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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 14, 1995
WORLDCOM, INC.
(formerly known as LDDS COMMUNICATIONS, INC.)
(Exact Name of Registrant as Specified in its Charter)
Georgia 0-11258 58-1521612
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification Number)
Incorporation)
515 East Amite Street
Jackson, Mississippi 39201-2702
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (601) 360-8600
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ITEM 5. OTHER EVENTS.
(a) On August 14, 1995, WorldCom, Inc. ("WorldCom"), a
Georgia corporation formerly known as LDDS Communications, Inc., announced
that it was notified by Metromedia Company ("Metromedia") of its intent to
convert its Series 1 $2.25 Cumulative Senior Perpetual Convertible Preferred
Stock (the "Series 1 Preferred Stock") and to sell its entire position of
30,855,983 common shares of WorldCom in a public offering. If the shares of
Series 1 Preferred Stock are converted in connection with the offering,
WorldCom plans to make a one-time, non-recurring payment of $15.0 million to
Metromedia, representing a discount to the minimum remaining nominal dividends
that would be payable on the Series 1 Preferred Stock prior to the September
15, 1996 optional call date of approximately $26.6 million (which amount
includes annual dividend requirement of $24.5 million plus accrued dividends to
such call date). Metromedia plans to commence the offering of these shares
immediately through an underwriting by Donaldson, Lufkin & Jenrette Securities
Corporation. The offering will only be made by means of a prospectus.
Following the offering, it is expected that John W. Kluge, Chairman of
WorldCom, and the two other directors elected by Metromedia, will remain
directors of WorldCom. No assurance can be given that the offering will be
completed, or that Metromedia will convert its Series 1 Preferred Stock.
(b) The following statements are brief summaries of
certain provisions relating to the capital stock of the Company. Such
summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the Company's Amended and Restated Articles of
Incorporation, as amended (the "Articles"), and Bylaws (the "Bylaws") referred
to herein, including the definitions therein of certain terms, a copy of each
of which is filed with the Securities and Exchange Commission. See "-- Certain
Charter and Bylaw Provisions" below for a discussion of certain provisions of
the Articles and Bylaws that may be deemed to have an "anti-takeover" effect.
The authorized capital stock of the Company consists of
500,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), and 50,000,000 shares of preferred stock, par value $.01 per share
including 10,896,785 shares of Series 1 Preferred Stock and 2,000,000 shares of
Series 2 Preferred Stock, as those terms are hereinafter defined.
COMMON STOCK
All of the outstanding shares of Common Stock are fully paid
and nonassessable. Subject to the prior rights of the holders of preferred
stock which may be issued and outstanding, the holders of Common Stock are
entitled to receive dividends as and when declared by the Board of Directors
out of funds legally available therefor, and, in the event of liquidation,
dissolution or winding up of the Company, to share ratably in all assets
remaining after payment of liabilities. Subject to the prior rights of the
holders of preferred stock, including the class voting rights of the holders of
Series 1 Preferred Stock and Series 2 Preferred Stock, each holder of Common
Stock is entitled to one vote for each share held of record on all matters
presented to a vote of stockholders, including the election of directors.
Holders of Common Stock have no cumulative voting rights or preemptive rights
to purchase or subscribe for any stock or other securities and there are no
conversion rights or redemption or sinking fund provisions with respect to such
stock. Additional shares of authorized Common Stock may be issued without
stockholder approval.
PREFERRED STOCK
The authorized but unissued preferred stock of the Company is
available for issuance from time to time at the discretion of the Board of
Directors of the Company without
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stockholder approval. The Board of Directors has the authority to prescribe
for each series of preferred stock it establishes the number, designation,
preferences, limitations and relative rights of the shares of such series,
subject to applicable law and the provisions of any outstanding series of
preferred stock. The terms of any series of preferred stock including, but not
limited to, dividend rate, redemption price, liquidation rights, sinking fund
provisions, conversion rights and voting rights, and any corresponding effect
on other stockholders, will be dependent largely on factors existing at the
time of issuance. Such terms and effects could include restrictions on
dividends on the Common Stock if dividends on the preferred stock are in
arrears, dilution of the voting power of other stockholders to the extent a
series of the preferred stock has voting rights, and reduction of amounts
available on liquidation as a result of any liquidation preference granted to
any series of preferred stock. The Company presently has no intention to issue
any additional shares of preferred stock.
SERIES 1 PREFERRED STOCK
The statements under this caption relating to the Series 1
Preferred Stock are summaries and do not purport to be complete. Such
summaries make use of certain terms defined in the Statement of Designation of
Rights and Preferences of the $2.25 Series 1 Cumulative Senior Perpetual
Convertible Preferred Stock (the "Statement of Designations") and are qualified
in their entirety by express reference to the Statement of Designations, a copy
of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. See "-- Definitions" below for definitions of certain
terms used in this section captioned "-- Series 1 Preferred Stock."
GENERAL
The Series 1 Preferred Stock offered hereby has been
designated as "Series 1 $2.25 Cumulative Senior Perpetual Convertible Preferred
Stock." There are currently 10,896,785 shares outstanding which number may be
decreased (but not below the number of the then outstanding shares of
Series 1 Preferred Stock) by the Board of Directors without a vote of the
stockholders.
The Series 1 Preferred Stock, with respect to dividend rights
and rights on liquidation, dissolution or winding up, ranks pari passu to the
Series 2 Preferred Stock, and ranks prior to all other classes and series of
capital stock of the Company now or hereafter authorized including, without
limitation, the Common Stock.
DIVIDEND RIGHTS
The holders of shares of Series 1 Preferred Stock, in
preference to the holders of shares of Common Stock and of any shares of other
capital stock of the Company (but pari passu with the holders of shares of
Series 2 Preferred Stock), are entitled to receive, out of the legally
available assets of the Company, when, as and if declared by the Board of
Directors, cumulative cash dividends at an annual rate on the Liquidation
Preference thereof equal to 4.4968% (or $2.2484 per share) calculated on the
basis of a 360-day year consisting of twelve 30-day months, accruing and
payable in equal quarterly
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payments, in immediately available funds, on the 15th day of February, May,
August and November in each year (a "Quarterly Dividend Payment Date").
