<PAGE>
As filed with the Securities and Exchange Commission on August 26, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------
MCI WORLDCOM, INC.
(Exact name of registrant as specified in its charter)
Georgia 4813 58-1521612
(Primary Standard (I.R.S. Employer
(State or other Industrial Identification Number)
jurisdiction of Classification Code
incorporation or Number)
organization)
500 Clinton Center Drive
Clinton, Mississippi 39056
(601) 460-5600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
Bernard J. Ebbers
President and Chief Executive Officer
MCI WORLDCOM, Inc.
500 Clinton Center Drive
Clinton, Mississippi 39056
(601) 460-5600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copies to:
<TABLE>
<S> <C>
R. Randall Wang, Esq. Robert A. Profusek, Esq.
Bryan Cave LLP James E. O'Bannon, Esq.
One Metropolitan Square Jones, Day, Reavis & Pogue
211 North Broadway 599 Lexington Avenue
Suite 3600 New York, New York 10022
St. Louis, Missouri 63102 (212) 326-3939
(314) 259-2000
</TABLE>
--------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement is declared
effective and all other conditions to the proposed merger (the "Merger") of
SkyTel Communications, Inc. ("SkyTel") with and into a subsidiary of the
Registrant pursuant to the Agreement and Plan of Merger described in the
enclosed proxy statement/prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Proposed maximum
Title of each class of Amount maximum aggregate Amount of
securities to be to be offering price offering registration
registered(1) registered(2) per unit price(3) fee(4)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01, and associated
preferred stock
purchase rights........ 19,034,902 N/A $1,314,730,704 $365,496
- ------------------------------------------------------------------------------------
Series C $2.25 Cumula-
tive Convertible Ex-
changeable Preferred
Stock, par value $.01.. 3,750,000 N/A $135,000,000 $37,530
- ------------------------------------------------------------------------------------
4.5% Convertible Subor-
dinated
Debentures due 2003.... $187,500,000 N/A N/A N/A
- ------------------------------------------------------------------------------------
Total................. N/A N/A $1,449,730,704 $403,026(5)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(footnotes appear on following page)
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(footnotes from previous page)
(1) This Registration Statement relates to: (A)(i) the common stock (the "MCI
WorldCom Common Stock"), par value $.01 per share, and associated preferred
stock purchase rights of MCI WORLDCOM, Inc. ("MCI WorldCom") and (ii)
Series C $2.25 Cumulative Convertible Exchangeable Preferred Stock, par
value $0.01 per share ("MCI WorldCom Preferred Stock"), of MCI WorldCom
which are issuable, or to be reserved for issuance, in the Merger described
herein, including 1,157,500 shares of MCI WorldCom Common Stock and
associated preferred stock purchase rights issuable in respect of SkyTel
Common Stock issuable upon conversion of the SkyTel Preferred Stock
(defined herein) and 998,185 shares of MCI WorldCom Common Stock and
associated preferred stock purchase rights issuable in respect of SkyTel
Common Stock (defined herein) issuable upon exercise of SkyTel employee
stock options or pursuant to SkyTel employee benefit plans; and (B) 4.5%
Convertible Subordinated Debentures due 2003 (the "Debentures") issuable
upon exchange of the MCI WorldCom Preferred Stock, including such
indeterminate number of shares of MCI WorldCom Common Stock and associated
preferred stock purchase rights issuable upon conversion of the MCI
WorldCom Preferred Stock or the Debentures. One preferred stock purchase
right attaches to and will be distributed without charge with respect to
each share of MCI WorldCom Common Stock registered hereby.
(2) The number of shares to be registered pursuant to this Registration
Statement is based on the maximum number of (i) shares of MCI WorldCom
Common Stock issuable to common stockholders of SkyTel in the Merger, at an
assumed exchange ratio of 0.2778 and assuming that the maximum number of
shares of Common Stock, par value $.01 per share ("SkyTel Common Stock"),
of SkyTel to be acquired in the Merger for MCI WorldCom Common Stock is
68,520,167 and (ii) shares of MCI WorldCom Preferred Stock issuable to
preferred stockholders of SkyTel in the Merger, at an exchange ratio of
1.00 and assuming that the maximum number of shares of $2.25 Cumulative
Convertible Exchangeable Preferred Stock, par value $0.01 ("SkyTel
Preferred Stock"), of SkyTel to be acquired in the Merger for MCI WorldCom
Preferred Stock is 3,750,000.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) of the Securities Act of 1933, as amended,
based on (i) in the case of the MCI WorldCom Common Stock, the product of
the estimated maximum number of shares of SkyTel Common Stock to be
acquired in the Merger (68,520,167) multiplied by the average of the high
and low sale prices of SkyTel Common Stock on August 20, 1999 ($19.19) as
reported on The Nasdaq National Market and (ii) in the case of the MCI
WorldCom Preferred Stock, the product of the estimated maximum number of
shares of SkyTel Preferred Stock to be acquired in the Merger (3,750,000)
multiplied by the average of the high and low sale prices of SkyTel
Preferred Stock on August 24, 1999 ($36.00) as reported on The Nasdaq
National Market.
(4) No additional consideration will be received by MCI WorldCom for the
issuance of Debentures upon exchange of the MCI WorldCom Preferred Stock,
or for the issuance of MCI WorldCom Common Stock and associated preferred
stock purchase rights upon the conversion of the MCI WorldCom Preferred
Stock or the Debentures. Accordingly, no additional registration fee is
required and, pursuant to Rule 457(i), the registration fee is calculated
on the basis of the MCI WorldCom Preferred Stock alone.
(5) $296,492 of the Registration Fee was previously paid in connection with
SkyTel's Preliminary Proxy Statement filed with the Commission on Schedule
14A on July 2, 1999. Pursuant to Rule 457(b), this amount is not remitted
herewith, and only the balance of $106,534 is required to be paid in
connection with the filing of this Registration Statement.
<PAGE>
[logo] August 26, 1999
Dear Stockholder:
You are invited to attend a special meeting of stockholders of SkyTel
Communications, Inc. The meeting will be held at 10:00 a.m., Central time, on
Wednesday, September 29, 1999, at the Capital Club, 125 South Congress Street,
Capital Towers Building, 19th Floor, in Jackson, Mississippi. At the meeting,
SkyTel common stockholders will be asked to vote on the adoption of a merger
agreement between SkyTel and MCI WORLDCOM, Inc.
In the merger, SkyTel common stockholders will receive 0.25 of a share of
MCI WorldCom common stock for each share of SkyTel common stock they own, so
long as the weighted average per share trading price for MCI WorldCom common
stock is $80.00 or more for the 20 trading days ending three trading days prior
to the completion of the merger. If the weighted average per share trading
price for the MCI WorldCom common stock is between $72.00 and $80.00 per share
for that period, the exchange ratio will be increased to a number of shares of
MCI WorldCom common stock equal to $20.00 divided by the weighted average per
share trading price. If the weighted average per share trading price for the
MCI WorldCom common stock is $72.00 or less, the exchange ratio will be fixed
at 0.2778 of a share of MCI WorldCom common stock for each share of SkyTel
common stock.
Holders of SkyTel preferred stock will receive one share of MCI WorldCom
convertible exchangeable preferred stock, which will be a new series of MCI
WorldCom preferred stock, in the merger for each share of SkyTel preferred
stock they own. The MCI WorldCom convertible exchangeable preferred stock will
be convertible into MCI WorldCom common stock on a basis that gives effect to
the exchange ratio in the merger and will otherwise have substantially the same
terms as the SkyTel preferred stock.
The SkyTel board of directors has unanimously determined that the merger is
fair to and in the best interests of SkyTel and its stockholders. The SkyTel
board believes that the long-term value to SkyTel stockholders of an investment
in the combined company will more likely than not be superior to the long-term
value of an investment in SkyTel as a stand-alone company. Accordingly, the
SkyTel board recommends that you vote for adoption of the merger agreement.
In light of the importance of the proposed merger, we urge you to attend the
special meeting in person or to participate by proxy. Please vote your shares
as soon as possible after carefully reading and considering the accompanying
materials. The accompanying materials contain detailed information on how to
vote. If you have any questions, require additional material or need assistance
in voting your proxy, please call our proxy solicitor, MacKenzie Partners,
Inc., toll-free at (800) 322-2885 or collect at (212) 929-5500.
[logo] [logo]
John N. Palmer John T. Stupka
Chairman of the Board President and Chief Executive
Officer
You should consider the matters discussed under "Risk Factors Relating to
the Merger" beginning on page 11 of this proxy statement/prospectus before
voting.
The MCI WorldCom common stock is listed on The Nasdaq National Market under
the symbol "WCOM." The MCI WorldCom convertible exchangeable preferred stock to
be issued in the merger has been approved for listing on The Nasdaq National
Market under the symbol "WCOMP," subject to official notice of issuance.
Neither the Securities and Exchange Commission nor any other securities
regulator has approved or disapproved the merger described in this proxy
statement/prospectus or the MCI WorldCom stock to be issued in the merger or
determined that this document is truthful or complete. Any representation to
the contrary is a criminal offense.
This document is dated August 26, 1999 and is first being mailed to SkyTel
stockholders on or about August 30, 1999.
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about MCI WorldCom and SkyTel from documents that are not
included in or delivered with this document. This information is available to
you without charge upon either written or oral request. You can obtain
documents incorporated by reference in this document by requesting them in
writing or by telephone from the appropriate company at the following addresses
and telephone numbers:
MCI WORLDCOM, Inc. SkyTel Communications, Inc.
500 Clinton Center Drive 200 South Lamar Street
Clinton, Mississippi 39056 SkyTel Centre, South Building
Attention: Investor Relations Jackson, Mississippi 39201
Department Attention: Vice President--Investor
Telephone: (877) 624-9266 or Relations
(601) 460-5600 Telephone: (601) 944-3800
If you would like to request documents, please do so by September 22, 1999
in order to receive them before the SkyTel stockholders meeting.
For additional sources of the documents incorporated by reference and other
information about MCI WorldCom and SkyTel, see "Where You Can Find More
Information" beginning on page 92.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Questions and Answers About the Meeting and the Merger.................... i
Summary................................................................... 1
The Companies........................................................... 1
General................................................................. 1
The Special Meeting..................................................... 3
The Merger Agreement.................................................... 4
The Stock Option Agreement.............................................. 5
Regulatory Matters...................................................... 5
Accounting Treatment.................................................... 5
Expenses................................................................ 5
Market Price and Dividend Information................................... 6
Forward-Looking Statements May Prove Inaccurate......................... 6
Comparative Per Share Data.............................................. 7
Selected Historical Financial Data...................................... 8
Risk Factors Relating to the Merger....................................... 11
The Special Meeting....................................................... 13
Date, Time and Place.................................................... 13
Purpose of the Special Meeting.......................................... 13
Record Date; Stock Entitled to Vote; Quorum............................. 13
Vote Required........................................................... 13
Voting by SkyTel Directors and Executive Officers....................... 13
Voting of Proxies....................................................... 14
Revocability of Proxies................................................. 14
Solicitation of Proxies................................................. 15
Adjournments............................................................ 15
The Companies............................................................. 16
MCI WorldCom............................................................ 16
SkyTel.................................................................. 17
Material Contracts Between MCI WorldCom and SkyTel...................... 17
The Merger................................................................ 18
Background of the Merger................................................ 18
SkyTel's Reasons for the Merger; Recommendation of the SkyTel Board..... 20
Opinion of Warburg Dillon Read LLC...................................... 22
Interests of SkyTel Directors and Executive Officers in the Merger...... 28
Accounting Treatment.................................................... 31
Form of the Merger...................................................... 32
Merger Consideration.................................................... 32
Conversion of Shares; Procedures For Exchange of Certificates;
Fractional Shares...................................................... 33
Effective Time of the Merger............................................ 34
Nasdaq Quotation of MCI WorldCom Stock.................................. 34
Delisting and Deregistration of SkyTel Common and Preferred Stock....... 34
Certain U.S. Federal Income Tax Consequences............................ 35
Regulatory Matters...................................................... 36
Appraisal Rights........................................................ 37
Continuation of SkyTel Employee Benefits................................ 37
Effect on Awards Outstanding Under SkyTel Stock Plans; Warrants......... 38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Resale of MCI WorldCom Common Stock and MCI WorldCom Convertible
Exchangeable Preferred Stock........................................... 39
The Merger Agreement and Stock Option Agreement........................... 40
The Merger Agreement.................................................... 40
The Stock Option Agreement.............................................. 49
Comparative Stock Prices and Dividends.................................... 52
Description of MCI WorldCom Capital Stock................................. 54
General................................................................. 54
Common Stock............................................................ 54
Preferred Stock......................................................... 55
Series B Preferred Stock................................................ 55
Series C $2.25 Cumulative Convertible Exchangeable Preferred Stock...... 56
The Exchange Debentures................................................. 63
Rights Plan............................................................. 70
Series 3 Preferred Stock................................................ 72
Certain Charter and Bylaw Provisions.................................... 73
Comparison of Rights of Shareholders of MCI WorldCom and SkyTel........... 77
Capitalization.......................................................... 77
Voting Rights........................................................... 77
Number and Election of Directors........................................ 77
Vacancies on the Board of Directors..................................... 78
Removal of Directors.................................................... 79
Amendments to Charter................................................... 79
Amendments to Bylaws.................................................... 80
Shareholder Action...................................................... 80
Notice of Shareholder Action............................................ 81
Special Shareholder Meetings............................................ 81
Limitation of Personal Liability of Directors........................... 81
Indemnification of Directors and Officers............................... 82
Dividends............................................................... 84
Appraisal Rights........................................................ 85
Preemptive Rights....................................................... 86
Conversion.............................................................. 86
Preferred Stock......................................................... 87
Special Redemption Provisions........................................... 87
Rights Plan............................................................. 87
Shareholder Suits....................................................... 88
Vote on Extraordinary Corporate Transactions............................ 88
Business Combination Restrictions....................................... 89
Legal Matters............................................................. 91
Experts................................................................... 91
Stockholder Proposals..................................................... 92
Other Matters............................................................. 92
Where You Can Find More Information....................................... 92
Special Note Regarding Forward-Looking Statements......................... 95
</TABLE>
<TABLE>
<C> <S>
Annexes
Annex A Agreement and Plan of Merger
Annex B Stock Option Agreement
Annex C Fairness Opinion of Warburg Dillon Read LLC
</TABLE>
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MEETING AND THE MERGER
Q:What do I need to do now?
A: If you owned shares of SkyTel common stock as of August 19, 1999, the record
date for the special meeting, you are entitled to vote on the merger. Please
carefully read the information contained in this document, complete and sign
the enclosed form of proxy and return it in the enclosed return envelope as
soon as possible, so that your shares of common stock may be represented at
the meeting. You can also vote by one of the alternative methods described
on page 14. If you send in your proxy and do not indicate how you want to
vote, we will count your proxy as a vote for adoption of the merger
agreement. If you abstain from voting or do not vote, it will have the
effect of a vote against adoption of the merger agreement. An affirmative
vote of a majority of the outstanding shares of SkyTel common stock is
required to adopt the merger agreement.
If you owned shares of SkyTel preferred stock as of the record date, you are
entitled to receive notice of the meeting, but you are not entitled to vote
on the merger.
Q: Can I change my vote after I have submitted my proxy?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting in several ways. First, you can send a written notice
stating that you would like to revoke your proxy. Second, you can complete
and submit a new proxy. If you choose either of these two methods, you must
submit your notice of revocation or your new proxy to the Secretary of
SkyTel at its headquarters, the address of which is set forth on page 1.
Third, you can attend the special meeting and vote in person. You may also
revoke your proxy by calling the toll-free number on your proxy card or by
voting through the Internet by following the instructions on your proxy
card, even if you did not previously vote by either of those methods.
Q: If my shares of SkyTel common stock are held in street name by my broker,
will my broker vote my shares for me?
A: Only if you provide instructions on how to vote. You should follow the
directions provided by your broker regarding how to instruct your broker to
vote your shares. Without instructions, your shares will not be voted, which
will have the effect of a vote against adoption of the merger agreement.
Q:Should I send in my stock certificates now?
A: No. After the merger is completed, you will receive written instructions for
exchanging your stock certificates. Please do not send in your stock
certificates with your proxy.
Q: When do you expect the merger to be completed?
A: We are working to complete the merger as quickly as possible. We expect to
complete the merger as promptly as practicable following the adoption of the
merger agreement at the special meeting of SkyTel stockholders.
Q:Who can help answer my questions?
A: If you have any questions about the merger or if you need additional copies
of this document or the enclosed proxy, you should contact:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
Telephone: call collect (212) 929-5500
or call toll-free (800) 322-2885
i
<PAGE>
SUMMARY
This summary, together with the preceding Questions and Answers section,
highlights selected information from this proxy statement/prospectus and does
not contain all of the information that may be important to you. To understand
the merger fully and for a more complete description of the terms of the
merger, you should carefully read this entire document and the other documents
to which we have referred you. See "Where You Can Find More Information"
beginning on page 92. We have included page references to direct you to a more
complete description of the topics presented in this summary.
The Companies (page 16)
MCI WORLDCOM, Inc.
500 Clinton Center Drive
Clinton, Mississippi 39056
(877) 624-9266 or
(601) 460-5600
MCI WorldCom is a global leader in telecommunications services with 1998 pro
forma revenues of more than $30 billion and established operations in over 65
countries encompassing the Americas, Europe and the Asia-Pacific regions. MCI
WorldCom is one of the first major facilities-based telecommunications
companies with the capability to provide consumers and businesses with high
quality local, long distance, Internet, data and international communications
services over its global networks.
SkyTel Communications, Inc.
200 South Lamar Street
SkyTel Centre, South Building
Jackson, Mississippi 39201
(601) 944-3800
SkyTel is a leading provider of wireless messaging services in the United
States. SkyTel operates a one-way messaging network which features FLEX(TM)
technology and an advanced messaging network that uses spectrum allocated by
the Federal Communications Commission for narrowband personal communication
services. Services available on the advanced messaging network include advanced
text messaging with guaranteed delivery, interactive two-way messaging and
fixed location services. As of June 30, 1999, SkyTel had 999,000 domestic one-
way paging units and 490,900 advanced messaging units in service. Through its
subsidiaries and joint ventures, SkyTel also operates nationwide one-way
messaging systems in 11 countries in Latin America, and provides its
subscribers with access to an international network that interconnects the one-
way systems in Latin America with SkyTel's systems in the United States and the
systems of other carriers in various countries.
General
What SkyTel Stockholders Will Receive in the Merger (page 32)
Common Stockholders. In the merger, SkyTel common stockholders will receive
the number of shares of MCI WorldCom common stock for each share of SkyTel
common stock they own determined by dividing $20.00 by the average of the
volume weighted averages of the trading prices of MCI WorldCom common stock on
The Nasdaq National Market as reported by Bloomberg Financial Markets for the
20 trading days ending on the third trading day before the completion of the
merger. This exchange ratio is subject to the following two adjustments:
. if the average trading price of MCI WorldCom common stock as calculated
above exceeds $80.00, the exchange ratio will be fixed at 0.25; and
. if the average trading price falls below $72.00, the exchange ratio will
be fixed at 0.2778.
This means that it is possible that each share of SkyTel common stock will
be valued in the merger at more or less than $20.00, since the number of shares
of MCI WorldCom common stock received for each share of SkyTel common stock
will not be less than 0.25 or more than 0.2778 regardless of what happens to
the price of MCI WorldCom common stock shortly before the merger. Under the
merger agreement, neither MCI WorldCom nor
SkyTel may terminate the merger agreement based solely on fluctuations in the
price of MCI WorldCom common stock.
1
<PAGE>
SkyTel common stockholders will receive an amount of cash for any fractional
shares which they would otherwise receive in the merger based on the closing
price of MCI WorldCom common stock on The Nasdaq National Market on the date
the merger is completed.
Set forth below is a table showing a range of average trading prices of MCI
WorldCom common stock, along with entries showing the corresponding exchange
ratios and corresponding valuations of a share of SkyTel common stock:
<TABLE>
<CAPTION>
Average
Trading Price Value of a
of MCI Share of
WorldCom SkyTel
Common Exchange Common
Stock Ratio Stock
------------- -------- ----------
<S> <C> <C> <C>
$84.00 .2500 $21.00
83.00 .2500 20.75
82.00 .2500 20.50
Exchange 81.00 .2500 20.25
Ratio n 80.00 .2500 20.00
Limitation 79.00 .2532 20.00
78.00 .2564 20.00
77.00 .2597 20.00
76.00 .2632 20.00
75.00 .2667 20.00
74.00 .2703 20.00
Exchange 73.00 .2740 20.00
Ratio n 72.00 .2778 20.00
Limitation 71.00 .2778 19.72
70.00 .2778 19.45
69.00 .2778 19.17
68.00 .2778 18.89
</TABLE>
For a SkyTel stockholder who owns 100 shares of SkyTel common stock, if the
exchange ratio was 0.2632, for example, this would translate into 26.32 shares
of MCI WorldCom common stock. Since cash will be paid instead of fractional
shares, that SkyTel stockholder would receive 26 shares of MCI WorldCom common
stock and a check in an amount equal to the fractional share multiplied by the
closing price of MCI WorldCom common stock on the date the merger is completed.
We urge you to look up current market information for the MCI WorldCom
common stock. You may call, toll-free, 877-624-9266 until the date of the
special meeting to hear what the exchange ratio would be if the merger were
completed on that day. However, because the exchange ratio will not be
determined until the third trading day before the completion of the merger,
changes in the price of MCI WorldCom common stock may cause the actual exchange
ratio to differ significantly from an exchange ratio that is calculated based
on the price of MCI WorldCom common stock on or before the date of the special
meeting.
Preferred Stockholders. In the merger, holders of SkyTel $2.25 cumulative
convertible exchangeable preferred stock, which we refer to as SkyTel preferred
stock, will receive one share of MCI WorldCom series C $2.25 cumulative
convertible exchangeable preferred stock, which we refer to as MCI WorldCom
convertible exchangeable preferred stock, for each share of SkyTel preferred
stock they own. The MCI WorldCom convertible exchangeable preferred stock will
be a new series of MCI WorldCom preferred stock and will have terms which are
substantially identical to the SkyTel preferred stock, except that it will
convert into shares of MCI WorldCom common stock rather than shares of SkyTel
common stock, with the conversion ratio adjusted for the exchange ratio in the
merger.
Ownership of MCI WorldCom Following the Merger
Based on the number of outstanding shares of SkyTel common stock on the
record date, we anticipate that holders of SkyTel common stock will receive
between 15.1 million and 16.7 million shares of MCI WorldCom common stock in
the merger, depending on the exchange ratio. Based on those numbers and the
number of outstanding shares of MCI WorldCom common stock on the record date,
following the merger, former SkyTel common stockholders will own less than 1%
of the outstanding shares of MCI WorldCom common stock.
2
<PAGE>
No Appraisal Rights (page 37)
SkyTel common and preferred stockholders will not have appraisal rights in
connection with the merger.
Material U.S. Federal Income Tax Consequences of the Merger (page 35)
The merger is intended to qualify as a tax-free reorganization for U.S.
federal income tax purposes, so that holders of SkyTel common and preferred
stock would not recognize gain or loss for U.S. federal income tax purposes as
a result of the exchange of their SkyTel stock for MCI WorldCom stock in the
merger, except for cash received instead of fractional shares of MCI WorldCom
common stock.
Tax matters are very complicated and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult your own
tax advisors for a full understanding of the tax consequences of the merger to
you.
Board of Directors Recommendation to Stockholders (page 22)
The SkyTel board of directors believes that the merger is fair to and in the
best interests of SkyTel and its stockholders and unanimously recommends that
the SkyTel common stockholders vote for the adoption of the merger agreement.
To review certain risks related to the merger as well as the background and
reasons for the merger in greater detail, see pages 11-12 and 18-22.
Fairness Opinion of Warburg Dillon Read LLC (page 22)
In deciding to approve the merger, the SkyTel board of directors considered
the opinion, as of the date of the merger agreement, of SkyTel's financial
advisor, Warburg Dillon Read LLC, as to the fairness of the consideration to be
received by SkyTel stockholders in the merger from a financial point of view.
This opinion is attached as Annex C to this document. We encourage you to read
this opinion carefully.
Interests of SkyTel Directors and Executive Officers in the Merger (page 28)
Some of the directors and executive officers of SkyTel have employment or
severance agreements, retention agreements, indemnification agreements,
restricted shares and stock options that provide them with interests in the
merger that may be different from, or in addition to, the interests of SkyTel
stockholders generally. You should consider these interests in assessing the
merger and the recommendation of the SkyTel board of directors that SkyTel
common stockholders vote to adopt the merger agreement.
The Special Meeting (page 13)
The special meeting of SkyTel stockholders will be held at the Capital Club,
125 South Congress Street, Capital Towers Building, 19th Floor, in Jackson,
Mississippi, on Wednesday, September 29, 1999 at 10:00 a.m., Central time. The
sole purpose of the special meeting is for the SkyTel common stockholders to
consider and vote on the adoption of the merger agreement.
Record Date; Voting Power
SkyTel common stockholders are entitled to receive notice of, and vote at,
the special meeting if they owned shares as of the close of business on August
19, 1999, the record date.
On the record date, there were 60,272,618 shares of SkyTel common stock
entitled to vote at the special meeting. Holders of SkyTel common stock will
have one vote at the special meeting for each share of SkyTel common stock they
owned on the record date.
Vote Required
The affirmative vote of the holders of a majority of the outstanding shares
of SkyTel common stock on the record date is required to adopt the merger
agreement.
SkyTel preferred stockholders are not entitled to vote at the special
meeting.
Voting by SkyTel Directors and Executive Officers
On the record date, directors and executive officers of SkyTel and their
affiliates owned and
3
<PAGE>
were entitled to vote 2,076,000 shares of SkyTel common stock, or 3.4% of the
shares of SkyTel common stock outstanding on the record date. The directors and
executive officers of SkyTel have indicated that they intend to vote the SkyTel
common stock owned by them for adoption of the merger agreement.
The Merger Agreement (page 40)
The merger agreement is attached as Annex A to this document. We encourage
you to read the merger agreement, as it is the principal document governing the
merger.
Conditions to the Merger (page 40)
MCI WorldCom and SkyTel will complete the merger only if they satisfy or, in
some cases, waive several conditions, including:
. holders of a majority of the outstanding shares of SkyTel common stock
must adopt the merger agreement;
. the required approval of the Federal Communications Commission must be
obtained;
. no legal restraints may exist which prevent the completion of the merger
or are reasonably likely to have a material adverse effect on MCI
WorldCom or SkyTel;
. MCI WorldCom and SkyTel each must receive letters from Arthur Andersen
LLP stating in substance that pooling-of-interests accounting is
appropriate for the merger under accounting rules applicable to the
merger;
. shares of MCI WorldCom common stock issuable to SkyTel stockholders must
have been approved for listing on The Nasdaq National Market;
. Jones, Day, Reavis & Pogue must deliver an opinion to SkyTel, and
Cravath, Swaine & Moore must deliver an opinion to MCI WorldCom, in each
case stating:
--that the merger will qualify for U.S. federal income tax purposes as a
"reorganization" within the meaning of the Internal Revenue Code, and
--that the parties to the merger agreement will each be a "party to a
reorganization" within the meaning of the Internal Revenue Code; and
. MCI WorldCom and SkyTel must satisfy the representations, warranties and
covenants contained in the merger agreement in all material respects.
Termination of the Merger Agreement (page 43)
1. MCI WorldCom and SkyTel can jointly agree to terminate the merger
agreement at any time without completing the merger.
2. MCI WorldCom or SkyTel can terminate the merger agreement if:
. MCI WorldCom and SkyTel do not complete the merger by February 28, 2000,
subject to extension by either party to May 28, 2000, if the required
approval of the Federal Communications Commission has not been obtained
by February 28, 2000;
. the holders of a majority of the outstanding shares of SkyTel common
stock do not adopt the merger agreement;
. a governmental authority or legal action permanently prohibits the
completion of the merger or is reasonably likely to have a material
adverse effect on either MCI WorldCom or SkyTel; or
. the other party breached in any material respect any of its
representations, warranties or obligations under the merger agreement
and has not cured the breach within 30 days.
4
<PAGE>
3. Before the special meeting, SkyTel can terminate the merger agreement if
the SkyTel board of directors receives an unsolicited proposal from a third
party to acquire SkyTel on terms determined by the SkyTel board to be more
favorable to SkyTel stockholders than the terms of the merger with MCI
WorldCom.
4. MCI WorldCom can terminate the merger agreement if SkyTel or any of its
directors or officers participates in discussions with third parties regarding
certain takeover proposals or other business transactions in breach of the
merger agreement.
Termination Fees (page 43)
Except as described below, SkyTel must pay MCI WorldCom a termination fee of
$25 million if:
. SkyTel common stockholders receive a takeover proposal or a takeover
proposal otherwise becomes publicly known and MCI WorldCom or SkyTel
then terminates the merger agreement for the first or second reason
described in paragraph 2 above under "--Termination of the Merger
Agreement;"
. SkyTel terminates the merger agreement for the reason described in
paragraph 3 above under "--Termination of the Merger Agreement;" or
. MCI WorldCom terminates the merger agreement for the reason described in
paragraph 4 above under "--Termination of the Merger Agreement."
SkyTel is not required to pay MCI WorldCom the termination fee for the
reasons described in the first and third bullet points of the paragraph above
unless SkyTel enters into an agreement for or completes any takeover proposal
within 12 months of the termination of the merger agreement.
The Stock Option Agreement (page 49)
SkyTel has granted an option to MCI WorldCom to purchase 7,500,000 shares of
SkyTel common stock, exercisable at a purchase price of $21.23 per share,
subject to adjustment, if certain events occur that entitle MCI WorldCom to
receive the termination fee under the merger agreement. Based on the number of
outstanding shares of SkyTel common stock on the record date, MCI WorldCom
would receive, as a result of exercising the option, 12.4% of the outstanding
shares of SkyTel common stock. The option agreement limits to $43.75 million
the total amount MCI WorldCom may receive from (1) profits from stock acquired
or cash received pursuant to the stock option and (2) any termination fee
payable by SkyTel if the merger agreement is terminated.
Regulatory Matters (page 36)
On August 25, 1999, the Federal Communications Commission approved the
transfer of control to MCI WorldCom of SkyTel and those subsidiaries of SkyTel
that hold FCC licenses and authorizations.
Accounting Treatment (page 31)
MCI WorldCom and SkyTel expect the merger to qualify as a pooling-of-
interests transaction, which means that MCI WorldCom and SkyTel will be treated
as if they had always been combined for financial reporting purposes.
Expenses (page 47)
Each of MCI WorldCom and SkyTel will bear all expenses it incurs in
connection with the merger, except that MCI WorldCom and SkyTel will share
equally the costs of filing, printing and mailing this document and the
registration statement of which this document is a part and the filing fees
incurred in connection with obtaining regulatory approval for the merger under
the United States antitrust laws.
5
<PAGE>
Market Price and Dividend Information (page 52)
Shares of common stock of MCI WorldCom and shares of both common and
preferred stock of SkyTel are listed on The Nasdaq National Market. The
following table presents:
. the last reported sale price of one share of MCI WorldCom common stock,
as reported on The Nasdaq National Market;
. the last reported sale price of one share of SkyTel common stock, as
reported on The Nasdaq National Market;
. the market value of one share of SkyTel common stock on an equivalent
per share basis; and
. the average of the high and low bid prices of one share of SkyTel
preferred stock, as reported on the over-the-counter market (on May 27,
1999) and the last reported sale price of one share of SkyTel preferred
stock, as reported on The Nasdaq National Market (on August 25, 1999),
on May 27, 1999, which was the last full trading day before the public
announcement of the proposed merger, and on August 25, 1999, which was the last
full trading day for which such information could be obtained before the date
of this document. The equivalent price per share data for SkyTel common stock
has been determined by multiplying the last reported sale price of one share of
MCI WorldCom common stock on each of these dates by an assumed exchange ratio
of 0.25.
<TABLE>
<CAPTION>
Equivalent
Price Per
MCI Share of
WorldCom SkyTel SkyTel SkyTel
Common Common Common Preferred
Date Stock Stock Stock Stock
---- -------- ------ ---------- ---------
<S> <C> <C> <C> <C>
May 27, 1999............................... $84.94 $19.31 $21.23 $30.44
August 25, 1999............................ 81.38 20.44 20.35 37.00
</TABLE>
Currently there are no outstanding shares of the MCI WorldCom convertible
exchangeable preferred stock which will be issued to SkyTel preferred
stockholders in the merger. Accordingly, their market price and dividend
information have not been included in this document. The MCI WorldCom
convertible exchangeable preferred stock has been approved for listing on The
Nasdaq National Market, subject to official notice of issuance.
Neither MCI WorldCom nor SkyTel has ever paid cash dividends on its common
stock.
Forward-Looking Statements May Prove Inaccurate (page 95)
MCI WorldCom and SkyTel have made forward-looking statements in this
document that are subject to risks and uncertainties. Forward-looking
statements are statements that are not historical facts. Forward-looking
statements include statements concerning possible or assumed future results of
operations of MCI WorldCom and SkyTel as well as statements preceded by,
followed by or that include the words "believes," "expects," "anticipates,"
"intends" or similar expressions. You should understand that important factors
discussed elsewhere in this document and in the documents which we incorporate
by reference could affect the future results of MCI WorldCom and could cause
those results to differ materially from those expressed in our forward-looking
statements.
6
<PAGE>
Comparative Per Share Data
The following table sets forth for MCI WorldCom common stock and SkyTel
common stock, for the periods indicated, selected historical per share data and
the corresponding unaudited pro forma combined and pro forma equivalent per
share amounts, calculated assuming an exchange ratio of either 0.25 or 0.2778
shares of MCI WorldCom common stock and giving effect to the proposed merger.
The actual exchange ratio may vary as described in this document. The data
presented are based upon the historical consolidated financial statements and
related notes of each of MCI WorldCom and SkyTel, which are incorporated by
reference into this document. See "Where You Can Find More Information"
beginning on page 92. This information should be read in conjunction with, and
is qualified in its entirety by reference to, the historical consolidated
financial statements of MCI WorldCom and SkyTel and related notes thereto. The
data presented is not necessarily indicative of the future results of
operations of the consolidated companies or the actual results that would have
occurred if the merger had been consummated prior to the periods indicated.
Neither MCI WorldCom nor SkyTel has ever paid dividends on its common stock.
<TABLE>
<CAPTION>
SkyTel SkyTel
MCI Pro Forma Pro Forma
WorldCom/ Equivalent Equivalent
MCI SkyTel (assuming an (assuming an
WorldCom SkyTel Pro Forma exchange ratio exchange ratio
Historical Historical Combined of 0.25) of 0.2778)
---------- ---------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Book value per common
share:
December 31, 1998..... $24.51 $(1.06) $24.27 $6.07 $6.74
June 30, 1999......... 25.77 (0.84) 25.54 6.39 7.10
Income (loss) per common
share from continuing
operations (after
preferred dividend
requirement):
Basic:
Year ended December
31, 1996(1).......... (5.02) (3.38) (5.27) (1.32) (1.46)
Year ended December
31, 1997............. 0.23 (1.87) 0.12 0.03 0.03
Year ended December
31, 1998(1)(2)....... (2.02) (0.57) (2.02) (0.51) (0.56)
Six months ended June
30, 1998(1).......... (0.06) (0.46) (0.09) (0.02) (0.03)
Six months ended June
30, 1999............. 0.85 0.18 0.85 0.21 0.24
Diluted:
Year ended December
31, 1996(1).......... (5.02) (3.38) (5.27) (1.32) (1.46)
Year ended December
31, 1997............. 0.22 (1.87) 0.12 0.03 0.03
Year ended December
31, 1998(1)(2)....... (2.02) (0.57) (2.02) (0.51) (0.56)
Six months ended June
30, 1998(1).......... (0.06) (0.46) (0.09) (0.02) (0.03)
Six months ended June
30, 1999............. 0.81 0.18 0.81 0.20 0.23
</TABLE>
- --------
(1) In 1998, MCI WorldCom recorded a pre-tax charge of $196 million in
connection with its merger with Brooks Fiber Properties, Inc. on January
29, 1998, the merger with MCI Communications Corporation on September 14,
1998 and certain asset write-downs and loss contingencies. These charges
included $21 million for employee severance, $17 million for Brooks Fiber
Properties direct merger costs, $38 million for conformance of Brooks Fiber
Properties accounting policies, $56 million for exit costs under long-term
commitments, $31 million for the write-down of a permanently impaired
investment and $33 million related to certain other asset write-downs and
loss contingencies. Additionally, in connection with business combinations,
MCI WorldCom made allocations of the purchase price to acquired in-process
research and development totaling $429 million in the first quarter of 1998
related to the merger with CompuServe Corporation on January 31, 1998 and
acquisition of ANS Communications, Inc. from America Online, Inc., on
January 31, 1998, $3.1 billion in the third quarter of 1998 related to the
merger with MCI Communications, and $2.14 billion in the fourth quarter of
1996 related to the merger with MFS Communications Company.
(footnotes continued on following page)
7
<PAGE>
(footnotes continued from previous page)
Results for 1996 include other after-tax charges of $121 million for
employee severance, employee compensation charges, alignment charges, and
costs to exit unfavorable telecommunications contracts and a $344 million
after-tax write-down of operating assets within MCI WorldCom's non-core
businesses. On a pre-tax basis, these charges totaled $600 million.
(2) On September 14, 1998, MCI WorldCom merged with MCI Communications in a
transaction accounted for as a purchase. Accordingly, the operating results
of MCI Communications are included in MCI WorldCom's historical results
from the date of acquisition. If MCI WorldCom's merger with MCI
Communications was assumed to have occurred on January 1, 1998, selected
pro forma combined per share amounts would reflect basic and diluted loss
per common share of $(1.42) for the year ended December 31, 1998.
Selected Historical Financial Data
Selected Historical Financial Data of MCI WorldCom. The selected historical
financial data of MCI WorldCom set forth below has been derived from the
historical consolidated financial statements of MCI WorldCom as they appeared
in MCI WorldCom's Annual Reports on Form 10-K filed with the Securities and
Exchange Commission for each of the five fiscal years in the period ended
December 31, 1998 and MCI WorldCom's Quarterly Reports on Form 10-Q filed with
the Commission for the periods ended June 30, 1999 and June 30, 1998. This data
should be read in conjunction with, and is qualified in its entirety by
reference to, those financial statements and the related notes thereto. See
"Where You Can Find More Information" beginning on page 92.
<TABLE>
<CAPTION>
Six Months
Ended and At
June 30, Years Ended and At December 31,
--------------- ----------------------------------------
1999 1998 1998 1997 1996 1995 1994
------- ------- ------- ------- ------- ------ ------
(In millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating results:
Revenues................ $17,945 $ 4,901 $17,678 $ 7,384 $ 4,449 $3,636 $2,211
Operating income
(loss)................. 3,259 423 (975) 1,018 (1,875) 667 67
Income (loss) before
extraordinary items.... 1,604 (53) (2,540) 247 (2,233) 257 (124)
Extraordinary items..... -- (129) (129) (3) (24) -- --
Net income (loss)
applicable to common
shareholders........... 1,572 (195) (2,700) 218 (2,258) 224 (152)
Preferred dividend
requirement............ -- 13 13 26 1 33 28
Earnings (loss) per
common share:
Income (loss) before
extraordinary items
Basic................. 0.85 (0.06) (2.02) 0.23 (5.02) 0.58 (0.48)
Diluted............... 0.81 (0.06) (2.02) 0.22 (5.02) 0.56 (0.48)
Net income (loss)
Basic................. 0.85 (0.19) (2.12) 0.23 (5.07) 0.58 (0.48)
Diluted............... 0.81 (0.19) (2.12) 0.22 (5.07) 0.56 (0.48)
Number of weighted
average shares
Basic................. 1,855 1,028 1,274 966 445 383 316
Diluted............... 1,930 1,028 1,274 997 445 439 316
Financial position:
Total assets............ $86,573 $27,082 $86,401 $23,596 $20,843 $6,803 $3,441
Long-term debt.......... 13,550 8,971 16,083 7,413 5,356 2,324 794
Subsidiary trust and
other mandatorily
redeemable preferred
securities............. 798 -- 798 -- -- -- --
Shareholders'
investment............. 48,249 15,119 45,003 13,801 13,252 2,281 1,827
Deficiency of earnings
to combined fixed
charges and preference
dividends.............. -- N/A (1,960) -- (2,114) -- (97)
Ratio of earnings to
combined fixed charges
and preference
dividends.............. 4.37:1 N/A -- 1.93:1 -- 2.12:1 --
Deficiency of earnings
to fixed charges....... -- N/A (1,909) -- (2,112) -- (52)
Ratio of earnings to
fixed charges.......... 4.69:1 N/A -- 2.08:1 -- 2.53:1 --
</TABLE>
8
<PAGE>
(notes relating to financial information on previous page)
- --------
(1) On September 14, 1998, MCI WorldCom completed a merger with MCI
Communications. The merger with MCI Communications was accounted for as a
purchase. Accordingly, the operating results of MCI Communications are
included from the date of that acquisition.
(2) In 1998, MCI WorldCom recorded a pre-tax charge of $196 million in
connection with a merger with Brooks Fiber Properties, the merger with MCI
Communications and certain asset write-downs and loss contingencies. Such
charges included $21 million for employee severance, $17 million for Brooks
Fiber Properties direct merger costs, $38 million for conformance of Brooks
Fiber Properties accounting policies, $56 million for exit costs under
long-term commitments, $31 million for the write-down of a permanently
impaired investment and $33 million related to certain asset write-downs
and loss contingencies. Additionally, in connection with business
combinations, MCI WorldCom made allocations of the purchase price to
acquired in-process research and development totaling $429 million in the
first quarter of 1998 related to a merger with CompuServe and the
acquisition of ANS Communications from America Online, $3.1 billion in the
third quarter of 1998 related to the merger with MCI Communications and
$2.14 billion in the fourth quarter of 1996 related to the merger with MFS
Communications.
(3) Results for 1996 include other after-tax charges of $121 million for
employee severance, employee compensation charges, alignment charges and
costs to exit unfavorable telecommunications contracts and a $344 million
after-tax write-down of operating assets within MCI WorldCom's non-core
businesses. On a pre-tax basis, these charges totaled $600 million.
(4) In connection with various debt refinancings, MCI WorldCom recognized in
1998, 1997 and 1996 extraordinary items of $129 million, $3 million and $4
million, respectively, net of taxes, consisting of unamortized debt
discount, unamortized issuance cost and prepayment fees. Additionally, in
1996 MCI WorldCom recorded an extraordinary item of $20 million, net of
taxes, related to a write-off of deferred international costs.
(5) In connection with the conversion of MCI WorldCom series 1 $2.25 cumulative
senior perpetual convertible preferred stock, MCI WorldCom made a non-
recurring payment of $15 million in 1995 to the holder of the stock,
representing a discount to the minimum nominal dividends that would have
been payable on the series 1 preferred stock before the September 15, 1996
optional call date of approximately $26.6 million (which amount included an
annual dividend requirement of $24.5 million plus accrued dividends to such
call date).
(6) As a result of a merger with IDB Communications Group, Inc., MCI WorldCom
initiated plans to reorganize and restructure its management and
operational organization and facilities to eliminate duplicate personnel,
physical facilities and service capacity, to abandon certain products and
marketing activities and to take further advantage of the synergies
available to the combined entities. Accordingly, in 1994, MCI WorldCom
charged $44 million to operations for the estimated costs of such
reorganization and restructuring activities, including employee severance,
physical facility abandonment and duplicate service capacity.
Also, during 1994, MCI WorldCom incurred direct merger costs of $15
million, related to the merger with IDB Communications Group. These costs
include professional fees, proxy solicitation costs, travel and related
expenses and certain other direct costs attributable to the merger with IDB
Communications Group.
(7) For the purpose of computing the ratio of earnings to combined fixed charges
and preference dividends, earnings consist of pretax income (loss) from
continuing operations, excluding minority interests in losses of
consolidated subsidiaries, and fixed charges consist of pretax interest
(including capitalized interest) on all indebtedness, amortization of debt
discount and expense, that portion of rental expense which MCI WorldCom
believes to be representative of interest, and distributions on subsidiary
trust and other mandatorily redeemable preferred securities and preferred
dividends, both of which have been grossed up to a pretax basis utilizing
MCI WorldCom's effective tax rate.
(8) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of pretax income (loss) from continuing operations,
excluding minority interests in losses of consolidated subsidiaries, and
fixed charges consist of pretax interest (including capitalized interest)
on all indebtedness, amortization of debt discount and expense, and that
portion of rental expense which MCI WorldCom believes to be representative
of interest.
9
<PAGE>
Selected Historical Financial Data of SkyTel. The selected historical
financial data of SkyTel set forth below has been derived from financial
statements of SkyTel as they appeared in SkyTel's Annual Reports on Form 10-K
filed with the SEC for each of the five fiscal years in the period ended
December 31, 1998 and SkyTel's Quarterly Reports on Form 10-Q filed with the
Commission for the six month periods ended June 30, 1999 and June 30, 1998.
These data should be read in conjunction with, and are qualified in their
entirety by reference to, those financial statements and the related notes
thereto. See "Where You Can Find More Information" beginning on page 92.
