DESCRIPTION OF T-MOBILE CAPITAL STOCK
The following description of the material terms of the capital stock of the combined company is not complete and is qualified in its entirety by reference to the fifth amended and restated certificate of incorporation of T-Mobile (which we refer to as the “combined company certificate of incorporation”) and the sixth amended and restated bylaws of T-Mobile, which will be in effect at the closing. This description is subject to the detailed provisions of, and is qualified by reference to, the combined company certificate of incorporation, the bylaws of the combined company and the amended and restated stockholders’ agreement, the forms of which are attached as Exhibits A, B and E, respectively, to the business combination agreement and Annexes D, E and F, respectively, to this joint consent solicitation statement/prospectus and are incorporated by reference herein.
Authorized Share Capital
The authorized capital stock of the combined company will consist of 2,000,000,000 shares of common stock, par value $0.00001 per share (which we refer to in this section as “common stock”), and 100,000,000 shares of preferred stock, par value $0.00001 per share (which we refer to in this section as “preferred stock”). Following the completion of the merger transactions, we expect that there will be approximately [ ] shares of common stock outstanding and no shares of preferred stock outstanding.
Common Stock
Holders of common stock have the right to vote on every matter submitted to a vote of stockholders other than any matter on which only the holders of preferred stock are entitled to vote separately as a class. There are no cumulative voting rights. Accordingly, holders of a majority of shares entitled to vote in an election of directors are able to elect all of the directors standing for election.
Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock will share equally on a per share basis any dividends when, as and if declared by the T-Mobile board of directors out of funds legally available for that purpose. If the combined company is liquidated, dissolved or wound up, the holders of common stock will be entitled to a ratable share of any distribution to stockholders, after satisfaction of all of the combined company’s liabilities and of the prior rights of any outstanding class of preferred stock. The common stock carries no preemptive or other subscription rights to purchase shares of common stock and is not convertible, assessable or entitled to the benefits of any sinking fund.
Redemption
Pursuant to the combined company certificate of incorporation, if a holder of common stock acquires additional shares of common stock or otherwise is attributed with ownership of such shares that would cause the combined company to violate FCC rules, the combined company may, at the option of the T-Mobile board of directors, redeem from the holder or holders causing the violation of the FCC’s rules shares of common stock sufficient to eliminate the violation.
The redemption price will be a price mutually determined by the combined company and the stockholders, but if no agreement can be reached, the redemption price will be either:
| • | 75% of the fair market value of the common stock being redeemed, if the holder caused the FCC violation; or |
| • | 100% of the fair market value of the common stock being redeemed, if the FCC violation was not caused by the holder. |
The foregoing redemption rights do not apply to any shares of common stock or preferred stock beneficially owned by Deutsche Telekom or SoftBank or any of their subsidiaries. If any waivers or approvals are required
from the FCC in order for Deutsche Telekom, SoftBank or any of their subsidiaries to acquire or hold any shares of common stock or preferred stock, each of Deutsche Telekom and SoftBank, as applicable, and any of its subsidiaries are required by the combined company certificate of incorporation to cooperate to secure such waivers or approvals and abide by any conditions related to such waivers or approvals.
Preferred Stock
Subject to the provisions of the combined company certificate of incorporation and the limitations prescribed by law, the combined company certificate of incorporation authorizes the T-Mobile board of directors to issue up to 100,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions of the preferred stock, including dividend rights, dividend rates, conversion rates, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of the series, which may be superior to those of the common stock, without further vote or action by the stockholders of the combined company.
One of the effects of undesignated preferred stock may be to enable the T-Mobile board of directors to render more difficult or to discourage an attempt to obtain control of the combined company by means of a tender offer, proxy contest, merger or otherwise, and as a result, protect the continuity of management. The issuance of shares of preferred stock under the T-Mobile board of directors’ authority described above may adversely affect the rights of the holders of common stock. For example, preferred stock issued by the combined company may rank prior to common stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage bids for the common stock or may otherwise adversely affect the market price of the common stock.
Anti-takeover Effects of Delaware Law and the Combined Company Certificate of Incorporation and Bylaws
Delaware law
The combined company will be a Delaware corporation and will be subject to Delaware law, which generally prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the time that the person became an interested stockholder, unless:
| • | before such time the board of directors of the corporation approved either the business combination or the transaction in which the person became an interested stockholder; |
| • | upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares owned by persons who are directors and also officers of the corporation and by certain employee stock plans; or |
| • | at or after such time the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66-2/3% of the outstanding voting stock of the corporation that is not owned by the interested stockholder. |
A “business combination” generally includes mergers, asset sales and similar transactions between the corporation and the interested stockholder, and other transactions resulting in a financial benefit to the stockholder. An “interested stockholder” is a person:
| • | who, together with affiliates and associates, owns 15% or more of the corporation’s outstanding voting stock; or |
| • | who is an affiliate or associate of the corporation and, together with his or her affiliates and associates, has owned 15% or more of the corporation’s outstanding voting stock within three years. |
The provisions of Delaware law described above along with the combined company certificate of incorporation would make more difficult or discourage a proxy contest or acquisition of control by a holder of a substantial block of common stock or the removal of the incumbent board of directors. Such provisions could also have the effect of discouraging an outsider from making a tender offer or otherwise attempting to obtain control of the combined company, even though such an attempt might be beneficial to the combined company and its stockholders.