Dividends are accrued and cumulative from the Issue Date, and
accrue on a daily basis, in each case whether or not declared. Dividends paid
on the shares of Series 1 Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall
be allocated pro rata on a share-by-share basis among all such shares of Series
1 Preferred Stock at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series 1 Preferred
Stock entitled to receive payment of a dividend declared thereon, which record
date shall be no more than 60 days or less than 10 days prior to the date fixed
for the payment thereof. Accumulated but unpaid dividends for any past
quarterly dividend periods may be declared and paid at any time, without
reference to any regular Quarterly Dividend Payment Date, to holders of record
on such date, not more than 60 or less than 10 days preceding the payment date
thereof, as may be fixed by the Board of Directors.
In addition in the event that the Company declares a dividend
or makes any other distribution (including, without limitation, in cash, in
capital stock (which shall include, without limitation, any options, warrants,
convertible securities or other rights to acquire capital stock) of the
Company, whether or not pursuant to a stockholder rights plan, "poison pill" or
similar arrangement, or other property or assets) on or with respect to shares
of Common Stock other than a Regular Dividend or a dividend paid solely in
Common Stock, then the Board of Directors shall declare, and the holder of each
share of Series 1 Preferred Stock shall be entitled to receive in respect of
each share of Series 1 Preferred Stock, a dividend or distribution in an amount
equal to the amount of such dividend or distribution received by a holder of
the number of shares of Common Stock for which such share of Series 1 Preferred
Stock is convertible on the record date for such dividend or distribution. Any
such amount shall be paid to the holders of shares of Series 1 Preferred Stock
at the same time such dividend or distribution is made to holders of Common
Stock.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or otherwise, no distribution
shall be made (i) to the holders of shares of Junior Stock unless, prior
thereto, the holders of shares of Series 1 Preferred Stock have received (a) if
a Voluntary Liquidation Event shall have occurred, the optional redemption
price with respect to each share and (b) if a Voluntary Liquidation Event shall
not have occurred, the Liquidation Preference, plus all accrued and unpaid
dividends, whether or not declared or currently payable, to the date of
distribution, with respect to each share, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series 1 Preferred Stock
and all other Parity Stock in proportion to the total amounts to which the
holders of all shares of the Series 1 Preferred Stock and other Parity Stock
are entitled upon such liquidation, dissolution or winding up.
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Neither the consolidation or merger of the Company with or
into any other Person nor the sale or other distribution to another Person of
all or substantially all the assets, property or business of the Company, in
each case when otherwise permitted, shall be deemed to be a liquidation,
dissolution or winding up of the Company for purposes of this liquidation
preference section.
CONVERSION
Holders of the Series 1 Preferred Stock have the right,
exercisable at any time and from time to time, to convert any or all of such
Series 1 Preferred Stock into Common Stock at a conversion price, subject to
adjustments, of $[24.9046875] (the "Conversion Price") per share of Common
Stock. In the case of Series 1 Preferred Stock called for redemption, such
right shall terminate at the close of business on the date fixed for
redemption. No fraction shall be issued upon the conversion of any shares of
Series 1 Preferred Stock. If more than one share of Series 1 Preferred Stock
shall be surrendered for conversion at one time by the same holder, the number
of full shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate Liquidation Preference of the Shares of
Series 1 Preferred Stock surrendered. If the conversion of any share or shares
of Series 1 Preferred Stock results in a fraction, an amount equal to such
fraction multiplied by the Current Market Price of the Common Stock on the
Business Day preceding the day of conversion shall be paid to such holder in
cash by the Company.
To the extent permitted by law, when shares of Series 1
Preferred Stock are converted, all dividends accrued and unpaid (whether or not
declared or currently payable) on the Series 1 Preferred Stock so converted to
the date of conversion shall be immediately due and payable, at the option of
the holder of shares of Series 1 Preferred Stock being converted, in cash or
shares of Common Stock. If the holder of shares of Series 1 Preferred Stock
elects to receive shares of Common Stock in lieu of cash payment of the accrued
and unpaid dividends, the holder of shares of Series 1 Preferred Stock shall be
entitled to receive that number of shares of Common Stock which the amount of
accrued and unpaid dividends would purchase at the Current Market Price, and
such shares of Common Stock must accompany the shares of Common Stock issued
upon conversion. If the holder of shares of Series 1 Preferred Stock elects to
receive payment in cash of such accrued and unpaid dividends, such cash payment
must accompany the shares of Common Stock issued upon such conversion with
certain exceptions.
In the event that the Company (i) pays a dividend or makes a
distribution other than a dividend or distribution paid or made to holders of
shares of Series 1 Preferred Stock in a manner otherwise provided for, on or
with respect to shares of Common Stock in capital stock which, for purposes of
this conversion section includes any options, warrants, convertible securities
or other rights to acquire capital stock of the Company, (ii) subdivides or
combines the outstanding shares of Common Stock, (iii) issues any shares of its
capital stock in a reclassification of the Common Stock or pays a dividend or
makes a distribution (other than a dividend or distribution paid or made to
holders of shares of Series 1 Preferred Stock) on the outstanding shares of
Common Stock in shares of its capital stock pursuant to a shareholder
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rights plan, "poison pill" or similar arrangement, then the Conversion Price in
effect immediately prior to such event shall be adjusted and any other
appropriate actions shall be taken by the Company so that the holder of any
share of Series 1 Preferred Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock or other securities
of the Company that such holder would have owned or would have been entitled to
receive had such share of Series 1 Preferred Stock been converted immediately
prior to the occurrence of such event.
In case the Company shall at any time or from time to time
issue or sell shares of Common Stock, (or securities convertible into or
exchangeable for Common Stock, or any options, warrants or other rights to
acquire shares of Common Stock), at a price per share less than 90% of the
Current Market Price per share of Common Stock then in effect (treating the
price per share of any security convertible or exchangeable or exercisable into
Common Stock as equal to (i) the sum of the price for such security divided by
(ii) the number of shares of Common Stock underlying such security), then the
Conversion Price then in effect shall be adjusted by dividing the Conversion
Price in effect on the day immediately prior to such record date by a fraction
of (x) the number of shares of Common Stock outstanding on such record date
plus the number of additional shares of Common Stock issued or to be issued (or
the maximum number into which such convertible or exchangeable securities
initially may convert or exchange or for which such options, warrants or other
rights initially may be exercised) divided by (y) the sum of the number of
shares of Common Stock outstanding plus the number of shares of Common Stock
which the aggregate consideration for the total number of such additional
shares of Common Stock so issued (or into which such convertible or
exchangeable securities may convert or exchange or for which such options,
warrants or other rights may be exercised plus any additional consideration
initially payable upon conversion, exchange or exercise of such security) would
purchase at 90% of the Current Market Price per share of Common Stock, provided
that, if any convertible or exchangeable securities, options, warrants or other
rights which shall have given rise to an adjustment pursuant to this section
shall have expired or terminated without the exercise thereof and/or if by
reason of the terms of such convertible or exchangeable securities, options,
warrants or other rights there shall have been an increase or increases, with
the passage of time or otherwise, in the price thereof, then the Conversion
Price shall be readjusted but to no greater extent than originally
adjusted with respect to the related event.
