<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
LDDS COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[LDDS COMMUNICATIONS LOGO]
515 EAST AMITE STREET
JACKSON, MISSISSIPPI 39201-2702
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Jackson, Mississippi
April 27, 1995
The annual meeting of the shareholders of LDDS Communications, Inc., a
Georgia corporation (the "Company"), will be held on Thursday, May 25, 1995, at
10:00 a.m. local time, at 515 East Amite Street, Jackson, Mississippi, for the
purposes of:
1. electing a Board of twelve directors;
2. considering and acting upon a proposal to amend the Company's
Amended and Restated Articles of Incorporation to change the Company's name
to "WorldCom, Inc." from "LDDS Communications, Inc."; and
3. transacting such other business as properly may come before the
meeting or any adjournments thereof.
Shareholders of record at the close of business on April 6, 1995, will be
entitled to receive notice of, and to vote at, the meeting.
A copy of the Company's Annual Report for 1994 accompanies this notice.
By Order of the Board of Directors
CARL J. AYCOCK
Secretary
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE PROMPTLY
MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY. A RETURN ADDRESSED ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 3
LDDS COMMUNICATIONS, INC.
515 EAST AMITE STREET
JACKSON, MISSISSIPPI 39201-2702
-------------------------------
PROXY STATEMENT
-------------------------------
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of LDDS
Communications, Inc., a Georgia corporation (the "Company"), for use at the
annual meeting of the Company's shareholders to be held at 515 East Amite
Street, Jackson, Mississippi, on Thursday, May 25, 1995, at 10:00 a.m. local
time and at any adjournments thereof. Shareholders of record at the close of
business on April 6, 1995 (the "Record Date"), will be entitled to receive
notice of, and to vote at, the meeting. Whether or not you expect to attend the
meeting in person, please return your executed proxy in the enclosed envelope
and the shares represented thereby will be voted in accordance with your wishes.
The first mailing of proxies to shareholders will occur on or about April 27,
1995. If, after sending in your proxy, you decide to vote in person or desire to
change the voting instructions on your proxy or revoke your proxy, you may do so
by notifying the Secretary of the Company in writing of such revocation at any
time prior to the voting of the proxy, by submitting a later-dated proxy or by
attending the meeting and voting in person.
On September 15, 1993, Metromedia Communications Corporation, a Delaware
corporation ("MCC"), merged into Resurgens Communications Group, Inc., a Georgia
corporation ("Resurgens"). Immediately thereafter, LDDS Communications, Inc., a
Tennessee corporation ("LDDS-TN"), merged into Resurgens, whereupon the name of
Resurgens was changed to "LDDS Communications, Inc." (the "Surviving
Corporation"). Such mergers are hereinafter referred to collectively as the
"Mergers" and individually as a "Merger." Although from a corporate law
perspective Resurgens was the survivor in both Mergers, for accounting purposes,
LDDS-TN was the survivor of the second Merger. The executive officers of LDDS-TN
at the time of the Mergers became the executive officers of the Surviving
Corporation and the Board of Directors of the Surviving Corporation consisted of
seven members selected by LDDS-TN and three members selected by Metromedia
Company, a Delaware general partnership and formerly the sole stockholder of MCC
("Metromedia"). Accordingly, unless otherwise provided herein, all references to
and information regarding the Company contained in this Proxy Statement relate
to LDDS-TN prior to the Mergers and to the Surviving Corporation after the
Mergers.
ACTION TO BE TAKEN UNDER PROXY
SHARES WILL BE VOTED AS INSTRUCTED IN THE ACCOMPANYING PROXY ON EACH MATTER
SUBMITTED TO THE VOTE OF SHAREHOLDERS. IF ANY DULY-EXECUTED PROXY IS RETURNED
WITHOUT VOTING INSTRUCTIONS, THE PERSONS NAMED AS PROXIES THEREON INTEND TO VOTE
ALL SHARES REPRESENTED BY SUCH PROXY AS FOLLOWS:
(1) FOR the election of the persons named herein as nominees for
directors of the Company to hold office until the 1996 annual meeting of
the Company's shareholders and until their successors have been duly
elected and qualified;
(2) FOR the amendment of Article One of the Company's Amended and
Restated Articles of Incorporation (the "Articles of Incorporation") to
change the Company's name to "WorldCom, Inc." from "LDDS Communications,
Inc."; and
(3) according to their best judgment on the transaction of such other
business as properly may come before the meeting or any adjournments
thereof.
<PAGE> 4
COMPANY SECURITIES
On the Record Date, there were issued and outstanding 161,046,363 shares of
Common Stock, 10,896,785 shares of Series 1 $2.25 Cumulative Senior Perpetual
Convertible Preferred Stock (the "Series 1 Preferred Stock") and 2,000,000
shares of Series 2 6.5% Cumulative Senior Perpetual Convertible Preferred Stock
(the "Series 2 Preferred Stock").
The holders of shares of Common Stock issued and outstanding are entitled
to cast one vote per share on all matters voted on by the holders of Common
Stock generally, including the election of directors, other than those directors
to be elected by the holders of the Series 1 Preferred Stock as described below.
The shares of Common Stock do not carry cumulative voting rights.
The shares of Series 1 Preferred Stock and Series 2 Preferred Stock are
currently convertible into shares of Common Stock at the option of the holders.
On the Record Date, the shares of Series 1 Preferred Stock and Series 2
Preferred Stock issued and outstanding were convertible into an aggregate of
21,876,976 shares and 4,233,087 shares, respectively, of Common Stock.
The holders of Series 1 Preferred Stock and Series 2 Preferred Stock are
entitled to vote together with holders of Common Stock as a single class on
issues presented to a vote of the Company's shareholders, on an as-if-converted
basis, except under certain conditions when such holders are entitled to vote as
a separate class, including the class voting rights of the Series 1 Preferred
Stock in the election of directors as described below. Presently, the holders of
a majority of the shares of the Series 1 Preferred Stock are entitled to elect
three members of the Company's Board of Directors. Neither the shares of Series
1 Preferred Stock nor the shares of Series 2 Preferred Stock carry cumulative
voting rights.
PRINCIPAL HOLDERS OF VOTING SECURITIES
As of the Record Date, the following persons, individually or as a group,
were known to the Company to be deemed to be the beneficial owners of more than
five percent of the issued and outstanding Common Stock, each of which persons
has sole voting and investment power over such Common Stock, except as set forth
in the footnotes hereto:
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF EXISTING PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(1)
---------------------------------------------------- ----------------------- -----------
<S> <C> <C>
Metromedia Company.................................. 30,855,983(2) 16.3%
One Meadowlands Plaza
East Rutherford, New Jersey 07073
ALLTEL Corporation ("ALLTEL")....................... 13,342,606 8.3%
One Allied Drive
Little Rock, Arkansas 72202
</TABLE>
- ---------------
(1) Based upon 161,046,363 shares of Common Stock issued and outstanding plus,
as to the holder thereof only, conversion of all derivative securities that
are convertible currently or within 60 days after the Record Date.
