UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4721
SPRINT CORPORATION
(Exact name of registrant as specified in its charter)
KANSAS 48-0457967
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
P.O. Box 11315, Kansas City, Missouri 64112
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(Address of principal executive offices)
(913) 624-3000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
SHARES OF COMMON STOCK OUTSTANDING AT March 31, 1996 -- 350,357,686
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SPRINT CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996
INDEX
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Page
Number
-------------------------
Part I - Financial Information
<S> <C>
Item 1. Financial Statements 1 - 8
Consolidated Balance Sheets 1 - 2
Consolidated Statements of Income 3
Consolidated Statements of Cash Flows 4
Consolidated Statements of Common Stock and Other Shareholders'
Equity 5
Condensed Notes to Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9 -19
Part II - Other Information
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signature 26
Exhibits
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PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions)
As of As of
March 31, December 31,
1996 1995
- ---------------------------------------------------------------------- --- ------------------ --- ------------------
(Unaudited)
Assets
Current assets
<S> <C> <C>
Cash and equivalents $ 1,718.2 $ 124.2
Accounts receivable, net of allowance for doubtful accounts of
$117.5 million ($125.8 million in 1995) 2,115.4 1,523.7
Receivable from cellular division -- 1,400.0
Inventories 189.7 171.0
Prepaid expenses 154.4 166.6
Other 360.9 233.9
- ---------------------------------------------------------------------- --- ------------------ --- ------------------
Total current assets 4,538.6 3,619.4
Investments in equity securities 265.1 262.9
Property, plant and equipment
Long distance communications services 6,704.9 6,773.7
Local communications services 12,868.5 12,603.1
Other 536.5 539.1
- ---------------------------------------------------------------------- --- ------------------ --- ------------------
20,109.9 19,915.9
Less accumulated depreciation 10,430.0 10,200.1
- ---------------------------------------------------------------------- --- ------------------ --- ------------------
9,679.9 9,715.8
Investments in affiliates 1,280.2 1,130.1
Net investment in cellular division -- 106.9
Other assets 363.8 360.8
- ---------------------------------------------------------------------- --- ------------------ --- ------------------
$ 16,127.6 $ 15,195.9
--- ------------------ --- ------------------
See accompanying condensed Notes to Consolidated Financial Statements.
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1
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PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED BALANCE SHEETS (continued)
(In Millions)
As of As of
March 31, December 31,
1996 1995
- ---------------------------------------------------------------------- --- ------------------ --- -------------------
(Unaudited)
Liabilities and shareholders' equity
Current liabilities
<S> <C> <C>
Current maturities of long-term debt $ 156.7 $ 280.4
Short-term borrowings 200.0 2,144.0
Accounts payable 883.6 938.9
Accrued interconnection costs 705.9 617.7
Accrued taxes 402.7 235.5
Advance billings 202.5 202.9
Other 695.3 722.7
- ---------------------------------------------------------------------- --- ------------------ --- -------------------
Total current liabilities 3,246.7 5,142.1
Long-term debt 3,178.0 3,253.0
Deferred credits and other liabilities
Deferred income taxes and investment tax credits 825.3 843.4
Postretirement and other benefit obligations 897.5 889.3
Other 354.1 393.0
- ---------------------------------------------------------------------- --- ------------------ --- -------------------
2,076.9 2,125.7
Redeemable preferred stock 14.1 32.5
Common stock and other shareholders' equity
Common stock, par value $2.50 per share, authorized 1.0
billion shares, issued 350.4 million (349.2 million in 1995)
and outstanding 350.3 million (349.2 million in 1995) 875.9 872.9
Capital in excess of par or stated value 989.6 960.0
Convertible preference stock 2,992.3 --
Retained earnings 2,717.6 2,766.5
Other 36.5 43.2
- ---------------------------------------------------------------------- --- ------------------ --- -------------------
7,611.9 4,642.6
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$ 16,127.6 $ 15,195.9
--- ------------------ --- -------------------
See accompanying condensed Notes to Consolidated Financial Statements.
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2
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PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In Millions, Except Per Share Data)
Three Months Ended
March 31,
----------------------------------
1996 1995
- ------------------------------------------------------------------------------- --- ------------- -- -------------
<S> <C> <C>
Net operating revenues $ 3,371.9 $ 3,079.1
Operating expenses
Costs of services and products 1,671.2 1,581.6
Selling, general and administrative 734.6 694.7
Depreciation and amortization 391.2 360.0
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Total operating expenses 2,797.0 2,636.3
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Operating income 574.9 442.8
Interest expense (47.7) (68.2)
Other expense, net (20.9) (20.5)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Income from continuing operations before income taxes 506.3 354.1
Income tax provision (194.1) (129.4)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Income from continuing operations 312.2 224.7
Discontinued operations, net (2.9) (0.4)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Net income 309.3 224.3
Preferred stock dividends (0.5) (0.7)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Earnings applicable to common stock $ 308.8 $ 223.6
--- ------------- -- -------------
Earnings per common share
Continuing operations $ 0.78 $ 0.64
Discontinued operations (0.01) --
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Total $ 0.77 $ 0.64
--- ------------- -- -------------
Weighted average number of common shares 400.3 349.5
--- ------------- -- -------------
Dividends per common share $ 0.25 $ 0.25
--- ------------- -- -------------
See accompanying condensed Notes to Consolidated Financial Statements.
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3
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<TABLE>
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PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Millions)
Three Months Ended
March 31,
----------------------------------
1996 1995
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Operating activities
<S> <C> <C>
Net income $ 309.3 $ 224.3
Adjustments to reconcile net income to net cash provided by operating
activities
Discontinued operations, net 2.9 0.4
Depreciation and amortization 391.2 360.0
Deferred income taxes and investment tax credits (29.2) (54.9)
Changes in operating assets and liabilities
Accounts receivable, net (634.0) (11.8)
Inventories and other current assets (74.4) (11.5)
Accounts payable and other current liabilities 189.9 58.9
Noncurrent assets and liabilities, net (29.2) 53.6
Other, net 16.3 (0.1)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Net cash provided by continuing operations 142.8 618.9
Net cash provided (used) by cellular division 1.8 (10.4)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Net cash provided by operating activities 144.6 608.5
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Investing activities
Capital expenditures (478.5) (405.6)
Investments in affiliates (92.2) (164.1)
Other, net (6.0) (3.2)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Net cash used by continuing operations (576.7) (572.9)
Repayment of intercompany advances by cellular division 1,400.0 --
Net investing activities of cellular division (140.7) (50.8)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Net cash provided (used) by investing activities 682.6 (623.7)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Financing activities
Proceeds from long-term debt 6.3 209.8
Retirements of long-term debt (169.4) (201.1)
Net increase (decrease) in notes payable and commercial paper (1,986.8) 109.9
Proceeds from convertible preference stock issued 3,000.0 --
Proceeds from common stock issued 27.3 0.7
Redemption of preferred stock (18.4) (2.5)
Dividends paid (88.1) (87.9)
Other, net (4.1) 3.6
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Net cash provided by financing activities 766.8 32.5
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Increase in cash and equivalents 1,594.0 17.3
Cash and equivalents at beginning of period 124.2 113.7
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Cash and equivalents at end of period $ 1,718.2 $ 131.0
--- ------------- -- -------------
See accompanying condensed Notes to Consolidated Financial Statements.
</TABLE>
4
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<TABLE>
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PART I.
Item 1.
SPRINT CORPORATION
CONSOLIDATED STATEMENTS OF COMMON STOCK AND
OTHER SHAREHOLDERS' EQUITY (UNAUDITED)
(In Millions)
Three Months Ended March 31, 1996
- --------------------------------------------------------------------------------------------------------------------
Capital in
Excess of Convertible
Common Par or Preference Retained
Stock Stated Value Stock Earnings Other Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1996
(349.2 million shares issued
and outstanding) $ 872.9 $ 960.0 $ -- $ 2,766.5 $ 43.2 $ 4,642.6
Net income -- -- -- 309.3 -- 309.3
Common stock dividends -- -- -- (87.6) -- (87.6)
Preference stock dividends (10.1) (10.1)
Preferred stock dividends -- -- -- (0.5) -- (0.5)
Common stock issued 2.7 23.8 -- -- -- 26.5
Convertible preference stock issued -- -- 3,000.0 -- -- 3,000.0
Change in unrealized holding
gains, net -- -- -- -- (7.0) (7.0)
Spin-off of cellular division -- -- -- (258.3) -- (258.3)
Other, net 0.3 5.8 (7.7) (1.7) 0.3 (3.0)
- --------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 1996
(350.4 million shares issued
and 350.3 million shares
outstanding) $ 875.9 $ 989.6 $ 2,992.3 $ 2,717.6 $ 36.5 $ 7,611.9
--------------------------------------------------------------------------------
See accompanying condensed Notes to Consolidated Financial Statements.
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5
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PART I.
Item 1.
SPRINT CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996 and 1995
The information contained in this Form 10-Q for the three-month interim periods
ended March 31, 1996 and 1995 has been prepared in accordance with instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all
adjustments considered necessary, consisting only of normal recurring accruals,
to present fairly the consolidated financial position, results of operations,
and cash flows for such interim periods have been made.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The results of operations for the
three months ended March 31, 1996 are not necessarily indicative of the
operating results that may be expected for the year ending December 31, 1996.
1. Accounting Policies
Basis of Consolidation and Presentation
The accompanying consolidated financial statements include the accounts of
Sprint Corporation and its wholly-owned and majority-owned subsidiaries
(Sprint). Investments in affiliates in which Sprint does not have a controlling
interest are accounted for using the equity method.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The prior period's financial statements have been restated to reflect Sprint's
spin-off of its cellular and wireless communications services division
(Cellular) (see Note 2). The operating results, net assets and cash flows of
Cellular are separately classified as discontinued operations and are excluded
from amounts reported for the continuing operations of Sprint. Intercompany
transactions with Cellular and its subsidiaries, which were previously
eliminated in consolidation, are now reflected in Sprint's consolidated
financial statements.
Certain other amounts previously reported for the prior period have been
reclassified to conform to the current period presentation in the accompanying
consolidated financial statements. Such reclassifications had no effect on the
results of operations or shareholders' equity as previously reported.
During 1995, Sprint determined that its local communications services division
no longer met the criteria necessary for the continued application of the
accounting prescribed by Statement of Financial Accounting Standards (SFAS) No.
71, "Accounting for the Effects of Certain Types of Regulation." Accordingly,
effective December 31, 1995, Sprint adopted accounting principles for a
competitive marketplace for its local division. In accordance with SFAS No. 71,
revenues and related net income of nonregulated operations attributable to
intercompany transactions with Sprint's regulated telephone companies were not
eliminated in the prior period's consolidated financial statements. Intercompany
revenues of such entities amounted to $71 million for the 1995 first quarter. In
conjunction with the adoption of accounting principles for a competitive
marketplace, such intercompany amounts are eliminated beginning in 1996. All
other significant intercompany transactions in 1996 and 1995 have been
eliminated.
6
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2. Spin-off of Cellular Division
In March 1996, Sprint completed the tax-free spin-off of Cellular to the holders
of Sprint common stock. The spin-off was effected by distributing to all holders
of Sprint common stock all shares of Cellular common stock at a rate of 1 share
of Cellular common stock for every 3 shares of Sprint common stock held. In
connection with the spin-off, Cellular repaid $1.4 billion of intercompany debt
owed by Cellular to Sprint and its subsidiaries, and Sprint contributed to the
equity capital of Cellular approximately $185 million of debt owed by Cellular
in excess of the amount repaid. This equity contribution, together with Sprint's
previous investments in Cellular, resulted in Sprint's net investment in
Cellular aggregating approximately $258 million as of the date of the spin-off.
The prior period's financial statements have been restated to reflect the
spin-off of Cellular (see Note 1).
3. Investments in Equity Securities
Investments in equity securities are classified as available for sale and
reported at fair value (estimated based on quoted market prices). As of March
31, 1996 and December 31, 1995, the cost of such investments was $109 million,
with gross unrealized holding gains of $156 million and $154 million,
respectively, reflected as additions to other shareholders' equity, net of
related income taxes.
4. Income Taxes
The differences which cause the effective income tax rate to vary from the
statutory federal income tax rate of 35 percent for the first quarters of 1996
and 1995, respectively, are as follows (in millions):
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Three Months Ended
March 31,
----------------------------------
1996 1995
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<S> <C> <C>
Income tax provision at the statutory rate $ 177.2 $ 123.9
Effect of:
State income taxes, net of federal income tax effect 18.7 12.8
Investment tax credits included in income (1.8) (4.0)
Other, net -- (3.3)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Income tax provision $ 194.1 $ 129.4
--- ------------- -- -------------
Effective income tax rate 38.3% 36.5%
--- ------------- -- -------------
</TABLE>
5. Commitments and Contingencies
Litigation, Claims and Assessments
Following announcement in 1992 of Sprint's merger agreement with Centel
Corporation (Centel), class action suits were filed against Centel and certain
of its officers and directors in federal and state courts. The state suits have
been dismissed, while the federal suits have been consolidated into a single
action which seeks damages for alleged violations of securities laws. On October
12, 1995, the New York trial court granted the motion of Centel's financial
advisors to dismiss a purported class action suit filed against them in
connection with their representation of Centel in the merger. The plaintiffs
have appealed the order dismissing their claims. Sprint may have indemnification
obligations to the financial advisors in connection with this suit. Various
other suits arising in the ordinary course of business are pending against
Sprint. Management cannot predict the ultimate outcome of these actions but
believes they will not result in a material effect on Sprint's consolidated
financial statements.
7
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Commitments
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" for a discussion of cash
commitments associated with Sprint Spectrum.
6. Supplemental Cash Flows Information
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Three Months Ended
March 31,
----------------------------------
1996 1995
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Cash paid for (in millions):
<S> <C> <C>
Interest - continuing operations $ 54.2 $ 60.8
--- ------------- -- -------------
Interest - cellular division $ 21.0 $ 31.0
--- ------------- -- -------------
Income taxes $ 22.6 $ 3.8
--- ------------- -- -------------
</TABLE>
During the 1996 first quarter, in conjunction with the consummation of its joint
venture with Deutsche Telekom AG (DT) and France Telecom (FT), Sprint
contributed cash, property, plant and equipment, and other assets and
liabilities of certain international operations to Global One. The net book
value of the noncash assets and liabilities contributed to the venture totaled
$72 million. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Strategic Developments - Global One" for further
discussion.
Also during the 1996 first quarter, as discussed in Note 2, Sprint completed the
tax-free spin-off of Cellular to the holders of Sprint common stock. The
spin-off had no immediate effect on cash flows.
7. Subsequent Events
In April 1996, the preference stock acquired by DT and FT in January 1996 for
$3.0 billion was converted into shares of Class A common stock, and DT and FT
acquired additional shares of Class A common stock for a total of approximately
$660 million, resulting in DT and FT each holding 43.1 million shares of Class A
common stock with approximately 10 percent of Sprint's voting power.
In April 1996, Sprint's Board of Directors declared dividends of $0.25 per share
on both Sprint's common stock and the Class A common stock payable on June 28,
1996.
8. Supplemental Earnings per Share Information
As discussed above, DT and FT have invested a total of approximately $3.7
billion in Sprint resulting in each holding 43.1 million shares of Class A
common stock. Assuming these shares had been issued as of January 1, 1996 and
that the related proceeds were used to repay debt or were invested on a
temporary basis, Sprint's earnings per share from continuing operations would
have decreased from $0.78 per share to $0.75 per share for the quarter ended
March 31, 1996.
8
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PART I.
Item 2.
SPRINT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Sprint Corporation (Sprint), incorporated in 1938 under the laws of Kansas, is
primarily a holding company. Sprint's principal subsidiaries provide domestic
and international long distance and local exchange telecommunications services.
Other subsidiaries are engaged in the wholesale distribution of
telecommunications products and the publishing and marketing of white and yellow
page telephone directories.
Long Distance Communications Services. The long distance division is the
nation's third largest long distance telephone company, operating a nationwide
all-digital long distance communications network utilizing state-of-the-art
fiber-optic and electronic technology. The division provides domestic and
international voice, video and data communications services. The terms under
which the division offers its services to the public are subject to different
levels of state and federal regulation, but rates are not subject to rate-base
regulation except nominally in some states.
Local Communications Services. The local division is comprised of regulated
local exchange carriers (LECs) which serve approximately 6.8 million access
lines in 19 states. In addition to furnishing local exchange services, the
division provides intraLATA toll service and interLATA access by telephone
customers and other carriers to Sprint's local exchange facilities.
Product Distribution and Directory Publishing. North Supply Company (North
Supply), a wholesale distributor of telecommunications and security and alarm
products, distributes products of more than 1,200 manufacturers to approximately
9,500 customers. Products range from basics, such as wire and cable, telephones
and repair parts, to complete private branch exchange (PBX) systems,
transmission systems and security and alarm equipment. North Supply also
provides material management services to several of its affiliates and to
several subsidiaries of the Bell Operating Companies.
Sprint Publishing & Advertising along with Centel Directory Company publish and
market white and yellow page telephone directories in certain of Sprint's local
exchange territories, as well as in the greater metropolitan areas of Milwaukee,
Wisconsin and Chicago, Illinois. The companies publish approximately 324
directories in 20 states with a circulation of 17.6 million copies.
Joint Ventures. Sprint is a 40 percent partner in Sprint Spectrum LP, a
partnership with Tele-Communications Inc. (TCI), Comcast Corporation (Comcast)
and Cox Communications, Inc. (Cox) to provide wireless personal communications
services (PCS) on a broad geographic basis within the United States.
Sprint is also a partner in Global One, a joint venture with Deutsche Telekom AG
(DT) and France Telecom (FT) to provide seamless global telecommunications
services to business, consumer and carrier markets worldwide. The interests of
DT and FT in the venture are held by their own joint venture, referred to as
Atlas. The operating group serving Europe (excluding France and Germany) is
owned one-third by Sprint and two-thirds by Atlas. The operating group for the
worldwide activities outside the United States and Europe is owned 50 percent by
Sprint and 50 percent by Atlas. Home country markets are served by DT in
Germany, FT in France and Sprint in the United States.
9
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Telecommunications Law
The Telecommunications Act of 1996, which was signed into law in February 1996,
promotes competition in all aspects of telecommunications. In particular, the
new law removes barriers to competition that will enable local and long distance
companies and cable TV companies to enter each others' markets. The regional
Bell Operating Companies (RBOCs) were allowed to provide out-of-region and
incidental long distance service upon enactment. The RBOCs will be allowed to
provide in-region long distance service once they obtain state certification of
compliance with a competitive "checklist" and a Federal Communications
Commission (FCC) ruling that it is in the public interest and that a facilities
based competitor exists in each market (or the failure of potential providers to
request local access). The new law directs the FCC to conclude a large number of
rule-makings in a relatively short period of time, including defining the
requirements of the competitive "checklist"; such rules will significantly
influence the amount and shape of competition in both local and long distance
markets in the future.
The new law eliminates regulatory barriers to entry into local telephone markets
and imposes several obligations upon incumbent LECs. They must allow local
resale without unreasonable restrictions, provide number portability (to the
extent technically feasible) and dialing parity, afford access to rights-of-way,
establish reciprocal compensation arrangements, negotiate interconnection
agreements, provide nondiscriminatory access to unbundled network elements and
allow collocation of interconnection equipment by competitors. The FCC is
presently developing regulations to implement these requirements. Some of
Sprint's LECs in rural areas may be exempted from some of these requirements.
Many states, including most of the states in which Sprint's LECs operate, allow
some competitive entry into the intraLATA long-distance and local service
markets. The federal law preempts inconsistent state laws.
The impact of the Act on Sprint is unknown because a number of important
implementation issues (such as the nature and extent of continued subsidies for
local rates) still need to be decided by state or federal regulators. However,
the Act offers opportunities as well as risks. Sprint should benefit from the
opportunity to enter additional local telephone markets. The new competitive
environment should lead to a reduction in local access fees, the largest single
cost in providing long distance service today. The risk aspect of local
competition is that market shares of Sprint's LECs in their current operating
regions (approximately 4 percent of the nation's local phone lines) are likely
to decline.
The removal of the long distance restrictions on the RBOCs is not anticipated to
have an immediate significant adverse impact on Sprint because of the
substantial preconditions that must be met before RBOCs can provide most
in-region long distance services. In addition, Sprint could potentially offset
losses of long distance customers at the retail level if it is successful in
becoming the underlying carrier for resellers (including the RBOCs) entering the
long distance market.
Strategic Developments
Global One
On January 31, 1996, Sprint, along with DT and FT, consummated their joint
venture, operating as Global One. Upon closing of the agreement, DT and FT
acquired shares of a new class of convertible preference stock for a total of
$3.0 billion, which resulted in DT and FT each holding approximately 7.5 percent
of the Sprint voting power. In April 1996, following the spin-off of Sprint's
cellular and wireless communications services division (Cellular), the
preference stock was converted into shares of Class A common stock, and DT and
FT acquired additional shares of Class A common stock. Following their aggregate
investment of approximately $3.7 billion, DT and FT each own shares of Class A
common stock with approximately 10 percent of Sprint's voting power.
10
<PAGE>
DT and FT, as the holders of the Class A common stock, have the right in most
circumstances to proportionate representation on Sprint's board of directors and
to purchase additional shares of Class A common stock from Sprint to enable them
to maintain their aggregate ownership level at 20 percent. In addition, the
holders of Class A common stock have disapproval rights with respect to Sprint's
undertaking certain types of transactions. (See "Part II - Other Information -
Item 2 - Changes in Securities" for additional discussion.) DT and FT have also
entered into a standstill agreement with Sprint that contains restrictions on
their ability to acquire voting securities of Sprint other than as contemplated
by their investment agreement with Sprint and related agreements, as well as
customary provisions restricting DT and FT from initiating or participating in
any proposal with respect to the control of Sprint.
In connection with the closing of the Global One joint venture, the long
distance division contributed certain assets and the related operations of its
international business unit to Global One.
Sprint Spectrum
Effective January 31, 1996, Sprint and its partners in Sprint Spectrum LP
entered into a series of agreements amending their approach to providing
competitive local services. Previously, the four partners had agreed that Sprint
Spectrum would provide local telecommunications services on a national basis
using the facilities of the cable partners. Under the revised agreements, local
offerings in each market will be the subject of individual joint ventures to be
negotiated between Sprint and the applicable cable company; however, there can
be no assurances that any such joint ventures will be formed.
Spin-off of Cellular
In March 1996, Sprint completed the tax-free spin-off of Cellular to the holders
of Sprint common stock. The spin-off was effected by distributing to all holders
of Sprint common stock all shares of Cellular common stock at a rate of 1 share
of Cellular common stock for every 3 shares of Sprint common stock held. In
connection with the spin-off, Cellular repaid $1.4 billion of intercompany debt
owed by Cellular to Sprint and its subsidiaries, and Sprint contributed to the
equity capital of Cellular approximately $185 million of debt owed by Cellular
in excess of the amount repaid. This equity contribution, together with Sprint's
previous investments in Cellular, resulted in Sprint's net investment in
Cellular aggregating approximately $258 million as of the date of the spin-off.
Results Of Operations
Consolidated
Sprint's two primary divisions -- long distance and local exchange -- generated
improved net operating revenues and operating income in the 1996 first quarter
as compared to the 1995 first quarter. The long distance division generated a 17
percent growth in traffic volumes over the first quarter of 1995 and the number
of access lines served by the local division grew 5.1 percent during the past 12
months.
Consolidated net operating revenues for the 1996 first quarter were $3.4
billion, a nearly 10 percent increase over net operating revenues of $3.1
billion for the 1995 first quarter. For the 1996 first quarter, income from
continuing operations was $312 million, or $0.78 per share, compared with $225
million, or $0.64 per share, for the 1995 first quarter.
11
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<TABLE>
<CAPTION>
Long Distance Communications Services
Selected Operating Results
(In Millions)
---------------------------------------------------------------------
Three Months Ended
March 31, Variance
---------------------------------- ----------------------------------
1996 1995 Dollar Percent
- -------------------------------------------- --- ------------- -- ------------- --- ------------- ----------------
<S> <C> <C> <C> <C>
Net operating revenues $ 2,001.5 $ 1,752.5 $ 249.0 14.2%
Operating expenses
Interconnection 892.7 762.2 130.5 17.1%
Operations 259.3 244.7 14.6 6.0%
Selling, general and administrative 470.5 451.0 19.5 4.3%
Depreciation and amortization 152.7 141.0 11.7 8.3%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Total operating expenses 1,775.2 1,598.9 176.3 11.0%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Operating income $ 226.3 $ 153.6 $ 72.7 47.3%
--- ------------- -- ------------- --- -------------
Operating margin 11.3% 8.8%
--- ------------- -- -------------
</TABLE>
On January 31, 1996, the long distance division contributed certain assets and
the related operations of its international business unit to Global One.
Accordingly, the operating results of such international operations are
reflected in the long distance division's operating results only through the
date of contribution. Assuming the contribution of these international
operations to Global One had occurred on January 1, 1995, it is estimated that
1996 first quarter operating income would have increased approximately 36
percent from the comparable 1995 period, and that related operating margins
would have increased to 11.8 percent in 1996 as compared to 10.0 percent in
1995.
Net operating revenues for the 1996 first quarter increased 14 percent over the
comparable 1995 period, while traffic volumes increased 17 percent. Revenue
growth for the 1996 first quarter reflects strong performance in the
international, residential, data services, and business markets. The
international market experienced strong growth, primarily due to marketing
initiatives and the related extension of various simplified calling plans to the
international market. Growth in the residential market reflects the continuing
success of Sprint Sense (sm), a flat rate calling plan, while growth in the data
services market reflects continued growth in demand and expanded service
offerings. The large business market continued to experience growth in "800" and
private line services. The small business market, which had experienced revenue
declines during 1995, produced increased net operating revenues in the 1996
first quarter relative to the comparable 1995 period, generally reflecting the
introduction of the Fridays Free (sm) calling plan. The contribution of
international operations to Global One resulted in a reduction of revenue, as
customers of such operations became Global One customers, and Global One traffic
carried by the division is now priced on a wholesale, rather than retail, basis.
Assuming the contribution of the international operations to Global One had
occurred as of January 1, 1995, it is estimated that the division's net
operating revenues for the 1996 first quarter would have increased approximately
15 percent over the comparable 1995 period.
12
<PAGE>
Interconnection costs consist of amounts paid to local exchange carriers, other
domestic service providers, and foreign telephone companies for the completion
of calls made by the division's domestic customers. Interconnection costs, which
were not significantly affected by the contribution of certain international
operations to Global One, increased in the 1996 first quarter relative to the
comparable 1995 period primarily as a result of growth in traffic volumes. As a
percentage of net operating revenues, interconnection costs were 44.6 percent in
1996 compared to 43.5 percent in 1995. This increase reflects changes in revenue
mix, particularly the growth in international traffic, as well as the impact of
the revenue reduction associated with the contribution of international
operations to Global One, as discussed above. This increase also reflects the
impact of the Fridays Free (sm) calling plan, as interconnection costs are
incurred without associated revenues. These factors were partially offset by
reduced costs of connecting to networks both domestically and internationally.
Assuming the contribution of the international operations to Global One had
occurred as of January 1, 1995, it is estimated that 1996 first quarter
interconnection costs would have been approximately 45.1 percent of net
operating revenues, compared to 44.5 percent in the comparable 1995 period.
Operations expense consists of costs related to operating and maintaining the
long distance network; costs of providing various services such as operator
services, public payphones, telecommunications services for the hearing
impaired, and video teleconferencing; and costs of data systems sales.
Operations costs for the 1996 first quarter increased $15 million from the
comparable 1995 period primarily due to increased costs associated with growth
within the data services market. Such increases were partially offset by the
impact of contributing certain international operations to Global One. Assuming
the contribution had occurred as of January 1, 1995, it is estimated that the
division's operations expense for the 1996 first quarter would have increased
approximately 14 percent over the comparable 1995 period.
Selling, general and administrative (SG&A) expenses for the 1996 first quarter
increased $20 million from the comparable 1995 period, generally reflecting the
overall growth in the division's operating activities. These increases were
generally due to costs associated with advertising and marketing efforts which
continue to be important in the intensely competitive long distance market. Such
increases were partially offset by the impact of contributing certain
international operations to Global One. Assuming this contribution had occurred
as of January 1, 1995, it is estimated that, as a percentage of net operating
revenues, SG&A expenses would have been 23.3 percent and 25.3 percent for the
first quarters of 1996 and 1995, respectively. This decrease in the relative pro
forma SG&A expense levels reflects the division's continued focus on cost
containment and sales productivity. This decrease also reflects $6 million of
expenses incurred in the 1995 first quarter associated with a reduction in the
division's work force.
The increase in depreciation and amortization expense in the 1996 first quarter
relative to the comparable 1995 period was generally due to an increase in the
asset base in support of data revenue growth and improved transport capacity
resulting from the deployment of the synchronous optical network (SONET).
Depreciation and amortization expense was minimally affected by the contribution
to Global One of depreciable assets of certain international operations with an
aggregate net book value of approximately $116 million.
13
<PAGE>
<TABLE>
<CAPTION>
Local Communications Services
Selected Operating Results
(In Millions)
---------------------------------------------------------------------
Three Months Ended
March 31, Variance
---------------------------------- ----------------------------------
1996 1995 Dollar Percent
- -------------------------------------------- --- ------------- -- ------------- --- ------------- ----------------
Net operating revenues
<S> <C> <C> <C> <C>
Local service $ 496.9 $ 453.6 $ 43.3 9.5%
Network access 460.0 411.3 48.7 11.8%
Toll service 113.5 122.6 (9.1) (7.4)%
Other 170.2 153.4 16.8 11.0%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Total net operating revenues 1,240.6 1,140.9 99.7 8.7%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Operating expenses
Plant operations 330.9 333.7 (2.8) (0.8)%
Depreciation and amortization 226.1 207.2 18.9 9.1%
Customer operations 153.4 141.2 12.2 8.6%
Other 197.8 188.3 9.5 5.0%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Total operating expenses 908.2 870.4 37.8 4.3%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Operating income $ 332.4 $ 270.5 $ 61.9 22.9%
--- ------------- -- ------------- --- -------------
Operating margin 26.8% 23.7%
--- ------------- -- -------------
</TABLE>
Sprint adopted accounting principles for a competitive marketplace effective
December 31, 1995 and discontinued applying Statement of Financial Accounting
Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation," to its local division. The primary effects of Sprint's discontinued
application of SFAS No. 71 were that certain accumulated depreciation balances
were increased, plant asset lives were shortened from regulator-prescribed lives
to estimated economic lives, switch software costs which had previously been
expensed as incurred are now being capitalized and amortized, and the effects of
any actions of regulators that had been recognized as assets and liabilities
pursuant to SFAS No. 71 but which would not have been recognized as such by
enterprises in general were eliminated from the consolidated balance sheet.
Sprint does not expect the discontinued application of SFAS No. 71 to have a
significant impact on 1996 operating results.
Alternative regulation now exists in six states in which the division operates,
impacting approximately 46 percent of its access lines. Effective January 1,
1996, Sprint's operations in Florida, which represent approximately 25 percent
of its access lines, changed from rate of return regulation to price regulation.
At the same time, the Florida local markets were opened to competition.
Effective in June 1996, North Carolina, which represents an additional 18
percent of the division's access lines, will also adopt alternative regulation.
It is anticipated that approximately 70 percent of the division's access lines
will be under some form of price regulation by the end of 1996. This shift from
rate of return regulation to various forms of alternative regulation is
resulting in the recognition of seasonal trends in the division's revenues.
The division's net operating revenues for the 1996 first quarter increased 9
percent over the comparable 1995 period. Growth in local service revenues
reflects continued increases in the number of access lines served and growth in
higher-margin advanced network services. The number of access lines served grew
5.1 percent during the past twelve months.
14
<PAGE>
Network access revenues, derived from interexchange long distance carriers' use
of the local network to complete calls, increased as a result of increased
traffic volumes, a portion of which is due to a migration of traffic related to
toll service revenues as described below. The increased traffic volume was also
affected by strong economic conditions in many of Sprint's operating territories
coupled with the harsh 1996 winter season experienced on the east coast. The
increased revenues also reflect the impact of the FCC's new interim interstate
price caps plan which became effective on August 1, 1995. Under the new plan,
the local division adopted a rate formula based on the maximum productivity
factors that effectively removed the earnings cap on the division's interstate
access revenues. Interstate access revenues comprise approximately 60 percent of
the division's network access revenues.
Toll service revenues, related to the provision of long distance services within
specified geographical areas and the reselling of interexchange long distance
services, decreased 7 percent. This decrease primarily reflects increased
competition in the intrastate long distance markets as interexchange long
distance carriers are now offering intraLATA long distance service in certain
states. While toll service revenues have declined as a result of this increased
competition, this reduction has been partially recovered through an increase in
network access revenues resulting from additional use of the local network by
interexchange long distance carriers.
Other revenues, including revenues from directory publishing fees, billing and
collection services and sales of telecommunications equipment, increased 11
percent, generally due to growth in equipment sales.
Plant operations expense includes network operations; repair and maintenance
costs of property, plant and equipment; and other costs associated with the
provision of local exchange services. Plant operations expense decreased
slightly in the 1996 first quarter from the comparable 1995 period. In
conjunction with the adoption of accounting principles for a competitive
marketplace, switch software costs which had previously been expensed as
incurred are now being capitalized and amortized, resulting in a decrease in
plant operations expense. Partially offsetting this decrease was an increase in
the costs of providing services resulting from access line growth.
The increase in depreciation and amortization expense for the 1996 first quarter
relative to the comparable 1995 period was generally due to the amortization of
switch software costs which are now being capitalized. Throughout 1996, this
amortization is expected to substantially offset the related decrease in plant
operations expense discussed above. Accordingly, the annual impact on operations
resulting from the capitalization of switch software is not expected to be
significant. Additionally, the impact of shortened asset lives resulting from
the discontinued application of SFAS No. 71 is not expected to have a
significant effect on 1996 operating results.
Customer operations expense includes costs associated with business office
operations and billing services, marketing costs, and expenses related to
providing operator and directory assistance and other customer services.
Customer operations expense increased $12 million in the 1996 first quarter
compared to the 1995 first quarter primarily due to increased marketing costs to
promote new products and services and increased costs associated with the
overall growth in access lines.
Other operating expenses increased $10 million in the 1996 first quarter over
the comparable 1995 period, primarily due to the growth in equipment sales.
15
<PAGE>
<TABLE>
<CAPTION>
Product Distribution and Directory Publishing Businesses
Selected Operating Results
(In Millions)
---------------------------------------------------------------------
Three Months Ended
March 31, Variance
---------------------------------- ----------------------------------
1996 1995 Dollar Percent
- -------------------------------------------- --- ------------- -- ------------- --- ------------- ----------------
<S> <C> <C> <C> <C>
Net operating revenues $ 289.7 $ 277.3 $ 12.4 4.5%
Operating expenses
Costs of services and products 241.8 235.0 6.8 2.9%
Selling, general and administrative 22.0 21.8 0.2 0.9%
Depreciation and amortization 1.8 1.8 -- -- %
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Total operating expenses 265.6 258.6 7.0 2.7%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Operating income $ 24.1 $ 18.7 $ 5.4 28.9%
--- ------------- -- ------------- --- -------------
Operating margin 8.3% 6.7%
--- ------------- -- -------------
</TABLE>
North Supply, Sprint's product distribution subsidiary, had net operating
revenues of $210 million for the 1996 first quarter, increasing $4 million from
the comparable 1995 period due to growth in sales to non-affiliates from $120
million for the 1995 first quarter to $125 million for the 1996 first quarter.
North Supply's costs of services and products increased from $177 million for
the 1995 first quarter to $179 million for the 1996 first quarter.
Sprint Publishing & Advertising, Sprint's directory publishing subsidiary, had
net operating revenues of $80 million and $71 million for the first quarters of
1996 and 1995, respectively. Sprint Publishing & Advertising's costs of services
and products for the first quarters of 1996 and 1995 were $63 million and $58
million, respectively.
Non-Operating Items
Interest Expense
Interest expense related to continuing operations for the 1996 first quarter
totaled $48 million compared to $68 million in the comparable 1995 period.
Interest expense related to the operations of Cellular totaled $21 million and
$31 million for the first quarters of 1996 and 1995, respectively, and is
included in discontinued operations in the accompanying Consolidated Statements
of Income. Sprint's average debt outstanding, including the debt incurred to
fund intercompany advances to Cellular prior to the spin-off, decreased by $1.4
billion from the 1995 first quarter to the 1996 first quarter primarily due to
repayments funded by the cash received from DT and FT for their purchase of
convertible preference stock as well as the cash received from Cellular for
repayment of intercompany debt upon completion of Sprint's spin-off of Cellular.
Sprint's effective interest rate increased 189 basis points for the 1996 first
quarter compared to the 1995 first quarter generally due to the significant
decrease in short-term borrowings as a percent of total borrowings. Sprint's
reported interest expense reflects the capitalization of interest costs on
borrowings associated with Sprint's investment in Sprint Spectrum. Sprint
capitalized interest costs of $24 million and $4 million during the first
quarters of 1996 and 1995, respectively.
16
<PAGE>
<TABLE>
<CAPTION>
Other Expense, Net
The components of other expense, net are as follows (in millions):
Three Months Ended
March 31,
----------------------------------
1996 1995
- ------------------------------------------------------------------------------- --- ------------- -- -------------
<S> <C> <C>
Equity in loss of Sprint Spectrum $ (17.3) $ (1.3)
Equity in loss of Global One and related venture costs (15.2) (2.1)
Loss on sales of accounts receivable (4.2) (9.8)
Dividend and interest income 12.4 3.0
Other 3.4 (10.3)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Total other expense, net $ (20.9) $ (20.5)
--- ------------- -- -------------
</TABLE>
The increased losses related to Sprint Spectrum and Global One were primarily
due to increased activities following the respective commencements of these
ventures. The decrease in loss on sales of accounts receivable reflects the
termination of an accounts receivable sales agreement during the 1996 first
quarter. The increase in dividend and interest income reflects the interest
income on the net invested cash received from DT, FT, and Cellular.
Income Tax Provision
See Note 4 of Condensed Notes to Consolidated Financial Statements for
information regarding the differences which cause the effective income tax rate
to vary from the statutory federal income tax rate.
Financial Condition
Sprint's financial condition at March 31, 1996 compared to December 31, 1995
generally reflects the completion of strategic initiatives during the 1996 first
quarter. Cash received from the investment in Sprint by DT and FT and the
repayment of intercompany debt by Cellular was used to reduce short-term and
long-term debt and to terminate an accounts receivable sales agreement, with
remaining proceeds being invested on a temporary basis. As a result, Sprint's
debt-to-capital ratio improved to 31.7 percent at March 31, 1996 compared to
54.8 percent at December 31, 1995.
Liquidity and Capital Resources
Cash Flows - Operating Activities
Cash flows from the operating activities of Sprint's continuing operations were
$143 million during the 1996 first quarter, compared to $619 million during the
1995 first quarter. During the 1996 first quarter, Sprint terminated an accounts
receivable sales agreement, resulting in a $600 million increase in accounts
receivable. Such termination was funded by the investment in Sprint by DT and FT
and the repayment of intercompany debt by Cellular. Excluding the effect of this
change, cash flows from operating activities increased $124 million, generally
reflecting improved operating results in all divisions.
Cash Flows - Investing Activities
Investing activities of Sprint's continuing operations used cash of $577 million
and $573 million during the first quarters of 1996 and 1995, respectively.