In case the Company shall at any time or from time to time
distribute on or with respect to the shares of Common Stock, cash, evidences of
indebtedness of the Company or another issuer, securities of the Company or
another issuer or other assets (excluding (i) Regular Dividends, (ii) dividends
or distributions paid or made to holders of shares of Series 1 Preferred Stock
and Series 2 Preferred Stock in a manner otherwise provided for, and (iii)
dividends payable in shares of Common Stock for which adjustment has otherwise
been made) or rights or warrants to subscribe for or purchase securities of the
Company, then, and in each such case, the Conversion Price then in effect shall
be adjusted by dividing the Conversion Price in effect immediately prior to the
date of such distribution by a fraction (x) the numerator of which shall be the
Current Market Price of the Common Stock on the record date referred to below
and (y)
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the denominator of which shall be such Current Market Price of the Common Stock
less the then Fair Market Value (as determined by the reasonable good faith
judgment of the Board of Directors of the Company) of the portion of the cash,
evidence of indebtedness, securities or other assets so distributed or of such
subscription rights or warrants applicable to one share of Common Stock (but
such denominator not to be less than one); provided, however, that no
adjustment shall be made with respect to any distribution of rights to purchase
securities of the Company if the holder of shares of Series 1 Preferred Stock
would otherwise be entitled to receive such rights upon conversion at any time
of shares of Series 1 Preferred Stock into Common Stock unless such rights are
subsequently redeemed by the Company, in which case such redemption shall be
treated for purposes of this section as a dividend on the Common Stock. Such
adjustments shall be made whenever any such distribution is made and shall
become effective retroactively to a date immediately following the close of
business on the record date for the determination of stockholders entitled to
receive such distribution.
In case the Company at any time or from time to time takes any
action affecting its Common Stock, other than the actions described above, the
Conversion Price shall be adjusted in such manner and at such time as the Board
of Directors of the Company in good faith determines to be equitable in the
circumstance.
In case of any capital reorganization or reclassification or
other change of outstanding shares of Common Stock other than a change in par
value, or in case of any consolidation or merger of the Company with or into
another Person (other than a consolidation or merger in which the Company is
the resulting or surviving Person and which does not result in any
reclassification or change of outstanding Common Stock), or in case of any sale
or other disposition to another Person of all or substantially all of the
assets of the Company (any of the foregoing, a "Transaction"), holders of each
share of Series 1 Preferred Stock then outstanding will have the right to
convert such share of Series 1 Preferred Stock into the kind and amount of
shares of stock or other securities of the Company or another issuer or
property or cash receivable upon such Transaction by a holder of the number of
shares of Common Stock into which such share of Series 1 Preferred Stock could
have been converted immediately prior to such Transaction.
VOTING RIGHTS
Except as otherwise required by applicable law, so long as any
shares of the Series 1 Preferred Stock are outstanding, each outstanding share
of Series 1 Preferred Stock entitles the holder thereof to vote, in person or
by proxy, at a special or annual meeting of stockholders, on all matters voted
on by holders of Common Stock voting together as a single class with other
shares entitled to vote thereon (other than matters on which the holders of
Series 1 Preferred Stock are entitled to vote as a separate class). With
respect to any such vote, each share of Series 1 Preferred Stock entitles the
holder thereof to cast that number of votes per share of Series 1 Preferred
Stock as is equal to the number of votes that such holder would be entitled to
cast had such holder converted his shares of Series 1 Preferred Stock into
Common
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Stock on the record date for determining the stockholders of the Company
eligible to vote on any such matters, provided that the Series 1 Preferred
Stock shall not vote with the Common Stock in the election of directors unless
the Preferred Stock Percentage is less than 2-1/2%.
In addition, the Company may not (i) authorize, increase the
authorized number of shares of, or issue (including on conversion or exchange
of any convertible or exchangeable securities or by reclassification), any
shares of any class or classes of Senior Stock or Parity Stock; (ii) authorize,
increase the authorized number of shares of, or issue any shares of any class
of capital stock of the Company having a mandatory redemption date earlier than
September 15, 1996 or amend the terms of any class of capital stock of the
Company to provide that such class of capital stock has a mandatory redemption
date earlier than September 15, 1996; (iii) authorize, adopt or approve an
amendment to the Articles that would increase or decrease the par value of the
shares of Series 1 Preferred Stock; or alter or change the powers, preferences
or special rights of the shares of Series 1 Preferred Stock; (iv) amend, alter
or repeal the Articles so as to affect the shares of Series 1 Preferred Stock
adversely, including, without limitation, by granting any voting right to any
holder of notes, bonds, debentures or other debt obligations of the Company, or
by amending certain provisions of the Statement of Designations; or (v)
authorize or issue any security convertible into, exchangeable for or
evidencing the right to purchase or otherwise receive any shares of any class
or classes of Senior Stock or Parity Stock unless approved by at least 66-2/3%
of the outstanding shares of Series 1 Preferred Stock voting separately
as a class.
Until the occurrence of a Change of Control, but not
thereafter, the outstanding shares of Series 1 Preferred Stock voting
separately as a single class, by written consent as provided herein or in
person or by proxy, at a special or annual meeting of stockholders called for
the purpose of electing directors, shall elect a number of directors to the
Company's Board of Directors which equals the Specified Number.
If on any date (i) the Company has failed to declare, or has
failed to pay, the full amount of dividends payable on the Series 1 Preferred
Stock for two quarterly dividend periods (whether consecutive or not) or (ii)
the Company has failed to satisfy an obligation to convert shares of Series 1
Preferred Stock pursuant to the conversion section of the Statement of
Designations, then the number of directors constituting the Board of Directors,
without further action, shall be increased by one and the holders of shares of
Series 1 Preferred Stock shall have, in addition to the other voting rights,
the exclusive right, voting separately as a single class, to elect a
director of the Company to fill such newly created directorship, by written
consent, or at a special meeting of such holders called. Any such additional
director shall continue as a director and the holders of Series 1 Preferred
Stock shall have such additional voting rights until such time as (a) dividends
then payable on the Series 1 Preferred Stock shall have been declared and paid
in full, or (b) any conversion obligation that has become due shall have been
satisfied or all necessary funds have been set aside for payment, as the case
may be, at which time such additional director shall cease to be a director and
such additional voting rights of the holders of the Series 1 Preferred Stock
shall terminate subject to revesting in the event of each and every subsequent
event of the character indicated above.
