STOCKHOLDERS’ AND PROXY AGREEMENTS
Amended and Restated Stockholders’ Agreement
In connection with the closing of the merger transactions, T-Mobile, Deutsche Telekom and SoftBank will enter into an amendment and restatement (which we refer to as the “amended and restated stockholders’ agreement”) of the stockholder’s agreement dated as of April 30, 2013, by and between Deutsche Telekom and T-Mobile, the form of which is attached as Exhibit E to the business combination agreement and Annex F to this joint consent solicitation statement/prospectus and is incorporated by reference herein. The following is a summary of the material provisions of the amended and restated stockholders’ agreement. The summary in this section and elsewhere in this joint consent solicitation statement/prospectus is qualified in its entirety by reference to the amended and restated stockholders’ agreement. This summary does not purport to be complete and may not contain all of the information about the amended and restated stockholders’ agreement that is important to you. We encourage you to read the amended and restated stockholders’ agreement carefully and in its entirety.
Pursuant to the business combination agreement, prior to the closing, T-Mobile, Deutsche Telekom and SoftBank will enter into the amended and restated stockholders’ agreement.
Board Representation
Pursuant to the amended and restated stockholders’ agreement, Deutsche Telekom and SoftBank will have the right to designate a number of individuals (each of which we refer to as a “Deutsche Telekom designee” and a “SoftBank designee,” respectively) to the T-Mobile board of directors and any committees thereof as follows:
| • | 50% or more aggregate voting percentage / 22.5% or more SoftBank voting percentage. At all times when (1) the sum of the voting percentage (as defined below) of Deutsche Telekom and the voting percentage of SoftBank is 50% or more, (2) any voting security (as defined below) continues to be subject to the proxy (as defined under “—Proxy Agreement”) and (3) the voting percentage of SoftBank is 22.5% or more: |
| • | the T-Mobile board of directors will consist of 14 directors as follows: (a) nine Deutsche Telekom designees, at least two of whom will be independent directors designated following consultation with SoftBank and the then-serving directors who are not officers, employees or directors of Deutsche Telekom, SoftBank, certain SoftBank affiliated entities or any of their respective controlled affiliates (each of whom we refer to as a “non-affiliated director”) and one of whom will be the chief executive officer of Deutsche Telekom (or, if such person is unable to serve, another person designated by Deutsche Telekom), (b) four SoftBank designees, at least two of whom will be independent directors designated following consultation with Deutsche Telekom and the then-serving non-affiliated directors (and one of whom will be the “security director” to the extent required by the NSA) and one of whom will be the chief executive officer of SoftBank (or, if such person is unable to serve, another person designated by SoftBank) and (c) the chief executive officer of the combined company; |
| • | the chief executive officer of Deutsche Telekom (or, if such person is unable to serve, another person designated by Deutsche Telekom) will have the right to be the chairperson of the T-Mobile board of directors; |
| • | the T-Mobile board of directors will establish a standing committee (which we refer to as the “CEO selection committee”) that has the exclusive right, by a majority vote of the members of such committee, to hire and fire the chief executive officer of the combined company. However, prior to any such firing of the chief executive officer, the CEO selection committee will consult with SoftBank for a period of one month (unless SoftBank concurs with such firing or the chief executive officer is fired for cause). The CEO selection committee will consist of five directors, three of whom will be Deutsche Telekom designees, one of whom will be a SoftBank designee and one of whom will be a non-affiliated director; and |
| • | all other committees of the T-Mobile board of directors will be comprised so that the number of Deutsche Telekom designees on such committee is greater than the number of SoftBank designees on such committee, the number of Deutsche Telekom and SoftBank designees on such committee is proportionate to the number of Deutsche Telekom and SoftBank designees on the T-Mobile board of directors and so that there will be at least one SoftBank designee and one non-affiliated director (or such greater number as may be required by the SEC, NASDAQ or any other exchange on which the securities of the combined company are listed) on each committee. In addition, the chairperson of the nominating and corporate governance committee will be a non-affiliated director and there will be a transaction committee and the chairperson of such committee will be a Deutsche Telekom designee. |
| • | 50% or more aggregate voting percentage / between 15% and 22.5% SoftBank voting percentage. At all times when (1) the sum of the voting percentage of Deutsche Telekom and the voting percentage of SoftBank is 50% or more, (2) any voting security continues to be subject to the proxy and (3) the voting percentage of SoftBank is 15% or more but less than 22.5%: |
| • | the T-Mobile board of directors will consist of 14 directors as follows: (a) ten Deutsche Telekom designees, at least two of whom will be independent directors designated following consultation with SoftBank and the then-serving non-affiliated directors and one of whom will be the chief executive officer of Deutsche Telekom (or, if such person is unable to serve, another person designated by Deutsche Telekom), (b) two SoftBank designees, at least one of whom will be an independent director designated following consultation with Deutsche Telekom and the then-serving non-affiliated directors (and will be the “security director” to the extent required by the NSA), (c) one independent director recommended by the nominating and corporate governance committee for nomination and not designated by Deutsche Telekom or SoftBank and (d) the chief executive officer of the combined company; |
| • | the chief executive officer of Deutsche Telekom (or, if such person is unable to serve, another person designated by Deutsche Telekom) will have the right to be the chairperson of the T-Mobile board of directors; |