(2) Includes 21,876,976 shares issuable upon conversion of the Series 1
Preferred Stock, and 6,213,952 shares issuable upon the exercise of
warrants. Metromedia is a Delaware general partnership of which the sole
partners are a trust affiliated with John W. Kluge, Chairman of the
Company, and Stuart Subotnick, a director of the Company. Mr. Kluge is
Chairman and President of Metromedia. Mr. Subotnick is Executive Vice
President of Metromedia.
All of the 10,896,785 outstanding shares of Series 1 Preferred Stock are
held by Metromedia. On the Record Date, the shares of Series 1 Preferred Stock
were convertible into 21,876,976 shares of Common Stock, representing 12.0% of
the outstanding Common Stock.
2
<PAGE> 5
To the knowledge of the Company, 999,705 shares, or approximately 50%, of
the 2,000,000 outstanding shares of Series 2 Preferred Stock are owned by The
1818 Fund, L.P., 63 Wall Street, New York, NY 10005. The general and managing
partner of The 1818 Fund, L.P. is Brown Brothers Harriman & Co. ("Brown
Brothers"), which has designated its partners T. Michael Long and Lawrence C.
Tucker the sole and exclusive partners having voting and investment power with
respect to the Common Stock into which said Series 2 Preferred Stock is
convertible. On the Record Date, the 999,705 outstanding shares of Series 2
Preferred Stock owned by The 1818 Fund, L.P. were convertible into 2,115,919
shares of Common Stock, representing 1.3% of the outstanding Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock, as
of the Record Date, by each nominee for election as a director, each director,
the named executive officers and by all persons, as a group, who are currently
directors and executive officers of the Company. Each nominee, director or
executive officer has sole voting and investment power over the shares listed
opposite his or her name except as set forth in the footnotes hereto.
<TABLE>
<CAPTION>
NAME OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS(1)
------------------------------------------------------ --------------------- -----------
<S> <C> <C>
Carl J. Aycock........................................ 463,178(2) *
Max E. Bobbitt........................................ 52,646(3) *
Charles T. Cannada.................................... 143,455(4) *
Danny M. Dunnaway..................................... 36,578(5) *
Bernard J. Ebbers..................................... 7,309,103(6) 4.5%
Francesco Galesi...................................... 1,489,668(7) *
Stiles A. Kellett, Jr................................. 914,431(8) *
Silvia Kessel......................................... 3,000(9) *
John W. Kluge......................................... 30,858,983(10) 16.3%
Gregory A. LeVert..................................... 100,000(11) *
John A. Porter........................................ 2,370,261(12) 1.5%
Stuart Subotnick...................................... 30,858,983(13) 16.3%
Lawrence C. Tucker.................................... 2,124,553(14) 1.3%
Roy A. Wilkens........................................ -0- *
All Directors and Current Executive Officers as a
Group (14 persons).................................. 43,839,588(15) 23.1%
</TABLE>
- ---------------
* Less than one percent.
(1) Based upon 161,046,363 shares of Common Stock issued and outstanding plus,
as to the holder thereof only, conversion of all derivative securities that
are convertible currently or within 60 days after April 6, 1995.
(2) Includes 2,788 shares owned by Mr. Aycock's spouse, 34,658 shares
purchasable upon exercise of options, and 1,656 shares held as custodian
for children.
(3) Includes 8,756 shares purchasable upon exercise of options.
(4) Includes 139,786 shares purchasable upon exercise of options.
(5) Includes 34,658 shares purchasable upon exercise of options and 1,784
shares held as custodian for children.
(6) Includes 18,216 shares held as custodian for children, 387,848 shares
purchasable upon exercise of options and 431,774 shares owned by Mr.
Ebbers' spouse, as to which Mr. Ebbers shares voting and investment power.
(7) Consists of 1,480,912 shares owned by Rotterdam Ventures, Inc., of which
Mr. Galesi is sole shareholder; and 8,756 shares purchasable upon exercise
of options.
3
<PAGE> 6
(8) Includes 8,000 shares owned by Mr. Kellett's spouse; 49,312 shares held by
or in trust for children; 10,000 shares held as trustee for nephew; and
34,658 shares purchasable upon exercise of options.
(9) Consists of 3,000 shares purchasable upon exercise of options.
(10) A total of 30,855,983 of these shares are beneficially owned by Metromedia,
of which Mr. Kluge is Chairman and President. The amount shown includes
21,876,976 shares issuable upon conversion of the Series 1 Preferred Stock,
and 6,213,952 shares issuable upon the exercise of warrants. Also includes
3,000 shares purchasable upon exercise of options.
(11) Consists of 100,000 shares purchasable upon exercise of options.
(12) Includes 125,686 shares held as custodian or trustee for children; 26,024
shares purchasable upon exercise of options; and 100,000 shares owned by
spouse, as to which beneficial ownership is disclaimed.
(13) A total of 30,855,983 of these shares are beneficially owned by Metromedia,
of which Mr. Subotnick is Executive Vice President. The amount shown
includes 21,876,976 shares issuable upon conversion of the Series 1
Preferred Stock, and 6,213,952 shares issuable upon the exercise of
warrants. Also includes 3,000 shares purchasable upon exercise of options.
(14) A total of 2,115,919 of these shares are beneficially owned by The 1818
Fund, L.P. Brown Brothers is the general and managing partner of The 1818
Fund, L.P. and Mr. Tucker, as a general partner of Brown Brothers, shares
voting and investment power with respect to such securities. Also includes
8,634 shares purchasable upon exercise of options.
(15) Includes 28,969,366 shares purchasable upon exercise of options or warrants
or conversion of Series 1 Preferred Stock.
ITEM 1. ELECTION OF DIRECTORS
The Company's Bylaws provide that the Board of Directors shall consist of
not less than three directors, with the number to be determined from time to
time by the Board of Directors, subject to the terms of the Series 1 Preferred
Stock (the "Series 1 Preferred Terms") set forth in the Articles of
Incorporation. The action of the Board of Directors and the Series 1 Preferred
Terms currently fix at twelve the number of directors constituting the Board of
Directors of the Company. Accordingly, twelve directors are to be elected at the
1995 annual meeting as hereinafter provided.
Danny M. Dunnaway, whose term expires at the 1995 annual meeting, is not
standing for re-election and will retire from the Board as of the 1995 annual
meeting. Mr. Dunnaway has managed a private portfolio since 1987. Lawrence C.
Tucker has been selected by the Nominating Committee as the nominee to replace
Mr. Dunnaway.
