SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
[ ] Definitive Information Statement
METROMEDIA FIBER NETWORK, INC.
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(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on
which the filing fee is calculated and state how it was
determined.)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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METROMEDIA FIBER NETWORK, INC.
One North Lexington Avenue
White Plains, NY 10601
(914) 421-6700
INFORMATION STATEMENT
Dated January __, 2000
We are furnishing this information statement to holders of our class A
common stock in connection with the previous approval by our board of directors
of the transaction described below and the subsequent adoption by written
consent of that transaction by a majority vote of our stockholders. All
corporate approvals in connection with the transaction described below have been
obtained and this information statement is furnished solely for the purpose of
informing stockholders, in the manner required by the Securities Exchange Act of
1934, of this corporate action.
We Are Not Asking You for a Proxy and You Are Requested Not to Send Us
a Proxy.
The record date for determining stockholders entitled to receive this
information statement has been established as the close of business on January
__, 2000. As of January 13, 2000, there were 205,640,020 shares of our class A
common stock, par value $.01 per share, issued and outstanding and 33,769,272
shares of our class B common stock, par value $.01 per share, issued and
outstanding. Each share of our class A common stock entitles its holder to one
vote on all matters submitted to a vote of the stockholders, and each share of
our class B common stock entitles its holder to ten votes on all matters
submitted to a vote of the stockholders.
ACTIONS TAKEN
On October 7, 1999, we entered into a securities purchase agreement
with Bell Atlantic Investments, Inc., a Delaware corporation, under which Bell
Atlantic agreed to purchase:
o up to 25,558,109 newly issued shares of our class A common stock
at a purchase price of $28.00 per share; and
o up to $975,281,364 of our convertible subordinated notes due
2010, which are convertible into shares of our class A common
stock at a conversion price of $34.00 per share (or 28,684,746
shares of our class A common stock).
The terms of this transaction are described in greater detail below. We
expect this transaction, which is subject to customary closing conditions, to be
completed by the end of the first quarter of 2000.
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This transaction was unanimously approved by our board of directors on
October 6, 1999. Although approval of this transaction by our stockholders is
not required under applicable Delaware law, we are required to obtain
stockholder approval under the rules applicable to companies listed on the
NASDAQ Stock Market.
Under the NASDAQ rules, we are required to obtain the approval of our
stockholders before we may issue any number of shares of our common stock (or
securities convertible into our common stock) equal to or in excess of 20% of
the number of shares of our common stock outstanding on the date of the proposed
issuance (and without giving effect to the issuance) if those shares are being
issued at a price per share below the greater of the market or book value of our
common stock on the date of issuance. In the proposed transaction with Bell
Atlantic described in more detail below, we plan to issue and sell to Bell
Atlantic a number of shares of class A common stock and convertible subordinated
notes which are convertible into shares of class A common stock so that after
giving effect to the sale of the shares of our class A common stock and the
convertible subordinated notes to Bell Atlantic, Bell Atlantic will not own in
excess of 19.9% of our outstanding class A common stock (assuming conversion of
all convertible subordinated notes). However, as the NASDAQ rules require us to
calculate for purposes of whether a stockholder vote is required the number of
shares of our class A common stock being issued to Bell Atlantic (including
those issuable upon conversion of the convertible subordinated notes) without
giving effect to the issuance of securities to Bell Atlantic, the affirmative
vote of the holders of a majority of the outstanding shares of our common stock
is required with respect to the number of shares of our common stock (or
securities convertible into our common stock) equal to or in excess of 20% of
the number of shares of our common stock on the date of the proposed issuance to
approve the transaction with Bell Atlantic described below.
On January __, 2000, Stephen A. Garofalo, Stuart Subotnick and
Metromedia Company, who collectively hold 66% of the total voting power of our
issued and outstanding common stock, executed a written consent approving this
transaction. As a result, no further vote or approval of our stockholders is
needed to approve the transaction with Bell Atlantic.
Under applicable federal securities laws, the transaction with Bell
Atlantic cannot be effected until at least 20 business days after this
information statement is sent or given to our stockholders. This information
statement is being mailed to stockholders on or about January __, 2000.
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NO DISSENTERS' RIGHTS
The corporate actions described in this information statement will not
afford our stockholders the opportunity to dissent from those actions or to
receive an agreed or judicially appraised value for their shares of our common
stock as a result of those actions.
THE TRANSACTION WITH BELL ATLANTIC
Terms of the Securities Purchase Agreement with Bell Atlantic
General Terms of the Securities Purchase Agreement
On October 7, 1999, we entered into a securities purchase agreement
with Bell Atlantic. In the securities purchase agreement, we agreed, subject to
closing conditions discussed below, to consummate the transaction described
below at two separate closings in order to satisfy the NASDAQ requirement that
our stockholders approve the issuance of shares of our class A common stock (or
securities convertible into our class A common stock) in excess of 19.9% of the
outstanding shares of our class A common stock before giving effect to the
issuance as part of the transaction being approved, which shares in excess of
that amount would be sold at the second closing. Since we have obtained the
requisite stockholder approval of the issuance of shares of our class A common
stock to Bell Atlantic, we intend to consolidate the transactions described
below at the "first" and "second" closings at a single closing.
