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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): December 31, 1996
WORLDCOM, 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 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On December 31, 1996, WorldCom, Inc., a Georgia corporation
("WorldCom") acquired MFS Communications Company, Inc., a Delaware
corporation ("MFS"), pursuant to the merger (the "Merger") of HIJ
Corp., a wholly owned subsidiary of WorldCom, with and into MFS. Upon
consummation of the Merger, MFS became a wholly owned subsidiary of
WorldCom. The Merger was effected pursuant to an Amended and Restated
Agreement and Plan of Merger dated as of August 25, 1996 by and among
WorldCom, MFS and HIJ Corp.
As a result of the Merger, each share of MFS common stock was
converted into the right to receive 2.1 shares of WorldCom common
stock or approximately 411,000,000 WorldCom common shares. Each share
of MFS' Series A 8% Cumulative Convertible Preferred Stock was
converted into the right to receive one share of Series A 8%
Cumulative Convertible Preferred Stock of WorldCom or 94,992 WorldCom
Series A preferred shares. Each share of MFS' Series B Convertible
Preferred Stock was converted into the right to receive one share of
Series B Convertible Preferred Stock of WorldCom or approximately
12,700,000 WorldCom Series B preferred shares. In addition, each
depositary share representing 1/100th of a share of MFS Series A
Preferred Stock was exchanged for a depositary share representing
1/100th of a share of WorldCom Series A Preferred Stock.
Upon effectiveness of the Merger, the then outstanding and unexercised
options and warrants exercisable for shares of MFS common stock were
converted into options and warrants, respectively, exercisable for
shares of WorldCom common stock having the same terms and conditions
as the MFS options and warrants, except that (i) the exercise price
and the number of shares issuable upon exercise were divided and
multiplied, respectively, by 2.1 and (ii) the holders of each then
outstanding and unexercised MFS option which was an "outperformance
option" under the MFS 1993 Stock Plan instead received the value of
such option in accordance with the terms of such plan.
The basic terms of the Merger, and the relationships between WorldCom
and MFS and their respective directors and executive officers, were
described in the Joint Proxy Statement/Prospectus dated November 14,
1996 filed in connection with WorldCom's Registration Statement on
Form S-4 (Registration No. 333-16015), which is incorporated by
reference herein. The terms of the Merger were determined in
accordance with the Merger Agreement and were established through
arm's length negotiations between WorldCom and MFS.
(b) The Board of Directors of WorldCom consists of the following
individuals: Carl J. Aycock, Max E. Bobbitt, R. Douglas Bradbury,
James Q. Crowe, Bernard J. Ebbers, Francesco Galesi, Richard R. Jaros,
Stiles A. Kellett, Jr., David C. McCourt, John A. Porter, Walter
Scott, Jr., John W. Sidgmore, Scott D. Sullivan, Michael B. Yanney
and, in lieu of Clyda Stokes Rent, who was unable to serve, Lawrence
C. Tucker.
(c) In connection with the Merger, WorldCom shareholders approved a
proposal to amend WorldCom's Amended and Restated Articles of
Incorporation, as amended, to increase the number of authorized shares
of WorldCom Common Stock from 750,000,000 to 2,500,000,000.
(d) Through its acquisition of MFS, WorldCom acquired a domestic and
international communications network used to provide integrated local
and long distance services as well as a wide range of voice, data,
Internet and other enhanced telecommunications services.
WorldCom intends to continue using property, plant and equipment
acquired pursuant to the Merger for the purposes previously noted,
subject to possible determinations to eliminate duplicate facilities.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired
The audited financial statements as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31, 1995 of
MFS, including the report of independent auditors, and the unaudited
financial statements of MFS as of and for the nine months ended
September 30, 1996 and 1995, were previously reported in WorldCom's
Current Report on Form 8-K/A dated August 25, 1996 (filed November 4,
1996 and November 20, 1996).
The audited financial statements as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31, 1995 of
UUNET Technologies, Inc., a wholly owned subsidiary of MFS, including
the report of independent auditors and the unaudited financial
statements of UUNET as of and for the six months ended June 30, 1996
and 1995, were previously reported in WorldCom's Current Report on
Form 8-K/A dated August 25, 1996 (filed November 4, 1996).
(b) Pro forma financial information
The pro forma financial information required by this item was
previously reported in and is incorporated by reference to item 7(b)
of WorldCom's Current Report on Form 8-K/A dated August 25, 1996
(filed November 20, 1996).
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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: January 15, 1997
WORLDCOM, INC.
By: /s/ Scott D. Sullivan
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Scott D. Sullivan
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
2.1 Amended and Restated Agreement and Plan of Merger by
and among WorldCom, HIJ Corp., and MFS dated as of
August 25, 1996 (filed as Appendix I to the Joint
Proxy Statement/Prospectus dated November 14, 1996
included in WorldCom's Registration Statement on Form
S-4, Registration No. 333-16015, and incorporated
herein by this reference)*
3.1 Second Amended and Restated Articles of Incorporation
of WorldCom (including preferred stock designations)
as of December 31, 1996
3.2 Bylaws of the Company, as amended (incorporated
herein by reference to Exhibit 3(iii) to WorldCom's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996)
4.1 See Exhibit 3.1
4.2 See Exhibit 3.2
4.3 Form of Deposit Agreement between WorldCom, The Bank
of New York and the holders from time to time of the
Depositary Shares representing 1/100 of a share of
WorldCom Series A Preferred Stock (the "WorldCom
Depositary Shares") (incorporated herein by reference
to Exhibit 4.5 to Registration Statement on Form S-4
filed by WorldCom (Registration No. 333-16015))
4.4 Form of certificate representing WorldCom Depositary
Shares (incorporated herein by reference to Exhibit A
to the Deposit Agreement filed as Exhibit 4.5 to
Registration Statement on Form S- 4 filed by WorldCom
(Registration No. 333-16015))
99.1 Press Release dated December 31, 1996
99.2 Joint Proxy Statement/Prospectus dated November 14,
1996 filed in connection with WorldCom's Registration
Statement on Form S-4 (No. 333-16015) and
incorporated herein by reference
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* The registrant hereby undertakes to furnish supplementally a copy of
any omitted schedule to this Agreement to the Securities and Exchange
Commission upon request.
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EXHIBIT 3.1
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WORLDCOM, INC.
ONE
The name of this corporation is WORLDCOM, INC. This
corporation is referred to hereinafter as the "Corporation."
TWO
The Corporation shall have perpetual duration.
THREE
The Corporation has been organized as a corporation for profit
pursuant to the Georgia Business Corporation Code, for the purpose of engaging
in any lawful activities whatsoever.
FOUR
A. Common Stock. The authorized voting common stock of the
Corporation is two billion five hundred million (2,500,000,000) shares, par
value $.01 per share.
B. Preferred Stock. The authorized preferred stock of the
Corporation is fifty million (50,000,000) shares, par value $.01 per share.
The Corporation, acting by its board of directors, without action by the
shareholders, may, from time to time by resolution and upon the filing of such
certificate or articles of amendment as may be required by the Georgia Business
Corporation Code as then in effect, authorize the issuance of shares of
preferred stock in one or more series, determine the preferences, limitations
and relative rights of the class or of any series within the class, and
designate the number of shares within that series.
FIVE
A series of the class of authorized preferred stock, par value
$.01 per share, of the Corporation is hereby created having the designation and
number of shares thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof, as are set forth
on Exhibit A.
SIX
A series of the class of authorized preferred stock, par value
$.01 per share, of the Corporation is hereby created having the designation and
number of shares thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof, as are set forth
on Exhibit B.
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SEVEN
A series of the class of authorized preferred stock, par value
$.01 per share, of the Corporation is hereby created having the designation and
number of shares thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof, as are set forth
on Exhibit C.
EIGHT
Subject to the provisions of Article THIRTEEN, each share of
common stock of the Corporation shall have unlimited voting rights and shall be
entitled to receive the net assets of the Corporation upon dissolution, except
as expressly provided herein. The preferred stock of the Corporation shall
have such voting rights as are set forth in Exhibits A, B or C hereto or in the
certificate or articles of amendment filed to authorize the issuance of shares
of preferred stock in one of more series and as are provided by law.
NINE
Shareholders shall not have the preemptive right to acquire
unissued shares of the Corporation.
TEN
No director of the Corporation shall be liable to the
Corporation or to its shareholders for monetary damages for breach of duty of
care or other duty as a director, except for liability (i) for any
appropriation, in violation of his duties, of any business opportunity of the
Corporation; (ii) for acts or omissions which involve intentional misconduct or
a knowing violation of the law; (iii) for the types of liability set forth in
section 14-2-832 of the Revised Georgia Business Corporation Code; or (iv) for
any transaction from which the director received an improper personal benefit.
If the Georgia Business Corporation Code is amended to authorize corporate
action further limiting the personal liability of directors, then the liability
of a director of the Corporation shall be limited to the fullest extent
permitted by the Georgia Business Corporation Code, as so amended. Any repeal
or modification of the foregoing paragraph by the shareholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing immediately prior to the time of such repeal or
modification.
ELEVEN
(a) In addition to the requirements of the provisions of
any series of preferred stock which may be outstanding, and whether or not a
vote of the shareholders is otherwise required, the affirmative vote of the
holders of not less than seventy percent (70%) of the Voting Stock shall be
required for the approval or authorization of any Business Transaction with a
Related Person, or any Business Transaction in which a Related Person has an
interest (other than only a proportionate interest as a shareholder of the
corporation); provided, however, that the seventy percent (70%)
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voting requirement shall not be applicable if (i) the Business Transaction is
Duly Approved by the Continuing Directors, or (ii) all of the following
conditions are satisfied:
(i) the aggregate amount of cash and the fair
market value of the property, securities or other consideration to be
received per share (on the date of effectiveness of such Business
Transaction) by holders of capital stock of the corporation (other
than such Related Person) in connection with such Business Transaction
is at least equal in value to such Related Person's Highest Stock
Price;
(ii) the consideration to be received by holders
of capital stock of the Corporation in connection with such Business
Transaction is in (a) cash, or (b) if the majority of the shares of
any particular class or series of stock of the Corporation as to which
the Related Person is the Beneficial Owner shall have been acquired
for a consideration in a form other than cash, in the same form of
Consideration used by the Related Person to acquire the largest number
of shares of such class or series of stock;
(iii) after such Related Person has become a
Related Person and prior to the consummation of such Business
Transaction, such Related Person shall not have become the Beneficial
Owner of any additional shares of capital stock of the Corporation or
securities convertible into capital stock of the Corporation, except
(i) as a part of the transaction which resulted in such Related Person
becoming a Related Person or (ii) as a result of a pro rata stock
dividend or stock split;
(iv) prior to the consummation of such Business
Transaction, such Related Person shall not have, directly or
indirectly, except as Duly Approved by the Continuing Directors (i)
received the benefit (other than only a proportionate benefit as a
shareholder of the corporation) of any loans, advances, guarantees,
pledges or other financial assistance or tax credits or tax advantages
provided by the Corporation or any of its subsidiaries, (ii) caused
any material change in the Corporation's business or equity capital
structure, including, without limitation, the issuance of shares of
capital stock of the Corporation, or other securities convertible into
or exercisable for such shares, or (iii) caused the Corporation to
fail to declare and pay at the regular date therefor quarterly cash
dividends on the outstanding capital stock of the Corporation entitled
to receive dividends, on a per share basis at least equal to the cash
dividends being paid thereon by the corporation immediately prior to
the date on which the Related Person became a Related Person; and
(v) a proxy or information statement describing
the proposed Business Transaction and complying with the requirements
of the Securities Exchange Act of 1934, as amended (the "Act"), and
the rules and regulations thereunder (or any subsequent provisions
replacing the Act or such rules or regulations) shall be mailed to
shareholders of the Corporation at least thirty (30) days prior to the
consummation of such Business Transaction (whether or not such proxy
or information statement is required to be mailed pursuant to the Act
and such rules and regulations or subsequent provisions).
(b) For the purpose of this Article ELEVEN:
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(i) The term "Affiliate", used to indicate a
relationship to a specified person, shall 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.
(ii) The term "Associate", used to indicate a
relationship with a specified person, shall 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 who has
the same home as such specified person or who is a director or officer
of the corporation 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 corporation or any wholly-owned subsidiary
of the corporation), partnership or other entity which is an Affiliate
of such Specified person.
(iii) The term "Beneficial Owner" shall be defined
by reference to Rule 13d-3 under the Act as in effect on September 15,
1993; provided, however, that any individual, corporation,
partnership, group, association or other person or entity which has
the right to acquire any capital stock of the corporation having
voting power at any time in the future, whether such right is
contingent or absolute, pursuant to any agreement, arrangement or
understanding or upon exercise of conversion rights, warrants or
options, or otherwise, shall be deemed the Beneficial Owner of such
capital stock.
