THE BUSINESS COMBINATION AGREEMENT
This section describes the material terms of the business combination agreement. The description in this section and elsewhere in this joint consent solicitation statement/prospectus is qualified in its entirety by reference to the complete text of the business combination agreement, a copy of which is attached as Annex A and is incorporated by reference into this joint consent solicitation statement/prospectus. This summary does not purport to be complete and may not provide all of the information about the business combination agreement that might be important to you. We encourage you to read the business combination agreement carefully and in its entirety.
Explanatory Note Regarding the Business Combination Agreement
The business combination agreement and this summary are included solely to provide you with information regarding the terms of the business combination agreement. The representations, warranties and covenants made in the business combination agreement by T-Mobile, Merger Sub, Merger Company, Sprint, the SoftBank Parties and the Deutsche Telekom Parties were made solely for the purposes of the business combination agreement and as of specific dates and are qualified by and subject to important limitations agreed to by T-Mobile, Merger Sub, Merger Company, Sprint, the SoftBank Parties and the Deutsche Telekom Parties in connection with negotiating the terms of the business combination agreement. In particular, in your review of the representations and warranties contained in the business combination agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the business combination agreement may have the right not to complete the merger transactions if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the business combination agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC, are qualified by certain matters contained in certain reports publicly filed with the SEC, and in some cases are qualified by the matters contained in disclosure letters delivered in connection with the business combination agreement, which disclosures were not included in the business combination agreement attached to this joint consent solicitation statement/prospectus as Annex A. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this joint consent solicitation statement/prospectus, may have changed since the date of the business combination agreement. Accordingly, the representations and warranties and other provisions of the business combination agreement should not be read alone, but instead should be read together with the information provided elsewhere in this joint consent solicitation statement/prospectus, the documents incorporated by reference into this joint consent solicitation statement/prospectus, and reports, statements and filings that T-Mobile and Sprint file with the SEC from time to time. See “Where You Can Find More Information.”
Pursuant to the business combination agreement, if certain conditions are met, each SoftBank US HoldCo will merge with and into Merger Company (which we refer to, collectively, as the “HoldCo mergers”), with Merger Company continuing as the surviving entity (which we sometimes refer to as the “SoftBank surviving entity”) and as a wholly owned subsidiary of T-Mobile. If either T-Mobile or Sprint is unable to obtain the applicable tax opinions described under “—Conditions to the Completion of the Merger Transactions,” but all other conditions have been satisfied or waived or are then capable of being satisfied or waived, then T-Mobile or Sprint, as the case may be, is required to give prompt written notice to the other party (which we refer to as a “revised structure notice”), and upon delivery of a revised structure notice, the parties will be required to complete the transactions contemplated by the business combination agreement, including the merger, other than the HoldCo mergers. Irrespective of whether the HoldCo mergers occur, subject to the satisfaction or waiver of the conditions in the business combination agreement, Merger Sub will merge with and into Sprint (which we refer to as the “merger”), with Sprint continuing as the surviving corporation (which we sometimes refer to as the
“surviving corporation”) and as a wholly owned indirect subsidiary of T-Mobile. Following the merger transactions, the Sprint common stock will be delisted from the New York Stock Exchange (which we refer to as the “NYSE”) and deregistered under the Exchange Act and cease to be publicly traded. Following the merger transactions, T- Mobile is expected to contribute Sprint to T-Mobile USA or otherwise cause Sprint to become a direct or indirect wholly owned subsidiary of T-Mobile USA.
Closing and Effective Time of the Merger Transactions
Unless otherwise mutually agreed to by T-Mobile and Sprint, the closing of the merger transactions (which we refer to as the “closing”) will take place at 9:00 a.m., New York time, on the third business day after the satisfaction or waiver of the last of the conditions to complete the merger transactions (other than any such conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of those conditions) (described under “ —Conditions to the Completion of the Merger Transactions”). However, if the marketing period (as defined below) has not ended at the time of the satisfaction or waiver of the conditions to complete the merger transactions, the closing will occur on the earlier to occur of (a) a date during the marketing period specified by T-Mobile on no less than three business days’ notice to Sprint and (b) the third business day immediately following the final day of the marketing period. The HoldCo mergers will be effective at the time (which we refer to as the “HoldCo mergers effective time”) that will be mutually agreed by the parties and specified in the certificate of merger with respect to the HoldCo mergers (which we refer to as the “HoldCo merger certificates”) and the merger will be effective at the time (which we refer to as the “effective time”) when the certificate of merger with respect to the merger (which we refer to as the “merger certificate”) has been duly filed with the Secretary of State of the State of Delaware or at such later time as may be mutually agreed by the parties. If no revised structure notice is delivered in accordance with the business combination agreement, the effective time will be at least one minute after the HoldCo mergers effective time.
Assuming timely satisfaction of the necessary closing conditions, the closing is expected to occur in the first half of 2019. However, as the merger transactions are subject to various regulatory approvals and the satisfaction or waiver of other conditions described in the business combination agreement, it is possible that factors outside the control of T-Mobile and Sprint could result in the merger transactions being completed at a later time or not at all.
For purposes of the business combination agreement, the term “marketing period” means the first period of 20 consecutive business days after the date of the business combination agreement (a) throughout and at the end of which T-Mobile will have certain required financial information regarding Sprint and its subsidiaries (which we refer to as the “required information”) and (b) throughout and at the end of which the conditions to each party’s obligation to effect the merger transactions and to the obligations of T-Mobile, Merger Sub, Merger Company and the Deutsche Telekom Parties (other than those conditions that by their terms are to be satisfied at the closing) will be satisfied. Notwithstanding the foregoing, the marketing period will not commence if, after the date of the business combination agreement and prior to the completion of such 20 consecutive business day period: (i) Sprint’s independent accountant has withdrawn its audit opinion with respect to Sprint’s most recent annual audited financial statements, in which case the marketing period will not be deemed to commence unless and until, at the earliest, a new unqualified audit opinion is issued with respect to the consolidated financial statements of Sprint for the applicable periods by the independent accountant or another independent public accounting firm reasonably acceptable to T-Mobile, (ii) Sprint issues a public statement indicating its intent to restate any historical financial statements of Sprint or that any such restatement is under consideration or may be a possibility, in which case the marketing period will not be deemed to commence unless and until, at the earliest, such restatement has been completed or Sprint has announced that it has concluded that no restatement is required in accordance with GAAP, (iii) any required information would not be compliant (as defined in the business combination agreement) at any time during such 20 consecutive business day period, in which case the marketing period will not be deemed to commence unless and until, at the earliest, the receipt by T-Mobile of required information that is compliant, or (iv) Sprint has failed to file any report or other document required to be filed with the SEC by the date required under the Exchange Act containing any
financial information that would be required to be contained therein in which case the marketing period will not be deemed to commence unless and until, at the earliest, such reports have been filed. The business combination agreement specifies certain days that will be excluded as a business day for purposes of determining the marketing period and certain additional requirements with respect to the start and end dates of the marketing period.
Consideration to Sprint Stockholders
Sprint Common Stock
In the HoldCo mergers, the shares of Galaxy common stock and Starburst common stock issued and outstanding immediately prior to the HoldCo mergers effective time, all of which are currently held by SoftBank UK, will be automatically converted into the right to receive an aggregate number of shares of T-Mobile common stock equal to the product of (x) 0.10256 (which we refer to as the “exchange ratio”) and (y) the aggregate number of shares of Sprint common stock then held collectively by Galaxy and Starburst (which we refer to as the “HoldCo merger consideration”).
In the merger, each share of Sprint common stock issued and outstanding immediately prior to the effective time (other than shares held directly by Sprint as treasury stock and shares held by the SoftBank surviving entity) will be automatically converted into the right to receive 0.10256 shares of T-Mobile common stock (which we refer to as the “merger consideration”).
SoftBank and its affiliates will receive the same amount of T-Mobile common stock per share of Sprint common stock in the merger transactions as all other Sprint stockholders.
Sprint Warrants
The business combination agreement provides that, except as described below, each Sprint warrant and all rights in respect thereof will automatically be canceled and retired and will cease to exist, and no consideration will be payable in respect of such Sprint warrant. However, the specified Sprint warrant will be assumed by T-Mobile in connection with the transactions contemplated by the business combination agreement, unless exercised prior to the closing. As of April 29, 2018, the SoftBank Sprint warrant was outstanding. On July 10, 2018, Starburst exercised the SoftBank Sprint warrant and received 54,579,924 shares of Sprint common stock at a purchase price of $5.25 per share.
Adjustment to Exchange Ratio
The exchange ratio will be adjusted appropriately to reflect the effect of any reclassification, recapitalization, split-up, combination, exchange of shares, dividend payable in stock or other securities or other similar transaction with respect to the shares of T-Mobile common stock or Sprint common stock outstanding after the date of the business combination agreement and prior to the effective time.
Exchange Agent and Transmittal Materials and Procedures
Prior to the effective time, T-Mobile will designate a bank, trust company or nationally recognized stockholder services provider (which we refer to as the “exchange agent”) reasonably acceptable to Sprint on terms reasonably acceptable to Sprint to act as the exchange agent in connection with the merger transactions. On or prior to the effective time, T-Mobile will deposit, or cause to be deposited, with the exchange agent evidence of shares of T-Mobile common stock representing the aggregate number of shares of T-Mobile common stock sufficient to deliver the merger consideration payable in respect thereof (which shares we refer to as the “exchange fund”).
Exchange Procedures for the HoldCo Mergers
On the closing date, promptly following the HoldCo mergers effective time, SoftBank will cause the certificates (or affidavits of loss in lieu thereof) and book-entry shares that immediately prior to the HoldCo mergers effective time represented outstanding shares of Galaxy common stock and Starburst common stock to be surrendered to the exchange agent, and upon such surrender, the holder of such certificates and such book-entry shares will be entitled to receive:
| • | the HoldCo merger consideration to which such holder is entitled; and |
| • | any fractional share consideration to which such holder is entitled. |
Exchange Procedures for the Merger
As soon as reasonably practicable after the effective time (but no more than five business days following the effective time), the exchange agent will mail transmittal materials to holders of record of certificates representing shares of Sprint common stock, which will include the appropriate form of a letter of transmittal and instructions on how to effect the surrender of certificates representing shares of Sprint common stock in exchange for the merger consideration into which such shares of Sprint common stock have been converted.
When a Sprint stockholder surrenders his, her or its shares of Sprint common stock, and, in the case of certificated shares, delivers a properly executed letter of transmittal and any other documents as may reasonably be required by the exchange agent, such holder will be entitled to receive:
| • | the merger consideration to which such holder is entitled; and |
| • | any fractional share consideration to which such holder is entitled. |
If any portion of the merger consideration is to be registered in the name of a person other than the holder in whose name any surrendered certificate or book-entry share is registered, it will be a condition of such registration that:
| • | the surrendered certificate or book-entry share be properly endorsed or otherwise be in proper form for transfer; and |
| • | the person requesting such registration pay to the exchange agent any transfer or other taxes required by reason of such registration in the name of a person other than the registered holder of such surrendered certificate or book-entry share or establish to the reasonable satisfaction of the exchange agent that such tax has been paid or is not required to be paid. |
Treatment of Sprint Equity-Based Awards
Stock Options. Each option to purchase shares of Sprint common stock (other than under the Sprint Employees Stock Purchase Plan), whether vested or unvested, that is outstanding immediately prior to the effective time, as of the effective time, will be automatically converted into an option to purchase, on the same terms and conditions (including, if applicable, any continuing vesting requirements) under the applicable plan and award agreement in effect immediately prior to the effective time, a number of shares of T-Mobile common stock, rounded down to the nearest whole share, equal to the product determined by multiplying (a) the total number of shares of Sprint common stock subject to such Sprint option immediately prior to the effective time, by (b) 0.10256, at an exercise price per share equal to the quotient (rounded up to the nearest whole cent) of (x) the per share exercise price for the Sprint common stock subject to such option as of immediately prior to the effective time, divided by (y) 0.10256.