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So long as such right to vote continues (and unless such right
has been exercised by written consent of the minimum number of shares required
to take such action), the President of the Company may call, and upon the
written request of holders of record of at least 5% of the outstanding shares
of Series 1 Preferred Stock, shall call, a special meeting of the holders of
shares entitled to vote as provided herein. Such meeting shall be held within
30 days after delivery of such request to the Secretary of the Company, at the
place and upon the notice provided by law and in the Bylaws of the Company for
the holding of meetings of stockholders.
LIMITATIONS ON RESTRICTED PAYMENTS
Whenever any quarterly dividends payable on any shares of
Series 1 Preferred Stock are not paid in full, at such time and thereafter
until all unpaid dividends payable, whether or not declared, on the outstanding
shares of Series 1 Preferred Stock have been paid in full or declared and
irrevocably set apart for payment or whenever the Company has not converted
shares of Series 1 Preferred Stock at a time required by the conversion section
of the Statement of Designations, at such time and thereafter until all
conversion obligations provided in the conversion section of the Statement of
Designations that have come due have been satisfied or all necessary funds have
been set apart for payment, the Company shall not: (i) declare or pay
dividends, or make any other distributions, on any shares of Junior Stock, (ii)
declare or pay dividends, or make any other distributions, on any shares of
Parity Stock, except dividends or distributions paid ratably on the Series 1
Preferred Stock and all Parity Stock on which dividends are payable or in
arrears, in proportion to the total amounts to which the holders of all shares
of the Series 1 Preferred Stock and such Parity Stock are then entitled, or
(iii) redeem, purchase or otherwise acquire for consideration any shares of
Junior Stock, or Parity Stock, provided, however, that (A) the Company may
accept shares of any Parity Stock or Junior Stock for conversion into Junior
Stock and (B) the Company may at any time redeem, purchase or otherwise acquire
shares of the Series 2 Preferred Stock in accordance with the Statement of
Designations. The Company shall not permit any Subsidiary of the Company, or
cause any other Person, to purchase or otherwise acquire for consideration any
shares of capital stock of the Company unless the Company could pursuant to the
Statement of Designations, purchase such shares at such time and in such
manner.
OPTIONAL REDEMPTION
The Company does not have any right to redeem any shares of
Series 1 Preferred Stock prior to September 15, 1996. On and after September
15, 1996, the Company, at its option, may redeem the shares of Series 1
Preferred Stock, in whole or in part in integral multiples of $100,000,000, on
not less than 30 days notice of the date of redemption, at the following
redemption prices (expressed as a percentage of the Liquidation Preference)
together with accrued and unpaid dividends, whether or not declared or payable,
to the redemption date, if redeemed during the twelve month period beginning
September 15 of the years indicated below:
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<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.53%
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.74%
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.95%
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.16%
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.37%
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.58%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.79%
2003 and thereafter . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
If less than all shares of Series 1 Preferred Stock at the
time outstanding are to be redeemed the shares to be redeemed shall be
determined by lot.
REACQUIRED SHARES
Any shares of Series 1 Preferred Stock converted, exchanged,
redeemed, purchased or otherwise acquired by to Company in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof.
DEFINITIONS
The following terms used in this section captioned "-- Series
1 Preferred Stock" shall have the meanings indicated:
"Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"Change of Control" means the occurrence of a reorganization,
merger or consolidation as a result of which the owners of outstanding shares
of capital stock of the Company immediately prior to such reorganization,
merger or consolidation beneficially own less than 50% of the combined voting
power of the then outstanding capital stock of the entity surviving such
reorganization, merger or consolidation.
"Common Stock" means the common stock, par value $.01 per
share, of the Company or any other stock of the Company issued upon
reclassification of the Common Stock.
"Convertible Securities" means evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
shares of Common Stock, either immediately or upon the occurrence of a
specified date or specified event.
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"Current Market Price" per share shall mean, on any date
specified herein for the determination thereof, (a) the average daily Market
Price of the Common Stock for the twenty trading days immediately preceding
such date (if no Market Price is available for any given trading day, such
trading day shall not be included in the determination of the Current Market
Price), and (b) if the Common Stock is not then listed or admitted to trading
on any national securities exchange or quoted in the over-the-counter market,
the Market Price on such date as determined in the second sentence of the
definition of "Market Price."
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder.
"Fair Market Value" shall mean the amount which a willing
buyer would pay a willing seller in an arms-length transaction.
"Fully Diluted Common Shares" means all issued and outstanding
shares of Common Stock (except shares then owned or held by or for the account
of the Company or any subsidiary thereof) and shares of Common Stock issuable
in respect of Options and Convertible Securities.
"Issue Date" shall mean the first date on which shares of
Series 1 Preferred Stock are issued.
"Junior Stock" shall mean any capital stock of the Company
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series 1 Preferred Stock including, without limitation, the
Common Stock.
"Liquidation Preference" with respect to a share of Series 1
Preferred Stock shall mean $50.
"Market Price" shall mean, per share of Common Stock, on any
date specified herein: (a) the closing price per share of the Common Stock on
such date published in the Wall Street Journal or, if no such closing price on
such date is published in the Wall Street Journal, the closing price on such
date, as officially reported on the principal national securities exchange on
which the Common Stock is then listed or admitted to trading; or (b) if the
Common Stock is not then listed or admitted to trading on any national
securities exchange but is designated as a national market system security by
the NASD, the last trading price (the closing sale price) of the Common Stock
on such date; or (c) if there shall have been no trading on such date or if the
Common Stock is not so designated, the average of the reported closing bid and
asked prices of the Common Stock, on such date as shown by NASDAQ and reported
by any member firm of the New York Stock Exchange, Inc. elected by the Company.
If the Common Stock is not then listed or admitted to trading on any national
securities exchange or quoted in the over-the-counter market, "Market Price"
shall mean a market price per share determined at the Company's expense by an
appraiser chosen by the holders of a majority of the shares of Series 1
Preferred Stock with the consent of the Company, which consent shall not be
unreasonably
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withheld or, if no such appraiser is so chosen more than twenty business days
after notice of the necessity of such calculation shall have been delivered by
the Company to the holders of Series 1 Preferred Stock, then by an appraiser
chosen by the Company.
