1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 2001
REGISTRATION NO. 333-47294 REGISTRATION NO. 333-47306
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO AMENDMENT NO. 2 TO
FORM F-4 FORM S-4
REGISTRATION STATEMENT REGISTRATION STATEMENT
UNDER UNDER
THE SECURITIES ACT OF 1933 THE SECURITIES ACT OF 1933
------------------------ ------------------------
DEUTSCHE TELEKOM AG VOICESTREAM WIRELESS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS
CHARTER) CHARTER)
FEDERAL REPUBLIC OF GERMANY DELAWARE
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
NONE 91-1983600
(I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
4812 4812
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE
NUMBER) NUMBER)
FRIEDRICH-EBERT-ALLEE 140
53113 BONN 12920 SE 38TH STREET
GERMANY BELLEVUE, WASHINGTON 98006
(011 49) 228-181-88880 (425) 378-4000
(ADDRESS INCLUDING ZIP CODE AND TELEPHONE NUMBER OF (ADDRESS INCLUDING ZIP CODE AND TELEPHONE NUMBER OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
PAUL B. GROSSE ALAN R. BENDER, ESQ.
DEUTSCHE TELEKOM, INC. VOICESTREAM WIRELESS CORPORATION
280 PARK AVENUE, 26TH FLOOR 12920 SE 38TH STREET
NEW YORK, NEW YORK 10017 BELLEVUE, WASHINGTON 98006
(212) 424-2900 (TEL) (425) 378-4000 (TEL)
(212) 424-2976 (FAX) (425) 586-8080 (FAX)
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR
SERVICE) SERVICE)
COPIES TO:
ROBERT P. DAVIS, ESQ. DANIEL A. NEFF, ESQ. BARRY A. ADELMAN, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON WACHTELL, LIPTON, ROSEN & KATZ FRIEDMAN KAPLAN SEILER &
ONE LIBERTY PLAZA 51 WEST 52ND STREET ADELMAN LLP
NEW YORK, NY 10006 NEW YORK, NY 10019 875 THIRD AVENUE
(212) 225-2000 (TEL) (212) 403-1000 (TEL) NEW YORK, NY 10022
(212) 225-3999 (FAX) (212) 403-2000 (FAX) (212) 833-1100 (TEL)
(212) 355-6401 (FAX)
RICHARD B. DODD, ESQ. JILL F. DORSEY, ESQ. JAMES WALKER IV, ESQ.
PRESTON GATES & ELLIS LLP POWERTEL, INC. MORRIS, MANNING & MARTIN, LLP
701 FIFTH AVENUE, SUITE 5000 1239 O.G. SKINNER DRIVE 1600 ATLANTA FINANCIAL CENTER
SEATTLE, WA 98104 WEST POINT, GA 31833 3343 PEACHTREE ROAD, N.E.
(206) 623-7580 (TEL) (706) 645-2000 (TEL) ATLANTA, GA 30326
(206) 623-7022 (FAX) (706) 645-9523 (FAX) (404) 233-7000 (TEL)
(404) 365-9532 (FAX)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: as promptly
as practicable after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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2
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
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Ordinary Shares of Deutsche
Telekom AG.................... 1,038,334,400(1) Not Applicable $23,485,065,676.20(4) $6,196,629.58(7)
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Ordinary Shares of Deutsche
Telekom AG.................... 148,823,247(2) Not Applicable $2,907,568,727.60(5) $767,034.28(8)
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Common Stock of VoiceStream
Wireless Corporation.......... 42,355,044(3) Not Applicable $2,907,652,562.63(6) $767,055.39(8)
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(1)The amount of Deutsche Telekom Ordinary Shares being registered is increased
by 7,720,530 shares under this Amendment No. 2 to Deutsche Telekom AG's
("Deutsche Telekom") Registration Statement filed under registration number
333-47294. The increased number is based on (i) 2,050,769 shares of common
stock, par value $0.001 per share ("VoiceStream Common Shares"), that may be
issued pursuant to payment by VoiceStream of a stock dividend on VoiceStream
Common Shares prior to the completion of the Deutsche Telekom/VoiceStream
merger and (ii) an exchange ratio of 3.7647 Deutsche Telekom Ordinary Shares
for each VoiceStream Common Share pursuant to the Deutsche Telekom/
VoiceStream merger.
(2)The amount of Deutsche Telekom Ordinary Shares being registered is increased
by 1,371,116 shares under this Amendment No. 2 to Deutsche Telekom's
Registration Statement filed under registration number 333-47294. The
increased number is based on (A)(i) 386,535 shares of common stock, par value
$0.01 per share ("Powertel Common Shares"), being the sum of (a) 286,535
Powertel Common Shares that may be issued pursuant to payment by Powertel of
a stock dividend on Powertel Common Shares prior to the completion of the
Deutsche Telekom/ Powertel merger; (b) 50,000 Powertel Common Shares
representing accrued or declared but unpaid dividends on 50,000 shares of
Powertel Series E Preferred Stock, par value $0.01 per share ("Powertel
Series E Preferred Shares"), and 50,000 shares of Powertel Series F Preferred
Stock, par value $0.01 per share ("Powertel Series F Preferred Shares")
(based on the number of Powertel Common Shares reserved for issuance in
respect of such unpaid dividends as of December 31, 2000); and (c) 50,000 of
Powertel Common Shares representing estimated accrued or declared (paid and
unpaid) dividends from December 31, 2000 through December 31, 2001 on the
Powertel Series E Preferred Shares and the Powertel Series F Preferred
Shares, as the case may be, and (ii) an exchange ratio of 2.6353 Deutsche
Telekom Ordinary Shares for each Powertel Common Share pursuant to the
Deutsche Telekom/Powertel merger; (B)(i) an additional 182,900 Deutsche
Telekom Ordinary Shares issued in respect of (a) 100,000 shares of Powertel
Series A Preferred Stock, par value $0.01 per share ("Powertel Series A
Preferred Shares"), and (b) 100,000 shares of Powertel Series B Preferred
Stock, par value $0.01 per share ("Powertel Series B Preferred Shares"), and
(ii) an exchange ratio of 122.8439 Deutsche Telekom Ordinary Shares for each
share of Powertel Series A Preferred Shares and Powertel Series B Preferred
Shares pursuant to the Deutsche Telekom/Powertel merger agreement; (C)(i) an
additional 34,880 Deutsche Telekom Ordinary Shares issued in respect of
50,000 shares of Powertel Series D Preferred Stock, par value $0.01 per share
("Powertel Series D Preferred Shares"), and (ii) an exchange ratio of 93.7082
Deutsche Telekom Ordinary Shares for each share of Powertel Series D
Preferred Shares pursuant to the Deutsche Telekom/Powertel merger agreement;
and (D)(i) an additional 134,700 Deutsche Telekom Ordinary Shares issued in
respect of (a) 50,000 shares of Powertel Series E Preferred Stock, par value
$0.01 per share ("Powertel Series E Preferred Shares"), and (b) 50,000 shares
of Powertel Series F Preferred Stock, par value $0.01 per share ("Powertel
Series F Preferred Shares"), and (ii) an exchange ratio of 180.9449 Deutsche
Telekom Ordinary Shares for each share of Powertel Series E Preferred Shares
and Powertel Series F Preferred Shares pursuant to the Deutsche
Telekom/Powertel merger agreement.
(3)The amount of VoiceStream Common Shares being registered is increased by
391,029 shares under this Amendment No. 2 to VoiceStream Wireless
Corporation's ("VoiceStream") Registration Statement filed under registration
number 333-47306. The increased number is based on (A) 521,372 Powertel
Common Shares being the sum of (i) 421,372 Powertel Common Shares that may be
issued pursuant to payment by Powertel of a stock dividend on Powertel Common
Shares prior to the completion of the VoiceStream/Powertel merger and (ii)
100,000 Powertel Common Shares being the sum of (a) the number of Powertel
Common Shares representing accrued or declared but unpaid dividends on 50,000
Powertel Series E Preferred Shares and 50,000 Powertel Series F Preferred
Shares (based on the number of Powertel Common Shares reserved for issuance
in respect of such unpaid dividends as of December 31, 2000) and (b) the
number of Powertel Common Shares representing estimated accrued or declared
(paid and unpaid) dividends from December 31, 2000 through December 31, 2001
on the Powertel Series E Preferred Shares and the Powertel Series F Preferred
Shares, as the case may be, and (B) an exchange ratio of .75 VoiceStream
Common Shares for each Powertel Common Share pursuant to the
VoiceStream/Powertel merger agreement.
(4)The proposed maximum aggregate offering price of the additional Deutsche
Telekom Ordinary Shares being registered by Deutsche Telekom in connection
with the Deutsche Telekom/VoiceStream merger is $244,841,310.91. Pursuant to
Rules 457(c), 457(f)(1) and 457(f)(2) under the Securities Act and solely for
the purpose of calculating the additional registration fee, the proposed
maximum aggregate offering price for the additional 7,720,530 Deutsche
Telekom Ordinary Shares is equal to the aggregate market value of the
approximate number of the additional VoiceStream Common Shares to be
cancelled in the Deutsche Telekom/VoiceStream merger (as set forth in note
(1) above) based upon a market value of $119.39 per VoiceStream Common Share,
the average of the high and low sale prices per VoiceStream Common Share on
the Nasdaq Stock Market on February 7, 2001.
(5)The proposed maximum aggregate offering price of the additional Deutsche
Telekom Ordinary Shares being registered by Deutsche Telekom in connection
with the Deutsche Telekom/Powertel merger is $40,275,571.49. Pursuant to
Rules 457(c), 457(f)(1) and 457(f)(2) under the Securities Act and solely for
the purpose of calculating the additional registration fee, the proposed
maximum aggregate offering price for the additional 1,371,116 Deutsche
Telekom Ordinary Shares is equal to the aggregate market value of the
approximate number of the additional Powertel Common Shares to be cancelled
in the Deutsche Telekom/Powertel merger (as set forth in note (2) above)
based upon a market value of $77.41 per Powertel Common Share, the average of
the high and low sale prices per Powertel Common Share on the Nasdaq Stock
Market on February 7, 2001.
(6)The proposed maximum aggregate offering price of the additional VoiceStream
Common Shares being registered by VoiceStream in connection with the
VoiceStream/Powertel merger is $40,359,406.52. Pursuant to Rules 457(c),
457(f)(1) and 457(f)(2) under the Securities Act and solely for the purpose
of calculating the additional registration fee, the proposed maximum
aggregate offering price for the additional 391,029 VoiceStream Common Shares
is equal to the aggregate market value of the approximate number of the
additional Powertel Common Shares to be cancelled in the VoiceStream/Powertel
merger (as set forth in note (3) above) based on a market value of $77.41 per
Powertel Common Share, the average of the high and low sale prices per
Powertel Common Share on the Nasdaq Stock Market on February 7, 2001.
(7)$6,135,419.25 has been previously paid.
(8)$756,965.39 has been previously paid.
3
[VOICESTREAM WIRELESS LOGO]
[DEUTSCHE TELEKOM LOGO]
[POWERTEL, INC. LOGO]
DEAR STOCKHOLDERS OF VOICESTREAM AND POWERTEL:
The boards of directors of VoiceStream Wireless Corporation and Powertel,
Inc. have approved mergers of their respective companies with Deutsche Telekom
AG, in which VoiceStream and Powertel will become wholly-owned subsidiaries of
Deutsche Telekom. Alternatively, in the event that the mergers with Deutsche
Telekom are not completed, the boards of directors of the two companies have
approved a merger, in which Powertel will become a wholly-owned subsidiary of
VoiceStream. VoiceStream and Powertel are holding separate special meetings of
their stockholders at which stockholders will be asked to approve these
transactions. We encourage you to attend these meetings or vote your shares by
proxy.
DEUTSCHE TELEKOM/VOICESTREAM MERGER AND DEUTSCHE TELEKOM/POWERTEL MERGER
In the Deutsche Telekom/VoiceStream merger, VoiceStream stockholders may
elect to receive for each of their VoiceStream common shares: (1) a combination
of $30 in cash and 3.2 Deutsche Telekom shares, (2) $200 in cash, subject to
proration, or (3) 3.7647 Deutsche Telekom shares, also subject to proration.
However, because the elections are subject to proration and a tax-related
adjustment as described in the accompanying document, based on the price of
Deutsche Telekom shares and the euro to U.S. dollar exchange rate as of February
7, 2001, among other factors, it is likely that VoiceStream stockholders would
receive for each VoiceStream common share approximately 3.4837 Deutsche Telekom
shares and $21.36 in cash, or an aggregate for all VoiceStream stockholders of
880.7 million Deutsche Telekom shares and $5.4 billion in cash.
In the Deutsche Telekom/Powertel merger, Powertel stockholders will receive
2.6353 Deutsche Telekom shares for each Powertel common share. Powertel
preferred shares will be exchanged at exchange ratios determined on an
as-converted-to-common share basis, as described in the accompanying document.
The merger consideration is subject to certain adjustments. We estimate that in
this merger Deutsche Telekom will issue approximately 136 million Deutsche
Telekom shares to Powertel stockholders.
VoiceStream and Powertel stockholders will receive Deutsche Telekom shares
in the form of Deutsche Telekom American depositary shares that are traded on
the New York Stock Exchange under the symbol "DT" or, at their election, in the
form of Deutsche Telekom ordinary shares that are traded principally on the
Frankfurt Stock Exchange under the symbol "DTE". Each Deutsche Telekom ADS
represents one Deutsche Telekom ordinary share.
ALTERNATIVE VOICESTREAM/POWERTEL MERGER
The VoiceStream/Powertel merger will be completed only if the Deutsche
Telekom/VoiceStream merger is not completed. If the VoiceStream/Powertel merger
does occur, Powertel stockholders will receive VoiceStream common shares at a
conversion number ranging from 0.65 to 0.75, subject to adjustments described in
the accompanying document, per Powertel common share, depending on the average
closing price of VoiceStream common shares during a measurement period close to
the completion of the merger. Holders of Powertel preferred shares will receive
VoiceStream common shares using the same conversion ratio, treating the
preferred shares on an as-converted-to-common share basis. We estimate that in
the VoiceStream/Powertel merger VoiceStream will issue approximately 38.4
million VoiceStream common shares to Powertel stockholders, but the merger
consideration is subject to certain adjustments as described in the accompanying
document. Assuming the VoiceStream/Powertel merger is completed, the VoiceStream
common shares will continue to be traded on the Nasdaq Stock Market under the
symbol "VSTR".
The accompanying document provides you with detailed information about each of
the three proposed mergers and the special stockholders meetings. WE ENCOURAGE
YOU TO READ THIS DOCUMENT CAREFULLY, AND IN ITS ENTIRETY, INCLUDING THE SECTIONS
DESCRIBING RISK FACTORS THAT BEGIN ON PAGES 25 AND 29.
The boards of directors of VoiceStream and Powertel each has, by unanimous vote
of the directors present at the deciding meetings, determined the applicable
mergers to be advisable and in the best interests of its stockholders and
recommends that the stockholders of VoiceStream and Powertel, respectively, vote
FOR the applicable merger transactions.
/s/ JOHN W. STANTON /s/ ALLEN E. SMITH
John W. Stanton Allen E. Smith
Chairman and Chief Executive Officer President and Chief Executive Officer
VoiceStream Wireless Corporation Powertel, Inc.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the stock to be issued by Deutsche
Telekom or VoiceStream under this document or determined if this document is
accurate or adequate. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated February 9, 2001 and was first mailed
to VoiceStream and Powertel stockholders on February 12, 2001.
4
[VOICESTREAM WIRELESS LOGO]
12920 SE 38TH STREET
BELLEVUE, WASHINGTON 98006
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 13, 2001
To the Stockholders of
VoiceStream Wireless Corporation:
Notice is hereby given that a special meeting of stockholders of
VoiceStream Wireless Corporation will be held on March 13, 2001, at 8:00 a.m.,
Pacific time, at the offices of VoiceStream Wireless Corporation, 12920 SE 38th
Street, Bellevue, Washington 98006.
You are cordially invited to attend the special meeting. The purposes of
the special meeting are:
- To consider and vote on a proposal to approve and adopt Agreement and
Plan of Merger, dated as of July 23, 2000, as amended and restated as of
February 8, 2001, among Deutsche Telekom AG, VoiceStream Wireless
Corporation and a Delaware corporation formed by Deutsche Telekom,
pursuant to which that corporation will be merged into VoiceStream, and
VoiceStream will become a wholly-owned subsidiary of Deutsche Telekom.
- To consider and vote on a proposal to approve and adopt the Agreement and
Plan of Reorganization, dated as of August 26, 2000, as amended and
restated as of February 8, 2001, among VoiceStream Wireless Corporation,
Powertel, Inc. and a wholly-owned subsidiary of VoiceStream, and the
transactions contemplated thereby, including the issuance of VoiceStream
common shares to Powertel stockholders. Pursuant to that agreement, the
VoiceStream subsidiary will be merged into Powertel, and Powertel will
become a wholly-owned subsidiary of VoiceStream. The merger between
VoiceStream and Powertel can occur only if the merger agreement between
VoiceStream and Deutsche Telekom is terminated.
- To transact any other business as may properly come before the special
meeting or any adjournments of the special meeting.
The merger agreements and the mergers are more fully described in the proxy
statement/prospectus attached to this notice.
Only holders of record of VoiceStream common shares and voting preferred
shares at the close of business on January 24, 2001 are entitled to notice of,
and to vote at, the special meeting and any adjournments of the special meeting.
You may vote in person or by proxy. Mailing your completed proxy in advance of
the special meeting will not prevent you from voting in person at the special
meeting.
We encourage you to vote on these important matters.
By order of the Board of Directors,
/s/ ALAN R. BENDER
Alan R. Bender
Secretary
IMPORTANT NOTICE
Whether or not you plan to attend the special meeting in person, you are urged
to read the attached proxy statement/prospectus carefully and then sign, date
and return the enclosed proxy card in the enclosed postage-paid envelope by
following the instructions on the enclosed proxy card. If you later desire to
revoke your proxy for any reason, you may do so in the manner set forth in the
attached proxy statement/prospectus.
5
[POWERTEL, INC. LOGO]
1239 O.G. SKINNER DRIVE
WEST POINT, GEORGIA 31833
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 13, 2001
To the Stockholders of
Powertel, Inc.:
Notice is hereby given that a special meeting of stockholders of Powertel,
Inc. will be held on March 13, 2001, at 11:00 a.m., Eastern time, at The Cotton
Duck, 6101 20th Avenue, Valley, Alabama 36854.
You are cordially invited to attend the special meeting. The purposes of
the special meeting are:
- To consider and vote on a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of August 26, 2000, as amended and restated as
of February 8, 2001, among Deutsche Telekom AG, Powertel, Inc. and a
Delaware corporation formed by Deutsche Telekom, pursuant to which that
corporation will be merged into Powertel, and Powertel will become a
wholly-owned subsidiary of Deutsche Telekom. The merger between Deutsche
Telekom and Powertel can occur only if the merger between Deutsche
Telekom and VoiceStream is completed.
- To consider and vote on a proposal to approve and adopt the Agreement and
Plan of Reorganization, dated as of August 26, 2000, as amended and
restated as of February 8, 2001, among VoiceStream Wireless Corporation,
Powertel, Inc. and a wholly-owned subsidiary of VoiceStream, pursuant to
which that subsidiary will be merged into Powertel and Powertel will
become a wholly-owned subsidiary of VoiceStream. The merger between
VoiceStream and Powertel can occur only if the merger agreement between
VoiceStream and Deutsche Telekom is terminated.
- To transact such other business as may properly come before the special
meeting or any adjournments of the special meeting.
The Deutsche Telekom/Powertel merger agreement, the VoiceStream/Powertel
merger agreement and the related mergers are more fully described in the proxy
statement/prospectus attached to this notice.
Only holders of record of Powertel's common shares and preferred shares at
the close of business on January 24, 2001 are entitled to notice of and to vote
at the special meeting and any adjournments of the special meeting. You may vote
in person or by proxy. Mailing your completed proxy in advance of the meeting
will not prevent you from voting in person at the special meeting.
We encourage you to vote upon these important matters.
By order of the Board of Directors,
/s/ Allen E. Smith
Allen E. Smith
President and Chief Executive Officer
IMPORTANT NOTICE
Whether or not you plan to attend the special meeting in person, you are urged
to read the attached proxy statement/prospectus carefully and then sign, date
and return the enclosed proxy card in the enclosed postage-paid envelope by
following the instructions on the enclosed proxy card. If you later desire to
revoke your proxy for any reason, you may do so in the manner set forth in the
attached proxy statement/prospectus.
6
ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Deutsche Telekom AG, VoiceStream Wireless Corporation and Powertel, Inc.
from documents filed with the Securities and Exchange Commission that are not
included in or delivered with this document. Deutsche Telekom AG, which in this
document we refer to as "Deutsche Telekom", will provide you with copies of this
information relating to Deutsche Telekom, without charge, upon written or oral
request to:
DEUTSCHE TELEKOM, INC.
280 Park Avenue, 26th Floor
New York, New York 10017
Attention: Brigitte Weniger
Telephone Number: (212) 424-2959
Email address: Brigitte.Weniger@usa.telekom.de
VoiceStream Wireless Corporation, which in this document we refer to as
"VoiceStream", will provide you with copies of this information relating to
VoiceStream, including its Omnipoint Corporation and Aerial Communications, Inc.
subsidiaries, without charge, upon written or oral request to:
VOICESTREAM WIRELESS CORPORATION
12920 SE 38th Street
Bellevue, Washington 98006
Attention: Investor Relations
Telephone Number: (425) 378-4000
Email address: investor.relations@voicestream.com
Powertel, Inc., which in this document we refer to as "Powertel", will
provide you with copies of this information relating to Powertel, without
charge, upon written or oral request to:
POWERTEL, INC.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Attention: Investor Relations
Telephone Number: (706) 645-2000
Email address: kinda@powertel.com
IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE
SPECIAL MEETINGS, YOU SHOULD MAKE YOUR REQUEST NO LATER THAN MARCH 6, 2001.
In addition, if you have questions about the Deutsche Telekom/VoiceStream,
Deutsche Telekom/Powertel or VoiceStream/Powertel mergers, you may contact:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
Bankers and brokers call collect: (212) 929-5500
All others call toll-free: (800) 322-2885
7
WHERE YOU CAN FIND MORE INFORMATION
Deutsche Telekom files annual and special reports and other information,
and VoiceStream and Powertel file annual, quarterly and special reports, proxy
statements and other information, with the Securities and Exchange Commission,
which in this document we refer to as the "SEC". You may read and copy any
reports, statements or other information on file at the SEC's public reference
room located at 450 Fifth Street, NW, Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference room. The
SEC filings are also available to the public from commercial document retrieval
services. The VoiceStream and Powertel filings, and the registration statements
filed by Deutsche Telekom and VoiceStream of which this proxy
statement/prospectus forms a part, are available at the Internet worldwide
website maintained by the SEC at www.sec.gov.
Deutsche Telekom has filed a registration statement on Form F-4 and a
registration statement on Form F-6, as amended, to register with the SEC the
Deutsche Telekom ADSs and Deutsche Telekom ordinary shares, respectively, that
VoiceStream stockholders would receive in connection with the Deutsche Telekom/
VoiceStream merger and Powertel stockholders would receive in connection with
the Deutsche Telekom/ Powertel merger. VoiceStream has filed a registration
statement on Form S-4 to register with the SEC the VoiceStream common shares
that Powertel stockholders would receive in connection with the VoiceStream/
Powertel merger. This proxy statement/prospectus is a part of the registration
statement of Deutsche Telekom on Form F-4 and the registration statement of
VoiceStream on Form S-4 and is a prospectus of Deutsche Telekom, a prospectus of
VoiceStream, a proxy statement of VoiceStream for the VoiceStream special
meeting and a proxy statement of Powertel for the Powertel special meeting.
The SEC permits Deutsche Telekom, VoiceStream and Powertel to "incorporate
by reference" information into this proxy statement/prospectus. This means that
the companies can disclose important information to you by referring you to
another document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this proxy statement/prospectus, except for
any information superseded by information contained directly in this proxy
statement/prospectus or by information contained in documents filed with or
furnished to the SEC after the date of this proxy statement/prospectus that is
incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that have been previously filed with the SEC. These documents
contain important information about Deutsche Telekom, VoiceStream and Powertel
and their financial conditions.
DEUTSCHE TELEKOM SEC FILINGS (FILE NO. 1-14540) PERIOD OR FILING DATE
----------------------------------------------- ---------------------
Annual Report on Forms 20-F and 20-F/A Year ended December 31, 1999
Reports on Form 6-K Filed on June 13, 2000, June 27, 2000, July 5,
2000, July 19, 2000, September 29, 2000, October
4, 2000, October 30, 2000, November 9, 2000,
December 5, 2000, January 23, 2001 and February 8,
2001
VOICESTREAM SEC FILINGS (FILE NO. 0-29667) PERIOD OR FILING DATE
------------------------------------------ ---------------------
Annual Report on Forms 10-K and 10-K/A Year ended December 31, 1999
Quarterly Report on Forms 10-Q and 10-Q/A Quarter ended March 31, 2000
Quarterly Report on Forms 10-Q and 10-Q/A Quarter ended June 30, 2000
Quarterly Report on Forms 10-Q and 10-Q/A Quarter ended September 30, 2000
Current Reports on Form 8-K and 8-K/A Filed on March 3, 2000, March 23, 2000,
May 5, 2000, May 16, 2000, July 28, 2000,
August 31, 2000, September 8, 2000,
September 29, 2000, October 11, 2000,
December 20, 2000 and February 2, 2001
8
POWERTEL SEC FILINGS (FILE NO. 0-23102) PERIOD OR FILING DATE
--------------------------------------- ---------------------
Annual Report on Forms 10-K and 10-K/A Year ended December 31, 1999
Quarterly Report on Form 10-Q Quarter ended March 31, 2000
Quarterly Report on Form 10-Q Quarter ended June 30, 2000
Quarterly Report on Forms 10-Q and 10-Q/A Quarter ended September 30, 2000
Current Reports on Form 8-K Filed on June 16, 2000, August 31, 2000 and
February 2, 2001
Deutsche Telekom, VoiceStream and Powertel also incorporate by reference
into this proxy statement/prospectus additional documents that they may file
with the SEC under Sections 13(a), 13(c), 14(a) and 15(d) of the Securities
Exchange Act of 1934, as amended, from and including the date of this proxy
statement/prospectus to the date of the VoiceStream special meeting and the
Powertel special meeting. These include reports such as Annual Reports on Form
10-K and Form 20-F, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
as well as any Reports on Form 6-K designated by Deutsche Telekom as being
incorporated by reference into this proxy statement/prospectus.
The Deutsche Telekom ADSs are listed on the New York Stock Exchange, which
in this document we refer to as the "NYSE". The Deutsche Telekom ordinary shares
are listed on the Frankfurt Stock Exchange. The Deutsche Telekom ordinary shares
also trade on the Berlin Stock Exchange, the Bremen Stock Exchange, the
Rhineland Westphalian Stock Exchange in Dusseldorf, the Hanseatic Stock Exchange
in Hamburg, the Hanover Stock Exchange in Hanover, the Bavarian Stock Exchange
and the Baden-Wurttemberg Stock Exchange in Stuttgart and on the Tokyo Stock
Exchange. Options on the Deutsche Telekom ordinary shares trade on the German
options exchange (Eurex Deutschland) and other exchanges. You may inspect any
periodic reports and other information filed with the SEC by Deutsche Telekom at
the offices of the NYSE, 20 Broad Street, New York, New York 10005 (17th Floor).
VoiceStream and Powertel common shares are both quoted on the Nasdaq Stock
Market. You may inspect any periodic reports, proxy statements and other
information filed with the SEC by VoiceStream and Powertel at the offices of the
National Association of Securities Dealers, Inc., 9801 Washingtonian Boulevard,
Gaithersburg, Maryland 20878 (5th Floor).
If you are a Deutsche Telekom, VoiceStream or Powertel stockholder, you may
not have been sent some of the documents incorporated by reference, but you can
obtain any of them through Deutsche Telekom, VoiceStream or Powertel as
described below, through the SEC or, with respect to VoiceStream and Powertel,
the SEC's Internet worldwide website as described above. Documents incorporated
by reference are available without charge, excluding all exhibits unless an
exhibit has been specifically incorporated by reference into this proxy
statement/prospectus. Stockholders may obtain documents incorporated by
reference into this proxy statement/prospectus by requesting them in writing or
by telephone from the appropriate company at the following addresses:
DEUTSCHE TELEKOM, INC. VOICESTREAM WIRELESS CORPORATION POWERTEL, INC.
280 PARK AVENUE, 26TH FLOOR 12920 SE 38TH STREET 1239 O.G. SKINNER DRIVE
NEW YORK, NY 10017 BELLEVUE, WA 98006 WEST POINT, GA 31833
ATTENTION: BRIGITTE WENIGER ATTENTION: INVESTOR RELATIONS ATTENTION: INVESTOR RELATIONS
TELEPHONE NO.: (212) 424-2959 TELEPHONE NO.: (425) 378-4000 TELEPHONE NO.: (706) 645-2000
EMAIL: EMAIL: EMAIL: kinda@powertel.com
Brigitte.Weniger@usa.telekom.de investor.relations@voicestream.com
If you would like to request documents from Deutsche Telekom, VoiceStream
or Powertel, please do so by March 6, 2001, to receive them before the
VoiceStream special meeting or the Powertel special meeting.
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE INTO THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER RELEVANT TO
YOU. NO ONE HAS BEEN AUTHORIZED TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM THAT CONTAINED IN, OR INCORPORATED BY REFERENCE INTO, THIS PROXY
STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS DATED FEBRUARY 9, 2001.
YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN, OR INCORPORATED BY
REFERENCE INTO, THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER
THAN THAT DATE.
9
NEITHER OUR MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO VOICESTREAM AND
POWERTEL STOCKHOLDERS NOR THE ISSUANCE BY DEUTSCHE TELEKOM OF ADSS OR ORDINARY
SHARES IN CONNECTION WITH THE DEUTSCHE TELEKOM/ VOICESTREAM MERGER OR THE
DEUTSCHE TELEKOM/POWERTEL MERGER OR BY VOICESTREAM OF COMMON SHARES IN
CONNECTION WITH THE VOICESTREAM/POWERTEL MERGER WILL CREATE ANY IMPLICATION TO
THE CONTRARY.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. INFORMATION CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS REGARDING DEUTSCHE TELEKOM HAS BEEN PROVIDED BY
DEUTSCHE TELEKOM, INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
REGARDING VOICESTREAM HAS BEEN PROVIDED BY VOICESTREAM AND INFORMATION CONTAINED
IN THIS PROXY STATEMENT/PROSPECTUS REGARDING POWERTEL HAS BEEN PROVIDED BY
POWERTEL.
10
TABLE OF CONTENTS
Page
----
Questions and Answers About the
Mergers............................... 1
Summary............................... 3
Risk Factors Relating to the Deutsche
Telekom/VoiceStream Merger and the
Deutsche Telekom/Powertel Merger...... 25
Risk Factors Relating to the
VoiceStream/Powertel Merger........... 29
Forward-Looking Statements............ 34
The Companies......................... 36
Deutsche Telekom AG................. 36
VoiceStream Wireless Corporation.... 36
Powertel, Inc. ..................... 37
The VoiceStream Special Meeting....... 38
General............................. 38
Record Date; Quorum................. 38
Required Vote....................... 39
Agreements to Vote in Favor of the
Mergers............................. 39
Voting and Revocation of Proxies.... 39
Election Procedures................. 40
Solicitation of Proxies............. 40
The Powertel Special Meeting.......... 42
General............................. 42
Record Date; Quorum................. 42
Required Vote....................... 43
Agreements to Vote in Favor of the
Deutsche Telekom/Powertel Merger.... 43
Agreements to Vote in Favor of the
VoiceStream/Powertel Merger......... 44
Voting and Revocation of Proxies.... 44
Solicitation of Proxies............. 45
The Deutsche Telekom/VoiceStream
Merger................................ 46
Background of the Deutsche Telekom/
VoiceStream Merger.................. 46
Deutsche Telekom's Reasons for the
Deutsche Telekom/VoiceStream
Merger.............................. 51
Recommendation and Considerations of
the VoiceStream Board of
Directors........................... 52
Opinion of VoiceStream's Financial
Advisor............................. 57
Page
----
Interests of Directors and Officers
of VoiceStream in the Deutsche
Telekom/VoiceStream Merger.......... 64
Appraisal Rights.................... 67
The Deutsche Telekom/Powertel Merger
and the VoiceStream/Powertel Merger... 69
Background of Deutsche Telekom/
Powertel Merger and VoiceStream/
Powertel Merger..................... 69
Deutsche Telekom's Reasons for the
Deutsche Telekom/Powertel Merger.... 74
VoiceStream's Reasons for the
VoiceStream/Powertel Merger......... 74
Recommendation and Considerations of
the VoiceStream Board of Directors
with Respect to the
VoiceStream/Powertel Merger......... 75
Recommendation and Considerations of
the Powertel Board of Directors with
Respect to the Deutsche
Telekom/Powertel Merger and
VoiceStream/Powertel Merger......... 76
Opinion of VoiceStream's Financial
Advisor............................. 80
Opinion of Powertel's Financial
Advisor............................. 87
Interests of Directors and Officers
of VoiceStream in the
VoiceStream/Powertel Merger......... 94
Interests of Directors and Officers
of Powertel in the Deutsche
Telekom/Powertel Merger and the
VoiceStream/Powertel Merger......... 94
Appraisal Rights.................... 98
Dividends............................. 99
Deutsche Telekom.................... 99
VoiceStream......................... 99
Federal Securities Law Consequences of
the Mergers........................... 100
The Deutsche Telekom/VoiceStream
Merger and the Deutsche Telekom/
Powertel Merger..................... 100
The VoiceStream/Powertel Merger..... 100
i
11
Page
----
Other Effects of the Mergers.......... 101
Other Effects of the Deutsche
Telekom/VoiceStream Merger and the
Deutsche Telekom/Powertel Merger.... 101
Other Effects of the VoiceStream/
Powertel Merger..................... 104
Accounting Treatment.................. 105
The Deutsche Telekom/VoiceStream
Merger and the Deutsche Telekom/
Powertel Merger..................... 105
The VoiceStream/Powertel Merger..... 105
Regulatory Approvals.................. 105
Regulatory Approvals Required for
the Deutsche Telekom/VoiceStream
Merger and the Deutsche
Telekom/Powertel Merger............. 105
Regulatory Approvals Required for
the VoiceStream/Powertel Merger..... 108
U.S. Federal and German Tax
Consequences.......................... 110
General............................. 110
U.S. Federal Income Tax Consequences
of the Deutsche Telekom/VoiceStream
Merger to U.S. Holders of
VoiceStream Common Shares........... 111
U.S. Federal Income Tax Consequences
of the Deutsche Telekom/Powertel
Merger to U.S. Holders of Powertel
Common Shares....................... 114
U.S. Federal Income Tax Consequences
of the Deutsche Telekom/Powertel
Merger to U.S. Holders of Powertel
Preferred Shares.................... 117
U.S. Federal Income Tax Consequences
of the VoiceStream/Powertel Merger
to U.S. Holders of Powertel Common
Shares.............................. 118
U.S. Federal Income Tax Consequences
of the VoiceStream/Powertel Merger
to U.S. Holders of Powertel
Preferred Shares.................... 119
U.S. Federal Income Tax and German
Tax Considerations for U.S. Resident
Holders of Deutsche Telekom ADSs and
Deutsche Telekom Ordinary Shares.... 120
Page
----
German Tax Considerations for Non-
German Holders of Deutsche Telekom
ADSs and Deutsche Telekom Ordinary
Shares.............................. 123
Summary of the Deutsche Telekom/
VoiceStream Transaction Documents..... 126
The Deutsche Telekom/VoiceStream
Merger Agreement.................... 126
The Deutsche Telekom/VoiceStream
Merger........................... 126
Effective Time and Timing of
Closing.......................... 126
Consideration To Be Received in
the Deutsche Telekom/VoiceStream
Merger........................... 126
Treatment of Other Capital Stock,
Warrants and Exchange Rights..... 130
Election and Exchange of
Certificates Representing
VoiceStream Common Shares........ 132
Treatment of Options and
Restricted Stock................. 133
Dissenting Shares................ 134
Representations and Warranties... 134
Conduct of Business Pending the
Deutsche Telekom/VoiceStream
Merger........................... 134
Offers for Alternative
Transactions..................... 137
VoiceStream Board of Directors'
Recommendation................... 138
Additional Agreements............ 139
VoiceStream's Nominations to
Deutsche Telekom Organizational
Bodies........................... 139
Efforts to Complete the Deutsche
Telekom/VoiceStream Merger....... 139
Indemnification and Insurance.... 140
Employee Benefits................ 140
Closing Conditions............... 141
Termination and Termination
Fee.............................. 143
Expenses......................... 144
Amendment; Waiver; Assignment.... 145
Important Definitions............ 145
Amendment and Restatement........ 146
ii
12
Page
----
Deutsche Telekom's Agreements with
Stockholders of VoiceStream......... 146
Agreement to Vote................ 146
Transfer Restrictions and Waiver
of Rights........................ 147
Registration Rights.............. 148
Termination...................... 148
No Solicitation.................. 148
The Agreements with Telephone &
Data Systems, Inc................ 148
The Deutsche Telekom Investment
Agreements.......................... 149
VoiceStream Voting Preferred
Shares........................... 149
Stock Subscription Agreement..... 150
Investor Agreement............... 150
First Amended and Restated Voting
Agreement........................... 152
Agreements with Joint Venture
Partners of VoiceStream............. 153
Summary of Deutsche Telekom/Powertel
and VoiceStream/Powertel Transaction
Documents............................. 154
The Deutsche Telekom/Powertel Merger
Agreement........................... 154
The Deutsche Telekom/Powertel
Merger........................... 154
Effective Time and Timing of
Closing.......................... 154
Consideration To Be Received in
the Deutsche Telekom/Powertel
Merger........................... 154
Adjustment in Connection with
Permitted Dividends.............. 156
Treatment of Powertel Warrants... 157
Treatment of Eliska Put Rights... 157
Election and Exchange of
Certificates Representing
Powertel Shares.................. 157
Treatment of Powertel Options and
Restricted Stock................. 158
Dissenting Shares................ 159
Representations and Warranties... 159
Conduct of Business Pending the
Deutsche Telekom/Powertel
Merger........................... 160
Offers for Alternative
Transactions..................... 162
Powertel Board of Directors'
Recommendation................... 163
Page
----
Additional Agreements............ 164
Senior Discount Notes and Senior
Notes............................ 164
Efforts to Complete the Deutsche
Telekom/Powertel Merger.......... 165
Indemnification and Insurance.... 165
Employee Benefits................ 165
Closing Conditions............... 166
Termination and Termination
Fee.............................. 169
Expenses......................... 171
Amendment; Waiver; Assignment.... 171
Important Definition............. 172
Amendment and Restatement........ 172
Deutsche Telekom's Agreements with
Stockholders of Powertel............ 173
Agreement to Vote................ 173
Transfer Restrictions and Waiver
of Rights........................ 173
Termination...................... 174
No Solicitation.................. 174
The Stockholder Agreement with
American Water Works Company..... 174
Deutsche Telekom's Agreement with
Joint Venture Partners of
Powertel............................ 175
Agreement with Eliska Wireless
Investors I, L.P................. 175
Agreement with Sonera Holding
B.V.............................. 175
The VoiceStream/Powertel Merger
Agreement........................... 175
The VoiceStream/Powertel
Merger........................... 175
Effective Time and Timing of
Closing.......................... 175
Consideration To Be Received in
the VoiceStream/Powertel
Merger........................... 176
Adjustment of Conversion Number
in Connection with the 0.0075
Permitted Stock Dividend......... 178
Treatment of Powertel Warrants... 178
Exchange of Certificates
Representing Powertel Shares..... 178
Treatment of Powertel Options and
Restricted Stock................. 179
iii
13
Page
----
Dissenting Shares................ 179
Representations and Warranties... 179
Conduct of Business Pending the
VoiceStream/Powertel Merger...... 180
Offers for Alternative
Transactions..................... 183
Powertel Board of Directors'
Recommendation................... 184
Additional Agreements............ 184
Senior Discount Notes and Senior
Notes............................ 185
Efforts to Complete the
VoiceStream/Powertel Merger...... 185
Indemnification and Insurance.... 185
Employee Benefits................ 185
Closing Conditions............... 186
Termination and Termination
Fee.............................. 189
Expenses......................... 190
Amendment; Waiver; Assignment.... 191
Important Definitions............ 191
Amendment and Restatement........ 191
VoiceStream's Agreements with
Stockholders of Powertel............ 191
Agreement to Vote................ 192
Transfer Restrictions............ 192
Termination...................... 193
No Solicitation.................. 193
Powertel's Agreements with
Stockholders of VoiceStream......... 193
Agreement to Vote................ 193
Transfer Restrictions............ 193
Agreement to Elect a Powertel
Nominee to the VoiceStream Board
of Directors..................... 194
Termination...................... 194
The Letter Agreement with
Telephone & Data Systems, Inc.... 194
Exchange Rates........................ 195
Market Price and Dividend Data........ 196
Market Prices....................... 196
Dividend Data....................... 199
Page
----
Description of Deutsche Telekom
Ordinary Shares....................... 201
Share Capital....................... 201
Repurchase of Shares................ 203
Voting Rights and Shareholders
Meetings............................ 204
Dividends and Other Distributions... 205
Record Dates........................ 205
Preemptive Rights................... 205
Liquidation Rights.................. 206
Notification Requirements........... 206
German Foreign Exchange Controls.... 206
Inspection of Share Register........ 206
Description of Deutsche Telekom
American Depositary Shares............ 207
Information About Deutsche Telekom
ADSs................................ 207
Dividends and Distributions......... 208
Changes Affecting Shares............ 210
Issuance of Deutsche Telekom ADSs
upon Deposit of Deutsche Telekom
Ordinary Shares..................... 210
Withdrawal of Deutsche Telekom
Ordinary Shares upon Cancellation of
Deutsche Telekom ADSs............... 211
Voting Rights....................... 211
Fees and Charges.................... 212
Notification Requirements........... 212
Amendments and Termination.......... 212
Books of Depositary................. 213
Limitations on Obligations and
Liabilities......................... 213
Pre-Release Transactions............ 214
Taxes............................... 214
Foreign Currency Conversion......... 214
Comparison of Rights of VoiceStream
and Powertel Stockholders and Deutsche
Telekom Shareholders.................. 216
Voting Rights....................... 216
Action by Written Consent........... 217
Stockholder Proposals and
Stockholder Nominations of
Directors........................... 218
Sources and Payment of Dividends.... 219
Rights of Purchase and Redemption... 220
iv
14
Page
----
Meetings of Shareholders............ 221
Appraisal Rights.................... 223
Preemptive Rights................... 224
Amendment of Governing
Organizational Instruments.......... 224
Preferred Shares.................... 226
Outstanding Preferred Stock......... 227
Stock Class Rights.................. 230
Stockholders' Votes on Certain
Transactions........................ 230
Rights of Inspection................ 231
Duties of Directors................. 231
Standard of Conduct for Directors... 232
Number and Term of Directors........ 233
Classification of the Board......... 233
Removal of Directors................ 234
Vacancies on the Board of
Directors........................... 235
Liability of Directors and
Officers............................ 236
Indemnification of Directors and
Officers............................ 237
Conflict-of-Interest Transactions... 239
Loans to Directors.................. 239
Stockholder Suits................... 239
Provisions Relating to Share
Acquisitions........................ 240
Takeover Related Provisions......... 242
Disclosure of Interests............. 242
Limitation on Enforceability of
Civil Liabilities Under U.S. Federal
Securities Laws..................... 243
Proxy Statements and Reports........ 244
Reporting Requirements.............. 245
Deutsche Telekom Following the
Deutsche Telekom/VoiceStream Merger
and the Deutsche Telekom/Powertel
Merger................................ 247
Business and Operations............. 247
Management Board and Supervisory
Board............................... 248
General.......................... 248
Page
----
Management Board of Deutsche
Telekom.......................... 248
Members of the Management Board
of Deutsche Telekom.............. 249
Management Board Compensation and
Share Ownership.................. 250
Supervisory Board of Deutsche
Telekom.......................... 250
Members of the Supervisory Board
of Deutsche Telekom.............. 251
Supervisory Board Compensation
and Share Ownership.............. 252
VoiceStream Following the VoiceStream/
Powertel Merger....................... 253
Business and Operations............. 253
Officers and Directors.............. 253
Ownership of Capital Stock of
VoiceStream and Powertel.............. 254
Beneficial Ownership of VoiceStream
Common Shares....................... 254
Beneficial Ownership of Powertel
Common Shares....................... 258
Fees and Expenses..................... 261
Listing of Securities................. 261
Deutsche Telekom ADSs and Deutsche
Telekom Ordinary Shares............. 261
VoiceStream Common Shares........... 261
Validity of Securities................ 262
Experts............................... 262
Stockholder Proposals for the 2001
Annual Meeting of VoiceStream
Stockholders.......................... 263
Stockholder Proposals for the 2001
Annual Meeting of Powertel
Stockholders.......................... 263
Deutsche Telekom Unaudited Pro Forma
Condensed Combined Financial
Statements............................ 264
VoiceStream Unaudited Pro Forma
Condensed Combined Financial
Statements............................ 294
v
15
Annex A -- Agreement and Plan of Merger dated July 23, 2000, as amended
and restated as of February 8, 2001, among Deutsche Telekom
AG, VoiceStream Wireless Corporation and a Delaware
corporation formed by Deutsche Telekom AG................... A-I
Annex B -- Agreement and Plan of Merger dated August 26, 2000, as
amended and restated as of February 8, 2001, among Deutsche
Telekom AG, Powertel, Inc. and a Delaware corporation formed
by Deutsche Telekom AG...................................... B-I
Annex C -- Agreement and Plan of Reorganization dated August 26, 2000,
as amended and restated on February 8, 2001, among
VoiceStream Wireless Corporation, Powertel, Inc. and a
wholly-owned subsidiary of VoiceStream Wireless
Corporation................................................. C-I
Annex D -- Opinion of Goldman, Sachs & Co. delivered in connection with
the Deutsche Telekom/VoiceStream merger..................... D-1
Annex E -- Opinion of Goldman, Sachs & Co. delivered in connection with
the VoiceStream/Powertel merger............................. E-1
Annex F -- Opinion of Morgan Stanley & Co. Incorporated delivered in
connection with the Deutsche Telekom/Powertel merger and the
VoiceStream/Powertel merger................................. F-1
Annex G -- Section 262 of the General Corporation Law of the State of
Delaware.................................................... G-1
vi
16
QUESTIONS AND ANSWERS ABOUT THE MERGERS
Q. WHAT TRANSACTIONS ARE BEING PROPOSED?
A. Deutsche Telekom is proposing to acquire both VoiceStream and Powertel in
separate merger transactions in which each of these companies would become a
wholly-owned subsidiary of Deutsche Telekom.
It is expected that these two merger transactions will occur at about the
same time, on or shortly after May 31, 2001, which the parties have agreed is
the earliest date that the mergers will be completed. However, Deutsche
Telekom will only complete its acquisition of Powertel if it first completes
its acquisition of VoiceStream. If the merger between Deutsche Telekom and
VoiceStream is not completed, then VoiceStream is proposing to acquire
Powertel in an alternative merger transaction in which Powertel would become
a wholly-owned subsidiary of VoiceStream.
Q. WHY IS DEUTSCHE TELEKOM PROPOSING TO ACQUIRE VOICESTREAM AND POWERTEL?
A. The management and supervisory boards of Deutsche Telekom and the boards of
directors of each of VoiceStream and Powertel believe that the combination of
their three companies will create a company well positioned to provide
current and next-generation wireless voice and data services on a global
basis over a common technology platform. They also believe the combined
company will:
- benefit U.S. consumers by creating a stronger and more competitive national
wireless operator;
- be able to accelerate the introduction of next-generation wireless voice
and data services, such as mobile Internet and multimedia applications;
- offer seamless global services over a common technology platform, and
provide customer-friendly features, such as global roaming, certified
billing and worldwide customer service; and
- have the necessary capital resources, technology expertise and global reach
to provide cost-competitive service.
Q. WHY IS VOICESTREAM PROPOSING TO ACQUIRE POWERTEL IF VOICESTREAM IS NOT
ACQUIRED BY DEUTSCHE TELEKOM?
A. VoiceStream believes that if the merger transaction with Deutsche Telekom is
terminated for any reason, then the acquisition of Powertel will make
VoiceStream a more competitive national wireless telecommunications company.
Powertel operates in 12 southeastern states of the United States in areas
where VoiceStream generally does not operate, and Powertel's network is based
on the same global system for mobile communications wireless technology that
VoiceStream uses, which in this document we refer to as "GSM". As a result,
the addition of Powertel will:
- fill a significant gap in VoiceStream's U.S. coverage; and
- create opportunities to improve VoiceStream's competitive position by
providing customers with seamless services over a common technology
platform on a nationwide basis.
Q. WHAT AM I BEING ASKED TO VOTE ON?
A. If you are a VOICESTREAM stockholder, you are being asked to consider and
vote on separate proposals to approve the Deutsche Telekom/VoiceStream merger
and the VoiceStream/Powertel merger.
If you are a POWERTEL stockholder, you are being asked to consider and vote
on separate proposals to approve the Deutsche Telekom/Powertel merger and the
VoiceStream/Powertel merger.
The VoiceStream/Powertel merger can occur only if the Deutsche
Telekom/VoiceStream merger is not completed and the merger agreement between
Deutsche Telekom and VoiceStream is terminated.
Q. HOW DO I VOTE?
A. You may choose one of the following ways to cast your vote:
- by completing the accompanying proxy card and returning it in the enclosed
postage-paid envelope; or
1
17
- by appearing and voting in person at the VoiceStream special meeting, if
you are a VoiceStream stockholder, or at the Powertel special meeting, if
you are a Powertel stockholder.
If your shares are held in "street name", which means that your shares are
held in the name of a bank, broker or other financial institution instead of
in your own name, you must either direct the financial institution as to how
to vote your shares or obtain a proxy from the financial institution to vote
at your special meeting.
Q. MAY I CHANGE MY VOTE?
A. Yes. You may revoke your proxy or change your vote:
- if you are a VoiceStream stockholder, by submitting a written revocation to
the
Secretary of VoiceStream Wireless Corporation,
12920 SE 38th Street
Bellevue, Washington 98006;
- if you are a Powertel stockholder, by submitting a written revocation to
the
Secretary of Powertel, Inc.,
1239 O.G. Skinner Drive
West Point, Georgia 31833;
- by properly submitting a new proxy to VoiceStream or Powertel, as the case
may be, dated as of a subsequent date; or
- by voting in person at the VoiceStream special meeting or the Powertel
special meeting, as the case may be.
Q. SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
A. No.
VoiceStream Stockholders
If you are a VoiceStream stockholder, then at least 45 days prior to the
expected completion of the Deutsche Telekom/VoiceStream merger, we expect to
mail to you a form with instructions for making your election of the form of
consideration you prefer to receive and a letter of transmittal for
surrendering your VoiceStream share certificates. The procedures for making
this election are described beginning on page 40 of this document. To make an
election, you will need to deliver the election form, the letter of
transmittal and your VoiceStream share certificates to the escrow agent
before the election deadline that we will announce in the future before the
expected completion of the Deutsche Telekom/VoiceStream merger. Stockholders
who fail to complete the election form in a timely fashion will be deemed to
have made the mixed election.
Powertel Stockholders
If you are a Powertel stockholder, then after Deutsche Telekom and Powertel
complete the Deutsche Telekom/Powertel merger or VoiceStream and Powertel
complete the VoiceStream/Powertel merger, as the case may be, you will be
sent instructions explaining how to exchange your Powertel share
certificates.
Q. WHOM SHOULD I CALL IF I HAVE QUESTIONS?
A. If you have any questions about the mergers or how to submit your proxy, or
if you need additional copies of this proxy statement/prospectus or the
enclosed proxy card or voting instructions, you should contact:
[MACKENZIE LOGO]
156 Fifth Avenue
New York, New York 10010
call toll-free: (800) 322-2885 or
call collect: (212) 929-5500
2
18
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus. It does not contain all of the information that is
important to you. You should read carefully the entire proxy
statement/prospectus and the additional documents referred to in this proxy
statement/prospectus to fully understand the mergers.
THE COMPANIES (SEE PAGE 36)
DEUTSCHE TELEKOM AG VOICESTREAM WIRELESS POWERTEL, INC.
Friedrich-Ebert-Allee 140 CORPORATION 1239 O.G. Skinner Drive
53113 Bonn 12920 SE 38th Street, West Point, Georgia 31833
Germany Bellevue, Washington 98006 (706) 645-2000
(011 49) 228-181-88880 (425) 378-4000
Deutsche Telekom is Europe's VoiceStream is a national Powertel is a wireless
largest telecommunications provider in the United States telecommunications services
company and one of the largest of personal communications company operating in the
telecommunications carriers services using the GSM southeastern United States
worldwide based on 1999 wireless technology. using the GSM wireless
revenues. technology.
THE MERGERS (SEE PAGES 46 AND 69)
The terms and conditions of the Deutsche Telekom/VoiceStream merger, the
Deutsche Telekom/Powertel merger and the VoiceStream/Powertel merger are
contained in three separate merger agreements, which are attached as Annexes A,
B and C to this document. We encourage you to read these merger agreements
carefully as they are the legal documents that govern the respective merger
transactions.
WHAT HOLDERS OF VOICESTREAM COMMON SHARES WILL RECEIVE IN THE DEUTSCHE TELEKOM/
VOICESTREAM MERGER (SEE PAGE 126)
The basic consideration in the Deutsche Telekom/VoiceStream merger is $30
in cash and 3.2 Deutsche Telekom shares for each VoiceStream common share
outstanding at the completion of the Deutsche Telekom/VoiceStream merger, and
each VoiceStream stockholder is entitled to elect to receive this basic mix.
VoiceStream stockholders may also elect to receive instead more cash and fewer
Deutsche Telekom shares, or more Deutsche Telekom shares and less cash, by
making a "cash" election or a "stock" election. AS EXPLAINED BELOW, HOWEVER, THE
CASH AND STOCK ELECTIONS ARE SUBJECT TO PRORATION TO PRESERVE AN OVERALL MIX OF
$30 IN CASH AND 3.2 DEUTSCHE TELEKOM SHARES FOR ALL OF THE OUTSTANDING
VOICESTREAM COMMON SHARES TAKEN TOGETHER, AND ALL THREE ELECTIONS ALSO ARE
SUBJECT TO A TAX-RELATED ADJUSTMENT IN SOME CIRCUMSTANCES. AS A RESULT, UNDER
ANY OF THE ELECTIONS YOU MAY RECEIVE LESS CASH AND MORE STOCK, OR LESS STOCK AND
MORE CASH, THAN YOU HAVE ELECTED. VoiceStream stockholders who fail to make an
election will be deemed to have made the mixed election.
CONSIDERATION TO BE RECEIVED PER
VOICESTREAM COMMON SHARE
TYPE OF ELECTION (BEFORE PRORATION AND/OR TAX-RELATED ADJUSTMENT)
---------------- ------------------------------------------------
- Mixed.................................................... -$30 in cash and 3.2 Deutsche Telekom shares
- Stock.................................................... - 3.7647 Deutsche Telekom shares
- Cash..................................................... - $200 in cash
Important note: Unless the price of Deutsche Telekom shares appreciates
substantially between the date of this document and the election deadline, it is
expected that the cash election will be subject to proration that will result in
the receipt of Deutsche Telekom shares and significantly less cash by
VoiceStream stockholders making the cash election. HOWEVER, STOCKHOLDERS MAKING
THE CASH ELECTION WILL RECEIVE AT
3
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LEAST AS MUCH CASH AS THEY WOULD HAVE RECEIVED BY MAKING THE MIXED ELECTION, AND
STOCKHOLDERS SEEKING TO MAXIMIZE THE AMOUNT OF CASH THEY RECEIVE SHOULD MAKE THE
CASH ELECTION.
The following table illustrates, for each type of election, the approximate
total value that you would receive for each of your VoiceStream common shares
assuming various prices of Deutsche Telekom ordinary shares at the time the
merger is completed. The potential values indicated for each election are
illustrative only and will vary at the time of the completion of the Deutsche
Telekom/VoiceStream merger based upon a number of factors, including whether
that election is prorated, which is likely in the case of the cash election, any
tax-related adjustment, as described below, and whether any VoiceStream
stockholders exercise dissenters' rights. The last sale price of Deutsche
Telekom ordinary shares on the Frankfurt Stock Exchange on February 7, 2001 was
euro 33.02 (equivalent to $30.81 based on an exchange rate of one euro per
0.9331 of a US dollar). You are urged to obtain a current market quotation for
the Deutsche Telekom ADSs and Deutsche Telekom ordinary shares.
PRICE PER VALUE OF
DEUTSCHE CASH ELECTION***
TELEKOM VALUE OF ---------------------
ORDINARY SHARE VALUE OF STOCK MAXIMUM NO
(IN DOLLARS) MIXED ELECTION ELECTION** PRORATION PRORATION
-------------- -------------- ------------- --------- ---------
$25.00* $107.84 $ 94.12 $107.84 $185.64
30.00* 125.87 112.94 125.87 199.18
30.81* 128.69 115.99 128.69 200.72
35.00* 142.07 131.76 142.07 200.53
40.00* 158.04 150.59 158.04 200.31
45.00* 174.00 169.41 174.00 200.09
50.00 190.00 188.24 190.00 200.00
55.00 206.00 206.00-207.60 200.00 200.00
---------------
*Based on the number of VoiceStream common shares outstanding on February 7,
2001 and the exchange rate on that date of one euro per 0.9331 of a U.S.
dollar, the tax-related adjustment described below would have been required
at these Deutsche Telekom ordinary share prices. The values indicated in the
table at these Deutsche Telekom ordinary share prices reflect the effect of
the tax-related adjustment assuming the number of VoiceStream common shares
outstanding and the euro/dollar exchange rate remained unchanged at the
completion of the Deutsche Telekom/ VoiceStream merger, and assuming that no
VoiceStream stockholders exercise dissenters' rights, which may not be the
case. Based on a number of factors described below, the tax-related
adjustment also could be triggered at higher prices per Deutsche Telekom
ordinary share.
**Range indicates maximum and minimum values depending on extent of proration.
Where no range is shown in this column, it is because the relative values of
the cash and stock elections make proration of the stock election unlikely at
the applicable Deutsche Telekom share price.
***Maximum proration of the cash election would occur if no stockholders make
the stock election. No proration is expected to occur where the value of the
stock election is higher than the value of the cash election. If both cash
elections and stock elections are made, the value of the cash election would
be within the range between the "maximum proration" amount and the "no
proration" amount and would depend upon the aggregate number of shares
subject to each election.
EXPLANATION OF PRORATION
The total number of Deutsche Telekom shares that will be issued and the
total amount of cash that will be paid to VoiceStream stockholders in the
Deutsche Telekom/VoiceStream merger is 3.2 Deutsche Telekom shares and $30,
respectively, times the total number of VoiceStream common shares outstanding
immediately prior to completion of the merger. The stock and cash elections are
subject to proration to preserve an overall mix of $30 in cash and 3.2 Deutsche
Telekom shares for all of the outstanding VoiceStream common shares taken
together. Therefore, unless the number of stock elections is significantly
greater than the number of cash elections, VoiceStream stockholders making the
cash election
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will not receive $200 in cash, but instead will receive a mix of cash and stock
calculated to preserve the overall cash and stock mix described above, after
taking into account all of the elections made by all of the VoiceStream
stockholders. In all cases, the cash election will include at least as much cash
as the mixed election. The formula that will be used to determine the actual
amount of proration at the completion of the Deutsche Telekom/VoiceStream merger
is described on page 127. Similarly, if the number of stock elections is
significantly greater than the number of cash elections, VoiceStream
stockholders making the stock election will not receive 3.7647 Deutsche Telekom
shares, but instead will receive a mix of cash and stock calculated to preserve
the overall cash and stock mix described above, after taking into account all of
the elections made by all of the VoiceStream stockholders. In all cases, the
stock election will include at least as much stock as the mixed election.
AS OF THE DATE OF THIS DOCUMENT, THE NON-PRORATED $200 VALUE OF THE CASH
ELECTION IS SUBSTANTIALLY GREATER THAN THE CURRENT VALUE OF THE STOCK AND MIXED
ELECTIONS. IF THIS REMAINS TRUE AT THE ELECTION DEADLINE, IT IS EXPECTED THAT
ALL OR NEARLY ALL VOICESTREAM STOCKHOLDERS WILL MAKE THE CASH ELECTION. IF THIS
OCCURS, STOCKHOLDERS MAKING THE CASH ELECTION WILL RECEIVE A MIX OF CASH AND
DEUTSCHE TELEKOM SHARES IN A PROPORTION VERY CLOSE TO OR EQUAL TO THE MIXED
ELECTION.
EXPLANATION OF POTENTIAL TAX-RELATED ADJUSTMENT TO MERGER CONSIDERATION
In order to preserve tax-free treatment of the receipt of Deutsche Telekom
shares by VoiceStream stockholders for U.S. federal income tax purposes and to
permit delivery of the requisite tax opinion pursuant to the Deutsche
Telekom/VoiceStream merger agreement, the aggregate amount of cash paid to all
VoiceStream stockholders, including dissenters, cannot exceed approximately 17%
to 18% of the total value of all of the shares and cash delivered by Deutsche
Telekom to VoiceStream's stockholders. As a result, all three types of elections
are subject to an adjustment to reduce the total amount of cash to be received
in the merger to the extent necessary to preserve this tax-free treatment. If
the tax-related adjustment were necessary, the amount of cash you would have
received, after taking into account your election and any proration, will be
reduced and you will receive additional Deutsche Telekom shares instead. Whether
the tax-related adjustment will be made, and the magnitude of the adjustment, if
made, will be based on a number of factors, including the trading price of
Deutsche Telekom shares at the time the merger is completed, the number of
VoiceStream shares outstanding at that time, the euro/dollar exchange rate and
the number of VoiceStream common shares for which dissenters' rights are
exercised. The amount of the tax-related adjustment would be determined by
VoiceStream after consultation with Deutsche Telekom, and may be conservatively
estimated to facilitate the delivery of the requisite tax opinion at the
completion of the Deutsche Telekom/VoiceStream merger.
IF THE MERGER HAD CLOSED ON FEBRUARY 7, 2001, AND NO DISSENTERS' RIGHTS HAD
BEEN EXERCISED, WHICH MAY NOT BE THE CASE, THE TAX-RELATED ADJUSTMENT WOULD HAVE
BEEN NECESSARY AND, AS A RESULT, THE AMOUNT OF CASH TO BE PAID TO EACH
VOICESTREAM STOCKHOLDER RECEIVING CASH IN THE MERGER WOULD HAVE BEEN REDUCED BY
APPROXIMATELY 29%, WITH ADDITIONAL DEUTSCHE TELEKOM SHARES ISSUED IN
SUBSTITUTION. The value of the Deutsche Telekom shares issued in substitution
will depend on the exchange rate between the euro and the dollar at the relevant
time, and upon the trading price of Deutsche Telekom ordinary shares; HOWEVER,
IF THE DEUTSCHE TELEKOM/VOICESTREAM MERGER HAD CLOSED ON FEBRUARY 7, 2001, THE
VALUE OF THE DEUTSCHE TELEKOM SHARES ISSUED IN LIEU OF CASH WOULD HAVE BEEN
APPROXIMATELY 1% MORE THAN THE CASH THEY REPLACED. As a result, if the merger
had closed on February 7, 2001 and the tax-related adjustment had been made on
the assumptions described in this paragraph, the mixed election would have been
adjusted as follows:
NUMBER
OF DT AMOUNT VALUE ON
MIXED ELECTION SHARES OF CASH FEBRUARY 7, 2001
-------------- ------ ------- ----------------
Unadjusted.................................................. 3.2 $30.00 $128.59
Adjusted.................................................... 3.4837 $21.36 $128.69
If the merger had been completed on February 7, 2001, the cash election, after
giving effect to expected proration, likely would have consisted of a mix of
Deutsche Telekom shares and cash very close to the
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mixed election. A more detailed explanation of this adjustment, how it would be
calculated, and how the value of the Deutsche Telekom shares issued in place of
cash may differ from the value of the cash is provided beginning on page 128.
ADDITIONAL INFORMATION ABOUT THE DEUTSCHE TELEKOM/VOICESTREAM MERGER
CONSIDERATION
We expect that the Deutsche Telekom/VoiceStream merger will be completed on
or shortly after May 31, 2001, subject to the receipt of all necessary
regulatory approvals. Before the completion of the Deutsche Telekom/VoiceStream
merger, VoiceStream expects to declare a stock dividend of 0.0075 of a
VoiceStream common share for each VoiceStream common share outstanding. This
stock dividend will have the effect of increasing by 0.75% the number of shares
owned by VoiceStream stockholders, and, accordingly, the aggregate amount of
cash and Deutsche Telekom shares to be received by VoiceStream stockholders in
the Deutsche Telekom/VoiceStream merger.
We estimate that, in the Deutsche Telekom/VoiceStream merger, Deutsche
Telekom will pay approximately $5.4 billion in cash and issue approximately
880.7 million Deutsche Telekom shares to VoiceStream stockholders, based on the
price of Deutsche Telekom shares and the exchange rate as of February 7, 2001
and the other factors affecting the tax-related adjustment. Those Deutsche
Telekom shares will represent approximately 22.5% of the equity of Deutsche
Telekom after the Deutsche Telekom/ VoiceStream merger and approximately 21.7%
of the equity of Deutsche Telekom after both the Deutsche Telekom/VoiceStream
and Deutsche Telekom/Powertel mergers. If circumstances change and the tax-
related adjustment becomes unnecessary, we estimate that Deutsche Telekom would
pay approximately $7.6 billion in cash and issue approximately 808.9 million
Deutsche Telekom shares to VoiceStream stockholders in the Deutsche
Telekom/VoiceStream merger. Those Deutsche Telekom shares would represent
approximately 21.1% of the equity of Deutsche Telekom after the Deutsche
Telekom/ VoiceStream merger and approximately 20.4% of the equity of Deutsche
Telekom after both the Deutsche Telekom/VoiceStream and Deutsche
Telekom/Powertel mergers.
In addition, as a result of the Deutsche Telekom/VoiceStream merger,
Deutsche Telekom will assume approximately $5.0 billion of long-term debt based
on the total amount of VoiceStream long-term debt outstanding as of September
30, 2000, and an additional $1.2 billion of long-term debt if the Deutsche
Telekom/Powertel merger is completed based on the total amount of Powertel
long-term debt outstanding as of September 30, 2000. The pro forma ownership of
VoiceStream common stockholders in Deutsche Telekom described above is
illustrative only and will vary as of the time of completion of the Deutsche
Telekom/VoiceStream merger.
WHAT HOLDERS OF POWERTEL COMMON SHARES AND HOLDERS OF POWERTEL PREFERRED SHARES
WILL RECEIVE IN THE DEUTSCHE TELEKOM/POWERTEL MERGER OR THE VOICESTREAM/POWERTEL
MERGER (SEE PAGES 154 AND 176)
DEUTSCHE TELEKOM/POWERTEL MERGER
In the Deutsche Telekom/Powertel merger, holders of Powertel shares would
have the right to receive a number of Deutsche Telekom shares determined as
follows:
NUMBER OF DEUTSCHE TELEKOM
TYPE OF POWERTEL SHARE SHARES FOR EACH POWERTEL SHARE
---------------------- ------------------------------
Common share*............................................. 2.6353
Series A preferred share.................................. 121.9294**
Series B preferred share.................................. 121.9294**
Series D preferred share.................................. 93.0106**
Series E preferred share.................................. 179.5979**
Series F preferred share.................................. 179.5979**
----------------
* Includes dividends payable in common shares on the Series E and Series F
preferred shares.
**Before adjustment.
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The following table illustrates the total value that you would receive for
each Powertel share at various hypothetical prices of Deutsche Telekom ordinary
shares.
PRICE PER
DEUTSCHE
TELEKOM VALUE RECEIVED PER SHARE OF POWERTEL**
ORDINARY SHARE -------------------------------------------------------------------
(IN DOLLARS)* COMMON SERIES A SERIES B SERIES D SERIES E SERIES F
-------------- ------- --------- --------- --------- --------- ---------
$25 $ 65.88 $3,048.24 $3,048.24 $2,325.27 $4,489.95 $4,489.95
30 79.06 3,657.88 3,657.88 2,790.32 5,387.94 5,387.94
35 92.24 4,267.53 4,267.53 3,255.71 6,285.93 6,285.93
40 105.41 4,877.18 4,877.18 3,720.42 7,183.92 7,183.92
45 118.59 5,486.82 5,486.82 4,185.48 8,081.91 8,081.91
50 131.77 6,096.47 6,096.47 4,650.53 8,979.90 8,979.90
55 144.94 6,706.12 6,706.12 5,115.58 9,877.88 9,877.88
---------------
* Based on an exchange rate of one euro to 0.9331 of a U.S. dollar on February
7, 2001.
**Before adjustment.
The last sale price of Deutsche Telekom ordinary shares on the Frankfurt
Stock Exchange on February 7, 2001 was 33.02 euros. You are urged to obtain a
current market quotation for the Deutsche Telekom ADSs and Deutsche Telekom
ordinary shares.
We expect that the Deutsche Telekom/Powertel merger will be completed on or
shortly after May 31, 2001, subject to the receipt of all necessary regulatory
approvals. Before the completion of the Deutsche Telekom/Powertel merger,
Powertel expects to declare a stock dividend of 0.0075 of a Powertel common
share for each Powertel common share outstanding. The exchange ratios of the
Powertel preferred shares will adjust upward to reflect the payment of this
dividend. The stock dividend and the upward adjustments to the exchange ratios
of the Powertel preferred stock will have the effect of increasing by 0.75% the
number of shares owned by Powertel stockholders, and, accordingly, the aggregate
amount of Deutsche Telekom shares to be received by Powertel stockholders in the
Deutsche Telekom/Powertel merger.
The number of Deutsche Telekom shares that Powertel stockholders will
receive in the Deutsche Telekom/Powertel merger is subject to adjustments in
circumstances explained in greater detail beginning on page 155.
We estimate that, in the Deutsche Telekom/Powertel merger, Deutsche Telekom
will issue approximately 136 million Deutsche Telekom shares to Powertel
stockholders. Those shares will represent approximately 3% of the equity of
Deutsche Telekom after the Deutsche Telekom/Powertel merger and the Deutsche
Telekom/VoiceStream merger, based on the estimated number of Deutsche Telekom
shares to be issued to the VoiceStream and Powertel stockholders.
The number of Deutsche Telekom shares that Powertel stockholders will
receive in the Deutsche Telekom/Powertel merger and the pro forma ownership of
the Powertel stockholders in Deutsche Telekom described above are illustrative
only and will vary as of the time of completion of the Deutsche Telekom/
Powertel merger.
FORM OF DEUTSCHE TELEKOM SHARES (SEE PAGES 201 AND 207)
If you are a VoiceStream or Powertel stockholder, you will receive Deutsche
Telekom shares in the form of Deutsche Telekom ADSs, which are traded on the
NYSE under the symbol "DT", or, if you elect, Deutsche Telekom ordinary shares,
which are traded principally on the Frankfurt Stock Exchange under the symbol
"DTE".
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VOICESTREAM/POWERTEL MERGER
If the VoiceStream/Powertel merger occurs, holders of Powertel common
shares will receive VoiceStream common shares at a conversion number, subject to
adjustments as explained below, ranging from 0.65 to 0.75 per Powertel common
share, depending on the closing price of VoiceStream common shares on 10 trading
days randomly selected from the 20 trading-day period ending five trading days
before the completion of the VoiceStream/Powertel merger. The conversion number
will be 0.65 if the average closing price of VoiceStream common shares is
$130.77 or above and 0.75 if the average closing price of VoiceStream common
shares is $113.33 or below. If the average closing price of VoiceStream common
shares is greater than $113.33 and less than $130.77, the conversion number will
be the quotient determined by dividing $85.00 by the average closing price of
VoiceStream common shares. Holders of Powertel preferred shares will receive
VoiceStream common shares using the same conversion number, treating each
preferred share on an as-converted-to common shares basis. Each Powertel share
will receive VoiceStream common shares as follows, subject to adjustments as
explained below:
AVERAGE PRICE OF VOICESTREAM COMMON SHARE BETWEEN $113.33 AND $130.77
VALUE IN VOICESTREAM
TYPE OF POWERTEL SHARE COMMON SHARES
---------------------- --------------------
Common*.................................................. $85.00
Series A preferred....................................... $3,932.76
Series B preferred....................................... $3,932.76
Series D preferred....................................... $3,000.00
Series E preferred....................................... $5,792.82
Series F preferred....................................... $5,792.82
---------------
* Includes dividends payable in common shares on the Series E and Series F
preferred shares.
AVERAGE PRICE OF VOICESTREAM COMMON SHARE $130.77 AND ABOVE
NUMBER OF VOICESTREAM
TYPE OF POWERTEL SHARE COMMON SHARES
---------------------- ---------------------
Common*................................................ 0.65
Series A preferred..................................... 30.07
Series B preferred..................................... 30.07
Series D preferred..................................... 22.94
Series E preferred..................................... 44.30
Series F preferred..................................... 44.30
---------------
* Includes dividends payable in common shares on the Series E and Series F
preferred shares.
AVERAGE PRICE OF VOICESTREAM COMMON SHARE $113.33 AND BELOW
NUMBER OF VOICESTREAM
TYPE OF POWERTEL SHARE COMMON SHARES
---------------------- ---------------------
Common*................................................ 0.75
Series A preferred..................................... 34.70
Series B preferred..................................... 34.70
Series D preferred..................................... 26.47
Series E preferred..................................... 51.11
Series F preferred..................................... 51.11
---------------
* Includes dividends payable in common shares on the Series E and Series F
preferred shares.
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The following table illustrates the total value that you would receive for
each Powertel share at various hypothetical prices of VoiceStream common shares,
subject to adjustments as explained below.
PRICE PER VALUE RECEIVED PER SHARE OF POWERTEL
VOICESTREAM -------------------------------------------------------------------
COMMON SHARE COMMON SERIES A SERIES B SERIES D SERIES E SERIES F
------------ ------- --------- --------- --------- --------- ---------
$100 $75.00 $3,470.00 $3,470.00 $2,647.00 $5,111.00 $5,111.00
110 82.50 3,817.00 3,817.00 2,911.70 5,622.10 5,622.10
120 85.00 3,932.76 3,932.76 3,000.00 5,792.82 5,792.82
130 85.00 3,932.76 3,932.76 3,000.00 5,792.82 5,792.82
140 91.00 4,209.80 4,209.80 3,211.60 6,202.00 6,202.00
150 97.50 4,510.50 4,510.50 3,441.00 6,645.00 6,645.00
In the event VoiceStream pays a stock dividend on the VoiceStream common
shares and/or Powertel pays a stock dividend on the Powertel common shares prior
to the completion of the VoiceStream/ Powertel merger, the payment of either of
these stock dividends will not affect the aggregate merger consideration to be
received by the Powertel stockholders in the VoiceStream/Powertel merger.
In addition, the consideration to be received by the Powertel stockholders
in the VoiceStream/ Powertel merger is subject to a downward pro rata adjustment
if the aggregate number of Powertel common shares outstanding as of the
completion of the VoiceStream/Powertel merger on a fully diluted basis, an
amount we call the "adjusted fully diluted shares amount", exceeds 55,742,000,
exclusive of certain permitted dividends. In the event of such an adjustment,
Powertel stockholders will receive fewer VoiceStream common shares for each
Powertel share they own. The adjustment procedures are described in greater
detail under "Summary of Deutsche Telekom/Powertel and VoiceStream/Powertel
Transaction Documents -- The VoiceStream/Powertel Merger
Agreement -- Consideration To Be Received in the VoiceStream/Powertel Merger."
The last sale price of VoiceStream common shares on February 7, 2001 was
$118.81. You are urged to obtain a current market quotation for the VoiceStream
common shares.
We estimate that in the VoiceStream/Powertel merger VoiceStream will issue
approximately 38.4 million VoiceStream common shares to Powertel stockholders,
subject to adjustment. Those VoiceStream common shares will represent
approximately 11.5% of the equity of VoiceStream after the VoiceStream/Powertel
merger. In addition, as a result of the VoiceStream/Powertel merger, VoiceStream
will assume approximately $1.2 billion of long-term debt based on the total
amount of Powertel long-term debt outstanding as of September 30, 2000.
The number of VoiceStream common shares that Powertel stockholders will
receive in the VoiceStream/Powertel merger and the pro forma ownership of
Powertel stockholders in VoiceStream described above are illustrative only and
will vary as of the time of completion of the VoiceStream/ Powertel merger.
APPRAISAL RIGHTS
DEUTSCHE TELEKOM/VOICESTREAM MERGER (SEE PAGE 67)
Delaware law entitles the record holders of VoiceStream common shares and
VoiceStream voting preferred shares who follow the procedures specified in
Section 262 of the Delaware General Corporation Law to have their VoiceStream
shares appraised by the Delaware Court of Chancery and to receive, in place of
the merger consideration, the "fair value" of their VoiceStream shares as of the
completion of the Deutsche Telekom/VoiceStream merger, as may be determined by
the court. In order to exercise these rights, a VoiceStream stockholder must
demand and perfect its rights in accordance with Section 262. A copy of Section
262 is attached to this document as Annex G.
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25
DEUTSCHE TELEKOM/POWERTEL MERGER AND VOICESTREAM/POWERTEL MERGER (SEE PAGE 98)
Delaware law does not entitle the record holders of Powertel common shares
to have their shares appraised in either merger.
Holders of Powertel preferred shares would have appraisal rights under
Delaware law with respect to the Deutsche Telekom/Powertel and
VoiceStream/Powertel mergers, except that all holders of Powertel preferred
shares have agreed to waive their appraisal rights and to vote their shares in
favor of each of these mergers.
U.S. FEDERAL TAX CONSEQUENCES
DEUTSCHE TELEKOM/VOICESTREAM MERGER (SEE PAGE 111)
If the Deutsche Telekom/VoiceStream merger is completed as contemplated,
for U.S. federal income tax purposes, if you are a U.S. holder of VoiceStream
common shares and:
- you receive only Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares, you will generally recognize neither gain nor loss;
- you receive both cash and either Deutsche Telekom ADSs or Deutsche
Telekom ordinary shares, you will generally not recognize any loss and you
will generally recognize gain in an amount not exceeding the amount of
cash received;
- you receive only cash, you will generally recognize gain or loss.
VoiceStream has received opinions from Jones, Day, Reavis & Pogue and Wachtell,
Lipton, Rosen & Katz, dated as of the effective date of this proxy
statement/prospectus, as to the material U.S. federal income tax consequences of
the Deutsche Telekom/VoiceStream merger, as described under "U.S. Federal and
German Tax Consequences -- U.S. Federal Income Tax Consequences of the Deutsche
Telekom/VoiceStream Merger to U.S. Holders of VoiceStream Common Shares."
DEUTSCHE TELEKOM/POWERTEL MERGER (SEE PAGE 114)
If the Deutsche Telekom/Powertel merger is completed as contemplated, for
U.S. federal income tax purposes, if you are a U.S. holder of Powertel common
shares:
- you will generally not recognize any gain or loss on the receipt of
Deutsche Telekom ADSs or Deutsche Telekom ordinary shares.
Powertel has received an opinion from Morris, Manning & Martin, LLP, and
Deutsche Telekom has received an opinion from Cleary, Gottlieb, Steen &
Hamilton, each dated as of the effective date of this proxy
statement/prospectus, as to the material U.S. federal income tax consequences of
the Deutsche Telekom/Powertel merger, as described under "U.S. Federal and
German Tax Consequences -- U.S. Federal Income Tax Consequences of the Deutsche
Telekom/Powertel Merger to U.S. Holders of Powertel Common Shares" and "U.S.
Federal and German Tax Consequences -- U.S. Federal Income Tax Consequences of
the Deutsche Telekom/Powertel Merger to U.S. Holders of Powertel Preferred
Shares."
VOICESTREAM/POWERTEL MERGER (SEE PAGE 118)
If the VoiceStream/Powertel merger is completed as contemplated, for U.S.
federal income tax purposes, if you are a U.S. holder of Powertel common shares:
- you will generally not recognize any gain or loss on the receipt of
VoiceStream common shares.
Powertel has received an opinion from Morris, Manning & Martin, LLP, and
VoiceStream has received opinions from Jones, Day, Reavis & Pogue and Preston
Gates & Ellis LLP, each dated as of the effective date of this proxy
statement/prospectus, as to the material U.S. federal income tax consequences of
the VoiceStream/Powertel merger, as described under "U.S. Federal and German Tax
Consequences -- U.S. Federal Income Tax Consequences of the VoiceStream/Powertel
Merger to U.S. Holders of Powertel
10
26
Common Shares" and "U.S. Federal and German Tax Consequences -- U.S. Federal
Income Tax Consequences of the VoiceStream/Powertel Merger to U.S. Holders of
Powertel Preferred Shares."
Tax matters are complex and holders of VoiceStream and Powertel shares are
urged to consult their tax advisors as to the tax consequences to them of the
mergers.
RECOMMENDATION OF THE VOICESTREAM BOARD OF DIRECTORS (SEE PAGE 52)
The VoiceStream board of directors determined that each of the Deutsche
Telekom/VoiceStream merger and the VoiceStream/Powertel merger is advisable,
fair to and in the best interests of VoiceStream and its stockholders, and has
approved each of the merger agreements. The VoiceStream board of directors
recommends that VoiceStream stockholders vote "FOR" approval and adoption of the
Deutsche Telekom/VoiceStream merger agreement and "FOR" approval and adoption of
the VoiceStream/Powertel merger agreement at the VoiceStream special meeting.
RECOMMENDATION OF THE POWERTEL BOARD OF DIRECTORS (SEE PAGE 76)
The Powertel board of directors determined that each of the Deutsche
Telekom/Powertel merger and the VoiceStream/Powertel merger is advisable and in
the best interests of Powertel and its stockholders, and has approved each of
the merger agreements. The Powertel board of directors recommends that Powertel
stockholders vote "FOR" approval and adoption of the Deutsche Telekom/Powertel
merger agreement and "FOR" approval and adoption of the VoiceStream/Powertel
merger agreement at the Powertel special meeting.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGES 57, 80 AND 87)
In connection with each of the Deutsche Telekom/VoiceStream, Deutsche
Telekom/Powertel and VoiceStream/Powertel mergers, financial advisors of
VoiceStream or Powertel, as the case may be, each delivered an opinion to the
effect that, as of the date of that opinion, the consideration to be received by
stockholders of VoiceStream or Powertel, respectively, in the applicable merger
was fair from a financial point of view to those stockholders.
In addition, in connection with the VoiceStream/Powertel merger,
VoiceStream's financial advisor delivered an opinion that, as of the date of
that opinion, the conversion number under the VoiceStream/Powertel merger
agreement was fair from a financial point of view to VoiceStream.
These opinions are attached as Annexes D, E and F to this document, and you
are urged to read them carefully.
STOCKHOLDER AGREEMENTS (SEE PAGES 146, 173, 191 AND 193)
VoiceStream and Powertel stockholders who had, in the aggregate and as of
the respective record dates, sufficient voting power to approve the Deutsche
Telekom/VoiceStream merger or the Deutsche Telekom/Powertel merger, as the case
may be, and the VoiceStream/Powertel merger, have entered into separate
stockholder agreements with the acquiring company in the applicable merger and
have agreed to vote all of their shares in favor of that merger. Accordingly,
stockholder approval of the three mergers is assured.
VOICESTREAM AND POWERTEL OPERATING LOSSES (SEE PAGE 31)
VoiceStream and Powertel have incurred substantial operating losses and
generated negative cash flow. VoiceStream and Powertel expect to incur
significant operating losses and to generate negative cash flow from operating
activities during the next several years while they continue to develop and
construct their systems and grow their subscriber bases. VoiceStream and
Powertel may not be able to achieve or sustain profitability or positive cash
flow from operating activities or generate sufficient cash flow to service
current or future debt requirements.
11
27
COMPARATIVE MARKET PRICE DATA
DEUTSCHE TELEKOM/VOICESTREAM MERGER
We present below the per share closing prices for Deutsche Telekom ordinary
shares as quoted on the Frankfurt Stock Exchange and VoiceStream common shares
as reported on Nasdaq. These prices are presented on the following dates:
- July 21, 2000, the last trading day before the public announcement of the
signing of the Deutsche Telekom/VoiceStream merger agreement; and
- February 7, 2001, the latest practicable date before the printing of this
document.
The table also presents implied equivalent per share values for VoiceStream
common shares by:
- multiplying the price per Deutsche Telekom ordinary share, converted into
U.S. dollars, on each of the two dates by the stock election of 3.7647,
assuming no proration;
- multiplying the price per Deutsche Telekom ordinary share, converted into
U.S. dollars, on July 21, 2000 by the mixed election exchange ratio of 3.2
and adding $30;
- multiplying the price per Deutsche Telekom ordinary share, converted into
U.S. dollars, on February 7, 2001 by the mixed election exchange ratio of
3.4837 and adding $21.36, which reflects the effect of the tax-related
adjustment described on page 128;
- for July 21, 2000, the value of a cash election of $200; and
- for February 7, 2001, the likely value of a cash election assuming
maximum proration and giving effect to the tax-related adjustment, as
described on page 128.
DEUTSCHE DEUTSCHE
TELEKOM TELEKOM IMPLIED IMPLIED IMPLIED
ORDINARY ORDINARY VOICESTREAM PER SHARE PER SHARE PER SHARE
SHARE PRICE SHARE PRICE COMMON VALUE OF VALUE OF VALUE OF
(IN EUROS) (IN U.S. DOLLARS) SHARE PRICE STOCK ELECTION MIXED ELECTION CASH ELECTION
----------- ----------------- ----------- -------------- -------------- -------------
July 21, 2000........... 55.27 $51.64 $149.75 $194.41 $195.25 $195.25
February 7, 2001........ 33.02 $30.81 $118.81 $115.99 $128.69 $128.69
You are urged to obtain current market quotations for Deutsche Telekom ordinary
shares and VoiceStream common shares before making a decision with respect to
the Deutsche Telekom/VoiceStream merger.
12
28
DEUTSCHE TELEKOM/POWERTEL MERGER
We present below the per share closing prices for Deutsche Telekom ordinary
shares as quoted on the Frankfurt Stock Exchange and Powertel common shares as
reported on Nasdaq. These prices are presented on the following dates:
- August 25, 2000, the last trading day before the public announcement of
the signing of the Deutsche Telekom/Powertel merger agreement; and
- February 7, 2001, the latest practicable date before the printing of this
document.
The table also presents implied equivalent per share values for Powertel
common shares by multiplying the price per Deutsche Telekom ordinary share,
converted into U.S. dollars, on the two dates by the exchange ratio of 2.6353.
DEUTSCHE DEUTSCHE IMPLIED PER SHARE VALUE
TELEKOM TELEKOM POWERTEL OF MERGER CONSIDERATION
ORDINARY ORDINARY COMMON (DEUTSCHE TELEKOM
SHARE PRICE SHARE PRICE SHARE CONVERSION ORDINARY SHARE
(IN EUROS) (IN U.S. DOLLARS) PRICE NUMBER PRICE X 2.6353)
----------- ----------------- -------- ---------- -----------------------
August 25, 2000.................. 44.30 $39.98 $86.63 2.6353 $105.36
February 7, 2001................. 33.02 $30.81 $76.69 2.6353 $ 81.19
You are urged to obtain current market quotations for Deutsche Telekom ordinary
shares and Powertel common shares before making a decision with respect to the
Deutsche Telekom/Powertel merger.
Powertel preferred shares are not publicly traded and, under the Deutsche
Telekom/Powertel merger agreement, holders of Powertel preferred shares will
receive Deutsche Telekom shares at a fixed exchange ratio based on an
as-converted-to common shares basis. This exchange ratio will be adjusted if
Powertel pays a stock dividend prior to completion of the Deutsche
Telekom/Powertel merger.
VOICESTREAM/POWERTEL MERGER
We present below the per share closing prices for VoiceStream common shares
and Powertel common shares, each as reported on Nasdaq. These prices are
presented on the following dates:
- August 25, 2000, the last trading day before the public announcement of
the signing of the VoiceStream/Powertel merger agreement; and
- February 7, 2001, the latest practicable date before the printing of this
document.
In addition, the table below presents implied equivalent per share values
for Powertel common shares on the two dates. Powertel preferred shares are not
publicly traded.
IMPLIED
PER SHARE
VOICESTREAM POWERTEL VALUE OF
COMMON COMMON MERGER
SHARE PRICE SHARE PRICE CONVERSION NUMBER CONSIDERATION
----------- ----------- ----------------- -------------
August 25, 2000........................ $118.19 $86.63 0.7192 $85.00
February 7, 2001....................... $118.81 $76.69 0.7154 $85.00
You are urged to obtain current market quotations for VoiceStream common shares
and Powertel common shares before making a decision with respect to the
VoiceStream/Powertel merger.
13
29
CURRENCIES AND EXCHANGE RATES
References in this document to "dollars", "$" or "cents" are to the
currency of the U.S. and references to "euro" and "EUR" are to the currency of
the European Union.
In this document, unless otherwise stated, euros have been translated,
solely for convenience, into U.S. dollars using the noon buying rate in New York
City for cable transfers in euros as certified for customs purposes by the
Federal Reserve Bank of New York. On February 7, 2001, the latest practicable
date for which exchange rate information was available before the printing of
this document, the noon buying rate for the euro was one euro per 0.9331 of a
U.S. dollar, which, if expressed in Deutsche Marks, would have been equivalent
to a rate of one DM per 0.477 of a U.S. dollar, translated from euros at the
official fixed conversion rate. These translations should not be construed as a
representation that the U.S. dollar amounts actually represent, or could be
converted into, euros at the rates indicated.
For a five-year history of relevant exchange rates, see "Exchange Rates" on
page 195.
ENFORCEABILITY OF CIVIL LIABILITY AND SERVICE OF PROCESS
Deutsche Telekom is incorporated under the laws of the Federal Republic of
Germany, and all of the members of the Deutsche Telekom management board,
executive officers and certain of the experts named or referred to herein are
non-residents of the United States. A substantial majority of the assets of
Deutsche Telekom and its direct and indirect subsidiaries and such non-resident
persons are located outside the United States. As a result, it may not be
possible for investors to effect service of process within the United States
upon such persons or to enforce in U.S. courts judgments against such persons
and judgments of such courts predicated upon the civil liability provisions of
the U.S. federal securities laws. Deutsche Telekom has been advised by Hengeler
Mueller Weitzel Wirtz, its German legal counsel, that there is doubt as to the
enforceability in Germany, in original actions or actions for enforcement of
judgments of U.S. courts, of claims based solely upon U.S. federal securities
laws.
14
30
SELECTED CONSOLIDATED FINANCIAL DATA
We present below selected historical financial data of Deutsche Telekom,
VoiceStream and Powertel for the nine months ended September 30, 2000 and 1999
and for each of the years in the five-year period ended December 31, 1999. We
derived the selected historical financial data as of and for the nine-month
periods ended September 30, 2000 and 1999 from the unaudited interim
consolidated financial statements of Deutsche Telekom, VoiceStream and Powertel
for those periods, including the notes to those financial statements. We derived
the selected historical financial data as of and for each of the years in the
five-year period ended December 31, 1999 from the audited annual consolidated
financial statements of Deutsche Telekom, VoiceStream and Powertel, including
the notes to those financial statements. All the data should be read in
conjunction with the consolidated financial statements and notes thereto, of
Deutsche Telekom, VoiceStream and Powertel incorporated by reference. See
"Additional Information -- Where You Can Find More Information."
VoiceStream and Powertel report their financial information in accordance
with U.S. generally accepted accounting principles, which in this document we
refer to as "U.S. GAAP". Deutsche Telekom reports its financial statements in
accordance with German generally accepted accounting principles, which in this
document we refer to as "German GAAP". German GAAP differs in certain
significant respects from U.S. GAAP. For a discussion of the principal
differences between German GAAP and U.S. GAAP as they relate to Deutsche
Telekom, see Note 36 to Deutsche Telekom's audited annual consolidated financial
statements. Deutsche Telekom historically has applied U.S. GAAP accounting
principles to the extent allowable under German GAAP. It is Deutsche Telekom's
policy to harmonize accounting principles according to German GAAP and U.S. GAAP
through the extensive application of the principles of U.S. GAAP. Deutsche
Telekom may depart from this policy. Any such departures are reflected in
Deutsche Telekom's U.S. GAAP reconciliation footnote.
15
31
SELECTED DEUTSCHE TELEKOM CONSOLIDATED FINANCIAL DATA (in billions, except per
share amounts)
U.S.$ EUROS U.S.$ EUROS
----------------- ------------------ ------------- ----------------------
NINE MONTHS YEAR ENDED DECEMBER 31,
NINE MONTHS ENDED YEAR ----------------------
ENDED SEPTEMBER 30, ENDED
SEPTEMBER 30, ------------------ DECEMBER 31, 1998
2000(a) 2000 1999(j) 1999(a) 1999(b)(j) (c)(b)(d)
----------------- ------- ------- ------------- ---------- ---------
(UNAUDITED) (UNAUDITED)
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Amounts in accordance
with German GAAP
Net revenue(e)......... 25.8 29.2 25.6 31.3 35.5 35.2
Other own capitalized
costs................ 0.6 0.7 0.7 0.8 0.9 1.0
Other operating
income(f)............ 8.9 10.1 1.3 1.7 1.9 2.1
Goods and services
purchased............ (7.4) (8.4) (4.9) (6.8) (7.7) (6.3)
Personnel costs........ (6.2) (7.0) (6.9) (8.1) (9.2) (9.2)
Depreciation and
amortization(g)...... (7.0) (8.0) (6.0) (7.5) (8.5) (9.0)
Other operating
expenses............. (6.1) (6.9) (4.5) (6.0) (6.8) (5.4)
Financial expense,
net.................. 0.1 0.1 (2.1) (2.6) (2.9) (3.3)
----- ----- ----- ----- ----- ----
Results from ordinary
business
activities......... 8.7 9.8 3.2 2.8 3.2 5.1
Extraordinary items.... (0.1) (0.1) (0.2) (0.2) (0.2) --
Taxes(h)............... (1.1) (1.2) (1.5) (1.3) (1.5) (2.7)
----- ----- ----- ----- ----- ----
Income after taxes... 7.5 8.5 1.5 1.3 1.5 2.4
Income applicable to
minority
shareholders......... (0.1) (0.1) (0.2) (0.3) (0.3) (0.2)
----- ----- ----- ----- ----- ----
Net income........... 7.4 8.4 1.3 1.0 1.2 2.2
===== ===== ===== ===== ===== ====
Earnings per
share(b)........... 2.46 2.79 0.44 0.38 0.43 0.82
Amounts in accordance
with U.S. GAAP
Net income............. 8.7 9.8 1.2 1.3 1.5 2.2
Basic and diluted
earnings per
share(b)(d)(i)....... 2.86 3.24 0.44 0.47 0.53 0.81
CASH FLOW DATA:
Amounts in accordance
with German GAAP
Net cash provided by
operating
activities........... 6.2 7.0 7.0 8.5 9.6 13.5
Net cash used for
investing
activities........... (21.7) (24.6) (11.0) (16.5) (18.7) (7.5)
Net cash provided by
(used for) financing
activities........... 17.3 19.6 6.9 7.0 8.0 (6.8)
----- ----- ----- ----- ----- ----
Net increase (decrease)
in cash and cash
equivalents.......... 1.8 2.0 2.9 (1.0) (1.1) (0.8)
===== ===== ===== ===== ===== ====
EUROS
--------------------------
YEAR ENDED DECEMBER 31,
--------------------------
1997
(c)(b) 1996(c) 1995(c)
------ ------- -------
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Amounts in accordance
with German GAAP
Net revenue(e)......... 34.5 32.3 33.8
Other own capitalized
costs................ 1.6 1.7 1.7
Other operating
income(f)............ 1.9 2.0 1.1
Goods and services
purchased............ (6.2) (5.2) (4.9)
Personnel costs........ (9.4) (9.6) (9.4)
Depreciation and
amortization(g)...... (9.5) (9.0) (7.9)
Other operating
expenses............. (5.2) (4.9) (4.9)
Financial expense,
net.................. (4.0) (3.9) (4.2)
---- ----- ----
Results from ordinary
business
activities......... 3.7 3.4 5.3
Extraordinary items.... -- (1.3) (0.7)
Taxes(h)............... (1.9) (1.1) (1.9)
---- ----- ----
Income after taxes... 1.8 1.0 2.7
Income applicable to
minority
shareholders......... (0.1) (0.1) --
---- ----- ----
Net income........... 1.7 0.9 2.7
==== ===== ====
Earnings per
share(b)........... 0.62 0.43 1.33
Amounts in accordance
with U.S. GAAP
Net income............. 1.3 1.3 2.9
Basic and diluted
earnings per
share(b)(d)(i)....... 0.46 0.62 1.40
CASH FLOW DATA:
Amounts in accordance
with German GAAP
Net cash provided by
operating
activities........... 11.6 11.4 12.1
Net cash used for
investing
activities........... (5.4) (13.0) (6.8)
Net cash provided by
(used for) financing
activities........... (7.0) 3.5 (7.8)
---- ----- ----
Net increase (decrease)
in cash and cash
equivalents.......... (0.8) 1.9 (2.5)
==== ===== ====
16
32
SELECTED DEUTSCHE TELEKOM CONSOLIDATED FINANCIAL DATA -- CONTINUED (in billions)
U.S.$ EUROS U.S.$ EUROS
-------------- -------------- ------------ -----------------------------------------------------
AS OF AS OF AS OF AS OF DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, -----------------------------------------------------
2000(a) 2000 1999(a) 1999(b) 1998(c)(b) 1997(c)(b) 1996(c) 1995(c)
-------------- -------------- ------------ ------- ---------- ---------- ------- -------
(UNAUDITED) (UNAUDITED)
BALANCE SHEET DATA:
Amounts in accordance
with German GAAP
Non-current assets... 95.2 107.8 72.3 82.0 66.5 70.0 73.8 71.2
Current assets,
prepaid expenses,
deferred charges... 16.1 18.3 11.1 12.6 12.8 13.2 15.3 10.7
----- ----- ---- ---- ---- ---- ---- ----
Total assets....... 111.3 126.1 83.4 94.6 79.3 83.2 89.1 81.9
===== ===== ==== ==== ==== ==== ==== ====
Shareholders'
equity............. 38.5 43.6 31.5 35.7 25.1 24.6 23.8 12.7
Accruals............. 10.0 11.3 8.2 9.3 8.3 7.7 7.6 6.6
Debt................. 54.8 62.1 37.3 42.3 39.9 44.9 51.1 56.4
Other liabilities and
deferred income.... 8.0 9.1 6.4 7.3 6.0 6.0 6.6 6.2
----- ----- ---- ---- ---- ---- ---- ----
Total shareholders'
equity and
liabilities..... 111.3 126.1 83.4 94.6 79.3 83.2 89.1 81.9
===== ===== ==== ==== ==== ==== ==== ====
Amounts in accordance
with U.S. GAAP
Shareholders'
equity............. 41.9 47.4 33.2 37.6 26.9 26.1 25.9 15.1
===== ===== ==== ==== ==== ==== ==== ====
---------------
(a) For convenience purposes, the selected financial data has been translated
from euros into U.S. dollars at the rate of one euro per 0.8837 of a U.S.
dollar, the exchange rate as of September 30, 2000. Such translations should
not be construed as representations that the euro amounts represent, or have
been or could be converted into, U.S. dollars at that or any other rate.
(b) Includes changes in the composition of the group (in particular the
acquisition of a minority interest in MATAV in 1997 and the acquisition of
DT Mobile Holdings (One 2 One) and max.mobil. in 1999).
(c) Amounts have been restated from Deutsche Marks to euros using the official
fixed conversion rate established on January 1, 1999, which is EUR 1.00 = DM
1.95583.
(d) Since the beginning of the 1999 financial year, revenues have been reported
in line with the changed organizational structure of group business areas of
the Deutsche Telekom Group. The prior year figures have been restated to
reflect the new structure. The difference in the figures compared to those
stated in prior years is mainly attributable to the deduction of the
revenues from the billing of services of other network operators, amounting
to approximately 0.5 billion euros, which were previously shown under other
services expense.
(e) In 1995, the amount includes pro forma value-added tax, which in this
document we refer to as "VAT." Adjusted to exclude VAT, the net revenue
would have been 30.5 billion euros.
(f) In 1996, the amount includes a one-time value-added tax refund amounting to
338 million euros.
(g) Including, for periods after 1995, depreciation of value-added tax
capitalized prior to January 1, 1996.
(h) In 1995, the levy to the Federal Republic of Germany was paid for the last
time, with Deutsche Telekom becoming essentially exempt from this levy.
Since January 1, 1996, Deutsche Telekom has been subject to normal corporate
taxation.
(i) As of and prior to September 30, 2000, Deutsche Telekom did not have any
potentially dilutive securities outstanding. Accordingly, there was no
difference between basic and diluted earnings per share for U.S. GAAP
purposes.
(j)In fiscal 2000, Deutsche Telekom reclassified fiscal 1999 research and
development costs as well as certain other expenses to "Other expenses" from
"Goods and services purchased" to conform with the fiscal 2000 presentations.
The reclassifications did not impact reported net income.
17
33
SELECTED VOICESTREAM CONSOLIDATED FINANCIAL DATA (dollars in thousands)
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------------- -------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------ ----------- ------------ ---------- ----------- ----------- -----------
(UNAUDITED)
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues:
Subscriber revenues........... $ 942,961 $ 245,209 $ 366,802 $ 123,966 $ 52,360 $ 7,794 $ --
Roamer revenues............... 74,174 6,205 9,295 3,506 227 -- --
Equipment revenues............ 177,673 48,554 78,025 40,490 25,143 9,745 --
Other revenues................ 77,989 11,725 21,407 -- -- -- --
------------ ----------- ------------ ---------- ----------- ----------- -----------
Total revenues.......... 1,272,797 311,693 475,529 167,962 77,730 17,539 --
------------ ----------- ------------ ---------- ----------- ----------- -----------
Operating expenses:
Cost of service............... 328,818 74,100 114,007 50,978 43,183 12,470 --
Cost of equipment sales....... 317,174 93,904 136,584 77,071 53,469 20,789 --
General and administrative.... 443,576 83,938 134,812 75,343 51,678 20,209 3,069
Sales and marketing........... 502,006 134,689 211,399 85,447 59,466 31,505 339
Depreciation and
amortization................ 541,197 96,280 140,812 83,767 66,875 14,395 269
Stock based compensation...... 30,729 53,935 60,690 -- -- -- --
------------ ----------- ------------ ---------- ----------- ----------- -----------
Total operating
expenses............... 2,163,500 536,846 798,304 372,606 274,671 99,368 3,677
------------ ----------- ------------ ---------- ----------- ----------- -----------
Operating loss................. (890,703) (225,153) (322,775) (204,644) (196,941) (81,829) (3,677)
Other income (expense):
Interest and financing
expense, net................ (343,679) (58,800) (103,461) (34,118) (57,558) (3,607) (40)
Equity in net loss of
unconsolidated affiliates... (96,380) (25,260) (50,945) (24,120) (9,327) (954) (11)
Interest income and other,
net......................... 55,883 6,176 22,442 8,616 11 40 --
------------ ----------- ------------ ---------- ----------- ----------- -----------
Net loss................ $ (1,274,879) $ (303,037) $ (454,739) $ (254,266) $ (263,815) $ (86,350) $ (3,728)
============ =========== ============ ========== =========== =========== ===========
CONSOLIDATED BALANCE SHEET
DATA:
Current assets................. $ 4,731,209 $ 158,695 $ 410,576 $ 59,398 $ 49,945 $ 59,515 $ 1,684
Property and equipment, net.... 2,497,426 770,170 931,792 619,280 420,638 318,473 37,914
Goodwill, licensing costs and
other intangible assets,
net........................... 10,976,381 321,412 450,261 312,040 315,653 227,997 145,728
Other assets................... 1,224,637 218,978 429,284 60,938 36,055 8,142 8,484
------------ ----------- ------------ ---------- ----------- ----------- -----------
Total assets............ $ 19,429,653 $ 1,469,255 $ 2,221,913 $1,051,656 $ 822,291 $ 614,127 $ 193,810
============ =========== ============ ========== =========== =========== ===========
Current liabilities............ $ 872,515 $ 185,043 $ 203,085 $ 125,026 $ 126,184 $ 155,769 $ 25,444
Long-term debt................. 5,031,699 1,165,000 2,011,451 540,000 300,000 143,000 13,000
Other long-term liabilities.... -- -- -- -- -- 173,705 7,613
Redeemable preferred shares and
minority interest............. 5,708,409 -- -- -- -- -- --
Shareholders' equity........... 7,817,030 119,212 7,377 386,630 396,107 141,653 147,753
------------ ----------- ------------ ---------- ----------- ----------- -----------
Total liabilities and
shareholders' equity... $ 19,429,653 $ 1,469,255 $ 2,221,913 $1,051,656 $ 822,291 $ 614,127 $ 193,810
============ =========== ============ ========== =========== =========== ===========
OTHER DATA:
Licensed population............ 121,704,000 62,593,000 64,825,000 62,593,000 62,808,000 19,488,000 14,853,000
Covered population(a).......... 95,175,000 19,754,000 23,411,000 16,121,000 12,529,000 6,133,000 --
Subscribers/Users:
Subscribers................... 3,067,900 685,100 845,700 322,400 128,600 35,500 --
Prepaid users................. 748,200 9,400 9,700 10,400 -- -- --
Adjusted EBITDA(b)............. $ (318,777) $ (74,938) $ (121,273) $ (120,877) $ (130,066) $ (67,434) $ (3,408)
CASH FLOWS PROVIDED BY
(USED IN):
Operating activities........... $ (554,750) $ (116,753) $ (241,827) $ (112,931) $ (198,129) $ (81,272) $ (4,115)
Investing activities........... (1,800,487) (431,447) (947,657) (253,633) (370,202) (342,587) (145,632)
Financing activities........... 6,227,322 589,009 1,416,860 374,284 563,254 429,250 149,770
---------------
(a) Represents population that is covered by VoiceStream's network, excluding
unconsolidated affiliates.
(b) Adjusted EBITDA represents operating loss before depreciation and
amortization and non-cash stock-based compensation. VoiceStream's management
believes Adjusted EBITDA provides meaningful additional information on
VoiceStream's operating results and on its ability to service its long-term
debt and other fixed obligations and to fund its continuing growth. Adjusted
EBITDA is considered by many financial analysts to be a meaningful indicator
of an entity's ability to meet its future financial obligations, and growth
in Adjusted EBITDA is considered to be an indicator of future profitability,
especially in a capital-intensive industry such as wireless telecommuni-
cations. Adjusted EBITDA should not be construed as an alternative to
operating income (loss) as determined in accordance with U.S. GAAP, as an
alternative to cash flows from operating activities, as determined in
accordance with U.S. GAAP, or as a measure of liquidity. Because Adjusted
EBITDA is not calculated in the same manner by all companies, VoiceStream's
presentation may not be comparable to other similarly titled measures of
other companies.
18
34
SELECTED POWERTEL CONSOLIDATED FINANCIAL DATA (dollars in thousands, except per
share)
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- ----------- --------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Service revenues................ $ 312,617 $ 177,921 $ 254,051 $ 152,275 $ 62,745 $ 31,875 $ 25,384
Equipment revenues.............. 17,941 20,377 29,360 23,161 16,171 7,250 3,928
----------- ----------- ----------- ----------- ----------- ----------- --------
Total revenues.......... 330,558 198,298 283,411 175,436 78,916 39,125 29,312
----------- ----------- ----------- ----------- ----------- ----------- --------
Cost of service................. 71,272 42,642 59,183 42,777 28,277 5,811 2,394
Cost of equipment sales......... 77,046 48,650 73,526 79,144 45,318 11,653 3,127
Operations expenses............. 49,131 46,619 64,269 56,522 23,989 9,927 3,596
Sales and marketing............. 86,098 65,414 99,012 63,936 41,409 13,301 4,280
General and administrative...... 33,817 30,429 44,184 37,639 25,742 16,963 4,218
Depreciation and amortization... 74,981 65,763 89,180 67,654 49,282 10,101 5,101
----------- ----------- ----------- ----------- ----------- ----------- --------
Operating expenses...... 392,345 299,517 429,354 347,672 214,017 67,756 22,716
----------- ----------- ----------- ----------- ----------- ----------- --------
Operating (loss) income......... (61,787) (101,219) (145,943) (172,236) (135,101) (28,631) 6,596
Other income (expense):
Interest and financing expense,
net........................... (102,955) (94,296) (127,054) (113,170) (63,604) (16,607) (1,657)
Gain on sale of assets(a)....... -- 127,161 129,172 -- 41,912 -- --
Interest income and other,
net........................... 17,292 13,616 19,159 19,576 21,625 18,556 295
----------- ----------- ----------- ----------- ----------- ----------- --------
(Loss) income before income
taxes and cumulative
effect...................... (147,450) (54,738) (124,666) (265,830) (135,168) (26,682) 5,234
Income tax (benefit)
provision..................... -- -- -- -- -- (1,654) 2,230
----------- ----------- ----------- ----------- ----------- ----------- --------
Net (loss) income before
cumulative effect........... (147,450) (54,738) (124,666) (265,830) (135,168) (25,028) 3,004
Dividends on cumulative
convertible, redeemable
preferred stock............... (7,312) (7,312) (9,750) (5,010) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- --------
Net (loss) income before
cumulative effect........... (154,762) (62,050) (134,416) (270,840) (135,168) (25,028) 3,004
Cumulative effect of change in
accounting principle, net of
tax(b)........................ -- -- -- -- -- (2,583) --
----------- ----------- ----------- ----------- ----------- ----------- --------
Net (loss) income............. $ (154,762) $ (62,050) $ (134,416) $ (270,840) $ (135,168) $ (27,611) $ 3,004
=========== =========== =========== =========== =========== =========== ========
EARNINGS (LOSS) PER SHARE:
Net (loss) income before
cumulative effect of change in
accounting principle.......... $ (5.07) $ (2.24) $ (4.75) $ (10.02) $ (5.04) $ (1.00) $ 0.30
Cumulative effect of change in
accounting principle.......... -- -- -- -- -- (0.10) --
----------- ----------- ----------- ----------- ----------- ----------- --------
Basic and diluted (loss) income
per common share.............. $ (5.07) $ (2.24) $ (4.75) $ (10.02) $ (5.04) $ (1.10) $ 0.30
=========== =========== =========== =========== =========== =========== ========
OTHER FINANCIAL AND OPERATING
DATA:
Licensed population............. 24,426,000 24,426,000 24,426,000 24,722,000 24,722,000 18,198,000 733,000
Covered population.............. 17,100,000 15,687,600 16,916,000 15,688,000 12,313,000 5,816,000 674,000
Subscribers/Users:
Subscribers................... 393,000 319,000 341,000 282,000 145,000 63,000 39,000
Prepaid users................. 410,000 119,000 205,000 42,000 -- -- --
Adjusted EBITDA(c).............. $ 13,194 $ (35,456) $ (56,763) $ (104,582) $ (85,819) $ (18,530) $ 11,697
CASH FLOWS PROVIDED BY
(USED IN):
Operating activities............ $ (36,567) $ (73,919) $ (98,977) $ (165,818) $ (57,030) $ (15,255) $ 5,640
Investing activities............ (110,351) 263,786 255,343 (184,072) (248,710) (489,084) (22,795)
Financing activities............ 9,711 8,880 10,243 227,723 447,169 669,234 17,278
19
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SELECTED POWERTEL CONSOLIDATED FINANCIAL DATA -- CONTINUED (dollars in
thousands)
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- -------- --------
(UNAUDITED)
BALANCE SHEET DATA:
Current assets................... $ 321,255 $ 503,762 $ 454,378 $ 296,819 $ 405,484 $289,859 $ 6,548
Property and equipment, net...... 579,060 560,162 561,110 642,404 491,750 251,269 18,066
Goodwill and licenses, net....... 392,392 403,134 400,587 407,998 416,252 388,634 23,283
Other assets..................... 49,172 17,171 23,720 33,357 65,106 17,355 26,433
Total assets..................... 1,341,879 1,484,229 1,439,795 1,380,578 1,378,592 947,117 74,330
Current liabilities.............. 107,192 85,438 103,588 69,958 91,762 33,510 5,571
Long-term debt................... 1,203,053 1,165,385 1,170,491 1,107,994 968,319 503,324 29,003
Other long-term liabilities...... 76,707 82,715 83,354 76 695 741 408
Total stockholders' (deficit)
equity......................... (197,292) (1,528) (69,857) 50,331 317,816 407,007 36,674
Total liabilities and
stockholders' equity........... 1,341,879 1,484,229 1,439,795 1,380,578 1,378,592 947,117 74,330
---------------
(a) During the year ended December 31, 1999, Powertel sold substantially all of
its remaining cellular telephone assets for $89.3 million and 650 of its
wireless towers for $274.6 million, resulting in an aggregate gain of $129.2
million. During the year ended December 31, 1997, Powertel sold
substantially all of its cellular telephone assets in the state of Maine for
$77.2 million, resulting in a gain of $41.9 million.
(b) During 1996, Powertel changed its method of accounting for costs incurred in
connection with certain promotional programs in which customers receive
discounted cellular equipment or airtime usage credits. Under Powertel's
previous accounting method, all such costs were deferred and amortized over
the life of the related non-cancelable cellular telephone service agreement.
Under the new accounting method, the costs are expensed as incurred.
(c) Adjusted EBITDA represents operating income (loss) before depreciation and
amortization and non-cash stock-based compensation. Powertel's management
believes Adjusted EBITDA provides meaningful additional information on
Powertel's operating results and on its ability to service its long-term
debt and other fixed obligations and to fund its continuing growth. Adjusted
EBITDA is considered by many financial analysts to be a meaningful indicator
of an entity's ability to meet its future financial obligations, and growth
in Adjusted EBITDA is considered to be an indicator of future profitability,
especially in a capital-intensive industry such as wireless telecommuni-
cations. Adjusted EBITDA should not be construed as an alternative to
operating income (loss) as determined in accordance with U.S. GAAP, as an
alternative to cash flows from operating activities, as determined in
accordance with U.S. GAAP, or as a measure of liquidity. Because Adjusted
EBITDA is not calculated in the same manner by all companies, Powertel's
presentation may not be comparable to other similarly titled measures of
other companies.
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UNAUDITED SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
In the table below, we provide you with the unaudited pro forma condensed
combined financial information for the Deutsche Telekom/VoiceStream merger only
and the Deutsche Telekom/VoiceStream/Powertel mergers, each of which is
presented under German GAAP and reconciled to U.S. GAAP. Additionally, we have
provided you with unaudited pro forma condensed consolidated financial statement
information for the VoiceStream/Powertel merger prepared in accordance with U.S.
GAAP. The unaudited pro forma condensed consolidated statements of operations
information has been prepared as if the mergers were effected on January 1,
1999. The unaudited pro forma condensed combined balance sheets give effect to
the mergers as if they had occurred on September 30, 2000. The data set forth
below gives effect to each merger using the purchase method of accounting.
We prepared this information based upon currently available data. You
should read these unaudited pro forma condensed combined financial statements in
conjunction with the separate historical financial statements and accompanying
notes of the companies incorporated by reference in this document.
We have provided these pro forma condensed combined statements for
informational purposes only in response to the requirements of the SEC. We do
not claim that they represent what the actual financial position or results of
operations would have been if the transactions had occurred at such dates or
that they project the financial position or results of operations for any future
date or period.
For further discussion of the pro forma adjustments and more detailed pro
forma financial statements, see "Deutsche Telekom Unaudited Pro Forma Condensed
Combined Financial Statements" beginning on page 264 and "VoiceStream Unaudited
Pro Forma Condensed Combined Financial Statements" beginning on page 294.
DEUTSCHE TELEKOM/VOICESTREAM/POWERTEL MERGERS (euros in millions, except per
share data):
NINE MONTHS ENDED
SEPTEMBER 30, 2000 YEAR ENDED DECEMBER 31, 1999
------------------------------------ ------------------------------------
DEUTSCHE TELEKOM, DEUTSCHE TELEKOM,
STATEMENTS OF OPERATIONS DEUTSCHE TELEKOM VOICESTREAM AND DEUTSCHE TELEKOM VOICESTREAM AND
(UNAUDITED) AND VOICESTREAM POWERTEL AND VOICESTREAM POWERTEL
------------------------ ---------------- ----------------- ---------------- -----------------
Total operating performance......... 31,582 31,936 37,424 37,691
Net (loss) income................... 5,006 4,607 (2,756) (3,109)
U.S. GAAP reconciling items......... 905 887 (314) (408)
Net income (loss) under U.S. GAAP... 5,911 5,494 (3,071) (3,517)
Earnings (loss) per share:
German GAAP.................... 1.32 1.17 (0.75) (0.82)
U.S. GAAP:
Basic........................ 1.56 1.40 (0.84) (0.93)
Diluted...................... 1.47 1.32 (0.84) (0.93)
Cash dividends per ordinary share... -- -- 0.49 0.47
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AS OF SEPTEMBER 30, 2000
------------------------------------------------
DEUTSCHE TELEKOM AND DEUTSCHE TELEKOM,
CONDENSED COMBINED BALANCE SHEET (UNAUDITED) VOICESTREAM VOICESTREAM AND POWERTEL
-------------------------------------------- -------------------- ------------------------
Non-current assets........................................ 150,590 157,314
Current assets............................................ 22,749 23,094
Other assets.............................................. 1,291 1,309
------- -------
Total assets............................................ 174,630 181,717
======= =======
Shareholders' equity...................................... 76,847 82,434
Accruals.................................................. 11,791 11,843
Liabilities............................................... 85,287 86,726
Deferred income........................................... 705 714
------- -------
Total liabilities and shareholders' equity.............. 174,630 181,717
======= =======
U.S. GAAP reconciling items............................... 11,414 11,849
------- -------
Shareholders' equity under U.S. GAAP...................... 88,261 94,283
======= =======
VOICESTREAM/POWERTEL MERGER (U.S. dollars in millions, except per share data):
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
STATEMENTS OF OPERATIONS (UNAUDITED) 2000 DECEMBER 31, 1999
------------------------------------ ----------------- -----------------
Revenues.................................................... $ 1,788 $ 1,324
Net loss.................................................... (1,907) (2,033)
Basic and diluted loss per share............................ $ (7.51) $ (8.14)
Cash dividends per common share............................. -- --
CONDENSED COMBINED BALANCE SHEET (UNAUDITED) AS OF SEPTEMBER 30, 2000
-------------------------------------------- ------------------------
Current assets.............................................. $ 5,039
Property and equipment, net................................. 3,076
Goodwill, licensing costs and other intangible assets,
net....................................................... 15,751
Other assets................................................ 1,274
-------
Total assets.............................................. $25,140
=======
Current liabilities......................................... $ 980
Long-term debt.............................................. 6,235
Redeemable preferred stock and minority interest............ 5,708
Shareholders' equity........................................ 12,217
-------
Total liabilities and shareholders' equity................ $25,140
=======
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COMPARATIVE PER SHARE DATA
Set forth below are earnings (loss) per share and book value per share
amounts presented separately for Deutsche Telekom, VoiceStream and Powertel on a
historic basis and on a pro forma combined basis per equivalent share as of and
for the nine months ended September 30, 2000 and the year ended December 31,
1999. The pro forma data are not indicative of the results of future operations
or the actual results that would have occurred had the mergers been completed at
the beginning of the periods presented. You should read the data presented in
conjunction with the unaudited pro forma condensed combined financial statements
and notes thereto included elsewhere in this document.
SEPTEMBER 30, 2000 DECEMBER 31, 1999
--------------------------- ---------------------------
HISTORIC PER SHARE DATA: EURO U.S. $ EURO U.S. $
------------------------ ------------ ------------ ------------ ------------
DEUTSCHE TELEKOM HISTORIC PER ORDINARY
SHARE DATA(b):
Net earnings............................. 2.79 2.47 0.43 0.38
Book value (a)........................... 14.41 12.73 11.78 10.41
VOICESTREAM HISTORIC PER COMMON SHARE
DATA(c):
Net loss, basic and diluted.............. (8.16) (7.21) (5.38) (4.75)
Book value (a)........................... 67.24 59.42 0.09 0.08
POWERTEL HISTORIC PER COMMON SHARE DATA(c):
Net loss, basic and diluted.............. (5.74) (5.07) (5.38) (4.75)
Book value (a)........................... (1.62) (1.43) 3.11 2.75
UNAUDITED PRO FORMA COMBINED PER EQUIVALENT
SHARE DATA:
-------------------------------------------
DEUTSCHE TELEKOM/VOICESTREAM/POWERTEL(b):
German GAAP
Net earnings (loss)................... 1.17 1.04 (0.82) (0.72)
Book value (a)........................ 20.96 18.52 -- --
U.S. GAAP
Net earnings (loss) - basic........... 1.40 1.24 (0.93) (0.82)
Net earnings (loss) - diluted......... 1.31 1.16 (0.93) (0.82)
Book value (a)........................ 24.06 21.26 -- --
DEUTSCHE TELEKOM/VOICESTREAM(b):
German GAAP
Net earnings (loss)................... 1.32 1.16 (0.75) (0.66)
Book value (a)........................ 20.21 17.86 -- --
U.S. GAAP
Net earnings (loss) - basic........... 1.56 1.38 (0.84) (0.74)
Net earnings (loss) - diluted......... 1.46 1.29 (0.84) (0.74)
Book value (a)........................ 23.30 20.59 -- --
VOICESTREAM/POWERTEL(c):
U.S. GAAP
Net loss - basic and diluted.......... (8.50) (7.51) (9.21) (8.14)
Book value (a)........................ 77.23 68.25 -- --
---------------
(a) The book value calculation represents the shareholders' equity divided by
the number of shares outstanding at the end of the period.
(b)For convenience purposes, the selected financial data has been translated
from euros into U.S. dollars at the rate of one euro per 0.8837 of a U.S.
dollar, the exchange rate as of September 30, 2000. Such
23
39
translations should not be construed as representations that the euro amounts
represent, or have been or could be converted into, U.S. dollars at that or
any other rate.
(c)For convenience purposes, the comparative per share data has been translated
from U.S. dollars into euros at the rate of one dollar per 1.1316 euros, the
exchange rate as of September 30, 2000. Such translations should not be
construed as representations that the dollar amounts represent, or have been
or could be converted into, euros at that or any other rate.
24
40
RISK FACTORS RELATING TO THE DEUTSCHE TELEKOM/VOICESTREAM MERGER AND THE
DEUTSCHE TELEKOM/POWERTEL MERGER
THE VALUE OF DEUTSCHE TELEKOM ADSs AND DEUTSCHE TELEKOM ORDINARY SHARES MAY
DECREASE SIGNIFICANTLY BETWEEN THE TIME YOU VOTE ON THE RELEVANT MERGER AND THE
TIME THE MERGERS ARE COMPLETED. AS A RESULT, AT THE TIME YOU VOTE ON THE
RELEVANT MERGER YOU WILL NOT KNOW THE VALUE YOU WILL RECEIVE FOR YOUR
VOICESTREAM OR POWERTEL SHARES OR WHETHER THE VALUE YOU WILL RECEIVE WILL BE
LESS THAN YOU PAID FOR YOUR VOICESTREAM OR POWERTEL SHARES
The exchange ratios for the portion of the merger consideration to be paid
in Deutsche Telekom shares are fixed, and neither the Deutsche
Telekom/VoiceStream merger agreement nor the Deutsche Telekom/Powertel merger
agreement contains a mechanism to adjust the exchange ratios in the event that
the market price of the Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares declines. As a result, if the market price of Deutsche Telekom ADSs and
Deutsche Telekom ordinary shares at the completion of the Deutsche
Telekom/VoiceStream merger and the Deutsche Telekom/Powertel merger is lower
than their market prices on the respective dates of the VoiceStream special
meeting and the Powertel special meeting, the value of Deutsche Telekom ADSs and
Deutsche Telekom ordinary shares representing the portion of the merger
consideration to be paid in Deutsche Telekom shares will be less than the value
on the date of your respective special meetings and may be less than you paid
for your VoiceStream or Powertel shares.
BECAUSE OF PRORATION OR THE TAX-RELATED ADJUSTMENT, VOICESTREAM STOCKHOLDERS MAY
RECEIVE MORE STOCK AND LESS CASH, OR MORE CASH AND LESS STOCK, THAN THEY ELECT
TO RECEIVE, OR ARE DEEMED TO HAVE ELECTED TO RECEIVE, AND MIGHT NOT BE ABLE TO
EXCHANGE THEIR VOICESTREAM COMMON SHARES IN AN ENTIRELY TAX-FREE TRANSACTION
The consideration to be received by VoiceStream stockholders in the
Deutsche Telekom/VoiceStream merger is subject to proration to preserve the
limitations on the maximum amount of cash and Deutsche Telekom shares to be
issued in the Deutsche Telekom/VoiceStream merger for outstanding VoiceStream
common shares. In addition, all three types of elections are subject to a
tax-related adjustment that would reduce the total amount of cash to be received
in the Deutsche Telekom/VoiceStream merger to the extent necessary to preserve
tax-free treatment of the receipt of Deutsche Telekom shares by VoiceStream
stockholders for U.S. federal income tax purposes. Based on a number of factors,
the tax-related adjustment generally would be triggered if the trading price of
Deutsche Telekom shares immediately prior to the completion of the merger is
less than approximately $47.10, but could also be triggered at a higher trading
price. IF THE MERGER HAD CLOSED ON FEBRUARY 7, 2001 AND NO DISSENTERS' RIGHTS
HAD BEEN EXERCISED, WHICH MAY NOT BE THE CASE, THE TAX-RELATED ADJUSTMENT WOULD
HAVE BEEN NECESSARY AND, AS A RESULT, THE AMOUNT OF CASH TO BE PAID TO EACH
VOICESTREAM STOCKHOLDER RECEIVING CASH IN THE DEUTSCHE TELEKOM/VOICESTREAM
MERGER WOULD HAVE BEEN REDUCED BY APPROXIMATELY 29%, WITH ADDITIONAL DEUTSCHE
TELEKOM SHARES, WHICH WOULD HAVE BEEN OF A SLIGHTLY GREATER VALUE, ISSUED IN
SUBSTITUTION. A MORE DETAILED EXPLANATION OF THIS TAX-RELATED ADJUSTMENT AND HOW
IT WOULD BE CALCULATED IS PROVIDED BEGINNING ON PAGE 128.
Accordingly, holders of VoiceStream common shares may not receive the type
of consideration they elect to receive in the Deutsche Telekom/VoiceStream
merger. If a holder of VoiceStream common shares elects to receive all of the
merger consideration in cash and the cash portion is oversubscribed, then the
holder will receive a portion of the Deutsche Telekom/VoiceStream merger
consideration in Deutsche Telekom shares. Similarly, if a holder elects to
receive all of the merger consideration in Deutsche Telekom shares and the
Deutsche Telekom share portion is oversubscribed, then the holder will receive a
portion of the Deutsche Telekom/VoiceStream merger consideration in cash. As of
the date of this document, the non-prorated $200 value of the cash election is
substantially greater than the current value of the stock and mixed elections.
If this remains true at the election deadline, it is expected that all or nearly
all VoiceStream stockholders will make the cash election. If this occurs,
stockholders making the cash election will receive a mix of cash and Deutsche
Telekom shares, in a proportion very close to or
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41
equal to the mixed election. Further, in all cases, if it is necessary to reduce
the amount of cash to be paid in order to preserve beneficial U.S. tax
treatment, holders, including those holders making a mixed election, may receive
more Deutsche Telekom shares than they elected even after accounting for
proration and such additional Deutsche Telekom shares may have a value that is
less than the amount of the cash that they replace. In addition, because the
receipt of cash in the Deutsche Telekom/VoiceStream merger may be taxable to a
VoiceStream stockholder, VoiceStream stockholders might not be able to exchange
VoiceStream common shares in an entirely tax-free transaction. The proration and
tax-related adjustment procedures are described in greater detail under "Summary
of the Deutsche Telekom/VoiceStream Transaction Documents -- The Deutsche
Telekom/VoiceStream Merger Agreement -- Consideration To Be Received in the
Deutsche Telekom/VoiceStream Merger."
VOICESTREAM'S BOARD HAS THE RIGHT TO TERMINATE THE DEUTSCHE TELEKOM/VOICESTREAM
MERGER AGREEMENT IF THE PRICE OF DEUTSCHE TELEKOM SHARES CLOSE TO THE TIME OF
THE DEUTSCHE TELEKOM/VOICESTREAM MERGER IS BELOW 33 EUROS, BUT IF VOICESTREAM'S
BOARD DOES NOT EXERCISE THIS RIGHT, THEN THE MARKET VALUE OF ANY ADDITIONAL
DEUTSCHE TELEKOM SHARES ISSUED IN THE TAX-RELATED ADJUSTMENT WILL LIKELY BE LESS
THAN THE VALUE OF THE CASH THAT THOSE SHARES REPLACE
VoiceStream has the right to terminate the Deutsche Telekom/VoiceStream
merger agreement if the average price of Deutsche Telekom ordinary shares to be
used in any tax-related adjustment to the cash amount of the merger
consideration in the Deutsche Telekom/VoiceStream merger, as calculated close to
the time that the Deutsche Telekom/VoiceStream merger is completed, is less than
33 euros. The average price of Deutsche Telekom ordinary shares to be used in
any tax-related adjustment, if necessary, will be calculated by taking the
average trading price of those shares on the Frankfurt Stock Exchange on seven
trading days randomly selected from the 15 trading days immediately preceding
the date on which any tax-related adjustment determination is to be made, which
will be very close to the time the Deutsche Telekom/VoiceStream merger is
completed. However, even if the Deutsche Telekom ordinary share price reaches
this level, VoiceStream's board of directors may or may not exercise its right
to terminate the Deutsche Telekom/VoiceStream merger agreement. In this
circumstance, in the event a portion of the cash consideration is replaced with
Deutsche Telekom shares to preserve the beneficial tax treatment, it is likely
that the market value of the additional Deutsche Telekom shares that you will
receive in substitution for the reduced cash amount will be less than the value
of the cash amount that those shares replace. Although the Deutsche
Telekom/Powertel merger agreement will terminate if the Deutsche Telekom/
VoiceStream merger agreement is terminated under the circumstances described in
this paragraph or otherwise, neither Powertel nor the Powertel board of
directors has any right to cause the VoiceStream board of directors to invoke or
waive any of VoiceStream's termination rights at any time.
AS A POWERTEL STOCKHOLDER, THE MERGER CONSIDERATION THAT YOU RECEIVE MAY BE
ADJUSTED DOWNWARD AND YOU MAY RECEIVE FEWER DEUTSCHE TELEKOM SHARES FOR EACH
POWERTEL SHARE YOU OWN
The consideration to be received by the Powertel stockholders in the
Deutsche Telekom/Powertel merger is subject to a downward pro rata adjustment if
the aggregate number of Powertel common shares outstanding as of the completion
of the Deutsche Telekom/Powertel merger on a fully diluted basis, including
Powertel common shares issuable in connection with existing commitments to sell
or issue Powertel common shares and securities convertible into Powertel common
shares, an amount we call the "adjusted fully diluted shares amount", exceeds
55,742,000, subject to adjustment. In the event of such an adjustment, Powertel
stockholders will receive fewer Deutsche Telekom shares for each Powertel share
they own. The adjustment procedures are described in greater detail under
"Summary of Deutsche Telekom/Powertel and VoiceStream/Powertel Transaction
Documents -- The Deutsche Telekom/Powertel Merger Agreement -- Consideration To
Be Received in the Deutsche Telekom/Powertel Merger."
26
42
REGULATORS MAY IMPOSE CONDITIONS THAT REDUCE THE ANTICIPATED BENEFITS FROM THE
MERGERS. AS A RESULT, THE PRICE OF THE DEUTSCHE TELEKOM ADSs AND DEUTSCHE
TELEKOM ORDINARY SHARES MAY BE ADVERSELY AFFECTED
As a condition to our respective obligations to complete the Deutsche
Telekom/VoiceStream merger and the Deutsche Telekom/Powertel merger, we must
obtain the approval of various regulatory authorities, including the Federal
Communications Commission, which in this document we refer to as the FCC, and
the Committee on Foreign Investment in the United States. Any of these entities
could impose conditions or restrictions on their approvals and we might not be
able to obtain these approvals without conditions or restrictions that are
materially adverse to us. Depending on their nature and extent, any conditions,
restrictions or waivers may jeopardize or delay completion of the mergers or may
lessen the anticipated potential benefits of the mergers.
The Deutsche Telekom/VoiceStream merger and the Deutsche Telekom/Powertel
merger may be terminated in the event that the conditions or restrictions
imposed by the regulatory authorities are materially adverse to Deutsche
Telekom.
However, even if these conditions or restrictions are imposed, the Deutsche
Telekom management board or the VoiceStream board may or may not exercise its
right to terminate the Deutsche Telekom/VoiceStream merger agreement and the
Deutsche Telekom management board might not exercise its right to terminate the
Deutsche Telekom/Powertel merger agreement, or might waive conditions to the
completion of the mergers or the Deutsche Telekom management board might take
actions that it is not required to take in connection with receipt of the
necessary regulatory approvals under the Deutsche Telekom/Powertel merger
agreement. If we were to proceed with the Deutsche Telekom/VoiceStream merger or
the Deutsche Telekom/Powertel merger despite the imposition of these conditions
or restrictions, or should we take such actions, they might result in a material
adverse effect on Deutsche Telekom and the price of the Deutsche Telekom ADSs
and Deutsche Telekom ordinary shares.
SALES VOLUME OF THE VOICESTREAM COMMON SHARES AND THE POWERTEL COMMON SHARES
AFTER STOCKHOLDER APPROVAL IS OBTAINED AND BEFORE THE MERGERS ARE COMPLETED, AND
OF DEUTSCHE TELEKOM ADSs AND DEUTSCHE TELEKOM ORDINARY SHARES BEFORE AND AFTER
THE MERGERS ARE COMPLETED, MAY INCREASE SIGNIFICANTLY. AS A RESULT, THE MARKET
PRICE FOR AND THE ABILITY TO SELL IN THE MARKET THE VOICESTREAM COMMON SHARES
AND THE POWERTEL COMMON SHARES BEFORE THE MERGERS ARE COMPLETED AND THE DEUTSCHE
TELEKOM ADSs AND DEUTSCHE TELEKOM ORDINARY SHARES BEFORE AND AFTER THE MERGERS
ARE COMPLETED, MAY BE ADVERSELY AFFECTED
For a number of reasons, including those discussed under "Other Effects of
the Mergers -- Other Effects of the Deutsche Telekom/VoiceStream Merger and the
Deutsche Telekom/Powertel Merger -- Potential Effects on Trading in Deutsche
Telekom ADSs and Deutsche Telekom Ordinary Shares," a substantial number of the
stockholders of VoiceStream and Powertel, including the principal stockholders
of VoiceStream and Powertel, may wish to sell their VoiceStream common shares or
Powertel common shares prior to completion of the mergers, or Deutsche Telekom
ADSs or Deutsche Telekom ordinary shares that they will receive in the mergers,
and Deutsche Telekom's two largest shareholders may sell all or a substantial
amount of Deutsche Telekom ordinary shares that they currently hold. In
addition, the market price of the Deutsche Telekom ordinary shares and the
Deutsche Telekom ADSs may be adversely affected by arbitrage activities
occurring prior to the completion of the mergers. These sales or the prospects
of future such sales could adversely affect the market price for and the ability
to sell in the market the VoiceStream common shares and the Powertel common
shares before the mergers are completed and the Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares before and after the mergers are completed.
27
43
WE MAY FAIL TO INTEGRATE OUR OPERATIONS SUCCESSFULLY. AS A RESULT, WE MAY NOT
ACHIEVE THE ANTICIPATED POTENTIAL BENEFITS OF THE MERGERS, AND THE PRICE OF THE
DEUTSCHE TELEKOM ADSs AND THE DEUTSCHE TELEKOM ORDINARY SHARES MIGHT BE
ADVERSELY AFFECTED
The Deutsche Telekom/VoiceStream merger and the Deutsche Telekom/Powertel
merger will combine three companies that have previously operated independently.
We expect to face significant challenges in consolidating operations,
integrating our organizations and services in a timely and efficient manner,
refinancing or consolidating indebtedness and retaining key VoiceStream and
Powertel executives and other personnel. The integration of Deutsche Telekom,
VoiceStream and Powertel also will require substantial attention from
management, particularly in light of the geographically dispersed operations and
different business cultures and compensation structures at the three companies.
In addition, after the completion of the mergers, we may elect, or be required,
to refinance or renegotiate all or a portion of the VoiceStream and Powertel
long-term debt and, in doing so, Deutsche Telekom may incur additional costs.
The diversion of management attention and any difficulties associated with
integrating the three companies could have a material adverse effect on the
revenues, the level of expenses and the operating and financial results of
Deutsche Telekom and the value of the Deutsche Telekom ADSs and the Deutsche
Telekom ordinary shares.
THE INCREASED DEPRECIATION AND AMORTIZATION EXPENSE ASSOCIATED WITH THE DEUTSCHE
TELEKOM/VOICESTREAM AND DEUTSCHE TELEKOM/POWERTEL MERGERS AND THE INCREASED
CAPITAL EXPENDITURES TO BE INCURRED TO CONTINUE BUILDING OUT THE VOICESTREAM AND
POWERTEL MOBILE NETWORKS IN THE UNITED STATES MAY HAVE A SIGNIFICANT ADVERSE
EFFECT ON DEUTSCHE TELEKOM'S FINANCIAL RESULTS
Deutsche Telekom expects to recognize substantial additional depreciation
and amortization expense as a result of the allocation of the purchase price of
the mergers to tangible and intangible assets. Goodwill resulting from the
mergers is expected to be amortized over 20 years and certain other tangible and
intangible assets are expected to be amortized over useful lives ranging from
three to 20 years. In addition, VoiceStream and Powertel have incurred
substantial operating losses and generated negative cash flow from operating
activities and expect to incur significant operating losses and to generate
negative cash flow during the next several years while they continue to develop
and construct their systems and grow their subscriber base. On a pro forma
basis, the combined statement of operations for Deutsche Telekom, VoiceStream
and Powertel for the year ended December 31, 1999 and for the nine months ended
September 30, 2000 reflects a net loss of euro 3,109.3 million and net income of
euro 4,606.6 million, respectively, in accordance with German GAAP and a net
loss of euro 3,516.9 million and net income of euro 5,493.7 million,
respectively, in accordance with US GAAP, as compared to Deutsche Telekom's net
income for such periods of euro 1,253.0 million and euro 8,445.0 million,
respectively, in accordance with German GAAP and euro 1,513.0 million and euro
9,812.0 million, respectively, in accordance with US GAAP. See "Deutsche Telekom
Unaudited Pro Forma Condensed Combined Financial Statements."
28
44
RISK FACTORS RELATING TO THE VOICESTREAM/POWERTEL MERGER
THE VALUE OF VOICESTREAM COMMON SHARES THAT POWERTEL STOCKHOLDERS RECEIVE MAY
DECREASE SIGNIFICANTLY BETWEEN THE TIME THEY VOTE ON THE VOICESTREAM/POWERTEL
MERGER AND THE TIME THE VOICESTREAM/POWERTEL MERGER IS COMPLETED. AS A RESULT,
AT THE TIME POWERTEL STOCKHOLDERS VOTE ON THE VOICESTREAM/POWERTEL MERGER, THEY
WILL NOT KNOW THE VALUE THEY WILL RECEIVE FOR THEIR POWERTEL SHARES OR WHETHER
THE VALUE THEY WILL RECEIVE WILL BE LESS THAN THEY PAID FOR THE POWERTEL SHARES
The number of VoiceStream common shares that you will receive in the
VoiceStream/Powertel merger for each of your Powertel common share equivalents
is calculated, subject to adjustments, at a conversion number of .65 if the
average closing price of VoiceStream common shares is $130.77 per share or
above, or .75 if the average closing price of VoiceStream common shares is
$113.33 per share or below. Between these two points, the conversion number
adjusts to yield approximately $85 in VoiceStream common shares for each
Powertel common share equivalent. The average closing price of VoiceStream
common shares will be calculated by averaging the closing prices on 10 trading
days randomly selected from the 20 trading-day period ending five trading days
before the completion of the VoiceStream/Powertel merger. The stock market
experiences significant price and volume fluctuations that could have a material
adverse effect on the market prices of the VoiceStream common shares. Because
the market price of VoiceStream common shares may fluctuate, the value at the
time of the VoiceStream/Powertel merger of the consideration to be received by
Powertel stockholders will depend on the closing prices of VoiceStream common
shares during the selected 10 trading days and could be less than $85 in market
value for each Powertel common share equivalent. If the market price of
VoiceStream common shares at the completion of the VoiceStream/Powertel merger
is less than the market price on the date of the Powertel special meeting, the
value of VoiceStream common shares that you will receive would be lower than the
value on the date of the Powertel special meeting and may be less than you, as a
Powertel stockholder, paid for your Powertel shares.
THE MERGER CONSIDERATION THAT POWERTEL STOCKHOLDERS MAY RECEIVE MAY BE ADJUSTED
DOWNWARD. AS A RESULT, POWERTEL STOCKHOLDERS MAY RECEIVE FEWER VOICESTREAM
COMMON SHARES FOR EACH POWERTEL SHARE THEY OWN
The consideration to be received by the Powertel stockholders in the
VoiceStream/Powertel merger is subject to a downward pro rata adjustment if the
aggregate number of Powertel common shares outstanding as of the completion of
the VoiceStream/Powertel merger on a fully diluted basis, including Powertel
common shares issuable in connection with existing commitments to sell or issue
Powertel common shares and securities convertible into Powertel common shares,
an amount we call the "adjusted fully diluted shares amount", exceeds
55,742,000. In the event of such an adjustment, Powertel stockholders will
receive fewer VoiceStream common shares for each Powertel share they own. The
adjustment procedures are described in greater detail under "Summary of Deutsche
Telekom/Powertel and VoiceStream/Powertel Transaction Documents -- The
VoiceStream/Powertel Merger Agreement -- Consideration To Be Received in the
VoiceStream/Powertel Merger."
THE FCC AND OTHER REGULATORY AGENCIES MUST APPROVE THE VOICESTREAM/POWERTEL
MERGER AND COULD DELAY OR REFUSE TO APPROVE THE VOICESTREAM/POWERTEL MERGER OR
IMPOSE CONDITIONS THAT COULD ADVERSELY AFFECT VOICESTREAM'S BUSINESS OR
FINANCIAL CONDITION
The Communications Act and FCC rules require the FCC's prior approval of
the transfer of control of Powertel's PCS licenses to VoiceStream. Completion of
the VoiceStream/Powertel merger is conditioned, among other factors, upon grants
of the requisite FCC consents becoming final. A "final" FCC order is one that
has not been stayed and is no longer subject to review by the FCC or the courts
because the statutory period for seeking such review has expired without any
request for review or stay pending. Following the FCC's grant of consent to the
VoiceStream/Powertel merger, there might be actions by the FCC or the courts
that would delay or prevent finality.
The FCC might not grant the application for transfer of control or the FCC
might grant the application with conditions. In addition, there might be a delay
caused by the filing of a challenge to the
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transfer and assignment application. Conditions imposed on any licenses granted
or delays in granting of the licenses could impair the value of the licenses and
reduce the value of VoiceStream common shares, and could lead to VoiceStream's
inability to obtain financing necessary for its growth. If VoiceStream is denied
a license in a market, it will not be able to operate in that market unless it
obtains rights to another, existing license from its current owner or acquires
through an FCC auction a new license for that market.
VOICESTREAM MAY FAIL TO INTEGRATE SUCCESSFULLY VOICESTREAM'S AND POWERTEL'S
OPERATIONS. AS A RESULT, VOICESTREAM MAY NOT ACHIEVE THE ANTICIPATED POTENTIAL
BENEFITS OF THE VOICESTREAM/POWERTEL MERGER AND THE PRICE OF THE VOICESTREAM
COMMON SHARES MIGHT BE ADVERSELY AFFECTED
VoiceStream expects to face significant challenges in consolidating
operations, integrating VoiceStream's and Powertel's organizations and services
in a timely and efficient manner, refinancing or consolidating indebtedness and
retaining key Powertel executives and other personnel. The integration of
VoiceStream and Powertel also will require substantial attention from
management. The diversion of management attention, any requirement that
VoiceStream refinance Powertel debt and any difficulties associated with
integrating the companies could have a material adverse effect on the revenues,
the level of expenses and the operating results of VoiceStream and the value of
the VoiceStream common shares.
VOICESTREAM WILL BE HIGHLY LEVERAGED, WHICH MAY LIMIT VOICESTREAM'S ABILITY TO
BORROW ADDITIONAL FUNDS TO MEET VOICESTREAM'S CAPITAL REQUIREMENTS FOR THE
BUILD-OUT AND DEVELOPMENT OF ITS SYSTEMS AND FOR ITS PARTICIPATION IN UPCOMING
FCC LICENSE AUCTIONS
VoiceStream's level of debt could affect VoiceStream's ability to build out
its systems and develop new systems. VoiceStream may have to incur further debt
if the $265 million credit facility between Powertel and certain lenders, dated
February 6, 1998, becomes due and payable prior to its stated maturity and
cannot be renegotiated on terms similar to existing ones. Without sufficient
funds, VoiceStream may have to delay or abandon some or all of VoiceStream's
plans to participate in upcoming FCC license auctions and/or its planned
build-out, which could materially limit VoiceStream's ability to compete in the
wireless telecommunications industry. VoiceStream's level of debt and the
incurrence of additional debt could have other consequences, such as requiring
VoiceStream to dedicate a greater portion of its cash flow from operations to
paying principal and interest and limiting its flexibility to react
competitively to changes in the wireless telecommunications industry.
VOICESTREAM FACES INTENSE COMPETITION FROM OTHER WIRELESS SERVICE PROVIDERS WHO
MAY HAVE GREATER FINANCIAL RESOURCES AND WHO MAY BE TARGETING MANY OF THE SAME
CUSTOMERS THAT VOICESTREAM TARGETS. THIS COMPETITION COULD ADVERSELY AFFECT
VOICESTREAM'S ABILITY TO GROW ITS SUBSCRIBER BASE AND REVENUES
VoiceStream and Powertel compete with providers of PCS, cellular and other
wireless telecommunications services. Under the current rules of the FCC, up to
six PCS licensees and two cellular licensees, as well as digital specialized
mobile radio licensees, may operate in each geographic area. Proposed or future
rules may increase the number of licenses available. VoiceStream and Powertel
compete against AT&T Wireless Services, Inc., Verizon Wireless Inc., Nextel
Communications, Inc., Cingular Wireless LLC, which is the joint venture between
SBC Communications and BellSouth, Sprint Corporation and US West Wireless LLC,
among others. Many of these competitors have substantially greater financial
resources than VoiceStream or Powertel, and several operate in multiple segments
of the industry. AT&T Wireless, Nextel and Sprint PCS operate substantially
nationwide networks, and Verizon and Cingular, among others, through joint
ventures and affiliation arrangements, operate or plan to operate substantially
nationwide wireless systems throughout the continental United States. With so
many companies targeting many of the same customers, the combined company, after
the completion of the VoiceStream/Powertel merger, might not be able to
successfully attract and retain customers and grow its subscriber base and
revenues.
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VOICESTREAM AND POWERTEL EACH HAS SUBSTANTIAL OPERATING LOSSES AND NEGATIVE CASH
FLOW AND VOICESTREAM MAY NOT BECOME PROFITABLE FOLLOWING THE
VOICESTREAM/POWERTEL MERGER
VoiceStream sustained operating losses of approximately $890.7 million for
the nine months ended September 30, 2000, and $322.8 million in fiscal 1999,
$204.6 million in fiscal 1998 and $196.9 million in fiscal 1997. At September
30, 2000, VoiceStream had an accumulated deficit of $2.4 billion and equity, net
of accumulated deficit, of $7.8 billion. Powertel sustained operating losses of
approximately $61.8 million for the nine months ended September 30, 2000, and
$145.9 million in fiscal 1999, $172.2 million in fiscal 1998 and $135.1 million
in fiscal 1997. At September 30, 2000, Powertel had an accumulated deficit of
$718.0 million and negative equity, net of accumulated deficit, of $197.3
million.
VoiceStream expects to incur significant operating losses and to generate
negative cash flow from operating activities during the next several years while
it continues to develop and construct its systems and grow its subscriber base.
After the VoiceStream/Powertel merger, VoiceStream might not be able to achieve
or sustain profitability or positive cash flow from operating activities in the
future and VoiceStream might not generate sufficient cash flow to service
current or future debt requirements.
VOICESTREAM'S ABILITY TO EXPAND AND PROVIDE SERVICE IS LIMITED BY ITS ABILITY TO
OBTAIN FCC LICENSES, WHICH ARE LIMITED IN NUMBER
Even on a combined basis, VoiceStream and Powertel do not have licenses
covering the entire United States. VoiceStream's and Powertel's ability to
expand is limited to those markets where they have obtained or can obtain
licenses with sufficient spectrum to provide PCS service, or where they
economically can become resellers of service. Because there are a limited number
of licenses available, and because resale agreements require mutual consent of
the incumbent PCS license holders, there is a risk that they may not be able to
obtain the licenses they need for expansion.
VOICESTREAM AND POWERTEL ARE AT RISK OF LOSING COVERAGE IN CERTAIN MARKETS
BECAUSE THEY HAVE ENTERED INTO JOINT VENTURES THAT THEY DO NOT CONTROL IN AN
ATTEMPT TO EXPAND INTO THOSE MARKETS
C Block and F Block licenses are two sets of licenses issued by the FCC
that enable their holders to provide wireless communications services in the
portion of the radio spectrum that is commonly referred to as "PCS". When
implementing the PCS licensing scheme in the United States, the FCC adopted
rules that granted a narrow category of entities, referred to as designated
entities, the right to bid for and own C and F Block licenses. In order to
continue expansion of service to VoiceStream customers, VoiceStream obtained
49.9% minority interests in two joint ventures controlled by Cook Inlet Region,
Inc., each of which is qualified through its subsidiaries to obtain C and F
Block licenses that VoiceStream cannot directly obtain. Subsidiaries of one of
the joint ventures have entered into agreements to acquire C and F Block
licenses and a subsidiary of the other joint venture is participating in FCC
Auction No. 35 of C and F Block licenses. Through reseller and other contractual
arrangements between VoiceStream and the two joint ventures, VoiceStream
customers will be able to obtain service in the joint ventures' territories. In
all markets where the joint ventures operate, VoiceStream will be at risk
because Cook Inlet will be in control and can choose to operate independently of
VoiceStream. If these joint venture entities determine to operate independently,
VoiceStream's ability to compete on a national scale may be adversely affected.
Like VoiceStream, Powertel did not qualify to obtain C and F Block
licenses. In order to continue expansion of service to Powertel customers,
Powertel has obtained a 49.9% minority interest in an affiliate of Eliska
Wireless Ventures I, Inc., an entity that is qualified to hold licenses that
Powertel could not directly obtain. Eliska Wireless holds C and F Block licenses
that it purchased from DiGiPH PCS, Inc. Powertel also has a creditor
relationship with another Eliska Wireless entity, which holds two designated
entity licenses. It is anticipated that Powertel customers, through reseller,
roaming or other contractual arrangements between Powertel and the Eliska
Wireless entities, will be able to obtain service in these markets. In all
markets where these entities operate, Powertel is at risk because these entities
are in control and can choose to operate independently of Powertel. If these
entities choose to operate
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independently, Powertel's ability to compete on a regional scale and
VoiceStream's ability, following completion of the merger with Powertel, to
compete on a national scale may be adversely affected.
VOICESTREAM OR JOINT VENTURES IN WHICH VOICESTREAM HOLDS AN INTEREST COULD LOSE
LICENSES AS A RESULT OF COURT PROCEEDINGS, WHICH COULD ADVERSELY AFFECT
VOICESTREAM'S ABILITY TO PROVIDE NATIONAL COVERAGE
All of the C Block licenses controlled by VoiceStream could be affected by
U.S. AirWaves, Inc. v. FCC. U.S. AirWaves participated in the original C Block
auction, which concluded on May 6, 1996, but withdrew after the bids exceeded
the maximum prices it was willing to pay. U.S. AirWaves sought judicial review
of two orders in the FCC's rulemaking proceeding on payment financing for PCS
licenses: the Second Report and Order and the Order on Reconsideration of the
Second Report and Order (WT Docket No. 97-82). These orders enabled initial C
Block licensees to return licenses or modify the conditions of payment. The
court consolidated into this case similar petitions filed by several other
parties. On November 21, 2000, the U.S. Court of Appeals for the D.C. Circuit
upheld the FCC's rulemaking proceeding. However, U.S. AirWaves may appeal the
ruling. If the decision of the Court of Appeals is appealed and the appeal is
successful, the orders could be reversed and affected licenses could be returned
to the FCC for reauction.
Additionally, 25 C Block licenses controlled by VoiceStream were issued
subject to the outcome of the bankruptcy proceeding of the original licensee, a
subsidiary of Pocket Communications, Inc., which was conditionally granted 43 C
Block licenses in 1996. Pursuant to an FCC order, the bankruptcy debtors elected
to relinquish certain licenses, which subsequently were reauctioned, and the
bankruptcy court issued an order making the election effective. A group of
secured creditors of the debtors filed with the court a motion for
reconsideration of the election order. The motion was denied, and the secured
creditors appealed the denial to the United States District Court for the
District of Maryland, Northern Division. The appeal of the election order is
still pending but has been administratively stayed. Until the appeal is
dismissed, there is uncertainty as to the status of these C Block licenses. The
District Court could order the return of these licenses to the jurisdiction of
the bankruptcy court. In the event that these licenses are so returned, it is
unlikely that VoiceStream will be able to recoup any or all of the costs
incurred by it in connection with the construction and development of systems
related to such licenses.
Finally, FCC Auction No. 35, in which VoiceStream and a joint venture in
which VoiceStream holds an interest participated, includes many licenses that
are the subject of pending litigation by the original licensee, NextWave
Communications, Inc. NextWave appealed to the U.S. Court of Appeals for the D.C.
Circuit the FCC's action cancelling NextWave's licenses and reclaiming the
spectrum and continues to pursue its administrative remedies. There is no
assurance that NextWave will not prevail in its lawsuit, and that the FCC will
not be obligated to return the licenses to NextWave, even if VoiceStream or the
joint venture in which VoiceStream holds an interest is awarded any of the
licenses for which it was the highest bidder at auction.
Loss of any license by VoiceStream will reduce or eliminate VoiceStream's
ability to own interests in markets where the licenses are lost, thereby
reducing VoiceStream's ability to compete with other national competitors.
CONCERNS OVER MEDIA REPORTS REGARDING THE EFFECT OF RADIO FREQUENCY EMISSIONS ON
MEDICAL DEVICES AND OTHER POTENTIAL NEGATIVE HEALTH EFFECTS RELATED TO THE USE
OF WIRELESS HANDSETS MAY DISCOURAGE USE OF WIRELESS SERVICES AND ADVERSELY
AFFECT VOICESTREAM'S BUSINESS
Media reports have suggested that some radio frequency emissions from
wireless handsets may raise various health concerns, including cancer, and may
interfere with various electronic medical devices, including hearing aids and
pacemakers, and at least one class action lawsuit has been filed in the U.S.
against wireless service providers and handset manufacturers relating to these
issues. Concerns over radio frequency emissions may discourage the use of
wireless handsets, which would adversely affect VoiceStream's business. Some
governments may propose legislation mandating health warnings pending the
outcome of research concerning the health and safety risks of wireless handsets.
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Negative findings of studies concerning health and safety risks of wireless
handsets could have an adverse effect on the wireless industry, VoiceStream's
business, or the use of GSM wireless technology and could lead to governmental
regulations that may have an adverse effect on VoiceStream's business. In
addition, several states in the U.S. have proposed or enacted legislation that
would limit or prohibit the use and/or possession of a mobile telephone while
driving an automobile. If such legislation is adopted and strictly enforced, it
may have an adverse effect on VoiceStream's business.
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FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus, and the documents we are incorporating by
reference, contain forward-looking statements about Deutsche Telekom,
VoiceStream, Powertel and the combined companies, which we intend to be covered
by the safe harbor for "forward-looking statements" provided by the Private
Securities Litigation Reform Act of 1995. Any document we filed or will file
with the SEC also may include forward-looking statements. Other written or oral
forward-looking statements have been made and may in the future be made, from
time to time, by or on behalf of Deutsche Telekom, VoiceStream and Powertel.
Forward-looking statements are statements that are not historical facts, and
include financial projections and estimates and their underlying assumptions;
statements regarding plans, objectives and expectations with respect to future
operations, products and services; the impact of regulatory initiatives on our
operations; our share of new and existing markets; general industry and
macroeconomic growth rates and our performance relative to them and statements
regarding future performance. Forward-looking statements generally are
identified by the words "expects", "anticipates", "believes", "intends",
"estimates" and similar expressions.
The forward-looking statements in this proxy statement/prospectus and in
the documents incorporated by reference into this document are subject to
various risks and uncertainties, most of which are difficult to predict and
generally beyond the control of Deutsche Telekom, VoiceStream and Powertel.
Accordingly, actual results of Deutsche Telekom following the Deutsche
Telekom/VoiceStream and Deutsche Telekom/Powertel mergers or of VoiceStream
following the VoiceStream/Powertel merger may differ materially from those
expressed in, or implied by, the forward-looking statements. The risks and
uncertainties to which forward-looking statements are subject include:
- those we discuss under "Risk Factors Relating to the Deutsche
Telekom/VoiceStream Merger and the Deutsche Telekom/Powertel Merger" and
"Risk Factors Relating to the VoiceStream/Powertel Merger;"
- those we discuss or identify in our public filings with the SEC;
- risks and uncertainties with respect to our expectations regarding the
benefits anticipated from the Deutsche Telekom/VoiceStream merger, the
Deutsche Telekom/Powertel merger and the VoiceStream/Powertel merger;
- for the mergers involving Deutsche Telekom, effects of foreign exchange
rate fluctuations;
- level of demand for telecommunications services, including with regard to
wireless telecommunications services, access lines, traffic and new
higher value products;
- competitive forces, including pricing pressures, technological
developments, alternative routing developments and our ability to gain
market share in new markets, including, among others, the United States
in respect of Deutsche Telekom, and our ability to retain market share in
existing markets in the face of competition from existing and new market
entrants;
- for the mergers involving Deutsche Telekom, effects of Deutsche Telekom's
tariff reduction initiatives, particularly in Deutsche Telekom's core
telephony business, but also with regard to many other areas;
- regulatory developments and changes, including with respect to the levels
of tariffs, terms of interconnection, customer access and international
settlement arrangements;
- outcome of litigation in which we are involved;
- success of new business, operating and financial initiatives, many of
which involve start-up costs, and new systems and applications,
particularly with regard to our integration of service offerings;
- VoiceStream's and Powertel's high level of debt, which may need to be
refinanced;
- ability to attract and retain qualified personnel;
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- product liability and other claims asserted against us;
- concerns over radio frequency emissions or other health and safety risks
related to the use of wireless handsets;
- progress of our domestic and international investments, joint ventures
and alliances;
- impact of unusual items resulting from ongoing evaluations of our
strategies;
- availability, terms and deployment of capital, particularly in view of
our debt refinancing needs, including the possible refinancing of
VoiceStream's and Powertel's debt, and the impact of regulatory and
competitive developments on capital outlays;
- level of demand in the market for our shares and for shares of our
subsidiaries, which can affect our acquisition strategies;
- our ability to achieve cost savings and realize productivity
improvements;
- with respect to the mergers involving Deutsche Telekom, the development
of the German real estate market in view of Deutsche Telekom's
substantial real estate portfolio, which had a book value of
approximately 17.2 billion euros as of December 31, 1999; and
- general economic conditions, government and regulatory policies, new
legislation and business conditions in the markets we and our affiliates
serve.
The actual results, performance or achievement of Deutsche Telekom,
VoiceStream, Powertel or the combined companies following the Deutsche
Telekom/VoiceStream merger and the Deutsche Telekom/Powertel merger or following
the VoiceStream/Powertel merger could differ significantly from those expressed
in, or implied by, our forward-looking statements. In addition, any of the
events anticipated by our forward-looking statements might not occur, and if
they do, we cannot predict what impact they might have on the results of
operations and financial condition of Deutsche Telekom, VoiceStream, Powertel or
the combined companies following the Deutsche Telekom/VoiceStream merger and the
Deutsche Telekom/ Powertel merger or the VoiceStream/Powertel merger.
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THE COMPANIES
DEUTSCHE TELEKOM AG
Deutsche Telekom is Europe's largest telecommunications company and one of
the largest telecommunications carriers worldwide based on 2000 revenues.
Deutsche Telekom's revenues in 2000 were 40.9 billion euros. Deutsche Telekom
offers its customers a complete range of fixed-line voice telephony products and
services through more than 49 million access lines as of December 31, 2000. As
of December 31, 2000, through T-Mobile, Deutsche Telekom served approximately
31.1 million mobile telephony customers in Europe through majority-controlled
operations. Deutsche Telekom is a leading provider of high-speed digital access
lines with, as of December 31, 2000, 600,000 digital service lines and 17.3
million channels using the information transfer standard known as Integrated
Services Digital Network. Deutsche Telekom is a leading provider of new
asymmetric digital subscriber line services. In online services, T-Online is
Europe's largest Internet provider with approximately 7.9 million subscribers as
of December 31, 2000.
Deutsche Telekom's international portfolio of subsidiaries and investments
includes telecommunications companies active in the United Kingdom, France,
Austria, Central and Eastern Europe, the United States and Asia.
Deutsche Telekom's strategic focus is on growth in four key areas: mobile
telecommunications, data/Internet Protocol/systems, consumer Internet services
and access services. Deutsche Telekom intends to pursue growth in these areas
aggressively, primarily through internal growth and acquisitions. In this
regard, Deutsche Telekom's primary emphasis is on Europe and the United States,
but Deutsche Telekom may pursue opportunities worldwide. Deutsche Telekom
expects to expand its presence internationally. Deutsche Telekom believes that
its advanced network and strategic focus position it well to take advantage of
the technological convergence of telecommunications and information services.
For a description of certain recent developments involving Deutsche
Telekom, see Deutsche Telekom's reports filed with the SEC that are, or may in
the future be, incorporated by reference herein as described under "Additional
Information -- Where You Can Find More Information."
Deutsche Telekom's principal executive offices are located at
Friedrich-Ebert-Allee 140 in 53113 Bonn, Germany, its telephone number is (011
49) 228-181-88880. Deutsche Telekom maintains a website on the Internet at
www.telekom.de/international, but the information found on its website is not
part of this proxy statement/prospectus.
VOICESTREAM WIRELESS CORPORATION
VoiceStream is a national provider of personal communications service in
the United States using GSM wireless technology. As of September 30, 2000,
VoiceStream, together with joint ventures in which it holds interests, had
licenses to provide service to over 220 million people and operating systems
from New York to Hawaii, serving approximately 3.3 million subscribers.
VoiceStream has licenses in 23 of the 25 largest markets in the United States.
In addition, VoiceStream holds 49.9% minority interests in two joint ventures
controlled by Cook Inlet Region, Inc., Cook Inlet/VS GSM IV PCS Holdings, LLC
and Cook Inlet/VS GSM V PCS Holdings, LLC. Subsidiaries of these joint ventures
are qualified to obtain C and F Block licenses that VoiceStream cannot obtain
directly. Subsidiaries of Cook Inlet/VS GSM IV PCS Holdings have entered into
agreements to acquire licenses in markets including Philadelphia, Pennsylvania;
Las Vegas, Nevada; New Orleans, Louisiana; Battle Creek, Michigan; and Corpus
Christi, Texas. In addition, a subsidiary of Cook Inlet/VS GSM V PCS Holdings
participated in FCC Auction No. 35 to acquire C and F Block licenses and was the
highest bidder in 22 markets covering approximately 21 million people, at a cost
of $506,376,000.
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VoiceStream was incorporated in June 1999 as a Delaware corporation to act
as the parent company for business combinations involving its predecessor, now
named "VS Washington Corporation". Prior to May 3, 1999, VS Washington was an
80.1%-owned subsidiary of Western Wireless Corporation. The remaining 19.9% was
owned by Hutchison Telecommunications PCS (USA) Limited, a subsidiary of
Hutchison Whampoa Limited, a Hong Kong company. On May 3, 1999, VS Washington
was formally separated in a spin-off transaction from Western Wireless's other
operations. In the first half of 2000, VoiceStream acquired Omnipoint
Corporation and Aerial Communications, Inc., substantially increasing
VoiceStream's geographic coverage.
For a description of certain recent development involving VoiceStream, see
VoiceStream's reports filed with the SEC that are, or may in the future be,
incorporated by reference herein as described under "Additional
Information -- Where you Can Find More Information."
VoiceStream's principal executive offices are located at 12920 SE 38(th)
Street, Bellevue, Washington 98006, its telephone number is (425) 378-4000.
VoiceStream maintains a website on the Internet at www.voicestream.com, but the
information found on its website is not part of this proxy statement/
prospectus.
POWERTEL, INC.
Powertel is a provider of wireless telecommunications services in the
southeastern United States. With licenses that cover over 24 million people,
Powertel has one of the largest contiguous licensed PCS coverage areas in the
southeastern United States. Powertel's licenses cover the major trading areas of
Atlanta, Georgia; Jacksonville, Florida; Memphis, Tennessee; Jackson,
Mississippi; and Birmingham, Alabama; and 13 basic trading areas in Kentucky and
Tennessee. Powertel provides its services using GSM wireless technology.
Powertel recently invested $125 million for a minority interest in an
affiliate of Eliska Wireless Ventures I, Inc., which purchased the assets of
DiGiPH PCS, a GSM-based provider that serves the Gulf Coast area of Alabama,
Florida and Mississippi. These markets are contiguous with Powertel's existing
markets. A portion of Powertel's business is now conducted through an affiliate
of Eliska in which Powertel holds a non-controlling equity interest.
For a description of certain recent developments involving Powertel, see
Powertel's reports filed with the SEC that are, or may in the future be,
incorporated by reference herein as described under "Additional
Information -- Where You Can Find More Information."
Powertel was incorporated in 1991 as a Delaware corporation. Powertel's
principal executive offices are located at 1239 O.G. Skinner Drive, West Point,
Georgia 31833, its telephone number is (706) 645-2000. Powertel maintains a
website on the Internet at www.powertel.com, but the information found on its
website is not part of this proxy statement/prospectus.
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THE VOICESTREAM SPECIAL MEETING
GENERAL
The special meeting of stockholders of VoiceStream will be held on March
13, 2001, at 8:00 a.m., Pacific time, at the offices of VoiceStream Wireless
Corporation, 12920 SE 38th Street, Bellevue, Washington 98006. At the
VoiceStream special meeting, VoiceStream stockholders will consider and vote
upon proposals to approve and adopt:
- the Agreement and Plan of Merger, dated as of July 23, 2000, as amended
and restated as of February 8, 2001, among Deutsche Telekom AG,
VoiceStream Wireless Corporation and a Delaware corporation formed by
Deutsche Telekom, pursuant to which that corporation will be merged into
VoiceStream, and VoiceStream will become a wholly-owned subsidiary of
Deutsche Telekom.
- the Agreement and Plan of Reorganization, dated as of August 26, 2000, as
amended and restated as of February 8, 2001, among VoiceStream Wireless
Corporation, Powertel, Inc. and a wholly-owned subsidiary of VoiceStream
and the transactions contemplated thereby, including the issuance of
VoiceStream Common Shares to Powertel stockholders. Pursuant to that
agreement, the VoiceStream subsidiary will be merged into Powertel, and
Powertel will become a wholly-owned subsidiary of VoiceStream. The merger
between VoiceStream and Powertel can occur only if the merger agreement
between VoiceStream and Deutsche Telekom is terminated.
If the Deutsche Telekom/VoiceStream merger is completed, VoiceStream will
become a wholly-owned subsidiary of Deutsche Telekom and the
VoiceStream/Powertel merger agreement will automatically terminate. If, however,
the Deutsche Telekom/VoiceStream merger agreement is terminated, the
VoiceStream/Powertel merger may still be completed. Therefore, it is necessary
for VoiceStream stockholders to vote on both the Deutsche Telekom/VoiceStream
merger and the VoiceStream/Powertel merger, even though it is not possible for
both mergers to be completed. We have attached copies of the Deutsche
Telekom/VoiceStream and VoiceStream/Powertel merger agreements to this document
as Annexes A and C, respectively.
RECORD DATE; QUORUM
Only holders of VoiceStream common shares and VoiceStream voting preferred
shares are entitled to vote on the mergers at the VoiceStream special meeting.
The VoiceStream board of directors has fixed the close of business on January
24, 2001 as the record date for the determination of the stockholders entitled
to notice of, and to vote at, the VoiceStream special meeting. At the record
date, there were outstanding 251,070,590 VoiceStream common shares held by
approximately 2,075 VoiceStream stockholders of record, and 3,906,250
VoiceStream voting preferred shares outstanding, all of which are held by
Deutsche Telekom.
The holders of a majority of the votes entitled to be cast in respect of
VoiceStream common shares and VoiceStream voting preferred shares outstanding at
the record date, represented in person or by proxy, will constitute a quorum for
purposes of the VoiceStream special meeting. A quorum is necessary to hold the
VoiceStream special meeting. Any VoiceStream common shares held in treasury by
VoiceStream or by any of its subsidiaries will not be counted for purposes of a
quorum. Brokers and nominees are allowed to vote on the approval of either the
Deutsche Telekom/VoiceStream merger or the VoiceStream/Powertel merger on behalf
of VoiceStream stockholders only if they receive instructions from such
stockholder on how to vote, and VoiceStream shares that are not voted because
brokers did not receive instructions are referred to as "broker non-votes."
Abstentions and broker non-votes represented at the special meeting count as
present for establishing a quorum. Once a VoiceStream share is represented at
the VoiceStream special meeting, it will be counted for the purpose of
determining a quorum at the VoiceStream special meeting and any adjournment of
the VoiceStream special meeting unless the holder is present solely to object to
the VoiceStream special meeting. However, if a new record date is set for the
adjourned VoiceStream special meeting, then a new quorum will have to be
established.
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REQUIRED VOTE
The completion of the Deutsche Telekom/VoiceStream merger requires the
approval of the Deutsche Telekom/VoiceStream merger agreement by the affirmative
vote of the holders of a majority of the voting power of the outstanding
VoiceStream common shares and VoiceStream voting preferred shares, voting
together as a single class. The completion of the VoiceStream/Powertel merger
requires the approval of the VoiceStream/Powertel merger agreement by a majority
of the votes cast at the VoiceStream special meeting by holders of VoiceStream
common shares and VoiceStream voting preferred shares, voting together as a
single class. Each VoiceStream common share and VoiceStream voting preferred
share outstanding as of the close of business on the record date, January 24,
2001, entitles the holder to one vote with respect to each merger to be voted
upon at the VoiceStream special meeting. Because the vote to approve the
Deutsche Telekom/VoiceStream merger is based on the number of VoiceStream shares
outstanding and entitled to vote rather than on the number of votes cast,
failure to vote your VoiceStream shares is effectively a vote against approval
of the Deutsche Telekom/VoiceStream merger. Similarly, abstentions and broker
non-votes represented at the VoiceStream special meeting will have the same
effect as votes against approval of the Deutsche Telekom/VoiceStream merger.
You may vote your VoiceStream shares in either of two ways:
- by completing and returning the accompanying proxy card; or
- by appearing and voting in person at the VoiceStream special meeting.
At the record date, directors and executive officers of VoiceStream and
their associates and affiliates owned approximately 53.6% of the outstanding
VoiceStream common shares.
AGREEMENTS TO VOTE IN FAVOR OF THE MERGERS
In connection with the Deutsche Telekom/VoiceStream merger, VoiceStream
stockholders who, in the aggregate, had sufficient voting power as of the
VoiceStream record date to approve the Deutsche Telekom/VoiceStream merger
entered into separate stockholder agreements with Deutsche Telekom whereby each
of the stockholders has agreed to vote its VoiceStream common shares in favor of
the Deutsche Telekom/VoiceStream merger. See "Summary of the Deutsche
Telekom/VoiceStream Transaction Documents -- Deutsche Telekom's Agreements with
Stockholders of VoiceStream." In addition, the VoiceStream voting preferred
shares held by Deutsche Telekom entitle Deutsche Telekom to cast approximately
1.5% of the votes, and Deutsche Telekom intends to vote these shares in favor of
the Deutsche Telekom/VoiceStream merger. As a result, VoiceStream stockholder
approval of the Deutsche Telekom/VoiceStream merger is assured.
In connection with the VoiceStream/Powertel merger, VoiceStream
stockholders who, in the aggregate, had sufficient voting power as of the
VoiceStream record date to approve the VoiceStream/Powertel merger entered into
stockholder agreements with Powertel whereby each of the stockholders has agreed
to vote its VoiceStream common shares in favor of the VoiceStream/Powertel
merger. See "Summary of Deutsche Telekom/Powertel and VoiceStream/Powertel
Transaction Documents -- Powertel's Agreements with Stockholders of
VoiceStream." As a result, VoiceStream stockholder approval of the
VoiceStream/Powertel merger is assured.
Deutsche Telekom has obtained all corporate and stockholder approvals
necessary to complete the Deutsche Telekom/VoiceStream merger, other than
ministerial actions to be taken in connection with the completion of the merger.
VOTING AND REVOCATION OF PROXIES
If you vote your VoiceStream common shares or voting preferred shares by
signing a proxy, your shares will be voted at the VoiceStream special meeting as
you indicate on your proxy card. If no instructions are indicated on your signed
proxy card, your VoiceStream common shares or voting preferred
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shares will be voted "FOR" the approval of both the Deutsche Telekom/VoiceStream
merger and the VoiceStream/Powertel merger.
You may revoke or change your proxy at any time before the proxy is voted
at the VoiceStream special meeting. A proxy may be revoked prior to the vote at
the VoiceStream special meeting in any of the following ways:
- by submitting a written revocation to the Secretary of VoiceStream
Wireless Corporation at 12920 SE 38th Street, Bellevue, Washington 98006;
- by submitting a new proxy dated after the date of the proxy that is being
revoked; or
- by voting in person at the VoiceStream special meeting.
However, simply attending the VoiceStream special meeting will not revoke a
proxy. If you do not hold your VoiceStream common shares in your own name, you
may revoke or change a previously given proxy by following the instructions
provided by the bank, broker or other party that is the registered owner of the
shares.
The VoiceStream board of directors is not aware of any other business to be
brought before the VoiceStream special meeting. If, however, other matters are
properly brought before the VoiceStream special meeting or any adjournment of
the VoiceStream special meeting, the persons appointed as proxies will have
discretionary authority to vote the shares represented by duly executed proxies
in accordance with their discretion and judgment.
DO NOT INCLUDE VOICESTREAM SHARE CERTIFICATES WHEN RETURNING THE ENCLOSED
PROXY CARD.
ELECTION PROCEDURES
At least 45 days before the expected completion of the Deutsche
Telekom/VoiceStream merger, we expect to mail to you a form with instructions
for making your election of the consideration you prefer to receive in the
Deutsche Telekom/VoiceStream merger and indicating whether you prefer to receive
Deutsche Telekom ADSs or Deutsche Telekom ordinary shares and a letter of
transmittal for surrendering your VoiceStream share certificates. To make an
election, you will need to complete the form as instructed and send your
VoiceStream share certificates with a completed letter of transmittal so that
the escrow agent receives them no later than the election deadline, which is the
fifth business day before the completion of the Deutsche Telekom/VoiceStream
merger. If you fail to make a valid election before the election deadline,
including failing to send in your VoiceStream share certificates, you will
receive the mixed consideration per VoiceStream common share of 3.2 Deutsche
Telekom shares and $30 in cash, subject to a tax-related adjustment, and after
we complete the Deutsche Telekom/VoiceStream merger, we will send you
instructions explaining how to exchange your VoiceStream common share
certificates for depositary receipts representing Deutsche Telekom ADSs and
cash, or, if you elect, cash and certificates for Deutsche Telekom ordinary
shares. We will make a public announcement of the election deadline at least
five business days before that deadline.
VoiceStream stockholders who hold VoiceStream common shares in "street
name" through a bank, broker or other financial institution should receive from
that institution information about the procedures for making an election and
exchanging that holder's shares for Deutsche Telekom ADSs or Deutsche Telekom
ordinary shares.
SOLICITATION OF PROXIES
VoiceStream is, and Deutsche Telekom may be, soliciting, and each will bear
its own cost of soliciting, proxies to vote on the mergers at the VoiceStream
special meeting. Deutsche Telekom, VoiceStream and Powertel will share equally
the amount of the expenses incurred in connection with the cost of printing and
distributing this proxy statement/prospectus. Deutsche Telekom and VoiceStream
will share equally the amount of the SEC filing fees incurred in connection with
registering the Deutsche Telekom ADSs and Deutsche Telekom ordinary shares
issuable upon completion of the Deutsche
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Telekom/VoiceStream merger. VoiceStream and Powertel will share equally the
amount of the SEC filing fees incurred in connection with registering
VoiceStream common shares issuable upon completion of the VoiceStream/Powertel
merger. Officers, directors and employees of VoiceStream and Deutsche Telekom
also may solicit proxies from VoiceStream stockholders by telephone, mail, the
Internet or in person. However, they will not be paid for soliciting proxies.
VoiceStream will make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to send the proxy materials to beneficial owners of
VoiceStream shares, and VoiceStream will reimburse those brokerage houses and
custodians for their reasonable expenses in doing so. MacKenzie Partners, Inc.
has been retained by VoiceStream to assist in the solicitation of proxies, using
the means referred to above, and will receive fees of up to $6,000, plus
reasonable out-of-pocket expenses.
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THE POWERTEL SPECIAL MEETING
GENERAL
The special meeting of stockholders of Powertel will be held on March 13,
2001, at 11:00 a.m., Eastern time, at The Cotton Duck, 6101 20th Avenue, Valley,
Alabama 36854. At the Powertel special meeting, the Powertel stockholders will
consider and vote upon proposals to approve and adopt:
- the Agreement and Plan of Merger dated as of August 26, 2000, as amended
and restated as of February 8, 2001, among Deutsche Telekom, Powertel and
a Delaware corporation formed by Deutsche Telekom, pursuant to which that
corporation will be merged into Powertel, and Powertel will become a
wholly-owned subsidiary of Deutsche Telekom; and
- the Agreement and Plan of Reorganization dated as of August 26, 2000, as
amended and restated as of February 8, 2001, among VoiceStream, Powertel
and a wholly-owned subsidiary of VoiceStream, pursuant to which that
subsidiary will be merged into Powertel, and Powertel will become a
wholly-owned subsidiary of VoiceStream.
The Deutsche Telekom/Powertel merger and the VoiceStream/Powertel merger
are mutually exclusive. If the Deutsche Telekom/VoiceStream merger is completed,
then the VoiceStream/Powertel merger agreement will automatically terminate, and
Powertel is expected to merge with a Delaware corporation formed by Deutsche
Telekom upon the terms set forth in the Deutsche Telekom/Powertel merger
agreement. If, however, the Deutsche Telekom/VoiceStream merger agreement is
terminated, the Deutsche Telekom/Powertel merger agreement will also terminate.
In that case, Powertel is expected to merge with the wholly-owned subsidiary of
VoiceStream upon the terms set forth in the VoiceStream/Powertel merger
agreement. Therefore, it is necessary for Powertel stockholders to vote on both
the Deutsche Telekom/Powertel merger and the VoiceStream/Powertel merger, even
though it is not possible for both mergers to be completed. We have attached
copies of the Deutsche Telekom/Powertel merger agreement and the
VoiceStream/Powertel merger agreement to this proxy statement/prospectus as
Annex B and Annex C, respectively.
RECORD DATE; QUORUM
Holders of Powertel common shares and preferred shares are entitled to vote
on the Deutsche Telekom/Powertel merger and the VoiceStream/Powertel merger at
the Powertel special meeting. The Powertel board of directors has fixed the
close of business on January 24, 2001 as the record date for the determination
of the stockholders entitled to notice of, and to vote at, the Powertel special
meeting. At the record date there were outstanding:
- 31,587,409 Powertel common shares held by approximately 281 Powertel
stockholders of record;
- 100,000 Series A preferred shares, all of which are owned by Sonera
Corporation;
- 100,000 Series B preferred shares, all of which are owned by SCANA
Communications Holdings, Inc.;
- 50,000 Series D preferred shares, all of which are owned by SCANA
Communications Holdings, Inc.;
- 50,000 Series E preferred shares, all of which are owned by SCANA
Communications Holdings, Inc.; and
- 50,000 Series F preferred shares, all of which are owned by ITC Wireless,
Inc.
The holders of shares representing a majority of the votes entitled to be
cast with respect to the proposals at the record date, represented in person or
by proxy, will constitute a quorum for purposes of the Powertel special meeting.
A quorum is necessary to hold the Powertel special meeting. Any Powertel common
shares held in treasury by Powertel or by any of its subsidiaries will not be
counted for purposes of a quorum. Brokers and nominees are allowed to vote on
the approval of either the Deutsche Telekom/
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Powertel merger or the VoiceStream/Powertel merger on behalf of Powertel
stockholders only if they receive instructions from such stockholders on how to
vote, and Powertel shares that are not voted because brokers did not receive
instructions are referred to as "broker non-votes". Abstentions and broker non-
votes represented at the special meeting count as present for establishing a
quorum. Once a Powertel share is represented at the Powertel special meeting, it
will be counted for the purpose of determining a quorum at the Powertel special
meeting and any adjournment of the Powertel special meeting, unless the holder
is present solely to object to the Powertel special meeting. However, if a new
record date is set for the adjourned Powertel special meeting, then a new quorum
will have to be established.
REQUIRED VOTE
The completion of each of the Deutsche Telekom/Powertel merger and the
VoiceStream/Powertel merger requires the approval of the relevant merger
agreement by the affirmative vote of the holders of:
- a majority of the voting power of the outstanding Powertel common shares
and Powertel Series A preferred shares, voting together as a single
class, with the Series A preferred shares voting on an
as-converted-to-common shares basis; and
- two-thirds of each of the Series A preferred shares, Series B preferred
shares, Series D preferred shares, Series E preferred shares and Series F
preferred shares, each voting as a separate class.
Each Powertel common share outstanding as of the close of business on January
24, 2001 entitles the holder to one vote at the Powertel special meeting. Each
Powertel Series A preferred share outstanding as of the close of business on
January 24, 2001 entitles the holder to 46.26774 votes at the Powertel special
meeting when voting together with the common shares on an as-converted-to-common
shares basis. Each Powertel preferred share is entitled to one vote when voting
as a separate class. Because the vote is based on the number of Powertel shares
outstanding rather than on the number of votes cast, failure to vote your shares
is effectively a vote against the mergers. In addition, abstentions and broker
non-votes will have the same effect as votes against approval of the mergers.
You may vote your shares in either of two ways:
- by completing and returning the accompanying proxy card; or
- by appearing and voting in person at the Powertel special meeting.
At the Powertel record date, directors and executive officers of Powertel
and their respective affiliates beneficially owned approximately 47.7% of all
the outstanding Powertel common shares, and Sonera Corporation beneficially
owned an additional 12.8% of all the outstanding Powertel common shares. All of
the outstanding Powertel preferred shares were held by the stockholders in the
amounts set forth under "-- Record Date; Quorum."
AGREEMENTS TO VOTE IN FAVOR OF THE DEUTSCHE TELEKOM/POWERTEL MERGER
In connection with the execution of the Deutsche Telekom/Powertel merger
agreement, Powertel stockholders who, in the aggregate, had sufficient voting
power as of the Powertel record date to approve the Deutsche Telekom/Powertel
merger entered into stockholder agreements with Deutsche Telekom whereby each of
the stockholders has agreed to vote its Powertel shares in favor of the Deutsche
Telekom/Powertel merger. See "Summary of Deutsche Telekom/Powertel and
VoiceStream/Powertel Transaction Documents -- Deutsche Telekom's Agreements with
Stockholders of Powertel." As a result, stockholder approval of the Deutsche
Telekom/Powertel merger is assured.
Deutsche Telekom has obtained all corporate and stockholder approvals
necessary to complete the Deutsche Telekom/Powertel merger, other than
ministerial actions to be taken in connection with the completion of the merger.
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AGREEMENTS TO VOTE IN FAVOR OF THE VOICESTREAM/POWERTEL MERGER
In connection with the execution of the VoiceStream/Powertel merger
agreement, Powertel stockholders who, in the aggregate, had sufficient voting
power as of the Powertel record date to approve the VoiceStream/Powertel merger
entered into stockholder agreements with VoiceStream whereby each of the
stockholders has agreed to vote its Powertel shares in favor of the
VoiceStream/Powertel merger. See "Summary of Deutsche Telekom/Powertel and
VoiceStream/Powertel Transaction Documents -- VoiceStream's Agreements with
Stockholders of Powertel." As a result, stockholder approval of the
VoiceStream/Powertel merger is assured.
VOTING AND REVOCATION OF PROXIES
If you vote your Powertel common shares or Powertel preferred shares by
signing a proxy, your shares will be voted at the Powertel special meeting as
you indicate on your proxy card. If no instructions are indicated on your signed
proxy card, your Powertel common shares or Powertel preferred shares will be
voted "FOR" the adoption of the Deutsche Telekom/Powertel merger agreement and
the VoiceStream/Powertel merger agreement.
You may revoke your proxy at any time before the proxy is voted at the
Powertel special meeting. A proxy may be revoked prior to the vote at the
Powertel special meeting in any of the following ways:
- by submitting a written revocation to the Secretary of Powertel, Inc. at
1239 O.G. Skinner Drive, West Point, Georgia 31833;
- by submitting a new proxy dated after the date of the proxy that is being
revoked; or
- by voting in person at the Powertel special meeting.
However, simply attending the Powertel special meeting will not revoke a proxy.
If you do not hold your Powertel common shares or Powertel preferred shares in
your own name, you may revoke a previously given proxy by following the
revocation instructions provided by the bank, broker or other party that is the
registered owner of the shares.
The Powertel board of directors is not aware of any other business to be
brought before the Powertel special meeting. If, however, other matters are
properly brought before the Powertel special meeting or any adjournment of the
Powertel special meeting, the persons appointed as proxies will have
discretionary authority to vote the Powertel shares represented by duly executed
proxies in accordance with their discretion and judgment.
DO NOT INCLUDE POWERTEL SHARE CERTIFICATES WHEN RETURNING THE ENCLOSED
PROXY CARD.
After the completion of the Deutsche Telekom/Powertel merger, Powertel will
mail to you a form with instructions for electing whether you prefer to receive
Deutsche Telekom ADSs or Deutsche Telekom ordinary shares and a letter of
transmittal for surrendering your Powertel share certificates to Deutsche
Telekom. You will need to send a completed letter of transmittal and Powertel
share certificates representing your Powertel shares to the escrow agent for the
Deutsche Telekom/Powertel merger. If you make an election to receive Deutsche
Telekom ordinary shares in connection with the Deutsche Telekom/Powertel merger,
you also will need to send a completed form of election.
In the alternative, if the Deutsche Telekom/VoiceStream merger agreement
terminates and the VoiceStream/Powertel merger is completed, VoiceStream will
promptly mail to you a form with instructions and a letter of transmittal for
surrendering your Powertel share certificates to VoiceStream. You will need to
send a completed letter of transmittal and Powertel share certificates
representing your Powertel shares to the escrow agent for the
VoiceStream/Powertel merger.
Powertel stockholders who hold Powertel shares in "street name" through a
bank, broker or other financial institution should receive from that institution
information about the procedures for making an election and exchanging that
holder's shares for Deutsche Telekom ADSs or Deutsche Telekom ordinary shares,
or if the Deutsche Telekom/VoiceStream merger agreement terminates and the
VoiceStream/
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Powertel merger is completed, information about the procedures for exchanging
that holder's shares for VoiceStream common shares.
SOLICITATION OF PROXIES
Powertel is, and Deutsche Telekom may be, soliciting, and each will bear
its own cost of soliciting, proxies to vote on the Deutsche Telekom/Powertel
merger and the VoiceStream/Powertel merger at the Powertel special meeting.
Deutsche Telekom, VoiceStream and Powertel will share equally the amount of
expenses incurred in connection with the cost of printing and distributing this
proxy statement/prospectus. Deutsche Telekom and Powertel will share equally the
amount of SEC filing fees incurred in connection with registering the Deutsche
Telekom ADSs and Deutsche Telekom ordinary shares issuable upon completion of
the Deutsche Telekom/Powertel merger. VoiceStream and Powertel will share
equally the amount of SEC filing fees incurred in connection with registering
the VoiceStream common shares issuable upon completion of the
VoiceStream/Powertel merger. Officers, directors and employees of Powertel and
Deutsche Telekom also may solicit proxies from Powertel stockholders by
telephone, mail, the Internet or in person. However, they will not be paid for
soliciting proxies. Powertel will make arrangements with brokerage houses and
other custodians, nominees and fiduciaries to send the proxy materials to
beneficial owners of Powertel shares, and Powertel will reimburse those
brokerage houses and custodians for their reasonable expenses in doing so.
MacKenzie Partners, Inc. has been retained by Powertel to assist in the
solicitation of proxies, using the means referred to above, and will receive
fees of up to $7,500, plus reasonable out-of-pocket expenses.
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THE DEUTSCHE TELEKOM/VOICESTREAM MERGER
BACKGROUND OF THE DEUTSCHE TELEKOM/VOICESTREAM MERGER
Deutsche Telekom -- General Background
Deutsche Telekom has been seeking to expand internationally through
acquisitions, investments and joint undertakings in the areas that are the four
pillars of its growth strategy: mobile telecommunications, data/ Internet
Protocol/systems, consumer Internet services and access services. Deutsche
Telekom considers expansion of its international business to be an essential
component of its overall business strategy. In particular, Deutsche Telekom has
aimed to build on its strength in Europe and to expand its reach in the United
States. From time to time, Deutsche Telekom has engaged and may continue to
engage in discussions with other parties that may lead to one or more
substantial cross-border acquisitions or business combinations. In that
connection, Deutsche Telekom retained Donaldson, Lufkin & Jenrette and Dresdner
Kleinwort Benson in November 1999 as financial advisors to advise it on
acquisition alternatives in the U.S. wireless telecommunications industry. Over
the next several months, Deutsche Telekom, with the aid of Donaldson, Lufkin &
Jenrette and Dresdner Kleinwort Benson, explored several wireless opportunities
in the United States, including an acquisition of VoiceStream. Among other
things, Deutsche Telekom and its financial advisors analyzed the U.S. wireless
market, possible valuations of VoiceStream and alternative transaction
structures and considerations.
VoiceStream -- General Background
Following the spin-off of VoiceStream from Western Wireless in May 1999,
the VoiceStream board of directors has sought to expand the geographical scope
of, and enhance the services provided by, its wireless business operations to
enable VoiceStream to become a nationwide service provider and to compete
effectively against larger wireless carriers. In the first half of 2000,
VoiceStream acquired wireless carriers Omnipoint Corporation and Aerial
Communications, Inc., received a $957 million investment from Hutchison Whampoa
Ltd., a $500 million investment from Sonera Corporation, entered into a new
$3.25 billion credit agreement and raised $1.46 billion in a high-yield debt
offering.
As a result of these acquisitions and financing activities, by the end of
the first half of 2000, VoiceStream had become a national competitor in the U.S.
wireless telecommunications industry. VoiceStream's board of directors and
management believed that VoiceStream's size and financial resources relative to
other national competitors, and the conditions and trends in the
telecommunications industry, including the ongoing consolidation of
telecommunications companies both in the United States and globally, would
require VoiceStream to continue to expand if VoiceStream were to remain a strong
competitor in the wireless telecommunications industry, and VoiceStream's board
of directors and management understood that this expansion strategy would
require VoiceStream to raise and spend billions of dollars in the future.
On a number of occasions during the year 2000, VoiceStream received
inquiries from U.S. and international communications companies expressing
interest in an acquisition of all of VoiceStream or a significant minority
investment in VoiceStream. In response to these inquiries and contacts,
VoiceStream's management, together with Goldman, Sachs & Co., VoiceStream's
financial advisor, held preliminary discussions with 10 parties who expressed
interest in such possible transactions with VoiceStream. Of these parties, three
communications companies expressed interest in acquiring all of VoiceStream,
including Deutsche Telekom and another party which submitted a preliminary
acquisition proposal in July. In addition, VoiceStream also received written
proposals from two international communications companies in addition to
Deutsche Telekom that expressed an interest in acquiring a significant minority
stake in VoiceStream. One of these parties, in addition to Deutsche Telekom,
conducted due diligence with VoiceStream's management, and VoiceStream delivered
to such party drafts of agreements under which such investment would be made.
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As discussed under "-- Recommendation and Considerations of the VoiceStream
Board of Directors," the VoiceStream board determined that the Deutsche
Telekom/VoiceStream merger, including the $5 billion equity investment by
Deutsche Telekom which was agreed to at the time of signing of the Deutsche
Telekom/ VoiceStream merger agreement, was the most desirable strategic
alternative for VoiceStream as well as the most attractive transaction that was
available.
The Deutsche Telekom/VoiceStream Transaction
On March 7, 2000, a representative of Donaldson, Lufkin & Jenrette, one of
Deutsche Telekom's financial advisors, contacted John W. Stanton, chairman and
chief executive officer of VoiceStream, by telephone to inform Mr. Stanton that
Deutsche Telekom was seeking to expand its telecommunications business into the
United States and that Deutsche Telekom had an interest in acquiring VoiceStream
and to arrange a meeting between Mr. Stanton and Dr. Ron Sommer, chairman of
Deutsche Telekom's management board. Mr. Stanton and Dr. Sommer, together with
other representatives of VoiceStream and Deutsche Telekom, met in New York on
March 13. At this meeting, the parties discussed the telecommunications industry
in general, and Deutsche Telekom indicated its interest in acquiring VoiceStream
to expand its wireless telecommunications business into the United States.
On March 29, 2000, Mr. Stanton and Dr. Sommer, together with other
representatives of VoiceStream and Deutsche Telekom, met again in New York. At
this meeting, Deutsche Telekom indicated that it was considering making a
proposal to acquire VoiceStream in a transaction in which stockholders of
VoiceStream would receive shares of T-Mobile, which is the Deutsche Telekom
subsidiary through which Deutsche Telekom conducts a substantial portion of its
mobile telecommunications businesses. Mr. Stanton said that VoiceStream would
not be willing to consider such a proposal, if made, in light of the absence of
an existing public trading market for the shares of T-Mobile and a number of
other contingencies and uncertainties surrounding T-Mobile.
On June 1, 2000, in light of press reports concerning a possible minority
investment in VoiceStream by a third party, Donaldson, Lufkin & Jenrette
contacted Goldman Sachs and VoiceStream to determine whether VoiceStream would
consider a proposal by Deutsche Telekom for an acquisition of VoiceStream or an
equity investment in VoiceStream. Goldman Sachs indicated that VoiceStream would
be willing to consider a written proposal from Deutsche Telekom, and requested
that any such proposal be provided no later than early June because of the
presence of other possible bidders. Later that day or the next, Dr. Sommer
telephoned Mr. Stanton and informed him that Deutsche Telekom would like to
continue discussions of a possible acquisition of VoiceStream by Deutsche
Telekom. Mr. Stanton indicated that VoiceStream would be willing to consider a
written proposal from Deutsche Telekom to acquire VoiceStream and requested that
such proposal be provided no later than early June.
On June 6, 2000, Deutsche Telekom submitted a written, preliminary proposal
to acquire all of VoiceStream. The proposal contemplated the acquisition of
VoiceStream solely for Deutsche Telekom ordinary shares at a fixed exchange
ratio to be negotiated that would imply a price of between $170 and $190 per
VoiceStream share.
On June 12, 2000, Mr. Stanton sent a written reply to Deutsche Telekom's
proposal which stated that VoiceStream would be willing to consider an
acquisition proposal for VoiceStream of at least $200 per VoiceStream common
share provided that a significant component of the purchase price be paid in
cash and that the proposal contain protection for VoiceStream stockholders if
the price of Deutsche Telekom's shares declined. The reply indicated that
VoiceStream would permit Deutsche Telekom to conduct limited due diligence if
Deutsche Telekom believed it could raise the value of its proposal to at least
$200 per VoiceStream common share.
On June 15, 2000, Mr. Stanton and Dr. Sommer spoke by telephone and
discussed terms of a potential transaction. Also on June 15, 2000,
representatives of the two companies held a conference call in which the parties
agreed that VoiceStream would provide Deutsche Telekom with preliminary due
diligence information. On June 21, 2000, Deutsche Telekom and VoiceStream
entered into a non-disclosure agreement.
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On June 22, 2000, Deutsche Telekom submitted a revised written, preliminary
proposal to acquire VoiceStream, indicating that it would be willing to pay at
least $200 per VoiceStream common share, with 10% of the consideration to be
paid in cash and the balance to be paid in Deutsche Telekom shares. Deutsche
Telekom's proposal stated that the share portion of the consideration would be
subject to a collar that would provide VoiceStream stockholders with some value
protection in the event of a decrease in the price of Deutsche Telekom's shares.
The proposal also indicated that, as part of any definitive agreement with
VoiceStream, Deutsche Telekom would require VoiceStream's principal stockholders
representing more than 50% of VoiceStream's voting power on a fully diluted
basis to agree to support the transaction and to restrict dispositions of the
Deutsche Telekom shares they would receive in the transaction for a period of at
least six months after the completion of the transaction.
On June 22, 2000, Mr. Stanton sent a written reply to Dr. Sommer and Mr.
Jeffrey Hedberg, a member of the Deutsche Telekom management board, raising a
number of business issues with respect to Deutsche Telekom's proposal and
scheduling due diligence meetings in Seattle, Washington commencing June 27. Mr.
Stanton requested that Deutsche Telekom be prepared to make a definitive
proposal by July 5.
On June 27 through June 29, 2000, Deutsche Telekom and its representatives
met in Seattle, Washington with senior members of VoiceStream's management and
conducted a due diligence review of VoiceStream's business, operations,
properties and finances. The parties discussed the terms of a separate
significant investment by Deutsche Telekom in VoiceStream.