Time-Based Restricted Stock Units. Each award of time-based restricted stock units in respect of shares of Sprint common stock, whether vested or unvested, that is outstanding as of immediately prior to the effective
time, as of the effective time, will be automatically converted into a restricted stock unit award, on the same terms and conditions (including, if applicable, any continuing vesting requirements) under the applicable plan and award agreement in effect immediately prior to the effective time, in respect of a number of shares of T-Mobile common stock equal to the product (rounded up to the nearest whole share) of (a) the number of shares of Sprint common stock subject to such restricted stock unit as of immediately prior to the effective time multiplied by (b) 0.10256. Any accrued but unpaid dividend equivalents with respect to any award of time-based restricted stock units in respect of shares of Sprint common stock will be assumed and become an obligation with respect to the applicable award of restricted stock units in respect of shares of T-Mobile common stock.
Performance-Based Restricted Stock Units. Each award of performance-based restricted stock units in respect of shares of Sprint common stock, whether vested or unvested, that is outstanding as of immediately prior to the effective time, as of the effective time, will be automatically converted into a restricted stock unit, on the same terms and conditions (including, if applicable, any continuing vesting requirements, but not the performance-based vesting conditions applicable to such performance-based restricted stock unit in respect of Sprint common stock immediately prior to the effective time) under the applicable plan and award agreement in effect immediately prior to the effective time, in respect of a number of shares of T-Mobile common stock equal to the product (rounded up to the nearest whole share) of (a) the number of shares of Sprint common stock subject to such restricted stock unit as of immediately prior to the effective time, multiplied by (b) 0.10256. Any accrued but unpaid dividend equivalents with respect to any award of performance-based restricted stock units in respect of shares of Sprint common stock will be assumed and become an obligation with respect to the applicable award of restricted stock units in respect of shares of T-Mobile common stock. The number of shares of Sprint common stock subject to each performance-based restricted stock unit outstanding as of immediately prior to the effective time will be based on the assumed level of performance equal to (x) in the case of a “turnaround incentive award” issued in respect of Sprint common stock, the greatest of (1) the volume-weighted average price of Sprint common stock over any 150-calendar day period as specified in the applicable award agreement as of the effective time, (2) the volume-weighted average price of Sprint common stock over the five consecutive trading day period ending with the second complete trading day prior to the effective time, and (3) the volume-weighted average price of Sprint common stock equal to 100% of the target award; and (y) in the case of an award of performance-based restricted stock units issued in respect of shares of Sprint common stock that is not a “turnaround incentive award,” in respect of outstanding performance periods as of the effective time, the target number of shares of Sprint common stock underlying such award of performance-based restricted stock units, and in respect of completed performance periods as of the effective time, the actual number of shares of Sprint common stock underlying such award of performance-based restricted stock units.
Employees Stock Purchase Plan. Prior to the effective time, Sprint will, contingent on the completion of the merger transactions, (a) cause the final purchase period, to the extent it would otherwise be outstanding at the effective time, to be terminated no later than five business days prior to the effective time; (b) make any pro rata adjustments that may be necessary to reflect the final purchase period, but otherwise treat the final purchase period as a fully effective and completed purchase period; and (c) cause the exercise (as of no later than five business days prior to the effective time) of each outstanding purchase right pursuant to the Sprint Employees Stock Purchase Plan. On such exercise date, Sprint will apply the funds credited to each participant’s payroll withholding account as of such date to the purchase of whole shares of Sprint common stock in accordance with the terms of the Sprint Employees Stock Purchase Plan, and such shares of Sprint common stock will be entitled to receive the merger consideration as of the effective time.
Cash will be payable in lieu of any fractional share of T-Mobile common stock resulting from application of the 0.10256 equity award adjustment ratio.
Stockholders are not entitled to appraisal rights under Delaware law in connection with the merger transactions. See “No Appraisal Rights.”
T-Mobile and the exchange agent will be entitled to deduct and withhold, from any amounts otherwise payable pursuant to the business combination agreement, any amounts that are required to be deducted or withheld with respect to the making of such payment under the Code or any provision of state, local or non-U.S. tax law. To the extent that amounts are withheld or paid over to the relevant taxing authority, such withheld amounts will be treated for all purposes of the business combination agreement as having been paid to the person in respect of which such deduction and withholding was made.
No fractional shares of T-Mobile common stock will be issued in connection with the merger transactions. Each holder of Sprint common stock converted pursuant to the merger transactions who would otherwise have been entitled to receive a fraction of a share of T-Mobile common stock (after taking into account all shares represented by the certificates and book-entry shares delivered by such holder) will instead receive cash (without interest) in the amount of such holder’s pro rata portion of the proceeds of the sale or sales by the exchange agent of the aggregate number of shares of T-Mobile common stock in lieu of which Sprint stockholders would receive cash (reduced by the amount of commissions, transfer taxes and other out-of-pocket transactions costs, as well as expenses, of the exchange agent), which the exchange agent will execute at then-prevailing prices on NASDAQ as promptly as practicable following the effective time.
Certain Governance Matters Following the Merger Transactions
Combined Company Name and Ticker
The parties intend that, following the effective time, the name of T-Mobile will continue to be “T-Mobile US, Inc.,” T-Mobile will continue to conduct its business under that name (unless otherwise determined by the T-Mobile board of directors) and the T-Mobile common stock will continue to trade on NASDAQ under the ticker symbol “TMUS.”
Combined Company Headquarters
The parties intend that, following the effective time, T-Mobile will have its headquarters in Bellevue, Washington, with a secondary headquarters in Overland Park, Kansas.
Board of Directors of the Combined Company
Under the business combination agreement, T-Mobile, Sprint, Deutsche Telekom and SoftBank have agreed to cooperate to take all actions necessary to cause the T-Mobile board of directors as of immediately following the effective time to consist of a total of 14 directors as follows:
| • | Deutsche Telekom will designate nine of such 14 directors prior to the effective time. Of the nine designees, (1) at least two of the designees will be designated following consultation with SoftBank and the independent directors of T-Mobile and will qualify as an “independent director” under the listing standards of NASDAQ and the applicable rules of the SEC and (2) one of the designees will be the chief executive officer of Deutsche Telekom as of immediately prior to the effective time; |
| • | SoftBank will designate four of such 14 directors prior to the effective time. Of the four designees, (1) at least two of the designees will be designated following consultation with Deutsche Telekom and the independent directors of Sprint and will qualify as an “independent director” under the listing standards of NASDAQ and the applicable rules of the SEC, one of whom will also qualify as the “security director” (or equivalent) to the extent required by the NSA, and (2) one of the designees will |
| be the chief executive officer of SoftBank as of the date of the business combination agreement (or, if such person is unable to serve, another person designated by SoftBank); and |
| • | the remaining director will be the chief executive officer of the combined company. |
In addition, immediately following the effective time, the chairperson of the T-Mobile board of directors will be the chief executive officer of Deutsche Telekom as of immediately prior to the effective time.
Management of the Combined Company
Under the business combination agreement, T-Mobile and Sprint have agreed to cooperate to take all reasonable actions necessary to cause, effective as of the effective time, the chief executive officer of T-Mobile immediately prior to the effective time to serve as the chief executive officer of the combined company from and after the effective time, and the officers of the combined company from and after the effective time to be such individuals as T-Mobile and Sprint will agree, through a process overseen by their respective chief executive officers and in consultation with Deutsche Telekom and SoftBank, cooperating in good faith to identify such individuals prior to the effective time, in each case serving until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified.
CEO Selection Committee
Under the business combination agreement, T-Mobile, Sprint, Deutsche Telekom and SoftBank have agreed to cooperate to take all actions necessary to cause the T-Mobile board of directors to establish, effective as of the effective time, a CEO selection committee in accordance with the terms of the amended and restated stockholders’ agreement. See “Stockholders’ and Proxy Agreements—Amended and Restated Stockholders’ Agreement.”
Representations and Warranties
Representations and Warranties of T-Mobile and Sprint
T-Mobile and Sprint made customary representations and warranties in the business combination agreement on behalf of themselves and their respective subsidiaries that are subject, in some cases, to specified exceptions and qualifications contained in the business combination agreement or in information provided pursuant to certain disclosure letters delivered in connection with the business combination agreement. The representations and warranties made by T-Mobile and Sprint are also subject to and qualified by certain information included in certain filings each party and its affiliates have made with the SEC.
Many of the representations and warranties of T-Mobile and Sprint are reciprocal and apply to T-Mobile and Sprint, as applicable, and their respective subsidiaries. Some of the more significant representations and warranties of T-Mobile and Sprint relate to:
| • | organization, existence and good standing, and requisite corporate or other power and authority to carry on its business; |
| • | corporate power and authority to enter into the business combination agreement and the enforceability thereof; |
| • | the absence of any breach or violation of organizational documents or certain contracts as a result of entry into the business combination agreement or the completion of the merger or the other transactions contemplated by the business combination agreement; |
| • | required governmental approvals; |
| • | capital structure; |
| • | subsidiaries; |
| • | SEC reports and financial statements, including their preparation in accordance with GAAP, filing or furnishing with the SEC, and compliance with the applicable rules and regulations promulgated thereunder, and that such reports and financial statements fairly present, in all material respects, the relevant financial position and results of operations and cash flows; |
| • | the absence of undisclosed liabilities; |
| • | compliance with the rules and regulations of NASDAQ or the NYSE, as applicable; |
| • | the maintenance of internal control over financial reporting and disclosure controls and procedures; |
| • | the reliability and accuracy of information supplied for this joint consent solicitation statement/prospectus; |
| • | the absence of certain changes since March 31, 2017 that have had or would be reasonably expected to have, individually or in the aggregate, a material adverse effect; |
| • | the absence of any actions since December 31, 2017 that would constitute a breach of the covenants described under “—Covenants and Agreements—Conduct of Business Pending the Closing Date” if such action was taken between the date of the business combination agreement and the closing; |
| • | compliance with laws, government regulations, licenses and leases; |
| • | the absence of certain material litigation, investigations, claims and actions; |
| • | employee benefits and compliance with applicable laws related to employee benefits and the Employment Retirement Income Security Act (which we refer to as “ERISA”); |
| • | the absence of collective bargaining agreements, labor disputes and other employment and labor matters; |
| • | the accuracy and completeness of tax returns and other tax matters; |
| • | the requisite vote or consent of stockholders to complete the merger and the other transactions contemplated by the business combination agreement; |
| • | ownership of or right to intellectual property, absence of infringement and operation of material information technology assets; |
| • | protection of personal data; |
| • | the existence of and compliance with certain material contracts, and certain matters related to contracts with governmental entities and security clearances; |
| • | compliance with environmental laws and permits, and the absence of material environmental claims; |
| • | compliance with the Foreign Corrupt Practices Act of 1977, as amended, and anti-corruption laws in other jurisdictions; |
| • | title and rights to, and condition of, real property; |
| • | related party agreements; |
| • | the receipt of fairness opinions from financial advisors; |
| • | the absence of undisclosed brokers’ fees or finders’ fees relating to the merger transactions; |
| • | the inapplicability of certain anti-takeover statutes and any similar provisions in organizational documents; and |
| • | ownership of T-Mobile common stock or Sprint common stock, as applicable. |
T-Mobile made additional representations and warranties in the business combination agreement in relation to financing commitments and the business of each of Merger Company and Merger Sub.