| • | the T-Mobile board of directors will establish a CEO selection committee that has the exclusive right, by a majority vote of the members of such committee, to hire and fire the chief executive officer of the combined company. However, prior to any such firing of the chief executive officer, the CEO selection committee will consult with SoftBank for a period of one month (unless SoftBank concurs with such firing or the chief executive officer is fired for cause). The CEO selection committee will consist of five directors, three of whom will be Deutsche Telekom designees, one of whom will be a SoftBank designee and one of whom will be a non-affiliated director; and |
| • | all other committees of the T-Mobile board of directors will be comprised so that the number of Deutsche Telekom designees on such committee is greater than the number of SoftBank designees on such committee, the number of Deutsche Telekom and SoftBank designees on such committee is proportionate to the number of Deutsche Telekom and SoftBank designees on the T-Mobile board of directors and so that there will be at least one SoftBank designee and one non-affiliated director (or such greater number as may be required by the SEC, NASDAQ or any other exchange on which the securities of the combined company are listed) on each committee. In addition, the chairperson of the nominating and corporate governance committee will be a non-affiliated director and there will be a transaction committee and the chairperson of such committee will be a Deutsche Telekom designee. |
| • | 50% or more aggregate voting percentage / between 10% and 15% SoftBank voting percentage. At all times when (1) the sum of the voting percentage of Deutsche Telekom and the voting percentage of |
| SoftBank is 50% or more, (2) any voting security continues to be subject to the proxy and (3) the voting percentage of SoftBank is 10% or more but less than 15%: |
| • | the T-Mobile board of directors will consist of 14 directors as follows: (a) ten Deutsche Telekom designees, at least two of whom will be independent directors designated following consultation with SoftBank and the then-serving non-affiliated directors and one of whom will be the chief executive officer of Deutsche Telekom (or, if such person is unable to serve, another person designated by Deutsche Telekom), (b) one SoftBank designee, (c) two independent directors recommended by the nominating and corporate governance committee for nomination and not designated by Deutsche Telekom or SoftBank and (d) the chief executive officer of the combined company; |
| • | the chief executive officer of Deutsche Telekom (or, if such person is unable to serve, another person designated by Deutsche Telekom) will have the right to be the chairperson of the T-Mobile board of directors; |
| • | the T-Mobile board of directors will establish a CEO selection committee that has the exclusive right, by a majority vote of the members of such committee, to hire and fire the chief executive officer of the combined company. The CEO selection committee will consist of five directors, three of whom will be Deutsche Telekom designees and two of whom will be non-affiliated directors; and |
| • | all other committees of the T-Mobile board of directors will be comprised so that the number of Deutsche Telekom designees on such committee is greater than the number of SoftBank designees on such committee, and so that there will be at least one non-affiliated director (or such greater number as may be required by the SEC, NASDAQ or any other exchange on which the securities of the combined company are listed) on each committee. In addition, the chairperson of the nominating and corporate governance committee will be a non-affiliated director and there will be a transaction committee and the chairperson of such committee will be a Deutsche Telekom designee. |
| • | 50% or more aggregate voting percentage / less than 10% SoftBank voting percentage. At all times when (1) the sum of the voting percentage of Deutsche Telekom and the voting percentage of SoftBank is 50% or more, (2) any voting security continues to be subject to the proxy and (3) the voting percentage of SoftBank is less than 10%: |
| • | the T-Mobile board of directors will consist of 14 directors as follows: (a) ten Deutsche Telekom designees, at least two of whom will be independent directors designated following consultation with SoftBank and the then-serving non-affiliated directors and one of whom will be the chief executive officer of Deutsche Telekom (or, if such person is unable to serve, another person designated by Deutsche Telekom), (b) three independent directors recommended by the nominating and corporate governance committee for nomination by the T-Mobile board of directors and not designated by Deutsche Telekom or SoftBank and (c) the chief executive officer of the combined company; |
| • | the chief executive officer of Deutsche Telekom (or, if such person is unable to serve, another person designated by Deutsche Telekom) will have the right to be the chairperson of the T-Mobile board of directors; |
| • | the T-Mobile board of directors will establish a CEO selection committee that has the exclusive right, by a majority vote of the members of such committee, to hire and fire the chief executive officer of the combined company. The CEO selection committee will consist of five directors, three of whom will be Deutsche Telekom designees and two of whom will be non-affiliated directors; and |
| • | all other committees of the T-Mobile board of directors will be comprised so that there will be at least one non-affiliated director (or such greater number as may be required by the SEC, |
| NASDAQ or any other exchange on which the securities of the combined company are listed) on each committee. In addition, the chairperson of the nominating and corporate governance committee will be a non-affiliated director and there will be a transaction committee and the chairperson of such committee will be a Deutsche Telekom designee. |
| • | Less than 50% or more aggregate voting percentage. At all times when either (1) the sum of the voting percentage of Deutsche Telekom and the voting percentage of SoftBank is less than 50% or (2) no voting security continues to be subject to the proxy: |