<TABLE>
<CAPTION>
Six Months
Ended
and At
June 30, Year Ended and At December 31,
---------- --------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ----- ------ ------ ------ ------ ------
(In millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating results:
Revenues:
One-way messaging........ $170 $ 173 $ 345 $ 338 $ 312 $ 225 $ 150
Advanced messaging....... 96 56 138 33 10 1 --
International messaging.. 14 18 32 31 20 10 3
Other.................... 1 1 3 6 9 10 10
---- ----- ------ ------ ------ ------ ------
Total revenues......... 281 248 518 408 351 246 163
Operating income (loss).... 33 9 33 (35) (131) (58) (25)
Net income (loss) before
nonrecurring items........ 15 (20) (23) (89) (133) (34) (20)
Cumulative effect of a
change in accounting
principle(1).............. -- (58) (58) -- -- -- --
Net income (loss).......... 15 (78) (81) (89) (172) (52) (20)
Preferred dividend
requirement............... 4 6 10 13 11 8 8
Net income (loss) to common
stockholders.............. 11 (84) (91) (102) (183) (60) (28)
Basic and diluted income
(loss) per common share
before cumulative effect
of a change in accounting
principles(1)............. 0.18 (0.46) (0.57) (1.87) (3.38) (1.19) (0.77)
Financial position:
Total assets............... $626 $ 656 $ 633 $ 742 $ 803 $ 851 $ 715
Long-term debt............. 327 388 365 398 402 333 274
Total stockholders'
investment................ 137 125 124 196 301 424 366
</TABLE>
- --------
(1) In 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities." This new accounting standard required all companies to
expense, on or before March 31, 1999, all start-up costs previously
capitalized, and thereafter to expense all costs of start-up activities as
incurred. This accounting standard broadly defines start-up activities as
one-time activities related to the opening of a new facility, the
introduction of a new product or service, the commencement of business in a
new territory, the establishment of business with a new class of customer,
the initiation of a new process in an existing facility or the commencement
of a new operation. SkyTel adopted this new standard as of January 1, 1998.
The cumulative effect of this change in accounting principle resulted in a
one-time, non-cash expense of $58 million or $1.00 per share for 1998. This
expense represented start-up costs incurred primarily in conjunction with
the development and construction of SkyTel's Advanced Messaging Network.
10
<PAGE>
RISK FACTORS RELATING TO THE MERGER
Certain risk factors pertaining to investment in MCI WorldCom that could
result from the merger are explained in this section. In addition to the other
information included and incorporated by reference in this document, you should
consider carefully the matters described below in determining whether to adopt
the merger agreement.
Stock price fluctuations will affect the value of the MCI WorldCom common stock
that SkyTel common stockholders would receive in the merger.
The relative prices of shares of common stock of SkyTel and MCI WorldCom at
the effective time of the merger may vary significantly from the prices as of
the date of the merger agreement, the date of this document, the date of the
special meeting and the date on which the exchange ratio is determined. These
variances may be due to a number of factors, including:
. changes in the businesses, operations, results and prospects of SkyTel
or MCI WorldCom;
. market assessments of the likelihood that the merger will be completed
and the timing of completion;
. the effect of any conditions or restrictions imposed on or proposed with
respect to the combined companies by regulatory agencies due to the
merger; and
. general market and economic conditions.
In addition, the stock market generally has experienced significant price
and volume fluctuations. These market fluctuations could have a material
adverse effect on the market price and liquidity of the MCI WorldCom common
stock.
The exchange ratio is capped at 0.2778 if the average of the volume weighted
averages of the trading prices of MCI WorldCom common stock during the 20
trading days ending three days before completion of the merger is less than
$72.00. There is no minimum initial value for the fraction of a share of MCI
WorldCom common stock you will receive in the merger for each share of SkyTel
common stock. Accordingly, if the average of the volume weighted averages of
the trading prices of MCI WorldCom common stock during the specified period is
less than $72.00, the initial value will likely be less than $20.00. SkyTel
does not have the right to terminate the merger agreement solely because the
initial value is less than $20.00.
We urge you to look up current market prices for MCI WorldCom common stock
and SkyTel common stock. You may call, toll-free, 877-624-9266 until the date
of the special meeting to hear what the exchange ratio would be if the merger
were completed on that day. However, because the exchange ratio will not be
determined until the third trading day before the completion of the merger, you
must decide whether or not to vote for or against the merger before knowing the
actual exchange ratio. Changes in the price of the MCI WorldCom common stock
may cause the actual exchange ratio to differ significantly from an exchange
ratio that is calculated based on the price of MCI WorldCom common stock on or
before the date of the special meeting.
The price of MCI WorldCom common stock may be affected by factors different
from those affecting the price of SkyTel common stock.
Upon completion of the merger, holders of SkyTel common stock will become
holders of MCI WorldCom common stock. MCI WorldCom's business differs from that
of SkyTel, and MCI WorldCom's results of operations, as well as the price of
MCI WorldCom common stock, may be affected by factors different from those
affecting SkyTel's results of operations and the price of SkyTel common stock.
For a discussion of MCI WorldCom's and SkyTel's businesses and other factors
to consider in connection with those businesses, please see MCI WorldCom's and
SkyTel's Annual Reports on Form 10-K for the fiscal year ended December 31,
1998 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999
and June 30, 1999. See "Where You Can Find More Information" beginning on page
92.
11
<PAGE>
There has been no public market for the MCI WorldCom preferred stock to be
issued in connection with the merger, and its price may be affected by factors
different from those affecting the SkyTel preferred stock.
Upon completion of the merger, holders of SkyTel preferred stock will become
holders of MCI WorldCom convertible exchangeable preferred stock. Because
shares of the MCI WorldCom convertible exchangeable preferred stock may be
converted into shares of MCI WorldCom common stock, those holders should
consider the same factors as described above.
The MCI WorldCom convertible exchangeable preferred stock issuable in the
merger, which will be a new series of MCI WorldCom preferred stock, has been
approved for listing on The Nasdaq National Market, subject to official notice
of issuance. There has been no public market for the shares of MCI WorldCom
convertible exchangeable preferred stock to be issued in connection with the
merger, and a market for those shares may not develop or, if it does develop,
may not be sustained. If an active market for those shares is not developed and
sustained, the price of those shares may fluctuate and the liquidity of those
shares may be limited.
Because the value of the MCI WorldCom convertible exchangeable preferred
stock will depend, in part, on the underlying value of the MCI WorldCom common
stock, SkyTel preferred stockholders cannot be certain that the value of the
MCI WorldCom convertible exchangeable preferred stock will be affected by the
same factors as the SkyTel preferred stock.
12
<PAGE>
THE SPECIAL MEETING
We are furnishing this proxy statement/prospectus to stockholders of SkyTel
as part of the solicitation of proxies from SkyTel common stockholders by the
SkyTel board of directors for use at the special meeting.
Date, Time and Place
We will hold the special meeting at 10:00 a.m., Central time, on Wednesday,
September 29, 1999 at the Capital Club, 125 South Congress Street, Capital
Towers Building, 19th Floor, in Jackson, Mississippi.
Purpose of the Special Meeting
At the special meeting, we are asking SkyTel common stockholders to adopt
the merger agreement. The SkyTel board of directors:
. has unanimously determined that the merger is fair to, and in the best
interests of, SkyTel and its stockholders;
. has unanimously approved the merger agreement; and
. unanimously recommends that SkyTel common stockholders vote for adoption
of the merger agreement.
Record Date; Stock Entitled to Vote; Quorum
Only record holders of SkyTel common stock at the close of business on
August 19, 1999, the record date, are entitled to vote at the special meeting.
On the record date, 60,272,618 shares of SkyTel common stock were issued and
outstanding and held by approximately 3,084 holders of record. Holders of
SkyTel common stock on the record date are entitled to one vote per share at
the special meeting.
A quorum is present at the special meeting if a majority of the outstanding
shares of SkyTel common stock entitled to vote on the record date is
represented in person or by proxy. A quorum is necessary to hold the special
meeting. Any shares of SkyTel common stock held in treasury by SkyTel or any of
its subsidiaries are not considered to be outstanding for purposes of
determining a quorum. In the event that a quorum is not present at the special
meeting, it is expected that the meeting will be adjourned or postponed to
solicit additional proxies. However, if a new record date is set for the
adjourned meeting, then a new quorum will have to be established.
Once a share of SkyTel common stock is represented at the special meeting,
it will be counted for the purpose of determining a quorum at the special
meeting and any adjournment of the special meeting unless the holder is present
solely to object to the special meeting.
Vote Required
Each share of SkyTel common stock outstanding on the record date is entitled
to one vote at the special meeting. SkyTel preferred stockholders are not
entitled to vote on the proposed merger. The adoption of the merger agreement
requires the affirmative vote of the holders of a majority of the outstanding
shares of SkyTel common stock on the record date. If a SkyTel common
stockholder abstains from voting or does not vote, either in person or by
proxy, it will have the same effect as a vote against the merger.
Voting by SkyTel Directors and Executive Officers
At the close of business on the record date, directors and executive
officers of SkyTel were entitled to vote 2,076,000 shares of SkyTel common
stock, or 3.4% of the shares outstanding on that date. Each SkyTel director and
executive officer has indicated his intention to vote the SkyTel common stock
owned by him for adoption of the merger agreement.
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Voting of Proxies
All shares of SkyTel common stock represented by properly submitted proxies
received in time for the special meeting will be voted at the special meeting
in the manner specified by the holders. Properly submitted proxies that do not
contain voting instructions will be voted for adoption of the merger agreement.
If you are a record holder of SkyTel common stock, in order for your shares
of SkyTel common stock to be included in the vote, you must vote your shares by
one of the following means:
. in person;
. by proxy by completing, signing and dating the enclosed proxy and
returning it in the enclosed postage-paid envelope; or
. by telephone or via the Internet by following the instructions printed
on the enclosed proxy.
If you hold your shares of SkyTel common stock in street name, you must
follow the instructions provided by your broker regarding how to instruct your
broker to vote your shares. Most banks and brokers have provisions for
telephone and Internet voting. Check the material sent to you by them, or call
your account representative for more information.
Shares of SkyTel common stock represented at the special meeting but not
voting will be treated as present at the special meeting for determining
whether or not a quorum exists for the transaction of all business. This
includes shares of SkyTel common stock for which proxies have been received but
for which the holders of shares have abstained from voting.
Only shares of SkyTel common stock voted for adoption of the merger
agreement, including properly submitted proxies that do not contain voting
instructions, will be counted as favorable votes. If a SkyTel common
stockholder abstains from voting or does not vote, either in person or by
proxy, it will effectively count as if that SkyTel stockholder had voted
against adoption of the merger agreement.
The persons named as proxies by a SkyTel common stockholder may propose and
vote for one or more adjournments of the special meeting, including
adjournments to permit further solicitations of proxies. However, no proxy
voted against the proposal to adopt the merger agreement will be voted in favor
of any adjournment or postponement.
SkyTel's by-laws do not permit any matter other than the proposal stated in
the notice of the special meeting to be brought before the special meeting.
Revocability of Proxies
Mailing the enclosed proxy or voting either by telephone or via the Internet
does not preclude a SkyTel common stockholder from voting in person at the
special meeting. A SkyTel common stockholder may revoke a proxy at any time
prior to the vote at the special meeting by:
. notifying the Secretary of SkyTel in writing of the revocation of the
proxy;
. submitting a duly executed proxy to the Secretary of SkyTel bearing a
later date;
. calling the toll-free number on the enclosed proxy and changing your
vote, even if you did not previously vote by telephone;
. submitting a later vote via the Internet; or
. appearing at the special meeting and voting in person.
Simply attending the special meeting, without voting at the meeting, will
not constitute revocation of a proxy.
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Solicitation of Proxies
MCI WorldCom and SkyTel will share the costs of preparing this document.
SkyTel will bear the cost of soliciting proxies from its common stockholders.
In addition to the solicitation by mail, SkyTel directors, officers and
employees may solicit proxies in person, by telephone or by other electronic
means. These persons will not be paid for doing this. SkyTel will have
brokerage houses and other custodians, nominees and fiduciaries forward
solicitation materials to the beneficial owners of outstanding shares of SkyTel
common stock on the record date. SkyTel will reimburse these persons for their
reasonable out-of-pocket expenses in doing so.
MacKenzie Partners, Inc. will assist in the solicitation of proxies by
SkyTel. SkyTel will pay MacKenzie Partners customary compensation for this
service, and will indemnify MacKenzie Partners against any losses arising out
of MacKenzie Partners' proxy soliciting services on behalf of SkyTel.
SkyTel common stockholders should not send stock certificates with their
proxies. Transmittal documents for the surrender of SkyTel common stock
certificates will be mailed to SkyTel common stockholders as soon as
practicable after completion of the merger.
Adjournments
The special meeting may be adjourned for the purpose of soliciting
additional proxies or for other reasons. Any adjournment may be made by
approval of the holders of a majority of the outstanding shares of SkyTel
common stock present in person or represented by proxy at the special meeting,
whether or not a quorum exists, without notice other than by an announcement
made at the special meeting. At the time this document is first being mailed to
SkyTel stockholders, SkyTel does not intend to seek a postponement or
adjournment of the special meeting. However, if a quorum is not obtained, or if
fewer shares of SkyTel common stock than the number required are voted in favor
of adopting the merger agreement, the special meeting may be postponed or
adjourned in order to permit additional time for soliciting and obtaining
additional proxies or votes. Any postponement or adjournment of the special
meeting for the purpose of soliciting additional proxies will allow the SkyTel
common stockholders who have already sent in their proxies to revoke them at
any time prior to their use.
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THE COMPANIES
MCI WorldCom
MCI WorldCom is one of the largest telecommunications companies in the
United States, serving local, long distance and Internet customers domestically
and internationally. Organized in 1983, MCI WorldCom provides
telecommunications services to business, government, telecommunications
companies and consumer customers through its networks of primarily fiber optic
cables, digital microwave and fixed and transportable satellite earth stations.
Prior to September 15, 1998, MCI WorldCom was named WorldCom, Inc.
MCI WorldCom is one of the first major facilities-based telecommunications
companies with the capability to provide consumers and businesses with high
quality local, long distance, Internet, data and international communications
services over its global networks. With service to points throughout the nation
and the world, MCI WorldCom provides telecommunications products and services
that include:
. switched and dedicated long distance and local products
. dedicated and dial-up Internet access
. wireless services
. 800 services
. calling cards
. private lines
. broadband data services
. debit cards
. conference calling
. messaging and mobility services
. advanced billing systems
. enhanced fax and data connections
. high speed data communications
. facilities management
. local access to long distance companies
. local access to asynchronous transfer mode-based backbone service
. web server hosting and integration services
. dial-up networking services
. interconnection via network access points to Internet service providers
MCI WorldCom's core business is communications services, which includes
voice, data, Internet, and international services. During each of the last
three years, more than 90% of operating revenues were derived from
communications services. MCI WorldCom is a holding company for its
subsidiaries' operations.
MCI WorldCom's principal executive offices are located at 500 Clinton Center
Drive, Clinton, Mississippi 39056, and its telephone number is (601) 460-5600.
Additional information regarding MCI WorldCom is contained in MCI WorldCom's
filings with the Securities and Exchange Commission. See "Where You Can Find
More Information" beginning on page 92.
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SkyTel
SkyTel is a leading provider of wireless messaging services in the United
States. SkyTel operates a one-way messaging network which features FLEX(TM)
technology and an advanced messaging network that utilizes spectrum allocated
by the FCC for narrowband personal communication services. Services available
on the advanced messaging network include advanced text messaging with
guaranteed delivery, interactive two-way messaging and fixed location services.
As of June 30, 1999, SkyTel had 999,000 domestic one-way paging units and
490,900 advanced messaging units in service. SkyTel, through its subsidiaries
and joint ventures, also operates nationwide one-way messaging systems in 11
countries in Latin America, and provides its subscribers with access to an
international network that interconnects the one-way systems in Latin America
with SkyTel's systems in the United States and the systems of other carriers in
various countries.
SkyTel's principal executive offices are located at 200 South Lamar Street,
SkyTel Centre, South Building, Jackson, Mississippi 39201, and its telephone
number is (601) 944-3800. Additional information regarding SkyTel is contained
in SkyTel's filings with the Securities and Exchange Commission. See "Where You
Can Find More Information" beginning on page 92.
Material Contracts Between MCI WorldCom and SkyTel
MCI WorldCom and SkyTel have entered into services agreements with each
other and with their affiliates in the ordinary course of their businesses. MCI
WorldCom and its subsidiaries have been engaged in transactions with SkyTel and
its subsidiaries aggregating $38.4 million in the first six months of fiscal
year 1999, $80.4 million in fiscal year 1998, $64.2 million in fiscal year 1997
and $73.0 million in fiscal year 1996.
As of the date of this document, neither MCI WorldCom nor SkyTel is aware of
any past, present or proposed material relationship between MCI WorldCom or its
directors, executive officers or affiliates, on the one hand, and SkyTel or its
directors, executive officers or affiliates, on the other hand, except as
contemplated by the merger or as described above, since the beginning of 1996.
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THE MERGER
Background of the Merger
From time to time, SkyTel has considered possible acquisitions, strategic
alliances, mergers and other forms of business combination transactions.
Commencing in the summer of 1998, representatives of SkyTel, including John N.
Palmer, the Chairman of SkyTel's board of directors, and John T. Stupka,
SkyTel's President and Chief Executive Officer, held informal discussions with
various companies in the telecommunications industry that SkyTel's senior
management believed might have an interest in discussing possible strategic
transactions involving SkyTel. As a part of SkyTel's ongoing review of its
strategic alternatives, SkyTel consulted with Warburg Dillon Read LLC, which
firm had from time to time performed various financial advisory services for
SkyTel.
During a discussion in early February 1999 initiated by Mr. Palmer, Bernard
J. Ebbers, President and Chief Executive Officer of MCI WorldCom, indicated
that MCI WorldCom had internally considered the possibility of pursuing a
negotiated business combination transaction with SkyTel and requested that
SkyTel contact Charles T. Cannada, Senior Vice President of MCI WorldCom, with
regard to the matter. In late February 1999, SkyTel and MCI WorldCom
subsequently entered into a confidentiality agreement, and SkyTel furnished
financial and operating information to MCI WorldCom.
On March 23, 1999, Messrs. Palmer and Stupka and other senior executives of
SkyTel met with representatives of MCI WorldCom to review SkyTel's business and
prospects. Thereafter, the parties exchanged additional business and financial
information.
On April 5, 1999, Messrs. Cannada and Stupka met to discuss a possible
business combination. At that meeting, Mr. Cannada indicated that any business
combination transaction involving the two companies would (1) have to be
structured on a pooling-of-interests basis to assure that it was accretive to
MCI WorldCom's earnings and (2) need to have a high likelihood of completion.
Mr. Cannada also indicated that MCI WorldCom's preliminary valuation of SkyTel
was in the range of $20.00 to $22.00 per share of SkyTel common stock.
The SkyTel board of directors reviewed the status of the discussions with
representatives of MCI WorldCom and other potential strategic partners at a
meeting on April 9, 1999 in which representatives of Warburg Dillon Read and
Jones, Day, Reavis & Pogue, counsel to SkyTel, also participated. The
presentations to and discussions by the SkyTel board included:
. a review by senior management of conditions in the wireless
telecommunications industry generally and SkyTel's existing strategic
plan and prospects;
. a presentation by Jones Day regarding the duties of SkyTel's directors
in the circumstances;
. a review by Warburg Dillon Read of the possible strategic alternatives
available to SkyTel;
. a review by SkyTel management and Warburg Dillon Read of the discussions
to date with representatives of MCI WorldCom and other possible
strategic partners; and
. a review by Jones Day of the provisions utilized in other transactions
in the telecommunications industry and other regulated industries,
including other mergers effected by MCI WorldCom, to assure continuity
of employment at the acquired company, and specific measures recommended
by Jones Day for consideration in this area (which were change of
control agreements, equity rights protections, a change of control plan
for employees generally and, if a specific business combination
agreement were entered into, a retention bonus arrangement).
The SkyTel board directed that SkyTel's senior management and the legal and
financial advisors continue to explore a possible business combination
transaction with MCI WorldCom, as well as pursue other possible strategic
alternatives that might be available to SkyTel.
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During the three weeks following the April 9th SkyTel board meeting,
representatives of SkyTel and MCI WorldCom, including representatives of Jones
Day and Cravath, Swaine & Moore, counsel to MCI WorldCom, began to discuss the
possible specific terms of a business combination transaction and conducted
additional due diligence reviews. The key terms discussed were provisions to
assure that pooling-of-interests accounting would be available for the
transaction and provisions requested by MCI WorldCom to assure that there would
be a high level of certainty that the transaction would be completed if
announced.
During the three-week period following the April 9th SkyTel board meeting
and thereafter, Warburg Dillon Read contacted a number of other companies in
the telecommunications industry, including companies previously contacted by
SkyTel management, to determine whether they would be interested in pursuing a
business combination or other strategic transaction involving SkyTel. While a
number of these other companies preliminarily indicated interest in considering
a possible strategic transaction, no specific proposals or substantive
discussions relating to such a transaction resulted from these efforts.
The SkyTel board of directors reviewed the status of the discussions with
MCI WorldCom, as well as contacts with other telecommunications industry
participants, at meetings on May 3 and May 20, 1999. During that period, the
parties continued to exchange certain information and had various discussions.
On May 24, 1999, Mr. Cannada contacted Mr. Stupka to advise him that, while
MCI WorldCom had originally considered an exchange ratio of 0.22 of a share of
MCI WorldCom common stock for each share of SkyTel common stock, MCI WorldCom
was exploring whether it could propose an exchange ratio as high as 0.25.
Representatives of the two companies, including Messrs. Palmer, Stupka and
Cannada, met on May 25, 1999 to discuss the terms of a possible transaction.
Mr. Cannada indicated in that meeting that MCI WorldCom would require a
termination fee of 3.5% of the total value of the transaction and an option to
purchase 19.99% of the outstanding shares of SkyTel common stock at the implied
merger price. Representatives of SkyTel requested that the merger exchange
ratio be restructured so as to give SkyTel stockholders protection in the event
of a decline in the market price for MCI WorldCom common stock. SkyTel's
representatives also requested that the stock option be eliminated and the
termination fee be reduced. Following discussions, the representatives of MCI
WorldCom indicated, in the May 25th meeting, that MCI WorldCom would be willing
to increase the merger exchange ratio to 0.25 of a share of MCI WorldCom common
stock for each share of SkyTel common stock only if the remaining key terms
proposed by MCI WorldCom were acceptable to SkyTel.
In subsequent discussions on May 25, 1999, MCI WorldCom proposed to adjust
the merger exchange ratio upward in the event that trading prices for MCI
WorldCom shares declined, with this protection to cease at $72.00 per share of
MCI WorldCom common stock, in exchange for the previously requested stock
option and the termination fee. In addition, representatives of MCI WorldCom
indicated that MCI WorldCom would be willing to reduce the number of shares of
SkyTel common stock subject to the stock option and include a cap on the
maximum amount realizable by MCI WorldCom under the termination fee provisions
and stock option, as described in "The Merger Agreement and Stock Option
Agreement--The Merger Agreement--Termination Fees" beginning on page 43 and
"The Merger Agreement and Stock Option Agreement--The Stock Option Agreement--
Limitation on Profits" on page 50, but that MCI WorldCom would not be willing
further to increase the merger exchange ratio above 0.25 of a share of MCI
WorldCom common stock for each share of SkyTel common stock. Representatives of
SkyTel indicated in these discussions that they were willing to continue to
pursue a possible transaction on this basis.
During the period from May 25, 1999 through May 28, 1999, representatives of
the parties completed their respective due diligence reviews and negotiated the
remaining terms of the proposed merger documents.
At a meeting of the SkyTel board of directors on May 28, 1999, SkyTel's
senior management and representatives of Warburg Dillon Read and Jones Day
reported on the discussions with MCI WorldCom. Jones Day again reviewed the
duties of the directors in these circumstances. In addition, Jones Day reviewed
the terms of the transaction documents, as well as each of the matters relating
to the proposed merger in which the SkyTel board of directors and SkyTel's
senior management had an interest which could be said to be different
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from or in addition to the interests of SkyTel stockholders generally. See "--
Interests of SkyTel Directors and Executive Officers in the Merger" beginning
on page 28. A representative of Warburg Dillon Read then presented the firm's
financial analysis of the proposed merger and orally informed the SkyTel board,
which oral advice was subsequently confirmed in writing, that, as of May 28,
1999, in the opinion of Warburg Dillon Read, the exchange ratio for the
conversion of SkyTel common stock into MCI WorldCom common stock was fair, from
a financial point of view, to the holders of SkyTel common stock and the
consideration to be received in the merger by the SkyTel preferred stockholders
was fair, from a financial point of view, to those holders. See "--Opinion of
Warburg Dillon Read LLC " beginning on page 22. Following discussion, the
SkyTel board of directors, by unanimous vote, approved the merger agreement,
the stock option agreement and the other transactions contemplated by these
agreements.
In addition, at the May 28th meeting, SkyTel's board of directors, with
Messrs. Palmer and Stupka, Jai P. Bhagat and John E. Welsh III abstaining,
approved change-of-control agreements for a group of senior managers, including
each of SkyTel's executive officers, and the other employment arrangements
summarized in "--Interests of SkyTel Directors and Executive Officers in the
Merger" beginning on page 28.
Following the approval of SkyTel's board of directors, the merger and stock
option agreements were executed and were publicly announced by the companies on
May 28, 1999.
SkyTel's Reasons for Merger; Recommendation of the SkyTel Board
SkyTel Board Action on May 28, 1999. At its May 28, 1999 meeting, the SkyTel
board of directors unanimously:
. determined that the merger is fair to and in the best interests of
SkyTel and its stockholders;
. approved the merger agreement and the transactions contemplated by that
agreement, including the stock option agreement;
. resolved to recommend that SkyTel common stockholders adopt the merger
agreement; and
. directed that the merger agreement be submitted for consideration by
SkyTel's common stockholders.
SkyTel's Reasons for the Merger. The SkyTel board of directors believes that
the long-term value to SkyTel stockholders of an investment in the combined
company will more likely than not be superior to the long-term value of an
investment in SkyTel as a stand-alone company.
The decision of the SkyTel board of directors to approve the merger
agreement and recommend its adoption by SkyTel's common stockholders was based
upon various factors, including, in addition to the factors mentioned in the
prior paragraph and in "--Background of the Merger" beginning on page 18, the
following:
. the judgment, advice and analyses of senior management of SkyTel,
including, in addition to their favorable recommendation of the merger,
senior management's analysis of conditions in the wireless
telecommunications industry, the strategic options available to SkyTel,
including SkyTel's continued pursuit of its strategic plan as an
independent company, the likelihood of future consolidation in the
wireless telecommunications industry and the constraints on SkyTel's
ability to take advantage of available opportunities due to SkyTel's
reasonably foreseeable size and financial resources;
. the merger exchange ratio in relation to historical and current trading
prices for SkyTel common stock, the provisions of the merger agreement
providing for an increase in the merger exchange ratio in the event of a
decrease in the market price for MCI WorldCom common stock to as low as
$72.00 per share, subject to limitations, and the SkyTel board of
directors' understanding, based on information furnished to it, that the
merger was expected to be accretive to the per share earnings of the
combined company compared to what they would have been on a stand-alone
basis (see, however, "Special Note Regarding Forward-Looking Statements"
beginning on page 95);
. the SkyTel board of directors' consideration of the business, financial
position, prospects and personnel of SkyTel and MCI WorldCom on a
combined basis, including the ability of the combined
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company more effectively to exploit SkyTel's business opportunities and
prospects due to MCI WorldCom's size and financial resources;
. the presentations by and discussions with senior executives of SkyTel
and representatives of Jones Day and Warburg Dillon Read regarding the
terms of the merger agreement and the stock option agreement, including
(1) the conditions to completion of the merger, (2) SkyTel's ability
under certain conditions to consider unsolicited alternative business
combination proposals, and (3) SkyTel's ability to terminate the
agreements in circumstances specified in the merger and stock option
agreements and the termination fees payable, and profits realizable,
under the merger and stock option agreements (see "--The Merger
Agreement" beginning on page 40, including "--Conditions to the
Completion of the Merger" beginning on page 40, "--No Solicitation"
beginning on page 41, "--Termination" on page 43, "--Termination Fees"
beginning on page 43 and "--The Stock Option Agreement" beginning on
page 49);
. Warburg Dillon Read's contacts with other companies in the wireless
telecommunications industry on behalf of SkyTel and the firm's and
management's analysis of the alternatives available to SkyTel;
. Warburg Dillon Read's financial analysis of the proposed merger and its
opinion described below to the effect that, as of the date of the
opinion and based upon and subject to certain matters stated in the
opinion, the exchange ratio for the conversion of SkyTel common stock
into MCI WorldCom common stock was fair, from a financial point of view,
to the holders of SkyTel common stock and the consideration to be
received in the merger by the SkyTel preferred stockholders was fair,
from a financial point of view, to those holders (see "--Opinion of
Warburg Dillon Read LLC" beginning on page 22);
. that the merger is intended to be accomplished on a tax-free basis to
the stockholders of SkyTel for U.S. federal income tax purposes, except
for cash received by SkyTel common stockholders instead of fractional
shares; and
. the interests of SkyTel's directors and management in the merger as
described in "--Interests of SkyTel Directors and Executive Officers in
the Merger" beginning on page 28.
In reaching its decision to approve the merger agreement and to recommend
the adoption of the merger agreement to the SkyTel common stockholders, the
SkyTel board of directors did not view any single factor as determinative, and
did not find it necessary or practicable to assign any relative or specific
weights to the various factors considered. Furthermore, individual directors
may have given differing weights to the various factors.
Each of the factors listed above was believed by the SkyTel board of
directors to support the decision to adopt the merger agreement. The SkyTel
board of directors did not specifically adopt Warburg Dillon Read's opinion,
but did rely on it in reaching its conclusion that the merger is fair to and in
the best interests of SkyTel and its stockholders and considered it an
important factor in determining whether to approve the merger agreement.
The SkyTel board of directors also considered three principal detriments to
SkyTel of the merger:
. the merger would be effected in highly competitive and rapidly changing
industry conditions which, among other factors, had resulted in
decreases in the market price for SkyTel common stock during 1998 and
1999;
. as a result of the merger, the benefits of SkyTel's long-term prospects
would be shared by SkyTel and MCI WorldCom stockholders, rather than
being realized solely by SkyTel's existing stockholders; and
. the terms of the merger and stock option agreements limiting SkyTel's
ability to consider other acquisition proposals and requiring the
payment by SkyTel of a termination fee in certain circumstances made it
more difficult for another potential bidder to propose to acquire SkyTel
on a basis that would be superior to that contemplated by the merger
agreement, particularly because the
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stock option agreement would preclude a competitive transaction from
being accounted for as a pooling-of-interests.
However, the SkyTel board of directors determined that the foregoing detriments
were outweighed by the potential benefits of the merger summarized above,
including the opportunity for SkyTel's stockholders to share in the benefits of
the combined company's long-term prospects. In addition, as to the third factor
relating to the transaction protections sought by MCI WorldCom, the SkyTel
board of directors had been advised by management that the protections afforded
to the SkyTel common stockholders against the effects of possible decreases in
the market price for MCI WorldCom common stock to as low as $72.00 per share
had been obtained in the course of negotiation of the terms of the merger
essentially in exchange for SkyTel's agreement to MCI WorldCom's request for
these transaction protections, and of the view of senior management, based in
substantial part on the contacts made with other potential strategic partners
and consultation with Warburg Dillon Read, that it was not reasonably likely
that a superior proposal was available. Accordingly, the SkyTel board
determined that the benefits of the proposed merger outweighed the potential
detriments of these specific provisions.
There can be no assurance, however, that any of the potential benefits
considered by the SkyTel board will be realized. See "Risk Factors Relating to
the Merger" beginning on page 11 and "Special Note Regarding Forward-Looking
Statements" beginning on page 95.
Recommendation of the SkyTel Board. The SkyTel board of directors believes
that the merger is fair to and in the best interests of SkyTel and its
stockholders and unanimously recommends that the SkyTel common stockholders
vote in favor of adoption of the merger agreement.
Opinion of Warburg Dillon Read LLC
The SkyTel board of directors retained Warburg Dillon Read to act as its
financial advisor in connection with the merger. At the meeting of the SkyTel
board of directors held on May 28, 1999, Warburg Dillon Read delivered its oral
opinion, subsequently confirmed in writing as of the same day, to the effect
that:
. the exchange ratio for the conversion of SkyTel common stock into MCI
WorldCom common stock was fair, from a financial point of view, to the
holders of SkyTel common stock; and
. the consideration to be received in the merger by the SkyTel preferred
stockholders was fair, from a financial point of view, to those
stockholders.
The following summary of the Warburg Dillon Read opinion is qualified in its
entirety by reference to the full text of the opinion. The full text of Warburg
Dillon Read's opinion sets forth the assumptions made, procedures followed,
matters considered and limitations on the scope of the review undertaken and is
attached as Annex C to this document. We urge you to carefully read the Warburg
Dillon Read opinion in its entirety.
The Warburg Dillon Read opinion:
. is directed to the SkyTel board of directors;
. relates to the fairness, from a financial point of view, of the exchange
ratio for the conversion of SkyTel common stock into MCI WorldCom common
stock and of the consideration to be received in the merger by SkyTel
preferred stockholders; and
. does not constitute a recommendation to SkyTel common stockholders about
how to vote at the special meeting.
In connection with rendering its opinion, Warburg Dillon Read:
. reviewed certain publicly available information concerning SkyTel and
MCI WorldCom;
. reviewed other financial information concerning SkyTel and MCI WorldCom,
including business plans, that was provided to Warburg Dillon Read by
SkyTel and MCI WorldCom;
. discussed the past and current business operations and financial
conditions of SkyTel and MCI WorldCom as well as other matters it
believed relevant to its inquiry with certain officers and employees of
SkyTel and MCI WorldCom; and
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. considered such other information, financial studies, analyses,
investigations and financial, economic and market criteria that it
deemed relevant.
In connection with its review, Warburg Dillon Read:
. did not independently verify any of the foregoing information concerning
SkyTel reviewed by Warburg Dillon Read and, with SkyTel's consent,
relied on its being complete and accurate in all material respects;
. assumed that the business plans of SkyTel and MCI WorldCom had been
reasonably prepared on bases reflecting the best currently available
estimates and judgments of the managements of SkyTel and MCI WorldCom as
to the future financial performance of each of their companies;
. expressed no opinion with respect to those plans or the assumptions on
which they were based;
. assumed that the merger will be consummated in accordance with the terms
of the merger agreement; and
. did not make or obtain or assume any responsibility for making or
obtaining any independent evaluations or appraisals of any of the
properties, facilities, other assets or liabilities of SkyTel or MCI
WorldCom.
Warburg Dillon Read's opinion:
. is necessarily based upon conditions as they existed on May 28, 1999 and
should be evaluated based upon these conditions;
. does not imply any conclusion as to the trading range for MCI WorldCom
common stock or the new series of MCI WorldCom convertible exchangeable
preferred stock following the merger, which may vary depending upon
various factors, including changes in interest rates, dividend rates,
market conditions, general economic conditions and other factors that
generally influence the price of securities; and
. does not address SkyTel's underlying business decision to effect the
merger.
In connection with its opinion, Warburg Dillon Read performed certain
financial analyses, which it discussed with the SkyTel board of directors. The
material portions of the analyses performed by Warburg Dillon Read in
connection with the rendering of its opinion are summarized below.
No company used in the comparable company analyses described below is
identical to SkyTel or MCI WorldCom, and no transaction used in the comparable
transactions analysis described below is identical to the proposed merger.
Accordingly, an analysis of the results of the analyses described below
necessarily involves complex considerations and judgments concerning
differences in financial and operating characteristics of the businesses and
other facts that could affect the public trading value or the acquisition value
of the companies to which they are being compared.
Certain business plans relating to SkyTel and MCI WorldCom furnished to
Warburg Dillon Read were prepared by the managements of SkyTel and MCI
WorldCom, respectively, and constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. As a matter of
policy, neither SkyTel nor MCI WorldCom publicly discloses internal business
plans of the type SkyTel and MCI WorldCom furnished to Warburg Dillon Read in
connection with its analysis of the merger, and such business plans were not
prepared with a view towards public disclosure. These business plans were based
on numerous variables and assumptions which are inherently uncertain and which
may not be within the control of management, including, without limitation,
general economic, regulatory and competitive conditions. Accordingly, actual
results could vary materially from those set forth in such business plans. See
"Special Note Regarding Forward-Looking Statements" beginning on page 95.
Historical Stock Price Performance. Warburg Dillon Read reviewed the
relationship between movements in stock prices for the period from January 1,
1996 through May 25, 1999 of:
. SkyTel common stock;
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<PAGE>
. a group of publicly traded peer companies in the paging industry, which
included Arch Communications Group, Inc., Metrocall, Inc., PageMart
Wireless, Inc. and Paging Network, Inc.;
. an index of cellular companies which included AirTouch Communications,
Inc., Cellular Communications of Puerto Rico, Inc., Centennial Cellular
Corporation, Price Communications Corporation, United States Cellular
Corporation and Western Wireless Corporation;
. an index of PCS companies which included Aerial Communications, Inc.,
Nextel Communications, Inc., Omnipoint Corporation, Powertel, Inc.,
Sprint PCS Group (Sprint Corporation) and Voicestream Wireless
Corporation; and
. the Standard & Poor's 500 Index for the period.
SkyTel Comparable Company Analysis. A comparable company analysis analyzes
the operating performance and outlook of a business relative to a group of
publicly traded peer companies to determine an implied market trading value.
Warburg Dillon Read compared certain financial information of SkyTel with that
of the paging companies mentioned above, which Warburg Dillon Read believed to
be appropriate for comparison. Warburg Dillon Read compared the multiples of
enterprise value (defined as market value of equity securities plus debt, less
cash) to the following, with all of the estimates based on analysts' consensus
estimates:
. estimated 1999 revenues, finding a multiple range of 1.7x to 2.6x with a
mean of 2.2x for the paging companies;
. estimated 2000 revenues, finding a multiple range of 1.6x to 2.1x with a
mean of 1.9x for the paging companies;
. estimated 1999 earnings before interest, taxes, depreciation and
amortization, or "EBITDA", finding a multiple range of 6.9x to 16.4x
with a mean of 7.3x for the paging companies, excluding PageMart
Wireless, which Warburg Dillon Read believed not to be comparable for
this purpose;
. estimated 2000 EBITDA, finding a multiple range of 5.9x to 9.2x with a
mean of 7.0x for the paging companies; and
. the number of paging units in service as of March 31, 1999, finding a
range of $180 to $258 per unit with a mean of $229 per unit.
Warburg Dillon Read noted that, other than SkyTel, none of the other paging
companies was projected to have positive earnings in 1999. This information
implied a valuation range of $12 to $16 per share of SkyTel common stock.
SkyTel Comparable Transactions Analysis. A comparable transactions analysis
provides a valuation range based upon publicly available financial information
for companies which have been acquired in selected recent transactions and
which are in the same or similar industries as the business being valued.
Warburg Dillon Read reviewed and analyzed certain financial, operating and
stock market information relating to selected merger transactions involving
paging companies. The transactions used in this analysis included the following
precedent transactions:
. Arch Communications Group's acquisition of USA Mobile Communications
Holdings, Inc.;
. MobileMedia Corporation's acquisition of Mobile Communications Corp. of
America;
. Arch Communications Group's acquisition of Westlink Holdings, Inc.;
. Metrocall's acquisition of A+ Network, Inc.;
. Metrocall's acquisition of ProNet, Inc.;
. Metrocall's acquisition of the Advanced Messaging Division of AT&T
Wireless, Inc., a subsidiary of AT&T Corporation; and
. Arch Communications Group's acquisition of MobileMedia.
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<PAGE>
However, Warburg Dillon Read noted that these transactions have taken place
over a protracted period and that the older transactions reflect industry
dynamics which no longer reflect current industry conditions, while the more
recent transactions involve companies and circumstances which differ from the
proposed merger of SkyTel and MCI WorldCom and thus are not truly comparable
transactions.
SkyTel Discounted Cash Flow Analysis. A discounted cash flow analysis
provides insight into the value of a business based on the anticipated future
earnings and capital requirements and the net present value of the subsequent
cash flows anticipated to be generated by the assets of such business. Warburg
Dillon Read derived ranges of implied firm value of SkyTel if SkyTel were to
continue on a stand-alone basis and without giving effect to the merger with
MCI WorldCom based upon:
. the present value of its five-year stream of future cash flows (based on
the business plan provided by management of SkyTel from 1999 to 2003);
and
. the anticipated future 2003 exit value based upon a range of multiples
of its future 2003 EBITDA.
Warburg Dillon Read applied several discount rates reflecting a weighted
average cost of capital and EBITDA multiples ranging as follows:
<TABLE>
<CAPTION>
2003 EBITDA
Discount Rates Multiples
-------------- -----------
<S> <C> <C>
One-Way Messaging.................................... 12%-14% 4.5x-5.5x
Advanced Messaging................................... 13%-15% 5.5x-7.5x
Corporate............................................ 12%-14% 4.5x-5.5x
</TABLE>
Based on the above, Warburg Dillon Read's discounted cash flow analysis
implied a valuation range for SkyTel of approximately $17 to $25 per share of
SkyTel common stock.
MCI WorldCom Historical Stock Price Performance. Warburg Dillon Read
reviewed the relationship between movements in stock prices for each of the
following for the period from May 25, 1994 through May 25, 1999:
. MCI WorldCom common stock;
. AT&T common stock;
. Sprint FON Group common stock;
. an index of GTE Corporation and Regional Bell Operating Companies, which
included Ameritech Corporation, Bell Atlantic Corporation, BellSouth
Corporation and U S WEST, Inc.; and
. the Standard & Poor's 500 Index.
MCI WorldCom Comparable Company Analysis. Warburg Dillon Read compared
certain financial information of MCI WorldCom with a group of companies that
Warburg Dillon Read believed to be appropriate for comparison. The group
included AT&T Corp. and Sprint FON Group (Sprint Corporation).
Warburg Dillon Read reviewed the multiples of enterprise value compared to
the following, which were all based on analysts' consensus estimates:
. estimated 1999 revenues, finding a multiple range of 2.9x to 3.lx;
. estimated 2000 revenues, finding a multiple range of 2.7x to 2.9x;
. estimated 1999 EBITDA, finding a multiple range of 9.5x to 10.0x; and
. estimated 2000 EBITDA, finding a multiple range of 8.6x to 9.lx.
Warburg Dillon Read also reviewed the multiples of equity value compared to
the following, which were both based on analysts' consensus estimates:
. estimated 1999 earnings, finding a multiple range of 25.7x to 29.lx; and
. estimated 2000 earnings, finding a multiple range of 23.3x to 25.0x.
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<PAGE>
In addition, Warburg Dillon Read reviewed the following, which were all
based on analysts' consensus estimates:
. estimated 1999 earnings described in the above paragraph to long-term
estimated growth in earnings, finding a multiple range of 2.0x to 2.6x;
. estimated 2000 earnings described in the above paragraph to long-term
estimated growth in earnings, finding a multiple range of 1.8x to 2.3x;
. estimated 1999 EBITDA to estimated growth in EBITDA from 1998 to 2000,
finding a multiple range of 0.6x to 1.1x;
. estimated 1999 earnings described in the above paragraph to total
return, which is the sum of long- term estimated growth in earnings and
dividend yield, finding a multiple range of 1.8x to 2.4x; and
. estimated 2000 earnings described in the above paragraph to total
return, which is the sum of long- term estimated growth in earnings and
dividend yield, finding a multiple range of 1.6x to 2.1x.
These analyses indicated a valuation range of $80 to $95 per share of MCI
WorldCom common stock.
MCI WorldCom Discounted Cash Flow Analysis. Warburg Dillon Read derived
ranges of implied firm value of MCI WorldCom (without giving effect to the
merger with SkyTel) based upon:
. the present value of its five-year stream of anticipated future cash
flows (based on business plans provided by management of MCI WorldCom
from 1999 to 2002 and extrapolated to 2003); and
. the anticipated future 2003 exit value based upon a range of multiples
of its 2003 EBITDA.
This analysis resulted in an implied value for MCI WorldCom ranging from
approximately $104 to $120 per share of MCI WorldCom common stock.
Implied Exchange Ratio. Based on the SkyTel and MCI WorldCom common stock
trading prices over the 60-day trading period prior to the issuance of its
opinion, Warburg Dillon Read arrived at a range of implied exchange ratios
equal to 0.1692 to 0.2524.
Based on the SkyTel discounted cash flow valuation range of $17 to $25 per
share of SkyTel common stock and the MCI WorldCom comparable company valuation
range of $80 to $95 per share of MCI WorldCom common stock, Warburg Dillon Read
arrived at a range of implied exchange ratios equal to 0.2125 to 0.2632.
Based on the SkyTel discounted cash flow valuation range of $17 to $25 per
share of SkyTel common stock and the MCI WorldCom discounted cash flow
valuation range of $104 to $120 per share of MCI WorldCom common stock, Warburg
Dillon Read arrived at a range of implied exchange ratios equal to 0.1635 to
0.2083.
Pro Forma Merger Consequences. Warburg Dillon Read analyzed certain pro
forma effects for the 1999 through 2002 period resulting from the merger. This
analysis, based upon plans prepared by the management of SkyTel and MCI
WorldCom, showed slight earnings per share accretion to MCI WorldCom over this
period as a result of the merger.
SkyTel Preferred Stock. Warburg Dillon Read reviewed the historical trading
prices of SkyTel preferred stock. Warburg Dillon Read also compared the current
market yield and the volatilities based on the current market values of SkyTel
preferred stock with a group of other convertible preferred securities which
Warburg Dillon Read believed to be appropriate for comparison. The comparison
was based on estimates by Warburg Dillon Read derived from using an arbitrage
pricing model. Warburg Dillon Read reviewed the historical market yield for MCI
WorldCom's 30-year bond issue. In addition, Warburg Dillon Read reviewed the
26
<PAGE>
volatility level for MCI WorldCom's traded options. Based upon the assumptions
and estimates used in this analysis, the MCI WorldCom convertible exchangeable
preferred stock had an implied theoretical value at least equal to the implied
theoretical value of the SkyTel preferred stock.