On July 5, 2000, Deutsche Telekom delivered to VoiceStream a written
acquisition proposal, including a draft merger agreement and draft agreement to
be entered into by VoiceStream's major stockholders. Deutsche Telekom's proposal
was to acquire all of the outstanding shares of VoiceStream for a combination
per VoiceStream common share of $10 in cash and Deutsche Telekom shares having
an anticipated value of $190. The proposal contained a collar designed to
provide that the portion of the consideration payable in Deutsche Telekom shares
would have a value of $190 as long as the trading price of Deutsche Telekom
ordinary shares were in the range of 54 euros to 69 euros. If the trading price
of Deutsche Telekom ordinary shares were below that range, a maximum agreed
fixed exchange ratio would apply and the trading value of the consideration
payable in Deutsche Telekom shares would be less than $190. Conversely, if the
trading price of Deutsche Telekom shares were above the range, a minimum fixed
exchange ratio would apply and the trading value of the Deutsche Telekom shares
would exceed $190. Deutsche Telekom also proposed to invest $5 billion in
VoiceStream on terms that Deutsche Telekom believed to be customary for
strategic investments of this kind, but which VoiceStream believed would have
the effect of significantly limiting VoiceStream's ability to use the funds
unless Deutsche Telekom specifically approved. The form of stockholders
agreement included as part of the proposal would obligate VoiceStream's
principal stockholders to vote for the transaction at the VoiceStream special
meeting and not to transfer any VoiceStream common shares or Deutsche Telekom
shares prior to six months after the completion of the Deutsche
Telekom/VoiceStream merger.
On July 7, 2000, Mr. Stanton responded to Deutsche Telekom's proposal of
July 5, requesting revisions to various business terms proposed by Deutsche
Telekom and suggesting that negotiations commence the following week among the
principals and their outside financial advisors. The parties agreed to meet in
New York on Monday, July 10 to discuss Deutsche Telekom's acquisition proposal.
On July 7, 2000, VoiceStream received an indication of interest from a
non-U.S. wireless company to combine with VoiceStream. The indication of
interest said that the third party was prepared to consider offering $160 to
$180 per VoiceStream common share but did not propose a specific transaction
structure and indicated that the timing of any transaction and the form of
consideration could be affected by other strategic transactions involving the
third party. The third party indicated that, as an alternative, it would also
consider making an investment in VoiceStream of between $5 billion and $8
billion as the first stage of a transaction that would result in the acquisition
of all of VoiceStream.
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On July 9, 2000, VoiceStream informed the third party that VoiceStream
would be willing to consider an acquisition proposal by such third party only if
its stockholders were to receive consideration of at least $200 per VoiceStream
common share.
On July 10, 2000, Mr. Stanton and other members of VoiceStream's senior
management and representatives of VoiceStream's financial advisor met with
members of Deutsche Telekom's management and representatives of its financial
advisor in New York to discuss the terms proposed by Deutsche Telekom and
modifications of such terms. At this meeting the parties discussed major terms
of a transaction, including financial terms, structure, tax considerations,
retention of VoiceStream's management and employees after the Deutsche
Telekom/VoiceStream merger and the portion of the purchase price that would be
payable to VoiceStream stockholders in cash. The parties also discussed an
investment by Deutsche Telekom in VoiceStream to be made prior to the completion
of a merger between the parties, the impact of the acquisition of VoiceStream on
Deutsche Telekom's plans for its mobile telecommunications subsidiary, T-Mobile,
and representation of VoiceStream on the supervisory and management boards of
Deutsche Telekom and T-Mobile.
During the period from July 12 to July 14, 2000, members of VoiceStream's
and Deutsche Telekom's respective managements and their respective financial
advisors met daily at Sun Valley, Idaho and continued to discuss a potential
transaction. On July 14, 2000, Deutsche Telekom and VoiceStream reached
agreement on the Deutsche Telekom/VoiceStream merger consideration per
VoiceStream share by raising the cash portion to $30 and fixing the exchange
ratio at 3.2 Deutsche Telekom shares, implying a value of about $205 per
VoiceStream common share, based on the closing price of Deutsche Telekom ADSs on
July 13, 2000. This agreement was subject to mutually satisfactory negotiation
of the other terms of the Deutsche Telekom/ VoiceStream merger agreement, the
agreements to be entered into by VoiceStream's principal stockholders and of a
significant investment by Deutsche Telekom in VoiceStream. In regard to the
investment, Deutsche Telekom and VoiceStream agreed that Deutsche Telekom would
invest $5 billion in a VoiceStream security that would be convertible into
VoiceStream common shares at a conversion price of $160 per VoiceStream common
share and having other terms which were to be negotiated. Deutsche Telekom said
that obtaining agreements from VoiceStream's stockholders representing in the
aggregate more than 50% of the voting power of VoiceStream would be a condition
to Deutsche Telekom's participation in the transaction.
On July 19, 2000, VoiceStream's representatives were contacted by telephone
by representatives of the financial advisors for the third party which had
submitted the written indication of interest on July 7, 2000. The
representatives indicated by phone that the third party would consider making a
proposal to acquire VoiceStream at a value in the range of $200 per VoiceStream
common share. Such representatives also stated that the third party would
require a period of several weeks to conduct due diligence of VoiceStream and
that the timing of a transaction could be delayed by other strategic
transactions involving the third party.
During the period between July 14 and July 23, 2000, members of
VoiceStream's and Deutsche Telekom's respective senior management and their
respective legal and financial advisors held continuous meetings in New York to
negotiate the terms and conditions of the Deutsche Telekom/VoiceStream merger
agreement, the $5 billion investment by Deutsche Telekom in VoiceStream and
related agreements between the parties. Representatives of Deutsche Telekom held
discussions with members of senior management of VoiceStream regarding the
retention of senior management and other employees of VoiceStream by Deutsche
Telekom after the completion of the Deutsche Telekom/VoiceStream merger and the
terms of such retention arrangements. Discussions also continued between
VoiceStream and Deutsche Telekom and VoiceStream's major stockholders with
respect to the terms of the proposed stockholders agreements between Deutsche
Telekom and the major stockholders of VoiceStream.
On July 18, 2000, VoiceStream convened a meeting of its board. At this
meeting, the VoiceStream board received an update from VoiceStream's management
and its financial and legal advisors on the status of the negotiations with
Deutsche Telekom and with the third party that had submitted the proposal on
July 7, 2000. The VoiceStream board also reviewed the history and status of the
various proposals
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which had been made to VoiceStream for an acquisition or significant minority
investment. Based on concerns about the timing, feasibility, structure and value
which might be realized in a transaction with the third party, and noting the
contingent nature of the third party's preliminary proposal, the VoiceStream
board instructed management to focus its efforts on a transaction with Deutsche
Telekom and to convey its concerns to the third party. The VoiceStream board
meeting was adjourned until July 21, 2000.
On July 21, 2000, the VoiceStream board continued to review the proposed
Deutsche Telekom/VoiceStream merger and VoiceStream's other strategic
alternatives. Representatives of VoiceStream's management and VoiceStream's
financial and legal advisors made presentations regarding the various strategic
alternatives available to VoiceStream, including:
- continuing as an independent entity and entering into strategic financing
or business arrangements with other industry participants or financing
sources that would assist VoiceStream in financing its business strategy;
- pursuing one or more significant acquisitions of other wireless
telecommunications companies; and
- entering into a combination with Deutsche Telekom or the third party that
had submitted the preliminary proposal on July 7, 2000, as orally
modified by its financial advisors on July 19, 2000.
VoiceStream's management and advisors then reviewed for the VoiceStream
board the status of the negotiations with Deutsche Telekom and the business and
strategic rationale for the proposed Deutsche Telekom/VoiceStream merger
transaction, and VoiceStream's legal counsel discussed certain legal
considerations relating to the proposed transactions. VoiceStream's management
and advisors also reviewed, among other things, the matters set forth under
"Risk Factors Relating to the Deutsche Telekom/VoiceStream Merger and the
Deutsche Telekom/Powertel Merger," "-- Deutsche Telekom's Reasons for the
Deutsche Telekom/VoiceStream Merger" and "-- Recommendation and Considerations
of the VoiceStream Board of Directors," as well as the provisions contained in
the draft Deutsche Telekom/VoiceStream merger agreement and the related
documents, including the various stockholders agreements in which VoiceStream
stockholders owning in the aggregate more than 50% of the voting power of
VoiceStream would agree to vote for the Deutsche Telekom/VoiceStream merger and
not to transfer their shares of VoiceStream or Deutsche Telekom for certain
specified periods. Goldman Sachs made presentations to the VoiceStream board
concerning financial aspects of the proposed Deutsche Telekom/VoiceStream merger
and discussed financial aspects of the various strategic alternatives available
to VoiceStream. The VoiceStream board meeting was again adjourned until July 23,
2000.
Deutsche Telekom's management board discussed a potential acquisition
transaction involving VoiceStream and a minority investment in VoiceStream on
various occasions at regularly scheduled meetings during the period from March
through July 2000. On July 23, 2000, Deutsche Telekom's supervisory board met in
Bonn, Germany to consider the proposed transactions. At this meeting, the
supervisory board approved and authorized the execution of the Deutsche
Telekom/VoiceStream merger agreement and the agreements providing for Deutsche
Telekom's $5 billion investment in VoiceStream, subject to finalization by the
parties' management and respective legal advisors.
Also on July 23, 2000, the VoiceStream board continued to review and
consider the proposed merger with Deutsche Telekom. VoiceStream's management and
financial and legal advisors reviewed the terms of the Deutsche
Telekom/VoiceStream merger agreement and described the resolution of all
significant open issues between VoiceStream and Deutsche Telekom.
Representatives of Goldman Sachs confirmed the financial analyses presented on
July 21 and then delivered Goldman Sachs' oral opinion, later confirmed in
writing, that as of the date of that opinion, the merger consideration in
aggregate to be received by holders of VoiceStream common shares was fair from a
financial point of view to those holders of VoiceStream common shares. Following
further discussion and consideration, the VoiceStream board, with one director
not present, unanimously approved and authorized the execution of the Deutsche
Telekom/VoiceStream merger agreement and the agreements providing for Deutsche
Telekom's $5 billion investment in VoiceStream on the terms discussed at the
VoiceStream board meeting, subject to finalization by the parties' management
and respective legal advisors.
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In the evening of July 23, representatives of Deutsche Telekom's and
VoiceStream's respective management and legal advisors completed the definitive
Deutsche Telekom/VoiceStream merger agreement, stockholder agreements,
investment agreement and related documents, and thereafter the parties executed
those documents, and Deutsche Telekom and VoiceStream's principal stockholders
entered into the stockholder agreements.
On July 24, 2000, Deutsche Telekom and VoiceStream issued a joint press
release announcing the transaction.
On February 8, 2001, with the approval of the VoiceStream board of
directors and the Deutsche Telekom management and supervisory boards, Deutsche
Telekom and VoiceStream agreed to amend the Deutsche Telekom/VoiceStream merger
agreement to provide, among other things, that the Deutsche Telekom/VoiceStream
merger will not be completed before May 31, 2001, which is the second day after
the expected record date for determining which Deutsche Telekom shareholders
will be entitled to receive Deutsche Telekom's annual dividend in respect of
fiscal year 2000. In connection with this agreement, the parties agreed that
VoiceStream would be permitted to pay a stock dividend to its stockholders
before completion of the Deutsche Telekom/VoiceStream merger of 0.0075 of a
VoiceStream common share for each VoiceStream share outstanding. This dividend
will have the effect of increasing by 0.75% the number of shares owned by
VoiceStream stockholders and, accordingly, the aggregate amount of cash and
Deutsche Telekom shares to be received by VoiceStream stockholders in the
Deutsche Telekom/ VoiceStream merger. The parties further agreed that if all of
the conditions to completion of the Deutsche Telekom/VoiceStream merger are
satisfied or waived in accordance with the merger agreement as of a date that is
earlier than May 31, 2001, including the condition that no material adverse
effect on VoiceStream shall have occurred, then after that earlier date Deutsche
Telekom will no longer have the ability to terminate the merger agreement
because of any material adverse effect on, or a material inaccuracy in, a
representation or warranty of VoiceStream.
DEUTSCHE TELEKOM'S REASONS FOR THE DEUTSCHE TELEKOM/VOICESTREAM MERGER
Deutsche Telekom believes that the addition of VoiceStream to Deutsche
Telekom's mobile telephony operations will make Deutsche Telekom a more
competitive telecommunications company with greater prospects for growth than
either Deutsche Telekom or VoiceStream would have on its own, and will generate
significant opportunities to deliver greater value to Deutsche Telekom
shareholders, including former VoiceStream stockholders after the Deutsche
Telekom/VoiceStream merger. Deutsche Telekom believes that VoiceStream provides
it with a strong entry opportunity into the U.S. wireless telecommunications
market, based on the same GSM wireless technology employed by Deutsche Telekom,
and believes that Deutsche Telekom will provide VoiceStream with the necessary
capital resources, technology expertise and global reach to provide
cost-competitive service and accelerate the introduction of next-generation
voice and data services in the United States.
High-Growth U.S. Wireless Telecommunications Industry
Deutsche Telekom's objective is to become a global player in four major
telecommunications segments: mobile telecommunications, data/Internet
Protocol/systems, consumer Internet services and network access services. The
U.S. telecommunications industry is the world's largest and its wireless
telecommunications sector, which is its most significant growth area, is one of
the most attractive wireless markets globally. Deutsche Telekom believes that
the U.S. wireless telecommunications sector has significant growth potential and
that the combined company will be well positioned to take advantage of this
opportunity.
VoiceStream's Licenses and Potential Customers
VoiceStream's licenses enable it to operate in 23 of the 25 largest markets
in the United States in terms of persons in a geographic area, which in this
document we refer to as "POPs". VoiceStream's
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licenses cover 220 million potential customers and VoiceStream's current network
coverage enables access to approximately 100 million potential customers.
VoiceStream expects its network coverage to increase by an additional 20 million
customers during 2001. Access to these customers is a key factor in realizing
the potential of the wireless telecommunications business. Deutsche Telekom
believes that these capabilities will enable it to implement its objective of
becoming a global player in this market.
First Transatlantic Wireless Operator Utilizing the GSM Wireless Technology
Standard
Deutsche Telekom and VoiceStream have compatible network platforms
utilizing GSM wireless technology, which is the established standard in most
countries outside the United States. VoiceStream is the only U.S. wireless
telecommunications provider with a national GSM wireless technology network. The
combination of Deutsche Telekom and VoiceStream will create the first
transatlantic wireless operator utilizing GSM wireless technology. Together,
Deutsche Telekom and VoiceStream will offer seamless services over a common
technology platform and provide customer-friendly features, such as global
roaming, unified billing and worldwide customer service. Deutsche Telekom
believes that these services, which currently are not offered in this form by
any other U.S. provider, will give the combined company a competitive edge in
the U.S. wireless telecommunications industry. The combined company will be,
after the combination, the number one global GSM wireless telecommunications
operator in terms of POPs with approximately 375 million POPs. If the Deutsche
Telekom/VoiceStream merger and the Deutsche Telekom/Powertel merger had been
completed on September 30, 2000, the combined company would have been, as of
that date, the number two provider of global GSM wireless technology in terms of
number of subscribers.
VoiceStream's Management
VoiceStream's senior executive team, which has substantial experience in
the industry, has agreed to fully support the Deutsche Telekom/VoiceStream
merger and the integration with Deutsche Telekom and is expected to lead
Deutsche Telekom's wireless telecommunications activities in the U.S. market.
Other Factors
Deutsche Telekom also has considered the following potentially negative
factors associated with the Deutsche Telekom/VoiceStream merger:
- The risks described under "Risk Factors Relating to the Deutsche
Telekom/VoiceStream Merger and the Deutsche Telekom/Powertel Merger" as
they apply to VoiceStream.
- The relatively small current market share of VoiceStream in the U.S.
mobile telecommunications market.
- The substantial operating losses and negative cash flow from operations
incurred by VoiceStream to date and expected to be incurred by
VoiceStream in the future.
- The substantial capital expenditures likely to be required to build out
VoiceStream's mobile network and to market and distribute VoiceStream's
mobile services in the U.S., including the uncertainties associated with
potential auctions of additional FCC licenses, both as to the timing of
such auctions and the financial obligations to be incurred in connection
with any successful bids.
- The risk that, if the Deutsche Telekom/VoiceStream merger were not to be
completed, Deutsche Telekom would retain a $5 billion minority financial
investment in VoiceStream that would not provide it with control over
VoiceStream's operations.
RECOMMENDATION AND CONSIDERATIONS OF THE VOICESTREAM BOARD OF DIRECTORS
On July 23, 2000, the board of directors of VoiceStream, by unanimous vote
of all of the directors present, with one director absent, determined the
Deutsche Telekom/VoiceStream merger and the other transactions contemplated by
the Deutsche Telekom/VoiceStream merger agreement to be advisable, fair to and
in the best interests of VoiceStream and its stockholders, approved and adopted
the Deutsche
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Telekom/VoiceStream merger agreement and recommended that the stockholders of
VoiceStream vote for approval and adoption of the Deutsche Telekom/VoiceStream
merger agreement. THE VOICESTREAM BOARD CONTINUES TO RECOMMEND THAT THE
STOCKHOLDERS OF VOICESTREAM VOTE "FOR" APPROVAL AND ADOPTION OF THE DEUTSCHE
TELEKOM/VOICESTREAM MERGER AGREEMENT AT THE VOICESTREAM SPECIAL MEETING.
In the course of reaching its decision to adopt the Deutsche
Telekom/VoiceStream merger agreement, the VoiceStream board consulted with
management, as well as with its outside legal counsel and financial advisors,
and considered the following material factors:
- Financial Terms -- Premium Valuation; Continuing Interest in Combined
Company. The VoiceStream board noted that:
-- Based on the closing market price of Deutsche Telekom ordinary
shares on the last trading day prior to the announcement of the
Deutsche Telekom/VoiceStream merger, the per share value of the
Deutsche Telekom/VoiceStream merger consideration represented a
premium of approximately:
(1) 31% over the closing price of VoiceStream common shares on the
last trading day prior to the VoiceStream board's approval;
(2) 57% over the closing price of VoiceStream common shares on July
10, 2000, the last date prior to public reports of merger
discussions between Deutsche Telekom and VoiceStream; and
(3) 58% and 96% over the average closing prices of VoiceStream
common shares for the three and six month periods leading up to
the announcement of the Deutsche Telekom/VoiceStream merger
agreement, respectively; and
-- The stock portion of the aggregate merger consideration, even
without considering the $30 per share in cash, would be received by
VoiceStream stockholders at a significant premium to historical
ratios of the relative trading prices of Deutsche Telekom ordinary
shares and VoiceStream common shares. As a result, the VoiceStream
stockholders would obtain a continuing interest in the Deutsche
Telekom/VoiceStream combined company on favorable terms.
- Alternatives to the Merger. VoiceStream had considered a number of
strategic alternatives and concluded that the Deutsche
Telekom/VoiceStream merger represented the most desirable strategic
alternative for VoiceStream, as well as the most attractive opportunity
that was available to VoiceStream and its stockholders. Specifically:
-- The VoiceStream board believed that in order to compete effectively
in the wireless telecommunications industry, VoiceStream would need
to continue its strategy of expanding its geographic coverage,
including by acquiring spectrum licenses, building out its network
in areas where it held licenses and growing its subscriber base.
The VoiceStream board considered that this strategy entails
considerable risk and would require VoiceStream to raise
significant amounts of new debt and equity capital;
-- The VoiceStream board considered various strategic alternatives
available to VoiceStream, including:
(1) continuing as an independent entity and entering into strategic
financing or business arrangements with other industry
participants or financing sources that would assist VoiceStream
in financing its business strategy;
(2) pursuing one or more significant acquisitions of other wireless
communications companies; and
(3) entering into a combination with or being acquired by a major
telecommunications company of national or global scale, or a
company in another industry;
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-- VoiceStream's directors and management investigated and discussed
these strategic alternatives over a period of months, and, during
this period, were in contact with and/or engaged in discussions
with numerous other parties interested in acquiring, being acquired
by, or engaging in a strategic or financial alliance with
VoiceStream, as discussed under "-- Background of the Deutsche
Telekom/VoiceStream Merger;" and
-- The possibility of a combination between Deutsche Telekom and
VoiceStream received substantial publicity commencing at least two
weeks before Deutsche Telekom and VoiceStream announced the
Deutsche Telekom/VoiceStream merger, and earlier a possible
strategic investment in VoiceStream was the subject of considerable
publicity. Notwithstanding the investigations and discussions
described above, and despite the publicity, only one other party
indicated an interest in engaging in a business combination
transaction at a value to VoiceStream stockholders comparable to
that offered by Deutsche Telekom. The preliminary proposal from the
third party was not a firm proposal, did not offer the assurances
of value or completion offered by Deutsche Telekom, and was subject
to a due diligence contingency.
- Opinion of Financial Advisor. Goldman Sachs, VoiceStream's financial
advisor, made presentations to the VoiceStream board concerning financial
aspects of the proposed Deutsche Telekom/VoiceStream merger and of the
various strategic alternatives available to VoiceStream, and delivered
its oral opinion, later confirmed in writing, that as of the date of that
opinion, the merger consideration in aggregate to be received by holders
of VoiceStream common shares was fair from a financial point of view to
those holders of VoiceStream common shares.
- $5 Billion Investment by Deutsche Telekom. The VoiceStream board viewed
favorably Deutsche Telekom's willingness to invest $5 billion in
VoiceStream convertible preferred shares at an effective price of $160
per VoiceStream common share irrespective of whether the Deutsche
Telekom/ VoiceStream merger were completed. This investment, which was
completed on September 6, 2000, will help VoiceStream to finance its
existing business strategy in the near term, including the potential
acquisition of spectrum licenses.
- Complementary Strategies and Technologies. The VoiceStream board
believed that there is a strong strategic and technology fit between
Deutsche Telekom's and VoiceStream's mobile communications businesses and
operations. In particular, the VoiceStream board noted that:
-- VoiceStream's and Deutsche Telekom's mobile communications services
are based on compatible network platforms utilizing GSM wireless
technology, which is the established standard in most countries
outside the United States; and
-- VoiceStream is the only U.S. wireless communications provider with
a nationwide GSM network.
- New Opportunities for Growth. The VoiceStream board believed that
combining VoiceStream's and Deutsche Telekom's mobile communications
businesses will create growth opportunities not available to either
company without the Deutsche Telekom/VoiceStream merger. These include
the opportunities:
-- to offer seamless services on a global basis over a common
technology platform and to provide services such as global roaming,
unified billing and worldwide customer service;
-- accelerate the introduction by VoiceStream of next-generation
wireless voice and data services, such as mobile Internet and
multimedia applications; and
-- to use Deutsche Telekom's greater financial resources to finance
VoiceStream's growth-focused business strategy, which is expected
to require significant capital commitments in the near term.
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The VoiceStream board observed that these opportunities could enable the
combined company to grow more quickly and beyond the levels VoiceStream
could be expected to achieve without the Deutsche Telekom/VoiceStream
merger.
- Likelihood of Completion. The VoiceStream board believed that the nature
and relatively limited number of conditions to the completion of the
Deutsche Telekom/VoiceStream merger, and the strength of Deutsche
Telekom's obligations to fulfill those conditions, would increase the
likelihood that the Deutsche Telekom/VoiceStream merger will be
completed.
- Tax-Free Treatment. It is expected that the portion of the merger
consideration to be received by VoiceStream stockholders in the form of
Deutsche Telekom ADSs or Deutsche Telekom ordinary shares will be
tax-free to those stockholders for U.S. federal income tax purposes,
although the VoiceStream board also considered that the cash portion of
the Deutsche Telekom/VoiceStream merger consideration would be taxable
for U.S. federal income tax purposes. See "U.S. Federal and German Tax
Consequences."
The VoiceStream board also considered the following potentially negative
factors associated with the Deutsche Telekom merger:
- the risks described under "Risk Factors Relating to the Deutsche
Telekom/VoiceStream Merger and the Deutsche Telekom/Powertel Merger;"
- that legislation had been proposed in the U.S. Congress which, if
enacted, would have prevented the FCC from approving the transfer of
wireless licenses to an entity of which a foreign government owns more
than 25 percent and would have had the effect of preventing the U.S.
regulatory approvals necessary for the Deutsche Telekom/VoiceStream
merger, and the risk that there may be other legislation or other
political or regulatory opposition to the Deutsche Telekom/VoiceStream
merger that could delay, impede or prohibit the Deutsche
Telekom/VoiceStream merger, as discussed under "Regulatory
Approvals -- Regulatory Approvals Required for the Deutsche
Telekom/VoiceStream Merger and the Deutsche Telekom/Powertel Merger;"
- that (1) the Deutsche Telekom/VoiceStream merger agreement is required to
be submitted to the stockholders even if the VoiceStream board withdraws
or changes its recommendation that VoiceStream stockholders vote in favor
of the merger; and (2) because VoiceStream stockholders representing in
excess of 50% of the outstanding voting power would enter into
stockholder agreements with Deutsche Telekom contemporaneously with the
signing of the Deutsche Telekom/VoiceStream merger agreement, and would
agree to vote their shares in favor of the merger agreement, stockholder
approval of the merger is assured even if the VoiceStream board were to
withdraw or change its recommendation.
These facts would likely discourage other potentially interested third
parties from proposing an alternative or superior transaction to
VoiceStream and would prevent VoiceStream from engaging in any such
transaction if proposed;
- that Deutsche Telekom ordinary shares and Deutsche Telekom ADSs have
experienced substantial price volatility in the past year;
- the risk that because the exchange ratios for the stock election and the
stock portion of the mixed election are fixed and the cash election is
subject to proration, the dollar value of the merger consideration to
VoiceStream stockholders receiving Deutsche Telekom ADSs or Deutsche
Telekom ordinary shares in the Deutsche Telekom/VoiceStream merger could
decrease prior to the completion of the merger. The merger agreement does
not contain a "collar" or other mechanism that could mitigate the effect
of a decrease in the trading price of Deutsche Telekom shares, except that
the VoiceStream board has the right to terminate the Deutsche
Telekom/VoiceStream merger if the trading price of Deutsche Telekom
ordinary shares falls below 33 euros as calculated in accordance with the
Deutsche Telekom/VoiceStream merger agreement during a 15-day measurement
period shortly prior to completion of the merger; and
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- that Deutsche Telekom is organized under German law and that the Federal
Republic of Germany and Kreditanstalt fur Wiederaufbau, which in this
document we refer to as "KfW", which is a development bank that is 80
percent owned by the Federal Republic and 20 percent owned by the German
Federal States, owned, as of July 23, 2000 approximately 58%, in the
aggregate, of Deutsche Telekom's shares, and after the completion of the
Deutsche Telekom/VoiceStream merger the aggregate ownership of Deutsche
Telekom by the Federal Republic of Germany and KfW would be expected to
be diluted to approximately 47% of Deutsche Telekom's shares.
The VoiceStream board believed and continues to believe that these
potential risks are greatly outweighed by the potential benefits anticipated to
result from the Deutsche Telekom/VoiceStream merger.
In considering the proposed Deutsche Telekom/VoiceStream merger, the
directors of VoiceStream were aware of the interests of certain officers and
directors in the Deutsche Telekom/VoiceStream merger described under
"-- Interests of Directors and Officers of VoiceStream in the Deutsche Telekom/
VoiceStream Merger."
The foregoing discussion addresses the material information and factors
considered by the VoiceStream board in its consideration of the Deutsche
Telekom/VoiceStream merger, including factors that support the Deutsche
Telekom/VoiceStream merger as well as those that may weigh against it. The
VoiceStream board conducted numerous discussions of the factors described above,
including asking questions of VoiceStream's management and legal and financial
advisors. In view of the variety of factors and the amount of information
considered, the VoiceStream board did not find it practical to, and did not,
make specific assessments of, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination. In addition, the
VoiceStream board did not undertake to make any specific determination as to
whether any particular factor, or any aspect of any particular factor, was
favorable or unfavorable to its ultimate determination. The determination to
approve the Deutsche Telekom/VoiceStream merger was made after consideration of
all of the factors as a whole. In addition, individual members of the
VoiceStream board may have given different weights to different factors.
Subsequent Stock Market Developments
As of February 7, 2001, the trading price of Deutsche Telekom ordinary
shares on the Frankfurt Stock Exchange had declined from 55.27 euros to 33.02
euros, or by approximately 40%, since the signing of the Deutsche
Telekom/VoiceStream merger agreement on July 23, 2000. As a result, the mixed
election consideration would have had a value on February 7, 2001 of
approximately $128.69, depending on exchange rates and other factors affecting
the calculation of the tax-related adjustment to the consideration, which
represents a premium of approximately 7.7% to the $118.81 trading price of
VoiceStream common stock on that day. As discussed above, in negotiating and
approving the merger agreement, the VoiceStream board was aware that a decline
in the trading price of Deutsche Telekom shares would decrease the dollar value
of the stock portion of the consideration to be received by VoiceStream
stockholders, and this fact was among the reasons VoiceStream negotiated to
include up to $30 of cash per VoiceStream common share in the merger
consideration. However, as is also discussed above, the VoiceStream board
believed that in a strategic transaction such as the Deutsche Telekom/
VoiceStream merger, the relative interest of the former VoiceStream stockholders
in the combined company after the merger is an important measure of long term
value of the transaction to VoiceStream stockholders, particularly in light of
the VoiceStream board's view that the combined company would be likely to grow
more quickly and beyond the levels VoiceStream could be expected to achieve
without the merger. It is expected that VoiceStream stockholders will receive
Deutsche Telekom shares that will represent approximately 21.1% of the equity of
Deutsche Telekom outstanding after the Deutsche Telekom/VoiceStream merger, or
20.4% if both the Deutsche Telekom/VoiceStream and Deutsche Telekom/Powertel
mergers are completed. These percentages may increase slightly depending on the
extent to which the tax-related adjustment to the merger consideration is
necessary, but will be unaffected by changes in the trading price of Deutsche
Telekom shares.
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OPINION OF VOICESTREAM'S FINANCIAL ADVISOR
VoiceStream Fairness Opinion
Goldman Sachs has acted as financial advisor to VoiceStream in connection
with the Deutsche Telekom/ VoiceStream merger. On July 23, 2000, Goldman Sachs
delivered its oral opinion to the VoiceStream board, subsequently confirmed in
writing, that, as of July 23, 2000, the Deutsche Telekom/VoiceStream merger
consideration in aggregate to be received by holders of VoiceStream common
shares was fair from a financial point of view to those holders of VoiceStream
common shares.
For purposes of the opinion and this description of the opinion, merger
consideration means the right to receive, with respect to each VoiceStream
common share, at the election of the holder of that share:
- 3.7647 Deutsche Telekom ordinary shares as more fully set forth in the
Deutsche Telekom/VoiceStream merger agreement;
- $200 in cash; or
- a combination of $30 and 3.2 Deutsche Telekom ordinary shares.
Each case is subject to certain procedures and limitations contained in the
Deutsche Telekom/VoiceStream merger agreement including, without limitation,
limiting the cash consideration to a maximum aggregate amount and to the right
of VoiceStream to reduce such maximum aggregate amount as it reasonably
determines necessary to permit delivery of the requisite tax opinion pursuant to
the Deutsche Telekom/ VoiceStream merger agreement, as to which procedures and
limitations Goldman Sachs expressed no opinion.
The full text of the Goldman Sachs opinion is attached as Annex D to this
proxy statement/prospectus and stockholders of VoiceStream are urged to, and
should, read such opinion in its entirety.
In connection with its opinion, Goldman Sachs reviewed, among other things:
- the Deutsche Telekom/VoiceStream merger agreement;
- the subscription agreement relating to the VoiceStream voting preferred
shares purchased by Deutsche Telekom;
- the annual reports to stockholders and annual reports on Form 10-K of
VoiceStream and its predecessors for the four years ended December 31,
1999;
- certain interim reports to stockholders and quarterly reports on Form
10-Q of VoiceStream;
- the definitive proxy statement dated January 25, 2000, in connection with
the acquisitions by VoiceStream of Aerial and Omnipoint;
- the Forms 20-F of Deutsche Telekom for each of the three years ended
December 31, 1999;
- certain interim reports to stockholders of Deutsche Telekom;
- the registration statement on Form F-3 of Deutsche Telekom, including the
prospectus, dated June 17, 2000, related to Deutsche Telekom's offering
of 200 million Deutsche Telekom ordinary shares;
- the registration statement on Form F-3 of Deutsche Telekom, including the
prospectus supplement, dated June 28, 2000, related to Deutsche Telekom's
offering of $14.6 billion aggregate principal amount of notes;
- other communications from VoiceStream and Deutsche Telekom to their
respective stockholders; and
- internal financial analyses and forecasts for VoiceStream prepared by the
management of VoiceStream.
Goldman Sachs also held discussions with members of the senior management
of VoiceStream and Deutsche Telekom regarding their assessment of the strategic
rationale for, and the potential benefits of,
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the Deutsche Telekom/VoiceStream merger, and the past and current business
operations, financial condition and future prospects of their respective
companies.
In addition, Goldman Sachs:
- reviewed the reported prices and trading activity for VoiceStream common
shares and Deutsche Telekom ordinary shares;
- compared certain financial and stock market information for VoiceStream
and Deutsche Telekom with similar information for certain other companies
the securities of which are publicly traded;
- reviewed the financial terms of certain recent business combinations in
the telecommunications industry specifically, and in other industries
generally; and
- performed such other studies and analyses as Goldman Sachs considered
appropriate.
Goldman Sachs understood that, in connection with the Deutsche
Telekom/VoiceStream merger agreement VoiceStream would issue, and since then
VoiceStream has issued, to Deutsche Telekom 3,906,250 shares of VoiceStream
voting preferred shares for aggregate consideration of $5 billion pursuant to
the voting preferred stock subscription agreement.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information discussed with or reviewed by it, and assumed
such accuracy and completeness for purposes of rendering its opinion. As the
VoiceStream board of directors was aware, Deutsche Telekom did not make
available to Goldman Sachs its projections of expected future financial
performance. Accordingly, Goldman Sachs's review of such matters was limited to
discussions with members of the senior management of Deutsche Telekom regarding
certain research analyst estimates of future financial performance of Deutsche
Telekom. In addition, Goldman Sachs did not make an independent evaluation or
appraisal of the assets and liabilities of VoiceStream or Deutsche Telekom or
any of their subsidiaries, and Goldman Sachs was not furnished with any such
evaluation or appraisal. Goldman Sachs also assumed that all material
governmental, regulatory or other consents and approvals necessary for the
completion of the Deutsche Telekom/VoiceStream merger will be obtained without
any adverse effect on VoiceStream or Deutsche Telekom or on the expected
benefits of the Deutsche Telekom/VoiceStream merger. Goldman Sachs's opinion was
addressed to the VoiceStream board, and the opinion does not constitute a
recommendation as to how any holder of VoiceStream common shares should vote or
which election to take with respect to the form of merger consideration to be
received in the Deutsche Telekom/VoiceStream merger.
The following is a summary of the material financial analyses presented by
Goldman Sachs to the VoiceStream board of directors on July 21, 2000. Some of
the summaries of the financial analyses include information presented in tabular
format. The tables must be read together with the text accompanying each
summary.
Analysis of VoiceStream
Historical Exchange Ratio Analysis. Goldman Sachs reviewed the historical
trading prices of Deutsche Telekom ordinary shares and VoiceStream common shares
in order to compare exchange ratios implied by those historical trading prices
to the merger consideration in the Deutsche Telekom/VoiceStream merger.
Specifically, Goldman Sachs compared the stock election exchange ratio and the
mixed election exchange ratio in the Deutsche Telekom/VoiceStream merger to the
ratio of the daily closing share prices of Deutsche Telekom ordinary shares to
corresponding prices for VoiceStream common shares on July 20, 2000, July 10,
2000, which was the last trading day before any public reports of the proposed
Deutsche Telekom/ VoiceStream merger, and the 10-day, 20-day, 30-day, 60-day,
three-month, six-month, nine-month and one-year periods ending July 20, 2000. In
this analysis, Deutsche Telekom share prices were converted to U.S. dollars
based on the noon buying rate of euros for U.S. dollars as reported by the
Federal Reserve System on the date indicated or averaged across the period
measured. This analysis indicated the following implied exchange ratios for
these points in time or
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periods, as compared with the stock election exchange ratio of 3.7647 and the
mixed election exchange ratio of 3.2 in the Deutsche Telekom/VoiceStream merger:
IMPLIED
DEUTSCHE STOCK IMPLIED
VOICESTREAM TELEKOM ELECTION MIXED ELECTION
PRICE PRICE EXCHANGE RATIO EXCHANGE RATIO
----------- ---------------- -------------- --------------
July 20, 2000..................... $153.00 $53.01 2.89x 2.32x
July 10, 2000..................... 124.94 58.41 2.14 1.63
10-day average.................... 141.73 55.98 2.54 2.00
20-day average.................... 131.25 56.91 2.31 1.79
30-day average.................... 131.38 59.07 2.23 1.72
60-day average.................... 119.72 59.61 2.02 1.51
Three-month average............... 118.48 59.93 1.99 1.49
Six-month average................. 123.59 70.57 1.79 1.35
Nine-month average................ 117.20 66.71 1.79 1.32
One-year average.................. 100.66 60.47 1.65 1.12
Goldman Sachs noted that the stock election exchange ratio and the mixed
election exchange ratio in the Deutsche Telekom/VoiceStream merger were greater
than the corresponding implied exchange ratios for each period measured.
Selected Companies Analysis. Goldman Sachs performed an analysis to
determine the public market values of VoiceStream relative to other public
companies in the wireless telecommunications sector, and how these figures
compared with the values for VoiceStream implied by the merger consideration in
the Deutsche Telekom/VoiceStream merger. Goldman Sachs reviewed and compared
financial information of VoiceStream to corresponding financial information for
selected companies chosen because they are publicly traded companies with
operations that are similar to those of VoiceStream. Goldman Sachs undertook to
determine how different measures of the price per VoiceStream POP represented by
the Deutsche Telekom/VoiceStream merger consideration compared both to
VoiceStream's stand-alone price per POP and the price per POP for the following
selected companies: Nextel Communications Inc., Powertel, TeleCorp PCS Inc. and
Sprint PCS Group.
One measure for calculating the value of companies within the wireless
telecommunications sector is through the analysis of the number of persons who
potentially have access to the wireless services of a company by virtue of their
geographic location. POPs are derived from management estimates and public
sources. The price per POP was calculated in each case by dividing the
respective company's core enterprise value or adjusted enterprise value by
different measures of that company's POPs. In this analysis:
- "Core enterprise value" is a measure of each company's value that is
calculated by adding its market capitalization, total debt, preferred
shares and minority interest, and subtracting from that sum its cash,
cash equivalents and an estimate of non-core assets, which are assets
that are not directly related to the company's wireless network.
- "Adjusted enterprise value" is a measure of each company's value that is
calculated by subtracting from the core enterprise value for that company
the value of its unbuilt POPs, or POPs for which the company does not
currently have plans to establish an operating network, valued at $25.00
per POP.
Different measures of a company's POPs are utilized to measure a company's
coverage of those POPs:
- "Covered POPs" are the estimated number of persons within the license
area actually served by the operating wireless network of the company.
- "Weighted Total POPs" is a measure calculated to reflect the fact that
networks have differing amounts of spectrum available in different
geographic areas and is calculated by weighing POPs with greater MHz
more than others, since licenses with greater MHz provide greater band
width or capacity. "Weighted Total POPs" are determined by multiplying
the number of POPs in a 30 MHz
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license area by one, the number of POPs in a 20 MHz license area by
0.75, the number of POPs in a 10 MHz license area by 0.25 and, with
respect to Nextel, the number of Nextel POPs by 0.75.
Finally, values per POP show the relation of the number of a company's POPs
to its capitalization. "2001 Covered POP Value" represents adjusted enterprise
value divided by projected 2001 covered POPs, "Weighted Total POP Value"
represents core enterprise value divided by Weighted total POPS and "Total POP
Value" represents core enterprise value divided by total POPs.
The analysis was performed using share prices as of July 20, 2000.
The following chart summarizes the results of that analysis:
VOICESTREAM VOICESTREAM* SPRINT PCS TELECORP POWERTEL NEXTEL
----------- ------------ ---------- -------- -------- -------
2001 Covered POPs (in
millions)................ 136.7 136.7 185.0 30.8 17.7 192.0
2001 Covered POP Value (in
dollars per POP)......... $331.80 $424.36 $419.94 $350.51 $331.28 $321.12
Weighted Total POPs (in
millions)................ 161.0 161.0 191.1 28.7 22.1 176.5
Weighted Total POP Value
(in dollars per POP)..... $287.44 $366.04 $415.80 $376.82 $265.02 $352.72
Total POPs (in millions)... 220.2 220.2 270.0 35.2 24.4 235.3
Total POP Value (in dollars
per POP)................. $210.14 $267.60 $294.22 $306.70 $240.31 $264.54
---------------
* VoiceStream valued at $199.63, which represented the value of 3.2 Deutsche
Telekom shares plus $30 on July 20, 2000, based on a closing price per share
of Deutsche Telekom stock of 57.05 euros and an exchange rate of 0.9292.
Goldman Sachs noted that the merger consideration resulted in a 2001
Covered POP Value which was higher than the range of values calculated for
VoiceStream on a stand-alone basis and the four other selected companies, and a
Weighted Total POP Value and a Total POP Value which were within the range of
values calculated for pre-acquisition VoiceStream and the four other selected
companies.
Goldman Sachs also computed the implied price per VoiceStream common share
that would result if VoiceStream's 2001 Covered POP Value were valued at the
same price per POP as that of each of Sprint PCS, TeleCorp, Powertel and Nextel.
This was done by multiplying each company's 2001 Covered POP Value by
VoiceStream's projected 2001 Covered POPs, adding in VoiceStream's unbuilt
licenses and non-core assets and subtracting VoiceStream's net debt, and the
value of dividing that figure by the 271.3 million VoiceStream common shares
outstanding as of June 2, 2000. The following chart summarizes the results of
that analysis:
SPRINT
VOICESTREAM PCS(a) TELECORP(b) POWERTEL NEXTEL
----------- ------------- ----------- -------- ------
2001 Covered POP Value (in dollars
per POP)........................... $332 $420 $351 $331 $321
Implied VoiceStream share price...... 153.00 197.41 162.43 152.74 147.62
Premium (decrease) to VoiceStream
current share price(c)............. NM 29.0% 6.2% (0.2)% (3.5)%
---------------
(a) Enterprise valued adjusted for value of affiliates at $14 per POP, assuming
Sprint captures 8% of the revenues as net income, discounted back at
Sprint's weighted average cost of capital, based on publicly available
research.
(b) Pro forma for Tritel, Inc. acquisition.
(c) The symbol "NM" means that the value was not measured because there was no
premium or decrease to current share price.
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Goldman Sachs noted that the $199.63 per share value of VoiceStream common stock
in the Deutsche Telekom/VoiceStream merger, based on July 20, 2000 stock prices
and assuming a mixed election, was above the range of share valuations for
VoiceStream stockholders on a stand-alone basis implied by the range of values
derived in the analysis above.
Discounted Cash Flow Analysis. Goldman Sachs performed an analysis the
purpose of which was to compare the present value per VoiceStream common share,
using discounted cash flow methodologies, to the value per share represented by
the merger consideration. Goldman Sachs performed this analysis by determining
ranges of enterprise values and equity values for VoiceStream on a stand-alone
basis. Specifically, Goldman Sachs considered the range of values for
VoiceStream on a stand-alone basis based on financial models prepared by
VoiceStream's management. The following tables reflect two scenarios based on
these models; a "base case", which involves a conservative estimate of future
revenue growth, and a "growth case", which involves a less conservative estimate
of future revenue growth. The tables present the ranges of enterprise values and
equity values, as well as the price per share and the ratio of enterprise value
to 2001 Covered POPs for both of the VoiceStream cases, based on forward 2009
EBITDA multiples for VoiceStream ranging from 10.0x to 12.0x and discount rates
ranging from 11% to 12%. The various ranges for the discount rates and terminal
value multiples were chosen by Goldman Sachs based upon theoretical analyses of
cost of capital ranges that could be applicable. Equity value represents
VoiceStream's enterprise value net of the book value of VoiceStream's
outstanding net indebtedness and estimated non-core assets.
"EBITDA" stands for earnings before interest, taxes, depreciation and
amortization. EBITDA is considered to be akin to cash flow and is considered to
be a more relevant measure of value in the wireless telecommunications sector
than net earnings or revenues.
VOICESTREAM VOICESTREAM
BASE CASE GROWTH CASE
---------------- ----------------
Enterprise value (in millions)............................. $51,006-61,615 $55,390-67,248
Equity value (in millions)................................. $45,116-55,725 $54,500-66,358
Price per VoiceStream share................................ $166.28-205.38 $180.12-219.31
2001 Covered POP Value (in dollars per POP)................ $343-421 $375-462
Goldman Sachs noted that the $199.63 per share value of VoiceStream common stock
in the Deutsche Telekom/VoiceStream merger, based on July 20, 2000 stock prices
and assuming a mixed election, was within the range of share valuations for
VoiceStream stockholders on a stand-alone basis implied by the range of values
derived in the discounted cash flow analysis.
Selected Transaction Analysis. Goldman Sachs performed an analysis to
assess the premium and the implied value per POP represented by the merger
consideration, and to compare those figures to premiums and price per POP in
other selected transactions or proposed transactions in the wireless industry.
Goldman Sachs measured the premium represented by the merger consideration and
the price per POP based on July 20, 2000 stock prices, and compared the premiums
and price per POP in the following transactions:
ACQUIROR TARGET
----------------------------- -----------------------------
TeleCorp Tritel Inc.
MCI Worldcom, Inc. Sprint PCS
VoiceStream Aerial
VoiceStream Omnipoint
Vodafone Group Public Limited Airtouch Communications, Inc.
Goldman Sachs selected these transactions for comparison because they generally
involved United States-based wireless PCS companies like VoiceStream.
The following table presents, for each of the acquired companies involved
in the relevant transaction, its enterprise value implied by the consideration
paid or to be paid in the relevant transaction, its implied
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Weighted Total POP Value based on that consideration and the premium to the
share price for the acquired company on the last trading day before any public
reports of the proposed transaction. The premium is the percentage by which the
value of the consideration in an acquisition exceeds the market value of the
security prior to the first public announcement or news of the acquisition
offer.
WEIGHTED TOTAL
ENTERPRISE VALUE POP VALUE
TRANSACTION (IN MILLIONS) (IN $ PER POP) PREMIUM TO MARKET
----------- ---------------- -------------- -----------------
Deutsche Telekom -- VoiceStream.............. $60,166 $366.0 59.8%
TeleCorp -- Tritel........................... 5,269 376.4 73.7
MCI Worldcom -- Sprint PCS................... 54,918 291.0 32.1
VoiceStream -- Aerial........................ 3,154 111.4 36.5
VoiceStream -- Omnipoint..................... 4,634 57.2 64.2
Vodafone -- AirTouch......................... 67,300 n/a 42.1
Goldman Sachs noted that the consideration to be paid in the Deutsche/Telekom
merger represented a premium to market that was within the range of the premiums
to market for the transactions reviewed.
Analysis of Deutsche Telekom
Sum-of-the-Parts Analysis. Goldman Sachs performed an analysis the purpose
of which was to determine a range of values for Deutsche Telekom based on the
values of the five major business units of Deutsche Telekom. The five units of
Deutsche Telekom analyzed by Goldman Sachs were:
- wireless operations;
- traditional fixed-line telecommunications operations;
- Internet operations;
- data communications operations; and
- miscellaneous other investments.
The following table presents the low, high, median and current equity value
and equity value per share for Deutsche Telekom based on that analysis:
LOW HIGH MEDIAN CURRENT
-------- -------- -------- --------
Total (in million euros)....................... 153,543 230,535 185,001 172,839
Per Deutsche Telekom share (in euros).......... 50.68 76.09 61.06 57.05
To reflect the way that the public markets value these two different types
of operations, Goldman Sachs valued Deutsche Telekom's wireless operations by
using discounted cash flow methodologies and EBITDA multiples, and valued its
traditional fixed-line telecommunications operations by using discounted cash
flow methodologies and revenue and enterprise value multiples. With respect to
Deutsche Telekom's Internet operations, Goldman Sachs based its analysis on
market valuations for Deutsche Telekom's publicly traded Internet subsidiary,
T-Online. Finally, for data communications and miscellaneous other investments,
Goldman Sachs used various valuation methodologies, including revenue multiples,
market values for certain public investments and acquisition price or book value
for other investments. In a multiples analysis, a company's price per share is
expressed as a multiple of a particular financial measure, such as EBITDA or
revenue per share. The resulting multiple can then be compared to the
corresponding multiple for other companies.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analysis or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs's opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly
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comparable to VoiceStream or Deutsche Telekom or the Deutsche
Telekom/VoiceStream merger. Goldman Sachs prepared the analyses solely for
purposes of providing its opinion to the VoiceStream board as to the fairness of
the merger consideration in aggregate to be received by holders of VoiceStream
common shares. The analyses do not purport to be appraisals or to necessarily
reflect the prices at which the business or securities actually may be sold.
Analyses based upon forecasts of future results, which are inherently subject to
uncertainty, are not necessarily indicative of actual future results, which may
be significantly more or less favorable than suggested by such analyses.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. VoiceStream selected
Goldman Sachs as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in transactions similar
to the Deutsche Telekom/VoiceStream merger and because of Goldman Sachs'
familiarity with VoiceStream arising from having provided investment banking
services in the past to VoiceStream and its predecessor.
Goldman Sachs is familiar with VoiceStream, having provided certain
investment banking services, from time to time to:
- VoiceStream;
- VoiceStream's predecessor, VoiceStream Wireless Corporation, a Washington
corporation, referred to in this description as VS Washington; and
- VS Washington's former parent, Western Wireless.
Such services include acting as:
- lead managing underwriter in the initial public offering of 12.65 million
Western Wireless common shares in May 1996;
- lead manager in the public offering of $200 million aggregate principal
amount of 10.5% senior subordinated notes due June 2006 of Western
Wireless in May 1996;
- lead manager in the private offering of $200 million aggregate principal
amount of 10.5% senior subordinated notes due February 2007 of Western
Wireless in October 1996;
- Western Wireless's financial advisor in connection with the sale of 19.9%
of the outstanding VS Washington common shares to Hutchison PCS (USA)
Limited in February 1998;
- lead manager in the secondary public offering of 13.915 million shares of
Western Wireless common shares in April 1998;
- VoiceStream's financial advisor in connection with the acquisition of
Omnipoint in June 1999;
- VoiceStream's financial advisor in connection with the acquisition of
Aerial in September 1999;
- lead manager in the private offering of $1.1 billion aggregate principal
amount of 10 3/8% senior notes due November 2009 of VS Washington and
VoiceStream and $720 million aggregate principal amount of 11 7/8% senior
discount notes due November 2009 of VS Washington and VoiceStream in
November 1999; and
- VoiceStream's financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Deutsche
Telekom/VoiceStream merger agreement.
Goldman Sachs has received compensation of approximately $39.5 million from
VoiceStream or VS Washington with respect to investment banking services
provided to VoiceStream and/or VS Washington over the past two years, which
includes $10 million already paid by VoiceStream in connection with the Deutsche
Telekom/VoiceStream merger. As of July 23, 2000, Goldman Sachs's parent
corporation and investment funds affiliated with Goldman Sachs had a principal
investment in VoiceStream in the
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amount of 9,800,469 VoiceStream common shares and the right to designate a
nominee for election to the VoiceStream board of directors. Terence O'Toole, a
managing director of Goldman Sachs, is a director of VoiceStream. From time to
time, Goldman Sachs also has provided, and is currently providing, significant
investment banking services to Deutsche Telekom, including having acted as:
- co-lead manager in the initial public offering of 714 million Deutsche
Telekom ordinary shares in November 1996;
- co-lead manager in the public offering of 250 million Deutsche Telekom
ordinary shares in June 1999;
- financial advisor to Deutsche Telekom in the acquisition of One 2 One
Ltd. in July 1999;
- co-lead manager in the initial public offering of 114 million shares of
T-Online common shares in April 2000;
- co-lead manager in the public offering of 200 million Deutsche Telekom
ordinary shares in June 2000;
- co-lead manager in the public offering of $14.6 billion aggregate
principal amount of notes, due at various maturity dates, of Deutsche
Telekom in June 2000.
In addition, Goldman Sachs may provide investment banking services to Deutsche
Telekom in the future.
Goldman Sachs provides a full range of financial advisory and securities
services, and, in the course of its normal trading activities, may, from time to
time, effect transactions and hold securities, including derivative securities,
of VoiceStream and Deutsche Telekom for its own account and for the accounts of
customers. As of July 21, 2000, Goldman Sachs had accumulated a net long
position of 1,178,796 Deutsche Telekom ordinary shares.
Pursuant to a letter agreement dated July 21, 2000, VoiceStream engaged
Goldman Sachs to act as its financial advisor in connection with a potential
transaction involving Deutsche Telekom. Pursuant to this letter agreement,
VoiceStream paid Goldman Sachs $10 million on completion of the sale of
VoiceStream voting preferred shares to Deutsche Telekom on September 6, 2000,
and has agreed to pay Goldman Sachs an additional $15 million on the date
VoiceStream stockholders vote to adopt the Deutsche Telekom/ VoiceStream merger
agreement. VoiceStream also has agreed to pay Goldman Sachs a transaction fee
equal to $70 million upon completion of the Deutsche Telekom/VoiceStream merger,
against which transaction fee the $25 million paid in accordance with the
preceding sentence will be credited. VoiceStream has agreed to reimburse Goldman
Sachs for its reasonable out-of-pocket expenses, including attorneys' fees, and
to indemnify Goldman Sachs against certain liabilities, including certain
liabilities under the U.S. federal securities laws.
INTERESTS OF DIRECTORS AND OFFICERS OF VOICESTREAM IN THE DEUTSCHE
TELEKOM/VOICESTREAM MERGER
Some of the directors and officers of VoiceStream have interests in the
Deutsche Telekom/VoiceStream merger that are different from, or in addition to,
the interests of VoiceStream stockholders generally. These interests, to the
extent material, are described below. The VoiceStream board was aware of these
interests and considered them in approving the Deutsche Telekom/VoiceStream
merger agreement and the Deutsche Telekom/VoiceStream merger.
Treatment of Equity Awards
The Deutsche Telekom/VoiceStream merger agreement provides that immediately
prior to the completion of the Deutsche Telekom/VoiceStream merger, each
outstanding option to purchase VoiceStream common shares will be converted into
the right to acquire Deutsche Telekom ordinary shares. The treatment of
VoiceStream options is described in greater detail under "Summary of the
Deutsche Telekom/VoiceStream Transaction Documents -- The Deutsche
Telekom/VoiceStream Merger Agreement -- Treatment of Options and Restricted
Stock." Upon stockholder approval of the Deutsche Telekom/VoiceStream merger by
the stockholders of VoiceStream, each outstanding option to purchase
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VoiceStream common shares granted prior to January 1, 2000 and held by the
directors and executive officers of VoiceStream will, by its terms, to the
extent not already vested, become immediately fully vested and exercisable,
except that the unvested options held by John W. Stanton, VoiceStream's chairman
and its chief executive officer, Robert R. Stapleton, VoiceStream's president,
Donald Guthrie, VoiceStream's vice chairman, Cregg B. Baumbaugh, VoiceStream's
executive vice president - finance, strategy and development, and Alan R.
Bender, VoiceStream's executive vice president, general counsel and secretary,
will not become immediately fully vested and exercisable because each of them
has waived the acceleration of the vesting of their options.
Assuming that at the completion of the Deutsche Telekom/VoiceStream merger
the value of a Deutsche Telekom share is $30.72, which was the price of a
Deutsche Telekom ADS on the NYSE on February 7, 2001, the value of the options
held by VoiceStream directors and executive officers that become vested as a
result of stockholder approval of the Deutsche Telekom/VoiceStream merger would
be as follows:
VALUE OF ACCELERATED
OPTIONS ASSUMING
DEUTSCHE TELEKOM
DIRECTORS AND EXECUTIVE OFFICERS SHARE PRICE OF $30.72
-------------------------------- ---------------------
Mitchell R. Cohen (director)................................ $ 76,052.55
Daniel J. Evans (director).................................. $ 76,052.55
Richard L. Fields (director)................................ $ 0
Canning Fok (director)...................................... $ 51,154.58
Jonathan M. Nelson (director)............................... $ 76,052.55
Terence M. O'Toole (director)............................... $ 76,052.55
James N. Perry, Jr. (director).............................. $ 0
Kaj-Erik Relander (director)................................ $ 0
James J. Ross (director).................................... $ 0
Frank J. Sixt (director).................................... $ 0
Douglas G. Smith (director)................................. $ 0
Hans Snook (director)....................................... $ 51,154.58
Timothy R. Wong* (senior vice president -- engineering)..... $2,381,052.01
Robert P. Dotson* (senior vice president -- marketing)...... $2,913,825.24
---------------
* Both of these executive officers have been offered, in exchange for waiving
the acceleration of the vesting of their unvested options, a like number of
additional options having the same terms, including exercise price and vesting
schedule, as the unvested options.
In addition, the VoiceStream board has discretion to vest the outstanding
restricted shares held by the VoiceStream executive officers, except for the
outstanding restricted VoiceStream common shares granted to Messrs. Stapleton,
Baumbaugh, Guthrie and Bender that are described in the following sentence. On
July 21, 2000, the board of directors of VoiceStream granted 127,871 restricted
VoiceStream common shares to Mr. Stapleton, 69,725 restricted VoiceStream common
shares to Mr. Baumbaugh, 51,475 restricted VoiceStream common shares to Mr.
Guthrie and 43,048 restricted VoiceStream common shares to Mr. Bender. Neither
the grant of such restricted shares nor the vesting of such restricted shares
was or is contingent upon the Deutsche Telekom/VoiceStream merger in any way.
The restricted shares have vested and are no longer subject to restriction based
upon VoiceStream having reached certain performance targets.
Stay Bonus Plan
Prior to the completion of the Deutsche Telekom/VoiceStream merger,
VoiceStream may implement a "stay bonus plan" for management. Pursuant to the
stay bonus plan, each person, other than executive officers, employed by
VoiceStream as of July 23, 2000, would receive a $3,000 cash bonus three months
following the completion of the Deutsche Telekom/VoiceStream merger if they
remain employed in good standing as of that date. In addition, approximately 500
to 1,000 management employees of VoiceStream,
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including the executive officers of VoiceStream other than Messrs. Stanton,
Stapleton, Baumbaugh, Guthrie and Bender, would be eligible to receive cash
bonuses equal to up to two years' base salary that would be paid as follows:
33.3% of the cash bonus would be paid 90 days after the completion of the
Deutsche Telekom/ VoiceStream merger, 33.3% of the cash bonus would be paid on
the first anniversary of the Deutsche Telekom/VoiceStream merger and 33.4% of
the cash bonus will be paid on the second anniversary of the Deutsche
Telekom/VoiceStream merger to those employees who remain employed in good
standing on those dates. The two executive officers eligible to receive such
cash bonus, Timothy R. Wong and Robert P. Dotson, would each be eligible to
receive an aggregate of up to $551,250 if they remained employed in good
standing until the second anniversary of the Deutsche Telekom/VoiceStream merger
and certain operating targets are achieved. Upon a participant's termination of
employment as a result of a reduction in force, termination without cause,
death, disability or a constructive termination due to a reduction in base pay,
the participant will be paid his remaining unpaid cash bonus in a lump sum.
Retention Plan
In addition, Deutsche Telekom and VoiceStream have entered into a retention
agreement providing an incentive to senior management employees of VoiceStream,
which is described under "Summary of the Deutsche Telekom/VoiceStream
Transaction Documents -- The Deutsche Telekom/VoiceStream Merger
Agreement -- Employee Benefits."
Tax Reimbursement Payments
If any VoiceStream employees, including executive officers, become subject
to the excise tax under Section 4999 of the U.S. tax code, VoiceStream may
provide to those employees tax reimbursement payments for the excise tax. The
aggregate amount of such payments to all employees is limited to $20 million.
Indemnification of Directors and Officers
Deutsche Telekom has agreed to cause the surviving corporation in the
Deutsche Telekom/VoiceStream merger to maintain, for a period of six years after
the completion of the Deutsche Telekom/VoiceStream merger, VoiceStream's current
provisions and policies regarding indemnification of officers and directors,
provided that the surviving corporation may substitute policies having at least
the same coverage and containing terms that are no less advantageous to the
insured. If the premium for such policies or substitute policies would otherwise
exceed 250% of the current premium, the surviving corporation need only obtain
as much insurance as can be obtained for 250% of the current premium. In
addition, Deutsche Telekom and VoiceStream have agreed to indemnify the officers
and directors of VoiceStream to the fullest extent permitted by law. For more
information, see "Summary of the Deutsche Telekom/VoiceStream Transaction
Documents -- The Deutsche Telekom/VoiceStream Merger
Agreement -- Indemnification and Insurance."
Stockholder Agreements
In connection with the execution of the Deutsche Telekom/VoiceStream merger
agreement, a number of VoiceStream stockholders and certain of their respective
affiliates entered into agreements with Deutsche Telekom regarding the voting
and transfer of all or a portion of their VoiceStream shares subject to such
agreements. Some of these stockholders are, or have relationships with,
directors or executive officers of VoiceStream, as follows:
- John W. Stanton, chairman and chief executive officer and director;
- Douglas G. Smith, vice chairman and director;
- Hutchison Whampoa Limited, which is the employer of directors Susan M.F.
Woo Chow, Canning K.N. Fok and Frank J. Sixt;
- Sonera Corporation, which is the employer of director Kaj-Erik Relander;
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- Goldman Sachs, which is the employer of director Terrence M. O'Toole;
- Madison Dearborn Capital Partners, LP, which is the employer of director
James N. Perry; and
- Allen & Company Incorporated, which is the employer of director Richard
L. Fields.
We describe these stockholder agreements in greater detail under "Summary
of the Deutsche Telekom/VoiceStream Transaction Documents -- Deutsche Telekom's
Agreements with Stockholders of VoiceStream."
APPRAISAL RIGHTS
Delaware law entitles the holders of record of VoiceStream common shares
and VoiceStream voting preferred shares that follow the procedures specified in
Section 262 of the Delaware corporation law to have their shares appraised by
the Delaware Court of Chancery and to receive the "fair value" of these
VoiceStream shares as of the completion of the Deutsche Telekom/VoiceStream
merger as determined by the court in place of the merger consideration. In order
to exercise such rights, a stockholder must demand and perfect the rights in
accordance with Section 262. The following is a summary of the material
provisions of Section 262 and is qualified in its entirety by reference to
Section 262, a complete copy of which is attached as Annex G to this proxy
statement/prospectus. You should carefully review Section 262 as well as the
information discussed below to determine your rights to appraisal.
Because all of the outstanding VoiceStream voting preferred shares are
owned by Deutsche Telekom, and Deutsche Telekom intends to vote these shares in
favor of the Deutsche Telekom/VoiceStream merger, the following discussion of
Section 262 addresses the rights and obligations of only the holders of
VoiceStream common shares.
If a holder of VoiceStream common shares elects to exercise the right to an
appraisal under Section 262, that VoiceStream stockholder must do all of the
following:
- file with VoiceStream at its main office in Bellevue, Washington, a
written demand for appraisal of VoiceStream common shares held before the
vote is taken on the Deutsche Telekom/VoiceStream merger agreement at the
VoiceStream special meeting, which demand must identify the VoiceStream
stockholder and expressly request an appraisal. This written demand for
appraisal must be in addition to and separate from any proxy or vote
against the Deutsche Telekom/VoiceStream merger agreement because voting
against or abstaining from voting or failing to vote on the Deutsche
Telekom/ VoiceStream merger agreement will not constitute a demand for
appraisal within the meaning of Section 262;
- not vote in favor of, or consent in writing to, the Deutsche
Telekom/VoiceStream merger agreement. Failing to vote or abstaining from
voting will satisfy this requirement, but a vote in favor of the Deutsche
Telekom/VoiceStream merger agreement, by proxy or in person, or the
return of a signed proxy card that does not specify a vote against
approval and adoption of the Deutsche Telekom/ VoiceStream merger
agreement, will constitute a waiver of the VoiceStream stockholder's
right of appraisal and will nullify any previously filed written demand
for appraisal; and
- continuously hold such shares through the completion of the Deutsche
Telekom/VoiceStream merger.
All written demands for appraisal should be addressed to VoiceStream
Wireless Corporation, 12920 SE 38th Street, Bellevue, Washington 98006,
Attention: General Counsel, before the vote is taken on the Deutsche
Telekom/VoiceStream merger agreement at the VoiceStream special meeting, and
should be executed by, or on behalf of, the holder of record of the relevant
VoiceStream common shares. This demand must reasonably inform VoiceStream of the
identity of the stockholder and that the stockholder is thereby demanding
appraisal of the stockholder's VoiceStream common shares.
Within 10 days after the completion of the Deutsche Telekom/VoiceStream
merger, the surviving corporation of the Deutsche Telekom/VoiceStream merger
will give written notice of the completion of
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the Deutsche Telekom/VoiceStream merger to each VoiceStream stockholder that has
satisfied the requirements of Section 262 and has not voted for or consented to
the proposal to approve and adopt the Deutsche Telekom/VoiceStream merger
agreement and the transactions contemplated by the Deutsche Telekom/VoiceStream
merger agreement. We refer to such a stockholder as a "dissenting stockholder".
Within 120 days after the completion of the Deutsche Telekom/VoiceStream merger,
the surviving corporation or any dissenting stockholder may file a petition in
the Delaware court demanding a determination of the fair value of the
VoiceStream common shares that are held by all dissenting stockholders. We
advise any dissenting stockholder desiring to file this petition to file such
petition on a timely basis unless the dissenting stockholder receives notice
that a petition has already been filed by the surviving corporation or another
dissenting stockholder.
If a petition for appraisal is timely filed, the court will determine which
stockholders are entitled to appraisal rights. The court then will determine the
fair value of the VoiceStream common shares held by the dissenting stockholders,
exclusive of any element of value arising from the accomplishment or expectation
of the Deutsche Telekom/VoiceStream merger, but together with a fair rate of
interest, if any, to be paid on the amount determined to be fair value. In
determining the fair value, the court will take into account all relevant
factors. The court may determine the fair value to be more than, less than or
equal to the consideration that the dissenting stockholder would otherwise be
entitled to receive under the Deutsche Telekom/VoiceStream merger agreement. If
a petition for appraisal is not timely filed, then the right to an appraisal
will cease. The costs of the appraisal proceeding may be determined by the court
and charged against the parties as the court determines to be equitable under
the circumstances. Upon the application of any stockholder, the court may
determine the amount of interest, if any, to be paid upon the value of the
VoiceStream common shares of stockholders entitled to such interest. Upon
application of a stockholder, the court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all
shares of VoiceStream common shares entitled to appraisal.
From and after the completion of the Deutsche Telekom/VoiceStream merger,
no dissenting stockholder will have any rights of a VoiceStream stockholder with
respect to that dissenting stockholder's shares for any purpose, except to
receive payment of its fair value and to receive payment of dividends or other
distributions on that dissenting stockholder's VoiceStream common shares, if
any, payable to VoiceStream stockholders of record as of a date prior to the
completion of the Deutsche Telekom/VoiceStream merger. If a dissenting
stockholder delivers to the surviving corporation a written withdrawal of the
demand for an appraisal within 60 days after the completion of the Deutsche
Telekom/VoiceStream merger or, if no petition for appraisal is filed within 120
days after the completion of the Deutsche Telekom/VoiceStream merger, then the
right of that dissenting stockholder to an appraisal will cease and the
dissenting stockholder will be entitled to receive only the mixed merger
consideration.
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THE DEUTSCHE TELEKOM/POWERTEL MERGER AND THE
VOICESTREAM/POWERTEL MERGER
BACKGROUND OF DEUTSCHE TELEKOM/POWERTEL MERGER AND VOICESTREAM/POWERTEL MERGER
Deutsche Telekom -- General Background
Deutsche Telekom has been seeking to expand internationally through
acquisitions, investments and joint undertakings in the areas that are the four
pillars of its growth strategy: mobile telecommunications, data/Internet
Protocol/systems, consumer Internet services and network access services.
Deutsche Telekom considers expansion of its international business to be an
essential component of its overall business strategy. In particular, Deutsche
Telekom has aimed to build on its strength in Europe and to expand its reach in
the United States. From time to time, Deutsche Telekom has engaged and may
continue to engage in discussions with other parties that may lead to one or
more substantial cross-border acquisitions or business combinations. In that
connection, Deutsche Telekom retained Donaldson, Lufkin & Jenrette and Dresdner
Kleinwort Benson in November 1999 as financial advisors to advise it on
acquisition alternatives in the U.S. wireless telecommunications industry.
VoiceStream -- General Background
Following the spin-off of VoiceStream from Western Wireless in May 1999,
VoiceStream's board of directors has sought to expand the geographic scope of,
and enhance the services provided by, its wireless business operations to enable
VoiceStream to become a nationwide service provider and to compete effectively
against larger wireless carriers. In late 1999 and the first half of 2000,
VoiceStream acquired wireless carriers Omnipoint and Aerial, received a $957
million investment from Hutchison Whampoa, a $500 million investment from
Sonera, entered into a new $3.25 billion credit agreement and raised $1.46
billion in a high-yield debt offering.
As a result of these acquisitions and financing activities, by the end of
the first half of 2000, VoiceStream had become a national competitor in the U.S.
wireless communications industry. VoiceStream's board of directors and
management believed that VoiceStream's size and financial resources relative to
other national competitors, and the conditions and trends in the
telecommunications industry, including the ongoing consolidation of
telecommunications companies both in the United States and globally, would
require VoiceStream to continue to expand if VoiceStream were to remain a strong
competitor in the wireless telecommunications industry.
Powertel -- General Background
During the past several years, the Powertel board of directors has
considered various options and has authorized various transactions in an effort
to maximize stockholder value. In 1997, Powertel sold its cellular assets in the
state of Maine, and in 1999 Powertel sold its cellular assets in the states of
Georgia and Alabama in order to focus its efforts on its PCS operations. Also in
1999, Powertel sold 650 of its telecommunications towers in order to take
advantage of the prices that were then available for telecommunications towers.
During this period, the Powertel board of directors continued to monitor market
developments, including the ongoing consolidation in the wireless
telecommunications industry and the trend toward nationwide coverage and rate
plans. In connection with these developments, the Powertel board of directors
considered various strategies for expanding Powertel's coverage area, and as a
result Powertel committed to make an equity investment in an affiliate of Eliska
Wireless Ventures I, Inc. to facilitate the purchase of DiGiPH PCS, which has a
coverage area that is contiguous with Powertel's. Powertel also began to contact
a number of other parties regarding the possibility of an acquisition,
investment or strategic alliance.
The Deutsche Telekom/Powertel Merger and the VoiceStream/Powertel Merger
On October 13, 1999, Allen E. Smith, president and chief executive officer
of Powertel, Fred G. Astor, Jr., chief financial officer of Powertel, Rodney D.
Dir, chief operating officer of Powertel, and
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Campbell B. Lanier, III, chairman of the Powertel board of directors, met with
John W. Stanton, chairman and chief executive officer of VoiceStream, Robert R.
Stapleton, president of VoiceStream, and Cregg B. Baumbaugh, executive vice
president of finance, strategy and development of VoiceStream, in Seattle,
Washington. The parties discussed possible strategic alliances between Powertel
and VoiceStream. At that time, VoiceStream's mergers with Omnipoint and Aerial
were pending. Mr. Stanton indicated that VoiceStream would be unable to engage
in serious discussions regarding strategic alliances between Powertel and
VoiceStream until after the completion of those mergers.
On February 29, 2000, Mr. Smith and Mr. Astor met with Mr. Stanton and Mr.
Baumbaugh at the CTIA Wireless Convention in New Orleans, Louisiana. The
parties' discussions focused on a potential investment by VoiceStream in
Powertel, which could be followed by an acquisition of Powertel by VoiceStream.
The parties also discussed the possibility that a third party might make an
additional investment in Powertel.
On March 9, 2000, VoiceStream and Powertel executed a non-disclosure
agreement. On March 10, 2000, Mr. Smith and Mr. Stanton spoke by telephone. They
discussed the fact that a Powertel stockholder had expressed an interest in
selling its Powertel shares. Mr. Stanton indicated that VoiceStream might be
interested in purchasing these shares. The parties also discussed the
possibility of a third party acquiring these shares. Also, on March 10, 2000,
representatives of Powertel met with representatives of this third party to
discuss a direct investment by this party in Powertel, a purchase by this party
of the selling stockholder's interest and the potential acquisition of Powertel
by this third party.
On March 13, 2000, Mr. Smith, Mr. Lanier and Mr. Stanton spoke by telephone
to further discuss the possibility of VoiceStream purchasing shares from a
Powertel stockholder, possibly to be followed by an acquisition of Powertel.
On March 16, 2000, Mr. Smith, Mr. Astor, Mr. Stanton, Mr. Stapleton and Mr.
Baumbaugh met in Phoenix, Arizona to further discuss these matters. At this
meeting, the parties again discussed the possibility of VoiceStream making a
direct investment in Powertel.
Later in March 2000, Mr. Stanton informed Mr. Smith, by telephone, that due
to certain unspecified conflicts, VoiceStream was not in a position to proceed
with discussions with Powertel.
During April and May 2000, members of Powertel's management and members of
the Powertel board of directors discussed various strategic alternatives
available to Powertel, including a possible strategic combination of Powertel
with a U.S. or international telecommunications company. Based upon a consensus
view that Powertel should explore a range of strategic alternatives,
representatives of Powertel contacted Morgan Stanley, which Powertel had
previously engaged, and asked that Morgan Stanley prepare a presentation
regarding methods by which Powertel could explore its strategic alternatives,
including a possible strategic business combination.
On May 22, 2000, Morgan Stanley made a presentation to members of the
Powertel board of directors and certain members of Powertel's management
regarding a proposed process for soliciting indications of interest from parties
that might be interested in engaging in a strategic transaction with Powertel.
The process outlined by Morgan Stanley involved soliciting preliminary
indications of interest from a list of potentially interested companies,
followed by a distribution of informational materials to these parties and a
solicitation of final indications of interest. Representatives of Powertel
reviewed a list of companies that Morgan Stanley believed potentially would be
interested in pursuing discussions with Powertel. Morgan Stanley was instructed
to proceed to contact these parties.
On June 15, 2000, Morgan Stanley provided an update to members of the
Powertel board and management regarding the status of contacts with potentially
interested parties. As of that date, Morgan Stanley had contacted eight
companies, had received preliminary oral indications of interest from three
companies, had received no response from two companies and had received a
negative response from three companies.
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During the course of Deutsche Telekom's due diligence review of VoiceStream
that took place in Seattle, Washington on June 27 through June 29, 2000,
VoiceStream informed Deutsche Telekom of its intention to commence discussions
with Powertel concerning a possible acquisition of Powertel by VoiceStream.
On June 28, 2000, VoiceStream submitted a preliminary written indication of
interest that contemplated an acquisition of Powertel in a stock-for-stock
transaction at a value of $85 per share of Powertel stock, which implied a fixed
exchange ratio of .675 of a VoiceStream common share for each Powertel common
share.
On July 12, 2000, the Powertel board of directors held a special meeting to
discuss the status of the process being conducted by Morgan Stanley. After
receiving an update on the status of this process, the Powertel board of
directors authorized Morgan Stanley to continue the process.
On July 13 and 14, 2000, several representatives of VoiceStream's
management team and VoiceStream's outside counsel conducted due diligence in
Atlanta, Georgia. These due diligence meetings involved general presentations by
members of Powertel's management, followed by numerous smaller meetings between
representatives of the companies responsible for specific functional areas.
Also, during these meetings, representatives of Powertel and VoiceStream
discussed the terms of VoiceStream's preliminary indication of interest.
During the week of July 17, 2000, VoiceStream and Deutsche Telekom
discussed the possibility of proceeding with an acquisition of Powertel in
conjunction with Deutsche Telekom's proposed acquisition of VoiceStream.
On July 18, 2000, VoiceStream distributed a draft merger agreement to
Powertel. On July 19, 2000, however, Mr. Baumbaugh informed Mr. Smith and Mr.
Astor, by telephone, that VoiceStream was involved in another unspecified
potential transaction, and that VoiceStream would not be in a position to
continue discussions with Powertel until VoiceStream had completed its
discussions with respect to the other potential transaction. Thereafter,
Powertel confirmed to VoiceStream, through Morgan Stanley, that the process that
Morgan Stanley was conducting would proceed and that final indications of
interest were due on August 4, 2000.
On July 19, 2000, in connection with the process initiated by Morgan
Stanley, Powertel distributed its form of merger agreement to VoiceStream.
On July 21, 2000, VoiceStream and Deutsche Telekom signed an agreement to
allow VoiceStream to disclose the identity of its potential acquiror to
Powertel. Thereafter, VoiceStream disclosed to Powertel that its potential
acquiror was Deutsche Telekom. Deutsche Telekom and VoiceStream subsequently
decided not to proceed with the acquisition of Powertel until after announcing
the acquisition of VoiceStream by Deutsche Telekom.
On July 24, 2000, VoiceStream publicly announced that it had agreed to
merge with Deutsche Telekom.
On or about July 24, 2000, representatives of the third party that had been
considering an acquisition of Powertel informed representatives of Powertel that
they would not be pursuing discussions regarding a possible strategic
combination with Powertel.
On July 25, 2000, Morgan Stanley, on behalf of Powertel, distributed a
final bid package to VoiceStream, including draft schedules to the merger
agreement that was distributed on July 19, 2000 and indicated that final
indications of interest were due by August 4, 2000.
On August 4, 2000, VoiceStream submitted a final indication of interest
with respect to the acquisition of Powertel, including forms of transaction
documents between VoiceStream and Powertel. This proposal contemplated that
Powertel would enter into separate merger agreements with VoiceStream and
Deutsche Telekom, and it included proposed terms of a VoiceStream/Powertel
transaction and a Deutsche Telekom/Powertel transaction. This proposal
contemplated that Powertel stockholders holding the requisite
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voting power necessary to approve the transactions would agree to vote their
Powertel shares in favor of the transactions, and representatives of Deutsche
Telekom and VoiceStream later indicated to representatives of Powertel that
Deutsche Telekom and VoiceStream would not enter into merger agreements with
Powertel unless Powertel stockholders holding a majority of the voting power
necessary to approve the Deutsche Telekom/Powertel merger and the
VoiceStream/Powertel merger agreed to vote in favor of these mergers. This
proposal, which was subject to satisfactory completion of due diligence, was to
remain in effect until August 11, 2000. No party other than VoiceStream
submitted final indications of interest by the August 4, 2000 deadline.
On August 8, 2000, the Powertel board held a special meeting to discuss the
VoiceStream proposal and the status of the process that was being conducted by
Morgan Stanley. The Powertel board reviewed the terms of the VoiceStream
proposal, including the proposed exchange ratios applicable to a transaction
with VoiceStream and Deutsche Telekom. At this meeting, Morgan Stanley made a
presentation to the Powertel board with respect to valuations of various
wireless telecommunications companies based on licensed POPs, covered POPs and
subscribers. Licensed POPs are, for any given company, the number of residents
of geographic areas in which that company owns, either directly or through
wholly-owned or majority-owned subsidiaries, a license to provide mobile
telecommunications services. Covered POPs are the estimated number of residents
within the license area actually served by the company's operating network. The
Powertel board authorized officers of Powertel to proceed with negotiations with
Deutsche Telekom and VoiceStream.
On August 9, 2000, Mr. Baumbaugh, Alan Bender, general counsel of
VoiceStream, and representatives of Goldman Sachs, financial advisors to
VoiceStream, met in Denver, Colorado, with Mr. Smith, Jill Dorsey, general
counsel of Powertel, and representatives of Morgan Stanley. At this meeting, the
parties discussed outstanding issues with respect to the proposed transaction,
including a proposal that the exchange ratio be structured to yield $85 per
Powertel common share if VoiceStream common shares were trading between a
specified range prior to the completion of the VoiceStream/Powertel merger.
On August 10, 2000, the Powertel board of directors held a special meeting
at which Mr. Smith provided an update on the status of the VoiceStream and
Deutsche Telekom negotiations. At this meeting, the Powertel board approved the
general terms of the VoiceStream and Deutsche Telekom proposals, as negotiated,
and authorized officers of Powertel to proceed with the negotiations of
definitive agreements.
On August 12, 2000, Deutsche Telekom delivered forms of the Deutsche
Telekom/Powertel transaction agreements to Powertel and its counsel.
From August 15 through August 17, 2000, representatives of VoiceStream,
Deutsche Telekom and Powertel, and their respective counsel, held a series of
meetings in Atlanta, Georgia to conduct further due diligence and negotiate
definitive documentation.
On August 18, 2000, members of Powertel's management met with
representatives of VoiceStream in Bellevue, Washington to conduct due diligence
and to discuss issues related to the proposed transaction.
On August 21 and 22, 2000, Mr. Smith and Mr. Dir conducted due diligence at
the offices of Deutsche Telekom in Bonn, Germany.
During the period of August 21 to August 26, 2000, representatives of
VoiceStream, Deutsche Telekom and Powertel met in Seattle, Washington to
continue negotiations with respect to definitive documentation.
On August 24, 2000, VoiceStream held a special meeting of the VoiceStream
board of directors. Mr. Stanton reviewed the strategic reasons for the proposed
VoiceStream/Powertel merger and senior management members of VoiceStream and
outside counsel presented further details regarding the transaction and reviewed
the terms of the definitive VoiceStream/Powertel merger agreement. Goldman Sachs
also presented a financial analysis of the proposed transaction and delivered
its oral opinion, later confirmed in writing, that as of the date of the
opinion, the conversion number under the VoiceStream/
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Powertel merger agreement was fair from a financial point of view to
VoiceStream. The presentation of Goldman Sachs is described under "-- Opinion of
VoiceStream's Financial Advisor." Mr. Stanton informed the VoiceStream board
that the only outstanding issues were minor and were expected to be resolved.
After such presentation and discussions, including the matters set forth in
"Risk Factors Relating to the VoiceStream/Powertel Merger," "-- VoiceStream's
Reasons for the VoiceStream/Powertel Merger" and "-- Recommendation and
Considerations of the VoiceStream Board of Directors with Respect to the
VoiceStream/Powertel Merger," the VoiceStream board of directors unanimously
determined, subject to the successful resolution of the remaining employment
issues, that the VoiceStream/Powertel merger agreement and the
VoiceStream/Powertel merger were fair to, and in the best interests of,
VoiceStream and its stockholders and unanimously voted to approve the
VoiceStream/Powertel merger agreement and the VoiceStream/Powertel merger and
related agreements and to recommend to VoiceStream stockholders that they vote
to approve the VoiceStream/Powertel merger agreement and the
VoiceStream/Powertel merger.
Deutsche Telekom's management board discussed a potential acquisition
transaction involving Powertel at regularly scheduled meetings during July and
August 2000. On August 24, 2000, Deutsche Telekom's supervisory board met in
Bonn, Germany to consider the proposed acquisition of Powertel. At this meeting,
the supervisory board approved and authorized the execution of the Deutsche
Telekom/Powertel merger agreement, subject to finalization by the parties'
management and respective legal advisors.
On August 24, 2000, a special meeting of the Powertel board of directors
was convened. At this meeting, members of Powertel's management and Powertel's
legal and financial advisors reviewed with the Powertel board the terms of the
VoiceStream/Powertel and Deutsche Telekom/Powertel merger agreements and
reported on the status of the negotiations. Morgan Stanley made a presentation
regarding the analysis described under "-- Opinion of Powertel's Financial
Advisor." The potential benefits of the proposed transactions and the financial
and other effects of the proposed transactions were discussed in detail. Mr.
Smith reported to the Powertel board that issues concerning Powertel's rights to
terminate the Deutsche Telekom/Powertel merger agreement, the transition plan
for Powertel employees and Powertel's right to consent to amendments to the
Deutsche Telekom/VoiceStream merger agreement remained unresolved. Mr. Smith
asked for a recess of the meeting until such issues could be further negotiated.
The Powertel board of directors voted to recess the meeting. On August 26, 2000,
the Powertel board reconvened this meeting. Mr. Smith reported that the parties
had completed negotiations on employee transition issues but that Powertel would
not have termination rights or a right to consent to amendments to the Deutsche
Telekom/VoiceStream merger agreement. Legal counsel then reported to the
Powertel board with regard to the terms of the definitive VoiceStream/Powertel
merger agreement and the Deutsche Telekom/Powertel merger agreement, copies of
which had previously been distributed to the Powertel board. After these
discussions, Morgan Stanley rendered its oral opinion, which was subsequently
confirmed in writing, that, as of the date of the opinion, the consideration to
be received by the holders of the Powertel common and preferred shares pursuant
to the Deutsche Telekom/Powertel merger agreement was fair, from a financial
point of view, to such holders and, in the event the Deutsche Telekom/
VoiceStream merger is not completed, the merger consideration to be received by
the holders of the Powertel common and preferred shares pursuant to the
VoiceStream/Powertel merger agreement was fair, from a financial point of view,
to such holders. After the presentation and discussions, the Powertel board
unanimously determined that each of the Deutsche Telekom/Powertel merger and the
VoiceStream/ Powertel merger was fair to, and in the best interests of, Powertel
and Powertel stockholders, and unanimously determined to approve each of the
mergers and each of the merger agreements and related agreements and to
recommend that the Powertel stockholders vote for the approval of each of the
mergers and the merger agreements.
Following the approval of the Powertel board, each of the merger agreements
and all related agreements were executed on August 26, 2000.
On August 27, 2000, prior to the commencement of trading on the Frankfurt
Stock Exchange on August 28, 2000, an announcement was made regarding the
proposed mergers.
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On February 8, 2001, with the approval of the Powertel board of directors
and the Deutsche Telekom management and supervisory boards, Deutsche Telekom and
Powertel agreed to amend the Deutsche Telekom/Powertel merger agreement to
provide that the Deutsche Telekom/Powertel merger will not be completed before
May 31, 2001, which is the second day after the expected record date for
determining which Deutsche Telekom shareholders will be entitled to receive
Deutsche Telekom's annual dividend in respect of fiscal year 2000. In connection
with this agreement, the parties agreed that Powertel would be permitted to pay
a stock dividend to its common stockholders before completion of the Deutsche
Telekom/Powertel merger of 0.0075 of a Powertel common share for each Powertel
common share outstanding and, in the event that such dividend is paid, adjust
correspondingly the exchange ratios for exchange of its preferred stock for
Deutsche Telekom shares pursuant to the Deutsche Telekom/Powertel merger. These
dividends and adjustments to the exchange ratios of the preferred stock and
other convertible securities will have the effect of increasing by 0.75% the
number of shares owned by Powertel stockholders and, accordingly, the aggregate
amount of Deutsche Telekom shares to be received by Powertel stockholders in the
Deutsche Telekom/Powertel merger. The parties further agreed that if all of the
conditions to completion of the Deutsche Telekom/Powertel merger are satisfied
or waived in accordance with the merger agreement as of a date that is earlier
than May 31, 2001, including the condition that no material adverse effect on
Powertel shall have occurred, then after that earlier date Deutsche Telekom will
no longer have the ability to terminate the Deutsche Telekom/Powertel merger
agreement because of any material adverse effect on, or a material inaccuracy
in, a representation or warranty of Powertel. With the approval of their
respective boards of directors, VoiceStream and Powertel agreed to amend the
VoiceStream/Powertel merger agreement to provide for the adjustment of the
calculation of the conversion number in the event the dividends described above
are paid.
DEUTSCHE TELEKOM'S REASONS FOR THE DEUTSCHE TELEKOM/POWERTEL MERGER
Deutsche Telekom believes that the Deutsche Telekom/Powertel merger will
complement the Deutsche Telekom/VoiceStream merger by augmenting Deutsche
Telekom's entry into the high-growth U.S. wireless telecommunications industry,
and will provide Powertel with the necessary capital resources, technology
expertise and national and global reach to provide cost-competitive service and
accelerate the introduction of next-generation voice and data services to its
customers. Deutsche Telekom believes that the Deutsche Telekom/Powertel merger
provides a unique opportunity to acquire a significant number of potential
customers and a wireless telecommunications network utilizing the same GSM
wireless technology as Deutsche Telekom and VoiceStream.
Deutsche Telekom also considered the risks described under "Risk Factors
Relating to the Deutsche Telekom/VoiceStream Merger and the Deutsche
Telekom/Powertel Merger" insofar as they apply to Powertel.
VOICESTREAM'S REASONS FOR THE VOICESTREAM/POWERTEL MERGER
VoiceStream believes that the addition of Powertel's wireless
communications business to VoiceStream's will make VoiceStream a more
competitive national wireless communications company with greater prospects for
growth than either VoiceStream or Powertel would have on its own and will
generate significant opportunities to deliver greater value to VoiceStream
stockholders, including former Powertel stockholders after the
VoiceStream/Powertel merger.
Strong Geographic Fit
The addition of Powertel, which operates a GSM-based network in 12
southeastern states where VoiceStream generally does not operate, fills the most
significant gap in VoiceStream's U.S. coverage, and will give the combined
company more complete nationwide coverage. Together with Powertel and its
affiliates, VoiceStream will have licenses to serve 24 of the 25 largest markets
in the United States. Those licenses will cover approximately 250 million
potential customers. Powertel's current network coverage enables access to
approximately 25 million potential customers. Access to these customers will
strengthen VoiceStream's ability to compete on a nationwide basis.
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Strong Technology Fit
VoiceStream and Powertel operate compatible network platforms utilizing GSM
wireless technology. Together, VoiceStream and Powertel will offer seamless
services over a common technology platform and provide customer-friendly
features such as global roaming, unified billing and national customer service.
VoiceStream believes that these services, which are not currently offered in
this form by any other U.S. providers will give VoiceStream a competitive edge
in the U.S. wireless communications industry.
RECOMMENDATION AND CONSIDERATIONS OF THE VOICESTREAM BOARD OF DIRECTORS WITH
RESPECT TO THE VOICESTREAM/POWERTEL MERGER
On August 24, 2000, the board of directors of VoiceStream, by a unanimous
vote, determined the VoiceStream/Powertel merger and the other transactions
contemplated by the VoiceStream/Powertel merger agreement to be advisable, fair
to and in the best interests of VoiceStream and its stockholders, approved and
adopted the VoiceStream/Powertel merger agreement and recommended that the
stockholders of VoiceStream vote for the approval and adoption of the
VoiceStream/Powertel merger agreement. THE VOICESTREAM BOARD CONTINUES TO
RECOMMEND THAT THE STOCKHOLDERS OF VOICESTREAM VOTE "FOR" APPROVAL AND ADOPTION
OF THE VOICESTREAM/POWERTEL MERGER AGREEMENT AT THE VOICESTREAM SPECIAL MEETING.
In the course of reaching its decision to adopt the VoiceStream/Powertel
merger agreement, the VoiceStream board consulted with management, as well as
with its outside legal counsel and financial advisors, and considered the
matters referred to under "--VoiceStream's Reasons for the VoiceStream/Powertel
Merger," as well as the following material factors:
- Complementary Strategies and Technologies; Opportunities for Growth. The
VoiceStream board believed that there is a strong strategic and
technology fit between VoiceStream's and Powertel's mobile communications
businesses and operations, as described more fully under "--VoiceStream's
Reasons for the VoiceStream/Powertel Merger." In particular, the
VoiceStream board noted that:
-- In light of current conditions and trends in the telecommunications
industry, including acquisitions that have increased the size and
strength of VoiceStream's competitors, the VoiceStream board
believed that in order to compete effectively, VoiceStream would
need to continue to expand its geographic coverage and aggressively
seek to grow its subscriber base;
-- Powertel provides wireless telecommunications services in 12 states
in the southeastern United States where VoiceStream generally does
not operate. These states contain a population of approximately 25
million people;
-- Adding Powertel's network to VoiceStream's would give VoiceStream
more complete nationwide coverage, with licenses to serve 24 of the
25 largest markets in the United States;
-- VoiceStream's and Powertel's mobile communications services are
based on compatible network platforms using GSM wireless
technology; and
-- Because VoiceStream's and Powertel's networks are based on the same
GSM standard, the combined company will be able to offer seamless
services on a nationwide basis over a common technology platform
and to provide services such as nationwide roaming, unified billing
and nationwide customer service.
The VoiceStream board observed that these compatibilities could enable
the combined company to grow more quickly and beyond the levels
VoiceStream could be expected to achieve without the VoiceStream/Powertel
merger.
- Financial Impact. The VoiceStream board reviewed, with management and
its financial advisors, the historical operating results of VoiceStream
and Powertel and the projected operating results of VoiceStream and
Powertel individually and in combination.
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- Transaction Terms. The VoiceStream board believed that the relatively
limited number of conditions and termination rights increased the
likelihood that the transaction would be completed if the Deutsche
Telekom/VoiceStream merger agreement is terminated.
- Opinion of Financial Advisor. Goldman Sachs, VoiceStream's financial
advisor, made presentations to the VoiceStream board concerning financial
aspects of the proposed VoiceStream/Powertel merger, and delivered its
oral opinion, later confirmed in writing, that as of the date of that
opinion, the conversion number under the VoiceStream/Powertel merger
agreement was fair from a financial point of view to VoiceStream.
- Powertel Stockholder Agreements. Powertel is required to submit the
VoiceStream/Powertel merger agreement to Powertel stockholders even if
the Powertel board withdraws its recommendation, and holders of
Powertel's common and preferred shares with sufficient voting power to
approve the VoiceStream/Powertel merger have entered into stockholder
agreements with VoiceStream in which such holders have agreed to vote
their shares in favor of the VoiceStream/Powertel merger at the Powertel
special meeting. As a result, Powertel stockholder approval of the
VoiceStream/Powertel merger is assured even if the Powertel board
withdraws or changes its recommendation.
The VoiceStream board also considered the following potentially negative
factors associated with the VoiceStream/Powertel merger:
- the risks described under "Risk Factors Relating to the
VoiceStream/Powertel Merger;"
- that the combined company following the VoiceStream/Powertel merger will
still be significantly smaller than many of its major competitors and, as
a result, the combined company will be required to raise significant
amounts of capital in order to continue to grow, expand and build out its
GSM network; and
- the risk that a regulatory body could delay the VoiceStream/Powertel
merger or impose conditions which reduce the anticipated benefits of the
VoiceStream/Powertel merger.
The VoiceStream board believed and continues to believe that these
potential risks are greatly outweighed by the anticipated benefits from the
VoiceStream/Powertel merger.
The foregoing discussion addresses the material information and factors
considered by the VoiceStream board in its consideration of the
VoiceStream/Powertel merger, including factors that support the
VoiceStream/Powertel merger as well as those that may weigh against it. The
VoiceStream board conducted numerous discussions of the factors described above,
including asking questions of VoiceStream's management and legal and financial
advisors. In view of the variety of factors and the amount of information
considered, the VoiceStream board did not find it practicable to, and did not,
make specific assessments of, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination. In addition, the
VoiceStream board did not undertake to make any specific determination as to
whether any particular factor, or any aspect of any particular factor, was
favorable or unfavorable to its ultimate determination. The determination to
approve the VoiceStream/Powertel merger was made after consideration of all of
the factors as a whole. In addition, individual members of the VoiceStream board
may have given different weights to different factors.
RECOMMENDATION AND CONSIDERATIONS OF THE POWERTEL BOARD OF DIRECTORS WITH
RESPECT TO THE DEUTSCHE TELEKOM/POWERTEL MERGER AND VOICESTREAM/POWERTEL MERGER
On August 26, 2000, at a special meeting, the Powertel board of directors
unanimously determined that each of the Deutsche Telekom/Powertel merger and the
VoiceStream/Powertel merger and the other transactions contemplated by each of
the Deutsche Telekom/Powertel merger agreement and the VoiceStream/Powertel
merger agreement, respectively, is advisable and in the best interests of
Powertel and its stockholders, approved and adopted each of the Deutsche
Telekom/Powertel merger agreement and the VoiceStream/Powertel merger agreement
and recommended that the stockholders of Powertel vote for approval and adoption
of the Deutsche Telekom/Powertel merger agreement and the VoiceStream/
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Powertel merger agreement. THE POWERTEL BOARD OF DIRECTORS CONTINUES TO
RECOMMEND THAT THE POWERTEL STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF
EACH OF THE MERGERS AND THE MERGER AGREEMENTS AT THE POWERTEL SPECIAL MEETING.
In the course of reaching its decision to adopt each of the merger
agreements, the Powertel board of directors consulted with members of Powertel's
management as well as with Powertel's legal counsel and financial advisors, and
considered the following material factors, in addition to those set forth under
"-- Deutsche Telekom's Reasons for the Deutsche Telekom/Powertel Merger:"
- the view of the Powertel board of directors and Powertel's management
that in light of current conditions and trends in the telecommunications
industry, including consolidation that has increased the size and
strength of our competitors:
-- it is uncertain how regional operators, such as Powertel, will compete
on a national or global basis; and
-- Powertel's business and financial performance should benefit from
being part of a larger, more diverse company;
- an analysis of the potential stockholder value that could be expected to
be generated from the various strategic alternatives available to
Powertel, including the alternatives of:
-- continuing as an independent company;
-- pursuing a series of acquisitions by Powertel to increase the size of
Powertel's coverage area; and
-- entering into a strategic business combination with another wireless
telecommunications company;
- the fact that:
-- the Powertel board of directors and Powertel's management had
investigated and discussed various strategic alternatives over a
period of months;
-- there had been ongoing publicity and speculation in the market
regarding Powertel possibly being a takeover target;
-- Morgan Stanley, at Powertel's direction, had contacted and solicited
indications of interest from telecommunications companies that were
viewed as potentially having an interest in engaging in a transaction
with Powertel; and
-- VoiceStream and Deutsche Telekom submitted the only firm proposal as a
result of this process;
- the view of Powertel's management and the Powertel board of directors
that a merger of Powertel and VoiceStream, even if VoiceStream were not
to combine with Deutsche Telekom, would represent an excellent "fit" from
a strategic standpoint due to the companies' common GSM wireless
technology platform, non-overlapping coverage areas and consistent
strategies that the companies were pursuing, and should produce a
stronger combined company with increased economies of scale;
- the fact that both transactions, because they are structured as
stock-for-stock mergers, instead of as sales for cash, provide Powertel's
stockholders with the opportunity to continue as stockholders in a
larger, more competitive company;
- the view of Powertel's board that Powertel would likely receive its
highest valuation from another GSM-based provider because of factors such
as Powertel's network compatibility with other GSM networks and its
existing base of customers who are using GSM technology, and the fact that
VoiceStream is the only national provider of wireless services using GSM
technology;
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- the view of the Powertel board and Powertel's management as to the
business, operations, properties and assets, financial condition,
competitive position, business strategy and prospects of each of Deutsche
Telekom and VoiceStream as well as the risks involved in achieving these
prospects, and the economic and market conditions applicable to the
telecommunications industry, both on a historical and on a prospective
basis;
- the fact that:
-- Deutsche Telekom has significant financial resources;
-- regardless of whether the Deutsche Telekom/VoiceStream merger closes,
Deutsche Telekom will invest $5 billion in VoiceStream; and
-- VoiceStream is expected to use these funds for the continued build out
and expansion of the GSM network in the United States;
- the fact that the Deutsche Telekom/Powertel merger will not close unless
the Deutsche Telekom/VoiceStream merger closes, which necessarily means
that, in either circumstance, Powertel will be combining its wireless
coverage areas with VoiceStream's complementary wireless coverage areas
to create a nationwide GSM-based wireless provider;
- the fact that additional spectrum for wireless communications is expected
to shortly become available, and this spectrum could be acquired by
Deutsche Telekom, VoiceStream or other persons as an alternative to
acquiring Powertel;
- the expectation that each of the Deutsche Telekom/Powertel merger and the
VoiceStream/Powertel merger will qualify as a tax-free transaction for
U.S. federal income tax purposes, except with respect to cash received
for fractional shares;
- a review of the provisions contained in the draft Deutsche
Telekom/Powertel and VoiceStream/ Powertel merger agreements and related
documents, including the various stockholders agreements in which
Powertel stockholders holding a majority of the voting power entitled to
vote with respect to the Deutsche Telekom/Powertel and
VoiceStream/Powertel mergers were to agree to vote to approve those
mergers; and
- the presentations of Morgan Stanley, Powertel's financial advisors,
concerning the financial aspects of the proposed mergers, including the
implied premia to the historical trading prices of Powertel's common
shares implied by the proposed consideration to be paid in the Deutsche
Telekom/ Powertel merger and the VoiceStream/Powertel merger, and of the
various strategic alternatives available to Powertel, and the oral
opinion received from Morgan Stanley, later confirmed in writing, that,
as of the date of the opinion, and based on the considerations in the
opinion:
-- the consideration to be received by holders of Powertel common and
preferred shares pursuant to the Deutsche Telekom/Powertel merger
agreement was fair from a financial point of view to such holders; and
-- in the event the Deutsche Telekom/VoiceStream merger is not completed,
the consideration to be received by holders of Powertel common and
preferred shares pursuant to the VoiceStream/Powertel merger agreement
was fair from a financial point of view to such holders.
The Powertel board also considered the following potentially negative
factors associated with the mergers:
- the fact that Deutsche Telekom ADSs, Deutsche Telekom ordinary shares and
VoiceStream common shares have experienced substantial price volatility
in recent months;
- the fact that because the exchange ratios for Powertel shares in the
Deutsche Telekom/Powertel merger are fixed, and because the provisions
of the VoiceStream/Powertel merger agreement provide only limited price
protection to Powertel stockholders, the value of the merger
consideration
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to Powertel stockholders may decrease prior to the completion of the Deutsche
Telekom/Powertel merger or the VoiceStream/Powertel merger, as the case may be;
- the fact that the consideration offered by VoiceStream with respect to
the VoiceStream/Powertel merger reflected only a slight premium in
comparison to the actual trading performance of Powertel's common shares
during most historical periods that were analyzed;
- with respect to the Deutsche Telekom/Powertel merger only, that the
market price for Deutsche Telekom shares to be received by Powertel
stockholders in the Deutsche Telekom/Powertel merger may be adversely
affected by the prospect of future sales of Deutsche Telekom shares by
the Federal Republic of Germany and KfW, Deutsche Telekom's two largest
shareholders, or by current Powertel stockholders who are not permitted
to hold equity securities of non-U.S. companies or who otherwise elect
not to hold Deutsche Telekom shares;
- the fact that the Deutsche Telekom/VoiceStream merger and the Deutsche
Telekom/Powertel merger may face enhanced regulatory scrutiny; and
- the fact that the termination fee provisions of the Deutsche
Telekom/Powertel merger agreement and the VoiceStream/Powertel merger
agreement, together with the fact that Powertel stockholders that, in the
aggregate, had sufficient voting power to approve each of the Deutsche
Telekom/ Powertel merger and the VoiceStream/Powertel merger would agree
to vote in favor of each of the mergers, would likely discourage
alternative proposals from being made to Powertel, but that the
termination fee provisions of each of the Deutsche Telekom/Powertel
merger agreement and the VoiceStream/Powertel merger agreement are
customary for transactions of this type, and that these provisions, in
addition to the Powertel stockholder agreements, were necessary to induce
each of Deutsche Telekom and VoiceStream to enter into the transactions.
The Powertel board believed that these potential risks were outweighed by
the potential benefits anticipated to result from the mergers. In considering
the proposed Deutsche Telekom/Powertel merger and the VoiceStream/Powertel
merger, the directors of Powertel were aware of the interests of certain
officers and directors of Powertel in the Deutsche Telekom/Powertel merger and
the VoiceStream/Powertel merger described under "-- Interests of Directors and
Officers of Powertel in the Deutsche Telekom/Powertel Merger and the
VoiceStream/Powertel Merger."
The foregoing discussion addresses the material information and factors
considered by the Powertel board in its consideration of the Deutsche
Telekom/Powertel merger and the VoiceStream/Powertel merger, including factors
that support each of the mergers as well as those that may weigh against each of
the mergers. The Powertel board of directors conducted numerous discussions of
the factors described above, including asking questions of Powertel's management
and legal and financial advisors. In view of the variety of factors and the
amount of information considered, the Powertel board of directors did not find
it practical to, and did not, make specific assessments of, quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. In addition, the Powertel board of directors did not
undertake to make any specific determination as to whether any particular
factor, or any aspect of any particular factor, was favorable or unfavorable to
its ultimate determination. The determination to approve each of the Deutsche
Telekom/Powertel merger and the VoiceStream/Powertel merger was made after
consideration of all of the factors as a whole. In addition, individual members
of the Powertel board of directors may have given different weights to different
factors.
Subsequent Stock Market Developments Relating to Deutsche Telekom Shares
As of February 7, 2001, the trading price of Deutsche Telekom ordinary
shares on the Frankfurt Stock Exchange had declined from 44.30 euros to 33.02
euros, or by approximately 25%, since August 25, 2000, the last trading day
before the public announcement of the signing of the Deutsche Telekom/Powertel
merger agreement. As a result, the consideration payable in the Deutsche
Telekom/Powertel merger would have had a value on February 7, 2001 of
approximately $80.96, which represents a premium of approximately 5.3% to the
$76.69 trading price of Powertel common shares on
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that day. As discussed above, in negotiating and approving the Deutsche
Telekom/Powertel merger agreement, the Powertel board was aware that a decline
in the trading price of Deutsche Telekom ADSs or shares would decrease the
dollar value of the consideration to be received by Powertel stockholders in the
merger. However, the Powertel board viewed the Deutsche Telekom/Powertel merger
as a strategic combination that could be expected to provide Powertel
stockholders with a long-term opportunity to participate in a stronger combined
company with increased economies of scale.
OPINION OF VOICESTREAM'S FINANCIAL ADVISOR
Goldman Sachs has acted as financial advisor to VoiceStream in connection
with the proposed VoiceStream/Powertel merger. On August 24, 2000, Goldman Sachs
delivered its oral opinion to the VoiceStream board, conditioned on the
finalization of the VoiceStream/Powertel merger agreement in substantially the
form reviewed by Goldman Sachs on August 24, 2000. After VoiceStream and
Powertel finalized the VoiceStream/Powertel merger agreement, Goldman Sachs
confirmed its oral opinion in writing without such condition that, as of August
26, 2000, the conversion number under the VoiceStream/Powertel merger agreement
was fair from a financial point of view to VoiceStream. Goldman Sachs noted that
the VoiceStream/Powertel merger agreement would automatically terminate
concurrently with the completion of the Deutsche Telekom/VoiceStream merger, in
which event the VoiceStream/ Powertel merger would not occur. In connection with
delivering its opinion for the VoiceStream/Powertel merger, Goldman Sachs did
not express any opinion with respect to the Deutsche Telekom/Powertel merger
agreement, the Deutsche Telekom/Powertel merger, the Deutsche
Telekom/VoiceStream merger agreement or the Deutsche Telekom/VoiceStream merger.
The "conversion number" means:
- 0.75 if the VoiceStream average closing price is $113.33 or below;
- 0.65 if the VoiceStream average closing price is $130.77 or above; and
- if the VoiceStream average closing price is greater than $113.33 and less
than $130.77, the quotient determined by dividing $85.00 by the
VoiceStream average closing price.
Each case is subject to reduction in the event that the aggregate number of
outstanding Powertel common shares and securities convertible into or
exchangeable for Powertel common shares as calculated pursuant to the
VoiceStream/Powertel merger agreement exceeds a specified amount. The
"VoiceStream average closing price" means the volume weighted average closing
price, based on the Nasdaq composite volume published by The Wall Street
Journal, of the VoiceStream common shares as publicly reported on the Nasdaq
Stock Market as of 4:00 p.m. eastern time for 10 trading days randomly selected
by lot within the last 20 trading days ending five trading days prior to the
completion of the VoiceStream/Powertel merger.
The full text of the Goldman Sachs opinion is attached as Annex E to this
proxy statement/prospectus, and stockholders of VoiceStream are urged to, and
should, read such opinion in its entirety.
In connection with its opinion, Goldman Sachs reviewed, among other things:
- the VoiceStream/Powertel merger agreement, the Deutsche Telekom/Powertel
merger agreement and the Deutsche Telekom/VoiceStream merger agreement;
- the annual reports to stockholders and annual reports on Form 10-K of
VoiceStream and VoiceStream predecessors and Powertel for the four years
ended December 31, 1999;
- the definitive proxy statement dated January 25, 2000 in connection with
the acquisitions by VoiceStream of Aerial and Omnipoint;
- certain interim reports to stockholders and quarterly reports on Form
10-Q of VoiceStream and Powertel;
- other communications from VoiceStream and Powertel to their respective
stockholders;
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- internal financial analyses and forecasts for Powertel prepared by
management of Powertel;
- internal financial analyses and forecasts for VoiceStream prepared by
management of VoiceStream; and
- internal financial analyses and forecasts for Powertel prepared by the
management of VoiceStream.
Goldman Sachs also held discussions with members of the senior management
of VoiceStream and Powertel regarding their assessment of the strategic
rationale for, and the potential benefits of, the transaction contemplated by
the VoiceStream/Powertel merger agreement and the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, Goldman Sachs:
- reviewed the reported price and trading activity for the VoiceStream
common shares and the Powertel common shares;
- compared certain financial and stock market information for VoiceStream
and Powertel with similar information for certain other companies the
securities of which are publicly traded;
- reviewed the financial terms of certain recent business combinations in
the telecommunications industry specifically and in other industries
generally; and
- performed such other studies and analyses as Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information discussed with or reviewed by it and assumed
such accuracy and completeness for purposes of rendering its opinion.
Specifically, Goldman Sachs assumed with the consent of the VoiceStream board
that the internal financial forecasts for Powertel prepared by VoiceStream
management have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of VoiceStream, and that those
forecasts will be realized in the amounts and time periods contemplated thereby.
In addition, Goldman Sachs did not make an independent evaluation or appraisal
of the assets and liabilities of VoiceStream or Powertel or any of their
subsidiaries and Goldman Sachs was not furnished with any such evaluation or
appraisal. Goldman Sachs also assumed that all material governmental, regulatory
or other consents and approvals necessary for the completion of the transaction
will be obtained without any adverse effect on VoiceStream or Powertel or on the
expected benefits of the VoiceStream/Powertel merger. Goldman Sach's opinion was
addressed to the VoiceStream board and the opinion does not constitute a
recommendation as to how any holder of VoiceStream common shares should vote
with respect to the VoiceStream/Powertel merger agreement or merger.
The following is a summary of the material financial analyses presented by
Goldman Sachs to the VoiceStream board on August 24, 2000. Some of the summaries
of the financial analyses include information presented in tabular format. The
tables must be read together with the text accompanying each summary.
Contribution Analysis
Goldman Sachs performed an analysis the purpose of which was to determine
how the contribution of Powertel to the combined company, based on the various
measurement factors described below, compared to the percentage of the total
equity of the combined company that Powertel stockholders would receive as a
result of the VoiceStream/Powertel merger. Goldman Sachs noted that, based on
the range of potential conversion numbers of 0.65-0.75, the Powertel
stockholders would receive between 10.7% and 12.2% of the total equity of the
combined company pursuant to the VoiceStream/Powertel merger agreement. In
preparing this analysis, Goldman Sachs reviewed certain estimated future
operating and financial information for VoiceStream and Powertel supplied to
Goldman Sachs by VoiceStream management. The measurement factors that Goldman
Sachs considered included for each of 2000, 2001 and 2002:
- covered POPs;
- subscribers;
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- service revenues;
- EBITDA;
- equity value; and
- enterprise value.
The projected financial information for each of VoiceStream and Powertel
was provided by the VoiceStream management. As projected:
- "Subscribers" is an estimated number of enrolled customers in a company's
subscription plans;
- "Service revenues" are the estimated revenues derived from providing
communications services;
- "Equity value" represents each company's enterprise value minus the book
value of its outstanding net indebtedness and estimated non-core assets,
or assets that are not directly related to the company's wireless
network; and
- "Enterprise value" is a measure of a company's value that is calculated
as the sum of a company's market capitalization, total debt, preferred
shares and minority interest, less cash and cash equivalents.
The following table presents the results of that analysis:
CONTRIBUTION OF POWERTEL
TO THE COMBINED COMPANY
--------------------------
2000E 2001E 2002E
------ ------ ------
Covered POPs................................................ 15.4% 13.6% 11.7%
Subscribers................................................. 18.7% 16.6% 15.1%
Service revenues............................................ 20.7% 16.3% 14.4%
EBITDA...................................................... NA 21.4% 16.4%
$85.00
PRICE PER POWERTEL
0.65 DEAL RATIO 0.75 DEAL RATIO SHARE
--------------- --------------- ------------------
Equity value........................... 11% 12% 11%
Enterprise value....................... 11% 12% 12%
Goldman Sachs noted that this analysis demonstrated that the percentage
ownership that current VoiceStream stockholders would hold in the combined
company as a result of the VoiceStream/Powertel merger was within or above the
range of VoiceStream's contribution to the combined company.
Discounted Cash Flow Analysis
Goldman Sachs performed an analysis the purpose of which was to compare the
present value per share of Powertel, using discounted cash flow methodologies,
to the present value per share of VoiceStream. Goldman Sachs performed this
analysis by determining ranges of enterprise values and equity values for
Powertel and VoiceStream, each on a stand-alone basis without accounting for any
synergies. Specifically, Goldman Sachs considered the range of values for
Powertel and VoiceStream, each on a stand-alone basis, based in both cases on
VoiceStream management's internal model for each company. The following table
presents the ranges of enterprise values and equity values, as well as the price
per share and the ratio of enterprise value to 2001 Covered POPs for both
Powertel and VoiceStream, based on forward 2009 EBITDA multiples for Powertel
and VoiceStream ranging from 9.0x to 13.0x and discount rates ranging from 11%
to 15%. The various ranges for the discount rates and
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terminal value multiples were chosen by Goldman Sachs based upon theoretical
analyses of cost of capital ranges that could be applicable.
POWERTEL VOICESTREAM
------------- --------------
Enterprise value (in millions)....................... $6,245-10,396 $44,588-73,706
Equity value (in millions)........................... 5,406-9,557 43,698-72,816
Price per VoiceStream share.......................... $96.44-170.48 $144.42-240.65
2001 Covered POP value (in dollars per POP).......... 318-536 297-510
Goldman Sachs also determined the exchange ratio implied by the prices per
share as well as the projected ownership percentage of Powertel stockholders in
the combined company to result from the VoiceStream/Powertel merger based on the
same forward 2009 EBITDA multiples and discount rates, as follows:
POWERTEL
------------
Exchange ratio
(ratio of Powertel price per share to VoiceStream price per
share)...................................................... 0.668-0.708x
Powertel ownership of combined company...................... 11.0-11.6%
Goldman Sachs noted that the exchange ratios derived in the above discounted
cash flow analysis were within the range of conversion numbers contemplated by
the VoiceStream/Powertel merger agreement.
Transaction Premium Analysis
Goldman Sachs performed an analysis the purpose of which was to assess the
premiums represented by assumed conversion numbers over the conversion number
that would be implied by the price or average prices of VoiceStream common
shares and Powertel common shares at a point in time or over a period of time.
The assumed conversion numbers used were 0.65 and 0.75, the minimum and maximum
possible conversion numbers under the VoiceStream/Powertel merger agreement, and
0.70, the median of those two. The point in time and periods used in the
analysis were August 18, 2000 and the 10-day, 20-day, 30-day, 60-day,
three-month, six-month, nine-month and one-year periods ending August 18, 2000,
the last trading day before any public reports of the proposed
VoiceStream/Powertel merger. The following table presents the result of that
analysis:
POWERTEL IMPLIED PREMIUM (DISCOUNT) TO
VOICESTREAM PRICE VOICESTREAM/ OBSERVED CONVERSION NUMBER
PRICE OR OR POWERTEL 0.65 0.70 0.75
AVERAGE AVERAGE CONVERSION CONVERSION CONVERSION CONVERSION
PRICE PRICE NUMBER NUMBER NUMBER NUMBER
----------- -------- ------------ ---------- ---------- ----------
Transaction price........ $111.88 $83.91(a) 0.75x (13.3)% (6.7)% 0.0%
August 18, 2000.......... 111.88 80.19 0.72 (9.3) (2.3) 11.6
10-day average........... 123.85 81.92 0.66 1.7 5.8 13.4
20-day average........... 124.54 83.81 0.67 (3.4) 4.0 11.5
30-day average........... 130.75 85.36 0.65 (0.4) 7.2 14.9
60-day average........... 128.93 82.77 0.64 1.3 9.0 16.8
3-month average.......... 126.77 82.01 0.65 0.5 8.2 15.9
6-month average.......... 121.10 78.79 0.65 (0.1) 7.6 15.3
9-month average.......... 121.28 83.55 0.69 (5.6) 1.6 8.9
One-year average......... 108.53 77.07 0.71 (8.5) (1.4) 5.6
---------------
(a) Represents the value per share of Powertel common shares at a conversion
number of 0.75, which is the conversion number applicable if the average
price of VoiceStream common shares calculated according to the
VoiceStream/Powertel merger agreement is $113.33 and below.
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Goldman Sachs noted that the implied conversion numbers derived in the analysis
above fell within the range of conversion numbers contemplated by the
VoiceStream/Powertel merger agreement.
Selected Companies Analysis
Goldman Sachs performed an analysis to determine the public market values
of Powertel and VoiceStream relative to other public companies in the wireless
telecommunications sector. Goldman Sachs reviewed and compared financial
information of Powertel and VoiceStream to corresponding financial information
for selected companies, chosen because they are publicly traded companies with
operations that are similar to those of Powertel and VoiceStream. Goldman Sachs
undertook to determine how different measures of the price per POP for Powertel,
VoiceStream and the combined company after the VoiceStream/Powertel merger
compared to the same measures of price per POP for the following selected
companies: TeleCorp PCS Inc., Sprint PCS Group, Triton PCS Holdings Inc. and
Nextel Communications Inc. The price per POP in each case was calculated by
dividing the respective company's core enterprise value or adjusted enterprise
value by different measures of that company's POPs. In this analysis:
- "Core enterprise value" is a measure of each company's value that is
calculated by adding its market capitalization, total debt, preferred
shares and minority interest, and subtracting from that sum its cash,
cash equivalents and an estimate of non-core assets, or assets that are
not directly related to the company's wireless network;
- "Adjusted enterprise value" is a measure of each company's value that is
calculated by subtracting from the core enterprise value for that company
the value of its unbuilt POPs, or POPs for which the company does not
currently have plans to establish an operating network, valued at $25.00
per POP; and
- "Weighted Total POPs" is a measure calculated to reflect the fact that
networks have differing levels of spectrum available to different
geographic areas and is calculated by weighting POPs with greater MHz,
since licenses with greater MHz provide greater bandwidth or capacity.
"Weighted Total POPs" are determined by multiplying the number of POPs in
a 30 MHz license area by one, the number of POPs in a 20 MHz license area
by 0.75, the number of POPs in a 10 MHz license area by 0.25 and, with
respect to Nextel, the number of Nextel POPs by 0.75.
Finally, values per POP show the relation of the number of a company's POPs
to its capitalization. "2001 Covered POP Value" represents adjusted enterprise
value divided by projected 2001 Covered POPs, "Weighted Total POP Value"
represents core enterprise value divided by Weighted Total POPs and "Total POP
Value" represents core enterprise value divided by total POPs.
The analysis was performed using share prices as of August 18, 2000. The
following chart summarizes the results of that analysis:
POWERTEL VOICESTREAM SPRINT PCS TELECORP TRITON NEXTEL
-------- ----------- ---------- -------- ------- -------
2001 Covered POPs
(in millions)................ 19.0 136.7 185.0 30.8 13.3 192.0
2001 Covered POP value
(in dollars per POP)......... $274.91 $236.50 $284.10 $289.80 $300.24 $239.13
Weighted total POPs
(in millions)................ 22.1 161.0 191.1 28.7 9.8 176.5
Weighted total POP value
(in dollars per POP)......... $245.55 $211.34 $284.26 $311.55 $409.56 $263.51
Total POPs (in millions)..... 26.9 220.2 270.0 35.2 13.0 235.3
Total POP value
(in dollars per POP)......... $201.96 $154.51 $201.14 $253.58 $307.17 $197.64
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Goldman Sachs noted that Powertel's values per POP were within the range of
values per POP represented by the other selected companies in the analysis.
Pro Forma Merger Analysis
Goldman Sachs also analyzed the potential effects of the
VoiceStream/Powertel merger on VoiceStream's projected EBITDA per share for
2002, 2001 and 2002. Goldman Sachs conducted the analysis using assumed
conversion numbers of 0.65 and 0.75, the minimum and maximum possible conversion
numbers under the VoiceStream/Powertel merger agreement, as well as an assumed
$85.00 per share value for Powertel common shares. The analysis also used
estimates for VoiceStream and Powertel EBITDA for 2000, 2001 and 2002 provided
by VoiceStream management. The following table lays out the accretion to the
EBITDA figures of VoiceStream that are projected to be the result of the
VoiceStream/Powertel merger. The percentage accretion represents the percentage
by which the pro forma EBITDA per share of the combined VoiceStream/Powertel
entity would exceed the projected EBITDA per share of VoiceStream on a
stand-alone basis. The following table presents the results of this analysis:
EBITDA ACCRETION PER POST-
MERGER VOICESTREAM SHARE
-------------------------------------
$85.00
.65x PER .75x
CONVERSION SHARE CONVERSION
NUMBER VALUE NUMBER
---------- --------- ----------
EBITDA 2000E..................................... 14.4% 15.9% 4.1%
2001E..................................... 13.6% 11.6% 11.7%
2002E..................................... 6.7% 4.8% 5.0%
Goldman Sachs noted that the above figures indicate that, given the assumptions
made in preparing the analysis, the VoiceStream/Powertel merger is projected to
be accretive to holders of VoiceStream common shares in the periods outlined.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analysis or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs's opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
VoiceStream or Powertel or the merger. Goldman Sachs prepared the analyses
solely for purposes of providing its opinion to the VoiceStream board as to the
fairness of the conversion number. The analyses do not purport to be appraisals
or necessarily reflect the prices at which the business or securities actually
may be sold. Analyses based upon forecasts of future results, which are
inherently subject to uncertainty, are not necessarily indicative of actual
future results, which may be significantly more or less favorable than suggested
by such analyses.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. VoiceStream selected
Goldman Sachs as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in transactions similar
to the merger and because of Goldman Sachs' familiarity with VoiceStream arising
from having provided investment banking services in the past to VoiceStream and
its predecessor.
Goldman Sachs is familiar with VoiceStream having provided certain
investment banking services from time to time to:
- VoiceStream;
- VS Washington; and
- VS Washington's former parent, Western Wireless.
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Such services include having acted as:
- lead managing underwriter in the initial public offering of 12.65 million
common shares of Western Wireless in May 1996;
- lead manager in the public offering of $200 million aggregate principal
amount of 10.5% senior subordinated notes due June 2006 of Western
Wireless in May 1996;
- lead manager in the private offering of $200 million aggregate principal
amount of 10.5% senior subordinated notes due February 2007 of Western
Wireless in October 1996;
- Western Wireless's financial advisor in connection with the sale of 19.9%
of the outstanding shares of VS Washington's common shares to Hutchison
PCS (USA) Limited in February 1998;
- lead manager in the public offering of 13.915 million Western Wireless
common shares in April 1998;
- VoiceStream's financial advisor in connection with the acquisition of
Omnipoint in June 1999;
- VoiceStream's financial advisor in connection with the acquisition of
Aerial in September 1999;
- lead manager in the private offering of $1.1 billion aggregate principal
amount of 10% senior notes due November 2009 of VS Washington and
VoiceStream and $720 million aggregate principal amount of 11% senior
discount notes due November 2009 of VS Washington and VoiceStream in
November 1999;
- VoiceStream's financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Deutsche
Telekom/VoiceStream merger agreement; and
- VoiceStream's financial advisor in connection with, and having
participated in certain of the negotiations leading to, the
VoiceStream/Powertel merger agreement.
Goldman Sachs has received compensation of approximately $39.5 million from
VoiceStream or VS Washington with respect to investment banking services
provided to VoiceStream and/or VS Washington over the past two years, which
includes $10 million already paid by VoiceStream in connection with the Deutsche
Telekom/VoiceStream merger. As of August 26, 2000, investment funds affiliated
with Goldman Sachs had a principal investment in VoiceStream in the amount of
10,088,128 VoiceStream common shares and have the right to designate a nominee
for election to the VoiceStream board of directors. Terrence O'Toole, a managing
director of Goldman Sachs, is a director of VoiceStream. Goldman Sachs has also
provided investment banking services to Powertel including having purchased from
Ericsson, Inc. in December 1998 $165 million aggregate principal amount of a
tranche of the loan made from Ericsson to Powertel, and in June 1998 an
additional $100 million aggregate principal amount of a tranche of that loan,
and having acted as a lender under, and having been a party to agreements with
respect to, that loan.
Goldman Sachs provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of VoiceStream and Powertel for its own account and for the accounts of
customers. As of August 26, 2000, Goldman Sachs had accumulated a net long
position of 308 Powertel shares. As of the same date and not including the
principal investment referred to above, Goldman Sachs had a net short position
of 180,716 shares of VoiceStream common shares.
Pursuant to a letter agreement dated May 8, 2000, VoiceStream engaged
Goldman Sachs to act as its financial advisor in connection with the potential
acquisition of Powertel. Pursuant to this letter agreement, VoiceStream has
agreed to pay Goldman Sachs $10 million upon consummation of the acquisition of
Powertel. VoiceStream has agreed to reimburse Goldman Sachs for its reasonable
out-of-pocket expenses, including attorney's fees, and to indemnify Goldman
Sachs against certain liabilities, including certain liabilities under the
federal securities laws.
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OPINION OF POWERTEL'S FINANCIAL ADVISOR
Under an engagement letter, dated as of January 12, 2000, Powertel engaged
Morgan Stanley to provide financial advisory services to Powertel. The Powertel
board of directors selected Morgan Stanley to act as its financial advisor based
on Morgan Stanley's qualifications, expertise and reputation, as well as Morgan
Stanley's knowledge of the business and affairs of Powertel.
On August 26, 2000, Morgan Stanley delivered its oral opinion, subsequently
confirmed in writing, to the Powertel board of directors that, as of such date,
and subject to and based upon the various considerations, assumptions,
limitations and qualifications set forth in its opinion:
- the consideration to be received by holders of Powertel common shares and
preferred shares pursuant to the Deutsche Telekom/Powertel merger
agreement is fair from a financial point of view to holders of Powertel
common shares and preferred shares; and
- in the event the Deutsche Telekom/VoiceStream merger is not completed,
the consideration to be received by the holders of Powertel common shares
and preferred shares pursuant to the VoiceStream/ Powertel merger
agreement is fair from a financial point of view to the holders of
Powertel common shares and preferred shares.
The full text of Morgan Stanley's opinion, dated August 26, 2000, which
sets forth, among other things, assumptions made, procedures followed, matters
considered and limitations on the scope of the review undertaken by Morgan
Stanley in rendering its opinion, is attached to this proxy statement/prospectus
as Annex F. You are urged to read the entire opinion carefully and in its
entirety.
Morgan Stanley's opinion is directed to the Powertel board of directors and
only addresses the fairness of the consideration to be received by the holders
of Powertel common shares and preferred shares pursuant to the Deutsche
Telekom/Powertel merger agreement, and if the Deutsche Telekom/VoiceStream
merger is not completed, the fairness of the consideration to be received
pursuant to the VoiceStream/Powertel merger agreement, in each case from a
financial point of view, as of the date of the opinion. Morgan Stanley's opinion
does not address any other aspect of the Deutsche Telekom/Powertel merger and
the VoiceStream/Powertel merger, and does not constitute a recommendation to any
Powertel stockholder as to how to vote at the Powertel special meeting. This
summary is qualified in its entirety by reference to the full text of the
opinion.
In connection with rendering its opinion, Morgan Stanley, among other things:
- reviewed certain publicly available financial statements and other
information of Powertel, Deutsche Telekom and VoiceStream;
- reviewed certain internal financial statements and other financial and
operating data concerning Powertel, Deutsche Telekom and VoiceStream
prepared by the managements of Powertel, Deutsche Telekom, and
VoiceStream, respectively;
- analyzed certain financial projections prepared by the management of
Powertel;
- analyzed certain financial projections for Deutsche Telekom and
VoiceStream contained in certain securities analysts' research reports
that were recommended for review by the managements of Deutsche Telekom
and VoiceStream, respectively;
- discussed the past and current operations and financial condition and the
prospects of Powertel, including information relating to certain
strategic, financial and operational benefits anticipated from each of
the Deutsche Telekom/Powertel merger and the VoiceStream/Powertel merger,
with senior executives of Powertel;
- discussed the past and current operations and financial condition and the
prospects of Deutsche Telekom, including information relating to certain
strategic, financial and operational benefits anticipated from the
Deutsche Telekom/Powertel merger with senior executives of Deutsche
Telekom;
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- discussed the past and current operations and financial condition and the
prospects of VoiceStream, including information relating to certain
strategic, financial and operational benefits anticipated from the
VoiceStream/Powertel merger with senior executives of VoiceStream;
- discussed the past and current operations and financial condition and the
prospects of Deutsche Telekom and VoiceStream, including information
relating to certain strategic, financial and operational benefits
anticipated from the VoiceStream merger, with senior executives of
Deutsche Telekom and VoiceStream;
- reviewed the reported prices and trading activity for the Powertel common
shares, the Deutsche Telekom ADSs and the VoiceStream common shares;
- compared the financial performance of Powertel, Deutsche Telekom and
VoiceStream and the prices and trading activity of the Powertel common
shares, the Deutsche Telekom ADSs and the VoiceStream common shares with
those of certain other publicly-traded companies comparable with
Powertel, Deutsche Telekom and VoiceStream respectively and their
securities;
- reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
- participated in discussions and negotiations among representatives of
Powertel, Deutsche Telekom and VoiceStream and their financial and legal
advisors;
- reviewed the terms, including the financial terms, of the Deutsche
Telekom/Powertel merger agreement, the VoiceStream/Powertel merger
agreement and the Deutsche Telekom/VoiceStream merger agreement and
certain related documents; and
- performed other analyses and considered other factors as we have deemed
appropriate.
For purposes of its opinion, Morgan Stanley analyzed the merger as if the
Powertel preferred shares were converted into Powertel common shares immediately
prior to the completion of the Deutsche Telekom/Powertel merger or the
VoiceStream/Powertel merger. Morgan Stanley's opinion does not extend to the
conversion terms of the Powertel preferred shares.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. With respect to the
financial projections, including information relating to certain strategic,
financial and operational benefits anticipated from each of the Deutsche
Telekom/Powertel merger, VoiceStream/Powertel merger and Deutsche
Telekom/VoiceStream merger, Morgan Stanley assumed they were reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
future financial performance of Deutsche Telekom, VoiceStream and Powertel. For
the purpose of its analysis, Morgan Stanley relied with Powertel's consent on
the estimates of certain securities analysts' research reports that were
recommended for review by the managements of Deutsche Telekom and VoiceStream.
Morgan Stanley also assumed that the VoiceStream/Powertel merger will be
completed only if the Deutsche Telekom/VoiceStream merger agreement is
terminated. In addition, Morgan Stanley assumed that the Deutsche
Telekom/Powertel merger will be completed in accordance with the terms set forth
in the Deutsche Telekom/Powertel merger agreement, including that the Deutsche
Telekom/Powertel merger will be treated as a tax-free merger and/or exchange
pursuant to the U.S. tax code. Morgan Stanley also assumed that in the event the
Deutsche Telekom/VoiceStream merger is terminated, the VoiceStream/Powertel
merger will be completed in accordance with the terms set forth in the
VoiceStream/ Powertel merger agreement, including that the VoiceStream/Powertel
merger will be treated as a tax-free merger and/or exchange pursuant to the U.S.
tax code. In addition, Morgan Stanley assumed that obtaining all necessary
regulatory approvals for the Deutsche Telekom/Powertel merger or
VoiceStream/Powertel merger will not have a material adverse effect on Powertel,
VoiceStream or Deutsche Telekom or the financial, strategic and operational
benefits anticipated from the Deutsche Telekom/Powertel merger, the Deutsche
Telekom/VoiceStream merger or the VoiceStream/Powertel
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merger. Morgan Stanley did not make any independent valuation or appraisal of
the assets or liabilities of Powertel, Deutsche Telekom or VoiceStream nor was
Morgan Stanley furnished with any such appraisals. Morgan Stanley's opinion is
necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to it as of August 26, 2000.
The following is a brief summary of the material financial analyses
performed by Morgan Stanley in connection with its oral opinion and the
preparation of its opinion letter dated August 26, 2000. These summaries of
financial analyses include information presented in tabular format. In order to
fully understand the financial analyses used by Morgan Stanley, the tables must
be read together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses.
Historical Public Market Trading Value
Morgan Stanley reviewed the recent price performance of Powertel common
shares based on an analysis of the historical closing prices and trading volumes
over the last twelve months ending August 25, 2000. Morgan Stanley performed
this analysis to derive the premia or discounts to the market prices for
Powertel common shares represented by the consideration to be received by
holders of Powertel shares in the Deutsche Telekom/Powertel merger and the
VoiceStream/Powertel merger. The following table lists the average daily closing
prices of Powertel common shares for the periods indicated. Based on the closing
prices of the Deutsche Telekom ADSs and VoiceStream common shares on August 25,
2000, the consideration to be received by holders of Powertel common shares in
the Deutsche Telekom/Powertel merger and the VoiceStream/Powertel merger was
determined to be approximately $106.24 and $85.00 per Powertel common share,
respectively. Morgan Stanley then compared the consideration to be received by
holders of Powertel common shares in the Deutsche Telekom/Powertel merger and
VoiceStream/Powertel merger to the average Powertel closing prices over this
period, to arrive at the implied premia and discount percentages over the
Powertel closing prices indicated in the table below.
PREMIA IMPLIED IN PREMIA/(DISCOUNT) IMPLIED IN
PERIOD ENDING AVERAGE POWERTEL DEUTSCHE TELEKOM/ VOICESTREAM/POWERTEL
AUGUST 25, 2000 SHARE PRICE POWERTEL MERGER MERGER
--------------- ---------------- ----------------- ----------------------------
Last one year...................... $ 77.43 37% 10%
Six months......................... 77.92 36 9
Three months....................... 82.88 28 3
One month.......................... 83.53 27 2
Current (8/25/00)(a)............... 86.63 23 (2)
52-week high(a).................... 105.00 1 (19)
52-week low(a)..................... 34.81 205 144
---------------
(a) Data reflects closing prices and not averages.
This analysis was designed to compare the consideration to be received by
the Powertel stockholders in either the Deutsche Telekom/Powertel merger or the
VoiceStream/Powertel merger to prices of Powertel common shares during selected
historical periods. The analysis indicated that the consideration to be received
pursuant to the VoiceStream/Powertel merger was a slightly greater value to the
Powertel stockholders as compared to Powertel's actual trading performance over
most historical periods compared in this analysis. Furthermore, the analysis
indicated that the consideration to be received pursuant to the Deutsche
Telekom/Powertel merger was of meaningfully greater value to the holders of
Powertel shares as compared to Powertel's actual trading performance over the
historical periods compared in this analysis.
Comparable Companies Analysis
Using closing market prices on August 25, 2000, Morgan Stanley calculated
aggregate value, defined as equity value adjusted for the addition of debt and
preferred stock and the subtraction of cash, warrant and option proceeds and
other assets of Powertel and VoiceStream. Morgan Stanley then compared the
aggregate value of Powertel and VoiceStream to service revenue multiples for
Powertel and VoiceStream
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for fiscal year 2001 and subscriber multiples for Powertel and VoiceStream for
fiscal year 2001. The service revenue and subscriber multiples used were based
on publicly available research estimates compiled by Powertel's management, as
adjusted for certain operating assumptions reflected in publicly available
reports, and based on publicly available research estimates for VoiceStream.
Morgan Stanley then compared the service revenue and subscriber multiples
obtained for Powertel and VoiceStream with similar multiples obtained, based on
publicly available research estimates, for selected domestic companies that
provide PCS services, including Sprint PCS and Nextel Communications, Inc.,
which in this document we refer to as the "Domestic PCS Peer Group".
In addition, Morgan Stanley compared aggregate value to fiscal year 2001
revenue multiples and aggregate value to EBITDA multiples for fiscal year 2001
for Deutsche Telekom, based on publicly available research estimates. Morgan
Stanley then compared the fiscal year 2001 revenue and EBITDA multiples for
Deutsche Telekom with multiples obtained for a group of selected peer companies
based on publicly available research estimates. The group of selected Deutsche
Telekom peer companies, which in this document we refer to as the "Deutsche
Telekom Peer Group", included France Telecom S.A., Koninklijke KPN NV and
Telecom Italia SpA. These analyses resulted in the following information:
Domestic PCS Peer Group
POWERTEL VOICESTREAM MEAN OF PEERS
-------- ----------- -------------
Licensed POPs (in dollars per POP)............... $ 225 $ 139 $ 246
Covered POPs (in dollars per POP)................ $ 326 $ 355 $ 318
2001 Subscribers (in dollars per subscriber)..... $4,213 $4,493 $4,894
Aggregate value (as a multiple of 2001 service
revenue)....................................... 8.3x 10.0x 7.8x
Deutsche Telekom Peer Group
DEUTSCHE TELEKOM
PEER GROUP
DEUTSCHE -----------------
TELEKOM MEDIAN MEAN
-------- ------- ------
2001 Revenue.............................................. 3.4x 4.8x 4.8x
2001 EBITDA............................................... 9.4x 12.8x 13.3x
Morgan Stanley noted that the consideration to be received by a holder of a
Powertel common share pursuant to the Deutsche Telekom/Powertel merger based on
the closing price of the Deutsche Telekom ADSs on August 25, 2000 represented a
multiple of $390 per Powertel's current covered POPs and 9.9x Powertel's fiscal
year 2001 service revenue. Furthermore, Morgan Stanley noted that the
consideration received pursuant to the VoiceStream/Powertel merger based on the
closing price of VoiceStream common shares on August 25, 2000 represented a
multiple of $320 per Powertel's current covered POPs and 8.1x Powertel's fiscal
year 2001 service revenue.
Securities Research Analysts' Future Price Targets Analysis
Morgan Stanley reviewed the 12-month price targets for Powertel common
shares as projected by analysts from various financial institutions in recent
reports. These targets reflected each analyst's estimate of the future public
market trading price of the Powertel common shares at the end of the particular
period considered for each estimate. Morgan Stanley then arrived at the present
value for these targets using an estimated equity discount rate of 15.0% for the
Powertel common shares.
This analysis showed the following mean and median present values for the
Powertel common shares:
PRESENT
VALUE
-------
Mean................................................ $95.88
Median.............................................. $94.50
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Morgan Stanley noted that the consideration to be received by a holder of
Powertel common shares pursuant to the Deutsche Telekom/Powertel merger based on
the closing price of the Deutsche Telekom ADSs on August 25, 2000 represented a
per Powertel common share value of $106.24. Furthermore, Morgan Stanley noted
that the consideration received pursuant to the VoiceStream/Powertel merger
based on the closing price of a VoiceStream common share on August 25, 2000
represented a per share value for a Powertel common share of $85.00.
Historical Exchange Ratio Analysis
Morgan Stanley reviewed the implied historical exchange ratios for Powertel
common shares, Deutsche Telekom ADSs and VoiceStream common shares. These
exchange ratios were determined by dividing the price per Powertel common share
by the price per Deutsche Telekom ADS and the price per VoiceStream common share
over the one year period from August 25, 1999 through August 25, 2000. Morgan
Stanley performed this analysis to compare premia or discounts represented by
the consideration received pursuant to the Deutsche Telekom/Powertel merger and
the VoiceStream/Powertel merger with the premium or discount represented by
historical exchange ratios prevailing in the open market.
This analysis indicated the following premia/discounts represented by the
average historical exchange ratios prevailing in the open market:
PREMIA IMPLIED PREMIA/(DISCOUNTS) IMPLIED IN
PERIOD ENDING IN DEUTSCHE TELEKOM/ VOICESTREAM/POWERTEL
AUGUST 25, 2000 POWERTEL MERGER MERGER
--------------- -------------------- -----------------------------
Last twelve months....................... 100% (1)%
Last six months.......................... 98 10
Last 90 trading days..................... 78 9
Last 20 trading days..................... 31 6
Last 10 trading days..................... 32 6
Current (8/25/00)........................ 23 (2)
The analysis indicated that the consideration to be received by holders of
Powertel shares pursuant to the VoiceStream/Powertel merger was of slightly
greater value to the holders of Powertel shares as compared to Powertel's and
VoiceStream's actual relative trading performance over the relevant historical
periods. Furthermore, the analysis indicated that the consideration to be
received by holders of Powertel shares pursuant to the Deutsche Telekom/Powertel
merger was of meaningfully greater value to the holders of Powertel shares as
compared to Powertel's and Deutsche Telekom's actual relative trading
performance over the relevant historical periods.
Analysis of Selected Precedent Transactions
To compare the Deutsche Telekom/Powertel merger and the
VoiceStream/Powertel merger to other recent mergers in the PCS industry, Morgan
Stanley reviewed the following three transactions involving domestic PCS
companies since June 1999:
- June 1999 -- VoiceStream Wireless/Omnipoint
- September 1999 -- VoiceStream Wireless/Aerial; and
- July 2000 -- Deutsche Telekom/VoiceStream.
For each of these transactions, Morgan Stanley reviewed and calculated the
consideration paid per current licensed POPs, per current covered POPs and per
current subscribers and calculated the consideration paid for each of these
transactions as a multiple of estimated service revenues of the
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acquired company for the next one year. This analysis indicated the following
multiples for these transactions:
AGGREGATE CONSIDERATION PER
--------------------------------------------------
LICENSED COVERED CURRENT FORWARD
POPS POPS SUBSCRIBERS SERVICE REV.
-------- ------- ----------- ------------
VoiceStream/Omnipoint............................. $ 45 $ 96 $ 7,544 9.2x
VoiceStream/Aerial................................ 114 141 9,099 10.2
Deutsche Telekom/VoiceStream...................... 241 547 20,646 17.2
Morgan Stanley noted that the consideration received pursuant to the
Deutsche Telekom/Powertel merger and VoiceStream/Powertel merger implied the
following multiples for Powertel:
AGGREGATE CONSIDERATION PER
--------------------------------------------------
LICENSED COVERED CURRENT FORWARD
POPS POPS SUBSCRIBERS SERVICE REV.
-------- ------- ----------- ------------
Deutsche Telekom/Powertel merger.................. $270 $390 $8,819 9.9x
VoiceStream/Powertel merger....................... 222 320 7,232 8.1
Morgan Stanley noted that the VoiceStream/Omnipoint transaction and the
VoiceStream/Aerial transaction were more directly comparable to the Deutsche
Telekom/Powertel and VoiceStream/Powertel mergers as these previous acquisitions
were made to expand VoiceStream's service area to include geographic areas not
previously covered by VoiceStream's mobile telecommunication service. Morgan
Stanley further noted that the multiples paid in the Deutsche Telekom/Powertel
and VoiceStream/Powertel mergers are broadly in line with these comparable
transactions.
Discounted Cash Flow Analysis
Morgan Stanley performed a discounted cash flow analysis of Powertel's
business. This analysis considers the present value of projected cash flows for
Powertel using discount rates and the present value of Powertel's business
assuming a perpetual existence and applying a multiple to the final free cash
flow of Powertel for the projected period. Morgan Stanley analyzed Powertel's
business for the period beginning January 1, 2000 and ending December 31, 2009,
based on publicly available research estimates compiled by Powertel's
management, as adjusted for certain operating assumptions reflected in publicly
available reports.
Morgan Stanley estimated Powertel's discounted cash flow value by using a
discount rate range of 12.0% to 12.5% and using free cash flow growth rates
ranging from 5.0% to 5.5% in the final year of the period analyzed. This
analysis yielded a range of values for the Powertel common shares of
approximately $90 per share to $106 per share. Morgan Stanley noted that the
consideration received pursuant to the Deutsche Telekom/Powertel merger based on
the closing price of the Deutsche Telekom ADSs on August 25, 2000 represented a
0% to 18% premium to the Powertel per share discounted cash flow value.
Furthermore, Morgan Stanley noted that the consideration received pursuant to
the VoiceStream/Powertel merger based on the closing price of the VoiceStream's
common shares on August 25, 2000 represented a 6% to 25% discount to the
Powertel per share discounted cash flow value.
In addition, Morgan Stanley performed sensitivity analyses on assumptions
underlying Powertel's business forecast. Specifically, Morgan Stanley varied the
assumptions regarding the revenue growth and EBITDA margin in the final year of
the period analyzed. Using a 12.0% discount rate and a 5.5% final free cash flow
growth rate, Morgan Stanley arrived at values for the Powertel common shares
ranging from approximately $83 per share to $107 per share.
Morgan Stanley performed a variety of financial and comparative analyses
solely for purposes of providing its opinion to the Powertel board of directors
as to the fairness from a financial point of view to the holders of Powertel
common shares and preferred shares of the consideration received in the Deutsche
Telekom/Powertel merger or VoiceStream/Powertel merger.
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The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Morgan Stanley considered the results of all of its analyses as
a whole and did not attribute any particular weight to any analysis or factor
considered by it. Morgan Stanley believes that the summary provided and the
analyses described above must be considered as a whole and that selecting any
portion of its analyses, without considering all analyses, would create an
incomplete view of the process underlying its analyses and opinion. In addition,
Morgan Stanley may have given various analyses and factors more or less weight
than other analyses and factors, and may have deemed various assumptions more or
less probable than other assumptions, so that the ranges of valuations resulting
from any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of Deutsche Telekom, VoiceStream or Powertel.
No company used in the Comparable Company Analysis is identical to Deutsche
Telekom, VoiceStream or Powertel, and no transaction used in the Analysis of
Selected Precedent Transactions is identical to the Deutsche Telekom/Powertel
merger or the VoiceStream/Powertel merger. In performing its analyses, Morgan
Stanley made numerous judgments and assumptions with respect to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Deutsche Telekom,
VoiceStream or Powertel. In addition, mathematical analysis, such as determining
the average or the median, is not in itself a meaningful method of using
comparable company or precedent transaction data.
The analyses performed by Morgan Stanley are not necessarily indicative of
future results or actual values, which may be significantly more or less
favorable than those suggested by such estimates. The analyses performed were
prepared solely as part of Morgan Stanley's analysis of the fairness of the
consideration received pursuant to the Deutsche Telekom/Powertel merger or
VoiceStream/Powertel merger from a financial point of view to the holders of
Powertel common shares and preferred shares. Morgan Stanley's analyses are not
intended to be appraisals or to reflect the prices at which Deutsche Telekom,
VoiceStream or Powertel might actually be sold or the price at which their
securities may trade.
The consideration received pursuant to the Deutsche Telekom/Powertel merger
or VoiceStream/ Powertel merger was determined through arm's length negotiations
between Powertel, Deutsche Telekom and VoiceStream and was approved by the
Powertel board of directors. Morgan Stanley did not recommend any specific
merger consideration to Powertel or that any specific merger consideration
constituted the only appropriate merger consideration for the Deutsche
Telekom/Powertel merger or VoiceStream/Powertel merger. Morgan Stanley's opinion
to the Powertel board was one of many factors taken into consideration by the
Powertel board of directors in making its determination to approve the Deutsche
Telekom/Powertel merger or VoiceStream/Powertel merger. Consequently, the Morgan
Stanley analyses described above should not be viewed as determinative of the
opinion of the Powertel board of directors with respect to the value of Powertel
or whether the Powertel board of directors would have been willing to agree to
different merger consideration.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Morgan Stanley and its
affiliates have provided in the past, are providing and may provide in the
future financial advisory and financing services for Powertel and Deutsche
Telekom. Morgan Stanley may receive customary fees for the rendering of these
services. In the ordinary course of Morgan Stanley's business, Morgan Stanley or
its affiliates may at any time hold long or short positions, may trade, make a
market or otherwise effect transactions, for its own account, the accounts of
investment funds and other clients under the management of Morgan Stanley or for
the accounts of customers, in the securities or indebtedness of Deutsche
Telekom, VoiceStream and Powertel.
Under the letter agreement dated as of January 12, 2000, Morgan Stanley has
provided advisory services and a financial opinion in connection with the
Deutsche Telekom/Powertel merger or VoiceStream/Powertel merger, and Powertel
has agreed to pay a fee to Morgan Stanley of $28 million if
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the Deutsche Telekom/Powertel merger is consummated or a fee of $23 million if
the VoiceStream/Powertel merger is consumated. In addition, Powertel has also
agreed to reimburse Morgan Stanley for its expenses incurred in performing its
services and to indemnify Morgan Stanley and its affiliates, their respective
directors, officers, agents and employees and each person, if any, controlling
Morgan Stanley or any of its affiliates against certain liabilities and
expenses, including the fees of its legal counsel and certain liabilities under
the federal securities laws, related to or arising out of Morgan Stanley's
engagement and any related transactions.
INTERESTS OF DIRECTORS AND OFFICERS OF VOICESTREAM IN THE VOICESTREAM/POWERTEL
MERGER
Sonera Corporation is a significant stockholder of both VoiceStream and
Powertel, beneficially owning approximately 8.3% and 16.8% of their common
shares outstanding, respectively. Under the VoiceStream voting agreement, Sonera
has designated one representative to the VoiceStream board of directors. Sonera
also has the right to designate one representative to the Powertel board of
directors, but is not currently exercising such right, although a Sonera
representative currently attends meetings of the Powertel board of directors as
an observer.
INTERESTS OF DIRECTORS AND OFFICERS OF POWERTEL IN THE DEUTSCHE TELEKOM/POWERTEL
MERGER AND THE VOICESTREAM/POWERTEL MERGER
Some of the directors and officers of Powertel have interests in the
Deutsche Telekom/Powertel merger and the VoiceStream/Powertel merger that are
different from, or in addition to, the interests of Powertel stockholders
generally. These interests, to the extent material, are described below. The
Powertel board of directors was aware of these interests and considered them,
among other matters, in approving both the Deutsche Telekom/Powertel merger
agreement and the Deutsche Telekom/Powertel merger and the VoiceStream/Powertel
merger agreement and the VoiceStream/Powertel merger.
Treatment of Equity Awards
Each merger agreement provides that, immediately prior to the completion of
the Deutsche Telekom/Powertel merger and the VoiceStream/Powertel merger, each
outstanding option to purchase Powertel common shares will be converted into the
right to acquire Deutsche Telekom ordinary shares or VoiceStream common shares,
respectively. See "Summary of Deutsche Telekom/Powertel and VoiceStream/Powertel
Transaction Documents -- The Deutsche Telekom/Powertel Merger Agreement --
Treatment of Powertel Options and Restricted Stock" and "Summary of Deutsche
Telekom/Powertel and VoiceStream/Powertel Transaction Documents -- The
VoiceStream/Powertel Merger Agreement -- Treatment of Powertel Options and
Restricted Stock." Except as provided below, none of the options to purchase
Powertel common shares will be subject to accelerated vesting. Powertel will be
allowed to issue up to an aggregate of 575,000 options prior to the completion
of the Deutsche Telekom/Powertel merger or the VoiceStream/Powertel merger, as
the case may be, to Powertel employees in yearly performance grants, to DiGiPH
employees that become Powertel employees and in connection with offers of
employment outstanding as of August 26, 2000. In the event an employee's
employment is terminated by Deutsche Telekom or VoiceStream, as the case may be,
because of job elimination resulting from the Deutsche Telekom/Powertel merger
or the VoiceStream/Powertel merger within 18 months of the completion of the
applicable merger, then the employee's options may become fully vested and
exercisable, subject to certain limitations and restrictions. In addition to
actual job elimination, an employee's employment will be considered to have been
terminated by Deutsche Telekom or VoiceStream, as the case may be, because of
job elimination if:
- that employee's employment with the surviving corporation terminates
within 30 days after the employee is subjected to a reduction in the
employee's salary, hourly wage or target bonus; or
- if the employee is required to transfer to a workplace 50 miles or more
from their current job location.
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Any employee who receives accelerated vesting of his or her options will not be
entitled to any actual or potential remaining payments under the cash bonus,
retention bonus or incentive bonus plans that are described below. However,
individuals who are eligible to receive payments under the severance plan will
still be able to receive those payments, except that those payments will be
reduced by any amounts that were previously paid to the employee under the cash
bonus, the retention bonus or the incentive bonus plans. To obtain accelerated
vesting or severance payments, an employee will be required to sign and deliver
to the surviving corporation a full release of all claims against Powertel,
Deutsche Telekom, VoiceStream and all related parties. In addition, all
restrictions on outstanding restricted shares held by Powertel employees will
lapse upon the completion of the Deutsche Telekom/Powertel merger or
VoiceStream/Powertel merger, as the case may be.
Cash and Retention Bonus Plans
Pursuant to the Deutsche Telekom/Powertel and the VoiceStream/Powertel
merger agreements, cash and retention bonus plans will be established for
Powertel management employees, including the executive officers of Powertel,
subject to offsets against severance payments as described below. Pursuant to
the cash bonus plan, each full-time employee of Powertel as of December 31, 2000
will receive a $3,000 cash bonus three months following the completion of the
Deutsche Telekom/Powertel or VoiceStream/Powertel merger, as the case may be, if
they remain employed in good standing as of that date or if their employment is
terminated within that period as a result of job elimination resulting from the
Deutsche Telekom/Powertel or VoiceStream/Powertel merger, as the case may be.
The bonus will be prorated for part-time employees and employees hired after
December 31, 2000. In addition, approximately 150-300 key employees of Powertel,
including the executive officers of Powertel, except for the chief executive
officer and chief financial officer, will be eligible to receive retention
bonuses paid out of a $20 million bonus pool in amounts and upon terms mutually
agreed upon by the chief executive officers and chief operating officers of
VoiceStream and Powertel. These retention bonuses will be paid as follows:
- 33.3% of the cash bonus 90 days after the Deutsche Telekom/Powertel or
VoiceStream/Powertel merger;
- 33.3% of the cash bonus on the first anniversary of the Deutsche
Telekom/Powertel or VoiceStream/ Powertel merger; and
- 33.4% on the second anniversary of the Deutsche Telekom/Powertel or
VoiceStream/Powertel merger.
To receive the retention bonuses, the participating employees must be
continuously employed from the start of the plan and remain in good standing
through the date of payment.
Incentive Bonus Plan
Deutsche Telekom or VoiceStream, as the case may be, intends to pay
incentive bonuses out of a separate $20 million bonus pool to the same employees
that participate in the retention bonus plan, which may include selected
executive officers of Powertel. These individuals will be eligible to receive
incentive bonuses based on the achievement of specified performance targets for
the Powertel markets. The chief executive officers and chief operating officers
of VoiceStream and Powertel will mutually agree upon the incentive bonus for
each participant. Incentive bonuses will be paid as follows, provided the
applicable merger has been completed by the indicated date of payment:
- 12.5% is payable in September 2001, based upon achieving a minimum number
of net subscriber and post-pay subscriber additions during the first
quarter of 2001;
- 12.5% is payable in September 2001, based upon achieving a minimum number
of net subscriber and post-pay subscriber additions during the second
quarter of 2001;
- 6.25% is payable in September 2001 for each of the first and second
calendar quarters of 2001 in which combined pre-pay and post-pay churn is
at or below a targeted percentage;
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- 6.25% is payable in September 2001 for each of the first and second
calendar quarters of 2001 in which bad debt is at or below a targeted
percentage of total subscriber revenue;
- 12.5% is payable in January 2002, based upon achieving a minimum number
of net subscriber and post-pay subscriber additions during the third
quarter of 2001;
- 12.5% is payable in January 2002, based upon achieving a minimum number
of net subscriber and post-pay subscriber additions during the fourth
quarter of 2001;
- 6.25% is payable in January 2002 for each of the third and fourth
calendar quarters during 2001 in which combined pre-pay and post-pay
churn is at or below a targeted percentage; and
- 6.25% is payable in January 2002 for each of the third and fourth
calendar quarters during 2001 in which bad debt is at or below a targeted
percentage of total subscriber revenue.
The incentive bonuses earned under this plan will depend on the number of
quarters during which performance targets are met. To earn any payments under
this plan, participants must be continuously employed by Powertel or its
successor and in good standing through the payment date. In addition, Powertel
agreed to implement an annual services agreement by January 1, 2001, and to use
its reasonable efforts to place a majority of its post-pay subscriber additions
on that agreement.
Severance Plan
Individuals who are employees of Powertel immediately before the completion
of the applicable merger and whose employment is terminated by Deutsche Telekom
or VoiceStream, as the case may be, because of a job elimination resulting from
the applicable merger will participate in the severance plan. Any payments under
the severance plan will be reduced dollar for dollar by any amounts that a
participant receives under the cash, retention or incentive bonus plans,
described above. Under the severance plan, the chief executive officer, chief
financial officer, chief operating officer and all other executive vice
presidents of Powertel would receive severance equal to one year of their base
salary plus their targeted bonus as of August 26, 2000. Vice presidents of
Powertel would receive a severance payment equal to six months of their base
salary plus their targeted bonus as of August 26, 2000. All other employees
would receive severance equal to their base salary or the hourly equivalent, not
including overtime, plus their targeted bonus as of August 26, 2000 for a
minimum of four weeks, plus two weeks per year of actual service to Powertel,
and Deutsche Telekom or VoiceStream, as the case may be, up to a maximum of 20
weeks. Partial years of service are prorated. The surviving corporation shall
provide premiums for health and dental coverage under COBRA for all participants
in the severance plan for a period equal to the salary continuation period, but
not to exceed the time that COBRA coverage is available to the employee. To
obtain benefits under the severance plan, employees will be required to sign and
deliver to the surviving corporation a full release of all claims against
Powertel, Deutsche Telekom and VoiceStream and all related parties.
Completion Bonus
Each of the Deutsche Telekom/Powertel merger agreement and the
VoiceStream/Powertel merger agreement provides for the payment to specified
officers of Powertel of completion bonuses upon the completion of the applicable
merger. The president and chief executive officer of Powertel, Allen E. Smith,
would receive a completion bonus of $2,450,125, the chief financial officer of
Powertel, Fred G. Astor, Jr., would receive a completion bonus of $1,660,027 and
the chief operating officer of Powertel, Rodney D. Dir, would receive a
completion bonus of $676,240 upon the completion of the applicable merger.
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Benefits Table
The following table identifies the directors and executive officers of
Powertel who may have an interest in the Deutsche Telekom/Powertel merger or the
VoiceStream/Powertel merger, other than any interest arising solely from the
ownership of Powertel common shares or preferred shares in which these persons
receive no extra or special benefit not shared on a pro rata basis with other
Powertel stockholders, and, if applicable, a quantification of the benefit to be
received by those persons as a result of the Deutsche Telekom/Powertel merger or
the VoiceStream/Powertel merger, as the case may be.
APPROXIMATE APPROXIMATE
DOLLAR DOLLAR
AMOUNT OF AMOUNT OF
INTEREST INTEREST IN
IN DEUTSCHE THE
NAME AND TITLE TELEKOM/ VOICESTREAM/
OR POSITION WITH NATURE OF INTEREST POWERTEL POWERTEL
POWERTEL IN THE MERGERS(a) MERGER MERGER
---------------- ------------------ ----------- ------------
Allen E. Smith(e) -- Potential severance payment $ 549,875 $ 549,875
President, Chief Executive Completion bonus 2,450,125 2,450,125
Officer and Director Stock options(b) 1,858,159 1,954,523
Restricted stock(b) 407,818 425,000
Additional benefits(c) 7,343 7,343
Fred G. Astor, Jr.(e) -- Potential severance payment 339,973 339,973
Executive Vice President Completion bonus 1,660,027 1,660,027
and Chief Financial Officer Stock options 837,368 880,760
Restricted stock 203,909 212,500
Additional benefits 7,343 7,343
Rodney D. Dir(d) -- Potential severance payment 323,760 323,760
Executive Vice President and Completion bonus 676,240 676,240
Chief Operating Officer Stock options 1,413,089 1,485,013
Additional benefits 7,343 7,343
H. Jay Galletly(d) -- Potential severance payment 213,996 213,996
Executive Vice President and Stock options 584,368 618,750
General Manager Additional benefits 4,895 4,895
Nicholas J. Jebbia(d) -- Potential severance payment 224,565 224,565
Executive Vice President and Stock options 492,571 518,124
General Manager Additional benefits 2,292 2,292
George R. Johnson(d) -- Potential severance payment 228,141 228,141
Executive Vice President and Stock options 584,633 614,801
General Manager Additional benefits 2,292 2,292
Walter R. Pettiss(d) -- Potential severance payment 225,987 225,987
Executive Vice President/ Stock options 417,573 439,195
Customer Service Additional benefits 4,895 4,895
Michael P. Tatom(d) -- Potential severance payment 202,542 202,542
Executive Vice President and Stock options 474,278 498,862
General Manager Additional benefits 2,292 2,292
---------------
(a) Unless otherwise indicated, the calculations of the benefits in this table
are based upon assumptions and other facts described in the preceding
paragraphs.
(b) Stock option amounts consist of the value of outstanding stock options that
will become vested upon the consummation of the applicable merger if the
employee is terminated, and is based upon the assumptions and other facts
described in the preceding paragraphs. For the Deutsche Telekom/ Powertel
merger, stock option values are based on the last sale price of $30.72 for
Deutsche Telekom ADSs on February 7, 2001. For the VoiceStream/Powertel
merger, stock option values are based on the last sale price of $118.81 for
VoiceStream common shares on February 7, 2001.
(c) Additional benefits consist of COBRA benefits that are payable on behalf of
these executive officers in the event the executive officer is terminated by
Deutsche Telekom or VoiceStream, as the case may be. The values of these
benefits were calculated based upon the cost of COBRA benefits under
Powertel's current plans and rates.
(d) These executive officers may receive cash bonuses, retention bonuses and
incentive bonuses. These bonuses will be payable upon the assumptions and
other facts described in the preceding paragraphs.
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(e)These executive officers may receive $3,000 cash bonuses, payable upon the
assumptions and other facts described in the preceding paragraphs on cash
bonuses but will not receive retention bonuses or incentive bonuses.
Indemnification of Directors and Officers
Deutsche Telekom or VoiceStream, as the case may be, has agreed to cause
the surviving corporation in the applicable merger to maintain, for a period of
six years after the completion of the applicable merger, Powertel's current
provisions and policies regarding indemnification of officers and directors,
provided that the applicable surviving corporation may substitute policies
having at least the same coverage and containing terms that are no less
advantageous to the insured. If the premium for such substitute policy would
otherwise exceed 250% of the current premium, the surviving corporation need
only obtain as much insurance as can be obtained for 250% of the current
premium. In addition, Deutsche Telekom or VoiceStream, as the case may be, and
Powertel have agreed to indemnify the officers and directors of Powertel to the
fullest extent permitted by law. For more information, see "Summary of Deutsche
Telekom/Powertel and VoiceStream/Powertel Transaction Documents -- The Deutsche
Telekom/Powertel Merger Agreement -- Indemnification and Insurance" and "Summary
of Deutsche Telekom/Powertel and VoiceStream/Powertel Transaction
Documents -- The VoiceStream/Powertel Merger Agreement -- Indemnification and
Insurance."
Stockholder Agreements
In connection with the execution of the Deutsche Telekom/Powertel merger
agreement and the VoiceStream/Powertel merger agreement, a number of Powertel
stockholders entered into agreements with Deutsche Telekom and VoiceStream,
respectively, regarding the voting and transfer of their Powertel shares. Some
of these Powertel stockholders are, or have relationships with, directors or
executive officers of Powertel, as follows:
- ITC Holding Company, Inc., which is an employer of directors Campbell B.
Lanier, III and William H. Scott, III, and which has directors O. Gene
Gabbard, Donald W. Burton and Donald W. Weber on its board of directors;
- SCANA Corporation, which is the sole stockholder of SCANA Communications
Holdings, Inc. and is the employer of directors William B. Timmerman and
Ann M. Milligan; and
- The South Atlantic Venture Funds and The Burton Partnerships, each of
which employs director Donald W. Burton.
These stockholder agreements are described in greater detail under "Summary
of Deutsche Telekom/Powertel and VoiceStream/Powertel Transaction
Documents -- Deutsche Telekom's Agreements with Stockholders of Powertel" and
"Summary of Deutsche Telekom/Powertel and VoiceStream/Powertel Transaction
Documents -- VoiceStream's Agreements with Stockholders of Powertel."
APPRAISAL RIGHTS
Delaware law does not entitle the record holders of Powertel common shares
to rights of appraisal in connection with either the Deutsche Telekom/Powertel
merger or the VoiceStream/Powertel merger. Delaware law entitles the record
holders of Powertel preferred shares who follow the procedures specified in
Section 262 of the Delaware corporation law to have their shares appraised by
the Delaware Court of Chancery and to receive the "fair value" of these Powertel
preferred shares as of the time the Deutsche Telekom/Powertel merger or the
VoiceStream/Powertel merger, as the case may be, is completed, as may be
determined by the court, in place of the applicable merger consideration. In
order to exercise such rights, a stockholder must demand and perfect the rights
in accordance with Section 262, a copy of which is attached as Annex G to this
proxy statement/prospectus. However, all holders of Powertel preferred shares
have agreed to waive their appraisal rights and to vote their shares in favor of
the Deutsche Telekom/Powertel merger and the VoiceStream/Powertel merger.
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DIVIDENDS
DEUTSCHE TELEKOM
Deutsche Telekom historically has paid dividends on an annual basis and
expects to continue to pay annual dividends on Deutsche Telekom ordinary shares.
The amount and payment of future Deutsche Telekom dividends will depend on
Deutsche Telekom's earnings, its financial condition and other factors,
including cash requirements, the future prospects of Deutsche Telekom, and tax,
regulatory and other legal considerations. Although Deutsche Telekom expects to
pay annual dividends on its shares, you should not assume that any dividend will
actually be paid or make any assumption about the amount that will be paid in
any given year.
VoiceStream and Powertel stockholders who receive Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares in the Deutsche Telekom/VoiceStream merger or
the Deutsche Telekom/Powertel merger in 2001 will be entitled to receive any
dividends declared with respect to fiscal year 2001 and subsequent years. Any
dividends with respect to fiscal year 2000 that are approved at the next annual
general meeting of Deutsche Telekom shareholders, which is currently scheduled
for May 29, 2001, would be payable after such meeting to shareholders as of the
date of completion of such meeting. If the next annual general meeting is held
on May 29, 2001, as currently scheduled, VoiceStream and Powertel stockholders
who receive Deutsche Telekom ADSs or Deutsche Telekom ordinary shares in the
Deutsche Telekom/VoiceStream merger or the Deutsche Telekom/Powertel merger will
not be entitled to receive any dividends that may be declared with respect to
fiscal year 2000.
Deutsche Telekom's dividend for the year ended December 31, 1999 was 0.62
euros per Deutsche Telekom ordinary share or $0.58 per Deutsche Telekom ADS,
based on the noon buying rate for euros on the dividend payment date, which
occurred during the second quarter of 2000. See "Market Price and Dividend
Data -- Dividend Data -- Deutsche Telekom."
Holders of Deutsche Telekom ordinary shares receive dividends in euros.
Deutsche Telekom's ADS depositary generally will convert dividends received in
respect of Deutsche Telekom ordinary shares represented by Deutsche Telekom ADSs
into U.S. dollars and distribute the dividends in U.S. dollars to holders of
Deutsche Telekom ADSs. See "Market Price and Dividend Data," "Description of
Deutsche Telekom Ordinary Shares -- Dividends and Other Distributions" and
"Description of Deutsche Telekom American Depositary Shares -- Dividends and
Distributions."
VOICESTREAM
VoiceStream has never declared or paid dividends on VoiceStream common
shares and does not anticipate paying dividends in the foreseeable future.
However, prior to completion of the Deutsche Telekom/ VoiceStream merger,
VoiceStream anticipates paying a stock dividend of 0.0075 of a VoiceStream
common share for each common share outstanding. In addition, provisions of
VoiceStream's credit facility and the indentures for its senior notes and senior
discount notes and the senior notes issued by Omnipoint, contain restrictions on
VoiceStream's ability to declare and pay cash dividends on VoiceStream common
shares.
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FEDERAL SECURITIES LAW CONSEQUENCES OF THE MERGERS
THE DEUTSCHE TELEKOM/VOICESTREAM MERGER AND THE DEUTSCHE TELEKOM/POWERTEL MERGER
Deutsche Telekom ADSs and Deutsche Telekom ordinary shares received in the
Deutsche Telekom/VoiceStream merger by VoiceStream stockholders and in the
Deutsche Telekom/Powertel merger by Powertel stockholders, as the case may be,
generally will be freely transferable except that:
- Deutsche Telekom ADSs and Deutsche Telekom ordinary shares received by
persons that are deemed to be affiliates of VoiceStream or Powertel under
the Securities Act of 1933, as amended, at the time of the VoiceStream or
Powertel special meeting, as the case may be, may be resold by them only
in transactions permitted by Rule 145 under the Securities Act or as
otherwise permitted under the Securities Act. Persons that may be deemed
to be affiliates of VoiceStream or Powertel for purposes of Rule 145
under the Securities Act generally include individuals or entities that
control, are controlled by or are under common control with VoiceStream
or Powertel, as the case may be, and include directors and executive
officers of VoiceStream or Powertel. Each of the Deutsche Telekom/
VoiceStream merger agreement and the Deutsche Telekom/Powertel merger
agreement requires each of VoiceStream and Powertel, respectively, to use
its reasonable best efforts to cause each of its respective affiliates to
deliver to Deutsche Telekom on or prior to the completion of the
applicable merger, a signed agreement to the effect that the affiliate
will not offer, sell or otherwise dispose of any Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares issued to the affiliate in the
applicable merger in violation of the Securities Act or the related SEC
rules.
- In addition, certain VoiceStream and Powertel stockholders who entered
into stockholder agreements with Deutsche Telekom described under
"Summary of the Deutsche Telekom/VoiceStream Transaction
Documents -- Deutsche Telekom's Agreements with Stockholders of
VoiceStream" and "Summary of Deutsche Telekom/Powertel and
VoiceStream/Powertel Transaction Documents -- Deutsche Telekom's
Agreement with Stockholders of Powertel" will be subject to certain
transfer restrictions on their shares for the first six months after the
completion of the Deutsche Telekom/VoiceStream merger or the Deutsche
Telekom/Powertel merger, as the case may be. Deutsche Telekom reserves
the right to waive these transfer restrictions at any time or from time
to time.
THE VOICESTREAM/POWERTEL MERGER
VoiceStream common shares received in the VoiceStream/Powertel merger by
Powertel stockholders generally will be freely transferable, except that:
- VoiceStream common shares received by persons that are deemed to be
affiliates of Powertel under the Securities Act at the time of the
Powertel special meeting may be resold by them only in transactions
permitted by Rule 145 under the Securities Act or as otherwise permitted
under the Securities Act. Persons that may be deemed to be affiliates of
Powertel for these purposes generally include individuals or entities
that control, are controlled by or are under common control with Powertel
and include directors and executive officers of Powertel. The
VoiceStream/Powertel merger agreement requires Powertel to use reasonable
efforts to cause each of its affiliates to deliver to VoiceStream on or
prior to the completion of the VoiceStream/Powertel merger a signed
agreement to the effect that the affiliate will not offer, sell or
otherwise dispose of any VoiceStream shares issued to the affiliate in
the VoiceStream/Powertel merger in violation of the Securities Act or the
related SEC rules.
- In addition, certain Powertel stockholders who have agreed in the
stockholder agreements with VoiceStream described under "Summary of
Deutsche Telekom/Powertel and VoiceStream/Powertel Transaction
Documents -- VoiceStream's Agreements with Stockholders of Powertel" will
be subject to certain resale restrictions on their VoiceStream shares
prior to the six month anniversary of the completion of the
VoiceStream/Powertel merger.
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OTHER EFFECTS OF THE MERGERS
OTHER EFFECTS OF THE DEUTSCHE TELEKOM/VOICESTREAM MERGER AND THE DEUTSCHE
TELEKOM/POWERTEL MERGER
Listing of Shares
It is a condition to each of the Deutsche Telekom/VoiceStream merger and
the Deutsche Telekom/Powertel merger that the Deutsche Telekom ADSs issuable in
connection with the Deutsche Telekom/VoiceStream merger or the Deutsche
Telekom/Powertel merger, as the case may be, be authorized for listing on the
NYSE subject to official notice of issuance, and that all steps necessary for
the listing of the Deutsche Telekom ordinary shares to be issued by Deutsche
Telekom in connection with the Deutsche Telekom/VoiceStream merger and the
Deutsche Telekom/Powertel merger, as the case may be, on the Frankfurt Stock
Exchange will have been taken. If the Deutsche Telekom/VoiceStream merger or the
Deutsche Telekom/Powertel merger, as the case may be, is completed, the newly
issued Deutsche Telekom ordinary shares will be listed on the Frankfurt Stock
Exchange and dealings in the Deutsche Telekom ordinary shares are expected to
commence, at 9:00 a.m., Frankfurt time, on or about the third business day after
the relevant merger is legally completed. For information concerning tax
considerations related to the ownership of Deutsche Telekom ADSs and Deutsche
Telekom ordinary shares, see "U.S. Federal and German Tax Consequences -- U.S.
Federal Income Tax and German Tax Considerations for U.S. Resident Holders of
Deutsche Telekom ADSs and Deutsche Telekom Ordinary Shares."
Effects on Other Capital Stock and Warrants of VoiceStream
Any 7% cumulative convertible preferred shares of Omnipoint, a subsidiary
of VoiceStream, that are outstanding at the time of the Deutsche
Telekom/VoiceStream merger will remain outstanding after the completion of the
Deutsche Telekom/VoiceStream merger and the holders thereof will become
entitled, upon conversion of the 7% convertible preferred shares, to receive the
merger consideration. Any warrants issued pursuant to the Omnipoint remainder
warrant certificate dated May 6, 1997 that are not exercised before the
completion of the Deutsche Telekom/VoiceStream merger will remain outstanding
after completion of the Deutsche Telekom/VoiceStream merger and the holders
thereof will become entitled, upon exercise of the warrants, to receive the
merger consideration. Any VoiceStream voting preferred shares, all of which are
held by Deutsche Telekom, will remain outstanding and will be unaffected by the
Deutsche Telekom/VoiceStream merger. For additional details concerning these
classes of VoiceStream shares and warrants, see "Summary of the Deutsche
Telekom/VoiceStream Transaction Documents -- The Deutsche Telekom/VoiceStream
Merger Agreement -- Treatment of Other Capital Stock, Warrants and Exchange
Rights."
Effects on Warrants of Powertel
Any warrants issued pursuant to the Warrant Agreement, dated February 7,
1996, between Powertel and Bankers Trust Company, as warrant agent, that have
not been exercised before the completion of the Deutsche Telekom/Powertel merger
will remain outstanding after the Deutsche Telekom/Powertel merger and any
holders thereof will become entitled, upon exercise of the warrants, to the
merger consideration. For additional details concerning these warrants, see
"Summary of Deutsche Telekom/Powertel and VoiceStream/Powertel Transaction
Documents -- The Deutsche Telekom/Powertel Merger Agreement -- Treatment of
Powertel Warrants."
Content and Timing of Reports and Notices of the Companies; Definition of
Foreign Private Issuer
The content and timing of reports and notices that Deutsche Telekom files
with the SEC differ in several respects from the reports and notices that
VoiceStream and Powertel currently file with the SEC. Deutsche Telekom is a
foreign private issuer for the purposes of the reporting rules under the
Securities Exchange Act of 1934, as amended.
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As United States reporting companies, VoiceStream and Powertel currently
must each file with the SEC, among other reports and notices:
- an annual report on Form 10-K within 90 days after the end of each fiscal
year;
- a quarterly report on Form 10-Q within 45 days after the end of each
fiscal quarter; and
- current reports on Form 8-K upon the occurrence of various corporate
events.
As a foreign private issuer, pursuant to the requirements of the Exchange
Act, Deutsche Telekom is required to:
- file with the SEC an annual report on Form 20-F within six months after
the end of each fiscal year; and
- furnish material information that it makes public in Germany on Form 6-K.
As a foreign private issuer, Deutsche Telekom is not required under the
Exchange Act to file quarterly reports on Form 10-Q after the end of each
financial quarter.
In addition, the content and timing of reports and notices that holders of
Deutsche Telekom ADSs and Deutsche Telekom ordinary shares will receive will
differ from the reports and notices that currently are received by VoiceStream
and Powertel stockholders. As United States reporting companies, VoiceStream and
Powertel each must mail to its respective stockholders in advance of each annual
meeting of stockholders:
- an annual report containing audited financial statements; and
- a proxy statement that complies with the requirements of the Exchange
Act.
As a foreign private issuer, Deutsche Telekom is exempt from the rules
under the Exchange Act prescribing the furnishing and content of annual reports
and proxy statements to its shareholders. Deutsche Telekom expects to retain its
status as a foreign private issuer after the completion of the Deutsche
Telekom/VoiceStream merger and the Deutsche Telekom/Powertel merger. Under SEC
rules, Deutsche Telekom will retain its status as a foreign private issuer
unless:
- more than 50% of Deutsche Telekom's ordinary shares, including Deutsche
Telekom ordinary shares underlying Deutsche Telekom ADSs, are, directly
or indirectly, owned of record by shareholders that are residents of the
United States; and
- any one of the following conditions is satisfied:
-- the majority of Deutsche Telekom's directors or executive officers
are United States citizens or residents of the United States;
-- more than 50% of Deutsche Telekom's assets are located in the United
States; or
-- Deutsche Telekom's business is administered principally in the United
States.
After completion of the Deutsche Telekom/VoiceStream and Deutsche
Telekom/Powertel mergers, it is possible that United States shareholders may at
some time in the future hold more than 50% of Deutsche Telekom's ordinary
shares, including Deutsche Telekom ordinary shares underlying the Deutsche
Telekom ADSs. However, Deutsche Telekom expects that after the Deutsche
Telekom/VoiceStream merger and Deutsche Telekom/Powertel merger, at least 50% of
its directors and executive officers will be persons that are not United States
citizens or residents and at least 50% of its assets will be located outside of
the United States. Furthermore, Deutsche Telekom will continue to administer its
business from its current headquarters in Germany. Accordingly, Deutsche Telekom
expects to retain its status as a foreign private issuer after completion of the
Deutsche Telekom/VoiceStream and Deutsche Telekom/Powertel mergers.
If Deutsche Telekom at any time loses its status as a foreign private
issuer, it would be required to file annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K. In
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addition, Deutsche Telekom would become subject to the rules under the Exchange
Act regarding the furnishing and content of annual reports and proxy statements
to its shareholders and forefeiture by its directors, officers and beneficial
owners of 10% or more of its shares of any "short swing" profits realized by
them from any purchases and sales of Deutsche Telekom shares within a six-month
period.
Although Deutsche Telekom, as a foreign private issuer, is exempt from the
rules under the Exchange Act regarding the furnishing of annual reports to
shareholders, under the rules of the NYSE, Deutsche Telekom is required to
distribute to the holders of its ADSs an annual report containing audited
financial statements a reasonable period of time before Deutsche Telekom's
annual general meeting of shareholders. Deutsche Telekom currently furnishes
holders of its ordinary shares with Deutsche Telekom's annual report, which
contains audited financial statements prepared in conformity with German GAAP,
including U.S. GAAP reconciliations. Deutsche Telekom also furnishes holders of
its ordinary shares with quarterly interim reports, which include unaudited
interim financial information prepared in conformity with German GAAP, including
U.S. GAAP reconciliations, and notices of meetings of shareholders and related
documents in accordance with the German Stock Corporation Act (Aktiengesetz) and
the Frankfurt Stock Exchange. See "Description of Deutsche Telekom American
Depositary Shares" and "Comparison of Rights of VoiceStream and Powertel
Stockholders and Deutsche Telekom Shareholders -- Reporting Requirements."
Delisting of VoiceStream and Powertel Common Shares
If the Deutsche Telekom/VoiceStream merger is completed, the VoiceStream
common shares will be delisted from the Nasdaq Stock Market and deregistered
under the Exchange Act. The Powertel common shares will be delisted from the
Nasdaq Stock Market and deregistered under the Exchange Act if the Deutsche
Telekom/Powertel merger is completed.
Potential Effects on Trading in Deutsche Telekom ADSs and Deutsche Telekom
Ordinary Shares
Some U.S. mutual funds, state pension funds and other investors are not
permitted to hold equity securities of non-U.S. companies. In addition, some
mutual funds and other investors may hold shares of VoiceStream because it is
included in the Nasdaq 100 Index, and Deutsche Telekom shares are not included
in that index. Also, a substantial number of VoiceStream and Powertel
stockholders, including principal stockholders and institutional and retail
investors, may not wish to retain the Deutsche Telekom shares they receive in
the applicable merger transaction with Deutsche Telekom and may wish to sell
them in the market. As a result, a substantial proportion of these shares might
flow back into Germany, Deutsche Telekom's home and principal trading market.
Moreover, prior to completion of the mergers, arbitrageurs may enter into
arbitrage positions by establishing a long position in VoiceStream stock and/or
Powertel stock and a short position in Deutsche Telekom shares. In addition,
Deutsche Telekom's two largest shareholders may sell all or a substantial amount
of the Deutsche Telekom ordinary shares they currently hold. Any sales or short
sales by these holders, or the prospect of future sales by such holders, could
adversely affect the market price of the Deutsche Telekom ADSs or Deutsche
Telekom ordinary shares.
The relative weight of Deutsche Telekom in the DAX Index, which is a market
capitalization weighted index of German securities, is capped at 15%. As a
result, if Deutsche Telekom's relative weight exceeds 15% at the end of any
quarter, as it is expected to be after completion of the mergers, it will be
reset to 15%. Deutsche Telekom's relative weight in the DAX Index was
approximately 11% as of February 7, 2001. Deutsche Telekom's weighting in the
Pan-European indices DJ-STOXX and MSCI, which are not subject to the same
limitations, will increase. As a result, pension funds, unit trusts and other
investment vehicles whose investment objective is to track the performance of
the DJ-STOXX and MSCI indices are likely to increase their holdings of Deutsche
Telekom ordinary shares. In addition, hedge funds and international
institutional investors may wish to use the increased liquidity in Deutsche
Telekom shares to either establish or raise their existing position in Deutsche
Telekom or to cover their hedges. Such demands may counterbalance the adverse
effect on the market price for the Deutsche Telekom ADSs or Deutsche Telekom
ordinary shares caused by some of the factors described above.
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Deutsche Telekom Financial Information
Deutsche Telekom prepares its financial statements in accordance with
German GAAP and presents them in euros. Deutsche Telekom financial statements
include a reconciliation of the German GAAP financial information to U.S. GAAP,
and Deutsche Telekom's annual financial statements contain a summary of the
effects of the differences between German GAAP and U.S. GAAP in accordance with
SEC rules.
If Deutsche Telekom loses its status as a foreign private issuer, under SEC
rules, it will be required to prepare financial statements in accordance with
U.S. GAAP and present them in U.S. dollars, in addition to its financial
statements prepared in accordance with German GAAP and presented in euros. Note
36 to the financial statements included in Deutsche Telekom's Annual Report for
the year ended December 31, 1999 describes the significant differences between
German GAAP and U.S. GAAP as they relate to Deutsche Telekom. The notes to the
unaudited pro forma condensed consolidated financial information, prepared in
accordance with German GAAP, set forth a summary of certain estimated
adjustments that would be required if U.S. GAAP had been applied to that
information.
Dilution of the German Government's Ownership Interest in Deutsche Telekom.
After the completion of the Deutsche Telekom/VoiceStream merger, the
aggregate ownership of Deutsche Telekom shares by the Federal Republic of
Germany and KfW is estimated to be diluted to approximately 46%, and after the
completion of the Deutsche Telekom/VoiceStream merger and the Deutsche
Telekom/Powertel merger, the aggregate ownership of Deutsche Telekom shares by
the Federal Republic of Germany and KfW is estimated to be diluted to
approximately 45%, based on facts that existed as of February 7, 2001 and
assumptions similar to those described under "Summary of the Deutsche
Telekom/VoiceStream Transaction Documents -- The Deutsche Telekom/VoiceStream
Merger Agreement -- Consideration To Be Received in the Deutsche
Telekom/VoiceStream Merger -- Explanation of Potential Tax-Related Adjustment to
Merger Consideration". The Federal Republic of Germany has publicly stated its
intention to reduce substantially its ownership of Deutsche Telekom shares.
OTHER EFFECTS OF THE VOICESTREAM/POWERTEL MERGER
Listing of Shares
It is a condition to the VoiceStream/Powertel merger that VoiceStream
common shares issuable in connection with the VoiceStream/Powertel merger be
authorized for listing on the Nasdaq Stock Market subject to official notice of
issuance.
Effects on Other Capital Stock and Warrants
At the completion of the VoiceStream/Powertel merger, each Powertel
preferred share will be converted into the right to receive a number of
VoiceStream common shares determined by multiplying the conversion number by the
sum of:
- the number of Powertel common shares into which such Powertel preferred
share would be converted as of the completion of the VoiceStream/Powertel
merger plus
- with respect to Powertel's Series E preferred shares and Series F
preferred shares, the number of Powertel common shares that represent
accrued or declared but unpaid dividends on these Powertel preferred
shares.
Any warrants granted pursuant to the warrant agreement dated February 2,
1996 between Powertel and Bankers Trust Company as warrant agent that are not
exercised before the completion of the VoiceStream/Powertel merger will remain
outstanding after completion of the VoiceStream/Powertel merger and be entitled
to receive VoiceStream common shares. For additional details concerning these
classes of shares and warrants, see "Summary of Deutsche Telekom/Powertel and
VoiceStream/Powertel Transaction Documents -- The VoiceStream/Powertel Merger
Agreement -- Treatment of Powertel Warrants" and "Summary of Deutsche
Telekom/Powertel and VoiceStream/Powertel Transaction Documents -- The Deutsche
Telekom/Powertel Merger Agreement -- Treatment of Powertel Options and
Restricted Stock."
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Delisting of Powertel Common Shares
If the VoiceStream/Powertel merger is completed, Powertel common shares
will be delisted from the Nasdaq Stock Market and deregistered under the
Exchange Act.
ACCOUNTING TREATMENT
THE DEUTSCHE TELEKOM/VOICESTREAM MERGER AND THE DEUTSCHE TELEKOM/POWERTEL MERGER
Deutsche Telekom will account for the Deutsche Telekom/VoiceStream merger
and for the Deutsche Telekom/Powertel merger as a purchase under generally
accepted accounting principles in Germany and in the United States. See
"Deutsche Telekom Unaudited Pro Forma Condensed Combined Financial Statements."
THE VOICESTREAM/POWERTEL MERGER
VoiceStream will account for the VoiceStream/Powertel merger as a purchase
under generally accepted accounting principles in the United States. See
"VoiceStream Unaudited Pro Forma Condensed Combined Financial Statements."
REGULATORY APPROVALS
REGULATORY APPROVALS REQUIRED FOR THE DEUTSCHE TELEKOM/VOICESTREAM MERGER AND
THE DEUTSCHE TELEKOM/POWERTEL MERGER
U.S. Antitrust
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
which in this document we refer to as the "HSR Act", we cannot complete the
initial investment by Deutsche Telekom in VoiceStream, the Deutsche
Telekom/VoiceStream merger or the Deutsche Telekom/Powertel merger until, with
respect to each, we have given notification and furnished information to the
Federal Trade Commission, which in this document we refer to as the "FTC", and
the Antitrust Division of the Department of Justice, which in this document we
refer to as the "DOJ", relating to the operations of the parties and the
relevant reviewing agency has granted early termination of the 30-day waiting
period under the HSR Act, or the 30-day waiting period has expired, or, if the
reviewing agency made a request for additional information, the extended waiting
period has expired. Expiration of the applicable waiting period under the HSR
Act is a condition to completing each transaction.
In August 2000, we filed with the FTC and the DOJ premerger notifications
and report forms relating to both Deutsche Telekom's initial investment in
VoiceStream and the Deutsche Telekom/VoiceStream merger. In September 2000, we
filed with the FTC and the DOJ premerger notifications and report forms relating
to the Deutsche Telekom/Powertel merger. The HSR Act waiting periods relating to
all of those transactions expired without the issuance of a request for
additional information.
Termination of the HSR Act waiting period does not prevent the government
from challenging the initial investment or either merger. At any time before or
after the completion of any of the transactions, the DOJ or FTC could take any
action under the antitrust laws that it deems necessary or desirable in the
public interest, including seeking the divestiture of substantial assets of
Deutsche Telekom, VoiceStream, or Powertel, or challenging any of the
transactions. Although we do not anticipate that the DOJ or FTC will challenge
the initial investment in VoiceStream, the Deutsche Telekom/VoiceStream merger
or the Deutsche Telekom/Powertel merger, the DOJ or FTC might challenge any of
these transactions on antitrust grounds. If a challenge is made, we cannot
predict what the result will be. In addition, certain private parties as well as
state attorneys general and other antitrust authorities may challenge the
transactions under antitrust laws under certain circumstances, and, even though
we believe we should prevail, we might not.
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FCC
The Deutsche Telekom/VoiceStream merger and the Deutsche Telekom/Powertel
merger are subject to the requirements of the Communications Act of 1934, as
amended, and the rules, regulations and policies of the FCC. Before each of the
mergers may occur, the FCC must give its consent based on a determination that
the merger would serve the public interest, convenience and necessity. In making
this determination, the FCC examines whether a proposed merger is consistent
with the Communications Act and the FCC's rules, regulations and policies,
including, among other things, the effect of the proposed merger on FCC policies
encouraging competition. In addition, before a non-U.S. company acquires a U.S.
company that controls FCC licenses, the FCC must specifically determine that
such foreign ownership is in the public interest. The FCC has adopted a strong
presumption that indirect foreign investments by entities from World Trade
Organization member countries such as Germany are in the public interest, absent
competition or national security or law enforcement concerns.
The Deutsche Telekom/VoiceStream and Deutsche Telekom/Powertel merger
applications were filed with the FCC on September 18, 2000. The public comment
period on the merger application concluded on January 8, 2001. Supporting and
opposing comments were filed on December 13, 2000. Opponents of the mergers
included Senator Ernest F. Hollings, who has urged the FCC to deny approval of
the mergers arguing that the Communications Act prohibits a representative of a
foreign government from controlling FCC wireless licenses and that the German
government controls Deutsche Telekom. The other principal opposing commenters
are QS Communications AG, Novaxess B.V., and Global Telesystems, Inc., three
firms that are actual or potential competitors of Deutsche Telekom in Europe.
These parties do not oppose the mergers, but urge the FCC to condition its
approval of the Deutsche Telekom/VoiceStream merger on commitments by Deutsche
Telekom for the benefit of Deutsche Telekom's competitors in Germany,
commitments by German regulatory authorities to enforce such commitments, and/or
a commitment by the German government to sell its stake in Deutsche Telekom
within a reasonable time period. Deutsche Telekom replied on January 8, 2001.
Others filed reply comments either supporting or seeking the imposition of
conditions on the mergers. Deutsche Telekom, VoiceStream and Powertel believe
that both mergers should be approved under the standards discussed in the prior
paragraph, and that under those standards the particular actions of Deutsche
Telekom outside the United States and of the German regulatory authority are not
relevant to the FCC's determination of whether the mergers would serve the
public interest, convenience and necessity. However, the FCC might disapprove
the mergers, or it might condition its approval of them on compliance with
conditions. Any FCC approval may be challenged in court.
In 2000, legislation was introduced in the U.S. Congress that, although not
enacted, would have prevented the FCC from approving the transfer of wireless
licenses to a corporation of which a foreign government owns more than 25
percent. Because the Federal Republic of Germany and KfW currently own in the
aggregate approximately 60 percent of Deutsche Telekom's outstanding shares and
are estimated to own approximately 45 percent of those shares following the
completion of both the Deutsche Telekom/VoiceStream and the Deutsche
Telekom/Powertel mergers, based on facts that existed as of
February 7, 2001 and assumptions similar to those described under "Summary of
the Deutsche Telekom/VoiceStream Transaction Documents -- The Deutsche
Telekom/VoiceStream Merger Agreement -- Consideration To Be Received in the
Deutsche Telekom/VoiceStream Merger -- Explanation of Potential Tax-Related
Adjustment to Merger Consideration," this legislation would have barred the FCC
from approving Deutsche Telekom's mergers with VoiceStream and Powertel.
Legislation with similar effect could be reintroduced in Congress in 2001.
On November 30, 2000, Senator Ernest F. Hollings requested that the FCC
issue a ruling declaring whether, in light of Deutsche Telekom's $5 billion
investment in VoiceStream and related contract terms, VoiceStream remains in
compliance with the FCC's foreign ownership limitations and whether VoiceStream
should be permitted to participate in Auction No. 35 for licenses for personal
communications services. On December 1, 2000, the FCC issued a public notice
listing VoiceStream as a bidder qualified to participate in the auction without
resolving Senator Hollings's request for a ruling, and by letter dated December
8, 2000, FCC Chairman William Kennard responded to Senator Hollings that
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VoiceStream would be permitted to bid, subject to scrutiny of its qualifications
after the conclusion of the bidding. The auction began on December 12, 2000,
with VoiceStream participating as a bidder. Auction No. 35 concluded on January
26, 2001, and VoiceStream was the highest bidder in 18 markets, covering
approximately 12 million people, at a cost of $482,653,000. In addition, Cook
Inlet/VS GSM V PCS, LLC, a joint venture in which VoiceStream owns a 49.9%
interest, was the highest bidder in 22 markets, covering approximately 21
million people, at a cost of $506,376,000. FCC rules provide that, following the
auction, VoiceStream must file an application for any licenses that it may win
in the auction. At that time, parties in interest may petition the FCC to deny
VoiceStream's application on foreign ownership or other grounds. While
VoiceStream believes that Deutsche Telekom's investment fully complies with the
FCC's foreign ownership limitations, a ruling adverse to VoiceStream on such a
petition to deny could result in the denial of any application for licenses
VoiceStream might win in the auction or in fines or other sanctions.
In the merger applications filed with the FCC, the parties recognized that
the FCC's review of the mergers would require consultation by the FCC with
appropriate U.S. executive agencies on national security and law enforcement
issues. Accordingly, Deutsche Telekom informed the FCC that the parties would
not object to making FCC approval of the mergers contingent on compliance with
any agreement on these issues reached with such agencies. On December 15, 2000,
Deutsche Telekom, VoiceStream and Powertel joined with the DOJ and the Federal
Bureau of Investigation in a request to defer grant of approval of the merger
applications until such an agreement is reached, and to condition any such grant
on compliance with the terms of the agreement. On January 12, 2001, Deutsche
Telekom and VoiceStream entered into an agreement with the DOJ and FBI that
addresses national security and law enforcement matters relating to the proposed
mergers of Deutsche Telekom with VoiceStream and Powertel. Under the agreement,
the DOJ and FBI agreed not to object to the FCC's grant of the pending merger
applications, provided that such grant is subject to the condition that Deutsche
Telekom and VoiceStream comply with the terms of the January 12, 2001 agreement.
On January 25, 2001, the DOJ and FBI filed with the FCC a petition stating that
they have no objection to a grant of the applications, provided that such grant
is subject to the condition that Deutsche Telekom and VoiceStream comply with
the terms of the January 12, 2001 agreement.
Exon-Florio
The provisions of the Exon-Florio amendment to the Omnibus Trade and
Competitiveness Act of 1988 authorize the President to investigate and, if he
deems it necessary, to suspend or prohibit any "merger, acquisition or takeover"
of a U.S. company that would result in foreign control of the company, where
such control would "threaten to impair the national security." The President has
delegated his authority to receive notices of transactions and to conduct
investigations to the Committee on Foreign Investment in the United States, an
interagency committee chaired by the Secretary of the Treasury.
A party or parties to a transaction may, but are not required to, submit to
the Committee on Foreign Investment in the United States a voluntary notice of
the transaction. In general, if the parties submit such a notice, the Committee
on Foreign Investment in the United States has 30 days in which to make an
initial determination whether to conduct an investigation. If the Committee on
Foreign Investment in the United States decides that an investigation is
warranted, it typically has 45 days in which to complete the investigation and
make a recommendation to the President, including whether to take action to
prohibit the merger. If the Committee on Foreign Investment in the United States
declines to initiate a 45-day investigation, the review process concludes and
the transaction is, in effect, approved.
Deutsche Telekom, VoiceStream and Powertel intend voluntarily to notify the
Committee on Foreign Investment in the United States. Although the parties do
not anticipate that the Committee on Foreign Investment in the United States
will recommend that the President suspend or prohibit the Deutsche
Telekom/VoiceStream merger or the Deutsche Telekom/Powertel merger, such a
recommendation could be made. In the January 12, 2001 agreement between the
parties and the DOJ and FBI, the U.S. Attorney General agreed not to make any
objection to the Committee on Foreign Investment in the United States or the
President concerning the Deutsche Telekom/VoiceStream or Deutsche Telekom/
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Powertel mergers, provided that the FCC's grant of the pending merger
applications is subject to the condition that Deutsche Telekom and VoiceStream
comply with the terms of the January 12, 2001 agreement.
General
It is possible that one or more of the pending regulatory approvals
required to complete the Deutsche Telekom/VoiceStream merger or the Deutsche
Telekom/Powertel merger will not be obtained on a timely basis or at all. In
addition, it is possible that any of the governmental entities with which
filings are made may seek regulatory conditions for granting approval of the
Deutsche Telekom/VoiceStream merger or the Deutsche Telekom/Powertel merger.
Under the Deutsche Telekom/VoiceStream merger agreement, Deutsche Telekom
and VoiceStream have each agreed to use reasonable best efforts to complete the
Deutsche Telekom/VoiceStream merger, including to gain clearance from antitrust
and competition authorities and obtain other required approvals. For this
purpose, Deutsche Telekom and VoiceStream have also agreed to accept any
actions, conditions, terms or restrictions necessary to obtain any regulatory
approval, unless those conditions, terms and restrictions amount to a
"burdensome condition," as that term is used in the Deutsche Telekom/VoiceStream
merger agreement. The meaning of "burdensome condition" is explained under
"Summary of the Deutsche Telekom/VoiceStream Transaction Documents -- The
Deutsche Telekom/VoiceStream Merger Agreement -- Important Definitions."
Although we do not expect regulatory authorities to raise any significant
objections to the Deutsche Telekom/VoiceStream merger, we cannot be certain that
we will obtain all required regulatory approvals or that these approvals will
not contain terms, conditions or restrictions that would be detrimental to
Deutsche Telekom or its telecommunications business after the Deutsche
Telekom/VoiceStream merger. If a burdensome condition is imposed, we might not
choose to terminate the Deutsche Telekom/VoiceStream merger.