| • | each of Deutsche Telekom and SoftBank will have the right to designate a number of individuals to be nominees for election to the T-Mobile board of directors as follows, so long as its voting percentage is 10% or more: the number of Deutsche Telekom designees and SoftBank designees will be equal to (a) Deutsche Telekom’s voting percentage or SoftBank’s voting percentage, as applicable, multiplied by (b) the total number of directors that the T-Mobile board of directors would have if there were no vacancies, rounded to the nearest whole number (and not less than one). However, the number of directors who are also officers, employees or directors of Deutsche Telekom, SoftBank, certain SoftBank affiliated entities or any of their respective controlled affiliates (each of which we refer to as an “affiliated director”) may not exceed a number equal to the voting percentage of Deutsche Telekom or SoftBank, as applicable, multiplied by the total number of directors that the T-Mobile board of directors would have if there were no vacancies rounded to the nearest whole number greater than zero. If at any time the voting percentage of Deutsche Telekom or SoftBank is less than 10%, Deutsche Telekom or SoftBank, as applicable, will promptly cause all of its designees then serving as directors to resign from the T-Mobile board of directors, and the contractual rights of Deutsche Telekom or SoftBank, as applicable, to designate any directors will forever terminate; and |
| • | unless otherwise consented to in writing by Deutsche Telekom or SoftBank, as applicable, any committee of the T-Mobile board of directors will include in its membership a number of Deutsche Telekom and SoftBank designees then serving as directors equal to (a) Deutsche Telekom’s voting percentage or SoftBank’s voting percentage, as applicable, multiplied by (b) the total number of members that such committee would have if there were no vacancies on such committee, rounded to the nearest whole number, in each case except to the extent that such membership would violate the rules of the SEC, NASDAQ or any other exchange on which the securities of the combined company are listed (provided that no committee may consist solely of affiliated directors). In addition, the chairperson of the nominating and corporate governance committee will be a non-affiliated director. |
For purposes of the amended and restated stockholders’ agreement, (1) the term “voting percentage” means, with respect to any person, the ratio, expressed as a percentage, of (a) the aggregate number of votes entitled to be cast generally in the election of directors in respect of the voting securities beneficially owned by such person to (b) the aggregate number of votes entitled to be cast generally in the election of directors by all holders of the then-outstanding voting securities; and (2) the term “voting securities” means, collectively, (a) the T-Mobile common stock and (b) any class of capital stock or other securities of the combined company other than the T-Mobile common stock that is entitled to vote generally in the election of directors.
Specified Actions
Pursuant to the amended and restated stockholders’ agreement, as long as Deutsche Telekom beneficially owns 30% or more of the outstanding shares of T-Mobile common stock, the combined company may not take the following actions without Deutsche Telekom’s prior written consent, which consent Deutsche Telekom may withhold in its sole discretion:
| • | create, incur, issue, assume or otherwise become liable for (including through a merger, acquisition or otherwise) or refinance or guarantee any indebtedness (as defined in the amended and restated |
| stockholders’ agreement) (excluding any permitted debt (as defined in the amended and restated stockholders’ agreement)) that would result in the combined company and its subsidiaries, on a consolidated basis, having or being liable for indebtedness in an aggregate principal amount that would result in the debt to cash flow ratio (as defined in the amended and restated stockholders’ agreement) for the combined company’s most recently ended four full fiscal quarters for which financial statements are available to be greater than 5.25 to 1.0 on a pro forma basis as if the additional indebtedness had been incurred at the beginning of such four-quarter period; |
| • | take any action or enter into any transaction that would reasonably be expected to result in a breach of or default under any credit agreement, indenture, note or similar instrument or security to which Deutsche Telekom or any of its affiliates is a party or is bound; |
| • | acquire (including by way of merger, recapitalization, reorganization, liquidation or dissolution) any business, debt or equity interests, operations or assets of any person, or make any investment in or loan to any person, in any single transaction or series of related transactions (excluding the acquisition of products and equipment in the ordinary course of business) (each of which we refer to as a “subject acquisition”), for consideration in excess of $1 billion; |
| • | sell, lease, transfer, encumber (other than permitted liens, as defined in the amended and restated stockholders’ agreement) or otherwise dispose of (including by way of merger, recapitalization, reorganization, liquidation or dissolution) any division, business or operations of the combined company or any of its subsidiaries, or any equity interests of the combined company or any of its subsidiaries, in any single transaction or series of related transactions (each of which we refer to as a “subject disposition”), for consideration in excess of $1 billion (including any such transaction or transactions providing for a sale of the combined company (as defined below)); |
| • | change the size of the T-Mobile board of directors; |
| • | issue any equity or equity-linked securities or other voting securities of the combined company or any of its subsidiaries, in any single transaction or series of related transactions, (a) constituting 10% or more of the then-outstanding shares of T-Mobile common stock (other than grants of incentive awards to officers or employees of the combined company or its subsidiaries that are approved by the T-Mobile board of directors or the applicable committee thereof or issuances of securities to the combined company or any of its wholly owned subsidiaries) or (b) for the purpose of redeeming or purchasing any indebtedness (as defined in the amended and restated stockholders’ agreement) of the combined company held by Deutsche Telekom or its affiliates; |
| • | (i) except as required by the governing documents of the combined company, repurchase or redeem any equity (or equity-based) securities of the combined company or any of its non-wholly owned subsidiaries, or (ii) make any extraordinary or in-kind dividend with respect to any of the equity (or equity-based) securities of the combined company or any of its subsidiaries, other than a dividend on a pro rata basis with respect to all stockholders of the combined company, or a dividend to the combined company or any of its wholly owned subsidiaries; or |
| • | hire, or terminate without cause, the chief executive officer of the combined company, or agree to do so (which under certain circumstances will be evidenced by majority vote of the members of the CEO selection committee). |