At the first closing, we agreed to issue and sell to Bell Atlantic for
a purchase price of $28.00 per share a minimum of 23,027,856 shares of our class
A common stock. If we issue any additional shares of class A common stock from
October 7, 1999 to the date of the first closing, the number of shares of class
A common stock to be sold at the first closing to Bell Atlantic will be
increased to the lesser of:
o 9.9% of the number of shares of our common stock issued and
outstanding immediately prior to the first closing; and
o 25,558,109 shares of class A common stock.
Also at the first closing, we agreed to issue and sell to Bell Atlantic
convertible subordinated notes in a minimum aggregate principal amount of
$790,855,674 at a purchase price equal to 100% of the aggregate principal amount
of the notes sold. The terms of these convertible subordinated notes are
described below. If we issue any additional shares of class A common stock from
October 7, 1999 to the date of the first closing, the aggregate principal amount
of convertible
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subordinated notes to be sold at the first closing to Bell Atlantic will be
increased to the lesser of:
o the product of (i) 10% of the number of shares of our common
stock issued and outstanding immediately prior to the first
closing, multiplied by (ii) $34.00; and
o $975,281,364.
At the second closing, we agreed to issue and sell to Bell Atlantic for
a purchase price of $28.00 per share the number of shares of our class A common
stock equal to:
o 25,558,109 shares; minus
-----
o the number of shares purchased by Bell Atlantic at the first
closing.
Following the purchases of class A common stock by Bell Atlantic at the
first and second closings, Bell Atlantic will beneficially own 9.9% of the
number of outstanding shares of our common stock immediately following the
consummation of the second closing.
Also at the second closing, we agreed to issue and sell to Bell
Atlantic convertible subordinated notes (at a price equal to 100% of the
principal amount of the notes being purchased) in an aggregate principal amount
equal to:
o $975,281,364; minus
o the aggregate principal amount of the convertible subordinated
notes purchased by Bell Atlantic at the first closing.
Following the purchases of convertible subordinated notes by Bell
Atlantic at the first and second closings, the number of shares of our class A
common stock into which these notes are convertible will be equal to 10% of the
number of outstanding shares of our common stock immediately following the
consummation of the second closing.
Under the terms of the securities purchase agreement, from October 7,
1999 to the date of the first closing, if we consummate, publicly announce or
enter into any agreement with a third party to privately sell 25,000,000 or more
shares of our capital stock for a purchase price of less than $28.00 per share,
the securities purchase agreement will be amended to reflect those more
favorable purchase price terms given to that third party, including with respect
to the conversion price of the
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convertible subordinated notes. To date, we have not entered into a transaction
of this type.
Bell Atlantic Rights to Appoint Members to our Board of Directors
After Bell Atlantic converts its convertible subordinated notes into
shares of our class A common stock and assuming it still owns at least 5% of our
outstanding common stock, Bell Atlantic may appoint two individuals to serve on
our board of directors. The conditions under which Bell Atlantic may convert any
of the convertible subordinated notes are described below. If Bell Atlantic
ceases to beneficially own at least 5% of the outstanding shares of our common
stock at any time for a period of 90 consecutive days, the individuals selected
by them must promptly resign from their positions as members of our board of
directors. In the event that Bell Atlantic is entitled to appoint directors but
chooses not to designate at least one director, Bell Atlantic may designate one
representative who may participate as an observer at each meeting of our board
of directors. This observer will not have the right to vote, but will receive
notice of each meeting and receive any other materials relevant to that meeting
at the same time and in the same manner as our directors.
Conditions to First and Second Closings
Our obligation and Bell Atlantic's obligation to consummate the first
and second closings are both subject to the following conditions:
o the truth and correctness of the representations and warranties
of the other party contained in the securities purchase
agreement;
o the performance of or compliance with all covenants and
agreements of the other party contained in the securities
purchase agreement;
o the absence of any order or ruling of any governmental authority
that:
(i) restrains, prevents or materially changes the
transactions contemplated in the securities purchase
agreement; or
(ii) requires or requests any amendment, modification or
waiver of any provision of the securities purchase
agreement or any related transaction documents;
o the absence of any pending suit, action, investigation or
proceeding by any governmental authority that seeks to:
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(i) restrain or prohibit the purchase and sale of the
shares of our common stock or convertible subordinated
notes or any of the other transactions contemplated by
the securities purchase agreement;
(ii) require the payment of any significant damages, fees or
other amounts by either party in connection with the
sale of the shares of our common stock or convertible
subordinated notes or the consummation of any of the
other transactions contemplated in the securities
purchase agreement;
(iii) prohibit or limit the ownership or operation by either
party of, or compel either party to dispose of or hold
separate, any of its business or assets, in each case,
as a result of the sale of shares of our common stock
or convertible subordinated notes or any of the other
transactions contemplated by the securities purchase
agreement; or
(iv) require any amendment, modification or waiver of any
provision of the securities purchase agreement or any
related transaction documents;
o the execution and delivery of each of the related transaction
documents by the parties;
o the procurement of all consents and approvals of all governmental
authorities and all other persons that are necessary to
consummate the transaction and for Bell Atlantic to receive the
benefits contemplated by the securities purchase agreement;
o the amendment and restatement of our franchise agreement with the
City of New York;
o the receipt by both parties of legal opinions; and
o the first closing must be consummated in accordance with the
terms of the securities purchase agreement as a condition to the
consummation of the second closing.