Capital expenditures were $479 million and $406 million during the first
quarters of 1996 and 1995, respectively. Long distance capital expenditures
totaled $143 million for the 1996 first quarter compared to $149 million for the
17
<PAGE>
same period in 1995. The 1996 expenditures were incurred primarily to enhance
network reliability, to upgrade capabilities for providing new products and
services and to meet increased demand for data-related services. Capital
expenditures for the local division totaled $328 million for the 1996 first
quarter compared to $250 million for the same period in 1995. In conjunction
with the December 31, 1995 adoption of accounting principles for a competitive
marketplace, the local division is now capitalizing switch software costs which
had previously been expensed as incurred. Such capitalized software costs
totaled $31 million in the 1996 first quarter. The remainder of the 1996
expenditures were made to accommodate access line growth and to expand the
division's capabilities for providing enhanced telecommunications services.
During the first quarters of 1996 and 1995, Sprint contributed $45 million and
$162 million, respectively, to Sprint Spectrum. The 1996 contribution was used
to fund Sprint's portion of Sprint Spectrum's capital and operating
requirements, while the 1995 amount was used to fund Sprint's portion of a
partial payment to the FCC for licenses acquired in the PCS auction and to fund
Sprint's portion of the venture's acquisition of a limited partnership interest
in American Personal Communications, which operates the nation's first broadband
PCS system in the Washington D.C. metropolitan area.
In conjunction with the spin-off of Cellular in March 1996, Sprint received $1.4
billion from Cellular as repayment of intercompany advances. Prior to the
spin-off, Cellular's investing activities required net cash of $141 million,
primarily for the acquisition of additional cellular properties and for capital
expenditures.
Cash Flows - Financing Activities
Financing activities provided cash of $767 million and $33 million in the first
quarters of 1996 and 1995, respectively. At the time of the closing of the
Global One joint venture agreement in January 1996, DT and FT acquired shares of
a new class of convertible preference stock for a total of $3.0 billion. These
proceeds, together with the $1.4 billion received from Cellular as discussed
above, were used to reduce outstanding debt and to terminate an accounts
receivable sales agreement, with remaining proceeds being invested on a
temporary basis.
Financing activities during 1995 generally reflect debt issued in order to fund
commitments associated with Sprint Spectrum.
Capital Requirements
During 1996, Sprint anticipates funding annual capital expenditures of
approximately $2.0 billion and annual dividends of approximately $430 million
with cash flows from operating activities (excluding the impact of the
termination of the accounts receivable sales agreement).
In April 1996, Sprint received approximately $660 million from the additional
investment in Class A common stock by DT and FT. These proceeds, together with
remaining proceeds from the initial investment by DT and FT and the repayment of
intercompany debt by Cellular, will be used to fund an estimated $450 million to
$550 million of remaining 1996 commitments associated with Sprint Spectrum and
to continue to reduce outstanding debt. Additionally, the Sprint Board of
Directors has authorized the repurchase of up to 10 million shares of Sprint
common stock. The shares may be repurchased on the open market from time to time
at management's discretion. Any repurchased shares will be held as treasury
stock and will be used primarily for employee benefit programs and other general
corporate purposes.
Liquidity
As of March 31, 1996, Sprint had the ability to borrow $1.5 billion under
revolving credit agreements with syndicates of domestic and international banks.
Other available financing sources include a Medium-Term Note program, under
which Sprint may offer for sale up to $175 million of unsecured senior debt
securities. In addition, Sprint may offer for sale approximately $1.0 billion of
debt securities pursuant to shelf registration statements filed with the
Securities and Exchange Commission.
The aggregate amount of additional borrowings which can be incurred is
ultimately limited by certain covenants contained in existing debt agreements.
As of March 31, 1996, Sprint had borrowing capacity of approximately $11.3
billion under the most restrictive of its debt covenants.
18
<PAGE>
The most restrictive covenant applicable to dividends results from a revolving
credit agreement. Among other restrictions, the agreement requires Sprint to
maintain specified levels of consolidated net worth, as defined. As a result of
this requirement, $2.0 billion of Sprint's $2.7 billion consolidated retained
earnings were effectively restricted from the payment of dividends as of March
31, 1996.
General Hedging Policies
Sprint, on a limited basis, utilizes certain derivative financial instruments in
an effort to manage exposure to interest rate risk and foreign exchange risk.
Sprint's utilization of such derivative financial instruments related to hedging
activities is generally limited to interest rate swap agreements and forward
contracts and options in foreign currencies. Sprint will in no circumstance take
speculative positions and create an exposure to benefit from market
fluctuations. All hedging activity is in accordance with board-approved
policies. Any potential loss or exposure related to Sprint's use of derivative
instruments is immaterial to its overall operations, financial condition and
liquidity.
Interest Rate Risk Management
Sprint's interest rate risk management program focuses on minimizing
vulnerability of net income to movements in interest rates, setting an optimal
mixture of floating-rate and fixed-rate debt in the liability portfolio and
preventing liquidity risk. Sprint primarily employs a gap methodology to measure
interest rate exposure and utilizes simulation analysis to manage interest rate
risk. Sprint takes an active stance in modifying hedge positions to benefit from
the value of timing flexibility and fixed-rate/floating-rate adjustments.
Foreign Exchange Risk Management
Sprint's foreign exchange risk management program focuses on optimizing
consolidated cash flows and stabilizing accounting results. Sprint does not
hedge translation exposure because it believes that optimizing consolidated cash
flows will, over time, maintain shareholder value. Sprint's primary transaction
exposure in foreign currencies results from changes in foreign exchange rates
between the dates Sprint incurs and settles liabilities (payable in a foreign
currency) to overseas telephone companies for the costs of terminating
international calls made by Sprint's domestic customers.
19
<PAGE>
PART II.
Other Information
Item 1. Legal Proceedings
There were no reportable events during the quarter ended March 31,
1996.
Item 2. Changes in Securities
Charter Amendments
The amendments to the Articles of Incorporation of Sprint approved by
its shareholders in connection with the investment in Sprint by FT and
DT (see "Item 4 - Submission of Matters to a Vote of Security Holders -
Special Meeting" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Strategic Developments - Global
One") increased the authorized common stock of Sprint to 1 billion
shares and authorized 500 million shares each of two new classes of
stock, Class A common stock and Class A preference stock (the
convertible preference stock).
The holders of the Class A common stock are entitled to receive
dividends in an amount per share equal to the per share amount of any
dividend paid on Sprint common stock, payable on the same date of
payment as the corresponding dividend on the Sprint common stock.
Dividends on the convertible preference stock are paid in preference to
dividends on Sprint common stock but after payment of dividends to
holders of Sprint's Preferred Stock-First Series, Convertible (First
Series Preferred), Preferred Stock-Second Series, Convertible (Second
Series Preferred) and Preferred Stock-Fifth Series (Fifth Series
Preferred).
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of Sprint, the holders of Class A common stock and the
holders of Sprint common stock share ratably in any assets remaining
after payment of the debts and other liabilities of Sprint, including
the liquidation preferences of any existing series of preferred or
preference stock then outstanding. The First Series Preferred, the
Second Series Preferred and the Fifth Series Preferred are entitled to
receive their liquidation preferences before any distributions are made
to the holders of the convertible preference stock.
The holders of Class A common stock and convertible preference stock
(together, the Class A Stock) have certain class voting rights,
including the right to elect their own directors to the Sprint board of
directors and to disapprove certain transactions, as well as general
voting rights.
As a general rule, the holders of Class A Stock are entitled to
representation on the Sprint board equal to the percent of Sprint
voting power owned by them, rounded up or down to the nearer whole
number of directors. In addition, for as long as it is necessary in
order to allow FT and DT to receive certain benefits under relevant tax
treaties between the United States and France and between the United
States and Germany, respectively, the holders of Class A Stock are
entitled to elect not less than 20 percent of the members of the Sprint
board at any time when their actual percentage of Sprint voting power
is at least 20 percent. If the holders of Class A Stock are entitled to
elect a number of additional directors which exceeds the number of
vacancies on the Sprint board, the total number of directors on the
Sprint board will automatically increase to such number as is necessary
to enable the holders of the Class A Stock to elect the number of
additional directors to which they are entitled. Sprint is required to
limit the number of non-US directors who are not designated by the
holders of Class A Stock if necessary in order to permit the holders of
Class A Stock under applicable law to have the representation on the
Sprint board to which they are entitled.
Until January 31, 1998, Sprint may not undertake certain transactions,
including certain divestitures, acquisitions and mergers and the
declaration of certain extraordinary cash dividends or distributions to
shareholders, if disapproved by the holders of Class A Stock. As long
20
<PAGE>
as any shares of Class A Stock are outstanding, the holders of Class A
Stock are entitled to disapprove any amendment to the Articles or
Bylaws of Sprint that would adversely affect their rights, any issuance
by Sprint of capital stock or debt with more than one vote per share or
otherwise having supervoting powers, or any business combination or
merger involving Sprint unless certain of their rights are preserved.
In addition, for a period of time holders of Class A Stock have certain
disapproval rights relating to the sale by Sprint of long distance
assets and transactions that would result in certain competitors of FT,
DT and Global One owning 10 percent or more of the outstanding Sprint
voting power. If Sprint determines to effect certain types of
transactions involving a change of control of Sprint, it must conduct
such transactions in accordance with reasonable procedures to be
determined by Sprint's board and permit FT and DT to participate in
that process on a basis no less favorable than that granted to any
other participant.
Both the Articles of Incorporation and Bylaws require that the holders
of a majority of the Class A Stock, voting separately as a class, must
approve any amendment of the Bylaws relating to the calling of meetings
of shareholders, procedures for the nomination of directors, procedures
regarding shareholder proposals, the votes represented by each share of
Sprint voting securities in the election of directors, the quorum for
the transaction of business at shareholder meetings, notice of meetings
of the Sprint board and committees of the Sprint board, the quorum for
the transaction of business at meetings of the Sprint board,
indemnification of officers and directors, the composition and quorum
required for the Executive Committee of the Sprint board, the
composition of other committees of the Sprint board, the declaration of
dividends out of the net income or earned surplus of Sprint, and the
amendment of the Bylaws.
The amendments to the Articles of Incorporation added provisions
permitting the redemption of shares of Sprint common stock held by
aliens if necessary to comply with the foreign ownership limitations
set forth in Section 310 of the U.S. Communications Act of 1934, as
amended. The provisions permit Sprint common stock to be redeemed at a
price equal to the fair market value of the shares, except that the
redemption price in respect of shares purchased by any alien after
November 21, 1995 and within one year of the redemption date would not
(unless otherwise determined by the Sprint board of directors) exceed
the purchase price paid for such shares by such person.
The provisions in Article Eight of Sprint's Articles of Incorporation,
which prohibit Sprint from purchasing its own equity securities from an
owner of 5 percent or more of such equity securities (if any of the
securities have been held for less than two years) at a premium over
market price unless Sprint either (1) obtains the approval of the
holders of a majority of the shares of Sprint's outstanding voting
stock (excluding the shares held by the 5 percent security holder) or
(2) makes a tender or exchange offer to purchase securities of the same
class on the same terms to all holders of such equity securities, were
amended to provide that the approval of shareholders other than DT, FT
and their affiliates which would otherwise be required by such
provisions will not be required in connection with purchases,
redemptions or other acquisitions by Sprint of Sprint capital stock
held by DT, FT and certain of their designated subsidiaries or other
qualified holders pursuant to the investment agreements with FT and DT
and the Articles of Incorporation.
Bylaw Amendments
The amendments to the Bylaws of Sprint approved by its shareholders
added an advance notice provision requiring shareholder proposals to be
delivered to the Corporate Secretary of Sprint not less than fifty nor
more than seventy-five days prior to a meeting of shareholders in order
to be eligible for presentation at such meeting (unless less than 65
days' notice or prior disclosure of the date of the meeting is given to
shareholders, in which event the notice to the Corporate Secretary must
be received no later than the close of business on the 15th day
following the day on which notice of the date of the meeting was mailed
or public disclosure was made, whichever is the first to occur). The
Bylaw amendments also eliminated the requirement that notice advising
of each specific amendment of the Bylaws by the Sprint board be given
to each shareholder having voting rights within 30 days after the date
of such amendment.
21
<PAGE>
Second Series Preferred Conversion Rate
As a result of the distribution of the common stock of Cellular to the
holders of Sprint common stock, the conversion rate at which shares of
the Second Series Preferred are convertible into Sprint common stock
was adjusted as provided by the Articles of Incorporation. Prior to the
distribution, the Second Series Preferred was convertible at the rate
of 2.5 shares of Sprint common stock for each share of Second Series
Preferred. Following the distribution, the Second Series Preferred is
convertible at the rate of 3.09 shares of Sprint common stock for each
share of Second Series Preferred.
Item 3. Defaults Upon Senior Securities
There were no reportable events during the quarter ended March 31,
1996.
Item 4. Submission of Matters to a Vote of Security Holders
Special Meeting
On January 29, 1996, Sprint held a Special Meeting of Shareholders to
vote on three proposals relating to the investment in Sprint by DT and
FT (see "Management's Discussion and Analysis of Financial Condition
and Results of Operations. - Strategic Developments - Global One" (page
10) for further discussion related to this investment). The
shareholders approved all three proposals.
The following votes were cast with respect to the proposal to approve
and adopt the Investment Agreement dated as of July 31, 1995, as
amended, among Sprint, FT and DT and the transactions contemplated by
the Investment Agreement (Proposal No. 1).
For 254,701,899
Against 11,925,847
Abstain 2,178,235
The following votes were cast with respect to the proposal to approve
and adopt the Charter Amendments and the Bylaw Amendments contemplated
by the Investment Agreement (Proposal No. 2).
For 251,797,486
Against 14,749,579
Abstain 2,258,916
The following votes were cast by the common stock, voting as a separate
class, with respect to the proposal to approve and adopt the Charter
Amendments and the Bylaw Amendments contemplated by the Investment
Agreement (Proposal No. 2).
For 251,666,480
Against 14,747,104
Abstain 2,249,151
The following votes were cast with respect to the proposal to approve
and adopt the Control Share Acquisitions Plan and to accord to the
shares acquired pursuant to such plan full voting rights (Proposal No.
3).
For 257,433,764
Against 6,447,938
Abstain 4,924,279
22
<PAGE>
The following votes were cast with respect to the proposal to approve
and adopt the Control Share Acquisitions Plan and to accord to the
shares acquired pursuant to such plan full voting rights, excluding
shares held by (i) FT, DT or any member of a group with FT and DT that
makes or proposes to make a "control share acquisition" (as defined in
the Kansas Control Share Acquisitions Statute), (ii) officers of Sprint
and (iii) employees of Sprint who are also directors of Sprint
(Proposal No. 3).
For 256,780,521
Against 6,449,252
Abstain 4,924,777
Annual Meeting
On April 16, 1996, Sprint held its Annual Meeting of Shareholders. In
addition to the election of three Class I Directors to serve for a term
of three years, the shareholders approved the appointment of Ernst &
Young LLP as independent auditors for Sprint and did not approve two
shareholder proposals.
The following votes were cast for each of the following nominees for
Director or were withheld with respect to such nominees:
For Withheld
------------------------- ---------------------- -------------------
DuBose Ausley 278,163,741 6,633,138
Warren L. Batts 277,676,488 7,120,391
Donald J. Hall 278,190,319 6,606,560
The following votes were cast with respect to the proposal to approve
the appointment of Ernst & Young LLP as independent auditors of Sprint
for 1996:
For 343,507,092
Against 1,717,581
Abstain 1,168,789
The following votes were cast with respect to a shareholder proposal
requesting that the Board of Directors of Sprint refrain from providing
retirement benefits to non-employee directors unless such benefits are
submitted to the shareholders for approval:
For 109,533,746
Against 205,206,736
Abstain 3,883,625
Broker non-votes 27,769,355
The following votes were cast with respect to a shareholder proposal
regarding the adoption of a bylaw establishing a Stockholder Advisory
Committee to review the business and affairs of the corporation:
For 20,597,772
Against 292,413,720
Abstain 5,632,668
Broker non-votes 27,749,302
23
<PAGE>
Item 5. Other Information
Sprint's ratios of earnings to fixed charges were 5.71 and 4.42 for the
three months ended March 31, 1996 and 1995, respectively. These ratios
have been computed by dividing fixed charges into the sum of (a) income
from continuing operations less capitalized interest included in
income, (b) income taxes, and (c) fixed charges. Fixed charges consist
of interest on all indebtedness (including amortization of debt
issuance expenses), the interest factor of operating rents and the
pre-tax cost of preferred stock dividends of subsidiaries.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation, as amended.
(b) Bylaws, as amended (filed as Exhibit 4B to Sprint
Corporation Current Report on Form 8-K dated January
31, 1996 and incorporated herein by reference).
(4) Instruments defining the Rights of Sprint's Equity Security
Holders:
(a) The rights of Sprint's equity security holders are
defined in the Fifth, Sixth, Seventh and Eighth
Articles of Sprint's Articles of Incorporation. See
Exhibit 3(a).
(b) Rights Agreement dated as of August 8, 1989, between
Sprint Corporation (formerly United Telecommunications,
Inc.) and UMB Bank, n.a. (formerly United Missouri Bank
of Kansas City, N.A.), as Rights Agent (filed as
Exhibit 2(b) to Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989
(File No. 1-4721), and incorporated herein by
reference).
(c) Amendment and supplement dated June 4, 1992 to Rights
Agreement dated as of August 8, 1989 (filed as Exhibit
2(c) to Amendment No. 1 on Form 8 dated June 8, 1992 to
Sprint Corporation Registration Statement on Form 8-A
dated August 11, 1989 (File No. 1-4721), and
incorporated herein by reference).
(d) Second Amendment to Rights Agreement dated as of July
31, 1995 between Sprint Corporation and UMB Bank, n.a.
(filed as Exhibit 2(d) to Form 8-A/A-2 dated October
20, 1995 amending Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File No.
1-4721) and incorporated herein by reference).
(e) Standstill Agreement dated as of July 31, 1995, by and
among Sprint Corporation, France Telecom and Deutsche
Telekom AG (filed as Exhibit (10)(c) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
24
<PAGE>
(10) Material Agreements - Joint Ventures:
(a) Joint Venture Agreement dated as of June 22, 1995 among
Sprint Corporation, Sprint Global Venture, Inc., France
Telecom and Deutsche Telekom AG (filed as Exhibit
(10)(a) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 and
incorporated herein by reference).
(b) Amendment No. 1 to Joint Venture Agreement, dated as of
January 31, 1996, among Sprint Corporation, Sprint
Global Venture, Inc., France Telecom, Deutsche Telekom
AG and Atlas Telecommunications, S.A. (filed as Exhibit
99A to Sprint Corporation Current Report on Form 8-K
dated January 31, 1996 and incorporated herein by
reference).
(c) Investment Agreement dated as of July 31, 1995 among
Sprint Corporation, France Telecom and Deutsche Telekom
AG (including as an exhibit the Stockholders' Agreement
among France Telecom, Deutsche Telekom AG and Sprint
Corporation) (filed as Exhibit (10)(b) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
(d) Amended and Restated Agreement of Limited Partnership
of MajorCo., L.P., dated as of January 31, 1996, among
Sprint Spectrum, L.P., TCI Network Services, Comcast
Telephony Services and Cox Telephony Partnership (filed
as Exhibit 99C to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(e) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Tele-Communications, Inc. (filed
as Exhibit 99D to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(f) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Comcast Corporation (filed as
Exhibit 99E to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(g) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Cox Communications, Inc. (filed
as Exhibit 99F to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(10) Executive Compensation Plans and Arrangements
(h) Agreement Regarding Special Compensation and Post
Employment Restrictive Covenants between Sprint
Corporation and one of its Executive Officers.
(11) Computation of Earnings Per Common Share.
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedules:
(a) March 31, 1996 Financial Data Schedule.
(b) December 31, 1995 Restated Financial Data Schedule.
(c) March 31, 1995 Restated Financial Data Schedule.
(b) Reports on Form 8-K.
Sprint filed a Current Report on Form 8-K dated January 31, 1996 in
which it reported the investment of $3.0 billion in Sprint by DT and FT
and the consummation of the global venture with DT and FT (see
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Strategic Developments - Global One" (page 10)
for further discussion). It also reported that Sprint, TCI, Comcast and
Cox had entered into a series of agreements amending in certain
respects their previously announced joint venture to engage in the
communications business (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Strategic Developments
- Sprint Spectrum" (page 11) for further discussion).
25
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPRINT CORPORATION
(Registrant)
By /s/ John P. Meyer
John P. Meyer
Senior Vice President -- Controller
Principal Accounting Officer
Dated: May 14, 1996
26
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation, as amended.
(b) Bylaws, as amended (filed as Exhibit 4B to Sprint
Corporation Current Report on Form 8-K dated January
31, 1996 and incorporated herein by reference).
(4) Instruments defining the Rights of Sprint's Equity Security
Holders:
(a) The rights of Sprint's equity security holders are
defined in the Fifth, Sixth, Seventh and Eighth
Articles of Sprint's Articles of Incorporation. See
Exhibit 3(a).
(b) Rights Agreement dated as of August 8, 1989, between
Sprint Corporation (formerly United Telecommunications,
Inc.) and UMB Bank, n.a. (formerly United Missouri Bank
of Kansas City, N.A.), as Rights Agent (filed as
Exhibit 2(b) to Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989
(File No. 1-4721), and incorporated herein by
reference).
(c) Amendment and supplement dated June 4, 1992 to Rights
Agreement dated as of August 8, 1989 (filed as Exhibit
2(c) to Amendment No. 1 on Form 8 dated June 8, 1992 to
Sprint Corporation Registration Statement on Form 8-A
dated August 11, 1989 (File No. 1-4721), and
incorporated herein by reference).
(d) Second Amendment to Rights Agreement dated as of July
31, 1995 between Sprint Corporation and UMB Bank, n.a.
(filed as Exhibit 2(d) to Form 8-A/A-2 dated October
20, 1995 amending Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File No.
1-4721) and incorporated herein by reference).
(e) Standstill Agreement dated as of July 31, 1995, by and
among Sprint Corporation, France Telecom and Deutsche
Telekom AG (filed as Exhibit (10)(c) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
(10) Material Agreements - Joint Ventures:
(a) Joint Venture Agreement dated as of June 22, 1995 among
Sprint Corporation, Sprint Global Venture, Inc., France
Telecom and Deutsche Telekom AG (filed as Exhibit
(10)(a) to Sprint Corporation Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 and
incorporated herein by reference).
(b) Amendment No. 1 to Joint Venture Agreement, dated as of
January 31, 1996, among Sprint Corporation, Sprint
Global Venture, Inc., France Telecom, Deutsche Telekom
AG and Atlas Telecommunications, S.A. (filed as Exhibit
99A to Sprint Corporation Current Report on Form 8-K
dated January 31, 1996 and incorporated herein by
reference).
<PAGE>
EXHIBIT
NUMBER
(10) Material Agreements - Joint Ventures (continued):
(c) Investment Agreement dated as of July 31, 1995 among
Sprint Corporation, France Telecom and Deutsche Telekom
AG (including as an exhibit the Stockholders' Agreement
among France Telecom, Deutsche Telekom AG and Sprint
Corporation) (filed as Exhibit (10)(b) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference).
(d) Amended and Restated Agreement of Limited Partnership
of MajorCo., L.P., dated as of January 31, 1996, among
Sprint Spectrum, L.P., TCI Network Services, Comcast
Telephony Services and Cox Telephony Partnership (filed
as Exhibit 99C to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(e) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Tele-Communications, Inc. (filed
as Exhibit 99D to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(f) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Comcast Corporation (filed as
Exhibit 99E to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(g) Parents Agreement dated as of January 31, 1996, between
Sprint Corporation and Cox Communications, Inc. (filed
as Exhibit 99F to Sprint Corporation Current Report on
Form 8-K dated January 31, 1996 and incorporated herein
by reference).
(10) Executive Compensation Plans and Arrangements
(h) Agreement Regarding Special Compensation and Post
Employment Restrictive Covenants between Sprint
Corporation and one of its Executive Officers.
(11) Computation of Earnings Per Common Share.
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedules:
(a) March 31, 1996 Financial Data Schedule.
(b) December 31, 1995 Restated Financial Data Schedule.
(c) March 31, 1995 Restated Financial Data Schedule.
<PAGE>
EXHIBIT 3(a)
ARTICLES OF INCORPORATION
OF
SPRINT CORPORATION
(As amended March 14, 1996)
FIRST
The name of the Corporation is SPRINT CORPORATION.
SECOND
That this Corporation is organized for profit, and that the purposes for
which it is formed are:
The construction and maintenance of a telephone line; the construction and
maintenance of a telegraph line; and the powers (but not by way of limitation)
to enter into joint ventures (whether incorporated or unincorporated),
partnerships and other forms of business relationships with public operators,
governmental agencies, governmental instrumentalities, corporations,
partnerships and other organizations, entities or persons (whether domestic or
foreign) for the construction, leasing, ownership, operation and maintenance of
telecommunications and other information transmission networks and all
businesses related thereto, both domestically and abroad, and to provide voice,
data and other communications and information services to any person or entity;
to lend and borrow money that may be necessary and proper in connection with the
conduct of its business; to hold, purchase, mortgage or otherwise convey such
real and personal estate as the purposes of this Corporation shall require; and
also take, hold and convey such other property, real, personal or mixed, as
shall be requisite for this Corporation to acquire in order to obtain or secure
the payment of any indebtedness or liability due to or belonging to this
Corporation; to sell real, mixed or personal property which may be proper for
the conduct of its business; to carry on its business outside of, as well as
within, the state, and to purchase, hold, sell, transfer, mortgage, pledge or
otherwise dispose of the shares of capital stock of, or any bonds, securities or
evidences of indebtedness created by any other corporation or corporations of
any state, or the United States, or any other country, nation or government,
which corporation shall be incorporated for the accomplishment of the same or
similar purposes as this Corporation or shall be incorporated for purposes, the
accomplishment of which would be incidental to or would aid or facilitate the
accomplishment of the purposes for which this Corporation shall have been
formed, and to exercise all rights, powers and privileges of ownership of such
stock or securities; to do any and all other acts or things necessary, proper
and incidental to the conduct of its business and incidental to the
accomplishment of the purposes for which this Corporation may be formed; and to
engage in any other lawful act or activity for which corporations may be
organized under the Kansas General Corporation Code (the "General Corporation
Code").
THIRD
The Corporation's registered office is located at 2330
Shawnee Mission Parkway, Westwood, Johnson County, Kansas
66205; Mr. J. Richard Devlin is the registered agent at said
address.
FOURTH
The Corporation shall have perpetual existence.
FIFTH
1. Number of Directors; Increases in Number of Directors. (a) The number of
Directors shall not be less than ten nor more than 20 (unless increased to more
than 20 pursuant to subsection (b) of this Section 1 or Section 6(e) of this
ARTICLE FIFTH) as may be determined from time to time by the affirmative vote of
the majority of the Board of Directors or as provided in subsection (b) of this
Section 1 or in Section 6(e) of this ARTICLE FIFTH.
(b) If at any time following the Initial Issuance Date, the Class A Holders
are entitled to elect a number of Directors pursuant to Section 2(a) of this
ARTICLE FIFTH or Section 3(d) of the Class A Provisions that exceeds the sum of
the number of Directors elected by the Class A Holders then serving on the Board
of Directors and the number of vacancies on the Board of Directors which the
Directors elected by the Class A Holders or the Class A Holders are entitled to
fill, the total number of Directors shall automatically and without further
action be increased by the smallest number necessary to enable the Class A
Holders (and the Directors elected by the Class A Holders in the case of
vacancies) to elect the number of Directors that the Class A Holders are
entitled to elect pursuant to such Section 2(a) or Section 3(d) of the Class A
Provisions.
2. Election of Directors. (a) Election of Directors by Class A Holders. (i)
Except as otherwise provided in Sections 7(b), 7(f) and 7(k) of the Class A
Provisions, after the Initial Issuance Date, the Class A Holders shall have the
right, voting separately as a class, to elect a number of Directors equal to the
greater of (x) two and (y) the product (rounded to the nearest whole number if
such product is not a whole number) of (I) the aggregate Percentage Ownership
Interests of the Class A Holders and (II) the total number of Directors,
provided that so long as Section 310 of the Communications Act of 1934, as
amended (or any successor provision of law) ("Section 310"), remains in effect,
under no circumstances shall (A) the Class A Holders have the right to elect
Aliens as Directors such that the total number of Aliens so elected by them
would exceed the maximum percentage of the total number of Directors of this
Corporation permitted under Section 310 to be Aliens or (B) the total number of
Directors elected by the Class A Holders and serving on the Board of Directors
exceed the maximum percentage of the total Directors of this Corporation
permitted under Section 310 to be elected by shareholders that are Aliens. Such
Directors elected by the Class A Holders shall not be divided into classes.
(ii) Upon the first to occur of (A) the conversion of all outstanding
shares of Class A Common Stock into Common Stock pursuant to Section 7 of the
Class A Provisions, (B) the redemption of all of the outstanding shares of Class
A Preference Stock, and (C) the termination of the Fundamental Rights as to all
outstanding shares of Class A Preference Stock pursuant to Section 7 of the
Class A Provisions, the term of office of all Class A Directors then in office
shall thereupon terminate, the vacancy or vacancies resulting from such
termination shall be filled by the remaining Directors then in office, acting by
majority vote of such remaining Directors, and the Director or Directors so
elected to fill such vacancy or vacancies shall not be treated hereunder or
under the Bylaws of this Corporation as Class A Directors. If at any time the
number of Directors that the Class A Holders have the right to elect pursuant to
this Section 2(a) shall decrease other than as set forth in the preceding
sentence, and the Class A Holders shall not have removed or caused to resign, in
either case effective not later than the fifteenth day following the event that
resulted in such decrease, a number of Class A Directors so that the total
number of Directors elected by the Class A Holders then in office does not
exceed the number provided in the first sentence of Section 2(a)(i), then the
terms of office of all Class A Directors shall terminate on such fifteenth date.
The vacancy or vacancies resulting from such termination of the terms of the
Class A Directors shall be filled as follows: (A) the vacancy or vacancies equal
to the number of Directors that the Class A Holders then have the right to elect
pursuant to this Section 2(a) (after giving effect to the decrease referred to
in the preceding sentence) shall be filled as provided in Section 4(b) of this
ARTICLE FIFTH, and (B) the remaining vacancy or vacancies shall be filled by the
remaining Directors other than Class A Directors then in office, acting by
majority vote of such remaining Directors, and the Director or Directors so
elected to fill such vacancy or vacancies shall not be treated hereunder or
under the Bylaws as Class A Directors.
(iii) (1) Notwithstanding anything to the contrary in this Section 2, but
subject to paragraphs (2), (3), (4) and (5) of this Section 2(a)(iii) and the
proviso set forth at the end of the first sentence of Section 2(a)(i) of this
ARTICLE FIFTH (the "Section 2(a) Proviso"), if the aggregate Percentage
Ownership Interest of the Class A Holders is 20% or greater, the Class A Holders
at all times shall have the right to elect not less than 20% of the total number
of Directors, provided that, if the Section 2(a) Proviso prevents the Class A
Holders from electing at least 20% of the total number of Directors under such
circumstances, this Corporation shall increase the total number of Directors to
a number not greater than 20 if such increase would enable the Class A Holders
to elect at least 20% of the total number of Directors as increased.
(2) The provisions of Section 2(a)(iii)(1) of this ARTICLE FIFTH (the
"Section 2(a)(iii)(1) Provisions") shall terminate and be of no force and effect
(a "Nullification") unless reinstated in accordance with Section 2(a)(iii)(5),
if either:
(A) this Corporation delivers an opinion of nationally-
recognized U.S. tax counsel to the effect that the
Section 2(a)(iii)(1) Provisions are, with respect to
both FT and DT, either not a Necessary Condition or
not a Sufficient Condition to secure any Treaty
Benefit and within 90 days of the delivery of such
opinion by this Corporation there is not delivered
to this Corporation by FT or DT an opinion of
nationally-recognized U.S. tax counsel concluding
that such provisions are a Necessary Condition and a
Sufficient Condition for either FT or DT to secure a
Treaty Benefit, or
(B) this Corporation provides written notice to FT and
DT in which it agrees to accord FT and DT those
Treaty Benefits to which FT and DT would be entitled
if the Section 2(a)(iii)(1) Provisions were in
effect (the "Continuing Treaty Benefits") and to
indemnify FT and DT on an after-tax basis against
(a) any liability arising out of according FT and DT
Continuing Treaty Benefits to the extent such
liability would not arise if the Section
2(a)(iii)(1) Provisions were in effect and (b) the loss of those
Continuing Treaty Benefits that this Corporation cannot directly
accord; provided that this Corporation by written notice to FT and DT
may revoke and withdraw such agreement to accord such Treaty Benefits
and to provide such indemnification following the date of such notice
and upon delivery of such notice the Section 2(a)(iii)(1) Provisions
shall again become effective. Notwithstanding any revocation or
withdrawal pursuant to the proviso contained in the immediately
preceding sentence, this Corporation shall continue to indemnify FT
and DT on an after-tax basis against any loss of Treaty Benefits to
which FT or DT, as the case may be, would have been entitled had the
Nullification described in this Section 2(a)(iii)(2)(B) not taken
place.
If a Nullification occurs under the provisions of paragraph (A) of this
Section 2(a)(iii)(2), then after the date of any such Nullification, and until
such time as a change in facts or Applicable Law requires a different result,
this Corporation shall accord FT and DT Treaty Benefits under the relevant
treaties between the United States and France and the United States and Germany,
but only to the extent FT or DT, as the case may be, would have been entitled to
claim such benefits had such Nullification not occurred.
(3) In addition to its rights under Section 2(a)(iii)(2), this Corporation
shall have the right, from time to time after the Investment Completion Date, to
deliver to each of FT and DT a written notice requesting that the chief tax
officer of each of FT and DT certify that FT, in the case of the request
furnished to FT, and DT, in the case of the request furnished to DT, is eligible
to claim at least one Treaty Benefit, and that such chief tax officer provide
this Corporation with other facts and information reasonably requested by this
Corporation that are reasonably necessary for this Corporation to determine
whether the Section 2(a)(iii)(1) Provisions are a Sufficient Condition or a
Necessary Condition to secure at least one Treaty Benefit. Unless within 60 days
of delivery of any such request, either FT or DT delivers such requested
certificate to this Corporation, and provides such requested facts or
information, the Section 2(a)(iii)(1) Provisions shall terminate and be of no
force or effect, unless reinstated in accordance with Section 2(a)(iii)(5).
(4) If FT and DT determine, after the Investment Completion Date, that the
Section 2(a)(iii)(1) Provisions are, with respect to both FT and DT, either not
a Necessary Condition or not a Sufficient Condition to secure at least one
Treaty Benefit, FT and DT shall deliver to this Corporation a certification to
such effect, and the Section 2(a)(iii)(1) Provisions shall terminate and be of
no force or effect, unless reinstated in accordance with Section 2(a)(iii)(5).
(5) Each of FT and DT shall have the right, at any time after the date the
Section 2(a)(iii)(1) Provisions are nullified pursuant to paragraph (A) (but not
paragraph (B)) of clause (2) or clause (3) or (4) of this Section 2(a)(iii), to
deliver to this Corporation a certificate signed by the chief tax officer of
either FT or DT to the effect that FT or DT, as the case may be, is eligible to
claim a Treaty Benefit and an opinion of nationally-recognized U.S. tax counsel
to the effect that the Section 2(a)(iii)(1) Provisions are again a Necessary
Condition and a Sufficient Condition for any of FT or DT to secure a Treaty
Benefit. Upon the delivery of any such certificate and opinion, the Section
2(a)(iii)(1) Provisions shall again become effective unless and until they
become ineffective pursuant to the other provisions of this Section 2(a)(iii).
(6) For purposes of this Section 2(a)(iii), the term "FT" shall include any
Qualified Subsidiary of FT organized under the laws of France and the term "DT"
shall include any Qualified Subsidiary of DT organized under the laws of
Germany.
(7) The Section 2(a)(iii)(1) Provisions shall be a "Necessary Condition"
with respect to any Treaty Benefit if FT or DT would not be entitled to claim
such Treaty Benefit unless such Section 2(a)(iii)(1) Provisions are in effect.
(8) The Section 2(a)(iii)(1) Provisions shall be a "Sufficient Condition"
with respect to any Treaty Benefit if FT and DT will otherwise fulfill all other
relevant conditions to claiming such Treaty Benefit if the Section 2(a)(iii)(1)
Provisions are in effect.
(b) Election of Directors by Other Holders. (i) Subject to clause (ii)
below, the holders of Common Stock shall have the right to elect that number of
Directors equal to the excess of (x) the total number of Directors over (y) the
sum of the number of Directors the Class A Holders are entitled to elect and the
number of Directors, if any, that the holders of Preferred Stock, voting
separately by class or series, are entitled to elect in accordance with the
provisions of ARTICLE SIXTH of these Articles of Incorporation. The Class A
Holders shall have no right to vote for Directors under this Section 2(b)(i).
(ii) So long as Section 310 remains in effect, under no circumstances shall
an Alien Director elected by the holders of Common Stock be qualified to serve
as a Director if the number of Aliens who would then be serving as members of
the Board of Directors, including such elected Alien, would constitute more than
the maximum number of Aliens permitted by Section 310 on the Board of Directors.
(iii) The Directors (other than the Directors elected by the Class A
Holders and any Directors elected by the holders of any one or more classes or
series of Preferred Stock having the right, voting separately by class or
series, to elect Directors) shall be divided into three classes, designated
Class I, Class II and Class III, with the term of office of one class expiring
each year. The number of Class I, Class II and Class III Directors shall
consist, as nearly as practicable, of one third of the total number of Directors
(other than the Directors elected by the Class A Holders and any Directors
elected by the holders of any one or more classes or series of Preferred Stock
having the right, voting separately by class or series, to elect Directors). At
each annual meeting of stockholders of this Corporation after the Initial
Issuance Date, successors to the class of Directors whose term expires at that
annual meeting shall be elected for a three-year term.
(iv) Whenever the holders of any one or more classes or series of Preferred
Stock shall have the right, voting separately by class or series, to elect
Directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of these Articles of Incorporation applicable thereto, and
such Directors so elected shall not be divided into classes pursuant to this
ARTICLE FIFTH unless expressly provided by such terms.
3. Change in Number of Directors. If the number of Directors (other than
Directors elected by Class A Holders and any Directors elected by the holders of
any one or more classes or series of Preferred Stock having the right, voting
separately by class or series, to elect Directors) is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
Directors in each class as nearly equal as possible.
4. Term of Office. (a) Each Director shall be elected for a three year
term. A Director shall hold office until the annual meeting for the year in
which his term expires and until his successor shall be elected and shall
qualify to serve, subject to prior death, resignation, retirement,
disqualification or removal from office.
(b) Any vacancy on the Board of Directors (whether resulting from an
increase in the total number of Directors, the departure of one of the Directors
or otherwise) may be filled by the affirmative vote of a majority of the
Directors elected by the same class or classes of stockholders which would be
entitled to elect the Director who would fill such vacancy if the annual meeting
of stockholders of this Corporation were held on the date on which such vacancy
occurred, provided that at any time when there is only one such Director so
elected and then serving, such Director may fill such vacancy and, provided,
further, that at any time when there are no such Directors then serving, the
stockholders of the class or classes entitled to elect the Director who will
fill such vacancy shall have the right to fill such vacancy and, provided,
further, that, so long as any Class A Stock is outstanding, any vacancy to be
filled by the Director or Directors elected by the holders of Common Stock may
not be filled with a Person who, upon his election, would not be an Independent
Director or would be an Alien, as the case may be, if the effect of such
election would be that less than a majority of the Board of Directors following
such election would be Independent Directors, or that the number of Aliens who
would then be serving on the Board of Directors would constitute more than the
maximum number of Aliens permitted on the Board of Directors under Section 310.