Pursuant to the amended and restated stockholders’ agreement, as long as (a) SoftBank beneficially owns 22.5% or more of the outstanding shares of T-Mobile common stock and (b) the sum of the voting percentage of Deutsche Telekom and SoftBank is at least 30%, the combined company may not take the following actions without SoftBank’s prior written consent, which consent SoftBank may withhold in its sole discretion:
| • | complete any subject acquisition in excess of $1 billion; |
| • | complete any subject disposition for consideration in excess of $1 billion (other than a sale of the combined company (as defined below), for which the prior written consent of SoftBank is not required); or |
| • | issue any equity or equity-linked securities or other voting securities of the combined company or any of its subsidiaries, in any single transaction or series of related transactions, constituting 10% or more of the then-outstanding shares of T-Mobile common stock (other than grants of incentive awards to officers or employees of the combined company or its subsidiaries that are approved by the T-Mobile board of directors or the applicable committee thereof, issuances of securities to the combined company or any of its wholly owned subsidiaries, issuances in connection with a subject acquisition in excess of $1 billion or issuances in connection with a sale of the combined company). |
In addition, the combined company will not be permitted to amend its governing documents in any manner that could adversely affect Deutsche Telekom, SoftBank or their respective rights under the amended and restated stockholders’ agreement, without the prior written consent of Deutsche Telekom or SoftBank, as applicable, as long as Deutsche Telekom or SoftBank, as applicable, beneficially owns 5% or more of the outstanding shares of T-Mobile common stock.
SoftBank Match Right for Sale of the Combined Company
Pursuant to the amended and restated stockholders’ agreement, as long as SoftBank beneficially owns 22.5% or more of the outstanding shares of T-Mobile common stock, the combined company may not enter into any binding definitive agreement to effect (a) any merger, tender or exchange offer, amalgamation, consolidation or similar transaction involving the combined company, pursuant to which the stockholders of the combined company immediately prior to such transaction would own, as of immediately after such transaction, less than 50% of the voting securities of the combined company (or, in the case of a transaction where the combined company or its successor entity becomes a direct or indirect subsidiary of a publicly traded entity, own less than 50% of the voting securities of such publicly traded entity) and (b) any sale or other disposition, directly or indirectly, of all or substantially all of the assets of the combined company and its subsidiaries, taken as a whole, or other liquidation of the combined company, in each case whether in any single transaction or series of related transactions, to a third party (which we refer to as a “sale of the combined company”), unless it first complies with the following:
| • | If the combined company determines to commence a process pursuant to which it will solicit offers for a sale of the combined company from one or more third parties, then the combined company will provide written notice to SoftBank at least 20 days prior to soliciting any such offers. During such 20-day period, SoftBank will have the right to make one bona fide written proposal for a sale of the combined company to SoftBank, subject to certain exceptions. |
| • | If the combined company receives a proposal from a third party for a sale of the combined company to such third party, at least 20 days (which we refer to as the “match right period”) prior to entering into any binding agreement to effect such sale to such third party, the combined company will deliver (1) a written notice to SoftBank setting forth the identity of such third party, the purchase price, the form of consideration and the other material terms and conditions of the proposed sale of the combined company, (2) a copy of the form of proposed definitive agreement, if any, and (3) a written certification that the combined company believes in good faith that the third party’s proposed terms represent a bona fide proposal for the sale of the combined company on such terms and that a binding agreement for the sale of the combined company could be obtainable on such terms. Following the delivery of such notice, SoftBank will be entitled, during the match right period, to submit to the T-Mobile board of directors one bona fide written proposal containing proposed terms for a sale of the combined company to SoftBank, subject to certain exceptions. If, prior to entering into a binding definitive agreement to effect a sale of the company, the third party proposes any material decrease to the purchase price or any material change to the form of consideration, then the combined company will be |
| required to deliver a new notice to SoftBank and SoftBank will have another match right period during which it can submit one bona fide written proposal for a sale of the company to SoftBank. The combined company may not enter into any binding definitive agreement to effect a sale of the combined company unless the T-Mobile board of directors, by a majority vote of the directors, determines in good faith, as of or following the end of the match right period, that the proposed terms of the third party proposal are more favorable to the stockholders of the combined company (other than SoftBank) than the proposed terms of the SoftBank proposal. |
Debt Defaults
Pursuant to the amended and restated stockholders’ agreement, the combined company will be required to notify Deutsche Telekom any time it is reasonably likely that the combined company will default on any indebtedness with a principal amount greater than $75 million (which we refer to as a “potential default”). Thereupon, Deutsche Telekom will have the right, but not the obligation, to provide new debt financing to the combined company up to the amount of the indebtedness that is the subject of the potential default plus any applicable prepayment or other penalties, on the same terms and conditions as such indebtedness (together with any waiver of the potential default). If Deutsche Telekom elects to provide the combined company with new debt financing, the combined company must take any actions reasonably requested by Deutsche Telekom (1) to prepare documentation reflecting the terms and conditions of the new debt financing, (2) to repay the indebtedness that is the subject of the potential default and (3) to take any other action necessary or desirable to avert the potential default.