Bell Atlantic's obligation to consummate the first and second closings
is subject to the following conditions:
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o the valid delivery and transfer of certificates representing the
shares of our class A common stock and convertible subordinated
notes to be sold to Bell Atlantic, free and clear of any and all
liens;
o the ownership by Metromedia Company and its related persons of at
least 50.1% of the voting power of our common stock;
o the ownership by any permitted holders of our class B common
stock (which includes Metromedia Company and Messrs. John W.
Kluge and Stuart Subotnick) of all of the ownership interests of
Metromedia Company; and
o the absence of any public announcement by us or any other person
between the execution date of the securities purchase agreement
and the date of either the first or second closing of any
transaction which would result in a change of control of
Metromedia Fiber.
In addition, Bell Atlantic's obligation to consummate the first closing
is subject to the following conditions:
o no material adverse change having occurred from the date of
execution of the securities purchase agreement to the date of the
first closing; and
o the absence of any consummation, public announcement or filing of
a registration statement by us with respect to the issuance or
sale of 25,000,000 or more of our equity securities or
convertible debt securities that are convertible into 25,000,000
or more shares of our common stock, subject to certain
exclusions.
Our obligation to consummate the second closing is subject to the
approval by a majority of our stockholders of the issuance and sale of the
shares of common stock and the convertible subordinated notes and the issuance
of shares of class A common stock issuable upon conversion of the convertible
subordinated notes issued on the date of the second closing. This approval has
already been obtained.
Following consummation of the transaction described above with Bell
Atlantic, we will have approximately _________ shares of class A common stock
(assuming conversion of all of the convertible subordinated notes issued to Bell
Atlantic) and __________ shares of class B common stock outstanding. No shares
of our class A common stock or class B common stock are entitled to preemptive
rights.
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The terms of this issuance and sale are more fully described in the
securities purchase agreement that is filed as Exhibit 10.1 to our Current
Report on Form 8-K, which is incorporated into this information statement by
reference. See "INCORPORATION OF INFORMATION WE FILE WITH THE SEC" below.
Terms of the Convertible Subordinated Notes to be Issued to Bell Atlantic
The convertible subordinated notes to be purchased by Bell Atlantic
will be governed by an indenture which we will execute on the date of the first
closing. U.S. Bank Trust National Association will be the trustee under the
indenture.
Interest on the convertible subordinated notes will be paid
semi-annually and will be computed on the basis of a 360-day year of twelve
30-day months. Interest is payable on the convertible subordinated notes at a
rate of 6.15% per year. The convertible subordinated notes will mature on the
tenth anniversary of their date of issuance.
The payment of all amounts due on the convertible subordinated notes is
subordinated to the prior payment of all of our other indebtedness, including
our Series A 10% Notes due 2008 issued under a previous indenture. Upon any
winding up or dissolution of Metromedia Fiber, we will pay all such senior
indebtedness in full, in cash, prior to making payments on the convertible
subordinated notes.
We will not be required to make mandatory redemption or sinking fund
payments with respect to the convertible subordinated notes. The convertible
subordinate notes will be redeemable, at our option, at the redemption prices
set forth below, plus accrued and unpaid interest on the notes to the date in
which they are to be redeemed, if redeemed during the twelve-month period
beginning on the anniversary of the date of the second closing:
Percentage of
Principal
Year Amount
- ---- -------
2005 ............................................. 102.733%
2006 ............................................. 102.050%
2007 ............................................. 101.367%
2008 ............................................. 100.683%
2009 and thereafter .............................. 100.000%
We will be able to redeem the convertible subordinated notes at any
time after two days following the first interest payment date with respect to
the notes after the fifth anniversary of the closing date, in whole or in part,
on not less than 45 nor more than 60 days' notice.
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Upon the occurrence of a "change of control," each holder of
convertible subordinated notes will have the right to require us to purchase all
or any part of that holder's convertible subordinated notes at a price equal to
100% of the outstanding principal amount.
