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, 2000
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 1-04721
SPRINT CORPORATION
(Exact name of registrant as specified in its charter)
KANSAS 48-0457967
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 11315, Kansas City, Missouri 64112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 624-3000
- --------------------------------------------------------------------------------
(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 these reports), and (2) has been subject to these filing
requirements for the past 90 days.
Yes X No
COMMON SHARES OUTSTANDING AT MARCH 31, 2000:
FON COMMON STOCK 790,373,816
PCS COMMON STOCK 915,218,373
CLASS A COMMON STOCK 86,236,036
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
Reference
Part I - Financial Information
<S> <C>
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk 1
Part II - Other Information
Item 1. Legal Proceedings 2
Item 2. Changes in Securities 2
Item 3. Defaults Upon Senior Securities 3
Item 4. Submission of Matters to a Vote of Security Holders 3
Item 5. Other Information 4
Item 6. Exhibits and Reports on Form 8-K 4
Signature 6
Exhibits
ANNEX I
ANNEX I
SPRINT CORPORATION
Consolidated Financial Information
Consolidated Statements of Operations I-1
Consolidated Statements of Comprehensive Income (Loss) I-3
Consolidated Balance Sheets I-4
Consolidated Statements of Cash Flows I-6
Consolidated Statement of Shareholders' Equity I-7
Condensed Notes to Consolidated Financial Statements I-8
Management's Discussion and Analysis of Financial Condition and Results of Operations I-11
ANNEX II
SPRINT FON GROUP
Combined Financial Information
Combined Statements of Operations II-1
Combined Statements of Comprehensive Income II-2
Combined Balance Sheets II-3
Combined Statements of Cash Flows II-4
Condensed Notes to Combined Financial Statements II-5
Management's Discussion and Analysis of Financial Condition and Results of Operations II-9
ANNEX III
SPRINT PCS GROUP
Combined Financial Information
Combined Statements of Operations III-1
Combined Statements of Comprehensive Loss III-2
Combined Balance Sheets III-3
Combined Statements of Cash Flows III-4
Condensed Notes to Combined Financial Statements III-5
Management's Discussion and Analysis of Financial Condition and Results of Operations III-8
</TABLE>
<PAGE>
Part I. - Financial Information
Item 1. Financial Statements
The information required by Item 1 is incorporated by reference from
Annex I, Annex II and Annex III included herein.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by Item 2 is incorporated by reference from
Annex I, Annex II and Annex III included herein.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Sprint's exposure to market risk through derivative financial
instruments and other financial instruments, such as investments in
marketable securities and long-term debt, is not material. There have
been no material changes in market risk since year-end 1999.
<PAGE>
PART II. - Other Information
Item 1. Legal Proceedings
There were no reportable events during the quarter ended March 31,
2000.
Item 2. Changes in Securities
On April 28, 2000, the shareholders of Sprint approved amendments to
Sprint's Articles of Incorporation and Bylaws.
Amendments to the Articles of Incorporation
Under the amended articles of incorporation, France Telecom and
Deutsche Telekom, which hold Series 3 FON common stock, Series 3 PCS
common stock and Class A common stock (together, Class A stock), no
longer have the ability to elect designated directors as a class.
Instead, France Telecom and Deutsche Telekom, as the holders of Class A
stock, will vote together with other Sprint shareholders in the
election of all directors generally. The amendments deleted numerous
provisions of the articles of incorporation relating to the ability of
France Telecom and Deutsche Telekom to designate directors by a
separate class vote.
Under the amended articles of incorporation, France Telecom and
Deutsche Telekom have the right to convert any of their shares into the
publicly traded classes and series of Sprint capital stock. In
particular, France Telecom and Deutsche Telekom may at any time convert
(1) any of their shares of Series 3 FON common stock into shares of
Series 1 FON common stock, and (2) any of their shares of Series 3 PCS
common stock into Series 1 PCS common stock. This also applies to the
shares of Series 3 FON common stock and Series 3 PCS common stock that
are issuable with respect to the shares of Class A common stock.
Under the amended articles of incorporation, France Telecom and
Deutsche Telekom are no longer entitled to vote their shares as a
separate class on amendments to Sprint's bylaws. The articles of
incorporation previously included the right to a class vote by the
holders of Class A stock on amendments to provisions of the bylaws that
related to the ability of the holders of the Class A stock to designate
directors by a separate class vote.
The amendments to the articles of incorporation deleted certain
disapproval rights of France Telecom and Deutsche Telekom, including
the right of France Telecom and Deutsche Telekom to disapprove:
- amendments to the articles of incorporation and bylaws that would
adversely affect their rights,
- issuances by Sprint of capital stock or debt securities with super
voting rights, and
- any action by Sprint before January 31, 2006, that would result in,
or is taken for the purpose of encouraging or facilitating, certain
competitors of France Telecom, Deutsche Telekom or Global One owning
10% or more of the outstanding voting power of Sprint.
The amendments also deleted provisions requiring the approval of the
independent directors of the Board of Directors before Sprint could
complete a transaction in which it issues securities representing 30%
or more of its total voting power and provisions that would have been
triggered if the Sprint Board of Directors had (1) decided to sell
control of Sprint in a way that resulted in a shareholder owning more
than 35% of the voting power of the resulting corporation, or (2)
decided not to oppose a tender offer for securities representing more
than 35% of the voting power of all Sprint voting securities.
In addition, the amendments deleted a provision that allowed France
Telecom and Deutsche Telekom, in cases where Sprint decided to (1) sell
all or substantially all of its assets or (2) sell control of Sprint in
a way that resulted in a 35% or larger shareholder in the resulting
entity, to participate on a basis no less favorable than that granted
any other participant.
<PAGE>
Amendments to the Bylaws
The amendments to the bylaws:
- removed references to the directors that France Telecom and Deutsche
Telekom elected by class vote,
- reflect the fact that under the amended articles of incorporation,
France Telecom and Deutsche Telekom vote together with other Sprint
shareholders in the election of all directors generally, and
- deleted provisions relating to the right of France Telecom and
Deutsche Telekom to vote their shares of Sprint capital stock as a
separate class on amendments to certain sections of the bylaws.
In addition, the amendments deleted provisions in the bylaws that
required at least one of the directors elected by a class vote of
France Telecom and Deutsche Telekom to be a member of the executive
committee of the Sprint Board of Directors. A similar provision
generally requiring that at least one of these directors be a member of
all other committees of the Board of Directors was also deleted.
Item 3. Defaults Upon Senior Securities
There were no reportable events during the quarter ended March 31,
2000.
Item 4. Submission of Matters to a Vote of Security Holders
On April 28, 2000, Sprint held a Special Meeting of Shareholders to
vote on (1) a proposal to adopt the merger agreement between
WorldCom, Inc. and Sprint, (2) a proposal to amend Sprint's Articles of
Incorporation and Bylaws, and (3) a proposal to amend the Employees
Stock Purchase Plan. The shareholders approved all three proposals.
The following votes were cast with respect to the proposal to adopt the
merger agreement:
For 993,478,554
Against 31,938,520
Abstain 4,159,464
Broker non-votes 165,379,369
The following votes were cast with respect to the proposal to amend
Sprint's Articles of Incorporation and Bylaws:
For 1,001,092,994
Against 22,586,023
Abstain 5,897,522
Broker non-votes 165,379,369
The following votes were cast with respect to the proposal to amend the
Employees Stock Purchase Plan:
For 1,156,353,462
Against 29,447,726
Abstain 9,154,722
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Item 5. Other Information
Ratio of Earnings to Fixed Charges
Sprint's earnings, as adjusted, were inadequate to cover fixed charges
by $72 million in the 2000 first quarter and $266 million in the 1999
first quarter. Earnings include loss from continuing operations before
taxes, plus equity in the net losses of less-than-50%-owned entities,
less capitalized interest. Fixed charges include interest on all debt
of continuing operations, including amortization of debt issuance costs
and the interest component of operating rents.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
(2) Agreement and Plan of Merger:
(a) Amended and Restated Agreement and Plan of Merger dated
March 8, 2000 between MCI WorldCom, Inc. and Sprint
Corporation (filed as Annex I to the Proxy
Statement/Prospectus that forms a part of MCI WorldCom's
Registration Statement No. 333-90421 and incorporated herein
by reference).
(b) Master Transfer Agreement dated January 21, 2000 between and
among France Telecom, Deutsche Telekom AG, NAB Nordamerika
Beteiligungs Holding GmbH, Atlas Telecommunications, S.A.,
Sprint Corporation, Sprint Global Venture, Inc. and the JV
Entities set forth in Schedule II thereto (filed as Exhibit
2 to Sprint Corporation's Current Report on Form 8-K dated
January 26, 2000 and incorporated herein by reference).
(c) Amendment No. 1 to the Master Transfer Agreement, dated as
of February 22, 2000 (filed as Exhibit 2B to Sprint
Corporation's Current Report on Form 8-K dated February 22,
2000 and incorporated herein by reference).
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation, as amended.
(b) Bylaws, as amended.
(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 November 23, 1998, between
Sprint Corporation and UMB Bank, n.a. (filed as Exhibit 4.1
to Amendment No. 1 to Sprint Corporation's Registration
Statement on Form 8-A relating to Sprint's PCS Group Rights,
filed November 25, 1998, and incorporated herein by
reference).
(c) Amended and Restated Standstill Agreement dated November 23,
1998, by and among Sprint Corporation, France Telecom S.A.
and Deutsche Telekom AG (filed as Exhibit 4E to
Post-Effective Amendment No. 2 to Sprint Corporation's
Registration Statement on Form S-3 (No. 33-58488) and
incorporated herein by reference).
(d) Tracking Stock Policies of Sprint Corporation (filed as
Exhibit 4D to Post-Effective Amendment No. 2 to Sprint
Corporation's Registration Statement on Form S-3 (No.
33-58488) and incorporated herein by reference).
(12) Computation of Ratio of Earnings to Fixed Charges
<PAGE>
(27) Financial Data Schedule
(a) March 31, 2000
(b) Reports on Form 8-K
Sprint filed a Current Report on Form 8-K dated January 26, 2000 in
which it reported that it had entered into a definitive agreement with
Deutsche Telekom and France Telecom to sell Sprint's interest in Global
One. Sprint also reported that it had announced fourth quarter 1999 and
calendar year 1999 results in both its FON Group and its PCS Group.
The news release regarding fourth quarter 1999 and calendar year 1999
results, which was included as an Exhibit to the Current Report dated
January 26, 2000, included the following financial information:
Sprint FON Group Combined Statements of Income
Sprint FON Group Selected Operating Results
Sprint FON Group Condensed Combined Balance Sheets
Sprint FON Group Condensed Combined Cash Flow Information
Sprint PCS Group Combined Statements of Operations
Sprint PCS Group Condensed Combined Balance Sheets
Sprint PCS Group Condensed Combined Cash Flow Information
Sprint Corporation Condensed Consolidated Balance Sheets
Sprint Corporation Condensed Consolidated Cash Flow Information
Sprint filed a Current Report on Form 8-K dated February 22, 2000 in
which it reported that it had completed the sale of its interest in
Global One. The Current Report included the following unaudited pro
forma consolidated financial statements for Sprint Corporation:
Pro Forma Consolidated Balance Sheets
Pro Forma Consolidated Statements of Operations
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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 10, 2000
<PAGE>
EXHIBIT EXHIBIT INDEX
NUMBER
(2) Agreement and Plan of Merger:
(a) Amended and Restated Agreement and Plan of Merger dated
March 8, 2000 between MCI WorldCom, Inc. and Sprint
Corporation (filed as Annex I to the Proxy
Statement/Prospectus that forms a part of MCI WorldCom's
Registration Statement No. 333-90421 and incorporated herein
by reference).
(b) Master Transfer Agreement dated January 21, 2000 between and
among France Telecom, Deutsche Telekom AG, NAB Nordamerika
Beteiligungs Holding GmbH, Atlas Telecommunications, S.A.,
Sprint Corporation, Sprint Global Venture, Inc. and the JV
Entities set forth in Schedule II thereto (filed as Exhibit
2 to Sprint Corporation's Current Report on Form 8-K dated
January 26, 2000 and incorporated herein by reference).
(c) Amendment No. 1 to the Master Transfer Agreement, dated as
of February 22, 2000 (filed as Exhibit 2B to Sprint
Corporation's Current Report on Form 8-K dated February 22,
2000 and incorporated herein by reference).
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation, as amended.
(b) Bylaws, as amended.
(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 November 23, 1998, between
Sprint Corporation and UMB Bank, n.a. (filed as Exhibit 4.1
to Amendment No. 1 to Sprint Corporation's Registration
Statement on Form 8-A relating to Sprint's PCS Group Rights,
filed November 25, 1998, and incorporated herein by
reference).
(c) Amended and Restated Standstill Agreement dated November 23,
1998, by and among Sprint Corporation, France Telecom S.A.
and Deutsche Telekom AG (filed as Exhibit 4E to
Post-Effective Amendment No. 2 to Sprint Corporation's
Registration Statement on Form S-3 (No. 33-58488) and
incorporated herein by reference).
(d) Tracking Stock Policies of Sprint Corporation (filed as
Exhibit 4D to Post-Effective Amendment No. 2 to Sprint
Corporation's Registration Statement on Form S-3 (No.
33-58488) and incorporated herein by reference).
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedule
(a) March 31, 2000
Exhibit 3(a)
ARTICLES OF INCORPORATION
OF SPRINT CORPORATION
(as amended April 28, 2000)
First
The name of the Corporation is SPRINT CORPORATION.
Second
This Corporation is organized for profit, and the purpose for which it is
formed is to engage in any 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
Section 1. Number of Directors. The number of Directors shall not be less than
ten nor more than 20 as may be determined from time to time by the affirmative
vote of the majority of the Board of Directors.
Section 2. Election of Directors. (a) Subject to clause (b) below, the holders
of Corporation 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
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.
(b) So long as Section 310 remains in effect, under no circumstances shall an
Alien Director elected by the holders of Corporation 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.
(c) The Directors (other than 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 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, successors to the class of Directors whose term expires at
that annual meeting shall be elected for a three-year term.
(d) 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
1
<PAGE>
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.
Section 3. Change in Number of Directors. If the number of Directors (other
than 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.
Section 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.
(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 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.
Section 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. Except to the extent required by law or as set forth in these
Articles of Incorporation or the Bylaws, 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 prior to
November 23, 2002, ARTICLE IV, SECTION 13 of the Bylaws may not be amended,
altered, repealed, superseded or made inoperative or ineffective by adoption of
other provisions to the Bylaws or these Articles of Incorporation (any such
action, a "CP Covered Bylaws Amendment") without the affirmative vote of the
holders of record of (i) a majority of the votes represented by the shares of
PCS Stock and Class A Common Stock then outstanding, voting together as a single
class in accordance with ARTICLE SIXTH, Section 3.2(d), and (ii) a majority of
the votes represented by the shares of Corporation Common Stock, voting together
as a single class, at any annual or special meeting of stockholders, the notice
of which shall have specified or summarized the proposed CP Covered Bylaws
Amendment.
Section 6. Removal. A Director (other than 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) 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
2
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removal for cause may be effected only by the affirmative vote of the holders of
a majority of the votes represented by the shares of the class or classes of
stockholders which were entitled to elect such Director.
Section 7. Definitions. Certain capitalized terms used in
this ARTICLE FIFTH without definition have the meanings set forth
in Section 10 of ARTICLE SIXTH.
Sixth
Section 1.1. Authorized Shares. The total number of shares of capital stock
which may be issued by this Corporation is 6,770,000,000, and the designation of
each class or series, the number of authorized shares of each class or series
and the par value of the shares of each class or series, are as follows:
<TABLE>
<CAPTION>
Designation Class Series No. of Shares Par Value
<S> <C> <C> <C> <C>
The "Series 1 FON Stock" FON Common Stock Series 1 2,500,000,000 $ 2.00 per share
The "Series 2 FON Stock" FON Common Stock Series 2 500,000,000 $ 2.00 per share
The "Series 3 FON Stock" FON Common Stock Series 3 1,200,000,000 $ 2.00 per share
The "Old Class A Common Stock" Class A Common Stock 100,000,000 $ 2.50 per share
The "Class A Common Stock-Series DT" Class A Common Stock Series DT 100,000,000 $ 2.50 per share
The "Series 1 PCS Stock" PCS Common Stock Series 1 1,250,000,000 $ 1.00 per share
The "Series 2 PCS Stock" PCS Common Stcok Series 2 500,000,000 $ 1.00 per share
The "Series 3 PCS Stock" PCS Common Stock Series 3 600,000,000 $ 1.00 per share
The "Preferred Stock" Preferred Stock See Section 20,000,000 No par value
13 below
</TABLE>
Section 1.2. Representation of Equity Value; Exchange of
Interests in Class A Common Stock. (a) The aggregate common
equity value of the Corporation and each Business Group shall, at
any time, be represented as follows:
(i) The total common equity value of the Corporation shall be represented by
the sum of the outstanding shares of (A) the FON Stock, (B) the PCS Stock and
(C) the Class A Common Stock.
(ii) The total common equity value of the FON Group shall be represented by
the sum of (A) the outstanding shares of the FON Stock and (B) the outstanding
shares of Old Class A Common Stock and Class A Common Stock--Series DT (but only
to the extent such stock represents a Number Of Shares Issuable With Respect To
The Old Class A Equity Interest In The FON Group and a Number Of Shares Issuable
With Respect To The Class A--Series DT Equity Interest In The FON Group,
respectively).
(iii) The total common equity value of the PCS Group shall be represented by
the sum of (A) the outstanding shares of the PCS Stock, (B) the Number Of Shares
Issuable With Respect To The FON Group Intergroup Interest, and (C) the
outstanding shares of Old Class A Common Stock and Class A Common Stock--Series
DT (but only to the extent such stock represents a Number Of Shares Issuable
With Respect To The Old Class A Equity Interest In The PCS Group and a Number Of
Shares Issuable With Respect To The Class A--Series DT Equity Interest In The
PCS Group, respectively).
(b) The Old Class A Common Stock and Class A Common Stock--Series DT shall, at
all times, be deemed to represent, respectively, a number of shares of Series 3
FON Stock and/or Series 3 PCS Stock equal to: (A) the Number Of Shares Issuable
With Respect To The Old Class A Equity Interest In The FON Group plus the Number
Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS
Group and (B) the Number Of Shares Issuable With Respect To The Class A--Series
DT Equity Interest In The FON Group plus the Number Of Shares Issuable With
Respect To The Class A--Series DT Equity Interest In The PCS Group.
(c) Each holder of a share of Old Class A Common Stock shall have the right,
exercisable at any time and from time to time, to cause the Corporation to issue
the following:
3
<PAGE>
(i) in respect of each share notionally represented in the Number Of Shares
Issuable With Respect To The Old Class A Equity Interest In The FON Group,
either a share of Series 3 FON Stock to such holder (or to a Qualified
Subsidiary of such holder) or a share of Series 1 FON Stock to a designee of
such holder, provided a transfer of such share to such designee is permitted
under the Stockholders' Agreement; or
(ii) in respect of each share notionally represented in the Number Of Shares
Issuable With Respect To The Old Class A Equity Interest In The PCS Group,
either a share of Series 3 PCS Stock to such holder (or to a Qualified
Subsidiary of such holder) or a share of Series 1 PCS Stock to a designee of
such holder, provided a transfer of such share to such designee is permitted
under the Stockholders' Agreement.
A holder of Old Class A Common Stock may exercise its right to cause any such
issuance solely with respect to the Number Of Shares Issuable With Respect To
The Old Class A Equity Interest In The FON Group, solely with respect to the
Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The
PCS Group, or any combination thereof; provided,
(x) when the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The FON Group is reduced to zero, no further shares of Series 1 FON
Stock or Series 3 FON Stock may be issued pursuant to this Section 1.2(c),
(y) when the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The PCS Group is reduced to zero, no further shares of Series 1 PCS
Stock or Series 3 PCS Stock may be issued pursuant to this Section 1.2(c), and
(z) if at any time the Number Of Shares Issuable With Respect To The Old Class
A Equity Interest In The FON Group and the Number Of Shares Issuable With
Respect To The Old Class A Equity Interest In The PCS Group are both zero, the
Old Class A Common Stock may be redeemed, at the Corporation's option, at a
redemption price of $0.001 per share.
(d) Each holder of a share of Class A Common Stock--Series DT shall have the
right, exercisable at any time and from time to time, to cause the Corporation
to issue the following:
(i) in respect of each share notionally represented in the Number Of Shares
Issuable With Respect To The Class A--Series DT Equity Interest In The FON
Group, either a share of Series 3 FON Stock to such holder (or to a Qualified
Subsidiary of such holder) or a share of Series 1 FON Stock to a designee of
such holder, provided a transfer of such share to such designee is permitted
under the Stockholders' Agreement; and
(ii) in respect of each share notionally represented in the Number Of Shares
Issuable With Respect To The Class A--Series DT Equity Interest In The PCS
Group, either a share of Series 3 PCS Stock to such holder (or to a Qualified
Subsidiary of such holder) or a share of Series 1 PCS Stock to a designee of
such holder, provided a transfer of such share to such designee is permitted
under the Stockholders' Agreement.
A holder of Class A Common Stock--Series DT may exercise its right to cause
any such issuance solely with respect to the Number Of Shares Issuable With
Respect To The Class A--Series DT Equity Interest In The FON Group, solely with
respect to the Number Of Shares Issuable With Respect To The Class A--Series DT
Equity Interest In The PCS Group, or any combination thereof; provided,
(i) when the Number Of Shares Issuable With Respect To The Class A--Series DT
Equity Interest In The FON Group is reduced to zero, no further shares of Series
1 FON Stock or Series 3 FON Stock may be issued pursuant to this Section 1.2(d),
(ii) when the Number Of Shares Issuable With Respect To The Class A--Series DT
Equity Interest In The PCS Group is reduced to zero, no further shares of Series
1 PCS Stock or Series 3 PCS Stock may be issued pursuant to
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this Section 1.2(d),
and
(iii) if at any time the Number Of Shares Issuable With Respect To The Class
A--Series DT Equity Interest In The FON Group and the Number Of Shares Issuable
With Respect To The Class A--Series DT Equity Interest In The PCS Group are both
zero, the Class A Common Stock--Series DT may be redeemed, at the Corporation's
option, at a redemption price of $0.001 per share.
(e) Automatic Reclassification and Adjustment to Par Value
Amount.
(i) Upon each issuance of any shares of Series 1 FON Stock and/or Series 3 FON
Stock, on the one hand, and Series 1 PCS Stock and/or Series 3 PCS Stock, on the
other, in accordance with Section 1.2(c) or Section 8.3(a), each share of the
Corporation's existing Old Class A Common Stock will be automatically
reclassified into a share of Class A Common Stock with a par value amount equal
to the Reduced Par Value Amount and the Number Of Shares Issuable With Respect
To The Old Class A Equity Interest In The FON Group and the Number Of Shares
Issuable With Respect To The Old Class A Equity Interest In The PCS Group,
respectively, will be reduced in accordance with the definitions of such terms
set forth in ARTICLE SIXTH, Section 10; provided that after each such
reclassification, the sum of (x) the total number of outstanding shares of
Series 1 FON Stock and/or Series 3 FON Stock, on the one hand, or Series 1 PCS
Stock and/or Series 3 PCS Stock, on the other, so issued in accordance with
Section 1.2(c) or Section 8.3(a) times the par value per share of such stock and
(y) the total number of outstanding shares of Old Class A Common Stock
immediately after such issuance times the Reduced Par Value Amount will always
equal (z) the total number of outstanding shares of Old Class A Common Stock
immediately prior to such issuance times the par value per share of such shares
existing immediately prior to such issuance.
(ii) Upon each issuance of any shares of Series 1 FON Stock and/or Series 3
FON Stock, on the one hand, and Series 1 PCS Stock and/or Series 3 PCS Stock, on
the other, in accordance with Section 1.2(d) or Section 8.3(a), each share of
the Corporation's existing Class A Common Stock--Series DT will be automatically
reclassified into a share of Class A Common Stock--Series DT with a par value
amount equal to the Reduced Par Value Amount and the Number Of Shares Issuable
With Respect To The Class A--Series DT Equity Interest In The FON Group and the
Number Of Shares Issuable With Respect To The Class A--Series DT Equity Interest
In The PCS Group, respectively, will be reduced in accordance with the
definitions of such terms set forth in ARTICLE SIXTH, Section 10; provided that
after each such reclassification, the sum of (x) the total number of outstanding
shares of Series 1 FON Stock and/or Series 3 FON Stock, on the one hand, or
Series 1 PCS Stock and/or Series 3 PCS Stock, on the other, so issued in
accordance with Section 1.2(d) or Section 8.3(a) times the par value per share
of such stock and (y) the total number of outstanding shares of Class A Common
Stock--Series DT immediately after such issuance times the Reduced Par Value
Amount will always equal (z) the total number of outstanding shares of Class A
Common Stock--Series DT immediately prior to such issuance times the par value
per share of such shares existing immediately prior to such issuance.
(f) Notice Provisions; Issuance of Stock Certificates, etc.
(i) A Class A Holder shall exercise its rights under this Section 1.2 by
delivering a written notice to the Corporation (an "Issuance Notice") signed by
an authorized officer of the Class A Holder specifying (1) the class and series
of the Shares to be issued by the Corporation, (2) the number of shares of each
to be issued pursuant to such request, and (3) the name of the Person in whose
name the shares are to be issued (such a Person, a "Designee").
(ii) As promptly as practical after receipt of an Issuance Notice, and in no
event later than 5 Business Days thereafter, the Corporation will deliver or
cause to be delivered a certificate or certificates representing the number of
duly issued, fully paid and nonassessable shares issued pursuant to the Issuance
Notice; provided, however, that the Corporation shall not be obligated to issue
such shares if any material defect exists with respect to such Issuance Notice.
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(iii) Immediately upon the issuance of the shares of Series 1 FON Stock,
Series 3 FON Stock, Series 1 PCS Stock and Series 3 PCS Stock pursuant to an
Issuance Notice, the Designee shall be treated for all purposes as having become
the record holder of the shares of such stock so issued.
(iv) 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 shares in connection with an Issuance Notice pursuant to
this Section 1.2, 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 such shares in a name other than that of the
registered holder of the Class A Common Stock that gave rise to the right to
cause the issuance of such Shares, 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.
(v) In addition to the obligations of the Corporation contained in these
Articles of Incorporation to reserve and keep available Shares, this Corporation
shall at all times reserve and keep available, out of the aggregate of its
authorized but unissued Series 3 FON Stock, Series 3 PCS Stock, Series 1 PCS
Stock and Series 1 FON Stock and its issued Series 1 FON Stock or Series 1 PCS
Stock held in its treasury, Shares for the purpose of effecting the issuances of
the Series 3 FON Stock, Series 1 FON Stock, Series 3 PCS Stock and Series 1 PCS
Stock contemplated hereby.
Section 2. General Provisions Relating to All Stock.
2.1. Preemptive Rights; Cumulative Voting. No holder of shares of capital
stock of any class or series of this Corporation or holder of any security or
obligation convertible into shares of capital stock of any class or series of
this Corporation shall have any preemptive right whatsoever to subscribe for,
purchase or otherwise acquire shares of capital stock of any class or series of
this Corporation, whether now or hereafter authorized; provided that this
provision shall not (i) prohibit this Corporation from granting, contractually
or otherwise, to any such holder, the right to purchase additional securities of
this Corporation or (ii) otherwise limit or otherwise modify any rights of any
such holder pursuant to any such contract or other agreement. Stockholders of
this Corporation shall not be entitled to cumulative voting of their shares in
elections of Directors.
2.2. Redemption of Shares Held by Aliens. Notwithstanding any other provision
of these Articles of Incorporation to the contrary, outstanding shares of
Non-Class A Common Stock Beneficially Owned by Aliens 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
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any of its Subsidiaries to comply with the requirements of Section 310 (each of
(i) through (iv), a "Fair Price Condition"), provided that (i) for purposes of
these Articles of Incorporation, redemption of the Class A Common Stock is
deemed to occur upon the reduction, in consideration of payments otherwise made
in respect of redemptions under this Section 2.2, of Shares Issuable With
Respect To The Class A Equity Interest In The FON Group or Shares Issuable With
Respect To The Class A Equity Interest In The PCS Group that are represented by
the Class A Common Stock (with any such redemption of shares of Class A Common
Stock being referred to in this Section 2.2 as a redemption of Shares Issuable
With Respect To The Class A Equity Interest In The FON Group or Shares Issuable
With Respect To The Class A Equity Interest In The PCS Group, as applicable) and
(ii) Series 3 FON Stock, Series 3 PCS Stock, Shares Issuable With Respect To The
Class A Equity Interest In The FON Group and Shares Issuable With Respect To The
Class A Equity Interest In The PCS Group may only be redeemed if, and only to
the extent that, they represent in the aggregate 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 2.2(f), the redemption price of the shares
to be redeemed pursuant to this Section 2.2 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 Section 2.2(d), provided that, except as
provided in Section 2.2(f), such redemption price as to any Alien who purchased
such shares of Non-Class A 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
(i) in all cases be entitled to redeem shares of Non-Class A Common Stock
Beneficially Owned by Aliens prior to redeeming any shares of Series 3 FON
Stock, Series 3 PCS Stock, Shares Issuable With Respect To The Class A Equity
Interest In The FON Group or Shares Issuable With Respect To The Class A Equity
Interest In The PCS Group Beneficially Owned by Aliens,
(ii) redeem Shares Issuable With Respect To The Class A Equity Interest In The
FON Group or Shares Issuable With Respect To The Class A Equity Interest In The
PCS Group of the holders of Old Class A Common Stock and Class A Common
Stock--Series DT on a pro rata basis,
(iii) redeem, on a pro rata basis, Shares Issuable With Respect To The Class A
Equity Interest In The FON Group based on the ratio of the Number Of Shares
Issuable With Respect To The Old Class A Equity Interest In The FON Group to the
Number Of Shares Issuable With Respect To The Class A--Series DT Equity Interest
In The FON Group,
(iv) redeem, on a pro rata basis, Shares Issuable With Respect To The Class A
Equity Interest In The PCS Group based on the ratio of the Number Of Shares
Issuable With Respect To The Old Class A Equity Interest In The PCS Group to the
Number Of Shares Issuable With Respect To The Class A--Series DT Equity Interest
In The PCS Group, and
(v) redeem shares of Series 3 PCS Stock and Series 3 FON Stock prior to
redeeming Shares Issuable With
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Respect To The Class A Equity Interest In The FON Group and Shares
Issuable With Respect To The Class A Equity Interest In The PCS Group;
(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,
(1) if any Shares Issuable With Respect To The Class A Equity Interest In The
FON Group or Shares Issuable With Respect To The Class A Equity Interest In The
PCS Group are redeemed pursuant to this Section 2.2, (x) the redemption price,
on a per share basis, of Shares Issuable With Respect To The Class A Equity
Interest In The FON Group shall be an amount equal to the redemption price of a
share of Series 3 FON Stock calculated pursuant to subsection (f)(2) of this
Section 2.2, and (y) the redemption price, on a per share basis, of Shares
Issuable With Respect To The Class A Equity Interest In The PCS Group shall be
an amount equal to the redemption price of shares of Series 3 PCS Stock
calculated pursuant to subsection (f)(4) of this Section 2.2;
(2) if any shares of Series 3 FON Stock are redeemed pursuant to this Section
2.2, the redemption price thereof shall be the Market Price of a share of Series
1 FON Stock on the Redemption Date;
(3) if any shares of Series 2 PCS Stock (or Series 2 FON Stock, if applicable)
are redeemed pursuant to this Section 2.2, the redemption price of any such
shares redeemed shall be the Market Price of a share of Series 1 PCS Stock (or
Series 1 FON Stock, if applicable) on the Redemption Date; and
(4) if any shares of Series 3 PCS Stock are redeemed pursuant to this Section
2.2, the redemption price thereof shall be the Market Price of a share of Series
1 PCS 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 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 11 of
ARTICLE SIXTH 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.
2.3. Beneficial Ownership Inquiry. (a) This Corporation may
by written notice require a Person that is a
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holder of record of Non-Class A Common Stock or Class A Stock or that this
Corporation knows to have, or has reasonable cause to believe has, Beneficial
Ownership of Non-Class A Common Stock or Class A Stock, to certify that, to the
knowledge of such Person:
(i) no Non-Class A 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 Non-Class A 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 Non-Class A Common Stock or Class A Stock identified
by such Person in response to Section 2.3(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 2.2 of
ARTICLE SIXTH.
(c) For purposes of applying Section 2.2 of ARTICLE SIXTH with respect to any
Non-Class A Common Stock or Class A Stock, if any Person fails to provide the
certificate or other information to which this Corporation is entitled pursuant
to this Section 2.3, this Corporation in its sole discretion may presume that
the Non- Class A Common Stock or Class A Stock in question is, or is not,
Beneficially Owned by Aliens.
2.4. Factual Determinations. The Board of Directors shall have the power and
duty to construe and apply the provisions of Sections 2.2 and 2.3 of ARTICLE
SIXTH and, with respect to shares of Non-Class A Common Stock, to make all
determinations necessary or desirable to implement such provisions, including
but not limited to: (a) the number of shares of Non-Class A 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 2.2 of ARTICLE SIXTH.
2.5. 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.
Section 3. Voting Powers.
Section 3.1. General. Except as otherwise provided by law or as expressly set
forth in ARTICLE FIFTH or in this ARTICLE SIXTH, each share of Corporation
Common Stock shall be entitled to vote, as provided in ARTICLE SIXTH, Section
3.2 and ARTICLE SIXTH, Section 7.5(d) (with respect to Class A Stock only), on
all matters in respect of which the holders of Corporation Common Stock are
entitled to vote, and, except as otherwise
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provided by the terms of any outstanding series of Preferred Stock, the holders
of Corporation 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; provided, however, that
(i) holders of FON Stock and Class A Common Stock, voting together as a single
class in accordance with Section 3.2(c), shall be entitled to vote upon a
proposed amendment to these Articles of Incorporation if such amendment would
(A) increase or decrease the aggregate number of authorized shares of FON Stock,
(B) increase or decrease the par value of the shares of FON Stock or (C) alter
or change the powers, preferences or special rights of the shares of FON Stock
so as to affect them adversely, and
(ii) holders of PCS Stock and Class A Common Stock, voting together as a
single class in accordance with Section 3.2(d), shall be entitled to vote upon a
proposed amendment to these Articles of Incorporation if such amendment would
(A) increase or decrease the aggregate number of authorized shares of PCS Stock,
(B) increase or decrease the par value of shares of PCS Stock or (C) alter or
change the powers, preferences or special rights of the shares of PCS Stock so
as to affect them adversely.
The Board of Directors is authorized to adopt resolutions requiring the
approval of any class or series of capital stock, alone or together with any
other class or series of capital stock, as a condition precedent, or condition
subsequent, to the approval, adoption, authorization or consummation of any
action, transaction or any other matter by or involving the Corporation, and no
provision contained in the Amended and Restated Articles of Incorporation shall
be interpreted to limit or restrict such authority in any way.
Section 3.2. Number of Votes. (a) On each matter to be voted
on by the holders of Non-Class A Common Stock and Class A Stock
voting together as a single class,
(i) each outstanding share of Series 1 FON and Series 3 FON Stock is entitled
to one vote (subject, in the case of the Series 3 FON Stock, to any increase in
accordance with ARTICLE SIXTH, Section 7.5(d));
(ii) subject to any increase resulting from the provisions of ARTICLE SIXTH,
Section 7.5(d), each outstanding share of Old Class A Common Stock and Class A
Common Stock--Series DT is entitled to a number of votes (which, at any time,
may be more or less than one whole vote and may include a fraction of a vote)
equal to the sum of (A) in the case of the Old Class A Common Stock, the Old
Class A FON Vote Per Share and the Old Class A PCS Vote Per Share (computed as
of the tenth Trading Day preceding the record date for determining the
stockholders entitled to vote, expressed as a decimal fraction rounded to the
nearest three decimal places); and (B) in the case of the Class A Common
Stock--Series DT, the Class A--Series DT FON Vote Per Share and the Class
A--Series DT PCS Vote Per Share (computed as of the tenth Trading Day preceding
the record date for determining the stockholders entitled to vote, expressed as
a decimal fraction rounded to the nearest three decimal places);
(iii) each outstanding share of Series 1 PCS Stock is entitled to a number of
votes (which, at any time, may be more or less than one whole vote and may
include a fraction of a vote) (the "PCS Per Share Vote") equal to the number of
votes determined by multiplying one by the ratio of the Average Trading Price of
one share of Series 1 PCS Stock to the Average Trading Price of one share of
Series 1 FON Stock computed as of the tenth Trading Day preceding the record
date for determining the stockholders entitled to vote, expressed as a decimal
fraction rounded to the nearest three decimal places;
(iv) each outstanding share of Series 2 PCS Stock is entitled to a number of
votes (which, at any time, may be more or less than one whole vote and may
include a fraction of one vote) equal to ten percent of the applicable PCS Per
Share Vote as determined in accordance with Section 3.2(a)(iii);
(v) each outstanding share of Series 3 PCS Stock is entitled to a number of
votes (which, at any time, may be more or less than one whole vote and may
include a fraction of one vote) equal to the applicable PCS Per Share
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Vote as determined in accordance with Section 3.2(a)(iii) (subject to any
increase in accordance with ARTICLE SIXTH, Section 7.5(d)); and
(vi) each outstanding share of Series 2 FON Stock is entitled to ten percent
of one vote.
(b) On each matter to be voted on by the holders of Non-Class A Common Stock
voting together as a single class,
(i) each outstanding share of Series 1 FON Stock is entitled
to one vote;
(ii) each outstanding share of Series 1 PCS Stock is entitled to the PCS Per
Share Vote determined in accordance with Section 3.2(a)(iii);
(iii) each outstanding share of Series 2 PCS Stock is entitled to a number of
votes determined in accordance with Section 3.2(a)(iv); and
(iv) each outstanding share of Series 2 FON Stock is entitled to ten percent
of one vote.
(c) On each matter to be voted on by the holders of FON Stock and Class A
Common Stock, voting together as a single class, each outstanding share of (i)
Series 1 FON Stock, Series 2 FON Stock and Series 3 FON Stock is entitled to one
vote and (ii) Old Class A Common Stock and Class A Common Stock--Series DT is
entitled to the Old Class A FON Vote Per Share and the Class A--Series DT FON
Vote Per Share, respectively.
(d) On each matter to be voted on by the holders of the PCS Stock and Class A
Common Stock voting together as a single class, each outstanding share of (i)
Series 1 PCS Stock, Series 2 PCS Stock and Series 3 PCS Stock is entitled to one
vote and (ii) Old Class A Common Stock and Class A Common Stock--Series DT is
entitled to the Old Class A PCS Vote Per Share and the Class A--Series DT PCS
Vote Per Share, respectively.
(e) On each matter to be voted on by the holders of the Class A Stock voting
together as a single class, each outstanding share of (i) Series 3 FON Stock is
entitled to one vote, (ii) Series 3 PCS Stock is entitled to the PCS Vote Per
Share determined in accordance with Section 3.2(a)(v), and (iii) Old Class A
Common Stock and Class A Common Stock--Series DT is entitled to their respective
per share vote determined in accordance with Section 3.2(a)(ii).
(f) In addition to the foregoing provisions of this Section 3, (i) if shares
of only one class or series of Corporation Common Stock are outstanding on the
record date for determining the holders of Corporation Common Stock entitled to
vote on any matter, then each share of that class or series shall be entitled to
one vote and (ii) if any class or any series of Corporation Common Stock votes
as a single class with respect to any matter, each share of that class or series
shall, for purposes of such vote, be entitled to one vote on such matter except
with respect to a vote of Old Class A Common Stock and Class A Common
Stock--Series DT voting together as a single class, in which case each share of
such stock shall be entitled to its per share vote determined in accordance with
Section 3.2(a)(ii).
Section 4. Liquidation Rights. If any voluntary or involuntary liquidation,
dissolution or winding up of this Corporation occurs, then 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, the
holders of Corporation Common Stock shall be entitled to receive the remaining
assets of the Corporation, regardless of the Business Group to which such assets
are attributed in accordance with Section 10 of this ARTICLE SIXTH, divided
among such holders in accordance with the per share "Liquidation Units"
attributable to each such class or series of stock as follows:
(i) each share of Series 1 FON Stock, Series 2 FON Stock and Series 3 FON
Stock is hereby attributed one
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"Liquidation Unit,"
(ii) at the time of the liquidation, dissolution or winding up of this
Corporation, each share of Old Class A Common Stock will be attributed a number
of "Liquidation Units" (which may be more or less than one whole "Liquidation
Unit" and may include a fraction of a "Liquidation Unit") equal to (A) the sum
of (I) the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The FON Group and (II) the product of the Number Of Shares Issuable
With Respect To The Old Class A Equity Interest In The PCS Group and the PCS
Ratio, divided by (B) the aggregate number of shares of Old Class A Common Stock
outstanding;
(iii) at the time of the liquidation, dissolution or winding up of this
Corporation, each share of Class A Common Stock--Series DT will be attributed a
number of "Liquidation Units" (which may be more or less than one whole
"Liquidation Unit" and may include a fraction of a "Liquidation Unit") equal to
(A) the sum of (I) the Number Of Shares Issuable With Respect To The Class
A--Series DT Equity Interest In The FON Group and (II) the product of the Number
Of Shares Issuable With Respect To The Class A--Series DT Equity Interest In The
PCS Group and the PCS Ratio, divided by (B) the aggregate number of shares of
Class A Common Stock--Series DT outstanding; and
(iv) each share of PCS Stock is hereby attributed the number of "Liquidation
Units" determined by multiplying one by the PCS Ratio.
The per share "Liquidation Units" of each such class or series of stock are
subject to adjustment as determined by the Board of Directors to be appropriate
to reflect equitably (i) any subdivision (by stock split or otherwise) or
combination (by reverse stock split or otherwise) of such class or series of
stock or (ii) any dividend or other distribution of shares of such class or
series of stock to holders of shares of such class or series of stock. 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 Section 4. Notwithstanding the foregoing, any transaction or series of
related transactions which results in the distribution of all or substantially
all of the assets of the PCS Group (excluding any portion of such assets
retained by the Corporation or distributed to holders of FON Stock in respect of
the FON Group Intergroup Interest Fraction) to the holders of the outstanding
PCS Stock and Class A Common Stock (to the extent of any Shares Issuable With
Respect To The Class A Equity Interest In The PCS Group) by way of the
distribution of equity interests in one or more entities that collectively hold,
directly or indirectly, all or substantially all of the assets of the PCS Group
(including, without limitation, the PCS Group Subsidiary) shall not constitute a
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation for purposes of this Section 4 but shall be subject to ARTICLE
SIXTH, Section 7.2.
Section 5. Dividends. Dividends shall be declared and paid only out of net
income or surplus of this Corporation and may be declared and paid upon each
class and series of Corporation Common Stock, upon the terms with respect to
each such class and series, and subject to the limitations provided for in this
Section 5 and in Section 13, as the Board of Directors may determine.
5.1. Generally. Dividends on Corporation Common Stock may be
declared and paid only out of the funds of the Corporation
legally available therefor.
5.1.1. The holders of the Series 1 FON Stock shall be entitled to receive,
when and if declared by the Board of Directors in accordance with this Section
5.1, dividends in respect of the Series 1 FON Stock equivalent on a per share
basis to those payable on the Series 2 FON Stock. Dividends on the Series 1 FON
Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 2 FON Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 2 FON Stock, plus the full per share amount (payable in kind) of any
non-cash dividend paid on shares of Series 2 FON Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Series 2 FON Stock
payable in shares of Series 2 FON Stock or Series 2 PCS Stock, or in options,
warrants or rights to acquire shares of Series 2
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FON Stock or Series 2 PCS Stock, or in securities convertible into or
exchangeable for shares of Series 2 FON Stock or Series 2 PCS 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
Series 1 FON Stock payable in shares of Series 1 FON Stock or Series 1 PCS
Stock, respectively, or equivalent corresponding options, warrants or rights to
acquire shares of Series 1 FON Stock or Series 1 PCS Stock, respectively, or
equivalent corresponding securities convertible into or exchangeable for shares
of Series 1 FON Stock or Series 1 PCS Stock, respectively.
5.1.2. The holders of the Series 1 FON Stock shall be entitled to receive,
when and if declared by the Board of Directors in accordance with this Section
5.1, dividends in respect of the Series 1 FON Stock equivalent on a per share
basis to those payable on the Series 3 FON Stock. Dividends on the Series 1 FON
Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 3 FON Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 3 FON Stock, plus the full per share amount (payable in kind) of any
non-cash dividend paid on shares of Series 3 FON Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Series 3 FON Stock
payable in shares of Series 3 FON Stock or Series 3 PCS Stock, or in options,
warrants or rights to acquire shares of Series 3 FON Stock or Series 3 PCS
Stock, or in securities convertible into or exchangeable for shares of Series 3
FON Stock or Series 3 PCS 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 Series 1 FON Stock payable in shares of
Series 1 FON Stock or Series 1 PCS Stock, respectively, or equivalent
corresponding options, warrants or rights to acquire shares of Series 1 FON
Stock or Series 1 PCS Stock, respectively, or equivalent corresponding
securities convertible into or exchangeable for shares of Series 1 FON Stock or
Series 1 PCS Stock, respectively.
5.1.3. The holders of shares of Series 2 FON Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 2 FON Stock equivalent on a per
share basis to those payable on the Series 1 FON Stock. Dividends on the Series
2 FON Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 1 FON Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 1 FON Stock, plus the full per share amount (payable in kind) of any
non-cash dividend paid on shares of Series 1 FON Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Series 1 FON Stock
payable in shares of Series 1 FON Stock or Series 1 PCS Stock, or in options,
warrants or rights to acquire shares of Series 1 FON Stock or Series 1 PCS
Stock, or in securities convertible into or exchangeable for shares of Series 1
FON Stock or Series 1 PCS 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 Series 2 FON Stock payable in shares of
Series 2 FON Stock or Series 2 PCS Stock, respectively, or equivalent
corresponding options, warrants or rights to acquire shares of Series 2 FON
Stock or Series 2 PCS Stock, respectively, or equivalent corresponding
securities convertible into or exchangeable for shares of Series 2 FON Stock or
Series 2 PCS Stock, respectively.
5.1.4. The holders of shares of Series 2 FON Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 2 FON Stock equivalent on a per
share basis to those payable on the Series 3 FON Stock. Dividends on the Series
2 FON Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 3 FON Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 3 FON Stock, plus the full per share amount (payable in kind) of any
non-cash dividend paid on shares of Series 3 FON Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Series 3 FON Stock
payable in shares of Series 3 FON Stock or Series 3 PCS Stock, or in options,
warrants or rights to acquire shares of Series 3 FON Stock or Series 3 PCS
Stock, or in securities convertible into or exchangeable for shares of Series 3
FON Stock or Series 3 PCS 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 Series 2 FON Stock payable in shares of
Series 2 FON Stock or Series 2 PCS Stock, respectively or equivalent
corresponding options, warrants or rights to acquire shares of Series 2 FON
Stock or Series 2 PCS Stock, respectively, or equivalent corresponding
securities convertible into or exchangeable for shares of Series 2 FON Stock or
Series 2 PCS Stock, respectively.
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5.1.5. The holders of shares of Series 3 FON Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 3 FON Stock equivalent on a per
share basis to those payable on the Series 1 FON Stock. Dividends on the Series
3 FON Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 1 FON Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 1 FON Stock, plus the full per share amount (payable in kind) of any
non-cash dividend paid on shares of Series 1 FON Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Series 1 FON Stock
payable in shares of Series 1 FON Stock or Series 1 PCS Stock, or in options,
warrants or rights to acquire shares of Series 1 FON Stock or Series 1 PCS
Stock, or in securities convertible into or exchangeable for shares of Series 1
FON Stock or Series 1 PCS 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 Series 3 FON Stock payable in shares of
Series 3 FON Stock or Series 3 PCS stock, respectively, or equivalent
corresponding options, warrants or rights to acquire shares of Series 3 FON
Stock or Series 3 PCS Stock, respectively, or equivalent corresponding
securities convertible into or exchangeable for shares of Series 3 FON Stock or
Series 3 PCS Stock, respectively.
5.1.6. The holders of shares of Series 3 FON Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 3 FON Stock equivalent on a per
share basis to those payable on the Series 2 FON Stock. Dividends on the Series
3 FON Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 2 FON Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 2 FON Stock, plus the full per share amount (payable in kind) of any
non-cash dividend paid on shares of Series 2 FON Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Series 2 FON Stock
payable in shares of Series 2 FON Stock or Series 2 PCS Stock, or in options,
warrants or rights to acquire shares of Series 2 FON Stock or Series 2 PCS
Stock, or in securities convertible into or exchangeable for shares of Series 2
FON Stock or Series 2 PCS 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 Series 3 FON Stock payable in shares of
Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent
corresponding options, warrants or rights to acquire shares of Series 3 FON
Stock or Series 3 PCS Stock, respectively, or equivalent corresponding
securities convertible into or exchangeable for shares of Series 3 FON Stock or
Series 3 PCS Stock, respectively.
5.1.7. In addition to the entitlement with respect to dividends contained in
Sections 5.1.16 through 5.1.18, the holders of shares of Class A Common Stock
shall be entitled to receive, when and if declared by the Board of Directors in
accordance with this Section 5.1, dividends in respect of the Class A Common
Stock equivalent on a Per Class A FON Share Basis to those payable on a per
share basis to the Series 1 FON 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 Series 1 FON Stock and shall be in an amount, on a Per
Class A FON Share Basis, equal to (i) the full per share amount of any cash
dividend paid on shares of Series 1 FON Stock plus (ii) the full per share
amount (payable in kind) of any non-cash dividend paid on shares of Series 1 FON
Stock, provided that if this Corporation shall declare and pay any dividend on
shares of Series 1 FON Stock payable in shares of Series 1 FON Stock or Series 1
PCS Stock, or in options, warrants or rights to acquire shares of Series 1 FON
Stock or Series 1 PCS Stock, or in securities convertible into or exchangeable
for shares of Series 1 FON Stock or Series 1 PCS 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 on a Per Class A FON Share Basis on
the Class A Common Stock payable in shares of Series 3 FON Stock or Series 3 PCS
Stock, respectively, or equivalent corresponding options, warrants or rights to
acquire shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or
equivalent corresponding securities convertible into or exchangeable for shares
of Series 3 FON Stock or Series 3 PCS Stock, respectively.
5.1.8. In addition to the entitlement with respect to dividends contained in
Sections 5.1.16 through 5.1.18, the holders of shares of Class A Common Stock
shall be entitled to receive, when and if declared by the Board of Directors in
accordance with this Section 5.1, dividends in respect of the Class A Common
Stock equivalent on a Per Class A FON Share Basis to those payable on a per
share basis to the Series 2 FON Stock. Dividends on the Class A Common Stock
shall be payable on the same date fixed for the payment of the corresponding
dividend on
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shares of Series 2 FON Stock and shall be in an amount, on a Per Class A FON
Share Basis, equal to (i) the full per share amount of any cash dividend paid on
shares of Series 2 FON Stock plus (ii) the full per share amount (payable in
kind) of any non-cash dividend paid on shares of Series 2 FON Stock, provided
that if this Corporation shall declare and pay any dividend on shares of Series
2 FON Stock payable in shares of Series 2 FON Stock or Series 2 PCS Stock, or in
options, warrants or rights to acquire shares of Series 2 FON Stock or Series 2
PCS Stock, or in securities convertible into or exchangeable for shares of
Series 2 FON Stock or Series 2 PCS 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 on a Per Class A FON Share Basis on the Class A
Common Stock payable in shares of Series 3 FON Stock or Series 3 PCS Stock,
respectively, or equivalent corresponding options, warrants or rights to acquire
shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent
corresponding securities convertible into or exchangeable for shares of Series 3
FON Stock or Series 3 PCS Stock, respectively.