In March 1995, the Board of Directors increased the number of directors
constituting the Board of Directors of the Company from ten to twelve. Gregory
A. LeVert and Roy A. Wilkens were appointed by the Board of Directors to serve
as directors until the next annual meeting and until their successors are duly
elected and qualified. All nominees have indicated their willingness to serve if
elected and all nominees, except for Mr. Tucker, are currently directors of the
Company. Should any nominee named herein for election become unavailable for any
reason, it is intended that the persons named in the proxy will vote for the
election of such other person in his or her stead as may be designated by the
Board of Directors. The Board of Directors is not aware of any reason that might
cause any nominee to be unavailable. The Board of Directors recommends a vote
"FOR" the election of all of the listed nominees.
Directors, other than those to be elected pursuant to the Series 1
Preferred Terms as described below, are elected by a plurality of the votes cast
by the shares entitled to vote in the election at a meeting of the shareholders
at which a quorum of the voting group involved is present. A majority of the
votes entitled to be cast in the election by the voting group constitutes a
quorum of that voting group for the election, except with respect to the Series
1 Preferred Stock. A majority of the total number of shares of Series 1
Preferred Stock outstanding and entitled to vote at the time of the meeting
constitutes a quorum of the holders of the Series 1 Preferred Stock. The absence
of a quorum with respect to the Series 1 Preferred Stock will not prevent the
4
<PAGE> 7
election of directors other than those to be elected by the holders of the
Series 1 Preferred Stock. Similarly, the absence of a quorum of the holders of
shares of any other class or series of capital stock of the Company will not
prevent the election of the directors to be elected by the holders of the Series
1 Preferred Stock.
Shares as to which voting authority is withheld will be considered present
for purposes of determining the presence of a quorum at the annual meeting but
as not entitled to vote, and not voted, for purposes of the election of
directors. Shares as to which a broker indicates it has no discretion to vote
and which are not voted will be considered not present at such meeting for
purposes of determining the presence of a quorum and as unvoted for the election
of directors.
Pursuant to the applicable provisions of the Articles of Incorporation,
holders of shares of Common Stock and Series 2 Preferred Stock currently are
entitled to vote as a single class in the election of nine of the twelve
directors to be elected at the annual meeting and holders of shares of Series 1
Preferred Stock currently are entitled to vote as a single class in the election
of the remaining three directors. Messrs. Aycock, Bobbitt, Ebbers, Galesi,
Kellett, LeVert, Porter, Tucker and Wilkens have been nominated by the Board of
Directors to stand for election by the holders of Common Stock and Series 2
Preferred Stock. Ms. Kessel and Messrs. Kluge and Subotnick have been nominated
by the Board of Directors to stand for election by the holders of Series 1
Preferred Stock. Each outstanding share of Common Stock is entitled to one vote
in the election and each holder of Series 2 Preferred Stock is entitled to cast
the number of votes per share of such Series 2 Preferred Stock as is equal to
the number of votes that such holder would be entitled to cast had such holder
converted the shares of Series 2 Preferred Stock held into Common Stock on the
Record Date. Each holder of Series 1 Preferred Stock is entitled to one vote for
each share of Series 1 Preferred Stock held on the Record Date. Metromedia was
the sole holder of Series 1 Preferred Stock on such date and has indicated its
intention to vote for the three nominees.
INFORMATION ABOUT NOMINEES AND EXECUTIVE OFFICERS
The following states each nominee's and each executive officer's age,
principal occupation, present position with the Company and the year in which
each nominee first was elected a director (each serving continuously since first
elected except as set forth otherwise). Unless indicated otherwise, each
individual has held his present position for at least five years. All references
to "the Company" include for these purposes LDDS-TN and its predecessors.
CARL J. AYCOCK, 46, has served as Secretary of the Company since 1987. Mr.
Aycock was the Secretary and Chief Financial Officer of Master Corporation, a
motel management and ownership company, from 1989 until 1992. Subsequent to
1992, Mr. Aycock has managed a private investment portfolio. Mr. Aycock has been
a director of the Company since 1983.
MAX E. BOBBITT, 50, has been a director of the Company since December 1992.
He was a director of Advanced Telecommunications Corporation ("ATC") until its
merger with the Company in December 1992 (the "ATC Merger"). Mr. Bobbitt held
various positions including President and Chief Operating Officer and director
of ALLTEL, a telecommunications company, from 1970 until his retirement in
January 1995.
CHARLES T. CANNADA, 36, serves as Senior Vice President of the Company,
which he joined in 1989. Prior to becoming Senior Vice President in January
1995, Mr. Cannada served as Treasurer, Chief Financial Officer and Assistant
Secretary of the Company. From 1980 to 1989, he served in various capacities
with Arthur Andersen LLP, independent public accountants.
BERNARD J. EBBERS, 53, has been President and Chief Executive Officer of
the Company since April 1985. He has served as a director of the Company since
1983.
FRANCESCO GALESI, 64, has been a director of the Company since December
1992. He was a director of ATC until the ATC Merger. He is the Chairman and
Chief Executive Officer of the Galesi Group, which includes companies engaged in
distribution, manufacturing, real estate and telecommunications.
STILES A. KELLETT, Jr, 51, has served as a director of the Company since
1981. Mr. Kellett is Chairman of the Board of Directors of Convalescent
Services, Inc., a long-term health care company in
5
<PAGE> 8
Atlanta, Georgia. He also serves as a director of Frederica Bank & Trust
Company, St. Simons Island, Georgia.
SILVIA KESSEL*, 44, is the President of Kluge & Company, which is a
division of Metromedia engaged in financial analysis and investment advice, and
Senior Vice President of Metromedia. Metromedia is a diversified, privately held
investment partnership and management company engaged in a variety of businesses
in the high technology, telecommunications, computerized painting, automotive
parts and the food services and hospitality industries. Ms. Kessel has served as
a director of the Company since consummation of the Mergers. She also is a
director of Orion Pictures Corporation.
JOHN W. KLUGE*, 80, Chairman of the Board of the Company, also serves as
Metromedia's Chairman and President. Mr. Kluge has served as a director of the
Company since consummation of the Mergers. He also is a director of The Bear
Stearns Companies, Inc., Occidental Petroleum Corporation, Orion Pictures
Corporation and Conair Corporation.
GREGORY A. LEVERT, 48, serves as President, Communication Services of the
Company, which he joined in December 1994. Prior to joining the Company, Mr.
LeVert spent five years with MCI Telecommunications Corporation, a
telecommunications company, and held various positions including President of
MCI Global Accounts, President of MCI Central Division and Vice President of MCI
National Accounts Marketing. Mr. LeVert has served as a director of the Company
since March 1995.