Many of the representations and warranties made by T-Mobile and Sprint are qualified by a “material adverse effect” standard (that is, they will not be deemed untrue or incorrect unless their failure to be true or correct, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the party making the representation and warranty). Certain of the representations and warranties are qualified by a general materiality standard or by a knowledge standard. For the purpose of the business combination agreement, a “material adverse effect” with respect to each of T-Mobile or Sprint means any fact, circumstance, effect, change, event or development (each referred to as an “effect”) that has had, or would reasonably be expected to have, individually or in the aggregate with all other effects, a material adverse effect on the business, assets, financial condition or results of operations of T-Mobile and its subsidiaries, or Sprint and its subsidiaries, as applicable, in each case taken as a whole, excluding any effect to the extent that it results from or arises out of:
| • | general economic or political conditions or securities, credit, financial or other capital markets conditions in the United States or elsewhere to the extent such effects do not have a disproportionate impact on the relevant party relative to other participants in the industry in which such party operates; |
| • | any failure, in and of itself, by the relevant party to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period (provided that the facts or occurrences giving rise to or contributing to such failure may be deemed to constitute, or be taken into account in determining whether there has been or will be, a material adverse effect on such party unless otherwise excluded in the definition of material adverse effect); |
| • | the execution and delivery of the business combination agreement or the public announcement or pendency of the merger transactions or any of the other transactions contemplated by the business combination agreement, including any litigation resulting or arising therefrom or with respect thereto; |
| • | any change, in and of itself, in the market price or trading volume of the securities of the relevant party (provided that the facts or occurrences giving rise to or contributing to such change may be deemed to constitute, or be taken into account in determining whether there has been or will be, a material adverse effect on such party unless otherwise excluded in the definition of material adverse effect); |
| • | any change after the date of the business combination agreement in applicable law, regulation or GAAP (or authoritative interpretation thereof) to the extent such effects do not have a disproportionate impact on the relevant party relative to other participants in the industry in which such party operates; |
| • | geopolitical conditions, the outbreak or escalation of hostilities, any acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism to the extent such effects do not have a disproportionate impact on the relevant party relative to other participants in the industry in which such party operates; |
| • | any hurricane, tornado, flood, earthquake or other natural disaster to the extent such effects do not have a disproportionate impact on the relevant party relative to other participants in the industry in which such party operates; |
| • | any changes, including in credit ratings or credit outlook, generally affecting the industry in which the relevant party and its subsidiaries operate to the extent such effects do not have a disproportionate impact on the relevant party relative to other participants in the industry in which such party operates; or |
| • | any action taken by the relevant party pursuant to the express written direction of another party to the business combination agreement, where the authority of the second party to direct the first party is granted by the business combination agreement. |
Representations and Warranties of the Deutsche Telekom Parties and the SoftBank Parties
The Deutsche Telekom Parties and the SoftBank Parties made certain limited representations and warranties in the business combination agreement that are subject, in some cases, to specified exceptions and qualifications
contained in the business combination agreement or in information provided pursuant to certain disclosure letters delivered in connection with the business combination agreement.
Some of the more significant representations and warranties of the Deutsche Telekom Parties and the SoftBank Parties relate to:
| • | organization, existence and good standing, and requisite corporate or other power and authority to carry on business; |
| • | power and authority to enter into the business combination agreement and the enforceability thereof; |
| • | the absence of certain material litigation, investigations, claims and actions; and |
| • | the reliability and accuracy of information supplied for this joint consent solicitation statement/prospectus. |
The SoftBank Parties made additional representations and warranties in the business combination agreement in relation to the capitalization and business of, and certain tax matters with respect to, each of Galaxy and Starburst, the ownership of Sprint common stock by each of Galaxy and Starburst, and voting power with respect to the matters set forth in the business combination agreement and the SoftBank support agreement with respect to such common stock.
THE DESCRIPTION OF THE BUSINESS COMBINATION AGREEMENT IN THIS JOINT CONSENT SOLICITATION STATEMENT/PROSPECTUS HAS BEEN INCLUDED TO PROVIDE YOU WITH INFORMATION REGARDING ITS TERMS. THE BUSINESS COMBINATION AGREEMENT CONTAINS REPRESENTATIONS AND WARRANTIES MADE BY AND TO THE PARTIES AS OF SPECIFIC DATES. THE STATEMENTS EMBODIED IN THOSE REPRESENTATIONS AND WARRANTIES WERE MADE FOR PURPOSES OF THE CONTRACT BETWEEN THE PARTIES AND ARE SUBJECT TO QUALIFICATIONS AND LIMITATIONS AGREED TO BY THE PARTIES IN CONNECTION WITH NEGOTIATING THE TERMS OF THE BUSINESS COMBINATION AGREEMENT AND IN SOME CASES WERE QUALIFIED BY CONFIDENTIAL DISCLOSURES MADE BY THE PARTIES, WHICH DISCLOSURES ARE NOT REFLECTED IN THE BUSINESS COMBINATION AGREEMENT ATTACHED AS ANNEX A TO THIS JOINT CONSENT SOLICITATION STATEMENT/PROSPECTUS. IN ADDITION, CERTAIN REPRESENTATIONS AND WARRANTIES WERE MADE AS OF A SPECIFIED DATE AND THE REPRESENTATIONS AND WARRANTIES WERE GENERALLY USED FOR THE PURPOSE OF ALLOCATING RISK BETWEEN THE PARTIES RATHER THAN ESTABLISHING MATTERS AS FACTS.
Nonsurvival of Representations and Warranties
The representations and warranties in the business combination agreement of each of T-Mobile, Sprint and the Deutsche Telekom Parties will not survive the completion of the merger. The representations and warranties in the business combination agreement of the SoftBank Parties, including any right to indemnification for breach thereof, will survive the completion of the merger and will terminate 90 days after the expiration of the applicable statute of limitations.
Conduct of Business Pending the Closing Date
During the period from the date of the business combination agreement to the earlier of the effective time and the termination of the business combination agreement pursuant to its terms, except as set forth in the applicable disclosure letter, as otherwise expressly permitted by the business combination agreement, as required by law or with the prior written consent of the other party (such consent not to be unreasonably withheld, conditioned or delayed), T-Mobile and Sprint have agreed to, and have agreed to cause their respective
subsidiaries to, use reasonable best efforts to carry on their respective businesses in the ordinary course of business consistent with past practice and, to the extent consistent therewith, use reasonable best efforts to preserve intact their current business organizations, preserve their assets and properties in good repair and condition and preserve their relationships with those persons having business dealings with them to the end that their goodwill and ongoing businesses will be unimpaired at the effective time.
During the period from the date of the business combination agreement to the earlier of the effective time and the termination of the business combination agreement pursuant to its terms, except as set forth in the applicable disclosure letter, as otherwise expressly permitted by the business combination agreement, as required by law or with the prior written consent of the other party (such consent not to be unreasonably withheld, conditioned or delayed), each of T-Mobile and Sprint has agreed not to, and has agreed not to permit any of its subsidiaries to:
| • | (1) other than dividends and distributions by a direct or indirect wholly owned subsidiary to its parent, declare, set aside or pay any dividends on, make any other distributions in respect of or enter into any agreement with respect to the voting of, any of its capital stock, (2) (a) other than with respect to the capital stock or securities of its direct or indirect wholly owned subsidiaries, split, combine or reclassify any shares of its capital stock or (b) issue any other securities in respect of, in lieu of or in substitution for shares of its capital stock, unless such issuance is to other direct or indirect wholly owned subsidiaries, or (3) purchase, redeem or otherwise acquire any shares of its capital stock or the capital stock of any non-wholly owned subsidiary or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities (other than the acquisition of shares from a holder of a T-Mobile or Sprint equity award, as applicable, in satisfaction of withholding obligations or in payment of the exercise price in accordance with the terms thereof or in connection with the forfeiture of such award); |
| • | issue, deliver, sell, pledge or otherwise encumber or subject to any lien any shares of its capital stock, any other voting or equity securities or interests or any securities or interests convertible into, or any rights, warrants or options to acquire, any such shares, securities or interests or convertible securities, other than (1) in connection with the exercise or settlement of T-Mobile or Sprint equity awards, as applicable, outstanding as of the date of the business combination agreement in accordance with their present terms (or granted following the date of the business combination agreement in accordance with the terms of the business combination agreement), (2) in accordance with the applicable disclosure letter, (3) the issuance, delivery or sale of capital stock or other voting or equity securities or interests to another direct or indirect wholly owned subsidiary, (4) liens on the capital stock of any of its subsidiaries which are required to be granted pursuant to the terms of any indebtedness existing on the date of the business combination agreement or permitted to be incurred in accordance with the business combination agreement or that constitutes or is incurred because it represents a pre-merger financing transaction, or (5) in the case of Sprint, the issuance of up to 61,868,554 shares of Sprint common stock upon the exercise of Sprint warrants in accordance with the terms thereof; |
| • | except as set forth in the applicable disclosure letter: (1) amend or modify in any material respect, renew, waive any material provision of or terminate any material contract, or enter into any contract that would have been a material contract had it been in effect as of the date of the business combination agreement, except (a) in the ordinary course of business consistent with past practice (subject to certain exceptions), (b) in connection with any matter to the extent such matter is expressly permitted by another bullet point above or below or (c) for any renewal or extension of a material contract in the ordinary course of business consistent with past practice and in accordance with the express terms of such material contract as in effect on the date of the business combination agreement; or (2) permit to exist as of the closing date any condition that is or would result in an event of termination or an event of default with respect to any of the material contracts set forth on the applicable disclosure letter, or otherwise would result in a right of the applicable counterparty to terminate such material contract; |
| • | other than acquisitions of wireless spectrum, and except for transactions solely between T-Mobile or Sprint, as applicable, and its wholly owned subsidiaries, or among its wholly owned subsidiaries, (1) acquire any equity interests in, or make any investment in or any capital contribution to, any person, or acquire a substantial portion of the assets or business of any person (or any division or line of business thereof), including in each case by merger or consolidation, or (2) otherwise acquire (including through leases, subleases and licenses of real property) any assets, except (a) in the case of (2), inventory, equipment, tower leases and assets acquired in the ordinary course of business consistent with past practice and (b) in the case of clauses (1) and (2), (w) pursuant to any agreement in effect on the date of the business combination agreement and made available to the other party prior to the date of the business combination agreement, (x) acquisitions in its investment portfolio made in the ordinary course of business consistent with past practice and consistent with its bona fide cash management policies, (y) assets required for, and reasonably acquired for, a disaster recovery operation or (z) in one or more transactions with respect to which the aggregate consideration for all such transactions during the period from the date of the business combination agreement to the closing date does not exceed $250 million (in the case of Sprint) or $375 million (in the case of T-Mobile); |
| • | acquire any wireless spectrum, except (1) fair market value exchanges of spectrum licenses in the ordinary course of business consistent with past practice that do not adversely affect existing operations, (2) pursuant to any agreement in effect on the date of the business combination agreement and made available to the other party prior to the date of the business combination agreement, (3) pursuant to an auction of wireless spectrum by a governmental entity or (4) in one or more transactions with respect to which the aggregate consideration for all such transactions (including any cash component of an otherwise fair market value exchange of spectrum licenses) during the period from the date of the business combination agreement to the closing date does not exceed $1 billion (in the case of Sprint) or $2 billion (in the case of T-Mobile); |