A holder of a convertible subordinated note that is subject to
"InterLATA Services" restrictions administered by the Federal Communications
Commission may convert its notes at the conversion price then in effect
(initially $34.00) into our class A common stock at any time after the date on
which that holder has obtained the approval of the Federal Communications
Commission to provide "InterLATA Services" in all states that are with respect
to that holder, "In-Region States," as those terms are defined in the U.S.
Communications Act of 1934, as amended by the Telecommunications Act of 1996, as
amended. Bell Atlantic is currently so regulated by the Federal Communications
Commission and to date it has obtained approval to provide InterLATA Services in
New York State. Non-regulated holders may convert their convertible subordinated
notes at any time at the conversion price then in effect. These conversions are
permitted provided that Bell Atlantic or any of its affiliates or any holder
that acquires a convertible subordinated note in connection with any offering,
sale or other transfer, other than through a public resale, may not convert that
convertible subordinated note if, after conversion, that holder would be deemed
to be our "affiliate," as that term is defined in our franchise agreement with
the City of New York, as amended.
The number of shares of class A common stock issuable upon conversion
of a convertible subordinated note will be determined by dividing the portion of
the convertible subordinated note surrendered for conversion by the conversion
price in effect on the date of conversion. The initial conversion price shall be
$34.00 and will be subject to adjustment in certain circumstances, including:
o if we pay a dividend in shares of our class A common stock to
holders of our class A common stock;
o if we make a distribution in shares of class A common stock to
holders of our class A common stock;
o if we combine, subdivide or split our outstanding class A common
stock;
o if we issue rights or warrants to all or substantially all of the
holders of our class A common stock entitling them to subscribe
for or purchase shares of our class A common stock or securities
convertible into shares of our class A common stock at a price
per share less than the current market value of our class A
common stock at the record date for that issuance;
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o if we distribute cash to the holders of our common stock other
than in certain allowable situations;
o if we make a tender or exchange offer for any portion of our
common stock and the fair market value of the per share
consideration at the expiration of that tender or exchange offer
is greater than the current market price of our class A common
stock on the next succeeding trading day;
o if we distribute to all or substantially all of the holders of
our class A common stock any shares of our capital stock other
than class A common stock, evidences of indebtedness or other
non- cash assets, or rights or warrants to subscribe for any of
our securities (other than as described above); or
o if another person makes a tender or exchange offer which would
result in that person owning more than 35% of our class A common
stock outstanding and the fair market value of the per share
consideration of that tender or exchange offer is greater than
the current market price of our class A common stock on the next
succeeding trading day.
No adjustment need be made, however, if holders of our convertible
subordinated notes may participate in the transaction that would otherwise give
rise to an adjustment or in certain other cases specified in the indenture.
If we become a party to any transaction involving a reclassification or
change of the shares of our class A common stock, a consolidation or merger
(other than one in which we are the continuing corporation), or a sale, transfer
or conveyance of all or substantially all of our property and assets, then as a
condition to entering into that transaction, we will be required to execute and
deliver a supplemental indenture providing that each holder of convertible
subordinate notes will have the right to convert its notes into the amount of
consideration that would be received by that holder had that holder converted
its notes into class A common stock immediately prior to that transaction.
A holder of a convertible subordinated note will not be entitled to any
rights of a holder of class A common stock until that holder has converted its
convertible subordinated note to class A common stock.
The convertible subordinated notes will be subject to events of default
under the indenture, including:
o our failure to pay principal of or premium, if any, on any
convertible subordinated note when due, or to deliver class A
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common stock upon conversion of any convertible subordinated
note;
o our failure to pay any interest on any convertible subordinated
note when due, continuing for 30 days;
o our failure to perform any other of our covenants in the
indenture, continuing for 60 days;
o our default under any indebtedness for money borrowed by us or
any of our subsidiaries in excess of $15 million if that default
results in the acceleration of that indebtedness;
o Our failure to pay final, non-appealable judgments in an
aggregate amount in excess of $15 million if those judgments are
not paid, vacated, discharged or stayed for a period of 60 days;
and
o certain events of bankruptcy, insolvency or reorganization.
The terms of the convertible subordinated notes are more fully
described in the form of indenture that is filed as Exhibit 10.2 to our Current
Report on Form 8-K, which is incorporated into this information statement by
reference. See "INCORPORATION OF INFORMATION WE FILE WITH THE SEC" below.
Stockholders Agreement
At the first closing of the securities purchase agreement, we will
enter into a Stockholders Agreement with Bell Atlantic, Metromedia Company, and
two members of our board of directors, Mr. John Kluge and Mr. Stuart Subotnick.