Under the Deutsche Telekom/Powertel merger agreement, Deutsche Telekom and
Powertel have each agreed to use reasonable best efforts to complete the
Deutsche Telekom/Powertel merger, including to gain clearance from antitrust and
competition authorities and obtain other required approvals, provided that
neither Deutsche Telekom nor any of its subsidiaries is required to and neither
Powertel nor its subsidiaries is permitted to, without the consent of Deutsche
Telekom, divest or hold separate or otherwise take any action that limits
Deutsche Telekom's freedom of action with respect to Deutsche Telekom, Powertel,
VoiceStream or any of their respective subsidiaries or any of their business,
product lines or assets. For this purpose, Deutsche Telekom and Powertel have
also agreed to accept any actions, conditions, terms or restrictions necessary
to obtain any regulatory approval, unless those actions, conditions, terms and
restrictions would reasonably be expected to have a "material adverse effect,"
as that term is used in the Deutsche Telekom/Powertel merger agreement. The
meaning of "material adverse effect" is explained under "Summary of Deutsche
Telekom/Powertel and VoiceStream/Powertel Transaction Documents -- The Deutsche
Telekom/Powertel Merger Agreement -- Important Definitions." Although we do not
expect regulatory authorities to raise any significant objections to the
Deutsche Telekom/Powertel merger, we cannot be certain that we will obtain all
required regulatory approvals or that these approvals will not contain terms,
conditions or restrictions that would be detrimental to Deutsche Telekom. If a
condition that would reasonably be expected to have a material adverse effect is
imposed, we might not choose to terminate the Deutsche Telekom/Powertel merger.
REGULATORY APPROVALS REQUIRED FOR THE VOICESTREAM/POWERTEL MERGER
U.S. Antitrust
Under the HSR Act, VoiceStream and Powertel cannot complete the
VoiceStream/Powertel merger until VoiceStream and Powertel have given
notification and furnished information relating to the operations of VoiceStream
and Powertel to the FTC and the DOJ and the relevant reviewing agency has
granted early termination of the 30-day waiting period under the HSR Act, or the
30-day waiting period has expired, or, if the reviewing agency makes a request
for additional information, the extended waiting
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period has expired. Expiration of the applicable waiting period under the HSR
Act is a condition to completing the VoiceStream/Powertel merger.
On September 13, 2000, VoiceStream and Powertel filed with the FTC and the
DOJ a premerger notification and report form relating to the
VoiceStream/Powertel transaction. The HSR Act waiting period relating to this
transaction expired on October 13, 2000 without the issuance of a request for
additional information.
Termination of the HSR Act waiting period does not prevent the government
from challenging the VoiceStream/Powertel merger. At any time before or after
the completion of the VoiceStream/Powertel merger, the FTC or DOJ could take any
action under the antitrust laws that it deems necessary or desirable in the
public interest, including seeking the divestiture of substantial assets of
VoiceStream or Powertel or challenging the VoiceStream/Powertel merger. In
addition, certain private parties as well as state attorneys general and other
antitrust authorities may challenge the acquisition under antitrust laws or
other circumstances, and even if VoiceStream and Powertel believe that they
should prevail, they might not. Although VoiceStream and Powertel do not
anticipate that the DOJ or FTC will challenge the VoiceStream/Powertel merger,
the DOJ or FTC might challenge the VoiceStream/Powertel merger on antitrust
grounds. If a challenge is made, we cannot predict what the result will be.
FCC
The VoiceStream/Powertel merger is subject to the requirements of the
Communications Act of 1934, as amended, and the rules, regulations and policies
of the FCC. Before the VoiceStream/Powertel merger may occur, the FCC must give
its consent based on a determination that the VoiceStream/Powertel merger would
serve the public interest, convenience and necessity. In making this
determination, the FCC examines whether a proposed merger is consistent with the
Communications Act and the FCC's rules, regulations and policies, including,
among other things, the effect of the transfer on FCC policies encouraging
competition.
The VoiceStream/Powertel merger application was filed with the FCC on
September 18, 2000. The public comment period on the application concluded on
January 8, 2001. Because consummation of the VoiceStream/Powertel merger is
conditioned upon the outcome of the Deutsche Telekom/VoiceStream merger,
VoiceStream and Powertel have requested that the FCC process the
VoiceStream/Powertel merger application simultaneously with the Deutsche
Telekom/VoiceStream and Deutsche Telekom/Powertel merger applications. A final
decision by the FCC on transactions of the type of the three proposed mergers
generally takes at least six months from the date of public notice and may take
substantially longer. Furthermore, while VoiceStream and Powertel believe that
the VoiceStream/Powertel merger application should be approved under the
foregoing standard, the FCC might not approve it. It is also possible that the
FCC will condition its approval on compliance with competitive safeguards, and
that any FCC approval will be challenged in court.
General
It is possible that either or both of the regulatory approvals required to
complete the VoiceStream/Powertel merger will not be obtained on a timely basis
or at all. In addition, it is possible that either of the governmental entities
with which filings are made may seek regulatory conditions for granting approval
of the VoiceStream/Powertel merger.
Under the VoiceStream/Powertel merger agreement, VoiceStream and Powertel
have each agreed to use reasonable best efforts to comply promptly with all
legal requirements, including furnishing all information required under the HSR
Act and all actions required in connection with approvals of or filings with the
FCC or similar agencies or any other governmental entities. Although VoiceStream
and Powertel do not expect regulatory authorities to raise any significant
objections to the VoiceStream/Powertel merger, VoiceStream and Powertel cannot
be certain that they will obtain all required regulatory approvals or that these
approvals will not contain terms, conditions or restrictions that would be
detrimental to VoiceStream or its telecommunications business after the
VoiceStream/Powertel merger. If a condition that would reasonably be expected to
have a material adverse effect is imposed, VoiceStream and Powertel might not
choose to terminate the VoiceStream/Powertel merger.
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U.S. FEDERAL AND GERMAN TAX CONSEQUENCES
GENERAL
The following sections contain separate discussions of:
- U.S. federal income tax consequences of the Deutsche Telekom/VoiceStream
merger to U.S. holders of VoiceStream common shares;
- U.S. federal income tax consequences of the Deutsche Telekom/Powertel
merger to U.S. holders of Powertel common shares;
- U.S. federal income tax consequences of the Deutsche Telekom/Powertel
merger to U.S. holders of Powertel preferred shares;
- U.S. federal income tax consequences of the VoiceStream/Powertel merger
to U.S. holders of Powertel common shares;
- U.S. federal income tax consequences of the VoiceStream/Powertel merger
to U.S. holders of Powertel preferred shares;
- U.S. federal income tax and German tax considerations for U.S. resident
holders of Deutsche Telekom ADSs and Deutsche Telekom ordinary shares;
and
- German tax considerations for non-German holders of Deutsche Telekom ADSs
and Deutsche Telekom ordinary shares.
General Matters Relating to U.S. Federal Income Tax Discussions
As used in these discussions, the term "U.S. holder" means, before the
merger, a beneficial owner of VoiceStream common shares or Powertel shares, as
applicable, or an employee stock option to acquire such shares, and, after the
merger, a beneficial owner of Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares or VoiceStream common shares, as applicable, who is for U.S. federal
income tax purposes:
- a citizen or resident of the United States;
- a corporation created or organized in the United States or under the law
of the United States or any state or the District of Columbia; or
- a partnership, trust, or estate that is treated as a United States
person.
These discussions do not address all aspects of U.S. tax law that may be
relevant to a U.S. holder in light of his particular circumstances or who is
subject to special provisions of such law. For example, these discussions do not
address all aspects of U.S. tax law that may be relevant to U.S. holders:
- who are liable for alternative minimum tax;
- who hold their VoiceStream common shares, Powertel shares, Deutsche
Telekom ADSs, or Deutsche Telekom ordinary shares as part of a straddle,
hedge, synthetic security, conversion transaction or other integrated
investment composed of one or more other investments;
- whose "functional currency" is not the U.S. dollar; or
- who are financial institutions, insurance companies, tax-exempt
organizations, traders in securities that elect mark-to-market accounting
treatment, or broker-dealers.
In addition, these discussions are limited to U.S. holders who hold their
VoiceStream common shares, Powertel shares, Deutsche Telekom ADSs or Deutsche
Telekom ordinary shares as capital assets. The discussion also does not address
U.S. state or local taxation or taxation by countries other than the United
States and Germany.
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The U.S. tax discussions are based on existing U.S. federal income tax law,
including statutes, regulations, administrative rulings, and court decisions,
all as in effect on the date of this proxy statement/prospectus. All of these
authorities are subject to change, or change in interpretation, possibly with
retroactive effect. These discussions assume that each merger will be completed
in accordance with the terms of the relevant merger agreement. Any change in any
of the foregoing authorities or failure of the assumption to be true could alter
the tax consequences discussed below. The parties will not request, and none of
the mergers is conditioned on, a ruling from the Internal Revenue Service as to
any of the U.S. federal income tax consequences of such merger. As a result,
there can be no assurance that the IRS will not disagree with or challenge any
of the conclusions set forth in the discussions.
In these discussions, when we refer to the completion of any of the
mergers, we mean the effective time of those mergers, which occurs when a
certificate of merger is filed and becomes effective.
Each VoiceStream shareholder and Powertel shareholder is urged to consult
his own tax advisor as to the U.S. federal income and other tax consequences to
him of the relevant merger, including the income tax consequences arising from
his own unique facts and circumstances, and including any estate, inheritance,
gift, state, local or non-U.S. tax consequences of the relevant merger.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DEUTSCHE TELEKOM/VOICESTREAM MERGER
TO U.S. HOLDERS OF VOICESTREAM COMMON SHARES
Subject to the limitations and qualifications set forth under "-- General"
and in this section, the discussion in this section represents the opinion of
Jones, Day, Reavis & Pogue, tax counsel to VoiceStream, and Wachtell, Lipton,
Rosen & Katz, special counsel to VoiceStream, as to the material U.S. federal
income tax consequences of the Deutsche Telekom/VoiceStream merger to U.S.
holders of VoiceStream common shares. Each counsel has delivered this opinion,
dated the effective date of this proxy statement/prospectus, to VoiceStream.
Tax Opinion Condition to Closing
The obligation of VoiceStream to complete the Deutsche Telekom/VoiceStream
merger is conditioned on the receipt of an additional opinion from tax counsel
to VoiceStream and/or special counsel to VoiceStream, dated as of completion of
the Deutsche Telekom/VoiceStream merger, substantially to the effect that the
Deutsche Telekom/VoiceStream merger will qualify as a reorganization within the
meaning of Section 368(a) of the U.S. tax code and that each transfer of
property to Deutsche Telekom by a shareholder of VoiceStream pursuant to the
Deutsche Telekom/VoiceStream merger will not be subject to Section 367(a)(1) of
the U.S. tax code. Counsel's tax opinion will be based on assumptions noted in
the opinion, including an assumption that any "five-percent transferee
shareholder" of Deutsche Telekom, as defined in Treasury regulations promulgated
under Section 367(a) of the U.S. tax code, will file a "gain recognition
agreement" as defined in such regulations, and on factual representations of
VoiceStream and Deutsche Telekom contained in certificates signed by officers of
VoiceStream and Deutsche Telekom to be delivered at the time of the Deutsche
Telekom/VoiceStream merger. VoiceStream does not intend to waive the receipt of
its counsel's opinion as a condition to its obligation to complete the Deutsche
Telekom/VoiceStream merger, and will not waive the receipt of an opinion as a
condition to its obligation to complete the merger without recirculating this
document in order to resolicit stockholder approval. Counsel's opinion will not
be binding on the IRS or any court.
Both counsels presently intend to deliver to VoiceStream at the completion
of the merger an opinion that satisfies the requirements set forth in the prior
paragraph, and it is assumed for purposes of the remainder of the discussion in
this section that both counsels will deliver such an opinion.
U.S. Holders Whose Merger Consideration Does Not Consist Solely of Cash
For U.S. federal income tax purposes, the Deutsche Telekom/VoiceStream
merger will qualify as a reorganization within the meaning of Section 368(a) of
the U.S. tax code and each transfer of property to Deutsche Telekom by a
shareholder of VoiceStream pursuant to the Deutsche Telekom/VoiceStream
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merger will not be subject to Section 367(a)(1) of the U.S. tax code.
Accordingly, with the possible exception of merger consideration that is
received in exchange for the 0.75% stock dividend permitted by the Deutsche
Telekom/VoiceStream merger agreement as described under "Summary of the Deutsche
Telekom/VoiceStream Transaction Documents -- The Deutsche Telekom/VoiceStream
Merger Agreement -- Election and Exchange of Certificates Representing
VoiceStream Common Shares", a U.S. holder of VoiceStream common shares whose
merger consideration does not consist solely of cash:
- will not recognize any loss upon his receipt of merger consideration in
the Deutsche Telekom/VoiceStream merger, and
- will recognize gain upon his receipt of merger consideration in the
Deutsche Telekom/VoiceStream merger equal to the lesser of the gain
realized, if any, with respect to each VoiceStream common share exchanged
and the cash, if any, received for the VoiceStream common share.
The amount of gain realized with respect to each VoiceStream common share
exchanged will equal the excess of:
- the sum of the fair market value at the completion of the Deutsche
Telekom/VoiceStream merger of the Deutsche Telekom ADSs or Deutsche
Telekom ordinary shares and the cash, if any, received for the share,
over
- the U.S. holder's tax basis in such share.
As discussed further below, different rules apply to any shareholder of
VoiceStream who, immediately after the Deutsche Telekom/VoiceStream merger, will
be a "five-percent transferee shareholder" of Deutsche Telekom, as defined in
Treasury regulations promulgated under Section 367(a) of the U.S. tax code, and
to any cash received in lieu of fractional shares in the Deutsche
Telekom/VoiceStream merger. Any recognized gain generally will be capital gain,
and generally will be long-term capital gain with respect to VoiceStream common
shares held by the U.S. holder for more than 12 months at the completion of the
Deutsche Telekom/VoiceStream merger. In some cases, if the shareholder actually
or constructively owns Deutsche Telekom ADSs or Deutsche Telekom ordinary shares
other than those received as a result of the Deutsche Telekom/VoiceStream
merger, the recognized gain could be treated as having the effect of the
distribution of a dividend, under the tests set forth in Section 302 of the U.S.
tax code, in which case such gain would be treated as ordinary dividend income.
The aggregate tax basis of the Deutsche Telekom ADSs or Deutsche Telekom
ordinary shares received by a U.S. holder in the Deutsche Telekom/VoiceStream
merger, including any fractional interests to which the U.S. holder would be
entitled but for the special treatment of fractional interests described below,
will equal the aggregate tax basis of the VoiceStream common shares exchanged
for the Deutsche Telekom ADSs or Deutsche Telekom ordinary shares, increased by
the amount of gain, including any gain that is treated as a dividend, recognized
by the U.S. holder as a result of his exchange of VoiceStream common shares in
the Deutsche Telekom/VoiceStream merger, and decreased by the amount of cash
received by the U.S. holder in the Deutsche Telekom/VoiceStream merger, other
than cash received in lieu of a fractional Deutsche Telekom ADS or Deutsche
Telekom ordinary share. The holding period of the Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares received will include the holding period of the
VoiceStream common shares exchanged therefor.
Fractional interests in Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares will not be issued to VoiceStream shareholders in the Deutsche
Telekom/VoiceStream merger. Instead, any fractional interests VoiceStream
shareholders otherwise would have been entitled to receive will be sold and the
proceeds will be paid to those shareholders. A U.S. holder who receives cash in
respect of a fractional interest in a Deutsche Telekom ADS or Deutsche Telekom
ordinary share will recognize gain or loss equal to the difference between the
cash received for the fractional share and the U.S. holder's tax basis in the
VoiceStream common shares exchanged which is allocable to the fractional
interest. Any such gain or loss generally will be capital gain or loss, and
generally will be long-term capital gain or loss with respect to
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VoiceStream common shares held for more than 12 months at the completion of the
Deutsche Telekom/VoiceStream merger.
Merger consideration received by a U.S. holder in exchange for the 0.75%
stock dividend permitted by the Deutsche Telekom/VoiceStream merger agreement
likely would be treated the same as other merger consideration, and Deutsche
Telekom and VoiceStream intend to treat it the same as other merger
consideration for U.S. federal income tax purposes. It is possible, however,
that merger consideration received by a U.S. holder in exchange for the stock
dividend could instead be treated as ordinary dividend income that is separately
received by the U.S. holder from Deutsche Telekom. In such case, the amount of
the dividend generally would be equal to the amount of cash plus the fair market
value of the Deutsche Telekom ADSs or Deutsche Telekom ordinary shares received
in exchange for the VoiceStream 0.75% stock dividend, determined at completion
of the Deutsche Telekom/VoiceStream merger. Further, the U.S. holder's tax basis
in such Deutsche Telekom ADSs or Deutsche Telekom ordinary shares would be equal
to such fair market value and his holding period generally would begin on the
date following the date of completion of the Deutsche Telekom/VoiceStream
merger. In the event that merger consideration received by a U.S. holder in
exchange for the stock dividend were treated as separately received by the U.S.
holder, that treatment would not affect the status of the merger as a
reorganization within the meaning of Section 368(a) of the U.S. tax code.
A U.S. HOLDER WHO IS A "FIVE-PERCENT TRANSFEREE SHAREHOLDER" OF DEUTSCHE
TELEKOM IMMEDIATELY AFTER THE DEUTSCHE TELEKOM/VOICESTREAM MERGER, AS DEFINED IN
TREASURY REGULATIONS PROMULGATED UNDER SECTION 367(a) OF THE U.S. TAX CODE, WILL
QUALIFY FOR NON-RECOGNITION TREATMENT AS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS ONLY IF THE U.S. HOLDER FILES WITH THE IRS A "GAIN
RECOGNITION AGREEMENT," AS DEFINED IN SUCH TREASURY REGULATIONS. ANY U.S. HOLDER
OF VOICESTREAM COMMON SHARES WHO MAY BE A FIVE-PERCENT TRANSFEREE SHAREHOLDER IS
URGED TO CONSULT HIS TAX ADVISOR CONCERNING THE DECISION TO FILE A GAIN
RECOGNITION AGREEMENT AND THE PROCEDURES TO BE FOLLOWED IN CONNECTION WITH THAT
FILING.
U.S. Holders Whose Merger Consideration Consists Solely of Cash
A U.S. holder of VoiceStream common shares that receives only cash in the
Deutsche Telekom/VoiceStream merger will generally recognize gain or loss for
U.S. federal income tax purposes equal to the difference between the amount of
cash received and the U.S. holder's tax basis in the VoiceStream common shares
surrendered in the Deutsche Telekom/VoiceStream merger. Such recognized gain or
loss generally will be capital gain or loss, and generally will be long term
with respect to VoiceStream common shares held by the U.S. holder for more than
12 months at the completion of the Deutsche Telekom/VoiceStream merger. In some
cases, if the shareholder actually or constructively owns Deutsche Telekom ADSs
or Deutsche Telekom ordinary shares, the recognized gain could be treated as
having the effect of the distribution of a dividend, under the tests set forth
in Section 302 of the U.S. tax code, in which case such gain would be treated as
ordinary dividend income. In addition, it is possible that cash received by a
U.S. holder in exchange for the 0.75% stock dividend permitted under the
Deutsche Telekom/VoiceStream merger agreement could be treated as ordinary
dividend income that is separately received by the U.S. holder from Deutsche
Telekom.
U.S. Holders Who Are Dissenting Shareholders
Subject to the discussion below, a U.S. holder who exercises his right to
dissent from the Deutsche Telekom/VoiceStream merger will recognize gain or loss
on the exchange of his VoiceStream common shares for cash in an amount equal to
the difference between:
- the cash received, other than amounts, if any, which are or are deemed
to be interest for U.S. federal income tax purposes, which amounts
will be taxed as ordinary income; and
- his tax basis in his VoiceStream common shares.
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Such gain or loss generally will be capital gain or loss and generally will be
long-term capital gain or loss with respect to VoiceStream shares held for more
than 12 months at the completion of the Deutsche Telekom/VoiceStream merger. A
dissenting shareholder may be required to recognize any gain or loss in the year
the Deutsche Telekom/VoiceStream merger closes, irrespective of whether the
dissenting shareholder actually receives payment for his or her shares in that
year. In some instances, cash received by a dissenting VoiceStream shareholder
could be taxed as ordinary dividend income if the shareholder actually or
constructively owns Deutsche Telekom ADSs or Deutsche Telekom ordinary shares
under the tests set forth in Section 302 of the U.S. tax code after the Deutsche
Telekom/VoiceStream merger.
U.S. Holders of Employee Stock Options
The exchange pursuant to the Deutsche Telekom/VoiceStream merger by a U.S.
holder of an employee stock option to acquire VoiceStream common shares for an
option to acquire Deutsche Telekom ADSs or Deutsche Telekom ordinary shares will
not be taxable for U.S. federal income tax purposes. A U.S. holder of an option
to acquire a Deutsche Telekom ADS or Deutsche Telekom ordinary share who
received that option in exchange for an option to acquire VoiceStream common
shares that was received as compensation, and who exercises that Deutsche
Telekom option, generally will recognize ordinary income for U.S. federal income
tax purposes in an amount equal to the excess of the fair market value on the
exercise date of the Deutsche Telekom ADS or Deutsche Telekom ordinary share
received pursuant to the exercise over the price paid for the Deutsche Telekom
ADS or Deutsche Telekom ordinary share pursuant to the option, and generally
will be subject to applicable withholding taxes. A U.S. holder's tax basis in
Deutsche Telekom ADSs or Deutsche Telekom ordinary shares received as a result
of the exercise of the option will equal the fair market value of the Deutsche
Telekom ADS or Deutsche Telekom ordinary share on the exercise date and a U.S.
holder's holding period will begin on the exercise date. Thereafter, the U.S.
holder will be subject to the rules discussed below with respect to U.S. holders
of Deutsche Telekom ADSs and Deutsche Telekom ordinary shares.
The foregoing discussion does not address the U.S. federal income tax
consequences of the exercise of any option that is treated as an incentive stock
option within the meaning of Section 422(b) of the U.S. tax code. Any U.S.
holder of an option that is treated as an incentive stock option is urged to
consult his own tax advisor concerning the consequences to him of the Deutsche
Telekom/VoiceStream merger and exercise of the option.
U.S. Backup Withholding
Under the U.S. tax code, a U.S. holder of VoiceStream common shares may be
subject, under certain circumstances, to backup withholding at a rate of 31%
with respect to the amount of cash, if any, received in the Deutsche
Telekom/VoiceStream merger, including cash received in lieu of fractional shares
or upon exercise of dissenters' rights, unless the U.S. holder provides proof of
an applicable exemption or correct taxpayer identification number and otherwise
complies with applicable requirements of the backup withholding rules. Any
amount withheld under the backup withholding rules is not additional tax and may
be refunded or credited against the U.S. holder's federal income tax liability,
so long as the required information is furnished to the IRS.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DEUTSCHE TELEKOM/POWERTEL MERGER TO
U.S. HOLDERS OF POWERTEL COMMON SHARES
Subject to the limitations and qualifications set forth under "-- General"
and in this section, the discussion in this section represents the opinion of
Morris, Manning & Martin, LLP, counsel to Powertel, and Cleary, Gottlieb, Steen
& Hamilton, counsel to Deutsche Telekom, as to the material U.S. federal income
tax consequences of the Deutsche Telekom/Powertel merger to U.S. holders of
Powertel common shares. Each counsel has delivered this opinion, dated the
effective date of this proxy statement/ prospectus, to Powertel or Deutsche
Telekom, as applicable.
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Tax Opinion Condition to Closing
The obligation of Powertel to complete the Deutsche Telekom/Powertel merger
is conditioned on the receipt of an additional opinion from Morris, Manning &
Martin, LLP, counsel to Powertel, and the obligation of Deutsche Telekom to
complete the Deutsche Telekom/Powertel merger is conditioned on the receipt of
an additional opinion from Cleary, Gottlieb, Steen & Hamilton, counsel to
Deutsche Telekom, each opinion, dated as of completion of the Deutsche
Telekom/Powertel merger, substantially to the effect that the Deutsche
Telekom/Powertel merger will qualify as a reorganization within the meaning of
Section 368(a) of the U.S. tax code and that each transfer of property to
Deutsche Telekom by a shareholder of Powertel pursuant to the Deutsche
Telekom/Powertel merger will not be subject to Section 367(a)(1) of the U.S. tax
code. Counsels' tax opinions will be based upon assumptions noted in the
opinions, including an assumption that any "five-percent transferee shareholder"
of Deutsche Telekom, as defined in Treasury regulations promulgated under
Section 367(a) of the U.S. tax code, will file a "gain recognition agreement" as
defined in such regulations, and on factual representations of Powertel and
Deutsche Telekom contained in certificates signed by officers of Powertel and
Deutsche Telekom to be delivered at the time of the Deutsche Telekom/Powertel
merger. Powertel does not intend to waive the receipt of its counsel's opinion
as a condition to its obligation to complete the Deutsche Telekom/Powertel
merger, and will not waive the receipt of an opinion as a condition to its
obligation to complete the merger without recirculating this document in order
to resolicit stockholder approval. Counsels' opinions will not be binding on the
IRS or any court.
Both counsels presently intend to deliver to Powertel or Deutsche Telekom,
as applicable, at the completion of the merger an opinion that satisfies the
requirements set forth in the prior paragraph, and it is assumed for purposes of
the remainder of the discussion in this section that each counsel will deliver
such an opinion.
U.S. Holders of Powertel Common Shares
For U.S. federal income tax purposes, the Deutsche Telekom/Powertel merger
will qualify as a reorganization within the meaning of Section 368(a) of the
U.S. tax code and each transfer of property to Deutsche Telekom by a shareholder
of Powertel pursuant to the Deutsche Telekom/Powertel merger will not be subject
to Section 367(a)(1) of the U.S. tax code. Accordingly, with the possible
exception of merger consideration that is received in exchange for the 0.75%
stock dividend permitted by the Deutsche Telekom/Powertel merger agreement as
described under "Summary of the Deutsche Telekom/Powertel and
VoiceStream/Powertel Transaction Documents -- The Deutsche Telekom/Powertel
Merger Agreement -- Adjustment in Connection with Permitted Dividends," a U.S.
holder of Powertel common shares generally will not recognize any gain or loss
upon his receipt of merger consideration in the Deutsche Telekom/Powertel
merger, except with respect to cash received in lieu of fractional shares, as
discussed further below.
The aggregate tax basis of the Deutsche Telekom ADSs or Deutsche Telekom
ordinary shares received by a U.S. holder in the Deutsche Telekom/Powertel
merger, including any fractional interest to which the U.S. holder would be
entitled but for the special treatment of fractional interests described below,
generally will equal the aggregate tax basis of the Powertel common shares
exchanged for the Deutsche Telekom ADSs or Deutsche Telekom ordinary shares. The
holding period of the Deutsche Telekom ADSs or Deutsche Telekom ordinary shares
received will include the holding period of the Powertel common shares exchanged
therefor.
Fractional interests in Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares will not be issued to Powertel shareholders in the Deutsche
Telekom/Powertel merger. Instead, any fractional interests in Deutsche Telekom
ADSs or Deutsche Telekom ordinary shares that a U.S. holder of Powertel common
shares otherwise would have been entitled to receive will be sold and the
proceeds will be paid to those shareholders. A U.S. holder who receives cash in
respect of a fractional interest in a Deutsche Telekom ADS or Deutsche Telekom
ordinary share will recognize gain or loss equal to the difference between the
cash received for the fractional share and the U.S. holder's tax basis in the
Powertel common
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shares exchanged which is allocable to the fractional interest. Any such gain or
loss generally will be capital gain or loss, and generally will be long-term
capital gain or loss with respect to Powertel common shares held for more than
12 months at the completion of the Deutsche Telekom/Powertel merger.
Merger consideration received by a U.S. holder in exchange for the 0.75%
stock dividend permitted by the Deutsche Telekom/Powertel merger agreement
likely would be treated the same as other merger consideration, and Deutsche
Telekom and Powertel intend to treat it the same as other merger consideration
for U.S. federal income tax purposes. It is possible, however, that merger
consideration received by a U.S. holder in exchange for the stock dividend could
instead be treated as ordinary dividend income that is separately received by
the U.S. holder from Deutsche Telekom. In such case, the amount of the dividend
generally would be equal to the fair market value of the Deutsche Telekom ADSs
or Deutsche Telekom ordinary shares received in exchange for the stock dividends
determined at completion of the Deutsche Telekom/Powertel merger. Further, the
U.S. holder's tax basis in such Deutsche Telekom ADSs or Deutsche Telekom
ordinary shares would be equal to such fair market value and his holding period
generally would begin on the date following the date of completion of the
Deutsche Telekom/ Powertel merger. In the event that merger consideration
received by a U.S. holder in exchange for the stock dividend were treated as
separately received by the U.S. holder, that treatment would not affect the
status of the merger as a reorganization within the meaning of Section 368(a) of
the U.S. tax code.
A U.S. HOLDER WHO IS A "FIVE-PERCENT TRANSFEREE SHAREHOLDER" OF DEUTSCHE
TELEKOM AFTER THE DEUTSCHE TELEKOM/POWERTEL MERGER, AS DEFINED IN TREASURY
REGULATIONS PROMULGATED UNDER SECTION 367(a) OF THE U.S. TAX CODE, WILL QUALIFY
FOR NON-RECOGNITION TREATMENT AS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS
ONLY IF THE SHAREHOLDER FILES WITH THE IRS A "GAIN RECOGNITION AGREEMENT", AS
DEFINED IN SUCH TREASURY REGULATIONS. ALTHOUGH NO SUCH PERSONS ARE EXPECTED TO
EXIST SOLELY AS A RESULT OF THE DEUTSCHE TELEKOM/POWERTEL MERGER, ANY U.S.
HOLDER OF POWERTEL SHARES WHO IS CONCERNED THAT HE MAY BE A FIVE-PERCENT
TRANSFEREE SHAREHOLDER IS URGED TO CONSULT HIS TAX ADVISOR CONCERNING THE
DECISION TO FILE A GAIN RECOGNITION AGREEMENT AND THE PROCEDURES TO BE FOLLOWED
IN CONNECTION WITH THAT FILING.
U.S. Holders of Employee Stock Options
The exchange pursuant to the Deutsche Telekom/Powertel merger by a U.S.
holder of an employee stock option to acquire Powertel common shares for an
option to acquire Deutsche Telekom ADSs or Deutsche Telekom ordinary shares will
not be taxable for U.S. federal income tax purposes. A U.S. holder of an option
to acquire a Deutsche Telekom ADS or Deutsche Telekom ordinary share who
received that option in exchange for an option to acquire Powertel common shares
that was received as compensation, and who exercises that Deutsche Telekom
option, generally will recognize ordinary income for U.S. federal income tax
purposes in an amount equal to the excess of the fair market value on the
exercise date of the Deutsche Telekom ADS or Deutsche Telekom ordinary share
received pursuant to the exercise over the price paid for the Deutsche Telekom
ADS or Deutsche Telekom ordinary share pursuant to the option, and generally
will be subject to applicable withholding taxes. A U.S. holder's tax basis in
Deutsche Telekom ADSs or Deutsche Telekom ordinary shares received as a result
of the exercise of the option will equal the fair market value of the shares on
the exercise date and a U.S. holder's holding period will begin on the exercise
date. Thereafter, the U.S. holder will be subject to the rules discussed below
with respect to U.S. holders of Deutsche Telekom ADSs and Deutsche Telekom
ordinary shares.
The foregoing discussion does not address the U.S. federal income tax
consequences of the exercise of any option that is treated as an incentive stock
option within the meaning of Section 422(b) of the U.S. tax code. Any U.S.
holder of an option that is treated as an incentive stock option is urged to
consult his own tax advisor concerning the consequences to him of the Deutsche
Telekom/Powertel merger and exercise of the option.
U.S. Backup Withholding
Under the U.S. tax code, a U.S. holder of Powertel shares may be subject,
under certain circumstances, to backup withholding at a rate of 31% with respect
to the amount of cash, if any, received
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in the Deutsche Telekom/Powertel merger, including cash received in lieu of
fractional shares, unless the U.S. holder provides proof of an applicable
exemption or correct taxpayer identification number and otherwise complies with
applicable requirements of the backup withholding rules. Any amount withheld
under the backup withholding rules is not additional tax and may be refunded or
credited against the U.S. holder's federal income tax liability, so long as the
required information is furnished to the IRS.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DEUTSCHE TELEKOM/POWERTEL MERGER TO
U.S. HOLDERS OF POWERTEL PREFERRED SHARES
Subject to the limitations and qualifications set forth under "-- General"
and this section, the discussion in this section represents the opinion of
Morris, Manning & Martin, LLP, counsel to Powertel, as to the material U.S.
Federal income tax consequences of the Deutsche Telekom/Powertel merger to U.S.
holders of Powertel preferred shares. Counsel has delivered this opinion, dated
the effective date of this proxy statement/prospectus, to Powertel. Furthermore,
it is assumed for purposes of the remainder of the discussion in this section
that counsel to Powertel will deliver an additional opinion dated as of the
completion of the Deutsche Telekom/Powertel merger that satisfies the
requirements set forth under "-- U.S. Federal Income Tax Consequences of the
Deutsche Telekom/Powertel Merger to U.S. Holders of Powertel Common
Shares -- Tax Opinion Condition to Closing."
Generally, the tax treatment for a U.S. holder of Powertel preferred shares
will be the same as described above for U.S. holders of Powertel common shares.
Pursuant to Section 1.05(b)(iv)(B) of the Deutsche Telekom/Powertel merger
agreement, however, the holders of Powertel Series E preferred shares and
Powertel Series F preferred shares are entitled to additional Deutsche Telekom
ADSs or Deutsche Telekom ordinary shares in satisfaction of any accrued or
declared but unpaid dividends on the Powertel Series E preferred shares or
Powertel Series F preferred shares on the date of the completion of the Deutsche
Telekom/Powertel merger. To the extent any accrued dividends on a Powertel
stockholder's Powertel Series E preferred shares or Powertel Series F preferred
shares have been declared (as distinguished from dividends which have accrued
but are undeclared) and remain unpaid upon the completion of the Deutsche
Telekom/Powertel merger, the receipt by that Powertel stockholder of Deutsche
Telekom ADSs or Deutsche Telekom ordinary shares in satisfaction of those
declared but unpaid dividends on its Powertel Series E preferred shares or
Powertel Series F preferred shares will be treated as a distribution with
respect to that Powertel stockholder's Powertel Series E preferred shares or
Powertel Series F preferred shares and will be either taxable to that
stockholder, a return of capital to that stockholder, or a combination of both,
under Section 301 of the U.S. tax code and the regulations and other authorities
promulgated thereunder.
The basis of the Deutsche Telekom ADSs or Deutsche Telekom ordinary shares
received by a holder of Powertel Series E preferred shares or Powertel Series F
preferred shares in satisfaction of any declared but unpaid dividends on that
stockholder's Powertel Series E preferred shares or Powertel Series F preferred
shares will equal the fair market value of such Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares on the date of the completion of the Deutsche
Telekom/Powertel merger. Further, the basis of the Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares received by a holder of Powertel Series E
preferred shares or Powertel Series F preferred shares in exchange for its
Powertel preferred shares, and not in satisfaction of any declared but unpaid
dividends, will equal the aggregate tax basis of the shares exchanged for the
Deutsche Telekom ADSs or Deutsche Telekom ordinary shares, subject to a downward
adjustment to the extent that any Deutsche Telekom ADSs or Deutsche Telekom
ordinary shares which represent declared but unpaid dividends on a stockholder's
Powertel Series E preferred shares or Powertel Series F preferred shares are
treated as a return of capital on that stockholder's preferred shares for tax
purposes.
The holding period for determining long-term capital gains treatment for
any Deutsche Telekom ADSs or Deutsche Telekom ordinary shares received by a
holder of Powertel Series E preferred shares or Powertel Series F preferred
shares in satisfaction of any declared but unpaid dividends with respect to
those shares will commence on the day following the completion of the Deutsche
Telekom/Powertel merger.
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Each holder of Powertel preferred shares should consult its tax advisor in
connection with the tax implications of any Deutsche Telekom ADSs or Deutsche
Telekom ordinary shares received in satisfaction of any declared but unpaid
dividends with respect to the stockholder's preferred shares.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE VOICESTREAM/POWERTEL MERGER TO U.S.
HOLDERS OF POWERTEL COMMON SHARES
Subject to the limitations and qualifications set forth under "-- General"
and in this section, the discussion in this section represents the opinion of
Morris, Manning & Martin, LLP, counsel to Powertel, Jones, Day, Reavis & Pogue,
tax counsel to VoiceStream, and Preston Gates & Ellis LLP, counsel to
VoiceStream, as to the material U.S. federal income tax consequences of the
VoiceStream/Powertel merger to U.S. holders of Powertel common shares. Each
counsel has delivered this opinion, dated the effective date of this proxy
statement/prospectus, to Powertel or to VoiceStream, as applicable.
Tax Opinion Condition to Closing
The obligation of Powertel to complete the VoiceStream/Powertel merger is
conditioned on the receipt of an additional opinion from Morris, Manning &
Martin, LLP, counsel to Powertel, and the obligation of VoiceStream to complete
the VoiceStream/Powertel merger is conditioned on the receipt of an additional
opinion from Preston Gates & Ellis LLP, counsel to VoiceStream, and/or Jones,
Day Reavis & Pogue, tax counsel to VoiceStream, each opinion dated as of the
completion of the VoiceStream/Powertel merger, substantially to the effect that
the VoiceStream/Powertel merger will qualify as a reorganization within the
meaning of Section 368(a) of the U.S. tax code. Counsels' tax opinions will be
based upon assumptions noted in the opinions and on factual representations of
Powertel and VoiceStream contained in certificates signed by officers of
Powertel and VoiceStream to be delivered at the time of the VoiceStream/Powertel
merger. Powertel does not intend to waive the receipt of its counsel's opinion
as a condition to its obligation to complete the VoiceStream/Powertel merger,
and will not waive the receipt of an opinion as a condition to its obligations
to complete the merger without recirculating this document in order to resolicit
stockholder approval of the waiver. Counsels' opinions will not be binding on
the IRS or any court.
Each counsel presently intends to deliver to Powertel or VoiceStream, as
applicable, at the completion of the merger an opinion that satisfies the
requirements set forth in the prior paragraph, and it is assumed for purposes of
the remainder of the discussion in this section that each counsel will deliver
such an opinion.
U.S. Holders of Powertel Common Shares
For U.S. federal income tax purposes, the VoiceStream/Powertel merger will
qualify as a reorganization within the meaning of Section 368(a) of the U.S. tax
code. Accordingly, a U.S. holder of Powertel common shares generally will not
recognize any gain or loss upon his receipt of merger consideration in the
VoiceStream/Powertel merger, except with respect to cash received in lieu of
fractional shares, as discussed further below.
The aggregate tax basis of the VoiceStream common shares received by a U.S.
holder in the VoiceStream/Powertel merger, including any fractional interests to
which the U.S. holder would be entitled but for the special treatment of
fractional interests discussed below, generally will equal the aggregate tax
basis of the Powertel common shares exchanged therefor. The holding period of
the VoiceStream common shares received will include the holding period of the
Powertel common shares exchanged therefor.
Fractional interests in VoiceStream common shares will not be issued to
Powertel shareholders in the VoiceStream/Powertel merger. Instead, cash will be
paid in lieu of any fractional interests in VoiceStream common shares that a
U.S. holder of Powertel common shares otherwise would have been entitled to
receive. A U.S. holder who receives cash in lieu of a fractional share of
VoiceStream common share will recognize gain or loss equal to the difference
between the cash received for the fractional share and the
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U.S. holder's tax basis in the Powertel common shares exchanged which is
allocable to the fractional interest. Any such gain or loss generally will be
capital gain or loss, and generally will be long-term capital gain or loss with
respect to Powertel common shares held for more than 12 months at the completion
of the VoiceStream/Powertel merger.
U.S. Holders of Employee Stock Options
The exchange pursuant to the VoiceStream/Powertel merger by a U.S. holder
of an employee stock option to acquire Powertel common shares for an option to
acquire VoiceStream common shares will not be taxable for U.S. federal income
tax purposes. A U.S. holder of an option to acquire VoiceStream common shares
who received that option in exchange for an option to acquire Powertel common
shares that was received as compensation, and who exercises that VoiceStream
option, generally will recognize ordinary income for U.S. federal income tax
purposes in an amount equal to the excess of the fair market value on the
exercise date of the VoiceStream common shares received pursuant to the exercise
over the price paid for the VoiceStream common shares pursuant to the option,
and generally will be subject to applicable withholding taxes. A U.S. holder's
tax basis in VoiceStream common shares received as a result of the exercise of
the option will equal the fair market value of the shares on the exercise date
and a U.S. holder's holding period will begin on the exercise date.
The foregoing discussion does not address the U.S. federal income tax
consequences of the exercise of any option that is treated as an incentive stock
option within the meaning of Section 422(b) of the U.S. tax code. Any U.S.
holder of an option that is treated as an incentive stock option is urged to
consult his own tax advisor concerning the consequences to him of the
VoiceStream/Powertel merger and exercise of the option.
U.S. Backup Withholding
Under the U.S. tax code, a U.S. holder of Powertel common shares may be
subject, under certain circumstances, to backup withholding at a rate of 31%
with respect to the amount of cash, if any, received in the VoiceStream/Powertel
merger, including cash received in lieu of fractional shares, unless the U.S.
holder provides proof of an applicable exemption or correct taxpayer
identification number and otherwise complies with applicable requirements of the
backup withholding rules. Any amount withheld under the backup withholding rules
is not additional tax and may be refunded or credited against the U.S. holder's
federal income tax liability, so long as the required information is furnished
to the IRS.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE VOICESTREAM/POWERTEL MERGER TO U.S.
HOLDERS OF POWERTEL PREFERRED SHARES
Subject to the limitations and qualifications set forth under the heading
"-- General" and this section, the discussion in this section represents the
opinion of Morris, Manning & Martin, LLP, counsel to Powertel, as to the
material U.S. Federal income tax consequences of the VoiceStream/Powertel merger
to U.S. holders of Powertel preferred shares. Counsel has delivered this
opinion, dated the effective date of this proxy statement/prospectus to
Powertel. Furthermore, it is assumed for purposes of the remainder of the
discussion in this section that counsel to Powertel will deliver an additional
opinion dated as of completion of the VoiceStream/Powertel merger that satisfies
the requirements set forth under "-- U.S. Federal Income Tax Consequences of the
VoiceStream/Powertel Merger to U.S. Holders of Powertel Common Shares -- Tax
Opinion Condition to Closing."
Generally, the tax treatment for a U.S. holder of Powertel preferred shares
will be the same as described above for U.S. holders of Powertel common shares.
Pursuant to Section 1.06(c)(ii)(B)(2) of the VoiceStream/Powertel merger
agreement, however, the holders of Powertel Series E preferred shares and
Powertel Series F preferred shares are entitled to additional VoiceStream common
shares in satisfaction of any accrued or declared but unpaid dividends on the
Powertel Series E preferred shares or Powertel Series F preferred shares on the
date of the completion of the VoiceStream/Powertel merger. To the extent any
accrued dividends on a Powertel stockholder's Powertel Series E preferred shares
or
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Powertel Series F preferred shares have been declared (as distinguished from
dividends which have accrued but are undeclared) and remain unpaid upon the
completion of the VoiceStream/Powertel merger, the receipt by that Powertel
stockholder of VoiceStream common shares in satisfaction of those declared but
unpaid dividends on its Powertel Series E preferred shares or Powertel Series F
preferred shares will be treated as a distribution with respect to that Powertel
stockholder's Powertel Series E preferred shares or Powertel Series F preferred
shares and will be either taxable to that stockholder, a return of capital to
that stockholder, or a combination of both, under Section 301 of the U.S. tax
code and the regulations and other authorities promulgated thereunder.
The basis of the VoiceStream common shares received by a holder of Powertel
Series E preferred shares or Powertel Series F preferred shares in satisfaction
of any declared but unpaid dividends on that stockholder's Powertel Series E
preferred shares or Powertel Series F preferred shares will equal the fair
market value of such VoiceStream common shares on the date of the completion of
the VoiceStream/Powertel merger. Further, the basis of the VoiceStream common
shares received by a holder of Powertel Series E preferred shares or Powertel
Series F preferred shares in exchange for its Powertel shares, and not in
satisfaction of any declared but unpaid dividends, will equal the aggregate tax
basis of the shares exchanged for the VoiceStream common shares, subject to a
downward adjustment to the extent that any VoiceStream common shares which
represent declared but unpaid dividends on a stockholder's Powertel Series E
preferred shares or Powertel Series F preferred shares are treated as a return
of capital on that stockholder's preferred shares for tax purposes.
The holding period for any VoiceStream common shares received by a holder
of Powertel Series E preferred shares or Powertel Series F preferred shares in
satisfaction of any declared but unpaid dividends with respect to those shares
will commence on the day following the completion of the VoiceStream/Powertel
merger.
Each holder of Powertel preferred shares should consult its tax advisor in
connection with the tax implications of any VoiceStream common shares received
in satisfaction of any declared but unpaid dividends with respect to the
stockholder's preferred shares.
U.S. FEDERAL INCOME TAX AND GERMAN TAX CONSIDERATIONS FOR U.S. RESIDENT HOLDERS
OF DEUTSCHE TELEKOM ADSs AND DEUTSCHE TELEKOM ORDINARY SHARES
The following is a summary of the material U.S. federal income tax and
German tax considerations related to the acquisition, ownership and disposition
of Deutsche Telekom ADSs or Deutsche Telekom ordinary shares by a holder that is
a resident of the United States for purposes of the income tax convention
between the United States and Germany, which in this document we refer to as the
"Income Tax Treaty", and is fully eligible for benefits under the Income Tax
Treaty. We refer in this document to such holder as a "U.S. resident holder".
The summary does not purport to be a comprehensive description of all of the tax
considerations that may be relevant to any particular investor, including tax
considerations, that arise from rules of general application or that are
generally assumed to be known by investors. In particular, the summary does not
deal with U.S. resident holders that do not hold Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares as capital assets. The summary does not address
the tax treatment of holders that are subject to special rules, such as banks,
insurance companies, dealers in securities or currencies, persons holding
property as part of an integrated investment, including a "straddle", that
includes one or more other positions, persons that own, directly or indirectly,
10% or more of Deutsche Telekom's voting shares and holders whose "functional
currency" is not the U.S. dollar. The summary is based on laws, treaties and
regulatory interpretations in effect on the date hereof, all of which are
subject to change.
Holders should consult their own advisors regarding the tax consequences of
the acquisition, ownership and disposition of Deutsche Telekom ADSs or Deutsche
Telekom ordinary shares in light of their particular circumstances, including
the effect of any state, local, or other national laws.
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The beneficial owner of a Deutsche Telekom ADS or Deutsche Telekom ordinary
share generally will be entitled to Income Tax Treaty benefits, and therefore
will be a U.S. resident holder, if it is the following:
- an individual resident of the United States, a U.S. corporation, or a
partnership, estate or trust to the extent its income from whatever
source derived is subject to taxation in the United States in its
hands or in the hands of its partners or beneficiaries;
- not also a resident of Germany for German tax purposes; and
- not subject to an anti-treaty shopping article that applies in limited
circumstances.
The Income Tax Treaty benefits discussed below generally are not available
to U.S. taxpayers that hold Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares in connection with the conduct of business through a permanent
establishment, or the performance of personal services through a fixed base, in
Germany. This summary does not discuss the treatment of such holders.
In general, for U.S. federal income tax purposes and for purposes of the
Income Tax Treaty, beneficial owners of Deutsche Telekom ADSs will be treated as
the beneficial owners of the Deutsche Telekom ordinary shares represented by
those Deutsche Telekom ADSs.
Dividends
As described more fully below, dividends paid by German corporations
generally are subject to German withholding tax at an aggregate rate of 21.1%,
consisting of a 20% withholding tax and a 1.1% surcharge. Distributions of
dividends in 2001 out of earnings that accrued prior to the end of the year 2000
will be subject to a withholding tax at a rate of 25% plus a 5.5% solidarity
surcharge thereon.
Under the Income Tax Treaty, the German withholding tax rate is reduced to
15% of the declared dividend. During the period in which the existing corporate
tax imputation system continues to apply to individuals under German law, U.S.
resident holders are entitled to claim an additional reduction in German
withholding tax equal to 5% of the gross dividend. Accordingly, a U.S. resident
holder would be entitled to receive a refund payment from the German tax
authorities equal to 16.375% of the declared dividend. The Income Tax Treaty
provides that 11.375% of the declared dividend will be treated for U.S. tax
purposes as a reduction in German withholding tax to the generally applicable
Income Tax Treaty rate of 15%, and the remaining 5% of the declared dividend
will be treated as the net amount of an additional dividend of 5.88% of the
declared dividend that has been subject to a 15% German withholding tax.
As discussed under "-- German Tax Considerations for Non-German Holders of
Deutsche Telekom ADSs and Deutsche Telekom Ordinary Shares -- Taxation of
Dividends," pursuant to the Tax Reduction Act adopted by the German Parliament
on July 14, 2000, the German corporate tax imputation system will be abolished.
Under the Income Tax Treaty, a U.S. resident holder will still be entitled to a
reduction in the German withholding tax rate to 15%. For a declared dividend of
100, a U.S. resident holder would initially receive 78.9 and could claim a
refund from the German tax authorities of 6.1 and would therefore receive a
total cash payment of 85. For U.S. federal income tax purposes, a U.S. resident
holder would be deemed to have received gross dividends of 100.
As discussed under "-- German Tax Considerations for Non-German Holders of
Deutsche Telekom ADSs and Deutsche Telekom Ordinary Shares -- Taxation of
Dividends," the Tax Reduction Act has, in principle, entered into force on
January 1, 2001. However, transition rules exist under which certain changes
will only become effective in 2002. Dividends paid in 2001 out of earnings that
accrued prior to the end of the year 2000 will still be subject to the corporate
tax imputation system.
The gross amount of dividends received by a U.S. resident holder, including
the additional dividend associated with the Income Tax Treaty refund and amounts
withheld in respect of German withholding tax, generally will be subject to U.S.
federal income taxation as foreign source dividend income, and will not be
eligible for the dividends received deduction generally allowed to U.S.
corporations. German withholding tax at the 15% rate provided under the Income
Tax Treaty will be treated as a foreign income
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tax that, subject to generally applicable limitations under U.S. tax law, is
eligible for credit against a U.S. resident holder's U.S. federal income tax
liability or, at the holder's election, may be deducted in computing taxable
income. Thus, for a declared dividend of 100, under the current German corporate
tax imputation system, a U.S. resident holder would be deemed to have paid
German taxes of 15.88, but under the Tax Reduction Act, a U.S. resident holder
would be deemed to have paid German taxes of 15. For foreign tax credit
purposes, dividends paid by Deutsche Telekom will be foreign source "passive
income" or, in the case of certain U.S. resident holders, "financial services
income". Foreign tax credits will not be allowed for withholding taxes imposed
in respect of certain short-term or hedged positions in Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares or in respect of arrangements in which a U.S.
resident holder's expected economic profit, after non-U.S. taxes, is
insubstantial. U.S. resident holders should consult their own tax advisors
concerning the implications of these rules in light of their particular
circumstances.
Dividends paid in non-U.S. currency will be included in the income of a
U.S. resident holder in a U.S. dollar amount calculated by reference to the
exchange rate in effect on the date of receipt by the holder or, in the case of
Deutsche Telekom ADSs, by the depositary bank for the ADSs, regardless of
whether the payment is in fact converted into U.S. dollars. In this document we
refer to the depositary bank as the "Depositary". If dividends paid in foreign
currency are converted into U.S. dollars on the date of receipt, U.S. resident
holders generally should not be required to recognize foreign currency gain or
loss in respect of the dividend income. A U.S. resident holder may be required
to recognize domestic-source foreign currency gain or loss on the receipt of a
refund in respect of German withholding tax to the extent the U.S. dollar value
of the refund differs from the U.S. dollar equivalent of that amount on the date
of receipt of the underlying dividend, but not with respect to the portion of
the Income Tax Treaty refund that is treated as an additional dividend.
Refund Procedures
Pursuant to administrative procedures introduced on a trial basis, claims
for refunds payable under the Income Tax Treaty to U.S. resident holders must be
submitted to the German tax authorities by the Depositary collectively on behalf
of all such U.S. resident holders. However, this procedure is not available for
U.S. resident holders entitled to refunds in excess of DM 300 for the calendar
year; such holders must file separate claims. Claims must be filed within four
years of the end of the calendar year in which the dividend was received.
Details of the collective refund procedure are available from the
Depositary. Individual claims for refunds are made on a special German form,
which must be filed with the German tax authorities: Bundesamt fur Finanzen,
Friedhofstrasse 1, 53221 Bonn, Germany. Copies of the required form may be
obtained from the German tax authorities at the same address or from the Embassy
of the Federal Republic of Germany, 4645 Reservoir Road, N.W., Washington, D.C.
20007-1998.
As part of the individual refund claim, a U.S. resident holder must submit
to the German tax authorities the original bank voucher, or the certified copy
thereof, issued by the paying entity documenting the tax withheld, and an
official certification on IRS Form 6166 of its last filed U.S. federal income
tax return. IRS Form 6166 may be obtained by filing a request with the Internal
Revenue Service Center in Philadelphia, Pennsylvania, Foreign Certificate
Request, P.O. Box 16347, Philadelphia, PA 19114-0447. Requests for certification
must include the holder's name, Social Security number or Employer
Identification number, tax return form number, and tax period for which the
certification is requested. Requests for certification can include a request to
the IRS to send the certification directly to the German tax authorities. If no
such request is made, the IRS will send a certificate on IRS Form 6166 to the
U.S. resident holder, which then must submit the certification with its claim
for refund.
Refunds under the Income Tax Treaty are not available in respect of
Deutsche Telekom ADSs or Deutsche Telekom ordinary shares held in connection
with a permanent establishment or fixed base in Germany.
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Capital Gains
Under the Income Tax Treaty, a U.S. resident holder will not be subject to
German capital gains tax in respect of a sale or other disposition of Deutsche
Telekom ADSs or Deutsche Telekom ordinary shares unless the Deutsche Telekom
ADSs or Deutsche Telekom ordinary shares were held in connection with a
permanent establishment or fixed base in Germany.
Gain or loss realized by a U.S. resident holder on the sale or disposition
of Deutsche Telekom ADSs or Deutsche Telekom ordinary shares will be capital
gain or loss, and will be long-term gain or loss if the Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares were held for more than one year. The net
amount of long-term capital gain realized by an individual holder generally is
subject to taxation at a present maximum rate of 20%. A U.S. resident holder's
ability to offset capital losses against ordinary income is subject to
limitations. Deposits and withdrawals of shares in exchange for Deutsche Telekom
ADSs will not result in the realization of gain or loss for U.S. federal income
tax purposes.
Inheritance and Gift Tax
Under the current estate, inheritance and gift tax treaty between the
United States and Germany, which in this document we refer to as the "Estate Tax
Treaty", a transfer of Deutsche Telekom ADSs or Deutsche Telekom ordinary shares
by gift or by reason of the death of a U.S. resident holder generally will not
be subject to German gift or inheritance tax unless the donor or transferor, or
the heir, donee or other beneficiary, is domiciled in Germany for purposes of
the Estate Tax Treaty at the time gift was made, or at the time of the donor's
or transferors' death, or the Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares were held in connection with a permanent establishment or fixed base in
Germany.
The Estate Tax Treaty provides a credit against U.S. federal estate and
gift tax liability for the amount of inheritance and gift tax paid in Germany,
subject to certain limitations, in a case where Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares are subject to German inheritance or gift tax
and U.S. federal estate or gift tax.
Information Reporting and Backup Withholding
Dividends on Deutsche Telekom ADSs or Deutsche Telekom ordinary shares, and
payments of the proceeds of a sale of Deutsche Telekom ADSs or Deutsche Telekom
ordinary shares paid within the United States or through certain U.S.-related
financial intermediaries are subject to information reporting and may be subject
to U.S. backup withholding at a 31% rate unless the holder:
- is a corporation or other exempt recipient; or
- provides a taxpayer identification number and certifies that no loss
of exemption from backup withholding has occurred.
Holders that are not United States persons generally are not subject to
information reporting or backup withholding. However, such a holder may be
required to provide a certification to establish its non-U.S. status in
connection with payments received within the United States or through certain
U.S.-related financial intermediaries.
GERMAN TAX CONSIDERATIONS FOR NON-GERMAN HOLDERS OF DEUTSCHE TELEKOM ADSs AND
DEUTSCHE TELEKOM ORDINARY SHARES
The following is a brief summary of material German tax considerations for
beneficial owners of Deutsche Telekom ADSs or Deutsche Telekom ordinary shares
that are not German residents for German income tax purposes and do not hold
Deutsche Telekom ADSs or Deutsche Telekom ordinary shares as part of a permanent
establishment or a fixed base in Germany, which in this document we refer to as
"Non-German Holders". This summary is based upon German law and typical tax and
other treaties between Germany and other countries in effect as of the date
hereof and is subject to changes in German law or in such treaties. The
following is not meant to be a comprehensive discussion of all of the German
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tax consequences which may be relevant for Non-German Holders. Prospective
holders of Deutsche Telekom ADSs or Deutsche Telekom ordinary shares should
consult their tax advisors regarding the German federal, state and local tax
consequences of the acquisition, ownership and disposition of Deutsche Telekom
ADSs or Deutsche Telekom ordinary shares in light of their particular
circumstances.
The following discussion does not purport to be a comprehensive discussion
of all German tax consequences which may be relevant for Non-German Holders.
Company Taxation in Germany
In general, German corporations are subject to corporate income tax at a
rate of 40% on non-distributed profits and of 30% on distributed profits. Since
January 1, 1998, the corporate income tax liability has been subject to a 5.5%
solidarity surcharge (Solidaritatszuschlag). This currently results in an
effective aggregate corporate income tax charge of 31.94% on distributed
profits. German resident taxpayers, including foreign investors that hold shares
or ADSs as part of a permanent establishment or a fixed base in Germany, are
entitled to a refundable tax credit in the amount of three-sevenths of the gross
amount before dividend withholding tax of profits distributed, which credit also
reduces the basis for the 5.5% surcharge on the German taxpayer's income tax
liability. That credit or refund is not available to Non-German Holders.
In addition, German corporations are subject to a profit-related trade tax,
the exact amount of which depends on the municipality in which the corporation
maintains its business establishments. Trade tax is a deductible item in
computing the corporation's tax base for the corporate income tax purposes.
Taxation of Dividends
A 20% withholding tax, plus a solidarity surcharge of 5.5 percent thereon
resulting in a withholding tax burden of 21.1, is imposed on gross dividend
distributions by a German corporation. With respect to a Non-German Holder, this
rate may be reduced by a tax treaty applicable to such Non-German Holder. Under
most tax treaties the withholding tax rate is reduced to 15%. The reduction is
granted by way of a refund of the difference between the tax withheld at the
statutory rate of 25% plus the surcharge and the applicable treaty rate upon
application to the German tax authorities (Bundesamt fur Finanzen), located at
Friedhofstrasse 1, 53225 Bonn, Germany. For Non-German Holders of ADSs entitled
to the benefits of the Income Tax Treaty a special refund procedure may apply,
as described under "-- U.S. Federal Income Tax and German Tax Considerations for
U.S. Resident Holders of Deutsche Telekom ADSs and Deutsche Telekom Ordinary
Shares."
Under the Income Tax Treaty, during the period in which the corporate tax
imputation system continues to apply to individuals under German law, qualifying
U.S. shareholders are entitled to an additional reduction in German tax equal to
5% of the gross amount of the dividend, which is refundable together with the
general treaty refund discussed in the preceding paragraph. Special U.S. tax
rules applicable to this additional refund are discussed under "-- U.S. Federal
Income Tax and German Tax Considerations for U.S. Resident Holders of Deutsche
Telekom ADSs and Deutsche Telekom Ordinary Shares -- Refund Procedures."
Changes in the German Taxation System
On July 14, 2000, the German parliament adopted a Tax Reduction Act
(Steuersenkungsgesetz) which, in principle, has entered into force on January 1,
2001. However, transition rules exist under which certain changes will only
become effective in 2002. Pursuant to the Tax Reduction Act, the corporate tax
imputation system will be abolished and the withholding tax and corporate income
tax rates have been reduced effective January 1, 2001. Corporate profits will be
subject to tax separately at corporate and shareholder levels. The corporate
income tax rate will be 25%, plus solidarity surcharge of 1.375%, on distributed
and retained earnings. Dividends received by Non-German Holders will be subject
to withholding tax at a rate of 20%, plus a 5.5% solidarity surcharge resulting
in an effective rate of 21.1%. Distributions of dividends in 2001 out of
earnings that accrued prior to the end of the year 2000 will be
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subject to a withholding tax at a rate of 25% plus a 5.5% solidarity surcharge
thereon. The withholding tax rate for Non-German Holders may be lower under the
provisions of an applicable double tax treaty. The abolishment of the corporate
income tax imputation system will result in U.S. resident holders being subject
to a maximum dividend withholding rate of 15% under the Income Tax Treaty,
without further reduction. Dividends paid in 2001 out of earnings that accrued
prior to the end of the year 2000 will still be subject to the imputation
system.
Capital Gains
Under German domestic tax law, gain which Non-German Holders derive from
the sale or other disposition of Deutsche Telekom ADSs or Deutsche Telekom
ordinary shares is not subject to tax in Germany, provided the Non-German Holder
has not held, directly or indirectly, 10% or more of the shares at any time
during the five-year period immediately preceding the disposition. Effective
January 1, 2002, this participation threshold will be reduced to 1% pursuant to
the Tax Reduction Act mentioned above. Most tax treaties concluded by Germany
with other countries, including the Income Tax Treaty, provide that Non-German
Holders resident in the respective treaty state are not subject to German income
tax on such capital gains.
Inheritance and Gift Tax
Under German law, German gift or inheritance tax will be imposed on
transfers of shares or ADSs by gift or at death of a Non-German Holder only if:
- the donor or transferor, or the heir, donee or other beneficiary,
was domiciled in Germany at the time of the transfer or, with
respect to German citizens who are not domiciled in Germany, if such
donor, transferor or beneficiary has not been continuously outside
of Germany for a period of more than five years or had a residence
in Germany during such absence; or
- the Deutsche Telekom ADSs or Deutsche Telekom ordinary shares
subject to such transfer consist or form part of a portfolio of 10%
or more of such Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares held directly or indirectly by the donor or transferor
himself or together with one or more related persons.
The few German estate tax treaties currently in force, for example, the
Estate Tax Treaty, usually provide that German gift or inheritance tax may only
be imposed if the first condition above is met or if the ordinary shares or ADSs
were held in connection with a permanent establishment or fixed base in Germany.
Other Taxes
No German transfer, stamp or other similar taxes apply to the acquisition,
sale or other disposition of Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares by Non-German Holders.
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SUMMARY OF THE DEUTSCHE TELEKOM/VOICESTREAM
TRANSACTION DOCUMENTS
THE DEUTSCHE TELEKOM/VOICESTREAM MERGER AGREEMENT
The following is a summary of the material provisions of the Deutsche
Telekom/VoiceStream merger agreement. This summary is qualified in its entirety
by reference to the Deutsche Telekom/VoiceStream merger agreement, a copy of
which is incorporated by reference and attached as Annex A to this proxy
statement/prospectus. VoiceStream stockholders are urged to read the Deutsche
Telekom/VoiceStream merger agreement in its entirety, as it is the legal
document governing the Deutsche Telekom/VoiceStream merger.
The Deutsche Telekom/VoiceStream Merger
A Delaware corporation formed by Deutsche Telekom will merge with and into
VoiceStream and, as a result, VoiceStream will become a wholly-owned subsidiary
of Deutsche Telekom.
Effective Time and Timing of Closing
The Deutsche Telekom/VoiceStream merger will be completed and become
effective when VoiceStream files a certificate of merger with the Secretary of
State of the State of Delaware or at such later time as is specified in the
certificate of merger in accordance with Delaware law. We expect the Deutsche
Telekom/VoiceStream merger to become effective on the same day as the closing of
the Deutsche Telekom/VoiceStream merger. The closing of the Deutsche
Telekom/VoiceStream merger will take place on the later of:
- the fifth business day, or on such other date that Deutsche Telekom and
VoiceStream may agree, after the conditions to the Deutsche
Telekom/VoiceStream merger have been satisfied or waived; and
- May 31, 2001.
In addition, on the closing date of the Deutsche Telekom/VoiceStream merger
or as soon as possible after the closing date, Deutsche Telekom and VoiceStream
will undertake a number of additional actions, including making filings with
regulatory and stock exchange authorities necessary to permit the issuance of
the Deutsche Telekom/VoiceStream merger consideration.
Consideration To Be Received in the Deutsche Telekom/VoiceStream Merger
The basic consideration in the Deutsche Telekom/VoiceStream merger is $30
in cash and 3.2 Deutsche Telekom shares for each VoiceStream common share
outstanding at the completion of the Deutsche Telekom/VoiceStream merger, and
each VoiceStream stockholder is entitled to elect to receive this basic mix.
VoiceStream stockholders may also elect to receive instead more cash and fewer
Deutsche Telekom shares, or more Deutsche Telekom shares and less cash, by
making a cash election or a stock election. AS EXPLAINED BELOW, HOWEVER, THE
CASH AND STOCK ELECTIONS ARE SUBJECT TO PRORATION TO PRESERVE AN OVERALL MIX OF
$30 IN CASH AND 3.2 DEUTSCHE TELEKOM SHARES FOR ALL OF THE OUTSTANDING
VOICESTREAM COMMON SHARES TAKEN TOGETHER, AND ALL THREE ELECTIONS ALSO ARE
SUBJECT TO A TAX-RELATED ADJUSTMENT IN SOME CIRCUMSTANCES. AS A RESULT, UNDER
ANY OF THE ELECTIONS YOU MAY RECEIVE LESS CASH AND MORE STOCK, OR LESS STOCK AND
MORE CASH, THAN YOU HAVE ELECTED. VoiceStream stockholders who fail to make an
election will be deemed to have made the mixed election.
CONSIDERATION TO BE RECEIVED PER VOICESTREAM COMMON SHARE
TYPE OF ELECTION (BEFORE PRORATION AND/OR TAX-RELATED ADJUSTMENT)
---------------- ---------------------------------------------------------
- Mixed........................... $30 in cash and 3.2 Deutsche Telekom shares
- Stock........................... 3.7647 Deutsche Telekom shares
- Cash............................ $200 in cash
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IMPORTANT NOTE: Unless the price of Deutsche Telekom shares appreciates
substantially between the date of this document and the election deadline, it is
expected that the cash election will be oversubscribed and therefore be subject
to proration that will result in the receipt of Deutsche Telekom stock and
significantly less cash by VoiceStream stockholders making the cash election.
HOWEVER, STOCKHOLDERS MAKING THE CASH ELECTION WILL RECEIVE AT LEAST AS MUCH
CASH AS THEY WOULD HAVE RECEIVED BY MAKING THE MIXED ELECTION, AND STOCKHOLDERS
SEEKING TO MAXIMIZE THE AMOUNT OF CASH THEY RECEIVE SHOULD MAKE THE CASH
ELECTION.
You will receive Deutsche Telekom shares in the form of Deutsche Telekom
ADSs, which are traded on the NYSE under the symbol "DT", or, if you prefer, in
the form of Deutsche Telekom ordinary shares, which trade principally on the
Frankfurt Stock Exchange under the symbol "DTE".
Explanation of Proration. The total number of Deutsche Telekom shares that
will be issued and the total amount of cash that will be paid to VoiceStream
stockholders in the Deutsche Telekom/VoiceStream merger is 3.2 Deutsche Telekom
shares and $30, respectively, multiplied by the total number of VoiceStream
common shares outstanding immediately prior to completion of the Deutsche
Telekom/VoiceStream merger. The stock and cash elections are subject to
proration to preserve an overall mix of $30 in cash and 3.2 Deutsche Telekom
shares for all of the outstanding VoiceStream common shares taken together.
Therefore, unless the number of stock elections is significantly greater than
the number of cash elections, VoiceStream stockholders making the cash election
will not receive $200 in cash, but instead will receive a mix of cash and stock
calculated to preserve the overall cash and stock mix described above, after
taking into account all of the elections made by all of the VoiceStream
stockholders. In all cases, the cash election will include at least as much cash
as the mixed election. Similarly, if the number of stock elections is
significantly greater than the number of cash elections, VoiceStream
stockholders making the stock election will not receive 3.7647 Deutsche Telekom
shares, but instead will receive a mix of cash and stock calculated to preserve
the overall cash and stock mix described above, after taking into account all of
the elections made by all of the VoiceStream stockholders. In all cases, the
stock election will include at least as much stock as the mixed election.
VoiceStream stockholders who make the mixed election will not be subject to
proration.
AS OF THE DATE OF THIS DOCUMENT, THE NON-PRORATED $200 VALUE OF THE CASH
ELECTION IS SUBSTANTIALLY GREATER THAN THE CURRENT VALUE OF THE STOCK AND MIXED
ELECTIONS. IF THIS REMAINS TRUE AT THE ELECTION DEADLINE, IT IS EXPECTED THAT
ALL OR NEARLY ALL VOICESTREAM STOCKHOLDERS WILL MAKE THE CASH ELECTION. IF THIS
OCCURS, STOCKHOLDERS MAKING THE CASH ELECTION WILL RECEIVE A MIX OF CASH AND
DEUTSCHE TELEKOM SHARES IN A PROPORTION VERY CLOSE TO OR EQUAL TO THE MIXED
ELECTION.
We illustrate below how the proration mechanism will be used. For ease of
reference, we refer to the number of Deutsche Telekom shares derived by
multiplying 3.2 and the number of VoiceStream common shares outstanding
immediately prior to the completion of the Deutsche Telekom/VoiceStream merger
as the "Deutsche Telekom share issuance number." Similarly, we refer to the
amount of cash derived by multiplying $30 and the number of VoiceStream common
shares outstanding immediately prior to the completion of the Deutsche
Telekom/VoiceStream merger as the "aggregate cash amount." THE ILLUSTRATION
BELOW ASSUMES THAT NO TAX-RELATED ADJUSTMENT, AS DESCRIBED BELOW, WOULD BE MADE.
Proration if Too Much Cash Is Elected. Unless the number of stock
elections is significantly greater than the number of cash elections,
VoiceStream stockholders making the cash election will not receive $200 in cash,
but instead will receive a mix of cash and stock calculated to preserve the
overall cash and stock mix described above in the following way:
- Step 1. Derive the available cash election amount: the available cash
election amount is the aggregate cash amount less the amount of cash to be
paid in respect of shares as to which a valid mixed election is made.
- Step 2. Derive the cash election amount: the cash election amount is the
product of $200, and the number of VoiceStream common shares as to which a
valid cash election is made.
- Step 3. Derive the cash proration factor: the cash proration factor
equals the available cash election amount divided by the cash election
amount.
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- Step 4. Derive the prorated cash consideration: each VoiceStream common
share as to which a valid cash election is made will be converted into the
right to receive an amount in cash equal to the product of $200 multiplied
by the cash proration factor.
- Step 5. Derive the stock consideration: each VoiceStream common share as
to which a valid cash election is made will be converted into the right to
receive a number of Deutsche Telekom ordinary shares equal to the product
of 3.7647 and the number equal to one minus the cash proration factor.
Example. If the cash election of VoiceStream stockholders is
oversubscribed, we would calculate the cash proration factor as illustrated
above. Assuming that the cash proration factor is 0.2, then if you own 100
VoiceStream common shares and make the cash election, you would receive:
- the amount of cash equal to 0.2 multiplied by $200, multiplied by the
number of VoiceStream common shares you hold, or 100, for a total of
$4,000 in cash; and
- the number of Deutsche Telekom shares equal to 3.7647 multiplied by 0.8,
multiplied by the number of VoiceStream common shares you hold, or 100,
for a total of 301 Deutsche Telekom shares (plus cash for .176 of a
Deutsche Telekom share).
Proration if Too Many Deutsche Telekom Shares Are Elected. If the number
of stock elections is significantly greater than the number of cash elections,
VoiceStream stockholders making the stock election will not receive 3.7647
Deutsche Telekom shares, but instead will receive a mix of cash and stock
calculated to preserve the overall cash and stock mix described above in the
following way:
- Step 1. Derive the available cash election amount: the available cash
election amount is the aggregate cash amount less the amount of cash to
be paid in respect of shares as to which a valid mixed election is made.
- Step 2. Derive the cash election amount: the cash election amount is the
product of $200 and the number of VoiceStream common shares as to which a
valid cash election is made.
- Step 3. Derive the excess cash amount: the excess cash amount is the
difference between the available cash election amount and the cash
election amount.
- Step 4. Derive the prorated cash consideration: each VoiceStream common
share as to which a valid stock election is made will receive an amount
in cash equal to the excess cash amount divided by the number of
VoiceStream common shares as to which a valid stock election is made.
- Step 5. Derive the stock proration factor: the stock proration factor is
a fraction the numerator of which is $200 minus the per share cash
consideration calculated in Step 4 and the denominator of which is $200.
- Step 6. Derive the prorated stock consideration: each VoiceStream common
share as to which a valid stock election is made will be converted into
the right to receive a number of Deutsche Telekom ordinary shares equal
to the product of 3.7647 and the stock proration factor.
Example. If the stock election of VoiceStream stockholders is
oversubscribed, we would calculate the cash consideration as illustrated above.
Assuming that the prorated cash consideration is $20 per share, then the stock
proration factor would be 0.9. If you own 100 VoiceStream shares and make the
stock election under these circumstances, you would receive:
- $20 multiplied by the number of VoiceStream shares you hold, or 100, for
a total of $2,000; and
- the amount of Deutsche Telekom ordinary shares equal to 3.7647 multiplied
by 0.9, multiplied by the number of VoiceStream common shares you hold,
or 100, for a total of 338 Deutsche Telekom shares plus cash for .823 of
a Deutsche Telekom share.
Explanation of Potential Tax-Related Adjustment to Merger
Consideration. In order to preserve tax-free treatment of the receipt of
Deutsche Telekom shares by VoiceStream stockholders for U.S. federal income tax
purposes and to permit delivery of the requisite tax opinion pursuant to the
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Deutsche Telekom/VoiceStream merger agreement, the aggregate amount of cash paid
to all VoiceStream stockholders, including dissenters, cannot exceed
approximately 17% to 18% of the total value of all of the shares and cash
delivered by Deutsche Telekom to VoiceStream's stockholders. As a result, all
three types of elections are subject to a tax-related adjustment to reduce the
total amount of cash to be received in the Deutsche Telekom/VoiceStream merger
to the extent necessary to preserve this tax-free treatment. If such a
tax-related adjustment were necessary, the amount of cash you would have
received, after taking into account your election and any proration, will be
reduced and you will receive additional Deutsche Telekom shares instead
calculated as described below. Whether the tax-related adjustment will be made,
and the magnitude of the tax-related adjustment, if made, will be based on a
number of factors, including the trading price of Deutsche Telekom shares at the
time the Deutsche Telekom/VoiceStream merger is completed, the number of
VoiceStream shares outstanding at that time, the euro/dollar exchange rate
immediately before the completion of the Deutsche Telekom/VoiceStream merger and
the number of VoiceStream common shares for which dissenters' rights are
exercised. The amount of any tax-related adjustment would be determined by
VoiceStream after consultation with Deutsche Telekom, and may be conservatively
estimated to facilitate the delivery of the requisite tax opinion at the
completion of the Deutsche Telekom/VoiceStream merger.
Based on the facts described above, the tax-related adjustment generally
would be triggered if the trading price of the Deutsche Telekom ordinary shares
immediately prior to completion of the Deutsche Telekom/VoiceStream merger were
less than approximately $47.10, but could be triggered at higher trading prices.
IF THE DEUTSCHE TELEKOM/VOICESTREAM MERGER HAD CLOSED ON FEBRUARY 7, 2001,
AND NO DISSENTERS' RIGHTS HAD BEEN EXERCISED, WHICH MAY NOT BE THE CASE, THE
TAX-RELATED ADJUSTMENT WOULD HAVE BEEN NECESSARY AND, AS A RESULT, THE AMOUNT OF
CASH TO BE PAID TO EACH VOICESTREAM STOCKHOLDER RECEIVING CASH IN THE DEUTSCHE
TELEKOM/VOICESTREAM MERGER WOULD HAVE BEEN REDUCED BY APPROXIMATELY 29%, WITH
ADDITIONAL DEUTSCHE TELEKOM SHARES ISSUED IN SUBSTITUTION. The value of the
Deutsche Telekom shares issued in substitution will depend on the exchange rate
between the euro and the dollar at the relevant time, and upon the trading price
of Deutsche Telekom ordinary shares; HOWEVER, IF THE DEUTSCHE
TELEKOM/VOICESTREAM MERGER HAD CLOSED ON FEBRUARY 7, 2001, THE VALUE OF THE
DEUTSCHE TELEKOM SHARES ISSUED IN LIEU OF CASH WOULD HAVE BEEN APPROXIMATELY 1%
MORE THAN THE CASH THEY REPLACED FOR THE REASONS DESCRIBED BELOW. As a result,
if the Deutsche Telekom/VoiceStream merger had closed on February 7, 2001 and
the tax-related adjustment had been made on the assumptions described in this
paragraph, the mixed election would have been adjusted as follows:
NUMBER OF AMOUNT VALUE ON
MIXED ELECTION DT SHARES OF CASH FEBRUARY 7, 2001
-------------- --------- ------- ------------------
Unadjusted...................................... 3.2 $30.00 $128.59
Adjusted........................................ 3.4837 $21.36 $128.69
If the Deutsche Telekom/VoiceStream merger had been completed on February 7,
2001, the cash election, after giving effect to expected proration, likely would
have consisted of a mix of Deutsche Telekom shares and cash very close to or
equal to the mixed election.
Number of Deutsche Telekom Shares in Lieu of Cash Consideration. If a
tax-related adjustment is made, then, for purposes of determining the number of
Deutsche Telekom shares to which a holder is entitled in lieu of the amount by
which the cash portion of the Deutsche Telekom/VoiceStream merger consideration
is reduced, the price of Deutsche Telekom ordinary shares is calculated by
taking the volume weighted average trading price in euros of Deutsche Telekom
ordinary shares on the Frankfurt Stock Exchange on seven trading days randomly
selected from the 15 trading days immediately preceding the date the
determination is to be made, converted into U.S. dollars at a fixed exchange
rate of one euro to 0.9216 of a U.S. dollar. If this calculated average price
would otherwise be less than 33 euros, then 33 euros, and not the calculated
average price, will be used. If the calculated average price is less than 33
euros or if the euro depreciates from the fixed exchange rate of one euro to
0.9216 of a U.S. dollar, the aggregate market value of the Deutsche Telekom
shares that VoiceStream stockholders receive to
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compensate for the reduction in cash consideration generally would be less than
the amount by which the cash consideration was reduced to permit delivery of the
required tax opinion. As of February 7, 2001, the euro had appreciated from the
exchange rate of one euro to 0.9216 of a U.S. dollar fixed in the Deutsche
Telekom/VoiceStream merger agreement. See "Exchange Rates." Had the Deutsche
Telekom/ VoiceStream merger closed on February 7, 2001, the value of the
additional Deutsche Telekom shares substituted would have been more than the
amount of the cash reduction.
Example. If you own 100 VoiceStream common shares, made a mixed election
and therefore would have otherwise received $30 in cash per share as part of
your merger consideration, you would have received a total of $3,000 and 320
Deutsche Telekom shares, absent the tax-related adjustment. We could be required
to adjust the cash payment to permit delivery of the required tax opinion by
reducing it from $30. In the event the cash payment were reduced to $25, you
then would receive in lieu of the $500, or $5 per VoiceStream common share, that
number of Deutsche Telekom shares equal in value to $500 based on a calculated
average price of the Deutsche Telekom ordinary shares in euros on the Frankfurt
Stock Exchange during a measurement period close to the time the Deutsche
Telekom/VoiceStream merger is completed, converted into dollars at an exchange
rate of one euro to 0.9216 of a U.S. dollar, with cash paid in lieu of
fractional shares. However, if the calculated average price would otherwise be
33 euros or less, the price of a Deutsche Telekom ordinary share will be deemed
to be 33 euros for purposes of the calculation. In addition, the euro to dollar
exchange rate is fixed at one euro to 0.9216 of a U.S. dollar, even if the
exchange rate at the time of the merger is lower than 0.9216. In this example,
if the price of Deutsche Telekom shares is lower than 33 euros at the time of
the merger or if the exchange rate between the euro and U.S. dollar is lower
than the fixed one euro to 0.9216 of a U.S. dollar exchange rate at that time,
the value of Deutsche Telekom shares you receive generally would be less than
the $500 value of the cash tax-related adjustment.
FOR ILLUSTRATION OF THE APPROXIMATE TOTAL VALUE THAT YOU WOULD RECEIVE FOR
EACH OF YOUR VOICESTREAM COMMON SHARES ASSUMING VARIOUS PRICES OF DEUTSCHE
TELEKOM ORDINARY SHARES AT THE TIME THE DEUTSCHE TELEKOM/VOICESTREAM MERGER IS
COMPLETED, SEE THE ILLUSTRATIVE TABLE ON PAGE 4.
Other Potential Adjustments. The amount and form of the Deutsche
Telekom/VoiceStream merger consideration will be adjusted in the event that
before the completion of the Deutsche Telekom/ VoiceStream merger.
- a reclassification, split-up, stock-split, reverse stock-split, stock
dividend, stock combination, recapitalization, redenomination of share
capital, merger or similar transaction or an exchange offer causes a
change to the Deutsche Telekom ordinary shares outstanding, or the number
of Deutsche Telekom ordinary shares represented by a Deutsche Telekom ADS
is changed; or
- all of the outstanding Deutsche Telekom ordinary shares, or more than 80%
of the outstanding Deutsche Telekom ordinary shares pursuant to an
exchange offer for all outstanding Deutsche Telekom shares, are changed
into or exchanged for a different number or kind of shares of Deutsche
Telekom, or into shares of another entity owning more than 80% of the
Deutsche Telekom shares.
For example, if prior to completion of the Deutsche Telekom/VoiceStream
merger, Deutsche Telekom, in order to facilitate future acquisitions, were to
establish a new German holding company that acquired through an exchange offer
more than 80% of the outstanding Deutsche Telekom shares, holders of VoiceStream
common shares would receive shares of the new holding company instead of
Deutsche Telekom shares in the Deutsche Telekom/VoiceStream merger.
Treatment of Other Capital Stock, Warrants and Exchange Rights
2 1/2% Convertible Junior Preferred Shares. On December 21, 2000, a
subsidiary of Hutchison Whampoa Ltd. converted each 2 1/2% convertible junior
preferred share of VoiceStream, par value $0.001 per share, into VoiceStream
common shares, at the conversion rate of $29 per VoiceStream common share
according to the terms of that series of VoiceStream preferred shares.
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Omnipoint 7% Convertible Preferred Shares. At any time on or after May 1,
2001 until the Deutsche Telekom/VoiceStream merger is completed, Deutsche
Telekom may, subject to some restrictions, require VoiceStream to issue a notice
of redemption with respect to all the shares of 7% cumulative convertible
preferred shares, par value $0.001, of Omnipoint. The redemption price will be
the redemption price in effect on the redemption date, as provided by the terms
of that series of preferred shares. If all the 7% convertible preferred shares
have not been redeemed before the Deutsche Telekom/VoiceStream merger is
completed, holders will become entitled, upon conversion of the 7% convertible
preferred shares, to receive from Deutsche Telekom the merger consideration. Any
Deutsche Telekom ordinary shares to which the holders are entitled will be
issued by a special trust established for the benefit of the holders of the 7%
convertible preferred shares, and any cash payment to which the holders are
entitled will be paid by Deutsche Telekom.
Voting Preferred Shares Issued to Deutsche Telekom. The VoiceStream voting
preferred shares acquired by Deutsche Telekom under the investment agreements
described under "-- The Deutsche Telekom Investment Agreements" will remain
outstanding and will not be affected by the Deutsche Telekom/VoiceStream merger.
Omnipoint Warrants. If any of the warrants granted pursuant to the
Omnipoint remainder warrant certificate have not been exercised before the
Deutsche Telekom/VoiceStream merger is completed the holders of warrants will
become entitled, upon exercise of the warrants, to receive the merger
consideration and any Deutsche Telekom ordinary shares to which the warrant
holder becomes entitled will be issued from a special trust established for the
benefit of the warrant holders and any cash to which the warrant holder becomes
entitled will be paid by Deutsche Telekom. These warrants expire by their terms
on August 2, 2001.
Cook Inlet Exchange Rights. In December 2000, Cook Inlet Region, Inc. and
SSPCS Corporation received a total of 7,912,867 VoiceStream common shares as a
result of their or their affiliates' exchange of their interests in certain of
the Cook Inlet Joint Ventures or their affiliates for VoiceStream common shares.
In addition, Providence Media Partners, L.P., Providence Equity Partners
III, L.P. and Providence Equity Operating Partners III, L.P. have rights to
exchange their interests in affiliates of Cook Inlet VoiceStream PV/SS PCS L.P.
and Cook Inlet/VoiceStream PCS, LLC for VoiceStream common shares. To the extent
that any of the Providence entities have not received VoiceStream common shares
before the Deutsche Telekom/VoiceStream merger is completed in respect of their
exchange rights, those entities will be entitled, upon exchange of their
interests, to receive the consideration that they are entitled to receive
pursuant to their exchange rights.
Furthermore, VoiceStream and an affiliate of Cook Inlet Region, Inc. have
entered into an exchange rights agreement pursuant to which the affiliate of
Cook Inlet Region, Inc. has certain rights to exchange its membership interest
in Cook Inlet/VS GSM IV PCS Holdings, LLC for 382,657 VoiceStream common shares.
Deutsche Telekom will assume VoiceStream's obligations pursuant to this exchange
rights agreement upon completion of the Deutsche Telekom/VoiceStream merger. In
addition, VoiceStream and an affiliate of Cook Inlet Region, Inc. are currently
negotiating an agreement pursuant to which the parties anticipate that the
affiliate will have certain rights to exchange its membership interest in Cook
Inlet/VS GSM V PCS Holdings, LLC for cash or VoiceStream common shares at
VoiceStream's discretion, provided that if the Deutsche Telekom/VoiceStream
merger is completed prior to the exchange, the exchange will be for cash or
Deutsche Telekom securities at Deutsche Telekom's discretion.
To the extent that Cook Inlet Region, Inc., SSPCS or the Providence
entities are entitled to receive Deutsche Telekom shares on or after the date
the Deutsche Telekom/VoiceStream merger is completed, the Deutsche Telekom
shares will be delivered from a special trust established for the benefit of
such entities, and any cash to which such entities become entitled will be paid
by Deutsche Telekom.
The "Cook Inlet Joint Ventures" are Cook Inlet VoiceStream PV/SS PCS, L.P.,
Cook Inlet/VoiceStream PCS, LLC, Cook Inlet/VS GSM II PCS, LLC, Cook Inlet/VS
GSM III PCS, LLC,
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Cook Inlet/VS GSM IV PCS Holdings, LLC and Cook Inlet/VS GSM V PCS Holdings, LLC
and any entity or entities designated as such by Deutsche Telekom and
VoiceStream for purposes of the Deutsche Telekom/VoiceStream merger agreement.
Election and Exchange of Certificates Representing VoiceStream Common Shares
Deutsche Telekom will appoint an escrow agent to serve in connection with
the Deutsche Telekom/VoiceStream merger.
Deutsche Telekom and VoiceStream will use their reasonable best efforts to
mail to each registered holder of VoiceStream common shares, at least 45 days
before the Deutsche Telekom/VoiceStream merger is expected to be completed, an
election form with instructions for making the stock election or the cash
election or for receiving the mixed consideration, and a letter of transmittal
that the holder must properly complete and deliver to the escrow agent with the
holder's VoiceStream share certificates before the election deadline. Any
registered holder of VoiceStream common shares that fails to submit properly
completed election forms or to deliver share certificates before the election
deadline will be deemed to have made a mixed election and will automatically
receive $30 in cash and 3.2 Deutsche Telekom shares, subject to a tax-related
adjustment, when the holder delivers to the escrow agent the holder's
VoiceStream share certificates, together with a properly completed letter of
transmittal.
The election deadline will be five business days before the Deutsche
Telekom/VoiceStream merger is expected to be completed. Since the actual
election deadline is not yet known, Deutsche Telekom and VoiceStream will use
their best efforts to make a public announcement notifying VoiceStream
stockholders of the election deadline at least five business days before that
deadline. Any holder may revoke in writing that holder's previously submitted
election forms until the election deadline.
If you own VoiceStream common shares in "street name" through a bank,
broker or other financial institution and wish to make the stock or cash
election, you should seek advice from the financial institution concerning
making such election.
The escrow agent will exchange VoiceStream share certificates for American
depositary receipts representing Deutsche Telekom ADSs or, if a VoiceStream
stockholder properly elects, certificates representing Deutsche Telekom ordinary
shares. The election forms and the letter of transmittal mailed to VoiceStream
stockholders will contain an "ordinary share election" form that can be used by
a stockholder to elect to receive that stockholder's stock consideration in
Deutsche Telekom ordinary shares.
After a record holder of VoiceStream common shares delivers certificates
for those shares and a properly completed letter of transmittal to the escrow
agent, the escrow agent will deliver to that holder:
- the number of whole Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares included in the Deutsche Telekom/VoiceStream merger consideration
in respect of those VoiceStream common shares, subject to proration and a
tax-related adjustment; and
- a check in the amount, after giving effect to any required tax
withholdings, of:
-- any cash consideration payable to that holder; plus
-- cash in lieu of any fractional interest in Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares on the terms described below; plus
-- any cash dividends or other distributions that the holder has the
right to receive, including dividends or other distributions payable
with respect to the holders of Deutsche Telekom ADSs or Deutsche
Telekom ordinary shares with a record date after the completion of
the Deutsche Telekom/VoiceStream merger and a payment date on or
before the date the holder properly delivers VoiceStream share
certificates to the escrow agent.
The escrow agent will not deliver fractional Deutsche Telekom ADSs or
fractional Deutsche Telekom ordinary shares in connection with the Deutsche
Telekom/VoiceStream merger. Instead, each holder of VoiceStream common shares
exchanged in the Deutsche Telekom/VoiceStream merger that would
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otherwise have received a fraction of a Deutsche Telekom ADS or Deutsche Telekom
ordinary share will be entitled to receive a cash payment representing that
holder's proportionate interest in the net proceeds from the sale by the escrow
agent of the aggregate of the fractions of Deutsche Telekom ADSs and Deutsche
Telekom ordinary shares that would otherwise be issued on the NYSE and the
Frankfurt Stock Exchange, respectively. Deutsche Telekom will pay all
commissions, transfer taxes and out-of-pocket costs, including the expenses and
compensation of the escrow agent, incurred in connection with the sale of the
Deutsche Telekom ADSs and Deutsche Telekom ordinary shares.
VoiceStream common shares that are surrendered to the escrow agent will be
canceled. No interest will be paid or accrued on any amount payable to holders
of VoiceStream common shares. In addition, no holder of VoiceStream common
shares will receive any dividends or other distributions with respect to
Deutsche Telekom ADSs or Deutsche Telekom ordinary shares to which the holder is
entitled under the Deutsche Telekom/VoiceStream merger agreement until that
holder's VoiceStream share certificate is surrendered to the escrow agent with a
properly completed letter of transmittal.
If any Deutsche Telekom ADSs or Deutsche Telekom ordinary shares are to be
delivered to a person other than the registered holder of the VoiceStream common
shares represented by the VoiceStream share certificates surrendered to the
escrow agent:
- such VoiceStream share certificates must be properly endorsed or
otherwise be in proper form for transfer; and
- the person requesting delivery must pay to the escrow agent any transfer
or other taxes required as a result of delivery to a person other than
the registered holder, or establish, to the satisfaction of the escrow
agent, that the tax has been paid or is not payable.
Under the Deutsche Telekom/VoiceStream merger agreement, VoiceStream may
declare and pay before the completion of the Deutsche Telekom/VoiceStream merger
a stock dividend of 0.0075 of a VoiceStream common share for each VoiceStream
common share outstanding. If the payment of this dividend is made after the
election deadline, any VoiceStream common shares issued pursuant to this
dividend generally will be deemed to be subject to the same election as was made
by the holder with respect to a majority of the holder's VoiceStream common
shares. The conversion or exercise terms of VoiceStream's and its subsidiaries'
options, warrants, preferred securities or other rights or securities
convertible into VoiceStream common shares will be adjusted to reflect the
dividend in accordance with the terms of the documents governing those
securities.
Treatment of Options and Restricted Stock
VoiceStream Options. If the Deutsche Telekom/VoiceStream merger is
completed, each outstanding VoiceStream stock option will be converted into an
option to acquire, from a trust established for the benefit of holders of
VoiceStream stock options, 3.7647 Deutsche Telekom ordinary shares for each
VoiceStream common share subject to that VoiceStream option rounded if necessary
to the nearest whole Deutsche Telekom ordinary share. The exercise price per
Deutsche Telekom ordinary share for each of these options will be the exercise
price per VoiceStream common share applicable to that option before completion
of the Deutsche Telekom/VoiceStream merger divided by 3.7647. The replacement
options generally will have the same terms and conditions as were applicable
under VoiceStream option plans.
VoiceStream Restricted Shares. If the Deutsche Telekom/VoiceStream merger
is completed, each outstanding VoiceStream restricted share will be converted
into a right to receive, from a trust established for the benefit of holders of
VoiceStream restricted shares, 3.7647 Deutsche Telekom shares. The Deutsche
Telekom ordinary shares issued to the former holders of VoiceStream restricted
shares will have the same terms and conditions and be subject to the same
vesting provisions as were applicable under the VoiceStream restricted share
award plans.
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Dissenting Shares
If appraisal rights for any VoiceStream shares are perfected by any
stockholder, then those shares will be treated as described under "The Deutsche
Telekom/VoiceStream Merger -- Appraisal Rights."
Representations and Warranties
The Deutsche Telekom/VoiceStream merger agreement contains a number of
representations and warranties made by VoiceStream and Deutsche Telekom to each
other, including those regarding:
- due organization, good standing and qualification;
- capital structure;
- corporate authority to enter into the Deutsche Telekom/VoiceStream merger
agreement and lack of conflicts with corporate governance documents,
contracts or laws;
- governmental filings;
- accuracy of SEC reports, financial statements and information provided to
the other party;
- absence of certain material changes or events since December 31, 1999;
- absence of undisclosed liabilities and pending litigation;
- compliance with laws;
- permits and licenses;
- finders or brokers fees;
- tax matters, including the absence of facts inconsistent with the
qualification of the Deutsche Telekom/VoiceStream merger as a
reorganization under Section 368(a) of the U.S. tax code, or that would
cause a stockholder of VoiceStream to recognize gain pursuant to Section
367(a) of the U.S. tax code;
In addition, VoiceStream made representations and warranties to Deutsche
Telekom as to:
- employee benefit plans;
- labor matters;
- the receipt of a fairness opinion from a financial advisor; and
- intellectual property.
In addition, the Deutsche Telekom/VoiceStream merger agreement contains
representations and warranties made by merger subsidiary to VoiceStream
regarding some of the above matters.
Conduct of Business Pending the Deutsche Telekom/VoiceStream Merger
Covenants of VoiceStream. VoiceStream has agreed that, until the Deutsche
Telekom/VoiceStream merger is completed, it will carry on its and its
subsidiaries' business in the ordinary course. VoiceStream also has agreed that,
until the Deutsche Telekom/VoiceStream merger is completed, it will use
commercially reasonable efforts to preserve substantially intact its business
organizations, keep available the services of those of its officers, employees
and consultants who are integral to the business and maintain its existing
relations and goodwill with customers, suppliers and others with whom it does
business.
In addition, VoiceStream has agreed that before the Deutsche
Telekom/VoiceStream merger is completed it will not take the actions listed in
the Deutsche Telekom/VoiceStream merger agreement,
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which includes the following actions, without Deutsche Telekom's prior written
consent, except under limited circumstances specified in the Deutsche
Telekom/VoiceStream merger agreement:
- issue any new shares of capital stock or any options or other rights to
acquire those shares;
- split, combine or reclassify any of its outstanding capital shares;
- declare or pay dividends or distributions with respect to VoiceStream
common shares;
- redeem, purchase or otherwise acquire any shares of VoiceStream capital
stock;
- make capital expenditures in excess of the aggregate annual amount
contained in VoiceStream's business plan for the year 2000;
- incur material indebtedness;
- grant severance or termination pay, stay bonus, or other incentive
arrangements;
- except in the ordinary course of business, make any payments under any
VoiceStream employee benefit plans to any director or officer of, or
independent contractor or consultant to, VoiceStream or any of its
subsidiaries;
- enter into or amend any employment or consulting agreement of the type
that would require disclosure to Deutsche Telekom pursuant to the
representations VoiceStream made in the Deutsche Telekom/VoiceStream
merger agreement concerning employee benefits-related matters;
- grant new awards under an existing VoiceStream benefit plan, except in
the ordinary course of business, or grant new equity-based rights;
- file material amended tax returns or settle material tax audits or other
material tax proceedings;
- change in any respect its method of tax accounting or tax practice or its
accounting policies or modify any actuarial cost method or practice used
in determining costs and obligations for any VoiceStream benefit plans,
except as required by U.S. GAAP and except as would not have a material
adverse effect on VoiceStream;
- take any action that would materially impair or delay the obtaining of
the necessary regulatory approvals to complete the Deutsche
Telekom/VoiceStream merger;
- take any action that would:
-- prevent or impede the Deutsche Telekom/VoiceStream merger from
qualifying as a reorganization within the meaning of Section 368(a)
of the U.S. tax code; or
-- cause VoiceStream stockholders to recognize gain in the Deutsche
Telekom/VoiceStream merger under Section 367(a)(1) of the U.S. tax
code;
- take any action that would cause the VoiceStream common shares to cease
to be quoted on the Nasdaq Stock Market;
- except as may be required by the terms of any existing VoiceStream award
agreement, accelerate the vesting or payment of any equity or
equity-based award;
- materially increase the compensation payable to an officer or director;
- agree to enter into a merger or similar business combination as a result
of which VoiceStream stockholders will receive consideration in exchange
for their shares; and
- authorize or enter into a material joint venture or an agreement that has
a non-competition provision applicable to the business of VoiceStream or
its subsidiaries, other than agreements that do not affect VoiceStream's
business outside the United States and that are in the ordinary course,
consistent with past practice in respect of certain VoiceStream joint
ventures.
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Acquisitions by VoiceStream. VoiceStream generally has agreed that, until
the Deutsche Telekom/VoiceStream merger is completed, it and its subsidiaries
will not engage in an acquisition transaction, including any acquisitions of
additional FCC licenses or increase an investment in another entity, with three
significant exceptions:
- VoiceStream is permitted to swap or exchange any of its property for
similar property of substantially equivalent value, subject to specified
limitations;
- VoiceStream is permitted to make acquisitions of up to $750 million,
including assumptions of debt, without Deutsche Telekom's consent as long
as the consideration paid in any single acquisition does not exceed $500
million, including assumptions of debt, and does not include any
VoiceStream shares; and
- VoiceStream may make any other acquisition, and the acquisition may
include VoiceStream shares as part of the consideration paid, as long as
the acquisition is approved in advance by an acquisition committee
established under the Deutsche Telekom/VoiceStream merger agreement.
In addition, if VoiceStream chooses to participate in any auction of FCC
licenses or spectrum rights, VoiceStream and Deutsche Telekom have agreed to
cooperate in accordance with specific procedures to agree upon maximum amounts
that VoiceStream may bid in the auction. If the acquisition committee denies its
consent to an acquisition proposed by VoiceStream, or VoiceStream and the
acquisition committee fail to agree upon maximum bids for a license or spectrum
auction prior to the tenth business day preceding the scheduled auction date,
then the parties have agreed that any officer, director, stockholder or
affiliate of VoiceStream, or any combination of them, may make such acquisition
or participate in such auction for his, her, its or their own account.
Dispositions by VoiceStream. VoiceStream generally has agreed that, until
the Deutsche Telekom/VoiceStream merger is completed, it and its subsidiaries
will not sell or dispose of any of their assets, with three significant
exceptions:
- VoiceStream may swap or exchange any of its property for similar property
of substantially equivalent value, subject to specified limitations;
- VoiceStream may sell or dispose of assets in the ordinary course of
business consistent with past practice; and
- VoiceStream may sell or dispose of assets as may be required by law or
any governmental or regulatory authority as necessary to enable or
facilitate completion of the Deutsche Telekom/VoiceStream merger.
Covenants of Deutsche Telekom. Except as contemplated by the Deutsche
Telekom/VoiceStream merger agreement, Deutsche Telekom has agreed that, before
the Deutsche Telekom/VoiceStream merger is completed, Deutsche Telekom and its
subsidiaries will not take the actions listed in the Deutsche
Telekom/VoiceStream merger agreement, which includes the following actions,
without VoiceStream's prior written consent:
- except for the purpose of using or increasing Deutsche Telekom's
authorized capital or as necessary for the conduct of its business, amend
or propose to amend the memorandum and articles of association or
management board rules of procedure or other comparable organizational
document of Deutsche Telekom in any manner that would be adverse to
VoiceStream or its stockholders;
- declare or pay dividends payable in cash, stock, property or otherwise
with respect to Deutsche Telekom capital stock, except for regular annual
cash dividends in a manner consistent with past practice;
- repurchase, redeem or otherwise acquire any shares of its capital stock
or any securities convertible or exercisable for or into shares of its
capital stock, except for repurchases, redemptions or acquisitions not
exceeding 10% of the total number of Deutsche Telekom ordinary shares
outstanding;
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- reclassify, recapitalize, restructure or engage in a similar transaction
that results in the direct or indirect receipt by holders of Deutsche
Telekom ordinary shares of any assets, property or cash for Deutsche
Telekom ordinary shares;
- take action that would be reasonably likely to prevent or impede the
Deutsche Telekom/VoiceStream merger from qualifying as a reorganization
within the meaning of Section 368(a) of the U.S. tax code or cause
VoiceStream stockholders to recognize gain under Section 367(a)(1) of the
U.S. tax code in the Deutsche Telekom/VoiceStream merger; and
- take action that would materially impair or delay the obtaining of the
necessary regulatory approvals to complete the Deutsche
Telekom/VoiceStream merger.
- Important Exception: Deutsche Telekom may make acquisitions as long as
the acquisitions, individually or in the aggregate, are not reasonably
likely to prevent the completion of the Deutsche Telekom/VoiceStream
merger.
Offers for Alternative Transactions
VoiceStream has agreed not to, has agreed not to authorize its officers,
directors or employees to, and has agreed to use its reasonable efforts to cause
its advisors and representatives not to:
- solicit, initiate or knowingly encourage, or knowingly take any other
action designed to facilitate, any alternative transaction, which we
define below, to the Deutsche Telekom/VoiceStream merger; or
- participate in any substantive discussions or negotiations regarding any
alternative transaction to the Deutsche Telekom/VoiceStream merger.
However, if at any time before VoiceStream stockholders approve the
Deutsche Telekom/VoiceStream merger, VoiceStream receives an unsolicited
proposal for an alternative transaction, then VoiceStream may, after giving
Deutsche Telekom 48 hours advance notice:
- furnish information with respect to VoiceStream pursuant to a
confidentiality agreement substantially similar to the confidentiality
agreement in place between VoiceStream and Deutsche Telekom; and
- engage in discussions and negotiations with the persons that made such
proposal,
but only if:
- the VoiceStream board of directors has determined in good faith that
providing information to the third party or participating in negotiations
or discussions could be reasonably expected to result in a superior
proposal, which we define below, being made; and
- VoiceStream is not otherwise in breach of its obligations described above
not to solicit or engage in discussions regarding an alternative
transaction.
In the Deutsche Telekom/VoiceStream merger agreement, "alternative
transaction" means any of the following:
- a transaction or series of transactions in which any third party would
acquire, directly or indirectly, beneficial ownership of more than 20% of
the outstanding VoiceStream shares;
- any acquisition of or business combination with VoiceStream or any of its
significant subsidiaries by a merger or other business combination, other
than any transaction that would be permitted under the Deutsche
Telekom/VoiceStream merger agreement; or
- any transaction in which any third party would acquire, directly or
indirectly, control of assets of VoiceStream or any of its subsidiaries
for consideration equal to 20% or more of the fair market value of all of
the outstanding VoiceStream common shares.
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In the Deutsche Telekom/VoiceStream merger agreement, "superior proposal"
means any proposal made by a third party to enter into an alternative
transaction which the VoiceStream board of directors determines in its good
faith judgment to be more favorable to VoiceStream's stockholders than the
Deutsche Telekom/VoiceStream merger.
VoiceStream also has agreed to notify Deutsche Telekom promptly of any
request for information or of any proposal in connection with an alternative
transaction, including the material terms of the request or proposal and the
identity of the person making it, and VoiceStream has agreed to keep Deutsche
Telekom informed of the status of any alternative transaction. In addition,
VoiceStream agreed to cease any solicitations, discussions or negotiations that
existed at the time the Deutsche Telekom/VoiceStream merger agreement was
signed.
VoiceStream Board of Directors' Recommendation
The Deutsche Telekom/VoiceStream merger agreement requires the VoiceStream
board of directors:
- to recommend that the VoiceStream stockholders approve the Deutsche
Telekom/VoiceStream merger agreement;
- not to withdraw, modify or qualify, or to propose publicly to withdraw,
modify or qualify, its recommendation in a manner adverse to Deutsche
Telekom;
- not to approve or recommend, or to propose publicly to approve or
recommend, any alternative transaction; and
- not to cause VoiceStream to agree to engage in any alternative
transactions.
However, if the VoiceStream board of directors receives a superior proposal
before VoiceStream stockholders approve the Deutsche Telekom/VoiceStream merger,
the VoiceStream board of directors may inform VoiceStream stockholders that it
no longer recommends approval of the Deutsche Telekom/VoiceStream merger, if:
- VoiceStream sends Deutsche Telekom written notice that VoiceStream has
received a superior proposal, which notice describes the terms of the
superior proposal and identifies the proposer, and that VoiceStream
intends to change its recommendation regarding the Deutsche Telekom/
VoiceStream merger; and
- two business days have passed since Deutsche Telekom received the notice.
In addition, during those two business days, VoiceStream must give
Deutsche Telekom reasonable opportunity to make adjustments in the terms
of the Deutsche Telekom/VoiceStream merger agreement that would enable
the VoiceStream board of directors to maintain its recommendation to
approve the Deutsche Telekom/VoiceStream merger.
The Deutsche Telekom/VoiceStream merger agreement also permits VoiceStream
to comply with Rule 14d-9 or Rule 14e-2(a) under the Exchange Act or to make any
other disclosure to VoiceStream stockholders if, in the good faith judgment of
the VoiceStream board of directors, after receipt of advice from outside
counsel, failure to disclose would result in a reasonable likelihood that the
VoiceStream board of directors would breach its duties to VoiceStream
stockholders under applicable law.
Submission of Deutsche Telekom/VoiceStream Merger Agreement to Stockholder
Vote. The Deutsche Telekom/VoiceStream merger agreement requires VoiceStream to
submit the Deutsche Telekom/VoiceStream merger agreement to a stockholder vote
at the VoiceStream special meeting even if the VoiceStream board of directors no
longer recommends approval of the Deutsche Telekom/VoiceStream merger.
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Additional Agreements
The Deutsche Telekom/VoiceStream merger agreement contains a number of
other covenants and agreements by or between VoiceStream and Deutsche Telekom on
subjects, including:
- filing accurate financial statements with the SEC;
- notifying the other party of the occurrence of material facts, events or
circumstances;
- using reasonable best efforts to obtain necessary tax opinions and
representation letters; and
- using reasonable best efforts to cause the Deutsche Telekom/VoiceStream
merger to qualify as a reorganization within the meaning of Section
368(a) of the U.S. tax code and to avoid gain recognition to VoiceStream
shareholders in the Deutsche Telekom/VoiceStream merger under Section
367(a)(1) of the U.S. tax code.
In addition, Deutsche Telekom has agreed to take all steps necessary to
cause the new Deutsche Telekom ADSs and the Deutsche Telekom ordinary shares to
become listed on the Frankfurt Stock Exchange and the NYSE, respectively.
VoiceStream's Nominations to Deutsche Telekom Organizational Bodies
Deutsche Telekom has agreed that, after the Deutsche Telekom/VoiceStream
merger is completed, it will use all reasonable efforts to recommend to the
Deutsche Telekom shareholders and the Deutsche Telekom organizational bodies
that one current member of the Deutsche Telekom supervisory board be replaced by
a person nominated by VoiceStream. Deutsche Telekom has agreed that, after the
Deutsche Telekom/VoiceStream merger is completed, it will use all reasonable
efforts to cause its T-Mobile subsidiary to recommend to the shareholders and
organizational bodies of T-Mobile that one VoiceStream nominee be appointed or
elected to each of the T-Mobile management board, T-Mobile supervisory board and
the T-Mobile executive committee. It is currently contemplated that Mr. John W.
Stanton, the Chief Executive Officer of VoiceStream, would be the nominee
appointed to the T-Mobile International management board.
The VoiceStream nominees will be selected in consultation with Deutsche
Telekom and must be reasonably acceptable to Deutsche Telekom.
Efforts to Complete the Deutsche Telekom/VoiceStream Merger
VoiceStream and Deutsche Telekom have agreed:
- to take or cause to be taken all actions and to do or cause to be done
all things necessary, proper or advisable to complete the Deutsche
Telekom/VoiceStream merger and to permit the issuance of the Deutsche
Telekom/VoiceStream merger consideration under German law and the rules
of the Frankfurt Stock Exchange;
- to obtain in a timely manner all necessary consents, permits, approvals
or waivers from any governmental or regulatory authority which are
necessary for the completion of the Deutsche Telekom/VoiceStream merger;
- to promptly prepare and file all required notifications under U.S. and
European Union antitrust laws and to comply with any requests for
additional information, and obtain termination of any applicable waiting
periods or obtain any required approvals as promptly as practicable; and
- to take all actions within its control necessary to obtain any required
regulatory approvals (which the Deutsche Telekom/VoiceStream merger
agreement limits principally to any required FCC approval, antitrust
clearances and clearances under the Exon-Florio Defense Protection Act of
1956).
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Important Exception: Neither VoiceStream nor Deutsche Telekom is required
to take any of the actions described above that would result in a "burdensome
condition." The meaning of "burdensome condition" is explained under
"-- Important Definitions."
Indemnification and Insurance
For a period of six years after the Deutsche Telekom/VoiceStream merger is
completed, the surviving corporation of the Deutsche Telekom/VoiceStream merger
is required by the Deutsche Telekom/VoiceStream merger agreement to:
- maintain in effect the current arrangements regarding indemnification of
officers and directors of VoiceStream and each of its subsidiaries;
- indemnify the directors and officers of VoiceStream to the fullest extent
to which VoiceStream is permitted to indemnify those officers and
directors under its charter and bylaws and applicable law; and
- maintain VoiceStream's current policies of directors' and officers'
insurance with respect to claims arising from facts or events which
occurred on or before the completion of the Deutsche Telekom/VoiceStream
merger, except that the surviving corporation may substitute policies of
at least the same coverage and amounts.
However, during that six-year period, the surviving corporation is not
required to expend in any year an amount in excess of 250% of the annual
aggregate premiums currently paid by VoiceStream for such coverage. If the
aggregate expenditure on coverage exceeds that amount, Deutsche Telekom has
agreed that the surviving corporation will use its best efforts to obtain as
much insurance as can be obtained for that amount.
In addition, after the completion of the Deutsche Telekom/VoiceStream
merger both Deutsche Telekom and the surviving corporation will indemnify each
present and former director, officer, employee and agent of VoiceStream or any
of its subsidiaries against any costs or expenses arising prior to the
completion of the Deutsche Telekom/VoiceStream merger and will also pay each
indemnified party's out-of-pocket expenses incurred in connection with any
indemnifiable claim.
Employee Benefits
Following the completion of the Deutsche Telekom/VoiceStream merger,
Deutsche Telekom will cause the surviving corporation or its successor to honor
all VoiceStream employee benefit plans and compensation arrangements and
agreements in accordance with their terms as in effect immediately before the
Deutsche Telekom/VoiceStream merger is completed. In addition, Deutsche Telekom
has agreed that for a period of not less than two years following the completion
of the Deutsche Telekom/VoiceStream merger, the current and former employees of
VoiceStream and its subsidiaries will be provided with compensation, severance
and employee benefits that are not less favorable in the aggregate than those
provided to VoiceStream's employees immediately before the completion of the
Deutsche Telekom/ VoiceStream merger. Discretionary equity and equity-based
awards will remain discretionary.
Following the completion of the Deutsche Telekom/VoiceStream merger, each
current and former employee of VoiceStream and its subsidiaries will be
immediately eligible to participate in any new Deutsche Telekom employee benefit
plan, to the extent that such plan replaces coverage under a comparable
VoiceStream employee benefit plan or compensation agreement or arrangement in
which the employee participated immediately before the completion of the
Deutsche Telekom/VoiceStream merger. The Deutsche Telekom/VoiceStream merger
agreement also specifies the treatment of pre-existing conditions, deductibles
and service credit with respect to current and former employees of VoiceStream
under any benefit plans of Deutsche Telekom or its subsidiaries that any current
or former employees of VoiceStream participate in after completion of the
Deutsche Telekom/VoiceStream merger.
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Pursuant to the Deutsche Telekom/VoiceStream merger agreement, Deutsche
Telekom and VoiceStream have entered into a retention agreement pursuant to
which Deutsche Telekom has agreed that, in connection with the Deutsche
Telekom/VoiceStream merger, Deutsche Telekom will amend and convert the
VoiceStream Management Incentive Stock Option Plan to permit the issuance after
completion of the merger of options to purchase Deutsche Telekom ordinary shares
to management employees and key personnel of VoiceStream. In order to effectuate
the conversion, Deutsche Telekom will establish a trust and deliver to the trust
8 million Deutsche Telekom ordinary shares to be used to satisfy the obligations
upon exercise of any retention options. During the period from the date of
completion of the Deutsche Telekom/ VoiceStream merger through December 31,
2004, Deutsche Telekom will cause the trust to issue retention options to
management employees and key personnel of VoiceStream substantially on terms set
forth in the VoiceStream Management Incentive Stock Option Plan, as amended from
time to time by Deutsche Telekom.
Additionally, Deutsche Telekom and VoiceStream have agreed that VoiceStream
shall offer to 31 management personnel, who now hold, in the aggregate, unvested
options to acquire 574,368 VoiceStream common shares, and which options provide
for vesting upon a change of control of VoiceStream, which for a significant
portion of the options would occur upon approval by VoiceStream stockholders of
the Deutsche Telekom/VoiceStream merger, an opportunity to receive additional
options in an amount equal to, and on the same terms and conditions, including
exercise price, as, their existing unvested options if they agree to waive the
change of control vesting provisions of their existing options. If all such
persons accept the offer, options to acquire an aggregate of an additional
574,368 shares of VoiceStream common shares would be issued.
Prior to completion of the Deutsche Telekom/VoiceStream merger, VoiceStream
may implement a stay bonus plan for management, which is described under "The
Deutsche Telekom/VoiceStream Merger -- Interests of Directors and Officers of
VoiceStream in the Deutsche Telekom/VoiceStream Merger -- Stay Bonus Plan."
Closing Conditions
Conditions to Each Party's Obligations to Complete the Deutsche
Telekom/VoiceStream Merger. VoiceStream's and Deutsche Telekom's respective
obligations to complete the Deutsche Telekom/VoiceStream merger are subject to
the satisfaction or waiver of conditions, including the following:
- Stockholder Approval. The holders of a majority of the voting power of
the VoiceStream common shares and voting preferred shares, voting
together as a single class, having approved and adopted the Deutsche
Telekom/VoiceStream merger agreement.
- Legality. The absence of any law, order or injunction enacted or entered
by any governmental or regulatory authority having the effect of making
the Deutsche Telekom/VoiceStream merger illegal or otherwise prohibiting
the completion of the Deutsche Telekom/VoiceStream merger.
- Registration Statement Effective. No stop order suspending the
effectiveness of the Form F-4 registration statement or the proxy
statement/prospectus then being in effect and no proceedings for that
purpose then being threatened by the SEC or having been initiated by the
SEC and not being concluded or withdrawn.
- Stock Exchange Listings.
-- All steps necessary for the Deutsche Telekom ordinary shares that
will be issued in the Deutsche Telekom/VoiceStream merger to be
listed on the Frankfurt Stock Exchange having been taken; and
-- The Deutsche Telekom ADSs that will be issued in the Deutsche
Telekom/VoiceStream merger having been authorized for listing on the
NYSE, subject to official notice of issuance.
- Required Regulatory Approvals. Without subjecting VoiceStream or
Deutsche Telekom to any "burdensome condition" described under
"-- Important Definitions," all required regulatory
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approvals having been obtained and all applicable waiting periods having
expired, as described under "Regulatory Approvals -- Regulatory Approvals
Required for the Deutsche Telekom/VoiceStream Merger and the Deutsche
Telekom/Powertel Merger."
Additional Conditions to the Obligations of VoiceStream. The obligations
of VoiceStream to effect the Deutsche Telekom/VoiceStream merger are also
subject to the satisfaction, or waiver by VoiceStream, of conditions, including
the following:
- Representations and Warranties True and Correct.
-- Deutsche Telekom's representation that, since December 31, 1999,
there has not been any material adverse effect on Deutsche Telekom,
will have been true and correct when the Deutsche Telekom/VoiceStream
merger agreement was entered into and as of the date the Deutsche
Telekom/VoiceStream merger is completed; and
-- other representations and warranties of Deutsche Telekom and merger
subsidiary in the Deutsche Telekom/VoiceStream merger agreement
having been true and correct with respect to Deutsche Telekom, when
the Deutsche Telekom/VoiceStream merger agreement was entered into
and with respect to merger subsidiary when it was amended and
restated and with respect to Deutsche Telekom and merger subsidiary
as of the date the Deutsche Telekom/VoiceStream merger is completed,
except to the extent that any representation or warranty expressly
speaks as of an earlier date, in which case that representation or
warranty having been true and correct as of that date,
(a) except for inaccuracies caused by changes permitted by the
Deutsche Telekom/VoiceStream merger agreement; and
(b) except for such failures which in the aggregate would not
reasonably be expected to result in a material adverse effect on
Deutsche Telekom.
- Compliance with Covenants. Deutsche Telekom having complied in all
material respects with all its agreements and covenants required by the
Deutsche Telekom/VoiceStream merger agreement to be complied with by the
completion of the Deutsche Telekom/VoiceStream merger.
- Receipt of Tax Opinion. VoiceStream having received an opinion of Jones,
Day, Reavis & Pogue and/or Wachtell, Lipton, Rosen & Katz substantially
to the effect that for U.S. federal income tax purposes:
-- the Deutsche Telekom/VoiceStream merger will qualify as a
reorganization within the meaning of Section 368(a) of the U.S. tax
code; and
-- each transfer of property to Deutsche Telekom by a stockholder of
VoiceStream pursuant to the Deutsche Telekom/VoiceStream merger will
not be subject to Section 367(a)(1) of the U.S. tax code.
Additional Conditions to the Obligations of Deutsche Telekom. The
obligations of Deutsche Telekom to effect the Deutsche Telekom/VoiceStream
merger are also subject to the satisfaction, or waiver by Deutsche Telekom, of
conditions, including the following:
- Representations and Warranties True and Correct.
-- VoiceStream's representation that, since December 31, 1999, there has
not been any material adverse effect on VoiceStream having been true
and correct when the Deutsche Telekom/VoiceStream merger agreement
was entered into and as of the "bringdown date", which is the date,
at least five business days after the last closing condition has been
fulfilled or waived, on which VoiceStream delivers a certificate
relating to the accuracy of VoiceStream's representations and
warranties; and
-- other representations and warranties of VoiceStream in the Deutsche
Telekom/VoiceStream merger agreement having been true and correct
when the Deutsche Telekom/VoiceStream
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merger agreement was entered into and as of the bringdown date
(except to the extent that any representation or warranty expressly
speaks as of an earlier or a later date, in which case that
representation or warranty having been true and correct as of that
date)
(1) except for inaccuracies caused by changes permitted by the
Deutsche Telekom/VoiceStream merger agreement; and
(2) except for such failures which in the aggregate would not
reasonably be expected to result in a material adverse effect on
VoiceStream.
- Compliance with Covenants. VoiceStream having complied in all material
respects with all its agreements and covenants required by the Deutsche
Telekom/VoiceStream merger agreement to be complied with by the time the
Deutsche Telekom/VoiceStream merger is completed.
Waiver of Conditions. In the event VoiceStream waives a material condition
to the Deutsche Telekom/VoiceStream merger, VoiceStream will, if legally
required, resolicit approval of its stockholders.
Termination and Termination Fee
Right to Terminate. The Deutsche Telekom/VoiceStream merger agreement may
be terminated at any time before the completion of the Deutsche
Telekom/VoiceStream merger in any of the following ways:
- by mutual written consent;
- by either Deutsche Telekom and VoiceStream:
-- if the Deutsche Telekom/VoiceStream merger is permanently restrained,
enjoined or otherwise prohibited by a governmental order, decree,
ruling or other action, and the order, decree, ruling or other action
has become final and nonappealable;
-- if in connection with the grant of a requisite regulatory approval, a
burdensome condition is imposed and the ruling imposing the condition
has become final and nonappealable. The meaning of "burdensome
condition" is explained under "-- Important Definitions;"
-- at any time that is not less than 15 days after any statute, rule,
decree or injunction has been enacted, entered, promulgated or
enforced by any governmental or regulatory authority, other than a
court, that has the effect of making any of the conditions to closing
described under "-- Closing Conditions -- Conditions to Each Party's
Obligations to Complete the Deutsche Telekom/VoiceStream
Merger -- Legality" and "-- Closing Conditions -- Conditions to Each
Party's Obligations to Complete the Deutsche Telekom/VoiceStream
Merger -- Required Regulatory Approvals" incapable of being satisfied
by September 30, 2001, in the case of a termination by VoiceStream,
or December 31, 2001, in the case of a termination by Deutsche
Telekom; or
-- if VoiceStream's stockholders fail to approve the Deutsche
Telekom/VoiceStream merger at the VoiceStream special meeting.
- by VoiceStream:
-- if the Deutsche Telekom/VoiceStream merger is not completed by
September 30, 2001, unless VoiceStream's failure to fulfill its
obligations under the Deutsche Telekom/VoiceStream merger agreement
caused the delay, or if any of the conditions to VoiceStream's
obligation to complete the Deutsche Telekom/VoiceStream merger
becomes incapable of being satisfied before that date;
-- if Deutsche Telekom breaches or fails to perform any of its
representations or covenants in any material respect and the breach
or failure cannot be cured by Deutsche Telekom before September 30,
2001, or, if curable, is not cured by Deutsche Telekom within 30
days, and
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such breach renders any conditions to VoiceStream's obligations
incapable of being satisfied by September 30, 2001; or
-- on 48 hours notice to Deutsche Telekom, if the calculated average
price of Deutsche Telekom ordinary shares to be used in any
tax-related adjustment to the amount of the cash merger
consideration is less than 33 euros. The calculated average price of
Deutsche Telekom ordinary shares to be used in any tax-related
adjustment, if necessary, will be the average trading price of
Deutsche Telekom ordinary shares on the Frankfurt Stock Exchange on
seven trading days randomly selected from the 15 trading days
immediately preceding the date on which any tax-related adjustment
determination is to be made, as described under "-- Consideration to
Be Received in the Deutsche Telekom/VoiceStream Merger --
Explanation of Potential Tax-Related Adjustment to Merger
Consideration."
- by Deutsche Telekom:
-- if the Deutsche Telekom/VoiceStream merger is not completed by
December 31, 2001, unless Deutsche Telekom's failure to fulfill its
obligations under the Deutsche Telekom/VoiceStream merger agreement
caused the delay, or if any of the conditions to Deutsche Telekom's
obligation to complete the Deutsche Telekom/VoiceStream merger
becomes incapable of being satisfied before that date; or
-- if VoiceStream breaches or fails to perform any of its
representations or covenants in any material respect and the breach
or failure cannot be cured by VoiceStream before December 31, 2001,
or, if curable, is not cured by VoiceStream within 30 days, and such
breach renders any conditions to Deutsche Telekom's obligations
incapable of being satisfied by December 31, 2001.
Should any of these potential grounds for termination occur, VoiceStream's
board of directors may or may not exercise its right to terminate the Deutsche
Telekom/VoiceStream merger agreement.
- Termination Fees Payable to Deutsche Telekom. VoiceStream has agreed to
pay Deutsche Telekom a termination fee of $1 billion if all three of the
following events occur:
-- after July 23, 2000 and before the VoiceStream special meeting, a
proposal for certain types of alternative transactions is announced
or publicly disclosed and not withdrawn;
-- the Deutsche Telekom/VoiceStream merger agreement is terminated by
either party because VoiceStream's stockholders do not approve the
Deutsche Telekom/VoiceStream merger at the VoiceStream special
meeting; and
-- within six months after the termination of the Deutsche
Telekom/VoiceStream merger agreement, VoiceStream enters into a
definitive agreement with any third party with respect to certain
types of alternative transactions.
In that circumstance, VoiceStream would pay to Deutsche Telekom the
termination fee no later than one business day after the signing of the
definitive agreement with the third party.
For purposes of determining whether a termination fee is payable, the term
"alternative transaction" has the meaning described under "-- Offers for
Alternative Transactions," except that the 20% thresholds are treated as
references to "50%," and mergers or business combinations in which VoiceStream
stockholders would continue to hold at least 65% of the outstanding stock of the
entity surviving the transaction are not considered to be "alternative
transactions".
Expenses
Whether or not the Deutsche Telekom/VoiceStream merger is completed, all
costs and expenses incurred in connection with the Deutsche Telekom/VoiceStream
merger and the Deutsche Telekom/VoiceStream merger agreement transactions will
be paid by the party incurring the expense, except that Deutsche Telekom and
VoiceStream will share equally the costs and expenses of filing and printing the
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Form F-4 registration statement and this document. Deutsche Telekom, VoiceStream
and Powertel have each shared equally the costs and expenses of the filing fees
paid under the HSR Act.
Amendment; Waiver; Assignment
VoiceStream, Deutsche Telekom and merger subsidiary may amend the Deutsche
Telekom/VoiceStream merger agreement by written agreement prior to completion of
the Deutsche Telekom/VoiceStream merger, but after VoiceStream's stockholders
have approved the Deutsche Telekom/VoiceStream merger agreement, no amendment
may be made which by law requires further stockholder approval without such
approval being obtained.
At any time before the Deutsche Telekom/VoiceStream merger is completed,
VoiceStream, Deutsche Telekom and merger subsidiary may:
- extend the time for the performance of any of the obligations or other
acts of the others; and
- waive any inaccuracies in the representations and warranties or
compliance with any of the agreements or conditions, contained in the
Deutsche Telekom/VoiceStream merger agreement or in any document
delivered under the Deutsche Telekom/VoiceStream merger agreement.
Deutsche Telekom, VoiceStream and merger subsidiary may not assign the
Deutsche Telekom/VoiceStream merger agreement or any of the rights, interests or
obligations under the Deutsche Telekom/VoiceStream merger agreement, in whole or
in part, to any other person, without the prior written consent of the
non-assigning party; except that:
- Deutsche Telekom may assign the Deutsche Telekom/VoiceStream merger
agreement to a corporation which owns more than 80% of the Deutsche
Telekom ordinary shares and which succeeds to all of the rights and
obligations of Deutsche Telekom under the Escrow Agency Agreement
executed pursuant to the Deutsche Telekom/VoiceStream merger agreement;
and
- merger subsidiary may assign the agreement to an entity which is a
direct, wholly-owned subsidiary of the entity to which Deutsche Telekom
assigned the Deutsche Telekom/VoiceStream merger agreement pursuant to
the immediately preceding clause.
Important Definitions
Burdensome Condition. As used in the Deutsche Telekom/VoiceStream merger
agreement, "burdensome condition" is a condition that, individually or together
with other conditions, would reasonably be expected to have a material adverse
effect on Deutsche Telekom or its mobile telecommunications business, in each
case assuming that the Deutsche Telekom/VoiceStream merger had been completed
and VoiceStream had become a part of Deutsche Telekom or its mobile
telecommunications business, and assuming that any other acquisition in the
mobile telecommunication industry entered into or completed by Deutsche Telekom
after July 23, 2000 had been completed.
Material Adverse Effect. As used in the Deutsche Telekom/VoiceStream
merger agreement, a "material adverse effect" on any company means any change in
or effect on the business of the company and its subsidiaries that is or is
reasonably likely to be materially adverse to the business, operations or
financial condition of the company and its subsidiaries, taken as a whole.
However, "material adverse effect" does not include the effects of changes
or developments:
- in the telecommunications industry, including regulatory and political
conditions, that do not uniquely relate to Deutsche Telekom or
VoiceStream;
- in the U.S. or European economy;
- in the U.S. or European securities markets; or
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- resulting from the announcement or the existence of the Deutsche
Telekom/VoiceStream merger agreement and the transactions contemplated by
the Deutsche Telekom/VoiceStream merger agreement.
Only for purposes of the definition of "material adverse effect", some of
VoiceStream's joint ventures are treated as subsidiaries of VoiceStream.
Amendment and Restatement
The Deutsche Telekom/VoiceStream merger agreement was originally entered
into between Deutsche Telekom and VoiceStream on July 23, 2000. On September 28,
2000, the Deutsche Telekom/VoiceStream merger agreement was amended and restated
primarily for the purpose of making merger subsidiary a party to the agreement
and other technical changes.
On February 8, 2001 the Deutsche Telekom/VoiceStream merger agreement was
further amended and restated primarily for the purpose of permitting VoiceStream
to pay a stock dividend of up to 0.0075 of a VoiceStream common share for each
VoiceStream common share outstanding prior to the completion of the Deutsche
Telekom/VoiceStream merger and to provide that the earliest date that the
Deutsche Telekom/VoiceStream merger will be completed is May 31, 2001. This
amendment also provided that if all of the conditions to completion of the
merger are satisfied or waived as of a date that is earlier than May 31, 2001,
including the condition that no material adverse effect on VoiceStream shall
have occurred, then after that earlier date Deutsche Telekom will no longer have
the ability to terminate the Deutsche Telekom/VoiceStream merger agreement
because of any material adverse effect on, or any material inaccuracy in, a
representation or warranty of VoiceStream.
DEUTSCHE TELEKOM'S AGREEMENTS WITH STOCKHOLDERS OF VOICESTREAM
In connection with the execution of the Deutsche Telekom/VoiceStream merger
agreement, VoiceStream stockholders who, in the aggregate, had sufficient voting
power as of the VoiceStream record date to approve the Deutsche
Telekom/VoiceStream merger entered into separate agreements with Deutsche
Telekom under which the stockholders agreed to vote all of their VoiceStream
shares in favor of the Deutsche Telekom/VoiceStream merger. We summarize the
material terms of these agreements below, and this summary is qualified in its
entirety by reference to the text of the agreements summarized, copies of which
have been filed as exhibits to Deutsche Telekom's and VoiceStream's respective
registration statements and are incorporated herein by reference.
The following stockholders and some of their affiliates have entered into
stockholder agreements with Deutsche Telekom in connection with the Deutsche
Telekom/VoiceStream merger:
Telephone and Data Systems, Inc.
Hutchison Whampoa Ltd.
Sonera Corporation
John W. Stanton
The Goldman Sachs Group, Inc.
Richard Fields and Allen & Company, Incorporated
Douglas G. Smith and Avance Capital
Madison Dearborn Capital Partners, LP
Agreement to Vote
The agreements with Telephone & Data Systems, Inc., Hutchison Whampoa Ltd.,
Sonera Corporation, John W. Stanton and Goldman Sachs & Co. obligate each of
them to vote all its shares in favor of the Deutsche Telekom/VoiceStream merger
and the Deutsche Telekom/VoiceStream merger
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agreement and to vote all of its shares against any alternative transaction, as
defined in the Deutsche Telekom/VoiceStream merger agreement and as discussed
under "-- The Deutsche Telekom/ VoiceStream Merger Agreement -- Offers for
Alternative Transactions," or the liquidation or winding up of VoiceStream. Each
stockholder's obligation to vote in this manner applies whether or not the
VoiceStream board of directors continues to recommend the Deutsche
Telekom/VoiceStream merger to VoiceStream stockholders.
Transfer Restrictions and Waiver of Rights
Each of the stockholder agreements restricts or limits the ability of the
stockholder that is a party to the agreement to sell, transfer, assign or
otherwise dispose of VoiceStream common stock or, until six months after
completion of the Deutsche Telekom/VoiceStream merger, Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares, except with Deutsche Telekom's written consent
or as expressly permitted by the stockholder agreement or pursuant to the
Deutsche Telekom/VoiceStream merger agreement. In that regard, the stockholder
agreements provide that:
- unless the Deutsche Telekom/VoiceStream merger agreement has been
terminated, until the later of January 1, 2001 and the date of the
VoiceStream special meeting, the stockholder may not sell, transfer,
pledge, assign or otherwise dispose of, any VoiceStream shares or rights
that are subject to the agreement;
- from the later of January 1, 2001 and the date of the VoiceStream special
meeting, until the earlier of the completion of the Deutsche
Telekom/VoiceStream merger or the termination of the Deutsche
Telekom/VoiceStream merger agreement, the stockholder may sell or
transfer up to an aggregate of 17.5% of the number of VoiceStream common
shares that are subject to the agreement. This percentage increases to
21.25% on August 1, 2001 and to 25% on September 1, 2001 if the Deutsche
Telekom/VoiceStream merger is not completed by those dates;
- from the completion of the Deutsche Telekom/VoiceStream merger through
and including the three-month anniversary of the completion of the
Deutsche Telekom/VoiceStream merger, the stockholder may not sell or
transfer any Deutsche Telekom ADSs, Deutsche Telekom ordinary shares or
securities convertible into Deutsche Telekom ADSs or Deutsche Telekom
ordinary shares that are subject to the agreement;
- from the day following the three month anniversary of the completion of
the Deutsche Telekom/VoiceStream merger, through and including the six
month anniversary of the completion of the Deutsche Telekom/VoiceStream
merger, the stockholder may sell or transfer up to an aggregate of 40% of
the total number of Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares that is subject to the agreement, as calculated pursuant to the
stockholder agreements; and
- after the six month anniversary of the completion of the Deutsche
Telekom/VoiceStream merger, all sale and transfer restrictions end.
Deutsche Telekom reserves the right to waive the transfer restrictions described
above at any time or from time to time.
Each stockholder agreed to waive, until the earlier of the completion of
the Deutsche Telekom/VoiceStream merger or termination of the Deutsche
Telekom/VoiceStream merger agreement, any preemptive rights. In addition, each
stockholder, other than Richard Fields and Allen & Company Incorporated, agreed
to waive any registration rights until the earlier of:
- the later of January 1, 2001 and the date of the VoiceStream special
meeting; and
- the termination of the Deutsche Telekom/VoiceStream merger agreement.
Mr. Fields and Allen & Company Incorporated agreed not to exercise their
registration rights during a specified period of time. In November 2000
VoiceStream filed a registration statement covering the VoiceStream common
shares to be delivered in connection with VoiceStream warrants held by Allen &
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Company. Each stockholder also agreed to terminate any of its existing
registration rights agreements with VoiceStream effective at the completion of
the Deutsche Telekom/VoiceStream merger.
In some circumstances, if Deutsche Telekom acquires any other company for
consideration in excess of $15 billion and significant stockholders of the
acquired company enter into agreements with Deutsche Telekom, or could
reasonably be expected to enter into agreements with Deutsche Telekom, that are
more favorable to those stockholders in terms of the obligations to vote in
favor of the related transaction or to refrain from selling or transferring
shares, the transfer restrictions in the stockholder agreements will be modified
to reflect the more favorable provisions or absence of restrictions, as the case
may be.
Registration Rights
If the existing majority shareholders of Deutsche Telekom -- the Federal
Republic of Germany and KfW -- elect to conduct a registered secondary offering
of their Deutsche Telekom shares during the period from the completion of the
Deutsche Telekom/VoiceStream merger through the first anniversary of the
completion of the Deutsche Telekom/VoiceStream merger, Deutsche Telekom agrees
to use its reasonable best efforts to obtain the agreement of the existing
majority shareholders to include in such registered offering the maximum amount
of Deutsche Telekom shares acquired in the Deutsche Telekom/VoiceStream merger
by the VoiceStream stockholders who have entered into stockholder agreements
with Deutsche Telekom. Deutsche Telekom's existing majority shareholders would
have the right to determine the number of Deutsche Telekom shares of these
VoiceStream stockholders which may be included in such secondary offering
without adversely affecting such secondary offering, on such terms and
conditions as the existing majority shareholders determine are appropriate.
Termination
Each of the stockholder agreements will terminate, except with respect to
the transfer restrictions, which will terminate as set forth above, and the
agreement to vote, which will terminate upon the earlier of the completion or
termination of the Deutsche Telekom/VoiceStream merger agreement, upon the
earliest to occur of:
- the completion of the Deutsche Telekom/VoiceStream merger;
- the termination of the Deutsche Telekom/VoiceStream merger agreement; and
- July 23, 2002.
No Solicitation
Each of the stockholders agreed not to initiate or participate in, and not
to authorize any representatives to initiate or participate in, discussions or
negotiations regarding transactions or business combinations between VoiceStream
and a company other than Deutsche Telekom, except as otherwise permitted by the
Deutsche Telekom/VoiceStream merger agreement. See "-- The Deutsche
Telekom/VoiceStream Merger Agreement -- Offers for Alternative Transactions."
The Agreements with Telephone & Data Systems, Inc.
Telephone & Data Systems, Inc. and Deutsche Telekom entered into a
stockholder agreement containing the general provisions described above and two
letter agreements. In addition, the parties agreed in a letter agreement dated
July 23, 2000 that, in the event that the board of directors of Telephone & Data
Systems determines that Telephone & Data Systems is subject to the regulations
of the Investment Company Act of 1940 and Telephone & Data Systems is
unsuccessful in obtaining an exemption from such regulations or is not eligible
for an exemption, the restrictions on Telephone & Data Systems' right to
transfer VoiceStream common shares will be modified to allow it to sell a
minimum number of VoiceStream common shares that would allow Telephone & Data
Systems, with a reasonable margin of safety, to avoid being characterized as an
"investment company" under the Investment Company Act of 1940.
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Moreover, in a letter agreement dated September 19, 2000, Telephone & Data
Systems and Deutsche Telekom agreed to procedures concerning Deutsche Telekom's
delivery of the consideration to be paid to VoiceStream stockholders in the
Deutsche Telekom/VoiceStream merger. Deutsche Telekom agreed to take all action
reasonably possible to expedite the steps necessary to issue the Deutsche
Telekom ordinary shares in the Deutsche Telekom/VoiceStream merger and list
those Deutsche Telekom shares on the Frankfurt Stock Exchange on or promptly
after the completion of the Deutsche Telekom/VoiceStream merger. Deutsche
Telekom further agreed to use its reasonable best efforts to deliver the cash
portion of the merger consideration to the escrow agent prior to or immediately
after the completion of the Deutsche Telekom/VoiceStream merger in immediately
available funds and to cause the escrow agent to release the aggregate cash
consideration payable in the Deutsche Telekom/VoiceStream merger, including the
cash payable to Telephone & Data Systems, promptly upon the registration of the
increase of Deutsche Telekom share capital. If possible, Deutsche Telekom will
cause the cash consideration to be released on the date the Deutsche
Telekom/VoiceStream merger is completed or, if this is not possible, as promptly
as possible thereafter. Deutsche Telekom also agreed to instruct the escrow
agent to release the share certificates for Deutsche Telekom ADSs and Deutsche
Telekom ordinary shares to be issued in the Deutsche Telekom/VoiceStream merger
no later than one business day after registration of the Deutsche Telekom
capital increase. In addition, Deutsche Telekom agreed to use its reasonable
best effects to cause the escrow agent to deliver such certificates to Telephone
& Data Systems.
On December 27, 2000, TDS transferred all of its VoiceStream common shares
to TDSI Corporation, a Delaware corporation and wholly-owned subsidiary of TDS.
In connection with this transfer, TDS assigned to TDSI and TDSI assumed the
stockholder agreement and the two letter agreements described above.
THE DEUTSCHE TELEKOM INVESTMENT AGREEMENTS
In connection with the Deutsche Telekom/VoiceStream merger agreement,
Deutsche Telekom agreed to purchase 3,906,250 shares of a new class of voting
preferred shares of VoiceStream for an aggregate purchase price of $5 billion.
This purchase was completed on September 6, 2000. We summarize below the
material terms of the new class of voting preferred shares and the agreements
entered into in connection with the issuance and sale of those shares. The
following summary is qualified in its entirety by reference to the full text of
the agreements summarized, copies of which have been filed as exhibits to
Deutsche Telekom's and VoiceStream's respective registration statements and are
incorporated herein by reference.
VoiceStream Voting Preferred Shares
On July 23, 2000, the VoiceStream board of directors authorized the
creation of a class of shares designated "Convertible Voting Preferred Stock,"
par value $0.001 per share, consisting of up to 3,906,250 shares, all of which
were issued to Deutsche Telekom under the stock subscription agreement, dated
July 23, 2000. See "-- Stock Subscription Agreement."
Liquidation Preference. In the event of a liquidation or dissolution of
VoiceStream, holders of shares of VoiceStream voting preferred shares will be
entitled to a liquidation preference of $1,280 per share, subject to adjustment
for stock splits or other comparable transactions with respect to the
VoiceStream voting preferred shares, before any distribution may be made to the
holders of VoiceStream common shares or junior preferred shares.
Conversion. The VoiceStream voting preferred shares are not convertible
unless the Deutsche Telekom/VoiceStream merger agreement is terminated. If the
Deutsche Telekom/VoiceStream merger agreement is terminated, each VoiceStream
voting preferred share will become convertible into the number of VoiceStream
common shares equal to the aggregate liquidation preference of the VoiceStream
voting preferred shares to be converted, divided by $160 per share, subject to
adjustment for stock splits or other comparable transactions with respect to the
VoiceStream voting preferred shares. Assuming no adjustment in the $1,280
liquidation preference or $160 purchase price, each VoiceStream voting preferred
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share will therefore be convertible into eight VoiceStream common shares or an
aggregate of 31,250,000 VoiceStream common shares.
Voting Rights. Holders of the VoiceStream voting preferred shares are
entitled to vote together with holders of VoiceStream common shares and not as a
separate class. Each VoiceStream voting preferred share is entitled to one vote.
The affirmative vote of the holders of a majority of the outstanding VoiceStream
voting preferred shares is necessary to adopt any amendment that will change the
powers, preferences or rights of the voting preferred shares.
Dividends. The holders of the VoiceStream voting preferred shares are
entitled to receive dividends and other distributions made by VoiceStream on its
capital stock to the same extent and at the same rate as dividends or
distributions made in respect of VoiceStream common shares, on an
as-converted-to-common shares basis.
Redemption at Option of VoiceStream. VoiceStream may redeem the
VoiceStream voting preferred shares at any time on or after December 31, 2020 at
a price of $1,280 per share, subject to adjustment for stock splits or other
comparable transactions with respect to the VoiceStream voting preferred shares.
However, VoiceStream will not be permitted to redeem the VoiceStream voting
preferred shares if VoiceStream is insolvent, will be rendered insolvent by the
redemption, or is prohibited by law or agreement from redeeming the VoiceStream
voting preferred shares.
Redemption at Option of Holder. Any holder of VoiceStream voting preferred
shares may require VoiceStream to redeem all of the VoiceStream voting preferred
shares owned by the holder at any time within the six months following December
31, 2030 at a price of $1,280 per share, subject to adjustment for stock splits
or other comparable transactions with respect to the VoiceStream voting
preferred shares. However, VoiceStream will not be permitted to redeem the
VoiceStream voting preferred shares if VoiceStream is insolvent, will be
rendered insolvent by the redemption, or is prohibited by law or agreement from
redeeming the VoiceStream voting preferred shares.
Transfer Restriction. Unless the Deutsche Telekom/VoiceStream merger
agreement is terminated, VoiceStream voting preferred shares are only
transferable to a controlled subsidiary of the holder.
Rank. This new class of voting preferred shares will, with respect to
rights on liquidation or dissolution, rank senior to VoiceStream's common shares
and the 2 1/2% convertible junior preferred shares and junior to any series or
class of VoiceStream's preferred shares.
Stock Subscription Agreement
The stock subscription agreement provides that, for so long as Deutsche
Telekom owns any of the VoiceStream voting preferred shares, Deutsche Telekom
agrees that if it takes any action which would cause VoiceStream to exceed the
broadband Commercial Mobile Radio Service spectrum aggregation limits under U.S.
federal communications laws, it will take appropriate remedial action, including
causing its designee, if it has one, to resign from the VoiceStream board of
directors and/or disposing of shares of VoiceStream common shares or voting
preferred shares.
Investor Agreement
In connection with Deutsche Telekom's agreement to purchase VoiceStream
voting preferred stock, VoiceStream and Deutsche Telekom have entered into an
Investor Agreement, dated as of July 23, 2000, which became effective on
September 6, 2000, when Deutsche Telekom first purchased such shares.
Standstill. Under the investor agreement, unless a standstill termination
event, which is described below, has occurred, until the fifth anniversary of
the investor agreement, Deutsche Telekom and its affiliates may not do the
following, subject to certain exceptions described below:
- acquire or agree to acquire any VoiceStream voting securities which would
increase Deutsche Telekom's voting power above the threshold percentage
described below;
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- solicit proxies with respect to the VoiceStream voting securities or
become a participant in any election contest relating to the election of
directors of VoiceStream; or
- act in concert with any person for the purpose of effecting a transaction
which would result in a change of control of VoiceStream.
The standstill provisions described above do not apply to the Deutsche
Telekom/VoiceStream merger and do not apply in the following specific
circumstances:
- if any person acquires or makes a bona fide offer to acquire voting
securities of VoiceStream which, when added to the number of voting
securities already owned by such person, exceeds or would exceed the
threshold percentage; or
- if Deutsche Telekom makes a tender offer for, or acquires, VoiceStream
voting securities, with the approval of a majority of the directors of
VoiceStream who are not Deutsche Telekom designees.
"Standstill termination event" means the date on which the first of the
following occurs:
- Deutsche Telekom and its affiliates beneficially own less than 5% or more
than 90% of the outstanding voting securities of VoiceStream; or
- the acquisition, by a party other than Deutsche Telekom or its
affiliates, of more than 50% of the VoiceStream voting securities, a sale
of substantially all the assets of VoiceStream or the liquidation or
dissolution of VoiceStream.
"Threshold percentage" means, subject to adjustment:
- 33% from the date of the investor agreement until the second anniversary
of the closing of the subscription agreement;
- 36% from the second anniversary of the closing of the subscription
agreement until the third anniversary of the closing of the subscription
agreement; and
- 40% from the third anniversary of the closing of the subscription
agreement until the fifth anniversary of the closing of the subscription
agreement.
Transfer Restrictions. Unless the Deutsche Telekom/VoiceStream merger
agreement is terminated before the Deutsche Telekom/VoiceStream merger is
completed, Deutsche Telekom and its affiliates may not transfer any VoiceStream
voting preferred shares. Deutsche Telekom may sell or transfer any VoiceStream
common shares it owns, including shares acquired on conversion of voting
preferred shares, as follows:
- Deutsche Telekom may transfer its VoiceStream common shares, but not its
rights and obligations under the investor agreement, to any buyer or
transferee; or
- Deutsche Telekom may transfer its VoiceStream common shares together with
its rights and obligations under the investor agreement to any transferee
that is more than 40% owned by Deutsche Telekom, of which Deutsche
Telekom and its affiliates are the largest shareholder and which agrees
to be bound by the investor agreement, or to any other transferee if a
majority of the directors of VoiceStream who are not Deutsche Telekom
designees approve the transfer.
Partial Pre-emptive Rights. If VoiceStream proposes to issue any voting
equity securities, Deutsche Telekom will have the right to purchase a portion of
those securities up to the percentage, calculated on a fully diluted basis, of
VoiceStream common shares owned by Deutsche Telekom at the time of the proposed
offering, on the terms and conditions VoiceStream proposes to offer those
securities to other persons. Deutsche Telekom's preemptive rights do not apply
to an issuance of equity securities by VoiceStream in connection with a stock
dividend, merger, employee stock option or public offering.
Registration Rights. VoiceStream has granted registration rights to
Deutsche Telekom with respect to any VoiceStream common shares Deutsche Telekom
acquires on conversion of the VoiceStream voting preferred shares or otherwise.
If the Deutsche Telekom/VoiceStream merger agreement is terminated, then
beginning 45 days after termination Deutsche Telekom will have the right to
demand registration of
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its shares on up to eight occasions as long as each occasion relates to
registration of shares having a minimum aggregate sales price of $25 million.
Deutsche Telekom may make no more than two demands in any 12-month period.
Deutsche Telekom also has the right to an unlimited number of piggyback
registrations, subject to customary cutback provisions.
FIRST AMENDED AND RESTATED VOTING AGREEMENT
The principal stockholders of VoiceStream are parties to an existing
agreement which governs their voting of VoiceStream securities. In connection
with Deutsche Telekom's agreement to purchase VoiceStream voting preferred
shares, the parties to the existing voting agreement and Deutsche Telekom
entered into the First Amended and Restated Voting Agreement, dated as of July
23, 2000. On December 27, 2000, TDS assigned to TDSI, its wholly-owned
subsidiary, and TDSI assumed, the existing voting agreement and the amended
voting agreement. The amended voting agreement will become effective if Deutsche
Telekom converts all of its VoiceStream voting preferred shares into VoiceStream
common shares, which can only happen if the Deutsche Telekom/VoiceStream merger
agreement is terminated. We summarize the material terms of the amended voting
agreement below, and this summary is qualified in its entirety by reference to
the text of the agreement, a copy of which has been filed as an exhibit to
Deutsche Telekom's and VoiceStream's respective registration statements and is
incorporated herein by reference.
The amended voting agreement will provide that the parties will agree to
vote their VoiceStream common shares for the election of a VoiceStream board of
directors consisting of 19 members, subject to adjustments, designated as
follows:
(1) Mr. Stanton, as long as he is the chief executive officer of
VoiceStream;
(2) One member designated by Mr. Stanton, so long as he, or entities
affiliated with him, beneficially owns at least 4,500,000 VoiceStream
common shares;
(3) Four members designated by Hutchison PCS (USA) and its affiliated
entities, which may be increased or decreased depending upon increases
or reductions in Hutchison PCS (USA)'s percentage ownership of
outstanding VoiceStream common shares, including VoiceStream common
shares issuable to Hutchison PCS (USA) upon conversion of
VoiceStream's 2.5% convertible junior preferred shares;
(4) One member designated by The Goldman Sachs Group, Inc. and its
affiliated entities, so long as the Goldman Sachs entities
beneficially own at least 4,500,000 VoiceStream common shares;
(5) Four members who were members of the Omnipoint board of directors
prior to VoiceStream's acquisition of Omnipoint and who were selected
by Omnipoint to serve during the period from the completion of the
Omnipoint acquisition until the second annual meeting of stockholders
of VoiceStream following the completion of VoiceStream's acquisition
of Omnipoint. Omnipoint has designated the following persons to serve
as directors: Douglas G. Smith, Richard L. Fields, James N. Perry, Jr.
and James J. Ross;
(6) One member designated by Sonera Corporation and its affiliated
entities, subject to the approval of VoiceStream, which approval may
not be unreasonably withheld, so long as Sonera Corporation entities
beneficially own at least 4,500,000 VoiceStream common shares. If
Sonera Corporation beneficially owns more than 9,800,000 VoiceStream
common shares and Telephone & Data Systems beneficially owns less than
4,500,000 VoiceStream common shares, Sonera Corporation will be
entitled to designate two directors;
(7) One member designated by Telephone & Data Systems and its affiliated
entities who is not affiliated with Telephone & Data Systems, subject
to the approval of VoiceStream, which approval may not be unreasonably
withheld, so long as the Telephone & Data Systems entities
beneficially own at least 4,500,000 VoiceStream common shares. If
Telephone & Data Systems beneficially owns more than 9,800,000
VoiceStream common shares and Sonera Corporation beneficially owns
less than 4,500,000 VoiceStream common shares, Telephone & Data
Systems will be entitled to designate two directors;
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(8) Two members designated by Deutsche Telekom and its affiliated
entities, subject to the approval of VoiceStream, which approval may
not be unreasonably withheld, so long as the Deutsche Telekom entities
beneficially own at least 9,800,000 VoiceStream common shares. If
Deutsche Telekom beneficially owns at least 4,500,000 VoiceStream
common shares but less than 9,800,000 VoiceStream common shares,
Deutsche Telekom will be entitled to designate only one director;
(9) The then President of VoiceStream;
(10) The then Vice Chairman of VoiceStream; and
(11) The remaining members, if any, of the board to be selected by a
majority of the persons designated as described in (1), (2), (4), (9)
and (10) above.
In connection with the VoiceStream/Powertel merger, the largest of
VoiceStream's principal stockholders, including Deutsche Telekom, entered in
agreements, described in more detail under "Summary of Deutsche Telekom/Powertel
and VoiceStream/Powertel Transaction Documents -- VoiceStream's Agreements with
Stockholders of Powertel," providing that the stockholders who are parties to
those agreements will vote the VoiceStream common shares, or in the case of
Deutsche Telekom, voting preferred shares, they own in favor of the election to
the VoiceStream board of directors of one nominee chosen by Powertel and
acceptable to VoiceStream. These agreements will not be effective until the
Deutsche Telekom/VoiceStream merger is terminated and the VoiceStream/Powertel
merger is completed.
AGREEMENTS WITH JOINT VENTURE PARTNERS OF VOICESTREAM
In connection with the execution of the Deutsche Telekom/VoiceStream merger
agreement, Deutsche Telekom and VoiceStream entered into agreements with some of
VoiceStream's joint venture partners. We summarize the material terms of these
agreements below, and this summary is qualified in its entirety by reference to
the text of the agreements summarized, copies of which have been filed as
exhibits to Deutsche Telekom's and VoiceStream's respective registration
statements and are incorporated herein by reference.
Under agreements with two wholly-owned subsidiaries of Cook Inlet Region,
Inc., with affiliates of Providence Equity Partners Inc. and with SSPCS
Corporation, Deutsche Telekom agreed to assume on the date the Deutsche
Telekom/VoiceStream merger is completed various VoiceStream obligations relating
to Cook Inlet Region's, Providence's and SSPCS' rights to exchange certain
partnership and limited liability company interests for VoiceStream common
shares. The subsidiaries of Cook Inlet Region and SSPCS exchanged their
interests for VoiceStream common shares in December 2000. In connection with the
exchange, Cook Inlet Region entered into a separate voting agreement, to vote
the VoiceStream common shares it acquired as a result of this exchange in favor
of the Deutsche Telekom/VoiceStream merger.
In connection with the Deutsche Telekom/VoiceStream merger agreement,
Providence also entered into an agreement with VoiceStream and Western Wireless
amending an existing agreement under which Providence had a right to exchange
certain partnership interests for Western Wireless common shares. In the new
agreement, VoiceStream and Western Wireless agreed to purchase for $20 million
Providence's right to exchange for Western Wireless common shares and granted
Providence the right to exchange its partnership interests for 321,334
VoiceStream common shares. Providence also entered into an exchange rights
agreement with VoiceStream that amended a prior agreement pursuant to which
Providence had the right to exchange its membership interest in a certain
limited liability company into a variable number of VoiceStream common shares,
based on the fair market value of Providence's membership interest at the time
of the exchange. The new exchange rights agreement fixes the number of
VoiceStream common shares Providence would receive for its limited liability
company interest at 4,000,000 VoiceStream common shares.
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SUMMARY OF DEUTSCHE TELEKOM/POWERTEL AND VOICESTREAM/POWERTEL TRANSACTION
DOCUMENTS
THE DEUTSCHE TELEKOM/POWERTEL MERGER AGREEMENT
The following is a summary of the material provisions of the Deutsche
Telekom/Powertel merger agreement. This summary is qualified in its entirety by
reference to the Deutsche Telekom/Powertel merger agreement, a copy of which is
attached as Annex B to this proxy statement/prospectus and incorporated herein
by reference. Powertel stockholders are urged to read the Deutsche
Telekom/Powertel merger agreement in its entirety, as it is the legal document
governing the Deutsche Telekom/Powertel merger.
The Deutsche Telekom/Powertel Merger
A Delaware corporation formed by Deutsche Telekom will merge with and into
Powertel, and, as a result, Powertel will become a wholly-owned subsidiary of
Deutsche Telekom.
Effective Time and Timing of Closing
The Deutsche Telekom/Powertel merger will be completed and become effective
when Powertel files a certificate of merger with the Secretary of State of the
State of Delaware or at such later time as is specified in the certificate of
merger in accordance with Delaware law. We expect the Deutsche Telekom/Powertel
merger to become effective on the same day as the closing of the Deutsche
Telekom/ Powertel merger. The closing of the Deutsche Telekom/Powertel merger
will take place on the later of:
- May 31, 2001; and
- the fifth business day after the conditions to the Deutsche
Telekom/Powertel merger have been satisfied or waived, or on such other
date as Deutsche Telekom and Powertel may agree.
In addition, on the closing date of the Deutsche Telekom/Powertel merger or as
soon as possible after the closing date, Deutsche Telekom and Powertel will
undertake a number of additional actions, including making filings with
regulatory and stock exchange authorities, necessary to permit the issuance of
the merger consideration under German laws and regulations and the rules of the
Frankfurt Stock Exchange.
Consideration To Be Received in the Deutsche Telekom/Powertel Merger
In the Deutsche Telekom/Powertel merger, holders of Powertel common shares
will receive 2.6353 Deutsche Telekom shares for each of their Powertel common
shares. We refer to the number of Deutsche Telekom shares to be received for
each Powertel common share as the "common share exchange ratio". Holders of
Powertel's Series A preferred shares and Series B preferred shares will receive
121.9294 Deutsche Telekom shares for each of their Powertel Series A preferred
shares and Series B preferred shares. Holders of Powertel's Series D preferred
shares will receive 93.0106 Deutsche Telekom shares for each of their Powertel
Series D preferred shares. Holders of Powertel's Series E preferred shares and
Series F preferred shares will receive 179.5979 Deutsche Telekom shares for each
of their Powertel Series E preferred shares and Series F preferred shares, plus
a number of Deutsche Telekom shares equal to the product of:
- the number of Powertel common shares representing accrued or declared but
unpaid dividends on each Powertel Series E or Series F preferred share,
calculated as if the date of the completion of the Deutsche
Telekom/Powertel merger were a dividend payment date multiplied by
- the common share exchange ratio.
All of the exchange ratios described above are subject to adjustments as
described below. We refer to the number of Deutsche Telekom shares a Powertel
stockholder, optionholder or warrantholder will receive in the Deutsche
Telekom/Powertel merger in exchange for its Powertel common shares, preferred
shares, warrants or options, as the case may be, as an "exchange ratio". The
exchange ratios applicable to the
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outstanding Powertel preferred shares, options and warrants are based on the
number of Deutsche Telekom shares a holder of those Powertel preferred shares,
options or warrants would have received in the Deutsche Telekom/Powertel merger
had such holder converted its Powertel preferred shares into Powertel common
shares or exercised its Powertel options or warrants for Powertel common shares
on the date of the Deutsche Telekom/Powertel merger agreement. As discussed more
fully below, the exchange ratio with respect to a particular class of Powertel
shares, options or warrants is a fixed number of Deutsche Telekom shares, but is
subject to adjustments.
You will receive Deutsche Telekom shares in the form of Deutsche Telekom
ADSs, which trade principally on the NYSE under the symbol "DT", or, if you
prefer, in the form of Deutsche Telekom ordinary shares, which are traded on the
Frankfurt Stock Exchange under the symbol "DTE".
Adjustments to Exchange Ratios if Maximum Share Amount is Exceeded. Each
exchange ratio was determined assuming that at the time the Deutsche
Telekom/Powertel merger is completed, the aggregate number of Powertel common
shares outstanding on a fully diluted basis and adjusted for specific
commitments to issue Powertel common shares, excluding Powertel common shares
issuable as dividends after August 26, 2000 on Series E preferred shares and
Series F preferred shares, will not exceed the "maximum share amount." In this
document we refer to this aggregate number of Powertel common shares as the
"adjusted fully diluted shares amount." The maximum share amount is 55,742,000
or, if the stock dividend permitted under the Deutsche Telekom/Powertel merger
agreement is paid, 56,160,000, and may be reduced as set forth in the Deutsche
Telekom/Powertel merger agreement. Each exchange ratio is subject to adjustment
in the event that the adjusted fully diluted shares amount as of the date the
Deutsche Telekom/Powertel merger is completed exceeds the maximum share amount.
In the event of an adjustment, the effect will be to cap the number of Deutsche
Telekom shares that will be issued in the Deutsche Telekom/Powertel merger and
to reduce the number of Deutsche Telekom shares to be received by Powertel
stockholders, optionholders and warrantholders in the Deutsche Telekom/Powertel
merger in exchange for each of their Powertel common shares or Powertel
preferred shares, as the case may be. We illustrate below how the adjustment
mechanism will be used.
- Step 1. Derive the adjusted fully diluted shares amount: The adjusted
fully diluted shares amount is the sum of the number of outstanding
Powertel common shares, less the number of shares issuable as dividends
after August 26, 2000 on the Series E preferred shares and Series F
preferred shares, plus
-- the number of Powertel common shares issuable upon conversion of the
Powertel preferred shares;
-- the number of Powertel common shares issuable pursuant to the
exercise of Powertel stock options and Powertel warrants;
-- the number of Powertel common shares issuable pursuant to Powertel
restricted stock awards;
-- the number of Powertel common shares issuable pursuant to the
exercise of the put rights held by Sonera Holding B.V. and Eliska
Wireless Investors, unless such rights have been terminated;
-- the number of Powertel common shares issuable pursuant to the stock
purchase agreement between Powertel and Sonera Holding B.V., unless
this stock purchase agreement has been terminated;
-- the number of Powertel common shares issuable pursuant to the
exercise of any stock appreciation rights, phantom stock rights or
other contractual rights the value of which is determined in whole or
in part by the value of any Powertel shares; and
-- the number of any other Powertel common shares outstanding and
Powertel common shares issuable pursuant to any other securities
outstanding, which are convertible into, or exercisable or
exchangeable for, Powertel common shares.
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- Step 2. Derive the adjustment factor: The adjustment factor is a
fraction (a) the numerator of which is 55,742,000, as it may be adjusted
in accordance with the Deutsche Telekom/Powertel merger agreement, and
(b) the denominator of which is the adjusted fully diluted shares amount.
- Step 3. Derive the adjusted exchange ratios: Each exchange ratio will be
reduced by multiplying such exchange ratio by the adjustment factor.
- Step 4. Derive the adjusted stock consideration: Each outstanding
Powertel common share, each Powertel common share issuable upon the
exercise of outstanding Powertel warrants and Powertel stock options and
each Powertel preferred share will then be converted in the Deutsche
Telekom/Powertel merger into the right to receive a number of Deutsche
Telekom shares equal to the adjusted exchange ratio calculated pursuant
to Step 3.
Example. If the adjusted fully diluted shares amount exceeds 55,742,000,
as it may be adjusted in accordance with the Deutsche Telekom/Powertel merger
agreement, we would calculate the number of Deutsche Telekom shares into which
each Powertel share will be converted as illustrated above. Assuming that the
adjusted fully diluted shares amount is 55,795,000, then the adjustment factor
would be 0.9991. If you own 100 Powertel common shares under these
circumstances, you would receive the amount of Deutsche Telekom shares equal to
2.6353 multiplied by 0.9991, multiplied by the number of shares you hold, or
100, for a total of 263 shares, plus cash for 0.29 of a Deutsche Telekom share.
Powertel stockholders will not receive fractional Deutsche Telekom shares
and instead will receive a cash payment representing the net proceeds from the
sale of the fractional Deutsche Telekom shares. The treatment of fractional
Deutsche Telekom shares is described under "-- Election and Exchange of
Certificates Representing Powertel Shares."
Adjustment in Connection with Permitted Dividends
Under the Deutsche Telekom/Powertel merger agreement, Powertel may declare
and pay before the completion of the Deutsche Telekom/Powertel merger a stock
dividend of not more than 0.0075 of a Powertel common share for each Powertel
common share outstanding. The conversion or exercise terms of Powertel's or its
subsidiaries' options, warrants, preferred securities or other rights or
securities convertible into Powertel common shares will be adjusted according to
the terms of the documents governing those securities.
If Powertel declares and pays a stock dividend of 0.0075 of a Powertel
common share for each outstanding Powertel common share prior to the completion
of the Deutsche Telekom/Powertel merger, the exchange ratios of the Powertel
preferred shares will be adjusted as follows:
- Holders of Powertel's Series A preferred shares and Series B preferred
shares will receive 122.8439 Deutsche Telekom shares for each of their
Powertel Series A preferred shares and Series B preferred shares.
- Holders of Powertel's Series D preferred shares will receive 93.7082
Deutsche Telekom shares for each of their Powertel Series D preferred
shares.
- Holders of Powertel's Series E preferred shares and Series F preferred
shares will receive 180.9449 Deutsche Telekom shares for each of their
Powertel Series E preferred shares and Series F preferred shares, plus a
number of Deutsche Telekom shares equal to the product of:
-- the number of Powertel common shares representing accrued or declared
but unpaid dividends on each Powertel Series E or Series F preferred
share, calculated as if the date of the completion of the Deutsche
Telekom/Powertel merger were a dividend payment date multiplied by
-- the common share exchange ratio.
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Other Potential Adjustments. The amount and form of the merger
consideration will be adjusted in the event that before the completion of the
Deutsche Telekom/Powertel merger:
- a reclassification, split-up, stock-split, reverse stock-split, stock
dividend, stock combination, recapitalization, redenomination of share
capital, merger or similar transaction or an exchange offer causes a
change to the Deutsche Telekom ordinary shares outstanding, or the number
of Deutsche Telekom ordinary shares represented by a Deutsche Telekom ADS
is changed; or
- all of the outstanding Deutsche Telekom ordinary shares, or more than 80%
of the outstanding Deutsche Telekom ordinary shares pursuant to an
exchange offer for all outstanding Deutsche Telekom shares, are changed
into or exchanged for a different number or kind of shares of Deutsche
Telekom, or into shares of another entity owning more than 80% of the
Deutsche Telekom ordinary shares.
For example, if prior to completion of the Deutsche Telekom/Powertel
merger, Deutsche Telekom, in order to facilitate future acquisitions, were to
establish a new German holding company that acquired through an exchange offer
more than 80% of the outstanding Deutsche Telekom shares, holders of Powertel
common shares would receive shares of the new holding company instead of
Deutsche Telekom shares in the Deutsche Telekom/Powertel merger.
Treatment of Powertel Warrants
If any of the warrants granted pursuant to the warrant agreement dated
February 7, 1996 between Powertel and Bankers Trust Company, as warrant agent,
have not been exercised before the Deutsche Telekom/Powertel merger becomes
effective and a holder of warrants becomes entitled, upon exercise of the
warrants, to the merger consideration at any time after the Deutsche
Telekom/Powertel merger, any Deutsche Telekom ordinary shares to which such
holder becomes entitled will be issued from a special trust established for the
benefit of such warrant holders. Any cash to which such holder becomes entitled
will be paid by Deutsche Telekom.
Treatment of Eliska Put Rights
If Sonera Holding B.V. or Eliska Wireless Investors, who we collectively
refer to as the "Eliska Partners," receive Powertel common shares before the
Deutsche Telekom/Powertel merger is completed as a result of exercising their
rights to exchange interests in an affiliate of Eliska Wireless for Powertel
common shares, such Eliska Partners will have all the rights with respect to
those Powertel common shares which a Powertel stockholder has.
To the extent that any of the Eliska Partners has not received Powertel
common shares before the Deutsche Telekom/Powertel merger is completed in
respect of their exchange rights, those Eliska Partners will be entitled to
receive the consideration that they are entitled to receive pursuant to their
exchange rights.
To the extent that any of the Eliska Partners are entitled to receive
Deutsche Telekom shares on or after the date the Deutsche Telekom/Powertel
merger is completed, the Deutsche Telekom shares will be delivered from a
special trust established for the benefit of such Eliska Partners, and any cash
to which such Eliska Partners become entitled will be paid by Deutsche Telekom.
Election and Exchange of Certificates Representing Powertel Shares
Deutsche Telekom will appoint an escrow agent to serve in connection with
the Deutsche Telekom/Powertel merger. Shortly after the Deutsche
Telekom/Powertel merger is completed, Deutsche Telekom and Powertel intend to
mail, or cause the escrow agent to mail, to each registered holder of Powertel
common shares and Powertel preferred shares a letter of transmittal which the
holder must properly complete and deliver to the escrow agent with the holder's
stock certificates.
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The escrow agent will exchange certificates representing Powertel shares
for American depositary receipts representing Deutsche Telekom ADSs or, if a
Powertel stockholder properly elects, certificates representing Deutsche Telekom
ordinary shares. The letter of transmittal mailed to Powertel stockholders will
contain an "ordinary share election" form which can be used by a stockholder to
elect to receive merger consideration in Deutsche Telekom ordinary shares.
After a record holder of Powertel shares delivers certificates for those
shares and a properly completed letter of transmittal to the escrow agent, the
escrow agent will deliver to the holder:
- the number of whole Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares included in the merger consideration in respect of such Powertel
shares; and
- after giving effect to any required tax withholdings, a check in the
amount of:
-- cash in lieu of any fractional interest in Deutsche Telekom ADSs or
Deutsche Telekom ordinary shares on the terms described below, plus
-- any cash dividends or other distributions that the holder has the
right to receive, including dividends or other distributions payable
with respect to the holders of Deutsche Telekom ADSs or Deutsche
Telekom ordinary shares with a record date after the completion of
the Deutsche Telekom/Powertel merger and a payment date on or before
the date the holder properly delivers Powertel stock certificates to
the escrow agent.
The escrow agent will not deliver fractional Deutsche Telekom ADSs or
fractional Deutsche Telekom ordinary shares in connection with the Deutsche
Telekom/Powertel merger. Instead, each holder of Powertel shares exchanged in
the Deutsche Telekom/Powertel merger who would otherwise have received a
fraction of a Deutsche Telekom ADS or Deutsche Telekom ordinary share will be
entitled to receive a cash payment representing that holder's proportionate
interest in the net proceeds from the sale by the escrow agent of the aggregate
of the fractions of Deutsche Telekom ADSs and Deutsche Telekom ordinary shares
that would otherwise be issued. The escrow agent will execute the sale of those
Deutsche Telekom ADSs and Deutsche Telekom ordinary shares on the NYSE and the
Frankfurt Stock Exchange, respectively. Deutsche Telekom will pay all
commissions, transfer taxes and out-of-pocket costs, including the expenses and
compensation of the escrow agent, incurred in connection with the sale of the
Deutsche Telekom ADSs and Deutsche Telekom ordinary shares.
Powertel shares that are surrendered to the escrow agent will be canceled.
No interest will be paid or accrued on any amount payable to holders of Powertel
shares. In addition, no holder of Powertel shares will receive any dividends or
other distributions with respect to Deutsche Telekom ADSs or Deutsche Telekom
ordinary shares to which the holder is entitled under the Deutsche
Telekom/Powertel merger agreement until that holder's Powertel stock certificate
is surrendered to the escrow agent with a properly completed letter of
transmittal.
If any Deutsche Telekom ADSs or Deutsche Telekom ordinary shares are to be
delivered to a person other than the registered holder of the Powertel shares
represented by the certificates surrendered to the escrow agent:
- those Powertel stock certificates must be properly endorsed or otherwise
be in proper form for transfer; and
- the person requesting the delivery must pay to the escrow agent any
transfer or other taxes required as a result of delivery to a person
other than the registered holder, or establish to the satisfaction of the
escrow agent that such tax has been paid or is not payable.
Treatment of Powertel Options and Restricted Stock
Powertel Options. If the Deutsche Telekom/Powertel merger is completed,
each outstanding Powertel stock option will be converted into an option to
acquire, from a trust established for the benefit of holders of Powertel stock
options, that number of Deutsche Telekom shares determined by multiplying the
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maximum number of Powertel common shares subject to the Powertel stock option by
the Powertel common share exchange ratio, rounded if necessary to the nearest
whole Deutsche Telekom ordinary share. The Powertel common share exchange ratio
is subject to adjustment as described under "-- Consideration To Be Received in
the Deutsche Telekom/Powertel Merger." The exercise price per Deutsche Telekom
ordinary share for each of these options will be the exercise price per Powertel
common share applicable to that option immediately prior to the completion of
the Deutsche Telekom/ Powertel merger divided by the common share exchange
ratio. The replacement options will generally have the same terms and conditions
as were applicable under the Powertel option plans.
Powertel Restricted Stock. At the time the Deutsche Telekom/Powertel
merger is completed, the Powertel restricted stock plan will terminate and any
unvested Powertel restricted stock awards will become fully vested, except as
otherwise provided in the individual restricted stock award agreements.
Dissenting Shares
If appraisal rights for any Powertel preferred shares are perfected by any
holder of preferred shares, then those shares will be treated as described under
"The Deutsche Telekom/Powertel Merger and the VoiceStream/Powertel
Merger -- Appraisal Rights."
Representations and Warranties
The Deutsche Telekom/Powertel merger agreement contains a number of
representations and warranties made by Powertel and Deutsche Telekom to each
other, including those regarding:
- due organization, good standing and qualification;
- capital structure;
- corporate authority to enter into the Deutsche Telekom/Powertel merger
agreement and lack of conflicts with corporate governance documents,
contracts or laws;
- governmental filings;
- accuracy of SEC reports, financial statements and information provided
for inclusion in this document and certain other filings by the parties;
- absence of certain material changes or events since December 31, 1999;
- permits and licenses;
- compliance with laws;
- tax matters, including the absence of facts inconsistent with the
qualification of the Deutsche Telekom/Powertel merger as a reorganization
under Section 368(a) of the U.S. tax code;
- absence of undisclosed liabilities and pending litigation;
- finders' or brokers' fees; and
- the vote necessary to approve the Deutsche Telekom/Powertel merger
agreement.
In addition, Powertel made representations and warranties to Deutsche
Telekom as to:
- employee benefit plans;
- employees and employment practices;
- Section 203 of the Delaware General Corporation Law and other
anti-takeover laws enacted under Georgia or Delaware law applicable to
Powertel;
- intellectual property;
- the receipt of a fairness opinion from a financial advisor;
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- material contracts; and
- absence of affiliate transactions.
In addition, the Deutsche Telekom/Powertel merger agreement contains
representations and warranties made by the merger subsidiary to Powertel
regarding some of the above matters.
Conduct of Business Pending the Deutsche Telekom/Powertel Merger
Covenants of Powertel. Except as contemplated by the Deutsche
Telekom/Powertel merger agreement or the VoiceStream/Powertel merger agreement,
Powertel has agreed that, until the earlier of the completion of the Deutsche
Telekom/Powertel merger or the termination of the Deutsche Telekom/Powertel
merger agreement, it will carry on its and its subsidiaries' business in the
ordinary course in all material respects. Until the Deutsche Telekom/Powertel
merger is completed or the Deutsche Telekom/Powertel merger agreement is
terminated, Powertel and its subsidiaries will not take the actions listed in
the Deutsche Telekom/Powertel merger agreement, which includes the following
actions, without Deutsche Telekom's prior written consent, except under limited
exceptions specified in the Deutsche Telekom/Powertel merger agreement:
- declare, set aside or pay dividends on, or make distributions in respect
of, Powertel shares or split, combine or reclassify any outstanding
Powertel shares;
- redeem or repurchase any Powertel shares, except as required by
Powertel's certificate of incorporation or the Powertel stock option
plans;
- issue, deliver, pledge, sell or encumber any Powertel shares or any
options or other rights to acquire those shares;
- Important Exception:
-- Powertel may issue Powertel common shares upon the closing of the
acquisition of substantially all of the assets of DiGiPH PCS, Inc.
and its affiliates by Eliska Wireless Ventures, which in this
document we refer to as the "DiGiPH transaction," and the performance
of the agreements entered into in connection with the DiGiPH
transaction, including the stock purchase agreement between Powertel
and Sonera Holding B.V., the put agreement dated May 30, 2000 between
Powertel, Eliska Wireless Investors and Sonera Holding B.V. and the
put agreement dated May 30, 2000 between Powertel and Sonera Holding
B.V.; or otherwise pursuant to previously disclosed contractual
obligations existing prior to the execution of the Deutsche
Telekom/Powertel merger agreement; and
-- Powertel may issue rights to acquire Powertel shares and may issue
shares pursuant to such rights for an aggregate of 575,000 Powertel
common shares pursuant to annual incentive grants, grants to newly
hired employees and grants to be made pursuant to the DiGiPH
transaction;
- adopt, amend or propose to amend any stockholder rights plan or related
rights plan;
- acquire any business, corporation or partnership, or substantially all of
the assets of any of the foregoing;
- Important Exceptions:
-- Powertel is permitted to enter into acquisition transactions which
involve individually, or in the aggregate, a purchase price of
$500,000 or less without Deutsche Telekom's consent;
-- Powertel is permitted to make capital expenditures in accordance
with its capital budget for the fiscal years 2000 and 2001; and
-- Powertel may enter into transactions in connection with the DiGiPH
transaction;
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- authorize or make capital expenditures other than those for less than the
aggregate annual amount contained in Powertel's capital budget for the
years 2000 and 2001:
- sell, lease, encumber or otherwise dispose of any of its assets;
- enter into employment or severance agreements with, or establish any new
benefit plan, other than in the ordinary course of business consistent
with its past practice or amend any existing Powertel benefit plan or
take any action inconsistent with the cash bonus, retention bonus,
incentive bonus, severance, equity awards and other plans set out in the
Deutsche Telekom/Powertel merger agreement, which are described in more
detail below;
- increase the compensation or reimbursement allowances payable to an
officer or director;
- make any awards under an existing Powertel benefit plan for the benefit
of any director, officer or employee, except in the ordinary course of
business consistent with past practices;
- except as required by a change in law or U.S. GAAP, make any change in
its method of accounting or its fiscal year;
- enter into, modify or amend in any material respect or terminate any
material contract or agreement to which Powertel is a party, or waive,
release or assign any material rights or claims;
- amend any term of any of its outstanding securities in any material
respect;
- adopt a plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other material reorganization;
- incur or guarantee material indebtedness, including refinancing existing
indebtedness;
- create, incur, assume or allow to exist material liens upon any property
or assets, except for liens arising in the ordinary course of business or
to secure indebtedness or arising by operation of law;
- guaranty any indebtedness, leases, dividends or other third party
obligations;
- make any loan or capital contributions to or investment in any person,
other than loans, capital contributions or investments made in the
ordinary course of business, as required in connection with the DiGiPH
transaction, or made to wholly-owned subsidiaries;
- enter into any agreement that materially restricts Powertel, or after
completion of the Deutsche Telekom/Powertel merger could materially
restrict Deutsche Telekom or the surviving corporation from engaging in
the business of providing wireless telecommunications services or
developing wireless telecommunications technology anywhere in the world,
or otherwise from engaging in any other business;
- settle, or propose to settle, any material litigation, investigation,
arbitration, proceeding or other claim;
- make any material tax election or enter into any settlement or compromise
of any material tax liability;
- take action that could reasonably be expected to make any representation
or warranty of Powertel under the Deutsche Telekom/Powertel merger
agreement inaccurate and have a material adverse effect on Powertel at
the completion of the Deutsche Telekom/Powertel merger;
- adopt, amend or propose to amend any Powertel benefit plans or make any
discretionary contributions to any Powertel benefit plan which is also an
"employee pension benefit plan" or "employee welfare benefit plan" as
defined in the Employee Retirement Income Security Act of 1974, as
amended, other than as required by law or as may be required to maintain
compliance with the U.S. tax code and except for other limited
exceptions;
- file any amended tax returns if the result would be a material increase
in Powertel's tax liability;
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- take action that would reasonably be expected to materially impair or
delay obtaining the necessary regulatory approvals to complete the
Deutsche Telekom/Powertel merger;
- take any action that would be reasonably likely to prevent or impede the
Deutsche Telekom/Powertel merger from qualifying as a reorganization
under Section 368(a) of the U.S. tax code or cause the stockholders of
Powertel to recognize gain in the Deutsche Telekom/Powertel merger under
Section 367(a)(1) of the U.S. tax code;
- take any action that would cause the Powertel common shares to cease to
be quoted on the Nasdaq Stock Market;
- during the five business days prior to the completion of the Deutsche
Telekom/Powertel merger, take or omit to take any action that could
increase the number of Powertel shares outstanding on a fully diluted
basis; and
- enter into any contract, agreement or arrangement to do any of the
foregoing.
Covenants of Deutsche Telekom. Except as contemplated by the Deutsche
Telekom/Powertel merger agreement, Deutsche Telekom has agreed that until the
Deutsche Telekom/Powertel merger is completed, Deutsche Telekom and its
subsidiaries will not take the actions listed in the Deutsche Telekom/Powertel
merger agreement, which includes the following actions, without Powertel's prior
written consent:
- except for the purpose of using or increasing Deutsche Telekom's
authorized capital or as necessary for the conduct of its business, amend
or propose to amend the Memorandum and Articles of Association or
Management Board Rules of Procedure or other comparable organizational
document of Deutsche Telekom in any manner that would be adverse to
Powertel or its stockholders;
- take action that would be reasonably likely to prevent or impede the
Deutsche Telekom/Powertel merger from qualifying as a reorganization
under Section 368(a) of the U.S. tax code or cause Powertel stockholders
to recognize gain in the Deutsche Telekom/Powertel merger under Section
367(a)(1) of the U.S. tax code; or
- take action that would reasonably be likely to materially adversely
affect or materially adversely delay the ability of the parties to obtain
any required regulatory approval or to complete the transactions
contemplated by the Deutsche Telekom/Powertel merger agreement.
- Important Exception: Deutsche Telekom may make acquisitions as
long as the acquisitions, individually or in the aggregate, are
not reasonably likely to prevent the consummation of the Deutsche
Telekom/Powertel merger.
Offers for Alternative Transactions
Powertel has agreed not to, has agreed not to permit any of its
subsidiaries to, has agreed not to authorize or permit any of its or their
respective officers, directors or employees to, and has agreed to use its
reasonable efforts to cause its advisors and representatives not to:
- solicit, initiate or knowingly encourage, or knowingly take any other
action designed to facilitate, any alternative transaction, which we
define below, to the Deutsche Telekom/Powertel merger; or
- continue or participate in any discussions or negotiations regarding any
alternative transaction to the Deutsche Telekom/Powertel merger.
However, if at any time before Powertel stockholders approve the Deutsche
Telekom/Powertel merger, Powertel receives an unsolicited proposal for an
alternative transaction, then Powertel may, after giving Deutsche Telekom three
business days advance notice:
- furnish information with respect to Powertel pursuant to a
confidentiality agreement substantially similar to the confidentiality
agreement in place between Powertel and Deutsche Telekom; and
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- engage in discussions and negotiations with the persons that made such
proposal;
but only if:
- the Powertel board of directors has determined in good faith, after
receiving advice from outside counsel, that providing information to the
third party or participating in negotiations or discussions could be
reasonably expected to result in a superior proposal, which we define
below, being made; and
- Powertel is not otherwise in breach of its obligations described above
not to solicit or engage in discussions regarding an alternative
transaction.
Important Definitions:
"alternative transaction" means any of the following:
- a transaction or series of transactions in which any third party would
acquire, directly or indirectly, beneficial ownership of more than 20% of
the outstanding Powertel shares or pursuant to a tender offer or exchange
offer;
- any acquisition of or business combination with Powertel or any of its
significant subsidiaries, by a merger or other business combination; or
- any transaction in which any third party would acquire, directly or
indirectly, control of assets of Powertel or any of its subsidiaries for
consideration equal to 20% or more of the fair market value of all of the
outstanding Powertel shares.
An alternative transaction does not include the acquisition of Powertel by
VoiceStream pursuant to the VoiceStream/Powertel merger agreement.
"superior proposal" means any proposal made by a third party to enter into
an alternative transaction which the Powertel board of directors determines in
its good faith judgment, based on, among other things, the advice of a financial
advisor of nationally recognized reputation, to be more favorable to Powertel's
stockholders than the Deutsche Telekom/Powertel merger taking into account all
relevant factors, including whether, in the good faith judgment of the Powertel
board of directors, the third party is reasonably able to finance the proposed
transaction.
Powertel also has agreed to notify Deutsche Telekom promptly of any request
for information or of any proposal in connection with an alternative
transaction, including the material terms of the request or proposal and the
identity of the person making it, and Powertel has agreed to keep Deutsche
Telekom informed of the status of any alternative transaction. In addition,
Powertel agreed to cease any activities, discussions or negotiations with
respect to an alternative transaction that existed at the time the Deutsche
Telekom/Powertel merger agreement was signed.
Powertel Board of Directors' Recommendation
The Deutsche Telekom/Powertel merger agreement requires the Powertel board
of directors:
- to recommend that the Powertel stockholders approve the Deutsche
Telekom/Powertel merger agreement;
- not to withdraw, modify or qualify, or to propose publicly to withdraw,
modify or qualify, its recommendation in a manner adverse to Deutsche
Telekom;
- not to approve or recommend, or to propose publicly to approve or
recommend, any alternative transaction; and
- not to cause Powertel to agree to engage in any alternative transactions.
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However, if the Powertel board of directors receives a superior proposal
before Powertel stockholders approve the Deutsche Telekom/Powertel merger, the
Powertel board of directors may inform Powertel stockholders that it no longer
recommends approval of the Deutsche Telekom/Powertel merger, if:
- Powertel sends Deutsche Telekom written notice that Powertel has received
a superior proposal, which notice describes the terms of the superior
proposal and identifies the proposers, and that Powertel intends to
change its recommendation regarding the Deutsche Telekom/Powertel merger;
and
- five business days have passed since Deutsche Telekom received the
notice. In addition, Powertel must give Deutsche Telekom reasonable
opportunity to make adjustments in the terms of the Deutsche
Telekom/Powertel merger agreement that would enable the Powertel board of
directors to maintain its recommendation to approve the Deutsche
Telekom/Powertel merger.
The Deutsche Telekom/Powertel merger agreement also permits Powertel to
comply with Rule 14d-9 or Rule 14e-2(a) under the Exchange Act or to make any
other disclosure to Powertel stockholders if, in the good faith judgment of the
Powertel board of directors, after receiving advice from outside counsel,
failure to disclose would result in a reasonable likelihood that the Powertel
board of directors would breach its duties to Powertel stockholders under
applicable law.
Submission of Deutsche Telekom/Powertel Merger Agreement to Stockholder
Vote. The Deutsche Telekom/Powertel merger agreement requires Powertel to
submit the Deutsche Telekom/Powertel merger agreement to a stockholder vote at
the Powertel special meeting even if the Powertel board of directors no longer
recommends approval of the Deutsche Telekom/Powertel merger.
Additional Agreements
The Deutsche Telekom/Powertel merger agreement contains a number of other
covenants and agreements by or between Powertel and Deutsche Telekom on subjects
including:
- filing financial statements with the SEC;
- notification of the occurrence of material facts, events or
circumstances;
- obtaining necessary tax opinions and representation letters;
- actions to be taken to cause the Deutsche Telekom/Powertel merger to
qualify as a reorganization within the meaning of Section 368(a) of the
U.S. tax code and to avoid gain recognition to the stockholders of
Powertel in the Deutsche Telekom/Powertel merger under Section 367(a)(1)
of the U.S. tax code; and
- taking appropriate actions to attempt to cause the Powertel warrants to
be exercised in full prior to the completion of the Deutsche
Telekom/Powertel merger to the extent agreed to by Deutsche Telekom and
Powertel.
In addition, Deutsche Telekom has agreed to take all steps necessary to
cause the new Deutsche Telekom ADSs and Deutsche Telekom ordinary shares to
become listed on the NYSE and the Frankfurt Stock Exchange, respectively.
Powertel has agreed to the termination of certain existing stockholder
agreements.
Deutsche Telekom has additionally agreed to vote its VoiceStream shares in
favor of the VoiceStream/Powertel merger.
Senior Discount Notes and Senior Notes
Deutsche Telekom has also agreed to cause the surviving corporation to
commence offers to repurchase certain outstanding publicly-traded notes of
Powertel pursuant to the terms of their indentures within 30 days following the
completion of the Deutsche Telekom/Powertel merger.
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Efforts to Complete the Deutsche Telekom/Powertel Merger
Powertel and Deutsche Telekom have agreed to:
- use reasonable best efforts to consummate and make effective the Deutsche
Telekom/Powertel merger and the other transactions contemplated by the
Deutsche Telekom/Powertel merger agreement;
- obtain in a timely manner all necessary consents, permits, approvals or
waivers from any governmental or regulatory authority which are necessary
for the completion of the Deutsche Telekom/Powertel merger;
- promptly prepare and file all required notifications under U.S. antitrust
laws and to comply with any requests for additional information, and
obtain termination of any applicable waiting periods or obtain any
required approvals as promptly as practicable; and
- take all actions within their control necessary to obtain any required
regulatory approvals.
- Important Exceptions:
-- Neither Deutsche Telekom nor its subsidiaries is required, nor will
Powertel or its subsidiaries be permitted, to divest or hold
separate or otherwise take or commit to take any action that limits
its freedom of action with respect to Powertel, Deutsche Telekom,
VoiceStream or any of their subsidiaries, any material portion of
their assets or any of their businesses or product lines; and
-- In connection with any filing or submission required or action to be
taken to consummate the Deutsche Telekom/Powertel merger, Powertel
will not, without Deutsche Telekom's prior written consent, commit
to divest any assets of the business of Powertel and its
subsidiaries if such divested assets and/or businesses are material
to the assets or profitability of Powertel and its subsidiaries
taken as a whole.
Indemnification and Insurance
The surviving corporation of the Deutsche Telekom/Powertel merger is
required by the Deutsche Telekom/Powertel merger agreement to maintain in effect
the current provisions regarding indemnification of officers and directors
contained in the charter and bylaws and any indemnification agreements of
Powertel and each of its subsidiaries.
Prior to the completion of the Deutsche Telekom/Powertel merger, Powertel
has the right, subject to Deutsche Telekom's prior written approval, to obtain a
"tail" coverage directors' and officers' liability insurance policy providing
coverage in amounts and on terms consistent with Powertel's existing insurance
for a period of six years after the completion of the Deutsche Telekom/Powertel
merger. If Powertel does not obtain this insurance prior to the completion of
the Deutsche Telekom/Powertel merger, Deutsche Telekom has agreed to cause the
surviving corporation to continue to provide directors' and officers' liability
insurance for a period of six years after the completion of the Deutsche
Telekom/VoiceStream merger. However, the surviving corporation is not required
to expend in any year an amount in excess of 250% of the last annual premium
paid by Powertel prior to August 26, 2000. If the aggregate expenditure on
coverage exceeds that amount, the surviving corporation will purchase as much
insurance as can be obtained for that amount.
Employee Benefits
Following the completion of the Deutsche Telekom/Powertel merger, Deutsche
Telekom will take all necessary action so that each current and former Powertel
employee who was eligible to participate in a Powertel benefit plan before the
Deutsche Telekom/Powertel merger will be eligible to participate in a
corresponding employee benefit plan maintained by Deutsche Telekom or its
subsidiaries after the Deutsche Telekom/Powertel merger. The Deutsche
Telekom/Powertel merger agreement also specifies the
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treatment of pre-existing conditions, exclusions and waiting periods with
respect to current and former employees of Powertel and its subsidiaries under
any welfare or fringe benefit plans of Deutsche Telekom in which such employees
and former employees participate in after completion of the Deutsche
Telekom/Powertel merger.
Powertel agreed to enact and implement the plans described under "The
Deutsche Telekom/Powertel Merger and the VoiceStream/Powertel
Merger -- Interests of Directors and Officers of Powertel in the Deutsche
Telekom/Powertel Merger and the VoiceStream/Powertel Merger" after approval of
the specifics of each plan by Deutsche Telekom and VoiceStream, which plans are
to be effective as of the completion of the Deutsche Telekom/Powertel merger:
- a $3,000 cash bonus payable to each full-time employee of Powertel who is
continuously employed by Powertel during the period starting December 31,
2000 and ending three months after the completion of the Deutsche
Telekom/Powertel merger, or whose job is eliminated within that period,
with such payment prorated for part-time employees and for those
employees who are hired after December 31, 2000;
- a $20 million cash retention bonus pool to be paid to 150-300 key
employees, as determined by the chief executive officer and chief
operating officer of each of VoiceStream and Powertel, with such payments
to be earned and payable over the two-year period following the
completion of the Deutsche Telekom/Powertel merger;
- a $20 million cash incentive bonus pool to be paid to the same 150-300
key employees, as determined by the chief executive officer and chief
operating officer of each of VoiceStream and Powertel, with such payments
to be earned and payable in September 2001 for performance during the
first and second calendar quarters of 2001, and in January 2002 for
performance during the third and fourth calendar quarters of 2001;
- a severance plan for employees of Powertel employed immediately before
the completion of the Deutsche Telekom/Powertel merger whose employment
is terminated due to job elimination resulting from the Deutsche
Telekom/Powertel merger. Severance payments will represent a minimum of
four weeks base salary or hourly equivalent, not including overtime, and
targeted bonus, plus two weeks per year of actual service to Powertel or
Deutsche Telekom, respectively, up to a maximum of 20 weeks. Any
payments under the severance plan will be reduced by any payments
received by the affected employee under the cash bonus, retention bonus
or incentive bonus plans described above. To obtain benefits under this
plan, an employee must agree to release the surviving corporation from
all claims against Powertel, Deutsche Telekom and VoiceStream; and
- Powertel will be allowed to issue up to an aggregate of 575,000 options
prior to the completion of the Deutsche Telekom/Powertel merger to
Powertel employees in yearly performance grants, to DiGiPH PCS employees
that become Powertel employees and in connection with offers of
employment outstanding as of August 26, 2000. Employees whose employment
is terminated due to job elimination resulting from the merger will
receive change of control accelerated vesting of their options if their
job is eliminated within 18 months of the completion of the Deutsche
Telekom/Powertel merger. Individuals receiving change of control vesting
will not be eligible for actual or potential remaining payments under the
cash bonus, retention bonus or incentive bonus plans but will be eligible
for severance payments, subject to certain reductions.
Closing Conditions
Conditions to Each Party's Obligations to Complete the Deutsche
Telekom/Powertel Merger. Powertel's and Deutsche Telekom's respective
obligations to complete the Deutsche Telekom/Powertel merger are subject to the
satisfaction or waiver of conditions, including the following:
- Powertel Stockholder Approval. The holders of a majority of the
outstanding voting power of the Powertel common shares and Series A
preferred shares, voting together as a single class with the
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Series A preferred shares voting on an as-converted-to-common shares
basis, and the holders of two-thirds of each class of the Powertel Series
A preferred shares, Series B preferred shares, Series D preferred shares,
Series E preferred shares and Series F preferred shares, each voting as a
separate class, having approved and adopted the Deutsche Telekom/Powertel
merger agreement.
- Legality. The absence of any law, order or injunction preventing the
completion of the Deutsche Telekom/Powertel merger or which would have a
material adverse affect on Powertel.
- Regulatory Approvals. All required regulatory approvals having been
obtained and all applicable waiting periods having expired, as described
under "Regulatory Approvals -- Regulatory Approvals Required for the
Deutsche Telekom/VoiceStream Merger and the Deutsche Telekom/Powertel
Merger."
- Registration Statement Effective. No stop order suspending the
effectiveness of the Form F-4 registration statement or the proxy
statement/prospectus then being in effect and no proceedings for that
purpose then being threatened by the SEC or having been initiated by the
SEC and not concluded or withdrawn.
- Stock Exchange Listings.
-- All steps necessary for the Deutsche Telekom ordinary shares that will
be issued in the Deutsche Telekom/Powertel merger to be listed on the
Frankfurt Stock Exchange having been taken; and
-- The Deutsche Telekom ADSs that will be issued in the Deutsche
Telekom/Powertel merger having been authorized for listing on the NYSE,
subject to official notice of issuance.
- Deutsche Telekom/VoiceStream Merger. The Deutsche Telekom/VoiceStream
merger having been consummated.
Additional Conditions to the Obligations of Powertel. The obligations of
Powertel to effect the Deutsche Telekom/Powertel merger are also subject to the
satisfaction, or waiver by Powertel, of conditions, including the following:
- Representations and Warranties True and Correct.
-- Deutsche Telekom's representation that, since December 31, 1999,
there has not been any material adverse effect on Deutsche Telekom
will have been true and correct when the Deutsche Telekom/Powertel
merger agreement was entered into and as of the date the Deutsche
Telekom/Powertel merger is completed; and
-- other representations and warranties of Deutsche Telekom and the
representations and warranties of merger subsidiary in the Deutsche
Telekom/Powertel merger agreement having been true and correct, with
respect to Deutsche Telekom, when the Deutsche Telekom/Powertel
merger agreement was entered into and, with respect to merger
subsidiary, when the Deutsche Telekom/Powertel merger agreement was
amended and restated and, with respect to Deutsche Telekom and merger
subsidiary, as of the date the Deutsche Telekom/Powertel merger is
completed, except to the extent that any representation or warranty
expressly speaks as of an earlier date, in which case that
representation or warranty must have been true and correct as of that
date;
(a) except for inaccuracies caused by changes permitted by the
Deutsche Telekom/Powertel merger agreement; and
(b) except for such failures which in the aggregate would not
reasonably be expected to result in a material adverse effect on
Deutsche Telekom.
Notwithstanding the conditions described above, Deutsche Telekom is
permitted to make subsequent acquisitions, and no changes resulting to any
of its representations and warranties as a result of a subsequent
transaction will result in a failure of these conditions.
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- Compliance with Covenants. Deutsche Telekom having complied in all
material respects with all its agreements and covenants required by the
Deutsche Telekom/Powertel merger agreement to be complied with by the
completion of the Deutsche Telekom/Powertel merger.
- Receipt of FCC Opinion. Powertel having received an opinion of FCC
counsel to Deutsche Telekom and/or VoiceStream substantially in the form
agreed upon in the Deutsche Telekom/Powertel merger agreement.