| • | transfer, sell, lease, license, mortgage, pledge, surrender, encumber, divest, cancel, abandon, voluntarily fail to renew on commercially reasonable terms, allow to lapse or expire or otherwise dispose of (in each case except among T-Mobile or Sprint, as applicable, and its wholly owned subsidiaries, including transactions between such subsidiaries) any communications licenses or wireless spectrum (or leases therefor) (or authorize, by action or inaction, any licensee leasing spectrum to such party or any of its subsidiaries to do any of the foregoing to the extent it would impair the rights of such party to leased spectrum), other than (1) fair market value exchanges of spectrum licenses in the ordinary course of business consistent with past practice that do not adversely affect existing operations and would not reasonably be expected to adversely affect the expected benefits of the transactions contemplated by the business combination agreement in any material respect, (2) pursuant to any agreement in effect on the date of the business combination agreement and made available to the other party prior to the date of the business combination agreement, (3) effecting any of the foregoing in one or more transactions (including any cash component of an otherwise fair market value exchange of spectrum licenses and fair market value of the wireless spectrum for any lease not so renewed) during the period from the date of the business combination agreement to the closing date does not exceed $50 million, or (4) liens which are required to be granted pursuant to the terms of any indebtedness existing on the date of the business combination agreement or permitted to be incurred in accordance with the bullet point related to indebtedness below; |
| • | except in the ordinary course of business, transfer, sell, lease, license, mortgage, pledge, surrender, encumber, divest, cancel, abandon, voluntarily fail to renew on commercially reasonable terms, allow to lapse or expire or otherwise dispose of (except transfers, sales, leases or licenses solely among T-Mobile or Sprint, as applicable, and its wholly owned subsidiaries, including transactions between such subsidiaries) any licenses (other than communications licenses), assets (other than wireless spectrum and intellectual property), operations, rights, businesses or interests, other than (1) any such licenses, assets, operations, rights, businesses or interests therein with a fair market value or purchase price in the aggregate not in excess of $250 million (in the case of Sprint) or $375 million (in the case |
| of T-Mobile) for all such transactions during the period from the date of the business combination agreement to the closing date or (2) pursuant to any agreement in effect on the date of the business combination agreement and made available to the other party prior to the date of the business combination agreement; |
| • | create, incur or assume any indebtedness for borrowed money; issue any debt securities or any right to acquire debt securities; assume, guarantee, endorse or otherwise become liable or responsible (whether, directly, contingently or otherwise) for the indebtedness of another person; enter into any agreement to maintain any financial condition of another person; in the case of Sprint, enter into any securitization or factoring arrangement; or enter into any arrangement having the economic effect of any of the foregoing, except for (1) indebtedness under current revolving credit facilities or agreements and securitization facilities; (2) any indebtedness incurred to refinance or replace indebtedness in existence on the date of the business combination agreement or permitted to be incurred by this bullet point, which refinancing indebtedness is in an amount not to exceed the amount of indebtedness refinanced thereby, plus accrued and unpaid interest, customary fees and expenses relating thereto; (3) any intercompany indebtedness solely among T-Mobile or Sprint, as applicable, and/or its direct or indirect wholly owned subsidiaries; (4) incremental indebtedness for borrowed money used to finance permitted acquisitions of wireless spectrum after the date of the business combination agreement and prior to the closing date, not to exceed $1 billion (in the case of Sprint) or $2.5 billion (in the case of T-Mobile) in the aggregate outstanding at any time; (5) incremental indebtedness for borrowed money not to exceed $2 billion in the aggregate outstanding at any time; and (6) guarantees by T-Mobile or Sprint, as applicable, or its wholly owned subsidiaries of indebtedness for borrowed money of such party or its wholly owned subsidiaries (other than intercompany indebtedness) to the extent that (a) such guarantee is required by the terms of such indebtedness and (b) such indebtedness is in existence on the date of the business combination agreement or incurred in compliance with the foregoing clauses (1) through (6) (provided, in the case of Sprint, that any such indebtedness incurred pursuant to the foregoing clauses (2), (4) or (5) is prepayable at par at any time (except, in the case of any term loan B, for any customary 101 “soft call”); provided, further, that the foregoing will not limit the incurrence of indebtedness pursuant to any pre-merger financing transaction in accordance with the business combination agreement); |
| • | except in the ordinary course of business consistent with past practice, make any loans or advances, except (1) to the extent required under any agreement in effect on the date of the business combination agreement and made available to the other party prior to the date of the business combination agreement, (2) to T-Mobile or Sprint, as applicable, or any of its wholly owned subsidiaries (including loans and advances between such subsidiaries) or (3) loans or advances not in excess of $30 million in the aggregate for all such loans and advances during the period from the date of the business combination agreement to the closing date; |
| • | make or forgive any loans or advances to any employees, directors or officers (other than making travel and similar advances in the ordinary course of business consistent with past practice), except in the ordinary course of business in amounts not in excess of $5,000 per employee; |
| • | other than any action with respect to taxes, waive, release, assign, settle or compromise any pending or threatened (in writing) action, other than (1) settlements that result in recoveries, (2) settlements involving de minimis non-monetary obligations entered into in the ordinary course of business consistent with past practice or (3) settlements that result solely in monetary obligations (without the admission of wrongdoing or a nolo contendere or similar plea by, the imposition of injunctive or other equitable relief on, or restrictions on the future activity or conduct of, T-Mobile or Sprint, as applicable, or any of its subsidiaries, and excluding any stockholder action relating to the business combination agreement) involving the payment by T-Mobile or Sprint, as applicable, or any of its subsidiaries of (a) amounts not in excess of the amounts specifically reserved in accordance with GAAP with respect to such action on its consolidated financial statements for the period ending December 31, 2017 or (b) amounts not in excess of $100 million (in the case of Sprint) or $150 million |
| (in the case of T-Mobile) for a single action or $167 million (in the case of Sprint) or $250 million (in the case of T-Mobile) in the aggregate for all such actions during the period from the date of the business combination agreement to the closing date; |
| • | other than in the ordinary course of business consistent with past practice, (1) make, change or revoke any material tax election, (2) settle or compromise any claim, audit, proceeding or liability relating to a material amount of taxes, (3) change (or make a request to any taxing authority to change) any tax accounting period or any material aspect of its method of accounting for tax purposes, (4) amend any material tax return, (5) enter into any closing agreement within the meaning of Section 7121 of the Code (or any similar provision of state, local or non-U.S. law) with respect to any material tax, (6) surrender any claim for a refund of a material amount of taxes or (7) in the case of T-Mobile, take any action or make any election pursuant to Treasury Regulations Section 301.7701-3(c) to treat Merger Company as other than disregarded as an entity separate from T-Mobile for U.S. federal income tax purposes; |
| • | other than in the ordinary course of business and consistent with past practice, as set forth on the applicable disclosure letter, as required by any T-Mobile or Sprint benefit plan, as applicable, in effect on the date of the business combination agreement or as required by law, (1) increase any compensation or benefits of any executive officer or director, (2) grant any cash or equity incentive compensation to any executive officer or director, or pay or settle any cash or equity incentive compensation, other than in accordance with the terms of the applicable benefit plan based, if applicable, on actual performance, (3) enter into or adopt any new T-Mobile or Sprint benefit plan, as applicable, or amend in any material respect or terminate any existing T-Mobile or Sprint benefit plan, as applicable, (4) accelerate the vesting of any compensation or benefits (including equity awards), (5) provide any funding for any rabbi trust or similar arrangement, or take any other action to fund or secure the payment of any compensation or benefit, (6) amend the funding obligation or contribution rate of any T-Mobile or Sprint benefit plan, as applicable, or change any underlying assumptions to calculate benefits payable under any T-Mobile or Sprint benefit plan, as applicable, except as may be required by GAAP, or (7) grant to any executive officer or director any right to receive any severance, change-in-control, retention, termination or similar compensation or benefits or increases therein; |
| • | (1) negotiate, enter into, materially modify or (except in accordance with its terms) extend any labor agreement or (2) voluntarily recognize or certify any labor or trade union, works council, employee representative body or other labor organization as the representative of any employees of T-Mobile or Sprint, as applicable, or any of its subsidiaries; |
| • | change any of its material financial accounting policies or procedures currently in effect, except (1) as required by GAAP (or with respect to permitted early adoption of changes required by GAAP), Regulation S-X of the Exchange Act or a governmental entity or quasi-governmental authority (including the Financial Accounting Standards Board or any similar organization) as determined in consultation with its outside auditor or (2) as required by law; |
| • | make any payment or accrual of aggregate capital expenditures (excluding leased handsets in the ordinary course of business consistent with past practice) that are greater than 110% of the amounts set forth in the applicable disclosure letter for the respective periods set forth therein; |
| • | write up, write down or write off the book value of any assets, other than (1) in the ordinary course of business consistent with past practice or (2) as may be consistent with its financial accounting policies and procedures and GAAP as determined in consultation with its outside auditor; |
| • | transfer, sell, lease, license, mortgage, pledge, surrender, encumber, divest or otherwise dispose of (in each case except among T-Mobile or Sprint, as applicable, and its wholly owned subsidiaries), cancel, dedicate to the public, disclaim, forfeit, reexamine, abandon or allow to lapse (except with respect to patents expiring in accordance with their terms), any rights in, or registrations or applications for, intellectual property, other than immaterial rights in, or registrations or applications for, intellectual property in the ordinary course of business consistent with past practice; |
| • | (A) amend its certificate of incorporation or bylaws or the comparable organizational documents of any of its subsidiaries (other than any amendment to the organizational documents of any of its wholly owned subsidiaries that would not reasonably be expected to be materially adverse to the other party or to prevent or materially delay the completion of any of the transactions contemplated by the business combination agreement) or (B) merge or consolidate with any person (other than any merger or consolidation involving only its direct and indirect wholly owned subsidiaries) or adopt or implement any plan of complete or partial liquidation, dissolution, consolidation, restructuring, recapitalization or other reorganization; or |
| • | authorize, commit, agree or publicly announce an intention to take any of the foregoing actions. |
Conduct of the SoftBank Parties Pending the Closing Date
The SoftBank Parties have agreed that the SoftBank Parties will not acquire Sprint common stock that would cause (1) SoftBank’s voting interest in Sprint to equal or exceed 85%, (2) SoftBank’s and Deutsche Telekom’s collective voting interest in the combined company as of immediately following the closing to exceed 80.1% or (3) the ratio of (a) SoftBank’s beneficial ownership of T-Mobile common stock to (b) Deutsche Telekom’s beneficial ownership of T-Mobile common stock to exceed 49.9% to 50.1% as of immediately following the closing. In addition, the SoftBank US Holdcos have agreed to certain restrictions on their ability to issue, or enter into voting agreements with respect to, shares of their capital stock, make acquisitions and dispositions, incur indebtedness, amend their organizational documents and take certain actions with respect to taxes.
Conduct of Deutsche Telekom Pending the Closing Date
Deutsche Telekom has agreed that Deutsche Telekom and its subsidiaries will not acquire T-Mobile common stock that would cause SoftBank’s and Deutsche Telekom’s collective voting interest in the combined company as of immediately following the closing to exceed 80.1%.