Under the stockholders agreement, Bell Atlantic and its affiliates will
agree to a "standstill" provision under which those entities will be prohibited
from acquiring shares of our class A common stock or any other voting stock,
which, when combined with the shares of class A common stock and the shares of
class A common stock issuable upon conversion of the convertible subordinated
notes purchased under the securities purchase agreement, would result in
beneficial ownership by them of more than 22% of the issued and outstanding
shares of our common stock. The standstill will also prohibit Bell Atlantic from
participating in acquisition proposals, tender offers, proxy solutions and
similar transactions without the consent of our board of directors. The
standstill will not prohibit Bell Atlantic from seeking permission to privately
and confidentially present to us the transactions in the preceding sentence or
proposing commercial relationships in the ordinary course of business. These
standstill restrictions last for a period of ten years.
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If, however, we sell or transfer more than 22% of the shares of our
common stock then issued and outstanding to another person or group and that
person or group is subject to more favorable standstill restrictions, the
standstill restrictions on Bell Atlantic will be modified so that they will not
be less favorable than those imposed upon the other person or group under any
stockholders agreement entered into by that other person or group with us. If we
sell or transfer more than 22% of the shares of our common stock then issued and
outstanding to another person or group without any standstill restriction, this
standstill restriction on Bell Atlantic will terminate automatically.
In addition to these standstill restrictions, unless otherwise
permitted in the stockholders agreement, Bell Atlantic and its affiliates would
not be permitted to:
o acquire beneficial ownership of any securities, including direct
and indirect rights or options to acquire such ownership, other
than as provided in the stockholders agreement;
o make public announcements or submit proposals to acquire voting
stock with respect to mergers, consolidations or business
combinations;
o solicit proxies or participate in election contests;
o propose matters for submission to a stockholder vote;
o form or join groups with respect to the voting stock;
o grant proxies to persons not approved by us;
o engage in voting trusts or similar arrangements (except in
relation to redemption to a trust);
o take action requiring us to make public announcements with
respect to these criteria;
o enter into negotiations to advance any of these elements;
o disclose a plan inconsistent with these elements; or
o act to seek control or influence over management, our board of
directors or our policies or request us to waive, amend or modify
these provisions.
The stockholders agreement will also impose restrictions on Bell
Atlantic's ability to sell our securities. Bell Atlantic will be permitted to
transfer its
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shares or convertible subordinated notes if approved by our board of directors
and anytime after the six-month anniversary of the first closing. Transfers will
be permitted under:
o a bona fide secondary offering effected through Bell Atlantic's
registration rights under the equity registration rights
agreement or the notes registration rights agreement described
below;
o a purchase agreement with a placement agent which contemplates
immediate resale of the securities to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933, as
amended, or to "off-shore purchasers" in a transfer permitted by
Regulation S of the Securities Act of 1933, as amended;
o a sale involving bona fide "brokered transactions" as permitted
or exempted from the resale of shares of common stock under Rule
144 of the Securities Act of 1933, as amended.
In each of the above, Bell Atlantic will not transfer shares to any person or
group other than passive or institutional investors who, to Bell Atlantic's
knowledge, would beneficially own more than 5% of our common stock then issued
and outstanding immediately after effecting the transfer.
From six months after the first closing date until 18 months after the
first closing date, Bell Atlantic and its affiliates will be prohibited from
transferring their shares of our class A common stock if it would involve the
transfer of beneficial ownership of more than 50% of their shares or convertible
subordinated notes acquired under the securities purchase agreement.
From one year after the first closing date until two years after the
first closing date, Bell Atlantic and its affiliates will also not be permitted
to transfer more than 5% of their shares of our common stock issued and
outstanding unless the transfer is approved by our board of directors,
constitutes a public resale or is consummated with specified passive or
institutional investors.
From and after the second anniversary of the first closing date, we
will have a right of first refusal to purchase any securities that Bell Atlantic
proposes to transfer to a third party on the same purchase terms and conditions
as were offered to Bell Atlantic for those securities.
We will be able to redeem the outstanding convertible subordinated
notes prior to the date on which Bell Atlantic has obtained the approval of the
Federal Communications Commission to provide "InterLATA Services" in all states
that are, with respect to Bell Atlantic, "In-Region States," as those terms are
defined in the
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Communications Act of 1934, as amended by the Telecommunications Act of 1996, as
amended. In this circumstance, Bell Atlantic will have the option of
transferring those convertible subordinated notes to a liquidating trust, and
those notes may be immediately converted. In the event that we reduce the
aggregate number of our shares of common stock outstanding so that Bell Atlantic
would beneficially own more than 10% of our shares of common stock then issued
and outstanding, Bell Atlantic will be able to transfer shares of our class A
common stock to a liquidating trust so that it owns less than 10% of our shares
of class A common stock then issued and outstanding.