Information Rights
As long as Deutsche Telekom or SoftBank, as applicable, beneficially owns 10% or more of the outstanding shares of T-Mobile common stock, it will have certain information and consultation rights, including (1) the right to consult and, upon request, meet with the officers of the combined company with respect to the combined company’s business and financial matters, (2) the right to access certain financial and operating data and other information with respect to the business and properties of the combined company and (3) the right to inspect all books and records and facilities and properties of the combined company.
Related Party Transaction Consent Rights
During the term of the amended and restated stockholders’ agreement, neither Deutsche Telekom nor SoftBank may support, enter into or vote in favor of (1) any transaction in excess of $120,000 in the aggregate between or involving both (a) the combined company and (b) Deutsche Telekom or SoftBank, as applicable, or any of its affiliates, unless such transaction is approved unanimously by the audit committee of the T-Mobile board of directors, or (2) any amendment or modification to, extension or waiver of, or statement of work under, any such transaction, unless such amendment, modification, extension, waiver or statement of work has been approved by a majority of the members of the audit committee of the T-Mobile board of directors.
Top Up Right
Pursuant to the amended and restated stockholders’ agreement, in the event that Deutsche Telekom’s voting percentage would be reduced to less than 30%, or SoftBank’s voting percentage would be reduced to less than 22.5%, in each case as a direct result of a proposed issuance by the combined company of any equity or equity-linked securities or other voting securities in a public or private offering, regardless of the number of purchasers, in exchange for cash (which we refer to as a “dilutive issuance”), Deutsche Telekom or SoftBank, as applicable, will have the right to acquire newly issued voting securities issued directly from the combined company, either as part of the dilutive issuance or otherwise as determined mutually by the combined company and Deutsche Telekom or SoftBank, as applicable, up to an amount that would cause Deutsche Telekom’s voting percentage or SoftBank’s voting percentage, as applicable, to equal its voting percentage prior to the dilutive issuance (which
we refer to as the “top up right”), in accordance with the terms of the amended and restated stockholders’ agreement. The price per share applicable to such purchase will be equal to the price per share applicable to the dilutive issuance that triggered the top up right, except that if the price per share applicable to the dilutive issuance is not available or readily determinable, then the price per share will instead be equal to the average of the volume-weighted average prices per share of the common stock on the national securities exchange on which the common stock is then listed for ten consecutive trading days immediately preceding the date that the dilutive issuance is completed or as otherwise determined mutually by the combined company and Deutsche Telekom or SoftBank, as applicable.
In addition, in the event that Deutsche Telekom’s voting percentage would be reduced to less than 30%, or SoftBank’s voting percentage would be reduced to less than 22.5%, in each case as the direct result of an issuance by the combined company of any equity or equity-linked securities or other voting securities, including by means of a dilutive issuance, SoftBank will not lose its match rights, and Deutsche Telekom or SoftBank, as applicable, will not lose its rights described under “—Specified Actions,” if Deutsche Telekom or SoftBank, as applicable, acquires beneficial ownership of additional voting securities such that its voting percentage is 30% or greater (in the case of Deutsche Telekom) or 22.5% or greater (in the case of SoftBank) prior to the 60th business day following the closing or settlement of such issuance (with such 60 business day period to be extended by an additional 90 calendar days under certain circumstances).
Acquisitions of T-Mobile Common Stock
Pursuant to the amended and restated stockholders’ agreement, Deutsche Telekom, SoftBank and their respective affiliates will generally be prohibited from acquiring voting securities that would cause the voting percentage of Deutsche Telekom and SoftBank, taken together, to exceed 80.1% of the outstanding shares of T-Mobile common stock unless such acquiring stockholder makes an offer to acquire all of the then-remaining outstanding shares of T-Mobile common stock at the same price and on the same terms and conditions as the proposed acquisition from all other stockholders of the combined company, which is either (1) accepted or approved by a majority of the directors, which majority includes a majority of non-affiliated directors, or (2) accepted or approved by a majority of the stockholders of the combined company (other than Deutsche Telekom, SoftBank and their respective affiliates) (which (1) or (2) we refer to as a “specified board approval”).