Reasonable Best Efforts; Regulatory Filings and Other Actions
Each of the parties to the business combination agreement has agreed to use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to complete and make effective, as soon as possible following the date of the business combination agreement, the merger transactions and the other transactions contemplated by the business combination agreement, including using reasonable best efforts in:
| • | obtaining all governmental consents, including making all necessary registrations and filings and taking all steps as may be necessary to obtain a governmental consent from, or to avoid an action or proceeding by, any governmental entity; |
| • | obtaining all necessary consents, approvals or waivers, and any necessary or appropriate financing arrangements, from third parties; |
| • | contesting and defending any lawsuits or other legal proceedings, whether judicial or administrative, challenging the business combination or the completion of the transactions contemplated thereby, including seeking to have any adverse decision, stay or temporary restraining order entered by any court or other governmental entity vacated or reversed; |
| • | executing and delivering any additional instruments necessary to complete the transactions contemplated by, and to fully carry out the purposes of, the business combination agreement; and |
| • | refraining from taking any action that would reasonably be expected to prevent or materially delay the completion of the transactions contemplated by the business combination agreement. |
In addition, each of the parties has agreed to make or submit all filings, registrations, analyses, appearances, presentations, memoranda, briefs, arguments, opinions, proposals, correspondence and written communications, and to take all other actions or steps to be taken, in connection therewith in accordance with a strategy (including as to the timing and substance thereof) jointly developed by T-Mobile and Sprint, with each of the parties to consult and cooperate reasonably promptly and in good faith with the other parties with respect thereto. In the event any party reasonably objects in writing to any filing, registration, analysis, appearance, presentation, memorandum, brief, argument, opinion, proposal, correspondence or written communication to be (or proposed to be) made or submitted, or any other action or step to be (or proposed to be) taken, in connection with obtaining any governmental consent necessary, proper or advisable to complete and make effective the merger transactions and the other transactions contemplated by the business combination agreement, then such matters may be escalated for discussion to the chief executive officer of SoftBank and the chief executive officer of Deutsche Telekom, such discussion to be held no later than 24 hours following the date of the objection. If such representatives are not in good faith able to resolve such objection during such discussion, such matter will thereafter be resolved by the chief executive officer of Deutsche Telekom in his sole discretion. Promptly following such resolution by the chief executive officer of Deutsche Telekom, the parties will in good faith make or submit any such filing, registration, analysis, appearance, presentation, memorandum, brief, argument, opinion, proposal, correspondence or written communication, or take any such other action or step, in accordance with such resolution by the chief executive officer of Deutsche Telekom.
Each of the parties has also agreed to notify the other party of, and permit (subject to applicable law) the other party to review and comment on, substantive communications from or to any governmental entity, consult with the other party in advance and give the other party the opportunity to attend and participate in substantive meetings or discussions with any governmental entity.
In connection with the foregoing, and subject to certain limitations specified in the business combination agreement, each of the parties has agreed that the use of “reasonable best efforts” will include (a) contesting and defending any lawsuits or other legal proceedings challenging the business combination agreement or the merger transactions, including seeking to have any adverse decision, stay or temporary restraining order vacated or reversed, and (b) proposing, negotiating, committing to and effecting by consent decree, hold separate order or otherwise, (1) the sale, divestiture, license or disposition of such assets or businesses of T-Mobile, Sprint or its subsidiaries and (2) restrictions, limitations or conditions relating to, or actions that after the effective time would limit T-Mobile’s or its subsidiaries’ freedom of action or operations with respect to, or its ability to retain, one or more of its or its subsidiaries’ businesses, product lines or assets, in each case (x) as may be required in order to avoid the entry, or to effect the dissolution, of any injunction, temporary restraining order or other order in any suit or proceeding that would otherwise have the effect of preventing or materially delaying the completion of the transactions contemplated by the business combination agreement and (y) conditioned upon the completion of the merger transactions.
Notwithstanding the foregoing, none of T-Mobile, Sprint, either Deutsche Telekom Party or any SoftBank Party will be required to take, or cause to be taken, any action that, individually or in the aggregate, would or would reasonably be expected to result in any of the following:
| • | any of the consequences set forth on the applicable disclosure letter; |
| • | a materially adverse impact on the business, financial condition or results of operations of T-Mobile, Sprint and their respective subsidiaries following the merger, taking into account the impact on the expected synergies of the merger (in each case with materiality measured on a scale consistent with the financial standard set forth in the next bullet point), as compared to such persons if such action (when taken together with all other actions undertaken with respect to the applicable section of the business combination agreement) were not taken; |
| • | any loss, cost or diminution in value of $7 billion or more, measured on a net present value basis, to T-Mobile, Sprint and their respective subsidiaries following the merger, taking into account the loss, |
| cost or diminution in value of the expected synergies of the merger, as compared to such persons if such action (when taken together with all other actions undertaken with respect to the applicable section of the business combination agreement) were not taken; |
| • | any limit, restrictions or conditions (including as a result of any national security agreement or similar agreement or arrangement with CFIUS or any of its constituent members, whether as part of or separate from any review by CFIUS (which we refer to as a “national security agreement”)) on: |
| • | the ability of Deutsche Telekom or SoftBank to designate members of the T-Mobile board of directors after the merger or committees thereof (other than a minority of the compensation committee thereof) in all respects as contemplated by the business combination agreement and/or the amended and restated stockholders’ agreement and in accordance with the existing qualification criteria for T-Mobile directors as of the date of the business combination agreement (other than any requirement that one of each of Deutsche Telekom’s and SoftBank’s designees qualify as a “security director” or substantial equivalent to the extent required by any national security agreement); |
| • | the scope of authority provided to the T-Mobile board of directors after the merger or the exercise of any rights of any directors of the T-Mobile board of directors, in his or her capacity as a member of the T-Mobile board of directors or any committee thereof, other than with respect to oversight of, or participation in, a national security committee or related national security matters; |
| • | the exercise of any material right contemplated to be provided to Deutsche Telekom (unless waived by Deutsche Telekom) or SoftBank (unless waived by SoftBank) under the amended and restated stockholders’ agreement or the proxy agreement; or |
| • | except in any de minimis respect, any business or operations of Deutsche Telekom, SoftBank or any of their respective affiliates, apart from the business or operations of T-Mobile, Sprint or their respective subsidiaries; |
| • | any requirement to adopt a FOCI mitigation agreement or similar arrangement with DSS that results in a material change in, or material impact to, the network operations or the business operations of T-Mobile and its subsidiaries following the effective time, including T-Mobile’s control over such network operations or the business operations, as compared to such operations as conducted and controlled by T-Mobile and Sprint and their respective subsidiaries prior to the effective time (provided that restrictions having the same terms and operational scope of the FOCI mitigation agreement in effect as of the date of the business combination agreement between Sprint and DSS, and solely with respect to the business currently conducted by Sprint Federal Operations LLC and Sprint Federal Management LLC, will not be deemed to result in any such change or impact); or |
| • | any requirement to change the ownership, including the interests held by any shareholders, of Deutsche Telekom, SoftBank or any of their respective affiliates. |
Any of the items described in the bullet points above is referred to in this joint consent solicitation statement/prospectus as a “regulatory material adverse condition.” However, the parties have agreed that each of (1) the existing Sprint security agreement and any other national security agreement with substantially similar or less conditions as applied to T-Mobile after the merger and (2) the FOCI mitigation agreement between Sprint and DSS in effect as of the date of the business combination agreement solely with respect to the business currently conducted by Sprint Federal Operations LLC and Sprint Federal Management LLC is not a regulatory material adverse condition.
No Solicitation; Third-Party Acquisition Proposals
Under the business combination agreement, each of T-Mobile, Deutsche Telekom, Sprint and SoftBank has agreed that it will not (and will cause its controlled affiliates and its officers and directors not to), and that it will
use reasonable best efforts to cause its other employees and representatives retained by it or any of its controlled affiliates not to, directly or indirectly:
| • | solicit, initiate or knowingly encourage (including by furnishing information), or knowingly take any other action designed to facilitate, any inquiries regarding, or the making of, any proposal the consummation of which would constitute an alternative transaction (as defined below); |
| • | participate in any discussions or negotiations, or cooperate in any way with any person (including furnishing non-public information), with respect to any inquiries regarding, or the making of, any proposal the consummation of which would constitute an alternative transaction; or |
| • | approve, endorse or recommend any proposal the consummation of which would constitute, or enter into any agreement, commitment, arrangement or understanding providing for, contemplating or otherwise in connection with, an alternative transaction. |
In addition, the business combination agreement requires each of T-Mobile, Deutsche Telekom, Sprint and SoftBank to, and to cause its controlled affiliates and its officers and directors to, and to use reasonable best efforts to cause its other employees and representatives to, immediately cease and cause to be terminated any discussions or negotiations with any third parties conducted theretofore with respect to any alternative transaction.
T-Mobile and Deutsche Telekom are required to promptly (and in no event later than 48 hours after receipt) advise Sprint, and Sprint and SoftBank are required to promptly (and in no event later than 48 hours after receipt) advise T-Mobile, in writing of the receipt of any inquiry regarding, or the making of, any proposal the consummation of which would constitute an alternative transaction, including the identity of the person making or submitting such inquiry or proposal, a summary of all of the material terms thereof and copies of all written materials relating thereto, and to keep Sprint or T-Mobile, as applicable, informed on a reasonably prompt basis regarding the status and material details of any such inquiry or proposal. In addition, to the extent any material non-public information, documents or materials are made available by or on behalf of T-Mobile or Sprint, as applicable, to any third party in response to any alternative transaction pursuant to the fiduciary duties of the T-Mobile board of directors or the Sprint board of directors, as applicable, all such information, documents and materials must promptly (and in any event within 48 hours) be made available to Sprint and SoftBank, or T-Mobile and Deutsche Telekom, as applicable.
Definition of Alternative Transaction
For purposes of the business combination agreement, the term “alternative transaction” (as used with respect to each of T-Mobile and Sprint, as applicable) means any of:
| • | a transaction or series of transactions pursuant to which any third party acquires or would acquire, directly or indirectly, beneficial ownership of more than 15% of the outstanding shares of common stock or securities representing 15% or more of the voting power of T-Mobile or Sprint; |
| • | a merger, consolidation, share exchange or similar transaction pursuant to which any third party acquires or would acquire, directly or indirectly, assets or businesses representing 15% or more of the consolidated revenues, net income or assets of T-Mobile or Sprint and their respective subsidiaries taken as a whole; |
| • | any transaction pursuant to which any third party acquires or would acquire, directly or indirectly, control of assets representing 15% or more of the consolidated revenues, net income or assets of T-Mobile or Sprint and their respective subsidiaries taken as a whole; |
| • | any disposition of assets to a third party representing 15% or more of the consolidated revenues, net income or assets of T-Mobile or Sprint and their respective subsidiaries taken as a whole; or |
| • | other than arrangements in effect as of the date of the business combination agreement and arrangements in the ordinary course of business consistent with past practice, any agreement or |
| transaction pursuant to which T-Mobile or Sprint or any of their respective subsidiaries provides or would provide mobile virtual network operator or other wholesale mobile network services to any third party which, individually or together with all related agreements or transactions with such third party or any affiliate thereof, would provide annual billed revenue to T-Mobile or Sprint in excess of $3 billion. |
Change of Recommendation of the T-Mobile Board of Directors
T-Mobile has agreed to include the recommendation of the T-Mobile board of directors to T-Mobile stockholders in favor of the approval of the T-Mobile charter amendment and the T-Mobile share issuance (which we refer to as the “T-Mobile board recommendation”) in this joint consent solicitation statement/prospectus, subject to the fiduciary duties of the T-Mobile board of directors under applicable law.
Notwithstanding the foregoing, prior to obtaining the T-Mobile stockholder approval, the T-Mobile board of directors is permitted to (1) disclose to T-Mobile stockholders a position contemplated by Rules 14d-9 and 14e-2(a) under the Exchange Act or issue a “stop, look and listen” statement to T-Mobile stockholders pursuant to Rule 14d-9(f) under the Exchange Act, (2) make any disclosure to T-Mobile stockholders and (3) change or withdraw the T-Mobile board recommendation, but, in the case of (2) or (3), solely to the extent any such disclosure, change or withdrawal is required for the T-Mobile board of directors to carry out its fiduciary duties under applicable law. However, in no event will any such disclosure, change or withdrawal (x) affect the validity and enforceability of the business combination agreement or the Deutsche Telekom support agreement, including the applicable parties’ obligations to complete the transactions contemplated by the business combination agreement or deliver (or cause to be delivered) the Deutsche Telekom written consent or (y) cause any state corporate takeover statute or other similar statute to be applicable to the merger transactions or the other transactions contemplated by this business combination agreement. Therefore, Deutsche Telekom Holding will be required to deliver the Deutsche Telekom written consent, which will constitute the T-Mobile stockholder approval, even if the T-Mobile board of directors changes or withdraws the T-Mobile board recommendation.