"Metromedia" means Metromedia Company, a Delaware general
partnership and its successors.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NASDAQ" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation System.
"Options" means rights, options or warrants to subscribe for,
purchase or otherwise acquire either shares of Common Stock or Convertible
Securities.
"Parity Stock" shall mean any capital stock of the Company,
including Series 2 Preferred Stock, ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series 1 Preferred
Stock.
"Person" shall mean any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind, and shall include any successor (by merger or
otherwise) of such entity.
"Pooling Notice" means a written notice delivered to the
holders of a majority of the outstanding shares of Series 1 Preferred Stock
pursuant to which (i) the Company certifies that it has entered into an
agreement providing for a transaction (a "Pooling Transaction") which it
intends to treat for accounting purposes as a "pooling of interests" and (ii)
the Company's independent certified public accounts notify the Company that the
inclusion in the numerator of the Preferred Stock Percentage of clause (ii) of
the definition of the Preferred Stock Percentage jeopardizes the ability of the
Company to account for such transaction as a "pooling of interest."
"Preferred Stock Percentage" means that fraction (expressed as
a percentage) the numerator of which is the sum (without duplication) of (i)
the number of shares of the Common Stock for which outstanding shares of Series
1 Preferred Stock could be converted and (ii) the number of Fully Diluted
Common Shares owned by Metromedia and its Affiliates and the denominator of
which is the Fully Diluted Common Shares; provided, that the numerator of such
fraction shall equal the number of shares of Common Stock for which outstanding
shares of Series 1 Preferred Stock could be converted from and after the
consummation of a Pooling Transaction contemplated by a Pooling Notice.
"Regular Dividend" shall mean a dividend on the Common Stock
declared by the Board of Directors of the Company with respect to the most
recently completed quarter of the fiscal year of the Company (the "Quarter"),
that satisfies either of the following conditions: (i)
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the product of four times the per share amount of such Common Stock dividend
declared with respect to such Quarter is less than or equal to 110% of the
aggregate per share amounts of the Common Stock dividends declared and paid
with respect to the immediately preceding four fiscal quarters or (ii) the
aggregate per share amounts of Common Stock dividends declared with respect to
such Quarter and the immediately preceding three fiscal quarters is less than
or equal to 25% of the consolidated net income of the Company and its
Subsidiaries per share of Common Stock (as determined in accordance with
generally accepted accounting principles) for the 12-month period ending on the
last day of such Quarter. In the case of a dividend on the Common Stock
declared by the Board of Directors of the Company with respect to a semi-annual
or annual period during which no quarterly dividends were declared, the
preceding formula will be adjusted and applied appropriately to determine
whether such dividend is a Regular Dividend.
"Senior Stock" shall mean any capital stock of the Company
ranking senior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series 1 Preferred Stock.
"Specified Number" means three; provided, however, that the
Specified Number shall be two (i) in the event that the board of directors of
the Company shall consist of 15 or more directors and the board shall have made
a good faith determination (which shall be evidenced by a written notice
delivered to the record holders of the Series 1 Preferred Stock) that the
board of directors' functions may be more effectively performed by decreasing
the size of the board of directors by one or more and (ii) at all times
subsequent to September 15, 1996. Notwithstanding the foregoing, from and
after the occurrence of any sale by Metromedia to any Person (other than an
Affiliate of Metromedia) of any shares of Series 1 Preferred Stock or any
shares of Common Stock issued upon conversion of Series 1 Preferred Stock, if
(i) the Preferred Stock Percentage is at least 5% but less than 10%, the
Specified Number shall be two, (ii) the Preferred Stock Percentage is at least
2 1/2% but less than 5%, the Specified Number shall be one and (iii) the
Preferred Stock Percentage is less than 2 1/2%, the Specified Number shall be
zero.
"Subsidiary" shall mean, with respect to any Person, a
corporation or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly by
such Person.
SERIES 2 PREFERRED STOCK
The statements under this caption relating to the Series 2
Preferred Stock are summaries and do not purport to be complete. Such
summaries make use of certain terms defined in the Statement of Designation of
Rights and Preferences of the Series 2 6.5% Cumulative Senior Perpetual
Convertible Preferred Stock (the "Series 2 Statement of Designations") and are
qualified in their entirety by express reference to the Series 2 Statement of
Designations, a copy of which is filed as an exhibit to the Registration
Statement to which this Prospectus is a part.
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GENERAL
The Series 2 Preferred Stock offered hereby has been
designated as "Series 2 6.5% Cumulative Senior Perpetual Convertible Preferred
Stock." There are currently 2,000,000 shares outstanding.
The Series 2 Preferred Stock shall, with respect to dividend
rights and rights on liquidation dissolution or winding up, rank on parity with
the Series 1 Preferred Stock and senior to all other classes of capital stock
of the Company, including the Common Stock.
DIVIDEND RIGHTS
The Series 2 Preferred Stock will provide for cumulative
dividends at the rate of 6.5% annually, payable quarterly.
VOTING RIGHTS
In addition to any voting rights provided by law, holders of
shares of Series 2 Preferred Stock will be entitled to vote together with
holders of Common Stock and Series 1 Preferred Stock, as a single class, with
each holder of shares of Series 2 Preferred Stock being entitled to cast the
number of votes per share as is equal to the number of votes that such holder
would be entitled to cast had such holder converted its shares of Series 2
Preferred Stock into Common Stock on the record date for determining the
stockholders eligible to vote on any such matters.
In addition, unless the consent or approval of the holders of
a greater number of shares shall then be required by law, the affirmative vote
of the holders of at least 66-2/3% of the outstanding shares of the Series 2
Preferred Stock, voting as a separate class, will be required in order to,
among other things: (i) authorize or issue shares of stock ranking senior to
or on a parity with the Series 2 Preferred Stock or securities exchangeable
for, convertible into or evidencing the right to receive such securities; (ii)
authorize or issue shares of the Company's stock having a mandatory redemption
date earlier than June 6, 1996; (iii) amend, alter or repeal the Articles so as
to affect adversely the shares of Series 2 Preferred Stock; or (iv) subject to
certain exceptions, effect the voluntary liquidation, dissolution, winding up,
recapitalization or reorganization of the Company, or the consolidation or
merger of the Company with or into another person, or the sale or distribution
to another person of all or substantially all of the assets of the Company.
An extraordinary transaction (described in clause (iv) above)
may be consummated notwithstanding the failure to receive the affirmative vote
of the holders of at least 66-2/3% of the outstanding shares of Series 2
Preferred Stock if, prior to consummation of such transaction, the Company has
redeemed all outstanding shares of the Series 2 Preferred Stock in accordance
with the terms of the Series 2 Preferred Stock set forth in the Series 2
Statement of Designations.