(iv) The term "Business Transaction" shall mean:
(A) any merger, share exchange or consolidation involving the
Corporation or a subsidiary of the Corporation; (B) any sale, lease,
exchange, transfer or other disposition (in one transaction or a
series of related transactions), including, without limitation, a
mortgage, pledge or any other security device of all or any
Substantial Part of the assets either of the Corporation or of a
subsidiary of the Corporation; (C) any sale, lease, exchange, transfer
or other disposition (in one transaction or a series of related
transactions) of all or any Substantial Part of the assets of any
entity to the Corporation or a subsidiary of the Corporation; (D) the
issuance, sale, exchange, transfer or other disposition (in one
transaction or a series of related transactions) by the Corporation or
a subsidiary of the Corporation of any securities of the Corporation
or any subsidiary of the Corporation in exchange for cash, securities
or other property, or a combination thereof, having an aggregate fair
market value of $15 million or more; (E) any merger, share exchange or
consolidation of the Corporation with any of its subsidiaries or any
similar transaction in which the Corporation is not the survivor and
the charter or certificate or articles of incorporation of the
consolidated or surviving Corporation do not contain provisions
substantially similar to those in this Article ELEVEN; (F) any
recapitalization or reorganization of the Corporation or any
reclassification of the securities of the Corporation (including,
without limitation, any reverse stock split) or other transaction that
would have the effect of increasing the voting power of a Related
Person or reducing the number of shares of each class of voting
securities outstanding; (G) any liquidation, spin-off, split-off,
split-up or dissolution of the Corporation; and (H) any agreement,
contract or other
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arrangement providing for any of the transactions described in this
definition of Business Transaction or having a similar purpose or
effect.
(v) The term "Continuing Director" shall mean a
director who either was a member of the Board of Directors of the
Corporation on September 15, 1993, or who became a director of the
Corporation subsequent to such date and whose election or nomination
for election by the Corporation's shareholders was Duly Approved by
the Continuing Directors then on the Board, either by a specific vote
or by approval of the proxy statement issued by the Corporation on
behalf of the Board of Directors in which such person is named as
nominee for director; provided, however, that in no event shall a
director be considered a "Continuing Director" if such director is a
Related Person and the Business Transaction to be voted upon is with
such Related Person or is one in which such Related Person has an
interest (other than only a proportionate interest as a shareholder of
the Corporation).
(vi) The term "Duly Approved by the Continuing
Directors" shall mean an action approved by the vote of at least a
majority of the Continuing Directors then on the Board; provided,
however, that if the votes of such Continuing Directors in favor of
such action would be insufficient to constitute an act of the Board of
Directors (if a vote by the entire Board of Directors were to have
been taken), then such term shall mean an action approved by the
unanimous vote of the Continuing Directors so long as there are at
least three (3) Continuing Directors on the Board of Directors at the
time of such unanimous vote.
(vii) The term "Fair Market Value", in the case of
stock, means the highest closing sale price during the 30-day period
immediately preceding the date in question of a share of such stock on
the Composite Tape for New York Stock Exchange-Listed Stocks, or, if
such stock is not on such Exchange, on the principal United States
securities exchange registered under the Act on which such stock is
listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or if no such quotations are
available, the fair market value on the date in question of a share of
such stock as determined by a majority of the Continuing Directors in
good faith.
(viii) The term "Highest Stock Purchase Price" shall
mean the greatest of the following:
(A) the highest amount of consideration
paid by a Related Person for a share of capital stock of the
Corporation (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) in the transaction which
resulted in such Related Person becoming a Related Person or
within two years prior to the first public announcement of the
Business Transaction (the "Announcement Date"), whichever is
higher; provided, however, that the Highest Stock Purchase
Price calculated under this subsection (A) shall be
appropriately adjusted to reflect the occurrence of any
reclassification, recapitalization, stock-split, reverse
stock-split or
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other similar corporate readjustment in the number of
outstanding shares of capital stock of the Corporation between
the last date upon which such Related Person paid the Highest
Stock Purchase Price up to the effective date of the merger,
share exchange or consolidation or the date of distribution to
shareholders of the Corporation of the proceeds from the sale
of substantially all of the assets of the Corporation referred
to in subparagraph (i) of Section (a)(ii) of this Article
ELEVEN;
(B) the Fair Market Value per share of
the respective classes and series of stock of the Corporation
on the Announcement Date;
(C) the Fair Market Value per share of
the respective classes and series of stock of the Corporation
on the date that the Related Person becomes a Related Person;
(D) if applicable, the Fair Market Value
per share determined pursuant to subsection (b)(viii)(B) or
(C) of this Article ELEVEN, whichever is higher, multiplied by
the ratio of (i) the highest price per share (including any
brokerage commissions, transfer taxes or soliciting dealers'
fees and adjusted for any subsequent stock dividends, splits,
combinations, recapitalizations, reclassifications or other
such reorganizations) paid to acquire any shares of such
respective classes and series Beneficially Owned by the
Related Person within the two years prior to the Announcement
Date, to (ii) the Fair Market Value per share (adjusted for
any subsequent stock dividends, splits, combinations,
recapitalizations, reclassifications or other such
reorganizations) of shares of such respective classes and
series on the first day in the two-year period ending on the
Announcement Date on which such shares Beneficially Owned by
the Related Person were acquired; or
(E) the amount per share of any
preferential payment to which holders of shares of such
respective classes and series are entitled in the event of a
liquidation, dissolution or winding up of the Corporation.
(ix) The term "Preferred Stock" shall mean each
class or series of capital stock which may from time to time be
authorized in or by these Second Amended and Restated Articles of
Incorporation (as amended from time to time) which is not designated
as "Common Stock."
(x) The phrase "property, securities or other
consideration to be received", for the purpose of subparagraph (i) of
Section (a)(ii) of this Article ELEVEN and in the event of a merger in
which the corporation is the surviving corporation, shall include,
without limitation, common stock of the Corporation retained by its
shareholders (other than such Related Person).
(xi) The term "Related Person" shall mean and
include (A) any individual, corporation, partnership, group,
association or other person or entity which, together with its
Affiliates and Associates, is the Beneficial Owner of not less than
ten percent (10%) of the
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voting power of the issued and outstanding capital stock of the
Corporation entitled to vote or was the Beneficial Owner of not less
than ten percent (10%) of the voting power of the issued and
outstanding capital stock of the Corporation entitled to vote (x) at
the time the definitive agreement providing for the Business
Transaction (including any amendment thereof) was entered into, (y) at
the time a resolution approving the Business Transaction was adopted
by the Board of Directors of the Corporation, or (z) as of the record
date for the determination of shareholders entitled to notice of and
to vote on or consent to the Business Transaction, and (B) any
Affiliate or Associate of any such individual, Corporation,
partnership, group, association or other person or entity; provided,
however, and notwithstanding any thing in the foregoing to the
contrary, that the term "Related Person" shall not include the
Corporation, a more than 90% owned subsidiary of the Corporation, any
employee stock ownership or other employee benefit plan of either the
Corporation or any more than 90% owned subsidiary of the Corporation,
or any trustee of or fiduciary with respect to any such plan when
acting in such capacity.
(xii) The term "Substantial Part" shall mean more
than twenty percent (20%) of the total assets of the entity in
question, as reflected on the most recent consolidated balance sheet
of such entity existing at the time the shareholders of the
Corporation would be required to approve or authorize the Business
Transaction involving the assets constituting any such Substantial
Part.
(xiii) The term "Voting Stock" shall mean all
outstanding shares of capital stock of the Corporation whose holders
are present at a meeting of shareholders, in person or by proxy, and
which entitle their holders to vote generally in the election of
directors, and considered for the purpose of this Article ELEVEN as
one class.
(c) For the purpose of this Article ELEVEN, so long as
Continuing Directors constitute at least two-thirds (2/3) of the entire Board
of Directors or the Corporation, the Board of Directors shall have the power to
make a good faith determination, on the basis of information known to them, of
(i) the number of shares of Voting Stock of which any person is the Beneficial
Owner, (ii) whether a person is a Related Person or is an Affiliate or
Associate of another, (iii) whether a person has an agreement, arrangement or
understanding with another as to the matters referred to in the definition of
Beneficial Owner herein, (iv) whether the assets subject to any Business
Transaction constitute a Substantial Part, (v) whether any Business Transaction
is with a Related Person or is one in which a Related Person has an interest
(other than only a proportionate interest as a shareholder of the corporation),
(vi) whether a Related Person has, directly or indirectly, received the
benefits or caused any of the changes referred to in subparagraph (iv) of
clause (ii) of Section (a) of this Article ELEVEN, (vii) the fair market value
of any consideration to be received in a Business Transaction and (viii) such
other matters with respect to which a determination is required under this
Article ELEVEN; and such determination by the Board of Directors shall be
conclusive and binding for all purposes of this Article ELEVEN.
(d) Nothing contained in this Article ELEVEN shall be
construed to relieve any Related Person of any fiduciary obligation imposed by
law.
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(e) The fact that any Business Transaction complies with
the provisions of Section (a) of this Article ELEVEN shall not be construed to
impose any fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve such Business Transaction or
recommend its adoption of approval to the shareholders of the corporation.
(f) Notwithstanding any other provisions of these Second
Amended and Restated Articles of Incorporation or the Bylaws of the corporation
(and notwithstanding that a lesser percentage may be permitted by law), the
provisions of this Article ELEVEN may not be repealed or amended, directly or
indirectly in any respect, unless such action is approved by the affirmative
vote of the holders of not less than seventy percent (70%) of the Voting Stock.
TWELVE
The Corporation shall indemnify a director against reasonable
expenses and liability incurred by him, and shall advance expenses upon receipt
from the director of the written affirmation and repayment authorization
required by section 14-2-853 of the Georgia Business Corporation Code,
provided, however, that the Corporation shall not indemnify a director for any
liability incurred by a director if he failed to act in a manner he believed in
good faith to be in or not opposed to the best interests of the Corporation, or
to have improperly received a personal benefit or, in the case of any criminal
proceeding, if he had reasonable cause to believe his conduct was unlawful, or
in the case of a proceeding by or in the right of the Corporation, in which he
was adjudged liable to the Corporation, unless a court shall determine that the
director is fairly and reasonably entitled to indemnification in view of all
the circumstances, in which case the director shall be indemnified for
reasonable expenses incurred.
THIRTEEN
(a) For purposes of this Article THIRTEEN, the following
terms shall have the respective meanings specified below:
(i) "Act" shall have the meaning set forth in
paragraph (a)(ii)(v) of Article ELEVEN of these Second Amended and
Restated Articles of Incorporation.
(ii) "Beneficial Owner" shall have the meaning set
forth in paragraph (b)(iii) of Article ELEVEN of these Second Amended
and Restated Articles of Incorporation.
(iii) "Closing Price" of a share of stock on any day
means the highest closing sales price or bid quotation on the National
Association of Securities Dealers, Inc. Automated Quotation System
(including the National Market System) or any comparable system then
in use, or if the class or series in question is quoted on a United
States securities exchange registered under the Act, the reported
closing sales price or, in case no such sale takes place, the average
of the reported closing bid and asked price on such exchange, or, if
no such prices or quotations are available, the fair market value on
the day in question as determined by the Board of Directors in good
faith.
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(iv) "Communications Act" shall mean the
Communications Act of 1934, 47 U.S.C. Sections 151 etseq., as
amended.
(v) "Communications Laws" shall mean the
Communications Act and the regulations promulgated by the Federal
Communications Commission pursuant thereto, including any amendments
thereof or successor or replacement provisions thereto.
(vi) "Fair Market Value" of a share of stock shall
mean the average Closing Price for such share for each of the
forty-five (45) most recent days during which shares of stock of such
class or series shall have been traded preceding the day on which
notice of redemption shall have been given pursuant to paragraph (iv)
of Section (e) of this Article THIRTEEN; provided, however, that if
shares of stock of such class or series are not traded on any
securities exchange or in the over-the-counter market, "Fair Market
Value" shall be determined by the Board of Directors in good faith;
and provided, further, however, that "Fair Market Value" as to any
stockholder who purchases any stock subject to redemption within one
hundred twenty (120) days prior to a Redemption Date shall not (unless
otherwise determined by the Board of Directors) exceed the purchase
price paid for such shares.
(vii) "Foreign Citizen" shall mean any of the
following:
(A) any alien;
(B) any foreign government;
(C) any representative of an alien or a
foreign government; or
(D) any corporation organized under the laws
of any country other than the United States; and
(E) any other Person falling within a class
of Persons identified from time to time in the Communications
Laws, including without limitation Section 310 of the
Communications Act, as being within a class of Persons whose
ownership of stock of a corporation holding station licenses
referenced in Title III of the Communications Act is limited
to a maximum percentage.