Fairness Opinion Process. The preparation of a fairness opinion is a complex
process not susceptible to partial analysis or summary descriptions. Warburg
Dillon Read believes that its analyses and the summary set forth above must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the processes underlying the analyses set forth in
its opinion.
In performing its analyses, Warburg Dillon Read made numerous assumptions
with respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
SkyTel or MCI WorldCom. The analyses which Warburg Dillon Read performed are
not necessarily indicative of actual values or actual future results, which may
be significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Warburg Dillon Read's analysis of the
fairness, from a financial point of view, of the exchange ratio for the
conversion of SkyTel common stock into MCI WorldCom common stock to the holders
of SkyTel common stock and the consideration to be received in the merger by
SkyTel preferred stockholders. The analyses do not purport to be appraisals or
to reflect the prices at which a company might actually be sold or the prices
at which any securities may trade at the present time or at any time in the
future.
Fees Payable to Warburg Dillon Read. Pursuant to an engagement letter dated
April 13, 1999, SkyTel agreed to pay Warburg Dillon Read:
. a fee of $100,000, which was payable following SkyTel's execution of the
engagement letter;
. $100,000 per month thereafter during the term of the engagement, up to a
maximum of $250,000, which will be offset against any other transaction
fee payable to Warburg Dillon Read by SkyTel; and
. a fee equal to 0.4% of the aggregate amount of the consideration of the
merger at closing, or $7.6 million as of May 28, 1999, 25% of which was
payable on announcement of the merger with the remainder payable upon
consummation of the merger.
SkyTel also agreed to reimburse Warburg Dillon Read for certain out-of-
pocket expenses incurred by Warburg Dillon Read in connection with the merger,
and agreed, under certain circumstances, to indemnify Warburg Dillon Read and
certain related persons against certain liabilities, including liabilities
under the U.S. federal securities laws, relating to or arising out of its
engagement.
Warburg Dillon Read is an internationally recognized investment banking firm
that provides financial services in connection with a wide range of business
transactions. As part of its business, Warburg Dillon Read:
. regularly engages in the valuation of companies and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and other purposes;
. in the past has rendered certain investment banking and financial
advisory services to SkyTel for which Warburg Dillon Read received
customary compensation; and
. in the ordinary course of its business may actively trade the securities
of SkyTel and MCI WorldCom for its own account and the accounts of its
customers and, accordingly, may at any time hold a long or short
position in such securities.
Warburg Dillon Read and its affiliates, including UBS AG, may have other
business relationships with SkyTel and its affiliates and MCI WorldCom. The
SkyTel board of directors retained Warburg Dillon Read
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<PAGE>
based on Warburg Dillon Read's familiarity with SkyTel as well as its
substantial experience in transactions such as the merger.
Interests of SkyTel Directors and Executive Officers in the Merger
Introduction. Some of the members of SkyTel's board of directors and
executive officers may have certain interests in the merger that are different
from or in addition to the interests of stockholders of SkyTel generally. These
additional interests relate to, among other things, the effect of the merger on
certain employment and benefit arrangements to which directors and executive
officers are parties or under which they have rights. These interests, to the
extent material, are described below. The SkyTel board of directors was aware
of these interests and considered them, among other things, prior to approving
the merger agreement.
Employment Agreements. SkyTel has entered into an employment agreement with
each of John N. Palmer (Chairman), John T. Stupka (President and Chief
Executive Officer) and Jai P. Bhagat (Vice Chairman), which expire on April 3,
2004, July 31, 2001 and April 3, 2002, respectively. The employment agreements
with Messrs. Palmer and Bhagat provide that if employment is terminated by
SkyTel during the term of the agreement, the employee is entitled to the
rights, remedies and damages as may be available under law or in equity. Mr.
Stupka's agreement provides that if his employment is terminated by SkyTel, or,
after a change in control as defined in the agreement, employment is terminated
under certain circumstances by Mr. Stupka, he is entitled to salary and some
other perquisites for the balance of the term of the agreement. The signing of
the merger agreement described in this document constituted a change of control
under Mr. Stupka's agreement.
Change of Control Agreements. In connection with the merger agreement,
SkyTel has entered into change of control agreements with each of its key
executive officers, including Messrs. Palmer, Stupka and Bhagat, John E. Welsh
III (Vice Chairman), Leonard G. Kriss (Senior Vice President, General Counsel
and Secretary) and Robert Kaiser (Senior Vice President--Finance and Chief
Financial Officer) and other key employees. Messrs. Palmer, Stupka, Bhagat and
Welsh are also SkyTel directors. The change of control agreements provide for
the payment of severance benefits and the continuation of health and other
welfare benefits in the event of a change of control of SkyTel, which would
include the merger, if the executive's employment with SkyTel is terminated (1)
by SkyTel, or by the acquiring or successor business entity following a change
of control, other than for "cause," death or disability, or (2) by the
executive for "good reason," in either event within two years after a change of
control and in some other circumstances 180 days prior to a change in control.
The severance benefits will be an amount equal to two times the sum of (1) the
executive's highest annual base salary in effect within two years immediately
preceding the change of control plus (2) the average of the executive's annual
cash bonus for the two calendar years immediately preceding the change of
control. The severance benefit also includes continuation of health and other
welfare benefits for two years following a termination of employment that are
not less favorable than those to which the executive was entitled before the
change of control. The severance benefits payable under the change of control
agreements will be reduced by any other cash payments made to the executive
under a written employment agreement between the executive and SkyTel for
periods after the executive's employment is terminated.
"Good reason" means any of the following events:
. the modification of the executive's job title, position or
responsibilities without the executive's prior written consent;
. the change of location where the executive is based to a location more
than 35 miles from his or her present location without the executive's
prior written consent; or
. the reduction of the executive's actual or projected annual salary and
bonus by more than 10% from the sum of the highest rate of the
executive's actual annual base salary and bonus in effect within two
years immediately preceding the change of control.
"Cause" means of any of the following events, so long as the event is
demonstrably and materially harmful to SkyTel and certain procedural
requirements have been satisfied:
. the intentional commission by the executive of any act of fraud or
embezzlement against SkyTel or any affiliate of SkyTel;
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<PAGE>
. the conviction of the executive of a felony;
. the intentional or material breach by the executive of any nondisclosure
or non-competition/non-solicitation provision of any agreement to which
the executive and SkyTel or any of its subsidiaries are parties; or
. the intentional and continual failure by the executive to perform in all
material respects his or her duties and responsibilities and the failure
of the executive to cure the same in all material respects within 30
days after written notice from SkyTel.
The change of control agreements also provide that the executives will
receive an additional amount, on an after-tax basis, to compensate for any
excise taxes imposed under the U.S. federal income tax laws other than in
respect of employee options. In addition, the executives are entitled to
reimbursement from SkyTel for the costs and expenses incurred by them in
enforcing the agreements.
As of the date of this document, MCI WorldCom has not informed SkyTel of its
intention to terminate the employment of any of SkyTel's executive officers
following the merger. However, the estimated severance payments under the
change of control agreements that may become payable to SkyTel's executive
officers if their employment were terminated immediately following the merger
in a manner qualifying for severance benefits are as follows, assuming that the
merger is completed on September 30, 1999:
<TABLE>
<CAPTION>
Name Severance Amount
---- ----------------
<S> <C>
John N. Palmer.............................................. $ 1,395,000
John T. Stupka.............................................. 2,607,347
Jai P. Bhagat............................................... 955,000
John E. Welsh III........................................... 955,000
Robert Kaiser............................................... 1,383,181
Leonard G. Kriss............................................ 1,385,119
Other (11 persons).......................................... 6,413,122
-----------
Total..................................................... $15,093,769
===========
</TABLE>
The severance amounts in the table above include excise tax gross-ups of
$778,147, $513,181, and $508,076 for Messrs. Stupka, Kaiser and Kriss,
respectively. In addition, the severance amount for the eleven "other" persons
in the table includes excise tax gross-ups of $2,141,283 in the aggregate.
Retention Arrangements. SkyTel has entered into retention bonus arrangements
with certain key employees, including two of its executive officers, Messrs.
Kaiser and Kriss. Under the retention arrangements, key employees are offered
retention bonuses equal to 100% of their base salary if they continue as full-
time employees for specified periods of time. SkyTel is obligated to pay an
aggregate amount of $3,353,103, of which $300,000 and $323,000 will be payable
to Messrs. Kaiser and Kriss, respectively. These amounts are payable in two
installments, the first of which was paid on August 13, 1999. On that date,
SkyTel paid an aggregate amount of $1,676,551.50, including $150,000 and
$161,500 to Messrs. Kaiser and Kriss, respectively. The remaining 50% of the
bonus is payable:
. six months following the completion of the merger; or
. if the merger agreement is terminated, the earlier of January 31, 2000
and the completion of any other merger in which SkyTel is a constituent
corporation.
If, before a key employee receives 100% of the retention bonus, that
employee's employment is terminated by SkyTel for any reason other than cause,
as described above, SkyTel must pay the employee any unpaid portion of the
bonus within 15 days of termination. No retention bonus is payable, if prior to
the date the applicable portion of the bonus is earned, the key employee
voluntarily terminates employment, or employment is terminated due to death or
disability, or by SkyTel for cause.
Indemnification. All rights of indemnification from liabilities existing in
favor of the current and former directors and current officers of SkyTel and
its subsidiaries as provided in their certificates of incorporation, by-laws
and existing indemnification agreements of SkyTel will be assumed by the
surviving corporation in the
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<PAGE>
merger, and will continue in full force and effect in accordance with the terms
of the certificate of incorporation and by-laws of the surviving corporation.
Please see "The Merger Agreement and Stock Option Agreement--The Merger
Agreement--Indemnification" beginning on page 46 for more information regarding
this topic.
Effects of the Merger on Stock Plans. SkyTel's stock option plans provide
that all outstanding options held by directors and executive officers will vest
as a result of the merger agreement and the resulting change of control of
SkyTel.
Under SkyTel's 1998 outside directors' stock option plan, upon the
occurrence of a change of control, which would include approval of the merger
by SkyTel's common stockholders, all options granted under the plan will become
fully vested and immediately exercisable. As of the date of this document,
directors held options under that plan to purchase the number of shares of
SkyTel common stock indicated in the following table:
<TABLE>
<CAPTION>
Number of Weighted Average
Name Option Shares Exercise Price
---- ------------- ----------------
<S> <C> <C>
Haley Barbour................................. 9,250 $22.238
Thomas Barksdale.............................. 9,250 22.238
Jai P. Bhagat................................. -- --
Robert Kaiser................................. -- --
Gregory B. Maffei............................. 8,615 22.256
John N. Palmer................................ -- --
John T. Stupka................................ -- --
R. Faser Triplett............................. 8,635 22.246
R. Gerald Turner.............................. 8,615 22.256
E. Lee Walker................................. 8,635 22.246
John E. Welsh III............................. -- --
</TABLE>
Each of Messrs. Maffei, Turner and Welsh were granted 50,000 options prior
to the adoption of the 1998 outside directors' plan at exercise prices of
$23.188, $12.375 and $9.50, respectively. Each such option is currently fully
vested and exercisable.
The number of unvested SkyTel stock options under the 1998 outside
directors' stock option plan, as of July 30, 1999, and their value, based on
the difference between the aggregate exercise price of the unvested options and
the number of shares of SkyTel common stock subject to these options multiplied
by $82.50 (the closing price for MCI WorldCom common stock on July 30, 1999,
multiplied by an assumed merger exchange ratio of 0.25), held by each of
SkyTel's directors are as follows:
<TABLE>
<CAPTION>
Number of Unvested Value of Unvested
Name Stock Options Stock Options(1)
---- ------------------ -----------------
<S> <C> <C>
Haley Barbour........................... 6,949 $ --
Thomas G. Barksdale..................... 6,949 --
Gregory B. Maffei....................... 6,949 --
R. Faser Triplett....................... 6,334 --
R. Gerald Turner........................ 6,949 --
E. Lee Walker........................... 6,334 --
</TABLE>
- --------
(1) The exercise price of these options is greater than the price at which the
SkyTel common stock was trading on the date of this document.
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<PAGE>
Under SkyTel's 1990 executive incentive plan, the execution of the merger
agreement caused all options outstanding under the plan to become fully vested
and immediately exercisable, subject to completion of the merger. As of the
date of this document, executive officers held options under that plan to
purchase the number of shares of SkyTel common stock indicated in the following
table:
<TABLE>
<CAPTION>
Number of Weighted Average
Name Option Shares Exercise Price
---- ------------- ----------------
<S> <C> <C>
John N. Palmer................................ 590,000 $ 9.243
John T. Stupka................................ 550,000 12.967
Jai P. Bhagat................................. 335,000 14.927
Robert Kaiser................................. 170,000 11.287
Leonard G. Kriss.............................. 205,000 15.601
John E. Welsh III............................. 435,000 15.783
</TABLE>
SkyTel's long-term management incentive plan provides that all awards under
the plan will be immediately payable in the event of a "change of control,"
which would include approval of the merger by SkyTel's common stockholders. In
the event the merger occurs before December 31, 1999, the current 1997-1999
award cycle bonuses will be based on stockholder return calculations through
the date of the merger. The aggregate amount that would have been payable
thereunder to Messrs. Palmer, Stupka, Bhagat, Kaiser, Kriss and Welsh had the
merger occurred as of July 30, 1999 is an award with a dollar value of
$621,010.
SkyTel's short-term management incentive plan provides that all awards under
the plan will be immediately payable in the event of a "change of control,"
which would include adoption of the merger agreement by SkyTel's common
stockholders. The annual bonus under the plan for the 1999 calendar year will
be subject to the discretion of the compensation committee of SkyTel's board of
directors and will continue to be administered after the merger by the
individuals who now constitute such committee.
Other Merger Agreement Provisions. The merger agreement also contains the
following additional provisions applicable to SkyTel executive officers,
including:
. during the pooling blackout period, the employment of any individual
considered to be an affiliate of SkyTel for pooling-of-interests
accounting purposes will not be terminated other than for cause without
at least 150 days' prior written notice, the compensation and benefits
for the last 120 days of which will reduce such person's severance or
termination benefits if such person's employment is terminated during
such period, and for six months thereafter, such terminations will
require at least five business days' prior written notice;
. for a period of six months following the merger, MCI WorldCom has agreed
to maintain existing SkyTel employee benefits or replace SkyTel benefits
with comparable MCI WorldCom benefits;
. for a period of at least 18 additional months following that six-month
period, Empire Merger Inc., the surviving corporation in the merger, has
agreed to maintain for SkyTel employees benefits that, in the aggregate,
are no less favorable than the aggregate benefits provided to similarly
situated employees of MCI WorldCom; and
. MCI WorldCom has agreed to honor for SkyTel employees credit for their
service with SkyTel and its subsidiaries and predecessors for purposes
of determining eligibility to participate and nonforfeitability of
benefits under MCI WorldCom plans and for purposes of benefit accrual
under vacation and severance pay plans.
See "The Merger--Continuation of SkyTel Employee Benefits" beginning on page
37 for more information on these arrangements.
Accounting Treatment
The merger is designed to qualify as a "pooling-of-interests" transaction
for accounting and financial reporting purposes. Under this method of
accounting, at the effective time of the merger, the recorded assets and
liabilities of MCI WorldCom and SkyTel will be carried forward to the combined
organization at their
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<PAGE>
recorded amounts. Income or loss of the combined organization will include
income or loss of MCI WorldCom and SkyTel for the entire fiscal year in which
the merger occurs. Additionally, the reported income or loss of the separate
corporations for prior periods will be combined and restated as income of the
combined organization. Among the conditions to pooling-of-interests accounting
treatment of the merger is the requirement that MCI WorldCom issue MCI WorldCom
common stock in exchange for at least 90% of the SkyTel common stock
outstanding on the date the merger is completed. The obligations of MCI
WorldCom and SkyTel to complete the merger are subject to the receipt from
Arthur Andersen LLP, the independent auditors for MCI WorldCom and SkyTel, of
letters to the effect that pooling-of-interests accounting is appropriate for
the merger under Accounting Principles Board Opinion No. 16. See "The Merger
Agreement and Stock Option Agreement--The Merger Agreement--Conditions to the
Completion of the Merger" beginning on page 40.
Pursuant to the merger agreement, SkyTel has agreed to use reasonable
efforts to cause each person who is an "affiliate," as defined in the rules
under the Securities Act of 1933, of SkyTel to enter into an agreement that
they will not transfer any securities of MCI WorldCom received in the merger
until MCI WorldCom has published financial statements containing at least 30
days of combined results of operations after the effective time of the merger.
This restriction is necessary to account for the merger as a pooling-of-
interests. See "The Merger--Resale of MCI WorldCom Common Stock and MCI
WorldCom Convertible Exchangeable Preferred Stock" on page 39. See "The Merger
Agreement and Stock Option Agreement--The Merger--Conditions to the Completion
of the Merger" beginning on page 40.
Form of the Merger
Subject to the terms and conditions of the merger agreement and in
accordance with Delaware law, at the effective time of the merger, SkyTel will
merge with and into Empire Merger Inc., a wholly owned Delaware subsidiary of
MCI WorldCom, which following the merger will be renamed SkyTel Communications,
Inc.
Merger Consideration
Common Stock. At the effective time of the merger, each outstanding share of
SkyTel common stock, other than treasury stock held by SkyTel and shares held
by MCI WorldCom or Empire Merger, will be converted into the right to receive a
number of shares of MCI WorldCom common stock equal to the exchange ratio,
rounded to the nearest 1/10,000, which will be determined by dividing:
. $20.00 by
. the average, rounded to the nearest 1/10,000, of the volume weighted
averages, rounded to the nearest 1/10,000, of the trading prices of MCI
WorldCom common stock on The Nasdaq National Market, as reported by
Bloomberg Financial Markets or another source to which MCI WorldCom and
SkyTel agree, for each of the 20 consecutive trading days ending with
the third trading day immediately preceding the effective time of the
merger.
However, the exchange ratio will not be less than 0.25 or greater than 0.2778.
MCI WorldCom and SkyTel determined the formula for the exchange ratio and its
upper and lower limits through arm's-length negotiations.
As of the effective time of the merger, all shares of SkyTel common stock
will no longer be outstanding and will automatically be cancelled and will
cease to exist. At that time, each certificate representing any shares of
SkyTel common stock will automatically be cancelled and retired and each holder
of such certificate will cease to have any rights as a stockholder except the
right to receive MCI WorldCom common stock in the merger and any cash in lieu
of MCI WorldCom fractional shares.
The exchange ratio will be proportionately adjusted to reflect any stock
split, stock dividend, recapitalization, subdivision, reclassification,
combination, exchange of shares or similar transaction relating to the MCI
WorldCom common stock if:
. MCI WorldCom changes, or establishes a record date for changing, the
number of shares of MCI WorldCom common stock issued and outstanding
before the effective time of the merger as a result of any of those
transactions; and
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. the record date for any of these transactions will be before the
effective time of the merger.
In addition, the exchange ratio will be appropriately adjusted to reflect
any extraordinary dividend or extraordinary distribution if MCI WorldCom pays,
or establishes a record date for payment of, an extraordinary dividend on, or
makes any other extraordinary distribution in respect of, MCI WorldCom common
stock.
Preferred Stock. At the effective time of the merger, each outstanding share
of SkyTel $2.25 cumulative convertible exchangeable preferred stock, other than
treasury stock held by SkyTel and shares held by MCI WorldCom or Empire Merger,
will be converted into the right to receive one share of MCI WorldCom series C
$2.25 cumulative convertible exchangeable preferred stock. The terms of this
new series of MCI WorldCom preferred stock will be substantially identical to
those of SkyTel preferred stock and are described under the heading
"Description of MCI WorldCom Capital Stock--Series C $2.25 Cumulative
Convertible Exchangeable Preferred Stock" beginning on page 56. As of the
effective time of the merger, all shares of SkyTel preferred stock will no
longer be outstanding and will automatically be cancelled and retired and will
cease to exist. At that time, each holder of a certificate representing any
shares of SkyTel preferred stock will cease to have any rights as a stockholder
except the right to receive MCI WorldCom convertible exchangeable preferred
stock in the merger.
Treasury Stock; Shares Held by Acquiror. As of the effective time of the
merger, shares of treasury stock of SkyTel and SkyTel stock held by MCI
WorldCom and Empire Merger will automatically be cancelled and retired and will
cease to exist. No consideration will be delivered for those shares in the
merger.
Fractional Shares. SkyTel common stockholders will receive cash for any
fractional shares which they would otherwise receive in the merger based on the
closing price of MCI WorldCom common stock on The Nasdaq National Market on the
date the merger is completed.
Conversion of Shares; Procedures For Exchange of Certificates; Fractional
Shares
The conversion of SkyTel common stock into the right to receive MCI WorldCom
common stock and the conversion of SkyTel preferred stock into the right to
receive MCI WorldCom convertible exchangeable preferred stock will occur
automatically at the effective time of the merger. As soon as reasonably
practicable after the effective time of the merger, The Bank of New York, as
exchange agent, will send a transmittal letter to each holder of record of
SkyTel stock immediately prior to the effective time of the merger. The
transmittal letter will contain instructions for obtaining shares of MCI
WorldCom stock in exchange for shares of SkyTel stock. SkyTel stockholders
should not return stock certificates with the enclosed proxy.
After the effective time of the merger, each certificate that previously
represented shares of SkyTel common stock will represent only the right to
receive the MCI WorldCom common stock into which such shares were converted in
the merger and the right to receive cash for any fractional shares of MCI
WorldCom common stock, as described below. Similarly, after the effective time
of the merger, each certificate that previously represented shares of SkyTel
preferred stock will represent only the right to receive the MCI WorldCom
convertible exchangeable preferred stock into which such shares were converted
in the merger.
Until holders of certificates previously representing SkyTel stock have
surrendered those certificates to the exchange agent for exchange in accordance
with the instructions in the transmittal letter, holders will not receive
dividends or distributions on the MCI WorldCom stock into which such shares
have been converted with a record date after the effective time of the merger.
Similarly, they will not receive cash for any fractional shares of MCI WorldCom
common stock. When holders surrender their certificates, they will receive any
unpaid dividends or other distributions, and any cash for fractional shares of
MCI WorldCom stock without interest, subject to applicable escheat or similar
laws.
In the event of a transfer of ownership of any SkyTel stock which is not
registered in the records of SkyTel's transfer agent, a certificate
representing the proper number of shares of MCI WorldCom stock may be issued to
a person other than the person in whose name the certificate so surrendered is
registered if:
. the certificate is properly endorsed or otherwise is in proper form for
transfer; and
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. the person requesting the issuance will (1) pay any transfer or other
taxes resulting from the issuance of shares of MCI WorldCom stock to a
person other than the registered holder of the certificate or (2)
establish to the satisfaction of MCI WorldCom that such tax has been
paid or is not applicable.
All shares of MCI WorldCom common stock issued upon surrender of
certificates representing shares of SkyTel common stock and all shares of MCI
WorldCom convertible exchangeable preferred stock issued upon surrender of
certificates representing shares of SkyTel preferred stock, including any cash
paid instead of any fractional shares of MCI WorldCom common stock, will be
deemed to have been issued and paid in full satisfaction of all rights relating
to those shares of SkyTel common stock or SkyTel convertible exchangeable
preferred stock. MCI WorldCom will remain obligated, however, to pay any
dividends or make any other distributions declared or made by SkyTel on shares
of SkyTel common or preferred stock with a record date before the effective
time of the merger and which remain unpaid at the effective time of the merger.
If certificates are presented to MCI WorldCom or the exchange agent after the
effective time of the merger, they will be cancelled and exchanged as described
above.
No fractional shares of MCI WorldCom common stock will be issued to any
SkyTel common stockholder upon surrender of certificates previously
representing SkyTel common stock. In addition, no dividend or distribution of
MCI WorldCom will relate to fractional share interests, and the fractional
share interests will not entitle the owner to vote or to any rights of MCI
WorldCom shareholders. Instead, MCI WorldCom will pay SkyTel common
stockholders an amount, without interest and less the amount of any withholding
taxes, in cash equal to the product obtained by multiplying:
. the fractional share interest to which the SkyTel common stockholders
would otherwise be entitled by
. the closing price for a share of MCI WorldCom common stock on The Nasdaq
National Market on the date on which the merger is completed.
Effective Time of the Merger
The merger will become effective upon the filing of the certificate of
merger with the Delaware Secretary of State or such later time as is agreed
upon by MCI WorldCom and SkyTel and specified in the certificate of merger. The
filing of the certificate of merger will occur as soon as practicable, but no
later than the second business day after the satisfaction or waiver of the
conditions to the completion of the merger described in the merger agreement,
unless another date is agreed to by MCI WorldCom and SkyTel.
Nasdaq Quotation of MCI WorldCom Stock
Common Stock. It is a condition to the completion of the merger that the MCI
WorldCom common stock issuable to SkyTel common stockholders in the merger be
approved for quotation on The Nasdaq National Market, subject to official
notice of issuance.
Convertible Exchangeable Preferred Stock. MCI WorldCom has agreed to use its
reasonable efforts to cause the MCI WorldCom convertible exchangeable preferred
stock that will be issuable to SkyTel preferred stockholders in the merger to
be listed on a national securities exchange or approved for quotation on The
Nasdaq National Market, subject to official notice of issuance, on or before
completion of the merger.
The MCI WorldCom convertible exchangeable preferred stock has been approved
for listing on The Nasdaq National Market, subject to official notice of
issuance.
Delisting and Deregistration of SkyTel Common and Preferred Stock
SkyTel common and preferred stock are admitted for trading on The Nasdaq
National Market and are registered under the Securities Exchange Act of 1934.
If the merger is completed, neither the SkyTel common stock nor the SkyTel
preferred stock will be quoted on The Nasdaq National Market. Additionally, the
SkyTel common stock and preferred stock will be deregistered under the Exchange
Act.
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Certain U.S. Federal Income Tax Consequences
General. In the opinion of Jones, Day, Reavis & Pogue, this section
discusses the material U.S. federal income tax consequences of the merger to
United States persons who hold shares of SkyTel common stock and SkyTel
preferred stock as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended. It does not discuss tax consequences
that may be relevant to holders of SkyTel common stock or SkyTel preferred
stock entitled to special treatment under U.S. federal income tax law
(including, without limitation, dealers in securities or foreign currency, tax-
exempt organizations, banks, trusts, insurance companies, persons that hold
SkyTel common stock or SkyTel preferred stock as part of a straddle, a hedge
against currency risk or as a constructive sale or conversion transaction,
persons that have a functional currency other than the United States dollar,
investors in pass-through entities and foreign persons, including foreign
individuals, partnerships and corporations), or to holders who acquired their
SkyTel common stock or SkyTel preferred stock pursuant to the exercise or
cancellation of employee stock options or otherwise as compensation. This
discussion also does not describe tax consequences arising out of the tax laws
of any state, local or foreign jurisdiction.
Consequences of the Merger. Consummation of the merger is conditioned upon,
among other things, the receipt of opinions of Jones, Day, Reavis & Pogue,
counsel to SkyTel, and Cravath, Swaine & Moore, counsel to MCI WorldCom, each
dated as of the effective date of the merger, stating that, on the basis of the
facts, representations and assumptions set forth in such opinions, (1) the
merger will qualify as a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code, and (2) MCI WorldCom, Empire Merger and SkyTel
will each be a "party to a reorganization" within the meaning of Section 368(b)
of the Internal Revenue Code.
Assuming that the merger is consummated in accordance with the terms of the
merger agreement and as described in this document, and assuming that the
representations and assumptions set forth in the opinions of counsel referred
to above will be true, correct, and complete at the effective time of the
merger, under current law:
. the merger will qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code; and
. MCI WorldCom, Empire Merger and SkyTel will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code.
This conclusion is based on the Internal Revenue Code, Treasury Department
regulations promulgated thereunder and in effect as of the date hereof, current
administrative rulings and practice and judicial precedent, all of which are
subject to change, possibly with retroactive effect. Any change in law or
failure of the factual representations and assumptions to be true, correct and
complete in all material respects could alter the tax consequences discussed
herein. The parties will not request and the merger is not conditioned upon a
ruling from the Internal Revenue Service as to any of the U.S. federal income
tax consequences of the merger. As a result, there can be no assurance that the
Internal Revenue Service will not disagree with or challenge any of the
conclusions set forth in this discussion.
As a result of the merger qualifying as a reorganization:
. holders of SkyTel common stock or SkyTel preferred stock who exchange
their SkyTel stock for MCI WorldCom common stock or MCI WorldCom
convertible exchangeable preferred stock in the merger will not
recognize gain or loss for U.S. federal income tax purposes, except with
respect to cash, if any, they receive instead of a fractional share of
MCI WorldCom common stock;
. each holder's aggregate tax basis in the MCI WorldCom stock received in
the merger will be the same as his or her aggregate tax basis in the
SkyTel stock surrendered in the merger, decreased by the amount of any
tax basis allocable to any fractional share interest in MCI WorldCom
common stock for which cash is received;
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. the holding period of the MCI WorldCom stock received in the merger by a
holder of SkyTel stock will include the holding period of SkyTel stock
that he or she surrendered in the merger; and
. no income, gain or loss will be recognized by SkyTel, MCI WorldCom, or
Empire Merger as a result of the merger.
A holder of SkyTel common stock who receives cash instead of a fractional
share of MCI WorldCom common stock will recognize gain or loss equal to the
difference between the amount of cash received and his or her tax basis in the
MCI WorldCom common stock that is allocable to the fractional share. That gain
or loss generally will constitute capital gain or loss. In the case of an
individual stockholder, any such capital gain will be subject to a maximum U.S.
federal income tax rate of 20% if the individual has held his or her SkyTel
common stock for more than 12 months at the effective time of the merger. The
deductibility of capital losses is subject to limitations for both individuals
and corporations.
Backup withholding. Certain noncorporate holders of SkyTel common stock may
be subject to backup withholding at a rate of 31% on cash payments received in
lieu of fractional shares of MCI WorldCom common stock. Backup withholding will
not apply, however, to a holder of SkyTel common stock who:
. furnishes a correct taxpayer identification number and certifies that he
or she is not subject to backup withholding on the substitute Form W-9
(or successor form) included in the letter of transmittal to be
delivered to holders of SkyTel common stock following consummation of
the merger;
. provides a certification of foreign status on Form W-8 (or successor
form); or
. is otherwise exempt from backup withholding.
Tax laws are complex and the tax consequences to any particular holder of
SkyTel common stock or SkyTel preferred stock may be affected by matters not
discussed above. As a result, each SkyTel stockholder is urged to consult his
or her personal tax advisor concerning the applicability to him or her of this
discussion, as well as of any other tax consequences of the merger.
Regulatory Matters
FCC Approvals. The Federal Communications Commission, which we refer to as
the FCC, was requested to approve the transfer of control to MCI WorldCom of
SkyTel and those subsidiaries of SkyTel that hold FCC licenses and
authorizations. The FCC decided that MCI WorldCom is qualified to control such
licenses and authorizations, and that the transfer is consistent with the
public interest, convenience and necessity. In particular, the FCC examined,
among other things, the competitive impact of the merger and other benefits and
alleged detriments to the public.
On June 17, 1999, SkyTel and MCI WorldCom filed the required applications
with the FCC. As required, the FCC sought public comments on the applications.
The deadline for filing protests to the application has passed and none were
filed. On August 25, 1999, the FCC granted the necessary consent to the
transfer of control. This action is effective as of August 25, 1999.
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United States Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and related rules, certain transactions, including the merger, may
not be completed unless certain waiting period requirements have been
satisfied. On June 23, 1999, MCI WorldCom and SkyTel each filed a Notification
and Report Form with the Antitrust Division of the Department of Justice and
the Federal Trade Commission. The Antitrust Division granted early termination
for the required waiting periods under the Hart-Scott-Rodino Act on July 13,
1999. However, at any time before or after the effective time of the merger,
the Antitrust Division, the Federal Trade Commission or others could take
action under the antitrust laws, including seeking (1) to prevent the merger,
(2) to rescind the merger, or (3) to conditionally approve the merger upon the
divestiture of substantial assets of MCI WorldCom or SkyTel. There can be no
assurance that a challenge to the merger on antitrust grounds will not be made
or, if such a challenge is made, that it would not be successful.
General. It is possible that any of the governmental entities with which
filings are made may seek, as conditions for granting approval of the merger,
various regulatory concessions. We cannot assure you that:
. MCI WorldCom or SkyTel will be able to satisfy or comply with such
conditions;
. compliance or non-compliance will not have adverse consequences for MCI
WorldCom after completion of the merger; or
. the required regulatory approvals will be obtained within the time frame
contemplated by MCI WorldCom and SkyTel and referred to in this document
or on terms that will be satisfactory to MCI WorldCom and SkyTel.
See "The Merger Agreement and Stock Option Agreement--The Merger Agreement--
Conditions to the Completion of the Merger" beginning on page 40.
Appraisal Rights
Under Delaware corporate law, holders of SkyTel common and preferred stock
are not entitled to appraisal rights in connection with the merger because, on
the record date, SkyTel common and preferred stock were designated and quoted
for trading on The Nasdaq National Market and will be converted into shares of
MCI WorldCom common stock or MCI WorldCom convertible exchangeable preferred
stock, which at the effective time of the merger will be listed on The Nasdaq
National Market.
Continuation of SkyTel Employee Benefits
MCI WorldCom has agreed that, for the six-month period following the
effective time of the merger, it will cause Empire Merger, which will be the
surviving corporation in the merger, to:
. maintain SkyTel benefit programs provided before the effective time; or
. replace all or any of those programs with programs that are maintained
for similarly situated employees of MCI WorldCom.
However, the parties have agreed that the aggregate level of benefits
provided during this six-month period will be substantially similar to the
aggregate level of benefits provided by SkyTel before the effective time of the
merger. For at least 18 months following that six-month period, Empire Merger
has agreed to provide benefits to employees of SkyTel that are no less
favorable in the aggregate than the benefits provided for similarly situated
employees of MCI WorldCom.
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If any of MCI WorldCom's plans become applicable to SkyTel employees,
including former SkyTel employees who are not current employees of SkyTel
immediately before the effective time of the merger, MCI WorldCom has agreed
that those employees will be credited with their service with SkyTel for
purposes of:
. determining eligibility for participation in and nonforfeitability of
benefits under that MCI WorldCom plan; and
. benefit accrual under vacation and severance pay plans but only to the
extent that service was credited under similar SkyTel plans.
In the case of any welfare benefit plans that MCI WorldCom offers to SkyTel
employees who are current employees of SkyTel immediately before the effective
time of the merger, MCI WorldCom has agreed to waive, or cause Empire Merger to
waive, any waiting periods, pre-existing condition exclusions and actively-at-
work requirements to the extent these provisions did not apply to those
employees before the plan was made available. MCI WorldCom has also agreed to
take into account any expenses incurred by those employees on or before the
date the plan was made available for purposes of satisfying deductible,
coinsurance and maximum out-of-pocket provisions. SkyTel has agreed to take any
actions necessary to prohibit any additional offerings of SkyTel stock options
under its employee stock purchase plan after the effective time of the merger.
Effect on Awards Outstanding Under SkyTel Stock Plans; Warrants
Under the merger agreement, the parties intend that, at the effective time
of the merger, MCI WorldCom will assume the stock plans of SkyTel and the
agreements to grant SkyTel stock options under those plans, and that those
plans will continue in effect following the merger on the same terms and
conditions, except for changes to those plans that MCI WorldCom and SkyTel
agree are appropriate to give effect to the merger. At the effective time of
the merger, each outstanding option to acquire shares of SkyTel common stock
will be converted into an option to acquire MCI WorldCom common stock on the
same terms and conditions as were applicable to the SkyTel stock option. The
number of shares of MCI WorldCom common stock subject to any option will be
equal to the number of shares of SkyTel common stock subject to the SkyTel
stock option multiplied by the exchange ratio in the merger and rounded down to
the nearest whole share. The exercise price per share of MCI WorldCom common
stock under any option will be equal to the aggregate exercise price for the
shares of SkyTel common stock otherwise purchasable pursuant to that SkyTel
stock option divided by the aggregate number of shares of MCI WorldCom common
stock to be purchased pursuant to the SkyTel stock option.
Under the merger agreement, MCI WorldCom agreed that it would take all
action necessary for the conversion of the SkyTel stock options outstanding at
the effective time of the merger, including reserving, issuing and listing the
number of shares of MCI WorldCom common stock that will be subject to the
converted options. As of July 30, 1999, the number of shares of SkyTel common
stock reserved for issuance under outstanding options to purchase SkyTel common
stock was approximately 3,281,505.
Under the merger agreement, at the effective time of the merger, each
outstanding warrant to acquire shares of SkyTel common stock will automatically
be converted into an option or right to acquire shares of MCI WorldCom common
stock on the same terms and conditions as were applicable under the SkyTel
warrant. The number of shares of MCI WorldCom common stock to be subject to any
such option or right will be equal to the number of shares of SkyTel common
stock subject to the SkyTel warrant multiplied by the exchange ratio in the
merger and rounded down to the nearest whole share. The exercise price per
share of MCI WorldCom common stock under the warrant will be equal to the
aggregate exercise price for the shares of SkyTel common stock otherwise
purchasable pursuant to the SkyTel warrant divided by the aggregate number of
shares of MCI WorldCom common stock to be purchased pursuant to the SkyTel
warrant. As of the date of this document, the only warrant outstanding is in
favor of Microsoft Corporation to purchase 409,500 shares of SkyTel common
stock.
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Resale of MCI WorldCom Common Stock and MCI WorldCom Convertible Exchangeable
Preferred Stock
MCI WorldCom common stock and convertible exchangeable preferred stock
issued in the merger will not be subject to any restrictions on transfer
arising under the Securities Act of 1933, except for shares issued to any
SkyTel stockholder who may be deemed to be an "affiliate" of SkyTel for
purposes of Rule 145 under the Securities Act or for purposes of qualifying the
merger for pooling-of-interests accounting treatment. It is expected that those
affiliates will agree not to transfer any MCI WorldCom common stock or
convertible exchangeable preferred stock received in the merger except in
compliance with the resale provisions of Rule 144 or 145 under the Securities
Act or as otherwise permitted under the Securities Act. In addition, it is
expected that these affiliates will agree not to make any such disposition
within 30 days before the effective time of the merger, and until after such
time as financial results covering at least 30 days of combined operations of
MCI WorldCom and SkyTel after the merger have been published.
The merger agreement requires SkyTel to use reasonable efforts to cause its
affiliates to enter into these agreements. MCI WorldCom has also agreed to use
reasonable efforts to cause its affiliates to comply with the transfer
restrictions referred to in the last sentence of the preceding paragraph.
This document does not cover resales of MCI WorldCom common stock or
convertible exchangeable preferred stock received by any person upon completion
of the merger, and no person is authorized to make any use of this document in
connection with any such resale.
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THE MERGER AGREEMENT AND STOCK OPTION AGREEMENT
The following description summarizes the material provisions of the merger
agreement and the stock option agreement. You should carefully read the merger
agreement and stock option agreement which are attached as Annexes A and B to
this document and incorporated herein by reference.
The Merger Agreement
Conditions to the Completion of the Merger. Each party's obligation to
effect the merger is subject to the satisfaction or waiver of various
conditions which include, in addition to other customary closing conditions,
the following:
. holders of a majority of the outstanding shares of SkyTel common stock
having voted to approve the merger agreement;
. all necessary consents and approvals of the FCC having been obtained;
. the waiting period applicable to the merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 having expired or been terminated;
. no judgment, order, decree, statute, law, ordinance, rule or regulation
entered, enacted, promulgated, enforced or issued by any court or other
governmental entity of competent jurisdiction or other legal restraint
or prohibition being in effect, and no suit, action or proceeding by any
governmental entity being pending that (1) would prevent the completion
of the merger or (2) otherwise would be reasonably likely to have a
material adverse effect, as described below, on MCI WorldCom or SkyTel;
provided, however, that each of the parties will use its reasonable
efforts to prevent the entry of any legal restraint or prohibition and
to appeal as promptly as possible any legal restraint or prohibition
that may be entered;
. the registration statement on Form S-4, of which this document forms a
part, having become effective under the Securities Act and not being the
subject of any stop order or proceedings seeking a stop order;
. MCI WorldCom and SkyTel each having received letters dated as of the
closing date of the merger from Arthur Andersen LLP stating in substance
that pooling-of-interests accounting is appropriate for the merger under
Accounting Principles Board Opinion No. 16 and the applicable rules and
regulations of the Securities and Exchange Commission; and
. the shares of MCI WorldCom common stock issuable to SkyTel common
stockholders in the merger having been approved for listing on The
Nasdaq National Market, subject to official notice of issuance.
In addition, each party's obligation to effect the merger is also subject to
the satisfaction or waiver of the following additional conditions:
. the representations and warranties of the other party set forth in the
merger agreement qualified as to materiality being true and correct, and
those not so qualified being true and correct in all material respects,
as of the date of the merger agreement and as of the date on which the
merger is to be completed, or if such representations and warranties
expressly relate to an earlier date, then as of the earlier date;
. the other party to the merger agreement having performed in all material
respects all obligations required to be performed by it under the merger
agreement on or before the date on which the merger is to be completed;
and
. SkyTel having received from its legal counsel, Jones, Day, Reavis &
Pogue, and MCI WorldCom having received from its legal counsel, Cravath,
Swaine & Moore, on the date on which the
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registration statement is declared effective by the Securities and
Exchange Commission and on the date on which the merger is to be
completed, an opinion stating that:
. the merger will qualify for U.S. federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code; and
. that the parties to the merger agreement will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Internal
Revenue Code.
The delivery of these opinions will be conditioned upon the receipt by
those law firms of customary representation letters from SkyTel and MCI
WorldCom in substantially the same forms as attached to the merger agreement.
The merger agreement provides that a "material adverse change" or "material
adverse effect" means, when used in connection with SkyTel or MCI WorldCom,
any change, effect, event, occurrence or state of facts:
. that is materially adverse to the business, financial condition or
results of operations of the party and its subsidiaries, taken as a
whole; or
. preventing or materially delaying the completion of the merger, other
than any change, effect, event, occurrence or state of facts relating to
the economy in general or relating to the industries in which the party
operates in general and not specifically relating to such party.
SkyTel cannot assure you that all of the conditions to the merger will be
satisfied or waived by the party permitted to do so. SkyTel cannot at this
point determine whether it would resolicit proxies in the event that it
decides to waive any of the items listed above, including the requirement that
it receive letters that the merger will qualify for pooling-of-interests
accounting treatment. SkyTel's decision as to whether or not to resolicit
proxies would depend upon the facts and circumstances leading to SkyTel's
decision to complete the merger and whether SkyTel believes there has been a
material change in the terms of the merger and its effect on SkyTel
stockholders. In making its determination, SkyTel would consider, among other
factors, the reasons for the waiver, the effect of the waiver on the terms of
the merger, whether the requirement being waived, including the requirement
that the merger be treated as a pooling-of-interests transaction for
accounting purposes, was necessary in order to make the merger fair to the
stockholders from a financial point of view, the availability of alternative
transactions and the prospects of SkyTel as an independent entity, market
prices for MCI WorldCom common stock at the relevant time and other factors
determined to be appropriate by SkyTel's board of directors. If SkyTel
determines that a waiver of a condition would have a material adverse effect
on the value of the merger to SkyTel stockholders, including the expected
qualification of the merger as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, it will resolicit proxies before
proceeding with the completion of the merger without the satisfaction of that
condition.
No Solicitation. The no solicitation provision of the merger agreement
provides that SkyTel will not and will not permit its subsidiaries or its
directors, officers and employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries, to directly or indirectly:
. solicit, initiate or encourage, including by way of furnishing
information, or take any other action designed to facilitate, any
inquiries or the making of any takeover proposal, as described below; or
. participate in any discussions or negotiations regarding any takeover
proposal.
However, if SkyTel receives a superior proposal, as described below, which was
not solicited by it or did not otherwise result from a breach of the no
solicitation provision, and the SkyTel board of directors determines in good
faith before the special meeting takes place, after consultation with outside
counsel, that it is necessary to
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do so in order to comply with its fiduciary duties to SkyTel stockholders under
applicable law, SkyTel may, after first giving written notice of its decision
to do so to MCI WorldCom:
. furnish under a customary confidentiality agreement, as determined by
SkyTel after consultation with its outside counsel, information about
SkyTel and its subsidiaries to any person making a superior proposal;
and
. participate in discussions or negotiations regarding such superior
proposal.
The no solicitation provision of the merger agreement provides that:
. the term "takeover proposal" means, other than the transactions
contemplated by the merger agreement, any inquiry, proposal or offer
from any person relating to:
-- any direct or indirect acquisition or purchase of a business that
constitutes 15% or more of the net revenues, net income or assets of
SkyTel and its subsidiaries, taken as a whole, or 15% or more of any
class of equity securities of SkyTel or any of its subsidiaries;
-- any tender offer or exchange offer that if completed would result in
any person beneficially owning 15% or more of any class of equity
securities of SkyTel or any of its subsidiaries; or
-- any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving SkyTel or
any of its subsidiaries; and
. the term "superior proposal" means any proposal made by a third party to
acquire, directly or indirectly, for consideration consisting of cash
and/or securities:
-- more than 50% of the combined voting power of the shares of SkyTel
common stock then outstanding; or
-- all or substantially all the assets of SkyTel,
on terms that the SkyTel board of directors determines in its good
faith judgment, after consultation with one or more of its financial
advisors, to be more favorable to SkyTel's stockholders than the merger
and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the SkyTel board of directors, is
reasonably capable of being obtained by the third party.