LIMITATIONS ON RESTRICTED PAYMENTS
Whenever any quarterly dividends payable on any shares of
Series 2 Preferred Stock are not paid in full, at such time and thereafter
until all unpaid dividends payable, whether or not declared, on the outstanding
shares of Series 2 Preferred Stock have been paid in full or declared and
irrevocably set apart for payment or whenever the Company has not converted or
exchanged shares of Series 2 Preferred Stock at a time required by the Series 2
Statement of Designations, at such time and thereafter
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until all the conversion and exchange obligations provided in the Series 2
Statement of Designations that have come due have been satisfied or all
necessary funds have been set apart for payment, the Company shall not: (i)
declare or pay dividends, or make any other distributions, on any shares of any
capital stock of the Company ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series 2 Preferred Stock (the
"Series 2 Junior Stock"), (ii) declare or pay dividends, or make any other
distributions, on any shares of any capital stock of the Company ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series 2 Preferred Stock (the" Series 2 Parity Stock"), except
dividends or distributions paid ratably on the Series 2 Preferred Stock and all
Series 2 Parity Stock on which dividends are payable or in arrears, in
proportion to the total amounts to which the holders of all shares of the
Series 2 Preferred Stock and such Series 2 Parity Stock are then entitled, or
(iii) redeem, purchase or otherwise acquire for consideration any shares of
Series 2 Junior Stock, or Series 2 Parity Stock, provided, however, that (A)
the Company may accept shares of any Series 2 Parity Stock or Series 2 Junior
Stock for conversion into Series 2 Junior Stock and (B) the Company may at any
time redeem, purchase or otherwise acquire shares of the Series 2 Preferred
Stock pursuant to mandatory redemption, put, sinking fund or other similar
obligations contained in such Series 2 Parity Stock, pro rata with the Series 2
Preferred Stock in proportion to the total amount then required to be applied
to the Company to redeem, repurchase, convert, exchange or otherwise acquire
shares of Series 2 Preferred Stock and shares of such Series 2 Parity Stock.
The Company shall not permit any subsidiary of the Company, or cause any other
person, to purchase or otherwise acquire for consideration any shares of
capital stock of the Company unless the Company could pursuant to the Series 2
Statement of Designations, purchase such shares at such time and in such
manner.
BOARD OF DIRECTORS REPRESENTATION
In the event the Company fails to pay the required dividends
with respect to the Series 2 Preferred Stock for two quarterly dividend periods
(whether consecutive or not), the Board of Directors of the Company will be
automatically expanded to create an additional position for the holders of
Series 2 Preferred Stock to fill such vacancy with a person of their choosing.
Such person shall serve as a director until such time as the dividends have
been paid in full or upon conversion or exchange of the Series 2 Preferred
Stock in accordance with the Series 2 Statement of Designations.
REDEMPTION
Except pursuant to a "Series 2 Change of Control" (as
hereinafter defined), or approved by at least 66 2/3% of the outstanding
Shares of Series 2 Preferred Stock by an amendment to the Articles, the
Series 2 Preferred Stock may not be redeemed by the Company prior to June
5, 1996. Thereafter, provided a Series 2 Change of Control of the Company has
not occurred, the Series 2 Preferred Stock may be redeemed in whole or in part
in integral multiples of $10.0 million, at prices which include premiums over
the Series 2 liquidation preference of $25 per share (the "Series 2 Liquidation
Preference"), which prices range at such date from 108% declining to 100% on
and after June 5, 2002. Further, the Series 2 Preferred Stock may be redeemed,
in whole but not in part, at any time on or after a Series 2 Change of Control
of the Company, at a price equal to 125% of the original issuance price, plus
accrued and unpaid dividends to the date of redemption.
A "Series 2 Change of Control" is defined to include the
following transactions: (i) a person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) becomes the beneficial owner of the Company's
stock entitling such person or group to exercise 50% or more of the combined
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voting power of all classes of the Company's stock (excluding votes entitled to
be cast by holders of Series 2 Preferred Stock); (ii) a change occurs in the
composition of the Company's Board of Directors so that a majority of the
members thereof are not "Continuing Directors" (defined as directors serving on
the original issue date of the Series 2 Preferred Stock and any person who
succeeds any such director and who is recommended or elected by a majority of
Continuing Directors); (iii) if immediately following a merger, consolidation,
reclassification or recapitalization Mr. Bernard J. Ebbers, President and
Chief Executive Officer of the Company, shall have increased his beneficial
ownership of shares of the Company's stock by 10% or more and he shall then be
the beneficial owner of the Company's stock entitling him to exercise 50% or
more of the total voting power of all classes of the Company's stock and, in
connection with such increase in Mr. Ebbers' holdings of the Company's stock,
the Company shall have incurred indebtedness in an amount equal to at least 50%
of the consideration payable in the transaction pursuant to which such increase
occurs, unless the holders of shares of Series 2 Preferred Stock participate in
the transaction on a pari passu basis with Mr. Ebbers, provided that if the
holders of Series 2 Preferred Stock are entitled to a class vote with respect
to the transaction and vote in favor thereof, the transaction will not be deemed
a "Series 2 Change of Control"; (iv) upon the occurrence of a reorganization,
merger or consolidation where following consummation thereof holders of the
Company's stock immediately prior to transaction beneficially own, in the
aggregate, less than 50% of the combined voting power of all classes of the
Company's stock (exclusive of voting power associated with the Series 2
Preferred Stock or shares of stock that holders thereof are entitled to receive
in the transaction); (v) upon the occurrence of a sale of all or substantially
all of the assets of the Company; (vi) in the event Mr. Ebbers sells or
transfers to a person or "group" (as defined above), whether in one transaction
or a series of transactions, (A) 20% or more of the shares of the Common Stock
owned by him within any period of 365 consecutive days, or (B) 40% or more of
the shares of Common Stock owned by him as of March 20, 1992 (including shares
underlying stock options then held by Mr. Ebbers), unless The 1818 Fund shall
have participated in such sales of stock on a pari passu basis with Mr. Ebbers;
and (vii) upon the occurrence of any transaction the result of which would be
that the Common Stock would not be required to be registered under the Exchange
Act and the holders of the Common Stock would not receive common stock of the
survivor to the transaction which is required to be registered under the
Exchange Act.