- Receipt of Governmental Approvals. All necessary consents or
authorizations from any governmental or regulatory authority required for
the Deutsche Telekom/Powertel merger having been received, unless the
failure to receive any such consent or authorization would not have a
material adverse effect on Deutsche Telekom or the transactions
contemplated by the Deutsche Telekom/Powertel merger agreement, provided
that the consents or authorizations do not contain any conditions which
would reasonably be expected to have a material adverse effect on
Deutsche Telekom or the transactions contemplated by the Deutsche
Telekom/Powertel merger agreement. However, Powertel's obligation to
effect the Deutsche Telekom/Powertel merger will not be subject to the
condition that any FCC consents or authorizations have become final
orders.
- Receipt of Tax Opinion. Powertel having received an opinion of Morris,
Manning & Martin, LLP, dated as of the date the Deutsche Telekom/Powertel
merger is completed, substantially to the effect that for U.S. federal
income tax purposes:
-- the Deutsche Telekom/Powertel merger will qualify as a reorganization
within the meaning of Section 368(a) of the U.S. tax code; and
-- each transfer of property to Deutsche Telekom by a stockholder of
Powertel pursuant to the Deutsche Telekom/Powertel merger will not be
subject to Section 367(a)(1) of the U.S. tax code.
Additional Conditions to the Obligations of Deutsche Telekom. The
obligations of Deutsche Telekom to effect the Deutsche Telekom/Powertel merger
are also subject to the satisfaction, or waiver by Deutsche Telekom, of
conditions, including the following:
- Representations and Warranties True and Correct.
-- Powertel's representation that since December 31, 1999, there has not
been any material adverse effect on Powertel will have been true and
correct when the Deutsche Telekom/Powertel merger agreement was
entered into and as of the "bringdown date", which is the date, at
least five business days after the last closing condition has been
fulfilled or waived, on which Powertel delivers a certificate
relating to the accuracy of Powertel's representations and
warranties; and
-- other representations and warranties of Powertel in the Deutsche
Telekom/Powertel merger agreement having been true and correct when
the Deutsche Telekom/Powertel merger agreement was entered into and
as of the bringdown date (except to the extent that any
representation or warranty expressly speaks as of an earlier or a
later date, in which case, that representation or warranty having
been true and correct as of that date);
(1) except for inaccuracies caused by changes permitted by the
Deutsche Telekom/ Powertel merger agreement; and
(2) except for such failures which in the aggregate would not
reasonably be expected to result in a material adverse effect on
Powertel, Deutsche Telekom or the transactions contemplated by
the Deutsche Telekom/Powertel merger agreement.
- Compliance with Covenants. Powertel having complied in all material
respects with all its agreements and covenants required by the Deutsche
Telekom/Powertel merger agreement to be complied with by the time the
Deutsche Telekom/Powertel merger is completed.
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- Receipt of Tax Opinion. Deutsche Telekom having received an opinion of
Cleary, Gottlieb, Steen & Hamilton, dated as of the date the Deutsche
Telekom/Powertel merger is completed, substantially to the effect that
for U.S. federal income tax purposes:
-- the Deutsche Telekom/Powertel merger will qualify as a reorganization
within the meaning of Section 368(a) of the U.S. tax code; and
-- each transfer of property to Deutsche Telekom by a stockholder of
Powertel pursuant to the Deutsche Telekom/Powertel merger will not be
subject to Section 367(a)(1) of the U.S. tax code.
- Receipt of FCC Opinion. Deutsche Telekom having received an opinion of
FCC counsel of Powertel substantially in the form agreed upon in the
Deutsche Telekom/Powertel merger agreement.
- Receipt of Consents. Powertel having obtained all material consents or
approvals required under Powertel's and its subsidiaries' debt
instruments.
- Receipt of Governmental Approvals. All necessary consents or
authorizations from any governmental or regulatory authority required for
the Deutsche Telekom/Powertel merger having been received, including from
the FCC and state public utility or service commissions and, in the case
of the FCC, having become final orders, unless the failure to receive any
such consent or authorization would not have a material adverse effect on
Powertel or Deutsche Telekom or the transactions contemplated by the
Deutsche Telekom/Powertel merger agreement and such consents or
authorizations do not contain any conditions which would reasonably be
expected to have a material adverse effect on Powertel or Deutsche
Telekom or the transactions contemplated by the Deutsche Telekom/Powertel
merger agreement.
Waiver of Conditions. In the event Powertel waives a material condition to
the Deutsche Telekom/Powertel merger, Powertel will, if legally required,
resolicit approval of its stockholders.
Termination and Termination Fee
Automatic Termination. The Deutsche Telekom/Powertel merger agreement will
terminate automatically upon the termination of the Deutsche Telekom/VoiceStream
merger agreement.
Right to Terminate. The Deutsche Telekom/Powertel merger agreement may be
terminated at any time before the completion of the Deutsche Telekom/Powertel
merger in any of the following ways:
- by mutual written consent;
- by either Deutsche Telekom or Powertel:
-- if the Deutsche Telekom/Powertel merger has not been completed on or
before December 31, 2001, unless the party seeking to terminate the
Deutsche Telekom/Powertel merger has failed to fulfill its
obligations under the Deutsche Telekom/Powertel merger agreement and
such failure has caused the delay;
-- if the Deutsche Telekom/Powertel merger is permanently restrained,
enjoined or otherwise prohibited by a governmental order, decree,
ruling or other action, and the order, decree, ruling or other action
has become final and nonappealable;
-- at any time that is not less than 15 days after any statute, rule,
decree, order or injunction has been enacted, entered, promulgated or
enforced by any governmental or regulatory authority, other than a
court, that has the effect of making any of the closing conditions
described under "-- Closing Conditions -- Conditions to Each Party's
Obligations to Complete the Deutsche Telekom/Powertel
Merger -- Legality," "-- Closing Conditions -- Conditions to Each
Party's Obligations to Complete the Deutsche Telekom/Powertel
Merger -- Regulatory Approvals" and "Regulatory
Approvals -- Regulatory Approvals Required for the Deutsche
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Telekom/VoiceStream Merger and the Deutsche Telekom/Powertel Merger"
incapable of being satisfied by December 31, 2001; or
-- if Powertel's stockholders fail to approve the Deutsche
Telekom/Powertel merger at the Powertel special meeting; or
- by Powertel:
-- if a condition to the obligations of Powertel to complete the
Deutsche Telekom/Powertel merger is or becomes incapable of being
satisfied prior to December 31, 2001; or
-- if Deutsche Telekom breaches or fails to perform in any material
respect any of its representations, warranties, covenants or other
agreements contained in the Deutsche Telekom/Powertel merger
agreement, which breach or failure cannot be cured by Deutsche
Telekom before December 31, 2001, or, if curable, is not cured by
Deutsche Telekom within 30 days of receipt by Deutsche Telekom of
notice of the breach from Powertel and such breach or failure renders
any condition to the obligation of Powertel to complete the Deutsche
Telekom/Powertel merger incapable of being satisfied prior to
December 31, 2001; or
- by Deutsche Telekom:
-- if Powertel breaches or fails to perform in any material respect any
of its representations, warranties, covenants or other agreements
contained in the Deutsche Telekom/Powertel merger agreement, which
breach or failure cannot be cured by Powertel before December 31,
2001, or, if curable, is not cured by Powertel within 30 days of
receipt by Powertel of notice of the breach from Deutsche Telekom and
such breach or failure renders any condition to the obligations of
Deutsche Telekom to complete the Deutsche Telekom/Powertel merger
incapable of being satisfied prior to December 31, 2001;
-- if a condition to the obligations of Deutsche Telekom to complete the
Deutsche Telekom/Powertel merger is or becomes incapable of being
satisfied prior to December 31, 2001;
-- if, in connection with the grant of any required regulatory approval
relating to the Deutsche Telekom/Powertel merger, Powertel, Deutsche
Telekom, VoiceStream or any of their subsidiaries will be required to
divest or hold separate or otherwise take any action that limits its
freedom of action with respect to Powertel, Deutsche Telekom,
VoiceStream or any of their subsidiaries or any material assets of
Powertel, Deutsche Telekom, VoiceStream or any of their subsidiaries,
or any of the businesses, product lines or assets of Powertel,
Deutsche Telekom, VoiceStream or any of their subsidiaries and such
order, decree, ruling, or other action will have become final and
nonappealable; or
-- if the VoiceStream/Powertel merger agreement has been terminated at
any time prior to the termination or consummation of the Deutsche
Telekom/VoiceStream merger agreement.
Should any of these potential grounds for termination occur, Powertel's
board of directors may or may not exercise its rights to terminate the Deutsche
Telekom/Powertel merger agreement.
Termination Fees Payable to Deutsche Telekom. Powertel has agreed to pay
Deutsche Telekom a termination fee of $150 million plus expenses not to exceed
$10 million if all three of the following events occur:
- after August 26, 2000 and before the Powertel special meeting a
proposal for certain types of alternative transactions is announced or
publicly disclosed and not withdrawn;
- the Deutsche Telekom/Powertel merger agreement is terminated by either
party because Powertel's stockholders do not approve the Deutsche
Telekom/Powertel merger at the Powertel special meeting; and
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- within six months after the termination of the Deutsche
Telekom/Powertel merger agreement, Powertel enters into a definitive
agreement with any third party with respect to certain types of
alternative transactions.
In that circumstance, Powertel would pay to Deutsche Telekom the
termination fee no later than one business day after the signing of the
definitive agreement with the third party.
In the event Powertel is also obligated to pay a termination fee pursuant
to the VoiceStream/Powertel merger agreement, Powertel will instead pay each of
Deutsche Telekom and VoiceStream $75 million plus expenses not to exceed $10
million. For purposes of determining whether a termination fee is payable, the
term "alternative transaction" has the meaning described under "-- Offers for
Alternative Transactions," except that the 20% thresholds are treated as 50%
thresholds, and mergers or business combinations in which Powertel stockholders
would continue to hold at least 65% of the outstanding stock of the entity
surviving the transaction are not considered to be "alternative transactions".
Expenses
Whether or not the Deutsche Telekom/Powertel merger is completed, all costs
and expenses incurred in connection with the Deutsche Telekom/Powertel merger
and the Deutsche Telekom/Powertel merger agreement will be paid by the party
incurring the expense, except that Deutsche Telekom, VoiceStream and Powertel
will share equally the costs and expenses of printing the Form F-4 registration
statement and this document, and Deutsche Telekom and Powertel will each share
equally the costs and expenses of any SEC filing fees with respect to the
Deutsche Telekom/Powertel merger. Deutsche Telekom, VoiceStream and Powertel
have shared the costs and expenses of the filing fees paid under the HSR Act.
Amendment; Waiver; Assignment
Powertel, Deutsche Telekom and merger subsidiary may amend the Deutsche
Telekom/Powertel merger agreement by written agreement prior to completion of
the Deutsche Telekom/Powertel merger, but after Powertel's stockholders have
approved the Deutsche Telekom/Powertel merger agreement, no amendment may be
made which by law requires further stockholder approval without such approval
being obtained.
At any time before the Deutsche Telekom/Powertel merger is completed,
Powertel, Deutsche Telekom and merger subsidiary may:
- extend the time for the performance of any of the obligations or other
acts required by the Deutsche Telekom/Powertel merger agreement; and
- waive any inaccuracies in the representations and warranties or contained
in the Deutsche Telekom/Powertel merger agreement or any document
required to be delivered pursuant to the Deutsche Telekom/Powertel merger
agreement.
Deutsche Telekom, Powertel and merger subsidiary may not assign the
Deutsche Telekom/Powertel merger agreement or any of their rights, interests or
obligations under the Deutsche Telekom/Powertel merger agreement, in whole or in
part, to any other person, without the prior written consent of the non-
assigning parties; except that:
- Deutsche Telekom may assign the Deutsche Telekom/Powertel merger
agreement to an entity which owns more than 80% of the Deutsche Telekom
ordinary shares and which succeeds to all of the rights and obligations
of Deutsche Telekom under the Escrow Agency Agreement executed pursuant
to the Deutsche Telekom/Powertel merger agreement; and
- merger subsidiary may assign the Deutsche Telekom/Powertel merger
agreement to an entity which is a direct, wholly-owned subsidiary of the
entity to which Deutsche Telekom has assigned the agreement under the
immediately preceding clause.
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Important Definition
"material adverse effect." As used in the Deutsche Telekom/Powertel merger
agreement, a "material adverse effect" on any company means any change in or
effect on the business of the company and its subsidiaries that is or is
reasonably likely to be materially adverse to the business, operations or
financial condition of the company.
However, "material adverse effect" does not include the effects of changes
or developments:
- in the wireless telecommunications industry, including regulatory and
political conditions, and not uniquely relating to Deutsche Telekom or
Powertel;
- in the U.S. or European economy;
- in the U.S. or European securities markets; or
- resulting from the announcement or the existence of the Deutsche
Telekom/Powertel merger agreement and the transactions contemplated by
the Deutsche Telekom/Powertel merger agreement.
Amendment and Restatement
The Deutsche Telekom/Powertel merger agreement was originally entered into
between Deutsche Telekom and Powertel on August 26, 2000. On September 28, 2000
the Deutsche Telekom/Powertel merger agreement was amended and restated for the
purpose of making merger subsidiary a party to the agreement and other technical
changes.
On February 8, 2001 the Deutsche Telekom/Powertel merger agreement was
further amended and restated primarily for the purpose of permitting Powertel to
pay a stock dividend of 0.0075 of a Powertel common share for each Powertel
common share outstanding prior to the completion of the Deutsche
Telekom/Powertel merger and, in the event that such dividend is paid, to adjust
correspondingly the exchange ratios for exchange of Powertel preferred stock for
Deutsche Telekom shares pursuant to the Deutsche Telekom/Powertel merger
agreement and to provide that the earliest date that the Deutsche
Telekom/Powertel merger will be completed is May 31, 2001. This amendment also
provided that if all of the conditions to completion of the Deutsche
Telekom/Powertel merger are satisfied or waived as of a date that is earlier
than May 31, 2001, including the condition that no material adverse effect on
Powertel shall have occurred, then after that earlier date Deutsche Telekom will
no longer have the ability to terminate the Deutsche Telekom/Powertel merger
agreement because of any material adverse effect on, or any material inaccuracy
in, a representation or warranty of Powertel.
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DEUTSCHE TELEKOM'S AGREEMENTS WITH STOCKHOLDERS OF POWERTEL
In connection with the execution of the Deutsche Telekom/Powertel merger
agreement, stockholders of Powertel who, in the aggregate, had sufficient voting
power as of the Powertel record date to approve the Deutsche Telekom/Powertel
merger entered into separate stockholder agreements with Deutsche Telekom and
agreed to vote all of their shares in favor of the Deutsche Telekom/Powertel
merger. We summarize the material terms of these agreements below, and this
description is qualified in its entirety by reference to the text of the
agreements, copies of which have been filed as exhibits to Deutsche Telekom's
and VoiceStream's respective registration statements and are incorporated herein
by reference.
The following Powertel stockholders and some of their affiliates have
entered into stockholder agreements with Deutsche Telekom in connection with the
Deutsche Telekom/Powertel merger:
ITC Holding Company, Inc.
SCANA Communications Holdings, Inc.
Sonera Corporation
Donald W. Burton and certain limited partnerships controlled by him
American Water Works Company
Agreement to Vote
Each stockholder agreement obligates the stockholder that is a party to the
agreement to vote all its Powertel shares in favor of the Deutsche
Telekom/Powertel merger and the Deutsche Telekom/Powertel merger agreement and
to vote all of its Powertel shares against any alternative transaction, as
defined in the Deutsche Telekom/Powertel merger agreement and as discussed under
"-- The Deutsche Telekom/ Powertel Merger Agreement -- Offers For Alternative
Transactions," or the liquidation or winding up of Powertel. Each stockholder's
obligation to vote in this manner applies whether or not the Powertel board of
directors continues to recommend the Deutsche Telekom/Powertel merger to the
Powertel stockholders.
Transfer Restrictions and Waiver of Rights
Each stockholder agreement restricts or limits the ability of the
stockholder that is a party to the agreement to sell, transfer, pledge, assign
or otherwise dispose of, including by short sale or the use of derivative or
futures contracts, any shares of, or rights to purchase, Powertel shares or,
until six months after completion of the Deutsche Telekom/Powertel merger,
Deutsche Telekom ADSs or Deutsche Telekom ordinary shares, in each case that are
subject to the stockholder agreement, except in limited circumstances, with
Deutsche Telekom's written consent or as expressly permitted by the stockholder
agreement or pursuant to the Deutsche Telekom/Powertel merger agreement. In that
regard, each stockholder agreement, other than the agreement with American Water
Works Company, provides that:
- until the later of January 1, 2001 and the date of the Powertel special
meeting, the stockholder may not sell, transfer, pledge, assign or
otherwise dispose of, any Powertel shares or rights that are subject to
the stockholder agreement;
- from the later of January 1, 2001 and the date of the Powertel special
meeting, until the earlier of the completion of the Deutsche
Telekom/Powertel merger or the termination of the Deutsche
Telekom/Powertel merger agreement, the stockholder may sell or transfer
up to an aggregate of 17.5% of the total number of Powertel shares owned
by such stockholder, which percentage increases to 21.25% on August 1,
2001 and to 25% on September 1, 2001 if the Deutsche Telekom/Powertel
merger is not completed by those dates;
- from the completion of the Deutsche Telekom/Powertel merger through and
including the three month anniversary of the completion of the Deutsche
Telekom/Powertel merger, the stockholder may not sell or transfer any
Deutsche Telekom ADSs, Deutsche Telekom ordinary shares or securities
convertible into Deutsche Telekom ADSs or Deutsche Telekom ordinary
shares;
- from the day following the three month anniversary of the completion of
the Deutsche Telekom/Powertel merger, through and including the six month
anniversary of the completion of the Deutsche Telekom/Powertel merger,
the stockholder may sell or transfer up to an aggregate of 40%
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of the total number of Deutsche Telekom ADSs or Deutsche Telekom ordinary shares
owned by the stockholder, as calculated pursuant to the stockholder agreement;
and
- after the six month anniversary of the completion of the Deutsche
Telekom/Powertel merger, all sale and transfer restrictions end.
Deutsche Telekom reserves the right to waive the transfer restrictions described
above at any time or from time to time.
Each stockholder, other than American Water Works Company, agreed to waive,
until the earlier of the completion of the Deutsche Telekom/Powertel merger or
termination of the Deutsche Telekom/Powertel merger agreement, any preemptive
rights and, until the earlier of:
- the later of (A) January 1, 2001 and (B) the date of the Powertel special
meeting; and
- the termination of the Deutsche Telekom/Powertel merger agreement,
any registration rights they may have.
Each stockholder also agreed to terminate any of its existing registration
rights agreements with Powertel upon the completion of the Deutsche
Telekom/VoiceStream merger.
In some circumstances, if Deutsche Telekom acquires any other company for
consideration in excess of $15 billion and significant stockholders of the
acquired company enter into agreements or could reasonably be expected to enter
into agreements with Deutsche Telekom that are more favorable to those
stockholders in terms of the obligations to vote in favor of the related
transaction or to refrain from selling or transferring shares, the transfer
restrictions in the stockholder agreements will be modified to reflect the more
favorable provisions or absence of restrictions, as the case may be.
Termination
Each stockholder agreement will terminate, except with respect to the
transfer restrictions, which will terminate as set forth above, and the
agreement to vote, which will terminate upon the earlier of the completion or
termination of the Deutsche Telekom/Powertel merger agreement, upon the earliest
to occur of:
- the completion of the Deutsche Telekom/Powertel merger;
- the termination of the Deutsche Telekom/Powertel merger agreement; and
- August 26, 2002.
No Solicitation
Each stockholder agrees not to solicit, initiate or participate in, and not
to authorize any representatives to solicit, initiate or participate in,
discussions or negotiations regarding transactions or business combinations
between Powertel and a company other than Deutsche Telekom, except as otherwise
permitted by the Deutsche Telekom/Powertel merger agreement. See "-- The
Deutsche Telekom/Powertel Merger Agreement -- Offers for Alternative
Transactions."
The Stockholder Agreement with American Water Works Company
The transfer restrictions described above applicable to each of the
stockholder agreements do not apply to American Water Works Company. The
American Water Works Company stockholder agreement only restricts transfers of
Powertel shares by the American Water Works Company as described below:
- until the date of the Powertel special meeting, the American Water Works
Company may not sell, transfer, pledge, assign or otherwise dispose of,
any Powertel shares or rights that are subject to its stockholder
agreement; and
- until the date of the Powertel special meeting, the American Water Works
Company may not effect, directly or indirectly, or through any
arrangement with a third party pursuant to which such
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third party may effect, directly or indirectly, any short sales of
Powertel shares that are subject to its stockholder agreement, as well as
any short sales of Deutsche Telekom ADS, Deutsche Telekom ordinary shares
or securities convertible into Deutsche Telekom ADSs or Deutsche Telekom
ordinary shares that are subject to the agreement.
DEUTSCHE TELEKOM'S AGREEMENT WITH JOINT VENTURE PARTNERS OF POWERTEL
In connection with the execution of the Deutsche Telekom/Powertel merger
agreement, Deutsche Telekom entered into separate agreements with Eliska
Wireless Investors I, L.P. and Sonera Holding B.V., joint venture partners of
Powertel. We summarize the material terms of these agreements below and the
following summaries are qualified in their entirety by reference to the text of
the agreements, copies of which have been filed as an exhibit to Deutsche
Telekom's and VoiceStream's respective registration statements and are
incorporated herein by reference.
Agreement with Eliska Wireless Investors I, L.P.
Under the agreement with Eliska Wireless Investors, Deutsche Telekom agreed
to assume on the date the Deutsche Telekom/Powertel merger is completed various
obligations of Powertel under an existing agreement relating to Eliska Wireless
Investors' rights, exercisable at various times, to exchange its ownership
interest in an affiliate of Eliska Wireless for shares or cash. Eliska Wireless
Investors agreed that its registration rights under an existing agreement will
be terminated on the date the Deutsche Telekom/Powertel merger is completed.
Agreement with Sonera Holding B.V.
Deutsche Telekom has agreed to assume, on the date the Deutsche
Telekom/Powertel merger is completed, obligations under an existing agreement
between Powertel and Sonera Holding B.V. relating to the DiGiPH transaction,
including, without limitation, Sonera Holding B.V.'s right to exchange its
ownership interest in an affiliate of Eliska Wireless for Deutsche Telekom
shares.
THE VOICESTREAM/POWERTEL MERGER AGREEMENT
The following is a summary of the material provisions of the
VoiceStream/Powertel merger agreement. This summary is qualified in its entirety
by reference to the VoiceStream/Powertel merger agreement, a copy of which is
attached as Annex C to this proxy statement/prospectus and is incorporated
herein by reference. VoiceStream and Powertel stockholders are urged to read the
VoiceStream/Powertel merger agreement in its entirety, as it is the legal
document governing the VoiceStream/Powertel merger. This section assumes that
the VoiceStream/Powertel merger will occur. You should remember, however, that
the VoiceStream/Powertel merger will not occur if the Deutsche
Telekom/VoiceStream merger occurs.
The VoiceStream/Powertel Merger
A Delaware corporation formed by VoiceStream will merge with and into
Powertel, and, as a result, Powertel will become a wholly-owned subsidiary of
VoiceStream.
Effective Time and Timing of Closing
The VoiceStream/Powertel merger will be completed and become effective when
Powertel files a certificate of merger with the Secretary of State of the State
of Delaware or at such later time as is specified in the certificate of merger
in accordance with Delaware law. We expect the VoiceStream/ Powertel merger to
become effective on the same day as the closing of the VoiceStream/Powertel
merger. The closing of the VoiceStream/Powertel merger will take place on the
fifth business day after the conditions to the VoiceStream/Powertel merger have
been satisfied or waived, or on such other date as VoiceStream and Powertel may
agree. In addition, on the closing date of the VoiceStream/Powertel
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merger or as soon as possible after the closing date, VoiceStream and Powertel
will undertake a number of additional actions, including making filings with
regulatory and stock exchange authorities, necessary to permit the issuance of
the VoiceStream/Powertel merger consideration under Delaware law and the rules
of the Nasdaq Stock Market.
Consideration To Be Received in the VoiceStream/Powertel Merger
In the VoiceStream/Powertel merger, holders of Powertel common shares will
receive for each of their Powertel common shares a number of VoiceStream common
shares determined as follows:
- 0.75 of a VoiceStream common share if the VoiceStream average closing
price is $113.33 or below;
- 0.65 of a VoiceStream common share if the VoiceStream average closing
price is $130.77 or above; or
- if the VoiceStream average closing price is greater than $113.33 and less
than $130.77, the quotient determined by dividing $85.00 by the
VoiceStream average closing price.
We refer to the number of VoiceStream common shares a Powertel stockholder
will receive in the VoiceStream/Powertel merger in exchange for their Powertel
common shares as the "conversion number". The conversion number is subject to
adjustment as described below.
Holders of Powertel preferred shares will receive for each Powertel
preferred share the right to receive a number of VoiceStream common shares
determined by multiplying the conversion number by the sum of:
- the number of Powertel common shares into which such Powertel preferred
share would be converted as of the completion of the VoiceStream/Powertel
merger, plus
- with respect to Powertel Series E preferred shares and Series F preferred
shares, the number of Powertel common shares that represent accrued or
declared but unpaid dividends on those Powertel preferred shares.
The "VoiceStream average closing price" means the volume weighted average
closing price, based on the Nasdaq composite volume published by The Wall Street
Journal, of the VoiceStream common shares as publicly reported on the Nasdaq
Stock Market as of 4:00 p.m. eastern time on 10 trading days randomly selected
from the 20 trading-day period ending five trading days prior to the completion
of the VoiceStream/Powertel merger.
Adjustment of Conversion Number if Maximum Share Amount is Exceeded. The
conversion number was determined assuming that at the time the
VoiceStream/Powertel merger is completed, the aggregate number of Powertel
common shares outstanding on a fully diluted basis and adjusted for specific
commitments to issue Powertel common shares, excluding Powertel common shares
issuable as dividends after August 26, 2000 on the Series E preferred shares and
Series F preferred shares, will not exceed the "maximum share amount". In this
document we refer to this aggregate number of Powertel common shares as the
"adjusted fully diluted shares amount." The maximum share amount is 55,742,000
and may be reduced as set forth in the VoiceStream/Powertel merger agreement.
The conversion number is subject to adjustment in the event that the adjusted
fully diluted shares amount as of the date the VoiceStream/ Powertel merger is
completed exceeds the maximum share amount. In the event of an adjustment, the
effect will be to cap the number of VoiceStream common shares that will be
issued in the VoiceStream/ Powertel merger and to reduce the number of
VoiceStream common shares to be received by Powertel stockholders, optionholders
and warrantholders in the VoiceStream/Powertel merger in exchange for each of
their Powertel common shares or Powertel preferred shares, as the case may be.
We illustrate below how the adjustment mechanism will be used.
- Step 1. Derive the adjusted fully diluted shares amount: The adjusted
fully diluted shares amount is the sum of the number of outstanding
Powertel common shares, less the number of shares issuable
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as dividends after August 26, 2000 on the Series E preferred shares and
Series F preferred shares, plus
-- the number of Powertel common shares issuable upon conversion of the
Powertel preferred shares;
-- the number of Powertel common shares issuable pursuant to the
exercise of Powertel stock options and Powertel warrants;
-- the number of Powertel common shares issuable pursuant to Powertel
restricted stock awards;
-- the number of Powertel common shares issuable pursuant to the
exercise of the put rights held by Sonera Holding B.V. and Eliska
Wireless Investors, unless such rights have been terminated;
-- the number of Powertel common shares issuable pursuant to the stock
purchase agreement between Powertel and Sonera Holding B.V., unless
this stock purchase agreement has been terminated;
-- the number of Powertel common shares issuable pursuant to the
exercise of any stock appreciation rights, phantom stock rights or
other contractual rights the value of which is determined in whole or
in part by the value of any Powertel shares; and
-- the number of Powertel common shares issuable pursuant to any other
securities outstanding, which are convertible into, or exercisable or
exchangeable for, Powertel common shares.
- Step 2. Derive the adjustment factor: The adjustment factor is a fraction
(a) the numerator of which is 55,742,000, as it may be adjusted in
accordance with the VoiceStream/Powertel merger agreement, and (b) the
denominator of which is the adjusted fully diluted shares amount.
- Step 3. Derive the adjusted conversion number: The conversion number will
be reduced by multiplying the conversion number by the adjustment factor.
- Step 4. Derive the adjusted stock consideration: Each outstanding
Powertel common share, each Powertel common share issuable upon the
exercise of outstanding Powertel warrants and Powertel stock options and
each Powertel preferred share will then be converted in the VoiceStream/
Powertel merger into the right to receive a number of VoiceStream common
shares equal to the adjusted conversion number calculated pursuant to
Step 3.
Example. If the adjusted fully diluted shares amount exceeds 55,742,000, as
it may be adjusted in accordance with the VoiceStream/Powertel merger agreement,
we would calculate the number of VoiceStream common shares into which each
Powertel share will be converted as illustrated above. Assuming that the
adjusted fully diluted shares amount is 55,795,000, then the adjustment factor
would be 0.9991. If you own 100 Powertel common shares and the VoiceStream
average closing price is $110.00 under these circumstances, you would receive
the amount of VoiceStream common shares equal to 0.75 multiplied by 0.9991,
multiplied by the number of shares you hold, or 100, for a total of 74
VoiceStream common shares, plus cash for 0.929 of a VoiceStream common share.
Powertel stockholders will not receive fractional VoiceStream common shares
and instead will receive an amount of cash calculated in the manner described
under "-- Exchange of Certificates Representing Powertel Shares."
Other Potential Adjustments. The conversion number will be adjusted in the
event that one of the following occurs or the record date for one of the
following is set before the completion of the VoiceStream/Powertel merger:
- any reclassification, stock-split or stock dividend with respect to the
VoiceStream common shares or Powertel common shares;
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- any change, exchange or conversion of VoiceStream common shares into
other securities or property; or
- any dividend or distribution with respect to VoiceStream common shares.
Adjustment of Conversion Number in Connection with the 0.0075 Permitted Stock
Dividend
The VoiceStream/Powertel merger agreement provides that in the event
VoiceStream and/or Powertel pays the 0.0075 stock dividend discussed previously
in this document in connection with the Deutsche Telekom/VoiceStream merger
agreement and the Deutsche Telekom/Powertel merger agreement, as applicable, the
calculation of the conversion number will be adjusted as appropriate so that the
aggregate consideration received by Powertel stockholders in the
VoiceStream/Powertel merger following such stock dividend will be equivalent to
the aggregate consideration Powertel stockholders would have received if the
stock dividend had not been paid. For example, if VoiceStream pays a dividend of
0.0075 of a VoiceStream common share for each VoiceStream common share
outstanding and Powertel pays a stock dividend of 0.0075 of a Powertel common
share for each Powertel common share outstanding, the conversion number will be
0.65 if the average closing price of the VoiceStream common shares is $129.80 or
above and 0.75 if the average closing price of VoiceStream common shares is
$112.49 or below. If the average closing price of VoiceStream common shares is
greater than $112.49 and less than $129.80, the conversion number will be the
quotient determined by dividing $84.37 by the average closing price of
VoiceStream common shares.
Treatment of Powertel Warrants
VoiceStream will assume all obligations of Powertel with respect to any
warrants to purchase Powertel common shares granted pursuant to the warrant
agreement dated February 7, 1996 between Powertel and Bankers Trust Company, as
warrant agent, outstanding at the time the VoiceStream/Powertel merger is
completed.
Exchange of Certificates Representing Powertel Shares
ChaseMellon Shareholder Services LLC will act as exchange agent in the
VoiceStream/Powertel merger. Shortly after the VoiceStream/Powertel merger is
completed, ChaseMellon will mail to each registered holder of Powertel common
shares and Powertel preferred shares a letter of transmittal which the holder
must properly complete and deliver to the exchange agent with the holder's stock
certificates.
After a record holder of Powertel shares delivers certificates for those
shares and a properly completed letter of transmittal to the exchange agent, the
exchange agent will deliver to the holder:
- the number of whole VoiceStream common shares included in the merger
consideration in respect of such Powertel shares; and
- after giving effect to any required tax withholdings, a check in the
amount of:
-- cash in lieu of any fractional interest in VoiceStream common shares
on the terms described below, plus
-- any cash dividends or other distributions that the holder has the
right to receive, including dividends or other distributions payable
with respect to the holders of VoiceStream common shares with a
record date after the completion of the VoiceStream/Powertel merger
and a payment date on or before the date the holder properly delivers
Powertel stock certificates to the exchange agent.
The exchange agent will not deliver fractional VoiceStream common shares in
connection with the VoiceStream/Powertel merger. Instead, each holder of
Powertel shares exchanged in the VoiceStream/Powertel merger who would otherwise
have received a fraction of a VoiceStream common share will be entitled to
receive an amount in cash determined by multiplying the per share closing price
on the Nasdaq
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Stock Market of VoiceStream common shares on the date on which the
VoiceStream/Powertel merger is completed by the fractional share to which the
holder would otherwise be entitled.
Powertel shares that are surrendered to the exchange agent will be
canceled. No interest will be paid or accrued on any amount payable to holders
of Powertel shares. In addition, no holder of Powertel shares will receive any
dividends or other distributions with respect to VoiceStream common shares to
which the holder is entitled under the VoiceStream/Powertel merger agreement
until that holder's Powertel share certificate is surrendered to the exchange
agent with a properly completed letter of transmittal.
If any VoiceStream common shares are to be delivered to a person other than
the registered holder of the Powertel shares represented by the certificates
surrendered to the exchange agent:
- those Powertel certificates must be properly endorsed or otherwise be in
proper form for transfer; and
- the person requesting the delivery must pay to the exchange agent any
transfer or other taxes required as a result of delivery to a person
other than the registered holder, or establish to the satisfaction of the
exchange agent that such tax has been paid or is not payable.
VoiceStream or the exchange agent will be entitled to deduct and withhold
from the consideration otherwise payable pursuant to any holder of Powertel
shares any amounts they are required to deduct and withhold with respect to the
making of such payment under the U.S. tax code or under any provision of state,
local or foreign tax law.
Treatment of Powertel Options and Restricted Stock
Powertel Options. If the VoiceStream/Powertel merger is completed, each
outstanding Powertel stock option will be converted into an option to purchase
the number of VoiceStream common shares determined by multiplying the number of
Powertel common shares subject to the option immediately prior to completion of
the VoiceStream/Powertel merger by the applicable conversion number. The
conversion number is subject to adjustment as described under "-- Consideration
To Be Received in the VoiceStream/Powertel Merger." The exercise price per
VoiceStream common share for each of these options will be the exercise price
per Powertel common share applicable to that option immediately prior to the
completion of the VoiceStream/Powertel merger divided by the conversion number
increased to the nearest whole cent. The replacement options will generally have
the same terms and conditions as were applicable under the Powertel option
plans.
Powertel Restricted Stock. At the time the VoiceStream/Powertel merger is
completed, the Powertel restricted stock plan will terminate and any unvested
Powertel restricted stock awards will become fully vested, except as otherwise
provided in the individual restricted stock award agreements.
Dissenting Shares
If appraisal rights for any Powertel preferred shares are perfected by any
holder of preferred shares then those shares will be treated as described under
"The Deutsche Telekom/Powertel Merger and the VoiceStream/Powertel
Merger -- Appraisal Rights."
Representations and Warranties
The VoiceStream/Powertel merger agreement contains a number of
representations and warranties made by VoiceStream and Powertel to each other,
including those regarding:
- due organization, good standing and qualification;
- capital structure;
- corporate authority to enter into the VoiceStream/Powertel merger
agreement and the stockholder agreements and lack of conflicts with
corporate governance documents, contracts or laws;
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- governmental filings;
- accuracy of SEC reports, financial statements and information provided
for inclusion in this document by the parties;
- absence of certain material changes or events since December 31, 1999;
- permits and licenses;
- compliance with laws;
- absence of undisclosed liabilities and pending litigation;
- the receipt of a fairness opinion from a financial advisor;
- finders or brokers fees;
- tax matters, including the absence of facts inconsistent with the
qualification of the VoiceStream/Powertel merger as a reorganization
under Section 368(a) of the U.S. tax code;
- the vote necessary to approve the VoiceStream/Powertel merger agreement;
and
- absence of affiliate transactions.
In addition, Powertel made representations and warranties to VoiceStream as
to:
- employee benefit plans;
- employees and employment practices;
- Section 203 of the Delaware General Corporation Law and other
anti-takeover laws enacted under Georgia or Delaware law applicable to
Powertel;
- intellectual property; and
- material contracts.
In addition, the VoiceStream/Powertel merger agreement contains representations
and warranties made by the merger subsidiary to Powertel representing some of
the above matters.
Conduct of Business Pending the VoiceStream/Powertel Merger
Covenants of Powertel. Except as contemplated by the VoiceStream/Powertel
merger agreement or the Deutsche Telekom/Powertel merger agreement, Powertel has
agreed that, until the earlier of completion of the VoiceStream/Powertel merger
or the termination of the VoiceStream/Powertel merger agreement, it will carry
on its and its subsidiaries' business in the ordinary course in all material
respects. Until the VoiceStream/Powertel merger is completed or the
VoiceStream/Powertel merger agreement is terminated, Powertel and its
subsidiaries will not take the actions listed in the VoiceStream/Powertel merger
agreement, which includes the following actions, without VoiceStream's prior
written consent, except under limited circumstances specified in the
VoiceStream/Powertel merger agreement:
- declare, set aside or pay dividends on, or make distributions in respect
of, Powertel shares, or split, combine or reclassify any outstanding
Powertel shares;
- redeem or repurchase any Powertel shares, except as required by
Powertel's certificate of incorporation or the Powertel stock option
plans;
- issue, deliver, pledge, sell or encumber any Powertel shares or any
options or other rights to acquire those shares;
- Important Exception:
-- Powertel may issue Powertel common shares upon the closing of the
DiGiPH transaction and the performance of the agreements entered
into in connection with the DiGiPH transaction,
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including the stock purchase agreement between Powertel and Sonera
Holding B.V., the put agreement dated May 30, 2000 between Powertel,
Eliska Wireless Investors and Sonera Holding B.V. and the put
agreement dated May 30, 2000 between Powertel and Sonera Holding
B.V.; or otherwise pursuant to previously disclosed contractual
obligations existing prior to the execution of the
VoiceStream/Powertel merger agreement; and
-- Powertel may issue rights to acquire Powertel shares and may issue
shares pursuant to such rights for an aggregate of 575,000 Powertel
common shares pursuant to annual incentive grants, grants to newly
hired employees and grants to be made pursuant to the DiGiPH
transaction;
- adopt, amend or propose to amend any stockholder rights plan or related
rights plan;
- acquire any business, corporation or partnership, or substantially all of
the assets of any of the foregoing;
- Important Exceptions:
-- Powertel is permitted to enter into acquisition transactions which
involve individually, or in the aggregate, a purchase price of
$500,000 or less without VoiceStream's consent;
-- Powertel is permitted to make capital expenditures in accordance
with its capital budget for the fiscal years 2000 and 2001; and
-- Powertel may enter into transactions in connection with the DiGiPH
transaction;
- authorize or make capital expenditures other than those for less than the
aggregate annual amount contained in Powertel's capital budget for the
years 2000 and 2001;
- sell, lease, encumber or otherwise dispose of any of its assets;
- increase the compensation or reimbursement allowances payable to an
officer or director;
- enter into employment or severance agreements with, or establish any new
benefit plan, other than in the ordinary course of business consistent
with past practice or amend any existing Powertel benefit plan or take
any action inconsistent with the cash bonus, retention bonus, incentive
bonus, severance, equity awards and other plans set out in the
VoiceStream/Powertel merger agreement, which are described in more detail
below;
- make any awards under an existing Powertel benefit plan for the benefit
of any director, officer or employee, except in the ordinary course of
business consistent with past practices;
- except as required by a change in law or U.S. GAAP, make any change in
its method of accounting or its fiscal year;
- enter into, modify or amend in any material respect or terminate any
material contract or agreement to which Powertel is a party, or waive,
release or assign any material rights or claims;
- amend any term of any of its outstanding securities in any material
respect;
- adopt a plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other material reorganization;
- incur or guarantee material indebtedness, including refinancing existing
indebtedness;
- create, incur, assume, or allow to exist material liens upon any property
or assets, except for liens arising in the ordinary course of business or
to secure indebtedness or arising by operation of law;
- guarantee any indebtedness, leases, dividends or other third party
obligations;
- make any loan or capital contributions to or investment in any person,
other than loans, capital contributions or investments made in the
ordinary course of business, as required in connection with the DiGiPH
transaction, or made to wholly-owned subsidiaries;
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- enter into any agreement that materially restricts Powertel, or after
completion of the VoiceStream/Powertel merger could materially restrict
VoiceStream or the surviving corporation from engaging in the business of
providing wireless telecommunications services or developing wireless
telecommunications technology anywhere in the world, or otherwise from
engaging in any other business;
- initiate, settle, appeal or propose to settle, initiate or appeal any
material litigation, investigation, arbitration, proceeding or other
claim;
- make any material tax election or enter into any settlement or compromise
of any material tax liability;
- take action that could reasonably be expected to make any representation
or warranty of Powertel under the VoiceStream/Powertel merger agreement
inaccurate and have a material adverse effect on Powertel at the
completion of the VoiceStream/Powertel merger;
- adopt, amend or propose to amend any Powertel benefit plans or make any
discretionary contributions to any Powertel benefit plan which is also an
"employee pension benefit plan" or "employee welfare benefit plan" as
defined in the Employee Retirement Income Security Act of 1974, as
amended, other than as required by law or as may be required to maintain
compliance with the U.S. tax code and except for other limited
exceptions;
- file any amended tax returns if the result would be a material increase
in Powertel's tax liability;
- take action that would reasonably be expected to materially impair or
delay obtaining the necessary regulatory approvals to complete the
VoiceStream/Powertel merger;
- take any action that would be reasonably likely to prevent or impede the
VoiceStream/Powertel merger from qualifying as a reorganization within
the meaning of Section 368(a) of the U.S. tax code;
- take any action that would cause the Powertel common shares to cease to
be quoted on the Nasdaq Stock Market;
- during the five business days prior to the completion of the
VoiceStream/Powertel merger, take or omit to take any action that could
increase the number of Powertel shares outstanding on a fully diluted
basis; or
- enter into any contract, agreement or arrangement to do any of the
foregoing.
Covenants of VoiceStream. VoiceStream has agreed that until the
VoiceStream/Powertel merger is completed, VoiceStream and its subsidiaries will
not take the actions listed in the VoiceStream/Powertel merger agreement, which
includes the following actions, without Powertel's prior written consent, except
under limited circumstances specified in the VoiceStream/Powertel merger
agreement:
- amend its certificate of incorporation or bylaws or the equivalent
organizational documents of any of its subsidiaries in any manner that
would be adverse to Powertel or its stockholders;
- reclassify, recapitalize, restructure or engage in a similar transaction
that results in the receipt by holders of VoiceStream common shares of
any assets, property or cash for such VoiceStream common shares;
- take action that would or could reasonably be expected to prevent, impair
or materially delay the ability of VoiceStream to complete the
VoiceStream/Powertel merger;
- take action that would reasonably be likely to materially adversely
affect or materially adversely delay the ability of the parties to obtain
any required regulatory approval or to complete the transactions
contemplated in the VoiceStream/Powertel merger agreement;
- fail to make in a timely manner any filings with the SEC required under
the Securities Act or the Exchange Act;
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- except as required by a change in law or U.S. GAAP, make any change in
its method of accounting or its fiscal year; or
- enter into or acquire any new line of business that is material to
VoiceStream and is not strategically related to the current business or
operations of VoiceStream.
Offers for Alternative Transactions
Powertel has agreed not to, has agreed not to permit any of its
subsidiaries to, has agreed not to authorize or permit any of its or their
respective officers, directors or employees to, and has agreed to use its best
efforts to cause its advisors and representatives not to:
- solicit, initiate or encourage, or knowingly take any other action
designed to facilitate, any alternative transaction, which we define
below, to the VoiceStream/Powertel merger; or
- continue or participate in any discussions or negotiations regarding any
alternative transaction to the VoiceStream/Powertel merger.
However, if at any time before Powertel stockholders approve the
VoiceStream/Powertel merger, Powertel receives an unsolicited proposal for an
alternative transaction, then Powertel may, after giving VoiceStream three
business days' advance written notice:
- furnish information with respect to Powertel pursuant to a
confidentiality agreement substantially similar to the confidentiality
agreement in place between VoiceStream and Powertel; and
- engage in discussions and negotiations with the persons that made such
proposal;
but only if:
- the Powertel board of directors has determined in good faith, after
receiving advice from outside counsel, that providing information to the
third party or participating in negotiations or discussions could be
reasonably expected to result in a superior proposal, which we define
below, being made; and
- Powertel is not otherwise in breach of its obligations described above
not to solicit or engage in discussions regarding an alternative
transaction.
Important Definitions:
"alternative transaction" means a proposal or intended proposal regarding
any of the following:
- a transaction or series of transactions in which any third party would
acquire, directly or indirectly, beneficial ownership of outstanding
shares representing more than 20% of the voting power of the outstanding
Powertel shares or pursuant to a tender offer or exchange offer;
- any acquisition of or business combination with Powertel or any of its
subsidiaries, as applicable, by a merger or other business combination;
or
- any transaction in which any third party acquires or would acquire,
directly or indirectly, control of assets of Powertel or any of its
subsidiaries for consideration equal to 20% or more of the fair market
value of all of the outstanding Powertel shares.
An alternative transaction does not include the Deutsche Telekom/Powertel merger
or the Deutsche Telekom/Powertel merger agreement.
"superior proposal" means any proposal made by a third party to enter into
an alternative transaction which the Powertel board of directors determines in
its good faith judgment based on, among other things, the advice of a financial
advisor of nationally recognized reputation, to be more favorable to Powertel's
stockholders than the VoiceStream/Powertel merger taking into account all
relevant factors, including whether, in the good faith judgment of the Powertel
board of directors, the third party is reasonably able to finance the proposed
transaction.
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Powertel also has agreed to notify VoiceStream promptly of any request for
information or of any proposal in connection with an alternative transaction,
including the material terms of the request or proposal and the identity of the
person making it, and Powertel has agreed to keep VoiceStream fully informed of
the status of any alternative transaction. In addition, Powertel agreed to cease
all activities, discussions or negotiations with respect to an alternative
transaction that existed at the time the VoiceStream/Powertel merger agreement
was signed.
Powertel Board of Directors' Recommendation
The VoiceStream/Powertel merger agreement requires the Powertel board of
directors:
- to recommend that the Powertel stockholders approve the
VoiceStream/Powertel merger agreement;
- not to withdraw, modify or qualify, or to propose publicly to withdraw,
modify or qualify, its recommendation in a manner adverse to VoiceStream;
- not to approve or recommend, or to propose publicly to approve or
recommend any alternative transaction; and
- not to cause Powertel to agree to engage in any alternative transactions.
However, if the Powertel board of directors receives a superior proposal
before Powertel stockholders approve the VoiceStream/Powertel merger agreement,
the Powertel board of directors may inform the Powertel stockholders that it no
longer recommends approval of the VoiceStream/Powertel merger agreement, if:
- Powertel sends VoiceStream written notice that Powertel has received a
superior proposal, which notice describes the terms of the superior
proposal and the identity of the proposer, and that Powertel intends to
change its recommendation regarding the VoiceStream/Powertel merger; and
- five business days have passed since VoiceStream received the notice. In
addition, Powertel must give VoiceStream reasonable opportunity to make
adjustments in the terms of the VoiceStream/ Powertel merger agreement
that would enable the Powertel board of directors to maintain its
recommendation to approve the VoiceStream/Powertel merger agreement.
The VoiceStream/Powertel merger agreement also permits Powertel to comply
with Rule 14d-9 or Rule 14e-2(a) under the Exchange Act or to make any other
disclosure to Powertel stockholders if, in the good faith judgment of the
Powertel board of directors, after receipt of advice from outside counsel,
failure to disclose would result in a reasonable likelihood that the Powertel
board of directors would breach its duties to Powertel stockholders under
Delaware law.
Submission of VoiceStream/Powertel Merger Agreement to Stockholder
Vote. The VoiceStream/Powertel merger agreement requires Powertel to submit the
VoiceStream/Powertel merger agreement to a stockholder vote at the Powertel
special meeting even if the Powertel board of directors no longer recommends
approval of the VoiceStream/Powertel merger.
Additional Agreements
The VoiceStream/Powertel merger agreement contains a number of other
covenants and agreements by or between VoiceStream and Powertel on subjects
including:
- notification of material facts, events or circumstances; and
- registration rights of principal Powertel stockholders.
In addition, VoiceStream has agreed to use its reasonable best efforts to
cause the new VoiceStream common shares to be included on the Nasdaq Stock
Market.
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Senior Discount Notes and Senior Notes
VoiceStream has also agreed to cause the surviving corporation to commence
offers to repurchase certain outstanding publicly-traded notes of Powertel
pursuant to the terms of their indentures within 30 days following the
completion of the VoiceStream/Powertel merger.
Efforts to Complete the VoiceStream/Powertel Merger
VoiceStream and Powertel have agreed to:
- use their reasonable best efforts to take all actions, and to cooperate
with the other party in doing, all things necessary to complete the
VoiceStream/Powertel merger and the other transactions contemplated by
the VoiceStream/Powertel merger agreement;
- take all actions necessary to comply promptly with all legal requirements
with respect to the VoiceStream/Powertel merger;
- obtain any consent by any governmental entity or other public or private
third party required to be obtained; and
- oppose entry or lift the effects of any injunction or other order
adversely affecting their ability to consummate the transactions
contemplated by the VoiceStream/Powertel merger agreement.
- Important exceptions:
-- VoiceStream will not be required, nor, without the consent of
VoiceStream, will Powertel be permitted, to divest or hold separate
or otherwise take or commit to take any action that limits its
freedom of action with respect to Powertel, VoiceStream or any of
their subsidiaries or any material portion of the assets of Powertel,
VoiceStream or any of their subsidiaries or any of the business,
product lines, or assets of Powertel, VoiceStream or any of their
subsidiaries; and
-- In connection with any filing or submission required or action to be
taken to consummate the VoiceStream/Powertel merger, Powertel will
not, without VoiceStream's prior written consent, commit to divest
any assets of the business of Powertel and its subsidiaries if such
divested assets and/or businesses are material to the assets or
profitability of Powertel and its subsidiaries taken as a whole.
Indemnification and Insurance
The surviving corporation of the VoiceStream/Powertel merger is required by
the VoiceStream/ Powertel merger agreement to maintain in effect the current
provisions regarding indemnification of officers and directors contained in the
charter and bylaws and any indemnification agreements of Powertel and each of
its subsidiaries.
Prior to the completion of the VoiceStream/Powertel merger, Powertel has
the right, subject to VoiceStream's prior written approval, to obtain a "tail"
coverage directors' and officers' liability insurance policy providing coverage
in amounts and on terms consistent with Powertel's existing insurance policy for
a period of six years after the completion of the VoiceStream/Powertel merger.
If Powertel does not obtain this insurance prior to the completion of the
VoiceStream/Powertel merger, VoiceStream has agreed to cause the surviving
corporation to continue to provide directors' and officers' liability insurance
for a period of six years after the completion of the VoiceStream/Powertel
merger. However, the surviving corporation is not required to expend in any year
an amount in excess of 250% of the last annual premium paid by Powertel prior to
August 26, 2000. If the aggregate expenditure on coverage exceeds that amount,
the surviving corporation will purchase as much insurance as can be obtained for
that amount.
Employee Benefits
Following the completion of the VoiceStream/Powertel merger, VoiceStream
will take all necessary action so that each current or former Powertel employee
who was eligible to participate in a Powertel
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benefit plan before the VoiceStream/Powertel merger will either be eligible to
continue participation in such Powertel benefit plan or participate in a
corresponding employee benefit plan maintained by VoiceStream or any of its
subsidiaries. The VoiceStream/Powertel merger agreement also specifies the
treatment of pre-existing conditions, exclusions and waiting periods with
respect to current and former employees of Powertel and its subsidiaries under
any welfare or fringe benefit plans of VoiceStream in which such employees and
former employees participate in after completion of the VoiceStream/Powertel
merger.
Powertel agreed to enact and implement the plans described below, after
approval of the specifics of each plan by Deutsche Telekom and VoiceStream,
which plans are to be effective as of the completion of the VoiceStream/Powertel
merger:
- a $3,000 cash bonus payable to each full-time employee of Powertel who is
continuously employed by Powertel during the period starting December 31,
2000 and ending three months after the completion of the
VoiceStream/Powertel merger, or whose job is eliminated within that
period, with such payment prorated for part-time employees and for those
employees who are hired after December 31, 2000;
- a $20 million cash retention bonus to be paid to 150-300 key employees,
as determined by the chief executive officer and chief operating officer
of each of VoiceStream and Powertel, with such payments to be earned and
payable over a two-year period following the completion of the
VoiceStream/Powertel merger;
- a $20 million cash incentive bonus pool to be paid to the same 150-300
key employees, as determined by the chief executive officer and chief
operating officer of each of VoiceStream and Powertel, with such payments
to be earned and payable in September 2001 for performance during the
first and second calendar quarters of 2001, and in January 2002 for
performance during the third and fourth calendar quarters of 2001;
- a severance plan for employees of Powertel employed immediately before
the completion of the VoiceStream/Powertel merger whose employment is
terminated due to job elimination resulting from the VoiceStream/Powertel
merger. Severance payments will represent a minimum of four weeks base
salary or hourly equivalent (not including overtime) and targeted bonus,
plus two weeks per year of actual service to Powertel or VoiceStream,
respectively, up to a maximum of 20 weeks. Any payments under the
severance plan will be reduced by any payments received by the affected
employee under the cash bonus, retention bonus or incentive bonus plans
described above. To obtain benefits under this plan, an employee must
agree to release the surviving corporation from all claims against
Powertel, Deutsche Telekom and VoiceStream; and
- Powertel will be allowed to issue up to an aggregate of 575,000 options
prior to the completion of the VoiceStream/Powertel merger, to Powertel
employees in yearly performance grants, to DiGiPH PCS employees that
become Powertel employees and in connection with offers of employment
outstanding as of August 26, 2000. Employees whose employment is
terminated due to job elimination resulting from the VoiceStream/Powertel
merger will receive change of control accelerated vesting of their
options if their job is eliminated within 18 months of the completion of
the VoiceStream/Powertel merger. Individuals receiving change of control
vesting will not be eligible for actual or potential remaining payments
under the cash bonus, retention bonus or incentive bonus plans but will
be eligible for severance payments, subject to certain reductions.
Closing Conditions
Conditions to Each Party's Obligations to Complete the VoiceStream/Powertel
Merger. VoiceStream's and Powertel's respective obligations to complete the
VoiceStream/Powertel merger are subject to the satisfaction or waiver of
conditions, including the following.
- Stockholder Approval. The holders of a majority of the outstanding
voting power of the Powertel common shares and Series A preferred shares
voting together as a single class with the Series A
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preferred shares voting on an as-converted-to-common shares basis, and
the holders of two-thirds of each class of the Powertel Series A
preferred shares, Series B preferred shares, Series D preferred shares,
Series E preferred shares and Series F preferred shares, each voting as a
separate class, having approved and adopted the VoiceStream/Powertel
merger agreement.
- No Injunction or Restraint. The absence of any law, order or injunction
preventing the completion of the VoiceStream/Powertel merger or which
could reasonably be expected to have a material adverse effect on
Powertel.
- Nasdaq Stock Market Listings. Authorization for listing on the Nasdaq
Stock Market of the VoiceStream common shares issuable in accordance with
the VoiceStream/Powertel merger.
- HSR Act. Expiration or termination of any waiting period under the HSR
Act applicable to the VoiceStream/Powertel merger.
- Registration Statement Effective. No stop order suspending the
effectiveness of the Form S-4 registration statement or this proxy
statement/prospectus will have been issued by the SEC, and no proceedings
for that purpose will have been initiated or, to the knowledge of
VoiceStream or Powertel, threatened by the SEC.
- Termination of Other Merger Agreements. Termination of the Deutsche
Telekom/VoiceStream merger agreement and the Deutsche Telekom/Powertel
merger agreement in accordance with their respective terms.
Additional Conditions to the Obligations of Powertel. The obligations of
Powertel to effect the VoiceStream/Powertel merger are also subject to the
satisfaction, or waiver by Powertel, of conditions, including the following.
- Performance of Obligations; Representations and Warranties.
-- VoiceStream having performed in all material respects each of its
agreements contained in the VoiceStream/Powertel merger agreement
required to be performed at or prior to the completion of the
VoiceStream/Powertel merger; and
-- the representations and warranties of VoiceStream and the
representations and warranties of the merger subsidiary in the
VoiceStream/Powertel merger agreement will be true and correct at and
as of the date the VoiceStream/Powertel merger is complete;
(a) except as contemplated or permitted by the VoiceStream/Powertel
merger agreement; and
(b) except for failures which, individually or in the aggregate, would
not reasonably be expected to have a material adverse effect on
VoiceStream or the transactions contemplated by the
VoiceStream/Powertel merger agreement.
Notwithstanding the conditions described above VoiceStream may enter
into any subsequent transaction, and no changes of representation or
warranty of VoiceStream contained in the VoiceStream/Powertel merger
agreement as a result of any subsequent transaction will result in a
failure of these conditions, provided the subsequent transaction would
not reasonably be expected to have a material adverse effect on
VoiceStream.
- Receipt of Consents Under Agreements. VoiceStream having obtained all
material consents or approvals required under VoiceStream's and its
subsidiaries' debt instruments.
- Receipt of FCC Opinion. Powertel having received an opinion of FCC counsel to
VoiceStream substantially in the form agreed upon in the VoiceStream/Powertel
merger agreement.
- Receipt of Governmental Approvals. All necessary consents or authorizations
from any governmental entities required for the VoiceStream/Powertel merger
having been received, unless the failure to receive any such consent or
authorization would not have a material adverse effect on VoiceStream or the
transactions contemplated by the VoiceStream/Powertel merger agreement, and
such consents or
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authorizations do not contain any conditions which would reasonably be
expected to have a material adverse effect on VoiceStream or the transactions
contemplated by the VoiceStream/Powertel merger agreement.
- Receipt of Tax Opinion. Powertel having received an opinion of Morris,
Manning & Martin, LLP, dated as of the date the VoiceStream/Powertel merger is
completed, substantially to the effect that, for U.S. federal income tax
purposes, the VoiceStream/Powertel merger will qualify as a reorganization
within the meaning of Section 368(a) of the U.S. tax code.
Additional Conditions to the Obligations of VoiceStream. The obligations
of VoiceStream to effect the VoiceStream/Powertel merger are also subject to the
satisfaction, or waiver by VoiceStream, of conditions, including the following.
- Performance of Obligations; Representations and Warranties.
-- Powertel having performed in all material respects each of its
agreements contained in the VoiceStream/Powertel merger agreement
required to be performed at or prior to the completion of the
VoiceStream/Powertel merger; and
-- the representations and warranties of Powertel in the
VoiceStream/Powertel merger agreement will be true and correct at and
as of the date the VoiceStream/Powertel merger is completed;
(a) except as contemplated or permitted by the VoiceStream/Powertel
merger agreement; and
(b) except for failures, which individually or in the aggregate,
would not reasonably be expected to have a material adverse
effect on Powertel, VoiceStream or the transactions contemplated
by the VoiceStream/Powertel merger agreement.
- Receipt of FCC Opinion. VoiceStream having received an opinion of the
FCC counsel of Powertel, substantially in the form agreed upon in the
VoiceStream/Powertel merger agreement.
- Consents Under Agreements. Powertel having obtained all material
consents or approvals required under Powertel's and its subsidiaries'
debt instruments.
- Receipt of Governmental Approvals. All necessary consents or
authorizations from any governmental entities required for the
VoiceStream/Powertel merger having been received and, in the case of the
FCC, having become final orders, unless this requirement of finality is
waived by VoiceStream in its sole discretion, unless the failure to
receive any such consent or authorization would not have a material
adverse effect on Powertel or VoiceStream or the transactions
contemplated by the VoiceStream/Powertel merger agreement and such
consents or authorizations do not contain any conditions which would
reasonably be expected to have a material adverse effect on VoiceStream
or the transactions contemplated by the VoiceStream/Powertel merger
agreement.
- Receipt of Tax Opinion. VoiceStream having received an opinion of Jones,
Day, Reavis & Pogue and/or Preston Gates & Ellis LLP, dated as of the
date the VoiceStream/Powertel merger is completed, substantially to the
effect that, on the basis of the facts, representations and assumptions
set forth in the opinion, for U.S. federal income tax purposes, the
VoiceStream/Powertel merger will qualify as a reorganization within the
meaning of Section 368(a) of the U.S. tax code.
Waiver of Conditions. In the event VoiceStream or Powertel waives a
material condition to the VoiceStream/Powertel merger, VoiceStream or Powertel,
as applicable, will, if legally required, resolicit approval of its
stockholders.
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Termination and Termination Fee
Automatic Termination. The VoiceStream/Powertel merger agreement will
terminate automatically upon the completion of the Deutsche Telekom/Powertel
merger.
Right to Terminate. The VoiceStream/Powertel merger agreement may be
terminated at any time before the completion of the VoiceStream/Powertel merger
in any of the following ways:
- by mutual written consent;
- by either VoiceStream or Powertel:
-- if the VoiceStream/Powertel merger has not been completed on or
before December 31, 2001, unless the party seeking to terminate the
VoiceStream/Powertel merger agreement has caused the delay, provided
that this date may be accelerated if the Deutsche Telekom/
VoiceStream merger agreement and the Deutsche Telekom/Powertel merger
agreement have been terminated;
-- if the VoiceStream/Powertel merger is permanently enjoined or
prohibited by a governmental order or ruling, and the order or ruling
has become final and nonappealable; or
-- the stockholders of Powertel or VoiceStream do not approve and adopt
the VoiceStream/Powertel merger agreement at their respective special
meetings;
- by VoiceStream if:
-- Powertel fails to comply with any of its covenants or agreements
contained in the VoiceStream/ Powertel merger agreement required to
be complied with prior to the date of termination and such failure
would reasonably be expected to have a material adverse effect on
VoiceStream or the transactions contemplated by the VoiceStream/
Powertel merger agreement; and the failure cannot be or has not been
cured within 30 days after receipt by Powertel of written notice of
the failure to comply; or
-- Powertel breaches any representation or warranty and the breach would
reasonably be expected to have a material adverse effect on Powertel,
VoiceStream or the transactions contemplated by the VoiceStream/
Powertel merger agreement, and the breach cannot be or has not been
cured within 30 days after receipt by Powertel of written notice of
the breach; or
- by Powertel if:
-- VoiceStream fails to comply with any of its covenants or agreements
contained in the VoiceStream/Powertel merger agreement required to be
complied with prior to the date of termination and the failure would
reasonably be expected to have a material adverse effect on Powertel,
VoiceStream or the transactions contemplated by the VoiceStream/
Powertel merger agreement, and cannot be or has not been cured within
30 days after receipt by VoiceStream of written notice of the failure
to comply; or
-- VoiceStream breaches any representation or warranty contained in the
VoiceStream/Powertel merger agreement and the breach would reasonably
be expected to have a material adverse effect on VoiceStream or the
transactions contemplated by the VoiceStream/Powertel merger
agreement, and the breach cannot be or has not been cured within 30
days after receipt by VoiceStream of written notice of the breach.
Should any of these potential grounds for termination occur, VoiceStream's
and Powertel's board of directors may or may not exercise their respective
rights to terminate the VoiceStream/Powertel merger agreement.
Termination Fees. Powertel has agreed to pay VoiceStream a termination fee
of $150 million plus expenses not to exceed $10 million in the event that
Powertel terminates the VoiceStream/Powertel
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merger agreement because the Powertel stockholders do not adopt and approve the
VoiceStream/Powertel merger agreement, or VoiceStream terminates the agreement
for one of the following reasons:
- Powertel fails to comply with any of its covenants or agreements
contained in the VoiceStream/Powertel merger agreement, the failure would
reasonably be expected to have a material adverse effect on VoiceStream
or the transactions contemplated by the VoiceStream/Powertel merger
agreement and the failure cannot be or has not been cured within 30 days
after receipt by Powertel of written notice of the failure to comply;
- the stockholders of Powertel do not adopt and approve the
VoiceStream/Powertel merger agreement; or
- Powertel breaches any representation or warranty contained in the
VoiceStream/Powertel merger agreement, the breach would reasonably be
expected to have a material adverse effect on Powertel, VoiceStream or
the transactions contemplated by the VoiceStream/Powertel merger and the
breach cannot be or has not been cured within 30 days after receipt by
Powertel of written notice of the breach.
Important Exception: In the event Powertel is also obligated to pay a
termination fee pursuant to the Deutsche Telekom/Powertel merger agreement,
Powertel will instead pay each of Deutsche Telekom and VoiceStream $75 million
plus expenses not to exceed $10 million.
VoiceStream has agreed to pay Powertel a termination fee of $150 million
plus expenses not to exceed $10 million in the event that Powertel terminates
the VoiceStream/Powertel merger agreement for one of the following reasons:
- VoiceStream fails to comply with any of its covenants or agreements
contained in the VoiceStream/Powertel merger agreement, the failure would
reasonably be expected to have a material adverse effect on Powertel,
VoiceStream or the transactions contemplated by the VoiceStream/Powertel
merger agreement and the failure cannot be or has not been cured within
30 days after receipt by VoiceStream of the failure to comply;
- the stockholders of VoiceStream do not adopt and approve the
VoiceStream/Powertel merger agreement; or
- VoiceStream breaches any representation or warranty contained in the
VoiceStream/Powertel merger agreement, the breach would reasonably be
expected to have a material adverse effect on VoiceStream or the
transactions contemplated by the VoiceStream/Powertel merger agreement
and the breach cannot be or has not been cured within 30 days after
receipt by VoiceStream of written notice of the breach.
Expenses
Whether or not the VoiceStream/Powertel merger is completed, all fees and
expenses incurred in connection with the VoiceStream/Powertel merger and the
VoiceStream/Powertel merger agreement will be paid by the party incurring the
fees or expenses, except that:
- Deutsche Telekom, VoiceStream and Powertel will share equally the costs
and expenses, other than attorneys' fees, incurred in connection with the
printing and mailing of this document;
- VoiceStream and Powertel will share equally any filing fees, including
fees payable to the SEC and state regulatory authorities, with respect to
the proxy statement/prospectus and the registration statement on Form S-4
covering the VoiceStream common shares issuable upon completion of the
VoiceStream/Powertel merger; and
- VoiceStream and Powertel will share equally the costs and expenses of any
filing fees paid under the HSR Act.
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Amendment; Waiver; Assignment
VoiceStream, Powertel and merger subsidiary may amend the
VoiceStream/Powertel merger agreement prior to completion of the
VoiceStream/Powertel merger, but after VoiceStream's and Powertel's stockholders
have approved the VoiceStream/Powertel merger agreement, no amendment may be
made which by law requires further stockholder approval without such approval
being obtained.
At any time before the VoiceStream/Powertel merger is completed,
VoiceStream, Powertel and merger subsidiary may:
- extend the time for the performance of any of the obligations or other
acts required by the VoiceStream/Powertel merger agreement; and
- waive any inaccuracies in the representations and warranties or
compliance with any of the agreements or conditions, contained in the
VoiceStream/Powertel merger agreement or in any document required to be
delivered pursuant to the VoiceStream/Powertel merger agreement.
VoiceStream, Powertel and merger subsidiary may not assign the
VoiceStream/Powertel merger agreement or any of their rights, interests or
obligations under the VoiceStream/Powertel merger agreement without the prior
written consent of the non-assigning parties.
Important Definitions
"material adverse effect." As used in the VoiceStream/Powertel merger
agreement, a "material adverse effect" on any company means any change, effect,
fact or condition that is materially adverse to the business, properties,
assets, results of operations or financial condition of the company and its
subsidiaries. "Material adverse effect" includes any event, fact or condition
which would reasonably be expected to materially delay, interfere with, impair
or prevent the transactions contemplated by the VoiceStream/Powertel merger
agreement in a manner that would have a material adverse effect on such
transactions.
However, "material adverse effect" does not include any adverse change,
effect or development that is primarily caused by:
- conditions affecting the U.S. economy generally or the economy of any
nation or region in which VoiceStream or Powertel and their subsidiaries
conduct business that is material to their businesses;
- conditions generally affecting the industries in which VoiceStream or
Powertel conduct their businesses; or
- the announcement or existence of the VoiceStream/Powertel merger
agreement and the transactions contemplated by the VoiceStream/Powertel
merger agreement.
Amendment and Restatement
The VoiceStream/Powertel merger agreement was originally entered into
between VoiceStream and Powertel on August 26, 2000. On September 28, 2000, the
VoiceStream/Powertel merger agreement was amended and restated for the purpose
of making merger subsidiary a party to the VoiceStream/Powertel merger agreement
and other technical changes. On February 8, 2001, the VoiceStream/Powertel
merger agreement was further amended and restated primarily for the purposes of
adjusting the calculation of the conversion number in the event the dividends
permitted under the Deutsche Telekom/VoiceStream merger agreement and the
Deutsche Telekom/Powertel merger agreement are paid.
VOICESTREAM'S AGREEMENTS WITH STOCKHOLDERS OF POWERTEL
In connection with the execution of the VoiceStream/Powertel merger
agreement, VoiceStream entered into separate agreements with Powertel
stockholders who, in the aggregate, had sufficient voting power as of the
Powertel record date to approve the VoiceStream/Powertel merger. We summarize
the material terms of these agreements below, and this summary is qualified in
its entirety by reference to the
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text of the stockholder agreements, copies of which have been filed as exhibits
to VoiceStream's and Deutsche Telekom's respective registration statements and
are incorporated herein by reference.
The following Powertel stockholders and some of their affiliates have
entered into stockholder agreements with VoiceStream in connection with the
VoiceStream/Powertel merger:
ITC Holding Company, Inc.
SCANA Communications Holdings, Inc.
Sonera Corporation
Donald W. Burton and certain limited partnerships controlled by him
American Water Works Company
Agreement to Vote
Each stockholder agreement obligates the stockholder that is a party to the
agreement to vote all its Powertel shares in favor of the VoiceStream/Powertel
merger and the VoiceStream/Powertel merger agreement and to vote all of its
Powertel shares against any alternative transaction, as defined in the
VoiceStream/Powertel merger agreement and as discussed under "-- The
VoiceStream/Powertel Merger Agreement -- Offers for Alternative Transactions,"
or the liquidation or winding up of Powertel. Each stockholder's obligation to
vote in this manner applies whether or not the Powertel board of directors
continues to recommend the VoiceStream/Powertel merger to the Powertel
stockholders.
Transfer Restrictions
Each stockholder agreement restricts or limits the ability of the
stockholder that is a party to the agreement to sell, transfer, pledge, assign
or otherwise dispose of, any of its Powertel shares, or rights to purchase
Powertel shares or, until six months after completion of the
VoiceStream/Powertel merger, VoiceStream common shares, in each case that are
subject to the stockholder agreement. The stockholders that are parties to the
stockholder agreements can sell, transfer, pledge, assign or otherwise dispose
of their Powertel shares or VoiceStream shares, as the case may be, in limited
circumstances, with VoiceStream's written consent, as expressly permitted by the
stockholder agreement, pursuant to the VoiceStream/ Powertel merger agreement or
pursuant to the Deutsche Telekom/Powertel merger agreement. In that regard, each
stockholder agreement, other than the agreement with American Water Works
Company, provides that:
- until the later of January 1, 2001 and the date of the Powertel special
meeting, the stockholder may not sell, transfer, pledge, assign or
otherwise dispose of, any Powertel shares or rights that are subject to
the stockholder agreement;
- from the later of January 1, 2001 and the date of the Powertel special
meeting, until the earlier of the completion of the VoiceStream/Powertel
merger or the termination of the VoiceStream/Powertel merger agreement,
the stockholder may sell or transfer up to an aggregate of 25% of the
number of Powertel shares owned by such stockholder, which percentage
increases commensurately to that percentage sold, subject to certain
exempt transfers, by any VoiceStream stockholder who executed a
VoiceStream stockholder agreement pursuant to the VoiceStream/Powertel
merger agreement;
- from the completion of the VoiceStream/Powertel merger through and
including the six month anniversary of the completion of the
VoiceStream/Powertel merger, the stockholder may not sell, transfer,
pledge, assign or otherwise dispose of, any VoiceStream common shares
that are subject to the stockholder agreement except in accordance with
Rule 144 and Rule 145 of the Securities Act, except that if a VoiceStream
stockholder who executed a VoiceStream stockholder agreement pursuant to
the VoiceStream/Powertel merger agreement proposes to transfer more than
the number of shares permitted to be transferred under Rule 144, subject
to certain exempt transfers, then the Powertel stockholder may transfer
shares under its registration rights commensurate with that percentage
sold by the VoiceStream stockholder; and
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- after the six-month anniversary of the completion of the
VoiceStream/Powertel merger, all contractual sale and transfer
restrictions end.
For a description of the stockholder agreements executed by VoiceStream
stockholders pursuant to the VoiceStream/Powertel merger agreement, see
"-- Powertel's Agreements with Stockholders of VoiceStream."
Termination
Each stockholder agreement will terminate upon the earliest to occur of:
- the completion of the VoiceStream/Powertel merger;
- the termination of the VoiceStream/Powertel merger agreement; and
- August 26, 2002.
No Solicitation
Each stockholder agrees not to initiate or participate in, and not to
authorize any representatives to solicit, initiate or participate in,
discussions or negotiations regarding transactions or business combinations
between Powertel and a company other than VoiceStream, except as otherwise
permitted by the VoiceStream/Powertel merger agreement. See "-- The
VoiceStream/Powertel Merger Agreement -- Offers for Alternative Transactions."
POWERTEL'S AGREEMENTS WITH STOCKHOLDERS OF VOICESTREAM
In connection with the execution of the VoiceStream/Powertel merger
agreement, Powertel entered into separate agreements with VoiceStream
stockholders who, in the aggregate, had sufficient voting power as of the
VoiceStream record date to approve the VoiceStream/Powertel merger. In addition,
Deutsche Telekom agreed in the Deutsche Telekom/Powertel merger agreement to
vote in favor of the VoiceStream/Powertel merger. We summarize the material
terms of these agreements below, and this summary is qualified in its entirety
by reference to the text of the stockholder agreements, copies of which have
been filed as exhibits to VoiceStream's and Deutsche Telekom's registration
statements and are incorporated herein by reference.
Agreement to Vote
Each stockholder agreement obligates the stockholder that is a party to the
agreement to vote all of its VoiceStream shares in favor of the
VoiceStream/Powertel merger and the VoiceStream/Powertel merger agreement. The
Deutsche Telekom/Powertel merger agreement obligates Deutsche Telekom to vote
all of its VoiceStream shares in favor of the VoiceStream/Powertel merger and
the VoiceStream/ Powertel merger agreement. Each stockholder's obligation to
vote in this manner is irrevocable and unconditional.
Transfer Restrictions
Each of the stockholder agreements and, with respect to Deutsche Telekom,
the Deutsche Telekom/ Powertel merger agreement, restricts or limits the ability
of the stockholder that is a party to the agreement to sell, transfer, pledge,
assign or otherwise dispose of any VoiceStream shares owned by such stockholder
until the later of January 1, 2001 and the date of the VoiceStream special
meeting, except to affiliates and by operation of law, in each case where the
transferees agree to be bound by the terms of the stockholder agreement.
Each VoiceStream stockholder who is a party to a stockholder agreement, not
including Deutsche Telekom, has agreed as follows:
- from the later of January 1, 2001 and the date of the VoiceStream special
meeting, until the earlier of the completion of the VoiceStream/Powertel
merger or the termination of the VoiceStream/ Powertel merger agreement,
if a VoiceStream stockholder proposes to sell, transfer, or exercise
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registration rights with respect to more than 25% of the VoiceStream
stockholders' shares, then the VoiceStream stockholder must notify each
of the Powertel stockholders who entered into stockholder agreements with
VoiceStream of the proposed sale, transfer or exercise of rights and
waive any right the VoiceStream stockholder has to preclude or delay the
filing of a registration statement on behalf of any of these Powertel
stockholders or transfers of Powertel shares in the amount permitted by
the applicable Powertel stockholder agreement; and
- for six months beginning on the completion of the VoiceStream/Powertel
merger, if the VoiceStream stockholder proposes to sell, transfer, or
exercise registration rights with respect to more VoiceStream shares than
the VoiceStream stockholder is permitted to sell or transfer under the
volume restrictions of Rule 144 of the Securities Act, the VoiceStream
stockholder must notify each of the Powertel stockholders who entered
into stockholder agreements with VoiceStream of the proposed sale,
transfer or exercise of rights and either allow the Powertel stockholder
to participate in the registration or waive any right the VoiceStream
stockholder has to preclude or delay the filing of a registration
statement on behalf of any of these Powertel stockholders.
Agreement to Elect a Powertel Nominee to the VoiceStream Board of Directors
Each VoiceStream stockholder that is a party to a stockholder agreement has
agreed that it will vote all its VoiceStream common shares, and Deutsche Telekom
has agreed in the Deutsche Telekom/Powertel merger agreement to vote all of its
VoiceStream voting preferred shares at the two annual meetings of VoiceStream
following the completion of the VoiceStream/Powertel merger in favor of the
election to VoiceStream's board of directors of one nominee, and successors of
such nominee, chosen by Powertel and acceptable to VoiceStream. After the
completion of the VoiceStream/Powertel merger, in the event a nominee or
successor nominee chosen by Powertel before the VoiceStream/Powertel merger is
completed is unable or unwilling to serve, two current Powertel stockholders
may, by mutual agreement, name an alternate successor. Deutsche Telekom's
obligation is not enforceable if it would reduce its rights to appoint directors
representing 10% of VoiceStream's board of directors. To effect these voting
arrangements, these VoiceStream stockholders have agreed to amend existing
VoiceStream voting agreements to which they are parties. See "-- VoiceStream's
Agreements with Stockholders of Powertel."
Termination
Each of the stockholder agreements, and the applicable provisions of the
Deutsche Telekom/Powertel merger agreement, will terminate upon the earliest to
occur of:
- the completion of the VoiceStream/Powertel merger;
- the termination of the VoiceStream/Powertel merger agreement; or
- August 26, 2002.
The Letter Agreement with Telephone & Data Systems, Inc.
In addition to the general provisions described above applying to each of
the stockholder agreements, Telephone & Data Systems, Inc. and Powertel entered
into a letter agreement. This agreement provides that, in the event that the
board of directors of Telephone & Data Systems determines that Telephone & Data
Systems is subject to the regulations of the Investment Company Act of 1940 and
Telephone & Data Systems is unsuccessful in obtaining an exemption from such
regulations or is not eligible for an exemption, the restrictions on Telephone &
Data Systems' right to transfer VoiceStream common shares will be modified to
allow it to sell the minimum number of VoiceStream common shares that would
allow Telephone & Data Systems to avoid being characterized as an "investment
company" under the Investment Company Act of 1940.
On December 27, 2000, TDS assigned to TDSI, its wholly-owned subsidiary,
its stockholder agreement and the letter agreement with Powertel described
above.
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EXCHANGE RATES
Effective January 1, 1999, Germany and ten other member states of the
European Union adopted the euro as their common currency. With the first quarter
of 1999, Deutsche Telekom began publishing its consolidated financial statements
in euros. Prior to January 1, 1999, Deutsche Telekom prepared its financial
statements in Deutsche Marks in accordance with German GAAP. Amounts stated in
euros appearing in this document for periods prior to January 1, 1999 have been
translated from Deutsche Marks at the official fixed conversion rate of 1.00 EUR
= DM 1.95583.
Unless otherwise stated, dollar amounts have been translated from euros
using the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New
York. As of February 7, 2001, the latest practicable date for which exchange
rate information was available prior to the printing of this document, the noon
buying rate for the euro was one euro per 0.9331 of a U.S. dollar, which if
expressed in Deutsche Marks would have been equivalent to a rate of one deutsche
mark per 0.477 of a U.S. dollar, translated from euros at the official fixed
conversion rate. This rate may differ from the actual rates used in the
preparation of Deutsche Telekom's consolidated financial statements included or
incorporated by reference herein. Accordingly, dollar amounts appearing in this
proxy statement/prospectus may differ from the actual dollar amounts originally
translated into euros in the preparation of Deutsche Telekom's financial
statements.
The following table sets forth:
- for the years 1999 and 2000 and for the period from January 1, 2001
through February 7, 2001, the average, high, low and period-end noon
buying rates for the euro expressed as dollars per 1.00 euro; and
- for each year in the period from 1995 through 1998, the average, high,
low and period-end noon buying rates for the Deutsche Mark converted into
euros at the official fixed conversion rate and expressed as dollars per
1.00 euro.
PERIOD-
YEAR AVERAGE(a) HIGH LOW END
---- ---------- ------- ------- ----------
1995........................................................ $1.3715 $1.4418 $1.2528 $1.3634
1996........................................................ 1.2978 1.3626 1.2493 1.2711
1997........................................................ 1.1244 1.2689 1.0398 1.0871
1998........................................................ 1.1120 1.2178 1.0548 1.1733
1999........................................................ 1.0588 1.1812 1.0016 1.0070
2000........................................................ 0.9232 1.0335 0.8270 0.9388
2001 (through February 7)................................... 0.9308 0.9535 0.9181 0.9331
---------------
(a) The average of the noon buying rates on the last business day of each month
during the relevant period.
Commencing January 4, 1999, the Deutsche Telekom ordinary shares have
traded on the German stock exchanges in euros. Fluctuations in the exchange rate
between the euro and the dollar will affect the dollar equivalent of the euro
price of the Deutsche Telekom ordinary shares on the German stock exchanges and,
as a result, are likely to affect the market price of the Deutsche Telekom ADSs
on the NYSE. Deutsche Telekom will declare any cash dividends in euros, and
exchange rate fluctuations will affect the dollar amounts you receive if you are
a holder of Deutsche Telekom ADSs on conversion of cash dividends on the
ordinary shares represented by your Deutsche Telekom ADSs.
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MARKET PRICE AND DIVIDEND DATA
MARKET PRICES
Deutsche Telekom
The principal trading market for Deutsche Telekom's shares is the Frankfurt
Stock Exchange. The shares also trade on the other German stock exchanges in
Berlin, Bremen, Dusseldorf, Hamburg, Hanover, Munich and Stuttgart and on the
Tokyo Stock Exchange. Options on the shares trade on the German options exchange
(Eurex Deutschland) and other exchanges. Originally, Deutsche Telekom issued all
of its shares in bearer form. With effect from January 24, 2000, the shares were
converted from bearer form to registered form.
From January 4, 1999, all shares on German stock exchanges have traded in
euros.
The table below sets forth, for the periods indicated, the high and low
closing sales prices for the Deutsche Telekom ordinary shares on the Frankfurt
Stock Exchange, as reported by the Frankfurt Stock Exchange XETRA trading
system, together with the high and low volumes of the DAX (Deutscher
Aktienindex).
PRICE PER PRICE PER
ORDINARY ORDINARY
SHARE SHARE DAX(a)
-------------- ------------- -------------------
HIGH LOW HIGH LOW HIGH LOW
------ ----- ----- ----- -------- --------
EUROS DM
YEAR ENDED DECEMBER 31, 1998
First Quarter................................ -- -- 41.65 31.19 5,114.13 4,134.64
Second Quarter............................... -- -- 50.14 39.70 5,915.13 5,018.67
Third Quarter................................ -- -- 55.61 44.90 6,171.43 4,433.87
Fourth Quarter............................... -- -- 55.97 43.40 5,121.48 3,896.08
YEAR ENDED DECEMBER 31, 1999
First Quarter................................ 43.45 31.35 -- -- 5,443.62 4,678.72
Second Quarter............................... 44.55 34.23 -- -- 5,468.67 4,914.59
Third Quarter................................ 43.15 36.90 -- -- 5,652.02 4,978.45
Fourth Quarter............................... 71.50 38.11 -- -- 6,958.14 5,124.55
YEAR ENDED DECEMBER 31, 2000
First Quarter................................ 103.50 61.00 -- -- 8,064.97 6,474.92
Second Quarter............................... 80.40 55.80 -- -- 7,599.39 6,834.88
Third Quarter................................ 61.35 38.40 -- -- 7,480.14 6,682.92
Fourth Quarter............................... 45.11 31.48 -- -- 7,136.30 6,200.71
YEAR ENDED DECEMBER 31, 2001
First Quarter (through February 7)........... 38.75 31.20 -- -- 6,795.14 6,289.82
---------------
(a) The DAX is a weighted performance index of the shares of 30 large German
corporations. The calculation of the DAX did not change upon the
introduction of the euro.
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The table below sets forth, for the periods indicated, the high and low
closing sales prices for the Deutsche Telekom ADSs on the NYSE:
PRICE PER
DEUTSCHE
TELEKOM ADS
-----------------
HIGH LOW
---- ---
(U.S.$ PER
DEUTSCHE
TELEKOM ADS)
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................. $22 7/8 $17 1/16
Second Quarter............................................ 28 5/16 21 1/8
Third Quarter............................................. 32 24
Fourth Quarter............................................ 33 1/2 26 1/4
YEAR ENDED DECEMBER 31, 1999
First Quarter............................................. 47 1/8 33 1/16
Second Quarter............................................ 45 7/8 36 1/4
Third Quarter............................................. 45 7/16 39 5/8
Fourth Quarter............................................ 71 40 3/4
YEAR ENDED DECEMBER 31, 2000
First Quarter............................................. 100 1/4 62 5/8
Second Quarter............................................ 79 1/2 49 1/4
Third Quarter............................................. 58 115/256 33 29/64
Fourth Quarter............................................ 38 3/16 29 1/4
YEAR ENDED DECEMBER 31, 2001
First Quarter (through February 7)........................ 36 9/16 29 1/2
YOU ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE DEUTSCHE TELEKOM
ADSs AND DEUTSCHE TELEKOM ORDINARY SHARES.
On July 21, 2000, the last trading day prior to the formal public
announcement of the signing of the Deutsche Telekom/VoiceStream merger
agreement, the closing sales price per Deutsche Telekom ordinary share on the
Frankfurt Stock Exchange was 55.27 euros, equivalent to U.S.$51.6388 per
Deutsche Telekom ordinary share, translated at the noon buying rate for July 21,
2000, and the high and low bid prices for the Deutsche Telekom ADSs as quoted on
the NYSE were $52 and $50 13/16, respectively.
On August 25, 2000, the last trading day prior to the formal public
announcement of the signing of the Deutsche Telekom/Powertel merger agreement,
the closing sales price per Deutsche Telekom ordinary share on the Frankfurt
Stock Exchange was 44.30 euros, equivalent to U.S.$39.9763 per Deutsche Telekom
ordinary share, translated at the noon buying rate for August 25, 2000 per
Deutsche Telekom ordinary share, and the high and low bid prices for the
Deutsche Telekom ADSs as quoted on the NYSE were $40 9/16 and $40, respectively.
On February 7, 2001, the last trading day for which information was
available prior to the printing of this proxy statement/prospectus, the closing
sales price per Deutsche Telekom ordinary share on the Frankfurt Stock Exchange
was 33.02 euros, equivalent to U.S.$30.81 based on an exchange rate of one euro
per 0.9331 of a U.S. dollar, and the high and low bid prices for the Deutsche
Telekom ADSs as quoted on the NYSE were $31.28 and $30.67, respectively.
The Deutsche Telekom ordinary shares are listed on the Frankfurt Stock
Exchange under the symbol "DTE". Deutsche Telekom ADSs, each representing one
Deutsche Telekom ordinary share, are listed on the NYSE under the symbol "DT".
The depositary for the Deutsche Telekom ADSs is Citibank N.A. As of December 31,
2000, there were 25,386,798 Deutsche Telekom ADSs outstanding, with 490 holders
of record of Deutsche Telekom ADSs with addresses in the United States and 52
holders of record of ADSs with addresses outside the United States. As of
December 31, 2000, there were approximately
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2,831,562 registered holders of Deutsche Telekom ordinary shares including 2,860
holders of record of Deutsche Telekom ordinary shares with addresses in the U.S.
VoiceStream
Since VoiceStream's spin-off from Western Wireless on May 3, 1999,
VoiceStream common shares have traded on the Nasdaq Stock Market under the
ticker symbol "VSTR". The table below sets forth, for the calendar quarters
indicated, the high and low sale prices of VoiceStream common shares as reported
on the Nasdaq Stock Market.
VOICESTREAM
COMMON STOCK
--------------
HIGH LOW
---- ---
(U.S.$ PER
SHARE)
YEAR ENDED DECEMBER 31, 1999(a)
First Quarter............................................. $ -- $--
Second Quarter............................................ 34 1/4 16 3/8
Third Quarter............................................. 72 28 1/8
Fourth Quarter............................................ 142 5/16 57 3/4
YEAR ENDED DECEMBER 31, 2000
First Quarter............................................. 159 5/16 97 1/2
Second Quarter............................................ 143 3/8 77 5/8
Third Quarter............................................. 161 100 13/16
Fourth Quarter............................................ 131 1/2 100 5/8
YEAR ENDED DECEMBER 31, 2001
First Quarter (through February 7)........................ 134 101
---------------
(a) Because VoiceStream completed its spin-off from Western Wireless during the
second quarter of 1999, no trading information is available for any prior
period.
On July 21, 2000, the last trading day prior to the formal public
announcement of the signing of the Deutsche Telekom/VoiceStream merger
agreement, the last sale price of VoiceStream common shares on Nasdaq was
$149.75 per share. On August 25, 2000, the last trading day prior to the formal
announcement of the signing of the VoiceStream/Powertel merger agreement, the
last sale price of VoiceStream common shares on Nasdaq was $118 3/16 per share.
On February 7, 2001, the last trading day for which information was available
prior to the printing of this document, the last sale price of VoiceStream
common shares on the Nasdaq was $118 13/16 per share.
As of February 7, 2001, the last date prior to the printing of this
document for which it was practicable for us to obtain this information, there
were approximately 1,985 registered holders of VoiceStream common shares.
YOU ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE VOICESTREAM
COMMON SHARES.
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Powertel
Powertel common shares are currently traded on the Nasdaq Stock Market
under the ticker symbol "PTEL." The table below sets forth, for the calendar
quarters indicated, the high and low sale prices of Powertel common shares as
reported on the Nasdaq Stock Market.
POWERTEL COMMON SHARES
--------------------------------------
HIGH LOW
--------------- ---------------
(US$ PER SHARE)
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................ $ 25 1/16 $16 3/4
Second Quarter........................................... 24 1/8 15 3/4
Third Quarter............................................ 21 1/4 9 5/8
Fourth Quarter........................................... 16 1/4 9 5/16
YEAR ENDED DECEMBER 31, 1999
First Quarter............................................ 17 3/4 12 5/16
Second Quarter........................................... 32 1/2 13 3/8
Third Quarter............................................ 59 28 5/8
Fourth Quarter........................................... 105 50 7/8
YEAR ENDED DECEMBER 31, 2000
First Quarter............................................ 104 5/8 66 3/4
Second Quarter........................................... 91 13/16 53 1/2
Third Quarter............................................ 97 27/64 66 1/2
Fourth Quarter........................................... 86 25/64 61 37/64
YEAR ENDED DECEMBER 31, 2001
First Quarter (through February 7, 2001)................. 89 1/4 62 9/16
On August 25, 2000, the last trading day prior to the formal public
announcement of the signing of the Deutsche Telekom/Powertel merger agreement
and the VoiceStream/Powertel merger agreement, the last sale price of Powertel
common shares on Nasdaq was $86.63 per share. On February 7, 2001, the last
trading day for which information was available prior to the printing of this
document, the last sale price of Powertel common stock on Nasdaq was $76 11/16
per share. The Powertel preferred shares are not traded on Nasdaq or on any U.S.
national securities exchange.
As of February 7, 2001, the last date prior to the printing of this
document for which it was practicable for Powertel to obtain this information,
there were approximately 275 registered holders of Powertel common shares.
YOU ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE POWERTEL COMMON
SHARES.
DIVIDEND DATA
Deutsche Telekom
The Deutsche Telekom ADSs and Deutsche Telekom ordinary shares issued in
connection with the Deutsche Telekom/VoiceStream and Deutsche Telekom/Powertel
mergers in 2001 will have the same dividend rights as the other currently
outstanding Deutsche Telekom ADSs and Deutsche Telekom ordinary shares with
respect to fiscal year 2001 and subsequent years. Any dividends with respect to
fiscal year 2000 that are approved at the next annual general meeting of
Deutsche Telekom shareholders, which is currently scheduled for May 29, 2001,
would be payable after such meeting to shareholders as of the date of completion
of such meeting. If the next annual general meeting is held on May 29, 2001, as
currently scheduled, VoiceStream and Powertel stockholders who receive Deutsche
Telekom ADSs or Deutsche Telekom ordinary shares in the Deutsche
Telekom/VoiceStream merger or the Deutsche Telekom/Powertel merger will not be
entitled to receive any dividends that may be declared with respect to fiscal
year 2000. For information relevant to receipt of dividend payments by Deutsche
Telekom ADS
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holders, see "Exchange Rates," "Description of Deutsche Telekom Ordinary
Shares -- Dividends and Other Distributions" and "Description of Deutsche
Telekom American Depositary Shares -- Dividends and Distributions."
The following table sets forth the annual dividends paid per Deutsche
Telekom ordinary share with respect to each of the fiscal years indicated:
DIVIDEND PAID PER
DEUTSCHE TELEKOM
YEAR ENDED DECEMBER 31, ORDINARY SHARE
----------------------- ---------------------
DM EURO $(A)
1996........................................................ 0.60 -- 0.35
1997........................................................ 1.20 -- 0.68
1998........................................................ 1.20 -- 0.64
1999........................................................ -- 0.62 0.58
---------------
(a) Dividend amounts have been translated into dollars at the noon buying rate
for the relevant dividend payment date, which occurred during the second
quarter of the following year.
The dividend levels of past years may not be indicative of future
dividends.
Shareholders determine the declaration, amount and timing of dividends in
respect of each fiscal year at their annual general meeting in the following
year, upon the joint recommendation of the management board and the supervisory
board. As long as the Federal Republic and KfW own a majority of Deutsche
Telekom's voting share capital, they will have the power to control most
decisions taken at shareholders' meetings, including the approval of proposed
dividend payments. We expect that, as a result of the Deutsche
Telekom/VoiceStream merger and the Deutsche Telekom/Powertel merger, the Federal
Republic and KfW will no longer own a majority of Deutsche Telekom's voting
share capital. Deutsche Telekom may declare and pay dividends only from
distributable balance sheet profits (Bilanzgewinn) of Deutsche Telekom, as
adjusted to reflect losses or gains carried over from prior years as well as
transfers to or from retained earnings. Certain reserves (Rucklagen) are
required by law to be made and deducted in calculating distributable balance
sheet profits available for distribution as dividends.
The payment of future dividends depends on Deutsche Telekom's earnings, its
financial condition and other factors, including cash requirements, the future
prospects of Deutsche Telekom and tax, regulatory and other legal
considerations. Although Deutsche Telekom expects to pay annual dividends on its
shares, you should not assume that any dividend will actually be paid or make
any assumption about the amount that will be paid in any given year. To the
extent necessary to implement Deutsche Telekom's dividend policy, Deutsche
Telekom will consider drawing upon its retained earnings. Deutsche Telekom's
ability to pay dividends is determined by reference to the unconsolidated
financial statements of Deutsche Telekom, which are prepared in accordance with
German GAAP. Dividends paid will be subject to German withholding tax. For
further information on German withholding tax and related U.S. refund
procedures, see "U.S. Federal and German Tax Consequences."
VoiceStream
VoiceStream has never declared or paid dividends on its common shares and
does not anticipate paying cash dividends in the foreseeable future. However,
VoiceStream anticipates paying a stock dividend of 0.0075 of a VoiceStream
common share for each VoiceStream common share outstanding prior to the
completion of the Deutsche Telekom/VoiceStream merger. In addition, VoiceStream
has entered into certain credit agreements and indentures which contain
restrictions on its ability to declare and pay cash dividends on its common
shares. For more information on such restrictions, please refer to VoiceStream's
Form 10-K for the fiscal year ended December 31, 1999, which is incorporated by
reference into this proxy statement/prospectus.
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Powertel
Powertel has never declared or paid cash dividends on its common shares and
does not anticipate paying cash dividends in the foreseeable future. However,
Powertel anticipates paying a stock dividend of 0.0075 of a Powertel common
share for each Powertel common share outstanding prior to the completion of the
Deutsche Telekom/Powertel merger. Powertel's Series E preferred shares and
Series F preferred shares accrue a cumulative 6.5% annual dividend that is
payable quarterly in Powertel common shares or cash. Powertel pays these
dividends in Powertel common shares because it is prohibited from paying cash
dividends due to restrictions contained in agreements governing its and its
subsidiaries' indebtedness. For more information on such restrictions, please
refer to Powertel's Form 10-K for the fiscal year ended December 31, 1999, which
is incorporated by reference into this proxy statement/prospectus.
DESCRIPTION OF DEUTSCHE TELEKOM ORDINARY SHARES
The following are only summaries of the terms of Deutsche Telekom's share
capital, the provisions of Deutsche Telekom's Articles of Association and
applicable German law in effect at the date of this proxy statement/prospectus.
A copy of Deutsche Telekom's Memorandum and Articles of Association has been
filed as an exhibit to Deutsche Telekom's registration statement and is
incorporated herein by reference. You are encouraged to read these documents in
their entirety.
SHARE CAPITAL
Deutsche Telekom's share capital amounts to 7,755,786,327.04 euros divided
into 3,029,604,034 ordinary shares issued in registered form. The individual
ordinary shares do not have a par value as such, but they do have a notional par
value that can be determined by dividing the share capital amount by the number
of ordinary shares.
Holders of ordinary shares, but not holders of ADSs, are required to
provide to Deutsche Telekom their names, addresses and occupations, or, in the
case of business entities, their names, business addresses and registered seats,
as well as the number of ordinary shares held, so that they can be entered into
the share register maintained by Deutsche Telekom. Following amendments to the
German Stock Corporation Act entered into force on January 25, 2001, persons
holding ordinary shares are required to provide their dates of birth in lieu of
their occupations. It is also possible to have a third party, such third party a
"street name", registered in lieu of the shareholders. ADEUS
Aktienregister-Service-GmbH, a joint venture of Dresdner Bank AG, Allianz AG,
Munchener Ruckversicherungs-Gesellschaft AG in Munchen and CSC Ploenzke AG, is
the transfer agent and registrar of the registered ordinary shares in Germany.
Citibank, N.A. is the depositary bank for the Deutsche Telekom ADSs. See
"Description of Deutsche Telekom American Depositary Shares."
Generally, the share capital of Deutsche Telekom may be increased, other
than by conditional capital or authorized capital, in consideration of
contributions in cash or in kind by a resolution passed at a general meeting of
the shareholders of Deutsche Telekom by a majority of the votes cast.
An English translation of the Deutsche Telekom Articles of Association
(Satzung) has been filed as an exhibit to this registration statement.
Authorized Capital
Section 5(2) of the Articles of Association (Satzung) of Deutsche Telekom
authorizes the Deutsche Telekom management board, with the approval of the
Deutsche Telekom supervisory board, to increase Deutsche Telekom's share capital
by up to a nominal amount of 3,865,093,163.52 euros by issuing up to
1,509,802,017 new ordinary shares for noncash contributions through May 25,
2005. In addition, according to Section 5(3) of the Articles of Association, the
Deutsche Telekom management board, with approval of the Deutsche Telekom
supervisory board, is authorized to increase Deutsche Telekom's share capital by
up to a nominal amount of 12,800,000 euros by issuing up to 5,000,000 new
ordinary shares for cash or noncash contributions for offerings to management
and key employees under a stock option plan through
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May 25, 2005. In both cases, shareholders do not have preemptive rights
(Bezugsrechte), which means that existing shareholders of Deutsche Telekom do
not have a right to subscribe for new Deutsche Telekom shares in the capital
increase in proportion to their existing holdings of Deutsche Telekom shares
before shares from the capital increase may be sold to other persons.
Conditional Capital
Section 5(5) of the Articles of Association provides for a conditional
capital of up to a nominal amount of 64 million euros or up to 25 million new
ordinary shares. This conditional share capital may only be used if and to the
extent that option rights granted pursuant to Deutsche Telekom's stock option
plan described below are exercised and new ordinary shares are delivered upon
such exercise. Option rights that have not been or may not be exercised prior
the expiration of the exercise period will expire. The ordinary shares issued
from the conditional share capital generally will be entitled to any dividends
paid in respect of the year in which they are issued. Shares that are issued
after the end of any fiscal year, but before the ordinary general shareholders
meeting at which the activities of the Deutsche Telekom management board for
that year are approved, will be entitled to any dividends paid in respect of
that year.
At their annual meeting on May 25, 2000, the shareholders of Deutsche
Telekom authorized the Deutsche Telekom supervisory board to grant stock options
to the members of its management board and authorized the Deutsche Telekom
management board to grant stock options to all other eligible participants. The
Deutsche Telekom supervisory board is authorized to determine the detailed terms
for the issuance of ordinary shares from the conditional share capital and for
the grant of options as well as the other terms of the stock option plan if the
Deutsche Telekom management board is the beneficiary of the stock option plan.
In all other cases, the Deutsche Telekom management board is authorized to make
these determinations.
The principal terms of the stock option plan are:
- Eligible Participants. The conditional share capital may only be used to
grant stock options to members of the Deutsche Telekom management board,
senior management at the levels below the Deutsche Telekom Management
Board and certain managers of Deutsche Telekom's domestic or foreign
group companies. Of the total number of options available under the stock
option plan, 20% may be granted to members of the Deutsche Telekom
management board and 15% may be granted to managers of Deutsche Telekom's
domestic and foreign group companies.
- Lock-up Period, Exercise Period. Options may not be exercised before the
expiration of two years after they have been granted. They may be
exercised for a period of three years following the lock-up period, which
in this document we refer to as the "exercise period".
- Strike Price. Each option entitles the holder to purchase one ordinary
share at the strike price. The strike price of the options will be equal
to the average of the closing prices quoted in the XETRA system of the
Frankfurt Stock Exchange on the 30 trading days prior to the day on which
the options are granted.
- Performance Requirements. The options may be exercised on any stock
exchange trading day in Frankfurt am Main during the exercise period if
both of the following performance requirements have been met:
-- Absolute Performance. The average ordinary share price during any 30
day period following the two year lock-up period must exceed the
strike price of the options by at least 20%.
-- Relative Performance. In addition, exercise of the options is linked
to the performance of the ordinary shares relative to the performance
of the Dow Jones Euro Stoxx 50 index. The options may only be
exercised if, during any 30 day period following expiration of the
two year lock-up period, the performance of the ordinary shares,
adjusted for dividends, preemptive rights and other special rights,
which in this document we refer to as the "total shareholder return",
exceeds the performance of the Euro Stoxx 50 index.
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Under the authorization, stock options may be granted in annual tranches.
Stock options are to be granted within the eight week period following the
ordinary general shareholders meeting in each year. The last tranche of options
may be granted in 2004. The terms and conditions of the stock options may
provide Deutsche Telekom with the right to make a cash payment instead of
issuing new ordinary shares upon exercise.
The terms and conditions of the options may also provide that the Deutsche
Telekom management board, and with respect to members of the Deutsche Telekom
management board, the Deutsche Telekom supervisory board, will be authorized to
determine that in lieu of one ordinary share against payment of the strike
price, a smaller number of ordinary shares may be issued upon exercise of an
option against payment of the minimum issue price. If that determination is
made, then each option will not entitle the holder to purchase one ordinary
share at the strike price set at the time of issuance of the option, but only a
certain number of options will entitle the holder to purchase one ordinary share
at the minimum issue price. The number of options necessary to purchase one
ordinary share will be determined as follows:
K-M
A= ---
K-X
Where:
A: means the number of options necessary to purchase one ordinary share;
X: means the strike price;
K: means the market price of a share at the time when the option is
exercised; and
M: means the minimum issue price, currently 2.56 euros.
On June 26, 2000, two Deutsche Telekom shareholders filed a suit with the
District Court in Bonn (Landgericht Bonn) seeking to have declared void the
shareholders resolutions authorizing both the stock option plan and a related
conditional capital increase. Deutsche Telekom cannot at present predict how
long it will take to resolve this litigation or what its outcome will be.
REPURCHASE OF SHARES
Under the German Stock Corporation Act (Aktiengesetz), Deutsche Telekom may
not purchase its own ordinary shares, subject to certain limited exceptions.
The general shareholders meeting on May 25, 2000 approved a resolution that
authorizes Deutsche Telekom pursuant to Section 71(1) no. 8 of the German Stock
Corporation Act to purchase its own ordinary shares in an amount representing up
to 10% of its registered share capital of approximately 7.76 billion euros
through November 15, 2001. The purchase price for the ordinary shares, excluding
purchasing costs, must not exceed or fall below the market price by more than
5%, in the case of a purchase on the stock exchange, or 20%, in the case of an
offer to purchase made to all shareholders. The relevant market price for this
purpose would be the opening auction price in the XETRA system of the Frankfurt
Stock Exchange on the day of the purchase, in the case of a purchase on the
stock exchange, or the closing price in the XETRA system on the day prior to the
publication of the offer, in the case of a public offer to purchase made to all
shareholders.
Pursuant to the resolution, the Deutsche Telekom management board is
authorized, with approval of the Deutsche Telekom supervisory board, to:
(1) list the acquired ordinary shares on foreign stock exchanges on which
they are not listed;
(2) offer the acquired ordinary shares to third parties in the context of
mergers with and acquisitions of other companies and acquisitions of
interests in other companies; and
(3) cancel the acquired ordinary shares without further shareholder
approval. This cancellation option can be exercised in whole or in
part.
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Shareholders do not have preemptive rights for the purposes listed in
clauses (1) and (2) above. The price for any sale on a stock exchange or use in
a merger or acquisition transaction would not be permitted to be more than 5%
below the opening auction price of Deutsche Telekom's ordinary shares in the
XETRA system of the Frankfurt Stock Exchange on the day of the sale on the stock
exchange or the definitive agreement with a third party, as applicable.
VOTING RIGHTS AND SHAREHOLDERS MEETINGS
Each ordinary share entitles its holder to one vote at Deutsche Telekom's
general meeting of shareholders. Shareholders may pass resolutions at a general
meeting by a majority of the votes cast, unless a higher vote is required by law
or by the Deutsche Telekom Articles of Association. Neither the German Stock
Corporation Act nor the Articles of Association provide for minimum quorum
requirements for shareholders meetings. The German Stock Corporation Act and the
Articles of Association require that significant resolutions be passed by at
least 75% of the share capital represented at a meeting.
These significant resolutions include:
- capital increases which provide for an exclusion of preemptive rights;
- capital decreases;
- the creation of authorized capital (genehmigtes Kapital) or conditional
capital (bedingtes Kapital);
- dissolution of Deutsche Telekom;
- merger of Deutsche Telekom into or consolidation of Deutsche Telekom with
another stock corporation;
- split- or spin-off;
- transfer of all Deutsche Telekom's assets;
- conclusion of intercompany agreements (Unternehmensvertrage), including,
in particular, direct control and profit and loss pooling agreements;
- amendments to the corporate purpose of Deutsche Telekom; and
- a change in Deutsche Telekom's corporate form.
A general meeting of the shareholders of Deutsche Telekom may be called by
the Deutsche Telekom management board, the Deutsche Telekom supervisory board or
by shareholders holding in the aggregate at least 5% of Deutsche Telekom's
issued share capital. The annual general meeting must take place within the
first eight months of the fiscal year and is called by the Deutsche Telekom
management board upon the receipt of the Deutsche Telekom supervisory board's
report on the annual financial statements. Under the Articles of Association,
the right to participate in and to vote at a shareholders meeting will only be
given to those shareholders who have timely registered for the shareholders
meeting in writing or by fax with the Deutsche Telekom management board at the
seat of the company and who are included in the share register when their
registration is received and on the date of the shareholders meeting. There must
be at least two days between receipt of the registration and the date of the
shareholders meeting. Deutsche Telekom must publish notice of shareholders
meetings in the Federal Gazette (Bundesanzeiger) at least one month prior to the
date by which shareholders have to register for the shareholders meeting. The
day of publication and the last date by which shareholders have to register for
the shareholders meeting are not counted for this purpose. In addition, Deutsche
Telekom must publish a notice in a national authorized stock exchange journal.
Those shareholders who have given timely notice to Deutsche Telekom in
writing or by fax and who are registered in the share register at the time of
this notice may participate in and vote in the general shareholders meeting.
This notice must be given so that there are at least two days between the day
when the notice is given and the day of the general shareholders meeting.
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DIVIDENDS AND OTHER DISTRIBUTIONS
Deutsche Telekom may pay dividends immediately following the resolution by
the general meeting of shareholders on the distribution of profits.
Under German law, Deutsche Telekom may declare and pay dividends only from
balance sheet profits as shown in the unconsolidated annual financial statements
of Deutsche Telekom. In determining the distributable balance sheet profits, the
Deutsche Telekom management board and the Deutsche Telekom supervisory board may
allocate to profit reserves (andere Gewinnrucklagen), either in whole or in
part, the annual surplus (Jahresuberschuss) that remains after allocation to
statutory reserves and losses carried forward. Under the Deutsche Telekom
Articles of Association, transferring more than one-half of the annual surplus
is not permissible if, following the transfer, the accumulated reserves out of
surplus would exceed one-half of Deutsche Telekom's share capital. The
shareholders, in determining the distribution of profits, may allocate
additional amounts to profit reserves and may carry forward profits in part or
in full.
Dividends approved at a shareholders meeting are payable on the first stock
exchange trading day after that meeting, unless otherwise decided at the
shareholders meeting. Details regarding paying agents are published in the
Federal Gazette (Bundesanzeiger). Shareholders holding ordinary shares through
Clearstream Banking AG will receive dividends by credit to their respective
accounts.
RECORD DATES
In accordance with the German Stock Corporation Act, the record date for
determining which holders of Deutsche Telekom ordinary shares are entitled to
the payment of dividends or other distributions, whether in cash, stock or
property, will be the date of the general meeting of shareholders at which such
dividends or other distributions are declared. The record date for determining
which holders of Deutsche Telekom ordinary shares are entitled to vote at a
general meeting will be the date of such general meeting, provided that holders
of Deutsche Telekom ordinary shares who are registered in the share register
(Aktienbuch) on the date of the meeting will be entitled to attend and vote at
the meeting only if such holders have given Deutsche Telekom notice of their
desire to attend early enough that there are at least two days between the day
the notice is given and the day of the several shareholders' meeting.
PREEMPTIVE RIGHTS
Under the German Stock Corporation Act, every shareholder generally has
preemptive rights with respect to an issuance of new ordinary shares, including
securities convertible into ordinary shares, securities with warrants to
purchase ordinary shares, profit-sharing certificates and securities with a
profit participation. Preemptive rights regarding a specific capital increase
are freely transferable and may be traded on the German stock exchanges for a
limited number of days prior to the final date for the exercise of the rights.
Shareholders may eliminate preemptive rights through a resolution passed by a
qualified majority of at least three quarters of the share capital represented
at a meeting. See "-- Share Capital -- Authorized Capital" for a description of
the authorized capital where preemptive rights have been eliminated. In
addition, an elimination of preemptive rights requires a report by the Deutsche
Telekom management board, which must justify the elimination by establishing
that Deutsche Telekom's interest in the elimination outweighs the shareholders'
interest in exercising their preemptive rights. Preemptive rights related to the
issuance of new ordinary shares may be eliminated without justification if:
- Deutsche Telekom increases share capital for cash contributions;
- the amount of the increase does not exceed 10% of the issued share
capital; and
- the ordinary shares are sold at a price not substantially lower than the
current quoted share price.
Shareholders do not have any preemptive rights with respect to ordinary
shares issued using conditional capital. See "-- Share Capital -- Conditional
Capital" for a description of the existing conditional capital.
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LIQUIDATION RIGHTS
In accordance with the German Stock Corporation Act, upon a liquidation of
Deutsche Telekom, shareholders will receive, in proportion to the ordinary
shares held, any liquidation proceeds remaining after paying off all of Deutsche
Telekom's liabilities.
NOTIFICATION REQUIREMENTS
Under the German Securities Trading Act (Wertpapierhandelsgesetz), any
person whose direct or indirect voting interest reaches, exceeds or, after
reaching, falls below 5%, 10%, 25%, 50% or 75% of the voting rights in Deutsche
Telekom must, within no more than seven calendar days, inform Deutsche Telekom
and the Federal Supervisory Authority for Securities Trading (Bundesaufsichtsamt
fur den Wertpapierhandel) in writing:
- that such person has reached, exceeded or fallen below one of these
thresholds; and
- the extent of such person's voting rights.
Failure to notify Deutsche Telekom or the Federal Supervisory Authority
will, for so long as such failure continues, disqualify the shareholder from
exercising the rights attached to his ordinary shares, including voting rights
and, if the shareholder is acting intentionally, the right to receive dividends.
In addition, a penalty may be imposed as provided for by law.
GERMAN FOREIGN EXCHANGE CONTROLS
At present, the Federal Republic of Germany does not restrict the movement
of capital between Germany and other countries, except investments in Iraq,
Myanmar and Serbia and with institutions of the Taliban party in Afghanistan and
the UNITA party in Angola. This is to comply with the applicable resolutions
adopted by the United Nations and the European Union.
For statistical purposes, with certain exceptions, every corporation or
individual residing in Germany is obligated to report any payment received from
or made to a non-resident corporation or individual to the German Central Bank
(Deutsche Bundesbank) if the payment exceeds DM 5,000 or EUR 2,500 or the
equivalent in a foreign currency. Additionally, corporations and individuals
residing in Germany must report to the German Central Bank any claims of a
resident corporation or individual against or liabilities payable to a
non-resident corporation or individual exceeding an aggregate of DM 3.0 million
or 1.5 million euros or the equivalent in a foreign currency at the end of any
calendar month.
Neither German law nor the Articles of Association restricts the right of
non-resident or foreign owners of the ordinary shares to hold or vote the
ordinary shares.
INSPECTION OF SHARE REGISTER
The share register of Deutsche Telekom will be maintained, on behalf and
under the responsibility of the Deutsche Telekom Management Board, by ADEUS
Aktienregister-Service-GmbH, for registration of any holder of Deutsche Telekom
ordinary shares, upon such holder's request, as a shareholder of Deutsche
Telekom. The share register will be open for inspection by the shareholders of
Deutsche Telekom during normal business hours at the principal office of
Deutsche Telekom in Bonn, Germany.
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DESCRIPTION OF DEUTSCHE TELEKOM AMERICAN DEPOSITARY SHARES
INFORMATION ABOUT DEUTSCHE TELEKOM ADSs
A Deutsche Telekom ADS is an American depositary share that represents one
ordinary share of Deutsche Telekom. The Deutsche Telekom ADSs were created to
allow U.S. shareholders of Deutsche Telekom to more easily hold and trade
interests in Deutsche Telekom on U.S. markets. Citibank, N.A., the depositary
for the Deutsche Telekom ADSs, will issue the Deutsche Telekom ADSs you will
receive in the relevant merger, and Citibank AG, Frankfurt Branch, the custodian
for the Deutsche Telekom ADSs, will hold the Deutsche Telekom ordinary shares
represented by those ADSs on behalf of the depositary.
There are advantages and disadvantages to receiving Deutsche Telekom ADSs
rather than Deutsche Telekom ordinary shares. Non-institutional holders may
prefer to receive Deutsche Telekom ADSs instead of Deutsche Telekom ordinary
shares for the following reasons:
- dividends on Deutsche Telekom ADSs are paid in U.S. dollars, whereas
dividends on Deutsche Telekom ordinary shares are paid in euros; and
- Deutsche Telekom ADSs are traded in the United States on the NYSE,
whereas Deutsche Telekom ordinary shares trade on the Frankfurt Stock
Exchange and other non-U.S. exchanges, but do not trade on any U.S.
national securities exchange.
You should, however, be aware that the trading volume of the Deutsche
Telekom ordinary shares on the Frankfurt Stock Exchange historically has been
significantly greater than the trading volume of the Deutsche Telekom ADSs on
the NYSE. If this continues, it may be more advantageous for a holder to sell a
large number of Deutsche Telekom ordinary shares on the Frankfurt Stock Exchange
than to sell a large number of Deutsche Telekom ADSs on the NYSE. In addition,
various fees are payable by holders of Deutsche Telekom ADSs to the depositary
in connection with various transactions as described below. The rights of a
holder of Deutsche Telekom ADSs also differ from the rights of a holder of
Deutsche Telekom ordinary shares in other respects as described below and under
"Description of Deutsche Telekom Ordinary Shares."
Citibank, N.A., as depositary bank for the Deutsche Telekom ADSs, will
issue Deutsche Telekom ADSs to you in the form of a certificated American
Depositary Receipt, which in this document we refer to as an "ADR", upon
completion of the Deutsche Telekom/VoiceStream merger and the Deutsche
Telekom/Powertel merger, unless you elect to receive Deutsche Telekom ordinary
shares. Each Deutsche Telekom ADS represents one Deutsche Telekom ordinary share
or the right to receive one Deutsche Telekom ordinary share on deposit with the
custodian bank. A Deutsche Telekom ADS will also represent any other property
received by the depositary bank or the custodian on behalf of the owner of the
Deutsche Telekom ADS but not distributed to the owners of Deutsche Telekom ADSs
because of legal restrictions or practical considerations.
Citibank's depositary offices are located at 111 Wall Street, New York, New
York 10043. Deutsche Telekom ADSs represent ownership interests in securities
that are on deposit with the depositary bank. The depositary bank typically
appoints a custodian to safekeep the securities on deposit. In this case, the
custodian is Citibank AG, located at Neue Mainzer Strasse 75, Frankfurt am Main,
Germany.
Deutsche Telekom has appointed Citibank as depositary bank pursuant to a
deposit agreement. The depositary bank will make available for inspection by
holders at its office and at the office of Citibank AG copies of documents,
reports and communications in respect of the Deutsche Telekom ADSs, including
the deposit agreement and Deutsche Telekom's Articles of Association. Deutsche
Telekom urges you to review the deposit agreement in its entirety as well as the
form of ADR attached to the deposit agreement as it is the agreement that
determines your rights and obligations as an owner of Deutsche Telekom ADSs. A
copy of the deposit agreement is also on file with the SEC under cover of a
Registration Statement on Form F-6. See "Additional Information -- Where You Can
Find More Information" for the location of the SEC Public Reference Room where
you can get copies of the deposit agreement. The depositary bank will also mail
copies of documents or reports and communications to you if requested by
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Deutsche Telekom to do so and if it is lawful and practicable to do so. Please
refer to Registration Number 333-05724 when retrieving a copy of the deposit
agreement.
If you become an owner of Deutsche Telekom ADSs, you will become a party to
the deposit agreement and therefore will be bound by its terms and by the terms
of the ADR that represents your Deutsche Telekom ADSs. The deposit agreement and
the ADR specify Deutsche Telekom's rights and obligations as well as your rights
and obligations as an owner of Deutsche Telekom ADSs and those of the depositary
bank. As a Deutsche Telekom ADS holder you appoint the depositary bank to act on
your behalf in certain circumstances. The deposit agreement and the ADRs are
governed by New York law. However, Deutsche Telekom's obligations to the holders
of ordinary shares will continue to be governed by the laws of Germany, which
may be different from the laws in the United States. Deutsche Telekom will treat
the depositary bank as the holder of the shares represented by your ADSs.
As an owner of Deutsche Telekom ADSs, you may hold your Deutsche Telekom
ADSs either by means of an ADR registered in your name or through a brokerage or
safekeeping account. If you decide to hold your Deutsche Telekom ADSs through
your brokerage or safekeeping account, you must rely on the procedures of your
broker or bank to assert your rights as a Deutsche Telekom ADS owner. Please
consult with your broker or bank to determine what those procedures are. This
summary description assumes you have opted to own the Deutsche Telekom ADSs
directly by means of an ADR registered in your name, and as such, you are
referred to as the "holder." When this summary refers to "you," it is on the
assumption that the reader owns new Deutsche Telekom ADSs and will own Deutsche
Telekom ADSs at the relevant time.
DIVIDENDS AND DISTRIBUTIONS
As a holder, you generally have the right to receive the distributions
Deutsche Telekom makes on the securities deposited with the custodian bank. Your
receipt of these distributions may be limited, however, by practical
considerations and legal limitations. Holders will receive the distributions
under the terms of the deposit agreement in proportion to the number of Deutsche
Telekom ADSs held as of a specified record date.
Distributions of Cash
Whenever Deutsche Telekom makes a cash distribution for the securities on
deposit with the custodian, it will notify the depositary bank. Subject to any
restrictions imposed by German laws or regulations, upon receipt of this notice
the depositary bank will arrange for the funds to be converted into U.S. dollars
and for the distribution of the U.S. dollars to the holders.
The conversion into U.S. dollars will take place only if practicable and if
the U.S. dollars are transferable to the U.S. The amounts distributed to holders
will be net of the fees, expenses, taxes and governmental charges payable by
holders under the terms of the deposit agreement. The depositary will apply the
same method for distributing the proceeds of the sale of any property, including
costs estimated with conversions of foreign currency into U.S. dollars, such as
undistributed rights, held by the custodian in respect of securities on deposit.
Distributions of Deutsche Telekom Ordinary Shares
Whenever Deutsche Telekom makes a free distribution of shares for the
securities on deposit with the custodian, it will notify the depositary bank.
Upon receipt of the notice, the depositary bank will either distribute to
holders new Deutsche Telekom ADSs representing the Deutsche Telekom ordinary
shares deposited or, with the written consent of Deutsche Telekom, modify the
ratio of Deutsche Telekom ADSs to Deutsche Telekom ordinary shares, in which
case each Deutsche Telekom ADS you hold will represent rights and interests in
the additional Deutsche Telekom ordinary shares so deposited. Only whole new
Deutsche Telekom ADSs will be distributed. Fractional entitlements will be sold
and the proceeds of the sale will be distributed as in the case of a cash
distribution.
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The distribution of new Deutsche Telekom ADSs or the modification of the
Deutsche Telekom ADS-to-Deutsche Telekom ordinary share ratio upon a
distribution of Deutsche Telekom ordinary shares will be made net of the fees,
expenses, taxes and governmental charges payable by holders under the terms of
the deposit agreement. To pay the taxes or governmental charges, the depositary
bank may sell all or a portion of the new Deutsche Telekom ordinary shares so
distributed.
No distribution of new Deutsche Telekom ADSs will be made if it would
violate a law, e.g., the U.S. securities laws, or if it is not operationally
practicable. On a distribution of new Deutsche Telekom ADSs, the depositary bank
may reasonably request an opinion of counsel regarding the need for registration
of the distribution under the U.S. Securities laws. Any such request may delay
distribution to you of new Deutsche Telekom ADSs. If the depositary bank does
not distribute new Deutsche Telekom ADSs as described above, it may sell the
Deutsche Telekom ordinary shares received and distribute the proceeds of the
sale as in the case of a distribution of cash.
Distributions of Rights
Whenever Deutsche Telekom intends to distribute rights to purchase
additional Deutsche Telekom ordinary shares, it may give prior notice to the
depositary bank and may assist the depositary bank in determining whether it is
lawful and reasonably practicable to distribute rights to purchase additional
Deutsche Telekom ADSs to holders.
The depositary bank will establish procedures to distribute rights to
purchase additional Deutsche Telekom ADSs to holders and to enable holders to
exercise their rights if it is lawful and reasonably practicable to make the
rights available to holders of Deutsche Telekom ADSs, and if Deutsche Telekom
provides all of the documentation contemplated in the deposit agreement, such as
opinions to address the lawfulness of the transaction. You may have to pay fees,
expenses, taxes and other governmental charges to subscribe for the new Deutsche
Telekom ADSs upon the exercise of your rights. The depositary bank is not
obligated to establish procedures to facilitate the distribution and exercise by
holders of rights to purchase new Deutsche Telekom ordinary shares directly
rather than new Deutsche Telekom ADSs.
The depositary bank will not distribute the rights to you if:
- Deutsche Telekom does not request that the rights be distributed to you
or if it asks that the rights not be distributed to you;
- Deutsche Telekom fails to deliver satisfactory documents to the
depositary bank; or
- it is not reasonably practicable to distribute the rights.
The depositary bank will sell the rights that are not exercised or not
distributed if the sale is lawful and reasonably practicable. The proceeds of
the sale will be distributed to holders as in the case of a cash distribution.
If the depositary bank is unable to sell the rights, it will allow the rights to
lapse.
Elective Distributions
Whenever Deutsche Telekom intends to distribute a dividend payable at the
election of shareholders either in cash or in additional Deutsche Telekom
ordinary shares, it will give prior notice thereof to the depositary bank and
will indicate whether it wishes the elective distribution to be made available
to you. In such case, Deutsche Telekom will assist the depositary bank in
determining whether the distribution is lawful and reasonably practical.
The depositary bank will make the election available to you only if it is
reasonably practical and if Deutsche Telekom has provided all of the
documentation contemplated in the deposit agreement. In such case, the
depositary bank will establish procedures to enable you to elect to receive
either cash or additional Deutsche Telekom ADSs, in each case as described in
the deposit agreement.
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If the election is not made available to you, you will receive either cash
or additional Deutsche Telekom ADSs, depending on what a shareholder in Germany
would receive for failing to make an election, as more fully described in the
deposit agreement.
Other Distributions
Whenever Deutsche Telekom intends to distribute property other than cash,
Deutsche Telekom ordinary shares or rights to purchase additional Deutsche
Telekom ordinary shares, it will notify the depositary bank in advance and will
indicate whether it wishes the distribution to be made to you. If so, Deutsche
Telekom will assist the depositary bank in determining whether the distribution
to holders is lawful and reasonably practicable.
If it is reasonably practicable to distribute the property to you, and if
Deutsche Telekom provides all of the documentation contemplated in the deposit
agreement, the depositary bank will distribute the property to the holders in a
manner it deems practicable.
The depositary bank will make the distribution net of fees, expenses, taxes
and governmental charges payable by holders under the terms of the deposit
agreement. In order to pay the taxes and governmental charges, the depositary
bank may sell all or a portion of the property received.
The depositary bank will not distribute the property to you and will sell
the property if:
- Deutsche Telekom does not request that the property be distributed to you
or if it asks that the property not be distributed to you;
- Deutsche Telekom fails to deliver satisfactory documents to the
depositary bank; or
- the depositary bank determines that all or a portion of the distribution
to you is not reasonably practicable.
The depositary bank will distribute the proceeds of the sale to holders as
in the case of a cash distribution.
CHANGES AFFECTING SHARES
The Deutsche Telekom ordinary shares held on deposit for your Deutsche
Telekom ADSs may change from time to time. For example, there may be a change in
nominal or par value, a split-up, consolidation or reclassification of the
Deutsche Telekom ordinary shares or a recapitalization, reorganization, merger,
consolidation or sale of assets.
If any such change were to occur, your Deutsche Telekom ADSs would, to the
extent permitted by law, represent the right to receive the property received or
exchanged in respect of the shares held on deposit. The depositary bank may in
such circumstances deliver new Deutsche Telekom ADSs to you or call for the
exchange of your existing Deutsche Telekom ADSs for new Deutsche Telekom ADSs
and will do so upon request of Deutsche Telekom to the extent legally permitted.
If the depositary bank may not lawfully distribute the property to you, the
depositary bank may sell the property and distribute the net proceeds to you as
in the case of a cash distribution.
ISSUANCE OF DEUTSCHE TELEKOM ADSs UPON DEPOSIT OF DEUTSCHE TELEKOM ORDINARY
SHARES
The depositary bank may create Deutsche Telekom ADSs on your behalf if you
deposit Deutsche Telekom ordinary shares with the custodian. The depositary bank
will deliver these Deutsche Telekom ADSs to the person you indicate only after
you pay any applicable issuance fees and any charges and taxes payable for the
transfer of the Deutsche Telekom ordinary shares to the custodian. Your ability
to deposit Deutsche Telekom ordinary shares could be limited by German legal
considerations at the time of deposit.
The depositary bank may delay the issuance of ADSs until the depositary
bank or the custodian receives confirmation that all required approvals have
been given and that the Deutsche Telekom ordinary
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shares have been duly transferred to the custodian. The depositary bank will
only issue Deutsche Telekom ADSs in whole numbers.
When you deposit Deutsche Telekom ordinary shares, you will be responsible
for transferring good and valid title to the depositary bank. You will thus be
deemed to represent and warrant the following:
- The Deutsche Telekom ordinary shares are duly authorized, validly issued,
outstanding, fully paid, non-assessable and legally obtained;
- All preemptive and similar rights, if any, with respect to the Deutsche
Telekom ordinary shares have been validly waived or exercised;
- You are authorized to deposit the Deutsche Telekom ordinary shares; and
- The shares presented for deposit are free and clear of any lien,
encumbrance, security interest, or other adverse claim, and are not, and
the Deutsche Telekom ADSs issuable upon the deposit are not, subject to
any other restriction on sale, transfer or deposit under the laws of the
United States, the Federal Republic of Germany, or under a shareholders'
agreement, or the Articles of Association, or any applicable regulations
of any securities exchange.
If any of the representations or warranties are incorrect in any way,
Deutsche Telekom and the depositary bank may, at your cost and expense, take any
and all actions necessary to correct the consequences of the misrepresentations.
WITHDRAWAL OF DEUTSCHE TELEKOM ORDINARY SHARES UPON CANCELLATION OF DEUTSCHE
TELEKOM ADSs
As a holder, you will be entitled to present your Deutsche Telekom ADSs to
the depositary bank for cancellation and then receive the underlying shares at
the custodian's offices. To withdraw the Deutsche Telekom ordinary shares
represented by your Deutsche Telekom ADSs, you will be required to pay to the
depositary the fees for cancellation of the Deutsche Telekom ADSs and any
charges and taxes payable upon the transfer of the Deutsche Telekom ordinary
shares being withdrawn. You assume the risk for delivery of all funds and
securities upon withdrawal. Once canceled, the Deutsche Telekom ADSs will not
have any rights under the deposit agreement.
If you hold an ADR registered in your name, the depositary bank may ask you
to provide proof of identity and genuineness of any signature and certain other
documents as the depositary bank may deem appropriate before it will cancel your
Deutsche Telekom ADSs. The depositary bank may delay the withdrawal of the
Deutsche Telekom ordinary shares represented by your Deutsche Telekom ADSs until
it receives satisfactory evidence of compliance with all applicable laws and
regulations. Please keep in mind that the depositary bank will only accept
Deutsche Telekom ADSs for cancellation that represent a whole number of
securities on deposit.
You will have the right to withdraw the securities represented by your
Deutsche Telekom ADSs at any time except in the following cases:
- Temporary delays caused by closing transfer books of the depositary or
Deutsche Telekom in connection with voting at a shareholders' meeting or
the payment of dividends;
- Obligations to pay fees, taxes and similar charges; or
- Restrictions imposed because of laws or regulations applicable to
Deutsche Telekom ADSs or the withdrawal of securities on deposit.
The deposit agreement may not be modified to impair your right to withdraw
the securities represented by your Deutsche Telekom ADSs except to comply with
mandatory provisions of law.
VOTING RIGHTS
At Deutsche Telekom's request, the depositary bank will mail to you any
notice of shareholders' meeting received from Deutsche Telekom together with
information explaining how to instruct the
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depositary bank to exercise the voting rights of the securities represented by
Deutsche Telekom ADSs. If the depositary bank timely receives voting
instructions from a holder of Deutsche Telekom ADSs, it will endeavor to vote
the securities represented by the holder's Deutsche Telekom ADSs in accordance
with the voting instructions.
Please note that the ability of the depositary bank to carry out voting
instructions may be limited by practical and legal limitations and the terms of
the securities on deposit (including Deutsche Telekom's Articles of
Association). Deutsche Telekom cannot assure you that you will receive voting
materials in time to enable you to return voting instructions to the depositary
bank in a timely manner. Securities for which no voting instructions have been
received will not be voted.
FEES AND CHARGES
As a Deutsche Telekom ADS holder, you will be required to pay the following
service fees to the depositary bank:
SERVICE FEES
------- ----
Issuance of Deutsche Telekom ADSs Up to 5c. per ADS issued
Cancellation of Deutsche Telekom ADSs Up to 5c. per ADS
canceled
Exercise of rights to purchase additional Deutsche Telekom
ADSs Up to 5c. per ADS issued
As a Deutsche Telekom ADS holder you may also be charged for the following
expenses:
- Fees for the transfer and registration of Deutsche Telekom ordinary
shares that the registrar and transfer agent charge for the transfer and
registration of Deutsche Telekom ordinary shares in Germany, i.e., upon
deposit and withdrawal of Deutsche Telekom ordinary shares;
- Expenses incurred for converting foreign currency into U.S. dollars or
for the sale of property;
- Expenses for cable, telex and fax transmissions and for delivery of
securities; and
- Taxes and duties upon the transfer of securities, i.e., when Deutsche
Telekom ordinary shares are deposited or withdrawn from deposit.
The expenses you may be required to pay would be customary for transactions
of this kind and are expected to be de minimis but may vary over time and may be
changed by Deutsche Telekom and by the depositary bank. You will receive prior
notice of any changes. Deutsche Telekom has agreed to pay certain other charges
and expenses of the depositary bank.
NOTIFICATION REQUIREMENTS
As a holder of Deutsche Telekom ADSs, you agree to comply with provisions
of German law relating to reporting of large positions in Deutsche Telekom
shares. For a description of these legal provisions, see "Description of
Deutsche Telekom Ordinary Shares -- Notification Requirements." You also agree
to provide certain information if reasonably requested by the depositary bank or
Deutsche Telekom.
AMENDMENTS AND TERMINATION
Deutsche Telekom may agree with the depositary bank to modify the deposit
agreement at any time without your consent. Any modification that would
prejudice any of the substantial rights of holders under the deposit agreement,
except in very limited circumstances enumerated in the deposit agreement, will
not become effective until 60 days after notice has been given to the holders.
Among the modifications that Deutsche Telekom will not consider to be materially
prejudicial to your substantial rights are:
- any modifications or supplements that are reasonably necessary for the
Deutsche Telekom ADSs to be registered under the Securities Act or to be
eligible for book-entry settlement, in each case without imposing or
increasing the fees and charges you are required to pay; and
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- any modifications or supplements that are required to accommodate
compliance with applicable provisions of law.
You will be bound by the modifications to the deposit agreement if you
continue to hold your Deutsche Telekom ADSs after the modifications to the
deposit agreement become effective. The deposit agreement cannot be amended to
prevent you from withdrawing the Deutsche Telekom ordinary shares represented by
your Deutsche Telekom ADSs, except as permitted by law.
Deutsche Telekom has the right to direct the depositary bank to terminate
the deposit agreement. Similarly, the depositary bank may in certain
circumstances on its own initiative terminate the deposit agreement. In either
case, the depositary bank must give notice to the holders at least 30 days
before termination.
Upon termination, the following will occur under the deposit agreement:
- For a period of one year after termination, you will be able to request
the cancellation of your Deutsche Telekom ADSs and the withdrawal of the
Deutsche Telekom ordinary shares represented by your Deutsche Telekom
ADSs and the delivery of all other property held by the depositary bank
in respect of those Deutsche Telekom ordinary shares on the same terms as
prior to the termination. During this one year period the depositary bank
will continue to collect all distributions received on the Deutsche
Telekom ordinary shares on deposit but will not distribute the property
to you until you request the cancellation of your Deutsche Telekom ADSs;
and
- After the expiration of the one year period, the depositary bank may sell
the securities held on deposit. The depositary bank will hold the
proceeds from the sale and any other funds then held for the holders of
Deutsche Telekom ADSs in a non-interest bearing account. At that point,
the depositary bank will have no further obligations to holders other
than to account for the funds then held for the holders of Deutsche
Telekom ADSs still outstanding.
BOOKS OF DEPOSITARY
The depositary bank will maintain Deutsche Telekom ADS holder records at
its depositary offices. You may inspect the records at the office during regular
business hours but solely for the purpose of communicating with other holders in
the interest of business matters relating to the Deutsche Telekom ADSs and the
deposit agreement.
The depositary bank will maintain in New York facilities to record and
process the issuance, cancellation, combination, split-up and transfer of ADRs.
These facilities may be closed from time to time, to the extent not prohibited
by law.
LIMITATIONS ON OBLIGATIONS AND LIABILITIES
The deposit agreement limits Deutsche Telekom's obligations and the
depositary bank's obligations to you. Please note the following:
- Deutsche Telekom and the depositary bank are obligated only to take the
actions specifically stated in the depositary agreement without
negligence or bad faith;
- The depositary bank disclaims any liability for any failure to carry out
voting instructions, for any manner in which a vote is cast or for the
effect of any vote, provided it acts in good faith and in accordance with
the terms of the deposit agreement;
- Deutsche Telekom and the depositary bank will not be obligated to perform
any act that is inconsistent with the terms of the deposit agreement;
- Deutsche Telekom and the depositary bank disclaim any liability if they
are prevented or forbidden from acting on account of any law or
regulation, any provision of Deutsche Telekom's Articles of Association,
any provision of any securities on deposit or by reason of any act of God
or war or other circumstances beyond their control;
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- Deutsche Telekom and the depositary bank disclaim any liability by reason
of any exercise of, or failure to exercise, any discretion provided for
in the deposit agreement or in Deutsche Telekom's Articles of Association
or in any provisions of securities on deposit;
- Deutsche Telekom and the depositary bank further disclaim any liability
for any action or inaction in reliance on the advice or information
received from legal counsel, accountants, any person presenting shares
for deposit, any holder of Deutsche Telekom ADSs or authorized
representative thereof, or any other person believed by either Deutsche
Telekom or the depositary bank in good faith to be competent to give the
advice or information;
- Deutsche Telekom and the depositary bank also disclaim any obligation to
appear in, prosecute or defend any action, suit or other proceeding in
respect of any deposited securities or the Deutsche Telekom ADSs, unless
indemnity satisfactory to it against expense and liability is furnished;
and
- Deutsche Telekom and the depositary bank may rely without any liability
upon any written notice, request or other document believed to be genuine
and to have been signed or presented by the proper parties.
PRE-RELEASE TRANSACTIONS
The depositary bank may, in certain circumstances, issue Deutsche Telekom
ADSs before receiving a deposit of Deutsche Telekom ordinary shares or release
Deutsche Telekom ordinary shares before receiving Deutsche Telekom ADSs. These
transactions are commonly referred to as "pre-release transactions." The deposit
agreement limits the aggregate size of pre-release transactions and imposes a
number of conditions on the transactions, such as the need to receive
collateral, the type of collateral required and the representations required
from brokers. The depositary bank may retain the compensation received from the
pre-release transactions. Full collateralization is a precondition to the
pre-release of Deutsche Telekom ADSs or underlying Deutsche Telekom ordinary
shares.
TAXES
You will be responsible for the taxes and other governmental charges
payable on the ADRs, the Deutsche Telekom ADSs evidenced by the ADRs and the
securities represented by the Deutsche Telekom ADSs. Deutsche Telekom, the
depositary bank and the custodian may deduct from any distribution the taxes and
governmental charges payable by holders and may sell any and all property on
deposit to pay the taxes and governmental charges payable by holders. You will
be liable for any deficiency if the sale proceeds do not cover the taxes that
are due.
The depositary bank may refuse to issue Deutsche Telekom ADSs, to deliver,
transfer, split and combine ADRs or to release securities on deposit until all
taxes and charges are paid by the applicable holder. The depositary bank and the
custodian may take reasonable administrative actions to obtain tax refunds and
reduced tax withholding for any distributions on your behalf. However, you may
be required to provide to the depositary bank and to the custodian proof of
taxpayer status and residence and the other information as the depositary bank
and the custodian may require to fulfill legal obligations. You are required to
indemnify Deutsche Telekom, the depositary bank and the custodian for any claims
with respect to taxes based on any tax benefit obtained for you.
FOREIGN CURRENCY CONVERSION
The depositary bank will arrange for the conversion into U.S. dollars of
all foreign currency received if the conversion is practical, and it will
distribute the U.S. dollars in accordance with the terms of the deposit
agreement. You may have to pay fees and expenses incurred in converting foreign
currency, such as fees and expenses incurred in complying with currency exchange
controls and other governmental requirements.
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If the conversion of foreign currency is not practical or lawful, or if any
required approvals are denied or not obtainable at a reasonable cost or within a
reasonable period, the depositary bank may take the following actions in its
discretion:
- Convert the foreign currency to the extent practical and lawful and
distribute the U.S. dollars to the holders for whom the conversion and
distribution is lawful and practical;
- Distribute the foreign currency to holders for whom the distribution is
lawful and practical; or
- Hold the foreign currency, without liability for interest, for the
applicable holders.
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COMPARISON OF RIGHTS OF VOICESTREAM AND POWERTEL
STOCKHOLDERS AND DEUTSCHE TELEKOM SHAREHOLDERS
As a result of the Deutsche Telekom/VoiceStream merger and the Deutsche
Telekom/Powertel merger, holders of VoiceStream common shares and Powertel
common shares, other than holders of VoiceStream common shares who make the cash
election and receive only cash as the merger consideration, will receive
Deutsche Telekom ADSs, each representing one Deutsche Telekom ordinary share or
the right to receive one Deutsche Telekom ordinary share on deposit with the
custodian bank, or, at the election of the holder, Deutsche Telekom ordinary
shares. If the Deutsche Telekom/VoiceStream merger is terminated and the
VoiceStream/Powertel merger occurs, holders of Powertel common shares will
receive VoiceStream common shares. Deutsche Telekom is a company incorporated
under the laws of Germany. Each of VoiceStream and Powertel is a corporation
incorporated in Delaware. The following is only a summary comparison of material
differences between the rights of a VoiceStream stockholder, a Powertel
stockholder and a Deutsche Telekom shareholder arising from the differences
between the corporate laws of Delaware and those of Germany, the governing
organizational instruments of the three companies and the securities laws and
regulations governing the three companies. We encourage you to read carefully
and in their entirety VoiceStream's certificate of incorporation, VoiceStream's
bylaws, Powertel's certificate of incorporation, Powertel's bylaws or Deutsche
Telekom's memorandum and articles of association. For information on how to
obtain the governing organizational instruments of VoiceStream, Powertel and
Deutsche Telekom, see "Additional Information -- Where You Can Find More
Information." You are encouraged to obtain and read these documents.
You should refer to "Description of Deutsche Telekom American Depositary
Shares" for a description of the Deutsche Telekom ADSs and a discussion of the
ways in which the rights of holders of Deutsche Telekom ADSs may differ from
those of holders of Deutsche Telekom ordinary shares.
If you hold shares of Deutsche Telekom, VoiceStream or Powertel through a
broker or other financial intermediary rather than directly as a person whose
name is entered in the share register of the relevant company, you must rely on
procedures established by that broker or financial intermediary in order to
assert the rights of a shareholder or stockholder against the relevant company.
PROVISIONS CURRENTLY APPLICABLE TO PROVISIONS APPLICABLE TO DEUTSCHE TELEKOM
VOICESTREAM AND POWERTEL STOCKHOLDERS SHAREHOLDERS
------------------------------------------------------------ ------------------------------------------------------------
VOTING RIGHTS
- Under Delaware law, each stockholder is entitled to one - Each share entitles the holder to one vote at the general
vote for each share of capital stock held by the shareholders meetings of Deutsche Telekom.
stockholder unless the certificate of incorporation
provides otherwise.
VoiceStream
- VoiceStream's certificate of incorporation contains no
provisions altering the voting rights of holders of
VoiceStream common shares.
- VoiceStream's bylaws provide that a majority of the - There are no quorum requirements for shareholders meetings
outstanding shares of VoiceStream entitled to vote, of Deutsche Telekom.
represented in person or by proxy, constitutes a quorum
for the transaction of business at a stockholder meeting.
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PROVISIONS CURRENTLY APPLICABLE TO PROVISIONS APPLICABLE TO DEUTSCHE TELEKOM
VOICESTREAM AND POWERTEL STOCKHOLDERS SHAREHOLDERS
------------------------------------------------------------ ------------------------------------------------------------
Powertel
- Powertel's certificate of incorporation contains no
provisions altering the voting rights of holders of
Powertel common shares.
- Powertel's bylaws provide that a majority of the
outstanding shares of Powertel entitled to vote,
represented in person or by proxy constitutes a quorum for
the transaction of business at a stockholder meeting.
- Under Delaware law, a certificate of incorporation may - The German Stock Corporation Act (Aktiengesetz) does not
provide that in elections of directors and other specified allow cumulative voting.
circumstances, stockholders are entitled to cumulate
votes.
VoiceStream
- VoiceStream's certificate of incorporation provides that
VoiceStream stockholders do not have cumulative voting
rights.
Powertel
- Powertel's certificate of incorporation does not provide
for cumulative voting rights.
ACTION BY WRITTEN CONSENT
- Under Delaware law, unless otherwise provided in the - Under the German Stock Corporation Act, stockholders may
certificate of incorporation, stockholders may take any not take any action by written consent in lieu of the
action required or permitted to be taken at a stockholder general shareholder meeting.
meeting without a meeting if the action is consented to in
writing by stockholders entitled to cast the same number
of votes that would be required to take that action at a
meeting at which stockholders were present and voting in
person.
VoiceStream
- VoiceStream's certificate of incorporation does not limit
this right of stockholders to act by written consent.
Powertel
- Powertel's certificate of incorporation provides that
stockholders may only take an action required or permitted
to be taken at a stockholder meeting without a meeting if
the action is consented to in writing by all stockholders
who would be entitled to vote with respect to the action
at the meeting.
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PROVISIONS CURRENTLY APPLICABLE TO PROVISIONS APPLICABLE TO DEUTSCHE TELEKOM
VOICESTREAM AND POWERTEL STOCKHOLDERS SHAREHOLDERS
------------------------------------------------------------ ------------------------------------------------------------
STOCKHOLDER PROPOSALS AND STOCKHOLDER NOMINATIONS OF DIRECTORS
- Under SEC proxy rules, any stockholder may submit a - Shareholders may nominate individuals for election to the
proposal to be acted upon at an annual meeting of Deutsche Telekom supervisory board, other than those
stockholders if the proposer has continuously held for at recommended by the existing Deutsche Telekom supervisory
least one year, as of the date he or she submits a board, by making a cross-motion to Deutsche Telekom within
proposal, 1% or at least $2,000 in market value of the one week after the publication of the notice of the
company's securities entitled to be voted on the proposal shareholders meeting in the Federal Gazette
at the meeting. In order for a stockholder's proposal to (Bundesanzeiger) if the election of one or several members
be included in the company's proxy statement for an annual of the Deutsche Telekom supervisory board is an item on
or special meeting, the proposal must meet certain the agenda of the shareholders meeting. The nomination
procedural and other requirements, including a requirement must contain the name, profession, domicile and
that the proposal be received by the company by the memberships in other supervisory boards or other
applicable submission deadline. For a regularly scheduled comparable domestic or foreign supervising bodies of the
annual meeting, the deadline is 120 days before the individual to be nominated. If Deutsche Telekom receives a
anniversary of the date on which the company's proxy communication of this kind, the Deutsche Telekom
statement for the previous year's annual meeting was first management board must, within 12 days after the
released to stockholders. If the company did not hold an publication of the notice of the shareholders meeting in
annual meeting the previous year, or if the date of the the Federal Gazette, notify the banks and the
current year's annual meeting has been changed by more shareholders' associations who at the prior shareholders
than 30 days from the date of the previous year's meeting, meeting exercised voting rights on behalf of shareholders
or if the submission is for a special meeting, the or who have requested notification of the applications and
deadline for submitting a proposal to be included in the proposals for elections by shareholders, including the
company's proxy statement is a reasonable time before the names of these shareholders and any response by the
company begins to print and mail its proxy materials. Deutsche Telekom management board. The same notification
has to be submitted by the Deutsche Telekom management
VoiceStream board to shareholders who have deposited their shares with
Deutsche Telekom or who have, after the publication of the
- VoiceStream's bylaws do not otherwise establish procedures notice of the shareholders meeting in the Federal Gazette,
and rules that a stockholder must follow in order to requested to receive notification or who are registered in
submit proposals, including director nominations, for an the share register of Deutsche Telekom and whose votes
annual or special meeting. have not been exercised by a bank at the last shareholders
meeting. In addition, any shareholder entitled to attend
Powertel and vote at the shareholders meeting can nominate
individuals for the Deutsche Telekom supervisory board at
- Powertel's bylaws do not otherwise establish procedures the shareholders meeting itself or between the date of the
and rules that a stockholder must follow in order to publication of the notice of the shareholders meeting and
submit proposals for an annual or special meeting. the shareholders meeting itself.
However, Powertel's certificate of incorporation requires
that director nominations be submitted in writing to the - According to the German Stock Corporation Act,
secretary of Powertel no later than 90 days prior to the shareholders holding in the aggregate shares representing
stockholder meeting at which such directors are to be at least 5% of the issued shares or the aggregate notional
elected, together with the par value amount of
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PROVISIONS CURRENTLY APPLICABLE TO PROVISIONS APPLICABLE TO DEUTSCHE TELEKOM
VOICESTREAM AND POWERTEL STOCKHOLDERS SHAREHOLDERS
------------------------------------------------------------ ------------------------------------------------------------
identity of the nominator and the number of Powertel 500,000 euros are entitled to require that a matter be put
shares owned, directly or indirectly, by the nominator. on the agenda for resolution and that the management board
submit a proposal at the shareholders meeting and publish
this proposal in the German Federal Gazette. The request
must be made in writing stating the purpose of, and the
reasons for, the request. Proposals duly published may be
submitted to the general shareholders meeting for
decision. In addition, each shareholder may also submit at
or prior to the shareholders meeting counterproposals to
the proposals submitted by the management board and the
supervisory board.
SOURCES AND PAYMENT OF DIVIDENDS
- Under Delaware law, subject to any restriction in the - Under the German Stock Corporation Act, dividends may be
corporation's certificate of incorporation, the board of declared and paid out of any distributable balance sheet
directors may declare and pay dividends out of: profits shown in the corporation's audited and approved
financial statements for the preceding fiscal year, as
-- surplus of the corporation, which is the excess of determined by resolution of the general shareholders
net assets over statutory capital; or meeting. For further information, see "Description
of Deutsche Telekom Ordinary Shares -- Dividends and
-- if no surplus exists, out of the net profits of the Other Distributions."
corporation for the year in which the dividend is
declared and/or the preceding year;
unless the net assets of the corporation are less than the
capital of any outstanding preferred shares.
VoiceStream
- VoiceStream's certificate of incorporation does not
contain provisions restricting the payment of dividends to
holders of VoiceStream common shares or to the voting
preferred shares.
Powertel
- Powertel's certificate of incorporation does not contain
provisions restricting the payment of dividends to holders
of Powertel common shares or to the preferred shares.
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PROVISIONS CURRENTLY APPLICABLE TO PROVISIONS APPLICABLE TO DEUTSCHE TELEKOM
VOICESTREAM AND POWERTEL STOCKHOLDERS SHAREHOLDERS
------------------------------------------------------------ ------------------------------------------------------------
RIGHTS OF PURCHASE AND REDEMPTION
- Under Delaware law, any corporation may purchase, redeem - Under the German Stock Corporation Act, a stock
and dispose of its own shares, except that it may not corporation may acquire its own shares:
purchase or redeem these shares if the capital of the
corporation is impaired or would become impaired as a -- only upon authorization by a shareholder meeting,
result of the redemption. provided that the company acquires no more than 10% of
its issued shares; or
- At any time, a corporation may purchase or redeem any of
its shares which are entitled upon any distribution of -- for certain defined purposes, e.g., for transfer to
assets to a preference over another class of its stock if employees. For further information, see "Description of
these shares will be retired upon acquisition or Deutsche Telekom Ordinary Shares -- Repurchase of
redemption, thereby reducing the capital of the Shares."
corporation.
VoiceStream
- VoiceStream's certificate of incorporation provides that
any outstanding VoiceStream shares may be subject to
redemption by VoiceStream to the extent necessary, in the
judgment of VoiceStream's board of directors, to prevent
the loss or secure the reinstatement of any license or
franchise from any governmental agency held by VoiceStream
or any of its subsidiaries to conduct any portion of the
business of VoiceStream or any of its subsidiaries or
affiliates, which license or franchise is conditioned upon
some or all of the holders of VoiceStream shares
possessing prescribed qualifications.
Powertel
- Powertel's certificate of incorporation provides that any
outstanding Powertel shares may be subject to redemption
by Powertel to the extent necessary, in the judgment of
Powertel's board of directors, to prevent the loss or
secure the reinstatement of any license or franchise from
any governmental agency held by Powertel or any of its
subsidiaries to conduct any portion of the business of
Powertel or any of its subsidiaries, which license or
franchise is conditioned upon some or all of the holders
of Powertel shares possessing prescribed qualifications.
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PROVISIONS CURRENTLY APPLICABLE TO PROVISIONS APPLICABLE TO DEUTSCHE TELEKOM
VOICESTREAM AND POWERTEL STOCKHOLDERS SHAREHOLDERS
------------------------------------------------------------ ------------------------------------------------------------
MEETINGS OF SHAREHOLDERS
General Meetings
VoiceStream - The Deutsche Telekom Articles of Association provide that
the general shareholders meeting will take place at the
- VoiceStream's bylaws provide that all meetings of headquarters of Deutsche Telekom, which is Bonn, Germany,
stockholders are to be held at any place designated by the or at the location of a German stock exchange or in a
VoiceStream board of directors or, if no designation is German city with over 500,000 inhabitants.
made, at the registered office of VoiceStream in Delaware.
- The Deutsche Telekom Articles of Association and the
Powertel German Stock Corporation Act provide that the annual
general meeting called to receive the approved audited
- Powertel's bylaws provide that all meetings of financial statements, ratify the actions of the Deutsche
stockholders are to be held at such place as may be fixed Telekom management board and the Deutsche Telekom
from time to time by the board of directors. supervisory board and resolve the appropriation of
distributable profits, as well as the appointment of the
- Unless otherwise provided in the certificate of auditor, must take place within the first eight months of
incorporation and described elsewhere in this summary, in each fiscal year.
all matters other than the election of directors,
stockholders act by the affirmative vote of the majority - Resolutions are passed at a Deutsche Telekom general
of shares present or represented by proxy and entitled to shareholders meeting by a majority of the votes cast,
vote on the subject matter. Directors are elected by a unless a higher vote or, additionally, a majority of the
plurality of the votes of the shares present in person or capital represented at the meeting is required by law or
represented by proxy and entitled to vote on the election the Deutsche Telekom Articles of Association. For further
of directors. information on this subject, see "Description of Deutsche
Telekom Ordinary Shares -- Voting Rights and Shareholders
VoiceStream Meetings."
- VoiceStream's bylaws provide that, for any meeting
requiring or permitting stockholder action, a written
notice of the meeting must be given to each stockholder
entitled to vote at that meeting not less than ten days or
more than sixty days before the date of the meeting. The
notice must identify the place, date and hour of the
meeting and, in the case of a special meeting, the purpose
for which the meeting is called.
- VoiceStream's bylaws provide that the annual meeting of
stockholders is to be held on the second Tuesday in June
of each year, or, if that day is a legal holiday, on the
next business day following, at 10 a.m. If the annual
meeting is not held on the designated date, then the
directors are to call the meeting to be held as soon
thereafter as convenient.
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VOICESTREAM AND POWERTEL STOCKHOLDERS SHAREHOLDERS
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- VoiceStream's annual meeting is for the election of
directors and for any other business that is properly
brought before the meeting.
Powertel
- Powertel's bylaws provide that, for any meeting of
stockholders, a written notice of the meeting must be
given not less than ten days or more than sixty days
before the date of the meeting, to each stockholder
entitled to vote at that meeting. The notice must identify
the place, date and hour of the meeting and, in the case
of a special meeting, the purpose for which the meeting is
called.
- Powertel's bylaws provide that the annual meeting of
stockholders is to be held on such date and at such time
as will be designated from time to time by the board of
directors.
- Powertel's annual meeting is for the election of directors
and for any other business that is properly brought before
the meeting.
Special Meetings
VoiceStream - A special meeting of shareholders of Deutsche Telekom may
be called by the Deutsche Telekom management board or the
- VoiceStream's bylaws provide that special meetings of Deutsche Telekom supervisory board.
stockholders may be called only by:
- A special meeting of shareholders must be called by the
-- the president; Deutsche Telekom management board upon request of
shareholders holding in the aggregate shares representing
-- the board of directors; or at least 5% of the issued shares. Written requests
received by Deutsche Telekom stating the purpose of and
-- stockholders entitled to cast at least one-fifth of the reasons for the special meeting must be forwarded to
votes which all stockholders are entitled to cast at the Deutsche Telekom management board.
that particular meeting.
- VoiceStream's bylaws provide that the business permitted
to be conducted at any special meeting is limited to the
purpose or purposes specified by the order calling the
special meeting.
Powertel
- Powertel's bylaws provide that special meetings of
stockholders may be called only by:
-- the board of directors;
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-- the chairman; or
-- the president.
Powertel stockholders do not have the right to call
special meetings.
- Powertel's bylaws provide that the business permitted to
be conducted at any special meeting is limited to the
purposes stated in the notice calling the special meeting.
Attendance at a special meeting constitutes waiver unless
the stockholder objects at the meeting to transacting
business or considering the matter.
APPRAISAL RIGHTS
- Under Delaware law, stockholders of a corporation involved - A valuation proceeding (Spruchverfahren) is available to
in a merger have the right to demand and receive payment Deutsche Telekom's shareholders under the German Stock
of the fair value of their stock in lieu of receiving the Corporation Act and the German Transformation Act
merger consideration, provided that these stockholders (Umwandlungsgesetz) to determine the adequacy of the
comply with the procedural requirements set forth under consideration to be paid in certain corporate
Delaware law for perfecting this right. However, appraisal transactions. These transactions include, among other
rights are not available to holders of shares: things:
-- listed on a national securities exchange; -- a merger;
-- designated as a national market system security on an -- a control and profit transfer agreement between a
interdealer quotation system operated by the National controlling shareholder and its dependent company; and
Association of Securities Dealers, Inc.; or
-- the forced withdrawal of minority shareholders from a
-- held of record by more than 2,000 stockholders; corporation upon the corporation's integration with a
parent corporation holding shares representing at least
unless holders of stock are required to accept 95% of the nominal capital of the corporation to be
consideration in the merger other than any combination of: integrated.
-- shares of stock or depositary receipts of the surviving These rights are available to shareholders, provided that in
corporation in the merger; each case the shareholder complies with the procedural
requirements specified in the respective statutory
-- shares of stock or depositary receipts of another provisions.
corporation that, at the effective date of the merger,
will be either: - Under the tentative draft of a German Takeover Act
(Ubernahmegesetz), expected to enter into force in 2001 or
(1) listed on a national securities exchange; 2002, the compulsory acquisition of minority shareholders
by a majority shareholder holding more than 95% of the
(2) designated as a national market system issued shares will entitle the minority shareholders the
right to a valuation proceeding.
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security on an interdealer quotation system
operated by the National Association of Securities
Dealers, Inc.; or
(3) held of record by more than 2,000 holders; or
-- cash in lieu of fractional shares of the stock or
depositary receipts received.
PREEMPTIVE RIGHTS
- Under Delaware law, a stockholder is not entitled to - Under the German Stock Corporation Act, in general, an
preemptive rights to subscribe for additional issuances of existing shareholder in a stock corporation has a
stock or any security convertible into stock unless they preemptive right (Bezugsrecht) to subscribe for any issue
are specifically granted those rights in the certificate by the corporation of new shares, including securities
of incorporation. convertible into shares, securities with warrants to
purchase shares, profit-sharing certificates and
VoiceStream securities with a profit participation, in proportion to
the shares held by the shareholder in the existing capital
- VoiceStream's certificate of incorporation does not of such corporation. The German Stock Corporation Act
provide for preemptive rights. provides that this preemptive right can be excluded only
by a shareholder resolution. The approval of a majority of
Powertel at least 75% of the issued shares represented at the
shareholders meeting is required to exclude preemptive
- Powertel's certificate of incorporation does not provide rights. See "Description of Deutsche Telekom Ordinary
for preemptive rights. Shares -- Preemptive Rights."
AMENDMENT OF GOVERNING ORGANIZATIONAL INSTRUMENTS
- Under Delaware law, unless the certificate of - Amendments of the Deutsche Telekom Articles of Association
incorporation requires a greater vote, an amendment to the may be proposed either by the Deutsche Telekom supervisory
certificate of incorporation requires: board, to the Deutsche Telekom management board or by a
shareholder or group of shareholders holding at least 5%
-- recommendation of the board of directors; of the issued shares or at least the notional par value
amount of 500,000 euros. According to the Deutsche Telekom
-- the affirmative vote of a majority of the outstanding Articles of Association, a resolution amending the
shares entitled to vote; and Deutsche Telekom Articles of Association generally must
be passed by a majority of the votes cast and a
-- the affirmative vote of a majority of the outstanding majority of the shares issued represented at the
shares of each class adversely affected by the meeting of shareholders at which the resolution is
amendment. considered. The German Stock Corporation Act requires,
however, that certain resolutions be passed by at least
Under Delaware law, stockholders have the power to adopt, three-quarters of the shares
amend or repeal bylaws by the
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affirmative vote of a majority of the outstanding stock issued represented at the meeting, including resolutions
entitled to vote unless the certificate of incorporation relating to:
or the bylaws specify another percentage. -- capital increase with an exclusion of preemptive rights;
VoiceStream -- capital decreases;
- Under VoiceStream's certificate of incorporation, approval -- the creation of authorized capital (genehmigtes Kapital)
of the holders of at least 66 2/3% of the outstanding or conditional capital (bedingtes Kapital); or
voting power of VoiceStream is required to amend or
repeal any of the provisions in the certificate of -- amendments of the corporate purpose of Deutsche Telekom.
incorporation relating to:
-- the redemption of outstanding shares;
-- preemptive rights;
-- cumulative voting; or
-- the voting requirements for the repeal or amendment of
VoiceStream's certificate of incorporation.
For further information, see "Description of Deutsche
Telekom Ordinary Shares -- Voting Rights and Shareholders
Meetings."
Powertel
- Under Powertel's certificate of incorporation, approval of
the holders of at least 66 2/3% of the shares entitled to
vote and the affirmative vote of a majority of the members
of the entire board of directors are required to amend or
repeal any of the provisions in the certificate of
incorporation relating to:
-- action by stockholders by written consent;
-- the election or classification of the board of
directors;
-- the elimination of liability of the board of directors;
-- the indemnification of the board of directors; or
-- the voting requirements for the repeal or amendment of
the Powertel certificate of incorporation.
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- Under Delaware law, if provided by the certificate of
incorporation, the board of directors may adopt, amend or
repeal the bylaws of a company by majority vote.
VoiceStream
- VoiceStream's certificate of incorporation gives the board
of directors that authority, but according to
VoiceStream's bylaws, only if notice of the proposed
amendment or repeal is provided in the notice of the board
meeting. In addition, VoiceStream's bylaws state that the
directors may not modify the provisions in the bylaws
which fix their qualifications, classifications or term of
office.
- VoiceStream's certificate of incorporation and bylaws
state that the bylaws may be amended or repealed by
VoiceStream's stockholders at any regular or special
meeting if notice of the proposed amendment is provided in
the notice of the meeting.
Powertel
- Powertel's certificate of incorporation and bylaws give
the board of directors the authority to adopt, amend or
repeal the bylaws of the company. However, Powertel's
bylaws state that the affirmative vote of at least 66 2/3%
of the shares entitled to vote and the affirmative vote of
a majority of the members of the entire board of directors
are required to amend, modify or repeal by law provisions
relating to meetings of stockholders, powers of directors
and rules regulating their exercise of power and
amendments to the bylaws.
PREFERRED SHARES
VoiceStream - As a general rule, the Deutsche Telekom management board,
with the approval of the Deutsche Telekom supervisory
- VoiceStream's certificate of incorporation authorizes the board, would be authorized to use the existing authorized
VoiceStream board of directors to: capital for the issuance of preferred shares
(Vorzugsaktien), which are shares with a cumulative
-- issue up to 100,000,000 preferred shares, $0.001 par preference right with respect to the distribution of
value per share; profits. In this case, Deutsche Telekom shareholders
would not have preemptive rights in connection with
-- provide for the issuance of one or more series of this issuance. The Deutsche Telekom shareholders may
preferred shares; also resolve in a general meeting to issue preferred
shares in which case Deutsche Telekom shareholders
-- fix the designations, and number of the shares would
constituting each series of preferred shares; and
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in general have preemptive rights. See "-- Preemptive
-- fix for each series, its relative rights. Rights."
Powertel
- Powertel's certificate of incorporation authorizes the
Powertel board of directors to:
-- issue up to 1,000,000 preferred shares;
-- provide for the issuance of one or more series of
preferred shares;
-- fix the designations, powers, preferences, and relative
rights of the shares of each series of preferred shares
and the qualifications, limitations and restrictions
thereof; and
-- establish the number of the shares constituting each
series of preferred shares.
OUTSTANDING PREFERRED STOCK
VoiceStream
- VoiceStream has 3,906,250 voting preferred shares
outstanding, all of which are held by Deutsche Telekom.
- Any of these shares outstanding as of the completion of
the Deutsche Telekom/ VoiceStream merger will remain
outstanding and will be unaffected by that merger. The
voting preferred shares are convertible only if the
Deutsche Telekom/VoiceStream merger is terminated.
Powertel
- There are five series of Powertel preferred shares
outstanding: Series A convertible preferred shares, Series
B convertible preferred shares, Series D convertible
preferred shares, Series E 6.5% cumulative convertible
preferred shares and Series F 6.5% cumulative convertible
preferred shares. There are 100,000 Powertel Series A
preferred shares outstanding, 100,000 Powertel Series B
preferred shares outstanding, 50,000 Powertel Series D
preferred shares outstanding, 50,000 Powertel Series E
preferred shares outstanding and 50,000 Powertel Series F
preferred shares outstanding.
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- Holders of two-thirds of each series of Powertel preferred
shares are entitled to consent as a class upon a proposed
action affecting such series involving an:
-- authorization, creation or issuance, or any increase in
the authorized or issued amount, of any class or series
ranking prior to such series as to dividends or
distribution of assets;
-- increase in the authorized or issued amount of the
class; or
-- amendment, alteration or repeal by merger,
consolidation or otherwise of any of the provisions of
the certificate of incorporation that would affect any
rights, preferences or voting powers of the series;
provided that an increase in the authorization or the
issuance of preferred stock ranking on a parity with,
or junior to, the series is not deemed to affect
rights, preferences or voting powers.
The foregoing voting rights do not apply if all outstanding
shares of a series have been redeemed or sufficient funds
have been deposited in trust to effect such redemption.
- Powertel Series A preferred shares are entitled to vote on
any merger, consolidation, sale of all or substantially
all of the assets, statutory stock exchange or other
extraordinary transaction. The Series A preferred shares
vote as a single class with the common shares. Each Series
A preferred share is entitled to cast that number of votes
equal to the number of votes which would be cast in such
vote by a holder of the common shares into which the
Series A preferred share is convertible on the record date
of such vote.
- Each series of preferred shares has a dividend preference.
For the Series A preferred shares, the Series B preferred
shares and the Series D preferred shares, the dividend
preference is equal to the dividend on the number of
Powertel common shares into which the preferred shares are
then convertible. The Series E preferred shares and the
Series F preferred shares accrue a cumulative 6.5% annual
dividend that is payable quarterly in common shares or
cash. Each series has a liquidation preference in the
amount of a stated amount plus declared or, in the case of
the Series E and Series F preferred shares, accrued but
unpaid dividends. Each series is subject to
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redemption provisions at a stated amount plus declared or,
in the case of the Series E and Series F preferred shares,
accrued but unpaid dividends and at stated times. At
certain times, each series is convertible into common
shares at the election of the holder. The number of common
shares into which such series is convertible is to be
determined by dividing the liquidation preference by the
current conversion price.
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STOCK CLASS RIGHTS
- Under Delaware law, changes to the rights of holders of - Under German law, any change to the rights of Deutsche
VoiceStream's or Powertel's common shares or preferred Telekom's shareholders, including any reclassification of
shares would require an amendment to VoiceStream's or the share capital of Deutsche Telekom, would generally
Powertel's certificate of incorporation, as the case may require the adoption of a shareholder resolution at a
be. Holders of shares of a class or a series are entitled general shareholder meeting. Generally, if the existing
to vote as a class upon a proposed amendment to the relationship of more than one class of shares is to be
certificate of incorporation if the amendment will: amended to the disadvantage of any class, the resolution
of the shareholders meeting will require the consent of
-- increase or decrease the authorized shares of the class the shareholders adversely affected in order to be
or series; effective. The shareholders adversely affected will
decide on such consent by adopting a separate
-- increase or decrease the par value of the shares of the resolution.
class or series; or
-- alter or change the powers, preferences or special
rights of the shares of the class or series so as to
affect them adversely.
STOCKHOLDERS' VOTES ON CERTAIN TRANSACTIONS
- Generally, under Delaware law, unless the certificate of - Under German law, the following resolutions in particular
incorporation provides for the vote of a larger portion of require a majority of at least 75% of the issued shares
the stock, completion of a merger or consolidation or sale represented at the shareholder meeting passing the
of substantially all of a corporation's assets or resolution and a simple majority of the votes cast at that
dissolution requires: meeting:
-- the approval of the board of directors; and -- capital increases with an exclusion of preemptive rights;
creation of authorized capital or conditional capital;
-- approvals by the vote of the holders of a majority of
the outstanding stock or, if the certificate of -- capital decreases;
incorporation provides for more or less than one vote
per share, a majority of the votes of the outstanding -- a dissolution of Deutsche Telekom;
stock of a corporation entitled to vote on the matter.
-- a merger of Deutsche Telekom or any other form of
VoiceStream transformation (Umwandlung) of Deutsche Telekom,
including, without limitation, spin-offs (Spaltungen), a
- VoiceStream's certificate of incorporation does not transfer of all or virtually all of Deutsche Telekom's
provide for the vote of a larger portion of the stock for assets, a change of Deutsche Telekom's corporate form, and
merger or consolidation. the execution of intercompany agreements
(Unternehmensvertrage); and
Powertel
-- amendments of the corporate purpose of Deutsche Telekom.
- Powertel's certificate of incorporation does not provide
for the vote of a larger portion of the stock for merger
or consolidation.
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RIGHTS OF INSPECTION
- Delaware law allows any stockholder: - In general, the German Stock Corporation Act does not permit
shareholders to inspect corporate books and records.
-- to inspect:
- The German Stock Corporation Act does permit shareholders to
(1) the corporation's stock ledger; inspect the share register upon request, and provides each
shareholder the right to receive oral information at the
(2) a list of its stockholders; shareholders meeting, to the extent that such information is
necessary to permit a proper evaluation of the relevant item on
(3) its other books and records; and the agenda. Information may be given in writing to
shareholders, but they are not entitled to receive written
-- to make copies or extracts of those materials during information.
normal business hours, provided that:
- Exceptions apply where the German Stock Corporation Act or the
(1) the stockholder makes a written request under German Transformation Act explicitly provide for the submission
oath stating the purpose of the inspection; and of written information, including written reports by the
management board or documentation concerning certain
(2) the inspection is for a purpose reasonably transactions. As a practical matter, shareholders may
related to the person's interest as a also receive written information about Deutsche
stockholder. Telekom through its public filings with the commercial
register (Handelsregister) and the Federal Gazette
Bundesanzeiger and other sources of publication by
Deutsche Telekom.
DUTIES OF DIRECTORS
- Consistent with Delaware law, each of VoiceStream's and - The Deutsche Telekom management board is responsible for
Powertel's bylaws provide that the business and affairs of managing Deutsche Telekom and representing Deutsche Telekom in
VoiceStream and Powertel, respectively, are to be managed its dealings with third parties, while the Deutsche Telekom
by VoiceStream's or Powertel's board of directors, supervisory board appoints and removes the members of the
respectively. Deutsche Telekom management board and oversees the management
of Deutsche Telekom. The supervisory board is required by law
to review the annual financial statements of Deutsche Telekom
and its consolidated financial statements. The Deutsche Telekom
management board must submit regular reports on the operations
and fundamental planning of Deutsche Telekom to the Deutsche
Telekom supervisory board, and the Deutsche Telekom supervisory
board is also entitled to request special reports at any time.
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- The German Stock Corporation Act prohibits the Deutsche Telekom
supervisory board from making management decisions. Pursuant to
the Articles of Association of Deutsche Telekom and the bylaws
(Geschaftsordnung) of the management board, the management
board must obtain the consent of the supervisory board for
certain actions, including acquisitions or dispositions of real
property having a value of more than 25 million euros,
acquisitions or dispositions of equity investments, the
appointment of members of the supervisory board or other bodies
having supervisory functions of direct or indirect subsidiaries
with a share capital of more than 2.5 million euros or an
annual turnover of more than 25 million euros, and actions
concerning the corporate structure or the strategy of Deutsche
Telekom. In addition, under the German Stock Corporation Act,
the supervisory board is authorized to subject other actions of
the management board to its consent.
STANDARD OF CONDUCT FOR DIRECTORS
- Delaware law does not contain any specific provisions setting
forth the standard of conduct of a director. The scope of the
fiduciary duties of VoiceStream's and Powertel's board is thus
determined by the courts of the State of Delaware. In general,
directors have a duty to act without self-interest, on a
well-informed basis and in a manner they reasonably believe to
be in the best interests of the stockholders.
- Neither Delaware law nor VoiceStream's or Powertel's
certificate of incorporation contains any provisions permitting
directors, when discharging their duties, to consider the
interests of any constituencies other than the corporation or
its stockholders.
STANDARD OF CONDUCT FOR DIRECTORS STANDARD OF CONDUCT FOR DIRECTORS
- Delaware law does not contain any specific provisions setting - In carrying out their duties, members of the Deutsche Telekom
forth the standard of conduct of a director. The scope of the management board and the Deutsche Telekom supervisory board
fiduciary duties of VoiceStream's and Powertel's board is thus must exercise the standard of care of a prudent and diligent
determined by the courts of the State of Delaware. In general, businessman and have the burden of proving that they exercised
directors have a duty to act without self-interest, on a such care if it is ever contested. The interests of Deutsche
well-informed basis and in a manner they reasonably believe to Telekom are deemed to include the interests of the
be in the best interests of the stockholders. shareholders, the interests of the work force and, to some
extent, the public interest, and both the Deutsche Telekom
- Neither Delaware law nor VoiceStream's or Powertel's management board and the Deutsche Telekom supervisory board
certificate of incorporation contains any provisions permitting must take all these interests into account when taking actions
directors, when discharging their duties, to consider the or decisions. Although there is no explicit obligation to act
interests of any constituencies other than the corporation or solely in the interests of shareholders, the management board
its stockholders. is required to respect the shareholders' rights to equal
treatment and equal information.
- The Deutsche Telekom management board has a duty to maintain
the confidentiality of corporate information.
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NUMBER AND TERM OF DIRECTORS
VoiceStream
- VoiceStream's bylaws provide that the number of directors will
be set from time to time by the board of directors but will not
be less than one. VoiceStream's board of directors currently
consists of 16 members, each elected for a term of one year,
and until his or her successor is elected and qualified or
until his or her earlier resignation or removal.
Powertel
- Powertel's certificate of incorporation provides that the
number of directors will not be fewer than three nor more than
15 directors. Powertel's board of directors currently consists
of eight members, each elected for a term of three years, and
until his or her successor is elected and qualified or until
his or her earlier resignation, removal from office, death or
incapacity. Powertel's certificate of incorporation classifies
the board of directors into three classes. The term of office
of only one class of directors expires in each year.
- The German Stock Corporation Act prohibits simultaneous
membership on the management board and the supervisory board of
a company.
NUMBER AND TERM OF DIRECTORS NUMBER AND TERM OF DIRECTORS
VoiceStream - The Deutsche Telekom supervisory board consists of 20 members,
10 of whom are elected by the holders of Deutsche Telekom
- VoiceStream's bylaws provide that the number of directors will shares, and, in accordance with the Co-determination Act of
be set from time to time by the board of directors but will not 1976 (Mitbestimmungsgesetz), 10 of whom are elected by the
be less than one. VoiceStream's board of directors currently employees of Deutsche Telekom. In the event of a deadlock, the
consists of 16 members, each elected for a term of one year, chairman of the supervisory board has a casting vote. The
and until his or her successor is elected and qualified or chairman and a deputy chairman are elected by the supervisory
until his or her earlier resignation or removal. board from among its members; in the event that a majority of
two-thirds of the members of the supervisory board is not
Powertel achieved, the shareholder representatives elect the chairman
and the employee representatives elect the deputy chairman.
- Powertel's certificate of incorporation provides that the
number of directors will not be fewer than three nor more than - The maximum term of office for members of the Deutsche Telekom
15 directors. Powertel's board of directors currently consists management board is limited to five years according to the
of eight members, each elected for a term of three years, and German Stock Corporation Act. According to the Deutsche Telekom
until his or her successor is elected and qualified or until Articles of Association, the term of office for members of the
his or her earlier resignation, removal from office, death or Deutsche Telekom supervisory board is limited to four fiscal
incapacity. Powertel's certificate of incorporation classifies years, although the general shareholders meeting may determine
the board of directors into three classes. The term of office that a shorter term of office applies to those members of the
of only one class of directors expires in each year. Deutsche Telekom supervisory board elected by the shareholders.
The German Stock Corporation Act and the Articles of
Association disregard the fiscal year in which the term of
office begins and extend the term until the shareholders
meeting in the year following the fourth fiscal year.
Accordingly, members of the Deutsche Telekom supervisory board
will usually have a term of approximately five years. Members
of both the Deutsche Telekom management board and the Deutsche
Telekom supervisory board may be re-elected for additional
terms, and there is no limit on the number of additional terms.
CLASSIFICATION OF THE BOARD
- Delaware law permits the certificate of incorporation or a - In accordance with the German Stock Corporation Act,
stockholder-adopted bylaw to provide that directors be Deutsche Telekom has a two- tier board system consisting
divided into one, two or three classes, with the term of of the Deutsche Telekom management board (Vorstand) and
office of one class the
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of directors to expire each year. Deutsche Telekom supervisory board (Aufsichtsrat).
VoiceStream
- Neither VoiceStream's certificate of incorporation nor its
bylaws provide for the classification of the board of
directors.
Powertel
- Powertel's certificate of incorporation classifies the
board of directors into three classes, as nearly equal in
number as possible, such that at each annual meeting only
one class of directors' term will expire. If the number of
directors is changed by resolution of the board of
directors, any increase or decrease will be apportioned
among the classes so as to maintain the number of
directors in each class as nearly equal as possible.
REMOVAL OF DIRECTORS
- Delaware law provides that a director may be removed with - The members of the Deutsche Telekom management board may
or without cause by the holders of a majority in voting be removed prior to the expiration of their terms by the
power of the shares entitled to be voted at an election of Deutsche Telekom supervisory board only for reasons
directors, except that: amounting to good cause, such as gross breach of duty,
inability to duly fulfill their responsibilities or
-- members of a classified board of directors may be revocation of confidence by the shareholder meeting.
removed only for cause, unless the certificate of
incorporation provides otherwise; and - Members of the Deutsche Telekom supervisory board elected
by the shareholders at the general meeting may be removed
-- directors may not be removed in certain situations in upon the affirmative vote of a majority of the votes
the case of a corporation having cumulative voting. cast at a shareholders meeting. A member of the
supervisory board elected by the employees may be
VoiceStream removed by a majority of the votes cast by at least 75%
of the relevant class of employees. Any member of the
- VoiceStream's bylaws state that if cumulative voting is Deutsche Telekom supervisory board can be removed for good
permitted and if less than the entire board of directors cause, including gross breach of duty, by a court decision
is to be removed, no director may be removed without cause upon request of the Deutsche Telekom supervisory board. In
if the votes cast against his or her removal would be such case, Deutsche Telekom supervisory board's
sufficient to elect him or her if then cumulatively voted determination to take such action requires a simple
at an election of the entire board of directors, or if majority vote with the member affected having no voting
there are classes of directors, at an election of the power.
class of directors of which he or she is a part.
Powertel
- Powertel has a classified board of directors, and
directors may only be removed for cause. Powertel's bylaws
do not contain provisions
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dealing with the potential ramifications resulting from
the future adoption of cumulative voting.
VACANCIES ON THE BOARD OF DIRECTORS
- Under Delaware law, unless otherwise provided in the
certificate of incorporation or the bylaws:
-- vacancies on a board of directors; and
-- newly created directorships resulting from an
increase in the number of directors
may each be filled by a majority of the
directors in office.
In the case of a classified board, directors elected to fill
vacancies or newly created directorships will hold office until
the next election of the class for which the directors have
been chosen.
VoiceStream
- VoiceStream's bylaws provide that:
-- vacancies resulting from death, removal or otherwise and
newly created directorships resulting from an increase in
the authorized number of directors may be filled by the
affirmative vote of a majority of the remaining directors in
office, even if less than a quorum, or by the sole remaining
director; and
-- when a director resigns from the board and the resignation
is effective as of a future date, a majority of the
directors then in office, including the person who has
resigned, may fill the vacancy, the vote to take effect when
the resignation becomes effective.
Powertel
- Powertel's certificate of incorporation provides that the board
of directors has the power to increase the number of directors.
The board of directors nominates candidates to stand for
election by the stockholders.
- Powertel's certificate of incorporation provides that vacancies
on the board of directors, however occurring, whether by an
increase in the number of directors, death, resignations,
retirement, disqualification, removal from office or otherwise,
may be filled by the affirmative vote of a majority of the
remaining directors in office or a
VACANCIES ON THE BOARD OF DIRECTORS VACANCIES ON THE BOARD OF DIRECTORS
- Under Delaware law, unless otherwise provided in the - In the case of vacancies on the Deutsche Telekom management
certificate of incorporation or the bylaws: board, the Deutsche Telekom supervisory board may fill the
vacancy by appointing a new member.
-- vacancies on a board of directors; and
- Vacancies on the Deutsche Telekom supervisory board may, in
-- newly created directorships resulting from an urgent cases, be filled for an interim period until the next
increase in the number of directors election by the shareholders or the employees, as the case may
be, by the competent court upon a motion by the Deutsche
may each be filled by a majority of the Telekom management board, a member of the Deutsche Telekom
directors in office. supervisory board, a shareholder or certain employee
representatives.
In the case of a classified board, directors elected to fill
vacancies or newly created directorships will hold office until
the next election of the class for which the directors have
been chosen.
VoiceStream
- VoiceStream's bylaws provide that:
-- vacancies resulting from death, removal or otherwise and
newly created directorships resulting from an increase in
the authorized number of directors may be filled by the
affirmative vote of a majority of the remaining directors in
office, even if less than a quorum, or by the sole remaining
director; and
-- when a director resigns from the board and the resignation
is effective as of a future date, a majority of the
directors then in office, including the person who has
resigned, may fill the vacancy, the vote to take effect when
the resignation becomes effective.
Powertel
- Powertel's certificate of incorporation provides that the board
of directors has the power to increase the number of directors.
The board of directors nominates candidates to stand for
election by the stockholders.
- Powertel's certificate of incorporation provides that vacancies
on the board of directors, however occurring, whether by an
increase in the number of directors, death, resignations,
retirement, disqualification, removal from office or otherwise,
may be filled by the affirmative vote of a majority of the
remaining directors in office or a
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sole remaining director, even if less than a quorum.
LIABILITY OF DIRECTORS AND OFFICERS
- Delaware law permits a corporation through its certificate of
incorporation to eliminate or limit the personal liability of a
director to the corporation and its stockholders for damages
arising from a breach of fiduciary duty as a director. However,
no provision can limit the liability of a director for:
-- any breach of his duty of loyalty to the corporation or its
stockholders;
-- acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
-- intentional or negligent payment of unlawful dividends or
stock purchases or redemptions; or
-- any transaction from which he derives an improper personal
benefit.
VoiceStream
- VoiceStream's certificate of incorporation provides that a
director of VoiceStream will not be personally liable to
VoiceStream or its stockholders for monetary damages for breach
of fiduciary duty as a director, except to the extent required
by Delaware law.
Powertel
- Powertel's certificate of incorporation provides that a
director of Powertel will not be personally liable to Powertel
or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent required by
Delaware law.
LIABILITY OF DIRECTORS AND OFFICERS LIABILITY OF DIRECTORS AND OFFICERS
- Delaware law permits a corporation through its certificate of - Under compulsory provisions of the German Stock Corporation
incorporation to eliminate or limit the personal liability of a Act, a stock corporation is not allowed to limit or eliminate
director to the corporation and its stockholders for damages the personal liability of the members of either the management
arising from a breach of fiduciary duty as a director. However, board or the supervisory board for damages due to breach of
no provision can limit the liability of a director for: duty in their official capacity. Deutsche Telekom may waive its
claims for damages due to a breach of duty or reach a
-- any breach of his duty of loyalty to the corporation or its settlement with regard to these claims if more than three years
stockholders; have passed after these claims have arisen, but only with
the approval by the shareholder meeting. However, a waiver
-- acts or omissions not in good faith or which involve may not be granted and a settlement may not be reached if
intentional misconduct or a knowing violation of law; shareholders holding in the aggregate at least 10% of the
issued shares object to the resolution at the shareholders
-- intentional or negligent payment of unlawful dividends or meeting as reflected in the minutes.
stock purchases or redemptions; or
- Members of the Deutsche Telekom management board who violate
-- any transaction from which he derives an improper personal their duties to maintain the confidentiality of corporate
benefit. information may be held jointly and severally liable by the
corporation for any resulting damages, unless their actions
VoiceStream were validly approved by resolution at a shareholders meeting.
The members of the Deutsche Telekom supervisory board have
- VoiceStream's certificate of incorporation provides that a similar liabilities in respect of the corporation if they
director of VoiceStream will not be personally liable to violate their duties to maintain the confidentiality of
VoiceStream or its stockholders for monetary damages for breach corporate information.
of fiduciary duty as a director, except to the extent required
by Delaware law.
Powertel
- Powertel's certificate of incorporation provides that a
director of Powertel will not be personally liable to Powertel
or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent required by
Delaware law.
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INDEMNIFICATION OF DIRECTORS AND OFFICERS
- Delaware law provides that a corporation may indemnify any - Under German law, a corporation may indemnify its officers
officer or director who is made a party to any third party (leitende Angestellte), and, under certain circumstances,
suit or proceeding on account of being a director, officer German labor law requires a stock corporation to do so.
or employee of the corporation against expenses, including However, a corporation may not, as a general matter, indemnify
attorneys' fees, judgments, fines and amounts paid in members of the management board or the supervisory board. A
settlement reasonably incurred by him in connection with German stock corporation may, however, purchase directors' and
the action, through, among other things, a majority vote officers' insurance. The insurance may be subject to any
of a quorum consisting of directors who were not parties mandatory restrictions imposed by German law. In addition,
to the suit or proceeding if the officer or director: German law may permit a corporation to indemnify a member of
the management board or the supervisory board for attorneys'
-- acted in good faith and in a manner he reasonably fees incurred if such member is the successful party in a
believed to be in the best interests of the suit in a country, like the United States, where winning
corporation; and parties are required to bear their own costs, if German law
would have required the losing party to pay the member's
-- in a criminal proceeding, had no reasonable cause to attorneys' fees had the suit been brought in Germany.
believe his conduct was unlawful.
- Members of the Deutsche Telekom supervisory board and the
VoiceStream Deutsche Telekom management board and officers of Deutsche
Telekom will be covered by customary liability insurance,
- VoiceStream's certificate of incorporation and bylaws including insurance against liabilities under the Securities
provide that: Act.
-- VoiceStream will indemnify its current and former
directors, officers, employees and agents to the
fullest extent permitted by law;
-- the indemnification will include the right to receive
advance payment of any expenses incurred in connection
with any proceeding in advance of final disposition of
the proceeding; and
-- advance payment of any expenses will be made only upon
delivery to VoiceStream of a written affirmation by the
person seeking indemnification of his or her good faith
belief that he or she has met the standard of conduct
required to be eligible for indemnification and an
undertaking to repay all amounts advanced if it is
ultimately determined that he or she did not meet the
required standard of conduct.
- VoiceStream is not liable to indemnify any person for
amounts paid in settlement of any
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proceeding if the settlement was made without
VoiceStream's written consent.
- VoiceStream's bylaws provide that VoiceStream must fully
pay claims for indemnification and advance payment of
expenses within 60 days and 20 days, respectively, of
receiving a written request for payment. If VoiceStream
has not done so, the person seeking indemnification or
advance payment of expenses may bring suit against
VoiceStream to recover the unpaid amounts of the claim. If
there is a judgment against VoiceStream in such a suit,
the indemnitee is also entitled to be paid his or her
expenses of prosecuting that claim, with such expenses to
be proportionately prorated if the indemnitee is only
partially successful.
- VoiceStream maintains directors' and officers' insurance.
Powertel
- Powertel's certificate of incorporation provides that:
-- Powertel will indemnify its current and former
directors and officers and any person who is or was
serving at the request of Powertel as a director or
officer of another enterprise, to the fullest extent
permitted by law; and
-- The indemnification will include the right to receive
advance funds for indemnification as requested by the
director or officer being indemnified, as allowed by
law.
- Powertel maintains directors' and officers' insurance on
behalf of any person who is or was a director, officer,
employee or agent of the corporation or who, while a
director, officer, employee or agent of the corporation,
is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.
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CONFLICT-OF-INTEREST TRANSACTIONS
- Delaware law generally permits transactions involving a - In any transaction or contract between Deutsche Telekom and any
Delaware corporation and an interested director of that member of the Deutsche Telekom management board, Deutsche
corporation if: Telekom is represented by the Deutsche Telekom supervisory
board.
-- the material facts as to his relationship or interest
are disclosed and a majority of disinterested directors
consents;
-- the material facts are disclosed as to his relationship
or interest and holders of a majority of shares
entitled to vote thereon consent; or
-- the transaction is fair to the corporation at the time
it is authorized by the board of directors, a committee
of the board of directors or the stockholders.
LOANS TO DIRECTORS
- Under Delaware law, loans can generally be made to - The German Stock Corporation Act requires that any loan
officers and directors upon approval by the board of made by Deutsche Telekom to any member of the management
directors. board or general manager or to their spouses or minor
children that exceeds one month's salary of such member of
the management board or general manager be authorized by a
resolution of the Deutsche Telekom supervisory board.
Loans made by Deutsche Telekom to a member of the Deutsche
Telekom supervisory board require an affirmative vote of
the Deutsche Telekom supervisory board. For purposes of
this resolution, the member of the Deutsche Telekom
supervisory board who would be the borrower is not
entitled to vote.
STOCKHOLDER SUITS
- An individual may commence a class action suit on behalf - The German Stock Corporation Act does not provide for
of himself or herself and other similarly situated class actions, and does not generally permit shareholder
stockholders where the requirements for maintaining a derivative suits, even in the case of breach of duty by
class action under Delaware law have been met. the members of the management board or the supervisory
board. The shareholders meeting, acting by a simple
- Under Delaware law, a stockholder may initiate a majority of the votes cast, or a minority of the
derivative action to enforce a right of a shareholders holding in the aggregate at least
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corporation if the corporation fails to enforce the right 10% of the issued shares, is entitled to request Deutsche
itself. To maintain a derivative action, a plaintiff must, Telekom to claim damages, but is not entitled to assert
in the complaint: any rights on behalf of Deutsche Telekom. Upon request,
the corporation must prosecute the claim. If the request
-- state that the plaintiff was a stockholder at the is not complied with, the court will appoint a
time of the transaction of which the plaintiff special representative upon a motion of
complains or that the plaintiff's shares shareholders with either shares representing at
subsequently devolved on the plaintiff by least 10%, or under special circumstances 5%, of
operation of law; and the issued shares or the notional par value amount
of 1 million euros, or under special circumstances
-- (1) allege with particularity the efforts made by 500,000 euros. The special representative will
the plaintiff to obtain the action the assert claims of Deutsche Telekom for
plaintiff desires from the directors; or compensation of damages. The general
shareholders meeting may appoint any
(2) state the reasons for the plaintiff's failure disinterested party as a special
to obtain the action or for not making the representative for these proceedings.
effort.
- Shareholders exercising the minority right described above
- Additionally, the plaintiff must remain a stockholder must establish that they have held their shares for at
through the duration of the derivative suit. The action least three months prior to the general shareholders
may not be dismissed or settled without the approval of meeting in which they make the request. The shareholder
the Delaware Court of Chancery. group must reimburse Deutsche Telekom for all costs of
litigation if the proceedings are unsuccessful or only
partially successful, but in the latter case only to the
extent that those costs exceed any amounts awarded to
Deutsche Telekom in these proceedings.
- Each shareholder who was present at a shareholders meeting
and has objected to the resolution as reflected in the
minutes may within one month after adoption of the
respective resolution of shareholders take action against
the company to contest the resolution (Anfechtungsklage).
PROVISIONS RELATING TO SHARE ACQUISITIONS
- Section 203 of the Delaware General Corporation Law - German law does not specifically regulate "business
prohibits "business combinations," including mergers, combinations" with interested shareholders. However,
sales and leases of assets, issuances of securities and certain general principles of German law may restrict
similar transactions by a corporation or a subsidiary with business combinations under various circumstances.
an "interested
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stockholder" who beneficially owns 15% or more of a
corporation's voting stock, within three years after the
person or entity becomes an interested stockholder,
unless:
-- the transaction that will cause the person to become an
interested stockholder is approved by the board of
directors of the target prior to the transaction;
-- after completion of the transaction in which the person
becomes an interested stockholder, the interested
stockholder holds at least 85% of the voting stock of
the corporation not including:
(1) shares held by officers and directors; and
(2) shares held by specified employee benefit plans;
or
-- after the person becomes an interested stockholder, the
business combination is approved by the board and
holders of at least 66 2/3% of the outstanding voting
stock, excluding shares held by the interested
stockholder.
VoiceStream
- As a result of the VoiceStream board of director's
unanimous approval and adoption of Deutsche Telekom's
initial investment in VoiceStream, the Deutsche Telekom/
VoiceStream merger and the Deutsche Telekom/ VoiceStream
merger agreement, Deutsche Telekom's initial investment in
VoiceStream and the Deutsche Telekom/VoiceStream merger
are not subject to the limitations set forth in Section
203, and Deutsche Telekom is deemed not to be an
interested stockholder for purposes of Section 203.
Powertel
- As a result of the Powertel board's unanimous approval and
adoption of the Deutsche Telekom/ Powertel merger and the
Deutsche Telekom/ Powertel merger agreement and the
VoiceStream/Powertel merger and the VoiceStream/Powertel
merger agreement, these mergers are not subject to the
limitation set forth in Section 203, and neither Deutsche
Telekom nor VoiceStream is deemed to be an interested
stockholder for purposes of Section 203.
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TAKEOVER RELATED PROVISIONS
- Under Delaware law, directors generally have a duty to act - No statutory law or case law exists with respect to the
without self-interest, on a well-informed basis and in a standard of conduct applicable to the members of the
manner they reasonably believe to be in the best interests management board and of the supervisory board of a German
of the stockholders. Nevertheless, a Delaware court will stock corporation (Aktiengesellschaft) in the context of a
generally apply a policy of judicial deference to a board threatened change in control. The voluntary German
of directors' decisions to adopt anti-takeover measures in Takeover Guidelines provide that the management board of
the face of a potential takeover where the directors are the target company may not take any measures that would
able to show that: impede the shareholders from taking advantage of the
tender offer. This recommendation is based on the
-- they had reasonable grounds for believing that there principle that the target company's management board
was a danger to corporate policy and effectiveness from has a duty to the shareholders to remain neutral.
an acquisition proposal; and However, the Local Court of Dusseldorf (Landgericht
Dusseldorf) held that it may be permissible for a
-- the board action taken was reasonable in relation to management board to advertise statements reflecting the
the threat posed. company's own business concept and its strategy in the
mass media.
- The same principles apply under the tentative draft of a
German Takeover Act which is expected to enter into force
in 2001. However, the draft Takeover Act expressly
permits, among other things:
-- solicitation for alternative transactions;
-- other defense measures authorized by the shareholders
meeting by a majority of the votes cast, if the
resolution is adopted after publication of the offer; and
-- the issuance of new shares granting preemptive rights to
shareholders, if the underlying resolution by the
shareholders meeting was adopted during the last 18
months prior to the publication of the offer.
DISCLOSURE OF INTERESTS
- Acquirors of VoiceStream and Powertel common shares are - Holders of Deutsche Telekom ADSs are required to comply
subject to disclosure requirements under Section 13(d)(1) with specified U.S. securities law requirements,
of the Exchange Act and Rule 13d-1 thereunder, which including, subject to certain exceptions, filing Schedules
provide, subject to certain exceptions, that any person 13D with respect to their beneficial ownership of the
who underlying
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becomes the beneficial owner of more than 5% of the Deutsche Telekom ordinary shares if they beneficially own
outstanding VoiceStream or Powertel common shares must, more than 5% of the Deutsche Telekom ordinary shares
within ten days after such acquisition: outstanding. Under the German Securities Trading Act
(Wertpapierhandelsgesetz), anyone whose direct or indirect
-- file a Schedule 13D with the SEC disclosing specified voting interest reaches, exceeds or, after reaching,
information; and falls below 5%, 10%, 25%, 50% or 75% of the voting
rights in Deutsche Telekom must, within no more than
-- send a copy of the Schedule 13D to VoiceStream or seven calendar days, inform Deutsche Telekom and the
Powertel, as the case may be. Federal Supervisory Authority for Securities Trading
(Bundesaufsichtsamt fur den Wertpapierhandel) in writing:
- Each of VoiceStream and Powertel is required by the rules
of the SEC to disclose in the proxy statement relating to -- that he has reached, exceeded or fallen below one of
their respective annual meetings of stockholders the these thresholds; and
identity and number of VoiceStream or Powertel common
shares, as the case may be, beneficially owned by: -- of the extent of his voting rights.
-- each of its directors; Failure to notify Deutsche Telekom or the Federal
Supervisory Authority will, for so long as such failure
-- its chief executive officer; continues, disqualify the shareholder from exercising the
rights attached to his shares, including voting rights
-- each of its four most highly compensated executive and, if the shareholder is acting intentionally, the
officers other than its chief executive officer; right to receive dividends.
In addition, a penalty may be imposed on the
-- all of its directors and executive officers as a group; shareholder as provided for by law.
and
-- any beneficial owner of 5% or more of the VoiceStream
common shares or Powertel common shares of whom it is
aware.