The stockholders agreement provides for "tag-along" rights for Bell
Atlantic. At any time after Metromedia Company, John Kluge and Stuart Subotnick,
collectively, transfer at least an aggregate of 20% of the shares of common
stock owned by them as of the date of the securities purchase agreement and
prior to the earliest to occur of (i) the date on which Bell Atlantic and its
affiliates are no longer bound by certain purchase restrictions in the
stockholders agreement and (ii) the date on which Bell Atlantic and its
affiliates no longer beneficially own in excess of 5% of the then outstanding
shares of common stock for a period of 90 consecutive days, if any of Metromedia
Company, Mr. Kluge or Mr. Subotnick proposes to transfer any shares of common
stock to a non-affiliated third party, that stockholder will have the obligation
to require the non-affiliated third party to purchase from Bell Atlantic or any
of its affiliates a number of shares of class A common stock up to or equal to
the product of:
o the quotient determined by dividing the number of shares of the
class A common stock held by Bell Atlantic and its affiliates by
the aggregate number of shares of common stock owned by the
stockholder preparing to sell its shares, Bell Atlantic and its
affiliates; and
o the number of shares of the common stock proposed to be
transferred in the contemplated sale
The purchase by the non-affiliated third party must be at the same
price per share and upon the same terms and conditions offered to the
stockholder proposing to sell its shares. The number of shares of common stock
to be sold by the stockholder proposing to sell its shares in the transfer shall
be reduced by the number of shares of common stock that Bell Atlantic elects to
require the purchaser of the shares to purchase in the transfer.
The stockholders agreement will terminate on the 90th consecutive day
on which Bell Atlantic does not beneficially own 5% or more of the issued and
outstanding shares of our common stock.
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The terms of the stockholders agreement are more fully described in the
form of stockholders agreement is filed as Exhibit 10.5 to our Current Report on
Form 8-K, which is incorporated into this information statement by reference.
See "INCORPORATION OF INFORMATION WE FILE WITH THE SEC" below.
Equity Registration Rights Agreement
Under the terms of the securities purchase agreement and as a condition
to the first closing, we agreed to enter into an equity registration rights
agreement with Bell Atlantic relating to the shares of our class A common stock
to be purchased by Bell Atlantic.
Under the equity registration rights agreement, Bell Atlantic and its
transferees will have four demand registration rights. To effect any of these
demand registration rights, the aggregate value of the shares of our class A
common stock to be registered must be at least $100,000,000. No more than two
demand registrations under either this agreement or the Notes Registration Right
Agreement described below will be permitted within any twelve month period. In
addition, Bell Atlantic will be prohibited from exercising its demand
registration rights within 90 days of the date of effectiveness of any of our
registration statements, other than shelf registration statements.
Bell Atlantic will be also entitled to unlimited piggyback registration
rights under the equity registration rights agreement for registration
statements filed by us or on behalf of another stockholder.
The terms of the equity registration rights agreement are more fully
described in the form of equity registration rights agreement that is filed as
Exhibit 10.3 to our Current Report on Form 8-K, which is incorporated into this
information statement by reference. See "INCORPORATION OF INFORMATION WE FILE
WITH THE SEC" below.
Notes Registration Rights Agreement
Under the terms of the securities purchase agreement and as a condition
to the first closing, we agreed to enter into a notes registration rights
agreement with Bell Atlantic relating to the convertible subordinated notes to
be purchased by Bell Atlantic.
Under the notes registration rights agreement, Bell Atlantic and its
transferees will have four demand registration rights. To effect any of these
demand registration rights, the aggregate value of the convertible subordinated
notes to be registered must be at least $100,000,000. No more than two demand
registrations under either this agreement or the equity registration rights
agreement will be permitted within a twelve month period. In addition, Bell
Atlantic will be prohibited
<PAGE>
16
from exercising its demand registration rights within 90 days of the date of
effectiveness of any of our registration statements, other than shelf
registration statements.
Bell Atlantic will also be entitled to unlimited piggyback
registrations rights under the notes registration rights agreement for
registration statements filed by us or on behalf of another stockholder.
The terms of the notes registration rights agreement are more fully
described in the form of notes registration rights agreement that is filed as
Exhibit 10.4 to our Current Report on Form 8-K, which is incorporated into this
information statement by reference. See "INCORPORATION OF INFORMATION WE FILE
WITH THE SEC" below.
Fiber Optic Private Network Agreement
Simultaneously with the execution of the Securities Purchase Agreement,
Bell Atlantic Global Networks, Inc., a Delaware corporation and an affiliate of
Bell Atlantic, entered into a Fiber Optic Private Network Agreement under which
it agreed to lease fiber strands on our network for 20 years. Bell Atlantic
Global Networks has agreed to pay us approximately $550 million over the next
three years in exchange for delivery of these fiber optic facilities over the
next five years.
Use of Proceeds
The proceeds from the sale of shares of our class A common stock to
Bell Atlantic and the payments for the delivery of fiber optic facilities to
Bell Atlantic Global Networks will be used by us to facilitate the expansion of
our network and for working capital and general corporate purposes. The proceeds
from the sale of our convertible subordinated notes to Bell Atlantic will be
used by us for the cost of engineering, construction, installation, acquisition,
lease, development or improvement of telecommunications assets.