5.1.9. In addition to the entitlement with respect to dividends contained in
Sections 5.1.16 through 5.1.18, the holders of shares of Class A Common Stock
shall be entitled to receive, when and if declared by the Board of Directors in
accordance with this Section 5.1, dividends in respect of the Class A Common
Stock, on a Per Class A FON Share Basis, equal to those payable on a per share
basis to the Series 3 FON 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 Series 3 FON Stock and shall be in an amount, on a Per Class A FON
Share Basis, equal to (i) the full per share amount of any cash dividend paid on
shares of Series 3 FON Stock plus (ii) the full per share amount (payable in
kind) of any non-cash dividend paid on shares of Series 3 FON Stock, provided
that if this Corporation shall declare and pay any dividend on shares of Series
3 FON Stock payable in shares of Series 3 FON Stock or Series 3 PCS Stock, or in
options, warrants or rights to acquire shares of Series 3 FON Stock or Series 3
PCS Stock, or in securities convertible into or exchangeable for shares of
Series 3 FON Stock or Series 3 PCS 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 on a Per Class A FON Share Basis on the Class A
Common Stock payable in shares of Series 3 FON Stock or Series 3 PCS Stock,
respectively, or equivalent corresponding options, warrants or rights to acquire
shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent
corresponding securities convertible into or exchangeable for shares of Series 3
FON Stock or Series 3 PCS Stock, respectively.
5.1.10. The holders of the Series 1 PCS Stock shall be entitled to receive,
when and if declared by the Board of Directors in accordance with this Section
5.1, dividends in respect of the Series 1 PCS Stock equivalent on a per share
basis to those payable on the Series 2 PCS Stock. Dividends on the Series 1 PCS
Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 2 PCS Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 2 PCS Stock, plus the full per share amount (payable in kind) of any
non-cash dividend paid on shares of Series 2 PCS Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Series 2 PCS Stock
payable in shares of Series 2 PCS Stock, or in options, warrants or rights to
acquire shares of Series 2 PCS Stock, or in securities convertible into or
exchangeable for shares of Series 2 PCS 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 Series 1 PCS Stock
payable in shares of Series 1 PCS Stock, or equivalent corresponding options,
warrants or rights to acquire shares of Series 1 PCS Stock, or equivalent
corresponding securities convertible into or exchangeable for shares of Series 1
PCS Stock.
5.1.11. The holders of the Series 1 PCS Stock shall be entitled to receive,
when and if declared by the Board of Directors in accordance with this Section
5.1, dividends in respect of the Series 1 PCS Stock equivalent on a per share
basis to those payable on the Series 3 PCS Stock. Dividends on the Series 1 PCS
Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 3 PCS Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 3 PCS Stock, plus the full per share amount (payable in kind) of any
non-cash dividend paid on shares of Series 3 PCS Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Series 3 PCS Stock
payable in shares of Series 3 PCS Stock, or in options, warrants or rights to
acquire shares of Series 3 PCS Stock, or in securities convertible into or
exchangeable for shares of Series 3 PCS Stock, then in each case, this
Corporation shall declare
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and pay, at the same time that it declares and pays any such dividend, an
equivalent dividend per share on the Series 1 PCS Stock payable in shares of
Series 1 PCS Stock, or equivalent corresponding options, warrants or rights to
acquire shares of Series 1 PCS Stock, or equivalent corresponding securities
convertible into or exchangeable for shares of Series 1 PCS Stock.
5.1.12. The holders of shares of Series 2 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 2 PCS Stock equivalent on a per
share basis to those payable on the Series 1 PCS Stock. Dividends on the Series
2 PCS Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 1 PCS Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 1 PCS Stock, plus the full per share amount (payable in kind) of any
non-cash dividend paid on shares of Series 1 PCS Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Series 1 PCS Stock
payable in shares of Series 1 PCS Stock, or in options, warrants or rights to
acquire shares of Series 1 PCS Stock, or in securities convertible into or
exchangeable for shares of Series 1 PCS 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 Series 2 PCS Stock
payable in shares of Series 2 PCS Stock, or equivalent corresponding options,
warrants or rights to acquire shares of Series 2 PCS Stock, or equivalent
corresponding securities convertible into or exchangeable for shares of Series 2
PCS Stock.
5.1.13. The holders of shares of Series 2 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 2 PCS Stock equivalent on a per
share basis to those payable on the Series 3 PCS Stock. Dividends on the Series
2 PCS Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 3 PCS Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 3 PCS Stock, plus the full per share amount (payable in kind) of any
non-cash dividend paid on shares of Series 3 PCS Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Series 3 PCS Stock
payable in shares of Series 3 PCS Stock, or in options, warrants or rights to
acquire shares of Series 3 PCS Stock, or in securities convertible into or
exchangeable for shares of Series 3 PCS 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 Series 2 PCS Stock
payable in shares of Series 2 PCS Stock, or equivalent corresponding options,
warrants or rights to acquire shares of Series 2 PCS Stock, or equivalent
corresponding securities convertible into or exchangeable for shares of Series 2
PCS Stock.
5.1.14. The holders of shares of Series 3 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 3 PCS Stock equivalent on a per
share basis to those payable on the Series 1 PCS Stock. Dividends on the Series
3 PCS Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 1 PCS Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 1 PCS Stock, plus the full per share amount (payable in kind) of any
non-cash dividend paid on shares of Series 1 PCS Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Series 1 PCS Stock
payable in shares of Series 1 PCS Stock, or in options, warrants or rights to
acquire shares of Series 1 PCS Stock, or in securities convertible into or
exchangeable for shares of Series 1 PCS 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 Series 3 PCS Stock
payable in shares of Series 3 PCS Stock, or equivalent corresponding options,
warrants or rights to acquire shares of Series 3 PCS Stock, or equivalent
corresponding securities convertible into or exchangeable for shares of Series 3
PCS Stock.
5.1.15. The holders of shares of Series 3 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 3 PCS Stock equivalent on a per
share basis to those payable on the Series 2 PCS Stock. Dividends on the Series
3 PCS Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 2 PCS Stock and shall be in an amount
per share equal to the full per share amount of any cash dividend paid on shares
of Series 2 PCS
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Stock, plus the full per share amount (payable in kind) of any non-cash dividend
paid on shares of Series 2 PCS Stock, provided that if this Corporation shall
declare and pay any dividend on shares of Series 2 PCS Stock payable in shares
of Series 2 PCS Stock, or in options, warrants or rights to acquire shares of
Series 2 PCS Stock, or in securities convertible into or exchangeable for shares
of Series 2 PCS 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 Series 3 PCS Stock payable in shares of Series 3 PCS
Stock, or equivalent corresponding options, warrants or rights to acquire shares
of Series 3 PCS Stock, or equivalent corresponding securities convertible into
or exchangeable for shares of Series 3 PCS Stock.
5.1.16. In addition to the entitlement with respect to dividends contained in
Sections 5.1.7 through 5.1.9, the holders of shares of Class A Common Stock
shall be entitled to receive, when and if declared by the Board of Directors in
accordance with this Section 5.1, dividends in respect of the Class A Common
Stock equivalent on a Per Class A PCS Share Basis to those payable on a per
share basis to the Series 1 PCS 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 Series 1 PCS Stock and shall be in an amount, on a Per
Class A PCS Share Basis, equal to (i) the full per share amount of any cash
dividend paid on shares of Series 1 PCS Stock plus (ii) the full per share
amount (payable in kind) of any non-cash dividend paid on shares of Series 1 PCS
Stock, provided that if this Corporation shall declare and pay any dividend on
shares of Series 1 PCS Stock payable in shares of Series 1 PCS Stock, or in
options, warrants or rights to acquire shares of Series 1 PCS Stock, or in
securities convertible into or exchangeable for shares of Series 1 PCS 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 on a Per Class A
PCS Share Basis on the Class A Common Stock payable in shares of Series 3 PCS
Stock, or equivalent corresponding options, warrants or rights to acquire shares
of Series 3 PCS Stock, or equivalent corresponding securities convertible into
or exchangeable for shares of Series 3 PCS Stock.
5.1.17. In addition to the entitlement with respect to dividends contained in
Sections 5.1.7 through 5.1.9, the holders of shares of Class A Common Stock
shall be entitled to receive, when and if declared by the Board of Directors in
accordance with this Section 5.1, dividends in respect of the Class A Common
Stock equivalent on a Per Class A PCS Share Basis to those payable on a per
share basis to the Series 2 PCS 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 Series 2 PCS Stock and shall be in an amount, on a Per
Class A PCS Share Basis, equal to (i) the full per share amount of any cash
dividend paid on shares of Series 2 PCS Stock plus (ii) the full per share
amount (payable in kind) of any non-cash dividend paid on shares of Series 2 PCS
Stock, provided that if this Corporation shall declare and pay any dividend on
shares of Series 2 PCS Stock payable in shares of Series 2 PCS Stock, or in
options, warrants or rights to acquire shares of Series 2 PCS Stock, or in
securities convertible into or exchangeable for shares of Series 2 PCS 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 on a Per Class A
PCS Share Basis on the Class A Common Stock payable in shares of Series 3 PCS
Stock, or equivalent corresponding options, warrants or rights to acquire shares
of Series 3 PCS Stock, or equivalent corresponding securities convertible into
or exchangeable for shares of Series 3 PCS Stock.
5.1.18. In addition to the entitlement with respect to dividends contained in
Sections 5.1.7 through 5.1.9, the holders of shares of Class A Common Stock
shall be entitled to receive, when and if declared by the Board of Directors in
accordance with this Section 5.1, dividends in respect of the Class A Common
Stock equivalent on a Per Class A PCS Share Basis to those payable on a per
share basis to the Series 3 PCS 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 Series 3 PCS Stock and shall be in an amount, on a Per
Class A PCS Share Basis, equal to (i) the full per share amount of any cash
dividend paid on shares of Series 3 PCS Stock plus (ii) the full per share
amount (payable in kind) of any non-cash dividend paid on shares of Series 3 PCS
Stock, provided that if this Corporation shall declare and pay any dividend on
shares of Series 3 PCS Stock payable in shares of Series 3 PCS Stock, or in
options, warrants or rights to acquire shares of Series 3 PCS Stock, or in
securities convertible into or exchangeable for shares of Series 3 PCS Stock,
then in each case, this Corporation shall declare and pay, at the same time that
it
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declares and pays any such dividend, an equivalent dividend on a Per Class A PCS
Share Basis on the Class A Common Stock payable in shares of Series 3 PCS Stock,
or equivalent corresponding options, warrants or rights to acquire shares of
Series 3 PCS Stock, or equivalent corresponding securities convertible into or
exchangeable for shares of Series 3 PCS Stock.
5.1.19. The holders of shares of Old Class A Common Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Old Class A Common Stock equivalent, on
a Per Class A FON Share Basis and on a Per Class A PCS Share Basis, to those
payable on the Class A Common Stock--Series DT. Dividends on the Old Class A
Common Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Class A Common Stock--Series DT and shall be
in an amount, on a Per Class A FON Share Basis and on a Per Class A PCS Share
Basis, equal to the amount of any cash dividend paid on shares of Class A Common
Stock--Series DT, plus the amount, on a Per Class A FON Share Basis and on a Per
Class A PCS Share Basis, (payable in kind) of any non-cash dividend paid on
shares of Class A Common Stock--Series DT, provided that if this Corporation
shall declare and pay any dividend on shares of Class A Common Stock--Series DT
payable in shares of FON Stock or PCS Stock, or in options, warrants or rights
to acquire shares of FON Stock or PCS Stock, or in securities convertible into
or exchangeable for shares of FON Stock or PCS 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, on a Per Class A FON Share Basis and
on a Per Class A PCS Share Basis, on the Old Class A Common Stock payable in
shares of FON Stock or PCS Stock, respectively, or equivalent corresponding
options, warrants or rights to acquire shares of FON Stock or PCS Stock,
respectively, or equivalent corresponding securities convertible into or
exchangeable for shares of FON Stock or PCS Stock, respectively.
5.1.20. The holders of shares of Class A Common Stock--Series DT shall be
entitled to receive, when and if declared by the Board of Directors in
accordance with this Section 5.1, dividends in respect of the Class A Common
Stock--Series DT equivalent, on a Per Class A FON Share Basis and on a Per Class
A PCS Share Basis, to those payable on the Old Class A Common Stock. Dividends
on the Class A Common Stock--Series DT shall be payable on the same date fixed
for the payment of the corresponding dividend on shares of Old Class A Common
Stock and shall be in an amount, on a Per Class A FON Share Basis and on a Per
Class A PCS Share Basis, equal to the full amount of any cash dividend paid on
shares of Old Class A Common Stock, plus the full amount, on a Per Class A FON
Share Basis and on a Per Class A PCS Share Basis, (payable in kind) of any
non-cash dividend paid on shares of Old Class A Common Stock, provided that if
this Corporation shall declare and pay any dividend on shares of Old Class A
Common Stock payable in shares of FON Stock or PCS Stock, or in options,
warrants or rights to acquire shares of FON Stock or PCS Stock, or in securities
convertible into or exchangeable for shares of FON Stock or PCS 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, on a Per Class A
FON Share Basis and on a Per Class A PCS Share Basis, on the Class A Common
Stock--Series DT payable in shares of FON Stock or PCS Stock, respectively, or
equivalent corresponding options, warrants or rights to acquire shares of FON
Stock or PCS Stock, respectively, or equivalent corresponding securities
convertible into or exchangeable for shares of FON Stock or PCS Stock,
respectively.
5.1.21. The holders of shares of Series 1 FON Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 1 FON Stock equivalent on a per
share basis to those payable, on a Per Class A FON Share Basis, on the Old Class
A Common Stock (with respect to the Number Of Shares Issuable With Respect To
The Old Class A Equity Interest In The FON Group only). Dividends on the Series
1 FON Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Old Class A Common Stock and shall be in an
amount per share equal to the full amount, on a Per Class A FON Share Basis, of
any cash dividend paid on shares of Old Class A Common Stock, plus the full
amount, on a Per Class A FON Share Basis, (payable in kind) of any non-cash
dividend paid on shares of Old Class A Common Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Old Class A Common
Stock (with respect to the Number Of Shares Issuable With Respect To The Old
Class A Equity Interest In The FON Group only) payable in shares of FON Stock or
PCS Stock, or in options,
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warrants or rights to acquire shares of FON Stock or PCS Stock, or in securities
convertible into or exchangeable for shares of FON Stock or PCS Stock, then in
each case this Corporation shall declare and pay, at the same time that it
declares and pays any such dividend, a dividend per share on the Series 1 FON
Stock (equivalent to that declared and paid on shares of Old Class A Common
Stock on a Per Class A FON Share Basis) payable in shares of Series 1 FON Stock
or Series 1 PCS Stock, respectively, or equivalent corresponding options,
warrants or rights to acquire shares of Series 1 FON Stock or Series 1 PCS
Stock, respectively, or equivalent corresponding securities convertible into or
exchangeable for shares of Series 1 FON Stock or Series 1 PCS Stock,
respectively.
5.1.22. The holders of shares of Series 2 FON Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 2 FON Stock equivalent on a per
share basis to those payable, on a Per Class A FON Share Basis, on the Old Class
A Common Stock (with respect to the Number Of Shares Issuable With Respect To
The Old Class A Equity Interest In The FON Group only). Dividends on the Series
2 FON Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Old Class A Common Stock and shall be in an
amount per share equal to the full amount, on a Per Class A FON Share Basis, of
any cash dividend paid on shares of Old Class A Common Stock, plus the full
amount, on a Per Class A FON Share Basis, (payable in kind) of any non-cash
dividend paid on shares of Old Class A Common Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Old Class A Common
Stock (with respect to the Number Of Shares Issuable With Respect To The Old
Class A Equity Interest In The FON Group only) payable in shares of FON Stock or
PCS Stock, or in options, warrants or rights to acquire shares of FON Stock or
PCS Stock, or in securities convertible into or exchangeable for shares of FON
Stock or PCS Stock, then in each case this Corporation shall declare and pay, at
the same time that it declares and pays any such dividend, a dividend per share
on the Series 2 FON Stock (equivalent to that declared and paid on shares of Old
Class A Common Stock on a Per Class A FON Share Basis) payable in shares of
Series 2 FON Stock or Series 2 PCS Stock, respectively, or equivalent
corresponding options, warrants or rights to acquire shares of Series 2 FON
Stock or Series 2 PCS Stock, respectively, or equivalent corresponding
securities convertible into or exchangeable for shares of Series 2 FON Stock or
Series 2 PCS Stock, respectively.
5.1.23. The holders of shares of Series 3 FON Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 3 FON Stock equivalent on a per
share basis to those payable, on a Per Class A FON Share Basis, on the Old Class
A Common Stock (with respect to the Number Of Shares Issuable With Respect To
The Old Class A Equity Interest In The FON Group only). Dividends on the Series
3 FON Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Old Class A Common Stock and shall be in an
amount per share equal to the full amount, on a Per Class A FON Share Basis, of
any cash dividend paid on shares of Old Class A Common Stock, plus the full
amount, on a Per Class A FON Share Basis, (payable in kind) of any non-cash
dividend paid on shares of Old Class A Common Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Old Class A Common
Stock (with respect to the Number Of Shares Issuable With Respect To The Old
Class A Equity Interest In The FON Group only) payable in shares of FON Stock or
PCS Stock, or in options, warrants or rights to acquire shares of FON Stock or
PCS Stock, or in securities convertible into or exchangeable for shares of FON
Stock or PCS Stock, then in each case this Corporation shall declare and pay, at
the same time that it declares and pays any such dividend, a dividend per share
on the Series 3 FON Stock (equivalent to that declared and paid on shares of Old
Class A Common Stock on a Per Class A FON Share Basis) payable in shares of
Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent
corresponding options, warrants or rights to acquire shares of Series 3 FON
Stock or Series 3 PCS Stock, respectively, or equivalent corresponding
securities convertible into or exchangeable for shares of Series 3 FON Stock or
Series 3 PCS Stock, respectively.
5.1.24. The holders of shares of Series 1 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 1 PCS Stock equivalent on a per
share basis to those payable, on a Per Class A PCS Share Basis, on the Old Class
A Common Stock (with respect to the Number Of Shares Issuable With Respect To
The Old Class A Equity Interest In The PCS Group only). Dividends on the Series
1 PCS Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Old Class A Common Stock and shall be in an
amount per share equal to the
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full amount, on a Per Class A PCS Share Basis, of any cash dividend paid on
shares of Old Class A Common Stock, plus the full amount, on a Per Class A PCS
Share Basis, (payable in kind) of any non-cash dividend paid on shares of Old
Class A Common Stock, provided that if this Corporation shall declare and pay
any dividend on shares of Old Class A Common Stock (with respect to the Number
Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS
Group only) payable in shares of PCS Stock, or in options, warrants or rights to
acquire shares of PCS Stock, or in securities convertible into or exchangeable
for shares of PCS Stock, then in each case this Corporation shall declare and
pay, at the same time that it declares and pays any such dividend, a dividend
per share on the Series 1 PCS Stock (equivalent to that declared and paid on
shares of Old Class A Common Stock on a Per Class A PCS Share Basis) payable in
shares of Series 1 PCS Stock, or equivalent corresponding options, warrants or
rights to acquire shares of Series 1 PCS Stock, or equivalent corresponding
securities convertible into or exchangeable for shares of Series 1 PCS Stock.
5.1.25. The holders of shares of Series 2 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 2 PCS Stock equivalent on a per
share basis to those payable, on a Per Class A PCS Share Basis, on the Old Class
A Common Stock (with respect to the Number Of Shares Issuable With Respect To
The Old Class A Equity Interest In The PCS Group only). Dividends on the Series
2 PCS Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Old Class A Common Stock and shall be in an
amount per share equal to the full amount, on a Per Class A PCS Share Basis, of
any cash dividend paid on shares of Old Class A Common Stock, plus the full
amount, on a Per Class A PCS Share Basis, (payable in kind) of any non-cash
dividend paid on shares of Old Class A Common Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Old Class A Common
Stock (with respect to the Number Of Shares Issuable With Respect To The Old
Class A Equity Interest In The PCS Group only) payable in shares of PCS Stock,
or in options, warrants or rights to acquire shares of PCS Stock, or in
securities convertible into or exchangeable for shares of PCS Stock, then in
each case this Corporation shall declare and pay, at the same time that it
declares and pays any such dividend, a dividend per share on the Series 2 PCS
Stock (equivalent to that declared and paid on shares of Old Class A Common
Stock on a Per Class A PCS Share Basis) payable in shares of Series 2 PCS Stock,
or equivalent corresponding options, warrants or rights to acquire shares of
Series 2 PCS Stock, or equivalent corresponding securities convertible into or
exchangeable for shares of Series 2 PCS Stock.
5.1.26. The holders of shares of Series 3 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 3 PCS Stock equivalent on a per
share basis to those payable, on a Per Class A PCS Share Basis, on the Old Class
A Common Stock (with respect to the Number Of Shares Issuable With Respect To
The Old Class A Equity Interest In The PCS Group only). Dividends on the Series
3 PCS Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Old Class A Common Stock and shall be in an
amount per share equal to the full amount, on a Per Class A PCS Share Basis, of
any cash dividend paid on shares of Old Class A Common Stock, plus the full
amount, on a Per Class A PCS Share Basis, (payable in kind) of any non-cash
dividend paid on shares of Old Class A Common Stock, provided that if this
Corporation shall declare and pay any dividend on shares of Old Class A Common
Stock (with respect to the Number Of Shares Issuable With Respect To The Old
Class A Equity Interest In The PCS Group only) payable in shares of PCS Stock,
or in options, warrants or rights to acquire shares of PCS Stock, or in
securities convertible into or exchangeable for shares of PCS Stock, then in
each case this Corporation shall declare and pay, at the same time that it
declares and pays any such dividend, a dividend per share on the Series 3 PCS
Stock (equivalent to that declared and paid on shares of Old Class A Common
Stock on a Per Class A PCS Share Basis) payable in shares of Series 3 PCS Stock,
or equivalent corresponding options, warrants or rights to acquire shares of
Series 3 PCS Stock, or equivalent corresponding securities convertible into or
exchangeable for shares of Series 3 PCS Stock.
5.1.27. The holders of shares of Series 1 FON Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 1 FON Stock equivalent on a per
share basis to those payable, on a Per Class A FON Share Basis, on the Class A
Common Stock-Series DT
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Stock (with respect to the Number Of Shares Issuable With Respect To The Class
A--Series DT Equity Interest In The FON Group only). Dividends on the Series 1
FON Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Class A Common Stock--Series DT Stock and
shall be in an amount per share equal to the full amount, on a Per Class A FON
Share Basis, of any cash dividend paid on shares of Class A Common Stock--Series
DT Stock, plus the full amount, on a Per Class A FON Share Basis, (payable in
kind) of any non-cash dividend paid on shares of Class A Common Stock--Series DT
Stock, provided that if this Corporation shall declare and pay any dividend on
shares of Class A Common Stock--Series DT Stock (with respect to the Number Of
Shares Issuable With Respect To The Class A--Series DT Equity Interest In The
FON Group only) payable in shares of FON Stock or PCS Stock, or in options,
warrants or rights to acquire shares of FON Stock or PCS Stock, or in securities
convertible into or exchangeable for shares of FON Stock or PCS Stock, then in
each case this Corporation shall declare and pay, at the same time that it
declares and pays any such dividend, a dividend per share on the Series 1 FON
Stock (equivalent to that declared and paid on shares of Class A Common
Stock--Series DT on a Per Class A FON Share Basis) payable in shares of Series 1
FON Stock or Series 1 PCS Stock, respectively, or equivalent corresponding
options, warrants or rights to acquire shares of Series 1 FON Stock or Series 1
PCS Stock, respectively, or equivalent corresponding securities convertible into
or exchangeable for shares of Series 1 FON Stock or Series 1 PCS Stock,
respectively.
5.1.28. The holders of shares of Series 2 FON Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 2 FON Stock equivalent on a per
share basis to those payable, on a Per Class A FON Share Basis, on the Class A
Common Stock--Series DT Stock (with respect to the Number Of Shares Issuable
With Respect To The Class A--Series DT Equity Interest In The FON Group only).
Dividends on the Series 2 FON Stock shall be payable on the same date fixed for
the payment of the corresponding dividend on shares of Class A Common
Stock--Series DT Stock and shall be in an amount per share equal to the full
amount, on a Per Class A FON Share Basis, of any cash dividend paid on shares of
Class A Common Stock--Series DT Stock, plus the full amount, on a Per Class A
FON Share Basis, (payable in kind) of any non-cash dividend paid on shares of
Class A Common Stock--Series DT Stock, provided that if this Corporation shall
declare and pay any dividend on shares of Class A Common Stock--Series DT Stock
(with respect to the Number Of Shares Issuable With Respect To The Class
A--Series DT Equity Interest In The FON Group only) payable in shares of FON
Stock or PCS Stock, or in options, warrants or rights to acquire shares of FON
Stock or PCS Stock, or in securities convertible into or exchangeable for shares
of FON Stock or PCS Stock, then in each case this Corporation shall declare and
pay, at the same time that it declares and pays any such dividend, a dividend
per share on the Series 2 FON Stock (equivalent to that declared and paid on
shares of Class A Common Stock--Series DT on a Per Class A FON Share Basis)
payable in shares of Series 2 FON Stock or Series 2 PCS Stock, respectively, or
equivalent corresponding options, warrants or rights to acquire shares of Series
2 FON Stock or Series 2 PCS Stock, respectively, or equivalent corresponding
securities convertible into or exchangeable for shares of Series 2 FON Stock or
Series 2 PCS Stock, respectively.
5.1.29. The holders of shares of Series 3 FON Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 3 FON Stock equivalent on a per
share basis to those payable, on a Per Class A FON Share Basis, on the Class A
Common Stock--Series DT Stock (with respect to the Number Of Shares Issuable
With Respect To The Class A--Series DT Equity Interest In The FON Group only).
Dividends on the Series 3 FON Stock shall be payable on the same date fixed for
the payment of the corresponding dividend on shares of Class A Common
Stock--Series DT Stock and shall be in an amount per share equal to the full
amount, on a Per Class A FON Share Basis, of any cash dividend paid on shares of
Class A Common Stock--Series DT Stock, plus the full amount, on a Per Class A
FON Share Basis, (payable in kind) of any non-cash dividend paid on shares of
Class A Common Stock--Series DT Stock, provided that if this Corporation shall
declare and pay any dividend on shares of Class A Common Stock--Series DT Stock
(with respect to the Number Of Shares Issuable With Respect To The Class
A--Series DT Equity Interest In The FON Group only) payable in shares of FON
Stock or PCS Stock, or in options, warrants or rights to acquire shares of FON
Stock or PCS Stock, or in securities convertible into or exchangeable for shares
of FON Stock or PCS Stock, then in each case this Corporation shall declare and
pay, at the same time that it declares and pays any such dividend, a dividend
per share on the Series 3 FON Stock (equivalent to that declared and paid on
shares of Class A
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Common Stock--Series DT on a Per Class A FON Share Basis) payable in shares of
Series 3 FON Stock or Series 3 PCS Stock, respectively, or equivalent
corresponding options, warrants or rights to acquire shares of Series 3 FON
Stock or Series 3 PCS Stock, respectively, or equivalent corresponding
securities convertible into or exchangeable for shares of Series 3 FON Stock or
Series 3 PCS Stock, respectively.
5.1.30. The holders of shares of Series 1 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 1 PCS Stock equivalent on a per
share basis to those payable, on a Per Class A PCS Share Basis, on the Class A
Common Stock--Series DT (with respect to the Number Of Shares Issuable With
Respect To The Class A--Series DT Equity Interest In The PCS Group only).
Dividends on the Series 1 PCS Stock shall be payable on the same date fixed for
the payment of the corresponding dividend on shares of Class A Common
Stock--Series DT and shall be in an amount per share equal to the full amount,
on a Per Class A PCS Share Basis, of any cash dividend paid on shares of Class A
Common Stock--Series DT, plus the full amount, on a Per Class A PCS Share Basis,
(payable in kind) of any non-cash dividend paid on shares of Class A Common
Stock--Series DT, provided that if this Corporation shall declare and pay any
dividend on shares of Class A Common Stock--Series DT (with respect to the
Number Of Shares Issuable With Respect To The Class A--Series DT Equity Interest
In The PCS Group only) payable in shares of PCS Stock, or in options, warrants
or rights to acquire shares of FON Stock or PCS Stock, or in securities
convertible into or exchangeable for shares of PCS Stock, then in each case this
Corporation shall declare and pay, at the same time that it declares and pays
any such dividend, a dividend per share on the Series 1 PCS Stock (equivalent to
that declared and paid on shares of Class A Common Stock--Series DT on a Per
Class A PCS Share Basis) payable in shares of Series 1 PCS Stock, or equivalent
corresponding options, warrants or rights to acquire shares of Series 1 PCS
Stock, or equivalent corresponding securities convertible into or exchangeable
for shares of Series 1 PCS Stock.
5.1.31. The holders of shares of Series 2 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 2 PCS Stock equivalent on a per
share basis to those payable, on a Per Class A PCS Share Basis, on the Class A
Common Stock--Series DT (with respect to the Number Of Shares Issuable With
Respect To The Class A--Series DT Equity Interest In The PCS Group only).
Dividends on the Series 2 PCS Stock shall be payable on the same date fixed for
the payment of the corresponding dividend on shares of Class A Common
Stock--Series DT and shall be in an amount per share equal to the full amount,
on a Per Class A PCS Share Basis, of any cash dividend paid on shares of Class A
Common Stock--Series DT, plus the full amount, on a Per Class A PCS Share Basis,
(payable in kind) of any non-cash dividend paid on shares of Class A Common
Stock--Series DT, provided that if this Corporation shall declare and pay any
dividend on shares of Class A Common Stock--Series DT (with respect to the
Number Of Shares Issuable With Respect To The Class A--Series DT Equity Interest
In The PCS Group only) payable in shares of PCS Stock, or in options, warrants
or rights to acquire shares of PCS Stock, or in securities convertible into or
exchangeable for shares of PCS Stock, then in each case this Corporation shall
declare and pay, at the same time that it declares and pays any such dividend, a
dividend per share on the Series 2 PCS Stock (equivalent to that declared and
paid on shares of Class A Common Stock--Series DT on a Per Class A PCS Share
Basis) payable in shares of Series 2 PCS Stock, or equivalent corresponding
options, warrants or rights to acquire shares of Series 2 PCS Stock, or
equivalent corresponding securities convertible into or exchangeable for shares
of Series 2 PCS Stock.
5.1.32. The holders of shares of Series 3 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 3 PCS Stock equivalent on a per
share basis to those payable, on a Per Class A PCS Share Basis, on the Class A
Common Stock--Series DT (with respect to the Number Of Shares Issuable With
Respect To The Class A--Series DT Equity Interest In The PCS Group only).
Dividends on the Series 3 PCS Stock shall be payable on the same date fixed for
the payment of the corresponding dividend on shares of Class A Common
Stock--Series DT and shall be in an amount per share equal to the full amount,
on a Per Class A PCS Share Basis, of any cash dividend paid on shares of Class A
Common Stock--Series DT, plus the full amount, on a Per Class A PCS Share Basis,
(payable in kind) of any non-cash dividend paid on shares of Class A Common
Stock--Series DT, provided that if this Corporation shall declare
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and pay any dividend on shares of Class A Common Stock-Series DT (with respect
to the Number Of Shares Issuable With Respect To The Class A--Series DT Equity
Interest In The PCS Group only) payable in shares of PCS Stock, or in options,
warrants or rights to acquire shares of PCS Stock, or in securities convertible
into or exchangeable for shares of PCS Stock, then in each case this Corporation
shall declare and pay, at the same time that it declares and pays any such
dividend, a dividend per share on the Series 3 PCS Stock (equivalent to that
declared and paid on shares of Class A Common Stock-Series DT on a Per Class A
PCS Share Basis) payable in shares of Series 3 PCS Stock, or equivalent
corresponding options, warrants or rights to acquire shares of Series 3 PCS
Stock, or equivalent corresponding securities convertible into or exchangeable
for shares of Series 3 PCS Stock.
5.2. Separate Declaration of Dividends. The Board of Directors, in accordance
with the applicable provisions of Section 5.1, may at any time declare and pay
dividends (i) exclusively on the FON Stock and the Class A Common Stock (on a
Per Class A FON Share Basis), (ii) exclusively on the PCS Stock and the Class A
Common Stock (on a Per Class A PCS Share Basis) or (iii) on the FON Stock and
the Class A Common Stock (on a Per Class A FON Share Basis), on the one hand,
and the PCS Stock and the Class A Common Stock (on a Per Class A PCS Share
Basis), on the other, in equal or unequal per share amounts, notwithstanding the
amount of dividends previously declared on each class or series of stock, the
respective voting or liquidation rights of each class or series of stock or any
other factor.
5.3 Share Distributions. Subject to ARTICLE SIXTH, Section 5 and except as
permitted by ARTICLE SIXTH, Sections 7.1 and 7.2, the Board of Directors may
declare and pay dividends or distributions of shares of Corporation Common Stock
(or Convertible Securities convertible into or exchangeable or exercisable for
shares of Corporation Common Stock) on shares of Corporation Common Stock or
shares of Preferred Stock only as follows:
(A) dividends or distributions of shares of (i) Series 1 FON Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of Series 1 FON Stock), (ii) Series 2 FON Stock (or Convertible
Securities convertible into or exchangeable or exercisable for Shares of Series
2 FON Stock) and (iii) Series 3 FON Stock (or Convertible Securities convertible
into or exchangeable or exercisable for shares of Series 3 FON Stock) on shares
of (i) Series 1 FON Stock, (ii) Series 2 FON Stock and (iii) Series 3 FON Stock
and shares of Class A Common Stock (but only in respect of the Shares Issuable
With Respect To The Class A Equity Interest In The FON Group), respectively, as
well as on Preferred Stock attributed to the Sprint FON Group exclusively in
accordance with ARTICLE SIXTH, Section 13;
(B) dividends or distributions of shares of (i) Series 1 PCS Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of Series 1 PCS Stock), (ii) Series 2 PCS Stock (or Convertible
Securities convertible into or exchangeable or exercisable for shares of Series
2 PCS Stock) and (iii) Series 3 PCS Stock (or Convertible Securities convertible
into or exchangeable or exercisable for shares of Series 3 PCS Stock) on shares
of (i) Series 1 PCS Stock, (ii) Series 2 PCS Stock and (iii) Series 3 PCS Stock
and shares of Class A Common Stock (but only in respect of the Shares Issuable
With Respect To The Class A Equity Interest In The PCS Group), respectively, and
Preferred Stock attributed to the PCS Group exclusively in accordance with
ARTICLE SIXTH, Section 13;
(C) dividends or distributions of shares of (i) Series 1 PCS Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of Series 1 PCS Stock), (ii) Series 2 PCS Stock (or Convertible
Securities convertible into or exchangeable or exercisable for shares of Series
2 PCS Stock) and (iii) Series 3 PCS Stock (or Convertible Securities convertible
into or exchangeable or exercisable for shares of Series 3 PCS Stock) on (x)
shares of (i) Series 1 FON Stock, (ii) Series 2 FON Stock and (iii) Series 3 FON
Stock and shares of Class A Common Stock (but only in respect of the Shares
Issuable With Respect To The Class A Equity Interest In The FON Group),
respectively, or (y) shares of FON Preferred Stock, but in any such case only if
immediately prior to such dividend or distribution the Number Of Shares Issuable
With Respect To The FON Group Intergroup Interest is greater than or equal to
the sum of (1) the amount of any decrease in the Number Of Shares Issuable With
Respect To The FON Group Intergroup Interest required by paragraph (B) of the
definition of such term in
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ARTICLE SIXTH, Section 10 as a result of such dividend or distribution, plus (2)
the number of shares of PCS Stock issuable upon conversion, exchange or exercise
of any Convertible Securities to be so issued or any other outstanding
Convertible Securities that have been issued as a dividend or other distribution
(including in connection with any reclassification or exchange of shares) to
holders of FON Stock or Class A Common Stock (but only in respect of the Shares
Issuable With Respect To The Class A Equity Interest In The FON Group) or shares
of Preferred Stock to the extent attributed to the Sprint FON Group in
accordance with ARTICLE SIXTH, Section 13; and
(D) dividends or distributions of shares of PCS Preferred Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of PCS Preferred Stock) on shares of FON Stock or Class A Common Stock
(but only in respect of the Shares Issuable With Respect To The Class A Equity
Interest In The FON Group) or shares of Preferred Stock to the extent attributed
to the Sprint FON Group in accordance with ARTICLE SIXTH, Section 13, but in any
such case only if immediately prior to such dividend or distribution the Number
Of Shares Issuable With Respect To The FON Group Intergroup Interest is greater
than or equal to the sum of (1) the amount of any decrease in the Number Of
Shares Issuable With Respect To The FON Group Intergroup Interest required by
paragraph (B) of the definition of such term in ARTICLE SIXTH, Section 10 as a
result of such dividend or distribution plus (2) the number of shares of PCS
Stock issuable upon conversion, exchange or exercise of any Convertible
Securities that have been issued as a dividend or other distribution (including
in connection with any reclassification or exchange of shares) to holders of FON
Stock or Class A Common Stock (but only in respect of the Shares Issuable With
Respect To The Class A Equity Interest In The FON Group) or shares of Preferred
Stock to the extent attributed to the Sprint FON Group in accordance with
ARTICLE SIXTH, Section 13.
For purposes of this Section 5.3, any outstanding Convertible Securities that
are convertible into or exchangeable or exercisable for any other Convertible
Securities which are themselves convertible into or exchangeable or exercisable
for FON Stock (or other Convertible Securities that are so convertible,
exchangeable or exercisable) or PCS Stock (or other Convertible Securities that
are so convertible, exchangeable or exercisable) shall be deemed to have been
converted, exchanged or exercised in full for such Convertible Securities.
Section 6. No Dilution or Impairment; Certain Tender Offers.
(a) No reclassification, subdivision or combination of the outstanding shares
of Series 2 FON 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
Series 1 FON Stock is reclassified, subdivided or combined on an equal per share
basis so that the holders of the Series 1 FON 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 Series 2 FON Stock as were represented
by the shares of Series 1 FON Stock outstanding immediately prior to such
reclassification, subdivision or combination and (ii) maintain all of the rights
associated with the Series 1 FON 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 Series 2 FON
Stock, subject to the limitations, restrictions and conditions on such rights
contained herein.
(b) No reclassification, subdivision or combination of the outstanding shares
of Series 3 FON 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
Series 1 FON Stock is reclassified, subdivided or combined on an equal per share
basis so that the holders of the Series 1 FON 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 Series 3 FON Stock as were represented
by the shares of Series 1 FON Stock outstanding immediately prior to such
reclassification, subdivision or combination and (ii) maintain all of the rights
associated with the Series 1 FON 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 Series 3 FON
Stock, subject to the limitations, restrictions and conditions
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on such rights contained herein.
(c) No reclassification, subdivision or combination of the outstanding shares
of Series 1 FON 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
Series 2 FON Stock is reclassified, subdivided or combined on an equal per share
basis so that the holders of the Series 2 FON 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 Series 1 FON Stock as were represented
by the shares of Series 2 FON Stock outstanding immediately prior to such
reclassification, subdivision or combination and (ii) maintain all of the rights
associated with the Series 2 FON 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 Series 1 FON
Stock, subject to the limitations, restrictions and conditions on such rights
contained herein.
(d) No reclassification, subdivision or combination of the outstanding shares
of Series 3 FON 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
Series 2 FON Stock is reclassified, subdivided or combined on an equal per share
basis so that the holders of the Series 2 FON 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 Series 3 FON Stock as were represented
by the shares of Series 2 FON Stock outstanding immediately prior to such
reclassification, subdivision or combination and (ii) maintain all of the rights
associated with the Series 2 FON 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 Series 3 FON
Stock, subject to the limitations, restrictions and conditions on such rights
contained herein.
(e) No reclassification, subdivision or combination of the outstanding shares
of Series 1 FON 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
Series 3 FON Stock is reclassified, subdivided or combined on an equal per share
basis so that the holders of the Series 3 FON 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 Series 1 FON Stock as were represented
by the shares of Series 3 FON Stock outstanding immediately prior to such
reclassification, subdivision or combination and (ii) maintain all of the rights
associated with the Series 3 FON 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 Series 1 FON
Stock, subject to the limitations, restrictions and conditions on such rights
contained herein.
(f) No reclassification, subdivision or combination of the outstanding shares
of Series 2 FON 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
Series 3 FON Stock is reclassified, subdivided or combined on an equal per share
basis so that the holders of the Series 3 FON 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 Series 2 FON Stock as were represented
by the shares of Series 3 FON Stock outstanding immediately prior to such
reclassification, subdivision or combination and (ii) maintain all of the rights
associated with the Series 3 FON 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 Series 2 FON
Stock, subject to the limitations, restrictions and conditions on such rights
contained herein.
(g) No adjustment to the Number Of Shares Issuable With Respect To The Class
A--Series DT Equity Interest In The FON Group or the Number Of Shares Issuable
With Respect To The Class A--Series DT Equity Interest In
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The PCS Group (other than with respect to any adjustments resulting from
issuances made in accordance with ARTICLE SIXTH, Section 1.2) shall be effected
directly or indirectly unless at the same time the Number Of Shares Issuable
With Respect To The Old Class A Equity Interest In The FON Group or the Number
Of Shares Issuable With Respect To The Old Class A Equity Interest In The PCS
Group is adjusted on an equal Per Class A FON Share Basis or Per Class A PCS
Share Basis, as the case may be, so that the holders of the Old 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 Class A
Common Stock--Series DT on an equal Per Class A FON Share Basis or Per Class A
PCS Share Basis, as the case may be, as were represented by the Number Of Shares
Issuable With Respect To The Old Class A Equity Interest In The FON Group or the
Number Of Shares Issuable With Respect To The Old Class A Equity Interest In The
PCS Group as calculated immediately prior to such adjustment and (ii) maintain
all of the rights associated with the Old 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, on a Per Class A FON Share Basis or Per
Class A PCS Share Basis, to those payable in respect of shares of Class A Common
Stock--Series DT, subject to the limitations, restrictions and conditions on
such rights contained herein.
(h) No adjustment to the Number Of Shares Issuable With Respect To The Old
Class A Equity Interest In The FON Group or the Number Of Shares Issuable With
Respect To The Old Class A Equity Interest In The PCS Group (other than with
respect to any adjustments resulting from issuances made in accordance with
ARTICLE SIXTH, Section 1.2) shall be effected directly or indirectly unless at
the same time the Number Of Shares Issuable With Respect To The Class A--Series
DT Equity Interest In The FON Group or the Number Of Shares Issuable With
Respect To The Class A--Series DT Equity Interest In The PCS Group is adjusted
on an equal Per Class A FON Share Basis or Per Class A PCS Share Basis, as the
case may be, so that the holders of the Class A Common Stock--Series DT (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 Old Class A
Common Stock on an equal Per Class A FON Share Basis or Per Class A PCS Share
Basis, as the case may be, as were represented by the Number Of Shares Issuable
With Respect To The Class A--Series DT Equity Interest In The FON Group or the
Number Of Shares Issuable With Respect To The Class A--Series DT Equity Interest
In The PCS Group as calculated immediately prior to such adjustment and (ii)
maintain all of the rights associated with the Class A--Series DT 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, on a Per Class A FON Share Basis or
Per Class A PCS Share Basis, to those payable in respect of shares of Old Class
A Common Stock, subject to the limitations, restrictions and conditions on such
rights contained herein.
(i) No reclassification, subdivision or combination of the outstanding shares
of Series 2 PCS 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
Series 1 PCS Stock is reclassified, subdivided or combined on an equal per share
basis so that the holders of the Series 1 PCS 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 Series 2 PCS Stock as were represented
by the shares of Series 1 PCS Stock outstanding immediately prior to such
reclassification, subdivision or combination and (ii) maintain all of the rights
associated with the Series 1 PCS 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 Series 2 PCS
Stock, subject to the limitations, restrictions and conditions on such rights
contained herein.
(j) No reclassification, subdivision or combination of the outstanding shares
of Series 3 PCS 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
Series 1 PCS Stock is reclassified, subdivided or combined on a equal per share
basis so that the holders of the Series 1 PCS 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 Series 3 PCS Stock as were represented
by the shares of Series 1 PCS Stock outstanding
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immediately prior to such reclassification, subdivision or combination and (ii)
maintain all of the rights associated with the Series 1 PCS 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 Series 3 PCS Stock, subject to the limitations, restrictions and
conditions on such rights contained herein.
(k) No reclassification, subdivision or combination of the outstanding shares
of Series 1 PCS 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
Series 2 PCS Stock is reclassified, subdivided or combined on an equal per share
basis so that the holders of the Series 2 PCS 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 Series 1 PCS Stock as were represented
by the shares of Series 2 PCS Stock outstanding immediately prior to such
reclassification, subdivision or combination and (ii) maintain all of the rights
associated with the Series 2 PCS 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 Series 1 PCS
Stock, subject to the limitations, restrictions and conditions on such rights
contained herein.
(l) No reclassification, subdivision or combination of the outstanding shares
of Series 3 PCS 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
Series 2 PCS Stock is reclassified, subdivided or combined on an equal per share
basis so that the holders of the Series 2 PCS 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 Series 3 PCS Stock as were represented
by the shares of Series 2 PCS Stock outstanding immediately prior to such
reclassification, subdivision or combination and (ii) maintain all of the rights
associated with the Series 2 PCS 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 Series 3 PCS
Stock, subject to the limitations, restrictions and conditions on such rights
contained herein.
(m) No reclassification, subdivision or combination of the outstanding shares
of Series 1 PCS 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
Series 3 PCS Stock is reclassified, subdivided or combined on an equal per share
basis so that the holders of the Series 3 PCS 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 Series 1 PCS Stock as were represented
by the shares of Series 3 PCS Stock outstanding immediately prior to such
reclassification, subdivision or combination and (ii) maintain all of the rights
associated with the Series 3 PCS 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 Series 1 PCS
Stock, subject to the limitations, restrictions and conditions on such rights
contained herein.
(n) No reclassification, subdivision or combination of the outstanding shares
of Series 2 PCS 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
Series 3 PCS Stock is reclassified, subdivided or combined on an equal per share
basis so that the holders of the Series 3 PCS 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 Series 2 PCS Stock as were represented
by the shares of Series 3 PCS Stock outstanding immediately prior to such
reclassification, subdivision or combination and (ii) maintain all of the rights
associated with the Series 3 PCS 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
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payable per share in respect of shares of Series 2 PCS Stock, subject to the
limitations, restrictions and conditions on such rights contained herein.
(o) Without limiting the generality of the foregoing paragraphs (a) through
(n), 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 Non-Class A Common
Stock) or any reclassification of the Non-Class A 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 convert each share of Series 3 FON
Stock, Series 3 PCS Stock and 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 (I) converted its shares of Series 3
FON Stock or Series 3 PCS Stock into Series 1 FON Stock or Series 1 PCS Stock,
respectively, or (II) received shares of Series 3 FON Stock or Series 3 PCS
Stock in respect of the Shares Issuable With Respect To The Class A Equity
Interest In The FON Group or the Shares Issuable With Respect To The Class A
Equity Interest In The PCS Group, respectively, represented by such Class A
Common Stock immediately prior to such merger, consolidation or reclassification
and converted such shares in accordance with clause (I). This Corporation shall
not effect, directly or indirectly, any such reclassification, subdivision or
combination of outstanding shares of Non-Class A 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.
(p) 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 Series 1 FON Stock or Series 1 PCS Stock) or any
reclassification of the Series 1 FON Stock or Series 1 PCS Stock into any other
form of capital stock of this Corporation, whether in whole or in part, each
holder of Series 2 FON Stock or Series 2 PCS Stock, as the case may be, 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 convert each share of Series 2 FON Stock or Series 2 PCS
Stock, as the case may be, held by such holder into the kind and amount of
shares of stock and other securities and property which such holder would have
been entitled to receive upon such consolidation, merger, or reclassification if
such holder had converted its shares of Series 2 FON Stock or Series 2 PCS Stock
into Series 1 FON Stock or Series 1 PCS Stock, respectively, immediately prior
to such merger, consolidation or reclassification. This Corporation shall not
effect, directly or indirectly, any such reclassification, subdivision or
combination of outstanding shares of Series 1 FON Stock or Series 1 PCS Stock
unless it delivers to the holders of Series 2 FON Stock and Series 2 PCS Stock
written notice of its intent to take such action at least ten Business Days
before taking such action.
(q) Exclusionary Tender Offers. If the Board of Directors shall determine not
to oppose a tender offer by a Person other than a Cable Holder 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 holders of Series 2 PCS Stock to sell an equal or greater percentage
of their shares as the holders of Series 1 PCS Stock are permitted to sell
taking into account any proration, then each holder of Series 2 PCS Stock shall
have the right (but not the obligation) to deliver to this Corporation a written
notice requesting conversion of certain shares of Series 2 PCS Stock designated
by such holder of Series 2 PCS Stock into Series 1 PCS Stock, upon which
delivery each share of Series 2 PCS 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 Series 1 PCS Stock, provided that
(i) unless the Series 2 PCS Stock shall have otherwise been converted into
Series 1 PCS Stock pursuant to ARTICLE SIXTH, Section 7.5 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 holder of Series 2 PCS Stock of a notice
that such transaction has been abandoned, each share of Series 1 PCS Stock held
by a holder of Series 2 PCS Stock shall automatically reconvert (without the
payment of any consideration) into one duly issued, fully paid and nonassessable
share of Series 2 PCS Stock, and (ii) only those
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shares of Series 2 PCS Stock related to shares of Series 1 PCS Stock that were
not so reconverted shall be deemed for any purpose under these Articles of
Incorporation to have been converted into Series 1 PCS Stock, pursuant to this
subparagraph (q) and the Series 2 PCS Stock so reconverted shall be deemed to
have been at all times outstanding shares of Series 2 PCS Stock, provided, that
if the Series 2 PCS Stock has been converted into or redeemed for Series 2 FON
Stock pursuant to ARTICLE SIXTH, Section 7, then the terms "Series 2 FON Stock"
and "Series 1 FON Stock" shall be deemed to replace the terms "Series 2 PCS
Stock" and "Series 1 PCS Stock," respectively, in this subparagraph (q).
(r) Issuer Tender Offers. The Corporation shall not conduct an issuer tender
offer (as defined on November 23, 1998 in Rule 13e-4 under the Exchange Act)
with respect to the Series 1 PCS Stock or the Series 1 FON Stock unless (i) such
tender offer provides for the participation of the holders of Series 2 PCS
Stock, Series 3 PCS Stock and Class A Common Stock (with respect to the Shares
Issuable With Respect To The Class A Equity Interest In The PCS Group), on the
one hand, or Series 2 FON Stock, Series 3 FON Stock and Class A Common Stock
(with respect to the Shares Issuable With Respect To The Class A Equity Interest
In The FON Group), on the other hand, on an equal basis with the Series 1 PCS
Stock or the Series 1 FON Stock, respectively, and (ii) the Corporation accepts
for repurchase the number of shares tendered by the holders of Series 1 PCS
Stock, Series 2 PCS Stock, Series 3 PCS Stock and Class A Common Stock (with
respect to the Shares Issuable With Respect To The Class A Equity Interest In
The PCS Group), on the one hand, or Series 1 FON Stock, Series 2 FON Stock,
Series 3 FON Stock and Class A Common Stock (with respect to the Shares Issuable
With Respect To The Class A Equity Interest In The FON Group), on the other, in
proportion to the number of shares of each such class and series tendered;
provided that the terms of this subparagraph (r) shall not prevent the
Corporation from administering in good faith an "odd-lot" program in connection
with such issuer tender offer and shall not apply to customary acquisitions of
Corporation Common Stock made by the Corporation on the open market for purposes
of maintaining stock option plans of the Corporation.