Change of Recommendation of the Sprint Board of Directors
Sprint has agreed to include the recommendation of the Sprint board of directors to Sprint stockholders in favor of the adoption of the business combination agreement (which we refer to as the “Sprint board recommendation”) in this joint consent solicitation statement/prospectus, subject to the fiduciary duties of the Sprint board of directors under applicable law.
Notwithstanding the foregoing, prior to obtaining the Sprint stockholder approval, the Sprint board of directors is permitted to (1) disclose to Sprint stockholders a position contemplated by Rules 14d-9 and 14e-2(a) under the Exchange Act or issue a “stop, look and listen” statement to Sprint stockholders pursuant to Rule 14d-9(f) under the Exchange Act, (2) make any disclosure to Sprint stockholders and (3) change or withdraw the Sprint board recommendation, but, in the case of (2) or (3), solely to the extent any such disclosure, change or withdrawal is required for the Sprint board of directors to carry out its fiduciary duties under applicable law. However, in no event will any such disclosure, change or withdrawal (x) affect the validity and enforceability of the business combination agreement or the SoftBank support agreement, including the applicable parties’ obligations to complete the transactions contemplated by the business combination agreement or deliver (or cause to be delivered) the SoftBank written consent or (y) cause any state corporate takeover statute or other similar statute to be applicable to the merger transactions or the other transactions contemplated by this business combination agreement. Therefore, Starburst and Galaxy will be required to deliver the SoftBank written consent, which will constitute the Sprint stockholder approval, even if the Sprint board of directors changes or withdraws the Sprint board recommendation.
No Stockholder Meetings
The business combination agreement provides that T-Mobile and Sprint will seek the T-Mobile stockholder approval and the Sprint stockholder approval, respectively, pursuant to this joint consent solicitation statement/prospectus, and neither T-Mobile nor Sprint will call or convene any meeting of its stockholders in connection with the T-Mobile stockholder approval or the Sprint stockholder approval, respectively. See “Solicitation of T-Mobile Written Consents” and “Solicitation of Sprint Written Consents.”
Employment and Benefits Matters
For 18 months following the effective time, T-Mobile will provide to each employee of Sprint or its subsidiaries: (a) base compensation that is no less favorable to such Sprint employee than the base compensation provided to such Sprint employee immediately prior to the effective time, (b) short-term compensation opportunities, equity compensation and commission opportunities that are no less favorable in the aggregate than those in effect immediately prior to the effective time and (c) other benefits that are no less favorable in the aggregate than the benefits provided to such employee immediately prior to the effective time or, starting in the year immediately following the year in which the effective time occurs, that are no less favorable in the aggregate than the benefits provided to similarly situated employees of T-Mobile or its subsidiaries.
During the year in which the effective time occurs, each employee of Sprint or its subsidiaries participating in an annual bonus plan will be eligible to receive a pro rata bonus, based on the greater of (x) target-level performance and (y) actual performance through the latest practicable date prior to the effective time (as determined by the compensation committee of Sprint’s board of directors or such other applicable committee and annualized through the end of the quarter in which the effective time occurs). Such pro rata bonus is payable following the end of Sprint’s fiscal year in which the effective time occurs, subject to the applicable employee’s continued employment with T-Mobile, Sprint or any of their respective affiliates through the end of such fiscal year or, if earlier, following such employee’s severance-eligible termination of employment (with such payment subject to the execution and non-revocation of a general release of claims in a form customarily used by T-Mobile, Sprint or their respective affiliates for similarly situated employees, if requested by T-Mobile, Sprint or any of their affiliates).
In terms of severance, the business combination agreement provides that T-Mobile will provide each employee of Sprint or its subsidiaries whose employment is terminated by T-Mobile on or within 18 months following the effective time with severance payments and severance benefits that are no less favorable than the greater of (i) the severance payments and severance benefits that were provided to such employee immediately prior to the effective time and (ii) the severance payments and severance benefits that are provided to similarly situated employees of T-Mobile and its affiliates from time to time.
Furthermore, the business combination agreement provides certain other employment and benefits covenants in respect to service credits for employees taking into consideration years of service, as well as covenants in respect to third-party beneficiary rights.
Financing Matters
The business combination agreement provides that T-Mobile will, in reasonable consultation with Sprint and in a reasonable manner, direct and control all decisions, communications and discussions relating to any financing transactions entered into by T-Mobile or Sprint prior to the effective time, including (i) the raising of new financing by Sprint, T-Mobile and/or their respective subsidiaries, (ii) the refinancing of existing indebtedness by Sprint, T-Mobile and/or their respective subsidiaries, (iii) the repayment or retirement of existing indebtedness of Sprint, T-Mobile and/or their respective subsidiaries, (iv) tendering or exchanging (or offering to tender or exchange) existing indebtedness of Sprint, T-Mobile and/or their respective subsidiaries, and/or (v) entering into amendments or modifications or obtaining consents or waivers (including waivers of change of
control provisions) in relation to agreements governing existing indebtedness or other financing arrangements of Sprint, T-Mobile and/or their respective subsidiaries (each of which we refer to as a “pre-merger financing transaction”).
The business combination agreement requires Sprint, in consultation with T-Mobile, to conduct change of control consent solicitations with respect to (i) all senior notes issued by Sprint and (ii) the 11.500% Senior Notes due 2021, the 7.000% Senior Notes due 2020 and the 6.000% Senior Notes due 2022, each issued by Sprint Communications, Inc., which consent solicitations have been completed.
Furthermore, the business combination agreement requires Sprint, upon the request of T-Mobile on reasonable notice, to use its reasonable best efforts to obtain (and requires T-Mobile to use its reasonable best efforts to assist in obtaining) the necessary consents with respect to the Series 2016-1 3.360% Senior Secured Notes, Series 2018-1 4.738% Senior Secured Notes, and Series 2018-1 5.152% Senior Secured Notes issued by Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC and Sprint Spectrum Co III LLC (which we refer to collectively as the “Sprint spectrum notes”) on terms reasonably determined by T-Mobile in consultation with Sprint, such that (1) T-Mobile and Deutsche Telekom and their affiliates will constitute “permitted holders” thereunder and (2) the merger transactions will not constitute a “change of control” thereunder. Such consents have been obtained, and in June 2018 the documentation relating to the Sprint spectrum notes was amended to, among other things, reflect the consents described in (1) and (2) above, and provide that the credit agreement contemplated by the amended and restated commitment letter that T-Mobile expects to enter into in connection with the closing of the merger transactions will be a “replacement credit agreement” as defined in such documentation and, in accordance with such documentation, any entity which is an obligor of such credit agreement (which entities are expected to include T-Mobile, T-Mobile USA and its domestic wholly owned restricted subsidiaries (subject to certain exceptions)) will also guarantee Sprint Communications Inc.’s lease payment obligations under the a 30-year intra-company lease agreement entered into by Sprint Communications Inc. in connection with the spectrum notes.
In addition, in connection with the merger transactions, Sprint conducted a consent solicitation to approve certain amendments to the governing documents of the 6.875% Senior Notes due 2028 and the 8.750% Senior Notes due 2032, each issued by Sprint Capital Corporation, which consent solicitation has been completed.
Each of T-Mobile and Sprint will, and will cause its officers and employees, its subsidiaries and the officers and employees of its subsidiaries to, and will use reasonable best efforts to cause its representatives to, provide all reasonable cooperation in completing any pre-merger financing transaction (and, in particular, each of T-Mobile and Sprint agrees to use reasonable best efforts to complete and obtain the financing contemplated by the amended and restated commitment letter in amounts reasonably necessary to effect the merger and the other transactions contemplated by the business combination agreement).
Pursuant to the business combination agreement, T-Mobile has agreed to indemnify and hold harmless Sprint from certain losses, damages, claims, and costs or expenses suffered or incurred in connection with any pre-merger financing transaction which are attributable to certain information provided by T-Mobile or its affiliates in connection therewith or to the gross negligence, willful misconduct or bad faith of T-Mobile or its affiliates. Additionally, pursuant to the business combination agreement, Sprint has agreed to indemnify and hold harmless T-Mobile from certain losses, damages, claims, and costs or expenses suffered or incurred in connection with any pre-merger financing transaction which are attributable to certain information provided by Sprint or its affiliates in connection therewith or to the gross negligence, willful misconduct or bad faith of Sprint or its affiliates.
T-Mobile will bear 67%, and Sprint will bear 33%, of the out-of-pocket fees, costs, penalties, premiums and expenses incurred in connection with any pre-merger financing transaction, and any interest on or prepayment penalties with respect to any pre-funded indebtedness (including indebtedness funded into escrow) incurred as part of any pre-merger financing transaction, including any costs and expenses incurred prior to the date of the business combination agreement (subject to disclosures in the Sprint disclosure letter).
The business combination agreement provides that T-Mobile and Sprint will each use their reasonable best efforts to (i) secure the specified minimum credit ratings for the combined company described under “—Conditions to the Completion of the Merger Transactions” and (ii) obtain the financing necessary to complete the transactions contemplated by the business combination agreement.
Pursuant to the business combination agreement, T-Mobile has agreed that, upon completion of the merger, T-Mobile will, and will cause T-Mobile USA to, guarantee each existing series of unsecured notes of Sprint, Sprint Communications Inc., and Sprint Capital Corporation.
Litigation Relating to the Transaction
The business combination agreement requires each of T-Mobile and Sprint to promptly advise the other party of any litigation commenced against it or any of its directors or officers by any of its stockholders relating to the business combination agreement or the transactions contemplated thereby (which we refer to as “stockholder litigation”), and to keep the other party reasonably informed regarding any such stockholder litigation. In addition, each of T-Mobile or Sprint must give the other party the opportunity to participate in the defense or settlement of any stockholder litigation and no settlement may be offered or agreed to by it without the other party’s prior written consent (which consent may not be unreasonably withheld, conditioned or delayed).
Termination of Certain Agreements
The business combination agreement provides that, from and after the date of the business combination agreement and prior to the effective time, the parties will reasonably cooperate in order to mutually agree on the continuation or termination as of the effective time of certain agreements or other arrangements between or among SoftBank or any of its affiliates (other than Sprint and its subsidiaries), on the one hand, and Sprint or any of its subsidiaries, on the other hand, and between or among Deutsche Telekom or any of its affiliates (other than T-Mobile and its subsidiaries), on the one hand, and T-Mobile or any of its subsidiaries, on the other hand, and will take all actions as may be reasonably necessary or appropriate in order to effect such mutual agreement. The business combination agreement further provides that, from and after the effective time through the six-month anniversary thereof, each of SoftBank and Deutsche Telekom will, and will cause its affiliates to, take all actions as may be reasonably necessary or appropriate in order to terminate any contracts or other arrangements between or among SoftBank or any of its affiliates, or Deutsche Telekom or any of its affiliates, as applicable (in each case other than T-Mobile and its subsidiaries), on the one hand, and T-Mobile or any of its subsidiaries (including Sprint or any of its subsidiaries), on the other hand, other than those set forth on the applicable disclosure letter, promptly following notice from T-Mobile to SoftBank or Deutsche Telekom, as applicable, that it has elected to terminate such contract or other arrangement.
Certain Additional Covenants
The business combination agreement also contains additional covenants, including, among others, covenants relating to the filing of this joint consent solicitation statement/prospectus, access to information of the other company, compliance with applicable FCC and Federal Aviation Administration rules and maintenance of communications licenses, communications with business counterparties and public announcements with respect to the merger, exemptions from takeover laws, Rule 16b-3 exemptions, the delisting of Sprint common stock and the listing of the shares of T-Mobile common stock issued in connection with the merger transactions, certain tax matters and FCC auction procedures.
