO THE HOLDER OF SUCH CONVERTED NOTE UNLESS
NEWCO HAS OBTAINED REASONABLE ASSURANCE THAT SUCH TRANSACTION IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF, OR IS COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER, THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS, INCLUDING, IF
NECESSARY IN THE REASONABLE JUDGMENT OF NEWCO OR ITS LEGAL COUNSEL, RECEIPT OF
AN OPINION TO SUCH EFFECT FROM COUNSEL SATISFACTORY TO NEWCO IN ITS REASONABLE
JUDGMENT.
THE UNDERSIGNED BORROWERS ACKNOWLEDGE RECEIPT OF A COPY
OF THIS PROMISSORY NOTE
CONVERTIBLE SENIOR PROMISSORY NOTE
----------------------------------
____________________, ______________________
(City) (State)
$_________________ [Borrowing Date]
FOR VALUE RECEIVED, the undersigned, Dolphin, Inc., a Delaware corporation
and EarthLink Network, Inc., a Delaware corporation, jointly and severally as
co-makers of this Note, (collectively the "Borrowers"), hereby promise to pay to
the order of Sprint Corporation, a Kansas corporation ("Lender"), its successors
and assigns (each a "Holder"), at its office designated below or at such other
place as the Holder hereof may, from time to time, designate in writing, the
following designated principal and interest in the manner set forth below:
<PAGE>
PRINCIPAL: The principal sum of $___________________________________. Such
amount constitutes an Advance under the Credit Agreement (as hereinafter
defined).
INTEREST on the principal shall be payable from the date hereof to and
including the date of maturity at a rate equal to SIX PERCENT (6 %) per annum;
provided, however, such interest rate may be increased as provided in the Credit
Agreement under certain circumstances to a floating rate equal to five percent
(5%) per annum above the Prime Rate.
Interest shall be computed on the basis of the actual number of elapsed
days and a 360-day year.
PRINCIPAL AND INTEREST shall be payable as follows:
PRINCIPAL: Shall be payable five (5) years after the date of this Note.
INTEREST: Shall be payable quarterly on the fifteenth day of January,
April, July and October of each year commencing on the first such day occurring
after the date of this Note and upon any prepayment or conversion hereunder
until such time as all amounts of principal under this Note are paid in full.
If any Payment Date for this Note is not a Business Day (as defined in
the Credit Agreement), payment shall be made on the next successive Business Day
and interest shall be payable thereon at the rate herein specified during such
extension.
Nothing in this Note shall be construed as an express or implied
agreement by Lender to forbear in the collection of any amount owing hereunder,
or be construed as in any way giving Borrowers the right, express or implied, to
fail to make timely payment hereunder.
PLACE OF PAYMENT: All payments of principal and interest shall be made in
lawful currency of the United States of America in immediately available funds
to Lender to an account designated by instructions from Lender or at such other
place as the Holder hereof may from time to time, designate in writing.
DEFINITIONS: The following terms shall have the following meanings herein:
"Credit Agreement" means the Credit Agreement, dated as of ______________,
1998, between Lender and Borrowers.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Credit Agreement.
CREDIT AGREEMENT: This Note is issued subject to the provisions of the
Credit Agreement and each and every provision of the Credit Agreement is hereby
incorporated into this
A-2
<PAGE>
Note by reference notwithstanding the termination of the Credit Agreement. Each
Holder of this Note, by accepting the same, agrees to and shall be bound by such
provisions.
SET-OFF: Lender may exercise its right of set off in accordance with
Article IX of the Credit Agreement.
- ----------
CONVERSION: The Conversion Price of this Note is $___________. This Note is
subject to the Conversion Rights set forth in the Credit Agreement.
In the event of conversion of this Note in part only, the unpaid portion of
interest accrued on the part of the Note converted shall be prepaid as of the
date of such conversion and a New Note evidencing the remaining principal
balance of this Note shall be issued in the name of the Holder hereof upon the
cancellation hereof.
PREPAYMENT: This Note is subject to optional and mandatory prepayment, all
as provided in the Credit Agreement.
DEFAULT AND ACCELERATION: Upon the occurrence of an Event of Default,
Lender may, at its option, declare the entire unpaid balance of principal of and
interest on this Note, as well as the unpaid principal of and interest on any
other indebtedness or liability of Borrowers to Lender, immediately due and
payable without notice or demand. In addition to Lender's right of set-off as
provided above, Lender shall have, upon the occurrence of any Event of Default,
and at any time thereafter, the remedies provided for in the Credit Agreement
and any other document, agreement or instrument evidencing or otherwise relating
to this Note.
PURPOSE OF LOAN: Borrowers hereby warrant and represent that the proceeds
of this loan will be used solely for business purposes of Borrowers and as set
forth in the Credit Agreement.
MISCELLANEOUS TERMS: Demand, presentment, protest and notice of nonpayment
and dishonor of this Note are hereby waived.
Unless otherwise agreed, all payments made by Borrowers to Lender in
connection with the indebtedness evidenced by this Note shall be applied first
toward all amounts owed to Lender for payment of attorneys' fees and costs of
collection, if any, next toward payment of accrued interest and finally toward
principal. If any Event of Default has occurred and is continuing, any and all
sums received from or for the account of Borrowers shall be applied to any
Indebtedness of any kind owed by Borrowers to Lender, whether evidenced by this
Note or otherwise, in such order as Lender may elect.
Each Borrower agrees that Lender may, at its option, assign all or a part
of, the obligation evidenced hereby to such parties as Lender shall determine in
its sole discretion, subject to the provisions of the Credit Agreement.
A-3
<PAGE>
No delay or omission on the part of Lender in exercising any right or
remedy hereunder shall operate as a waiver of such right or remedy. A waiver on
any one occasion shall not be construed as a bar to or waiver of any such right
and/or remedy on any future occasion.
Notwithstanding anything to the contrary herein, the interest rate hereon
shall not exceed the maximum rate, if any, permitted by applicable law to be
contracted by Borrowers for the purposes set forth herein.
This Note shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware.
Borrowers will pay on demand, to the extent permitted by applicable law,
all costs of collection, including attorneys fees actually incurred or paid by
Lender in enforcing this Note.
If any provision or clause of this Note shall be held or deemed to be or
shall, in fact, be inoperative, invalid or unenforceable as applied in any
particular case or in all cases because it conflicts with any provisions of any
constitution or statute or rule of public policy, or for any other reason, such
determination shall not affect in any way any other provision or clause herein
which can be given effect without the inoperative, invalid or unenforceable
provision or clause.
EXCLUSIVE JURISDICTION AND CONSENT TO SERVICE OF PROCESS. THE PARTIES
--------------------------------------------------------
AGREE THAT ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL BE INSTITUTED IN A FEDERAL COURT SITTING
IN DELAWARE OR STATE COURT SITTING IN DELAWARE, WHICH SHALL BE THE EXCLUSIVE
VENUE OF ANY SUCH ACTION. EACH PARTY WAIVES ANY OBJECTION WHICH SUCH PARTY MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH ACTION, AND IRREVOCABLY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY SUCH COURT (AND THE APPROPRIATE
APPELLATE COURTS) IN ANY SUCH ACTION. ANY AND ALL SERVICE OF PROCESS AND ANY
OTHER NOTICE IN ANY SUCH ACTION SHALL BE EFFECTIVE AGAINST SUCH PARTY WHEN
TRANSMITTED IN ACCORDANCE WITH SECTION 11.01. NOTHING CONTAINED HEREIN SHALL BE
-------------
DEEMED TO AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY MANNER PERMITTED
BY LAW.
DOLPHIN, INC.
By_________________________________
Printed Name:______________________
Title______________________________
<PAGE>
EARTHLINK NETWORK, INC.
By________________________________
Printed Name:_____________________
Title_____________________________
[Any additional Borrowers at the Borrowing Date shall also sign the Note]
<PAGE>
EXHIBIT B
---------
AGREEMENT TO ADD BORROWER
-------------------------
THIS AGREEMENT made and entered into this ______ day of ______, _____ by
and between ______________, a ______________ ("Subsidiary") and Sprint
Corporation, a Kansas corporation ("Sprint").
WHEREAS, Sprint, as lender, and Dolphin, Inc. and EarthLink Network, Inc.,
as borrowers, have entered into a Credit Agreement, dated February __, 1998 (the
"Credit Agreement"); and
WHEREAS, it is anticipated that Subsidiary will become a "Subsidiary" (as
that term is defined in the Credit Agreement) of a Borrower under the Credit
Agreement; and
WHEREAS, Subsidiary recognizes and acknowledges that the Credit Agreement,
the Investment Agreement and the Ancillary Agreements, including Advances
heretofore and hereafter made to the Borrowers under the Credit Agreement, serve
to benefit, directly or indirectly, Subsidiary; and
WHEREAS, the Credit Agreement requires that prior to a Person becoming a
Subsidiary, such Person shall enter into this Agreement.
NOW, THEREFORE, the parties hereto hereby agrees as follows:
1. All capitalized terms appearing herein and not otherwise defined shall
have the meaning attributed to them in the Credit Agreement.
2. Sprint hereby agrees that upon the Subsidiary becoming a Subsidiary
(as defined in the Credit Agreement) of a Borrower, the Subsidiary shall be and
become a "Borrower" under the Credit Agreement with all of the rights and
obligations of a Borrower thereunder.
3. In consideration of Sprint's Agreement set forth in paragraph 2 above,
Subsidiary hereby agrees to be bound by all of the terms and conditions of the
Credit Agreement as a "Borrower" thereunder and hereby joins all other Borrowers
therein in making, jointly and severally with each other Borrower, each and
every agreement, warranty and representation made therein by the Borrowers
thereunder, including, without limitation, the joint and several obligation of
the Borrower to pay all Obligations (including those in existence prior to the
date hereof) when the same are due, whether at maturity, by acceleration,
mandatory prepayment or otherwise.
B-1
<PAGE>
4. Subsidiary agrees that at the request of Sprint, it will execute all
Convertible Senior Promissory Notes outstanding prior to the date hereof as an
additional Borrower, joint obligor and co-maker of each such Note.
5. The Credit Agreement is not otherwise amended and shall continue in
full force and effect.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
the day and year first above written.
SPRINT CORPORATION ________________________________
By:________________________________ By:_____________________________
("Sprint") ("Subsidiary")
The undersigned being all of the Borrowers under the above-mentioned Credit
Agreement hereby consent and agree to the foregoing Agreement to Add Borrowers.
Dated ___________, ______
DOLPHIN, INC. EARTHLINK NETWORK, INC.
By:________________________________ By:_____________________________
("Newco") ("The Company")
[The above is to be agreed to by all other Borrowers that exist at the time the
above Agreement is entered into.]
<PAGE>
EXHIBIT C
---------
COMPLIANCE CERTIFICATE
----------------------
This Compliance Certificate is furnished to Sprint Corporation ("Lender")
pursuant to that certain Credit Agreement dated as of ____________, 1998, by and
among Lender and Dolphin, Inc. (the "Newco") and EarthLink Network, Inc.
(collectively, with those Persons added as a party to the Credit Agreement
pursuant to Section 6.02 thereof, the "Borrowers"). Unless otherwise defined
------------
herein, the terms used in this Compliance Certificate have the meanings ascribed
to thereto in the Credit Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly appointed chief financial officer of Newco;
2. I have reviewed the terms of the Credit Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of each of the Borrowers during the accounting
period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or occurrence of any event which
constitutes a Default or Event of Default during or at the end of the accounting
period covered by the attached financial statements or as of the date of this
Certificate, except as set forth below;
4. No Business Combination has occurred as of the date of this
Certificate;
5. The financial statements required by Section 6.01 of the Credit
------------
Agreement and being furnished to you concurrently with this Certificate are
true, correct and complete as of the date and for the periods covered thereby;
and
6. The Attachment hereto sets forth the financial data and computations
evidencing Newco's compliance with Section 6.11(e) and (f) and Section 6.16 of
----------------------- ------------
the Credit Agreement, which data and computations are, to the best of my
knowledge, true, correct and complete and have been made in accordance with
Section 6.11(e) and (f) and Section 6.16 of the Credit Agreement.
- ----------------------- ------------
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the relevant Borrower has taken, is taking, or
proposes to take with respect to each such condition or event:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
C-1
<PAGE>
The foregoing certifications, together with the computations set forth in
the Attachment hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this ____________ day of
________________ __________.
_____________________________________
Chief Financial Officer for Newco
<PAGE>
ATTACHMENT TO COMPLIANCE CERTIFICATE
Compliance Calculations for Credit Agreement
Calculations as of ___________________
________________________________________________________________________________
<TABLE>
<CAPTION>
INDEBTEDNESS (SECTION 6.16)
<S> <C> <C>
1. Indebtedness (as defined) $__________________
2. EBITDA (as defined) $__________________
3. 4 1/2 times Line 2 $__________________
4. Fiscal Year Amount
----------- -------
1998 $ 75,000,000
1999 150,000.000
2000 200,000,000
2001 and beyond 300,000,000
</TABLE>
5. As listed in Section 6.16 for the Fiscal years indicated,
Indebtedness shall not exceed the greater of Line 3 above
or the amount indicated in Line 4 above adjacent to the
appropriate Fiscal year.
6. Newco is in compliance?
(Circle yes or no) Yes / No
--------
CAPITALIZED LEASE OBLIGATIONS AND OTHER INDEBTEDNESS SECURED BY LIENS (SECTIONS
6.11(e) AND (f))
1. Capitalized Lease Obligations (as defined) $_____________
2. Other Indebtedness (as defined) secured by Liens
(as defined) $_____________
<TABLE>
<CAPTION>
Capitalized Other
Lease Indebtedness
3. Fiscal Year Obligations Secured by Liens
----------- ----------------
<S> <C> <C>
1998 $ 56,250,000 $30,000,000
1999 90,000,000 45,000,000
2000 100,000,000 60,000,000
2001 and beyond 150,000,000 90,000,000
</TABLE>
<PAGE>
4. As set forth in Section 6.11(e) for the Fiscal years indicated,
---------------
Capitalized Lease Obligations shall not exceed the amount indicated in
Line 3 above adjacent to the appropriate Fiscal year.
Newco is in compliance?
(Circle yes or no) Yes / No
--------
5. As set forth in Seciton 6.11(f) for the Fiscal years indicated, other
Indebtedness secured by Liens shall not exceed the amount indicated in
Line 3 above adjacent to the appropriate Fiscal year.
Newco is in compliance?
(Circle yes or no) Yes / No
--------
C-4
<PAGE>
EXHIBIT NO. 99.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of February
10, 1998 (the "Effective Date"), is by and between Dolphin, Inc., a Delaware
corporation ("Newco"), Sprint Corporation, a Kansas corporation ("Sprint") and
Sprint Communications Company L.P., a Delaware limited partnership ("Sprint
L.P.").