(c) Any additional Director of any class elected to fill a vacancy
resulting from an increase in the number of Directors of such class shall hold
office for a term that shall coincide with the remaining term of the Directors
of that class, but, except as provided in Section 2(a)(ii) of this ARTICLE
FIFTH, in no case will a decrease in the number of Directors shorten the term of
any incumbent Director. Any Director elected to fill a vacancy not resulting
from an increase in the number of Directors shall have the same remaining term
as that of his predecessor.
5. Rights, Powers, Duties, Rules and Procedures; Amendment of Bylaws. (a)
Except to the extent prohibited by law or as set forth in these Articles of
Incorporation or the Bylaws, the Board of Directors shall have the right (which,
to the extent exercised, shall be exclusive) to establish the rights, powers,
duties, rules and procedures that from time to time shall govern the Board of
Directors and each of its members, including, without limitation, the vote
required for any action by the Board of Directors, and that from time to time
shall affect the Directors' power to manage the business and affairs of this
Corporation. No Bylaw shall be adopted by stockholders which shall impair or
impede the implementation of the foregoing.
(b) The Board of Directors is expressly authorized and empowered, in the
manner provided in the Bylaws of this Corporation, to adopt, amend and repeal
the Bylaws of this Corporation in any respect to the full extent permitted by
the General Corporation Code not inconsistent with the laws of the General
Corporation Code or with these Articles of Incorporation, provided that the
following provisions of the Bylaws may not be amended, altered, repealed or made
inoperative or ineffective by adoption of other provisions to the Bylaws without
the affirmative vote of the holders of record of a majority of the shares of
Class A Stock then outstanding, voting separately as a class, at any annual or
special meeting of stockholders, the notice of which shall have specified or
summarized the proposed amendment, alteration or repeal of the Bylaws: ARTICLE
III, SECTIONS 2, 4, 5, 8 AND 9; ARTICLE IV, SECTIONS 5, 6, 10, 11 AND 12;
ARTICLE VI, SECTION 1; AND ARTICLE VII, SECTIONS 1 AND 2.
6. Removal; Changes in Status; Preferred Stock Directors. (a) Except as
provided in paragraphs (c) or (d) of this Section 6, a Director (other than a
Director elected by the Class A Holders or by the holders of any class or series
of Preferred Stock having the right, voting separately by class or series, to
elect Directors) may be removed only for cause. No Director so removed may be
reinstated for so long as the cause for removal continues to exist. Such removal
for cause may be effected only by the affirmative vote of the holders of a
majority of shares of the class or classes of stockholders which were entitled
to elect such Director.
(b) A Director elected by the holders of the Class A Stock may be removed
with or without cause. If removed for cause, no Director so removed may be
reinstated for so long as the cause for removal continues to exist. Removal may
be effected with or without cause by the affirmative vote of the holders of a
majority of shares of Class A Stock or with cause by the affirmative vote of the
holders of two-thirds of the shares of the Common Stock, the Class A Stock and
other capital stock of this Corporation entitled to general voting power, voting
together as a single class.
(c) If a Director elected by the holders of Common Stock who was not, at
the time of his election to the Board of Directors, an Alien, subsequently
becomes an Alien, the effect of which would be that the number of Aliens who
would then be serving as members of the Board of Directors, including the
Director who changed status, would constitute more than the maximum number of
Aliens permitted on the Board of Directors under Section 310, such Director
shall upon his change in status automatically and without further action be
removed from the Board of Directors.
(d) So long as any Class A Stock is outstanding, if an Independent Director
elected by the holders of Common Stock subsequently ceases to be an Independent
Director, the effect of which would be that the Independent Directors who would
then be serving as members of the Board of Directors would not constitute a
majority of the Board of Directors, such Director shall automatically and
without further action upon his change in status be removed from the Board of
Directors.
(e) (i) So long as any Class A Stock is outstanding, if a Director elected
by the holders of any class or series of Preferred Stock having the right,
voting separately by class or series, to elect Directors (a "Preferred Stock
Director") is an Alien, or after election becomes an Alien, the effect of which
would be that the number of Aliens who would then be serving as members of the
Board of Directors (including such Preferred Stock Director) would constitute
more than the maximum number of Aliens permitted on the Board of Directors under
Section 310, the total number of Directors shall automatically and without
further action be increased by the smallest number necessary to enable the Class
A Holders (and the Directors elected by the Class A Holders in the case of
vacancies) to elect Aliens as Directors to the fullest extent that the Class A
Holders are entitled to elect Directors pursuant to Section 2(a) of this ARTICLE
FIFTH without violating the requirements of Section 310.
(ii) So long as any Class A Stock is outstanding, if a Preferred Stock
Director is not an Independent Director, or after election ceases to be an
Independent Director, the effect of which would be that the Independent
Directors who would then be serving as members of the Board of Directors would
not constitute a majority of the Board of Directors, the total number of
Directors shall automatically and without further action be increased by the
smallest number necessary so that the number of Directors then serving who are
not Independent Directors (including such Preferred Stock Director and any
vacancies which the holders of Class A Stock have a right to fill) constitute
less than a majority of the Board of Directors.
7. Definitions. Certain capitalized terms used in this
ARTICLE FIFTH without definition shall have the meanings set
forth in Section 12 of the Class A Provisions.
SIXTH
The total number of shares of capital stock which may be issued by this
Corporation is 2,020,000,000, of which 500,000,000 shares shall be Class A
Common Stock with a par value of $2.50 per share (hereinafter, the "Class A
Common Stock"); 1,000,000,000 shares shall be Common Stock with a par value of
$2.50 per share (hereinafter, the "Common Stock"); 500,000,000 shares shall be
Class A Preference Stock with a par value of $1.00 per share (hereinafter, the
"Class A Preference Stock"); and 20,000,000 shares shall be Preferred Stock
(herein referred to as the "Preferred Stock," such term not to include the Class
A Preference Stock) without par value.
GENERAL PROVISIONS RELATING TO ALL STOCK
1. Preemptive Rights; Cumulative Voting. No holder of shares of capital
stock of any class of this Corporation or holder of any security or obligation
convertible into shares of capital stock of any class of this Corporation shall
have any preemptive right whatsoever to subscribe for, purchase or otherwise
acquire shares of capital stock of any class of this Corporation, whether now or
hereafter authorized; provided that this provision shall not prohibit this
Corporation from granting, contractually or otherwise, to any such holder, the
right to purchase additional securities of this Corporation. Stockholders of
this Corporation shall not be entitled to cumulative voting of their shares in
elections of Directors.
2. Redemption of Shares Held by Aliens. Not withstanding any other
provision of these Articles of Incorporation to the contrary, outstanding shares
of Common Stock and Class A Stock Beneficially Owned by Aliens may be redeemed
by this Corporation, by action duly taken by the Board of Directors (with the
approval of a majority of the Continuing Directors (as defined in ARTICLE
SEVENTH) at a meeting at which at least seven Continuing Directors are present,
except that no such approval of the Continuing Directors shall be required if
(i) the Fair Price Provisions have been deleted in their entirety, (ii) the Fair
Price Provisions have been modified so as explicitly not to apply to any Class A
Holder, or they have been modified in a manner reasonably satisfactory to FT and
DT so as explicitly not to apply to any transactions with any Class A Holder
contemplated under these Articles of Incorporation, (iii) the transaction in
question is not a "Business Combination" within the meaning of the Fair Price
Provisions, or (iv) the Class A Holder that is a party to the transaction, along
with its Affiliates (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as in effect on October 1, 1982) and Associates (as such
term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as in
effect on October 1, 1982), is no longer an "Interested Stockholder" or
"Affiliate" of an "Interested Stockholder" within the meaning of the Fair Price
Provisions), to the extent necessary or advisable, in the judgment of the Board
of Directors, for this Corporation or any of its Subsidiaries to comply with the
requirements of Section 310 (each of (i) through (iv), a "Fair Price
Condition"), provided that shares of Class A Stock only may be redeemed if, and
only to the extent that, the outstanding shares of Class A Stock represent Votes
constituting greater than 20% of the aggregate Voting Power of this Corporation
immediately prior to the time of such redemption. The terms and conditions of
such redemption shall be as follows, subject in any case to any other rights of
a particular Alien or of this Corporation pursuant to any contract or agreement
between such Alien and this Corporation:
(a) except as provided in Section 2(f), the redemption price of the
shares to be redeemed pursuant to this Section 2 of these GENERAL
PROVISIONS RELATING TO ALL STOCK of ARTICLE SIXTH shall be equal to the
Market Price of such shares on the third Business Day prior to the date
notice of such redemption is given pursuant to subsection (d) of this
Section 2, provided that, except as provided in clause (f), below, such
redemption price as to any Alien who purchased such shares of Common Stock
after November 21, 1995 and within one year prior to the Redemption Date
shall not (unless otherwise determined by the Board of Directors) exceed
the purchase price paid by such Alien for such shares;
(b) the redemption price of such shares may be
paid in cash, Redemption Securities or any combination
thereof;
(c) if less than all of the shares Beneficially Owned by Aliens are to
be redeemed, the shares to be redeemed shall be selected in such manner as
shall be determined by the Board of Directors, which may include selection
first of the most recently purchased shares thereof, selection by lot or
selection in any other manner determined by the Board of Directors to be
equitable, provided that this Corporation shall in all cases be entitled to
redeem shares of Common Stock Beneficially Owned by Aliens prior to
redeeming any shares of Class A Common Stock Beneficially Owned by Aliens;
(d) this Corporation shall give notice of the Redemption Date at least
30 days prior to the Redemption Date to the record holders of the shares
selected to be redeemed (unless waived in writing by any such holder) by
delivering a written notice by first class mail, postage pre-paid, to the
holders of record of the shares selected to be redeemed, addressed to such
holders at their last address as shown upon the stock transfer books of
this Corporation (each such notice of redemption specifying the date fixed
for redemption, the redemption price, the place or places of payment and
that payment will be made upon presentation and surrender of the
certificates representing such shares), provided that the Redemption Date
may be the date on which written notice shall be given to record holders if
the cash or Redemption Securities necessary to effect the redemption shall
have been deposited in trust for the benefit of such record holders and
subject to immediate withdrawal by them upon surrender of the stock
certificates for their shares to be redeemed;
(e) on the Redemption Date, unless this Corporation shall have
defaulted in paying or setting aside for payment the cash or Redemption
Securities payable upon such redemption, any and all rights of Aliens in
respect of shares so redeemed (including without limitation any rights to
vote or participate in dividends), shall cease and terminate, and from and
after such Redemption Date such Aliens shall be entitled only to receive
the cash or Redemption Securities payable upon redemption of the shares to
be redeemed; and
(f) such other terms and conditions as the Board of Directors shall
determine to be equitable, provided that, if any shares of Class A Stock
are redeemed pursuant to this Section 2 of these GENERAL PROVISIONS
RELATING TO ALL STOCK of ARTICLE SIXTH, the redemption price of any such
shares redeemed shall be a per share price equal to (i) in the case of
Class A Common Stock the greater of (A) the Market Price of a share of
Common Stock on the Redemption Date and (B) the Weighted Average Price paid
by the Class A Holders for the Class A Common Stock together with a stock
appreciation factor thereon calculated on the basis of a 365-day year) at
the rate of 3.88% through and including the Redemption Date, such stock
appreciation factor to be calculated, on an annual compounding basis, from
the date of purchase of such Class A Common Stock until the Redemption Date
(the "Alternative Price"), and (ii) in the case of Class A Preference
Stock, its Liquidation Preference, provided, that if this Corporation
redeems any shares of Class A Common Stock after the third anniversary of
the Investment Completion Date, the redemption price of any such shares
redeemed shall be the Market Price of a share of Common Stock on the
Redemption Date. The redemption price to be paid to the Class A Holders
shall be modified in accordance with Article IX of the Stockholders'
Agreement if either (i) such redemption is effected on or prior to the
third anniversary of the Investment Completion Date, or (ii) such
redemption is effected within the 120-day period described in the last
sentence of Section 2.11 of the Stockholders' Agreement (as such period may
be extended pursuant thereto) following an election by this Corporation to
redeem shares in accordance with such Section.
Any notice that is mailed as herein provided shall be conclusively presumed
to have been duly given, whether or not the holder of shares to be redeemed
received such notice, provided that all notices to be given to the Class A
Holders shall be made and deemed delivered in accordance with Section 13 of the
Class A Provisions; and failure to give such notice by mail, or any defect in
such notice, to holders of shares designated for redemption shall not affect the
validity of the proceedings for the redemption of any other shares.
3. Beneficial Ownership Inquiry. (a) This Corporation may by written notice
require a Person that is a holder of record of Common Stock or Class A Stock or
that this Corporation knows to have, or has reasonable cause to believe has,
Beneficial Ownership of Common Stock or Class A Stock to certify that, to the
knowledge of such Person:
(i) no Common Stock or Class A Stock as to which such Person has
record ownership or Beneficial Ownership is Beneficially Owned by Aliens;
or
(ii) the number and class or series of shares of Common Stock or Class
A Stock owned of record or Beneficially Owned by such Person that are owned
of record or Beneficially Owned by Persons that are Aliens are as set forth
in such certificate.
(b) With respect to any Common Stock or Class A Stock identified by such
Person in response to Section 3(a)(ii) above, this Corporation may require such
Person to provide such further information as this Corporation may reasonably
require in order to implement the provisions of Section 2 of these GENERAL
PROVISIONS RELATING TO ALL STOCK of ARTICLE SIXTH.
(c) For purposes of applying Section 2 of these GENERAL PROVISIONS RELATING
TO ALL STOCK of ARTICLE SIXTH with respect to any Common Stock or Class A Stock,
in the event of the failure of any Person to provide the certificate or other
information to which this Corporation is entitled pursuant to this Section, this
Corporation in its sole discretion may presume that the Common Stock or Class A
Stock in question is, or is not, Beneficially Owned by Aliens.
4. Factual Determinations. The Board of Directors shall have the power and
duty to construe and apply the provisions of Sections 2 and 3 of these GENERAL
PROVISIONS RELATING TO ALL STOCK of ARTICLE SIXTH and, with respect to shares of
Common Stock, to make all determinations necessary or desirable to implement
such provisions, including but not limited to: (a) the number of shares of
Common Stock that are Beneficially Owned by any Person; (b) whether a Person is
an Alien; (c) the application of any other definition of these Articles of
Incorporation to the given facts; and (d) any other matter relating to the
applicability or effect of Section 2 of these GENERAL PROVISIONS RELATING TO ALL
STOCK of ARTICLE SIXTH.
5. Loss of Voting Rights. If (a) there is a breach by FT, DT, any Qualified
Subsidiary, any Strategic Investor or any Qualified Stock Purchaser of any of
the provisions of Sections 3.1(a) or 3.2(b) (as it relates to matters described
in Section 3.1(a)) of the Standstill Agreement or any corresponding provision of
any Qualified Subsidiary Standstill Agreement, Strategic Investor Standstill
Agreement or Qualified Stock Purchaser Standstill Agreement, (b) there is a
willful breach in any material respect by FT, DT, any Qualified Subsidiary, any
Strategic Investor or any Qualified Stock Purchaser of any provision of Section
3.1 (other than Section 3.1(a)) of the Standstill Agreement or any corresponding
provision of any Qualified Subsidiary Standstill Agreement, Strategic Investor
Standstill Agreement or Qualified Stock Purchaser Standstill Agreement, or (c) a
Government Affiliate or Related Company (each as defined in the Standstill
Agreement) takes an action which if taken by FT or DT would violate Sections 3.1
or 3.2(b) (as it relates to matters other than those described in Section
3.1(a)) of the Standstill Agreement, then FT and its Qualified Subsidiaries
(except in the case of a breach arising from the action of a Government
Affiliate of Germany, a Related Company of DT or a Strategic Investor in a
Qualified Subsidiary of DT in which FT is not an investor), DT and its Qualified
Subsidiaries (except in the case of a breach arising from the action of a
Government Affiliate of France, a Related Company of FT or a Strategic Investor
in a Qualified Subsidiary of FT in which DT is not an investor) and each
Qualified Stock Purchaser shall not be entitled to vote any of their shares of
capital stock of this Corporation with respect to any matter or proposal arising
from, relating to or involving, such breach or action, and no such purported
vote by such Class A Holders on such matter shall be effective or shall be
counted.
6. Definitions. Certain capitalized terms used in these GENERAL PROVISIONS
RELATING TO ALL STOCK without definition shall have the meanings set forth in
Section 12 of the provisions of ARTICLE SIXTH entitled GENERAL PROVISIONS
RELATING TO CLASS A STOCK.
GENERAL PROVISIONS RELATING TO COMMON STOCK
AND CLASS A STOCK
1. Except as expressly set forth in ARTICLE FIFTH of these Articles of
Incorporation or in the provisions of ARTICLE SIXTH entitled GENERAL PROVISIONS
RELATING TO ALL STOCK and GENERAL PROVISIONS RELATING TO CLASS A STOCK, each
share of Common Stock and each share of Class A Common Stock shall be entitled
to one Vote, and the shares of Class A Preference Stock shall be entitled to the
number of Votes equal to the number of Class A Conversion Shares or, if the
Conversion Price has not yet been Fixed, the number of Class A Conversion Shares
determined as if the Conversion Price had been Fixed on the Initial Issuance
Date at the Minimum Price, on all matters in respect of which the holders of
Common Stock are entitled to vote, and the Class A Holders and the holders of
Common Stock shall vote together with the holders of all other classes or series
of capital stock which have general voting power on all such matters as a single
class.
2. Dividends shall be declared and paid only out
of net income or earned surplus of this Corporation.
3. (a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of this Corporation, after payment or provision for
payment of the debts and other liabilities of this Corporation, including the
liquidation preferences of any series of Preferred Stock and of the Class A
Preference Stock, the holders of Class A Common Stock and the holders of Common
Stock shall be entitled to share ratably in the remaining net assets of this
Corporation.
(b) The Class A Preference Stock shall rank junior to any series of
Preferred Stock in the payment of dividends and the distribution of assets upon
the liquidation, dissolution or winding-up of this Corporation, unless any such
series of Preferred Stock is specifically made junior to or to rank on a parity
with the Class A Preference Stock in the payment of dividends or the
distribution of assets upon liquidation, dissolution or winding-up of this
Corporation. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of this Corporation, no holder of shares of Class A
Preference Stock shall receive any distributions or payments with respect to
such shares unless prior thereto holders of all series of Preferred Stock, which
have not been specifically made junior to or to rank on a parity with the Class
A Preference Stock in the distribution of assets upon liquidation, dissolution
or winding-up of this Corporation, shall have received with respect to each
share of such Preferred Stock the amounts to be paid with respect to such share
upon the liquidation, dissolution or winding-up of this Corporation as provided
in ARTICLE SIXTH of these Articles of Incorporation.
(c) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of this Corporation, (i) no distribution shall be made
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding-up) to the Class A Preference Stock, unless
prior thereto the holders of shares of Class A Preference Stock shall have
received with respect to all outstanding shares of Class A Preference Stock
(other than Section 7(i) Preference Shares), the Adjusted Aggregate Liquidation
Preference, and (ii) the Section 7(i) Preference Shares shall, immediately prior
to such liquidation, dissolution or winding-up, automatically convert (without
the payment of any consideration) into that number of duly issued, fully paid
and nonassessable shares of Common Stock equal to the number of shares of Common
Stock purchased by the Class A Holders and converted into shares of Class A
Preference Stock pursuant to Section 7(i) of the Class A Provisions, for an
aggregate conversion price equal to the Section 7(i) Aggregate Purchase Price.
(d) Neither the merger nor consolidation of this Corporation, nor the
Transfer of all or part of its assets, shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of this Corporation within
the meaning of this clause 3.
GENERAL PROVISIONS RELATING TO COMMON STOCK
1. Dividends. The holders of the Common Stock shall be entitled to receive,
when and if declared by the Board of Directors out of funds legally available
therefor, dividends in respect of the Common Stock equivalent on a per share
basis to those payable on the Class A Common Stock. Dividends on the Common
Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Class A Common Stock and shall be in an
amount per share equal to the full per share amount of any cash dividend paid on
shares of Class A Common Stock, plus the full per share amount (payable in kind)
of any non-cash dividend paid on shares of Class A Common Stock, provided that
if this Corporation shall declare and pay any dividends on shares of Class A
Common Stock payable in shares of Class A Common Stock, or in options, warrants
or rights to acquire shares of Class A Common Stock, or in securities
convertible into or exchangeable for shares of Class A Common Stock, then in
each case, this Corporation shall declare and pay, at the same time that it
declares and pays any such dividend, an equivalent dividend per share on the
Common Stock payable in shares of Common Stock, or options, warrants or rights
to acquire shares of Common Stock, or securities convertible into or
exchangeable for shares of Common Stock.
2. No Dilution or Impairment. No reclassification, subdivision or
combination of the outstanding shares of Class A Stock shall be effected
directly or indirectly (including, without limitation, any reclassification,
subdivision or combination effected pursuant to a consolidation, merger or
liquidation) unless at the same time the Common Stock is reclassified,
subdivided or combined so that the holders of the Common Stock are entitled, in
the aggregate, to Voting Power representing the same percentage of the Voting
Power of this Corporation relative to the Class A Stock as was represented by
the shares of Common Stock outstanding immediately prior to such
reclassification, subdivision or combination, subject to the limitations,
restrictions and conditions on such rights contained herein.
GENERAL PROVISIONS RELATING TO
CLASS A STOCK
1. Rights and Privileges. (a) Except as otherwise set forth in ARTICLE
FIFTH of these Articles of Incorporation, that portion of ARTICLE SIXTH entitled
GENERAL PROVISIONS RELATING TO ALL STOCK, or the Class A Provisions, the holders
of Class A Common Stock shall be entitled to all of the rights and privileges
pertaining to the ownership of Common Stock without any limitations,
prohibitions, restrictions or qualifications whatsoever, and shall be entitled
to such other rights and privileges as are expressly set forth in ARTICLE FIFTH
of these Articles of Incorporation, that portion of ARTICLE SIXTH entitled
GENERAL PROVISIONS RELATING TO ALL STOCK or in the Class A Provisions.
(b) Except as otherwise set forth in ARTICLE FIFTH of these Articles of
Incorporation, that portion of ARTICLE SIXTH entitled GENERAL PROVISIONS
RELATING TO ALL STOCK, or in the Class A Provisions, the holders of Class A
Preference Stock shall be entitled to all of the rights and privileges to which
Kansas law accords a separate class of preferred stock, without any limitations,
prohibitions, restrictions or qualifications whatsoever, and shall be entitled
to such other rights and privileges as are expressly set forth in ARTICLE FIFTH
of these Articles of Incorporation, that portion of ARTICLE SIXTH entitled
GENERAL PROVISIONS RELATING TO ALL STOCK or in the Class A Provisions.
2. Dividends. (a) (i) The holders of shares of Class A Common Stock shall
be entitled to receive, when and if declared by the Board of Directors out of
funds legally available therefor, dividends in respect of the Class A Common
Stock equivalent on a per share basis to those payable on the Common Stock.
Dividends on the Class A Common Stock shall be payable on the same date fixed
for the payment of the corresponding dividend on shares of Common Stock and
shall be in an amount per share equal to the full per share amount of any cash
dividend paid on shares of Common Stock, plus the full per share amount (payable
in kind) of any non-cash dividend paid on shares of Common Stock.
(ii) The holders of shares of Class A Preference Stock, in preference to
the holders of Common Stock and of any other outstanding junior capital stock
(including any series of Preferred Stock which is specifically made junior to
the Class A Preference Stock in the payment of dividends), but after payment of
dividends to holders of shares of all series of Preferred Stock that are not
specifically made junior to or made to rank on a parity with the Class A
Preference Stock in the payment of dividends, shall be entitled to receive, when
and if declared by the Board of Directors out of funds legally available
therefor, quarterly dividends payable in cash on the first day of January,
April, July and October in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date" and each such quarter a "Dividend Payment
Period"), commencing on the first Quarterly Dividend Payment Date after the
Initial Issuance Date, in an amount per share (rounded to the nearest cent)
equal to (x) if the Conversion Price has not yet been Fixed, (1) during the
first two years following the Initial Issuance Date, the greater of (A) the
Minimum Dividend Amount per share of Class A Preference Stock multiplied by
43,118,018 and divided by the number of shares of Class A Preference Stock then
outstanding, and (B) the Per Share Common Dividend (as defined below) multiplied
by the Dividend Factor divided by the number of shares of Class A Preference
Stock then outstanding, and (2) following the second anniversary of the Initial
Issuance Date, an identical amount per Dividend Payment Period resulting in an
annual dividend rate equal to 12.5 basis points over the Applicable LIBOR Rate,
(y) if the Conversion Price has been Fixed but the Investment Completion Date
has not occurred, the aggregate per share amount of all dividends and
distributions (other than Extraordinary Dividends and other dividends or
distributions that result in an adjustment pursuant to the Class A Provisions
and other than a dividend payable in shares of Cellular Common Stock in
connection with the Cellular Spin-off if it occurs prior to the delivery of a
Notice of Abandonment)(the "Per Share Common Dividend"), declared on the Common
Stock since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the Initial Issuance
Date, in each case multiplied by a fraction, the numerator of which shall be
$47.225 and the denominator of which shall be the Conversion Price at the time
in effect, or (z) if the Investment Completion Date has occurred, the aggregate
per share amount of all dividends (including, without limitation, all non-cash
dividends except for dividends described in clause (iii), below) declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the
Investment Completion Date, in each case multiplied by a fraction, the numerator
of which shall be the Liquidation Preference of a share of Class A Preference
Stock and the denominator of which shall be the Conversion Price at the time in
effect. With respect to shares of Class A Preference Stock outstanding for less
than a full Dividend Payment Period, the dividend paid with respect to such
shares shall be equal to the dividend paid with respect to such entire Dividend
Payment Period times a fraction the numerator of which shall be the number of
days during such Dividend Payment Period that such shares were outstanding and
the denominator shall be the number of days during such Dividend Payment Period.
(iii) If this Corporation shall declare and pay any dividend on shares of
Common Stock payable in shares of Common Stock, or in options, warrants or
rights to acquire shares of Common Stock, or in securities convertible into or
exchange able for shares of Common Stock, then in each case, this Corporation
shall declare and pay, at the same time that it declares and pays any such
dividend, an equivalent dividend per share on the Class A Common Stock.
(b) Dividends under Section 2(a)(ii) of the Class A Provisions shall begin
to accrue and be cumulative on outstanding shares of Class A Preference Stock
from the Initial Issuance Date. Accrued but unpaid dividends shall accumulate
but shall not bear interest. Dividends paid on the shares of Class A Preference
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Class A Preference Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 30 days
prior to the date fixed for the payment thereof.
(c) Notwithstanding any other provision of this Section 2, the holders of
shares of Class A Preference Stock shall not be entitled to receive shares,
other equity interests of any direct or indirect Subsidiary of this Corporation
or cash or other property distributed to the holders of Common Stock in
connection with the Cellular Spin-off.
3. Other Class A Preference Stock Terms. (a) (i) Except as otherwise
provided in clause (iii) below, all of the outstanding shares of Class A
Preference Stock shall automatically convert, without the requirement of any
payment by the Class A Holders, upon the date (the "Conversion Date") that is
the later of (A) the earliest of (I) 35 Trading Days after the Cellular Spin-off
Date, (II) 30 days after the date on which this Corporation has delivered a
notice to each Class A Holder that the Cellular Spin-off has been abandoned (a
"Notice of Abandonment"), and (III) the 60th day after the fifth anniversary of
the Initial Issuance Date, and (B) five Business Days after the date on which
the Conversion Price becomes Fixed, into that number of validly issued, fully
paid and nonassessable shares of Class A Common Stock or, if the Fundamental
Rights shall have terminated as to all outstanding shares of Class A Preference
Stock, Common Stock, equal to the quotient of the aggregate of the Liquidation
Preference of the outstanding shares of Class A Preference Stock divided by the
applicable Conversion Price specified in Section 3(b); provided that, if the
Conversion Price has not been Fixed by the fifth anniversary of the Initial
Issuance Date, the Class A Preference Stock shall only be convertible pursuant
to Section 3(b)(v) of the Class A Provisions. In addition, shares of Class A
Preference Stock shall convert, without the requirement of any payment by the
Class A Holders, as otherwise provided in these Class A Provisions. To the
extent any such conversion would result in the Class A Holders that are Aliens
owning securities with Votes constituting in the aggregate more than 20% of the
Voting Power of this Corporation outstanding at that time, such number of shares
of Class A Preference Stock as may be required so that the 20% level is not
exceeded shall, at the election of this Corporation, effected by delivery of a
notice to each Class A Holder at least five Business Days prior to the
Conversion Date, be either (a) redeemed by this Corporation within ten Business
Days of the delivery of such notice in cash and/or Redemption Securities in an
amount equal to the Liquidation Preference of such shares as modified to comply
with the requirements of Article IX of the Stockholders' Agreement, or (b) sold
by such Class A Holders in third party or open market sales (a "Requested
Sale"), provided that this Corporation shall not be permitted to so redeem
shares of Class A Preference Stock unless a majority of the Continuing Directors
shall have first approved, at a meeting at which at least seven Continuing
Directors are present, such redemption, unless a Fair Price Condition has been
satisfied. In the case of any Requested Sale, the Class A Holders shall sell
such Shares, as promptly as practicable following receipt of the notice referred
to in the immediately preceding sentence, but in no event later than 120 days
following the receipt thereof, as extended day-for-day for each day that such
sales are actually delayed during such time period because (A) the Requested
Sale cannot be effected due to the anti-fraud rules of the U.S. securities laws,
or (B) this Corporation has delayed a proposed registration of such shares in
accordance with Section 1.4 of the Registration Rights Agreement. Each Class A
Holder shall, promptly upon the conclusion of such Requested Sale, deliver to
this Corporation a notice stating that such Requested Sale has been concluded
and indicating the total amount of consideration received therefrom (the "Total
Requested Sale Proceeds"). Following receipt of such notice, this Corporation
shall promptly pay (a "Requested Sale Supplementary Payment") to each Class A
Holder the excess, if any, of the aggregate Liquidation Preference of such
shares sold by such Class A Holder over the Total Requested Sale Proceeds (in
each case as modified to comply with the requirements of Section 9.2 of the
Stockholders' Agreement).
(ii) At any time on or after the Conversion Date, any holder of a
certificate or certificates representing shares of Class A Preference Stock may
surrender such certificates at the principal office of this Corporation (or at
any other location designated by both this Corporation and the Class A Holders),
which certificate or certificates, if this Corporation shall so require, shall
be duly endorsed to this Corporation or in blank, or accompanied by proper
instruments of transfer to this Corporation. This Corporation shall, as soon as
practicable after such deposit of a certificate or certificates evidencing
shares of Class A Preference Stock and compliance with any other conditions
herein contained, deliver at such office (or such other location) to the person
for whose account such certificate or certificates were so surrendered, or to
the nominee or nominees of such person, a certificate or certificates evidencing
the number of shares of Class A Common Stock or Common Stock, as the case may
be, to which such person shall be entitled as aforesaid. The conversion of the
shares of Class A Preference Stock shall be deemed to have been made, for all
purposes, as of the Conversion Date without regard to the date of the surrender
of the certificates for shares of Class A Preference Stock, and the person or
persons entitled to receive the Class A Common Stock or Common Stock, as the
case may be, deliverable upon conversion of such Class A Preference Stock shall
be treated for all purposes as the record holder or holders of such Class A
Common Stock or Common Stock, as the case may be, on the Conversion Date.
(iii) Notwithstanding anything to the contrary in this Section 3(a), if
after the Cellular Spin-off Date shares of Class A Preference Stock that
previously were not convertible because the Cellular Spin-off Date had not
occurred otherwise would be converted pursuant to this Section 3(a) into Class A
Common Stock or Common Stock at a Conversion Price greater than 135% of the
Average Sprint Price for the 20 Trading Days ended on the tenth Business Day
prior to the Conversion Date, the Class A Holders may elect, by delivery of a
notice to this Corporation executed by or on behalf of all Class A Holders, at
least two Business Days prior to the Conversion Date, to defer such conversion
until the first Business Day following the thirtieth day after the occurrence of
a period of 20 Trading Days in which the Conversion Price is less than or equal
to 135% of the Average Sprint Price over such period or until the Class A
Holders shall otherwise elect, by delivery of a notice to this Corporation
executed by or on behalf of each Class A Holder, to convert ten Business Days
after delivery of such notice the shares of Class A Preference Stock at the
Conversion Price set forth in Section 3(b) without regard to this clause (iii).
If the Class A Holders elect to defer conversion in accordance with this Section
3(a)(iii), the shares of Class A Preference Stock shall not be subject to
conversion pursuant to Section 3(b)(v) or redemption pursuant to Section 3(c).
(b) The Conversion Price of the Class A Preference Stock shall initially be
established at the time and at the price set forth below in this Section 3(b)
(such Conversion Price to be subject in each case to adjustment as provided in
the Class A Provisions):
(i) If the Average Sprint Price determined at the
Initial Issuance Date is within the Sprint Price Range,
the Conversion Price shall be Fixed on the Initial
Issuance Date at the Target Price.
(ii) If the Average Sprint Price determined at the Initial Issuance
Date is above the Upper Threshold Sprint Price, the Conversion Price shall
be Fixed on the Initial Issuance Date at the Maximum Price (determined by
reference to such Average Sprint Price).
(iii) If the Average Sprint Price determined at the
Initial Issuance Date is below the Lower Threshold Sprint
Price,
(x) the Conversion Price shall be Fixed on the Initial Issuance
Date at the Minimum Price if this Corporation has elected, by delivery
of a notice to each of FT and DT at least five Business Days before
the Initial Issuance Date, to establish the Conversion Price at the
Minimum Price (determined by reference to such Average Sprint Price),
and the Conversion Price shall be Fixed on the Initial Issuance Date
at the Target Price if FT and DT have elected, by delivery at least
five Business Days before the Initial Issuance Date, of a notice to
this Corporation executed by each of FT and DT, to establish the
Conversion Price at the Target Price, the first such notice delivered
to be effective, provided that this Corporation may only deliver such
a notice if a majority of the Continuing Directors shall have first
approved, at a meeting at which at least seven Continuing Directors
are present, Fixing the Conversion Price on the Initial Issuance Date
at the Minimum Price, unless a Fair Price Condition has been
satisfied;
(y) if no timely election has been made by
this Corporation or by FT and DT as contemplated by
clause (x) above, and
(1) if, prior to the second anniversary of the Initial
Issuance Date, the Cellular Spin-off Date has occurred and the
Average Sprint Price for any period of 20 consecutive Trading
Days following the Cellular Spin-off Date has been at or above
the New Lower Threshold Sprint Price, the Conversion Price shall,
effective on the first day following the end of such 20-day
period, be Fixed at the New Target Price, provided that if the
Cellular Spin-off Date shall have occurred prior to the second
anniversary of the Initial Issuance Date and the Average Sprint
Price during any Spin-off Trading Period is at or above the
Modified Lower Threshold, the Conversion Price shall be Fixed,
effective on the first day following such Spin-off Trading
Period, at the New Target Price;
(2) if, prior to the second anniversary of the Initial
Issuance Date, the Cellular Spin-off Date has not occurred and
the Average Sprint Price for any period of 20 consecutive Trading
Days has been at or above the Lower Threshold Sprint Price, the
Conversion Price shall be Fixed on the day following the end of
such 20-day period at the Target Price;
(3) at any time prior to the second anniversary of the
Initial Issuance Date, (i) if the Cellular Spin-off Date has
occurred, this Corporation or the Class A Holders, by notice
delivered, in the case of this Corporation to each Class A
Holder, and in the case of the Class A Holders, to this
Corporation by or on behalf of each Class A Holder, the first
such notice delivered to be effective, may elect to Fix the
Conversion Price, effective on the date of such notice, at (A) if
the Class A Holders make such election, the New Target Price or
(B) if this Corporation makes such election, the Minimum Price
(determined by reference to such Average Sprint Price for the 20
consecutive Trading Day period ended five days before the date of
such election, provided that, if the Cellular Spin-off Date has
occurred fewer than 25 Trading Days prior to the delivery of such
notice, the Conversion Price shall be determined by reference to
such Average Sprint Price for the 20 consecutive Trading Day
period beginning on the Trading Day following the Cellular
Spin-off Date and the Conversion Date shall be Fixed five days
after the end of such 20-day period), provided that this
Corporation may only deliver such a notice if a majority of the
Continuing Directors shall have first approved, at a meeting at
which at least seven Continuing Directors are present, Fixing the
Conversion Price on the date of such notice at the Minimum Price,
unless a Fair Price Condition has been satisfied; and (ii) if the
Cellular Spin-off Date has not occurred, either this Corporation
or the Class A Holders, by notice delivered, in the case of this
Corporation, to each Class A Holder, and in the case of the Class
A Holders, to this Corporation by or on behalf of each Class A
Holder, the first such notice delivered to be effective, may
elect to Fix the Conversion Price, effective on the date of such
notice, at (A) if the Class A Holders make such election, the
Target Price, or (B) if this Corporation makes such election, the
Minimum Price (determined by reference to the Average Sprint
Price for the 20 consecutive Trading Day period ended five days
before the date of such election), provided that this Corporation
may only deliver such a notice if a majority of the Continuing
Directors shall have first approved, at a meeting at which at
least seven Continuing Directors are present, Fixing the
Conversion Price on the date of such notice at the Minimum Price,
unless a Fair Price Condition has been satisfied;
(4) (A) if neither the Cellular Spin-off Date nor the
conversion of all of the outstanding Class A Preference Stock
into Class A Common Stock or Common Stock has occurred prior to
the second anniversary of the Initial Issuance Date and the
Conversion Price has not previously been Fixed, the Conversion
Price will, automatically on such second anniversary, become
Fixed at the Minimum Price, determined by reference to the
Average Sprint Price for the 20 consecutive Trading Days ended
five Business Days before such second anniversary; provided that,
if such Average Sprint Price is then below the Second Anniversary
Lower Threshold Sprint Price, this Corporation may elect to defer
the Fixing of the Conversion Price, by notice delivered to each
Class A Holder within such five Business Day period, so that if,
at any time during the following three years, the Average Sprint
Price shall be at least the Second Anniversary Lower Threshold
Sprint Price (if the Cellular Spin-off Date shall not have
occurred) or 93.308% of the New Lower Threshold Sprint Price (if
the Cellular Spin-off Date shall have so occurred), the
Conversion Price shall be Fixed at 93.308% of the Target Price
(if the Cellular Spin-off Date shall not have so occurred) and
93.308% of the New Target Price (if the Cellular Spin-off Date
shall have so occurred), provided that if the Cellular Spin-off
Date shall have occurred prior to the fifth anniversary of the
Initial Issuance Date and the Average Sprint Price during any
Spin-off Trading Period is at or above the Modified New Lower
Threshold, the Conversion Price shall be Fixed, effective on the
day following such Spin-off Trading Period, at 93.308% of the New
Target Price. At any time during such three year period, this
Corporation may elect, by notice delivered to each Class A
Holder, to cause the Conversion Price to be Fixed, effective on
the date of such notice, at the Minimum Price (determined by
reference to the Average Sprint Price for the 20 Trading Days
ended five Business Days before the date of such election,
provided that, if the Cellular Spin-off Date shall occur during
the last 20 Trading Day period before the second anniversary of
the Initial Issuance Date, all calculations to have been based
upon such period under this clause (A) shall be deferred until
the first 20 consecutive Trading Day Period after the Cellular
Spin-off Date, on which such calculations shall be then based),
provided that this Corporation may only deliver such a notice if
a majority of the Continuing Directors shall have first approved,
at a meeting at which at least seven Continuing Directors are
present, Fixing the Conversion Price on the date of such notice
at the Minimum Price, unless a Fair Price Condition has been
satisfied, and FT and DT may elect by notice delivered to this
Corporation by or on behalf of each Class A Holder to cause the
Conversion Price to be Fixed, effective on the date of such
notice, at a price equal to 93.308% of the Target Price (if the
Cellular Spin-Off Date shall have not occurred) and 93.308% of
the New Target Price (if the Cellular Spin-Off Date shall have
occurred), the first such notice to be effective;
(B) if, prior to such second anniversary, the Cellular
Spin-off Date has occurred, but the conversion of all of the
outstanding shares of Class A Preference Stock has not taken
place and the Conversion Price has not previously been Fixed, the
Conversion Price will, automatically on such second anniversary,
become Fixed at the Minimum Price, determined by reference to the
Average Sprint Price for the 20 consecutive Trading Days ended
five Business Days before the second anniversary of the Initial
Issuance Date, provided that if such Average Sprint Price is then
below 93.308% of the New Lower Threshold Sprint Price, this
Corporation may elect to defer the Fixing of the Conversion Price
by notice delivered to each Class A Holder within such five
Business Day period so that if, at any time during the following
three years, the Average Sprint Price shall be at least equal to
93.308% of the New Lower Threshold Sprint Price, the Conversion
Price will be Fixed at 93.308% of the New Target Price. At any
time during such three year period, this Corporation may elect by
notice delivered to each Class A Holder at any time after the
fifth Business Day following the end of the 20 Trading Day period
starting on the first Trading Day following the Cellular Spin-off
Date, to cause the Conversion Price to be Fixed, effective on the
date of such notice, at the Minimum Price (determined by
reference to the Average Sprint Price for the 20 Trading Days
ended five Business Days before the date of such election),
provided that this Corporation may only deliver such a notice if
a majority of the Continuing Directors shall have first approved,
at a meeting at which at least seven Continuing Directors are
present, Fixing the Conversion Price on the date of such notice
at the Minimum Price, unless a Fair Price Condition has been
satisfied, and the Class A Holders may elect, by notice to that
effect delivered to this Corporation by or on behalf of each
Class A Holder, at any time to cause the Conversion Price to be
Fixed effective on the date of such notice, at a price equal to
93.308% of the New Target Price, the first such notice delivered
to be effective.