Voting Agreements of our Stockholders
Metromedia Company, John Kluge and Stuart Subotnick have entered into a
voting agreement with Bell Atlantic. Under this agreement, they agreed to appear
in person or by proxy, for the purpose of obtaining a quorum at any annual or
special meeting relating to the issuances to Bell Atlantic under the securities
purchase agreement of the class A common stock, the convertible subordinated
notes, and the shares of class A common stock issuable upon the conversion of
the convertible subordinated notes. They also agreed to (i) vote for any other
transactions contemplated by the Securities Purchase Agreement, (ii) vote in
favor of the shares of class A common stock, convertible subordinated notes and
the shares of class A common stock issuable on the conversion of the convertible
subordinated notes, and
<PAGE>
17
(iii) use all reasonable efforts to effect the transactions noted in the
Securities Purchase Agreement. In accordance with the terms of this voting
agreement, these stockholders have executed written consents in favor of the
issuance of the shares of class A common stock to Bell Atlantic.
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
The following table provides you with certain information, as of
December 31, 1999, regarding the beneficial ownership of our common stock by:
o each of our directors and director nominees;
o each person whom we believe beneficially owns more than 5% of our
outstanding voting stock;
o each named executive officer; and
o all our executive officers and directors as a group.
In accordance with the rules promulgated by the Securities and Exchange
Commission, the ownership includes shares currently owned as well as shares
which the named person has the right to acquire beneficial ownership of within
60 days, including through the exercise of options, warrants or other rights, or
through the conversion of a security. Accordingly, more than one or more persons
may be deemed to be a beneficial owner of the same securities. Except as
otherwise indicated, each stockholder listed below has sole voting and
investment power of the shares beneficially owned by that person.
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock(1)
--------------------------- -----------------------
Percent
of Total
Number Percent Number Percent Voting
of Shares of Class of Shares of Class Power
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Stephen A. Garofalo............ 44,166,112(2) 21.2% -- -- 8.1%
Metromedia Company(3).......... -- -- 31,462,048 93.2% 57.9%
Putnam Investments, Inc........ 29,056,060(4) 14.1% -- -- 5.3%
FMR Corp....................... 13,344,000(5) 6.5% -- -- 2.5%
Howard M. Finkelstein.......... 9,458,000(6) 4.4% -- -- 1.7%
Vincent A. Galluccio........... 2,980,855(7) 1.4% -- -- *
Gerard Benedetto............... 208,750(8) * -- -- *
</TABLE>
<PAGE>
18
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock(1)
--------------------------- -----------------------
Percent
of Total
Number Percent Number Percent Voting
of Shares of Class of Shares of Class Power
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Nicholas M. Tanzi.............. 366,880(9) * -- -- *
Silvia Kessel.................. 400,072(10) * -- -- *
John W. Kluge.................. 1,863,550(11) * 31,462,048(12) 93.2% 58.0%
David Rockefeller.............. 2,033,604(13) -- -- -- *
Stuart Subotnick............... 1,366,750(14) -- 33,769,272(12) 100.0% 62.2%
Arnold L. Wadler............... 477,344(15) * -- -- *
Leonard White.................. 46,000(16) * -- -- *
Sherman Tuan................... 924,889(17) * -- -- *
David Rand..................... 513,925(18) * -- -- *
All Directors and Executive 64,806,731(19) 28.8% 33,769,272 100.0% 71.5%
Officers as a Group........
</TABLE>
* less than 1.0%
(1) The shares of class B common stock are convertible into shares of class
A common stock at the rate of one share of class A common stock for
each share of class B common stock, and the holders of shares of class
B common stock are entitled to 10 votes per share.
(2) Includes presently exercisable options to purchase 3,042,000 shares of
class A common stock at an exercise price of $.245 per share of which
2,882,000 are held by the Stephen A. Garofalo 1999 Annuity Trust No. 1
and 160,000 are held by the Stephen A. Garofalo 1999 Annuity Trust No.
2. Mr. Garofalo is the trustee of both trusts. Also includes 406,689
shares of class A common stock owned by the Garofalo Foundation, Inc.
Mr. Garofalo's address is One North Lexington Avenue, White Plains, New
York 10601.
(3) Metromedia Company's address is One Meadowlands Plaza, East Rutherford,
New Jersey 07073.
(4) Based solely upon the Schedule 13G, dated February 2, 1999 filed by
Putnam Investments, Inc. Putnam Investments, Inc.'s address is One Post
Office Square, Boston, Massachusetts 02109.