JOHN A. PORTER, 51, Vice Chairman of the Board of the Company, served as
Chairman of the Board of Directors of the Company from 1988 until consummation
of the Mergers. Mr. Porter serves as Chairman of the Board of Directors of
Phillips & Brooks/Gladwin, Inc., a manufacturer of pay telephone enclosures and
equipment. Mr. Porter is President and sole shareholder of P.M. Restaurant
Group, Inc. which filed for protection under Chapter 11 of the U.S. Bankruptcy
code in March 1995. He is also a director of Uniroyal Technology Corporation and
Intelligent Electronics, Inc.
STUART SUBOTNICK*, 53, is Executive Vice President of Metromedia. Mr.
Subotnick has served as a director of the Company since consummation of the
Mergers. He also serves as a director of Carnival Cruise Lines, Inc. and Orion
Pictures Corporation.
SCOTT D. SULLIVAN, 33, serves as Chief Financial Officer and Treasurer of
the Company. From 1992 until December 1994, Mr. Sullivan served as Vice
President and Assistant Treasurer of the Company. From 1989 until 1992, Mr.
Sullivan served as an executive officer of two long-distance companies,
including ATC. From 1983 to 1989, Mr. Sullivan served in various capacities with
KPMG Peat Marwick LLP.
LAWRENCE C. TUCKER, 52, is a general partner of Brown Brothers, which is
the general and managing partner of The 1818 Fund, L.P. He is also a director of
Dorr-Oliver Incorporated and Blenheim Group PLC.
ROY A. WILKENS, 52, serves as President and Chief Executive Officer,
WilTel, which the Company purchased in January 1995. Prior to such date, Mr.
Wilkens held various positions with The Williams Companies, Inc., including
President of Williams Pipe Line Co. and President and Chief Executive Officer of
WilTel, Inc. Mr. Wilkens has served as a director of the Company since March
1995.
- ---------------
* Ms. Kessel and Messrs. Kluge and Subotnick currently serve and are nominated
for re-election as directors pursuant to the Series 1 Preferred Terms.
6
<PAGE> 9
INFORMATION CONCERNING BOARD OF DIRECTORS
COMMITTEES AND MEETINGS
During 1994, the Board of Directors of the Company held five meetings. Each
director attended at least 75% of the meetings of the Board of Directors, and of
the meetings of committees on which such director served, except Stuart
Subotnick, who missed two of the seven 1994 meetings of the Board of Directors
and committee on which he served.
The Board of Directors has a standing Audit Committee, consisting of Max E.
Bobbitt (Chairman), Francesco Galesi and Stuart Subotnick. During 1994, the
Audit Committee held two meetings. The Audit Committee performs the following
functions: (a) review of periodic financial statements, (b) communication with
independent accountants, (c) review of the Company's internal accounting
controls, and (d) recommendation to the Board of Directors as to selection of
independent accountants.
The Board of Directors has a standing Compensation and Stock Option
Committee consisting of Stiles A. Kellett, Jr. (Chairman), Danny M. Dunnaway and
Silvia Kessel. The Compensation and Stock Option Committee held three meetings
during 1994. The duties of the Compensation and Stock Option Committee are as
follows: (a) to review and recommend to the Board of Directors the annual
salary, fees, bonus and other benefits of the directors, officers and employees
of the Company and the Company's subsidiaries; (b) to administer the stock
option plans of the Company, including a determination of the individuals to
whom options are granted and the terms and provisions of options under such
plans; and (c) to review and submit to the Board of Directors recommendations
concerning compensation, stock plans and other benefits to the Company's
directors, officers and employees and expense account policies.
The Board of Directors has a Nominating Committee consisting of John A.
Porter (Chairman), Carl J. Aycock and John W. Kluge. The Nominating Committee
did not meet during 1994. The duties of the Nominating Committee include
recommending to the Board, if so requested by the Board, nominees for director,
successors to the Chief Executive Officer in the event there is a vacancy in
that office, and nominees for committee chairpersons and members. The Nominating
Committee will give due consideration to written recommendations from
shareholders entitled to vote in the election of directors. Under the Bylaws of
the Company, such shareholders are entitled to nominate persons for election as
directors only if written notice has been given as specified therein to the
Company's Secretary, 515 East Amite Street, Jackson, Mississippi 39201-2702, not
later than 90 days prior to the anniversary of the preceding year's meeting.
Such notice must set forth information about the proposed nominee and the
consent of the nominee, among other things. See "FUTURE PROPOSALS OF SECURITY
HOLDERS."
COMPENSATION OF DIRECTORS
The Company's directors are paid fees of $6,000 per year and $1,000 per
meeting of the Board attended plus certain expenses. Committee members are paid
a fee of $300 for any committee meeting attended on the same day as a Board
meeting, and $500 for each committee meeting attended that is not on the same
day as a Board meeting, plus certain expenses. The chairman of each committee
receives an additional $1,000 per year.
Pursuant to the Company's Second Amended and Restated 1990 Stock Option
Plan, each director receives annually a non-discretionary grant of options to
purchase 3,000 shares of the Company's Common Stock at the fair market value of
such stock on the date of grant. Such options are immediately exercisable and
expire on the earliest to occur of (a) ten years following the date of grant,
(b) three months following retirement, (c) 12 months following termination of
service due to disability or death, (d) upon cessation of service for reasons
other than retirement, death or disability, or (e) the day preceding the
consummation of a specified change in control transaction, defined generally to
include the dissolution or liquidation of the Company, a reorganization, merger
or consolidation of the Company in which the Company is not the surviving
corporation, or a sale of substantially all of the assets or 80% or more of the
outstanding stock of the Company to another entity. The exercise price may be
paid in cash or, in the discretion of the committee which administers the plan,
Common Stock. In the discretion of such committee, shares receivable on exercise
may be withheld to pay applicable taxes on the exercise.
7
<PAGE> 10
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
GENERAL
The Company's executive compensation program is administered by the
Compensation and Stock Option Committee of the Board of Directors (the
"Committee"). From September 15, 1993 to May 31, 1994, the Committee was
composed of Carl J. Aycock (Chairman), Stiles A. Kellett, Jr. and Silvia Kessel.
Since May 31, 1994, the Committee has been composed of Stiles A. Kellett, Jr.
(Chairman), Danny M. Dunnaway and Silvia Kessel. None of the Committee members
are employees of the Company.
The Company's executive compensation policy as implemented by the Committee
is designed to provide a competitive compensation program that will enable the
Company to attract, motivate, reward and retain executives who have the skills,
experience and talents required to promote the short- and long-term financial
performance and growth of the Company. The compensation policy is based on the
principle that the financial rewards to the executive must be aligned with the
financial interests of the shareholders of the Company. In this manner, the
Company will meet its ultimate responsibility to its shareholders.
The Company's executive compensation has three elements: base salary,
annual incentive compensation and long-term incentive compensation. The
Committee is endeavoring to maximize deductibility of compensation under Section
162(m) of the Internal Revenue Code to the extent practicable while maintaining
competitive compensation. The following is a summary of the considerations
underlying each element.