WHEREAS, the respective Boards of Directors of Sprint, the general partner
of Sprint L.P. and Newco have determined to enter into a strategic relationship
in the area of Internet access and related services and Sprint and Sprint L.P.
will make investments in EarthLink Network, Inc., a Delaware corporation (the
"Company"), and Newco in connection with the Merger (as defined below) of
Dolphin Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Newco
("Newco Sub"), and the Company in order to enhance the capabilities for growth
and financial and strategic success;
WHEREAS, Sprint, Sprint L.P., Newco, the Company, and Newco Sub have
entered into an Investment Agreement as of the date hereof (the "Investment
Agreement") contemplating that strategic alliance and addressing the terms and
conditions of such investment and related transactions;
WHEREAS, Sprint proposes to make a tender offer (as it may be amended from
time to time as permitted under the Investment Agreement, with the Company's
consent if required thereby, the "Offer") to purchase 1,250,000 shares of common
stock, par value $.01 per share, of the Company (the "Common Stock"), for an
aggregate cash consideration of $56,250,000 and at a price per share of Common
Stock of $45 net to each seller in cash (such price, as may hereafter be
changed, the "Offer Price"), upon the terms and subject to the conditions set
forth in the Investment Agreement; and the Board of Directors of the Company has
approved the Offer and the other transactions contemplated by the Investment
Agreement and is recommending that the Company's stockholders who wish to
receive cash for their shares of the Common Stock accept the Offer;
WHEREAS, immediately following the closing of the Offer, Sprint L.P.
proposes to purchase 4,102,941 shares of Series A Convertible Preferred Stock,
par value $.01 per share of Newco (the "Convertible Preferred Stock") in
exchange for (i) an aggregate cash consideration of $23,750,000, (ii) the
assignment to Newco of 100% of the Sprint Internet Passport Subscribers, and
(iii) entering into a network agreement whereby Newco and the Company will
utilize Sprint's long-distance network under specified terms and conditions;
WHEREAS, Sprint, Sprint L.P., the Company and Newco will enter into a
marketing and distribution agreement whereby Newco and the Company will utilize
the Sprint brand under specified terms and conditions and will, inter alia, have
----- ----
the right to use Sprint L.P. distribution channels under specified terms and
conditions and agrees to sell certain Sprint L.P. products;
WHEREAS, Sprint shall provide Newco and the Company, as co-borrowers, with
up to $25 million of Convertible Senior Debt financing on or after the Closing,
with such amount to
<PAGE>
increase to up to $100 million over time (the "Convertible Debt Financing"),
such indebtedness to be evidenced by one or more Convertible Senior Promissory
Note(s) (the "Convertible Notes");
WHEREAS, the closing of the acqisition of the Convertible Preferred Stock
and the other transactions referred to above other than the Offer shall take
place concurrently with the merger of Newco Sub into the Company (the "Merger")
and the conversion of each share of Common Stock into one share of Newco common
stock, par value $.01 per share (the "Newco Common Stock") pursuant to the
Merger, in each case upon the terms and subject to the conditions set forth in
the Investment Agreement and/or the Ancillary Agreements;
WHEREAS, Sprint and Sprint L.P. may desire, from time to time, to sell to
the public shares of Common Stock acquired in the Offer or pursuant to the
Merger or which may be acquired upon exercise of the conversion rights
associated with the Convertible Preferred Stock and the Convertible Notes or
pursuant to the exercise of its rights under the Governance Agreement
(individually a "Convertible Security" and collectively the "Convertible
Securities");
WHEREAS, Newco, Sprint and Sprint L.P. therefore deem it to be in their
respective best interests to set forth the rights of Sprint in connection with
public offerings and sales of Registrable Securities (as defined below and
hereinafter all references to Sprint shall refer collectively to Sprint and
Sprint L.P. inasmuch as Sprint shall cause all decisions by Sprint to bind both
of them);
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and in the Ancillary
Agreements, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as
follows:
ARTICLE 1.
DEFINITIONS AND CONSTRUCTION
Section 1.1 Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the meanings specified below:
"Affiliate" of a Person means any Person that, directly or indirectly,
---------
controls, is controlled by, or under common control with such Person.
"Ancillary Agreement" shall have the meaning ascribed to that term in the
-------------------
Investment Agreement, and shall also include for purposes of this Agreement, the
Investment Agreement.
"Closing" shall have the meaning ascribed to that term in the Investment
-------
Agreement.
"Closing Date" shall have the meaning ascribed to that term in the
------------
Investment Agreement.
2
<PAGE>
"Closing Price" per share of Registrable Securities on any date shall mean
-------------
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Registrable Securities are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Registrable Securities are listed or
admitted to trading or, if the Registrable Securities are not listed or admitted
to trading on any national securities exchange, if such shares of Registrable
Securities are not listed or admitted to trading on such exchange, as reported
on the Nasdaq National Market, or if not quoted on the Nasdaq National Market,
the last quoted sale price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by Nasdaq or such
other system then in use, or, if on any such date the Registrable Securities are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Registrable Securities selected by the Board of Directors. If the Registrable
Securities are not publicly held or so listed or publicly traded, "Closing
Price" shall mean the Fair Market Value per share as determined in good faith by
the Board of Directors of Newco.
"Common Stock" shall mean (i) Common Stock as defined in the third Recital
------------
to this Agreement with respect to the time period prior to the Merger, (ii)
Newco Common Stock as defined in the sixth Recital to this Agreement with
respect to the time period after the Merger, and (iii) any other class of common
equity of Newco into which the shares defined in (i) and (ii) may hereafter have
been changed or reclassified.
"Effective Date" shall have the meaning ascribed to that term in the
--------------
introductory paragraph of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated thereunder as in effect at the time.
"Governance Agreement" means the Governance Agreement, dated as of the
--------------------
Effective Date, by and between Sprint, Sprint L.P., Newco and the Company.
"Holder" means Sprint, so long as it holds any Registrable Securities, and
------
any Person owning Registrable Securities who is a permitted transferee or
assignee of rights under Article 10 of this Agreement.
"Party" means any Person that is a signatory to this Agreement.
-----
"Person" means any natural person, corporation, partnership, limited
------
liability company, trust, unincorporated organization or other entity.
3
<PAGE>
"Register" the terms "register," "registered," and "registration" refer to
--------
a registration effected by the preparation and filing of a Registration
Statement in compliance with the Securities Act, and the declaration or ordering
of effectiveness of such Registration Statement by the SEC.
"Registrable Securities" means at any time: (i) the Registration Common
----------------------
Shares then owned or held by the Holders, and (ii) the Registration Common
Shares then issuable upon conversion of any and all Convertible Securities then
owned or held by the Holders, and, in each case, all shares of Common Stock
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend, stock split or other distribution
including as a result of any merger, consolidation or other reorganization
involving Newco with respect to, in exchange for, or in replacement of such
Registration Common Shares then owned or held by such Holder or Holders or
Registration Common Shares then issuable upon conversion of any and all
Convertible Securities then owned or held by the Holders, as the case may be,
including as a result of any merger, consolidation or other reorganization
involving Newco. The term "Registrable Securities" excludes, however, any
security (i) the sale of which has been effectively registered under the
Securities Act and which has been disposed of in accordance with a Registration
Statement, (ii) that has been sold by a Holder in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(l) thereof (including transactions pursuant to Rules 144 and 144A)
such that the further disposition of such securities by the transferee or
assignee is not restricted under the Securities Act, (iii) that has been sold by
a Holder in a transaction in which such Holder's rights under this Agreement are
not, or cannot be, assigned, or (iv) for which the registration rights provided
under this Agreement have expired pursuant to Article 13 of this Agreement.
"Registration Common Shares" shall mean all shares of Common Stock owned or
--------------------------
acquired by Sprint, Sprint L.P. or by any permitted assignee or transferee as of
the date hereof or any time subsequent thereto, including Common Stock acquired
in the Tender Offer, by exercise of any top up or other rights to purchase
Common Stock under the Governance Agreement, or otherwise.
"Registration Expenses" means: (i) registration, qualification and filing
---------------------
fees; (ii) fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications or registration of any Registrable Securities being
registered under the Securities Act or any applicable state securities or blue
sky laws); (iii) printing expenses; (iv) fees and disbursements of counsel for
Newco and customary fees and expenses for independent certified public
accountants retained by Newco (including the expenses of any comfort letters or
costs associated with the delivery by independent certified public accountants
of comfort letters customarily requested by underwriters); and (v) fees and
expenses of listing any Registrable Securities on any securities exchange or
automated quotation system on which the Common Stock is then listed or quoted,
but in all events excluding the compensation of regular employees of Newco and
excluding underwriter's fees, discounts and commissions.
"Registration Statement" means any registration statement or similar
----------------------
document under the Securities Act or any successor thereto that covers any of
the Registrable Securities pursuant to the provisions of this Agreement,
including the prospectus or preliminary prospectus included therein, all
amendments and supplements to such Registration Statement, including post-
effective
4
<PAGE>
amendments, all exhibits to such Registration Statement and all material
incorporated by reference in such Registration Statement.
"Rule 144" means Rule 144 promulgated under the Securities Act or any
--------
successor rule thereto.
"Rule 144A" mean Rule 144A promulgated under the Securities Act or any
---------
successor rule thereto.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder as in effect at the time.
Section 1.2. Construction. The definitions in Section 1.1 shall apply
------------
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes," and "including"
shall be deemed to be followed by the phrase "without limitation." All
references to Articles and Sections shall be deemed to be references to Articles
and Sections of this Agreement unless the context otherwise requires. The
headings of the Articles and Sections are inserted for convenience of reference
only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. Unless the context otherwise requires or
provides, any reference to any agreement or other instrument or statute or
regulation is to such agreement, instrument, statute or regulation as amended
and supplemented from time to time (and, in the case of a statute or regulation,
to any successor provision).
ARTICLE 2.
DEMAND REGISTRATION
5
<PAGE>
Section 2.1 If Newco shall receive a written request from Sprint, or if
Sprint is not a Holder at such time, from Holders who in the aggregate hold a
majority of the Registrable Securities (in either case, collectively, the
"Initiating Holders") that Newco file a Registration Statement under the
Securities Act covering the registration of any or all of such Holder's
Registrable Securities, then Newco shall (i) within 10 days of the receipt
thereof, give written notice of such request to all Holders of outstanding
Registrable Securities known to Newco and to any additional addressees provided
to Newco by any transferee of any Holder, and (ii) subject to the limitations
contained in this Article 2, as soon as practicable and in any event within 45
days of the receipt of such request, file the Registration Statement to effect
registration under the Securities Act covering all Registrable Securities for
which Newco receives a request from the Holders and transferees thereof within
30 days of the delivery of the notice by Newco as required in clause (i) above.
Newco, however, shall not be required to file a Registration Statement pursuant
to this Article 2 unless the aggregate number of Registrable Securities
requested to be registered is greater than 750,000 (as adjusted to reflect stock
splits, reverse stock splits, stock dividends and similar actions).
Section 2.2 If an Initiating Holder intends to distribute the Registrable
Securities covered by its request by means of an underwriting, it shall so
advise Newco as a part of its request made pursuant to Section 2.1 and Newco
shall include such information in the written notice to the Holders referred to
in Section 2.1. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in the underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to sell Registrable Securities through such underwriting
(together with Newco as provided in Section 4.1(ix) of this Agreement and any
other holder of shares of Common Stock permitted to participate in such
registration pursuant to this Section 2.2) shall enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by the Initiating Holder(s) (provided the same are
underwriters of recognized national standing, and provided that such selection
is subject to the approval of Newco, which shall not be unreasonably withheld)
upon the terms and conditions agreed upon among Newco, the Initiating Holder(s)
and such underwriter(s). Notwithstanding any other provision of this Article 2,
if the underwriter(s) advise the Initiating Holder(s) and Newco in writing that
marketing or other factors require a limitation of the number of Registrable
Securities to be underwritten, then Newco shall so advise all Holders of
Registrable Securities that would otherwise be underwritten pursuant hereto, and
the number of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders thereof, including the Initiating
Holder(s), in proportion (as nearly as practicable) to the number of Registrable
Securities which each Holder requested to be included in such registration;
provided, that there shall be no reduction in the number of shares included in
the registration by Sprint or its successor until all shares of Holders other
than Sprint or its successor have been excluded from such registration. If the
number of Registrable Securities to be underwritten has not been so limited,
Newco may include shares of Common Stock for its own account (or for the account
of other shareholders) in such registration if the underwriter(s) so agree and
to the extent that, in the opinion of such underwriter(s), the inclusion of such
additional shares will not adversely affect the offering and successful
marketing of the Registrable Securities included in such registration and if the
number of Registrable Securities that would otherwise have been included in such
registration and underwriting will not thereby be limited.
6
<PAGE>
Section 2.3 Newco shall not be obligated to effect a total of more than
four (4) registrations and shall not be obligated to cause any registration
pursuant to this Article 2 to be declared effective unless at least nine months
have elapsed since the prior Registration Statement filed pursuant to Article II
ceased to be effective.
ARTICLE 3.
INCIDENTAL REGISTRATION
7
<PAGE>
If at any time (but without any obligation to do so) Newco proposes to
register (including a registration effected by Newco for shareholders other than
the Holders) any shares of Common Stock under the Securities Act in connection
with the public offering of such shares solely for cash on any form of
Registration Statement in which the inclusion of Registrable Securities is
appropriate (other than a registration (i) relating solely to the sale of
securities to participants in a Company stock or stock option plan, (ii)
pursuant to a Registration Statement on Form S-4 or Form S-8 (or any successor
forms) or any form that does not include substantially the same information,
other than information relating to the selling shareholders or their plan of
distribution, as would be required to be included in a Registration Statement
covering the sale of Registrable Securities, (iii) in connection with any
dividend reinvestment or similar plan, or (iv) for the sole purpose of offering
securities to another entity or its security holders in connection with the
acquisition of assets or securities of such entity or any similar business
combinations transaction), Newco shall promptly give each Holder written notice
of such registration at least 10 days before the anticipated filing date of any
such Registration Statement. Such notice shall describe fully the proposed
method of distribution of the securities being registered. If the registration
of which Newco gives notice is for a registered public offering involving an
underwriting, Newco shall so advise each of the Holders as a part of the written
notice given pursuant to this Article. Upon the written request of any Holder
given within 10 days after the delivery of such notice by Newco, Newco shall
cause to be registered under the Securities Act all of the Registrable
Securities that such Holder has so requested to be registered. Newco may decline
to file a Registration Statement after giving notice to the Holders, or withdraw
a Registration Statement after filing and after such notice, but prior to the
effectiveness thereof, provided that Newco shall promptly notify each Holder of
Registrable Securities in writing of any such action and provided further that
Newco shall bear all out-of-pocket expenses incurred by each Holder or otherwise
in connection with such declined or withdrawn Registration Statement. Further,
any such declining or withdrawal shall be without prejudice to the rights (if
any) of the Holders immediately to request that such registration be effected as
a registration under Article 2. The right of any Holder to have Registrable
Securities included in such Registration Statement shall be conditioned upon
participation in any underwriting to the extent provided herein. Newco shall not
be required to include any Registrable Securities in such underwriting unless
the Holders thereof agree to enter into an underwriting agreement in customary
form, and upon terms and conditions agreed upon among such Holders, Newco and
the underwriter(s), with the underwriter(s) selected by Newco. In the event that
the underwriter(s) shall advise Newco that marketing or other factors require a
limitation of the number of shares to be underwritten, then Newco shall so
advise all Holders of Registrable Securities that would otherwise be
underwritten pursuant hereto. The underwriter(s) may exclude some or all of the
Registrable Securities from such underwriting and the number of Registrable
Securities, if any, that may be included in the underwriting shall be allocated
among all Holders thereof in proportion (as nearly as practicable) to the number
of Registrable Securities which each Holder requested be included in such
registration. Nothing in this Article 3 is intended to diminish the number of
shares to be sold by Newco in such underwriting. Newco and the underwriter(s)
selected by Newco shall make all determinations with respect to the timing,
pricing and other matters related to the offering, provided that no Holder shall
be obligated to sell any Registrable Securities in such offering and may be
withdrawn at any time for any reason, including a disagreement with respect to
the timing, pricing and other matters related to the offering.
8
<PAGE>
ARTICLE 4.
REGISTRATION PROCEDURE
Section 4.1 Whenever required under this Agreement to effect the
registration of any Registrable Securities, Newco shall, as expeditiously as
reasonably practicable:
(i) Prepare and file with the SEC as soon as practicable a new
Registration Statement with respect to such Registrable Securities and use
its reasonable best efforts to cause such Registration Statement to become
effective as promptly as practicable, and keep such Registration Statement
continuously effective for up to 120 days; provided, however, that no
Registration Statement need remain in effect after all Registrable
Securities covered thereby have been sold and the confirmation of sale and
prospectus delivery requirements of the Securities Act and applicable state
securities or blue sky laws have been effected.
(ii) Furnish to each Holder and to any underwriter, before filing
with the SEC, copies of any Registration Statement (including all exhibits)
and any prospectus forming a part thereof and any amendments and
supplements thereto (including all documents incorporated or deemed
incorporated by reference therein prior to the effectiveness of such
Registration Statement and including each preliminary prospectus, any
summary prospectus or any term sheet (as such term is used in Rule 434
under the Securities Act)) and any other prospectus filed under Rule 424
under the Securities Act, which documents, other than documents
incorporated or deemed incorporated by reference, will be subject to the
review of the Holders and any such underwriter for a period of at least two
business days. Newco shall not file any such Registration Statement or such
prospectus or any amendment or supplement to such Registration Statement or
prospectus to which any Holder or any such underwriter shall reasonably
object within two business days after the receipt thereof. A Holder or such
underwriters, if any, may only object to such filing if the Registration
Statement, amendment, prospectus or supplement, as applicable, as proposed
to be filed, contains a material misstatement or omission.