<PAGE>
19
(5) Based solely on the Schedule 13G, dated, February 16, 1999 filed by FMR
Corp., Edward C. Johnson III and Abigail P. Johnson. FMR's address is
82 Devonshire Street, Boston, Massachusetts 02109.
(6) Includes presently exercisable options to purchase 9,408,000 shares of
class A common stock at an exercise price of $.245 per share and 20,000
shares owned by The Howard and Susan Finkelstein Foundation, Inc. and
30,000 shares of class A common stock owned by members of Mr.
Finkelstein's family. Mr. Finkelstein's address is One North Lexington
Avenue, White Plains, New York 10601.
(7) Includes presently exercisable options to purchase 1,131,840 and
250,000 Shares of class A common stock at an exercise price of $.246
and $2.00 per share, respectively and 17,175 shares owned by his
spouse.
(8) Includes presently exercisable options to purchase 200,000 shares of
class A common stock at an exercise price of $1.9375 per share.
(9) Includes presently exercisable options to purchase 285,000, 75,000 and
880 shares of class A common stock at an exercise price of $2.00, $5.25
and $.95375 per share, respectively. Also includes 5,200 shares of
class A common stock owned by members of Mr. Tanzi's family, with
respect to which Mr. Tanzi has been granted a proxy to vote. Mr.
Tanzi's address is One North Lexington Avenue, White Plains, New York
10601.
(10) Includes 400,072 presently exercisable options to acquire shares of
class A common stock at an exercise price of $.246 per share. Does not
include shares owned by Metromedia Company. Ms. Kessel is employed by
Metromedia Company and disclaims beneficial ownership of the shares
owned by Metromedia Company.
(11) Consists of 1,863,550 presently exercisable options to acquire shares
of class A common stock at an exercise price of $.246 per share. Mr.
Kluge's address is 810 Seventh Avenue, 29th Floor, New York, New York
10019.
(12) Includes 31,462,048 shares owned by Metromedia Company. Messrs. Kluge
and Subotnick, directors of our company, are general partners of
Metromedia Company.
(13) Represents 1,893,604 shares owned by DR & Descendants LLC, of which Mr.
Rockefeller is Managing Member and for which he exercises voting and
investment power plus presently exercisable options in his own name to
purchase 40,000 shares of class A common stock at an exercise price of
$2.00 per share. Mr. Rockefeller disclaims actual beneficial ownership
of shares owned by DR & Descendants LLC except as to one seventh (1/7)
of the shares
<PAGE>
20
attributable to his proportionate interest in the LLC. The other
interests of the LLC are owned by Mr. Rockefeller's six children.
(14) Consists of 1,366,750 presently exercisable options to acquire shares
of class A common stock at an exercise price of $.246 per share. Mr.
Subotnick's address is 810 Seventh Avenue, 29th Floor, New York, New
York 10019.
(15) Includes 405,600 presently exercisable options to acquire shares of
class A common stock at an exercise price of $.246 per share. Does not
include shares owned by Metromedia Company. Mr. Wadler is employed by
Metromedia Company and disclaims beneficial ownership of the shares
owned by Metromedia Company.
(16) Includes 40,000 presently exercisable options to acquire shares of
class A common stock at an exercise price of $2.00 per share.
(17) Includes presently exercisable options to purchase 151,625; 146,875;
11,750; 134,025; 5,875 and 35,250 shares of class A common stock at an
exercise price of $.0018; $.171; $.511; $4.25; $5.16 and $33.192,
respectively.
(18) Includes presently exercisable options to purchase 10,260; 58,750;
11,750; 237,937; 5,875; 117,500 and 35,250 shares of class A common
stock at an exercise price of $0.52; $.171; $.511; $4.256; $5.16;
$22.208 and $33.192, respectively.
(19) Includes presently exercisable options to acquire 151,625; 205,625;
12,450,000; 5,167,812; 880; 200,000; 615,000; 10,260; 11,750; 134,025;
237,937; 11,750; 75,000; 117,500 and 70,500 shares of class A common
stock at an exercise price of $.0018, $.171, $.245, $.246, $.95375,
$1.9375, $2.00; $.052; $.511, $4.25, $4.256; $5.16; $5.25, $22.208 and
$33.192, respectively.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The following documents and other materials, which have been filed by
us with the Securities and Exchange Commission, are incorporated into and
specifically made a part of this Information Statement by this reference:
o our Annual Report on Form 10-K for the fiscal year ended December
31, 1998;
o our Quarterly Report on Form 10-Q for the three months ended
March 31, 1999;
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21
o our Quarterly Report on Form 10-Q for the six months ended June
30, 1999;
o our Quarterly Report on Form 10-Q for the nine months ended
September 30, 1999; and
o our Current Report on Form 8-K filed on October 18, 1999, which
includes as exhibits copies of the securities purchase agreement,
the form of indenture, the form of stockholders agreement, the
form of equity registration rights agreement and the form of
notes registration rights agreement.
By Order of the Board of Directors:
By:__________________________________
Stephen Garofalo
Chairman
January ___, 2000