Section 7. Conversion or Redemption of PCS Stock. Except as otherwise provided
in Sections 2.2, 6(q) and 8.5, shares of PCS Stock are (i) subject to conversion
or redemption, as the case may be, upon the terms provided in this Section 7
with respect to each class and (ii) otherwise not subject to conversion or
redemption.
7.1. Conversion or Redemption of PCS Stock.
(A) If the Corporation and/or its subsidiaries makes a Disposition, in one
transaction or a series of related transactions, of all or substantially all of
the properties and assets attributed to the PCS Group to one or more persons or
entities (other than (w) the Disposition by the Corporation of all or
substantially all of its properties and assets in one transaction or a series of
related transactions in connection with the dissolution or the liquidation and
winding up of the Corporation and the distribution of assets to stockholders
pursuant to Section 4, (x) the redemption of the PCS Stock for the stock of the
PCS Group Subsidiary pursuant to Section 7.2, (y) to any person or entity
controlled (as determined by the Board of Directors) by the Corporation or (z)
pursuant to a Related Business Transaction), then the Corporation shall, on or
prior to the 85th Trading Day after the date of consummation of such Disposition
(the "PCS Group Disposition Date"), either (I) pay a dividend on the PCS Stock
or (II) redeem some or all of the PCS Stock or convert PCS Stock into Series 1
FON Stock, Series 2 FON Stock and Series 3 FON Stock, as applicable (or another
class or series of common stock of the Corporation), in accordance with the
following subparagraphs (1) and (2) of this paragraph (A) and, to the extent
applicable, in accordance with Section 7.4, as the Board of Directors shall have
selected among such alternatives:
(1) provided that there are funds of the Corporation legally available
therefor:
(a) pay to the holders of the shares of PCS Stock a dividend, as the Board of
Directors shall have declared in accordance with Section 5.1 of ARTICLE SIXTH,
in cash and/or in securities (other than a dividend of Corporation Common Stock
or other common equity securities of the Corporation) or other property having a
Fair Value as of the PCS Group Disposition Date in the aggregate equal to the
product of the Outstanding PCS Fraction as of the record date for determining
holders entitled to receive such dividend multiplied by the Fair Value of the
Net
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Proceeds of such Disposition; or
(b) (i) subject to the last sentence of this paragraph (A), if such
Disposition involves all (not merely substantially all) of the properties and
assets attributed to the PCS Group, redeem as of the Redemption Date provided by
Section 7.4(C) all outstanding shares of PCS Stock in exchange for cash and/or
securities (other than Corporation Common Stock or other common equity
securities of the Corporation) or other property having a Fair Value as of the
PCS Group Disposition Date in the aggregate equal to the product of the
Outstanding PCS Fraction as of such Redemption Date multiplied by the Fair Value
of the Net Proceeds of such Disposition (such aggregate amount to be allocated
to shares of Series 1 PCS Stock, Series 2 PCS Stock and Series 3 PCS Stock in
the ratio of the number of shares of each such series outstanding to the other
series (so that the amount of consideration paid for the redemption of each
share of Series 1 PCS Stock, Series 2 PCS Stock and Series 3 PCS Stock is the
same)); or
(ii) subject to the last sentence of this paragraph (A), if such Disposition
involves substantially all (but not all) of the properties and assets attributed
to the PCS Group, redeem as of the Redemption Date provided by Section 7.4(D)
the number of whole shares of PCS Stock (which may be all of such shares
outstanding) as have in the aggregate an average Market Value during the period
of ten consecutive Trading Days beginning on the sixteenth Trading Day
immediately succeeding the PCS Group Disposition Date closest to the product of
the Outstanding PCS Fraction as of the date such shares are selected for
redemption multiplied by the Fair Value as of the PCS Group Disposition Date of
the Net Proceeds of such Disposition, in exchange for cash and/or securities
(other than Corporation Common Stock or other common equity securities of the
Corporation) or other property having a Fair Value in the aggregate equal to
such product (such aggregate amount to be allocated to shares of Series 1 PCS
Stock, Series 2 PCS Stock and Series 3 PCS Stock in the ratio of the number of
shares of each such series outstanding to the other series (so that the amount
of consideration paid for the redemption of each share of Series 1 PCS Stock,
Series 2 PCS Stock and Series 3 PCS Stock is the same)); or
(2) convert each outstanding share of Series 1 PCS Stock, Series 2 PCS Stock
and Series 3 PCS Stock as of the Conversion Date provided by Section 7.4(E) into
a number of fully paid and nonassessable shares of Series 1 FON Stock, Series 2
FON Stock and Series 3 FON Stock, respectively (or, if the Series 1 FON Stock is
not Publicly Traded at such time and shares of another class or series of common
stock of the Corporation (other than PCS Stock) are then Publicly Traded, of
such other class or series of common stock as has the largest Total Market
Capitalization as of the close of business on the Trading Day immediately
preceding the date of the notice of such conversion required by Section 7.4(E))
equal to 110% of the ratio, expressed as a decimal fraction rounded to the
nearest five decimal places, of the average Market Value of one share of Series
1 PCS Stock over the period of ten consecutive Trading Days beginning on the
sixteenth Trading Day following the PCS Group Disposition Date to the average
Market Value of one share of Series 1 FON Stock (or such other class or series
of common stock) over the same ten Trading Day period.
Notwithstanding the foregoing provisions of this paragraph (A), the
Corporation may redeem PCS Stock as provided by subparagraph (1)(b)(i) or
(1)(b)(ii) of this paragraph (A) only if the amount to be paid in redemption of
such stock (and the Shares Issuable With Respect To The Class A Equity Interest
In The PCS Group in accordance with ARTICLE SIXTH, Section 7.1(B)) is less than
or equal to the sum of (i) the amount available for the payment of dividends on
such shares to be redeemed in accordance with Section 5 of ARTICLE SIXTH
measured as of the Redemption Date and (ii) the amount determined to be capital
in respect of the shares to be redeemed in accordance with applicable
corporation law as of the Redemption Date.
(B) For purposes of this Section 7.1:
(1) as of any date, "substantially all of the properties and assets"
attributed to the PCS Group means a portion of such properties and assets that
represents at least 80% of the Fair Value of the properties and assets
attributed to the PCS Group as of such date;
(2) in the case of a Disposition of the properties and assets attributed to
the PCS Group in a series of related
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transactions, such Disposition shall not be deemed to have been
consummated until the consummation of the last of such transactions;
(3) the Board of Directors may pay any dividend or redemption price referred
to in Section 7.1(A) in cash, securities (other than Corporation Common Stock or
other common equity securities of the Corporation) or other property, regardless
of the form or nature of the proceeds of the Disposition; provided that if such
payment is made in Voting Securities (other than Corporation Common Stock or
other common equity securities of the Corporation) of the Corporation or another
entity, holders of Series 2 PCS Stock shall receive Voting Securities with
Voting Power equivalent on a per share basis to such shares received by holders
of Series 1 PCS Stock;
(4) if the Corporation pays a dividend to the holders of shares of PCS Stock
in accordance with Section 7.1(A)(1)(a), then the Corporation will pay a
dividend equivalent on a Per Class A PCS Share Basis to the holders of Class A
Common Stock;
(5) if the Corporation redeems all outstanding shares of PCS Stock in
accordance with Section 7.1(A)(1)(b)(i), then the Corporation will pay an
aggregate amount to the holders of Old Class A Common Stock and Class A Common
Stock--Series DT equivalent on a Per Class A PCS Share Basis to the per share
redemption amount paid in accordance with Section 7.1(A)(1)(b)(i) in respect of
the total Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The PCS Group and the Number Of Shares Issuable With Respect To The
Class A--Series DT Equity Interest In The PCS Group, respectively;
(6) if the Corporation redeems shares of PCS Stock in accordance with Section
7.1(A)(1)(b)(ii), then the Corporation will pay to the holders of Old Class A
Common Stock and Class A Common Stock--Series DT an amount in accordance with
subparagraph (5) immediately above but only in respect of the same proportion of
the Number Of Shares Issuable With Respect To The Old Class A Equity Interest In
The PCS Group and the Number Of Shares Issuable With Respect To The Class
A--Series DT Equity Interest In The PCS Group, respectively, as the PCS Stock
redeemed in accordance with Section 7.1(A)(7)(b)(ii); and
(7) if the Corporation converts shares of PCS Stock in accordance with Section
7.1(A)(2), then (i) the Number Of Shares Issuable With Respect To The Old Class
A Equity Interest In The PCS Group will convert into a Number Of Shares Issuable
With Respect To The Old Class A Equity Interest In The FON Group and (ii) the
Number Of Shares Issuable With Respect To The Class A--Series DT Equity Interest
In The PCS Group will convert into a Number Of Shares Issuable With Respect To
The Class A--Series DT Equity Interest in the FON Group, each such conversion to
be on the same basis as set forth in Section 7.1(A)(2).
(C) If the payment of the dividend or the redemption price with respect to the
PCS Stock provided for by Section 7.1(A)(1) occurs prior to November 23, 2001,
then the Board of Directors may convert each share of Series 1 PCS Stock, Series
2 PCS Stock and Series 3 PCS Stock remaining outstanding, but only as of a
Conversion Date (determined as provided by Section 7.4(E) hereof) prior to the
first anniversary of the payment of such dividend or redemption price, into a
number of fully paid and nonassessable shares of Series 1 FON Stock, Series 2
FON Stock and Series 3 FON Stock, respectively (or, if the Series 1 FON Stock is
not Publicly Traded at such time and shares of any other class or series of
common stock of the Corporation (other than PCS Stock) are then Publicly Traded,
of such other class or series of common stock as has the largest Total Market
Capitalization as of the close of business on the Trading Day immediately
preceding the date of the notice of such conversion required by Section 7.4(E))
equal to 110% of the Optional Conversion Ratio as of the fifth Trading Day prior
to the date of the notice of such conversion required by Section 7.4(E);
provided, that upon such conversion, the Number Of Shares Issuable With Respect
To The Old Class A Equity Interest In The PCS Group and the Number Of Shares
Issuable With Respect To The Class A--Series DT Equity Interest In The PCS Group
will convert, on the same basis, into a Number Of Shares Issuable With Respect
To The Old Class A Equity Interest In The FON Group and a Number Of Shares
Issuable With Respect To The Class A--Series DT Equity Interest In The FON
Group, respectively.
(D) At any time following November 23, 2001, the Board of Directors may
convert each outstanding share of
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Series 1 PCS Stock, Series 2 PCS Stock and Series 3 PCS Stock, as of the
Conversion Date provided by Section 7.4(E), into the number of fully paid and
nonassessable shares of Series 1 FON Stock, Series 2 FON Stock and Series 3 FON
Stock, respectively (or, if the Series 1 FON Stock is not Publicly Traded at
such time and shares of any other class or series of common stock of the
Corporation (other than PCS Stock) are then Publicly Traded, of such other class
or series of common stock as has the largest Total Market Capitalization as of
the close of business on the Trading Day immediately preceding the date of the
notice of conversion required by Section 7.4(E)) equal to, on the Conversion
Date, (i) if following November 23, 2001 but prior to November 23, 2002, 110% of
the Optional Conversion Ratio as of the fifth Trading Day prior to the date of
the notice of such conversion required by Section 7.4(E), or (ii) if on or after
November 23, 2002, at such conversion ratio (if any) as the Board of Directors
determines to be fair to holders of the PCS Stock, taken as a separate class,
and holders of FON Stock, taken as a separate class, provided, that upon such
conversion, the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The PCS Group and the Number Of Shares Issuable With Respect To The
Class A--Series DT Equity Interest In The PCS Group will convert, on the same
basis, into a Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The FON Group and a Number Of Shares Issuable With Respect To The
Class A--Series DT Equity Interest In The FON Group, respectively.
7.2. Redemption of PCS Stock for Subsidiary Stock. At any time the Board of
Directors may redeem all of the outstanding shares of PCS Stock, on a Redemption
Date of which notice is delivered in accordance with Section 7.4(F), in exchange
for the number of shares of common stock of one or more wholly-owned
subsidiaries of the Corporation (collectively, the "PCS Group Subsidiary") that
collectively hold directly or indirectly all of the assets and liabilities
attributed to the PCS Group (and no other assets or liabilities of the
Corporation or any subsidiary thereof) equal to the product of the Outstanding
PCS Fraction and the number of shares of common stock of such PCS Group
Subsidiary to be outstanding immediately following such exchange of shares
(including any shares of such PCS Group Subsidiary which will be retained by the
Corporation in respect of the FON Group Intergroup Interest Fraction), such PCS
Group Subsidiary shares to be delivered to the holders of shares of PCS Stock on
the Redemption Date and to be divided among the holders of PCS Stock pro rata in
accordance with the number of shares of PCS Stock held by each on such
Redemption Date, each of which shares of common stock of such PCS Group
Subsidiary shall be, upon such delivery, fully paid and nonassessable; provided,
however, that
(i) no such redemption pursuant to this Section 7.2 may occur prior to
November 23, 2000 unless such redemption is approved by the affirmative vote of
the holders of a majority of shares of PCS Stock and Class A Common Stock,
voting together as a single class in accordance with ARTICLE SIXTH, Section
3.2(d),
(ii) holders of shares of Series 2 PCS Stock and Series 3 PCS Stock
outstanding immediately prior to the Redemption Date shall receive on a per
share basis, pursuant to such redemption, shares of common stock of such PCS
Group Subsidiary with Voting Power equivalent on a per share basis to such
shares received by holders of Series 1 PCS Stock and
(iii) on such Redemption Date, the holders of Old Class A Common Stock and
Class A Common Stock--Series DT will receive the number of shares of the PCS
Group Subsidiary equal to the product of (A) the Old Class A PCS Interest
Fraction, in the case of the holders of the Old Class A Common Stock, and the
Class A--Series DT PCS Interest Fraction, in the case of holders of Class A
Common Stock--Series DT and (B) the number of shares of common stock of such PCS
Group Subsidiary to be outstanding immediately following such issuance of
shares;
and provided further, that no such redemption pursuant to this Section 7.2 may
occur unless (i) the redemption is tax-free to the holders of PCS Stock or (ii)
such other arrangement exists for the benefit of the holders of PCS Stock
redeemed such that, net of all taxes related to such redemption and to such
other arrangement itself which are realized by such stockholders, such
stockholders will be in a position that is substantially equivalent economically
to the position such stockholders would be in after a tax-free distribution
described in the immediately preceding clause (i).
7.3. Treatment of Convertible Securities. After any
Conversion Date or Redemption Date on which all
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outstanding shares of any class or series of PCS Stock are converted or
redeemed, any share of such class or series of PCS Stock that is issued on
conversion, exchange or exercise of any Convertible Securities shall,
immediately upon issuance pursuant to such conversion, exchange or exercise and
without any notice from or to, or any other action on the part of, the
Corporation or its Board of Directors or the holder of such Convertible
Security:
(A) if the shares of such class or series of PCS Stock outstanding on such
Conversion Date were converted into shares of another class or series of
Corporation Common Stock (or another class or series of common stock of the
Corporation) pursuant to subparagraph (A)(2) or paragraph (C) or (D) of Section
7.1, be converted into the amount of cash and/or the number of shares of the
kind of capital stock and/or other securities or property of the Corporation
that the number of shares of such class or series of PCS Stock issued upon such
conversion, exchange or exercise would have received had such shares been
outstanding on such Conversion Date; or
(B) if the shares of such class or series of PCS Stock outstanding on such
Redemption Date were redeemed pursuant to Section 7.1(A)(1)(b) or Section 7.2,
be redeemed, to the extent of funds of the Corporation legally available
therefor, for $.01 per share in cash for each share of such class or series of
PCS Stock issued upon such conversion, exchange or exercise.
The provisions of this Section 7.3 shall not apply to the extent that other
adjustments in respect of such conversion, exchange or redemption of a class or
series of PCS Stock are otherwise made pursuant to the provisions of such
Convertible Securities.
7.4. Notice and Other Provisions.
(A) Not later than the tenth Trading Day following the consummation of a
Disposition referred to in Section 7.1(A), the Corporation shall announce
publicly by press release (1) the Net Proceeds of such Disposition, (2) the
number of shares outstanding of the PCS Stock, (3) the number of shares of PCS
Stock into or for which Convertible Securities are then convertible,
exchangeable or exercisable and the conversion, exchange or exercise price
thereof and (4) the Outstanding PCS Fraction, the Old Class A PCS Interest
Fraction and the Class A--Series DT Interest Fraction on the date of such
notice. Not earlier than the 26th Trading Day and not later than the 30th
Trading Day following the consummation of such Disposition, the Corporation
shall announce publicly by press release which of the actions specified in
Section 7.1(A) it has irrevocably determined to take in respect of such
Disposition.
(B) If the Corporation determines to pay a dividend on shares of PCS Stock
pursuant to Section 7.1(A)(1)(a), the Corporation shall, not later than the 30th
Trading Day following the consummation of the Disposition referred to in such
Section, cause notice to be given to each holder of PCS Stock, Class A Common
Stock and to each holder of Convertible Securities that are convertible into or
exchangeable or exercisable for shares of PCS Stock (unless alternate provision
for such notice to the holders of such Convertible Securities is made pursuant
to the terms of such Convertible Securities), setting forth (1) the record date
for determining holders entitled to receive such dividend, which shall be not
earlier than the 40th Trading Day and not later than the 50th Trading Day
following the consummation of such Disposition, (2) the anticipated payment date
of such dividend (which shall not be more than 85 Trading Days following the
consummation of such Disposition), (3) the kind of shares of capital stock, cash
and/or other securities or property to be paid as such dividend in respect of
the outstanding shares of PCS Stock, (4) the Net Proceeds of such Disposition,
(5) the Outstanding PCS Fraction, the Old Class A PCS Interest Fraction and the
Class A--Series DT Interest Fraction on the date of such notice, (6) the number
of outstanding shares of PCS Stock and the number of shares of PCS Stock into or
for which outstanding Convertible Securities are then convertible, exchangeable
or exercisable and the conversion, exchange or exercise price thereof and (7) in
the case of notice to be given to holders of Convertible Securities, a statement
to the effect that a holder of such Convertible Securities shall be entitled to
receive such dividend only if such holder properly converts, exchanges or
exercises such Convertible Securities on or prior to the record date referred to
in clause (1) of this sentence. Such notice shall be sent by first-class mail,
postage prepaid, to each such holder at such holder's address as the same
appears on the transfer books of the Corporation.
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(C) If the Corporation determines to redeem PCS Stock pursuant to Section
7.1(A)(1)(b)(i), the Corporation shall, not earlier than the 45th Trading Day
and not later than the 35th Trading Day prior to the Redemption Date, cause
notice to be given to each holder of shares of PCS Stock, Class A Common Stock
and to each holder of Convertible Securities convertible into or exchangeable or
exercisable for shares of PCS Stock (unless alternate provision for such notice
to the holders of such Convertible Securities is made pursuant to the terms of
such Convertible Securities), setting forth (1) a statement that all shares of
PCS Stock outstanding on the Redemption Date shall be redeemed, (2) the
Redemption Date (which shall not be more than 85 Trading Days following the
consummation of such Disposition), (3) the kind of shares of capital stock, cash
and/or other securities or property in which the redemption price for the shares
to be redeemed is to be paid, (4) the Net Proceeds of such Disposition, (5) the
Outstanding PCS Fraction, the Old Class A PCS Interest Fraction and the Class
A--Series DT Interest Fraction on the date of such notice, (6) the place or
places where certificates for shares of PCS Stock, properly endorsed or assigned
for transfer (unless the Corporation waives such requirement), are to be
surrendered for delivery of cash and/or securities or other property, (7) the
number of outstanding shares of PCS Stock and the number of shares of PCS Stock
into or for which such outstanding Convertible Securities are then convertible,
exchangeable or exercisable and the conversion, exchange or exercise price
thereof, (8) in the case of notice to be given to holders of Convertible
Securities, a statement to the effect that a holder of such Convertible
Securities shall be entitled to participate in such redemption only if such
holder properly converts, exchanges or exercises such Convertible Securities on
or prior to the Redemption Date referred to in clause (2) of this sentence and a
statement as to what, if anything, such holder will be entitled to receive
pursuant to the terms of such Convertible Securities or, if applicable, this
Section 7 if such holder thereafter converts, exchanges or exercises such
Convertible Securities and (9) a statement to the effect that, except as
otherwise provided by paragraph (I) of this Section 7.4, dividends on such
shares of PCS Stock shall cease to be paid as of such Redemption Date. Such
notice shall be sent by first-class mail, postage prepaid, to each such holder
at such holder's address as the same appears on the transfer books of the
Corporation.
(D) If the Corporation determines to redeem PCS Stock pursuant to Section
7.1(A)(1)(b)(ii), the Corporation shall, not later than the 30th Trading Day
following the consummation of the Disposition referred to in such subparagraph,
cause notice to be given to each holder of shares of PCS Stock, Class A Common
Stock and to each holder of Convertible Securities that are convertible into or
exchangeable or exercisable for shares of PCS Stock (unless alternate provision
for such notice to the holders of such Convertible Securities is made pursuant
to the terms of such Convertible Securities) setting forth (1) a date, not
earlier than the 40th Trading Day and not later than the 50th Trading Day
following the consummation of the Disposition in respect of which such
redemption is to be made, on which shares of PCS Stock shall be selected for
redemption, (2) the anticipated Redemption Date (which shall not be more than 85
Trading Days following the consummation of such Disposition), (3) the kind of
shares of capital stock, cash and/or other securities or property in which the
redemption price for the shares to be redeemed is to be paid, (4) the Net
Proceeds of such Disposition, (5) the Outstanding PCS Fraction, the Old Class A
PCS Interest Fraction and the Class A--Series DT Interest Fraction on the date
of such notice, (6) the number of shares of PCS Stock outstanding and the number
of shares of PCS Stock into or for which outstanding Convertible Securities are
then convertible, exchangeable or exercisable and the conversion, exchange or
exercise price thereof, (7) in the case of notice to be given to holders of
Convertible Securities, a statement to the effect that a holder of such
Convertible Securities shall be eligible to participate in such selection for
redemption only if such holder properly converts, exchanges or exercises such
Convertible Securities on or prior to the record date referred to in clause (1)
of this sentence, and a statement as to what, if anything, such holder will be
entitled to receive pursuant to the terms of such Convertible Securities or, if
applicable, this Section 7 if such holder thereafter converts, exchanges or
exercises such Convertible Securities and (8) a statement that the Corporation
will not be required to register a transfer of any shares of PCS Stock for a
period of 15 Trading Days next preceding the date referred to in clause (1) of
this sentence. Promptly following the date referred to in clause (1) of the
preceding sentence, but not earlier than 40 Trading Days nor later than 50
Trading Days following the consummation of such Disposition, the Corporation
shall cause a notice to be given to each holder of record of shares of PCS Stock
to be redeemed setting forth (1) the number of shares of PCS Stock held by such
holder to be redeemed, (2) a statement that such shares of PCS Stock shall be
redeemed, (3) the Redemption Date, (4) the kind and per share amount of cash
and/or securities or other
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property to be received by such holder with respect to each share of PCS Stock
to be redeemed, including details as to the calculation thereof, (5) the place
or places where certificates for shares of PCS Stock, properly endorsed or
assigned for transfer (unless the Corporation shall waive such requirement), are
to be surrendered for delivery of such cash and/or securities or other property,
(6) if applicable, a statement to the effect that the shares being redeemed may
no longer be transferred on the transfer books of the Corporation after the
Redemption Date and (7) a statement to the effect that, subject to paragraph (I)
of this Section 7.4, dividends on such shares of PCS Stock shall cease to be
paid as of the Redemption Date. Such notices shall be sent by first-class mail,
postage prepaid, to each such holder at such holder's address as the same
appears on the transfer books of the Corporation.
(E) If the Corporation determines to convert the PCS Stock pursuant to Section
7.1(A)(2), Section 7.1(C) or Section 7.1(D), as the case may be, the Corporation
shall, not earlier than the 45th Trading Day and not later than the 35th Trading
Day prior to the Conversion Date, cause notice to be given to each holder of
shares of PCS Stock, Class A Common Stock and to each holder of Convertible
Securities that are convertible into or exchangeable or exercisable for shares
of PCS Stock (unless alternate provision for such notice to the holders of such
Convertible Securities is made pursuant to the terms of such Convertible
Securities) setting forth (1) a statement that all outstanding shares of PCS
Stock shall be converted, (2) the Conversion Date (which, in the case of a
conversion after a Disposition, shall not be more than 85 Trading Days following
the consummation of such Disposition), (3) the per share number of shares of
Series 1 FON Stock (or Series 2 FON Stock or Series 3 FON Stock, if applicable)
or another class or series of common stock of the Corporation, as the case may
be, to be received with respect to each share of PCS Stock, including details as
to the calculation thereof, (4) the place or places where certificates for
shares of PCS Stock, properly endorsed or assigned for transfer (unless the
Corporation shall waive such requirement), are to be surrendered for delivery of
certificates for shares of Series 1 FON Stock (or Series 2 FON Stock or Series 3
FON Stock, if applicable) or another class or series of common stock of the
Corporation, as the case may be, (5) the number of outstanding shares of PCS
Stock and the number of shares of PCS Stock into or for which outstanding
Convertible Securities are then convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof, (6) a statement to the effect
that, subject to paragraph (I) of this Section 7.4, dividends on such shares of
PCS Stock shall cease to be paid as of such Conversion Date and (7) in the case
of notice to holders of such Convertible Securities, a statement to the effect
that a holder of such Convertible Securities shall be entitled to receive shares
of common stock upon such conversion only if such holder properly converts,
exchanges or exercises such Convertible Securities on or prior to such
Conversion Date and a statement as to what, if anything, such holder will be
entitled to receive pursuant to the terms of such Convertible Securities or, if
applicable, this Section 7.4 if such holder thereafter converts, exchanges or
exercises such Convertible Securities. Such notice shall be sent by first-class
mail, postage prepaid, to each such holder at such holder's address as the same
appears on the transfer books of the Corporation.
(F) If the Corporation determines to redeem shares of PCS Stock pursuant to
Section 7.2, the Corporation shall cause notice to be given to each holder of
shares of PCS Stock to be redeemed, and to each holder of Class A Common Stock
and Convertible Securities that are convertible into or exchangeable or
exercisable for shares of such class of PCS Stock (unless alternate provision
for such notice to the holders of such Convertible Securities is made pursuant
to the terms of such Convertible Securities), setting forth (1) a statement that
all shares of PCS Stock outstanding on the Redemption Date shall be redeemed in
exchange for shares of common stock of the PCS Group Subsidiary, (2) the
Redemption Date, (3) the Outstanding PCS Fraction, the Old Class A PCS Interest
Fraction and the Class A--Series DT Interest Fraction on the date of such
notice, (4) the place or places where certificates for shares of PCS Stock to be
redeemed, properly endorsed or assigned for transfer (unless the Corporation
shall waive such requirement), are to be surrendered for delivery of
certificates for shares of the PCS Group Subsidiaries, (5) a statement to the
effect that, subject to paragraph (I) of this Section 7.4, dividends on such
shares of PCS Stock shall cease to be paid as of such Redemption Date, (6) the
number of shares of PCS Stock outstanding and the number of shares of PCS Stock
into or for which outstanding Convertible Securities are then convertible,
exchangeable or exercisable and the conversion, exchange or exercise price
thereof and (7) in the case of notice to holders of Convertible Securities, a
statement to the effect that a holder of Convertible Securities shall be
entitled to receive shares of common stock of the PCS Group Subsidiary upon
redemption only if such holder properly converts, exchanges or exercises such
Convertible Securities on or prior to the Redemption Date and a statement as to
what, if
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anything, such holder will be entitled to receive pursuant to the terms of such
Convertible Securities or, if applicable, this Section 7 if such holder
thereafter converts, exchanges or exercises such Convertible Securities. Such
notice shall be sent by first-class mail, postage prepaid, not less than 30
Trading Days nor more than 45 Trading Days prior to the Redemption Date to each
such holder at such holder's address as the same appears on the transfer books
of the Corporation. If any shares of Series 2 PCS Stock or Series 3 PCS Stock
are outstanding immediately prior to the Redemption Date, then the notice
provided to each holder of Series 2 PCS Stock or Series 3 PCS Stock, as the case
may be, pursuant to this Section 7.4(F) will also indicate that such holders of
shares of Series 2 PCS Stock and Series 3 PCS Stock outstanding immediately
prior to the Redemption Date shall receive on a per share basis, pursuant to
such redemption, shares of common stock of such PCS Group Subsidiary with Voting
Power equivalent to such shares received by holders of Series 1 PCS Stock.
(G) If less than all of the outstanding shares of PCS Stock are to be redeemed
pursuant to Section 7.1(A)(1), then the shares to be redeemed by the Corporation
shall be selected from among the holders of shares of PCS Stock outstanding at
the close of business on the record date for such redemption on a pro rata basis
among each class or series of PCS Stock (including pro rata among all holders of
Series 2 PCS Stock and Series 3 PCS Stock) or, if Series 2 PCS Stock is no
longer outstanding, by lot or such other method as may be determined by the
Board of Directors of the Corporation to be equitable.
(H) The Corporation shall not be required to issue or deliver fractional
shares of any capital stock or of any other securities to any holder of PCS
Stock upon any conversion, redemption, dividend or other distribution pursuant
to this Section 7. If more than one share of PCS Stock shall be held at the same
time by the same holder, the Corporation may aggregate the number of shares of
any capital stock that shall be issuable or any other securities or property
that shall be distributable to such holder upon any conversion, redemption,
dividend or other distribution (including any fractional shares). If there are
fractional shares of any capital stock or of any other securities remaining to
be issued or distributed to the holders of PCS Stock, the Corporation shall, if
such fractional shares are not issued or distributed to the holder, pay cash in
respect of such fractional shares in an amount equal to the Fair Value thereof
on the fifth Trading Day prior to the date such payment is to be made (without
interest). For purposes of the preceding sentence only, "Fair Value" of any
fractional share means (A) in the case of any fraction of a share of capital
stock of the Corporation, the product of such fraction and the Market Value of
one share of such capital stock and (B) in the case of any other fractional
security, such value as is determined by the Board of Directors.
(I) No adjustments in respect of dividends shall be made upon the conversion
or redemption of any shares of PCS Stock; provided, however, that if the
Conversion Date or Redemption Date, as the case may be, with respect to any
shares of PCS Stock shall be subsequent to the record date for the payment of a
dividend or other distribution thereon or with respect thereto, the holders of
such shares of PCS Stock at the close of business on such record date shall be
entitled to receive the dividend or other distribution payable on or with
respect to such shares on the date set for payment of such dividend or other
distribution, in each case without interest, notwithstanding the subsequent
conversion or redemption of such shares.
(J) Before any holder of PCS Stock shall be entitled to receive any cash
payment and/or certificates or instruments representing shares of any capital
stock and/or other securities or property to be distributed to such holder with
respect to such shares of PCS Stock pursuant to this Section 7, such holder
shall surrender at such place as the Corporation shall specify certificates for
such shares of PCS Stock, properly endorsed or assigned for transfer (unless the
Corporation shall waive such requirement). The Corporation shall as soon as
practicable after receipt of certificates representing such shares of PCS Stock
deliver to the person for whose account such shares of PCS Stock were so
surrendered, or to such person's nominee or nominees, the cash and/or the
certificates or instruments representing the number of whole shares of the kind
of capital stock and/or other securities or property to which such person shall
be entitled as aforesaid, together with any payment in respect of fractional
shares contemplated by Section 7.4(H), in each case without interest. If less
than all of the shares of PCS Stock represented by any one certificate are to be
redeemed or converted, then the Corporation shall issue and deliver a new
certificate for the shares of PCS Stock not redeemed.
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(K) From and after any applicable Conversion Date or Redemption Date, as the
case may be, all rights of a holder of shares of PCS Stock that were converted
or redeemed shall cease except for the right, upon surrender of the certificates
representing such shares of PCS Stock as required by Section 7.4(J), to receive
the cash and/or the certificates or instruments representing shares of the kind
of capital stock and/or other securities or property for which such shares were
converted or redeemed, together with any payment in respect of fractional shares
contemplated by Section 7.4(H) and rights to dividends as provided in Section
7.4(I), in each case without interest. Subject to the next sentence, any holder
of a certificate that immediately prior to the applicable Conversion Date or
Redemption Date represented shares of PCS Stock shall not be entitled to receive
any dividend or other distribution or interest payment with respect to shares of
any kind of capital stock or other security or instrument for which PCS Stock
was converted or redeemed until the surrender as required by this Section 7 of
such certificate in exchange for a certificate or certificates or instrument or
instruments representing such capital stock or other security. Upon such
surrender, there shall be paid to the holder the amount of any dividends or
other distributions (without interest) which theretofore became payable on any
class of capital stock of the Corporation as of a record date after the
Conversion Date or Redemption Date, but that were not paid by reason of the
foregoing, with respect to the number of whole shares of the kind of capital
stock represented by the certificate or certificates issued upon such surrender.
From and after a Conversion Date or Redemption Date, the Corporation shall,
however, be entitled to treat the certificates for PCS Stock that have not yet
been surrendered for conversion or redemption as evidencing the ownership of the
number of whole shares of the kind or kinds of capital stock of the Corporation
for which the shares of PCS Stock represented by such certificates shall have
been converted or redeemed, notwithstanding the failure to surrender such
certificates.
(L) The Corporation shall pay any and all documentary, stamp or similar issue
or transfer taxes that may be payable in respect of the issuance or delivery of
any shares of capital stock and/or other securities upon conversion or
redemption of shares of PCS Stock pursuant to this Section 7. The Corporation
shall not, however, be required to pay any tax that may be payable in respect of
any transfer involved in the issuance or delivery of any shares of capital stock
and/or other securities in a name other than that in which the shares of PCS
Stock so converted or redeemed were registered, and no such issuance or delivery
shall be made unless and until the person requesting such issuance or delivery
has paid to the Corporation the amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been paid.
(M) Neither the failure to mail any notice required by this Section 7.4 to any
particular holder of PCS Stock or of Convertible Securities nor any defect
therein shall affect the sufficiency of any notice given to any other holder of
outstanding shares of PCS Stock or of Convertible Securities or the validity of
any such conversion or redemption.
(N) The Board of Directors may establish such rules and requirements to
facilitate the effectuation of the transactions contemplated by this Section 7
as the Board of Directors shall determine to be appropriate.
(O) If notices to Class A Holders are made pursuant to this Section 7, then
the Corporation will make such notices in compliance with the provisions of
Section 11 of ARTICLE SIXTH as well as with the provisions of this Section 7.
7.5 Automatic Conversion of Series 2 PCS Stock and Series 2 FON Stock.
(a) Below One Percent Voting Power. If the total number of Converted Votes
represented by the aggregate number of issued and outstanding shares of Series 2
PCS Stock or Series 2 FON Stock, as the case may be, is below one percent of the
outstanding Voting Power of the Corporation for more than 90 consecutive days,
then (i) the Corporation shall notify FT and DT, in accordance with ARTICLE
SIXTH, Section 11, of the date on which such conversion will occur as soon as
practicable following the date on which such 90-day period ends (the "Conversion
Trigger Date") but in no event later than ten Business Days after the Conversion
Trigger Date and (ii) each outstanding share of Series 2 PCS Stock or Series 2
FON Stock will automatically convert (without the payment of
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any consideration) into one duly issued, fully paid and nonassessable share of
Series 1 PCS Stock or Series 1 FON Stock, respectively, such conversion to take
place on the 90th day following the Conversion Trigger Date.
(b) Certain Transfers. Upon any Transfer of shares of Series 2 PCS Stock or
Series 2 FON Stock, as the case may be (other than a Transfer to a Cable Holder)
each such share so Transferred shall automatically convert (without the payment
of any consideration) into one duly issued, fully paid and nonassessable share
of Series 1 PCS Stock or Series 1 FON Stock, respectively, as of the date of
such Transfer.
(c) Notice of Automatic Conversion; Exchange of Stock Certificates; Effect of
Automatic Conversion of All Series 2 PCS Stock, etc.
(i) In addition to the notice required in Section 7.5(a), as soon as
practicable after a conversion of shares of Series 2 PCS Stock (or, if
applicable, Series 2 FON Stock) into shares of Series 1 PCS Stock (or, if
applicable, Series 1 FON Stock), pursuant to this Section 7, the Corporation
shall notify FT and DT, in accordance with ARTICLE SIXTH, Section 11, of the
number of shares so converted and the date on which such conversion occurred.
(ii) Immediately upon the conversion of shares of Series 2 PCS Stock (or, if
applicable, Series 2 FON Stock) into shares of Series 1 PCS Stock (or, if
applicable, Series 1 FON Stock), pursuant to this Section 7 (such shares so
converted hereinafter referred to as the "Converted Series Shares"), the rights
of the holders of such Converted Series 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 Series 1 PCS Stock or Series 1 FON Stock, as the case
may be, issuable upon such conversion (the "Newly Issued Shares"), provided that
such Persons shall be entitled to receive when paid any dividends declared on
the Converted Series Shares as of a record date preceding the time the Converted
Series Shares were converted (the "Series Conversion Time") and unpaid as of the
Series Conversion Time. If the stock transfer books of this Corporation shall be
closed at the Series Conversion Time, such Person or Persons shall be deemed to
have become such holder or holders of record of the Newly Issued Shares at the
opening of business on the next succeeding day on which such stock transfer
books are open.
(iii) As promptly as practicable after the Series Conversion Time, upon the
delivery to this Corporation of the certificates formerly representing Converted
Series 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 Newly Issued Shares into which the Converted Series Shares
formerly represented by such certificates have been converted in accordance with
the provisions of this Section 7.5.
(iv) 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 Newly Issued Shares upon the conversion of Converted Series
Shares pursuant to this Section 7.5, 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 Newly Issued 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.
(v) This Corporation shall at all times reserve and keep available, out of the
aggregate of its authorized but unissued Series 1 PCS Stock, authorized but
unissued Series 1 FON Stock, issued Series 1 PCS Stock held in its treasury and
issued Series 1 FON Stock held in its treasury, for the purpose of effecting the
conversion of the Series 2 PCS Stock or Series 2 FON Stock, as the case may be,
contemplated hereby, the full number of shares of Series 1 PCS Stock and Series
1 FON Stock then deliverable upon the conversion of all outstanding shares of
Series 2 PCS Stock or Series 2 FON Stock, as the case may be, and the full
number of shares of Series 2 PCS Stock the Cable Holders are permitted to
acquire under the Restructuring Agreement and the Cable Holder Standstill
Agreements.
(d) Temporary Voting Power Adjustment for Class A Holders. If any conversions
of shares of Series 2 PCS
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Stock or Series 2 FON Stock into shares of Series 1 PCS Stock or Series 1 FON
Stock, respectively, pursuant to this Section 7.5, or any increases in the per
share vote of other Voting Securities of the Corporation upon a Transfer of such
Voting Securities, occur on or after the tenth Trading Day preceding a record
date for purposes of determining the stockholders entitled to vote or to receive
the payment of a dividend, then the per share vote of the Class A Stock
determined in accordance with ARTICLE SIXTH, Section 3.2 shall be increased such
that the aggregate Percentage Ownership Interest of each Class A Holder,
including with respect to Series 3 FON Stock and Series 3 PCS Stock (or stock
converting into Series 3 FON Stock and Series 3 PCS Stock pursuant to ARTICLE
SIXTH, Section 8.5(i)) acquired prior to such record date, shall not be diluted
as a result of such conversions until 12:01 a.m. on the day immediately
following the date of such stockholder meeting or the dividend payment date,
respectively.
Section 8. Provisions Relating to Class A Stock.
8.1. Rights and Privileges. Except as otherwise set forth in these Articles of
Incorporation, at all times (i) the holders of Series 3 FON Stock shall be
entitled to all of the rights and privileges pertaining to the ownership of
Series 1 FON Stock, (ii) the holders of Series 3 PCS Stock shall be entitled to
all of the rights and privileges pertaining to the ownership of Series 1 PCS
Stock, and (iii) the holders of Class A Common Stock shall be entitled to all of
the rights and privileges pertaining to the ownership of Series 1 FON Stock and
Series 1 PCS Stock to the extent such Class A Common Stock represents, at such
time, Shares Issuable With Respect To The Class A Equity Interest In The FON
Group and Shares Issuable With Respect To The Class A Equity Interest In The PCS
Group, in all such cases without any limitations, prohibitions, restrictions or
qualifications whatsoever, and such holders shall be entitled to such other
rights and privileges as are expressly set forth in these Articles of
Incorporation; provided that a holder of shares of Class A Common Stock shall
not have any rights or privileges under these Articles of Incorporation or the
General Corporation Code of Kansas, as amended, or otherwise (whether in
connection with the voluntary or involuntary liquidation, dissolution or winding
up of this Corporation, in connection with the declaration and/or payment of
dividends, with respect to redemptions of such shares or in connection with any
other distributions by the Corporation of any character on the Corporation
Common Stock or otherwise) in respect of such shares except such rights and
privileges that such holder would have had if all Shares Issuable With Respect
To The Class A Equity Interest In The FON Group and all Shares Issuable With
Respect To The Class A Equity Interest In The PCS Group had been issued and all
shares of Class A Common Stock had been redeemed pursuant to ARTICLE SIXTH,
Section 1.2(c) or 1.2(d), as applicable.
8.2. Certain Agreements. Except as otherwise provided in Section 8.3 of
ARTICLE SIXTH, for so long as any shares of Class A Stock are outstanding:
(i) if any merger or other business combination involving this Corporation
results directly or indirectly in a Change of Control, then unless this
Corporation survives as the parent entity, the surviving corporation will
expressly assume all of this Corporation's obligations in respect of the
Registration Rights Agreement and this Section 8.2; and
(ii) if any merger or other business combination involving this Corporation
occurs that does not result directly or indirectly in a Change of Control, then
unless this Corporation survives as the parent entity, the surviving corporation
will expressly assume all of this Corporation's obligations in respect of the
rights of the Class A Holders granted pursuant to these Articles of
Incorporation, the Stockholders' Agreement, the FT/DT Restructuring Agreement
and the Registration Rights Agreement.
8.3. Conversion of Shares. (a) Unauthorized Transfers; Automatic Conversions.
Upon any Transfer of shares of Class A Stock (other than a Transfer to a
Qualified Subsidiary, to 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), or upon delivery of a written notice, provided
by a Class A Holder with respect to such holder's shares of Class A Stock, to
Sprint in accordance with the notice delivery requirements as set forth in
ARTICLE SIXTH, Section 11,
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(A) each share of Series 3 FON Stock and Series 3 PCS Stock, as the case may
be, so Transferred, or identified in such notice, shall automatically convert
(without the payment of any consideration) into one duly issued, fully paid and
nonassessable share of Series 1 FON Stock and Series 1 PCS Stock, respectively,
and
(B) (i) the Old Class A Common Stock, to the extent so Transferred, or
identified in such notice, shall be adjusted as provided in, and with the same
effect as provided in, ARTICLE SIXTH, Sections 1.2(c) and 1.2(e), except that in
such case only Series 1 PCS Stock and Series 1 FON Stock shall be issued; and
(ii) the Class A Common Stock--Series DT, to the extent so Transferred, or
identified in such notice, shall be adjusted as provided in, and with the same
effect as provided in, ARTICLE SIXTH, Sections 1.2(d) and 1.2(e), except that in
such case only Series 1 PCS Stock and Series 1 FON Stock shall be issued;
as of the date of such Transfer or delivery of such notice, provided that no
conversion of Class A Stock pursuant to this Section 8.3(a) shall be considered
to be an acquisition of Series 1 FON Stock or Series 1 PCS Stock for purposes of
Section 8.3(c) of ARTICLE SIXTH.
(b) Material Breach of Investment Documents. (i) (A) Each outstanding share of
Series 3 FON Stock and Series 3 PCS Stock Beneficially Owned by a Breaching
Holder shall automatically convert (without the payment of any consideration)
into one duly issued, fully paid and nonassessable share of Series 1 FON Stock
and Series 1 PCS Stock, respectively, and (B) all (i) outstanding shares of Old
Class A Common Stock Beneficially Owned by a Breaching Holder shall
automatically convert (without the payment of any consideration) into the number
of duly issued, fully paid and nonassessable shares of Series 1 FON Stock and
Series 1 PCS Stock equal to the Number Of Shares Issuable With Respect To The
Old Class A Equity Interest In The FON Group and the Number Of Shares Issuable
With Respect To The Old Class A Equity Interest In The PCS Group, respectively,
represented by such shares of Old Class A Common Stock, and (ii) outstanding
shares of Class A Common Stock--Series DT Beneficially Owned by a Breaching
Holder shall automatically convert (without the payment of any consideration)
into the number of duly issued, fully paid and nonassessable shares of Series 1
FON Stock and Series 1 PCS Stock equal to the Number Of Shares Issuable With
Respect To The Class A--Series DT Equity Interest In The FON Group and the
Number Of Shares Issuable With Respect To The Class A--Series DT Equity Interest
In The PCS Group, respectively, represented by such shares of Class A Common
Stock--Series DT, if:
(v) FT or DT or any Qualified Subsidiary breaches in any material respect its
obligations under Section 2.4 of the Stockholders' Agreement;
(w) deleted;
(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), (x), (y) or (z) above, the Class A Holder(s) alleged to have taken
the actions causing such breach (the "Breaching Holders") shall deliver a notice
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(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 Stock 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 Stock 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
(A) each outstanding share of Series 3 FON Stock and Series 3 PCS Stock, as
the case may be, Beneficially Owned by a Breaching Holder shall automatically
convert (without the payment of any consideration) into one duly issued, fully
paid and nonassessable share of Series 1 FON Stock and Series 1 PCS Stock,
respectively, and
(B) all (i) outstanding shares of Old Class A Common Stock Beneficially Owned
by a Breaching Holder shall automatically convert (without the payment of any
consideration) into the number of duly issued, fully paid and nonassessable
shares of Series 1 FON Stock and Series 1 PCS Stock equal to the Number Of
Shares Issuable With Respect To The Old Class A Equity Interest In The FON Group
and the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The PCS Group, respectively, represented by such shares of Old Class
A Common Stock, and (ii) outstanding shares of Class A Common Stock--Series DT
Beneficially Owned by a Breaching Holder shall automatically convert (without
the payment of any consideration) into the number of duly issued, fully paid and
nonassessable shares of Series 1 FON Stock and Series 1 PCS Stock equal to the
Number Of Shares Issuable With Respect To The Class A--Series DT Equity Interest
In The FON Group and the Number Of Shares Issuable With Respect To The Class
A--Series DT Equity Interest In The PCS Group, respectively, represented by such
shares of Class A Common Stock--Series DT,
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 (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 clause (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 Non-Class A Common Stock or Class A
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Stock, as the case may be, as is necessary to return the Breaching Holder 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 this Section 8.3 shall, with respect to the Breaching
Holder only, be suspended and may not be exercised by the Breaching Holder.
(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 this Section 8.3 shall, with
respect to the Breaching Holder only, be suspended and may not be exercised by
the Breaching Holder; 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 this Section 8.3 shall, with
respect to the Breaching Holder only, be suspended and may not be exercised by
the Breaching Holder; 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
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effect that such breach has occurred.
(v) For purposes of this Section 8.3(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 8.3(b) shall be considered an
acquisition for purposes of Section 8.3(c) of ARTICLE SIXTH.
(c) Conversion into Class A Stock. Until the conversion of all of the shares
of Class A Stock pursuant to this Section 8.3, (x) each share of Series 1 FON
Stock or Series 2 FON Stock, as the case may be, 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 Series 3 FON Stock at the
date of such acquisition and (y) each share of Series 1 PCS Stock or Series 2
PCS Stock, as the case may be, 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 Series 3 PCS Stock at the date of such
acquisition.
(d) Notice of Conversion; Exchange of Stock Certificates; Effect of Conversion
of all Class A Stock. (i) Immediately upon the conversion of shares of Series 3
FON Stock, Series 3 PCS Stock and Class A Common Stock into shares of Series 1
FON Stock, Series 1 PCS Stock and, as applicable, shares of both Series 1 FON
Stock and Series 1 PCS Stock, respectively, or upon the conversion of shares of
Series 1 FON Stock and Series 2 FON Stock or Series 2 PCS Stock and Series 1 PCS
Stock into shares of Series 3 FON Stock or Series 3 PCS Stock, respectively, and
in each case pursuant to this Section 8.3 (the shares of Class A Common Stock,
Series 3 FON Stock, Series 3 PCS Stock, Series 1 FON Stock, Series 2 FON Stock,
Series 2 PCS Stock or Series 1 PCS 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 Series 1 FON Stock, Series 3
FON Stock, Series 1 PCS Stock or Series 3 PCS 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 such
Persons were the record holders of the Converted Shares on such record date. 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 8.3.
(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 8.3, 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 Series 3 FON Stock, Series 3 PCS
Stock, Series 1 PCS Stock and Series 1 FON Stock and its issued Series 1 FON
Stock or Series 1 PCS Stock held in its treasury, for the purpose of effecting
the conversion of the Series 3
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FON Stock, Series 1 FON Stock, Series 2 FON Stock, Series 3 PCS Stock, Series 2
PCS Stock, Series 1 PCS Stock and Class A Common Stock contemplated hereby, the
full number of shares of Series 1 FON Stock or Series 1 PCS Stock then
deliverable upon the conversion of all outstanding shares of Series 3 FON Stock,
Series 3 PCS Stock and Class A Common Stock, and the full number of shares of
Series 3 FON Stock and Series 3 PCS Stock that would be deliverable upon
conversion of all of the shares of Series 1 FON Stock, Series 1 PCS Stock,
Series 2 FON Stock and Series 2 PCS Stock the Class A Holders are permitted to
acquire hereunder and under the Investment Agreement, the FT/DT Restructuring
Agreement, the Stockholders' Agreement and the Standstill Agreement.
(v) Following conversion of all outstanding shares of Class A Stock into
shares of Series 1 FON Stock or Series 1 PCS Stock, as the case may be, pursuant
to this Section 8.3, this Corporation shall not, directly or indirectly, issue,
or sell from the treasury, any shares of Class A Stock.
(e) Class A Stock Held by Qualified Stock Purchasers. (i) (A) Each outstanding
share of Series 3 FON Stock and Series 3 PCS Stock, as the case may be, 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
Series 1 FON Stock and Series 1 PCS Stock, respectively, if:
(v) such Qualified Stock Purchaser breaches in any material respect its
obligations under Section 2.4 of the Stockholders' Agreement;
(w) deleted;
(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 (ii)(x) or (iii)(x) below, in which case no
conversion of the Class A Stock owned by such Qualified Stock Purchaser 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 Stock owned by such Qualified Stock Purchaser 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 Series 3 FON Stock and Series 3 PCS
Stock, as the case may be, 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 Series 1 FON Stock and Series 1
PCS Stock, respectively upon delivery of such notice; and
provided, further, that if such Qualified Stock Purchaser fails to perform the
actions described in clauses (I) or (II)
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above within the time periods provided for performing such actions in clauses
(ii), (iii) or (iv) below, it shall be deemed to have taken the action described
in clause (III) above.