Except as expressly permitted by the no solicitation provision of the merger
agreement, neither the SkyTel board of directors nor any committee of the board
of directors will:
. withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to MCI WorldCom, the approval or recommendation by the
SkyTel board of directors of the merger or the merger agreement;
. approve or recommend, or propose publicly to approve or recommend, any
takeover proposal as defined above; or
. cause SkyTel to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any takeover
proposal, other than any such agreement entered into concurrently with a
termination as described in the next sentence in order to facilitate
such action.
However, in response to a superior proposal, which was not solicited by
SkyTel or did not otherwise result from a breach of the no solicitation
provision of the merger agreement described above, the SkyTel board of
directors may terminate the merger agreement, but only at a time before the
date of the special meeting and after the fifth business day following MCI
WorldCom's receipt of written notice advising MCI WorldCom that the SkyTel
board of directors is prepared to accept a superior proposal. SkyTel must pay a
fee in the amount of $25 million to MCI WorldCom upon such termination.
Further, a termination of the merger agreement in these
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circumstances would permit MCI WorldCom to exercise the option to purchase
SkyTel common stock under the stock option agreement. See "--The Merger
Agreement--Termination" and "--The Merger Agreement-- Termination Fees" below.
Termination. The merger agreement may be terminated at any time before the
effective time of the merger, whether before or after adoption of the merger
agreement by the SkyTel common stockholders:
. by mutual written consent of MCI WorldCom and SkyTel;
. by MCI WorldCom or SkyTel, if the merger has not been completed by
February 28, 2000, except (1) that if on that date all consents,
approvals or orders of authorization of, or actions by the FCC have not
been obtained, then either MCI WorldCom or SkyTel may cause that date to
be extended to May 28, 2000, upon delivery of written notice to the
other party; and (2) that this right to terminate the merger agreement
will not be available to a party whose failure to perform any of its
obligations under the merger agreement has resulted in the failure of
the merger to be completed by that date;
. by MCI WorldCom or SkyTel, if the SkyTel common stockholders do not
adopt the merger agreement at the special meeting;
. by MCI WorldCom or SkyTel, if any legal restraint or prohibition is in
effect and has become final and nonappealable (1) preventing the
completion of the merger or (2) which otherwise is reasonably likely to
have a material adverse effect on SkyTel or MCI WorldCom, except that
the party seeking to exercise this right to terminate the merger
agreement must have used its reasonable best efforts to prevent the
entry of and to remove the legal restraint or prohibition;
. by MCI WorldCom or SkyTel, if the other party has breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in the merger agreement, which
breach or failure to perform would give rise to the failure of the
condition to the merger relating to its representations, warranties or
obligations and is not or cannot be cured within 30 calendar days after
receipt of written notice from the non-breaching party;
. by SkyTel, at any time before the date of the special meeting, in
response to a superior proposal which was not solicited by SkyTel and
which did not otherwise result from a breach of the provisions of the
merger agreement described above under "--The Merger Agreement--No
Solicitation," if SkyTel has complied with its notice requirements and
paid the termination fee; or
. by MCI WorldCom, if SkyTel or any of its directors or officers has taken
any of the actions that would be prohibited by the covenant described in
"--The Merger Agreement--No Solicitation" above.
Termination Fees. If the merger agreement is terminated:
. by MCI WorldCom or SkyTel as described above in the second or third
clause under "--The Merger Agreement--Termination" above at a time when
a takeover proposal has been made to SkyTel or made directly to SkyTel
stockholders generally or has otherwise become publicly known or any
person has publicly announced an intention to make a takeover proposal;
. by SkyTel as described above in the sixth clause under "--The Merger
Agreement--Termination;" or
. by MCI WorldCom as described above in the seventh clause under "--The
Merger Agreement--Termination,"
then SkyTel must pay MCI WorldCom a $25 million termination fee; except that no
termination fee will be payable under the first or third clauses of this
section unless SkyTel enters into a letter of intent, agreement in principle,
acquisition agreement or other similar agreement concerning, or completes, a
takeover proposal involving at least 30% of the stock or assets of SkyTel
within 12 months of termination of the merger agreement.
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The merger agreement further provides that if SkyTel fails to pay any
termination fee when due, SkyTel must pay the costs and expenses, together with
interest on the amount of the termination fee, in connection with any suit by
MCI WorldCom to collect payment which results in a judgment against SkyTel for
the termination fee.
Conduct of Business Pending the Merger. Under the merger agreement, SkyTel
has agreed that, before the effective time of the merger, SkyTel and its
subsidiaries will carry on their businesses in the ordinary course consistent
with past practice. To the extent consistent with that obligation, SkyTel has
agreed to, and will cause its subsidiaries to, use all commercially reasonable
efforts to preserve intact their current business organizations, to keep
available the services of their current officers and employees and to preserve
their relationships with those persons having business dealings with them to
the end that its ongoing business will be unimpaired at the effective time of
the merger.
In addition, SkyTel has agreed that, among other things and subject to some
exceptions, neither it nor any of its subsidiaries will:
. other than dividends or distributions by a direct or indirect wholly
owned subsidiary of SkyTel to its parent, dividends and distributions by
SkyTel's other subsidiaries, of which SkyTel receives its proportionate
share, and dividends and distributions declared, set aside or paid by
SkyTel as required by and in accordance with the terms of its capital
stock, (1) declare, set aside or pay any dividends or other
distributions on any of its capital stock, (2) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in lieu of or in substitution for shares of its
capital stock, or (3) purchase, redeem or otherwise acquire any shares
of capital stock of SkyTel or its subsidiaries or any other of their
securities or any rights, warrants or options to acquire any such
securities, other than the purchase, redemption or other acquisition of
SkyTel stock options as required by the SkyTel stock plans;
. issue, deliver, sell, grant, pledge or otherwise encumber any shares of
capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such
securities, other than (1) issuances of stock options representing in
the aggregate not more than 50,000 shares of SkyTel common stock in the
ordinary course of business, consistent with past practice, to new
employees of SkyTel, (2) in accordance with SkyTel's rights agreement,
(3) issuances of shares of SkyTel common stock pursuant to outstanding
stock options, (4) issuances of SkyTel common stock upon conversion of
the SkyTel convertible exchangeable preferred stock, and (5) issuances
of SkyTel common stock under the stock option agreement described under
"--The Stock Option Agreement" beginning on page 49;
. amend the certificate of incorporation of SkyTel, the by-laws of SkyTel
or other comparable organizational documents;
. acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other
manner, any business or any person, other than purchases of raw
materials or supplies in the ordinary course of business consistent with
past practice, provided that this will not prohibit (1) any merger or
consolidation of a direct or indirect wholly owned subsidiary of SkyTel
with and into SkyTel or another direct or indirect wholly owned
subsidiary of SkyTel, (2) the sale of a substantial portion of the
assets of a direct or indirect wholly owned subsidiary of SkyTel to
SkyTel or another direct or indirect wholly owned subsidiary of SkyTel,
or (3) the creation of new, wholly owned subsidiaries of SkyTel
organized to conduct activities expressly permitted by the merger
agreement;
. sell, lease, license, mortgage or otherwise encumber or subject to any
lien or otherwise dispose of any of its properties or assets, other than
(1) sales or licenses of finished goods and services in the ordinary
course of business consistent with past practice, or (2) sales of any
properties or assets of a direct or indirect wholly owned subsidiary of
SkyTel to SkyTel or another direct or indirect wholly owned subsidiary
of SkyTel;
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. incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of SkyTel or any
of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, except for (1)
borrowings under a specified credit, security guaranty and pledge
agreement dated as of December 21, 1995 with The Chase Manhattan Bank,
Credit Lyonnais and JP Morgan Securities, Inc., (2) borrowings under a
specified credit agreement dated December 31, 1998 with Credit Lyonnais
New York Branch, (3) short-term borrowings incurred in the ordinary
course of business (or to refund existing or maturing indebtedness)
consistent with past practice, and (4) intercompany indebtedness between
SkyTel and any of its wholly owned subsidiaries or between SkyTel's
wholly owned subsidiaries;
. make any loans, advances or capital contributions to, or investments in,
any other person;
. make or agree to make any new capital expenditure or expenditures, other
than as set forth in the operating budgets of SkyTel for the fiscal
years ending December 31, 1999 and 2000 that were provided to MCI
WorldCom before the date of the merger agreement in connection with the
negotiations;
. (1) pay, discharge, settle or satisfy any claims, liabilities,
obligations or litigation, other than the payment, discharge, settlement
or satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities recognized or
disclosed in the most recent consolidated financial statements of SkyTel
included in the documents filed by SkyTel with the Securities and
Exchange Commission or incurred since the date of those financial
statements for an amount in cash not to exceed the amount of the
specific reserve relating to that claim, liability, obligation or
litigation included in such financial statements plus $5,000,000 in the
aggregate for all those claims, liabilities, obligations or litigation,
or (2) waive the benefits of, or agree to modify in any manner, any
standstill or similar agreement to which SkyTel or any of its
subsidiaries is a party;
. except as required by law or contemplated by the merger agreement, enter
into, adopt or amend in any material respect or terminate any benefit
plan, collective bargaining agreement, employment agreement, deferred
compensation agreement, consulting agreement, severance agreement,
termination agreement or any other agreement, plan or policy involving
SkyTel or its subsidiaries, and one or more of its directors, officers
or employees, or materially change any actuarial or other assumption
used to calculate funding obligations for any pension plan, or change
the manner in which contributions to any pension plan are made or the
basis on which such contributions are determined;
. except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially
increase benefits or compensation expenses of SkyTel or its
subsidiaries, or as contemplated in the merger agreement or by the terms
of any contract the existence of which does not constitute a violation
of the merger agreement, increase the compensation of any director,
officer or other employee or pay any benefit or amount not required by a
plan or arrangement as in effect on the date of the merger agreement to
any such person;
. take any action that would cause SkyTel's representations and warranties
under the merger agreement relating to the absence of certain changes or
events, including a material adverse change, to become untrue or
incorrect;
. authorize, commit or agree to take, any of the foregoing actions; or
. make any tax election that, individually or in the aggregate, is
reasonably likely to have a material adverse effect on the tax liability
or tax attributes of SkyTel or any of its subsidiaries or settle or
compromise any material income tax liability.
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Other Actions. Except as required by applicable law or as expressly
permitted by the merger agreement, SkyTel and MCI WorldCom have agreed that
neither party nor any of their subsidiaries will voluntarily take any action
that would, or that could reasonably be expected to, result in:
. any of its representations and warranties set forth in the merger
agreement or the stock option agreement that are qualified as to
materiality becoming untrue at the effective time of the merger;
. any of its representations and warranties that are not so qualified
becoming untrue in any material respect at the effective time of the
merger; or
. any of the conditions to the merger set forth in the merger agreement
not being satisfied.
Notice of Changes. In addition, SkyTel and MCI WorldCom have agreed that
each will promptly advise the other orally and in writing if it has knowledge
of:
. any of its representations or warranties and, in the case of MCI
WorldCom, any of those made by Empire Merger contained in the merger
agreement or the stock option agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect;
. its failure and, in the case of MCI WorldCom, the failure by Empire
Merger to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under the
merger agreement or the stock option agreement; and
. any change or event having, or which is reasonably likely to have, a
material adverse effect on it or on the truth of its representations and
warranties or the ability of the conditions of the merger to be
satisfied.
However, no such notification will affect the representations, warranties,
covenants or agreements of the parties, or related remedies, or the conditions
to the obligations of the parties under the merger agreement or the stock
option agreement.
Indemnification. Under the merger agreement, all rights to indemnification
and exculpation from liabilities for acts or omissions occurring at or before
the effective time of the merger, in favor of the current or former directors
or officers of SkyTel and its subsidiaries, as provided in their organizational
documents as in effect on May 28, 1999 and in any indemnification or other
agreements of SkyTel in effect on May 28, 1999, will be assumed by Empire
Merger, as the surviving corporation in the merger, and MCI WorldCom and will
continue in full force and effect after the merger. This will include rights to
advancement of expenses.
If the surviving corporation or any of its successors or assigns:
. consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of the consolidation or
merger; or
. transfers or conveys all or substantially all of its properties and
assets to any person,
then MCI WorldCom will provide that the successors and assigns of the surviving
corporation will assume the obligations regarding indemnification, exculpation
and insurance policies set forth in the merger agreement.
For six years after the effective time of the merger, MCI WorldCom has
agreed to maintain in effect:
. SkyTel's current directors' and officers' liability insurance policy
covering acts or omissions occurring before the effective time of the
merger for each person covered by SkyTel's directors' and officers'
liability insurance policy on May 28, 1999; and
. SkyTel's current fiduciary liability insurance policies covering acts or
omissions occurring before the effective time of the merger for
employees who serve or have served as fiduciaries under or with respect
to any SkyTel benefit plans,
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on terms with respect to that coverage and amounts no less favorable than those
of the policies in effect on May 28, 1999. MCI WorldCom may substitute policies
of MCI WorldCom with respect to coverage and amount no less favorable to those
directors, officers or fiduciaries. However, in no event will MCI WorldCom be
required to pay aggregate premiums for insurance in excess of 200% of the
amount of the aggregate premiums paid by SkyTel in 1998 on an annualized basis,
although MCI WorldCom will nevertheless be obligated to provide as much
coverage as may be obtained for 200% of that amount.
Rights Agreement. SkyTel agreed that its board of directors will take all
further action reasonably requested in writing by MCI WorldCom to render the
stockholder rights under SkyTel's rights agreement dated as of July 26, 1989
inapplicable to the merger and the other related transactions. Except as
provided in the merger agreement and the stock option agreement, SkyTel agreed
that its board of directors will not, without the consent of MCI WorldCom:
. amend the rights agreement; or
. take any action, or make any determination, relating to the rights
agreement, including a redemption of the rights or any action to
facilitate a takeover proposal, as described under "--The Merger
Agreement--No Solicitation" beginning on page 41.
Amendment, Extension and Waiver. Subject to applicable law:
. the merger agreement may be amended by the parties in writing at any
time, except that after the merger agreement has been adopted by the
SkyTel common stockholders, no amendment may be entered into which
requires further approval by SkyTel stockholders or the approval of the
shareholders of MCI WorldCom, unless such further approval is obtained;
and
. at any time before the effective time of the merger, a party may in
writing, extend the time for performance of the obligations of any other
party to the merger agreement, waive inaccuracies in representations and
warranties of any other party contained in the merger agreement or in
any related document and, except as to the agreement described above to
not amend the merger agreement until all requisite approval by SkyTel
stockholders or MCI WorldCom shareholders has been obtained, waive
compliance by any other party with any agreements or conditions in the
merger agreement.
Under Section 251(d) of the Delaware General Corporation Law, no amendment
to the merger agreement made after the adoption of the merger agreement by the
stockholders of SkyTel may, without further stockholder approval, alter or
change the amount or kind of shares, securities, cash, property and/or rights
to be received by SkyTel stockholders in the merger, or alter or change any
terms and conditions of the merger agreement if such alteration or change would
adversely affect the holders of any class or series of stock of SkyTel.
Expenses; Transfer Taxes. Whether or not the merger is completed, all fees
and expenses incurred in connection with the merger, the merger agreement and
the stock option agreement will be paid by the party incurring such fees or
expenses, except as otherwise provided in the merger agreement and the stock
option agreement; however, MCI WorldCom and SkyTel will share equally the
expenses incurred in connection with filing, printing and mailing this document
and the registration statement of which it is a part and the filing fees for
the premerger notification and report forms under the Hart-Scott-Rodino Act.
SkyTel will pay all stock transfer, real estate transfer, documentary,
stamp, recording and other similar taxes, including interest, penalties and
additions to any such taxes, incurred in connection with the merger and related
transactions.
Representations and Warranties. The merger agreement contains customary
representations and warranties relating to, among other things:
. corporate organization and similar corporate matters of MCI WorldCom,
Empire Merger and SkyTel;
. subsidiaries of SkyTel;
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. the capital structure of each of MCI WorldCom, Empire Merger and SkyTel;
. authorization, execution, delivery, performance and enforceability of,
and required consents, approvals, orders and authorizations of
governmental authorities relating to, the merger agreement, the stock
option agreement and related matters of MCI WorldCom, Empire Merger and
SkyTel;
. documents filed by each of MCI WorldCom and SkyTel with the Securities
and Exchange Commission, the accuracy of information contained in such
documents and the absence of undisclosed liabilities of each of MCI
WorldCom and SkyTel;
. the accuracy of information supplied by each of MCI WorldCom and SkyTel
in connection with this document and the registration statement of which
it is a part;
. absence of material changes or events concerning MCI WorldCom or SkyTel;
. outstanding and pending material litigation relating to MCI WorldCom or
SkyTel;
. compliance with applicable laws by each of MCI WorldCom and SkyTel;
. absence of violations and defaults under contracts of SkyTel;
. absence of changes in benefit plans of SkyTel;
. matters relating to the Employee Retirement Income Security Act of 1974
for SkyTel;
. filing of tax returns and payment of taxes by each of MCI WorldCom and
SkyTel;
. required stockholder vote of SkyTel and the absence of a required
shareholder vote for MCI WorldCom;
. satisfaction of state takeover statutes' requirements by SkyTel;
. the absence of actions by MCI WorldCom or SkyTel that would prevent
using the pooling-of-interests method to account for the merger;
. engagement and payment of fees of brokers, investment bankers, financial
advisors and other persons by each of MCI WorldCom and SkyTel;
. receipt of a fairness opinion by SkyTel from its financial advisors;
. intellectual property matters of SkyTel;
. year 2000 matters of MCI WorldCom and SkyTel;
. interim operations of Empire Merger;
. ownership of SkyTel stock by MCI WorldCom or any of its subsidiaries,
including Empire Merger; and
. SkyTel's stockholder rights agreement.
Amendments to the Certificate of Incorporation of the Surviving
Corporation. As of the effective time of the merger, the certificate of
incorporation of the surviving corporation will be substantially identical to
the certificate of incorporation of Empire Merger immediately before the
merger, except that Article I of the certificate of incorporation shall be
amended to read "The name of this corporation is SkyTel Communications, Inc."
For a summary of certain provisions of the SkyTel certificate of incorporation
and the associated rights of SkyTel stockholders, see "Comparison of Rights of
Shareholders of MCI WorldCom and SkyTel" beginning on page 77.
Amendments to the By-laws of the Surviving Corporation. The merger agreement
provides that the by-laws of Empire Merger, as in effect immediately before the
effective time of the merger, will be the by-laws of
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the surviving corporation following the merger until changed or amended. For a
summary of certain provisions of the SkyTel by-laws and the associated rights
of SkyTel stockholders, see "Comparison of Rights of Shareholders of MCI
WorldCom and SkyTel" beginning on page 77.
The Stock Option Agreement
General. Immediately after signing the merger agreement, MCI WorldCom and
SkyTel entered into a stock option agreement. Under that agreement, SkyTel
granted MCI WorldCom an option to purchase up to 7,500,000 shares of SkyTel
common stock at a purchase price per share of $21.23, subject to adjustment, as
described below.
Exercise of the Option. Except as described below, the option is exercisable
in whole or in part at any time after the occurrence of any event entitling MCI
WorldCom to receive the termination fee under the merger agreement. The right
to purchase shares under the stock option agreement will terminate upon the
earliest to occur of:
. the effective time of the merger;
. 12 months after the first occurrence of any event entitling MCI WorldCom
to receive the termination fee; or
. termination of the merger agreement before the occurrence of any event
entitling MCI WorldCom to receive the termination fee, unless MCI
WorldCom has the right to receive a termination fee following such
termination upon the occurrence of certain events, in which case the
option will not terminate until the later of (1) six months following
the time such termination fee becomes payable and (2) the expiration of
the period during which MCI WorldCom has such right to receive a
termination fee.
In spite of the termination of the option, MCI WorldCom will be entitled to
purchase the shares subject to the option if it exercises the option in
accordance with the terms of the stock option agreement before the termination
of the option and the termination of the option will not affect any rights
under the stock option agreement which by their terms do not terminate or
expire before or as of the termination.
Any purchase of shares upon the exercise of the option is subject to
compliance with the Hart-Scott-Rodino Act and the obtaining or making of any
governmental or regulatory consents, approvals, orders, notifications, filings
or authorizations, the failure of which to have obtained or made would make the
issuance of shares subject to the option illegal. In the event that any
governmental or regulatory action has not yet been obtained or made at the time
the option is exercisable which prohibits the exercise of the entire option,
the option may be exercised for a lesser amount of shares than may be then
acquired without such governmental or regulatory action. If MCI WorldCom
receives official notice that such governmental or regulatory action will not
be issued or granted for any shares or it is not issued or granted within the
six-month period after the date on which MCI WorldCom gives SkyTel written
notice of its desire to exercise the option in whole or in part, then MCI
WorldCom may exercise its right to receive cash for any shares subject to the
option for which such governmental or regulatory action will not be issued or
granted or has not been issued or granted within that six-month period.
Adjustments to Number and Type of Securities. The number and type of
securities subject to the option and the purchase price per share will be
adjusted for any change in SkyTel common stock by reason of a stock dividend,
split-up, merger, recapitalization, combination, exchange of shares or similar
transaction, such that MCI WorldCom will receive, upon exercise of the option,
the number and type of securities or property that MCI WorldCom would have
received if the option had been exercised immediately before the occurrence of
such event, or the record date of such event. The number of shares of SkyTel
common stock subject to the option will also be adjusted if:
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. SkyTel issues additional shares of common stock (other than pursuant to
(1) any option, warrant or other right outstanding as of the date of the
stock option agreement pursuant to which SkyTel has an obligation to
issue additional shares; or (2) a stock dividend, split-up, merger,
recapitalization, combination, exchange of shares or similar
transaction); or
. the number of outstanding shares of SkyTel common stock is reduced,
such that the number of shares of SkyTel common stock subject to the option
represents the same percentage of the shares of SkyTel common stock then
outstanding as before the issuance of additional shares or before the reduction
of outstanding shares, without giving effect to shares subject to or issued
under the option.
If SkyTel agrees:
. to consolidate with or merge into any person other than MCI WorldCom or
one of its subsidiaries in a transaction in which SkyTel will not be the
surviving corporation;
. to permit any person other than MCI WorldCom or one of its subsidiaries
to merge into SkyTel in a transaction in which SkyTel will be the
surviving corporation but in which (1) shares of SkyTel common stock
will be exchanged for other securities of SkyTel or any other person or
for other property, or (2) shares of SkyTel common stock outstanding
immediately before the transaction will represent less than 50% of the
outstanding voting securities of the surviving corporation; or
. to sell or otherwise transfer all or substantially all of its assets to
any person other than MCI WorldCom or one of its subsidiaries,
then the agreement will provide that the option will, upon the completion of
such transaction, be converted into or exchanged for an option to acquire the
number and class of shares or other securities or property that MCI WorldCom
would have received for SkyTel common stock if the option had been exercised
immediately before such consolidation, merger, sale or transfer, or the record
date of such event.
Cash Payment For the Option. Instead of purchasing shares of SkyTel common
stock under the option, MCI WorldCom may exercise its right to have SkyTel pay
to MCI WorldCom an amount in cash equal to the number of shares of SkyTel
common stock subject to the option multiplied by the difference between:
. the average closing price on The Nasdaq National Market per share of
SkyTel common stock for the 10 trading days commencing on the 12th
trading day immediately preceding the date on which MCI WorldCom gives
SkyTel written notice of its desire to exercise its right to receive
cash under the option; and
. the purchase price per share under the option.
Limitation on Profits. In addition, the stock option agreement provides that
in no event will MCI WorldCom's total profit from the option plus any
termination fee paid to MCI WorldCom exceed $43.75 million in the aggregate
and, if MCI WorldCom's total profit from the option would otherwise exceed that
amount, MCI WorldCom is required to, at its election:
. reduce the number of shares of SkyTel common stock subject to the
option;
. deliver to SkyTel for cancellation shares of SkyTel common stock
previously purchased by MCI WorldCom pursuant to the option against the
refund of the aggregate purchase price for such shares;
. pay cash to SkyTel; or
. do any combination of the foregoing, so that MCI WorldCom's total profit
from the option plus the termination fee so paid to MCI WorldCom does
not exceed $43.75 million after taking into account the foregoing
actions.
Registration Rights and Listing. MCI WorldCom has rights to require
registration by SkyTel of any shares purchased under the option under the
securities laws if necessary for MCI WorldCom to be able to sell
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or otherwise dispose of any or all purchased shares and to require the listing
of these shares on The Nasdaq National Market or other national securities
exchange.
Assignability. The stock option agreement may not be assigned or delegated
by MCI WorldCom or SkyTel without the prior written consent of the other,
except that MCI WorldCom may assign, in its sole discretion, any or all of its
rights, interests and obligations under the stock option agreement to any
direct or indirect wholly owned subsidiary of MCI WorldCom; but no assignment
will relieve MCI WorldCom of any of its obligations under the stock option
agreement.
The shares subject to the option may not be sold, assigned, transferred or
otherwise disposed of except in an underwritten public offering or to a
purchaser or transferee who would not, to the knowledge of MCI WorldCom,
immediately after such sale, assignment, transfer or disposal, beneficially own
more than 4.9% of the outstanding voting power of SkyTel, except that MCI
WorldCom will be permitted to sell any such shares if the sale is made in
connection with a tender or exchange offer that has been approved or
recommended by a majority of the SkyTel board of directors.
Effect of Stock Option Agreement. The stock option agreement is intended to
increase the likelihood that the merger will be completed on the terms set
forth in the merger agreement. Consequently, some aspects of the stock option
agreement may discourage persons who might now or before the effective time of
the merger be interested in acquiring all of or a significant interest in
SkyTel from considering or proposing such an acquisition, even if such persons
were prepared to offer higher consideration per share for SkyTel common stock
than that implicit in the exchange ratio in the proposed merger or a higher
price per share for SkyTel common stock than the market price.
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COMPARATIVE STOCK PRICES AND DIVIDENDS
MCI WorldCom common stock is quoted on The Nasdaq National Market under the
trading symbol "WCOM" and SkyTel common stock is quoted on The Nasdaq National
Market under the trading symbol "SKYT." The SkyTel preferred stock was, prior
to August 18, 1999, traded on the over-the-counter market and is currently
quoted on The Nasdaq National Market, in each case under the symbol "SKYTP."
The following table sets forth, for the periods indicated, the high and low
sale prices per share of MCI WorldCom common stock and of SkyTel common stock
on The Nasdaq National Market. For the SkyTel preferred stock, the table sets
forth the high and low bid prices per share as reported on the over-the-counter
market for the period prior to August 18, 1999, the high and low sale prices
per share on The Nasdaq National Market for the period from and after August
18, 1999, and the dividends paid on the SkyTel preferred stock. The prices
reported for the over-the-counter market reflect inter-dealer prices without
retail mark-up, mark-down or commission, and may not represent actual
transactions. For current price information, you are urged to consult publicly
available sources. Neither MCI WorldCom nor SkyTel has ever paid dividends on
its common stock.
<TABLE>
<CAPTION>
MCI WorldCom SkyTel SkyTel
Common Stock Common Stock Preferred Stock(1)
------------- ------------- ---------------------
High Low High Low High Low Dividends
------ ------ ------ ------ ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1996:
First Quarter.............. $23.31 $16.25 $21.88 $12.63 $ -- $ -- $.5625
Second Quarter............. 27.72 21.31 17.61 13.50 -- -- .5625
Third Quarter.............. 28.88 18.38 16.75 9.88 -- -- .5625
Fourth Quarter............. 26.13 21.00 16.13 8.13 -- -- .5625
1997:
First Quarter.............. 27.88 21.75 10.13 5.13 -- -- .5625
Second Quarter............. 32.97 21.25 14.88 6.00 -- -- .5625
Third Quarter.............. 37.75 29.88 16.75 10.63 -- -- .5625
Fourth Quarter............. 39.88 28.50 23.88 14.00 -- -- .5625
1998:
First Quarter.............. 44.88 28.00 26.19 19.63 -- -- .5625
Second Quarter............. 48.44 41.63 27.13 19.25 -- -- .5625
Third Quarter.............. 57.88 40.00 25.06 12.94 36.00 26.50 .5625
Fourth Quarter............. 75.75 39.00 24.50 12.00 33.63 20.00 .5625
1999:
First Quarter.............. 94.25 69.00 28.88 14.06 40.75 25.50 .5625
Second Quarter............. 96.75 80.31 23.75 13.13 39.75 27.50 .5625
Third Quarter (through
August 25, 1999).......... 91.38 73.31 22.19 18.44 39.00 31.00 --
</TABLE>
- --------
(1) The high and low bid prices per share as reported on the over-the-counter
market for the periods prior to the third quarter of 1998 are not available
without unreasonable effort or expense.
The following table sets forth:
. the last reported sale price of one share of MCI WorldCom common stock,
as reported on The Nasdaq National Market;
. the last reported sale price of one share of SkyTel common stock, as
reported on The Nasdaq National Market;
. the market value of one share of SkyTel common stock on an equivalent
per share basis; and
. the high and low bid prices of one share of SkyTel preferred stock, as
reported on the over-the-counter market (on May 27, 1999) (which
reflects inter-dealer prices without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions), and
the last reported sale price of one share of SkyTel preferred stock, as
reported on The Nasdaq National Market (on August 25, 1999),
52
<PAGE>
in each case on May 27, 1999, which was the last full trading day before the
public announcement of the proposed merger, and on August 25, 1999, which was
the last full trading day for which such information could be obtained before
the date of this document. The equivalent price per share data for SkyTel
common stock has been determined by multiplying the last reported sale price of
one share of MCI WorldCom common stock on each of these dates by an assumed
exchange ratio of 0.25.
<TABLE>
<CAPTION>
Equivalent
MCI Price Per
WorldCom SkyTel Share of SkyTel SkyTel
Date Common Stock Common Stock Common Stock Preferred Stock
- ---- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
May 27, 1999......... $84.94 $19.31 $21.23 $30.44
August 25, 1999...... 81.38 20.44 20.35 37.00
</TABLE>
Currently there are no outstanding shares of the MCI WorldCom convertible
exchangeable preferred stock which will be issued in the merger. Accordingly,
its stock price and dividend information has not been included in this
document. The MCI WorldCom convertible exchangeable preferred stock has been
approved for listing on The Nasdaq National Market, subject to official notice
of issuance.
53
<PAGE>
DESCRIPTION OF MCI WORLDCOM CAPITAL STOCK
The following is a summary of the material terms of the capital stock of MCI
WorldCom and the provisions of its articles of incorporation, bylaws and rights
agreement. It also summarizes relevant provisions of the Georgia Business
Corporation Code, which we refer to as Georgia law. Since the terms of those
articles of incorporation, bylaws and rights agreement, and Georgia law, are
more detailed than the general information provided below, you should only rely
on the actual provisions of those documents and Georgia law. The following
summary of the capital stock of MCI WorldCom is subject in all respects to
applicable Georgia law, MCI WorldCom's articles of incorporation and bylaws and
MCI WorldCom's rights agreement. If you would like to read MCI WorldCom's
articles of incorporation, bylaws or rights agreement, these documents are on
file with the Securities and Exchange Commission, as described under the
heading "Where You Can Find More Information" beginning on page 92. Additional
information regarding the capital stock of MCI WorldCom is contained under the
heading "Comparison of Rights of Shareholders of MCI WorldCom and SkyTel"
beginning on page 77.
General
The authorized capital stock of MCI WorldCom consists of 5,000,000,000
shares of common stock, par value $.01 per share, and 50,000,000 shares of
preferred stock, par value $.01 per share. The MCI WorldCom board of directors
has designated (1) 15,000,000 shares of MCI WorldCom preferred stock as series
B convertible preferred stock, which we refer to as series B preferred stock,
and (2) 5,000,000 shares of MCI WorldCom preferred stock as series 3 junior
participating preferred stock, which we refer to as series 3 preferred stock.
Before completion of the merger, the MCI WorldCom board of directors will
designate 3,750,000 shares of MCI WorldCom preferred stock as series C $2.25
cumulative convertible exchangeable preferred stock, which we refer to as
convertible exchangeable preferred stock. As of July 30, 1999, there were
approximately 1,877,620,578 shares of MCI WorldCom common stock and 11,203,502
shares of MCI WorldCom series B preferred stock outstanding, and no other
shares of MCI WorldCom preferred stock were issued and outstanding.
Common Stock
All of the outstanding shares of MCI WorldCom common stock are fully paid
and nonassessable.
Voting Rights. Each holder of common stock is entitled to cast one vote for
each share held of record on all matters submitted to a vote of shareholders,
including the election of directors. Holders of common stock have no cumulative
voting rights.
Dividends. Holders of common stock are entitled to receive dividends or
other distributions declared by the board of directors. The right of the board
of directors to declare dividends, however, is subject to the rights of any
holders of preferred stock of MCI WorldCom and the availability of sufficient
funds under Georgia law to pay dividends.
Liquidation Rights. In the event of the dissolution of MCI WorldCom, MCI
WorldCom common shareholders will share ratably in the distribution of all
assets that remain after it pays all of its liabilities and satisfies its
obligations to the holders of any preferred stock, as provided in the MCI
WorldCom articles of incorporation.
Preemptive and Other Rights. Holders of common stock have no preemptive
rights to purchase or subscribe for any stock or other securities of MCI
WorldCom. In addition, there are no conversion rights or redemption or sinking
fund provisions with respect to the common stock. The MCI WorldCom board of
directors may issue additional shares of authorized common stock without
shareholder approval. If they decide to issue shares to persons friendly to
current management, they could render more difficult or discourage an attempt
to obtain control of MCI WorldCom by means of a merger, tender offer, proxy
contest or otherwise.
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<PAGE>
This could protect the continuity of MCI WorldCom's management and possibly
deprive shareholders of an opportunity to sell their shares of common stock at
prices higher than the prevailing market prices. Any additional shares also
could be used to dilute the stock ownership of persons seeking to obtain
control of MCI WorldCom.
Transfer Agent. The transfer agent and registrar for the common stock is The
Bank of New York, 101 Barclay Street--12W, New York, New York 10286.
Preferred Stock
The board of directors is authorized to issue shares of preferred stock at
any time, without shareholder approval. It has the authority to determine all
aspects of those shares, including the following:
. the designation and number of shares;
. the dividend rate and preferences, if any, which dividends on that
series of preferred stock will have compared to any other class or
series of capital stock of MCI WorldCom;
. the voting rights, if any;
. the voluntary and involuntary liquidation prices;
. the conversion or exchange privileges, if any, applicable to that
series;
. the redemption price or prices and the other terms of redemption, if
any, applicable to that series; and
. sinking fund provisions.
Any of these terms could have an adverse effect on the availability of
earnings for distribution to the holders of MCI WorldCom common stock or for
other corporate purposes. Voting rights of holders of preferred shares could
adversely affect the voting power of common shareholders and could have the
effect of delaying, deferring or impeding a change of control of MCI WorldCom.
This could protect the continuity of MCI WorldCom's management and possibly
deprive shareholders of an opportunity to sell their shares of common stock at
prices higher than the prevailing market prices.
Series B Preferred Stock
Dividends. The holders of MCI WorldCom series B preferred stock are entitled
to receive cumulative dividends when, as and if declared by the board of
directors out of funds legally available for such dividends. Cumulative
dividends accrue from the issue date of the shares of series B preferred stock,
at the rate per share of $0.0775 per annum. Those dividends must be paid before
any dividends can be set apart for or paid upon the MCI WorldCom common stock
or any other stock ranking as to dividends junior to the series B preferred
stock in any year.
Dividends are only payable in cash, except for payment of accrued but unpaid
dividends upon conversion or redemption of the series B preferred stock, as
described below. MCI WorldCom is not permitted to set apart for or pay upon the
MCI WorldCom common stock any extraordinary cash dividend, as described below,
unless at the same time MCI WorldCom sets apart for or pays 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 that share if the holder of that share had converted that share into
shares of MCI WorldCom common stock immediately before the record date for the
extraordinary cash dividend.
The term "extraordinary cash dividend" means, with respect to any cash
dividend or cash distribution paid on any date, the amount, if any, by which
all cash dividends and cash distributions on the MCI WorldCom common stock paid
during the consecutive 12-month period ending on and including that date
exceeds, on a per share of common stock basis, 10% of the average daily closing
price of the common stock over that 12-month period.
55
<PAGE>
Voting Rights. Holders of series B preferred stock are entitled to cast one
vote per share on all matters submitted to a vote of shareholders, including
the election of directors. The holders of the series B preferred stock and the
holders of common stock will vote together as a single class, unless otherwise
provided by law or the MCI WorldCom articles of incorporation. The approval of
at least a majority of the votes entitled to be cast by the holders of issued
and outstanding shares of series B preferred stock is required to adversely
change the rights, preferences or privileges of the series B preferred stock.
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 MCI WorldCom will
not be deemed to affect adversely the series B preferred stock.
Conversion Rights. Holders of series B preferred stock have the right to
convert any or all of their shares, at any time, into shares of common stock at
a rate of 0.0973912 shares of MCI WorldCom common stock for each share of
series B preferred stock, subject to adjustment. Upon any conversion, the
holder will also be entitled to receive all accrued and unpaid dividends on the
shares of series B preferred stock surrendered for conversion, which will be
payable in cash or, at the option of MCI WorldCom, in shares of its common
stock, based on its fair market value.
Redemption Provisions. The MCI WorldCom series B preferred stock is not
redeemable by MCI WorldCom before September 30, 2001. After that time, MCI
WorldCom will have the right to redeem any or all of the shares of series B
preferred stock 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. MCI WorldCom has the option to pay any or all of the redemption price,
including accrued dividends, in cash or in shares of its common stock, based on
its fair market value.
Adjustment for Consolidation or Merger. In order to protect the interests of
the holders of series B preferred stock, the MCI WorldCom articles of
incorporation provide for customary adjustments of the conversion price,
redemption price and related terms in the case of certain mergers,
consolidations or other capital transactions.
Liquidation Rights. In the event of the liquidation, dissolution or winding
up of the business of MCI WorldCom, the holders of series B preferred stock are
entitled to receive a liquidation preference for each share in an amount equal
to the sum of $1.00 plus all accrued and unpaid dividends thereon.
Series C $2.25 Cumulative Convertible Exchangeable Preferred Stock
General. The MCI WorldCom convertible exchangeable preferred stock will rank
equally with the series B preferred stock with respect to dividends and
liquidation rights but senior to the common stock and to the series 3 junior
participating preferred stock. The shares of MCI WorldCom convertible
exchangeable preferred stock will not be subject to any sinking fund. Unless
converted or redeemed, they will have perpetual maturity.
We have described below the material terms of the MCI WorldCom convertible
exchangeable preferred stock. However, there are certain tax consequences which
may result from your holding the MCI WorldCom convertible exchangeable
preferred stock which we have not addressed, including those relating to
dividends, interest, redemptions, exchange, conversion, sale or other aspects
of the MCI WorldCom convertible exchangeable preferred stock. We urge you to
contact your personal tax advisor concerning those and other tax aspects of
holding MCI WorldCom convertible exchangeable preferred stock.
Dividends. The holders of the MCI WorldCom convertible exchangeable
preferred stock are entitled to receive, when, as and if declared by MCI
WorldCom's board of directors out of funds of MCI WorldCom legally available
therefor, cash dividends at the annual rate of $2.25 per share, payable in four
equal quarterly installments on January 15, April 15, July 15, and October 15,
commencing January 15, 2000. If that day is not a business day, dividends will
be payable on the next business day. If the quarterly dividend payable on
October 15, 1999 to the holders of the SkyTel preferred stock is declared by
the SkyTel board of directors
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<PAGE>
before the merger is consummated, then the first quarterly dividend of the MCI
WorldCom convertible exchangeable preferred stock payable on January 15, 2000
will be $0.5625 per share. If the quarterly dividend payable to the holders of
SkyTel preferred stock on October 15, 1999 has not been declared before the
merger is consummated, then the first quarterly dividend of the MCI WorldCom
convertible exchangeable preferred stock payable on January 15, 2000 will be
equal to $1.125 per share of MCI WorldCom convertible exchangeable preferred
stock. Accordingly, in either event the holders of the SkyTel preferred stock
will receive the full dividend to which they would have been entitled in the
absence of the merger. Dividends on the convertible exchangeable preferred
stock are cumulative and accrue without interest.
The dividends are payable to holders of record as they appear on the stock
books on the record dates fixed by the board of directors. The record date will
be not more than 60 days nor less than 10 days preceding the payment dates
fixed by the board of directors. However, holders of shares of convertible
exchangeable preferred stock called for redemption on a redemption date falling
between a dividend payment record date and the dividend payment date will
receive that dividend payment, together with all other accrued and unpaid
dividends, on the date fixed for redemption, instead of receiving the dividend
on the dividend payment date. Dividends payable for any period greater or less
than a full quarterly dividend period will be computed on the basis of a 360-
day year consisting of twelve 30-day months.
If dividends are not paid in full upon the convertible exchangeable
preferred stock and any other preferred stock ranking on a parity as to
dividends with the convertible exchangeable preferred stock, other than the
series B preferred stock, all dividends paid or declared and set aside for
payment upon the shares will be paid or declared and set aside for payment pro
rata. As a result, in all cases the amount of dividends declared per share will
bear the same ratio to each other that accrued and unpaid dividends per share
on the shares bear to each other. Except as described above, unless all accrued
and unpaid dividends on the convertible exchangeable preferred stock have been
paid or declared and set aside for payment, neither dividends nor other
distributions may be made upon the common stock or on any other stock ranking
junior to or on a parity with the convertible exchangeable preferred stock as
to dividends, except for dividends paid solely in:
. common stock;
. other capital stock ranking junior as to dividends to the convertible
exchangeable preferred stock; and
. rights to acquire the foregoing stock.
In addition, no common stock or any other stock ranking junior to or on a
parity with the convertible exchangeable preferred stock as to dividends may be
redeemed, purchased or otherwise acquired by MCI WorldCom, unless all accrued
and unpaid dividends on the convertible exchangeable preferred stock have been
paid or declared and set aside for payment. This restriction does not apply to
(1) repurchases by MCI WorldCom from employees or consultants pursuant to
employee stock option plans, or (2) the conversion of stock of MCI WorldCom
into, or exchange of stock of MCI WorldCom for, stock of MCI WorldCom ranking
junior to the convertible exchangeable preferred stock as to dividends.
The restriction on distributions described above does not apply to any stock
dividend or distributions made in connection with any liquidation, dissolution
or winding up of MCI WorldCom, whether voluntary or involuntary.
Conversion Rights. Holders of MCI WorldCom convertible exchangeable
preferred stock may, at any time, convert their shares into shares of MCI
WorldCom common stock. The number of shares of common stock issuable upon
conversion of each share of convertible exchangeable preferred stock will be
equal to the quotient obtained by dividing $50.00 by the conversion price in
effect on the date of conversion. The initial conversion price will be equal to
$45.00 divided by the exchange ratio in the merger. However, the conversion
price will be adjusted and readjusted from time to time as described below.
Except as may be provided by the board of directors, upon conversion, MCI
WorldCom is not obligated to make any payment or adjustment with respect to
dividends accrued on the convertible exchangeable preferred stock unless the
holder of the shares
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<PAGE>
being converted was the record holder of such shares on the record date for the
payment of such dividends. Upon conversion of the convertible exchangeable
preferred stock, MCI WorldCom will make no payment or adjustment whatsoever
relating to dividends accrued on the MCI WorldCom common stock issuable upon
conversion.
Upon surrender of certificates for shares of convertible exchangeable
preferred stock to be converted, MCI WorldCom will issue the number of shares
of common stock issuable upon conversion thereof and cash for any fractional
shares in an amount equal to the current market price, as described below, of
the common stock on the conversion date. The term "current market price" per
share of MCI WorldCom common stock on any date generally means the average
daily closing prices of the common stock for the 30 consecutive trading days
beginning 45 trading days before such date.
The conversion price is subject to adjustment upon certain events,
including:
. the subdivision or combination of the outstanding common stock;
. the payment of a common stock dividend to holders of common stock; or
. the issuance or sale to all holders of common stock of any shares of
common stock for a consideration per share that is less than the current
market price, as described above, immediately before such issuance or
sale.
The issuance of options exerciseable for common stock or for securities
convertible into common stock or of securities convertible into common stock
are deemed to be the issuance of the underlying common stock for purposes of
adjustments to the conversion price.
No adjustment is required for:
. the issuance of (1) common stock, (2) options exercisable for common
stock or for other securities convertible into common stock or (3)
securities convertible into common stock to employees or directors of
MCI WorldCom, pursuant to employee benefit plans or otherwise, or the
issuance of common stock upon the conversion or exchange therefor;
. the issuance of common stock upon conversion, exercise or exchange of
(1) outstanding options as of the effective date of the merger
exercisable for common stock or for other securities convertible into
common stock, or (2) outstanding securities as of the effective date of
the merger convertible into common stock;
. the issuance of any securities pursuant to a shareholder rights plan; or
. the issuance of common stock upon conversion of the convertible
exchangeable preferred stock.
Whenever the conversion price is adjusted, MCI WorldCom will promptly mail
to holders of convertible exchangeable preferred stock a notice briefly stating
the facts requiring the adjustment and the manner of computing it. No
adjustment in the conversion price need be made unless the adjustment would
require an increase or decrease of at least 1% in the conversion price.
However, any adjustments that are not made will be carried forward and taken
into account in any later adjustment. All adjustment calculations will be made
either to the nearest cent or the nearest 1/100th of a share.