Conditions to the Completion of the Merger Transactions
Under the business combination agreement, the respective obligations of each party to effect the merger transactions are subject to the satisfaction or, to the extent permitted by applicable law, waiver on or prior to the closing date of each of the following conditions:
| • | Stockholder Approvals. Each of the T-Mobile stockholder approval and the Sprint merger approval has been obtained. |
| • | Required Regulatory Consents. (1) The waiting period (and any extension thereof) applicable to the merger transactions under the HSR Act has been terminated or has expired and (2) all consents required to be obtained from the FCC in connection with the transactions contemplated by the business combination agreement have been granted by the FCC. |
| • | Other Governmental Consents. (1) All consents required to be obtained from any PUCs or similar state and foreign regulatory bodies in connection with the transactions contemplated by the business combination agreement have been obtained, (2) CFIUS has completed its review and, where applicable, investigation under Section 721 without unresolved national security concerns with respect to the transactions contemplated by the business combination agreement, and (3) DSS has approved a plan to operate pursuant to a FOCI mitigation agreement those NISPOM covered activities of T-Mobile, Sprint and their respective subsidiaries that DSS determines are necessary to be operated pursuant to such an agreement, or has accepted a commitment from the parties to implement such FOCI mitigation agreement following the closing. |
| • | No Injunctions or Restraints. No court or other governmental entity of competent jurisdiction has entered, enacted, promulgated, enforced or issued any law, order or injunction (whether temporary, preliminary or permanent) preventing the completion of the merger (which we refer to as a “restraint”). |
| • | Form S-4. The registration statement on Form S-4 of which this joint consent solicitation statement/prospectus forms a part has become effective in accordance with the provisions of the Securities Act prior to the mailing of this joint consent solicitation statement/prospectus by each of T-Mobile and Sprint to their respective stockholders, and no stop order or proceeding seeking a stop order has been threatened or initiated by the SEC. |
| • | NASDAQ Listing. The shares of T-Mobile common stock to be issued in the merger transactions have been approved for listing on NASDAQ, subject to official notice of issuance. |
| • | Ratings. On the closing date, T-Mobile USA, taking into account and after giving effect to the merger and the other transactions contemplated by and relating to the business combination agreement, has at least two of the following three credit ratings (which we refer to as the “specified minimum credit ratings”): (1) a corporate family rating (CFR) of at least “Ba2” from Moody’s Investors Services, Inc. (which we refer to as “Moody’s”), (2) a long-term issuer credit rating of at least “BB” from Standard & Poor’s Financial Services LLC (which we refer to as “S&P”) and (3) a long-term issuer credit rating of at least “BB” from Fitch, Inc. (which we refer to as “Fitch”) (provided that the condition in this bullet point will be deemed satisfied if, on the closing date (or, if earlier, upon the date of issuance by T-Mobile USA of debt securities in an amount sufficient to replace in full the commitments under the bridge facilities in the amended and restated commitment letter), T-Mobile USA, taking into account and after giving effect to the merger and the other transactions contemplated by and relating to the business combination agreement, has at least two of the following three public credit ratings on not less than $45 billion of secured debt: (a) a secured tranche rating of at least “Baa3” from Moody’s, (b) a secured tranche rating of at least “BBB-” from S&P, and (c) a secured tranche rating at least “BBB-” from Fitch). No party may rely on the failure of the condition set forth in this bullet point to be satisfied if such failure was principally caused by such party’s material breach of any material provision of the business combination agreement or such party’s failure to act in good faith. |
Under the business combination agreement, the respective obligations of T-Mobile, Merger Sub, Merger Company and the Deutsche Telekom Parties to effect the merger transactions are also subject to the satisfaction or, to the extent permitted by applicable law, waiver of the following additional conditions:
| • | Representations and Warranties. (1) The representations and warranties of Sprint regarding due organization and good standing, corporate authority, absence of stockholder agreements and similar agreements to which Sprint is a party, requisite vote of stockholders, related party agreements, brokers and absence of anti-takeover statutes or provisions (without giving effect to any qualification as to materiality or material adverse effect, or any provision relating to preventing or materially delaying the completion of the transactions contemplated by the business combination agreement, contained therein) are true and correct in all material respects as of the closing date as though made on the closing date (except to the extent such representations and warranties expressly relate to a specific date or the date of the business combination agreement, in which case such representations and warranties are true and correct in all material respects as of such date), (2) the representations and warranties of Sprint regarding authorized capital stock are true and correct as of the closing date as though made on the closing date (except to the extent such representations and warranties expressly relate to a specific date, in which case such representations and warranties are true and correct as of such date), except for any de minimis inaccuracies, (3) the representation and warranty of Sprint regarding the absence of a material adverse effect since December 31, 2017 is true and correct as of the closing date as though made on the closing date, (4) the representations and warranties of Sprint contained in the business combination agreement (other than those set forth in the preceding clauses (1), (2) and (3)) (without giving effect to any qualification as to materiality or material adverse effect, or any provision relating to preventing or materially delaying the completion of the transactions contemplated by the business combination agreement, contained therein) are true and correct as of the closing date as though made on the closing date (except to the extent such representations and warranties expressly relate to a specific date or the date of the business combination agreement, in which case such representations and warranties are true and correct as of such date), except where the failure to be so true and correct, individually or in the aggregate, does not have and would not reasonably be expected to have a material adverse effect on Sprint and (5) the representations and warranties of the SoftBank Parties (without giving effect to any qualification as to materiality or material adverse effect, or any provision relating to preventing or materially delaying the completion of the transactions contemplated by the business combination agreement, contained therein) are true and correct in all material respects as of the closing date as though made on the closing date (except to the extent such representations and warranties expressly relate to a specific date or the date of the business combination agreement, in which case such representations and warranties are true and correct in all material respects as of such date). However, the accuracy of the representations and warranties of the SoftBank US HoldCos are only a condition to the obligations of T-Mobile, Merger Sub, Merger Company and Deutsche Telekom to effect the HoldCo mergers. |
| • | Performance of Obligations. Each of Sprint and the SoftBank Parties has performed in all material respects all obligations required to be performed by it under the business combination agreement at or prior to the closing date. |
| • | Officer’s Certificate. T-Mobile has received an officer’s certificate duly executed by the chief executive officer or the chief financial officer of Sprint to the effect that the conditions in the preceding two bullet points are satisfied. |
| • | Other Agreements. SoftBank has duly executed and delivered (1) the amended and restated stockholders’ agreement and (2) the proxy agreement. |
| • | Tax Opinion. If the HoldCo mergers are to be completed, T-Mobile has received a written opinion of Wachtell, Lipton, Rosen & Katz (or in certain circumstances, other counsel selected by T-Mobile), in form and substance reasonably satisfactory to T-Mobile, dated as of the closing date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, each of |
| the HoldCo mergers will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. |
Under the business combination agreement, the respective obligations of Sprint and the SoftBank Parties to effect the merger transactions are also subject to the satisfaction or, to the extent permitted by applicable law, waiver of the following additional conditions:
| • | Representations and Warranties. (1) The representations and warranties of T-Mobile, Merger Sub and Merger Company regarding due organization and good standing, corporate authority, absence of stockholder agreements and similar agreements to which T-Mobile is a party, requisite vote of stockholders, related party agreements and brokers (without giving effect to any qualification as to materiality or material adverse effect, or any provision relating to preventing or materially delaying the completion of the transactions contemplated by the business combination agreement, contained therein) are true and correct in all material respects as of the closing date as though made on the closing date (except to the extent such representations and warranties expressly relate to a specific date or the date of the business combination agreement, in which case such representations and warranties are true and correct in all material respects as of such date), (2) the representations and warranties of T-Mobile, Merger Sub and Merger Company regarding authorized capital stock are true and correct as of the closing date as though made on the closing date (except to the extent such representations and warranties expressly relate to a specific date, in which case such representations and warranties are true and correct as of such date), except for any de minimis inaccuracies, (3) the representation and warranty of T-Mobile, Merger Sub and Merger Company regarding the absence of a material adverse effect since December 31, 2017 is true and correct as of the closing date as though made on the closing date, (4) the representations and warranties of T-Mobile, Merger Sub and Merger Company contained in the business combination agreement (other than those set forth in the preceding clauses (1), (2) and (3)) (without giving effect to any qualification as to materiality or material adverse effect, or any provision relating to preventing or materially delaying the completion of the transactions contemplated by the business combination agreement, contained therein) are true and correct as of the closing date as though made on the closing date (except to the extent such representations and warranties expressly relate to a specific date or the date of the business combination agreement, in which case such representations and warranties are true and correct as of such date), except where the failure to be so true and correct, individually or in the aggregate, does not have and would not reasonably be expected to have a material adverse effect on T-Mobile, and (5) the representations and warranties of the Deutsche Telekom Parties (without giving effect to any qualification as to materiality or material adverse effect, or any provision relating to preventing or materially delaying the completion of the transactions contemplated by the business combination agreement, contained therein) are true and correct in all material respects as of the closing date as though made on the closing date (except to the extent such representations and warranties expressly relate to a specific date or the date of the business combination agreement, in which case such representations and warranties are true and correct in all material respects as of such date). |
| • | Performance of Obligations. Each of T-Mobile, Merger Sub, Merger Company and the Deutsche Telekom Parties has performed in all material respects all obligations required to be performed by it under the business combination agreement at or prior to the closing date. |
| • | Officer’s Certificate. Sprint has received an officer’s certificate duly executed by the chief executive officer or the chief financial officer of T-Mobile to the effect that the conditions in the preceding two bullet points are satisfied. |
| • | Other Agreements. T-Mobile and Deutsche Telekom have duly executed and delivered (as applicable) (1) the amended and restated stockholders’ agreement, (2) the proxy agreement and (3) the license agreement amendment. |
| • | Tax Opinion. If the HoldCo mergers are to be completed, Sprint has received a written opinion of Morrison & Foerster LLP, in form and substance reasonably satisfactory to Sprint (and, with respect to |
| the opinion in (2), T-Mobile), dated as of the closing date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, (1) each of the HoldCo mergers will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and (2) the merger (or the merger and the HoldCo mergers, taken together) will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. |
Termination of the Business Combination Agreement; Payment Amount
Termination of the Business Combination Agreement
The business combination agreement may be terminated at any time prior to the HoldCo mergers effective time as follows:
| • | by mutual written consent of T-Mobile and Sprint; |
| • | by either T-Mobile or Sprint, if the merger transactions have not been completed by April 29, 2019, or, if the marketing period has started and is in effect at such date, then the second business day following the end of the marketing period (but in no event will such date be later than the 22nd business day following April 29, 2019) (which we refer to as the “outside date”) (provided that, if the closing has not occurred by April 29, 2019, but on that date, all of the conditions to the completion of the merger transactions have been satisfied or waived (other than the conditions regarding required regulatory and other governmental consents and the absence of restraints and those conditions that by their terms are to be satisfied at the closing, provided they would be satisfied if the closing were to occur on such date), then either T-Mobile or Sprint may elect to extend the outside date to July 29, 2019, or, if the marketing period has started and is in effect at such date, then the second business day following the end of the marketing period (but in no event will such date be later than the 22nd business day following July 29, 2019); provided, further, that, if after such extension, the closing has not occurred by July 29, 2019, but on that date, all of the conditions to the completion of the merger transactions have been satisfied or waived (other than the conditions regarding required regulatory and other governmental consents and the absence of restraints and those conditions that by their terms are to be satisfied at the closing, provided they would be satisfied if the closing were to occur on such date), then either T-Mobile or Sprint may elect to extend the outside date to October 29, 2019, or, if the marketing period has started and is in effect at such date, then the second business day following the end of the marketing period (but in no event will such date be later than the 22nd business day following October 29, 2019)). However, the business combination agreement may not be so terminated by Sprint, if Sprint’s or any SoftBank Party’s, or T-Mobile, if T-Mobile’s or any Deutsche Telekom Party’s, material breach of its obligations under the business combination agreement, the SoftBank support agreement or the Deutsche Telekom support agreement, as applicable, has been the principal cause of, or principally resulted in, the failure of the merger to be completed by such time; |
| • | by either T-Mobile or Sprint, if (1) any restraint is in effect and has become final and nonappealable or (2) any authorization or consent from a governmental entity that must be obtained to satisfy the conditions regarding required regulatory and other governmental consents (a) has been denied and such denial has become final and nonappealable or (b) requires as a final and nonappealable condition to such authorization or consent that Sprint, T-Mobile, SoftBank or Deutsche Telekom take any action that would or would reasonably be expected to result in a regulatory material adverse condition. However, the business combination agreement may not be so terminated by Sprint, if Sprint’s or any SoftBank Party’s, or T-Mobile, if T-Mobile’s or any Deutsche Telekom Party’s, material breach of its obligations under the provisions of the business combination agreement described under “—Covenants and Agreements—Reasonable Best Efforts; Regulatory Filings and Other Actions” has been the principal cause of, or principally resulted in, such restraint or denial; |
| • | by T-Mobile, if Sprint has breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the business combination |
| agreement, which breach or failure to perform would result in the conditions to the other parties’ obligation to complete the merger transactions not being satisfied (and such breach is incapable of being cured by Sprint or is not cured within 60 days of written notice thereof). However, the business combination agreement may not be terminated by T-Mobile under this bullet point if T-Mobile is then in material breach of any representation, warranty, covenant or other agreement contained in the business combination agreement; |
| • | by Sprint, if T-Mobile has breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the business combination agreement, which breach or failure to perform would result in the conditions to the other parties’ obligation to complete the merger transactions not being satisfied (and such breach is incapable of being cured by T-Mobile or is not cured within 60 days of written notice thereof). However, the business combination agreement may not be terminated by Sprint under this bullet point if Sprint is then in material breach of any representation, warranty, covenant or other agreement contained in the business combination agreement; |
| • | by T-Mobile, if any of the SoftBank Parties or SoftBank UK fails to execute and deliver to T-Mobile the SoftBank support agreement within one business day following the execution of the business combination agreement; and |
| • | by Sprint, if either Deutsche Telekom Party fails to execute and deliver to Sprint the Deutsche Telekom support agreement within one business day following the execution of the business combination agreement. |
Subsequent to the execution of the business combination agreement, the SoftBank Parties and SoftBank UK executed and delivered to T-Mobile the SoftBank support agreement, and the Deutsche Telekom Parties executed and delivered to Sprint the Deutsche Telekom support agreement, in each case within one business day following the execution of the business combination agreement.