Upon the occurrence of a Series 2 Change of Control, the
dividend rate with respect to the Series 2 Preferred Stock will increase from
6.5% per annum to 13% per annum unless and until the Company exercises its
right to redeem said shares.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or otherwise, no distribution
shall be made (i) to the holders of shares of Series 2 Junior Stock unless,
prior thereto, the holders of shares of Series 2 Preferred Stock have received
(a) if a voluntary liquidation event shall have occurred, the optional
redemption price with respect to each share and (b) if a voluntary liquidation
event shall not have occurred, the Series 2 Liquidation Preference, plus all
accrued and unpaid dividends, whether or not declared or currently payable, to
the date of distribution, with respect to each share, or (ii) to the holders of
shares of Series 2 Parity Stock, except distributions made ratably on the
Series 2 Preferred Stock and all other Series 2 Parity Stock in proportion to
the total amounts to which the holders of all shares of the Series 2 Preferred
Stock and other Series 2 Parity Stock are entitled upon such liquidation,
dissolution or winding up.
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Neither the consolidation or merger of the Company with or
into any other person nor the sale or other distribution to another person of
all or substantially all the assets, property or business of the Company, in
each case when otherwise permitted, shall be deemed to be a liquidation,
dissolution or winding up of the Company for purposes of this liquidation
preference section.
CONVERSION PRICE
The shares of Series 2 Preferred Stock will be convertible
into shares of Common Stock at a conversion price of $11.81171 per share,
subject to adjustment in the event of stock dividends, subdivisions,
combinations, reclassifications and other distributions with respect to Common
Stock, and in certain other instances.
OPTIONAL EXCHANGE
The Company shall have the right, at any time and from time to
time at its sole option and election, to exchange shares of Series 2 Preferred
Stock, in whole or in part in multiples of $10,000,000, for 6.5% Convertible
Subordinated Notes of the Company (the "Convertible Notes"), at a price per
share equal to (i) the Series 2 Liquidation Preference per share plus (ii) all
accrued and unpaid dividends thereon, whether or not declared or currently
payable, to the date fixed for exchange, with the Convertible Notes valued at
their principal amount.
Notwithstanding anything in the Series 2 Statement of
Designations to the contrary, the Company shall not be entitled to exchange
shares of Series 2 Preferred Stock for Convertible Notes at any time that the
Company (i) is liable with respect to any indebtedness which is expressly
subordinate by its terms in right of payment to any Senior Institutional
Indebtedness (as defined in the Convertible Notes) unless such indebtedness by
its terms is expressly subordinate in right of payment to, or pari passu in
right of payment with, the Convertible Notes, or (ii) is prohibited under the
terms of any agreement governing its Senior Institutional Indebtedness from
redeeming the Convertible Notes as required by the terms of the Convertible
Notes, except that such agreement may prohibit such redemption (A) during the
existence of a default under such agreement or (B) if such redemption would,
although not in itself a breach of any covenant in any such agreement, result
in the occurrence of a default arising from a breach by the Company of one or
more covenants regarding the financial condition of the Company.
MANDATORY EXCHANGE
If at any time on or after May 6, 1997 to and including May 6,
2002, the holders of 50% or more of the shares of Series 2 Preferred Stock
shall deliver to the Company a notice demanding that the Company exchange the
shares of Series 2 Preferred Stock pursuant to the Mandatory Exchange section
of the Series 2 Statement of Designations, then the Company shall exchange all
(but not less than all) of the shares of Series 2 Preferred Stock for shares of
Common Stock or the Notes (as hereinafter defined) or any combination of the
two at the option of the Company, at any time, or from time to time, during the
period from the fortieth day following the date of such notice (the "Demand
Notice Date") to the third anniversary of the Demand Notice Date, in multiples
of $5,000,000 by the Series 2 Liquidation Preference, on a 30 days' notice of
each date of exchange (any such date, a "Mandatory Exchange Date"), at a price
per share equal to (i) the Series 2 Liquidation Preference per share plus all
accrued and unpaid dividends thereon, whether or not declared or currently
payable, to the applicable Mandatory Exchange Date, with any shares of Common
Stock to be exchanged valued for such purposes at 95% of
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the current market price as of the day immediately preceding the applicable
Mandatory Exchange Date and with any Notes to be exchanged valued at their
principal amount; provided, that the Company shall effect one such exchange on
the fortieth day following the Demand Notice Date and, if any shares of Series
2 Preferred Stock shall be outstanding, shall effect a second such exchange on
or before the first anniversary of the Demand Notice Date and, if any shares of
Series 2 Preferred Stock shall be outstanding on the third anniversary of the
Demand Notice Date, shall effect on or before such third anniversary a final
exchange for all such shares; provided, that any Notes issued in exchange for
Series 2 Preferred Stock on a Mandatory Exchange Date shall have an aggregate
principal amount that is a multiple of $5,000,00 (or, if all outstanding shares
of Series 2 Preferred Stock are to be exchanged, such Notes may have an
aggregate principal amount equal to the aggregate Series 2 Liquidation
Preference of such shares) and, provided, further, that the Company shall not
issue any Notes in exchange for Series 2 Preferred Stock if such issuance would
result in or constitute a default under or with respect to any indebtedness of
the Company or any of its subsidiaries.
"Notes" shall mean subordinated non-convertible notes of the
Company having (i) a floating interest rate, (ii) a final maturity date the
same as that of all other such Notes but in any event no later than June 5,
2002 and (ii) such other terms and conditions as shall result in a
determination that such Notes have a fair market value (determined in
accordance with the Series 2 Statement of Designations) at least equal to their
principal amount as of the date of their proposed issuance.
REGISTRATION UNDER THE SECURITIES ACT
Pursuant to certain registration rights granted to the holders
of Series 2 Preferred Stock, the Company has filed a registration statement
covering the resale of such shares or the shares of Common Stock into which
they may be converted under the Securities Act.
CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's Articles and Bylaws contain certain provisions,
which are summarized below, which may have the effect of discouraging certain
types of transactions that involve an actual or threatened change of control of
the Company. Reference is made to the full text of the Articles and Bylaws,
which are included as exhibits to the Registration Statement, of which this
Prospectus is a part. The following summary is qualified in its entirety by
such reference. See " -- Series 2 Preferred Stock -- Voting Rights" and "--
Redemption."