BASE SALARY
The Committee determines the salary ranges for each of the executive
officer positions of the Company, based upon the level and scope of the
responsibilities of the office and the pay levels of similarly positioned
executive officers in comparable companies. With respect to executive officers
other than the Chief Executive Officer, the evaluation of the Chief Executive
Officer is of paramount importance in setting base salaries. The Committee's
practice has been to establish base salaries for particular offices between the
median and high end of the range of such salaries at comparable companies, in
order to attract and retain the best qualified management team available. In
1994, base salaries for particular officers were consistent with this policy.
The peer group of companies for comparison of compensation levels is
composed of two other national facilities based, long distance
telecommunications companies. Although the market shares of these companies
exceed that of the Company, the Committee views these companies as comparable
for purposes of reflecting the market in which the Company competes for
executive talent. This is a smaller group than the peer group represented in the
index used for stock performance comparisons elsewhere in this Proxy Statement
under the caption "COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS." One of
these companies is included in the index used for stock performance comparisons.
The other company is not traded on the Nasdaq Stock Market and is therefore not
included in the performance graph. The information as to salary and bonus ranges
in the peer group companies is acquired through the review of public filings.
The Committee is satisfied that it has accurate information with respect to
salary ranges in the Company's peer group.
The Committee begins its annual compensation review in November, and it
meets in the following February of each year to set the compensation of the
Company's executive officers. The Committee considers (i) the Company's
performance as evidenced in changes in the price of the Common Stock during the
year as compared to changes in its industry and the broader economic
environment, (ii) the Chief Executive Officer's recommendations with respect to
a particular officer, (iii) the officer's individual performance, (iv) any
significant changes in the officer's level of responsibility, and (v) each
officer's then-current salary within the range of salaries for such position.
The Committee includes significant qualitative components in evaluating the
individual performance of each executive officer. These components include the
officer's leadership, teambuilding and motivational skills, adaptability to
rapid change, and assimilation of new technical knowledge to meet the demands of
the industry's customers. In this qualitative evaluation, the Committee
exercises its collective judgment as to the officer's contributions to the
growth and success of the Company during the prior year and the expected
contributions of such officer in the future.
8
<PAGE> 11
The proposed salary increases, as well as the annual and long-term
incentive awards, are presented for the approval of the Board of Directors of
the Company. Generally, such salary increases are made retroactive to January 1
of the current year. For 1995, executive officers' salaries were adjusted
consistent with the policy to pay between the median and high end of the range
of such salaries at comparable companies, and the completion of the merger with
IDB Communications Group, Inc. on December 30, 1994 (the "IDB Merger") and the
acquisition of Williams Telecommunications Group, Inc. (the "WilTel
Acquisition") on January 5, 1995, which significantly increased the size of the
Company. The Company's Board of Directors unanimously approved the 1995 salary
adjustments and the annual and long-term incentive awards for 1994.
ANNUAL INCENTIVE COMPENSATION
The Company's executive officers, as well as other management employees,
are eligible to receive annual cash bonus awards. The key components in
determining the amount of such awards include the financial performance of the
Company in the context of the overall industry and economic environment,
generally as evidenced by changes in the Common Stock price during the prior
year, as well as the individual growth and success of the Company as measured
primarily by revenues. The judgment of each member of the Committee and, in the
case of other executive officers, of the Chief Executive Officer as to the
impact of the individual on the financial performance of the Company also are
considered. Based largely upon internal growth, the IDB Merger and the WilTel
Acquisition, the Committee awarded bonuses for 1994 which fell between the
median and high end of the range of annual bonuses at the peer group companies.
The change in Common Stock price in 1994 was not strongly considered due to the
overall decline experienced in the market generally.
In 1994, the Company adopted the Annual Performance Bonus Plan (the
"Plan"), which relates to certain cash bonuses for the Chief Executive Officer.
The bonuses are predicated on the achievement by the Company of one or more
quantitative performance goals for the year. Over time, in light of its
experience with the Plan and other compensation-related considerations, the
Committee may expand the number of participants in the Plan to include other
executive officers of the Company. Subject to attainment of the specified
performance goal(s) and the limitation with respect to the maximum bonus payable
under the Plan, the Committee intends to exercise its judgment as to individual
contributions to the Company's performance, as set forth above under the caption
"Base Salary," in determining the actual amount of the bonus or bonuses to be
paid under the Plan.
LONG-TERM INCENTIVE COMPENSATION
The Committee believes that long-term incentive compensation in the form of
stock options is the most direct way of making executive compensation dependent
upon increases in shareholder value. The Company's stock option plans provide
the means through which executive officers can build an investment in Company
Common Stock which will align such officers' economic interests with the
interests of shareholders. The value of the stock options historically has
increased as a result of increases in the price of the Common Stock, and such
options are highly valued by employees. The Committee believes that the grant of
stock options has been a particularly important component of its success in
retaining talented management employees.
The exercise price of each option is the market price of the Common Stock
on the date of grant. Options generally are exercisable immediately upon grant
and have a term of ten years. The Committee believes that stock options give the
executive officers greater incentives throughout the term of the options to
strive to operate the Company in a manner that directly affects the financial
interests of the shareholders both on a long-term, as well as a short-term,
basis.
In determining the number of option shares to grant to executive officers,
the Committee considers on a subjective basis the same factors as it does in
determining the other components of compensation, with no single factor accorded
special weight. The recommendation of the Chief Executive Officer is of
paramount importance in determining awards as to persons other than himself.
Prior option grants to the individual involved are not considered in making new
nonqualified option grants.
9
<PAGE> 12
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Ebbers' base salary, annual incentive compensation and long-term
incentive compensation are determined by the Committee based upon the same
factors as those employed by the Committee for executive officers generally,
with exception for cash bonuses granted under the Plan and, as discussed below,
under the 1995 Special Performance Bonus Plan (the "1995 Plan"). The total
compensation package of Mr. Ebbers is designed to be competitive within the
industry while creating awards for short- and long-term performance in line with
the financial interests of the shareholders. In 1994, the compensation package
for Mr. Ebbers was consistent with this policy.