(iv) If the Conversion Price has been Fixed before the Cellular
Spin-off Date, effective at the Cellular Spin-off Date, the Conversion
Price fixed with reference to the Maximum Price, Minimum Price or Target
Price, as the case may be, automatically and without notice, will be
re-fixed with reference to the New Maximum Price, New Minimum Price or New
Target Price, respectively, the calculation of such New Minimum Price or
such New Maximum Price to be based on the Average Sprint Price used to
calculate the related Maximum Price or Minimum Price, as the case may be.
(v) If the Conversion Price has not been Fixed by a date which is five
years after the Initial Issuance Date and this Corporation shall not have
redeemed all of the outstanding shares of Class A Preference Stock as
required under Section 3(c), the Class A Preference Stock shall be
convertible only at the election of the Class A Holders made at any time
after the end of ten Business Days after the 60th day after such fifth
anniversary, by notice to that effect delivered to this Corporation by or
on behalf of each Class A Holder, such conversion to occur five Business
Days after delivery of such notice, at a Conversion Price equal to 135% of
the Average Sprint Price for the 20 Trading Days ended on the Trading Day
five Trading Days prior to such conversion.
(vi) Upon the issuance of shares of Class A Preference Stock at the
Optional Shares Closing (as defined in the Investment Agreement) or as
provided in Section 7(i) of the Class A Provisions or Article V or VI of
the Stockholders' Agreement, the Conversion Price shall be adjusted further
to be the quotient of (x) the sum of (I) the number of outstanding shares
of Class A Preference Stock prior to such issuance times the Conversion
Price of such shares prior to this adjustment and (II) the number of such
shares received upon such issuance times the purchase price thereof,
divided by (y) the total number of shares of Class A Preference Stock
outstanding after such issuance.
(vii) In addition to any other adjustments provided
for in the Class A Provisions,
(x) the Conversion Price and, as appropriate, the per share
dollar amounts reflected in or used in calculating the Adjusted
Cellular Price, the Net Cellular Acquisition Amount, the Net Cellular
Indebtedness, the Average Sprint Price, the Average Cellular Price,
the Lower Threshold Sprint Price, the New Lower Threshold Sprint
Price, the Upper Threshold Sprint Price, the New Upper Threshold
Sprint Price, the Second Anniversary Lower Threshold Sprint Price, the
Target Price, the New Target Price, the Minimum Price, the New Minimum
Price, the Maximum Price, the New Maximum Price, the Modified Lower
Threshold, the Modified New Lower Threshold, and the Cellular Spin-off
Reduction Factor shall be adjusted to reflect any stock split,
subdivision, stock dividend payable in shares of Common Stock or other
reclassification, consolidation or combination of this Corporation's
Voting Securities or similar action or transaction undertaken after
June 14, 1994, provided that no such adjustment shall be made to the
Average Sprint Price, the Average Cellular Price, the Minimum Price or
the New Minimum Price with respect to events described in this clause
(x) which occur prior to the beginning of the measurement period with
respect to such price, and provided, further, that no adjustment shall
be made under this subsection (vii)(x) in respect of the Cellular
Spin-off or any Spin-off.
(y) the Conversion Price and, as appropriate, the per share
dollar amounts reflected in or used in calculating the Lower Threshold
Sprint Price, the New Lower Threshold Sprint Price, the Upper
Threshold Sprint Price, the New Upper Threshold Sprint Price, the
Second Anniversary Lower Threshold Sprint Price, the Target Price, the
New Target Price, the Minimum Price, the New Minimum Price, the
Modified Lower Threshold, the Modified New Lower Threshold, the
Maximum Price and the New Maximum Price shall be adjusted to reflect
any Extraordinary Dividend or Dividends and any non-cash dividend or
distribution (except as described in clause (x) and except for
dividends or distributions of equity securities of any Subsidiary of
this Corporation pursuant to a Spin-off or the Cellular Spin-off) paid
on or with respect to shares of Common Stock, or any reorganization or
reclassification pursuant to which holders of Common Stock receive
cash, property or (except as described in clause (x), above)
securities of this Corporation, in each case occurring after June 22,
1995, as follows, provided that no such adjustment shall be made to
the Minimum Price or the New Minimum Price with respect to events
described in this clause (y) which occur prior to the determination of
such price:
(A) if such dividend, distribution or
event occurs on or prior to the date the
Conversion Price is Fixed,
(1) the Target Price, the Maximum Price, the New Target
Price, the Minimum Price, the New Minimum Price and the New
Maximum Price shall be decreased dollar for dollar by the
amount of cash and the Fair Market Value of all non-cash
property or securities distributed with respect to a share
of Common Stock (the "Per Share Distributed Value");
(2) the Lower Threshold Sprint Price and the New Lower
Threshold Sprint Price shall be decreased by the Per Share
Distributed Value divided by 1.35; and
(3) the Upper Threshold Sprint Price and the New Upper
Threshold Sprint Price shall be decreased by the Per Share
Distributed Value divided by 1.25; and
(B) if such dividend, distribution or event occurs after the
date the Conversion Price is Fixed, the Conversion Price shall be
decreased by subtracting an amount equal to the Per Share
Distributed Value.
(c) Unless the Class A Holders have exercised their option to defer
conversion of the Class A Preference Stock pursuant to Section 3(a)(iii), each
outstanding share of Class A Preference Stock shall be redeemed by this
Corporation within five Business Days after the 60th day following the fifth
anniversary of the Initial Issuance Date for cash at a redemption price per
share equal to its Liquidation Preference (such price, the "Class A Preference
Redemption Price"), such payment to be delivered to each Class A Holder no later
than five Business Days after such redemption, provided that the failure to so
redeem at such time shall not preclude this Corporation from so redeeming at any
time thereafter.
(d) If any time after the termination of Fundamental Rights as to all
outstanding Shares of Class A Preference Stock, this Corporation shall not have
declared and paid all accrued and unpaid dividends on the Class A Preference
Stock as provided in Section 2 of the Class A Provisions for four consecutive
Quarterly Dividend Payment Dates, then, in addition to any other voting rights
provided in these Articles of Incorporation, the holders of the Class A
Preference Stock shall have the exclusive right, voting separately as a class,
to elect two Directors. The right of the holders of the Class A Preference Stock
to elect the Class A Directors pursuant to this Section 3(d) shall continue
until all such accrued and unpaid dividends shall have been paid. At such time,
the terms of the Class A Directors shall terminate. At any time when the holders
of the Class A Preference Stock shall have thus become entitled to elect Class A
Directors, a special meeting of the Class A Holders shall be called for the
purpose of electing such Class A Directors, to be held within 30 days after the
right of the holders of the Class A Preference Stock to elect such Class A
Directors shall arise, upon notice given in the manner provided by law or the
Bylaws of this Corporation for giving notice of a special meeting of the Class A
Holders (provided, however, that such a special meeting shall not be called if
the annual meeting of stock holders is to convene within said 30 days). At any
such special meeting or at any annual meeting at which the Class A Holders shall
be entitled to elect Class A Directors, the holders of a majority of the then
outstanding Class A Preference Stock present in person or by proxy shall be
sufficient to constitute a quorum for the election of such directors. The
persons elected by the holders of the Class A Preference Stock at any meeting in
accordance with the terms of the preceding sentence shall become Class A
Directors on the date of such election.
(e) Whenever quarterly dividends or other dividends or distributions
payable on the Class A Preference Stock as provided in Section 2 of the Class A
Provisions are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Class A Preference
Stock outstanding shall have been paid in full, this Corporation shall not:
(i) declare or pay dividends or make any other distributions on any
shares or stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding-up) to the Class A Preference Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding-up) with the Class A Preference Stock
except dividends paid ratably on the Class A Preference Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled; or
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock junior (either as to dividends or upon liquidation,
dissolution or winding-up) to the Class A Preference Stock, provided that,
notwithstanding the foregoing, this Corporation may at any time redeem,
purchase or otherwise acquire shares of stock of any such class junior as
to either or both dividends or upon liquidation, dissolution or winding-up,
in exchange for, or out of the net cash proceeds from the substantially
simultaneous sale of, other shares of stock of any class which is also
junior as to either or both dividends or upon liquidation, dissolution or
winding-up, as the case may be.
(f) This Corporation shall not permit any Subsidiary of this Corporation to
purchase or otherwise acquire for consideration any shares of stock of this
Corporation unless this Corporation could, under Section 3(e), above, purchase
or otherwise acquire such shares at such time and in such manner.
4. Special Rights to Disapprove Certain Actions. At least 40 days prior to
the occurrence of a Subject Event (as defined below), this Corporation shall
deliver to each Class A Holder a notice (a "Notice") of such proposed Subject
Event, setting forth in reasonable detail the nature of such proposed Subject
Event. This Corporation shall thereafter be entitled to effect such proposed
Subject Event unless within 30 days of delivery of such Notice there shall have
been a Class A Action exercising the special rights of the Class A Holders to
disapprove such Subject Event, provided that the Class A Holders shall have no
special right to disapprove any action (x) which this Corporation is required to
take to comply with its obligations or exercise its rights under the Investment
Agreement, the Stockholders' Agreement, the Standstill Agreement, the
Registration Rights Agreement or the Joint Venture Agreement or any document
executed pursuant to any such agreement or the Class A Provisions, or (y) taken
to comply with Applicable Law or the rules of any exchange or market system on
which securities of this Corporation may be traded, and provided, further, that
any action to be taken by this Corporation in reliance on clause (y) of the
foregoing proviso is the only action commercially reasonably available to this
Corporation to effect such compliance, as certified to the Class A Holders by
resolution of the Independent Directors. For purposes of these Articles, the
term "Subject Event" means only the following transactions and only if such
transactions are consummated within the respective time periods indicated below:
(a) Until the second anniversary of the Initial Issuance Date or, in
the case of clause (iv) below, the later of (x) the second anniversary of
the Initial Issuance Date and (y) the Investment Completion Date:
(i) any transaction or series of related transactions (other than
Exempt Asset Divestitures or Exempt Long Distance Asset Divestitures)
that results, directly or indirectly, in Transfers of assets of this
Corporation or its Subsidiaries with an aggregate Fair Market Value
(calculated in the case of each Transfer as at the date this
Corporation or any such Subsidiary enters into a definitive agreement
to effect such Transfer) of more than 20 percent of Market
Capitalization (calculated (x) in the case of a single transaction as
at the date this Corporation or any such Subsidiary enters into a
definitive agreement to effect such Transfer and (y) in the case of a
series of related transactions, as at the date this Corporation or any
such Subsidiary enters into a definitive agreement to effect the last
of such Transfers);
(ii) any transaction or series of related transactions
(including, without limitation, mergers, purchases of stock or assets,
joint ventures or other acquisitions), but excluding any transaction
constituting an Exempt Asset Divestiture or Exempt Long Distance Asset
Divestiture, resulting, directly or indirectly, in the acquisition by
this Corporation or its Subsidiaries for cash or debt securities
maturing in less than one year from the date of issuance of (x) assets
constituting or predominantly used in Core Businesses ("Core Business
Assets") for a purchase price or, in the case of a series of related
transactions, an aggregate purchase price that exceeds 20 percent of
Market Capitalization (calculated as at the date this Corporation or
any such Subsidiary enters into a definitive agreement to effect such
transaction or, in the case of a series of related transactions, as at
the date this Corporation or any such Subsidiary enters into a
definitive agreement to effect the last of such related transactions)
or (y) other assets for a purchase price or, in the case of a series
of related transactions, for an aggregate purchase price that exceeds
five percent of Market Capitalization (calculated as at the date this
Corporation or any such Subsidiary enters into a definitive agreement
to effect such transaction or, in the case of a series of related
transactions, as at the date this Corporation or any such Subsidiary
enters into a definitive agreement to effect the last of such related
transactions), provided that, if any such other assets are proposed to
be obtained in the course of a proposed transaction in which both Core
Business Assets and other assets are to be acquired and the ratio of
the fair market value of the Core Business Assets to be acquired to
the fair market value of the other assets to be acquired exceeds 1.75
to 1, then the holders of the Class A Stock shall not be entitled to
disapproval rights with respect to such transaction except as provided
in clause (x) of this Section 4(a)(ii);
(iii) issuance by this Corporation of any capital stock or debt
(including, without limitation, direct or indirect issuances such as
pursuant to mergers and other business combinations) with both (x) a
class vote to elect one or more Directors and (y) rights with respect
to dispositions of Long Distance Assets or other assets, or share
issuances, which rights are in scope and duration as extensive as or
more extensive than the comparable related rights granted to the Class
A Holders in these Articles of Incorporation or in the Stockholders'
Agreement, provided that this Section 4(a)(iii) shall not apply to the
extent that (a) such rights are required by Applicable Law, (b) the
holders of any series of Preferred Stock have the right, voting
separately as a class, to elect a number of Directors of this
Corporation upon the occurrence of a default in payment of dividends
or redemption price, or (c) such rights described in clause (y) are
granted in connection with borrowings and are reflected in a loan
agreement, credit agreement, trust indenture or similar agreement or
instrument;
(iv) declaration of any Extraordinary Dividends during any one
year that, individually or in the aggregate, exceed five percent of
Market Capitalization as at the Business Day immediately preceding the
declaration of the last such dividend or distribution (other than in
connection with transactions within the meaning of clause (e) of the
definition of Exempt Asset Divestitures or clause (g) of the
definition of Exempt Long Distance Asset Divestitures); or
(v) any merger or other business combination
in which this Corporation is not the surviving
parent corporation.
(b) Until the earliest of (i) the fifth anniversary of the Initial
Issuance Date, (ii) such time as (A) legislation has been enacted repealing
Section 310, (B) an FCC Order shall have been issued, or (C) outside
counsel to this Corporation with a nationally recognized expertise in
telecommunications regulatory matters delivers to each of FT and DT a legal
opinion, addressed to each of them, in form and substance reasonably
satisfactory to FT and DT, to the effect that Section 310 does not prohibit
FT and DT from owning the Long Distance Assets proposed to be Transferred
by this Corporation, (iii) the delivery by FT, DT, Atlas or any of their
Affiliates (or a Permitted Designee (as such term is defined in the Joint
Venture Agreement)) of a notice pursuant to Section 17.2(b) of the Joint
Venture Agreement indicating the agreement to purchase all of the Sprint
Venture Interests (as such term is defined in the Joint Venture Agreement)
following an offer by this Corporation or Sprint Sub pursuant to Section
17.2(a) of the Joint Venture Agreement, and (iv) the delivery by this
Corporation and/or Sprint Sub of a notice pursuant to Section 17.3(a) of
the Joint Venture Agreement exercising the put right to sell all of their
Sprint Venture Interests (as such term is defined in the Joint Venture
Agreement) to FT, DT and Atlas (or a Permitted Designee (as such term is
defined in the Joint Venture Agreement)), a direct or indirect Transfer
(other than in connection with an Exempt Long Distance Asset Divestiture)
after the Initial Issuance Date by this Corporation or its Subsidiaries of
Long Distance Assets with a Fair Market Value (calculated as at the date
this Corporation or any such Subsidiary enters into a definitive agreement
to effect such Transfer) that, when aggregated with the Fair Market Value
of all other Long Distance Assets Transferred by this Corporation or its
Subsidiaries since the Initial Issuance Date (other than in Exempt Long
Distance Asset Divestitures) (calculated in each case as at the date this
Corporation or any such Subsidiary enters into a definitive agreement to
effect each such respective Transfer) exceeds five percent of the Fair
Market Value of the Long Distance Assets of this Corporation and its
Subsidiaries, on a consolidated basis (calculated as at the date this
Corporation or any such Subsidiary enters into a definitive agreement to
effect the last such Transfer).
(c) Except as otherwise provided in Section 7 of the Class A
Provisions, for so long as any shares of Class A Stock are outstanding:
(i) any amendment to these Articles of Incorporation, the Bylaws
or the Rights Agreement that would adversely affect the rights of the
Class A Holders under these Articles of Incorporation or the Bylaws;
(ii) issuance by this Corporation (including, without limitation,
pursuant to mergers or other business combinations) of any series or
class of capital stock or debt security with Supervoting Powers;
(iii) any merger or other business combination involving this
Corporation that results directly or indirectly in a Change of
Control, unless the surviving corporation expressly (x) assumes all of
this Corporation's obligations in respect of the rights of the Class A
Holders under Section 4(b) of the Class A Provisions and the
provisions of Article III of the Stockholders' Agreement (except, in
each case, as they may be otherwise terminated pursuant to the Class A
Provisions or the Stockholders' Agreement) and all of the provisions
of the Registration Rights Agreement and (y) agrees to be bound by any
applicable Tie-Breaking Vote in accordance with Articles 17 and 18 of
the Joint Venture Agreement;
(iv) any merger or other business combination involving this
Corporation that does not result directly or indirectly in a Change of
Control unless:
(x) this Corporation survives as the
parent entity; or
(y) the surviving corporation expressly assumes all of this
Corporation's obligations in respect of the rights of the Class A
Holders granted pursuant to these Articles of Incorporation and
the Class A Provisions and under the Bylaws, the Stockholders'
Agreement and the Registration Rights Agreement; or
(v) if any shares of Class A Preference Stock are outstanding,
issuance by this Corporation of shares of Preferred Stock which have
rights to the payment of dividends or the distribution of assets upon
the liquidation, dissolution or winding up of this Corporation senior
to such rights of the Class A Preference Stock.
5. Special Rights Regarding Major Issuances. At least 90 days before the
consummation, directly or indirectly, by this Corporation of any Major Issuance
prior to the second anniversary of the Initial Issuance Date, this Corporation
shall deliver to each Class A Holder a notice of such proposed Major Issuance.
This Corporation shall be entitled to effect such proposed Major Issuance (upon
receipt of the requisite approval of the Board of Directors described below)
unless within 75 days of the delivery of such notice there shall have been a
Class A Action exercising the special rights of the Class A Holders to
disapprove such Major Issuance. In addition, so long as any Class A Stock is
outstanding, prior to effecting any Major Issuance:
(a) occurring on or prior to the fifth anniversary of the Initial
Issuance Date, this Corporation shall obtain the prior approval of
two-thirds of the Independent Directors by resolution, certified to the
Class A Holders; and
(b) occurring after the fifth anniversary of the Initial Issuance
Date, this Corporation shall obtain the prior approval of a majority of the
Independent Directors.
6. Special Rights Regarding Holdings by Major Competitors of FT or DT. (a)
Until the tenth anniversary of the Initial Issuance Date, at least 90 days prior
to consummating any transaction or taking any other action that, directly or
indirectly, would result in, or is taken for the purpose of encouraging or
facilitating, a Major Competitor of FT or DT or of the Joint Venture having, or
being granted by this Corporation any right, permission or approval to acquire
(other than pursuant to a Strategic Merger), a Percentage Ownership Interest of
ten percent or more (a "Major Competitor Transaction"), this Corporation shall
provide each Class A Holder with notice of such Major Competitor Transaction in
the manner set forth in Subsection (c) below and, if there is a Class A Action
exercising the special rights of the Class A Holders to disapprove such Major
Competitor Transaction within 75 days of the delivery of such notice, this
Corporation shall not consummate such Major Competitor Transaction.
(b) Until the tenth anniversary of the Initial Issuance Date, if a Major
Competitor of FT or DT or of the Joint Venture obtains a Percentage Ownership
Interest of 20 percent or more as a result, directly or indirectly, of a
Strategic Merger:
(i) if the Class A Holders have not made the commitment described in
Article VI of the Stockholders' Agreement, this Corporation (or its
successor in such Strategic Merger) shall, subject to the provisos of
Sections 2.1(a)(iii) and 2.2(a) of the Standstill Agreement, nonetheless
take all action necessary or advisable to lift all restrictions,
contractual or otherwise, imposed by this Corporation or such successor on
the ability of the Class A Holders, at any time after the Class A Common
Issuance Date, to purchase shares of Common Stock or other Voting
Securities from third parties sufficient to permit the Class A Holders to
have a Percentage Ownership Interest equal to that of the Major Competitor
of FT or DT or of the Joint Venture; and
(ii) this Corporation shall ensure that the Class A Holders have
rights with regard to (w) a class vote to elect Directors, (x) class
approval and disapproval rights, (y) any other special rights in respect of
the business or operations of this Corporation and (z) any rights to
receive special dividends, distributions or other rights from this
Corporation, which are in scope and duration at least as extensive as any
rights granted by this Corporation to such Major Competitor of FT or DT or
of the Joint Venture (other than rights deriving solely from the number of
Voting Securities owned), regardless of whether or not the Class A Holders
purchase any additional Voting Securities.
(c) Until the tenth anniversary of the Initial Issuance Date, this
Corporation shall deliver to each Class A Holder notice of its intent to issue
Voting Securities in a Major Competitor Transaction to any Major Competitor of
FT or DT or of the Joint Venture at least 30 days prior to such issuance, such
notice to contain a complete and correct description in reasonable detail of the
transaction in question, including, without limitation, the purchase price for
such securities, the nature of such securities, the identity of the Major
Competitor of FT or DT or of the Joint Venture and the rights (contractual and
other) this Corporation would grant such Major Competitor. This Corporation
shall also deliver to each Class A Holder notice of any such issuance within
five days after it occurs, such notice to contain a description of the
transaction in question and be accompanied by complete and correct copies of all
agreements, instruments and written understandings of this Corporation, its
Subsidiaries and Affiliates and such Major Competitor of FT or DT or of the
Joint Venture and the Subsidiaries and Affiliates of such Major Competitor
executed in respect of such transaction.
7. Conversion of Shares; Termination of Fundamental
Rights. (a) Failure to Maintain Ownership. If, after the
Investment Completion Date, the aggregate Committed Percentage
of the Class A Holders shall be below ten percent (i) for more
than 180 consecutive days or (ii) immediately following a
Transfer of Class A Stock by a Class A Holder, each
outstanding share of Class A Common Stock shall automatically
convert (without the payment of any consideration) into one
duly issued, fully paid and nonassessable share of Common
Stock, or if any shares of Class A Preference Stock are
outstanding, the Fundamental Rights shall terminate as to all
outstanding shares of Class A Preference Stock, such
conversion or termination to take place on the next Business
Day following the end of such 180-day period in the case of
clause (i) or on the date of such Transfer in the case of
clause (ii), provided that, if the aggregate Committed
Percentage of the Class A Holders shall fall below ten percent
for more than 180 consecutive days following the later of the
Fixed Closing Date and the date of a Major Issuance as a
result of the consummation of such Major Issuance, then unless
all of the outstanding shares of Class A Common Stock shall
have been converted earlier, or the Fundamental Rights shall
have previously terminated as to all outstanding shares of
Class A Preference Stock, in each case pursuant to this
Section 7 of the Class A Provisions, (x) the Class A Common
Stock shall not convert into Common Stock, or the Fundamental
Rights shall not terminate, as the case may be, until the last
to occur of (i) the third anniversary of the date of such
Major Issuance, (ii) the third anniversary of the Fixed
Closing Date and (iii) the Investment Completion Date, and
(y) the Class A Holders shall continue to be entitled to elect
Directors pursuant to ARTICLE FIFTH of these Articles of
Incorporation until the last to occur of (i) the third
anniversary of the date of such Major Issuance, (ii) the
third anniversary of the Fixed Closing Date, and (iii) the
Investment Completion Date, but (z) after the last to occur
of the expiration of 180 days following the Fixed Closing
Date, 180 days following the date of such Major Issuance,
and the Investment Completion Date, the Class A Holders
shall no longer have their rights under Sections 4, 5, 6,
7 and 8 of the Class A Provisions, and provided, further,
that such conversion shall not be considered to be an
acquisition of Common Stock for purposes of Section 7(i)
of the Class A Provisions.
(b) FT/DT Joint Venture Termination; Material Breach of Investment
Documents. (i) Each outstanding share of Class A Common Stock shall
automatically convert (without the payment of any consideration) into one duly
issued, fully paid and nonassessable share of Common Stock and, if any shares of
Class A Preference Stock are outstanding, the Fundamental Rights shall terminate
as to all outstanding shares of Class A Preference Stock, if:
(t) the Sprint Parties receive the Tie-Breaking
Vote pursuant to Section 17.5 of the Joint Venture
Agreement;
(u) there is an FT/DT Joint Venture Termination;
(v) FT or DT or any Qualified Subsidiary breaches
in any material respect its obligations under Section 2.4
of the Stockholders' Agreement;
(w) FT or DT or any Qualified Subsidiary breaches in any material
respect its obligations under Article II (other than Section 2.4) of the
Stockholders' Agreement;
(x) FT, DT or any Qualified Subsidiary breaches any of the provisions
of Article 2 (other than Section 2.1(b)) of the Standstill Agreement or any
corresponding provision of any Qualified Subsidiary Standstill Agreement;
(y) FT, DT or any Qualified Subsidiary breaches any of the provisions
of Sections 3.1 or 3.2 of the Standstill Agreement or any corresponding
provisions of any Qualified Subsidiary Standstill Agreement, in each case
in a Control Context, or otherwise breaches Sections 3.1(a)(ii), (iii) or
(iv) or Section 3.1(g) of the Standstill Agreement or any corresponding
provision of any Qualified Subsidiary Standstill Agreement; or
(z) FT, DT or any Qualified Subsidiary breaches any of the provisions
of Sections 3.1 (except Section 3.1(a)(ii), (iii) or (iv), or Section
3.1(g)) or 3.2 of the Standstill Agreement or any corresponding provisions
of any Qualified Subsidiary Standstill Agreement, in each case other than
in a Control Context;
provided that, with respect to an alleged breach of the type described in
clauses (v), (w), (x), (y) or (z) above, the Class A Holders alleged to have
committed such breach (the "Breaching Holders") shall deliver a notice
(I) except with respect to a breach of the type described in
clause (y) above, in accordance with clauses (ii)(x) or (iii)(x)
below, in which case no conversion of the Class A Common Stock or
termination of the Fundamental Rights as to all outstanding shares of
Class A Preference Stock, as the case may be, shall take place unless
such breach fails to be cured within the time provided for cure in
such clause (ii) or (iii), as the case may be;
(II) in accordance with clauses (ii)(y), (iii)(y) or (iv) below,
in which case no conversion of the Class A Common Stock or termination
of the Fundamental Rights, as the case may be, shall take place until
there is issued a final nonappealable decision or order of a court of
competent jurisdiction finding that such breach has occurred and, if
applicable, was not cured within the time provided for cure in clauses
(ii) or (iii) below, as the case may be; or
(III) admitting that such a breach has occurred, and (if
applicable) cannot be cured within the time periods provided for cure
in clauses (ii) or (iii) below, in which case each outstanding share
of Class A Common Stock shall automatically convert (without the
payment of any consideration) into one duly issued, fully paid and
nonassessable share of Common Stock or the Fundamental Rights shall
terminate as to all outstanding shares of Class A Preference Stock, as
the case may be, in each case upon delivery of such notice; and
provided, further, that if the Breaching Holders fail to perform the actions
described in clauses (I) or (II) above within the time periods provided for
performing such actions in clauses (ii), (iii) or (iv) below, they shall be
deemed to have taken the action described in clause (III) above.
(ii) For any alleged breach of the type described in clauses (w), (x) or
(z) of clause (i) above, the Breaching Holders shall have the right, within five
Business Days after the date (for purposes of this clause (ii), the "Breach
Notice Date") that notice of such breach is delivered to each Breaching Holder
by this Corporation, to deliver to this Corporation a notice either:
(x) committing to effect a cure as soon as practical, in which case
the Breaching Holders shall effect such cure as soon as practical, but in
no event later than the 20th Business Day from the Breach Notice Date (or,
with respect to an alleged breach of clauses (w) or (x), if such cure
cannot be effected within such time period due to the anti-fraud rules of
the U.S. securities laws, such longer period as is reasonably necessary to
cure such breach in a manner consistent with such rules), provided that
(I) the Breaching Holders shall have no right to cure unless such
breach is susceptible to cure;
(II) such cure period shall continue only for so long as each
Breaching Holder shall be undertaking to effect such a cure in a
diligent manner;
(III) with respect to an alleged breach of clause (i)(x) above,
this Corporation shall have the right at any time after the end of
such 20-day period to purchase such number of shares of Common Stock
or Class A Stock, as the case may be, as is necessary to return the
Class A Holders to the ownership level permitted by the Standstill
Agreement or a Qualified Subsidiary Standstill Agreement, as the case
may be, at a price equal to the lower of (A) the Market Price for such
shares at the time of such redemption and (B) the price paid by the
Breaching Holders for such shares, provided that this Corporation may
only exercise such right if a majority of the Continuing Directors
shall have first approved, at a meeting at which at least seven
Continuing Directors are present, such a purchase of Shares, unless a
Fair Price Condition has been satisfied; and
(IV) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or
(y) disputing that such a breach has occurred, provided that during
such time as the most recent decision or order of a court of competent
jurisdiction is to the effect that such breach has occurred and was not
cured within the time provided for cure in clause (x) of this clause (ii),
the rights provided to the Class A Holders under Sections 4 (except
4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and the right
to elect members of the Board of Directors of the holders of the Class A
Stock under ARTICLE FIFTH of these Articles of Incorporation shall be
suspended and may not be exercised by the Class A Holders.
(iii) For any alleged breach of the type described in clause (i)(v) above,
the Breaching Holders shall have the right, within five Business Days after the
date (for purposes of this clause (iii), the "Breach Notice Date") that notice
of such breach is delivered to each Breaching Holder by this Corporation, to
deliver to this Corporation a notice either:
(x) committing to effect a cure as soon as practical, in which case
the Breaching Holders shall effect such cure as soon as practical, but in
no event later than the 20th Business Day from the Breach Notice Date (or,
if such cure cannot be effected within such time period due to the
anti-fraud rules of the U.S. securities laws, such longer period as is
reasonably necessary to cure such breach in a manner consistent with such
rules), provided that
(I) the Breaching Holders shall have no right to cure unless such
breach is susceptible to cure;
(II) such cure period shall continue only for so long as each
Breaching Holder shall be undertaking to effect such a cure in a
diligent manner; and
(III) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or
(y) disputing that such a breach has occurred;
provided that, in each case, from the Breach Notice Date until the earlier
to occur of the cure of such breach and the issuance of a decision or order
of a court of competent jurisdiction finding that such breach has not
occurred or was cured within the time provided for cure in clause (x) of
this clause (iii), the rights provided to the Class A Holders under
Sections 4 (except 4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A
Provisions and the right to elect members of the Board of Directors of the
holders of the Class A Stock under ARTICLE FIFTH of these Articles of
Incorporation shall be suspended and may not be exercised by the Class A
Holders; and provided, further, that following such decision or order, such
rights shall be suspended during such time as the most recent decision or
order of a court of competent jurisdiction is to the effect that such
breach has occurred and was not cured within the time provided for cure in
clause (x) of this clause (iii).
(iv) For any alleged breach of the type described in clause (i)(y) above,
the Breaching Holders shall have the right, within five Business Days after the
date (for purposes of this clause (iv), the "Breach Notice Date") that notice of
such breach is delivered to each Breaching Holder by this Corporation, to
deliver to this Corporation a notice disputing that such a breach has occurred,
provided that from the Breach Notice Date until the issuance of a decision or
order of a court of competent jurisdiction finding that such breach has not
occurred, the rights provided to the Class A Holders under Sections 4 (except
4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and the right to
elect members of the Board of Directors of the holders of the Class A Stock
under ARTICLE FIFTH of these Articles of Incorporation shall be suspended and
may not be exercised by the Class A Holders; and provided, further, that
following such decision or order, such rights shall be suspended during such
time as the most recent decision or order of a court of competent jurisdiction
is to the effect that such breach has occurred.
(v) For purposes of this Section 7(b), an alleged breach shall be deemed to
have occurred in a Control Context if the action or actions alleged to have
given rise to such breach were taken in the context of efforts by any Class A
Holder or any other Person having the purpose or effect of changing or
influencing the control of this Corporation.
(vi) No conversion pursuant to this Section 7(b) shall be considered an
acquisition for purposes of Section 7(i) of the Class A Provisions.
(c) Failure to Purchase at Closings; Class A Preference Stock Ownership.
The Fundamental Rights shall terminate as to all outstanding shares of Class A
Preference Stock if (i) FT or DT or any Qualified Subsidiary which is a party to
the Investment Agreement breaches its obligation to purchase shares of Common
Stock or Class A Stock, as the case may be, under the Investment Agreement at an
Additional Preference Stock Closing, a Supplemental Preference Stock Closing or
a Deferred Common Stock Closing, as such terms are defined in the Investment
Agreement, or (ii) if, prior to the Investment Completion Date, the outstanding
shares of Class A Preference Stock have an aggregate liquidation value of less
than $1.5 billion as a result of a Transfer of shares of Class A Preference
Stock by a Class A Holder (other than a Transfer contemplated by Section
7.4(b)(i)(y) of the Stockholders' Agreement);
(d) Corporation Joint Venture Termination. Unless the Class A Common Stock
shall have been converted earlier or the Fundamental Rights shall have been
terminated earlier as to all outstanding shares of Class A Preference Stock, in
each case pursuant to this Section 7 of the Class A Provisions, if there is a
Corporation Joint Venture Termination, each outstanding share of Class A Common
Stock shall automatically convert (without the payment of any consideration)
into one duly issued, fully paid and nonassessable share of Common Stock or the
Fundamental Rights shall terminate as to all outstanding shares of Class A
Preference Stock, as the case may be, in each case on the third anniversary of
the date of such Corporation Joint Venture Termination, provided that any such
conversion shall not be considered to be an acquisition of Common Stock for
purposes of Section 7(i) of the Class A Provisions.
(e) Other Joint Venture Termination. If (i) there is a sale of all the
Venture Interests of the Sprint Parties or the FT/DT Parties pursuant to Section
17.2, 17.3, 17.4, 19.3, 20.6 or 20.11 of the Joint Venture Agreement or (ii) the
Joint Venture is otherwise terminated, in each case other than due to (i) an
FT/DT Joint Venture Termination or (ii) a Corporation Joint Venture Termination:
(x) on the date of such termination, the rights provided to the Class
A Holders in Sections 4 (except Sections 4(c)(i) and 4(c)(iii)), 5 and 6 of
the Class A Provisions shall terminate; and
(y) unless the Class A Common Stock shall have been converted, or the
Fundamental Rights shall have been terminated earlier as to all outstanding
shares of Class A Preference Stock, as the case may be, in each case
pursuant to this Section 7 of the Class A Provisions, each outstanding
share of Class A Common Stock shall automatically convert (without the
payment of any consideration) into one duly issued, fully paid and
nonassessable share of Common Stock or those Fundamental Rights which have
not been terminated earlier as to all outstanding shares of Class A
Preference Stock pursuant to clause (x) shall terminate, as the case may
be, in each case on the third anniversary of the date of such termination,
provided that any such conversion shall not be considered to be an
acquisition of Common Stock for purposes of Section 7(i) of the Class A
Provisions.
(f) Change of Control. If there is a Change of Control within the meaning
of clause (a) of the definition of Change of Control, (i) the rights provided to
the Class A Holders in ARTICLE FIFTH of these Articles of Incorporation, and
Sections 4 (except Sections 4(b), 4(c)(iii) (as to rights provided under Section
4(b)) and 4(c)(iv) (as to rights provided under Section 4(b)), 5 and 6 of the
Class A Provisions shall terminate upon the consummation of the transactions
contemplated thereby, provided that, prior to such consummation, this
Corporation shall engage in good faith negotiations with any potential acquiror
of Control to provide the Class A Holders with rights equivalent to those
provided in ARTICLE FIFTH of these Articles of Incorporation and (ii) all, but
not less than all, of the Class A Holders shall have the right (but not the
obligation) to deliver to this Corporation a written notice upon which delivery
(x) if Class A Common Stock is then outstanding, each outstanding share of Class
A Common Stock shall automatically convert (without the payment of any
consideration) into one duly issued, fully paid and nonassessable share of
Common Stock or (y) if Class A Preference Stock is then outstanding, (A) if at
the time of delivery of such notice the Conversion Price has been Fixed, the
Transfer Restrictions shall cease to be of further force and effect, and each
share of Class A Preference Stock Transferred thereafter (other than to a
Qualified Subsidiary or Class A Holder) shall convert at the applicable
Conversion Price (without the payment of any consideration) into that number of
duly issued, fully paid and nonassessable shares of Common Stock equal to the
number of related Class A Conversion Shares, or (B) if at the time of delivery
of such notice the Conversion Price has not been Fixed, the Class A Holders may
deliver a notice to this Corporation electing either that (x) upon delivery of
such notice, the Transfer Restrictions shall cease to be of further force and
effect, and each share of Class A Preference Stock Transferred thereafter (other
than to a Qualified Subsidiary or Class A Holder) shall convert upon such
Transfer at the Target Price (without the payment of consideration) into that
number of duly issued, fully paid and nonassessable shares of Common Stock equal
to the number of related Class A Conversion Shares, or (y) on the 31st day
following delivery of such notice, the Transfer Restrictions cease to be of
further force and effect, and each share of Class A Preference Stock Transferred
thereafter (other than to a Qualified Subsidiary or Class A Holder) shall
convert upon such Transfer at the Minimum Price at the date of such Transfer
(without the payment of consideration) into that number of duly issued, fully
paid and nonassessable shares of Common Stock equal to the number of related
Class A Conversion Shares, provided that this Corporation may elect within 30
days after the delivery of notice by the Class A Holders hereunder to the effect
specified in this clause (y), in lieu of releasing the Transfer Restrictions and
having such Shares convert at the Minimum Price, to have this Corporation redeem
each share of Class A Preference Stock for cash at a per share price equal to
its Liquidation Preference on the 90th day following the delivery of such
notice, provided, further, that (i) if this Corporation's notes at the date of
delivery of such notice fulfill the requirements set forth in the proviso to the
definition of "Corporation Eligible Notes," this Corporation may, upon delivery
of a notice to each Class A Holder no fewer than ten Business Days prior to such
90th day, in lieu of redeeming the Class A Preference Stock for cash, issue to
each Class A Holder a Corporation Eligible Note in an amount equal to the
aggregate Liquidation Preference attributable to the shares of Class A
Preference Stock held by such Class A Holder maturing at the earlier of (A)
three years from the date of issuance, and (B) five years from the Initial
Issuance Date, and (ii) this Corporation shall not be permitted to elect the
option to redeem set forth in the first proviso unless a majority of the
Continuing Directors shall have first approved, at a meeting at which at least
seven Continuing Directors are present, such redemption, unless a Fair Price
Condition has been satisfied. Any such conversion of Class A Stock pursuant to
this clause (f) shall not be considered to be an acquisition of Common Stock for
purposes of Section 7(i) of the Class A Provisions.