LIMITATION ON ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. FEDERAL SECURITIES LAWS
Ability to Bring Suits, Enforce Judgments and Enforce U.S. Law
- Each of VoiceStream and Powertel is a U.S. company - Deutsche Telekom is a German company located in Germany.
incorporated under the laws of Delaware and has All of the members of its management board and executive
substantial assets located in the United States. As a officers are non-residents of the United States. In
result, investors generally can initiate lawsuits in the addition, although Deutsche Telekom will have substantial
United States against each of VoiceStream and Powertel and assets in the United States if the Deutsche
its directors and officers and can enforce lawsuits based Telekom/VoiceStream merger and the Deutsche
on U.S. federal securities laws in U.S. courts Telekom/Powertel merger are completed, the majority of
Deutsche Telekom's assets and a large portion of the
assets of Deutsche Telekom's directors and officers will
be located outside of the United States.
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- As a result, U.S. investors may find it difficult in a
lawsuit based on the civil liability provisions of the
U.S. federal securities laws;
-- to effect service within the United States upon
Deutsche Telekom and the members of its management
board and officers of Deutsche Telekom located outside
the United States;
-- to enforce in U.S. courts or outside the United States,
judgments obtained against those persons in U.S. courts;
-- to enforce in U.S. courts judgments obtained against
those persons in courts in jurisdictions outside the
United States; and
-- to enforce against those persons in Germany, whether in
original actions or in actions for the enforcement of
judgments of U.S. courts, civil liabilities based solely
upon the U.S. federal securities laws.
Short Swing Profits
- Directors and officers of each of VoiceStream and Powertel - Directors and officers of Deutsche Telekom and beneficial
and beneficial owners of 10% or more of the VoiceStream owners of 10% or more of Deutsche Telekom ordinary shares
common shares and Powertel common shares are governed by are not subject to the Exchange Act's "short swing" profit
rules under the Exchange Act that may require directors rules as long as Deutsche Telekom remains a foreign
and officers and such beneficial owners to forfeit to each private issuer under the Exchange Act. Members of the
of VoiceStream and Powertel, as the case may be, any Deutsche Telekom management board and Deutsche Telekom
"short swing" profits realized from purchases and sales of supervisory board, as well as other officers and employees
VoiceStream or Powertel equity securities within a six of Deutsche Telekom who are aware of non-public
month period, as determined under the Exchange Act and the information related to Deutsche Telekom, are prohibited
rules thereunder. from insider dealing under the German Securities Trading
Act.
PROXY STATEMENTS AND REPORTS
Notices and Reports to Stockholders
- Under the Exchange Act proxy rules, each of VoiceStream - As a foreign private issuer, Deutsche Telekom is exempt
and Powertel must comply with notice and disclosure from the proxy rules under the Exchange Act.
requirements relating to the solicitation of proxies for
stockholder meetings. - However, Deutsche Telekom must comply with notice,
publication and information requirements
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relating to general shareholders meetings under German
law. Announcements concerning shareholders meetings, the
payment of dividends, the issuance of new shares, the
exercise of exchange, conversion and preemptive rights and
any other rights vested in the shares must be published in
the German language in at least one newspaper with
national circulation (Borsenpflichtblatt), and Deutsche
Telekom must submit a copy thereof to the Frankfurt Stock
Exchange. See also "-- Reporting Requirements" and
"Description of Deutsche Telekom American Depositary
Shares."
REPORTING REQUIREMENTS
- As U.S. public companies, VoiceStream and Powertel must - As a foreign private issuer with securities quoted on the
file with the SEC, among other reports and notices: NYSE and registered under Section 12 of the Exchange Act,
Deutsche Telekom will be required to publicly file with
-- an annual report on Form 10-K within 90 days after the the SEC Annual Reports on Form 20-F within six months
end of each fiscal year; after the end of each fiscal year and to furnish to the
SEC in reports on Form 6-K, material information that
-- a quarterly report on Form 10-Q within 45 days after it makes public in Germany.
the end of each fiscal quarter; and
- Under the German Securities Act (Borsengesetz and
-- current reports on Form 8-K upon the occurrence of Borsenzulassungsverordnung), if Deutsche Telekom makes an
important corporate events. announcement or publication in the United States, which
may be relevant to the Deutsche Telekom ordinary
shares, Deutsche Telekom must make at least equivalent
announcements and publications in the German language
in at least one newspaper with national circulation. If
the information to be provided is extensive, the
admission office of the Frankfurt Stock Exchange may
require that such information be made available at the
German paying agent, and that an announcement in that
respect is published. A copy of such publication has to
be submitted to the admission office of the Frankfurt
Stock Exchange.
- Deutsche Telekom must also publish the annual accounts,
which is the balance sheet, profit and loss accounts and
notes thereto, consolidated and unconsolidated, promptly
after they have been finally determined. In addition,
interim reports for the first six months of Deutsche
Telekom's financial year must be published within two
months after the first six months have expired.
Publication must be made in at least one
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newspaper with national circulation or the German Federal
Gazette, unless submitted to the German paying agent. The
interim report must represent a true and fair view of the
financial position and the general course of business of
Deutsche Telekom. See also "-- Proxy Statements and
Reports."
- Under the German Securities Trading Act, Deutsche Telekom
must publish any and all information which is not publicly
known if it has a potentially significant effect on the
price of the Deutsche Telekom ordinary shares. The facts
must be published in at least one newspaper with national
circulation or an electronic information system widely
used by banks and brokers.
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DEUTSCHE TELEKOM FOLLOWING THE DEUTSCHE TELEKOM/
VOICESTREAM MERGER AND THE DEUTSCHE TELEKOM/POWERTEL MERGER
BUSINESS AND OPERATIONS
As a result of the completion of the Deutsche Telekom/VoiceStream merger
and the Deutsche Telekom/Powertel merger, each of VoiceStream and Powertel will
become wholly-owned subsidiaries of Deutsche Telekom. It is currently
anticipated that after the completion, Deutsche Telekom will transfer
VoiceStream and Powertel, directly or indirectly, to its wholly-owned
subsidiary, T-Mobile International AG, which is currently the holding company
for a substantial portion of Deutsche Telekom's European mobile
telecommunications operations, including the following:
- T-Mobile, Germany's second largest provider of mobile
telecommunications services, measured by number of subscribers at
December 31, 2000,
- One 2 One, the fourth largest provider of mobile telecommunications
services in the United Kingdom, measured by number of subscribers at
December 31, 2000, which was acquired by Deutsche Telekom in the
fall of 1999, and
- max.mobil Telekommunikation Service GmbH, the second largest
Austrian mobile telecommunications company, measured by number of
subscribers at December 31, 2000, which became a wholly-owned
subsidiary of Deutsche Telekom in April 2000.
In accordance with the Deutsche Telekom/VoiceStream merger agreement,
following the completion of the Deutsche Telekom/VoiceStream merger, Deutsche
Telekom has agreed to recommend the nomination of one VoiceStream nominee to be
appointed to each of the T-Mobile International management board, supervisory
board and executive committee, and has agreed to recommend that one current
member of the Deutsche Telekom supervisory board be replaced by a person
nominated by VoiceStream. It is currently contemplated that John W. Stanton,
Chief Executive Officer of VoiceStream, would be the nominee appointed to the
T-Mobile International management board and would be responsible for T-Mobile's
North American operations. It is expected that VoiceStream's headquarters in
Bellevue, Washington would become the base of operations for Deutsche Telekom's
mobile services in the United States.
Following the mergers, Deutsche Telekom's strategic focus will continue to
be on growth in four key areas: mobile telecommunications, data/Internet
Protocol/systems, consumer Internet services and access. Deutsche Telekom has
pursued growth in these areas aggressively, primarily through internal growth
and acquisitions. In this regard, Deutsche Telekom's primary emphasis will
continue to be on Europe and the United States, but Deutsche Telekom may pursue
opportunities worldwide. Deutsche Telekom remains intent on expanding its
presence internationally. As one of the world's largest telecommunications
companies, Deutsche Telekom believes that its advanced network and strategic
focus position it well to take advantage of the technological convergence of
telecommunications and information services.
With respect to mobile telecommunications operations, following the
mergers, Deutsche Telekom will continue to provide voice and data mobile
telecommunications services in the United States through the operations of its
subsidiaries, VoiceStream and Powertel, in their respective geographic regions
under the VoiceStream brand name. Going forward, Deutsche Telekom will be
seeking to expand the availability, quality and functionality of voice and data
services offered to its customers in the United States. Deutsche Telekom expects
that, after the mergers are completed, it will continue to make substantial
capital expenditures in connection with the acquisition of additional mobile
licenses, particularly in the United States, the capital requirements related to
its network buildout and marketing and distribution efforts in the United States
and Europe, as well as the roll-out of third generation mobile voice and data
services.
In its more mature European mobile telecommunications markets, Deutsche
Telekom's penetration levels may be approaching the point where future revenue
growth will be driven less by subscriber additions and more by attracting
existing subscribers to new applications, some of which are still under
development.
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Deutsche Telekom expects to recognize substantial additional depreciation
and amortization expense as a result of the allocation of the purchase price of
the Deutsche Telekom/VoiceStream merger and the Deutsche Telekom/Powertel merger
to tangible and intangible assets. Goodwill resulting from the mergers is
expected to be amortized over 20 years and certain other tangible and intangible
assets are expected to be amortized over useful lives ranging from three to 20
years. In addition, VoiceStream and Powertel have incurred substantial operating
losses and generated negative cash flow from operating activities and expect to
incur significant operating losses and to generate negative cash flow during the
next several years while they continue to develop and construct their systems
and grow their subscriber base. The increased depreciation and amortization
expense associated with the Deutsche Telekom/VoiceStream merger and the Deutsche
Telekom/Powertel merger and the increased capital expenditures to be incurred to
continue to build out the VoiceStream and Powertel mobile networks in the United
States may have a significant adverse effect on Deutsche Telekom's financial
results. In addition, after the completion of the mergers, we may elect, or be
required, to refinance or renegotiate all or a portion of the VoiceStream and
Powertel long-term debt and in doing so, Deutsche Telekom may incur additional
costs. On a pro forma basis, the combined statement of operations for Deutsche
Telekom, VoiceStream and Powertel for the year ended December 31, 1999 and for
the nine months ended September 30, 2000 reflects a net loss of euro 3,109.3
million and net income of euro 4,606.6 million, respectively, in accordance with
German GAAP and a net loss of euro 3,516.9 million and net income of euro
5,493.7 million, respectively, in accordance with US GAAP, as compared to
Deutsche Telekom's net income for such periods of euro 1,253.0 million and euro
8,445.0 million, respectively, in accordance with German GAAP and euro 1,513.0
million and euro 9,812.0 million, respectively, in accordance with US GAAP. See
"Deutsche Telekom Unaudited Pro Forma Condensed Combined Financial Statements."
MANAGEMENT BOARD AND SUPERVISORY BOARD
General
As required by the German Stock Corporation Act, Deutsche Telekom has a
two-tier board system consisting of a management board and a supervisory board.
The management board is responsible for managing Deutsche Telekom and
representing Deutsche Telekom in its dealings with third parties, while the
supervisory board appoints and removes the members of the management board and
oversees the management of Deutsche Telekom. The official auditor is engaged by
the supervisory board. See "Comparison of Rights of VoiceStream and Powertel
Stockholders and Deutsche Telekom Shareholders -- Classification of the Board."
Management Board of Deutsche Telekom
Pursuant to Deutsche Telekom's Articles of Association, the supervisory
board determines the size of the management board, subject to the requirement
that the management board must have at least two members. The supervisory board
may appoint a chairman of the management board as well as a deputy chairman.
The members of the management board are appointed by the supervisory board
for a term of up to five years and they may be re-appointed or have their term
extended for one or more terms of up to five years. Under certain circumstances,
such as a material breach of duty or a bona fide vote of no confidence by the
shareholders, a member of the management board may be removed by the supervisory
board prior to the expiration of the five-year term. A member of the management
board may not deal with, or vote on, matters relating to proposals, arrangements
or contracts between himself and Deutsche Telekom.
The management board takes action by simple majority unless otherwise
provided by law. In the event of a deadlock, the management board member in
whose area of responsibility the resolution falls has a deciding vote.
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Members of the Management Board of Deutsche Telekom
The name, age, current position and business experience of the current
members of the management board are set forth below. The members of the
management board may be reached at Deutsche Telekom's registered address.
Dr. Ron Sommer, age 51, was appointed chairman of the management board in
May 1995. As such, he is responsible for Group Strategy, Communication, Auditing
and Organization, Government Relations, Competition Policy, Regulatory Affairs
and top Management. He received a doctorate in mathematics and began his career
with the Nixdorf group, first in New York and then in Paderborn and Paris. In
1980, he became managing director of Sony Deutschland and in 1986 become
chairman of the management board of Sony Deutschland. In 1990, Dr. Sommer became
president and chief operating officer of Sony USA, and in 1993, he took over the
management of Sony Europe in the same capacity.
Josef Brauner, age 50, became head of the Sales and Customer Care Division
of Deutsche Telekom in October 1998. He joined Deutsche Telekom in June 1997 as
head of the Main Department for Sales. He started his sales career with Avery as
the U.S. company's branch manager for Germany, Austria and Switzerland.
Mr.Brauner next joined Sony Deutschland, where he was appointed head of sales in
the investment goods division and afterwards became head of that division. In
1988, Mr. Brauner became a member of the management board of Sony Deutschland,
and in 1993 was appointed chairman of that board.
Detlev Buchal, age 55, was appointed head of the Product Marketing Division
in October 1998, having previously acted as head of the Sales and Distribution
Division (Business and Residential Customers). After holding various management
positions in the banking industry, he joined the management board of the GZS
Gesellschaft fur Zahlungssysteme GmbH of the German Eurocardund
eurocheque-Zentrale. In 1992, he became chairman of that board, primarily
responsible for strategic planning, marketing and sales. He has been a member of
Deutsche Telekom's management board since February 1996.
Dr. Karl-Gerhard Eick, age 46, was appointed head of Finance and
Controlling Division in January 2000. After studying business administration and
earning a doctorate, Dr. Eick worked in various positions for BMW AG between
1982 and 1988. From 1989 to 1991 he acted as head of Controlling at WMF AG in
Geislingen. In 1991, he became head of the Controlling, Planning and IT Division
for the Carl Zeiss Group. From 1993 to 1999, he held top management positions
with the Haniel Group, where he was responsible for the Controlling, Business
Administration and IT Division of the strategic management holding company of
Franz Haniel & Cie. GmbH. He has been a member of Deutsche Telekom's management
board since January 2000.
Jeffrey A. Hedberg, age 39, has been the head of Deutsche Telekom's
International Division since January 1999. Mr. Hedberg, who is a U.S. citizen,
joined the TVM/Matuschka group in Munich in 1985, where he was primarily
involved in analyzing venture capital projects for companies with international
operations. From 1990 to 1992, he worked in the international division of US
West, and then as an associate at Coopers & Lybrand in the international
projects of globally active telecommunications group. In 1994, Mr. Hedberg
joined Swisscom, where he was in charge of international investments as
Executive Vice President and member of the company's senior management. He has
been a member of Deutsche Telekom's management board since 1999.
Dr. Hagen Hultzsch, age 60, was appointed head of Deutsche Telekom's
Technology and Services Division in July 1993. Dr. Hultzsch received a doctorate
in physics and was Assistant Professor in Mainz before in 1977 becoming head of
the Computer Center of the Gesellschaft fur Schwerionen Forschung (GSI, Center
for Heavy Ion Research) in Darmstadt. In 1985, he became director of the
Technical Services Group Germany at Electronic Data Systems. In 1988, Dr.
Hultzsch joined Volkswagen AG as the corporate executive director responsible
for Organization and Information Systems. From July 1993 until 1994, he was a
member of the management board of Deutsche Bundespost TELEKOM, and he has been a
member of Deutsche Telekom's management board since January 1995.
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Dr. Heinz Klinkhammer, age 54, was appointed head of Deutsche Telekom's
Personnel and Legal Affairs Division in 1996. Dr. Klinkhammer received a
doctorate in law and began his career at the Institute for German and European
Labor, Social and Business Law before becoming a Labor Court judge. From 1979 to
1990, he worked at the Ministry of Labor, Health and Social Affairs of the state
of North-Rhine/Westphalia. In 1991, he became Labor Director at Huttenwerke
Krupp Mannesmann GmbH and, in 1992, board member of Mannesmannrohren-Werke AG.
He has been a member of Deutsche Telekom's management board since April 1996.
Gerd Tenzer, age 57, was appointed head of the Networks Division in January
1990 and is now also responsible for Purchasing, Environmental Protection,
Carrier Services and Broadcasting and Broadband Cable. From 1990 to 1994, he was
a member of the management board of Deutsche Bundespost TELEKOM, and has been a
member of Deutsche Telekom's management board since January 1995. As a
communications engineer, he worked in the telecommunications research department
at AEG-Telefunken from 1968 to 1970. In 1970, he joined what was then the
Deutsche Bundespost. In 1975, Mr. Tenzer moved to the Federal Ministry of Posts
and Telecommunications, where he became head of the Telecommunications Policy
Section in 1980.
Management Board Compensation and Share Ownership
The remuneration of the management board of Deutsche Telekom in respect of
financial year 2000 amounted to 8,970,291.16 euros. A portion of the total
compensation of the management board is paid pursuant to a bonus arrangement
consisting of a guaranteed portion and a variable portion. The variable portion
is dependent upon a number of criteria, including the attainment of certain
financial performance objectives and the achievement of certain individual
performance objectives. For the year ended December 31, 2000, 30.02% of the
total remuneration was paid pursuant to this bonus arrangement. The members of
the management board of Deutsche Telekom further received additional bonus
payments during fiscal year 2000 in the aggregate amount of 2,692,974 euros. In
addition, a proposal to establish a stock option program for the members of the
management board and key employees was approved at the shareholders' meeting on
May 25, 2000. For further information on this program, see "Description of
Deutsche Telekom Ordinary Shares -- Share Capital -- Conditional Capital."
Pension accruals totaling 21,777,792.03 euros have been established in the
books of Deutsche Telekom for the members of the management board as of December
31, 2000. Obligations for such persons for which no reserve has been established
amounted to 3,285,382.67 euros as of December 31, 2000. Payments to former
members for the management board of Deutsche Telekom or their surviving family
members amounted to 977,271.32 euros in 2000.
The members of Deutsche Telekom's management board owned a total of
approximately 4,200 Deutsche Telekom shares as of March 31, 2000.
Supervisory Board of Deutsche Telekom
In accordance with the German Stock Corporation Act (Aktiengesetz), the
supervisory board of Deutsche Telekom consists of twenty members, ten of whom
represent the shareholders and ten of whom represent the employees. Members of
the supervisory board may be elected for a term of up to approximately five
years. The supervisory board members representing the shareholders are elected
at the General Meeting of the shareholders. Most of the current supervisory
board members representing employees were elected on October 2, 1997 by the
employees in accordance with the provisions of the Co-Determination Act of 1976
(Mitbestimmungsgesetz). In this election procedure, employees elect ten
representatives made up of workers, regular employees, senior management
employees and three union representatives. Under the law that governed the
conversion of Deutsche Telekom to a stock corporation, civil servants, who are
not covered by the Co-Determination Act, are included in these groups according
to their occupations for purposes of these elections.
The supervisory board must meet at least twice in each half year. To
achieve a quorum, at least ten of the members of the supervisory board must be
present or cast their votes in writing. Except in situations
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in which a different majority is required by law, the supervisory board takes
decisions by simple majority of the votes cast. If, in the event of a deadlock,
a second vote again results in a tie, the chairman of the supervisory board can
cast a deciding vote.
The supervisory board has formed several committees including a mediation
committee, a personnel committee for extraordinary matters and a presiding
committee. All committees have an equal number of shareholder representatives
and employee representatives. The chairman of the supervisory board is the
chairman of the mediation committee and the presiding committee where he has the
deciding vote in case of a tie. In the other committees, the chairman does not
have the deciding vote in case of a tie. The chairman of the personnel committee
is a representative of the employees.
The first election of shareholder representatives to the supervisory board
took place at the shareholders' meeting in July 1996. Since then, further
elections have taken place to fill vacancies of the supervisory board. The terms
of office of the shareholder representatives will expire at the end of the
shareholders' meeting at which the shareholders discharge the supervisory board
members in respect of the financial year 2000, which is expected to occur in
2001. The terms of office of the employee representatives on the supervisory
board expire in 2002 upon the election of new employee representatives in
accordance with the Co-Determination Act.
Members of the Supervisory Board of Deutsche Telekom
The current members of Deutsche Telekom's supervisory board, the years of
their appointment and their principal occupations are as follows:
NAME MEMBER SINCE PRINCIPAL OCCUPATION
---- ------------ --------------------
Dr. Hans-Dietrich Winkhaus 1999 chairman, chairman of the management board of
Henkel KGaA
Rudiger Schulze 1999 vice-chairman, Member of the Central Executive
Committee of the German Postal Union
Gert Becker 1995 former chairman of the management board of
Degussa AG
Josef Falbisoner 1997 chairman of Deutsche Postgewerkschaft trade
union, Bavarian District
Dr. Hubertus von Grunberg 2000 chairman of the supervisory board of
Continental AG
Dr. sc. techn. Dieter Hundt 1995 managing shareholder of Allgaier Werke GmbH &
Co. KG; president of the National Union of
German Employers Associations
Rainer Koch 2000 chairman of the Works Council of DeTeImmobilien
Dr. h.c. Andre Leysen 1995 chairman of the supervisory board of GEVAERT
N.V.
Waltraud Litzenberger 1999 chairwoman of the Works Council of NL Bad
Kreuznach
Michael Loffler 1995 chairman of the Works Council at Leipzig Branch
Office 1, Deutsche Telekom AG
Hans-W. Reich 1999 speaker of the management board, Kreditanstalt
fur Wiederaufbau
Rainer Roll 1998 vice-chairman of the Central Works Council at
Deutsche Telekom
Wolfgang Schmitt 1997 head of Freiburg i.B. Regional Directorate,
Deutsche Telekom
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NAME MEMBER SINCE PRINCIPAL OCCUPATION
---- ------------ --------------------
Prof. Dr. Helmut Sihler 1996 chairman, Member of the Shareholders' Committee
of Henkel KGaA
Michael Sommer 2000 vice-chairman of the Deutsche Post Gewerkschaft
Ursula Steinke 1995 chairwoman of the Works Council at DeTeCSM
Northern District Service and Computer Center
Prof. Dr. h.c. Dieter Stolte 1995 director general of the Zweites Deutsches
Fernsehen (ZDF) broadcasting organization
Bernhard Walter 1999 former chairman of the management board of
Dresdner Bank
Wilhelm Wegner 1996 chairman of the Central Works Council at
Deutsche Telekom
Prof. Dr. Heribert Zitzelsberger 1999 state secretary in BMF, the Federal Finance
Ministry (Bundesministerium der Finanzen)
In the Deutsche Telekom/VoiceStream merger agreement, Deutsche Telekom has
agreed to use reasonable efforts after the closing to recommend to the
shareholders and organizational bodies of Deutsche Telekom to include a person
nominated by VoiceStream in consultation with Deutsche Telekom who is reasonably
acceptable to Deutsche Telekom as a member of the Deutsche Telekom supervisory
board in replacement for one of the current members of the Deutsche Telekom
supervisory board.
Supervisory Board Compensation and Share Ownership
The Articles of Association as amended by a shareholders resolution on May
25, 2000 provide for an annual compensation at 50,000 euros for the chairman,
37,500 euros for the deputy chairman and 25,000 euros for each remaining member
of the supervisory board. In addition, members of the supervisory board are
entitled to reimbursement of actual out-of-pocket expenses and to receive an
attendance fee amounting to 200 euros for each meeting of the supervisory board
or its committees. The value-added tax payable on this compensation will be
borne by Deutsche Telekom. These compensation rules apply for the first time for
the 1999 financial year. In 2000, remuneration was paid to members of the
supervisory board of Deutsche Telekom for 2000 in the amount of 546,498.00 euros
inclusive of meeting expenses of 34,000.00 euros.
The members of the supervisory board owned a total of approximately 2,700
Deutsche Telekom shares as of December 31, 2000.
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VOICESTREAM FOLLOWING THE VOICESTREAM/POWERTEL MERGER
BUSINESS AND OPERATIONS
After the VoiceStream/Powertel merger, VoiceStream will continue to offer
the services currently offered by VoiceStream and Powertel, which include
advanced data capabilities, voice and text messaging, privacy and security using
smart card technology, caller identification and global roaming. VoiceStream
will continue to employ the GSM digital standard for its PCS systems. The
acquisition by VoiceStream of Powertel, which operates a GSM-based network in 12
southeastern states where VoiceStream generally does not operate, fills the most
significant gap in VoiceStream's U.S. coverage, and will give the combined
company a more complete nationwide coverage. Together with Powertel and its
affiliates, VoiceStream will have licenses to serve 23 of the 25 largest markets
in the United States and will have approximately 250 million licensed POPs.
Powertel's current network coverage enables access to approximately 25 million
potential customers.
Following the VoiceStream/Powertel merger, VoiceStream's strategy will be
to efficiently consolidate the operations and marketing of VoiceStream and
Powertel under the VoiceStream brand name, and to:
- Penetrate the rapidly growing, broad consumer market segment. VoiceStream
will seek to penetrate the consumer segment of the market by providing
premier value in wireless services with more minutes, features and
services at attractive price points, and marketing such features and
services under its "Get More From Life" message. This marketing message
is delivered by a celebrity spokesperson, Jamie Lee Curtis.
- Increase Sales. VoiceStream's services and products will continue to be
sold through an extensive and balanced distribution network featuring
national and local dealers, company-owned stores and a direct sales
force.
- Achieve cost efficiencies through centralization and size. VoiceStream
plans to continue to centralize key functions such as customer care and
sales. VoiceStream's size should also enable it to purchase network and
subscriber equipment at favorable pricing and financing terms.
- Build high quality networks with extensive coverage. VoiceStream plans
to continue to construct its networks to increase capacity and enhance
call quality. In addition, VoiceStream will seek to launch networks with
substantial geographic coverage in and around the metropolitan markets
that it serves.
- Offer features that capitalize on the advantages of GSM wireless
technology. VoiceStream will continue to offer a wide variety of
wireless products and services including the capability of offering
customers next-generation wireless voice and data services such as
wireless Internet and multimedia applications.
- Acquire PCS licenses and systems opportunistically. VoiceStream will
continue to seek opportunities to acquire additional PCS licenses,
systems and/or operators which are additive to its current footprint,
increase its spectrum or that would increase the availability of GSM
wireless service in North America.
OFFICERS AND DIRECTORS
The officers of VoiceStream immediately before the VoiceStream/Powertel
merger will be the officers of VoiceStream immediately after the
VoiceStream/Powertel merger.
In connection with the VoiceStream/Powertel merger agreement, the parties
to a voting agreement among VoiceStream stockholders beneficially owning more
than 50% of VoiceStream's outstanding voting shares agreed that in the event
that the Deutsche Telekom/VoiceStream merger agreement is terminated and the
VoiceStream/Powertel merger is completed, that voting agreement will be amended
as necessary
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to entitle the current Powertel board to designate one member to the VoiceStream
board. The Powertel designee would be nominated for re-election at each of the
first two annual meetings of VoiceStream stockholders after the completion of
the VoiceStream/Powertel merger.
OWNERSHIP OF CAPITAL STOCK OF VOICESTREAM AND POWERTEL
BENEFICIAL OWNERSHIP OF VOICESTREAM COMMON SHARES
The following table sets forth certain information regarding beneficial
ownership of VoiceStream common shares and vested options to purchase
VoiceStream common shares as of February 5, 2001, except as otherwise noted
below, including beneficial ownership by:
- each person who is known by VoiceStream to own beneficially 5% or more of
the outstanding VoiceStream common shares;
- each VoiceStream director;
- each of the executive officers named in the summary compensation table in
VoiceStream's annual report on Form 10-K for the fiscal year ended
December 31, 1999, which in this document we refer to as the "named
executive officers"; and
- all directors and executive officers as a group.
The information in the table below has been calculated in accordance with Rule
13d-3 under the Exchange Act. Except as indicated in the footnotes to the table,
the persons named in the table have sole voting and investment power with
respect to all VoiceStream common shares shown as beneficially owned by them,
subject to community property laws where applicable. A person or entity is
considered to "beneficially own" any shares over which such person or entity
exercises sole or shared voting or investment power, or, which such person or
entity has the right to acquire at any time within 60 days of February 5, 2001.
In addition to the common share ownership information set forth below, on
September 6, 2000, Deutsche Telekom acquired the entire class of outstanding
VoiceStream voting preferred shares, consisting of 3,906,250 shares. Each
VoiceStream voting preferred share entitles its holder to one vote, voting
together as a single class with the holders of VoiceStream common shares. The
business address of VoiceStream's directors, other than as noted below, and
executive officers is: c/o VoiceStream Wireless Corporation, 12920 SE 38th
Street, Bellevue, WA 98006.
TOTAL PERCENTAGE
TOTAL SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OWNED OWNED
---------------- ------------ ----------------
Hutchison Whampoa Limited................................... 55,899,252 22.26%
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
TDSI Corporation, a wholly-owned subsidiary of Telephone &
Data Systems, Inc. ....................................... 35,570,494 14.17%
30 N. LaSalle Street, Suite 4000
Chicago, IL 60602
Sonera Corporation.......................................... 18,975,774 7.56%
Fin-00051-Tele
Sturenkatu 16, Helsinki
Finland
The Goldman Sachs Group, Inc.(a)(j)......................... 9,800,469 3.90%
and related investors
85 Broad Street, 10th Floor
New York, NY 10004
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TOTAL PERCENTAGE
TOTAL SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OWNED OWNED
---------------- ------------ ----------------
John W. Stanton and Theresa E. Gillespie(b)(c).............. 6,062,652 2.41%
3650 131st Avenue SE
Bellevue, WA 98006
Douglas G. Smith(b)(d)...................................... 4,306,416 1.71%
3 Metrocenter, Suite 400
Bethesda, MD 20814
Richard L. Fields(b)(e)..................................... 2,157,100 *
711 Fifth Avenue
New York, NY 10022
James N. Perry, Jr.(b)(f)................................... 588,067 *
Three First National Plaza
Suite 1330
Chicago, IL 60602
Cregg B. Baumbaugh(b)....................................... 278,050 *
Alan R. Bender(b)........................................... 251,028 *
James J. Ross(b)(g)......................................... 995,406 *
Robert R. Stapleton(b)...................................... 786,703 *
Donald Guthrie(b)........................................... 425,980 *
Mitchell R. Cohen(b)(h)..................................... 25,610 *
Daniel J. Evans(b).......................................... 7,288 *
Jonathan M. Nelson(b)(i).................................... 4,546,301 1.81%*
Terence M. O'Toole (b)(j)................................... 9,800,469 3.90%
Canning Fok(b)(k)........................................... 55,899,972 22.26%
Susan M. F. W. Chow(b)(k)................................... 55,899,502 22.26%
Frank J. Sixt(b)(k)......................................... 55,899,502 22.26%
Hans Snook(b)............................................... 3,685 *
Kaj-Erik Relander(b)(l)..................................... 18,976,024 7.57%
All directors and executive officers as a group (21
persons)(b)(m)............................................ 140,866,828 54.75%
---------------
* Less than 1% of the outstanding common shares.
(a) Includes (1) 8,986,738 VoiceStream common shares held of record by GS
Capital Partners, L.P., (2) 470,401 VoiceStream common shares held of
record by Stone Street Fund 1992, L.P., (3) 273,069 VoiceStream common
shares held of record by Bridge Street Fund 1992, L.P., and (4) 68,821
VoiceStream common shares held of record by The Goldman Sachs Group, Inc.
Each of GS Capital, Stone Street and Bridge Street is an investment limited
partnership, the general partner, the managing general partner or the
managing partner of an affiliate of The Goldman Sachs Group, Inc. Goldman
Sachs and The Goldman Sachs Group, Inc. disclaims beneficial ownership of
shares held by such investment partnerships to the extent interests in such
partnerships are held by persons other than The Goldman Sachs Group, Inc.
and its affiliates. Also includes options to purchase 1,440 common shares
granted to Mr. Terence M. O'Toole that he holds for the benefit of The
Goldman Sachs Group, Inc. Mr. O'Toole, who is a managing director of
Goldman Sachs, disclaims beneficial ownership of these common shares.
Excludes (i) common shares owned by Goldman Sachs which were acquired in
ordinary course trading activities and (ii) common shares held in client
accounts, for which Goldman Sachs exercises voting or investment authority,
or both. Goldman Sachs and The Goldman Sachs Group, Inc. disclaim
beneficial ownership of common shares held in these client accounts.
(b) May include stock jointly or separately owned with or by a spouse or a
family trust.
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(c) Mr. Stanton and Ms. Gillespie are husband and wife. Their beneficial
ownership includes (1) 1,686,069 VoiceStream common shares held of record
by PN Cellular, Inc., which is substantially owned and controlled by Mr.
Stanton and Ms. Gillespie; (2) 1,274,519 VoiceStream common shares held of
record by Stanton Communications Corporation which is substantially owned
and controlled by Mr. Stanton and Ms. Gillespie, as tenants in common; (3)
164,437 VoiceStream common shares held by The Stanton Family Trust; and
(4) 35,000 VoiceStream common shares and 10,000 VoiceStream common shares
held of record by each of Mr. Stanton and Ms. Gillespie, respectively,
pursuant to the Western Wireless 1997 Executive Restricted Stock Plan. Mr.
Stanton and Ms. Gillespie share voting and investment power with respect
to the shares jointly owned by them, as well as the shares held of record
by PN Cellular, Stanton Communications Corporation and the Stanton Family
Trust.
(d) Includes 27,896 VoiceStream common shares owned by Mr. Smith's minor
children, 1,348,630 common shares held by Avance Capital, Avance Capital
II, Avance Capital III, all sole proprietorships, and 428,572 VoiceStream
common shares held in a grantor trust. Mr. Smith does not exercise voting
or investment power over, and disclaims beneficial ownership of, the
shares held in the grantor trust. Of the total shares held in Mr. Smith's
name and in the name of Avance, 1,428,572 are held in a blind trust. While
Mr. Smith is the beneficial owner of these shares, he exercises no control
over these shares. The blind trust is free to sell, exchange, hedge, or
otherwise dispose of these shares at any time. Mr. Smith has voting and
investment power with respect to the other shares.
(e) Includes 1,627,336 VoiceStream common shares owned by Allen & Company
Incorporated, including 247,447 VoiceStream common shares issuable upon
exercise of outstanding warrants held by Allen & Company Incorporated and
27,397 common shares issuable upon exercise of outstanding warrants held
by Mr. Fields. Mr. Fields is a Managing Director of Allen & Company
Incorporated. Of such amounts, Mr. Fields does not exercise voting or
investment power over, and disclaims beneficial ownership of the 1,627,336
VoiceStream common shares owned by Allen & Company Incorporated.
(f) Includes 562,267 VoiceStream common shares owned by Madison Dearborn
Partners, L.P. and 8,307 VoiceStream common shares held in trust for Mr.
Perry's children. Mr. Perry is a member of the committee that manages
Madison Dearborn Partners, L.P. Mr. Perry may therefore be deemed to share
investment control with respect to the common shares owned by Madison
Dearborn Partners, L.P. and may therefore be deemed to have beneficial
ownership of shares of common shares owned by Madison Dearborn Partners,
L.P.
(g) Includes 256,724 VoiceStream common shares held in trust for Mr. Ross'
children. Mr. Ross may be deemed to be the beneficial owner of such
shares.
(h) Includes options to purchase 485 VoiceStream common shares granted to Mr.
Cohen that he holds for the benefit of Hellman & Friedman Partners II,
L.P. Mr. Cohen disclaims beneficial ownership of these shares.
(i) Includes (1) 28,538 VoiceStream common shares held in the Jonathan M.
Nelson Family Foundation, of which Mr. Nelson is president, (2) 720
VoiceStream common shares held by Providence Media Services, Inc., of
which Mr. Nelson is president, and options to purchase 720 VoiceStream
common shares granted to Mr. Nelson that he holds for the benefit of
Providence Media Services, Inc; (3) a total of 4,000,000 VoiceStream
common shares issuable to Providence Equity Partners III, L.P. and
Providence Equity Operating Partners III, L.P. in exchange for their
interests in a joint venture entity with VoiceStream; and (4) 321,334
VoiceStream common shares issuable to Providence Media Partners, L.P. in
exchange for its interest in a separate joint venture entity with
VoiceStream. Mr. Nelson is a member and the managing director of
Providence Equity Partners III, LLC, which controls Providence Equity
Partners III, L.P. and Providence Equity Operating Partners III, L.P. and
is the managing general partner of Providence Ventures L.P., which
controls Providence Media Partners, L.P. Mr. Nelson
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disclaims beneficial ownership of the shares listed above except to the
extent of his pecuniary interest therein, if any.
(j) Includes 9,800,469 VoiceStream common shares beneficially owned by The
Goldman Sachs Group, Inc. Mr. O'Toole, who is a managing director of
Goldman Sachs, disclaims beneficial ownership of VoiceStream common shares,
which may be deemed to be beneficially owned by The Goldman Sachs Group,
Inc., except to the extent of his pecuniary interest therein, if any.
(k) Includes 55,899,252 VoiceStream common shares owned by Hutchison Whampoa
Limited, as Mr. Fok is the Group Managing Director of Hutchison Whampoa
Limited, and each of Mrs. Chow and Mr. Sixt are executive directors of
Hutchison Whampoa Limited. Each of Mr. Fok, Mrs. Chow and Mr. Sixt disclaim
beneficial ownership of these shares.
(m) Kaj-Erik Relander, the director designated by Sonera Corporation, may be
deemed to be the owner of the VoiceStream common shares owned by Sonera
Corporation. Mr. Relander disclaims beneficial ownership of these shares.
(n) In determining the aggregate number of shares owned by VoiceStream
executive officers and directors, VoiceStream common shares as to which
such executive officers and directors share voting or investment power have
not been duplicated.
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273
BENEFICIAL OWNERSHIP OF POWERTEL COMMON SHARES
The following table sets forth certain information regarding beneficial
ownership of Powertel common shares as of February 5, 2001 (except as otherwise
noted below), including beneficial ownership by the following:
- each person who is known by Powertel to own beneficially 5% or more of
the outstanding Powertel common shares;
- each Powertel director;
- each of the executive officers named in the summary compensation table in
Powertel's annual report on Form 10-K for the fiscal year ended December
31, 1999; and
- all directors and executive officers as a group.
The information in the table below has been calculated in accordance with Rule
13d-3 under the Exchange Act. Except as indicated in the footnotes to the table,
the persons named in the table have sole voting and investment power with
respect to all Powertel common shares shown as beneficially owned by them,
subject to community property laws where applicable. A person or entity is
considered to "beneficially own" any shares over which such person or entity
exercises sole or shared voting or investment power, or, which such person or
entity has the right to acquire at any time within 60 days of February 5, 2001.
The business address of Powertel's directors and executive officers, other than
as noted below, is: 1239 O.G. Skinner Drive, West Point, Georgia 31833.
AMOUNT AND PERCENT OF
NATURE OF COMMON
BENEFICIAL SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING
------------------------------------ ------------ -----------
ITC Holding Company, Inc.(a)................................ 7,808,616 23.4%
3300 20th Avenue, Valley, Alabama 36854
SCANA Communications Holdings, Inc.(b)...................... 4,995,697 15.0
300 Delaware Avenue, Suite 510, Wilmington, Delaware
19801-1622
Sonera Corporation(c)....................................... 6,367,721 16.8
Teollisuuskatu 15, P.O. Box 106, FIN-00051, Helsinki,
Finland
Janus Capital Corporation................................... 1,724,855 5.2
100 Filimore Street, Suite 300, Denver, Colorado
80206-4923
Donald W. Burton(d)(e)...................................... 1,603,727 4.8
614 West Bay Street, Suite 200, Tampa, Florida 33606
Campbell B. Lanier, III(f)(g)............................... 237,485 *
Allen E. Smith(d)........................................... 161,907 *
O. Gene Gabbard(d)(f)....................................... 196,191 *
William H. Scott, III(h).................................... 43,859 *
Donald W. Weber(d).......................................... 20,000 *
Ann M. Milligan............................................. -- --
William B. Timmerman........................................ -- --
Fred G. Astor, Jr.(d)(i).................................... 124,759 *
Walter R. Pettiss(d)(j)..................................... 60,494 *
Nicholas J. Jebbia(d)....................................... 40,888 *
Rodney D. Dir(d)............................................ 43,686 *
All executive officers and directors as a group (15
persons)(d)-(j)........................................... 2,460,628 7.3
---------------
* Less than 1% of the outstanding common shares.
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274
(a) ITC Holding Company has pledged approximately 4.2 million of its Powertel
common shares to certain lenders in connection with a credit facility. Does
not include 3,407,542 Powertel common shares issuable upon conversion of
Powertel Series F preferred shares.
(b) Includes options to acquire 15,000 Powertel common shares. Does not include:
- 4,626,744 Powertel common shares issuable upon conversion of Powertel
Series B preferred shares;
- 1,764,706 Powertel common shares issuable upon conversion of Powertel
Series D preferred shares; and
- 3,407,542 Powertel common shares issuable upon conversion of Powertel
Series E preferred shares.
(c) These shares are issuable upon conversion of Powertel Series A preferred
shares, which is currently convertible.
(d) Includes the following Powertel common shares that the named individuals
have the right to purchase within 60 days of February 5, 2001 pursuant to
options:
Donald W. Burton........................................... 10,000
Allen E. Smith............................................. 77,458
O. Gene Gabbard............................................ 20,000
Donald W. Weber............................................ 8,000
Fred G. Astor, Jr.......................................... 46,892
Walter R. Pettiss.......................................... 47,404
Nicholas J. Jebbia......................................... 28,947
Rodney D. Dir.............................................. 29,567
-------
Total.................................................... 268,268
=======
(e) Includes:
- 116,104 Powertel common shares held of record by The
Burton Partnership, Limited Partnership, of which Mr.
Burton is the sole general partner;
- 348,313 Powertel common shares held of record by The
Burton Partnership (QP), Limited Partnership, of which Mr.
Burton is the sole general partner;
- 654,893 Powertel common shares held of record by South
Atlantic Venture Fund II, Limited Partnership, of which
South Atlantic Venture Partners II, Limited Partnership is
the sole general partner, of which Mr. Burton is the
managing general partner;
- 464,417 Powertel common shares held of record by South
Atlantic Venture Fund III, Limited Partnership, of which
South Atlantic Venture Partners III, Limited Partnership
is the sole general partner, of which Mr. Burton is the
managing general partner;
- 4,200 Powertel common shares held of record by South
Atlantic Private Equity Fund IV, Limited Partnership, of
which South Atlantic Private Equity Partners IV, Inc. is
the sole general partner, of which Mr. Burton is the
chairman; and
- 5,800 Powertel common shares held of record by South
Atlantic Private Equity Fund IV (QP) Limited Partnership,
of which South Atlantic Private Equity Partners IV, Inc.
is the sole general partner, of which Mr. Burton is the
chairman.
Mr. Burton disclaims beneficial ownership of these shares.
(f) Includes 176,191 Powertel common shares held of record by
The Charitable Remainder Education Trust III, of which
Messrs. Gabbard and Lanier are trustees. Messrs. Gabbard and
Lanier disclaim beneficial ownership of these shares.
259
275
(g) Includes 2,620 Powertel common shares held of record by Mr.
Lanier's wife and 500 Powertel common shares held by Mr.
Lanier as custodian for his son. Mr. Lanier disclaims
beneficial ownership of such shares.
(h) Includes 3,200 Powertel common shares held of record by Mr.
Scott's wife as trustee and 100 Powertel common shares held
by Mr. Scott's daughter. Mr. Scott disclaims beneficial
ownership of such shares.
(i) Includes 1,000 Powertel common shares and 300 Powertel
common shares held of record by Mr. Astor's wife and minor
sons, respectively. Mr. Astor disclaims beneficial ownership
of such shares.
(j) Includes warrants to acquire 128 Powertel common shares.
260
276
FEES AND EXPENSES
Deutsche Telekom, VoiceStream and Powertel have agreed to each pay one
third of the expenses incurred in connection with the cost of printing and
distributing this proxy statement/prospectus, Deutsche Telekom and VoiceStream
have each agreed to pay one half of the amount of the SEC filing fees incurred
in connection with registering the Deutsche Telekom ADSs and Deutsche Telekom
ordinary shares issuable upon completion of the Deutsche Telekom/VoiceStream
merger. Deutsche Telekom and Powertel have each agreed to pay one half of the
amount of the SEC filing fees incurred in connection with registering the
Deutsche Telekom ADSs and Deutsche Telekom ordinary shares issuable upon
completion of the Deutsche Telekom/Powertel merger. VoiceStream and Powertel
have each agreed to pay one half of the amount of the SEC filing fees incurred
in connection with registering the shares of VoiceStream common shares issuable
upon completion of the VoiceStream/Powertel merger. See "Summary of Deutsche
Telekom/Powertel and VoiceStream/Powertel Transaction Documents -- The Deutsche
Telekom/Powertel Merger Agreement -- Expenses" and "Summary of Deutsche
Telekom/Powertel and VoiceStream/Powertel Transaction Document -- The
VoiceStream/Powertel Merger Agreement -- Expenses."
Deutsche Telekom and its subsidiaries estimate that they will incur fees
and expenses in connection with the Deutsche Telekom/VoiceStream and Deutsche
Telekom/Powertel mergers of approximately $120 million.
VoiceStream estimates that it will incur fees and expenses in connection
with the Deutsche Telekom/ VoiceStream merger and the VoiceStream/Powertel
merger of approximately $125 million and $15 million, respectively.
Powertel estimates that it will incur fees and expenses in connection with
the Deutsche Telekom/ Powertel merger and the VoiceStream/Powertel merger of
approximately $38 million and $33 million, respectively.
These fees and expenses related to the mergers will be financed from
generally available funds of each of Deutsche Telekom, VoiceStream and Powertel.
Neither Deutsche Telekom, VoiceStream nor Powertel will pay any fees or
commissions to any broker or dealer or any person, other than MacKenzie Partners
and the escrow agent, for soliciting VoiceStream stockholders or Powertel
stockholders with respect to the mergers. Upon request, VoiceStream and
Powertel, respectively, will reimburse brokers, dealers, commercial banks and
trust companies for reasonable and necessary costs and expenses incurred by them
in forwarding materials to their customers.
LISTING OF SECURITIES
DEUTSCHE TELEKOM ADSs AND DEUTSCHE TELEKOM ORDINARY SHARES
Under the Deutsche Telekom/VoiceStream merger agreement and the Deutsche
Telekom/Powertel merger agreement, Deutsche Telekom has agreed to take all steps
necessary for the listing and authorization for listing on the NYSE and the
Frankfurt Stock Exchange, subject to official notice of issuance, of the
Deutsche Telekom ADSs and the Deutsche Telekom ordinary shares, respectively, to
be issued pursuant to the Deutsche Telekom/VoiceStream merger and the Deutsche
Telekom/Powertel merger. Deutsche Telekom expects that the Deutsche Telekom ADSs
and the Deutsche Telekom ordinary shares to be issued to the VoiceStream and
Powertel stockholders will continue to trade on the NYSE and the Frankfurt Stock
Exchange under the symbols "DT" and "DTE", respectively.
VOICESTREAM COMMON SHARES
Under the VoiceStream/Powertel merger agreement, VoiceStream has agreed to
use its reasonable best efforts to be included on the Nasdaq Stock Market, upon
notification of issuance, the shares of VoiceStream common shares to be issued
in connection with the VoiceStream/Powertel merger.
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277
VoiceStream expects that its common shares, including the shares issued to
Powertel stockholders pursuant to the VoiceStream/Powertel merger, will continue
to trade on the Nasdaq Stock Market under the symbol "VSTR".
VALIDITY OF SECURITIES
Dr. Manfred Balz, Deutsche Telekom's General Counsel, will pass upon the
validity under German law of the Deutsche Telekom ordinary shares to be issued
pursuant to the Deutsche Telekom/VoiceStream merger and the Deutsche
Telekom/Powertel merger. Preston Gates & Ellis LLP will pass upon the validity
under U.S. federal and Delaware law of the VoiceStream common shares to be
issued pursuant to the VoiceStream/Powertel merger.
EXPERTS
The consolidated financial statements of Deutsche Telekom as of December
31, 1999 and 1998, and for each of the three years in the period ended December
31, 1999, incorporated in this document by reference to the Deutsche Telekom
Annual Report on Form 20-F, which incorporates said financial statements to the
Deutsche Telekom Annual Report for 1999 filed on Form 6-K, have been so
incorporated in reliance on the report of PwC Deutsche Revision, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of VoiceStream and its subsidiaries
as of December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999, incorporated in this document by reference to
VoiceStream's Annual Report on Form 10-K for the year ended December 31, 1999,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon their authority as experts in giving said reports.
The consolidated financial statements of Omnipoint and its subsidiaries as
of December 31, 1999 and 1998, and for each of the three years in the period
ended December 31, 1999, incorporated in this document by reference to
VoiceStream's Current Report on Form 8-K dated September 29, 2000, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of Aerial and its subsidiaries as of
December 31, 1999 and 1998 and for each of the three years in the period ended
December 31, 1999, included in Aerial's Form 10-K, incorporated into this
document by reference to VoiceStream's Current Report on Form 8-K, dated March
23, 2000, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon their authority as experts in giving said
reports.
The consolidated financial statements of Powertel and its subsidiaries as
of December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999, included in Powertel's Annual Report on Form 10-K,
incorporated herein by reference, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon their authority as experts in
giving said reports.
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278
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
OF VOICESTREAM STOCKHOLDERS
VoiceStream will hold an annual meeting in the year 2001 only if the
Deutsche Telekom/VoiceStream merger has not already been completed. If the 2001
annual meeting is held, stockholders' proposals will be eligible for
consideration for inclusion in the proxy statement for that annual meeting if
those proposals are received by VoiceStream within a reasonable time before the
solicitation of proxies for the 2001 annual meeting is made. Any stockholder
proposal or notice should be directed to the attention of the Secretary,
VoiceStream Wireless Corporation, 12920 SE 38th Street, Bellevue, Washington
98006.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
OF POWERTEL STOCKHOLDERS
If either the Deutsche Telekom/Powertel merger or the VoiceStream/Powertel
merger is completed as expected, Powertel will not hold an annual meeting of
Powertel stockholders in 2001. If neither the Deutsche Telekom/Powertel merger
nor the VoiceStream/Powertel merger is completed for any reason, Powertel
expects to hold its 2001 annual meeting of stockholders in May 2001. To enable
management to analyze and respond adequately to proposals and to prepare
appropriate proposals for presentation in next year's proxy statement, a
Powertel stockholder must submit his or her proposal to Powertel no later than
December 29, 2000, to the attention of the Secretary, at Powertel, Inc., 1239
O.G. Skinner Drive, West Point, Georgia 31833. Powertel stockholders may also
submit the names of individuals whom they wish to be considered by the Powertel
board of directors as nominees for directors. For each matter a stockholder
intends to bring before the meeting, their notice must include a brief
description of the business they wish to be considered, any material interest
they have in that business and the reasons for conducting that business at the
meeting. The notice must also include the stockholder's name and address and the
class and number of Powertel shares that they own. Any proposal for presentation
at Powertel's next annual meeting which is outside the process of Rule 14a-8
under the Exchange Act will be considered untimely for purposes of Rules 14a-4
and 14a-5 if Powertel receives it after March 13, 2001.
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279
DEUTSCHE TELEKOM
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
combine the historical consolidated balance sheets and statements of operations
of Deutsche Telekom, VoiceStream and Powertel. VoiceStream includes the pro
forma impacts of its acquisitions of Omnipoint and Aerial, which were effected
in 2000. The consummation of the Deutsche Telekom/Powertel merger is dependent
upon consummation of the Deutsche Telekom/VoiceStream merger. Should the
Deutsche Telekom/VoiceStream merger be terminated, the Deutsche Telekom/Powertel
merger will also be terminated. These financial statements give effect to the
Deutsche Telekom/VoiceStream and Deutsche Telekom/Powertel mergers using the
purchase method of accounting for business combinations for both.
We derived this information from the audited consolidated financial
statements of Deutsche Telekom, VoiceStream, Omnipoint, Aerial and Powertel for
the year ended December 31, 1999, the unaudited consolidated financial
statements of Deutsche Telekom, VoiceStream and Powertel for the nine months
ended September 30, 2000 and the unaudited statements of operations of Omnipoint
and Aerial for the periods ended February 24, 2000 and May 3, 2000,
respectively. As Omnipoint and Aerial were consolidated with VoiceStream as of
September 30, 2000, the pro forma balance sheet is derived from the consolidated
balance sheets of Deutsche Telekom, VoiceStream and Powertel. This information
is only a summary and you should read it in conjunction with the historical
financial statements and related notes of Deutsche Telekom, VoiceStream,
Omnipoint, Aerial and Powertel and other information included in this filing or
incorporated by reference.
The unaudited pro forma condensed combined statements of operations for the
nine months ended September 30, 2000 and the year ended December 31, 1999 assume
the mergers were effected on January 1, 1999. The unaudited pro forma condensed
combined balance sheet as of September 30, 2000 gives effect to the mergers as
if they had occurred on September 30, 2000. The VoiceStream and Powertel balance
sheets and statements of operations have been converted from U.S. GAAP to German
GAAP to be presented on a consistent basis with Deutsche Telekom. It is Deutsche
Telekom's policy to harmonize accounting principles according to German GAAP and
U.S. GAAP through the extensive application of the principles of U.S. GAAP.
Deutsche Telekom may depart from this policy. Any such departures are reflected
in Deutsche Telekom's U.S. GAAP reconciliation footnote. The differences between
U.S. GAAP and German GAAP are summarized in the accompanying Notes 21 and 26,
respectively. The accounting policies of Deutsche Telekom, VoiceStream and
Powertel are substantially comparable, although certain reclassifications have
been made to VoiceStream's and Powertel's historical presentation to conform to
Deutsche Telekom's presentation. These reclassifications do not materially
impact VoiceStream's or Powertel's results of operations or financial position
for the periods presented.
The unaudited pro forma condensed combined financial information is for
illustrative purposes only. Deutsche Telekom, VoiceStream, Omnipoint, Aerial and
Powertel may have performed differently had they always been combined. You
should not rely on the pro forma combined financial information as being
indicative of the historical results that would have been achieved had the
companies always been combined or the future results that the combined companies
will experience after the mergers.
264
280
DEUTSCHE TELEKOM
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(VOICESTREAM AND POWERTEL MERGERS)
AS OF SEPTEMBER 30, 2000
(IN EUROS)
(IN THOUSANDS)
VOICESTREAM DEUTSCHE POWERTEL
DEUTSCHE MERGER TELEKOM AND MERGER
TELEKOM VOICESTREAM ADJUSTMENTS VOICESTREAM POWERTEL ADJUSTMENTS
----------- ----------- ----------- ----------- ----------- -----------
NOTE 1 NOTES 2, 28 NOTE 4 NOTES 3, 29 NOTE 14
ASSETS
NON-CURRENT ASSETS
Intangible assets................. 33,770,000 12,136,909 32,505,543(5) 78,412,452 390,036 5,644,619(15)
Property, plant and equipment..... 57,091,000 2,475,025 -- 59,566,025 650,510 --
Financial assets.................. 16,917,000 1,352,536 (5,658,000)(6a) 12,611,536 38,993 --
----------- ---------- ----------- ----------- --------- ---------
107,778,000 15,964,470 26,847,543 150,590,013 1,079,539 5,644,619
----------- ---------- ----------- ----------- --------- ---------
CURRENT ASSETS
Inventories....................... 1,203,000 576,585 -- 1,779,585 24,546 --
Receivables....................... 6,274,000 366,921 -- 6,640,921 51,908 --
Other assets...................... 4,173,000 59,311 -- 4,232,311 3,309 --
Marketable securities............. 762,000 4,100 -- 766,100 -- --
Liquid assets..................... 4,682,000 4,648,067 -- 9,330,067 265,007 --
----------- ---------- ----------- ----------- --------- ---------
17,094,000 5,654,984 -- 22,748,984 344,770 --
----------- ---------- ----------- ----------- --------- ---------
PREPAID EXPENSES, DEFERRED CHARGES
AND DEFERRED TAXATION........... 1,271,000 19,679 -- 1,290,679 18,762 --
----------- ---------- ----------- ----------- --------- ---------
126,143,000 21,639,133 26,847,543 174,629,676 1,443,071 5,644,619
=========== ========== =========== =========== ========= =========
SHAREHOLDERS' EQUITY AND
LIABILITIES
SHAREHOLDERS' EQUITY
Preferred shares.................. -- 6,111,730 (6,111,730)(6b) -- 172,254 (172,254)(14)
Capital shares.................... 7,756,000 258 1,986,189(8) 9,742,447 355 333,267(16)
Additional paid-in capital........ 24,290,000 11,569,921 19,582,617(11) 55,442,538 588,820 4,687,492(18)
Deferred stock compensation....... -- (44,154) (196,956)(12) (241,110) -- (18,866)(14)
Retained earnings (deficit)....... 870,000 (11,288) 11,288 870,000 -- --
Unappropriated net income (loss)
carried forward from previous
year............................ 44,000 (1,558,490) 1,558,490(13) 44,000 (619,730) 619,730(17)
Net (loss) income................. 8,445,000 (1,462,212) 1,431,212(10) 8,414,000 (183,934) 180,539(20)
Minority interest................. 2,227,000 347,906 -- 2,574,906 -- --
----------- ---------- ----------- ----------- --------- ---------
43,632,000 14,953,671 18,261,110 76,846,781 (42,235) 5,629,908
----------- ---------- ----------- ----------- --------- ---------
ACCRUALS
Pension and similar obligations... 3,186,000 -- -- 3,186,000 -- --
Other accruals.................... 8,135,000 371,622 98,000(9) 8,604,622 38,119 14,711(19)
----------- ---------- ----------- ----------- --------- ---------
11,321,000 371,622 98,000 11,790,622 38,119 14,711
----------- ---------- ----------- ----------- --------- ---------
LIABILITIES
Debt.............................. 62,116,000 5,765,858 8,488,433(7) 76,370,291 1,393,071 --
Other liabilities................. 8,369,000 547,982 -- 8,916,982 45,167 --
----------- ---------- ----------- ----------- --------- ---------
70,485,000 6,313,840 8,488,433 85,287,273 1,438,238 --
----------- ---------- ----------- ----------- --------- ---------
DEFERRED INCOME................... 705,000 -- -- 705,000 8,949 --
----------- ---------- ----------- ----------- --------- ---------
126,143,000 21,639,133 26,847,543 174,629,676 1,443,071 5,644,619
=========== ========== =========== =========== ========= =========
SHAREHOLDERS' EQUITY UNDER GERMAN
GAAP............................ 43,632,000 14,953,671 18,261,110 76,846,781 (42,235) 5,629,908
U.S. GAAP reconciling items
(Note 21)....................... 3,794,000 (6,107,920) 13,727,563 11,413,643 (181,022) 616,226
----------- ---------- ----------- ----------- --------- ---------
SHAREHOLDERS' EQUITY UNDER U.S.
GAAP............................ 47,426,000 8,845,751 31,988,673 88,260,424 (223,257) 6,246,134
=========== ========== =========== =========== ========= =========
ADJUSTED
DEUTSCHE
TELEKOM,
VOICESTREAM
AND POWERTEL
------------
ASSETS
NON-CURRENT ASSETS
Intangible assets................. 84,447,107
Property, plant and equipment..... 60,216,535
Financial assets.................. 12,650,529
-----------
157,314,171
-----------
CURRENT ASSETS
Inventories....................... 1,804,131
Receivables....................... 6,692,829
Other assets...................... 4,235,620
Marketable securities............. 766,100
Liquid assets..................... 9,595,074
-----------
23,093,754
-----------
PREPAID EXPENSES, DEFERRED CHARGES
AND DEFERRED TAXATION........... 1,309,441
-----------
181,717,366
===========
SHAREHOLDERS' EQUITY AND
LIABILITIES
SHAREHOLDERS' EQUITY
Preferred shares.................. --
Capital shares.................... 10,076,069
Additional paid-in capital........ 60,718,850
Deferred stock compensation....... (259,976)
Retained earnings (deficit)....... 870,000
Unappropriated net income (loss)
carried forward from previous
year............................ 44,000
Net (loss) income................. 8,410,605
Minority interest................. 2,574,906
-----------
82,434,454
-----------
ACCRUALS
Pension and similar obligations... 3,186,000
Other accruals.................... 8,657,452
-----------
11,843,452
-----------
LIABILITIES
Debt.............................. 77,763,362
Other liabilities................. 8,962,149
-----------
86,725,511
-----------
DEFERRED INCOME................... 713,949
-----------
181,717,366
===========
SHAREHOLDERS' EQUITY UNDER GERMAN
GAAP............................ 82,434,454
U.S. GAAP reconciling items
(Note 21)....................... 11,848,847
-----------
SHAREHOLDERS' EQUITY UNDER U.S.
GAAP............................ 94,283,301
===========
See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
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281
DEUTSCHE TELEKOM
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(VOICESTREAM AND POWERTEL MERGERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN EUROS)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ADJUSTED
DEUTSCHE DEUTSCHE
VOICESTREAM TELEKOM POWERTEL TELEKOM,
DEUTSCHE MERGER AND MERGER VOICESTREAM
TELEKOM VOICESTREAM ADJUSTMENTS VOICESTREAM POWERTEL ADJUSTMENTS AND POWERTEL
----------- ----------- ----------- ----------- ----------- ----------- ------------
NOTE 1 NOTES 2, 30 NOTES 3, 31
Net revenue............... 29,222,000 1,559,333 -- 30,781,333 354,523 -- 31,135,856
Other own capitalized
costs................... 707,000 93,535 -- 800,535 -- -- 800,535
----------- ---------- ---------- ---------- -------- -------- -----------
Total operating
performance............. 29,929,000 1,652,868 -- 31,581,868 354,523 -- 31,936,391
Other operating income.... 10,144,000 67,810 -- 10,211,810 768 -- 10,212,578
Goods and services
purchased............... (8,381,000) (800,389) -- (9,181,389) (143,311) -- (9,324,700)
Personnel costs........... (7,038,000) (402,939) (64,660)(22) (7,505,599) (74,897) (11,996)(22) (7,592,492)
Depreciation and
amortization............ (7,958,000) (770,933) (1,253,522)(23) (9,982,455) (79,155) (218,936)(23) (10,280,546)
Other operating
expenses................ (6,921,000) (955,512) -- (7,876,512) (127,732) -- (8,004,244)
Financial income
(expenses), net......... 126,000 (462,321) (684,133)(24) (1,020,454) (89,718) -- (1,110,172)
----------- ---------- ---------- ---------- -------- -------- -----------
Results from ordinary
business activities..... 9,901,000 (1,671,416) (2,002,315) 6,227,269 (159,522) (230,932) 5,836,815
Extraordinary items....... (138,000) (2,635) -- (140,635) -- -- (140,635)
Taxes..................... (1,219,000) (19,276) 273,653(25) (964,623) (1,538) -- (966,161)
----------- ---------- ---------- ---------- -------- -------- -----------
Income (loss) after
taxes................... 8,544,000 (1,693,327) (1,728,662) 5,122,011 (161,060) (230,932) 4,730,019
Losses applicable to
minority shareholders... (99,000) (16,618) -- (115,618) (7,842) -- (123,460)
----------- ---------- ---------- ---------- -------- -------- -----------
Net income (loss)......... 8,445,000 (1,709,945) (1,728,662) 5,006,393 (168,902) (230,932) 4,606,559
U.S. GAAP reconciling
items (Note 26)......... 1,367,000 18,539 (480,950) 904,589 2,917 (20,335) 887,171
----------- ---------- ---------- ---------- -------- -------- -----------
Net income (loss) after
U.S. GAAP adjustments... 9,812,000 (1,691,406) (2,209,612) 5,910,982 (165,985) (251,267) 5,493,730
=========== ========== ========== ========== ======== ======== ===========
Earnings per share under
German GAAP (Note 27)... 2.79 1.32 1.17
=========== ========== ===========
Basic earnings per share
under U.S. GAAP
(Note 27)............... 3.24 1.56 1.40
=========== ========== ===========
Diluted earnings per share
under U.S. GAAP
(Note 27)............... 3.24 1.46 1.31
=========== ========== ===========
See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
266
282
DEUTSCHE TELEKOM
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(VOICESTREAM AND POWERTEL MERGERS)
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN EUROS)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
VOICESTREAM DEUTSCHE POWERTEL
DEUTSCHE MERGER TELEKOM MERGER
TELEKOM VOICESTREAM ADJUSTMENTS AND VOICESTREAM POWERTEL ADJUSTMENTS
---------- ----------- ----------- --------------- ----------- -----------
NOTE 1 NOTES 2, 32 NOTES 3, 33
Net revenue...................... 35,470,000 978,330 -- 36,448,330 266,063 --
Other own capitalized costs...... 947,000 29,115 -- 976,115 270 --
---------- ---------- ---------- ----------- --------- --------
Total operating performance...... 36,417,000 1,007,445 -- 37,424,445 266,333 --
Other operating income........... 1,871,000 48,869 -- 1,919,869 204,180 --
Goods and services purchased..... (7,667,000) (511,410) -- (8,178,410) (122,525) --
Personnel costs.................. (9,210,000) (363,759) (86,213)(22) (9,659,972) (75,543) (15,995)(22)
Depreciation and amortization.... (8,466,000) (771,778) (1,675,506)(23) (10,913,284) (82,986) (291,914)(23)
Other operating expenses......... (6,872,000) (661,249) -- (7,533,249) (122,601) --
Financial expense, net........... (2,889,000) (409,381) (1,052,495)(24) (4,350,876) (99,642) --
---------- ---------- ---------- ----------- --------- --------
Results from ordinary business
activities..................... 3,184,000 (1,661,263) (2,814,214) (1,291,477) (32,784) (307,909)
Extraordinary items.............. (240,000) (38,520) -- (278,520) -- --
Taxes............................ (1,420,000) 107,987 420,998(25) (891,015) (3,367) --
---------- ---------- ---------- ----------- --------- --------
Income (loss) after taxes........ 1,524,000 (1,591,796) (2,393,216) (2,461,012) (36,151) (307,909)
Losses applicable to minority
shareholders................... (271,000) (24,066) -- (295,066) (9,153) --
---------- ---------- ---------- ----------- --------- --------
Net income (loss)................ 1,253,000 (1,615,862) (2,393,216) (2,756,078) (45,304) (307,909)
U.S. GAAP reconciling items (Note
26)............................ 260,000 52,929 (627,390) (314,461) (80,885) (12,292)
---------- ---------- ---------- ----------- --------- --------
Net income (loss) after U.S. GAAP
adjustments.................... 1,513,000 (1,562,933) (3,020,606) (3,070,539) (126,189) (320,201)
========== ========== ========== =========== ========= ========
Earnings (loss) per share under
German GAAP (Note 27).......... 0.43 (0.75)
========== ===========
Basic and diluted earnings (loss)
per share under U.S. GAAP (Note
27)............................ 0.53 (0.84)
========== ===========
ADJUSTED
DEUTSCHE
TELEKOM,
VOICESTREAM
AND POWERTEL
------------
Net revenue...................... 36,714,393
Other own capitalized costs...... 976,385
-----------
Total operating performance...... 37,690,778
Other operating income........... 2,124,049
Goods and services purchased..... (8,300,935)
Personnel costs.................. (9,751,510)
Depreciation and amortization.... (11,288,184)
Other operating expenses......... (7,655,850)
Financial expense, net........... (4,450,518)
-----------
Results from ordinary business
activities..................... (1,632,170)
Extraordinary items.............. (278,520)
Taxes............................ (894,382)
-----------
Income (loss) after taxes........ (2,805,072)
Losses applicable to minority
shareholders................... (304,219)
-----------
Net income (loss)................ (3,109,291)
U.S. GAAP reconciling items (Note
26)............................ (407,638)
-----------
Net income (loss) after U.S. GAAP
adjustments.................... (3,516,929)
===========
Earnings (loss) per share under
German GAAP (Note 27).......... (0.82)
===========
Basic and diluted earnings (loss)
per share under U.S. GAAP (Note
27)............................ (0.93)
===========
See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
267
283
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 1
These columns reflect Deutsche Telekom's historical consolidated balance
sheet and statement of operations as of and for the nine months ended September
30, 2000 and statement of operations for the year ended December 31, 1999,
prepared and presented in accordance with German GAAP, and reconciled to U.S.
GAAP.
Certain reclassifications have been made to the prior year statement of
operations to conform to the current year presentation. Such reclassifications
have no impact on prior year reported net income.
Note 2
These columns reflect the VoiceStream historical consolidated balance sheet
and pro forma statement of operations as of and for the nine months ended
September 30, 2000 and the pro forma statement of operations for the year ended
December 31, 1999. The VoiceStream pro forma statements of operations include
the consolidation of Omnipoint and Aerial as if they had been acquired by
VoiceStream at the beginning of the period.
The historical consolidated balance sheet and the pro forma statements of
operations have been prepared and presented in accordance with German GAAP and
reconciled to U.S. GAAP. The U.S. GAAP financial statements are incorporated by
reference in this document. A summary of reconciling items between German GAAP
and U.S. GAAP is disclosed in Notes 21 and 26.
On February 25, 2000 and May 4, 2000, VoiceStream completed mergers with
Omnipoint and Aerial, respectively. Accordingly, subsequent to the respective
merger dates, Omnipoint and Aerial results are included in VoiceStream's
consolidated results. Pursuant to the Omnipoint agreement, VoiceStream exchanged
0.825 of a VoiceStream common share plus $8.00 in cash for each outstanding
Omnipoint common share. Pursuant to the Aerial agreement, VoiceStream exchanged
0.455 of a VoiceStream common share for each outstanding Aerial common share.
The aggregate purchase price and the preliminary allocations are as
follows:
AERIAL OMNIPOINT
---------- -----------
Consideration and merger costs:
Total value of shares issued in merger(a)................ 6,454,000 1,740,400
Cash payments............................................ 128,900 709,500
Fair value of options and warrants converted............. 6,900 972,000
Fair value of liabilities assumed inclusive of minority
interest.............................................. 533,700 3,584,200
Merger related costs..................................... 23,200 21,500
Cook Inlet exchange rights............................... -- 31,700
---------- -----------
Total consideration.............................. 7,146,700 7,059,300
Preliminary allocation of purchase price:
Current assets........................................... 106,100 226,700
Property, plant and equipment............................ 410,800 535,200
Investments in unconsolidated affiliates................. 4,000 769,400
Licenses and other intangibles........................... 623,400 1,062,600
---------- -----------
Preliminary goodwill............................. 6,002,400 4,465,400
========== ===========
---------------
(a) VoiceStream issued 52,325,301 and 52,952,399 shares, respectively, in
conjunction with the Aerial and Omnipoint mergers.
268
284
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The above allocations reflect the estimated fair value of assets and
liabilities acquired. Some allocations are based on valuations which are
currently being finalized. VoiceStream does not believe that the final purchase
price allocations will produce materially different results than those reflected
above.
Certain reclassifications have been made to the historical financial
information for VoiceStream to conform to Deutsche Telekom's financial statement
presentation. These reclassifications do not materially impact VoiceStream's
results of operations or financial position. Intercompany transactions are
immaterial to the financial statement presentation and have not been eliminated.
Note 3
These columns reflect the Powertel historical consolidated balance sheet
and statement of operations as of and for the nine months ended September 30,
2000 and statement of operations for the year ended December 31, 1999, prepared
and presented in accordance with German GAAP and reconciled to U.S. GAAP. The
U.S. GAAP financial statements are incorporated by reference in this document. A
summary of reconciling items between German GAAP and U.S. GAAP are disclosed in
Notes 21 and 26.
Certain reclassifications have been made to the historical financial
information for Powertel to conform to Deutsche Telekom's financial statement
presentation. These reclassifications do not materially impact Powertel's
results of operations or financial position. Intercompany transactions are
immaterial to the financial statement presentation and have not been eliminated.
Note 4
The Deutsche Telekom/VoiceStream merger will result in an allocation of the
purchase price to the tangible and intangible assets and liabilities of
VoiceStream. The transaction is not expected to result in an incremental
deferred tax liability. Such allocation reflects the estimated fair value of the
assets and liabilities acquired by Deutsche Telekom based upon information
available at the date of the preparation of the accompanying pro forma condensed
combined financial statements. Such allocation will be adjusted upon the final
determination of such fair values. Management is not aware of any circumstances
that would cause the final purchase price allocation to be significantly
different from that which is reflected in the accompanying pro forma condensed
combined balance sheet. However, actual valuations and allocations may differ
from those reflected herein.
269
285
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Under German GAAP, the aggregate purchase price was calculated as follows:
VoiceStream common shares outstanding(a).................... 228,859
Conversion of VoiceStream preferred shares to common
shares(b)................................................. 13,627
-----------
Pro forma VoiceStream common shares outstanding... 242,486
Deutsche Telekom exchange ratio(d).......................... 3.2
Equivalent Deutsche Telekom ordinary shares................. 775,955
Deutsche Telekom share price(c)............................. 41.26
-----------
Subtotal (notional par value 1,986,447)..................... 32,015,943
Cash consideration for all VoiceStream shares(d)............ 8,488,433
Conversion of VoiceStream preferred shares into common
shares(b)................................................. (453,730)
Minority interest and fair value of liabilities assumed by
Deutsche Telekom(j)....................................... 7,487,097
Option, warrants and restricted share conversion costs(e)... 1,123,042
Merger related costs(g)..................................... 67,000
-----------
Total consideration(k)............................ 48,727,785
Deferred compensation related to unvested grants(f)......... (241,110)
Fair value of VoiceStream tangible assets acquired(h)....... (3,844,223)
Fair value of VoiceStream intangible assets acquired(i)..... (5,098,084)
-----------
Preliminary goodwill resulting from the
VoiceStream merger(k)............................ 39,544,368
===========
---------------
(a) The outstanding VoiceStream common shares as of November 15, 2000.
(b) Represents the conversion of the VoiceStream junior convertible preferred
shares to VoiceStream common shares prior to the closing of the merger. The
VoiceStream junior convertible preferred shares will be converted at 33.84
euros ($29) per common share, pursuant to the VoiceStream preferred share
agreement.
(c) Deutsche Telekom ordinary shares issued in consideration for the acquisition
of VoiceStream would be valued based on the quoted market price as of the
closing date of the transaction. The share price is based on the closing
price of Deutsche Telekom ordinary shares on November 15, 2000, the latest
practicable date. For each 10 euro increase or decrease in the Deutsche
Telekom share price, the merger consideration amount would increase or
decrease by 7.8 billion euros and annual amortization expense would increase
or decrease by 390 million euros.
(d) The conversion factor used for purposes of this pro forma purchase price
allocation is the stock and cash election of 3.2 shares of Deutsche Telekom
shares plus 35.01 euros ($30) cash for each VoiceStream common share. The
merger agreement includes a provision which will increase the number of
shares to be issued and decrease the cash consideration in the event the
stock to cash mix is not adequate for the transaction to qualify as a
tax-free exchange.
(e) This amount represents the fair value, based on a Black-Scholes valuation,
associated with the conversion of outstanding VoiceStream options, warrants
and restricted shares to equivalent options, warrants and restricted shares
of Deutsche Telekom at the time of the Deutsche Telekom/VoiceStream merger
based on the number of options, warrants and restricted shares outstanding
and the closing market price of Deutsche Telekom ordinary shares as of
November 15, 2000.
270
286
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(f) A portion of the intrinsic value of the unvested VoiceStream options to be
converted into Deutsche Telekom options have been recorded as deferred
compensation and will be expensed over the remaining vesting period.
(g) Anticipated merger costs to be capitalized by Deutsche Telekom as a result
of the Deutsche Telekom/VoiceStream merger represent bankers' fees.
(h) The estimated fair market value of the VoiceStream tangible assets acquired,
which excludes the 5.7 billion euro investment previously made by Deutsche
Telekom in VoiceStream preferred shares, is based on preliminary valuations,
using assumptions we believe are reasonable, pending finalization of the
purchase price allocation process.
(i) The estimated fair value of the VoiceStream intangible assets acquired,
based on preliminary valuations, are as follows:
Historical cost of FCC licenses acquired.................... 1,771,642
Fair value adjustment for FCC licenses...................... 3,171,543
Historical cost of other intangible assets acquired
(excluding goodwill)...................................... 154,899
----------
5,098,084
==========
(j) Certain of VoiceStream's long-term debt agreements contain provisions which
could require VoiceStream to repay the debt upon a change in control.
The 4.44 billion euros senior secured credit facility, which we refer to as
the "Credit Facility", contains a provision whereby a change in control,
together with an affirmative vote of the majority of the lenders within 90
days after the change in control occurs, constitutes an event of default. If
the event of default is declared, all principal and interest under the
Credit Facility becomes due and payable immediately. At September 30, 2000
approximately 3.0 billion euros was outstanding under the credit facility.
The 10 3/8% Senior Notes, the 11 1/2% Senior Notes and the 11 7/8% Senior
Discount Notes, which we refer collectively to as "Notes", contain
provisions whereby a change in control, together with a rating decline of
the Notes would constitute a change in control triggering event. If such an
event occurs, the holders of the Notes can require VoiceStream to repurchase
the Notes, within 90 days of the occurrence of the event, at the greater of:
(1) 101% plus unpaid interest, and (2) the sum of the present values of the
remaining scheduled payments of principal and interest. At September 30,
2000 approximately 3.0 billion euros in Notes were outstanding.
The pro forma condensed combined balance sheet assumes that the change in
control will not result in the repayment of the debt outstanding under these
agreements, and therefore, outstanding debt amounts have not been
reclassified as current.
(k) The actual consideration and resulting goodwill for the Deutsche
Telekom/VoiceStream merger could change due to the exercise of stock
options, warrants, put options or conversion of remaining outstanding
preferred shares prior to the closing date.
Exercise or conversion of all of these financial instruments would result in
approximately 99.5 million additional Deutsche Telekom ordinary shares being
issued, 3.5 billion euros of additional consideration and goodwill and
additional amortization expense of approximately 130 million euros for the
nine months ended September 30, 2000 and 173 million euros for the year
ended December 31, 1999. If such financial instruments are not exercised or
converted prior to the closing of the merger, the merger agreement
stipulates that these financial instruments, upon exercise or conversion
thereof after
271
287
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
the closing date of the merger, will be exchanged for or converted into
equivalent Deutsche Telekom ordinary shares.
Note 5
The incremental adjustment to intangible assets for the Deutsche
Telekom/VoiceStream merger is comprised of the following:
Fair value adjustment made to historical cost of FCC
licenses.................................................. 3,171,543
Goodwill resulting from the Deutsche Telekom/VoiceStream
merger.................................................... 39,544,368
VoiceStream historical intangible assets.................... (10,210,368)
-----------
Incremental adjustment to intangible assets................. 32,505,543
===========
Note 6
(a) This adjustment represents the elimination for accounting consolidation
purposes of Deutsche Telekom's investment of 5.7 billion euros ($5 billion)
in VoiceStream preferred shares on September 6, 2000. Deutsche Telekom's
purchase of these shares was funded from partial proceeds of a global bond
offering closed on July 4, 2000.
(b) The adjustment to preferred shares for the Deutsche Telekom/VoiceStream
merger is comprised of the following:
Elimination of the junior convertible preferred shares (Note
4(b))..................................................... (453,730)
Elimination of the convertible redeemable preferred shares
held by Deutsche Telekom for accounting consolidation
purposes (Note 6(a))...................................... (5,658,000)
----------
(6,111,730)
==========
Note 7
This adjustment represents the 8.5 billion euros to be borrowed to fund the
cash consideration portion of the Deutsche Telekom/VoiceStream merger disclosed
in Note 4(d).
Note 8
The adjustment to capital shares for the Deutsche Telekom/VoiceStream
merger is comprised of the following:
Notional par value of Deutsche Telekom ordinary shares to be
issued (Note 4)........................................... 1,986,447
Elimination of the par value of VoiceStream common shares to
be acquired............................................... (258)
----------
1,986,189
==========
272
288
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 9
The adjustment of 98.0 million euros represents estimated merger and stock
registration costs to be incurred by Deutsche Telekom. Under German GAAP, legal,
accounting and other fees of 31.0 million euros are not capitalizable as part of
the purchase price and accordingly have been recorded as an adjustment to net
income (loss). The total estimated liability is as follows:
Bankers' fees............................................... 67,000
Legal, accounting and other fees............................ 31,000
-------
98,000
=======
Note 10
The adjustment to net income (loss) is comprised of the following items:
Merger related costs to be expensed for German GAAP purposes
(Note 9).................................................. (31,000)
Elimination of VoiceStream's historical net loss recorded
prior to the pro forma merger date of September 30,
2000...................................................... 1,462,212
---------
1,431,212
=========
Note 11
The adjustment to additional paid-in capital for the Deutsche
Telekom/VoiceStream merger is comprised of the following:
Fair value of Deutsche Telekom ordinary shares to be issued
(Note 4).................................................. 32,015,943
Less: Notional par value of Deutsche Telekom ordinary shares
to be issued (Note 8)..................................... (1,986,447)
Fair value of stock options, warrants and restricted shares
to be issued by Deutsche Telekom (Note 4(e)).............. 1,123,042
Elimination of VoiceStream's historical additional paid-in
capital................................................... (11,569,921)
-----------
19,582,617
===========
Note 12
The adjustment to deferred compensation for the Deutsche
Telekom/VoiceStream merger is comprised of the following:
Fair value of the unvested stock options and warrants to be
issued by Deutsche Telekom (Note 4(f)).................... (241,110)
Elimination of VoiceStream's historical deferred
compensation.............................................. 44,154
--------
(196,956)
========
273
289
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 13
The adjustment represents the elimination of VoiceStream's historical
unappropriated net losses carried over from previous years.
Note 14
The Deutsche Telekom/Powertel merger will result in an allocation of the
purchase price to the tangible and intangible assets and liabilities of
Powertel. The transaction is not expected to result in an incremental deferred
tax liability. The allocation reflects the estimated fair value of the assets
and liabilities acquired by Deutsche Telekom based upon information available at
the date of the preparation of the accompanying pro forma condensed combined
financial statements and will be adjusted upon the final determination of such
fair values. Management is not aware of any circumstances that would cause the
final purchase price allocation to be significantly different from that which is
reflected in the accompanying pro forma condensed combined balance sheet.
However, actual valuations and allocations may differ from those reflected
herein.
Under German GAAP, the aggregate purchase price was calculated as follows:
Powertel restricted and common shares outstanding(a)........ 31,499
Conversion of Powertel preferred shares and cumulative
dividends to common shares (b)............................ 17,953
----------
Pro forma Powertel common shares outstanding...... 49,452
Deutsche Telekom exchange ratio per share(c)................ 2.6353
----------
Equivalent Deutsche Telekom ordinary shares................. 130,321
Deutsche Telekom share price(d)............................. 41.26
----------
Subtotal (notional par value 333,622)....................... 5,377,059
Fair value of liabilities of Powertel at September 30,
2000(g)................................................... 1,485,306
Option and warrant conversion costs(e)...................... 232,875
Merger related costs(f)..................................... 11,316
----------
Total consideration(j)............................ 7,106,556
Deferred compensation related to unvested grants(i)......... (18,866)
Fair value of tangible assets acquired(h)................... (1,053,035)
Fair value of intangible assets acquired.................... (879,872)
----------
Preliminary goodwill.............................. 5,154,783
==========
---------------
(a) The outstanding Powertel common and restricted shares as of November 15,
2000.
(b) These shares relate to the Powertel preferred shares which will be converted
into Deutsche Telekom ordinary shares as part of the merger.
(c) Pursuant to the merger agreement the exchange ratio is 2.6353 Deutsche
Telekom ordinary shares for each Powertel common share.
(d) Deutsche Telekom ordinary shares issued in consideration for the acquisition
of Powertel would be valued based on the quoted market price as of the
closing date of the transaction. The share price is based on the closing
price of Deutsche Telekom ordinary shares on November 15, 2000, the latest
practicable date. For each 10 euro increase or decrease in the Deutsche
Telekom ordinary share price,
274
290
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
the merger consideration amount would increase or decrease by 1.3 billion
euros and annual amortization expense would increase or decrease by 65
million euros.
(e) This amount represents the fair value, based on a Black-Scholes valuation of
Deutsche Telekom options and warrants to be issued in exchange for
outstanding Powertel options and warrants at the time of the Deutsche
Telekom/Powertel merger. The calculation is based on the number of Powertel
options and warrants outstanding, the exchange ratio as defined above, and
the share price of Deutsche Telekom ordinary shares.
(f) Anticipated merger costs to be capitalized by Deutsche Telekom as a result
of the Deutsche Telekom/Powertel merger represents bankers' fees.
(g) Powertel has issued certain senior notes which contain provisions that
require Powertel to offer repayment of outstanding amounts when a change of
control occurs. Additionally, the holders of the debt issued under these
agreements are entitled to a prepayment premium which at March 31, 2001
would be $7.1 million.
The pro forma condensed combined balance sheet assumes that the lenders will
not accept the offer of Powertel to repay amounts outstanding, and
therefore, no outstanding debt amounts have been reclassified as current.
The aggregate amount of principal maturities, including any prepayment
premiums, of Powertel's long-term debt at September 30, 2000, should the
holders accept the offer of repayment, is approximately 1.4 billion euros.
It is assumed that the offer to repurchase would commence within 30 days of
the completion of the Deutsche Telekom/Powertel merger.
(h) The estimated fair market value of the Powertel tangible assets acquired is
based on preliminary valuations using assumptions we believe are reasonable
pending finalization of the purchase price allocation process.
(i) A portion of the intrinsic value of the unvested Powertel options to be
converted into Deutsche Telekom options for which performance of future
service is required has been recorded as deferred compensation and will be
expensed over the remaining vesting period.
Note 15
The adjustment to intangible assets for the Deutsche Telekom/Powertel
merger is comprised of the following:
Fair value adjustment made to historical cost of FCC
licenses.................................................. 489,836
Goodwill (Note 14).......................................... 5,154,783
---------
5,644,619
=========
Note 16
The adjustment to capital shares for the Deutsche Telekom/Powertel merger
is comprised of the following:
Notional par value of Deutsche Telekom ordinary shares to be
issued (Note 14).......................................... 333,622
Elimination of the par value of Powertel common shares to be
acquired.................................................. (355)
-------
333,267
=======
275
291
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 17
The adjustment represents the elimination of Powertel's unappropriated net
losses carried over from previous years.
Note 18
The adjustment to additional paid-in capital for the Deutsche
Telekom/Powertel merger is comprised of the following:
Fair value of Deutsche Telekom ordinary shares to be issued
(Note 14)................................................. 5,377,059
Less: Notional par value of Deutsche Telekom ordinary shares
to be issued (Note 16).................................... (333,622)
Fair value of stock options, warrants and restricted shares
to be issued by Deutsche Telekom (Note 14(e))............. 232,875
Elimination of Powertel's historical additional paid-in
capital................................................... (588,820)
---------
4,687,492
=========
Note 19
This adjustment represents estimated merger and stock registration costs
for Powertel to be incurred by Deutsche Telekom. Under German GAAP, legal,
accounting and other fees are not capitalizable as part of the purchase price
and accordingly have been recorded as an adjustment to net income (loss). The
total estimated liability is as follows:
Bankers' fees (Note 14)..................................... 11,316
Legal, accounting and other fees............................ 3,395
------
14,711
======
Note 20
The pro forma adjustment to net income (loss) is comprised of the following
items:
Merger related costs expensed for German GAAP purposes (Note
19)....................................................... (3,395)
Elimination of Powertel's historic loss recorded prior to
the pro forma merger date of September 30, 2000........... 183,934
-------
180,539
=======
276
292
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 21
The following summarizes the principal adjustments to reconcile
shareholders' equity under German GAAP to the amounts that would have been
reported had U.S. GAAP been applied.
SEPTEMBER 30, 2000
-------------------------------------------------------------------------------------------------------
ADJUSTED
DEUTSCHE
DEUTSCHE TELEKOM,
VOICESTREAM TELEKOM POWERTEL VOICESTREAM
DEUTSCHE MERGER AND MERGER AND
TELEKOM(a) VOICESTREAM ADJUSTMENTS VOICESTREAM POWERTEL ADJUSTMENTS POWERTEL
----------- ----------- ----------- ----------- -------- ----------- ----------------
Shareholders' equity
under German GAAP.... 43,632,000 14,953,671 18,261,110 76,846,781 (42,235) 5,629,908 82,434,454
Value-added tax........ 55,000 -- -- 55,000 -- -- 55,000
Software costs......... 209,000 1,934(b) -- 210,934 -- -- 210,934
Personnel restructuring
costs................ 56,000 -- -- 56,000 -- -- 56,000
Employee share purchase
plans................ 13,000 -- -- 13,000 -- -- 13,000
Deferred income/
derivatives.......... (210,000) -- -- (210,000) -- -- (210,000)
Maintenance accruals... 46,000 4,002(c) -- 50,002 2,632(c) -- 52,634
Goodwill and intangible
differences.......... 1,572,000 -- 7,848,303(g) 9,420,303 -- 415,716(g) 9,836,019
Deferred financing..... -- 106,407(d) -- 106,407 16,390(d) -- 122,797
Capitalized interest... -- 37,860(e) (30,957)(e) 6,903 46,216(e) (45,750)(e) 7,369
License amortization... 465,000 201,513(f) (201,513)(f) 465,000 12,793(f) (12,793)(f) 465,000
Sales leaseback........ -- -- -- -- (86,802)(h) 86,802(i) --
Income taxes........... (1,398,000) -- -- (1,398,000) -- -- (1,398,000)
Unrealized gains on
marketable
securities........... 5,143,000 -- -- 5,143,000 -- -- 5,143,000
Minority interest...... (2,227,000) (347,906)(j) -- (2,574,906) -- -- (2,574,906)
U.S. GAAP and German
GAAP equity
differences.......... -- (6,111,730)(k) 6,111,730(k) -- (172,251)(k) 172,251(k) --
Other differences...... 70,000 -- -- 70,000 -- -- 70,000
---------- ---------- ---------- ---------- -------- --------- ----------
Shareholders' equity
under U.S. GAAP...... 47,426,000 8,845,751 31,988,673 88,260,424 (223,257) 6,246,134 94,283,301
========== ========== ========== ========== ======== ========= ==========
---------------
(a) Deutsche Telekom's German to U.S. GAAP reconciling items are derived from
Note 19 of the Deutsche Telekom unaudited interim consolidated financial
statements for the nine months ended September 30, 2000 incorporated by
reference in this document.
(b) Under German GAAP, internal software development costs are not capitalized.
This adjustment capitalizes and amortizes costs capitalizable for U.S. GAAP
purposes.
(c) Under German GAAP, maintenance accruals are recorded for costs to be
incurred in future periods. These accruals were reversed for U.S. GAAP
purposes.
(d) Under German GAAP, financing costs are expensed as incurred. This adjustment
is to defer and amortize financing costs over the term of the loan for U.S.
GAAP purposes.
(e) Under German GAAP, interest related to construction projects is not
capitalized. Under U.S. GAAP, interest costs would be capitalized as part of
the asset being constructed.
(f) Under German GAAP, license amortization commences on the date the license is
acquired. Under U.S. GAAP, amortization of these licenses would commence
upon the license being placed into service. This adjustment reverses the
amortization expense recognized under German GAAP during the non-operational
period of the license.
277
293
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(g) The application of German GAAP results in differences from U.S. GAAP related
to certain aspects of the accounting for the purchase of VoiceStream and
Powertel, which would result in the following adjustments:
i)As discussed in note 4 (c) and 14 (c), under German GAAP Deutsche
Telekom ordinary shares issued in consideration for the acquisitions of
VoiceStream and Powertel would be valued based on the quoted market
price as of the closing dates. Under U.S. GAAP, the share price used to
value the Deutsche Telekom ordinary shares issued in consideration for
the acquisitions of VoiceStream and Powertel would be valued based on
the quoted market price for a few days before and after the merger
announcement dates of July 23, 2000 and August 28, 2000, respectively,
which were 51.51 euro per share and 44.57 euro per share, respectively.
This would result in additional merger consideration of 8.0 billion
euros and 433 million euros for the VoiceStream and Powertel
acquisition, respectively.
Under U.S. GAAP, certain events could cause remeasurement of the fair
value of the Deutsche Telekom ordinary shares issued for the acquisition
of VoiceStream. At the close of the transaction, if, pursuant to the
merger agreement, a decline in the Deutsche Telekom share price results
in a reduction of the amount of total cash consideration to be received
and/or an increase in Deutsche Telekom ordinary shares issued due to the
tax-related adjustment provisions, a new measurement of the share price
would be triggered. The effect of any remeasurement pursuant to the
tax-related adjustment provisions would reduce the overall purchase
price. For each 10 euro decrease in the Deutsche Telekom ordinary share
price from the share price disclosed in the preceding paragraph, the
VoiceStream merger consideration would decrease by 7.8 billion euros and
annual amortization would decrease by 390 million euros.
ii) Certain intangible assets including VoiceStream's tradename, subscriber
base and assembled workforce have been recognized for U.S. GAAP
purchase accounting but not for German GAAP purposes. Based on
preliminary valuations using assumptions we consider reasonable, the
value ascribed to these intangible assets was approximately 3.1 billion
euros. The asset lives for these assets have been estimated to be 20, 3
and 3 years, respectively, resulting in additional annual amortization
of 265.2 million euros (nine months - 198.9 million euros).
(h) Under German GAAP, the gain from the Powertel sales-leaseback transaction
would be recognized immediately, whereas under U.S. GAAP, gains on
sales-leaseback transactions can be deferred under certain circumstances.
This adjustment defers the gain recognized under German GAAP.
(i) For U.S. GAAP purposes, the gain deferred by Powertel for the sale and
leaseback of towers is not valued in the purchase price allocation as it
provides no future benefit.
(j) Under German GAAP, minority interest and mandatorily redeemable securities
are included in shareholders' equity. For U.S. GAAP purposes, these items
are classified as mezzanine on the balance sheet.
(k) Under U.S. GAAP, preferred shares that are mandatorily redeemable are
excluded from shareholders' equity. Under German GAAP, these financial
instruments are classified as equity. Additionally, these preferred shares
are assumed to be converted for pro forma purposes and have been eliminated
to reconcile the U.S. GAAP pro forma shareholders' equity to the German GAAP
pro forma shareholders' equity.
278
294
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 22
As discussed in Notes 12 and 14(i), Deutsche Telekom has recorded as
deferred compensation expense a portion of the intrinsic value of the unvested
stock options for which future service is required related to the unvested
portion of stock options issued as part of the Deutsche Telekom/VoiceStream
merger and the Deutsche Telekom/Powertel merger. This expense is being
recognized over the remaining future vesting periods of the VoiceStream and
Powertel grants estimated to be an average of 2.8 and 1.2 years, respectively.
Additionally, as part of the Deutsche Telekom/VoiceStream and Deutsche
Telekom/Powertel merger agreements, Deutsche Telekom has agreed to pay existing
management and employee retention and incentive bonuses and grant options. The
payments will be recorded as period expenses in the period subsequent to the
mergers. The total amount currently estimated to be paid out is 150 million
euros. Since these costs are non-recurring in nature, no associated compensation
expense has been recognized in the pro forma statements of operations.
Note 23
This adjustment represents additional depreciation and amortization expense
recognized as part of the purchase price allocation to tangible and intangible
assets. These tangible and intangible assets are being amortized over their
useful lives as follows:
Property, plant and equipment............................... 3 to 20 years
Goodwill.................................................... 20 years
Licenses.................................................... 20 years
Note 24
Deutsche Telekom obtained financing to fund its initial 5.7 billion euro
investment in VoiceStream preferred shares and will borrow additional amounts to
fund the cash portion of the Deutsche Telekom/ VoiceStream merger consideration.
The pro forma adjustment represents additional interest expense that would have
been incurred had the merger or the investment occurred at the beginning of the
period. Interest expense was calculated using Deutsche Telekom's weighted
average borrowing rate of 7.44%.
Note 25
This adjustment represents the tax benefit resulting from the additional
interest expense to be recognized by Deutsche Telekom as described in Note 24.
279
295
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 26
The following summarizes the principal adjustments to reconcile net income
(loss) under German GAAP to the amounts that would have been reported had U.S.
GAAP been applied.
SEPTEMBER 30, 2000
-------------------------------------------------------------------
DEUTSCHE
VOICESTREAM TELEKOM
DEUTSCHE MERGER AND
TELEKOM(a) VOICESTREAM ADJUSTMENTS VOICESTREAM POWERTEL
---------- ----------- ----------- ----------- --------
Unaudited pro forma net income
(loss) under German GAAP...... 8,445,000 (1,709,945) (1,728,662) 5,006,393 (168,902)
Value-added tax................. (141,000) -- -- (141,000) --
Software costs.................. 33,000 882(b) -- 33,882 --
Personnel restructuring
accrual....................... (81,000) -- -- (81,000) --
Employee share purchase plans... 15,000 -- -- 15,000 --
Deferred income/derivatives..... (66,000) -- -- (66,000) --
Maintenance accrual............. 4,000 -- -- 4,000 --
Share offering costs............ 94,000 -- -- 94,000 --
Goodwill/intangible
differences................... (71,000) -- (493,164)(f) (564,164) --
Deferred financing.............. 23,000 (5,903)(c) -- 17,097 (2,924)(c)
Capitalized interest............ -- (2,263)(d) -- (2,263) (1,446)(d)
License amortization............ 465,000 3,496(e) 12,214(e) 480,710 183(e)
Sales-leaseback................. -- -- -- -- 7,104(g)
Income taxes.................... (752,000) -- -- (752,000) --
Mark to market of available for
sale securities............... -- 22,327(i) -- 22,327 --
Gain on subsidiary stock issued
as part of a business
combination................... 1,822,000 -- -- 1,822,000 --
Other differences............... 22,000 -- -- 22,000 --
--------- ---------- ---------- --------- --------
Unaudited pro forma net income
(loss) under U.S. GAAP........ 9,812,000 (1,691,406) (2,209,612) 5,910,982 (165,985)
========= ========== ========== ========= ========
SEPTEMBER 30, 2000
-----------------------------
ADJUSTED
DEUTSCHE
TELEKOM,
POWERTEL VOICESTREAM
MERGER AND
ADJUSTMENTS POWERTEL
----------- -----------
Unaudited pro forma net income
(loss) under German GAAP...... (230,932) 4,606,559
Value-added tax................. -- (141,000)
Software costs.................. -- 33,882
Personnel restructuring
accrual....................... -- (81,000)
Employee share purchase plans... -- 15,000
Deferred income/derivatives..... -- (66,000)
Maintenance accrual............. -- 4,000
Share offering costs............ -- 94,000
Goodwill/intangible
differences................... (15,588)(f) (579,752)
Deferred financing.............. -- 14,173
Capitalized interest............ -- (3,709)
License amortization............ 2,357(e) 483,250
Sales-leaseback................. (7,104)(h) --
Income taxes.................... -- (752,000)
Mark to market of available for
sale securities............... -- 22,327
Gain on subsidiary stock issued
as part of a business
combination................... -- 1,822,000
Other differences............... -- 22,000
-------- ---------
Unaudited pro forma net income
(loss) under U.S. GAAP........ (251,267) 5,493,730
======== =========
280
296
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31, 1999
----------------------------------------------------------------------------------------------------------
ADJUSTED
DEUTSCHE
DEUTSCHE TELEKOM,
VOICESTREAM TELEKOM POWERTEL VOICESTREAM
DEUTSCHE MERGER AND MERGER AND
TELEKOM(a) VOICESTREAM ADJUSTMENTS VOICESTREAM POWERTEL ADJUSTMENTS POWERTEL
---------- ----------- ----------- ----------- -------- ----------- ----------------
Unaudited pro forma net
income (loss) under
German GAAP.......... 1,253,000 (1,615,862) (2,393,216) (2,756,078) (45,304) (307,909) (3,109,291)
Value-added tax........ 288,000 -- -- 288,000 -- -- 288,000
Software costs......... 163,000 553(b) -- 163,553 -- -- 163,553
Personnel restructuring
accrual.............. (97,000) -- -- (97,000) -- -- (97,000)
Employee share purchase
plans................ (17,000) -- -- (17,000) -- -- (17,000)
Deferred
income/derivatives... (61,000) -- -- (61,000) -- -- (61,000)
Maintenance accrual.... 2,000 -- -- 2,000 -- -- 2,000
Share offering costs... 238,000 -- -- 238,000 -- -- 238,000
Goodwill/intangible
differences.......... -- -- (657,553)(f) (657,553) -- (20,784)(f) (678,337)
Deferred financing..... -- 34,309(c) -- 34,309 (1,919)(c) -- 32,390
Capitalized interest... -- (472)(d) -- (472) (949)(d) -- (1,421)
License amortization... -- 18,539(e) 30,163(e) 48,702 214(e) 3,141(e) 52,057
Sales-leaseback........ -- -- -- -- (78,231)(g) 5,351(h) (72,880)
Income taxes........... (244,000) -- -- (244,000) -- -- (244,000)
Other differences...... (12,000) -- -- (12,000) -- -- (12,000)
--------- ---------- ---------- ---------- -------- -------- ----------
Unaudited pro forma net
income (loss) under
U.S. GAAP............ 1,513,000 (1,562,933) (3,020,606) (3,070,539) (126,189) (320,201) (3,516,929)
========= ========== ========== ========== ======== ======== ==========
---------------
(a) Deutsche Telekom's German GAAP to U.S. GAAP reconciling items are derived
from Note 36 of the Deutsche Telekom consolidated financial statements for
the year ended December 31, 1999 and Note 19 of the Deutsche Telekom
unaudited interim consolidated financial statements for the nine months
ended September 30, 2000, incorporated by reference in this document.
(b) Under German GAAP, internal software development costs are not capitalized.
This adjustment capitalizes and amortizes costs capitalizable for U.S. GAAP
purposes.
(c) Under German GAAP, financing costs are expensed as incurred. This adjustment
is to defer and amortize financing costs over the term of the loan for U.S.
GAAP purposes.
(d) Under German GAAP, interest is not capitalized related to construction
projects. Under U.S. GAAP interest costs are capitalized as part of the
asset being constructed.
(e) Under German GAAP, license amortization commences on the date the license is
acquired. Under U.S. GAAP, amortization of these licenses would commence
upon the asset being placed into service. This adjustment reverses the
amortization expense recognized under German GAAP during the non-
operational period of the license.
(f) As discussed in note 21(g), the application of German GAAP results in
differences from U.S. GAAP related to certain aspects of the accounting for
the purchase of VoiceStream and Powertel, which would result in the
following adjustments:
i) Under U.S. GAAP, goodwill amortization would be increased due to
valuation differences in the ordinary shares issued as acquisition
consideration. Annual goodwill amortization would increase
281
297
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
by 400 million euros and 22 million euros for the VoiceStream and
Powertel mergers respectively (9 months - 300 million euros and 16
million euros);
ii) Certain intangible assets including VoiceStream's tradename, subscriber
base and assembled workforce have been recognized for U.S. GAAP
purchase accounting but not for German GAAP purposes. Based on
preliminary valuations using assumptions we consider reasonable, the
value ascribed to these intangible assets was approximately 3.1 billion
euros. The asset lives for these assets have been estimated to be 20, 3
and 3 years, respectively, resulting in additional annual amortization
of 265.2 million euros (nine months - 198.9 million euros).
(g) Under German GAAP, the gains from the Powertel sale-leaseback transaction
would be recognized immediately whereas under U.S. GAAP, gains on
sale-leaseback transactions can be deferred under certain circumstances.
This adjustment defers the gain recognized for German GAAP purposes.
(h) For U.S. GAAP purposes, the gain recognized by Powertel is not valued in the
purchase price allocation as it provides no future benefit.
(i) Under U.S. GAAP mark to market adjustments for investments classified as
available for sale are recorded in other comprehensive income. Under German
GAAP investment write-downs are recorded against net income.
282
298
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 27
The following summarizes the pro forma earnings (loss) per share
calculation under German GAAP and U.S. GAAP:
DEUTSCHE TELEKOM DEUTSCHE TELEKOM,
AND VOICESTREAM VOICESTREAM AND POWERTEL
-------------------------------------- --------------------------------------
NINE MONTHS ENDED YEAR ENDED NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2000 DECEMBER 31, 1999 SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ ----------------- ------------------ -----------------
GERMAN GAAP:
Pro forma net income (loss)........... 5,006,393 (2,756,078) 4,606,559 (3,109,291)
========== ========== ========== ==========
Weighted average Deutsche Telekom
common shares outstanding........... 3,025,000 2,884,000 3,025,000 2,884,000
Shares issued in VoiceStream merger... 775,955 775,955 775,955 775,955
Shares issued in Powertel merger...... -- -- 130,321 130,321
---------- ---------- ---------- ----------
Pro forma weighted average shares
outstanding......................... 3,800,955 3,659,955 3,931,276 3,790,276
========== ========== ========== ==========
Earnings (loss) per share............. 1.32 (0.75) 1.17 (0.82)
========== ========== ========== ==========
U.S. GAAP-BASIC:
Pro forma net income (loss)........... 5,910,982 (3,070,539) 5,493,730 (3,516,929)
========== ========== ========== ==========
Weighted average Deutsche Telekom
common shares outstanding........... 3,025,000 2,884,000 3,025,000 2,884,000
Shares issued in VoiceStream merger... 775,955 775,955 775,955 775,955
Shares issued in Powertel merger...... -- -- 130,321 130,321
---------- ---------- ---------- ----------
Pro forma weighted average shares
outstanding......................... 3,800,955 3,659,955 3,931,276 3,790,276
========== ========== ========== ==========
Basic pro forma earnings (loss) per
share............................... 1.56 (0.84) 1.40 (0.93)
========== ========== ========== ==========
U.S. GAAP--DILUTIVE:
Pro forma net income (loss)........... 5,910,982 (3,070,539) 5,493,730 (3,516,929)
Add: Preferred stock dividends........ 9,137 -- 9,137 --
Less: Losses in unconsolidated
subsidiaries........................ (57,618) -- (57,618) --
---------- ---------- ---------- ----------
Adjusted pro forma net income
(loss).............................. 5,862,501 (3,070,539) 5,445,249 (3,516,929)
========== ========== ========== ==========
Weighted average Deutsche Telekom
common shares outstanding........... 3,025,000 2,884,000 3,025,000 2,884,000
Shares issued in VoiceStream merger... 775,955 775,955 775,955 775,955
Shares issued in Powertel merger...... -- -- 130,321 130,321
Effect of dilutive securities:
Subsidiary pro forma shares(b)...... 31,710 -- 31,710 --
Unconsolidated subsidiary put
options(b)........................ 47,499 -- 47,499 --
Stock options....................... 132,126 -- 145,502 --
---------- ---------- ---------- ----------
Pro forma weighted average shares
outstanding......................... 4,012,290 3,659,955 4,155,987 3,790,276
========== ========== ========== ==========
Diluted pro forma earnings (loss) per
share............................... 1.46 (0.84)(a) 1.31 (0.93)(a)
========== ========== ========== ==========
---------------
(a) All potentially convertible securities as of December 31, 1999 were
anti-dilutive, and accordingly have not been included in the calculation of
dilutive earnings (loss) per share under U.S. GAAP.
(b) Adjustment to include the impact of dilutive convertible securities.
283
299
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 28 Pro Forma Balance Sheet of VoiceStream at September 30, 2000
The table below sets out the adjustments to convert the VoiceStream U.S.
GAAP and U.S. dollars consolidated balance sheet as at September 30, 2000
derived from the unaudited Quarterly Report on Form 10-Q filed with the SEC for
the nine months ended September 30, 2000 to Deutsche Telekom's accounting
policies under German GAAP and euros.
SEPTEMBER 30, 2000
-------------------------------------------------------------
HISTORICAL GERMAN GAAP VOICESTREAM VOICESTREAM
VOICESTREAM ADJUSTMENTS PRE-ACQUISITION PRE-ACQUISITION
----------- ----------- --------------- ---------------
US $ US $ US $ EUROS
NOTE 34 NOTE 36 NOTE 38
ASSETS
NONCURRENT ASSETS
Intangible assets........................................... 11,024,908 (178,078)(f) 10,725,441 12,136,909
(94,032)(d)
(27,357)(e)
Property, plant and equipment............................... 2,195,000 (6,100)(e) 2,187,191 2,475,025
(1,709)(b)
Financial assets............................................ 1,195,242 -- 1,195,242 1,352,536
----------- -------- ----------- -----------
14,415,150 (307,276) 14,107,874 15,964,470
----------- -------- ----------- -----------
CURRENT ASSETS
Inventories................................................. 509,531 -- 509,531 576,585
Receivables................................................. 324,250 -- 324,250 366,921
Other assets................................................ 52,413 -- 52,413 59,311
Marketable securities....................................... 3,623 -- 3,623 4,100
Liquid assets............................................... 4,107,518 -- 4,107,518 4,648,067
----------- -------- ----------- -----------
4,997,335 -- 4,997,335 5,654,984
----------- -------- ----------- -----------
PREPAID EXPENSES, DEFERRED CHARGES AND DEFERRED TAXATION.... 17,390 -- 17,390 19,679
----------- -------- ----------- -----------
19,429,875 (307,276) 19,122,599 21,639,133
=========== ======== =========== ===========
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Preferred stock............................................. 5,400,963 -- 5,400,963 6,111,730
Capital stock............................................... 228 -- 228 258
Additional paid-in capital.................................. 10,224,391 -- 10,224,391 11,569,921
Deferred compensation....................................... (39,019) -- (39,019) (44,154)
Retained deficit............................................ (30,793) 20,818(a) (9,975) (11,288)
Unappropriated net loss carried forward from previous
years..................................................... (1,062,898) (174,819)(f) (1,377,245) (1,558,490)
(99,537)(d)
(3,537)(c)
(35,566)(e)
(888)(b)
Net loss.................................................... (1,274,879) (3,259)(f) (1,292,163) (1,462,212)
5,505(d)
2,109(e)
(20,818)(a)
(821)(b)
Minority interest........................................... 307,446 -- 307,446 347,906
----------- -------- ----------- -----------
13,525,439 (310,813) 13,214,626 14,953,671
----------- -------- ----------- -----------
ACCRUALS
Other accruals.............................................. 324,867 3,537(c) 328,404 371,622
----------- -------- ----------- -----------
LIABILITIES
Debt........................................................ 5,095,315 -- 5,095,315 5,765,858
Other liabilities........................................... 484,254 -- 484,254 547,982
----------- -------- ----------- -----------
5,579,569 -- 5,579,569 6,313,840
----------- -------- ----------- -----------
19,429,875 (307,276) 19,122,599 21,639,133
=========== ======== =========== ===========
284
300
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 29 Pro Forma Balance Sheet of Powertel at September 30, 2000
The table below sets out the adjustments to convert the Powertel U.S. GAAP
and U.S. dollars consolidated balance sheet as at September 30, 2000 derived
from the unaudited Quarterly Report on Form 10-Q filed with the SEC for the nine
months ended September 30, 2000 to Deutsche Telekom's accounting policies under
German GAAP and euros.
SEPTEMBER 30, 2000
------------------------------------------------------------
HISTORICAL GERMAN GAAP PRE-ACQUISITION PRE-ACQUISITION
POWERTEL ADJUSTMENTS POWERTEL POWERTEL
---------- ----------- --------------- ---------------
US $ US $ US $ EUROS
NOTE 34 NOTE 36 NOTE 38
ASSETS
NONCURRENT ASSETS
Intangible assets........................................... 407,106 (14,484)(d) 344,677 390,036
(36,640)(e)
(11,305)(f)
Property, plant and equipment............................... 579,060 (4,201)(e) 574,859 650,510
Financial assets............................................ 34,458 -- 34,458 38,993
--------- ------- --------- ---------
1,020,624 (66,630) 953,994 1,079,539
--------- ------- --------- ---------
CURRENT ASSETS
Inventories................................................. 21,691 -- 21,691 24,546
Receivables................................................. 45,871 -- 45,871 51,908
Other assets................................................ 2,924 -- 2,924 3,309
Liquid assets............................................... 234,189 -- 234,189 265,007
--------- ------- --------- ---------
304,675 -- 304,675 344,770
--------- ------- --------- ---------
PREPAID EXPENSES, DEFERRED CHARGES AND DEFERRED TAXATION.... 16,580 -- 16,580 18,762
--------- ------- --------- ---------
1,341,879 (66,630) 1,275,249 1,443,071
========= ======= ========= =========
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Preferred stock............................................. 152,222 -- 152,222 172,254
Capital stock............................................... 314 -- 314 355
Additional paid-in capital.................................. 520,343 -- 520,343 588,820
Unappropriated net loss carried forward from previous
year...................................................... (563,190) (17,210)(d) (547,658) (619,730)
(42,189)(e)
(6,074)(f)
(2,326)(c)
83,331(g)
Net loss.................................................... (154,762) 2,726(d) (162,543) (183,934)
1,348(e)
(5,231)(f)
(6,624)(g)
--------- ------- --------- ---------
(45,073) 7,751 (37,322) (42,235)
--------- ------- --------- ---------
ACCRUALS
Other accruals.............................................. 31,360 2,326 33,686 38,119
--------- ------- --------- ---------
LIABILITIES
Debt........................................................ 1,231,063 -- 1,231,063 1,393,071
Other liabilities........................................... 39,914 -- 39,914 45,167
--------- ------- --------- ---------
1,270,977 -- 1,270,977 1,438,238
========= ======= ========= =========
DEFERRED INCOME............................................. 84,615 (76,707) 7,908 8,949
--------- ------- --------- ---------
1,341,879 (66,630) 1,275,249 1,443,071
========= ======= ========= =========
285
301
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 30 Pro Forma VoiceStream Statement of Operations for the Nine Months Ended
September 30, 2000
(a) The table below sets out the adjustments to convert the pro forma
VoiceStream U.S. GAAP and U.S. dollars consolidated statement of operations
derived from the unaudited Quarterly Reports on Form 10-Q filed with the SEC
for the nine months ended September 30, 2000 to Deutsche Telekom's
accounting policies under German GAAP and euros. See Note 30(b) for
disclosures regarding the Adjusted Historical VoiceStream column below.
SEPTEMBER 30, 2000
-------------------------------------------------------------
ADJUSTED
HISTORICAL GERMAN GAAP VOICESTREAM VOICESTREAM
VOICESTREAM ADJUSTMENTS PRE-ACQUISITION PRE-ACQUISITION
----------- ----------- --------------- ---------------
US $ US $ US $ EUROS
NOTE 34 NOTE 37 NOTE 38
Net revenue................................ 1,453,924 -- 1,453,924 1,559,333
Other owned capitalized costs.............. 87,212 -- 87,212 93,535
---------- ------- ---------- ----------
Total operating performance................ 1,541,136 -- 1,541,136 1,652,868
Other operating income..................... 63,226 -- 63,226 67,810
Goods and services purchased............... (746,284) -- (746,284) (800,389)
Personnel costs............................ (374,361) (1,340)(a) (375,701) (402,939)
Depreciation and amortization.............. (718,236) (3,259)(d) (718,819) (770,933)
532(b)
1,626(c)
518(a)
Other operating expenses................... (890,920) -- (890,920) (955,512)
Financial expense, net..................... (418,162) 7,429(b) (431,067) (462,321)
484(c)
(20,818)(f)
---------- ------- ---------- ----------
Results from ordinary business
activities............................... (1,543,601) (14,828) (1,558,429) (1,671,416)
Extraordinary losses....................... -- (2,457)(b) (2,457) (2,635)
Taxes...................................... (17,973) -- (17,973) (19,276)
---------- ------- ---------- ----------
Loss after taxes........................... (1,561,574) (17,285) (1,578,859) (1,693,327)
Losses applicable to minority
shareholders............................. (15,494) -- (15,494) (16,618)
---------- ------- ---------- ----------
Net loss................................... (1,577,068) (17,285) (1,594,353) (1,709,945)
========== ======= ========== ==========
286
302
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(b) The table below consolidates the results of VoiceStream, Omnipoint and
Aerial included in the pro forma VoiceStream consolidated statement of
operations in U.S. GAAP and U.S. dollars. The VoiceStream historical results
are derived from VoiceStream's unaudited Quarterly Reports on Form 10-Q
filed with the SEC for the nine months ended September 30, 2000. The
Omnipoint results are derived from Omnipoint's unaudited Quarterly Reports
on Form 10-Q filed with the SEC for the period from January 1, 2000 to
February 24, 2000, the date of Omnipoint's merger with VoiceStream. Aerial's
results are derived from its statement of operations for the period from
January 1, 2000 to May 4, 2000, the date of Aerial's merger with
VoiceStream.
SEPTEMBER 30, 2000 (US $)
-------------------------------------------------------------------------------
OMNIPOINT
AND
COOK AERIAL ADJUSTED
HISTORICAL HISTORICAL HISTORICAL CARVE- PURCHASE HISTORICAL
VOICESTREAM OMNIPOINT AERIAL OUT ADJUSTMENTS VOICESTREAM
----------- ---------- ---------- ---------- ----------- -----------
NOTE 34 NOTE 34 NOTE 34 (i) NOTE 35
Net revenue...................... 1,262,873 108,365 97,902 (15,216) -- 1,453,924
Other owned capitalized costs.... 84,304 2,722 267 (81) -- 87,212
---------- -------- ------- ------- -------- ----------
Total operating performance...... 1,347,177 111,087 98,169 (15,297) -- 1,541,136
Other operating income........... 62,839 16 371 -- -- 63,226
Goods and services purchased..... (655,092) (48,063) (50,046) 6,917 -- (746,284)
Personnel costs.................. (320,154) (21,440) (31,909) 604 (1,462)(c) (374,361)
Depreciation and amortization.... (541,197) (38,240) (36,585) 4,658 (106,872)(d) (718,236)
Other operating expenses......... (766,037) (88,608) (47,270) 10,995 -- (890,920)
Financial income (expense),
net............................ (375,132) (56,386) 15,958 (2,542) (60)(e) (418,162)
---------- -------- ------- ------- -------- ----------
Results from ordinary business
activities..................... (1,247,596) (141,634) (51,312) 5,335 (108,394) (1,543,601)
Taxes............................ (15,276) 331 (3,025) (3) -- (17,973)
---------- -------- ------- ------- -------- ----------
Income (loss) after taxes........ (1,262,872) (141,303) (54,337) 5,332 (108,394) (1,561,574)
Losses applicable to minority
shareholders................... (12,007) -- -- -- (3,487)(f) (15,494)
---------- -------- ------- ------- -------- ----------
Net Income (loss)................ (1,274,879) (141,303) (54,337) 5,332 (111,881) (1,577,068)
========== ======== ======= ======= ======== ==========
(i) This column reflects the deconsolidation adjustments and the recording of
VoiceStream's equity losses for certain Omnipoint operations which were
contributed to two joint ventures, Cook Inlet/VoiceStream GSM II and Cook
Inlet/VoiceStream GSM III, which we refer to as CIVS II and CIVS III,
immediately prior to the Omnipoint merger with VoiceStream. The joint
ventures are owned 49.9% by VoiceStream and as such have been accounted for
under the equity method.
287
303
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 31 Pro Forma Powertel Statement of Operations for the Nine Months Ended
September 30, 2000
The table below sets out the adjustments to convert the Powertel U.S. GAAP and
U.S. dollars consolidated statement of operations derived from the unaudited
Quarterly Report on Form 10-Q filed with the SEC for the nine months ended
September 30, 2000 to Deutsche Telekom's accounting policies under German GAAP
and euros.
SEPTEMBER 30, 2000
------------------------------------------------------------
HISTORICAL GERMAN GAAP PRE-ACQUISITION PRE-ACQUISITION
POWERTEL ADJUSTMENTS POWERTEL POWERTEL
---------- ----------- --------------- ---------------
US $ US $ US $ EUROS
NOTE 34 NOTE 37 NOTE 38
Net revenue................................. 330,558 330,558 354,523
Other owned capitalized costs............... -- -- -- --
-------- ------ -------- --------
Total operating performance................. 330,558 -- 330,558 354,523
Other operating income...................... 716 -- 716 768
Goods and services purchased................ (133,623) -- (133,623) (143,311)
Personnel costs............................. (69,834) -- (69,834) (74,897)
Depreciation and amortization............... (74,981) 1,348(c) (73,804) (79,155)
(171)(d)
Other operating expenses.................... (112,473) (6,624)(e) (119,097) (127,732)
Financial expense, net...................... (86,379) 2,726(b) (83,653) (89,718)
-------- ------ -------- --------
Results from ordinary business activities... (146,016) (2,721) (148,737) (159,522)
Taxes....................................... (1,434) -- (1,434) (1,538)
-------- ------ -------- --------
Loss after taxes............................ (147,450) (2,721) (150,171) (161,060)
Losses applicable to minority
shareholders.............................. (7,312) -- (7,312) (7,842)
-------- ------ -------- --------
Net loss.................................... (154,762) (2,721) (157,483) (168,902)
======== ====== ======== ========
288
304
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 32 Pro Forma VoiceStream Statement of Operations for the Year Ended
December 31, 1999
(a) The table below sets out the adjustments to convert the pro forma
VoiceStream U.S. GAAP and U.S. dollars consolidated statement of operations
derived from the Annual Report on Form 10-K filed with the SEC for the year
ended December 31, 1999 to Deutsche Telekom's accounting policies under
German GAAP and euros. See Note 32(b) for disclosures regarding the Adjusted
Historical VoiceStream column below.
DECEMBER 31, 1999
-------------------------------------------------------------
ADJUSTED
HISTORICAL GERMAN GAAP VOICESTREAM VOICESTREAM
VOICESTREAM ADJUSTMENTS PRE-ACQUISITION PRE-ACQUISITION
----------- ----------- --------------- ---------------
US $ US $ US $ EUROS
NOTE 34 NOTE 37 NOTE 38
Net revenue................................ 1,042,118 -- 1,042,118 978,330
Other owned capitalized costs.............. 31,013 -- 31,013 29,115
---------- ------- ---------- ----------
Total operating performance................ 1,073,131 -- 1,073,131 1,007,445
Other operating income..................... 52,055 -- 52,055 48,869
Goods and services purchased............... (544,754) -- (544,754) (511,410)
Personnel costs............................ (386,617) (859)(a) (387,476) (363,759)
Depreciation and amortization.............. (803,467) 270(a) (822,099) (771,778)
485(c)
361(b)
(19,748)(d)
Other operating expenses................... (704,363) -- (704,363) (661,249)
Financial expense, net..................... (440,216) 18(c) (436,073) (409,381)
4,125(b)
---------- ------- ---------- ----------
Results from ordinary business
activities............................... (1,754,231) (15,348) (1,769,579) (1,661,263)
Extraordinary losses....................... -- (41,032)(b) (41,032) (38,520)
Taxes...................................... 115,028 -- 115,028 107,987
---------- ------- ---------- ----------
Loss after taxes........................... (1,639,203) (56,380) (1,695,583) (1,591,796)
Losses applicable to minority
shareholders............................. (25,635) -- (25,635) (24,066)
---------- ------- ---------- ----------
Net loss................................... (1,664,838) (56,380) (1,721,218) (1,615,862)
========== ======= ========== ==========
289
305
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(b) The table below consolidates the results of VoiceStream, Omnipoint and
Aerial included in the pro forma VoiceStream consolidated statement of
operations in U.S. GAAP and U.S. dollars as derived from each entity's
Annual Report on Form 10-K filed with the SEC for the year ended December
31, 1999.
DECEMBER 31, 1999 (US $)
---------------------------------------------------------------------------------
OMNIPOINT
AND
COOK AERIAL ADJUSTED
HISTORICAL HISTORICAL HISTORICAL CARVE- PURCHASE HISTORICAL
VOICESTREAM OMNIPOINT AERIAL OUT ADJUSTMENTS VOICESTREAM
----------- ---------- ---------- ------------ ----------- -----------
NOTE 34 NOTE 34 NOTE 34 (i) NOTE 35
Net revenue....................... 473,627 386,089 233,541 (51,139) -- 1,042,118
Other owned capitalized costs..... 23,341 7,167 658 (153) -- 31,013
-------- -------- -------- ------- -------- ----------
Total operating performance....... 496,968 393,256 234,199 (51,292) -- 1,073,131
Other operating income............ 7,489 44,566 -- -- -- 52,055
Goods and services purchased...... (231,890) (235,899) (111,875) 34,910 -- (544,754)
Personnel costs................... (166,629) (125,914) (92,178) 6,874 (8,770)(c) (386,617)
Depreciation and amortization..... (140,812) (198,806) (92,006) 26,684 (398,527)(d) (803,467)
Other operating expenses.......... (284,469) (316,273) (148,736) 45,115 -- (704,363)
Financial expense, net............ (135,964) (248,744) (83,114) (23,623) (1,244)(e) (440,216)
61,197(b)
(8,724)(a)
-------- -------- -------- ------- -------- ----------
Results from ordinary business
activities...................... (455,307) (687,814) (293,710) 38,668 (356,068) (1,754,231)
Taxes............................. 568 5,878 108,582 -- -- 115,028
-------- -------- -------- ------- -------- ----------
Income (loss) after taxes......... (454,739) (681,936) (185,128) 38,668 (356,068) (1,639,203)
Losses applicable to minority
shareholders.................... -- (4,717) 15,782 -- (15,782)(g) (25,635)
(20,918)(f)
-------- -------- -------- ------- -------- ----------
Net loss.......................... (454,739) (686,653) (169,346) 38,668 (392,768) (1,664,838)
======== ======== ======== ======= ======== ==========
(i) This column reflects the deconsolidation adjustments and the recording of
VoiceStream's equity losses for certain Omnipoint operations which were
contributed to CIVS II and CIVS III immediately prior to the Omnipoint
merger with VoiceStream. The joint ventures are owned 49.9% by VoiceStream
and as such have been accounted for under the equity method.
290
306
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 33 Pro Forma Powertel Statement of Operations for the Year Ended December
31, 1999
The table below sets out the adjustments to convert the Powertel U.S. GAAP
and U.S. dollars consolidated income statement derived from the Annual Report on
Form 10-K filed with the SEC for the year ended December 31, 1999 to Deutsche
Telekom's accounting policies under German GAAP and euros.
DECEMBER 31, 1999
------------------------------------------------------------
HISTORICAL GERMAN GAAP PRE-ACQUISITION PRE-ACQUISITION
POWERTEL ADJUSTMENTS POWERTEL POWERTEL
---------- ----------- --------------- ---------------
US $ US $ US $ EUROS
NOTE 34 NOTE 37 NOTE 38
Net revenue................................. 283,411 -- 283,411 266,063
Other owned capitalized costs............... 288 -- 288 270
-------- ------ -------- --------
Total operating performance................. 283,699 -- 283,699 266,333
Other operating income...................... 129,172 88,321(e) 217,493 204,180
Goods and services purchased................ (130,514) -- (130,514) (122,525)
Personnel costs............................. (80,468) -- (80,468) (75,543)
Depreciation and amortization............... (89,180) 1,011(c) (88,397) (82,986)
(228)(d)
Other operating expenses.................... (125,606) (4,989)(e) (130,595) (122,601)
Financial expense, net...................... (108,183) 2,044(c) (106,139) (99,642)
-------- ------ -------- --------
Results from ordinary business activities... (121,080) 86,159 (34,921) (32,784)
Taxes....................................... (3,586) -- (3,586) (3,367)
-------- ------ -------- --------
Income (loss) after taxes................... (124,666) 86,159 (38,507) (36,151)
Losses applicable to minority
shareholders.............................. (9,750) -- (9,750) (9,153)
-------- ------ -------- --------
Net Loss.................................... (134,416) 86,159 (48,257) (45,304)
======== ====== ======== ========
Note 34 Reclassifications
Reclassifications have been made to the VoiceStream, Powertel, Omnipoint
and Aerial historical financial information presented under U.S. GAAP to conform
to Deutsche Telekom's presentation under German GAAP.
As a result of the reclassifications, minority interest and mandatorily
redeemable preferred shares, which are treated as mezzanine under U.S. GAAP and
excluded from shareholders' equity have been included in shareholders' equity
for German GAAP presentation. Additionally, certain immaterial reclassifications
between assets and liabilities have been made.
Note 35 Omnipoint and Aerial Merger Adjustments
The proforma adjustments described below are necessary to effect the
mergers as though they were completed at the beginning of the period.
(a) This adjustment reflects financing expenses that would have been incurred
due to the increase in borrowings related to the total $150 million
investment in Omnipoint made by VoiceStream during 1999 at a market interest
rate of 10.3%. This adjustment assumes that VoiceStream purchased Omnipoint
Series A preferred shares as of January 1, 1999 and incurred interest
expense due to an increase in borrowing to fund the purchase.
(b) This adjustment reverses intercompany interest expense recorded by Aerial as
part of the merger transaction with VoiceStream.
291
307
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(c) The adjustments represent additional costs recorded as a result of
modifications made to stock option agreements for an officer of Omnipoint.
(d) This adjustment represents the amortization of the additional purchase price
allocated to FCC licenses and goodwill of Omnipoint and Aerial offset by a
reduction in depreciation expense as a result of the write-down to fair
value of fixed assets acquired in the Omnipoint and Aerial mergers. FCC
licenses are amortized over a 40 year period and goodwill is amortized over
a 20 year period.
(e) Represents the amortization of the difference between the underlying net
book value of the investments in CIVS II and CIVS III and the fair value
assigned to these investments at the time of the Omnipoint merger. This
difference has been allocated to FCC licenses and goodwill and is being
amortized over 40 years and 20 years, respectively.
(f) These adjustments represent dividends related to Omnipoint 7% convertible
preferred shares which are reflected as minority interest expense by
VoiceStream as a result of the Omnipoint merger.
(g) Represents the elimination of Aerial's historical minority interest loss and
minority interest, resulting from Sonera's conversion of its equity in
Aerial Operating Company to equity in Aerial prior to the Aerial merger.
Note 36 U.S./German GAAP Balance Sheet Adjustments
Accounting principles generally accepted in Germany differ in certain
material respects from those generally accepted in the U.S. The differences
which are material to restating the historical consolidated or combined balance
sheets of VoiceStream, Powertel, Omnipoint and Aerial in Notes 28 and 29 are
described below.
(a) Under U.S. GAAP mark to market adjustments for investments are classified
as available for sale are recorded in other comprehensive income. For
German GAAP investment write-downs are recorded against income.
(b) Under German GAAP, internal software development costs are not capitalized.
This adjustment reverses the costs capitalized and related amortization for
U.S. GAAP purposes.
(c) Under German GAAP, maintenance accruals are recorded for costs to be
incurred in future periods. These accruals were not recorded for U.S. GAAP
purposes.
(d) Under German GAAP, financing costs are expensed as incurred. This
adjustment reverses the deferral and the amortization of financing costs
which are recorded for U.S. GAAP purposes.
(e) Under German GAAP, interest related to construction projects is not
capitalized. Under U.S. GAAP, interest costs are capitalized as part of the
asset being constructed.
(f) Under German GAAP, FCC license amortization commences on the date the
license is acquired. Under U.S. GAAP, amortization of these licenses would
commence upon the license being placed into service. This adjustment
reflects the additional amortization expense and reduction of net book
value of FCC licenses recognized under German GAAP during the
non-operational period of the license.
(g) Under German GAAP, the gain from the Powertel sale-leaseback transaction
would be recognized immediately, whereas under U.S. GAAP, gains on
sale-leaseback transactions can be deferred under certain circumstances.
This adjustment recognizes the gain for German GAAP purposes.
292
308
DEUTSCHE TELEKOM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (CONTINUED)
(VOICESTREAM AND POWERTEL MERGERS)
(IN EUROS, EXCEPT AS OTHERWISE INDICATED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 37 US/German Statement of Operations Adjustments
Accounting principles generally accepted in Germany differ in certain
material respects from those generally accepted in the U.S. The differences
which are material to restating the historical consolidated or combined
statement of operations of VoiceStream, Powertel, Omnipoint and Aerial in Notes
30 to 33.
(a) Under German GAAP, internal software development costs are not capitalized.
This adjustment reverses the costs capitalized and related amortization
costs for U.S. GAAP purposes.
(b) Under German GAAP, financing costs are expensed as incurred. This adjustment
reverses the deferral and related amortization of financing costs which are
recorded for U.S. GAAP purposes.
(c) Under German GAAP, interest is not capitalized related to construction
projects. Under U.S. GAAP interest costs are capitalized as part of the
asset being constructed.
(d) Under German GAAP, license amortization commences on the date the license is
acquired. Under U.S. GAAP, amortization of these licenses would commence
upon the asset being placed into service. This adjustment reflects the
amortization expense recognized under German GAAP during the non-
operational period of the license.
(e) Under German GAAP, the gains from the Powertel sale-leaseback transaction
would be recognized immediately whereas under U.S. GAAP, gains on
sale-leaseback transactions can be deferred under certain circumstances.
These adjustments are to recognize the full gain realized on the sale
leaseback transaction in the period in which the transaction was completed
and reverses the amortization related to the gain in future periods for
German GAAP purposes.
(f) Under U.S. GAAP mark to market and adjustments for investments classified as
available for sale are recorded in other comprehensive income. For German
GAAP investment write-downs are recorded against income. This adjustment
records the write-down to income for German GAAP purposes.
Note 38 Translation of Financial Statements
VoiceStream, Powertel, Omnipoint and Aerial present their financial
statements in U.S. dollars. Deutsche Telekom presents its financial statements
in dollars. The results as restated under German GAAP, have been translated into
euros at the following average rates:
$ EUR
---- -----
12 months to December 31, 1999.............................. 1.00 to 0.939
9 months to September 30, 2000.............................. 1.00 to 1.073
The balance sheet at September 30, 2000 in U.S. dollars as restated under
German GAAP, have been translated into euros at $1.00 to 1.1316 euros.
293
309
VOICESTREAM
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
combine the historical consolidated balance sheets of VoiceStream and Powertel
and statements of operations of VoiceStream, Omnipoint, Aerial and Powertel. The
VoiceStream/Powertel merger is contingent upon the termination of the Deutsche
Telekom/VoiceStream merger. Should the VoiceStream merger with Deutsche Telekom
be consummated, Powertel will also merge with Deutsche Telekom. These financial
statements give effect to the VoiceStream/Powertel merger using the purchase
method of accounting for a business combination.
We derived this information from the audited consolidated financial
statements of VoiceStream, Omnipoint, Aerial and Powertel for the year ended
December 31, 1999, the unaudited consolidated financial statements of
VoiceStream and Powertel for the nine months ended September 30, 2000 and the
unaudited financial statements of Omnipoint and Aerial for the periods ended
February 24, 2000 and May 3, 2000, respectively. This information is only a
summary and you should read it in conjunction with the historical financial
statements and related notes of VoiceStream, Omnipoint, Aerial and Powertel and
other information included in this filing or incorporated by reference.
The unaudited pro forma condensed combined statements of operations for the
year ended December 31, 1999 and the nine months ended September 30, 2000 assume
the VoiceStream mergers with Omnipoint, Aerial and Powertel were effected on
January 1, 1999. The unaudited pro forma condensed combined balance sheet as of
September 30, 2000 gives effect to the VoiceStream/Powertel merger as if it had
occurred on September 30, 2000. The accounting policies of VoiceStream,
Omnipoint, Aerial and Powertel are substantially comparable. Certain
reclassifications have been made to Omnipoint, Aerial and Powertel's historical
presentations to conform to VoiceStream's presentation. These reclassifications
do not materially impact the companies' results of operations or financial
position for the periods presented.
We are providing the unaudited pro forma condensed combined financial
information for illustrative purposes only. The companies may have performed
differently had they always been combined. You should not rely on the pro forma
combined financial information as being indicative of the historical results
that would have been achieved had the companies always been combined or the
future results that the combined companies will experience after the merger.
294
310
VOICESTREAM
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 2000
(IN THOUSANDS)
POWERTEL VOICESTREAM
MERGER AND POWERTEL
VOICESTREAM(1) POWERTEL(2) ADJUSTMENTS PRO FORMA
-------------- ----------- ----------- ------------
ASSETS
Current assets:
Cash and cash equivalents.............. $ 4,107,518 $ 234,189 $ (13,000)(5e) $ 4,328,707
Accounts receivable, net............... 324,028 45,871 -- 369,899
Inventory.............................. 232,033 21,691 -- 253,724
Prepaid expenses and other current
assets............................... 67,630 19,504 -- 87,134
----------- ---------- ---------- -----------
Total current assets............ 4,731,209 321,255 (13,000) 5,039,464
Property and equipment, net.............. 2,497,426 579,060 -- 3,076,486
Goodwill, net............................ 9,022,948 -- 4,000,775(5) 13,023,723
Licensing costs and other intangible
assets, net............................ 1,953,433 392,392 381,135(5) 2,726,960
Investments in and advances to
unconsolidated affiliates.............. 1,167,548 34,458 -- 1,202,006
Other assets............................. 57,089 14,714 -- 71,803
----------- ---------- ---------- -----------
$19,429,653 $1,341,879 $4,368,910 $25,140,442
=========== ========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 172,966 $ 21,493 $ -- $ 194,459
Accrued liabilities.................... 437,998 45,791 -- 483,789
Deferred revenues...................... 42,962 11,898 -- 54,860
Construction accounts payable.......... 154,973 -- -- 154,973
Current portion of long-term debt...... 63,616 28,010 -- 91,626
----------- ---------- ---------- -----------
Total current liabilities....... 872,515 107,192 -- 979,707
----------- ---------- ---------- -----------
Deferred gain on sale of assets.......... 76,707 (76,707)(6) --
Long-term debt (see Note 7).............. 5,031,699 1,203,053 -- 6,234,752
----------- ---------- ---------- -----------
Total long-term liabilities..... 5,031,699 1,279,760 (76,707) 6,234,752
----------- ---------- ---------- -----------
Contingencies (see Note 16)..............
Junior preferred shares.................. 400,963 -- -- 400,963
Convertible redeemable preferred
shares................................. 5,000,000 -- -- 5,000,000
Preferred shares of consolidated
subsidiary............................. 307,446 152,219 (152,219)(5) 307,446
Shareholders' equity:
Common shares and paid-in capital...... 10,224,619 521,476 (521,476)(8) 14,639,739
4,203,559(5)
14,576(10)
196,985(5d)
Deferred compensation.................. (39,019) (816) 816(8) (53,595)
(14,576)(10)
Accumulated other comprehensive loss... (30,793) -- -- (30,793)
Deficit................................ (2,337,777) (717,952) 717,952(8) (2,337,777)
----------- ---------- ---------- -----------
Total shareholders' (deficit)
equity........................ 7,817,030 (197,292) 4,597,836 12,217,574
----------- ---------- ---------- -----------
$19,429,653 $1,341,879 $4,368,910 $25,140,442
=========== ========== ========== ===========
See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
295
311
VOICESTREAM
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OMNIPOINT
AND AERIAL VOICESTREAM, POWERTEL
MERGER OMNIPOINT MERGER
VOICESTREAM(1) OMNIPOINT(3) AERIAL(4) ADJUSTMENTS AND AERIAL POWERTEL(2) ADJUSTMENTS
-------------- ------------ --------- --------------- ------------ ----------- -----------
Revenues:
Subscriber revenues... $ 780,708 $ 34,765 $ 75,155 $ -- $ 890,628 $ 180,812 $ --
Prepaid revenues...... 162,253 38,180 10,052 -- 210,485 116,994 --
Roamer revenues....... 74,174 8,931 5,901 -- 89,006 9,288 --
Equipment revenues.... 177,673 10,272 6,796 -- 194,741 17,941 --
Other revenues........ 77,989 223 -- -- 78,212 391 --
----------- --------- -------- --------- ----------- ---------- ---------
Total
revenues...... 1,272,797 92,371 97,904 -- 1,463,072 325,426 --
----------- --------- -------- --------- ----------- ---------- ---------
Operating expenses:
Cost of service....... 328,818 23,527 32,143 -- 384,488 79,887 --
Cost of equipment
sales............... 317,174 27,520 21,558 -- 366,252 77,046 --
Cost of engineering
services and R&D.... 2,867 2,266 -- -- 5,133 -- --
General and
administrative...... 440,709 49,770 43,550 -- 534,029 71,619 --
Sales and marketing... 502,006 32,762 32,547 -- 567,315 83,680 --
Depreciation and
amortization........ 541,197 33,582 36,585 106,872(13) 718,236 74,981 171,679(9)
Stock based
compensation........ 30,729 -- -- 1,462(12) 32,191 -- 10,911(10)
----------- --------- -------- --------- ----------- ---------- ---------
Total operating
expenses...... 2,163,500 169,427 166,383 108,334 2,607,644 387,213 182,590
----------- --------- -------- --------- ----------- ---------- ---------
Operating loss.......... (890,703) (77,056) (68,479) (108,334) (1,144,572) (61,787) (182,590)
----------- --------- -------- --------- ----------- ---------- ---------
Other income (expense):
Interest and financing
expense, net........ (343,679) (57,138) (8,605) -- (409,422) (102,955) --
Equity in net loss of
unconsolidated
affiliates.......... (96,380) -- -- (4,322)(14) (100,702) -- --
Interest income and
other, net.......... 67,889 2,485 22,747 -- 93,121 17,292 --
Minority share of
loss................ (12,006) -- -- (3,487)(15) (15,493) -- --
----------- --------- -------- --------- ----------- ---------- ---------
Total other
income
(expense)..... (384,176) (54,653) 14,142 (7,809) (432,496) (85,663) --
----------- --------- -------- --------- ----------- ---------- ---------
Net loss................ $(1,274,879) $(131,709) $(54,337) $(116,143) $(1,577,068) $ (147,450) $(182,590)
=========== ========= ======== ========= =========== ========== =========
Basic and diluted pro
forma loss per common
share (see Note 11)...
Weighted average common
shares used in
computing basic and
diluted loss per
common share (see Note
11)...................
ADJUSTED
VOICESTREAM
AND POWERTEL
------------
Revenues:
Subscriber revenues... $ 1,071,440
Prepaid revenues...... 327,479
Roamer revenues....... 98,294
Equipment revenues.... 212,682
Other revenues........ 78,603
-----------
Total
revenues...... 1,788,498
-----------
Operating expenses:
Cost of service....... 464,375
Cost of equipment
sales............... 443,298
Cost of engineering
services and R&D.... 5,133
General and
administrative...... 605,648
Sales and marketing... 650,995
Depreciation and
amortization........ 964,896
Stock based
compensation........ 43,102
-----------
Total operating
expenses...... 3,177,447
-----------
Operating loss.......... (1,388,949)
-----------
Other income (expense):
Interest and financing
expense, net........ (512,377)
Equity in net loss of
unconsolidated
affiliates.......... (100,702)
Interest income and
other, net.......... 110,413
Minority share of
loss................ (15,493)
-----------
Total other
income
(expense)..... (518,159)
-----------
Net loss................ $(1,907,108)
===========
Basic and diluted pro
forma loss per common
share (see Note 11)... $ (7.51)
===========
Weighted average common
shares used in
computing basic and
diluted loss per
common share (see Note
11)................... 255,759
===========
See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
296
312
VOICESTREAM
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OMNIPOINT
AND AERIAL VOICESTREAM, POWERTEL
MERGER OMNIPOINT AND MERGER
VOICESTREAM(1) OMNIPOINT(3) AERIAL(4) ADJUSTMENTS AERIAL POWERTEL(2) ADJUSTMENTS
-------------- ------------ --------- ----------- --------------- ----------- -----------
Revenues:
Subscriber
revenues........... $ 366,802 $ 258,955 $ 192,150 $ -- $ 817,907 $ 238,879 $ --
Roamer revenues...... 9,295 28,838 6,690 -- 44,823 8,799 --
Equipment revenues... 78,025 52,004 30,361 -- 160,390 29,360 --
Other revenues....... 21,407 2,691 -- -- 24,098 -- --
--------- --------- --------- --------- ----------- --------- ---------
Total
revenues..... 475,529 342,488 229,201 -- 1,047,218 277,038 --
--------- --------- --------- --------- ----------- --------- ---------
Operating expenses:
Cost of service...... 114,007 116,788 67,247 -- 298,042 67,287 --
Cost of equipment
sales.............. 136,584 141,492 61,298 -- 339,374 73,526 --
Cost of engineering
services and R&D... -- 4,822 -- -- 4,822 -- --
General and
administrative..... 134,812 161,402 136,677 -- 432,891 95,911 --
Sales and
marketing.......... 211,399 154,142 81,980 -- 447,521 97,077 --
Depreciation and
amortization....... 140,812 172,122 92,007 398,527(13) 803,468 89,180 228,906(9)
Stock based
compensation....... 60,690 6,276 -- 8,770(12) 75,736 -- 14,548(10)
--------- --------- --------- --------- ----------- --------- ---------
Total operating
expenses..... 798,304 757,044 439,209 407,297 2,401,854 422,981 243,454
--------- --------- --------- --------- ----------- --------- ---------
Operating loss......... (322,775) (414,556) (210,008) (407,297) (1,354,636) (145,943) (243,454)
--------- --------- --------- --------- ----------- --------- ---------
Other income (expense):
Interest and
financing expense,
net................ (112,185) (228,534) (22,118) -- (362,837) (107,895) --
Equity in net loss of
unconsolidated
affiliates......... (50,945) (62,433) (314) (1,244)(14) (114,936) -- --
Interest income and
other, net......... 22,442 8,278 (4,891) -- 25,829 129,172 --
Gain on sale of
subsidiary stock... -- 41,013 -- -- 41,013 -- --
Minority share of
loss............... -- -- -- (20,918)(15) (20,918) -- --
--------- --------- --------- --------- ----------- --------- ---------
Total other
income
(expense).... (140,688) (241,676) (27,323) (22,162) (431,849) 21,277 --
--------- --------- --------- --------- ----------- --------- ---------
Net loss before
income
taxes........ (463,463) (656,232) (237,331) (429,459) (1,786,485) (124,666) (243,454)
Income tax benefit... -- 8,250 113,400 -- 121,650 -- --
--------- --------- --------- --------- ----------- --------- ---------
Net loss............... $(463,463) $(647,982) $(123,931) $(429,459) $(1,664,835) $(124,666) $(243,454)
========= ========= ========= ========= =========== ========= =========
Basic and diluted pro
forma loss per common
share (see Note
11)..................
Weighted average common
shares used in
computing basic and
diluted loss per
common share (see
Note 11).............
ADJUSTED
VOICESTREAM
AND POWERTEL
------------
Revenues:
Subscriber
revenues........... $ 1,056,786
Roamer revenues...... 53,622
Equipment revenues... 189,750
Other revenues....... 24,098
-----------
Total
revenues..... 1,324,256
-----------
Operating expenses:
Cost of service...... 365,329
Cost of equipment
sales.............. 412,900
Cost of engineering
services and R&D... 4,822
General and
administrative..... 528,802
Sales and
marketing.......... 544,598
Depreciation and
amortization....... 1,121,554
Stock based
compensation....... 90,284
-----------
Total operating
expenses..... 3,068,289
-----------
Operating loss......... (1,744,033)
-----------
Other income (expense):
Interest and
financing expense,
net................ (470,732)
Equity in net loss of
unconsolidated
affiliates......... (114,936)
Interest income and
other, net......... 155,001
Gain on sale of
subsidiary stock... 41,013
Minority share of
loss............... (20,918)
-----------
Total other
income
(expense).... (410,572)
-----------
Net loss before
income
taxes........ (2,154,605)
Income tax benefit... 121,650
-----------
Net loss............... $(2,032,955)
===========
Basic and diluted pro
forma loss per common
share (see Note
11).................. $ (8.14)
===========
Weighted average common
shares used in
computing basic and
diluted loss per
common share (see
Note 11)............. 251,811
===========
See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
297
313
VOICESTREAM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
Note 1
These columns reflect VoiceStream's consolidated historical balance sheet
and statement of operations as of and for the nine months ended September 30,
2000 and the statement of operations for the year ended December 31, 1999. The
December 31, 1999 statement of operations has been adjusted for interest and
financing expenses that would have been incurred due to the increase in
borrowings related to the total $150 million investment in Omnipoint made by
VoiceStream during 1999 at a market interest rate of 10.3%. This adjustment
assumes that VoiceStream purchased the Omnipoint Series A preferred shares as of
January 1, 1999 and incurred interest expense due to an increase in borrowings
to fund such purchase.
The balance sheet includes the $5 billion investment in VoiceStream
convertible voting preferred shares made by Deutsche Telekom on September 6,
2000. The preferred shares are convertible to VoiceStream common shares at
Deutsche Telekom's option at a price of $160 per share if the proposed merger
between Deutsche Telekom and VoiceStream is terminated. If Deutsche Telekom
converted these preferred shares to VoiceStream common shares, an additional
31,250,000 VoiceStream common shares would have been outstanding. On a pro forma
basis the loss per share would have been as follows:
HISTORICAL
VOICESTREAM VOICESTREAM AND POWERTEL
----------- ------------------------
September 30, 2000................................. $6.14 $6.69
December 31, 1999.................................. $3.58 $7.24
As discussed above, on February 25, 2000 and May 4, 2000, VoiceStream
completed mergers with Omnipoint and Aerial, respectively. Pursuant to the
Omnipoint agreement, VoiceStream exchanged 0.825 of a VoiceStream common share
plus $8.00 in cash for each outstanding Omnipoint common share. Pursuant to the
Aerial agreement, VoiceStream exchanged 0.455 of a VoiceStream common share for
each outstanding Aerial common share.
The components of the purchase price of these merger transactions and the
preliminary allocations are as follows (in thousands):
AERIAL OMNIPOINT
---------- ----------
Consideration and merger costs:
Total value of shares issued in merger.................... $5,703,500 $1,538,000
Cash payments............................................. 113,900 627,000
Fair value of options and warrants converted.............. 6,100 859,000
Fair value of liabilities assumed inclusive of minority
interest............................................... 471,600 3,167,400
Merger related costs...................................... 20,500 19,000
Cook Inlet exchange rights................................ -- 28,000
---------- ----------
Total consideration............................... 6,315,600 6,238,400
Preliminary allocation of purchase price:
Current assets............................................ 93,800 200,300
Property, plant and equipment............................. 363,000 473,000
Investments in unconsolidated affiliates.................. 3,500 679,900
Licenses and other intangibles............................ 550,900 939,000
---------- ----------
Preliminary goodwill.............................. $5,304,400 $3,946,200
========== ==========
298
314
VOICESTREAM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (CONTINUED)
The above allocations reflect the estimated fair value of assets and
liabilities acquired. Some allocations are based on valuations, which have not
been finalized. VoiceStream does not believe that the final purchase price
allocations will produce materially different results than those reflected
above.
Note 2
These columns reflect the Powertel historical consolidated balance sheet
and statement of operations as of and for the nine months ended September 30,
2000 and the statement of operations for the year ended December 31, 1999.
Certain reclassifications have been made to the historical financial
statements of Powertel to conform to VoiceStream's financial statement
presentation. These reclassifications do not materially impact Powertel's
results of operations or financial position.
Note 3
These columns reflect the historical statements of operations of Omnipoint
for the period ended February 24, 2000 and for the year ended December 31, 1999,
respectively, adjusted for the deconsolidation of certain operations that were
contributed to CIVS II and CIVS III immediately prior to the merger with
VoiceStream. These joint ventures are owned 49.9% by VoiceStream and as such
have been accounted for under the equity method.
Certain reclassifications have been made to the historical financial
information for Omnipoint to conform to VoiceStream's financial statement
presentation. These reclassifications do not materially impact Omnipoint's
results of operations.
Note 4
These columns reflect the historical statements of operations of Aerial for
the period ended May 3, 2000 and the year ended December 31, 1999, respectively.
The statements of operations have been adjusted to reflect certain debt
conversions, repayments and equity investments between Aerial, its subsidiary,
Aerial Operating Corporation, its parent, Telephone & Data Systems, and Sonera,
which occurred in connection with the VoiceStream/Aerial merger on May 4, 2000.
Certain reclassifications have been made to the historical financial
information for Aerial to conform to VoiceStream's financial statement
presentation. These reclassifications do not materially impact Aerial's
financial position or results of operations.
Note 5
The VoiceStream/Powertel merger will result in an allocation of the
purchase price to the tangible and intangible assets and liabilities of
Powertel. The transaction is not expected to result in an incremental deferred
tax liability. The allocation reflects the estimated fair value of the assets
and liabilities acquired by VoiceStream based upon information available at the
date of the preparation of the accompanying pro forma condensed combined
financial statements and will be adjusted upon final determination of such fair
values. Management is not aware of any circumstances that would cause the final
purchase price allocation to be significantly different from that which is
reflected in the accompanying pro forma condensed combined balance sheet.
However, the actual purchase price will differ based on any change in
VoiceStream's common share price on the actual measurement date and the
valuations and allocations may differ from those reflected herein.
299
315
VOICESTREAM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (CONTINUED)
The components of the purchase price of this transaction and the
preliminary allocation are as follows (in thousands, except share data):
Powertel restricted and common shares outstanding(a)........ 31,499
Conversion of Powertel preferred shares and cumulative
dividends to common shares(b)............................. 17,953
----------
Pro forma Powertel shares outstanding....................... 49,452
VoiceStream exchange ratio per share(c)..................... 0.708
----------
Equivalent VoiceStream common shares........................ 35,012
VoiceStream share price(c).................................. $ 120.06
----------
Subtotal.................................................... $4,203,559
Fair value of liabilities of Powertel at September 30,
2000...................................................... 1,310,245
Option/warrant conversion costs(d).......................... 196,985
Merger related costs(e)..................................... 13,000
----------
Total consideration............................... $5,723,789
Preliminary allocation of purchase price:
Fair value of assets of Powertel acquired (excluding FCC
licenses)(f).............................................. (949,487)
Fair value of FCC licenses acquired (net book value of
licenses equal to $392,392)(f)............................ (773,527)
----------
Preliminary goodwill.............................. $4,000,775
==========
---------------
(a) Outstanding Powertel common shares are as of November 15, 2000, the latest
practicable date.
(b) An additional 18.0 million VoiceStream common shares relate to the Powertel
preferred shares and cumulative dividends that will be converted into
VoiceStream common shares as part of the merger.
(c) The exchange ratio of .708 of a VoiceStream common share for each Powertel
share is calculated pursuant to the merger agreement based on the closing
price of VoiceStream common shares on November 15, 2000, the latest
practicable date, at $120.06 per share. Pursuant to the VoiceStream/Powertel
merger agreement, if the average of the closing prices of VoiceStream common
shares on certain days immediately prior to the closing date is less than
$113.33 per share, the conversion factor will be .75. If the closing price
of VoiceStream common shares on those days is greater than $130.77 per
share, the conversion factor will be .65.
For a $10 per share increase in the VoiceStream common share price above the
$130.77 collar, the merger consideration would increase by approximately
$320 million and would also increase annual amortization expense by
approximately $16 million. For a $10 per share decrease in the VoiceStream
share price below the $113.13 collar, the merger consideration would
decrease by approximately $370 million and would also decrease annual
amortization expense by approximately $19 million.
(d) This amount represents the fair value, based on a Black-Scholes valuation,
of VoiceStream options and warrants to be issued in exchange for outstanding
Powertel options and warrants at November 15, 2000, the latest practicable
date. The calculation is based on the number of Powertel options and
warrants outstanding, the exchange ratio as defined above, and the closing
market price of VoiceStream on the Nasdaq Stock Market on that date. The
calculation excludes a portion of the intrinsic value of unvested stock
options for which performance of future service is required, pursuant to the
guidelines of Financial Accounting Standards Board Interpretation Number 44
('FIN 44'), that has been recorded as deferred compensation (see Note 10).
300
316
VOICESTREAM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (CONTINUED)
(e) The estimated merger costs to be incurred by VoiceStream as a result of the
VoiceStream/Powertel merger are as follows (in thousands):
Investment banking fees..................................... $10,000
Legal, accounting and printing fees......................... 3,000
-------
$13,000
=======
(f) The estimated fair market values of the Powertel tangible assets and
licenses acquired are based on preliminary valuation using assumptions we
believe are reasonable, pending finalization of the purchase price
allocation process.
Note 6
This adjustment reflects the reversal of a deferred gain recorded on
Powertel's balance sheet from a sales-leaseback transaction, which occurred in
1999.
Note 7
Certain of the long-term debt agreements of Powertel contain provisions
which require Powertel to offer repayment of outstanding amounts when a change
of control occurs. Additionally, the holders of the debt issued under certain of
these agreements are entitled to a prepayment premium which at March 31, 2001,
would be $7.1 million. The pro forma condensed combined balance sheet assumes
that the lenders will not exercise the offer for Powertel to repay amounts
outstanding, and therefore, no outstanding debt amounts have been reclassified
as current. The aggregate amount of principal maturities (including prepayment
premiums, if any) of Powertel's long-term debt at September 30, 2000, should the
holders accept the offer of repayment would be approximately $1.2 billion. It is
assumed that the offer to repurchase would commence within 30 days of the
completion of the VoiceStream/Powertel merger.
Note 8
This adjustment represents the elimination in consolidation of Powertel's
historical common shares and paid-in capital of $521.5 million, the elimination
of Powertel's historical deferred compensation of approximately $1.0 million and
the elimination of Powertel's historical accumulated deficit of $718.0 million.
Note 9
This adjustment represents the amortization of the additional purchase
price allocated to FCC licenses and goodwill in the VoiceStream/Powertel merger.
Goodwill and FCC licenses acquired in the Powertel merger are amortized over 20
years. Other FCC licenses are amortized over 40 years.
Note 10
Pursuant to FIN 44, VoiceStream has recorded as deferred compensation a
portion of the intrinsic value of the unvested stock options for which future
service is required as deferred compensation in shareholders' equity
(approximately $14.6 million). This balance is being recognized as compensation
expense over the remaining future vesting period of the grants.
301
317
VOICESTREAM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (CONTINUED)
Note 11
The following summarizes the pro forma calculation of loss per share (in
thousands, except per share data):
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
VoiceStream weighted average common shares outstanding.... 178,181 95,708
Conversion of Omnipoint outstanding common shares......... 9,449 46,386
Additional Hutchison investment (includes Omnipoint Series
A preferred share conversion)........................... 1,384 6,793
Conversion of East/West Communications shares............. 280 1,374
Sonera Corporation's $500 million investment (at
$57/share).............................................. 1,787 8,772
Conversion of Aerial shares............................... 24,225 52,325
Conversion of Powertel common and restricted shares....... 22,500 22,500
Conversion of Powertel preferred shares (including
cumulative dividends)................................... 17,953 17,953
----------- -----------
Total weighted average common shares............ 255,759 251,811
=========== ===========
VoiceStream pro forma net loss............................ $(1,907,108) $(2,032,955)
VoiceStream 2.5% convertible junior preferred dividends... (12,973) (17,297)
----------- -----------
Pro forma net loss attributable to common shareholders.... $(1,920,081) $(2,050,252)
=========== ===========
Basic and diluted pro forma loss per common share......... $ (7.51) $ (8.14)
=========== ===========
Note 12
This adjustment represents additional costs recorded as a result of
modifications made to stock option agreements for an officer of Omnipoint.
Note 13
This adjustment represents the amortization of the additional purchase
price allocated to FCC licenses and goodwill of Omnipoint and Aerial, offset by
a reduction in depreciation expense as a result of the write-down to fair value
of fixed assets acquired in the Omnipoint and Aerial mergers. FCC licenses
acquired in the Omnipoint and Aerial merger are amortized over a 40 year period
and goodwill is amortized over a 20 year period.
Note 14
This adjustment represents the amortization of the difference between the
underlying net book value of the investments in CIVS II and CIVS III and the
fair value assigned to these investments at the time of the Omnipoint merger.
This difference has been allocated to FCC licenses and goodwill and is being
amortized over 40 years and 20 years, respectively.
Note 15
This adjustment represents dividends related to Omnipoint 7% convertible
preferred shares which are reflected as minority interest expense by VoiceStream
as a result of the Omnipoint merger.
302
318
VOICESTREAM
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (CONTINUED)
Note 16
As a result of the Omnipoint and Aerial mergers, and potentially the
Deutsche Telekom/VoiceStream merger or the VoiceStream/Powertel merger,
VoiceStream may have to make substantial tax indemnity payments to Western
Wireless. In a spin-off transaction effected on May 3, 1999, Western Wireless
distributed its entire 80.1% interest in VoiceStream's common shares to its
stockholders. Western Wireless will recognize gain as a result of the spin-off,
if the spin-off is considered to be part of a plan or series of related
transactions pursuant to which one or more persons acquire, directly or
indirectly, 50% or more of VoiceStream's common shares, considered under IRS
rules a "prohibited transaction". VoiceStream has agreed to indemnify Western
Wireless on an after-tax basis for any taxes, penalties, interest and various
other expenses incurred by Western Wireless if it is required to recognize such
a gain. The amount of such gain that Western Wireless would recognize would be
equal to the difference between the fair market value of VoiceStream common
shares at the time of the spin-off and Western Wireless' adjusted tax basis in
such shares at the time.
In the absence of direct authority, and although the issue is not free from
doubt, VoiceStream believes that it should be able to establish that the
spin-off and the acquisition of shares pursuant to the mergers, in conjunction
with the related transactions and Hutchison's acquisition of its existing
VoiceStream shares within two years prior to the spin-off, are not pursuant to a
prohibited plan. However, if the IRS were to take the position that a prohibited
plan did occur, the estimated range of possible liability of VoiceStream, not
including interest and penalties, if any, is from zero to $400 million.
303
319
ANNEX A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 23, 2000,
AS AMENDED AND RESTATED AS OF FEBRUARY 8, 2001
AMONG
DEUTSCHE TELEKOM AG,
VOICESTREAM WIRELESS CORPORATION
AND
BEGA, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
A-I
320
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
THE MERGER
Section 1.01. Appointment of Escrow Agent and Formation of Merger Sub..... A-1
Section 1.02. The Merger.................................................. A-2
Section 1.03. The Closing................................................. A-2
Section 1.04. The Merger Exchange......................................... A-2
Section 1.05. Conversion and Exchange of Shares........................... A-3
Section 1.06. Surrender and Payment....................................... A-8
Section 1.07. Permitted Stock Dividend.................................... A-9
Section 1.08. Treatment of Voicestream Stock Plans........................ A-10
Section 1.09. Fractional DT Depositary Shares and Fractional DT Ordinary
Shares.................................................... A-11
Section 1.10. The Surviving Corporation................................... A-11
Section 1.11. Lost, Stolen or Destroyed Certificates...................... A-11
Section 1.12. Dissenting Shares........................................... A-12
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF VOICESTREAM
Section 2.01. Organization and Qualification; Subsidiaries................ A-12
Section 2.02. Certificate of Incorporation and Bylaws..................... A-13
Section 2.03. Capitalization.............................................. A-13
Section 2.04. Authority Relative to this Agreement, the Stockholders
Agreement and the DT Financing Agreements................. A-14
Section 2.05. No Conflict; Required Filings and Consents.................. A-15
Section 2.06. SEC Filings; Financial Statements........................... A-15
Section 2.07. Absence of Certain Changes or Events........................ A-16
Section 2.08. Litigation.................................................. A-16
Section 2.09. No Violation of Law; Permits................................ A-16
Section 2.10. Information Provided by Voicestream......................... A-16
Section 2.11. Employee Matters; ERISA..................................... A-17
Section 2.12. Labor Matters............................................... A-19
Section 2.13. Environmental Matters....................................... A-19
Section 2.14. Board Action; Vote Required; Applicability of Section 203... A-20
Section 2.15. Opinion of Financial Advisor................................ A-20
Section 2.16. Brokers..................................................... A-20
Section 2.17. Tax Matters................................................. A-20
Section 2.18. Intellectual Property....................................... A-21
Section 2.19. Ownership of Securities..................................... A-21
Section 2.20. Certain Contracts........................................... A-21
Section 2.21. Licenses.................................................... A-22
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DT
Section 3.01. Organization and Qualification; Subsidiaries................ A-22
Section 3.02. Certificate of Incorporation and Bylaws..................... A-22
Section 3.03. Capitalization.............................................. A-23
Section 3.04. Authority Relative to this Agreement........................ A-23
A-II
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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Section 3.05. No Conflict; Required Filings and Consents.................. A-24
Section 3.06. SEC Filings; Financial Statements........................... A-24
Section 3.07. Absence of Certain Changes or Events........................ A-25
Section 3.08. Litigation.................................................. A-25
Section 3.09. No Violation of Law......................................... A-25
Section 3.10. Information Provided by DT.................................. A-25
Section 3.11. Environmental Matters....................................... A-26
Section 3.12. Board Action; Vote Required................................. A-26
Section 3.13. Brokers..................................................... A-26
Section 3.14. Tax Matters................................................. A-26
Section 3.15. Ownership of Securities..................................... A-27
Section 3.16. Certain Contracts........................................... A-27
Section 3.17. Licenses.................................................... A-27
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
Section 4.01. Conduct of Business in the Ordinary Course.................. A-28
Section 4.02. Conduct of Business by DT................................... A-31
Section 4.03. No Solicitation............................................. A-31
Section 4.04. Subsequent Financial Statements............................. A-32
Section 4.05. Control of Operations....................................... A-32
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.01. Voicestream Proxy Statement; the Registration Statement and
the German Listing Prospectus............................. A-32
Section 5.02. Voicestream Stockholders' Meeting and Consummation of the
Merger.................................................... A-33
Section 5.03. Cook Inlet.................................................. A-34
Section 5.04. Notification of Certain Matters............................. A-34
Section 5.05. Access to Information....................................... A-35
Section 5.06. Public Announcements........................................ A-35
Section 5.07. Cooperation................................................. A-35
Section 5.08. Indemnification, Directors' and Officers' Insurance......... A-36
Section 5.09. Stock Exchange Listings/Establishment of DT Depositary
Shares.................................................... A-37
Section 5.10. No Shelf Registration....................................... A-37
Section 5.11. Affiliates.................................................. A-37
Section 5.12. Blue Sky.................................................... A-37
Section 5.13. Tax-Free Merger............................................. A-37
Section 5.14. Interim Dividend Policy..................................... A-38
Section 5.15. Permitted Acquisitions...................................... A-38
Section 5.16. Reasonable Best Efforts..................................... A-39
Section 5.17. Certain Matters............................................. A-39
Section 5.18. Takeover Laws............................................... A-39
Section 5.19. Employee Benefits........................................... A-39
Section 5.20. Certain Employment Matters.................................. A-40
A-III
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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ARTICLE 6
CLOSING CONDITIONS
Section 6.01. Conditions to Each Party's Obligation to Effect the
Merger.................................................... A-40
Section 6.02. Conditions to the Obligations of Voicestream................ A-41
Section 6.03. Conditions to the Obligations of DT......................... A-41
Section 6.04. Pre-Closing Bringdown....................................... A-42
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.01. Termination................................................. A-42
Section 7.02. Effect of Termination....................................... A-43
Section 7.03. Amendment................................................... A-44
Section 7.04. Waiver...................................................... A-44
ARTICLE 8
DEFINITIONS
Section 8.01. Certain Definitions......................................... A-44
Section 8.02. Date of this Agreement; No Waiver........................... A-46
ARTICLE 9
GENERAL PROVISIONS
Section 9.01. Non-Survival of Representations, Warranties and
Agreements................................................ A-47
Section 9.02. Notices..................................................... A-47
Section 9.03. Expenses.................................................... A-48
Section 9.04. Headings.................................................... A-48
Section 9.05. Severability................................................ A-48
Section 9.06. Entire Agreement; No Third-Party Beneficiaries.............. A-48
Section 9.07. Assignment.................................................. A-48
Section 9.08. Governing Law............................................... A-49
Section 9.09. Submission to Jurisdiction; Waivers......................... A-49
Section 9.10. Waiver of Immunity.......................................... A-49
Section 9.11. Counterparts................................................ A-49
A-IV
323
INDEX OF DEFINED TERMS
2
2 1/2% Convertible Preferred
Shares............................. A-9
7
7% Convertible Preferred Shares...... A-9
7% Convertible Preferred Shares
Trust.............................. A-9
A
Acquisitions......................... A-49
Adjusted Aggregate Cash Amount....... A-6
Adjustment Factor.................... A-6
Affiliate............................ A-58
Aggregate Cash Amount................ A-4
Agreement............................ A-58
Alternative Transaction.............. A-41
Auction.............................. A-50
Available Cash Amount................ A-5
B
Base Amount.......................... A-6
Bid Schedule......................... A-50
Bringdown Date....................... A-55
Burdensome Conditions................ A-53
Business Day......................... A-58
C
Cash Adjustment...................... A-6
Cash Consideration................... A-4
Cash Election........................ A-5
Cash Election Amount................. A-5
Cash Election Base Amount............ A-6
Cash Election Difference............. A-6
Cash Fraction........................ A-5
Certificate.......................... A-4
Certificate of Merger................ A-2
Closing.............................. A-3
Closing Date......................... A-3
Code................................. A-58
Commercial Register.................. A-3
Common Shares Trust.................. A-14
Confidentiality Agreement............ A-41
Control.............................. A-58
controlled by........................ A-58
Cook Inlet Exchange Rights........... A-10
Cook Inlet Joint Ventures............ A-58
Cook Inlet Partners.................. A-58
D
D&O Insurance........................ A-47
Delaware Law......................... A-58
Deposit Agreement.................... A-8
Depositary........................... A-8
Determination Date................... A-6
Dissenting Shares.................... A-15
Dissenting Stockholders Trust........ A-16
DT................................... A-1
DT ADRs.............................. A-8
DT Daily Price....................... A-7
DT Depositary Shares................. A-8
DT Equity Rights..................... A-30
DT Financial Statements.............. A-32
DT Financing Agreements.............. A-59
DT Licenses.......................... A-36
DT Ordinary Shares................... A-4
DT Preferred Shares.................. A-10
DT Required Approvals................ A-32
DT SEC Reports....................... A-32
DT Share Price....................... A-7
DT Subsidiary........................ A-60
DT Termination Date.................. A-55
E
Effective Time....................... A-2
Election............................. A-7
Election Deadline.................... A-8
Election Difference.................. A-6
Environmental Law.................... A-26
ERISA................................ A-22
Escrow Agency Agreement.............. A-2
Escrow Agent......................... A-2
Excess ADSs.......................... A-14
Excess Shares........................ A-14
Exchange Act......................... A-59
Excluded Voicestream Share........... A-4
Exon-Florio.......................... A-59
F
FCC.................................. A-20
Form Election........................ A-4
Form F-4............................. A-42
Fractional Interest.................. A-14
FSE.................................. A-7
G
GAAP................................. A-59
German Act........................... A-3
German Listing Prospectus............ A-59
Governmental or Regulatory
Authority.......................... A-59
H
Hazardous Substances................. A-26
HSR Act.............................. A-59
I
Intellectual Property................ A-28
Investment Interest.................. A-59
IRS.................................. A-23
Index 1
A-V
324
J
Jones Day............................ A-54
K
Knowledge............................ A-59
L
Legal Requirements................... A-21
Letter of Transmittal................ A-11
M
Material Adverse Effect.............. A-59
Merger............................... A-2
Merger Consideration................. A-4
Merger Consideration Recipients...... A-3
Merger Sub Common Stock.............. A-2
Mixed Consideration.................. A-4
Mixed Election....................... A-4
Mixed Election Base Amount........... A-6
Mixed Election Difference............ A-6
N
New Plans............................ A-51
No Election Shares................... A-7
NYSE................................. A-14
O
Old Plans............................ A-51
Ordinary Share Election.............. A-8
Other Joint Ventures................. A-60
P
Parties.............................. A-1
Party................................ A-1
Party Representatives................ A-46
Per Share Cash Amount................ A-4
Permits.............................. A-21
Permitted Swaps...................... A-60
Person............................... A-60
Proposed Acquisition................. A-50
Proposed Acquisition Notice.......... A-50
Proposed Bid Increase................ A-50
R
Record Date.......................... A-19
Redemption........................... A-9
Registration Statement............... A-60
Required Regulatory Approvals........ A-32
Restricted Share Amount.............. A-13
S
Section 2.21 Licenses................ A-28
Securities Act....................... A-60
significant subsidiary............... A-60
Significant Subsidiary............... A-60
Stock Consideration.................. A-4
Stock Election Base Amount........... A-6
Stock Election Difference............ A-6
Stock Election Exchange Ratio........ A-4
Stockholders Agreements.............. A-1
Subsequent Determination............. A-44
Subsidiary........................... A-60
Superior Proposal.................... A-44
Surviving Corporation................ A-2
Surviving Corporation Common Stock... A-8
T
Takeover Laws........................ A-26
Tax.................................. A-60
Tax Returns.......................... A-60
Tax Sharing Agreement................ A-60
Taxes................................ A-60
Telecom Act.......................... A-61
Termination Fee...................... A-57
Third Party.......................... A-41
T-Mobile............................. A-61
U
under common control with............ A-58
V
Voicestream.......................... A-1
Voicestream Acquisition Agreement.... A-44
Voicestream Benefit Plans............ A-22
Voicestream Common Shares............ A-4
Voicestream Contracts................ A-28
Voicestream Employees................ A-51
Voicestream Equity Rights............ A-17
Voicestream Financial Statements..... A-20
Voicestream Intellectual Property.... A-27
Voicestream Option................... A-13
Voicestream Option Amount............ A-13
Voicestream Option Plans............. A-13
Voicestream Plans.................... A-17
Voicestream Proxy Statement.......... A-43
Voicestream Required Approvals....... A-20
Voicestream Restricted Shares........ A-13
Voicestream Rollover Option.......... A-13
Voicestream Rollover Restricted
Share.............................. A-13
Voicestream SEC Reports.............. A-20
Voicestream Stockholder Approval..... A-19
Voicestream Stockholders' Meeting.... A-44
Voicestream Subsidiary............... A-60
Voicestream Termination Date......... A-55
W
Wachtell Lipton...................... A-54
Warrants............................. A-10
Warrants Trust....................... A-10
A-VI
325
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of July 23, 2000, as amended
and restated as of February 8, 2001, among Deutsche Telekom AG, an
AKTIENGESELLSCHAFT organized and existing under the laws of the Federal Republic
of Germany ("DT"), Voicestream Wireless Corporation, a Delaware corporation
("VOICESTREAM"), and Bega, Inc., a Delaware corporation formed by DT ("MERGER
SUB") (each a "PARTY" and, together, the "PARTIES").
WITNESSETH:
WHEREAS, the Management Board (VORSTAND) and the Supervisory Board
(AUFSICHTSRAT) of DT and the Board of Directors of Voicestream have determined
that it is advisable and in the best interests of their respective companies and
stockholders to consummate the strategic combination transaction provided for in
this Agreement, the stock subscription contemplated by the DT Financing
Agreements (as defined below) and the other transactions contemplated hereby in
accordance with the laws of their respective jurisdictions of organization and
have authorized the execution and delivery of this Agreement;
WHEREAS, the Board of Directors of Merger Sub has determined that it is
advisable and in the best interests of Merger Sub and its stockholder to
consummate the strategic combination transaction provided for in this Agreement
and has authorized the execution and delivery of this Agreement, and DT, as
Merger Sub's current sole stockholder, has approved and adopted this Agreement;
WHEREAS, simultaneously with the execution and delivery of this Agreement,
as part of a single overall transaction, and to induce DT to enter into this
Agreement, certain stockholders of Voicestream are each entering into a
Stockholders Agreement (collectively, the "STOCKHOLDERS AGREEMENTS") with DT
dated the date hereof with respect to this Agreement and the Merger (as defined
below);
WHEREAS, simultaneously with the execution and delivery of this Agreement,
as part of a single overall transaction, and to induce Voicestream to enter into
this Agreement, DT is entering into the DT Financing Agreements as defined below
with Voicestream in the form attached hereto as Exhibit C;
WHEREAS, for United States federal income tax purposes the parties intend
that the Merger will qualify (i) as a reorganization within the meaning of
Section 368(a) of the Code (as defined below) and (ii) for an exception to the
general rule of Section 367(a)(1) of the Code; and
WHEREAS, DT and Voicestream desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, DT, Voicestream and Merger Sub hereby
agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.01. Appointment of Escrow Agent and Formation of Merger
Sub. (a) Merger Sub is a corporation incorporated pursuant to Delaware Law and
is a constituent company in the Merger. Except as provided in or contemplated by
the last sentence of Section 1.01(b), DT owns 100 percent of the outstanding
capital stock of Merger Sub.
(b) As promptly as possible following the date hereof, DT shall appoint a
United States bank or trust company or other independent financial institution
in the United States reasonably satisfactory to Voicestream to act, inter alia,
as escrow agent and exchange agent for the Merger and the delivery of the Merger
Consideration (as defined below) to former stockholders of Voicestream and the
other Merger Consideration Recipients (as defined below) (the "ESCROW AGENT").
DT and Voicestream shall enter into
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326
an Escrow Agency Agreement with the Escrow Agent based on the form attached
hereto as Exhibit F but with such changes as Voicestream and DT may agree (the
"ESCROW AGENCY AGREEMENT"), which agreement shall set forth the duties,
responsibilities and obligations of the Escrow Agent consistent with the terms
of this Agreement. Solely to accommodate the transactions described in this
Article I and subject to the terms and conditions of the Escrow Agency
Agreement, one day prior to the Effective Time DT shall cause the Escrow Agent
to be registered, as DT's fiduciary (for the period prior to the Effective Time)
as the record holder of all of the issued and outstanding shares of common
stock, par value $.000001 per share, of Merger Sub (the "MERGER SUB COMMON
STOCK").
SECTION 1.02. The Merger. (a) Upon the terms and subject to the
conditions of this Agreement and in accordance with Delaware Law, on the Closing
Date (as defined below), Voicestream will cause a certificate of merger (the
"CERTIFICATE OF MERGER") to be executed and filed with the Secretary of State of
the State of Delaware and make all other filings or recordings required by
applicable law in connection with the Merger. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware or at such later time as is specified in the
Certificate of Merger in accordance with Delaware Law (the "EFFECTIVE TIME").
(b) Upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time, Merger Sub shall be merged with and into
Voicestream in accordance with Delaware Law (the "MERGER"), whereupon the
separate existence of Merger Sub shall cease, and Voicestream shall be the
surviving corporation in the Merger (the "SURVIVING CORPORATION") and shall
continue to be governed by the laws of the State of Delaware, and the separate
corporate existence of Voicestream, with all its rights, privileges, immunities,
powers and franchises, shall continue unaffected by the Merger except as set
forth in this Article I. The Merger shall have the effects specified in Delaware
Law.
SECTION 1.03. The Closing. On the later of (i) the fifth Business Day (or
such other date as Voicestream and DT may agree) after the last to be fulfilled
or waived of the conditions set forth in Article VI hereof (other than the
conditions contained in Sections 6.02(c), 6.02(d) and 6.03(c) so long as it is
reasonably apparent that such conditions and the condition contained in Section
6.01(b) will be able to be satisfied at the Closing) shall be fulfilled or
waived in accordance with this Agreement, and (ii) May 31, 2001, subject to the
first sentence of Section 1.05(g)(i)(2), the closing of the Merger (the
"CLOSING") shall be held (but only if all of the conditions set forth in Article
VI shall have been satisfied or waived prior to the Effective Time) at such time
as DT and Voicestream shall agree (the "CLOSING DATE") at the offices of Cleary,
Gottlieb, Steen & Hamilton, New York, New York or at such other place or places
as DT and Voicestream may agree.
SECTION 1.04. The Merger Exchange. (a) Upon the terms and subject to the
conditions of this Agreement and the Escrow Agency Agreement, as soon as
possible after the Effective Time, (x) on the Closing Date, the Escrow Agent
shall contribute, for the account of the former stockholders of Voicestream, all
of the issued and outstanding shares of the Surviving Corporation Common Stock
(as defined below) to DT as a transfer in kind, and (y) DT shall deliver the
Merger Consideration to the Escrow Agent for the account of (i) the former
stockholders of Voicestream, (ii) the Dissenting Stockholders Trustee (as
defined in Annex 1.12(a) below), (iii) the Options Trustee (as defined in Annex
1.08(a) below), (iv) the 7% Convertible Preferred Shares Trustee (as defined in
Annex 1.05(n)(2) below), (v) the Cook Inlet Partners Trustee (as defined in
Annex 1.05(p) below)), (vi) the Restricted Shares Trustee (as defined in Annex
1.08(b) below) and (vii) the Warrants Trustee (as defined in Annex 1.05(o))
(collectively, the "MERGER CONSIDERATION RECIPIENTS"). DT and the Escrow Agent
shall effect the foregoing in accordance with Sections 183 et seq. and 203 et
seq. of the German Stock Corporation Act (AKTIENGESETZ) (the "GERMAN ACT") by
registering the increase of the DT stated share capital with the commercial
register (HANDELSREGISTER) for DT (the "COMMERCIAL REGISTER") as soon as
possible after the Effective Time. In the event that, in connection with the
performance of DT's obligations in this Section 1.04(a), on or prior to the
Closing Date the Management Board of DT passes a resolution to increase the
issued capital of DT in accordance with Article 5(2) of the Articles of
Association of DT by such number of shares as is equal to the number of shares
to be delivered as part of the Merger Consideration, and the Supervisory Board
shall have consented thereto,
A-2
327
then (i) the Escrow Agent shall promptly subscribe for such new DT Ordinary
Shares to be issued as part of the Merger Consideration and shall promptly on
the Closing Date make the contribution to DT referred to in the first sentence
of this Section 1.04(a) and (ii) the Management Board and the chairman of the
Supervisory Board shall as soon as possible thereafter file the application for
registration of the implementation of the capital increase with the Commercial
Register, with the effect that on registration of the capital increase in the
Commercial Register, such new DT Ordinary Shares shall by operation of law be
held solely by the Escrow Agent, for delivery to and for the benefit of the
Merger Consideration Recipients. Prior to, and or immediately after or at the
Effective Time, DT shall deposit, or cause to be deposited, with the Escrow
Agent for the benefit of holders of Voicestream Common Shares in accordance with
this Article I, the Aggregate Cash Amount, or, if applicable, the Adjusted
Aggregate Cash Amount. At the Effective Time, the obligations of DT and the
Escrow Agent under this Section 1.04(a) shall be unconditional.
(b) Each share certificate (a "CERTIFICATE") formerly representing any
Voicestream Common Shares (other than Excluded Voicestream Shares (as defined
below) and Dissenting Shares (as defined below)) shall thereafter represent only
the right to receive the Merger Consideration and the right, if any, to receive
pursuant to Section 1.09 cash in lieu of fractional DT Depositary Shares or
fractional DT Ordinary Shares, as applicable, and any dividend or distribution
pursuant to Section 1.06(f), in each case, without interest. The DT Ordinary
Shares and the DT Depositary Shares issued as provided in Section 1.05 shall be
of the same class and shall have the same rights as the currently outstanding DT
Ordinary Shares and the currently outstanding DT Depositary Shares,
respectively.
SECTION 1.05. Conversion and Exchange of Shares. At the Effective Time:
(a) Each share of common stock, par value $0.001 per share, of Voicestream
("VOICESTREAM COMMON SHARES") owned by DT or Voicestream immediately prior to
the Effective Time (each, an "EXCLUDED VOICESTREAM SHARE") shall, by virtue of
the Merger, and without any action on the part of the holder thereof, no longer
be outstanding, be canceled and retired without payment of any consideration
therefor and shall cease to exist.
(b) Subject to the further provisions of this Section 1.05, each
Voicestream Common Share, other than Excluded Voicestream Shares and Dissenting
Shares, issued and outstanding immediately prior to the Effective Time shall by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive: (i) for each Voicestream Common Share in
respect of which an effective Election shall have been made, one of the
following: (A) a combination of $30 in cash (the "PER SHARE CASH AMOUNT") and
3.2 validly issued, fully paid and nonassessable ordinary shares of DT ("DT
ORDINARY SHARES"), subject to adjustment as provided in Section 1.05(g) (the
"MIXED CONSIDERATION"), (B) $200.00 in cash (the "CASH CONSIDERATION"), subject
to proration and/or adjustment as provided in Sections 1.05(e) and (g) or (C)
3.7647 DT Ordinary Shares (the "EXCHANGE RATIO"), subject to proration and/or
adjustment as provided in Sections 1.05(f) and (g) (the "STOCK CONSIDERATION")
and (ii) for each Voicestream Common Share in respect of which no effective
Election has been made for any reason, the Mixed Consideration. The
consideration payable pursuant to this paragraph (b) is referred to herein
collectively as the "MERGER CONSIDERATION".
(c) For purposes of this Section 1.05, "AGGREGATE CASH AMOUNT" shall equal
the product of (1) the Per Share Cash Amount and (2) the total number of
Voicestream Common Shares outstanding immediately prior to the Effective Time.
(d) Mixed Election. Each record holder of Voicestream Common Shares
immediately prior to the Election Deadline who validly makes or is deemed to
have made below a mixed election (a "MIXED ELECTION") shall be entitled to
receive the Mixed Consideration for each of such holder's Voicestream Common
Shares as to which such Mixed Election is made. Mixed Elections shall be made on
a form, mutually acceptable to DT and Voicestream, designed for the purpose of
making Elections (a "FORM ELECTION") accompanied by Certificates for the
Voicestream Common Shares to which such Form of Election relates as provided in
Section 1.05(h) below.
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328
(e) Cash Election. Each record holder of Voicestream Common Shares
immediately prior to the Election Deadline who validly makes a cash election (a
"CASH ELECTION") shall be entitled to receive cash or a combination of cash and
DT Ordinary Shares, solely as provided in clause (i) or (ii) below:
(i) If (A) the product of the number of Voicestream Common Shares as
to which a valid Cash Election is made and the Cash Consideration (such
product being the "CASH ELECTION AMOUNT") exceeds (B) the Aggregate Cash
Amount minus the product of the Per Share Cash Amount and the number of
Voicestream Common Shares as to which a valid Mixed Election (including No
Election Shares) has been made (the amount determined pursuant to this
clause (B) being the "AVAILABLE CASH ELECTION AMOUNT"), then each
Voicestream Common Share as to which a valid Cash Election is made shall be
converted into the right to receive (x) an amount of cash (without
interest) equal to the Cash Consideration multiplied by a fraction, the
numerator of which shall be the Available Cash Election Amount and the
denominator of which shall be the Cash Election Amount (such fraction being
the "CASH FRACTION") and (y) a number of DT Ordinary Shares equal to the
product of (p) the Exchange Ratio and (q) a fraction equal to one minus the
Cash Fraction.
(ii) If the Available Cash Amount equals or exceeds the Cash Election
Amount, each Voicestream Common Share as to which a valid Cash Election is
made shall be converted into the right to receive the Cash Consideration in
cash (without interest).
Cash Elections shall be made on the Form of Election, accompanied by
Certificates for the Voicestream Common Shares to which such Form of Cash
Election relates as provided in Section 1.05(h) below.
(f) Stock Election. Each record holder of Voicestream Common Shares
immediately prior to the Election Deadline who validly makes a stock election (a
"STOCK ELECTION") shall be entitled to receive DT Ordinary Shares or a
combination of cash and DT Ordinary Shares, solely as provided in clause (i) or
(ii) below:
(i) If the Available Cash Election Amount exceeds the Cash Election
Amount, then each Voicestream Common Share as to which a valid Stock
Election is made shall be converted into the right to receive (A) an amount
of cash (without interest) equal to the amount of such excess divided by
the number of Voicestream Common Shares as to which a valid Stock Election
is made and (B) a number of DT Ordinary Shares equal to the product of (x)
the Exchange Ratio and (y) a fraction, the numerator of which shall be $200
minus the amount calculated in clause (A) of this paragraph and the
denominator of which shall be $200.
(ii) If the Cash Election Amount equals or exceeds the Available Cash
Election Amount, each Voicestream Common Share as to which a valid Stock
Election is made shall be converted into the right to receive the number of
DT Ordinary Shares equal to the Exchange Ratio.
(g) Further Adjustments. (i)(1) If necessary to permit the delivery of the
tax opinion referred to in Section 6.02(d), in addition to the adjustments set
forth above, Voicestream shall, after consultation with DT, prior to the
delivery of the tax opinion referred to in Section 6.02(d), reduce (a "CASH
ADJUSTMENT") the Aggregate Cash Amount to such amount (the "ADJUSTED AGGREGATE
CASH AMOUNT") as Voicestream reasonably determines is necessary to permit the
delivery of the tax opinion referred to in Section 6.02(d) and, if Voicestream
makes a Cash Adjustment, DT shall substitute in lieu of such cash DT Common
Shares as set forth in this Section 1.05(g). On the date that is the fifth
Business Day (the "DETERMINATION DATE") prior to the expected Closing Date first
scheduled in accordance with Section 1.03, Voicestream shall reasonably
determine, in consultation with DT, based on information available as of such
date, whether a Cash Adjustment should be made, and if so, shall estimate the
Adjusted Aggregate Cash Amount. Such estimated Adjusted Aggregate Cash Amount
may, in Voicestream's reasonable discretion, after consultation with DT, be
conservatively estimated so as to facilitate the delivery of the tax opinion
referred to in Section 6.02(d) on the previously scheduled Closing Date based on
such estimated Adjusted Aggregate Cash Amount.
(2) If a Cash Adjustment is made after the Determination Date, the
Effective Time and the Closing Date shall be postponed by the minimum number of
days, if any (but not to exceed five (5) Business
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Days with respect to any single postponement), that Voicestream reasonably
determines, in consultation with DT, is necessary for such adjustments to be
properly made, and the Adjusted Aggregate Cash Amount may, in Voicestream's
reasonable discretion, after consultation with DT, be conservatively estimated
so as to facilitate the delivery of the tax opinion referred to in Section
6.02(d) on the postponed Closing Date based on such Adjusted Aggregate Cash
Amount. The Adjusted Aggregate Cash Amount divided by the Aggregate Cash Amount
shall be referred to herein as the "ADJUSTMENT FACTOR".
(ii) In the event the Aggregate Cash Amount is adjusted pursuant to the
first sentence of Section 1.05(g)(i), then the amount of cash that would
otherwise be payable in respect of a Voicestream Common Share subject to a Cash
Election, a Stock Election or a Mixed Election (respectively, a "CASH ELECTION
BASE AMOUNT", "STOCK ELECTION BASE AMOUNT" or "MIXED ELECTION BASE AMOUNT", and
each, a "BASE AMOUNT"), shall be reduced by the difference (respectively, the
"CASH ELECTION DIFFERENCE", the "STOCK ELECTION DIFFERENCE" and the "MIXED
ELECTION DIFFERENCE", and each, an "ELECTION DIFFERENCE") between such Base
Amount and the product of such Base Amount and the Adjustment Factor. In
substitution for the reduction of the cash portion of the Merger Consideration
resulting from the Election Difference,
(1) each share with respect to which a Cash Election shall have been
made shall also receive a number of DT Ordinary Shares equal to the Cash
Election Difference divided by the DT Share Price;
(2) each share with respect to which a Stock Election shall have been
made shall also receive a number of DT Ordinary Shares equal to the Stock
Election Difference divided by the DT Share Price;
(3) each share with respect to which a Mixed Election shall have been
made shall also receive a number of DT Ordinary Shares equal to the Mixed
Election Difference divided by the DT Share Price.
(iii) The term "DT SHARE PRICE" means the average (rounded to the nearest
1/10,000) of the DT Daily Prices for the seven (7) Frankfurt Stock Exchange
("FSE") trading days randomly selected by lot by DT and Voicestream together
from the fifteen consecutive FSE trading days ending on the day prior to the day
on which the relevant Cash Adjustment is made, and the term "DT DAILY PRICE" for
any trading day means the volume weighted average (rounded to the nearest
1/10,000) of the per share trading prices of DT Ordinary Shares on the FSE (in
Euros, as reported by the Frankfurt Stock Exchange Xetra trading system (or such
other source as Voicestream and DT shall agree in writing) on such FSE trading
day, converted into U.S. Dollars at a fixed exchange rate of one Euro to 0.9216
of a U.S. Dollar; provided, that if, prior to such conversion, the DT Share
Price would be less than 33 Euros, then the DT Share Price shall be deemed to be
33 Euros.
(h) Form of Election. To be effective, an Election Form must be properly
completed and signed, and must be received by the Escrow Agent, accompanied by
the Certificates as to which the election is being made in compliance with the
requirements for surrender of Voicestream Common Shares contained in Section
1.06(a) below by the Election Deadline. DT shall have the discretion, which it
may delegate in whole or in part to the Escrow Agent, to determine whether
Election Forms have been properly completed, signed, submitted and revoked and
to disregard immaterial defects in Election Forms. The decision of DT (or the
Escrow Agent) in such matters shall be conclusive and binding. DT and the Escrow
Agent shall make reasonable efforts to notify any Person of any defect in an
Election Form submitted to the Escrow Agent. The Escrow Agent shall also make
all computations contemplated by this Section 1.05(h), and, absent manifest
error, all such computations shall be conclusive and binding on the holders of
Voicestream Common Shares. If DT or the Escrow Agent shall determine that any
purported Cash Election, Stock Election or Mixed Election (any of such
elections, an "ELECTION") was not properly made, the Voicestream Common Shares
subject to such improperly made Election shall be treated as No Election Shares.
Each Voicestream Common Share as to which neither a valid Mixed Election, a
valid Cash Election nor a valid Stock Election is made, including, without
limitation, Voicestream Common Shares issued on exercise, conversion or exchange
of outstanding options, warrants, rights or convertible or exchangeable
securities after the Election Deadline (as defined below) ("NO ELECTION
SHARES"), shall be
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deemed to have made a valid Mixed Election. A record holder need not make the
same election with respect to all of the Voicestream Common Shares held of
record by such holder or represented by a single Certificate.
(i) Election Deadline. DT and Voicestream shall each use its reasonable
best efforts to cause copies of the Election Forms and the Letter of Transmittal
to be mailed to the record holders of Voicestream Common Shares not less than
forty five (45) days prior to the anticipated Effective Time and to make the
Election Forms available promptly to all Persons who become record holders of
Voicestream Common Shares subsequent to the date of such mailing and no later
than the close of business on the second Business Day prior to the Election
Deadline. An Election Form must be received by the Escrow Agent by 5:00 p.m.,
New York City time, on the date (the "ELECTION DEADLINE") that is the fifth
Business Day prior to the first Closing Date scheduled by the parties in
accordance with Section 1.03. All elections may be revoked until the Election
Deadline in writing by the record holders submitting the Election Forms. DT and
Voicestream shall use reasonable efforts to cause a public announcement of the
actual Election Deadline not fewer than five Business Days prior to the Election
Deadline.
(j) Form of Stock Consideration. Any DT Ordinary Shares constituting a
portion of the Merger Consideration shall be delivered to the holders of
Voicestream Common Shares in the form of American depositary shares, each
representing the right to receive one DT Ordinary Share (the "DT DEPOSITARY
SHARES"). The DT Depositary Shares may be evidenced by one or more receipts ("DT
ADRs") issued in accordance with the Deposit Agreement, dated as of November 18,
1996, as amended, among DT, Citibank N.A., as Depositary (the "DEPOSITARY"), and
the holders and beneficial owners from time to time of DT ADRs, as it may be
further amended from time to time (the "DEPOSIT AGREEMENT"). Notwithstanding the
foregoing, each Person who is entitled to receive DT Ordinary Shares as Merger
Consideration shall be entitled, with respect to all or any portion of his
Voicestream Common Shares, to make an unconditional and irrevocable election
(the "ORDINARY SHARE ELECTION") to receive DT Ordinary Shares in lieu of DT
Depositary Shares. The Election Forms and the Letter of Transmittal shall
contain a form of Ordinary Share Election and shall be used by each holder of
Voicestream Common Shares who wishes to make an Ordinary Share Election.
(k) Each share of Merger Sub Common Stock, issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger, and
without any action on the part of the holder thereof, no longer be outstanding,
be cancelled and retired. Immediately following the Effective Time, the
Surviving Corporation shall issue to the Escrow Agent a number of shares of
Common Stock par value $0.000001 per share, of the Surviving Corporation
("SURVIVING CORPORATION COMMON STOCK") equal to the total number of Voicestream
Common Shares outstanding immediately prior to the Merger.
(l) In consideration of the contribution to DT by the Escrow Agent of
Surviving Corporation Common Stock pursuant to Section 1.04(a) hereof, DT shall
issue, in accordance with Section 1.04(a), and deliver to the Escrow Agent, the
maximum number of DT Ordinary Shares (including DT Ordinary Shares underlying DT
Depositary Shares that are to be delivered as part of the Merger Consideration)
that has become payable pursuant to Section 1.05 for delivery to the Merger
Consideration Recipients entitled thereto and shall pay to the Escrow Agent the
Aggregate Cash Amount (or, if applicable, the Adjusted Aggregate Cash Amount)
that has become payable to the Merger Consideration Recipients pursuant to
Section 1.05.
(m) If, between the date of this Agreement and the Effective Time, all of
the outstanding DT Ordinary Shares, or more than 80% of the outstanding DT
Ordinary Shares pursuant to an exchange offer for all outstanding shares, shall
have been changed into or exchanged for a different number of shares or kind of
shares of DT or another corporation or entity owning more than 80% of the DT
Ordinary Shares, or the DT Ordinary Shares outstanding shall have changed, by
reason of any reclassification, split-up, stock-split, reverse stock-split,
stock dividend, stock combination, recapitalization or redenomination of share
capital, merger or similar statutory procedure or pursuant to an exchange offer,
or DT changes the number of DT Ordinary Shares represented by a DT Depositary
Share, then the Exchange Ratio and/or the amount or form of any portion of the
Merger Consideration that would otherwise be payable in DT
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Ordinary Shares and the issuer thereof and other definitions and provisions of
this Agreement dependent thereon or on the market price therefor, shall be
appropriately adjusted.
(n) Preferred Stock. (1) Not later than the third Business Day preceding
the record date for the Voicestream Stockholders' Meeting, each share of 2 1/2%
Convertible Junior Preferred Stock, par value $0.001 per share, of Voicestream
(the "2 1/2% CONVERTIBLE PREFERRED SHARES") shall be converted, in accordance
with paragraphs (i)(i) and (i)(vii) of Section 1 of the Certificate of
Designation of the 2 1/2% Convertible Preferred Shares and the provisions of the
relevant Stockholders Agreement, into Voicestream Common Shares at the
Conversion Rate (as such term is defined in the 2 1/2% Convertible Preferred
Shares Certificate of Designation) in effect on the Conversion Date (as such
term is defined in the 2 1/2% Convertible Preferred Shares Certificate of
Designation).