(ii) For any alleged breach of the type described in clauses (x) or (z) of
clause (i) 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 clause (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 (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 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 (ii), the rights provided to such
Qualified Stock Purchaser under this Section 8.3 shall be suspended and may not
be exercised by such Qualified Stock Purchaser.
(iii) For any alleged breach of the type described in clause (i)(v) 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, 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
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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 such Qualified Stock Purchaser under this Section 8.3 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 (iii).
(iv) For any alleged breach of the type described in clause (i)(y) 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 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 this Section 8.3 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.
(v) For purposes of this Section 8.3(e), 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.
(vi) No conversion pursuant to this Section 8.3(e) shall be considered an
acquisition for purposes of Section 8.3(c) of ARTICLE SIXTH.
(f) Effect of Conversion. Upon the conversion of all of the
shares of Class A Stock pursuant to this Section 8.3,
(A) each share of Series 3 FON Stock and Series 3 PCS Stock, as the case may
be, issued by this Corporation pursuant to the Investment Agreement, the FT/DT
Restructuring 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
Series 1 FON Stock and Series 1 PCS Stock, respectively, and
(B) all (i) outstanding shares of Old Class A Common Stock shall automatically
convert (without the payment of any consideration) into the number of duly
issued, fully paid and nonassessable shares of Series 1 FON Stock and Series 1
PCS Stock equal to the Number Of Shares Issuable With Respect To The Old Class A
Equity Interest In The FON Group and the Number Of Shares Issuable With Respect
To The Old Class A Equity Interest In The PCS Group, respectively, represented
by such shares of Old Class A Common Stock, and (ii) outstanding shares of Class
A Common Stock--Series DT shall automatically convert (without the payment of
any consideration) into the number of duly issued, fully paid and nonassessable
shares of Series 1 FON Stock and Series 1 PCS Stock equal to the Number Of
Shares Issuable With Respect To The Class A--Series DT Equity Interest In The
FON Group and the Number Of Shares Issuable With Respect To The Class A--Series
DT Equity Interest In The PCS Group, respectively, represented by such shares of
Class A Common Stock--Series DT;
provided that such conversion shall not be considered an acquisition of Series
1 FON Stock or Series 1 PCS Stock, as the case may be, for purposes of Section
8.3(c) of ARTICLE SIXTH.
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8.4. Class Voting. Except as otherwise provided by law, 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.
8.5. Amendment of Class A Provisions; The Master Transfer Agreement. The Class
A Provisions may be amended in any manner which would not materially alter or
change the powers, preferences or rights of the holders of shares of Non-Class A
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 votes
represented by 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
Non- Class A Common Stock or the Preferred Stock. Upon the retirement of shares
of Class A Common 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. ss. 17-6003 and ss. 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 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. Notwithstanding any other provision
in these Articles of Incorporation, the transactions contemplated by the Master
Transfer Agreement shall not constitute a Corporation Joint Venture Termination
or an FT/DT Joint Venture Termination.
Section 9. Application of the Provisions of ARTICLE SIXTH.
9.1. Certain Determinations of the Board of Directors. In addition to the
determinations regarding Preferred Stock to be made by the Board of Directors as
provided by Section 13.6, the Board of Directors shall make such determinations
(i) with respect to the assets and liabilities to be attributed to the Business
Groups (in accordance with the definitions of "PCS Group" and "Sprint FON Group"
set forth in ARTICLE SIXTH, Section 10), (ii) with respect to the application of
the provisions of this ARTICLE SIXTH to transactions to be engaged in by the
Corporation and (iii) as may be or become necessary or appropriate to the
exercise of the powers, preferences and relative, participating, optional and
other special rights of the classes or series of Corporation Common Stock,
including, without limiting the foregoing, the determinations referred to in the
following paragraphs (A), (B), (C) and (D) of this Section 9.1. A record of any
such determination shall be filed with the Secretary of the Corporation to be
kept with the records of the actions of the Board of Directors.
(A) Upon any acquisition by the Corporation or its subsidiaries of any assets
or business, or any assumption of liabilities, outside of the ordinary course of
business of the Sprint FON Group or the PCS Group, as the case may be, the Board
of Directors shall determine whether such assets, business and liabilities (or
an interest therein) shall be for the benefit of the Sprint FON Group or the PCS
Group or that an interest therein shall be partly for the benefit of the Sprint
FON Group and partly for the benefit of the PCS Group and, accordingly, shall be
attributed to the Sprint FON Group or the PCS Group, or partly to each, in
accordance with the definitions of "PCS Group," "Sprint FON Group," and "Number
Of Shares Issuable With Respect To The FON Group Intergroup Interest" set forth
in Section 10 of ARTICLE SIXTH.
(B) Upon any issuance of any shares of PCS Stock at a time when the Number Of
Shares Issuable With Respect To The FON Group Intergroup Interest is more than
zero, the Board of Directors shall determine, based on the use of the proceeds
of such issuance and any other relevant factors, whether all or any part of the
shares of PCS Stock so issued should reduce the Number Of Shares Issuable With
Respect To The FON Group Intergroup Interest and the Number Of Shares Issuable
With Respect To The FON Group Intergroup Interest shall be adjusted accordingly.
(C) Upon any issuance by the Corporation or any subsidiary thereof of any
Convertible Securities that are convertible into or exchangeable or exercisable
for shares of PCS Stock, if at the time such Convertible Securities
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are issued the Number Of Shares Issuable With Respect To The FON Group
Intergroup Interest is greater than zero, the Board of Directors shall determine
whether, upon conversion, exchange or exercise thereof, the issuance of shares
of PCS Stock pursuant thereto shall, in whole or in part, reduce the Number Of
Shares Issuable With Respect To The FON Group Intergroup Interest, taking into
consideration the use of the proceeds of such issuance of Convertible Securities
in the business of the Sprint FON Group or the PCS Group and any other relevant
factors.
(D) Upon any redemption or repurchase by the Corporation or any subsidiary
thereof of shares of any Preferred Stock of any class or series or of other
securities or debt obligations of the Corporation, if some of such shares, other
securities or debt obligations were attributed to the Sprint FON Group and some
of such shares, other securities or debt obligations were attributed to the PCS
Group, the Board of Directors shall determine which, if any, of such shares,
other securities or debt obligations redeemed or repurchased shall be attributed
to the Sprint FON Group and which, if any, of such shares, other securities or
debt obligations shall be attributed to the PCS Group and, accordingly, how many
of the shares of such series of Preferred Stock or of such other securities, or
how much of such debt obligations, that remain outstanding, if any, continue to
be attributed to the Sprint FON Group or to the PCS Group.
9.2. Sources of Dividends and Distributions; Uses of Proceeds of Share
Issuances. Notwithstanding the attribution of properties or assets of the
Corporation to the Sprint FON Group or the PCS Group as provided in the
definitions of such terms in Section 10 of ARTICLE SIXTH, the Board of Directors
(i) may cause dividends or distributions or other payments to the holders of any
class of Corporation Common Stock or any class or series of Preferred Stock to
be made out of the properties or assets attributed to any Business Group,
subject, however, to any contrary term of any series of Preferred Stock fixed in
accordance with Section 13 of ARTICLE SIXTH, and (ii) may cause the proceeds of
issuance of any shares of Non-Class A Stock or Class A Stock or any class or
series of Preferred Stock, to whichever Business Group attributed in accordance
with Section 13 of ARTICLE SIXTH, to be used in the business of, and to be
attributed to, either the Sprint FON Group or the PCS Group in accordance with
the definitions of "PCS Group," "Sprint FON Group," and "Number Of Shares
Issuable With Respect To The FON Group Intergroup Interest" in Section 10 of
ARTICLE SIXTH.
9.3. Certain Determinations Not Required. Notwithstanding the foregoing
provisions of this Section 9, the provisions of Section 10 of ARTICLE SIXTH or
any other provision of this ARTICLE SIXTH, at any time when there are not
outstanding both (i) one or more shares of FON Stock (or Shares Issuable With
Respect To The Class A Equity Interest In The FON Group) or Convertible
Securities convertible into or exchangeable or exercisable for FON Stock and
(ii) one or more shares of PCS Stock (or Shares Issuable With Respect To The
Class A Equity Interest In The PCS Group) or Convertible Securities convertible
into or exchangeable or exercisable for PCS Stock, the Board of Directors need
not (A) attribute any of the assets or liabilities of the Corporation or any of
its subsidiaries to the Sprint FON Group or the PCS Group, (B) make any
determination required in connection therewith, or (C) make any of the
determinations otherwise required by this ARTICLE SIXTH, and in such
circumstances the holders of the shares of FON Stock or PCS Stock outstanding,
as the case may be, shall (unless otherwise specifically provided by the
Articles of Incorporation of the Corporation) be entitled to all the voting
powers, preferences, optional or other special rights of such classes of
Corporation Common Stock without differentiation between the FON Stock and the
PCS Stock and any provision of this ARTICLE SIXTH to the contrary shall no
longer be in effect or operative and the Board of Directors may cause the
Articles of Incorporation of the Corporation to be amended as permitted by law
to delete such provisions as are no longer operative or of further effect.
9.4. Emergency Use of Business Group Assets. Notwithstanding the foregoing
provisions of this Section 9 or any other provision of ARTICLE SIXTH, the Board
of Directors may transfer assets or properties from one Business Group to
another on such other basis as the Board of Directors shall determine,
consistent with its fiduciary duties to the Corporation and the holders of all
classes and series of the Corporation's common stock, provided that the Board of
Directors determines (i) that such transfer on such basis should be made to
prevent or mitigate material adverse consequences that would fundamentally
affect the transferee Business Group, (ii) that the benefit of such transfer on
such basis to the transferee Business Group is to materially exceed any adverse
effect of
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such transfer to the transferor Business Group, and (iii) that such transfer on
such basis is in the best interest of the Corporation as a whole after giving
fair consideration to the potentially divergent interests of the holders of the
separate classes of Corporation Common Stock.
9.5. Board Determinations Binding. Subject to applicable law, any
determinations made in good faith by the Board of Directors of the Corporation
under any provision of this Section 9 or otherwise in furtherance of the
application of this ARTICLE SIXTH shall be final and binding on all
stockholders.
Section 10. Definitions. For purposes of ARTICLE FIFTH and ARTICLE SIXTH of
these Articles of Incorporation, the following terms have the following meanings
(with terms defined in the singular having comparable meaning when used in the
plural and vice versa), unless the context otherwise requires. As used in this
Section 10, a "contribution" or "transfer" of assets or properties from one
Business Group to another refers to the reattribution of such assets or
properties from the contributing or transferring Business Group to the other
Business Group and correlative phrases have correlative meanings.
"Affiliate" means, 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" means "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 Law" has the meaning set forth in the
Stockholders' Agreement.
"Associate" has 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" means (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 Corporation.
"Atlas" means 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 Trading Price" of a share of any class or series of capital stock of
the Corporation on any day means the average Closing Price of such capital stock
determined over the 20 Trading Days immediately preceding the date of such
determination; provided that for purposes of this definition only, in
determining the "Closing Price" of a share of any class or series of capital
stock for such 20 Trading Day period, (i) the "Closing Price" of a share of
capital stock on any day prior to any "ex-dividend" date or any similar date
occurring during such period for any dividend or distribution (other than any
dividend or distribution contemplated by clause (ii)(B) of this definition) paid
or to be paid with respect to such capital stock shall be reduced by the Fair
Value of the per share amount of such dividend or distribution and (ii) the
"Closing Price" of any share of capital stock on any day prior to (A) the
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effective date of any subdivision (by stock split or otherwise) or combination
(by reverse stock split or otherwise) of outstanding shares of such class of
capital stock occurring during such period or (B) any "ex-dividend" date or any
similar date occurring during such period for any dividend or distribution with
respect to such capital stock to be made in shares of such class or series of
capital stock or Convertible Securities that are convertible, exchangeable or
exercisable for such class or series of capital stock, shall be appropriately
adjusted, as determined by the Board of Directors, to reflect such subdivision,
combination, dividend or distribution.
"Beneficial Owner" (including, with its correlative meanings, "Beneficially
Own" and "Beneficial Ownership"), with respect to any securities, means 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 FT/DT Restructuring 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 (i) Class A Stock, Non-Class A Common Stock and Preferred Stock
held by one of FT or DT or its Affiliates or Associates shall not also be deemed
to be Beneficially Owned by the other of FT or DT or its Affiliates or
Associates, (ii) FON Stock and PCS Stock shall not be deemed to be Beneficially
Owned by FT, DT or their Affiliates or Associates by virtue of the top up rights
and standby commitments granted under the Purchase Rights Agreement (as defined
in the FT/DT Restructuring Agreement) except to the extent that FT, DT or their
Affiliates or Associates have (A) acquired shares of FON Stock or PCS Stock
pursuant to the Purchase Rights Agreement, or (B) become irrevocably committed
to acquire, and the Cable Holders have become irrevocably committed to sell,
shares of FON Stock or PCS Stock pursuant to the Purchase Rights Agreement (with
such Beneficial Ownership being determined on a full-voting basis), subject only
to customary closing conditions, if any; (iii) FT, DT and their Affiliates and
Associates shall not be deemed to Beneficially Own any incremental Voting Power
resulting solely from the increase in Voting Power provided for by the
application of ARTICLE SIXTH, Section 7.5(d) and (iv) prior to the conversion
thereof (other than during the 90-day period following the Conversion Trigger
Date set forth in ARTICLE SIXTH, Section 7.5(a)), a holder of Series 2 PCS Stock
or Series 2 FON Stock shall not be deemed to beneficially own the shares of
Series 1 PCS Stock or Series 1 FON Stock issuable upon conversion thereof.
"Board of Directors" means the board of directors of this
Corporation.
"Business Day" means 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.
"Business Group" means, as of any date, the Sprint FON Group or the PCS Group,
as the case may be.
"Bylaws" means the Bylaws of this Corporation as amended or supplemented from
time to time.
"Cable Holder" means any of
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(i) Tele-Communications, Inc., a Delaware corporation, Comcast
Corporation, a Pennsylvania corporation, or Cox Communications,
Inc., a Delaware corporation,
(ii) any Affiliate of an entity identified in clause (i) of this definition,
(iii) any successor (by operation of law or otherwise) of an entity identified
in clauses (i) or (ii) of this definition so long as such successor remains an
Affiliate of an entity identified in clause (i) or (ii),
(iv) any entity controlled by two or more entities identified in clauses (i)
through (iii) of this definition or this clause (iv) even if such entity is not
considered an Affiliate of any individual entity so identified and
(v) for purposes of ARTICLE SIXTH, Section 7.5(b) only, with respect to any
Transfer of shares of Series 2 PCS Stock, the transferee of such shares if (A)
at the time of such Transfer, the transferor was a Cable Holder under any of the
clauses (i) through (iv) of this definition, (B) after giving effect to such
Transfer, the transferee was an Associate of the transferor, (C) immediately
prior to such Transfer, the transferee was identified in writing by the
transferor as a "Cable Holder" under this clause (v), and (D) the transferor and
transferee satisfied the conditions set forth in Section 2.4 of the applicable
Cable Holder Standstill Agreements.
"Cable Holder Standstill Agreements" means the Standstill Agreements, dated as
of May 26, 1998, entered into between this Corporation and each of certain Cable
Holders, and any Standstill Agreements in the form thereof entered into from
time to time between this Corporation and certain transferee Affiliates and
Associates of such Cable Holders.
"Cellular and Wireless Division" means the former Cellular
and Wireless Communications Services Division of this
Corporation.
"Change of Control" means 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" means action by the holders of a majority of the Votes
represented by the 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 Stock" means the Old Class A Common Stock and the Class A
Common Stock--Series DT.
"Class A Common Stock--Series DT" has the meaning set forth in the
"Designation" column in Section 1 of ARTICLE SIXTH.
"Class A FON Shares" means, with respect to FT, shares of Series 3 FON Stock
and the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The FON Group, and, with respect to DT, shares of
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Series 3 FON Stock and the Number Of Shares Issuable With Respect To The Class
A--Series DT Equity Interest In The FON Group.
"Class A Holders" means (a) the holders of the Class A Stock, 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 Stock.
"Class A PCS Shares" means, with respect to FT, shares of Series 3 PCS Stock
and the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The PCS Group and, with respect to DT, shares of Series 3 PCS Stock
and the Number Of Shares Issuable With Respect To The Class A--Series DT Equity
Interest In The PCS Group.
"Class A Provisions" means Section 5 (but only with respect to those
provisions addressing the Class A Stock), Section 6 (but only with respect to
those provisions addressing the Class A Stock), Section 8, Section 9 (but only
with respect to those provisions addressing the Class A Stock), Section 10,
Section 11 and Section 12 of ARTICLE SIXTH.
"Class A--Series DT FON Vote Per Share" means, on any date, a number equal to
X/Y, where "X" equals the Number Of Shares Issuable With Respect To The Class
A--Series DT Equity Interest In The FON Group and "Y" equals the aggregate
number of outstanding shares of Class A Common Stock--Series DT.
"Class A--Series DT PCS Interest Fraction," as of any date, means the fraction
the numerator of which shall be the Number Of Shares Issuable With Respect To
The Class A--Series DT Equity Interest In The PCS Group on such date and the
denominator of which shall be the sum of (i) the number of shares of PCS Stock
outstanding on such date, (ii) the Number Of Shares Issuable With Respect To The
FON Group Intergroup Interest on such date, (iii) the Number Of Shares Issuable
With Respect To The Old Class A Equity Interest In The PCS Group on such date
and (iv) the Number Of Shares Issuable With Respect To The Class A--Series DT
Equity Interest In The PCS Group on such date.
"Class A--Series DT PCS Vote Per Share" means, on any date, a number equal to
(X/Y) x Z, where "X" equals the Number Of Shares Issuable With Respect To The
Class A--Series DT Equity Interest In The PCS Group, "Y" equals the aggregate
number of outstanding shares of Class A Common Stock--Series DT and "Z" equals,
in the case of ARTICLE SIXTH, Section 3.2(d), one, and in all other cases, the
applicable PCS Per Share Vote on such date.
"Class A Stock" means the Class A Common Stock, the Series 3 FON Stock and the
Series 3 PCS Stock.
"Closing Price" means, 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 the National Association of
Securities Dealers, Inc. Automated Quotations System 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" means the Fair Market Value of such security.
"Committed Percentage" means, as to any Class A Holder, the
percentage obtained by dividing the aggregate
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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 Article V of the Stockholders Agreement, by the sum of (i) the
Voting Power of this Corporation, and (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 Article V of the
Stockholders' Agreement.
"Continuing Director" has the meaning set forth in the Fair
Price Provisions.
"Contract" means 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" means, 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" means the date fixed by the Board of Directors as the
effective date for the conversion of shares of PCS Stock into shares of FON
Stock (and Shares Issuable With Respect To The Class A Equity Interest In The
PCS Group into Shares Issuable With Respect To The Class A Equity Interest In
The FON Group) as shall be set forth in the notice to holders of shares of PCS
Stock and to holders of any Convertible Securities that are convertible into or
exchangeable or exercisable for shares of PCS Stock required pursuant to Section
7.4(E).
"Conversion Time" has the meaning set forth in Section
8.5(j) of ARTICLE SIXTH.
"Converted Series Shares" has the meaning set forth in
Section 7.5(c) of ARTICLE SIXTH.
"Converted Shares" has the meaning set forth in Section
8.5(j) of ARTICLE SIXTH.
"Converted Votes" means, on any particular day, (i) in the case of a share of
Series 2 PCS Stock, the applicable PCS Per Share Vote a share of Series 1 PCS
Stock would have had if the computation described in Section 3.2(a)(iii) had
occurred on such day and (ii) in the case of a share of Series 2 FON Stock, one
vote per share.
"Convertible Securities" at any time means any securities of the Corporation
or of any subsidiary thereof (other than shares of Corporation Common Stock),
including warrants and options, outstanding at such time that by their terms are
convertible into or exchangeable or exercisable for or evidence the right to
acquire any shares of any class or series of Corporation Common Stock, whether
convertible, exchangeable or exercisable at such time or a later time or only
upon the occurrence of certain events, pursuant to antidilution provisions of
such securities or otherwise.
"Corporation Common Stock" means the Series 1 FON Stock, the Series 2 FON
Stock, the Series 3 FON Stock, the Class A Common Stock, the Series 1 PCS Stock,
the Series 2 PCS Stock and the Series 3 PCS Stock.
"Corporation Joint Venture Termination" means 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;
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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" means a member of the Board of Directors.
"Disposition" means a sale, transfer, assignment or other disposition (whether
by merger, consolidation, sale or contribution of assets or stock or otherwise)
of properties or assets.
"DT" means Deutsche Telekom AG, an Aktiengesellschaft formed under the laws of
Germany.
"ESMR" means 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" means 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-Herzegovina, 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" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the United States Securities and Exchange Commission
promulgated thereunder.
"Fair Market Value" means, 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.
"Fair Price Condition" has the meaning set forth in Section
2.2 of ARTICLE SIXTH.
"Fair Price Provisions" means ARTICLE SEVENTH of these Articles of
Incorporation, and any successor provision thereto.
"Fair Value" means, in the case of equity securities or debt securities of a
class that has previously been Publicly Traded for a period of at least 15
months, the Market Value thereof (if such value, as so defined, can be
determined) or, in the case of an equity security or debt security that has not
been Publicly Traded for at least such period, means the fair value per share of
stock or per other unit of such other security, on a fully distributed basis, as
determined by an independent investment banking firm experienced in the
valuation of securities selected in good faith by the Board of Directors;
provided, however, that in the case of property other than securities, the "Fair
Value" thereof shall be determined in good faith by the Board of Directors based
upon such appraisals or valuation reports of such independent experts as the
Board of Directors shall in good faith determine to be appropriate in accordance
with good business practice. Any such determination of Fair Value shall be
described in a statement filed with the records of the actions of the Board of
Directors.
"FCC" means the Federal Communications Commission.
"FON Group Intergroup Interest Fraction" as of any date
means a fraction the numerator of which is the
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Number Of Shares Issuable With Respect To The FON Group Intergroup Interest on
such date and the denominator of which is the sum of (A) such Number Of Shares
Issuable With Respect To The FON Group Intergroup Interest, (B) the aggregate
number of shares of PCS Stock outstanding on such date, (iii) the Number Of
Shares Issuable With Respect To The Old Class A Equity Interest In The PCS Group
on such date and (iv) the Number Of Shares Issuable With Respect To The Class
A--Series DT Equity Interest In The PCS Group on such date. A statement setting
forth the FON Group Intergroup Interest Fraction as of the record date for any
dividend or distribution on the PCS Stock, as of the end of each fiscal quarter
of the Corporation and as of any date otherwise required under these Articles of
Incorporation or by the Board of Directors shall be filed by the Secretary of
the Corporation in the records of the Board of Directors of the Corporation not
later than fifteen Business Days after such date.
"FON Preferred Stock" means Preferred Stock to the extent attributed to the
Sprint FON Group in accordance with ARTICLE SIXTH, Section 13.
"FON Stock" means the Series 1 FON Stock, the Series 2 FON Stock and the
Series 3 FON Stock.
"France" means the Republic of France, including French Guiana, Guadeloupe,
Martinique and Reunion, and its territories and possessions.
"FT" means France Telecom SA, a societe anonyme formed under the laws of
France.
"FT/DT Joint Venture Termination" means 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" has the meaning set forth in the Joint Venture Agreement.
"FT/DT Restructuring Agreement" means the Master Restructuring and Investment
Agreement, dated as of May 26, 1998, among FT, DT and this Corporation, as
amended or supplemented from time to time.
"Germany" means the Federal Republic of Germany.
"Governmental Authority" means 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" means any group within the meaning of Section
13(d)(3) of the Exchange Act.
"Independent Director" means 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
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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 filing of these Articles of Incorporation
who is not an executive officer of this Corporation shall be deemed to be an
Independent Director hereunder.
"Investment Agreement" means the Investment Agreement, dated as of July 31,
1995, among FT, DT and this Corporation (and all exhibits and schedules
thereto), as amended or supplemented from time to time.
"Investment Documents" means the FT/DT Restructuring
Agreement and the Stockholders' Agreement.
"Joint Venture" means the joint venture formed by FT, DT, this Corporation and
Sprint Sub, as provided in the Joint Venture Agreement.
"Joint Venture Agreement" means the Joint Venture Agreement, dated as of June
22, 1995 among FT, DT, Sprint Sub, and this Corporation, as amended or
supplemented from time to time.
"JV Entity" has the meaning set forth in the Joint Venture
Agreement.
"Lien" means 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" means 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.
"Local Exchange Division" means the Local Communications
Services Division of this Corporation.
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"Long Distance Assets" means:
(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" means 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" means the Long Distance
Communications Services Division of this Corporation.
"Major Competitor" means (a) 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 (b) 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 Issuance" means 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.
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"Market Capitalization" means, 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" means 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, (i) in the case of a share of Series 3 FON
Stock or Series 2 FON Stock, as the case may be, the Market Price of a share of
Series 1 FON Stock and (ii) in the case of a share of Series 3 PCS Stock or
Series 2 PCS Stock, as the case may be, the Market Price of a share of Series 1
PCS Stock. The Market Price of (x) any options, warrants, rights or other
securities convertible into or exercisable for Series 3 FON Stock or Series 2
FON Stock shall be equal to the Market Price of options, warrants, rights or
other securities convertible into or exercisable for Series 1 FON Stock upon the
same terms and otherwise containing the same terms as such options, warrants,
rights or other securities convertible into or exercisable for Series 3 FON
Stock or Series 2 FON Stock, as the case may be, and (y) any options, warrants,
rights or other securities convertible into or exercisable for Series 3 PCS
Stock or Series 2 PCS Stock, as the case may be, shall be equal to the Market
Price of options, warrants, rights or other securities convertible into or
exercisable for Series 1 PCS Stock upon the same terms and otherwise containing
the same terms as such options, warrants, rights or other securities convertible
into or exercisable for Series 3 PCS Stock or Series 2 PCS Stock, as the case
may be.
"Market Value" of a share of any class or series of capital stock of the
Corporation on any day means the average of the high and low reported sales
prices regular way of a share of such class or series on such day (if such day
is a Trading Day, and if such day is not a Trading Day, on the Trading Day
immediately preceding such day) or, in case no such reported sale takes place on
such Trading Day, the average of the reported closing bid and asked prices
regular way of a share of such class or series on such Trading Day, in either
case as reported on the New York Stock Exchange Composite Tape or, if the shares
of such class or series are not listed or admitted to trading on such Exchange
on such Trading Day, on the principal national securities exchange in the United
States on which the shares of such class or series are listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange on such Trading Day, on the National Market tier of The Nasdaq Stock
Market or, if the shares of such class or series are not listed or admitted to
trading on any national securities exchange or quoted on such National Market
System on such Trading Day, the average of the closing bid and asked prices of a
share of such class or series in the over-the-counter market on such Trading Day
as furnished by any New York Stock Exchange member firm selected from time to
time by the Board of Directors or, if such closing bid and asked prices are not
made available by any such New York Stock Exchange member firm on such Trading
Day, the Fair Value of a share of such class or series; provided that, for
purposes of determining the Market Value of a share of any class or series of
capital stock for any period,
(i) the "Market Value" of a share of capital stock on any day prior to any
"ex-dividend" date or any similar date occurring during such period for any
dividend or distribution (other than any dividend or distribution contemplated
by clause (ii)(B) of this definition) paid or to be paid with respect to such
capital stock shall be reduced by the Fair Value of the per share amount of such
dividend or distribution and
(ii) the "Market Value" of any share of capital stock on any day prior to (A)
the effective date of any subdivision (by stock split or otherwise) or
combination (by reverse stock split or otherwise) of outstanding shares of such
class of capital stock occurring during such period or (B) any "ex-dividend"
date or any similar date occurring during such period for any dividend or
distribution with respect to such capital stock to be made in shares of such
class or series of capital stock or Convertible Securities that are convertible,
exchangeable or exercisable for such class or series of capital stock shall be
appropriately adjusted, as determined by the Board of Directors, to reflect such
subdivision, combination, dividend or distribution.
"Master Transfer Agreement" means the Master Transfer Agreement, dated as of
January 21, 2000, between and among the Corporation, FT, DT and the other
parties named therein.
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"Net Proceeds" means, as of any date with respect to any Disposition of any of
the properties and assets attributed to the PCS Group, an amount, if any, equal
to what remains of the gross proceeds of such Disposition after payment of, or
reasonable provision is made as determined by the Board of Directors for, (A)
any taxes payable by the Corporation (or which would have been payable but for
the utilization of tax benefits attributable to the Sprint FON Group) in respect
of such Disposition or in respect of any resulting dividend or redemption
pursuant to ARTICLE SIXTH, Section 7.1(A)(1)(a) or (b), (B) any transaction
costs, including, without limitation, any legal, investment banking and
accounting fees and expenses and (C) any liabilities (contingent or otherwise)
of or attributed to the PCS Group, including, without limitation, any
liabilities for deferred taxes or any indemnity or guarantee obligations of the
Corporation incurred in connection with the Disposition or otherwise, and any
liabilities for future purchase price adjustments and any preferential amounts
plus any accumulated and unpaid dividends in respect of Preferred Stock
attributed to the PCS Group. For purposes of this definition, any properties and
assets attributed to the PCS Group remaining after such Disposition shall
constitute "reasonable provision" for such amount of taxes, costs and
liabilities (contingent or otherwise) as the Board of Directors determines can
be expected to be supported by such properties and assets.
"Non-Class A Common Stock" means the Series 1 FON Stock, the Series 2 FON
Stock, the Series 1 PCS Stock and the Series 2 PCS Stock.
"Non-Long Distance Business" means (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
interests, assets, properties and businesses attributed to the PCS Group in
accordance with this Section 10; (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" means the current geographic area covered by
the following countries: Canada, Mexico and the United States of
America.
"Number Of Shares Issuable With Respect To The Class A--Series DT Equity
Interest In The FON Group" means, as of November 23, 1998, a number equal to the
aggregate number of outstanding shares of Class A Common Stock--Series DT as of
November 23, 1998; provided, however, that such number shall from time to time
thereafter be:
(A) adjusted, on an equivalent Per Class A FON Share Basis, to reflect any
subdivision (by stock split or otherwise) or combination (by reverse stock split
or otherwise) of the FON Stock or any reclassification of FON Stock; and
(B) decreased (but to not less than zero), if before such decrease such number
is greater than zero, by the number of shares of Series 1 FON Stock or Series 3
FON Stock issued in accordance with ARTICLE SIXTH, Section 1.2(d) or ARTICLE
SIXTH, Section 8.3(a) (by virtue of reference to ARTICLE SIXTH, Section 1.2(d))
and any reduction required to reflect the redemption of Shares Issuable With
Respect To The Class A Equity Interest In
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The FON Group pursuant to Section 2.2 to the extent allocated to shares of Class
A Common Stock--Series DT; and
(C) adjusted by the Board of Directors to properly reflect any other necessary
changes on an equivalent Per Class A FON Share Basis.
"Number Of Shares Issuable With Respect To The Class A--Series DT Equity
Interest In The PCS Group" means, as of November 23, 1998, a number (rounded up
to the nearest whole share) equal to one-half of the aggregate number of
outstanding shares of Class A Common Stock--Series DT as of November 23, 1998;
provided, however, that such number shall from time to time thereafter be:
(A) adjusted, on an equivalent Per Class A PCS Share Basis, to reflect any
subdivision (by stock split or otherwise) or combination (by reverse stock split
or otherwise) of the PCS Stock or any reclassification of PCS Stock; and
(B) decreased (but to not less than zero), if before such decrease such number
is greater than zero, by action of the Board of Directors by (1) the amount of
any payment made to the holders of Class A Common Stock--Series DT pursuant to
Section 7.1(B)(5) or Section 7.1(B)(6) divided by the corresponding redemption
price per share of PCS Stock pursuant to Section 7.1(A)(1)(b)(i) or Section
7.1(A)(1)(b)(ii), (2) any reduction required to reflect the redemption of Shares
Issuable With Respect To The Class A Equity Interest In The PCS Group pursuant
to Section 2.2 to the extent allocated to shares of Class A Common Stock--Series
DT, (3) the amount necessary to reflect the conversion of some or all of this
number into a Number Of Shares Issuable With Respect To The Class A--Series DT
Equity Interest In The FON Group in accordance with Sections 7.1(B)(7), 7.1(C)
and 7.1(D), and (4) the amount necessary to reflect the redemption thereof in
exchange for the issuance of shares of common stock of the PCS Group Subsidiary
in accordance with Section 7.2; and
(C) decreased (but to not less than zero), if before such decrease such number
is greater than zero, by the number of shares of Series 1 PCS Stock or Series 3
PCS Stock issued by the Corporation in accordance with ARTICLE SIXTH, Section
1.2(d) or ARTICLE SIXTH, Section 8.3(a) (by virtue of reference to ARTICLE
SIXTH, Section 1.2(d)); and
(D) adjusted by the Board of Directors to properly reflect any other necessary
changes on an equivalent Per Class A PCS Share Basis.
"Number Of Shares Issuable With Respect To The FON Group Intergroup Interest"
means, as of November 23, 1998, a number equal to 220,000,000 less the sum of
(i) the Number Of Shares Issuable With Respect To The Old Class A Common Equity
Interest In The PCS Group, (ii) the Number Of Shares Issuable With Respect To
The Class A--Series DT Equity Interest In The PCS Group, (iii) one-half of the
number of shares of Common Stock, par value $2.50 per share, outstanding
immediately prior to November 23, 1998, and (iv) one-half of the number of
shares of Common Stock, par value $2.50 per share, held as treasury shares by
the Corporation immediately prior to November 23, 1998; provided, however, that
such number shall from time to time thereafter be:
(A) adjusted, as determined by the Board of Directors to be appropriate to
reflect equitably any subdivision (by stock split or otherwise) or combination
(by reverse stock split or otherwise) of the PCS Stock or any dividend or other
distribution of shares of PCS Stock to holders of shares of PCS Stock or any
reclassification of PCS Stock;
(B) decreased (but to not less than zero), if before such decrease such number
is greater than zero, by action of the Board of Directors by (1) the number of
shares of PCS Stock issued or sold by the Corporation that, immediately prior to
such issuance or sale, were included (as determined by the Board of Directors
pursuant to paragraph (C) of this definition) in the Number Of Shares Issuable
With Respect To The FON Group Intergroup Interest, (2) the number of shares of
PCS Stock issued upon conversion, exchange or exercise of Convertible Securities
that, immediately prior to the issuance or sale of such Convertible Securities,
were included in the
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Number Of Shares Issuable With Respect To The FON Group Intergroup Interest, (3)
the number of shares of PCS Stock issued by the Corporation as a dividend or
other distribution (including in connection with any reclassification or
exchange of shares) to holders of FON Stock and Class A Common Stock (but only
with respect to any Shares Issuable With Respect To The Class A Equity Interest
In The FON Group) or shares of FON Preferred Stock, as the case may be, (4) the
number of shares of PCS Stock issued upon the conversion, exchange or exercise
of any Convertible Securities issued by the Corporation as a dividend or other
distribution (including in connection with any reclassification or exchange of
shares) to holders of FON Stock or Class A Common Stock (but only with respect
to any Shares Issuable With Respect To The Class A Equity Interest In The FON
Group) or shares of FON Preferred Stock, as the case may be, (5) the quotient of
(a) the aggregate Fair Value of any PCS Preferred Stock (or Convertible
Securities convertible into or exchangeable or exercisable for shares of PCS
Preferred Stock) issued by the Corporation as a dividend or other distribution
(including in connection with any classification or exchange of shares) to
holders of FON Stock, Class A Common Stock (but only with respect to any Shares
Issuable With Respect To The Class A Equity Interest In The FON Group), or
shares of FON Preferred Stock, as the case may be, divided by (b) the Market
Value of one share of PCS Stock as of the date of issuance of such PCS Preferred
Stock (or Convertible Securities), or (6) the number (rounded, if necessary, to
the nearest whole number) equal to the quotient of (a) the aggregate Fair Value
as of the date of contribution of properties or assets (including cash)
transferred from the PCS Group to the Sprint FON Group in consideration for a
reduction in the Number Of Shares Issuable With Respect To The FON Group
Intergroup Interest divided by (b) the Market Value of one share of PCS Stock as
of the date of such transfer; and
(C) increased by (1) the number of outstanding shares of PCS Stock repurchased
by the Corporation for consideration that had been attributed to the Sprint FON
Group, (2) the number (rounded, if necessary, to the nearest whole number) equal
to the quotient of (a) the Fair Value of properties or assets (including cash)
theretofore attributed to the Sprint FON Group that are contributed, by action
of the Board of Directors, to the PCS Group in consideration of an increase in
the Number Of Shares Issuable With Respect To The FON Group Intergroup Interest,
divided by (b) the Market Value of one share of PCS Stock as of the date of such
contribution and (3) the number of shares of PCS Stock into or for which
Convertible Securities are deemed converted, exchanged or exercised pursuant to
the penultimate sentence of the definition of "Sprint FON Group";
provided, further, that the Board of Directors may make such subsequent changes
to the calculations made pursuant to subparagraphs (A), (B) and (C) immediately
above as may be required for purposes of accurately determining such number.
"Number Of Shares Issuable With Respect To The Old Class A Equity Interest In
The FON Group" means, as of November 23, 1998, a number equal to the aggregate
number of outstanding shares of Old Class A Common Stock as of November 23,
1998; provided, however, that such number shall from time to time thereafter be:
(A) adjusted, on an equivalent Per Class A FON Share Basis, to reflect any
subdivision (by stock split or otherwise) or combination (by reverse stock split
or otherwise) of the FON Stock or any reclassification of FON Stock; and
(B) decreased (but to not less than zero), if before such decrease such number
is greater than zero, by the number of Shares of Series 1 FON Stock or Series 3
FON Stock issued in accordance with ARTICLE SIXTH, Section 1.2(c) or ARTICLE
SIXTH, Section 8.3(a) (by virtue of reference to ARTICLE SIXTH, Section 1.2(c))
and any reduction required to reflect the redemption of Shares Issuable With
Respect To The Class A Equity Interest In The FON Group pursuant to Section 2.2
to the extent allocated to shares of Old Class A Common Stock; and
(C) adjusted by the Board of Directors to properly reflect any other necessary
changes on an equivalent Per Class A FON Share Basis.
"Number Of Shares Issuable With Respect To The Old Class A Equity Interest In
The PCS Group" means, as of November 23, 1998, a number (rounded up to the
nearest whole share) equal to one-half of the aggregate number
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of outstanding shares of Old Class A Common Stock as of November 23, 1998;
provided, however, that such number shall from time to time thereafter be:
(A) adjusted, on an equivalent Per Class A PCS Share Basis, to reflect any
subdivision (by stock split or otherwise) or combination (by reverse stock split
or otherwise) of the PCS Stock or any reclassification of PCS Stock; and
(B) decreased (but to not less than zero), if before such decrease such number
is greater than zero, by action of the Board of Directors by (1) the amount of
any payment made to the holders of Old Class A Common Stock pursuant to Section
7.1(B)(5) or Section 7.1(B)(6) divided by the corresponding redemption price per
share of PCS Stock pursuant to Section 7.1(A)(1)(b)(i) or Section
7.1(A)(1)(b)(ii), (2) any reduction required to reflect the redemption of Shares
Issuable With Respect To The Class A Equity Interest In The PCS Group pursuant
to Section 2.2 to the extent allocated to shares of Old Class A Common Stock,
(3) the amount necessary to reflect the conversion of some or all of this number
into a Number Of Shares Issuable With Respect To The Old Class A Equity Interest
In The FON Group in accordance with Sections 7.1(B)(7), 7.1(C) and 7.1(D), and
(4) the amount necessary to reflect the redemption thereof in exchange for the
issuance of shares of common stock of the PCS Group Subsidiary in accordance
with Section 7.2; and
(C) decreased (but to not less than zero), if before such decrease such number
is greater than zero, by the number of shares of Series 1 PCS Stock or Series 3
PCS Stock issued by the Corporation in accordance with ARTICLE SIXTH, Section
1.2(c) or ARTICLE SIXTH, Section 8.3(a) (by virtue of reference to ARTICLE
SIXTH, Section 1.2(c)); and
(D) adjusted by the Board of Directors to properly reflect any other necessary
changes on an equivalent Per Class A PCS Share Basis.
"Old Class A Common Stock" has the meaning set forth in the "Designation"
column in Section 1 of ARTICLE SIXTH.
"Old Class A FON Vote Per Share" means, on any date, a number equal to X/Y,
where "X" equals the Number Of Shares Issuable With Respect To The Old Class A
Equity Interest In The FON Group and "Y" equals the aggregate number of
outstanding shares of Old Class A Common Stock.
"Old Class A PCS Interest Fraction," as of any date, means the fraction the
numerator of which shall be the Number Of Shares Issuable With Respect To The
Old Class A Equity Interest In The PCS Group on such date and the denominator of
which shall be the sum of (i) the number of shares of PCS Stock outstanding on
such date, (ii) the Number Of Shares Issuable With Respect To The FON Group
Intergroup Interest on such date, (iii) the Number Of Shares Issuable With
Respect To The Old Class A Equity Interest In The PCS Group on such date and
(iv) the Number Of Shares Issuable With Respect To The Class A--Series DT Equity
Interest In The PCS Group on such date.
"Old Class A PCS Vote Per Share" means, on any date, a number equal to (X/Y)
x Z, where "X" equals the Number Of Shares Issuable With Respect To The Old
Class A Equity Interest In The PCS Group, "Y" equals the aggregate number of
outstanding shares of Old Class A Common Stock and "Z" equals, in the case of
ARTICLE SIXTH, Section 3.2(d), one, and in all other cases, the applicable PCS
Per Share Vote on such date.
"Optional Conversion Ratio" as of any date means the ratio of the Average
Trading Price of a share of Series 1 PCS Stock to the Average Trading Price of a
share of Series 1 FON Stock; provided, that such ratio would be determined over
a 60-Trading Day period if the 20-Trading Day period normally used to determine
the Average Trading Price is less than 90% of such ratio as determined over a
60-Trading Day period.
"Outstanding PCS Fraction," as of any date, means the
fraction the numerator of which shall be the number of
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shares of PCS Stock outstanding on such date and the denominator of which shall
be the sum of (i) the number of shares of PCS Stock outstanding on such date,
(ii) the Number Of Shares Issuable With Respect To The FON Group Intergroup
Interest on such date, (iii) the Number Of Shares Issuable With Respect To The
Old Class A Equity Interest In The PCS Group on such date and (iv) the Number Of
Shares Issuable With Respect To The Class A--Series DT Equity Interest In The
PCS Group on such date. A statement setting forth the Outstanding PCS Fraction
as of the record date for the payment of any dividend or distribution on PCS
Stock and as of the end of each fiscal quarter of the Corporation shall be filed
by the Secretary of the Corporation in the records of the actions of the Board
of Directors not later than fifteen Business Days after such date.
"PCS" means 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.
"PCS Group" means, as of any date from and after November
23, 1998:
(A) the interest on such date of the Corporation and any of its subsidiaries
in any of the following Persons or any of their respective subsidiaries
(including any successor thereto by merger, consolidation or sale of all or
substantially all of its assets, whether or not in connection with a Related
Business Transaction) (the "PCS Group Companies") and the corresponding
interests in their respective assets and liabilities and the businesses
conducted by such entities: SWV Six, Inc.; SWV One, Inc.; SWV Two, Inc.; SWV
Three, Inc.; SWV Four, Inc.; SWV Seven, Inc.; SWV Eight, Inc.; SWV One Telephony
Partnership; SWV Two Telephony Partnership; SWV Three Telephony Partnership;
Sprint Enterprises, L.P.; MinorCo, L.P.; Sprint Spectrum Holding Company, L.P.;
American PCS, L.P.; Cox Communications PCS, L.P.; NewTelco, L.P.; Sprint
Spectrum L.P.; American Personal Communications Holdings, Inc.; American PCS
Communications, LLC; APC PCS, LLC; APC Realty and Equipment Company, LLC; Sprint
Spectrum Finance Corporation; Sprint Spectrum Equipment Company, L.P.; Sprint
Spectrum Realty Company, L.P.; WirelessCo, L.P.; SWV Five, Inc.; PhillieCo
Partners I, L.P.; PhillieCo Partners II, L.P.; PhillieCo Sub, L.P.; PhillieCo.,
L.P.; PhillieCo Equipment & Realty Company, L.P.; SprintCom, Inc.; SprintCom
Equipment Company L.P.; PCS Leasing Co., L.P.; Cox PCS Assets, L.L.C.; and Cox
PCS License, L.L.C.;
(B) all assets and liabilities of the Corporation and its subsidiaries
attributed by the Board of Directors to the PCS Group, whether or not such
assets or liabilities are or were also assets or liabilities of any of the PCS
Group Companies;
(C) all properties and assets transferred to the PCS Group from the Sprint FON
Group (other than a transaction pursuant to paragraph (D) of this definition)
after November 23, 1998 pursuant to transactions in the ordinary course of
business of both the Sprint FON Group and the PCS Group or otherwise as the
Board of Directors may have directed as permitted by this ARTICLE SIXTH;
(D) all properties and assets transferred to the PCS Group from the Sprint FON
Group in connection with an increase in the Number Of Shares Issuable With
Respect To The FON Group Intergroup Interest; and
(E) the interest of the Corporation or any of its subsidiaries in any business
or asset acquired and any liabilities assumed by the Corporation or any of its
subsidiaries outside of the ordinary course of business and attributed to the
PCS Group, as determined by the Board of Directors as contemplated by Section
9.1(A) of ARTICLE SIXTH; provided that
(1) from and after the payment date of any dividend or other distribution with
respect to shares of PCS Stock (other than a dividend or other distribution
payable in shares of PCS Stock, with respect to which adjustment shall be made
as provided in the definition of "Number Of Shares Issuable In Respect Of The
FON Group Intergroup Interest," or in securities of the Corporation attributed
to the PCS Group, for which provision shall be made as set
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forth in clause (2) of this proviso), the PCS Group shall no longer include an
amount of assets or properties previously attributed to the PCS Group of the
same kind as so paid in such dividend or other distribution with respect of
shares of PCS Stock as have a Fair Value on the record date for such dividend or
distribution equal to the product of (a) the Fair Value on such record date of
the aggregate of such dividend or distribution to holders of shares of PCS Stock
declared multiplied by (b) a fraction the numerator of which is equal to the FON
Group Intergroup Interest Fraction in effect on the record date for such
dividend or distribution and the denominator of which is equal to the
Outstanding PCS Fraction in effect on the record date for such dividend or
distribution (and in such eventuality such assets as are no longer included in
the PCS Group shall be attributed to the Sprint FON Group in accordance with the
definition of "Sprint FON Group"), and
(2) if the Corporation shall pay a dividend or make some other distribution
with respect to shares of PCS Stock payable in securities of the Corporation
that are attributed to the PCS Group for purposes of this ARTICLE SIXTH (other
than PCS Stock), there shall be excluded from the PCS Group an interest in the
PCS Group equivalent to the number or amount of such securities that is equal to
the product of the number or amount of securities so distributed to holders of
PCS Stock multiplied by the fraction specified in clause 1(b) of this proviso
(determined as of the record date for such distribution) (and such interest in
the PCS Group shall be attributed to the Sprint FON Group) and, to the extent
interest is or dividends are paid on the securities so distributed, the PCS
Group shall no longer include a corresponding ratable amount of the kind of
assets paid as such interest or dividends as would have been paid in respect of
the securities equivalent to such interest in the PCS Group deemed held by the
Sprint FON Group if the securities equivalent to such interest were outstanding
(and in such eventuality such assets as are no longer included in the PCS Group
shall be attributed to the Sprint FON Group in accordance with the definition of
"Sprint FON Group").
The Corporation may also, to the extent a dividend or distribution on the PCS
Stock has been paid in Convertible Securities that are convertible into or
exchangeable or exercisable for PCS Stock, cause such Convertible Securities as
are deemed to be held by the Sprint FON Group in accordance with the
third-to-last sentence of the definition of "Sprint FON Group" and clause (2) of
the proviso to the immediately preceding sentence to be deemed to be converted,
exchanged or exercised as provided in the penultimate sentence of the definition
of "Sprint FON Group," in which case such Convertible Securities shall no longer
be deemed to be held by the Sprint FON Group.
"PCS Group Disposition Date" has the meaning set forth in Section 7.1(A) of
ARTICLE SIXTH.
"PCS Group Subsidiary" has the meaning set forth in Section
7.2 of ARTICLE SIXTH.
"PCS Per Share Vote" has the meaning set forth in Section 3.2 of ARTICLE
SIXTH.
"PCS Preferred Stock" means Preferred Stock to the extent attributed to the
PCS Group in accordance with ARTICLE SIXTH, Section 13.
"PCS Ratio" means the ratio of the Average Trading Price of one share of
Series 1 PCS Stock to the Average Trading Price of one share of Series 1 FON
Stock determined, in each such case, as of the 21st Trading Day following the
commencement of regular way trading of both the Series 1 PCS Stock and the
Series 1 FON Stock.
"PCS Stock" means the Series 1 PCS Stock, the Series 2 PCS Stock and the
Series 3 PCS Stock.
"Per Class A FON Share Basis" means, with respect to Old Class A Common Stock
or Class A Common Stock--Series DT, an amount per share equal to (X/Y) x Z,
where "X" equals the Number Of Shares Issuable With Respect To The Old Class A
Equity Interest In The FON Group or the Number Of Shares Issuable With Respect
To The Class A--Series DT Equity Interest In The FON Group, respectively, "Y"
equals the number of shares outstanding of Old Class A Common Stock or Class A
Common Stock--Series DT, respectively, and "Z" equals the per share number of
votes or dividend amount, redemption amount or other payment paid to the class
or series of FON Stock to which the Old Class A Common Stock or Class A Common
Stock--Series DT is being compared.
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"Per Class A PCS Share Basis" means, with respect to Old Class A Common Stock
or Class A Common Stock--Series DT, an amount per share equal to (X/Y) x Z,
where "X" equals the Number Of Shares Issuable With Respect To The Old Class A
Equity Interest In The PCS Group or the Number Of Shares Issuable With Respect
To The Class A--Series DT Equity Interest In The PCS Group, respectively, "Y"
equals the number of shares outstanding of Old Class A Common Stock or Class A
Common Stock--Series DT, respectively, and "Z" equals the per share number of
votes or dividend amount, redemption amount or other payment paid to the class
or series of PCS Stock to which the Old Class A Common Stock or Class A Common
Stock--Series DT is being compared.
"Percentage Ownership Interest" means, 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.
"Person" means 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" has the meaning set forth in Section 1 of
ARTICLE SIXTH.
"Proceeding" means any action, litigation, suit, proceeding or formal
investigation or review of any nature, civil, criminal, regulatory or otherwise,
before any Governmental Authority.
"Publicly Traded" with respect to any security means (i) registered under
Section 12 of the Securities Exchange Act of 1934, as amended (or any successor
provision of law), and (ii) listed for trading on the New York Stock Exchange or
the American Stock Exchange (or any national securities exchange registered
under Section 7 of the Securities Exchange Act of 1934, as amended (or any
successor provision of law), that is the successor to either such exchange) or
quoted in the National Association of Securities Dealers Automation Quotation
System (or any successor system).
"Qualified Joint Venture" has the meaning set forth in
Article I of the Investment Agreement.
"Qualified Stock Purchaser" means 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" has the
meaning set forth in the Standstill Agreement.