(g) Unequal Ownership. (i) If the ratio (the "Ownership Ratio") of the
Percentage Ownership Interest of either FT or DT to the Percentage Ownership
Interest of the other exceeds the Applicable Ratio for 60 consecutive days
following a notice of such event delivered by this Corporation to each of FT and
DT, each share of Class A Common Stock, if any, shall automatically convert
(without the payment of any consideration) into one duly issued, fully paid and
nonassessable share of Common Stock or the Fundamental Rights shall terminate as
to all outstanding shares of Class A Preference Stock, as the case may be,
provided that any such conversion shall not be considered to be an acquisition
of Common Stock for purposes of Section 7(i) of the Class A Provisions.
(ii) For purposes of calculating the Ownership Ratio, FT and DT shall be
deemed to own shares of Class A Stock owned by a Qualified Subsidiary as
follows:
(x) if only one of FT or DT owns, directly or indirectly, Votes in
such Qualified Subsidiary, FT or DT, as the case may be, shall be deemed to
own all of the shares of Class A Stock owned by such Qualified Subsidiary;
and
(y) if both FT and DT own, directly or indirectly, Votes in such
Qualified Subsidiary, each of FT and DT shall be deemed to own its
respective Applicable Percentage of the shares of Class A Stock owned by
such Qualified Subsidiary. As used herein, the "Applicable Percentage"
shall mean the percentage of the equity interests of such Qualified
Subsidiary owned, directly or indirectly, by FT or DT, as the case may be.
(h) Unauthorized Transfers. Unless approved by this Corporation, upon any
Transfer of shares of Class A Stock (other than a Transfer to a Qualified
Subsidiary, a Qualified Stock Purchaser or to FT or DT, in each case which
Transfer is effected in accordance with the provisions of Article II of the
Stockholders' Agreement), (i) in the case of a Transfer of Class A Common Stock,
each share of Class A Common Stock so Transferred shall automatically convert
(without the payment of any consideration) into one duly issued, fully paid and
nonassessable share of Common Stock as of the date of such Transfer and (ii) in
the case of a Transfer of Class A Preference Stock, (x) if at the date of
Transfer the Conversion Price has been Fixed, each share of Class A Preference
Stock so Transferred shall automatically convert (without the payment of any
consideration) into that number of duly issued, fully paid and nonassessable
shares of Common Stock equal to the number of related Class A Conversion Shares,
or (y) if at the date of Transfer the Conversion Price has not been Fixed, each
share of Class A Preference Stock so Transferred shall automatically convert at
the Target Price (without the payment of any consideration) into that number of
duly issued, fully paid and nonassessable shares of Common Stock equal to the
number of related Class A Conversion Shares, provided that no conversion of
Class A Stock pursuant to this Section 7(h) shall be considered to be an
acquisition of Common Stock for purposes of Section 7(i) of the Class A
Provisions.
(i) Conversion of Common Stock into Class A Stock. Unless the Fundamental
Rights shall have been previously terminated as to all outstanding shares of
Class A Preference Stock, (i) following the Class A Common Issuance Date and
until the conversion of all of the shares of Class A Common Stock pursuant to
this Section 7, each share of Common Stock acquired by a Class A Holder shall
automatically convert (without the payment of any consideration) into one duly
issued, fully paid and nonassessable share of Class A Common Stock at the date
of such acquisition; and (ii) following the date of the Supplemental Preference
Stock Closing and prior to the Class A Common Issuance Date, each share of
Common Stock acquired by a Class A Holder shall automatically convert (without
payment of any consideration) into that number of duly issued, fully paid and
nonassessable shares of Class A Preference Stock at the date of such purchase
equal to the quotient of (A) the number of shares of Class A Preference Stock
outstanding immediately prior to such acquisition, divided by (B) the number of
Class A Conversion Shares associated with such outstanding shares of Class A
Preference Stock.
(j) Notice of Conversion; Exchange of Stock Certificates; Effect of
Conversion of all Class A Stock, etc. (i) Immediately upon the conversion of
shares of Class A Stock into shares of Common Stock, or shares of Common Stock
into shares of Class A Stock, as the case may be and in each case pursuant to
this Section 7 (the shares of Class A Stock or shares of Common Stock so
converted hereinafter referred to as the "Converted Shares"), the rights of the
holders of such Converted Shares, as such, shall cease and the holders thereof
shall be treated for all purposes as having become the record owners of the
shares of Class A Stock or Common Stock, as the case may be, issuable upon such
conversion (the "New Shares"), provided that such Persons shall be entitled to
receive when paid any dividends declared on the Converted Shares as of a record
date preceding the time the Converted Shares were converted (the "Conversion
Time") and unpaid as of the Conversion Time. If the stock transfer books of this
Corporation shall be closed at the Conversion Time, such Person or Persons shall
be deemed to have become such holder or holders of record of the New Shares at
the opening of business on the next succeeding day on which such stock transfer
books are open.
(ii) As promptly as practicable after the Conversion Time, upon the
delivery to this Corporation of the certificates formerly representing Converted
Shares, this Corporation shall deliver or cause to be delivered, to or upon the
written order of the record holder of such certificates, a certificate or
certificates representing the number of duly issued, fully paid and
nonassessable New Shares into which the Converted Shares formerly represented by
such certificates have been converted in accordance with the provisions of this
Section 7.
(iii) This Corporation shall pay all United States federal, state or local
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of New Shares upon the conversion of Converted Shares pursuant
to this Section 7, provided that this Corporation shall not be required to pay
any tax which may be payable in respect of any registration of Transfer involved
in the issue or delivery of New Shares in a name other than that of the
registered holder of shares converted or to be converted, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to this Corporation the amount of any such tax or has established, to the
satisfaction of this Corporation, that such tax has been paid.
(iv) This Corporation shall at all times reserve and keep available, out of
the aggregate of its authorized but unissued Class A Common Stock, Class A
Preference Stock and Common Stock and its issued Common Stock held in its
treasury, for the purpose of effecting the conversion of the Common Stock, Class
A Preference Stock and Class A Common Stock contemplated hereby, the full number
of shares of Common Stock then deliverable upon the conversion of all
outstanding shares of Class A Stock, and the full number of shares of Class A
Stock that would be deliverable upon conversion of all of the shares of Common
Stock and Class A Preference Stock the Class A Holders are permitted to acquire
hereunder and under the Investment Agreement, the Stockholders' Agreement and
the Standstill Agreement.
(v) Following conversion of all outstanding shares of Class A Common Stock
into shares of Common Stock pursuant to this Section 7 of the Class A
Provisions, this Corporation shall not, directly or indirectly, issue, or sell
from the treasury, any shares of Class A Common Stock. Following conversion of
all outstanding shares of Class A Preference Stock into shares of Class A Common
Stock (or Common Stock, as the case may be) this Corporation shall not, directly
or indirectly, issue, or sell from the treasury, any shares of Class A
Preference Stock.
(k) Class A Stock Held by Qualified Stock Purchasers. (i) If any Qualified
Stock Purchaser shall become a Major Competitor of this Corporation or of the
Joint Venture, on the date the writing referred to in the definition of Major
Competitor in Section 12 of these Class A Provisions is delivered to each Class
A Holder, each share of Class A Common Stock owned by such Qualified Stock
Purchaser shall automatically convert (without the payment of any consideration)
into one duly issued, fully paid and nonassessable share of Common Stock, or if
shares of Class A Preference Stock are outstanding, the Fundamental Rights shall
terminate as to the particular shares of Class A Preference Stock owned by such
Qualified Stock Purchaser.
(ii) Each outstanding share of Class A Common Stock owned by a Qualified
Stock Purchaser shall automatically convert (without the payment of any
consideration) into one duly issued, fully paid and nonassessable share of
Common Stock, or if shares of Class A Preference Stock are outstanding, the
Fundamental Rights shall terminate as to the particular shares of Class A
Preference Stock owned by such Qualified Stock Purchaser, in each case if:
(v) such Qualified Stock Purchaser breaches in any
material respect its obligations under Section 2.4 of the
Stockholders' Agreement;
(w) such Qualified Stock Purchaser breaches in any material respect
its obligations under Article II (other than Section 2.4) of the
Stockholders' Agreement;
(x) such Qualified Stock Purchaser breaches any of
the provisions of Article 2 of the Qualified Stock
Purchaser Standstill Agreement;
(y) such Qualified Stock Purchaser breaches any of the provisions of
Section 3.1 or 3.2 of the Qualified Stock Purchaser Standstill Agreement in
a Control Context, or such Qualified Stock Purchaser otherwise breaches
Sections 3.1(a)(ii), (iii) or (iv) or Section 3.1(g) of the Qualified Stock
Purchaser Standstill Agreement; or
(z) such Qualified Stock Purchaser breaches any of the provisions of
Sections 3.1 (except Section 3.1(a)(ii), (iii) or (iv), or Section 3.1(g))
or 3.2 of the Qualified Stock Purchaser Standstill Agreement, in each case
other than in a Control Context;
provided, that such Qualified Stock Purchaser shall deliver a
notice
(I) except with respect to a breach of the type described in clause
(y) above, in accordance with clauses (iii)(x) or (iv)(x) below, in which
case no conversion of the Class A Common Stock owned by such Qualified
Stock Purchaser shall take place and the Fundamental Rights shall not
terminate as to the particular shares of Class A Preference Stock owned by
such Qualified Stock Purchaser unless such breach fails to be cured within
the time provided for cure in such clause (iii) or (iv), as the case may
be;
(II) in accordance with clauses (iii)(y), (iv)(y) or (v) below, in
which case no conversion of the Class A Common Stock owned by such
Qualified Stock Purchaser shall take place and the Fundamental Rights shall
not terminate as to the particular shares of Class A Preference Stock owned
by such Qualified Stock Purchaser until there is issued a final
nonappealable decision or order of a court of competent jurisdiction
finding that such breach has occurred and, if applicable, was not cured
within the time provided for cure in clauses (iii) or (iv) below, as the
case may be; or
(III) admitting that such a breach has occurred, and (if applicable)
cannot be cured within the time periods provided for cure in clauses (iii)
or (iv) below, in which case each outstanding share of Class A Common Stock
owned by such Qualified Stock Purchaser shall automatically convert
(without the payment of any consideration) into one duly issued, fully paid
and nonassessable share of Common Stock upon delivery of such notice, or if
shares of Class A Preference Stock are outstanding, the Fundamental Rights
shall terminate as to the particular shares of Class A Preference Stock
owned by such Qualified Stock Purchaser; and
provided, further, that if such Qualified Stock Purchaser fails to perform the
actions described in clauses (I) or (II) above within the time periods provided
for performing such actions in clauses (iii), (iv) or (v) below, it shall be
deemed to have taken the action described in clause (III) above.
(iii) For any alleged breach of the type described in clauses (w), (x) or
(z) of clause (ii) above, such Qualified Stock Purchaser shall have the right,
within five Business Days after the date (for purposes of this clause (iii), the
"Breach Notice Date") that notice of such breach is delivered to such Qualified
Stock Purchaser by this Corporation, to deliver to this Corporation a notice
either:
(x) committing to effect a cure as soon as practical, in which case
such Qualified Stock Purchaser shall effect such cure as soon as practical,
but in no event later than the 20th Business Day from the Breach Notice
Date (or, with respect to an alleged breach of clauses (w) or (x), if such
cure cannot be effected within such time period due to the anti-fraud rules
of the U.S. securities laws, such longer period as is reasonably necessary
to cure such breach in a manner consistent with such rules), provided that
(I) such Qualified Stock Purchaser shall have no right to cure
unless such breach is susceptible to cure;
(II) such cure period shall continue only for so long as such
Qualified Stock Purchaser shall be undertaking to effect such a cure
in a diligent manner;
(III) with respect to an alleged breach of clause (ii)(x) above,
this Corporation shall have the right at any time after the end of
such 20-day period to purchase such number of shares of Class A Stock
as is necessary to return such Qualified Stock Purchaser to the
ownership level permitted by the Qualified Stock Purchaser Standstill
Agreement, at a price equal to the lower of (A) the Market Price for
such Shares at the time of such redemption and (B) the price paid by
such Qualified Stock Purchaser for such Shares, provided that this
Corporation may only exercise such right if a majority of the
Continuing Directors shall have first approved, at a meeting at which
at least seven Continuing Directors are present, such a purchase of
Shares, unless a Fair Price Condition has been satisfied; and
(IV) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or
(y) disputing that such a breach has occurred, provided that during
such time as the most recent decision or order of a court of competent
jurisdiction is to the effect that such breach has occurred and was not
cured within the time provided for cure in clause (x) of this clause (iii),
the rights provided to such Qualified Stock Purchaser under Sections 4
(except 4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and
the right of such Qualified Stock Purchaser to elect members of the Board
of Directors as a holder of the Class A Common Stock under ARTICLE FIFTH of
these Articles of Incorporation shall be suspended and may not be exercised
by such Qualified Stock Purchaser.
(iv) For any alleged breach of the type described in clause (ii)(v) above,
such Qualified Stock Purchaser shall have the right, within five Business Days
after the date (for purposes of this clause (iv), the "Breach Notice Date") that
notice of such breach is delivered to such Qualified Stock Purchaser by this
Corporation, to deliver to this Corporation a notice either:
(x) committing to effect a cure as soon as practical, in which case
such Qualified Stock Purchaser shall effect such cure as soon as practical,
but in no event later than the 20th Business Day from the Breach Notice
Date (or, if such cure cannot be effected within such time period due to
the anti-fraud rules of the U.S. securities laws, such longer period as is
reasonably necessary to cure such breach in a manner consistent with such
rules), provided that
(I) such Qualified Stock Purchaser shall have no right to cure
unless such breach is susceptible to cure;
(II) such cure period shall continue only for so long as such
Qualified Stock Purchaser shall be undertaking to effect such a cure
in a diligent manner; and
(III) withdrawal of the action alleged to have caused such breach
shall not, in and of itself, give rise to a presumption that such
breach has been cured; or
(y) disputing that such a breach has occurred;
provided that, in each case, from the Breach Notice Date until the earlier to
occur of the cure of such breach and the issuance of a decision or order of a
court of competent jurisdiction finding that such breach has not occurred or was
cured within the time provided for cure in clause (x) of this clause (iv), the
rights provided to such Qualified Stock Purchaser under Sections 4 (except
4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the Class A Provisions and the right of
such Qualified Stock Purchaser to elect members of the Board of Directors as a
holder of the Class A Common Stock under ARTICLE FIFTH of these Articles of
Incorporation shall be suspended and may not be exercised by such Qualified
Stock Purchaser; and provided, further, that following such decision or order,
such rights shall be suspended during such time as the most recent decision or
order of a court of competent jurisdiction is to the effect that such breach has
occurred and was not cured within the time provided for cure in clause (x) of
this clause (iv).
(v) For any alleged breach of the type described in clause (ii)(y) above,
such Qualified Stock Purchaser shall have the right, within five Business Days
after the date (for purposes of this clause (v), the "Breach Notice Date") that
notice of such breach is delivered to such Qualified Stock Purchaser by this
Corporation, to deliver to this Corporation a notice disputing that such a
breach has occurred, provided that from the Breach Notice Date until the
issuance of a decision or order of a court of competent jurisdiction finding
that such breach has not occurred, the rights provided to such Qualified Stock
Purchaser under Sections 4 (except 4(a)(iii) and 4(c)), 5, 6, 7 and 8 of the
Class A Provisions and the right of such Qualified Stock Purchaser to elect
members of the Board of Directors as a holder of the Class A Common Stock under
ARTICLE FIFTH of these Articles of Incorporation shall be suspended and may not
be exercised by such Qualified Stock Purchaser and provided, further, that
following such decision or order, such rights shall be suspended during such
time as the most recent decision or order of a court of competent jurisdiction
is to the effect that such breach has occurred.
(vi) For purposes of this Section 7(k), an alleged breach shall be deemed
to have occurred in a Control Context if the action or actions alleged to have
given rise to such breach were taken in the context of efforts by such Qualified
Stock Purchaser or any other Person having the purpose or effect of changing or
influencing the control of this Corporation.
(vii) No conversion pursuant to this Section 7(k) shall be considered an
acquisition for purposes of Section 7(i) of the Class A Provisions.
(l) Effect of Conversion or Termination of Fundamental Rights. Following
the earlier of (i) conversion of all of the shares of Class A Common Stock
pursuant to this Section 7 and (ii) a termination of the Fundamental Rights as
to all outstanding shares of Class A Preference Stock, each share of Class A
Common Stock issued by this Corporation pursuant to the Investment Agreement,
the Stockholders' Agreement or these Articles of Incorporation shall
automatically convert (without the payment of any consideration) into one duly
issued, fully paid and nonassessable share of Common Stock and each share of
Class A Preference Stock to be so issued shall automatically convert (without
the payment of any consideration) into duly issued, fully paid and nonassessable
shares of Common Stock based on the number of related Class A Conversion Shares,
provided that such conversion shall not be considered an acquisition of Common
Stock for purposes of Section 7(i) of the Class A Provisions.
(m) Exclusionary Tender Offer. If the Board of Directors shall determine
not to oppose a tender offer by a Person other than FT, DT or any of their
respective Affiliates for Voting Securities of this Corporation representing not
less than 35 percent of the Voting Power of this Corporation, and the terms of
such tender offer do not permit the Class A Holders to sell an equal or greater
percentage of their Shares as the other holders of Voting Securities of this
Corporation are permitted to sell taking into account any proration, all, but
not less than all, of the Class A Holders shall have the right (but not the
obligation) to deliver to this Corporation a written notice requesting (x) if
Class A Common Stock is then outstanding, conversion of certain shares of Class
A Common Stock designated by the Class A Holders into Common Stock, upon which
delivery each share of Class A Common Stock so designated in such notice shall
automatically convert (without the payment of any consideration) into one duly
issued, fully paid and nonassessable share of Common Stock, and (y) if Class A
Preference Stock is then outstanding, (A) if at the time of delivery of the
notice the Conversion Price has been Fixed, conversion of certain shares of
Class A Preference Stock designated by the Class A Holders into Common Stock,
upon which delivery each share of Class A Preference Stock so designated shall
convert (without the payment of any consideration) into that number of duly
issued, fully paid and nonassessable shares of Common Stock equal to the number
of related Class A Conversion Shares, or (B) if at the time of delivery of the
notice the Conversion Price has not been Fixed, conversion at the Target Price
of certain shares of Class A Preference Stock designated by the Class A Holders
into Common Stock, upon which delivery each share of Class A Preference Stock so
designated shall convert (without the payment of any consideration) at the
Target Price into that number of duly issued, fully paid and nonassessable
shares of Common Stock equal to the number of related Class A Conversion Shares,
provided that (i) conversion pursuant to this clause (m) shall not be considered
to be an acquisition of Common Stock for purposes of Section 7(i) of the Class A
Provisions, (ii) unless the Class A Common Stock shall have otherwise been
converted into Common Stock, or the Fundamental Rights shall have been
terminated as to all outstanding shares of Class A Preference Stock, in each
case pursuant to Section 7 of these Class A Provisions upon or prior to the
consummation or abandonment of the transaction contemplated by such tender
offer, immediately following the consummation of such transaction or the
delivery by this Corporation to each Class A Holder of a notice that such
transaction has been abandoned, each share of Common Stock, if any, held by a
Class A Holder shall automatically reconvert (without the payment of any
consideration) into one duly issued, fully paid and nonassessable share of Class
A Common Stock (if Class A Common Stock was outstanding immediately prior to
delivery of the notice) or that number of duly issued, fully paid and
nonassessable shares of Class A Preference Stock on the same basis as shares of
Class A Preference initially converted into Common Stock (if Class A Preference
Stock was outstanding immediately prior to delivery of the notice); and (iii)
only those shares of Class A Common Stock or Class A Preference Stock, as the
case may be, related to shares of Common Stock that were not so reconverted
shall be deemed for any purpose under these Articles, the Stockholders'
Agreement, the Investment Agreement, the Standstill Agreement, the Registration
Rights Agreement, or any agreement or document related thereto to have been
converted into Common Stock pursuant to this Section 7(m) of the Class A
Provisions, and the Class A Common Stock or Class A Preference Stock so
reconverted, as the case may be, shall be deemed to have been at all times
outstanding shares of Class A Common Stock or Class A Preference Stock, as the
case may be.
(n) Events under the Stockholders' Agreement. While
shares of Class A Preference Stock are outstanding, but prior
to the time the Conversion Price shall have been Fixed,
(i) if the event described in Section 2.6(a)(iii) of the Stockholders'
Agreement shall occur and not have been cured within the time period
specified therein, the holders of a majority of the Class A Preference
Stock may deliver a notice of election to this Corporation within 20
Business Days following the date that such cure period has lapsed (or such
earlier date that this Corporation provides notice to each of FT and DT
that it will not effect such cure) electing either that (x) upon delivery
of such notice, the Transfer Restrictions cease to be of further force and
effect, and each share of Class A Preference Stock Transferred thereafter
(other than to a Qualified Subsidiary or Class A Holder) convert upon such
Transfer at the Target Price (without the payment of consideration) into
that number of duly issued, fully paid and nonassessable shares of Common
Stock equal to the number of related Class A Conversion Shares, or (y) this
Corporation redeem each share of Class A Preference Stock for cash at a per
share price equal to its Liquidation Preference on the 90th day following
the delivery of such notice, provided that this Corporation, if it disputes
that such a breach has occurred, shall not be obligated to so redeem the
Class A Stock until the earlier of the date the parties agree that a breach
described in Section 2.6(a)(iii) of the Stockholders' Agreement has
occurred and the date of a final, nonappealable judgment of a court of
competent jurisdiction to the effect that such a breach has occurred (in
which case the amount to be paid shall include interest at a rate equal to
12.5 basis points over the Applicable LIBOR Rate, less any dividends paid
or payable on the Class A Preference Stock with respect to such period,
from the 90th day following the initial court judgment until the date of
payment), provided, further, that if the Class A Holders elect the
redemption option provided in the preceding clause (y), this Corporation
may in lieu of such redemption, by notice delivered to the Class A Holders
prior to (A) if this Corporation is contesting that such a breach has
occurred, the expiration of the 90th day following the initial court
judgment, or (B) if this Corporation is not so contesting, the 30th day
following delivery of a notice of election by the Class A Holders
hereunder, elect to cause the Transfer Restrictions to cease to be of
further force and effect, and each share of Class A Preference Stock
Transferred thereafter (other than to a Qualified Subsidiary or Class A
Holder) to convert upon such Transfer at the Minimum Price at the date of
such Transfer (without payment of any consideration) into that number of
duly issued, fully paid and nonassessable shares of Common Stock equal to
the number of related Class A Conversion Shares, provided that this
Corporation shall be deemed to have made this election unless, prior to the
expiration of the time periods set forth in the preceding clauses (A) and
(B), as the case may be, a majority of the Continuing Directors shall have
approved, at a meeting at which at least seven Continuing Directors are
present, the redemption option set forth in clause (y) above, unless a Fair
Price Condition has been satisfied.
(ii) if any of the events described in Section 2.6(a) of the
Stockholders' Agreement (other than clause (iii) or (iv) thereof) shall
occur, the holders of a majority of the Class A Preference Stock may
deliver a notice of election to this Corporation electing that, upon
delivery of such notice, the Transfer Restrictions cease to be of further
force and effect, and each share of Class A Preference Stock Transferred
thereafter (other than to a Qualified Subsidiary or Class A Holder) convert
upon such Transfer at the Target Price (without the payment of
consideration) into that number of duly issued, fully paid and
nonassessable shares of Common Stock equal to the number of related Class A
Conversion Shares.
(o) Transfers if Not Redeemed. Each Share of Class A Preference Stock
Transferred pursuant to Section 2.6(c) of the Stockholders' Agreement shall
automatically convert (without the payment of any consideration) at the Minimum
Price on the date of such Transfer into that number of duly issued, fully paid
and nonassessable Shares of Common Stock equal to the number of related Class A
Conversion Shares, provided that such conversion shall not be considered an
acquisition of Common Stock for purposes of Section 7(i) of the Class A
Provisions.
(p) Events under Rights Agreement. If there shall occur a Stock Acquisition
Date (as defined in the Rights Agreement) or an event described in clause (ii)
of Section 3(a) of the Rights Agreement (without regard to the ten business day
period (or such longer period as the Board shall determine) described therein),
in each case other than due to an action on the part of any Class A Holder, the
holders of a majority of the outstanding shares of Class A Preference Stock may
deliver a notice of election to this Corporation electing that, immediately
prior to the Distribution Date (as defined in the Rights Agreement), each share
of Class A Preference Stock shall convert at the Target Price (without the
payment of any consideration) into that number of duly issued, fully paid and
nonassessable shares of Class A Common Stock equal to the number of related
Class A Conversion Shares.
8. Change of Control Procedures. As long as shares of Class A Stock are
outstanding, but subject to Sections 7(a), (b), (f) and (k) of the Class A
Provisions, if this Corporation, directly or indirectly, (a) determines to sell
all or substantially all of the assets of this Corporation, (b) determines not
to oppose a third-party tender, exchange or other purchase offer for Voting
Securities with a number of Votes in excess of 35 percent of the Voting Power of
this Corporation, (c) determines to effect a merger or other business
combination involving this Corporation that would result in a Person (other than
any Class A Holder) holding Voting Securities of the resulting entity
representing 35 percent or more of the Voting Power of such entity or (d)
otherwise determines to sell Control of this Corporation, this Corporation shall
conduct such transaction in accordance with reasonable procedures to be
determined by the Board of Directors, and permit FT and DT to participate in
that process on a basis no less favorable than that granted any other
participant.
9. No Dilution or Impairment. (a) After the Class A Common Issuance Date,
no reclassification, subdivision or combination of the outstanding shares of
Common Stock shall be effected directly or indirectly (including without
limitation any reclassification, subdivision or combination effected pursuant to
a consolidation, merger or liquidation) unless at the same time the Class A
Common Stock is reclassified, subdivided, combined or consolidated so that the
holders of the Class A Common Stock (i) are entitled, in the aggregate, to a
number of Votes representing the same percentage of the Voting Power of this
Corporation relative to the Common Stock as were represented by the shares of
Class A Common Stock outstanding immediately prior to such reclassification,
subdivision or combination and (ii) maintain all of the rights associated with
the Class A Common Stock set forth in these Articles of Incorporation, including
without limitation the right to receive dividends and other distributions
(including liquidating and other distributions) that are equivalent to those
payable per share in respect of shares of Common Stock, subject to the
limitations, restrictions and conditions on such rights contained herein.
(b) Without limiting the generality of the foregoing, in the case of any
consolidation or merger of this Corporation with or into any other entity (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of the Common Stock) or any reclassification of the
Common Stock into any other form of capital stock of this Corporation, whether
in whole or in part, each Class A Holder shall, after such consolidation, merger
or reclassification, have the right (but not the obligation), by notice
delivered to this Corporation or any successor thereto within 90 days after the
consummation of such consolidation, merger or reclassification, to (i) in the
case of Class A Common Stock, convert each share of Class A Common Stock held by
it into the kind and amount of shares of stock and other securities and property
which such Class A Holder would have been entitled to receive upon such
consolidation, merger, or reclassification if such Class A Holder had converted
its shares of Class A Common Stock into Common Stock immediately prior to such
merger, consolidation or reclassification or (ii) in the case of Class A
Preference Stock, receive preferred or preference stock of this Corporation or
the ultimate parent entity of any successor thereto with rights no less
favorable to the Class A Holders than those applicable to the Class A Preference
Stock (including, without limitation, the right to receive dividends and
liquidating and other distributions) set forth in these Articles of
Incorporation, the Bylaws, the Investment Agreement, the Stockholders' Agreement
and the Registration Rights Agreement. This Corporation shall not effect,
directly or indirectly, any such reclassification, subdivision or combination of
outstanding shares of Common Stock unless it delivers to the Class A Holders
written notice of its intent to take such action at least ten Business Days
before taking such action.
(c) The conversion ratio expressed in Section 3(c)(ii) of the portion of
ARTICLE SIXTH entitled GENERAL PROVISIONS RELATING TO COMMON STOCK AND CLASS A
STOCK and the Dividend Factor shall be adjusted to reflect any stock split,
subdivision, stock dividend, or other reclassification, consolidation or a
combination of this Corporation's Voting Securities or similar action or
transaction undertaken after June 22, 1995, provided that no adjustment shall be
made under this Section 9(c) in respect of the Cellular Spin-off or any
Spin-off.
10. Class Voting. Except as otherwise provided in Section 2(a) of ARTICLE
FIFTH or in the Class A Provisions, the Class A Holders shall not have, nor be
entitled to, a class vote with respect to any matter to be voted on by the
stockholders of this Corporation.
11. Amendment of Class A Provisions and ARTICLE FIFTH. The Class A
Provisions and Section 2(a)(iii) of ARTICLE FIFTH of these Articles of
Incorporation may be amended in any manner which would not materially alter or
change the powers, preferences or rights of the holders of shares of the Common
Stock or Preferred Stock so as to affect such powers, preferences or rights
adversely, by the Board of Directors of this Corporation with the affirmative
vote of only the holders of at least two-thirds of the outstanding shares of
Class A Stock, voting together as a single class, and without the affirmative
vote of the holders of shares of the Common Stock or the Preferred Stock. Upon
the retirement of shares of Class A Stock, (i) such shares shall not resume the
status of authorized and unissued shares of that class, (ii) such shares shall
not be reissued, and (iii) upon the execution, acknowledgment and filing of a
certificate in accordance with Kan. Stat. Ann. 17-6003 and 17-6603 (or any
successor provisions) stating that the reissuance of such shares is prohibited,
identifying the shares and reciting their retirement, then the filing of such
certificate shall have the effect of amending these Articles of Incorporation so
as to reduce accordingly the number of authorized shares of Class A Common Stock
or Class A Preference Stock, as the case may be, or if such retired shares
constitute all of the authorized shares of such class, then the filing of such
certificate shall have the effect of amending these Articles of Incorporation
automatically so as to eliminate all references to such class of stock
therefrom.
12. Definitions. For purposes of ARTICLE FIFTH of these Articles of
Incorporation, the provisions of ARTICLE SIXTH of these Articles of
Incorporation entitled GENERAL PROVISIONS RELATING TO ALL STOCK, GENERAL
PROVISIONS RELATING TO COMMON STOCK AND CLASS A STOCK, GENERAL PROVISIONS
RELATING TO COMMON STOCK, and the Class A Provisions:
"Acquisition" shall mean the acquisition by Cellular of assets (which may
include the acquisition of the common equity interests in a Person) that
constitute a business that, prior to such acquisition, has been operated as a
company or a division or has otherwise been operated as a separate business.
"Adjusted Aggregate Liquidation Preference" shall mean the difference
between (a) the aggregate of the Liquidation Preference of the outstanding
shares of Class A Preference Stock (including Section 7(i) Preference Shares
whether or not converted pursuant to Section 3(c)(ii) of the Class A
Provisions), minus (b) the Section 7(i) Aggregate Purchase Price.
"Adjusted Cellular Price" shall mean, subject to adjustment as provided in
the Class A Provisions, the Average Cellular Price multiplied by the
Capitalization Ratio.
"Affiliate" shall mean, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by, or is under common Control with, such Person, provided that (a)
no JV Entity shall be deemed an Affiliate of any Class A Holder or this
Corporation unless (i) FT, DT and Atlas own a majority of the Voting Power of
such JV Entity and this Corporation does not have the Tie-Breaking Vote (as
defined in Section 18.1 of the Joint Venture Agreement), or (ii) FT, DT or Atlas
has the Tie-Breaking Vote; (b) FT, DT and this Corporation shall not be deemed
Affiliates of each other; (c) Atlas shall be deemed an Affiliate of FT and DT;
and (d) the term "Affiliate" shall not include any Governmental Authority of
France or Germany or any other Person Controlled, directly or indirectly, by any
such Governmental Authority except in each case for FT, DT, Atlas and any other
Person directly, or indirectly through one or more intermediaries, Controlled by
FT, DT or Atlas.
"Alien" shall mean "aliens", "their representatives", "a foreign government
or representatives thereof" or "any corporation organized under the laws of a
foreign country" as such terms are used in Section 310(b)(4) of the
Communications Act of 1934, as amended, or as hereafter may be amended, or any
successor provision of law.
"Applicable LIBOR Rate" shall mean the one-month London Interbank Offered
Rate (the "Quoted Rate") listed in the "Money Rates Box" of The Wall Street
Journal (New York Edition) (or any successor publication) on the day on which
such interest is to begin to accrue, provided that if such day is a day on which
the Quoted Rate is not listed in The Wall Street Journal (New York Edition) (or
such successor publication) or The Wall Street Journal (New York Edition) (or
such successor publication) is not published, the Applicable LIBOR Rate shall be
the Quoted Rate on the most recent day prior to such date on which a Quoted Rate
is listed in The Wall Street Journal (New York Edition) (or such successor
publication).
"Applicable Ratio" shall have the meaning set forth in Section 7.5(a) of
the Stockholders' Agreement.
"Associate" shall have the meaning ascribed to such term in Rule 12b-2
under the Exchange Act, provided that when used to indicate a relationship with
FT or DT or their respective Subsidiaries or Affiliates, the term "Associate"
shall mean (a) in the case of FT, any Person occupying any of the positions
listed on Schedule A to the Stockholders' Agreement and (b) in the case of DT,
any Person occupying any of the positions listed on Schedule B to the
Stockholders' Agreement, provided, further, that, in each case, no Person
occupying any such position described in clause (a) or (b) hereof shall be
deemed an "Associate" of FT or DT, as the case may be, unless the Persons
occupying all such positions described in clauses (a) and (b) hereof
Beneficially Own, in the aggregate, more than 0.2% of the Voting Power of the
Company.
"Atlas" shall mean the company formed as a societe anonyme under the laws
of Belgium pursuant to the Joint Venture Agreement, dated as of December 15,
1994, between FT and DT, as amended.
"Average Cellular Price" shall mean, subject to adjustment as provided in
the Class A Provisions, the average of the Closing Prices of a share of Cellular
Common Stock for the 20 consecutive Trading Days on which such shares are traded
"regular way" starting on the first such Trading Day after the Cellular Spin-off
Date.
"Average Price" shall mean, as to a security, the average of the Closing
Prices of a security for the 20 consecutive Trading Days ending on the fifteenth
Trading Day prior to the date of determination or ending on such other date
specified herein.
"Average Sprint Price" shall mean, subject to adjustment as provided in the
Class A Provisions, the Average Price of a share of Common Stock at the date of
determination specified herein. For purposes of this definition, if any portion
of the relevant determination period occurs prior to the Cellular Spin-off and
the Closing Price of Common Stock on any Trading Day during the determination
period is quoted "ex" the distribution of Cellular Common Stock, the Closing
Price of the Common Stock for such Trading Day will be adjusted by adding the
product of the Closing Price of the Cellular Common Stock for such Trading Day
multiplied by the Capitalization Ratio.
"Beneficial Owner" (including, with its correlative meanings, "Beneficially
Own" and "Beneficial Ownership"), with respect to any securities, shall mean any
Person which:
(a) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to acquire (whether such right is exercisable
immediately or only after the passage of time) such securities pursuant to
any agreement, arrangement or understanding (whether or not in writing),
including, without limitation, pursuant to the Investment Agreement and the
Stockholders' Agreement, or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise;
(b) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to vote or dispose of (whether such right is
exercisable immediately or only after the passage of time) or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 under the
Exchange Act but including all such securities which a Person has the right
to acquire beneficial ownership of whether or not such right is exercisable
within the 60-day period specified therein) such securities, including
pursuant to any agreement, arrangement or understanding (whether or not in
writing); or
(c) has, or any of whose Affiliates or Associates has, any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting or disposing of any securities which are
Beneficially Owned, directly or indirectly, by any other Person (or any
Affiliate thereof),
provided that Class A Stock and Common Stock held by one of FT or DT or its
Affiliates shall not also be deemed to be Beneficially Owned by the other of FT
or DT or its Affiliates.
"Board of Directors" shall mean the board of directors of
this Corporation.
"Business Day" shall mean any day other than a day on which commercial
banks in The City of New York, Paris, France, or Frankfurt am Main, Germany, are
required or authorized by law to be closed.
"Buyers" shall have the meaning set forth in the
Investment Agreement.
"Bylaws" shall mean the Bylaws of this Corporation as amended or
supplemented from time to time.
"Capitalization Ratio" shall mean the quotient of the number of shares of
Cellular Common Stock outstanding immediately following the Cellular Spin-off,
divided by the number of shares of Common Stock immediately following the
Cellular Spin-off.
"Cellular" shall mean (a) until immediately prior to the Cellular Spin-off
Date, the Cellular and Wireless Division, (b) immediately prior to the Cellular
Spin-off Date, the direct or indirect wholly owned subsidiary of this
Corporation owning the assets of the Cellular and Wireless Division, the shares
of which subsidiary are to be distributed to this Corporation's stockholders in
connection with the Cellular Spin-off, and (c) on and after the Cellular
Spin-off Date, such company, provided that the term "Cellular" shall not include
any assets retained by this Corporation after the Cellular Spin-off Date.
"Cellular and Wireless Division" shall mean the Cellular
and Wireless Communications Services Division of this
Corporation.
"Cellular Common Stock" shall mean the shares of common
stock of Cellular.
"Cellular Spin-off" shall mean the distribution by this Corporation on a
pro rata basis to the holders of the Common Stock of shares of Cellular Common
Stock representing all of the common equity of Cellular.
"Cellular Spin-off Date" shall mean the date on which shares of Cellular
Common Stock are distributed to the holders of Common Stock.
"Cellular Spin-off Reduction Factor" shall mean, subject to adjustment as
provided in the Class A Provisions, (a) $5.25, if the Adjusted Cellular Price is
not less than $3.25 or more than $7.25, or (b) if the Adjusted Cellular Price is
more than $7.25 but not more than $8.25, $5.25 plus 50% of the difference
between the Adjusted Cellular Price and $7.25, or (c) if the Adjusted Cellular
Price is more than $8.25, $5.75 plus the difference between the Adjusted
Cellular Price and $8.25, or (d) if the Adjusted Cellular Price is less than
$3.25 but not less than $2.25, $5.25 minus 50% of the difference between $3.25
and the Adjusted Cellular Price or (e) if the Adjusted Cellular Price is below
$2.25, $4.75 minus the difference between $2.25 and the Adjusted Cellular Price.