(iii) Prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such Registration Statement.
(iv) Furnish to the Holders of Registrable Securities to be
registered and to any underwriter, without charge, such number of copies of
a prospectus, including each preliminary prospectus, summary prospectus or
term sheet, and any amendment or supplement thereto as they may, from time
to time, reasonably request and a reasonable number of copies of the then-
effective Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, all documents incorporated
therein by reference and all exhibits (including those incorporated by
reference).
9
<PAGE>
(v) To the extent practicable, promptly prior to the filing of any
document that is to be incorporated by reference into any Registration
Statement or prospectus forming a part thereof subsequent to the
effectiveness thereof, and in any event no later than the date such
document is filed with the SEC, provide copies of such document to the
Holders of Registrable Securities covered thereby and any underwriter and
make representatives of Newco available for discussion of such document and
other customary due diligence matters, and include in such document prior
to the filing thereof such information as any Holder or any such
underwriter may reasonably request.
(vi) Use its reasonable best efforts (x) to register and qualify the
securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Holders, (y) to keep such registration or qualification in
effect for so long as the applicable Registration Statement remains in
effect, and (z) to take any other action which may be reasonably necessary
or advisable to enable such Holders to consummate the disposition in such
jurisdictions of the securities to be sold by such Holders; provided,
however, that Newco shall not be required to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions where it would not otherwise be required to so qualify to do
business or consent to service of process or subject itself to taxation in
any such jurisdiction.
(vii) Use its reasonable best efforts to cause all Registrable
Securities covered by such Registration Statement to be registered with or
approved by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to Newco and
counsel to the Holders of Registrable Securities to enable the Holders
thereof to consummate the disposition of such Registrable Securities.
(viii) Cooperate with the Holders of Registrable Securities and each
underwriter participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to be
made with the National Association of Securities Dealers, Inc.
(ix) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the underwriter(s) of such offering, with such terms
and conditions as Newco, the Holders and the underwriter(s) may reasonably
agree, including customary indemnification and contribution obligations of
the type contemplated by Article 8 hereof. Newco agrees to cause the
participation by senior management of Newco in such meetings with and
presentations (including the provision of all customary information in
connection therewith) to investors, analysts, investment banking firms and
other institutions as are usual and customary in connection with the public
offering of registered securities by companies similar to Newco. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement; provided, that no Holder shall be
required to make any
10
<PAGE>
representation concerning information in a Registration Statement that is
more broad than the information for which such Holder has agreed to provide
indemnity under Section 8.2.
(x) Promptly notify each Holder of Registrable Securities covered by
a Registration Statement (A) upon discovery that, or upon the happening of
any event as a result of which, the prospectus forming a part of such
Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, (B) of the
issuance by the SEC of any stop order suspending the effectiveness of such
Registration Statement or the initiation of proceedings for that purpose,
(C) of any request by the SEC for (1) amendments to such Registration
Statement or any document incorporated or deemed to be incorporated by
reference in any such Registration Statement, (2) supplements to the
prospectus forming a part of such Registration Statement or (3) additional
information, or (D) of the receipt by Newco of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose, and at
the request of any such Holder promptly prepare, file with the SEC and
other required agency, and furnish to it a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary or
take other action so that, as applicable, (a) as thereafter delivered to
the purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, (b) such stop order is lifted at the earliest possible time, or
the proceedings that might otherwise lead to a stop order are terminated at
the earliest practicable time, (c) such request by the SEC is satisfied, or
(d) such suspension is lifted at the earliest possible time.
(xi) Use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of any such registration, or the lifting
of any suspension of the qualification (or exemption from qualification) of
any of the Registrable Securities for sale in any jurisdiction.
(xii) If requested by any Initiating Holder, or any underwriter,
promptly incorporate in such Registration Statement or prospectus, pursuant
to a supplement or post-effective amendment if necessary, such information
as the Initiating Holder and any underwriter may reasonably request to have
included therein, including information relating to the "plan of
distribution" of the Registrable Securities, information with respect to
the principal amount or number of shares of Registrable Securities being
sold to such underwriter, the purchase price being paid therefor and any
other terms of the offering of the Registrable Securities to be sold in
such offering and make all required filings of any such prospectus
supplement or post-effective amendment as soon as practicable after Newco
is notified of the matters to be incorporated in such prospectus supplement
or post-effective amendment.
11
<PAGE>
(xiii) Otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning after the effective date of such Registration Statement, which
earnings statement shall satisfy the provision of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder.
(xiv) Provide promptly to the Holders upon request any document
filed by Newco with the SEC pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
(xv) Cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange or automated quotation
system on which shares of the Common Stock is then listed. If any of such
shares are not so listed, Newco shall cause such shares to be listed on the
securities exchange or automated quotation system as may be reasonably
requested by the Holders of a majority of the Registrable Securities being
registered.
(xvi) Furnish to the Holders, at the request of any Holder
requesting registration pursuant to this Agreement, (A) an opinion of
counsel representing Newco for the purposes of such registration addressed
to such Holder and dated the date of the closing under the underwriting
agreement, if any, or the date of effectiveness of the Registration
Statement if such registration is not an underwritten offering, and (B) if
such accountant will render such letter to such Holders, a "comfort" letter
from independent certified public accountants of Newco who have certified
Newco's financial statements included in such registration with respect to
events included in and subsequent to the date of such financial statements,
in each case to be dated such date and to be in form and substance as is
customarily given by counsel or independent certified public accountants,
as the case may be, to underwriters in an underwritten public offering,
addressed to the underwriters.
(xvii) Permit a representative of any Holder of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration, and any attorney or accountant retained by such Holder
or underwriter, to participate, at each Person's own expense, in the
preparation of the Registration Statement, and cause Newco's officers,
directors and employees to supply all information reasonably requested by
any such representative, underwriter, attorney or accountant in connection
with such registration; provided, however, that such representatives,
underwriters, attorneys or accountants enter into a confidentiality
agreement, in form and substance reasonably satisfactory to Newco, prior to
the release or disclosure of any such information.
(xviii) Promptly notify the Holders and any underwriter when any
Registration Statement filed pursuant to this Agreement is declared
effective.
Notwithstanding the foregoing, Newco may delay, suspend or withdraw any
registration or qualification of Registrable Securities required pursuant to
this Agreement for a period not exceeding
12
<PAGE>
120 days if Newco shall in good faith determine that any such registration would
adversely affect an offering or contemplated offering of any securities of Newco
or any other contemplated material corporate event (including requiring the
premature disclosure of such event); provided that (i) there shall be no more
than three such discontinuances during any two-year period, and (ii) if Newco
imposes such a suspension or a postponement pursuant to this Article 4 following
the printing and distribution of a preliminary prospectus in any underwritten
public offering of Registrable Securities (except such suspension, not to exceed
fifteen days, which results from an event that is not within the reasonable
control of Newco), then Newco shall reimburse the Holder for such printing
expenses and all other Registration Expenses incurred in connection therewith by
the Holder.
ARTICLE 5.
HOLDER'S OBLIGATION TO FURNISH INFORMATION
It shall be a condition precedent to the obligations of Newco to take any
action pursuant to this Agreement with respect to any Registrable Securities
that the Holder of such securities furnish to Newco such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of such Holder's Registrable Securities.
Each Holder agrees that, upon receipt of any notice from Newco, such Holder
will forthwith discontinue disposition of Registrable Securities pursuant to the
then current prospectus until (i) such Holder is advised in writing by Newco
that a new Registration Statement covering the reoffer of Registrable Securities
has become effective under the Securities Act, (ii) such Holder receives copies
of a supplemented or amended prospectus contemplated by Article 4 which
addresses any additional information, including material nonpublic information,
required to be disclosed therein, or until such Holder is advised in writing by
Newco that the use of the prospectus may be resumed, or (iii) a period of 75
days has elapsed, whichever is sooner. Newco shall use its reasonable best
efforts to limit the duration of any discontinuance of disposition of
Registrable Securities pursuant to this paragraph.
13
<PAGE>
ARTICLE 6.
REGISTRATION EXPENSES
In the case of any demand registration pursuant to Article 2, Newco shall
pay all Registration Expenses. In the case of any incidental registration
pursuant to Article 3, the requesting Holders shall bear the pro rata share of
underwriter's fees, discounts and commissions incurred in such registration and
any incremental Registration Expenses, in each case, including (i) incremental
registration and qualification fees and expenses, and (ii) any incremental costs
and disbursements (including legal fees and expenses) that result from the
inclusion of the Registrable Securities included in such registration, with such
incremental expenses being borne by the requesting Holders on a pro rata basis.
Notwithstanding the foregoing, if, as a result of the withdrawal of a request
for registration pursuant to Article 2 by any of the Holders, as applicable, the
Registration Statement does not become effective, the Holders and the other
stockholders requesting registration may elect to bear the Registration Expenses
(pro rata on the basis of the number of their shares included in the
registration request, or on such other basis as such Holders and other
stockholders may agree), in which case such registration shall not be counted as
a registration requested under Section 2.3.
ARTICLE 7.
EFFECTIVENESS OF REGISTRATION
A registration requested pursuant to Article 2 will not be deemed to have
been effected if (i) the Registration Statement has not been kept effective for
the period required under Section 4.1(i) of this Agreement, (ii) the offering of
Registrable Securities pursuant to such registration is interfered with by any
stop order, injunction or other order or requirement of the SEC or other
governmental agency or court, (iii) the conditions to the closing of any such
registration that is underwritten are not satisfied, unless such conditions have
not been satisfied by the Holders participating in the underwriting, or (iv)
Newco has not complied with the terms of this Agreement, including Article 4.
ARTICLE 8.
INDEMNIFICATION AND CONTRIBUTION
14
<PAGE>
Section 8.1 In the event any Registrable Securities are included in a
Registration Statement pursuant to this Agreement, Newco will indemnify and hold
harmless each Holder, each Person, if any, who "controls" such Holder (within
the meaning of the Securities Act or the Exchange Act) and their respective
directors, officers, employees and agents against all losses, claims, damages,
or liabilities, joint or several, or actions in respect thereof to which such
Holder or other Person entitled to indemnification hereunder may become subject
under the Securities Act, the Exchange Act, state securities or blue sky law,
common law or otherwise, insofar as such losses, claims, damages, liabilities or
actions in respect thereof arise out of, or are based upon, any untrue statement
or alleged untrue statement of any material fact contained in such Registration
Statement, any related preliminary prospectus, or any related prospectus or any
amendment or supplement thereto, offering circular or other document (including
any related notification or the like) incident to any such registration,
qualification or compliance, or arise out of, or are based upon, any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
Newco of the Securities Act, the Exchange Act, state securities or blue sky law,
common law or otherwise and relating to action or inaction required of Newco in
connection with any such registration, qualification or compliance, and Newco
will reimburse each such Holder or other Person entitled to indemnification
hereunder for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that Newco will not be so liable to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, an untrue statement or alleged untrue statement of a material
fact or an omission or alleged omission to state a material fact in such
Registration Statement, such preliminary prospectus, or such prospectus, or any
such amendment or supplement thereto, offering circular or other document
(including any related notification or the like) incident to any registration,
qualification or compliance, in reliance upon, and in conformity with, written
information furnished to Newco by the Holder specifically for use therein.
Newco will also indemnify underwriters and dealer managers participating in the
distribution, each Person who "controls" such Persons (within the meaning of the
Securities Act or the Exchange Act), and their respective officers, directors,
employees and agents to the same extent as provided above with respect to the
indemnification of the Holders, if so requested, except (i) with respect to
information furnished in writing specifically for use in any prospectus or
Registration Statement by any selling Holders or any such underwriters, or (ii)
to the extent that any such loss, claim, damage, liability or action is solely
attributable to such underwriter's failure to deliver a final prospectus (or
amendment or supplement thereto) that corrects a material misstatement or
omission contained in the preliminary prospectus (or final prospectus).
15
<PAGE>
Section 8.2 With respect to written information furnished to Newco by a
Holder specifically for use in a Registration Statement, any related preliminary
prospectus, or any related prospectus or any supplement or amendment thereto,
offering circular or other document (including any related notification or the
like) incident to any registration, qualification or compliance, if Registrable
Securities held by it are included in the securities as to which such
registration, qualification or compliance is being effected, such Holder will
severally indemnify and hold harmless Newco and its directors, officers,
employees, agents and each Person, if any, who "controls" Newco (within the
meaning of the Securities Act or the Exchange Act) and any other Holder against
any losses, claims, damages or liabilities, joint or several, or actions in
respect thereof, to which Newco or such other Person entitled to indemnification
hereunder may become subject under the Securities Act, the Exchange Act, state
securities or blue sky laws, common law or otherwise, insofar as such losses,
claims, damages, liabilities or actions in respect thereof arise out of, or are
based upon, any untrue statement or alleged untrue statement of any material
fact contained in such Registration Statement, such preliminary prospectus, or
such prospectus, or any such amendment or supplement thereto, offering circular
or other document (including any related notification or the like) incident to
any registration, qualification or compliance, or arise out of, or are based
upon, the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and such Holder will reimburse Newco and such other Persons for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, in each case to the
extent, but only to the extent, that the same arises out of, or is based upon,
an untrue statement or alleged untrue statement of material fact or an omission
or alleged omission to state a material fact in such Registration Statement,
such preliminary prospectus, or such prospectus or any such amendment or
supplement thereto in reliance upon, and in conformity with, such written
information; provided, however, that the obligations of each of the Holders
hereunder shall be limited to an amount equal to the net proceeds to such Holder
of Registrable Securities sold as contemplated herein. Newco shall be entitled
to receive indemnities from underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the distribution, to
the same extent as provided above with respect to the information so furnished
in writing by such Persons specifically for inclusion in any prospectus or
Registration Statement. The Holder will also indemnify underwriters and dealer
managers participating in the distribution and each Person who "controls" such
Persons (within the meaning of the Securities Act or the Exchange Act), their
officers, directors, employees and agents to the same extent as provided herein
with respect to the indemnification of Newco, if so requested.
Section 8.3 Promptly after receipt by an indemnified Party of notice of
any claim or the commencement of any action, the indemnified Party will, if a
claim in respect thereof is to be made against the indemnifying Party, notify
the indemnifying Party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying Party
will not relieve it from any liability that it may have to the indemnified Party
except to the extent it was actually damaged or suffered any loss or incurred
any additional expense as a result thereof. If any such claim or action is
brought against an indemnified Party, and it notifies the indemnifying Party
thereof, the indemnifying Party will be entitled to assume the defense thereof
with counsel selected by the indemnifying Party and reasonably satisfactory to
the indemnified Party. After notice from the indemnifying Party to the
indemnified Party of its election to assume the defense of such claim or
16
<PAGE>
action, (i) the indemnifying Party will not be liable to the indemnified Party
for any legal or other expense subsequently incurred by the indemnified Party in
connection with the defense thereof, (ii) the indemnifying Party will not be
liable for the costs and expenses of any settlement of such claim or action
unless such settlement was effected with the written consent of the indemnifying
Party or the indemnified Party waived any rights to indemnification hereunder in
writing, in which case the indemnified Party may effect a settlement without
such consent, and (iii) the indemnified Party will be obligated to cooperate
with the indemnifying Party in the investigation of such claim or action;
provided, however, that the indemnified Party who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by such
indemnified Party against Newco may employ its own counsel if such indemnified
Party has been advised by counsel in writing that, in the reasonable judgment of
such counsel, it is advisable for such indemnified Party to be represented by
separate counsel due to the presence of actual or potential conflicts of
interest, and in that event the fees and expenses of such separate counsel will
also be paid by Newco; provided that Newco shall not be liable for the
reasonable fees and expenses of more than one separate counsel at any time for
all such indemnified parties. An indemnifying Party shall not, without the prior
written consent of the indemnified parties, settle, compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes a release of such indemnified Party reasonably acceptable to such
indemnified Party from all liability arising out of such claim, action, suit or
proceeding and unless the indemnifying Party shall confirm in a written
agreement reasonably acceptable to such indemnified Party, that notwithstanding
any federal, state or common law, such settlement, compromise or consent shall
not adversely affect the right of any indemnified Party to indemnification or
contribution as provided in this Agreement.