(2) (A) If the Effective Time does not occur prior to May 1, 2001, at any
time on or after May 1, 2001 until the Effective Time, DT may, in its sole
discretion by giving ten (10) Business Days prior written notice to Voicestream,
but only if permissible at such time under the terms of any indebtedness of
Voicestream or any of its Significant Subsidiaries existing on the date hereof
(including its credit agreement), require Voicestream to (or to cause Omnipoint
Corporation to) issue a notice of redemption (the "REDEMPTION") with respect to
all shares of Omnipoint Corporation 7% Cumulative Convertible Preferred Stock,
par value $0.001 per share (the "7% CONVERTIBLE PREFERRED SHARES"), in
accordance with Sections 5.1(b) and 5.3 of the Certificate of Designation of the
7% Convertible Preferred Shares, at the Redemption Price (as such term is
defined in the 7% Convertible Preferred Shares Certificate of Designation) in
effect on the Redemption Date (as such term is defined in the 7% Convertible
Preferred Shares Certificate of Designation), which Redemption Price shall be
equal to the appropriate Redemption Price per share set forth in Section 5.1(b)
of the Certificate of Designation of the 7% Convertible Preferred Shares, plus
in each case all accrued and unpaid dividends on such 7% Convertible Preferred
Shares (other than previously declared dividends payable to the holder of record
on a prior date) through and including the Redemption Date, whether or not
declared, which shall be due and payable only in cash out of funds of
Voicestream or Omnipoint Corporation legally available for the payment of
dividends, as more fully provided in the 7% Convertible Preferred Shares
Certificate of Designation.
(B) If all the 7% Convertible Preferred Shares have not been redeemed
pursuant to paragraph (A) of this Section 1.05(n)(2) prior to the Effective Time
and upon conversion of any outstanding shares of 7% Convertible Preferred Shares
after the Effective Time, the holders thereof become entitled to DT Ordinary
Shares, such DT Ordinary Shares to which such holder of 7% Convertible Preferred
Shares is entitled will be issued from the 7% Convertible Preferred Shares Trust
described in Annex 1.05(n)(2) (the "7% CONVERTIBLE PREFERRED SHARES TRUST"), and
to the extent holders of 7% Convertible Preferred Shares become entitled to cash
payment after the Effective Time, such cash payment to which such holder of 7%
Convertible Preferred Shares is entitled will be paid by DT.
(3) Any shares of Convertible Voting Preferred Stock held by DT ("DT
PREFERRED SHARES") and any Omnipoint 7% Convertible Preferred Stock outstanding
at the Effective Time shall remain outstanding and shall be unaffected by the
Merger.
(o) Warrants. If all the warrants granted pursuant to the Omnipoint
Corporation Remainder Warrant Certificate dated May 6, 1997 (the "WARRANTS")
shall not have been exercised prior to the Effective Time and any holder of such
Warrants becomes entitled to DT Ordinary Shares after the Effective Time, such
DT Ordinary Shares to which such holder of Warrants is entitled will be issued
from the Warrants Trust described in Annex 1.05(o) (the "WARRANTS TRUST"), and
to the extent any holder of Warrants become entitled to cash payment after the
Effective Time, such cash payment to which such holder of Warrants is entitled
will be paid by DT.
(p) Cook Inlet and Cook Inlet Joint Venture Partners.
(i) To the extent that prior to the Effective Time any of the Cook
Inlet Partners receives Voicestream Common Shares in respect of its rights
to exchange its interest in any of the Cook Inlet Joint Ventures or
Affiliates of such joint ventures (the "COOK INLET EXCHANGE RIGHTS"), such
Cook
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Inlet Partner shall have all the rights with respect to such Voicestream
Common Shares which a Voicestream stockholder has.
(ii) To the extent that any of the Cook Inlet Partners does not
receive Voicestream Common Shares prior to the Effective Time in respect of
its Cook Inlet Exchange Rights, each Cook Inlet Partner shall be entitled
to receive the consideration that such Cook Inlet Partner is entitled to
receive pursuant to the Cook Inlet Exchange Rights. To the extent that, on
or after the Effective Time, a Cook Inlet Partner is entitled to DT
Ordinary Shares, such shares will be delivered from the Cook Inlet Partners
Trust described in Annex 1.05(p) (the "COOK INLET PARTNERS TRUST"), which
shall be in form and substance reasonably satisfactory to DT and
Voicestream and to the extent that such Cook Inlet Partner is entitled to
cash, such cash shall be paid by DT. The consideration payable to a Cook
Inlet Partner pursuant to this clause (ii) shall not constitute Merger
Consideration for the purpose of this Agreement.
(iii) After the date hereof, Voicestream shall use reasonable efforts
to obtain the agreement of SSPCS Corporation to enter into an agreement
relating to its Cook Inlet Exchange Rights in a form substantially similar
to the agreement relating to such matters entered into by Cook Inlet on the
date hereof.
(iv) For purposes of this Section 1.05(p) only, reference to "Cook
Inlet Partner," "Cook Inlet Partners" or "Cook Inlet Joint Ventures" shall
include any entity or entities designated as such by mutual agreement of DT
and Voicestream.
SECTION 1.06. Surrender and Payment. (a) Promptly after the Effective
Time, the Surviving Corporation will send, or will cause the Escrow Agent to
send, to each holder of record as of the Effective Time of Voicestream Common
Shares (other than holders of Excluded Voicestream Shares and Dissenting Shares
and holders of Voicestream Common Shares who made a valid Election with respect
to all their shares), a letter of transmittal which shall specify that the
delivery of Certificates shall be effected, and risk of loss and title shall
pass, only upon proper delivery of a Certificate to the Escrow Agent, and
instructions for use in effecting the surrender to the Escrow Agent of
Certificates in exchange for the Merger Consideration (the "LETTER OF
TRANSMITTAL"). The Letter of Transmittal shall contain such other terms and
conditions as DT and Voicestream may reasonably specify.
(b) Each record holder of any Voicestream Common Shares that have been
converted into a right to receive the consideration set forth in Section 1.05(b)
shall, upon surrender to the Escrow Agent of a Certificate or Certificates,
together with a properly completed Letter of Transmittal covering the
Voicestream Common Shares represented by such Certificate or Certificates,
without further action, be entitled to receive, and the Escrow Agent shall
deliver (and DT shall cause the Escrow Agent to deliver) to each such holder,
subject to Section 1.06(e) below, (i) the number of whole DT Depositary Shares
or DT Ordinary Shares included in the Merger Consideration in respect of such
Voicestream Common Shares, subject to the provisions of Section 1.05, and (ii) a
check in the amount (after giving effect to any required tax withholdings) of
(A) the cash consideration that such holder has the right to receive pursuant to
Section 1.05, plus (B) any cash in lieu of Fractional Interests to be paid
pursuant to Section 1.09, plus (C) any cash dividends or other distributions
that such holder has the right to receive pursuant to Section 1.06(f). Until so
surrendered, each such Certificate shall, after the Effective Time, represent
for all purposes only the right to receive the number of whole DT Depositary
Shares or DT Ordinary Shares, as applicable, to which it is entitled pursuant to
Section 1.05 and the applicable amounts of cash provided in the foregoing clause
(ii) of the preceding sentence.
(c) If any DT Depositary Shares or DT Ordinary Shares are to be delivered
to a Person (as defined below) other than the registered holder of the
Voicestream Common Shares represented by a Certificate or Certificates
surrendered with respect thereto, it shall be a condition to such issuance that
the Certificate or Certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
delivery shall pay to the Escrow Agent any transfer or other taxes required as a
result of such delivery to a Person other than the registered holder of such
Voicestream Common Shares or establish to the satisfaction of the Escrow Agent
that such tax has been paid or is not payable.
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(d) The stock transfer books of Voicestream shall be closed after the close
of trading on the NASDAQ on the Trading Day immediately prior to the Effective
Time, and thereafter there shall be no further registration of transfers of
Voicestream Common Shares that were outstanding prior to the Effective Time,
except that such stock transfer books shall be updated to reflect the Permitted
Stock Dividend (as defined below), if paid after such books are otherwise
closed. After the Effective Time, Certificates presented to the Surviving
Corporation for transfer shall be canceled and exchanged for the consideration
provided for, and in accordance with the procedures set forth, in this Article
I.
(e) Any DT Ordinary Shares issued and delivered in respect of Voicestream
Common Shares pursuant to this Article I, any cash entitled to be received
therefor pursuant to Section 1.05, and any cash in lieu of Fractional Interests
to be paid pursuant to Section 1.09, plus any cash dividend or other
distribution that such holder has the right to receive pursuant to Section
1.06(f) that remains unclaimed by any holder of Voicestream Common Shares six
months after the Effective Time, shall be held by the Escrow Agent (or a
successor agent appointed by DT) or shall be delivered to the Depositary upon
the instruction of DT and held by the Depositary, in either case subject to the
instruction of DT, in an account or accounts designated for such purpose. DT
shall not be liable to any holder of Voicestream Common Shares for any
securities delivered or any amount paid by the Depositary, the Escrow Agent or
its nominee, as the case may be, to a public official which it is so required to
pay under applicable abandoned property laws. Any cash remaining unclaimed by
holders of Voicestream Common Shares five years after the Effective Time (or
such earlier date immediately prior to such time as such cash would otherwise
escheat to or become property of any governmental entity or as is otherwise
provided by applicable Legal Requirements (as defined below)) shall, to the
extent permitted by applicable Legal Requirements, become the property of the
Surviving Corporation or DT, as DT may determine.
(f) No dividends or other distributions nor any voting rights with respect
to securities of DT issuable to the Escrow Agent with respect to Voicestream
Common Shares shall be paid to or exercised by the holder of any unsurrendered
Certificates until such Certificates are surrendered as provided in this
Section. Subject to the effect of applicable Legal Requirements, upon such
surrender, there shall be issued and/or paid to the holder of DT Depositary
Shares or DT Ordinary Shares issued in exchange therefor, without interest and
after giving effect to any required tax withholding, (A) at the time of such
surrender, the dividends or other distributions payable with respect to such DT
Depositary Shares or DT Ordinary Shares with a record date after the Effective
Time and a payment date on or prior to the date of such surrender and not
previously paid and (B) at the appropriate payment date, the dividends or other
distributions payable with respect to such DT Depositary Shares or DT Ordinary
Shares with a record date after the Effective Time but with a payment date
subsequent to such surrender. For purposes of dividends or other distributions
in respect of DT Depositary Shares or DT Ordinary Shares, all DT Depositary
Shares and DT Ordinary Shares to be issued pursuant to the Merger shall be
deemed issued and outstanding as of the Effective Time. Notwithstanding the
foregoing, no dividends or other distributions nor any voting rights with
respect to securities of DT issuable to the Escrow Agent for the account of the
Dissenting Stockholders Trustee, the Option Trustee, the Warrants Trustee, the
7% Convertible Preferred Shares Trustee and the Cook Inlet Partners Shares
Trustee shall be paid to or exercised by any such trustees.
SECTION 1.07. Permitted Stock Dividend. Anything in this Agreement to the
contrary notwithstanding:
(i) Voicestream may declare, and thereafter make, at any time prior to
the Effective Time, a pro rata distribution to the holders of the then
outstanding Voicestream Common Shares of 0.0075 of a Voicestream Common
Share for each Voicestream Common Share outstanding on the record date for
such action (the "PERMITTED STOCK DIVIDEND"), and the conversion or
exercise terms of any VoiceStream Equity Right (as defined below) that by
its terms (as in effect on February 8, 2001 in the case of Voicestream
Equity Rights outstanding on February 8, 2001) adjusts as a result of such
Permitted Stock Dividend (whether automatically, or upon the taking of any
corporate action or action by the board of directors of Voicestream or any
such subsidiary) shall be appropriately adjusted.
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(ii) If the Permitted Stock Dividend is paid on or after the Election
Deadline, then the holder of any Voicestream Common Shares received by
virtue of the Permitted Stock Dividend shall be deemed to have made the
same election with respect to such shares as such holder shall have made,
or shall have been deemed to have made, with respect to a majority of the
Voicestream Common Shares held by such holder; provided, however, that if
there is no such majority, or no such majority is readily discernible by
the Escrow Agent, such shares shall be deemed to be No Election Shares.
SECTION 1.08. Treatment of Voicestream Stock Plans. (a) Subject to the
consummation of the Merger, immediately prior to the Effective Time, each
outstanding option to purchase Voicestream Common Shares (each, a "VOICESTREAM
OPTION") will be converted (and such Voicestream Option will be extinguished)
into a right to acquire (each, a "VOICESTREAM ROLLOVER OPTION") from the Options
Trust described in Annex 1.08(a) (which shall be in form and substance
reasonably satisfactory to DT and Voicestream) on the same terms and conditions
as were applicable under the Voicestream Option (but taking into account any
changes thereto, including any acceleration thereof, provided for in the option
award or in the Voicestream option plans listed on Schedule 1.08(ii) (the
"VOICESTREAM OPTION PLANS") and applicable to such Voicestream Options by reason
of this Agreement or the transactions contemplated hereby) that number of DT
Ordinary Shares (the "VOICESTREAM OPTION AMOUNT") determined by multiplying the
maximum number of Voicestream Common Shares subject to such Voicestream Option
by the Exchange Ratio, rounded if necessary to the nearest whole DT Ordinary
Share at an exercise price per DT Ordinary Share equal to the exercise price per
Voicestream Common Share in effect with respect to such Voicestream Option
immediately prior to the Effective Time divided by the Exchange Ratio. In order
to implement the conversion of the Voicestream Options described above, the
arrangements set forth in Annex 1.08(a) will be effected at the Effective Time.
In the case of a Voicestream Option which is intended to be an incentive stock
option under Section 422 of the Code, the adjustment in this Section 1.08 shall
be modified if necessary to permit such Voicestream Option to continue to comply
with Section 422 of the Code. Prior to the Effective Time, Voicestream and DT
shall mutually agree to either terminate Voicestream's Employee Stock Purchase
Plan or to convert the options under such plan to Voicestream Rollover Options
under this Section 1.08(a).
(b) Subject to the consummation of the Merger, immediately prior to the
Effective Time, each outstanding award of Voicestream restricted shares that
remains subject to restrictions at the Effective Time (the "VOICESTREAM
RESTRICTED SHARES") will be converted (and such Voicestream Restricted Shares
will be extinguished) into a right to receive (each, a "VOICESTREAM ROLLOVER
RESTRICTED SHARE") from the Restricted Shares Trust described in Annex 1.08(b),
on the same terms and conditions and subject to the same vesting provisions as
were applicable to such award under the Voicestream Plans listed on Schedule
1.08(ii) (but taking into account any changes thereto provided for in the
Voicestream Plans listed on Schedule 1.08(ii)) that number of DT Ordinary Shares
(the "RESTRICTED SHARE AMOUNT") determined by multiplying the number of shares
of Voicestream Common Stock subject to the award by the Exchange Ratio, rounded
if necessary, to the nearest whole DT Ordinary Share. In order to implement the
conversion of the Voicestream Restricted Shares described above, the
arrangements set forth in Annex 1.08(b) will be effected at the Effective Time.
(c) To the extent that any Person would otherwise be entitled to receive a
fraction of a DT Ordinary Share pursuant to this Section 1.08, such fraction
shall be treated in accordance with Section 1.09.
(d) As soon as practicable after the Effective Time, DT shall cause to be
delivered to the holders of Voicestream Options and Voicestream Restricted
Shares appropriate notices setting forth such holders' rights pursuant to the
respective Voicestream Plans and agreements evidencing the grants of such
Voicestream Options and Voicestream Restricted Shares (including that, in
connection with the Merger and to the extent provided by the terms of the
Voicestream Plans and award agreements thereunder, the Voicestream Options
subject to change of control vesting have become fully vested).
(e) No later than the Effective Time, DT shall file or cause to be filed
with the SEC a registration statement on an appropriate form or a post-effective
amendment to a previously filed registration statement under the Securities Act
with respect to the DT Ordinary Shares and DT Depositary Shares which are
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subject to the Voicestream Rollover Options as provided in Section 1.08(a), and
shall use reasonable best efforts to maintain the current status of the
prospectus associated therewith, as well as to comply with any applicable state
securities or "blue sky" laws for so long as such options remain outstanding.
SECTION 1.09. Fractional DT Depositary Shares and Fractional DT Ordinary
Shares. No fraction of a DT Depositary Share or a DT Ordinary Share will be
issued, but each holder of Voicestream Common Shares otherwise entitled to
receive a fraction of a DT Depositary Share or DT Ordinary Share will be
entitled to receive in accordance with the provisions of this Section 1.09 from
the Escrow Agent a cash payment in lieu of such fraction of a DT Depositary
Share or DT Ordinary Share, as applicable, (each a "FRACTIONAL INTEREST")
representing such holder's proportionate interest in the net proceeds from the
sale by the Escrow Agent on behalf of all such holders of the aggregate of the
fractions of DT Depositary Shares and DT Ordinary Shares which would otherwise
be issued ("EXCESS ADSs" and "EXCESS SHARES", respectively). The sale of the
Excess ADSs and the Excess Shares by the Escrow Agent shall be executed on the
New York Stock Exchange, Inc. (the "NYSE") and the FSE, respectively, through
one or more member firms of the NYSE or the FSE, as the case may be, and shall
be executed in round lots to the extent practicable. Until the net proceeds of
such sale or sales have been distributed to the holders of Voicestream Common
Shares otherwise entitled to receive Fractional Interests, the Escrow Agent will
hold such proceeds in trust for such holders of Voicestream Common Shares (the
"COMMON SHARES TRUST"). DT shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation, of the
Escrow Agent incurred in connection with such sale of the Excess ADSs and Excess
Shares. The Escrow Agent shall determine the portion of the Common Shares Trust
to which each holder of Voicestream Common Shares shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the Common
Shares Trust by a fraction, the numerator of which is the amount of Fractional
Interests to which such holder of Voicestream Common Shares is entitled and the
denominator of which is the aggregate amount of Fractional Interests to which
all holders of Voicestream Common Shares are entitled. As soon as practicable
after the determination of the amount of cash, if any, to be paid to holders of
Voicestream Common Shares in lieu of any Fractional Interests, the Escrow Agent
shall make available such amounts to such holders of Voicestream Common Shares
without interest.
SECTION 1.10. The Surviving Corporation. (a) The certificate of
incorporation of Voicestream in effect at the Effective Time shall, by virtue of
the Merger, be amended and restated as of the Effective Time to be identical to
the certificate of incorporation of Merger Sub (except that Article I thereof
shall read: "The name of the Corporation is Voicestream Wireless Corporation")
and, as so amended and restated, shall be the certificate of incorporation of
the Surviving Corporation until amended in accordance with applicable law.
(b) The bylaws of Merger Sub in effect at the Effective Time shall be the
bylaws of the Surviving Corporation until amended in accordance with applicable
law, provided that from and after the Effective Time the bylaws of Merger Sub
shall contain provisions identical to Article VII of the bylaws of Voicestream
as in effect as of the date of this Agreement.
(c) The directors of Merger Sub and the officers of Voicestream immediately
prior to the Effective Time shall be the directors and officers of the Surviving
Corporation, respectively, and such individuals shall serve in such positions
until their successors shall have been duly elected and shall qualify.
SECTION 1.11. Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the holder's
compliance with the replacement requirements established by the Escrow Agent,
including, if necessary, the posting by such Person of a bond in customary
amount as indemnity against any claim that may be made against it with respect
to such Certificate, the Escrow Agent will issue in exchange for such lost,
stolen or destroyed Certificate, the Merger Consideration and any cash payable
in lieu of Fractional Interests and any unpaid dividends or other distributions
deliverable pursuant to Section 1.06(f) in respect of the Voicestream Common
Shares represented by such Certificate pursuant to this Agreement.
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SECTION 1.12. Dissenting Shares. Voicestream Common Shares which are
issued and outstanding immediately prior to the Effective Time and which are
held by a holder who has not voted such shares in favor of the Merger, who shall
have delivered a written demand for appraisal of such shares in the manner
provided by Delaware Law and who shall not have effectively withdrawn or lost
such right to appraisal as of the Effective Time ("DISSENTING SHARES"), shall be
entitled to such rights (but only such rights) as are granted by Section 262 of
the Delaware Law. Each holder of Dissenting Shares who becomes entitled to
payment for such Dissenting Shares pursuant to Section 262 of the Delaware Law
shall receive payment therefor from the Surviving Corporation in accordance with
Delaware Law; provided, however, that (i) if any such holder of Dissenting
Shares shall have failed to establish his entitlement to appraisal rights as
provided in Section 262 of the Delaware Law, (ii) if any holder of Dissenting
Shares shall have effectively withdrawn his demand for appraisal of such Shares
or lost his right to appraisal and payment for his Shares under Section 262 of
the Delaware Law or (iii) if neither any holder of Dissenting Shares nor the
Surviving Corporation shall have filed a petition demanding a determination of
the value of all Dissenting Shares within the time provided for the filing of
such petition in Section 262 of the Delaware Law, such holder shall forfeit the
right to appraisal of such Dissenting Shares and the holder of each such
Dissenting Share shall be deemed to have made a Mixed Election pursuant to
Section 1.05(d) and each such Share shall be converted into the right to receive
the Mixed Consideration pursuant to Section 1.05(d). Voicestream shall give DT
prompt notice of any demands received by Voicestream for appraisal of
Voicestream Common Shares and DT shall have the right to conduct all
negotiations and proceedings with respect to such demands. Except with the prior
written consent of DT, Voicestream shall not make any payment with respect to,
or settle or offer to settle, any such demands. To the extent holders of
Dissenting Shares become entitled to DT Ordinary Shares or cash after the
Effective Time, such DT Ordinary Shares and cash to which such holder of
Dissenting Shares is entitled will be issued from the Dissenting Stockholder
Trust described in Annex 1.12 (the "DISSENTING STOCKHOLDERS TRUST").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF VOICESTREAM
Except as disclosed in the Voicestream SEC Reports filed prior to the date
of this Agreement and except as set forth in the Voicestream disclosure
schedules to this Agreement (it being agreed that disclosure of any item in such
schedules shall be deemed disclosure with respect to any section of this
Agreement to which the relevance of such item is reasonably apparent),
Voicestream hereby represents and warrants as of the date hereof to DT as
follows:
SECTION 2.01. Organization and Qualification; Subsidiaries. Voicestream
and each of its Significant Subsidiaries is a corporation or limited liability
company duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization. Each of the Voicestream
Subsidiaries which is not a Significant Subsidiary and each of the Cook Inlet
Joint Ventures, as listed on Schedule 2.01 hereto, is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, except for such failure which, when taken
together with all other such failures, would not reasonably be expected to have
a Material Adverse Effect on Voicestream. Each of Voicestream, its Significant
Subsidiaries and the Cook Inlet Joint Ventures has the requisite power and
authority and any necessary Permit (as defined below) to own, operate or lease
the properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted, and is duly qualified to do business, and
is in good standing, in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failure which, when taken together with
all other such failures, would not reasonably be expected to have a Material
Adverse Effect on Voicestream. Schedule 2.01 sets forth a list of all
Voicestream Significant Subsidiaries and all entities in which Voicestream has
an Investment Interest and their respective jurisdictions of incorporation or
organization and identifies Voicestream's (direct or indirect) percentage
ownership interest therein.
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SECTION 2.02. Certificate of Incorporation and Bylaws. Voicestream has
heretofore furnished, or otherwise made available, to DT a complete and correct
copy of the Certificate of Incorporation and the Bylaws, each as amended to the
date hereof, of Voicestream and each of its Significant Subsidiaries. Such
Certificates of Incorporation and Bylaws are in full force and effect. Neither
Voicestream, any of its Significant Subsidiaries nor any of the Cook Inlet Joint
Ventures is in violation of any of the provisions of its respective Certificate
of Incorporation or, in any material respect, its Bylaws or similar constituent
documents.
SECTION 2.03. Capitalization. (a) The authorized capital stock of
Voicestream consists solely of (i) 1,000,000,000 Voicestream Common Shares, of
which, as of June 30, 2000, (A) 214,117,711 shares were issued and outstanding,
including the restricted shares listed on Schedule 1.08(ii), (B) no shares were
held in the treasury of Voicestream, (C) 10,173,546 shares were issuable upon
the exercise of options outstanding under the Voicestream option plans listed on
Schedule 2.03(a) hereto (the "VOICESTREAM PLANS"), and (D) 274,844 shares were
issuable upon the exercise of the Warrants, and (ii) 100,000,000 shares of
preferred stock, $0.001 par value, of Voicestream, of which, as of June 30,
2000, 7,606 2 1/2% Convertible Preferred Shares were issued and outstanding and
owned by Hutchison Telecommunications PCS (USA) Limited, which shares, as of the
date hereof, are convertible into 26,227,586 Voicestream Common Shares. The
authorized share capital of Omnipoint Corporation consists solely of (i)
200,000,000 shares of common stock $0.01 par value, of which, as of June 30,
2000 65,000,000 shares were issued and outstanding and owned by Voicestream, and
(ii) 10,000,000 shares of preferred stock, $0.01 par value, of which, as of June
30, 2000 6,355,195 shares of 7% Convertible Preferred Stock were issued and
outstanding, which shares are convertible, as of the date hereof, into 8,425,082
Voicestream Common Shares. Except as set forth in Schedule 2.03 or permitted by
Section 4.01 or as a result of transactions permitted by Section 5.15 and as to
the exchange rights relating to the Cook Inlet Joint Ventures, and except as a
result of the Permitted Stock Dividend, (i) since June 30, 2000, no Voicestream
Common Shares have been issued, except upon the exercise of options or the
Warrants described in the immediately preceding sentence, and (ii) as of June
30, 2000, there are no outstanding Voicestream Equity Rights. For purposes of
this Agreement, "VOICESTREAM EQUITY RIGHTS" means subscriptions, options,
warrants, calls, commitments, agreements, conversion rights, exchange rights or
other rights of any character (contingent or otherwise) to purchase or otherwise
acquire from Voicestream or any of Voicestream's Subsidiaries or any Cook Inlet
Joint Venture at any time any shares of the capital stock or other voting or
non-voting securities of Voicestream. Schedule 2.03 hereto sets forth a complete
and accurate list of all outstanding Voicestream Equity Rights as of June 30,
2000 (provided that, with respect to options, such list need only set forth the
aggregate number of options with weighted average exercise prices at which
grants have been made and need not specify grants by grantee). Since June 30,
2000, no Voicestream Equity Rights have been issued except (1) after the date
hereof, as permitted by Section 4.01, (2) as a result of transactions permitted
by Section 5.15 hereof (or as would have been permitted had this Agreement been
in effect from June 30, 2000), (3) the DT Preferred Shares, (4) or the
restricted shares set forth on Schedule 1.08(ii) and (5) any increases in any
existing Voicestream Equity Rights arising from antidilution or similar
adjustments resulting from the payment of the Permitted Stock Dividend, which
increases, in the aggregate, will not, on the date the Permitted Stock Dividend
is declared and on the date it is paid, increase the aggregate number of
Voicestream Common Shares subject to Voicestream Equity Rights by more than
0.75%.
(b) Except as set forth on Schedule 2.03(b), there are no outstanding
obligations of Voicestream or any of Voicestream's Subsidiaries or any Cook
Inlet Joint Venture to repurchase, redeem or otherwise acquire any shares of
capital stock of Voicestream, except those arising after the date hereof, as
permitted by Section 4.01.
(c) All of the issued and outstanding Voicestream Common Shares are validly
issued, fully paid and nonassessable.
(d) All the outstanding capital stock of each of Voicestream's Significant
Subsidiaries and each of the Cook Inlet Joint Ventures which is owned by
Voicestream is duly authorized, validly issued, fully paid and nonassessable and
owned by Voicestream or one of its Subsidiaries free and clear of any material
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liens, security interest, pledges, charges or encumbrances except for any liens,
security interest, pledges, charges or encumbrances which are granted to secure
indebtedness. Except as set forth on Schedules 1.08 and 2.03 and as to the
exchange rights relating to the Cook Inlet Joint Ventures, except as hereafter
issued or entered into in accordance with Section 4.01 and except for the DT
Preferred Shares, there are no material existing subscriptions, options,
warrants, calls, commitments, agreements, conversion rights, exchange rights or
other rights of any character (contingent or otherwise) to purchase or otherwise
acquire from Voicestream or any of Voicestream's Significant Subsidiaries or the
Cook Inlet Joint Venture at any time any shares of the capital stock or other
voting or non-voting securities or partnership interests or membership interests
of any Voicestream Significant Subsidiary or any Cook Inlet Joint Venture,
whether or not presently issued or outstanding (except for rights of first
refusal to purchase interests in Subsidiaries which are not wholly owned by
Voicestream and the Cook Inlet Joint Venture), and there are no outstanding
obligations of Voicestream or any of Voicestream's Significant Subsidiaries or
the Cook Inlet Joint Ventures to repurchase, redeem or otherwise acquire any
shares of capital stock or other voting or non-voting securities or partnership
interests or membership interests of Voicestream or any of Voicestream's
Subsidiaries or any Cook Inlet Joint Venture. Except for (i) its Subsidiaries,
(ii) investments of Persons in which Voicestream has less than a five percent
(5%) interest, (iii) equity interests disclosed on Schedules 2.01 and 2.03
hereto or hereafter acquired as permitted under Section 4.01 or as a result of
transactions permitted by Section 5.15 and (iv) the Cook Inlet Joint Ventures
and the Other Joint Ventures, Voicestream does not directly or indirectly own
any equity interest in any other Person except as permitted by Section 4.01 or
as a result of transactions permitted by Section 5.15. Except as a result of
transactions permitted by Section 4.01 or Section 5.15, neither Voicestream nor
any of its Subsidiaries is subject to any material requirement to provide funds
for or to make any investment (in the form of a loan, capital contribution or
otherwise) to or in any Cook Inlet Joint Venture, any Other Joint Venture or any
other non-Affiliated entity.
(e) No bonds, debentures, notes or other indebtedness of Voicestream having
the right to vote on any matters on which stockholders may vote are issued or
outstanding except for any securities issued after the date hereof in accordance
with Section 4.01.
(f) Neither Voicestream nor any of its Subsidiaries or Affiliates nor any
of the Cook Inlet Joint Ventures shall have any obligations or liabilities
arising out of the exercise of the exchange rights relating to the Cook Inlet
Joint Ventures Investment other than (i) the obligation to issue to the Cook
Inlet Partners with respect to each Cook Inlet Joint Venture the number of
Voicestream Common Shares set forth on Schedule 2.03(f) the payment by each Cook
Inlet Joint Venture of the amounts set forth opposite the names of such Cook
Inlet Joint Venture on Schedule 2.03(f) and obligations relating to the
registration, listing and similar matters with respect to the Voicestream Common
Shares and (iii) any obligations or liabilities relating to the management or
operation of or membership in the Cook Inlet Joint Ventures and obligations to
restructure or modify the organizational documents of the Cook Inlet Joint
Ventures.
SECTION 2.04. Authority Relative to this Agreement, the Stockholders
Agreement and the DT Financing Agreements. Voicestream has the necessary
corporate power and authority to enter into this Agreement and the DT Financing
Agreements and, subject to obtaining any necessary stockholder approval of the
Merger and this Agreement, to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the DT Financing
Agreements by Voicestream and the consummation by Voicestream of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Voicestream, subject to the approval
and adoption of this Agreement by a majority of the votes entitled to be cast by
all holders of Voicestream Common Shares and Voicestream Convertible Voting
Preferred Stock outstanding on the record date (the "RECORD DATE") established
for the Voicestream Stockholders Meeting, voting together as a single class
("VOICESTREAM STOCKHOLDER APPROVAL"). This Agreement and the DT Financing
Agreements have been duly executed and delivered by Voicestream and, assuming
the due authorization, execution and delivery thereof by the other Parties
hereto and thereto, constitute legal, valid and binding obligation of
Voicestream, enforceable against it in accordance with their respective terms,
subject to applicable
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bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally and to general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).
SECTION 2.05. No Conflict; Required Filings and Consents. (a) Except as
described in subsection (b) below, the execution and delivery of this Agreement
and the DT Financing Agreements by Voicestream does not, and the performance of
this Agreement and the DT Financing Agreements by Voicestream will not, and, if
the Permitted Stock Dividend is declared or paid, on the date the Permitted
Stock Dividend is declared and the date it is paid, such declaration or payment
(including treatment of fractional shares), as the case may be, will not, (i)
violate or conflict with the Certificate of Incorporation or Bylaws of
Voicestream, (ii) conflict with or violate any law, regulation, court order,
judgment or decree applicable to Voicestream or any of its Significant
Subsidiaries or by which any of their respective property is bound or affected,
(iii) violate or conflict with the Certificate of Incorporation or Bylaws of any
of Voicestream's Subsidiaries or any of the constituent documents of any of the
Cook Inlet Joint Ventures, or (iv) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination or cancellation or
repurchase of, or result in the creation of a lien or encumbrance on any of the
properties or assets of Voicestream or any of its Subsidiaries or any Cook Inlet
Joint Venture pursuant to, or result in the loss of any material benefit or
right, or result in an acceleration of any rights or amounts due resulting from
a change of control or otherwise, or require the consent of any other party to,
any contract, instrument, Permit, license or franchise to which Voicestream or
any of its Significant Subsidiaries or any Cook Inlet Joint Venture is a party
or by which Voicestream, any of such Subsidiaries or any Cook Inlet Joint
Venture or any of their respective property is bound or affected, except, in the
case of clauses (ii), (iii) and (iv) above, for conflicts, violations, breaches,
defaults, rights, results or consents which, individually or in the aggregate,
would not have a Material Adverse Effect on Voicestream, and except that the
consummation of the Merger is conditional upon receipt of the Voicestream
Stockholder Approval.
(b) Except for applicable requirements, if any, of the Federal
Communications Commission (the "FCC"), the Exchange Act, the premerger
notification requirements of the HSR Act, Council Regulation (EEC) No. 4064/89,
if required, filing of a notice pursuant to Sections 721 of Exon-Florio, filing
and recordation of appropriate merger or other documents as required by Delaware
Law and any filings required pursuant to the rules of any applicable stock
exchanges (collectively, the "VOICESTREAM REQUIRED APPROVALS"), neither
Voicestream nor any of its Subsidiaries nor any Cook Inlet Joint Venture is
required to submit any notice, report or other filing with any Governmental or
Regulatory Authority in connection with the execution, delivery or performance
of this Agreement or the DT Financing Agreements. Except as set forth in the
immediately preceding sentence, no waiver, consent, approval or authorization of
any Governmental or Regulatory Authority is required to be obtained by
Voicestream or any of its Subsidiaries or any Cook Inlet Joint Venture in
connection with its execution, delivery or performance of this Agreement or the
DT Financing Agreements.
SECTION 2.06. SEC Filings; Financial Statements. (a) Each of Voicestream
and its Significant Subsidiaries has filed all forms, reports and documents
required to be filed with the SEC since January 1, 1999, together with any
amendments and exhibits thereto, (i) its Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, (ii) all proxy statements relating to
meetings of stockholders (whether annual or special) held since January 1, 1999,
(iii) its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2000 and (iv) all other reports or registration statements filed by each of
Voicestream and its Significant Subsidiaries with the SEC since January 1, 1999
(collectively, the "VOICESTREAM SEC REPORTS"). Taking into account any
amendments and supplements filed prior to the date of this Agreement, the
Voicestream SEC Reports (i) were prepared substantially in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated under each of such respective acts, and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
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(b) The financial statements (the "VOICESTREAM FINANCIAL STATEMENTS"),
including all related notes and schedules, contained in the Voicestream SEC
Reports (or incorporated by reference therein) fairly present the consolidated
financial position of Voicestream and its Subsidiaries as at the respective
dates thereof and the consolidated results of operations and cash flows of
Voicestream and its Subsidiaries, or of Voicestream's Significant Subsidiaries,
as the case may be, for the periods indicated in accordance with GAAP applied on
a consistent basis throughout the periods involved (except as disclosed in the
notes thereto) and subject in the case of interim financial statements to normal
year-end adjustments.
SECTION 2.07. Absence of Certain Changes or Events. Except as permitted
by this Agreement or consented to by DT hereunder, (a) since December 31, 1999,
there has not been any Material Adverse Effect on Voicestream and (b)
Voicestream, its Subsidiaries and the Cook Inlet Joint Ventures, taken as a
whole, have not incurred since December 31, 1999 any material liabilities or
obligations except (i) liabilities or obligations (1) which are accrued or
reserved against in the Voicestream Financial Statements included in
Voicestream's SEC Reports filed prior to the date hereof or reflected in the
notes thereto or (2) which were incurred after December 31, 1999 in the ordinary
course of business and consistent with past practices, (ii) liabilities or
obligations which have been discharged or paid in full prior to the date hereof
in the ordinary course of business, (iii) liabilities and obligations which are
of a nature not required to be reflected in the consolidated financial
statements of Voicestream and its Subsidiaries prepared in accordance with GAAP
and (iv) liabilities and obligations arising after December 31, 1999 which,
individually and in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Voicestream.
SECTION 2.08. Litigation. As of the date hereof, there are no claims,
actions, suits, proceedings or investigations pending or, to Voicestream's
Knowledge, threatened against Voicestream, any of its Subsidiaries or any Cook
Inlet Joint Venture, or any properties or rights of Voicestream, any of its
Subsidiaries or any Cook Inlet Joint Venture, before any Governmental or
Regulatory Authority that would reasonably be expected to result in an adverse
judgment or determination against Voicestream, any of its Subsidiaries or any
Cook Inlet Joint Venture, except for those that are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on Voicestream or
prevent Voicestream from consummating the transactions contemplated by this
Agreement.
SECTION 2.09. No Violation of Law; Permits. The business of Voicestream,
its Subsidiaries and the Cook Inlet Joint Ventures is not being conducted in
violation of any statute, law, ordinance, regulation, judgment, order or decree
of any Governmental or Regulatory Authority (including, without limitation, any
stock exchange or other self-regulatory body) ("LEGAL REQUIREMENTS"), or in
violation of any permits, franchises, licenses, privileges, immunities,
approvals, certificates, orders, authorizations or consents that are granted by
any Governmental or Regulatory Authority (including, without limitation, any
stock exchange or other self-regulatory body) ("PERMITS"), except for violations
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Voicestream. Except as disclosed in the
Voicestream SEC Reports filed prior to the date hereof, as of the date hereof,
no investigation, review or proceeding by any Governmental or Regulatory
Authority (including, without limitation, any stock exchange or other
self-regulatory body) with respect to Voicestream, its Subsidiaries or any Cook
Inlet Joint Venture in relation to any alleged violation of law or regulation is
pending or, to Voicestream's Knowledge, threatened, nor has any Governmental or
Regulatory Authority (including, without limitation, any stock exchange or other
self-regulatory body) indicated in writing an intention to conduct the same,
except for such investigations which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Voicestream. None
of the representations and warranties made in this Section 2.09 are being made
with respect to Environmental Laws (as defined below).
SECTION 2.10. Information Provided by Voicestream. None of the
information supplied or to be supplied by or on behalf of Voicestream for
inclusion or incorporation by reference in the Registration Statement (as
defined below) will, at the time the Registration Statement becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
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they were made, not misleading. None of the information supplied or to be
supplied by or on behalf of Voicestream for inclusion or incorporation by
reference in the Voicestream Proxy Statement (as defined below) will, at the
dates mailed to stockholders and at the times of the Voicestream Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. None of the information supplied or to be supplied by or on behalf
of Voicestream for inclusion or incorporation by reference in the German Listing
Prospectus will, at the time the German Listing Prospectus is published, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the information supplied or to be supplied by or on behalf of Voicestream for
inclusion or incorporation by reference in the auditor's report to be prepared
pursuant to Section 183(3) of the German Act will, at the time the report is
filed with the Commercial Register, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information to be supplied by
or on behalf of Voicestream pursuant to Section 5.07(d) will contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Registration
Statement and the Voicestream Proxy Statement (except for information relating
solely to DT) will comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder.
SECTION 2.11. Employee Matters; ERISA. Except as set forth on Schedule
2.11:
(a) Schedule 2.11 contains a true and complete list of all material
employee benefit plans sponsored or maintained by Voicestream or its
Subsidiaries and covering present or former employees or directors of
Voicestream and of each of its Subsidiaries or their beneficiaries, or providing
benefits to such persons in respect of services provided to any such entity, or
with respect to which Voicestream or any of its Subsidiaries has, or has had, an
obligation to contribute or any other liability, including, but not limited to,
any employee benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), any deferred
compensation, bonus, stock option, restricted stock, incentive, profit sharing,
retirement, savings, medical, health, life insurance, disability, sick leave,
cafeteria or flexible spending, vacation, unemployment compensation, severance
or change in control agreements, arrangements, programs, policies or plans and
any other benefit arrangements or payroll practice (collectively, the
"VOICESTREAM BENEFIT PLANS"), whether funded or unfunded, insured or uninsured,
written or unwritten, true and complete copies of which have been provided to
DT.
(b) Except as would not reasonably be expected to result in a Material
Adverse Effect on Voicestream, all contributions and other payments required to
be made by Voicestream or any of its Subsidiaries to or under any Voicestream
Benefit Plan (or to any person pursuant to the terms thereof) have been made or
the amount of such payment or contribution obligation has been reflected in the
Voicestream Financial Statements.
(c) Each of the Voicestream Benefit Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service (the "IRS") or is a prototype plan
which has received a favorable opinion letter, and, to Voicestream's Knowledge,
no circumstances exist that could reasonably be expected by Voicestream to
adversely affect such qualification, except as would not reasonably be expected
to have a Material Adverse Effect on Voicestream. Except as would not reasonably
be expected to have a Material Adverse Effect on Voicestream, Voicestream is in
compliance in all respects with, and each of the Voicestream Benefit Plans
complies in form with, and is and has been operated in all respects in
compliance with, all applicable Legal Requirements, including, without
limitation, ERISA and the Code. No assets of Voicestream or any of its
Subsidiaries are subject to liens arising under ERISA or the Code on account of
any Voicestream Benefit Plan, neither Voicestream nor any of its Subsidiaries
has been required to provide any security under Section 401(a)(29) or 412(f) of
the Code, or under Section 307 of ERISA, and, to Voicestream's
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Knowledge, no event has occurred that could give rise to any such lien or a
requirement to provide such security.
(d) Except as would not reasonably be expected to have a Material Adverse
Effect on Voicestream, to Voicestream's Knowledge, there does not now exist any
condition or set of circumstances, that could subject Voicestream or any of its
Subsidiaries to any material liability arising under any indemnity agreement to
which Voicestream or any of its Subsidiaries is a party, excluding liability for
benefit claims and funding obligations payable in the ordinary course. No
Voicestream Benefit Plan subject to Title IV of ERISA has terminated, nor has a
"reportable event" (within the meaning of Section 4043 of ERISA) occurred with
respect to any such plan (other than such events with respect to which the
reporting requirement has been waived by regulation).
(e) None of the Voicestream Benefit Plans that are "welfare plans" within
the meaning of Section 3(1) of ERISA provide for any post-employment or retiree
benefits other than continuation coverage required to be provided under Section
4980B of the Code, Part 6 of Title I of ERISA, or applicable state law.
(f) Voicestream has made available to DT a true and correct copy of each
current or last, in the case where there is no current, expired collective
bargaining agreement to which Voicestream or any of its Subsidiaries is a party
or under which Voicestream or any of its Subsidiaries has obligations and copies
of the following documents with respect to each Voicestream Benefit Plan, where
applicable, (i) the plan documents governing such plan and the most recent
summary plan description furnished to employees, (ii) the most recent annual
reports filed with the IRS, (Form 5500-series), including all schedules and
attachments thereto, (iii) each related trust agreement or other funding
arrangement (including all amendments to each such agreement), (iv) the most
recent determination of the IRS with respect to the qualified status of such
Voicestream Benefit Plan, and any currently-pending application for such a
letter, and (v) the most recent actuarial report or valuation.
(g) The consummation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in any (a) payment (whether of severance pay
or otherwise) becoming due from Voicestream or any of its Subsidiaries to any
officer, employee, former employee or director thereof or to the trustee under
any "rabbi trust" or similar arrangement, (b) obligation on the part of
Voicestream or DT to pay any excise tax or any similar tax imposed on any
employee or former employee of Voicestream or its subsidiaries under Section
4999 of the Code or any other similar taxes except as provided in Schedule
4.01(e), (c) benefit under any Voicestream Benefit Plan being established or
becoming accelerated, vested or payable or (d) "reportable event" (as defined in
Section 4043 of ERISA) with respect to a Voicestream Benefit Plan subject to
Title IV of ERISA.
(h) The consummation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in the disqualification of any of the
Voicestream Benefit Plans intended to be qualified under, result in a prohibited
transaction or breach of fiduciary duty under, or otherwise violate, ERISA or
the Code in a manner that would give rise to material liability.
(i) Except as would not reasonably be expected to have a Material Adverse
Effect on Voicestream, neither Voicestream nor any of its Subsidiaries nor any
of their directors, officers, employees or agents, nor any "party in interest"
or "disqualified person", as such terms are defined in Section 3 of ERISA and
Section 4975 of the Code, with respect to any Voicestream Benefit Plan, has
engaged in or been a party to any "prohibited transaction", as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, which is not
otherwise exempt, which could result in the imposition of either a penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of
the Code upon Voicestream or its Subsidiaries, or which could constitute a
breach of fiduciary duty which could result in liability on the part of
Voicestream or any of its Subsidiaries.
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(j) No Voicestream Benefit Plan has incurred any "accumulated funding
deficiency" (as defined in Section 412 of the Code or Part 3 of Title I of
ERISA), whether or not waived. Neither Voicestream nor any of its Subsidiaries
has incurred, and none of such entities reasonably expects to incur, any
material liability to the PBGC with respect to any Voicestream Benefit Plan.
Neither Voicestream nor any of its Subsidiaries is a party to, contributes to,
or is required to contribute to, and neither has incurred or reasonably expects
to incur, any withdrawal liability with respect to, any "multiemployer plan" (as
defined in Section 3(37) of ERISA). No Voicestream Benefit Plan is a "multiple
employer plan", within the meaning of the Code or ERISA.
(k) No employee is entitled to any "reload" options under any of the
Voicestream Benefit Plans.
SECTION 2.12. Labor Matters. As of the date hereof, neither Voicestream
nor any of its Subsidiaries is party to any collective bargaining agreements. As
of the date hereof, there are no labor unions or other organizations
representing or to Voicestream's Knowledge purporting to represent or making
significant or sustained efforts to represent, a significant number of employees
of Voicestream or its Subsidiaries. There is no pending, or, to the knowledge of
Voicestream, threatened labor dispute, strike, work stoppage or other concerted
labor activity against Voicestream or its Subsidiaries which would be reasonably
likely to have a Material Adverse Effect on Voicestream. During the three (3)
year period preceding the date hereof, to the Knowledge of Voicestream, there
have been no significant or sustained efforts to organize activities conducted
by any labor organization or work council or the like with respect to any
employees of Voicestream or its Subsidiaries. Except for any violations, charges
or complaints that would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect on Voicestream, neither Voicestream nor
any of its Subsidiaries has committed any unfair labor practices or violated in
any material respect any applicable employment laws, regulations, ordinances,
rules, orders or decrees in connection with the operation of the respective
businesses of Voicestream and its Subsidiaries and there is no pending or, to
the knowledge of Voicestream, threatened charge, complaint, investigation or
proceeding against Voicestream or its Subsidiaries by or before the National
Labor Relations Board, the Department of Labor, the Equal Employment Opportunity
Commission, the Occupational Health and Safety Administration or any comparable
state or municipal agency by or on behalf of any employee or class of employees
or by or before any governmental agency relating to a purported violation of any
applicable employment laws, regulations, ordinances, rules, orders or decrees.
SECTION 2.13. Environmental Matters. Except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on Voicestream, or would not otherwise require disclosure
pursuant to the Securities Act or Exchange Act, (i) each of Voicestream, its
Subsidiaries and the Cook Inlet Joint Ventures has complied and is in compliance
with all applicable Environmental Laws (as defined below); (ii) the properties
currently owned or operated by it, any of its Subsidiaries or any Cook Inlet
Joint Venture (including soils, groundwater, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances (as defined
below); (iii) to Voicestream's Knowledge, no Hazardous Substances were present,
disposed, released or otherwise deposited on, under, at or from the properties
formerly owned or operated by it, any of its Subsidiaries or any Cook Inlet
Joint Venture during the period of ownership or operation by it, any of its
Subsidiaries or any Cook Inlet Joint Venture; (iv) to Voicestream's Knowledge,
neither it nor any of its Subsidiaries nor any Cook Inlet Joint Venture is
subject to liability for any Hazardous Substance disposal or contamination on
any third party property; (v) neither it nor any of its Subsidiaries nor any
Cook Inlet Joint Venture has received any notice, demand, threat, letter, claim
or request for information alleging that it or any of its Subsidiaries may be in
violation of or liable under any Environmental Law (including any claims
relating to electromagnetic fields or microwave transmissions); and (vi) to
Voicestream's Knowledge, neither it nor any of its Subsidiaries nor any Cook
Inlet Joint Venture is subject to any orders, decrees, injunctions or other
arrangements (other than those of general applicability not specifically related
to Voicestream) with any Governmental or Regulatory Authority or is subject to
any indemnity or other agreement with any third party relating to liability
under any Environmental Law or relating to Hazardous Substances (except for such
agreements entered into by Voicestream in the ordinary course of business).
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"ENVIRONMENTAL LAW" means any federal, state, local, foreign or other law
(including common law), statutes, ordinances or codes relating to: (a) the
protection, investigation or restoration of the environment or natural
resources, (b) the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance, or (c) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to person or property in
connection with any Hazardous Substance.
"HAZARDOUS SUBSTANCES" means any substance that is: listed, classified or
regulated pursuant to any Environmental Law, including any petroleum product or
by-product, asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon.
SECTION 2.14. Board Action; Vote Required; Applicability of Section
203. (a) The Board of Directors of Voicestream has determined that the
transactions contemplated by this Agreement are advisable and in the best
interests of Voicestream and its stockholders and has resolved to recommend to
such stockholders that they vote in favor thereof.
(b) The Voicestream Stockholder Approval is the only vote of the holders of
any class or series of the capital stock of Voicestream required to approve this
Agreement, the Merger and the other transactions contemplated hereby.
(c) Prior to the execution of the Stockholders Agreement and the DT
Financing Agreements, the Board of Directors of Voicestream approved the
transactions contemplated hereby, by the DT Financing Agreements and the
Stockholders Agreement for purposes of Section 203 of the Delaware Law
including, without limitation, approving of DT becoming an "interested
stockholder" as defined in and for the purposes of such Section 203. To
Voicestream's Knowledge, no "moratorium", "control share", "fair price" or other
antitakeover laws and regulations of the State of Delaware or the State of
Washington (collectively, "VOICESTREAM TAKEOVER LAWS") are applicable to the
Merger or the other transactions contemplated by this Agreement, the
Stockholders' Agreement and the DT Financing Agreements.
SECTION 2.15. Opinion of Financial Advisor. Voicestream has received the
opinion of Goldman, Sachs & Co., dated the date hereof, to the effect that, as
of such date, the Merger Consideration is fair from a financial point of view to
the holders of Voicestream Common Shares.
SECTION 2.16. Brokers. Except for Goldman, Sachs & Co., the arrangements
with which have been disclosed to DT prior to the date hereof, no broker, finder
or investment banker is entitled to any brokerage, finder's or investment
banking fee in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Voicestream or any of its
Subsidiaries.
SECTION 2.17. Tax Matters. Except as set forth on Schedule 2.17 and
except to the extent that the failure of the following representations to be
true whether considered individually or in the aggregate would not have a
Material Adverse Effect on Voicestream:
(a) All Tax Returns required to be filed by Voicestream or its
Subsidiaries on or prior to the Effective Time have been or will be timely
filed with the appropriate Governmental or Regulatory Authorities and are
or will be correct in all respects, and all Taxes due by Voicestream or its
Subsidiaries on or prior to the Effective Time have been, or will be,
timely paid;
(b) There are no liens (except for statutory liens for current Taxes
not yet due and payable) against any domestic or foreign assets of
Voicestream or any of its Subsidiaries resulting from any unpaid Taxes;
(c) No audit or other proceeding with respect to Taxes due from
Voicestream or any of its Subsidiaries, or any Tax Return of Voicestream or
any of its Subsidiaries, is pending, threatened in writing, or being
conducted by any Governmental or Regulatory Authority;
(d) Except for complete and accurate copies of tax sharing agreements
and amendments thereto made available to DT prior to the execution of this
Agreement and listed in Schedule 2.17, no agreements relating to the
allocation or sharing of Taxes exist between Voicestream and/or any one of
its Subsidiaries, on the one hand, and a third party, on the other hand;
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(e) No extension of the statute of limitations on the assessment of
any Taxes has been granted by Voicestream or any of its Subsidiaries and is
currently in effect;
(f) Neither Voicestream nor any of its Subsidiaries has taken any
action or knows of any fact that is reasonably likely to (i) prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code or (ii) cause the stockholders of Voicestream,
other than any such stockholder that would be a "five-percent transferee
shareholder" of DT (within the meaning of U.S. Treasury Regulations Section
1.367(a)-3(c)(5)) following the Merger, to recognize gain pursuant to
Section 367(a) of the Code; and
(g) The Tax Sharing Agreement has not been amended or modified (after
May 3, 1999). Voicestream will not amend, modify or terminate the Tax
Sharing Agreement in any material respect without the prior written consent
of DT.
SECTION 2.18. Intellectual Property. Voicestream, its Subsidiaries and
the Cook Inlet Joint Ventures have all right, title and interest in, or a valid
and binding license to use, all Intellectual Property (as defined below) that is
individually or in the aggregate material to the conduct of the businesses of
Voicestream, its Subsidiaries and the Cook Inlet Joint Ventures taken as a whole
("VOICESTREAM INTELLECTUAL PROPERTY") except where the failure to have such
right, title and interest or have the right to use such Intellectual Property
would not reasonably be expected to have a Material Adverse Effect on
Voicestream. Voicestream, its Subsidiaries and the Cook Inlet Joint Ventures (i)
have not defaulted (except defaults that have been waived) in any material
respect under any license to use Voicestream Intellectual Property, and (ii) are
not as of the date hereof the subject of any proceeding or litigation for
infringement of any third party Intellectual Property, other than a default
proceeding or litigation, that is not having or would not be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect on
Voicestream. For purposes of this Agreement, "INTELLECTUAL PROPERTY" means
patents and patent rights, trademarks and trademark rights, trade names and
trade name rights, service marks and service mark rights, copyrights and
copyright rights, trade secret and trade secret rights, and other intellectual
property rights, and all pending applications for and registrations of any of
the foregoing.
SECTION 2.19. Ownership of Securities. As of the date hereof, neither
Voicestream nor to Voicestream's Knowledge any of its Subsidiaries, beneficially
owns, directly or indirectly, or is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of capital stock of DT.
SECTION 2.20. Certain Contracts. All material contracts required to be
filed prior to the date hereof by Voicestream or any Significant Subsidiary
pursuant to Item 601(b)(10) of Regulation S-K have been filed as exhibits to, or
incorporated by reference in, a Voicestream SEC Report filed after December 31,
1999, or in Omnipoint Corporation 's Annual Report on Form 10-K for the year
ended December 31, 1999, or in Aerial Communications, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1999. Except as entered into after the
date hereof in compliance with the terms of this Agreement, Schedule 2.20 (i)
lists all material joint venture or strategic alliance agreements to which
Voicestream or any of its Subsidiaries is a party, Schedule 2.20 (ii) contains a
list of all material agreements that exist between Voicestream and any of its
non-employee Affiliates, Schedule 2.20 (iii) contains a list of all registration
rights agreements that exist in respect of Voicestream Common Shares and
Schedule 2.20 (iv) contains a list of all agreements that have a non-competition
or similar operational restriction applicable to, or could be reasonably
anticipated to be applicable to, and material to, the business of Voicestream
and its Subsidiaries taken as a whole. Taken as a whole, the contracts and
agreements required to be filed by Voicestream with the SEC and referred to in
the first sentence of this Section 2.20, together with the contracts and
agreements required to be set forth on Schedules 2.20 (i) through 2.20 (iv), are
collectively referred to as the "VOICESTREAM CONTRACTS." The Voicestream
Contracts are valid and in full force and effect on the date hereof except to
the extent they have previously expired in accordance with their terms or, to
the extent such invalidity or failure to be in full force and effect would not
have a Material Adverse Effect on Voicestream, and, to Voicestream's Knowledge,
neither Voicestream nor any of its Subsidiaries nor any Cook Inlet Joint Venture
has violated any provision of, or
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committed or failed to perform any act which with or without notice, lapse of
time or both would constitute a default under the provisions of, any Voicestream
Contract, except for defaults which individually and in the aggregate would not
reasonably be expected to result in a Material Adverse Effect on Voicestream.
SECTION 2.21. Licenses. (a) Voicestream, each of its Subsidiaries and
each Cook Inlet Joint Venture are the authorized legal holders or otherwise have
rights to all Permits and licenses and operating rights necessary for the
operation of their businesses as presently operated (collectively, the "SECTION
2.21 LICENSES") and all Section 2.21 Licenses are in full force and effect,
except for such failures to hold or to have such rights or to be in full force
and effect as would not reasonably be expected to have a Material Adverse Effect
on Voicestream. Voicestream and its Subsidiaries and the Cook Inlet Joint
Ventures are each in compliance in all respects with the Communications Act of
1934, as amended, and the rules, regulations and policies of the FCC and all
applicable Governmental or Regulatory Authorities, except for such failure to
comply which would not have a Material Adverse Effect on Voicestream. As of the
date hereof, there is not pending and, to Voicestream's Knowledge, there is not
threatened, any action by or before the FCC or any Governmental or Regulatory
Authority to revoke, suspend, cancel, rescind or modify any of the Section 2.21
Licenses, except for such action or actions which individually and in the
aggregate would not reasonably be expected to have a Material Adverse Effect on
Voicestream. Schedule 2.21 sets forth a complete list of all material Section
2.21 Licenses except for such Section 2.21 Licenses, sold, pledged, disposed of
or encumbered in accordance with Section 4.01(b).
(b) None of the Section 2.21 Licenses issued by the FCC are held directly
by Voicestream but instead are held through one or more Subsidiaries of
Voicestream or one or more Cook Inlet Joint Ventures.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DT
Except as disclosed in the DT SEC Reports filed prior to the date of this
Agreement and except as set forth in the DT disclosure schedules to this
Agreement (it being agreed that disclosure of any item in such schedules shall
be deemed disclosure with respect to any section of this Agreement to which the
relevance of such item is reasonably apparent), (i) DT hereby represents and
warrants as of the date hereof to Voicestream as follows (except to the extent
any of the following relates to Merger Sub), and (ii) Merger Sub hereby
represents and warrants as of September 28, 2000 to Voicestream as follows (but
only to the extent any of the following relates to Merger Sub):
SECTION 3.01. Organization and Qualification; Subsidiaries. DT and each
of its Significant Subsidiaries, as listed on Schedule 3.01 hereto, and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization. Each of DT and
its Subsidiaries has the requisite corporate power and authority and any
necessary Permit to own, operate or lease the properties that it purports to
own, operate or lease and to carry on its business as it is now being conducted,
and is duly qualified to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its activities makes such qualification necessary, except for such
failure which, when taken together with all other such failures, would not
reasonably be expected to have a Material Adverse Effect on DT.
SECTION 3.02. Certificate of Incorporation and Bylaws. DT is an
Aktiengesellschaft organized and existing under the laws of the Federal Republic
of Germany. DT has heretofore furnished, or otherwise made available, to
Voicestream a complete and correct copy of the Memorandum and Articles of
Association (SATZUNG) and Management Board (VORSTAND) Rules of Procedure
(GESCHAFTSORDNUNG), each as amended to the date hereof, of DT. Such Memoranda
and Articles of Association (SATZUNG), Management Board (VORSTAND) Rules of
Procedure (GESCHAFTSORDNUNG), are in full force and effect. DT is not in
violation of any of the provisions of its Memorandum or Articles
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of Association (SATZUNG) or, in any material respect, its Management Board
(VORSTAND) Rules of Procedure (GESCHAFTSORDNUNG).
SECTION 3.03. Capitalization. (a) As of the date hereof, DT's stated
share capital (GRUND KAPITAL) amounts to E7,755,786,327.04 divided into
3,029,604,034 ordinary shares, all of which, as of the date hereof, are issued
and outstanding and not held in the Treasury of DT, and DT's authorized capital
(GENEHMIGTES KAPITAL) available for the issuance of new DT Shares against
contributions in kind amounts to up to E3,865,093,163.52, as set forth in
Section 5 of the Articles of Association of DT. As of the date hereof, 4,969,388
shares were held in the treasury of DT (EIGENE AKTIEN). Except as set forth on
Schedule 3.03, there are no outstanding DT Equity Rights on the date hereof. For
purposes of this Agreement, "DT EQUITY RIGHTS" shall mean subscriptions,
options, warrants, calls, commitments, agreements, conversion rights or other
rights of any character (contingent or otherwise) to purchase or otherwise
acquire from DT or any of DT's Significant Subsidiaries at any time, or upon the
happening of any stated event, any shares of the capital stock or other voting
or non-voting securities of DT.
(b) All of the issued and outstanding capital stock of DT is validly
issued, fully paid and nonassessable. All DT Depositary Shares and DT Ordinary
Shares to be issued as Merger Consideration will be, when issued, validly
issued, fully paid and nonassessable.
(c) Except as disclosed on Schedule 3.03 hereto, all the outstanding
capital stock of each of DT's Significant Subsidiaries which is owned by DT is
duly authorized, validly issued, fully paid and nonassessable, and is owned by
DT free and clear of any liens, security interest, pledges, agreements, claims,
charges or encumbrances except for any liens, security interest, pledges,
agreements, claims, charges or encumbrances which would not, individually or in
the aggregate, have a Material Adverse Effect on DT. Except as set forth on
Schedule 3.03 or, with respect to Merger Sub, as otherwise contemplated by this
Agreement, there are no existing subscriptions, options, warrants, calls,
commitments, agreements, conversion rights or other rights of any character
(contingent or otherwise) to purchase or otherwise acquire from DT or any of
DT's Significant Subsidiaries or Merger Sub at any time, or upon the happening
of any stated event, any shares of the capital stock or other voting or
non-voting securities of any DT Subsidiary or Merger Sub, whether or not
presently issued or outstanding (except for rights of first refusal to purchase
interests in Subsidiaries which are not wholly-owned by DT), and there are no
outstanding obligations of DT or any of DT's Significant Subsidiaries or Merger
Sub to repurchase, redeem or otherwise acquire any shares of capital stock or
other voting or non-voting securities of any of DT's Subsidiaries, other than
such as would not, individually or in the aggregate, have a Material Adverse
Effect on DT. The Merger Sub Common Stock constitutes all of the outstanding
capital stock of Merger Sub, and, except as provided in the last sentence of
Section 1.01(b), DT owns 100 percent of the outstanding capital stock of Merger
Sub.
SECTION 3.04. Authority Relative to this Agreement. (a) DT has the
necessary corporate power and authority to enter into this Agreement, the
Stockholders Agreement and the DT Financing Agreements and to carry out its
obligations hereunder and thereunder. The execution and delivery of this
Agreement, the Stockholders Agreement and the DT Financing Agreements by DT and
the consummation by DT of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of DT,
including by the Management Board (VORSTAND) of DT, and the Supervisory Board
(AUFSICHTSRAT) of DT of this Agreement and the Stockholders Agreement (except
for the determination by the Board of Management which will be made pursuant to
Section 205(2) of the German Act and except for the application to be filed with
the Commercial Register). This Agreement and the Stockholders Agreement have
been duly executed and delivered by DT and, assuming the due authorization,
execution and delivery thereof by the other Parties, constitutes a legal, valid
and binding obligation of DT, enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting the rights and remedies of creditors
generally and to general principles of equity (regardless of whether considered
in a proceeding in equity or at law).
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(b) Merger Sub has the necessary corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution
and delivery of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Sub and its stockholder. This Agreement
has been duly executed and delivered by Merger Sub and, assuming the due
authorization, execution and delivery thereof by the other Parties hereto,
constitutes the legal, valid and binding obligation of Merger Sub, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
the rights and remedies of creditors generally and to general principles of
equity (regardless of whether considered in a proceeding in equity or at law).
SECTION 3.05. No Conflict; Required Filings and Consents. (a) Except as
set forth on Schedule 3.05 or as described in subsection (b) below, the
execution and delivery of this Agreement, the Stockholders Agreement and the DT
Financing Agreements by DT, or, as applicable, by Merger Sub, do not, and the
performance of this Agreement, the Stockholders Agreement and the DT Financing
Agreements by DT, or, as applicable, by Merger Sub, will not, (i) violate or
conflict with the Memorandum and Articles of Association (SATZUNG) or the
Management Board (VORSTAND) Rules of Procedure (GESCHAFTSORDNUNG) of DT, (ii)
conflict with or violate any law, regulation, court order, judgment or decree
applicable to DT, any of its Significant Subsidiaries or Merger Sub or by which
any of their respective property is bound or affected, (iii) violate or conflict
with the Memorandum and Articles of Association (SATZUNG) or the Management
Board (VORSTAND) Rules of Procedure (GESCHAFTSORDNUNG) of any Subsidiaries of DT
or the certificate of incorporation or bylaws of Merger Sub, or (iv) result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of DT or any of its Significant
Subsidiaries or Merger Sub pursuant to, or result in the loss of any material
benefit or right, including the benefit of any standstill agreement, or result
in an acceleration of any rights or amounts due resulting from a change of
control or otherwise, or require the consent of any other party to, any
contract, instrument, Permit, license or franchise to which DT or any of its
Significant Subsidiaries or Merger Sub is a party or by which DT or any of such
Subsidiaries or Merger Sub, or any of their respective property is bound or
affected, except, in the case of clauses (ii), (iii) and (iv) above, for
conflicts, violations, breaches, defaults, rights, results or consents which,
individually or in the aggregate, would not have a Material Adverse Effect on
DT.
(b) Except for applicable requirements, if any, of state, local, or foreign
regulatory laws and commissions, the FCC, the Exchange Act, the premerger
notification requirements of the HSR Act, Council Regulation (EEC) No. 4064/89,
if required, filing of a notice pursuant to Section 721 of Exon-Florio, filing
and recordation of appropriate merger or other documents as required by Delaware
Law and any filings required pursuant to any state securities or "blue sky" laws
or the rules of any applicable stock exchanges (the "DT REQUIRED APPROVALS" and
together with the Voicestream Required Approvals, the "REQUIRED REGULATORY
APPROVALS"), neither DT nor any of its Subsidiaries nor Merger Sub is required
to submit any notice, report or other filing with any Governmental or Regulatory
Authority in connection with the execution, delivery or performance of this
Agreement, the Stockholders Agreement and the DT Financing Agreements, as
applicable. Except as set forth in the immediately preceding sentence, no
waiver, consent, approval or authorization of any Governmental or Regulatory
Authority is required to be obtained by DT or any of its Subsidiaries in
connection with its execution, delivery or performance of this Agreement, the
Stockholders Agreement and the DT Financing Agreements.
SECTION 3.06. SEC Filings; Financial Statements. (a) DT has filed all
forms, reports and documents required to be filed with the SEC since January 1,
1999, and has heretofore made available to Voicestream, in the form filed with
the SEC, together with any amendments and exhibits thereto, (i) its Annual
Report on Form 20-F for the fiscal year ended December 31, 1999, and (ii) all
other reports or registration statements filed by DT with the SEC since January
1, 1999 (collectively, the "DT SEC REPORTS"). The DT SEC Reports (i) were
prepared substantially in accordance with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations
promulgated
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under each of such respective acts, and (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The financial statements (the "DT FINANCIAL STATEMENTS"), including all
related notes and schedules, contained in the DT SEC Reports (or incorporated by
reference therein) fairly present the consolidated financial position of DT and
its Subsidiaries as at the respective dates thereof and the consolidated results
of operations and cash flows of DT and its Subsidiaries for the periods
indicated in accordance with generally accepted accounting principles in Germany
(with a reconciliation to GAAP in accordance with SEC rules) applied on a
consistent basis throughout the periods involved (except for changes as
disclosed in the notes thereto) and subject in the case of interim financial
statements to normal year-end adjustments.
SECTION 3.07. Absence of Certain Changes or Events. Except as permitted
by this Agreement or consented to by Voicestream hereunder, (a) since December
31, 1999, there has not been any Material Adverse Effect on DT, and (b) DT and
its Subsidiaries, taken as a whole, have not incurred since December 31, 1999
any material liabilities or obligations except (i) liabilities or obligations
(1) which are accrued or reserved against in the DT Financial Statements or
reflected in the notes thereto or (2) which were incurred after December 31,
1999 in the ordinary course of business and consistent with past practices, (ii)
liabilities or obligations which have been discharged or paid in full prior to
the date hereof in the ordinary course of business, and (iii) liabilities and
obligations which are of a nature not required to be reflected in the
consolidated financial statements of DT and its Subsidiaries prepared in
accordance with GAAP.
SECTION 3.08. Litigation. As of the date hereof, there are no claims,
actions, suits, proceedings or investigations pending or, to DT's Knowledge,
threatened against DT or any of its Subsidiaries, or any properties or rights of
DT or any of its Subsidiaries, before any Governmental or Regulatory Authority
that would reasonably be expected to result in an adverse judgment or
determination against DT or any of its Subsidiaries, except for those that are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on DT or prevent DT from consummating the transactions
contemplated by this Agreement except as set forth on Schedule 3.08 hereof.
SECTION 3.09. No Violation of Law. The business of DT and its
Subsidiaries is not being conducted in violation of any Legal Requirements or in
violation of any Permits, except for possible violations none of which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on DT. Except as disclosed in DT SEC Reports filed prior
to the date hereof and as set forth on Schedule 3.09 hereto, as of the date
hereof, no investigation, review or proceeding by any Governmental or Regulatory
Authority (including, without limitation, any stock exchange or other self-
regulatory body) with respect to DT or its Subsidiaries in relation to any
alleged violation of law or regulation is pending or, to DT's Knowledge,
threatened, nor has any Governmental or Regulatory Authority (including, without
limitation, any stock exchange or other self-regulatory body) indicated in
writing an intention to conduct the same, except for such investigations which,
if they resulted in adverse findings, would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on DT. None of the
representations and warranties made in this Section 3.09 are being made with
respect to Environmental Laws.
SECTION 3.10. Information Provided by DT. None of the information
supplied or to be supplied by or on behalf of DT for inclusion or incorporation
by reference in the Registration Statement will, at the time the Registration
Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of DT for inclusion or
incorporation by reference in the Voicestream Proxy Statement will, at the date
mailed to stockholders of Voicestream and at the times of the Voicestream
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state
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any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement (except for information relating
solely to Voicestream) will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations promulgated
thereunder. None of the information supplied or to be supplied by or on behalf
of DT for inclusion or incorporation by reference in the German Listing
Prospectus will, at the time the German Listing Prospectus is published, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the information supplied or to be supplied by or on behalf of DT for inclusion
or incorporation by reference in the auditor's report to be prepared pursuant to
Section 183(3) of the German Act will, at the time the report is filed with the
Commercial Register, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statement therein, in light of the circumstances under which they were made, not
misleading.
SECTION 3.11. Environmental Matters. Except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on DT, or would not otherwise require disclosure pursuant to the
Securities Act, or are listed on Schedule 3.11 hereto, (i) each of DT and its
Subsidiaries has complied and is in compliance with all applicable Environmental
Laws (as defined below); (ii) the properties currently owned or operated by it
or any of its Subsidiaries (including soils, groundwater, surface water,
buildings or other structures) are not contaminated with any Hazardous
Substances (as defined below); (iii) to DT's Knowledge, no Hazardous Substances
were present, disposed, released or otherwise deposited on, under, at or from
the properties formerly owned or operated by it or any of its Subsidiaries
during the period of ownership or operation by it or any of its Subsidiaries;
(iv) to DT's Knowledge, neither it nor any of its Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither it nor any of its Subsidiaries has received any
notice, demand, threat, letter, claim or request for information alleging that
it or any of its Subsidiaries may be in violation of or liable under any
Environmental Law (including any claims relating to electromagnetic fields or
microwave transmissions); and (vi) to DT's Knowledge, neither it nor any of its
Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements (other than those of general applicability not specifically related
to DT) with any Governmental or Regulatory Authority or is subject to any
indemnity or other agreement with any third party relating to liability under
any Environmental Law or relating to Hazardous Substances, except for such
agreements entered into by DT in the ordinary course of business.
SECTION 3.12. Board Action; Vote Required. (a) The Management Board
(VORSTAND) and the Supervisory Board (AUFSICHTSRAT) of DT have determined that
the transactions contemplated by this Agreement, the Stockholders Agreement and
the DT Financing Agreements are advisable and in the best interests of DT and
its shareholders.
(b) No vote of holders of any class or series of DT capital stock,
including, without limitation, holders of DT Ordinary Shares or DT Depositary
Shares, is required for the approval or entering into of this Agreement or the
DT Financing Agreements or the consummation of the transactions contemplated
hereby and thereby, including the Merger.
SECTION 3.13. Brokers. Except for Donaldson, Lufkin & Jenrette and
Dresdner Kleinwort Benson, or as indicated in writing to Voicestream on or prior
to February 8, 2001, no broker, finder or investment banker is entitled to any
brokerage, finder's or investment banking fee in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of DT or any of its Subsidiaries.
SECTION 3.14. Tax Matters. Except as set forth on Schedule 3.15 attached
hereto and except to the extent that the failure of the following
representations to be true, whether considered individually or in the aggregate,
would not have a Material Adverse Effect on DT:
(a) All Tax Returns required to be filed by DT or its Subsidiaries on
or prior to the Effective Time have been or will be timely filed with the
appropriate Governmental or Regulatory Authorities
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and are or will be correct in all respects, and all Taxes due by DT or its
Subsidiaries on or prior to the Effective Time have been, or will be,
timely paid;
(b) The assets of DT do not consist wholly or principally of immovable
property situated within Germany within the meaning of Article 13(2)(b) of
the Income Tax Treaty between Germany and the United States;
(c) There are no liens (except for statutory liens for current Taxes
not yet due and payable) against any domestic or foreign assets of DT or
any of its Subsidiaries resulting from any unpaid Taxes;
(d) No audit or other proceeding with respect to Taxes due from DT or
any of its Subsidiaries, or any Tax Return of DT or any of its
Subsidiaries, is pending, threatened in writing, or being conducted by any
Governmental or Regulatory Authority;
(e) No extension of the statute of limitations on the assessment of
any Taxes has been granted by DT or any of its Subsidiaries and is
currently in effect;
(f) Neither DT nor any of its Subsidiaries has taken any action or
knows of any fact that is reasonably likely to (i) prevent or impede the
Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code, or (ii) cause the stockholders of Voicestream, other
than any such stockholder that would be a "five-percent transferee
shareholder" of DT (within the meaning of U.S. Treasury Regulations Section
1.367(a)-3(c)(5)) following the Merger, to recognize gain pursuant to
Section 367(a) of the Code; and
(g) DT is not aware of any German withholding taxes that would be
applicable to any Merger Consideration to be received in the Merger by
Voicestream stockholders other than in their capacity as employees of
Voicestream prior to the Effective Time. Except to the extent required
under the Code, or any provision of state, local or non-U.S. (other than
German) tax law, and in the case of withholding or deduction pursuant to
German tax law, except to the extent required solely as a result of a
change in law, including, without limitation, an administrative action by a
German taxing authority or change, amendment to, or clarification of an
official position or an official interpretation, occurring after the date
of this Agreement, neither the Escrow Agent nor DT will deduct or withhold
any amount on account of Taxes (other than stock transfer, stamp taxes, or
any other similar Taxes) from the consideration otherwise payable pursuant
to this Agreement. To the extent that amounts are so withheld by the Escrow
Agent or DT, as the case may be, such withholdings shall be treated for all
purposes of this Agreement as having been paid to the Shareholders in
respect of which such deduction and withholding was made by the Escrow
Agent or DT, as the case may be.
SECTION 3.15. Ownership of Securities. Except pursuant to the
Stockholders Agreements, the DT Financing Agreements or as set forth on Schedule
3.16, as of the date hereof, neither DT nor, to DT's Knowledge, any of its
Subsidiaries, beneficially owns, directly or indirectly, or is party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of capital stock of Voicestream
(other than shares held by DT Benefit Plans). Except as set forth on Schedule
3.16 hereto, DT owns no shares of Voicestream Common Stock which would
constitute Disqualified Shares.
SECTION 3.16. Certain Contracts. All material contracts required to be
filed by DT pursuant to Item 19(b) of Form 20-F and Instruction B.2 thereto,
have been filed as exhibits to, or incorporated by reference in, a DT SEC Report
filed after December 31, 1999.
SECTION 3.17. Licenses. DT and each of its Subsidiaries are the
authorized legal holders or otherwise have rights to all material Permits and
licenses and operating rights necessary for the operation of their business as
presently operated, except for such failures as would not reasonably be expected
to have a Material Adverse Effect on DT (collectively, the "DT LICENSES"). As of
the date hereof there is not pending and, to DT's Knowledge, there is not
threatened, any action by or before any Governmental or
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Regulatory Authority to revoke, suspend, cancel, rescind or modify in any
material respect any of the DT Licenses which action would reasonably be
expected to have a Material Adverse Effect on DT.
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. Conduct of Business in the Ordinary Course. Voicestream
covenants and agrees with DT that, between the date hereof and the Effective
Time, except as described on Schedule 4.01 or as otherwise expressly
contemplated hereby, the business of Voicestream and its Subsidiaries shall be
conducted only in, and such entities shall not take any action except in, the
ordinary course of business; and Voicestream for itself and on behalf of its
Subsidiaries agrees with DT to use its commercially reasonable efforts to
preserve substantially intact their business organizations, to keep available
the services of those of their present officers, employees and consultants who
are integral to the operation of their businesses as presently conducted and to
preserve their present relationships with significant customers and suppliers
and with other persons with whom they have significant business relations;
provided, however, that no action by Voicestream or its Subsidiaries with
respect to matters specifically addressed by any other provision of this Section
4.01 or Section 5.15 shall be deemed a breach of this sentence unless such
action would constitute a breach of such other provision. Except as set forth on
Schedule 4.01 or as otherwise expressly contemplated by this Agreement
(including Section 1.07), Voicestream agrees with DT, on behalf of itself and
its Subsidiaries, that they will not, between the date hereof and the Effective
Time directly or indirectly, do any of the following without the prior written
consent of DT:
(a) (i) issue, sell, pledge, dispose of, encumber, authorize, or
propose the issuance, sale, pledge, disposition, encumbrance or
authorization of any shares of capital stock of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of capital stock of, or any other ownership interest in, Voicestream
or any of its Subsidiaries, except for (A) the issuance of Voicestream
Common Shares upon exercise of such rights existing on the date hereof in
amounts not exceeding the amounts set forth in Schedule 4.01(a)(i)(A), (B)
grants of stock options with respect to Voicestream Common Shares to
employees or directors, provided such grants shall not exceed 1,500,000
Voicestream Common Shares in the aggregate and, provided further, that the
consummation of the transactions contemplated by this Agreement will not
constitute a change in control with respect to any such newly granted
options, (C) issuances of equity securities in respect of options,
warrants, convertible securities or other rights of any kind to acquire
equity securities of any Person that is the subject of an Acquisition
permitted by Section 5.15, (D) the issuance of securities by a Subsidiary
to any Person which is directly or indirectly wholly owned by Voicestream,
(E) liens granted to secure indebtedness permitted by Section 4.01 or in
connection with Acquisitions permitted by Section 5.15, (F) issuances of
Voicestream Common Shares upon (1) conversion of the 2 1/2% Convertible
Preferred Stock in accordance with the terms of such stock as in effect on
the date hereof, (2) conversion of the 7% Convertible Preferred Shares in
accordance with the terms of such stock as of the date hereof, (3) exercise
of the Warrants in accordance with the terms of such Warrants as in effect
on the date hereof and/or (4) exercise of the Cook Inlet Partners' exchange
rights as in effect on the date hereof; (G) the sale of shares of capital
stock pursuant to the exercise of Voicestream Options if necessary to
effectuate an optionee direction upon exercise or for withholding, (H)
issuance of shares of capital stock under Voicestream's Employee Stock
Purchase Plan which shares are acquired by Voicestream in accordance with
clause (iv)(B); (ii) amend or propose to amend the Certificate of
Incorporation or Bylaws (or other comparable organizational document) or
any certificate of designation of Voicestream, or adopt, amend or propose
to amend any stockholder rights plan or related rights agreement; (iii)
split, combine or reclassify any outstanding shares of Voicestream Common
Shares, or declare, set aside or pay any dividend or distribution payable
in cash, stock, property or otherwise with respect to shares of Voicestream
Common Shares; or (iv) redeem, purchase or otherwise acquire or offer to
redeem, purchase or otherwise acquire any shares of its capital stock,
except that Voicestream shall be permitted to acquire shares of Voicestream
Common Shares, from time to time (A) as permitted by or in accordance with
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Article IX of Voicestream's certificate of incorporation and (B) in open
market transactions, consistent with past practice and in compliance with
Legal Requirements and the provisions of any applicable employee benefit
plan, program or arrangement, for issuance upon the exercise of options and
other rights granted, and the lapsing of restrictions, under Voicestream's
employee benefit plans, programs and arrangements;
(b) (i) except in connection with Permitted Swaps or Acquisitions
pursuant to Section 5.15, acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other business
organization or division thereof or make or increase any investment in
another entity (other than an entity which is a wholly-owned Subsidiary of
Voicestream as of the date hereof and other than incorporation of a
wholly-owned Subsidiary) other than investments permitted by Schedule
4.01(b); (ii) except in connection with Permitted Swaps or as approved by
the Acquisitions Committee (as defined below), except in the ordinary
course of business and in a manner consistent with past practice or as may
be required by, or in accordance with, law or any Governmental or
Regulatory Authority, including to comply with spectrum limitations, in
order to permit or facilitate the consummation of the transactions
contemplated hereby, sell, pledge, dispose of, or encumber or authorize or
propose the sale, pledge, disposition or encumbrance of any assets of
Voicestream or any of its Subsidiaries, except for Acquisitions pursuant to
Section 5.15; (iii) except in the ordinary course of business and in a
manner consistent with past practice and all Legal Requirements and
Permits, authorize or make capital expenditures in an aggregate amount not
to exceed the aggregate annual amounts set forth in Voicestream's 2000
business plan as provided to DT during the week of June 26, 2000;
(c) incur indebtedness (incremental to that shown on its balance sheet
as of March 31, 2000) except (i) pursuant to binding commitments to lend in
existence on the date hereof as listed by Schedule 4.01(c), (ii) pursuant
to the DT Financing Agreements, (iii) refinancing of existing indebtedness,
(iv) in connection with Acquisitions (including assumed indebtedness)
permitted by Section 5.15, and (v) additional indebtedness that would be
prepayable at the election of Voicestream on or after the Closing Date, the
aggregate prepayment penalty of which does not exceed $25,000,000;
(d) enter into (i) leveraged derivative contracts (defined as
contracts that use a factor to multiply the underlying index exposure), or
(ii) other derivative contracts except for the purpose of hedging known
interest rate and foreign exchange exposures or otherwise reducing
Voicestream's cost of financing; provided, however, that employee stock
ownership plans and other pension and deferred compensation plans of
Voicestream may enter into derivative contracts as part of their ordinary
course investment strategy;
(e) take any action with respect to the grant of any severance or
termination pay, or stay, bonus, or other incentive arrangements (otherwise
than pursuant to the Voicestream Benefit Plans and the policies of
Voicestream in effect on the date hereof in the ordinary course of
Voicestream's business or as otherwise expressly permitted under this
Agreement or otherwise in the ordinary course of business and consistent
with Voicestream's past practice);
(f) make any payments (except in the ordinary course of business and
in amounts and in a manner consistent with past practice or as otherwise
required by Legal Requirements or the provisions of any Voicestream Benefit
Plan) under any Voicestream Benefit Plan to any director or officer of, or
independent contractor or consultant to, Voicestream or any of its
Subsidiaries, adopt or otherwise materially amend (except for amendments
required by Legal Requirements) any Voicestream Benefit Plan, or enter into
or amend any employment or consulting agreement of the type which would be
required to be disclosed hereunder pursuant to Section 2.11 or grant or
establish any new awards under any such existing Voicestream Benefit Plan
(excluding any stock options granted pursuant to Section 4.01(a)) or
agreement (except in the ordinary course of business and in amounts and in
a manner consistent with past practice and subject to the other provisions
of this Section 4.01);
(g) file any amended Tax Returns or settle any Tax audits or other tax
proceedings of Voicestream if the result of such amendment or settlement
would result in an increase of Voicestream
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tax liability in excess of $15,000,000 or change in any respect (i) its
method of tax accounting or tax practice or (ii) its accounting policies,
methods or procedures, except as required by GAAP, which in the case of (i)
or (ii) would have a Material Adverse Effect on Voicestream;
(h) take any action which would reasonably be expected to materially
adversely affect or materially delay the ability of any of the Parties to
obtain any Required Regulatory Approval or consummate the transactions
contemplated hereby;
(i) take any action that would be reasonably likely to (i) prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code or (ii) cause the Stockholders of Voicestream to
recognize gain pursuant to Section 367(a) of the Code;
(j) other than pursuant to this Agreement, take any action to cause
the Voicestream Common Shares to cease to be quoted on NASDAQ;
(k) (i) grant new Stock Appreciation Rights, new performance shares,
restricted stock, or other equity based rights (other than stock options
granted pursuant to Section 4.01(a)); (ii) materially modify any actuarial
cost method, assumption or practice used in determining benefit
obligations, annual expense and funding for any Voicestream Benefit Plan,
except to the extent required by GAAP; (iii) materially modify the
investment philosophy of the benefit plan trusts or maintain an asset
allocation which is not consistent with such philosophy, subject to any
ERISA fiduciary obligation; (iv) subject to any ERISA fiduciary obligation,
enter into any outsourcing agreement, or any other material contract
relating to the Voicestream Benefit Plans or management of the benefit plan
trusts; (v) offer any new or extend any existing retirement incentive,
"window" or similar benefit program; (vi) grant any ad hoc pension
increase; (vii) establish any new or fund any existing "rabbi" or similar
trust (except in accordance with the current terms of such trust), or enter
into any other arrangement for the purpose of securing non-qualified
benefits or deferred compensation; (viii) adopt or implement any corporate
owned life insurance; (ix) adopt, implement or maintain any "split dollar"
life insurance program; or (x) except as may be required by the terms of
any award agreement, accelerate the vesting or payment of any equity or
equity-based award or (xi) materially increase the compensation payable to
any officer or director (other than for normal compensation increases in
the ordinary course of business consistent with past practice);
(l) agree to enter into any merger, reorganization, share exchange,
business combination or similar transaction pursuant to which the
stockholders of Voicestream will receive any consideration (whether payable
in cash, securities, property or other consideration) in exchange for their
Voicestream Common Shares;
(m) authorize or enter into (i) any material joint venture (other than
Permitted Swaps and other than joint ventures complying with the
"designated entity" rules which are required for the completion of any
Acquisition permitted pursuant to Section 5.15) or (ii) any agreement
(other than in the ordinary course consistent with its past practice in
respect of the Cook Inlet Joint Ventures and that does not apply to the
business of Voicestream or its Subsidiaries outside the United States) that
has a non-competition provision or similar operational restriction
applicable to, or could be reasonably anticipated to be applicable to, the
business of Voicestream or any of its Subsidiaries and that is reasonably
expected to be materially adverse to DT or the mobile telecommunication
business of DT after the Effective Time; or
(n) authorize or enter into any contract, agreement, commitment or
arrangement with respect to any of the matters prohibited by this Section
4.01.
(o) Notwithstanding anything in this Agreement to the contrary, during
the period of time beginning on the later of the Election Deadline and the
fifth Business Day prior to the Effective Time and extending until and
including the Effective Time, other than the Permitted Stock Dividend,
Voicestream shall not take or omit to take any action that could increase
the number of Voicestream Common Shares outstanding on a fully diluted
basis.
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SECTION 4.02. Conduct of Business by DT. Except as set forth on Schedule
4.02 hereto or as otherwise expressly contemplated by this Agreement, DT agrees
on behalf of itself and its Subsidiaries that they will not, between the date
hereof and the Effective Time, directly or indirectly, do any of the following
without the prior written consent of Voicestream:
(a) (i) except as may be necessary or required for the purpose of
using or increasing any or all of DT's authorized capital (GENEHMIGTES
KAPITAL) or necessary for the conduct of its business, amend or propose to
amend the Memorandum and Articles of Association (SATZUNG) or Management
Board (VORSTAND) Rules of Procedure (GESCHAFTSORDNUNG) (or other comparable
organizational document) of DT in any manner that would be adverse to
Voicestream or its stockholders; (ii) declare, set aside or pay any
dividend or distribution payable in cash, stock, property or otherwise with
respect to shares of DT capital stock (other than regular annual cash
dividends in a manner consistent with past practice); (iii) repurchase,
redeem or otherwise acquire any shares of its capital stock or any
securities convertible, exchangeable or exercisable for or into shares of
its capital stock, except for repurchases, redemptions or acquisitions not
exceeding 10% of the total number of DT Ordinary Shares outstanding as of
the date hereof in the aggregate; or (iv) effect any reclassification,
recapitalization or restructuring or other similar transaction (other than
as permitted in clause (ii) of this Section 4.02(a)) that results in the
direct or indirect receipt by holders of DT Ordinary Shares of any assets,
property or cash in respect of such DT Ordinary Shares.
(b) take any action that would be reasonably likely to (i) prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code; or (ii) cause the stockholders of Voicestream
to recognize gain pursuant to Section 367(a) of the Code; or
(c) take any action that would reasonably be likely to (i) materially
adversely affect the ability of the Parties to obtain any Required
Regulatory Approval or to consummate the transactions contemplated hereby,
or (ii) materially delay the ability of any of the Parties to obtain any
Required Regulatory Approval or to consummate the transactions contemplated
hereby, provided, however, that this Section 4.02(c) shall not preclude any
acquisitions by DT or any of its Subsidiaries so long as such acquisitions,
individually or in the aggregate, are not reasonably likely to prevent the
consummation of the Merger.
SECTION 4.03. No Solicitation. (a) From and after the date hereof,
Voicestream shall not, nor shall it permit any of its Subsidiaries to, nor shall
they authorize or instruct any of their respective officers, directors or
employees to, and shall use their reasonable efforts to cause any investment
banker, financial advisor, attorney, accountants or other representatives
retained by them or any of their respective Subsidiaries not to, directly or
indirectly through another person, (i) solicit, initiate or knowingly encourage
(including by way of furnishing information), or knowingly take any other action
designed to facilitate, any Alternative Transaction (as defined below), or (ii)
participate in any substantive discussions or negotiations regarding any
Alternative Transaction; provided, however, that if, at any time prior to the
time the Voicestream Stockholders' Approval is obtained, the Board of Directors
of Voicestream receives an unsolicited bona fide proposal and determines in good
faith that providing information to the Third Party (as defined below), making
such proposal or participating in negotiations or discussions with the Third
Party could be reasonably expected to result in a Voicestream Superior Proposal
(as defined below) and if Voicestream is not in breach of its obligations under
this Section 4.03, Voicestream may, subject to giving DT 48 hours advance
written notice of its intention to do so, (x) furnish information with respect
to Voicestream pursuant to a confidentiality agreement from the Third Party
substantially similar to the Mutual Nondisclosure Agreement between Voicestream
and DT dated as of June 21, 2000 (the "CONFIDENTIALITY AGREEMENT"), and (y)
engage in discussions and negotiations with the persons that made such proposal.
Voicestream shall promptly notify DT orally and in writing of any request for
information or of any proposal in connection with an Alternative Transaction,
the material terms and conditions of such request or proposal and the identity
of the person making such request or proposal. Voicestream will keep DT informed
of the status (including amendments) of such request or proposal on a current
basis. Voicestream shall immediately cease and terminate any existing
solicitations, discussions or negotiations with any persons conducted heretofore
by it or its representatives with respect to the foregoing.
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(b) Nothing contained in this Section 4.03 or in Section 5.02 shall
prohibit Voicestream (x) from taking and disclosing to its stockholders a
position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the
Exchange Act, or (y) from making any disclosure to its stockholders if, in the
good faith judgment of the Board of Directors of Voicestream, after receipt of
advice from outside counsel, failure to disclose would result in a reasonable
likelihood that the Board of Directors of Voicestream would breach its duties to
Voicestream's stockholders under applicable law.
(c) For purposes of this Agreement, "ALTERNATIVE TRANSACTION" means a
proposal or intended proposal, regarding any of (i) a transaction or series of
transactions pursuant to which any Person (or group of Persons) other than a
Party and its Subsidiaries (a "THIRD PARTY") acquires or would acquire, directly
or indirectly, beneficial ownership (as defined in Rule 13d-3 under the Exchange
Act) of more than twenty percent (20%) of the outstanding shares of Voicestream,
(ii) any acquisition or proposed acquisition of, or business combination with
Voicestream or any of its Significant Subsidiaries, as applicable, by a merger
or other business combination (including any so-called "merger-of-equals" and
whether or not Voicestream or any of its Significant Subsidiaries, as the case
may be, is the entity surviving any such merger or business combination), other
than any transaction that would be permitted pursuant to Section 5.15 hereof, or
(iii) any other transaction pursuant to which any Third Party acquires or would
acquire, directly or indirectly, control of assets (including for this purpose
the outstanding equity securities of Subsidiaries of Voicestream and any entity
surviving the merger or business combination including any of them) of
Voicestream or any of its Subsidiaries, as the case may be, for consideration
equal to twenty percent (20%) or more of the fair market value of all of the
outstanding shares of Voicestream Common Stock on the date of this Agreement.
SECTION 4.04. Subsequent Financial Statements. Voicestream, prior to the
Effective Time, will timely file with the SEC each Annual Report on Form 10-K,
Quarterly Report on Form 10-Q and Current Report on Form 8-K required to be
filed by it under the Exchange Act and the rules and regulations promulgated
thereunder and will promptly deliver to DT copies of each such report filed with
the SEC. DT will timely file with the SEC each Annual Report on Form 20-F and
Report on Form 6-K required to be filed by it under the Exchange Act and the
rules and regulations promulgated thereunder and will promptly deliver to
Voicestream copies of each such report filed with the SEC. As of their
respective dates, none of such reports shall contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The respective audited financial
statements and unaudited interim financial statements of each of Voicestream and
DT, as the case may be, included in such reports will fairly present the
financial position of such Party and its Subsidiaries as at the dates thereof
and the results of their operations and cash flows for the periods then ended in
accordance with GAAP (with a reconciliation to GAAP in accordance with SEC rules
in the case of Voicestream) or generally accepted accounting principles in
Germany (in the case of DT) applied on a consistent basis and, subject, in the
case of unaudited interim financial statements, to normal year-end adjustments
and any other adjustments described therein.
SECTION 4.05. Control of Operations. Nothing contained in this Agreement
shall give DT, directly or indirectly, the right to control or direct
Voicestream's operations prior to the Effective Time. Prior to the Effective
Time, Voicestream shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision over its respective operations.
ARTICLE 5
ADDITIONAL AGREEMENTS
SECTION 5.01. Voicestream Proxy Statement; the Registration Statement and
the German Listing Prospectus. (a) Each of DT and Voicestream shall cooperate
and promptly prepare and DT shall file with the SEC as soon as practicable a
Registration Statement on Form F-4 (or any successor form) (the "FORM F-4")
under the Securities Act with respect to the DT Ordinary Shares and the DT
Depositary Shares issuable and deliverable pursuant to this Agreement. A portion
of the Form F-4 shall serve as a
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prospectus with respect to the DT Ordinary Shares and the DT Depositary Shares
issuable and deliverable pursuant to the terms of this Agreement and as
Voicestream's proxy statement with respect to Voicestream Stockholders' Meeting
(the "VOICESTREAM PROXY STATEMENT"). DT will cause the Form F-4 to comply as to
form in all material respects with the applicable provisions of the Securities
Act and the rules and regulations thereunder and Voicestream will cause the
Voicestream Proxy Statement to comply as to form in all material respects with
the applicable provisions of the Exchange Act and the rules and regulations
thereunder. Voicestream and DT shall use their reasonable best efforts to have
the Voicestream Proxy Statement and Registration Statement declared effective by
the SEC under the Securities Act, and promptly thereafter shall mail to the
holders of record of Voicestream Common Shares, the Voicestream Proxy Statement;
provided, however, that Voicestream shall not mail or otherwise furnish the
Voicestream Proxy Statement to its stockholders unless and until:
(i) it has received notice from the SEC that the Registration
Statement is effective under the Securities Act;
(ii) Voicestream shall have received a letter of its independent
accountants, dated a date within two (2) business days prior to the date of
the first mailing of the Voicestream Proxy Statement, and addressed to
Voicestream, in form reasonably satisfactory to Voicestream and customary
in scope for similar "cold comfort" letters delivered by independent public
accountants in connection with registration statements on Form F-4 with
respect to the financial statements of DT included in the Voicestream Proxy
Statement and the Registration Statement;
(iii) DT shall have received a letter of its independent accountants,
dated a date within two (2) business days prior to the date of the first
mailing of the Voicestream Proxy Statement, and addressed to DT, in form
reasonably satisfactory to DT and customary in scope for similar "cold
comfort" letters delivered by independent public accountants in connection
with registration statements on Form F-4 with respect to the financial
statements of Voicestream included in the Voicestream Proxy Statement and
the Registration Statement.
DT shall use reasonable best efforts to obtain prior to the effective date
of the Form F-4, all necessary state securities law or "Blue Sky" permits or
approvals required to effect the transactions contemplated by this Agreement. DT
will advise Voicestream, promptly after it receives notice, of the time when the
Form F-4 has become effective or any supplement or amendment has been filed, the
issuance of any stop order or the suspension of the qualification of the DT
Depositary Shares or DT Ordinary Shares issuable and deliverable in connection
with the Merger for offering or sale in any jurisdiction.
(b) DT and Voicestream will cooperate in (i) the preparation of the
Voicestream Proxy Statement and the Registration Statement and in having the
Registration Statement declared effective as soon as practicable and (ii) the
preparation and filing of the German Listing Prospectus with the FSE and the
auditor's report with the Commercial Register.
SECTION 5.02. Voicestream Stockholders' Meeting and Consummation of the
Merger. (a) As promptly as practicable after the Registration Statement is
declared effective under the Securities Act, Voicestream shall duly give notice
of, convene and hold a meeting of its stockholders (the "VOICESTREAM
STOCKHOLDERS' MEETING") in accordance with Delaware Law for the purposes of
obtaining the Voicestream Stockholder Approval and shall, subject to the
provisions of Section 5.02(b) hereof, through its Board of Directors, recommend
to its stockholders the approval and adoption of this Agreement and use its
reasonable best efforts to obtain the Voicestream Stockholder Approval.
(b) Neither the Board of Directors of Voicestream nor any committee thereof
shall (i) except as expressly permitted by this Section 5.02(b), withdraw,
qualify or modify, or propose publicly to withdraw, qualify or modify, in a
manner adverse to DT, the approval or recommendation of such Board of Directors
or such committee of this Agreement, the Merger and the other transactions
contemplated hereby, (ii) approve or recommend, or propose publicly to approve
or recommend, any Alternative Transaction, or (iii) cause Voicestream to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement for any Alternative Transaction (each, a "VOICESTREAM
ACQUISITION AGREEMENT").
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Notwithstanding the foregoing, in the event that prior to the time the
Voicestream Stockholder Approval is obtained, Voicestream receives a Superior
Proposal (as defined below), the Board of Directors of Voicestream may (subject
to this and the following sentences) (A) inform Voicestream stockholders that it
no longer recommends Voicestream Stockholder Approval (a "SUBSEQUENT
DETERMINATION"), but only at a time that is after the second Business Day
following DT's receipt of written notice advising DT that the Board of Directors
of Voicestream has received a Superior Proposal specifying the material terms
and conditions of such Superior Proposal (and including a copy or draft copy
thereof with all accompanying documentation or draft documentation, if in
writing), identifying the Person making such Superior Proposal and stating that
it intends to make a Subsequent Determination. After providing such notice,
Voicestream shall provide a reasonable opportunity to DT to make such
adjustments in the terms and conditions of this Agreement as would enable
Voicestream to proceed with its recommendation to its stockholders without a
Subsequent Determination; provided, however, that any such adjustment shall be
at the discretion of Voicestream and DT at the time. For purposes of this
Agreement, a "SUPERIOR PROPOSAL" means any proposal (on its most recently
amended or modified terms, if amended or modified) made by a Third Party to
enter into an Alternative Transaction which the Board of Directors of
Voicestream determines in its good faith judgment to be more favorable to
Voicestream's stockholders than the transactions contemplated by this Agreement.
Voicestream shall submit this Agreement to its stockholders at the Voicestream
Stockholders' Meeting even if the Board of Directors of Voicestream shall have
made a Subsequent Determination.
SECTION 5.03. Cook Inlet. Voicestream shall not agree to any modification
of the existing exchange rights agreements relating to the Cook Inlet Joint
Ventures that would (i) prior to the Effective Date, increase the number of
Voicestream Common Shares issuable to the Cook Inlet Joint Ventures upon
exercise of their exchange rights in excess of the maximum number of shares set
forth on Schedule 2.03(f) on and after the Effective Date, increase the number
of DT Ordinary Shares or DT Depositary Shares issuable to the Cook Inlet Joint
Ventures upon exercise of their exchange rights.
SECTION 5.04. Notification of Certain Matters. Each of Voicestream and DT
shall give prompt notice to each other of the following:
(a) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (i) any representation or
warranty contained in this Agreement of such Party to be untrue, inaccurate
or incomplete in any material respect at any time from the date hereof to
the Effective Time if such failure to be true, accurate or complete would
cause the condition set forth in Section 6.02(a) or 6.03(a) not to be
satisfied, in which case the Party required to give prompt notice thereof
shall promptly update and deliver to the others any Schedules hereto which
require an update to remain true, accurate and correct or (ii) directly or
indirectly, any Material Adverse Effect on such Party;
(b) any material failure of such Party, or any officer, director,
employee or agent of any thereof, to comply with or satisfy any covenant or
agreement to be complied with or satisfied by it hereunder (if such failure
would cause the condition set forth in Section 6.02(b) or 6.03(b) not to be
satisfied);
(c) any facts relating to such Party which would make it necessary or
advisable to amend the Voicestream Proxy Statement or the Registration
Statement in order to make the statements therein not misleading or to
comply with applicable law; provided, however, that the delivery of any
notice pursuant to this Section 5.04 shall not limit or otherwise affect
the remedies available hereunder to the Parties receiving such notice;
(d) Promptly upon receipt by Voicestream from any Voicestream
stockholder who is a party to the Stockholder Agreements of a proxy card
sent to the Voicestream stockholders with the Voicestream Proxy Statement
and in accordance with Section 5 of the Stockholders Agreements, but in no
event later than the second Business Day following such receipt or, if such
receipt is on or after the fifth Business Day prior to the Closing, then on
the date of such receipt, Voicestream shall notify DT orally of its receipt
and provide DT with copy of such proxy card; and
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(e) Voicestream will not settle any claim with respect to Section 1.19
and 1.20 the Tax Sharing Agreement (the "355 PROVISIONS") or amend, modify
or terminate the 355 Provisions without the prior written consent of DT.
Voicestream will promptly provide DT with any notice of indemnification
claim or other notice of communication with respect to or under the Tax
Sharing Agreement with respect to the 355 Provisions. Voicestream will use
its reasonable best efforts to permit DT to participate in the negotiation,
resolution, settlement and contest of any claim or tax refund related to
any items for which Voicestream has sole indemnification responsibility
under the Section 355 Provisions.
SECTION 5.05. Access to Information. (a) Each of Voicestream and DT
shall, and shall cause its respective Subsidiaries, and its and their officers,
directors, employees, auditors, counsel and agents to afford the officers,
employees, auditors, counsel and agents of the other Parties reasonable access
during regular business hours to such Party's and its Subsidiaries' officers,
employees, auditors, counsel, agents, properties, offices and other facilities
and to all of their respective books and records, and shall furnish the other
with all financial, operating and other data and information as such other
Parties may reasonably request. Notwithstanding the foregoing, neither
Voicestream nor DT shall be required to provide any information which it
reasonably believes it may not provide to the other Party by reason of any Legal
Requirements or other applicable law, rules or regulations, which constitutes
information protected by attorney/client privilege, or which it or any of its
Subsidiaries is required to keep confidential by reason of contract, agreement
or understanding with third parties.
(b) Each of Voicestream and DT agrees that all non-public, confidential
information so received from any other Party shall be deemed received pursuant
to the Confidentiality Agreement and shall cause its Subsidiaries and each of
its and their respective officers, directors, employees, financial advisors,
attorneys, accountants, consultants and agents ("PARTY REPRESENTATIVES") to,
comply with the provisions of the Confidentiality Agreement with respect to such
information, and the provisions of the Confidentiality Agreement are hereby
incorporated herein by reference with the same effect as if fully set forth
herein.
SECTION 5.06. Public Announcements. Voicestream and DT shall develop a
joint communications plan and each Party shall, except as otherwise required by
any Legal Requirement, use its reasonable best efforts to ensure that all press
releases and other public statements with respect to the transactions
contemplated hereby shall be consistent with such joint communications plan or,
to the extent inconsistent therewith, shall have received the prior written
approval of the other Parties.
SECTION 5.07. Cooperation. (a) Upon the terms and subject to the
conditions hereof, each of Voicestream and DT agrees, and agrees to cooperate
with each other, (w) to take or cause to be taken all actions and to do or cause
to be done all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement (including all actions expected to
be taken after the Effective Time in connection with the actions contemplated by
Section 1.04), (x) to obtain in a timely manner all necessary Permits or
waivers, from, approvals or consents of, or declarations, registrations or
filings with, and all expirations of waiting periods imposed by, any
Governmental or Regulatory Authority which are necessary for the consummation of
the transactions contemplated hereby, (y) to promptly (1) prepare and file a
Premerger Notification in accordance with the HSR Act, comply with any requests
for additional information, and obtain termination of the waiting period
thereunder as promptly as practicable, (2) prepare and file all required
notifications, if any, under Council Regulation (EEC) No. 4064/89, and obtain
the approval of the Council of the European Union to the transactions
contemplated by this Agreement, if required, and (3) file a notice pursuant to
Section 721 of Exon-Florio, and (z) to take all actions within its control
necessary to obtain any Required Regulatory Approvals necessary to consummate
the transactions contemplated hereby; provided, however, that nothing in this
sentence of Section 5.07(a) shall require DT or Voicestream to take any action
that would result in a Burdensome Condition;
(b) Each of Voicestream and DT agrees to cooperate with each other (1) to
respond to inquiries from, and to make presentations to, Governmental or
Regulatory Authorities; and (2) to promptly inform the others of any material
oral or written communication received by such Party from, or given by such
Party to, any Governmental or Regulatory Authority, and of any material
communication received or given
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in connection with any proceeding by a private Party, in each case regarding the
relevant transactions. Voicestream and DT agree to consult with each other in
advance of any meeting or conference with, or of making any filing or other
written submission to, any such Governmental or Regulatory Authority, and to the
extent permitted by the applicable Governmental or Regulatory Authority, give
the others the opportunity to attend and participate in such meetings and
conferences, or to review and approve any such filing or other written
submission, in each case regarding the relevant transactions.
(c) Each of Voicestream and DT shall cooperate with each other to eliminate
or reduce to the extent possible any illegality, forfeiture or loss on the part
of DT, Voicestream or their respective Subsidiaries that may result from the
consummation of the transactions contemplated hereby.
(d) Each of Voicestream and DT hereby agrees to cooperate with the other
party, and to cause its officers, directors and independent accountants to
cooperate with the other party, to do or cause to be done all things reasonably
requested by the other party (including, without limitation, providing such
information as may reasonably be requested to permit pro forma financial
statements after giving effect to the Merger to be produced) in order to
facilitate any financing, acquisition or capital markets transaction to be
entered into by either Party after the date hereof.
(e) Voicestream hereby agrees to use reasonable best efforts, in
consultation with DT, to obtain all waivers and consents that may be required
from any parties to any Voicestream Contract, including, without limitation,
from lenders and other financing sources of Voicestream and its Subsidiaries, in
connection with this Agreement, the Stockholders Agreements, the DT Financing
Agreements and the transactions contemplated hereby and thereby.
(f) Voicestream hereby agrees, from the date hereof until the Closing, to
take any and all actions that are required to be taken prior to the Effective
Time pursuant to any Voicestream Contract or other agreement, including, without
limitation, any debt instruments, including credit agreements and indentures, to
which Voicestream or any of its Significant Subsidiaries or any Cook Inlet Joint
Venture is a party and to make any offer to purchase any securities required to
be made, as a result of the execution and delivery of this Agreement, the
Stockholders Agreements and the DT Financing Agreements.
SECTION 5.08. Indemnification, Directors' and Officers'
Insurance. (a) For a period of six (6) years after the Effective Time, the
Surviving Corporation (i) shall maintain in effect the current provisions
regarding indemnification of officers and directors contained in the charter and
bylaws of Voicestream and each of its Subsidiaries and any directors, officers
or employees indemnification agreements of Voicestream and its Subsidiaries,
(ii) shall maintain in effect the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by Voicestream
("D&O INSURANCE") (provided that the Surviving Corporation may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are, in the aggregate, no less advantageous to the insured),
with respect to claims arising from facts or events which occurred on or before
the Effective Time, provided, however, if the existing D&O Insurance expires, is
terminated or cancelled, or if the annual premium therefor is increased to an
amount in excess of 250% of the last annual premium paid prior to the date
hereof, in each case during such six year period, the Surviving Corporation will
use its best efforts to obtain D&O Insurance in an amount and scope as great as
can be obtained for the remainder of such period for a premium not in excess (on
an annualized basis) of 250% of the Current Premium, and (iii) shall indemnify
the directors and officers of Voicestream to the fullest extent to which
Voicestream is permitted to indemnify such officers and directors under their
respective charters and bylaws and applicable law.
(b) Without limiting Section 5.08(a), after the Effective Time, each of DT
and the Surviving Corporation shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, each present and former director,
officer, employee and agent of Voicestream or any of its Subsidiaries (each,
together with such person's heirs, executors or administrators, an "INDEMNIFIED
PARTY" and collectively, the "INDEMNIFIED PARTIES") against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any actual or
threatened claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative,
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arising out of, relating to or in connection with any action or omission
occurring or alleged to occur prior to the Effective Time (including, without
limitation, acts or omissions in connection with such persons serving as an
officer, director or other fiduciary in any entity if such service was at the
request or for the benefit of Voicestream) or arising out of or pertaining to
this Agreement, the Merger and the other transactions contemplated by this
Agreement and the DT Financing Agreements. In the event of any such actual or
threatened claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) DT and the Surviving Corporation, as
the case may be, shall pay the reasonable fees and out of pocket expenses of
counsel selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to DT and the Surviving Corporation, promptly after statements
therefor are received and shall pay all other reasonable out of pocket expenses
in advance of the final disposition of such action, (ii) DT and the Surviving
Corporation will cooperate and use all reasonable efforts to assist in the
vigorous defense of any such matter, and (iii) to the extent any determination
is required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth under Delaware Law and DT's or the
Surviving Corporation's respective articles of incorporation or bylaws, such
determination shall be made by independent legal counsel acceptable to DT or the
Surviving Corporation, as the case may be, and the Indemnified Party; provided,
however, that neither DT nor the Surviving Corporation shall be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld). The Indemnified Parties as a group may not retain more
than one law firm to represent them with respect to each matter unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties.
SECTION 5.09. Stock Exchange Listings/Establishment of DT Depositary
Shares. DT will take all steps necessary for the listing and authorization for
listing on the FSE and the NYSE (subject to official notice of issuance) of the
DT Ordinary Shares and the DT Depositary Shares, respectively, to be issued
pursuant to the Merger.
SECTION 5.10. No Shelf Registration. DT shall not be required to amend or
maintain the effectiveness of the Registration Statement for the purpose of
permitting resale of the shares of DT received pursuant hereto by the Persons
who may be deemed to be "affiliates" of Voicestream within the meaning of Rule
145 promulgated under the Securities Act. The DT Ordinary Shares issuable upon
exercise of options pursuant to Section 1.05 hereof shall be registered under
the Securities Act and such registration shall be effective at the time of
issuance.
SECTION 5.11. Affiliates. Voicestream (i) shall deliver to DT not later
than the 30th day after the date of this Agreement a list of all persons who
are, as of the date hereof its Affiliates for purposes of Rule 145 under the
Securities Act, and (ii) shall use its reasonable best efforts to cause each
person who is identified as its "affiliate" on Schedule 5.11 to deliver to DT as
promptly as practicable but in no event later than the Closing Date, a signed
agreement substantially in the form of Exhibit A. Voicestream shall notify DT
from time to time of any other persons who then are such an "affiliate" of
Voicestream and use its reasonable best efforts to cause each additional person
who is identified as such an "affiliate" to execute a signed agreement as set
forth in this Section 5.11.
SECTION 5.12. Blue Sky. DT will use its reasonable best efforts to obtain
prior to the Effective Time all necessary state securities or "blue sky" Permits
and approvals or similar foreign approvals required to permit the distribution
of the DT Depositary Shares and the DT Ordinary Shares to be issued in
accordance with the provisions of this Agreement, and Voicestream will provide
any reasonably requested cooperation in connection therewith.
SECTION 5.13. Tax-Free Merger. Each of the Parties will use its
reasonable best efforts, and each agrees to cooperate with the other Parties and
provide one another with such documentation, information and materials, as may
be reasonably necessary, proper or advisable, to (i) cause the Merger to qualify
as a reorganization within the meaning of Section 368(a) of the Code and (ii)
avoid gain recognition to the Stockholders of Voicestream pursuant to Section
367(a) of the Code.
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SECTION 5.14. Interim Dividend Policy. Other than the Permitted Stock
Dividend, Voicestream shall not, without the prior written consent of DT,
declare, set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise with respect to shares of Voicestream Common Stock.
SECTION 5.15. Permitted Acquisitions. (a) Voicestream and its
Subsidiaries may only engage in an acquisition transaction taking the form of a
stock acquisition, asset acquisition, merger or similar type or form of
transaction, including, without limitation, any transaction pursuant to which
Voicestream would propose to acquire, directly or indirectly, any additional FCC
licenses, and may only make investments in other Persons (collectively,
"ACQUISITIONS") subject to the provisions of this Section 5.15 and subject to
the provisions of Sections 4.01(h), (i) and (m). Subject to Sections 4.01(h),
(i) and (m), Voicestream and its Subsidiaries may engage in (A) Acquisitions in
accordance with Section 5.15(b), (B) Acquisitions without DT's consent, provided
that the aggregate value of the consideration payable by Voicestream and any of
its Subsidiaries in respect of any Acquisition pursuant to this clause (B) shall
not exceed $500 million (including assumption of debt) and in respect of all
Acquisitions pursuant to this clause (B) shall not exceed in the aggregate $750
million (including assumptions of debt), and, provided further, that, without
consent of the Acquisitions Committee (as hereinafter defined), none of such
Acquisitions include shares of Voicestream or any of its Subsidiaries as
consideration for the transaction, and (C) Acquisitions permitted (or deemed
permitted) by the Acquisitions Committee. The Acquisitions Committee shall
consist of the individuals listed on Schedule 5.15(C). If Voicestream desires to
make or engage in an Acquisition requiring consent of the Acquisitions
Committee, it shall notify (a "PROPOSED ACQUISITION NOTICE") the Acquisitions
Committee in writing (care of the office of the Chairman of the Acquisitions
Committee) of such proposed Acquisition (a "PROPOSED ACQUISITION"). The Proposed
Acquisition Notice shall include or be preceded by a copy of the material
information upon which senior management of Voicestream relied in determining
that Voicestream should pursue the Proposed Acquisition. Unless the Acquisitions
Committee denies permission in writing (in care of the office of Voicestream's
Chief Executive Officer) which is received within five (5) Business Days of
receipt of the Proposed Acquisition Notice, the Proposed Acquisition shall be
deemed to have been consented to and permitted by this Section 5.15 and for all
purposes under this Agreement (and shall not count toward the individual or
aggregate dollar limitation set forth in clause (B) of this Section 5.15(a) nor
shall any securities issued in connection therewith be deemed to breach any
restriction contained in Section 4.01. DT agrees and acknowledges that if the
Acquisitions Committee denies Voicestream permission to proceed with any
Proposed Acquisition, thereafter any officer, director, stockholder or Affiliate
of Voicestream (other than any of Voicestream's Subsidiaries), or any group or
combination of them, may pursue or engage in such Proposed Acquisition for his,
its or their own account. The Acquisitions Committee shall also, from time to
time, consider the capital structure of Voicestream.
(b) In the event that Voicestream determines to participate in any auction
of spectrum or airwave rights or licenses conducted during the period from the
date hereof until the Effective Time or the termination of this Agreement (an
"AUCTION"), then management of Voicestream shall work with the Acquisitions
Committee to develop, not later than the tenth Business Day prior to the date
the short form application related to such Auction is due, a schedule (a "BID
SCHEDULE") of maximum amounts that Voicestream shall be permitted to bid in such
Auction, which shall set forth both a maximum bid per license or market (as
applicable), and an aggregate maximum for the entire Auction. In the event that,
in the course of an Auction, Voicestream desires to bid in excess of the maximum
bid permitted in the Bid Schedule for any market or license, as applicable, or
the maximum aggregate of all bids, Voicestream may do so only with the consent
of any one of the members of the Acquisitions Committee (which consent may be
sought and/or granted by telephone). Unless any of the members of the
Acquisitions Committee denies such request to exceed such maximum bid (a
"PROPOSED BID INCREASE") within 24 hours of the time such request shall have
been made, DT shall be deemed to have consented to such request. DT hereby
agrees and acknowledges that in the event that Voicestream and the Acquisitions
Committee fail to agree upon a Bid Schedule prior to the tenth Business Day
prior to the schedule commencement of any Auction, thereafter any officer,
director, stockholder or Affiliate of Voicestream (other than any of
Voicestream's Subsidiaries), or any group or combination of them, may
participate in such Auction and acquire rights or licenses pursuant thereto for
his, its or their own account.
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SECTION 5.16. Reasonable Best Efforts. Each of Voicestream and DT shall
use its reasonable best efforts to obtain the opinions referred to in Section
6.02(d) and the delivery of the executed Representation Letters in the forms set
forth in Exhibits D and E hereto.
SECTION 5.17. Certain Matters. After the Effective Time, DT will take the
actions set forth in Schedule 5.17.
SECTION 5.18. Takeover Laws. Subject to Section 5.02, no Party shall take
any action that would cause the transactions contemplated by this Agreement or
the Stockholders Agreement to be subject to requirements imposed by any Takeover
Laws (including any such laws or regulations applicable to DT under German Legal
Requirements or the Legal Requirements of the FSE) and each of them shall take
all necessary steps within its control to exempt (or ensure the continued
exemption of), or minimize the effect on, the transactions contemplated by this
Agreement and the Stockholders Agreement from, or if necessary challenge the
validity or applicability of, any applicable Takeover Law, as now or hereafter
in effect, including, without limitation, Section 203 of the Delaware Law or any
other Takeover Laws that purport to apply to this Agreement or the Stockholders
Agreement or the transactions contemplated hereby or thereby.
SECTION 5.19. Employee Benefits. (a) From and after the Effective Time,
DT shall cause the Surviving Corporation or its successor to honor all
Voicestream employee benefit plans and compensation arrangements and agreements
in accordance with their terms as in effect immediately before the Effective
Time, subject to any amendment or termination thereof that may be permitted by
such terms. For a period of not less than two years following the Effective
Time, DT shall cause to be provided, to current and former employees of
Voicestream and its Subsidiaries (the "VOICESTREAM EMPLOYEES") compensation and
employee benefits (it being understood that discretionary equity and equity
based awards will remain discretionary) that are, in the aggregate, not less
favorable than those provided to Voicestream Employees immediately before the
Effective Time.
(b) For purposes of vesting, eligibility to participate and level of
benefits (but not benefit accrual under pension or similar plans) under the
employee benefit plans of DT and its Affiliates providing benefits to any
Voicestream Employees after the Effective Time (the "NEW PLANS"), each
Voicestream Employee shall be credited with his or her years of service with
Voicestream and its Affiliates before the Effective Time, to the same extent as
such Voicestream Employee was entitled, before the Effective Time, to credit for
such service under any similar Voicestream Employee Benefit Plans in which such
Voicestream Employee participated or was eligible to participate immediately
prior to the Effective Time, provided, that the foregoing shall not apply to the
extent that its application would result in a duplication of benefits or for
newly established plans and programs for which prior service of DT employees is
not taken into account. In addition, and without limiting the generality of the
foregoing: (i) each Voicestream Employee shall be immediately eligible to
participate, without any waiting time, in any and all New Plans to the extent
coverage under such New Plan replaces coverage under a comparable Voicestream
employee benefit plan or compensation arrangement or agreements in which such
Voicestream Employee participated immediately before the consummation of the
Merger (such plans, collectively, the "OLD PLANS"); and (ii) for purposes of
each New Plan providing medical, dental, pharmaceutical and/or vision benefits
to any Voicestream Employee, DT shall cause all pre-existing condition
exclusions and actively-at-work requirements of such New Plan to be waived for
such employee and his or her covered dependents, unless such conditions would
not have been waived under the comparable plans of Voicestream or its
subsidiaries in which such employee participated immediately prior to the
Effective Time and DT shall cause any eligible expenses incurred by such
employee and his or her covered dependents during the portion of the plan year
of the Old Plan ending on the date such employee's participation in the
corresponding New Plan begins to be taken into account under such New Plan for
purposes of satisfying all deductible, coinsurance and maximum out-of-pocket
requirements applicable to such employee and his or her covered dependents for
the applicable plan year as if such amounts had been paid in accordance with
such New Plan.
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(c) DT hereby acknowledges and agrees that the transactions contemplated
hereby will constitute a Change of Control for all purposes under the applicable
Voicestream Employee Benefit Plans listed on Schedule 2.11(g).
(d) Voicestream and DT shall, during the sixty-day period following the
date hereof, seek to develop a mutually acceptable retention plan for senior
management employees.
(e) For a period of at least two years following the Effective Time, DT
shall continue and cause to be honored Voicestream's severance policy described
in Schedule 4.01(e) as in effect prior to the Effective Time without any
amendments adverse to Voicestream Employees.
SECTION 5.20. Certain Employment Matters. Prior to the Effective Time, DT
and Voicestream shall take all such steps as may be required to cause the
transactions contemplated by this Agreement, including any dispositions of
Voicestream Common Shares (including derivative securities with respect to the
Voicestream Common Shares) and acquisitions of DT Ordinary Shares (including
derivative securities with respect to DT Ordinary Shares) by each Person who is
or will be subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to the Voicestream or DT, as the case may be, to be
exempt under Rule 16b-3 promulgated under the Exchange Act.
ARTICLE 6
CLOSING CONDITIONS
SECTION 6.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of Voicestream and DT to consummate the
Merger shall be subject to the fulfillment or (to the extent permitted by
applicable law) written waiver prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. The Voicestream Stockholder Approval shall
have been obtained.
(b) Legality. No federal, state or foreign statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any Governmental or Regulatory Authority which
is in effect and has the effect of making the Merger illegal or otherwise
prohibiting the consummation of the Merger.
(c) Required Regulatory Approvals. Any waiting period applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated; to the extent required, the Commission of the European Union
shall have approved the Merger under Regulation (EEC) No. 4064/89 of the
Council of the European Union, or such approval shall have been deemed to
have been granted; the review and investigation under Exon-Florio shall
have been terminated and the President shall have taken no action
authorized thereunder; and any Required Regulatory Approval of the FCC
shall have been received and shall be in full force and effect; provided
that the conditions contained in this paragraph (c) shall not be deemed
satisfied as to DT or Voicestream, if any such consents or authorizations
shall contain any conditions (collectively, "BURDENSOME CONDITIONS") that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on DT or the mobile telecommunications business of
DT, in each case after giving effect to the transactions contemplated
hereby and any other acquisition in the mobile telecommunication industry
which is entered into or consummated by DT or any of its Subsidiaries after
the date hereof.
(d) Registration Statement Effective. The Registration Statement
shall have become effective prior to the mailing by Voicestream of the
Voicestream Proxy Statement to its stockholders, no stop order suspending
the effectiveness of the Registration Statement shall then be in effect,
and no proceedings for that purpose shall then be threatened by the SEC or
shall have been initiated by the SEC and not concluded or withdrawn.
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(e) Stock Exchange Listings. All steps necessary for the listing of
the DT Ordinary Shares to be issued pursuant to the Merger on the FSE shall
have been taken and the DT Depositary Shares to be issued pursuant to the
Merger shall have been authorized for listing on the NYSE, subject to
official notice of issuance.
SECTION 6.02. Conditions to the Obligations of Voicestream. The
obligations of Voicestream to consummate the Merger are also subject to the
fulfillment or written waiver by Voicestream, prior to the Effective Time, of
each of the following conditions:
(a) Representations and Warranties. The representation and warranty
set forth in Section 3.07(a) of this Agreement shall have been true and
correct on the date hereof and on and as of the Closing Date as though made
on the Closing Date; and the other representations and warranties of DT and
Merger Sub set forth in this Agreement shall have been true and correct on
the date hereof (or in the case of matters relating to Merger Sub, as of
September 28, 2000) and on and as of the Closing Date as though made on the
Closing Date (except to the extent that any representation or warranty
expressly speaks as of an earlier date, in which case it shall be true and
correct as of such date) except (i) for changes permitted under Section
4.02 or otherwise contemplated by this Agreement, and (ii) for such
failures to be true and correct which in the aggregate would not reasonably
be expected to result in a Material Adverse Effect on DT.
(b) Agreements and Covenants. DT shall have performed or complied
with all agreements and covenants required by this Agreement to be
performed or complied with by it on or before the Effective Time; provided,
however, that for purposes of this Section 6.02(b) only, such agreements
and covenants shall be deemed to have been complied with unless the failure
or failures of such agreements and covenants to have been complied with,
individually or in the aggregate, results or would reasonably be expected
to result in a Material Adverse Effect on DT or on Voicestream
shareholders.
(c) Certificates. Voicestream shall have received a certificate of an
executive officer of DT (and, to the extent such matters relate to Merger
Sub, of an executive officer of Merger Sub) to the effect set forth in
subparagraphs (a) and (b) above.
(d) Tax Opinion. Voicestream shall have received an opinion of Jones,
Day, Reavis & Pogue ("JONES DAY") and/or Wachtell, Lipton, Rosen & Katz
("WACHTELL LIPTON") dated as of the Closing Date substantially to the
effect that, on the basis of the facts, representations and assumptions set
forth or referred to in such opinion, for U.S. federal income tax purposes,
the Merger (i) will qualify as a reorganization within the meaning of
Section 368(a) of the Code and (ii) each transfer of property to DT by a
stockholder of Voicestream pursuant to the Merger will not be subject to
Section 367(a)(1) of the Code. In rendering such opinion, Jones Day and/or
Wachtell Lipton may require and shall be entitled to rely upon customary
representations of Voicestream and DT, including representations
substantially in the form of Exhibits D and E, respectively. The opinion
set forth in clause (ii) may assume that any stockholder who is a
"five-percent transferee shareholder" with respect to DT within the meaning
of U.S. Treasury Regulations Section 1.367(a)-3(c)(5)(ii) will file the
agreement described in U.S. Treasury Regulations Section
1.367(a)-3(c)(1)(iii)(B).
SECTION 6.03. Conditions to the Obligations of DT. The obligations of DT
to consummate the Merger are also subject to the fulfillment or written waiver
by DT, prior to the Effective Time, of each of the following conditions:
(a) Representations and Warranties. The representation and warranty
of Voicestream set forth in Section 2.07(a) of this Agreement shall have
been true and correct on the date hereof and on and as of the Bringdown
Date as though made on the Bringdown Date; and the other representations
and warranties of Voicestream set forth in this Agreement shall have been
true and correct on the date hereof and on and as of the Bringdown Date as
though made on the Bringdown Date (except to the extent that any
representation or warranty expressly speaks as of (A) an earlier date, or
(B) in the cases of Section 2.05(a) and clause (5) of the last sentence of
Section 2.03(a) to the extent either
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relates to the declaration or payment of the Permitted Stock Dividend, an
earlier or later date, in which cases ((A) or (B)) it shall be true and
correct as of such specified date) except (i) for changes permitted under
Section 4.01 hereof or otherwise contemplated by this Agreement, and (ii)
for such failures to be true and correct which in the aggregate would not
reasonably be expected to result in a Material Adverse Effect on
Voicestream.
(b) Agreements and Covenants. Voicestream shall have performed or
complied with all agreements and covenants required by this Agreement to be
performed or complied with by it on or before the Effective Time; provided,
however, that for purposes of this Section 6.03(b) only, such agreements
and covenants shall be deemed to have been complied with unless the failure
or failures of such agreements and covenants to have been complied with
individually or in the aggregate, results or would reasonably be expected
to result in a Material Adverse Effect on DT or the mobile
telecommunications business of DT, in each case after giving effect to the
transactions contemplated hereby and any other acquisition in the mobile
telecommunications industry which is entered into or consummated by DT or
any of its Subsidiaries after the date hereof.
(c) Certificates. DT shall have received certificates of an executive
officer of Voicestream to the effect set forth in subparagraph (a) above on
the Bringdown Date and subparagraph (b) above on the Closing Date;
provided, however, that if the Bringdown Date occurs before the Closing
Date and the Permitted Stock Dividend is declared or paid after the
Bringdown Date, then the matters referred to in clause (B) of paragraph (a)
shall be covered in the certificate delivered on the Closing Date, and need
not be addressed or referenced in the certificate delivered on the
Bringdown Date.
SECTION 6.04. Pre-Closing Bringdown. At any time on or after the fifth
Business Day after the last to be fulfilled or waived of the conditions set
forth in Article VI hereof (other than the conditions contained in Sections
6.02(c), 6.02(d) and 6.03(c) so long as it is reasonably apparent that such
conditions and the condition contained in Section 6.01(b) will be able to be
satisfied on such fifth or later Business Day) shall be fulfilled or waived in
accordance with this Agreement, Voicestream may deliver to DT a certificate of
an executive officer of Voicestream, dated as of such day, to the effect set
forth in Section 6.03(a), and the date on which such certificate is delivered
shall thereupon be deemed to be the "BRINGDOWN DATE"; provided, however, that if
the Bringdown Date does not occur before the Closing Date, then the Bringdown
Date shall be the same date as the Closing Date.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination. This Agreement may be terminated at any time
before the Effective Time, in each case as authorized by the Board of Directors
of Voicestream or the Management Board (VORSTAND) of DT:
(a) By mutual written consent of each of Voicestream and DT;
(b) By Voicestream, if the Merger shall not have been consummated on
or before September 30, 2001 (the "VOICESTREAM TERMINATION DATE") or by DT
if the Merger shall not have been consummated on or before December 31,
2001 (the "DT TERMINATION DATE"); provided, however, that the right to
terminate this Agreement under this Section 7.01(b) shall not be available
to any Party whose failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before the relevant Termination Date;
(c) By either Voicestream or DT, if (i) any Governmental or Regulatory
Authority shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling Voicestream and DT shall use its
reasonable best efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the Merger, or (ii) in connection with
the grant of any Required Regulatory Approval relating to the Merger, a
Burdensome Condition shall have been imposed, and in the case of
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either clause (i) or (ii), such order, decree, ruling, Burdensome Condition
or other action shall have become final and nonappealable;
(d) By Voicestream, (A) if DT shall have breached or failed to perform
in any material respect any of its representations, warranties, covenants
or other agreements contained in this Agreement, which breach or failure to
perform (1) is incapable of being cured by DT prior to the Voicestream
Termination Date, or, if capable of being cured, is not cured by DT within
30 days after written notice thereof shall have been received by DT from
Voicestream, and (2) renders any condition under Section 6.01 or 6.02
incapable of being satisfied prior to the Voicestream Termination Date, or
(B) if a condition under Section 6.01 or 6.02 to Voicestream's obligations
hereunder is or becomes incapable of being satisfied prior to the
Voicestream Termination Date;
(e) By DT, (A) if Voicestream shall have breached or failed to perform
in any material respect any of its representations, warranties, covenants
or other agreements contained in this Agreement, which breach or failure to
perform (1) is incapable of being cured by Voicestream prior to the DT
Termination Date, or, if capable of being cured, is not cured by
Voicestream within 30 days after written notice thereof shall have been
received by Voicestream from DT, and (2) renders any condition under
Section 6.01 or 6.03 incapable of being satisfied prior to the DT
Termination Date, or (B) if a condition under Section 6.01 or 6.03 to DT's
obligations hereunder is or becomes incapable of being satisfied prior to
the DT Termination Date;
(f) By Voicestream or DT, respectively, at any time that is not less
than 15 days after any federal, state or foreign statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any Governmental or Regulatory Authority (other
than, for purposes of this paragraph only, any court of law or equity) and
that has the effect of making the condition set forth in Section 6.01(b) or
the condition set forth in Section 6.01(c) incapable of being satisfied by
the Parties prior to, in the case of termination by Voicestream, the
Voicestream Termination Date or, in the case of termination by DT, the DT
Termination Date, respectively;
(g) By either Voicestream or DT, if the Voicestream Stockholder
Approval shall fail to have been obtained at a duly held stockholders
meeting of Voicestream, including any adjournments thereof;
(h) By Voicestream, if the DT Share Price that would be applied in the
Cash Adjustment (prior to conversion into U.S. Dollars and without giving
effect to the proviso to the definition of DT Share Price) is less than 33
Euros; provided that Voicestream shall have given DT 48 hours prior notice
of its intention to terminate pursuant to this Section 7.01(h).
SECTION 7.02. Effect of Termination. (a) In the event of termination of
this Agreement as provided in Section 7.01 hereof, this Agreement shall
forthwith become void and there shall be no liability on the part of Voicestream
or DT, except (i) as set forth in this Section 7.02 and in Sections 2.16, 3.13,
5.05(b), 9.03, 9.09 and 9.10 hereof, and (ii) nothing herein shall relieve
Voicestream or DT from liability for any willful breach hereof.
(b) If this Agreement is terminated by Voicestream or DT pursuant to
Section 7.01(g) because of the failure to obtain the Voicestream Stockholder
Approval and (i) at any time after the date of this Agreement and prior to the
Voicestream Stockholders' Meeting an offer or proposal for a transaction that
would constitute an Alternative Transaction (as defined in Section 4.03(c)
hereof) (except that, for the purposes of this Section 7.02(b), the applicable
percentage in clauses (i) and (iii) of such definition shall be fifty percent
(50%) and only for any transaction referred to in clause (ii) of such definition
to be treated as an Alternative Transaction for purposes of this Section
7.02(b), stockholders of Voicestream would own less than 65% of the outstanding
stock of the entity surviving or resulting from such transaction) shall have
been announced or otherwise publicly disclosed, and not withdrawn, and (ii)
within six months after the termination of this Agreement, Voicestream enters
into a definitive agreement with any Third Party with respect to an Alternative
Transaction (provided that for any transaction referred to in clause (ii) of
such definition to be treated as an Alternative Transaction for purposes of this
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Section 7.02(b), stockholders of Voicestream would own less than 65% of the
outstanding stock of the entity surviving or resulting from such transaction),
Voicestream shall pay to DT a termination fee of $1,000,000,000 (the
"TERMINATION FEE"). Except as otherwise provided in this paragraph, no
Termination Fee shall be or become payable upon termination of this Agreement.
(c) The termination fee payable under Section 7.02(b) above shall be
payable in cash no later than one business day following the day Voicestream
enters into the definitive agreement providing for the Alternative Transaction
giving rise to the payment of such fee.
(d) Voicestream and DT agree that the agreements contained in Section
7.02(b) above are an integral part of the transactions contemplated by this
Agreement and are an inducement to DT to enter into this Agreement and, to the
extent payable in connection with a breach of this Agreement, constitute
liquidated damages and not a penalty. If Voicestream fails to promptly pay to DT
any fee due under such Section 7.02(b), then Voicestream shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Citibank, N.A., from the date such fee was required to
be paid.
SECTION 7.03. Amendment. This Agreement may be amended by Voicestream, DT
and Merger Sub pursuant to a writing adopted by action taken by each of them at
any time before the Effective Time; provided, however, that, after approval of
this Agreement by the stockholders of Voicestream no amendment may be made which
under applicable law would require approval of such Party's stockholders without
such approval.
SECTION 7.04. Waiver. At any time before the Effective Time Voicestream,
DT and Merger Sub may (i) extend the time for the performance of any of the
obligations or other acts of the others, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a Party to any such
extension or waiver shall be valid only as against such Party and only if set
forth in an instrument in writing signed by such Party.
ARTICLE 8
DEFINITIONS
SECTION 8.01. Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"AFFILIATE" of a Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person; provided, however, that
such term shall not be deemed to include the Federal Republic of Germany
and Kreditanstalt fur Wiederaufbau ("KFW") in their capacities as
shareholders of DT.
"AGREEMENT" means this Agreement and Plan of Merger, together with all
of its schedules and exhibits.
"BUSINESS DAY" means a day other than Saturday, Sunday, federal or New
York State holiday or other day on which commercial banks in New York City
are authorized or required by law to close.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of stock, as trustee or executor, by contract
or otherwise.
"COOK INLET JOINT VENTURES" means Cook Inlet Western Wireless PV/SS
PCS, L.P., Cook Inlet Voicestream PCS, LLC, Cook Inlet/VS GSM II PCS, LLC
and Cook Inlet/VS GSM III PCS,
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LLC, Cook Inlet/VS GSM IV PCS Holdings, LLC and Cook Inlet/VS GSM V PCS
Holdings, LLC.
"COOK INLET PARTNERS" means Cook Inlet Telecommunications, Inc., SSPCS
Corporation, Providence Media Partners L.P., Cook Inlet GSM Inc.,
Providence Media Partners III L.P. and Providence Equity Operating Partners
III.
"DELAWARE LAW" means the Delaware General Corporation Law, as amended.
"DT FINANCING AGREEMENTS" means the Stock Subscription Agreement, the
Investor Agreement and the First Amended and Restated Voting Agreement,
each dated as of the date hereof, between Voicestream, DT and certain other
parties.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as the same
may be amended from time to time.
"EXON-FLORIO" means the provisions of the Exon-Florio Amendment to the
Omnibus Trade and Competitiveness Act of 1988.
"GAAP" means United States generally accepted accounting principles.
"GERMAN LISTING PROSPECTUS" means the prospectus
(BORSENZULASSUNGSPROSPEKT) required for the listing of the DT Ordinary
Shares to be issued pursuant to the Merger on the FSE.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any domestic or foreign,
national, federal, state, county, city, local or other administrative,
legislative, regulatory or other governmental authority, commission,
agency, court of competent jurisdiction or other judicial entity, tribunal,
arbitrator, office, principality, registry (including, but not limited to,
with respect to patents, trademarks, designs, or copyrights), legislative
or regulatory body, instrumentality, or quasi-governmental agency,
commission or authority or any arbitral tribunal exercising any regulatory
or taxing authority; provided that such term shall not be deemed to include
the Federal Republic of Germany and KFW, in their capacities as
shareholders of DT.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as the same may be amended from time to time.
"INVESTMENT INTEREST" means a direct or indirect ownership of capital
stock, partnership, membership interests or other ownership interests or
similar securities of any Person.
"KNOWLEDGE" of any Party means the actual knowledge of the executive
officers of such Party.
"MATERIAL ADVERSE EFFECT" means, with respect to Voicestream and its
Subsidiaries and the Cook Inlet Joint Ventures, taken as a whole, or DT and
its Subsidiaries, taken as a whole, any change in or effect on the business
of Voicestream and its Subsidiaries and the Cook Inlet Joint Ventures taken
as a whole or DT and its Subsidiaries taken as a whole, as the case may be,
that is or is reasonably likely to be materially adverse to the business,
operations or financial condition of Voicestream and its Subsidiaries and
the Cook Inlet Joint Ventures taken as a whole or DT and its Subsidiaries
taken as a whole, respectively, but shall not include the effects of
changes or developments (A) in (i) the telecommunications industry,
including regulatory and political conditions, and not uniquely relating to
DT or Voicestream, (ii) the United States or European economy, or (iii) the
United States or European securities markets, or (B) resulting from the
announcement or the existence of this Agreement and the transactions
contemplated hereby.
"OTHER JOINT VENTURES" means Iowa Wireless Services, L.P., STPCS, LLC,
D&E/Omnipoint Corporation Wireless Joint Venture, LP, NPI-Omnipoint
Corporation Wireless, LLC, Wireless Alliance, LLC and Access Plus, LLC.
"PERMITTED SWAPS" means transactions in which Voicestream or any of
its Subsidiaries exchanges property, assets and/or any legal rights of
substantially equivalent value (including spectrum rights)
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with any third party relating to not more than 5,000,000 POPs in any one
transaction or more than 10,000,000 POPs in all such transactions.
"PERSON" means an individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, entity or group (as defined in the Exchange
Act) or a Governmental or Regulatory Authority.
"REGISTRATION STATEMENT" means one or more registration statements to
be filed with the SEC by DT in connection with the issuance of DT
Depositary Shares and DT Ordinary Shares in the Merger.
"SECURITIES ACT" means the Securities Act of 1933, as the same may be
amended from time to time.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary which on the date of
determination is a "SIGNIFICANT SUBSIDIARY" within the meaning of Rule
1-02(w) of Regulation S-X promulgated under the Exchange Act, including,
without limitation, Omnipoint Corporation and Aerial Communications, Inc.
"SUBSIDIARY", "VOICESTREAM SUBSIDIARY," or "DT SUBSIDIARY" means any
Person on the date of determination of which Voicestream or DT, as the case
may be (either alone or through or together with any other Subsidiary or
Subsidiaries) owns, directly or indirectly, more than fifty percent (50%)
of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the Board of Directors or other
governing body of such Person.
"TAX" or "TAXES" means any U.S. federal, state or local or foreign
taxes of any kind, including, without limitation, those on or measured by
or referred to as income, gross receipts, capital, sales, use, ad valorem,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall
profits taxes, customs, duties, or similar fees, assessments, or charges of
any kind whatsoever, imposed by any taxing authority, together with any
interest and any penalties, additions to tax, or additional amounts
thereon.
"TAX RETURNS" means any U.S. federal, state or local or foreign
return, report, or statement required to be filed with any Governmental or
Regulatory Authority with respect to Taxes.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement dated February
17, 1998, by and among Western Wireless Corporation, Western PCS
Corporation and Hutchison Telecommunications PCS (USA) Limited, and the
First Amendment to such Tax Sharing Agreement dated May 3, 1999.
"TELECOM ACT" means the Communications Act of 1934, as amended.
"T-MOBILE" means T-Mobile International AG, an Aktiengesellschaft
organized and existing under the laws of the Federal Republic of Germany.
SECTION 8.02. Date of this Agreement; No Waiver. (a) The amendment and
restatement of this Agreement on February 8, 2001 notwithstanding, unless
otherwise expressly provided herein, this Agreement shall be deemed for all
purposes to be dated and made as of July 23, 2000 (the date of the original
Agreement and Plan of Merger) and to be effective as of such date, and all
references herein to "the date hereof", "the date of this Agreement" and other
similar references, shall be deemed to be references to July 23, 2000.
(b) The parties' execution and delivery of this Amended and Restated
Agreement shall not constitute a waiver of any rights that any of the parties
hereto may have by reason of any event, condition, misrepresentation or breach
of covenant of the original Agreement and Plan of Merger having occurred prior
to the date of execution and delivery of this Amended and Restated Agreement,
whether or not known to any or all of the parties hereto. No representation or
warranty of any party in this Agreement shall be affected or limited by reason
of the knowledge of any other party at any time that such representation or
warranty is not, or may not be, true and correct.
A-46
371
ARTICLE 9
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01 hereof, as the case may be, except that (i) the
agreements set forth in Article I, Sections 5.08, 5.10, 5.13, 5.17 and 5.19
hereof shall survive the Effective Time indefinitely, (ii) the agreements set
forth in Sections 5.05(b), 7.02, 9.03 and 9.10 hereof shall survive termination
indefinitely, (iii) any covenant or agreement of Voicestream and DT which by its
terms contemplates performance after the Effective Time shall survive the
Effective Time in accordance with its terms, and (iv) the representations and
warranties made by Voicestream in this Agreement shall terminate at the earlier
of the Effective Time and 12:00 midnight on the Bringdown Date, except that if
the Permitted Stock Dividend is declared or paid after the Bringdown Date, then
the representations and warranties made by Voicestream in clause (5) of the last
sentence of Section 2.03(a) and in Section 2.05(a) to the extent either relates
to the declaration or payment of the Permitted Stock Dividend shall terminate
immediately after such payment.
SECTION 9.02. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date of receipt and shall be delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), sent
by overnight courier or sent by telecopy, to the Parties at the following
addresses or telecopy numbers (or at such other address or telecopy number for a
Party as shall be specified by like notice):
(a) if to Voicestream:
Voicestream Wireless Corporation
3650 131st Avenue S.E.
Bellevue, Washington 98006
Attention: Alan R. Bender
Facsimile: 425-586-8080
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff
Facsimile: 212-403-2000
and a copy to:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, New York 10022
Attention: Barry A. Adelman
Facsimile: 212-355-6401
A-47
372
(b) if to DT or Merger Sub:
Deutsche Telekom AG
140 Friedrich-Ebert Allee
53113 Bonn
Germany
Attention: Kevin Copp
Facsimile: 49-228-181-44177
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Robert P. Davis
Facsimile: 212-225-3999
and a copy to:
Hengeler Mueller Weitzel Wirtz
Trinkausstrasse 7
D-40213 Dusseldorf
Germany
Attention: Dr. Rainer Krause
Facsimile: +49-211-83-04-170
SECTION 9.03. Expenses. Except as otherwise provided herein, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring such costs and
expenses, except that those expenses incurred in connection with the printing of
the Voicestream Proxy Statement and the Registration Statement, as well as the
filing fees related thereto and any filing fee required in connection with the
filing of Premerger Notifications under the HSR Act, shall be shared equally by
Voicestream and DT.
SECTION 9.04. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, then all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the maximum extent
possible.
SECTION 9.06. Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the DT Financing Agreements and the Confidentiality Agreement
constitute the entire agreement and, except as expressly set forth herein,
supersedes any and all other prior agreements and undertakings, both written and
oral, among the Parties, or any of them, with respect to the subject matter
hereof and, except for Section 5.08, or 5.17, is not intended to confer upon any
person other than Voicestream, DT and, after the Effective Time their respective
stockholders, any rights or remedies hereunder.
SECTION 9.07. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other party; provided, however, that (i) this
Agreement may be assigned by DT to an entity treated as a corporation for U.S.
federal income tax
A-48
373
purposes which owns more than 80% of the DT Ordinary Shares and which succeeds
to all of the rights and obligations of DT under the Escrow Agency Agreement and
(ii) this Agreement may be assigned by Merger Sub to an entity treated as a
corporation for U.S. federal income tax purposes and which is a direct,
wholly-owned subsidiary of the entity to which DT has assigned this Agreement
pursuant to (i) above. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. Anything in this Section 9.07 to the
contrary notwithstanding, no assignment shall be permitted hereunder unless
after such assignment Jones Day and/or Wachtell Lipton is able to issue the
opinion required pursuant to Section 6.02(d) hereof.
SECTION 9.08. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed entirely within that
State, without regard to the conflicts of laws provisions thereof.
SECTION 9.09. Submission to Jurisdiction; Waivers. Each of the parties
hereto irrevocably agrees that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns shall be
brought and determined only in the United States District Court for the District
of Delaware, or in the event (but only in the event) that such court does not
have subject matter jurisdiction over such action or proceeding, in the courts
of the State of Delaware. Each of the parties hereto hereby irrevocably submits
with regard to any such action or proceeding for itself and in respect of its
property, generally and unconditionally, to the personal jurisdiction of the
aforesaid courts. Each of the parties hereto hereby irrevocably waives, and
agrees not to assert, by way of motion, as a defense, counterclaim or otherwise,
in any action or proceeding with respect to this Agreement, (a) any claim that
it is not personally subject to the jurisdiction of the above-named courts for
any reason other than the failure to serve in accordance with this Section 9.09,
(b) that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), and (c) to the fullest extent
permitted by the applicable law, that (i) the suit, action or proceeding in such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
SECTION 9.10. Waiver of Immunity. DT agrees that, to the extent that it
or any of its Subsidiaries or any of its property or the property of its
Subsidiaries is or becomes entitled to any immunity on the grounds of
sovereignty or otherwise based upon its status as an agency or instrumentality
of the government from any legal action, suit or proceeding or from set-off or
counterclaim relating to this Agreement from the jurisdiction of any competent
court, from service of process, from attachment prior to judgment, from
attachment in aid of execution, from execution pursuant to a judgment or an
arbitral award or from any other legal process in any jurisdiction, it, for
itself and its property, and for each of its Subsidiaries and its property,
expressly, irrevocably and unconditionally waives, and agrees not to plead or
claim, any such immunity with respect to matters arising with respect to this
Agreement or the subject matter hereof (including any obligation for the payment
of money). DT agrees that the foregoing waiver is irrevocable and is not subject
to withdrawal in any jurisdiction or under any statute, including the Foreign
Sovereign Immunities Act, 28 U.S.C. sec. 1602 et seq. The foregoing waiver shall
constitute a present waiver of immunity at any time any action is initiated
against DT or any of its Subsidiaries with respect to this Agreement or the
subject matter hereof (including any obligation for the payment of money).
SECTION 9.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
A-49
374
IN WITNESS WHEREOF, the parties have caused this amended and restated
Agreement to be executed on February 8, 2001 by their respective officers
thereunto duly authorized.
VOICESTREAM WIRELESS CORPORATION
By: /s/ JOHN W. STANTON
------------------------------------
Name: John W. Stanton
Title: Chairman and Chief
Executive Officer
DEUTSCHE TELEKOM AG
By: /s/ JEFFREY A. HEDBERG
------------------------------------
Name: Jeffrey A. Hedberg
Title: Member of the Board of
Management, International
By: /s/ KARL-GERHARD EICK
------------------------------------
Name: Dr. Karl-Gerhard Eick
Title: Member of the Board of
Management, Finance
BEGA, INC.
By: /s/ KARL-GERHARD EICK
------------------------------------
Name: Dr. Karl-Gerhard Eick
Title: Director
By: /s/ JEFFREY A. HEDBERG
------------------------------------
Name: Jeffrey A. Hedberg
Title: Director
A-50
375
ANNEX B
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 26, 2000,
AS AMENDED AND RESTATED AS OF FEBRUARY 8, 2001
AMONG
DEUTSCHE TELEKOM AG,
POWERTEL, INC.
AND
BEGA II, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
B-I
376
ARTICLE 1
THE MERGER
Section 1.01. Appointment of Escrow Agent and Formation of Merger Sub..... B-1
Section 1.02. The Merger.................................................. B-2
Section 1.03. The Closing................................................. B-2
Section 1.04. The Merger Exchange......................................... B-2
Section 1.05. Conversion and Exchange of Shares........................... B-3
Section 1.06. Surrender and Payment....................................... B-6
Section 1.07. Permitted Stock Dividend.................................... B-7
Section 1.08. Treatment of Powertel Option Plans.......................... B-7
Section 1.09. Fractional DT Depositary Shares and Fractional DT Ordinary
Shares.................................................... B-8
Section 1.10. The Surviving Corporation................................... B-8
Section 1.11. Lost, Stolen or Destroyed Certificates...................... B-9
Section 1.12. Dissenting Shares........................................... B-9
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF POWERTEL
Section 2.01. Organization................................................ B-9
Section 2.02. Subsidiaries................................................ B-10
Section 2.03. Capital Structure........................................... B-10
Section 2.04. Authority................................................... B-12
Section 2.05. No Conflict; Required Filings and Consents.................. B-12
Section 2.06. SEC Filings; Financial Statements........................... B-13
Section 2.07. Absence of Certain Changes or Events........................ B-13
Section 2.08. Information Provided by Powertel............................ B-13
Section 2.09. Permits; Compliance with Laws............................... B-14
Section 2.10. Tax Matters................................................. B-15
Section 2.11. Liabilities................................................. B-16
Section 2.12. Benefit Plans; Employees and Employment Practices........... B-16
Section 2.13. Litigation.................................................. B-18
Section 2.14. Environmental Matters....................................... B-18
Section 2.15. Section 203 of the Delaware Law............................. B-19
Section 2.16. Intellectual Property....................................... B-19
Section 2.17. Opinion of Financial Advisor................................ B-19
Section 2.18. Brokers..................................................... B-19
Section 2.19. Tax Status.................................................. B-20
Section 2.20. Contracts................................................... B-20
Section 2.21. Vote Required............................................... B-20
Section 2.22. Transactions with Affiliates................................ B-20
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DT
Section 3.01. Organization; Subsidiaries.................................. B-21
Section 3.02. Certificate of Incorporation and Bylaws..................... B-21
Section 3.03. Capital Structure........................................... B-21
Section 3.04. Authority................................................... B-22
Section 3.05. No Conflict; Required Filings and Consents.................. B-22
Section 3.06. SEC Filings; Financial Statements........................... B-23
Section 3.07. Absence of Certain Changes or Events........................ B-23
B-II
377
Section 3.08. Litigation.................................................. B-24
Section 3.09. No Violation of Law......................................... B-24
Section 3.10. Information Provided by DT.................................. B-24
Section 3.11. Board Action; Vote Required................................. B-24
Section 3.12. Brokers..................................................... B-25
Section 3.13. Tax Matters................................................. B-25
Section 3.14. Ownership of Securities..................................... B-25
Section 3.15. Licenses.................................................... B-25
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
Section 4.01. Conduct of Business by Powertel Pending the Merger.......... B-26
Section 4.02. Conduct of Business by DT................................... B-28
Section 4.03. No Solicitation............................................. B-29
Section 4.04. Subsequent Financial Statements............................. B-30
Section 4.05. Control of Operations....................................... B-30
Section 4.06. Alternative Merger Agreement................................ B-30
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.01. Powertel Proxy Statement; the DT Registration Statement and
the German Listing Prospectus............................. B-31
Section 5.02. Powertel Stockholders' Meeting and Consummation of the
Merger.................................................... B-31
Section 5.03. Notification of Certain Matters............................. B-32
Section 5.04. Access to Information....................................... B-33
Section 5.05. Public Announcements........................................ B-33
Section 5.06. Cooperation................................................. B-33
Section 5.07. Indemnification, Directors' and Officers' Insurance......... B-35
Section 5.08. Stock Exchange Listings/Establishment of DT Depositary
Shares.................................................... B-36
Section 5.09. No Shelf Registration....................................... B-36
Section 5.10. Affiliates.................................................. B-36
Section 5.11. Tax-Free Merger............................................. B-36
Section 5.12. Reasonable Best Efforts..................................... B-36
Section 5.13. Takeover Laws............................................... B-36
Section 5.14. Certain Litigation.......................................... B-36
Section 5.15. Senior Discount Notes and Senior Notes...................... B-36
Section 5.16. Employee Benefits........................................... B-37
Section 5.17. Termination of Agreements with Stockholders................. B-38
Section 5.18. Plans and Programs to be Implemented........................ B-38
Section 5.19. Voting Agreement and Transfer Restrictions.................. B-38
Section 5.20. Powertel Warrants........................................... B-39
ARTICLE 6
CLOSING CONDITIONS
Section 6.01. Conditions to Each Party's Obligation to Effect the
Merger.................................................... B-39
Section 6.02. Conditions to the Obligations of Powertel................... B-40
Section 6.03. Conditions to the Obligations of DT......................... B-41
Section 6.04. Pre-Closing Bringdown....................................... B-42
B-III
378
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.01. Termination........................................................................ B-42
Section 7.02. Automatic Termination.............................................................. B-43
Section 7.03. Effect of Termination.............................................................. B-43
Section 7.04. Amendment.......................................................................... B-44
Section 7.05. Waiver............................................................................. B-44
ARTICLE 8
DEFINITIONS
Section 8.01. Certain Definitions................................................................ B-44
Section 8.02. Date of this Agreement; No Waiver.................................................. B-48
ARTICLE 9
GENERAL PROVISIONS
Section 9.01. Non-Survival of Representations, Warranties and Agreements......................... B-49
Section 9.02. Notices............................................................................ B-49
Section 9.03. Expenses........................................................................... B-50
Section 9.04. Headings........................................................................... B-50
Section 9.05. Severability....................................................................... B-51
Section 9.06. Entire Agreement; No Third-Party Beneficiaries..................................... B-51
Section 9.07. Assignment......................................................................... B-51
Section 9.08. Governing Law...................................................................... B-51
Section 9.09. Enforcement; Submission to Jurisdiction; Waivers................................... B-51
Section 9.10. Waiver of Immunity................................................................. B-52
Section 9.11. Counterparts....................................................................... B-52
Section 9.12. Reliance on Representations........................................................ B-52
B-IV
379
INDEX OF DEFINED TERMS
1
1991 Plan............................. B-13
2
2000 Plan............................. B-13
A
Action................................ B-56
Adjusted Fully Diluted Shares......... B-6
Adjusted Series A and B Preferred
Exchange Ratio...................... B-4
Adjusted Series D Preferred Exchange
Ratio............................... B-4
Adjusted Series E and F Preferred
Exchange Ratio...................... B-5
Affiliate............................. B-56
Agreement............................. B-56
Alternative Merger.................... B-1
Alternative Merger Agreement.......... B-1
Alternative Transaction............... B-37
April 1996 Indenture.................. B-56
B
Bringdown Date........................ B-53
Business Day.......................... B-56
C
Certificate........................... B-3
Certificate of Merger................. B-2
Closing............................... B-3
Closing Date.......................... B-3
Code.................................. B-56
Commercial Register................... B-3
Common Stock Exchange Ratio........... B-4
Communications Act.................... B-56
Confidentiality Agreement............. B-37
Control............................... B-56
controlled by......................... B-56
D
D&O Insurance......................... B-44
Delaware Law.......................... B-56
Deposit Agreement..................... B-5
Depositary............................ B-5
DiGiPH Transaction.................... B-56
Dissenting Shares..................... B-11
Dissenting Stockholders Trust......... B-11
DT.................................... B-1
DT ADRs............................... B-5
DT Depositary Shares.................. B-5
DT Equity Rights...................... B-27
DT Filed SEC Documents................ B-30
DT Financial Statements............... B-29
DT Licenses........................... B-32
DT Ordinary Shares.................... B-3
DT Permits............................ B-26
DT Registration Statement............. B-57
DT Required Approvals................. B-29
DT SEC Documents...................... B-29
DT Subsidiary......................... B-61
E
Effective Time........................ B-2
Eliska................................ B-7
Eliska Joint Venture.................. B-57
Eliska Partners....................... B-57
Eliska Partners Shares Trust.......... B-7
Eliska Partners Shares Trust
Amount......................... 1.05(i)-1
Eliska Partners Shares Trustee... 1.05(i)-1
Eliska Partners Trust Agreement.. 1.05(i)-1
Eliska Put............................ B-7
Eliska Put Rights..................... B-7
Environmental Laws.................... B-57
ERISA................................. B-57
ERISA Affiliate....................... B-57
ERISA Benefit Plan.................... B-57
Escrow Agency Agreement............... B-2
Escrow Agent.......................... B-2
Excess ADSs........................... B-10
Excess Shares......................... B-10
Exchange Act.......................... B-57
Excluded Powertel Share............... B-4
Exon-Florio........................... B-57
F
FAA................................... B-57
FCC................................... B-58
February 1996 Indenture............... B-58
Final Order........................... B-58
Form F-4.............................. B-38
Fractional Interest................... B-10
FSE................................... B-10
G
GAAP.................................. B-58
German Act............................ B-3
German Listing Prospectus............. B-58
Governmental or Regulatory
Authority........................... B-58
H
Hazardous Substances.................. B-58
HSR Act............................... B-58
B-V
380
I
Indebtedness.......................... B-58
Indemnified Person.................... B-44
Intellectual Property Rights.......... B-58
Investment Entity..................... B-59
Investment Interest................... B-59
J
June 1997 Indenture................... B-59
K
Knowledge............................. B-59
L
Legal Requirements.................... B-18
Letter of Transmittal................. B-7
Liabilities........................... B-59
Liens................................. B-59
M
Material Adverse Effect............... B-59
Maximum Share Amount.................. B-6
Merger................................ B-2
Merger Consideration Recipients....... B-3
Merger Consideration.................. B-5
Merger Sub............................ B-1
Merger Sub Common Stock............... B-2
N
Nasdaq................................ B-8
Nonemployee Option Plan............... B-13
Notes................................. B-46
NYSE.................................. B-10
O
Options Trust......................... B-9
Options Trust Agreement.......... 1.08(a)-1
Options Trustee.................. 1.08(a)-1
Ordinary Share Election............... B-5
P
Parties............................... B-1
Party................................. B-1
Permitted Stock Dividend.............. B-9
Person................................ B-59
Powertel.............................. B-1
Powertel Acquisition Agreement........ B-40
Powertel Benefit Plans................ B-59
Powertel Common Stock................. B-4
Powertel Common Stock Equivalents..... B-14
Powertel Contracts.................... B-25
Powertel Employee..................... B-60
Powertel Equity Rights................ B-14
Powertel FCC Licenses................. B-18
Powertel Filed SEC Documents.......... B-16
Powertel Financial Advisor............ B-24
Powertel Indentures................... B-46
Powertel Option Amount................ B-9
Powertel Permits...................... B-18
Powertel Preferred Stock.............. B-13
Powertel Principal Stockholders....... B-60
Powertel Proxy Statement.............. B-17
Powertel Required Approvals........... B-16
Powertel Restricted Stock Award....... B-60
Powertel Rollover Option.............. B-9
Powertel SEC Documents................ B-16
Powertel Stock........................ B-13
Powertel Stock Option Plans........... B-13
Powertel Stock Options................ B-13
Powertel Stock Rights................. B-14
Powertel Stock Trust.................. B-10
Powertel Stockholder Agreements....... B-1
Powertel Stockholder Approval......... B-15
Powertel Stockholders' Meeting........ B-40
Powertel Subsidiaries................. B-12
Powertel Subsidiary................... B-61
Powertel Warrant Agreement............ B-6
Powertel Warrants..................... B-6
R
Required Regulatory Approvals......... B-29
Restated By-laws of Powertel.......... B-60
Restated Certificate of Incorporation
of Powertel......................... B-60
Restricted Stock Plan................. B-13
S
Securities Act........................ B-60
Senior Discount Notes................. B-60
Senior Notes.......................... B-60
Series A and B Preferred Exchange
Ratio............................... B-4
Series A Preferred Shares............. B-13
Series B Preferred Shares............. B-13
Series C Preferred Shares............. B-13
Series D Preferred Exchange Ratio..... B-4
Series D Preferred Shares............. B-13
Series E and F Preferred Exchange
Ratio............................... B-4
Series E Preferred Shares............. B-13
Series F Preferred Shares............. B-13
Significant Employee.................. B-60
Significant Subsidiary................ B-60
Sonera Put............................ B-7
Subsequent Determination.............. B-40
Subsequent Transaction................ B-60
Subsidiary............................ B-61
Superior Proposal..................... B-40
B-VI
381
Surviving Corporation................. B-2
Surviving Corporation Common Stock.... B-5
T
Tax................................... B-61
Tax Returns........................... B-61
Taxes................................. B-61
Termination Date...................... B-53
Termination Fee....................... B-55
Third Party........................... B-37
U
under common control with............. B-56
V
VoiceStream........................... B-1
VoiceStream Merger.................... B-1
VoiceStream Merger Agreement.......... B-1
VoiceStream Stockholder Agreements.... B-61
W
Warrants Trust........................ B-6
Warrants Trust Agreement......... 1.05(h)-1
Warrants Trust Amount............ 1.05(h)-1
Warrants Trustee................. 1.05(h)-1
B-VII
382
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of August 26, 2000, as amended
and restated as of February 8, 2001, among DEUTSCHE TELEKOM AG, an
AKTIENGESELLSCHAFT organized and existing under the laws of the Federal Republic
of Germany ("DT"), POWERTEL, INC., a Delaware corporation ("POWERTEL") and BEGA
II, INC., a Delaware corporation formed by DT ("MERGER SUB") (each a "PARTY"
and, together, the "PARTIES").
WITNESSETH:
WHEREAS, VoiceStream Wireless Corporation, a Delaware corporation
("VOICESTREAM"), and DT entered into an Agreement and Plan of Merger dated as of
July 23, 2000 (as amended or modified from time to time, the "VOICESTREAM MERGER
AGREEMENT"), providing for the acquisition of VoiceStream by DT (the
"VOICESTREAM MERGER") and VoiceStream and Powertel are entering into a separate
merger agreement dated as of the date hereof (as amended or modified from time
to time (the "ALTERNATIVE MERGER AGREEMENT"), providing for the acquisition of
Powertel by VoiceStream (the "ALTERNATIVE MERGER") if the VoiceStream Merger
Agreement is terminated and certain other conditions are satisfied or waived;
WHEREAS, the Management Board (VORSTAND) and the Supervisory Board
(AUFSICHTSRAT) of DT and the Board of Directors of Powertel have determined that
it is fair to and in the best interests of their respective companies and
stockholders to consummate the strategic combination transaction provided for in
this Agreement and the other transactions contemplated hereby in accordance with
the laws of their respective jurisdictions of organization and have authorized
the execution and delivery of this Agreement;
WHEREAS, the Board of Directors of Merger Sub has determined that it is
advisable and in the best interests of Merger Sub and its stockholder to
consummate the strategic combination transaction provided for in this Agreement
and has authorized the execution and delivery of this Agreement, and DT, as
Merger Sub's sole current stockholder, has approved and adopted this Agreement;
WHEREAS, simultaneously with the execution and delivery of this Agreement
and the Alternative Merger Agreement, as part of a single overall transaction,
and to induce DT to enter into this Agreement, certain stockholders of Powertel
are each entering into a stockholder agreement (collectively, the "POWERTEL
STOCKHOLDER AGREEMENTS") with DT dated as of the date hereof;
WHEREAS, for United States federal income tax purposes the parties intend
that the Merger (as defined below) will qualify (i) as a reorganization within
the meaning of Section 368(a) of the Code (as defined below) and (ii) for an
exception to the general rule of Section 367(a)(1) of the Code; and
WHEREAS, DT and Powertel desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, DT, Powertel and Merger Sub hereby agree
as follows:
ARTICLE 1
THE MERGER
SECTION 1.01. Appointment of Escrow Agent and Formation of Merger
Sub. (a) Merger Sub is a corporation incorporated pursuant to Delaware Law and
is a constituent company in the Merger. Except as provided in, or contemplated
by, the last sentence of Section 1.01(b), DT owns 100 percent of the outstanding
capital stock of Merger Sub.
B-1
383
(b) As soon as practicable after the date hereof, DT shall appoint a United
States bank or trust company or other independent financial institution in the
United States reasonably satisfactory to Powertel to act, inter alia, as escrow
agent and exchange agent for the Merger and the delivery of the Merger
Consideration (as defined below) to former stockholders of Powertel and the
other Merger Consideration Recipients (as defined below) (the "ESCROW AGENT").
DT and Powertel shall enter into an escrow agency agreement with the Escrow
Agent, in substantially the same form as the Escrow Agency Agreement to be
entered into in connection with the VoiceStream Merger Agreement but with such
changes as may be appropriate (the "ESCROW AGENCY AGREEMENT"), which agreement
shall set forth the duties, responsibilities and obligations of the Escrow Agent
consistent with the terms of this Agreement. Solely to accommodate the
transactions described in this Article 1 and subject to the terms and conditions
of the Escrow Agency Agreement, one day prior to the Effective Time DT shall
cause the Escrow Agent to be registered, as DT's fiduciary (for the period prior
to the Effective Time) as the record holder of all of the issued and outstanding
shares of common stock, par value $.000001 per share, of Merger Sub (the "MERGER
SUB COMMON STOCK").
SECTION 1.02. The Merger. (a) Upon the terms and subject to the
conditions of this Agreement and in accordance with Delaware Law, on the Closing
Date (as defined below), Powertel will cause a certificate of merger (the
"CERTIFICATE OF MERGER") to be executed and filed with the Secretary of State of
the State of Delaware and make all other filings or recordings required by
applicable law in connection with the Merger. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware or at such later time as is specified in the
Certificate of Merger in accordance with Delaware Law (the "EFFECTIVE TIME").
(b) Upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time, Merger Sub shall be merged with and into
Powertel in accordance with Delaware Law (the "MERGER"), whereupon the separate
existence of Merger Sub shall cease, Powertel shall be the surviving corporation
in the Merger (the "SURVIVING CORPORATION") and shall continue to be governed by
the laws of the State of Delaware, and the separate corporate existence of
Powertel, with all its rights, privileges, immunities, powers and franchises,
shall continue unaffected by the Merger except as set forth in this Article 1.
The Merger shall have the effects specified in Delaware Law.
SECTION 1.03. The Closing. On the later of (i) the fifth Business Day
after the last to be fulfilled or waived of the conditions set forth in Article
6 hereof (other than the conditions contained in Sections 6.02(c), 6.02(d),
6.02(e), 6.03(c), 6.03(d) and 6.03(e) so long as it is reasonably apparent that
such conditions and the condition contained in Section 6.01(b) will be able to
be satisfied at the Closing) shall be fulfilled or waived in accordance with
this Agreement, and (ii) May 31, 2001, the closing of the Merger (the "CLOSING")
shall be held (but only after all of the conditions set forth in Article 6 shall
have been satisfied or waived prior to the Effective Time) at such time as DT
and Powertel shall agree (the "CLOSING DATE") at the offices of Cleary,
Gottlieb, Steen & Hamilton, New York, New York, unless this Agreement shall have
been terminated and the transactions contemplated by this Agreement abandoned
pursuant to Article 7 or unless another date, time or place is agreed to in
writing by DT and Powertel.
SECTION 1.04. The Merger Exchange.
(a) Upon the terms and subject to the conditions of this Agreement and the
Escrow Agency Agreement, as soon as possible after the Effective Time, (x) on
the Closing Date, the Escrow Agent shall contribute, for the account of the
former stockholders of Powertel, all of the issued and outstanding shares of the
Surviving Corporation Common Stock (as defined below) to DT as a transfer in
kind, and (y) DT shall deliver the Merger Consideration to the Escrow Agent for
the account of (i) the former stockholders of Powertel, (ii) the Options Trustee
(as defined in Annex 1.08(a)), (iii) the Warrants Trustee (as defined in Annex
1.05(h)), (iv) the Eliska Partners Shares Trustee (as defined in Annex 1.05(i))
and (v) the Dissenting Stockholders Trustee (as defined in Annex 1.12 below)
(collectively, the "MERGER CONSIDERATION RECIPIENTS"). DT and the Escrow Agent
shall effect the foregoing in accordance with Sections 183 et seq. and 203 et
seq. of the German Stock Corporation Act (AKTIENGESETZ) (the "GERMAN ACT") by
registering the increase of the DT stated share capital with the commercial
register
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(HANDELSREGISTER) for DT (the "COMMERCIAL REGISTER") as soon as possible after
the Effective Time. In the event that, in connection with the performance of
DT's obligations in this Section 1.04(a), on or prior to the Closing Date the
Management Board of DT passes a resolution to increase the issued capital of DT
in accordance with Article 5(2) of the Articles of Association of DT by such
number of shares as is equal to the number of shares to be delivered as part of
the Merger Consideration, and the Supervisory Board shall have consented
thereto, then (i) the Escrow Agent shall promptly subscribe for such new
ordinary shares of DT ("DT ORDINARY SHARES") to be issued as part of the Merger
Consideration and shall promptly on the Closing Date make the contribution to DT
referred to in the first sentence of this Section 1.04(a) and (ii) the
Management Board and the chairman of the Supervisory Board shall as soon as
possible thereafter file the application for registration of the implementation
of the capital increase with the Commercial Register, with the effect that, on
registration of the capital increase in the Commercial Register, such new DT
Ordinary Shares shall by operation of law be held solely by the Escrow Agent for
delivery to and for the benefit of the Merger Consideration Recipients. At the
Effective Time, the obligations of DT and the Escrow Agent under this Section
1.04(a) shall be unconditional.
(b) Each share certificate (a "CERTIFICATE") formerly representing any
Powertel Stock (as defined below) (other than Excluded Powertel Shares (as
defined below) and Dissenting Shares (as defined below)) shall thereafter
represent only the right to receive the Merger Consideration as set forth in
Section 1.05(b) and the right, if any, to receive pursuant to Section 1.09 cash
in lieu of fractional DT Depositary Shares (as defined below) or fractional DT
Ordinary Shares, as applicable, and any dividend or distribution pursuant to
Section 1.06(f), in each case, without interest. The DT Ordinary Shares and the
DT Depositary Shares issued as provided in Section 1.05 shall be of the same
class and shall have the same rights as the currently outstanding DT Ordinary
Shares and the currently outstanding DT Depositary Shares, respectively.
SECTION 1.05. Conversion and Exchange of Shares. At the Effective Time:
(a) Each share of common stock, par value $0.01 per share, of Powertel
("POWERTEL COMMON STOCK") and Powertel Preferred Stock (as defined below) owned
by DT or Powertel immediately prior to the Effective Time (each, an "EXCLUDED
POWERTEL SHARE") shall, by virtue of the Merger, and without any action on the
part of the holder thereof, no longer be outstanding, be cancelled and retired
without payment of any consideration therefor and shall cease to exist.
(b) By virtue of the Merger and without any action on the part of the
holder thereof (in each of the following cases other than Excluded Powertel
Shares) and subject to the further provisions of this Section 1.05:
(i) each share of Powertel Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive 2.6353 validly issued, fully paid and nonassessable DT Ordinary
Shares (the "COMMON STOCK EXCHANGE RATIO");
(ii) each share of Powertel Series A Preferred Shares (as defined
below) and Powertel Series B Preferred Shares (as defined below) issued and
outstanding immediately prior to the Effective Time shall be converted into
the right to receive 121.9294 validly issued, fully paid and nonassessable
DT Ordinary Shares (the "SERIES A AND B PREFERRED EXCHANGE RATIO"),
provided, that if the Permitted Stock Dividend (as defined below) is
declared and paid prior to the Effective Time, the Series A and B Preferred
Exchange Ratio shall be 122.8439 (the "ADJUSTED SERIES A AND B PREFERRED
EXCHANGE RATIO");
(iii) each share of Powertel Series D Preferred Shares (as defined
below) issued and outstanding immediately prior to the Effective Time shall
be converted into the right to receive 93.0106 validly issued, fully paid
and nonassessable DT Ordinary Shares (the "SERIES D PREFERRED EXCHANGE
RATIO"), provided, that if the Permitted Stock Dividend is declared and
paid prior to the Effective Time, the Series D Preferred Exchange Ratio
shall be 93.7082 (the "ADJUSTED SERIES D PREFERRED EXCHANGE RATIO"); and
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(iv) each share of Powertel Series E Preferred Shares (as defined
below) and Powertel Series F Preferred Shares (as defined below) issued and
outstanding prior to the Effective Time shall be converted into the right
to receive (A) 179.5979 validly issued, fully paid and non-assessable DT
Ordinary Shares (the "SERIES E AND F PREFERRED EXCHANGE RATIO"), plus (B) a
number of validly issued, fully paid and nonassessable DT Ordinary Shares
equal to the product of the number of shares of Powertel Common Stock
representing accrued or declared but unpaid dividends on such Powertel
Series E Preferred Share or Powertel Series F Preferred Share (calculated
as if the Closing Date were a dividend payment date), as the case may be,
and the Common Stock Exchange Ratio, provided, that if the Permitted Stock
Dividend is declared and paid prior to the Effective Time, the Series E and
F Preferred Exchange Ratio shall be 180.9449 (the "ADJUSTED SERIES E AND F
PREFERRED EXCHANGE RATIO").
The consideration payable pursuant to this paragraph (b) is referred to herein
as the "MERGER CONSIDERATION."
(c) Any DT Ordinary Shares constituting a portion of the Merger
Consideration shall be delivered to the holders of Powertel Stock in the form of
American depositary shares, each representing the right to receive one DT
Ordinary Share (the "DT DEPOSITARY SHARES"). The DT Depositary Shares may be
evidenced by one or more receipts ("DT ADRs") issued in accordance with the
Deposit Agreement, dated as of November 18, 1996, as amended, among DT, Citibank
N.A., as Depositary (the "DEPOSITARY"), and the holders and beneficial owners
from time to time of DT ADRs, as it may be further amended from time to time
(the "DEPOSIT AGREEMENT"). Notwithstanding the foregoing, each Person who is
entitled to receive DT Ordinary Shares as Merger Consideration shall be
entitled, with respect to all or any portion of his Powertel Stock, to make an
unconditional and irrevocable election (the "ORDINARY SHARE ELECTION") to
receive DT Ordinary Shares in lieu of DT Depositary Shares. The Letter of
Transmittal (as defined below) shall contain a form of Ordinary Share Election
and shall be used by each holder of Powertel Stock who wishes to make an
Ordinary Share Election.
(d) Each share of Merger Sub Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger, and
without any action on the part of the holder thereof, no longer be outstanding,
be cancelled and retired. Immediately following the Effective Time, the
Surviving Corporation shall issue to the Escrow Agent a number of shares of
common stock, par value $0.000001 per share, of the Surviving Corporation
("SURVIVING CORPORATION COMMON STOCK") equal to the total number of Adjusted
Fully Diluted Shares (as defined below) outstanding immediately prior to the
Merger.
(e) In consideration of the contribution to DT by the Escrow Agent of
Surviving Corporation Common Stock pursuant to Section 1.04(a) hereof, DT shall
issue, in accordance with Section 1.04(a), and deliver to the Escrow Agent, the
maximum number of DT Ordinary Shares (including DT Ordinary Shares underlying DT
Depositary Shares that are to be delivered as part of the Merger Consideration)
that has become payable pursuant to Section 1.05 for delivery to the Merger
Consideration Recipients entitled thereto.
(f) If, between the date of this Agreement and the Effective Time, all of
the outstanding DT Ordinary Shares, or more than 80% of the outstanding DT
Ordinary Shares pursuant to an exchange offer for all outstanding shares, shall
have been changed into or exchanged for a different number of shares or kind of
shares of DT or another corporation or entity owning more than 80% of the DT
Ordinary Shares, or the DT Ordinary Shares outstanding shall have changed, by
reason of any reclassification, split-up, stock-split, reverse stock-split,
stock dividend, stock combination, recapitalization or redenomination of share
capital, merger or similar statutory procedure or pursuant to an exchange offer,
or DT changes the number of DT Ordinary Shares represented by a DT Depositary
Share, then the Common Stock Exchange Ratio, the Series A and B Preferred
Exchange Ratio, the Series D Preferred Exchange Ratio, the Series E and F
Preferred Exchange Ratio and the amount of any portion of the Merger
Consideration that would otherwise be payable in DT Ordinary Shares and the
issuer thereof and other definitions and provisions of this Agreement dependent
thereon shall be appropriately adjusted.
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(g) In the event that the aggregate number of shares of Powertel Common
Stock and the Powertel Common Stock Equivalents (as defined below) ("ADJUSTED
FULLY DILUTED SHARES") exceeds the Maximum Share Amount (as defined below) as of
the Effective Time, excluding, for purposes of this Section 1.05(g), Powertel
Common Stock issuable after the date hereof and prior to the Effective Time in
respect of dividends accrued on the Series E Preferred Shares and the Series F
Preferred Shares, each of the Common Stock Exchange Ratio, the Series A and B
Preferred Exchange Ratio, the Series D Preferred Exchange Ratio, the Series E
and F Preferred Exchange Ratio, the Adjusted Series A and B Preferred Exchange
Ratio, the Adjusted Series D Preferred Exchange Ratio and the Adjusted Series E
and F Preferred Exchange Ratio shall be adjusted by multiplying each of the
Common Stock Exchange Ratio, the Series A and B Preferred Exchange Ratio or the
Adjusted Series A and B Preferred Exchange Ratio, as applicable, the Series D
Preferred Exchange Ratio or the Adjusted Series D Preferred Exchange Ratio, as
applicable, and the Series E and F Preferred Exchange Ratio or the Adjusted
Series E and F Preferred Exchange Ratio, as applicable, by a fraction the
numerator of which shall be the Maximum Share Amount and the denominator of
which shall be the number of Adjusted Fully Diluted Shares as of the Effective
Time. Except as described in the preceding sentence, the number of shares of
Powertel Common Stock and Powertel Common Stock Equivalents for the purpose of
such recalculation shall be determined in the same manner as described in
SCHEDULE 2.03, including the shares of Powertel Stock actually outstanding and
shares of Powertel Stock issuable (i) in exchange for Powertel Preferred Stock,
(ii) pursuant to Powertel Stock Options (as defined below) and Powertel Warrants
(as defined below), (iii) pursuant to Powertel Restricted Stock Awards (as
defined below), (iv) in connection with the Eliska Put Rights (as defined below)
and (v) any other Powertel Common Stock and Powertel Common Stock Equivalents
outstanding as of the Effective Time. For purposes of this Section 1.05(g), the
"MAXIMUM SHARE AMOUNT" means 55,742,000 shares; provided, however, that if the
Permitted Stock Dividend is paid prior to the Effective Time, the Maximum Share
Amount shall mean instead 56,160,000 shares; provided further, however, that if
prior to the Effective Time the Eliska Put (as defined below) or the Sonera Put
(as defined below) shall have been terminated, the Maximum Share Amount shall be
appropriately reduced.
(h) Warrants. If all the warrants (the "POWERTEL WARRANTS") to purchase
Powertel Common Stock issued by Powertel pursuant to the Warrant Agreement (the
"POWERTEL WARRANT AGREEMENT") dated February 7, 1996 between Powertel and
Bankers Trust Company, as warrant agent, shall not have been exercised prior to
the Effective Time and any holder of such Powertel Warrants becomes entitled to
DT Ordinary Shares after the Effective Time, such DT Ordinary Shares to which
such holder of Powertel Warrants is entitled will be issued from a U.S. trust,
as described in Annex 1.05(h) (which shall be in form and substance reasonably
satisfactory to DT and Powertel, the "WARRANTS TRUST"), and to the extent any
holder of Powertel Warrants becomes entitled to cash payment after the Effective
Time, such cash payment to which such holder of Powertel Warrants is entitled
will be paid by DT.
(i) Eliska Partners.
(i) To the extent that prior to the Effective Time, any of the Eliska
Partners receives Powertel Common Stock in respect of its rights to sell
its interest in the Eliska Joint Venture pursuant to (x) the Put Agreement
dated May 30, 2000 between Powertel and Sonera Holding B.V. (the "SONERA
PUT") or (y) the Put Agreement dated May 30, 2000 between Powertel, Eliska
Wireless Investors I, L.P. ("ELISKA") and Sonera Holding B.V. (the "ELISKA
PUT," and together with the Sonera Put, the "ELISKA PUT RIGHTS"), such
Eliska Partner shall have all the rights with respect to such Powertel
Common Stock which a Powertel stockholder has.
(ii) To the extent that any of the Eliska Partners does not receive
Powertel Common Stock prior to the Effective Time in respect of its Eliska
Put Rights, such Eliska Partner shall be entitled to receive DT Ordinary
Shares, DT Depositary Shares or cash as the case may be, pursuant to the
Eliska Put Rights. To the extent that, on or after the Effective Time, an
Eliska Partner is entitled to DT Ordinary Shares, such shares will be
delivered from a U.S. trust, as described in Annex 1.05(i) (which shall be
in form and substance reasonably satisfactory to DT and Powertel, the
"ELISKA PARTNERS SHARES TRUST") and to the extent that such Eliska Partner
is entitled to cash, such cash shall
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be paid by DT. The consideration payable to an Eliska Partner pursuant to
this clause (ii) shall not constitute Merger Consideration for the purpose
of this Agreement.
(iii) Prior to the date hereof Powertel, DT and the Eliska Partners
have entered into an agreement pursuant to which the Eliska Partners have
consented to the assumption by DT of Powertel's obligations under the
Eliska Put Rights and the treatment of the Eliska Put Rights as
contemplated by this Agreement.
SECTION 1.06. Surrender and Payment. (a) Promptly after the Effective
Time, DT shall cause the Surviving Corporation to send, or will cause the Escrow
Agent to send, to each holder of record as of the Effective Time of Powertel
Stock (other than holders of Excluded Powertel Shares) a letter of transmittal
which shall specify that the delivery of Certificates shall be effected, and
risk of loss and title shall pass, only upon proper delivery of a Certificate to
the Escrow Agent, and instructions for use in effecting the surrender to the
Escrow Agent of Certificates in exchange for the Merger Consideration (the
"LETTER OF TRANSMITTAL"). The Letter of Transmittal shall contain such other
terms and conditions as DT and Powertel may reasonably specify.
(b) Each record holder of any Powertel Stock (other than Excluded Powertel
Shares) shall, upon surrender to the Escrow Agent of a Certificate or
Certificates representing such shares of Powertel Stock, together with a
properly completed Letter of Transmittal covering the Powertel Stock represented
by such Certificate or Certificates, without further action, be entitled to
receive, and the Escrow Agent shall deliver (and DT shall cause the Escrow Agent
to deliver) to each such holder, subject to Section 1.06(e) below, (i) the
number of whole DT Depositary Shares or DT Ordinary Shares included in the
Merger Consideration in respect of such Powertel Stock, subject to the
provisions of Section 1.05, and (ii) a check in the amount (after giving effect
to any required tax withholdings) of (A) any cash in lieu of Fractional
Interests (as defined below) to be paid pursuant to Section 1.09, plus (B) any
cash dividends or other distributions that such holder has the right to receive
pursuant to Section 1.06(f). Until so surrendered, each such Certificate shall,
after the Effective Time, represent for all purposes only the right to receive
the number of whole DT Depositary Shares or DT Ordinary Shares, as applicable,
to which it is entitled pursuant to Section 1.05 and the applicable amounts of
cash provided in the foregoing clause (ii) of the preceding sentence.
(c) If any DT Depositary Shares or DT Ordinary Shares are to be delivered
to a Person other than the registered holder of the Powertel Stock represented
by a Certificate or Certificates surrendered with respect thereto, it shall be a
condition to such issuance that the Certificate or Certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such delivery shall pay to the Escrow Agent any transfer
or other taxes required as a result of such delivery to a Person other than the
registered holder of such Powertel Stock or establish to the satisfaction of the
Escrow Agent that such tax has been paid or is not payable.
(d) The stock transfer books of Powertel shall be closed after the close of
trading on the National Market System (the "NASDAQ") on the trading day
immediately prior to the Effective Time, and thereafter there shall be no
further registration of transfers of Powertel Common Stock that were outstanding
prior to the Effective Time except that such stock transfer books shall be
updated to reflect the Permitted Stock Dividend, if paid after such books are
otherwise closed. After the Effective Time, Certificates presented to the
Surviving Corporation for transfer shall be cancelled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this Article 1.
(e) Any DT Ordinary Shares issued and delivered in respect of Powertel
Stock pursuant to this Article 1 and any cash in lieu of Fractional Interests to
be paid pursuant to Section 1.09, plus any cash dividend or other distribution
that such holder has the right to receive pursuant to Section 1.06(f) that
remains unclaimed by any holder of Powertel Stock six months after the Effective
Time, shall be held by the Escrow Agent (or a successor agent appointed by DT)
or shall be delivered to the Depositary upon the instruction of DT and held by
the Depositary, in either case subject to the instruction of DT, in an account
or accounts designated for such purpose. None of DT, Merger Sub, Powertel, the
Surviving Corporation or the Exchange Agent shall be liable to any holder of
Powertel Stock for any securities
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delivered or any amount paid by the Depositary, the Escrow Agent or its nominee,
as the case may be, to a public official which it is so required to pay under
applicable abandoned property laws. Any cash remaining unclaimed by holders of
Powertel Stock five years after the Effective Time (or such earlier date
immediately prior to such time as such cash would otherwise escheat to or become
property of any Governmental or Regulatory Authority or as is otherwise provided
by any applicable Legal Requirement (as defined below)) shall, to the extent
permitted by applicable Legal Requirements, become the property of the Surviving
Corporation or DT, as DT may determine.
(f) No dividends or other distributions nor any voting rights with respect
to securities of DT issuable to the Escrow Agent with respect to Powertel Stock
shall be paid to or exercised by the holder of any unsurrendered Certificates
until such Certificates are surrendered as provided in this Section. Subject to
the effect of applicable Legal Requirements, upon such surrender, there shall be
issued and/or paid to the holder of DT Depositary Shares or DT Ordinary Shares
issued in exchange therefor, without interest and after giving effect to any
required tax withholding, (A) at the time of such surrender, the dividends or
other distributions payable with respect to such DT Depositary Shares or DT
Ordinary Shares with a record date after the Effective Time and a payment date
on or prior to the date of such surrender and not previously paid and (B) at the
appropriate payment date, the dividends or other distributions payable with
respect to such DT Depositary Shares or DT Ordinary Shares with a record date
after the Effective Time but with a payment date subsequent to such surrender.
For purposes of dividends or other distributions in respect of DT Depositary
Shares or DT Ordinary Shares, all DT Depositary Shares and DT Ordinary Shares to
be issued pursuant to the Merger shall be deemed issued and outstanding as of
the Effective Time. Notwithstanding the foregoing, no dividends or other
distributions nor any voting rights with respect to securities of DT issuable to
the Escrow Agent for the account of the Options Trustee, the Warrants Trustee,
the Eliska Partners Shares Trustee and the Dissenting Stockholders Trustee shall
be paid to or exercised by any such trustees.
SECTION 1.07. Permitted Stock Dividend. Anything in this Agreement to the
contrary notwithstanding, at any time prior to the Effective Time, Powertel may
declare, and thereafter make, a pro rata distribution, including distribution of
fractional shares, to the holders of the then outstanding Powertel Common Stock
of 0.0075 of a share of Powertel Common Stock for each share of Powertel Common
Stock outstanding on the record date for such action (the "PERMITTED STOCK
DIVIDEND"), and the conversion or exercise terms of any Powertel Equity Rights
(as defined below) that by its terms (as in effect on February 8, 2001 in the
case of Powertel Equity Rights outstanding on February 8, 2001), adjusts as a
result of such Permitted Stock Dividend (whether automatically, or upon the
taking of any corporate action or action by the board of directors of Powertel
or of any subsidiary of Powertel) shall be so adjusted. In the event that a
Permitted Stock Dividend is paid, the exchange ratios for the exchange of
Powertel preferred stock for DT Ordinary Shares will be adjusted as provided in
Section 1.05(b)(ii)-(iv) above.
SECTION 1.08. Treatment of Powertel Option Plans. (a) Subject to the
consummation of the Merger, immediately prior to the Effective Time, each
outstanding Powertel Stock Option will be converted (and such Powertel Stock
Option will be extinguished) into a right to acquire (each, a "POWERTEL ROLLOVER
OPTION") from a U.S. trust, as described in Annex 1.08(a) (which shall be in
form and substance reasonably satisfactory to DT and Powertel, the "OPTIONS
TRUST") on the same terms and conditions as were applicable under the Powertel
Stock Option (but taking into account any changes thereto, including any
acceleration thereof, provided for in the option award or in the Powertel Stock
Option Plans listed on SCHEDULE 1.08 and applicable to such Powertel Stock
Options by reason of this Agreement or the transactions contemplated hereby)
that number of DT Ordinary Shares (the "POWERTEL OPTION AMOUNT") determined by
multiplying the maximum number of shares of Powertel Common Stock subject to
such Powertel Stock Option by the Common Stock Exchange Ratio, rounded if
necessary to the nearest whole DT Ordinary Share at an exercise price per DT
Ordinary Share equal to the exercise price per share of Powertel Common Stock in
effect with respect to such Powertel Stock Option immediately prior to the
Effective Time divided by the Common Stock Exchange Ratio. In order to implement
the conversion of the Powertel Stock Options described above, the arrangements
set forth in Annex 1.08(a)
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will be effected at the Effective Time. In the case of a Powertel Stock Option
which is intended to be an incentive stock option under Section 422 of the Code,
the adjustment in this Section 1.08 shall be modified if necessary to permit
such Powertel Stock Option to continue to comply with Section 422 of the Code.
(b) To the extent that any Person would otherwise be entitled to receive a
fraction of a DT Ordinary Share pursuant to this Section 1.08, such fraction
shall be treated in accordance with Section 1.09.
(c) As soon as practicable after the Effective Time, DT shall cause to be
delivered to the holders of Powertel Stock Options appropriate notices setting
forth such holders' rights pursuant to the respective Powertel Stock Option
Plans and agreements evidencing the grants of such Powertel Stock Options
(including that, in connection with the Merger and to the extent provided by the
terms of the Powertel Stock Option Plans award agreements thereunder, the
Powertel Stock Options subject to change of control vesting have become fully
vested).
(d) No later than the Effective Time, DT shall file or cause to be filed
with the SEC a registration statement on an appropriate form or a post-effective
amendment to a previously filed registration statement under the Securities Act
with respect to the DT Ordinary Shares and DT Depositary Shares which are
subject to the Powertel Rollover Options as provided in Section 1.08(a), and
shall use reasonable best efforts to maintain the current status of the
prospectus associated therewith, as well as to comply with any applicable state
securities or "blue sky" laws for so long as such options remain outstanding.
SECTION 1.09. Fractional DT Depositary Shares and Fractional DT Ordinary
Shares. No fraction of a DT Depositary Share or a DT Ordinary Share will be
issued to holders of Powertel Stock, but each holder of Powertel Stock otherwise
entitled to receive a fraction of a DT Depositary Share or DT Ordinary Share
will be entitled to receive in accordance with the provisions of this Section
1.09 from the Escrow Agent a cash payment in lieu of such fraction of a DT
Depositary Share or DT Ordinary Share, as applicable (each a "FRACTIONAL
INTEREST") representing such holder's proportionate interest in the net proceeds
from the sale by the Escrow Agent on behalf of all such holders of the aggregate
of the fractions of DT Depositary Shares and DT Ordinary Shares which would
otherwise be issued ("EXCESS ADSs" and "EXCESS SHARES", respectively). The sale
of the Excess ADSs and the Excess Shares by the Escrow Agent shall be executed
on the New York Stock Exchange, Inc. (the "NYSE") and the Frankfurt Stock
Exchange (the "FSE"), respectively, through one or more member firms of the NYSE
or the FSE, as the case may be, and shall be executed in round lots to the
extent practicable. Until the net proceeds of such sale or sales have been
distributed to the holders of Powertel Stock otherwise entitled to receive
Fractional Interests, the Escrow Agent will hold such proceeds in trust for such
holders of Powertel Stock (the "POWERTEL STOCK TRUST"). DT shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation, of the Escrow Agent incurred in connection with
such sale of the Excess ADSs and Excess Shares. The Escrow Agent shall determine
the portion of the Powertel Stock Trust to which each holder of Powertel Stock
shall be entitled, if any, by multiplying the amount of the aggregate net
proceeds comprising the Powertel Stock Trust by a fraction, the numerator of
which is the amount of Fractional Interests to which such holder of Powertel
Stock is entitled and the denominator of which is the aggregate amount of
Fractional Interests to which all holders of Powertel Stock are entitled. As
soon as practicable after the determination of the amount of cash, if any, to be
paid to holders of Powertel Stock in lieu of any Fractional Interests, the
Escrow Agent shall make available such amounts to such holders of Powertel Stock
without interest.
SECTION 1.10. The Surviving Corporation. (a) The certificate of
incorporation of Powertel in effect at the Effective Time shall, by virtue of
the Merger, be amended and restated as of the Effective Time to be identical to
the certificate of incorporation of Merger Sub (except that Article 1 thereof
shall read: "The name of the Corporation is Powertel, Inc." and, as so amended
and restated, shall be the certificate of incorporation of the Surviving
Corporation until amended in accordance with applicable law).
(b) The bylaws of Merger Sub in effect at the Effective Time shall be the
bylaws of the Surviving Corporation until amended in accordance with applicable
law.
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(c) The directors of Merger Sub and the officers of Powertel immediately
prior to the Effective Time shall be the directors and officers of the Surviving
Corporation, respectively, and such individuals shall serve in such positions
until their successors shall have been duly elected and shall qualify.
SECTION 1.11. Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the holder's
compliance with the replacement requirements established by the Escrow Agent,
including, if necessary, the posting by such Person of a bond in customary
amount as indemnity against any claim that may be made against it with respect
to such Certificate, the Escrow Agent will issue (or cause to be issued) in
exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration and any cash payable in lieu of Fractional Interests and any
unpaid dividends or other distributions deliverable pursuant to Section 1.06(f)
in respect of the Powertel Stock represented by such Certificate pursuant to
this Agreement.
SECTION 1.12. Dissenting Shares. Series A, B, D, E and F Preferred Shares
which are issued and outstanding immediately prior to the Effective Time and
which are held by a holder who has not voted such shares in favor of the Merger,
who shall have delivered a written demand for appraisal of such shares in the
manner provided by Delaware Law and who shall not have effectively withdrawn or
lost such right to appraisal as of the Effective Time ("DISSENTING SHARES"),
shall be entitled to such rights (but only such rights) as are granted by
Section 262 of the Delaware Law. Each holder of Dissenting Shares who becomes
entitled to payment for such Dissenting Shares pursuant to Section 262 of the
Delaware Law shall receive payment therefor from the Surviving Corporation in
accordance with Delaware Law; provided, however, that (i) if any such holder of
Dissenting Shares shall have failed to establish his entitlement to appraisal
rights as provided in Section 262 of the Delaware Law, (ii) if any holder of
Dissenting Shares shall have effectively withdrawn his demand for appraisal of
such shares or lost his right to appraisal and payment for his shares under
Section 262 of the Delaware Law or (iii) if neither any holder of Dissenting
Shares nor the Surviving Corporation shall have filed a petition demanding a
determination of the value of all Dissenting Shares within the time provided for
the filing of such petition in Section 262 of the Delaware Law, such holder
shall forfeit the right to appraisal of such Dissenting Shares and each such
share shall be converted into the right to receive the Merger Consideration
pursuant to Section 1.05(b). Powertel shall give DT prompt notice of any demands
received by Powertel for appraisal of Powertel Preferred Stock and DT shall have
the right to conduct all negotiations and proceedings with respect to such
demands. Except with the prior written consent of DT, Powertel shall not make
any payment with respect to, or settle or offer to settle, any such demands. To
the extent holders of Dissenting Shares become entitled to DT Ordinary Shares
after the Effective Time, such DT Ordinary Shares to which such holder of
Dissenting Shares is entitled will be issued from the Dissenting Stockholder
Trust described in Annex 1.12 (the "DISSENTING STOCKHOLDER TRUST").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF POWERTEL
Except as disclosed in Powertel Filed SEC Documents (as defined below) and
except as set forth in the Powertel disclosure schedules attached to this
Agreement (it being agreed that disclosure of any item in the schedules shall be
deemed disclosure with respect to any section of this Agreement to which the
relevance of such item is reasonably apparent), Powertel hereby represents and
warrants as of the date hereof to DT as follows:
SECTION 2.01. Organization. Each of Powertel and its Subsidiaries
(collectively, the "POWERTEL SUBSIDIARIES") is a corporation or limited
liability company duly organized, validly existing and is in good standing
(where such concept is applicable) under the laws of the jurisdiction of its
incorporation or organization and has the requisite power and authority to carry
on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
could not reasonably be expected to have a Material Adverse Effect on Powertel
or prevent or materially delay the consummation of the Merger. Powertel and each
of the Powertel Subsidiaries is duly qualified or licensed to do business and is
in good standing (where such concept is applicable) in each
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jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing could not reasonably be expected to have a Material Adverse Effect on
Powertel or prevent or materially delay the consummation of the Merger. Powertel
has delivered to DT complete and correct copies of the Restated Certificate of
Incorporation of Powertel and Restated By-laws of Powertel and has made
available to DT the certificate of incorporation and by-laws (or similar
organizational documents) of each of the Powertel Subsidiaries.