Notwithstanding the foregoing, (i) if the Net Cellular Indebtedness immediately
after the Cellular Spin-off exceeds $2.955, each dollar amount set forth in the
first sentence of this definition (other than the Adjusted Cellular Price) shall
be reduced dollar-for-dollar by such excess; (ii) if $2.955 exceeds the Net
Cellular Indebtedness, each such dollar amount shall be increased
dollar-for-dollar by such excess; and (iii) if Cellular has effected any
Acquisition and/or Disposition after June 22, 1995 and prior to the Cellular
Spin-off Date, such dollar amounts shall be increased by the Net Cellular
Acquisition Amount, if positive, and decreased by the absolute value of the Net
Cellular Acquisition Amount, if negative.
"Change of Control" shall mean a:
(a) decision by the Board of Directors to sell Control of this
Corporation or not to oppose a third party tender offer for Voting
Securities of this Corporation representing more than 35% of the Voting
Power of this Corporation; or
(b) change in the identity of a majority of the Directors due to (i) a
proxy contest (or the threat to engage in a proxy contest) or the election
of Directors by the holders of Preferred Stock; or (ii) any unsolicited
tender, exchange or other purchase offer which has not been approved by a
majority of the Independent Directors,
provided that a Strategic Merger shall not be deemed to be a Change of Control
and provided, further, that any transaction between this Corporation and FT and
DT or otherwise involving FT and DT and any of their direct or indirect
Subsidiaries which are party to a Contract therefor shall not be deemed to be a
Change of Control.
"Class A Action" shall mean action by the holders of a majority of the
shares of Class A Stock taken by a vote at either a regular or special meeting
of the stockholders of this Corporation or of the holders of the Class A Stock
or by written consent delivered to the Secretary of this Corporation.
"Class A Common Issuance Date" shall mean the date this Corporation first
issues shares of Class A Common Stock.
"Class A Common Stock" shall have the meaning set forth in ARTICLE SIXTH of
these Articles of Incorporation.
"Class A Conversion Shares" shall mean, the shares of Class A Common Stock
or Common Stock into which the then outstanding shares of Class A Preference
Stock (or, as the case may be, a specified number of shares of Class A
Preference Stock) would, at the time of determination, be convertible at the
then applicable Conversion Price if the conditions to establishment of the
Conversion Date had been met.
"Class A Director" shall mean any Director elected by the Class A Holders
pursuant to Section 2(a) of ARTICLE FIFTH of these Articles of Incorporation,
appointed by Class A Directors pursuant to Section 4(b) of ARTICLE FIFTH of
these Articles of Incorporation, or elected by the Class A Holders pursuant to
Section 3(d) of the Class A Provisions.
"Class A Holders" shall mean (a) the holders of the Class A Stock or the
Class A Preference Stock, as the case may be, and (b) any Qualified Stock
Purchaser who has executed with this Corporation a Qualified Stock Purchaser
Assumption Agreement (as such term is defined in the Stockholders' Agreement),
for so long as such Person holds Class A Preference Stock or Class A Common
Stock.
"Class A Preference Stock" shall have the meaning set forth in ARTICLE
SIXTH of these Articles of Incorporation.
"Class A Provisions" shall mean the portion of ARTICLE SIXTH of these
Articles of Incorporation entitled GENERAL PROVISIONS RELATING TO CLASS A STOCK.
"Class A Stock" shall mean the Class A Common Stock or, if shares of Class
A Preference Stock are outstanding, the Class A Preference Stock.
"Closing Price" shall mean, with respect to a security on any day, 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, Inc.
or, if such security is not listed or admitted to trading on such exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
security is listed or admitted to trading or, if the security is not listed or
admitted to trading on any national securities exchange, 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 such security 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 security selected in good faith
by the Board of Directors. If the security is not publicly held or so listed or
publicly traded, "Closing Price" shall mean the Fair Market Value of such
security.
"Committed Percentage" shall mean, as to any Class A Holder, the percentage
obtained by dividing the aggregate number of Votes represented or to be
represented by the Voting Securities of this Corporation (a) owned of record by
such Class A Holder or by its nominees; and (b) which such Class A Holder has
committed to this Corporation to purchase pursuant to Articles V and VI and
Sections 7.3 and 7.8 of the Stockholders Agreement and Article II of the
Investment Agreement, by the sum of (i) the Voting Power of this Corporation,
plus (ii) the Votes to be represented by any Voting Securities of this
Corporation such Class A Holder has committed to this Corporation to purchase
from this Corporation pursuant to Articles V and VI and Section 7.3 of the
Stockholders' Agreement and Article II of the Investment Agreement.
"Continuing Director" shall have the meaning set
forth in the Fair Price Provisions.
"Contract" shall mean any loan or credit agreement, note, bond, indenture,
mortgage, deed of trust, lease, franchise, contract, or other agreement,
obligation, instrument or binding commitment of any nature.
"Control" shall mean, with respect to a Person or
Group, any of the following:
(a) ownership by such Person or Group of Votes entitling it to
exercise in the aggregate more than 35 percent of the Voting Power of the
entity in question; or
(b) possession by such Person or Group of the power, directly or
indirectly, (i) to elect a majority of the board of directors (or
equivalent governing body) of the entity in question; or (ii) to direct or
cause the direction of the management and policies of or with respect to
the entity in question, whether through ownership of securities, by
contract or otherwise.
"Conversion Date" shall have the meaning set forth in Section 3(a)(i) of
the Class A Provisions.
"Conversion Price" shall have the meaning set forth in Section 3(b) of the
Class A Provisions.
"Core Businesses" shall mean all businesses in the fields of
telecommunications and information technology and applications, and equipment,
software applications and consumer and business services related thereto or
making use of the technology thereof, including value-added consumer and
business services generated through or as a result of underlying
telecommunications services using all technology (voice, data and image) and
physical transport, network intelligence, and software applications, and cable
television (but not including any programming or content-related activities with
respect thereto).
"Corporation Eligible Notes" shall mean notes of this Corporation,
substantially in the form of "Company Eligible Notes" as provided in the
Stockholders' Agreement, made payable to a Class A Holder as provided in
Sections 7(f) and 7(n) of the Class A Provisions, which, in the written opinion
of an investment banking firm of recognized international standing addressed to
the Class A Holder and reasonably satisfactory to such Class A Holder, would
sell, at the date of their issuance, at a price equal to their principal amount
(taking into account the likely manner and timing of resale by such Class A
Holder), provided that no note of this Corporation shall be deemed to be a
Corporation Eligible Note (a) if it is to be issued at a time when this
Corporation's debt instruments comparable to the notes proposed to be a
Corporation Eligible Note (or such note itself) do not possess at least two of
the three following ratings: Baa3 or better (or a comparable rating if the
rating system is changed) by Moody's Investors Service, Inc.; BBB- or better (or
a comparable rating if the rating system is changed) by Standard and Poor's
Corporation; and BBB- or better (or a comparable rating if the rating system is
changed) by Duff & Phelps Credit Rating Co., and (b) unless
nationally-recognized counsel shall have delivered an opinion in form and
substance reasonably satisfactory to each payee that such notes are enforceable
obligations of this Corporation in accordance with the terms thereof.
"Corporation Joint Venture Termination" shall mean any of
the following:
(a) the sale of Venture Interests by a Sprint Party
pursuant to Section 20.5(a) of the Joint Venture
Agreement; or
(b) the receipt by the FT/DT Parties of the Tie- Breaking Vote due to
a Funding Default, Material Non- Funding Default or Bankruptcy (as such
terms are defined in the Joint Venture Agreement) on the part of any of the
Sprint Parties.
"Director" shall mean a member of the Board of Directors.
"Disposition" means the disposition by Cellular of assets (which may
include the disposition of common equity interests in a Person) that constitute
a business that, prior to such disposition, has been operated as a company or a
division or has otherwise been operated as a separate business.
"Dividend Factor" shall mean 43,118,018, as adjusted as provided in Section
9(c) of the Class A Provisions.
"DT" shall mean Deutsche Telekom AG, an Aktiengesellschaft formed under the
laws of Germany.
"ESMR" shall mean any commercial mobile radio service, and the resale of
such service, of the type authorized under the rules for Specialized Mobile
Radio Services designated under Subpart S of Part 90 of the FCC's rules or
similar Applicable Laws of any other country in effect on the date hereof,
including the networking, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"Europe" shall mean the current geographic area covered by the following
countries and territories located on the European continent, plus, in the case
of France, its territories and possessions located outside the European
continent: Albania, Andorra, Austria, Belgium, Bosnia- Hercegovina, Bulgaria,
Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Gibraltar, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein,
Lithuania, Luxembourg, Macedonia, Malta, Monaco, Montenegro, Netherlands,
Norway, Poland, Portugal, Romania, San Marino, Serbia, Slovakia, Slovenia,
Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, and Vatican City.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the United States Securities and Exchange
Commission promulgated
thereunder.
"Exempt Asset Divestitures" shall mean, with respect to this Corporation
and its Subsidiaries:
(a) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) to joint ventures approved by FT and DT prior to the
Initial Issuance Date;
(b) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) to (i) any entity in exchange for equity interests in
such entity if, after such transaction, this Corporation owns at least 51
percent of both the Voting Power and equity interests in such entity or
(ii) any joint venture that is an operating joint venture not controlled by
any of its principals and in which (x) this Corporation has the right,
acting alone, to disapprove (and thereby prohibit) decisions relating to
acquisitions and divestitures involving more than 20 percent of the Fair
Market Value of such entity's assets, mergers, consolidations and
dissolution or liquidation of such entity and the adoption of such entity's
business plan, and (y) Major Competitors of the Joint Venture do not in the
aggregate own more than 20% of the equity interests or Voting Power; or
(c) transactions in which this Corporation exchanges one or more (i)
local exchange telephone businesses for one or more such businesses or (ii)
public cellular or wireless radio telecommunications service systems for
one or more such systems, provided that this Corporation shall not,
directly or indirectly, receive cash in any such transaction in an amount
greater than 20 percent of the Fair Market Value of the property or
properties Transferred by it;
(d) Transfers of assets, shares or other equity interests (other than
Long Distance Assets) by this Corporation to any of its Subsidiaries, or by
any of its Subsidiaries to this Corporation or any other Subsidiary of this
Corporation;
(e) (i) any Spin-off of equity interests of a wholly-owned Subsidiary
that is not a Subsidiary which, directly or indirectly, owns Long Distance
Assets (for purposes of this definition, the "Spun-off Entity"), provided
that, in the case of a Spin-off which is consummated following the Initial
Issuance Date, the Class A Holders receive securities in the Spun-off
Entity of a separate class with rights no less favorable to the Class A
Holders than those applicable to the Class A Stock set forth in these
Articles of Incorporation and the Bylaws, or (ii) the Cellular Spin-off,
unless a Notice of Abandonment has been delivered;
(f) Transfers of assets (other than Long Distance Assets) of this
Corporation or any of its Subsidiaries that are primarily or exclusively
used in connection with providing information technology or data processing
functions or services (collectively, for purposes of this definition, the
"IT Assets") to any Person that regularly provides information technology
or data processing functions or services on a commercial basis, in
connection with a contractual arrangement (for purposes of this definition,
an "IT Service Contract") pursuant to which such Person undertakes to
provide information technology or data processing functions or services to
this Corporation or any of its Subsidiaries of substantially the same
nature as the services associated with the use of such assets prior to such
Transfer and upon commercially reasonable terms to this Corporation as
determined in good faith by this Corporation, provided that (i) the term of
such IT Service Contract shall be for a period at least as long as the
weighted average useful life of such assets, or this Corporation or such
Subsidiary shall have the right to cause such IT Service Contract to be
renewed or extended for a period at least as long as such weighted average
useful life upon commercially reasonable terms to this Corporation as
determined in good faith by this Corporation, and (ii) the Transfer of such
assets will not materially and adversely affect the operation of this
Corporation; or
(g) Transfers of assets (other than Long Distance Assets or IT Assets)
of this Corporation or any of its Subsidiaries to any Person in connection
with any contractual arrangement (for purposes of this definition, a
"Non-IT Service Contract") pursuant to which such Person undertakes to
provide services to this Corporation or any of its Subsidiaries of
substantially the same nature as the services associated with the use of
such assets prior to such Transfer and upon commercially reasonable terms
to this Corporation as determined in good faith by this Corporation,
provided, that (i) the Fair Market Value of such assets, together with the
Fair Market Value of assets of this Corporation Transferred to such Person
or other Persons in related transactions, do not represent more than five
percent of the Fair Market Value of the assets of this Corporation, (ii)
the Transfer of such assets will not materially and adversely affect the
operation of this Corporation, and (iii) the term of such Non-IT Service
Contract shall be for a period at least as long as the weighted average
useful life of the assets so Transferred or this Corporation or such
Subsidiary has the right to cause such Non-IT Service Contract to be
renewed or extended for a period at least as long as such weighted average
useful life upon commercially reasonable terms to this Corporation as
determined in good faith by this Corporation.
"Exempt Long Distance Asset Divestitures" shall mean, with respect to this
Corporation and its Subsidiaries:
(a) Transfers of Long Distance Assets to a
Qualified Joint Venture;
(b) Transfers of Long Distance Assets to any entity if this
Corporation and its Subsidiaries after such transaction own at least 70
percent of both the Voting Power and equity interests of such entity,
provided that if a Major Competitor of FT or DT or of the Joint Venture
holds equity interests in such entity, such Major Competitor's equity
interests and Votes in such entity as a percentage of the Voting Power of
such entity shall not, directly or indirectly, exceed 20 percent;
(c) Transfers of Long Distance Assets pursuant to an underwritten,
widely-distributed public offering at the conclusion of which this
Corporation and its Subsidiaries shall own at least 51 percent of both the
Voting Power and equity interests in the entity that owns such Long
Distance Assets;
(d) Transfers in the ordinary course of business of Long Distance
Assets determined by this Corporation to be unnecessary for the orderly
operation of this Corporation's business, and sale-leasebacks of Long
Distance Assets and similar financing transactions after which this
Corporation and its Subsidiaries continue in possession and control of the
Long Distance Assets involved in such transaction;
(e) Transfers of Long Distance Assets by this Corporation to any of
its Subsidiaries, or by any of its Subsidiaries to this Corporation or any
other Subsidiary of this Corporation;
(f) Transfers of Long Distance Assets to FT or DT
or any assignee thereof pursuant to the Stockholders'
Agreement;
(g) any Spin-off of equity interests of a wholly-owned Subsidiary
which, directly or indirectly, owns Long Distance Assets (for purposes of
this definition, the "Spun-off Entity"), provided that the Class A Holders
receive securities in the Spun-off Entity of a separate class with rights
no less favorable to the Class A Holders than those applicable to the Class
A Stock set forth in these Articles of Incorporation and the Bylaws;
(h) Transfers of Long Distance Assets of this Corporation or any of
its Subsidiaries that are primarily or exclusively used in connection with
providing information technology or data processing functions or services
(collectively, for purposes of this definition, the "IT Assets") to any
Person that regularly provides information technology or data processing
functions or services on a commercial basis, in connection with a
contractual arrangement (for purposes of this definition, an "IT Service
Contract") pursuant to which such Person undertakes to provide information
technology or data processing functions or services to this Corporation or
any of its Subsidiaries of substantially the same nature as the services
associated with the use of such Long Distance Assets prior to such Transfer
and upon commercially reasonable terms to this Corporation as determined in
good faith by this Corporation, provided that (i) the term of such IT
Service Contract shall be for a period at least as long as the weighted
average useful life of such Long Distance Assets, or this Corporation or
such Subsidiary shall have the right to cause such IT Service Contract to
be renewed or extended for a period at least as long as such weighted
average useful life upon commercially reasonable terms to this Corporation
as determined in good faith by this Corporation, and (ii) the Transfer of
such Long Distance Assets will not materially and adversely affect the
operation of the Long Distance Business. Any such IT Service Contract
involving Transfers of Long Distance Assets, including any renewal or
extension thereof, shall be deemed to be a Long Distance Asset; or
(i) Transfers of Long Distance Assets (other than IT Assets) of this
Corporation or any of its Subsidiaries to any Person in connection with any
contractual arrangement (for purposes of this definition, a "Non-IT Service
Contract") pursuant to which such Person undertakes to provide services to
this Corporation or any of its Subsidiaries of substantially the same
nature as the services associated with the use of such Long Distance Assets
prior to such Transfer and upon commercially reasonable terms to this
Corporation as determined in good faith by this Corporation, provided, that
(i) the Fair Market Value of such Long Distance Assets, together with the
Fair Market Value of Long Distance Assets Transferred to such Person or
other Persons in related transactions, do not represent more than three
percent of the Fair Market Value of the Long Distance Assets of this
Corporation, (ii) the Transfer of such Long Distance Assets will not
materially and adversely affect the operation of the Long Distance
Business, and (iii) the term of such Non-IT Service Contract shall be for a
period at least as long as the weighted average useful life of the Long
Distance Assets so Transferred or this Corporation or such Subsidiary has
the right to cause such Service Contract to be renewed or extended for a
period at least as long as such weighted average useful life upon
commercially reasonable terms to this Corporation as determined in good
faith by this Corporation. Any such Non-IT Service Contract involving
Transfers of Long Distance Assets, including any renewal or extension
thereof, shall be deemed to be a Long Distance Asset.
"Extraordinary Dividend" shall mean, with respect to capital stock of this
Corporation, a cash dividend or other cash distribution, other than (a) a
regular periodic dividend payable in cash; or (b) a dividend payable in
accordance with the terms of the Preferred Stock or the Class A Preference
Stock.
"Fair Market Value" shall mean, with respect to any asset, shares or other
property, the cash price at which a willing seller would sell and a willing
buyer would buy such asset, shares or other property in an arm's-length
negotiated transaction without undue time restraints, as determined in good
faith by a majority of the Independent Directors as certified in a resolution
delivered to all of the Class A Holders.
"Fair Price Condition" shall have the meaning set forth in that section of
ARTICLE SIXTH of these Articles of Incorporation entitled GENERAL PROVISIONS
RELATING TO ALL STOCK.
"Fair Price Provisions" shall mean ARTICLE SEVENTH of these Articles of
Incorporation, and any successor provision thereto.
"FCC" shall mean the Federal Communications Commission.
"FCC Order" shall mean, with respect to any proposed Transfer of Long
Distance Assets by this Corporation, either:
(a) an effective written order or other final action from the FCC
(either in the first instance or upon review or reconsideration) either
declaring that FT and DT are not prohibited by Section 310 from owning such
Long Distance Assets or stating that no such declaration is required, and
as to which no Proceeding shall be pending or threatened that presents a
substantial possibility of resulting in a reversal thereof; or
(b) an effective written order from, or other final action taken by,
the FCC pursuant to delegated authority (either in the first instance or
upon review or reconsideration) either declaring that FT and DT are not
prohibited by Section 310 from owning such Long Distance Assets, or stating
that no such declaration is required, which order or final action shall no
longer be subject to further administrative review, and as to which no
Proceeding shall be pending or threatened that presents a substantial
possibility of resulting in a reversal thereof;
For purposes of clause (b) of this definition, an order from, or other final
action taken by, the FCC pursuant to delegated authority shall be deemed no
longer subject to further administrative review:
(x) if no petition for reconsideration or
application for review by the FCC of such order
or final action has been filed within thirty
days after the date of public notice of such
order or final action, as such 30-day period is
computed and as such date is defined in
Sections 1.104 and 1.4 (or any successor
provisions), as applicable, of the FCC's rules,
and the FCC has not initiated review of such
order or final action on its own motion within
forty days after the date of public notice of the
order or final action, as such 40-day period is
computed and such date is defined in Sections
1.117 and 1.4 (or any successor provisions) of
the FCC's rules; or
(y) if any such petition for reconsideration or application for
review has been filed, or, if the FCC has initiated review of
such order or final action on its own motion, the FCC has issued
an effective written order or taken final action to the effect
set forth in clause (a) above.
"Fix" or "Fixed" shall mean, in relation to the Conversion Price, the
initial establishment of the Conversion Price in accordance with Section 3(b) of
the Class A Provisions.
"Fixed Closing Date" means the date of the first closing to occur under the
Investment Agreement after the date on which the Conversion Price is Fixed.
"France" shall mean the Republic of France, including
French Guiana, Guadeloupe, Martinique and Reunion, and its
territories and possessions.
"FT" shall mean France Telecom, an exploitant public formed under the laws
of France.
"FT/DT Joint Venture Termination" shall mean any of the
following:
(a) the sale of Venture Interests by an FT/DT Party
pursuant to Section 20.5(b), 20.5(c) or 20.5(d) of the
Joint Venture Agreement; or
(b) the receipt by the Sprint Parties of the Tie- Breaking Vote due to
a Funding Default, Material Non- Funding Default or Bankruptcy (as such
terms are defined in the Joint Venture Agreement) on the part of any of the
FT/DT Parties.
"FT/DT Party" shall have the meaning set forth in the
Joint Venture Agreement.
"Fundamental Rights" means the rights of holders of Class A Preference
Stock to elect Directors and the rights of the holders of Class A Preference
Stock provided in Sections 4, 5, 6 and 8 of the Class A Provisions.
"Germany" shall mean the Federal Republic of Germany.
"Governmental Authority" shall mean any federation, nation, state,
sovereign, or government, any federal, supranational, regional, state or local
political subdivision, any governmental or administrative body, instrumentality,
department or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission or other similar dispute resolving panel or body,
and any other entity exercising executive, legislative, judicial, regulatory or
administrative functions of a government, provided that the term "Governmental
Authority" shall not include FT, DT, Atlas or any of their respective
Subsidiaries.
"Group" shall mean any group within the meaning of Section 13(d)(3) of the
Exchange Act.
"Independent Director" shall mean any member of the Board of Directors who
(a) is not an officer or employee of this Corporation, or any Class A Holder, or
any of their respective Subsidiaries, (b) is not a former officer of this
Corporation, or any Class A Holder, or any of their respective Subsidiaries, (c)
does not, in addition to such person's role as a Director, act on a regular
basis, either individually or as a member or representative of an organization,
serving as a professional adviser, legal counsel or consultant to this
Corporation, or any Class A Holder, or their respective Subsidiaries, if, in the
opinion of the Nominating Committee of the Board of Directors of this
Corporation (the "Nominating Committee") or the Board of Directors if a
Nominating Committee is not in existence, such relationship is material to this
Corporation, any Class A Holder, or the organization so represented or such
person, and (d) does not represent, and is not a member of the immediate family
of, a person who would not satisfy the requirements of the preceding clauses
(a), (b) and (c) of this sentence. A person who has been or is a partner,
officer or director of an organization that has customary commercial,
industrial, banking or underwriting relationships with this Corporation, any
Class A Holder, or any of their respective Subsidiaries, that are carried on in
the ordinary course of business on an arms-length basis and who otherwise
satisfies the requirements set forth in clauses (a), (b), (c) and (d) of the
first sentence of this definition, may qualify as an Independent Director,
unless, in the opinion of the Nominating Committee or the Board of Directors if
a Nominating Committee is not in existence, such person is not independent of
the management of this Corporation, or any Class A Holder, or any of their
respective Subsidiaries, or the relationship would interfere with the exercise
of independent judgment as a member of the Board of Directors. A person who
otherwise satisfies the requirements set forth in clauses (a), (b), (c) and (d)
of the first sentence of this definition and who, in addition to fulfilling the
customary director's role, also provides additional services directly for the
Board of Directors and is separately compensated therefor, would nonetheless
qualify as an Independent Director. Notwithstanding anything to the contrary
contained in this definition, each Director as of the date of the execution of
the Investment Agreement who is not an executive officer of this Corporation
shall be deemed to be an Independent Director hereunder.
"Initial Issuance Date" shall mean the first date that any shares of Class
A Stock are issued.
"Investment Agreement" shall mean the Investment Agreement, dated as of
July 31, 1995, among FT, DT and this Corporation (and all exhibits and schedules
thereto), as it may be amended or supplemented from time to time.
"Investment Completion Date" shall mean the date of the Supplemental
Preference Stock Closing (as such term is defined in the Investment Agreement)
or the Class A Common Issuance Date, whichever shall first occur.
"Investment Documents" means the Investment Agreement
and the Stockholders' Agreement.
"Joint Venture" shall mean the joint venture formed by FT, DT, this
Corporation and Sprint Sub, as provided in the Joint Venture Agreement.
"Joint Venture Agreement" shall mean the Joint Venture Agreement, dated as
of June 22, 1995 among FT, DT, Sprint Sub, and this Corporation.
"JV Entity" shall have the meaning set forth in the Joint
Venture Agreement.
"Lien" shall mean any mortgage, pledge, security interest, adverse claim,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
similar Applicable Law of any jurisdiction) or any other type of preferential
arrangement for the purpose, or having the effect, of protecting a creditor
against loss or securing the payment or performance of an obligation.
"Lien Transfer" shall mean the granting of any Lien on any Long Distance
Asset, other than:
(a) a lien securing purchase money indebtedness that does not have a
term longer than the estimated useful life of such Long Distance Asset;
(b) Liens or other comparable arrangements relating
to the financing of accounts receivable; and
(c) Liens securing any other indebtedness for borrowed money, provided
that (i) the amount of such indebtedness, when added to the aggregate
amount of purchase money indebtedness referred to in clause (a) above, does
not exceed 30% of the total book value of the Long Distance Assets as at
the date of the most recently published balance sheet of this Corporation,
(ii) the indebtedness secured by such Liens is secured only by Liens on
Long Distance Assets, (iii) the face amount of such indebtedness does not
exceed the book value of the Long Distance Assets subject to such Liens,
and (iv) such indebtedness is for a term no longer than the estimated
useful life of the Long Distance Assets subject to such Liens.
"Liquidation Preference" shall mean, at a date of determination, the
quotient of (a) the sum of (i) the products of (x) each share of Class A
Preference Stock (other than Section 7(i) Preference Shares or shares of Class A
Preference Stock purchased from this Corporation at the Optional Shares Closing
(as such term is defined in the Investment Agreement) or pursuant to Article V
or VI of the Stockholders' Agreement), times (y) the liquidation value thereof
for each such share, (ii) the aggregate purchase price of shares of Class A
Preference Stock purchased from this Corporation at the Optional Shares Closing
or pursuant to Article V or VI of the Stockholders' Agreement, and (iii) the
Section 7(i) Aggregate Purchase Price, divided by (b) the number of shares of
Class A Preference Stock outstanding, in each case immediately prior to the date
of determination, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, on such date of determination.
"Local Exchange Division" shall mean the Local
Communications Services Division of this Corporation.
"Long Distance Assets" shall mean:
(a) the assets reflected in this Corporation's balance sheet for the
year ended December 31, 1994 as included in the Long Distance Division;
(b) any assets acquired by this Corporation or any of its Subsidiaries
following December 31, 1994 that are reflected in this Corporation's
balance sheet as included in the Long Distance Division;
(c) any assets of this Corporation or any of its Subsidiaries that are
not reflected in this Corporation's balance sheet for the year ended
December 31, 1994 as included in the Long Distance Division, which after
December 31, 1994 are transferred by this Corporation or any of its
Subsidiaries to, or reclassified by this Corporation or any of its
Subsidiaries as part of, the Long Distance Division;
(d) any assets acquired by this Corporation after December 31, 1994
that are used or held for use primarily for the benefit of the Long
Distance Business; and
(e) any assets referred to in clauses (a) through (c) above that are
used or held for use primarily for the benefit of the Long Distance
Business which are transferred or reclassified by this Corporation or any
of its Subsidiaries outside of the Long Distance Division, but which
continue to be owned by this Corporation or any of its Subsidiaries;
provided that the term "Long Distance Assets" shall not include (i) any assets
that are used or held for use primarily for the benefit of any Non-Long Distance
Business, or (ii) any other assets reflected in this Corporation's balance sheet
for the year ended December 31, 1994 as included in the Cellular and Wireless
Division or the Local Exchange Division (other than as such assets in the
Cellular and Wireless Division or the Local Exchange Division may be transferred
or reclassified in accordance with paragraph (c) of this definition).
"Long Distance Business" shall mean all long distance telecommunications
activities and services of this Corporation and its Subsidiaries at the relevant
time, including (but not limited to) all long distance transport services,
switching and value-added services for voice, data, video and multimedia
transmission, migration paths and intelligent overlapping architectures,
provided that the term "Long Distance Business" shall not include any activities
or services primarily related to any Non-Long Distance Business.
"Long Distance Division" shall mean the Long Distance
Communications Services Division of this Corporation.
"Lower Threshold Sprint Price" shall mean $34.982 (subject to adjustment as
provided in the Class A Provisions).
"Major Competitor" shall mean (a) with respect to FT or DT, a Person that
materially competes with a major portion of the telecommunications services
business of FT or DT in Europe or a Person that has taken substantial steps to
become such a Major Competitor and which FT or DT has reasonably concluded, in
its good faith judgment, will be such a competitor in the near future in France
or Germany, provided that FT and/or DT furnish in writing to this Corporation
reasonable evidence of the occurrence of such steps; (b) with respect to this
Corporation, a Person that materially competes with a major portion of the
telecommunications services business of this Corporation in North America, or a
Person that has taken substantial steps to become such a Major Competitor and
which this Corporation has reasonably concluded, in its good faith judgment,
will be such a competitor in the near future in the United States of America
provided that this Corporation furnish in writing to each Class A Holder
reasonable evidence of the occurrence of such steps; and (c) with respect to the
Joint Venture, a Person that materially competes with a major portion of the
telecommunications services business of the Joint Venture, or a Person that has
taken substantial steps to become such a Major Competitor and which FT, DT or
this Corporation has reasonably concluded, in its good faith judgment, will be
such a competitor in the near future, provided that FT, DT or this Corporation
furnish in writing to the other two of them reasonable evidence of the
occurrence of such steps.
"Major Competitor Transaction" shall have the meaning set forth in Section
6(a) of the Class A Provisions.
"Major Issuance" shall mean any transaction, including, but not limited to,
a merger or business combination, resulting, directly or indirectly, in the
issuance (or sale from treasury) in connection with such transaction of Voting
Securities of this Corporation with a number of Votes equal to or greater than
30 percent of the Voting Power of this Corporation immediately prior to such
issuance.
"Market Capitalization" shall mean, with respect to this Corporation at any
date, the sum of the average Market Price over the immediately preceding 20
Business Days of each share of outstanding capital stock of this Corporation,
securities convertible into such capital stock and options, warrants or other
rights to acquire such capital stock.
"Market Price" shall mean with respect to a security on any date, the
Closing Price of such security on the Trading Day immediately prior to such
date. The Market Price shall be deemed to be equal to (a) in the case of a share
of Class A Common Stock, the Market Price of a share of Common Stock; and (b) in
the case of a share of Class A Preference Stock, the Liquidation Preference. The
Market Price of any options, warrants, rights or other securities convertible
into or exercisable for Class A Common Stock (except for the Class A Preference
Stock) shall be equal to the Market Price of options, warrants, rights or other
securities convertible into or exercisable for Common Stock upon the same terms
and otherwise containing the same terms as such options, warrants, rights or
other securities convertible into or exercisable for Class A Common Stock.
"Maximum Price" shall mean, subject to adjustment as provided in the Class
A Provisions, the lesser of (a) 125% of the Average Sprint Price for the
relevant trading period provided for herein and (b) $48.704.
"Minimum Dividend Amount" shall mean $0.25 per share per
quarter.
"Minimum Price" shall mean, subject to adjustment as provided in the Class
A Provisions, 135% of the Average Sprint Price for the relevant period as
provided for herein.
"Modified Lower Threshold" shall mean, subject to adjustment as provided in
the Class A Provisions, the quotient of (A) the sum of (i) the product of the
Lower Threshold Sprint Price multiplied by that number of days prior to the
Cellular Spin-off Date in any Spin-off Trading Period and (ii) the product of
the New Lower Threshold Sprint Price multiplied by that number of days beginning
on and including the Cellular Spin-off Date in such Spin-off Trading Period,
divided by (B) 20.
"Modified New Lower Threshold" shall mean, subject to adjustment as
provided in the Class A Provisions, the quotient of (A) the sum of (i) the
product of the Second Anniversary Lower Threshold Sprint Price multiplied by
that number of days prior to the Cellular Spin-off Date in any Spin-off Trading
Period and (ii) the product of 93.308% of the New Lower Threshold Sprint Price
multiplied by that number of days beginning on and including the Cellular
Spin-off Date in such Spin-off Trading Period, divided by (B) 20.
"NASDAQ" means the National Association of Securities
Dealers, Inc. Automated Quotations System.
"Net Cellular Acquisition Amount" shall mean, subject to adjustment as
provided in the Class A Provisions, the difference, which may be a negative
number, of the aggregate Purchase Prices paid by Cellular for Acquisitions after
June 22, 1995, minus the aggregate value of the Sales Prices received by
Cellular in connection with Dispositions after June 22, 1995, such difference to
be calculated on a per share basis using the number of outstanding shares of
Common Stock immediately after the Cellular Spin-off Date.
"Net Cellular Indebtedness" shall mean, subject to adjustment as provided
in the Class A Provisions, the amount of indebtedness for borrowed money of
Cellular outstanding immediately after the Cellular Spin-off Date, minus the
amount of Cellular's cash at such time, such amount to be calculated on a per
share basis using the number of outstanding shares of Common Stock immediately
after the Cellular Spin-off Date.
"New Lower Threshold Sprint Price" shall mean, subject to adjustment as
provided in the Class A Provisions, the Lower Threshold Sprint Price minus .9630
times the Cellular Spin-off Reduction Factor.
"New Maximum Price" shall mean, subject to adjustment as provided in the
Class A Provisions, (a) if the Cellular Spin- off Date occurs prior to the First
Closing for the relevant period specified herein, the lesser of (i) 125% of the
Average Sprint Price for the relevant period specified herein and (ii) $48.704
minus 125% of the Cellular Spin-off Reduction Factor and (b) if the Cellular
Spin-off Date occurs after the First Closing, the Maximum Price minus the
product of (i) the lesser of (x) 1.25 and (y) the quotient of $48.704 divided by
the Average Sprint Price used in calculating such Maximum Price, multiplied by
(ii) the Cellular Spin-off Reduction Factor.
"New Minimum Price" shall mean, subject to adjustment as provided in the
Class A Provisions, the Minimum Price minus 135% of the Cellular Spin-off
Reduction Factor.
"New Target Price" shall mean, subject to adjustment as provided in the
Class A Provisions, the Target Price minus 130% of the Cellular Spin-off
Reduction Factor, provided that, if the Cellular Spin-off Date does not occur
prior to the Initial Issuance Date and the Average Sprint Price determined at
the Initial Issuance Date is within the Sprint Price Range, the New Target Price
shall be the Target Price minus the product of (a) the quotient of $47.225
divided by such Average Sprint Price, multiplied by (b) the Cellular Spin-off
Reduction Factor.
"New Upper Threshold Sprint Price" shall mean, subject to adjustment as
provided in the Class A Provisions, the Upper Threshold Sprint Price minus 1.04
times the Cellular Spin-off Reduction Factor.
"Non-Long Distance Business" shall mean (a) the ownership of any equity or
other interests in the Joint Venture or any of the JV Entities; the enforcement
or performance of any of the rights or obligations of this Corporation or any
Subsidiary of this Corporation pursuant to the Joint Venture Agreement; or any
activities or services of the Joint Venture or any of the JV Entities; (b) the
Triple Play Activities; (c) any activities or services primarily related to the
provision of subscriber connections to a local exchange or switch providing
access to the public switched telephone network; (d) any activities or services
primarily related to the provision of exchange access services for the purpose
of originating or terminating long distance telecommunications services; (e) any
activities or services primarily related to the resale by the Local Exchange
Division of long distance telecommunications services of this Corporation or
other carriers; (f) any activities or services primarily related to the
provision of inter-LATA long distance telecommunications services that are
incidental to the local exchange services business of the Local Exchange
Division; (g) any activities or services primarily related to the provision of
intra-LATA long distance telecommunications services; (h) any activities or
services (whether local, intra-LATA or inter-LATA) primarily related to the
provision of cellular, PCS, ESMR or paging services, mobile telecommunications
services or any other voice, data or voice/data wireless services, whether fixed
or mobile, or related to telecommunications services provided through
communications satellite systems (whether low, medium or high orbit systems);
and (i) the use of the "Sprint" brand name or any other brand names, trade names
or trademarks owned or licensed by this Corporation or any of its Subsidiaries.
"North America" shall mean the current geographic area
covered by the following countries: Canada, the United States
of Mexico and the United States of America.
"Notice of Abandonment" shall have the meaning set forth in Section 3(a)(i)
of the Class A Provisions, provided that if the Cellular Spin-off Date does not
occur on or prior to the fifth anniversary of the Initial Issuance Date, the
Company shall be conclusively deemed to have delivered a Notice of Abandonment
on such fifth anniversary.
"PCS" shall mean a radio communications system of the type authorized under
the rules for broadband personal communications services designated as Subpart E
of Part 24 of the FCC's rules or similar Applicable Laws of any other country,
including the network, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"Percentage Ownership Interest" shall mean, with respect to any Person,
that percentage of the Voting Power of this Corporation represented by Votes
associated with the Voting Securities of this Corporation owned of record by
such Person or by its nominees.
"Per Share Common Dividend" shall have the meaning set forth in Section
2(a)(ii) of the Class A Provisions.
"Per Share Distributed Value" shall have the meaning set forth in Section
3(b)(vii) of the Class A Provisions.
"Person" shall mean an individual, a partnership, an association, a joint
venture, a corporation, a business, a trust, any entity organized or existing
under Applicable Law, an unincorporated organization or any Governmental
Authority.
"Preferred Stock" shall have the meaning set forth in ARTICLE SIXTH of
these Articles of Incorporation.
"Preferred Stock Director" shall have the meaning set forth in ARTICLE
FIFTH of these Articles of Incorporation.
"Proceeding" shall mean any action, litigation, suit, proceeding or formal
investigation or review of any nature, civil, criminal, regulatory or otherwise,
before any Governmental Authority.
"Purchase Price" shall mean, as to Acquisitions by Cellular, the amount
paid in cash plus the Fair Market Value of non-cash consideration paid to effect
such Acquisition, provided that indebtedness assumed by Cellular shall not be
included in the Purchase Price paid in respect of any Acquisition to the extent
that it is included in Net Cellular Indebtedness.
"Qualified Joint Venture" shall have the meaning set forth in Article I of
the Investment Agreement.
"Qualified Stock Purchaser" shall mean a Person that (a) FT and DT
reasonably believe has the legal and financial ability to purchase shares of
Class A Stock from this Corporation in accordance with Article VI of the
Stockholders' Agreement and (b) would not be a Major Competitor of this
Corporation or of the Joint Venture immediately following such purchase.
"Qualified Stock Purchaser Standstill Agreement" shall have the meaning set
forth in the Standstill Agreement.
"Qualified Subsidiary" shall have the meaning set forth
in the Investment Agreement.
"Qualified Subsidiary Standstill Agreement" shall have the meaning set
forth in the Investment Agreement.
"Redemption Date" shall mean the date fixed by the Board of Directors for
the redemption of any shares of capital stock of this Corporation pursuant to
Section 2 of the provisions of ARTICLE SIXTH of these Articles of Incorporation
entitled GENERAL PROVISIONS RELATING TO ALL STOCK.