Section 8.4 If for any reason the indemnification provided for in
Sections 8.1 or 8.2 is unavailable to an indemnified Party or is insufficient to
hold such indemnified Party harmless as contemplated therein, then the
indemnifying Party shall contribute to the amount paid or payable by the
indemnified Party as a result of such loss, claim , damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the indemnifying Party and the indemnified Party, but also the relative fault
of the indemnifying Party and the indemnified Party, as well as any other
relevant equitable considerations. The relative fault of the indemnifying Party
and of the indemnified Party shall be determined by reference to, among other
things, whether the untrue (or alleged untrue) statement of a material fact or
the omission (or alleged omission) to state a material fact relates to
information supplied by the indemnifying Party or by the indemnified Party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, however, that the
obligations of each of the Holders hereunder shall be limited to an amount equal
to the net proceeds to such Holder of Registrable Securities sold as
contemplated herein. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
17
<PAGE>
Section 8.5 The obligations under this Article 8 shall survive the
completion of any offering of Registrable Securities in a Registration Statement
pursuant to this Agreement, and otherwise.
Section 8.6 Notwithstanding the foregoing provisions of this Article 8,
to the extent that the provisions regarding indemnification and contribution
contained in the underwriting agreement entered into in connection with any
underwritten public offering contemplated by this Agreement are in conflict with
the foregoing provisions, the provisions in such underwriting agreement shall be
controlling, provided that each Holder, each Person, if any, who controls such
Holder (within the meaning of the Securities Act or the Exchange Act) and their
respective directors, officers, employees and agents receive protection at least
as extensively and are subject to obligations that are no more extensive, than
those set forth in this Article 8.
ARTICLE 9.
REPORTS UNDER EXCHANGE ACT
With a view to making available to the Holders the benefits of Rule 144 and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of Newco to the public without registration, Newco agrees that
so long as Newco is subject to the reporting requirements of the Exchange Act,
to:
(1) Make and keep public information available, as those terms are
understood and defined in Rule 144;
(2) File with the SEC in a timely manner all reports and other
documents required of Newco under the Securities Act and the Exchange Act;
and
(3) Furnish to any Holder, so long as the Holder owns any Registrable
Securities, upon request (a) a written statement by Newco as to its
compliance with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (b) a copy of the most recent annual or quarterly
report of Newco and such other reports and documents so filed by Newco, and
(c) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the selling of
any such securities without registration or pursuant to such form.
ARTICLE 10.
18
<PAGE>
ASSIGNMENT OF REGISTRATION RIGHTS
The Holders' rights pursuant to this Agreement may not be assigned or
transferred by any Holder without the consent of Newco; provided, however, that
any transfer or assignment of the Common Stock or the Convertible Securities
permitted pursuant to the Governance Agreement, including any assignment or
transfer to an Affiliate of Sprint or any transfer pursuant to any merger or
sale of substantially all of the assets of Sprint or such Affiliates shall also
cause a permitted transfer or assignment of the rights under this Agreement and,
provided, further, that assignment or transfer may be made by (i) Sprint to any
of its Affiliates, (ii) any Affiliate of Sprint to any other Affiliate of
Sprint, or (iii) pursuant to any merger or sale of substantially all of the
assets of Sprint or such Affiliates (or any transaction having such effect)
without the consent of Newco. Such an assignment or transfer shall be in
accordance with all applicable securities laws.
ARTICLE 11.
AMENDMENT OF REGISTRATION RIGHTS
Any provision of this Agreement may be amended or the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of Newco and the
Holders of a majority of Registrable Securities then outstanding. Any amendment
or waiver effected in accordance with this Section shall be binding upon each
Holder of any Registrable Securities, each future Holder of such Registrable
Securities and Newco.
ARTICLE 12.
STAND-OFF AGREEMENT
Any Holder, if requested by Newco or an underwriter of an underwritten
public offering, agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise transfer or dispose of any Common Stock
held by such Holder (other than Registrable Securities included in the
registration) without the prior written consent of Newco or such underwriter(s),
as the case may be, during a period of up to five days prior to the pricing of
such public offering and 90 days following the effective date of any
underwritten registration of Newco's securities effected pursuant to Articles 2
or 3. Such agreement shall be in writing in form satisfactory to Newco and such
underwriter, and may be included in the underwriting agreement. Newco may impose
stop-transfer instructions with respect to the securities subject to the
foregoing restriction until the end of the required stand-off period.
ARTICLE 13.
19
<PAGE>
TERMINATION OF REGISTRATION RIGHTS
If the number of shares of Registrable Securities owned by a Holder
represents less than one percent (1%) of the total number of shares of Common
Stock then outstanding, then such Holder's registration rights under this
Agreement relating to such Registrable Securities shall terminate on the date
such Holder is able to dispose of all of its shares of Registrable Securities in
any 90-day period pursuant to Rule 144. All registration rights (except for
rights previously exercised in connection with an underwritten public offering
pursuant to Article 3) of a Holder under this Agreement shall terminate on the
date on which all of such Holder's shares of Registrable Securities can be sold
pursuant to Rule 144(k).
ARTICLE 14.
COMPANY OPTION
Notwithstanding any provision to the contrary, Newco shall be granted an
option to purchase the number of shares of Registrable Securities set forth in a
Holder's written request that such Registrable Securities shall be Registered
pursuant to Article 2 or Article 3, which must be exercised by delivering
written notice of exercise to Sprint within ten business days after receipt of
such notice. The exercise price per share under such option shall be the average
Closing Price for a period of 20 trading days immediately preceding the date of
such written request for Registration. The aggregate purchase price shall be
paid to Holders, based on the number of Registrable Shares proposed to be sold
as set forth in such notice, and shall be payable in cash by wire transfer of
immediately available funds to the accounts specified in wire transfer
instructions supplied by a duly authorized officer of a Holder with respect to
payments due such Holder.
ARTICLE 15.
EXERCISE OF RIGHTS
Notwithstanding any other provision of this Agreement to the contrary, the
Holders may not exercise rights to Register Registrable Securities hereunder
until 27 months have elapsed after the Closing Date. Notwithstanding anything
herein to the contrary, during such 27 month period, Newco will not be obligated
to provide to the Holders notice of a registration as otherwise required under
Article 3.
ARTICLE 16.
20
<PAGE>
MISCELLANEOUS
Section 16.1 Confidential Information. No Holder may use any
------------------------
confidential information received by it pursuant to this Agreement in violation
of the Exchange Act or reproduce, disclose, or disseminate such information to
any other Person (other than its employees or agents having a need to know the
contents of such information and its accountants and attorneys), except to the
extent reasonably related to the exercise of rights under this Agreement, unless
(i) such information has been made available to the public generally (other than
by such recipient in violation of this Section 16.1), or (ii) such recipient is
required to disclose such information by a governmental body, regulatory agency
or subpoena or by law in connection with a transaction that is not otherwise
prohibited hereby and, to the extent possible, Newco is given a reasonable
opportunity to obtain injunctive relief or a protective order to maintain the
confidentiality of such information.
Section 16.2 Notices. Unless otherwise provided herein, any notice,
-------
request, waiver, instruction, consent or document or other communication
required or permitted to be given by this Agreement shall be effective only if
it is in writing and (a) delivered by hand or sent by certified mail, return
receipt requested, (b) if sent by a nationally-recognized overnight delivery
service with delivery confirmed, or (c) if telexed or telecopied, with receipt
confirmed as follows:
Newco: Dolphin, Inc.
3100 New York Drive
Pasadena, California 91107
Attn: President and Chief Executive Officer
Telecopy No.: (626) 296-2161
with a copy to: Hunton & Williams
NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Scott M. Hobby, Esq.
Telecopy No.: (404) 888-4190
Sprint: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Chief Financial Officer
Telecopy No.: (913) 624-8426
with a copy to: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Corporate Secretary
Telecopy No.: (913) 624-2256
21
<PAGE>
with an additional Stinson, Mag & Fizzell, P.C.
copy to: 1201 Walnut, Suite 2800
P.O. Box 419251
Kansas City, Missouri 64141-6251
Attn: John A. Granda, Esq.
Telecopy No.: (816) 691-3495
The Parties shall promptly notify each other of any change in their respective
addresses or facsimile numbers or of the Person or office to receive notices,
requests or other communications under this Section 16.2. Notice shall be
deemed to have been given as of the date when so personally delivered, when
physically delivered by the U.S. Postal Service at the proper address, the next
day when delivered during business hours to an overnight delivery service
properly addressed or when receipt of a telex or telecopy is confirmed, as the
case may be, unless the sending Party has actual Knowledge (as defined in the
Investment Agreement) that such notice was not received by the intended
recipient.
Section 16.3 Entire Agreement. This Agreement and, upon execution by all
----------------
Parties thereto, the Ancillary Agreements, together with the respective
Schedules and Exhibits hereto and thereto, embodies the entire agreement and
understanding of the Parties in respect to the matter contemplated hereby and
thereby and supersedes and renders null and void all other prior agreements and
understandings, written and oral, with respect to the subject matter hereof and
thereof, provided that this provision shall not abrogate any other written
--------
agreement executed simultaneously with this Agreement by one or more of the
Parties to the Investment Agreement with respect to the Parties signing such
other agreement. No Party shall be liable or bound to any other Party in any
manner by any promises, conditions, representations, warranties, covenants,
agreements and understandings, except as specifically set forth herein or
therein.
Section 16.4 Waiver. Except as otherwise permitted in this Agreement,
------
the terms or conditions of this Agreement may not be waived unless set forth in
a writing signed by the Party entitled to the benefits thereof. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a waiver
of such provision at any time in the future or a waiver of any other provision
hereof. The rights and remedies of the Parties are cumulative and not
alternative. Except as otherwise provided in this Agreement, neither the failure
nor any delay by any Party in exercising any right, power or privilege under
this Agreement, or any of the Ancillary Agreements or the documents referred to
in this Agreement or therein will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege.
Section 16.5 Successors and Assigns. Neither this Agreement nor any of
----------------------
the rights, interests or obligations under this Agreement shall be assigned or
transferred, in whole or in part, by any of the Parties without the prior
written consent of the other Parties except as set forth in Article 10. 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.
22
<PAGE>
Section 16.6 Governing Law. This Agreement shall be governed by the laws
-------------
of the State of Delaware, without regard to conflict of laws principles.
Section 16.7 Severability. If any term or provision of this Agreement or
------------
the application thereof to either Party or set of circumstances shall, in any
jurisdiction and to any extent, be finally held invalid or unenforceable, such
term or provision shall only be ineffective as to such jurisdiction, and only to
the extent of such invalidity or unenforceability, without invalidating or
rendering unenforceable any other terms or provisions of this Agreement or under
any other circumstances, and the Parties shall negotiate in good faith a
substitute provision which comes as close as possible to the invalidated or
unenforceable term or provision, and which puts each Party in a position as
nearly comparable as possible to the position it would have been in but for the
finding of invalidity or unenforceability, while remaining valid and
enforceable.
Section 16.8 No Inconsistent Agreements. Newco will not hereafter enter
--------------------------
into any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders of Registrable Securities in this Agreement.
Section 16.9 Remedies. The Parties hereto recognize and agree that
--------
immediate irreparable damages for which there is no adequate remedy at law would
occur in the event that any provision of this Agreement is not performed in
accordance with the specific terms hereof or is otherwise breached. It is
accordingly agreed that in the event of a failure by a Party to perform its
obligations under this Agreement, the non-breaching Party shall be entitled to
specific performance through injunctive relief to prevent breaches of the
provisions of this Agreement and to enforce specifically the provisions of this
Agreement in any action instituted in any court having subject matter
jurisdiction, in addition to any other remedy to which such Party may be
entitled, at law or in equity.
Section 16.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts each of which when so executed and delivered shall for all purposes
be deemed to be an original but all of which, when taken together, shall
constitute one and the same Agreement.
Section 16.11 No Third-Party Beneficiaries. Nothing in this Agreement,
----------------------------
express or implied, shall create or confer upon any Person (including but not
limited to any employees), other than the Parties or their respective successors
and permitted assigns, any legal or equitable rights, remedies, obligations,
liabilities or claims under or with respect to this Agreement, except as
expressly provided herein.
Section 16.12 Interpretation. (a) Each Party is a sophisticated legal
--------------
entity that was advised by experienced counsel and, to the extent it deemed
necessary, other advisors in connection with this Agreement and the Ancillary
Agreements. Accordingly, each Party hereby acknowledges that no Party has
relied or will rely in respect of this Agreement or any Ancillary Agreements or
the transactions contemplated hereby or thereby upon any document or written or
oral information previously furnished to or discovered by it or its
representatives, other than this Agreement or any Ancillary Agreements or the
documents and instruments delivered at the Closing.
23
<PAGE>
(b) No provision of this Agreement shall be interpreted in favor of, or
against, either of the Parties by reason of the extent to which either such
Party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
Section 16.13 Exclusive Jurisdiction and Consent to Service of Process.
--------------------------------------------------------
The Parties agree that any Action (as defined in the Investment Agreement)
arising out of or relating to this Agreement, shall be brought by the Parties
and held and determined only in a Delaware state court or a federal court
sitting in that State which shall be the exclusive venue of any such Action.
Each Party waives any objection which such Party may now or hereafter have to
the laying of venue of any such Action, and irrevocably consents and submits to
the jurisdiction of any such court (and the appropriate appellate courts) in any
such Action. Any and all service of process and any other notice in any such
Action shall be effective against such Party when transmitted in accordance with
Section 16.02. Nothing contained herein shall be deemed to affect the right of
any Party to serve process in any manner permitted by Law.
Section 16.14 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT
--------------------
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A
TRIAL BY JURY IN ANY ACTION INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER ANCILLARY AGREEMENT OR
THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
Section 16.15 Effectiveness of Agreement. This Agreement shall not become
--------------------------
effective until the Closing (as defined in the Investment Agreement) and then
only if all of the applicable conditions to the Closing have been satisfied or
waived.
24
<PAGE>
IN WITNESS WHEREOF, the Parties have caused their respective duly
authorized officers to execute this Agreement as of the day and year first above
written.
DOLPHIN, INC.
By: /s/ Charles G. Betty
------------------------------------
Name: Charles G. Betty
Title: President & CEO
SPRINT CORPORATION
By: /s/ Theodore H. Schell
------------------------------------
Name: Theodore H. Schell
Title: Vice President - Strategic
Planning and Corporate
Development
SPRINT COMMUNICATIONS COMPANY L.P.
By: US Telecom, Inc., General Partner
By: /s/ Don A. Jensen
------------------------------------
Name: Don A. Jensen
Title: Vice President and
Secretary
SIGNATURE PAGE FOR REGISTRATION RIGHTS AGREEMENT
25
<PAGE>
EXHIBIT NO. 99.2
Execution Copy
--------------
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (the "Agreement"), dated as of February 10,
1998, is entered into by and among, EARTHLINK NETWORK, INC., a Delaware
corporation (the "Company"), DOLPHIN, INC., a Delaware corporation ("NEWCO"),
SPRINT CORPORATION, a Kansas corporation ("Sprint"), SPRINT COMMUNICATIONS
COMPANY L.P., a Delaware limited partnership ("Sprint L.P.") and the persons
identified on Schedule I hereto, each of whom is a stockholder of the Company
(individually, a "Stockholder" and collectively, the "Stockholders").