Dispositions of T-Mobile Common Stock
Pursuant to the amended and restated stockholders’ agreement, each of Deutsche Telekom and SoftBank will be prohibited from transferring any shares of T-Mobile common stock in any other transaction that would result in a third party owning more than 30% of the outstanding shares of T-Mobile common stock unless (1) such transfer is approved by the T-Mobile board of directors (including the specified board approval) or (2) such third party offers to acquire all of the then outstanding shares of T-Mobile common stock at the same price and on the same terms and conditions as the proposed transfer.
Registration Rights
The amended and restated stockholders’ agreement will include certain registration rights for equity securities (including the T-Mobile common stock) and debt securities (which we refer to collectively as “registrable securities”) of the combined company beneficially owned by Deutsche Telekom or SoftBank, as applicable. The combined company must file a shelf registration statement covering all registrable securities within 30 days after the closing, and Deutsche Telekom or SoftBank, as applicable, generally will have the right to request that the combined company file, from time to time, a registration statement or prospectus supplement to a registration statement (i) with respect to equity securities so long as it owns 5% or more of the T-Mobile common stock and (ii) with respect to debt securities so long as it holds any debt securities issued by the combined company.
Notwithstanding the foregoing, each of Deutsche Telekom and SoftBank will be subject to the following limitations with respect to its registration rights:
| • | the expected proceeds from the sale of registrable securities to be included in any requested registration statement or prospectus supplement must be $100 million or greater; |
| • | with respect to equity securities, Deutsche Telekom and SoftBank must wait 90 days between requests, subject to certain exceptions; and |
| • | the combined company will be entitled to postpone and delay, for reasonable periods of time not in excess of 60 days, and in no event more than twice in any 12-month period, the filing or effectiveness of any such requested registration statement or prospectus supplement, if one or more executive officers of the combined company determines in good faith that any such filing or the offering or sale of any equity securities thereunder would (1) impede, delay or otherwise interfere with any pending or contemplated material acquisition, disposition, corporate reorganization or other similar material transaction involving the combined company, (2) based upon advice from the combined company’s investment banker or financial advisor, materially and adversely impede, delay or otherwise interfere with any pending or contemplated financing, offering or sale of any class of securities by the combined company, (3) require disclosure of material non-public information which, if disclosed at such time, would not be in the best interests of the combined company and its stockholders or (4) have a material adverse effect on the combined company. |
In addition, Deutsche Telekom and SoftBank will have piggyback registration rights with respect to any offering initiated by the combined company or any of its other stockholders. These piggyback registration rights will be subject to cutback procedures in the event the piggyback offering is oversubscribed.
Any transferee of Deutsche Telekom or SoftBank who acquires at least 5% of either the registrable equity securities or the registrable debt securities pursuant to a transaction that is not registered under the Securities Act will be entitled to enjoy the same registration rights as Deutsche Telekom or SoftBank, respectively, as long as the registrable securities held by such transferee may not be sold or disposed of pursuant to Rule 144 without volume limitations at the time when such transferee seeks to exercise its registration rights.
Non-Competition
The amended and restated stockholders’ agreement will restrict each of Deutsche Telekom’s and SoftBank’s ability to compete with the combined company during the period beginning on the closing date and ending on the date that is six months after the first date on which Deutsche Telekom’s or SoftBank’s, as applicable, voting percentage is less than 10%. Specifically, during such period, Deutsche Telekom, SoftBank and certain of their respective controlled affiliates (excluding, in the case of SoftBank, Fortress Investment Group LLC, SoftBank Vision Fund L.P. and certain of their respective related persons) may not directly engage in the provision to retail mass market customers in the United States, Puerto Rico and the territories and protectorates of the United States through a terrestrial facilities-based network of commercial mobile radio services, broadband internet access service or acting as a multichannel video programming distributor, in each case as such term is defined by the FCC as of the date of the business combination agreement, including conventional mobile virtual network operator, but in each case excluding the provision of (1) devices, software, apps, advertising and “over-the-top” services on or through mobile, wireless or wired networks, (2) resale of network services ancillary to providing internet of things products or services, including autonomous driving, accident prevention, monitoring and security, smart agriculture, demand forecasting, consumer services, preventative medicine, health monitoring and smart houses and mapping services, and/or (3) satellite-based services and also excluding acquisitions of interests of persons conducting such covered activities if such acquisition does not exceed 10% of the voting equity of such person or if the aggregate purchase price for such acquisition is less than $50,000,000. In addition, in the case of Deutsche Telekom, for the period beginning on the closing date and ending on the first anniversary of the termination of the trademark license in accordance with its terms, or in the case of SoftBank, at any time after the
closing, Deutsche Telekom or SoftBank, as applicable, may not manufacture, market or distribute any products or services under, or use in any way, the trademark T-MOBILE in connection with any of the activities described in the previous sentence, other than by the combined company and its affiliates in accordance with the terms of the trademark license. In addition, if SoftBank Vision Fund L.P. or certain of its related persons acquires any interest in excess of 10% of the voting equity of any of certain specified persons, then SoftBank will be deemed to automatically waive all of its rights under the provisions of the amended and restated stockholders’ agreement relating to board representation, the SoftBank match right and information rights.