"Qualified Subsidiary" has the meaning set forth in the
Investment Agreement.
"Qualified Subsidiary Standstill Agreement" has the meaning
set forth in the Investment Agreement.
"Recapitalization" means the reclassification of, among other things, certain
outstanding shares of Sprint capital stock to be effected pursuant to the terms
set forth in the Restructuring Agreement and the FT/DT Restructuring Agreement.
"Redemption Date" means the date fixed by the Board of Directors for the
redemption of (i) any shares of capital stock of this Corporation pursuant to
ARTICLE SIXTH, Section 2.2 or (ii) shares of PCS Stock as shall be set forth in
the notice to holders of shares of PCS Stock and to holders of any Convertible
Securities that are convertible into or exchangeable or exercisable for shares
of PCS Stock required pursuant to ARTICLE SIXTH, Section 7.4.
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"Redemption Securities" means 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
Section 2.2(b) of ARTICLE SIXTH of these Articles of Incorporation, 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 Section 2.2(d) of ARTICLE
SIXTH of these Articles of Incorporation, at least equal to the redemption price
required to be paid by such Section 2.2(a).
"Reduced Par Value Amount" means, at any time and only with respect to either
the Old Class A Common Stock or the Class A Common Stock--Series DT following an
issuance of FON Stock and/or PCS Stock in accordance with ARTICLE SIXTH,
Sections 1.2(c), 1.2(d) or 8.3(a) the amount resulting from (X-Y)/Z, where
"X" equals Z times the par value per share of either the Old Class A Common
Stock or the Class A Common Stock--Series DT, as applicable, immediately prior
to an issuance of shares of FON Stock and/or PCS Stock in accordance with
ARTICLE SIXTH, Sections 1.2(c), 1.2(d) or 8.3(a),
"Y" equals the number of shares of FON Stock and/or PCS Stock issued in
accordance with ARTICLE SIXTH, Sections 1.2(c), 1.2(d) or 8.3(a) times the par
value of such shares so issued, and
"Z" equals the aggregate outstanding shares of Old Class A Common Stock or the
Class A Common Stock--Series DT, as applicable.
"Registration Rights Agreement" means the Amended and Restated Registration
Rights Agreement, dated as of November 23, 1998, among FT, DT and this
Corporation, as amended from time to time and any replacement registration
rights agreement or agreements entered into pursuant to Section 5.16 of the
Master Transfer Agreement.
"Related Business Transaction" means any Disposition of all or substantially
all the properties and assets attributed to the PCS Group in a transaction or
series of related transactions that result in the Corporation receiving in
consideration of such properties and assets primarily equity securities
(including, without limitation, capital stock, debt securities convertible into
or exchangeable for equity securities or interests in a general or limited
partnership or limited liability company, without regard to the voting power or
other management or governance rights associated therewith) of any entity which
(i) acquires such properties or assets or succeeds (by merger, formation of a
joint venture or otherwise) to the business conducted with such properties or
assets or controls such acquiror or successor and (ii) which the Board of
Directors determines is primarily engaged or proposes to engage primarily in one
or more businesses similar or complementary to the businesses conducted by such
Business Group prior to such Disposition.
"Restructuring Agreement" means the Restructuring and Merger Agreement dated
as of May 26, 1998, by and among certain Cable Holders, this Corporation and the
other parties listed therein, as amended or supplemented from time to time.
"Rights Agreement" means the Rights Agreement, dated as of November 23, 1998,
between this Corporation and UMB Bank, N.A., as amended or supplemented from
time to time.
"Section 310" means Section 310 of the Communications Act of 1934, as amended
(or any successor provision of law).
"Series 1 FON Stock" has the meaning set forth in the "Designation" column in
Section 1 of ARTICLE SIXTH.
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"Series 1 PCS Stock" has the meaning set forth in the "Designation" column in
Section 1 of ARTICLE SIXTH.
"Series 2 FON Stock" has the meaning set forth in the "Designation" column in
Section 1 of ARTICLE SIXTH.
"Series 2 PCS Stock" has the meaning set forth in the "Designation" column in
Section 1 of ARTICLE SIXTH.
"Series 3 FON Stock" has the meaning set forth in the "Designation" column in
Section 1 of ARTICLE SIXTH.
"Series 3 PCS Stock" has the meaning set forth in the "Designation" column in
Section 1 of ARTICLE SIXTH.
"Shares" means (a) shares of Class A Stock, Non-Class A Common Stock,
Preferred 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 FT/DT Restructuring Agreement, the Purchase Rights Agreement (as defined
in the FT/DT Restructuring Agreement) and the Stockholders' Agreement (but not
excluding any Voting Securities received upon the exercise of such rights).
"Shares Issuable With Respect To The Class A Equity Interest In The FON Group"
means, at any time, the Number Of Shares Issuable With Respect To The Old Class
A Equity Interest In The FON Group and the Number Of Shares Issuable With
Respect To The Class A--Series DT Equity Interest In The FON Group.
"Shares Issuable With Respect To The Class A Equity Interest In The PCS Group"
means, at any time, the Number Of Shares Issuable With Respect To The Old Class
A Equity Interest In The PCS Group and the Number Of Shares Issuable With
Respect To The Class A--Series DT Equity Interest In The PCS Group.
"Sprint FON Group" means, as of any date from and after November 23, 1998:
(A) the interest of the Corporation or any of its subsidiaries on such date in
all of the assets, liabilities and businesses of the Corporation or any of its
subsidiaries (and any successor companies), other than any assets, liabilities
and businesses attributed in accordance with this Section 10 to the PCS Group;
(B) a proportionate undivided interest in each and every business, asset and
liability attributed to the PCS Group equal to the FON Group Intergroup Interest
Fraction as of such date;
(C) all properties and assets transferred to the Sprint FON Group from the PCS
Group (other than pursuant to paragraph (D) or (F) of this definition) after
November 23, 1998 pursuant to transactions in the ordinary course of business of
both the Sprint FON Group and the PCS Group or otherwise as the Board of
Directors may have directed as permitted by this ARTICLE SIXTH;
(D) all properties and assets transferred to the Sprint FON Group from the PCS
Group in connection with a reduction of the Number Of Shares Issuable With
Respect To The FON Group Intergroup Interest;
(E) the interest of the Corporation or any of its subsidiaries in any business
or asset acquired and any liabilities assumed by the Corporation or any of its
subsidiaries outside the ordinary course of business and attributed to the
Sprint FON Group, as determined by the Board of Directors as contemplated by
Section 9.1(A) of ARTICLE SIXTH; and
(F) from and after the payment date of any dividend or other distribution with
respect to shares of PCS Stock (other than a dividend or other distribution
payable in shares of PCS Stock, with respect to which adjustment shall be made
as provided in the definition of "Number Of Shares Issuable With Respect Of The
FON Group Intergroup Interest," or in securities of the Corporation attributed
to the PCS Group, for which provision shall be made as set
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forth in the third to last sentence of this definition), an amount of assets or
properties previously attributed to the PCS Group of the same kind as were paid
in such dividend or other distribution with respect to shares of PCS Stock and
Class A Common Stock (with respect to Shares Issuable With Respect To The Class
A Equity Interest In The PCS Group) as have a Fair Value on the record date for
such dividend or distribution equal to the product of (1) the Fair Value on such
record date of such dividend or distribution to holders of shares of PCS Stock
declared on a per share basis multiplied by (2) the Number Of Shares Issuable
With Respect To The FON Group Intergroup Interest (determined as of the record
date for such dividend or distribution);
provided that from and after any transfer of any assets or properties from the
Sprint FON Group to the PCS Group, the Sprint FON Group shall no longer include
such assets or properties so transferred (other than as reflected in respect of
such a transfer by the FON Group Intergroup Interest Fraction, as provided by
paragraph (B) of this definition).
If the Corporation shall pay a dividend or make some other distribution with
respect to shares of PCS Stock payable in securities of the Corporation that are
attributed to the PCS Group for purposes of this ARTICLE SIXTH (other than PCS
Stock), the Sprint FON Group shall be deemed to hold an interest in the PCS
Group equivalent to the number or amount of such securities that is equal to the
product of the number or amount of securities so distributed to holders of PCS
Stock on a per share basis multiplied by the Number Of Shares Issuable With
Respect To The FON Group Intergroup Interest (determined as of the record date
for such distribution) and, to the extent interest is or dividends are paid on
the securities so distributed, the Sprint FON Group shall include, and there
shall be transferred thereto out of the PCS Group, a corresponding ratable
amount of the kind of assets paid as such interest or dividends as would have
been paid in respect of such securities so deemed to be held by the Sprint FON
Group if such securities were outstanding.
The Corporation may also, to the extent the securities so paid as a dividend
or other distribution to the holders of PCS Stock are Convertible Securities and
at the time are convertible into or exchangeable or exercisable for shares of
PCS Stock, treat such Convertible Securities as are so deemed to be held by the
Sprint FON Group to be deemed to be converted, exchanged or exercised, and shall
do so to the extent such Convertible Securities are mandatorily converted,
exchanged or exercised (and to the extent the terms of such Convertible
Securities require payment of consideration for such conversion, exchange or
exercise, the Sprint FON Group shall then no longer include an amount of the
kind of properties or assets required to be paid as such consideration for the
amount of Convertible Securities deemed converted, exchanged or exercised (and
such properties or assets shall be attributed to the PCS Group)), in which case,
from and after such time, the securities into or for which such Convertible
Securities so deemed to be held by the Sprint FON Group were so considered
converted, exchanged or exercised shall be deemed held by the Sprint FON Group
(as provided in clause (3) of paragraph (C) of the definition of "Number Of
Shares Issuable With Respect To The FON Group Intergroup Interest") and such
Convertible Securities shall no longer be deemed to be held by the Sprint FON
Group. A statement setting forth the election to effectuate any such deemed
conversion, exchange or exercise of Convertible Securities so deemed to be held
by the Sprint FON Group and the properties or assets, if any, to be attributed
to the PCS Group in consideration of such conversion, exchange or exercise (if
any) shall be filed in the records of the actions of the Board of Directors and,
upon such filing, such deemed conversion, exchange or exercise shall be
effectuated.
"Sprint Party" has the meaning set forth in the Joint
Venture Agreement.
"Sprint Sub" means Sprint Global Venture, Inc.
"Standstill Agreement" means the Amended and Restated Standstill Agreement,
dated as of November 23, 1998, among FT, DT and this Corporation, as amended or
supplemented from time to time, and any replacement standstill agreement or
agreements entered into pursuant to Section 5.17 of the Master Transfer
Agreement.
"Stockholders' Agreement" means the Amended and Restated Stockholders'
Agreement, dated as of November 23, 1998, among FT, DT and this Corporation (and
all exhibits thereto), as amended or supplemented from time to
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time.
"Strategic Investor" has the meaning set forth in the
Investment Agreement.
"Strategic Merger" means 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" means, 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.
"Tie-Breaking Vote" has the meaning set forth in Section 18.1(a) of the Joint
Venture Agreement, and shall include any successor provision thereto.
"Total Market Capitalization" of any class or series of common stock on any
date means the product of (i) the Market Value of one share of such class or
series of common stock on such date and (ii) the number of shares of such class
or series of common stock outstanding on such date.
"Trading Day" means, 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 The Nasdaq Stock Market, 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 The
Nasdaq Stock Market, 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" means 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.
"Venture Interests" has the meaning set forth in the Joint
Venture Agreement.
"Vote" means, 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, the term "Vote" means the ability to
exercise general voting power (as opposed to the exercise of
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special voting or disapproval rights such as those set forth in this ARTICLE
SIXTH) with respect to matters other than the election of directors at a meeting
of the stockholders of this Corporation.
"Voting Power" means, 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" means, 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 Non-Class A 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" means the weighted average per unit price paid by the
purchasers of any capital stock, debt instrument or security of this
Corporation; provided, that (i) the price paid by the purchasers of Series 2 PCS
Stock and Series 3 PCS Stock acquired on November 23, 1998 is the Average
Trading Price of a share of Series 1 PCS Stock as of the 21st Trading Day
following the commencement of regular way trading in connection with the
Recapitalization, (ii) the original purchase price paid by the purchasers of Old
Class A Common Stock shall be allocated as of November 23, 1998 among the Number
Of Shares Issuable With Respect To The Old Class A Equity Interest In The FON
Group and the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The PCS Group represented by such Old Class A Common Stock in the
same proportion per share of Old Class A Common Stock as the per share
reclassification and exchange of a share of Common Stock, par value $2.50 per
share, outstanding immediately prior to the Recapitalization, into one share of
Series 1 FON Stock and one-half of a share of Series 1 PCS Stock and (iii) the
original purchase price paid by the purchasers of Class A Common Stock--Series
DT shall be allocated as of November 23, 1998 among the Number Of Shares
Issuable With Respect To The Class A--Series DT Equity Interest In The FON Group
and the Number Of Shares Issuable With Respect To The Class A--Series DT Equity
Interest In The PCS Group represented by such Class A Common Stock--Series DT in
the same proportion per share of Class A Common Stock as the per share
reclassification and exchange of a share of Common Stock, par value $2.50 per
share, outstanding immediately prior to the Recapitalization, into one share of
Series 1 FON Stock and a portion of a share of Series 1 PCS Stock. In
determining the price of shares of Non-Class A Common Stock or Class A 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 Non-
Class A 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 or holders of Series 2 PCS Stock or
Series 2 FON Stock, as the case may be.
Section 11. Notices. Notwithstanding the provisions of Section 7.4, all
notices to Class A Holders made by this Corporation pursuant to this ARTICLE
SIXTH 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
telefacsimile communication 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 telefacsimile
communication also shall be sent concurrently by air mail, but shall in any
event be effective as stated above.
Section 12. 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 votes represented by the outstanding shares of Class A Stock,
voting together as a single class.
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Section 13. General Provisions Relating to Preferred Stock.
13.1. 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.
13.2. 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.
13.3. 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.
13.4. 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
Corporation 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.
13.5. In the event that the Preferred Stock of any series
shall be redeemable, then, at the option of the Board of
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Directors, the Corporation may at such time or times as may be specified by the
Board of Directors as provided in Section 13.2(c) 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 Section 13.2(c) (the sum so payable upon any
redemption of Preferred Stock being herein referred to as the "redemption
price").
13.6. Attribution of Preferred Stock to Groups. As of November 23, 1998, the
outstanding shares of Preferred Stock- First Series, Preferred Stock-Second
Series, and Preferred Stock- Fifth Series shall be attributed entirely to the
Sprint FON Group. Upon any issuance of any shares of Preferred Stock of any
series after November 23, 1998, the Board of Directors shall attribute for
purposes of this ARTICLE SIXTH the shares so issued entirely to the Sprint FON
Group or entirely to the PCS Group or partly to the Sprint FON Group and partly
to the PCS Group in such proportion as the Board of Directors shall determine
and, further, in case of the issuance of shares of Preferred Stock that are
exchangeable or exercisable for PCS Stock, if at the time such shares of
Preferred Stock are issued the Number Of Shares Issuable With Respect To The FON
Group Intergroup Interest shall be greater than zero, then the Board of
Directors shall also determine what portion (which may be some, all or none) of
such shares of Preferred Stock shall reduce the Number Of Shares Issuable With
Respect To The FON Group Intergroup Interest, taking into consideration the use
of the proceeds of such issuance of shares of Preferred Stock in the business of
the Sprint FON Group or the PCS Group and any other relevant factors. Upon any
redemption or repurchase of shares of Preferred Stock, the Board of Directors
shall determine the proper attribution thereof in accordance with Section 9.1(D)
of ARTICLE SIXTH. Notwithstanding any such attribution of shares of Preferred
Stock to the Sprint FON Group or the PCS Group, any dividends or distributions
or other payments which are made by the Corporation on such shares of Preferred
Stock may be made, and as required by the preferences and relative,
participating, optional or other special rights thereof shall be made, out of
any of the properties or assets of the Corporation, regardless of the Business
Group to which such properties or assets are attributed in accordance with the
definitions of "Sprint FON Group" and "PCS Group" set forth in Section 10,
except as otherwise provided by the resolution of the Board of Directors fixing
the preferences and relative, participating, optional or other special rights of
a series of Preferred Stock.
13.7. Intentionally Omitted.
13.8. Intentionally Omitted.
13.9. Preferred Stock--Fifth Series.
13.9.1. 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.
13.9.2. 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.
13.9.3. 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.
13.9.4. 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 Corporation 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
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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.
13.9.5. Non-Convertible. The Fifth Series Shares shall not
be convertible into or exchangeable for stock of any other class
or classes of the Corporation.
13.9.6. 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 Corporation (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.
13.9.7. 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.
13.9.8. 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.
13.9.9. 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.
13.9.10. 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
Corporation Common Stock (other than a distribution in shares of its Corporation
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 Corporation Common Stock until such default shall have been cured.
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13.9.11. 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 Corporation 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.
PREFERRED STOCK - SIXTH SERIES
(1) Designation and Amount. The shares of such Series shall be
designated as "Preferred Stock-Sixth Series, Junior Participating"
(hereafter "Sixth Series") and the number of shares constituting such
series shall be one million five hundred
thousand (1,500,000).
(2) Dividends.
(A) Subject to the prior and superior rights of the holders of
any shares of any other series of Preferred Stock of the Corporation
("Preferred Stock"), or any similar stock ranking prior and superior
to the shares of the Sixth Series with respect to dividends, the
holders of shares of the Sixth Series, in preference to the holders of
Common Stock and any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
shares of the Sixth Series (collectively with such Common Stock,
"Junior Stock"), shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash, on January 1, April
1, July 1 and October 1 in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date") in an amount (rounded
to the nearest cent) equal to the greater of (a) $100.00 or (b) the
product of the FON Group Multiple (as defined below) times the
aggregate per share amount of all cash dividends, plus the product of
the FON Group Multiple 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 FON Group
Common Stock, or a subdivision of the outstanding shares of FON Group
Common Stock (by reclassification or otherwise), declared (but not
withdrawn) on the FON Group Common Stock since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of the Sixth Series.
(B) As used herein, the FON Group Multiple shall initially be
2,000. In the event the Corporation shall (i) declare any dividend on
FON Group Common Stock payable in shares of such stock, (ii) subdivide
the outstanding FON Group Common Stock, or (iii) combine the
outstanding FON Group Common Stock into a smaller number of shares,
then in each such case the FON Group Multiple shall be adjusted by
multiplying such amount by a fraction the numerator of which is the
number of shares of FON Group Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of FON Group Common Stock that were outstanding immediately prior to
such event.
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(C) The Corporation shall declare a dividend or distribution on
the Sixth Series as provided above in paragraph (A) of this Section
(2) immediately after it declares a dividend or distribution on the
FON Group Common Stock (other than a dividend payable in shares of FON
Group Common Stock); provided, however, that in the event no dividend
or distribution shall have been declared on the FON Group Common Stock
during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, the minimum quarterly
dividend of $100.00 on the Sixth Series shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(D) Dividends shall begin to accrue and be cumulative on
outstanding shares of Sixth Series from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Sixth Series,
unless the date of issue of such shares of Sixth Series is prior to
the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for
the determination of holders of shares of Sixth Series entitled to
receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which cases such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall cumulate but shall not bear
interest. Dividends paid on the shares of Sixth Series 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.
(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, the holders of the shares of the Sixth Series
shall be entitled to vote at any annual or special meeting of the
stockholders of the Corporation, for each share of Sixth Series, a number
of votes equal to the product of the FON Group Multiple then in effect
times the highest number of votes that any share of FON Group Common Stock
entitles its holder to vote at such meeting of stockholders of the
Corporation. The holders of the shares of the Sixth Series shall be
entitled to exercise such voting rights with the holders of Series 1 FON
Stock, without distinction as to class, at any annual or special meeting of
stockholders for the election of directors and on any other matter
submitted to a vote of the stockholders of the Corporation at such meeting.
Except as otherwise provided herein, in the Articles of Incorporation of
the Corporation, in any other Certificate of Designation establishing a
series of Preferred Stock or any similar stock or otherwise required by
law, the holders of the shares of the Sixth Series and the holders of
Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(4) Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the shares of the Sixth 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 Sixth Series outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends (except a dividend payable in
FON Group Common Stock and/or any other Junior Stock)on, make and
other
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distributions on, or redeem or purchase or
otherwise acquire for consideration any
shares of Junior Stock;
(ii) declare or pay dividends on or make any other
distribution on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the shares of the Sixth Series, except dividends paid
ratably on the shares of the Sixth Series 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;
(iii) redeem or purchase or otherwise acquire for
consideration any shares ranking on a parity (either as to
dividends or upon dissolution, liquidation or winding up) with
the shares of the Sixth Series, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of such
parity stock in exchange for shares of Junior Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of the Sixth Series, or any shares of stock ranking on a
parity with the shares of the Sixth 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 Sixth Series purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares
of Preferred Stock and may be reissued as part of a new series of 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, in
the Articles of Incorporation, in any other Certificate of Designation
establishing a series of Preferred Stock or any similar stock or as
otherwise required by law.
(6) Liquidation, Dissolution or Winding Up.
(A) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the
shares of the Sixth Series shall be entitled to receive, in preference
to the holders of Junior Stock, the greater of (a) $1,000.00 per
share, plus accrued and unpaid dividends to the date of distribution,
whether or not earned or declared, or (b) an amount per share equal to
the product of the FON Group Multiple then in effect times the
aggregate amount to be distributed per share to holders of FON Group
Common Stock.
(B) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Sixth Series shall not
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receive any distributions except for distributions made ratably on the
Sixth Series and all other such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled
upon such liquidation, dissolution or winding up.
(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 Sixth Series shall at the same time be similarly exchanged or
changed in an amount per share equal to the product of the FON Group
Multiple then in effect 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 FON Group Common Stock is changed or
exchanged.
(8) Ranking. The shares of the Sixth Series shall rank junior to all
other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such
series shall provide otherwise. The shares of the Sixth Series shall rank
on a parity with the Corporation's Preferred Stock-Series Eighth, Junior
Participating, as to the payment of dividends and the distribution of
assets. Nothing herein shall preclude the Board of Directors of the
Corporation from creating any additional series of Preferred Stock or any
similar stock ranking on a parity with or prior to the shares of the Sixth
Series as to the payment of dividends or distribution of assets.
(9) Fractional Shares. Shares of the Sixth 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 Sixth Series.
(10) Definitions. For purposes of this amended and restated
Certificate of Designation, Preferences and Rights of Sixth Series, unless
the context otherwise requires:
(A) "Class A Common Stock-Series DT" shall have the meaning set
forth in the Subsequent Charter Amendment.
(B) "Common Stock" shall mean Series 1 FON Stock, and/or Series 2
FON Stock, and/or Series 3 FON Stock, and/or Old Class A Common Stock,
and/or Class A Common Stock-Series DT, and/or Series 1 PCS Stock,
and/or Series 2 PCS Stock, and/or Series 3 PCS Stock, in each case as
the context requires.
(C) "FON Group Common Stock" shall mean Series 1 FON Stock,
and/or Series 2 FON Stock, and/or Series 3 FON Stock, in each case as
the context requires.
(D) "FON Group Multiple" shall have the meaning set forth in
Section 2(B).
(E) "Initial Charter Amendment" shall have the meaning set forth
in the Restructuring and Merger Agreement.
(F) "Old Class A Common Stock" shall have the meaning set forth
in the Subsequent Charter Amendment.
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(G) "Recapitalization" shall mean the reclassification of each
outstanding share of Sprint Common Stock into one share of Series 1
FON Stock and one-half of a share of Series 1 PCS Stock effected by
filing of the Subsequent Charter Amendment.
(H) "Restructuring and Merger Agreement" shall mean that certain
agreement, dated as of May 26, 1998, by and among the Corporation,
TeleCommunications, Inc., a Delaware corporation, Comcast Corporation,
a Pennsylvania corporation, Cox Communications, Inc., a Delaware
corporation, TCI Spectrum Holdings, Inc., a Colorado corporation,
Comcast Telephony Services, a Delaware general partnership, Cox
Telephony Partnership, a Delaware general partnership, Sprint
Enterprises, L.P., a Delaware limited partnership, TCI Philadelphia
Holdings, Inc., a Delaware corporation, Com Telephony Services, Inc.,
a Delaware corporation, Comcast Telephony Services, Inc., a Delaware
corporation, Cox Telephony Partners, Inc., a Delaware corporation, Cox
Communications Wireless, Inc., a Delaware corporation, SWV One, Inc.,
a Delaware corporation, SWV Two, Inc., a Delaware corporation, SWV
Three, Inc., a Delaware corporation, SWV Four, Inc., a Delaware
corporation, SWV Five, Inc., a Delaware corporation, and SWV Six,
Inc., a Colorado corporation.
(I) "Series 2 Common Stock" shall mean the Common Stock - Series
2, par value $2.50 per share, of the Corporation, created by the
filing of the Initial Charter Amendment.
(J) "Series 1 FON Stock" shall mean the FON Common Stock - Series
1, par value $2.00 per share, of the Corporation, created by the
filing of the Subsequent Charter Amendment.
(K) "Series 2 FON Stock" shall mean the FON Common Stock - Series
2, par value $2.00 per share, of the Corporation, created by the
filing of the Subsequent Charter Amendment.
(L) "Series 3 FON Stock" shall mean the FON Common Stock - Series
3, par value $2.00 per share, of the Corporation, created by the
filing of the Subsequent Charter Amendment.
(M) "Series 1 PCS Stock" shall mean the PCS Common Stock - Series
1, par value $1.00 per share, of the Corporation, created by the
filing of the Initial Charter Amendment.
(N) "Series 2 PCS Stock" shall mean the PCS Common Stock - Series
2, par value $1.00 per share, of the Corporation, created by the
filing of the Initial Charter Amendment.
(O) "Series 3 PCS Stock" shall mean the PCS Common Stock - Series
3, par value $1.00 per share, of the Corporation, created by the
filing of the Initial Charter Amendment.
(P) "Sprint Common Stock" shall mean Common Stock, par value
$2.50 per share, of the Corporation, as provided for in the Initial
Charter Amendment.
(Q) "Subsequent Charter Amendment" shall have the meaning set
forth in the Restructuring and Merger Agreement.
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13.10 Preferred Stock--Seventh Series Convertible.
13.10.1 Amount, Rank and Designation. The amount of shares
to constitute the Seventh Series of Preferred Stock shall be 300,000 shares.
The designation thereof shall be "Preferred Stock--Seventh Series,
Convertible" (hereinafter "Seventh Series"). Shares of the Seventh Series
shall rank junior as to dividends and upon liquidation to shares
of the Fifth Series of the Preferred Stock and any other Preferred Stock
designated as senior to the Seventh Series as to dividends or upon liquidation,
dissolution or winding up ("Senior Stock"), and shall have a preference over the
shares of the Corporation Common Stock and any other class or series of Junior
Stock.
13.10.2. Dividends. Holders of record of shares of the Seventh Series will be
entitled to receive, when, as and if declared by the Board of Directors of the
Corporation, out of funds legally available for the payment of dividends,
cumulative cash dividends ("Preferred Dividends") payable at the rate of $6.73
per share quarterly in arrears on each September 30, December 31, March 31 and
June 30 (each a "Dividend Payment Date") or, if any such date is not a business
day (as defined herein), the Preferred Dividends due on such Dividend Payment
Date shall be paid on the next succeeding business day. Preferred Dividends on
the Seventh Series shall be cumulative and shall accumulate from the date of
original issuance of the Seventh Series. Preferred Dividends shall be payable to
holders of record as they appear on the stock register of the Corporation, net
of any amounts required to be withheld for or with respect to taxes, on such
record dates, not more than 60 days preceding the payment date thereof, as shall
be fixed by the Board of Directors. Preferred Dividends payable on the Seventh
Series for any period less than a full quarterly dividend period shall be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed in any period less than one month. Preferred Dividends
shall accrue on a daily basis whether or not there are funds of the Corporation
legally available for the payment of such dividends and whether or not such
Preferred Dividends are declared. Accrued but unpaid Preferred Dividends shall
accumulate as of the Dividend Payment Date on which they first become payable,
but no interest shall accrue on accumulated but unpaid Preferred Dividends.
Before any dividends on the Corporation Common Stock or any other class or
series of stock of the Corporation ranking junior to the Seventh Series as to
dividends shall be paid or declared and set apart for payment, the holders of
shares of the Seventh 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
Seventh Series as to dividends is declared or is to be paid.
13.10.3. Conversion.
(a) Each holder of shares of Seventh Series may at such holder's option at any
time convert any or all of such holder's shares of Seventh Series into (i) if
such holder is a Cable Holder, shares of Series 2 PCS Stock, and (ii) if such
holder is not a Cable Holder, shares of Series 1 PCS Stock. All references
herein to shares of Series 2 PCS Stock issuable upon conversion of shares of
Seventh Series shall be deemed to refer to shares of Series 1 PCS Stock if the
holder of such Seventh Series is not a Cable Holder. Such shares of Seventh
Series shall be convertible into a number of fully paid and nonassessable whole
shares of Series 2 PCS Stock as is equal to the aggregate Liquidation Preference
of the shares of Seventh Series surrendered for conversion divided by the
Initial Conversion Price (as adjusted from time to time, the "Conversion
Price"). In case of the redemption of any shares of the Seventh 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 the
Corporation defaults in the payment of the redemption price plus all accrued and
unpaid dividends. If the Corporation defaults with respect to such payment, the
right to convert the shares designated for redemption shall terminate at the
close of business on the business day next preceding the date that such default
is cured. Upon conversion the Corporation shall make no payment or adjustment on
account of dividends accrued or in arrears on the Seventh Series surrendered for
conversion.
(b) Holders of shares of Seventh Series at the close of business on a record
date for any payment of declared Preferred Dividends shall be entitled to
receive the Preferred Dividends payable on those shares of Seventh Series on the
corresponding Dividend Payment Date notwithstanding the conversion pursuant to
this section of those shares of Seventh Series following such record date and
before the close of business on such Dividend Payment
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Date. Except as provided in the preceding sentence, upon any conversion of
shares of Seventh Series, the Corporation shall make no payment of or
allowance of unpaid Preferred Dividends, whether or not in arrears, on
such shares of Seventh Series, or for previously declared dividends or
distributions on the shares of Series 2 PCS Stock issued upon conversion.
(c) Conversion of shares of Seventh Series may be effected by delivering
certificates evidencing such shares of Seventh Series, together with written
notice of conversion stating the number of shares to be converted and a proper
assignment of such certificates to the Corporation or in blank, to the office of
the transfer agent for the Seventh Series or to any other office or agency
maintained by the Corporation for that purpose and otherwise in accordance with
conversion procedures established by the Corporation. Each conversion shall be
deemed to have been effected immediately before the close of business on the
date on which the foregoing requirements shall have been satisfied. The
Corporation shall as promptly as practicable after any conversion pursuant to
this section issue and deliver to the converting holder a certificate or
certificates representing the number of whole shares of Series 2 PCS Stock into
which such shares of Seventh Series were converted. Upon conversion of less than
the entire number of the shares of Seventh Series represented by any
certificate, the Corporation shall issue and deliver to the converting holder a
new certificate representing the number of shares of Seventh Series not
converted. The Corporation shall effect such conversion as soon as practicable;
provided that the Corporation shall not be required to convert shares of Seventh
Series, and no surrender of shares of Seventh Series shall be effective for that
purpose, while the stock transfer books of the Corporation for the Series 2 PCS
Stock are closed for any reason, but the surrender of shares of Seventh Series
for conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books, as if the
conversion had been made on the date such shares of Seventh Series were
surrendered, and at the Conversion Price in effect on the date of such
surrender.
(d) No fraction of a share of Series 2 PCS Stock shall be issued upon any
conversion. In lieu of the fraction of a share to which the holder of shares of
the Seventh 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
Series 1 PCS Stock. For the purposes of this subparagraph, the market value of a
share of Series 1 PCS Stock shall be the Closing Price of such a share on the
day immediately preceding the date upon which such shares of Seventh Series are
surrendered for conversion.
(e) The Conversion Price in effect at any time shall be subject to adjustment
as follows:
(i) If the Corporation shall at any time after the filing of these Articles of
Incorporation: (A) pay a dividend on the PCS Stock in shares of PCS Stock, (B)
subdivide the outstanding shares of PCS Stock into a greater number of shares,
(C) combine the outstanding shares of PCS Stock into a smaller number of shares,
(D) pay a dividend on the PCS Stock in shares of its capital stock (other than
PCS Stock), or (E) issue any shares of its capital stock by reclassification of
the shares of PCS Stock (other than any reclassification by way of merger or
binding share exchange that is subject to Section 13.10.3(e)(viii)), then the
Conversion Price 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 if the holder elects to convert shares of
Seventh Series after such time, the holder thereof shall be entitled to receive
the aggregate number of shares of PCS Stock which, if such conversion had
occurred immediately prior to such time, he would have owned upon such
conversion and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. Subject to Section 13.10.3(e)(vi)
for a dividend or distribution, the adjustment shall become effective
immediately after the record date for the dividend or distribution, and for a
subdivision, combination or reclassification, the adjustment shall become
effective immediately after the effective date of the subdivision, combination
or reclassification.
(ii) If the Corporation shall issue rights or warrants to the holders of the
PCS Stock entitling them (for a period expiring within 45 days after the record
date for the determination of stockholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of PCS Stock (or Convertible
Securities) at a price per share (or having a conversion price per share, after
adding thereto an allocable portion of the Conversion Price of the right or
warrant
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to purchase such Convertible Securities, computed on the basis of the
maximum number of shares of PCS Stock issuable upon conversion of such
Convertible Securities) less than the Current Market Price per share on the
Determination Date, the Conversion Price shall be adjusted by multiplying the
conversion price in effect immediately prior to such record date by a
fraction, of which the numerator shall be the number of shares of PCS Stock
outstanding on such record date plus the number of shares which the aggregate
offering price of the total number of shares of PCS Stock so offered (or the
aggregate initial conversion price of the Convertible Securities so offered,
after adding thereto the aggregate conversion price of the rights or warrants
to purchase such Convertible Securities) to holders of PCS Stock (and to
holders of Convertible Securities referred to in the following paragraph
if the distribution to which this paragraph (ii) applies is also being made
to such holders) would purchase at such Current Market Price, and of which
the denominator shall be the number of shares of PCS Stock
outstanding on such record date plus the number of additional shares of PCS
Stock so offered for subscription or purchase (or into which the Convertible
Securities so offered are initially convertible). The adjustment contemplated by
this paragraph (ii) shall be made successively whenever any such rights or
warrants are issued and shall become effective immediately after the close of
business on such record date; however, to the extent that shares of PCS Stock
(or Convertible Securities) have not been issued when such rights or warrants
expire (or, in the case of rights or warrants to purchase Convertible Securities
which have been exercised, if all of the shares of PCS Stock issuable upon
conversion of such Convertible Securities have not been issued prior to the
expiration of the conversion right thereof), the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares (or Convertible Securities)
actually issued upon the exercise of such rights or warrants (or the conversion
of such Convertible Securities).
For purposes of this paragraph (ii) the number of shares of PCS Stock
outstanding on any record date shall be deemed to include the maximum number of
shares of PCS Stock the issuance of which would be necessary to effect the full
exercise, exchange or conversion of all Convertible Securities outstanding on
such record date which are then exercisable, exchangeable or convertible at a
price (before giving effect to any adjustment to such price for the distribution
to which this paragraph (ii) is being applied) equal to or less than the Current
Market Price per share of PCS Stock on the applicable Determination Date, if all
of such Convertible Securities were deemed to have been exercised, exchanged or
converted immediately prior to the opening of business on such record date. In
case any subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined by the Board of Directors of the Corporation.
(iii) If the Corporation shall distribute to the holders of PCS Stock
evidences of its indebtedness or assets or subscription rights or warrants
(excluding (x) dividends or distributions referred to in Section 13.10.3(e)(i)
and distributions of rights or warrants referred to in Section 13.10.3(e)(ii)
and (y) cash dividends or other cash distributions, unless such cash dividends
or cash distributions are Extraordinary Cash Dividends), the Conversion Price
shall be adjusted by multiplying the Conversion Price in effect immediately
prior to the record date for the determination of stockholders entitled to
receive such distribution by a fraction, of which the numerator shall be the
number of shares of PCS Stock outstanding on such record date multiplied by the
Current Market Price on the Determination Date, less the fair market value (as
determined by the Board of Directors of the Corporation) on such record date of
the evidences of indebtedness, assets (including Extraordinary Cash Dividends),
subscription rights or warrants to be distributed to the holders of PCS Stock
(and to the holders of Convertible Securities referred to below if the
distribution to which this paragraph (iii) applies is also being made to such
holders), and of which the denominator shall be the number of shares of PCS
Stock outstanding on such record date multiplied by such Current Market Price.
For purposes of this paragraph (iii), the number of shares of PCS Stock
outstanding on any record date shall be deemed to include the maximum number of
shares of PCS Stock the issuance of which would be necessary to effect the full
exercise, exchange or conversion of all Convertible Securities outstanding on
such record date which are then exercisable, exchangeable or convertible at a
price (before giving effect to any adjustment to such price for the distribution
to which this paragraph (iii) is being applied) equal to or less than the
Current Market Price per share of PCS Stock on the applicable Determination
Date, if all of such Convertible Securities were deemed to have been exercised,
exchanged or converted immediately prior to the opening of business on such
record date.
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For purposes of this paragraph (iii), the term "Extraordinary Cash Dividend"
shall mean any cash dividend with respect to the PCS Stock the amount of which,
together with the aggregate amount of cash dividends on the PCS Stock to be
aggregated with such cash dividend in accordance with the following
provisions of this paragraph, equals or exceeds the threshold
percentage set forth below in the following sentence. If, upon the date prior to
the Ex-Dividend Date with respect to a cash dividend on the PCS Stock, the
aggregate of the amount of such cash dividend together with the amounts of all
cash dividends on the PCS Stock with Ex-Dividend Dates occurring in the 365
consecutive day period ending on the date prior to the Ex- Dividend Date with
respect to the cash dividend to which this provision is being applied (other
than any such other cash dividends with Ex-Dividend Dates occurring in such
period for which a prior adjustment to the Conversion Price was previously made
under this paragraph (iii)) equals or exceeds on a per share basis 5% of the
average of the Closing Prices during the period beginning on the date after the
first such Ex-Dividend Date in such period and ending on the date prior to the
Ex-Dividend Date with respect to the cash dividend to which this provision is
being applied (except that if no other cash dividend has had an Ex-Dividend Date
occurring in such period, the period for calculating the average of the Closing
Prices shall be the period commencing 365 days prior to the date immediately
prior to the Ex- Dividend Date with respect to the cash dividend to which this
provision is being applied), such cash dividend together with each other cash
dividend with an Ex-Dividend Date occurring in such 365-day period that is
aggregated with such cash dividend in accordance with this paragraph shall be
deemed to be an Extraordinary Cash Dividend.
The adjustment pursuant to the foregoing provisions of this paragraph (iii)
shall be made successively whenever any distribution to which this paragraph
(iii) applies is made, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
(iv) If this Section 13.10.3(e) requires adjustments to the Conversion Price
under more than one of clause (D) of the first sentence of paragraph (i),
paragraph (ii) or paragraph (iii), and the record dates for the distribution
giving rise to such adjustments shall occur on the same date, then such
adjustments shall be made by applying, first, the provisions of paragraph (i),
second the provisions of paragraph (iii) and, third, the provisions of paragraph
(ii).
(v) No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least one percent
thereof; provided, however, that any adjustments which by reason of this
paragraph (v) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
13.10.3(e) shall be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be.
(vi) In any case in which this Section 13.10.3(e) shall require that an
adjustment in the Conversion Price be made effective as of the record date for a
specified event, the Corporation may elect to defer until the occurrence of such
event (x) issuing to the holder of the Seventh Series the Shares, if any,
issuable upon such conversion over and above the Shares, if any, issuable upon
such conversion on the basis of the Conversion Price in effect prior to such
adjustment, if the Seventh Series is converted after such record date, and (y)
paying to the holder cash or its check in lieu of any fractional interest to
which the holder would be entitled pursuant to Section 13.10.3(d); provided,
however, that the Corporation shall deliver to the holder a due bill or other
appropriate instrument evidencing the holder's right to receive such additional
Shares and such cash upon the occurrence of the event requiring such adjustment.
(vii) If the Corporation consolidates with or merges into, or transfers (other
than by mortgage or pledge) its properties and assets substantially as an
entirety to, another Person or the Corporation is a party to a merger or binding
share exchange which reclassifies or changes its outstanding PCS Stock, or the
PCS Stock is converted into another class or series of capital stock of the
Corporation, the Corporation (or its successor in such transaction) or the
transferee of such properties and assets shall make appropriate provision so
that the holder's certificate representing shares of Seventh Series shall
thereafter be convertible, upon the terms and conditions specified in the
certificates, for the kind and amount of securities, cash or other assets
receivable upon such transaction by a holder of the number of shares of PCS
Stock purchasable upon conversion of the holder's Seventh Series immediately
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before the effective date of such transaction (assuming, to the extent
applicable, that such holder of PCS Stock failed to exercise any rights of
election with respect thereto, and received per Share the kind and amount of
securities, cash or other assets received per share of PCS Stock by a plurality
of the nonelecting shares of PCS Stock); and in any such case, if necessary,
the provisions set forth in this Section 13.10.3(e) with respect to
the rights and interests thereafter of the holder of the Seventh Series
shall be appropriately adjusted so as to be applicable, as nearly as
may reasonably be, to any such other securities or assets thereafter
deliverable on the conversion of the holder's Seventh Series. The
subdivision or combination of the PCS Stock at any time outstanding into a
greater or lesser number of shares of PCS Stock shall not be deemed to be a
reclassification of the PCS Stock for the purposes of this subsection. The
Corporation shall not effect any such consolidation, merger, transfer or binding
share exchange unless prior to or simultaneously with the consummation thereof
the successor (if other than the Corporation) resulting from such consolidation
or merger or the Person purchasing such assets or other appropriate Person shall
assume, by written instrument, the obligation to deliver to the holders of the
Seventh Series such securities, cash or other assets as, in accordance with the
foregoing provisions, the holder may be entitled to purchase and the other
obligations in this Section 13.10.
The Corporation may make such reductions in the Conversion Price, in addition
to those required by paragraphs (i), (ii) and (iii) of this Section 13.10.3(e),
as it shall in its sole discretion determine to be advisable.
(viii) Subject to Section 13.10.3(e)(v) and to the remaining provisions of
this Section 13.10.3(e)(viii), in the event that a holder of Seventh Series
would be entitled to receive upon conversion thereof pursuant to this Section
13.10.3(e) any Redeemable Capital Stock and the Corporation redeems, exchanges
or otherwise acquires all of the outstanding shares or other units of such
Redeemable Capital Stock (such event being a "Redemption Event"), then, from and
after the effective date of such Redemption Event, the holders of shares of
Seventh Series then outstanding shall be entitled to receive upon conversion of
such shares, in lieu of shares or units of such Redeemable Capital Stock, the
kind and amount of shares of stock and other securities and property receivable
upon the Redemption Event by a holder of the number of shares or units of such
Redeemable Capital Stock into which such shares of Seventh Series could have
been converted immediately prior to the effective date of such Redemption Event
(assuming, to the extent applicable, that such holder failed to exercise any
rights of election with respect thereto and received per share or unit of such
Redeemable Capital Stock the kind and amount of stock and other securities and
property received per share or unit by a plurality of the non-electing shares or
units of such Redeemable Capital Stock), and (from and after the effective date
of such Redemption Event) the holders of the Seventh Series shall have no other
conversion rights under these provisions with respect to such Redeemable Capital
Stock.
Notwithstanding the foregoing, if the redemption price for the shares of such
Redeemable Capital Stock is paid in whole or in part in Redemption Securities,
and the Mirror Preferred Stock Condition is met, the Seventh Series shall not be
convertible into such Redemption Securities and, from and after the applicable
redemption date, the holders of any shares of Seventh Series that have not been
exchanged for Mirror Preferred Stock and Exchange Preferred Stock shall have no
conversion rights under these provisions except for any conversion right that
may have existed immediately prior to the effective date of the Redemption Event
with respect to any shares of stock (including the PCS Stock) or other
securities or property other than the Redeemable Capital Stock so redeemed. The
Corporation shall use all commercially reasonable efforts to ensure that the
Mirror Preferred Stock Condition is satisfied. The "Mirror Preferred Stock
Condition" will be satisfied in connection with a redemption of any Redeemable
Capital Stock into which the Seventh Series is then convertible if appropriate
provision is made so that the holders of the Seventh Series have the right to
exchange their shares of Seventh Series on the effective date of the Redemption
Event for Exchange Preferred Stock of the Corporation and Mirror Preferred Stock
of the issuer of the Redemption Securities. The sum of the initial liquidation
preferences of the shares of Exchange Preferred and Mirror Preferred Stock
delivered in exchange for a share of Seventh Series will equal the Liquidation
Preference of a share of Seventh Series on the effective date of the Redemption
Event. The Mirror Preferred Stock will have an aggregate initial liquidation
preference equal to the product of the aggregate Liquidation Preference of the
shares of Seventh Series exchanged therefor and the quotient of (x) the product
of the amount of shares of the Redeemable Capital Stock for which each share of
Seventh Series is then convertible to be redeemed (determined immediately prior
to the effective date of the Redemption Event) and the average of the daily
Closing Prices of the Redeemable
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Capital Stock for the period of ten consecutive trading days ending on
the third trading day prior to the effective date of the Redemption Event,
divided by (y) the sum of the amount determined pursuant to clause (x),
plus the fair value of the shares of stock or other securities or
property (other than the Redeemable Capital Stock being redeemed) that
would have been receivable by a holder of Seventh Series upon conversion
thereof immediately prior to the effective date of the Redemption Event
(such fair value to be determined in the case of stock or other securities
with a Closing Price in the same manner as provided in clause (x) and otherwise
by the Board of Directors in the exercise of its judgment). The shares of
Exchange Preferred Stock will have an aggregate initial liquidation preference
equal to the difference between the aggregate Liquidation Preference of the
shares of Seventh Series exchanged therefor and the aggregate initial
liquidation preference of the Mirror Preferred Stock. No shares of Exchange
Preferred Stock will be issued in exchange for the Seventh Series if the shares
of Exchange Preferred Stock would have no Liquidation Preference as a result of
the above formula.
(ix) If the Corporation effects a Spin Off, the Corporation shall make
appropriate provision so that the holders of the Seventh Series have the right
to exchange their shares of Seventh Series on the effective date of the Spin Off
for Exchange Preferred Stock of the Corporation and Mirror Preferred Stock of
the issuer of the Spin Off Securities. The sum of the initial liquidation
preference of the shares of Exchange Preferred Stock and Mirror Preferred Stock
delivered in exchange for a share of Seventh Series will equal the Liquidation
Preference of a share of Seventh Series on the effective date of the Spin Off.
The Mirror Preferred Stock will have an aggregate liquidation preference equal
to the product of the aggregate Liquidation Preference of the shares of Seventh
Series exchanged therefor and the quotient of (x) the product of the number (or
fraction) of Spin Off Securities that would have been receivable upon such Spin
Off by a holder of the number of shares of PCS Stock issuable upon conversion of
a share of Seventh Series immediately prior to the effective date of the Spin
Off and the average of the daily Closing Prices of the Spin Off Securities for
the period of ten consecutive trading days commencing on the tenth trading day
following the effective date of the Spin Off, divided by (y) the sum of the
amount determined pursuant to clause (x), plus the fair value of the shares of
PCS Stock and other securities or property (other than Spin Off Securities) that
would have been receivable by a holder of a share of Seventh Series in the Spin
Off following conversion thereof immediately prior to the effective date of the
Spin Off (such fair value to be determined in the case of PCS Stock or other
securities with a Closing Price in the same manner as provided in clause (x) and
otherwise by the Board of Directors in the exercise of its judgment). The shares
of Exchange Preferred Stock will have an aggregate initial liquidation
preference equal to the difference between the aggregate Liquidation Preference
of the shares of Seventh Series exchanged therefor and the aggregate initial
liquidation preference of the Mirror Preferred Stock. No shares of Exchange
Preferred Stock will be issued in exchange for the Seventh Series if the shares
of Exchange Preferred Stock would have no Liquidation Preference as a result of
the above formula. From and after the effective date of such Spin Off, the
holders of any shares of Seventh Series that have not been exchanged for Mirror
Preferred Stock and Exchange Preferred Stock as provided above shall have no
conversion rights under these provisions with respect to such Spin Off
Securities.
(f) The Corporation shall pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of shares of PCS
Stock on the conversion of Seventh Series; provided, however, that the
Corporation shall not be required to pay any tax that may be payable in respect
of any registration of transfer involved in the issue or delivery of shares of
PCS Stock in a name other than that of the registered holder of Seventh Series
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 the Corporation the
amount of any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
13.10.4. Liquidation Rights. Subject to prior payment of preferred amounts to
which any Senior Stock is entitled, in the event of any liquidation, dissolution
or winding up of the Corporation the holders of the Seventh 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 Corporation Common Stock or any other class or series
of stock ranking junior to the Seventh Series upon liquidation, the sum of U.S.
$1,000 per share (the "Liquidation Preference"), plus in each case any
accumulated unpaid dividends (whether or not declared), to the date of final
distribution. If upon any liquidation, dissolution or winding up of the
Corporation the amounts payable with
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respect to the Seventh Series and any other Parity Stock are not paid in
full, the holders of the Seventh Series and such Parity Stock will share
ratably in any distribution of assets in proportion to the full preferential
amounts to which they are entitled. After payment of the full amount of the
liquidating distribution to which they are entitled, the holders of Seventh
Series shall not be entitled to any further participation in any
distribution of assets by the Corporation. A consolidation or merger of
the Corporation with or into one or more other corporations (whether or not the
Corporation is the corporation surviving such consolidation or merger), or a
sale, lease or exchange of all or substantially all of the assets of the
Corporation shall not be deemed to be a voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation. Notice of a liquidation,
dissolution or winding up of the Corporation shall be filed at each office or
agency maintained for the purpose of conversion of the Seventh Series, and shall
be mailed to the holders of Seventh Series at their last addresses as they shall
appear on the stock register of the Corporation, at least 20 business days
before any such action, stating the date on which any such action is expected to
become effective. The failure to give or receive the notice required by this
Section or any defect therein shall not affect the legality or validity of any
such action.
13.10.5. Redemption.
(a) General. Except as provided below and in Section 13.10.5(h), the Seventh
Series shall not be redeemed by the Corporation prior to November 23, 2001. The
Corporation may at its option redeem the Seventh Series in whole or in part
after November 23, 2001, at any time or from time to time, upon at least thirty
days' prior notice, at a redemption price equal to the Liquidation Preference
per share of Seventh Series, plus any accumulated unpaid dividends (whether or
not declared) up to but excluding such redemption date. In connection with a
Spin Off or a Redemption Event, the Corporation may, at its option, redeem the
Seventh Series in whole after November 23, 2000, and before November 23, 2001,
upon at least thirty days prior notice, at a redemption price equal to the
Premium Price per share of Seventh Series, plus any accumulated unpaid dividends
(whether or not declared) up to but excluding such redemption date, which
redemption shall be deemed effective immediately prior to the consummation of
the Spin Off or the Redemption Event. If less than all the outstanding Seventh
Series is to be redeemed, the shares to be redeemed shall be selected pro rata
as nearly as practicable or by lot, or by such other method as may be determined
by the Board of Directors to be equitable, without regard to whether the shares
to be redeemed are convertible into Series 1 PCS Stock or Series 2 PCS Stock.