In case of:
. any consolidation or merger of MCI WorldCom with any other entity, other
than a wholly owned subsidiary of MCI WorldCom;
. any sale or transfer of all or substantially all of the assets of MCI
WorldCom; or
. any share exchange pursuant to which all of the outstanding shares of
MCI WorldCom common stock are converted into other securities or
property,
MCI WorldCom will provide holders of shares of convertible exchangeable
preferred stock then outstanding with the right to convert their shares into
the kind and amount of shares of stock and other securities and property
58
<PAGE>
receivable upon that transaction by a holder of the number of shares of MCI
WorldCom common stock into which their shares might have been converted
immediately before the effective date of that transaction. If, in connection
with one of those transactions, holders of shares of MCI WorldCom common stock
are entitled to elect to receive either securities, cash or other assets upon
completion of the transaction, MCI WorldCom will provide each holder of
convertible exchangeable preferred stock with the right to make such an
election to receive such assets on the same terms and conditions applicable to
holders of the common stock.
MCI WorldCom will reserve a sufficient number of shares of authorized common
stock to effect the conversion of all outstanding shares of convertible
exchangeable preferred stock.
Liquidation Rights. In the event of any liquidation, dissolution or winding
up of MCI WorldCom, the holders of shares of convertible exchangeable preferred
stock are entitled to receive out of assets of MCI WorldCom a liquidating
distribution in the amount of:
. $50.00 per share of convertible exchangeable preferred stock, plus
. any accrued and unpaid dividends.
This distribution will be made before any payment is made or any assets are
distributed to holders of MCI WorldCom common stock or any other class of
capital stock of MCI WorldCom ranking junior to the convertible exchangeable
preferred stock as to a liquidation, dissolution or winding up.
If the assets of MCI WorldCom are insufficient to pay the liquidating
distribution in full to holders of convertible exchangeable preferred stock and
any other preferred stock ranking as to any such distribution on a parity with
the convertible exchangeable preferred stock, these holders will share ratably
in any distribution of those assets in proportion to the preferential amounts
to which they are entitled. After payment in full of the liquidating
distribution to which they are entitled, the holders of shares of convertible
exchangeable preferred stock will not be entitled to any other distribution of
assets by MCI WorldCom.
The following transactions are not considered a liquidation, dissolution or
winding up of MCI WorldCom for these purposes:
. a consolidation or merger of MCI WorldCom with another corporation, or
. a sale or transfer of all or part of MCI WorldCom's assets for cash,
securities or other property.
Optional Redemption. MCI WorldCom will have the option to redeem shares of
convertible exchangeable preferred stock, in whole or in part, at any time out
of funds legally available therefor, at the per share redemption prices set
forth below in effect on the date fixed for redemption during the relevant 12-
month period beginning on October 15 of the years shown below, plus any accrued
and unpaid dividends to the redemption date.
<TABLE>
<S> <C> <C> <C>
If Redeemed During If Redeemed During
12-Month Period Redemption Price 12-Month Period Redemption Price
Beginning October 15, Per Share Beginning October 15, Per Share
- --------------------- ---------------- --------------------- ----------------
1998.............. $51.00 2000................. $50.50
1999.............. $50.75 2001................. $50.25
2002 and thereafter.. $50.00
</TABLE>
If MCI WorldCom elects to redeem any shares, it will mail a notice of
redemption to holders of record not less than 30 nor more than 60 days before
the redemption date. If fewer than all of the shares of convertible
exchangeable preferred stock will be redeemed, the MCI WorldCom board of
directors will determine how to select the shares to be redeemed, such as by
lot or pro rata or by any other equitable manner. If the redemption price has
been paid or provided for, including any accrued and unpaid dividends, then on
and after the date fixed for redemption:
.dividends will cease to accrue on the shares called for redemption;
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<PAGE>
. those shares will no longer be deemed to be outstanding; and
. all rights of the holders of those redemption shares as shareholders of
MCI WorldCom will cease, except the right to receive the required
payment, upon surrender of the stock certificates representing those
shares.
Any holder of shares of MCI WorldCom convertible exchangeable preferred
stock selected for redemption may, at any time before the close of business on
the third business day preceding the redemption date, give written notice of
the conversion of any of those shares.
Exchangeability. MCI WorldCom will have the option on any dividend payment
date to issue MCI WorldCom 4.5% Convertible Subordinated Debentures due 2003,
which we refer to as the exchange debentures, in exchange for the convertible
exchangeable preferred stock. MCI WorldCom can only exercise this option in
whole, with respect to all outstanding shares of convertible exchangeable
preferred stock, and not in part. Please see "--The Exchange Debentures"
beginning on page 63. The right of MCI WorldCom to exercise this option is
subject to certain conditions.
If MCI WorldCom exercises this exchange option, holders of shares of
convertible exchangeable preferred stock will be entitled to receive $50.00
principal amount of exchange debentures for each share of convertible
exchangeable preferred stock. However, the exchange debentures will only be
issued in denominations of $1,000 and integral multiples of $1,000. MCI
WorldCom will pay cash for any amounts that are not an integral multiple of
$1,000. MCI WorldCom will mail written notice of its intention to exchange to
each holder of record of the MCI WorldCom convertible exchangeable preferred
stock not less than 30 nor more than 60 days before the date fixed for
exchange.
If MCI WorldCom has taken all required actions to authorize the exchange,
then on the exchange date:
. all of the shares of convertible exchangeable preferred stock will no
longer be deemed outstanding; and
. all rights relating to those shares will terminate, except the right to
receive accrued and unpaid dividends to the exchange date and the right
to receive the exchange debentures upon surrender of the stock
certificates representing those shares.
MCI WorldCom may not exercise this exchange option if all dividends accrued
and payable on the convertible exchangeable preferred stock have not been paid
or declared before the exchange date and funds have not been set aside to
provide for payment in full of the dividends. In addition, the exchange of the
convertible exchangeable preferred stock for the exchange debentures must
comply with any relevant covenants in MCI WorldCom's then existing bank loan
and other debt agreements.
The exchange of convertible exchangeable preferred stock for exchange
debentures may be a taxable event and, therefore, may result in tax liability
for the holder exchanging that stock without any correlative cash payment to
such holder.
Voting Rights. Unless otherwise required by law, holders of convertible
exchangeable preferred stock will have no voting rights except as follows. If
at any time the equivalent of six quarterly dividends payable on the
convertible exchangeable preferred stock are accrued and unpaid and in arrears,
the number of directors of MCI WorldCom will be increased by two and the
holders of all outstanding shares of convertible exchangeable preferred stock
and any capital stock ranking on a parity as to dividends with the shares of
convertible exchangeable preferred stock and having similar voting rights will
be entitled to elect the additional two directors to serve until all dividends
accrued and unpaid have been paid or declared and funds set aside to provide
for payment in full.
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In addition, without the vote or consent of the holders of at least a
majority of shares of the convertible exchangeable preferred stock then
outstanding, MCI WorldCom may not:
. create, issue or increase the authorized number of shares of any class
or series of stock ranking senior to the convertible exchangeable
preferred stock either as to dividends or upon liquidation, dissolution
or winding up, or any security convertible into or exercisable or
exchangeable for such stock; or
. amend, alter or repeal any of the provisions of MCI WorldCom's articles
of incorporation so as to affect adversely any right, preference,
privilege or voting power of the convertible exchangeable preferred
stock.
However, any of the following will not be deemed to affect adversely those
rights, preferences or voting powers: any increase in the amount of authorized
preferred stock, the creation and issuance of other series of preferred stock,
or any increase in the amount of authorized shares of such series or of any
other series of preferred stock, in each case ranking on a parity with or
junior to the convertible exchangeable preferred stock with respect to the
payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up.
Redemption Upon a Fundamental Change. If a fundamental change, as described
below, occurs, each holder of convertible exchangeable preferred stock will
have the right to require MCI WorldCom to repurchase any or all of his or her
shares, which have an aggregate liquidation value that is a multiple of $50.00,
at a price per share equal to $50.00, plus accrued and unpaid dividends to the
repurchase date. MCI WorldCom will have the option to pay all or any part of
the repurchase price upon a fundamental change in shares of common stock of MCI
WorldCom or any successor corporation.
For purposes of calculating the number of shares of common stock issuable
upon the redemption, the value of the common stock will be equal to the average
of the closing sales prices of the common stock for the five trading days
ending on the third trading day immediately before the repurchase date. MCI
WorldCom cannot make payment in shares of common stock unless the shares have
been, or will be no later than the final surrender date (as described below),
registered under the Securities Act, or are freely tradable pursuant to an
exemption under the Securities Act, and are listed on a United States national
securities exchange or quoted on The Nasdaq National Market at the time of
payment.
Within 30 days after a fundamental change takes place, MCI WorldCom must
mail to all holders of record of the convertible exchangeable preferred stock a
notice describing, among other things, the occurrence of the fundamental change
and the resulting repurchase right. MCI WorldCom must publish such notice in
The Wall Street Journal, if then in circulation, or otherwise in another daily
newspaper of national circulation. At least two business days before the
repurchase date, MCI WorldCom must publish a similar notice stating whether and
to what extent the repurchase price will be paid in cash or shares of common
stock of MCI WorldCom or any successor corporation. To exercise the repurchase
right, a holder of convertible exchangeable preferred stock must surrender, on
or before the final surrender date, unless contrary to applicable law, the
stock certificates representing the shares to be repurchased, duly endorsed for
transfer to MCI WorldCom, together with a written notice of election. The
"final surrender date" is the date which is 60 days after the date of the first
of the MCI WorldCom notices described in this paragraph. MCI WorldCom is
required to repurchase the shares on a date it selects that is not less than 10
nor more than 20 days after the final surrender date.
The term "fundamental change" generally means either of the following:
. a "person" or "group" (as those terms are used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becoming, in one
transaction or a series of related transactions, the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act) of shares
representing more than 50% of the total voting power of all outstanding
shares of any class or classes of capital stock of MCI WorldCom entitled
to vote generally in the election of directors; or
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. any of the following:
-- any consolidation of MCI WorldCom with, or merger of MCI
WorldCom into, another entity;
-- any merger of another entity into MCI WorldCom; or
-- any sale, lease or transfer of all or substantially all of
the assets of MCI WorldCom to another entity;
other than a merger:
-- which results in the holders of common stock of MCI WorldCom
immediately before the transaction owning shares of capital
stock of the surviving corporation in such transaction
representing over 40% of the total voting power of all shares
of capital stock of such surviving corporation entitled to
vote generally in the election of directors;
-- in which the shares of the surviving corporation held by such
holders (1) are, or immediately upon issuance will be, listed
on a national securities exchange or quoted on The Nasdaq
National Market, (2) are not subject to any right of
repurchase by the issuer thereof or any third party, and (3)
are not otherwise subject to any encumbrance as a result of
such transaction; and
-- in which (1) the surviving corporation amends its charter to
include the convertible exchangeable preferred stock and its
terms or (2) if the convertible exchangeable preferred stock
has been exchanged for the exchange debentures, the surviving
corporation assumes or guarantees MCI WorldCom's obligations
under the exchange debentures.
However, a fundamental change will not occur if either:
. for any five trading days during the 10 trading days immediately
preceding either the public announcement by MCI WorldCom of the
transaction or the completion of the transaction, the closing
price of the MCI WorldCom common stock is equal to at least 105%
of the conversion price in effect on such trading days; or
. at least 90% of the consideration (excluding cash payments for
fractional shares) in the transaction or transactions to the
holders of MCI WorldCom common stock consists of shares of common
stock that are, or immediately upon issuance will be, listed on a
national securities exchange or quoted on The Nasdaq National
Market, and as a result of such transaction or transactions, the
convertible exchangeable preferred stock becomes convertible into
such common stock.
The right to require MCI WorldCom to repurchase the convertible exchangeable
preferred stock for cash as a result of the occurrence of a fundamental change
could create an event of default under existing or future indebtedness of MCI
WorldCom. As a result, MCI WorldCom could be prevented from repurchasing for
cash the convertible exchangeable preferred stock when required.
Rule 13e-4 under the Securities Exchange Act of 1934 requires the
dissemination of certain information to security holders in the event of an
issuer tender offer and may apply in the event that the repurchase option
becomes available to holders of the convertible exchangeable preferred stock.
MCI WorldCom will comply with this rule to the extent applicable at that time.
The provisions described above would not necessarily afford holders of the
convertible exchangeable preferred stock protection upon the occurrence of
events that would constitute a change in control or in the event of highly
leveraged or other transactions involving MCI WorldCom that may adversely
affect such holders or against a decline in the creditworthiness of MCI
WorldCom.
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Preemptive Rights. Holders of the convertible exchangeable preferred stock
have no preemptive rights to purchase or subscribe for any stock or other
securities.
Reissuance. Any share of convertible exchangeable preferred stock converted,
redeemed or otherwise acquired by MCI WorldCom will be retired and canceled and
assume the status of authorized but unissued shares of preferred stock. It may
thereafter be reissued in the same manner as other authorized but unissued
preferred stock.
Listing. The convertible exchangeable preferred stock has been approved for
listing on The Nasdaq National Market under the symbol "WCOMP," subject to
official notice of issuance.
Registrar and Transfer Agent. The Bank of New York will serve as registrar
and transfer agent for the MCI WorldCom convertible exchangeable preferred
stock.
The Exchange Debentures
General. If MCI WorldCom elects to exchange the convertible exchangeable
preferred stock for the exchange debentures, MCI WorldCom will issue the
exchange debentures pursuant to an indenture entered into between MCI WorldCom
and a financial institution as trustee to be designated by MCI WorldCom
substantially in the form of the indenture on file with the Commission. The
exchange debentures will be issued at a rate of $50.00 principal amount of
exchange debentures for each share of MCI WorldCom convertible exchangeable
preferred stock as exchanged.
The following summary of the material terms of the exchange debentures is
subject in all respects to the related indenture. If you would like to read the
form of the indenture, which contains the terms of the exchange debentures, it
is on file with the Commission, as described under the heading "Where You Can
Find More Information" beginning on page 92.
The indenture will be subject to and governed by the Trust Indenture Act of
1939. The description of the indenture assumes that MCI WorldCom has entered
into the indenture. MCI WorldCom will sign the indenture when and if it issues
the exchange debentures.
The exchange debentures will be general, unsecured, subordinated obligations
of MCI WorldCom, limited to an aggregate principal amount equal to the
aggregate liquidation value of the MCI WorldCom convertible exchangeable
preferred stock, excluding accrued and unpaid dividends payable upon
liquidation, and will mature on October 15, 2003. The exchange debentures will
be issued initially only in fully registered form, without coupons, and only in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of the exchange
debentures, but MCI WorldCom may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection with the
transaction.
Interest. The exchange debentures will bear interest at the rate of 4.5% per
annum from the date of issuance, or from the most recent interest payment date
to which interest has been paid or provided for, payable semiannually on April
15 and October 15 each year. Interest will be payable to registered holders of
record at the close of business on the April 1 and October 1 next preceding the
interest payment date. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Payments of principal, premium if any, and
interest will be made on the exchange debentures, and transfers of the exchange
debentures will be effected, at the principal office of the paying agent. In
addition, payment of principal, premium, if any, and interest may, at the
option of MCI WorldCom, be made by check mailed to the address of the person
entitled to the payment as it appears in the register of holders of exchange
debentures.
Conversion Rights. Holders of exchange debentures will have the option to
convert their debentures into common stock of MCI WorldCom at any time at the
conversion price then in effect. The conversion price is the same price as the
conversion price of the MCI WorldCom convertible exchangeable preferred stock.
See "--Series C $2.25 Cumulative Convertible Exchangeable Preferred Stock--
Conversion Rights" beginning on
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page 57. The number of shares of MCI WorldCom common stock issuable upon
conversion of any exchange debenture would be determined by dividing the
principal amount of the exchange debentures by the conversion price in effect
on the conversion date. No fractional shares of MCI WorldCom common stock will
be issued upon conversion. Any fractional shares resulting from conversion will
be paid in cash based on the current market price, as described below, of the
common stock on the trading day preceding the date of conversion. If the
exchange debentures are called for redemption, this conversion right will
terminate at the close of business on the third business day preceding the date
fixed for redemption and will be lost if not exercised before that time.
If MCI WorldCom is a party to any transaction as a result of which shares of
common stock will be converted into the right to receive stock, other
securities or other property, each exchange debenture will become convertible
into the kind and amount of shares of stock, securities or other property
receivable (including cash) upon completion of that transaction by a holder of
that number of shares of common stock, or fraction thereof, into which an
exchange debenture was convertible immediately before the transaction. Examples
of these transactions include a merger, consolidation, sale, lease or transfer
of all or substantially all of its assets or reclassification of the common
stock.
The conversion price is subject to adjustment upon certain events,
including:
. the subdivision or combination of the outstanding common stock;
. the payment of a common stock dividend to holders of common stock;
. the issuance of rights, options or warrants to all or
substantially all holders of common stock entitling such holders
to purchase shares of common stock, or securities convertible into
or exchangeable for common stock, for a consideration per share
that is less than the current market price, as described below, on
the applicable record date; and
. the distribution to (1) all holders of common stock of shares of any class
of stock other than common stock, evidences of indebtedness or other
assets other than dividends or cash distributions, or (2) all or
substantially all holders of common stock, rights or warrants to subscribe
for securities (other than those described above).
The issuance of options exerciseable for common stock and securities
convertible into common stock are deemed to be the issuance of the underlying
common stock for purposes of adjustments to the conversion price.
The term "current market price" on any date generally means the average
daily closing stock prices of the common stock for the 30 consecutive trading
days beginning 45 trading days before such date.
Whenever the conversion price is adjusted, MCI WorldCom will promptly mail
to holders of exchange debentures a notice briefly stating the facts requiring
the adjustment and the manner of computing it. No adjustment of the conversion
price is required in any case until cumulative adjustments amount to a change
in the conversion price of 1% more. However, any adjustment that would
otherwise be required to be made will be carried forward and taken into account
in any later adjustment. All adjustment calculations will be made either to the
nearest cent or the nearest 1/100 of a share.
Holders of exchange debentures at the close of business on an interest
payment record date will be entitled to receive the interest payable on the
exchange debentures on the corresponding interest payment date, even if the
exchange debentures are later converted or MCI WorldCom defaults on payment of
the interest due on the interest payment date. However, if a holder surrenders
his or her exchange debentures for conversion during the period from the close
of business on any interest payment record date to the opening of business on
the corresponding interest payment date, the holder must pay an amount equal to
the interest payable on such exchange debentures on such interest payment date,
except for a holder of exchange debentures called for redemption on the
redemption date during that period. A holder of exchange debentures on an
interest payment record date who (or whose transferee) converts exchange
debentures on an interest payment date will receive the interest payment on
such exchange debentures by MCI WorldCom on such date. That converting holder
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need not include payment in the amount of such interest upon surrender of
exchange debentures for conversion. Except as described above, no payment or
adjustment will be made on account of accrued interest upon conversion of
exchange debentures.
Subordination. The payment of the principal of, premium, if any, and
interest on the exchange debentures will, to the extent set forth in the
indenture, be subordinated in right of payment to the prior payment in full of
all senior indebtedness, as described below. No payment with respect to the
principal, interest or premium, if any, on the exchange debentures may be made
by MCI WorldCom in the event and during the continuation of:
. any default in the payment of principal of, or premium, if any,
or interest on any senior indebtedness; or
. an event of default with respect to any bank credit facility
(other than a default in payment of principal, premium, if any,
or interest thereunder of the type described above) permitting
the holders, if any, to accelerate the maturity of the senior
indebtedness, continuing beyond the grace period, specified in
the instrument evidencing such senior indebtedness.
Upon any payment or distribution of assets to creditors upon any dissolution,
winding up, liquidation or reorganization of MCI WorldCom, the holders of all
senior indebtedness will first be entitled to receive payment in full of all
amounts owing to them before the holders of the exchange debentures will be
entitled to receive any payment.
Because of these subordination provisions, in the event of an insolvency of
MCI WorldCom, holders of exchange debentures may recover less, ratably, than
holders of senior indebtedness. The exchange debentures will rank on a parity
with MCI WorldCom's guarantee of indebtedness of one of its subsidiaries.
The term "senior indebtedness" as used above means:
. the principal of and premium, if any, and interest on the
following, whether presently outstanding or incurred or created
in the future:
-- all indebtedness or obligations of MCI WorldCom for money
borrowed (other than that evidenced by the exchange
debentures), including inter-company loans made to MCI
WorldCom, and
-- all indebtedness or obligations of MCI WorldCom which are
evidenced by a note, bond, debenture or similar instrument,
including a purchase money mortgage;
. all obligations constituting debt under MCI WorldCom's bank
credit facilities, as amended, supplemented or replaced from time
to time;
. all obligations of MCI WorldCom:
-- for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction,
-- under interest rate swaps, caps, collars, options and similar
arrangements, and
-- under any foreign exchange contract, currency swap agreement,
futures contract, currency option contract or other foreign
currency hedge;
. all obligations for the payment of money relating to a capitalized
lease obligation;
. any liabilities of others described in the preceding clauses
which MCI WorldCom has guaranteed or which are otherwise its
legal liability; and
. renewals, extensions, refundings, restructurings, amendments and
modifications of any such indebtedness or guarantee.
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However, the term "senior indebtedness" does not include:
. any indebtedness of MCI WorldCom to any of its subsidiaries
except to the extent any such indebtedness is pledged by such
subsidiary as security for any bank debt;
. any indebtedness or guarantee of MCI WorldCom which is not
superior in right of payment to the exchange debentures; and
. accounts payable or any other indebtedness to trade creditors
created or assumed by MCI WorldCom in the ordinary course of
business, which will rank on a parity with the exchange
debentures.
As of the date of this document, substantially all of MCI WorldCom's debt
and capital lease obligations on a consolidated basis, as reflected in its
historical consolidated financial statements which are incorporated by
reference in this document, would be senior to the exchange debentures
according to the terms of the debt and capital lease obligations, or
structurally senior to the exchange debentures by virtue of being subsidiary
debt and capital lease obligations. See "Where You Can Find More Information"
beginning on page 92. MCI WorldCom expects from time to time to incur
additional indebtedness constituting senior indebtedness. The indenture will
not prohibit or limit the incurrence of additional senior indebtedness. In
addition, the exchange debentures will be structurally subordinated to
indebtedness of MCI WorldCom's subsidiaries.
Optional Redemption. MCI WorldCom will have the option at any time to redeem
the exchange debentures, in whole or in part. The redemption prices will be as
set forth below (expressed as percentages of principal amount), plus accrued
interest to the date fixed for redemption, if redeemed during the 12-month
period beginning October 15 of the year indicated:
<TABLE>
<CAPTION>
Redemption
If Redeemed During 12-Month Period Beginning October 15, Price
-------------------------------------------------------- ----------
<S> <C>
1998........................................................ 102.0%
1999........................................................ 101.5%
2000........................................................ 101.0%
2001........................................................ 100.5%
2002 and thereafter......................................... 100.0%
</TABLE>
If MCI WorldCom elects to redeem any exchange debentures, it will mail a
notice of redemption to holders of record not less than 30 nor more than 60
days before the redemption date. If fewer than all of the exchange debentures
will be redeemed, the trustee will select the exchange debentures to be
redeemed by lot or pro rata, as the trustee determines.
Unless MCI WorldCom defaults in making the redemption payment, interest on
the exchange debentures called for redemption ceases to accrue on and after the
redemption date. The only remaining right of the holder would be to receive
payment of the redemption price upon surrender to the paying agent of the
exchange debenture.
Any holder of exchange debentures called for redemption may, at any time
before the close of business on the third business day preceding the redemption
date, give written notice of the conversion of any of the exchange debentures.
Redemption Upon a Fundamental Change. If a fundamental change occurs, each
holder of exchange debentures will have the option to require MCI WorldCom to
repurchase any or all of his or her exchange debentures, that are an integral
multiple of $1,000. The term "fundamental change" is generally the same as
described above under "-- Series C $2.25 Cumulative Convertible Exchangeable
Preferred Stock--Redemption Upon a Fundamental Change" beginning on page 61,
although for this purpose, the definition does not include references to the
convertible exchangeable preferred stock. The purchase price will be equal to
the principal amount of the exchange debentures, plus accrued and unpaid
interest to the final surrender date (as described below).
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For purposes of calculating the number of shares of common stock issuable
upon the redemption, the value of any of the common stock will be equal to the
average of the closing prices of the common stock for the five trading days
ending on the third trading day immediately before the final surrender date.
MCI WorldCom cannot make payment in shares of common stock unless the shares
have been, or will be no later than the repurchase date, registered under the
Securities Act, or are freely tradable pursuant to an exemption under the
Securities Act, and are listed on a United States national securities exchange
or quoted on The Nasdaq National Market at the time of payment.
Within 30 days after a fundamental change takes place, MCI WorldCom must
mail to all holders of record, and beneficial owners as required under
applicable law, of the exchange debentures a notice describing, among other
things, the occurrence of the fundamental change and of the resulting
repurchase right. MCI WorldCom must mail the notice to the trustee and publish
the notice in The Wall Street Journal, if then in circulation, or otherwise in
a daily newspaper of national circulation. At least two business days before
the final surrender date, MCI WorldCom must publish and mail a similar notice
which shall also state whether and to what extent the repurchase price will be
paid in cash or equivalent shares of common stock of MCI WorldCom or any
successor corporation. To exercise the repurchase right, a holder of exchange
debentures must surrender, on or before the final surrender date, unless
contrary to applicable law, the exchange debentures to be repurchased, duly
endorsed for transfer to MCI WorldCom, together with a written notice of
election. The final surrender date is the date which is 60 days after the date
of the first of the MCI WorldCom notices described in this paragraph. MCI
WorldCom is required to repurchase the shares on a date it selects that is not
less than 10 nor more than 20 days after the final surrender date.
The right to require MCI WorldCom to repurchase the exchange debentures for
cash as a result of the occurrence of a fundamental change could create an
event of default under existing or future senior indebtedness of MCI WorldCom.
As a result, any repurchase for cash could, without a waiver, be blocked by the
subordination provisions of the exchange debentures. Failure by MCI WorldCom to
repurchase the exchange debentures when required will result in an event of
default with respect to the debentures whether or not such repurchase is
permitted by the subordination provisions.
Rule 13e-4 under the Securities Exchange Act requires the dissemination of
certain information to security holders in the event of an issuer tender offer
and may apply in the event that the repurchase option becomes available to
holders of the exchange debentures. MCI WorldCom will comply with this rule to
the extent applicable at that time.
The provisions described above would not necessarily give holders of the
exchange debentures protection upon the occurrence of a change in control or in
the event of highly leveraged or other transactions involving MCI WorldCom that
may adversely affect such holders or against a decline in the creditworthiness
of MCI WorldCom.
Events of Default. The following will be events of default under the
indenture:
. failure to pay any interest on any exchange debentures when due,
continued for 30 days;
. failure to pay principal of or premium, if any, on the exchange
debentures when due at maturity, upon redemption or otherwise, including
failure by MCI WorldCom to redeem the exchange debentures when required
as described above under "--Redemption Upon a Fundamental Change,"
beginning on page 66;
. failure to perform any other covenant or agreement of MCI WorldCom set
forth in the exchange debentures or the indenture, continued for 30 days
after written notice of default is given as provided in the indenture;
. failure to pay at maturity or at a date fixed for pre-payment or by
acceleration (other than an acceleration that is withdrawn, cancelled or
otherwise annulled within 10 days following such acceleration) any
principal, premium, if any, or interest payable with respect to any
indebtedness for money borrowed or under any guarantee by MCI WorldCom
in excess of $10 million; and
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. certain events in bankruptcy, insolvency or reorganization of MCI
WorldCom or any of its subsidiaries.
A "default" under the indenture will be an event which is, or after notice
or passage of time, or both, would be an event of default.
If an event of default or default occurs and is continuing and if it is
known to the trustee, the trustee will mail to each holder of exchange
debentures notice of the event of default or default within 90 days after it
occurs. The trustee may withhold the notice if it in good faith determines that
withholding the notice is in the interest of holders of the exchange
debentures, except in the case of an event of default or default in payment of
the principal of or premium, if any, or interest on any exchange debenture.
The trustee is not required to exercise any of its rights or powers under
the indenture at the request or direction of any of the holders of the exchange
debentures, unless the holders offer the trustee satisfactory indemnity. The
holders of a majority in aggregate principal amount of the outstanding exchange
debentures will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or exercising
any trust or power conferred to the trustee, subject to certain exceptions.
If an event of default is continuing, either the trustee or the holders of
at least 25% in aggregate principal amount of the outstanding exchange
debentures may accelerate the maturity of all exchange debentures, except in
the case of an event of default arising out of certain events of bankruptcy,
insolvency or reorganization. The maturity of the exchange debentures
automatically accelerates upon the occurrence of an event of default arising
out of certain events of bankruptcy, insolvency or reorganization. After
acceleration, the holders of a majority in aggregate principal amount of
outstanding exchange debentures may, subject to certain conditions, cancel the
acceleration if such cancellation would not conflict with a judgment or decree
of a court if all events of default, other than the non-payment of amounts
which became due by acceleration, have been cured or waived as provided in the
indenture.
No holder of the exchange debentures can pursue any remedy under the
indenture unless:
. the holder has previously given the trustee written notice of a
continuing event of default;
. the holders of at least 25% in aggregate principal amount of the
outstanding exchange debentures have made written request, and offered
reasonable indemnity, to the trustee to pursue the remedy;
. the trustee has not received from the holders of a majority in aggregate
principal amount of the outstanding exchange debentures a direction
inconsistent with the request; and
. the trustee has failed to comply with the request within 60 days of the
request and offer of indemnity.
However, these limitations do not apply to actions instituted by a holder of
an exchange debenture to enforce:
. payment of the principal of or premium, if any, or interest on such
exchange debenture on or after the due dates expressed in such exchange
debenture; or
. the right to convert the exchange debenture in accordance with the
indenture.
MCI WorldCom will be required to furnish to the trustee annually a statement
of its performance of its obligations under the indenture and as to the
existence of any event of default or any default in the performance of the
obligations.
The holders of a majority in aggregate principal amount of outstanding
exchange debentures may on behalf of the holders of all the exchange debentures
waive any existing event of default or default, other than:
. a default in payment of the principal of or premium, if any, or interest
on any exchange debenture; or
. a failure by MCI WorldCom to convert any exchange debentures into common
stock.
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Merger and Consolidation. So long as the exchange debentures are
outstanding, MCI WorldCom may not consolidate or merge with or into, or sell,
lease, convey, transfer or otherwise dispose of all or substantially all of its
assets to, another entity unless:
. MCI WorldCom is the surviving entity or the successor or transferee is a
corporation organized under the laws of the United States, any state
thereof or the District of Columbia (however, this provision does not
apply in the event of a transaction constituting a fundamental change,
as described above);
. the successor assumes all the obligations of MCI WorldCom under the
exchange debentures and the indenture (in which case all obligations of
MCI WorldCom will terminate); and
. immediately before and after giving effect to such transaction, no
default or event of default exists.
Certain Other Covenants. MCI WorldCom will be required to file all reports
and other information and documents which it is required to file with the
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act and
within 15 days after it files them with the Commission, MCI WorldCom will be
required to file copies of all such reports, information and other documents
with the trustee. MCI WorldCom will be required to mail to the holders of the
exchange debentures any quarterly and annual reports which it mails to its
shareholders.
If MCI WorldCom is not subject to those provisions of the Securities
Exchange Act, it will be required to prepare for the first three quarters of
each year, quarterly financial statements substantially equivalent to those
required by the Commission. MCI WorldCom will also be required to prepare, on
an annual basis, complete audited consolidated financial statements. All such
financial statements will be required to be prepared in accordance with
generally accepted accounting principles consistently applied, except for
changes with which MCI WorldCom's independent accountants concur, and except
that quarterly statements may be subject to year-end adjustments. MCI WorldCom
will be required to cause a copy of such financial statements to be filed with
the trustee and mailed to the holders of the exchange debentures within 50 days
after the close of each of the first three quarters of each fiscal year and
within 95 days after the close of each fiscal year.
The board of directors or the shareholders of MCI WorldCom may not adopt a
plan of liquidation which plan provides for, contemplates or the effectuation
of which is preceded by:
. the sale, lease, conveyance or other disposition of all or substantially
all of the assets of MCI WorldCom otherwise than substantially as an
entirety; and
. the distribution of all or substantially all of the proceeds of such
sale, lease, conveyance or other disposition and of the remaining assets
of MCI WorldCom to the holders of the capital stock of MCI WorldCom,
unless MCI WorldCom shall in connection with the adoption of such plan provide
for, or agrees that prior to making any liquidating distributions it will
provide for, the satisfaction of MCI WorldCom's obligations under the exchange
debentures as to the payment of the principal, premium, if any, and interest.
Satisfaction and Discharge. MCI WorldCom may terminate all of its
obligations under the exchange debentures and the indenture, except for certain
obligations, if:
. all of the exchange debentures (other than destroyed, lost or stolen
exchange debentures which have been replaced or paid or exchange
debentures for whose payment money has been held in trust and thereafter
repaid to MCI WorldCom) have been delivered to the trustee for
cancellation and MCI WorldCom has paid all sums payable by it in
connection with the exchange debentures, or
. if MCI WorldCom irrevocably deposits in trust with the trustee cash or
U.S. government obligations sufficient to pay the principal of and
premium, if any, and interest on the debentures then outstanding to
maturity or to the date fixed for redemption and to pay all other sums
payable by it with respect to the exchange debentures.
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The trustee or paying agent will hold in trust, for the benefit of the
holders of the exchange debentures, the amounts deposited with it. They will
apply the deposited amounts to the payment of the principal of and premium, if
any, and interest on the exchange debentures.
If the trustee or the paying agent is unable to apply any deposited amounts
to the exchange debentures as described above by reason of any legal proceeding
or by reason of any order or judgment of any court or governmental authority,
MCI WorldCom's obligations will be reinstated until such time as the trustee or
paying agent is permitted to apply all such amounts.
Modification. MCI WorldCom and the trustee may amend or supplement the
indenture or the exchange debentures with the consent of the holders of a
majority in aggregate principal amount of the outstanding exchange debentures.
However, no amendment or supplement may, without the consent of each affected
holder of the exchange debentures then outstanding:
. extend the stated maturity of any exchange debenture;
. reduce the rate or extend the time of payment of interest on any
exchange debenture;
. reduce the principal amount on any exchange debenture or premium, if
any, on any exchange debenture;
. impair the right of a holder to institute suit for payment thereof;
. change the currency in which the exchange debentures are payable;
. impair the right of any holder to convert the exchange debentures into
cash, securities or other assets;
. modify the subordination provisions of the indenture in a manner adverse
to the holders of exchange debentures;
. impair the rights of holders to cause MCI WorldCom to repurchase the
exchange debentures upon a fundamental change; or
. reduce the percentage of exchange debenture whose holders must consent
to any such modification.
However, MCI WorldCom and the trustee may amend or supplement the indenture
or the exchange debentures without notice to or consent of any holder of the
exchange debentures:
. to comply with requirements of the indenture concerning liquidation as
described under "--Exchange Debentures--Certain Other Covenants" on page
69 and successor corporations in a consolidation, merger or sale of
substantially all assets as described under "--Exchange Debentures--
Merger and Consolidation" on page 69;
. to provide for uncertificated exchange debentures in addition to or in
place of certificated exchange debentures;
. to cure any ambiguity, defect or inconsistency, or to make any other
change that does not adversely affect the rights of any holder of the
exchange debentures; or
. to comply with the provisions of the Trust Indenture Act of 1939.
Listing. MCI WorldCom is not required to cause the exchange debentures to be
listed or included for trading on any national securities exchange or other
market.
Regarding the Trustee. There may be more than one trustee under the
indenture. Any trustee may resign or be removed with respect to the exchange
debentures, and a successor trustee may be appointed. From time to time, MCI
WorldCom may enter into banking relationships with the trustee.
Rights Plan
MCI WorldCom has adopted a shareholder rights plan pursuant to a rights
agreement with The Bank of New York, as rights agent. The following description
of the rights agreement is subject in its entirety to the
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terms and conditions of the rights agreement. SkyTel stockholders should read
carefully the rights agreement. See "Where You Can Find More Information"
beginning on page 92.
Exercisability of Rights. Under the rights agreement, one right, which we
refer to as an MCI WorldCom right, attaches to each share of MCI WorldCom
common stock outstanding and, when exercisable, entitles the registered holder
to purchase from MCI WorldCom one one-thousandth of a share of MCI WorldCom
series 3 preferred stock at an initial purchase price of $160, subject to the
customary antidilution adjustments. For a description of the terms of the MCI
WorldCom series 3 preferred stock, see "Description of MCI WorldCom Capital
Stock--Series 3 Preferred Stock" beginning on page 72.
The rights will not become exercisable until the earlier of:
. 10 business days following a public announcement that a person or group
has become the beneficial owner of securities representing 15% or more
of the voting power of MCI WorldCom voting stock;
. 10 business days after MCI WorldCom first determines that a person or
group has become the beneficial owner of securities representing 15% or
more of the voting power of MCI WorldCom voting stock; or
. 10 business days, or such later date as may be determined by the MCI
WorldCom board of directors, following the commencement of, or the
announcement of an intention to commence, a tender offer or exchange
offer that would result in a person or group becoming the beneficial
ownership of securities representing 15% or more of the voting power of
MCI WorldCom voting stock (or such later date as the MCI WorldCom board
of directors may determine, but in no event later than the date that any
person or group actually becomes such an owner).
Additionally, at any time a person or a group has become the beneficial
owner of securities representing 15% or more of the voting power of MCI
WorldCom voting stock and MCI WorldCom has registered the securities subject to
the MCI WorldCom rights under the Securities Act of 1933, the flip-in features
of the rights or, at the discretion of the board of directors, the exchange
features of the rights, may be exercised by any holder, except for such person
or group. A summary description of each of these features follows:
"Flip In" Feature. In the event a person or group becomes the beneficial
owner of securities representing 15% or more of the voting power of MCI
WorldCom voting stock, each holder of a right, except for such person or group,
will have the right to acquire, upon exercise of the right, instead of one one-
thousandth of a share of MCI WorldCom series 3 preferred stock, shares of MCI
WorldCom common stock having a value equal to twice the exercise price of the
right. For example, if we assume that the initial purchase price of $160 is in
effect on the date that the flip-in feature of the right is exercised, any
holder of an MCI WorldCom right, except for the person or group that has become
the beneficial owner of securities representing 15% or more of the voting power
of MCI WorldCom voting stock, can exercise his or her right by paying MCI
WorldCom $160 in order to receive from MCI WorldCom shares of common stock
having a value equal to $320.
"Exchange" Feature. At any time after a person or group becomes the
beneficial owner of securities representing 15% or more, but less than 50%, of
the voting power of the MCI WorldCom voting stock, the MCI WorldCom board of
directors may, at its option, exchange all or some of the rights, except for
those held by such person or group, for MCI WorldCom common stock at an
exchange ratio of one share of common stock per right, subject to adjustment,
and cash instead of fractional shares, if any. Use of this exchange feature
means that eligible MCI WorldCom rights holders would not have to pay a
purchase price before receiving shares of common stock.
"Flip Over" Feature. In the event MCI WorldCom is acquired in a merger or
other business combination transaction or 50% or more of the assets or earning
power of MCI WorldCom and its subsidiaries, taken as a whole, are sold, each
holder of an MCI WorldCom right, except for a person or group that is the
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beneficial owner of securities representing 15% or more of the voting power of
the MCI WorldCom voting stock, will have the right to receive, upon exercise of
the right, the number of shares of the acquiring company's capital stock with
the greatest voting power having a value equal to twice the exercise price of
the right.
Redemption of Rights. At any time before the earlier to occur of:
. public disclosure that a person or group has become the beneficial owner
of securities representing 15% or more of the voting power of the MCI
WorldCom voting stock; or
. MCI WorldCom's determination that a person or group has become the
beneficial owner of securities representing 15% or more of the voting
power of the MCI WorldCom voting stock,
MCI WorldCom's board of directors may redeem all of the MCI WorldCom rights at
a redemption price of $0.01 per right, subject to adjustment. The right to
exercise the MCI WorldCom rights, as described under
"--Rights Plan--Exercisability of Rights" on page 71 will terminate upon
redemption, and at such time, the holders of the rights will have the right to
receive only the redemption price for each right held.
Amendment of Rights. At any time before a person or group becomes the
beneficial owner of securities representing 15% or more of the voting power of
MCI WorldCom voting stock, the terms of the MCI WorldCom rights and the rights
agreement may be amended by the MCI WorldCom board of directors without the
consent of the holders of the MCI WorldCom rights, including an amendment to
lower the 15% threshold to not less than the greater of:
. any percentage greater than the largest percentage of the voting power
of all MCI WorldCom voting stock then known to MCI WorldCom to be
beneficially owned by any person or group; and
. 10%.
However, if at any time after a person or group beneficially owns securities
representing 15% or more, or such lower percentage as may be amended in the
rights agreement, of the voting power of the MCI WorldCom voting stock, the MCI
WorldCom board of directors may not adopt amendments to the rights agreement
that adversely affect the interests of holders of the MCI WorldCom rights.
Furthermore, once the rights are no longer redeemable, the MCI WorldCom board
of directors may not adopt any amendment that would lengthen the time period
during which the rights are redeemable.
Termination of Rights. If not previously exercised, the MCI WorldCom rights
will expire on September 6, 2001, unless MCI WorldCom earlier redeems or
exchanges the rights or extends the final expiration date.
Anti-takeover Effects. The MCI WorldCom rights have certain anti-takeover
effects. Once the rights have become exercisable, the rights will cause
substantial dilution to a person or group that attempts to acquire or merge
with MCI WorldCom in certain circumstances. Accordingly, the existence of the
rights may deter potential acquirors from making a takeover proposal or tender
offer. The rights should not interfere with any merger or other business
combination approved by the MCI WorldCom board of directors since MCI WorldCom
may redeem the rights as described above and since a transaction approved by
the MCI WorldCom board of directors would not cause the rights to become
exercisable.
Series 3 Preferred Stock
In connection with the creation of the MCI WorldCom rights, as described
above, the MCI WorldCom board of directors has authorized the issuance of
5,000,000 shares of preferred stock as series 3 junior participating preferred
stock.
MCI WorldCom has designed the dividend, liquidation, voting and redemption
features of the series 3 preferred stock so that the value of one one-
thousandth of a share of series 3 preferred stock approximates the
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value of one share of common stock. Shares of series 3 preferred stock may only
be purchased after the MCI WorldCom rights have become exercisable, and each
share of the series 3 preferred stock:
. is nonredeemable and junior to all other series of preferred stock,
unless otherwise provided in the terms of those series of preferred
stock;
. will have a preferential dividend in an amount equal to the greater of
$10.00 and 1,000 times any dividend declared on each share of common
stock;
. in the event of liquidation, will entitle its holder to receive a
preferred liquidation payment equal to the greater of $1,000 or 1,000
times the payment made per share of common stock;
. will have 1,000 votes, voting together with the common stock and any
other capital stock with general voting rights; and
. in the event of any merger, consolidation or other transaction in which
shares of common stock are converted or exchanged, will be entitled to
receive 1,000 times the amount and type of consideration received per
share of common stock.
The rights of the series 3 preferred stock as to dividends, liquidation and
voting, and in the event of mergers and consolidations, are protected by
customary antidilution provisions.
Certain Charter and Bylaw Provisions
In addition to the MCI WorldCom rights described above, MCI WorldCom's
articles of incorporation and bylaws contain a number of provisions which may
have the effect of discouraging transactions that involve an actual or
threatened change of control. The following description is subject in its
entirety to applicable Georgia law and MCI WorldCom's articles of incorporation
and bylaws.
Election of Directors; Filling Vacancies. Under Georgia law, directors are
elected at each annual shareholder meeting, unless the articles of
incorporation or a bylaw approved by shareholders provides that their terms are
staggered. Additionally, either shareholders or directors may fill any
vacancies on the board of directors, unless the articles of incorporation or a
bylaw approved by the shareholders provides otherwise. The articles of
incorporation may authorize the election of all or certain directors by one or
more classes or series of shares. The articles of incorporation or the bylaws
also may allow the shareholders or the board of directors to fix or change the
number of directors.
The MCI WorldCom bylaws provide that the number of members of the board of
directors is fixed by the board of directors but cannot be less than three.
Currently, MCI WorldCom's board of directors has 17 members. Neither the MCI
WorldCom articles nor the bylaws provide for a staggered board of directors.
MCI WorldCom's bylaws provide that if there is a vacancy with respect to any
seat on the MCI WorldCom board of directors caused by removal or resignation of
a director as provided in the bylaws or an increase in the number of directors
by an action of the board of directors those vacancies will be filled by the
affirmative vote of a majority of the remaining directors, and if the increase
in the number of directors is by action of the shareholders, then the
shareholders will fill any vacancy in the same manner as at an annual meeting.
Notwithstanding the foregoing, in the event the holders of the convertible
exchangeable preferred stock become entitled to elect two directors on account
of unpaid dividends, the MCI WorldCom articles of incorporation will provide
that those holders, voting separately as a class, would have the exclusive
right to fill any vacancy relative to those two directors. A director elected
to fill a vacancy or newly created directorship will serve for the remainder of
the full term of the vacant or newly created directorship and until such
director's successor has been duly elected and qualified.
Under Georgia law, shareholders do not have cumulative voting rights for the
election of directors unless the articles of incorporation so provide. The MCI
WorldCom articles of incorporation do not provide for cumulative voting.
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Limitations on Nomination of Directors. Under MCI WorldCom's bylaws, in
order for a shareholder to nominate a candidate for director, timely notice of
the nomination must be given to and received by MCI WorldCom in advance of the
meeting. Ordinarily, such notice must be given and received not less than 120
nor more than 150 days before the first anniversary of the preceding year's
annual meeting. However, if the date of the annual meeting is advanced by more
than 30 days or delayed by more than 60 days from that anniversary date, then
such notice must be given by the shareholder and received by MCI WorldCom not
earlier than 150 days before the annual meeting and not later than the close of
business on the later of the 120th day before the annual meeting or the 10th
day following the day on which public announcement of the meeting is first
made. In some cases, notice may be delivered and received later if the number
of directors to be elected to the board of directors is increased. The
shareholder submitting the notice of nomination must describe various matters
as specified in the bylaws, including the name, age and address of each
proposed nominee, his or her occupation, the class and number of shares held by
the nominee.