R E C I T A L S
A. WHEREAS, the respective Boards of Directors of Sprint and the Company
have determined to enter into a strategic relationship in the area of Internet
access and related services and Sprint will make investments in Newco and the
Company in connection with the Merger (as defined below) of Dolphin Sub, Inc., a
Delaware corporation ("Newco Sub") and the Company in order to enhance the
capabilities for growth and financial and strategic success;
B. WHEREAS, pursuant to an Investment Agreement, dated as of February 10,
1998, among Sprint, Sprint L.P., the Company, Newco and Newco Sub (the
"Investment Agreement"), Sprint proposes to make a tender offer (as it may be
amended from time to time as permitted under the Investment Agreement, with the
Company's consent, if required under the Investment Agreement (the "Tender
Offer")), to purchase 1,250,000 shares of common stock, par value $.01 per
share, of the Company (the "Common Stock"), for an aggregate cash consideration
of $56,250,000 and at a price per share of Common Stock of $45 net to each
seller in cash, upon the terms and subject to the conditions set forth in the
Investment Agreement; and the Board of Directors of the Company has approved the
Tender Offer and the other transactions contemplated by the Investment Agreement
and is recommending that the Company's stockholders who wish to receive cash for
their shares of Common Stock accept the Tender Offer;
C. WHEREAS, immediately following the closing of the Tender Offer, Sprint
L.P. proposes to purchase 4,102,941 shares of Series A Convertible Preferred
Stock, par value $.01 per share of Newco (the "Convertible Preferred Stock") in
exchange for (i) an aggregate cash consideration of $23,750,000, (ii) the
assignment to Newco of 100% of the Sprint Internet Passport Subscribers, and
(iii) entering into a network agreement whereby Newco and the Company will
utilize Sprint L.P.'s long-distance network under specified terms and
conditions;
D. WHEREAS, Sprint, Sprint L.P., the Company and Newco will enter into a
marketing agreement whereby Newco and the Company will utilize the Sprint brand
under specified terms and conditions, and will, inter alia, have the right to
----- ----
use Sprint L.P. distribution channels under specified terms and conditions and
agree to sell certain Sprint products;
E. WHEREAS, Sprint shall provide Newco and the Company, as co-borrowers,
with up to $25 million of Convertible Senior Debt financing on or after the
Closing, with such amount
<PAGE>
to increase to up to $100 million over time (the "Convertible Debt Financing"),
such indebtedness to be evidenced by one or more Convertible Senior Promissory
Note(s);
F. WHEREAS, the closing of the Contribution and the other transactions
referred to above other than the Tender Offer shall take place concurrently with
the merger of Newco Sub into the Company (the "Merger") and the conversion of
each share of the Company's outstanding Common Stock into one share of Newco
common stock, par value $.01 per share ("Newco Common Stock") pursuant to the
Merger, in each case upon the terms and subject to the conditions set forth in
the Investment Agreement and any applicable Ancillary Agreements;
G. WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements and also to prescribe various conditions in
connection with the transactions contemplated by this Agreement;
H. WHEREAS, in furtherance of all of the foregoing arrangements, the
Company, Newco, Sprint and Steven L.P. have entered into a Governance Agreement,
dated February 10, 1998 (the "Governance Agreement");
I. WHEREAS, in order to effectuate the intent and provisions of the
Governance Agreement, the Company, Newco, Sprint, Steven L.P. and the
Stockholders each desire to enter into this Agreement to provide for certain
rights and obligations of such parties with respect to the Stockholders' voting
and disposition of certain Equity Securities beneficially owned by each of them;
and
J. WHEREAS, the rights and obligations of the parties hereto shall not
take effect prior to the Closing.
NOW, THEREFORE, in consideration of the mutual covenants, benefits and
agreements of the parties hereto pursuant to this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. DEFINITIONS. All capitalized terms used herein but not otherwise
-----------
defined shall have the meanings given to such terms in the Governance Agreement.
2. REPRESENTATIONS AND WARRANTIES. Each of the Stockholders represents,
------------------------------
as to itself only, and warrants to Sprint and Sprint L.P. as follows:
(a) Each Stockholder that is an entity is a corporation or
partnership that is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated or organized and has
the power and authority to execute, deliver and perform this Agreement. Each
Stockholder that is a natural person has the capacity and the full legal right
to execute, deliver and perform this Agreement.
(b) This Agreement has been duly executed and delivered and
constitutes a valid and binding agreement and irrevocable proxy (coupled with an
interest), respectively, and
2
<PAGE>
is enforceable in accordance with its terms, except to the extent that the
enforcement of this Agreement may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
regardless of whether enforceability is considered in a proceeding in equity or
at law.
(c) The execution and delivery of this Agreement did not, and the
performance thereof, without obtaining the consent of any third party will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under (i) to the knowledge of the Stockholder, the
certificate of incorporation or bylaws of the Company, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit or license applicable to the applicable Stockholder or the
Owned Shares, or (iii) any law applicable to the Stockholder. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental entity or any party to a material contract is required by
or with respect to the applicable Stockholder or by the applicable Stockholder
in connection with the execution and delivery of this Agreement except under the
Exchange Act.
(d) Each of the Owned Shares is free and clear of all liens, claims
and encumbrances, except for any bona fide pledge to margin facilities and,
except as contemplated by this Agreement and the Voting Agreement, is not
subject to any (i) right of first refusal, (ii) right to purchase, acquire or
vote or (iii) power of attorney.
(e) Each Stockholder has the sole power, right and authority to vote
and to tender the Owned Shares in accordance with the terms of this Agreement.
(f) Notwithstanding the foregoing, Quantum Industrial Partners LDC
("QIP") has granted discretionary authority to vote and dispose of its Owned
Shares to Soros Fund Management LLC, although such grant will not affect QIP's
obligations hereunder.
3. OBLIGATIONS TO TENDER OR VOTE.
-----------------------------
(a) NOTICE OF OFFERS. Promptly after its receipt thereof, Newco
----------------
shall give notice of an Offer, a Sprint Offer or a Qualified Offer to each of
the Stockholders (a "Stockholder Notice"). Such notice shall set forth in
reasonable detail the aggregate consideration and other terms and conditions of
the Offer, Sprint Offer or the Qualified Offer, as appropriate. If the terms of
any such offer are materially amended after an initial Stockholder Notice, Newco
shall promptly give notice of such amended terms to each Stockholder. For
purposes of comparing a Third-Party Offer with a Sprint Offer or a Qualified
Offer, the Stockholders may request and shall be entitled to receive from Newco
any additional information pertaining to any such offer possessed by Newco.
(b) SPRINT OFFER. If a Sprint Offer is initiated and if an
------------
Intervening Offer is not then outstanding, each Stockholder shall be subject to
the following obligations:
(i) Tender Offers. If the Sprint Offer is to be effected,
-------------
in whole or in part, in the form of a tender offer (a "Sprint Tender
Offer"), each Stockholder shall
3
<PAGE>
validly tender into the Sprint Tender Offer, in accordance with the terms
and subject to the conditions set forth in Sprint's offer to purchase and
related letter of transmittal and shall not withdraw such shares therefrom,
all of such Stockholder's Owned Shares; and
(ii) Other Offers. If the Sprint Offer involves a Business
------------
Combination which must be approved by the holders of Voting Equity
Securities (or a related matter that must be approved by the holders of
Voting Equity Securities in order for such Business Combination to be
effected), at the meeting at which such matters are considered by the
stockholders of Newco, each Stockholder shall vote all of such
Stockholder's Owned Shares in favor of such Business Combination and any
such related matter.
(c) QUALIFIED OFFER. If a Qualified Offer is initiated and if an
---------------
Intervening Offer is not then outstanding, each Stockholder shall be subject to
the following obligations:
(i) Tender Offers. If the Qualified Offer is to be effected, in
-------------
whole or in part, in the form of a Sprint Tender Offer, each Stockholder
shall tender into the Sprint Tender Offer, in accordance with the terms and
subject to the conditions set forth in Sprint's offer to purchase and
related letter of transmittal and shall not withdraw such shares therefrom,
all of such Stockholder's Owned Shares;
(ii) Other Offers. If the Qualified Offer involves a Business
------------
Combination, which must be approved by the holders of Voting Equity
Securities (or a related matter that must be approved by the holders of
Voting Equity Securities in order for such Business Combination to be
effected), at the meeting at which such matters are considered by the
stockholders of Newco, each Stockholder shall vote all of such
Stockholder's Owned Shares in favor of such Business Combination and any
such related matter.
4. COVERED SHARES.
--------------
(a) The term "Owned Shares" used herein shall mean all Equity
Securities (defined as if it covered both Common Stock and Newco Common Stock)
owned of record or beneficially (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) by each respective
Stockholder as of the date hereof, which shall include all shares of Newco
Common Stock received in the Merger, all Newco securities received in the Merger
and convertible into Newco Common Stock, and all other shares of stock or
securities or rights issuable in respect thereof on or after the date hereof.
Upon receipt of a Stockholder Notice, each Stockholder holding Equity Securities
that are convertible into Newco Common Stock shall promptly convert such
securities to Newco Common Stock in a manner that will permit the Newco Common
Stock issued pursuant to such conversion to be included in the Tender Offer, as
required under Sections 3(b)(i) and 3(c)(i) hereof, or voted under the
irrevocable proxy required under Sections 3(b)(ii) or 3(c)(ii) hereof, as the
case may be; provided, that no such conversion shall be required if the amount
to be paid per share in the relevant transaction is less than the amount to be
paid by the Stockholder in effecting such conversion. All of the
4
<PAGE>
Newco Common Stock issued upon conversion shall be considered "Owned Shares" for
purposes of this Agreement.
(b) Notwithstanding any provision of this Agreement to the contrary,
at any time after the Closing, each Stockholder may offer, sell, convey, assign
or otherwise transfer or dispose of ("Transfer") any of such Stockholder's Owned
Shares:
(i) in transactions effected pursuant to Rule 144 under the
Securities Act of 1933, as amended;
(ii) in a public offering registered with the SEC;
(iii) in any other transaction other than one which, to the
applicable Stockholder's actual knowledge, would be a Transfer to a Person
that (i) owns, of record or beneficially, or who is (by virtue of such
Transfer) reasonably anticipated to own of record or beneficially (as
defined in Rule 13d-3 under the Exchange Act), 5% or more of the
outstanding Equity Securities of the Company (calculated in accordance with
Rule 13d-3 under the Exchange Act), or (ii) is obligated to file (or would,
by virtue of such transaction, reasonably be anticipated to be obligated to
file) a Schedule 13D with the SEC pursuant to each of paragraphs (b) and
(e) of Rule 13d-1 under the Exchange Act;
(iv) in any placement to a margin or nominee account; subject to
the requirements set forth in Section 5(b) hereof; or
(v) subject to Sprint's prior written consent, in any other
transaction.
(c) Owned Shares as to which a Transfer is effected shall cease to be
Owned Shares immediately upon acceptance by such Stockholder of payment for such
shares, and may be so Transferred free and clear of any restrictions arising
under this Agreement.
5. VOTING AGREEMENT. (a) To the extent this Agreement constitutes a
----------------
voting agreement in accordance with Section 218(c) of the Delaware General
Corporation Law, it is intended to comply therewith and be enforceable
thereunder. The obligations of the Stockholders in this Agreement, including
without limitation those with respect to the voting of their respective Owned
Shares, are irrevocable during the term of this Agreement.
(b) In order to insure that the voting agreements set forth in
Sections 3(b)(ii) and 3(c)(ii) will be fulfilled, each of the undersigned
Stockholders agrees to grant, and (except with respect to shares held by a
nominee for which the applicable Stockholders will obtain from such nominee
promptly after the date hereof) concurrently with the execution of this
Agreement hereby grants, to Sprint and Sprint L.P., or either of them, an
Irrevocable Proxy, coupled with an interest, in the form attached hereto, with
respect to all of the Owned Shares covered by such voting agreements, for and in
the name, place and stead of such Stockholder, at any annual or special meeting
of the holders of Newco Common Stock and at any adjournment or postponement
thereof, or pursuant to any consent in lieu of a meeting, in respect of the
specific matters described in Sections 3(b)(ii) and 3(c)(ii). The Irrevocable
Proxy granted by each of the
5
<PAGE>
Stockholders constitutes the valid and effective Irrevocable Proxy, coupled with
an interest, of each such Stockholder in respect of the Owned Shares, within the
meaning of Section 212(e) of the Delaware General Corporation Law, revokes any
proxy or proxies or powers of attorney heretofore given by such Stockholder in
respect of such Owned Shares; shall remain in full force and effect and is and
shall be irrevocable until the termination of this Agreement and is coupled with
an interest and an integral part of the benefits and obligations of such
Stockholder and the rights and benefits of Sprint and Sprint L.P.
Notwithstanding the foregoing, in the event that a Stockholder places any Owned
Shares in a nominee account after the date hereof, the Stockholder shall, on or
before the date on which such placement is made, deliver a replacement
Irrevocable Proxy to Sprint.
6. NATURE OF STOCKHOLDER OBLIGATIONS. The obligations of the
---------------------------------
Stockholders hereunder are several and not joint.
7. TERM. This Agreement and the obligations hereunder shall commence
----
on the Closing Date (as defined in the Investment Agreement) and continue until
the earlier of (i) the termination of the Investment Agreement, (ii) the
modification, waiver or amendment of the Investment Agreement or the Ancillary
Agreements in any manner adverse to the Stockholders, and (iii) June 15, 1998 if
the Closing Date has not occurred on or before such date (each, a "Termination
Date").
8. MISCELLANEOUS.
-------------
(a) Notices. Unless otherwise provided herein, any notice, request,
-------
waiver, instruction, consent or document or other communication required or
permitted to be given by this Agreement shall be effective only if it is in
writing and (a) delivered by hand or sent by certified mail, return receipt
requested, (b) if sent by a nationally-recognized overnight delivery service
with delivery confirmed, or (c) if telexed or telecopied, with receipt confirmed
as follows:
6
<PAGE>
The Company: 3100 New York Drive
Pasadena, California 91107
Attn: President and CEO
Telecopy No.: 626/296-4161
with a copy to: Hunton & Williams
NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Scott M. Hobby, Esq.
Telecopy No.: (404) 888-4190
Newco and Newco Sub: 3100 New York Drive
Pasadena, California 91107
Attn: President and CEO
Telecopy No.: 626/296-4161
with a copy to: Hunton & Williams
NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Scott M. Hobby, Esq.
Telecopy No.: (404) 888-4190
Sprint: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Chief Financial Officer
Telecopy No.: (913) 624-8426
with a copy to: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Corporate Secretary
Telecopy No.: (913) 624-8233
7
<PAGE>
with an additional
copy to: Stinson, Mag & Fizzell, P.C.
1201 Walnut, Suite 2800
P.O. Box 419251
Kansas City, Missouri 64141-6251
Attn: John A. Granda, Esq.
Telecopy No.: (816) 691-3495
Quantum Industrial
Partners LDC: Quantum Industrial Partners LDC
c/o Soros Fund Management, LLC
888 7th Avenue, Floor 33
New York, New York 10106
Attn: Michael Neus, Esq.
Telecopy No.: (212) 664-0544
with a copy to: Akin, Gump, Strauss, Hauer, Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attn: Patrick Dooley, Esq.
Telecopy No.: (212) 407-3280
The parties hereto (the "Parties") shall promptly notify each other of any
change in their respective addresses or facsimile numbers or of the Person or
office to receive notices, requests or other communications under this Section
8(a). Notice shall be deemed to have been given as of the date when so
personally delivered, when actually delivered by the U.S. Postal Service at the
proper address, the next day when delivered during business hours to an
overnight delivery service properly addressed or when receipt of a telex or
telecopy is confirmed, as the case may be, unless the sending party has actual
Knowledge that such notice was not received by the intended recipient.
(b) Amendments. No amendment, modification or alteration of the
----------
terms or provisions of this Agreement shall be binding unless the same
shall be in writing and duly executed by the Party against whom such
amendment, modification or alteration is sought to be enforced.
(c) Waivers. Except as otherwise permitted in this Agreement, the
-------
terms or conditions of this Agreement may not be waived unless set forth in
a writing signed by, the Party entitled to the benefits thereof. No waiver
of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of such provision at any time in the future or a waiver
of any other provision hereof. The rights and remedies of the Parties are
cumulative and not alternative. Except as otherwise permitted in this
Agreement, neither the failure nor any delay by any Party in exercising any
right, power or privilege under this Agreement will operate as a waiver of
such right, power or privilege, and no single or partial exercise of any
such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power
or privilege.