(viii) "Permitted Percentage" shall mean twenty
percent (20%), or such other percentage as may from time to time be
specified by the Communications Laws as the maximum percentage of
capital stock of a corporation holding licenses referenced in Section
310 of the Communications Act that may be owned by Foreign Citizens.
(ix) "Person" shall mean an individual, partnership,
corporation, trust or other entity.
- 9 -
<PAGE> 10
(x) "Redemption Date" shall mean the date fixed by
the Board of Directors for the redemption of any shares of stock of
the Corporation pursuant to Section (e) of this Article THIRTEEN.
(xi) "Redemption Securities" shall mean any debt or
equity securities of the Corporation, any Subsidiary or any other
corporation, or any combination thereof, having such terms and
conditions as shall be approved by the Board of Directors and which,
together with any cash to be paid as part of the redemption price, in
the opinion of any nationally recognized investment banking firm
selected by the Board of Directors (which may be a firm which provides
other investment banking, brokerage or other services to the
Corporation), has a value, at the time notice of redemption is given
pursuant to paragraph (d) of Section 5 of this Article THIRTEEN, at
least equal to the Fair Market Value of the shares to be redeemed
pursuant to this Article THIRTEEN (assuming, in the case of Redemption
Securities to be publicly traded, such Redemption Securities were
fully distributed and subject only to normal trading activity).
(b) It is the policy of the Corporation that Foreign Citizens
should own of record or Beneficially Own, directly or indirectly, individually
or in the aggregate, no more than the Permitted Percentage of its from time to
time outstanding shares of capital stock. If at any time Foreign Citizens,
directly or indirectly, individually or in the aggregate, become the record
owners or the Beneficial Owners of more than the Permitted Percentage of the
capital stock of the Corporation, then the Corporation shall have the power to
take the actions prescribed in this Section (b) through Section (f) of this
Article THIRTEEN. The provisions of this Article THIRTEEN are intended to
assure that the Corporation remains in continuous compliance with the
citizenship requirements of the Communications Laws. Any amendments to the
Communications Laws relating to the citizenship of station license holders or
their shareholders are deemed to be incorporated herein by reference. To the
extent necessary to enable the Corporation to submit any proof of direct or
indirect citizenship required by law or by contract with the United States
government (or any agency thereof), the Corporation may require the record
holders and the Beneficial Owners of capital stock to confirm their direct or
indirect citizenship status from time to time, and dividends payable with
respect to stock held by such record holder or owner by such Beneficial Owner
may, in the discretion of the Board of Directors, be withheld until
confirmation of such citizenship status is received. The Board of Directors is
authorized to take such actions or make such interpretations as it may deem
necessary or advisable in order to implement the policy set forth in this
Section (b) including, without limitation, causing any transfer, or attempted
transfer, of any shares of stock of the Corporation, the effect of which would
be to cause one or more Foreign Citizens to own of record or Beneficially Own
more than the Permitted Percentage of the Corporation's capital stock, to be
ineffective as against the Corporation, and not registering (or permitting its
transfer agent to register) such transfer or purported transfer on the stock
transfer records of the Corporation. In addition, neither the Corporation
(even if the transfer agent shall have recognized such transfer) nor its
transfer agent shall be required to recognize the transferee or purported
transferee thereof as a shareholder of the Corporation for any purpose
whatsoever except to the extent necessary to effect any remedy available to the
Corporation under this Article THIRTEEN. A citizenship certificate may be
required from all transferees (and from any recipient upon original issuance)
of capital stock of the Corporation and, if such transferee (or recipient) is
acting as a fiduciary or nominee for a record
- 10 -
<PAGE> 11
owner or a Beneficial Owner, such Beneficial Owner or record owner, and
registration of transfer (or original issuance) may be denied upon refusal to
furnish such certificate.
(c) If on any date (including any record date) the number of
shares of capital stock that is owned of record or Beneficially Owned, directly
or indirectly, by Foreign Citizens is in excess of the Permitted Percentage of
all outstanding capital stock of the Corporation (such number of shares herein
referred to as the "Excess Shares"), the Corporation shall identify a number of
shares owned of record or Beneficially Owned, directly or indirectly, by
Foreign Citizens equal to the number of Excess Shares. The determination of
the Corporation as to those shares that constitute the Excess Shares shall be
conclusive. Shares deemed to constitute such Excess Shares (so long as such
excess exists) shall not be accorded any voting rights and shall not be deemed
to be outstanding for purposes of determining the vote required on any matter
properly brought before the shareholders of the Corporation for a vote thereon.
The Corporation shall (so long as such excess exists) withhold the payment of
dividends and the sharing in any other distribution (upon liquidation or
otherwise) in respect of the Excess Shares. At such time as the Permitted
Percentage is no longer exceeded, full voting rights shall be restored to any
shares previously deemed to be Excess Shares and any dividends or distribution
with respect thereto that have been withheld, without interest thereon, shall
be due and paid solely to the record holders of such shares at the time the
Permitted Percentage is no longer exceeded.
(d) Subject to the provisions of any resolution of the Board
of Directors creating any series of preferred stock or any other class of stock
which has a preference over common stock with regard to dividends or upon
liquidation, and subject to the procedures in the series of preferred stock of
the Corporation referenced in Articles FIVE, SIX and SEVEN hereof, the Excess
Shares shall be subject to redemption at any time by the Corporation by action
of the Board of Directors. The terms and conditions of such redemption shall
be as follows:
(i) the redemption price of the shares to be
redeemed pursuant to this Article THIRTEEN shall be equal to the Fair
Market Value of such shares or such other redemption price as required
by pertinent state or federal law pursuant to which the redemption is
required;
(ii) the redemption price of such shares may be paid
in cash, Redemption Securities or any combination thereof;
(iii) if less than all the Excess Shares are to be
redeemed, the shares to be redeemed shall be selected in such manner
as set forth in Section (c) of this Article THIRTEEN or as otherwise
determined by the Board of Directors;
(iv) at least thirty (30) days' written notice of
the Redemption Date shall be given to the record holders of the Excess
Shares selected to be redeemed (unless waived in writing by any such
holder) provided that the Redemption Date may be the date on which
written notice shall be given to record holders if the cash or
Redemption Securities necessary to effect the redemption shall have
been deposited in trust for the benefit of such record
- 11 -
<PAGE> 12
holders and subject to immediate withdrawal by them upon surrender of
the stock certificates for Excess Shares to be redeemed;
(v) from and after the Redemption Date or such
earlier date as mandated by pertinent state or federal law, any and
all rights of whatever nature, which may be held by the record holder
of Excess Shares selected for redemption (including without limitation
any rights to vote or participate in dividends declared on stock of
the same class or series as such shares), shall cease and terminate
and they shall thenceforth be entitled only to receive the cash or
Redemption Securities payable upon redemption; and
(vi) such redemption shall be upon such other terms
and conditions as the Board of Directors shall determine.
(e) In determining the direct or indirect citizenship of
owners of record or Beneficial Owners or their transferees of its capital
stock, the Corporation may rely on the stock transfer records of the
Corporation and the citizenship certificates given by Beneficial Owners or
owners of record or their transferees or any recipients (in the case of
original issuance) (in each case whether such certificates have been given on
their own behalf or on behalf of others) to prove the citizenship of such
owners of record, Beneficial Owners, transferees or recipients of such capital
stock. The determination of the direct or indirect citizenship of owners of
record, Beneficial Owners and their transferees of such capital stock may also
be subject to proof in such other way or ways as the Corporation may deem
reasonable. The Corporation may at any time require proof of citizenship, in
addition to the citizenship certificates, of the record owner or Beneficial
Owner or proposed transferees of shares of the Corporation's capital stock, and
the payment of dividends may be withheld, and any application for transfer of
ownership on the stock transfer records of the Corporation may be refused,
until such additional proof is submitted.
(f) Each provision of this Article THIRTEEN is intended to be
severable from every other provision. If any provision contained in this
Article THIRTEEN is held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of any other provision of this Article THIRTEEN
shall not be affected, and this Article THIRTEEN shall be construed as if the
provision held to be invalid, illegal or unenforceable had never been contained
therein.
********************************************************************************
The provisions of Article FOUR, Section A of these Second
Amended and Restated Articles of Incorporation were duly approved by the
shareholders of the Corporation in accordance with the provisions of Sections
14-2-1007 and 14-2-1003 of the Georgia Business Corporation Code on the 20th
day of December, 1996.
These Second Amended and Restated Articles of Incorporation
were duly adopted and authorized by the Board of Directors of the Company on
November 20, 1996.
- 12 -
<PAGE> 13
IN WITNESS WHEREOF, WORLDCOM, INC. has caused its duly
authorized officer to execute these Second Amended and Restated Articles of
Incorporation as of this 30th day of December, 1996.
WORLDCOM, INC.
By: /s/ Bernard J. Ebbers
------------------------------------
Name: Bernard J. Ebbers
Title: President and Chief Executive Officer
ATTEST:
/s/ Scott D. Sullivan
- -----------------------------
Name: Scott D. Sullivan
Title: Secretary
STATE OF MISSISSIPPI )
) SS.
CITY OF JACKSON )
I, Deborah A. Blackwell, a notary public, do hereby certify
that on this 30th day of December, 1996, personally appeared before me Bernard
J. Ebbers who, being by me first duly sworn, declared that he is the President
of WorldCom, Inc., that he signed the foregoing document as President of the
corporation, and that the statements therein contained are true.
/s/ Deborah A. Blackwell
[SEAL] ---------------------------------
Notary Public
My Commission Expires:
10-4-97
- 13 -
<PAGE> 14
EXHIBIT A
Series A 8% Cumulative Convertible Preferred Stock
1. Designation. The designation of this Series shall be
Series A 8% Cumulative Convertible Preferred Stock. The number of shares of
this Series shall be 94,992. The liquidation value of shares of this Series
shall be $3,350.00 per share.
2. Dividends.
(a) The holders of shares of this Series shall be
entitled to receive, when, as and if declared by the Board of Directors of
WorldCom, Inc. (the "Company") out of funds legally available therefor,
cumulative preferential dividends from the issue date of such shares, at the
rate per share of $268.00 per annum or $67.00 per quarter, and no more, payable
quarterly for each share of this Series, payable in arrears on each February
28, May 31, August 31 and November 30, respectively (each such date being
hereinafter referred to as a "Dividend Payment Date") or, if any Dividend
Payment Date is not a business day, then the Dividend Payment Date shall be the
next succeeding business day; provided, however, that with respect to any
dividend period during which a redemption occurs, the Company may, at its
option, declare accrued dividends to, and pay such dividends on, the redemption
date, in which case such dividends would be payable on the redemption date in
shares of the Common Stock of the Company, par value $.01 per share (the
"Common Stock"), to the holders of the shares of this Series as of the record
date for such dividend payment and such accrued dividends would not be included
in the calculation of the related Call Price (as hereinafter defined). Each
dividend on the shares of this Series shall be payable to holders of record as
they appear on the stock books of the Company on such record dates as shall be
fixed by the Board of Directors. The first dividend payment of $67.00 shall be
for the period from the date of issuance of shares of this Series to and
including February 27, 1997 and shall be payable on February 28, 1997.
Dividends (or amounts equal to accrued and unpaid dividends) payable on the
shares of this Series for any period other than a quarterly dividend period
shall be computed on the basis of a 360-day year of twelve 30-day months. At
the election of the Board of Directors of the Company, dividends may be paid in
cash or in shares of Common Stock. In the event the Board of Directors of the
Company elects to pay a dividend in shares of Common Stock, the number of
shares of Common Stock to be issued on the Dividend Payment Date will be
determined by dividing the total dividend to be paid on each share of this
Series by 90% of the average of the average of the high and low sales prices of
the Common Stock as reported on the Nasdaq National Market for each of the ten
consecutive Trading Days (as hereinafter defined) immediately preceding the
fifth business day preceding the record date for such dividend.
Dividends on the shares of this Series shall accrue (whether or not
the Company has earnings, whether or not there are funds legally available for
the payment of such dividends and whether or not such dividends are declared)
on a daily basis from the previous Dividend Payment Date, except that the first
dividend shall accrue from the date of issuance of the shares of this Series.
Dividends accumulate to the extent they are not paid on the Dividend Payment
Date for the quarter for which they accrue ("Accumulated Unpaid Dividends").
Accumulated Unpaid Dividends shall not bear interest.
- 14 -
<PAGE> 15
(b) No dividend whatsoever shall be declared or
paid upon, or any sum set apart for the payment of dividends upon, any shares
of this Series or Parity Stock (as hereinafter defined) for any dividend period
unless all dividends for all past dividend periods have been declared and paid
upon, or declared and a sufficient sum set apart for the payment of such
dividends upon, all shares of this Series and Parity Stock outstanding other
than the Exchange Preferred (as hereinafter defined).