The Combined Company Certificate of Incorporation and Bylaws
The following provisions of the combined company certificate of incorporation and bylaws could be deemed to have an anti-takeover effect and could delay, defer or prevent a takeover attempt that a stockholder might consider to be in the stockholders’ best interests.
| • | Advance notice of director nominations and matters to be acted upon at meetings. The bylaws of the combined company contain advance notice requirements for nominations of directors to the T-Mobile board of directors and for proposing matters that can be acted upon by stockholders at stockholder meetings. |
| • | Amendment to bylaws. The combined company certificate of incorporation provides that the bylaws of the combined company may be amended upon the affirmative vote of the holders of shares having a majority of the combined company’s voting power. The combined company certificate of incorporation also provides that the T-Mobile board of directors is authorized to make, alter or repeal the bylaws of the combined company without further stockholder approval. |
| • | Special meeting of stockholders. The combined company certificate of incorporation provides that a special meeting of stockholders (1) may be called by the chairman of the T-Mobile board of directors or the chief executive officer of the combined company and (2) must be called by the secretary of the combined company at the request of (a) a majority of the T-Mobile board of directors or (b) as long as Deutsche Telekom beneficially owns 25% or more of the outstanding shares of common stock, the holders of not less than 33-1/3% of the voting power of all of the outstanding voting stock of the combined company entitled to vote generally in the election of directors. |
| • | Board representation. The combined company certificate of incorporation incorporates the applicable provisions of the amended and restated stockholders’ agreement providing that Deutsche Telekom and SoftBank generally have the right to designate nominees for election to the T-Mobile board of directors and committees thereof as described under “Stockholders’ and Proxy Agreement—Amended and Restated Stockholders’ Agreement—Board Representation.” |
| • | Special approval rights. The combined company certificate of incorporation provides Deutsche Telekom and SoftBank with the same approval rights as are set forth in the amended and restated stockholders’ agreement with respect to the combined company’s ability to take certain actions without the prior written consent of Deutsche Telekom or SoftBank, respectively, pursuant to the provisions described under “Stockholders’ and Proxy Agreement—Amended and Restated Stockholders’ Agreement—Specified Actions.” |
| • | Authorized but unissued shares. The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval. These additional shares may be used for a variety of corporate purposes, such as for additional public offerings, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could render more difficult or discourage an attempt to obtain control of the combined company by means of a proxy contest, tender offer, merger or otherwise. |
| • | Cumulative voting. The combined company certificate of incorporation does not permit cumulative voting in the election of directors. Instead, any election of directors will be decided by a plurality of the votes cast (in person or by proxy) by holders of common stock. |
Amended and Restated Stockholders’ Agreement
Pursuant to the amended and restated stockholders’ agreement, Deutsche Telekom and SoftBank will have certain rights to designate nominees for election to the T-Mobile board of directors and committees thereof. The amended and restated stockholders’ agreement also sets forth specified actions that the combined company may not take without the prior written consent of Deutsche Telekom or SoftBank, as applicable. Additionally, the amended and restated stockholders’ agreement restricts each of Deutsche Telekom and SoftBank with respect to certain acquisitions and dispositions of common stock and the conduct of certain business activities that would compete with the combined company in the United States, Puerto Rico and the territories and protectorates of the United States during specified time periods, subject to certain exceptions. The amended and restated stockholders’ agreement is described in more detail in the section of this joint consent solicitation statement/prospectus entitled “—Stockholders’ and Proxy Agreement—Amended and Restated Stockholders’ Agreement.”
Limitations on Liability and Indemnification of Officers and Directors
The combined company certificate of incorporation and bylaws:
| • | eliminate the personal liability of directors for monetary damages resulting from breaches of fiduciary duty to the extent permitted by Delaware law, except (1) for any breach of a director’s duty of loyalty to the company or its stockholders, (2) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (3) under Section 174 of the DGCL for payment of unlawful dividends or unlawful stock repurchases or redemption or (4) for any transaction from which the director derived an improper personal benefit; and |
| • | indemnify directors and officers to the fullest extent permitted by Delaware law, including in circumstances in which indemnification is otherwise discretionary. |
We believe that these provisions are necessary to attract and retain qualified directors and officers. The combined company will also enter into separate indemnification agreements with each director and officer under which it agrees to indemnify, and to advance expenses to, each director and officer to the fullest extent permitted by applicable law with respect to liabilities they may incur in their capacities as directors and officers.
Director Removal
The combined company certificate of incorporation provides that, subject to certain rights of the holders of any preferred stock, any director may be removed from office at any time, with or without cause, by the affirmative vote of the holders of at least a majority of the voting power of all of the outstanding shares of the capital stock entitled to elect such director, voting separately as a class, at a duly organized meeting of stockholders or by written consent.
Stockholder Action by Written Consent
The combined company certificate of incorporation provides that, as long as Deutsche Telekom beneficially owns 25% or more of the outstanding shares of common stock, any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing setting forth the action so taken is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
Governing Law; Forum for Adjudication of Disputes
The combined company certificate of incorporation provides that the combined company certificate of incorporation and the internal affairs of the combined company will be governed by and interpreted under the laws of the State of Delaware. In addition, unless the combined company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (1) any derivative action brought on behalf of the combined company, (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the combined company to the combined company or its stockholders, (3) any action asserting a claim arising pursuant to any provision of the DGCL, the combined company certificate of incorporation or bylaws, or (4) any other action asserting a claim arising under, in connection with, and governed by the internal affairs doctrine.
Corporate Opportunities
The combined company certificate of incorporation provides, as permitted by the DGCL, that non-employee directors have no obligation to offer the company a corporate opportunity to participate in business opportunities presented to them or their respective affiliates even if the opportunity is one that the company might reasonably have pursued, unless such corporate opportunity is offered to such director in his or her capacity as a director of the combined company. Stockholders will be deemed to have notice of and to have consented to this provision of the combined company certificate of incorporation.
Listing of Common Stock
We expect that the common stock will be listed on NASDAQ under the ticker symbol “TMUS.”
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Stock Transfer & Trust Company, LLC.