During 1993, the Company's stock price (adjusted for stock dividends during
1993 and 1994) increased from $15.59 to $24.125 per share, and the Company
increased significantly in size upon the Mergers, having $2.5 billion in total
assets as of December 31, 1993, and $1.14 billion in revenues for the year ended
December 31, 1993 (before restatement for the IDB Merger, which was accounted
for as a pooling-of-interests). In recognition of these achievements, the
Committee determined to increase Mr. Ebbers' base salary in 1994 by
approximately 40% over his 1993 salary, to $700,000. During 1994, after
restatement for the IDB Merger, revenues increased from $1.5 billion to $2.2
billion. Also, on January 5, 1995, the Company completed the WilTel Acquisition
for approximately $2.5 billion in cash. On a pro forma basis, the combined
assets and revenues of these companies for 1994 totaled $6.4 billion and $3.1
billion, respectively. In recognition of these achievements, the Committee
determined to increase Mr. Ebbers' base salary in 1995 to $850,000, an increase
of 21% over his 1994 base salary. The Committee established a maximum bonus
under the Plan for the Chief Executive Officer for 1994 equal to $750,000. It
established specific performance goals for 1994 based on the attainment by the
Company of specified minimum gross revenues and adjusted earnings per share of
Common Stock. The Company achieved the performance goals, and the Committee
determined to award the Chief Executive Officer the entire bonus, based on the
factors discussed above.
During 1994, the Committee granted Mr. Ebbers options exercisable for an
aggregate of 100,000 shares of Common Stock. The Committee believes that options
appropriately compose a significant portion of compensation for the reasons set
forth above. In evaluating the number of options awarded, the Committee did not
employ a formal valuation formula, but compared the number of options to the
numbers of options awarded by the peer group companies.
In 1994, the Company also adopted the 1995 Plan which relates to a special
bonus for the Chief Executive Officer of the Company with respect to fiscal year
1995. The bonus is in addition to any other bonus payable to the Chief Executive
Officer. The award of a bonus to the Chief Executive Officer under the 1995 Plan
is predicated on the achievement by the Company of one or more performance goals
during fiscal year 1995, as determined by the Committee. The Committee
established a maximum bonus under the 1995 Plan for the Chief Executive of
$1,000,000, and a performance goal, based on specified minimum gross revenues of
the Company in any one month. The 1995 performance goal was achieved in January
1995 and the Committee awarded Mr. Ebbers the entire bonus, based on the factors
discussed above.
10
<PAGE> 13
CONCLUSION
The Committee intends to continue its practice of basing executive
compensation on stock price and other financial performance criteria in the
context of the telecommunications industry and the broader economy, and on its
qualitative evaluation of individual performance. Additionally, the Committee is
augmenting, as applicable to the person(s) involved, these components of the
compensation process with the quantitative measures of performance included in
the Plan. The Committee believes that its compensation policies promote the
goals of attracting, motivating, rewarding and retaining talented executives who
will maximize value for the Company's shareholders.
THE COMPENSATION AND STOCK OPTION COMMITTEE
APRIL 27, 1995
Through May 31, 1994: Carl J. Aycock (Chairman)
Stiles A. Kellett, Jr.
Silvia Kessel
June 1, 1994 to Present: Stiles A. Kellett, Jr. (Chairman)
Danny M. Dunnaway
Silvia Kessel
11
<PAGE> 14
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
The following graphs and tables compare cumulative five-year shareholder
returns (including reinvestment of dividends) on an indexed basis with the
Center for Research in Security Prices ("CRSP") Index for the Nasdaq Stock
Market (US Companies) and the CRSP Index for Nasdaq Telecommunications Stocks
(SIC codes 4800 through 4899 -- US and Foreign Companies), the first reflecting
LDDS-TN returns prior to the Mergers and the second reflecting the returns
applicable to Resurgens prior to the Mergers. Upon a shareholder's written
request to the Treasurer of the Company, the Company will promptly provide the
names of the companies included in the indices. These indices are included for
comparative purposes only and do not necessarily reflect management's opinion
that such indices are an appropriate measure of the relative performance of the
stock involved, and are not intended to forecast or be indicative of possible
future performance of the Common Stock.
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
Performance Graph for LDDS Communications, Inc. (LDDS -- TN Prior to 9/15/93)
[GRAPH]
<TABLE>
<CAPTION>
Nasdaq
Telecomm
unications
Stocks
LDDS Com- Nasdaq Stock SIC 4800
Measurement Period munications, Market (US through 4899
(Fiscal Year Covered) Inc. Companies) US & Foreign
<S> <C> <C> <C>
12/29/89 100.0 100.0 100.0
12/31/90 177.0 84.9 67.4
12/31/91 405.7 136.3 93.0
12/31/92 662.1 158.6 114.2
12/31/93 1024.6 180.9 176.0
12/30/94 825.5 176.9 145.7
</TABLE>
- ---------------
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index level for all series was set to $100.00 on 12/29/89.
12
<PAGE> 15
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
Performance Graph for LDDS Communications, Inc. (Resurgens Prior to 9/15/93)
[GRAPH]
<TABLE>
<CAPTION>
Nasdaq
Telecomm
unications
Stocks
LDDS Com- Nasdaq Stock SIC 4800
Measurement Period munications, Market (US through 4899
(Fiscal Year Covered) Inc. Companies) US & Foreign
<S> <C> <C> <C>
12/29/89 100.0 100.0 100.0
12/31/90 107.9 84.9 67.4
12/31/91 79.4 136.3 93.0
12/31/92 184.1 158.6 114.2
12/31/93 306.3 180.9 176.0
12/30/94 246.8 176.9 145.7
</TABLE>
- ---------------
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index level for all series was set to $100.00 on 12/29/89.
E. Resurgens was used prior to and exchanged for the Company ($46.50/share) on
9/15/93.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the named executive
officers of the Company for the three years ended December 31, 1994, including
compensation from LDDS-TN prior to the Mergers.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
NAME AND ---------------------- OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SARS(#) COMPENSATION($)
- ------------------------------------- ---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Bernard J. Ebbers.................... 1994 $ 711,000(1) $750,000 100,000/0 $ 8,994(2)
President and 1993 $ 514,250 $700,000 143,924/0 $ 8,994
Chief Executive Officer 1992 $ 303,750 $500,000 143,924/0 $ 8,728
Charles T. Cannada................... 1994 $ 273,467 $302,000 120,000/0 $ 9,240(2)
Senior Vice President 1993 $ 250,000 $ 75,000 47,974/0 $ 8,610
1992 $ 150,000 $ 77,000 51,812/0 $76,228
</TABLE>
- ---------------
(1) Amounts shown include director's fees.
(2) Matching contributions to the Company's 401(k) Salary Savings Plan.