(c) Unless full cumulative dividends on all
outstanding shares of this Series and (to the extent that the amount thereof
shall have become determinable) any outstanding shares of Parity Stock due for
all past dividend periods shall have been declared and paid, or declared and a
sufficient sum for the payment thereof set apart, then, subject to the rights
of holders of shares of previously issued series of Preferred Stock: (i) no
dividend (other than a dividend payable solely in Junior Stock (as hereinafter
defined)) shall be declared or paid upon, or any sum set apart for the payment
of dividends upon, any shares of Junior Stock; (ii) no other distribution shall
be made upon any shares of Junior Stock; (iii) no shares of Junior Stock or any
other series of Preferred Stock shall be purchased, redeemed or otherwise
acquired for cash or other property of the Company (excluding shares of Junior
Stock or Exchange Preferred) by the Company or by any Subsidiary; and (iv) no
monies shall be paid into or set apart or made available for a sinking or other
like fund for the purchase, redemption or other acquisition for value of any
shares of Junior Stock by the Company or any Subsidiary.
(d) Any dividend payment made on shares of this
Series shall be distributed pro rata to the holders entitled thereto and be
credited first against the earliest accrued but unpaid dividend due with
respect to shares of this Series.
3. Voting Rights.
(a) The holders of shares of this Series shall
have the right with the holders of Common Stock to vote in the election of
directors of the Company and upon each other matter coming before any meeting
of the shareholders of the Company on the basis of ten votes for each such
share held. The holders of shares of this Series and the holders of Common
Stock shall vote together as a single class except as otherwise set forth
herein or as otherwise provided by law or by the Second Amended and Restated
Articles of Incorporation of the Company.
(b) The approval of more than two-thirds of the
votes entitled to be cast by the holders of the outstanding shares of this
Series (voting separately as a class), shall be required for the adoption of
any amendment to the Second Amended and Restated Articles of Incorporation that
materially adversely changes the rights, preferences or privileges of the
shares of this Series.
(c) The holders of the outstanding shares of this
Series shall also have the right, voting together with the holders of any other
outstanding shares of Voting Preferred Stock (as hereinafter defined) as a
separate voting group, to elect two members of the Board of Directors of the
Company at any time six or more quarterly dividends on any shares of Voting
Preferred Stock shall be in arrears and unpaid, in whole or in part, whether or
not declared and whether or not any funds shall be or have been legally
available for payment thereof. For this purpose, "Voting
- 15 -
<PAGE> 16
Preferred Stock" shall mean the shares of this Series and each other series of
Preferred Stock which shall have substantially similar voting rights (including
voting as one voting group with other shares of Voting Preferred Stock) with
respect to the election of directors upon substantially similar arrearages of
dividends. In such event, the number of Directors of the Company shall be
increased by two, and, unless a regular meeting of the shareholders of the
Company is to be held within 60 days thereof for the purpose of electing
Directors, within 30 days thereafter, the Company shall call a special meeting
of the holders of the outstanding shares of Voting Preferred Stock for the
purpose of electing such Directors to take place at the time specified in the
notice of the meeting, to be not more than 60 days after such holders become so
entitled to elect two Directors and not less than 10 days nor more than 50 days
after the date on which such notice is mailed. If such special meeting shall
not have been so called by the Company, or such regular meeting shall not be so
held, a special meeting may be called for such purpose at the expense of the
Company by the holders of not less than 10% of the outstanding shares of any
series of Voting Preferred Stock; and notice of any such special meeting shall
be given by the person or persons calling the same to the holders of the
outstanding shares of the Voting Preferred Stock by first-class mail, postage
prepaid, at their last address as shall appear on the stock transfer records of
the Company. At any such special meeting the holders of the outstanding shares
of Voting Preferred Stock (voting separately as a class with each share having
one vote) shall elect two members of the Board of Directors of the Company. If
a regular meeting of the shareholders of the Company for the purpose of
electing Directors is to be held within 60 days after the time the holders of
the outstanding shares of Voting Preferred Stock become so entitled to elect
two Directors, then the holders of the outstanding shares of Voting Preferred
Stock shall be given notice thereof in the same manner as other shareholders of
the Company entitled to vote thereat; and at such regular meeting, the holders
of the outstanding shares of Voting Preferred Stock (voting separately as a
class with each share having one vote) shall elect two members of the Board of
Directors. The right of the holders of the Voting Preferred Stock (voting
separately as a class) to elect two members of the Board of Directors of the
Company shall continue until such time as no dividends on any outstanding
shares of Voting Preferred Stock are in arrears and unpaid, in whole or in
part, at which time (i) the voting power of the holders of the outstanding
shares of Voting Preferred Stock so to elect two Directors shall cease, but
always subject to the same provisions of this subparagraph (c) for the vesting
of such voting power upon the occurrence of each and every like arrearage of
dividends, and (ii) the term of office of each member of the Board of Directors
who was elected pursuant to this subparagraph (c) shall automatically expire.
4. Redemptions and Conversions.
(a) Mandatory Conversion. On May 31, 1999 (the
"Mandatory Conversion Date"), each outstanding share of this Series shall
convert automatically (the "Mandatory Conversion") into shares of Common Stock
at the Common Equivalent Rate (as hereinafter defined) in effect on the
Mandatory Conversion Date and the right to receive, out of funds legally
available therefor, an amount equal to all accrued and unpaid dividends on such
share of this Series to the Mandatory Conversion Date, whether or not declared
(payable in cash or in shares of Common Stock on the same basis as that used to
determine dividends), subject to the right of the Company to redeem the shares
of this Series on or after the Initial Redemption Date (as hereinafter defined)
and prior to the Mandatory Conversion Date, as described below, and subject to
the conversion of the
- 16 -
<PAGE> 17
shares of this Series at the option of the holder at any time prior to the
Mandatory Conversion Date. Notwithstanding the forgoing, if the Mandatory
Conversion Date occurs after a record date for a quarterly dividend and before
the corresponding Dividend Payment Date, such dividend shall be paid, out of
funds legally available therefor, on the Dividend Payment Date rather than on
the Mandatory Conversion Date. The Common Equivalent Rate is initially four-
hundred and twenty shares of Common Stock for each share of this Series.
Dividends on the shares of this Series shall cease to accrue and such shares
shall cease to be outstanding on the Mandatory Conversion Date. The Company
shall make such arrangements as it deems appropriate for the issuance of
certificates representing shares of Common Stock and for the payment (in cash
or in shares of Common Stock, at the election of the Board of Directors of the
Company) in respect of such accrued and unpaid dividends, if any, or cash in
lieu of fractional shares, if any, in exchange for and contingent upon
surrender of certificates representing the shares of this Series, provided that
the Company shall give the holders of the shares of this Series such notice of
any such actions as the Company deems appropriate and upon such surrender such
holders shall be entitled to receive such dividends declared and paid on such
shares of Common Stock subsequent to the Mandatory Conversion Date. Amounts
payable in cash in respect of the shares of this series or in respect of such
shares of Common Stock shall not bear interest.
(b) Redemption by the Company.
(i) Right to Redeem. Shares of this Series are
not redeemable by the Company prior to May 31, 1998 (the "Initial Redemption
Date"). At any time and from time to time on or after the Initial Redemption
Date and prior to the Mandatory Conversion Date, the Company shall have the
right to redeem, in whole or in part, the outstanding shares of this Series.
Upon any such redemption, the Company shall deliver to the holders of shares of
this Series, in accordance with the provisions of these Articles of Amendment
in exchange for each share so redeemed, a number of shares of Common Stock
equal to (A) the Call Price (as hereinafter defined) in effect on the date of
redemption, divided by (B) the Current Market Price (as hereinafter defined) of
the Common Stock determined as of the date which is one trading day prior to
the public announcement of the redemption. The Call Price of each share of
this Series is an amount equal to the sum of (X) $3,417.00 on and after the
Initial Redemption Date through August 30, 1998, $3,400.25 on and after August
31, 1998 through November 29, 1998, $3,383.50 on and after November 30, 1998
through February 27, 1999, $3,366.75 on and after February 28, 1999 through
April 29, 1999 and $3,350.00 on and after April 30, 1999 until the Mandatory
Conversion Date plus (Y) all accrued and unpaid dividends thereon to the date
fixed for redemption. Notwithstanding the forgoing, if the date fixed for
redemption occurs after a record date for a quarterly dividend and prior to the
corresponding Dividend Payment Date, such dividend shall be paid, out of funds
legally available therefor, on the Dividend Payment Date and the Call Price
shall not include the amount of the dividend to be so paid. Dividends on the
shares of this Series shall cease to accrue and such shares shall cease to be
outstanding on the date fixed for redemption. A public announcement of any
call for redemption shall be made prior to the mailing of the notice of such
call to holders of shares of this Series as described below. If fewer than all
the outstanding shares of this Series are to be redeemed, shares to be redeemed
shall be selected by the Company from outstanding shares of this Series not
previously redeemed by lot or pro rata (as nearly as may be practicable) or by
any other method determined by the Board of Directors of the Company in its
sole discretion to be fair and proper.
- 17 -
<PAGE> 18
(ii) Current Market Price. As used in this
subparagraph (b), the term "Current Market Price" per share of the Common Stock
on any date of determination means the lesser of (X) the average of the average
of the high and low sales prices of the Common Stock as reported on the Nasdaq
National Market or any national securities exchange upon which the Common Stock
is then listed, for each of the ten consecutive Trading Dates ending on and
including such date of determination and (Y) the Closing Price (as hereinafter
defined) of the Common Stock for such date of determination; provided, however,
that, with respect to any redemption of shares of this Series, if any event
that results in an adjustment of the Common Equivalent Rate occurs during the
period beginning on the first day of such ten-day period and ending on the
applicable redemption date, the Current Market Price as determined pursuant to
the foregoing shall be appropriately adjusted to reflect the occurrence of such
event.
(iii) Notice of Redemption. The Company shall
provide notice of any redemption of the shares of this Series to holders of
record of the shares of this Series to be called for redemption not less than
15 nor more than 60 days prior to the date fixed for such redemption. Such
notice shall be provided by mailing notice of such redemption first class
postage prepaid, to each holder of record of shares of this Series to be
redeemed, at such holder's address as it appears on the stock register of the
Company; provided, however, that neither failure to give such notice nor any
defect therein shall affect the validity of the proceeding for the redemption
of any shares of this Series to be redeemed.
Each such notice shall state, as appropriate, the following and may
contain such other information as the Company deems advisable:
(A) the redemption date;
(B) that all outstanding shares of
this Series are to be redeemed or, in the
case of a call for redemption of fewer than
all outstanding shares of this Series, the
number of such shares held by such holder to
be redeemed;
(C) the Call Price, the number of
shares of Common Stock deliverable upon
redemption of each share of this Series to be
redeemed and the Current Market Price used to
calculate such number of shares of Common
Stock;
(D) the place or places where
certificates for such shares are to be
surrendered for redemption; and
(E) that dividends on the shares of
this Series to be redeemed shall cease to
accrue on such redemption date (except as
otherwise provided herein).
(iv) Deposit of Shares and Funds. The Company's
obligation to deliver shares of Common Stock and provide funds upon redemption
in accordance with this paragraph 4
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<PAGE> 19
shall be deemed fulfilled if, on or before a redemption date, the Company shall
irrevocably deposit, with a bank or trust company, or an affiliate of a bank or
trust company, having an office or agency in New York City and having a capital
and surplus of at least $50,000,000, or shall set aside or make other
reasonable provision for the issuance of, such number of shares of Common Stock
as are required to be delivered by the Company pursuant to this paragraph 4
upon the occurrence of the related redemption (and for the payment of cash in
lieu of the issuance of fractional share amounts and accrued and unpaid
dividends payable in cash, if any, on the shares to be redeemed as and to the
extent provided by this paragraph 4). Any interest accrued on such funds shall
be paid to the Company from time to time. Any shares of Common Stock or funds
so deposited and unclaimed at the end of two years from such redemption date
shall be repaid and released to the Company, after which the holder or holders
of such shares of this Series so called for redemption shall look only to the
Company for delivery of such shares of Common Stock or funds.