Shares so redeemed 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 series.
(b) Mandatory Redemption. To the extent permitted by law, the Corporation
shall redeem, on November 23, 2008 (or, if such day is not a business day, on
the first business day thereafter) (subject to extension as provided in the last
sentence of this Section 13.10.5(b), the "Mandatory Redemption Date"), all
remaining shares of Seventh Series then outstanding, at the redemption price of
$1,000 for each share outstanding, plus an amount in cash equal to all accrued
but unpaid dividends thereon to the Mandatory Redemption Date. Prior to
authorizing or making such redemption with respect to the Seventh Series, the
Corporation, by resolution of the Board of Directors shall, to the extent of
funds legally available therefor, declare a dividend on the Seventh Series
payable on the Mandatory Redemption Date in an amount equal to any accrued and
unpaid dividends on the Seventh Series as of such date and, if the Corporation
does not have sufficient legally available funds to declare and pay all
dividends accrued at the time of such redemption, any remaining accrued and
unpaid dividends shall be added to the redemption price. After paying any
accrued and unpaid dividends pursuant to the foregoing sentence, if the funds of
the Corporation legally available for redemption of shares of the Seventh Series
then required to be redeemed are insufficient to redeem the total number of such
shares then outstanding, those funds which are legally available shall be used
to redeem the maximum possible number of shares of the Seventh Series. At any
time and from time to time thereafter, when additional funds of the Corporation
are legally available to discharge its obligation to redeem all of the
outstanding shares of Seventh Series required to be redeemed pursuant to this
section (the "Mandatory Redemption Obligation"), such funds shall be immediately
used to discharge such Mandatory Redemption Obligation until the balance of such
shares have been redeemed. If and so long as the Mandatory Redemption Obligation
shall not be fully discharged, (x) dividends on any remaining outstanding shares
of Seventh Series shall continue to accrue and be added to the dividend payable
pursuant to the second preceding sentence and (y) the Corporation shall not
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declare or pay any dividend or make any distribution on any Parity Stock or
Junior Stock. With respect to any Exchange Preferred Stock or Mirror Preferred
Stock, the Mandatory Redemption Date shall be the later to occur of (i) November
23, 2008, and (ii) the fifth anniversary of the date of issuance of such
Exchange Preferred Stock or Mirror Preferred Stock.
(c) Notice. The Corporation will provide notice of any redemption of shares of
Seventh Series to holders of record of the Seventh Series to be redeemed not
less than 30 nor more than 60 days prior to the date fixed for such redemption.
Such notice shall be provided by first-class mail postage prepaid, to each
holder of record of the Seventh Series to be redeemed, at such holder's address
as it appears on the stock transfer books of the Corporation. Each such mailed
notice shall state, as appropriate, the following:
(i) the redemption date;
(ii) the number of shares of Seventh Series to be redeemed and, if fewer than
all the shares held by any holder are to be redeemed, the number of such shares
to be redeemed from such holder;
(iii) the Redemption Price;
(iv) the place or places where certificates for such shares are to be
surrendered for redemption;
(v) the amount of full cumulative dividends per share of Seventh Series to be
redeemed accrued and unpaid up to but excluding such redemption date, and that
dividends on shares of Seventh Series to be redeemed will cease to accrue on
such redemption date unless the Corporation shall default in payment of the
Redemption Price plus such full cumulative dividends accrued and unpaid thereon;
(vi) the name and location of any bank or trust company with which the
Corporation will deposit redemption funds pursuant to subsection (e) below;
(vii) the then effective Conversion Price (as determined under Section
13.10.3); and
(viii) that the right of holders to convert shares of Seventh Series to be
redeemed will terminate at the close of business on the business day next
preceding the date fixed for redemption (unless the Corporation shall default in
the payment of the Redemption Price and such full cumulative dividends accrued
and unpaid thereon).
Any notice that is mailed as set forth above shall be conclusively presumed to
have been duly given, whether or not the holder of shares of Seventh Series
receives such notice, and failure to give such notice by mail, or any defect in
such notice, to the holders of any shares designated for redemption shall not
affect the validity of the proceedings for the redemption of any other shares of
Seventh Series.
(d) Mechanics of Redemption. Upon surrender in accordance with the aforesaid
notice of the certificate for any shares so redeemed (duly endorsed or
accompanied by appropriate instruments of transfer if so required by the
Corporation), the holders of record of such shares shall be entitled to receive
the redemption price, without interest, plus full cumulative dividends thereon
accrued and unpaid up to but excluding such redemption date out of funds legally
available therefor. If fewer than all the shares represented by any such
certificate are redeemed, a new certificate representing the unredeemed shares
shall be issued without cost to the holder thereof.
(e) Redemption Funds. On the date of any redemption being made pursuant to
this Section, the Corporation shall, and at any time after notice of such
redemption shall have been mailed and before the date of redemption the
Corporation may, deposit for the benefit of the holders of shares of Seventh
Series to be redeemed the funds necessary for such redemption with a bank or
trust company in the City of New York having a capital and surplus of at least
$1 billion, with instructions to such bank or trust company to pay the full
redemption amounts as provided herein to the holders of shares of Seventh Series
upon surrender of certificates for such shares; provided, however,
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that the making of such deposit shall not release the Corporation from any
of its obligations hereunder. Any moneys so deposited by the Corporation
and unclaimed at the end of two years from the date designated for such
redemption shall revert to the general funds of the Corporation and, upon
demand, such bank or trust company shall pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company shall be relieved
of all responsibility in respect thereof and any holder of shares of
Seventh Series so redeemed shall look only to the Corporation for the
payment of the full redemption amounts, as provided herein.
(f) Rights After Redemption. Notice of redemption having been given as
aforesaid, upon the deposit pursuant to subsection (e) of the full redemption
amounts as provided herein in respect of all shares of Seventh Series then to be
redeemed, notwithstanding that any certificates for such shares shall not have
been surrendered in accordance with subsection (d), from and after the date of
redemption designated in the notice of redemption: (i) the shares represented
thereby shall no longer be deemed outstanding, (ii) the rights to receive
dividends thereon shall cease to accrue, and (iii) all rights of the holders of
such shares of Seventh Series shall cease and terminate, excepting only the
right to receive the full redemption amounts as provided herein without interest
thereon. If the funds deposited are not sufficient for redemption of the shares
of the Seventh Series that were to be redeemed, then no certificates evidencing
such shares shall be deemed surrendered and such shares shall remain outstanding
and the rights of holders of shares of Seventh Series shall continue to be those
of holders of shares of the Seventh Series.
(g) Restrictions on Redemption and Purchase. Any provision of this Section to
the contrary notwithstanding, in the event that any quarterly dividend payable
on the Seventh Series shall be in arrears and until all such dividends in
arrears shall have been paid or declared and set apart for payment, the
Corporation shall not redeem any shares of Parity Stock or Junior Stock unless
all outstanding shares of Seventh Series are simultaneously redeemed and shall
not purchase or otherwise acquire any shares of Seventh Series or any Parity
Stock or Junior Stock except (i) by conversion into or exchange for stock
ranking junior as to dividends or (ii) in accordance with a purchase or exchange
offer made by the Corporation to all holders of record of Seventh Series and
such Parity Stock upon the same terms as to holders of any series and, in the
case of offers relating to more than one series, upon such terms as between such
series as the Board of Directors or, to the extent permitted by applicable law,
any authorized committee thereof, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series of stock, will result in fair and equitable treatment as between such
series, which determination shall be conclusive.
(h) The Corporation shall redeem the Seventh Series in whole or in part in
accordance with and to the extent required by Section 6.6 of the Restructuring
Agreement. With respect to any such redemption, (i) the provisions of Section
13.10.5(c) and Section 13.10.5(e) shall not apply and (ii) the restriction on
rights in Section 13.10.5(f) shall apply from the time of the closing of the IPO
or other primary offering contemplated by Section 6.6 of the Restructuring
Agreement.
13.10.6. Advance Notice of Certain Transactions. If the Corporation: (i) takes
any action which would require any adjustment to the Conversion Price or the
number of shares issuable upon a Conversion; (ii) is a party to a consolidation,
merger or binding share exchange, or transfers all or substantially all of its
assets to another person or entity, and any stockholders of the Corporation must
approve the transaction; or (iii) voluntarily or involuntarily dissolves,
liquidates or winds up, then, in any such event, the Corporation shall give to
the holders of the Seventh Series, at least 10 days prior to any record date or
other date set for definitive action if there shall be no record date, a notice
stating the record date for, the anticipated effective date of such action or
event and, if applicable, whether the Corporation will adjust the Conversion
Price or the number of shares issuable upon a Conversion. Notwithstanding the
foregoing, notice shall be given no later than the time any required notice of
such action or event is given to the holders of PCS Stock.
13.10.7. Reservation of Shares. The Corporation shall at all times keep
available and reserved for the purpose of issuance upon conversion of shares of
Seventh Series the number of shares of its Series 1 PCS Stock and the number of
shares of its Series 2 PCS Stock required for conversion of the outstanding and
any reserved shares of the
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Seventh Series. The Corporation shall take all corporate and other actions
necessary to ensure that all shares of PCS Stock issuable on conversion
of Seventh Series will upon issuance be duly and validly authorized and
issued, fully paid and nonassessable.
13.10.8. Certain Protective Provisions. If at any time the full cumulative
dividends on shares of the Seventh 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 class or series of Parity Stock or Junior
Stock; (b) will not redeem, purchase or otherwise acquire, or permit any
subsidiary to purchase or otherwise acquire, any shares of any class or series
of Parity Stock or Junior Stock; provided that notwithstanding the foregoing,
the Corporation may at any time redeem, purchase or otherwise acquire shares of
Junior Stock in exchange for, or out of the net cash proceeds from the
substantially simultaneous sale of, other shares of Junior Stock; and (c) will
not redeem pursuant to redemption rights in the terms of such stock any Parity
Stock unless at the same time it redeems all the shares of the Seventh Series.
13.10.9. Voting Rights. Except as otherwise required by law, each outstanding
share of the Seventh Series shall be entitled to vote on all matters in respect
of which the holders of the common stock of the Corporation are entitled to
vote, and the holders of the Seventh Series shall vote together with the holders
of all other classes or series of capital stock that have general voting power
on all such matters as a single class; provided, however, that the affirmative
vote or consent of two-thirds of the votes to which the holders of the
outstanding shares of the Seventh Series are entitled shall be necessary for
authorizing, effecting or validating the amendment, alteration or repeal of any
or the provisions of the Articles of Incorporation or of any amendment thereto
(including any certificate of designation or any similar document relating to
any series of preferred stock) of the Corporation, which would materially and
adversely affect the voting powers, preferences, rights, powers or privileges,
qualifications, limitations and restrictions of the Seventh Series; provided,
however, that neither (i) the creation, issuance, or increase in the amount of
authorized shares of, any series of preferred stock nor (ii) the consummation of
any transaction described in Section 13.10.3 in which the voting powers,
preferences, rights, powers or privileges, qualifications, limitations and
restrictions of the Seventh Series are addressed as contemplated by such Section
will (in either such case) be deemed to materially and adversely affect such
voting powers, preferences, rights, powers or privileges, qualifications,
limitations and restrictions of the Seventh Series.
On each matter to be voted on by the holders of the Seventh Series, each
outstanding share of the Seventh Series is entitled to a number of votes equal
to the number of votes that could be cast with respect to such matter by the
holder of that number of the series of PCS Stock into which such share of
Seventh Series could be converted if the requirements for conversion under
Section 13.10.3(c) had been satisfied by such voting party on the record date
for determining the shareholders of the Corporation who are entitled to vote
with respect to such matter.
13.10.10. Definitions. As used in this Section 13.10 only:
(a) the term "Affiliate" has the meaning given to such term
in the Restructuring Agreement;
(b) the term "business day" shall mean 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;
(c) the term "Cable Holder" means any of (i) TeleCommunications, Inc., a
Delaware corporation, Comcast Corporation, a Pennsylvania corporation, or Cox
Communications, Inc., a Delaware corporation, (ii) any Affiliate of an entity
identified in clause (i) of this definition, (iii) any successor by operation of
law of an entity identified in clauses (i) or (ii) of this definition, or (iv)
any entity controlled by two or more entities identified in clauses (i) through
(iii) of this definition or this clause (iv) even if such entity is not
considered an Affiliate of any individual entity so identified;
(d) the term "close of business" means 5:00 p.m. local New York City time on a
business day;
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(e) the term "Closing Price" for a security, on any day, means the last sale
price, regular way, per share of such security as reported on the New York Stock
Exchange on such day, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, of such security on
the New York Stock Exchange, in either case as reported on the New York
Stock Exchange Composite Transactions Tape, or if such security is not then
listed or admitted to trading on such exchange, on the principal national
securities exchange on which such security is then listed or admitted to
trading, or if such security is not then listed or admitted to trading
on any national securities exchange, as quoted through the
National Market tier of The Nasdaq Stock Market;
(f) "Convertible Securities" means any or all options, warrants, securities
and rights which are convertible into or exercisable or exchangeable for PCS
Stock at the option of the holder thereof, or which otherwise entitle the holder
thereof to subscribe for, purchase or otherwise acquire PCS Stock.
(g) "Current Market Price", on the Determination Date for any issuance of
rights or warrants or any distribution in respect of which the Current Market
Price is being calculated, means the average of the daily Closing Prices of the
Series 1 PCS Group Common Stock for the shortest of:
(i) the period of 30 consecutive Trading Days commencing 45 Trading Days
before such Determination Date;
(ii) the period commencing on the date next succeeding the first public
announcement of the issuance of rights or warrants or the distribution in
respect of which the Current Market price is being calculated and ending on the
last full Trading Day before such Determination Date; and
(iii) the period, if any, commencing on the date next succeeding the
Ex-Dividend Date with respect to the next preceding issuance of rights or
warrants or distribution for which an adjustment is required by the provisions
of clause (D) of the first sentence of Section 13.10.3(e)(i), Section
13.10.3(e)(ii) or Section 13.10.3(e)(iii), and ending on the last full Trading
Day before such Determination Date.
If the record date for an issuance of rights or warrants or a distribution for
which an adjustment is required by the provisions of clause (D) of the first
sentence of Section 13.10.3(e)(i), Section 13.10.3(e)(ii) or Section
13.10.3(e)(iii)(the "preceding adjustment event") precedes the record date for
the issuance or distribution in respect of which the Current Market Price is
being calculated and the Ex-Dividend Date for such preceding adjustment event is
on or after the Determination Date for the issuance or distribution in respect
of which the Current Market Price is being calculated, then the Current Market
Price shall be adjusted by deducting therefrom the fair market value (on the
record date for the issuance or distribution in respect of which the Current
Market Price is being calculated), as determined in good faith by the Board of
Directors, of the capital stock, rights, warrants, assets or evidences of
indebtedness issued or distributed in respect of each share of Series 1 PCS
Group Common Stock in such preceding adjustment event. Further, in the event
that the Ex-Dividend Date (or in the case of a subdivision, combination or
reclassification, the effective date with respect thereto) with respect to a
dividend, subdivision, combination or reclassification to which clauses (A),
(B), (C) or (D) of the first sentence of Section 13.10.3(e)(i) applies occurs
during the period applicable for calculating the Current Market Price, then the
Current Market Price shall be calculated for such period in a manner determined
in good faith by the Board of Directors to reflect the impact of such dividend,
subdivision, combination or reclassification on the Closing Prices of the Series
1 PCS Group Common Stock during such period.
For purposes of this Section 13.10, the Current Market Price of a share of
Series 2 PCS Group Common Stock as of any Determination Date shall be the
Current Market Price of a share of Series 1 PCS Group Common Stock as of such
Determination Date;
(h) "Determination Date" for any issuance of rights or warrants or any
distribution to which Section 13.10.3(e)(i) or 13.10.3(e)(ii) applies means the
earlier of (i) the record date for the determination of stockholders entitled to
receive the rights or warrants or the distribution to which such Section applies
and (ii) the Ex-Dividend Date for such right, warrants or distribution;
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(i) "Exchange Preferred Stock" means a series of convertible preferred stock
of the Corporation having terms, conditions, designations, dividend rights,
voting powers, rights on liquidation and other preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof that are identical, or as nearly so as is practicable in
the judgment of the Board of Directors, to those of the Seventh Series for which
such Exchange Preferred Stock is exchanged, except that (i) the liquidation
preference will be determined as provided in Section 13.10.3(e)(vii) or Section
13.10.3(e)(viii), as applicable, (ii) the running of any time periods pursuant
to the terms of the Seventh Series shall be tacked to the corresponding time
periods in the Exchange Preferred Stock and (iii) the Exchange Preferred Stock
will not be convertible into, and the holders will have no conversion rights
thereunder with respect to, (x) in the case of a redemption of Redeemable
Capital Stock, the Redeemable Capital Stock redeemed, or the Redemption
Securities issued, in the Redemption Event, and (y) in the case of a Spin Off,
the Spin Off Securities;
(j) "Ex-Dividend Date" shall mean the date on which "ex- dividend" trading
commences for a dividend, an issuance of rights or warrants or a distribution to
which any of Section 13.10.3(e)(i), Section 13.10.3(e)(ii) or Section
13.10.3(e)(iii) applies in the over-the-counter market or on the principal
exchange on which the Series 1 PCS Stock is then quoted or listed;
(k) the term "Initial Conversion Price" shall be an amount equal to $15.3733.
(l) "IPO" has the meaning given to such term in the Restructuring Agreement;
(m) the term "IPO Price" means the price per share of Series 1 PCS Stock in
the IPO;
(n) the term "Junior Stock" means any stock ranking junior as to dividends or
upon liquidation, dissolution or winding up to the Seventh Series;
(o) the term "Lien" means 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;
(p) the term "Mirror Preferred Stock" means convertible preferred stock issued
by (i) in the case of a redemption of Redeemable Capital Stock, the issuer of
the applicable Redemption Securities, and (b) in the case of a Spin Off, the
issuer of the applicable Spin Off Securities and having terms, designations,
conditions, dividend rights, voting powers, rights on liquidation and other
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof that are identical, or as
nearly so as is practicable in the judgment of the Board of Directors, to those
of the Seventh Series for which such Mirror Preferred Stock is exchanged, except
that (i) the liquidation preference will be determined as provided in Section
13.10.3(e)(vii) or Section 13.10.3(e)(viii), as applicable, (ii) the running of
any time periods pursuant to the terms of the Seventh Series shall be tacked to
the corresponding time periods in the Mirror Preferred Stock and (iii) the
Mirror Preferred Stock shall be convertible into the kind and amount of
Redemption Securities or Spin Off Securities, as applicable, and other
securities and property that the holder of a share of Seventh Series in respect
of which such Mirror Preferred Stock is issued pursuant to the terms hereof
would have received (x) in the case of the redemption of Redeemable Capital
Stock, upon such redemption had such share of Seventh Series been converted
immediately prior to the effective date of the Redemption Event and (y) in the
case of a Spin Off, in such Spin Off had such share of Seventh Series been
converted immediately prior to the record date for such Spin Off;
(q) the term "Parity Stock" means any stock ranking on a parity as to
dividends or upon liquidation, dissolution or winding up with the Seventh
Series;
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(r) the term "PCS Stock" means the Series 1 PCS Stock, the Series 2 PCS Stock
and the Series 3 PCS Stock;
(s) the term "Premium Price," which shall be measured as of the effective date
of the redemption referred to in Section 13.10.5(a), means the greater of (i)
110% of the Liquidation Preference and (ii) 110% of the product of (A) the
number of shares of PCS Stock (or other securities) into which a share of
Seventh Series is convertible as of such redemption date multiplied by (B) the
average of the Closing Prices for the Series 1 PCS Stock (or, if the Seventh
Series is then convertible into a different publicly traded security of the
Corporation, then the average of the Closing Prices of such publicly traded
security) for the 30 consecutive Trading Days ending on the 5th Trading Day
prior to such redemption date.
(t) the term "record date" means such date as from time to time fixed by the
Board of Directors with respect to the receipt of dividends, the receipt of a
redemption price upon redemption or the taking of any action or exercise of any
voting rights;
(u) the term "Redeemable Capital Stock" means a class or series of capital
stock of the Corporation that provides by its terms a right in favor of the
Corporation to call, redeem, exchange or otherwise acquire all of the
outstanding shares or units of such class or series;
(v) the term "Redemption Securities" means, with respect to the redemption of
any Redeemable Capital Stock, stock of a Subsidiary of the Corporation that is
distributed by the Corporation in payment, in whole or in part, of the
redemption price of such Redeemable Capital Stock;
(w) the term "Restructuring Agreement" means that Restructuring and Merger
Agreement, dated as of May 26, 1998, among the Corporation, Tele-Communications,
Inc., Comcast Corporation, Cox Communications, Inc. and certain of their
respective Affiliates;
(x) the term "Series 1 PCS Stock" means the PCS Common Stock--Series 1, par
value $1.00 per share, of the Corporation;
(y) the term "Series 2 PCS Stock" means the PCS Common Stock--Series 2, par
value $1.00 per share, of the Corporation;
(z) the term "Series 3 PCS Stock" means the PCS Common Stock--Series 3, par
value $1.00 per share, of the Corporation;
(aa) the term "Spin Off" means the distribution of stock of a Subsidiary of
the Corporation as a dividend to all holders of PCS Stock.
(bb) the term "Spin Off Securities" means stock of a Subsidiary of the
Corporation that is distributed to holders of PCS Stock in a Spin Off.
(cc) the term "Subsidiary" means, with respect to any person, any corporation,
limited liability company, partnership or other legal entity more than 50% of
whose outstanding voting securities or membership, partnership or other
ownership interests, as the case may be, are directly or indirectly owned by
such person.
(dd) the term "Trading Day" means a day on which the principal national
securities exchange on which the Series 1 PCS Stock is listed or admitted to
trading, or The Nasdaq Stock Market, as applicable, if the Series 1 PCS Stock is
not listed or admitted to trading on any national securities exchange, is open
for the transaction of business (unless such trading shall have been suspended
for the entire day) or, if the Series 1 PCS Stock is not listed or admitted to
trading on any national securities exchange or The Nasdaq Stock Market, any
Business Day; and
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(ee) the term "Transfer" means 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 or (b) any conversion or exchange of any security of this
Corporation pursuant to a merger or other business combination involving this
Corporation.
PREFERRED STOCK-EIGHTH SERIES
(1) Designation and Amount. The shares of such Series shall be
designated as "Preferred Stock-Eighth Series, Junior Participating"
(hereafter "Eighth Series") and the number of shares constituting such
series shall be one million two hundred fifty thousand (1,250,000).
(2) Dividends.
(A) Subject to the prior and superior rights of the holders of
any shares of any other series of Preferred Stock of the Corporation
("Preferred Stock"), or any similar stock ranking prior and superior
to the shares of the Eighth Series with respect to dividends, the
holders of shares of the Eighth Series, in preference to the holders
of Common Stock and any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
shares of the Eighth Series (collectively with such Common Stock,
"Junior Stock"), shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash, on January 1, April
1, July 1 and October 1 in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date") in an amount (rounded
to the nearest cent) equal to the greater of (a) $100.00 or (b) the
product of the PCS Group Multiple (as defined below) times the
aggregate per share amount of all cash dividends, plus the product of
the PCS Group Multiple 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 PCS Group
Common Stock, or a subdivision of the outstanding shares of PCS Group
Common Stock (by reclassification or otherwise), declared (but not
withdrawn) on the PCS Group Common Stock since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of the Eighth Series.
(B) As used herein, the PCS Group Multiple shall initially be
2,000. In the event the Corporation shall (i) declare any dividend on
PCS Group Common Stock payable in shares of PCS Group Common Stock,
(ii) subdivide the outstanding PCS Group Common Stock, or (iii)
combine the outstanding PCS Group Common Stock into a smaller number
of shares, then in each such case the PCS Group Multiple shall be
adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of PCS Group Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of PCS Group Common Stock that were outstanding
immediately prior to such event.
(C) The Corporation shall declare a dividend or distribution on
the Eighth Series as provided above in paragraph (A) of this Section
(2) immediately after it declares a dividend or distribution on the
PCS Group Common Stock (other than a dividend payable in shares of PCS
Group Common Stock); provided, however, that in the event no dividend
or distribution shall have been declared on the PCS Group Common Stock
during the period between any Quarterly Dividend Payment Date and the
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next subsequent Quarterly Dividend Payment Date, the minimum
quarterly dividend of $100.00 on the Eighth Series shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
(D) Dividends shall begin to accrue and be cumulative on
outstanding shares of Eighth Series from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Eighth
Series, unless the date of issue of such shares of Eighth Series is
prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is
a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Eighth Series entitled
to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which cases such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall cumulate but shall not bear
interest. Dividends paid on the shares of Eighth Series 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.
(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, the holders of the shares of the Eighth Series
shall be entitled to vote at any annual or special meeting of the
stockholders of the Corporation, for each share of Eighth Series, a number
of votes equal to the product of the PCS Group Multiple then in effect
times the highest number of votes that each share of PCS Group Common Stock
entitles its holder to vote at such meeting of stockholders of the
Corporation. The holders of the shares of the Eighth Series shall be
entitled to exercise such voting rights with the holders of Series 1 PCS
Stock, without distinction as to class, at any annual or special meeting of
stockholders for the election of directors and on any other matter
submitted to a vote of the stockholders of the Corporation at such meeting.
Except as otherwise provided herein, in the Articles of Incorporation of
the Corporation, in any other Certificate of Designation establishing a
series of Preferred Stock or any similar stock or otherwise required by
law, the holders of the shares of the Eighth Series and the holders of
Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(4) Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the shares of the Eighth 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 Eighth Series outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends (except a dividend payable in
PCS Group Common Stock and/or any other Junior Stock) on, make
any other distributions on, or redeem or purchase or otherwise
acquire for consideration any shares of Junior Stock;
(ii) declare or pay dividends on or make any other
distribution on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the shares of the Eighth Series, except dividends paid
ratably on the shares of the Eighth Series and all such
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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;
(iii) redeem or purchase or otherwise acquire for
consideration any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the shares of the Eighth Series, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares of
such parity stock in exchange for shares of Junior Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of the Eighth Series, or any shares of stock ranking on a
parity with the shares of the Eighth 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 Eighth Series purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares
of Preferred Stock and may be reissued as part of a new series of 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, in
the Articles of Incorporation, in any other Certificate of Designation
establishing a series of Preferred Stock or any similar stock or as
otherwise required by law.
(6) Liquidation, Dissolution or Winding Up.
(A) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the
shares of the Eighth Series shall be entitled to receive, in
preference to the holders of Junior Stock, the greater of (a)
$1,000.00 per share, plus accrued dividends to the date of
distribution, whether or not earned or declared, or (b) an amount per
share equal to the product of the PCS Group Multiple then in effect
times the aggregate amount to be distributed per share to holders of
PCS Group Common Stock.
(B) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Eighth Series shall not receive
any distributions except for distributions made ratably on the Eighth
Series and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
(7) Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which
the shares of PCS Group Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other
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property, then in any such case the shares of the Eighth Series shall
at the same time be similarly exchanged or changed in an amount per share
equal to the product of the PCS Group Multiple then in effect 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 PCS Group Common Stock is changed or exchanged.
(8) Ranking. The shares of the Eighth Series shall rank junior to all
other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such
series shall provide otherwise. The shares of the Eighth Series shall rank
on a parity with the Corporation's Preferred Stock-Series Sixth, Junior
Participating, as to the payment of dividends and the distribution of
assets. Nothing herein shall preclude the Board of Directors of the
Corporation from creating any additional series of Preferred Stock or any
similar stock ranking on a parity with or prior to the shares of the Eighth
Series as to the payment of dividends or distribution of assets.
(9) Fractional Shares. Shares of the Eighth 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 Eighth Series.
(10) Definitions. For purposes of this Certificate of Designation,
Preferences and Rights of Eighth Series, unless the context otherwise
requires:
(A) "Class A Common Stock-Series DT" shall have the meaning set
forth in the Subsequent Charter Amendment.
(B) "Common Stock" shall mean Series 1 FON Stock, and/or Series 2
FON Stock, and/or Series 3 FON Stock, and/or Old Class A Common Stock,
and/or Class A Common Stock-Series DT, and/or Series 1 PCS Stock,
and/or Series 2 PCS Stock, and/or Series 3 PCS Stock, in each case as
the context requires.
(C) "Initial Charter Amendment" shall have the meaning set forth
in the Restructuring and Merger Agreement.
(D) "Old Class A Common Stock" shall have the meaning set forth
in the Subsequent Charter Amendment.
(E) "PCS Group Common Stock" shall mean Series 1 PCS Stock,
and/or Series 2 PCS Stock, and/or Series 3 PCS Stock, in each case as
the context requires.
(F) "PCS Group Multiple" shall have the meaning set forth in
Section 2(B).
(G) "Recapitalization" shall mean the reclassification of each
outstanding share of Sprint Common Stock into one share of Series 1
FON Stock and one-half of a share of Series 1 PCS Stock effected by
filing of the Subsequent Charter Amendment.
(H) "Restructuring and Merger Agreement" shall mean that certain
agreement, dated as of May 26, 1998, by and among the Corporation,
TeleCommunications, Inc., a Delaware corporation, Comcast Corporation,
a Pennsylvania corporation, Cox Communications, Inc., a Delaware
corporation, TCI Spectrum Holdings, Inc., a Colorado corporation,
Comcast Telephony Services, a Delaware general partnership, Cox
Telephony Partnership, a Delaware general partnership, Sprint
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Enterprises, L.P., a Delaware limited partnership, TCI Philadelphia
Holdings, Inc., a Delaware corporation, Com Telephony Services,
Inc., a Delaware corporation, Comcast Telephony Services, Inc., a
Delaware corporation, Cox Telephony Partners, Inc., a
Delaware corporation, Cox Communications Wireless, Inc., a Delaware
corporation, SWV One, Inc., a Delaware corporation, SWV Two, Inc., a
Delaware corporation, SWV Three, Inc., a Delaware corporation, SWV
Four, Inc., a Delaware corporation, SWV Five, Inc., a Delaware
corporation, and SWV Six, Inc., a Colorado corporation.
(I) "Series 2 Common Stock" shall mean the Common Stock - Series
2, par value $2.50 per share, of the Corporation, created by the
filing of the Initial Charter Amendment.
(J) "Series 1 FON Stock" shall mean the FON Common Stock - Series
1, par value $2.00 per share, of the Corporation, created by the
filing of the Subsequent Charter Amendment.
(K) "Series 2 FON Stock" shall mean the FON Common Stock - Series
2, par value $2.00 per share, of the Corporation, created by the
filing of the Subsequent Charter Amendment.
(L) "Series 3 FON Stock" shall mean the FON Common Stock - Series
3, par value $2.00 per share, of the Corporation, created by the
filing of the Subsequent Charter Amendment.
(M) "Series 1 PCS Stock" shall mean the PCS Common Stock - Series
1, par value $1.00 per share, of the Corporation, created by the
filing of the Initial Charter Amendment.
(N) "Series 2 PCS Stock" shall mean the PCS Common Stock - Series
2, par value $1.00 per share, of the Corporation, created by the
filing of the Initial Charter Amendment.
(O) "Series 3 PCS Stock" shall mean the PCS Common Stock - Series
3, par value $1.00 per share, of the Corporation, created by the
filing of the Initial Charter Amendment.
(P) "Sprint Common Stock" shall mean Common Stock, par value
$2.50 per share, of the Corporation, as provided for in the Initial
Charter Amendment.
(Q) "Subsequent Charter Amendment" shall have the meaning set
forth in the Restructuring and Merger Agreement.
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
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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" means:
(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" means 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" means:
(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
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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" means and includes, as of the date of any
proposed Business Combination, 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 these Articles 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 10 of ARTICLE SIXTH of these Articles of
Incorporation) or these Articles of Incorporation, (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), and (iii) no such
affirmative vote shall be required with respect to any purchase, redemption,
conversion or other acquisition by this Corporation of Series 2 FON Stock or PCS
Stock (as defined in ARTICLE SIXTH) from a holder thereof pursuant to the
provisions of these Articles of Incorporation.
2. Certain Definitions. For the purposes of this ARTICLE EIGHTH:
A. A "person" means any individual, firm, corporation or
other entity.
B. "Interested Securityholder" means 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
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(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" means 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.
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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.
100
Exhibit 3(b)
AMENDED AND RESTATED
SPRINT CORPORATION
BYLAWS
ARTICLE I
Name and Location
Section 1. The name of the Corporation shall be the name set forth in the
Articles of Incorporation.
Section 2. The principal office of the Corporation is located at 2330 Shawnee
Mission Parkway, Westwood, Kansas.
Section 3. Other offices for the transaction of business of the Corporation
may be located at such place in Kansas or elsewhere as the Board of Directors
may from time to time determine.
ARTICLE II
Capital Stock
Section 1. All certificates of stock shall be signed by the Chairman of the
Board of Directors, the President or a Vice President and the Secretary or an
Assistant Secretary, and sealed with the corporate seal.
Section 2. Transfers of stock shall be made on the books of the Corporation
upon the surrender of the old certificate properly endorsed, and said old
certificate shall be cancelled before a new certificate is issued.
Section 3. A new certificate of stock may be issued in the place of any
certificate theretofore issued, alleged to have been lost or destroyed, and the
Corporation may, in its discretion, require the owner of the lost or destroyed
certificate, or its legal representative, to give a bond sufficient to indemnify
the Corporation against any claim that may be made against it on account of the
alleged loss of any certificate.
Section 4. No holder of shares of any class of this Corporation, or holder of
any securities or obligations convertible into shares of any class of this
Corporation, shall have any preemptive right whatsoever to subscribe for,
purchase or otherwise acquire shares of this Corporation of any class, whether
now or hereafter authorized; provided, however, that nothing in SECTION 4 shall
prohibit the Corporation from granting, contractually or otherwise, to any such
holder, the right to purchase additional securities of the Corporation.
ARTICLE III
Stockholders' Meetings
Section 1. The annual meeting of the stockholders of the Corporation shall be
held on the third Tuesday of April in each year, either within or without the
State of Kansas, as may from time to time be
<PAGE>
determined by the Board of Directors. At such meeting the stockholders shall
elect directors in the manner provided in the Articles of Incorporation of the
Corporation. The stockholders may transact such other business at such annual
meetings as may properly come before the meeting.
Section 2. A special meeting of the holders of any one or more classes of the
capital stock of the Corporation entitled to vote as a class or classes with
respect to any matter, as required by law or as provided in the Articles of
Incorporation, may be called at any time and place by the Chairman, the
President or the Board of Directors, and shall be called by the Chairman, the
President or the Secretary on the written request of the holders of record of a
majority of the shares of stock of such class or classes issued and outstanding
and entitled to vote.
Section 3. Notice of the time and place of all annual meetings and of the
time, place and purpose of all special meetings (other than meetings of the
holders of the Class A Stock separately as a class) shall be mailed by the
Secretary to each stockholder at his last known post office address as it
appears on the records of the Corporation at least twenty (20) days before the
date set for such meeting.
Section 4. Nominations of persons for election to the Board of the Corporation
at a meeting of the stockholders may be made by or at the direction of the Board
of Directors or may be made at a meeting of stockholders by any stockholder of
the Corporation who is entitled to vote for the election of Directors at the
meeting in compliance with the notice procedures set forth in this SECTION 4 of
ARTICLE III. Such nominations, other than those made by or at the direction of
the Board, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than fifty (50) days nor more than seventy-five (75) days prior to the
meeting; provided, however, that in the event that less than sixty-five (65)
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
no later than the close of business on the fifteenth (15th) day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a Director, (i) the name, age, business
address and residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class and number of shares of capital stock
of the Corporation which are beneficially owned by the person and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of Directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended; and (b) as to the
stockholder giving the notice (i) the name and record address of the stockholder
and (ii) the class and number of shares of capital stock of the Corporation
which are beneficially owned by the stockholder. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of such proposed nominee to
serve as Director of the Corporation. No person shall be eligible for election
as a Director of the Corporation at a meeting of the stockholders unless such
person has been nominated in accordance with the procedures set forth herein. If
the facts warrant, the Chairman of the meeting shall determine and declare to
the meeting that a nomination does not satisfy the requirements set forth in the
preceding sentence and the defective nomination shall be disregarded. Nothing in
this SECTION 4 shall be construed to affect the requirements for proxy
statements of the Corporation under Regulation 14A of the Exchange Act.
Section 5. At any meeting of the stockholders (other than a separate meeting
of the holders of the Class A Stock), only such business shall be conducted as
shall have been properly brought before the meeting. To be properly brought
before a meeting (other than a separate meeting of the holders of the Class A
Stock), business must be (a) specified in the notice of meeting (or any
supplement thereto) given
2
<PAGE>
by or at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (c)
otherwise properly brought before the meeting by a stockholder. For business to
be properly brought before a meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation. To
be timely, a stockholder's notice shall be delivered to or mailed and received
at the principal executive offices of the Corporation not less than fifty (50)
days nor more than seventy-five (75) days prior to the meeting; provided,
however, that in the event that less than sixty-five (65) days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received no later than the
close of business on the fifteenth (15th) day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made,
whichever first occurs. Such stockholder's notice to the Secretary shall set
forth (a) as to each matter the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting, and (b) as
to the stockholder giving the notice (i) the name and record address of the
stockholder, (ii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder and (iii) any
material interest of the stockholder in such business. No business shall be
conducted at a meeting of the stockholders (other than a separate meeting of the
holders of the Class A Stock) unless proposed in accordance with the procedures
set forth herein. The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the foregoing procedure and such business
shall not be transacted. To the extent this SECTION 5 shall be deemed by the
Board of Directors or the Securities and Exchange Commission, or finally
adjudged by a court of competent jurisdiction, to be inconsistent with the right
of stockholders to request inclusion of a proposal in the Corporation's proxy
statement pursuant to Rule 14a-8 promulgated under the Securities Exchange Act
of 1934, as amended, such rule shall prevail.
Section 6. The Chairman of the Board of Directors, or in his absence the
President, or in his absence or inability to act, a Vice President shall preside
at all stockholders' meetings (other than meetings of the holders of the Class A
Stock separately as a class).
Section 7. Except as otherwise provided in the Articles of Incorporation of
the Corporation, at each meeting of the stockholders, each stockholder shall be
entitled to cast one vote for each share of voting stock standing of record on
the books of the Corporation, in his name, and may cast such vote either in
person or by proxy.
Section 8. Except as otherwise provided in the Articles of Incorporation of
the Corporation, each stockholder shall have the right to vote, in person or by
proxy, a number of votes equal to the number of shares of stock owned by the
stockholder for each Director to be elected. Stockholders shall not be entitled
to cumulative voting of their shares in elections of Directors.
Section 9. At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of at least a majority of the then
outstanding voting shares of the Corporation shall be required and be sufficient
to constitute a quorum for the election of directors. At a meeting held for any
purpose other than the election of directors, shares representing a majority of
the votes entitled to be cast on such matter, present in person or represented
by proxy, shall constitute a quorum. In the absence of the required quorum at
any meeting of stockholders, a majority of such holders present in person or by
proxy shall have the power to adjourn the meeting, from time to time, without
notice (except as required by law) other than an announcement at the meeting,
until a quorum shall be present.
3
<PAGE>
Section 10. At each of the annual stockholders' meetings, one of the executive
officers of the Corporation shall submit a statement of the business done during
the preceding year, together with a report of the general financial condition of
the Corporation.
ARTICLE IV
Directors
Section 1. The business and property of the Corporation shall be managed by a
Board consisting of such number of Directors as is determined from time to time
in accordance with the provisions of the Articles of Incorporation of the
Corporation. The Board of Directors may elect one of their number to act as
Chairman of the Board.
Section 2. Each Director upon his election shall qualify by filing his written
acceptance with the Secretary or an Assistant Secretary and by fulfilling any
prerequisite to qualification that may be set forth in the Articles of
Incorporation of the Corporation.
Section 3. The annual meeting of the directors shall be held immediately after
the adjournment of each annual meeting of the stockholders and in the event a
quorum is not present, said meeting shall be held within ten days after
adjournment upon proper notice by the Chairman of the Board of Directors, the
President or a Vice President.
Section 4. Special meetings of the Board of Directors may be called at any
time or place by the Chairman of the Board or by the President, and in the
absence or inability of either of them to act, by a Vice President, and may also
be called by any two members of the Board. By unanimous consent of the
directors, special meetings of the Board may be held without notice, at any time
and place.
Section 5. Notice of all regular and special meetings of the Board of
Directors or the Executive Committee or any committee established pursuant to
SECTION 12 of ARTICLE IV (an "Other Committee") shall be sent to each Director
or member of such committee, as the case may be, by the Secretary, by a means
reasonably calculated to be received at least seven (7) days prior to the time
fixed for such meeting, or notice of special meetings of the Board of Directors
or the Executive Committee or any Other Committee may be given by telephone,
telegraph, telefax or telex to each Director or member of such committee, as the
case may be, at least twenty-four (24) hours prior to the time fixed for such
meeting, or on such shorter notice as the person or persons calling the meeting
may reasonably deem necessary or appropriate in the circumstances. To the extent
provided in the notice of the meeting or as otherwise determined by the Chairman
of the Board or the Board of Directors, Directors may participate in any regular
or special meeting by means of conference telephone or similar communications
equipment which allows all persons participating in such meeting to hear each
other, and participation in such meeting by means of such a device shall
constitute presence in person at such meeting.
Section 6. Except as otherwise provided in the Articles of Incorporation of
the Corporation, a quorum for the transaction of business at any meeting of the
directors shall consist of a majority of the members of the Board, but the
directors present, although less than a quorum, shall have the power to adjourn
the meeting from time to time or to some future date.
Section 7. The directors shall elect the officers of the Corporation and fix
their salaries. Such election shall be made at the Directors' meeting following
each annual stockholders' meeting.
4
<PAGE>
Section 8. The Board of Directors from time to time, as they may deem proper,
shall have authority to appoint a general manager, counsel or attorneys and
other employees for such length of time and upon such terms and conditions and
at such salaries as they may deem necessary and/or advisable.
Section 9. The members of the Board of Directors shall receive compensation
for their services in such amount as may be reasonable and proper and consistent
with the time and service rendered. The members of the Board of Directors shall
receive the reasonable expenses necessarily incurred in the attendance of
meetings and in the transaction of business for the Corporation.
Section 10.
(a) Indemnification.
(1) Actions Other Than Those by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason of the fact
that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation (or such other corporation or organization), and, with respect to
any criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
(2) Action by or in the Right of the Corporation. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the Corporation to procure a judgment in its favor by reason of the fact that
such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation (or such other corporation or
organization) and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Corporation (or such other corporation or organization)
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
5
<PAGE>
(3) Successful Defense of Action. Notwithstanding, and without limitation
of, any other provision of this SECTION 10, to the extent that a director,
officer, employee or agent of the Corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to
in paragraph (1) or (2) of this sub-Section (a), or in defense of any claim,
issue or matter therein, such director, officer, employee or agent shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(4) Determination Required. Any indemnification under paragraph (1) or (2)
of this sub-Section (a) (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such director, officer, employee or agent has met the
applicable standard of conduct set forth in said paragraph. Such determination
shall be made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the particular action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders.
(5) Advance of Expenses. Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of a
satisfactory undertaking by or on behalf of the director, officer, employee or
agent to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this sub-Section (a).
(b) Insurance. The Corporation may, when authorized by the Board of Directors,
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify him against such liability
under the provisions of sub-Section (a). The risks insured under any insurance
policies purchased and maintained on behalf of any person as aforesaid or on
behalf of the Corporation shall not be limited in any way by the terms of this
SECTION 10 and to the extent compatible with the provisions of such policies,
the risks insured shall extend to the fullest extent permitted by law, common or
statutory.
(c) Nonexclusivity; Duration. The indemnifications and rights provided by, or
granted pursuant to, this SECTION 10 shall not be deemed exclusive of any other
indemnifications, rights or limitations of liability to which any person may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise, either as to action in such person's official capacity
or as to action in another capacity while holding office, and they shall
continue although such person has ceased to be a director, officer, employee or
agent and shall inure to the benefit of such person's heirs, executors and
administrators. The authorization to purchase and maintain insurance set forth
in sub-Section (b) shall likewise not be deemed exclusive.
Section 11. The Chief Executive Officer of the Corporation, together with no
more than five additional Directors, shall constitute an Executive Committee of
the Board of Directors. The Executive Committee between regular meetings of the
Board of Directors shall manage the business and property of the Corporation and
shall have the same power and authority as the Board of Directors; provided,
however, the Executive Committee shall not act (other than to make
recommendations) in those cases where it is provided by law or by the Articles
of Incorporation of the Corporation that any vote or action
6
<PAGE>
in order to bind the Corporation shall be taken by the Directors. Members of the
Executive Committee may participate in any meeting of the Executive Committee by
means of conference telephone or similar communications equipment which allows
all persons participating in the meeting to hear each other, and participation
in a meeting by means of such a device shall constitute presence in person at
such meeting.
The Executive Committee shall keep a record of its proceedings and may hold
meetings upon one (1) day's written notice or upon waiver of notice signed by
the members either before or after said Executive Committee meeting.
A majority of the Executive Committee shall constitute a quorum for the
transaction of business at any meeting for which notice has been given to all
members in accordance with ARTICLE IV, SECTION 5 hereof or for which notice has
been waived by all members.
Section 12. The Board of Directors may form any committee other than the
Executive Committee described in the preceding Section and the Capital Stock
Committee described in the next Section. Any committee so formed, to the extent
provided in the resolution of the Board of Directors pursuant to which it was
formed or in the Bylaws or pursuant to the statutes of Kansas, shall have and
may exercise all the powers and authority of the Board of Directors.
Section 13. The Board of Directors shall form a Capital Stock Committee. Each
member of the Capital Stock Committee shall be an Independent Director or a
person who, except for a relationship with a Class A Holder or a Subsidiary of a
Class A Holder, would be an Independent Director. The Capital Stock Committee
shall have and may exercise such powers, authority and responsibilities as may
be delegated by the Board of Directors in connection with the adoption of
general policies governing the relationship between business groups or
otherwise, including such powers, authority and responsibilities as are
delegated by the Board of Directors with respect to, among other things: (a) the
business and financial relationships between the Sprint FON Group (or any
business or subsidiary allocated thereto) and the Sprint PCS Group (or any
business or subsidiary allocated thereto); (b) dividends in respect of, and
transactions by Sprint or the Sprint FON Group (or any business or subsidiary
allocated thereto) in, shares of Sprint PCS Stock; and (c) any matters arising
in connection therewith.
(Capitalized terms not otherwise defined in the Bylaws have the meanings
ascribed to them in the Articles of Incorporation.)
ARTICLE V
Officers
Section 1. The officers of this Corporation shall be a Chairman of the Board
of Directors, a President, as many Vice Presidents as the Board of Directors may
from time to time deem advisable and one or more of which may be designated
Executive Vice President or Senior Vice President, a Secretary, a Treasurer, and
such Assistant Secretaries and Assistant Treasurers as the Board of Directors
may from time to time deem advisable, and such other officers as the Board of
Directors may from time to time deem advisable and designate. The Chairman of
the Board of Directors shall be a member of and be elected by the Board of
Directors. All other officers shall be elected by the Board of Directors. All
officers shall hold office until their respective successors are elected and
shall have qualified. Any two of said offices may be held by one person except
the office of President and Vice President.
7
<PAGE>
Section 2. The Chairman of the Board of Directors shall preside at all
meetings of the Directors and stockholders at which he is present and shall have
such other duties, power and authority as may be prescribed by the Board of
Directors from time to time. The Board of Directors may designate the Chairman
of the Board as the Chief Executive Officer of the Corporation with all of the
powers otherwise conferred upon the President of the Corporation under these
Bylaws, or it may, from time to time, divide the responsibilities, duties and
authority for the general control and management of the Corporation's business
and affairs between the Chairman of the Board and the President.
Section 3. Unless the Board of Directors otherwise provides, the President
shall be the Chief Executive Officer of the Corporation with such general
executive powers and duties of supervision and management as are usually vested
in such office and shall perform such other duties as are authorized by the
Board of Directors. The Chairman of the Board or the President shall sign
contracts, certificates and other instruments of the Corporation as authorized
by the Board of Directors. If the Chairman of the Board is designated as the
Chief Executive Officer of the Corporation, the President shall perform such
duties as may be delegated to him by the Board of Directors and as are conferred
by law exclusively upon such office.
Section 4. A Vice President shall have right and power to perform all duties
and exercise all authority of the President, in case of absence of the President
or upon vacancy in the office of President, and shall have all power and
authority usually enjoyed by a person holding the office of Vice President.
Section 5. The Secretary shall issue notices of all directors' and
stockholders' meetings, and shall attend and keep the minutes of the same; shall
have charge of all corporate books, records and papers; shall be custodian of
the corporate seal; shall attest with his signature, which may be a facsimile
signature if authorized by the Board of Directors, and impress with the
corporate seal, all stock certificates and written contracts of the Corporation;
and shall perform all other duties as are incident to his office. Any Assistant
Secretary, in the absence or inability of the Secretary, shall perform all
duties of the Secretary and such other duties as may be required.
Section 6. The Treasurer shall have custody of all money and securities of the
Corporation and shall give bond in such sum and with such sureties as the
directors may specify, conditioned upon the faithful performance of the duties
of his office. He shall keep regular books of account and shall submit them,
together with all his records and other papers, to the directors for their
examination and approval annually; and semi-annually, or when directed by the
Board of Directors, he shall submit to each director a statement of the
condition of the business and accounts of the Corporation; and shall perform all
such other duties as are incident to his office. An Assistant Treasurer, in the
absence or inability of the Treasurer, shall perform all the duties of the
Treasurer and such other duties as may be required.
Section 7. Any officer or employee of the Corporation shall give such bond for
the faithful performance of his duties in such sum, as and when the Board of
Directors may direct.
ARTICLE VI
Dividends
Section 1. Dividends shall be paid out of the net income or earned surplus of
the Corporation, determined after making proper provision for required sinking
fund deposits for debt obligations and proper provisions for working capital and
such reserves as may be required by good and generally
8
<PAGE>
accepted accounting practice, when declared from time to time by resolution of
the Board of Directors. No such dividends shall be declared or paid which will
impair the capital of the Corporation.
ARTICLE VII
Amendments
Section 1. Except as otherwise provided in the Articles of Incorporation of
the Corporation, the Bylaws may be amended, altered or repealed by the Board of
Directors, subject to the power of stockholders to amend, alter or repeal the
Bylaws; or the Bylaws shall be amended in such other manner as may from time to
time be authorized by the laws of the State of Kansas.
ARTICLE VIII
Corporate Seal
Section 1. The corporate seal of this Corporation shall have inscribed thereon
the name of the Corporation and its state of incorporation and the words,
"Seal--Incorporated 1938".
9
<TABLE>
<CAPTION>
EXHIBIT (12)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Unaudited) Sprint Corporation
Quarters Ended
March 31,
-------------------------------
-------------------------------
2000 1999
- --------------------------------------------------------------------------------------------------------------------
(millions)
Earnings
Loss from continuing operations
<S> <C> <C>
before income taxes $ (70) $ (248)
Capitalized interest (34) (31)
Equity in net losses of less
than 50% owned entities 32 13
- --------------------------------------------------------------------------------------------------------------------
Subtotal (72) (266)
- --------------------------------------------------------------------------------------------------------------------
Fixed charges
Interest charges 288 222
Interest factor of operating rents 80 70
- --------------------------------------------------------------------------------------------------------------------
Total fixed charges 368 292
- --------------------------------------------------------------------------------------------------------------------
Earnings, as adjusted $ 296 $ 26
-------------------------------
Earnings, as adjusted, were inadequate to cover fixed charges by $72 million in
the 2000 first quarter and $266 million in the 1999 first quarter.