"Redemption Securities" shall mean any debt or equity securities of this
Corporation, any of its Subsidiaries, or any combination thereof having such
terms and conditions as shall be approved by the Board of Directors and which,
together with any cash to be paid as part of the redemption price pursuant to
subsection (b) of Section 2 of the provisions of ARTICLE SIXTH of these Articles
of Incorporation entitled GENERAL PROVISIONS RELATING TO ALL STOCK or Section
3(a)(i) of the Class A Provisions, in the opinion of an investment banking firm
of recognized national standing selected by the Board of Directors (which may be
a firm which provides other investment banking, brokerage or other services to
this Corporation), have a Market Price, at the time notice of redemption is
given pursuant to subsection (d) of Section 2 of the provisions of ARTICLE SIXTH
of these Articles of Incorporation entitled GENERAL PROVISIONS RELATING TO ALL
STOCK of Section 3(a)(i) of the Class A Provisions, at least equal to the
redemption price required to be paid by subsection (a) of such Section 2 or
Section 3(a)(i) of the Class A Provisions.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated the Initial Issuance Date, among FT, DT and this Corporation,
as it may be amended or supplemented from time to time.
"Requested Sale" shall have the meaning set forth in Section 3(a)(i) of the
Class A Provisions.
"Rights Agreement" shall mean the Rights Agreement, dated as of August 8,
1989, between this Corporation and UMB Bank, n.a., as amended on June 4, 1992
and as of July 31, 1995, and as it may be amended or supplemented from time to
time.
"Sales Price" shall mean, as to any Disposition by Cellular, the amount
received in cash plus the Fair Market Value of non-cash consideration received
to effect such Disposition, provided that any indebtedness assumed or retained
by Cellular shall not be deducted from the Sales Price to the extent that it is
included in Net Cellular Indebtedness.
"Second Anniversary Lower Threshold Sprint Price" shall mean, subject to
adjustment as provided in the Class A Provisions, $32.641.
"Section 310" shall have the meaning set forth in Section 2(a) of ARTICLE
FIFTH of these Articles of Incorporation.
"Section 7(i) Aggregate Purchase Price" means the aggregate purchase price
paid for shares of Common Stock purchased by the Class A Holders which are
converted into Class A Preference Stock pursuant to Section 7(i) of the Class A
Provisions.
"Section 7(i) Preference Shares" shall mean shares of Class A Preference
Stock acquired by the Class A Holders upon conversion of shares of Common Stock
pursuant to Section 7(i) of the Class A Provisions.
"Shares" shall mean (a) shares of Class A Stock, Common Stock or any other
Voting Securities of this Corporation, (b) securities of this Corporation
convertible into Voting Securities of this Corporation and (c) options, warrants
or other rights to acquire such Voting Securities, but in the case of clause (c)
excluding any rights of the Class A Holders or FT and DT to acquire Voting
Securities of this Corporation pursuant to the Investment Agreement and the
Stockholders' Agreement (but not excluding any Voting Securities received upon
the exercise of such rights).
"Spin-off" shall mean any spin-off or other pro rata distribution of equity
interests of a wholly-owned direct or indirect Subsidiary of this Corporation to
the stockholders of this Corporation, provided that the term "Spin-off" shall
not include the Cellular Spin-off unless a Notice of Abandonment has been
delivered.
"Spin-off Trading Period" shall mean any 20 consecutive Trading Day period
which begins on or after the 19th Trading Day before the Cellular Spin-off Date
or which ends on or before the 18th Trading Day after the Cellular Spin-off
Date.
"Sprint Party" shall have the meaning set forth in the
Joint Venture Agreement.
"Sprint Price Range" shall mean from and including the Lower Threshold
Sprint Price to and including the Upper Threshold Sprint Price.
"Sprint Sub" shall mean Sprint Global Venture, Inc.
"Standstill Agreement" shall mean the Standstill Agreement, dated as of
July 31, 1995, among FT, DT and this Corporation, as it may be amended or
supplemented from time to time.
"Stockholders' Agreement" shall mean the Stockholders' Agreement, dated as
of the Initial Issuance Date, among FT, DT and this Corporation (and all
exhibits thereto), as it may be amended or supplemented from time to time.
"Strategic Investor" shall have the meaning set forth in
the Investment Agreement.
"Strategic Merger" shall mean a merger or other business combination
involving this Corporation (a) in which the Class A Holders are entitled to
retain or receive, as the case may be, voting equity securities of the surviving
parent entity in exchange for or in respect of (by conversion or otherwise) such
Class A Stock, with an aggregate Fair Market Value equal to at least 75% of the
sum of (i) the Fair Market Value of all consideration which such Class A Holders
have a right to receive with respect to such merger or other business
combination, and (ii) if this Corporation is the surviving parent entity, the
Fair Market Value of the equity securities of the surviving parent entity which
the Class A Holders are entitled to retain, (b) immediately after which the
surviving parent entity is an entity whose voting equity securities are
registered pursuant to Section 12(b) or Section 12(g) of the Exchange Act or
which otherwise has any class or series of its voting equity securities held by
at least 500 holders and (c) immediately after which no Person or Group (other
than the Class A Holders) owns Voting Securities of such surviving parent entity
with Votes equal to more than 35 percent of the Voting Power of such surviving
parent entity.
"Subsidiary" shall mean, with respect to any Person (the "Parent"), any
other Person in which the Parent, one or more direct or indirect Subsidiaries of
the Parent, or the Parent and one or more of its direct or indirect Subsidiaries
(a) have the ability, through ownership of securities individually or as a
group, ordinarily, in the absence of contingencies, to elect a majority of the
directors (or individuals performing similar functions) of such other Person,
and (b) own more than 50% of the equity interests, provided that Atlas shall be
deemed to be a Subsidiary of each of FT and DT.
"Supervoting Powers" shall mean, as to the capital stock and debt
securities of this Corporation:
(a) Common Stock entitled to more than one Vote per
share (other than pursuant to the Rights Agreement); or
(b) Voting Securities of this Corporation other than Common Stock
entitled to a number of Votes per share or unit, as the case may be,
greater than the quotient of (i) the price per share or unit, as the case
may be, at which such security will be issued by this Corporation divided
by (ii) the Market Price per share of Common Stock on the date of issuance.
"Target Price" shall mean $47.225 (subject to adjustment as provided in the
Class A Provisions).
"Tie-Breaking Vote" shall have the meaning set forth in Section 18.1(a) of
the Joint Venture Agreement, and shall include any successor provision thereto.
"Total Requested Sale Proceeds" shall have the meaning set forth in Section
3(a)(i) of the Class A Provisions.
"Trading Day" shall mean, with respect to any security, any day on which
the principal national securities exchange on which such security is listed or
admitted to trading or NASDAQ, if such security is listed or admitted to trading
thereon, is open for the transaction of business (unless such trading shall have
been suspended for the entire day) or, if such security is not listed or
admitted to trading on any national securities exchange or NASDAQ, 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.
"Transfer" shall mean any act pursuant to which, directly or indirectly,
the ownership of the assets or securities in question is sold, transferred,
conveyed, delivered or otherwise disposed, but shall not include (a) any grant
of Liens, (b) any conversion or exchange of any security of this Corporation
pursuant to a merger or other business combination involving this Corporation,
(c) any transfer of ownership of assets to the surviving entity in a Strategic
Merger or pursuant to any other merger or other business combination not
prohibited by the Class A Provisions, or (d) any foreclosure or other execution
upon any of the assets of this Corporation or any of its Subsidiaries other than
foreclosures resulting from Lien Transfers.
"Treaty Benefit" shall mean:
(a) the 5% rate of dividend withholding (or any
successor rate applicable to non-portfolio
investments);
(b) the exemption from income tax with respect to
dividends paid or profits distributed by this
Corporation;
(c) the exemption from income tax with respect to gains or profits derived
from the sale, exchange, or disposal of stock in this Corporation; or
(d) the exemption from taxes on capital with
respect to stock in this Corporation;
under, in the case of (a), (b), (c) and (d) above, either (i) the relevant
income tax treaty between the United States and France, in the case of FT,
and the United States and Germany, in the case of DT, or (ii) any
provisions of French statutory law, in the case of FT, or German statutory
law, in the case of DT, which refers to, or is based on or derived from,
any provision of such treaty, or
(e) any other favorable treaty benefit or statutory
benefit, that specifically requires the ownership of
a certain amount of voting power or voting interest
in this Corporation, under a provision of the
relevant income tax treaty between the United States
and France or the statutory laws of France, in the
case of FT, or the relevant income tax treaty
between the United States and Germany or the
statutory laws of Germany, in the case DT, provided
that the chief tax officer of FT or DT certifies
that such benefit is reasonably expected to provide
to FT or DT, as the case may be, combined tax
savings in the year such certification is made and
in future years of at least U.S. $15 million.
"Triple Play Activities" shall mean (a) the ownership of any equity or
other interests in MajorCo, L.P. or any of its successors or Affiliates; the
enforcement or performance of any of the rights or obligations of this
Corporation or any Subsidiary of this Corporation pursuant to the Agreement of
Limited Partnership of MajorCo, L.P. or any other agreement or arrangement
contemplated thereby, except to the extent relating to the provision of services
by this Corporation as the long distance telecommunications provider to MajorCo,
L.P.; or any activities or services of MajorCo, L.P. or any of its successors or
Affiliates; (b) the ownership of any equity or other interests in any Teleport
Entity (as that term is defined in the Contribution Agreement (the "Contribution
Agreement"), dated as of March 28, 1995, by and among TCI Network Services,
Comcast Telephony Services, Cox Telephony Partnership, MajorCo, L.P. and
NewTelco, L.P.); or any activities or services of any Teleport Entity or any of
their respective successors or Affiliates; and (c) the ownership of any equity
or other interests in PhillieCo, L.P., or any of its successors or Affiliates;
the enforcement or performance of any of the rights or obligations of this
Corporation or any Subsidiary of this Corporation pursuant to the Amended and
Restated Agreement of Limited Partnership of PhillieCo, L.P., dated as of
February 17, 1995, or any other agreement or arrangement contemplated thereby,
except to the extent relating to the provision of services by this Corporation
as the long distance telecommunications provider to PhillieCo, L.P.; or any
activities or services of PhillieCo, L.P. or any of its successors or
Affiliates.
"Upper Threshold Sprint Price" shall mean, subject to adjustment as
provided in the Class A Provisions, $37.780.
"Venture Interests" shall have the meaning set forth in
the Joint Venture Agreement.
"Vote" shall mean, with respect to any entity, the ability to cast a vote
at a stockholders', members' or comparable meeting of such entity with respect
to the election of directors, managers or other members of such entity's
governing body, or the ability to cast a general partnership or comparable vote,
provided that with respect to this Corporation only, the term "Vote" shall mean
the ability to exercise general voting power (as opposed to the exercise of
special voting or disapproval rights such as those set forth in the Class A
Provisions) with respect to matters other than the election of directors at a
meeting of the stockholders of this Corporation.
"Voting Power" shall mean, with respect to any entity as at any date, the
aggregate number of Votes outstanding as at such date in respect of such entity.
"Voting Securities" shall mean, with respect to an entity, any capital
stock or debt securities of such entity if the holders thereof are ordinarily,
in the absence of contingencies, entitled to a Vote, even though the right to
such Vote has been suspended by the happening of such a contingency, and in the
case of this Corporation, shall include, without limitation, the Common Stock
and the Class A Stock, but shall not include any shares issued pursuant to the
Rights Agreement to the extent such issuance is caused by action of a Class A
Holder.
"Weighted Average Price" shall mean the weighted average per unit price
paid by the purchasers of any capital stock, debt instrument or security of this
Corporation. In determining the price of shares of Common Stock or Class A
Common Stock issued upon the conversion or exchange of securities or issued upon
the exercise of options, warrants or other rights, the consideration for such
shares shall be deemed to include the price paid to purchase the convertible
security or the warrant, option or other right, plus any additional
consideration paid upon conversion or exercise. If any portion of the price paid
is not cash, the Independent Directors (acting by majority vote) shall determine
in good faith the Fair Market Value of such non-cash consideration. If any new
shares of Common Stock are issued together with other shares or securities or
other assets of this Corporation for consideration which covers both the new
shares and such other shares, securities or other assets, the portion of such
consideration allocable to such new shares shall be determined in good faith by
the Independent Directors (acting by majority vote), in each case as certified
in a resolution sent to all Class A Holders.
13. Notices. All notices made by this Corporation pursuant to the Class A
Provisions shall be made in writing and any such notice shall be deemed
delivered when the same has been delivered in person to, or transmitted by telex
or telecopier to, or seven days after it has been sent by air mail to the
addresses of, all of the Class A Holders as indicated on the stock transfer
books of this Corporation. Communications by telex or telecopier also shall be
sent concurrently by air mail, but shall in any event be effective as stated
above.
14. No Other Beneficiaries. The Class A Provisions are intended for the
benefit of the Class A Holders only, and nothing in the Class A Provisions is
intended or will be construed to confer upon or to give any third party or other
stockholder of this Corporation any rights or remedies by virtue hereof. Any
term of the Class A Provisions may be waived by the holders of at least
two-thirds of the outstanding shares of Class A Stock, voting together as a
single class.
GENERAL PROVISIONS RELATING TO PREFERRED STOCK
1. The Preferred Stock may be issued from time to time in one or more
series, each of such series to have such voting powers (full or limited or
without voting powers) designation, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof as are stated and expressed herein, or in a resolution or resolutions
providing for the issue of such series adopted by the Board of Directors as
hereinafter provided.
2. Authority is hereby granted to the Board of Directors, subject to the
provisions of this ARTICLE SIXTH, to create one or more series of Preferred
Stock and, with respect to each series, to fix or alter as permitted by law, by
resolution or resolutions providing for the issue of such series:
(a) the number of shares to constitute such series
and the distinctive designation thereof;
(b) the dividend rate on the shares of such series, the dividend payment
dates, the periods in respect of which dividends are payable
("dividend periods") whether such dividends shall be cumulative, and
if cumulative, the date or dates from which dividends shall
accumulate;
(c) whether or not the shares of such series shall be redeemable, and, if
redeemable, on what terms, including the redemption prices which the
shares of such series shall be entitled to receive upon the redemption
thereof;
(d) whether or not the shares of such series
shall be subject to the operation of
retirement or sinking funds to be applied to
the purchase or redemption of such shares
for retirement and, if such retirement or
sinking fund or funds be established, the
annual amount thereof and the terms and
provisions relative to the operation
thereof;
(e) whether or not the shares of such series
shall be convertible into, or exchangeable
for, shares of any other class or classes or
of any other series of the same or any other
class or classes of stock of the Corporation
and the conversion price or prices or rate or
rates, or the rate or rates at which such
exchange may be made, with such adjustments,
if any, as shall be stated and expressed or
provided in such resolution or resolutions;
(f) the voting power, if any, of the shares of
such series; and
(g) such other terms, conditions, special rights and protective provisions
as the Board of Directors may deem advisable.
3. No dividend shall be declared and set apart for payment on any series of
Preferred Stock in respect of any dividend period unless there shall likewise be
or have been paid, or declared and set apart for payment, on all shares of
Preferred Stock of each other series entitled to cumulative dividends at the
time outstanding which rank equally as to dividends with the series in question,
dividends ratably in accordance with the sums which would be payable on the said
shares through the end of the last preceding dividend period if all dividends
were declared and paid in full.
4. If upon any dissolution of the Corporation, the assets of the
Corporation distributable among the holders of any one or more series of
Preferred Stock which are (i) entitled to a preference over the holders of the
Common Stock upon such dissolution, and (ii) rank equally in connection with any
such distribution, shall be insufficient to pay in full the preferential amount
to which the holders of such shares shall be entitled, then such assets, or the
proceeds thereof, shall be distributed among the holders of each such series of
the Preferred Stock ratably in accordance with the sums which would be payable
on such distribution if all sums payable were discharged in full.
5. In the event that the Preferred Stock of any series shall be redeemable,
then, at the option of the Board of Directors, the Corporation may at such time
or times as may be specified by the Board of Directors as provided in paragraph
(c) of Section 2 of this ARTICLE SIXTH redeem all, or any number less than all,
of the outstanding shares of such series at the redemption price thereof and on
the other terms fixed herein or by the Board of Directors as provided in said
paragraph (c) (the sum so payable upon any redemption of preferred Stock being
herein referred to as the "redemption price").
PREFERRED STOCK-FIRST SERIES, CONVERTIBLE
Amount
The number of shares to constitute the initial series of Preferred Stock
shall be 1,742,853 and the designation thereof shall be Preferred Stock-First
Series (hereafter "First Series").
Dividends
Holders of shares of the First Series will be entitled to receive
cumulative cash dividends at the quarterly rate of $.22-1/2 per share for six
consecutive quarters commencing in September, 1967 (the specific date to
coincide with the date the Corporation pays its third quarter Common Stock
dividend); thereafter the cumulative quarterly dividend rate will be $.37-1/2
per share. All such payments will be made out of funds legally available for the
payment of such dividends, when and as declared, before any distribution shall
be made on the Corporation's Common Stock.
Conversion Rights
The holders of shares of the First Series may convert any or all of said
shares into Common Stock at any time after December 7, 1989, on the basis of
three (3) shares of the Common Stock of the Corporation for each share of the
First Series. Such ratio is herein referred to as the "conversion rate."
The conversion rate shall be subject to the following adjustments:
A. In case the Corporation shall (i) pay a dividend in
Common Stock or (ii)subdivide the outstanding shares
of Common Stock into a greater number of shares of
Common Stock or combine the outstanding shares of
Common Stock into a smaller number of shares of
Common Stock, the conversion rate in effect
immediately prior to such stock dividend,
subdivision or combination shall be proportionately
increased or decreased as the case may be.
B. No such adjustment shall be required, however, if
the aggregate number of shares of Common Stock
issued as dividends on the Common Stock since the
most recent previous adjustment does not exceed 5%
of the total number of shares of Common Stock
outstanding; provided, however, that when the
aggregate number of shares of Common Stock issued as
dividends since the most recent previous adjustment
shall exceed the foregoing 5%, the conversion rate
shall be increased in proportion to the same
percentage or ratio that the aggregate of all such
dividends in shares of Common Stock since the most
recent previous adjustment bears to the total number
of shares of Common Stock outstanding.
C. In the event the Corporation shall fix a record date
for the purpose of determining the holders of shares
of Common Stock entitled to receive any dividend in
Common Stock, the conversion rate or any subsequent
conversion rate in effect immediately prior to the
record date fixed for the determination of
shareholders entitled to such dividend shall be
proportionately increased (subject to the limitation
of subparagraph (B) above) and such adjustment will
become effective immediately after the opening of
business on the day following such record date.
D. The conversion rate shall not be adjusted by reason of: (i) the
issuance of shares pursuant to options and stock purchase agreements
granted or entered into with officers or employees of the Corporation;
and (ii) the issuance of shares for cash or in exchange for assets or
stock of another company.
E. Any adjustment in the conversion rate as herein provided shall be to
the nearest, or if there shall be no nearest, then to the next lower,
one-hundredth of a share of Common Stock, and shall remain in effect
until further adjustment as required hereunder.
F. In case the Corporation shall be recapitalized, or
shall be consolidated with or merged into, or shall
sell or transfer its property and assets as, or
substantially as, an entirety to any other
corporation, proper provisions shall be made as a
part of the terms of such recapitalization,
consolidation, merger, sale or transfer whereby the
holder of any shares of the First Series at the time
outstanding immediately prior to such event shall
thereafter be entitled to such conversion rights,
with respect to securities of the Corporation
resulting from such recapitalization, consolidation
or merger, or to which such sale or transfer shall
be made, as shall be substantially equivalent to the
conversion rights herein provided for.
G. No fraction of a share of Common Stock shall be
issued upon any conversion. In lieu of the fraction
of a share to which the holder of shares of the
First Series surrendered for conversion would
otherwise be entitled, such holder shall receive, as
soon as practicable after the date of conversion, an
amount in cash equal to the same fraction of the
market value of a full share of Common Stock. For
the purposes of this subparagraph, the market value
of a share of Common Stock shall be the last
recorded sale price of such a share on the New York
Stock Exchange on the day immediately preceding the
date upon which such shares of such series are
surrendered for conversion, or if there be no such
recorded sale price on such date, the last quoted
bid price per share of Common Stock on such Exchange
at the close of business on such date.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the
Corporation the holders of the First Series will be entitled to receive out of
the assets of the Corporation available for distribution to stockholders, before
any distribution of the assets shall be made to the holders of Common Stock, the
sum of $42.50 per share if such liquidation is voluntary and the sum of $40.00
per share if such liquidation is involuntary, plus in each case any accumulated
unpaid dividends. If upon any liquidation, dissolution or winding up of the
Corporation the amounts payable with respect to the Preferred Stock are not paid
in full, the holders of the Preferred Stock will share ratably in any
distribution of assets in proportion to the full preferential amounts to which
they are entitled.
Redemption
The First Series may be redeemed by the Corporation after July 1, 1972, at
any time or from time to time, upon at least thirty days' prior notice, at the
redemption price of $42.50 per share, plus any accumulated unpaid dividends. If
less than all the outstanding First Series is to be redeemed, the shares to be
redeemed shall be determined in such manner as may be prescribed by the Board of
Directors. Shares so redeemed shall be retired and not reissued.
Voting Rights
Each holder of the First Series will be entitled to one (1) vote for each
share held.
If six quarterly dividends on any series of the Preferred Stock are in
arrears, the number of directors of the Corporation shall be increased by two
(2) and the holders of all the Preferred Stock voting as a class will be
entitled to elect two (2) directors until all arrears in dividends have been
paid.
Consent of the holders of at least two-thirds of the then outstanding
Preferred Stock of all classes will be necessary to: (a) authorize any stock
ranking either as to payment of dividend or distribution of assets prior to the
First Series or any other Preferred Stock then outstanding or (b) amend, alter,
or change in any material respect prejudicial to the holders thereof the
preferences of any then outstanding Preferred Stock.
Consent of the holders of a majority of the then outstanding Preferred
Stock of all classes will be necessary to: (a) increase the authorized amount of
the Preferred Stock or (b) create any other class of stock ranking on a parity
with the Preferred Stock.
Preemptive Rights
No holder of Preferred Stock will have any preemptive rights.
Listing
The Corporation intends to apply for listing on the New York Stock
Exchange, subject to the approval of that Exchange, of its First Series.
PREFERRED STOCK-SECOND SERIES, CONVERTIBLE
Amount, Rank and Designation
The amount of shares to constitute the Second Series of Preferred Stock
shall be 8,758,472 shares plus such an additional amount, if any, as shall be
required under the Agreement and Plan of Merger between the Company and Carolina
Telephone and Telegraph Company dated as of July 18, 1968. The designation
thereof shall be "Preferred Stock-Second Series, Convertible" (hereinafter
"Second Series"). Shares of the Second Series shall rank on a parity with shares
of the First Series of the Preferred Stock as to dividends and upon liquidation
and shall have a preference over the shares of the Common Stock and any other
class or series of stock ranking junior to the Second Series as to dividends or
upon liquidation.
Dividends
Holders of shares of the Second Series will be entitled to receive
cumulative cash dividends each calendar quarter payable in March, June,
September and December of each year, at the following rates: $.31-1/4 per share
for the eight (8) consecutive quarters beginning with the quarter ending March
31, 1969 through the quarter ending December 31, 1970; $.34-3/8 per share for
eight (8) quarters beginning with the quarter ending March 31, 1971 through the
quarter ending December 31, 1972; and $.37-1/2 per share in each quarter
thereafter.
All such payments will be made out of funds legally available for the
payment of such dividends, when and as declared by the Board of Directors of the
Corporation. Before any dividends on the Common Stock or any other class or
series of stock of the Corporation ranking junior to the Second Series as to
dividends shall be paid or declared and set apart for payment, the holders of
shares of the Second Series shall be entitled to receive the full accumulated
cash dividends for all quarterly dividend periods ending on or before the date
on which any dividend on any such class or series of stock ranking junior to the
Second Series as to dividends or upon liquidation is declared or is to be paid.
Conversion Rights
The holders of shares of the Second Series may convert any or all of said
shares into Common Stock at any time after December 7, 1989, on the basis of two
and one-half (2-1/2) shares of the Common Stock of the Corporation for each one
share of the Second Series. Such ratio is herein referred to as the "conversion
rate." In case of the redemption of any shares of the Second Series, such right
of conversion shall cease and terminate as to the shares duly called for
redemption, at the close of business on the date fixed for redemption, unless
default shall be made in the payment of the redemption price. Upon conversion
the Corporation shall make no payment or adjustment on account of dividends
accrued or in arrears on the Second Series surrendered for conversion.
The conversion rate in effect at any time shall be subject to adjustment as
follows:
A. In case the Corporation shall (i) declare a dividend
on its Common Stock in shares of its capital stock,
(ii) subdivide its outstanding shares of Common
Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, or
(iv) issue any shares by reclassification of its
shares of Common Stock (including any
reclassification in connection with a consolidation
or merger in which the Corporation is the continuing
corporation), at the conversion rate in effect at
the time of the record date for such dividend or of
the effective date of such subdivision, combination
or reclassification shall be proportionately
adjusted so that the holder of any shares of the
Second Series surrendered for conversion after such
time shall be entitled to receive the number of
shares which he would have owned or have been
entitled to receive had such shares of the Second
Series been converted immediately prior to such
time. Such adjustment shall be made successively
whenever any event listed above shall occur.
B. In case the Corporation shall fix a record date for
the issuance of rights or warrants to all holders of
its Common Stock entitling them (for a period
expiring within 45 days after such record date) to
subscribe for or purchase shares of Common Stock at
a price per share less than the current market price
per share of Common Stock (as defined in Paragraph D
below) on such record date, the conversion rate
after such record date shall be determined by
multiplying the conversion rate in effect
immediately prior to such record date by a fraction,
of which the numerator shall be the number of shares
of Common Stock outstanding on such record date plus
the number of additional shares of Common Stock to
be offered for subscription or purchase, and of
which the denominator shall be the number of shares
of Common Stock outstanding on such record date plus
the number of shares of Common Stock which the
aggregate offering price (without deduction for
expenses or commissions of any kind) of the total
number of shares so to be offered would purchase at
such current market price. Such adjustment shall be
made successively whenever such a record date is
fixed; and in the event that such rights or warrants
are not so issued, the conversion rate shall again
be adjusted to be the conversion rate which would
then be in effect if such record date had not been
fixed.
C. In case the Corporation shall fix a record date for
the making of a distribution to all holders of its
Common Stock (including any such distribution made
in connection with a consolidation or merger in
which the Corporation is the continuing corporation)
of evidences of its indebtedness or assets
(excluding dividends paid in, or distributions of,
cash) or subscription rights or warrants (excluding
those referred to in Paragraph B above), the
conversion rate after such record date shall be
determined by multiplying the conversion rate in
effect immediately prior to such record date by a
fraction, of which the numerator shall be the
current market price per share of Common Stock (as
defined in Paragraph D below) on such record date,
and of which the denominator shall be such current
market price per share of Common Capital Stock, less
the fair market value (as determined by the Board of
Directors whose determination shall be conclusive,
and described in a statement filed with the transfer
agent or agents for the Second Series and with the
principal office of the Corporation) of the portion
of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or
warrants applicable to one share of Common Stock.
Such adjustment shall be made successively whenever
such a record date is fixed; and in the event that
such distribution is not so made, the conversion
rate shall again be adjusted to the conversion rate
which would then be in effect if such record date
had not been fixed.
D. For the purpose of any computation under Paragraphs
B and C above, the current market price per share of
Common Stock on any record date shall be deemed to
be the average of the daily closing prices for the
30 consecutive business days commencing 45 business
days before such date. The closing price for each
day shall be the last sale price regular way or, in
case no such sale takes place on such day, the mean
between the closing bid and asked prices regular
way, in either case on the New York Stock Exchange.
E. The conversion rate shall not be adjusted by reason of: (i) the
issuance of shares pursuant to options and stock purchase agreements
granted or entered into with officers or employees of the Corporation;
and (ii) the issuance of shares for cash (except as provided in
Paragraph B above) or in exchange for assets or stock of another
company.
F. Any adjustment in the conversion rate as herein provided shall be to
the nearest, or if there shall be no nearest, then to the next lower,
one-hundredth of a share of Common Stock, and shall remain in effect
until further adjustment as required hereunder.
G. In case the Corporation shall be recapitalized, or
shall be consolidated with or merged into, or shall
sell or transfer its property and assets as, or
substantially as, an entirety to any other
corporation, proper provisions shall be made as a
part of the terms of such recapitalization,
consolidation, merger, sale or transfer whereby the
holder of any shares of the Second Series at the
time outstanding immediately prior to such event
shall thereafter be entitled to such conversion
rights, with respect to securities of the
Corporation resulting from such recapitalization,
consolidation or merger or to which such sale or
transfer shall be made, as shall be substantially
equivalent to the conversion rights herein provided
for.
H. No fraction of a share of Common Stock shall be
issued upon any conversion. In lieu of the fraction
of a share to which the holder of shares of the
Second Series surrendered for conversion would
otherwise be entitled, such holder shall receive, as
soon as practicable after the date of conversion, an
amount in cash equal to the same fraction of the
market value of a full share of Common Stock. For
the purposes of this subparagraph, the market value
of a share of Common Stock shall be the last
recorded sale price of such a share on the New York
Stock Exchange on the day immediately preceding the
date upon which such shares of such series are
surrendered for conversion, or if there be no such
recorded sale price on such day, the last quoted bid
price per share of Common Stock on such Exchange at
the close of business on such date.
I. Whenever there shall be an adjustment in the
conversion rate as provided by the foregoing, the
Corporation will file with each transfer agent for
shares of the Second Series a certificate signed by
the President or the chief financial or accounting
officer of the Corporation, setting forth in
reasonable detail the calculation of the adjustment,
and shall mail to each holder of record thereof, a
notice describing the adjustment and stating the
applicable record or effective date therefor, at
least 20 days prior thereto.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the
Corporation the holders of the Second Series will be entitled to receive out of
the assets of the Corporation available for distribution to stockholders, before
any distribution of the assets shall be made to the holders of the Common Stock
or any other class or series of stock ranking junior to the Second Series either
as to dividends or upon liquidation, the sum of $35.42 per share if such
liquidation is voluntary and the sum of $33.33 per share if such liquidation is
involuntary, plus in each case any accumulated unpaid dividends (whether or not
declared), to the end of the current quarterly dividend period in which the
payment is made. If upon any liquidation, dissolution or winding up of the
Corporation the amounts payable with respect to the Second Series and any other
series of Preferred Stock which ranks on a parity with the Second Series are not
paid in full, the holders of the Second Series and such parity Preferred Stock
will share ratably in any distribution of assets in proportion to the full
preferential amounts to which they are entitled.
Redemption
Subject to the provisions herein and in the charter contained, the Second
Series may be redeemed by the Corporation after December 31, 1975, at any time
or from time to time, upon at least thirty days' prior notice, at the redemption
price of $50.00 per share, plus any accumulated unpaid dividends (whether or not
declared), to the end of the current quarterly dividend period in which the
payment is made. If less than all the outstanding Second Series is to be
redeemed, the shares to be redeemed shall be selected by lot, in such equitable
manner as may be prescribed by the Board of Directors. Shares so redeemed shall
be retired and not reissued.
Reservation of Shares
The Corporation shall at all times keep available and reserved the number
of shares of its Common Stock required for conversion of the outstanding and any
reserved shares of the Second Series.
Certain Protective Provisions
If at any time the full cumulative dividends on shares of the Second Series
have not been paid or declared and set aside for payment for the current and all
past quarterly dividend periods, the Corporation (a) will not declare, or pay,
or set apart for payment any dividends or make any distribution, on any other
class or series of stock of the Corporation ranking junior to the Second Series
whether as to dividends or upon liquidation; (b) will not redeem, purchase or
otherwise acquire, or permit any subsidiary to purchase or otherwise acquire,
any shares of any junior class or series if the Corporation shall be in default
with respect to any dividend payable on shares of the Second Series, provided
that notwithstanding the foregoing, the Corporation may at any time redeem,
purchase or otherwise acquire shares of stock of any such junior class in
exchange for, or out of the net cash proceeds from the substantially
simultaneous sale of, other shares of stock of any junior class; and (c) will
not redeem pursuant to redemption rights in the terms of such stock any stock
ranking on a parity with the Second Series unless at the same time it redeems
all the shares of the Second Series.
Unless the consent of all or a greater number of such shares is required by
law, the consent of the holders of at least two-thirds (2/3) of the then
outstanding shares of the Second Series shall be necessary in order to liquidate
or dissolve the Corporation voluntarily or by any other means involving the vote
or consent of any stockholders of the Corporation.
Unless the consent of all or a greater number of such shares is required by
law, consent of the holders of at least two-thirds (2/3) of the then outstanding
aggregate number of shares of the Second Series and each other series of the
Preferred Stock whose terms provide for such consent, taken together, will be
necessary to: (a) authorize (by whatever means) any stock ranking either as to
payment of dividends or distribution of assets prior to the Second Series or any
other Preferred Stock then outstanding; or (b) authorize any merger or
consolidation (or transfer of all or substantially all of the assets of the
Corporation in a transaction contemplating in substance and effect the exchange
of shares of the Preferred Stock for stock of another corporation) unless the
surviving, resulting or other corporation in such transaction shall have
authorized no stock ranking prior to the Preferred Stock as to dividends or upon
liquidation (unless such stock is a stock substantially the same as, and to be
exchanged for, stock of the Corporation previously authorized pursuant to the
preceding clause (a)); or (c) amend, alter, or change in any material respect
adverse to the holders thereof the preferences of any then outstanding Preferred
Stock; provided that in case of any such action described in the preceding
clauses (a), (b) and (c) which, in any material respect, is adverse to the
Second Series as a series and is not a term generally applicable to and with the
same relative effect upon all series, the consent of the holders of two-thirds
(2/3) of the then outstanding shares of the Second Series will be required.
Unless the consent of all or a greater number of such shares is required by
law, consent of the holders of a majority of the then outstanding aggregate
number of shares of the Second Series and each other series of the Preferred
Stock whose terms provide for such consent, taken together, will be necessary
to: (a) increase the authorized amount of the Preferred Stock; (b) authorize any
merger or consolidation (or transfer of all or substantially all the assets of
the Corporation to another corporation contemplating in substance and effect the
exchange of shares of the Preferred Stock for stock of another corporation)
unless the surviving, resulting or other corporation in such transaction shall
have no greater authorized amount of stock ranking on a parity with the
Preferred Stock as to payment of dividends or upon liquidation than was
authorized by the Corporation immediately prior to such transaction; or (c)
create any other class of stock ranking on a parity with the Preferred Stock as
to dividends or upon liquidation.
Voting Rights
Each holder of the Second Series will be entitled to one (1) vote for each
share held, and, in addition to the other class and series voting rights of the
shares of the Second Series, shall have general voting power, share for share,
with the Common Stock of the Corporation and any other shares having general
voting power.
If six quarterly dividends on any series of the Preferred Stock are in
arrears, the number of directors of the Corporation shall be increased by two
(2) and the holders of all the Preferred Stock voting as a class will be
entitled to elect two (2) directors until all arrears in dividends have been
paid. The Corporation will promptly take all such action as shall be necessary
to permit such election to occur promptly after such arrearage occurs.
PREFERRED STOCK-FOURTH SERIES
(1) Designation and Amount. The shares of such Series shall be designated
as "Preferred Stock - Fourth Series, Junior Participating" (hereafter "Fourth
Series") and the number of shares constituting such series shall be six million
two hundred fifty thousand (6,250,000).
(2) Dividends. The dividend rate on the shares of the Fourth Series shall
be for each quarterly dividend (here inafter referred to as a "quarterly
dividend period"), which quarterly dividend periods shall commence on January 1,
April 1, July 1 and October 1 in each year (or in the case of original issuance,
from the date of original issuance) and shall end on and include the day next
preceding the first date of the next quarterly dividend period, at a rate per
quarterly dividend period (rounded to the nearest cent) equal to the greater of
(a) $10.00 or (b) subject to the provision for adjustment hereinafter set forth,
100 times the aggregate per share amount of all cash dividends, and 100 times
the aggregate per share amount (payable in cash, based upon the fair market
value at the time the non-cash dividend or other distribution is declared as
determined in good faith by the Board of Directors) of all non-cash dividends or
other distributions other than a dividend payable in shares of Common Stock or
Class A Common Stock, as the case may be, or a subdivision of the outstanding
shares of Common Stock or Class A Common Stock, as the case may be (by
reclassification or otherwise), declared (but not withdrawn) on the Common Stock
of the Corporation or the Class A Common Stock of the Corporation, as the case
may be, during the immediately preceding quarterly dividend period, or, with
respect to the first quarterly dividend period, since the first issuance of any
share or fraction of a share of the Fourth Series. In the event this Company
shall at any time after August 12, 1986 (the "Rights Declaration Date") (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount to
which holders of shares of the Fourth Series were entitled immediately prior to
such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(3) Voting Rights. Except as prescribed by law and in addition to the
rights provided for in ARTICLE SIXTH of the Articles of Incorporation of the
Corporation, as amended, and subject to the provision for adjustment hereinafter
set forth, the holders of the Fourth Series shall be entitled to 100 votes for
each share held and shall be entitled to exercise such voting rights with the
holders of Common Stock, without distinction as to class, at any annual or
special meeting of stockholders for the election of directors and on any other
matter coming before such meeting. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of the Fourth Series were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(4) Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the shares of the Fourth Series as provided in Section (2) are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of the Fourth Series
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends (except a dividend payable in Common
Stock and/or any other class of stock ranking junior to the shares of
the Fourth Series) on, make any other distributions on, or redeem or
purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the shares of the Fourth Series;
(ii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the shares of the
Fourth Series, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding
up) to the Shares of the Fourth Series; or
(iii) purchase or otherwise acquire for consideration any shares
of the Fourth Series, or any shares of stock ranking on a parity with
the shares of the Fourth Series, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of this
Section (4), purchase or otherwise acquire such shares at such time and in
such manner.
(5) Reacquired Shares. Any shares of the Fourth Series purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Serial Preferred
Stock and may be reissued as part of a new series of Serial Preferred Stock to
be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
(6) Liquidation, Dissolution or Winding Up. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, the
holders of the shares of the Fourth Series shall be entitled to receive the
greater of (a) $100.00 per share, plus accrued dividends to the date of
distribution, whether or not earned or declared, or (b) an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Stock. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of the Fourth Series were entitled
immediately prior to such event pursuant to clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(7) Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of the Fourth
Series shall at the same time be similarly exchanged or changed in an amount per
share (subject to the provision for adjustment hereinafter set forth) equal to
100 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of the Fourth Series
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(8) Ranking. The shares of the Fourth Series shall rank junior to all other
series of the Corporation's Serial Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
(9) Fractional Shares. Shares of the Fourth Series may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Shares of the Fourth Series.
PREFERRED STOCK-FIFTH SERIES
(1) Designation; Number of Shares; Stated Value. The Series shall be
designated as Preferred Stock-Fifth Series (the "Fifth Series") and shall
consist of ninety-five (95) shares. The shares of such series are hereinafter
sometimes called the "Fifth Series Shares." The stated value of the Fifth Series
Shares shall be One Hundred Thousand Dollars ($100,000) per share.
(2) Dividends. The rate of dividends upon the Fifth Series Shares (which
shall be cumulative from the date of issue) and the time of payment thereof
shall be 6.00% of the stated value per share per annum, payable quarterly on the
last days of January, April, July and October in each year.
(3) Rank. The Fifth Series Shares shall rank on a parity with shares of the
First Series and Second Series of the Preferred Stock as to dividends and upon
liquidation.