(v) Surrender of Certificates; Status. Each
holder of shares of this Series to be redeemed shall surrender the certificates
evidencing such shares (properly endorsed or assigned for transfer, if the
Board of Directors of the Company shall so require and the notice shall so
state) to the Company at the place designated in the notice of such redemption
and shall thereupon be entitled to receive certificates evidencing shares of
Common Stock and to receive any funds or shares of Common Stock payable
pursuant to this paragraph (4) following such surrender and following the date
of such redemption. In case fewer than all the shares represented by any such
surrendered certificate are called for redemption, a new certificate shall be
issued at the expense of the Company representing the unredeemed shares. If
such notice of redemption shall have been given, and if on the date fixed for
redemption shares of Common Stock and funds necessary for the redemption shall
have been irrevocably either set aside by the Company separate and apart from
its other funds or assets in trust for the account of the holders of the shares
to be redeemed or converted (and so as to be and continue to be available
therefor) or deposited with a bank or a trust company or an affiliate thereof
as provided herein or the Company shall have made other reasonable provision
therefor, then, notwithstanding that the certificates evidencing any shares of
this Series so called for redemption or subject to conversion shall not have
been surrendered, the shares represented thereby so called for redemption shall
be deemed no longer outstanding, dividends with respect to the shares so called
for redemption shall cease to accrue on the date fixed for redemption (except
that holders of shares of this Series at the close of business on a record date
for any payment of dividends shall be entitled to receive the dividend payable
on such shares on the corresponding Dividend Payment Date notwithstanding the
redemption of such shares following such record date and prior to such Dividend
Payment Date) and all rights with respect to the shares so called for
redemption shall forthwith after such date cease and terminate, except for the
rights of the holders to receive the shares of Common Stock and funds, if any,
payable pursuant to this paragraph (4) without interest upon surrender of their
certificates therefor. Holders of shares of this Series that are redeemed
shall not be entitled to receive dividends declared and paid on such shares of
Common Stock, and such shares of Common Stock shall not be entitled to vote,
until such shares of Common Stock are issued upon the surrender of the
certificates representing such shares of this Series and upon such surrender
such holders shall be entitled to receive such dividends declared and paid on
such shares of Common Stock subsequent to such redemption date.
- 19 -
<PAGE> 20
(c) Conversion at Option of Holder. Shares of
this Series are convertible, in whole or in part, at the option of the holder
thereof, at any time prior to the Mandatory Conversion Date, unless previously
redeemed, into shares of Common Stock at a rate of 344.274 shares of Common
Stock for each share of this Series (the "Optional Conversion Rate")
(equivalent to a conversion price of $9.73 per share of Common Stock). The
right to convert shares of this Series called for redemption shall terminate at
the close of business on the redemption date.
Conversion of shares of this Series may be effected by delivering
certificates evidencing such shares, together with written notice of conversion
and a proper assignment of such certificates to the Company or in blank, to the
office or agency to be maintained by the Company for that purpose (and, if
applicable, payment by the Company of an amount, out of funds legally available
therefor (in cash or in shares of Common Stock, at the election of the
Company), equal to the dividend payable on such shares), and otherwise in
accordance with conversion procedures established by the Company. Each
conversion shall be deemed to have been effected immediately prior to the close
of business on the date on which the foregoing requirements shall have been
satisfied. The conversion shall be at the Optional Conversion Rate in effect
at such time and on such date.
Holders of shares of this Series at the close of business on a record
date for any payment of dividends shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion of such shares following such record date and
prior to such Dividend Payment Date. The Company shall make no other payment
or allowance for unpaid dividends, whether or not in arrears, on converted
shares of this Series or for dividends or distributions on the shares of Common
Stock issued upon such conversion.
(d) Common Equivalent Rate and Optional
Conversion Rate Adjustments. The Common Equivalent Rate and the Optional
Conversion Rate also shall be subject to adjustment from time to time as
provided below in this paragraph.
(i) If the Company shall:
(A) pay a dividend or make a
distribution with respect to its
Common Stock in shares of such
stock,
(B) subdivide or split its
outstanding shares of Common
Stock into a greater number of
shares,
(C) combine its outstanding shares
of Common Stock into a smaller
number of shares, or
(D) issue by reclassification of its
shares of Common Stock any
shares of Common Stock of the
Company,
then, in any such event, the Common Equivalent Rate and the Optional Conversion
Rate in effect immediately prior to such event shall each be adjusted so that
the holder of any shares of this Series
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<PAGE> 21
shall thereafter be entitled to receive, upon Mandatory Conversion or upon
conversion at the option of the holder, the number of shares of Common Stock of
the Company which such holder would have owned or been entitled to receive
immediately following any event described above had such shares of this Series
been converted immediately prior to such event or any record date with respect
thereto. Such adjustment shall become effective at the opening of business on
the business day next following the record date for determination of
shareholders entitled to receive such dividend or distribution in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, split, combination or
reclassification. Such adjustment shall be made successively.
(ii) If the Company shall, after the date hereof,
issue rights or warrants to all holders of
its Common Stock entitling them (for a period
not exceeding forty-five days from the date
of such issuance) to subscribe for or
purchase shares of Common Stock at a price
per share less than the current market price
of the Common Stock, then in each case the
Common Equivalent Rate and Optional
Conversion Rate shall each be adjusted by
multiplying the Common Equivalent Rate and
the Optional Conversion Rate, in effect
immediately prior to the date of issuance of
such rights or warrants, by a fraction, of
which the numerator shall be the number of
shares of Common Stock outstanding on the
date of issuance of such rights or warrants,
immediately prior to such issuance, plus the
number of additional shares of Common Stock
offered for subscription or purchase pursuant
to such rights or warrants, and of which the
denominator shall be the number of shares of
Common Stock outstanding on the date of
issuance of such rights or warrants,
immediately prior to such issuance, plus the
number of additional shares of Common Stock
which the aggregate offering price of the
total number of shares of Common Stock so
offered for subscription or purchase pursuant
to such rights or warrants would purchase at
such current market price (determined by
multiplying such total number of shares by
the exercise price of such rights or warrants
and dividing the product so obtained by such
current market price). Such adjustment shall
become effective at the opening of business
on the business day next following the record
date for the determination of shareholders
entitled to receive such rights or warrants.
To the extent that shares of Common Stock are
not delivered after the expiration of such
rights or warrants, the Common Equivalent
Rate shall be readjusted to the Common
Equivalent Rate which would then be in effect
had the adjustments been made upon the
issuance of such rights or warrants been made
upon the basis of delivery of only the number
of shares of Common Stock actually delivered.
Such adjustment shall be made successively.
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<PAGE> 22
(iii) If the Company shall pay a dividend or make a
distribution to all holders of its Common
Stock of evidences of its indebtedness,
securities of a Subsidiary or other assets
(excluding any dividends or distributions
referred to in clause (i) above or any cash
dividends other than Extraordinary Cash
Distributions (as hereinafter defined)) or
shall issue to all holders of its Common
Stock rights or warrants to subscribe for or
purchase any of its securities (other than
those referred to in clause (ii) above), then
in each such case, the Common Equivalent Rate
and the Optional Conversion Rate shall each
be adjusted by multiplying the Common
Equivalent Rate and the Optional Conversion
Rate in effect on the record date mentioned
below, by a fraction of which the numerator
shall be the current market price per share
of the Common Stock on the record date for
the determination of shareholders entitled to
receive such dividend or distribution, and of
which the denominator shall be such current
market price per share of Common Stock less
the fair market value (as determined by the
Board of Directors of the Company, whose good
faith determination shall be conclusive, and
described in a resolution adopted with
respect thereto) as of such record date of
the portion of the assets or evidences of
indebtedness so distributed or of such
subscription rights or warrants applicable to
one share of Common Stock. Such adjustment
shall become effective on the opening of
business on the business day next following
the record date for the determination of
shareholders entitled to receive such
dividend or distribution. Such adjustment
shall be made successively.
(iv) Any shares of Common Stock issuable in
payment of a dividend shall be deemed to have
been issued immediately prior to the close of
business on the record date for such dividend
for purposes of calculating the number of
outstanding shares of Common Stock under
clause (ii) above. For purposes of any
computation under clause (ii) and (iii)
above, the current market price per share of
Common Stock at any date shall be deemed to
be the average of the daily Closing Prices
for the thirty consecutive Trading Dates
preceding the date in question; provided,
however, if any event that results in an
adjustment of the Common Equivalent Rate
occurs during such thirty-day period, the
current market price as determined pursuant
to the foregoing shall be appropriately
adjusted to reflect the occurrence of such
event.
(v) The Company shall also be entitled to make
upward adjustments in the Common Equivalent
Rate, the Optional Conversion Rate and the
Call Price, as the Board of Directors in its
good faith discretion shall determine to be
advisable, in order that any stock dividends,
subdivisions of shares, distribution of
rights to purchase stock or securities, or
distribution of securities convertible into
or
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<PAGE> 23
exchangeable for stock (or any transaction
which could be treated as any of the
foregoing transactions pursuant to Section
305 of the Internal Revenue Code of 1986, as
amended) hereafter made by the Company to its
shareholders shall not be taxable.
(vi) In any case in which clause (iii) above shall
require that an adjustment as a result of any
event become effective at the opening of
business on the business day next following a
record date and the date fixed for conversion
pursuant to subparagraph (4)(c) or redemption
pursuant to subparagraph (4)(b) occurs after
such record date, but before the occurrence
of such event, the Company may in its sole
discretion, elect to defer, until after the
occurrence of such event, issuing to the
holder of any converted or redeemed shares of
this Series the additional shares of Common
Stock issuable upon such conversion or
redemption over the shares of Common Stock
issuable before giving effect to such
adjustment.
(vii) All adjustments to the Common Equivalent Rate
and the Optional Conversion Rate shall be
calculated to the nearest 1/1000th of a share
of Common Stock (or if there is not a nearest
1/1000th of a share to the next lower
1/1000th of a share). No adjustment in the
Common Equivalent Rate and the Optional
Conversion Rate shall be required unless such
adjustment would require an increase or
decrease of at least one percent therein;
provided, however, that any adjustments which
by reason of this subparagraph are not
required to be made shall be carried forward
and taken into account in any subsequent
adjustments.
(e) Adjustment for Consolidation or Merger. In
case of any consolidation or merger to which the Company is a party (other than
a merger or consolidation in which the Company is the continuing corporation
and in which the Common Stock outstanding immediately prior to the merger or
consolidation remains unchanged), or in case of any sale or transfer to another
corporation of the property of the Company as an entirety or substantially as
an entirety, or in case of any statutory exchange of securities with another
corporation (other than in connection with a merger or acquisition), proper
provision shall be made so that each share of this Series shall, after
consummation of such transaction, be subject to (i) conversion at the option of
the holder into the kind and amount of securities, cash or other property
receivable upon consummation of such transaction by a holder of the number of
shares of Common Stock into which such share of this Series might have been
converted immediately prior to consummation of such transaction, (ii)
conversion on the Mandatory Conversion Date into the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock into which such
share of this Series would have been converted if the conversion on the
Mandatory Conversion Date had occurred immediately prior to the date of
consummation of such transaction, and (iii) redemption on any redemption date
in exchange for the kind and amount of securities, cash or other property
receivable upon consummation of such
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<PAGE> 24
transaction by a holder of the number of shares of Common Stock that would have
been issuable at the Call Price in effect on such redemption date upon a
redemption of such shares immediately prior to the consummation of such
transaction, assuming that the public announcement of such redemption had been
made on the last possible date permitted by the terms of this Series and
applicable law; assuming in each case that such holder of shares of this Series
failed to exercise rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon consummation of such
transaction (provided that if the kind or amount of securities, cash or other
property receivable upon consummation of such transaction is not the same for
each non-electing share, then the kind and amount of securities, cash or other
property receivable upon consummation of such transaction for each non-electing
share shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). The kind and amount of securities into
which the shares of this Series shall be convertible after the consummation of
such transaction shall be subject to adjustment as described in the immediately
preceding subparagraph 4(d) following the date of consummation of such
transaction. The Company shall not, without the affirmative vote of more than
the holders of two-thirds of all the outstanding shares of this Series, become
a party to any such transaction unless the terms thereof are consistent with
the foregoing.
(f) Notice of Adjustments. Whenever the Common
Equivalent Rate and Optional Conversion Rate are adjusted as herein provided,
the Company shall:
(i) forthwith compute the adjusted Common
Equivalent Rate and Optional Conversion Rate
in accordance herewith and prepare a
certificate signed by an officer of the
Company setting forth the adjusted Common
Equivalent Rate and the Optional Conversion
Rate, the method of calculation thereof in
reasonable detail and the facts requiring
such adjustment and upon which such
adjustment is based, which certificate shall
be conclusive, final and binding evidence of
the correctness of the adjustment, and file
such certificate forthwith with the transfer
agent for the shares of this Series and the
Common Stock; and
(ii) mail a notice to the holders of the
outstanding shares of this Series stating
that the Common Equivalent Rate and the
Optional Conversion Rate have been adjusted,
the facts requiring such adjustment and upon
which such adjustment is based and setting
forth the adjusted Common Equivalent Rate and
Optional Conversion Rate, such notice to be
mailed at or prior to the time the Company
mails an interim statement to its
shareholders covering the fiscal quarter
during which the facts requiring such
adjustment occurred, but in any event within
45 days of the end of such fiscal quarter.