Note: Earnings include loss from continuing operations before taxes, plus
equity in the net losses of less-than-50% owned entities, less
capitalized interest. Fixed charges include interest on all debt of
continuing operations, including amortization of debt issuance costs
and the interest component of operating rents.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-END> Mar-31-2000
<CASH> 250
<SECURITIES> 0
<RECEIVABLES> 3,707
<ALLOWANCES> 267
<INVENTORY> 750
<CURRENT-ASSETS> 4,988
<PP&E> 38,313
<DEPRECIATION> 15,881
<TOTAL-ASSETS> 38,714
<CURRENT-LIABILITIES> 5,992
<BONDS> 15,099
0
247
<COMMON> 2,712
<OTHER-SE> 11,264
<TOTAL-LIABILITY-AND-EQUITY> 38,714
<SALES> 0
<TOTAL-REVENUES> 5,479
<CGS> 0
<TOTAL-COSTS> 3,805
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 254
<INCOME-PRETAX> (70)
<INCOME-TAX> (5)
<INCOME-CONTINUING> (65)
<DISCONTINUED> 675
<EXTRAORDINARY> (3)
<CHANGES> 0
<NET-INCOME> 607
<EPS-BASIC> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>
FON Group EPS - Basic 1.28
FON Group EPS - Diluted 1.25
PCS Group EPS - Basic (0.54)
PCS Group EPS - Diluted (0.54)
</FN>
</TABLE>
Annex I
SPRINT CORPORATION
Consolidated Financial Information
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Sprint Corporation
(millions)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Quarters Ended March 31, 2000 1999
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
<S> <C> <C>
Net Operating Revenues $ 5,479 $ 4,652
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Operating Expenses
Costs of services and products 2,839 2,519
Selling, general and administrative 1,518 1,367
Depreciation and amortization 966 856
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Total operating expenses 5,323 4,742
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Operating Income (Loss) 156 (90)
Interest expense (254) (191)
Other income, net 28 33
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Loss from continuing operations before income taxes (70) (248)
Income tax benefit 5 77
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Loss from Continuing Operations (65) (171)
Discontinued operation, net 675 (28)
Extraordinary items, net (3) (21)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Net Income (Loss) $ 607 $ (220)
-- ------------- --- -------------
See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (continued) Sprint Corporation
(Unaudited)
(millions, except per share data)
- -------------------------------------------------------- -- ----------- --- ---------- --- --- ---------- --- -----------
Quarters Ended March 31, 2000 1999 2000 1999
- -------------------------------------------------------- ----------------------------- --- ------------------------------
FON Common Stock PCS Common Stock
----------------------------- ------------------------------
<S> <C> <C> <C> <C>
Earnings (Loss) Applicable to Common Stock $ 1,122 $ 408 $ (517) $ (630)
-- ----------- --- ---------- --- --- ---------- --- -----------
Diluted Earnings (Loss) per Common Share
Continuing operations $ 0.50 $ 0.49 $ (0.54) $ (0.71)
Discontinued operation 0.75 (0.03) - -
Extraordinary items - - - (0.02)
- -------------------------------------------------------- -- ----------- --- ---------- --- --- ---------- --- -----------
Total $ 1.25 $ 0.46 $ (0.54) $ (0.73)
-- ----------- --- ---------- --- --- ---------- --- -----------
Diluted weighted average common shares 894.7 880.9 956.3 863.4
-- ----------- --- ---------- --- --- ---------- --- -----------
Basic Earnings (Loss) per Common Share
Continuing operations $ 0.51 $ 0.50 $ (0.54) $ (0.71)
Discontinued operation 0.77 (0.03) - -
Extraordinary items - - - (0.02)
- -------------------------------------------------------- -- ----------- --- ---------- --- --- ---------- --- -----------
Total $ 1.28 $ 0.47 $ (0.54) $ (0.73)
-- ----------- --- ---------- --- --- ---------- --- -----------
Basic weighted average common shares 875.6 863.2 956.3 863.4
-- ----------- --- ---------- --- --- ---------- --- -----------
DIVIDENDS PER COMMON SHARE
FON common stock $ 0.125 $ 0.125 N/A N/A
-- ----------- --- ---------- --- --- ---------- --- -----------
Note: In the 2000 first quarter, Sprint effected a two-for-one stock split of
its PCS common stock. In the 1999 second quarter, Sprint effected a
two-for-one stock split of its FON common stock. As a result, 1999
basic and diluted earnings (loss) per common share, weighted average
common shares and dividends per common share have been restated for
periods prior to these splits.
N/A = Not applicable
See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Sprint Corporation
(Unaudited)
(millions)
- --------------------------------------------- ----------------- ----------------- ---------------- -----------------
Quarters Ended March 31, 2000 1999
- --------------------------------------------- ----------------- ----------------- ---------------- -----------------
<S> <C> <C>
Net Income (Loss) $ 607 $ (220)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Other Comprehensive Loss
Unrealized holding losses on securities - (6)
Income tax benefit - 2
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Net unrealized holding losses on securities
during the period - (4)
Reclassification adjustment for gains
included in net income (32) -
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Total other comprehensive loss (32) (4)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Comprehensive Income (Loss) $ 575 $ (224)
-- ------------- --- -------------
See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS Sprint Corporation
(millions)
- -------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2000 1999
- -------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets
<S> <C> <C>
Cash and equivalents $ 250 $ 120
Accounts receivable, net of allowance for doubtful accounts of
$267 and $285 3,440 3,408
Inventories 750 777
Prepaid expenses 411 340
Income tax receivable - 411
Investments in equity securities - 317
Other 137 207
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 4,988 5,580
Investments in securities 127 147
Property, plant and equipment
FON Group 28,365 27,687
PCS Group 9,948 9,411
- -------------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment 38,313 37,098
Accumulated depreciation (15,881) (15,129)
- -------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 22,432 21,969
Investments in and advances to affiliates 492 452
Intangible assets
Goodwill 5,743 5,745
PCS licenses 3,060 3,060
Other 1,553 1,453
- -------------------------------------------------------------------------------------------------------------------------
Total intangible assets 10,356 10,258
Accumulated amortization (827) (691)
- -------------------------------------------------------------------------------------------------------------------------
Net intangible assets 9,529 9,567
Net assets of discontinued operation - 394
Other 1,146 1,141
- -------------------------------------------------------------------------------------------------------------------------
Total $ 38,714 $ 39,250
-----------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (continued) Sprint Corporation
(millions, except per share data)
- -------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2000 1999
- -------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Liabilities and Shareholders' Equity
Current liabilities
<S> <C> <C>
Current maturities of long-term debt $ 609 $ 1,087
Accounts payable 1,467 1,462
Construction obligations 951 1,039
Accrued interconnection costs 578 683
Accrued taxes 337 410
Advance billings 319 323
Payroll and employee benefits 429 638
Other 1,302 1,190
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 5,992 6,832
Long-term debt and capital lease obligations 15,099 15,685
Deferred credits and other liabilities
Deferred income taxes and investment tax credits 1,737 1,511
Postretirement and other benefit obligations 1,067 1,064
Other 596 598
- -------------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 3,400 3,173
Shareholders' equity
Common stock
Class A, par value $2.50 per share, 200.0 shares authorized, 86.2
shares issued and outstanding (each share represents the right to
one FON share and1/2PCS share) 216 216
FON, par value $2.00 per share, 4,200.0 shares authorized, 790.4 and 788.0
shares issued and outstanding 1,581 1,576
PCS, par value $1.00 per share, 2,350.0 shares authorized, 915.2 and 910.4
shares issued and outstanding 915 910
PCS preferred stock, no par, 0.3 shares authorized, 0.2 shares issued and
outstanding 247 247
Capital in excess of par or stated value 8,756 8,569
Retained earnings 2,458 1,961
Treasury stock, at cost - (2)
Accumulated other comprehensive income 49 81
Other 1 2
- -------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 14,223 13,560
- -------------------------------------------------------------------------------------------------------------------------
Total $ 38,714 $ 39,250
-----------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Sprint Corporation
(millions)
- ------------------------------------------------------------------ ----------------- ----------------- ----------------
Quarters Ended March 31, 2000 1999
- ------------------------------------------------------------------ ----------------- ----------------- ----------------
Operating Activities
<S> <C> <C>
Net income (loss) $ 607 $ (220)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Discontinued operation, net (675) 28
Extraordinary items, net 3 21
Equity in net losses of affiliates 25 9
Depreciation and amortization 966 856
Deferred income taxes and investment tax credits 298 (20)
Changes in assets and liabilities:
Accounts receivable, net (32) (160)
Inventories and other current assets 371 (270)
Accounts payable and other current liabilities (594) 152
Noncurrent assets and liabilities, net 22 (49)
Other, net (61) 10
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Net cash provided by operating activities 930 357
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Investing Activities
Capital expenditures (1,451) (1,318)
Investments in affiliates, net (130) (67)
Proceeds from sale of investment in Global One 1,403 -
Other, net 122 (87)
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Net cash used by investing activities (56) (1,472)
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Financing Activities
Proceeds from long-term debt - 1,703
Payments on long-term debt (751) (1,836)
Proceeds from common stock issued 66 914
Dividends paid (109) (104)
Treasury stock purchased - (45)
Other, net 50 26
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Net cash provided (used) by financing activities (744) 658
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Increase (Decrease) in Cash and Equivalents 130 (457)
Cash and Equivalents at Beginning of Period 120 605
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Cash and Equivalents at End of Period $ 250 $ 148
--- ------------- -- -------------
See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) Sprint Corporation
(millions)
- ----------------------------------------------------------------------------------------------------------------------
Quarter Ended March 31, 2000
- ----------------------------------------------------------------------------------------------------------------------
PCS Capital
Common In Excess
Sprint FON and of Par or
Common Common Preferred Stated Retained Treasury
Stock Stock Stock Value Earnings Stock Other Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning 2000 balance $ 216 $ 1,576 $ 1,157 $ 8,569 $ 1,961 $ (2) $ 83 $ 13,560
Net income - - - - 607 - - 607
FON common stock dividends - - - - (99) - - (99)
Class A common stock dividends - - - - (11) - - (11)
PCS preferred stock dividends - - - - (2) - - (2)
FON Series 1 common stock issued - 5 - 43 - - - 48
PCS Series 1 common stock issued - - 5 60 - - - 65
Treasury stock issued - - - - 3 2 - 5
Tax benefit from stock options
exercised - - - 81 - - - 81
Other, net - - - 3 (1) - (33) (31)
- ----------------------------------------------------------------------------------------------------------------------
March 2000 balance $ 216 $ 1,581 $ 1,162 $ 8,756 $ 2,458 $ - $ 50 $ 14,223
--------------------------------------------------------------------------------------
Shares Outstanding
- ------------------------------------------------------------------
Beginning 2000 balance 86.2 788.0 910.6
FON Series 1 common stock issued - 2.4 -
PCS Series 1 common stock issued - - 4.8
-------------------------------
March 2000 balance 86.2 790.4 915.4
-------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited) Sprint Corporation
- --------------------------------------------------------------------------------
The information in this Form 10-Q has been prepared according to Securities and
Exchange Commission (SEC) rules and regulations. In our opinion, the
consolidated interim financial statements reflect all adjustments, consisting
only of normal recurring accruals, needed to fairly present Sprint Corporation's
consolidated financial position, results of operations, cash flows and
comprehensive income (loss).
Certain information and footnote disclosures normally included in consolidated
financial statements prepared according to accounting principles generally
accepted in the United States have been condensed or omitted. As a result, you
should read these financial statements along with Sprint Corporation's 1999 Form
10-K. Operating results for the 2000 year-to-date period do not necessarily
represent the results that may be expected for the year ending December 31,
2000.
- --------------------------------------------------------------------------------
1. Merger
- --------------------------------------------------------------------------------
In October 1999, Sprint announced a definitive merger agreement with WorldCom,
Inc. (WorldCom). Under the agreement, each share of Sprint FON stock will be
exchanged for $76 of WorldCom common stock, subject to a collar. In addition,
each share of Sprint PCS stock will be exchanged for one share of a new WorldCom
PCS tracking stock and 0.116025 shares of WorldCom common stock. The terms of
the WorldCom PCS tracking stock will be equivalent to those of Sprint's PCS
common stock and will track the performance of the company's personal
communication services (PCS) business. Sprint and WorldCom shareholders have
approved the merger. The merger is subject to approvals from the Federal
Communications Commission (FCC), the Justice Department, various state
government bodies and foreign regulatory authorities. The companies anticipate
that the merger will close in the second half of 2000.
- --------------------------------------------------------------------------------
2. Basis of Consolidation and Presentation
- --------------------------------------------------------------------------------
The consolidated financial statements include the accounts of Sprint and its
wholly owned and majority-owned subsidiaries. The PCS stock is intended to
reflect the performance of Sprint's domestic wireless PCS operations. The FON
stock is intended to reflect the performance of all of Sprint's other
operations.
Investments in entities in which Sprint exercises significant influence, but
does not control, are accounted for using the equity method (see Note 4).
The consolidated financial statements are prepared using accounting principles
generally accepted in the United States. These principles require management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses. Actual results could differ from
those estimates.
Certain prior-year amounts have been reclassified to conform to the current-year
presentation. These reclassifications had no effect on the results of operations
or shareholders' equity as previously reported.
- --------------------------------------------------------------------------------
3. Discontinued Operation
- --------------------------------------------------------------------------------
In January 2000, Sprint reached a definitive agreement with France Telecom S.A.
(FT) and Deutsche Telekom AG (DT) to sell its interest in Global One. In
February 2000, Sprint received $1.1 billion in cash and was repaid $276 million
for advances for its entire stake in Global One.
Sprint recorded an after-tax gain related to the sale of its interest in Global
One of $675 million in the first quarter of 2000. Sprint recorded after-tax
losses related to its share of losses from Global One of $28 million in the
first quarter of 1999.
- --------------------------------------------------------------------------------
4. Investments
- --------------------------------------------------------------------------------
At the end of March 2000, investments accounted for using the equity method
consisted of the FON Group's investments in EarthLink, Call-Net and other
strategic investments. Combined, unaudited, summarized financial information
(100% basis) of entities accounted for using the equity method was as follows:
<TABLE>
<CAPTION>
Quarters Ended
March 31,
-----------------------
2000 1999
- ------------------ -- --------- - --------- -- --------
(millions)
Results of operations
<S> <C> <C>
Net operating revenues $ 481 $ 397
- --------- -- --------
Operating loss $ (60) $ (32)
- --------- -- --------
Net loss $ (137) $ (35)
- --------- -- --------
Equity in net losses of
affiliates $ (25) $ (9)
- --------- -- --------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
5. Income Taxes
- --------------------------------------------------------------------------------
The differences that caused Sprint's effective income tax rates to vary from the
35% federal statutory rate for income taxes related to continuing operations
were as follows:
<TABLE>
<CAPTION>
Quarters Ended
March 31,
-----------------------
2000 1999
- ---------------------------------------------------------
(millions)
Income tax benefit at the
<S> <C> <C>
federal statutory rate $ (25) $ (87)
Effect of:
State income taxes, net of
federal income tax effect 2 3
Equity in losses of foreign
joint ventures 10 1
Goodwill amortization 12 7
Other, net (4) (1)
- ---------------------------------------------------------
Income tax benefit $ (5) $ (77)
-----------------------
Effective income tax rate 7.1% 31.0%
-----------------------
</TABLE>
- --------------------------------------------------------------------------------
6. Long-term Debt and Capital Lease Obligations
- --------------------------------------------------------------------------------
During the 2000 first quarter, Sprint's notes payable and commercial paper
decreased $488 million. Sprint used a portion of the proceeds from the sale of
its investment in Global One to repay the borrowings.
In the 2000 first quarter, Sprint exchanged 6.6 million common shares of SBC
Communications, Inc. for certain notes payable of the FON Group. The notes had a
market value of $275 million on the maturity date and $316 million at year-end
1999. The notes had an interest rate of 8.3%.
In March 2000, Sprint repaid, prior to scheduled maturities, $127 million of the
PCS Group's notes payable to the FCC. These notes had an interest rate of 7.8%.
This resulted in a $3 million after-tax extraordinary loss.
- --------------------------------------------------------------------------------
7. Stock Splits
- --------------------------------------------------------------------------------
In December 1999, Sprint's Board of Directors authorized a two-for-one stock
split of Sprint's PCS common stock in the form of a stock dividend which was
distributed on February 4, 2000 to the PCS shareholders. A comparable dividend
was paid on the Class A common stock owned by FT and DT. PCS Group loss per
share and weighted average common shares for the prior periods have been
restated to reflect the stock split.
In April 1999, Sprint's Board of Directors authorized a two-for-one stock split
of Sprint's FON common stock in the form of a stock dividend which was
distributed on June 4, 1999 to the FON shareholders. A comparable dividend was
paid on the Class A common stock owned by FT and DT. FON Group earnings per
common share, dividends per common share and weighted average common shares for
the prior periods have been restated to reflect the stock split.
- --------------------------------------------------------------------------------
8. Litigation, Claims and Assessments
- --------------------------------------------------------------------------------
Various suits arising in the ordinary course of business are pending against
Sprint. Management cannot predict the final outcome of these actions but
believes they will not be material to Sprint's consolidated financial
statements.
- --------------------------------------------------------------------------------
9. Segment Information
- --------------------------------------------------------------------------------
The FON Group operates in five business segments, based on services and
products: the long distance division, the local division, the product
distribution and directory publishing businesses, activities to develop and
deploy Sprint ION(SM) -- Integrated On-Demand Network, and other ventures. See
Note 9 of Sprint FON Group Condensed Notes to Combined Financial Statements for
more information about the FON Group's business segments.
The PCS Group businesses operate in a single segment.
<PAGE>
<TABLE>
<CAPTION>
Industry segment financial information was as follows:
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Sprint Sprint Intergroup
Quarters Ended March 31, FON Group PCS Group Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------
(millions)
2000
<S> <C> <C> <C> <C>
Net operating revenues $ 4,397 $ 1,177 $ (95) $ 5,479
Intergroup revenues 91 4 (95) -
Operating income (loss) 758 (602) - 156
1999
Net operating revenues $ 4,107 $ 604 $ (59) $ 4,652
Intergroup revenues 59 - (59) -
Operating income (loss) 737 (827) - (90)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
10. Supplemental Cash Flows Information
- --------------------------------------------------------------------------------
Sprint's cash paid (received) for interest and income taxes was as follows:
Quarters Ended
March 31,
-------------------------
2000 1999
- -------------------------------------------------------
(millions)
Interest (net of capitalized
interest) $ 115 $ 113
-------------------------
Income taxes $ (414) $ 21
-------------------------
Sprint's noncash activities included the following:
Quarters Ended
March 31,
-------------------------
2000 1999
- -------------------------------------------------------
(millions)
Debt redeemed with
investments in equity
securities $ 275 $ -
-------------------------
Tax benefit from stock
options exercised $ 81 $ 51
-------------------------
Common stock issued under
employee stock benefit
plans $ 49 $ 24
-------------------------
Stock received for stock
option exercises $ 19 $ 23
-------------------------
Capital lease obligations $ - $ 46
-------------------------
- --------------------------------------------------------------------------------
11. Subsequent Events
- --------------------------------------------------------------------------------
In April 2000, Sprint's Board of Directors declared dividends of 12.5 cents per
share on the Sprint FON common stock and Class A common stock. Dividends will be
paid June 30, 2000.
In May 2000, Sprint announced that it would purchase an additional 26 million
shares of EarthLink, Inc. for $431 million. The purchase will increase Sprint's
interest in EarthLink, Inc. to 26.7%.
- --------------------------------------------------------------------------------
12. Recently Issued Accounting Pronouncement
- --------------------------------------------------------------------------------
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB 101). In March 2000, the SEC issued an
amendment to SAB 101 which delayed the effective date for registrants with
fiscal years that begin between December 12, 1999 and March 15, 2000. The
effective date for Sprint will be for the quarter ending June 30, 2000. The
deferral of telecommunication service activation fees and certain related costs
are specifically addressed in SAB 101 and Sprint is in the process of
determining the impact of SAB 101 on its financial statements. Based on a
preliminary analysis, SAB 101 is not expected to have a material impact on
Sprint's consolidated financial statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Sprint Corporation
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
General
- --------------------------------------------------------------------------------
In October 1999, Sprint announced a definitive merger agreement with WorldCom,
Inc. (WorldCom). Under the agreement, each share of Sprint FON stock will be
exchanged for $76 of WorldCom common stock, subject to a collar. In addition,
each share of Sprint PCS stock will be exchanged for one share of a new WorldCom
PCS tracking stock and 0.116025 shares of WorldCom common stock. The terms of
the WorldCom PCS tracking stock will be equivalent to those of Sprint's PCS
common stock and will track the performance of the company's personal
communication services (PCS) business. Sprint and WorldCom shareholders have
approved the merger. The merger is subject to approvals from the Federal
Communications Commission (FCC), the Justice Department, various state
government bodies and foreign regulatory authorities. The companies anticipate
that the merger will close in the second half of 2000.
In January 2000, Sprint reached a definitive agreement with France Telecom S.A.
(FT) and Deutsche Telekom AG (DT) to sell its interest in Global One. In
February 2000, Sprint received $1.1 billion in cash and was repaid $276 million
for advances for its entire stake in Global One. Sprint's equity share of the
results of Global One has been reported as a discontinued operation for all
periods presented.
The PCS stock is intended to reflect the performance of Sprint's domestic
wireless PCS operations. These operations are referred to as the PCS Group.
The FON stock is intended to reflect the performance of all of Sprint's other
operations. These operations are referred to as the FON Group and include the
following:
- Core businesses
- Long distance division
- Local division
- Product distribution and directory publishing businesses
- Activities to develop and deploy Sprint ION(SM), Integrated On-Demand
Network
- Other strategic ventures.
FON and PCS shareholders are subject to the risks related to all of Sprint's
businesses, assets and liabilities. Owning FON or PCS shares does not represent
a direct legal interest in the assets and liabilities of the Groups. Rather,
shareholders remain invested in Sprint and continue to vote as a single voting
class for Board member elections and most other company matters.
FON Group or PCS Group events affecting Sprint's consolidated statements of
operations and balance sheets could, in turn, affect the other Group's financial
statements or stock price.
Net losses of either Group, and dividends or distributions on, or repurchases
of, PCS stock or FON stock, will reduce Sprint funds legally available for
dividends on both Groups' stock. Sprint does not expect to pay dividends on the
PCS shares in the foreseeable future.
Sprint's "Management's Discussion and Analysis of Financial Condition and
Results of Operations" (MD&A) should be read along with the FON Group's MD&A and
the PCS Group's MD&A.
- --------------------------------------------------------------------------------
General Overview of the Sprint FON Group
- --------------------------------------------------------------------------------
Core Businesses
Long Distance Division
The long distance division is the nation's third-largest long distance phone
company. It operates a nationwide, all-digital long distance communications
network that uses fiber-optic and electronic technology. The division mainly
provides domestic and international voice, video and data communications
services.
Local Division
The local division consists of regulated local phone companies serving more than
8.1 million access lines in 18 states. It provides local phone services, access
by phone customers and other carriers to its local network, sales of
telecommunications equipment, and long distance services within certain regional
calling areas.
Product Distribution and Directory Publishing Businesses
The product distribution business provides wholesale distribution services of
telecommunications products. The directory publishing business publishes and
markets white and yellow page phone directories.
<PAGE>
Sprint ION(SM)
Sprint is developing and deploying new integrated communications services,
referred to as Sprint ION. Sprint ION extends Sprint's existing network
capabilities to the customer and enables Sprint to provide the network
infrastructure to meet customers' demands for advanced services including
integrated voice, data, Internet and video. It is also expected to be the
foundation for Sprint to provide new competitive local service. Beginning in
2000, the Sprint ION segment includes costs to develop high-speed data services
and Sprint ION services for the Multipoint Multichannel Distribution Services
broadband fixed wireless platform.
Other Ventures
The "other ventures" segment includes the cable TV service operations of the
broadband fixed wireless companies acquired in the second half of 1999.
This segment also includes the FON Group's investments in EarthLink, Inc., an
Internet service provider; Call-Net, a long distance provider in Canada
operating under the Sprint brand name; and certain other telecommunications
investments and ventures. All of the investments and ventures are accounted for
on the equity basis.
- --------------------------------------------------------------------------------
General Overview of the Sprint PCS Group
- --------------------------------------------------------------------------------
The PCS Group includes Sprint's domestic wireless PCS operations. It operates
the only 100% digital PCS wireless network in the United States with licenses to
provide service nationwide using a single frequency and a single technology. At
the end of March 2000, the PCS Group operated PCS systems in more than 300
metropolitan markets, including the 50 largest U.S. metropolitan areas. The PCS
Group has licenses to serve more than 270 million people in all 50 states,
Puerto Rico and the U.S. Virgin Islands. The service offered by the PCS Group
and its affiliates now reaches more than 190 million people. The PCS Group
provides nationwide service through:
- operating its own digital network in major U.S. metropolitan areas,
- affiliating with other companies, mainly in and around smaller U.S.
metropolitan areas,
- roaming on other providers' analog cellular networks using
dual-band/dual-mode handsets, and
- roaming on other providers' digital PCS networks that use code
division multiple access.
- --------------------------------------------------------------------------------
Results of Operations
- --------------------------------------------------------------------------------
Consolidated
Total net operating revenues were as follows:
Quarters Ended
March 31,
------------------------
2000 1999
- -------------------------------------------------------
(millions)
FON Group $ 4,397 $ 4,107
PCS Group 1,177 604
Intergroup eliminations (95) (59)
- -------------------------------------------------------
Net operating revenues $ 5,479 $ 4,652
------------------------
Income (Loss) from continuing operations was as follows:
Quarters Ended
March 31,
------------------------
2000 1999
- -------------------------------------------------------
(millions)
FON Group $ 445 $ 434
PCS Group (510) (605)
- -------------------------------------------------------
Loss from continuing
operations $ (65) (171)
------------------------
Sprint FON Group
Quarters Ended
March 31,
------------------------
2000 1999
- -------------------------------------------------------
(millions)
Net operating revenues $ 4,397 $ 4,107
Operating expenses 3,639 3,370
- -------------------------------------------------------
Operating income $ 758 $ 737
------------------------
Operating margin 17.2% 17.9%
------------------------
Net Operating Revenues
Net operating revenues were $4.4 billion for the 2000 first quarter, an increase
of 7% from $4.1 billion for the same 1999 period. The increase mainly reflects
growth in the FON Group's long distance and local divisions.
Long Distance Division
Net operating revenues increased 7% in the 2000 first quarter from the same 1999
period. This increase mainly reflects strong data services revenue growth.
Calling volumes increased 17%, but were largely offset by a more competitive
pricing environment.
Business and data market revenues increased 11% in the 2000 first quarter from
the same 1999 period. The increase mainly reflects growth in data services.
<PAGE>
Residential market revenues decreased 4% in the 2000 first quarter from the same
1999 period. This decrease reflects lower international and phone card revenues.
Wholesale market revenues increased 9% in the 2000 first quarter from the same
1999 period. Approximately one-third of the increase is the result of sales of
capacity on Sprint's transoceanic cable in the 2000 first quarter. The remainder
of the increase is primarily due to growth in private line services.
Local Division
Local division revenues increased 4% in the 2000 first quarter from the same
1999 period. This increase mainly reflects customer access line growth and
increased sales of network-based services such as Caller ID and Call Waiting.
Customer access lines increased 5% during the past 12 months. Sales of
network-based services increased due to strong demand for bundled services which
combine local service, network-based features and long distance calling.
Local service revenues grew 9% in the 2000 first quarter from the same 1999
period because of customer access line growth and strong demand for bundled
services. Revenue growth also reflects increased sales of data products and
revenues from maintaining customer wiring and equipment.
Network access revenues increased 7% in the 2000 first quarter from the same
1999 period reflecting a 9% increase in minutes of use, the continued
implementation of local number portability charges and increased special access
services. These increases were partly offset by FCC-mandated access rate
reductions.
Toll service revenues decreased 23% in the 2000 first quarter from the same 1999
period, reflecting increased competition, which is expected to continue, in the
intraLATA long distance market. The decrease also reflects the success of sales
of bundled services which shift intraLATA customers to Sprint's long distance
division. Despite the losses realized by the local division, Sprint's overall
intraLATA long distance market share in the local division's territories has
remained steady at approximately 65% from the 1999 first quarter to the 2000
first quarter.
Other revenues decreased 12% in the 2000 first quarter from the same 1999 period
mainly due to a decrease in equipment sales.
Product Distribution & Directory Publishing Businesses
The product distribution and directory publishing businesses' revenues increased
7% in the 2000 first quarter from the same 1999 period. Nonaffiliated revenues
accounted for over one-half of revenues in both periods and increased 17% in the
2000 first quarter compared with the same 1999 period, but were partly offset by
a decrease in product sales to affiliates The increase in nonaffiliated revenues
is mainly due to certain customers accelerating equipment purchases in the 2000
first quarter. The change in the mix of the local division's capital program to
more electronics and software, which is more frequently purchased directly from
manufacturers, caused the decline in affiliate sales.
Operating Expenses
The FON Group's operating expenses increased 8% in the 2000 first quarter from
the same 1999 period.
Long Distance Division
Long distance division operating expenses increased 6% in the 2000 first quarter
from the same 1999 period.
Interconnection costs increased 2% reflecting increased calling volumes and
costs related to growth in non-minute driven revenues, partly offset by
reductions in per-minute costs for both domestic and international access. The
domestic rate reductions were generally due to FCC-mandated access rate
reductions that took effect in July 1999. Lower international per minute costs
reflect continued competition. Sprint expects government deregulation and
competitive pressures to add to the trend of declining unit costs for
international interconnection.
Operations expense increased 24% in the 2000 first quarter mainly due to an
increase in equipment sales.
Selling, general and administrative (SG&A) expense increased 5% mainly
reflecting increased marketing and promotions in the business market.
Depreciation and amortization expense decreased 1% due to an adjustment to
increase the depreciable lives of certain assets, largely offset by an increased
asset base.
Local Division
Local division operating expenses increased 1% in the 2000 first quarter from
the same 1999 period.
Costs of services and products decreased 1% reflecting a decline in equipment
sales and the success of cost control initiatives.
<PAGE>
SG&A decreased 2% due to continued emphasis on cost control partly offset by
increased customer service costs related to customer access line growth and
increased marketing costs to promote core products and services.
Depreciation and amortization expense increased 7% reflecting increased capital
expenditures in switching and transport technologies which have shorter asset
lives.
Product Distribution & Directory Publishing Businesses
Operating expenses increased 5% in the 2000 first quarter compared to the same
1999 period reflecting increased costs of services and products related to
increased equipment sales.
Sprint ION(SM)
Operating expenses for Sprint ION in the 2000 first quarter reflect continued
development and deployment activities including costs for network research and
testing, systems and operations development, product development, and
advertising. Depreciation and amortization expense increased due to a rapidly
increasing asset base.
Other Ventures
The "other ventures" segment includes the operating results of the cable TV
service operations of the broadband fixed wireless companies acquired in the
second half of 1999.
The equity in losses of affiliates increased due to increased losses from
Call-Net which include a restructuring charge in the 2000 first quarter.
Sprint PCS Group
Quarters Ended
March 31,
----------------------
2000 1999
- ------------------------------------------------------
(millions)
Net operating revenues $ 1,177 $ 604
Operating expenses 1,779 1,431
- ------------------------------------------------------
Operating loss $ (602) $ (827)
----------------------
The PCS Group markets its products through multiple distribution channels,
including its own retail stores as well as other retail outlets. Equipment sales
to one retail chain and the subsequent service revenues generated by sales to
its customers accounted for 25% of net operating revenues in the 2000 first
quarter and 28% in the 1999 first quarter.
Net Operating Revenues
The PCS Group's net operating revenues include subscriber revenues and sales of
handsets and accessory equipment. Subscriber revenues consist of monthly
recurring charges and usage charges. Subscriber revenues increased 113% in the
2000 first quarter reflecting a 107% increase in the average number of
customers. The PCS Group added 831,000 customers in the 2000 first quarter and
ended the quarter with over 6.5 million customers in more than 300 metropolitan
markets nationwide. Average monthly service revenue per user (ARPU) was $54 for
the 2000 first quarter compared to $52 for the same 1999 period.
Revenues from sales of handsets and accessories were approximately 15% of net
operating revenues in the 2000 first quarter and 20% in the 1999 first quarter.
As part of the PCS Group's marketing plans, handsets are normally sold at prices
below the PCS Group's cost.
Operating Expenses
The PCS Group's costs of services and products mainly include handset and
accessory costs, switch and cell site expenses and other network-related costs.
These costs increased 26% in the 2000 first quarter from the 1999 first quarter
reflecting the significant growth in customers and expanded market coverage,
partly offset by a reduction in handset unit costs.
SG&A expense mainly includes marketing costs to promote products and services as
well as salary and benefit costs. SG&A expense increased 25% in the 2000 first
quarter from the 1999 first quarter reflecting an expanded workforce to support
subscriber growth and increased marketing and selling costs.
Depreciation and amortization expense consists mainly of depreciation of network
assets and amortization of intangible assets. The intangible assets include
goodwill, PCS licenses, customer base, microwave relocation costs and assembled
workforce, which are being amortized over 30 months to 40 years.
Depreciation and amortization expense increased 21% in the 2000 first quarter
from the 1999 first quarter reflecting amortization of intangible assets
acquired in the Cox PCS purchase in the 1999 second quarter. It also reflects
depreciation of the network assets placed in service during 2000 and 1999.
<PAGE>
- --------------------------------------------------------------------------------
Nonoperating Items
- --------------------------------------------------------------------------------
Interest Expense
Sprint's effective interest rate on long-term debt was 6.9% in the 2000 first
quarter and 7.2% in the 1999 first quarter. The decrease mainly reflects
increased borrowings with lower interest rates.
Interest costs on short-term borrowings classified as long-term debt, deferred
compensation plans and customer deposits have been excluded so as not to distort
the effective interest rate on long-term debt.
Other Income, Net
Other income (expense) consisted of the following:
Quarters Ended
March 31,
----------------------
2000 1999
- ----------------------------------------------------
(millions)
Dividend and interest income $ 7 $ 8
Equity in net losses of
affiliates (25) (9)
Net gains from investments 26 -
Gain on sale of assets 28 -
Minority interest for Cox PCS - 20
Other, net (8) 14
- ----------------------------------------------------
Total $ 28 $ 33
----------------------
Net gains from investments are the result of the gain realized on the exchange
of SBC Communications Inc. common stock for certain FON Group notes payable,
partly offset by losses related to the sale of an investment. Gain on sale of
assets is the result of the sale of certain PCS Group customers and associated
network infrastructure.
Income Taxes
See Note 5 of Condensed Notes to Consolidated Financial Statements for
information about the differences that caused the effective income tax rates to
vary from the federal statutory rate for income taxes related to continuing
operations.
Discontinued Operation, Net
As a result of Sprint's sale of its interest in Global One to FT and DT,
Sprint's gain on sale and its equity share of the results of Global One have
been reported as a discontinued operation for all periods presented.
Sprint recorded an after-tax gain related to the sale of its interest in Global
One of $675 million in the first quarter of 2000. Sprint recorded after-tax
losses related to its share of losses from Global One of $28 million in the
first quarter of 1999.
Extraordinary Items, Net
In the 2000 first quarter, Sprint repaid, prior to scheduled maturities, $127
million of the PCS Group's notes payable to the FCC. These notes had an interest
rate of 7.8%. This resulted in a $3 million after-tax extraordinary loss for the
PCS Group.
In the 1999 first quarter, Sprint terminated some of the PCS Group's revolving
credit facilities and repaid, prior to scheduled maturities, the related
outstanding balance of $1.7 billion. These facilities had a weighted average
interest rate equal to the London Inter-Bank Offered Rate plus 40 basis points.
This resulted in a $21 million after-tax extraordinary loss for the PCS Group.
- --------------------------------------------------------------------------------
Financial Condition
- --------------------------------------------------------------------------------
March 31, December 31,
2000 1999
- -----------------------------------------------------
(millions)
Consolidated assets $ 38,714 $ 39,250
--------------------------------
Consolidated assets decreased due to using most of the cash from the sale of the
net assets of the Global One discontinued operation and the receipt of an income
tax refund to repay debt. Consolidated assets also decreased due to the exchange
of investments in equity securities for certain notes payable. Net property,
plant and equipment increased $463 million in the 2000 first quarter reflecting
capital expenditures to support the PCS network buildout and expansion, core
long distance and local network enhancements, and Sprint ION development and
hardware deployment. See "Liquidity and Capital Resources" for more information
about changes in Sprint's Consolidated Balance Sheets.
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
- --------------------------------------------------------------------------------
Operating Activities
Quarters Ended
March 31,
-------------------------------
2000 1999
- ------------------------------------------------------
(millions)
Cash flows provided
by operating
activities $ 930 $ 357
-------------------------------
Operating cash flows increased $573 million mainly reflecting a $414 million
income tax refund received in the 2000 first quarter and decreased operating
losses for the PCS Group.
<PAGE>
Investing Activities
Quarters Ended
March 31,
-------------------------------
2000 1999
- ------------------------------------------------------
(millions)
Cash flows used by
investing
activities $ (56) $ (1,472)
-------------------------------
In February 2000, Sprint received $1.4 billion from the sale of its interest in
Global One. The proceeds were used to repay existing debt and fund the PCS
Group's capital expenditures.
The FON Group's capital expenditures totaled $758 million in the 2000 first
quarter and $806 million in the 1999 first quarter. Long distance capital
expenditures were incurred mainly to enhance network reliability, meet increased
demand for data-related services and upgrade capabilities for providing new
products and services. The local division incurred capital expenditures to
accommodate access line growth and expand capabilities for providing enhanced
services. Sprint ION capital expenditures were incurred for development and
hardware deployment. PCS Group capital expenditures were $693 million in the
2000 first quarter and $512 million in the 1999 first quarter. Capital
expenditures in both years were mainly for the continued buildout and expansion
of the PCS network.
"Investments in affiliates, net" consisted of capital contributions to EarthLink
and other affiliates accounted for using the equity method.
Financing Activities
Quarters Ended
March 31,
-------------------------------
2000 1999
- ------------------------------------------------------
(millions)
Cash flows provided
(used) by
financing
activities $ (744) $ 658
-------------------------------
Financing activities in the 2000 first quarter mainly reflect payments on
long-term debt. Financing activities in the 1999 first quarter mainly reflect
proceeds from common stock issuances.
Sprint paid cash dividends of $109 million in the 2000 first quarter and $104
million in the 1999 first quarter.
Capital Requirements
Sprint's 2000 investing activities, mainly consisting of capital expenditures
and investments in affiliates, are expected to require cash of $7.7 to $8.3
billion. FON Group capital expenditures are expected to range between $4.0 and
$4.3 billion. Including the investments in broadband fixed wireless facilities,
Sprint ION is expected to require $900 million to $1 billion of this amount. PCS
Group capital expenditures are expected to be between $2.9 and $3.1 billion.
Additional funds will be required to fund the PCS Group's expected operating
losses, working capital and debt service requirements. Investments in affiliates
are expected to require cash of $800 to $900 million. Dividend payments are
expected to total $450 million in 2000.
Sprint's tax sharing agreement provides for the allocation of income taxes
between the FON Group and the PCS Group. Sprint expects the FON Group to
continue to make significant payments to the PCS Group under this agreement
because of expected PCS Group operating losses.
Liquidity
In July 1999, Sprint filed a shelf registration statement with the SEC covering
$4.0 billion of senior unsecured debt securities to be used mainly to repay debt
and for general purposes, including working capital requirements, acquisitions,
and new capital investments. At March 31, 2000, Sprint had issued $750 million
of these registered securities.
Borrowings during the remainder of 2000 will be allocated to the FON Group or
the PCS Group based on their cash requirements.
Any borrowings Sprint may incur are ultimately limited by certain debt
covenants. Sprint could borrow up to $13.8 billion at the end of March 2000
under the most restrictive of its debt covenants.
- --------------------------------------------------------------------------------
Financial Strategies
- --------------------------------------------------------------------------------
General Hedging Policies
Sprint selectively enters into interest rate swap and cap agreements to manage
its exposure to interest rate changes on its debt. Sprint also enters into
forward contracts and options in foreign currencies to reduce the impact of
changes in foreign exchange rates. Sprint seeks to minimize counterparty credit
risk through stringent credit approval and review processes, the selection of
only the most creditworthy counterparties, continual review and monitoring of
all counterparties, and thorough legal review of contracts. Sprint also controls
exposure to market risk by regularly monitoring changes in foreign exchange and
interest rate positions under normal and stress conditions to ensure they do not
exceed established limits.
<PAGE>
Sprint's derivative transactions are used for hedging purposes only and comply
with Board-approved policies. Senior management receives frequent status updates
of all outstanding derivative positions.
Interest Rate Risk Management
Sprint's interest rate risk management program focuses on minimizing exposure to
interest rate movements, setting an optimal mixture of floating- and fixed-rate
debt, and minimizing liquidity risk. Sprint uses simulation analysis to assess
its interest rate exposure and establish the desired ratio of floating- and
fixed-rate debt. To the extent possible, Sprint manages interest rate exposure
and the floating-to-fixed ratio through its borrowings, but sometimes uses
interest rate swaps and caps to adjust its risk profile.
Foreign Exchange Risk Management
Sprint's foreign exchange risk management program focuses on hedging transaction
exposure to optimize consolidated cash flow. Sprint's main transaction exposure
results from net payments made to overseas telecommunications companies for
completing international calls made by Sprint's domestic customers. These
international operations were not material to the consolidated financial
position at March 31, 2000 or results of operations or cash flows for the
quarter ended March 31, 2000. In addition, foreign currency transaction gains
and losses were not material to Sprint's year-to-date 2000 results of
operations. Sprint has not entered into any significant foreign currency forward
contracts or other derivative instruments to hedge the effects of adverse
fluctuations in foreign exchange rates. As a result, Sprint was not subject to
material foreign exchange risk.
- --------------------------------------------------------------------------------
Forward-looking Information
- --------------------------------------------------------------------------------
Sprint includes certain estimates, projections and other forward-looking
statements in its reports, in presentations to analysts and others, and in other
publicly available material. Future performance cannot be ensured. Actual
results may differ materially from those in the forward-looking statements. Some
factors that could cause actual results to differ include:
- the effects of vigorous competition in the markets in which Sprint
operates;
- the costs and business risks related to entering and expanding new
markets necessary to provide seamless services and new services;
- the ability of the PCS Group to continue to grow its market presence;
- the risks related to Sprint's investments in joint ventures;
- the impact of any unusual items resulting from ongoing evaluations of
Sprint's business strategies;
- regulatory risks, including the impact of the Telecommunications Act
of 1996;
- unexpected results of litigation filed against Sprint;
- uncertainties associated with the pending merger of Sprint and
WorldCom;
- the possibility of one or more of the markets in which Sprint competes
being impacted by changes in political, economic or other factors such
as monetary policy, legal and regulatory changes or other external
factors over which Sprint has no control; and
- other risks referenced from time to time in Sprint's filings with the
Securities and Exchange Commission.
The words "estimate," "project," "intend," "expect," "believe" and similar
expressions are intended to identify forward-looking statements. Forward-looking
statements are found throughout MD&A. The reader should not place undue reliance
on forward-looking statements, which speak only as of the date of this report.
Sprint is not obligated to publicly release any revisions to forward-looking
statements to reflect events after the date of this report or unforeseen events.
<PAGE>
Annex II
Sprint FON Group
Combined Financial Information
<PAGE>
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF OPERATIONS (Unaudited) Sprint FON Group
(millions, except per share data)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Quarters Ended March 31, 2000 1999
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
<S> <C> <C>
Net Operating Revenues $ 4,397 $ 4,107
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Operating Expenses
Costs of services and products 2,031 1,861
Selling, general and administrative 1,063 1,002
Depreciation and amortization 545 507
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Total operating expenses 3,639 3,370
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Operating Income 758 737
Interest expense (39) (42)
Other income, net 7 9
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Income from continuing operations before income taxes 726 704
Income tax expense (281) (270)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Income from Continuing Operations 445 434
Discontinued operation, net 675 (28)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Net Income 1,120 406
Preferred stock dividends received 2 2
- ------------------------------------------------- ------------- -- -------------- -- ------------- --- -------------
Earnings applicable to common stock $ 1,122 $ 408
-- ------------- --- -------------
Diluted Earnings per Common Share(1)
Continuing operations $ 0.50 $ 0.49
Discontinued operation 0.75 (0.03)
- --------------------------------------------------------------- -- -------------- -- ------------- --- -------------
Total $ 1.25 $ 0.46
-- ------------- --- -------------
Diluted weighted average common shares(1) 894.7 880.9
-- ------------- --- -------------
Basic Earnings per Common Share(1)
Continuing operations $ 0.51 $ 0.50
Discontinued operation 0.77 (0.03)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Total $ 1.28 $ 0.47
-- ------------- --- -------------
Basic weighted average common shares(1) 875.6 863.2
-- ------------- --- -------------
Dividends per Common Share(1) $ 0.125 $ 0.125
-- ------------- --- -------------
(1) In the 1999 second quarter, Sprint effected a two-for-one stock split of
its FON common stock. As a result, 1999 basic and diluted earnings per
common share, weighted average common shares and dividends per common share
have been restated for periods prior to the split.
See accompanying Condensed Notes to Combined Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Sprint FON Group
(millions)
- --------------------------------------------- ----------------- ----------------- ---------------- -----------------
Quarters Ended March 31, 2000 1999
- --------------------------------------------- ----------------- ----------------- ---------------- -----------------
<S> <C> <C>
Net Income $ 1,120 $ 406
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Other Comprehensive Loss
Unrealized holding losses on securities (3) (5)
Income tax benefit 1 2
- --------------------------------------------------------------- -- -------------- -- ------------- --- -------------
Net unrealized holding losses on securities
during the period (2) (3)
Reclassification adjustment for gains
included in net income (32) -
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Total other comprehensive loss (34) (3)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Comprehensive Income $ 1,086 $ 403
-- ------------- --- -------------
See accompanying Condensed Notes to Combined Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS Sprint FON Group
(millions)
- -------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2000 1999
- -------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets
<S> <C> <C>
Cash and equivalents $ 195 $ 104
Accounts receivable, net of allowance for doubtful accounts
of $210 and $228 2,867 2,836
Inventories 430 441
Prepaid expenses 288 251
Receivables from the PCS Group 1,152 136
Investments in equity securities - 316
Other 137 198
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 5,069 4,282
Investments in securities 114 139
Property, plant and equipment
Long distance division 9,960 9,824
Local division 16,141 15,828
Other 2,264 2,035
- -------------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment 28,365 27,687
Accumulated depreciation (14,184) (13,685)
- -------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 14,181 14,002
Investments in and loans to the PCS Group 432 431
Investments in and advances to other affiliates 492 452
Intangible assets
Goodwill 1,213 1,223
Other 375 296
- -------------------------------------------------------------------------------------------------------------------------
Total intangible assets 1,588 1,519
Accumulated amortization (146) (140)
- -------------------------------------------------------------------------------------------------------------------------
Net intangible assets 1,442 1,379
Net assets of discontinued operation - 394
Other 736 724
- -------------------------------------------------------------------------------------------------------------------------
Total $ 22,466 $ 21,803
-----------------------------------
Liabilities and Group Equity
Current liabilities
Current maturities of long-term debt $ 551 $ 902
Accounts payable 1,037 1,012
Accrued interconnection costs 578 683
Accrued taxes 647 162
Advance billings 319 323
Payroll and employee benefits 354 557
Other 684 662
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 4,170 4,301
Long-term debt and capital lease obligations 4,183 4,531
Deferred credits and other liabilities
Deferred income taxes and investment tax credits 1,100 935
Postretirement and other benefit obligations 1,067 1,064
Other 441 458
- -------------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 2,608 2,457
Group equity 11,505 10,514
- -------------------------------------------------------------------------------------------------------------------------
Total $ 22,466 $ 21,803
-----------------------------------
See accompanying Condensed Notes to Combined Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF CASH FLOWS (Unaudited) Sprint FON Group
(millions)
- ------------------------------------------------------------------ ----------------- ----------------- ----------------
Quarters Ended March 31, 2000 1999
- ------------------------------------------------------------------ ----------------- ----------------- ----------------
Operating Activities
<S> <C> <C>
Net income $ 1,120 $ 406
Adjustments to reconcile net income to net cash provided by
operating activities:
Discontinued operation, net (675) 28
Equity in net losses of affiliates 25 9
Depreciation and amortization 545 507
Deferred income taxes and investment tax credits 238 24
Changes in assets and liabilities:
Accounts receivable, net (31) (110)
Inventories and other current assets (22) (10)
Accounts payable and other current liabilities (82) 21
Affiliate receivables and payables, net (88) (91)
Noncurrent assets and liabilities, net 5 (38)
Other, net (45) (6)
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Net cash provided by operating activities 990 740
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Investing Activities
Capital expenditures (758) (806)
Investments in other affiliates, net (130) (67)
Proceeds from sale of investment in Global One 1,403 -
Advances to the PCS Group (1,014) -
Repayments from Sprint PCS - 134
Other, net - (5)
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Net cash used by investing activities (499) (744)
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Financing Activities
Allocation of long-term debt to the PCS Group - (278)
Payments on long-term debt (381) (12)
Dividends paid (105) (100)
Proceeds from common stock issued 36 72
Treasury stock purchased - (45)
Other, net 50 18
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Net cash used by financing activities (400) (345)
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Increase (Decrease) in Cash and Equivalents 91 (349)
Cash and Equivalents at Beginning of Period 104 432
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Cash and Equivalents at End of Period $ 195 $ 83
--- ------------- -- -------------
See accompanying Condensed Notes to Combined Financial Statements (Unaudited).
</TABLE>
<PAGE>
CONDENSED NOTES TO COMBINED FINANCIAL STATEMENTS
(Unaudited) Sprint FON Group
The information in this Form 10-Q has been prepared according to Securities and
Exchange Commission (SEC) rules and regulations. In our opinion, the combined
interim financial statements reflect all adjustments, consisting only of normal
recurring accruals, needed to fairly present the FON Group's combined financial
position, results of operations, cash flows and comprehensive income.
Certain information and footnote disclosures normally included in combined
financial statements prepared according to accounting principles generally
accepted in the United States have been condensed or omitted. As a result, you
should read these financial statements along with Sprint Corporation's 1999 Form
10-K. Operating results for the 2000 year-to-date period do not necessarily
represent the results that may be expected for the year ending December 31,
2000.
- --------------------------------------------------------------------------------
1. Merger
- --------------------------------------------------------------------------------
In October 1999, Sprint announced a definitive merger agreement with WorldCom,
Inc. (WorldCom). Under the agreement, each share of Sprint FON stock will be
exchanged for $76 of WorldCom common stock, subject to a collar. In addition,
each share of Sprint PCS stock will be exchanged for one share of a new WorldCom
PCS tracking stock and 0.116025 shares of WorldCom common stock. The terms of
the WorldCom PCS tracking stock will be equivalent to those of Sprint's PCS
common stock and will track the performance of the company's personal
communication services (PCS) business. Sprint and WorldCom shareholders have
approved the merger. The merger is subject to approvals from the Federal
Communications Commission, the Justice Department, various state government
bodies and foreign regulatory authorities. The companies anticipate that the
merger will close in the second half of 2000.