SECTION 2.02. Subsidiaries. SCHEDULE 2.02 lists each Powertel Subsidiary
and any Investment Entity. All of the outstanding shares of capital stock of
each Powertel Subsidiary that is a corporation have been validly issued and are
fully paid and nonassessable. All of the outstanding shares of capital stock of
each Powertel Subsidiary are owned by Powertel or by another Powertel Subsidiary
free and clear of all Liens, except for Liens which are granted to secure
indebtedness and are disclosed in SCHEDULE 2.02. Except as set forth in SCHEDULE
2.02, (i) Powertel and the Powertel Subsidiaries have no material ongoing
obligations, agreements, commitments, rights, understandings or arrangements
with respect to any Investment Entities, including funding obligations; and (ii)
all Investment Interests are owned by Powertel or the Powertel Subsidiaries free
and clear of all Liens. Except as set forth in SCHEDULE 2.02 and except for the
capital stock owned by Powertel, directly or indirectly, in the Powertel
Subsidiaries, neither Powertel nor any of the Powertel Subsidiaries owns,
directly or indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture, limited liability company or other
entity.
SECTION 2.03. Capital Structure. (a) The authorized capital stock of
Powertel consists of 401,000,000 shares of capital stock of which 400,000,000
shares are authorized to be issued as Powertel Common Stock and 1,000,000 shares
are authorized to be issued as Powertel Preferred Stock. As of the close of
business on August 18, 2000, Powertel had 31,381,461 shares of Powertel Common
Stock issued and outstanding (not including 33,165 shares of restricted stock
issued under the Restricted Stock Plan). The series of Powertel Preferred Stock
and the number of designated, issued and outstanding shares, the current
conversion ratio and the number of shares of Powertel Common Stock issuable upon
conversion as of the close of business on August 18, 2000 were as follows:
DESIGNATED,
ISSUED AND CURRENT
OUTSTANDING CONVERSION COMMON STOCK
SERIES SHARES RATIO(1) EQUIVALENTS
------ ----------- ---------- ------------
Series A Convertible Preferred Stock
("SERIES A PREFERRED SHARES")........................ 100,000 46.26774 4,626,774
Series B Convertible Preferred Stock
("SERIES B PREFERRED SHARES")........................ 100,000 46.26774 4,626,774
Series C Convertible Preferred Stock
("SERIES C PREFERRED SHARES")........................ --(2) -- --
Series D Convertible Preferred Stock
("SERIES D PREFERRED SHARES")........................ 50,000 35.29412 1,764,706
Series E 6.5% Cumulative Convertible
Preferred Stock ("SERIES E PREFERRED SHARES")(3)..... 50,000 68.15084 3,407,542
Series F 6.5% Cumulative Convertible
Preferred Stock("SERIES F PREFERRED SHARES")(3)...... 50,000 68.15084 3,407,542
---------------
(1) Subject to applicable adjustments set forth in the related Certificate of
Designations.
(2) 50,000 shares initially designated as Series C Preferred Shares have been
converted to Powertel Common Stock.
(3) The Series E Preferred Shares and Series F Preferred Shares bear cumulative
dividends that accrue on a daily basis at an annual rate of 6.5% of the
initial purchase price of such shares.
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The Series A, B, C, D, E, and F Preferred Shares are hereinafter
collectively referred to as the "POWERTEL PREFERRED STOCK" and, with the
Powertel Common Stock, the "POWERTEL STOCK". As of the close of business on
August 18, 2000: (i) 56,438 shares of Powertel Common Stock were held by
Powertel in treasury; (ii) an aggregate of 17,833,338 shares of Powertel Common
Stock were reserved for issuance upon conversion of Powertel Preferred Stock;
(iii) an aggregate of 2,152,602 shares of Powertel Common Stock were reserved
for issuance upon exercise of outstanding stock options (the "POWERTEL STOCK
OPTIONS") granted under the Amended and Restated 1991 Employee Stock Option Plan
(the "1991 PLAN"), the Amended Nonemployee Stock Option Plan (the "NONEMPLOYEE
OPTION PLAN") and the 2000 Stock Option and Incentive Plan (the "2000 PLAN" and
with the 1991 Plan and the Nonemployee Option Plan, the "POWERTEL STOCK OPTION
PLANS"); (iv) 33,165 shares of Powertel Common Stock were reserved for issuance
pursuant to outstanding Powertel Restricted Stock Awards granted under the 1995
Employee Restricted Stock Plan (the "RESTRICTED STOCK PLAN"); (v) 3,446,340
shares of Powertel Common Stock remained available for issuance pursuant to
future stock option grants and restricted stock awards under the 2000 Plan; (vi)
966,688 shares of Powertel Common Stock were reserved for issuance pursuant to
outstanding Powertel Warrants, which have an exercise price of $16.9546 per
share, subject to adjustment; and (vii) an aggregate of 30,142 shares of
Powertel Common Stock are reserved for accrued but unpaid dividends on the
Series E Preferred Shares and Series F Preferred Shares. SCHEDULE 2.03 sets
forth a complete and accurate schedule of all Powertel Stock Options and their
respective shares, vesting schedules, exercise prices and expiration dates that
are outstanding on the date hereof (provided, that with respect to Powertel
employees below the director level, such list need only set forth the aggregate
number of options with the weighted average exercise prices at which grants have
been made and need not specify grants by grantee).
(b) Except as set forth above and in SCHEDULES 2.02 and 2.03 and except as
a result of the Permitted Stock Dividend, as of the date hereof, no shares of
Powertel Stock or shares of capital stock of any Powertel Subsidiary were
issued, reserved for issuance or outstanding and there are no stock appreciation
rights, phantom stock rights or other contractual rights the value of which is
determined in whole or in part by the value of any capital stock ("POWERTEL
STOCK RIGHTS") of Powertel or any Powertel Subsidiary. The Powertel Preferred
Stock, the Powertel Stock Options, the Powertel Warrants, the Eliska Put Rights,
the Powertel Stock Rights and any other security convertible into, or
exercisable or exchangeable for, Powertel Common Stock (each of which shall be
determined on an as-if-converted, exercised or exchanged basis) are herein
referred to as "POWERTEL COMMON STOCK EQUIVALENTS." Each outstanding share of
Powertel Stock is, and each share of Powertel Stock which may be issued pursuant
to the Powertel Benefit Plans and the other agreements and instruments listed
above will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no outstanding
bonds, debentures, notes or other indebtedness of Powertel or any Powertel
Subsidiary having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matter on which Powertel's
stockholders may vote.
(c) Except as set forth above or in SCHEDULE 2.02 or SCHEDULE 2.03 and
except as a result of the Permitted Stock Dividend, as of the date of this
Agreement, there are no "POWERTEL EQUITY RIGHTS." Powertel Equity Rights means
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind obligating Powertel or any of the
Powertel Subsidiaries to issue, deliver or sell or create, or cause to be
issued, delivered or sold or created, additional shares of capital stock or
other voting securities or Powertel Common Stock Equivalents or stock
equivalents of any of the Powertel Subsidiaries or obligating Powertel or any of
the Powertel Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking.
(d) Any increase in any existing Powertel Equity Rights arising from
antidilution or similar adjustments resulting from the payment of the Permitted
Stock Dividend will not, in the aggregate, on the date the Permitted Stock
Dividend is declared and on the date it is paid, increase the number of shares
of Powertel Common Stock subject to Powertel Equity Rights by more than 0.75%.
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(e) Except as set forth in SCHEDULE 2.02 or SCHEDULE 2.03, as of the date
of this Agreement, there are no outstanding contractual obligations of Powertel
or any of the Powertel Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of Powertel or any of the Powertel Subsidiaries.
(f) Between August 18, 2000 and the date of this Agreement, no Powertel
Common Stock or Powertel Common Stock Equivalents have been issued or granted,
except issuances of Powertel Common Stock upon the exercise of Powertel Stock
Options or Powertel Warrants outstanding on August 18, 2000, and grants of new
Powertel Stock Options to new employees or employees granted promotion in the
ordinary course of business, provided that such shares of Powertel Common Stock
underlying such new Powertel Stock Options will not exceed 50,000 shares.
SECTION 2.04. Authority. The Board of Directors of Powertel, at a meeting
duly called and held, duly adopted resolutions (i) approving this Agreement, the
Merger and the Powertel Stockholder Agreements, (ii) determining that the Merger
is fair to and in the best interests of Powertel's stockholders and (iii)
recommending that Powertel's stockholders approve and adopt this Agreement.
Powertel has requisite corporate power and authority to execute and deliver this
Agreement and the other agreements to which it is a party that are referenced
herein and, subject to the adoption and approval of this Agreement by (i) a
majority of the votes entitled to be cast by the holders of all outstanding
shares of Powertel Common Stock and Series A Preferred Shares, voting on an
as-if-converted to Powertel Common Stock basis and voting together with the
holders of Powertel Common Stock as a single class, and (ii) two-thirds of each
class of the Series A Preferred Shares, Series B Preferred Shares, Series D
Preferred Shares, Series E Preferred Shares and Series F Preferred Shares, each
such class of preferred stock voting as a single class (collectively, the
"POWERTEL STOCKHOLDER APPROVAL"), to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by Powertel
and the consummation by Powertel of the Merger and of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Powertel, subject to the Powertel Stockholder Approval. This
Agreement has been duly executed and delivered by Powertel and (assuming the
valid authorization, execution and delivery of this Agreement by DT )
constitutes the valid and binding obligation of Powertel enforceable against
Powertel in accordance with its terms, except that such enforceability (i) may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights and
remedies generally, and (ii) is subject to general principles of equity
(regardless of whether considered in a proceeding in equity or at law).
SECTION 2.05 No Conflict; Required Filings and Consents. (a) Except as
set forth in subsection (b) below or as set forth in SCHEDULE 2.05, the
execution, delivery or performance (assuming such performance occurred on the
date hereof) of this Agreement by Powertel and the consummation by Powertel of
the transactions contemplated hereby will not, and if the Permitted Stock
Dividend is declared or paid, on the date the Permitted Stock Dividend is
declared and the date it is paid, such declaration or payment (including
treatment of fractional shares), as the case may be, will not (i) violate or
conflict with the Restated Certificate of Incorporation or Restated By-laws of
Powertel or of the similar organizational documents of any of the Powertel
Subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Powertel
or any of the Powertel Subsidiaries is a party or by which any of their
properties are bound, (iii) violate any law, court order, judgment, decree or
regulation applicable to Powertel or any of the Powertel Subsidiaries or by
which any of their respective properties are bound, or (iv) result in the
creation or imposition of any Lien on any asset of Powertel or the Powertel
Subsidiaries, except in the case of clauses (ii), (iii) or (iv) for violations,
breaches or defaults that could not reasonably be expected to have a Material
Adverse Effect on Powertel or prevent or materially delay the consummation of
the Merger.
(b) Except for filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the Securities Act,
state securities or "Blue Sky" laws, the Exchange Act, the Communications Act,
the HSR Act, Council Regulation (EEC) No. 4064/89, if applicable,
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Delaware Law, the rules, regulations and published decisions of the FAA, the FCC
and state public utility or service commissions or similar agencies, or the
rules and regulations of the Nasdaq or as specified in SCHEDULE 2.05
(collectively, "POWERTEL REQUIRED APPROVALS"), neither the execution, delivery
or performance of this Agreement by Powertel nor the consummation by Powertel of
the transactions contemplated hereby will require any filing with, or permit,
authorization, consent or approval of, any Governmental or Regulatory Authority
(except where the failure to obtain such permit, authorization, consent or
approval or to make such filings could not reasonably be expected to have a
Material Adverse Effect on Powertel or prevent or materially delay the
consummation of the Merger).
SECTION 2.06. SEC Filings; Financial Statements. Powertel has filed with
the SEC all documents required to be filed by it since January 1, 1997 under the
Securities Act or the Exchange Act (the "POWERTEL SEC DOCUMENTS"). As of their
respective filing dates, the Powertel SEC Documents were prepared substantially
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, each as in effect on the date so filed, and at the time
filed with the SEC (or if amended or superseded by a filing prior to the date
hereof, then on the date of such filing) none of the Powertel SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
financial statements of Powertel included in the Powertel SEC Documents have
been prepared in accordance with GAAP (except in the case of the unaudited
statements, as permitted by Form 10-Q under the Exchange Act) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly present the consolidated financial position
of Powertel and the consolidated Powertel Subsidiaries as of the respective
dates thereof and the consolidated results of operations and consolidated cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments and to any other adjustments described
therein).
SECTION 2.07. Absence of Certain Changes or Events. Except as disclosed
in SCHEDULE 2.07 or in the documents filed by Powertel with the SEC and publicly
available prior to the date of this Agreement (the "POWERTEL FILED SEC
DOCUMENTS"), since December 31, 1999, Powertel and the Powertel Subsidiaries
have conducted their respective businesses in all material respects only in the
ordinary course, consistent with past practices, and there has not been (i) any
Material Adverse Change with respect to Powertel, (ii) any declaration, setting
aside or payment of any dividend or other distribution with respect to its
capital stock (other than regularly scheduled dividends on the Series E
Preferred Shares and Series F Preferred Shares) or any redemption, purchase or
other acquisition of any of its capital stock, (iii) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, or (iv) any change in
accounting methods, principles or practices by Powertel affecting its assets,
liabilities or business, except insofar as may have been required by a change in
GAAP.
SECTION 2.08. Information Provided by Powertel. None of the information
supplied or to be supplied by Powertel specifically for inclusion or
incorporation by reference in (i) the DT Registration Statement or (ii) the
proxy statement/prospectus (together with any amendments or supplements thereto,
the "POWERTEL PROXY STATEMENT") relating to the Powertel Stockholders' Meeting
(as defined below) and the prospectus included in the DT Registration Statement
for the distribution of DT Ordinary Shares or DT Depositary Shares pursuant to
the Merger, will, in the case of the DT Registration Statement, at the time it
becomes effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or in the case of the Powertel Proxy Statement, at the
time of the mailing of the Powertel Proxy Statement or the time of the Powertel
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The DT Registration Statement will comply (with
respect to Powertel) as to form in all material respects with the requirements
of the Securities Act, and the Powertel Proxy Statement will comply (with
respect to Powertel) as to form in all material
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respects with the requirements of the Exchange Act. None of the information
supplied or to be supplied by or on behalf of Powertel for inclusion or
incorporation by reference in the German Listing Prospectus will, at the time
the German Listing Prospectus is published, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by or on behalf of Powertel for inclusion or incorporation by reference
in the auditor's report to be prepared pursuant to Section 183(3) of the German
Act will, at the time the report is filed with the Commercial Register, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the information to be supplied by or on behalf of Powertel pursuant to Section
5.06(d) will contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Powertel makes no representation or warranty with respect to any
information supplied by DT or any other Person who is not an Affiliate of
Powertel that is contained in the DT Registration Statement, Powertel Proxy
Statement, the German Listing Prospectus or the auditor's report to be prepared
pursuant to Section 183(3) of the German Act.
SECTION 2.09. Permits; Compliance with Laws. (a) Each of Powertel and the
Powertel Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, charters, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental or Regulatory
Authority necessary for Powertel or any of the Powertel Subsidiaries to own,
lease and operate its properties or to carry on its business as it is now being
conducted (the "POWERTEL PERMITS"), except where the failure to have any of the
Powertel Permits could not, individually or in the aggregate, have a Material
Adverse Effect on Powertel, and, as of the date of this Agreement, no suspension
or cancellation of any of the Powertel Permits is pending or, to the Knowledge
of Powertel, threatened, except where the suspension or cancellation of any of
the Powertel Permits could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Powertel. The business of Powertel
and the Powertel Subsidiaries is not being conducted in violation of any
applicable law, ordinance regulation, judgment, order or decree of any
Governmental or Regulatory Authority ("LEGAL REQUIREMENTS"), except for possible
violations that could not reasonably be expected to have a Material Adverse
Effect on Powertel or prevent or materially delay the consummation of the
Merger. None of the representations made in this Section 2.09 are being made
with respect to Environmental Laws.
(b) Except as set forth in SCHEDULE 2.09:
(i) Powertel and each of the Powertel Subsidiaries holds, and is
qualified and eligible to hold, all material licenses, permits and other
authorizations issued or to be issued by the FCC to such entity for the
operation of their respective businesses, all of which are set forth in
SCHEDULE 2.09(b)(i) (the "POWERTEL FCC LICENSES"). Each of the Powertel FCC
Licenses that is subject to restrictions under Section 310(b) of the
Communications Act is held by a Powertel Subsidiary.
(ii) The Powertel FCC Licenses are valid and in full force and effect,
and neither Powertel nor any of the Powertel Subsidiaries is or has been
delinquent in payment on or in default under any installment obligation
owed to the United States Treasury in connection with the Powertel FCC
Licenses. As used herein, the term "full force and effect" means that (A)
the orders issuing the Powertel FCC Licenses have become effective, (B) no
stay of effectiveness of such orders has been issued by the FCC, and (C)
the Powertel FCC Licenses have not been invalidated by any subsequent
published FCC action.
(iii) All material reports and applications required by the
Communications Act or required to be filed with the FCC by Powertel or any
of the Powertel Subsidiaries have been filed and are accurate and complete
in all material respects.
(iv) Powertel and the Powertel Subsidiaries are, and have been, in
compliance in all material respects with, and the wireless communications
systems operated pursuant to the Powertel FCC
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Licenses are and have been operated in compliance in all material respects
with, the Communications Act.
(v) There is not pending or, to Powertel's Knowledge, threatened as of
the date hereof any application, petition, objection, pleading or
proceeding with the FCC or any public service commission or similar body
having jurisdiction or authority over the communications operations of
Powertel or any of the Powertel Subsidiaries which is reasonably likely to
result in the revocation, cancellation, suspension, dismissal, denial or
any materially adverse modification of any Powertel FCC License or
imposition of any substantial fine or forfeiture against Powertel or any of
the Powertel Subsidiaries.
(vi) No facts are known to Powertel or the Powertel Subsidiaries which
if known by a Governmental or Regulatory Authority of competent
jurisdiction would present a substantial risk that any Powertel FCC License
could be revoked, cancelled, suspended or materially adversely modified or
that any substantial fine or forfeiture could be imposed against Powertel
or any of the Powertel Subsidiaries.
(vii) Powertel and the Powertel Subsidiaries have not made any
material misstatements of fact, or omitted to disclose any fact, to any
Government Entity or in any report, document or certificate filed
therewith, which misstatements or omissions, individually or in the
aggregate, could reasonably be expected to subject any material Powertel
FCC Licenses to revocation or failure to renew, except to the extent that
such revocation or failure to renew would not have a Material Adverse
Effect on Powertel or the transactions contemplated by this Agreement.
SECTION 2.10. Tax Matters. Except as set forth in SCHEDULE 2.10 or as
would not have a Material Adverse Effect on Powertel: (i) Powertel and each of
the Powertel Subsidiaries have timely filed (after taking into account any
extensions to file) all Tax Returns required to be filed by them either on a
separate or combined or consolidated basis; (ii) all such Tax Returns are
correct in all respects and accurately disclose in all respects all Taxes
required to be paid for the periods covered thereby; (iii) Powertel and the
Powertel Subsidiaries have paid or caused to be paid all Taxes shown as due on
such Tax Returns and all Taxes for which no Tax Return was required to be filed,
and the financial statements contained in the Powertel SEC Documents reflect an
adequate reserve as determined in accordance with GAAP for all material Taxes
payable by Powertel and the Powertel Subsidiaries and not yet due (other than a
reserve for deferred Taxes established to reflect timing differences between
book and Tax treatment) for all taxable periods and portions thereof accrued
through the date of such financial statements; (iv) none of Powertel or any
Powertel Subsidiary has waived in writing any statute of limitations in respect
of Taxes; (v) there is no action, suit, investigation, audit, claim or
assessment that has been formally commenced or proposed to Powertel in writing
with respect to Taxes of Powertel or any of the Powertel Subsidiaries where an
adverse determination is reasonably likely; (vi) there are no Liens for Taxes
upon the assets of Powertel or any Powertel Subsidiary except for Liens relating
to current Taxes not yet due; (vii) all Taxes which Powertel or any Powertel
Subsidiary is required by law to withhold or to collect for payment have been
duly withheld and collected, and have been paid or accrued on the books of
Powertel or such Powertel Subsidiary; (viii) neither Powertel nor any Powertel
Subsidiary has been a member of any group of corporations filing Tax Returns on
a consolidated, combined, unitary or similar basis other than each such group of
which it is currently a member; (ix) no deduction of any amount that would
otherwise be deductible by Powertel or any of the Powertel Subsidiaries with
respect to taxable periods ending on or before the Effective Time could be
disallowed under Section 162(m) of the Code; (x) neither Powertel nor any of the
Powertel Subsidiaries has constituted either a "distributing corporation" or a
"controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (a) in the two years prior to the date
of this Agreement or (b) in a distribution which could otherwise constitute part
of a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) in conjunction with the Merger; (xi) neither Powertel nor
any of the Powertel Subsidiaries is a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code; (xii) neither
Powertel nor DT will be obligated to make a payment, in connection with the
transactions contemplated hereunder or otherwise, to any employee or former
employee of, or individual providing services to, Powertel or Powertel
Subsidiaries that would be a
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"parachute payment" to a "disqualified individual" as those terms are defined in
Section 280G of the Code without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the future;
and (xiii) none of Powertel, the Powertel Subsidiaries or DT will be obligated
to pay any excise taxes or similar taxes imposed on any employee or former
employee of, or individual providing services to, Powertel or the Powertel
Subsidiaries under Section 4999 of the Code or any similar provisions as a
result of the consummation of the transactions contemplated hereby, either alone
or in connection with any other event.
SECTION 2.11. Liabilities. Except as set forth in Powertel Filed SEC
Documents or SCHEDULE 2.11, and as permitted by this Agreement and the
Alternative Merger Agreement, Powertel and the Powertel Subsidiaries, taken as a
whole, do not have any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth on
a consolidated balance sheet of Powertel and the Powertel Subsidiaries or in the
notes thereto, other than (i) liabilities and obligations incurred in the
ordinary course of business since December 31, 1999 or (ii) liabilities arising
after December 31, 1999 which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Powertel.
SECTION 2.12. Benefit Plans; Employees and Employment Practices.
(a) Except as disclosed in the Powertel Filed SEC Documents or SCHEDULE
2.12(a) or to the extent required by law or required to maintain in compliance
with provisions of the Code, neither Powertel nor any of the Powertel
Subsidiaries has adopted or amended in any material respect any ERISA Benefit
Plan since the date of the most recent audited financial statements included in
the Powertel Filed SEC Documents. Except as set forth in SCHEDULE 2.12(a),
Powertel does not have any commitment to create, adopt or contribute to any
Powertel Benefit Plan. Except as disclosed in SCHEDULE 2.12(a) or in the
Powertel Filed SEC Documents, as of the date of this Agreement, there exist no
material employment, consulting, severance, bonus, incentive or termination
agreements between Powertel or any of the Powertel Subsidiaries and any current
or former employee, officer or director of Powertel or any of the Powertel
Subsidiaries.
(b) SCHEDULE 2.12(b) contains a list of all the material Powertel Benefit
Plans. None of Powertel, any of the Powertel Subsidiaries, any officer of
Powertel or any of the Powertel Subsidiaries or any of the ERISA Benefit Plans
has on or before the date of this Agreement engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
with respect to any ERISA Benefit Plan that could reasonably be expected to
subject Powertel, any of the Powertel Subsidiaries or any officer of Powertel or
any of the Powertel Subsidiaries to any Tax on prohibited transactions imposed
by Section 4975 of the Code or to any liability under Section 502(i) or (l) of
ERISA where such Tax or liability has or would be reasonably expected to have a
Material Adverse Effect on Powertel. No ERISA Benefit Plan has incurred any
"accumulated funding deficiency" (as defined in Section 412 of the Code or Part
3 of Title I or ERISA), whether or not waived. Neither Powertel nor any of the
Powertel Subsidiaries has incurred and none of such entities reasonably expects
to incur, any material liability to the PBGC with respect to any ERISA Benefit
Plan. No assets of Powertel or any of the Powertel Subsidiaries are subject to
liens arising under ERISA or the Code on account of any ERISA Benefit Plan,
neither Powertel nor any of the Powertel Subsidiaries has been required to
provide any security under Sections 401(a)(29) or 412(f) of the Code, or under
Section 307 of ERISA, and, to Powertel's Knowledge, no event has occurred that
could give rise to any such lien or a requirement to provide any such security.
Except as disclosed in SCHEDULE 2.12(b), none of Powertel, the Powertel
Subsidiaries or any ERISA Affiliate has at any time during the five-year period
preceding the date hereof contributed to any "multiemployer plan" (as defined in
Section 3(37) of ERISA).
(c) Except as disclosed in SCHEDULE 2.12(c), and except for such matters as
could not be reasonably expected to have a Material Adverse Effect on Powertel,
to the extent applicable, (i) each ERISA Benefit Plan complies with the
requirements of ERISA and the Code, (ii) each ERISA Benefit Plan intended to be
qualified under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and nothing has occurred since the date of
that determination that could reasonably be
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expected to adversely affect the qualified status of such plan and its related
trust is tax-exempt and has been so since its creation, and (iii) each Powertel
Benefit Plan has been maintained, administered and operated in compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations, including but not limited to ERISA and the Code, which
are applicable to such Powertel Benefit Plans.
(d) Except as disclosed in SCHEDULE 2.12(d), all material contributions,
reserves or premium payments under or to Powertel Benefit Plans, accrued to the
date hereof have been made or provided for.
(e) Except as disclosed in SCHEDULE 2.12(e), and except for any liability
as could not be reasonably expected to have a Material Adverse Effect on
Powertel, Powertel has not incurred any liability under Subtitle C or D of Title
IV of ERISA with respect to any "single-employer plan" within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by Powertel, or
any entity which is considered one employer with Powertel under Section 4001 of
ERISA.
(f) Except as disclosed in SCHEDULE 2.12(f) neither Powertel nor any of the
Powertel Subsidiaries has any obligation to provide retiree health or welfare
benefits for any current or former employee under any Powertel Benefit Plan,
except as required by Part 6 of Title I of ERISA or to avoid excise taxes under
Section 4980B of the Code, and the terms of Powertel Benefit Plans permit
Powertel to amend or terminate such Powertel Benefit Plans at any time without
incurring liability thereunder.
(g) Except as disclosed in SCHEDULE 2.12(g), Powertel has not engaged in,
nor is it a successor or parent corporation to an entity that has engaged in a
transaction described in Section 4069 of ERISA.
(h) Except as disclosed in SCHEDULE 2.12(h), the consummation or
announcement of any transaction contemplated by this Agreement will not (either
alone or upon the occurrence of any additional or further acts or events) result
in any (i) payment (whether of severance pay or otherwise) becoming due from
Powertel or any of the Powertel Subsidiaries to any officer, employee, former
employee or director thereof or to the trustee under any "rabbi trust" or
similar arrangement; (ii) benefit under any Powertel Benefit Plan being
established or becoming accelerated, vested or payable; or (iii) "reportable
event" (as defined in Section 4043 of ERISA) with respect to any ERISA Benefit
Plan subject to Title IV of ERISA.
(i) Except as disclosed in SCHEDULE 2.12(i), as of the date of this
Agreement there are no pending disputes, arbitrations, claims, suits, grievances
or, to the Knowledge of Powertel, governmental audits involving a Powertel
Benefit Plan (other than routine claims for benefits payable under any such
Powertel Benefit Plan or routine audits) that would reasonably be expected
either individually or in the aggregate, to have a Material Adverse Effect on
Powertel.
(j) SCHEDULE 2.12(j) contains a list setting forth the name and current
annual salary and other material compensation payable to each Significant
Employee, and the profit sharing, bonus or other form of additional cash
compensation paid or payable by Powertel or the Powertel Subsidiaries to or for
the benefit of each such person for the current fiscal year. Except as set forth
in SCHEDULE 2.12(j), there are no oral or written contracts, agreements or
arrangements obligating Powertel or any of the Powertel Subsidiaries to increase
the compensation or benefits presently being paid or hereafter payable to any
Significant Employees or any oral employment or consulting or similar
arrangements regarding any Significant Employee that are not terminable without
liability on thirty days' or less prior notice. SCHEDULE 2.12(j) lists all
written employment and consulting agreements with respect to any Significant
Employee. Powertel has provided true and correct copies of all employment
agreements listed on SCHEDULE 2.12(j). Except for severance or retention
obligations to Significant Employees set forth in SCHEDULE 2.12(j) or as
otherwise set forth on SCHEDULE 2.12(j), there is not due or owing and there
will not be due and owing at the Effective Time to any Significant Employees,
any sick pay, severance pay (whether arising out of the termination of a
Significant Employee prior to, on, or subsequent to the Effective Time),
compensable time or pay, including salary, commission and bonuses, personal time
or pay or vacation time or vacation pay attributable to service rendered on or
prior to the Effective Time the aggregate amount of which exceeds $50,000 for
any Significant Employee. Except as disclosed in SCHEDULE 2.12(j) and other than
claims made in the ordinary course of business consistent with past
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practice in an aggregate amount not to exceed $500,000 neither Powertel nor any
of the Powertel Subsidiaries have any liability arising out of claims made or
suits brought (including workers' compensation claims and claims or suits for
contribution to, or indemnification of, third parties, occupational health and
safety, environmental, consumer protection or equal employment matters) for
injury, sickness, disease, discrimination, death or termination of employment of
any Significant Employee, or other employment matter to the extent attributable
to an event occurring or a state of facts existing on or prior to the Effective
Time.
(k) Except as set forth on SCHEDULE 2.12(k), Powertel and each of the
Powertel Subsidiaries (i) is in compliance with all applicable federal and state
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
Powertel Employees, except where the failure to be in compliance would not,
singly or in the aggregate, have a Material Adverse Effect on Powertel or any of
the Powertel Subsidiaries or their financial condition or business; (ii) has
withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Powertel Employees; (iii) is not liable
for any arrears of wages or any taxes or any penalty for failure to comply with
any of the foregoing, except as would reasonably be expected to not have a
Material Adverse Effect on Powertel; and (iv) (other than routine payments to be
made in the normal course of business and consistent with past practice) is not
liable for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
Social Security or other benefits for Powertel Employees.
(l) Except as disclosed in SCHEDULE 2.12(l), as of the date of this
Agreement there are no controversies, strikes, work stoppages or disputes
pending or to Powertel's Knowledge threatened against Powertel or any of the
Powertel Subsidiaries, and no organizational effort by any labor union or other
collective bargaining unit currently is under way with respect to any employee,
which in any such case would reasonably be expected to have a Material Adverse
Effect on Powertel. None of Powertel or any of the Powertel Subsidiaries is a
party to a collective bargaining agreement. Except as set forth in SCHEDULE
2.12(l), there is no, and there is not threatened, any labor dispute, grievance
or litigation relating to labor, safety or discrimination matters involving any
Powertel Employee including charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Powertel.
There has been no engagement in any unfair labor practices by Powertel or the
Powertel Subsidiaries within the meaning of the National Labor Relations Act
which would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Powertel.
SECTION 2.13. Litigation. Except as disclosed in SCHEDULE 2.13 or in the
Powertel Filed SEC Documents, as of the date of this Agreement, there is no
suit, action, proceeding or investigation pending or, to Powertel's Knowledge,
threatened, against Powertel or any of the Powertel Subsidiaries before any
Governmental or Regulatory Authority that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on Powertel or
prevent or materially delay the consummation of the Merger. Except as disclosed
in Schedule 2.13 or in the Powertel Filed SEC Documents, neither Powertel nor
any of the Powertel Subsidiaries is subject to any outstanding judgment, order,
writ, injunction or decree that would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Powertel.
SECTION 2.14. Environmental Matters. Except for such matters that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on Powertel, or would not otherwise require disclosure
pursuant to the Securities Act or Exchange Act, (i) each of Powertel and the
Powertel Subsidiaries has complied and is in compliance with all applicable
Environmental Laws; (ii) the properties currently owned or operated by Powertel
or any of the Powertel Subsidiaries (including soils, groundwater, surface
water, buildings or other structures) are not contaminated with any Hazardous
Substances; (iii) to Powertel's Knowledge, no Hazardous Substances were present,
disposed, released or otherwise deposited on, under, at or from the properties
formerly owned or operated by Powertel or any of the Powertel Subsidiaries
during the period of ownership or operation by Powertel or any of the Powertel
Subsidiaries; (iv) to Powertel's Knowledge, neither Powertel nor any of the
Powertel Subsidiaries is
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subject to liability for any Hazardous Substance disposal or contamination on
any third party property; (v) neither Powertel nor any of the Powertel
Subsidiaries has received any notice, demand, threat, letter, claim or request
for information alleging that Powertel or any of the Powertel Subsidiaries may
be in violation of or liable under any Environmental Law (including any claims
relating to electromagnetic fields or microwave transmissions); and (vi) to
Powertel's Knowledge, neither Powertel nor any of the Powertel Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements (other than
those of general applicability not specifically related to Powertel) with any
Governmental or Regulatory Authority or regulatory authority or is subject to
any indemnity or other agreement with any third party relating to liability
under any Environmental Law or relating to Hazardous Substances (except for such
agreements entered into by Powertel in the ordinary course of business).
SECTION 2.15. Section 203 of the Delaware Law. The Board of Directors of
Powertel has approved this Agreement, the Merger and the Stockholders Agreement
and the transactions contemplated hereby, with the effect that the restrictions
on business combinations contained in Section 203 of the Delaware Law will not
apply to DT as a result of this Agreement, the Merger and the Stockholders
Agreement. To Powertel's Knowledge, (i) no anti-takeover statute or similar law
of Georgia or Delaware imposes restrictions which could reasonably be expected
to adversely affect or delay the consummation of the transactions contemplated
by this Agreement, and (ii) no "control share acquisition," "fair price,"
"moratorium" or other anti-takeover laws or regulations enacted under Georgia or
Delaware law ("TAKEOVER LAW") are applicable to Powertel apply to this Agreement
or any of the transactions related thereto.
SECTION 2.16. Intellectual Property. Except as set forth in the Powertel
Filed SEC Documents or in SCHEDULE 2.16, the Intellectual Property Rights
consist solely of items and rights which are: (i) owned by Powertel or the
Powertel Subsidiaries, (ii) in the public domain or (iii) rightfully used by
Powertel or the Powertel Subsidiaries pursuant to a license, and, with respect
to Intellectual Property Rights owned by Powertel or the Powertel Subsidiaries,
Powertel or the Powertel Subsidiaries own the entire right, title and interest
in and to such Intellectual Property Rights free and clear of any Liens.
Powertel and the Powertel Subsidiaries have all rights in the Intellectual
Property Rights necessary to carry out their businesses substantially as
currently conducted except as could not reasonably be expected to have a
Material Adverse Effect on Powertel. The Intellectual Property Rights do not
infringe on any proprietary right of any Person, except to the extent that any
such infringement, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on Powertel. As of the date of this
Agreement, no claims against Powertel or any Powertel Subsidiary (or to
Powertel's Knowledge, against any other holder of Intellectual Property Rights)
(x) challenging the validity, effectiveness, or ownership by Powertel or the
Powertel Subsidiaries of any of the Intellectual Property Rights, or (y) to the
effect that the Intellectual Property Rights infringe or will infringe on any
intellectual property or other proprietary right of any person have been
asserted or, to Powertel's Knowledge, are threatened by any person nor to
Powertel's Knowledge are there any valid grounds for any bona fide claim of any
such kind. To Powertel's Knowledge, there is no material unauthorized use,
infringement or misappropriation of any of the Intellectual Property Rights by
any third party, employee or former employee of Powertel or the Powertel
Subsidiaries.
SECTION 2.17. Opinion of Financial Advisor. The Board of Directors of
Powertel has received the oral opinion of Morgan Stanley Dean Witter & Co.
("POWERTEL FINANCIAL ADVISOR"), on the date hereof, to the effect that, as of
the date hereof, the consideration to be received in the Merger by Powertel's
stockholders is fair to Powertel's stockholders from a financial point of view.
SECTION 2.18. Brokers. Except for the Powertel Financial Advisor, the
fees and expenses of which will be paid by Powertel (and are reflected in
agreements with Powertel, a true and correct copy of which has been furnished
to, and accepted by, DT), no broker, investment banker, financial advisor or
other person, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Powertel. In
no event shall the amounts paid or payable by Powertel to the Powertel Financial
Advisor in connection with the transactions contemplated by this Agreement
exceed $28,000,000.
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SECTION 2.19. Tax Status. To the Knowledge of Powertel after due
investigation, neither Powertel nor any of its Affiliates has taken any action
or failed to take any action which action or failure would (i) jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code or (ii) cause the stockholders of Powertel, other than any
such stockholder that would be a "five-percent transferee shareholder" of DT
(within the meaning of U.S. Treasury Regulations Section 1.367(a)-3(c)(5))
following the Merger, to recognize gain pursuant to Section 367(a) of the Code.
To the Knowledge of Powertel after due investigation, there are no facts or
circumstances relating to Powertel or its Affiliates, including any covenants or
undertakings of Powertel pursuant to this Agreement, that would prevent Morris,
Manning & Martin, LLP from delivering the opinion referred to in Section 6.02(d)
as of the date hereof.
SECTION 2.20. Contracts. Except as set forth in the Powertel Filed SEC
Documents or in SCHEDULE 2.20, and except for this Agreement, the Alternative
Merger Agreement and the agreements referenced hereby and thereby, neither
Powertel nor any of the Powertel Subsidiaries is a party to or bound by (i) any
"material contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K of the SEC) or any agreement, contract or commitment the loss or termination
of which could have a Material Adverse Effect on Powertel; (ii) any
non-competition agreement or any similar agreement or obligation which
materially limits or could materially limit Powertel or any of the Powertel
Subsidiaries from engaging in the business of providing wireless communications
services or from developing wireless communications technology anywhere in the
world or (iii) any management agreement, technical services agreement or other
agreement whereby Powertel or any of the Powertel Subsidiaries is providing or
is required to provide management or technical services to any other Person.
Taken as a whole, the contracts and agreements required to be filed by Powertel
with the SEC together with the contracts and agreements required to be set forth
on SCHEDULE 2.20 are collectively referred to as the "POWERTEL CONTRACTS". With
such exceptions as, individually or in the aggregate, have not had, and could
not be reasonably expected to have, a Material Adverse Effect on Powertel, (x)
each of the Powertel Contracts is valid and in full force and effect (except to
the extent they have previously expired with no residual obligation in
accordance with their terms), and (y) except as set forth in SCHEDULE 2.20,
neither Powertel nor any of the Powertel Subsidiaries has violated any provision
of, or committed or failed to perform any act which, with or without notice,
lapse of time, or both, would constitute a default under the provisions of any
such Powertel Contract. To the knowledge of Powertel, no counterparty to any
such Powertel Contract has violated any provision of, or committed or failed to
perform any act which, with or without notice, lapse of time, or both would
constitute a default or other breach under the provisions of, such Powertel
Contract, except for defaults or breaches which, individually or in the
aggregate, have not had, or would not reasonably be expected to have, a Material
Adverse Effect on Powertel. Neither Powertel nor any of the Powertel
Subsidiaries is a party to, or otherwise a guarantor of or liable with respect
to, any interest rate, currency or other swap or derivative transaction, other
than any such transactions which are not material to the business of Powertel or
the Powertel Subsidiaries. Powertel has provided or made available to DT a copy
of each agreement described in item (i), (ii) and (iii) above. The designation
or definition of Powertel Contracts for purposes of this Section 2.20 and the
disclosures made pursuant hereto shall not be construed or utilized to expand,
limit or define the terms "material" and "Material Adverse Effect" as otherwise
referenced and used in this Agreement.
SECTION 2.21. Vote Required. The only vote of the holders of any class or
series of capital stock of Powertel necessary to approve this Agreement and the
transactions contemplated hereby is the Powertel Stockholder Approval. As of the
date hereof, the Powertel Principal Stockholders have the requisite voting power
to satisfy the Powertel Stockholder Approval.
SECTION 2.22. Transactions with Affiliates. Except as described in
SCHEDULE 2.22 or in the Powertel Filed SEC Documents, to Powertel's Knowledge,
no director or executive officer of Powertel or any 5% or greater stockholder of
Powertel is at the date hereof a party to any transaction with Powertel or any
of the Powertel Subsidiaries in which the amount involved exceeds $60,000,
including any contract or arrangement providing for the furnishing of services
to or by, providing for rental of real or personal
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property (including intellectual property) to or from, or otherwise requiring
payments to or from Powertel or any of the Powertel Subsidiaries.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DT
Except as disclosed in the DT Filed SEC Documents and except as set forth
in the DT disclosure schedules attached to this Agreement (it being agreed that
disclosure of any item in the schedules shall be deemed disclosure with respect
to any section of this Agreement to which the relevance of such is reasonably
apparent), (i) DT hereby represents and warrants as of the date hereof as
follows (except to the extent any of the following relates to Merger Sub), and
(ii) Merger Sub hereby represents and warrants as of September 28, 2000) to
Powertel as follows (but only to the extent any of the following relates to
Merger Sub):
SECTION 3.01. Organization; Subsidiaries. DT and each of its Significant
Subsidiaries, as listed on SCHEDULE 3.01 hereto, and Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of DT and its Subsidiaries
has the requisite corporate power and authority and any necessary franchise,
grant, authorization, license, permit, easement, variance, exception, consent,
certificate, approval and order of any Governmental or Regulatory Authority
necessary for DT or any of its Subsidiaries to own, operate or lease the
properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted (the "DT PERMITS"), and is duly qualified
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failure which,
when taken together with all other such failures, would not reasonably be
expected to have a Material Adverse Effect on DT or materially delay the
consummation of the Merger.
SECTION 3.02. Certificate of Incorporation and Bylaws. DT is an
Aktiengesellschaft organized and existing under the laws of the Federal Republic
of Germany. DT has heretofore furnished, or otherwise made available, to
Powertel a complete and correct copy of the Memorandum and Articles of
Association (SATZUNG) and Management Board (VORSTAND) Rules of Procedure
(GESCHAFTSORDNUNG), each as amended to the date hereof, of DT. Such Memoranda
and Articles of Association (SATZUNG), Management Board (VORSTAND) Rules of
Procedure (GESCHAFTSORDNUNG), are in full force and effect. DT is not in
violation of any of the provisions of its Memorandum or Articles of Association
(SATZUNG) or, in any material respect, its Management Board (VORSTAND) Rules of
Procedure (GESCHAFTSORDNUNG).
SECTION 3.03. Capital Structure. (a) As of the date hereof, DT's stated
share capital (GRUND KAPITAL) amounts to Euro 7,755,786,327.04 divided into
3,029,604,034 ordinary shares, all of which, as of the date hereof, are issued
and outstanding and not held in the Treasury of DT, and DT's authorized capital
(GENEHMIGTES KAPITAL) available for the issuance of new DT Shares against
contributions in kind amounts to up to Euro 3,865,093,163.52, as set forth in
Section 5 of the Articles of Association of DT. As of the date hereof, 4,969,388
shares were held in the treasury of DT (EIGENE AKTIEN). Except as set forth on
SCHEDULE 3.03 and except for the VoiceStream Merger Agreement, there are no
outstanding DT Equity Rights on the date hereof. For purposes of this Agreement,
"DT EQUITY RIGHTS" shall mean subscriptions, options, warrants, calls,
commitments, agreements, conversion rights or other rights of any character
(contingent or otherwise) to purchase or otherwise acquire from DT or any of
DT's Significant Subsidiaries at any time, or upon the happening of any stated
event, any shares of the capital stock or other voting or non-voting securities
of DT.
(b) All of the issued and outstanding capital stock of DT is validly
issued, fully paid and nonassessable. All DT Depositary Shares and DT Ordinary
Shares to be issued as Merger Consideration will be, when issued, validly
issued, fully paid and nonassessable.
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(c) Except as disclosed on SCHEDULE 3.03 hereto, all the outstanding
capital stock of each of DT's Significant Subsidiaries which is owned by DT is
duly authorized, validly issued, fully paid and nonassessable, and is owned by
DT free and clear of any liens, security interest, pledges, agreements, claims,
charges or encumbrances except for any liens, security interest, pledges,
agreements, claims, charges or encumbrances which would not, individually or in
the aggregate, have a Material Adverse Effect on DT. Except as set forth on
SCHEDULE 3.03 or in connection with the VoiceStream Merger Agreement or, with
respect to Merger Sub, as otherwise contemplated by this Agreement, there are no
existing subscriptions, options, warrants, calls, commitments, agreements,
conversion rights or other rights of any character (contingent or otherwise) to
purchase or otherwise acquire from DT or any of DT's Significant Subsidiaries or
Merger Sub at any time, or upon the happening of any stated event, any shares of
the capital stock or other voting or non-voting securities of any DT Subsidiary
or Merger Sub, whether or not presently issued or outstanding (except for rights
of first refusal to purchase interests in Subsidiaries which are not
wholly-owned by DT), and there are no outstanding obligations of DT or any of
DT's Significant Subsidiaries or Merger Sub to repurchase, redeem or otherwise
acquire any shares of capital stock or other voting or non-voting securities of
any of DT's Subsidiaries, other than such as would not, individually or in the
aggregate, have a Material Adverse Effect on DT. The Merger Sub Common Stock
constitutes and, to the knowledge of DT, as of the Closing Date, will constitute
all of the outstanding capital stock of Merger Sub and, except as provided in
the last sentence of Section 1.01(b), DT owns 100 percent of the outstanding
capital stock of Merger Sub.
SECTION 3.04. Authority. (a) DT has the necessary corporate power and
authority to enter into this Agreement and the Powertel Stockholder Agreements
and to carry out its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Stockholders Agreement by DT and the
consummation by DT of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of DT, including
by the Management Board (VORSTAND) of DT, and the Supervisory Board
(AUFSICHTSRAT) of DT of this Agreement and the Stockholders Agreement (except
for the determination by the Board of Management which will be made pursuant to
Section 205(2) of the German Act and except for the application to be filed with
the Commercial Register). This Agreement and the Stockholders Agreement have
been duly executed and delivered by DT and, assuming the due authorization,
execution and delivery thereof by the other Parties, constitutes legal, valid
and binding obligations of DT, enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting the rights and remedies of creditors
generally and to general principles of equity (regardless of whether considered
in a proceeding in equity or at law).
(b) Merger Sub has the necessary corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution
and delivery of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Sub and its stockholder. This Agreement
has been duly executed and delivered by Merger Sub and, assuming the due
authorization, execution and delivery thereof by the other Parties hereto,
constitutes the legal, valid and binding obligation of Merger Sub, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
the rights and remedies of creditors generally and to general principles of
equity (regardless of whether considered in a proceeding in equity or at law).
SECTION 3.05. No Conflict; Required Filings and Consents. (a) Except as
set forth on SCHEDULE 3.05 or as described in subsection (b) below, the
execution and delivery of this Agreement and the Stockholders Agreement by DT,
or as applicable, by Merger Sub do not, and the performance of this Agreement
and the Stockholders Agreement by DT, or as applicable, by Merger Sub will not,
(i) violate or conflict with the Memorandum and Articles of Association
(SATZUNG) or the Management Board (VORSTAND) Rules of Procedure
(GESCHAFTSORDNUNG) of DT, (ii) conflict with or violate any law, regulation,
court order, judgment or decree applicable to DT, any of its Significant
Subsidiaries or Merger Sub or by which any of their respective property is bound
or affected, (iii) violate or conflict with the Memorandum and Articles of
Association (SATZUNG) or the Management Board
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(VORSTAND) Rules of Procedure (GESCHAFTSORDNUNG) of any Subsidiaries of DT or
the certificate of incorporation or bylaws of Merger Sub or (iv) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of DT or any of its Significant
Subsidiaries or Merger Sub pursuant to, or result in the loss of any material
benefit or right, including the benefit of any standstill agreement, or result
in an acceleration of any rights or amounts due resulting from a change of
control or otherwise, or require the consent of any other party to, any
contract, instrument, DT Permit, license or franchise to which DT or any of its
Significant Subsidiaries or Merger Sub is a party or by which DT or any of such
Subsidiaries or Merger Sub, or any of their respective property is bound or
affected, except, in the case of clauses (ii), (iii) and (iv) above, for
conflicts, violations, breaches, defaults, rights, results or consents which,
individually or in the aggregate, would not have a Material Adverse Effect on DT
or materially delay the consummation of the Merger.
(b) Except for applicable requirements, if any, of state, local, or foreign
regulatory laws and commissions, the FCC, the Exchange Act, the premerger
notification requirements of the HSR Act, Council Regulation (EEC) No. 4064/89,
if required, filing of a notice pursuant to Section 721 of Exon-Florio, filing
and recordation of appropriate merger or other documents as required by Delaware
Law and any filings required pursuant to any state securities or "blue sky" laws
or the rules of any applicable stock exchanges (the "DT REQUIRED APPROVALS" and
together with the Powertel Required Approvals, the "REQUIRED REGULATORY
APPROVALS"), neither DT nor any of its Subsidiaries nor Merger Sub is required
to submit any notice, report or other filing with any Governmental or Regulatory
Authority in connection with the execution, delivery or performance of this
Agreement and the Stockholders Agreement, as applicable. Except as set forth in
the immediately preceding sentence, no waiver, consent, approval or
authorization of any Governmental or Regulatory Authority is required to be
obtained by DT or any of its Subsidiaries in connection with its execution,
delivery or performance of this Agreement and the Stockholders Agreement.
SECTION 3.06. SEC Filings; Financial Statements. (a) DT has filed all
forms, reports and documents required to be filed with the SEC since January 1,
1999, and has heretofore made available to Powertel, in the form filed with the
SEC, together with any amendments and exhibits thereto, (i) its Annual Report on
Form 20-F for the fiscal year ended December 31, 1999 and (ii) all other reports
or registration statements filed by DT with the SEC since January 1, 1999
(collectively, the "DT SEC DOCUMENTS"). The DT SEC Documents (i) were prepared
substantially in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations promulgated
under each of such respective acts and (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The financial statements (the "DT FINANCIAL STATEMENTS"), including all
related notes and schedules, contained in the DT SEC Documents (or incorporated
by reference therein) fairly present the consolidated financial position of DT
and its Subsidiaries as at the respective dates thereof and the consolidated
results of operations and cash flows of DT and its Subsidiaries for the periods
indicated in accordance with generally accepted accounting principles in Germany
(with a reconciliation to GAAP in accordance with SEC rules) applied on a
consistent basis throughout the periods involved (except for changes as
disclosed in the notes thereto) and subject in the case of interim financial
statements to normal year-end adjustments.
SECTION 3.07. Absence of Certain Changes or Events. Except as permitted
by this Agreement or the VoiceStream Merger Agreement or consented to by
Powertel hereunder or as disclosed in the documents filed by DT with the SEC and
publicly available prior to the date of this Agreement (the "DT FILED SEC
DOCUMENTS"), (a) since December 31, 1999, there has not been any Material
Adverse Effect on DT, and (b) DT and its Subsidiaries, taken as a whole, have
not incurred since December 31, 1999 any material liabilities or obligations
except (i) liabilities or obligations (A) which are accrued or reserved
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against in the DT Financial Statements or reflected in the notes thereto or (B)
which were incurred after December 31, 1999 in the ordinary course of business
and consistent with past practices, (ii) liabilities or obligations which have
been discharged or paid in full prior to the date hereof in the ordinary course
of business and (iii) liabilities and obligations which are of a nature not
required to be reflected in the consolidated financial statements of DT and its
Subsidiaries prepared in accordance with GAAP.
SECTION 3.08. Litigation. As of the date hereof, there are no claims,
actions, suits, proceedings or investigations pending or, to DT's Knowledge,
threatened against DT or any of its Subsidiaries, or any properties or rights of
DT or any of its Subsidiaries, before any Governmental or Regulatory Authority
that would reasonably be expected to result in an adverse judgment or
determination against DT or any of its Subsidiaries, except for those that are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on DT or prevent or materially delay the consummation of the
Merger except as set forth on SCHEDULE 3.08 hereof.
SECTION 3.09. No Violation of Law. The business of DT and its
Subsidiaries is not being conducted in violation of any Legal Requirements or in
violation of any DT Permits, except for possible violations none of which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on DT or prevent or materially delay the consummation of
the Merger. Except as disclosed in DT SEC Documents filed prior to the date
hereof and as set forth on SCHEDULE 3.09 hereto, as of the date hereof, no
investigation, review or proceeding by any Governmental or Regulatory Authority
(including, without limitation, any stock exchange or other self-regulatory
body) with respect to DT or its Subsidiaries in relation to any alleged
violation of law or regulation is pending or, to DT's Knowledge, threatened, nor
has any Governmental or Regulatory Authority (including, without limitation, any
stock exchange or other self-regulatory body) indicated in writing an intention
to conduct the same, except for such investigations which, if they resulted in
adverse findings, would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on DT.
SECTION 3.10. Information Provided by DT. None of the information
supplied or to be supplied by or on behalf of DT for inclusion or incorporation
by reference in the Registration Statement will, at the time the Registration
Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of DT for inclusion or
incorporation by reference in the Powertel Proxy Statement will, at the date
mailed to stockholders of Powertel and at the time of the Powertel Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement (except for information relating solely
to Powertel) will comply as to form in all material respects with the provisions
of the Securities Act and the rules and regulations promulgated thereunder. None
of the information supplied or to be supplied by or on behalf of DT for
inclusion or incorporation by reference in the German Listing Prospectus will,
at the time the German Listing Prospectus is published, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of DT for inclusion or
incorporation by reference in the auditor's report to be prepared pursuant to
Section 183(3) of the German Act will, at the time the report is filed with the
Commercial Register, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 3.11. Board Action; Vote Required. (a) The Management Board
(VORSTAND) and the Supervisory Board (AUFSICHTSRAT) of DT have determined that
the transactions contemplated by this Agreement and the Stockholders Agreement
are advisable and in the best interests of DT and its shareholders.
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(b) No vote of holders of any class or series of DT capital stock,
including, without limitation, holders of DT Ordinary Shares or DT Depositary
Shares, is required for the approval or entering into of this Agreement or the
consummation of the transactions contemplated hereby, including the Merger.
SECTION 3.12. Brokers. Except for Donaldson, Lufkin & Jenrette, or as
indicated in writing to Powertel on or prior to February 8, 2001, no broker,
finder or investment banker is entitled to any brokerage, finder's or investment
banking fee in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of DT or any of its Subsidiaries.
SECTION 3.13. Tax Matters. Except as set forth on SCHEDULE 3.13 and
except to the extent that the failure of the following representations to be
true, whether considered individually or in the aggregate, would not have a
Material Adverse Effect on DT:
(a) All Tax Returns required to be filed by DT or its Subsidiaries on
or prior to the Effective Time have been or will be timely filed with the
appropriate Governmental or Regulatory Authorities and are or will be
correct in all respects, and all Taxes due by DT or its Subsidiaries on or
prior to the Effective Time have been, or will be, timely paid;
(b) There are no liens (except for statutory liens for current Taxes
not yet due and payable) against any domestic or foreign assets of DT or
any of its Subsidiaries resulting from any unpaid Taxes;
(c) No audit or other proceeding with respect to Taxes due from DT or
any of its Subsidiaries, or any Tax Return of DT or any of its
Subsidiaries, is pending, threatened in writing, or being conducted by any
Governmental or Regulatory Authority;
(d) No extension of the statute of limitations on the assessment of
any Taxes has been granted by DT or any of its Subsidiaries and is
currently in effect;
(e) Neither DT nor any of its Subsidiaries has taken any action or
knows of any fact that is reasonably likely to (i) prevent or impede the
Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code or (ii) cause the stockholders of Powertel, other than
any such stockholder that would be a "five-percent transferee shareholder"
of DT (within the meaning of U.S. Treasury Regulations Section
1.367(a)-3(c)(5)) following the Merger, to recognize gain pursuant to
Section 367(a) of the Code; and
(f) The assets of DT do not consist wholly or principally of immovable
property situated within Germany within the meaning of Article 13(2)(b) of
the Income Tax Treaty between Germany and the United States.
SECTION 3.14. Ownership of Securities. Except pursuant to the
Stockholders Agreement or as set forth on SCHEDULE 3.14, as of the date hereof,
neither DT nor, to DT's Knowledge, any of its Subsidiaries, beneficially owns,
directly or indirectly, or is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of capital stock of Powertel (other than shares held by DT
Benefit Plans). Except as set forth on SCHEDULE 3.14, DT owns no shares of
Powertel Common Stock which would constitute Excluded Powertel Shares.
SECTION 3.15. Licenses. DT and each of its Subsidiaries are the
authorized legal holders or otherwise have rights to all material Permits and
licenses and operating rights necessary for the operation of their business as
presently operated, except for such failures as would not reasonably be expected
to have a Material Adverse Effect on DT (collectively, the "DT LICENSES"). As of
the date hereof there is not pending and, to DT's Knowledge, there is not
threatened, any action by or before any Governmental or Regulatory Authority to
revoke, suspend, cancel, rescind or modify in any material respect any of the DT
Licenses which action would reasonably be expected to have a Material Adverse
Effect on DT.
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ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. Conduct of Business by Powertel Pending the Merger. During
the period from the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement, Powertel shall, and shall cause each
of the Powertel Subsidiaries to, in all material respects, except as
contemplated by this Agreement or the Alternative Merger Agreement or as
disclosed in the disclosure schedules to this Agreement (including, without
limitation, disclosures regarding the DiGiPH Transaction) or unless DT shall
otherwise agree in writing in advance of the specific action taken, carry on its
business in the ordinary course. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this Agreement
(including Section 1.07) or the Alternative Merger Agreement or as disclosed in
the disclosure schedules to this Agreement, during such period, Powertel shall
not, and shall not permit any of the Powertel Subsidiaries to, without the prior
written consent of DT:
(a) except for regularly scheduled dividends payable on the Series E
Preferred Shares and Series F Preferred Shares in Powertel Common Stock,
(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, or redeem or repurchase, any of its capital
stock or other equity interest, except for dividends by a Powertel
Subsidiary to its parent, and except that Powertel shall be permitted to
acquire shares of Powertel Common Stock, from time to time, to the extent
required by (A) Section 5.4 of the Restated Certificate of Incorporation of
Powertel and (B) any Powertel Stock Option Plan in connection with the
exercise of options and other rights granted thereunder; or (ii) split,
combine or reclassify any of its capital stock or other equity interest or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock or other equity interest, any other voting securities or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities,
except for issuances of Powertel Common Stock or Powertel Common Stock
Equivalents as set forth in Schedule 4.01(b) or deliveries of shares of its
capital stock pursuant to contractual obligations existing prior to the
execution of this Agreement and which are otherwise disclosed in this
Agreement or the disclosure schedules hereto;
(c) amend the Restated Certificate of Incorporation of Powertel or
Restated By-laws of Powertel or other similar organizational documents;
(d) adopt, amend or propose to amend any stockholder rights plan or
related rights plan;
(e) acquire, or agree to acquire, in a single transaction or in a
series of related transactions, any business, corporation or partnership,
or substantially all of the assets of any of the foregoing, other than (i)
transactions which involve individually or in the aggregate a purchase
price not in excess of $500,000, (ii) capital expenditures described in
Section 4.01(f) below and (iii) transactions in connection with the DiGiPH
Transaction;
(f) make or agree to make any new capital expenditure other than
capital expenditures (i) in fiscal year 2000 that are contemplated by
Powertel's capital budget for fiscal year 2000, provided the aggregate
amount of such capital expenditures is less than $177 million, or (ii) in
fiscal year 2001 that are contemplated by Powertel's business plan for
fiscal year 2001, as approved by the Board of Directors of Powertel,
provided the aggregate amount of such capital expenditures is less than
$181.5 million;
(g) sell, lease, license, encumber or otherwise dispose of, or agree
to sell, lease, license, encumber or otherwise dispose of, any of its
assets, other than as set forth on SCHEDULE 4.01(G) or in connection with
transactions that are in the ordinary course of business and which involve
assets having a current value not in excess of $500,000 individually or in
the aggregate (for avoidance of
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doubt, the sale, lease, license, encumbrance or other disposition of
Powertel FCC Licenses or other material assets shall not be in the ordinary
course of business);
(h) increase the salary, wages, stipends, bonuses or reimbursable
allowances payable or to become payable to its directors or officers,
except for increases for officers in the ordinary course of business
consistent with past practices; or enter into any employment or severance
agreement with, or establish, adopt, enter into or amend, or make any
grants or awards under, any new Powertel Benefit Plan for the benefit of,
any director, officer or employee, except, in each case in the ordinary
course of business consistent with past practices or adopt or amend any
Powertel Benefit Plan except those specifically set forth in Annex 5.18 or
take any action inconsistent with the provisions set forth in Annex 5.18,
provided, that the aggregate increase in such compensation shall not exceed
5% of the previous year's amount (including those with respect to the
timing and amount of, and persons entitled to, grants and awards), as may
be required by the terms of any such Powertel Benefit Plan, or to comply
with applicable law or as permitted by Section 4.01(b), provided, further,
that nothing in this Section 4.01(h) shall restrict the ability of
Powertel's Board of Directors to take the action contemplated by and to
comply with the terms of the severance, retention and other arrangements as
set forth in Annex 5.18 and to adopt appropriate resolutions with respect
to persons who are officers or directors (including persons who are
directors by deputization) of Powertel to cause the transactions relating
to the Merger that may be considered dispositions under Section 16 of the
Exchange Act for such persons to be exempt from such Section;
(i) except as may be required as a result of a change in law or in
GAAP, make any change in its method of accounting or its fiscal year;
(j) except in connection with the transactions contemplated hereby or
in the ordinary course of business, enter into, modify in any material
respect, amend in any material respect or terminate any material contract
or agreement to which Powertel or any of the Powertel Subsidiaries is a
party, or waive, release or assign any material rights or claims, except to
the extent that such contract, agreement, modification or amendment would
not reasonably be expected to have a Material Adverse Effect on Powertel;
(k) amend any term of any of its outstanding securities in any
material respect;
(l) adopt a plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other material reorganization;
(m) incur, assume or guarantee any material Indebtedness, including
any refinancing of existing Indebtedness, for borrowed money unless such
Indebtedness is prepayable at the election of Powertel on or after the
Closing Date and the aggregate prepayment penalty and all other fees
associated with such Indebtedness do not exceed $1,000,000;
(n) create, incur, assume or suffer to exist any material Lien upon
any of its property or assets, whether now owned or hereafter acquired,
other than Liens incurred in the ordinary course of business or to secure
Indebtedness, Liens arising by operation of law and not yet due and payable
or other obligations permitted by this Agreement (including refinancing of
existing Indebtedness);
(o) create, incur, assume or suffer to exist any obligation whereby
Powertel or Powertel Subsidiaries guarantee any Indebtedness, leases,
dividends or other obligations of any third party;
(p) make any loan or capital contributions to or investment in any
Person, other than in the ordinary course of business or as set forth in
SCHEDULE 4.01(p), as required in connection with the DiGiPH Transaction,
and loans or capital contributions to or investments in wholly owned
Powertel Subsidiaries;
(q) enter into any agreement or arrangement that materially limits or
otherwise materially restricts Powertel or any of the Powertel Subsidiaries
or any successor thereto or that could, after the Effective Time,
reasonably be expected to materially limit or restrict DT, any of the DT
Subsidiaries or the Surviving Corporation from engaging in the business of
providing wireless communications
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services or developing wireless communications technology anywhere in the
world or otherwise from engaging in any other business;
(r) settle, or propose to settle, any material litigation,
investigation, arbitration, proceeding or other claim;
(s) make any material tax election or enter into any settlement or
compromise of any material tax liability;
(t) take any action, other than as expressly permitted by this
Agreement, that could reasonably be expected to make any representation or
warranty of Powertel hereunder inaccurate and have a Material Adverse
Effect on Powertel at the Effective Time;
(u) adopt, amend or propose to amend any Powertel Benefit Plan or make
any discretionary contributions to any ERISA Benefit Plan other than as may
be required by law or as may be required to maintain compliance with
provisions of the Code; provided, however, that Powertel (1) may make an
annual 3% of compensation profit sharing contribution and (2) may make
matching contributions of 50% of the first 2% of compensation contributed
by participants, to Powertel's profit sharing Code sec. 401(k) plan
(similar to past practices);
(v) enter into (i) leveraged derivative contracts (defined as
contracts that use a factor to multiply the underlying index exposure) or
(ii) other derivative contracts except for the purpose of hedging known
interest rate and foreign exchange exposures or otherwise reducing
Powertel's cost of financing; provided, however, that employee stock
ownership plans and other pension and deferred compensation plans of
Powertel may enter into derivative contracts as part of their ordinary
course investment strategy;
(w) file any amended Tax Returns if the result of such amendment would
result in a material increase of Powertel tax liability;
(x) take any action which could reasonably be expected to materially
adversely affect or materially delay the ability of any of the Parties to
obtain any Required Regulatory Approval or consummate the transactions
contemplated hereby;
(y) take any action that would be reasonably likely to (i) prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code or (ii) cause the stockholders of Powertel to
recognize gain pursuant to Section 367(a) of the Code;
(z) other than pursuant to this Agreement, take any action to cause
the Powertel Common Stock to cease to be quoted on Nasdaq;
(aa) Notwithstanding anything in this Agreement to the contrary,
during the period of time beginning on the fifth Business Day prior to the
Effective Time and extending until and including the Effective Time,
Powertel shall not take or omit to take any action that could increase the
number of shares of Powertel Stock outstanding on a fully diluted basis; or
(bb) enter into any contract, agreement, commitment or arrangement to
do any of the foregoing.
SECTION 4.02. Conduct of Business by DT. Except as set forth on SCHEDULE
4.02 hereto or as otherwise expressly contemplated by this Agreement, DT agrees
on behalf of itself and its Subsidiaries that they will not, between the date
hereof and the Effective Time, directly or indirectly, do any of the following
without the prior written consent of Powertel:
(a) except as may be necessary or required for the purpose of using or
increasing any or all of DT's authorized capital (GENEHMIGTES KAPITAL) or
necessary for the conduct of its business, amend or propose to amend the
Memorandum and Articles of Association (SATZUNG) or Management Board
(VORSTAND) Rules of Procedure (GESCHAFTSORDNUNG) (or other comparable
organizational document) of DT in any manner that would be adverse to
Powertel or its stockholders;
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(b) take any action that would reasonably be likely to (i) prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code or (ii) cause the stockholders of Powertel to
recognize gain pursuant to Section 367(a) of the Code; or
(c) take any action that would reasonably be likely to (i) materially
adversely affect the ability of the Parties to obtain any Required
Regulatory Approval or to consummate the transactions contemplated hereby
or (ii) materially delay the ability of any of the Parties to obtain any
Required Regulatory Approval or to consummate the transactions contemplated
hereby; provided, however, that this Section 4.02(c) shall not preclude any
acquisitions by DT or any of its Subsidiaries so long as such acquisitions,
individually or in the aggregate, are not reasonably likely to prevent the
consummation of the Merger.
SECTION 4.03. No Solicitation. (a) From and after the date hereof until
the earlier of the Effective Time or the termination of this Agreement, Powertel
shall not, nor shall it permit any of the Powertel Subsidiaries to, nor shall
they authorize or instruct any of their respective officers, directors or
employees to, and shall use their reasonable efforts to cause any investment
banker, financial advisor, attorney, accountants or other representatives
retained by them or any of their respective Subsidiaries not to, directly or
indirectly through another person, (i) solicit, initiate or knowingly encourage
(including by way of furnishing information), or knowingly take any other action
designed to facilitate, any Alternative Transaction (as defined below), or (ii)
continue or participate in any discussions or negotiations regarding any
Alternative Transaction; provided, however, that if, at any time prior to the
time that the Powertel Stockholders' Approval is obtained, the Board of
Directors of Powertel receives an unsolicited bona fide proposal and determines
in good faith and after the receipt of advice from outside counsel that
providing information to the Third Party (as defined below), making such
proposal or participating in negotiations or discussions with the Third Party is
reasonably expected to result in a Powertel Superior Proposal (as defined below)
and if Powertel has fully and completely complied with its obligations under
this Section 4.03, Powertel may, subject to giving DT three Business Days'
advance written notice of its intention to do so and obtaining a confidentiality
agreement from the Third Party substantially similar to the Confidentiality
Agreement between Powertel and DT dated as of August 16, 2000 (the
"CONFIDENTIALITY AGREEMENT"), (x) furnish information to such Third Party with
respect to Powertel and the Powertel Subsidiaries and (y) engage in discussions
and negotiations regarding such proposal.
(b) Powertel will notify DT promptly (but in no event later than 24
hours) after receipt by Powertel (or any of its advisors) of any
Alternative Transaction, or of any request (other than in the ordinary
course of business and not related to an Alternative Transaction) for
non-public information relating to Powertel or any of the Powertel
Subsidiaries or for access to the properties, books or records of Powertel
or any of the Powertel Subsidiaries by any Person who is known to be
considering making, or has made, an Alternative Transaction. Powertel shall
provide such notice orally and in writing and shall identify the Person
making, and the terms and conditions of, any such Alternative Transaction
or request. Powertel shall keep DT fully informed, on a prompt basis (but
in any event no later than 24 hours), of the status and details of any such
Alternative Transaction or request. Powertel shall, and shall cause the
Powertel Subsidiaries and the directors, employees and other agents of
Powertel and the Powertel Subsidiaries to cease immediately and cause to be
terminated all activities, discussions or negotiations, if any, with any
Persons conducted prior to the date hereof with respect to any Alternative
Transaction.
(c) Powertel (i) agrees not to release any Third Party from, or waive
any provision of, or fail to enforce, any standstill agreement or similar
agreement to which it is a party related to, or which could affect, an
Alternative Transaction and agrees that DT shall be entitled to enforce
Powertel's rights and remedies under and in connection with such
agreements, and (ii) acknowledges that the provisions of clause (i) are an
important and integral part of this Agreement. Nothing contained in this
Section 4.03 or in Section 5.02 shall prohibit Powertel (x) from complying
with Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act, or (y)
from making any disclosure to its stockholders if, in the good faith
judgment of the Board of Directors of Powertel, after receipt of
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advice from outside counsel, failure to disclose would result in a
reasonable likelihood that the Board of Directors of Powertel would breach
its duties to Powertel's stockholders under Delaware Law.
For purposes of this Agreement, "ALTERNATIVE TRANSACTION" means a proposal
or intended proposal, regarding any of (i) a transaction or series of
transactions pursuant to which any Person (or "group" of Persons) other than a
Party and its Subsidiaries (a "THIRD PARTY") acquires or would acquire, directly
or indirectly, "beneficial ownership" (as such terms are defined in or
interpreted for purposes of Rule 13d-3 under the Exchange Act) of more than
twenty percent (20%) of the voting power of the outstanding capital stock of
Powertel or pursuant to a tender offer or exchange offer or otherwise, (ii) any
acquisition or proposed acquisition of, or business combination with Powertel or
any of the Powertel Subsidiaries, as applicable, by a merger or other business
combination (including any so-called "merger-of-equals" and whether or not
Powertel or any of the Powertel Subsidiaries, as the case may be, is the entity
surviving any such merger or business combination) or (iii) any other
transaction pursuant to which any Third Party acquires or would acquire,
directly or indirectly, control of assets (including for this purpose the
outstanding equity securities of the Powertel Subsidiaries and any entity
surviving the merger or business combination including any of them) of Powertel
or any of the Powertel Subsidiaries, as the case may be, for consideration equal
to twenty percent (20%) or more of the fair market value of all of the
outstanding shares of Powertel capital stock on the date of this Agreement;
provided, that for purposes of this Agreement the term "Alternative Transaction"
does not include the proposed acquisition of Powertel by VoiceStream as
contemplated by the Alternative Merger Agreement.
SECTION 4.04. Subsequent Financial Statements. Powertel, prior to the
Effective Time, will timely file with the SEC each Annual Report on Form 10-K,
Quarterly Report on Form 10-Q and Current Report on Form 8-K required to be
filed by it under the Exchange Act and the rules and regulations promulgated
thereunder and will promptly deliver to DT copies of each such report filed with
the SEC. DT will timely file with the SEC each Annual Report on Form 20-F and
Report on Form 6-K required to be filed by it under the Exchange Act and the
rules and regulations promulgated thereunder and will promptly deliver to
Powertel copies of each such report filed with the SEC. As of their respective
dates, none of such reports shall contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The respective audited financial statements and
unaudited interim financial statements of each of Powertel and DT, as the case
may be, included in such reports will fairly present the financial position of
such Party and its Subsidiaries as at the dates thereof and the results of their
operations and cash flows for the periods then ended in accordance with GAAP
(with a reconciliation to GAAP in accordance with SEC rules in the case of
Powertel) or generally accepted accounting principles in Germany (in the case of
DT) applied on a consistent basis and, subject, in the case of unaudited interim
financial statements, to normal year-end adjustments and any other adjustments
described therein.
SECTION 4.05. Control of Operations. Nothing contained in this Agreement
shall be deemed to give DT, directly or indirectly, the right to "control" or
"direct", as such terms are construed under applicable rules or regulations of
the FCC, Powertel's operations prior to the Effective Time. Prior to the
Effective Time, Powertel shall exercise, consistent with the terms and
conditions of this Agreement, "control" over its respective operations.
SECTION 4.06. Alternative Merger Agreement. Powertel will not modify,
amend or waive in any material respect the provisions of the Alternative Merger
Agreement without DT's prior written consent except for the amendments to the
Alternative Merger Agreement made on September 28, 2000 and as of February 8,
2001.
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ARTICLE 5
ADDITIONAL AGREEMENTS
SECTION 5.01. Powertel Proxy Statement; the DT Registration Statement and
the German Listing Prospectus. (a) Each of DT and Powertel shall cooperate and
promptly prepare and DT shall file with the SEC as soon as practicable the DT
Registration Statement on Form F-4 (or any successor form) (the "FORM F-4")
under the Securities Act with respect to the DT Ordinary Shares and the DT
Depositary Shares issuable and deliverable pursuant to this Agreement. A portion
of the Form F-4 shall serve as a prospectus with respect to the DT Ordinary
Shares and the DT Depositary Shares issuable and deliverable pursuant to the
terms of this Agreement and as Powertel's proxy statement with respect to
Powertel Stockholders' Meeting (the "POWERTEL PROXY STATEMENT"). DT will cause
the Form F-4 to comply as to form in all material respects with the applicable
provisions of the Securities Act and the rules and regulations thereunder, and
Powertel will cause the Powertel Proxy Statement to comply as to form in all
material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder. Powertel and DT shall use their reasonable
best efforts to have the Powertel Proxy Statement and the DT Registration
Statement declared effective by the SEC under the Securities Act, and promptly
thereafter shall mail to the holders of record of Powertel Common Shares the
Powertel Proxy Statement; provided, however, that Powertel shall not mail or
otherwise furnish the Powertel Proxy Statement to its stockholders unless and
until:
(i) it has received oral notice from the SEC that the DT Registration
Statement is effective under the Securities Act;
(ii) Powertel shall have received a letter of its independent
accountants, dated a date within two (2) business days prior to the date of
the first mailing of the Powertel Proxy Statement, and addressed to
Powertel, in form reasonably satisfactory to Powertel and customary in
scope for similar "cold comfort" letters delivered by independent public
accountants in connection with registration statements on Form F-4 with
respect to the financial statements of DT included in the Powertel Proxy
Statement and the DT Registration Statement;
(iii) DT shall have received a letter of its independent accountants,
dated a date within two (2) business days prior to the date of the first
mailing of the Powertel Proxy Statement, and addressed to DT, in form
reasonably satisfactory to DT and customary in scope for similar "cold
comfort" letters delivered by independent public accountants in connection
with registration statements on Form F-4 with respect to the financial
statements of Powertel included in the Powertel Proxy Statement and the DT
Registration Statement.
DT shall take any reasonable action (other than qualifying to do business
in any jurisdiction in which it is now not so qualified) to obtain prior to the
effective date of the Form F-4 all necessary state securities law or "Blue Sky"
permits and approvals or similar foreign approvals required to effect the
transactions contemplated by this Agreement, including the distribution of DT
Depositary Shares and DT Ordinary Shares issued in accordance with the
provisions of this Agreement, and Powertel will provide any reasonably requested
cooperation in connection therewith. DT will advise Powertel of the time when
the Form F-4 has become effective or any supplement or amendment has been filed,
the issuance of any stop order or the suspension of the qualification of the DT
Depositary Shares or DT Ordinary Shares issuable and deliverable in connection
with the Merger for offering or sale in any jurisdiction.
(b) DT and Powertel will cooperate in (i) the preparation of the Powertel
Proxy Statement and the DT Registration Statement or any amendments and
supplements thereto and in having the DT Registration Statement declared
effective as soon as practicable and (ii) the preparation and filing of the
German Listing Prospectus with the FSE and the auditor's report with the
Commercial Register.
SECTION 5.02. Powertel Stockholders' Meeting and Consummation of the
Merger.
(a) As promptly as practicable after the DT Registration Statement is
declared effective under the Securities Act, Powertel shall duly give notice of,
convene and hold a meeting of its stockholders (the
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"POWERTEL STOCKHOLDERS' MEETING") in accordance with Delaware Law for the
purposes of obtaining the Powertel Stockholder Approval and shall, subject to
the provisions of Section 5.02(b) hereof, through its Board of Directors,
recommend to its stockholders the approval and adoption of this Agreement and
use its reasonable best efforts to obtain the Powertel Stockholder Approval.
(b) Neither the Board of Directors of Powertel nor any committee thereof
shall (i) except as expressly permitted by this Section 5.02(b), withdraw,
qualify or modify, or propose publicly to withdraw, qualify or modify, in a
manner adverse to DT, the approval or recommendation of such Board of Directors
or such committee of this Agreement, the Merger and the other transactions
contemplated hereby, (ii) approve or recommend, or propose publicly to approve
or recommend, any Alternative Transaction, or (iii) cause Powertel to enter into
any letter of intent, agreement in principle, acquisition agreement or other
similar agreement related to any Alternative Transaction (each, a "POWERTEL
ACQUISITION AGREEMENT"). Notwithstanding the foregoing, in the event that prior
to the time the Powertel Stockholder Approval is obtained, Powertel receives a
Superior Proposal (as defined below), the Board of Directors of Powertel may
(subject to this and the following sentences) inform Powertel stockholders that
it no longer recommends Powertel Stockholder Approval (a "SUBSEQUENT
DETERMINATION"), but only at a time that is after the fifth Business Day
following DT's receipt of written notice advising DT that the Board of Directors
of Powertel has received a Superior Proposal specifying the material terms and
conditions of such Superior Proposal (and including a copy or draft copy thereof
with all accompanying documentation or draft documentation, if in writing),
identifying the Person making such Superior Proposal and stating that it intends
to make a Subsequent Determination. After providing such notice, Powertel shall
provide a reasonable opportunity to DT to make such adjustments in the terms and
conditions of this Agreement as would enable Powertel to proceed with its
recommendation to its stockholders without a Subsequent Determination; provided,
however, that any such adjustment shall be at the discretion of Powertel and DT
at the time. For purposes of this Agreement, a "SUPERIOR PROPOSAL" means any
proposal (on its most recently amended or modified terms, if amended or
modified) made by a Third Party to enter into an Alternative Transaction which
the Board of Directors of Powertel determines in its good faith judgment (based
on, among other things, the advice of a financial advisor of nationally
recognized reputation) to be more favorable to Powertel's stockholders than the
transactions contemplated by this Agreement taking into account all relevant
factors (including whether, in the good faith judgment of the Board of Directors
of Powertel, after obtaining the advice of a financial advisor of nationally
recognized reputation, the Third Party is reasonably able to finance the
transaction, and any changes to this Agreement that may be proposed by DT in
response to such Alternative Transaction). Powertel shall submit this Agreement
to its stockholders at the Powertel Stockholders' Meeting even if the Board of
Directors of Powertel shall have made a Subsequent Determination.
Powertel shall use its reasonable best efforts to schedule the Powertel
Stockholders' Meeting at the same time as the Powertel Stockholders' Meeting (as
defined in the Alternative Merger Agreement).
SECTION 5.03. Notification of Certain Matters. (a) Each of Powertel and
DT shall give prompt notice to each other of the following:
(i) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (i) any representation or
warranty contained in this Agreement of such Party to be untrue, inaccurate
or incomplete in any material respect at any time from the date hereof to
the Effective Time if such failure to be true, accurate or complete would
cause the condition set forth in Section 6.02(a) or 6.03(a) not to be
satisfied, in which case the Party required to give prompt notice thereof
shall promptly update and deliver to the other Party any Schedules hereto
which require an update to remain true, accurate and correct or (ii)
directly or indirectly, any Material Adverse Effect on such Party;
(ii) any material failure of such Party, or any officer, director,
employee or agent of any thereof, to comply with or satisfy any covenant or
agreement to be complied with or satisfied by it hereunder (if such failure
would cause the condition set forth in Section 6.02(b) or 6.03(b) not to be
satisfied); and
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(iii) any facts relating to such Party which would make it necessary
or advisable to amend the Powertel Proxy Statement or the DT Registration
Statement in order to make the statements therein not misleading or to
comply with applicable law; provided, however, that the delivery of any
notice pursuant to this Section 5.03 shall not limit or otherwise affect
the remedies available hereunder to the Parties receiving such notice.
(iv) Promptly upon receipt by Powertel from any Powertel stockholder
who is a party to the Powertel Stockholder Agreements of a proxy card sent
to the Powertel stockholders with the Powertel Proxy Statement and in
accordance with Section 5 of the Stockholders Agreement, but in no event
later than the second Business Day following such receipt or, if such
receipt is on or after the fifth Business Day prior to the Closing, then on
the date of such receipt, Powertel shall notify DT orally of its receipt
and provide DT with copy of such proxy card.
(b) DT shall promptly provide to Powertel a copy of any written notice
given by DT to VoiceStream or received by DT from VoiceStream of the termination
of the VoiceStream Merger Agreement.
SECTION 5.04. Access to Information. Upon reasonable notice and subject
to restrictions contained in the Confidentiality Agreement and other
confidentiality agreements to which Powertel is subject, (a) Powertel shall, and
shall cause each Powertel Subsidiary to, afford to DT and to the officers,
employees, accountants, counsel and other representatives of DT all reasonable
access, during normal business hours during the period prior to the Effective
Time, to all their respective lenders, agents and other representatives,
properties, assets, books, contracts, commitments and records and, during such
period, Powertel shall (and shall cause each Powertel Subsidiary to) furnish
promptly to DT all information concerning its business, properties and personnel
as DT may reasonably request, including a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of the federal or state securities laws or
the federal Tax laws and (b) DT shall, and shall cause each DT Subsidiary to,
afford to Powertel and to the officers, employees, accountants, counsel and
other representatives of Powertel all reasonable access, during normal business
hours during the period prior to the Effective Time, to all their respective
properties, assets, books, contracts, commitments and records and, during such
period, DT shall (and shall cause each DT Subsidiary to) furnish promptly to
Powertel all information concerning its business, properties and personnel as
Powertel may reasonably request, including a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of the federal or state securities laws.
SECTION 5.05. Public Announcements. DT and Powertel will consult with
each other before issuing any press release with respect to the transactions
contemplated by this Agreement and shall not issue any such press release prior
to such consultation, except as may be required by applicable law, fiduciary
duties or by obligations pursuant to any listing agreement with any national
securities exchange. The parties will cooperate in preparing a joint press
release announcing the execution of this Agreement.
SECTION 5.06. Cooperation. (a) Upon the terms and subject to the
conditions hereof, each of Powertel and DT agrees, and agrees to cooperate with
each other, (i) to use reasonable best efforts to consummate and make effective,
in the most expeditious manner practicable, the Merger and the transactions
contemplated by this Agreement, (ii) to obtain in a timely manner all necessary
Permits or waivers from, approvals or consents of, or declarations,
registrations or filings with, and all expirations of waiting periods imposed
by, any Governmental or Regulatory Authority which are necessary for the
consummation of the transactions contemplated hereby, (iii) to promptly (A)
prepare and file a Premerger Notification in accordance with the HSR Act, comply
with any requests for additional information, and obtain termination of the
waiting period thereunder as promptly as practicable, (B) prepare and file all
required notifications, if any, under Council Regulation (EEC) No. 4064/89, and
obtain the approval of the Council of the European Union to the transactions
contemplated by this Agreement, if required, and (C) file a notice pursuant to
Section 721 of Exon-Florio, and (iv) to take all actions within its control
necessary to obtain any Required Regulatory Approvals necessary to consummate
the transactions contemplated hereby; provided, however, that neither DT nor any
of its Subsidiaries shall
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be required, nor, without the consent of DT, shall Powertel or its Subsidiaries
be permitted, to divest or hold separate or otherwise take or commit to take any
action that limits its freedom of action with respect to Powertel, DT,
VoiceStream or any of their Subsidiaries or any material portion of the assets
of Powertel, DT, VoiceStream or any of their Subsidiaries or any of the
business, product lines, or assets of Powertel, DT, VoiceStream or any of their
Subsidiaries.
(b) Each of Powertel and DT agrees to cooperate with each other (i) to
respond to inquiries from, and to make presentations to, Governmental or
Regulatory Authorities and (ii) to promptly inform the others of any material
oral or written communication received by such Party from, or given by such
Party to, any Governmental or Regulatory Authority, and of any material
communication received or given in connection with any proceeding by a private
Party, in each case regarding the transactions between DT and Powertel
contemplated by this Agreement. Powertel and DT agree to consult with each other
in advance of any meeting or conference with, or of making any filing or other
written submission to, any such Governmental or Regulatory Authority, and to the
extent permitted by the applicable Governmental or Regulatory Authority, give
the others the opportunity to attend and participate in such meetings and
conferences, or to review and approve any such filing or other written
submission, in each case regarding the transactions between DT and Powertel
contemplated by this Agreement. Powertel shall promptly provide to DT, upon
request, and DT shall promptly provide to Powertel, upon request, copies of all
written communications referenced in Section 5.06(b)(i) above and all filings
made by DT or Powertel, as the case may be, with any Governmental or Regulatory
Authority in connection with this Agreement and the transactions contemplated
hereby and written correspondence from any Governmental or Regulatory Authority
that relates to the transactions contemplated hereby (excluding any exhibits,
schedules and any confidential information contained therein).
(c) Each of Powertel and DT shall cooperate with each other to eliminate or
reduce to the extent possible any illegality, forfeiture or loss on the part of
DT, Powertel or their respective Subsidiaries that may result from the
consummation of the transactions contemplated hereby.
(d) Each of Powertel and DT hereby agrees to cooperate with the other
party, and to cause its officers, directors and independent accountants to
cooperate with the other party, to do or cause to be done all things reasonably
requested by the other party (including, without limitation, providing such
information as may reasonably be requested to permit pro forma financial
statements after giving effect to the Merger to be produced) in order to
facilitate any financing, acquisition or capital markets transaction or
registration to be entered into or made by either Party after the date hereof.
(e) Powertel hereby agrees to use reasonable best efforts, in consultation
with DT, to obtain all waivers and consents that may be required from any
parties to any Powertel Contract, including, without limitation, from lenders
and other financing sources of Powertel and its Subsidiaries, in connection with
this Agreement, the Powertel Stockholder Agreements and the transactions
contemplated hereby and thereby.
(f) Powertel hereby agrees, from the date hereof until the Closing, to take
any and all actions that are required to be taken prior to the Effective Time
pursuant to any Powertel Contract or other agreement, including, without
limitation, any debt instruments, including credit agreements and indentures, to
which Powertel or any of its Significant Subsidiaries is a party and to make any
offer to purchase any securities required to be made, as a result of the
execution and delivery of this Agreement and the Powertel Stockholder
Agreements.
(g) DT shall cause Merger Sub to approve, and shall vote all securities and
give all approvals necessary for Merger Sub to approve, the Merger.
(h) Notwithstanding anything to the contrary contained in this Agreement,
in connection with any filing or submission required or action to be taken by
DT, Powertel or any of its respective Subsidiaries to consummate the Merger or
the other transactions contemplated in this Agreement, Powertel shall not,
without DT's prior written consent, commit to any divestiture of assets of
businesses of Powertel and its
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Subsidiaries if such divested assets and/or businesses are material to the
assets or profitability of Powertel and its Subsidiaries taken as a whole.
SECTION 5.07. Indemnification, Directors' and Officers' Insurance. (a) DT
shall, or shall cause the Surviving Corporation to, continue to provide, fulfill
and honor all rights to indemnification or exculpation existing in favor of a
director, officer, employee or agent (an "INDEMNIFIED PERSON") of Powertel or
any of the Powertel Subsidiaries (including rights relating to advancement of
expenses and indemnification rights to which such persons are entitled because
they are serving as a director, officer, agent or employee of another entity at
the request of Powertel or any of the Powertel Subsidiaries), as provided in the
Restated Certificate of Incorporation of Powertel, the Restated By-laws of
Powertel or any indemnification agreement, in each case, as in effect on the
date of this Agreement, and relating to actions or events through the Effective
Time, and such rights to indemnification shall survive the Merger and shall
continue in full force and effect, without any amendment thereto; provided,
however, that neither DT nor the Surviving Corporation shall be required to
indemnify any Indemnified Person in connection with any proceeding (or portion
thereof) to the extent involving any claim initiated by such Indemnified Person
unless the initiation of such proceeding (or portion thereof) was authorized by
the Board of Directors of Powertel or unless such proceeding is brought by an
Indemnified Person to enforce rights under this Section 5.07; provided further
any determination required to be made with respect to whether an Indemnified
Person's conduct complies with the standards set forth under the Delaware Law,
the Restated Certificate of Incorporation of Powertel, the Restated By-laws of
Powertel or any such agreement, as the case may be, shall be made by independent
legal counsel selected by DT and reasonably acceptable to such Indemnified
Person; provided further that DT and the Surviving Corporation will cooperate
and use all reasonable efforts to assist in the vigorous defense of any such
matter; and provided further that that nothing in this Section 5.07 shall impair
any rights of any Indemnified Person. Without limiting the generality of the
preceding sentence, in the event that any Indemnified Person becomes involved in
any actual or threatened action, suit, claim, proceeding or investigation after
the Effective Time relating to actions prior to the Effective Time, DT shall, or
shall cause the Surviving Corporation to, promptly advance to such Indemnified
Person his or her legal and other expenses (including the cost of any
investigation and preparation incurred in connection therewith), subject to the
providing by such Indemnified Person, to the extent required by law, of an
undertaking to reimburse all amounts so advanced in the event of a
non-appealable determination of a court of competent jurisdiction that such
Indemnified Person is not entitled thereto.
(b) Subject to the prior written approval by DT, which shall not be
unreasonably withheld, prior to the Effective Time, Powertel shall have the
right to obtain and pay for in full a "tail" coverage directors' and officers'
liability insurance policy ("D&O INSURANCE") covering a period of six years
after the Effective Time and providing coverage in amounts and on terms
consistent with Powertel's existing D&O Insurance. In the event the Surviving
Corporation does not obtain such insurance, DT shall cause the Surviving
Corporation to continue to provide D&O Insurance relating to actions or events
through the Effective Time, for a period of six years after the Effective Time;
provided, that the Surviving Corporation may substitute therefor policies of
substantially similar coverage and amounts containing terms no less advantageous
to such former directors or officers; provided further that if the existing D&O
Insurance expires or is cancelled during such period, DT or the Surviving
Corporation shall make reasonable commercial efforts to obtain substantially
similar D&O Insurance; and provided further that the Surviving Corporation shall
not be required to expend, in order to maintain or procure an annual D&O
Insurance policy, an amount in excess of 250% of the last annual premium paid
prior to the date hereof, but in such case shall purchase as much coverage as
possible for such amount.
(c) In the event DT or the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person in a single transaction or a series of
related transactions, then, and in each such case, DT will make or cause to be
made proper provision so that the successors and assigns of
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DT or the Surviving Corporation, as the case may be, assume the indemnification
obligations described herein for the benefit of the Indemnified Parties.
(d) The provisions of this Section 5.07 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Person, his or her heirs and
his or her personal representatives and shall survive the Merger and be binding
upon the successors and assigns of DT, Powertel and the Surviving Corporation.
SECTION 5.08. Stock Exchange Listings/Establishment of DT Depositary
Shares. DT will take all steps necessary for the listing and authorization for
listing on the FSE and the NYSE (subject to official notice of issuance) of the
DT Ordinary Shares and the DT Depositary Shares, respectively, to be issued
pursuant to the Merger.
SECTION 5.09. No Shelf Registration. DT shall not be required to amend or
maintain the effectiveness of the Registration Statement for the purpose of
permitting resale of the shares of DT received pursuant hereto by the Persons
who may be deemed to be "affiliates" of Powertel within the meaning of Rule 145
promulgated under the Securities Act. The DT Ordinary Shares issuable upon
exercise of options pursuant to Section 1.05 hereof shall be registered under
the Securities Act and such registration shall be effective at the time of
issuance.
SECTION 5.10. Affiliates. Powertel (i) shall deliver to DT not later than
the 30th day after the date of this Agreement a list of all persons who are, as
of the date hereof, its Affiliates for purposes of Rule 145 under the Securities
Act and (ii) shall use its reasonable best efforts to cause each person who is
identified as its "affiliate" on SCHEDULE 5.10 to deliver to DT as promptly as
practicable but in no event later than the Closing Date, a signed agreement
substantially in the form of Exhibit A. Powertel shall notify DT from time to
time of any other persons who then are such an "affiliate" of Powertel and use
its reasonable best efforts to cause each additional person who is identified as
such an "affiliate" to execute a signed agreement as set forth in this Section
5.10.
SECTION 5.11. Tax-Free Merger. Each of the Parties will use its
reasonable best efforts, and each agrees to cooperate with the other Parties and
provide one another with such documentation, information and materials as may be
reasonably necessary, proper or advisable to (i) cause the Merger to qualify as
a reorganization within the meaning of Section 368(a) of the Code and (ii) avoid
gain recognition to the stockholders of Powertel pursuant to Section 367(a) of
the Code.
SECTION 5.12. Reasonable Best Efforts. Each of Powertel and DT shall use
its reasonable best efforts to obtain the opinions referred to in Section
6.02(d), Section 6.02(e), 6.03(d) and 6.03(e) and the delivery of the
Representation Letters in the forms set forth in Exhibits B and C.
SECTION 5.13. Takeover Laws. Subject to Section 5.02, no Party shall take
any action that would cause the transactions contemplated by this Agreement or
the Stockholders Agreement to be subject to requirements imposed by any Takeover
Laws (including any such laws or regulations applicable to DT under German Legal
Requirements or the Legal Requirements of the FSE) and each of them shall take
all necessary steps within its control to exempt (or ensure the continued
exemption of), or minimize the effect on, the transactions contemplated by this
Agreement and the Stockholders Agreement from, or if necessary challenge the
validity or applicability of, any applicable Takeover Law, as now or hereafter
in effect, including, without limitation, Section 203 of the Delaware Law or any
other Takeover Laws that purport to apply to this Agreement or the Stockholders
Agreement or the transactions contemplated hereby or thereby.
SECTION 5.14. Certain Litigation. Powertel agrees that it shall not
settle any litigation commenced after the date hereof against Powertel or any of
its directors by any stockholder of Powertel relating to the Merger, this
Agreement, the Alternative Merger Agreement or the Stockholders Agreement
without the prior written consent of DT, which consent shall not be unreasonably
withheld or delayed.
SECTION 5.15. Senior Discount Notes and Senior Notes. Within 30 days
following the Effective Time, DT shall cause the Surviving Corporation to
commence an offer to purchase all of the Senior Discount Notes and Senior Notes
(collectively, the "NOTES") pursuant to the terms of the February 1996
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Indenture, April 1996 Indenture and June 1997 Indenture, as applicable
(collectively, the "POWERTEL INDENTURES"). Any investment banking firm engaged
in connection with such acquisition shall be selected by DT. DT shall bear the
fees, costs and expenses of acquiring the Notes.
SECTION 5.16. Employee Benefits. (a) As of the Effective Time, Powertel
will have terminated all Powertel Benefit Plans except for those Powertel
Benefit Plans that DT requests not be terminated and those Powertel Benefit
Plans described in Annex 5.18. DT shall take all necessary action so that, after
the Effective Time, any current or former employee of Powertel who is eligible
to participate in a Powertel Benefit Plan as of the Effective Time shall either
be eligible to continue his or her participation in such Powertel Benefit Plan
or participate in a corresponding employee benefit plan maintained by DT or any
of its Subsidiaries, subject to the terms of such corresponding plan. DT shall
have the sole discretion to determine which current or former employees of
Powertel will continue participation in a Powertel Benefit Plan after the
Effective Time and which will commence participation in a corresponding employee
benefit plan maintained by DT or any of its Subsidiaries after the Effective
Time and, with respect to current or former employees who transfer participation
to such a corresponding plan, when such transfer will occur. DT need not treat
all current and former employees of Powertel (including those who are similarly
situated) in the same manner with respect to which plans they participate in and
when, if at all, they transfer participation from a Powertel Benefit Plan to a
corresponding employee benefit plan maintained by DT or any of its Subsidiaries.
For example, DT may decide to have a current or former employee of Powertel
continue participation after the Effective Time in certain Powertel Benefit
Plans that have not been terminated, and with respect to other benefits
transition his or her participation on or shortly after the Effective Time to a
corresponding employee benefit plan maintained by DT or one of its Subsidiaries.
DT may take such actions (or cause its Subsidiaries or the Surviving Corporation
to take such actions) as are necessary or advisable to accomplish the foregoing,
including, without limitation, amending the eligibility provisions of plans of
DT, any of its Subsidiaries or the Surviving Corporation (including, without
limitation, Powertel Benefit Plans that are not terminated on or before the
Effective Time). Within 5 days of the date hereof, Powertel shall deliver a true
and complete list of each director, officer and employee of Powertel and its
Subsidiaries holding options under any Powertel Benefit Plan as of August 18,
2000, and the dollar or share amounts thereof.
(b) Except as otherwise provided in this Section, nothing in this Agreement
shall be interpreted as limiting the power of the Surviving Corporation to amend
or terminate any particular Powertel Benefit Plan or any other particular
employee benefit plan, program, agreement or policy or as requiring the
Surviving Corporation or DT to offer to continue (other than as required by its
terms) any written employment contract or to continue the employment of any
specific person; provided, however, (1) that no such termination or amendment
may take away benefits or any other payments already accrued as of the time of
such termination or amendment without the consent of such person, except as
allowed by law, and (2) that nothing in this Section 5.01 shall be interpreted
as limiting or modifying any requirement in Section 5.18 or the provisions of
Annex 5.18.
(c) DT shall, or shall cause the Surviving Corporation to, (i) waive all
limitations, to the extent allowable under applicable law, as to pre-existing
conditions, exclusions and waiting periods with respect to participation and
coverage requirements applicable to the current and former employees of Powertel
and its Subsidiaries under any welfare or fringe benefit plan in which such
employees and former employees may be eligible to participate after the
Effective Time (other than a Powertel Benefit Plan that is not terminated on or
before the Effective Time), other than limitations or waiting periods that are
in effect with respect to such employees and that have not been satisfied under
the corresponding welfare or fringe benefit plan maintained by Powertel for such
current and former employees prior to the Effective Time, (ii) provide each
current and former employee with credit under any welfare plans in which such
employee or former employee becomes eligible to participate after the Effective
Time for any co-payments and deductibles paid by such current or former employee
for the then current plan year under the corresponding welfare plans maintained
by Powertel prior to the Effective Time, and (iii) provide (to the extent
allowed by law and Treasury regulations applicable to tax-qualified plans) each
current and former employee with full credit for purposes of eligibility,
vesting, and determination of the level of benefits
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under any employee benefit plans, policies, practices or arrangements maintained
by DT or any Subsidiary of DT for such current or former employee's service with
Powertel or any Powertel Subsidiary to the same extent recognized by Powertel
immediately prior to the Effective Time.
(d) Except in connection with the Permitted Stock Dividend, neither
Powertel nor any Affiliate thereof shall, from the date hereof until the
Effective Time, without the prior express written consent of DT, make any
contribution, sale or other transfer of Powertel Stock or any other "employer
security" (as such term is defined in Section 407 of ERISA), whether to satisfy
a required obligation, to reimburse for expenses incurred, or otherwise, to any
Powertel Benefit Plan or to the Powertel stock fund (or any other fund) under
the Powertel 401(k) Profit Sharing Plan. Moreover, Powertel shall, promptly
after the date hereof, amend the Powertel 401(k) Profit Sharing Plan (as amended
and restated effective as of January 1, 1998, and further amended August 23,
1999), (a) to require that all contributions, from whatever source, be made in
the form of cash and (b) to preclude the use of any present or future Powertel
401(k) Profit Sharing Plan assets to purchase from Powertel, or any Affiliate
thereof, shares of Powertel Stock or other "employer securities" (as such term
is defined in Section 407 of ERISA); it being understood, however, that such
amendment need not preclude the Powertel 401(k) Profit Sharing Plan from
purchasing Powertel Stock on the open market from any person or entity, other
than Powertel or an Affiliate thereof, nor require that shares of Powertel Stock
and units in the Powertel stock fund presently under the Powertel 401(k) Profit
Sharing Plan be sold or otherwise liquidated.
SECTION 5.17. Termination of Agreements with Stockholders. Powertel
agrees to the termination of the agreements referred to in Section 7 of the
Powertel Stockholder Agreements.
SECTION 5.18. Plans and Programs to be Implemented. After the execution
of this Agreement, Powertel and/or its subsidiaries shall adopt and implement
the plans and arrangements described in Annex 5.18 with each such plan or
arrangement being approved by VoiceStream and DT prior to such adoption or
implementation. Each such plan or arrangement shall be designed to become
effective as of the Effective Time (contingent upon the occurrence of the
transactions contemplated by this Agreement) and remain effective without
modification of the terms and provisions of such plan or arrangement until the
termination date noted for each respective plan or arrangement in Annex 5.18.
After the execution of this Agreement, Powertel and/or its subsidiaries shall
take such actions as are required, necessary or appropriate to implement the
provisions of Annex 5.18 and this Section 5.18, notwithstanding any provisions
of this Agreement to the contrary, and no such actions shall be deemed to be a
breach of any other provision of this Agreement.
SECTION 5.19. Voting Agreement and Transfer Restrictions. (a) If and when
DT becomes a record or beneficial owner of any Shares, DT agrees:
(i) that, from the date hereof until the later of January 1, 2001 and
the date of the VoiceStream Stockholders' Meeting, without Powertel's prior
written consent, it will not Transfer or agree to Transfer any Shares,
Additional Shares, Rights or Additional Rights that it owns of record or
beneficially, except (A) pursuant to the VoiceStream Merger Agreement, (B)
Transfers to any Affiliate of DT who agrees in writing to be bound by the
terms of this Section 5.19 or (C) Transfers which occur by operation of law
if the transferee remains or agrees in writing to remain bound by the terms
of this Section 5.19; provided, however, that this Section 5.19(a)(i) shall
cease to be of any force or effect immediately upon termination of the
Alternative Merger Agreement; and
(ii) irrevocably and unconditionally to vote or cause to be voted or
provide consent with respect to, all Shares and Additional Shares, if any,
that it owns of record or beneficially as of the record date for the
VoiceStream Stockholders' Meeting at the VoiceStream Stockholders' Meeting
and at any other annual or special meeting of stockholders of VoiceStream
or action by written consent where such matters arise in favor of the
"Merger" contemplated by the Alternative Merger Agreement and, if required,
the other transactions referenced in the Alternative Merger Agreement.
(iii) (a) to complete and send the proxy card received by it with the
Joint Proxy Statement, so that such proxy card is received by VoiceStream,
as prescribed by the Joint Proxy Statement, not
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later than the fifth Business Day preceding the day of the VoiceStream
Stockholders' Meeting, (b) to vote, by completing such proxy card but not
otherwise, all the Shares it owns of record or beneficially as of the
record date for the VoiceStream Stockholders' Meeting in favor of the
"Merger" contemplated in the Alternative Merger Agreement and, if required,
the other transactions referenced in the Alternative Merger Agreement and
(c) not to revoke any such proxy.
(b) The provisions of Section 5.19(a)(i) shall terminate at the earlier of
the date indicated therein and the date of termination of the Alternative Merger
Agreement. Sections 5.19(a)(ii) and 5.19(a)(iii) shall terminate on the earlier
of the termination of the Alternative Merger Agreement and the VoiceStream
Stockholders' Meeting.
(c) From and after the date that this Agreement terminates in accordance
with Article 7 hereof, DT agrees to abide by the provisions of the second, third
and fourth sentences of Section 6 of the VoiceStream Stockholders' Agreements as
if DT were a "Stockholder" named therein, provided that the First Amended and
Restated Voting Agreement dated July 23, 2000 takes effect as to DT in
accordance with its terms, and, provided, further, that, notwithstanding
anything to the contrary contained herein, nothing contained in this Section
5.19(c) shall require DT to take any action that adversely affects its rights
under the "DT Financing Agreements" (as defined in the VoiceStream Merger
Agreement) or that might result in DT's designees on the VoiceStream Board of
Directors in accordance with the DT Financing Agreements to represent less than
10% of the total number of members of the VoiceStream Board of Directors.
(d) For purposes of Section 5.19 only, the words "beneficially owns" or
similar expressions of ownership and capitalized terms used but not otherwise
defined in this Agreement shall have the meanings set forth in, or determined in
accordance with, the VoiceStream Stockholder Agreements as if DT were a
"Stockholder" thereunder.
SECTION 5.20. Powertel Warrants. After consultation with each other, DT
and Powertel shall use reasonable efforts to take such actions as they may deem
to be appropriate to attempt to cause the outstanding Powertel Warrants to be
exercised in full prior to the Effective Time, including by reducing the
exercise price of the Powertel Warrants to the extent agreed to by DT and
Powertel and in accordance with the provisions of the Powertel Warrant
Agreement.
ARTICLE 6
CLOSING CONDITIONS
SECTION 6.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of Powertel and DT to consummate the Merger
shall be subject to the fulfillment or (to the extent permitted by applicable
law) written waiver prior to the Effective Time of the following conditions:
(a) Stockholder Approval. The Powertel Stockholder Approval shall have
been obtained.
(b) Legality. No federal, state or foreign statute, rule, regulation,
executive order, decree, temporary restraining order or injunction shall have
been enacted, entered, promulgated or enforced by any Governmental or Regulatory
Authority which is in effect and has the effect of making the Merger illegal or
otherwise prohibiting the consummation of the Merger or which could reasonably
be expected to have a Material Adverse Effect on Powertel.
(c) Competition Law Approvals. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated; to the extent required, the Commission of the European Union shall
have approved the Merger under Regulation (EEC) No. 4064/89 of the Council of
the European Union, or such approval shall have been deemed to have been
granted; the review and investigation under Exon-Florio shall have been
terminated and the President shall have taken no action authorized thereunder.
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(d) Registration Statement Effective. The DT Registration Statement shall
have become effective prior to the mailing by Powertel of the Powertel Proxy
Statement to its stockholders, no stop order suspending the effectiveness of the
DT Registration Statement or the Powertel Proxy Statement shall then be in
effect, and no proceedings for that purpose shall then be threatened by the SEC
or shall have been initiated by the SEC and not concluded or withdrawn.
(e) Stock Exchange Listings. All steps necessary for the listing of the DT
Ordinary Shares to be issued pursuant to the Merger on the FSE shall have been
taken and the DT Depositary Shares to be issued pursuant to the Merger shall
have been authorized for listing on the NYSE, subject to official notice of
issuance.
(f) The VoiceStream Merger. The VoiceStream Merger shall have been
consummated.
SECTION 6.02. Conditions to the Obligations of Powertel. The obligations
of Powertel to consummate the Merger are also subject to the fulfillment, or
written waiver by Powertel, prior to the Effective Time, of each of the
following conditions:
(a) Representations and Warranties. The representation and warranty of DT
set forth in Section 3.07(a) of this Agreement shall have been true and correct
on the date hereof and on and as of the Closing Date as though made on the
Closing Date; and the other representations and warranties of DT and Merger Sub
set forth in this Agreement shall have been true and correct on the date hereof
(or, in the case of matters relating to Merger Sub, as of September 28, 2000)
and on and as of the Closing Date as though made on the Closing Date (except to
the extent that any representation or warranty expressly speaks as of an earlier
date, in which case it shall be true and correct as of such date) except (i) for
changes permitted under Section 4.02 or otherwise contemplated by this Agreement
and (ii) for such failures to be true and correct which in the aggregate would
not reasonably be expected to result in a Material Adverse Effect on DT.
(b) Agreements and Covenants. DT shall have performed or complied with all
agreements and covenants required by this Agreement to be performed or complied
with by it on or before the Effective Time; provided, however, that for purposes
of this Section 6.02(b) only, such agreements and covenants shall be deemed to
have been complied with unless the failure or failures of such agreements and
covenants to have been complied with, individually or in the aggregate, results
or would reasonably be expected to result in a Material Adverse Effect on DT.
(c) Certificates. Powertel shall have received a certificate of an
executive officer of DT (and, to the extent such matters relate to Merger Sub,
of an executive officer of Merger Sub) to the effect set forth in subparagraphs
(a) and (b) above.
(d) Tax Opinion. Powertel shall have received an opinion of Morris,
Manning & Martin, LLP in a form and substance reasonably satisfactory to
Powertel, dated as of the Closing Date, substantially to the effect that, on the
basis of the facts, representations and assumptions set forth or referred to in
such opinion, for U.S. federal income tax purposes, the Merger (i) will qualify
as a reorganization within the meaning of Section 368(a) of the Code and (ii)
each transfer of property to DT by a stockholder of Powertel pursuant to the
Merger will not be subject to Section 367(a)(1) of the Code. In rendering such
opinion, Morris, Manning & Martin, LLP may require and shall be entitled to rely
upon customary representations of Powertel and DT, including representations
substantially in the form of Exhibits B and C, respectively and, if reasonably
requested, customary tax certificates of Powertel Principal Shareholders. The
opinion set forth in clause (ii) may assume that any stockholder who is a
"five-percent transferee shareholder" with respect to DT within the meaning of
U.S. Treasury Regulations Section 1.367(a)-3(c)(5)(ii) will file the agreement
described in U.S. Treasury Regulations Section 1.3.67(a)-3(c)(1)(iii)(B).
(e) FCC Opinion. Powertel shall have received an opinion of FCC counsel of
DT and/or VoiceStream, dated the Effective Time, substantially in the form
attached hereto as Exhibit D.
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(f) Governmental Approvals. All necessary consents or authorizations from
any Governmental or Regulatory Authority which may be required in connection
with the transactions contemplated hereby, shall have been received, unless the
failure to receive any such consent or authorization would not have a Material
Adverse Effect on DT or the transactions contemplated by this Agreement, and
such consents or authorizations shall not contain any conditions which would
reasonably be expected to have a Material Adverse Effect on DT or the
transactions contemplated by this Agreement. With respect to any FCC consents or
authorizations, effectiveness of necessary FCC approvals shall be sufficient to
satisfy this condition, and Powertel's obligation to effect the Merger shall not
be subject to the condition that any FCC consents or authorizations have become
Final Orders.
Notwithstanding anything contained to the contrary in Section 6.02(a) or
anywhere else in this Agreement, DT may enter into any Subsequent Transaction,
and no changes of any representation or warranty of DT contained in this
Agreement as a result of any Subsequent Transaction shall result in a failure of
the conditions set forth in Section 6.02(a).
SECTION 6.03. Conditions to the Obligations of DT. The obligations of DT
to consummate the Merger are also subject to the fulfillment or written waiver
by DT, prior to the Effective Time, of each of the following conditions:
(a) Representations and Warranties. The representation and warranty of
Powertel set forth in Section 2.07(i) of this Agreement shall have been true and
correct on the date hereof and on and as of the Bringdown Date as though made on
the Bringdown Date; and the other representations and warranties of Powertel set
forth in this Agreement shall have been true and correct on the date hereof and
on and as of the Bringdown Date as though made on the Bringdown Date (except to
the extent that any representation or warranty expressly speaks as of (A) an
earlier date, or (B) in the cases of Sections 2.03(d) and 2.05(a) to the extent
either relates to the declaration or payment of the Permitted Stock Dividend, an
earlier or later date, in which cases ((A) or (B)) it shall be true and correct
as of such specified date) except (i) for changes permitted under Section 4.01
hereof or otherwise contemplated by this Agreement and (ii) for such failures to
be true and correct which in the aggregate would not reasonably be expected to
result in a Material Adverse Effect on Powertel or DT or the transactions
contemplated by this Agreement.
(b) Agreements and Covenants. Powertel shall have performed or complied
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or before the Effective Time; provided, however, that for
purposes of this Section 6.03(b) only, such agreements and covenants shall be
deemed to have been complied with unless the failure or failures of such
agreements and covenants to have been complied with individually or in the
aggregate, results or would reasonably be expected to result in a Material
Adverse Effect on Powertel or DT or the transactions contemplated by this
Agreement.
(c) Certificates. DT shall have received certificates of an executive
officer of Powertel to the effect set forth in subparagraph (a) above on the
Bringdown Date and subparagraph (b) above on the Closing Date; provided,
however, that if the Bringdown Date occurs before the Closing Date and the
Permitted Stock Dividend is declared or paid after the Bringdown Date, then the
matters referred to in clause (B) of paragraph (a) shall be covered in the
certificate delivered on the Closing Date, and need not be addressed or
referenced in the certificate delivered on the Bringdown Date.
(d) Tax Opinion. DT shall have received an opinion of Cleary, Gottlieb,
Steen & Hamilton, in form and substance reasonably satisfactory to DT, dated as
of the Closing Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth or referred to in such opinion, for
U.S. federal income tax purposes, the Merger will (i) qualify as a
reorganization within the meaning of Section 368(a) of the Code and (ii) each
transfer of property to DT by a stockholder of Powertel pursuant to the Merger
will not be subject to Section 367(a)(1) of the Code. In rendering such opinion,
Cleary, Gottlieb, Steen & Hamilton may require and shall be entitled to rely
upon customary representations of Powertel and DT including representations
substantially in the form of Exhibits B and C, respectively. The opinion set
forth in clause (ii) may assume that any
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stockholder who is a "five-percent transferee shareholder" with respect to
DT within the meaning of U.S. Treasury Regulations 1.367(a)-3(c)(5)(ii)
will file the agreement described in U.S. Treasury Regulations Section
1.367(a)-3(c)(1)(iii)(B).
(e) FCC Opinion. DT shall have received an opinion of FCC counsel of
Powertel, dated the Effective Time, substantially in the form attached
hereto as Exhibit D.
(f) Consents Under Agreements. Powertel shall have obtained the
consent or approval of each person whose consent or approval shall be
required in connection with the transactions contemplated hereby under any
indenture, mortgage, evidence of indebtedness, lease or other agreement or
instrument to which Powertel or any of the Powertel Subsidiaries is a
party, except where the failure to obtain the same would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on Powertel or DT or upon the transactions contemplated by this
Agreement.
(g) Governmental Approvals. All necessary consents or authorizations
from any Governmental or Regulatory Authority which may be required in
connection with the transactions contemplated hereby, including the FCC and
state public utility or service commissions or similar agencies, shall have
been received and, in the case of the FCC, shall have become Final Orders
(unless this requirement of finality is waived by DT in its sole
discretion), unless the failure to receive any such consent or
authorization would not have a Material Adverse Effect on Powertel or DT or
the transactions contemplated by this Agreement, and such consents or
authorizations shall not contain any conditions which would reasonably be
expected to have a Material Adverse Effect on Powertel or DT or the
transactions contemplated by this Agreement.
SECTION 6.04. Pre-Closing Bringdown. At any time on or after the fifth
Business Day after the last to be fulfilled or waived of the conditions set
forth in Article VI hereof (other than the conditions contained in Sections
6.02(c), 6.02(d) and 6.03(c) so long as it is reasonably apparent that such
conditions and the condition contained in Section 6.01(b) will be able to be
satisfied on such fifth or later Business Day) shall be fulfilled or waived in
accordance with this Agreement, Powertel may deliver to DT a certificate of an
executive officer of Powertel, dated as of such day, to the effect set forth in
Section 6.03(a), and the date on which such certificate is delivered shall
thereupon be deemed to be the "BRINGDOWN DATE"; provided, however, that if the
Bringdown Date does not occur before the Closing Date, then the Bringdown Date
shall be the same date as the Closing Date.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination. This Agreement may be terminated at any time
before the Effective Time, in each case as authorized by the Board of Directors
of Powertel, the Management Board (VORSTAND) of DT or the Board of Directors of
Merger Sub:
(a) By mutual written consent of each of Powertel and DT;
(b) By Powertel or DT, if the Merger shall not have been consummated
on or before the close of business on December 31, 2001 (the "TERMINATION
DATE" ); provided, however, that the right to terminate this Agreement
under this Section 7.01(b) shall not be available to any Party whose
failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before
the Termination Date;
(c) By either Powertel or DT, if any Governmental or Regulatory
Authority shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling Powertel and DT shall use its
reasonable best efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the Merger;
(d) By Powertel, (i) if DT shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which
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breach or failure to perform (A) is incapable of being cured by DT prior to
the Termination Date, or, if capable of being cured, is not cured by DT
within 30 days after written notice thereof shall have been received by DT
from Powertel and (B) renders any condition under Section 6.01 or 6.02
incapable of being satisfied prior to the Termination Date or (ii) if a
condition under Section 6.01 or 6.02 to Powertel's obligations hereunder is
or becomes incapable of being satisfied prior to the Termination Date;
(e) By DT, (i) if Powertel shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure to
perform (A) is incapable of being cured by Powertel prior to the
Termination Date, or, if capable of being cured, is not cured by Powertel
within 30 days after written notice thereof shall have been received by
Powertel from DT and (B) renders any condition under Section 6.01 or 6.03
incapable of being satisfied prior to the Termination Date or (ii) if a
condition under Section 6.01 or 6.03 to DT's obligations hereunder is or
becomes incapable of being satisfied prior to the Termination Date, (iii)
in connection with the grant of any Required Regulatory Approval relating
to the Merger, Powertel, DT, VoiceStream or any of their Subsidiaries is
required to divest or hold separate or otherwise take or commit to take any
action that limits its freedom of action with respect to Powertel, DT,
VoiceStream or any of their Subsidiaries or any material portion of the
assets of Powertel, DT, VoiceStream or any of their Subsidiaries or any of
the business, product lines or assets of Powertel, DT, VoiceStream or any
of their Subsidiaries, and such order, decree, ruling, or other action
shall have become final and nonappealable or (iv) if the Alternative Merger
Agreement has been terminated at any time prior to the termination or
consummation of the VoiceStream Merger Agreement;
(f) By Powertel or DT, respectively, at any time that is not less than
15 days after any federal, state or foreign statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any Governmental or Regulatory Authority (other
than, for purposes of this paragraph only, any court of law or equity) and
that has the effect of making the conditions set forth in Section 6.01(b),
Section 6.01(c), Section 6.02(f) or Section 6.03(g) incapable of being
satisfied by the Parties prior to the Termination Date; or
(g) By either Powertel or DT, if the Powertel Stockholder Approval
shall fail to have been obtained at a duly held stockholders meeting of
Powertel, including any adjournments thereof.
SECTION 7.02. Automatic Termination. This Agreement shall terminate
automatically upon the termination of the VoiceStream Merger Agreement without
any action required by the parties.
SECTION 7.03. Effect of Termination. (a) In the event of termination of
this Agreement as provided in Section 7.01 hereof, this Agreement shall
forthwith become void and there shall be no liability on the part of Powertel or
DT, except (i) as set forth in this Section 7.03 and in Sections 2.18, 3.12,
9.03, 9.09 and 9.10 hereof and (ii) nothing herein shall be interpreted to
relieve any party of liability for any willful breach of this Agreement.
(b) If this Agreement is terminated by Powertel or DT pursuant to Section
7.01(g) because of the failure to obtain the Powertel Stockholder Approval and
(i) at any time after the date of this Agreement and prior to the Powertel
Stockholders' Meeting an offer or proposal for a transaction that would
constitute an Alternative Transaction (as defined in Section 4.03(c) hereof)
(except that, for the purposes of this Section 7.03(b), the applicable
percentage in clauses (i) and (iii) of such definition shall be fifty percent
(50%) and only for any transaction referred to in clause (ii) of such definition
to be treated as an Alternative Transaction for purposes of this Section
7.03(b), stockholders of Powertel would own less than 65% of the outstanding
stock of the entity surviving or resulting from such transaction) shall have
been announced or otherwise publicly disclosed, and not withdrawn, and (ii)
within six months after the termination of this Agreement, Powertel enters into
a definitive agreement with any Third Party with respect to an Alternative
Transaction (provided that for any transaction referred to in clause (ii) of
such definition to be treated as an Alternative Transaction for purposes of this
Section 7.03(b), stockholders of Powertel would own less than 65% of the
outstanding stock of the entity surviving or resulting from such
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transaction), Powertel shall pay to DT a termination fee of $150,000,000 (the
"TERMINATION FEE") plus expenses not to exceed $10,000,000; provided that, in
the event a termination fee is also payable by Powertel in connection with the
termination of the Alternative Merger Agreement pursuant to Section 5.10(b) of
the Alternative Merger Agreement, Powertel shall instead pay each of DT and
VoiceStream $75,000,000 plus expenses not to exceed $10,000,000. Except as
otherwise provided in this paragraph, no Termination Fee shall be or become
payable upon termination of this Agreement.
(c) The Termination Fee payable under Section 7.03(b) above shall be
payable in cash no later than one business day following the day Powertel enters
into the definitive agreement providing for the Alternative Transaction giving
rise to the payment of such fee.
(d) Powertel and DT agree that the agreements contained in Section 7.03(b)
above are an integral part of the transactions contemplated by this Agreement
and are an inducement to DT to enter into this Agreement and, to the extent
payable in connection with a breach of this Agreement, constitute liquidated
damages and not a penalty. If Powertel fails to promptly pay to DT any fee due
under such Section 7.03(b), then Powertel shall pay the costs and expenses
(including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee at the publicly announced prime
rate of Citibank, N.A., from the date such fee was required to be paid.
SECTION 7.04. Amendment. This Agreement may be amended by Powertel, DT
and Merger Sub pursuant to a writing adopted by action taken by each of them at
any time before the Effective Time; provided, however, that, after approval of
this Agreement by the stockholders of Powertel no amendment may be made which
under applicable law would require approval of such Party's stockholders without
such approval.
SECTION 7.05. Waiver. At any time before the Effective Time, Powertel, DT
and Merger Sub may (i) extend the time for the performance of any of the
obligations or other acts of the others, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a Party to any such
extension or waiver shall be valid only as against such Party and only if set
forth in an instrument in writing signed by such Party.
ARTICLE 8
DEFINITIONS
SECTION 8.01. Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"ACTION" shall mean any action, suit, arbitration, inquiry, proceeding
or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration
tribunal.
"AFFILIATE" of a Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person; provided, however, that
such term shall not be deemed to include the Federal Republic of Germany
and Kreditanstalt fur Wiederaufbau ("KFW") in their capacities as
shareholders of DT.
"AGREEMENT" means this Agreement and Plan of Merger as amended or
modified from time to time, together with all of its schedules, annexes and
exhibits.
"APRIL 1996 INDENTURE" shall mean the Indenture dated as of April 19,
1996, between Powertel and Bankers Trust Company relating to the 12% Senior
Discount Notes due May 2006.
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"BUSINESS DAY" means a day other than Saturday, Sunday, federal, State
of New York holiday or other day on which commercial banks in New York City
are authorized or required by law to close.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMUNICATIONS ACT" shall mean the Communications Act of 1934, as
amended, and the Telecommunications Act of 1996, as amended, together with
the rules, regulations and published decisions of the FCC promulgated
thereunder.
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of stock, as trustee or executor, by contract
or otherwise.
"DELAWARE LAW" means the Delaware General Corporation Law, as amended.
"DiGiPH TRANSACTION" means the transactions and agreements relating to
the acquisition of substantially all of the assets of DiGiPH PCS, Inc.,
DigiPH Communication, Inc. and DigiPH Holding Company, Inc. by Eliska, as
described in Powertel's Form 8-K as filed on June 16, 2000, including (i)
all agreements and commitments that have been entered into in connection
therewith as listed in the Powertel disclosure schedules attached hereto;
(ii) all agreements that are proposed to be entered into prior to closing,
forms of which or term sheets for which or summaries of which have been
made available to DT and are listed on the Powertel disclosure schedules;
and (iii) any other agreements that are to be entered into prior to the
closing of such transactions, that are reasonably necessary to consummate
such transactions (and any amendments or modifications thereof) and with
respect to clauses (ii) and (iii) that do not (A) materially alter the
scope of such transactions, (B) materially increase Powertel's obligations
in connection therewith or (C) interfere with the transactions contemplated
by this Agreement or the DT Merger Agreement.
"DT REGISTRATION STATEMENT" means one or more registration statements
to be filed with the SEC by DT in connection with the issuance of DT
Depositary Shares and DT Ordinary Shares in the Merger.
"ELISKA JOINT VENTURE" means Eliska Wireless Ventures I, Inc.
"ELISKA PARTNERS" means Eliska Wireless Investors I, L.P. and Sonera
Holding BV.
"ENVIRONMENTAL LAWS" shall mean any applicable statute, law,
ordinance, regulation, rule, judgment, decree or order of any Governmental
or Regulatory Authority relating to or regulating or imposing liability or
standards of conduct with respect to pollution, protection of the
environment or environmental regulation or control or regarding Hazardous
Substances or occupational health or safety.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, together with the rules and regulations promulgated
thereunder.
"ERISA AFFILIATE" shall mean (i) any corporation which is a member of
the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as Powertel; (ii) any partnership, trade or business
(whether or not incorporated) which on the day before the Closing Date was
under common control (within the meaning of Section 414(c) of the Code)
with Powertel and (iii) any entity which is a member of the same affiliated
service group (within the meaning of Section 414(m) of the Code) as either
Powertel, any corporation described in clause (i) or any partnership, trade
or business described in clause (ii).
"ERISA BENEFIT PLAN" shall mean a Powertel Benefit Plan maintained as
of the date of this Agreement which is also an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) or which is also an "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA).
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as the same
may be amended from time to time.
"EXON-FLORIO" means the Exon-Florio Amendment to the Omnibus and
Competitiveness Act of 1988, as amended, or any successor thereto.
"FAA" shall mean the Federal Aviation Administration and any successor
agency or body.
"FCC" shall mean the Federal Communications Commission and any
successor agency or body.
"FEBRUARY 1996 INDENTURE" means the Indenture dated as of February 7,
1996, between Powertel and Bankers Trust Company relating to the 12% Senior
Discount Notes due February 2006.
"FINAL ORDER" means action by the applicable regulatory authority
which is in full force and effect, with respect to which no petition or
other request for such authority or court stay, reconsideration or review
of any kind is pending, and as to which all time periods have expired
within which such authority or a court may be asked to stay, reconsider or
review the action or may stay, reconsider or review the action sua sponte.
"GAAP" means United States generally accepted accounting principles.
"GERMAN LISTING PROSPECTUS" means the prospectus
(BORSENZULASSUNGSPROSPEKT) required for the listing of the DT Ordinary
Shares to be issued pursuant to the Merger on the FSE.
"GOVERNMENTAL OR REGULATORY AUTHORITY" shall mean any domestic or
foreign, national, federal, state, county, city, local or other
administrative, legislative, regulatory or other governmental authority,
commission, agency, court of competent jurisdiction or other judicial
entity, tribunal, arbitrator, office, principality, registry (including,
but not limited to, with respect to patents, trademarks, designs, or
copyrights), legislative or regulatory body, instrumentality, or
quasi-governmental agency, commission or authority or any arbitral tribunal
exercising any regulatory or taxing authority (including, without
limitation, any stock exchange or other self-regulatory body); provided
that such term shall not be deemed to include the Federal Republic of
Germany and KFW, in their capacities as shareholders of DT.
"HAZARDOUS SUBSTANCES" shall mean any material defined as toxic or
hazardous, including any petroleum and petroleum products, under any
applicable Environmental Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as the same may be amended from time to time.
"INDEBTEDNESS" of any Person at any date shall mean (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities
incurred in the ordinary course of business and payable in accordance with
customary practices), (b) any other indebtedness of such Person which is
evidenced by a note, bond, debenture or similar instrument, (c) all
obligations of such Person under financing leases, (d) all obligations of
such Person in respect of acceptances issued or created for the account of
such Person and with respect to unpaid reimbursement obligations related to
letters of credit issued for the account of such Person and (e) all
liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the
payment thereof.
"INTELLECTUAL PROPERTY RIGHTS" shall mean any right to use, all
patents, patent rights, trademarks, trade names, trade dress, logos,
service marks, copyrights, know how and other proprietary intellectual
property rights and computer programs held or used by Powertel or any of
its Subsidiaries that are individually or in the aggregate material to the
conduct of the business of Powertel and the Powertel Subsidiaries, taken as
a whole.
"INVESTMENT ENTITY" means an entity in which Powertel or any Powertel
Subsidiaries has an Investment Interest.
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"INVESTMENT INTEREST" means a direct or indirect ownership of capital
stock, partnership, membership interests or other ownership interests or
similar securities of any Person.
"JUNE 1997 INDENTURE" means the Indenture dated as of June 10, 1997,
between Powertel and Bankers Trust Company relating to the Senior Notes.
"KNOWLEDGE" of any Party means the actual knowledge of the executive
officers of such Party.
"LIABILITIES" shall mean any and all debts, liabilities and
obligations, absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, whenever arising (unless otherwise
specified in this Agreement), including all costs and expenses relating
thereto, and including those debts, liabilities and obligations arising
under any law, rule, regulation, Action, threatened Action, order or
consent decree of any Governmental or Regulatory Authority or any award of
any arbitrator of any kind, and those arising under any contract,
commitment or undertaking.
"LIENS" shall mean any pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever.
"MATERIAL ADVERSE EFFECT" means, with respect to Powertel and its
Subsidiaries, taken as a whole, or DT and its Subsidiaries, taken as a
whole, any change in or effect on the business of Powertel and its
Subsidiaries taken as a whole or DT and its Subsidiaries taken as a whole,
as the case may be, that is or is reasonably likely to be materially
adverse to the business, operations or financial condition of Powertel and
its Subsidiaries taken as a whole or DT and its Subsidiaries taken as a
whole, respectively, but shall not include the effects of changes or
developments (i) in (A) the telecommunications industry, including
regulatory and political conditions, and not uniquely relating to DT or
Powertel, (B) the United States or European economy or (C) the United
States or European securities markets or (ii) resulting from the
announcement or the existence of this Agreement and the transactions
contemplated hereby.
"PERSON" means an individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, entity or group (as defined in the Exchange
Act) or a Governmental or Regulatory Authority.
"POWERTEL BENEFIT PLANS" shall mean any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical, life,
insurance, supplemental unemployment benefits, employee stock purchase,
stock appreciation, restricted stock or other employee benefit plan,
policy, arrangement or agreement providing benefits to any current or
former employee, officer or director of Powertel or any of its Subsidiaries
or with respect to which Powertel or any of its Subsidiaries (or, in the
case of an ERISA Benefit Plan, any of Powertel's ERISA Affiliates) may have
any liability.
"POWERTEL EMPLOYEE" shall mean any employee of Powertel or any of the
Powertel Subsidiaries.
"POWERTEL PRINCIPAL STOCKHOLDERS" shall mean ITC Holding Company,
Inc., ITC Service Company, Inc., ITC Wireless Inc., SCANA Communications
Holdings, Inc., Sonera Corporation, Sonera Holding B.V., Donald W. Burton,
The Burton Partnership, L.P., The Burton Partnership (QP), L.P., South
Atlantic Venture Fund II, L.P., South Atlantic Venture Fund III, L.P.,
South Atlantic Private Equity Fund IV, L.P., South Atlantic Private Equity
Fund IV (QP) L.P. and American Water Works Company.
"POWERTEL RESTRICTED STOCK AWARD" shall mean restricted stock awards
granted under the Restricted Stock Plan and the 2000 Plan.
"RESTATED BY-LAWS OF POWERTEL" shall mean the Second Restated By-laws
of Powertel as in effect on the date hereof.
"RESTATED CERTIFICATE OF INCORPORATION OF POWERTEL" shall mean the
Third Restated Certificate of Incorporation, as amended and as in effect on
the date hereof.
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"SECURITIES ACT" means the Securities Act of 1933, as the same may be
amended from time to time.
"SENIOR DISCOUNT NOTES" means the Powertel 12% Senior Discount Notes
due February 2006 and the 12% Senior Discount Notes due May 2006.
"SENIOR NOTES" means shall mean the 11 1/8% Senior Notes due 2007 of
Powertel.
"SIGNIFICANT EMPLOYEE" shall mean any Employee of Powertel or any of
its Subsidiaries who (i) is an officer of Powertel or any of its
Subsidiaries, (ii) has a written employment contract with Powertel or any
of its Subsidiaries which calls for annual compensation in excess of
$90,000, or (iii) is compensated by Powertel and/or its Subsidiaries at an
annual rate greater than $90,000.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary which on the date of
determination is a "significant subsidiary" within the meaning of Rule
1-02(w) of Regulation S-X promulgated under the Exchange Act.
"SUBSEQUENT TRANSACTION" means any transaction entered into after the
date hereof whereby any of DT or its Subsidiaries would (i) acquire (by
merger, consolidation, business combination, acquisition of stock or assets
or otherwise) any corporation, limited liability company, partnership,
other business organization or assets or division thereof, which is engaged
in any line of business that is similar to or compatible with any of the
lines of business in which DT is engaged on the date of this Agreement;
(ii) acquire an Investment Interest in any of the foregoing; (iii) issue
any equity interest or incur any indebtedness whether in connection with
any item described in (i) or (ii) or otherwise; (iv) enter into or engage
in a strategic alliance or other commercial relationship or (v) act in the
ordinary course of business; provided, however, in connection with a
Subsequent Transaction described in items (i), (ii), (iii) or (iv) of this
definition for a consideration paid by DT or any of its Subsidiaries in an
amount greater than $50 billion, DT must receive an opinion from a
nationally recognized investment bank, acting as a financial advisor to DT,
to the effect that, from a financial point of view, such Subsequent
Transaction is fair to the holders of DT Ordinary Shares or, if applicable,
DT.
"SUBSIDIARY", "POWERTEL SUBSIDIARY" or "DT SUBSIDIARY" means any
Person on the date of determination of which Powertel or DT, as the case
may be (either alone or through or together with any other Subsidiary or
Subsidiaries) owns, directly or indirectly, more than fifty percent (50%)
of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the Board of Directors or other
governing body of such Person.
"TAX" or "TAXES" means any U.S. federal, state or local or foreign
taxes of any kind, including, without limitation, those on or measured by
or referred to as income, gross receipts, capital, sales, use, ad valorem,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall
profits taxes, customs, duties, or similar fees, assessments, or charges of
any kind whatsoever, imposed by any taxing authority, together with any
interest and any penalties, additions to tax, or additional amounts
thereon.
"TAX RETURNS" means any U.S. federal, state or local or foreign
return, report, or statement required to be filed with any Governmental or
Regulatory Authority with respect to Taxes.
"VOICESTREAM STOCKHOLDER AGREEMENTS" means the Stockholder Agreements
dated as of the date hereof among certain stockholders of VoiceStream,
VoiceStream and Powertel entered into in connection with the Alternative
Merger Agreement.
SECTION 8.02. Date of this Agreement; No Waiver. (a) The amendment and
restatement of this Agreement as of February 8, 2001 notwithstanding, unless
otherwise provided herein or unless the context expressly otherwise requires,
this Agreement shall be deemed for all purposes to be dated and made as of
August 26, 2000, the date of the original Agreement and Plan of Merger and to be
effective as of such date, and all references herein to "the date hereof", "the
date of this Agreement" and other similar references shall be deemed to be
references to August 26, 2000.
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(b) The parties' execution and delivery of this Amended and Restated
Agreement shall not constitute a waiver of any rights that any of the parties
hereto may have by reason of any event, condition, misrepresentation or breach
of covenant of the original Agreement and Plan of Merger having occurred prior
to the date of execution and delivery of this Amended and Restated Agreement,
whether or not known to any or all of the parties hereto. No representation or
warranty of any party in this Agreement shall be affected or limited by reason
of the knowledge of any other party at any time that such representation or
warranty is not, or may not be, true and correct.
ARTICLE 9
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01 hereof, as the case may be, except that (i) the
agreements set forth in Article 1, Sections 5.07, 5.09, 5.11, 5.18 and 5.19
hereof shall survive the Effective Time indefinitely, (ii) the agreements set
forth in Sections 5.04 (with regard to confidentiality), 7.02, 9.03 and 9.10
hereof shall survive termination indefinitely, (iii) the agreements set forth in
Section 5.19 shall survive termination in accordance with provisions specified
in Section 5.19, (iv) any covenant or agreement of Powertel and DT which by its
terms contemplates performance after the Effective Time shall survive the
Effective Time in accordance with its terms, and (v) the representations and
warranties made by Powertel in this Agreement shall terminate at the earlier of
the Effective Time and 12:00 midnight on the Bringdown Date, except that if the
Permitted Stock Dividend is declared or paid after the Bringdown Date, then the
representations and warranties made by Powertel in Sections 2.03(d) and 2.05(a),
to the extent either relates to the declaration or payment of the Permitted
Stock Dividend, shall terminate immediately after such payment.
SECTION 9.02. Notices. (a) All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date of receipt and shall be delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested), sent by overnight courier or sent by telecopy, to the Parties at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a Party as shall be specified by like notice):
if to Powertel:
Powertel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Attn: Allen E. Smith
Jill F. Dorsey
Telecopy No.: 706-645-9532
with a copy to:
Morris, Manning & Martin, LLP
1600 Atlantic Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attn: James Walker IV, Esq.
Telecopy No.: 404-365-9532
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if to DT or Merger Sub:
Deutsche Telekom AG
140 Friedrich-Ebert-Alle
53113 Bonn
Germany
Attention: Kevin Copp
Facsimile: 49-228-181-44177
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Robert P. Davis
Facsimile: 212- 225-3999
and a copy to:
Hengeler Mueller Weitzel Wirtz
Trinkausstrasse 7
D-40213 Dusseldorf
Germany
Attention: Rainer Krause
Facsimile: +49-211-83-04-170
(b) Notices given hereunder shall be also given by the party delivering
such notice to VoiceStream at the address below:
VoiceStream
VoiceStream Wireless Corporation
3650 131(st)Avenue S.E.
Bellevue, Washington 98006
Attention: Alan R. Bender
Facsimile: 425-586-8080
with a copy to:
Preston Gates & Ellis LLP
701 Fifth Avenue, Suite 5000
Seattle, WA 98104
Attn: Richard B. Dodd, Esq.
Telecopy No.: 206-623-7022
SECTION 9.03. Expenses. Except as otherwise provided herein, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring such costs and
expenses, except that (i) those expenses incurred in connection with the
printing of the Powertel Proxy Statement and the DT Registration Statement shall
be borne one-third by VoiceStream, one-third by DT and one-third by Powertel and
(ii) the filing fees related to the Powertel Proxy Statement and the DT
Registration Statement with respect to the DT Ordinary Shares and the DT
Depositary Shares to be offered to stockholders of Powertel shall be borne
one-half by DT and one-half by Powertel.
SECTION 9.04. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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SECTION 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, then all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the maximum extent
possible.
SECTION 9.06. Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the Powertel Stockholder Agreements and the Confidentiality Agreement
constitute the entire agreement and, except as expressly set forth herein,
supersedes any and all other prior agreements and undertakings, both written and
oral, between the Parties, or any of them, with respect to the subject matter
hereof and, except for Section 5.07, 5.19 or 9.02(c), is not intended to confer
upon any person other than Powertel, DT and, after the Effective Time their
respective stockholders, as stockholders, any rights or remedies hereunder.
SECTION 9.07. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other party; provided, however, that (i) this
Agreement may be assigned by DT to an entity treated as a corporation for U.S.
federal income tax purposes which owns more than 80% of the DT Ordinary Shares
and which succeeds to all of the rights and obligations of DT under the Escrow
Agency Agreement and (ii) this Agreement may be assigned by Merger Sub to an
entity treated as a corporation for U.S. federal income tax purposes and which
is a direct, wholly-owned subsidiary of the entity to which DT has assigned this
Agreement pursuant to (i) above. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
SECTION 9.08. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED ENTIRELY WITHIN THAT
STATE, WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF.
SECTION 9.09. Enforcement; Submission to Jurisdiction; Waivers. The
parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached in any material respect. It is
accordingly agreed that the Parties shall be, to the extent permitted by law,
entitled to an injunction or injunctions to prevent breaches of this Agreement
or any related agreement and to enforce specifically the terms and provisions of
this Agreement or any related agreement, this being in addition to any other
remedy to which they are entitled at law or in equity. Each of the parties
hereto irrevocably agrees that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns shall be
brought and determined only in the United States District Court for the District
of Delaware, or in the event (but only in the event) that such court does not
have subject matter jurisdiction over such action or proceeding, in the courts
of the State of Delaware. Each of the parties hereto hereby irrevocably submits
with regard to any such action or proceeding for itself and in respect of its
property, generally and unconditionally, to the personal jurisdiction of the
aforesaid courts. Each of the parties hereto hereby irrevocably waives, and
agrees not to assert, by way of motion, as a defense, counterclaim or otherwise,
in any action or proceeding with respect to this Agreement, (a) any claim that
it is not personally subject to the jurisdiction of the above-named courts for
any reason other than the failure to serve in accordance with this Section 9.09,
(b) that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), and (c) to the fullest extent
permitted by the applicable law, that (i) the suit, action or proceeding in such
court is brought in
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an inconvenient forum, (ii) the venue of such suit, action or proceeding is
improper and (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.
SECTION 9.10. Waiver of Immunity. DT agrees that, to the extent that it
or any of its Subsidiaries or any of its property or the property of its
Subsidiaries is or becomes entitled to any immunity on the grounds of
sovereignty or otherwise based upon its status as an agency or instrumentality
of the government from any legal action, suit or proceeding or from set-off or
counterclaim relating to this Agreement from the jurisdiction of any competent
court, from service of process, from attachment prior to judgment, from
attachment in aid of execution, from execution pursuant to a judgment or an
arbitral award or from any other legal process in any jurisdiction, it, for
itself and its property, and for each of its Subsidiaries and its property,
expressly, irrevocably and unconditionally waives, and agrees not to plead or
claim, any such immunity with respect to matters arising with respect to this
Agreement or the subject matter hereof (including any obligation for the payment
of money). DT agrees that the foregoing waiver is irrevocable and is not subject
to withdrawal in any jurisdiction or under any statute, including the Foreign
Sovereign Immunities Act, 28 U.S.C. sec. 1602 et seq. The foregoing waiver shall
constitute a present waiver of immunity at any time any action is initiated
against DT or any of its Subsidiaries with respect to this Agreement or the
subject matter hereof (including any obligation for the payment of money).
SECTION 9.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
SECTION 9.12. Reliance on Representations. Notwithstanding any
investigation, knowledge or review made at any time by or on behalf of any party
hereto, the parties acknowledge and agree that all representations and
warranties contained in this Agreement, the Annexes, the Schedules annexed
hereto or in any of the documents, certifications or agreements delivered in
connection therewith, are being relied upon as a material inducement to enter
into this Agreement and the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties have caused this amended and restated
Agreement dated the date first written above to be executed on February 8, 2001
by their respective officers thereunto duly authorized.
POWERTEL, INC.
By: /s/ FRED G. ASTOR, JR.
------------------------------------
Name: Fred G. Astor, Jr.
Title: Chief Financial Officer and
Executive Vice President
DEUTSCHE TELEKOM AG
By: /s/ JEFFREY A. HEDBERG
------------------------------------
Name: Jeffrey A. Hedberg
Title: Member of the Board of
Management, International
By: /s/ DR. KARL-GERHARD EICK
------------------------------------
Name: Dr. Karl-Gerhard Eick
Title: Member of the Board of
Management, Finance
BEGA II, INC.
By: /s/ JEFFREY A. HEDBERG
------------------------------------
Name: Jeffrey A. Hedberg
Title: Director
By: /s/ KARL-GERHARD EICK
------------------------------------
Name: Dr. Karl-Gerhard Eick
Title: Director
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ANNEX C
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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF AUGUST 26, 2000,
AS AMENDED AND RESTATED AS OF FEBRUARY 8, 2001
AMONG
VOICESTREAM WIRELESS CORPORATION,
POWERTEL, INC.,
AND
VOICESTREAM SUBSIDIARY V CORPORATION
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TABLE OF CONTENTS
PAGE
----
ARTICLE I -- THE REORGANIZATION............................................... C-2
Section 1.01 The Merger.................................................. C-2
Section 1.02 Closing..................................................... C-2
Section 1.03 Effective Time.............................................. C-2
Section 1.04 Effects of the Merger....................................... C-2
Section 1.05 Restated Certificate of Incorporation and By-laws; Officers
and Directors............................................... C-2
Section 1.06 Effect on Stock............................................. C-3
Section 1.07 Surrender of Certificates................................... C-5
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF POWERTEL...................... C-8
Section 2.01 Organization................................................ C-8
Section 2.02 Subsidiaries................................................ C-8
Section 2.03 Capital Structure........................................... C-8
Section 2.04 Authority................................................... C-10
Section 2.05 Consents and Approvals; No Violations....................... C-10
Section 2.06 SEC Documents and Other Reports............................. C-11
Section 2.07 Absence of Material Adverse Change.......................... C-11
Section 2.08 Information Supplied........................................ C-12
Section 2.09 Permits; Compliance with Laws............................... C-12
Section 2.10 Tax Matters................................................. C-13
Section 2.11 Liabilities................................................. C-14
Section 2.12 Benefit Plans; Employees and Employment Practices........... C-14
Section 2.13 Litigation.................................................. C-16
Section 2.14 Environmental Matters....................................... C-16
Section 2.15 Section 203 of DGCL......................................... C-17
Section 2.16 Intellectual Property....................................... C-17
Section 2.17 Opinion of Financial Advisor................................ C-17
Section 2.18 Brokers..................................................... C-17
Section 2.19 Tax Status.................................................. C-18
Section 2.20 Contracts................................................... C-18
Section 2.21 Vote Required............................................... C-18
Section 2.22 Transactions with Affiliates................................ C-18
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF VOICESTREAM AND SUB..........
C-19
Section 3.01 Organization................................................ C-19
Section 3.02 Ownership of Sub............................................ C-19
Section 3.03 Capital Structure........................................... C-19
Section 3.04 Authority................................................... C-20
Section 3.05 Consents and Approvals; No Violations....................... C-21
Section 3.06 SEC Documents and Other Reports............................. C-21
C-II
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PAGE
----
Section 3.07 Absence of Material Adverse Change.......................... C-22
Section 3.08 Information Supplied........................................ C-22
Section 3.09 Permits; Compliance with Laws............................... C-22
Section 3.10 Tax Matters................................................. C-23
Section 3.11 Liabilities................................................. C-24
Section 3.12 Litigation.................................................. C-24
Section 3.13 State Takeover Statutes..................................... C-24
Section 3.14 Brokers..................................................... C-24
Section 3.15 Tax Status.................................................. C-24
Section 3.16 Interim Operations and Performance of Sub................... C-25
Section 3.17 Vote Required............................................... C-25
Section 3.18 Transactions with Affiliates................................ C-25
Section 3.19 Opinion of Goldman, Sachs & Co. ............................ C-25
ARTICLE IV -- COVENANTS RELATING TO CONDUCT OF BUSINESS....................... C-25
Section 4.01 Conduct of Business by Powertel Pending the
Reorganization.............................................. C-25
Section 4.02 Conduct of Business by VoiceStream Pending the
Reorganization.............................................. C-28
Section 4.03 No Solicitation............................................. C-28
Section 4.04 Disclosure of Certain Matters; Delivery of Certain
Filings..................................................... C-30
Section 4.05 Tax Status.................................................. C-30
Section 4.06 Control of Operations....................................... C-30
Section 4.07 Powertel Merger Agreement................................... C-30
ARTICLE V -- ADDITIONAL AGREEMENTS............................................ C-30
Section 5.01 Employee Benefits........................................... C-30
Section 5.02 Options; Restricted Stock Awards............................ C-32
Section 5.03 Stockholders Meetings....................................... C-32
Section 5.04 Preparation of the Registration Statement and Joint Proxy
Statement................................................... C-33
Section 5.05 Notification of Receipt of Proxy............................ C-34
Section 5.06 Comfort Letters............................................. C-34
Section 5.07 Access to Information....................................... C-34
Section 5.08 Compliance with the Securities Act.......................... C-35
Section 5.09 Nasdaq Listings............................................. C-35
Section 5.10 Fees and Expenses........................................... C-35
Section 5.11 Public Announcements........................................ C-36
Section 5.12 State Takeover Laws......................................... C-36
Section 5.13 Indemnification; Directors and Officers Insurance........... C-36
Section 5.14 Reasonable Best Efforts..................................... C-37
Section 5.15 Certain Litigation.......................................... C-39
Section 5.16 Powertel Stockholder Agreement and VoiceStream Stockholder
Agreement................................................... C-39
Section 5.17 Senior Discount Notes and Senior Notes...................... C-39
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PAGE
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Section 5.18 Plans and Programs to Be Implemented........................ C-39
Section 5.19 Registration Rights......................................... C-39
ARTICLE VI -- CONDITIONS PRECEDENT............................................ C-40
Section 6.01 Conditions to Each Party's Obligation to Effect the
Reorganization.............................................. C-40
Section 6.02 Additional Conditions to Obligation of Powertel to Effect
the Reorganization.......................................... C-40
Section 6.03 Conditions to Obligations of VoiceStream and Sub to Effect
the Reorganization.......................................... C-41
ARTICLE VII -- TERMINATION AND AMENDMENT...................................... C-42
Section 7.01 Termination................................................. C-42
Section 7.02 Effect of Termination....................................... C-43
Section 7.03 Amendment................................................... C-44
Section 7.04 Extension; Waiver........................................... C-44
ARTICLE VIII -- GENERAL PROVISIONS............................................ C-44
Section 8.01 Non-Survival of Representations and Warranties and
Agreements.................................................. C-44
Section 8.02 Notices..................................................... C-44
Section 8.03 Interpretation; Definitions................................. C-45
Section 8.04 Counterparts................................................ C-53
Section 8.05 Entire Agreement; No Third-Party Beneficiaries.............. C-53
Section 8.06 Governing Law............................................... C-53
Section 8.07 Assignment.................................................. C-53
Section 8.08 Severability................................................ C-53
Section 8.09 Enforcement of this Agreement............................... C-53
Section 8.10 Obligations of Subsidiaries................................. C-53
Section 8.11 Reliance on Representations................................. C-54
Section 8.12 Failure or Indulgence Not Waiver; Remedies Cumulative....... C-54
Section 8.13 Rules of Construction....................................... C-54
Section 8.14 Date of this Agreement; No Waiver........................... C-54
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated as of August 26, 2000, as
amended and restated as of February 8, 2001 (this "AGREEMENT"), among
VoiceStream Wireless Corporation, a Delaware corporation ("VOICESTREAM"),
VoiceStream Subsidiary V Corporation, a Delaware corporation formed by
VoiceStream ("SUB"), and Powertel, Inc., a Delaware corporation ("POWERTEL").
Except as otherwise set forth herein, capitalized (and certain other) terms used
herein shall have the meanings set forth in SECTION 8.03.
W I T N E S S E T H:
WHEREAS, VoiceStream and Deutsche Telekom AG, an AKTIENGESELLSCHAFT ("DT")
entered into an Agreement and Plan of Merger dated as of July 23, 2000 (as
amended or modified from time to time, the "DT MERGER AGREEMENT"), providing for
the acquisition of VoiceStream by DT (the "DT MERGER");
WHEREAS, Powertel and DT entered into a separate merger agreement dated as
of August 26, 2000 (as amended or modified from time to time, the "POWERTEL
MERGER AGREEMENT"), providing for the acquisition of Powertel by DT (the
"POWERTEL MERGER"), subject to certain closing conditions, including the
consummation of the DT Merger;
WHEREAS, VoiceStream and Powertel desire to provide for the acquisition of
Powertel by VoiceStream upon the terms and conditions set forth in this
Agreement in the event the DT Merger is not consummated;
WHEREAS, the reorganization provided for herein (the "REORGANIZATION")
shall include the merger (the "MERGER") of SUB with and into Powertel and, if
applicable, the other transactions described below and shall only take place if
the DT Merger Agreement has previously terminated;
WHEREAS, the respective Boards of Directors of VoiceStream, Sub and
Powertel have approved and declared advisable the Reorganization, upon the terms
and subject to the conditions herein set forth whereby each issued and
outstanding share of common stock of Powertel, $0.01 par value (the "POWERTEL
COMMON STOCK"), and each issued and outstanding share of preferred stock of
Powertel (whether or not such shares of preferred stock are or become
convertible into Powertel Common Stock prior to the Effective Time), $0.01 par
value per share and together with all accrued and unpaid dividends thereon
(calculated as if the Closing Date were a dividend payment date) (the "POWERTEL
PREFERRED STOCK," and collectively with Powertel Common Stock, the "POWERTEL
STOCK"), other than shares of Powertel Stock owned directly or indirectly by
VoiceStream or Powertel, will be converted into shares of common stock, $0.001
par value, of VoiceStream (the "VOICESTREAM COMMON STOCK");
WHEREAS, the respective Boards of Directors of VoiceStream, Sub and
Powertel have determined that the Reorganization is in furtherance of and
consistent with their respective long-term business strategies and is fair to
and in the best interests of their respective stockholders;
WHEREAS, the Board of Directors of Sub has determined that it is advisable
and in the best interests of Sub and its stockholder to consummate the Merger
and the other transactions contemplated hereby and has authorized the execution
and delivery of this Agreement, and VoiceStream, as Sub's current sole
stockholder, has approved and adopted this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Code;
WHEREAS, as a condition to the willingness of, and as an inducement to,
VoiceStream to enter into this Agreement, contemporaneously with the execution
and delivery of this Agreement certain holders of Powertel Stock are each
entering into a stockholder agreement dated as of the date hereof (each a
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440
"POWERTEL STOCKHOLDER AGREEMENT"), providing for certain actions relating to the
transactions contemplated by this Agreement;
WHEREAS, as a condition to the willingness of, and as an inducement to,
Powertel to enter into this Agreement, contemporaneously with the execution and
delivery of this Agreement certain holders of VoiceStream Common Stock and
preferred stock of VoiceStream are each entering into a voting agreement dated
as of the date hereof (each a "VOICESTREAM STOCKHOLDER AGREEMENT"), providing
for certain actions relating to the transactions contemplated by this Agreement;
and
WHEREAS, VoiceStream, Sub and Powertel desire to make certain
representations, warranties, covenants and agreements in connection with the
Reorganization and also to prescribe various conditions to the Reorganization.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
VoiceStream, Sub and Powertel hereby agree as follows:
ARTICLE I
THE REORGANIZATION
SECTION 1.01 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the DGCL, in the Reorganization, Sub shall be
merged with and into Powertel at the Effective Time. Following the Effective
Time, the separate corporate existence of Sub shall cease, and Powertel shall
continue as the surviving corporation (the "SURVIVING CORPORATION") and shall
succeed to and assume all the rights and obligations of Sub and Powertel in
accordance with the DGCL.
SECTION 1.02 Closing. The closing (the "CLOSING") of the Merger will take
place at 10:00 a.m., Seattle time, on the fifth Business Day after satisfaction
or waiver of the conditions set forth in ARTICLE VI (excluding conditions that,
by their terms, cannot be satisfied except at the Closing), at the offices of
Preston Gates & Ellis LLP, 701 Fifth Avenue, Suite 5000, Seattle, WA 98104-7078,
unless this Agreement shall have been terminated and the transactions
contemplated by this Agreement abandoned pursuant to ARTICLE VII or unless
another date, time or place is agreed to in writing by the parties hereto. The
date on which the Closing takes place is herein referred to as the "CLOSING
DATE."
SECTION 1.03 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "CERTIFICATE OF MERGER"), executed in accordance with
the relevant provisions of the DGCL, is duly filed with the Secretary of State
of the State of Delaware, or at such other time as Sub and Powertel shall agree
should be specified in the Certificate of Merger. The term "EFFECTIVE TIME"
shall mean the later of the date and time at which the Certificate of Merger is
duly filed with the Secretary of State of the State of Delaware or such other
time established by the Certificate of Merger. The filing of the Certificate of
Merger shall be made on the Closing Date as soon as practicable after the
satisfaction or waiver of the conditions set forth herein.
SECTION 1.04 Effects of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement and in the applicable
provisions of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the assets, property, rights,
privileges, immunities, powers and franchises of Powertel and Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of Powertel and
Sub shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.05 Restated Certificate of Incorporation and By-laws; Officers
and Directors.
(a) The Restated Certificate of Incorporation of Powertel, as in effect
immediately prior to the Effective Time, shall be amended as of the Effective
Time as set forth on ANNEX A hereto. As so amended, such Restated Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
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(b) The Restated By-laws of Powertel, as in effect immediately prior to the
Effective Time, shall be amended as of the Effective Time as set forth on ANNEX
B hereto. As so amended, such Restated By-laws shall be the By-laws of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
(c) The directors of Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation, until the next annual meeting of
stockholders (or the earlier of their resignation or removal) and until their
respective successors are duly elected and qualified, as the case may be.
(d) The officers of Sub immediately prior to the Effective Time shall be
the officers of the Surviving Corporation until the earlier of their resignation
or removal and until their respective successors are duly elected and qualified,
as the case may be.
SECTION 1.06 Effect on Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of any party hereto or the holders of
any securities of Powertel and Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one validly issued,
fully paid and nonassessable share of common stock, no par value, of the
Surviving Corporation.
(b) Treasury Stock and VoiceStream Owned Stock. Each share of
Powertel Stock that is owned by Powertel or by any Powertel Subsidiary and
each share of Powertel Stock that is owned by VoiceStream, Sub or any other
VoiceStream Subsidiary shall automatically be cancelled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(c) Conversion of Powertel Stock. At the Effective Time: (i) each
share of Powertel Common Stock issued and outstanding shall be converted
automatically into the right to receive a number (as calculated below, the
"CONVERSION NUMBER") of validly issued, fully paid and nonassessable shares
of VoiceStream Common Stock; and (ii) each share of Powertel Preferred
Stock issued and outstanding, whether or not such share is convertible by
its terms as of the Effective Time, shall be converted automatically into
the right to receive a number of shares of validly issued, fully paid and
nonassessable shares of VoiceStream Common Stock determined by multiplying
(A) the Conversion Number by (B) the sum of (1) the number of shares of
Powertel Common Stock into which such share of Powertel Preferred Stock
would be converted as of the Effective Time, if such share were then
convertible and had been converted, plus (2) with respect to the Series E
Preferred Shares and Series F Preferred Shares, the number of shares of
Powertel Common Stock that represent accrued or declared but unpaid
dividends on such shares (calculated as if the Closing Date were a dividend
payment date). The Conversion Number shall be determined as follows: (i)
0.75 if the VoiceStream Average Closing Price is $113.33 or below; (ii)
0.65 if the VoiceStream Average Closing Price is $130.77 or above; and
(iii) if the VoiceStream Average Closing Price is greater than $113.33 and
less than $130.77, the quotient determined by dividing $85.00 by the
VoiceStream Average Closing Price. The "VOICESTREAM AVERAGE CLOSING PRICE"
shall mean the volume weighted average closing price (based on the Nasdaq
National Market System ("NASDAQ") composite volume published by the Wall
Street Journal) of the VoiceStream Common Stock as publicly reported for
the Nasdaq as of 4:00 p.m. Eastern Time for ten (10) trading days randomly
selected by lot out of the last twenty (20) trading days ending five (5)
trading days prior to the Closing Date. As of the Effective Time, all such
shares of Powertel Stock shall be converted in accordance with this
paragraph, and when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares of Powertel Stock
shall cease to have any rights with respect thereto, except the right to
receive (i) certificates representing the shares of VoiceStream Common
Stock into which such shares of Powertel Stock have been converted, (ii)
any dividends and other distributions in accordance with SECTION 1.07(d)
and (iii) any cash, without interest, to be paid in lieu of any fractional
share of VoiceStream Common Stock in accordance with SECTION 1.07(e). ITEM
1.06(c) of the Powertel Letter sets forth a pro forma calculation of the
conversion of Powertel Common Stock and each outstanding Powertel Common
Stock Equivalent (including the corresponding conversion ratios with
respect to each series of
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Powertel Preferred Stock) into VoiceStream Common Stock or VoiceStream
Equity Rights as of the date hereof.
(d) Assumption of Options, Warrants and Puts. Subject to SECTION 5.02
hereof, Powertel and VoiceStream shall take all requisite action such that,
at the Effective Time, (i) all Powertel Stock Options outstanding at the
Effective Time, (ii) all obligations of Powertel with respect to the
warrants (the "POWERTEL WARRANTS") to purchase Powertel Common Stock issued
by Powertel pursuant to the Warrant Agreement (the "WARRANT AGREEMENT")
dated February 7, 1996 between Powertel and Bankers Trust Company, as
warrant agent, outstanding at the Effective Time, (iii) all obligations
with respect to the Stock Purchase Agreement and the Put Agreement, each
dated May 30, 2000 between Powertel and Sonera Holding B.V. (together, the
"SONERA PUT") and (iv) all obligations with respect to the Put Agreement
dated May 30, 2000 and between Powertel, Eliska Wireless Investors I, L.P.
and Sonera Holding B.V. (the "ELISKA PUT" and together with the Sonera Put,
the "ELISKA PUT RIGHTS") shall be specifically assumed by VoiceStream in
writing.
(e) Permitted Stock Dividends. Anything in this Agreement to the
contrary notwithstanding, at any time prior to both the Effective Time and
the termination of the DT Merger Agreement, (A) VoiceStream may declare and
pay (provided such declaration and payment are both effected prior to the
Effective Time), a pro rata distribution, including a distribution of
fractional shares, to the holders of the then outstanding VoiceStream
Common Stock of 0.0075 of a share of VoiceStream Common Stock for each
share of VoiceStream Common Stock outstanding on the record date for such
action (the "VOICESTREAM PERMITTED STOCK DIVIDEND"), and the conversion or
exercise terms of any option, warrant, restricted stock award, put or
preferred security of VoiceStream or any VoiceStream Subsidiary that by its
terms, as in effect on February 8, 2001, adjusts as a result of such
VoiceStream Permitted Stock Dividend (whether automatically, or upon the
taking of any corporate action or action by the board of directors of
VoiceStream or any such VoiceStream Subsidiary) shall be so adjusted and
(B) Powertel may declare and pay (provided such declaration and payment are
both effected prior to the Effective Time), a pro rata distribution,
including a distribution of fractional shares, to the holders of the then
outstanding Powertel Common Stock of 0.0075 of a share of Powertel Common
Stock for each share of Powertel Common Stock outstanding on the record
date for such action (the "POWERTEL PERMITTED STOCK DIVIDEND"), and the
conversion or exercise terms of any option, warrant, restricted stock
award, put or preferred security of Powertel or any Powertel Subsidiary
that by its terms, as in effect on February 8, 2001, adjusts as a result of
such Powertel Permitted Stock Dividend (whether automatically, or upon the
taking of any corporate action or action by the board of directors of
Powertel or any such Powertel Subsidiary) shall be so adjusted.
(f) Adjustment of Conversion Number.
(i) In the event of any reclassification, stock split or stock
dividend with respect to VoiceStream Common Stock or Powertel Common
Stock (to the extent permitted by this Agreement), any change, exchange
or conversion of VoiceStream Common Stock into other securities or
property, or any other dividend or distribution with respect to
VoiceStream Common Stock (other than normal quarterly cash dividends as
the same may be modified from time to time in the ordinary course), or
if a record date with respect to any of the foregoing should occur,
prior to the Effective Time (provided that the VoiceStream Permitted
Stock Dividend and Powertel Permitted Stock Dividend must be declared
and paid prior to the Effective Time), appropriate and proportionate
adjustments, if any, shall be made to the Conversion Number, and
thereafter all references in this Agreement to the Conversion Number
shall be deemed to be to the Conversion Number as so adjusted. For
illustration purposes, assuming the VoiceStream Permitted Stock Dividend
and/or the Powertel Permitted Stock Dividend, as applicable, is declared
and paid prior to the Effective Time, then:
(A) In the event both the VoiceStream Permitted Stock Dividend
and the Powertel Permitted Stock Dividend are declared and paid prior
to the Effective Time pursuant to Section 1.06(e), the Conversion
Number shall be determined as follows: (x) 0.75 if the
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VoiceStream Average Closing Price is $112.49 or below; (y) 0.65 if
the VoiceStream Average Closing Price is $129.80 or above; and (z) if
the VoiceStream Average Closing Price is greater than $112.49 and
less than $129.80, the quotient determined by dividing $84.37 by the
VoiceStream Average Closing Price.
(B) In the event the VoiceStream Permitted Stock Dividend is
declared and paid prior to the Effective Time pursuant to Section
1.06(e) but the Powertel Permitted Stock Dividend is not declared and
paid prior to the Effective Time pursuant to Section 1.06(e), the
Conversion Number shall be determined as follows: (x) 0.756 if the
VoiceStream Average Closing Price is $112.49 or below; (y) 0.655 if
the VoiceStream Average Closing Price is $129.80 or above; and (z) if
the VoiceStream Average Closing Price is greater than $112.49 and
less than $129.80, the quotient determined by dividing $85.00 by the
VoiceStream Average Closing Price.
(C) In the event the Powertel Permitted Stock Dividend is
declared and paid prior to the Effective Time pursuant to Section
1.06(e) but the VoiceStream Permitted Stock Dividend is not declared
and paid prior to the Effective Time pursuant to Section 1.06(e), the
Conversion Number shall be determined as follows: (x) 0.744 if the
VoiceStream Average Closing Price is $113.33 or below; (y) 0.645 if
the VoiceStream Average Closing Price is $130.77 or above; and (z) if
the VoiceStream Average Closing Price is greater than $113.33 and
less than $130.77, the quotient determined by dividing $84.37 by the
VoiceStream Average Closing Price.
(ii) In the event that the aggregate number of shares of Powertel
Common Stock and Powertel Common Stock Equivalents ("ADJUSTED FULLY
DILUTED SHARES") exceeds the Maximum Share Amount as of the Effective
Time, excluding, for purposes of this SECTION 1.06(f), Powertel Common
Stock issuable after the date hereof and prior to the Effective Time in
respect of dividends accrued on the Series E Preferred Shares and the
Series F Preferred Shares, and Powertel Common Stock issued for the
Powertel Permitted Stock Dividend, including Powertel Common Stock and
Powertel Common Stock Equivalents deemed to be issued as a result of the
adjustment of the conversion or exercise terms of any option, warrant,
restricted stock award, put or preferred security of Powertel or any
Powertel Subsidiary that by its terms adjusts as a result of such
Powertel Permitted Stock Dividend (whether automatically, or upon the
taking of any corporate action or action by the board of directors of
Powertel or any such Powertel Subsidiary), the Conversion Number shall
be adjusted by multiplying the Conversion Number otherwise applicable
under SECTION 1.06(c) by a fraction the numerator of which shall be the
Maximum Share Amount and the denominator of which shall be the number of
Adjusted Fully Diluted Shares as of the Effective Time. Except as
described in the preceding sentence, the number of shares of Powertel
Common Stock and Powertel Common Stock Equivalents for the purpose of
such recalculation shall be determined in the same manner as described
in ITEM 1.06(c) of the Powertel Letter, including shares of Powertel
Common Stock issuable (i) in exchange for Powertel Preferred Stock, (ii)
pursuant to Powertel Stock Options and Powertel Warrants, (iii) pursuant
to Powertel Restricted Stock Awards, (iv) in connection with the Eliska
Put Rights, (v) pursuant to the Sonera Stock Purchase Agreement (as
defined below) and (vi) any other Powertel Common Stock and Powertel
Common Stock Equivalents outstanding as of the Effective Time. For
purposes of this SECTION 1.06(f), the "MAXIMUM SHARE AMOUNT" means
55,742,000 shares; provided, however, that if prior to the Effective
Time the Stock Purchase Agreement between Powertel and Sonera B.V.
relating to the DiGiPH Transaction (the "SONERA STOCK PURCHASE
AGREEMENT") or the Eliska Put or the Sonera Put shall have been
terminated, the Maximum Share Amount shall be appropriately reduced.
SECTION 1.07 Surrender of Certificates.
(a) Exchange Agent. ChaseMellon Shareholder Services LLC shall act as
exchange agent in the Merger (the "EXCHANGE AGENT"). As and when needed, but no
later than twenty-five (25) Business Days
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after the Effective Time, VoiceStream shall deposit with the Exchange Agent, in
trust for the holders of certificates (the "POWERTEL CERTIFICATES") which
immediately prior to the Effective Time represented shares of Powertel Stock
converted in the Merger, certificates (the "VOICESTREAM CERTIFICATES")
representing the shares of VoiceStream Common Stock issuable pursuant to SECTION
1.06(c) (such shares of VoiceStream Common Stock, together with cash in lieu of
fractional shares and any dividends, securities, property or distributions with
respect thereto payable in accordance with SECTION 1.07(d) being hereinafter
referred to as the "EXCHANGE FUND").
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, but no later than five (5) Business Days after the Effective
Time, the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of record of a Powertel Certificate, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to a
Powertel Certificate shall pass, only upon delivery of such Powertel Certificate
to the Exchange Agent and shall be in a form and have such other provisions as
VoiceStream may reasonably specify), and (ii) instructions for use in effecting
the surrender of Powertel Certificates in exchange for the property described in
the next sentence. Upon surrender for cancellation to the Exchange Agent of any
Powertel Certificate(s) held by any holder of record of a Powertel Certificate,
together with such letter of transmittal duly executed, such holder shall be
entitled to receive in exchange therefor a VoiceStream Certificate (which shall
not include any restrictive legends but may be subject to the agreement signed
by Rule 145 Affiliates pursuant to SECTION 5.08(a) of this Agreement)
representing the number of whole shares of VoiceStream Common Stock into which
the shares of Powertel Stock represented by the surrendered Powertel
Certificate(s) shall have been converted at the Effective Time pursuant to
SECTION 1.06(c), cash in lieu of any fractional share of VoiceStream Common
Stock in accordance with SECTION 1.07(e) and the dividends and other
distributions in accordance with SECTION 1.07(d); and the Powertel
Certificate(s) so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of shares of Powertel Stock that is not registered in the
transfer records of Powertel, cash or a VoiceStream Certificate representing
shares of VoiceStream Common Stock may be paid to or issued in a name other than
that in which the Powertel Certificate surrendered in exchange therefor is
registered, if such Powertel Certificate shall be properly endorsed or otherwise
be in proper form for transfer and the person requesting such payment shall pay
any transfer or other Taxes required by reason of the payment to a person other
than the registered holder of such Powertel Certificate or establish to the
satisfaction of the Surviving Corporation that such Tax has been paid or is not
applicable. Until surrendered as contemplated by this SECTION 1.07, each
Powertel Certificate shall be deemed at any time after the Effective Time to
represent only (A) the right to receive VoiceStream Certificates representing
the shares of VoiceStream Common Stock into which the shares of Powertel Stock
represented by such Powertel Certificate have been converted, (B) any dividends
and other distributions in accordance with SECTION 1.07(d), and (C) any cash,
without interest, to be paid in lieu of any fractional share of VoiceStream
Common Stock in accordance with SECTION 1.07(e). VoiceStream or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Powertel Stock
such amounts as VoiceStream or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of state, local or foreign Tax law, but in connection therewith shall
be obligated to pay over to the proper Tax authorities and properly report such
payment as required by such Tax law. To the extent that amounts are so withheld
by VoiceStream or the Exchange Agent (but not both) and have been properly paid
to the appropriate Tax authorities and reported as required by law, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Powertel Stock in respect of which such
deduction and withholding was made by VoiceStream or the Exchange Agent.
(c) No Further Ownership Rights in Shares. All shares of VoiceStream
Common Stock issued and cash paid upon the surrender of Powertel Certificates in
accordance with the terms of this ARTICLE I (including any cash paid pursuant to
SECTION 1.07(d) or SECTION 1.07(e)) shall be deemed to have been issued (and
paid) in full satisfaction of all rights pertaining to the shares of Powertel
Stock theretofore represented by such Powertel Certificates. At the Effective
Time, the stock transfer books of Powertel shall be closed, and there shall be
no further registration of transfers on the stock transfer books of the
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Surviving Corporation of the shares of Powertel Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Powertel
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be cancelled and exchanged as provided in this
ARTICLE I.
(d) Dividends. No dividends or other distributions that are declared on or
after the Effective Time on VoiceStream Common Stock, or are payable to the
holders of record thereof on or after the Effective Time, shall be paid to any
person entitled by reason of the Merger to receive VoiceStream Certificates, and
no cash payment in lieu of any fractional share of VoiceStream Common Stock
shall be paid to any such person pursuant to SECTION 1.07(e), until such person
shall have surrendered its Powertel Certificate(s) as provided in SECTION
1.07(b). Subject to applicable law, there shall be paid to each person receiving
a VoiceStream Certificate: (i) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other distributions
theretofore paid with respect to the shares of VoiceStream Common Stock
represented by such VoiceStream Certificate and having a record date on or after
the Effective Time and a payment date prior to such surrender; and (ii) at the
appropriate payment date or as promptly as practicable thereafter, the amount of
any dividends or other distributions payable with respect to such shares of
VoiceStream Common Stock and having a record date on or after the Effective Time
but prior to such surrender and a payment date on or subsequent to such
surrender. In no event shall the person entitled to receive such dividends or
other distributions be entitled to receive interest on such dividends or other
distributions.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of VoiceStream Common Stock shall be issued upon the surrender for
exchange of Powertel Certificates pursuant to this ARTICLE I; and no such
fractional share shall entitle the record or beneficial owner thereof to vote or
to any other rights of a stockholder of VoiceStream. In lieu of any such
fractional share, each holder of shares of Powertel Stock who would otherwise
have been entitled thereto upon the surrender of Powertel Certificate(s) for
exchange pursuant to this ARTICLE I will be paid an amount in cash (without
interest), rounded to the nearest whole cent, determined by multiplying (i) the
per share closing price on the Nasdaq of VoiceStream Common Stock (as reported
on the Nasdaq) on the date on which the Effective Time shall occur (or, if
VoiceStream Common Stock shall not trade on the Nasdaq on such date, the first
day of trading in VoiceStream Common Stock on the Nasdaq thereafter) by (ii) the
fractional share to which such holder would otherwise be entitled.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to holders of Powertel Stock for twelve (12) months after
the Effective Time shall be delivered to VoiceStream, upon demand, and any
holders of Powertel Stock who have not theretofore complied with this ARTICLE I
and the instructions set forth in the letter of transmittal mailed to such
holders after the Effective Time shall thereafter look only to the Surviving
Corporation (subject to abandoned property, escheat or other similar laws) only
as general creditors thereof for payment of shares of VoiceStream Common Stock,
any cash in lieu of fractional shares of VoiceStream Common Stock and any
dividends or distributions with respect to such shares of VoiceStream Common
Stock to which they are entitled.
(g) No Liability. None of VoiceStream, Sub, Powertel, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of
any VoiceStream Common Stock or cash delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(h) Lost Certificates. If any Powertel Certificate is lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Powertel Certificate to be lost, stolen or destroyed and executing an
indemnity reasonably satisfactory to VoiceStream (and, if required by
VoiceStream, the posting by such Person of a bond, in such reasonable amount as
VoiceStream may direct, as indemnity) indemnifying VoiceStream against any claim
that may be made against VoiceStream with respect to the Powertel Certificate,
the Exchange Agent will issue, in exchange for such lost, stolen or destroyed
Powertel Certificate, the consideration to be paid in respect of the shares
represented by such Powertel Certificate. Such Person additionally will be
entitled to receive any amounts payable pursuant to SECTION 1.07(d)and/or
SECTION 1.07(e).
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF POWERTEL
Except as disclosed in the Powertel Filed SEC Documents and except as set
forth in the Powertel Letter (it being agreed that disclosure of any item in the
Powertel Letter shall be deemed disclosure with respect to any section of this
Agreement to which the relevance of such item is reasonably apparent), Powertel
hereby represents and warrants as of the date hereof to VoiceStream and Sub as
follows:
SECTION 2.01 Organization. Each of Powertel and its Subsidiaries
(collectively, the "POWERTEL SUBSIDIARIES") is a corporation or limited
liability company duly organized, validly existing and is in good standing
(where such concept is applicable) under the laws of the jurisdiction of its
incorporation or organization and has the requisite power and authority to carry
on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
could not reasonably be expected to have a Material Adverse Effect on Powertel
or prevent or materially delay the consummation of the Reorganization. Powertel
and each of the Powertel Subsidiaries is duly qualified or licensed to do
business and is in good standing (where such concept is applicable) in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing could not reasonably be expected to have a Material Adverse Effect on
Powertel or prevent or materially delay the consummation of the Reorganization.
Powertel has delivered to VoiceStream complete and correct copies of the
Restated Certificate of Incorporation of Powertel and Restated By-laws of
Powertel and has made available to VoiceStream the certificate of incorporation
and by-laws (or similar organizational documents) of each of the Powertel
Subsidiaries.
SECTION 2.02 Subsidiaries. ITEM 2.02 of the Powertel Letter lists each
Powertel Subsidiary and any Investment Entity. All of the outstanding shares of
capital stock of each Powertel Subsidiary that is a corporation have been
validly issued and are fully paid and nonassessable. All of the outstanding
shares of capital stock of each Powertel Subsidiary are owned by Powertel or by
another Powertel Subsidiary free and clear of all Liens, except for Liens which
are granted to secure indebtedness and are disclosed in ITEM 2.02 of the
Powertel Letter. Except as set forth in ITEM 2.02 of the Powertel Letter, (i)
Powertel and the Powertel Subsidiaries have no material ongoing obligations,
agreements, commitments, rights, understandings or arrangements with respect to
any Investment Entities, including funding obligations; and (ii) all Investment
Interests are owned by Powertel or the Powertel Subsidiaries free and clear of
all Liens. Except as set forth in ITEM 2.02 of the Powertel Letter and except
for the capital stock owned by Powertel, directly or indirectly, in the Powertel
Subsidiaries, neither Powertel nor any of the Powertel Subsidiaries owns,
directly or indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture, limited liability company or other
entity.
SECTION 2.03 Capital Structure. The authorized capital stock of Powertel
consists of 401,000,000 shares of capital stock, of which 400,000,000 shares are
authorized to be issued as Powertel Common Stock, and 1,000,000 shares are
authorized to be issued as Powertel Preferred Stock. As of the close of business
on August 18, 2000, Powertel had 31,381,461 shares of Powertel Common Stock
issued and outstanding. The series of Powertel Preferred Stock and the number of
designated, issued and outstanding shares, the current exchange ratio and the
number of shares of Powertel Common Stock issuable upon conversion as of the
close of business on August 18, 2000, were as follows:
SHARES OF
DESIGNATED, POWERTEL
ISSUED AND CURRENT COMMON STOCK
OUTSTANDING EXCHANGE ISSUABLE UPON
SERIES SHARES RATIO(1) CONVERSION
------ ----------- -------- -------------
Series A Convertible Preferred Stock
("SERIES A PREFERRED SHARES")......................... 100,000 46.26774 4,626,774
Series B Convertible Preferred Stock
("SERIES B PREFERRED SHARES")......................... 100,000 46.26774 4,626,774
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SHARES OF
DESIGNATED, POWERTEL
ISSUED AND CURRENT COMMON STOCK
OUTSTANDING EXCHANGE ISSUABLE UPON
SERIES SHARES RATIO(1) CONVERSION
------ ----------- -------- -------------
Series C Convertible Preferred Stock
("SERIES C PREFERRED SHARES")......................... --(2) -- --
Series D Convertible Preferred Stock
("SERIES D PREFERRED SHARES")......................... 50,000 35.29412 1,764,706
Series E 6.5% Cumulative Convertible Preferred Stock
("SERIES E PREFERRED SHARES")(3)...................... 50,000 68.15084 3,407,542
Series F 6.5% Cumulative Convertible Preferred Shares
("SERIES F PREFERRED SHARES")(3)...................... 50,000 68.15084 3,407,542
---------------
(1) Subject to any applicable adjustments set forth in the Certificates of
Designation relating to Powertel Preferred Stock.
(2) 50,000 shares initially designated as Series C Preferred Shares have been
converted to Powertel Common Stock.
(3) The Series E Preferred Shares and Series F Preferred Shares bear cumulative
dividends that accrue on a daily basis at an annual rate of 6.5% of the
initial purchase price of such shares.
The Series A, B, C, D, E and F Preferred Shares are hereinafter
collectively referred to as the "POWERTEL PREFERRED STOCK." As of the close of
business on August 18, 2000: (i) 56,438 shares of Powertel Common Stock were
held by Powertel in treasury; (ii) an aggregate of 17,833,338 shares of Powertel
Common Stock were reserved for issuance upon conversion of Powertel Preferred
Stock; (iii) an aggregate of 2,152,602 shares of Powertel Common Stock were
reserved for issuance upon exercise of outstanding stock options (the "POWERTEL
STOCK OPTIONS") granted under the Amended and Restated 1991 Employee Stock
Option Plan (the "1991 PLAN"), the Amended Nonemployee Stock Option Plan (the
"NONEMPLOYEE OPTION PLAN") and the 2000 Stock Option and Incentive Plan (the
"2000 PLAN" and with the 1991 Plan and the Nonemployee Option Plan, the
"POWERTEL STOCK OPTION PLANS"); (iv) 33,165 shares of Powertel Common Stock were
reserved for issuance pursuant to outstanding Powertel Restricted Stock Awards
granted under the 1995 Employee Restricted Stock Plan (the "RESTRICTED STOCK
PLAN"); (v) 3,446,340 shares of Powertel Common Stock remained available for
issuance pursuant to future stock option grants and restricted stock awards
under the 2000 Plan; (vi) 966,688 shares of Powertel Common Stock were reserved
for issuance pursuant to outstanding Powertel Warrants, which have an exercise
price of $16.9546 per share, subject to adjustment; and (vii) an aggregate of
30,142 shares of Powertel Common Stock are reserved for accrued but unpaid
dividends on the Series E Preferred Shares and Series F Preferred Shares. ITEM
2.03 of the Powertel Letter has a complete and accurate schedule of all Powertel
Stock Options and their respective shares, vesting schedules, exercise prices
and expiration dates that are outstanding on the date hereof (provided that with
respect to Powertel employees below the director level, such list need only set
forth the aggregate number of options with the weighted average exercise prices
at which grants have been made and need not specify grants by grantee). Except
as set forth above and in ITEMS 2.02 and 2.03 of the Powertel Letter, as of the
date hereof, no shares of Powertel Stock or shares of capital stock of any
Powertel Subsidiary were issued, reserved for issuance or outstanding, and there
are no stock appreciation rights, phantom stock rights or other contractual
rights the value of which is determined in whole or in part by the value of any
capital stock ("POWERTEL STOCK RIGHTS") of Powertel or any Powertel Subsidiary.
The Powertel Preferred Stock, the Powertel Stock Options, the Powertel Warrants,
the Eliska Put Rights, the Powertel Stock Rights and any other security
convertible into or exercisable or exchangeable for Powertel Common Stock (each
of which shall be determined on an as if converted, exercised or exchanged
basis) are herein referred to as "POWERTEL COMMON STOCK EQUIVALENTS." Each
outstanding share of Powertel Stock is, and each share of Powertel Stock which
may be issued pursuant to the Powertel Benefit Plans and the other agreements
and instruments listed above will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
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are no outstanding bonds, debentures, notes or other indebtedness of Powertel or
any Powertel Subsidiary having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matter on which
Powertel's stockholders may vote. Except as set forth above or in ITEM 2.03 of
the Powertel Letter and except as a result of the Powertel Permitted Stock
Dividend, as of the date of this Agreement, there are no Powertel Equity Rights.
"POWERTEL EQUITY RIGHTS" means securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind obligating
Powertel or any of the Powertel Subsidiaries to issue, deliver or sell or
create, or cause to be issued, delivered or sold or created, additional shares
of capital stock or other voting securities or Powertel Common Stock Equivalents
or stock equivalents of any of the Powertel Subsidiaries or obligating Powertel
or any of the Powertel Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking.
Any increase in any existing Powertel Equity Rights arising from
anitdilution or similar adjustments resulting from the declaration and payment
of the Powertel Permitted Stock Dividend will not increase the number of shares
of Powertel Common Stock subject to Powertel Equity Rights by more than 0.75% in
the aggregate.
Except as set forth in ITEM 2.03 of the Powertel Letter, as of the date of
this Agreement, there are no outstanding contractual obligations of Powertel or
any of the Powertel Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of Powertel or any of the Powertel Subsidiaries.
Between August 18, 2000, and the date of this Agreement, no Powertel Common
Stock or Powertel Common Stock Equivalents have been issued or granted, except
issuances of Powertel Common Stock upon the exercise of Powertel Stock Options
or Powertel Warrants outstanding on August 18, 2000, and grants of new Powertel
Stock Options to new employees or employees granted promotions in the ordinary
course of business; provided that the shares of Powertel Common Stock underlying
such Powertel Stock Options will not exceed a total of 50,000 shares of Powertel
Common Stock.
SECTION 2.04 Authority. The Board of Directors of Powertel, at a meeting
duly called and held, duly adopted resolutions (i) approving this Agreement, the
Reorganization and the Powertel Stockholder Agreement, (ii) determining that the
Reorganization, including the Merger, is fair to and in the best interests of
Powertel's stockholders and (iii) recommending that Powertel's stockholders
approve and adopt this Agreement. Powertel has the requisite corporate power and
authority to execute and deliver this Agreement and the other agreements to
which it is a party that are referenced herein and, subject to the adoption and
approval of this Agreement by (i) a majority of the votes entitled to be cast by
the holders of all outstanding shares of Powertel Common Stock and Series A
Preferred Shares, voting on an as-if-converted to Powertel Common Stock basis
and voting together with the holders of the Powertel Common Stock as a single
class, and (ii) two-thirds of each class of the Series A Preferred Shares,
Series B Preferred Shares, Series D Preferred Shares, Series E Preferred Shares
and Series F Preferred Shares, each such class of preferred stock voting as a
single class (collectively, the "POWERTEL STOCKHOLDER APPROVAL"), to consummate
the transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Powertel and the consummation by Powertel of the
Reorganization and of the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Powertel, subject to
the Powertel Stockholder Approval. This Agreement has been duly executed and
delivered by Powertel and (assuming the valid authorization, execution and
delivery of this Agreement by VoiceStream) constitutes the valid and binding
obligation of Powertel enforceable against Powertel in accordance with its
terms, except that such enforceability (i) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to the enforcement of creditors' rights and remedies generally, and
(ii) is subject to general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
SECTION 2.05 Consents and Approvals; No Violations. Except as set forth
in ITEM 2.05 of the Powertel Letter, and except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Act, state securities or "Blue Sky"
laws, the Exchange Act, the Communications Act, the HSR Act, the DGCL, the
rules, regulations and published
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decisions of the FAA, the FCC and state public utility or service commissions or
similar agencies, or the rules and regulations of Nasdaq (collectively, the
"POWERTEL REQUIRED APPROVALS"), the execution, delivery or performance of this
Agreement by Powertel and the consummation by Powertel of the transactions
contemplated hereby will not, and on the date the Powertel Permitted Stock
Dividend is declared and the date it is paid, such declaration or payment, as
the case may be, will not (i) violate or conflict with the Restated Certificate
of Incorporation or Restated By-laws of Powertel or of the similar
organizational documents of any of the Powertel Subsidiaries, (ii) require any
filing with, or permit, authorization, consent or approval of, any Governmental
Entity (except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings could not reasonably be expected
to have a Material Adverse Effect on Powertel or prevent or materially delay the
consummation of the Reorganization), (iii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Powertel or any of the Powertel Subsidiaries
is a party or by which any of their respective properties are bound, (iv)
violate any law, court order, judgment, decree, or regulation applicable to
Powertel or any of the Powertel Subsidiaries or by which any of their respective
properties are bound, or (v) result in the creation or imposition of any Lien on
any asset of Powertel or the Powertel Subsidiaries, except in the case of
clauses (iii), (iv) or (v) for violations, breaches or defaults that could not
reasonably be expected to have a Material Adverse Effect on Powertel or prevent
or materially delay the consummation of the Reorganization.
SECTION 2.06 SEC Documents and Other Reports. Powertel has filed with the
SEC all documents required to be filed by it since January 1, 1997 under the
Securities Act or the Exchange Act (the "POWERTEL SEC DOCUMENTS"). As of their
respective filing dates, the Powertel SEC Documents were prepared substantially
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, each as in effect on the date so filed, and at the time
filed with the SEC (or if amended or superseded by a filing prior to the date
hereof, then on the date of such filing) none of the Powertel SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
financial statements of Powertel included in the Powertel SEC Documents have
been prepared in accordance with generally accepted accounting principles
(except in the case of the unaudited statements permitted by Form 10-Q under the
Exchange Act) applied on a consistent basis during the periods involved (except
as may be indicated therein or in the notes thereto) and fairly present the
consolidated financial position of Powertel and the consolidated Powertel
Subsidiaries as of the respective dates thereof and the consolidated results of
operations and consolidated cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments and to
any other adjustments described therein).
SECTION 2.07 Absence of Material Adverse Change. Except as disclosed in
ITEM 2.07 of the Powertel Letter or in the documents filed by Powertel with the
SEC and publicly available prior to the date of this Agreement (the "POWERTEL
FILED SEC DOCUMENTS"), since December 31, 1999, Powertel and the Powertel
Subsidiaries have conducted their respective businesses in all material respects
only in the ordinary course, consistent with past practices, and there has not
been (i) any Material Adverse Change with respect to Powertel, (ii) except as a
result of the Powertel Permitted Stock Dividend, any declaration, setting aside
or payment of any dividend or other distribution with respect to its capital
stock (other than regularly scheduled dividends on the Series E Preferred Shares
and Series F Preferred Shares) or any redemption, purchase or other acquisition
of any of its capital stock, (iii) except as a result of the Powertel Permitted
Stock Dividend, any split, combination or reclassification of any of its capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iv) any material change in accounting methods, principles or
practices by Powertel affecting its assets, liabilities or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
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SECTION 2.08 Information Supplied. None of the information supplied or to
be supplied by Powertel specifically for inclusion or incorporation by reference
in (i) the Registration Statement or (ii) the joint proxy statement (together
with any amendments or supplements thereto, the "JOINT PROXY STATEMENT")
relating to the Stockholder Meetings will, in the case of the Registration
Statement, at the time it becomes effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or in the case of the
Joint Proxy Statement, at the time of the mailing of the Joint Proxy Statement
or the time of the Stockholder Meetings, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Registration
Statement will comply (with respect to Powertel) as to form in all material
respects with the requirements of the Securities Act, and the Joint Proxy
Statement will comply (with respect to Powertel) as to form in all material
respects with the requirements of the Exchange Act. Powertel makes no
representation or warranty with respect to any information supplied by
VoiceStream or any other Person who is not an Affiliate of Powertel that is
contained in the Registration Statement or the Joint Proxy Statement.
SECTION 2.09 Permits; Compliance with Laws. (a) Each of Powertel and the
Powertel Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, charters, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity
necessary for Powertel or any of the Powertel Subsidiaries to own, lease and
operate its properties or to carry on its business as it is now being conducted
(the "POWERTEL PERMITS"), except where the failure to have any of the Powertel
Permits could not, individually or in the aggregate, have a Material Adverse
Effect on Powertel, and, as of the date of this Agreement, no suspension or
cancellation of any of the Powertel Permits is pending or, to the knowledge of
Powertel, threatened, except where the suspension or cancellation of any of the
Powertel Permits could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Powertel. The business of Powertel
and the Powertel Subsidiaries is not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for possible
violations that could not reasonably be expected to have a Material Adverse
Effect on Powertel or prevent or materially delay the consummation of the
Reorganization. None of the representations and warranties made in this SECTION
2.09 are being made with respect to Environmental Laws.
(b) Except as set forth in ITEM 2.09 of the Powertel Letter:
(i) Powertel and each of the Powertel Subsidiaries holds, and is
qualified and eligible to hold, all material licenses, permits and other
authorizations issued or to be issued by the FCC to such entity for the
operation of their respective businesses, all of which are set forth in
ITEM 2.09 of the Powertel Letter (the "POWERTEL FCC LICENSES"). Each of the
Powertel FCC Licenses that is subject to restrictions under Section 310(b)
of the Communications Act is held by a Powertel Subsidiary.
(ii) The Powertel FCC Licenses are valid and in full force and effect,
and neither Powertel nor any of the Powertel Subsidiaries is or has been
delinquent in payment on or in default under any installment obligation
owed to the United States Treasury in connection with the Powertel FCC
Licenses. As used herein, the term "full force and effect" means that (A)
the orders issuing the Powertel FCC Licenses have become effective, (B) no
stay of effectiveness of such orders has been issued by the FCC, and (C)
the Powertel FCC Licenses have not been invalidated by any subsequent
published FCC action.
(iii) All material reports and applications required by the
Communications Act or required to be filed with the FCC by Powertel or any
of the Powertel Subsidiaries have been filed and are accurate and complete
in all material respects.
(iv) Powertel and the Powertel Subsidiaries are, and have been, in
compliance in all material respects with, and the wireless communications
systems operated pursuant to the Powertel FCC Licenses are and have been
operated in compliance in all material respects with, the Communications
Act.
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(v) There is not pending or, to Powertel's knowledge, threatened, as
of the date hereof any application, petition, objection, pleading or
proceeding with the FCC or any public service commission or similar body
having jurisdiction or authority over the communications operations of
Powertel or any of the Powertel Subsidiaries which is reasonably likely to
result in the revocation, cancellation, suspension, dismissal, denial or
any materially adverse modification of any Powertel FCC License or
imposition of any substantial fine or forfeiture against Powertel or any of
the Powertel Subsidiaries.
(vi) No facts are known to Powertel or the Powertel Subsidiaries which
if known by a Governmental Entity of competent jurisdiction would present a
substantial risk that any Powertel FCC License could be revoked, cancelled,
suspended or materially adversely modified or that any substantial fine or
forfeiture could be imposed against Powertel or any of the Powertel
Subsidiaries.
(vii) Powertel and the Powertel Subsidiaries have not made any
material misstatements of fact, or omitted to disclose any fact, to any
Government Entity or in any report, document or certificate filed
therewith, which misstatements or omissions, individually or in the
aggregate, could reasonably be expected to subject any Powertel FCC
Licenses to revocation or failure to renew, except to the extent that such
revocation or failure to renew would not have a Material Adverse Effect on
Powertel or the transactions contemplated by this Agreement.
SECTION 2.10 Tax Matters. Except as set forth in ITEM 2.10 of the
Powertel Letter or as would not have a Material Adverse Effect on Powertel: (i)
Powertel and each of the Powertel Subsidiaries have timely filed (after taking
into account any extensions to file) all Tax Returns required to be filed by
them either on a separate or combined or consolidated basis; (ii) all such Tax
Returns are correct in all respects and accurately disclose in all respects all
Taxes required to be paid for the periods covered thereby; (iii) Powertel and
the Powertel Subsidiaries have paid or caused to be paid all Taxes shown as due
on such Tax Returns and all Taxes for which no Tax Return was required to be
filed, and the financial statements contained in the Powertel SEC Documents
reflect an adequate reserve as determined in accordance with generally accepted
accounting principles for all material Taxes payable by Powertel and the
Powertel Subsidiaries and not yet due (other than a reserve for deferred Taxes
established to reflect timing differences between book and Tax treatment) for
all taxable periods and portions thereof accrued through the date of such
financial statements; (iv) none of Powertel or any Powertel Subsidiary has
waived in writing any statute of limitations in respect of Taxes; (v) there is
no action, suit, investigation, audit, claim or assessment that has been
formally commenced or proposed to Powertel in writing with respect to Taxes of
Powertel or any of the Powertel Subsidiaries where an adverse determination is
reasonably likely; (vi) there are no Liens for Taxes upon the assets of Powertel
or any Powertel Subsidiary except for Liens relating to current Taxes not yet
due; (vii) all Taxes which Powertel or any Powertel Subsidiary is required by
law to withhold or to collect for payment have been duly withheld and collected,
and have been paid or accrued on the books of Powertel or such Powertel
Subsidiary; (viii) neither Powertel nor any Powertel Subsidiary has been a
member of any group of corporations filing Tax Returns on a consolidated,
combined, unitary or similar basis other than each such group of which it is
currently a member; (ix) no deduction of any amount that would otherwise be
deductible by Powertel or any of the Powertel Subsidiaries with respect to
taxable periods ending on or before the Effective Time could be disallowed under
Section 162(m) of the Code; (x) neither Powertel nor any of the Powertel
Subsidiaries has constituted either a "distributing corporation" or a
"controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (a) in the two (2) years prior to the
date of this Agreement or (b) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Reorganization; (xi) neither
Powertel nor any of the Powertel Subsidiaries is a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code; (xii)
none of Powertel, VoiceStream or any of their Subsidiaries will be obligated to
make a payment, in connection with the transactions contemplated hereunder or
otherwise, to any employee or former employee of, or individual providing
services to, Powertel or any Powertel Subsidiary that would be a "parachute
payment" to a "disqualified individual" as those terms are defined in Section
280G of the Code without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in
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the future; and (xiii) none of Powertel, VoiceStream or any of their
Subsidiaries will be obligated to pay any excise taxes or similar taxes imposed
on any employee or former employee of, or individual providing services to,
Powertel or any Powertel Subsidiary under Section 4999 of the Code or any
similar provisions as a result of the consummation of the transactions
contemplated hereby, either alone or in connection with any other event.