(g) Notices. In case, at any time while any of
the shares of this Series are outstanding,
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<PAGE> 25
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock,
excluding any cash dividends; or
(ii) the Company shall authorize the issuance to
all holders of its Common Stock of rights or
warrants to subscribe for or purchase shares
of its Common Stock or of any other
subscription rights or warrants; or
(iii) the Company shall authorize any
reclassification of the Common Stock of the
Company (other than a subdivision or
combination thereof) or of any consolidation
or merger to which the Company is a party and
for which approval of any shareholders of the
Company is required (except for a merger of
the Company into a Subsidiary solely for the
purpose of changing the corporate domicile of
the Company to another state of the United
States and in connection with which there is
no substantive change in the rights or
privileges of any securities of the Company
other than changes resulting from differences
in the corporate statutes of the then
existing and the new state of domicile), or
of the sale or transfer of all or
substantially all of the assets of the
Company; or
(iv) there shall be commenced the voluntary or
involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of the shares of this Series, and shall cause to
be mailed to the holders of shares of this Series at their last addresses as
they shall appear on the stock register, at least 10 days before the date
hereinafter specified (or the earlier of the dates hereinafter specified, in
the event that more than one date is specified), a notice stating (A) the date
on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined, or (B) the
date on which any such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
(including cash), if any, deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
The failure to give or receive the notice required by this subparagraph (g) or
any defect therein shall not affect the legality or validity of any such
dividend, distribution, right or warrant or other action.
(h) Effective Date of Conversions and
Redemptions. The person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon any conversion
or redemption shall be deemed to have become on the date of any such conversion
or redemption the holder or holders of record of the shares represented
thereby; provided, however, that any such surrender on any date when the stock
transfer books of the Company shall
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<PAGE> 26
be closed shall constitute the person or persons in whose name or names the
certificate or certificates for such shares are to be issued as the record
holder or holders thereof for all purposes at the opening of business on the
next succeeding business day on which such stock transfer books are open.
(i) No Fractional Shares. No fractional shares
or scrip representing fractional shares of Common Stock shall be issued upon
the redemption or conversion of any shares of this Series or in respect of any
dividend paid in shares of Common Stock. In lieu of any fractional share
otherwise issuable in respect of all the shares of this Series of any holder
which are redeemed or converted on any redemption date or upon Mandatory
Conversion or any optional conversion or in respect of any dividend paid in
shares of Common Stock, the Company shall, at the election of the Company,
either (i) sell such fractional share, as agent for the person entitled
thereto, and distribute the proceeds of such sale, net of any discounts,
commissions, fees or expenses associated with such sale, to such person, all in
accordance with applicable rules under the Securities Act of 1933, as amended,
or (ii) pay to the person entitled thereto an amount in cash equal to the
current value of such fraction, calculated to the nearest one-hundredth (1/100)
of a share, to be computed (x) if the shares of this Series are listed on any
national securities exchange or the Nasdaq National Market, on the basis of the
last sales price (or the quoted closing bid price if there shall have been no
sales) of the shares of this Series on such exchange or the Nasdaq National
Market (as the case may be) on the date of any such conversion or redemption or
the date of payment of any such dividend, or (y) if the shares of this Series
are not so listed, on the basis of the mean between the closing bid and asked
prices for the shares of this Series on the date of any such conversion or
redemption or the date of payment of any such dividend, as reported by Nasdaq,
or its successor, or (z) if the shares of this Series are not so listed and if
there are no such closing bid and asked prices, on the basis of the fair market
value per share as determined in good faith by the Board of Directors.
(j) Reissuance. Shares of this Series that have
been issued and reacquired in any manner, including shares purchased,
exchanged, redeemed or converted, shall not be reissued as part of this Series
and shall (upon compliance with any applicable provisions of the laws of the
State of Georgia) have the status of authorized and unissued shares of the
Preferred Stock undesignated as to series and may be redesignated and reissued
as part of any series of Preferred Stock.
(k) Definitions. As used herein:
(i) the term "business day" shall mean any day
other than a Saturday, Sunday, or a day on
which banking institutions in the State of
New York are authorized or obligated by law
or executive order to close or are closed
because of a banking moratorium or otherwise;
(ii) the term "Capital Stock" means any capital
stock of any class or series (however
designated) of the Company;
(iii) the term "Closing Price" on any day shall
mean the closing sale price regular way on
such day or, in case no such sale takes place
on such day, the average of the reported
closing bid and asked prices regular
- 26 -
<PAGE> 27
way, in each case on the Nasdaq National
Market or, if the Common Stock is not listed
or admitted to trading on the Nasdaq National
Market then on the principal national
securities exchange on which the Common Stock
is listed or admitted to trading (which shall
be the national securities exchange on which
the greatest number of shares of Common Stock
has been traded during the five consecutive
Trading Dates ending on and including the
date of determination), or, if not quoted or
listed or admitted to trading on any national
securities exchange or quotation system, the
average of the closing bid and asked prices
of the Common Stock on the over-the-counter
market on the day in question as reported by
the National Quotation Bureau Incorporated,
or a similar generally accepted reporting
service, or if not so available as determined
in good faith by the Board of Directors, on
the basis of such relevant factors as it in
good faith considers appropriate;
(iv) the term "Exchange Preferred" means the
Series B Convertible Preferred Stock of the
Company.
(v) the term "Extraordinary Cash Distributions"
means, with respect to any cash dividend or
distribution paid on any date, the amount, if
any, by which all cash dividends and cash
distributions on the Common Stock paid during
the consecutive 12-month period ending on and
including such date (other than cash
dividends and cash distributions for which an
adjustment to the Common Equivalent Rate and
the Optional Conversion Rate was previously
made) exceeds, on a per share of Common Stock
basis, 10% of the average daily Closing Price
of the Common Stock over such 12-month
period;
(vi) the term "Junior Stock" means any Capital
Stock ranking as to dividends or as to rights
in liquidation, dissolution or winding up of
the affairs of the Company junior to the
shares of this Series;
(vii) the term "Parity Stock" means any Capital
Stock ranking as to dividends or as to rights
in liquidation, dissolution or winding up the
affairs of the Company equally with the
shares of this Series;
(viii) the term "Subsidiary" means any corporation a
majority of the outstanding Voting Stock of
which is owned, directly or indirectly, by
the Company or by one or more Subsidiaries or
by the Company and one or more Subsidiaries.
For this purpose, the term "Voting Stock"
means stock of any class or classes (however
designated) having ordinary voting power for
the election of a majority of the members of
the board of directors (or other governing
body) of such
- 27 -
<PAGE> 28
corporation, other than stock having such
powers only by reason of the happening of a
contingency;
(ix) the term "Trading Date" shall mean a date on
which the Nasdaq National Market (or any
successor thereto) is open for the
transaction of business.
(l) Payment of Taxes. The Company shall pay any
and all documentary, stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of shares of Common Stock on the redemption or
conversion of shares of this Series pursuant to this paragraph 4; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any registration of transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the registered
holder of shares of this Series redeemed or converted or to be redeemed or
converted, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Company the amount of any such tax
or has established, to the satisfaction of the Company, that such tax has been
paid.
(m) Reservation of Common Stock. The Company
shall at all times reserve and keep available, free from preemptive rights, out
of the aggregate of its authorized but unissued Common Stock and/or its issued
Common Stock held in its treasury, for the purpose of effecting any Mandatory
Conversion of the shares of this Series or any conversion of the shares of this
Series at the option of the holder, the full number of shares of Common Stock
then deliverable upon any such conversion of all outstanding shares of this
Series.
5. Liquidation Rights.
(a) In the event of the liquidation, dissolution,
or winding up of the Company, whether voluntary or involuntary, the holders of
shares of this Series then outstanding, after payment or provision for payment
of the debts and other liabilities of the Company and the payment or provision
for payment of any distribution on any shares of the Company having a
preference and a priority over the shares of this Series on liquidation, and
before any distribution to the holders of the Common Stock, or any other stock
ranking junior to the shares of this Series with respect to distributions upon
liquidation, dissolution or winding up, shall be entitled to be paid out of the
assets of the Company available for distribution to its shareholders, an amount
per share of this Series equal to the greater of (i) the sum of (a) the
liquidation value set forth in paragraph (1) above and (b) all accrued and
unpaid dividends thereon to the date of liquidation, dissolution or winding up
and (ii) the value of the shares of Common Stock into which such shares of this
Series are convertible on the date of such liquidation, dissolution or winding
up, before any payment shall be made or any assets distributed to the holders
of any shares of the Company ranking junior to the shares of this Series upon
liquidation. In the event the assets of the Company available for distribution
to the holders of the shares of this Series upon any dissolution, liquidation
or winding up of the Company shall be insufficient to pay in full the
liquidation payments payable to the holders of outstanding shares of this
Series and any shares of Parity Stock, then the holders of all such shares of
this Series shall share ratably in such distribution of assets in accordance
with the amount which would be payable on such distribution if the amounts to
which the holders of outstanding shares of
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<PAGE> 29
this Series and the holders of outstanding shares of such shares of Parity
Stock are entitled were paid in full. Except as provided in this paragraph 5,
holders of this Series shall not be entitled to any distribution in the event
of liquidation, dissolution or winding up of the affairs of the Company.
(b) For the purposes of this paragraph 5, none of
the following shall be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Company:
(i) the voluntary sale, conveyance,
lease, exchange or transfer (for
cash, shares of stock,
securities or other
consideration) of all or
substantially all of the
property or assets of the
Company;
(ii) the consolidation or merger of
the Company with or into one or
more other corporations, or
other associations;
(iii) the consolidation or merger of
one or more corporations or
other associations with or into
the Company; or
(iv) the participation by the Company
in a share exchange.
6. Definition. As used herein, the term "Common Stock" shall
mean any stock of any class of the Company which has no preference in respect
of dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which is not subject
to redemption by the Company. However, shares of Common Stock issuable upon
conversion of shares of this Series shall include only shares of the class
designated as Common Stock as of the original date of issuance of shares of
this Series, or shares of the Company of any class or classes resulting from
any reclassification or reclassification thereof and which have no preference
in respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company and which are
not subject to redemption by the Company; provided that if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total number of
shares of such class resulting from such reclassification bears to the total
number of shares of all classes resulting from all such reclassification.
7. No Preemptive Rights. The holders of shares of this
Series shall have no preemptive rights, including preemptive rights with
respect to any shares of Capital Stock or other securities of the Company
convertible into or carrying rights or options to purchase any such shares.
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<PAGE> 30
EXHIBIT B
Series B Convertible Preferred Stock
1. Designation and Amount. The shares of such series shall be
designated "Series B Convertible Preferred Stock" (the "Series B Preferred
Stock"), and the number of shares constituting such series shall be 15,000,000.
2. Dividends.
(a) The holders of Series B Preferred Stock shall be
entitled to receive, when and as declared, out of the funds legally available
for that purpose, dividends per share of Series B Preferred Stock at the rate
of 7.75 cents per annum, payable when and as the Board of Directors (the "Board
of Directors") of WorldCom, Inc. (the "Company") may determine, in cash, before
any dividends shall be set apart for or paid upon the common stock of the
Company, par value $.01 per share (the "Common Stock"), or any stock ranking as
to dividends junior to the Series B Preferred Stock (such stock being referred
to hereinafter collectively as "Junior Stock") in any year. All dividends
declared upon Series B Preferred Stock shall be declared pro rata per share and
shall be payable to holders of record as they appear on the stock books of the
Company on such record dates as shall be fixed by the Board of Directors.
Notwithstanding the foregoing, the Company may declare, set apart and pay
dividends on shares of the Company's Series A 8% Cumulative Convertible
Preferred Stock (the "Series A Preferred Stock") whether or not dividends have
been declared, set apart or paid on the shares of Series B Preferred Stock.
The Board of Directors shall not be required to declare any dividends on the
Series B Preferred Stock and the failure to declare any such dividends shall
not constitute a default or otherwise vest the holders of Series B Preferred
Stock with any right, other than the right to receive amounts in respect of
accrued but unpaid dividends pursuant to Sections 3, 5 and 7 hereof.
(b) Dividends on the Series B Preferred Stock shall be
cumulative and shall accrue on a daily basis, whether or not in any fiscal year
there shall be net profits or surplus available for the payment of dividends in
such fiscal year, so that if in any fiscal year or years, dividends in whole or
in part are not paid upon the Series B Preferred Stock, unpaid dividends shall
accumulate as against the holders of the Junior Stock. Accrued but unpaid
dividends shall not bear interest.
(c) Dividends (or amounts equal to accrued and unpaid
dividends) payable on the shares of Series B Preferred Stock shall be computed
on the basis of a 360-day year of twelve 30-day months.