13
<PAGE> 16
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock option grants
made in the fiscal year ended December 31, 1994, to the individuals named in the
Summary Compensation Table. There were no grants of SARs to said individuals
during the year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUME ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO OR BASE TERM(3)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED(#)(1) IN FY ($/SH)(2) DATE 5%($) 10%(5)
- -------------------------- --------------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bernard J. Ebbers............ 100,000 5.9% $ 17.88 6/30/04 $1,124,464 $2,849,612
Charles T. Cannada........... 120,000 7.1% $ 17.88 6/30/04 $1,349,356 $3,419,534
</TABLE>
- ---------------
(1) The options terminate on the earlier of their expiration date or ten years
after grant or, generally, immediately on termination for reasons other
than retirement, disability or death; three months after termination of
employment on retirement; 12 months after termination for disability or
death; or on the day before the consummation of a specified change of
control transaction, defined generally to include the dissolution or
liquidation of the Company, a reorganization, merger or consolidation of
the Company in which the Company is not the surviving corporation, or a
sale of substantially all the assets or 80% or more of the outstanding
stock of the Company to another entity. In the event of a change of control
transaction, the Committee has the right, but not the obligation, to
accelerate the time in which any option may be exercised prior to such
termination. Mr. Ebbers' options are fully exercisable on the date of
grant. Mr. Cannada's options become exercisable in three equal annual
installments beginning with the date of grant through the second
anniversary of grant.
(2) The exercise price may be paid in cash or, in the discretion of the
Committee, by shares of Common Stock already owned or to be issued pursuant
to the exercise, valued at the closing quoted selling price on the date of
exercise, or a combination of cash and Common Stock.
(3) The indicated 5% and 10% rates of appreciation are provided to comply with
Securities and Exchange Commission regulations and do not necessarily
reflect the views of the Company as to the likely trend in the stock price.
Actual gains, if any, on stock option exercises and Common Stock holdings
will be dependent on, among other things, the future performance of the
Common Stock and overall stock market conditions. There can be no assurance
that the amounts reflected in this table will be achieved.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table sets forth information concerning the number and value
realized as to options exercised during 1994 and options held at December 31,
1994, by the individuals named in the Summary Compensation Table and the value
of those options held at such date. The options exercised were not exercised as
SARs and no SARs were held at year end. All options had exercise prices lower
than the fair market value of the Common Stock on December 31, 1994
("in-the-money" options).
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES VALUE OPTIONS AT FY-END(#) FY-END($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bernard J. Ebbers.... 324,502 $6,548,328 387,848 -- $1,725,824 $ --
Charles T. Cannada... 56,130 $ 967,340 139,786 80,000 $ 619,918 $ 124,600
</TABLE>
- ---------------
(1) Based upon the difference between the closing price on the date of exercise
and the option exercise price.
(2) Based upon a price of $19.4375 per share, being the closing price of Common
Stock on December 31, 1994.
14
<PAGE> 17
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and 10% or greater shareholders of the Company ("Reporting
Persons") to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of equity securities of the
Company. To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that certain
reports were not required, during the year ended December 31, 1994, the
Reporting Persons have complied with all applicable Section 16(a) filing
requirements.
TRANSACTIONS WITH MANAGEMENT
During 1994, the Company made short-term loans aggregating $13,992,000 to
the Chief Executive Officer of the Company. The loans were payable on demand
with accrued interest at the Company's prevailing interest rate under its credit
facilities. In August 1994, the entire loan balance, including accrued interest
of $177,000, was paid in full.
MCC leased approximately 139,700 square feet of space for its East
Rutherford, New Jersey corporate headquarters, of which approximately 31,000
square feet is used by Metromedia. The Metromedia portion of the rent is
approximately $692,000 per year. The entire lease is for a 15-year period, with
various partial termination options. In addition, Metromedia guaranteed all of
MCC's obligations under the lease for the East Rutherford, New Jersey
headquarters. MCC also subleased or leased from Metromedia or affiliates of
Metromedia certain additional office space in Secaucus, New Jersey; New York,
New York; and Columbia, Maryland. The Company is currently evaluating these
properties and leases to determine what action it will take thereunder.
Pursuant to the terms of separate leases of microwave transmission
facilities, the Company as successor to MCC made rental payments in 1994 to
Metromedia in the amount of $16,587,000 and is obligated to make the following
estimated minimum payments to Metromedia over the remaining terms of the leases,
one of which expires in 1997 and the others expire in 2001: $17,359,000 (1995),
$18,096,000 (1996), $11,367,000 (1997), $4,040,000 (1998) and $10,507,000 (in
the aggregate for the years from 1999 through 2001). In addition, at the end of
the term of each of the leases, the Company may purchase the equipment covered
by such lease at a price to be determined at such date in accordance with the
provisions of each lease.
MCC and Metromedia were parties to a Trademark License Agreement (the
"License Agreement") which provided for an exclusive, royalty-free license by
Metromedia of the name "Metromedia" to MCC for use solely in connection with
MCC's long distance telecommunications business. Prior to the Mergers, the
License Agreement was amended to provide the Company, as the successor to MCC,
with a limited license to use the name "Metromedia" solely in connection with
the Company's long distance telecommunications business for a period of three
years. The Amended and Restated License Agreement provides that Metromedia may
terminate the agreement in its sole discretion upon the occurrence of certain
designated events, including, among others, if Metromedia's equity ownership in
the Company declines below a designated percentage or if the Company breaches
various provisions of the Amended and Restated License Agreement and such
breaches are not cured within a designated period.
MCC provided a 20% discount on its long distance services to Metromedia
employees, and such discount has continued for Metromedia employees who were
employed by Metromedia on September 15, 1993. In addition, MCC provided long
distance service to certain affiliates of Metromedia. MCC believed that these
services to the affiliates were provided on an arm's-length basis. The Company
has continued these agreements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Subsequent to May 31, 1994, the members of the Company's Compensation and
Stock Option Committee have been Stiles A. Kellett, Jr. (Chairman), Danny M.
Dunnaway and Silvia Kessel. The Compensation and Stock Option Committee from
September 15, 1993 to May 31, 1994 was composed of Carl J. Aycock (Chairman),
Stiles A. Kellett, Jr. and Silvia Kessel. Mr. Aycock has served as Secretary of
the Company since 1987.
15
<PAGE> 18
ITEM 2. APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
TO CHANGE THE COMPANY'S NAME TO "WORLDCOM, INC."
FROM "LDDS COMMUNICATIONS, INC."
The Board of Directors of the Company has unanimously adopted a resolution
recommending that the Company's Articles of Incorporation be amended to change
its name from "LDDS Communications, Inc." to "WorldCom, Inc.", subject to the
approval by shareholders at the annual meeting. The Board of Directors of the
Company believes that it is in the best interests of the Company to change its
corporate name to appropriately express the Company's new image, direction and
capabilities. The new name and corresponding corporate logo were designed to
convey the message that the Company is a major participant in the worldwide
telecommunications market.
If approved by the shareholders at the annual meeting, the amendment will
become effective upon the filing of an amendment to the Company's Articles of
Incorporation with the Georgia Secretary of State. The change of the Company's
name will be accomplished by amending Article One of the Company's Articles of
Incorporation to read as follows:
'Article One. The name of this corporation is WorldCom, Inc. This
corporation is referred to hereinafter as the "Corporation".'