In the case of special meetings of shareholders, only such business will be
conducted, and only such proposals will be acted upon, as are brought pursuant
to MCI WorldCom's notice of meeting. Nominations for persons for election to
the board of directors at a special meeting for which the election of directors
is a stated purpose in the notice of meeting may be made by any shareholder who
complies with the notice and other requirements of the bylaws. If MCI WorldCom
calls a special meeting of shareholders to elect one or more directors, any
shareholder may nominate a candidate, if notice from the shareholder is given
and received not earlier than 150 days before the special meeting and not later
than the close of business on the later of the 120th day before the special
meeting or the 10th day following the day on which public announcement of the
meeting and/or of the nominees proposed by MCI WorldCom is first made. The
notice from the shareholder must also include the same information described
above.
Limitation on Calling Special Meetings of Shareholders. Georgia law allows
the board of directors or any person authorized in the corporation's articles
of incorporation or bylaws to call special meetings of shareholders. Generally,
a special meeting may also be called by holders of at least 25% of all votes
entitled to be cast on any issue proposed to be considered at the special
meeting, or any other percentage as may be provided in the corporation's
articles of incorporation or bylaws.
The MCI WorldCom bylaws provide that a special meeting may be called by the
MCI WorldCom board of directors or the President of MCI WorldCom, and shall be
called by the President of MCI WorldCom at the request of holders of not less
than 40% of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting. Shareholders requesting a special
meeting must describe the purpose or purposes for which the meeting is to be
held (which must be a proper subject for action by the shareholders), and
provide the same information as would be required for such a proposal at an
annual meeting.
Limitations on Proposals of Other Business. In order for a shareholder to
bring other business before a annual meeting, timely notice must be given to
and received by MCI WorldCom within the time limits described above under the
heading "--Certain Charter and Bylaw Provisions--Limitations on Nomination of
Directors." The shareholder's notice must include a description of the proposed
business (which must be a proper subject for action by the shareholders), the
reasons for conducting such business and other matters specified in the bylaws.
Proposals of other business may be considered at a special meeting requested
in accordance with the bylaws only if the requesting shareholder gives and MCI
WorldCom receives a notice containing the same information as required for an
annual meeting at the time the meeting is requested.
Special Redemption Provisions. Under Georgia law, a corporation may acquire
its own shares of capital stock, subject to the requirement that at all times
the corporation must have authorized:
. at least one or more classes of shares that together have unlimited
voting rights; and
. at least one or more classes of shares (which may be the same class or
classes as those with unlimited voting rights) that together are
entitled to receive the net assets of the corporation upon dissolution.
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In addition, a corporation's acquisition of its own shares of capital stock is
considered a distribution under Georgia law. As a result, these acquisitions
are subject to the restrictions on distributions set forth in the corporation's
articles of incorporation and Georgia law.
MCI WorldCom's articles of incorporation contain provisions allowing MCI
WorldCom to redeem shares of its capital stock from some foreign shareholders
in order to enable it to continue to hold certain common carrier radio
licenses. These provisions are intended to cause MCI WorldCom to remain in
compliance with the Communications Act of 1934, and related regulations.
Under these provisions, if the percentage of capital stock owned by foreign
shareholders exceeds 20%, or such other percentage as may be specified by the
Communications Act and related regulations, MCI WorldCom has the right to
redeem the excess shares held by them at a specified amount based on then
recent trading prices. After MCI WorldCom determines that any excess shares
exist, those excess shares will not be considered outstanding for purposes of
determining the vote required on any matter submitted to shareholders of MCI
WorldCom. Similarly, those excess shares will not have the right to receive any
dividends or other distributions, including distributions in liquidation. The
redemption price may be paid in cash, securities or a combination of both. MCI
WorldCom may require confirmation of citizenship from any record or beneficial
holders of shares, or any transferee, as a condition to registration or
transfer of those shares.
Business Combination Restrictions. Under Georgia law, Georgia corporations
may adopt a provision in their bylaws requiring that business combinations be
approved by a special vote of the board of directors and/or the shareholders
unless specified fair pricing criteria are met. Georgia corporations may also
adopt a provision in their articles of incorporation or bylaws which requires
that business combinations with interested shareholders be approved by a super-
majority vote. MCI WorldCom has not adopted either of these provisions.
Instead, MCI WorldCom's articles contain provisions governing some types of
business combinations, as described below.
The MCI WorldCom articles contain a provision that requires the approval by
the holders of at least 70% of the voting power of the outstanding shares of
any class of capital stock of MCI WorldCom entitled to vote generally in the
election of directors as a condition for business transactions, as described
below, involving MCI WorldCom and a related person, as described below, or in
which a related person has an interest, unless:
. the business transaction is approved by at least a majority of MCI
WorldCom's continuing directors, as described below, then serving on the
board of directors, but if the votes of those continuing directors would
have been insufficient to constitute an act of the board of directors,
then the unanimous vote of the continuing directors so long as there are
at least three continuing directors serving on the board of directors at
the time of the unanimous vote will be sufficient to approve the
transaction; or
. certain minimum price and other requirements are met.
A "business transaction" means:
. any merger, share exchange or consolidation involving MCI WorldCom or
any of its subsidiaries;
. any sale, lease, exchange, transfer or other disposition by MCI WorldCom
or any of its subsidiaries of more than 20% of its assets;
. any sale, lease, exchange, transfer or other disposition of more than
20% of the assets of an entity to MCI WorldCom or a subsidiary of MCI
WorldCom;
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. the issuance, sale, exchange, transfer or other disposition by MCI
WorldCom or a subsidiary of MCI WorldCom of any securities of MCI
WorldCom or any subsidiary of MCI WorldCom in exchange for cash,
securities or other property having an aggregate fair market value of
$15 million or more;
. any merger, share exchange or consolidation of MCI WorldCom with any
subsidiary of MCI WorldCom in which MCI WorldCom is not the surviving
corporation and the charter of the surviving corporation does not
contain provisions similar to the business combination restrictions in
the MCI WorldCom articles of incorporation;
. any recapitalization or reorganization of MCI WorldCom or
reclassification of its securities which 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;
. any liquidation, spin off, split off, split up or dissolution of MCI
WorldCom; and
. any agreement, contract or other arrangement providing for any of the
business transactions described above or having a similar purpose or
effect.
A "related person" means a person or entity which, together with its
affiliates and associates, beneficially owns 10% or more of MCI WorldCom's
outstanding voting stock or who had that level of beneficial ownership:
. at the time of entering into the definitive agreement providing for the
business transaction;
. at the time of adoption by the board of directors of a resolution
approving such transaction; or
. as of the record date for the determination of shareholders entitled to
vote on or consent to the business transaction.
A "continuing director" means a director of MCI WorldCom who either:
. was a member of the board of directors on September 15, 1993; or
. who became a director of MCI WorldCom after that date, and whose
election, or nomination for election by the shareholders, was approved
by at least a majority of the continuing directors then on the board of
directors;
provided that any director who is a related person with an interest in the
business transaction to be voted upon, other than a proportionate interest as a
shareholder of MCI WorldCom, will not be considered to be a continuing
director.
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COMPARISON OF RIGHTS OF SHAREHOLDERS
OF MCI WORLDCOM AND SKYTEL
Upon completion of the merger, SkyTel stockholders will become holders of
MCI WorldCom stock and their rights will be governed by the Georgia Business
Corporation Code, which we refer to as Georgia law, MCI WorldCom's articles of
incorporation and bylaws and MCI WorldCom's rights agreement. The rights of
SkyTel stockholders are governed by the Delaware General Corporation Law, which
we refer to as Delaware law, SkyTel's certificate of incorporation and by-laws
and SkyTel's rights agreement.
The following is a summary of the material differences between the rights of
shareholders of MCI WorldCom and SkyTel, but does not purport to be a complete
statement of all such differences. SkyTel stockholders should read carefully
the relevant provisions of Georgia law, Delaware law, MCI WorldCom's articles
of incorporation, bylaws and rights agreement and SkyTel's certificate of
incorporation, by-laws and rights agreement. See "Where You Can Find More
Information," beginning on page 92.
Capitalization
MCI WorldCom
MCI WorldCom's authorized capital stock is described above under
"Description of MCI WorldCom Capital Stock--General" on page 54.
SkyTel
The total number of authorized shares of capital stock of SkyTel consists of
100,000,000 shares of common stock, par value $.01 per share, and 25,000,000
shares of preferred stock, par value $.01 per share, of which 3,750,000 shares
have been designated as $2.25 cumulative convertible exchangeable preferred
stock and 750,000 shares have been designated as series C junior participating
preferred stock.
Voting Rights
MCI WorldCom
Each holder of common stock is entitled to cast one vote for each share held
of record on all matters submitted to a vote of shareholders, including the
election of directors. Holders of common stock have no cumulative voting
rights.
SkyTel
Each holder of common stock is entitled to cast one vote for each share held
of record on all matters submitted to a vote of stockholders, including the
election of directors. Holders of common stock have no cumulative voting
rights.
Number and Election of Directors
MCI WorldCom
Under Georgia law, directors are elected at each annual shareholder meeting,
unless the articles of incorporation or a bylaw approved by shareholders
provides that their terms are staggered. The articles of incorporation may
authorize the election of all or certain directors by one or more classes or
series of shares. The articles of incorporation or the bylaws also may allow
the shareholders or the board of directors to fix or change the number of
directors.
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The MCI WorldCom bylaws provide that the number of members of the board of
directors is fixed by the board of directors but cannot be less than three.
Currently, MCI WorldCom's board of directors has 17 members. Neither the MCI
WorldCom articles nor the bylaws provide for a staggered board of directors.
The MCI WorldCom articles of incorporation provide that the directors shall be
elected by a majority of shares of all classes or series of shares with voting
rights. No class or series of MCI WorldCom shares has a right to elect any
director solely by vote of such class or series, except that the holders of
convertible exchangeable preferred stock would have the right to elect two
directors if dividends remain unpaid for six quarters, as described under
"Description of MCI WorldCom Capital Stock -- Series C $2.25 Cumulative
Convertible Exchangeable Preferred Stock" beginning on page 56.
Under Georgia law, shareholders do not have cumulative voting rights for the
election of directors unless the articles of incorporation so provide. The MCI
WorldCom articles of incorporation do not provide for cumulative voting.
SkyTel
Under Delaware law, directors are elected at each annual meeting of
stockholders unless the certificate of incorporation or by-laws provide
otherwise, or if their terms are staggered. The certificate of incorporation
may authorize the election of certain directors by one or more classes or
series of shares and the certificate of incorporation or by-laws may provide
for staggered terms for directors.
The SkyTel certificate of incorporation and by-laws provide that the number
of members of the board of directors is fixed by the board of directors but
cannot be less than three or more than 15 people. Currently, SkyTel's board of
directors has 10 members. SkyTel's certificate of incorporation and by-laws
provide for a staggered board of directors consisting of three classes of
directors. Under SkyTel's certificate of incorporation and by-laws, at each
annual meeting of stockholders, the successors of the class of directors whose
term expires at the meeting will be elected to hold office for a term expiring
at the annual meeting of stockholders held in the third year following the year
of their election.
Under Delaware law, stockholders do not have cumulative voting rights for
the election of directors unless the certificate of incorporation so provides.
SkyTel's certificate of incorporation does not provide for cumulative voting or
for the election of directors by written consent of stockholders.
Vacancies on the Board of Directors
MCI WorldCom
Under Georgia law, either shareholders or directors may fill any vacancies
on the board of directors, unless the articles of incorporation or a bylaw
approved by the shareholders specifically regulate the filling of any such
vacancies. However, any such vacancy must be filled according to the articles
of incorporation to the extent the articles provide that a class of
shareholders may fill a vacancy created by the removal or resignation of a
director elected by that class. Since no individual class or series of shares
of MCI WorldCom stock, other than the convertible exchangeable preferred stock
in certain limited circumstances, has a right to elect any directors, vacancies
on the board of directors of MCI WorldCom will be filled in accordance with MCI
WorldCom's bylaws which provide that if there is a vacancy on the MCI WorldCom
board of directors caused by removal or resignation of a director as provided
in the bylaws or an increase in the number of directors by an action of the
board of directors, those vacancies will be filled by the affirmative vote of a
majority of the remaining directors, and if the increase in the number of
directors is by action of the shareholders, then the shareholders will fill any
vacancy in the same manner as at an annual meeting. A director elected to fill
a vacancy or newly created directorship will serve for the remainder of the
full term of the vacant or newly created directorship and until such director's
successor has been duly elected and qualified. The holders of the convertible
exchangeable preferred stock have the sole right to fill any vacancies created
by the removal or resignation of either director appointed by them.
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SkyTel
Under Delaware law, unless the certificate of incorporation or by-laws
provide otherwise, vacancies on the board of directors may be filled by the
stockholders or the directors. SkyTel's certificate of incorporation and by-
laws provide that subject to the rights of holders of any class or series of
stock having a preference over the common stock as to dividends or upon
liquidation to elect additional directors under certain circumstances,
vacancies and newly created directorships resulting from an increase in the
authorized number of directors will be filled solely by the affirmative vote of
a majority of the remaining directors then in office, even if less than a
quorum, except as may be required by law. A director elected to fill a vacancy
or newly created directorship will serve for the remainder of the full term of
the class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor has been elected and qualified.
Removal of Directors
MCI WorldCom
Georgia law provides that directors may be removed with or without cause by
a majority of the votes entitled to be cast, unless director terms are
staggered or the articles of incorporation of a bylaw adopted by the
shareholders provides that directors may be removed only for cause. However, if
a director is elected by a particular voting group of shareholders, that
director may only be removed by the requisite vote of that voting group. MCI
WorldCom's bylaws provide that any or all directors may be removed with or
without cause. Because directors' terms are not staggered and no particular
voting group of shareholders have authority to elect a director (other than the
holders of convertible exchangeable preferred stock if they have become
entitled to elect two directors), any or all directors of MCI WorldCom may be
removed with or without cause by a majority vote of shares of voting stock of
MCI WorldCom. Holders of convertible exchangeable preferred stock would have
the sole right to remove either of the directors appointed by them.
SkyTel
SkyTel's certificate of incorporation provides that, subject to the rights
of the holders of any class or series of stock having a preference over the
common stock as to dividends or upon liquidation to elect additional directors
under certain circumstances, any director may be removed from office only for
cause by the affirmative vote of at least 80% of the stock of SkyTel entitled
to vote in the election of directors, voting together as a single class.
However, under Delaware law, if holders of any class or series are entitled to
elect one or more directors by the certificate of incorporation, only the
holders of the outstanding shares of that class or series may vote on the
removal of those directors for cause. Holders of SkyTel convertible
exchangeable preferred stock under certain circumstances will have the right to
elect two directors.
Amendments to Charter
MCI WorldCom
Georgia law allows MCI WorldCom's board of directors to make only relatively
technical amendments to the articles of incorporation without shareholder
approval. Otherwise, the affirmative vote of a majority of the votes entitled
to be cast on the amendment by each voting group entitled to vote on the
amendment is required to amend the articles of incorporation, unless a higher
vote is required by Georgia law, the articles of incorporation, or the board of
directors. Neither the articles of incorporation of MCI WorldCom nor its board
of directors have authorized or provided for a super-majority percentage of any
voting group for the amendment of the articles of incorporation of MCI
WorldCom.
SkyTel
Under Delaware law, an amendment to the certificate of incorporation of a
corporation requires the approval of the board of directors and the approval of
the holders of a majority of the outstanding stock entitled
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to vote upon the proposed amendment. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would:
. increase or decrease the aggregate number of authorized shares of such
class;
. increase or decrease the par value of the shares of such class; or
. alter or change the powers, preferences or special rights of the shares
of such class, so as to affect them adversely.
If any proposed amendment would alter or change the powers, preferences or
special rights of one or more series of any class so as to affect them
adversely, but would not so affect the entire class, then only the shares of
the series so affected by the amendment will be considered a separate class.
Under SkyTel's certificate of incorporation, the affirmative vote of 80% of
outstanding shares entitled to vote, voting together as a single class, is
required to amend provisions of the certificate of incorporation relating to
amendment of the by-laws, actions to be taken by stockholders at annual or
special meetings and the number, election, terms and other matters relating to
directors.
Amendments to Bylaws
MCI WorldCom
Georgia law provides that, unless a corporation's articles, applicable law
or a particular bylaw approved by shareholders provides otherwise, either the
directors or shareholders may amend the bylaws. MCI WorldCom's bylaws allow the
directors or shareholders to amend or repeal the bylaws, and the articles or
bylaws of MCI WorldCom do not provide any restrictions on the authority of
either the shareholders or the directors to amend or repeal the bylaws.
SkyTel
Under Delaware law, unless a corporation's certificate of incorporation
provides otherwise, the stockholders have the power to adopt, amend or repeal
the by-laws. SkyTel's certificate of incorporation and by-laws allow the
directors and stockholders to amend or repeal the by-laws except that the by-
laws relating to:
. notice of stockholder business;
. nomination of director candidates;
. number, qualification, election and terms of directors;
. removal of directors; and
. amendments and repeals of the by-laws;
may not be amended or repealed without the affirmative vote of the holders of
at least 80% of the outstanding stock entitled to vote, voting together as a
single class.
Shareholder Action
MCI WorldCom
Subject to certain requirements, Georgia law provides that any action
required or permitted to be taken by the shareholders at a meeting may be taken
without a meeting if evidenced by one or more written consents describing the
action taken, signed and dated by all shareholders entitled to vote on such
action. Alternatively, if the articles of incorporation so provide, such action
could be taken by persons who would be entitled to vote shares at a meeting
having the requisite voting power to take action at a meeting at which all
shareholders
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entitled to vote were present and voted. The MCI WorldCom articles of
incorporation do not provide for the consent of a lesser number of shares with
respect to an action by written consent. Therefore, the written consent of all
shareholders of MCI WorldCom entitled to vote on such action would be required
in order to take such an action without a meeting of shareholders.
SkyTel
Delaware law provides that, unless otherwise provided in the certificate of
incorporation, any action that could be taken by the stockholders at a meeting
may be taken without a meeting if a consent or consents in writing, setting
forth the action taken, is signed by the holders of record of outstanding stock
having at least the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
on the matter were present and voted. SkyTel's certificate of incorporation
does not provide for action to be taken by the stockholders by written consent.
SkyTel's certificate of incorporation provides that any action required or
permitted to be taken by the stockholders of SkyTel must be effected at a duly
called annual or special meeting of the stockholders and may not be effected by
any consent in writing of such stockholders.
Notice of Shareholder Action
MCI WorldCom
MCI WorldCom's bylaws require that shareholders give advance written notice
of nominations for the election of directors and to properly bring business
before any meeting of shareholders, as described under "Description of MCI
WorldCom Capital Stock--Certain Charter and Bylaw Provisions--Limitations on
Nomination of Directors" on page 74 and "--Limitations on Proposals of Other
Business" on page 74.
SkyTel
SkyTel's bylaws require that stockholders give advance written notice to the
Secretary of SkyTel for all business to be properly brought before a meeting of
stockholders and for nominations for the election of directors to be made at an
annual or special meeting.
Special Shareholder Meetings
MCI WorldCom
A description of Georgia law and the relevant provisions of MCI WorldCom's
bylaws relating to special meetings of shareholders is contained under
"Description of MCI WorldCom Capital Stock--Certain Charter and Bylaw
Provisions--Limitations on Calling Special Meetings of Shareholders" on page
74.
SkyTel
Under Delaware law, a special meeting of stockholders may be called by the
board of directors or by other persons authorized by the certificate of
incorporation or the by-laws. The SkyTel's certificate of incorporation and by-
laws provide that special meetings of the stockholders may only be called by
the chairman of the board of directors. Special meetings will be called within
10 days of the chairman receiving the written request of the board of directors
pursuant to a resolution approved by a majority of the board of directors.
Limitation of Personal Liability of Directors
MCI WorldCom
Georgia law provides that a corporation's articles of incorporation may
include a provision eliminating or limiting the personal liability of a
director to the corporation or its shareholders for monetary damages for any
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action taken, or any failure to take action, as a director. However, no
provision in the articles of incorporation can eliminate or limit the monetary
liability of a director for:
. misappropriation of corporate business opportunities;
. intentional misconduct or knowing violation of the law;
. unlawful distributions; or
. any transaction in which such director receives an improper personal
benefit.
MCI WorldCom's articles of incorporation limit the personal liability of
directors for monetary damages to the fullest extent permissible under Georgia
law.
SkyTel
Delaware law provides that a certificate of incorporation may contain a
provision eliminating or limiting the personal liability of directors to the
corporation or its stockholders for monetary damages for breach of a fiduciary
duty as a director, except no provision in the certificate of incorporation can
eliminate or limit the liability of a director:
. for any breach of a director's duty of loyalty to the corporation or its
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. statutory liability for unlawful payment of dividends or unlawful stock
purchase or redemption; or
. for any transaction from which the director derived an improper personal
benefit.
SkyTel's certificate of incorporation provides that, to the fullest extent
permitted by law, no director will be personally liable to SkyTel or its
stockholders for or with respect to any acts or omissions in the performance of
his or her duties as a director of SkyTel.
Indemnification of Directors and Officers
MCI WorldCom
Georgia law provides that a Georgia corporation may indemnify an individual
who is a party to a proceeding because he or she is or was a director, against
liability incurred in the proceeding, provided that such individual acted in
good faith and reasonably believed:
. in the case of conduct in his or her official capacity, that such
conduct was in the best interests of the corporation;
. in all other cases other than a criminal proceeding, that such conduct
was at least not opposed to the best interests of the corporation; and
. in the case of a criminal proceeding, that such individual had no
reasonable cause to believe that such conduct was unlawful.
A Georgia corporation may not indemnify a director under Georgia law:
. in connection with a proceeding by or in the right of the corporation,
except for reasonable expenses incurred by such director in connection
with the proceeding, provided it is determined that such director met
the relevant standard of conduct described above; or
. in connection with any proceeding with respect to conduct for which such
director was adjudged liable on the basis that he or she received an
improper personal benefit.
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Before indemnifying a director under the Georgia code, a determination must
be made that the director has met the relevant standard of conduct described
above. This determination must be made by:
. if there are two or more disinterested directors, by the board of
directors by a majority vote of all the disinterested directors or by a
majority of the members of a committee of two or more disinterested
directors appointed by such vote;
. by special legal counsel (1) selected by a vote of the board directors
or committee thereof as described above, or (2) if there are fewer than
two disinterested directors, selected by the board of directors,
including directors who are not disinterested directors; or
. by the shareholders, but shares owned by or voted under the control of a
director who is not a disinterested director may not vote on that
determination.
A Georgia corporation may, before final disposition of a proceeding, advance
funds to pay for or reimburse the reasonable expenses incurred by a director
who is a party to a proceeding because he or she is a director if he or she
delivers to the corporation:
. a written affirmation of his or her good faith belief that he or she has
met the relevant standard of conduct described in the Georgia law or
that the proceeding involves conduct for which such director's liability
has been properly eliminated under the articles of incorporation; and
. his or her written undertaking to repay any funds advanced if it is
ultimately determined that such director was not entitled to such
indemnification.
The authorization for such advancement of funds will be made:
. by the board of directors:
. when there are two or more disinterested directors, by a majority
vote of all of the disinterested directors or by a majority of the
members of a committee of two or more disinterested directors
appointed by such vote; or
. when there are fewer than two disinterested directors, by a vote of
the board of directors, including directors who are not
disinterested directors; or
. by the shareholders, but shares owned or voted under the control of a
director who is not a disinterested director may be not voted on such
authorization.
Georgia law also allows a Georgia corporation to indemnify directors made a
party to a proceeding without regard to those limitations if such
indemnification has been authorized by a majority of the votes entitled to be
cast which excludes shares owned or voted under the control of the director or
directors who are not disinterested. However, the corporation may not indemnify
a director adjudged liable of any of the acts or omissions described above
under "--Limitation of Personal Liability of Directors."
Under Georgia law, a corporation has authority to indemnify officers to the
same extent as directors. One distinction for officer indemnification however,
is that Georgia law does not require shareholder approval for indemnification
of officers without regard to the limitations specified previously for
directors, subject in all cases to public policy exceptions described above
under "--Limitation of Personal Liability of Directors." A person who is both
an officer and a director is treated, for indemnification purposes, as a
director.
The MCI WorldCom articles of incorporation and bylaws authorize
indemnification to the fullest extent permitted by Georgia law except for
certain additional shareholder approved indemnification permitted under Georgia
law.
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SkyTel
Under Delaware law, a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any proceeding, other than an
action by or on behalf of the corporation, because the person is or was a
director or officer, against liability incurred in connection with the
proceeding if:
. the director or officer acted in good faith and in a manner reasonably
believed to be in the best interests of the corporation; and
. with respect to any criminal action or proceeding, had no reasonable
cause to believe the conduct was unlawful.
Under Delaware law, a corporation may not indemnify a director or officer in
connection with any proceeding in which the director or officer has been
adjudged to be liable to the corporation unless and only to the extent that the
court in which the proceeding was brought determines that, in view of all the
circumstances of the case, the director or officer is fairly and reasonably
entitled to indemnity for such expenses which the court deems proper.
Delaware law provides that any indemnification for a director or officer,
unless ordered by a court, is subject to a determination that the director or
officer has met the applicable standard of conduct. The determination will be
made:
. by a majority vote of the directors who are not parties to such
proceeding, even though less than a quorum;
. if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion; or
. by the stockholders.
Under Delaware law, a corporation may advance expenses before the final
disposition of a proceeding if the director or officer undertakes to repay the
amount if it is ultimately determined that the director or officer is not
entitled to indemnification. These expenses incurred by former directors or
officers may be paid upon the terms and conditions, if any, as the corporation
deems appropriate.
Under Delaware law, to the extent that a present or former director or
officer of a corporation has been successful on the merits or otherwise in
defense of the proceeding, that person must be indemnified against expenses
actually and reasonably incurred in connection with any claim.
Delaware law gives a corporation the power to purchase and maintain
insurance on behalf of any director or officer against any liability asserted
against the director or officer and incurred in his or her capacity as a
director or officer, whether or not the corporation would have the power to
indemnify the director or officer against this liability under Delaware law.
SkyTel's certificate of incorporation of SkyTel provides that SkyTel will
indemnify its directors and officers to the fullest extent allowed by law and
authorizes SkyTel to enter into agreements with directors and executive
officers which provide greater indemnification than that provided in the
restated certificate of incorporation. SkyTel has entered into agreements with
each of its directors and executive officers requiring SkyTel to indemnify such
persons and to advance litigation expenses to its directors and executive
officers to the fullest extent permitted by applicable law.
Dividends
MCI WorldCom
Holders of common stock are entitled to receive dividends declared by the
board of directors. The right of the board of directors to declare dividends,
however, is subject to the rights of any holders of preferred stock of
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MCI WorldCom and the availability of sufficient funds under Georgia law to
make distributions to its shareholders.
SkyTel
Delaware law provides that a corporation may pay dividends out of its
surplus or if there is no surplus out of its net profits for the fiscal year
in which the dividend is declared and for the preceding fiscal year. Delaware
law also provides that dividends may not be paid out of the net profits if,
after the payment of the dividend, the corporation's capital would be less
than the capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets.
Appraisal Rights
MCI WorldCom
Georgia law provides that shareholders are entitled to dissent from and
obtain payment of the fair value of their shares in the event of:
. mergers, share exchanges, sales or exchanges of all or substantially all
of the corporation's assets;
. amendments to the articles of incorporation that materially and
adversely affect certain rights in respect of a dissenter's shares; and
. certain other actions taken pursuant to a shareholder vote to the extent
provided for under Georgia law, the articles of incorporation, bylaws or
resolution of the board of directors.
However, unless the corporation's articles of incorporation otherwise
provide, appraisal rights are not available:
. to holders of shares of any class or series of shares not entitled to
vote on the merger, share exchange or sale or exchange of all or
substantially all of a corporation's assets;
. in a sale of all or substantially all of the assets of the corporation
pursuant to court order;
. in a sale of all or substantially all of the corporation's assets for
cash, where all or substantially all of the net proceeds of such sale
will be distributed to the shareholders within one year; or
. to holders of shares which at the record date were either listed on a
national securities exchange or held of record by more than 2,000
shareholders,
unless:
. in the case of a plan of merger or share exchange, the holders of shares
of the class or series are required under the plan of merger or share
exchange to accept for their shares anything except shares of the
surviving corporation or a publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
. the articles of incorporation or a resolution of the board of directors
approving the transaction provides otherwise.
MCI WorldCom's articles of incorporation do not provide for appraisal
rights under these circumstances.
SkyTel
Under Delaware law, a stockholder of a Delaware corporation is generally
entitled to demand an appraisal and to obtain payment of the fair value of his
or her shares in the event of a merger or consolidation in which
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the corporation is to be a party. This right to demand an appraisal does not
apply to holders of shares of any class or series of stock which are:
. shares of a surviving corporation and if a vote of the stockholders of
that corporation is not necessary to authorize the merger or
consolidation;
. listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc., such as The Nasdaq
National Market; or
. held of record by more than 2,000 holders.
Appraisal rights are available for holders of shares of any class or series
of stock of a Delaware corporation if the holders are required by the terms of
the merger or consolidation agreement to accept in exchange for their stock
anything except:
. shares of stock of the corporation surviving or resulting from the
merger or consolidation;
. shares of stock of any other corporation which, at the effective time of
the merger or consolidation, will be listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, such as The Nasdaq National Market, or held of record by more
than 2,000 holders;
. cash instead of fractional shares of the corporations described above;
or
. any combination of the shares of stock and cash instead of fractional
shares described above.
Preemptive Rights
MCI WorldCom
Georgia law does not provide for preemptive rights to shareholders to
acquire a corporation's unissued stock except with respect to corporations
meeting extremely narrow criteria. However, preemptive rights may be expressly
granted to the shareholders in a corporation's articles of incorporation. MCI
WorldCom does not meet the narrow criteria for which its shareholders are
statutorily provided preemptive rights nor do the articles of incorporation of
MCI WorldCom provide for preemptive rights.
SkyTel
Delaware law does not provide for preemptive rights to acquire a
corporation's unissued stock, but preemptive rights may be provided to
stockholders in a corporation's certificate of incorporation. SkyTel's
certificate of incorporation does not provide for preemptive rights.
Conversion
MCI WorldCom
Holders of MCI WorldCom common stock do not have the right to convert their
shares into any other securities.
SkyTel
Holders of SkyTel common stock do not have the right to convert their
shares into any other securities.
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Preferred Stock
Pursuant to the merger, shares of the SkyTel preferred stock will be
exchanged for shares of the MCI WorldCom convertible exchangeable preferred
stock. The terms of the MCI WorldCom convertible exchangeable preferred stock
will be substantially identical to those of the SkyTel preferred stock except:
. the issuer will be MCI WorldCom instead of SkyTel; and
. the shares will be convertible into shares of MCI WorldCom common stock
instead of SkyTel common stock.
The terms of the MCI WorldCom convertible exchangeable preferred stock are
summarized above under "Description of MCI WorldCom Capital Stock--Series C
$2.25 Cumulative Convertible Exchangeable Preferred Stock," beginning on page
56.
Special Redemption Provisions
MCI WorldCom
MCI WorldCom's articles of incorporation permit MCI WorldCom to redeem
shares of its capital stock from certain foreign shareholders under some
circumstances, as described under "Description of MCI WorldCom Capital Stock--
Certain Charter and Bylaw Provisions--Special Redemption Provisions," beginning
on page 74.
SkyTel
SkyTel's certificate of incorporation does not contain any special
redemption provisions.
Rights Plan
MCI WorldCom
MCI WorldCom's rights plan is described above under "Description of MCI
WorldCom Capital Stock--Rights Plan," beginning on page 70.
SkyTel
In July 1989, the SkyTel board of directors adopted a rights agreement and
issued, as a dividend, one common share purchase right for each outstanding
share of SkyTel common stock. One SkyTel purchase right has also been issued
with respect to each share of SkyTel common stock issued since the date of that
dividend.
Each SkyTel purchase right entitles the holder to buy one share of SkyTel
common stock at a price of $30 per share of SkyTel common stock, subject to
adjustment. The SkyTel purchase rights will be exercisable after the earlier
of:
. 10 calendar days following a public announcement that a person or group
has acquired 20% or more of the outstanding shares of SkyTel common
stock, or
. 10 calendar days, or such later date as may be specified by the SkyTel
board of directors, following the commencement of a tender offer or
exchange offer that would result in a person acquiring 20% or more of
the outstanding shares of SkyTel common stock.
If a person or group acquires 20% or more of the outstanding shares of
SkyTel common stock, each holder of a SkyTel purchase right will receive, upon
exercise, shares of SkyTel common stock with a market value equal to two times
the exercise price of a SkyTel purchase right, except that purchase rights
owned by such person or group will be void. If, following an acquisition by a
person or group of 20% or more of the
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outstanding shares of SkyTel common stock, SkyTel is acquired in a merger or
other business combination, each SkyTel purchase right will be exercisable for
shares of SkyTel common stock or the number of the acquiring company's shares
of common stock, in each case, having a market value equal to two times the
exercise price of the SkyTel purchase right.
SkyTel may redeem the purchase rights at a price of $.01 per purchase right
before the purchase rights become exercisable. On August 5, 1999, SkyTel and
the rights agent extended the expiration date of the rights agreement to August
7, 2000.
In connection with the negotiation of the merger agreement, MCI WorldCom and
SkyTel agreed that the SkyTel board of directors would amend the SkyTel rights
agreement prior to signing the merger agreement to permit the merger to be
completed and to cause the SkyTel purchase rights to expire immediately before
the merger. SkyTel and the rights agent entered into the amendment on May 28,
1999.
Shareholder Suits
MCI WorldCom
Under Georgia law, a shareholder may file a lawsuit against one or more
directors, either on his own behalf or on behalf of the corporation. As noted
previously, Georgia law permits a corporation, in its articles of
incorporation, to limit or eliminate the personal liability of a director to
the corporation or its shareholders for monetary damages for any action taken,
or any failure to take any action, as a director, except in some circumstances.
The MCI WorldCom articles of incorporation contain such a provision, as
described above under "--Limitation of Personal Liability of Directors"
beginning on page 81.
SkyTel
Under Delaware law and applicable court decisions a stockholder may file a
lawsuit on behalf of the corporation. Delaware law provides that a stockholder
must state in the complaint that he or she was a stockholder of the corporation
at the time of the transaction of which he or she complains. However, no action
may be brought by a stockholder unless he first seeks remedial action on his
claim from the corporation's board of directors, unless the demand for redress
is excused.
The board of directors may appoint an independent litigation committee to
review a stockholder's request for a derivative action and the litigation
committee, acting reasonably and in good faith, can terminate the stockholder's
action subject to a court's review of the committee's independence, good faith
and reasonable investigation.
Under Delaware law, the court in a derivative action may apply a variety of
legal and equitable remedies on behalf of the corporation that vary depending
on the facts and circumstances of the case and the nature of the claim brought.
As noted above, Delaware law contains provisions allowing a corporation,
through a provision in its restated certificate of incorporation, to limit or
eliminate the personal liability of a director to the corporation or its
stockholders for breach of a fiduciary duty as a director, except that the
provision cannot eliminate or limit the liability of a director in some
circumstances, as described above under "--Limitation of Personal Liability of
Directors" beginning on page 81.
Vote on Extraordinary Corporate Transactions
MCI WorldCom
Georgia law is similar to Delaware law in that, except as described below
under "--Business Combination Restrictions," a sale or other disposition of all
or substantially all of the corporation's assets, a merger of the
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corporation with and into another corporation, a share exchange involving one
or more classes or series of the corporation's shares or a dissolution of the
corporation must be adopted by the MCI WorldCom board of directors, except in
certain limited circumstances, plus the affirmative vote of the holders of a
majority of all shares of stock entitled to vote thereon, except in certain
cases.
SkyTel
Under Delaware law, mergers or consolidations or sales or exchanges of all
or substantially all of a corporation's assets, require the affirmative vote of
the board of directors (except in certain limited circumstances). In addition,
the affirmative vote of a majority of the outstanding stock of the corporation
entitled to vote on the matter may be required. Stockholder consent is not
required under the following circumstances:
. for a corporation which survives a merger and does not issue in the
merger more than 20% of its outstanding shares immediately prior to the
merger;
. the merger agreement does not amend in any respect the survivor's
certificate of incorporation;
. each share of the surviving corporation outstanding immediately prior to
the merger remains an identical outstanding share of the surviving
corporation after the merger;
. stockholder approval is not required by the survivor's certificate of
incorporation; and
. for either corporation where one corporation owns 90% of each class of
outstanding stock of the other corporation.
Business Combination Restrictions
MCI WorldCom
MCI WorldCom's articles of incorporation contain provisions governing some
types of business combinations, as described under "Description of MCI WorldCom
Capital Stock--Certain Charter and Bylaw Provisions--Business Combination
Restrictions," beginning on page 75.
SkyTel
SkyTel is subject to the antitakeover provisions in Delaware law. The
antitakeover provisions prohibit business combinations between a Delaware
corporation and an interested stockholder, as described below, within three
years of the time the interested stockholder became an interested stockholder
unless:
. before that time, the board of directors approved either the business
combination or the transaction in which the interested stockholder
became an interested stockholder; or
. upon completion of the transaction that resulted in the stockholder
becoming an interested stockholder, the stockholder owned at least 85%
of the voting stock of the corporation, excluding shares held by
directors who are also officers of the corporation and by employee stock
ownership plans that do not permit employees to determine confidentially
whether shares held by the plan will be tendered in a tender or exchange
offer; or
. on or following that time, the business combination is approved by the
board of directors and the business combination transaction is approved
by the holders of at least 66 2/3% of the outstanding voting stock of
the corporation not owned by the interested stockholder.
The business combination restrictions described above do not apply if:
. the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by the antitakeover
provisions in Delaware law;
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. the holders of a majority of the voting stock of the corporation approve
an amendment to its certificate of incorporation or bylaws expressly
electing not to be governed by the antitakeover provisions, which
election will be effective 12 months after the amendment's adoption and
would not apply to any business combination with a person who was an
interested stockholder at or prior to the time the amendment was
approved; or
. the corporation does not have a class of voting stock that is (a) listed
on a national securities exchange, (b) authorized for quotation on The
Nasdaq National Market, or (c) owned by more than 2,000 stockholders.
The antitakeover provisions do not apply to a business combination that: (1)
is proposed after the public announcement of, and before the consummation or
abandonment of:
. a merger or consolidation of the corporation;
. a sale of 50% or more of the aggregate market value of the assets of the
corporation and its subsidiaries determined on a consolidated basis or
the aggregate market value of all outstanding shares of the corporation;
or
. a tender or exchange offer for 50% or more of the outstanding shares of
the corporation;
(2) is with a person who either was not an interested stockholder during the
previous three years or who became an interested stockholder with the approval
of the board of directors; and (3) is approved by a majority of the current
directors who were also directors before any person became an interested
stockholder during the previous three years.
An "interested stockholder" generally is defined as a person that owns 15%
or more of the corporation's outstanding voting stock and the affiliates and
associates of that person.
The term "business combination" includes the following transactions with an
interested stockholder:
. a merger or consolidation of the corporation with an interested
stockholder;
. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition, except proportionately as a stockholder of the corporation,
of assets of the corporation or its subsidiaries having an aggregate
market value equal to 10% or more of either the aggregate market value
of all assets of the corporation and its subsidiaries determined on a
consolidated basis or the aggregate market value of all the outstanding
stock of the corporation;
. any transaction which results in the issuance or transfer by the
corporation or its subsidiaries of stock of the corporation or such
subsidiary to the interested stockholder, except for transactions
involving the exercise, conversion or exchange of securities outstanding
before the interested stockholder became an interested stockholder and
certain other transactions which do not increase the interested
stockholder's proportionate share of any class or series of the
corporation's stock;
. any transaction involving the corporation or any of its subsidiaries
which increases the proportionate share of any class or series of stock,
or securities convertible into the stock of any class or series, of the
corporation or any subsidiary which is owned by the interested
stockholder, except as a result of immaterial changes due to fractional
share adjustments or as a result of any purchase or redemption of any
shares of stock not caused by the interested stockholder; or
. any receipt by the interested stockholder of the benefit, except
proportionately as a stockholder of the corporation, of any loans,
advances, guarantees, pledges or other financial benefits provided by
the corporation or its subsidiaries.
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LEGAL MATTERS
Jones, Day, Reavis & Pogue, New York, New York, has represented SkyTel in
connection with this transaction and will pass on certain U.S. federal income
tax consequences of the merger for SkyTel.
Cravath, Swaine & Moore, New York, New York, and Bryan Cave LLP, St. Louis,
Missouri, have represented MCI WorldCom in connection with this transaction.
Cravath, Swaine & Moore will pass on certain U.S. federal income tax
consequences of the merger for MCI WorldCom. Cravath, Swaine & Moore and Bryan
Cave LLP from time to time act as counsel for MCI WorldCom and its
subsidiaries.
EXPERTS
The consolidated financial statements of MCI WorldCom as of December 31,
1998 and 1997, and for each of the years in the three-year period ended
December 31, 1998, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included in MCI WorldCom's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, and are incorporated herein by reference, in reliance upon
the authority of such firm as experts in accounting and auditing in giving said
reports.
The consolidated financial statements of Brooks Fiber Properties, Inc. as of
December 31, 1997, and for each of the years in the two-year period ended
December 31, 1997 have been incorporated by reference in this document and in
the registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, included in MCI WorldCom's Annual Report on Form
10-K for the year ended December 31, 1998 and incorporated by reference in this
document, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of SkyTel as of December 31, 1998 and
1997, and for each of the years in the three-year period ended December 31,
1998, have been audited by Arthur Andersen LLP, independent public accountants,
as indicated in their report with respect thereto, and are included in SkyTel's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, and are
incorporated herein by reference, in reliance upon the authority of such firm
as experts in accounting and auditing in giving said reports.
The consolidated financial statements of MFS Communications Company, Inc. as
of December 31, 1996, and for the period ended December 31, 1996, included in
MCI WorldCom's Current Report on Form 8-K/A dated August 25, 1996 (filed
December 19, 1997), and incorporated by reference into this registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated herein by reference, in reliance upon the authority of such firm
as experts in accounting and auditing in giving said reports.
The consolidated financial statements of MCI Communications Corporation as
of December 31, 1997 and 1996, and for each of the years in the three-year
period ended December 31, 1997, included in MCI WorldCom's Current Report on
Form 8-K/A-3 dated November 9, 1997 (filed May 28, 1998), have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent public accountants, given on the authority of such firm as experts
in accounting and auditing.
The consolidated financial statements of Comunicaciones Mtel, S.A. de C.V.
as of December 31, 1998 and 1997, and for the years ended December 31, 1998,
1997 and 1996, have been audited by PricewaterhouseCoopers, independent public
accountants, as indicated in their report with respect thereto, and are
included in SkyTel's Annual Report on Form 10-K/A (filed June 30, 1999) for the
year ended December 31, 1998, and are incorporated herein by reference, in
reliance upon the authority of such firm as experts in accounting and auditing
in giving said reports.
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STOCKHOLDER PROPOSALS
SkyTel will hold an annual meeting of SkyTel stockholders in 2000 only if
the merger is not completed before the time of the meeting. SkyTel's by-laws do
not permit any matter other than the proposal stated in the notice of the
special meeting to be brought before the special meeting.
A stockholder who wishes to submit a proposal to be included in next year's
proxy materials for consideration at SkyTel's 2000 annual meeting, if one is to
be held, should submit the proposal in writing to SkyTel at the address below
under "Where You Can Find More Information." The person submitting a proposal
is required to have been an owner of at least 1%, or $2,000 in market value, of
SkyTel common stock for a period of at least one year and must continue to own
these shares through the date on which the 2000 annual meeting is held. A
proposal must be received by SkyTel on or before December 18, 1999 to be
included in next year's proxy materials. Stockholders who submit proposals to
be included in next year's proxy materials must, in all other respects, comply
with Rule 14a-8 under the Securities Exchange Act of 1934.
A stockholder who wishes to submit a proposal for consideration at the 2000
annual meeting must also comply with SkyTel's by-laws, whether or not the
proponent wishes for the proposal to be included in the proxy materials to be
mailed to stockholders by SkyTel for the 2000 annual meeting. SkyTel's by-laws
provide that in order for a stockholder proposal to be brought before an annual
meeting of stockholders, a stockholder must give written notice to the
Secretary of SkyTel. This notice must be received by SkyTel at the address
below under "Where You Can Find More Information" not less than 80 days prior
to the annual meeting. If less than 90 days' notice or prior public disclosure
has been given of the date of the annual meeting, notice of a stockholder
proposal must be received not later than the close of business on the tenth day
following the date on which the notice of the date of the annual meeting was
mailed or the date on which the public disclosure was made. The 2000 annual
meeting is scheduled to be held on May 18, 2000. Accordingly, notice of a
stockholder proposal must be received by SkyTel on or before February 28, 2000
in order for the stockholder proposal to be brought before the 2000 annual
meeting in accordance with these by-law requirements.
OTHER MATTERS
As of the date of this document, the SkyTel board of directors knows of no
matters that will be presented for consideration at the special meeting other
than as described in this document.
WHERE YOU CAN FIND MORE INFORMATION
MCI WorldCom and SkyTel are subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance with those requirements file
annual, quarterly and special reports, proxy statements and other information
with the Securities and Exchange Commission. You may read and copy any reports,
statements or other information that MCI WorldCom and SkyTel file with the
Securities and Exchange Commission at the Commission's public reference rooms
at the following locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. Seven World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street,
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. These filings with the Commission are also available to
the public from commercial document retrieval services and at the Internet
world wide web site maintained by the Commission at "http://www.sec.gov."