(d) The Company shall not set apart for or pay upon the
Common Stock any Extraordinary Cash Dividend unless, at the same time, the
Company shall have set apart for or paid upon all shares of Series B Preferred
Stock an amount of cash per share of Series B Preferred Stock equal to the
Extraordinary Cash Dividend that would have been paid in respect of such share
if the holder of such share had converted such share into shares of Common
Stock pursuant to Section 5 immediately prior to the record date for such
Extraordinary Cash Dividend. For purposes of this paragraph 2(d),
"Extraordinary Cash Dividend" shall mean, with respect to any cash dividend or
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<PAGE> 31
distribution paid on any date, the amount, if any, by which all cash dividends
and cash distributions on the Common Stock paid during the consecutive 12-month
period ending on and including such date exceeds, on a per share of Common
Stock basis, 10% of the average daily closing price of the Common Stock over
such 12-month period.
3. Liquidation, Dissolution or Winding Up.
(a) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, no distribution shall be made (i) to
the holders of Junior Stock unless, prior thereto, the holders of the Series B
Preferred Stock shall have received $1.00 per share, plus an amount equal to
unpaid dividends thereon, including accrued dividends, whether or not declared,
to the date of such payment and subject to the payment in full of all amounts
required to be distributed to the holders of any other Preferred Stock of the
Company ranking on liquidation prior and in preference to the Series B
Preferred Stock (such Preferred Stock being referred to hereinafter as "Senior
Preferred Stock") or (ii) to the holders of stock ranking on a parity, either
as to dividends or upon liquidation with the Series B Preferred Stock, except
distributions made ratably on the Series B Preferred Stock and all other such
parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation. In the event the assets of the
Company available for distribution to the holders of the shares of the Series B
Preferred Stock upon any dissolution, liquidation or winding up of the Company
shall be insufficient to pay in full the liquidation payments payable to the
holders of outstanding shares of the Series B Preferred Stock and the holders
of any shares of stock ranking on a parity with the Series B Preferred Stock,
then the holders of all such shares of the Series B Preferred Stock shall share
ratably in such distribution of assets in accordance with the amount which
would be payable on such distribution if the amounts to which the holders of
outstanding shares of the Series B Preferred Stock and the holders of
outstanding shares of such shares of parity stock are entitled were paid in
full. The Series A Preferred Stock shall rank on a parity with the Series B
Preferred Stock for purposes of this paragraph 3(a).
(b) The merger or consolidation of the Company into or
with another company, the merger or consolidation of any other company into or
with the Company, or the sale, conveyance, mortgage, pledge or lease of all or
substantially all the assets of the Company shall not be deemed to be a
liquidation, dissolution or winding up of the Company for purposes of this
Section 3.
4. Voting.
(a) Each issued and outstanding share of Series B
Preferred Stock shall be entitled to one vote per share with respect to any and
all matters presented to the shareholders of the Company for their action or
consideration. Except as provided by law and by the provisions of paragraph
4(b) below, holders of Series B Preferred Stock shall vote together with the
holders of Common Stock as a single class.
(b) The Company shall not amend, alter or repeal the
preferences, special rights or other powers or terms of the Series B Preferred
Stock so as to affect adversely the Series B
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<PAGE> 32
Preferred Stock, without the written consent or affirmative vote of the holders
of at least a majority of the then outstanding aggregate number of shares of
Series B Preferred Stock, given in writing or by vote at a meeting, consenting
or voting (as the case may be) separately as a class. For this purpose, the
authorization or issuance of any series of preferred stock with preference or
priority over, or being on a parity with the Series B Preferred Stock as to the
right to receive either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Company shall not be deemed to affect
adversely the Series B Preferred Stock.
5. Optional Conversion.
(a) Each share of Series B Preferred Stock may be
converted at any time, unless previously redeemed, at the option of the holder
thereof, in the manner hereinafter provided, into fully paid and nonassessable
shares of Common Stock at the rate of 0.0973912 shares (or an effective initial
conversion price of $10.268 per share of Common Stock) of Common Stock for each
one share of Series B Preferred Stock surrendered for conversion, or at such
other rate as may then be effective following adjustment pursuant to Section 6
hereof (the "Conversion Rate").
(b) The Company shall not issue fractions of shares of
Common Stock upon conversion of Series B Preferred Stock or scrip in lieu
thereof. If any fraction of a share of Common Stock would, except for the
provisions of this paragraph 5(b), be issuable upon conversion of any Series B
Preferred Stock, the Company shall in lieu thereof at the election of the
Company, either (i) sell such fractional share, as agent for the person
entitled thereto, and distribute the proceeds of such sale, net of any
discounts, commissions, fees or expenses associated with such sale, to such
person, all in accordance with all applicable rules under the Securities Act of
1933, as amended, or (ii) pay to the person entitled thereto an amount in cash
equal to the current value of such fraction, calculated to the nearest
one-hundredth (1/100) of a share, to be computed (x) if the Common Stock is
listed on any national securities exchange or the Nasdaq National Market, on
the basis of the last sales price (or the quoted closing bid price if there
shall have been no sales) of the Common Stock on such exchange or the Nasdaq
National Market (as the case may be) on the date of conversion, or (y) if the
Common Stock is not so listed, on the basis of the mean between the closing bid
and asked prices for the Common Stock on the date of conversion as reported by
Nasdaq, or its successor, or (z) if the Common Stock is not so listed and if
there are no such closing bid and asked prices, on the basis of the fair market
value per share as determined by the Board of Directors.
(c) In order to exercise the conversion privilege, the
holder of any Series B Preferred Stock to be converted shall surrender his, her
or its certificate or certificates therefore to the principal office of the
transfer agent for the Series B Preferred Stock (or if no transfer agent be at
the time appointed, then the Company at its principal office), and shall give
written notice to the Company at such office that the holder elects to convert
the Series B Preferred Stock represented by such certificates, or any number
thereof. Such notice shall also state the name or names (with address) in
which the certificate or certificates for shares of Common Stock that shall be
issuable on such conversion shall be issued. If so required by the Company,
certificates surrendered for conversion shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Company. The date of receipt by the transfer agent (or by the Company if the
Company serves as its own transfer agent) of the certificates and notice shall
be the conversion
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<PAGE> 33
date (the "Conversion Date"). As soon as practicable after receipt of such
notice and the surrender of the certificate or certificates for Series B
Preferred Stock as aforesaid, the Company shall cause to be issued and
delivered at such office to such holder, or on such holder's written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash
as provided in paragraph 5(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
(d) The Company shall at all times when the Series B
Preferred Stock shall be outstanding reserve and keep available out of its
authorized but unissued stock, for the purposes of effecting the conversion of
the Series B Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series B Preferred Stock.
(e) Shares of Series B Preferred Stock may not be
converted after the close of business on the business day preceding the date
fixed for redemption of such shares pursuant to Section 7.
(f) Upon any such conversion, the Company shall pay, out
of funds legally available therefor, to the person entitled thereto an amount
equal to all accrued but unpaid dividends to, but not including, the Conversion
Date in respect of the shares of Series B Preferred Stock surrendered for
conversion, which amount shall be payable, at the election of the Company, in
cash or shares of Common Stock. In the event the Company elects to pay such
amount in shares of Common Stock, the number of shares of Common Stock to be
issued in respect of unpaid dividends on each share of Series B Preferred Stock
surrendered for conversion shall, subject to paragraph 5(b), be determined by
dividing (x) the total amount of accrued but unpaid dividends to be paid on
each such share of Series B Preferred Stock by (y) the Fair Market Value of a
share of Common Stock. For purposes hereof, the term "Fair Market Value" shall
mean (i) if the Common Stock is listed on any national securities exchange or
the Nasdaq National Market, the average of the last sales price (or the quoted
closing bid price if there shall have been no sales) of the Common Stock on
such exchange or the Nasdaq National Market (as the case may be) for a period
of 30 trading days prior to the Conversion Date, or (ii) if the Common Stock is
not so listed, on the basis of the average of the mean between the closing bid
and asked prices for the Common Stock for each day in the 30 trading day period
prior to the Conversion Date, as reported by Nasdaq, or its successor, or (iii)
if the Common Stock is not so listed and if there are no such closing bid and
asked prices, on the basis of the fair market value per share as determined by
the Board of Directors.
(g) All shares of Series B Preferred Stock which shall
have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall forthwith cease and
terminate except only the right of the holder thereof to receive shares of
Common Stock in exchange therefor and payment of any accrued and unpaid
dividends thereon. Any shares of Series B Preferred Stock so converted shall
be retired and canceled and shall not be reissued, and the Company may from
time to time take such appropriate action as may be necessary to reduce the
authorized Series B Preferred Stock accordingly.
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<PAGE> 34
6. Adjustment Provisions.
(a) In case the Company shall at any time (x) subdivide
(whether by stock dividend, stock split or otherwise) its outstanding shares of
Common Stock into a greater number of shares or (y) combine its outstanding
shares of Common Stock into a smaller number of shares, the Conversion Rate in
effect immediately prior thereto shall be proportionately adjusted so that the
holder of any shares of Series B Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of capital stock
of the Company which the holder would have owned or have been entitled to
receive after the happening of any of the events described above, had such
shares of Series B Preferred Stock been converted immediately prior to the
happening of such event. In case the Company shall at any time prior to March
23, 1999 subdivide (whether by stock dividend, stock split or otherwise) its
outstanding shares of Common Stock into a greater number of shares (each a
"Subdivision"), the voting rights of each share of Series B Preferred Stock
shall be adjusted to provide that the percentage of the aggregate voting power
of the Common Stock represented by the Series B Preferred Stock, shall be the
same as such percentage immediately prior to such Subdivision, with the holder
of each share of Series B Preferred Stock being entitled to the number of votes
proportionate to such adjustment. The adjustment made pursuant to this
paragraph 4(a) shall become effective immediately after the effective date of
the event requiring such adjustment and shall be made by the Board of Directors
of the Company, whose judgment shall be final, binding and conclusive absent
manifest error. Such adjustment made pursuant to this paragraph 6(a) shall
become effective immediately after the effective date of the event requiring
such adjustment.
(b) If any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with another company, or the sale of all or substantially all of its assets to
another company shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities, cash or other property with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the holders of the Series B Preferred
Stock shall have the right to acquire and receive upon conversion of the Series
B Preferred Stock, which right shall be prior to the rights of the holders of
Junior Stock (but after and subject to the rights of holders of Senior
Preferred Stock, if any, and on parity with the rights of holders of Series A
Preferred Stock), such shares of stock, securities, cash or other property
issuable or payable (as part of the reorganization, reclassification,
consolidation, merger or sale) with respect to or in exchange for such number
of outstanding shares of the Company's Common Stock as would have been received
upon conversion of the Series B Preferred Stock at the Conversion Rate then in
effect. The Company will not effect any such consolidation, merger or sale,
unless prior to the consummation thereof the successor company (if other than
the Company) resulting from such consolidation or merger or the company
purchasing such assets shall assume by written instrument mailed or delivered
to the holders of the Series B Preferred Stock at the last address of each such
holder appearing on the books of the Company, the obligation to deliver to each
such holder such shares of stock, securities, cash or other property as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase.
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<PAGE> 35
(c) In the event that:
(1) the Company shall declare any dividend upon
its Common Stock payable in stock or make any special dividend
or other distribution to the holders of its Common Stock, or
(2) there shall be any capital reorganization or
reclassification of the capital stock of the Company,
including any subdivision or combination of its outstanding
shares of Common Stock, or consolidation or merger of the
Company with, or sale of all or substantially all of its
assets to, another company, or
(3) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in accordance with such event, the Company shall give to the holders of
the Series B Preferred Stock:
(i) at least twenty (20) days prior written
notice of the date on which the books of the
Company shall close or a record shall be
taken for such dividend or distribution or
for determining rights to vote in respect of
any such reorganization, reclassification,
consolidation, merger, sale, dissolution,
liquidation or winding up; and
(ii) in the case of any such reorganization,
reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up,
at least twenty (20) days prior written
notice of the date when the same shall take
place.
A notice in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend or distribution, the date on which the holders of
Common Stock shall be entitled thereto, and a notice in accordance with the
foregoing clause (ii) shall also specify the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be. Each such written notice shall be sent by mail, first class,
postage prepaid, addressed to the holders of the Series B Preferred Stock at
the address of each such holder as shown on the books of the Company.
(d) If any event occurs as to which, in the opinion of
the Board of Directors of the Company, the provisions of this Section 6 are not
strictly applicable or if strictly applicable would not fairly protect the
rights of the holders of the Series B Preferred Stock in accordance with the
essential intent and principles of such provisions, then the Board of Directors
shall make an adjustment in the application of such provisions, in accordance
with such essential intent and principles, so as to protect such rights as
aforesaid, but in no event shall any adjustment have the effect of decreasing
the Conversion Rate as otherwise determined pursuant to any of the provisions
of this Section 6 except in the case of a combination of shares of a type
contemplated in paragraph
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<PAGE> 36
6(a) and then in no event to a rate less than the Conversion Rate as adjusted
pursuant to paragraph 6(a).