- --------------------------------------------------------------------------------
2. Basis of Combination and Presentation
- --------------------------------------------------------------------------------
The PCS stock is intended to reflect the performance of Sprint's domestic
wireless PCS operations. The FON stock is intended to reflect the performance of
all of Sprint's other operations.
The combined FON Group financial statements, together with the combined PCS
Group financial statements, include all the accounts in Sprint's consolidated
financial statements. The combined financial statements for each Group were
prepared on a basis that management believes is reasonable and proper and
include:
- the combined historical balance sheets, results of operations and cash
flows for each of the Groups, with all significant intragroup amounts
and transactions eliminated,
- an allocation of Sprint's debt, including the related effects on
results of operations and cash flows, and
- an allocation of corporate overhead.
The FON Group entities are commonly controlled companies. Transactions between
the PCS Group and the FON Group have not been eliminated in the combined
financial statements of either Group.
The FON Group combined financial statements provide FON shareholders with
financial information about the FON Group operations. Investors in FON stock and
PCS stock are Sprint shareholders and are subject to risks related to all of
Sprint's businesses, assets and liabilities. Sprint retains ownership and
control of the assets and operations of each Group. Financial effects of either
Group that affect Sprint's results of operations or financial condition could
affect the results of operations or financial position of the other Group or the
market price of the other Group's stock. Net losses of either Group, and
dividends or distributions on, or repurchases of, PCS stock or FON stock, will
reduce Sprint funds legally available for dividends on both Groups' stock. As a
result, the FON Group combined financial statements should be read along with
Sprint's consolidated financial statements and the PCS Group's combined
financial statements.
The FON Group combined financial statements are prepared using accounting
principles generally accepted in the United States. These principles require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported amounts of revenues and expenses. Actual results could differ from
those estimates.
Certain prior-year amounts have been reclassified to conform to the current-year
presentation. These reclassifications had no effect on the results of operations
or group equity as previously reported.
Investments in entities in which the FON Group exercises significant influence,
but does not control, are accounted for using the equity method (see Note 4).
<PAGE>
- --------------------------------------------------------------------------------
3. Discontinued Operation
- --------------------------------------------------------------------------------
In January 2000, Sprint reached a definitive agreement with France Telecom S.A.
(FT) and Deutsche Telekom AG (DT) to sell its interest in Global One. In
February 2000, Sprint received $1.1 billion in cash and was repaid $276 million
for advances for its entire stake in Global One.
The FON Group recorded an after-tax gain related to the sale of Sprint's
interest in Global One of $675 million in the first quarter of 2000. The FON
Group recorded after-tax losses related to its share of losses from Global One
of $28 million in the first quarter of 1999.
- --------------------------------------------------------------------------------
4. Investments
- --------------------------------------------------------------------------------
At the end of March 2000, investments accounted for using the equity method
consisted of the FON Group's investments in EarthLink, Call-Net and other
strategic investments. Combined, unaudited, summarized financial information
(100% basis) of entities accounted for using the equity method was as follows:
Quarters Ended
March 31,
-----------------------
2000 1999
- -------------------------------------------------------
(millions)
Results of operations
Net operating revenues $ 481 $ 397
-----------------------
Operating loss $ (60) $ (32)
-----------------------
Net loss $ (137) $ (35)
-----------------------
Equity in net losses
of affiliates $ (25) $ (9)
-----------------------
- --------------------------------------------------------------------------------
5. Income Taxes
- --------------------------------------------------------------------------------
The differences that caused the FON Group's effective income tax rates to vary
from the 35% federal statutory rate for income taxes related to continuing
operations were as follows:
Quarters Ended
March 31,
-------------------------
2000 1999
- -------------------------------------------------------
(millions)
Income tax expense at the
federal statutory rate $ 254 $ 246
Effect of:
State income taxes, net
of federal income tax 19 22
effect
Equity in losses of
foreign joint ventures 10 1
Goodwill amortization 2 -
Other, net (4) 1
- -------------------------------------------------------
Income tax expense $ 281 $ 270
-------------------------
Effective income tax rate 38.7% 38.4%
-------------------------
- --------------------------------------------------------------------------------
6. Long-term Debt and Capital Lease Obligations
- --------------------------------------------------------------------------------
During the 2000 first quarter, the FON Group's notes payable and commercial
paper decreased $295 million. The FON Group used a portion of the proceeds from
the sale of its interest in Global One to repay the borrowings.
In March 2000, the FON Group exchanged 6.6 million common shares of SBC
Communications, Inc. for certain notes payable. The notes had a market value of
$275 million on the maturity date and $316 million at year-end 1999. The notes
had an interest rate of 8.3%.
- --------------------------------------------------------------------------------
7. Group Equity
- --------------------------------------------------------------------------------
Quarter Ended
March 31,
2000
- -------------------------------------------------------
(millions)
Beginning balance $ 10,514
Net income 1,120
Dividends (108)
Equity issued 48
Other, net (69)
- -------------------------------------------------------
Ending balance $ 11,505
------------------
<PAGE>
- --------------------------------------------------------------------------------
8. Litigation, Claims and Assessments
- --------------------------------------------------------------------------------
FON shareholders are subject to all of the risks related to an investment in
Sprint and the FON Group, including the effects of any legal proceedings and
claims against the PCS Group.
Various suits arising in the ordinary course of business are pending against
Sprint. Management cannot predict the final outcome of these actions but
believes they will not be material to the FON Group's combined financial
statement.
- --------------------------------------------------------------------------------
9. Segment Information
- --------------------------------------------------------------------------------
The FON Group operates in five business segments, based on services and
products: the long distance division, the local division, the product
distribution and directory publishing businesses, activities to develop and
deploy Sprint ION(SM) -- Integrated On-Demand Network, and other ventures.
<TABLE>
<CAPTION>
Industry segment financial information was as follows:
- -----------------------------------------------------------------------------------------------------------------------
Product Corporate
Long Distribution and Sprint
Quarters Ended Distance Local & Directory Sprint Other Elim- FON
March 31, Division Division Publishing ION Ventures inations Group
- -----------------------------------------------------------------------------------------------------------------------
(millions)
2000
<S> <C> <C> <C> <C> <C> <C> <C>
Net operating revenues $ 2,737 $ 1,432 $ 454 $ 1 $ 18 $ (245) $ 4,397
Affiliated revenues 84 92 160 - - (245) 91
Operating income (loss) 431 416 67 (136) (13) (7) 758
1999
Net operating revenues $ 2,560 $ 1,371 $ 426 $ - $ - $ (250) $ 4,107
Affiliated revenues 63 72 174 - - (250) 59
Operating income (loss) 388 363 56 (52) (6) (12) 737
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
10. Supplemental Cash Flows Information
- --------------------------------------------------------------------------------
The FON Group's cash paid (received) for interest and income taxes was as
follows:
Quarters Ended
March 31,
-------------------------
2000 1999
- -------------------------------------------------------
(millions)
Interest (net of capitalized
interest) $ 71 $ 28
-------------------------
Income taxes $ (149) $ 185
-------------------------
The FON Group's noncash activities included the following:
Quarters Ended
March 31,
-------------------------
2000 1999
- -------------------------------------------------------
(millions)
Debt redeemed with
investments in equity
securities $ 275 $ -
-------------------------
Tax benefit from stock
options exercised $ 51 $ 51
-------------------------
Common stock issued under
employee stock benefit
plans $ 16 $ 24
-------------------------
Stock received for stock
options exercised $ 13 $ 23
-------------------------
<PAGE>
- --------------------------------------------------------------------------------
11. Subsequent Events
- --------------------------------------------------------------------------------
In April 2000, Sprint's Board of Directors declared dividends of 12.5 cents per
share on the Sprint FON common stock and Class A common stock. Dividends will be
paid June 30, 2000.
In May 2000, Sprint announced that it would purchase an additional 26 million
shares of EarthLink, Inc. for $431 million. The purchase will increase the FON
Group's interest in EarthLink, Inc. to 26.7%.
- --------------------------------------------------------------------------------
12. Recently Issued Accounting Pronouncement
- --------------------------------------------------------------------------------
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB 101). In March 2000, the SEC issued an
amendment to SAB 101 which delayed the effective date for registrants with
fiscal years that begin between December 12, 1999 and March 15, 2000. The
effective date for Sprint will be for the quarter ending June 30, 2000. The
deferral of telecommunication service activation fees and certain related costs
are specifically addressed in SAB 101 and the FON Group is in the process of
determining the impact of SAB 101 on its financial statements. Based on a
preliminary analysis, SAB 101 is not expected to have a material impact on the
FON Group's combined financial statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Sprint FON Group
- --------------------------------------------------------------------------------
Recent Developments
- --------------------------------------------------------------------------------
In October 1999, Sprint announced a definitive merger agreement with WorldCom,
Inc. (WorldCom). Under the agreement, each share of Sprint FON stock will be
exchanged for $76 of WorldCom common stock, subject to a collar. In addition,
each share of Sprint PCS stock will be exchanged for one share of a new WorldCom
PCS tracking stock and 0.116025 shares of WorldCom common stock. The terms of
the WorldCom PCS tracking stock will be equivalent to those of Sprint's PCS
common stock and will track the performance of the company's personal
communication services business. Sprint and WorldCom shareholders have approved
the merger. The merger is subject to approvals from the Federal Communications
Commission (FCC), the Justice Department, various state government bodies and
foreign regulatory authorities. The companies anticipate that the merger will
close in the second half of 2000.
In January 2000, Sprint reached a definitive agreement with France Telecom S.A.
(FT) and Deutsche Telekom AG (DT) to sell its interest in Global One. In
February 2000, Sprint received $1.1 billion in cash and was repaid $276 million
for advances for its entire stake in Global One. The FON Group's equity share of
the results of Global One has been reported as a discontinued operation for all
periods presented.
- --------------------------------------------------------------------------------
Sprint FON Group
- --------------------------------------------------------------------------------
Core Businesses
Long Distance Division
The long distance division is the nation's third-largest long distance phone
company. It operates a nationwide, all-digital long distance communications
network that uses fiber-optic and electronic technology. The division mainly
provides domestic and international voice, video and data communications
services.
Local Division
The local division consists of regulated local phone companies serving more than
8.1 million access lines in 18 states. It provides local phone services, access
by phone customers and other carriers to its local network, sales of
telecommunications equipment, and long distance services within certain regional
calling areas.
Product Distribution and Directory Publishing Businesses
The product distribution business provides wholesale distribution services of
telecommunications products. The directory publishing business publishes and
markets white and yellow page phone directories.
Sprint ION(SM)
Sprint is developing and deploying new integrated communications services,
referred to as Sprint ION. Sprint ION extends Sprint's existing network
capabilities to the customer and enables Sprint to provide the network
infrastructure to meet customers' demands for advanced services including
integrated voice, data, Internet and video. It is also expected to be the
foundation for Sprint to provide new competitive local service. Beginning in
2000, the Sprint ION segment includes costs to develop high-speed data services
and Sprint ION services for the Multipoint Multichannel Distribution Services
broadband fixed wireless platform.
Other Ventures
The "other ventures" segment includes the cable TV service operations of the
broadband fixed wireless companies acquired in the second half of 1999.
This segment also includes the FON Group's investment in EarthLink, Inc., an
Internet service provider; Call-Net, a long distance provider in Canada
operating under the Sprint brand name; and certain other telecommunications
investments and ventures. All of the investments and ventures are accounted for
on the equity basis.
- --------------------------------------------------------------------------------
Results of Operations
- --------------------------------------------------------------------------------
Net operating revenues were $4.4 billion for the 2000 first quarter, an increase
of 7% from $4.1 billion for the same 1999 period.
Net income was $1.1 billion for the 2000 first quarter compared to $406 million
for the same 1999 period. Net income for the 2000 first quarter includes a $675
million gain related to the sale of the FON Group's interest in Global One. See
Note 3 of Notes to Combined Financial Statements.
<PAGE>
Core Businesses
The FON Group's core businesses generated improved first quarter net operating
revenues and operating income compared to the same 1999 period. Core businesses
exclude results from Sprint ION and other ventures. First quarter 2000 long
distance calling volumes increased 17% from the same 1999 period. Access lines
served by the local division increased 5% during the past 12 months.
- --------------------------------------------------------------------------------
Segmental Results of Operations
- --------------------------------------------------------------------------------
Long Distance Division
<TABLE>
<CAPTION>
Selected Operating Results
---------------------------------------------------------------------
Quarters Ended
March 31, Variance
---------------------------------- -------------------------------
2000 1999 $ %
- ---------------------------------------------- ---------------- ----------------- -- ------------- -----------------
(millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 2,737 $ 2,560 $ 177 6.9%
- ---------------------------------------------- -- ------------- -- -------------- -- ------------- -----------------
Operating expenses
Interconnection 964 943 21 2.2%
Operations 434 349 85 24.4%
Selling, general and administrative 672 642 30 4.7%
Depreciation and amortization 236 238 (2) (0.8)%
- ---------------------------------------------- -- ------------- -- -------------- -- -------------
Total operating expenses 2,306 2,172 134 6.2%
- ---------------------------------------------- -- ------------- -- -------------- -- -------------
Operating income $ 431 $ 388 $ 43 11.1%
-- ------------- -- -------------- -- -------------
Operating margin 15.7% 15.2%
-- ------------- -- --------------
</TABLE>
Net Operating Revenues
Net operating revenues increased 7% in the 2000 first quarter from the same 1999
period. The increase mainly reflects strong data services revenue growth.
Calling volumes increased 17%, but were largely offset by a more competitive
pricing environment. Future revenue and operating income growth may be impacted
by the continuing pricing pressures being experienced by the long distance
division.
Business and Data Market
Business and data market revenues increased 11% in the 2000 first quarter from
the same 1999 period. Data services showed strong growth because of continued
demand and an increased use of the Internet.
Residential Market
Residential market revenues decreased 4% in the 2000 first quarter from the same
1999 period due to lower volumes and more competitive pricing in the
international markets. Additionally, revenues decreased due to the loss of a
major Local Exchange Carrier calling card contract. However, Sprint has entered
into another calling card contract that will partially replace the lost
revenues. Domestic residential calling volumes increased compared with the prior
year period, but were partly offset by price reductions.
Wholesale Market
Wholesale market revenues increased 9% in the 2000 first quarter from the same
1999 period. Approximately one-third of the increase is the result of sales of
capacity on Sprint's transoceanic cable in the 2000 first quarter. The remainder
of the increase is primarily due to growth in private line services.
Interconnection Costs
Interconnection costs consist of amounts paid to local phone companies, other
domestic service providers and foreign phone companies to complete calls made by
the division's domestic customers. These costs increased 2% in the 2000 first
quarter from the same 1999 period reflecting increased calling volumes and costs
related to growth in non-minute driven revenues, partly offset by reductions in
per-minute costs for both domestic and international access. The domestic rate
reductions were generally due to FCC-mandated access rate reductions that took
effect in July 1999. Lower international per minute costs reflect continued
competition. Sprint expects government deregulation and competitive pressures to
add to the
<PAGE>
trend of declining unit costs for international interconnection. Interconnection
costs were 35.2% of net operating revenues in the 2000 first quarter compared to
36.8% for the same period a year ago.
Operations Expense
Operations expense includes costs to operate and maintain the long distance
network and costs of equipment sales. It also includes costs to provide
operator, public payphone and video teleconferencing services as well as
telecommunications services for the hearing-impaired. Operations expense
increased 24% in the 2000 first quarter from the same 1999 period mainly due to
an increase in equipment sales. Operations expense was 15.9% of net operating
revenues in the 2000 first quarter compared to 13.6% for the same period a year
ago.
Selling, General and Administrative Expense
Selling, general and administrative (SG&A) expense increased 5% in the 2000
first quarter from the same 1999 period. This increase mainly reflects increased
marketing and promotions in the business market. SG&A expense was 24.5% of net
operating revenues in the 2000 first quarter compared to 25.1% for the same
period a year ago.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased 1% in the 2000 first quarter
from the same period a year ago. This decrease was generally due to an
adjustment to increase the depreciable lives of certain assets, largely offset
by an increased asset base. Depreciation and amortization expense was 8.7% of
net operating revenues in the 2000 first quarter compared to 9.3% for the 1999
first quarter.
Local Division
<TABLE>
<CAPTION>
Selected Operating Results
---------------------------------------------------------------------
Quarters Ended
March 31, Variance
----------------------------------- -------------------------------
2000 1999 $ %
- --------------------------------------------- ----------------- ----------------- -- ------------- -----------------
(millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 1,432 $ 1,371 $ 61 4.4%
- --------------------------------------------- --- ------------- -- -------------- -- -------------
Operating expenses
Costs of services and products 467 473 (6) (1.3)%
Selling, general and administrative 270 275 (5) (1.8)%
Depreciation and amortization 279 260 19 7.3%
- --------------------------------------------- --- ------------- -- -------------- -- -------------
Total operating expenses 1,016 1,008 8 0.8%
- --------------------------------------------- --- ------------- -- -------------- -- -------------
Operating income $ 416 $ 363 $ 53 14.6%
--- ------------- -- -------------- -- -------------
Operating margin 29.1% 26.5%
--- ------------- -- --------------
</TABLE>
Net Operating Revenues
Net operating revenues increased 4% in the 2000 first quarter from the same 1999
period. This increase mainly reflects customer access line growth and increased
sales of network-based services such as Caller ID and Call Waiting. Customer
access lines increased 5% during the past 12 months. Sales of network-based
services increased due to strong demand for bundled services which combine local
service, network-based features and long distance calling.
Local Service Revenues
Local service revenues, derived from local exchange services, grew 9% in the
2000 first quarter from the same 1999 period because of customer access line
growth and strong demand for bundled services. Revenue growth also reflects
increased sales of data products and revenues from maintaining customer wiring
and equipment.
Network Access Revenues
Network access revenues, derived from long distance phone companies using the
local network to complete calls, increased 7% in the 2000 first quarter from the
same 1999 period. The 2000 first quarter revenues reflect a 9% increase in
minutes of use, the continued implementation of local number portability charges
and increased special access
<PAGE>
services. These increases were partly offset by FCC-mandated access rate
reductions.
Toll Service Revenues
Toll service revenues are mainly derived from providing long distance services
within specified regional calling areas, or LATAs, that are beyond the local
calling area. These revenues decreased 23% in the 2000 first quarter from the
same 1999 period, reflecting increased competition, which is expected to
continue, in the intraLATA long distance market. The decrease also reflects the
success of sales of bundled services which shift intraLATA customers to Sprint's
long distance division. Despite the losses realized by the local division,
Sprint's overall intraLATA long distance market share in the local division's
territories has remained steady at approximately 65% from the 1999 first quarter
to the 2000 first quarter.
Other Revenues
Other revenues decreased 12% in the 2000 first quarter from the same 1999 period
mainly due to a decrease in equipment sales.
Costs of Services and Products
Costs of services and products includes costs to operate and maintain the local
network and costs of equipment sales. These costs decreased 1% in the 2000 first
quarter compared to the same 1999 period due to a decline in equipment sales and
the success of cost control initiatives. Costs of services and products was
32.6% of net operating revenues in the 2000 first quarter compared to 34.5% for
the same period a year ago.
Selling, General and Administrative Expense
SG&A expense decreased 2% in the 2000 first quarter compared to the same 1999
period. This decrease is mainly due to continued emphasis on cost control partly
offset by increased customer service costs related to customer access line
growth and increased marketing costs to promote core products and services. SG&A
expense was 18.9% of net operating revenues in the 2000 first quarter compared
to 20.1% for the same period a year ago.
Depreciation and Amortization Expense
Depreciation and amortization expense increased 7% in the 2000 first quarter
compared to the same 1999 period, mainly because of increased capital
expenditures in switching and transport technologies which have shorter asset
lives. Depreciation and amortization expense was 19.4% of net operating revenues
in the 2000 first quarter compared to 18.9% for the same period a year ago.
Product Distribution and Directory Publishing Businesses
<TABLE>
<CAPTION>
Selected Operating Results
---------------------------------------------------------------------
Quarters Ended
March 31, Variance
----------------------------------- -------------------------------
2000 1999 $ %
- --------------------------------------------- ----------------- ----------------- -- ------------- -----------------
(millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 454 $ 426 $ 28 6.6%
- --------------------------------------------- --- ------------- -- -------------- -- -------------
Operating expenses
Costs of services and products 351 334 17 5.1%
Selling, general and administrative 32 32 - -
Depreciation and amortization 4 4 - -
- --------------------------------------------- --- ------------- -- -------------- -- -------------
Total operating expenses 387 370 17 4.6%
- --------------------------------------------- --- ------------- -- -------------- -- -------------
Operating income $ 67 $ 56 $ 11 19.6%
--- ------------- -- -------------- -- -------------
Operating margin 14.8% 13.1%
--- ------------- -- --------------
</TABLE>
Net operating revenues increased 7% in the 2000 first quarter compared to the
same 1999 period. Nonaffiliated revenues accounted for over one-half of revenues
in both the 2000 and 1999 first quarters. Nonaffiliated revenues increased 17%
in the 2000 first quarter compared to the same 1999 period, but were partly
offset by a decrease in product sales to affiliates. The increase in
nonaffiliated revenues is mainly due to certain customers accelerating equipment
purchases in the 2000 first quarter. The change in the mix of the local
division's capital program to more electronics and software, which is
<PAGE>
more frequently purchased directly from manufacturers, caused the decline in
affiliate sales.
Operating expenses increased 5% in the 2000 first quarter compared to the same
1999 period reflecting increased costs of services and products related to
increased equipment sales.
Sprint ION(SM)
Quarters Ended
March 31,
------------------------
2000 1999
- ---------------------------------------------------------
(millions)
Net operating revenues $ 1 $ -
------------------------
Total operating expenses $ 137 $ 52
------------------------
Operating loss $ (136) $ (52)
------------------------
Operating expenses for Sprint ION in the 2000 first quarter reflect continued
development and deployment activities including costs for network research and
testing, systems and operations development, product development, and
advertising. Depreciation and amortization expense increased to $26 million in
the 2000 first quarter from $6 million for the same period a year ago due to a
rapidly increasing asset base.
Other Ventures
Quarters Ended
March 31,
-----------------------
2000 1999
- -----------------------------------------------------
(millions)
Net operating revenues $ 18 $ -
-----------------------
Total operating expenses $ 31 $ 6
-----------------------
Operating loss $ (13) $ (6)
-----------------------
Equity in losses of
affiliates $ (37) $ (15)
-----------------------
This segment includes the operating results of the cable TV service operations
of the broadband fixed wireless companies acquired in the second half of 1999.
The increase in equity in losses of affiliates reflects increased losses from
Call-Net, which include a restructuring charge in the 2000 first quarter.
- --------------------------------------------------------------------------------
Nonoperating Items
- --------------------------------------------------------------------------------
Interest Expense, Net
The FON Group's effective interest rate on long-term debt was 7.6% in the 2000
first quarter and 8.0% in the 1999 first quarter. The decrease mainly reflects
increased borrowings with lower interest rates.
Interest costs on short-term borrowings classified as long-term debt, intergroup
borrowings, deferred compensation plans and customer deposits have been excluded
so as not to distort the effective interest rate on long-term debt.
Interest expense on borrowings incurred by Sprint and allocated to the PCS Group
is based on rates the PCS Group would be able to obtain from third parties as a
direct or indirect wholly owned Sprint subsidiary, but without the benefit of
any guaranty by Sprint or any member of the FON Group. The difference between
Sprint's actual interest rates and the rates charged to the PCS Group is
reflected as a reduction in the FON Group's interest expense. These reductions,
which totaled $45 million in the 2000 first quarter and $30 million in the 1999
first quarter, have also been excluded in computing the effective interest rates
above.
Other Income, Net
Other income (expense) consisted of the following:
Quarters Ended
March 31,
-----------------------
2000 1999
- ------------------------------------------------------
(millions)
Dividend and interest income $ 11 $ 9
Equity in net losses of
affiliates (25) (9)
Net gains from investments 26 -
Other, net (5) 9
- ------------------------------------------------------
Total $ 7 $ 9
-----------------------
Net gains from investments are the result of the gain realized on the exchange
of SBC Communications Inc. common stock for certain FON Group notes payable,
partly offset by losses related to the sale of an investment.
Income Taxes
See Note 5 of Condensed Notes to Combined Financial Statements for information
about the differences that caused the effective income tax rates to vary from
the federal statutory rate for income taxes related to continuing operations.
Discontinued Operation, Net
As a result of Sprint's sale of its interest in Global One to FT and DT, the FON
Group's gain on sale and its equity share of the results of Global One have been
reported as a discontinued operation for all periods presented.
The FON Group recorded an after-tax gain related to the sale of Sprint's
interest in Global One of $675 million in the first quarter of 2000. The FON
Group
<PAGE>
recorded after-tax losses related to its share of losses from Global One
of $28 million in the first quarter of 1999.
- --------------------------------------------------------------------------------
Financial Condition
- --------------------------------------------------------------------------------
March 31, December 31,
2000 1999
- ------------------------------------------------------
(millions)
Combined assets $ 22,466 $ 21,803
--------------------------------
See "Liquidity and Capital Resources" for information about changes in the
Combined Balance Sheets.
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
- --------------------------------------------------------------------------------
Operating Activities
Quarters Ended
March 31,
-------------------------------
2000 1999
- ------------------------------------------------------
(millions)
Cash flows provided
by operating
activities $ 990 $ 740
-------------------------------
Operating cash flows increased $250 million mainly reflecting changes in cash
flows related to income taxes and an increase in operating income, partly offset
by an increase in working capital. In the 2000 first quarter, the FON Group
received a $149 million income tax refund from the PCS Group in accordance with
the tax sharing agreement. In the 1999 first quarter, the FON Group paid $185
million for income taxes.
Investing Activities
Quarters Ended
March 31,
-------------------------------
2000 1999
- ------------------------------------------------------
(millions)
Cash flows used by
investing
activities $ (499) $ (744)
-------------------------------
In February 2000, the FON Group received $1.4 billion from the sale of its
investment in Global One. Most of the proceeds were advanced to the PCS Group
and were used to fund its cash requirements. The remainder was used to repay
existing FON Group debt.
Capital expenditures totaled $758 million in the 2000 first quarter and $806
million in the 1999 first quarter. Long distance capital expenditures were
incurred mainly to enhance network reliability, meet increased demand for
data-related services and upgrade capabilities for providing new products and
services. The local division incurred capital expenditures to accommodate access
line growth and expand capabilities for providing enhanced services. Sprint ION
capital expenditures were incurred for development and hardware deployment.
Cash flows for the 1999 first quarter also include the repayment of loans made
to Sprint PCS prior to the Sprint restructuring.
"Investments in other affiliates, net" includes the FON Group's investment in
EarthLink and other affiliates accounted for using the equity method.
Financing Activities
Quarters Ended
March 31,
-------------------------------
2000 1999
- ------------------------------------------------------
(millions)
Cash flows used by
financing
activities $ (400) $ (345)
-------------------------------
Financing activities in the 2000 first quarter mainly reflect payments on
long-term debt. Financing activities in the 1999 first quarter mainly reflect
net debt allocated to the PCS Group of $278 million.
The FON Group paid cash dividends of $105 million in the 2000 first quarter
compared to $100 million in the 1999 first quarter.
Capital Requirements
The FON Group's 2000 investing activities, mainly consisting of capital
expenditures and investments in affiliates, are expected to require cash of $4.6
to $5.0 billion. FON Group capital expenditures are expected to range between
$4.0 and $4.3 billion in 2000. The long distance and local divisions will
require the majority of this total. Including the investments in broadband fixed
wireless facilities, Sprint ION is expected to require $900 million to $1
billion for capital expenditures in 2000. Investments in affiliates are expected
to require cash of $600 to $700 million. Dividend payments are expected to total
$435 million.
Sprint's tax sharing agreement provides for the allocation of income taxes
between the FON Group and the PCS Group. Sprint expects the FON Group to
continue to make significant payments to the PCS Group under this agreement
because of expected PCS Group operating losses.
Liquidity
See Sprint's "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity" for a discussion of liquidity.
<PAGE>
- --------------------------------------------------------------------------------
Financial Strategies
- --------------------------------------------------------------------------------
Financial strategies are determined by Sprint on a centralized basis. See
Sprint's "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Financial Strategies."
- --------------------------------------------------------------------------------
Forward-looking Information
- --------------------------------------------------------------------------------
See Sprint's "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Forward-looking Information" for a discussion of
forward-looking information.
<PAGE>
Annex III
Sprint PCS Group
Combined Financial Information
<PAGE>
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF OPERATIONS (Unaudited) Sprint PCS Group
(millions, except per share data)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Quarters Ended March 31, 2000 1999
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
<S> <C> <C>
Net Operating Revenues $ 1,177 $ 604
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Operating Expenses
Costs of services and products 903 717
Selling, general and administrative 455 365
Depreciation and amortization 421 349
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Total operating expenses 1,779 1,431
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Operating Loss (602) (827)
Interest expense (220) (151)
Other income, net 26 26
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Loss before income taxes and extraordinary items (796) (952)
Income tax benefit 286 347
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Loss before Extraordinary Items (510) (605)
Extraordinary items, net (3) (21)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Net Loss (513) (626)
Preferred stock dividends (4) (4)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Loss applicable to common stock $ (517) $ (630)
-- ------------- --- -------------
Basic and Diluted Loss per Common Share(1)
Continuing operations $ (0.54) $ (0.71)
Extraordinary items - (0.02)
- --------------------------------------------- --- ------------- -- ------------- -- ------------- --- -------------
Total $ (0.54) $ (0.73)
-- ------------- --- -------------
Basic and diluted weighted average common shares(1) 956.3 863.4
-- ------------- --- -------------
(1) In February 2000, Sprint effected a two-for-one stock split of its PCS
common stock. As a result, 1999 basic and diluted loss per common share and
weighted average common shares have been restated.
See accompanying Condensed Notes to Combined Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) Sprint PCS Group
(millions)
- --------------------------------------------- ----------------- ----------------- ---------------- -----------------
Quarters Ended March 31, 2000 1999
- --------------------------------------------- ----------------- ----------------- ---------------- -----------------
<S> <C> <C>
Net Loss $ (513) $ (626)
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Other Comprehensive Income
Unrealized holding gains on securities 3 -
Income tax expense (1) -
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Net unrealized holding gains on securities 2 -
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Total other comprehensive income 2 -
- --------------------------------------------- --- ------------- -- -------------- -- ------------- --- -------------
Comprehensive Loss $ (511) $ (626)
-- ------------- --- -------------
See accompanying Condensed Notes to Combined Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS Sprint PCS Group
(millions)
- -------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2000 1999
- -------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets
<S> <C> <C>
Cash and equivalents $ 55 $ 16
Accounts receivable, net of allowance for doubtful
accounts of $57 573 572
Inventories 320 336
Prepaid expenses 123 89
Current tax benefit receivable from the FON Group 447 293
Other - 9
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 1,518 1,315
Property, plant and equipment
Network equipment 6,186 5,817
Construction work in progress 1,729 1,692
Buildings and leasehold improvements 1,340 1,235
Other 693 667
- -------------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment 9,948 9,411
Accumulated depreciation (1,664) (1,415)
- -------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 8,284 7,996
Intangible assets
Goodwill 4,530 4,522
PCS licenses 3,060 3,060
Customer base 735 726
Microwave relocation costs 398 377
Other 45 54
- -------------------------------------------------------------------------------------------------------------------------
Total intangible assets 8,768 8,739
Accumulated amortization (681) (551)
- -------------------------------------------------------------------------------------------------------------------------
Net intangible assets 8,087 8,188
Other 423 425
- -------------------------------------------------------------------------------------------------------------------------
Total $ 18,312 $ 17,924
-----------------------------------
Liabilities and Group Equity
Current liabilities
Current maturities of long-term debt $ 58 $ 185
Accounts payable 430 450
Construction obligations 951 1,039
Accrued taxes 137 130
Accrued interest 239 120
Payables to the FON Group 1,152 136
Other 486 518
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,453 2,578
Long-term debt and capital lease obligations 11,070 11,304
Deferred credits and other liabilities
Deferred income taxes 644 582
Other 156 140
- -------------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 800 722
Group equity 2,989 3,320
- -------------------------------------------------------------------------------------------------------------------------
Total $ 18,312 $ 17,924
-----------------------------------
See accompanying Condensed Notes to Combined Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF CASH FLOWS (Unaudited) Sprint PCS Group
(millions)
- ------------------------------------------------------------------ ----------------- ----------------- ----------------
Quarters Ended March 31, 2000 1999
- ------------------------------------------------------------------ ----------------- ----------------- ----------------
Operating Activities
<S> <C> <C>
Net loss $ (513) $ (626)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization 421 349
Deferred income taxes 60 64
Extraordinary items, net 3 21
Changes in assets and liabilities:
Accounts receivable, net (1) (50)
Inventories and other current assets (18) (69)
Accounts payable and other current liabilities 53 97
Current tax benefit receivable from the FON Group (154) (265)
Receivables from and payables to the FON Group, net 88 91
Noncurrent assets and liabilities, net 17 (10)
Other, net (16) 26
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Net cash used by operating activities (60) (372)
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Investing Activities
Capital expenditures (693) (512)
Proceeds from sale of assets 122 -
Purchase of PrimeCo Hawaii - (82)
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Net cash used by investing activities (571) (594)
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Financing Activities
Proceeds from long-term debt - 1,980
Payments on long-term debt (370) (1,958)
Dividends paid (4) (4)
Proceeds from common stock issued 30 842
Advances from the FON Group 1,014 -
Other, net - (2)
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Net cash provided by financing activities 670 858
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Increase (Decrease) in Cash and Equivalents 39 (108)
Cash and Equivalents at Beginning of Period 16 173
- ------------------------------------------------------------------ --- ------------- --- ------------- -- -------------
Cash and Equivalents at End of Period $ 55 $ 65
--- ------------- -- -------------
See accompanying Condensed Notes to Combined Financial Statements (Unaudited).
</TABLE>
<PAGE>
CONDENSED NOTES TO COMBINED FINANCIAL
STATEMENTS (Unaudited) Sprint PCS Group
The information in this Form 10-Q has been prepared according to Securities and
Exchange Commission (SEC) rules and regulations. In our opinion, the combined
interim financial statements reflect all adjustments, consisting only of normal
recurring accruals, needed to fairly present the PCS Group's combined financial
position, results of operations, cash flows and comprehensive loss.
Certain information and footnote disclosures normally included in combined
financial statements prepared according to accounting principles generally
accepted in the United States have been condensed or omitted. As a result, you
should read these financial statements along with Sprint Corporation's 1999 Form
10-K. Operating results for the 2000 year-to-date period do not necessarily
represent the results that may be expected for the year ending December 31,
2000.
- --------------------------------------------------------------------------------
1. Merger
- --------------------------------------------------------------------------------
In October 1999, Sprint announced a definitive merger agreement with WorldCom,
Inc. (WorldCom). Under the agreement, each share of Sprint FON stock will be
exchanged for $76 of WorldCom common stock, subject to a collar. In addition,
each share of Sprint PCS stock will be exchanged for one share of a new WorldCom
PCS tracking stock and 0.116025 shares of WorldCom common stock. The terms of
the WorldCom PCS tracking stock will be equivalent to those of Sprint's PCS
common stock and will track the performance of the company's personal
communication services (PCS) business. Sprint and WorldCom shareholders have
approved the merger. The merger is subject to approvals from the Federal
Communications Commission (FCC), the Justice Department, various state
government bodies and foreign regulatory authorities. The companies anticipate
that the merger will close in the second half of 2000.
- --------------------------------------------------------------------------------
2. Basis of Combination and Presentation
- --------------------------------------------------------------------------------
The PCS stock is intended to reflect the performance of Sprint's domestic
wireless PCS operations. The FON stock is intended to reflect the performance of
all of Sprint's other operations.
The combined PCS Group financial statements, together with the combined FON
Group financial statements, include all the accounts in Sprint's consolidated
financial statements. The combined financial statements for each Group were
prepared on a basis that management believes is reasonable and proper and
include:
- the combined historical balance sheets, results of operations and cash
flows for each of the Groups, with all significant intragroup amounts
and transactions eliminated,
- an allocation of Sprint's debt, including the related effects on
results of operations and cash flows, and
- an allocation of corporate overhead.
The PCS Group entities are commonly controlled companies and are wholly owned by
Sprint. Transactions between the PCS Group and the FON Group have not been
eliminated in the combined financial statements of either Group.
The PCS Group combined financial statements provide PCS shareholders with
financial information about the PCS Group operations. Investors in FON stock and
PCS stock are Sprint shareholders and are subject to risks related to all of
Sprint's businesses, assets and liabilities. Sprint retains ownership and
control of the assets and operations of each Group. Financial effects of either
Group that affect Sprint's results of operations or financial condition could
affect the results of operations or financial position of the other Group or the
market price of the other Group's stock. Net losses of either Group, and
dividends or distributions on, or repurchases of, PCS stock or FON stock, will
reduce Sprint funds legally available for dividends on both Groups' stock. As a
result, the PCS Group combined financial statements should be read along with
Sprint's consolidated financial statements and the FON Group's combined
financial statements.
The PCS Group combined financial statements are prepared using accounting
principles generally accepted in the United States. These principles require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported amounts of revenues and expenses. Actual results could differ from
those estimates.
Certain prior-year amounts have been reclassified to conform to the current-year
presentation. These reclassifications had no effect on the results of operations
or group equity as previously reported.
<PAGE>
- --------------------------------------------------------------------------------
3. Income Taxes
- --------------------------------------------------------------------------------
The differences that caused the PCS Group's effective income tax rates to vary
from the 35% federal statutory rate for income taxes related to continuing
operations were as follows:
Quarters Ended
March 31,
-------------------------
2000 1999
- -------------------------------------------------------
(millions)
Income tax benefit at the
federal statutory rate $ (279) $ (333)
Effect of:
State income taxes, net
of federal income tax (17) (19)
effect
Goodwill amortization 10 7
Other, net - (2)
- -------------------------------------------------------
Income tax benefit $ (286) $ (347)
-------------------------
Effective income tax rate 35.9% 36.4%
-------------------------
- --------------------------------------------------------------------------------
4. Long-term Debt and Capital Lease Obligations
- --------------------------------------------------------------------------------
During the 2000 first quarter, the PCS Group's notes payable and commercial
paper decreased $193 million. The PCS Group used advances from the FON Group to
repay the borrowings.
In the 2000 first quarter, Sprint repaid, prior to scheduled maturities, $127
million of the PCS Group's notes payable to the FCC. These notes had an interest
rate of 7.8%. This resulted in a $3 million after-tax extraordinary loss.
- --------------------------------------------------------------------------------
5. Group Equity
- --------------------------------------------------------------------------------
Quarter Ended
March 31,
2000
- -------------------------------------------------------
(millions)
Beginning balance $ 3,320
Net loss (513)
Dividends (4)
Common stock issued 65
Other, net 121
- -------------------------------------------------------
Ending balance $ 2,989
------------------
- --------------------------------------------------------------------------------
6. Litigation, Claims and Assessments
- --------------------------------------------------------------------------------
PCS shareholders are subject to all of the risks related to an investment in
Sprint and the PCS Group, including the effects of any legal proceedings and
claims against the FON Group.
Various suits arising in the ordinary course of business are pending against
Sprint. Management cannot predict the final outcome of these actions but
believes they will not be material to the PCS Group's combined financial
statements.
- --------------------------------------------------------------------------------
7. Supplemental Cash Flows Information
- --------------------------------------------------------------------------------
The PCS Group's cash paid (received) for interest and income taxes was as
follows:
Quarters Ended
March 31,
-------------------------
2000 1999
- -------------------------------------------------------
(millions)
Interest (net of capitalized
interest) $ 44 $ 85
-------------------------
Income taxes $ (265) $ (164)
-------------------------
The PCS Group's noncash activities included the following:
Quarters Ended
March 31,
-------------------------
2000 1999
- -------------------------------------------------------
(millions)
Common stock issued under
employee stock benefit
plans $ 33 $ -
-------------------------
Tax benefit from stock
option exercises $ 30 $ -
-------------------------
Stock received for stock
options exercised $ 6 $ -
-------------------------
Capital lease obligations $ - $ 46
-------------------------
<PAGE>
- --------------------------------------------------------------------------------
8. Recently Issued Accounting Pronouncement
- --------------------------------------------------------------------------------
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB 101). In March 2000, the SEC issued an
amendment to SAB 101 which delayed the effective date for registrants with
fiscal years that begin between December 12, 1999 and March 15, 2000. The
effective date for Sprint will be for the quarter ending June 30, 2000. The
deferral of telecommunication service activation fees and certain related costs
are specifically addressed in SAB 101 and the PCS Group is in the process of
determining the impact of SAB 101 on its financial statements. Based on a
preliminary analysis, SAB 101 is not expected to have a material impact on the
PCS Group's combined financial statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Sprint PCS Group
- --------------------------------------------------------------------------------
Recent Developments
- --------------------------------------------------------------------------------
In October 1999, Sprint announced a definitive merger agreement with WorldCom,
Inc.(WorldCom). Under the agreement, each share of Sprint FON stock will be
exchanged for $76 of WorldCom common stock, subject to a collar. In addition,
each share of Sprint PCS stock will be exchanged for one share of a new WorldCom
PCS tracking stock and 0.116025 shares of WorldCom common stock. The terms of
the WorldCom PCS tracking stock will be equivalent to those of Sprint PCS stock
and will track the performance of the company's personal communication services
(PCS) business. Sprint and WorldCom shareholders have approved the merger. The
merger is subject to approvals from the Federal Communications Commission (FCC),
the Justice Department, various state government bodies and foreign regulatory
authorities. The companies anticipate that the merger will close in the second
half of 2000.
- --------------------------------------------------------------------------------
Sprint PCS Group
- --------------------------------------------------------------------------------
The PCS Group includes Sprint's domestic wireless PCS operations. It operates
the only 100% digital PCS wireless network in the United States with licenses to
provide service nationwide using a single frequency and a single technology. At
the end of March 2000, the PCS Group operated PCS systems in more than 300
metropolitan markets, including the 50 largest U.S. metropolitan areas. The PCS
Group has licenses to serve more than 270 million people in all 50 states,
Puerto Rico and the U.S. Virgin Islands. The service offered by the PCS Group
and its affiliates now reaches more than 190 million people. The PCS Group
provides nationwide service through:
- operating its own digital network in major U.S. metropolitan areas,
- affiliating with other companies, mainly in and around smaller U.S.
metropolitan areas,
- roaming on other providers' analog cellular networks using
dual-band/dual-mode handsets, and
- roaming on other providers' digital PCS networks that use code
division multiple access.
The wireless industry typically generates a higher number of subscriber
additions and handset sales in the fourth quarter of each year compared to the
remaining quarters. This is due to the use of retail distribution, which is
dependent on the holiday shopping season; the timing of new products and service
introductions; and aggressive marketing and sales promotions.
- --------------------------------------------------------------------------------
Results of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Selected Operating Results
---------------------------------------------------------------------
Quarters Ended
March 31, Variance
---------------------------------- -------------------------------
2000 1999 $ %
- ---------------------------------------------- ---------------- ----------------- -- ------------- -----------------
(millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 1,177 $ 604 $ 573 94.9%
- ---------------------------------------------- -- ------------- -- -------------- -- -------------
Operating expenses
Costs of services and products 903 717 186 25.9%
Selling, general and administrative 455 365 90 24.7%
Depreciation and amortization 421 349 72 20.6%
- ---------------------------------------------- -- ------------- -- -------------- -- -------------
Total operating expenses 1,779 1,431 348 24.3%
- ---------------------------------------------- -- ------------- -- -------------- -- -------------
Operating loss $ (602) $ (827) $ 225 27.2%
-- ------------- -- -------------- -- -------------
Operating loss before depreciation and
amortization $ (181) $ (478) $ 297 62.1%
-- ------------- -- -------------- -- -------------
</TABLE>
<PAGE>
The PCS Group markets its products through multiple distribution channels,
including its own retail stores as well as other retail outlets. Equipment sales
to one retail chain and the subsequent service revenues generated by sales to
its customers accounted for 25% of net operating revenues in the 2000 first
quarter and 28% in the 1999 first quarter.
Net Operating Revenues
Net operating revenues include subscriber revenues and sales of handsets and
accessory equipment. Subscriber revenues consist of monthly recurring charges
and usage charges. Subscriber revenues increased 113% in the 2000 first quarter
mainly reflecting a 107% increase in the average number of customers. The PCS
Group added 831,000 customers in the 2000 first quarter and ended the quarter
with over 6.5 million customers in more than 300 metropolitan markets
nationwide. Average monthly service revenue per user (ARPU) was $54 for the 2000
first quarter compared to $52 for the same 1999 period.
Customer churn rates have improved from the 1999 first quarter and are currently
in the low-3% range. The improvement reflects increased services and the success
of several churn reduction initiatives implemented in the second half of 1999.
Revenues from sales of handsets and accessories were approximately 15% of net
operating revenues in the 2000 first quarter and 20% in the 1999 first quarter.
As part of the PCS Group's marketing plans, handsets are normally sold at prices
below the PCS Group's cost.
Operating Expenses
Costs of services and products mainly include handset and accessory costs,
switch and cell site expenses and other network-related costs. These costs
increased 26% in the 2000 first quarter from the 1999 first quarter reflecting
the significant growth in customers and expanded market coverage, partly offset
by a reduction in handset unit costs.
Selling, general and administrative (SG&A) expense mainly includes marketing
costs to promote products and services as well as salary and benefit costs. SG&A
expense increased 25% in the 2000 first quarter from the 1999 first quarter
reflecting an expanded workforce to support subscriber growth and increased
marketing and selling costs.
Acquisition costs per gross customer addition, including equipment subsidies and
marketing costs, have improved from the high-$400 range in the 1999 first
quarter to the high-$300 range in 2000. Lower handset unit costs and scale
benefits from greater customer additions have contributed to the improvement.
Cash costs per user (CCPU) consists of costs of service revenues, service
delivery and other general and administrative costs. CCPU decreased more than
30% in the 2000 first quarter from the 1999 first quarter. The improvements
reflect successful expense management and scale benefits resulting from the
increased customer base.
Depreciation and amortization expense consists mainly of depreciation of network
assets and amortization of intangible assets. The intangible assets include
goodwill, PCS licenses, customer base, microwave relocation costs and assembled
workforce, which are being amortized over 30 months to 40 years.
Depreciation and amortization expense increased 21% in the 2000 first quarter
from the 1999 first quarter mainly reflecting amortization of intangible assets
acquired in the Cox PCS purchase in the 1999 second quarter. It also reflects
depreciation of the network assets placed in service during 2000 and 1999.
- --------------------------------------------------------------------------------
Nonoperating Items
- --------------------------------------------------------------------------------
Interest Expense
The PCS Group's effective interest rate on long-term debt was 8.6% for both the
2000 and 1999 first quarters. Interest costs on short-term borrowings classified
as long-term debt and intergroup borrowings have been excluded so as not to
distort the PCS Group's effective interest rate on long-term debt.
Interest expense on borrowings incurred by Sprint and allocated to the PCS Group
is based on rates the PCS Group would be able to obtain from third parties as a
direct or indirect wholly owned Sprint subsidiary, but without the benefit of
any guaranty by Sprint or any member of the FON Group. The PCS Group's interest
expense includes $45 million in the 2000 first quarter and $30 million in the
1999 first quarter resulting from the difference between Sprint's actual
interest rates and the rates charged to the PCS Group. These costs are reflected
in the effective interest rates above.
Other Income, Net
Other income mainly includes a gain on the sale of customers and associated
network infrastructure of $28 million in the 2000 first quarter. Other income
<PAGE>
for the 1999 first quarter primarily includes minority interest in Cox PCS of
$20 million.
Income Taxes
See Note 3 of Condensed Notes to Combined Financial Statements for the
differences that caused the effective income tax rates to vary from the federal
statutory rate for income taxes related to continuing operations.
Extraordinary Items, Net
In the 2000 first quarter, Sprint repaid, prior to scheduled maturities, $127
million of the PCS Group's notes payable to the FCC. These notes had an interest
rate of 7.8%. This resulted in a $3 million after-tax extraordinary loss.
In the 1999 first quarter, Sprint terminated some of the PCS Group's revolving
credit facilities and repaid, prior to scheduled maturities, the related
outstanding balance of $1.7 billion. These facilities had a weighted average
interest rate equal to the London Inter-Bank Offered Rate plus 40 basis points.
This resulted in a $21 million after-tax extraordinary loss.
- --------------------------------------------------------------------------------
Financial Condition
- --------------------------------------------------------------------------------
March 31, December 31,
2000 1999
- ------------------------------------------------------
(millions)
Combined assets $ 18,312 $ 17,924
--------------------------------
Net property, plant and equipment increased $288 million since year-end mainly
reflecting capital expenditures to support the PCS network buildout and
expansion, partly offset by year-to-date depreciation.
Sprint's tax sharing agreement provides for the allocation of income taxes
between the FON Group and the PCS Group. The current tax benefit receivable from
the FON Group increased $154 million reflecting the PCS Group's 2000
year-to-date current income tax benefit recognized, offset by payments from the
FON Group during the period.
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
- --------------------------------------------------------------------------------
Operating Activities
Quarters Ended
March 31,
-------------------------------
2000 1999
- ------------------------------------------------------
(millions)
Cash flows used by
operating
activities $ (60) $ (372)
-------------------------------
Cash flows used by operating activities decreased $312 million in the 2000 first
quarter primarily reflecting decreased operating losses for the PCS Group.
Investing Activities
Quarters Ended
March 31,
-------------------------------
2000 1999
- ------------------------------------------------------
(millions)
Cash flows used by
investing
activities $ (571) $ (594)
-------------------------------
Capital expenditures, which are the PCS Group's largest investing activity,
totaled $693 million in the 2000 first quarter, compared to $512 million in the
1999 first quarter. Capital expenditures in both years were mainly for the
buildout and expansion of the PCS network. In the 2000 first quarter, the PCS
Group sold a portion of its customer base and the associated network
infrastructure to an affiliate for $122 million. In the 1999 first quarter, the
PCS Group purchased PCS operations in Hawaii for $82 million.
Financing Activities
Quarters Ended
March 31,
-------------------------------
2000 1999
- ------------------------------------------------------
(millions)
Cash flows provided
by financing
activities $ 670 $ 858
-------------------------------
In the 2000 first quarter, financing activities reflect advances from the FON
Group used mainly to fund capital expenditures and repay existing debt. In the
1999 first quarter, the PCS Group received $842 million of net proceeds from PCS
common stock issuances. The proceeds were used mainly to fund capital
requirements and operating losses.
Capital Requirements
The PCS Group's 2000 investing activities, mainly consisting of capital
expenditures and investments in affiliates, are expected to be between $3.1 and
$3.3 billion. Additional funds will be required to fund expected operating
losses, working capital and debt service requirements of the PCS Group.
Investments in affiliates are expected to require cash of $200 million.
PCS preferred stock dividend payments are expected to total $15 million in 2000,
including payments to the FON Group for its preferred intergroup interest.
<PAGE>
Liquidity
See Sprint's "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity" for a discussion of liquidity.
- --------------------------------------------------------------------------------
Financial Strategies
- --------------------------------------------------------------------------------
Financial strategies are determined by Sprint on a centralized basis. See
Sprint's "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Financial Strategies."
- --------------------------------------------------------------------------------
Forward-looking Information
- --------------------------------------------------------------------------------
See Sprint's "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Forward-looking Information" for a discussion of
forward-looking information.