Reports, proxy statements and other information concerning MCI WorldCom and
SkyTel are also available for inspection at the offices of The Nasdaq Stock
Market, which is located at 1735 K Street, N.W., Washington, D.C. 20006.
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MCI WorldCom filed a registration statement on Form S-4 on August 26, 1999
to register with the Commission the MCI WorldCom common stock and convertible
exchangeable preferred stock to be issued to SkyTel stockholders in the merger.
This document is a part of that registration statement and constitutes a
prospectus of MCI WorldCom in addition to being a proxy statement of SkyTel. As
allowed by Commission rules, this document does not contain all the information
you can find in MCI WorldCom's registration statement or the exhibits to the
registration statement.
The Commission allows MCI WorldCom and SkyTel to "incorporate by reference"
information into this document, which means that the companies can disclose
important information to you by referring you to other documents filed
separately with the Commission. The information incorporated by reference is
considered part of this document, except for any information superseded by
information contained directly in this document or in later filed documents
incorporated by reference in this document.
This document incorporates by reference the documents set forth below that
MCI WorldCom and SkyTel have previously filed with the Commission. These
documents contain important business and financial information about MCI
WorldCom and SkyTel that is not included in or delivered with this document.
MCI WorldCom Filings
(File No. 000-11258,
formerly Resurgens
Communications Group, Inc.
(File No. 1-10415))
Annual Report on Form 10-K.... Fiscal year ended December 31, 1998
Quarterly Reports on Form 10- Quarters ended March 31, 1999 and June 30,
Q............................. 1999
Current Reports on Form 8-K... Form 8-K/A dated August 25, 1996 (filed
December 19, 1997), Form 8-K/A-3 dated
November 9, 1997 (filed May 28, 1998), and
Form 8-K dated July 12, 1999 (filed July 12,
1999).
The description of MCI
WorldCom common stock set
forth in Resurgens'
Registration Statement on Resurgens' Registration Statement on Form 8-A
Form 8-A...................... dated December 12, 1989, as updated by the
descriptions contained in the MCI WorldCom's
Registration Statement on Form S-4 (File No.
333-16015), as declared effective by the
Securities and Exchange Commission on November
14, 1996, which includes the Joint Proxy
Statement/Prospectus dated November 14, 1996
with respect to the MCI WorldCom's Special
Meeting of Shareholders held on December 20,
1996, under the following captions:
"Description of WorldCom Capital Stock" and
"Comparative Rights of Shareholders" and by
the descriptions contained in MCI WorldCom's
Proxy Statement dated April 23, 1999 under the
following captions: "Approval of Amendment to
Second Amended and Restated Articles of
Incorporation, as Amended, To Increase
Authorized Shares of Common Stock" and "Future
Proposals of Security Holders."
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<PAGE>
MCI WorldCom Filings
(File No. 000-11258,
formerly Resurgens
Communications Group, Inc.
(File No. 1-10415))
The description of the MCI
WorldCom rights to acquire
preferred stock set forth in
its Registration Statement on MCI WorldCom's Registration Statement on Form
Form 8-A...................... 8-A dated August 26, 1996, as updated by MCI
WorldCom's Current Report on Form 8-K dated
May 22, 1997 (filed June 6, 1997).
The description of MCI
WorldCom convertible
exchangeable preferred stock
set forth in its Registration
Statement on Form 8-A.........
Dated August 26, 1999 (filed August 26, 1999)
SkyTel Filings (File No. 000-17316)
Annual Report on Form 10-K.... Form 10-K/A filed June 30, 1999, Form 10-K
filed for fiscal year ended December 31, 1998
Quarterly Reports on Form 10- Quarters ended March 31, 1999 and June 30,
Q............................. 1999
Current Report on Form 8-K.... Filed June 3, 1999
The description of SkyTel
common stock set forth in its
Registration Statement on
Form 10....................... Dated December 31, 1988 (filed November 18,
1988 and declared effective December 29, 1988)
The description of SkyTel
rights to acquire preferred
stock set forth in its
Registration Statement on
Form 8-A...................... Dated July 26, 1989 (filed August 3, 1989), as
amended on Form 8-A/A (filed June 3, 1999) and
further amended on Form 8-A/A (filed August 6,
1999)
The description of SkyTel
preferred stock set forth in
its Registration Statement on
Form 8-A...................... Dated August 5, 1999 (filed August 5, 1999)
MCI WorldCom and SkyTel also incorporate by reference additional documents
that may be filed with the Commission under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act between the date of this document and the date of the
special meeting. These include periodic reports, such as Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well
as proxy statements.
MCI WorldCom has supplied all information contained or incorporated by
reference in this document relating to MCI WorldCom, and SkyTel has supplied
all such information relating to SkyTel.
SkyTel common and preferred stockholders should not send in their SkyTel
certificates until they receive the transmittal materials from the exchange
agent. SkyTel common and preferred stockholders of record who have further
questions about their share certificates or the exchange of their SkyTel stock
for MCI WorldCom stock should call the exchange agent.
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If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the
companies, the Commission or the Commission's Internet web site as described
above. Documents incorporated by reference are available from the companies
without charge, excluding all exhibits, except that if the companies have
specifically incorporated by reference an exhibit in this document, the exhibit
will also be provided without charge. Stockholders may obtain documents
incorporated by reference in this document by requesting them in writing or by
telephone from the appropriate company at the following addresses:
MCI WORLDCOM, Inc. SkyTel Communications, Inc.
500 Clinton Center Drive 200 South Lamar Street
Clinton, Mississippi 39056 SkyTel Centre, South Building
Attention: Investor Relations Jackson, Mississippi 39201
Department Attention: Vice President--Investor
Telephone: (877) 624-9266 or Relations
(601) 460-5600 Telephone: (601) 944-3800
If you would like to request documents, please do so by September 22, 1999
in order to receive them before the SkyTel special meeting.
You should rely only on the information contained or incorporated by
reference in this document. We have not authorized anyone to provide you with
information that is different from what is contained in this document. This
proxy statement/prospectus is dated August 26, 1999. You should not assume that
the information contained in this document is accurate as of any date other
than that date. Neither the mailing of this document to stockholders nor the
issuance of MCI WorldCom common stock or convertible exchangeable preferred
stock in the merger creates any implication to the contrary.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains or incorporates by reference a number of forward-
looking statements relating to MCI WorldCom and SkyTel within the meaning of
the Private Securities Litigation Reform Act of 1995 with respect to:
. their financial condition;
. their results of operations;
. their business plans;
. their business strategies, operating efficiencies or synergies,
competitive positions and growth opportunities for existing products;
. the financial and regulatory environment in which they operate;
. MCI WorldCom's estimated costs to complete or possible future revenues
from in-process research and development programs;
. the likelihood of completion of those programs;
. the outcome of their year 2000 and Euro conversion efforts;
. the plans and objectives of their management;
. the markets for their stock; and
. other matters.
We consider any statements that are not historical facts as "forward-looking
statements" for the purpose of the safe harbor provided by Section 21E of the
Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933.
These forward-looking statements, including, among others, those relating to
the MCI
95
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WorldCom and SkyTel business plans and future prospects, revenues and income,
including, among others, those referenced under the captions "The Merger--
SkyTel's Reasons for the Merger; Recommendation of the SkyTel Board" and "The
Merger--Opinion of Warburg Dillon Read LLC," are necessarily estimates
reflecting the best judgment of the senior management of MCI WorldCom and
SkyTel. They involve a number of risks and uncertainties that could cause
actual results to differ materially from those suggested by the forward-looking
statements. These differences could be material; therefore, you should evaluate
forward-looking statements in light of various important factors, including
those set forth or incorporated by reference in this document.
Important factors that could cause actual results to differ materially from
estimates or forecasts contained in the forward-looking statements include,
among others:
. the impact of technological change on MCI WorldCom's and SkyTel's
businesses, new entrants and alternative technologies in their
respective businesses and their dependence on the availability of
transmission facilities;
. the ability to integrate the operations of MCI WorldCom and its acquired
businesses (including SkyTel), including their respective product lines;
. uncertainties associated with the success of other acquisitions of MCI
WorldCom and the integration of these other acquisitions;
. risks of international business;
. regulatory risks, including the impact of the Telecommunications Act of
1996;
. contingent liabilities;
. the impact of competitive services and pricing in both MCI WorldCom's
and SkyTel's markets;
. risks associated with year 2000 uncertainties and Euro conversion
efforts;
. risks associated with debt service requirements and interest rate
fluctuations;
. MCI WorldCom's degree of financial leverage; and
. other risks referenced from time to time in MCI WorldCom's and SkyTel's
filings with the Securities and Exchange Commission.
Words such as "estimate," "project," "plan," "intend," "expect," "believe"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are found at various places throughout this
document and the other documents incorporated by reference, including, but not
limited to, the Annual Reports on Form 10-K for the year ended December 31,
1998, including any amendments, and Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1999 and June 30, 1999 of MCI WorldCom and SkyTel,
including any amendments.
You should not place undue reliance on these forward-looking statements,
which speak only as of the date of this document. Neither MCI WorldCom nor
SkyTel undertakes any obligation to publicly update or release any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this document or to reflect the occurrence of unanticipated events.
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ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Dated as of May 28, 1999
By and Among
MCI WORLDCOM, INC.,
EMPIRE MERGER INC.
And
SKYTEL COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
The Merger
<C> <S> <C>
Section 1.01. The Merger.............................................. A-1
Section 1.02. Closing................................................. A-1
Section 1.03. Effective Time.......................................... A-2
Section 1.04. Effects of the Merger................................... A-2
Section 1.05. Certificate of Incorporation and By-laws................ A-2
Section 1.06. Board of Directors of the Surviving Corporation......... A-2
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
Section 2.01. Effect on Capital Stock ................................ A-2
(a)Capital Stock of Sub................................. A-2
(b)Cancelation of Treasury Stock and WorldCom-Owned
Stock................................................... A-2
(c)Conversion of SkyTel Common Stock.................... A-2
(d)Conversion of Convertible Exchangeable Preferred
Stock................................................... A-3
(e)WorldCom Rights...................................... A-3
(f)Anti-Dilution Provisions............................. A-3
Section 2.02. Exchange of Certificates................................ A-3
(a)Exchange Agent....................................... A-3
(b)Exchange Procedures.................................. A-3
(c)Distributions with Respect to Unsurrendered
Certificates............................................ A-4
(d)No Further Ownership Rights in SkyTel Common Stock or
Convertible Exchangeable Preferred Stock........... A-4
(e)No Fractional Shares................................. A-5
(f)No Liability......................................... A-5
(g)Lost Certificates.................................... A-5
ARTICLE III
Representations and Warranties
Section 3.01. Representations and Warranties of SkyTel................ A-5
(a)Organization, Standing and Corporate Power........... A-5
(b)Subsidiaries......................................... A-6
(c)Capital Structure.................................... A-6
(d)Authority; Noncontravention.......................... A-7
(e)SEC Documents; Undisclosed Liabilities............... A-8
(f)Information Supplied................................. A-8
(g)Absence of Certain Changes or Events................. A-8
(h)Litigation........................................... A-9
(i)Compliance with Applicable Laws...................... A-9
(j)Contracts............................................ A-9
(k)Absence of Changes in Benefit Plans.................. A-10
(l)ERISA Compliance..................................... A-10
(m)Taxes................................................ A-11
</TABLE>
A-i
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<TABLE>
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<C> <S> <C>
(n)Voting Requirements.................................... A-12
(o)State Takeover Statutes................................ A-12
(p)Accounting Matters..................................... A-12
(q)Brokers................................................ A-12
(r)Opinion of Financial Advisor........................... A-12
(s)Intellectual Property; Year 2000....................... A-12
(t)Rights Agreement....................................... A-13
Section 3.02. Representations and Warranties of WorldCom and Sub........ A-13
(a)Organization, Standing and Corporate Power............. A-13
(b)Capital Structure...................................... A-13
(c)Authority; Noncontravention............................ A-14
(d)SEC Documents; Undisclosed Liabilities................. A-15
(e)Information Supplied................................... A-16
(f)Absence of Certain Changes or Events................... A-16
(g)Litigation............................................. A-16
(h)Compliance with Applicable Laws........................ A-16
(i)Taxes.................................................. A-17
(j)Voting Requirements.................................... A-17
(k)Accounting Matters..................................... A-17
(l)Brokers................................................ A-17
(m)Interim Operations of Sub.............................. A-17
(n)Year 2000.............................................. A-17
(o)Ownership of SkyTel Stock.............................. A-18
ARTICLE IV
Covenants Relating to Conduct of Business
Section 4.01. Conduct of Business....................................... A-18
(a)Conduct of Business by SkyTel.......................... A-18
(b)Other Actions.......................................... A-20
(c)Advice of Changes...................................... A-20
Section 4.02. No Solicitation by SkyTel................................. A-20
ARTICLE V
Additional Agreements
Section 5.01. Preparation of the Form S-4 and the SkyTel Proxy
Statement;
SkyTel Stockholders Meeting.............................. A-21
Section 5.02. Letters of SkyTel's Accountants........................... A-22
Section 5.03. Letters of WorldCom's Accountants......................... A-23
Section 5.04. Access to Information; Confidentiality.................... A-23
Section 5.05. Reasonable Best Efforts................................... A-23
Section 5.06. SkyTel Stock Options; Warrants............................ A-24
Section 5.07 Employee Benefit Plans; Existing Agreements............... A-25
Section 5.08. Indemnification, Exculpation and Insurance................ A-26
Section 5.09. Fees and Expenses......................................... A-26
Section 5.10. Public Announcements...................................... A-27
Section 5.11. Affiliates................................................ A-27
Section 5.12. Nasdaq Quotation.......................................... A-27
Section 5.13. Tax Treatment............................................. A-27
</TABLE>
A-ii
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<TABLE>
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<C> <S> <C>
Section 5.14. Pooling of Interests.................................... A-27
Section 5.15. Further Assurances...................................... A-28
Section 5.16. Rights Agreement........................................ A-28
Section 5.17. Transfer Taxes.......................................... A-28
ARTICLE VI
Conditions Precedent
Conditions to Each Party's Obligation To Effect the
Section 6.01. Merger.................................................. A-28
(a)SkyTel Stockholder Approval.......................... A-28
(b)HSR Act.............................................. A-28
(c)Governmental Approvals............................... A-28
(d)No Litigation........................................ A-28
(e)Form S-4............................................. A-28
(f)Nasdaq Quotation..................................... A-28
(g)Pooling Letters...................................... A-28
Section 6.02. Conditions to Obligations of WorldCom and Sub........... A-29
(a)Representations and Warranties....................... A-29
(b)Performance of Obligations of SkyTel................. A-29
(c)Tax Opinions......................................... A-29
Section 6.03. Conditions to Obligations of SkyTel..................... A-29
(a)Representations and Warranties....................... A-29
(b)Performance of Obligations of WorldCom and Sub....... A-29
(c)Tax Opinions......................................... A-29
Section 6.04. Frustration of Closing Conditions....................... A-29
ARTICLE VII
Termination, Amendment and Waiver
Section 7.01. Termination............................................. A-30
Section 7.02. Effect of Termination................................... A-30
Section 7.03. Amendment............................................... A-30
Section 7.04. Extension; Waiver....................................... A-31
Procedure for Termination, Amendment, Extension or
Section 7.05. Waiver.................................................. A-31
ARTICLE VIII
General Provisions
Section 8.01. Nonsurvival of Representations and Warranties........... A-31
Section 8.02. Notices................................................. A-31
Section 8.03. Definitions............................................. A-32
Section 8.04. Interpretation.......................................... A-32
Section 8.05. Counterparts............................................ A-33
Section 8.06. Entire Agreement; No Third-Party Beneficiaries.......... A-33
Section 8.07. Governing Law........................................... A-33
Section 8.08. Assignment.............................................. A-33
Section 8.09. Enforcement............................................. A-33
Section 8.10. Severability............................................ A-33
Annex I Index of Defined Terms ................................. A-35
</TABLE>
A-iii
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<C> <S> <C>
Exhibit A Form of Affiliate Letter...................................... A-36
Exhibit B Form of SkyTel Representation Letter.......................... A-39
Exhibit C Form of MCI WorldCom, Inc. Representation Letter ............. A-42
Exhibit D Form of Cravath, Swaine & Moore Opinion....................... A-46
Exhibit E Form of Jones, Day Reavis & Pogue Tax Opinion ................ A-48
</TABLE>
A-iv
<PAGE>
Agreement and Plan of Merger (this "Agreement") dated as of May 28, 1999,
among MCI WorldCom, Inc., a Georgia corporation ("WorldCom"), Empire Merger
Inc., a Delaware corporation and a wholly owned subsidiary of WorldCom ("Sub"),
and SkyTel Communications, Inc., a Delaware corporation ("SkyTel").
Whereas the respective Boards of Directors of WorldCom, Sub and SkyTel have
approved this Agreement and the merger of SkyTel with and into Sub (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, whereby (a) each issued and outstanding share of SkyTel's Common
Stock, par value $.01 per share (the "SkyTel Common Stock"), other than any
such shares directly owned by WorldCom, Sub or SkyTel, will be converted into
the right to receive shares of common stock, par value $.01 per share, of
WorldCom ("WorldCom Common Stock") and (b) each issued and outstanding share of
SkyTel's $2.25 Cumulative Convertible Exchangeable Preferred Stock, par value
$.01 per share (the "Convertible Exchangeable Preferred Stock"), other than any
such shares directly owned by WorldCom, Sub or SkyTel, will be converted into
the right to receive one share of $2.25 Cumulative Convertible Exchangeable
Preferred Stock, par value $.01 per share, of WorldCom (the "WorldCom
Convertible Exchangeable Preferred Stock");
Whereas WorldCom, Sub and SkyTel desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
Whereas, for Federal income tax purposes, it is intended that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations promulgated thereunder and that this Agreement constitutes a plan
of reorganization;
Whereas, for financial accounting purposes, it is intended that the Merger
will be accounted for as a pooling of interests transaction; and
Whereas, immediately following the execution and delivery of this Agreement,
SkyTel and WorldCom will enter into a stock option agreement (the "Option
Agreement"), pursuant to which SkyTel will grant WorldCom the option to
purchase shares of SkyTel Common Stock, upon the terms and subject to the
conditions set forth therein.
Now, Therefore, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
The Merger
Section 1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), SkyTel shall be merged with and into Sub at the
Effective Time. Following the Effective Time, Sub shall be the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of SkyTel in accordance with the DGCL.
Section 1.02. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second Business Day after satisfaction
or waiver of the conditions set forth in Article VI (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or waiver of those conditions), unless another time or date
is agreed to by the parties hereto. The Closing will be held at such location
in the City of New York as is agreed to by the parties hereto.
A-1
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Section 1.03. Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the
DGCL. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Delaware Secretary of State, or at such other
time as WorldCom and SkyTel shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time").
Section 1.04. Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
Section 1.05. Certificate of Incorporation and By-laws. (a) The Certificate
of Incorporation of Sub, as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law, except
that Article I of the Certificate of Incorporation of the Surviving Corporation
shall be amended to read in its entirety as follows: "The name of this
corporation is SkyTel Communications, Inc.".
(b) The By-laws of Sub, as in effect immediately prior to the Effective
Time, shall be the By-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
Section 1.06. Board of Directors of the Surviving Corporation. The directors
of Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
Section 2.01. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
capital stock of SkyTel or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall remain issued, outstanding and unchanged as a validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Cancelation of Treasury Stock and WorldCom-Owned Stock. Each share
of SkyTel Common Stock and Convertible Exchangeable Preferred Stock that is
directly owned by SkyTel, Sub or WorldCom shall automatically be canceled
and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(c) Conversion of SkyTel Common Stock. Subject to Section 2.02(e), each
issued and outstanding share (other than shares to be canceled in
accordance with Section 2.01(b)) of SkyTel Common Stock shall be converted
into the right to receive a number of fully paid and nonassessable shares
of WorldCom Common Stock equal to the Exchange Ratio (the "Common Stock
Merger Consideration"). For purposes of this Agreement, "Exchange Ratio"
means the quotient (rounded to the nearest 1/10,000) determined by dividing
$20 by the average (rounded to the nearest 1/10,000) of the volume weighted
averages (rounded to the nearest 1/10,000) of the trading prices of
WorldCom Common Stock on The Nasdaq National Market ("Nasdaq"), as reported
by Bloomberg Financial Markets (or such other source to which WorldCom and
SkyTel may agree), for each of the 20 consecutive trading days ending with
the third trading day immediately preceding the Effective Time; provided,
that the Exchange Ratio shall not be less than .2500 or greater than .2778.
As of the Effective Time, all such shares of SkyTel Common Stock shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each
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holder of a certificate that immediately prior to the Effective Time
represented any such shares shall cease to have any rights with respect
thereto, except the right to receive the Common Stock Merger Consideration
and any cash in lieu of fractional shares of WorldCom Common Stock to be
issued or paid in consideration therefor upon surrender of such certificate
in accordance with Section 2.02, without interest.
(d) Conversion of Convertible Exchangeable Preferred Stock. Each issued
and outstanding share (other than shares to be canceled in accordance with
Section 2.01(b)) of Convertible Exchangeable Preferred Stock shall be
converted into the right to receive one fully paid and nonassessable share
of WorldCom Convertible Exchangeable Preferred Stock (the "Preferred Stock
Merger Consideration" and, together with the Common Stock Merger
Consideration, the "Merger Consideration"), which WorldCom Convertible
Exchangeable Preferred Stock shall have terms that are identical to the
Convertible Exchangeable Preferred Stock (except that (x) the issuer
thereof shall be WorldCom rather than SkyTel and (y) the WorldCom
Convertible Exchangeable Preferred Stock shall become convertible into
WorldCom Common Stock as required by Section 9(l) of the Certificate of
Designations for the Convertible Exchangeable Preferred Stock. As of the
Effective Time, all such shares of the Convertible Exchangeable Preferred
Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Preferred Stock Merger
Consideration.
(e) WorldCom Rights. All WorldCom Common Stock issued in the Merger
shall be accompanied by rights to purchase shares of WorldCom's Series 3
Junior Participating Preferred Stock pursuant to the Rights Agreement dated
as of August 26, 1996, between WorldCom and The Bank of New York, as rights
agent.
(f) Anti-Dilution Provisions. In the event WorldCom changes (or
establishes a record date for changing) the number of shares of WorldCom
Common Stock issued and outstanding prior to the Effective Time as a result
of a stock split, stock dividend, recapitalization, subdivision,
reclassification, combination, exchange of shares or similar transaction
with respect to the outstanding WorldCom Common Stock and the record date
therefor shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted to reflect such stock split, stock dividend,
recapitalization, subdivision, reclassification, combination, exchange of
shares or similar transaction. In addition, in the event WorldCom pays (or
establishes a record date for payment) an extraordinary dividend on, or
makes any other extraordinary distribution in respect of, WorldCom Common
Stock, the Exchange Ratio shall be appropriately adjusted to reflect such
dividend or distribution.
Section 2.02. Exchange of Certificates. (a) Exchange Agent. Prior to the
Effective Time, WorldCom shall enter into an agreement with such bank or trust
company as may be designated by WorldCom (the "Exchange Agent"), which shall
provide that WorldCom shall deposit with the Exchange Agent as of the Effective
Time, for the benefit of the holders of shares of SkyTel Common Stock and
Convertible Exchangeable Preferred Stock, for exchange in accordance with this
Article II, through the Exchange Agent, certificates representing the Merger
Consideration issuable pursuant to Section 2.01 in exchange for outstanding
shares of SkyTel Common Stock or Convertible Exchange Preferred Stock. WorldCom
shall make available to the Exchange Agent from time to time as required after
the Effective Time cash necessary to pay dividends and other distributions in
accordance with Section 2.02(c) and to make payments in lieu of any fractional
shares of WorldCom Common Stock in accordance with Section 2.02(e).
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of SkyTel Common Stock or Convertible
Exchangeable Preferred Stock (the "Certificates") whose shares were converted
into the right to receive the Merger Consideration pursuant to Section 2.01,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form
and have such other provisions as WorldCom may reasonably specify) and (ii)
instructions for use
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in surrendering the Certificates in exchange for certificates representing the
Merger Consideration. Upon surrender of a Certificate for cancelation to the
Exchange Agent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of WorldCom Common Stock
or shares of Convertible Exchangeable Preferred Stock that such holder has the
right to receive pursuant to the provisions of this Article II, certain
dividends or other distributions in accordance with Section 2.02(c) and cash in
lieu of any fractional share of WorldCom Common Stock in accordance with
Section 2.02(e), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of SkyTel Common Stock or
Convertible Exchangeable Preferred Stock that is not registered in the transfer
records of SkyTel, a certificate representing the proper number of shares of
WorldCom Common Stock or WorldCom Convertible Exchangeable Preferred Stock, as
applicable, may be issued to a person other than the person in whose name the
Certificate so surrendered is registered if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such issuance shall pay any transfer or other taxes required by reason of the
issuance of shares of WorldCom Common Stock or WorldCom Convertible
Exchangeable Preferred Stock to a person other than the registered holder of
such Certificate or establish to the satisfaction of WorldCom that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 2.02(b), each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration that the holder thereof has the right to receive pursuant
to the provisions of this Article II, certain dividends or other distributions
in accordance with Section 2.02(c) and cash in lieu of any fractional share of
WorldCom Common Stock in accordance with Section 2.02(e). No interest shall be
paid or will accrue on any cash payable to holders of Certificates pursuant to
the provisions of this Article II.
(c) Distributions with Respect to Unsurrendered Certificates. No dividends
or other distributions with respect to WorldCom Common Stock or WorldCom
Convertible Exchangeable Preferred Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of WorldCom Common Stock or WorldCom Convertible Exchangeable
Preferred Stock represented thereby, and no cash payment in lieu of fractional
shares of WorldCom Common Stock shall be paid to any such holder pursuant to
Section 2.02(e) until the holder of record of such Certificate shall surrender
such Certificate in accordance with this Article II. Subject to the effect of
applicable escheat or similar laws, following surrender of any such Certificate
there shall be paid to the holder of the certificate representing whole shares
of WorldCom Common Stock or shares of WorldCom Convertible Exchangeable
Preferred Stock issued in exchange therefor, without interest, (i) at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole
shares of WorldCom Common Stock or shares of WorldCom Convertible Exchangeable
Preferred Stock, and the amount of any cash payable in lieu of a fractional
share of WorldCom Common Stock to which such holder is entitled pursuant to
Section 2.02(e) and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time
but prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole shares of WorldCom Common Stock or
shares of WorldCom Convertible Exchangeable Preferred Stock.
(d) No Further Ownership Rights in SkyTel Common Stock or Convertible
Exchangeable Preferred Stock. All shares of WorldCom Common Stock or shares of
WorldCom Convertible Exchangeable Preferred Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of this Article II
(including any cash paid pursuant to this Article II) shall be deemed to have
been issued (and paid) in full satisfaction of all rights pertaining to the
shares of SkyTel Common Stock or Convertible Exchangeable Preferred Stock
previously represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by SkyTel on such shares of SkyTel Common Stock or Convertible
Exchangeable Preferred Stock which remain unpaid at the Effective Time, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of SkyTel Common Stock or
Convertible Exchangeable Preferred Stock which were outstanding immediately
prior to the
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Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of WorldCom Common Stock shall be issued upon the surrender
for exchange of Certificates formerly representing SkyTel Common Stock, no
dividend or distribution of WorldCom shall relate to such fractional share
interests and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a shareholder of WorldCom.
(ii) Notwithstanding any other provision of this Agreement, each holder of
shares of SkyTel Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of WorldCom
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount,
less the amount of any withholding taxes that may be required thereon, equal to
such fractional part of a share of WorldCom Common Stock multiplied by the per
share closing price of WorldCom Common Stock on the Closing Date, as such price
is quoted by Nasdaq.
(f) No Liability. None of WorldCom, Sub, SkyTel or the Exchange Agent shall
be liable to any person in respect of any Merger Consideration, any dividends
or distributions with respect thereto, or any cash in lieu of fractional shares
of WorldCom Common Stock, in each case delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any
Certificate shall not have been surrendered prior to three years after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration, any dividends or distributions payable to the holder of such
Certificate or any cash payable in lieu of fractional shares of WorldCom Common
Stock pursuant to this Article II, would otherwise escheat to or become the
property of any Governmental Entity), any such Merger Consideration, dividends
or distributions in respect thereof or such cash shall, to the extent permitted
by applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interest of any person previously entitled thereto.
(g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by WorldCom,
the posting by such person of a bond in such reasonable amount as WorldCom may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration and any unpaid
dividends and distributions in respect thereof and any cash in lieu of
fractional shares of WorldCom Common Stock, in each case pursuant to this
Agreement.
ARTICLE III
Representations and Warranties
Section 3.01. Representations and Warranties of SkyTel. Except as expressly
disclosed in the SkyTel Filed SEC Documents or as expressly set forth on the
disclosure schedule delivered by SkyTel to WorldCom prior to the execution of
this Agreement (the "SkyTel Disclosure Schedule"), SkyTel represents and
warrants to WorldCom and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of SkyTel and its
Subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may be,
and authority to carry on its business as now being conducted, except for those
jurisdictions where the failure to be so organized, existing or in good
standing individually or in the aggregate is not reasonably likely to have a
Material Adverse Effect on SkyTel. Each of SkyTel and its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
except for those jurisdictions in which the failure
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to be so qualified or licensed or to be in good standing individually or in the
aggregate is not reasonably likely to have a Material Adverse Effect on SkyTel.
SkyTel has made available to WorldCom prior to the execution of this Agreement
complete and correct copies of its Restated Certificate of Incorporation and
By-laws, as amended to date.
(b) Subsidiaries. Exhibit 21 to SkyTel's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (the "SkyTel 1998 10-K"), sets forth each
Significant Subsidiary of SkyTel as of the date hereof. All the outstanding
shares of capital stock of, or other equity interests in, each Significant
Subsidiary of SkyTel have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by SkyTel, free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of any
kind or nature whatsoever (collectively, "Liens") and free of any restriction
on the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests. Except for the capital stock or other ownership interests
of its Subsidiaries, as of the date hereof, SkyTel does not beneficially own
directly or indirectly any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any person.
(c) Capital Structure. The authorized capital stock of SkyTel consists of
125,000,000 shares of capital stock consisting of: (1) 100,000,000 shares of
SkyTel Common Stock and (2) 25,000,000 shares of preferred stock, par value
$.01 per share (the "SkyTel Preferred Stock"), of which (A) 3,750,000 shares
have been designated as Convertible Exchangeable Preferred Stock and (B)
750,000 shares have been designated as Series C Junior Participating Preferred
Stock (the "Series C Preferred Stock"). At the close of business on May 26,
1999, (i) 60,180,404 shares of SkyTel Common Stock were issued and outstanding;
(ii) no shares of SkyTel Common Stock were held by SkyTel in its treasury;
(iii) 3,750,000 shares of Convertible Exchangeable Preferred Stock were issued
and outstanding; (iv) 750,000 shares of Series C Preferred Stock were reserved
for issuance in connection with the rights (the "Rights") to purchase shares of
Series C Preferred Stock issued pursuant to the Rights Agreement dated as of
July 26, 1989, between SkyTel and NCNB Texas National Bank (the "Rights
Agreement"); (v) no other shares of SkyTel Preferred Stock were issued and
outstanding; (vi) 409,500 shares of SkyTel Common Stock were reserved for
issuance pursuant to warrants and other similar rights to purchase SkyTel
Common Stock (the "Warrants"); (vii) 3,136,444 shares of SkyTel Common Stock
were reserved for issuance pursuant to the 1990 Executive Incentive Plan, the
1988 Executive Plan, the 1998 Outside Directors' Stock Option Plan, the 1993
Employee Stock Purchase Plan, the Long-Term Management Incentive Plan and
grants of options made to individual employees (such plans and arrangements,
collectively, the "SkyTel Stock Plans") (of which 1,204,269 shares of SkyTel
Common Stock are subject to outstanding SkyTel Stock Options (as defined
below)); and (viii) 4,280,867 shares of SkyTel Common Stock were reserved for
issuance upon conversion of (A) the Convertible Exchangeable Preferred Stock,
(B) SkyTel's 6.75% Convertible Subordinate Debentures due 2002 (the
"Convertible Debentures") and (C) the Mtel Latin America, L.P. common stock.
There are no stock appreciation rights or other rights (other than the SkyTel
Stock Options and Warrants) to receive shares of SkyTel Common Stock on a
deferred basis granted under the SkyTel Stock Plans or otherwise. SkyTel has
delivered to WorldCom a complete and correct list, as of May 26, 1999, of the
number of shares of SkyTel Common Stock subject to outstanding stock options or
other rights to purchase or receive SkyTel Common Stock granted under (i) the
SkyTel Stock Plans (collectively, "SkyTel Stock Options") and (ii) the
Warrants, and the exercise prices thereof. As of the date of this Agreement,
other than the Convertible Debentures, no bonds, debentures, notes or other
indebtedness of SkyTel having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of SkyTel may vote are issued or outstanding. All outstanding
shares of capital stock of SkyTel are, and all shares which may be issued will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Except as set forth in this Section
3.01(c) (including pursuant to the conversion or exercise of the securities
referred to above), (x) there are not issued, reserved for issuance or
outstanding (A) any shares of capital stock or other voting securities of
SkyTel, (B) any securities of SkyTel or any of its Subsidiaries convertible
into or exchangeable or exercisable for shares of capital stock or other voting
securities of, or other ownership interests in, SkyTel or any of its
Subsidiaries, (C) any warrants, calls, options or other rights to acquire from
SkyTel or any Subsidiary of SkyTel, and no obligation
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of SkyTel or any Subsidiary of SkyTel to issue, any capital stock or other
voting securities of, or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for capital stock or other
voting securities of, or other ownership interests in, SkyTel or any of its
Subsidiaries and (y) as of the close of business on May 26, 1999, there are not
any outstanding obligations of SkyTel or any Subsidiary of SkyTel to
repurchase, redeem or otherwise acquire any such securities or to issue,
deliver or sell, or cause to be issued, delivered or sold, any such securities.
SkyTel is not a party to any voting agreement with respect to the voting of any
such securities.
(d) Authority; Noncontravention. SkyTel has the requisite corporate power
and authority to enter into this Agreement and, subject to receipt of SkyTel
Stockholder Approval, to consummate the transactions contemplated by this
Agreement. SkyTel has the requisite corporate power and authority to enter into
the Option Agreement and to consummate the transactions contemplated thereby.
The execution and delivery of this Agreement and the Option Agreement by SkyTel
and the consummation by SkyTel of the transactions contemplated by this
Agreement and the Option Agreement have been duly authorized by all necessary
corporate action on the part of SkyTel, subject, in the case of the Merger, to
receipt of the SkyTel Stockholder Approval. This Agreement and the Option
Agreement have been duly executed and delivered by SkyTel and, assuming the due
authorization, execution and delivery by each of the other parties hereto and
thereto, constitute the valid and binding obligations of SkyTel, enforceable
against SkyTel in accordance with their terms. The execution and delivery of
this Agreement and the Option Agreement do not, and the consummation of the
transactions contemplated by this Agreement and the Option Agreement and
compliance with the provisions hereof and thereof will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of SkyTel or any of
its Subsidiaries under, (i) the Restated Certificate of Incorporation or By-
laws of SkyTel or the comparable organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
license or similar authorization applicable to SkyTel or any of its
Subsidiaries or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to SkyTel or any of its Subsidiaries or their respective properties
or assets, other than, in the case of clauses (ii) and (iii), any such
conflicts, violations, defaults, rights, losses or Liens that individually or
in the aggregate are not reasonably likely to have a Material Adverse Effect on
SkyTel. No consent, approval, order or authorization of, action by or in
respect of, or registration, declaration or filing with, any Federal, state,
local or foreign government, any court, administrative, regulatory or other
governmental agency, commission or authority or any non-governmental self-
regulatory agency, commission or authority (each a "Governmental Entity") is
required by or with respect to SkyTel or any of its Subsidiaries in connection
with the execution and delivery of this Agreement or the Option Agreement by
SkyTel or the consummation by SkyTel of the Merger or the other transactions
contemplated by this Agreement or the Option Agreement, except for (1) the
filing of a premerger notification and report form by SkyTel under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and
any applicable filings and approvals under similar foreign antitrust or
competition laws and regulations; (2) the filing with the Securities and
Exchange Commission (the "SEC") of (A) a proxy statement relating to the SkyTel
Stockholders Meeting (such proxy statement, as amended or supplemented from
time to time, the "SkyTel Proxy Statement"), and (B) such reports under Section
13(a), 13(d), 15(d) or 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as may be required in connection with this Agreement, the
Option Agreement and the transactions contemplated by this Agreement or the
Option Agreement; (3) the filing of the Certificate of Merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other states in which SkyTel is qualified to do business and such filings with
Governmental Entities to satisfy the applicable requirements of state
securities or "blue sky" laws; (4) filings with and approvals of the Federal
Communications Commission (the "FCC") as required under the Communications Act
of 1934, as amended (the "Communications Act"), and the rules and regulations
promulgated thereunder; (5) such filings with and approvals of Nasdaq to permit
the shares of SkyTel Common Stock that are to be issued pursuant to the Option
Agreement to be traded on Nasdaq; (6) filings with and
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approvals of any state public service commissions ("PUCs"), foreign
telecommunications regulatory agencies or similar regulatory bodies as required
by applicable statutes, laws, rules, ordinances and regulations; and (7) such
other consents, approvals, orders or authorizations the failure of which to be
made or obtained individually or in the aggregate is not reasonably likely to
have a Material Adverse Effect on SkyTel.
(e) SEC Documents; Undisclosed Liabilities. SkyTel has filed all required
reports, schedules, forms, statements and other documents (including exhibits
and all other information incorporated therein) with the SEC since January 1,
1998 (collectively, the "SkyTel SEC Documents"). As of their respective dates,
the SkyTel SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such SkyTel SEC Documents, and none of
the SkyTel SEC Documents when filed contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any SkyTel SEC Document has been revised or
superseded by a later filed SkyTel SEC Document, none of the SkyTel SEC
Documents contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of SkyTel included in the SkyTel
SEC Documents comply as to form, as of their respective dates of filing with
the SEC, in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto (the
"Accounting Rules"), have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of unaudited statements, as
permitted by the Accounting Rules) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of SkyTel
and its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal recurring year-end audit
adjustments). Except (i) as reflected in such financial statements, in the
notes thereto or elsewhere in the SkyTel Filed SEC Documents or as expressly
permitted by Section 5.07(d) or (ii) for liabilities incurred in connection
with this Agreement or the Option Agreement or the transactions contemplated
hereby or thereby, neither SkyTel nor any of its Subsidiaries has any
liabilities or obligations of any nature which, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect on SkyTel.
(f) Information Supplied. None of the information supplied or to be supplied
by SkyTel specifically for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by WorldCom in
connection with the issuance of WorldCom Common Stock in the Merger (the "Form
S-4") will, at the time the Form S-4 becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading or (ii) the SkyTel Proxy Statement will, at the date it is first
mailed to SkyTel's stockholders or at the time of the SkyTel Stockholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The SkyTel Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder. No representation or warranty is made by SkyTel with
respect to statements made or incorporated by reference in the SkyTel Proxy
Statement based on information supplied by WorldCom or Sub specifically for
inclusion or incorporation by reference in the SkyTel Proxy Statement.
(g) Absence of Certain Changes or Events. Except for liabilities incurred in
connection with or expressly permitted by this Agreement and the Option
Agreement and except as disclosed in the SkyTel SEC Documents filed and
publicly available prior to the date of this Agreement (as amended to the date
of this Agreement, the "SkyTel Filed SEC Documents"), since December 31, 1998,
SkyTel and its Subsidiaries have conducted their business only in the ordinary
course consistent with past practice, and there has not been (1) any Material
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Adverse Change in SkyTel, (2) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to any of SkyTel's capital stock, except for dividends or other
distributions declared, set aside or paid by SkyTel as required by and in
accordance with the respective terms of such capital stock as of the date
hereof, (3) any split, combination or reclassification of any of SkyTel's
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of SkyTel's
capital stock, (4) (A) any granting by SkyTel or any of its Subsidiaries to any
current or former director, executive officer or other employee of SkyTel or
its Subsidiaries of any increase in compensation, bonus or other benefits,
except for normal increases in cash compensation in the ordinary course of
business consistent with past practice or as was required under any employment
agreements in effect as of the date of the most recent audited financial
statements included in the SkyTel Filed SEC Documents, (B) any granting by
SkyTel or any of its Subsidiaries to any such current or former director,
executive officer or employee of any increase in severance or termination pay,
except as was required under any employment, severance or termination
agreements in effect as of the date of the most recent audited financial
statements in the SkyTel Filed SEC Documents or as expressly permitted by
Section 5.07(d), (C) any entry by SkyTel or any of its Subsidiaries into, or
any amendments of, any employment, deferred compensation, consulting,
severance, termination or indemnification agreement with any such current or
former director, executive officer or domestic employee, or (D) any amendment
to, or modification of, any SkyTel Stock Option or Warrant, (5) any damage,
destruction or loss, whether or not covered by insurance, that individually or
in the aggregate is reasonably likely to have a Material Adverse Effect on
SkyTel, (6) except insofar as may have been required by a change in GAAP, any
change in accounting methods, principles or practices by SkyTel or any of its
Subsidiaries materially affecting the consolidated financial position or
results of operations of SkyTel or (7) any tax election or any settlement or
compromise of any income tax liability that individually or in the aggregate is
reasonably likely to have a Material Adverse Effect on SkyTel.
(h) Litigation. There is no suit, action, proceeding, claim, grievance or
investigation pending or, to the Knowledge of SkyTel, threatened against or
affecting SkyTel or any of its Subsidiaries that, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on SkyTel nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against SkyTel or any of its Subsidiaries
having, or that is reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on SkyTel.
(i) Compliance with Applicable Laws. SkyTel and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders, registrations and approvals
of all Governmental Entities which are required for the operation of the
business of SkyTel and its Subsidiaries taken as a whole (the "SkyTel
Permits"), except where the failure to have any such SkyTel Permits
individually or in the aggregate is not reasonably likely to have a Material
Adverse Effect on SkyTel. SkyTel and its Subsidiaries are in compliance with
the terms of the SkyTel Permits and all applicable statutes, laws, ordinances,
rules and regulations, except where the failure so to comply individually or in
the aggregate is not reasonably likely to have a Material Adverse Effect on
SkyTel. The Merger, in and of itself, would not cause the revocation or
cancelation of any SkyTel Permit that individually or in the aggregate is
reasonably likely to have a Material Adverse Effect on SkyTel.
(j) Contracts. Neither SkyTel nor any of its Subsidiaries is in violation of
or in default under (nor does there exist any condition which upon the passage
of time or the giving of notice or both would cause such a violation of or
default under) any loan or credit agreement, bond, note, mortgage, indenture,
lease or other contract, agreement, obligation, commitment, arrangement,
understanding, instrument, permit or license to which it is a party or by which
it or any of its properties or assets is bound, except for violations or
defaults that individually or in the aggregate are not reasonably likely to
have a Material Adverse Effect on SkyTel. Since December 31, 1998, none of
SkyTel or its Subsidiaries has entered into any contract, agreement,
obligation, commitment, arrangement or understanding with any Affiliate of
SkyTel that would have been required to be filed as an exhibit to the SkyTel
1998 10-K had SkyTel been a party thereto as of December 31, 1998. Neither
SkyTel nor any of its Subsidiaries is a party to or bound by any non-
competition agreement or any other similar agreement or obligation which
purports to limit in any material respect the manner in which,
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or the localities in which, all or any material portion of the business of
SkyTel and its Subsidiaries, taken as a whole, is conducted.
(k) Absence of Changes in Benefit Plans. Except as expressly permitted by
this Agreement, since the date of the most recent audited financial statements
included in the SkyTel Filed SEC Documents, there has not been (i) any adoption
or amendment in any material respect by SkyTel or any of its Subsidiaries of
any employment agreement with any director, officer or domestic employee of
SkyTel or any of its Subsidiaries or of any collective bargaining agreement or
(ii) any adoption or material amendment of any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical, welfare benefit or other plan, arrangement
or understanding providing compensation or benefits to any current or former
employee, officer or director of SkyTel or any of its Subsidiaries
(collectively, the "SkyTel Benefit Plans"), or any material change in any
actuarial or other assumption used to calculate funding obligations with
respect to any SkyTel pension plans, or any material change in the manner in
which contributions to any SkyTel pension plans are made or the basis on which
such contributions are determined.
(1) ERISA Compliance. (i) With respect to the SkyTel Benefit Plans, no
liability has been incurred and to the Knowledge of SkyTel there exists no
condition or circumstances in connection with which SkyTel or any of its
Subsidiaries could be subject to any liability that individually or in the
aggregate is reasonably likely to have a Material Adverse Effect on SkyTel
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code or any other applicable law.
(ii) Each SkyTel Benefit Plan has been administered in accordance with its
terms, except for any failures so to administer any SkyTel Benefit Plan that
individually or in the aggregate are not reasonably likely to have a Material
Adverse Effect on SkyTel. SkyTel, its Subsidiaries and all SkyTel Benefit Plans
are in compliance with the applicable provisions of ERISA, the Code and all
other applicable laws and the terms of all applicable collective bargaining
agreements, except for any failures to be in such compliance that individually
or in the aggregate are not reasonably likely to have a Material Adverse Effect
on SkyTel.
(iii) None of SkyTel or any of its Subsidiaries sponsors or contributes to
any SkyTel Benefit Plan that is subject to Title IV of ERISA.