SECTION 2.11 Liabilities. Except as set forth in the Powertel Filed SEC
Documents or ITEM 2.11 of the Powertel Letter, and as permitted by this
Agreement and the Powertel Merger Agreement, Powertel and the Powertel
Subsidiaries, taken as a whole, do not have any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) required by
generally accepted accounting principles to be set forth on a consolidated
balance sheet of Powertel and the Powertel Subsidiaries or in the notes thereto,
other than (i) liabilities and obligations incurred in the ordinary course of
business since December 31, 1999 or (ii) liabilities arising after December 31,
1999 which could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on Powertel.
SECTION 2.12 Benefit Plans; Employees and Employment Practices.
(a) Except as disclosed in the Powertel Filed SEC Documents or ITEM 2.12(a)
of the Powertel Letter, or to the extent required by law or required to maintain
compliance with provisions of the Code, neither Powertel nor any of the Powertel
Subsidiaries has adopted or amended in any material respect any ERISA Benefit
Plan of Powertel since the date of the most recent audited financial statements
included in the Powertel Filed SEC Documents. Except as set forth in ITEM
2.12(a) of the Powertel Letter, Powertel does not have any commitment to create,
adopt or contribute to any Powertel Benefit Plan. Except as disclosed in ITEM
2.12(a) of the Powertel Letter or in the Powertel Filed SEC Documents, as of the
date of this Agreement, there exist no material employment, consulting,
severance, bonus, incentive or termination agreements between Powertel or any of
the Powertel Subsidiaries and any current or former employee, officer or
director of Powertel or any of the Powertel Subsidiaries.
(b) ITEM 2.12(b) of the Powertel Letter contains a list of all the Powertel
Benefit Plans. None of Powertel, any of the Powertel Subsidiaries, any officer
of Powertel or any of the Powertel Subsidiaries or any of the ERISA Benefit
Plans has on or before the date of this Agreement engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
with respect to any ERISA Benefit Plan that could reasonably be expected to
subject Powertel, any of the Powertel Subsidiaries or any officer of Powertel or
any of the Powertel Subsidiaries to any Tax on prohibited transactions imposed
by Section 4975 of the Code or to any liability under Section 502(i) or (l) of
ERISA where such Tax or liability has or would be reasonably expected to have a
Material Adverse Effect on Powertel. No ERISA Benefit Plan has incurred any
"accumulated funding deficiency" (as defined in Section 412 of the Code or Part
3 of Title I of ERISA), whether or not waived. Neither Powertel nor any of the
Powertel Subsidiaries has incurred and none of such entities reasonably expects
to incur, any material liability to the PBGC with respect to any ERISA Benefit
Plan. No assets of Powertel or any of the Powertel Subsidiaries are subject to
Liens arising under ERISA or the Code on account of any ERISA Benefit Plan,
neither Powertel nor any of the Powertel Subsidiaries has been required to
provide any security under Sections 401(a)(29) or 412(f) of the Code, or under
Section 307 of ERISA, and, to Powertel's knowledge, no event has occurred that
could give rise to any such Lien or a requirement to provide any such security.
Except as disclosed in ITEM 2.12(b) of the Powertel Letter, none of Powertel,
the Powertel Subsidiaries or any ERISA Affiliate has at any time during the
five-year period preceding the date hereof contributed to any "multiemployer
plan" (as defined in Section 3(37) of ERISA).
(c) Except as disclosed in ITEM 2.12(c) of the Powertel Letter, and except
for such matters as could not be reasonably expected to have a Material Adverse
Effect on Powertel, to the extent applicable, (i) each ERISA Benefit Plan
complies with the requirements of ERISA and the Code, (ii) each ERISA
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Benefit Plan intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified and nothing has
occurred since the date of that determination that could reasonably be expected
to adversely affect the qualified status of such plan and its related trust is
tax-exempt and has been so since its creation, and (iii) each Powertel Benefit
Plan has been maintained, administered and operated in compliance with its terms
and with the requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such Powertel Benefit Plans.
(d) Except as disclosed in ITEM 2.12(d) of the Powertel Letter, all
material contributions, reserves or premium payments under or to the Powertel
Benefit Plans, accrued to the date hereof have been made or provided for.
(e) Except as disclosed in ITEM 2.12(e) of the Powertel Letter, and except
for any liability as could not be reasonably expected to have a Material Adverse
Effect on Powertel, Powertel has not incurred any liability under Subtitle C or
D of Title IV of ERISA with respect to any "single-employer plan" within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
Powertel, or any entity which is considered one employer with Powertel under
Section 4001 of ERISA.
(f) Except as disclosed in ITEM 2.12(f) of the Powertel Letter, neither
Powertel nor any of the Powertel Subsidiaries has any obligation to provide
retiree health or welfare benefits for any current or former employee under any
Powertel Benefit Plan, except as required by Part 6 of Title I of ERISA or to
avoid excise taxes under Section 4980B of the Code, and the terms of the
Powertel Benefit Plans permit Powertel to amend or terminate such Powertel
Benefit Plans at any time without incurring liability thereunder.
(g) Except as disclosed in ITEM 2.12(g) of the Powertel Letter, Powertel
has not engaged in, nor is it a successor or parent corporation to an entity
that has engaged in a transaction described in Section 4069 of ERISA.
(h) Except as disclosed in ITEM 2.12(h) of the Powertel Letter, the
consummation or announcement of any transaction contemplated by this Agreement
will not (either alone or upon the occurrence of any additional or further acts
or events) result in any (i) payment (whether of severance pay or otherwise)
becoming due from Powertel or any of the Powertel Subsidiaries to any officer,
employee, former employee or director thereof or to the trustee under any "rabbi
trust" or similar arrangement; (ii) benefit under any Powertel Benefit Plan
being established or becoming accelerated, vested or payable; or (iii)
"reportable event" (as defined in Section 4043 of ERISA) with respect to any
ERISA Benefit Plan subject to Title IV of ERISA.
(i) Except as disclosed in ITEM 2.12(i) of the Powertel Letter, as of the
date of this Agreement there are no pending disputes, arbitrations, claims,
suits, grievances or, to the knowledge of Powertel, governmental audits
involving a Powertel Benefit Plan (other than routine claims for benefits
payable under any such Powertel Benefit Plan or routine audits) that would
reasonably be expected either individually or in the aggregate, to have a
Material Adverse Effect on Powertel.
(j) ITEM 2.12(j) of the Powertel Letter contains a list setting forth the
name and current annual salary and other material compensation payable to each
Significant Employee, and the profit sharing, bonus or other form of additional
cash compensation paid or payable by Powertel or the Powertel Subsidiaries to or
for the benefit of each such person for the current fiscal year. Except as set
forth in ITEM 2.12(j) of the Powertel Letter, there are no oral or written
contracts, agreements or arrangements obligating Powertel or any of the Powertel
Subsidiaries to increase the compensation or benefits presently being paid or
hereafter payable to any Significant Employees or any oral employment or
consulting or similar arrangements regarding any Significant Employee that are
not terminable without liability on thirty (30) days' or less prior notice. ITEM
2.12(j) of the Powertel Letter lists all written employment and consulting
agreements with respect to any Significant Employee. Powertel has provided true
and correct copies of all employment agreements listed on ITEM 2.12(j) of the
Powertel Letter. Except for severance or retention obligations to Significant
Employees set forth in ITEM 2.12(j) or as otherwise set forth in
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ITEM 2.12(j), there is not due or owing and there will not be due and owing at
the Effective Time to any Significant Employees, any sick pay, severance pay
(whether arising out of the termination of a Significant Employee prior to, on,
or subsequent to the Effective Time), compensable time or pay, including salary,
commission and bonuses, personal time or pay or vacation time or vacation pay
attributable to service rendered on or prior to the Effective Time, the
aggregate of which exceeds $50,000 for any Significant Employee. Except as
disclosed in ITEM 2.12(j) of the Powertel Letter and other than claims made in
the ordinary course of business consistent with past practice in an aggregate
amount not to exceed $500,000 neither Powertel nor any of the Powertel
Subsidiaries have any liability arising out of claims made or suits brought
(including workers' compensation claims and claims or suits for contribution to,
or indemnification of, third parties, occupational health and safety,
environmental, consumer protection or equal employment matters) for injury,
sickness, disease, discrimination, death or termination of employment of any
Significant Employee, or other employment matter to the extent attributable to
an event occurring or a state of facts existing on or prior to the Effective
Time.
(k) Except as set forth in ITEM 2.12(k) of the Powertel Letter, Powertel
and each of the Powertel Subsidiaries (i) is in compliance with all applicable
federal and state laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Powertel Employees, except where the failure to be in compliance
would not, singly or in the aggregate, have a Material Adverse Effect on
Powertel or its financial condition or business; (ii) has withheld all amounts
required by law or by agreement to be withheld from the wages, salaries and
other payments to Powertel Employees; (iii) is not liable for any arrears of
wages or any taxes or any penalty for failure to comply with any of the
foregoing, except as would reasonably be expected to not have a Material Adverse
Effect on Powertel; and (iv) (other than routine payments to be made in the
normal course of business and consistent with past practice) is not liable for
any payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, Social Security
or other benefits for Powertel Employees.
(l) Except as disclosed in ITEM 2.12(l) of the Powertel Letter, as of the
date of this Agreement there are no controversies, strikes, work stoppages or
disputes pending or to Powertel's knowledge threatened against Powertel or any
of the Powertel Subsidiaries, and no organizational effort by any labor union or
other collective bargaining unit currently is under way with respect to any
employee, which in any such case would reasonably be expected to have a Material
Adverse Effect on Powertel. None of Powertel or any of the Powertel Subsidiaries
is a party to a collective bargaining agreement. Except as set forth in ITEM
2.12(l) of the Powertel Letter, there is no, and there is not threatened, any
labor dispute, grievance or litigation relating to labor, safety or
discrimination matters involving any Powertel Employee including charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Powertel. There has been no engagement
in any unfair labor practices by Powertel or the Powertel Subsidiaries within
the meaning of the National Labor Relations Act which would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Powertel.
SECTION 2.13 Litigation. Except as disclosed in ITEM 2.13 of the Powertel
Letter or in the Powertel Filed SEC Documents, as of the date of this Agreement,
there is no suit, action, proceeding or investigation pending or, to Powertel's
knowledge, threatened, against Powertel or any of the Powertel Subsidiaries
before any Governmental Entity that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Powertel or prevent
or materially delay the consummation of the Reorganization. Except as disclosed
in ITEM 2.13 of the Powertel Letter or in the Powertel Filed SEC Documents,
neither Powertel nor any of the Powertel Subsidiaries is subject to any
outstanding judgment, order, writ, injunction or decree that could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Powertel.
SECTION 2.14 Environmental Matters. Except for such matters that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on Powertel, or would not otherwise require disclosure
pursuant to the Securities Act or Exchange Act, (i) each of Powertel and the
Powertel Subsidiaries has complied and is in compliance with all applicable
Environmental Laws; (ii) the
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properties currently owned or operated by Powertel or any of the Powertel
Subsidiaries (including soils, groundwater, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances; (iii) to
Powertel's knowledge, no Hazardous Substances were present, disposed, released
or otherwise deposited on, under, at or from the properties formerly owned or
operated by Powertel or any of the Powertel Subsidiaries during the period of
ownership or operation by Powertel or any of the Powertel Subsidiaries; (iv) to
Powertel's knowledge, neither Powertel nor any of the Powertel Subsidiaries is
subject to liability for any Hazardous Substance disposal or contamination on
any third party property; (v) neither Powertel nor any of the Powertel
Subsidiaries has received any notice, demand, threat, letter, claim or request
for information alleging that Powertel or any of the Powertel Subsidiaries may
be in violation of or liable under any Environmental Law (including any claims
relating to electromagnetic fields or microwave transmissions); and (vi) to
Powertel's knowledge, neither Powertel nor any of the Powertel Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements (other than
those of general applicability not specifically related to Powertel) with any
Governmental Entity or regulatory authority or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances (except for such
agreements entered into by Powertel in the ordinary course of business).
SECTION 2.15 Section 203 of DGCL. The Board of Directors of Powertel has
approved this Agreement, the Reorganization and the Powertel Stockholder
Agreement and the transactions contemplated hereby, with the effect that the
restrictions on business combinations contained in Section 203 of the DGCL will
not apply to VoiceStream or Sub as a result of this Agreement, the
Reorganization and Powertel Stockholder Agreement. To Powertel's knowledge, (i)
no anti-takeover statute or similar law of Georgia or Delaware imposes
restrictions which could reasonably be expected to adversely affect or delay the
consummation of the transactions contemplated by this Agreement, and (ii) no
"control share acquisition," "fair price," "moratorium" or other anti-takeover
laws or regulations enacted under Georgia or Delaware law applicable to Powertel
apply to this Agreement or any of the transactions related thereto.
SECTION 2.16 Intellectual Property. Except as set forth in the Powertel
Filed SEC Documents or in ITEM 2.16 of the Powertel Letter, the Intellectual
Property Rights consist solely of items and rights which are: (i) owned by
Powertel or the Powertel Subsidiaries; (ii) in the public domain; or (iii)
rightfully used by Powertel or the Powertel Subsidiaries pursuant to a license,
and, with respect to Intellectual Property Rights owned by Powertel or the
Powertel Subsidiaries, Powertel or the Powertel Subsidiaries own the entire
right, title and interest in and to such Intellectual Property Rights free and
clear of any Liens. Powertel and the Powertel Subsidiaries have all rights in
the Intellectual Property Rights necessary to carry out their businesses
substantially as currently conducted except as could not reasonably be expected
to have a Material Adverse Effect on Powertel. The Intellectual Property Rights
do not infringe on any proprietary right of any Person, except to the extent
that any such infringement, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Powertel. As of the
date of this Agreement, no claims against Powertel or any Powertel Subsidiary
(or, to Powertel's knowledge, against any other holder of Intellectual Property
Rights) (x) challenging the validity, effectiveness, or ownership by Powertel or
the Powertel Subsidiaries of any of the Intellectual Property Rights, or (y) to
the effect that the Intellectual Property Rights infringe or will infringe on
any intellectual property or other proprietary right of any Person have been
asserted or, to Powertel's knowledge, are threatened by any Person nor to
Powertel's knowledge are there any valid grounds for any bona fide claim of any
such kind. To Powertel's knowledge, there is no material unauthorized use,
infringement or misappropriation of any of the Intellectual Property Rights by
any third party, employee or former employee of Powertel or the Powertel
Subsidiaries.
SECTION 2.17 Opinion of Financial Advisor. The Board of Directors of
Powertel has received the oral opinion of Morgan Stanley & Co. Incorporated
("POWERTEL FINANCIAL ADVISOR"), on the date hereof, to the effect that, as of
the date hereof, the consideration to be received in the Reorganization by
Powertel's stockholders is fair to Powertel's stockholders from a financial
point of view.
SECTION 2.18 Brokers. Except for the Powertel Financial Advisor, the fees
and expenses of which will be paid by Powertel (and are reflected in an
agreement with Powertel, a true and correct copy
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of which has been furnished to and accepted by VoiceStream), no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Powertel. In no event shall the amounts
paid or payable by Powertel to the Powertel Financial Advisor in connection with
the transactions contemplated by this Agreement exceed $23,000,000.
SECTION 2.19 Tax Status. To the knowledge of Powertel after due
investigation, neither Powertel nor any of its Affiliates has taken any action
or failed to take any action which action or failure would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code. To the knowledge of Powertel after due investigation, there
are no facts or circumstances relating to Powertel or its Affiliates, including
any covenants or undertakings of Powertel pursuant to this Agreement, that would
prevent Morris, Manning & Martin, LLP from delivering the opinion referred to in
SECTION 6.02(B) as of the date hereof.
SECTION 2.20 Contracts. Except as set forth in the Powertel Filed SEC
Documents or in ITEM 2.20 of the Powertel Letter, and except for this Agreement,
the Powertel Merger Agreement and the agreements referenced hereby and thereby,
neither Powertel nor any of the Powertel Subsidiaries is a party to or bound by:
(i) any "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) or any agreement, contract or commitment the loss or
termination of which could have a Material Adverse Effect on Powertel; (ii) any
non-competition agreement or any similar agreement or obligation which
materially limits or could materially limit Powertel or any of the Powertel
Subsidiaries from engaging in the business of providing wireless communications
services or from developing wireless communications technology anywhere in the
world; or (iii) any management agreement, technical services agreement or other
agreement whereby Powertel or any of the Powertel Subsidiaries is providing or
is required to provide management or technical services to any other Person.
Taken as a whole, the contracts and agreements required to be filed by Powertel
with the SEC together with the contracts and agreements required to be set forth
on ITEM 2.20 of the Powertel Letter are collectively referred to as the
"POWERTEL CONTRACTS"). With such exceptions as, individually or in the
aggregate, have not had, and could not be reasonably expected to have, a
Material Adverse Effect on Powertel, (x) each of the Powertel Contracts is valid
and in full force and effect (except to the extent they have previously expired
in accordance with their terms), and (y) except as set forth in ITEM 2.20 of the
Powertel Letter, neither Powertel nor any of the Powertel Subsidiaries has
violated any provision of, or committed or failed to perform any act which, with
or without notice, lapse of time, or both, would constitute a default under the
provisions of any Powertel Contract. To the knowledge of Powertel, no
counterparty to any such contract, agreement or commitment has violated any
provision of, or committed or failed to perform any act which, with or without
notice, lapse of time, or both would constitute a default or other breach under
the provisions of, such Powertel Contract, except for defaults or breaches
which, individually or in the aggregate, have not had, or would not reasonably
be expected to have, a Material Adverse Effect on Powertel. Neither Powertel nor
any of the Powertel Subsidiaries is a party to, or otherwise a guarantor of or
liable with respect to, any interest rate, currency or other swap or derivative
transaction, other than any such transactions which are not material to the
business of Powertel or the Powertel Subsidiaries. Powertel has provided or made
available to VoiceStream a copy of each agreement described in item (i), (ii)
and (iii) above. The designation or definition of Powertel Contracts for
purposes of this SECTION 2.20 and the disclosures made pursuant hereto shall not
be construed or utilized to expand, limit or define the terms "material" and
"Material Adverse Effect" as otherwise referenced and used in this Agreement.
SECTION 2.21 Vote Required. The only vote of the holders of any class or
series of capital stock of Powertel necessary to approve this Agreement and the
transactions contemplated hereby is the Powertel Stockholder Approval. As of the
date hereof, the Powertel Principal Stockholders have the requisite voting power
to satisfy the Powertel Stockholder Approval.
SECTION 2.22 Transactions with Affiliates. Except as described in ITEM
2.22 of the Powertel Letter or in the Powertel Filed SEC Documents, to
Powertel's knowledge, no director or executive officer
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of Powertel or any 5% or greater stockholder of Powertel is at the date hereof a
party to any transaction with Powertel or any of the Powertel Subsidiaries in
which the amount involved exceeds $60,000, including any contract or arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property (including intellectual property) to or from, or otherwise
requiring payments to or from Powertel or any of the Powertel Subsidiaries.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VOICESTREAM AND SUB
Except as disclosed in the VoiceStream Filed SEC Documents and except as
set forth in the VoiceStream Letter (it being agreed that disclosure of any item
in the VoiceStream Letter shall be deemed disclosure with respect to any section
of this Agreement to which the relevance of such item is reasonably apparent),
(i) VoiceStream hereby represents and warrants as of the date hereof to Powertel
as follows, and (ii) Sub hereby represents and warrants as of September 28, 2000
to Powertel as follows (but only to the extent any of the following relates to
Sub):
SECTION 3.01 Organization. Each of VoiceStream and its Subsidiaries
(collectively, the "VOICESTREAM SUBSIDIARIES") is a corporation or limited
liability company and Sub is a corporation duly organized, validly existing and
in good standing (where such concept is applicable) under the laws of the
jurisdiction of its incorporation or organization and has the requisite power
and authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority could not reasonably be expected to have a Material Adverse Effect
on VoiceStream or prevent or materially delay the consummation of the
Reorganization. VoiceStream and Sub are duly qualified or licensed to do
business and are in good standing (where such concept is applicable) in each
jurisdiction in which the nature of their respective businesses or the ownership
or leasing of their respective properties makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing (where such concept is applicable)
could not reasonably be expected to have a Material Adverse Effect on
VoiceStream or prevent or materially delay the consummation of the
Reorganization. VoiceStream has delivered to Powertel complete and correct
copies of its Certificate of Incorporation and By-laws and has made available to
Powertel the certificate of incorporation and by-laws (or similar organizational
documents) of each of the VoiceStream Subsidiaries.
SECTION 3.02 Ownership of Sub. All of the outstanding shares of capital
stock of Sub have been validly issued and are fully paid and nonassessable. All
of the outstanding shares of capital stock of Sub are owned by VoiceStream.
SECTION 3.03 Capital Structure. (a) The authorized capital stock of
VoiceStream consists solely of (i) 1,000,000,000 shares of VoiceStream Common
Stock, of which, as of July 31, 2000, (A) 214,617,441 shares were issued and
outstanding, including the restricted shares listed on ITEM 3.03 of the
VoiceStream Letter, (B) no shares were held in the treasury of VoiceStream, (C)
9,625,762 shares were issuable upon the exercise of options outstanding under
the VoiceStream 2000 Management Incentive Stock Option Plan, and (D) 274,844
shares were issuable upon the exercise of the warrants described in ITEM 3.03 of
the VoiceStream Letter, and (ii) 100,000,000 shares of preferred stock, $0.001
par value, of VoiceStream, of which, as of July 31, 2000, 7,606 2 1/2%
Convertible Preferred Shares were issued and outstanding and owned by Hutchison
Telecommunications PCS (USA) Limited, which shares, as of the date hereof, are
convertible into 26,227,586 shares of VoiceStream Common Stock. The authorized
capital stock of Omnipoint Corporation consists solely of (i) 200,000,000 shares
of common stock $0.01 par value, of which, as of July 31, 2000, 65,000,000
shares were issued and outstanding and owned by VoiceStream, and (ii) 10,000,000
shares of preferred stock, $0.01 par value, of which, as of July 31, 2000,
6,355,195 shares of 7% Convertible Preferred Stock were issued and outstanding,
which shares are convertible, as of the date hereof, into 8,425,082 shares of
VoiceStream Common Stock. Except as set forth in ITEM 3.03 of the VoiceStream
Letter or permitted by the DT Merger Agreement and as to the exchange rights
relating to the Cook Inlet Joint Ventures as set forth on ITEM 3.03 of the
VoiceStream Letter ("EXCHANGE
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RIGHTS") and except as a result of the VoiceStream Permitted Stock Dividend, (i)
since July 31, 2000, no shares of VoiceStream Common Stock have been issued,
except upon the exercise of options or the warrants described in the immediately
preceding sentence, and (ii) as of July 31, 2000, there are no outstanding
VoiceStream Equity Rights. For purposes of this Agreement, "VOICESTREAM EQUITY
RIGHTS" means subscriptions, options, warrants, calls, commitments, agreements,
conversion rights, exchange rights or other rights of any character (contingent
or otherwise) to purchase or otherwise acquire from VoiceStream or any of
VoiceStream's Subsidiaries or any Cook Inlet Joint Venture at any time any
shares of the capital stock or other voting or non-voting securities of
VoiceStream. ITEM 3.03 of the VoiceStream Letter sets forth a complete and
accurate list of all outstanding VoiceStream Equity Rights as of July 31, 2000
(provided that, with respect to options, such list need only set forth the
aggregate number of options with weighted-average exercise prices at which
grants have been made and need not specify grants by grantee). Since July 31,
2000, no VoiceStream Equity Rights have been issued except (1) after the date
hereof, as permitted by Section 4.01 of the DT Merger Agreement or as a result
of the transactions permitted by Section 5.15 of the DT Merger Agreement, (2)
pursuant to the VoiceStream stock plans listed on ITEM 3.03(a) of the
VoiceStream Letter, (3) pursuant to the Exchange Rights; (4) any increases in
any existing VoiceStream Equity Rights arising from anti-dilution or similar
adjustments resulting from the payment of the VoiceStream Permitted Stock
Dividend, which increases, in the aggregate, do not, on the date the VoiceStream
Permitted Stock Dividend is declared and on the date it is paid, increase the
aggregate number of shares of VoiceStream Common Stock subject to VoiceStream
Equity Rights by more than 0.75% in the aggregate.
(b) Except as set forth on ITEM 3.03 of the VoiceStream Letter, there are
no outstanding obligations of VoiceStream or any of VoiceStream's Subsidiaries
or any Cook Inlet Joint Venture to repurchase, redeem or otherwise acquire any
shares of capital stock of VoiceStream.
(c) All shares of issued and outstanding VoiceStream Common Stock are
validly issued, fully paid and nonassessable, and the shares of VoiceStream
Common Stock to be issued to the Powertel Stockholders pursuant to this
Agreement are not subject to any preemptive rights.
(d) All the outstanding capital stock of each of the VoiceStream
Subsidiaries and each of the Cook Inlet Joint Ventures which is owned by
VoiceStream is duly authorized, validly issued, fully paid and nonassessable and
owned by VoiceStream or one of the VoiceStream Subsidiaries free and clear of
any Liens except for Liens which are granted to secure indebtedness and are
disclosed in ITEM 3.03 of the VoiceStream Letter. Except as set forth on ITEM
3.03 of the VoiceStream Letter and as to the Exchange Rights, except as
hereafter issued or entered into in accordance with the DT Merger Agreement,
there are no material existing subscriptions, options, warrants, calls,
commitments, agreements, conversion rights, exchange rights or other rights of
any character (contingent or otherwise) to purchase or otherwise acquire from
VoiceStream or any VoiceStream Subsidiary or any Cook Inlet Joint Venture at any
time any shares of the capital stock or other voting or non-voting securities or
partnership interests or membership interests of any VoiceStream Subsidiary or
any Cook Inlet Joint Venture, whether or not presently issued or outstanding
(except for rights of first refusal to purchase interests in Subsidiaries which
are not wholly owned by VoiceStream and the Cook Inlet Joint Ventures), and
there are no outstanding obligations of VoiceStream or any of the VoiceStream
Subsidiaries or the Cook Inlet Joint Ventures to repurchase, redeem or otherwise
acquire any shares of capital stock or other voting or non-voting securities or
partnership interests or membership interests of VoiceStream or any of the
VoiceStream Subsidiaries or any Cook Inlet Joint Venture.
(e) No bonds, debentures, notes or other indebtedness of VoiceStream having
the right to vote on any matters on which stockholders may vote are issued or
outstanding except for any securities issued after the date hereof in accordance
with Section 4.01 of the DT Merger Agreement.
SECTION 3.04 Authority. The Board of Directors of VoiceStream, at a
meeting duly called and held, duly adopted resolutions (i) approving this
Agreement, the Reorganization, the Powertel Stockholder Agreements and the
VoiceStream Stockholder Agreements, (ii) determining that the Reorganization,
including the Merger, and the issuance of shares of VoiceStream Common Stock in
accordance with the
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Reorganization, is fair to and in the best interests of VoiceStream stockholders
and (iii) recommending that the VoiceStream stockholders approve and adopt this
Agreement. The Board of Directors of Sub has declared the Reorganization
advisable and approved this Agreement. VoiceStream and Sub have the requisite
corporate power and authority to execute and deliver this Agreement and the
other agreements to which they are parties, if any, that are referenced herein
and, subject, in the case of VoiceStream, to the approval and adoption of this
Agreement by a majority of the votes cast at a meeting by the holders of the
VoiceStream Common Stock and the VoiceStream Voting Preferred Stock, voting
together as a single class (the "VOICESTREAM STOCKHOLDER APPROVAL"), to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by VoiceStream and Sub and the consummation by
VoiceStream and Sub of the Reorganization and of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of VoiceStream and Sub, subject, in the case of VoiceStream, to the
VoiceStream Stockholder Approval. This Agreement has been duly executed and
delivered by VoiceStream and Sub and (assuming the valid authorization,
execution and delivery of this Agreement by Powertel) constitutes the valid and
binding obligation of each of VoiceStream and Sub enforceable against each of
them in accordance with its terms, except that such enforceability (i) may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to the enforcement of creditors' rights and remedies
generally and (ii) is subject to general principles of equity (regardless of
whether considered in a proceeding in equity or at law). The issuance of shares
of VoiceStream Common Stock in connection with the Reorganization and the filing
of a registration statement on Form S-4 with the SEC by VoiceStream under the
Securities Act for the purpose of registering the shares of VoiceStream Common
Stock to be issued in connection with the Reorganization (together with any
amendments or supplements thereto, whether prior to or after the effective date
thereof, the "REGISTRATION STATEMENT") have been duly authorized by
VoiceStream's Board of Directors.
SECTION 3.05 Consents and Approvals; No Violations. Except as set forth
in ITEM 3.05 of the VoiceStream Letter, and except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Act, state securities or "Blue Sky"
laws, the Exchange Act, the Communications Act, the HSR Act, the DGCL, the
rules, regulations and published decisions of the FAA, the FCC and state public
utility or service commissions or similar agencies, or the rules and regulations
of Nasdaq (collectively, the "VOICESTREAM REQUIRED APPROVALS" and together with
the Powertel Required Approvals, the "REQUIRED REGULATORY APPROVALS"), neither
the execution, delivery or performance of this Agreement by VoiceStream and Sub
nor the consummation by VoiceStream and Sub of the transactions contemplated
hereby will (i) violate or conflict with the respective Certificate of
Incorporation or By-laws of VoiceStream and Sub, (ii) require any filing with,
or permit, authorization, consent or approval of, any Governmental Entity
(except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings could not reasonably be expected to have a
Material Adverse Effect on VoiceStream or prevent or materially delay the
consummation of the Reorganization), (iii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which VoiceStream or any of the VoiceStream
Subsidiaries is a party or by which any of their respective properties are
bound, (iv) violate any order, writ, judgment, injunction, decree, statute, rule
or regulation applicable to VoiceStream or any of the VoiceStream Subsidiaries
or by which any of their respective properties are bound, or (v) result in the
creation or imposition of any Lien on any asset of VoiceStream or the
VoiceStream Subsidiaries, except in the case of clauses (iii), (iv) or (v)for
violations, breaches or defaults that could not reasonably be expected to have a
Material Adverse Effect on VoiceStream or prevent or materially delay the
consummation of the Reorganization.
SECTION 3.06 SEC Documents and Other Reports. VoiceStream has filed with
the SEC all documents required to be filed by it since January 1, 1999 under the
Securities Act or the Exchange Act (the "VOICESTREAM SEC DOCUMENTS"). As of
their respective filing dates, the VoiceStream SEC Documents were prepared
substantially in accordance with the requirements of the Securities Act or the
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Exchange Act, as the case may be, each as in effect on the date so filed, and at
the time filed with the SEC (or if amended or superseded by a filing prior to
the date hereof, then on the date of such filing) none of the VoiceStream SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of VoiceStream included in the
VoiceStream SEC Documents have been prepared in accordance with generally
accepted accounting principles (except in the case of the unaudited statements,
under the Exchange Act) applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto) and fairly
present the consolidated financial position of VoiceStream and the consolidated
VoiceStream Subsidiaries as of the respective dates thereof and the consolidated
results of operations and consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
SECTION 3.07 Absence of Material Adverse Change. Except as disclosed in
ITEM 3.07 of the VoiceStream Letter or in the documents filed by VoiceStream
with the SEC and publicly available prior to the date of this Agreement (the
"VOICESTREAM FILED SEC DOCUMENTS"), since December 31, 1999, VoiceStream and the
VoiceStream Subsidiaries have conducted their respective businesses in all
material respects only in the ordinary course, consistent with past practices,
and there has not been (i) any Material Adverse Change with respect to
VoiceStream, (ii) except as a result of the VoiceStream Permitted Stock
Dividend, any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock (other than regular quarterly
cash dividends) or any redemption, purchase or other acquisition of any of its
capital stock, (iii) except as a result of the VoiceStream Permitted Stock
Dividend, any split, combination or reclassification of any of its capital stock
or any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
(iv) any material change in accounting methods, principles or practices by
VoiceStream affecting its assets, liabilities or business, except insofar as may
have been required by a change in generally accepted accounting principles.
SECTION 3.08 Information Supplied. None of the information supplied or to
be supplied by VoiceStream specifically for inclusion or incorporation by
reference in (i) the Registration Statement or (ii) the Joint Proxy Statement,
will, in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or in the case of the Joint Proxy Statement, at the time of the
first mailing of the Joint Proxy Statement or the time of the Stockholder
Meetings, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply (with respect to VoiceStream)
as to form in all material respects with the requirements of the Securities Act,
and the Joint Proxy Statement will comply (with respect to VoiceStream) as to
form in all material respects with the requirements of the Exchange Act.
VoiceStream makes no representation or warranty with respect to any information
supplied by Powertel or any other Person who is not an Affiliate of VoiceStream
which is contained in the Registration Statement or the Joint Proxy Statement.
SECTION 3.09 Permits; Compliance with Laws. (a) Each of VoiceStream and
the VoiceStream Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, charters, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity
necessary for VoiceStream or any of the VoiceStream Subsidiaries to own, lease
and operate its properties or to carry on its business as it is now being
conducted (the "VOICESTREAM PERMITS"), except where the failure to have any of
the VoiceStream Permits could not, individually or in the aggregate, have a
Material Adverse Effect on VoiceStream and, as of the date of this Agreement, no
suspension or cancellation of any of the VoiceStream Permits is pending or, to
the knowledge of VoiceStream, threatened, except where the suspension or
cancellation of any of the VoiceStream Permits could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on
VoiceStream. The business of VoiceStream
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and the VoiceStream Subsidiaries is not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for possible
violations that could not reasonably be expected to have a Material Adverse
Effect on VoiceStream or prevent or materially delay the consummation of the
Reorganization.
(b) Except as set forth in ITEM 3.09 of the VoiceStream Letter:
(i) VoiceStream and each of the VoiceStream Subsidiaries holds, and is
qualified and eligible to hold, all material licenses, permits and other
authorizations issued or to be issued by the FCC to such entity for the
operation of their respective businesses, all of which are set forth in
ITEM 3.09 of the VoiceStream Letter (the "VOICESTREAM FCC LICENSES").
(ii) The VoiceStream FCC Licenses are valid and in full force and
effect, and neither VoiceStream nor any of the VoiceStream Subsidiaries is
or has been delinquent in payment on or in default under any installment
obligation owed to the United States Treasury in connection with the
VoiceStream FCC Licenses. As used herein, the term "full force and effect"
means that (A) the orders issuing the VoiceStream FCC Licenses have become
effective, (B) no stay of effectiveness of such orders has been issued by
the FCC, and (C) the VoiceStream FCC Licenses have not been invalidated by
any subsequent published FCC action.
(iii) All material reports and applications required by the
Communications Act or required to be filed with the FCC by VoiceStream or
any of the VoiceStream Subsidiaries have been filed and are accurate and
complete in all material respects.
(iv) VoiceStream and the VoiceStream Subsidiaries are, and have been,
in compliance in all material respects with, and the wireless
communications systems operated pursuant to the VoiceStream FCC Licenses
are and have been operated in compliance in all material respects with, the
Communications Act.
(v) There is not pending or, to VoiceStream's knowledge, threatened,
as of the date hereof any application, petition, objection, pleading or
proceeding with the FCC or any public service commission or similar body
having jurisdiction or authority over the communications operations of
VoiceStream or any of the VoiceStream Subsidiaries which is reasonably
likely to result in the revocation, cancellation, suspension, dismissal,
denial or any materially adverse modification of any VoiceStream FCC
License or imposition of any substantial fine or forfeiture against
VoiceStream or any of the VoiceStream Subsidiaries.
(vi) No facts are known to VoiceStream or the VoiceStream Subsidiaries
which if known by a Governmental Entity of competent jurisdiction would
present a substantial risk that any VoiceStream FCC License could be
revoked, cancelled, suspended or materially adversely modified or that any
substantial fine or forfeiture could be imposed against VoiceStream or any
of the VoiceStream Subsidiaries.
(vii) VoiceStream and the VoiceStream Subsidiaries have not made any
material misstatements of fact, or omitted to disclose any fact, to any
Government Entity or in any report, document or certificate filed
therewith, which misstatements or omissions, individually or in the
aggregate, could reasonably be expected to subject any material VoiceStream
FCC Licenses to revocation or failure to renew, except to the extent that
such revocation or failure to renew would not have a Material Adverse
Effect on VoiceStream or the transactions contemplated by this Agreement.
SECTION 3.10 Tax Matters. Except as set forth in ITEM 3.10 of the
VoiceStream Letter or as would not have a Material Adverse Effect on
VoiceStream, (i) VoiceStream and each of the VoiceStream Subsidiaries have
timely filed (after taking into account any extensions to file) all Tax Returns
required to be filed by them either on a separate or combined or consolidated
basis; (ii) all such Tax Returns are correct in all respects and accurately
disclose in all respects all Taxes required to be paid for the periods covered
thereby; (iii) VoiceStream and the VoiceStream Subsidiaries have paid or caused
to be paid all Taxes shown as due on such Tax Returns and all Taxes for which no
Tax Return was required to be filed,
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and the financial statements contained in the VoiceStream SEC Documents reflect
an adequate reserve as determined in accordance with generally acceptable
accounting principles for all material Taxes payable by VoiceStream and the
VoiceStream Subsidiaries and not yet due (other than a reserve for deferred
Taxes established to reflect timing differences between book and Tax treatment)
for all taxable periods and portions thereof accrued through the date of such
financial statements; (iv) neither VoiceStream nor any VoiceStream Subsidiary
has waived in writing any statute of limitations in respect of Taxes; (v) there
is no action, suit, investigation, audit, claim or assessment that has been
formally commenced or proposed to VoiceStream in writing with respect to Taxes
of VoiceStream or any of the VoiceStream Subsidiaries; (vi) there are no Liens
for Taxes upon the assets of VoiceStream or any VoiceStream Subsidiary except
for Liens relating to current Taxes not yet due; (vii) all Taxes which
VoiceStream or any VoiceStream Subsidiary is required by law to withhold or to
collect for payment have been duly withheld and collected, and have been paid or
accrued on the books of VoiceStream or such VoiceStream Subsidiary; (viii) none
of VoiceStream or any VoiceStream Subsidiary has been a member of any group of
corporations filing Tax Returns on a consolidated, combined, unitary or similar
basis other than each such group of which it is currently a member; (ix) no
deduction of any amount that would otherwise be deductible by VoiceStream or any
of the VoiceStream Subsidiaries with respect to taxable periods ending on or
before the Effective Time could be disallowed under Section 162(m) of the Code;
and (x) neither VoiceStream nor any of the VoiceStream Subsidiaries is a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
SECTION 3.11 Liabilities. Except as set forth in the VoiceStream Filed
SEC Documents and as permitted by this Agreement, VoiceStream and the
VoiceStream Subsidiaries, taken as a whole, do not have any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by generally accepted accounting principles to be set forth on a
consolidated balance sheet of VoiceStream and the VoiceStream Subsidiaries or in
the notes thereto, other than (i) liabilities and obligations incurred in the
ordinary course of business since December 31, 1999 and (ii) liabilities arising
after December 31, 1999 which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on VoiceStream.
SECTION 3.12 Litigation. Except as disclosed in ITEM 3.12 of the
VoiceStream Letter or in the VoiceStream Filed SEC Documents, as of the date of
this Agreement, there is no suit, action, proceeding or investigation pending
or, to VoiceStream's knowledge, threatened, against VoiceStream or any of the
VoiceStream Subsidiaries before any Governmental Entity that, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect on
VoiceStream or prevent or materially delay the consummation of the
Reorganization. Except as disclosed in ITEM 3.12 of the VoiceStream Letter or in
the VoiceStream Filed SEC Documents, neither VoiceStream nor any of the
VoiceStream Subsidiaries is subject to any outstanding judgment, order, writ,
injunction or decree that could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on VoiceStream.
SECTION 3.13 State Takeover Statutes. To the knowledge of VoiceStream, no
state antitakeover statute or similar statute or regulation applicable to
VoiceStream is applicable to this Agreement or the transactions contemplated
hereby. To the knowledge of VoiceStream, no other "control share acquisition,"
"fair price," "moratorium" or other antitakeover laws or regulations enacted
under Washington or Delaware state laws applicable to VoiceStream apply to this
Agreement or any of the transactions related thereto.
SECTION 3.14 Brokers. No broker, investment banker, financial advisor or
other person, other than Goldman, Sachs & Co., the fees and expenses of which
will be paid by VoiceStream and are reflected in an agreement between Goldman,
Sachs & Co. and VoiceStream, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
VoiceStream.
SECTION 3.15 Tax Status. To the knowledge of VoiceStream after due
investigation, neither VoiceStream nor any of its Affiliates has taken any
action or failed to take any action which action or failure would jeopardize the
qualification of the Merger as a reorganization within the meaning of
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Section 368(a) of the Code. To the knowledge of VoiceStream after due
investigation, there are no facts or circumstances relating to VoiceStream or
its Affiliates, including any covenants or undertakings of VoiceStream pursuant
to this Agreement, that would prevent Jones, Day, Reavis & Pogue and/or Preston,
Gates & Ellis LLP from delivering the opinion referred to in SECTION 6.03(b) as
of the date hereof.
SECTION 3.16 Interim Operations and Performance of Sub. Sub is a
newly-formed single purpose corporation which has been formed solely for the
purpose of engaging in the transactions contemplated hereby, shall engage in no
other business or activities and shall have conducted its operations only as
contemplated hereby. VoiceStream shall have caused Sub to take all action
required pursuant to this Agreement prior to the Effective Time, including the
approval and adoption of this Agreement.
SECTION 3.17 Vote Required. The Merger requires the approval by
VoiceStream as the stockholder of Sub. The only vote required by the
stockholders of VoiceStream to approve this Agreement and the transactions
contemplated hereby is the VoiceStream Stockholder Approval.
SECTION 3.18 Transactions with Affiliates. Except as described in ITEM
3.18 of the VoiceStream Letter or the VoiceStream Filed SEC Documents, to
VoiceStream's knowledge, no director or executive officer of VoiceStream or any
5% or greater stockholder of VoiceStream is at the date hereof a party to any
transaction with VoiceStream or any of the VoiceStream Subsidiaries in which the
amount involved exceeds $60,000, including any contract or arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property (including intellectual property) to or from, or otherwise
requiring payments to or from VoiceStream or any of the VoiceStream
Subsidiaries.
SECTION 3.19 Opinion of Goldman, Sachs & Co. The Board of Directors of
VoiceStream has received the oral opinion of Goldman, Sachs & Co. on the date
hereof, to the effect that, as of the date hereof, the Conversion Number
pursuant to this Agreement is fair to VoiceStream from a financial point of
view.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01 Conduct of Business by Powertel Pending the
Reorganization. During the period from the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Powertel
shall, and shall cause each of the Powertel Subsidiaries to, in all material
respects, except as contemplated by this Agreement or the Powertel Merger
Agreement or as disclosed in the Powertel Letter (including disclosures
regarding the DiGiPH Transaction) or unless VoiceStream shall otherwise agree in
writing in advance of the specific action taken, carry on its business in the
ordinary course. Without limiting the generality of the foregoing, and except as
otherwise contemplated by this Agreement or the Powertel Merger Agreement or as
disclosed in the Powertel Letter, during such period, Powertel shall not, and
shall not permit any of the Powertel Subsidiaries to, without the prior written
consent of VoiceStream:
(a) except for regularly scheduled dividends payable on the Series E
Preferred Shares and Series F Preferred Shares in Powertel Common Stock and
except for the Powertel Permitted Stock Dividend, (i) declare, set aside or
pay any dividends on, or make any other distributions in respect of, or
redeem or repurchase, any of its capital stock or other equity interest,
except for dividends by a Powertel Subsidiary to its parent, and except
that Powertel shall be permitted to acquire shares of Powertel Common
Stock, from time to time, to the extent required by (A) Section 5.4 of the
Restated Certificate of Incorporation of Powertel and (B) any Powertel
Stock Option Plan in connection with the exercise of options and other
rights granted thereunder; or (ii) split, combine or reclassify any of its
capital stock or other equity interest or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock or other equity interest, any other voting securities or
any securities convertible into, or any rights, warrants or
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options to acquire, any such shares, voting securities or convertible
securities, except for (i) issuances of Powertel Common Stock or Powertel
Common Stock Equivalents as set forth in ITEM 4.01(b) of the Powertel
Letter, (ii) deliveries of shares of its capital stock pursuant to
contractual obligations existing prior to the execution of this Agreement
and which are otherwise disclosed in this Agreement or the Powertel Letter
(including pursuant to antidilution or similar adjustments required by such
contractual obligations due to the Powertel Permitted Stock Dividend), or
(iii) the Powertel Permitted Stock Dividend;
(c) amend the Restated Certificate of Incorporation of Powertel or
Restated By-laws of Powertel or other similar organizational documents;
(d) adopt, amend or propose to amend any stockholder rights plan or
related rights plan;
(e) acquire, or agree to acquire, in a single transaction or in a
series of related transactions, any business, corporation or partnership,
or substantially all of the assets of any of the foregoing, other than (i)
transactions which involve individually or in the aggregate a purchase
price not in excess of $500,000, (ii) capital expenditures described in
SECTION 4.01(f) below and (iii) transactions in connection with the DiGiPH
Transaction;
(f) make or agree to make any new capital expenditure other than
capital expenditures (i) in fiscal year 2000 that are contemplated by
Powertel's capital budget for fiscal year 2000, provided the aggregate
amount of such capital expenditures is less than $177 million, or (ii) in
fiscal year 2001 that are contemplated by Powertel's business plan for
fiscal year 2001, as approved by the Board of Directors of Powertel,
provided the aggregate amount of such capital expenditures is less than
$181.5 million;
(g) sell, lease, license, encumber or otherwise dispose of, or agree
to sell, lease, license, encumber or otherwise dispose of, any of its
assets, other than as set forth in ITEM 4.01(g) of the Powertel Letter or
in connection with transactions that are in the ordinary course of business
and which involve assets having a current value not in excess of $500,000
individually or in the aggregate (for avoidance of doubt, the sale, lease,
license, encumbrance or other disposition of any of the Powertel FCC
Licenses or other material assets shall not be in the ordinary course of
business);
(h) increase the salary, wages, stipends, bonuses or reimbursable
allowances payable or to become payable to its directors or officers,
except for increases for officers in the ordinary course of business
consistent with past practices; or enter into any employment or severance
agreement with, or establish, adopt, enter into or amend, or make any
grants or awards under, any Powertel Benefit Plan for the benefit of, any
director, officer or employee, except, in each case in the ordinary course
of business consistent with past practices or adopt or amend any Powertel
Benefit Plan except those specifically set forth in ANNEX 5.18 or take any
action inconsistent with the provisions set forth in ANNEX 5.18; provided,
that the aggregate increase in such compensation shall not exceed 5% of the
previous year's amount (including those with respect to the timing and
amount of, and persons entitled to, grants and awards), as may be required
by the terms of any such Powertel Benefit Plan, or to comply with
applicable law or as permitted by SECTION 4.01(b); provided, further, that
nothing in this SECTION 4.01(h) shall restrict the ability of Powertel's
Board of Directors to take the action contemplated by and to comply with
the terms of the severance, retention and other plans and arrangements as
set forth in ANNEX 5.18 and to adopt appropriate resolutions with respect
to persons who are officers or directors (including persons who are
directors by deputization) of Powertel to cause the transactions relating
to the Reorganization that may be considered dispositions under Section 16
of the Exchange Act for such persons to be exempt from such Section;
(i) except as may be required as a result of a change in law or in
generally accepted accounting principles, make any change in its method of
accounting or its fiscal year;
(j) except in connection with the transactions contemplated hereby,
enter into, modify in any material respect, amend in any material respect
or terminate any material contract or agreement to which Powertel or any of
the Powertel Subsidiaries is a party, or waive, release or assign any
material
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rights or claims, except to the extent that such contract agreement,
modification or amendment would not reasonably be expected to have a
Material Adverse Effect on Powertel;
(k) amend any term of any of its outstanding securities in any
material respect;
(l) adopt a plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other material reorganization, except for the Powertel Permitted Stock
Dividend;
(m) incur, assume or guarantee any material Indebtedness, including
any refinancing of existing Indebtedness, for borrowed money unless such
Indebtedness is prepayable at the election of Powertel on or after the
Closing Date and the aggregate prepayment penalty and all other fees
associated with such Indebtedness do not exceed $1,000,000;
(n) create, incur, assume or suffer to exist any material Lien upon
any of its property or assets, whether now owned or hereafter acquired,
other than Liens incurred in the ordinary course of business or to secure
Indebtedness, Liens arising by operation of law and not yet due and payable
or other obligations permitted by this Agreement (including refinancing of
existing Indebtedness);
(o) create, incur, assume or suffer to exist any obligation whereby
Powertel or the Powertel Subsidiaries guarantees any Indebtedness, leases,
dividends or other obligations of any third party;
(p) make any loan or capital contributions to or investment in any
Person, other than in the ordinary course of business or as set forth in
ITEM 4.01(p) of the Powertel Letter, as required in connection with the
DiGiPH Transaction and loans or capital contributions to or investments in
wholly owned Powertel Subsidiaries;
(q) enter into any agreement or arrangement that materially limits or
otherwise materially restricts Powertel or any of the Powertel Subsidiaries
or any successor thereto or that could, after the Effective Time,
reasonably be expected to materially limit or restrict VoiceStream, any of
the VoiceStream Subsidiaries or the Surviving Corporation from engaging in
the business of providing wireless communications services or developing
wireless communications technology anywhere in the world or otherwise from
engaging in any other business;
(r) initiate, settle, or appeal or propose to settle, initiate or
appeal any material litigation, investigation, arbitration, proceeding or
other claim;
(s) make any material tax election or enter into any settlement or
compromise of any material tax liability;
(t) take any action, other than as expressly permitted by this
Agreement, that could reasonably be expected to make any representation or
warranty of Powertel hereunder inaccurate and have a Material Adverse
Effect on Powertel at the Effective Time;
(u) adopt, amend or propose to amend any Powertel Benefit Plan or make
any discretionary contributions to any ERISA Benefit Plan other than as may
be required by law or as may be required to maintain compliance with
provisions of the Code; provided, however, Powertel (1) may make an annual
3% of compensation profit sharing contribution and (2) may make matching
contributions of 50% of the first 2% of compensation contributed by
participants, to Powertel's profit sharing Code sec. 401(k) plan (similar
to past practices);
(v) enter into (i) leveraged derivative contracts (defined as
contracts that use a factor to multiply the underlying index exposure) or
(ii) other derivative contracts except for the purpose of hedging known
interest rate and foreign exchange exposures or otherwise reducing
Powertel's cost of financing; provided, however, that employee stock
ownership plans and other pension and deferred compensation plans of
Powertel may enter into derivative contracts as part of their ordinary
course investment strategy;
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(w) file any amended Tax Returns if the result of such amendment would
result in a material increase of Powertel's tax liability;
(x) take any action which would reasonably be expected to materially
adversely affect or materially delay the ability of any of the parties to
obtain any Powertel Required Regulatory Approval or consummate the
transactions contemplated hereby;
(y) take any action that would be reasonably likely to prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code;
(z) other than pursuant to this Agreement, take any action to cause
the Powertel Common Stock to cease to be quoted on Nasdaq;
(aa) notwithstanding anything in this Agreement to the contrary,
during the period of time beginning on the fifth Business Day prior to the
Effective Time and extending until and including the Effective Time, other
than with respect to the Powertel Permitted Stock Dividend, Powertel shall
not take or omit to take any action that could increase the number of
shares of Powertel Stock outstanding on a fully diluted basis; or
(bb) enter into any contract, agreement, commitment or arrangement to
do any of the foregoing.
SECTION 4.02 Conduct of Business by VoiceStream Pending the
Reorganization. During the period from the date of this Agreement until the
Effective Time, VoiceStream shall not, and shall not permit any of the
VoiceStream Subsidiaries to, without the prior written consent of Powertel:
(a) amend the Certificate of Incorporation or the By-laws or the
equivalent organizational documents of VoiceStream or of any VoiceStream
Subsidiary in any manner that would be adverse to Powertel or its
stockholders;
(b) effect any reclassification, recapitalization or restructuring or
other similar transaction that results in the direct or indirect receipt by
holders of VoiceStream Common Stock of any assets, property or cash in
respect of such VoiceStream Common Stock, except for the VoiceStream
Permitted Stock Dividend;
(c) take any action that would or could reasonably be expected to
prevent, impair or materially delay the ability of VoiceStream to
consummate the transactions contemplated by this Agreement;
(d) fail to make in a timely manner any filings with the SEC required
under the Securities Act or the Exchange Act or the Regulations promulgated
thereunder, provided that this provision shall not apply to any filings
with the SEC required to be made by any VoiceStream Subsidiary;
(e) change (i) its methods of accounting or accounting practices in
any material respect except as required by concurrent changes in generally
accepted accounting principles or by law or (ii) its fiscal year;
(f) enter into or acquire any new line of business that (i) is
material to VoiceStream and (ii) is not strategically related to the
current business or operations of VoiceStream;
(g) take any action that would reasonably be expected to have a
Material Adverse Effect or materially delay the ability of any of the
parties to obtain any VoiceStream Required Regulatory Approval; or
(h) enter into any contract, agreement, commitment or arrangement to
do any of the foregoing.
SECTION 4.03 No Solicitation.
(a) From and after the date hereof until the earlier of the Effective Time
or the termination of the Agreement, Powertel shall not, nor shall it permit any
of the Powertel Subsidiaries to, nor shall they authorize or permit any of their
respective officers, directors or employees to, and shall use their best efforts
to cause any investment banker, financial advisor, attorney, accountants or
other representatives retained by them or any of their respective Subsidiaries
not to, directly or indirectly through another
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Person, (i) solicit, initiate or encourage (including by way of furnishing
information), or knowingly take any other action designed to facilitate, any
Alternative Transaction (as defined below), or (ii) continue or participate in
any discussions or negotiations regarding any Alternative Transaction; provided,
however, that if, at any time prior to the time that the Powertel Stockholders
Approval is obtained, the Board of Directors of Powertel receives an unsolicited
bona fide proposal and determines in good faith and after the receipt of advice
from outside counsel that providing information to the Third Party, making such
proposal or participating in negotiations or discussions with the Third Party is
reasonably likely to result in a Superior Proposal and if Powertel has fully and
completely complied with all its obligations under this SECTION 4.03, Powertel
may, subject to giving VoiceStream three (3) Business Days' advance written
notice of its intention to do so and obtaining a confidentiality agreement from
the Third Party substantially similar to the Confidentiality Agreement between
Powertel and VoiceStream dated as of March 9, 2000 (the "CONFIDENTIALITY
AGREEMENT"), (x) furnish information with respect to Powertel and the Powertel
Subsidiaries, and (y) engage in discussions and negotiations regarding such
proposal.
(b) Powertel will notify VoiceStream promptly (but in no event later than
24 hours) after receipt by Powertel (or any of its advisors) of any Alternative
Transaction, or of any request (other than in the ordinary course of business
and not related to an Alternative Transaction) for non-public information
relating to Powertel or any of the Powertel Subsidiaries or for access to the
properties, books or records of Powertel or any of the Powertel Subsidiaries by
any Person who is known to be considering making, or has made, an Alternative
Transaction. Powertel shall provide such notice orally and in writing and shall
identify the Person making, and the terms and conditions of, any such
Alternative Transaction or request. Powertel shall keep VoiceStream fully
informed, on a prompt basis (but in any event no later than 24 hours), of the
status and details of any such Alternative Transaction or request. Powertel
shall, and shall cause the Powertel Subsidiaries and the directors, employees
and other agents of Powertel and the Powertel Subsidiaries to, cease immediately
and cause to be terminated all activities, discussions or negotiations, if any,
with any Persons conducted prior to the date hereof with respect to any
Alternative Transaction.
(c) Powertel (i) agrees not to release any Third Party from, or waive any
provision of, or fail to enforce, any standstill agreement or similar agreement
to which it is a party related to, or which could affect, an Alternative
Transaction and agrees that VoiceStream shall be entitled to enforce Powertel's
rights and remedies under and in connection with such agreements, and (ii)
acknowledges that the provisions of clause (i) are an important and integral
part of this Agreement. Nothing contained in this SECTION 4.03 or in SECTION
5.03 shall prohibit Powertel (x) from taking and disclosing to its stockholders
a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the
Exchange Act, or (y) from making any disclosure to its stockholders if, in the
good faith judgment of the Board of Directors of Powertel, after receipt of
advice from outside counsel, failure to disclose would result in a reasonable
likelihood that the Board of Directors of Powertel would breach its duties to
Powertel's stockholders under Delaware law.
(d) For purposes of this Agreement, "ALTERNATIVE TRANSACTION" means a
proposal or intended proposal, regarding any of (i) a transaction or series of
transactions pursuant to which any Person or "group" of Persons, other than
VoiceStream and its Subsidiaries (a "THIRD PARTY"), acquires or would acquire,
directly or indirectly, "beneficial ownership" (as such terms are defined in or
interpreted for purposes of Rule 13d-3 under the Exchange Act) of outstanding
shares representing more than twenty percent (20%) of the voting power of the
outstanding capital stock of Powertel or pursuant to a tender offer or exchange
offer or otherwise, (ii) any acquisition or proposed acquisition of, or business
combination with Powertel or any of the Powertel Subsidiaries, as applicable, by
a merger or other business combination (including any so-called
"merger-of-equals" and whether or not Powertel or any of the Powertel
Subsidiaries, as the case may be, is the entity surviving any such merger or
business combination), or (iii) any other transaction pursuant to which any
Third Party acquires or would acquire, directly or indirectly, control of assets
(including for this purpose the outstanding equity securities of the Powertel
Subsidiaries and any entity surviving the merger or business combination
including any of them) of Powertel or any of the Powertel Subsidiaries, as the
case may be, for consideration equal to
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twenty percent (20%) or more of the fair market value of all of the outstanding
shares of the Powertel capital stock on the date of this Agreement; provided,
that for purposes of this Agreement the term "Alternative Transaction" does not
include the Powertel Merger or the Powertel Merger Agreement.
SECTION 4.04 Disclosure of Certain Matters; Delivery of Certain
Filings. Powertel shall promptly advise VoiceStream orally and in writing if
there occurs, to the knowledge of Powertel, any change or event which results in
the executive officers of Powertel having a good faith belief that such change
or event has resulted in or is reasonably likely to result in a Material Adverse
Effect on Powertel or that could reasonably be expected to prevent or materially
delay consummation of the Reorganization. VoiceStream shall promptly advise
Powertel orally and in writing if there occurs, to the knowledge of VoiceStream,
any change or event which results in the executive officers of VoiceStream
having a good faith belief that such change or event has resulted in or is
reasonably likely to result in a Material Adverse Effect on VoiceStream or that
could reasonably be expected to prevent or materially delay consummation of the
Reorganization. VoiceStream shall promptly provide to Powertel a copy of any
written notice given by VoiceStream to DT or received by VoiceStream from DT of
termination of the DT Merger Agreement. Powertel shall promptly provide to
VoiceStream, and VoiceStream shall promptly provide to Powertel, copies of all
filings made by Powertel or VoiceStream, as the case may be, with any
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby and all notices and other communications and correspondence
from any Governmental Entity that relate to the Reorganization.
SECTION 4.05 Tax Status. During the period from the date of this
Agreement through the Effective Time, each of VoiceStream, Powertel and their
respective Affiliates shall use its reasonable best efforts (i) to cause the
Merger to qualify as a reorganization within the meaning of Section 368(a) of
the Code and (ii) to obtain the opinions of counsel referred to in SECTION
6.02(b) and SECTION 6.03(b), including the execution of the tax certificates
referenced therein.
SECTION 4.06 Control of Operations. Nothing contained in this Agreement
shall give VoiceStream, directly or indirectly, the right to "control" or
"direct," as such terms are construed under applicable rules or regulations of
the FCC, Powertel's operations prior to the Effective Time. Prior to the
Effective Time, Powertel shall exercise, consistent with the terms and
conditions of this Agreement, "control" over its respective operations.
SECTION 4.07 Powertel Merger Agreement. Powertel will not modify, amend
or waive in any material respect the provisions of the Powertel Merger Agreement
without VoiceStream's prior written consent, except for the amendments to the
Powertel Merger Agreement on September 28, 2000 and as of February 8, 2001.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Employee Benefits.
(a) As of the Effective Time, Powertel will have terminated all Powertel
Benefit Plans except for those Powertel Benefit Plans that VoiceStream requests
not be terminated and those Powertel Benefit Plans described in ANNEX 5.18.
VoiceStream shall take all necessary action so that after the Effective Time,
any current or former employee of Powertel who is eligible to participate in a
Powertel Benefit Plan as of the Effective Time shall either be eligible to
continue his or her participation in such Powertel Benefit Plan or participate
in a corresponding employee benefit plan maintained by VoiceStream or any of its
Subsidiaries, subject to the terms of such corresponding plan. VoiceStream shall
have the sole discretion to determine which current or former employees of
Powertel will continue participation in a Powertel Benefit Plan after the
Effective Time and which will commence participation in a corresponding employee
benefit plan maintained by VoiceStream or any of its Subsidiaries after the
Effective Time and, with respect to current or former employees who transfer
participation to such a corresponding plan, when such transfer will occur.
VoiceStream need not treat all current and former employees of Powertel
(including those who are similarly situated) in the same manner with respect to
which plans they
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participate in and when, if at all, they transfer participation from a Powertel
Benefit Plan to a corresponding employee benefit plan maintained by VoiceStream
or any of its Subsidiaries. For example, VoiceStream may decide to have a
current or former employee of Powertel continue participation after the
Effective Time in certain Powertel Benefit Plans that have not been terminated,
and with respect to other benefits transition his participation on or shortly
after the Effective Time to a corresponding employee benefit plan maintained by
VoiceStream or one of its Subsidiaries. VoiceStream may take such actions (or
cause its Subsidiaries or the Surviving Corporation to take such actions) as are
necessary or advisable to accomplish the foregoing, including, without
limitation, amending the eligibility provisions of plans of VoiceStream, any of
its Subsidiaries or the Surviving Corporation (including, without limitation,
Powertel Benefit Plans that are not terminated on or before the Effective Time).
(b) Except as otherwise provided in this SECTION 5.01, nothing in this
Agreement shall be interpreted as limiting the power of the Surviving
Corporation to amend or terminate any particular Powertel Benefit Plan or any
other particular employee benefit plan, program, agreement or policy or as
requiring the Surviving Corporation to offer to continue (other than as required
by its terms) any written employment contract or to continue the employment of
any specific person; provided, however, (1) that no such termination or
amendment may take away benefits or any other payments already accrued as of the
time of such termination or amendment without the consent of such person, except
as allowed by law, and (2) that nothing in this SECTION 5.01 shall be
interpreted as limiting or modifying any requirement in SECTION 5.18 or
provisions of ANNEX 5.18.
(c) VoiceStream shall, or shall cause the Surviving Corporation to, (A)
waive all limitations, to the extent allowable under applicable law, as to
preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the current and former
employees of Powertel and its Subsidiaries under any welfare or fringe benefit
plan in which such employees and former employees may be eligible to participate
after the Effective Time (other than a Powertel Benefit Plan that is not
terminated on or before the Effective Time), other than limitations or waiting
periods that are in effect with respect to such employees and that have not been
satisfied under the corresponding welfare or fringe benefit plan maintained by
Powertel for such current and former employees prior to the Effective Time, (B)
provide each current and former employee with credit under any welfare plans in
which such employee or former employee becomes eligible to participate after the
Effective Time for any co-payments and deductibles paid by such current or
former employee for the then current plan year under the corresponding welfare
plans maintained by Powertel prior to the Effective Time, and (C) provide (to
the extent allowed by law and Treasury regulations applicable to tax-qualified
plans) each current and former employee with full credit for purposes of
eligibility, vesting, and determination of the level of benefits under any
employee benefit plans, policies, practices or arrangements maintained by
VoiceStream or any VoiceStream Subsidiary for such current or former employee's
service with Powertel or any Powertel Subsidiary to the same extent recognized
by Powertel immediately prior to the Effective Time.
(d) Except as expressly contemplated under SECTION 5.02 of this Agreement
and except in connection with the Powertel Preferred Stock Dividend, neither
Powertel nor any affiliate thereof shall, from the date hereof until the
Effective Time, without the prior express written consent of VoiceStream, make
any contribution, sale or other transfer of Powertel Stock or any other
"employer security" (as such term is defined in Section 407 of ERISA), whether
to satisfy a required obligation, to reimburse for expenses incurred, or
otherwise, to any Powertel Benefit Plan or to the Powertel stock fund (or any
other fund) under the Powertel 401(k) Profit Sharing Plan. Moreover, Powertel
shall, promptly after the date hereof, amend the Powertel 401(k) Profit Sharing
Plan (as amended and restated effective as of January 1, 1998, and further
amended August 23, 1999), (a) to require that all contributions, from whatever
source, be made in the form of cash and (b) to preclude the use of any present
or future Powertel 401(k) Profit Sharing Plan assets to purchase from Powertel
or any affiliate thereof shares of Powertel Stock or other "employer securities"
(as such term is defined in Section 407 of ERISA); it being understood, however,
that such amendment need not preclude the Powertel 401(k) Profit Sharing Plan
from purchasing Powertel Stock on the open market from any person or entity
other than Powertel or an affiliate thereof,
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nor require that shares of Powertel Stock and units in the Powertel stock fund
presently under the Powertel 401(k) Profit Sharing Plan be sold or otherwise
liquidated.
SECTION 5.02 Options; Restricted Stock Awards.
(a) Prior to the Effective Time, the Board of Directors of Powertel (or the
Stock Option Compensation Committee of the Board of Directors) shall adopt such
resolutions or shall take such other actions as may be required, with respect to
Powertel Stock Options and the Powertel Restricted Stock Plan, to specifically
approve the transactions contemplated by this SECTION 5.02.
(b) At the Effective Time, each Powertel Stock Option which is outstanding
immediately prior to the Effective Time pursuant to any Powertel Stock Plan
shall become and represent an option to purchase the number of shares of
VoiceStream Common Stock (a "SUBSTITUTE OPTION") determined by multiplying the
number of shares of Powertel Common Stock subject to such Powertel Stock Option
immediately prior to the Effective Time by the Conversion Number, at an exercise
price per share of VoiceStream Common Stock (increased to the nearest whole
cent) equal to the exercise price per share of Powertel Common Stock subject to
such Powertel Stock Option immediately prior to the Effective Time divided by
the Conversion Number; provided, however, that in the case of any Powertel Stock
Option to which Section 421 of the Code applies by reason of its qualification
under Section 422 of the Code ("INCENTIVE STOCK OPTIONS"), the option price, the
number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order to comply
with Section 424(a) of the Code. The parties intend that the assumption of
incentive stock options provided for under this SECTION 5.02 shall meet the
requirements of Section 424(a) of the Code, and this SECTION 5.02 shall be
interpreted in a manner consistent with such intent. All other terms and
conditions applicable to the Powertel Stock Options, including vesting, shall
remain unchanged with respect to the Substitute Options (except to the extent
that such terms and conditions may be altered in accordance with the applicable
Powertel Stock Option Plan or stock option agreements related thereto). No
fractional shares of VoiceStream Common Stock will be issued upon the exercise
of Substitute Options. In lieu of such issuance, the shares of VoiceStream
Common Stock issued pursuant to the terms of this Agreement shall be rounded to
the closest whole share of VoiceStream Common Stock. After the Effective Time,
except as otherwise provided in this SECTION 5.02, each Substitute Option shall
be exercisable upon the same terms and conditions as were applicable to the
related Powertel Stock Option immediately prior to the Effective Time, after
giving effect to the resolutions and other actions described in this SECTION
5.02. Not later than the Effective Time, VoiceStream shall file a registration
statement on Form S-8 with respect to or otherwise include in an existing
registration statement the shares of VoiceStream Common Stock to be issued upon
exercise of the Substitute Options and shall use its reasonable best efforts to
maintain the effectiveness of such registration statement for so long as the
Substitute Options shall remain outstanding.
(c) At the Effective Time, the Powertel Restricted Stock Plan shall
terminate and any unvested Powertel Restricted Stock Awards shall become fully
vested, except as otherwise provided in the applicable agreements relating to
such Powertel Restricted Stock Awards.
SECTION 5.03 Stockholders Meetings.
(a) As promptly as practicable after the Registration Statement is declared
effective under the Securities Act, Powertel shall duly give notice of, convene
and hold a meeting of its stockholders (the "POWERTEL STOCKHOLDERS MEETING") in
accordance with Delaware law for the purpose of obtaining the Powertel
Stockholder Approval and shall, subject to the provisions of SECTION 5.03(d)
hereof, through its Board of Directors, recommend to its stockholders the
approval and adoption of this Agreement, the Merger and the other transactions
contemplated hereby and shall use its reasonable best efforts to obtain the
Powertel Stockholder Approval.
(b) As promptly as practicable after the Registration Statement is declared
effective under the Securities Act, VoiceStream shall duly give notice of,
convene and hold a meeting of its stockholders (the "VOICESTREAM STOCKHOLDERS
MEETING") in accordance with the DGCL for the purpose obtaining the VoiceStream
Stockholder Approval and shall, through its Board of Directors, recommend to its
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stockholders the approval and adoption of this Agreement and shall use its
reasonable best efforts to obtain the VoiceStream Stockholder Approval.
(c) Powertel and VoiceStream shall coordinate and cooperate with respect to
the timing of the Stockholder Meetings and shall use their reasonable best
efforts to hold such meetings on the same day.
(d) Neither the Board of Directors of Powertel nor any committee thereof
shall (i) except as expressly permitted by this SECTION 5.03(d), withdraw,
qualify or modify, or propose publicly to withdraw, qualify or modify, in a
manner adverse to VoiceStream, the approval or recommendation of such Board of
Directors or such committee of this Agreement, the Merger and the other
transactions contemplated hereby, (ii) approve or recommend, or propose publicly
to approve or recommend, any Alternative Transaction, or (iii) cause Powertel to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement related to any Alternative Transaction.
Notwithstanding the foregoing, in the event that prior to the time the Powertel
Stockholder Approval is obtained, Powertel receives a Superior Proposal (as
defined below), the Board of Directors of Powertel may (subject to this and the
following sentences) inform the Powertel stockholders that it no longer
recommends adoption and approval of this Agreement by the Powertel's
stockholders (a "SUBSEQUENT DETERMINATION"), but only at a time that is after
the fifth Business Day following VoiceStream's receipt of written notice
advising VoiceStream that the Board of Directors of Powertel has received a
Superior Proposal specifying the material terms and conditions of such Superior
Proposal (and including a copy or draft copy thereof with all accompanying
documentation or draft documentation, if in writing), identifying the Person
making such Superior Proposal and stating that it intends to make a Subsequent
Determination. After providing such notice, Powertel shall provide a reasonable
opportunity to VoiceStream to make such adjustments in the terms and conditions
of this Agreement as would enable Powertel to proceed with its recommendation to
its stockholders without a Subsequent Determination; provided, however, that any
such adjustment shall be at the discretion of Powertel and VoiceStream at the
time. For purposes of this Agreement, a "SUPERIOR PROPOSAL" means any proposal
(on its most recently amended or modified terms, if amended or modified) made by
a Third Party to enter into an Alternative Transaction which the Board of
Directors of Powertel determines in its good faith judgment (based on, among
other things, the advice of a financial advisor of nationally recognized
reputation) to be more favorable to the Powertel's stockholders than the
transactions contemplated by this Agreement taking into account all relevant
factors (including whether, in the good faith judgment of the Board of Directors
of Powertel, after obtaining the advice of a financial advisor of nationally
recognized reputation, the Third Party is reasonably able to finance the
transaction, and any proposed changes to this Agreement that may be proposed by
VoiceStream in response to such Alternative Transaction). Powertel shall submit
this Agreement to its stockholders at the Powertel Stockholders Meeting even if
the Board of Directors of Powertel shall have made a Subsequent Determination.
SECTION 5.04 Preparation of the Registration Statement and Joint Proxy
Statement. As promptly as reasonably practicable following the date of this
Agreement, Powertel and VoiceStream shall prepare and file with the SEC the
Joint Proxy Statement and VoiceStream shall prepare and file with the SEC the
Registration Statement, in which the Joint Proxy Statement will be included as a
prospectus. VoiceStream shall use its reasonable best efforts, with the
cooperation and assistance of Powertel, to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing and to keep the Registration Statement effective as long as is
necessary to consummate the Reorganization and the transactions contemplated in
connection therewith. VoiceStream shall also take any reasonable action (other
than qualifying to do business in any jurisdiction in which it is now not so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of VoiceStream Common Stock, in connection with the
Reorganization and upon any exercise of the Substitute Options. Powertel shall
furnish all information concerning Powertel and the holders of shares of
Powertel Stock as may be reasonably requested by VoiceStream in connection with
any such action. VoiceStream shall notify Powertel promptly of the receipt of
any comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Registration Statement or the Joint
Proxy Statement or for additional information and will supply Powertel with
copies of all correspondence between VoiceStream or any of its representatives,
on the one hand, and the SEC or its
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staff, on the other hand, with respect to the Registration Statement, the Joint
Proxy Statement or the Reorganization. If at any time prior to the Powertel
Stockholders Meeting or the VoiceStream Stockholders Meeting there shall occur
any event that should be set forth in an amendment or supplement to the
Registration Statement or the Joint Proxy Statement, each of VoiceStream and
Powertel shall promptly prepare and mail to the stockholders of Powertel and
VoiceStream such an amendment or supplement. VoiceStream and Powertel shall
cooperate with one another and with DT in the preparation of the Registration
Statement, the DT Registration Statement, the Joint Proxy Statement or any
amendment or supplement thereto and in having the Registration Statement, the DT
Registration Statement and the Joint Proxy Statement declared effective as soon
as practicable.
SECTION 5.05 Notification of Receipt of Proxy.
(a) Promptly upon receipt by Powertel from any Powertel stockholder who is
a party to the Powertel Stockholder Agreement of a proxy card sent to the
Powertel stockholders with the Joint Proxy Statement and in accordance with the
Powertel Stockholder Agreement, but in no event later than the second Business
Day following such receipt or, if such receipt is on or after the fifth Business
Day prior to the Closing, then on the date of such receipt, Powertel shall
notify VoiceStream orally of its receipt and provide VoiceStream with a copy of
such proxy card.
(b) Promptly upon receipt by VoiceStream from any VoiceStream stockholder
who is a party to a VoiceStream Stockholder Agreement of a proxy card sent to
the VoiceStream Stockholders with the Joint Proxy Statement and in accordance
with such VoiceStream Stockholder Agreement, but in no event later than the
second Business Day following such receipt or, if such receipt is on or after
the fifth Business Day prior to the Closing, then on such date of receipt,
VoiceStream shall notify Powertel orally of its receipt and provide Powertel
with a copy of such proxy card.
SECTION 5.06 Comfort Letters.
(a) Powertel shall have received a "comfort" letter of Arthur Andersen LLP,
Powertel's independent public accountants, dated a date within two (2) business
days prior to the date of the first mailing of the Joint Proxy Statement,
addressed to Powertel, in form and substance reasonably satisfactory to Powertel
and as is reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements on
Form S-4 with respect to the financial statements of VoiceStream included in the
Joint Proxy Statement and the Registration Statement.
(b) VoiceStream shall have received a "comfort" letter of Arthur Andersen
LLP, VoiceStream's independent public accountants, dated a date within two (2)
business days prior to the date of the first mailing of the Joint Proxy
Statement, addressed to VoiceStream, in form and substance reasonably
satisfactory to VoiceStream and as is reasonably customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements on Form S-4 with respect to the financial
statements of Powertel included in the Joint Proxy Statement and the
Registration Statement.
SECTION 5.07 Access to Information. Upon reasonable notice and subject to
restrictions contained in the Confidentiality Agreement and other
confidentiality agreements to which Powertel is subject, (a) Powertel shall, and
shall cause each Powertel Subsidiary to, afford to VoiceStream and to the
officers, employees, accountants, counsel and other representatives of
VoiceStream all reasonable access, during normal business hours during the
period prior to the Effective Time, to all their respective lenders, agents and
other representatives, properties, assets, books, contracts, commitments and
records and, during such period, Powertel shall (and shall cause each Powertel
Subsidiary to) furnish promptly to VoiceStream all information concerning its
business, properties and personnel as VoiceStream may reasonably request,
including a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of the federal or state securities laws or the federal Tax laws and (b)
VoiceStream shall, and shall cause each VoiceStream Subsidiary to, afford to
Powertel and to the officers, employees, accountants, counsel and other
representatives of Powertel all reasonable access, during normal business hours
during the period prior to the Effective Time, to all their respective
properties, assets, books, contracts, commitments and records and, during such
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period, VoiceStream shall (and shall cause each VoiceStream Subsidiary to)
furnish promptly to Powertel all information concerning its business, properties
and personnel as Powertel may reasonably request, including a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of the federal or state
securities laws.
SECTION 5.08 Compliance with the Securities Act.
(a) No later than thirty (30) days following the date of this Agreement,
Powertel shall cause to be prepared and delivered to VoiceStream a list
identifying all persons who, at the time of the Powertel Stockholders Meeting,
may be deemed to be an "affiliate" of Powertel, as such term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "RULE 145
AFFILIATES"). Powertel shall use reasonable efforts to cause each person who is
identified as a Rule 145 Affiliate in such list to deliver to VoiceStream on or
prior to the Effective Time a written agreement, in the form attached hereto as
ANNEX C, that such Rule 145 Affiliate shall not sell, pledge, transfer or
otherwise dispose of any shares of VoiceStream Common Stock issued to such Rule
145 Affiliate in connection with the Reorganization, except pursuant to an
effective registration statement or in compliance with such Rule 145 or another
exemption from the registration requirements of the Securities Act.
(b) Prior to the Effective Time, the Board of Directors of VoiceStream (or
the committee of the Board of Directors of VoiceStream composed solely of two
(2) or more "Non-Employee Directors," as that term is defined in Rule
16b-3(b)(3)(i) under the Exchange Act, administering the stock plans of
VoiceStream) shall adopt such resolutions or shall take such other actions as
are required to specifically approve the acquisitions of VoiceStream Common
Stock and Substitute Options at the Effective Time, as contemplated by SECTIONS
1.06(c) and 5.02, by directors, officers or employees of Powertel who may become
directors or officers of VoiceStream, such approvals to be given for the purpose
of exempting such acquisitions under Rule 16b-3 under the Exchange Act, it being
acknowledged that such approvals shall not adversely affect VoiceStream's
ability subsequently to determine that any such person has not in fact become a
director or officer of VoiceStream.
SECTION 5.09 Nasdaq Listings. VoiceStream shall use reasonable best
efforts to be included on Nasdaq, upon notification of issuance, the shares of
VoiceStream Common Stock to be issued in connection with the Reorganization and
upon any exercise of the Substitute Options.
SECTION 5.10 Fees and Expenses.
(a) Except as provided below in this SECTION 5.10 or SECTION 5.14, all fees
and expenses incurred in connection with the Reorganization, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
fees or expenses, whether or not the Reorganization is consummated, except that
the costs and expenses, other than attorneys' fees, incurred in connection with
(i) the printing and mailing of the Joint Proxy Statement with respect to the
Reorganization, the DT Merger and the Powertel Merger, the Registration
Statement, the DT Registration Statement and the Powertel Registration Statement
(and any amendment or supplement thereto) and any prospectus included in such
registration statements (and any amendment or supplement thereto) shall be borne
one-third by VoiceStream, one-third by DT and one-third by Powertel, and (ii)
any filing fees (including fees payable to the SEC and state regulatory
authorities) with respect to the Joint Proxy Statement and the Registration
Statement shall be borne one-half by VoiceStream and one-half by Powertel.
(b) In the event that VoiceStream terminates this Agreement pursuant to
SECTION 7.01(c)(i), Section 7.01(c)(ii) or SECTION 7.01(e)(ii) or Powertel
terminates this Agreement pursuant to SECTION 7.01(d)(ii), Powertel shall pay,
or cause to be paid, in same day funds to VoiceStream within one (1) Business
Day of such termination, $150,000,000 plus expenses not to exceed $10,000,000
(the "TERMINATION FEE"); provided that, in the event a termination fee is also
payable by Powertel in connection with the termination of the Powertel Merger
Agreement, Powertel shall pay each of DT and VoiceStream $75,000,000, plus
expenses not to exceed $10,000,000 in the aggregate.
(c) In the event that Powertel terminates this Agreement pursuant to
SECTION 7.01(d)(i), Section 7.01(d)(iii) or SECTION 7.01(e)(i), VoiceStream
shall pay, or cause to be paid, the Termination
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Fee to Powertel in same day funds within one (1) Business Day following such
termination of this Agreement.
(d) Powertel and VoiceStream agree that the agreements contained in SECTION
5.10(b) and SECTION 5.10(c) above are an integral part of the transactions
contemplated by this Agreement and are an inducement to VoiceStream and Powertel
to enter into this Agreement. If Powertel fails to promptly pay to VoiceStream
any fee due under such SECTION 5.10(b), or if VoiceStream fails to promptly pay
Powertel any fee due under SECTION 5.10(c), then the non-paying party shall pay
the costs and expenses (including legal fees and expenses) of the other party in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Citibank, N.A., from the date
such fee was required to be paid.
SECTION 5.11 Public Announcements. VoiceStream and Powertel will consult
with each other and with DT before issuing any press release with respect to the
transactions contemplated by this Agreement and shall not issue any such press
release prior to such consultation, except as may be required by applicable law,
fiduciary duties or by obligations pursuant to any listing agreement with any
national securities exchange. The parties will cooperate in preparing a joint
press release announcing the execution of this Agreement.
SECTION 5.12 State Takeover Laws. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, VoiceStream and Powertel and
their respective Boards of Directors shall use reasonable best efforts to grant
such approvals and take such actions as are necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to minimize the effects of any such
statute or regulation on the transactions contemplated hereby.
SECTION 5.13 Indemnification; Directors and Officers Insurance.
(a) VoiceStream shall, or shall cause the Surviving Corporation to,
continue to provide, fulfill and honor all rights to indemnification or
exculpation existing in favor of a director, officer, employee or agent (an
"INDEMNIFIED PERSON") of Powertel or any of the Powertel Subsidiaries (including
rights relating to advancement of expenses and indemnification rights to which
such persons are entitled because they are serving as a director, officer, agent
or employee of another entity at the request of Powertel or any of the Powertel
Subsidiaries), as provided in the Restated Certificate of Incorporation of
Powertel, the Restated By-laws of Powertel or any indemnification agreement, in
each case, as in effect on the date of this Agreement, and relating to actions
or events through the Effective Time, and such rights to indemnification shall
survive the Reorganization and shall continue in full force and effect, without
any amendment thereto; provided, however, that neither VoiceStream nor the
Surviving Corporation shall be required to indemnify any Indemnified Person in
connection with any proceeding (or portion thereof) to the extent involving any
claim initiated by such Indemnified Person unless the initiation of such
proceeding (or portion thereof) was authorized by the Board of Directors of
Powertel or unless such proceeding is brought by an Indemnified Person to
enforce rights under this SECTION 5.13; provided further that any determination
required to be made with respect to whether an Indemnified Person's conduct
complies with the standards set forth under the DGCL, the Restated Certificate
of Incorporation of Powertel, the Restated By-laws of Powertel or any such
agreement, as the case may be, shall be made by independent legal counsel
selected by VoiceStream and reasonably acceptable to such Indemnified Person;
provided further that VoiceStream and the Surviving Corporation will cooperate
and use all reasonable efforts to assist in the vigorous defense of any such
matter; and provided further that nothing in this SECTION 5.13 shall impair any
rights of any Indemnified Person. Without limiting the generality of the
preceding sentence, in the event that any Indemnified Person becomes involved in
any actual or threatened action, suit, claim, proceeding or investigation after
the Effective Time relating to actions prior to the Effective Time, VoiceStream
shall, or shall cause the Surviving Corporation to, promptly advance to such
Indemnified Person his or her legal and other expenses (including the cost of
any investigation and preparation incurred in connection therewith), subject to
the providing by such Indemnified Person, to the
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extent required by law, of an undertaking to reimburse all amounts so advanced
in the event of a non-appealable determination of a court of competent
jurisdiction that such Indemnified Person is not entitled thereto.
(b) Subject to the prior written approval by VoiceStream, which shall not
be unreasonably withheld, prior to the Effective Time, Powertel shall have the
right to obtain and pay for in full a "tail" coverage directors' and officers'
liability insurance policy ("D&O INSURANCE") covering a period of six (6) years
after the Effective Time and providing coverage in amounts and on terms
consistent with Powertel's existing D&O Insurance. In the event Powertel does
not obtain such insurance, VoiceStream shall cause the Surviving Corporation to
continue to provide D&O Insurance relating to actions or events through the
Effective Time, for a period of six (6) years after the Effective Time;
provided, that the Surviving Corporation may substitute therefor policies of
substantially similar coverage and amounts containing terms no less advantageous
to such former directors or officers; provided further that if the existing D&O
Insurance expires or is cancelled during such period, VoiceStream or the
Surviving Corporation shall make reasonable commercial efforts to obtain
substantially similar D&O Insurance; and provided further that Powertel shall
not be required to expend, in order to maintain or procure an annual D&O
Insurance policy, an amount in excess of 250% of the last annual premium paid
prior to the date hereof, but in such case shall purchase as much coverage as
possible for such amount.
(c) In the event VoiceStream or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person in a single transaction or a series of
related transactions, then, and in each such case, VoiceStream will make or
cause to be made proper provision so that the successors and assigns of
VoiceStream or the Surviving Corporation, as the case may be, assume the
indemnification obligations described herein for the benefit of the Indemnified
Parties.
(d) The provisions of this SECTION 5.13 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Person, his or her heirs and
his or her personal representatives and shall survive the Reorganization and be
binding upon the successors and assigns of VoiceStream, Powertel and the
Surviving Corporation.
SECTION 5.14 Reasonable Best Efforts.
(a) Subject to the provisions of this Agreement, each of Powertel,
VoiceStream and Sub agrees to use its reasonable best efforts to take, or cause
to be taken, all actions, and do, or cause to be done, and to assist and
cooperate with the other party or parties in doing, all things necessary, proper
or advisable, to consummate and make effective, in the most expeditious manner
practicable, the Reorganization and the other transactions contemplated by this
Agreement; provided, however, that neither VoiceStream nor any of the
VoiceStream Subsidiaries shall be required, nor, without the consent of
VoiceStream, shall Powertel or the Powertel Subsidiaries be permitted, to divest
or hold separate or otherwise take or commit to take any action that limits its
freedom of action with respect to Powertel, VoiceStream or any of their
respective Subsidiaries or any material portion of the assets of Powertel,
VoiceStream or any of their respective Subsidiaries or any of the business,
product lines, or assets of Powertel, VoiceStream or any of their respective
Subsidiaries. Without limiting the foregoing, (i) each of Powertel, VoiceStream
and Sub agrees to use its reasonable best efforts to take, or cause to be taken,
all actions necessary to comply promptly with all legal requirements that may be
imposed on itself or its Subsidiaries with respect to the Reorganization (which
actions shall include furnishing all information required under the HSR Act and
all actions required in connection with approvals of or filings with the FCC,
state public utility or service commissions or similar agencies and any other
Governmental Entity) and shall promptly cooperate with and furnish information
to each other in connection with any such requirements imposed upon any of them
or any of their Subsidiaries in connection with the Reorganization, (ii) each of
Powertel, VoiceStream and Sub shall, and shall cause its Subsidiaries to, use
its reasonable best efforts to obtain (and shall cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, the FCC, state public utility or service commissions or similar agencies and
any other
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Governmental Entity or other public or private third party required to be
obtained or made by Powertel, VoiceStream, Sub or any of their Subsidiaries in
connection with the Reorganization or the taking of any action contemplated
thereby or by this Agreement, (iii) VoiceStream shall maintain Sub as a wholly-
owned VoiceStream Subsidiary, with no voting or approval rights outstanding
other than those held by VoiceStream, and VoiceStream shall cause Sub to
approve, and shall vote all securities and give all approvals necessary for Sub
to approve, the Reorganization, and (iv) each party will use its reasonable best
efforts to oppose entry or lift the effects of any injunction or other order
adversely affecting the ability of any party hereto to consummate the
transactions contemplated hereby to prevent, with respect to any threatened or
such injunction or other order, the issuance or entry thereto, provided however,
that notwithstanding anything to the contrary contained in this Agreement, in
connection with any filing or submission required or action to be taken by
VoiceStream, Powertel or any of their respective Subsidiaries to consummate the
Reorganization or the other transactions contemplated in this Agreement,
Powertel shall not, without VoiceStream's prior written consent, commit to any
divestiture of assets or businesses of Powertel and the Powertel Subsidiaries if
such divested assets and/or businesses are material to the assets or
profitability of Powertel and the Powertel Subsidiaries taken as a whole.
(b) As promptly as practicable after the execution and delivery of this
Agreement, VoiceStream and Powertel shall prepare all appropriate applications
for FCC approval, and such other documents as may be required, with respect to
the transfer of control of Powertel to VoiceStream (collectively, the "FCC
APPLICATIONS"). Not later than the tenth Business Day following execution and
delivery of this Agreement, Powertel and VoiceStream will exchange with each
other their respective completed portions of the FCC Applications. Not later
than the fifteenth Business Day following the execution and delivery of this
Agreement, Powertel and VoiceStream shall file, or cause to be filed, the FCC
Applications. If the Effective Time shall not have occurred for any reason
within any applicable initial consummation period, and neither Powertel nor
VoiceStream shall have terminated this Agreement pursuant to SECTION 7.01,
VoiceStream and Powertel shall jointly request one or more extensions of the
consummation period of such grant. No party hereto shall knowingly take, or fail
to take, any action if the intent or reasonably anticipated consequence of such
action or failure to act is, or would be, to cause the FCC not to grant approval
of the FCC Applications or delay either such approval or the consummation of the
transfer of control of Powertel. VoiceStream and Powertel shall each pay
one-half ( 1/2) of any FCC fees, if applicable, in connection with the filing or
granting of approval of the FCC Applications. Each of VoiceStream and Powertel
shall bear its own expenses in connection with the preparation and prosecution
of the FCC Applications. VoiceStream and Powertel shall each use all
commercially reasonable efforts to prosecute the FCC Applications in good faith
and with due diligence before the FCC and in connection therewith shall take
such action or actions as may be necessary or reasonably required in connection
with the FCC Applications, including furnishing to the FCC any documents,
materials or other information requested by the FCC in order to obtain such FCC
approval as expeditiously as practicable.
(c) Promptly after the date hereof, VoiceStream and Powertel (as may be
required pursuant to the HSR Act) will complete all documents required to be
filed with the Federal Trade Commission and the Department of Justice in order
to comply with the HSR Act and, not later than twenty (20) Business Days after
the date hereof, together with the Persons who are required to join in such
filings, shall file the same with the appropriate Governmental Entities.
VoiceStream and Powertel shall each pay one-half (1/2) of any fees that may be
payable in connection with the filing pursuant to the HSR Act. VoiceStream and
Powertel shall promptly furnish all materials thereafter required by any of the
Governmental Entities having jurisdiction over such filings and shall take all
reasonable actions and shall file and use all reasonable efforts to have
declared effective or approved all documents and notifications with any such
Governmental Entities, as may be required under the HSR Act or other federal
antitrust laws for the consummation of the Transactions and any other
transactions contemplated hereby.
(d) Each of Powertel and VoiceStream shall promptly notify the other of:
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
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(ii) any notice or other communication from or to any Governmental
Entity in connection with the transactions contemplated by this Agreement;
(iii) the occurrence, or non-occurrence, of any event the occurrence
or non-occurrence of which would reasonably be expected to cause any
representation or warranty made by it and contained herein to be untrue or
inaccurate in any material respect at any time during the period commencing
on the date hereof and ending at the Effective Time;
(iv) any failure of such party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this SECTION
5.14(d) shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice;
(v) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against such party which, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to SECTION 2.13, in the case of Powertel, or
SECTION 3.12, in the case of VoiceStream, or which relate to the
consummation of the Transactions; and
(vi) any event, condition or state of facts which could have a
Material Adverse Effect on such party.
SECTION 5.15 Certain Litigation. Powertel agrees that it shall not settle
any litigation commenced after the date hereof against Powertel or any of its
directors by any stockholder of Powertel relating to the Reorganization, this
Agreement or the Powertel Stockholder Agreement without the prior written
consent of VoiceStream, which consent shall not be unreasonably withheld or
delayed.
SECTION 5.16 Powertel Stockholder Agreement and VoiceStream Stockholder
Agreement. VoiceStream and each of the Powertel Principal Stockholders shall
enter into a Powertel Stockholder Agreement as of the date hereof. Powertel and
each of the VoiceStream Principal Stockholders shall enter into a VoiceStream
Stockholder Agreement as of the date hereof.
SECTION 5.17 Senior Discount Notes and Senior Notes. Within thirty (30)
days following the Effective Time, VoiceStream shall cause the Surviving
Corporation to commence an offer to purchase all of the Senior Discount Notes
and Senior Notes (collectively, the "NOTES") pursuant to the terms of the
February 1996 Indenture, April 1996 Indenture and June 1997 Indenture
(collectively, the "POWERTEL INDENTURES"), as applicable. Any investment banking
firm engaged in connection with such acquisition shall be selected by
VoiceStream. VoiceStream shall bear the fees, costs and expenses of acquiring
the Notes.
SECTION 5.18 Plans and Programs to Be Implemented. After the execution of
this Agreement, Powertel and/or its Subsidiaries shall adopt and implement the
plans and arrangements described in ANNEX 5.18 with each such plan and
arrangement being approved by VoiceStream or DT prior to such adoption or
implementation. Each such plan or arrangement shall be designed to become
effective as of the Effective Time (contingent upon the occurrence of the
transactions contemplated by this Agreement), and remain effective without
modification of the terms and provisions of such plan or arrangement until the
termination date noted for each respective plan or arrangement in ANNEX 5.18.
After the execution of this Agreement, Powertel and/or its Subsidiaries shall
take such actions as are required, necessary or appropriate to implement the
provisions of ANNEX 5.18 and this Section 5.18 notwithstanding any provisions of
this Agreement to the contrary, and no such actions shall be deemed to be a
breach of any other provision of this Agreement.
SECTION 5.19 Registration Rights. Powertel Principal Stockholders shall
have registration rights as set forth in ANNEX A to their respective Powertel
Stockholder Agreements.
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ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01 Conditions to Each Party's Obligation to Effect the
Reorganization. The respective obligations of VoiceStream, Sub and Powertel to
effect the Reorganization shall be subject to the fulfillment or (to the extent
permitted by applicable law) written waiver prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. The Powertel Stockholder Approval shall
have been obtained.
(b) No Injunction or Restraint. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other Governmental Entity preventing the consummation of
the Reorganization or which could reasonably be expected to have a Material
Adverse Effect on Powertel shall be in effect.
(c) Nasdaq Listings. The shares of VoiceStream Common Stock issuable
in accordance with the Reorganization and pursuant to SECTION 5.02 shall
have been authorized for listing on the Nasdaq, subject to official notice
of issuance.
(d) HSR. Any waiting period (and any extension thereof) under the HSR
Act applicable to the Reorganization shall have expired or been terminated.
(e) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act.
No stop order suspending the effectiveness of the Registration Statement or
the Joint Proxy Statement shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or, to the knowledge
of VoiceStream or Powertel, threatened by the SEC. All necessary state
securities authorizations (including state takeover approvals) shall have
been received unless the failure to receive any such authorization would
not have a Material Adverse Effect on Powertel or VoiceStream or the
transactions contemplated by this Agreement.
(f) Termination of Other Merger Agreements. The DT Merger Agreement
and the Powertel Merger Agreement shall have terminated in accordance with
their respective terms.
SECTION 6.02 Additional Conditions to Obligation of Powertel to Effect the
Reorganization. The obligation of Powertel to effect the Reorganization shall
be subject to the fulfillment or written waiver by Powertel at or prior to the
Effective Time of the following additional conditions:
(a) Performance of Obligations; Representations and Warranties. Each
of VoiceStream and Sub shall have performed in all material respects each
of its agreements contained in this Agreement required to be performed at
or prior to the Effective Time, and each of the representations and
warranties of VoiceStream and Sub contained in this Agreement shall be true
and correct at and as of the Effective Time as if made at and as of the
Effective Time (other than representations and warranties which address
matters only as of a particular date, in which case such representations
and warranties shall be true and correct on and as of such particular date)
in each case except as contemplated or permitted by this Agreement and
except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on VoiceStream or the
transactions contemplated by this Agreement; provided, however, for
purposes of this SECTION 6.02(a), the representations and warranties of
VoiceStream shall be construed as if they did not contain any qualification
that refers to Material Adverse Effect or materiality; and Powertel shall
have received a certificate signed on behalf of VoiceStream by a duly
authorized officer to such effect.
(b) Tax Opinion. Powertel shall have received an opinion of Morris,
Manning & Martin, LLP, in form and substance reasonably satisfactory to
Powertel, dated the Closing Date, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing as of the Effective
Time, the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code for federal income tax purposes.
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In rendering such opinion, Morris, Manning & Martin, LLP, may receive
and rely upon representations from others, including representations from
(i) Powertel and (ii) VoiceStream contained in certificates substantially
in the form of the Powertel Tax Certificate and the VoiceStream Tax
Certificate attached hereto as ANNEX F and ANNEX G, respectively. Each such
certificate shall be dated on or before the date of such opinion and shall
not have been withdrawn or modified in any material respect.
(c) Consents Under Agreements. VoiceStream shall have obtained the
consent or approval of each person whose consent or approval shall be
required to consummate the transactions contemplated hereby under any
indenture, mortgage, evidence of indebtedness, lease or other agreement or
instrument to which VoiceStream or any of the VoiceStream Subsidiaries is a
party, except where the failure to obtain the same would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on VoiceStream or upon the transactions contemplated by this
Agreement.
(d) FCC Opinion. Powertel shall have received an opinion of FCC
counsel to VoiceStream, dated the Effective Time, substantially in the form
attached hereto as ANNEX D.
(e) [Reserved]
(f) Governmental Approvals. All necessary consents or authorizations
from Governmental Entities which may be required in connection with the
transactions contemplated hereby, shall have been received, unless the
failure to receive any such consent or authorization would not have a
Material Adverse Effect on VoiceStream or the transactions contemplated by
this Agreement, and such consents or authorizations shall not contain any
conditions which would reasonably be expected to have a Material Adverse
Effect on VoiceStream or the transactions contemplated by this Agreement.
With respect to any FCC consents or authorizations, effectiveness of
necessary FCC approvals shall be sufficient to satisfy this condition, and
Powertel's obligation to effect the Reorganization shall not be subject to
the condition that any FCC consents or authorizations have become Final
Orders.
Notwithstanding anything contained to the contrary in SECTION 6.02(a) or
anywhere else in this Agreement, VoiceStream may enter into any Subsequent
Transaction, and no changes of any representation or warranty of VoiceStream
contained in this Agreement as a result of any Subsequent Transaction shall
result in a failure of the conditions set forth in SECTION 6.02(a); provided, in
each case, that any such Subsequent Transaction would not reasonably be expected
to have a Material Adverse Effect on VoiceStream.
SECTION 6.03 Conditions to Obligations of VoiceStream and Sub to Effect
the Reorganization. The obligation of VoiceStream and Sub to effect the
Reorganization shall be subject to the fulfillment or written waiver by
VoiceStream at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and
Warranties. Powertel shall have performed in all material respects each of
its agreements contained in this Agreement required to be performed at or
prior to the Effective Time, and each of the representations and warranties
of Powertel contained in this Agreement shall be true and correct at and as
of the Effective Time as if made at and as of the Effective Time (other
than representations and warranties which address matters only as of a
particular date, in which case such representations and warranties shall be
true and correct on and as of such particular date), in each case except as
contemplated or permitted by this Agreement and except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Powertel or VoiceStream or the transactions contemplated
by this Agreement; provided, however, for purposes of this SECTION 6.03(a),
the representations and warranties of Powertel shall be construed as if
they did not contain any qualification that refers to Material Adverse
Effect or materiality; and VoiceStream shall have received a certificate
signed on behalf of Powertel by a duly authorized officer to such effect.
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(b) Tax Opinion. VoiceStream shall have received an opinion of Jones,
Day, Reavis & Pogue and/or Preston Gates & Ellis LLP, in form and substance
reasonably satisfactory to VoiceStream, dated the Closing Date,
substantially to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion which are consistent with the
state of facts existing as of the Effective Time, the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code for federal income tax purposes.
In rendering such opinion, Jones, Day, Reavis & Pogue and/or Preston
Gates & Ellis LLP may receive and rely upon representations from others,
including representations from (i) Powertel and (ii) VoiceStream contained
in certificates substantially in the form of the Powertel Tax Certificate
and the VoiceStream Tax Certificate attached hereto as ANNEX F, and ANNEX
G, respectively. Each such certificate shall be dated on or before the date
of such opinion and shall not have been withdrawn or modified in any
material respect.
(c) FCC Opinion. VoiceStream shall have received an opinion of FCC
counsel of Powertel, dated the Effective Time, substantially in the form
attached hereto as ANNEX E.
(d) Consents Under Agreements. Powertel shall have obtained the
consent or approval of each person whose consent or approval shall be
required to consummate the transactions contemplated hereby under any
indenture, mortgage, evidence of Indebtedness, lease or other agreement or
instrument to which Powertel or any of the Powertel Subsidiaries is a
party, except where the failure to obtain the same would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on Powertel or VoiceStream or upon the transactions contemplated by
this Agreement.
(e) Governmental Approvals. All necessary consents or authorizations
from Governmental Entities which may be required in connection with the
transactions contemplated hereby, including the FCC and state public
utility or service commissions or similar agencies, shall have been
received and, in the case of the FCC, shall have become Final Orders
(unless this requirement of finality is waived by VoiceStream in its sole
discretion), unless the failure to receive any such consent or
authorization would not have a Material Adverse Effect on Powertel or
VoiceStream or the transactions contemplated by this Agreement, and such
consents or authorizations shall not contain any conditions which would
reasonably be expected to have a Material Adverse Effect on Powertel or
VoiceStream or the transactions contemplated by this Agreement.
ARTICLE VII
TERMINATION AND AMENDMENT
SECTION 7.01 Termination. This Agreement may be terminated and the
Reorganization contemplated hereby may be abandoned at any time prior to the
Effective Time, whether before or after any approval by the stockholders of
VoiceStream or Powertel of the matters presented in connection with the
Reorganization:
(a) by mutual written consent of VoiceStream, Sub and Powertel;
(b) by either VoiceStream or Powertel:
(i) if the Reorganization has not been effected on or prior to the
close of business on December 31, 2001 (the "TERMINATION DATE");
provided that in the event both the DT Merger Agreement and the Powertel
Merger Agreement shall have terminated, the Termination Date shall
instead be the later of September 30, 2001 and the date that is thirty
(30) days after the date of termination of the DT Merger Agreement and
the Powertel Merger Agreement; provided further that the right to
terminate this Agreement pursuant to this SECTION 7.01(b)(i) shall not
be available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Reorganization to have occurred on or prior to such date; or
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(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action (including by enacting any law or
regulation) (which order, decree, ruling or other action Powertel and
VoiceStream shall use its reasonable best efforts to lift) permanently
enjoining, restraining or otherwise prohibiting or making illegal the
transactions contemplated by this Agreement and such order, decree or
ruling or other action shall have become final and nonappealable;
provided, however, that the right to terminate this Agreement pursuant
to this SECTION 7.01(b)(ii) shall not be available to any party who has
not used its reasonable best efforts to cause such order to be lifted or
otherwise taken such action as is required to comply with SECTION 5.14;
(c) by VoiceStream if (i) Powertel shall have failed to comply with
any of its covenants or agreements contained in this Agreement required to
be complied with prior to the date of such termination, except as would not
reasonably be expected to have a Material Adverse Effect on VoiceStream or
the transactions contemplated by this Agreement, which failure to comply
cannot be or has not been cured within 30 days after receipt by Powertel of
written notice of such failure to comply, (ii) the stockholders of Powertel
shall not approve and adopt the Agreement at the Powertel Stockholders
Meeting or any adjournment thereof, or (iii) the stockholders of
VoiceStream shall not approve and adopt the Agreement at the VoiceStream
Stockholders Meeting or any adjournment thereof;
(d) by Powertel if (i) VoiceStream or Sub shall have failed to comply
with any of its respective covenants or agreements contained in this
Agreement required to be complied with prior to the date of such
termination, except as would not reasonably be expected to have a Material
Adverse Effect on Powertel or VoiceStream or the transactions contemplated
by this Agreement, which failure to comply cannot be or has not been cured
within 30 days after receipt by VoiceStream of written notice of such
failure to comply, (ii) the stockholders of Powertel shall not approve and
adopt the Agreement at the Powertel Stockholders Meeting or any adjournment
thereof; or (iii) the stockholders of VoiceStream shall not approve and
adopt the Agreement at the VoiceStream Stockholders Meeting or any
adjournment thereof;
(e) (i) by Powertel if there has been a breach by VoiceStream or Sub
of any representation or warranty (disregarding all qualifications and
exceptions contained therein relating to materiality or a Material Adverse
Effect or any similar standard or qualification) except any breach that
would not reasonably be expected to have a Material Adverse Effect on
VoiceStream or the transactions contemplated by this Agreement, in each
case which breach cannot be or has not been cured within 30 days after
receipt by the breaching party of written notice of the breach and (ii) by
VoiceStream if there has been a breach by Powertel of any representation or
warranty (disregarding all qualifications and exceptions contained therein
relating to materiality or a Material Adverse Effect or any similar
standard or qualification) except any breach that would not reasonably be
expected to have a Material Adverse Effect on Powertel or VoiceStream or
the transactions contemplated by this Agreement, in each case which breach
cannot be or has not been cured within 30 days after receipt by the
breaching party of written notice of the breach; or
(f) automatically, without any action being required of any party
hereto, concurrently with the closing of the DT Merger.
SECTION 7.02 Effect of Termination. In the event of a termination of this
Agreement by either Powertel or VoiceStream as provided in SECTION 7.01, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of VoiceStream, Sub or Powertel or their respective
officers or directors, except with respect to SECTION 2.18, SECTION 3.14,
SECTION 5.10 or this SECTION 7.02; provided, however, that neither any provision
in this ARTICLE VII nor the payment of any fees and expenses pursuant to SECTION
5.10, shall be interpreted to (i) relieve any party of liability for any breach
of this Agreement, (ii) constitute liquidated damages or (iii) limit the amount
of damages that may be recovered for a breach of this Agreement.
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SECTION 7.03 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval by the stockholders of VoiceStream and
Powertel of the matters presented to them in connection with the Reorganization;
provided, however, that after any such approval, no amendment shall be made if
applicable law would require further approval by such stockholders, unless such
further approval shall be obtained. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.
SECTION 7.04 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01 Non-Survival of Representations and Warranties and
Agreements. None of the representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time or, except as set forth in SECTION 7.02 hereof, the termination of this
Agreement pursuant to the terms hereof. This SECTION 8.01 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time.
SECTION 8.02 Notices. (a) All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
overnight courier (providing proof of delivery) or telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to VoiceStream or Sub to:
Voicestream Wireless Corporation
12920 S.E. 38th Street
Bellevue, Washington 98006
Attn: Alan R. Bender
Telecopy No: 425-586-8080
with a copy to:
Preston, Gates & Ellis LLP
701 Fifth Avenue, Suite 5000
Seattle, WA 98104
Attn: Richard B. Dodd, Esq.
Telecopy No: 206-623-7022
if to Powertel, to:
Powertel, Inc.
1239 O.G. Skinner Drive
West Point, GA 31833
Attn: Chairman of the Board
Telecopy No: 706-645-9563
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with a copy to:
Morris, Manning & Martin, LLP
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, GA 30326
Attn: James Walker IV, Esq.
Telecopy No: 404-365-9532
or to such other addresses as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith.
(b) Copies of all notices delivered to VoiceStream, Sub or Powertel
pursuant to this Agreement shall also be provided by the party providing such
notice to DT at the following address:
Deutsche Telekom AG
140 Friedrich-Ebert Allee
53113 Bonn
Germany
Attn: Kevin Copp
Telecopy No: 49-228-181-44177
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York
Attn: Robert P. Davis
Telecopy No: 212-225-3999
or to such other addresses as DT may have furnished to VoiceStream and Powertel
in writing in accordance herewith.
SECTION 8.03 Interpretation; Definitions. When a reference is made in
this Agreement to an Article, Section, Schedule, Annex or Exhibit, such
reference shall be to an Article, Section, Schedule, Annex or Exhibit of this
Agreement unless otherwise indicated or unless the context otherwise requires.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." References to a Person are also references to its assigns and
successors in interest (by means of merger, consolidation or sale of all or
substantially all the assets of such Person or otherwise, as the case may be).
References to a document are to such document as amended, waived and otherwise
modified from time to time and references to a statute or other governmental
rule are to such statute or rule as amended and otherwise modified from time to
time (and references to any provision thereof shall include references to any
successor provision). The definitions set forth herein are equally applicable
both to the singular and plural forms and the feminine, masculine and neuter
forms of the terms defined. The term "hereof" and similar terms refer to this
Agreement as a whole. As used in this Agreement, the phrase "made available"
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available.
As used in this Agreement, the following terms have the meanings specified
or referred to in this SECTION 8.03.
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"ACTION" shall mean any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
"ADJUSTED FULLY DILUTED SHARES" shall have the meaning set forth in SECTION
1.06(f).
"AFFILIATE" shall mean with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person provided that, for purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"AGREEMENT" shall mean this Agreement and Plan of Reorganization as amended
or modified from time to time and shall include the Schedules, Annexes, Exhibits
and disclosure letters attached or related hereto.
"ALTERNATIVE TRANSACTION" shall have the meaning set forth in SECTION
4.03(d).
"APRIL 1996 INDENTURE" shall mean the Indenture dated as of April 19, 1996,
among Powertel and Bankers Trust Company relating to the 12% Senior Discount
Notes due May 2006.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York City, Atlanta, Georgia or Seattle, Washington
are authorized or required by law to close.
"CERTIFICATE OF MERGER" shall have the meaning set forth in SECTION 1.03.
"CLOSING" shall have the meaning set forth in SECTION 1.02.
"CLOSING DATE" shall have the meaning set forth in SECTION 1.02.
"CODE" shall mean the United States Internal Revenue Code of 1986, as
amended.
"COMMUNICATIONS ACT" shall mean, collectively, the Communications Act of
1934, as amended, and the Telecommunications Act of 1996, as amended, together
with the rules, regulations and published decisions of the FCC promulgated
thereunder.
"CONFIDENTIALITY AGREEMENT" shall have the meaning set forth in SECTION
4.03(a).
"CONVERSION NUMBER" shall have the meaning set forth in SECTION 1.06(c).
"COOK INLET JOINT VENTURES" means Cook Inlet Western Wireless PV/SS PCS,
L.P., Cook Inlet VoiceStream PCS, LLC, Cook Inlet/VS GSM II PCS, LLC and Cook
Inlet/VS GSM III PCS, LLC.
"COOK INLET PARTNERS" means Cook Inlet Telecommunications, Inc., SSPCS
Corporation, Providence Media Partners, L.P., Cook Inlet GSM Inc., Providence
Media Partners III L.P. and Providence Equity Operating Partners III.
"DIGIPH TRANSACTION" means the transactions and agreements relating to the
acquisition of substantially all of the assets of DiGiPH PCS, Inc., DigiPH
Communication, Inc. and DigiPH Holding Company, Inc. by Eliska, as described in
Powertel's Form 8-K as filed on June 16, 2000, including (i) all agreements and
commitments that have been entered into in connection therewith as listed in the
Powertel Letter, (ii) all agreements that are proposed to be entered into prior
to the closing of such transactions, forms or summaries of which, or term sheets
for which, have been provided to VoiceStream and are listed in the Powertel
Letter and (iii) any other agreements that are to be entered into prior to the
closing of such transactions that are reasonably necessary to consummate such
transactions (and any amendments or modifications thereof), and with respect to
clauses (ii) and (iii) that such agreements do not (A) materially alter the
scope of such transactions, (B) materially increase Powertel's obligations in
connection therewith or (C) interfere with the transactions contemplated by this
Agreement or the DT Merger Agreement.
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"D&O INSURANCE" shall have the meaning set forth in SECTION 5.13(b).
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"DT" shall have the meaning set forth in the recitals of this Agreement.
"DT MERGER" shall have the meaning set forth in the recitals of this
Agreement.
"DT MERGER AGREEMENT" shall have the meaning set forth in the recitals of
this Agreement.
"DT REGISTRATION STATEMENT" shall mean one or more registration statements
to be filed with the SEC by DT in connection with the issuance of DT depositary
shares and DT ordinary shares in the DT Merger.
"EFFECTIVE TIME" shall have the meaning set forth in SECTION 1.03.
"ELISKA" means Eliska Wireless Ventures I, Inc.
"ELISKA PUT" shall have the meaning set forth in SECTION 1.06(d).
"ELISKA PUT RIGHTS" shall have the meaning set forth in SECTION 1.06(d).
"ENVIRONMENTAL LAWS" shall mean any applicable statute, law, ordinance,
regulation, rule, judgment, decree or order of any Governmental Entity relating
to or regulating or imposing liability or standards of conduct with respect to
pollution, protection of the environment or environmental regulation or control
or regarding Hazardous Substances or occupational health or safety.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, together with the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean (i) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as Powertel; (ii) any partnership, trade or business (whether or not
incorporated) which on the day before the Closing Date was under common control
(within the meaning of Section 414(c) of the Code) with Powertel; and (iii) any
entity which is a member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as either Powertel, any corporation
described in clause (i) or any partnership, trade or business described in
clause (ii).
"ERISA BENEFIT PLAN" shall mean a Powertel Benefit Plan maintained as of
the date of this Agreement which is also an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) or which is also an "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"EXCHANGE AGENT" shall have the meaning set forth in SECTION 1.07(a).
"EXCHANGE FUND" shall have the meaning set forth in SECTION 1.07(a).
"EXCHANGE RIGHTS" shall have the meaning set forth in SECTION 3.03(a).
"FAA" shall mean the Federal Aviation Administration and any successor
agency or body.
"FCC" shall mean the Federal Communications Commission and any successor
agency or body.
"FCC APPLICATIONS" shall have the meaning set forth in SECTION 5.14(b).
"FEBRUARY 1996 INDENTURE" shall mean the Indenture dated as of February 7,
1996, among Powertel and Bankers Trust Company relating to the 12% Senior
Discount Notes due February 2006.
"FINAL ORDER" shall mean action by the applicable Governmental Entity which
is in full force and effect, with respect to which no petition or other request
for such Governmental Entity or court stay, reconsideration or review of any
kind is pending, and as to which all time periods have expired within
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which a Governmental Entity may be asked to stay, reconsider or review the
action or may stay, reconsider or review the action sua sponte.
"GOVERNMENTAL ENTITY" shall mean any federal, state or local government or
any court, tribunal, administrative agency or commission or other governmental
or other regulatory authority or agency, domestic, foreign or supranational,
including the FAA, FCC and any state public utility or service commission or
similar agency.
"HAZARDOUS SUBSTANCE" shall mean any material defined as toxic or
hazardous, including any petroleum and petroleum products, under any applicable
Environmental Law.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INCENTIVE STOCK OPTIONS" shall have the meaning set forth in SECTION
5.02(b).
"INDEBTEDNESS" of any Person at any date shall mean (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under financing leases,
(d) all obligations of such Person in respect of acceptances issued or created
for the account of such Person and with respect to unpaid reimbursement
obligations related to letters of credit issued for the account of such Person
and (e) all liabilities secured by any Lien on any property owned by such Person
even though such Person has not assumed or otherwise become liable for the
payment thereof.
"INDEMNIFIED PERSON" shall have the meaning set forth in SECTION 5.13(a).
"INTELLECTUAL PROPERTY RIGHTS" shall mean any right to use, all patents,
patent rights, trademarks, trade names, trade dress, logos, service marks,
copyrights, know how and other proprietary intellectual property rights and
computer programs held or used by Powertel or any of the Powertel Subsidiaries
that are individually or in the aggregate material to the conduct of the
business of Powertel and the Powertel Subsidiaries, taken as a whole.
"INVESTMENT ENTITY" shall mean an entity in which Powertel or any of the
Powertel Subsidiaries has an Investment Interest.
"INVESTMENT INTEREST" shall mean a direct or indirect ownership of (i)
capital stock, bonds, debentures, partnership, membership interests or other
ownership interests or other securities of any Person; (ii) any deposit with or
advance, loan or other extension of credit (including the purchase of property
from another Person subject to an understanding or agreement, contingent or
otherwise to resell such property to such other Person) to any other Person;
(iii) any revenue or profit interests pursuant to any agreement or license; or
(iv) any agreement, commitment, right, understanding or arrangement with respect
to any of the items referred to in (i), (ii) or (iii) of this definition.
"JOINT PROXY STATEMENT" shall have the meaning set forth in SECTION 2.08.
"JUNE 1997 INDENTURE" shall mean the Indenture dated as of June 10, 1997
among Powertel and Bankers Trust Company relating to the Senior Notes.
"KNOWLEDGE" and "KNOWN TO" shall mean the actual knowledge of the executive
officers of Powertel or the executive officers of VoiceStream, as the case may
be, who have exercised reasonable due diligence with respect to the
representation and warranty to which such knowledge statement is made.
"LIENS" shall mean any pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" shall mean, when
used in connection with Powertel or VoiceStream, as the case may be, any change
or effect (or any development that, insofar as can reasonably be foreseen, is
likely to result in any change or effect) or fact or condition that is
materially adverse to the business, properties, assets, financial condition or
results of operations of Powertel
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and its Subsidiaries taken as a whole, or VoiceStream and its Subsidiaries taken
as a whole, as the case may be, provided, however, that (i) any adverse change,
effect or development that is primarily caused by conditions affecting the
United States economy generally or the economy of any nation or region in which
Powertel or VoiceStream, as the case may be, or its Subsidiaries conducts
business that is material to the business of Powertel or VoiceStream, as the
case may be, and its Subsidiaries, taken as a whole, shall not be taken into
account in determining whether there has been (or whether there could reasonably
be foreseen) a "Material Adverse Change" or "Material Adverse Effect" with
respect to Powertel or VoiceStream, as the case may be, (ii) any adverse change,
effect or development that is primarily caused by conditions generally affecting
the industries in which Powertel or VoiceStream, as the case may be, conducts
its business shall not be taken into account in determining whether there has
been (or whether there could reasonably be foreseen) a "Material Adverse Change"
or "Material Adverse Effect" with respect to Powertel or VoiceStream, as the
case may be, and (iii) any adverse change, effect or development that is
primarily caused by the announcement or pendency of this Agreement, the
Reorganization or the transactions contemplated hereby shall not be taken into
account in determining whether there has been (or whether there could reasonably
be foreseen) a "Material Adverse Change" or "Material Adverse Effect" with
respect to Powertel or VoiceStream, as the case may be; and a "Material Adverse
Effect" with respect to either Powertel or VoiceStream, as the case may be,
shall include any applicable event, fact or condition with respect to such party
which would reasonably be expected to materially delay, interfere with, impair
or prevent the transactions contemplated by this agreement in a manner which
would have a material adverse effect on such transactions taken as a whole
considering the intentions and expectations of the parties hereto.
"MAXIMUM SHARE AMOUNT" shall have the meaning set forth in SECTION 1.06(f).
"MERGER" shall have the meaning set forth in the recitals of this
Agreement.
"NASDAQ" shall have the meaning set forth in SECTION 1.06(c).
"1991 PLAN" shall have the meaning set forth in SECTION 2.03.
"NONEMPLOYEE OPTION PLAN" shall have the meaning set forth in SECTION 2.03.
"NOTES" shall have the meaning set forth in SECTION 5.17.
"PERSON" shall mean an individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company,
unincorporated syndicate, unincorporated organization, trust, trustee, executor,
administrator or other legal representative, Governmental Entity, political
subdivision, or any group of Persons acting in concert.
"POWERTEL" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"POWERTEL BENEFIT PLAN" shall mean any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical, life insurance, supplemental unemployment
benefits, employee stock purchase, stock appreciation, restricted stock or other
employee benefit plan, policy, arrangement or agreement providing benefits to
any current or former employee, officer or director of Powertel or any of the
Powertel Subsidiaries or with respect to which Powertel or any of the Powertel
Subsidiaries (or, in the case of an ERISA Benefit Plan, any of Powertel's ERISA
Affiliates) may have any liability.
"POWERTEL CERTIFICATES" shall have the meaning set forth in SECTION
1.07(a).
"POWERTEL COMMON STOCK" shall have the meaning set forth in the recitals of
this Agreement.
"POWERTEL COMMON STOCK EQUIVALENTS" shall have the meaning set forth in
SECTION 2.03.
"POWERTEL CONTRACTS" shall have the meaning set forth in SECTION 2.20.
"POWERTEL EMPLOYEE" shall mean any employee of Powertel or any of the
Powertel Subsidiaries.
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"POWERTEL EQUITY RIGHTS" shall have the meaning set forth in SECTION 2.03.
"POWERTEL FCC LICENSES" shall have the meaning set forth in SECTION
2.09(b)(i).
"POWERTEL FINANCIAL ADVISOR" shall have the meaning set forth in SECTION
2.17.
"POWERTEL INDENTURES" shall have the meaning set forth in SECTION 5.17.
"POWERTEL LETTER" shall mean the letter from Powertel to VoiceStream dated
the date hereof, which letter relates to this Agreement and is designated
therein as the Powertel Letter.
"POWERTEL MERGER" shall have the meaning set forth in the recitals of this
Agreement.
"POWERTEL MERGER AGREEMENT" shall have the meaning set forth in the
recitals of this Agreement.
"POWERTEL PERMITS" shall have the meaning set forth in SECTION 2.09.
"POWERTEL PREFERRED STOCK" shall have the meaning set forth in the recitals
of this Agreement and in SECTION 2.03.
"POWERTEL PRINCIPAL STOCKHOLDERS" shall mean ITC Holding Company, Inc.; ITC
Service Company, Inc.; ITC Wireless Inc.; SCANA Communications Holdings, Inc.;
Sonera Corporation; Sonera Holding B.V.; Donald W. Burton; The Burton
Partnership, L.P.; The Burton Partnership (QP) L.P.; South Atlantic Venture Fund
II, L.P.; South Atlantic Venture Fund III, L.P.; South Atlantic Private Equity
Fund IV, L.P.; South Atlantic Private Equity Fund IV (QP) L.P.; and American
Water Works Company.
"POWERTEL REGISTRATION STATEMENT" shall mean one or more registration
statements to be filed with the SEC by DT in connection with the issuance of DT
depositary shares and DT ordinary shares in the Powertel Merger.
"POWERTEL RESTRICTED STOCK AWARDS" shall mean restricted stock awards
granted under the Restricted Stock Plan and the 2000 Plan.
"POWERTEL REQUIRED APPROVALS" shall have the meaning set forth in SECTION
2.05.
"POWERTEL SEC DOCUMENTS" shall have the meaning set forth in SECTION 2.06.
"POWERTEL STOCK" shall have the meaning set forth in the recitals of this
Agreement.
"POWERTEL STOCK RIGHTS" shall have the meaning set forth in SECTION 2.03.
"POWERTEL STOCKHOLDER AGREEMENT" shall have the meaning set forth in the
recitals of this Agreement.
"POWERTEL STOCKHOLDER APPROVAL" shall have the meaning set forth in SECTION
2.04.
"POWERTEL STOCKHOLDERS MEETING" shall have the meaning set forth in SECTION
5.03(a).
"POWERTEL STOCK OPTIONS" shall have the meaning set forth in SECTION 2.03.
"POWERTEL STOCK OPTION PLANS" shall have the meaning set forth in SECTION
2.03.
"POWERTEL SUBSIDIARIES" shall have the meaning set forth in SECTION 2.01.
"POWERTEL WARRANTS" shall have the meaning set forth in SECTION 1.06(d).
"REGISTRATION STATEMENT" shall have the meaning set forth in SECTION 3.04.
"REORGANIZATION" shall have the meaning set forth in the recitals of this
Agreement.
"REQUIRED REGULATORY APPROVALS" shall have the meaning set forth in SECTION
3.05.
"RESTATED BY-LAWS OF POWERTEL" shall mean the Second Restated By-laws of
Powertel as in effect on the date hereof.
"RESTATED CERTIFICATE OF INCORPORATION OF POWERTEL" shall mean the Third
Restated Certificate of Incorporation, as amended and as in effect on the date
hereof.
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"RESTRICTED STOCK PLAN" shall have the meaning set forth in SECTION 2.03.
"RULE 145 AFFILIATES" shall have the meaning set forth in SECTION 5.08(a).
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"SENIOR DISCOUNT NOTES" shall mean Powertel's 12% Senior Discount Notes due
February 2006 and the 12% Senior Discount Notes due May 2006.
"SENIOR NOTES" shall mean Powertel's 11 and 1/8% Senior Notes due June
2007.
"SERIES A PREFERRED SHARES" shall have the meaning set forth in SECTION
2.03.
"SERIES B PREFERRED SHARES" shall have the meaning set forth in SECTION
2.03.
"SERIES C PREFERRED SHARES" shall have the meaning set forth in SECTION
2.03.
"SERIES D PREFERRED SHARES" shall have the meaning set forth in SECTION
2.03.
"SERIES E PREFERRED SHARES" shall have the meaning set forth in SECTION
2.03.
"SERIES F PREFERRED SHARES" shall have the meaning set forth in SECTION
2.03.
"SIGNIFICANT EMPLOYEE" shall mean any Employee of Powertel or any of the
Powertel Subsidiaries who (i) is an officer of Powertel or any of the Powertel
Subsidiaries, (ii) has a written employment contract with Powertel or any of the
Powertel Subsidiaries that calls for annual compensation in excess of $90,000,
or (iii) is compensated by Powertel and/or any of the Powertel Subsidiaries at
an annual rate greater than $90,000.
"SONERA PUT" shall have the meaning set forth in SECTION 1.06(d).
"SONERA STOCK PURCHASE AGREEMENT" shall have the meaning set forth in
SECTION 1.06(f).
"STOCKHOLDER MEETINGS" shall mean the Powertel Stockholders Meeting and the
VoiceStream Stockholders Meeting.
"SUB" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"SUBSEQUENT DETERMINATION" shall have the meaning set forth in SECTION
5.03(d).
"SUBSEQUENT TRANSACTION" shall mean any transaction entered into after date
hereof whereby VoiceStream or any of its Subsidiaries would (i) acquire or be
acquired (by merger, consolidation, acquisition of stock or assets or otherwise)
by any corporation, limited liability company, partnership, other business
organization or assets or division thereof; (ii) acquire an Investment Interest
in any of the foregoing; (iii) issue any equity interest or incur any
Indebtedness whether in connection with any item described in (i) or (ii) or
otherwise; (iv) enter into or engage in a strategic alliance or other commercial
relationship; or (v) act in the ordinary course of business; provided, however,
in connection with a Subsequent Transaction described in items (i), (ii), (iii)
or (iv) of this definition for a consideration paid by VoiceStream or any of its
Subsidiaries in an amount greater than $5 billion, VoiceStream must receive an
opinion from a nationally recognized investment bank, acting as financial
advisor to VoiceStream, to the effect that, from a financial point of view, such
Subsequent Transaction is fair to the holders of VoiceStream Common Stock or, if
applicable, VoiceStream.
"SUBSIDIARY" or "SUBSIDIARY" of a Person shall mean any Person (including
any corporation, partnership, joint venture, limited liability company or other
entity) in which the Person in question owns, directly or indirectly, an amount
of the voting securities, other voting ownership or voting partnership interests
which is sufficient to elect at least a majority of such Person's Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests) of such Person.
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"SUBSTITUTE OPTIONS" shall have the meaning set forth in SECTION 5.02(b).
"SUPERIOR PROPOSAL" shall have the meaning set forth in SECTION 5.03(d).
"SURVIVING CORPORATION" shall have the meaning set forth in SECTION 1.01.
"TAX" and "TAXES" shall mean any federal, state, local or foreign net
income, gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any Governmental Entity.
"TAX RETURN" shall mean any return, report or similar statement required to
be filed with respect to any Tax including any information return, claim for
refund, amended return or declaration of estimated tax.
"TERMINATION DATE" shall have the meaning set forth in SECTION 7.01(b)(i).
"TERMINATION FEE" shall have the meaning set forth in SECTION 5.10(b).
"THIRD PARTY" shall have the meaning set forth in SECTION 4.03(d).
"2000 PLAN" shall have the meaning set forth in SECTION 2.03.
"VOICESTREAM" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"VOICESTREAM AVERAGE CLOSING PRICE" shall have the meaning set forth in
SECTION 1.06(c).
"VOICESTREAM CERTIFICATES" shall have the meaning set forth in SECTION
1.07(a).
"VOICESTREAM COMMON STOCK" shall have the meaning set forth in the recitals
of this Agreement.
"VOICESTREAM EQUITY RIGHTS" shall have the meaning set forth in SECTION
3.03(a).
"VOICESTREAM FCC LICENSES" shall have the meaning set forth in SECTION
3.09.
"VOICESTREAM LETTER" shall mean the letter from VoiceStream to Powertel
dated the date hereof, which letter relates to this Agreement and is designated
therein as the VoiceStream Letter.
"VOICESTREAM PERMITS" shall have the meaning set forth in SECTION 3.09.
"VOICESTREAM PRINCIPAL STOCKHOLDERS" shall mean John W. Stanton; Theresa E.
Gillespie; PN Cellular, Inc.; Stanton Family Trust; Stanton Communications
Corporation; GS Capital Partners, L.P.; The Goldman Sachs Group, Inc.; Bridge
Street Fund 1992, L.P.; Stone Street Fund 1992, L.P.; Sonera Corporation; Sonera
Holding B.V.; Hutchison Telecommunications PCS (USA) Limited; Hutchison
Telecommunications Holdings (USA) Limited and Telephone & Data Systems, Inc.
"VOICESTREAM REQUIRED APPROVALS" shall have the meaning set forth in
SECTION 3.05.
"VOICESTREAM SEC DOCUMENTS" shall have the meaning set forth in SECTION
3.06.
"VOICESTREAM STOCKHOLDER AGREEMENT" shall have the meaning set forth in the
recitals of this Agreement.
"VOICESTREAM STOCKHOLDER APPROVAL" shall have the meaning set forth in
SECTION 3.04.
"VOICESTREAM STOCKHOLDERS MEETING" shall have the meaning set forth in
SECTION 5.03(b).
"VOICESTREAM SUBSIDIARIES" shall have the meaning set forth in SECTION
3.01.
"VOICESTREAM VOTING PREFERRED STOCK" shall mean the Convertible Voting
Preferred Stock, $.001 par value per share of VoiceStream.
"WARRANT AGREEMENT" shall have the meaning set forth in SECTION 1.06(d).
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SECTION 8.04 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 8.05 Entire Agreement; No Third-Party Beneficiaries. Except for
the Confidentiality Agreement, this Agreement constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof. This Agreement,
except for the provisions of SECTIONS 5.01, 5.13 and 8.02(b), is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
SECTION 8.06 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS.
SECTION 8.07 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 8.08 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
SECTION 8.09 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached in any material respect. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement or any related agreement and to enforce specifically the terms
and provisions of this Agreement or any related agreement in the Court of
Chancery of the State of Delaware or the Federal District Court for the District
of Delaware, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of the Court of Chancery
of the State of Delaware and Federal District Court for the District of Delaware
in the event any dispute arises out of this Agreement or any related agreement
or any transaction contemplated hereby or thereby, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, (c) agrees that it will not bring any action
relating to this Agreement or any related agreement or any transaction
contemplated hereby or thereby in any court other than the Court of Chancery of
the State of Delaware or the Federal Court for the District of Delaware and (d)
waives any right to trial by jury with respect to any action related to or
arising out of this Agreement or related agreement or any transaction
contemplated hereby or thereby. Neither the payment of fees and expenses
pursuant to SECTION 5.10, any action seeking damages pursuant to SECTION 7.02,
nor any action brought pursuant to this SECTION 8.09, shall be interpreted as
providing an exclusive remedy to any party.
SECTION 8.10 Obligations of Subsidiaries. Whenever this Agreement
requires any Powertel or VoiceStream Subsidiary (including Sub) to take any
action, such requirement shall be deemed to include an undertaking on the part
of VoiceStream or Powertel, as the case may be, to cause such Subsidiary to take
such action.
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SECTION 8.11 Reliance on Representations. Notwithstanding any
investigation, knowledge or review made at any time by or on behalf of any party
hereto, the parties acknowledge and agree that all representations and
warranties contained in this Agreement, the Annexes, the Powertel Letter, the
VoiceStream Letter or in any of the documents, certifications or agreements
delivered in connection therewith, are being relied upon as a material
inducement to enter into this Agreement and the transactions contemplated
hereby.
SECTION 8.12 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder will impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor will any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 8.13 Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application by any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
SECTION 8.14 Date of this Agreement; No Waiver. The amendment and
restatement of this Agreement on September 28, 2000 and as of February 8, 2001
notwithstanding, unless otherwise expressly provided herein, this Agreement
shall be deemed for all purposes to be dated and made as of August 26, 2000 (the
date of the original Agreement and Plan of Reorganization) and to be effective
as of such date, and all references herein to "the date hereof", "the date of
this Agreement" and other similar references, shall be deemed to be references
to August 26, 2000.
The parties' execution and delivery of this Amended and Restated Agreement
shall not constitute a waiver of any rights that any of the parties hereto may
have by reason of any event, condition, misrepresentation or breach of covenant
of the original Agreement and Plan of Reorganization having occurred prior to
the date of execution and delivery of this Amended and Restated Agreement,
whether or not known to any or all of the parties hereto. No representation or
warranty of any party in this Agreement shall be affected or limited by reason
of the knowledge of any other party at any time that such representation or
warranty is not, or may not be, true and correct.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, VoiceStream, Sub and Powertel have caused this amended
and restated Agreement dated the date first written above to be executed as of
February 8, 2001 by their respective officers thereunto duly authorized.
VOICESTREAM WIRELESS POWERTEL, INC.
CORPORATION
By: /s/ JOHN W. STANTON By: /s/ FRED G. ASTOR
-----------------------------------------------------
----------------------------------------------------- Name: Fred G. Astor
Name: John W. Stanton Title: Executive Vice President and Chief
Title: Chairman and Chief Executive Officer Financial Officer
VOICESTREAM SUBSIDIARY V
CORPORATION
By: /s/ JOHN W. STANTON
--------------------------------
Name: John W. Stanton
Title: President
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ANNEX D
PERSONAL AND CONFIDENTIAL
July 23, 2000
Board of Directors
VoiceStream Wireless Corporation
3650 131st Avenue, S.E.
Bellevue, WA 98006
Gentlemen and Madam:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.001
per share (the "Shares"), of VoiceStream Wireless Corporation ("VoiceStream" or
the "Company") of the Merger Consideration (as defined below) to be received by
such holders pursuant to the Agreement and Plan of Merger, dated as of July 23,
2000, between Deutsche Telekom AG ("DT") and the Company (the "Agreement").
Pursuant to the Agreement, a subsidiary of DT to be formed by DT will be merged
with and into the Company, and each outstanding Share not owned by DT or the
Company will be converted into, at the election of the holder of such Share,
either (i) 3.7647 ordinary shares of DT (the "DT Shares") as more fully set
forth in the Agreement; (ii) $200 in cash; or (iii) a combination of $30 in cash
and 3.2 DT Shares, in each case subject to certain procedures and limitations
contained in the Agreement including, without limitation, with respect to the
cash consideration to a maximum aggregate amount with respect to all Shares and
to the right of the Company to reduce such maximum aggregate amount as it
reasonably determines necessary to permit delivery of the requisite tax opinion
pursuant to the Agreement (collectively, the "Merger Consideration"), as to
which procedures and limitations we are expressing no opinion. Any stock
consideration payable pursuant to the Agreement to any holder of Shares will be
paid in the form of American Depositary Shares, each representing the right to
receive one DT Share, unless such holder elects to receive DT Shares in lieu of
such American Depositary Shares. In addition, pursuant to the Agreement, if the
volume weighted average per share trading prices of DT Shares on the Frankfurt
Stock Exchange for the seven Frankfurt Stock Exchange trading days randomly
selected by lot by DT and the Company together from the fifteen consecutive
Frankfurt Stock Exchange trading days ending on the date prior to the day on
which an adjustment to the aggregate cash consideration is to be made pursuant
to the Agreement is less than E33.00 per DT Share, the Company, but not DT, has
the right to terminate the Agreement. We also understand that the Agreement
contemplates the Company issuing to DT 3,906,250 shares of Convertible Voting
Preferred Stock, par value $0.001 per share, for aggregate consideration of
$5,000,000,000 pursuant to the Subscription Agreement (as defined below) prior
to the completion of the transaction contemplated by the Agreement.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company, its predecessor, VoiceStream Wireless Corporation, a Washington
Corporation ("VoiceStream Washington"), and its former parent, Western Wireless
Corporation ("Western"), from time to time, including having acted as lead
managing underwriter in the initial public offering of 12.65 million shares of
Western Common Stock in May 1996; having acted as lead manager in the public
offering of $200 million aggregate principal amount of 10.5% senior subordinated
notes due June 2006 of Western in May 1996; having acted as lead manager in the
private offering of $200 million aggregate principal amount of 10.5% senior
subordinated notes due February 2007 of Western in October 1996; having acted as
Western's financial advisor in connection with the sale of 19.9% of the
outstanding shares of VoiceStream Washington Common Stock to Hutchison PCS (USA)
Limited in February 1998; having acted as lead manager in the public offering of
13.915 million shares of Western Common Stock in April 1998; having acted as
financial advisor to VoiceStream in connection with its acquisition of Omnipoint
Corporation ("Omnipoint") in June 1999; having acted as
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VoiceStream Wireless Corporation
July 23, 2000
Page 2
financial advisor to VoiceStream in connection with its acquisition of Aerial
Communications, Inc. ("Aerial") in September 1999; having acted as co-manager in
the private offering of $1.1 billion aggregate principal amount of 10 3/8%
senior notes due November 2009 of VoiceStream Washington and the Company and
$720 million aggregate principal amount of 11 7/8% senior discount notes due
November 2009 of VoiceStream Washington and the Company in November 1999; and
having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement.
Investment funds affiliated with Goldman, Sachs & Co. have a principal
investment in VoiceStream in the amount of 10,088,128 Shares and have the right
to designate a nominee for election to VoiceStream's Board of Directors. Terence
O'Toole, a Managing Director of Goldman, Sachs & Co., is a director of
VoiceStream. We have also provided, and are currently providing, significant
investment banking services to DT from time to time, including having acted as a
co-lead manager in the initial public offering of 714 million DT Shares in
November 1996; having acted as a co-lead manager in the public offering of 250
million DT Shares in June 1999; having acted as financial advisor to DT in the
acquisition of One 2 One Ltd. in July 1999; having acted as a co-lead manager in
the initial public offering of 114 million shares of T-Online (a subsidiary of
DT) Common Stock in April 2000; having acted as a co-lead manager in the public
offering of 200 million DT Shares in June 2000; having acted as a co-lead
manager in the public offering of $14.6 billion aggregate principal amount of
notes (due at various maturity dates) of DT in June 2000, and may provide
investment banking services to DT in the future. Goldman, Sachs & Co. provides a
full range of financial advisory and securities services and, in the course of
its normal trading activities, may from time to time effect transactions and
hold securities, including derivative securities, of VoiceStream and DT for its
own account and for the accounts of customers. As of July 21, 2000, Goldman,
Sachs & Co. accumulated a net long position of 1,178,796 DT Shares. As of the
same date and in addition to the principal investment referred to above,
Goldman, Sachs & Co. had a net short position of 108,848 Shares.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Stock Subscription Agreement, dated as of July 23, 2000 (the
"Subscription Agreement"), between the Company and DT; Annual Reports to
Stockholders and Annual Reports on Form 10-K of the Company (and its
predecessors) for the four years ended December 31, 1999; the definitive Proxy
Statement dated January 25, 2000 in connection with the acquisitions of
Omnipoint and Aerial; the Form 20-F of DT for the three years ended December 31,
1999; certain interim reports to stockholders of DT; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company; the Registration
Statement on Form F-3 of DT, including the Prospectus dated June 17, 2000,
related to DT's offering of 200 million DT Shares; the Registration Statement on
Form F-3 of DT, including the Prospectus Supplement dated June 28, 2000, related
to DT's offering of $14.6 billion aggregate principal amount of notes; certain
other communications from the Company and DT to their respective stockholders;
and certain internal financial analyses and forecasts for the Company prepared
by its management. We also have held discussions with members of the senior
management of the Company and DT regarding their assessment of the strategic
rationale for, and the potential benefits of, the transaction contemplated by
the Agreement and the past and current business operations, financial condition
and future prospects of their respective companies. In addition, we have
reviewed the reported price and trading activity for the Shares and the DT
Shares, compared certain financial and stock market information for the Company
and DT with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the telecommunications industry specifically and in
other industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. As you are
aware, DT did not make available to us its projections of expected future
financial performance. Accordingly, our review of such matters was limited to
discussions with
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July 23, 2000
Page 3
members of the senior management of DT regarding certain research analyst
estimates of future financial performance of DT. In addition, we have not made
an independent evaluation or appraisal of the assets and liabilities of the
Company or DT or any of their subsidiaries and we have not been furnished with
any such evaluation or appraisal. We have also assumed that all material
governmental, regulatory or other consents and approvals necessary for the
consummation of the transaction contemplated by the Agreement will be obtained
without any adverse effect on the Company or DT or the contemplated benefits of
the transactions contemplated by the Agreement. Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Shares should vote, or which election to
take, with respect to the Merger Consideration.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the Merger
Consideration in aggregate to be received by the holders of Shares is fair from
a financial point of view to the holders of Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
(GOLDMAN, SACHS & CO.)
D-3
497
ANNEX E
PERSONAL AND CONFIDENTIAL
August 26, 2000
Board of Directors
VoiceStream Wireless Corporation
3650 131st Avenue, S.E.
Bellevue, WA 98006
Gentlemen and Madam:
You have requested our opinion as to the fairness from a financial point of
view to VoiceStream Wireless Corporation ("VoiceStream" or the "Company") of the
Conversion Number (as defined below) pursuant to the Agreement and Plan of
Reorganization, dated as of August 26, 2000, between Powertel, Inc. ("Powertel")
and the Company (the "VoiceStream Powertel Agreement"). Pursuant to the
VoiceStream Powertel Agreement, a subsidiary of VoiceStream to be formed by
VoiceStream will be merged (the "VoiceStream Powertel Merger") with and into
Powertel. We understand that VoiceStream has also entered into an Agreement and
Plan of Merger, dated as of July 23, 2000, between Deutsche Telekom AG ("DT")
and the Company (the "DT VoiceStream Agreement") pursuant to which a subsidiary
of DT to be formed by DT will be merged (the "DT VoiceStream Merger") with and
into the Company. We understand that DT has also entered into an Agreement and
Plan of Merger, dated as of August 26, 2000, between DT and Powertel (the "DT
Powertel Agreement") pursuant to which a subsidiary of DT to be formed by DT
will be merged (the "DT Powertel Merger") with and into Powertel. We understand
that pursuant to the terms of the VoiceStream Powertel Agreement, the
VoiceStream Powertel Agreement will automatically terminate concurrently with
the closing of the DT VoiceStream Merger (in which event the VoiceStream
Powertel Merger will not occur). We are not expressing any opinion herein with
respect to the DT Powertel Agreement, the DT Powertel Merger, the DT VoiceStream
Agreement or the DT VoiceStream Merger.
Pursuant to the VoiceStream Powertel Agreement, upon consummation of the
VoiceStream Powertel Merger, each issued and outstanding share of Common Stock,
par value $0.01 per share (the "Powertel Common Stock"), of Powertel shall be
converted into a number of shares of Common Stock, par value $0.001 per share
(the "VoiceStream Common Stock"), of VoiceStream (the "Conversion Number") equal
to (i) 0.75 if the VoiceStream Average Closing Price (as defined below) is
$113.33 or below; (ii) 0.65 if the VoiceStream Average Closing Price is $130.77
or above; and (iii) if the VoiceStream Average Closing Price is greater than
$113.33 and less than $130.77, the quotient determined by dividing $85.00 by the
VoiceStream Average Closing Price, in each case subject to reduction in the
event that the aggregate number of outstanding shares of Powertel Common Stock
and securities convertible into or exchangeable for shares of Powertel Common
Stock as calculated pursuant to the VoiceStream Powertel Agreement exceeds the
number specified in the VoiceStream Powertel Agreement. Pursuant to the
VoiceStream Powertel Agreement, the "VoiceStream Average Closing Price" means
the volume weighted average closing price (based on the Nasdaq National Market
System ("Nasdaq") composite volume published by the Wall Street Journal) of the
VoiceStream Common Stock as publicly reported for Nasdaq as of 4:00 p.m. Eastern
Time for ten trading days randomly selected by lot out of the last twenty
trading days ending five trading days prior to the closing date of the
VoiceStream Powertel Merger. Also pursuant to the VoiceStream Powertel
Agreement, upon consummation of the VoiceStream Powertel Merger, each share of
Preferred Stock, par value $0.01 per share (the "Powertel Preferred Stock"), of
Powertel, whether or not such share is convertible by its terms as of the
effective time of the VoiceStream Powertel Merger, shall be converted into a
number of shares of VoiceStream Common Stock determined by multiplying (A) the
Conversion Number by (B) the sum of (1) the number of shares of Powertel Common
Stock into which such share of Powertel Preferred Stock would have been
converted as of the effective time of the VoiceStream Powertel Merger, if such
shares were then convertible and had been converted, plus
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(2) with respect to any share of Series E 6.5% Cumulative Convertible Preferred
Stock of Powertel or any share of Series F 6.5% Cumulative Convertible Preferred
Stock of Powertel, the number of shares of Powertel Common Stock that represent
accrued or declared but unpaid dividends on any such share calculated as if the
closing date of the VoiceStream Powertel Merger were a dividend payment date.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company, its predecessor, VoiceStream Wireless Corporation, a Washington
corporation ("VoiceStream Washington"), and its former parent, Western Wireless
Corporation ("Western"), from time to time, including having acted as lead
managing underwriter in the initial public offering of 12.65 million shares of
Western Common Stock in May 1996; having acted as lead manager in the public
offering of $200 million aggregate principal amount of 10.5% senior subordinated
notes due June 2006 of Western in May 1996; having acted as lead manager in the
private offering of $200 million aggregate principal amount of 10.5% senior
subordinated notes due February 2007 of Western in October 1996; having acted as
Western's financial advisor in connection with the sale of 19.9% of the
outstanding shares of VoiceStream Washington Common Stock to Hutchison PCS (USA)
Limited in February 1998; having acted as lead manager in the public offering of
13.915 million shares of Western Common Stock in April 1998; having acted as
financial advisor to VoiceStream in connection with its acquisition of Omnipoint
Corporation ("Omnipoint") in June 1999; having acted as financial advisor to
VoiceStream in connection with its acquisition of Aerial Communications, Inc.
("Aerial") in September 1999; having acted as co-manager in the private offering
of $1.1 billion aggregate principal amount of 10 3/8% senior notes due November
2009 of VoiceStream Washington and the Company and $720 million aggregate
principal amount of 11 7/8% senior discount notes due November 2009 of
VoiceStream Washington and the Company in November 1999; having acted as
VoiceStream's financial advisor in connection with, and having participated in
certain of the negotiations leading to, the DT Voicestream Agreement; and having
acted as its financial advisor in connection with, and having participated in
certain of the negotiations leading to, the Voicestream Powertel Agreement.
Investment funds affiliated with Goldman, Sachs & Co. have a principal
investment in VoiceStream in the amount of 10,088,128 shares of VoiceStream
Common Stock and have the right to designate a nominee for election to
VoiceStream's Board of Directors. Terence O'Toole, a Managing Director of
Goldman, Sachs & Co., is a director of VoiceStream. We have also provided
investment banking services in transactions involving Powertel from time to
time, including, through an affiliate, having purchased from Ericsson Inc.
("Ericsson"), in December 1997, $165 million aggregate principal amount of a
tranche of the loan made by Ericsson to Powertel (the "Ericsson Facility") and,
in June 1998, an additional $100 million aggregate principal amount of a tranche
of the Ericsson Facility, both tranches of which were subsequently syndicated to
other financial institutions. From time to time we have been a lender under the
Ericsson Facility and in that context, have been party to agreements with
respect to the Ericsson Facility. Goldman, Sachs & Co. provides a full range of
financial advisory and securities services and, in the course of its normal
trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of VoiceStream and Powertel for its
own account and for the accounts of customers. As of the date hereof, Goldman,
Sachs & Co. accumulated a net long position of 308 shares of Powertel Common
Stock. As of the same date and in addition to the principal investment referred
to above, Goldman, Sachs & Co. had a net short position of 180,716 shares of
VoiceStream Common Stock.
In connection with this opinion, we have reviewed, among other things, the
VoiceStream Powertel Agreement; the DT Powertel Agreement and the DT VoiceStream
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company (and its predecessors) and Powertel for the four years ended December
31, 1999; the Joint Proxy Statement dated January 25, 2000 in connection
E-2
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VoiceStream Wireless Corporation
August 26, 2000
Page 3
with the acquisitions of Omnipoint and Aerial; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company and Powertel;
certain other communications from the Company and Powertel to their respective
stockholders; certain internal financial analyses and forecasts for Powertel
prepared by management of Powertel; certain internal financial analyses and
forecasts for the Company prepared by the Company's management; and certain
financial analyses and forecasts for Powertel prepared by the Company's
management (the "Powertel Forecasts"). We also have held discussions with
members of the senior management of the Company and Powertel regarding their
assessment of the strategic rationale for, and the potential benefits of, the
transaction contemplated by the VoiceStream Powertel Agreement and the past and
current business operations, financial condition and future prospects of their
respective companies. In addition, we have reviewed the reported price and
trading activity for the VoiceStream Common Stock and Powertel Common Stock,
compared certain financial and stock market information for the Company and
Powertel with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the telecommunications industry specifically and in
other industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In that
regard, we have assumed with your consent that the Powertel Forecasts have been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the Company, and that the Powertel Forecasts will be realized
in the amounts and time periods contemplated thereby. In addition, we have not
made an independent evaluation or appraisal of the assets and liabilities of the
Company or Powertel or any of their subsidiaries and we have not been furnished
with any such evaluation or appraisal. We have also assumed that all material
governmental, regulatory or other consents and approvals necessary for the
consummation of the transaction contemplated by the VoiceStream Powertel
Agreement will be obtained without any adverse effect on the Company or Powertel
or the contemplated benefits of the transactions contemplated by the VoiceStream
Powertel Agreement. Our advisory services and the opinion expressed herein are
provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the transaction contemplated by
the VoiceStream Powertel Agreement and such opinion does not constitute a
recommendation as to how any holder of VoiceStream Common Stock should vote with
respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Conversion Number is fair from a financial point of view to VoiceStream.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
(GOLDMAN, SACHS & CO.)
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ANNEX F
OPINION OF MORGAN STANLEY DEAN WITTER
VOICESTREAM/POWERTEL MERGER
August 26, 2000
Board of Directors
Powertel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Members of the Board:
We understand Powertel, Inc. ("Powertel" or the "Company") and Deutsche
Telekom AG ("DT") propose to enter into an Agreement and Plan of Merger,
substantially in the form of the execution draft dated August 26, 2000 (the
"Merger Agreement"), which provides, among other things, for the merger (the
"Merger") of a corporation to be formed as a wholly-owned subsidiary of DT with
and into Powertel. Pursuant to the Merger, Powertel will become a wholly-owned
subsidiary of DT and each outstanding share of common stock, par value $0.01 per
share, of Powertel (the "Powertel Common Stock"), other than shares owned by DT
or Powertel, shall be converted into the right to receive 2.6353 ordinary shares
of DT (the "DT Common Stock"), subject to adjustment in certain circumstances.
In addition, each share of Preferred Stock, par value $0.01 per share, of
Powertel (the "Powertel Preferred Stock") shall be converted directly into the
right to receive DT Common Stock pursuant to the ratios set forth in the Merger
Agreement, subject to adjustment in certain circumstances. The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
As you know, VoiceStream Wireless Corporation ("VoiceStream") and DT
entered into an Agreement and Plan of Merger, dated as of July 23, 2000 (the
"VoiceStream Merger Agreement"), providing for the acquisition of VoiceStream by
DT (the "VoiceStream Merger"). We also understand that VoiceStream and Powertel
are entering into a separate merger agreement substantially in the form of the
execution draft dated August 26, 2000 (the "Alternative Merger Agreement"),
which provides for, among other things, the merger (the "Alternative Merger") of
a wholly owned subsidiary ("Alternative Sub") of VoiceStream with and into
Powertel in the event the VoiceStream Merger Agreement is terminated and the
VoiceStream Merger is not consummated. Pursuant to the Alternative Merger
Agreement, each outstanding share of Powertel Common Stock, other than shares
owned by Powertel or any subsidiary of Powertel or by VoiceStream, Alternative
Sub or any other subsidiary of VoiceStream, shall be converted into the right to
receive a certain number of shares of common stock, $0.001 par value, of
VoiceStream (the "VoiceStream Common Stock"), determined pursuant to the
formula(s) set forth in the Alternative Merger Agreement. In addition, each
share of Powertel Preferred Stock shall be converted directly into the right to
receive shares of VoiceStream Common Stock in accordance with the formula(s) set
forth in the Alternative Merger Agreement. The terms and conditions of the
Alternative Merger are more fully set forth in the Alternative Merger Agreement.
For the purposes of our opinion, we have assumed that each share of the Powertel
Preferred Stock has been converted into Powertel Common Stock immediately prior
to the consummation of the Merger or Alternative Merger. Our opinion does not
extend to the conversion terms of the Powertel Preferred Stock into Powertel
Common Stock.
You have asked for our opinion as to whether (i) the consideration to be
received by the holders of shares of Powertel Common Stock and Powertel
Preferred Stock pursuant to the Merger Agreement is fair from a financial point
of view to holders of shares of the Powertel Common Stock and Powertel Preferred
Stock and (ii) in the event the VoiceStream Merger is not consummated, the
consideration to be received by the holders of shares of the Powertel Common
Stock and Powertel Preferred Stock pursuant to the Alternative Merger Agreement
is fair from a financial point of view to holders of shares of the Powertel
Common Stock and Powertel Preferred Stock.
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For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of Powertel, DT and VoiceStream;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning Powertel, DT and VoiceStream
prepared by the managements of Powertel, DT, and VoiceStream, respectively;
(iii) analyzed certain financial projections prepared by the
management of Powertel;
(iv) analyzed certain financial projections for DT and VoiceStream
contained in certain securities analysts' research reports that were
recommended for review by the managements of DT and VoiceStream,
respectively;
(v) discussed the past and current operations and financial condition
and the prospects of Powertel, including information relating to certain
strategic, financial and operational benefits anticipated from each of the
Merger and the Alternative Merger, with senior executives of Powertel;
(vi) discussed the past and current operations and financial condition
and the prospects of DT, including information relating to certain
strategic, financial and operational benefits anticipated from the Merger
with senior executives of DT;
(vii) discussed the past and current operations and financial
condition and the prospects of VoiceStream, including information relating
to certain strategic, financial and operational benefits anticipated from
the Alternative Merger with senior executives of VoiceStream;
(viii) discussed the past and current operations and financial
condition and the prospects of DT and VoiceStream, including information
relating to certain strategic, financial and operational benefits
anticipated from the VoiceStream Merger, with senior executives of DT and
VoiceStream;
(ix) reviewed the reported prices and trading activity for the
Powertel Common Stock, the DT American Depositary Shares, each representing
one right to receive one share of DT Common Stock (the "DT ADS's") and the
VoiceStream Common Stock;
(x) compared the financial performance of Powertel, DT and VoiceStream
and the prices and trading activity of the Powertel Common Stock, the DT
ADS's and the VoiceStream Common Stock with those of certain other
publicly-traded companies comparable with Powertel, DT and VoiceStream
respectively and their securities;
(xi) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(xii) participated in discussions and negotiations among
representatives of Powertel, DT and VoiceStream and their financial and
legal advisors;
(xiii) reviewed the terms, including the financial terms, of the
Merger Agreement, the Alternative Merger Agreement and the VoiceStream
Merger Agreement and certain related documents; and
(xiv) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, including information
relating to certain strategic, financial and operational benefits anticipated
from each of the Merger, the Alternative Merger and the VoiceStream Merger, we
have assumed they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of Powertel, DT, and VoiceStream. For the purposes of our analysis, we have
relied with your consent on the estimates of certain securities analysts'
research reports that were recommended
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for review by the managements of DT and VoiceStream. Morgan Stanley & Co.
Incorporated has also assumed that the Alternative Merger will be consummated
only if the VoiceStream Merger is not consummated. In addition, we have assumed
the Merger will be consummated in accordance with the terms set forth in the
Merger Agreement, including that the Merger will be treated as a tax-free merger
and/or exchange pursuant to the Internal Revenue Code of 1986 (the "Code"), and
we have assumed that in the event the VoiceStream Merger is not consummated, the
Alternative Merger will be consummated in accordance with the terms set forth in
the Alternative Merger Agreement, including that the Alternative Merger will be
treated as a tax-free merger and/or exchange pursuant to the Code. Morgan
Stanley & Co. Incorporated has assumed that obtaining all necessary regulatory
approvals for the Merger or Alternative Merger will not have a material adverse
effect on Powertel, VoiceStream or DT or the financial, strategic and
operational benefits anticipated from the Merger or Alternative Merger. We have
not made any independent valuation or appraisal of the assets or liabilities of
Powertel, DT, or VoiceStream, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on financial, economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
We have acted as financial advisor to the Board of Directors of Powertel in
connection with these related transactions and will receive a fee for our
services. In the past, Morgan Stanley & Co. Incorporated and its affiliates have
provided financial advisory services and financing services for Powertel and DT
and have received fees for the rendering of these services.
It is understood this letter is for the information of the Board of
Directors of Powertel and may not be used for any other purpose without our
prior written consent, which consent will not be unreasonably withheld, except
this opinion may be included in its entirety in any filing made by Powertel in
respect of the Merger or Alternative Merger with the Securities and Exchange
Commission. In addition, this opinion does not in any manner address the prices
at which the Powertel Common Stock, the DT Common Stock or the VoiceStream
Common Stock will trade following the consummation of the Merger or Alternative
Merger, and Morgan Stanley & Co. Incorporated expresses no opinion or
recommendation as to how the holders of the Powertel Common Stock, holders of
the DT Common Stock or holders of the VoiceStream Common Stock should vote at
the shareholders' meetings held in connection with the Merger or Alternative
Merger. In addition, we express no opinion as to the relative values of the
consideration to be received by holders of shares of Powertel Common Stock and
Powertel Preferred Stock pursuant to the Merger Agreement and the consideration
to be received by holders of shares of the Powertel Common Stock and Powertel
Preferred Stock pursuant to the Alternative Merger Agreement.
Based on and subject to the foregoing, we are of the opinion on the date
hereof that (i) the consideration to be received by holders of shares of
Powertel Common Stock and Powertel Preferred Stock pursuant to the Merger
Agreement is fair from a financial point of view to holders of shares of the
Powertel Common Stock and Powertel Preferred Stock and (ii) in the event the
VoiceStream Merger is not consummated, the consideration to be received by the
holders of shares of the Powertel Common Stock and Powertel Preferred Stock
pursuant to the Alternative Merger Agreement is fair from a financial point of
view to holders of shares of the Powertel Common Stock and Powertel Preferred
Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ SCOTT W. MATLOCK
------------------------------------
Scott W. Matlock
Managing Director
F-3
503
ANNEX G
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
SEC. 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsections (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to secs.
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated
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therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective date
of the merger or consolidation, the record date shall be such effective
date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day
next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has
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submitted such stockholder's certificates of stock to the Register in Chancery,
if such is required, may participate fully in all proceedings until it is
finally determined that such stockholder is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Deutsche Telekom has obtained customary liability insurance for members of
its supervisory board and its management board and certain of its officers. This
includes insurance against liabilities under the Securities Act.
Under German law, a corporation may indemnify its officers, and, under
certain circumstances, German labor law requires a stock corporation to do so.
However, a corporation may not, as a general matter, indemnify members of the
management board or the supervisory board. In addition, German law may permit a
corporation to indemnify a member of the management board or the supervisory
board for attorneys' fees incurred if such member is the successful party in a
suit in a country, like the United States, where winning parties are required to
bear their own costs, if German law would have required the losing party to pay
the member's attorneys' fees had the suit been brought in Germany.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) The following Exhibits are filed herewith unless otherwise indicated:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Agreement and Plan of Merger, dated as of July 23, 2000, as
amended and restated on February 8, 2001, among Deutsche
Telekom AG, VoiceStream Wireless Corporation and a Delaware
corporation formed by Deutsche Telekom AG (included as Annex
A to the proxy statement/prospectus which is part of this
Registration Statement). Schedules and certain other
attachments to this Exhibit have not been filed; upon
request, Deutsche Telekom will furnish supplementally to the
Securities and Exchange Commission a copy of any omitted
schedule or attachment.
2.2 Agreement and Plan of Merger, dated as of August 26, 2000,
as amended and restated on February 8, 2001, among Deutsche
Telekom AG, Powertel, Inc. and a Delaware corporation formed
by Deutsche Telekom AG (included as Annex B to the proxy
statement/prospectus which is part of this Registration
Statement). Schedules and certain other attachments to this
Exhibit have not been filed; upon request, Deutsche Telekom
will furnish supplementally to the Securities and Exchange
Commission a copy of any omitted schedule or attachment.
2.3 Agreement and Plan of Reorganization, dated as of August 26,
2000, as amended and restated on February 8, 2001, among
VoiceStream Wireless Corporation, Powertel, Inc. and a
wholly-owned subsidiary of VoiceStream Wireless Corporation
(included as Annex C to the proxy statement/prospectus which
is part of this Registration Statement). Schedules and
certain other attachments to this Exhibit have not been
filed; upon request, Deutsche Telekom will request
VoiceStream and Powertel to furnish supplementally to the
Securities and Exchange Commission a copy of any omitted
schedule or attachment.
4.1 Articles of Association (Satzung) of Deutsche Telekom AG
(included as Exhibit 4.1 to the Amendment No. 1 to the
Registration Statement on Form F-4, filed on December 6,
2000).
4.2 Deposit Agreement among Deutsche Telekom AG, Citibank, N.A.
as Depositary and the owners and beneficial owners from time
to time of American Depositary Receipts evidencing American
Depositary Shares representing Shares of Deutsche Telekom AG
(incorporated herein by reference to Exhibit (a) to Deutsche
Telekom AG's Registration Statement on Form F-6 (Reg. No.
333-05724), filed on October 21, 1996).
4.3 Amendment to Deposit Agreement (incorporated herein by
reference to Exhibit (a)(ii) to Amendment No. 1 to the
Registration Statement on Form F-6 (Reg. No. 333-05724),
filed on August 10, 1998).
II-1
508
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.4 Amendment to Deposit Agreement (incorporated herein by
reference to Exhibit (a)(i) to Amendment No. 2 to the
Registration Statement on Form F-6 (Reg. No. 333-05724),
filed on December 27, 1999).
5 Opinion of Dr. Manfred Balz, General Counsel to Deutsche
Telekom AG as to the validity of the securities being
registered.
8.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding certain
tax matters.
8.2 Opinion of Jones, Day, Reavis & Pogue regarding certain tax
matters.
8.3 Opinion of Cleary, Gottlieb, Steen & Hamilton regarding
certain tax matters.
8.4 Opinion of Morris, Manning & Martin, LLP regarding certain
tax matters.
8.5 Opinion of Preston Gates & Ellis regarding certain tax
matters.
10.1 Stock Subscription Agreement, dated as of July 23, 2000,
between Deutsche Telekom AG and VoiceStream Wireless
Corporation (incorporated herein by reference to Exhibit
99.1 to the VoiceStream Wireless Corporation's Current
Report on Form 8-K (File No. 000-29667), dated July 28,
2000). Certain attachments to this Exhibit have not been
filed; upon request, Deutsche Telekom AG will furnish
supplementally a copy of any omitted attachment.
10.2 Certificate of Designation for the VoiceStream Convertible
Voting Preferred Stock (incorporated herein by reference to
Exhibit 4.1 to VoiceStream Wireless Corporation's Current
Report on Form 8-K (File No. 000-29667), dated October 11,
2000).
10.3 Investor Agreement between Deutsche Telekom AG and
VoiceStream Wireless Corporation, dated as of July 23, 2000
(incorporated herein by reference to Exhibit 99.2 to
VoiceStream Wireless Corporation's Current Report on Form
8-K (File No. 000-29667), dated July 28, 2000). An annex to
this Exhibit has not been filed; upon request, Deutsche
Telekom AG will furnish supplementally to the Securities and
Exchange Commission a copy of the omitted annex.
10.4 First Amended and Restated Voting Agreement among
VoiceStream Wireless Corporation and the stockholders
parties thereto, dated as of July 23, 2000 (incorporated
herein by reference to Exhibit 10.1 to VoiceStream Wireless
Corporation's Current Report on Form 8-K (File No.
000-29667), dated July 28, 2000).
10.5 Stockholder Agreement between Telephone & Data Systems, Inc.
and Deutsche Telekom AG, dated as of July 23, 2000, together
with the Side Letter Agreement between Telephone & Data
Systems, Inc. and Deutsche Telekom AG, dated as of July 23,
2000 (incorporated herein by reference to Exhibit 6 to
Deutsche Telekom AG's Schedule 13D filed on August 2, 2000).
10.6 Letter Agreement between Telephone & Data Systems, Inc. and
Deutsche Telekom AG, dated September 19, 2000 (incorporated
herein by reference to Exhibit 24 to Deutsche Telekom AG's
Amendment No. 2 to Schedule 13D filed on October 5, 2000).
10.7 Stockholder Agreement among Hutchison Telecommunications PCS
(USA) Limited, Hutchison Telecommunications Holdings (USA)
Limited and Deutsche Telekom AG, dated as of July 23, 2000
(incorporated herein by reference to Exhibit 7 to Deutsche
Telekom AG's Schedule 13D filed on August 2, 2000).
10.8 Stockholder Agreement among Sonera Corporation, Sonera
Holding B.V. and Deutsche Telekom AG, dated as of July 23,
2000 (incorporated herein by reference to Exhibit 8 to
Deutsche Telekom AG's Schedule 13D filed on August 2, 2000).
10.9 Stockholder Agreement among John W. Stanton, Theresa E.
Gillespie, Stanton Family Trust, PN Cellular, Inc., Stanton
Communications Corporation and Deutsche Telekom AG, dated as
of July 23, 2000 (incorporated herein by reference to
Exhibit 9 to Deutsche Telekom AG's Schedule 13D filed on
August 2, 2000).
II-2
509
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.10 Stockholder Agreement among GS Capital Partners, L.P., The
Goldman Sachs Group, Inc., Bridge Street Fund 1992, L.P.,
Stone Street Fund 1992, L.P. and Deutsche Telekom AG, dated
as of July 23, 2000 (incorporated herein by reference to
Exhibit 10 to Deutsche Telekom AG's Schedule 13D filed on
August 2, 2000).
10.11 Letter Agreement between Deutsche Telekom AG and Allen &
Company Incorporated, dated as of July 23, 2000
(incorporated herein by reference to Exhibit 11 to Deutsche
Telekom AG's Schedule 13D filed on August 2, 2000).
10.12 Letter Agreement between Deutsche Telekom AG and Richard
Fields, dated as of July 23, 2000 (incorporated herein by
reference to Exhibit 12 to Deutsche Telekom AG's Schedule
13D filed on August 2, 2000).
10.13 Stockholder Agreement between Allen & Company Incorporated
and Deutsche Telekom AG, dated as of August 25, 2000
(incorporated herein by reference to Exhibit 19 to Deutsche
Telekom AG's Amendment No. 1 to Schedule 13D filed on
September 8, 2000).
10.14 Stockholder Agreement between Douglas Smith and Deutsche
Telekom AG, dated as of August 16, 2000 (incorporated herein
by reference to Exhibit 20 to Deutsche Telekom AG's
Amendment No. 1 to Schedule 13D filed on September 8, 2000).
10.15 Agreement among Cook Inlet GSM, Inc., Cook Inlet
Telecommunications Inc., Deutsche Telekom AG and VoiceStream
Wireless Corporation, dated as of July 23, 2000, and Exhibit
A (Form of Voting and Lock-up Agreement) thereto
(incorporated herein by reference from Exhibit 10.2 to
VoiceStream Wireless Corporation's Current Report on Form
8-K (File No. 000-29667), dated July 28, 2000).
10.16 Agreement among Providence Media Partners, L.P., Providence
Equity Partners III, L.P., Providence Equity Operation
Partners III, L.P., Deutsche Telekom AG and VoiceStream
Wireless Corporation, dated as of July 23, 2000, and Exhibit
A (Form of Voting and Lock-up Agreement) thereto
(incorporated herein by reference to Exhibit 10.3 to
VoiceStream Wireless Corporation's Current Report on Form
8-K (File No. 000-29667), dated July 28, 2000).
10.17 Exchange Rights Acquisition and Grant Agreement among
VoiceStream PCS BTA I Corporation, VoiceStream Wireless
Corporation, Western Wireless Corporation and Providence
Media Partners, L.P., dated as of July 23, 2000
(incorporated herein by reference to Exhibit 10.4 to
VoiceStream Wireless Corporation's Current Report on Form
8-K (File No. 000-29667), dated July 28, 2000).
10.18 Exchange Rights Agreement between VoiceStream Wireless
Corporation, Providence Equity Partners III, L.P., and
Providence Equity Operation Partners III, L.P., dated as of
July 23, 2000 (incorporated herein by reference to Exhibit
10.5 to VoiceStream Wireless Corporation's Current Report on
Form 8-K (File No. 000-29667), dated July 28, 2000).
10.19 Stockholder Agreement between Deutsche Telekom AG and
Madison Dearborn Capital Partners, LP, dated as of September
18, 2000 (incorporated herein by reference to Exhibit 23 to
Deutsche Telekom AG's Amendment No. 2 to Schedule 13D filed
on October 5, 2000).
10.20 Stockholder Agreement among Deutsche Telekom AG, Donald W.
Burton, The Burton Partnership, L.P., The Burton Partnership
(QP), L.P., South Atlantic Venture Fund II, L.P., South
Atlantic Venture Fund III, L.P., South Atlantic Private
Equity Fund IV, L.P. and South Atlantic Private Equity Fund
IV (QP), L.P., dated as of August 26, 2000 (incorporated
herein by reference to Exhibit 2 to Deutsche Telekom AG's
Schedule 13D filed on September 5, 2000).
10.21 Stockholder Agreement between Deutsche Telekom AG and
American Water Works Company, dated as of August 26, 2000.
(incorporated herein by reference to Exhibit 3 to Deutsche
Telekom AG's Schedule 13D filed on September 5, 2000).
II-3
510
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.22 Stockholder Agreement between Deutsche Telekom AG and SCANA
Communications Holdings, Inc., dated as of August 26, 2000
(incorporated herein by reference to Exhibit 4 to Deutsche
Telekom AG's Schedule 13D filed on September 5, 2000).
10.23 Stockholder Agreement among Deutsche Telekom AG, ITC Holding
Company, Inc., ITC Service Company and ITC Wireless Inc.,
dated as of August 26, 2000 (incorporated herein by
reference to Exhibit 5 to Deutsche Telekom AG's Schedule 13D
filed on September 5, 2000).
10.24 Stockholder Agreement among Deutsche Telekom AG, Sonera
Corporation and Sonera Holding B.V., dated as of August 26,
2000 (incorporated herein by reference to Exhibit 6 to
Deutsche Telekom AG's Schedule 13D filed on September 5,
2000).
10.25 Agreement between Eliska Wireless Investors I, L.P. and
Deutsche Telekom AG, dated as of August 26, 2000
(incorporated herein by reference to Exhibit 7 to Deutsche
Telekom AG's Schedule 13D filed on September 5, 2000).
10.26 Stockholder Agreement among VoiceStream Wireless
Corporation, Donald W. Burton, The Burton Partnership, L.P.,
The Burton Partnership (QP), L.P., South Atlantic Venture
Fund II, L.P., South Atlantic Venture Fund III, L.P., South
Atlantic Private Equity Fund IV, L.P. and South Atlantic
Private Equity Fund IV (QP), L.P., dated as of August 26,
2000 (incorporated herein by reference to Exhibit 2 to
VoiceStream Wireless Corporation's Schedule 13D filed on
October 10, 2000).
10.27 Stockholder Agreement between VoiceStream Wireless
Corporation and The American Water Works Company, dated as
of August 26, 2000 (incorporated herein by reference to
Exhibit 3 to VoiceStream Wireless Corporation's Schedule 13D
filed on October 10, 2000).
10.28 Stockholder Agreement between VoiceStream Wireless
Corporation and SCANA Communications Holdings, Inc., dated
as of August 26, 2000 (incorporated herein by reference to
Exhibit 4 to VoiceStream Wireless Corporation's Schedule 13D
filed on October 10, 2000).
10.29 Stockholder Agreement among VoiceStream Wireless
Corporation, ITC Holding Company, Inc., ITC Wireless Inc.
and ITC Service Company, dated as of August 26, 2000
(incorporated herein by reference to Exhibit 5 to
VoiceStream Wireless Corporation's Schedule 13D filed on
October 10, 2000).
10.30 Stockholder Agreement among VoiceStream Wireless
Corporation, Sonera Corporation and Sonera Holding, B.V.,
dated as of August 26, 2000 (incorporated herein by
reference to Exhibit 6 to VoiceStream Wireless Corporation's
Schedule 13D filed on October 10, 2000).
10.31 Stockholder Agreement among Powertel, Inc., VoiceStream
Wireless Corporation, GS Capital Partners, L.P., The Goldman
Sachs Group, Inc., Bridge Street Fund 1992, L.P. and Stone
Street Fund 1992, L.P., dated as of August 26, 2000
(incorporated herein by reference to Exhibit 10.3 of
Powertel, Inc.'s Current Report on Form 8-K (File No.
0-23102), filed on August 31, 2000).
10.32 Stockholder Agreement among Powertel, Inc., VoiceStream
Wireless Corporation, Hutchison Telecommunications PCS (USA)
Limited and Hutchison Telecommunications Holdings (USA)
Limited, dated as of August 26, 2000 (incorporated herein by
reference to Exhibit 10.5 of Powertel, Inc.'s Current Report
on Form 8-K (File No. 0-23102), filed on August 31, 2000).
10.33 Stockholder Agreement among Powertel, Inc., VoiceStream
Wireless Corporation, Sonera Corporation and Sonera Holding,
B.V., dated as of August 26, 2000 (incorporated herein by
reference to Exhibit 10.2 of Powertel, Inc.'s Current Report
on Form 8-K (File No. 0-23102), filed on August 31, 2000).
10.34 Stockholder Agreement among Powertel, Inc., VoiceStream
Wireless Corporation, John W. Stanton, Theresa E. Gillespie,
PN Cellular, Inc., Stanton Family Trust and Stanton
Communications Corporation, dated as of August 26, 2000
(incorporated herein by reference to Exhibit 10.1 of
Powertel, Inc.'s Current Report on Form 8-K (File No.
0-23102), filed on August 31, 2000).
II-4
511
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.35 Stockholder Agreement among Powertel, Inc., VoiceStream
Wireless Corporation and Telephone & Data Systems, Inc.,
dated as of August 26, 2000 (incorporated herein by
reference to Exhibit 10.5 of Powertel, Inc.'s Current Report
on Form 8-K (File No. 0-23102), filed on August 31, 2000).
10.36 Side Letter Agreement between Powertel, Inc. and Telephone &
Data Systems, Inc., dated as of August 26, 2000
(incorporated herein by reference to Exhibit 9 to Powertel,
Inc.'s Amendment No. 1 to Schedule 13D filed on November 8,
2000).
10.37 Agreement between SSPCS Corporation and Deutsche Telekom AG,
dated as of September 27, 2000 (incorporated herein by
reference to Exhibit 25 to Deutsche Telekom AG's Amendment
No. 2 to Schedule 13D filed on October 5, 2000).
10.38 Retention Agreement between Deutsche Telekom AG and
VoiceStream Wireless Corporation, dated as of December 22,
2000.
10.39 Voting and Lockup Agreement between Cook Inlet Region, Inc.
and Deutsche Telekom AG, dated as of December 14, 2000.
23.1 Consent of PwC Deutsche Revision.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of PricewaterhouseCoopers LLP.
23.5 Consent of Dr. Manfred Balz (included in the opinion filed
as Exhibit 5 to this Registration Statement and incorporated
herein by reference).
23.6 Consent of Wachtell, Lipton, Rosen & Katz (included in the
opinion filed as Exhibit 8.1 to this Registration Statement
and incorporated herein by reference).
23.7 Consent of Jones, Day, Reavis & Pogue (included in the
opinion filed as Exhibit 8.2 to this Registration Statement
and incorporated herein by reference).
23.8 Consent of Cleary, Gottlieb, Steen & Hamilton (included in
the opinion filed as Exhibit 8.3 to this Registration
Statement and incorporated herein by reference).
23.9 Consent of Morris, Manning & Martin, LLP (included in the
opinion filed as Exhibit 8.4 to this Registration Statement
and incorporated herein by reference).
23.10 Consent of Preston Gates & Ellis LLP (included in the
opinion filed as Exhibit 8.5 to this Registration Statement
and incorporated herein by reference).
23.11 Consent of Goldman, Sachs & Co.
23.12 Consent of Morgan Stanley & Co. Incorporated.
24 Power of Attorney (see page II-7 of the Registration
Statement on Form F-4 filed on October 4, 2000).
99.1 Form of Proxy Card of VoiceStream Wireless Corporation.
99.2 Form of Proxy Card of Powertel, Inc.
---------------
(b) Financial Statement Schedules. All supporting schedules have been
omitted because they are either not required, are not applicable or because
equivalent information has been included in the financial statements, the notes
thereto or elsewhere herein.
(c) Reports, Opinions and Appraisals. Included as Annexes D, E, and F to
the proxy statement/prospectus which is part of this Registration Statement.
II-5
512
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
will be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To file a post-effective amendment to the Registration Statement to
include any financial statements required by Item 8 of Form 20-F at
the start of any delayed offering or throughout a continuous
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the Registration Statement will be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to be
the initial bona fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The undersigned registrant hereby undertakes that every prospectus
(i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment will be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing
II-6
513
provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes: (1) to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means; and (2) to arrange or provide for a facility
in the United States for the purpose of responding to such requests. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
514
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 2 to the Registration Statement on Form F-4 filed with
the Securities and Exchange Commission on October 4, 2000 to be signed on its
behalf by the undersigned, thereunto duly authorized in Bonn, Germany, on
February 8, 2001.
Deutsche Telekom AG
By: /s/ JEFFREY A. HEDBERG
------------------------------------
Name: Jeffrey A. Hedberg
Title: Member, Management Board
By: /s/ DR. KARL-GERHARD EICK
------------------------------------
Name: Dr. Karl-Gerhard Eick
Title: Member, Management Board,
Chief Financial Officer
and Chief Accounting
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to the Registration Statement on Form F-4 filed with the
Securities and Exchange Commission on October 4, 2000 has been signed by the
following persons in the following capacities as of February 8, 2001.
SIGNATURE TITLE
--------- -----
* Chairman and Chief Executive Officer
--------------------------------------------------------
Dr. Ron Sommer
* Member, Management Board
--------------------------------------------------------
Detlev Buchal
* Member, Management Board
--------------------------------------------------------
Dr. Hagen Hultzsch
* Member, Management Board
--------------------------------------------------------
Dr. Heinz Klinkhammer
* Member, Management Board, Chief Financial
-------------------------------------------------------- Officer and Chief Accounting Officer
Dr. Karl-Gerhard Eick
* Member, Management Board
--------------------------------------------------------
Josef Brauner
* Member, Management Board
--------------------------------------------------------
Jeffrey A. Hedberg
* Member, Management Board
--------------------------------------------------------
Dipl. Ing. Gerd Tenzer
II-8
515
SIGNATURE
---------
/s/ PAUL B. GROSSE
--------------------------------------------------------
(Authorized Representative)
Name: Paul B. Grosse
Title: President and Chief Executive Officer, Deutsche
Telekom, Inc.
*By: /s/ DR. KARL-GERHARD EICK
-----------------------------------
Dr. Karl-Gerhard Eick
Attorney-in-Fact
/s/ JEFFREY A. HEDBERG
-----------------------------------
Jeffrey A. Hedberg
Attorney-in-Fact
II-9
516
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Agreement and Plan of Merger, dated as of July 23, 2000, as
amended and restated on February 8, 2001, among Deutsche
Telekom AG, VoiceStream Wireless Corporation and a Delaware
corporation formed by Deutsche Telekom AG (included as Annex
A to the proxy statement/prospectus which is part of this
Registration Statement). Schedules and certain other
attachments to this Exhibit have not been filed; upon
request, Deutsche Telekom will furnish supplementally to the
Securities and Exchange Commission a copy of any omitted
schedule or attachment.
2.2 Agreement and Plan of Merger, dated as of August 26, 2000,
as amended and restated on February 8, 2001, among Deutsche
Telekom AG, Powertel, Inc. and a Delaware corporation formed
by Deutsche Telekom AG (included as Annex B to the proxy
statement/prospectus which is part of this Registration
Statement). Schedules and certain other attachments to this
Exhibit have not been filed; upon request, Deutsche Telekom
will furnish supplementally to the Securities and Exchange
Commission a copy of any omitted schedule or attachment.
2.3 Agreement and Plan of Reorganization, dated as of August 26,
2000, as amended and restated on February 8, 2001, among
VoiceStream Wireless Corporation, Powertel, Inc. and a
wholly-owned subsidiary of VoiceStream Wireless Corporation
(included as Annex C to the proxy statement/prospectus which
is part of this Registration Statement). Schedules and
certain other attachments to this Exhibit have not been
filed; upon request, Deutsche Telekom will request
VoiceStream and Powertel to furnish supplementally to the
Securities and Exchange Commission a copy of any omitted
schedule or attachment.
4.1 Articles of Association (Satzung) of Deutsche Telekom AG
(included as Exhibit 4.1 to the Amendment No. 1 to the
Registration Statement on Form F-4, filed on December 6,
2000).
4.2 Deposit Agreement among Deutsche Telekom AG, Citibank, N.A.
as Depositary and the owners and beneficial owners from time
to time of American Depositary Receipts evidencing American
Depositary Shares representing Shares of Deutsche Telekom AG
(incorporated herein by reference to Exhibit (a) to Deutsche
Telekom AG's Registration Statement on Form F-6 (Reg. No.
333-05724), filed on October 21, 1996).
4.3 Amendment to Deposit Agreement (incorporated herein by
reference to Exhibit (a)(ii) to Amendment No. 1 to the
Registration Statement on Form F-6 (Reg. No. 333-05724),
filed on August 10, 1998).
4.4 Amendment to Deposit Agreement (incorporated herein by
reference to Exhibit (a)(i) to Amendment No. 2 to the
Registration Statement on Form F-6 (Reg. No. 333-05724),
filed on December 27, 1999).
5 Opinion of Dr. Manfred Balz, General Counsel to Deutsche
Telekom AG as to the validity of the securities being
registered.
8.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding certain
tax matters.
8.2 Opinion of Jones, Day, Reavis & Pogue regarding certain tax
matters.
8.3 Opinion of Cleary, Gottlieb, Steen & Hamilton regarding
certain tax matters.
8.4 Opinion of Morris, Manning & Martin, LLP regarding certain
tax matters.
8.5 Opinion of Preston Gates & Ellis LLP regarding certain tax
matters.
10.1 Stock Subscription Agreement, dated as of July 23, 2000,
between Deutsche Telekom AG and VoiceStream Wireless
Corporation (incorporated herein by reference to Exhibit
99.1 to the VoiceStream Wireless Corporation's Current
Report on Form 8-K (File No. 000-29667), dated July 28,
2000). Certain attachments to this Exhibit have not been
filed; upon request, Deutsche Telekom AG will furnish
supplementally a copy of any omitted attachment.
517
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.2 Certificate of Designation for the VoiceStream Convertible
Voting Preferred Stock (incorporated herein by reference to
Exhibit 4.1 to VoiceStream Wireless Corporation's Current
Report on Form 8-K (File No. 000-29667), dated October 11,
2000).
10.3 Investor Agreement between Deutsche Telekom AG and
VoiceStream Wireless Corporation, dated as of July 23, 2000
(incorporated herein by reference to Exhibit 99.2 to
VoiceStream Wireless Corporation's Current Report on Form
8-K (File No. 000-29667), dated July 28, 2000). An annex to
this Exhibit has not been filed; upon request, Deutsche
Telekom AG will furnish supplementally to the Securities and
Exchange Commission a copy of the omitted annex.
10.4 First Amended and Restated Voting Agreement among
VoiceStream Wireless Corporation and the stockholders
parties thereto, dated as of July 23, 2000 (incorporated
herein by reference to Exhibit 10.1 to VoiceStream Wireless
Corporation's Current Report on Form 8-K (File No.
000-29667), dated July 28, 2000).
10.5 Stockholder Agreement between Telephone & Data Systems, Inc.
and Deutsche Telekom AG, dated as of July 23, 2000, together
with the Side Letter Agreement between Telephone & Data
Systems, Inc. and Deutsche Telekom AG, dated as of July 23,
2000 (incorporated herein by reference to Exhibit 6 to
Deutsche Telekom AG's Schedule 13D filed on August 2, 2000).
10.6 Letter Agreement between Telephone & Data Systems, Inc. and
Deutsche Telekom AG, dated September 19, 2000 (incorporated
herein by reference to Exhibit 24 to Deutsche Telekom AG's
Amendment No. 2 to Schedule 13D filed on October 5, 2000).
10.7 Stockholder Agreement among Hutchison Telecommunications PCS
(USA) Limited, Hutchison Telecommunications (USA) Limited
and Deutsche Telekom AG, dated as of July 23, 2000
(incorporated herein by reference to Exhibit 7 to Deutsche
Telekom AG's Schedule 13D filed on August 2, 2000).
10.8 Stockholder Agreement among Sonera Corporation, Sonera
Holding B.V. and Deutsche Telekom AG, dated as of July 23,
2000 (incorporated herein by reference to Exhibit 8 to
Deutsche Telekom AG's Schedule 13D filed on August 2, 2000).
10.9 Stockholder Agreement among John W. Stanton, Theresa E.
Gillespie, Stanton Family Trust, PN Cellular, Inc., Stanton
Communications Corporation and Deutsche Telekom AG, dated as
of July 23, 2000 (incorporated herein by reference to
Exhibit 9 to Deutsche Telekom AG's Schedule 13D filed on
August 2, 2000).
10.10 Stockholder Agreement among GS Capital Partners, L.P., The
Goldman Sachs Group, Inc., Bridge Street Fund 1992, L.P.,
Stone Street Fund 1992, L.P. and Deutsche Telekom AG, dated
as of July 23, 2000 (incorporated herein by reference to
Exhibit 10 to Deutsche Telekom AG's Schedule 13D filed on
August 2, 2000).
10.11 Letter Agreement between Deutsche Telekom AG and Allen &
Company Incorporated, dated as of July 23, 2000
(incorporated herein by reference to Exhibit 11 to Deutsche
Telekom AG's Schedule 13D filed on August 2, 2000).
10.12 Letter Agreement between Deutsche Telekom AG and Richard
Fields, dated as of July 23, 2000 (incorporated herein by
reference to Exhibit 12 to Deutsche Telekom AG's Schedule
13D filed on August 2, 2000).
10.13 Stockholder Agreement between Allen & Company Incorporated
and Deutsche Telekom AG, dated as of August 25, 2000
(incorporated herein by reference to Exhibit 19 to Deutsche
Telekom AG's Amendment No. 1 to Schedule 13D filed on
September 8, 2000).
10.14 Stockholder Agreement between Douglas Smith and Deutsche
Telekom AG, dated as of August 16, 2000 (incorporated herein
by reference to Exhibit 20 to Deutsche Telekom AG's
Amendment No. 1 to Schedule 13D filed on September 8, 2000).
518
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.15 Agreement among Cook Inlet GSM, Inc., Cook Inlet
Telecommunications, Inc., Deutsche Telekom AG and
VoiceStream Wireless Corporation, dated as of July 23, 2000,
and Exhibit A (Form of Voting and Lock-up Agreement) thereto
(incorporated herein by reference from Exhibit 10.2 to
VoiceStream Wireless Corporation's Current Report on Form
8-K (File No. 000-29667), dated July 28, 2000).
10.16 Agreement among Providence Media Partners, L.P., Providence
Equity Partners III, L.P., Providence Equity Operation
Partners III, L.P., Deutsche Telekom AG and VoiceStream
Wireless Corporation, dated as of July 23, 2000, and Exhibit
A (Form of Voting and Lock-up Agreement) thereto
(incorporated herein by reference to Exhibit 10.3 to
VoiceStream Wireless Corporation's Current Report on Form
8-K (File No. 000-29667), dated July 28, 2000).
10.17 Exchange Rights Acquisition and Grant Agreement among
VoiceStream PCS BTA I Corporation, VoiceStream Wireless
Corporation, Western Wireless Corporation and Providence
Media Partners, L.P., dated as of July 23, 2000
(incorporated herein by reference to Exhibit 10.4 to
VoiceStream Wireless Corporation's Current Report on Form
8-K (File No. 000-29667), dated July 28, 2000).
10.18 Exchange Rights Agreement between VoiceStream Wireless
Corporation, Providence Equity Partners III, L.P., and
Providence Equity Operation Partners III, L.P., dated as of
July 23, 2000 (incorporated herein by reference to Exhibit
10.5 to VoiceStream Wireless Corporation's Current Report on
Form 8-K (File No. 000-29667), dated July 28, 2000).
10.19 Stockholder Agreement between Deutsche Telekom AG and
Madison Dearborn Capital Partners, LP, dated as of September
18, 2000 (incorporated herein by reference to Exhibit 23 to
Deutsche Telekom AG's Amendment No. 2 to Schedule 13D filed
on October 5, 2000).
10.20 Stockholder Agreement among Deutsche Telekom AG, Donald W.
Burton, The Burton Partnership, L.P., The Burton Partnership
(QP), L.P., South Atlantic Venture Fund II, L.P., South
Atlantic Venture Fund III, L.P., South Atlantic Private
Equity Fund IV, L.P. and South Atlantic Private Equity Fund
IV (QP), L.P., dated as of August 26, 2000 (incorporated
herein by reference to Exhibit 2 to Deutsche Telekom AG's
Schedule 13D filed on September 5, 2000).
10.21 Stockholder Agreement between Deutsche Telekom AG and
American Water Works Company, dated as of August 26, 2000
(incorporated herein by reference to Exhibit 3 to Deutsche
Telekom AG's Schedule 13D filed on September 5, 2000).
10.22 Stockholder Agreement between Deutsche Telekom AG and SCANA
Communications Holdings, Inc., dated as of August 26, 2000
(incorporated herein by reference to Exhibit 4 to Deutsche
Telekom AG's Schedule 13D filed on September 5, 2000).
10.23 Stockholder Agreement among Deutsche Telekom AG, ITC Holding
Company, Inc., ITC Service Company and ITC Wireless Inc.,
dated as of August 26, 2000 (incorporated herein by
reference to Exhibit 5 to Deutsche Telekom AG's Schedule 13D
filed on September 5, 2000).
10.24 Stockholder Agreement among Deutsche Telekom AG, Sonera
Corporation and Sonera Holding B.V., dated as of August 26,
2000 (incorporated herein by reference to Exhibit 6 to
Deutsche Telekom AG's Schedule 13D filed on September 5,
2000).
10.25 Agreement between Eliska Wireless Investors I, L.P. and
Deutsche Telekom AG, dated as of August 26, 2000
(incorporated herein by reference to Exhibit 7 to Deutsche
Telekom AG's Schedule 13D filed on September 5, 2000).
519
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.26 Stockholder Agreement among VoiceStream Wireless
Corporation, Donald W. Burton, The Burton Partnership, L.P.,
The Burton Partnership (QP), L.P., South Atlantic Venture
Fund II, L.P., South Atlantic Venture Fund III, L.P., South
Atlantic Private Equity Fund IV, L.P. and South Atlantic
Private Equity Fund IV (QP), L.P., dated as of August 26,
2000 (incorporated herein by reference to Exhibit 2 to
VoiceStream Wireless Corporation's Schedule 13D filed on
October 10, 2000).
10.27 Stockholder Agreement between VoiceStream Wireless
Corporation and The American Water Works Company, dated as
of August 26, 2000 (incorporated herein by reference to
Exhibit 3 to VoiceStream Wireless Corporation's Schedule 13D
filed on October 10, 2000).
10.28 Stockholder Agreement between VoiceStream Wireless
Corporation and SCANA Communications Holdings, Inc., dated
as of August 26, 2000 (incorporated herein by reference to
Exhibit 4 to VoiceStream Wireless Corporation's Schedule 13D
filed on October 10, 2000).
10.29 Stockholder Agreement among VoiceStream Wireless
Corporation, ITC Holding Company, Inc., ITC Wireless Inc.
and ITC Service Company, dated as of August 26, 2000
(incorporated herein by reference to Exhibit 5 to
VoiceStream Wireless Corporation's Schedule 13D filed on
October 10, 2000).
10.30 Stockholder Agreement among VoiceStream Wireless
Corporation, Sonera Corporation and Sonera Holding, B.V.,
dated as of August 26, 2000 (incorporated herein by
reference to Exhibit 6 to VoiceStream Wireless Corporation's
Schedule 13D filed on October 10, 2000).
10.31 Stockholder Agreement among Powertel, Inc., VoiceStream
Wireless Corporation, GS Capital Partners, L.P., The Goldman
Sachs Group, Inc., Bridge Street Fund 1992, L.P. and Stone
Street Fund 1992, L.P., dated as of August 26, 2000
(incorporated herein by reference to Exhibit 10.3 of
Powertel, Inc.'s Current Report on Form 8-K (File No.
0-23102), filed on August 31, 2000).
10.32 Stockholder Agreement among Powertel, Inc., VoiceStream
Wireless Corporation, Hutchison Telecommunications PCS (USA)
Limited and Hutchison Telecommunications Holdings (USA)
Limited, dated as of August 26, 2000 (incorporated herein by
reference to Exhibit 10.5 of Powertel, Inc.'s Current Report
on Form 8-K (File No. 0-23102), filed on August 31, 2000).
10.33 Stockholder Agreement among Powertel, Inc., VoiceStream
Wireless Corporation, Sonera Corporation and Sonera Holding,
B.V., dated as of August 26, 2000 (incorporated herein by
reference to Exhibit 10.2 of Powertel, Inc.'s Current Report
on Form 8-K (File No. 0-23102), filed on August 31, 2000).
10.34 Stockholder Agreement among Powertel, Inc., VoiceStream
Wireless Corporation, John W. Stanton, Theresa E. Gillespie,
PN Cellular, Inc., Stanton Family Trust and Stanton
Communications Corporation, dated as of August 26, 2000
(incorporated herein by reference to Exhibit 10.1 of
Powertel, Inc.'s Current Report on Form 8-K (File No.
0-23102), filed on August 31, 2000).
10.35 Stockholder Agreement among Powertel, Inc., VoiceStream
Wireless Corporation and Telephone & Data Systems, Inc.,
dated as of August 26, 2000 (incorporated herein by
reference to Exhibit 10.5 of Powertel, Inc.'s Current Report
on Form 8-K (File No. 0-23102), filed on August 31, 2000).
10.36 Side Letter Agreement between Powertel, Inc. and Telephone &
Data Systems, Inc. dated as of August 26, 2000 (incorporated
herein by reference to Exhibit 9 to Powertel, Inc.'s
Amendment No. 1 to Schedule 13D filed on November 8, 2000).
10.37 Agreement between SSPCS Corporation and Deutsche Telekom AG,
dated as of September 27, 2000 (incorporated herein by
reference to Exhibit 25 to Deutsche Telekom AG's Amendment
No. 2 to Schedule 13D filed on October 5, 2000).
10.38 Retention Agreement between Deutsche Telekom AG and
VoiceStream Wireless Corporation, dated as of December 22,
2000.
520
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.39 Voting and Lockup Agreement between Cook Inlet Region, Inc.
and Deutsche Telekom AG, dated as of December 14, 2000.
23.1 Consent of PwC Deutsche Revision.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of PricewaterhouseCoopers LLP.
23.5 Consent of Dr. Manfred Balz (included in the opinion filed
as Exhibit 5 to this Registration Statement and incorporated
herein by reference).
23.6 Consent of Wachtell, Lipton, Rosen & Katz (included in the
opinion filed as Exhibit 8.1 to this Registration Statement
and incorporated by reference).
23.7 Consent of Jones, Day, Reavis & Pogue (included in the
opinion filed as Exhibit 8.2 to this Registration Statement
and incorporated herein by reference).
23.8 Consent of Cleary, Gottlieb, Steen & Hamilton (included in
the opinion filed as Exhibit 8.3 to this Registration
Statement and incorporated herein by reference).
23.9 Consent of Morris, Manning & Martin, LLP (included in the
opinion filed as Exhibit 8.4 to this Registration Statement
and incorporated herein by reference).
23.10 Consent of Preston Gates & Ellis LLP (included in the
opinion filed as Exhibit 8.5 to this Registration Statement
and incorporated herein by reference).
23.11 Consent of Goldman, Sachs & Co.
23.12 Consent of Morgan Stanley & Co. Incorporated.
24 Power of Attorney (See Page II-7 of the Registration
Statement on Form F-4 filed on October 4, 2000).
99.1 Form of Proxy Card of VoiceStream Wireless Corporation.
99.2 Form of Proxy Card of Powertel, Inc.
---------------
(b) Financial Statement Schedules. All supporting schedules have been
omitted because they are either not required, are not applicable or because
equivalent information has been included in the financial statements, the notes
thereto or elsewhere herein.
(c) Reports, Opinions and Appraisals. Included as Annexes D, E and F to the
proxy statement/prospectus which is part of this Registration Statement.