Payment Amount
The business combination agreement requires T-Mobile to pay Sprint an amount equal to $600 million (which we refer to as the “payment amount”) if all of the following occur:
| • | T-Mobile terminates the business combination agreement because the merger transactions have not been completed by the outside date; |
| • | at the time of such termination, all of the conditions to the respective obligations of each party to effect the merger transactions have been satisfied or waived, except for the condition related to the specified minimum credit ratings, and all of the conditions to the obligations of T-Mobile, Merger Sub, Merger Company and the Deutsche Telekom Parties to effect the merger transactions would be satisfied at the time of such termination if the closing were held at such time; and |
| • | Sprint has provided a written certification to T-Mobile that it is ready, willing and able to complete the merger on the date required by the business combination agreement at the time of such termination. |
Notwithstanding the foregoing, T-Mobile will have no obligation to pay the payment amount if:
| • | on the date of the termination of the business combination agreement pursuant to the bullet points above, Sprint does not have the following three credit ratings: (A) a corporate family rating (CFR) of at least “B2” from Moody’s, (B) a long-term issuer credit rating of at least “B” from S&P, and (C) a long-term issuer credit rating of at least “B+” from Fitch (unless Sprint does not have any such credit rating due to a change in credit ratings or credit outlook generally affecting the industry in which Sprint operates); or |
| • | Sprint or any of the SoftBank Parties has breached in any material respect any of its representations, warranties, covenants or agreements set forth in the business combination agreement and such breach |
| has impacted any of the credit ratings described in the bullet point above or the ability of T-Mobile to obtain the specified minimum credit ratings. |
In the event of the termination of the business combination agreement pursuant to the provisions described under “—Termination of the Business Combination Agreement; Payment Amount,” there will be no liability or obligation on the part of any party to the business combination agreement (or any of its directors, officers, employees or representatives). However, no such termination will relieve (i) T-Mobile from its obligation to pay the payment amount described under “—Termination of the Business Combination Agreement; Payment Amount—Payment Amount” or (ii) any party from liability for fraud or any willful breach of the business combination agreement, the confidentiality agreement or any other agreement contemplated by the business combination agreement and delivered in connection therewith prior to such termination.
In the event that the payment amount is paid to Sprint, the payment of the payment amount will be the sole and exclusive remedy of Sprint, the SoftBank Parties and their respective subsidiaries, stockholders, affiliates, officers, directors, employees and representatives against T-Mobile, Merger Sub, Merger Company, Deutsche Telekom, their respective affiliates and their and their respective affiliates’ stockholders, officers, directors, employees and representatives, for any loss suffered as a result of the failure of the merger transactions to be completed or the termination of, any liabilities or obligations arising under or any claims or actions arising out of or relating to, the business combination agreement.
Except as otherwise expressly provided in the business combination agreement, all fees and expenses incurred in connection with the merger transactions, the business combination agreement and the other transactions contemplated by the business combination agreement will be paid by the party incurring such fees or expenses, whether or not the merger transactions are completed, except that:
| • | T-Mobile and Sprint will share equally the costs and expenses incurred in connection with the filing, printing and mailing of this joint consent solicitation statement/prospectus and the registration statement of which it is a part, including SEC filing fees; |
| • | T-Mobile will pay 67%, and Sprint will pay 33%, of the HSR and FCC filing fees; and |
| • | T-Mobile will bear 67%, and Sprint will bear 33%, of the out-of-pocket fees, costs, penalties, premiums and expenses incurred in connection with any pre-merger financing transaction, and any interest on or prepayment penalties with respect to any pre-funded indebtedness (including indebtedness funded into escrow) incurred as part of any pre-merger financing transaction, including any costs and expenses incurred prior to the date of the business combination agreement (subject to disclosures in the Sprint disclosure letter). |
Indemnification of Directors and Officers; Directors’ and Officers’ Insurance
The parties to the business combination agreement have agreed that, from and after the effective time, the surviving corporation will, and T-Mobile will cause the surviving corporation to, indemnify and hold harmless each individual who is or was, or who becomes prior to the effective time, a director or officer of Sprint or any of its subsidiaries or T-Mobile, or who is as of the date of the business combination agreement, or thereafter commences prior to the effective time, serving at the request of Sprint or any of its subsidiaries as a director, officer or employee of another person (which individuals we refer to collectively as the “indemnified parties”), for acts or omissions occurring prior to the effective time to the same extent as such indemnified parties are indemnified as of the date of the business combination agreement pursuant to the Sprint certificate of incorporation, the bylaws of Sprint, the governing organizational documents of any subsidiary of Sprint, the T-Mobile certificate of incorporation, the bylaws of T-Mobile and any indemnification agreements in existence as of the date of the business combination agreement.
In addition, for a period of six years from and after the effective time, T-Mobile will either cause to be maintained in effect the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by Sprint or T-Mobile, as applicable, or any of their respective subsidiaries or provide substitute policies for not less than the existing coverage and with other terms not less favorable to the insured persons with respect to claims arising from facts or events that occurred prior to the effective time. However, T-Mobile will not be required to pay with respect to such policies in respect of any one policy year more than 300% of the last annual premium paid prior to the date of the business combination agreement. Notwithstanding the foregoing, Sprint or T-Mobile, as applicable, may at or prior to the effective time substitute for such policy a six-year “tail” policy under its existing policy, as long as the amount paid for such tail policy does not exceed 300% of the last annual premium paid prior to the date of the business combination agreement.
Certain Indemnification Obligations of SoftBank
SoftBank has agreed that, from and after the HoldCo mergers effective time, SoftBank will indemnify Deutsche Telekom, T-Mobile, their respective affiliates and each of their and their respective affiliates’ representatives, successors and assigns (each of which we refer to as a “T-Mobile indemnitee”) against any losses incurred or suffered by any such T-Mobile indemnitee arising out of, attributable to or resulting from (1) any breach of, or inaccuracy in, any of the representations or warranties of the SoftBank US HoldCos contained in the business combination agreement or any tax certificate delivered by them pursuant thereto, (2) any breach or nonfulfillment of any of the covenants or agreements made or to be performed by either SoftBank US HoldCo pursuant to the business combination agreement, (3) any breach of a covenant or agreement made or to be performed by SoftBank or any of its representatives or affiliates pursuant to the provision of the business combination agreement addressing procedural requirements of the indemnity described in this paragraph, (4) any and all assets of either SoftBank US HoldCo, other than the Sprint common stock held by them, and (5) any and all liabilities of either SoftBank US HoldCo, other than with respect to the tax matters described in the next paragraph.
SoftBank has agreed that, from and after the HoldCo mergers effective time, SoftBank will indemnify each T-Mobile indemnitee from any and all losses for or in connection with certain tax matters, including from (1) taxes imposed on or payable by either of the SoftBank US HoldCos or the SoftBank surviving entity for any pre-closing tax period, (2) taxes arising from the failure of any of the HoldCo mergers to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, except to the extent such failure is exclusively attributable to a breach by T-Mobile of any of the covenants contained in the tax certificates delivered by T-Mobile pursuant to the business combination agreement, (3) any taxes of a T-Mobile indemnitee that would not have arisen but for the HoldCo mergers and (4) certain other tax matters.
Subject to applicable law, the parties may amend the business combination agreement by written agreement, duly approved by the parties’ respective boards of directors (or comparable governing body) or a duly authorized committee thereof, at any time either before or after the T-Mobile stockholder approval or the Sprint stockholder approval is obtained. However, after such approval, no amendment may be made, which by law requires further approval by T-Mobile or Sprint stockholders, unless such further approval is obtained.
Prior to the effective time, the parties may, to the extent permitted by applicable law and except as otherwise set forth in the business combination agreement:
| • | extend the time for the performance of any of the obligations or other acts of the other parties; |
| • | waive any inaccuracies in the representations and warranties of the other parties contained in the business combination agreement or in any document delivered pursuant thereto; |
| • | waive compliance by the other party with any of the agreements or conditions contained in the business combination agreement; or |
| • | waive the satisfaction of any of the conditions contained in the business combination agreement. |
Any agreement by a party to such extension or waiver must be in writing and signed on behalf of the applicable party.
The business combination agreement is governed by the laws of the State of Delaware, without giving effect to conflicts of laws principles that would result in the application of the law of any other jurisdiction.
The business combination agreement may not be assigned by any party without the prior written consent of the other parties. Any purported assignment for which written consent has not been obtained will be void.
The parties to the business combination agreement have agreed that irreparable damage would occur if any provisions of the business combination agreement are not performed in accordance with their specific terms or are otherwise breached, and that monetary damages would not be an adequate remedy for such defective performance or other breach. Accordingly, in addition to any other remedy to which they are entitled at law or in equity, the parties are entitled to an injunction or injunctions to prevent breaches of the business combination agreement and to enforce specifically the terms and provisions of the business combination agreement, without proof of actual damages (and with no requirement for the securing or posting of a bond in connection with any such remedy). The parties have further agreed not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to law or inequitable for any reason, or to assert that a remedy of monetary damages would provide an adequate remedy for any such breach.