Term
Except as otherwise provided in the amended and restated stockholders’ agreement, the amended and restated stockholders’ agreement will terminate with respect to Deutsche Telekom or SoftBank, as applicable, at any time after which its voting percentage is less than 5%.
In connection with the closing of the merger transactions, Deutsche Telekom and SoftBank will enter into a proxy, lock-up and ROFR agreement (which we refer to as the “proxy agreement”), the form of which is attached as Exhibit F to the business combination agreement and Annex G to this joint consent solicitation statement/prospectus and is incorporated by reference herein. The following is a summary of the material provisions of the proxy agreement. The summary in this section and elsewhere in this joint consent solicitation statement/prospectus is qualified in its entirety by reference to the proxy agreement. This summary does not purport to be complete and may not contain all of the information about the proxy agreement that is important to you. We encourage you to read the proxy agreement carefully and in its entirety.
Pursuant to the business combination agreement, prior to the closing, Deutsche Telekom and SoftBank will enter into the proxy agreement. The proxy agreement will establish between Deutsche Telekom and SoftBank certain rights and obligations in respect of the shares of T-Mobile common stock that will be owned by each of Deutsche Telekom, SoftBank and their respective affiliates following the completion of the merger transactions and related matters concerning each of Deutsche Telekom’s and SoftBank’s relationship with and investment in the combined company.
Voting Agreement and Proxy
Pursuant to the proxy agreement, at any meeting of the stockholders of the combined company, SoftBank is obligated to (1) vote or not vote or deliver or not deliver a consent with respect to all of its shares of T-Mobile common stock to the fullest extent that such shares are entitled to be voted or to consent, with respect to each proposal, action or other matter, as directed by Deutsche Telekom and (2) take all steps necessary or appropriate to ensure that all of its shares of T-Mobile common stock are counted as present for quorum purposes (if applicable). So long as SoftBank has the right under the amended and restated stockholders’ agreement to designate any SoftBank designee to be a nominee for election to the T-Mobile board of directors, at any meeting of the stockholders of the combined company, Deutsche Telekom is obligated to (1) vote (or cause to be voted) or deliver a consent (or cause a consent to be delivered) with respect to all of its shares of T-Mobile common stock and any shares of T-Mobile common stock that are subject to the proxy (as defined below) to the fullest extent such shares are entitled to be voted or to consent, with respect to any election of directors, in favor of (a) the election of all SoftBank designees to the extent that the selection of such SoftBank designees is consistent with the amended and restated stockholders’ agreement and (b) the removal (with or without cause) from office of any SoftBank designee’s service as a director upon the written request of SoftBank and (2) take (or cause to be taken) all steps necessary or appropriate to ensure that all of its shares of T-Mobile common stock and any shares of T-Mobile common stock that are subject to the proxy are counted as present for quorum purposes (if applicable).
In addition, pursuant to the proxy agreement, SoftBank will irrevocably appoint Deutsche Telekom or its designee as its attorney-in-fact and proxy to vote all of its shares of T-Mobile common stock at any meeting of the stockholders of the combined company or in connection with any written consent of the stockholders of the combined company, which will be deemed to include the right to execute and deliver a written consent in respect of such shares from time to time (which we refer to as the “proxy”). Any attempt by SoftBank to vote, or express consent or dissent with respect to, its shares in contravention of the proxy agreement will be null and void ab initio.
With respect to any share of T-Mobile common stock beneficially owned by Deutsche Telekom or SoftBank, as applicable, the obligation to vote such share in accordance with the proxy agreement will terminate upon the earliest of (1) the date on which the proxy agreement is terminated, (2) the date on which such share is transferred to a third party (other than a transfer that is a pledge or loan of shares of T-Mobile common stock pursuant to bona fide hedging or financing transactions in which Deutsche Telekom or SoftBank, as applicable, retains voting power over all such shares prior to any foreclosure (which, for purposes of the proxy agreement, we refer to as a “pledge”)) pursuant to the terms of the proxy agreement, (3) in the case of a pledged excess share (as defined below), the date on which such pledged excess share is transferred to a third party pursuant to a foreclosure in accordance with the proxy agreement, (4) the date on which Deutsche Telekom’s voting percentage equals or exceeds 55% and (5) the date on which Deutsche Telekom has transferred an aggregate number of shares representing 5% or more of the outstanding T-Mobile common stock as of immediately following the effective time (we refer to such earlier date in (4) or (5) as the “proxy fall away date”).
For the purposes of the proxy agreement, “excess shares” means, with respect to either of Deutsche Telekom or SoftBank as of any time, that number of shares of T-Mobile common stock held by Deutsche Telekom or SoftBank, as applicable, as of such time that is in excess of a number of shares of T-Mobile common stock equal to (1) 51% minus the voting percentage of Deutsche Telekom as of immediately following the effective time, multiplied by (2) the number of shares of T-Mobile common stock outstanding immediately following the effective time on a fully diluted basis (which number will be recalculated as of the time of any subsequent increase in the voting percentage of Deutsche Telekom and may only stay the same or decrease, but not increase, at any time after the effective time, and which number shall equal zero shares of T-Mobile common stock from and after the proxy fall away date).