(4) Voting Rights. Holders of Fifth Series Shares will be entitled to one
vote for each share held and will be entitled to exercise such voting rights
together with the holders of Common Stock of the Corporation, without
distinction as to class. If no dividends or less than full cumulative dividends
on the Fifth Series Shares shall have been paid for each of four consecutive
dividend periods, or if arrearages in the payment of dividends on the Fifth
Series Shares shall have cumulated to an amount equal to full cumulative
dividends on the Fifth Series Shares for six quarterly dividend periods, the
holders of the Fifth Series Shares shall, at all meetings held for the election
of Directors until full cumulative dividends for all past quarterly dividend
periods and the current quarterly dividend period on the Fifth Series Shares
shall have been paid or declared and set apart for payment, possess voting
power, acting alone, to elect the smallest number constituting a majority of the
Directors then to be elected. The Corporation will promptly take all such action
as shall be necessary to permit such election to occur promptly after such
arrearage occurs.
(5) Non-Convertible. The Fifth Series Shares shall not be convertible into
or exchangeable for stock of any other class or classes of the Corporation.
(6) Repurchase by the Corporation. Upon six months' prior written notice,
the holders of the Fifth Series Shares may tender all and not less than all of
the Fifth Series Shares to the Corporation for purchase at a price per share
equal to the stated value of One Hundred Thousand Dollars ($100,000) per share
plus accrued dividends to the date of repurchase by the Company (the Purchase
Price). Upon such proper tender of all shares of the Fifth Series Shares by the
holders, the Corporation shall purchase the Fifth Series Shares at the Purchase
Price.
(7) Tender Procedures. The Fifth Series Shares will not be deemed tendered
unless and until the certificate or certificates therefor have been received by
the Corporation or the bank or trust company designated for the purpose and, if
payment upon acceptance of tender thereof is to be made other than to the record
holders, such certificate or certificates have been duly endorsed and are in
proper form for transfer, with all transfer taxes due in respect thereof paid or
provided for.
(8) Redemption. If the holders have not theretofore tendered the Fifth
Series Shares to the Corporation for purchase pursuant to paragraphs 6 and 7
hereof by March 14, 2003, then the Corporation shall redeem all of the
outstanding Fifth Series Shares at the Purchase Price on a date set forth in
written notice to the holders as the redemption date (the Redemption Date). The
Corporation shall give notice of such redemption not less than thirty (30) days
prior to the Redemption Date, by mail to the holders of record of the
outstanding shares at their respective addresses then appearing on the books of
the Corporation. At any time before the Redemption Date, the Corporation may
deposit in trust the funds necessary for such redemption with a bank or trust
company to be designated in the notice of redemption, doing business in the City
of Chicago and State of Illinois or in the City and State of New York, and
having capital, surplus and undivided profits aggregating $25,000,000. In the
event such deposit is made so that the deposited funds shall be forthwith
available to the holders of the shares to be redeemed upon surrender of the
certificates evidencing such shares, then, upon the giving of the notice of such
redemption, as hereinabove provided, or upon the earlier delivery to such bank
or trust company of irrevocable authorization and direction so to give such
notice, all shares with respect to the redemption of which such deposit shall
have been made and the giving of such notice effected shall, whether or not the
certificates for such shares shall be surrendered for cancellation, be deemed to
be no longer outstanding for any purpose and all rights with respect to such
shares shall thereupon cease and terminate, except only the right of the holders
of the certificates for such shares to receive, out of the funds so deposited in
trust, from and after the time of such deposit, the amount payable upon the
redemption thereof, without interest.
(9) Cancelled Shares. The Fifth Series Shares, purchased upon tender or
redeemed as herein provided, shall be cancelled and upon such cancellation shall
be deemed to be authorized and unissued shares of Preferred Stock, without par
value, of the Corporation but shall not be reissued as shares of the same or any
theretofore outstanding series.
(10) Default. Default by the Corporation in complying with the provisions
of paragraph 6 or 8 hereof shall preclude the declaration or the payment of
dividends or the making of any other distribution whatsoever upon the Common
Stock of the Corporation (other than a distribution in shares of its Common
Stock) until the Corporation shall have cured such default by depositing the
funds necessary therefor in the manner and upon the terms herein provided. The
holders of the Fifth Series Shares shall not be entitled to apply to any court
of law or equity for a money judgment or remedy on account of any such default
other than to restrain the Corporation from the actions specified above upon the
Common Stock of the Corporation until such default shall have been cured; and
(11) Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Corporation the holders of the Fifth Series will be entitled
to receive out of the assets of the Corporation available for distribution to
stockholders, before any distribution of the assets shall be made to the holders
of Common Stock, the sum of $100,000 per share, plus an amount equal to
cumulative dividends accrued and unpaid thereon to the date of distribution to
holders of the Fifth Series. If upon any liquidation, dissolution or winding up
of the Corporation the amounts payable with respect to the Fifth Series and any
other series of Preferred Stock which ranks on a parity with the Fifth Series
are not paid in full, the holders of the Fifth Series and such parity Preferred
Stock will share ratably in any distribution of assets in proportion to the full
preferential amounts to which they are entitled.
SEVENTH
1. In addition to any affirmative vote required by law or these Articles of
Incorporation, and except as expressly provided in section 2 of this ARTICLE
SEVENTH, the affirmative vote of the holders of eighty (80) percent of the
outstanding shares of the Corporation entitled to vote in an election of
Directors shall be required for the approval or authorization of any Business
Combination (as hereinafter defined).
2. The provisions of section 1 of this ARTICLE SEVENTH
shall not be applicable if:
A. The Business Combination shall have been approved by a majority of
the Continuing Directors (as hereinafter defined); provided, however, that
such approval shall only be effective if obtained at a meeting of Directors
at which at least seven Continuing Directors are present; or
B. The Business Combination is a merger or consolidation and the cash
or Fair Market Value (as hereinafter defined) of the property, securities
or other consideration to be received per share by the stockholders of each
class of stock of the Corporation in the Business Combination, if
applicable, is not less than the highest per share price paid by the
Interested Stockholder (as hereinafter defined), with appropriate
adjustments for stock splits, stock dividends and like distributions, in
the acquisition by the Interested Stockholder of any of its holdings of
each class of the Corporation's capital stock.
3. For purposes of this ARTICLE SEVENTH:
A. The term "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any
subsidiary of the Corporation with (a) any Interested Stockholder or
(b) any other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be,
an Affiliate (as defined on October 1, 1982 in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
an Interested Stockholder;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to
or with any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the Corporation or any subsidiary of the
Corporation that have an aggregate Fair Market Value of $1,000,000 or
more;
(iii) the issuance or transfer by the Corporation or any
subsidiary of the Corporation (in one transaction or a series of
transactions) of any securities of the Corporation or any subsidiary
of the Corporation to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair Market
Value of $1,000,000 or more;
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested Stockholder;
or
(v) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate of any Interested
Stockholder.
B. The term "Continuing Director" shall mean any member of the Board
of Directors of the Corporation who is unaffiliated with the Interested
Stockholder and was a member of the Board of Directors prior to the time
that the Interested Stockholder became an Interested Stockholder, and any
successor of a Continuing Director if the successor is unaffiliated with
the Interested Stockholder and is recommended or elected to succeed a
Continuing Director by a majority of Continuing Directors, provided that
such recommendation or election shall only be effective if made at a
meeting of Directors at which at least seven Continuing Directors are
present.
C. The term "Fair Market Value" shall mean:
(i) in the case of stock, the highest closing sale price during
the 30-day period immediately preceding the date in question of a
share of such stock on the Composite Tape for New York Stock
Exchange-listed stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such stock is
not listed on such Exchange, on the principal United States securities
exchange registered under the Exchange Act on which such stock is
listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or if no such quotations are
available, the fair market value on the date in question of a share of
such stock as determined in good faith by a majority of Continuing
Directors, provided that such determination shall only be effective if
made at a meeting of Directors at which at least seven Continuing
Directors are present; or
(ii) in the case of property or securities other than cash or
stock, the fair market value of such property or securities on the
date in question as determined in good faith by a majority of
Continuing Directors, provided that such determination shall only be
effective if made at a meeting of Directors at which at least seven
Continuing Directors are present.
D. The term "Interested Stockholder" shall mean and include any
individual, corporation, partnership or other person or entity which,
together with its Affiliates and "Associates" (as defined on October 1,
1982 in Rule 12b-2 under the Exchange Act), "Beneficially Owns" (as defined
on October 1, 1982 in Rule 13d-3 under the Exchange Act) in the aggregate
ten percent or more of the outstanding shares of the Corporation entitled
to vote in an election of Directors, and any Affiliate or Associate of any
such individual, corporation, partnership or other person or entity.
EIGHTH
1. Prevention of "Greenmail." Any direct or indirect purchase or other
acquisition by this Corporation of any Equity Security (as hereinafter defined)
of any class at a price above Market Price (as hereinafter defined) from any
Interested Securityholder (as hereinafter defined) who has beneficially owned
any Equity Security of the class to be purchased for less than two years prior
to the date of such purchase or any agreement in respect thereof shall, except
as hereinafter expressly provided, require the affirmative vote of the holders
of at least a majority of the voting power of the then outstanding shares of
capital stock of this Corporation entitled to vote generally in the election of
directors (the "Voting Stock"), excluding Voting Stock beneficially owned by
such Interested Securityholder, voting together as a single class (it being
understood that for the purposes of this ARTICLE EIGHTH, each share of the
Voting Stock shall have the number of votes granted to it pursuant to ARTICLE
SIXTH of this Certificate of Incorporation). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or any agreement with any national
securities exchange, or otherwise, but (i) no such affirmative vote shall be
required with respect to any purchase, redemption or other acquisition by this
Corporation of capital stock from FT, DT, any Qualified Subsidiary or any
Qualified Stock Purchaser pursuant to the provisions of the Investment Documents
(as such term is defined in Section 12 of the provisions of ARTICLE SIXTH of
these Articles of Incorporation entitled GENERAL PROVISIONS RELATING TO CLASS A
STOCK) or these Articles of Incorporation, and (ii) no such affirmative vote
shall be required with respect to any purchase or other acquisition of
securities made as part of a tender or exchange offer by this Corporation to
purchase securities of the same class made on the same terms to all holders of
such securities and complying with the applicable requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations).
2. Certain Definitions. For the purposes of this
ARTICLE EIGHTH:
A. A "person" shall mean any individual, firm,
corporation or other entity.
B. "Interested Securityholder" shall mean any
person (other than the Corporation or any corporation
of which a majority of any class of Equity Security is
owned, directly or indirectly, by the Corporation) who or
which:
(i) is the beneficial owner, directly or
indirectly, of 5% or more of the class of securities
to be acquired; or
(ii) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 5% or more of the class
of securities to be acquired; or
(iii) is an assignee or has otherwise succeeded to any shares of
the class of securities to be acquired which were at any time within
the two-year period immediately prior to the date in question
beneficially owned by an Interested Securityholder, if such assignment
or succession shall have occurred in the course of a transaction or
transactions not involving a public offering within the meaning of the
Securities Act of 1933, as amended.
C. A person shall be a "beneficial owner" of any
security of any class of the Corporation:
(i) which such person or any of its
Affiliates or Associates (as hereinafter defined)
beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (b) any right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any security of
any class of the Corporation.
D. For the purposes of determining whether a person is an Interested
Securityholder pursuant to paragraph B of this Section 2, the relevant
class of securities outstanding shall be deemed to comprise all such
securities deemed owned through application of paragraph C of this Section
2, but shall not include other securities of such class which may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
E. "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on October 1, 1982.
F. "Equity Security" shall have the meaning
ascribed to such term in Section 3(a)(11) of the
Securities Exchange Act of 1934, as in effect on
January 1, 1985.
G. "Market Price" shall mean the highest closing sale price during the
thirty-day period immediately preceding the date in question, of a share of
any Equity Security on the Composite Tape for New York Stock Exchange
issues or, if such Equity Security is not quoted on the Composite Tape or
is not listed on such Exchange, on the principal United States security
exchange registered under the Securities Exchange Act of 1934, as amended,
on which such Equity Security is listed, or, if such Equity Security is not
listed on any such exchange, the highest closing bid quotation with respect
to a share of such Equity Security during the thirty-day period preceding
the date in question on the National Association of Securities Dealers,
Inc. Automated Quotations System or any system then in use, or, if no such
quotations are available, the fair market value on the date in question of
a share of such Equity Security.
3. Compliance. The Board of Directors of the Corporation shall have the
power to determine the application of, or compliance with, this ARTICLE EIGHTH,
including, without limitation: (i) whether a person is an Interested
Securityholder; (ii) whether a person is a beneficial owner of any Equity
Security; and (iii) the Market Price of any Equity Security. Any decision or
action taken by the Board of Directors arising out of or in connection with the
construction, interpretation and effect of this ARTICLE EIGHTH shall lie within
its absolute discretion and shall be conclusive and binding, except in
circumstances involving bad faith.
NINTH
No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such Director as a Director; provided, however, that this ARTICLE NINTH
shall not eliminate or limit the liability of a Director to the extent provided
by applicable law (i) for any breach of the Director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 51 of the General Corporation Code of the State of Kansas, or (iv) for
any transaction from which the Director derived an improper personal benefit. No
amendment to or repeal of this ARTICLE NINTH shall apply to or have any effect
on the liability or alleged liability of any Director of the Corporation for or
with respect to any acts or omissions of such Director occurring prior to such
amendment or repeal.
<PAGE>
Exhibit 10(h)
AGREEMENT REGARDING SPECIAL COMPENSATION
AND POST EMPLOYMENT RESTRICTIVE COVENANTS
THIS AGREEMENT made this 12th day of December, 1995, by and between SPRINT
CORPORATION, a Kansas corporation ("Sprint"), (Sprint, and the subsidiaries of
Sprint are collectively referred to herein as "Employer"), and GENE M.
BETTS ("Executive").
W I T N E S S E T H:
WHEREAS, Employer is engaged in the telecommunications
business;
WHEREAS, Executive has expertise, experience and capability
in the business of Employer and the telecommunications business
in general;
WHEREAS, Executive has been, and/or now is serving Employer
as Senior Vice President Financial Services/Taxes;
WHEREAS, Employer desires to enter into this Agreement to provide severance
and other benefits for Executive and obtain Executive's agreements regarding
confidentiality and post- employment restrictive covenants for Employer; and
WHEREAS, Executive is willing to provide such agreements to Employer.
NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which consideration are mutually acknowledged by the parties, it
is hereby agreed as follows:
1. Recitals.
The recitals hereinbefore set forth constitute an integral part of this
Agreement, evidencing the intent of the parties in executing this Agreement, and
describing the circumstances surrounding its execution. Said recitals are by
express reference made a part of the covenants hereof, and this Agreement all be
construed in light thereof.
2. Duties and Responsibilities.
The duties and responsibilities of Executive are and shall continue to be of
an executive nature as shall be required by Employer in the conduct of its
business. Executive's powers and authority shall include all those presently
delegated to him or such other duties and responsibilities as from time to time
may be assigned to him. Executive recognizes, that during his employment
hereunder, he owes an undivided duty of loyalty to Employer, and agrees to
devote his entire business time and attention to the performance of said duties
and responsibilities and to use his best efforts to promote and develop the
business of Employer.
3. Employment Term.
Executive's employment may be terminated by either party in accordance with
Sections 5, 6, 7, or 8 herein.
4. Compensation and Benefits.
During employment, Executive shall be entitled to receive a base annual
salary, shall be reimbursed for reasonable expenses incurred and accounted for
in accordance with the policies and procedures of Employer, and shall be
entitled to vacation pay and other benefits applicable to employees generally,
each as may from time to time be established, amended or terminated. In
addition, Executive (a) shall be awarded an option to purchase 15,000 shares of
common stock as set forth in a stock option agreement of even-date herewith,
attached hereto and incorporated herein (the "Stock Option Agreement") or, if
Executive so elects, in lieu of the option to purchase shares, 3,750 shares of
restricted stock to be granted after Sprint's spin-off of its cellular division,
the number of shares being subject to adjustment to maintain the pre-spin-off
value of the grant, all as set forth in a restricted stock agreement of
even-date herewith, attached hereto and incorporated herein ("Restricted Stock
Agreement") and (b) shall be entitled to the Special Compensation set forth in
Section 5 hereof in accordance with the terms of this Agreement.
5. Termination by Employer: Special Compensation.
At any time, Employer may terminate Executive's employment for any reason. If
Executive's termination is other than pursuant to Section 6, Executive shall,
subject to the other provisions of this Section 5, be entitled to the following
Special Compensation (as that term is defined in this Section 5) in lieu of any
benefits available under any and all Employer separation plans or policies,
except as noted in Section 17. If Executive's termination is pursuant to
Sections 5, 6 or 7, Executive's obligations under Sections 11, 12, 13, and 14
hereof shall continue.
For purposes of this Agreement, "Special Compensation" shall entitle
Executive:
(a) to continue to receive for a period of eighteen (18) months from the
date of termination (the "Severance Period") biweekly compensation at the
rate equal to the biweekly amount of his base annual salary in effect at the
date of termination of employment;
(b) to receive a bonus, based on actual performance results, up to the
target amount, under the Management Incentive Plan (MIP) throughout the
Severance Period provided that the amount, if any, payable under such Plan
for the award period including the last day of the Severance Period shall be
pro rated based upon the number of months of the Severance Period that fall
within the award period and the total number of months in such award period;
(c) to receive an award under the Long Term Incentive Plan, pro rated
based on the Executive's last day worked, exclusive of any Severance Period,
determined in accordance with the terms of said Plan;
(d) to an acceleration of vesting of stock options or restricted stock
in accordance with the relevant provisions of the Stock Option Agreement or
Restricted Stock Agreement;
(e) to continue to receive throughout the Severance Period any executive
medical, dental, life, and qualified or nonqualified retirement benefits
which the Executive was receiving or was entitled to receive at the time of
termination, except that long term disability and short term disability
benefits cease on the last day worked;
(f) to receive outplacement counseling by a firm
selected by Employer to continue until Executive becomes
employed; and
(g) to continue to receive throughout the Severance Period all
applicable executive perquisites (including automobile allowance, long
distance services and all miscellaneous services) except country club
membership dues and accrual of vacation.
Employer shall pay or cause to be paid the amounts payable under paragraph
(a) above in equal installments, bi-weekly in arrears, and the amount payable
under paragraphs (b) and (c) in accordance with the terms of the Plans. All
payments pursuant to this Section shall be subject to applicable federal and
state income and other withholding taxes.
In addition to the Special Compensation described above, Executive shall
also be entitled to any vacation pay for vacation accrued by Executive in the
calendar year of termination but not taken at the time of termination.
In the event Executive becomes employed full time during the Severance
Period, Executive's entitlement to continuation of the benefits described in
paragraph (e) shall immediately cease, however, Executive shall retain any
rights to continue medical insurance coverage under the COBRA continuation
provisions of the group medical insurance plan by paying the applicable premium
therefor.
The payments and benefits provided for in this Section shall be in addition
to all other sums then payable and owing to Executive hereunder and, except as
expressly provided herein, shall not be subject to reduction for any amounts
received by Executive for employment or services provided after termination of
employment hereunder, and shall be in full settlement and satisfaction of all of
Executive's claims and demands.
In all events, Executive's right to receive severance and/or other benefits
pursuant to this Section shall cease immediately in the event Executive is
reemployed by Employer or an affiliate or Executive breaches his Confidential
Information Covenant (as defined in Section 11 hereof), or breaches Sections 12,
13 or 14 hereof. In all cases, Employer's rights under Section 15 shall
continue.
6. Voluntary Resignation by Executive; Termination for
Cause: Total Disability
Upon termination of Executive's employment by either Voluntary Resignation,
Termination for Cause (as those terms are defined in this Section 6), or Total
Disability, as that term is defined in the Long Term Disability Plan, Executive
shall have no right to compensation, severance pay or other benefits described
herein but Executive's obligations under Sections 11, 12, 13 and 14 hereof shall
continue.
(a) Voluntary Resignation by Executive. At any time, Executive has the
right, by written notice to Employer, to terminate his services hereunder
("Voluntary Resignation"), effective as of thirty (30) days after such
notice.
(b) Termination for Cause by Employer. At any time, Employer has the
right to terminate Executive's employment. Termination upon the occurrence
of any of the following shall be deemed termination for cause ("Termination
for Cause"):
(i) Conduct by the Executive which reflects
adversely on the Executive's honesty, trustworthiness
or fitness as an Executive, or
(ii) Executive's willful engagement in conduct which is
demonstrably and materially injurious to the Employer.
Termination for failure to meet performance expectations, unless willful,
continuing and substantial, shall not be deemed a Termination for Cause.
For Termination for Cause, written notice of the termination of Executive's
employment by Employer shall be served upon Executive and shall be
effective as of the date of such service. Such notice given by Employer
shall specify the act or acts of Executive underlying such termination.
(c) Total Disability. Upon the total disability of the Executive, as that
term is defined in the Long Term Disability Plan, Executive shall have no
right to compensation or severance pay described herein but shall be
entitled to long term disability and other such benefits afforded under the
applicable policies and plans.
7. Resignation Following Constructive Discharge.
If at any time, except in connection with a termination pursuant to Section
5, 6, or 8 Executive is Constructively Discharged (as that term is defined in
this Section 7) then Executive shall have the right, by written notice to
Employer within sixty (60) days of such Constructive Discharge, to terminate his
services hereunder, effective as of thirty (30) days after such notice.
Executive shall in such event be entitled to the compensation and benefits as if
such employment were terminated pursuant to Section 5 of this Agreement.
For purposes of this Agreement, the Executive shall be "Constructively
Discharged" upon the occurrence of any one of the following events:
(a) Executive is removed from his position with Employer other than as a
result of Executive's appointment to positions of equal or superior scope and
responsibility; or
(b) Executive's targeted total compensation is reduced by more than 10%
(other than across-the-board reductions similarly affecting all officers of
Sprint Corporation).
8. Effect of Change in Control.
In the event that within one year of a Change in Control (as that term is
defined in this Section 8) Executive's employment is terminated:
(a) by the Employer other than pursuant to Section 6,
(b) by Executive pursuant to Section 7 hereof,
(c) by Executive if Executive is required to be based anywhere other than
his location at the time or the Kansas City metropolitan area, except for
required travel on business to an extent substantially consistent with
Executive's business travel obligations immediately prior the Change in
Control;
then Executive shall be entitled to the Special Compensation described in
Section 5 and shall be bound by Section 11, but shall not have any continuing
obligations under Sections 12, 13, and 14, except as otherwise required by
common law or statute.
For purposes of this Agreement, a "Change in Control" shall be deemed to
have occurred if:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")) other than a trustee
or other fiduciary holding securities under an employee benefit plan of
Sprint or any of its affiliates, and other than Sprint or a corporation
owned, directly or indirectly, by the stockholders of Sprint in
substantially the same proportions as their ownership of stock of Sprint,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Sprint representing
20% or more of the combined voting power of Sprint's then outstanding
securities, or
(ii) during any period of two consecutive years (not including any period
prior to the date of this Agreement), incumbent members cease for any
reason to constitute a majority of the members of the Board of Directors of
Sprint;
provided, however, that a transaction among Employer, France Telecom and
Deutsche Bundespost Telekom commonly known as Project Phoenix shall not
constitute a Change in Control for this Agreement and the related Stock Option
Agreement or Restricted Stock Agreement. A member of the Board of Directors of
Sprint shall be an "incumbent member" if such individual is as of the date of
this Agreement or at the beginning of the applicable two consecutive year period
a member of the Board of Directors of Sprint, and any new director after the
date of this Agreement (other than a director designated by person who has
entered into an agreement to effect a transaction described in subparagraph (i)
above) whose election to the Board or nomination for election by the
stockholders of Sprint was approved by a vote of at least two-thirds (2/3) of
the directors still in office who either were directors as of the date hereof or
as of the first day of the applicable two consecutive year period or whose
election or nomination for election was previously so approved.
9. Dispute Resolution.
All disputes arising under this Agreement, other than those disputes
relating to Executive's alleged violations of Sections 11 through 14 herein,
shall be submitted to arbitration by the American Arbitration Association of
Kansas City, Missouri. Costs of arbitration shall be borne equally by the
parties. The decision of the arbitrators shall be final and there shall be no
appeal from any award rendered. Any award rendered may be entered as a judgment
in any court of competent jurisdiction. In any judicial enforcement proceeding,
the losing party shall reimburse the prevailing party for its reasonable costs
and attorneys' fees for enforcing its rights under this Agreement, in addition
to any damages or other relief granted. This Section 9 does not apply to any
action by Employer to enforce Sections 11 through 14 of this Agreement and does
not in any way restrict Employer's rights under Section 15 herein.
10. Enforcement.
In the event Employer shall fail to pay any amounts due to Executive under
this Agreement as they come due, Employer agrees to pay interest on such amounts
at a rate of prime plus two percent (2%) per annum. Employer agrees that
Executive and any successor shall be entitled to recover all costs of
successfully enforcing any provision of this Agreement, including reasonable
attorney fees and costs of litigation.
11. Confidential Information.
Executive acknowledges that during the course of his employment he has
learned or will learn or develop Confidential Information (as that term is
defined in this Section 11). Executive further acknowledges that unauthorized
disclosure or use of such Confidential Information, other than in discharge of
Executive's duties, will cause Employer irreparable harm.
For purposes of this Section, Confidential Information means trade secrets
(such as technical and non-technical data, a formula, pattern, compilation,
program, device, method, technique, drawing, process) and other proprietary
information concerning the products, processes or services of Employer or its
parent, and/or affiliates, including but not limited to: computer programs;
unpatented inventions, discoveries or improvements; marketing, manufacturing, or
organizational research and development; business plans; sales forecasts;
personnel information, including the identity of other employees of Employer,
their responsibilities, competence, abilities, and compensation; pricing and
financial information; current and prospective customer lists and information on
customers or their employees; information concerning planned or pending
acquisitions or divestitures; and information concerning purchases of major
equipment or property, which information: (a) has not been made generally
available to the public; and (b) is useful or of value to the current or
anticipated business, or research or development activities of Employer or of
any customer or supplier of Employer, or (c) has been identified to Executive as
confidential by Employer, either orally or in writing.
Except in the course of his employment and in the pursuit of the business of
Employer or any of its subsidiaries or affiliates, Executive shall not, during
the course of his employment, or for a period of eighteen (18) months following
termination of his employment for any reason, directly or indirectly, disclose,
publish, communicate or use on his behalf or another's behalf, any proprietary
information or data of Employer or any of its subsidiaries or affiliates.
Executive acknowledges that Employer operates and competes nationally, and
that Employer will be harmed by unauthorized disclosure or use of Confidential
Information regardless of where such disclosure or use occurs, and that
therefore this confidentiality agreement is not limited to any single state or
other jurisdiction.
12. Non-Competition.
Executive acknowledges that use or disclosure of Confidential Information
described in Section 11 is likely if Executive were to perform
telecommunications services on behalf of a competitor of Employer. Therefore,
Executive shall not, for eighteen (18) months following termination of
employment for any reason (the "Non-Compete Period"), accept any position,
including but not limited to a position with AT&T, MCI, GTE or any Regional Bell
Operating Company or any subsidiary thereof, where Executive dedicates any time
or efforts to managing, controlling, participating in, investing in, acting as
consultant or advisor to, rendering services for, or otherwise assisting any
person or entity in the long distance, local telecommunications or wireless
business and performing functions relating to long distance, local
telecommunications or wireless services.
Executive acknowledges that Employer operates and competes nationally, and
that therefore this non-competition agreement is not limited to any single state
or other jurisdiction.
This section shall not prevent Executive from using general skills and
experience developed during employment with Employer or other employers; or from
accepting a position of employment with another company, firm, or other
organization which competes with Employer, if its business is diversified and
Executive is employed in a part of the business that is not related to long
distance, local telecommunications or wireless services and provided that such
position does not require or permit the disclosure or use of Confidential
Information.
13. Inducement of Other Employees.
For an eighteen (18) month period following termination of employment,
Executive will not directly or indirectly solicit, induce or encourage any
employee or agent of Employer to terminate his relationship with Employer.
14. Return of Employer's Property.
All notes, reports, sketches, plans, published memoranda or other documents
created, developed, generated or held by Executive during employment, concerning
or related to Employer's business, and whether containing or relating to
Confidential Information or not, are the property of Employer and will be
promptly delivered to Employer upon termination of Executive's employment for
any reason whatsoever. During the course of employment, Executive shall not
remove any of the above property containing Confidential Information, or
reproductions or copies thereof, or any apparatus from Employer's premises
without authorization.
15. Remedies.
Executive acknowledges that the restraints and agreements herein provided
are fair and reasonable, that enforcement of the provisions of Sections 11, 12,
13 and 14 will not cause him undue hardship and that said provisions are
reasonably necessary and commensurate with the need to protect Employer and its
legitimate and proprietary business interests and property from irreparable
harm.
Executive acknowledges that failure to comply with the terms of this
Agreement will cause irreparable damage to Employer. Therefore, Executive agrees
that, in addition to any other remedies at law or in equity available to
Employer for Executive's breach or threatened breach of this Agreement, Employer
is entitled to specific performance or injunctive relief, without bond, against
Executive to prevent such damage or breach, and the existence of any claim or
cause of action Executive may have against Employer will not constitute a
defense thereto. Executive further agrees to pay reasonable attorney fees and
costs of litigation incurred by Employer in any proceeding relating to the
enforcement of the Agreement or to any alleged breach thereof in which Employer
shall prevail in whole or those reasonable fees and costs attributable to the
extent that Employer prevails in part.
In the event of a breach or a violation by Executive of any of the covenants
and provisions of this Agreement, the running of the Non-Compete Period (but not
of Executive's obligation thereunder), shall be tolled during the period of the
continuance of any actual breach or violation.
16. Confidentiality of Agreement.
As a specific condition to Executive's right to Special Compensation or other
benefits described herein, Executive agrees that he will not disclose or
discuss: the existence of this Agreement; the Special Compensation provided
hereunder; or any other terms of the Agreement except: (1) to members of his
immediate family; (2) to his financial advisor or attorney but then only to the
extent necessary for them to assist him; (3) to a potential employer on a
strictly confidential basis and then only to the extent necessary for reasonable
disclosure in the course of serious negotiations; or (4) as required by law or
to enforce legal rights.
17. Entire Understanding.
This Agreement constitutes the entire understanding between the parties
relating to Executive's employment hereunder and supersedes and cancels all
prior written and oral understandings and agreements with respect to such
matters, except for the terms and provisions of the Key Management Benefit Plan
and any other employee benefit or other compensation plans (or any agreements or
awards thereunder) referred to in or contemplated by this Agreement and except
for the SPRINT UNITED EMPLOYEE AGREEMENT REGARDING PROPERTY RIGHTS AND BUSINESS
PRACTICES which the Executive has signed and by which Executive continues to be
bound.
18. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of Executive's
executors, administrators, legal representatives, heirs and legatees and the
successors and assigns of Employer.
19. Partial Invalidity.
The various provisions of this Agreement are intended to be severable and to
constitute independent and distinct binding obligations. Should any provision of
this Agreement be determined to be void and unenforceable, in whole or in part,
it shall not be deemed to affect or impair the validity of any other provision
or part thereof, and such provision or part thereof shall be deemed modified to
the extent required to permit enforcement. Without limiting the generality of
the foregoing, if the scope of any provision contained in this Agreement is too
broad to permit enforcement to its full extent, but may be made enforceable by
limitations thereon, such provision shall be enforced to the maximum extent
permitted by law, and Executive hereby agrees that such scope may be judicially
modified accordingly.
20. Strict Construction.
The language used in this Agreement will be deemed to be the language chosen
by Employer and Executive to express their mutual intent and no rule of strict
construction shall be applied against any person.
21. Waiver.
The waiver of any party hereto of a breach of any provision of this
Agreement by any other party shall not operate or be construed as a waiver of
any subsequent breach.
22. Notices.
Any notice or other communication required or permitted to be given hereunder
shall be determined to have been duly given to any party (a) upon delivery to
the address of such party specified below if delivered personally or by courier;
(b) upon dispatch if transmitted by telecopy or other means of facsimile,
provided a copy thereof is also sent by regular mail or courier; or (c) within
forty-eight (48) hours after deposit thereof in the U.S. mail, postage prepaid,
for delivery as certified mail, return receipt requested, addressed, in any case
to the party at the following address(es) or telecopy numbers:
If to Executive:
Gene M. Betts
5216 W 128th Street
Leawood, KS 66209-3415
If to Employer:
Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, KS 66205
Attention: Corporate Secretary
or to such other address(es) or telecopy number(s) as any party may designate by
Written Notice in the aforesaid manner.
23. Governing Law.
This Agreement shall be governed by, and interpreted, construed and enforced
in accordance with, the laws of the State of Kansas.
24. Gender.
Wherever from the context it appears appropriate, each term stated in either
the singular of plural shall include the singular and the plural, and the
pronouns stated in either the masculine, the feminine or the neuter gender shall
include the masculine, feminine or neuter.
25. Headings.
The headings of the Sections of this Agreement are for reference purposes
only and do not define or limit, and shall not be used to interpret or construe
the contents of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date above set forth.
EXECUTIVE SPRINT CORPORATION
/s/ Gene M. Betts /s/ B. Watson
By:
Gene M. Betts Title: Senior Vice President
Human Resources
<TABLE>
<CAPTION>
EXHIBIT (11)
SPRINT CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (UNAUDITED)
(In Millions, Except Per Share Data)
Three Months Ended
March 31,
---------------------------
1996 1995
- -------------------------------------------------------------------------------------- --- --------- --- ---------
Primary earnings per share
<S> <C> <C>
Income from continuing operations $ 312.2 $ 224.7
Preferred stock dividends (0.5) (0.7)
- -------------------------------------------------------------------------------------- --- --------- --- ---------
311.7 224.0
Discontinued operations, net (2.9) (0.4)
- -------------------------------------------------------------------------------------- --- --------- --- ---------
Earnings applicable to common stock $ 308.8 $ 223.6
--- --------- --- ---------
Weighted average number of common shares (1) 400.3 349.5
--- --------- --- ---------
Primary earnings per share
Continuing operations $ 0.78 $ 0.64
Discontinued operations (0.01) --
- -------------------------------------------------------------------------------------- --- --------- --- ---------
Total $ 0.77 $ 0.64
--- --------- --- ---------
Fully diluted earnings per share
Income from continuing operations, net of preferred stock dividends $ 311.7 $ 224.0
Convertible preferred stock dividends 0.1 0.1
- -------------------------------------------------------------------------------------- --- --------- --- ---------
311.8 224.1
Discontinued operations, net (2.9) (0.4)
- -------------------------------------------------------------------------------------- --- --------- --- ---------
Earnings as adjusted for purposes of computing fully diluted earnings per
share $ 308.9 $ 223.7
--- --------- --- ---------
Weighted average number of common shares 400.3 349.5
Additional dilution for common stock equivalents and dilutive securities 1.9 1.5
- -------------------------------------------------------------------------------------- --- --------- --- ---------
Total 402.2 351.0
--- --------- --- ---------
Fully diluted earnings per share
Continuing operations $ 0.78 $ 0.64
Discontinued operations (0.01) --
- -------------------------------------------------------------------------------------- --- --------- --- ---------
Total $ 0.77 $ 0.64
--- --------- --- ---------
(1) Weighted average number of common shares have been adjusted for the assumed
conversion of convertible preference stock and for dilutive common stock
equivalents using the treasury stock method.
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT (12)
SPRINT CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
(In Millions)
Three Months Ended
March 31,
-----------------------------------------
1996 1995
- ------------------------------------------------------------------------ --- ---------------- --- ----------------
Earnings
<S> <C> <C>
Income from continuing operations $ 312.2 $ 224.7
Capitalized interest (24.4) (4.4)
Income tax provision 194.1 129.4
- ------------------------------------------------------------------------ --- ---------------- --- ----------------
Subtotal 481.9 349.7
Fixed charges
Interest charges 72.1 72.6
Interest factor of operating rents 30.2 29.4
Pre-tax cost of preferred stock dividends of subsidiaries 0.1 0.2
- ------------------------------------------------------------------------ --- ---------------- --- ----------------
Total fixed charges 102.4 102.2
- ------------------------------------------------------------------------ --- ---------------- --- ----------------
Earnings, as adjusted $ 584.3 $ 451.9
--- ---------------- --- ----------------
Ratio of earnings to fixed charges 5.71 4.42
--- ---------------- --- ----------------
Note: The above ratios have been computed by dividing fixed charges into the
sum of (a) income from continuing operations less capitalized interest
included in income, (b) income taxes, and (c) fixed charges. Fixed
charges consist of interest on all indebtedness (including amortization
of debt issuance expenses), the interest component of operating rents
and the pre-tax cost of preferred stock dividends of subsidiaries.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,718,200
<SECURITIES> 0
<RECEIVABLES> 2,232,900
<ALLOWANCES> 117,500
<INVENTORY> 189,700
<CURRENT-ASSETS> 4,538,600
<PP&E> 20,109,900
<DEPRECIATION> 10,430,000
<TOTAL-ASSETS> 16,127,600
<CURRENT-LIABILITIES> 3,246,700
<BONDS> 3,178,000
14,100
0
<COMMON> 875,900
<OTHER-SE> 6,736,000
<TOTAL-LIABILITY-AND-EQUITY> 16,127,600
<SALES> 0
<TOTAL-REVENUES> 3,371,900
<CGS> 0
<TOTAL-COSTS> 2,062,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,700
<INCOME-PRETAX> 506,300
<INCOME-TAX> 194,100
<INCOME-CONTINUING> 312,200
<DISCONTINUED> (2,900)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 309,300
<EPS-PRIMARY> 0.77
<EPS-DILUTED> 0.77
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Dec-31-1995
<CASH> 124,200
<SECURITIES> 0
<RECEIVABLES> 1,649,500
<ALLOWANCES> 125,800
<INVENTORY> 171,000
<CURRENT-ASSETS> 3,619,400
<PP&E> 19,915,900
<DEPRECIATION> 10,200,100
<TOTAL-ASSETS> 15,195,900
<CURRENT-LIABILITIES> 5,142,100
<BONDS> 3,253,000
32,500
0
<COMMON> 872,900
<OTHER-SE> 3,769,700
<TOTAL-LIABILITY-AND-EQUITY> 15,195,900
<SALES> 0
<TOTAL-REVENUES> 12,765,100
<CGS> 0
<TOTAL-COSTS> 7,971,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260,700
<INCOME-PRETAX> 1,480,400
<INCOME-TAX> 534,300
<INCOME-CONTINUING> 946,100
<DISCONTINUED> 14,500
<EXTRAORDINARY> (565,300)
<CHANGES> 0
<NET-INCOME> 395,300
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 132,200
<SECURITIES> 0
<RECEIVABLES> 1,642,200
<ALLOWANCES> 154,700
<INVENTORY> 213,200
<CURRENT-ASSETS> 2,214,300
<PP&E> 19,599,700
<DEPRECIATION> 8,648,600
<TOTAL-ASSETS> 15,218,500
<CURRENT-LIABILITIES> 2,997,700
<BONDS> 4,784,400
34,700
0
<COMMON> 871,400
<OTHER-SE> 3,805,300
<TOTAL-LIABILITY-AND-EQUITY> 15,218,500
<SALES> 0
<TOTAL-REVENUES> 3,079,100
<CGS> 0
<TOTAL-COSTS> 1,941,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,200
<INCOME-PRETAX> 354,100
<INCOME-TAX> 129,400
<INCOME-CONTINUING> 224,700
<DISCONTINUED> (400)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224,300
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.64
</TABLE>