8
<PAGE>
(d) Severability. If any term or provision of this Agreement or the
------------
application thereof to either party or set of circumstances shall, in any
jurisdiction and to any extent, be finally held invalid or unenforceable,
such term or provision shall only be ineffective as to such jurisdiction,
and only to the extent of such invalidity or unenforceability, without
invalidating or rendering unenforceable any other terms or provisions of
this Agreement or under any other circumstances, and the parties shall
negotiate in good faith a substitute provision which comes as close as
possible to the invalidated or unenforceable term or provision, and which
puts each party in a position as nearly comparable as possible to the
position it would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
(e) Inapplicability of Certain Sections. Notwithstanding the
-----------------------------------
obligations set forth in Section 3(b)(i) and (ii), 3(c)(i) and (ii), and
Sections 4(a) or 5(b), such sections shall be deemed to be inapplicable to
any Stockholder who, in his or its sole discretion, reasonably determines,
at any time after the date hereof and prior to his or its tender,
conversion, voting or granting of such proxy as to Owned Shares, that such
action could be a transaction in violation of Section 16(b) of the Exchange
Act. In such event, the applicable Stockholder's obligation to take any
actions required under such Sections shall be deemed to be null and void
and not enforceable against such Stockholder, but only to the extent of
such potential violation.
(f) Entire Agreement. This Agreement and, upon execution by all
----------------
Parties thereto embodies the entire agreement and understanding of the
Parties in respect to the matter contemplated hereby and thereby and
supersedes and renders null and void all other prior agreements and
understandings, written and oral, with respect to the subject matter hereof
and thereof, provided, that this provision shall not abrogate any other
--------
written agreement between the Parties executed simultaneously with this
Agreement. No Party shall be liable or bound to any other Party in any
manner by any promises, conditions, representations, warranties, covenants,
agreements and understandings, except as specifically set forth herein or
therein.
(g) Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations under this Agreement shall be assigned or
transferred, in whole or in part, by any of the Parties without the prior
written consent of the other Parties; provided, however, that such
assignment or transfer may be made by (i) by Sprint to any of its
Affiliates, or (ii) pursuant to any merger or sale of substantially all of
the assets of Sprint or such Affiliates (or any transaction having such
effect) that is pursuant to an agreement entered into after the Closing.
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. Any attempted assignment in violation of
this Section 8(g) shall be void.
(h) Parties in Interest. Nothing in this Agreement, express or
-------------------
implied, shall create or confer upon any Person (including but not limited
to any employees), other than the Parties or their respective successors
and permitted assigns, any legal or equitable rights, remedies,
obligations, liabilities or claims under or with respect to this Agreement
except as expressly provided herein.
(i) Specific Performance. The Parties recognize and agree that
--------------------
immediate irreparable damages for which there is no adequate remedy at law
would occur in the event that
9
<PAGE>
any provision of this Agreement is not performed in accordance with the
specific terms hereof or is otherwise breached. Accordingly, it is agreed
that in the event of a failure by a Party to perform its obligations under
this Agreement, the non-breaching Party shall be entitled to specific
performance through injunctive relief to prevent breaches of the provisions
of this Agreement and to enforce specifically the provisions of this
Agreement in any action instituted in any court having subject matter
jurisdiction, in addition to any other remedy to which such party may be
entitled, at law or in equity.
(j) Governing Law. This Agreement shall be construed in accordance
-------------
with and governed by the laws of the State of Delaware, without regard to
conflict of laws principles.
(k) Exclusive Jurisdiction and Consent to Service of Process. The
--------------------------------------------------------
Parties agree that any Action arising out of or relating to this Agreement,
the Ancillary Agreements or the transactions contemplated hereby or thereby
shall be brought by the Parties only in a Delaware state court or a federal
court sitting in that state, which shall be the exclusive venue of any such
Action. Each Party waives any objection which such party may now or
hereafter have to the laying of venue of any such Action, and irrevocably
consents and submits to the jurisdiction of any such court (and the
appropriate appellate courts) in any such Action. Any and all service of
process and any other notice in any such Action shall be effective against
such Party when transmitted in accordance with Section 8(a). Nothing
contained herein shall be deemed to affect the right of any Party to serve
process in any manner permitted by Law.
(l) Counterparts. This Agreement may be executed in one or more
------------
counterparts each of which when so executed and delivered shall for all
purposes be deemed to be an original but all of which, when taken together,
shall constitute one and the same Agreement.
(m) Effectiveness; Termination. This Agreement shall become effective
--------------------------
at the Closing and, concurrently therewith, upon the effectiveness of the
Governance Agreement. After becoming effective, this Agreement shall
terminate upon termination of the Governance Agreement and the Stockholders
shall thereafter have no further obligations hereunder.
(n) WAIVER OF JURY TRIAL. THE COMPANY, NEWCO, SPRINT AND SPRINT L.P.
--------------------
AND EACH STOCKHOLDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT
THAT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY
ANCILLARY AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR
THEREUNDER.
(o) Nothing herein contained shall prohibit a Stockholder from
tendering into any Tender Offer any Owned Shares.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders'
Agreement as of the day and year first above written.
[Signatures on the following page]
11
<PAGE>
EARTHLINK NETWORK, INC.
By: /s/ Charles G. Betty
-----------------------------------------
Name: Charles G. Betty
---------------------------------------
Title: President and CEO
DOLPHIN, INC.
By: /s/ Charles G. Betty
-----------------------------------------
Name: Charles G. Betty
---------------------------------------
Title: President and CEO
SPRINT CORPORATION
By: /s/ Theodore H. Schell
-----------------------------------------
Name: Theodore H. Schell
---------------------------------------
Title: Vice President - Strategic Planning
and Corporate Development
SPRINT COMMUNICATIONS COMPANY L.P.
By: U.S. Telecom, Inc., General Partner
By: /s/ Don A. Jenson
-------------------------------------
Name: Don A. Jenson
-----------------------------------
Title: Vice President and Secretary
----------------------------------
SIGNATURE PAGE FOR STOCKHOLDERS' AGREEMENT
12
<PAGE>
/s/ Sky Dayton
----------------------------------
SKY D. DAYTON
SIGNATURE PAGE FOR STOCKHOLDERS' AGREEMENT
<PAGE>
QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ Michael C. Neus
------------------------------------
Name: Michael C. Neus
----------------------------------
Title: Attorney-in-Fact
SIGNATURE PAGE FOR STOCKHOLDERS' AGREEMENT
<PAGE>
/s/ Kevin M. O'Donnell
----------------------------------
KEVIN M. O'DONNELL
SIGNATURE PAGE FOR STOCKHOLDERS' AGREEMENT
<PAGE>
/s/ George Soros
----------------------------------
GEORGE SOROS
SIGNATURE PAGE FOR STOCKHOLDERS' AGREEMENT
<PAGE>
/s/ Reed Slatkin
----------------------------------
REED SLATKIN
SIGNATURE PAGE FOR STOCKHOLDERS' AGREEMENT
<PAGE>
/s/ Sidney Azeez
----------------------------------
SIDNEY AZEEZ
SIGNATURE PAGE FOR STOCKHOLDERS' AGREEMENT
<PAGE>
Schedule I
----------
Name and Address Owned Shares
- ---------------- ------------
Sky D. Dayton 1,500,000
3100 New York Drive
Pasadena, CA 91107
Quantum Industrial Partners LDC 1,456,095
c/o Soros Fund Management
Attn: Paul McNulty
888 Seventh Avenue
New York, NY 10106
Kevin M. O'Donnell 974,002
9919 Beverly Grove Drive
Beverly Hills, CA 90210
George Soros 214,545
888 Seventh Avenue
New York, NY 10106
Reed Slatkin 1,042,473
890 North Kellogg Avenue
Santa Barbara, CA 93111
Sidney Azeez 236,884
c/o Unitel Cellular Communications Systems
Bayport One, Suite 400
West Atlantic City, NJ 08232
<PAGE>
EXHIBIT NO. 99.3
AGREEMENT TO VOTE STOCK
THIS AGREEMENT TO VOTE STOCK, dated as of February 10, 1998 (the
"Agreement"), among the Granting Stockholders named on Schedule A hereto, Sprint
Corporation, a Kansas corporation ("Sprint") and Sprint Communications Company
L.P., a Delaware limited partnership ("Sprint L.P.") (the Granting Stockholders,
Sprint and Sprint L.P. are collectively referred to herein as the "Parties" and
individually as a "Party").
WHEREAS, the respective Boards of Directors of Sprint and EarthLink
Network, Inc., a Delaware corporation (the "Company") have determined to enter
into a strategic relationship in the area of Internet access and related
services and Sprint will make investments in Dolphin, Inc., a Delaware
corporation ("Newco") and the Company in connection with the Merger of Dolphin
Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Newco ("Newco
Sub") and the Company in order to enhance the capabilities for growth and
financial and strategic success;
WHEREAS, Sprint, Sprint L.P., the Company, Newco and Newco Sub have
entered into an Investment Agreement as of the date hereof (the "Investment
Agreement") contemplating that strategic alliance and addressing the terms and
conditions of such investment and related transactions;
WHEREAS, a condition to Sprint's obligations under the Investment
Agreement is that each of the Granting Stockholders execute and perform this
Agreement;
WHEREAS, Sprint proposes to make a tender offer (as it may be amended
from time to time as permitted under the Investment Agreement, with the
Company's consent if required hereby, the "Offer") to purchase 1,250,000 shares
of common stock, par value $.01 per share, of the Company (the "Common Stock"),
for an aggregate cash consideration of $56,250,000 and at a price per share of
Common Stock of $45 net to each seller in cash (such price, as may hereafter be
changed, the "Offer Price"), upon the terms and subject to the conditions set
forth in the Investment Agreement; and the Board of Directors of the Company has
approved the Offer and the other transactions contemplated in the Investment
Agreement and is recommending that the Company's stockholders who wish to
receive cash for their shares of Common Stock accept the Offer;
WHEREAS, immediately following the closing of the Offer, Sprint L.P.
proposes to purchase 4,102,941 shares of Series A Convertible Preferred Stock,
par value $.01 per share of Newco (the "Convertible Preferred Stock") in
exchange for (i) an aggregate cash consideration of $23,750,000, (ii) the
assignment to Newco of 100% of the Sprint Internet Passport Subscribers, and
(iii) entering into a network agreement whereby Newco and the Company will
utilize Sprint's long-distance network under specified terms and conditions (the
consideration under clauses (i), (ii) and (iii) is referred to collectively
herein as the "Contribution");
WHEREAS, Sprint L.P. will enter into an agreement whereby Newco and the
Company will utilize the Sprint brand under specified terms and conditions Newco
and Newco Sub will,
<PAGE>
inter alia, have the right to use Sprint distribution channels under specified
- ----- ----
terms and conditions and agrees to sell certain Sprint products;
WHEREAS, Sprint shall provide Newco and the Company, as co-borrowers,
with up to $25 million of Convertible Senior Debt financing (the "Convertible
Debt Financing") on or after the Closing, with such amount to increase to up to
$100 million over time, such indebtedness to be evidenced by one or more
Convertible Senior Promissory Note(s) (the "Convertible Notes");
WHEREAS, the closing of the Contribution and the other transactions
referred to above other than the Offer shall take place concurrently with the
merger of Newco Sub into the Company (the "Merger") and the conversion of each
share of the Company's outstanding Common Stock into one share of Newco common
stock, par value $.01 per share ("Newco Common Stock") pursuant to the Merger,
in each case upon the terms and subject to the conditions set forth in the
Investment Agreement and/or the Ancillary Agreements (as defined below);
WHEREAS, Section 2.02(c) of the Investment Agreement includes as a
condition to the obligations of Sprint and Sprint L.P. to consummate the
transactions contemplated by the Investment Agreement and the Ancillary
Agreements that the Granting Stockholders shall execute, deliver and fully
perform this Agreement and that the terms and conditions of this Agreement shall
have been otherwise satisfied in all material respects;
WHEREAS, the Granting Stockholders desire to induce the parties to the
Investment Agreement to execute, deliver and perform such agreement and the
Ancillary Agreements and to satisfy the aforesaid condition to the Closing of
the Investment Agreement;
WHEREAS, capitalized terms used herein shall have the meaning set forth
in the Investment Agreement unless otherwise defined herein; and
NOW, THEREFORE, in consideration of (i) the foregoing premises, (ii)
the benefits to be received equally by all stockholders of the Company upon the
execution, delivery and performance of the Investment Agreement and the
Ancillary Agreements, (iii) the interest of Sprint in purchasing shares of
Common Stock from the stockholders of the Company in the Offer, (iv) the
representations, warranties, covenants and agreements contained in this
Agreement, the Investment Agreement and the Ancillary Agreements, and (v) for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Agreement and Obligation to Vote. Each of the Granting Stockholders
--------------------------------
on and prior to the Termination Date agrees to cast, or cause to be cast, at any
duly called meeting of the stockholders, all of the votes represented by the
shares of Common Stock which they own of record or beneficially (within the
meaning of Rule 13d-3 under the Exchange Act as of the date hereof), which
number of shares is set forth opposite the Granting Stockholder's name on
Schedule A attached hereto (the "Owned Shares"; which term shall include any and
all other shares of capital stock or securities or rights issued or issuable in
respect thereof on or after the date hereof), (which for this purpose shall also
include all shares of Newco Common Stock
<PAGE>
received upon conversion of the Owned Shares into Newco Common Stock pursuant to
the Merger) which such Granting Stockholder has the right or power to vote,
directly or indirectly, or has the right or power to vote by holding a proxy to
vote such shares or otherwise, in favor of the following matters only (a) the
Merger, (b) the issuance and sale of the Convertible Preferred Stock, the
Convertible Notes and the Newco Common Stock issuable upon conversion of the
Convertible Preferred Stock and/or the Convertible Notes, in each case in
accordance with the Investment Agreement and the applicable Ancillary
Agreements, (c) the other transactions contemplated by the Investment Agreement
and the Ancillary Agreements, and (d) any related matter that must be approved
by the holders of Common Stock or Newco Common Stock in order for the
transactions contemplated by the Investment Agreement or any Ancillary Agreement
to be consummated so long as not inconsistent with the Investment Agreement and
the Ancillary Agreements.
2. Agreement Not to Dispose of Shares. Each Granting Stockholder hereby
----------------------------------
covenants and agrees as follows between the date hereof and the Termination
Date:
(a) The Granting Stockholders will not, and will not agree to, directly
or indirectly, (i) sell, transfer, assign, pledge, hypothecate, cause to be
redeemed or repurchased or otherwise dispose of any of the Owned Shares, (ii)
grant any proxy, power of attorney or interest in or with respect to the Owned
Shares, or (iii) enter into a voting agreement with respect to the Owned Shares,
in any such case prior to the Closing of the Merger and the other transactions
contemplated by the Investment Agreement and the Ancillary Agreements, provided,
such Granting Stockholder may pledge such shares in connection with bona fide
margin facilities.
(b) The Granting Stockholders will request the Company to have the
certificates evidencing those shares which are owned of record by such Granting
Stockholders to bear substantially the following legend and to request the
Company to instruct its transfer agent to stop the transfer of any certificates
bearing such legend that is not made in accordance with this Agreement:
THE TRANSFER OF AND VOTING OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE PRIOR RIGHTS AND LIMITATIONS
IMPOSED BY THE AGREEMENT TO VOTE DATED AS OF FEBRUARY 10, 1998
AMONG SPRINT CORPORATION, A KANSAS CORPORATION, SPRINT
COMMUNICATIONS COMPANY L.P. AND CERTAIN GRANTING STOCKHOLDERS
WHO ARE SIGNATORIES THERETO. A COPY OF SUCH AGREEMENT WILL BE
FURNISHED BY THE COMPANY'S SECRETARY UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
(c) Notwithstanding the foregoing, each Granting Stockholder shall be
permitted to tender any or all Owned Shares into the Offer.
3
<PAGE>
3. Representations and Warranties. Each of the Granting Stockholders,
------------------------------
as to itself only, represents and warrants to Sprint and Sprint L.P. as follows:
(a) Each Granting Stockholder that is an entity is a corporation,
limited liability company or partnership that is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized and has the power and authority to execute, deliver
and perform this Agreement. Each Granting Stockholder that is a natural person
has the capacity and the full legal right to execute, deliver and perform this
Agreement.
(b) This Agreement has been duly executed and delivered and constitute
a valid and binding agreement and is enforceable in accordance with its terms,
except to the extent that the enforcement of this Agreement may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally, and (ii) general
principles of equity regardless of whether enforceability is considered in a
proceeding in equity or at law.