BUSINESS COMBINATION RESTRICTIONS
The Articles include a provision that requires the approval by
the holders of at least 70% of the voting power of the outstanding shares of
any class of stock of the Company entitled to vote generally in the election of
directors as a condition for Business Transactions (as hereinafter defined)
involving the Company and a Related Person (as hereinafter defined) or in
which a Related Person has an interest, unless (a) the Business Transaction is
approved by at least a majority of the Company Continuing Directors' (as
hereinafter defined) then serving on the Board of Directors, but if the votes of
such Continuing Directors would have been insufficient to constitute an act of
the Board of Directors, then such transaction must have been approved by the
unanimous vote of such Continuing Directors so long as there were at least
three such Continuing Directors serving on the Board of Directors at the time
of such unanimous vote, provided, that no such Continuing Director is a Related
Person who has an interest in the Business Transaction (other
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than a proportionate interest as a stockholder of the Company), or (b) certain
minimum price and procedural requirements are met. A "Business Transaction" is
defined to mean: (i) any merger, share exchange or consolidation involving the
Company or any of its subsidiaries; (ii) any sale, lease, exchange, transfer or
other disposition by the Company or any of its subsidiaries of more than 20% of
its assets; (iii) any sale, lease, exchange, transfer or disposition of more
than 20% of the assets of any entity to the Company or a subsidiary of the
Company; (iv) the issuance, sale, exchange, transfer or other disposition by
the Company or a subsidiary of the Company of any securities of the Company or
any subsidiary in exchange for cash, securities or other properties having an
aggregate fair market value of $15 million or more; (v) any merger, share,
exchange or consolidation between the Company and any subsidiary of the Company
in which the Company is not the survivor and the charter of the surviving
corporation does not contain provisions substantially similar to this
provision; (vi) any recapitalization or reorganization of the Company or
reclassification of its securities which would have the effect of increasing
the voting power of a Related Person; (vii) any liquidation, spin off, split
off, split up or dissolution of the Company; and (viii) any agreement, contract
or other arrangement providing for any of the Business Transactions defined or
having a similar purpose or effect. A "Related Person" is defined to mean a
beneficial owner which, together with its Affiliates and Associates (as
hereinafter defined), beneficially own 10% or more of the Company's outstanding
voting stock or who had such level of beneficial ownership: (a) at the time of
entering into the definitive agreement providing for the Business Transaction;
(b) at the time of adoption by the Board of Directors of a resolution approving
such transaction; or (c) as of the record date for the determination of
stockholders entitled to vote on or consent to the Business Transaction. A
"Continuing Director" is a director of the Company who either was a member of
the Board of Directors on September 15, 1993 or who became a director of the
Company subsequent to such date and whose election, or nomination for election
by the stockholders, was approved by at least a majority of the Continuing
Directors then on the Board of Directors. If the votes of such Continuing
Directors would have been insufficient to constitute an act of the Board of
Directors, then such election or nomination must have been approved by the
unanimous vote of the Continuing Directors so long as there were at least three
such Continuing Directors on the Board of Directors at the time of such
unanimous vote. An "Affiliate" is defined to mean a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such specified person. An "Associate" is
defined to mean: (a) any corporation, partnership or other organization of
which such specified person is an officer or partner; (b) any trust or other
estate in which such specified person has a substantial beneficial interest or
as to which such specified person serves as trustee or in a similar fiduciary
capacity; (c) any relative or spouse of such specified person, or any relative
of such spouse, who has the same home as such specified person or who is a
director or officer of the Company or any of its subsidiaries; and (d) any
person who is a director, officer or partner of such specified person or of any
corporation (other than the Company or any wholly-owned subsidiary of the
Company), partnership or other entity which is an Affiliate of such specified
person.
The affirmative vote of holders of at least 70% of the
Company's voting stock generally is required to amend or repeal the foregoing
provision of the Articles.
The foregoing provision could have the effect of delaying,
deferring or preventing a change in control of the Company that is opposed by
the Board of Directors but which might be beneficial to stockholders.
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CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
One of the effects of the existence of unissued and unreserved
Common Stock and preferred stock may be to enable the Board of Directors to
issue shares to persons friendly to current management, which could render more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of the Company's management and possibly deprive the stockholders of
opportunities to sell their shares of Common Stock at price higher than the
prevailing market prices. Such additional shares also could be used to dilute
the stock ownership of persons seeking to obtain control of the Company.
SPECIAL REDEMPTION PROVISIONS
The Articles contain a provision permitting the Company to
redeem shares of its capital stock from certain foreign stockholders in order
to enable the Company to continue to hold certain common carrier radio
licenses. These provisions are intended to cause the Company to remain in
compliance with the Communications Act and the regulations of the Federal
Communications Commissions promulgated thereunder.
Under these provisions, at such time as the percentage of
capital stock owned by foreign stockholders or certain affiliates thereof
exceeds 20%, the Company has the right to redeem the "excess shares" held by
such persons at the fair market value thereof. Following any determination
that such excess shares exist, such excess shares shall not be deemed
outstanding for purposes of determining the vote required on any matter brought
to the attention of the stockholders of the Company, and such excess shares
shall have no right to receive any dividends or other distributions, including
distributions in liquidation. If such shares are traded on a national
securities exchange or in the over-the-counter market, such fair market value
is the average closing price for the 45 trading days immediately preceding the
date of redemption. If such shares are not so traded, such fair market value
shall be established by the Board of Directors of the Company. In the event
there is a foreign stockholder who acquired shares within 120 days of the date
of redemption, however, the redemption price shall not exceed the price per
share paid by such stockholder. At least 30 days' notice of redemption must be
given, and the redemption price may be paid in cash, securities or any
combination thereof. The Company may require confirmation of citizenship from
any record or beneficial owner of shares of its capital stock, and from any
transferee thereof, as a condition to the registration or transfer of those
shares.
NOMINATION OF DIRECTORS
Under the Bylaws, stockholders entitled to vote in the
election of directors may nominate one or more persons as directors only if
written notice of such stockholder's intent to make such nomination or
nominations has been given either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Company not later than 90 days
prior to the anniversary date of the immediately preceding annual meeting.
Such notice must set forth: (a) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be nominated;
(b) a representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(c) description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
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pursuant to the proxy rules of the Securities and Exchange Commission; and (e)
the consent of each nominee to serve as a director of the Company if so
elected.
SPECIAL MEETINGS OF STOCKHOLDERS
The Bylaws provide that a special meeting may be called by
the Board of Directors of the Company, the President of the Company or the
holders of not less than 40% of all the votes entitled to be cast on the issue
proposed to be considered at the proposed special meeting.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 14, 1995
WORLDCOM, INC.
By: /s/ SCOTT D. SULLIVAN
-------------------------------------
Scott D. Sullivan
Treasurer and Chief Financial Officer