(e) Whenever the Conversion Rate shall be adjusted
pursuant to this Section 6, the Company shall forthwith file at each office
designated for the conversion of Series B Preferred Stock, a statement, signed
by the Chairman of the Board, the President, any Vice President or Treasurer of
the Company, showing in reasonable detail the facts requiring such adjustment
and the Conversion Rate that will be effective after such adjustment. The
Company shall also cause a notice setting forth any such adjustments to be sent
by mail, first class, postage prepaid, to each record holder of Series B
Preferred Stock at his or its address appearing on the stock register. If such
notice relates to an adjustment resulting from an event referred to in
paragraph 6(c), such notice shall be included as part of the notice required to
be mailed and published under the provisions of paragraph 6(c) hereof.
7. Redemption.
The Company shall have the right to redeem shares of Series B
Preferred Stock pursuant to the following provisions:
(a) The Company shall not have any right to redeem shares
of the Series B Preferred Stock prior to September 30, 2001. Thereafter, the
Company shall have the right, at its sole option and election, out of funds
legally available therefor, to redeem the shares of Series B Preferred Stock,
in whole or in part, at any time and from time to time at a redemption price of
$1.00 per share plus an amount equal to all accrued and unpaid dividends
thereon (the "Redemption Price"), whether or not declared, to the redemption
date; provided, that any amount due in respect of all or any portion of the
Redemption Price, including accrued dividends, may be paid in cash or shares of
Common Stock as determined by the Board of Directors. In the event the Board
of Directors elects to pay any portion of the Redemption Price in shares of
Common Stock, the number of shares of Common Stock to be issued shall be
determined in accordance with the provisions of paragraph 5(f).
(b) If less than all of the Series B Preferred Stock at
the time outstanding is to be redeemed, the shares so to be redeemed shall be
selected by lot, pro-rata or in such other manner as the Board of Directors may
determine to be fair and proper.
(c) Notice of any redemption of the Series B Preferred
Stock (including notice of whether such redemption shall be paid in cash or
shares of Common Stock) shall be mailed at least 30 days, but not more than 60
days prior to the date fixed for redemption to each holder of Series B
Preferred Stock to be redeemed, at such holder's address as it appears on the
books of the Company. In order to facilitate the redemption of the Series B
Preferred Stock, the Board of Directors may fix a record date for the
determination of holders of Series B Preferred Stock to be redeemed, or may
cause the transfer books of the Company to be closed for the transfer of the
Series B Preferred Stock, not more than 60 days prior to the date fixed for
such redemption.
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<PAGE> 37
(d) On the redemption date specified in the notice given
pursuant to paragraph 7(c), the Company shall, and at any time after such
notice shall have been mailed and before such redemption date the Company may,
deposit for the pro-rata benefit of the holders of the shares of the Series B
Preferred Stock so called for redemption, funds in an amount equal to the
portion of the Redemption Price, if any, to be paid in cash with a bank or
trust company in the Borough of Manhattan, The City of New York, having a
capital and surplus of at least $50,000,000. Any monies so deposited by the
Company and unclaimed at the end of one (1) year from the date designated for
such redemption shall revert to the general funds of the Company. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Company such unclaimed amounts and thereupon such bank or trust company shall
be relieved of all responsibility in respect thereof to such holder and such
holder shall look only to the Company for the payment of the redemption price.
Any interest accrued on funds so deposited pursuant to this paragraph 7(d)
shall be paid from time to time to the Company for its own account.
(e) Upon the deposit of funds pursuant to paragraph 7(d)
in respect of shares of the Series B Preferred Stock called for redemption, or,
in the event that the Board of Directors elects to pay all or part of the
Redemption Price in shares of Common Stock, on the date fixed for redemption,
notwithstanding that any certificates for such shares shall not have been
surrendered for cancellation, the shares represented thereby shall no longer be
deemed outstanding, the rights to receive dividends thereon shall cease to
accrue from and after the date of redemption designated in the notice of
redemption and all rights of the holders of the shares of the Series B
Preferred Stock called for redemption shall cease and terminate, excepting only
the right to receive the Redemption Price therefor and the right to convert
such shares into shares of Common Stock until the close of business on the
business day preceding the redemption date, as provided in Section 5.
8. Reissuance. Shares of this Series that have been issued
and reacquired in any manner including shares purchased, exchanged, redeemed or
converted shall not be reissued as part of this Series and shall upon
compliance with any applicable provisions of the laws of the State of Georgia
have the status of authorized and unissued shares of the Preferred Stock
undesignated as to series and may be redesignated and reissued as part of any
series of Preferred Stock.
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<PAGE> 38
EXHIBIT C
Series 3 Junior Participating Preferred Stock
Section 1. Designation and Amount.
There shall be a series of the Preferred Stock which shall be
designated as the "Series 3 Junior Participating Preferred Stock," par value
$.01 per share, and the number of shares constituting such series shall be
2,500,000. Such number of shares may be increased or decreased by resolution
of the Board of Directors; provided, that no decrease shall reduce the number
of shares of Series 3 Junior Participating Preferred Stock to a number less
than that of the shares then outstanding plus the number of shares issuable
upon exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Company.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of
any series of preferred stock of the Company ranking prior and superior to the
Series 3 Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series 3 Junior Participating Preferred Stock, in
preference to the holders of shares of Common Stock, par value $.01 per share
of the Company (the "Common Stock"), and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
any regular quarterly dividend payment date as shall be established by the
Board of Directors (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction of a share of Series 3
Junior Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $10.00 or (b) subject to the
provision for adjustment hereinafter set forth, 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions,
other than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series 3 Junior
Participating Preferred Stock. In the event the Company shall at any time
after August 25, 1996 (the "Rights Declaration Date") declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of Series 3 Junior
Participating Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
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<PAGE> 39
(B) The Company shall declare a dividend or distribution
on the Series 3 Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share
on the Series 3 Junior Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series 3 Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such
shares, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series 3 Junior
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series 3 Junior Participating 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 at the time outstanding. The Board of Directors may, in
accordance with applicable law, fix a record date for the determination of
holders of shares of Series 3 Junior Participating Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than such number of days prior to the date fixed for the
payment thereof as may be allowed by applicable law.
Section 3. Voting Rights.
The holders of shares of Series 3 Junior Participating
Preferred Stock shall have the following voting rights:
(A) Each share of Series 3 Junior Participating Preferred
Stock shall entitle the holder thereof to 1,000 votes on all matters submitted
to a vote of the stockholders of the Company. In the event the Company shall
at any time after the Rights Declaration Date declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes to which holders of shares of Series 3 Junior
Participating Preferred Stock were entitled immediately prior to such event
under the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
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<PAGE> 40
(B) Except as otherwise provided herein, in the Company's
Second Amended and Restated Articles of Incorporation, as amended, or by law,
the holders of shares of Series 3 Junior Participating Preferred Stock, the
holders of shares of Common Stock, and the holders of shares of any other
capital stock of the Company having general voting rights, shall vote together
as one class on all matters submitted to a vote of stockholders of the Company.
(C) Except as otherwise set forth herein or in the
Company's Second Amended and Restated Articles of Incorporation, as amended,
and except as otherwise provided by law, holders of Series 3 Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever dividends or distributions payable on the
Series 3 Junior Participating Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series 3 Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Company shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series 3 Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series 3 Junior Participating Preferred Stock, except dividends paid
ratably on the Series 3 Junior Participating Preferred Stock and all
such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) except as permitted in Section 4(A)(iv)
below, redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series 3 Junior
Participating Preferred Stock, provided that the Company may at any
time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Company ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series 3 Junior Participating Preferred Stock; and
(iv) purchase or otherwise acquire for
consideration any shares of Series 3 Junior Participating Preferred
Stock, or any shares of stock ranking on a parity with the Series 3
Junior Participating Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective
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<PAGE> 41
series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(B) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration any shares of stock
of the Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares.
Any shares of Series 3 Junior Participating Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall
be retired and canceled promptly after the acquisition thereof. The Company
shall cause all such shares upon their cancellation to be authorized but
unissued shares of Preferred Stock which may be reissued as part of a new
series of Preferred Stock, subject to the conditions and restrictions on
issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock of the Company ranking prior and superior to the
Series 3 Junior Participating Preferred Stock with respect to liquidation, upon
any liquidation (voluntary or otherwise), dissolution or winding up of the
Company, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series 3 Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series 3 Junior Participating Preferred Stock
shall have received $1,000.00 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment (the "Series 3 Liquidation Preference"). Following the
payment of the full amount of the Series 3 Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series 3
Junior Participating Preferred Stock, unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Series 3
Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in
subparagraph C below to reflect such events as stock dividends, and
subdivisions, combinations and consolidations with respect to the Common Stock)
(such number in clause (ii) being referred to as the "Adjustment Number").
Following the payment of the full amount of the Series 3 Liquidation Preference
and the Common Adjustment in respect of all outstanding shares of Series 3
Junior Participating Preferred Stock and Common Stock, respectively, holders of
Series 3 Junior Participating Preferred Stock and holders of shares of Common
Stock shall receive their ratable and proportionate share of the remaining
assets to be distributed in the ratio of the Adjustment Number to 1 with
respect to such Series 3 Junior Participating Preferred Stock and Common Stock,
on a per share basis, respectively.
(B) In the event there are not sufficient assets
available to permit payment in full of the Series 3 Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series 3 Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their
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<PAGE> 42
respective liquidation preferences. In the event there are not sufficient
assets available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Company shall at any time after the
Rights Declaration Date declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc.
In case the Company shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock
are exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such case the shares of Series 3 Junior
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Company shall at any time after the Rights Declaration Date
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series 3 Junior
Participating Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that are outstanding immediately prior to such
event.
Section 8. Redemption.
The shares of Series 3 Junior Participating Preferred Stock
shall not be redeemable.
Section 9. Ranking.
The Series 3 Junior Participating Preferred Stock shall rank
junior to all other series of the Company's Preferred Stock as to the payment
of dividends and the distribution of assets, unless the terms of any such
series shall provide otherwise.
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<PAGE> 43
Section 10. Fractional Shares.
Series 3 Junior Participating Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series 3 Junior Participating Preferred Stock.
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<PAGE> 1
EXHIBIT 99.1
Contact: Beverly Buckley
Director, Investor Relations
(601) 360-8600
WORLDCOM/MFS MERGER COMPLETED
JACKSON, Mississippi (December 31, 1996) -- WorldCom, Inc. (WorldCom) today
announced the merger between WorldCom and MFS Communications Company, Inc.
(MFS) has been completed and will be effective today at 11:58 p.m. eastern
standard time.
As a result of the merger, each share of MFS common stock will be
converted into the right to receive 2.1 shares of WorldCom common stock. Each
share of MFS' Series A 8% Cumulative Convertible Preferred Stock will be
converted into the right to receive one share of Series A 8% Cumulative
Convertible Preferred Stock of WorldCom. Each share of MFS' Series B
Convertible Preferred Stock will be converted into the right to receive one
share of Series B Convertible Preferred Stock of WorldCom. In addition, each
depositary share representing 1/100th of a share of MFS Series A Preferred
Stock will be exchanged for a depositary share representing 1/100th of a share
of WorldCom Series A Preferred Stock.
Upon effectiveness of the merger, the Board of Directors of WorldCom will
consist of the following individuals: Carl J. Aycock, Max E. Bobbitt, R.
Douglas Bradbury, James Q. Crowe, Bernard J. Ebbers, Francesco Galesi, Richard
R. Jaros, Stiles A. Kellett, Jr., David C. McCourt, John A. Porter, Walter
Scott, Jr., John W. Sidgmore, Scott D. Sullivan, Michael B. Yanney and, in lieu
of Clyda Stokes Rent, who was unable to serve, Lawrence C. Tucker.
According to Bernard J. Ebbers, president and chief executive officer of
WorldCom, the combined company will do business under the name WorldCom.
Ebbers stated, "This business combination has created one of the world's
premier business communications companies, blending a full range of local, long
distance, international and Internet-based services. As a result of the
merger, we have an exciting opportunity to increase revenue and customer
retention by offering this unique combination of services through a combined
sales force of nearly 3,000 professionals. In addition, we expect to achieve
significant cost savings from reduced line and access costs, as well as the
elimination of duplicate capital spending programs."
WorldCom is a leading provider of integrated long distance and local
telecommunications services, offering domestic and international voice, data,
Internet and video products and services to business customers, other carriers
and the residential market. The company operates a nationwide digital fiber
optic network in the United States and has worldwide network capacity. Its
World Wide Web address is: http://www.wcom.com. The common and depositary
shares of WorldCom trade on the Nasdaq National Market under the symbols WCOM
and WCOMP, respectively.
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