(c) The execution and delivery of this Agreement did not, and the
performance thereof, without obtaining the consent of any third party will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under (i) to their knowledge, the certificate of
incorporation or bylaws of the Company, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit or
license applicable to the Granting Stockholder or the Owned Shares, or (iii) any
Law applicable to the Granting Stockholders. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity or any party to a Contract is required by or with respect to the
applicable Granting Stockholder or by the Granting Stockholder in connection
with the execution and delivery of this Agreement except under the Exchange Act.
(d) Each of the Owned Shares is free and clear of all Liens except for
bona fide margin facilities permitted under Section 2(a), and, except as
contemplated by this Agreement and the Stockholder's Agreement, is not subject
to any (i) right of first refusal, (ii) right to purchase, acquire or vote, or
(iii) power of attorney.
(e) Each Granting Stockholder has the sole power, right and authority
to vote the Owned Shares in accordance with the terms of this Agreement.
(f) Notwithstanding the foregoing, Quantum Industrial Partners LDC
("QIP") has granted discretionary authority to vote and dispose of its Owned
Shares to Soros Fund Management LLC, although such grant will not affect QIP's
obligations hereunder.
4. Term. This Agreement and the obligations hereunder shall commence on
----
the date hereof and continue until the earlier of (a) consummation of the
Merger, (b) termination of the Investment Agreement pursuant to Section 6.01
thereof, (c) the modification, waiver or amendment, in any manner, adverse to
the Granting Stockholders, of the Investment Agreement or the Ancillary
Agreements, and (d) June 15, 1998 (the "Termination Date").
4
<PAGE>
5. Miscellaneous Provisions. (a) Unless otherwise provided herein, any
------------------------
notice, request, waiver, instruction, consent or document or other communication
required or permitted to be given by this Agreement shall be effective only if
it is in writing and (i) delivered by hand or sent by certified mail, return
receipt requested, (ii) if sent by a nationally-recognized overnight delivery
service with delivery confirmed, or (iii) if telexed or telecopied, with receipt
confirmed as follows:
Granting Stockholders Hunton & Williams
in care of their attorneys: NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Scott M. Hobby, Esq.
Telecopy No.: (404) 888-4190
Sprint and Sprint L.P.: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Chief Financial Officer
Telecopy No.: (913) 624-8426
with a copy to: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Corporate Secretary
Telecopy No.: (913) 624-8233
with an additional copy to: Stinson, Mag & Fizzell, P.C.
1201 Walnut, Suite 2800
P.O. Box 419251
Kansas City, Missouri 64141-6251
Attn: John A. Granda, Esq.
Telecopy No.: (816) 691-3495
The parties shall promptly notify each other of any change in their respective
addresses or facsimile numbers or of the Person or office to receive notices,
requests or other communications under this Section 5(a). Notice shall be deemed
to have been given as of the date when so personally delivered, when physically
delivered by the U.S. Postal Service at the proper address, the next day when
delivered during business hours to an overnight delivery service properly
addressed or when receipt of a telex or telecopy is confirmed, as the case may
be, unless the sending party has actual Knowledge that such notice was not
received by the intended recipient.
(b) This Agreement embodies the entire agreement and understanding of
the Parties in respect to the matter contemplated hereby and thereby and
supersede and render null and void all other prior agreements and
understandings, written and oral, with respect to the subject matter hereof and
thereof, provided that this provision shall not abrogate any other written
agreement
5
<PAGE>
between the Parties executed simultaneously with this Agreement. No Party shall
be liable or bound to any other Party in any manner by any promises, conditions,
representations, warranties, covenants, agreements and understandings, except as
specifically set forth herein or therein.
(c) Except as otherwise permitted in this Agreement, this Agreement may
not be amended or supplemented, unless set forth in a writing signed by and
delivered to, all the Parties. Except as otherwise permitted in this Agreement,
the terms or conditions of this Agreement may not be waived unless set forth in
a writing signed by the Party or Parties entitled to the benefits thereof. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of such provision at any time in the future or a waiver of
any other provision hereof. The rights and remedies of the Parties are
cumulative and not alternative. Except as otherwise provided in this Agreement,
neither the failure nor any delay by any Party in exercising any right, power or
privilege under this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege.
(d) This Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned or transferred, in whole or in part, by
any of the Parties without the prior written consent of the other Parties;
provided, however, that such assignment or transfer may be made by (i) Sprint or
Sprint L.P. to any of their Affiliates, (ii) by any Affiliate of Sprint to any
other Affiliate of Sprint, or (iii) pursuant to any merger, consolidation,
reorganization or sale of substantially all of the assets of Sprint or such
Affiliates (or any transaction having such effect). 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.
(e) This Agreement shall be governed by the laws of the State of
Delaware, without regard to conflict of laws principles.
(f) If any term or provision of this Agreement or the application
thereof to any Party or set of circumstances shall, in any jurisdiction and to
any extent, be finally held invalid or unenforceable, such term or provision
shall only be ineffective as to such jurisdiction, and only to the extent of
such invalidity or unenforceability, without invalidating or rendering
unenforceable any other terms or provisions of this Agreement or under any other
circumstances, and the Parties shall negotiate in good faith a substitute
provision which comes as close as possible to the invalidated or unenforceable
term or provision, and which puts each Party in a position as nearly comparable
as possible to the position it would have been in but for the finding of
invalidity or unenforceability, while remaining valid and enforceable.
(g) This Agreement may be executed in one or more counterparts each of
which when so executed and delivered shall for all purposes be deemed to be an
original but all of which, when taken together, shall constitute one and the
same Agreement.
(h) The captions and headings used in this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction or
6
<PAGE>
interpretation hereof.
(i) Nothing in this Agreement, express or implied, shall create or
confer upon any Person, other than the Parties or their respective successors
and permitted assigns, any legal or equitable rights, remedies, obligations,
liabilities or claims under or with respect to this Agreement, except as
expressly provided herein.
(j) Unless specifically stated otherwise, references to sections refer
to sections in this Agreement. References to "includes" and "including" mean
"includes without limitation" and "including without limitation."
(k) Each Granting Stockholder is a sophisticated legal entity or
individual that was advised by experienced counsel and, to the extent it deemed
necessary, other advisors in connection with this Agreement. Accordingly, each
Party hereby acknowledges that no Party has relied or will rely in respect of
this Agreement or the transactions contemplated hereby or thereby upon any
document or written or oral information previously furnished to or discovered by
it or its representatives, other than this Agreement or the documents and
instruments delivered at the Closing.
(l) No provision of this Agreement shall be interpreted in favor of, or
against, any Party by reason of the extent to which such Party or its counsel
participated in the drafting thereof or by reason of the extent to which any
such provision is inconsistent with any prior draft hereof or thereof.
(m) The Parties agree that any Action arising out of or relating to
this Agreement shall be brought by the Parties and held and determined only in a
Delaware state court or a federal court sitting in that state which shall be the
exclusive venue of any such Action. Each Party waives any objection which such
Party may now or hereafter have to the laying of venue of any such Action, and
irrevocably consents and submits to the jurisdiction of any such court (and the
appropriate appellate courts) in any such Action. Any and all service of process
and any other notice in any such Action shall be effective against such Party
when transmitted in accordance with subsection (a) of this Section 5. Nothing
contained herein shall be deemed to affect the right of any Party to serve
process in any manner permitted by Law.
(n) All representations, warranties and covenants in this Agreement
shall survive the execution and delivery of this Agreement and shall continue
for their respective statute of limitations period, except for any covenant
which by its terms continues in effect for a longer time period, and shall in no
way be affected by any investigation of the subject matter thereof made by or on
behalf of any Party or any information capable of being acquired by any Party.
(o) THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT
THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY ACTION INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING
7
<PAGE>
IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first above written.
SPRINT CORPORATION
By: /s/ Theodore H. Schell
--------------------------------------------
Name: Theodore H. Schell
-------------------------------------
Title: Vice President-Strategic
-------------------------------------
Planning and Corporate Development
-------------------------------------
SPRINT COMMUNICATIONS
COMPANY L.P.
By: US Telecom, Inc., General Partner
By: /s/ Don A. Jensen
--------------------------------------------
Name: Don A. Jensen
-------------------------------------
Title: Vice President and Secretary
-------------------------------------
SIGNATURE PAGE FOR AGREEMENT TO VOTE STOCK
<PAGE>
/s/ George Soros
------------------------------------
George Soros
QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ Michael C. Neus
----------------------------------
Name: Michael C. Neus
---------------------------
Title: Attorney-in-Fact
---------------------------
/s/ Reed Slatkin
-------------------------------------
Reed Slatkin
/s/ Sidney Azeez
-------------------------------------
Sidney Azeez
SIGNATURE PAGE FOR AGREEMENT TO VOTE STOCK
<PAGE>
Schedule A
----------
Name and Address Owned Shares
---------------- ------------
George Soros
888 Seventh Avenue
New York, NY 10106 214,545
Quantum Industrial Partners LDC
c/o Soros Fund Management
Attn: Paul McNulty
888 Seventh Avenue
New York, NY 10106 1,456,095
Reed Slatkin
890 North Kellogg Avenue
Santa Barbara, CA 93111 1,042,473
Sidney Azeez
c/o Unitel Cellular Communications Systems
Bayport One, Suite 400
West Atlantic City, NJ 08232 236,884
<PAGE>
EXHIBIT 99.4
AGREEMENT TO VOTE AND TENDER STOCK
THIS AGREEMENT TO VOTE AND TENDER STOCK, dated as of February 10, 1998
(the "Agreement"), among the Granting Stockholders named on Schedule A hereto,
Sprint Corporation, a Kansas corporation ("Sprint") and Sprint Communications
Company L.P., a Delaware limited partnership ("Sprint L.P.") (the Granting
Stockholders, Sprint and Sprint L.P. are collectively referred to herein as the
"Parties" and individually as a "Party").
WHEREAS, the respective Boards of Directors of Sprint and EarthLink
Network Inc., a Delaware corporation (the "Company") have determined to enter
into a strategic relationship in the area of Internet access and related
services and Sprint will make investments in the Newco, Inc., a Delaware
corporation ("Newco") and the Company in connection with the Merger of Newco
Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Newco ("Newco
Sub") and the Company in order to enhance the capabilities for growth and
financial and strategic success;
WHEREAS, Sprint, Sprint L.P., the Company, Newco and Newco Sub have
entered into an Investment Agreement as of the date hereof (the "Investment
Agreement") contemplating that strategic alliance and addressing the terms and
conditions of such investment and related transactions;
WHEREAS, a condition to Sprint's obligations under the Investment
Agreement is that each of the Granting Stockholders execute and perform this
Agreement and grant an irrevocable proxy in the form attached hereto as Exhibit
A (the "Irrevocable Proxy");
WHEREAS, Sprint proposes to make a tender offer (as it may be amended
from time to time as permitted under the Investment Agreement, with the
Company's consent if required hereby, the "Offer") to purchase 1,250,000 shares
of common stock, par value $.01 per share, of the Company (the "Common Stock"),
for an aggregate cash consideration of $56,250,000 and at a price per share of
Common Stock of $45 net to each seller in cash (such price, as may hereafter be
changed, the "Offer Price"), upon the terms and subject to the conditions set
forth in the Investment Agreement; and the Board of Directors of the Company has
approved the Offer and the other transactions contemplated in the Investment
Agreement and is recommending that the Company's stockholders who wish to
receive cash for their shares of Common Stock accept the Offer;
WHEREAS, immediately following the closing of the Offer, Sprint L.P.
proposes to purchase 4,102,941 shares of Series A Convertible Preferred Stock,
par value $.01 per share of Newco (the "Convertible Preferred Stock") in
exchange for (i) an aggregate cash consideration of $23,750,000, (ii) the
assignment to Newco of 100% of the Sprint Internet Passport Subscribers, (iii)
entering enter into an agreement whereby Newco and the Company will utilize the
Sprint brand under specified terms and conditions Newco and Newco Sub will,
inter alia, have the right to use Sprint distribution channels under specified
terms and conditions, and (iv) entering into a
<PAGE>
network agreement whereby Newco and the Company will utilize Sprint's long-
distance network under specified terms and conditions.
WHEREAS, Sprint shall provide Newco and the Company, as co-borrowers,
with up to $25 million of Convertible Senior Debt financing (the "Convertible
Debt Financing") on or after the Closing, with such amount to increase to up to
$100 million over time, such indebtedness to be evidenced by one or more
Convertible Senior Promissory Note(s) (the "Convertible Notes");
WHEREAS, the closing of the Contribution and the other transactions
referred to above other than the Offer shall take place concurrently with the
merger of Newco Sub into the Company (the "Merger") and the conversion of each
share of the Company's outstanding Common Stock into one share of Newco common
stock, par value $.01 per share ("Newco Common Stock") pursuant to the Merger,
in each case upon the terms and subject to the conditions set forth in the
Investment Agreement and/or the Ancillary Agreements (as defined below);
WHEREAS, Section 2.02(c) of the Investment Agreement includes as a
condition to the obligations of Sprint and Sprint L.P. to consummate the
transactions contemplated by the Investment Agreement and the Ancillary
Agreements that the Granting Stockholders shall execute, deliver and fully
perform this Agreement and that the terms and conditions of this Agreement shall
have been otherwise satisfied in all material respects;
WHEREAS, the Granting Stockholders desire to induce the parties to the
Investment Agreement to execute, deliver and perform such agreement and the
Ancillary Agreements and to satisfy the aforesaid condition to the Closing of
the Investment Agreement;
WHEREAS, capitalized terms used herein shall have the meaning set forth
in the Investment Agreement unless otherwise defined herein.
NOW, THEREFORE, in consideration of (i) the foregoing premises, (ii)
the benefits to be received equally by all stockholders of the Company upon the
execution, delivery and performance of the Investment Agreement and the
Ancillary Agreements, (iii) the interest of Sprint and Sprint L.P. in purchasing
shares of Common Stock from the Granting Stockholders and other stockholders of
the Company in the Offer, (iv) the representations, warranties, covenants and
agreements contained in this Agreement, the Investment Agreement and the
Ancillary Agreements, and (v) for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Agreement and Obligation to Tender. Each of the Granting
----------------------------------
Stockholders agrees to tender all of the shares of Common Stock which they own
of record or beneficially (within the meaning of Rule 13d-3 under the Exchange
Act as of the date hereof), which number of shares is set forth opposite the
Granting Stockholder's name on Schedule A attached hereto in the precise manner
in which such name it is set forth on the certificate evidencing the Shares (the
"Owned
2
<PAGE>
Shares"; which term shall include any and all other shares of capital stock or
securities or rights issued or issuable in respect thereof on or after the date
hereof), in accordance with the terms and subject to the conditions set forth in
the Offer to Purchase and the related Letter of Transmittal (which, together
with any amendments or supplements to such Offer to Purchase and Letter of
Transmittal, shall definitively constitute the Offer). The Granting Stockholders
understand and agree that the actual number of Owned Shares purchased by Sprint
will vary depending upon the total number of shares of Common Stock validly
tendered and not withdrawn at the expiration of the Offer and the obligation
imposed on Sprint by Rule 14d-8 under the Exchange Act to prorate such
purchases; provided, however, that Sprint shall not be obligated to purchase any
shares of Common Stock in the Offer unless all of the conditions to the Offer
have been satisfied or waived in accordance with the Investment Agreement.
2. Agreement and Obligation to Vote. (a) Each of the Granting
--------------------------------
Stockholders agrees to cast, or cause to be cast, all of the votes represented
by the Owned Shares (which for this purpose shall also include all shares of
Newco Common Stock received upon conversion of the Owned Shares into Newco
Common Stock pursuant to the Merger) which such Granting Stockholder has the
right or power to vote, directly or indirectly, or has the right or power to
vote by holding a proxy to vote such shares or otherwise, in favor of (a) the
Merger, (b) the issuance and sale of the Convertible Preferred Stock, the
Convertible Notes and the Newco Common Stock issuable upon conversion of the
Convertible Preferred Stock and/or the Convertible Notes, in each case in
accordance with the Investment Agreement and the applicable Ancillary
Agreements, (c) the other transactions contemplated by the Investment Agreement
and the Ancillary Agreements, and (d) any related matter that must be approved
by the holders of Common Stock or Newco Common Stock in order for the
transactions contemplated by the Investment Agreement or any Ancillary Agreement
to be consummated.