The change in corporate name will not affect the validity or
transferability of stock certificates presently outstanding and the Company's
shareholders will not be required to exchange any certificates presently held by
them.
Approval of the amendment requires a majority of the votes entitled to be
cast on the amendment by the holders of Common Stock, Series 1 Preferred Stock
and Series 2 Preferred Stock as a single class, with the holders of Preferred
Stock voting on an as-if-converted basis. Consequently, any shares not voted on
the amendment (whether by abstention or broker non-votes) will have the same
effect as votes against such amendment.
The Board of Directors recommends a vote "FOR" approval of the amendment.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP ("Arthur Andersen") has been selected as the Company's
independent accountant for 1995. Representatives of Arthur Andersen are expected
to attend the annual meeting and will have the opportunity to make statements
and respond to appropriate questions from shareholders.
Upon effectiveness of the Mergers, the Surviving Corporation's Board of
Directors authorized the Audit Committee of the Board of Directors to select an
auditor to perform the audit of the books and accounts of the Surviving
Corporation and its subsidiaries for the fiscal year ended December 31, 1993. On
October 7, 1993, the Audit Committee engaged Arthur Andersen as such auditor and
certifying accountant.
Prior to the Mergers, Arthur Andersen was the certifying accountant of
LDDS-TN, which, for accounting purposes, was the surviving corporation in the
Mergers. From an accounting perspective, therefore, there has not been a change
in certifying accountant. From a corporate law perspective, Ernst & Young, as
the certifying accountant of Resurgens, was dismissed pursuant to resolutions of
the Audit Committee on October 7, 1993. Ernst & Young's reports on the financial
statements of Resurgens for the fiscal years ended June 30, 1992 and 1991 did
not contain an adverse opinion or a disclaimer of opinion, nor were they
qualified or modified as to uncertainty, auditscope, or accounting principles.
Ernst & Young has not reported on the financial statements of the Company for
any period subsequent to June 30, 1992.
In connection with the Mergers on September 15, 1993, there was a change of
management of the Company. To the knowledge of current management, during the
fiscal years ended June 30, 1992 and 1991, and the subsequent period through the
date of dismissal, there were no disagreements with the former accountant on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which, if such disagreement was not resolved to the
satisfaction of the former accountant, would have caused it to make a reference
to the subject matter of the disagreements in connection with the report on the
financial statements.
16
<PAGE> 19
REPORT ON FORM 10-K
A copy of the Company's Report on Form 10-K for the period ended December
31, 1994, filed with the Securities and Exchange Commission (including related
financial statements and schedules) is available to shareholders without charge,
upon written request to Scott D. Sullivan, Treasurer, LDDS Communications, Inc.,
515 East Amite Street, Jackson, Mississippi 39201-2702.
FUTURE PROPOSALS OF SECURITY HOLDERS
All proposals of security holders intended to be presented at the 1996
annual meeting of shareholders must be received by the Company not later than
December 29, 1995, for inclusion in the Company's 1996 proxy statement and form
of proxy relating to the 1996 annual meeting. Upon timely receipt of any such
proposal, the Company will determine whether or not to include such proposal in
the proxy statement and proxy in accordance with applicable regulations and
provisions governing the solicitation of proxies.
Under the Bylaws of the Company, shareholders entitled to vote in the
election of directors may nominate one or more persons for election as directors
only if written notice of such shareholder'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 shareholder who intends to make
the nomination and of the person or persons to be nominated; (b) a
representation that the shareholder 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 shareholder
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
shareholder; (d) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed
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.
OTHER BUSINESS
The Company knows of no business to be brought before the annual meeting
other than as set forth above. If other matters properly come before the
meeting, it is the intention of the persons named in the solicited proxy to vote
the proxy on such matters in accordance with their best judgment.
MISCELLANEOUS
The Company will pay the cost of soliciting proxies in connection with the
1995 annual meeting. In addition to solicitation by use of the mails, certain
directors, officers and regular employees of the Company may solicit the return
of proxies by telephone, facsimile or other means, or personal interview, and
may request brokerage houses and custodians, nominees and fiduciaries to forward
soliciting material to their principals and will agree to reimburse them for
their reasonable out-of-pocket expenses.
Shareholders are urged to mark, sign and send in their proxies without
delay.
By Order of the Board of Directors
Carl J. Aycock
Secretary
Jackson, Mississippi
April 27, 1995
17
<PAGE> 20
PROXY
LDDS COMMUNICATIONS, INC.
515 East Amite Street
Jackson, Mississippi 39201-2702
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS, MAY 25, 1995
The undersigned hereby appoints Bernard J. Ebbers and Carl J. Aycock,
and each of them, with full power of substitution, the true and lawful
attorneys in fact, agents and proxies of the undersigned to vote at the Annual
Meeting of Shareholders of LDDS Communications, Inc. (the "Company"), to be
held on Thursday, May 25, 1995, commencing at 10:00 a.m. local time, at the
corporate office of the Company, 515 East Amite Street, Jackson, Mississippi
39201-2702, and at any and all adjournments thereof, according to the number of
votes which the undersigned would possess if personally present, for the
purposes of considering and taking action upon the following, as more fully set
forth in the Proxy Statement of the Company dated April 27, 1995.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below, as applicable [ ] WITHHOLD AUTHORITY (to vote for ALL
(except as marked to the contrary below) nominees listed below)
</TABLE>
TO BE ELECTED BY HOLDERS OF COMMON STOCK AND SERIES 2 PREFERRED STOCK: Carl J.
Aycock, Max E. Bobbitt, Bernard J. Ebbers,
Francesco Galesi, Stiles A. Kellett, Jr., Gregory A. LeVert,
John A. Porter, Lawrence C. Tucker and Roy A. Wilkens.
TO BE ELECTED BY HOLDERS OF SERIES 1 PREFERRED STOCK: Silvia Kessel, John W.
Kluge and Stuart Subotnick.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below.)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
2. Proposal to approve the amendment to the Company's Amended and Restated Articles of Incorporation to change the Company's
name to "WorldCom, Inc." from "LDDS Communications, Inc."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on reverse side)
- ------------------------------------------------------------------------------------------------------------------------------------
3. In their discretion with respect to such other business as properly may come before the meeting or any adjournments
thereof.
</TABLE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES UNDER
PROPOSAL 1, FOR PROPOSAL 2 AND IN THE PROXIES' DISCRETION WITH RESPECT
TO PROPOSAL 3.
Dated: _________________________, 1995.
________________________________________
Signature
________________________________________
Signature if held jointly
Please sign exactly as name(s) appear
on this proxy card. When shares are
held by joint tenants, both should sign.
When signing as attorney-in-fact,
executor, admini-strator, personal
representative, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN THIS PROXY CARD USING
THE ENCLOSED ENVELOPE.