Following the completion of the merger transactions, because Deutsche Telekom will retain the power to vote a majority of the T-Mobile common stock, T-Mobile will continue to be a “controlled company” for purposes of NASDAQ rules.
Restrictions on Transfer of Shares
During the period from and after the effective time until the earliest to occur of (1) the date on which the proxy agreement is terminated, (2) the proxy fall away date and (3) the fourth anniversary of the effective time (which we refer to as the “lock-up period”), the proxy agreement prohibits each of Deutsche Telekom and SoftBank from transferring or encumbering any of its shares of T-Mobile common stock without the prior written consent of the other, except for:
| • | a transfer of shares to a controlled affiliate; |
| • | a pledge of shares or a transfer of pledged shares pursuant to a foreclosure of such pledged shares in accordance with the terms of the proxy agreement; |
| • | a transfer of Deutsche Telekom shares from Deutsche Telekom to SoftBank or from SoftBank to Deutsche Telekom; |
| • | a transfer pursuant to a tender offer or exchange offer for any shares, or merger or consolidation involving the combined company, in each case, that has been approved and recommended by the T-Mobile board of directors; |
| • | one or more transfers of excess shares of SoftBank or Deutsche Telekom, as applicable, following the first anniversary of the effective time and prior to the second anniversary of the effective time totaling no more than 5% of the shares of T-Mobile common stock outstanding as of the effective time, calculated on a fully diluted basis (provided that all such transfers are subject to the right of first refusal described below); |
| • | one or more transfers of excess shares of SoftBank or Deutsche Telekom, as applicable, following the second anniversary of the effective time totaling no more than the sum of (1) 10% of the shares of T-Mobile common stock outstanding as of the effective time, calculated on a fully diluted basis, and (2) the number of shares, if any, which Deutsche Telekom or SoftBank, as applicable, was permitted to transfer pursuant to the immediately preceding bullet point but did not transfer (provided that all such transfers are subject to the right of first refusal described below); and |
| • | one or more transfers of excess shares of SoftBank or Deutsche Telekom, as applicable, following the third anniversary of the effective time (provided that all such transfers will be subject to the right of first refusal described below). |
Pursuant to the proxy agreement, each of SoftBank and Deutsche Telekom may pledge any of its shares of T-Mobile common stock, subject to certain terms and conditions, including:
| • | the aggregate amount of all obligations which are secured by any shares subject to a pledge may not exceed 50% of the aggregate fair market value of such shares that are subject to such pledge, subject to any cure mechanism in the pledge documents; and |
| • | as a condition to any pledge of a share, such share will continue to be subject to the proxy and may not be transferred in connection with any foreclosure, except in accordance with a right of first refusal of the other stockholder as provided in the proxy agreement, subject to certain additional terms and conditions. |
Rights of First Refusal
Pursuant to the proxy agreement, until the earliest to occur of (1) the proxy fall away date and (2) any time when either Deutsche Telekom or SoftBank no longer beneficially owns at least 5% of the voting securities of the combined company outstanding as of the effective time (which earlier date we refer to as the “ROFR fall away date”), neither Deutsche Telekom nor SoftBank may transfer any of its shares of T-Mobile common stock, whether such transfer occurs during or after the lock-up period, without first providing SoftBank (in the case of Deutsche Telekom) or Deutsche Telekom (in the case of SoftBank) a right of first refusal pursuant to the procedures set forth in the proxy agreement. However, the right of first refusal does not apply to (a) any transfer to a controlled affiliate, (b) any transfer from SoftBank to Deutsche Telekom or from Deutsche Telekom to SoftBank, (c) a transfer pursuant to a tender offer or exchange offer or merger or consolidation involving the combined company, in each case that has been approved and recommended by the T-Mobile board of directors, (d) any pledge of a share or any transfer in connection with a foreclosure of a pledged share, which is subject to a separate right of first refusal in the proxy agreement until the ROFR fall away date or (e) any transfer pursuant to a sale of the combined company.
Certain Prohibited Acquisitions of Shares
Pursuant to the proxy agreement, until the proxy fall away date, SoftBank may not, without prior written consent of Deutsche Telekom, acquire or offer to acquire any voting securities of the combined company if, following the acquisition, the ratio of (1) the number of shares of T-Mobile common stock beneficially owned by SoftBank to (2) the number of shares of T-Mobile common stock beneficially owned by Deutsche Telekom would be greater than the ratio of 49.9% to 50.1%.
In addition, each of Deutsche Telekom and SoftBank agrees that, without prior written consent of the other, until such time as either stockholder’s voting percentage is less than 5%, it will not, directly or indirectly, alone
or in concert with any other person, acquire or offer to acquire any voting securities if the acquisition would cause the voting percentage of both stockholders, taken together, to exceed 80.1% of the outstanding shares of T-Mobile common stock.
Term
The proxy agreement will terminate on the earlier to occur of (1) the first date that either Deutsche Telekom or SoftBank no longer beneficially owns any shares of T-Mobile common stock or (2) the mutual agreement of Deutsche Telekom and SoftBank.