(b) In order to ensure that the voting agreement set forth in Section
2(a) will be fulfilled, each of the Granting Stockholders agrees to grant, and
concurrently with the execution of this Agreement hereby grants, to Sprint
Corporation an Irrevocable Proxy, coupled with an interest, with respect to all
of the Owned Shares covered by the aforesaid voting agreement which the Granting
Stockholder is entitled to vote, for and in the name, place and stead of such
stockholder, at any annual or special meeting of the holders of Common Stock and
at any adjournment or postponement thereof, or pursuant to any consent in lieu
of a meeting, or otherwise for the matters described in Section 2(a). The
Irrevocable Proxy granted by each of the Granting Stockholders constitutes the
valid and effective irrevocable proxy, coupled with an interest, of each of the
Granting Stockholders in respect of the Owned Shares within the meaning of
Section 212(e) of the Delaware General Corporation Law; revokes any proxy or
proxies or powers of attorney heretofore given by any of the Granting
Stockholders in respect of the Shares; shall remain in full force and effect and
is and shall be irrevocable until the Closing of the Merger and the other
transactions contemplated by the Investment Agreement and the Ancillary
Agreements; and is coupled with an interest and an integral part of the benefits
and obligations of each of the Granting Stockholders and the rights and benefits
of Sprint and Sprint L.P.
3. Agreement Not to Dispose of Shares. Each Granting Stockholder
----------------------------------
hereby
3
<PAGE>
covenants and agrees as follows between the date hereof and the Closing (as
defined in the Investment Agreement):
a. The Granting Stockholders will not, and will not agree to,
directly or indirectly, (i) sell, transfer, assign, pledge,
hypothecate, cause to be redeemed or repurchased or otherwise dispose
of any of the Owned Shares, (ii) grant any proxy, power of attorney or
interest in or with respect to the Shares, or (iii) enter into a voting
agreement with respect to the Owned Shares, in any such case prior to
the Closing of the Merger and the other transactions contemplated by
the Investment Agreement and the Ancillary Agreements.
b. The Granting Stockholders will cause the Company to have
the certificates evidencing their shares bear substantially the
following legend and to cause the Company to instruct its transfer
agent to stop the transfer of any certificates bearing such legend that
is not made in accordance with this Agreement:
THE TRANSFER OF AND VOTING OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE PRIOR RIGHTS AND LIMITATIONS
IMPOSED BY THE AGREEMENT TO VOTE AND TENDER STOCK DATED FEBRUARY
10, 1998 AMONG SPRINT CORPORATION, A KANSAS CORPORATION, SPRINT
COMMUNICATIONS COMPANY L.P., AND CERTAIN GRANTING STOCKHOLDERS
WHO ARE SIGNATORIES THERETO. A COPY OF SUCH AGREEMENT WILL BE
FURNISHED BY THE COMPANY'S SECRETARY UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
4. Representations and Warranties. Each of the Granting
------------------------------
Stockholders severally represents and warrants to Sprint and Sprint L.P. as
follows:
a. Each Granting Stockholder that is an entity is a
corporation, limited liability company or partnership that is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or organized and has the power
and authority to execute, deliver and perform this Agreement and to
grant the Irrevocable Proxy. Each Granting Stockholder that is a
natural person has the capacity and the full legal right to execute,
deliver and perform this Agreement and to grant the Irrevocable Proxy.
b. This Agreement and each Irrevocable Proxy have been duly
executed and delivered and constitute a valid and binding agreement or
irrevocable proxy (coupled with an interest), respectively, and are
enforceable in accordance with their respective terms, except to the
extent that the enforcement of this Agreement or the Irrevocable Proxy
may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws
4
<PAGE>
now or hereafter in effect relating to creditors' rights generally, and
(ii) general principles of equity regardless of whether enforceability
is considered in a proceeding in equity or at law.
c. The execution and delivery of this Agreement and of the
Irrevocable Proxies did not, and the performance thereof, without
obtaining the consent of any third party will not, conflict with, or
result in any violation of, or default (with or without notice or lapse
of time, or both) under (i) to their knowledge, the certificate of
incorporation or bylaws of the Company, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit or license applicable to the Granting Stockholder or
the Owned Shares, or (iii) any Law applicable to the Granting
Stockholders. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or
any party to a Contract is required by or with respect to the
applicable Granting Stockholder or in connection with the execution and
delivery of this Agreement or the applicable Irrevocable Proxy.
d. Each of the Owned Shares has been duly and validly issued,
is fully paid and nonassessable, is free and clear of all Liens, and is
not subject to (i) any preemptive rights, (ii) right of first refusal,
(iii) right to purchase, acquire or vote, (iv) power of attorney, or
(v) any other right.
e. Each Granting Stockholder has the sole power, right and
authority to vote and to tender the Owned Shares in accordance with the
terms of this Agreement and the Irrevocable Proxy.
5. Specific Performance. Each Granting Stockholder understands and
--------------------
agrees that immediate irreparable damages for which there is no adequate remedy
at law would occur in the event that any provision of this Agreement and/or the
Irrevocable Proxy is not performed in accordance with the specific terms hereof
or thereof or is otherwise breached. Accordingly, it is agreed that in the event
of a failure by a Granting Stockholder to perform its obligations under this
Agreement and/or the Irrevocable Proxy, Sprint and Sprint L.P. shall each be
entitled to specific performance through injunctive relief to prevent breaches
of the provisions of this Agreement and/or the Irrevocable Proxy and to enforce
specifically the provisions of this Agreement and/or the Irrevocable Proxy in
any Action instituted in any court having competent jurisdiction, in addition to
any other remedy to which Sprint and Sprint L.P. may be entitled, at law or in
equity.
6. Term. This Agreement and the obligations hereunder shall commence
----
on the date hereof and continue until the earlier of (a) the Closing of the
Merger and the other transactions contemplated by the Investment Agreement and
the Ancillary Agreements, or (b) the termination of the Investment Agreement
pursuant to Section 6.01 thereof.
7. Miscellaneous Provisions. (a) Unless otherwise provided herein,
------------------------
any notice, request, waiver, instruction, consent or document or other
communication required or permitted
5
<PAGE>
to be given by this Agreement shall be effective only if it is in writing and
(i) delivered by hand or sent by certified mail, return receipt requested, (ii)
if sent by a nationally-recognized overnight delivery service with delivery
confirmed, or (iii) if telexed or telecopied, with receipt confirmed as follows:
Granting Stockholders Hunton & Williams
in care of their attorneys: NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Scott M. Hobby, Esq.
Telecopy No.: (404) 888-4190
Sprint and Sprint L.P.: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Chief Financial Officer
Telecopy No.: (913) 624-8426
with a copy to: Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Attn: Corporate Secretary
Telecopy No.: (913) 624-8233
with an additional copy to: Stinson, Mag & Fizzell, P.C.
1201 Walnut, Suite 2800
P.O. Box 419251
Kansas City, Missouri 64141-6251
Attn: John A. Granda, Esq.
Telecopy No.: (816) 691-3495
The parties shall promptly notify each other of any change in their respective
addresses or facsimile numbers or of the Person or office to receive notices,
requests or other communications under this Section 7(a). Notice shall be deemed
to have been given as of the date when so personally delivered, three (3) days
after when so deposited with the United States mail properly addressed, the next
day when delivered during business hours to such overnight delivery service
properly addressed or when receipt of a telex or telecopy is confirmed, as the
case may be, unless the sending party has actual Knowledge that such notice was
not received by the intended recipient.
(b) This Agreement and the Irrevocable Proxies embody the entire
agreement and understanding of the Parties in respect to the matter contemplated
hereby and thereby and supersede and render null and void all other prior
agreements and understandings, written and oral, with respect to the subject
matter hereof and thereof, provided that this provision shall not
6
<PAGE>
abrogate any other written agreement between the Parties executed simultaneously
with this Agreement. No Party shall be liable or bound to any other Party in any
manner by any promises, conditions, representations, warranties, covenants,
agreements and understandings, except as specifically set forth herein or
therein.
(c) Except as otherwise permitted in this Agreement, this Agreement may
not be amended or supplemented, unless set forth in a writing signed by and
delivered to, all the Parties and no Irrevocable Proxy may be amended or
supplemented unless set forth in a writing signed by Sprint, Sprint L.P. and the
Granting Stockholder who has granted such Irrevocable Proxy. Except as otherwise
permitted in this Agreement or the Irrevocable Proxies, the terms or conditions
of this Agreement and the Irrevocable Proxies may not be waived unless set forth
in a writing signed by the Party or Parties entitled to the benefits thereof. No
waiver of any of the provisions of this Agreement or the Irrevocable Proxies
shall be deemed or shall constitute a waiver of such provision at any time in
the future or a waiver of any other provision hereof or, in the case of the
Irrevocable Proxies, any similar provision in another Irrevocable Proxy. The
rights and remedies of the Parties are cumulative and not alternative. Except as
otherwise provided in this Agreement or the Irrevocable Proxies, neither the
failure nor any delay by any Party in exercising any right, power or privilege
under this Agreement or the Irrevocable Proxies will operate as a waiver of such
right, power or privilege, and no single or partial exercise of any such right,
power or privilege will preclude any other or further exercise of such right,
power or privilege or the exercise of any other right, power or privilege.
(d) Neither this Agreement or the Irrevocable Proxies nor any of the
rights, interests or obligations under this Agreement or the Irrevocable Proxies
shall be assigned or transferred, in whole or in part, by any of the Parties
without the prior written consent of the other Parties; provided, however, that
such assignment or transfer may be made by (i) Sprint or Sprint L.P. to any of
its Affiliates, (ii) by any Affiliate of Sprint to any other Affiliate of
Sprint, or (iii) pursuant to any merger, consolidation, reorganization or sale
of substantially all of the assets of Sprint or such Affiliates (or any
transaction having such effect). Subject to the preceding sentence, this
Agreement and the Irrevocable Proxies will be binding upon, inure to the benefit
of, and be enforceable by, the Parties and their respective successors and
assigns.
(e) This Agreement shall be governed by the laws of the State of
Delaware, without regard to conflict of laws principles.
(f) If any term or provision of this Agreement or the Irrevocable
Proxies or the application thereof to any Party or set of circumstances shall,
in any jurisdiction and to any extent, be finally held invalid or unenforceable,
such term or provision shall only be ineffective as to such jurisdiction, and
only to the extent of such invalidity or unenforceability, without invalidating
or rendering unenforceable any other terms or provisions of this Agreement or
the Irrevocable Proxies or under any other circumstances, and the Parties shall
negotiate in good faith a substitute provision which comes as close as possible
to the invalidated or unenforceable term or provision, and which puts each Party
in a position as nearly comparable as possible to the position it would have
been in but for the finding of invalidity or unenforceability, while remaining
valid and
7
<PAGE>
enforceable.
(g) This Agreement may be executed in one or more counterparts each of
which when so executed and delivered shall for all purposes be deemed to be an
original but all of which, when taken together, shall constitute one and the
same Agreement.
(h) The captions and headings used in this Agreement and the Irrevocable
Proxies are inserted for convenience only and shall not be deemed to constitute
part of this Agreement or the Irrevocable Proxies, as the case may be, or to
affect the construction or interpretation hereof or thereof.
(i) Nothing in this Agreement or the Irrevocable Proxies, express or
implied, shall create or confer upon any Person, other than the Parties or their
respective successors and permitted assigns, any legal or equitable rights,
remedies, obligations, liabilities or claims under or with respect to this
Agreement or the Irrevocable Proxies, except as expressly provided herein or
therein.
(j) Unless specifically stated otherwise, references to sections refer
to sections in this Agreement. References to "includes" and "including" mean
"includes without limitation" and "including without limitation."
(k) Each Granting Stockholder is a sophisticated legal entity or
individual that was advised by experienced counsel and, to the extent it deemed
necessary, other advisors in connection with this Agreement and the Irrevocable
Proxies. Accordingly, each Party hereby acknowledges that no Party has relied or
will rely in respect of this Agreement or the Irrevocable Proxies or the
transactions contemplated hereby or thereby upon any document or written or oral
information previously furnished to or discovered by it or its representatives,
other than this Agreement or the Irrevocable Proxies or the documents and
instruments delivered at the Closing.
(l) No provision of this Agreement or the Irrevocable Proxies shall be
interpreted in favor of, or against, any Party by reason of the extent to which
such Party or its counsel participated in the drafting thereof or by reason of
the extent to which any such provision is inconsistent with any prior draft
hereof or thereof.
(m) The Parties agree that any Action arising out of or relating to this
Agreement or the Irrevocable Proxies shall be brought by the Parties and held
and determined only in a Delaware state court or a federal court sitting in that
state which shall be the exclusive venue of any such Action. Each Party waives
any objection which such Party may now or hereafter have to the laying of venue
of any such Action, and irrevocably consents and submits to the jurisdiction of
any such court (and the appropriate appellate courts) in any such Action. Any
and all service of process and any other notice in any such Action shall be
effective against such Party when transmitted in accordance with subsection (a)
of this Section 7. Nothing contained herein shall be deemed to affect the right
of any Party to serve process in any manner permitted by Law.
8
<PAGE>
(n) All representations, warranties and covenants in this Agreement or
the Irrevocable Proxies shall survive the execution and delivery of this
Agreement and shall continue for their respective statute of limitations period,
except for any covenant which by its terms continues in effect for a longer time
period, and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of any Party or any information capable of
being acquired by any Party.
9
<PAGE>
(o) THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT
THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY ACTION INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE
IRREVOCABLE PROXIES.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first above written.
EARTHLINK NETWORK, INC.
By: /s/ Charles G. Betty
--------------------------------
Name: Charles G. Betty
Title: President and CEO
DOLPHIN, INC.
By: /s/ Charles G. Betty
--------------------------------
Name: Charles G. Betty
Title: President and CEO
SPRINT CORPORATION
By: /s/ Theodore H. Schell
--------------------------------
Name: Theodore H. Schell
Title: Vice President-Strategic
Planning and Corporate
Development
SPRINT COMMUNICATIONS
COMPANY L.P.
By: US Telecom, Inc., General Partner
By: /s/ Don A. Jensen
--------------------------------
Name: Don A. Jensen
Title: Vice President and Secretary
SIGNATURE PAGE FOR AGREEMENT TO VOTE AND TENDER STOCK
-----------------------------------------------------
10
<PAGE>
/s/ Sky D. Dayton
----------------------------
Sky D. Dayton
SIGNATURE PAGE FOR AGREEMENT TO VOTE AND TENDER STOCK
-----------------------------------------------------
11
<PAGE>
/s/ Kevin M. O'Donnell
----------------------
Kevin M. O'Donnell
SIGNATURE PAGE FOR AGREEMENT TO VOTE AND TENDER STOCK
-----------------------------------------------------
12
<PAGE>
/s/ Gregory Abbott
------------------
Gregory Abbott
SIGNATURE PAGE FOR AGREEMENT TO VOTE AND TENDER STOCK
-----------------------------------------------------
13
<PAGE>
/s/ Robert S. London
-----------------------------------
Robert S. London
SIGNATURE PAGE FOR AGREEMENT TO VOTE AND TENDER STOCK
14
<PAGE>
/s/ George Abbott
---------------------------------
George Abbott
SIGNATURE PAGE FOR AGREEMENT TO VOTE AND TENDER STOCK
15
<PAGE>
STORIE PARTNERS L.P.
By: /s/ Steven A. Ledger
-----------------------------
Name: Steven A. Ledger
Title: Managing Partner
SIGNATURE PAGE FOR AGREEMENT TO VOTE AND TENDER STOCK
16
<PAGE>
Schedule A
----------
<TABLE>
<CAPTION>
Name and Address Owned Shares
---------------- ------------
<S> <C>
Sky D. Dayton
3100 New York Drive
Pasadena, CA 91107 1,500,000
Kevin M. O'Donnell
9919 Beverly Grove Drive
Beverly Hills, CA 90210 944,614
Gregory Abbott
1200 Kessler Drive
Aspen, CO 81611 427,212
Robert S. London
212 Aurora Drive
Montecito, CA 93108 392,032
George Abbott
1285 South Ocean Boulevard
Palm Beach, FL 33480 203,364
Storie Partners LP
c/o Coman and Cohen
One Bush Street, Suite 1350
San Francisco, CA 94104 521,892
</TABLE>