(iv) SkyTel and its Subsidiaries are in compliance with all Federal, state,
local and foreign requirements regarding employment, except for any failures to
comply that individually or in the aggregate are not reasonably likely to have
a Material Adverse Effect on SkyTel. Neither SkyTel nor any of its Subsidiaries
is a party to any collective bargaining or other labor union contract
applicable to persons employed by SkyTel or any of its Subsidiaries in the
United States and as of the date of this Agreement no such collective
bargaining agreement is being negotiated by SkyTel or any of its Subsidiaries.
As of the date of this Agreement, there is no labor dispute, strike or work
stoppage against SkyTel or any of its Subsidiaries pending or, to the Knowledge
of SkyTel, threatened which may interfere with the respective business
activities of SkyTel or any of its Subsidiaries, except where such dispute,
strike or work stoppage individually or in the aggregate is not reasonably
likely to have a Material Adverse Effect on SkyTel. As of the date of this
Agreement, to the Knowledge of SkyTel, none of SkyTel, any of its Subsidiaries
or any of their respective representatives or employees has committed any
unfair labor practice in connection with the operation of the respective
businesses of SkyTel or any of its Subsidiaries, and there is no action, charge
or complaint against SkyTel or any of its Subsidiaries by the National Labor
Relations Board or any comparable governmental agency pending or threatened in
writing, in each case except where such practices, actions, charges or
complaints, individually or in the aggregate, are not reasonably likely to have
a Material Adverse Effect on SkyTel.
(v) Except as a result of items expressly permitted by Section 5.07(d), no
employee of SkyTel or its Subsidiaries will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any SkyTel Benefit Plan as a result of the transactions contemplated by
this Agreement or the Option Agreement. Except as a result of items expressly
permitted by Section 5.07(d), no amount payable,
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or economic benefit provided, by SkyTel or its Subsidiaries (including any
acceleration of the time of payment or vesting of any benefit) could be
considered an "excess parachute payment" under Section 280G of the Code. Except
as a result of items expressly permitted by Section 5.07(d), no person is
entitled to receive any additional payment from SkyTel or its Subsidiaries or
any other person (a "Parachute Gross-Up Payment") in the event that the excise
tax of Section 4999 of the Code is imposed on such person.
(m) Taxes. (i) Each of SkyTel and its Subsidiaries has filed or has caused
to be filed all material tax returns and reports required to be filed by it and
all such returns and reports are complete and correct in all material respects,
or requests for extensions to file such returns or reports have been timely
filed, granted and have not expired, except to the extent that such failures to
file, to be complete or correct or to have extensions granted that remain in
effect individually or in the aggregate are not reasonably likely to have a
Material Adverse Effect on SkyTel. SkyTel and each of its Subsidiaries has paid
or caused to be paid (or SkyTel has paid on its behalf) all taxes shown as due
on such returns and reports, and the most recent financial statements contained
in the SkyTel Filed SEC Documents reflect an adequate reserve for all taxes
payable by SkyTel and its Subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or assessed
in writing against SkyTel or any of its Subsidiaries or any SkyTel Consolidated
Group that are not adequately reserved for, except for deficiencies that
individually or in the aggregate are not reasonably likely to have a Material
Adverse Effect on SkyTel. The Federal income tax returns of SkyTel and its
Subsidiaries consolidated in such returns have closed by virtue of the
applicable statute of limitations.
(iii) Neither SkyTel nor any of its Subsidiaries has taken or agreed to take
any action or knows of any fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(iv) No deduction of any amount that would otherwise be deductible with
respect to tax periods ending on or before the Effective Time could be
disallowed under Section 162(m) of the Code, except any disallowances under
Section 162(m) of the Code that alone or with other such disallowances are not
reasonably likely to have a Material Adverse Effect on SkyTel.
(v) Neither SkyTel nor any of its Subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (x) in
the two years prior to the date of this Agreement or (y) in a distribution
which could otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in conjunction
with the Merger.
(vi) Neither SkyTel nor any of its Subsidiaries is a "United States real
property holding company" within the meaning of Section 897(c)(2) of the Code.
(vii) Schedule 3.01(m)(1) sets forth a complete schedule of each SkyTel
Consolidated Group of which SkyTel is or has been a member during the last six
years. Such schedule sets forth the names of all members of each such SkyTel
Consolidated Group and the periods during which SkyTel or any of its
Subsidiaries is or has been a member.
(viii) Schedule 3.01(m)(2) sets forth a complete schedule of all States in
which SkyTel has "nexus" for state tax law purposes.
(ix) As used in this Agreement (1) "taxes" shall include all (x) Federal,
state, local or foreign income, property, sales, excise and other taxes or
similar governmental charges, including any interest, penalties or additions
with respect thereto, (y) liability for the payment of any amounts of the type
described in clause (x) as a result of being a member of an affiliated,
consolidated, combined or unitary group, and (z) liability for the
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payment of any amounts as a result of being party to any tax sharing agreement
or as a result of any express or implied obligation to indemnify any other
person with respect to the payment of any amounts of the type described in
clause (x) or (y) and (2) "SkyTel Consolidated Group" means any affiliated
group within the meaning of Section 1504(a) of the Code, in which SkyTel (or
any Subsidiary of SkyTel) is or has ever been a member.
(n) Voting Requirements. The affirmative vote of the holders of a majority
of the voting power of all outstanding shares of SkyTel Common Stock at the
SkyTel Stockholders Meeting to adopt this Agreement (the "SkyTel Stockholder
Approval") is the only vote of the holders of any class or series of SkyTel's
capital stock necessary to approve and adopt this Agreement, the Option
Agreement and the transactions contemplated hereby or thereby.
(o) State Takeover Statutes. The Board of Directors of SkyTel (including the
disinterested directors thereof) has unanimously approved the terms of this
Agreement and the Option Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement and the Option Agreement and
such approval constitutes approval of the Merger and the other transactions
contemplated by this Agreement and the Option Agreement by the SkyTel Board of
Directors under the provisions of Section 203 of the DGCL and represents all
the action necessary to ensure that such Section 203 does not apply to WorldCom
in connection with the Merger and the other transactions contemplated by this
Agreement and the Option Agreement. To the Knowledge of SkyTel, no other state
takeover statute is applicable to the Merger or the other transactions
contemplated hereby and by the Option Agreement.
(p) Accounting Matters. Neither SkyTel nor any of its Affiliates has taken
or agreed to take any action that would prevent the business combination to be
effected by the Merger to be accounted for as a pooling of interests
transaction.
(q) Brokers. No broker, investment banker, financial advisor or other
person, other than Warburg Dillon Read LLC, the fees, commissions and expenses
of which will be paid by SkyTel, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission, or the reimbursement of
expenses, in connection with the transactions contemplated by this Agreement
and the Option Agreement based upon arrangements made by or on behalf of
SkyTel. SkyTel has furnished to WorldCom true and complete copies of all
agreements under which any such fees, commissions or expenses are payable and
all indemnification and other agreements related to the engagement of the
persons to whom such fees, commissions or expenses are payable.
(r) Opinion of Financial Advisor. SkyTel has received the opinion of Warburg
Dillon Read LLC, dated the date of this Agreement, to the effect that, as of
such date, the Exchange Ratio is fair from a financial point of view to the
stockholders of SkyTel (other than WorldCom and its Affiliates), a signed copy
of which has been or promptly will be delivered to WorldCom.
(s) Intellectual Property; Year 2000. (i) SkyTel and its Subsidiaries own,
or are validly licensed or otherwise have the right to use, all patents, patent
rights, trademarks, trade secrets, trade names, service marks, copyrights and
other proprietary intellectual property rights and computer programs (the
"Intellectual Property Rights") used in the business of SkyTel and its
Subsidiaries, except for such Intellectual Property Rights the failure of which
to own, license or otherwise have the right to use is not, individually or in
the aggregate, reasonably likely to have a Material Adverse Effect on SkyTel.
(ii) To the Knowledge of SkyTel, neither SkyTel nor any of its Subsidiaries
has interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property Rights or other proprietary information
of any other person, except for any such interference, infringement,
misappropriation or other conflict which is not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on SkyTel.
Neither SkyTel nor any of its Subsidiaries has received any written charge,
complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or other conflict (including any claim
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that SkyTel or any such Subsidiary must license or refrain from using any
Intellectual Property Rights or other proprietary information of any other
person) which has not been settled or otherwise fully resolved, except with
respect to any such interference, infringement, misappropriation or other
conflict which is not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on SkyTel. To SkyTel's Knowledge, no other
person has interfered with, infringed upon, misappropriated or otherwise come
into conflict with any Intellectual Property Rights of SkyTel or any of its
Subsidiaries, except for any such interference, infringement, misappropriation
or other conflict which is not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on SkyTel.
(iii) The disclosure set forth in SkyTel 1998 10-K under the heading "Year
2000 Readiness" was true and correct in all material respects on the date
thereof and is true and correct in all material respects as if made as of the
date hereof.
(iv) As of the Closing Date, SkyTel and its Subsidiaries are Year 2000
Compliant and SkyTel and its Subsidiaries have no Knowledge that their
respective suppliers are not Year 2000 Compliant, except, in each case, for
such failures to be Year 2000 Compliant that, individually or in the aggregate,
are not reasonably likely to have a Material Adverse Effect on SkyTel. The term
"Year 2000 Compliant", with respect to a computer system or software program,
means that such computer system or program: (i) is capable of recognizing,
processing, managing, representing, interpreting and manipulating correctly
date-related data for dates earlier and later than January 1, 2000; (ii) has
the ability to provide date recognition for any data element without
limitation; (iii) has the ability to function automatically into and beyond the
year 2000 without human intervention and without any change in operations
associated with the advent of the year 2000; (iv) has the ability to interpret
data, dates and time correctly into and beyond the year 2000; (v) has the
ability not to produce noncompliance in existing data, nor otherwise corrupt
such data, into and beyond the year 2000; (vi) has the ability to process
correctly after January 1, 2000, data containing dates and times before that
date; and (vii) has the ability to recognize all "leap year" dates, including
February 29, 2000.
(t) Rights Agreement. SkyTel has amended the Rights Agreement to provide
that neither WorldCom nor Sub shall be deemed to be an Acquiring Person (as
defined in the Rights Agreement) and the Distribution Date or Share Acquisition
Date (each as defined in the Rights Agreement) shall not be deemed to occur and
that the Rights will not become separable, distributable, unredeemable or
exercisable as a result of entering into this Agreement, the Option Agreement
or consummating the Merger and/or the other transactions contemplated hereby or
thereby.
Section 3.02. Representations and Warranties of WorldCom and Sub. Except as
expressly disclosed in the WorldCom Filed SEC Documents, WorldCom and Sub
represent and warrant to SkyTel as follows:
(a) Organization, Standing and Corporate Power. Each of WorldCom, Sub
and their Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate or
other power, as the case may be, and authority to carry on its business as
now being conducted, except for those jurisdictions where the failure to be
so organized, existing or in good standing individually or in the aggregate
is not reasonably likely to have a Material Adverse Effect on WorldCom.
Each of WorldCom and its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature
of its business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except for those
jurisdictions in which the failure to be so qualified or licensed or to be
in good standing individually or in the aggregate is not reasonably likely
to have a Material Adverse Effect on WorldCom. WorldCom has made available
to SkyTel prior to the execution of this Agreement complete and correct
copies of its articles of incorporation and by-laws, in each case as
amended to date.
(b) Capital Structure. (i) As of the date hereof, the authorized capital
stock of WorldCom consists of 5,000,000,000 shares of WorldCom Common
Stock, and 50,000,000 shares of preferred stock, par value $.01 per share,
of which 94,992 shares have been designated as Series A 8% Cumulative
Convertible Preferred Stock (the "WorldCom Series A Preferred"), 15,000,000
shares have been
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designated as Series B Convertible Preferred Stock (the "WorldCom Series B
Preferred") and 5,000,000 shares have been designated as Series 3 Junior
Participating Preferred Stock (the "WorldCom Series 3 Preferred" and,
together with the WorldCom Series A Preferred and WorldCom Series B
Preferred, the "WorldCom Preferred Stock"). As of May 26, 1999, (i)
1,866,687,349 shares of WorldCom Common Stock were issued and outstanding,
(ii) 4,510,211 shares of WorldCom Common Stock were held by WorldCom in its
treasury, (iii) no shares of the WorldCom Series A Preferred were issued
and outstanding, (iv) 11,483,357 shares of WorldCom Series B Preferred were
issued and outstanding, (v) no shares of WorldCom Series 3 Preferred were
issued and outstanding, (vi) no other shares of WorldCom Preferred Stock
were issued and outstanding, (vii) 1,030,710 shares of WorldCom Common
Stock were reserved for issuance pursuant to warrants to purchase WorldCom
Common Stock (the "WorldCom Warrants"), (viii) 1,511,471 shares of WorldCom
Common Stock were reserved for issuance as incentive stock units, (ix)
384,417,585 shares of WorldCom Common Stock were reserved for issuance
pursuant to WorldCom's stock option plans (such plans, collectively, the
"WorldCom Stock Plans") (of which 235,211,976 are subject to outstanding
WorldCom Stock Options (as defined below)) and (x) 1,118,611 shares of
WorldCom Common Stock were reserved for issuance upon conversion of the
WorldCom Preferred Stock. There are no rights (other than outstanding stock
options or other rights to purchase or receive WorldCom Common Stock
granted under the WorldCom Stock Plans (collectively, the "WorldCom Stock
Options")) to receive shares of WorldCom Common Stock on a deferred basis
granted under the WorldCom Stock Plans or otherwise. As of May 26, 1999, no
bonds, debentures, notes or other indebtedness of WorldCom having the right
to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which shareholders of WorldCom may vote
are issued or outstanding. All outstanding shares of capital stock of
WorldCom are, and all shares which may be issued will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except as set forth in this Section 3.02(b) (including
pursuant to the conversion or exercise of the securities referred to
above), (x) there are not issued, reserved for issuance or outstanding (A)
any shares of capital stock or other voting securities of WorldCom, (B) any
securities of WorldCom or any of its Subsidiaries convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities of, or other ownership interests in, WorldCom or any of its
Subsidiaries, (C) any warrants, calls, options or other rights to acquire
from WorldCom or any Subsidiary of WorldCom, and no obligation of WorldCom
or any Subsidiary of WorldCom to issue, any capital stock or other voting
securities of, or other ownership interests in any securities convertible
into or exchangeable or exercisable for capital stock or other voting
securities of WorldCom or any of its Subsidiaries and (y) as of May 26,
1999, there are not any outstanding obligations of WorldCom or any
Subsidiary of WorldCom to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered
or sold, any such securities. WorldCom is not a party to any voting
agreement with respect to the voting of any such securities.
(ii) The authorized capital stock of Sub consists of 20,000 shares of
common stock, par value $0.01 per share ("Sub Common Stock"). There are
issued and outstanding 1,000 shares of Sub Common Stock. All such shares
are owned by WorldCom. Sub does not have issued or outstanding any options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating Sub to issue, transfer or sell any
shares of Sub Common Stock. Sub does not have any bonds, debentures, notes
or other indebtedness outstanding.
(c) Authority; Noncontravention. Each of WorldCom and Sub has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. WorldCom has
all requisite corporate power and authority to enter into the Option
Agreement and to consummate the transactions contemplated thereby. The
execution and delivery of this Agreement by WorldCom and Sub and of the
Option Agreement by WorldCom and the consummation by WorldCom and Sub of
the transactions contemplated by this Agreement and by WorldCom of the
transactions contemplated by the Option Agreement have been duly authorized
by all necessary corporate action on the part of WorldCom and Sub, as
applicable. This Agreement has been duly executed and delivered by WorldCom
and Sub and, assuming the due authorization, execution and delivery by
SkyTel, constitutes a
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valid and binding obligation of WorldCom and Sub, enforceable against each
of them in accordance with its terms. The Option Agreement has been duly
executed and delivered by WorldCom, and, assuming the due authorization,
execution and delivery by SkyTel, constitutes a valid and binding
obligation of WorldCom, enforceable against WorldCom in accordance with its
terms. The execution and delivery of this Agreement and the Option
Agreement do not, and the consummation of the transactions contemplated by
this Agreement and the Option Agreement and compliance with the provisions
of this Agreement and the Option Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancelation
or acceleration of any obligation or loss of a benefit under, or result in
the creation of any Lien upon any of the properties or assets of WorldCom
or Sub or any of WorldCom's other Subsidiaries under, (i) the articles or
certificate of incorporation or by-laws of WorldCom or Sub or the
comparable organizational documents of any of WorldCom's other
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise, license or similar authorization applicable to WorldCom or Sub
or any of WorldCom's other Subsidiaries or their respective properties or
assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to WorldCom or any
of its Subsidiaries or their respective properties or assets, other than,
in the case of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the aggregate are
not reasonably likely to have a Material Adverse Effect on WorldCom. No
consent, approval, order or authorization of, action by, or in respect of,
or registration, declaration or filing with, any Governmental Entity is
required by or with respect to WorldCom or Sub or any of WorldCom's other
Subsidiaries in connection with the execution and delivery of this
Agreement by WorldCom and Sub or the execution and delivery of the Option
Agreement by WorldCom or the consummation by WorldCom and Sub of the
transactions contemplated by this Agreement or the consummation by WorldCom
of the transactions contemplated by the Option Agreement, except for (1)
the filing of a premerger notification and report form by WorldCom under
the HSR Act and any applicable filings and approvals under similar foreign
antitrust or competition laws and regulations; (2) the filing with the SEC
of (A) the Form S-4 and (B) such reports under Section 13(a), 13(d), 15(d)
or 16(a) of the Exchange Act as may be required in connection with this
Agreement and the Option Agreement and the transactions contemplated by
this Agreement and the Option Agreement; (3) the filing of the Certificate
of Merger with the Delaware Secretary of State and appropriate documents
with the relevant authorities of other states in which WorldCom or Sub is
qualified to do business and such filings with Governmental Entities to
satisfy the applicable requirements of state securities or "blue sky" laws;
(4) such filings with and approvals of Nasdaq to permit the shares of
WorldCom Common Stock that are to be issued in the Merger to be traded on
Nasdaq; (5) filings with and approvals of the FCC as required under the
Communications Act and any rules and regulations promulgated thereunder;
(6) filings with and approvals of any PUCs, foreign telecommunications
regulatory agencies or similar regulatory bodies as required by applicable
statutes, laws, ordinances, rules and regulations; and (7) such other
consents, approvals, orders or authorizations the failure of which to be
made or obtained individually or in the aggregate is not reasonably likely
to have a Material Adverse Effect on WorldCom.
(d) SEC Documents; Undisclosed Liabilities. WorldCom has filed all
required reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated therein) with
the SEC since January 1, 1998 (collectively, the "WorldCom SEC Documents").
As of their respective dates, the WorldCom SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such WorldCom SEC Documents, and none
of the WorldCom SEC Documents when filed contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Except to the
extent that information contained in any WorldCom SEC Document has been
revised or superseded by a later filed WorldCom SEC Document, none of the
WorldCom SEC Documents contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
in order to make the
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statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of WorldCom included in the
WorldCom SEC Documents comply as to form, as of their respective dates of
filing with the SEC, in all material respects with the Accounting Rules,
have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by the Accounting Rules) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the
consolidated financial position of WorldCom and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal recurring year-end audit adjustments).
Except (i) as reflected in such financial statements, in the notes thereto
or elsewhere in the WorldCom Filed SEC Documents or (ii) for liabilities
incurred in connection with this Agreement or the Option Agreement or the
transactions contemplated hereby or thereby, neither WorldCom nor any of
its Subsidiaries has any liabilities or obligations of any nature which,
individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect on WorldCom.
(e) Information Supplied. None of the information supplied or to be
supplied by WorldCom specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or (ii) the SkyTel
Proxy Statement will, at the date it is first mailed to SkyTel's
stockholders or at the time of the SkyTel Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder. No representation or warranty is made by WorldCom with respect
to statements made or incorporated by reference in the Form S-4 based on
information supplied by SkyTel specifically for inclusion or incorporation
by reference in the Form S-4.
(f) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with or expressly permitted by this Agreement or the
Option Agreement and except as disclosed in the WorldCom SEC Documents
filed and publicly available prior to the date of this Agreement (as
amended to the date of this Agreement, the "WorldCom Filed SEC Documents"),
since December 31, 1998, WorldCom and its Subsidiaries have conducted their
business only in the ordinary course consistent with past practice, and
there has not been (1) any Material Adverse Change in WorldCom, (2) except
insofar as may have been required by a change in GAAP, any change in
accounting methods, principles or practices by WorldCom or any of its
Subsidiaries materially affecting the consolidated financial position or
results of operations of WorldCom or (3) any tax election that individually
or in the aggregate is reasonably likely to have a Material Adverse Effect
on the tax liability or tax attributes of WorldCom or any of its
Subsidiaries or any settlement or compromise of any material income tax
liability.
(g) Litigation. There is no suit, action, proceeding or investigation
pending or, to the Knowledge of WorldCom, threatened against or affecting
WorldCom or any of its Subsidiaries that, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect on WorldCom nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against WorldCom or any of its
Subsidiaries having, or which is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on WorldCom.
(h) Compliance with Applicable Laws. WorldCom and its Subsidiaries hold
all permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities which are required for the operation
of the business of WorldCom and its Subsidiaries taken as a whole (the
"WorldCom Permits") except where the failure to have any such WorldCom
Permits individually or in the aggregate is not reasonably likely to have a
Material Adverse Effect on WorldCom. WorldCom and its Subsidiaries are in
compliance with the terms of the WorldCom Permits and all applicable
statutes, laws, ordinances, rules and regulations, except where the failure
so to comply individually or in the aggregate is not reasonably likely to
have a Material Adverse Effect on WorldCom.
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(i) Taxes. (i) Each of WorldCom and its Subsidiaries and each WorldCom
Consolidated Group has filed all material tax returns and reports required
to be filed by it and all such returns and reports are complete and correct
in all material respects, or requests for extensions to file such returns
or reports have been timely filed, granted and have not expired, except to
the extent that such failures to file, to be complete or correct or to have
extensions granted that remain in effect individually or in the aggregate
are not reasonably likely to have a Material Adverse Effect on WorldCom.
WorldCom and each of its Subsidiaries has paid or caused to be paid (or
WorldCom has paid on its behalf) all taxes shown as due on such returns,
and the most recent financial statements contained in the WorldCom Filed
SEC Documents reflect an adequate reserve for all taxes payable by WorldCom
and its Subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed in writing against WorldCom or any of its Subsidiaries or any
WorldCom Consolidated Group that are not adequately reserved for, except
for deficiencies that individually or in the aggregate are not reasonably
likely to have a Material Adverse Effect on WorldCom.
(iii) Neither WorldCom nor any of its Subsidiaries has taken or agreed
to take any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
(iv) Neither WorldCom nor any of its Subsidiaries has constituted either
a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355
of the Code (x) in the two years prior to the date of this Agreement or (y)
in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of
the Code) in conjunction with the Merger.
(v) As used in this Agreement, "WorldCom Consolidated Group" means any
affiliated group within the meaning of Section 1504(a) of the Code that
WorldCom (or any Subsidiary of WorldCom) is or has ever been a member or
any group of corporations with which WorldCom files, has filed or is or was
required to file an affiliated, consolidated, combined, unitary or
aggregate tax return.
(j) Voting Requirements. No vote of the holders of shares of WorldCom
Common Stock or any other class or series of capital stock of WorldCom is
necessary to approve and adopt this Agreement and the Option Agreement and
the transactions contemplated hereby and thereby.
(k) Accounting Matters. Neither WorldCom nor any of its Affiliates has
taken or agreed to take any action that would prevent the business
combination to be effected by the Merger to be accounted for as a pooling
of interests transaction.
(l) Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission, or the reimbursement of expenses, in connection
with the transactions contemplated by this Agreement and the Option
Agreement based upon arrangements made by or on behalf of WorldCom.
(m) Interim Operations of Sub. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
(n) Year 2000. (i) The disclosure set forth in WorldCom's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, under the heading
"Year 2000 Readiness Disclosure" was true and correct in all material
respects on the date thereof and is true and correct in all material
respects as if made as of the date hereof.
(ii) As of the Closing Date, WorldCom and its Subsidiaries are Year 2000
Compliant and WorldCom and its Subsidiaries have no Knowledge that their
respective suppliers are not Year 2000 Compliant, except, in each case, for
such failures to be Year 2000 Compliant that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on
WorldCom.
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(o) Ownership of SkyTel Stock. Neither WorldCom nor Sub (nor any other
Subsidiary of WorldCom) has acquired or, except as a result of the Merger,
will acquire, or has owned in the past three years, any stock of SkyTel.
ARTICLE IV
Covenants Relating to Conduct of Business
Section 4.01. Conduct of Business. (a) Conduct of Business by SkyTel. Except
as set forth in Section 4.01(a) of the SkyTel Disclosure Schedule, as otherwise
expressly permitted by this Agreement (including as expressly permitted
pursuant to clauses (i) through (xi) of this Section 4.01(a)) or the Option
Agreement or as consented to in writing by WorldCom, during the period from the
date of this Agreement to the Effective Time, SkyTel shall, and shall cause its
Subsidiaries to, carry on their respective businesses in the ordinary course
consistent with past practice and, to the extent consistent therewith, use all
commercially reasonable efforts to preserve intact its current business
organizations, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with them to the
end that its goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time, except as set
forth in Section 4.01(a) of the SkyTel Disclosure Schedule, as otherwise
expressly permitted by this Agreement or the Option Agreement, as required by
applicable law or a Governmental Entity or as consented to in writing by
WorldCom, SkyTel shall not, and shall not permit any of its Subsidiaries to:
(i) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly owned Subsidiary of SkyTel to
its parent, dividends and distributions by SkyTel's other Subsidiaries, of
which SkyTel receives its proportionate share, and dividends and
distributions declared, set aside or paid by SkyTel as required by and in
accordance with the respective terms of its capital stock as of the date
hereof, (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, or (z) purchase, redeem or otherwise acquire
any shares of capital stock of SkyTel or any of its Subsidiaries or any
other securities thereof or any rights, warrants or options to acquire any
such shares or other securities (other than the purchase, redemption or
other acquisition of SkyTel Stock Options as required by and in accordance
with the respective terms of the SkyTel Stock Plans as in effect on the
date hereof);
(ii) issue, deliver, sell, grant, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities (other than (v) the issuance of SkyTel Stock Options
representing in the aggregate not more than 50,000 shares of SkyTel Common
Stock granted in the ordinary course of business, consistent with past
practice, to new employees of SkyTel, (w) in accordance with the Rights
Agreement, (x) the issuance of shares of SkyTel Common Stock upon the
exercise of SkyTel Stock Options as of the date hereof in accordance with
their terms on the date hereof, (y) the issuance of shares of SkyTel Common
Stock upon the conversion of Convertible Exchangeable Preferred Stock
outstanding as of the date hereof in accordance with their terms on the
date hereof or (z) the issuance of shares of SkyTel Common Stock pursuant
to the Option Agreement);
(iii) amend SkyTel's Restated Certificate of Incorporation, By-laws or
other comparable organizational documents;
(iv) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner,
any business or any person, other than purchases of raw materials or
supplies in the ordinary course of business consistent with past practice;
provided, however, that this paragraph (iv) shall not prohibit (x) any
merger or consolidation of a direct or indirect wholly
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owned Subsidiary of SkyTel with and into SkyTel or another direct or
indirect wholly owned Subsidiary of SkyTel, (y) the sale of a substantial
portion of the assets of a direct or indirect wholly owned Subsidiary of
SkyTel to SkyTel or another direct or indirect wholly owned Subsidiary of
SkyTel or (z) the creation of new, wholly owned Subsidiaries of SkyTel
organized to conduct or continue activities expressly permitted under this
Agreement;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets (including
securitizations), other than (A) sales or licenses of finished goods and
services in the ordinary course of business consistent with past practice
or (B) sales of any properties or assets of a direct or indirect wholly
owned Subsidiary of SkyTel to SkyTel or another direct or indirect wholly
owned Subsidiary of SkyTel;
(vi) (A) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of SkyTel or any of
its Subsidiaries, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for (w) borrowings under
the Credit, Security Guaranty and Pledge Agreement dated as of December 21,
1995, as in effect as of the date hereof, among SkyTel, STC certain
Subsidiaries of SkyTel, The Chase Manhattan Bank, Credit Lyonnais and JP
Morgan Securities, Inc., (x) borrowings under the Credit Agreement dated
December 31, 1998, as in effect as of the date hereof, between Mtel Latin
America, Inc. and Credit Lyonnais New York Branch, (y) short-term
borrowings incurred in the ordinary course of business (or to refund
existing or maturing indebtedness) consistent with past practice and (z)
intercompany indebtedness between SkyTel and any of its wholly owned
Subsidiaries or between such wholly owned Subsidiaries, or (B) make any
loans, advances or capital contributions to, or investments in, any other
person;
(vii) make or agree to make any new capital expenditure or expenditures,
other than as set forth in SkyTel's operating budgets for the fiscal years
ending December 31, 1999 and 2000, in each case in the form provided to
WorldCom on or prior to the date hereof;
(viii) pay, discharge, settle or satisfy any claims, liabilities,
obligations or litigation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with its terms, of any liability recognized or
disclosed in the most recent consolidated financial statements (or the
notes thereto) of SkyTel included in the SkyTel Filed SEC Documents or
incurred since the date of such financial statements for an amount in cash
not to exceed the amount of the specific reserve in respect of such claim,
liability, obligation or litigation included in such financial statements
plus $5,000,000 in the aggregate for all such claims, liabilities,
obligations or litigation, or waive the benefits of, or agree to modify in
any manner, any standstill or similar agreement to which SkyTel or any of
its Subsidiaries is a party;
(ix) except as required by law or contemplated hereby enter into, adopt
or amend in any material respect or terminate any SkyTel Benefit Plan,
collective bargaining agreement, employment agreement, deferred
compensation agreement, consulting agreement, severance agreement,
termination agreement or any other agreement, plan or policy involving
SkyTel or its Subsidiaries, and one or more of its directors, officers or
employees, or materially change any actuarial or other assumption used to
calculate funding obligations with respect to any pension plan, or change
the manner in which contributions to any pension plan are made or the basis
on which such contributions are determined;
(x) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially
increase benefits or compensation expenses of SkyTel or its Subsidiaries,
or as contemplated hereby or by the terms of any contract the existence of
which does not constitute a violation of this Agreement, increase the
compensation of any director, officer or other employee or pay any benefit
or amount not required by a plan or arrangement as in effect on the date of
this Agreement to any such person;
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(xi) take any action that would cause the representations and warranties
set forth in Section 3.01(g) to no longer be true and correct;
(xii) authorize, commit or agree to take, any of the foregoing actions;
or
(xiii) make any tax election that, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on the tax liability or
tax attributes of SkyTel or any of its subsidiaries or settle or compromise
any material income tax liability.
(b) Other Actions. Except as required by applicable law or as expressly
permitted by this Agreement, SkyTel and WorldCom shall not, and shall not
permit any of their respective Subsidiaries to, voluntarily take any action
that would, or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement or the
Option Agreement that are qualified as to materiality becoming untrue at the
Effective Time, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect at the Effective Time, or
(iii) any of the conditions to the Merger set forth in Article VI not being
satisfied.
(c) Advice of Changes. SkyTel and WorldCom shall promptly advise the other
party orally and in writing to the extent it has Knowledge of (i) any
representation or warranty made by it (and, in the case of WorldCom, made by
Sub) contained in this Agreement or the Option Agreement that is qualified as
to materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure of it (and, in the case
of WorldCom, by Sub) to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or the Option Agreement and (iii) any change or event having, or
which is reasonably likely to have, a Material Adverse Effect on such party or
on the truth of their respective representations and warranties or the ability
of the conditions set forth in Article VI to be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or
the conditions to the obligations of the parties under this Agreement or the
Option Agreement.
Section 4.02. No Solicitation by SkyTel. (a) SkyTel shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any of its
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
Subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any
proposal that constitutes a Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any Takeover Proposal;
provided, however, that if, at any time prior to the date of the SkyTel
Stockholders Meeting (the "Applicable Period"), the Board of Directors of
SkyTel determines in good faith, after consultation with outside counsel, that
it is necessary to do so in order to comply with its fiduciary duties to
SkyTel's stockholders under applicable law, SkyTel may, in response to a
Superior Proposal which was not solicited by it or which did not otherwise
result from a breach of this Section 4.02(a), and subject to providing prior
written notice of its decision to take such action to WorldCom and compliance
with Section 4.02(c), (x) furnish information with respect to SkyTel and its
Subsidiaries to any person making such Superior Proposal pursuant to a
customary confidentiality agreement (as determined by SkyTel after consultation
with its outside counsel) and (y) participate in discussions or negotiations
regarding such Superior Proposal. For purposes of this Agreement, "Takeover
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of a business that constitutes 15%
or more of the net revenues, net income or the assets of SkyTel and its
Subsidiaries, taken as a whole, or 15% or more of any class of equity
securities of SkyTel or any of its Subsidiaries, any tender offer or exchange
offer that if consummated would result in any person beneficially owning 15% or
more of any class of equity securities of SkyTel or any of its Subsidiaries, or
any merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving SkyTel or any of its Subsidiaries,
other than the transactions contemplated by this Agreement.
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(b) Except as expressly permitted by this Section 4.02, neither the Board of
Directors of SkyTel nor any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to WorldCom, the
approval or recommendation by such Board of Directors or such committee of the
Merger or this Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any Takeover Proposal, or (iii) cause SkyTel to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement (each, an "Acquisition Agreement") related to any
Takeover Proposal. Notwithstanding the foregoing, during the Applicable Period,
in response to a Superior Proposal which was not solicited by SkyTel and which
did not otherwise result from a breach of Section 4.02(a), the Board of
Directors of SkyTel may (subject to this and the following sentences) terminate
this Agreement (and concurrently with or after such termination, if it so
chooses, cause SkyTel to enter into any Acquisition Agreement with respect to
any Superior Proposal), but only at a time that is during the Applicable Period
and is after the fifth business day following WorldCom's receipt of written
notice (a "Notice of Superior Proposal") advising WorldCom that the Board of
Directors of SkyTel is prepared to accept a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. For purposes of this Agreement, a
"Superior Proposal" means any proposal made by a third party to acquire,
directly or indirectly, including pursuant to a tender offer, exchange offer,
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash and/or
securities, more than 50% of the combined voting power of the shares of
SkyTel's Common Stock then outstanding or all or substantially all the assets
of SkyTel and otherwise on terms which the Board of Directors of SkyTel
determines in its good faith judgment (after consultation with one or more of
SkyTel's financial advisors) to be more favorable to SkyTel's stockholders than
the Merger and for which financing, to the extent required, is then committed
or which, in the good faith judgment of the Board of Directors of SkyTel, is
reasonably capable of being obtained by such third party.
(c) In addition to the obligations of SkyTel set forth in paragraphs (a) and
(b) of this Section 4.02, SkyTel shall immediately advise WorldCom orally and
in writing of any request for information or of any Takeover Proposal, the
material terms and conditions of such request or Takeover Proposal and the
identity of the person making such request or Takeover Proposal. SkyTel will
keep WorldCom informed of the status and material details (including amendments
or proposed amendments) of any such request or Takeover Proposal.
(d) Nothing contained in this Section 4.02 shall prohibit SkyTel from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to SkyTel's
stockholders (including with respect to the delivery by SkyTel to WorldCom of a
Notice of Superior Proposal) if, in the good faith judgment of the Board of
Directors of SkyTel, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under applicable law;
provided, however, that neither SkyTel nor its Board of Directors nor any
committee thereof shall withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, a Takeover Proposal.
ARTICLE V
Additional Agreements
Section 5.01. Preparation of the Form S-4 and the SkyTel Proxy Statement;
SkyTel Stockholders Meeting. (a) As soon as practicable following the date of
this Agreement, SkyTel and WorldCom shall prepare and SkyTel shall file with
the SEC the SkyTel Proxy Statement and WorldCom shall prepare and file with the
SEC the Form S-4, in which the SkyTel Proxy Statement will be included as a
prospectus. Each of SkyTel and WorldCom shall use reasonable efforts to have
the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing and keep the Form S-4 effective for so long as
necessary to complete the Merger. SkyTel will use all reasonable efforts to
cause the SkyTel Proxy Statement to be mailed to SkyTel's stockholders as
promptly as practicable after the Form S-4 is declared effective under the
Securities
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Act. WorldCom shall also take any action (other than qualifying to do business
in any jurisdiction in which it is not now so qualified or to file a general
consent to service of process) required to be taken under any applicable state
securities laws in connection with the issuance of WorldCom Common Stock in the
Merger and SkyTel shall furnish all information concerning SkyTel and the
holders of capital stock of SkyTel as may be reasonably requested in connection
with any such action. No filing of, or amendment or supplement to, or
correspondence to the SEC or its staff with respect to, the Form S-4 will be
made by WorldCom, or the SkyTel Proxy Statement will be made by SkyTel, without
providing the other party a reasonable opportunity to review and comment
thereon. WorldCom will advise SkyTel, promptly after it receives notice
thereof, of the time when the Form S-4 has become effective or any supplement
or amendment has been filed, the issuance of any stop order, the suspension of
the qualification of the WorldCom Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Form S-4 or comments thereon and responses thereto or requests
by the SEC for additional information and will, as promptly as practicable,
provide to SkyTel copies of all correspondence and filings with the SEC with
respect to the Form S-4. SkyTel will inform WorldCom, promptly after it
receives notice thereof, of any request by the SEC for the amendment of the
SkyTel Proxy Statement or comments thereon and responses thereto or requests by
the SEC for additional information and will, as promptly as practicable,
provide to WorldCom copies of all correspondence and filings with the SEC with
respect to the SkyTel Proxy Statement. If at any time prior to the Effective
Time any information relating to SkyTel or WorldCom, or any of their respective
Affiliates, officers or directors, should be discovered by SkyTel or WorldCom
which should be set forth in an amendment or supplement to any of the Form S-4
or the SkyTel Proxy Statement, so that any of such documents would not include
any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an appropriate
amendment or supplement describing such information shall be promptly filed
with the SEC and, to the extent required by law, disseminated to the
stockholders of SkyTel. No amendment or supplement to the information supplied
by SkyTel for inclusion in the Form S-4 shall be made without the approval of
SkyTel, which approval shall not be unreasonably withheld or delayed. For
purposes of Sections 5.01, 3.01(f) and 3.02(e), information concerning or
related to WorldCom and Sub will be deemed to have been provided by WorldCom
and information concerning or related to SkyTel, its Subsidiaries or the SkyTel
Stockholders Meeting will be deemed to have been provided by SkyTel.
(b) SkyTel will, as soon as practicable following the date of this
Agreement, establish a record date (which shall be as soon as practicable
following the date of this Agreement) for, duly call, give notice of, convene
and hold a meeting of its stockholders (the "SkyTel Stockholders Meeting") for
the purpose of obtaining SkyTel Stockholder Approval and shall, through its
Board of Directors, recommend to its stockholders the approval and adoption of
this Agreement, the Merger and the other transactions contemplated hereby.
Without limiting the generality of the foregoing but subject to its rights to
terminate this Agreement pursuant to Sections 4.02(b) and 7.01, SkyTel agrees
that its obligations pursuant to the first sentence of this Section 5.01(b)
shall not be affected by the commencement, public proposal, public disclosure
or communication to SkyTel of any Takeover Proposal.
Section 5.02. Letters of SkyTel's Accountants. (a) SkyTel shall use
reasonable efforts to cause to be delivered to WorldCom two letters from
SkyTel's independent accountants, one dated a date within two Business Days
before the date on which the Form S-4 shall become effective and one dated a
date within two Business Days before the Closing Date, each addressed to
WorldCom, in form and substance reasonably satisfactory to WorldCom and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4.
(b) SkyTel shall provide reasonable cooperation to each of its independent
accountants and WorldCom's independent accountants to enable them to issue the
letters referred to in Section 6.01(g) and shall use reasonable efforts to
cause them to do so.
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Section 5.03. Letters of WorldCom's Accountants. (a) WorldCom shall use
reasonable efforts to cause to be delivered to SkyTel two letters from
WorldCom's independent accountants, one dated a date within two Business Days
before the date on which the Form S-4 shall become effective and one dated a
date within two Business Days before the Closing Date, each addressed to
SkyTel, in form and substance reasonably satisfactory to SkyTel and customary
in scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
(b) WorldCom shall provide reasonable cooperation to each of its independent
accountants and SkyTel's independent accountants to enable them to issue the
letters referred to in Section 6.01(g) and shall use reasonable efforts to
cause them to do so.
Section 5.04. Access to Information; Confidentiality. Subject to the
existing confidentiality agreement between WorldCom and SkyTel (the
"Confidentiality Agreement"), upon reasonable notice, each of WorldCom and
SkyTel shall, and shall cause each of its respective Subsidiaries to, afford to
the other party and to the officers, employees, accountants, counsel, financial
advisors and other representatives of such other party, reasonable access
during normal business hours during the period prior to the Effective Time to
all their respective properties, books, contracts, commitments, personnel and
records and, during such period, each of SkyTel and WorldCom shall, and shall
cause each of its respective Subsidiaries to, furnish promptly to the other
party (a) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the
requirements of Federal or state securities laws and (b) all other information
concerning its business, properties and personnel as such other party may
reasonably request. Neither WorldCom nor SkyTel shall be required to provide
access to or disclose information where such access or disclosure would
contravene any applicable law, rule, regulation, order or decree or would, with
respect to any pending matter, result in a waiver of the attorney-client
privilege or the protection afforded attorney work-product. WorldCom and SkyTel
shall use reasonable efforts to obtain from third parties any consents or
waivers of confidentiality restrictions with respect to any such information
being provided by it. No review pursuant to this Section 5.04 shall have an
effect for the purpose of determining the accuracy of any representation or
warranty given by either party hereto to the other party hereto. Each of SkyTel
and WorldCom will hold, and will cause its respective officers, employees,
accountants, counsel, financial advisors and other representatives and
Affiliates to hold, any nonpublic information in accordance with the terms of
the Confidentiality Agreement.
Section 5.05. Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement and the Option Agreement, including
using reasonable efforts to accomplish the following: (i) the taking of all
reasonable acts necessary to cause the conditions to Closing to be satisfied as
promptly as practicable, (ii) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by any Governmental Entity, (iii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iv) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the Option Agreement or the consummation of the
Merger or the other transactions contemplated hereby or thereby, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed and (v) the execution and
delivery of any additional instruments necessary to consummate the Merger and
the other transactions contemplated by, and to fully carry out the purposes of,
this Agreement and the Option Agreement. In connection with and without
limiting the foregoing, SkyTel and its Board of Directors shall (1) take all
action reasonably necessary to ensure that no state takeover statute or similar
statute or regulation is or becomes applicable to this Agreement, the Option
Agreement, the Merger or any of the other transactions contemplated by this
Agreement and the Option Agreement and (2) if any state takeover statute or
similar statute becomes applicable to this Agreement,
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the Option Agreement, the Merger or any other transactions contemplated by this
Agreement or the Option Agreement, take all action reasonably necessary to
ensure that the Merger and the other transactions contemplated by this
Agreement and the Option Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and the Option
Agreement and otherwise to minimize the effect of such statute or regulation on
this Agreement, the Option Agreement, the Merger and the other transactions
contemplated by this Agreement and the Option Agreement. Nothing in this
Agreement shall be deemed to require WorldCom to agree to, or proffer to,
divest or hold separate any assets or any portion of any business of WorldCom,
SkyTel or any of their respective Subsidiaries if the Board of Directors of
WorldCom determines that so doing would materially impair the benefit intended
to be obtained by WorldCom in the Merger. Without limiting the generality of
the foregoing, SkyTel shall give WorldCom the opportunity to participate in the
defense of any litigation against SkyTel and/or its directors relating to the
transactions contemplated by this Agreement and the Option Agreement. This
Section 5.05 shall be deemed not to have been breached by SkyTel as a result of
any action taken by SkyTel with respect to a Superior Proposal that is
expressly permitted under Section 4.02.
Section 5.06. SkyTel Stock Options; Warrants. (a) As soon as practicable
following the date of this Agreement, the Board of Directors of SkyTel (or, if
appropriate, any committee administering the SkyTel Stock Plans) shall adopt
such resolutions or take such other actions as may be required to effect the
following:
(i) adjust the terms of all outstanding SkyTel Stock Options, whether
vested or unvested, as necessary to provide that, at the Effective Time,
each SkyTel Stock Option outstanding immediately prior to the Effective
Time shall be amended and converted into an option to acquire, on the same
terms and conditions as were applicable under such SkyTel Stock Option, the
number of shares of WorldCom Common Stock (rounded down to the nearest
whole share) determined by multiplying the number of shares of SkyTel
Common Stock subject to such SkyTel Stock Option by the Exchange Ratio, at
a price per share of WorldCom Common Stock equal to (A) the aggregate
exercise price for the shares of SkyTel Common Stock otherwise purchasable
pursuant to such SkyTel Stock Option divided by (B) the aggregate number of
shares of WorldCom Common Stock deemed purchasable pursuant to such SkyTel
Stock Option (each, as so adjusted, an "Adjusted Option"); provided that
such exercise price shall be rounded up to the nearest whole cent; and
(ii) make such other changes to the SkyTel Stock Plans as WorldCom and
SkyTel may agree are appropriate to give effect to the Merger.
(b) The adjustments provided herein with respect to any SkyTel Stock Options
to which Section 421(a) of the code applies shall be and are intended to be
effected in a manner which is consistent with Section 424(a) of the Code.
(c) At the Effective Time, by virtue of the Merger and without the need of
any further corporate action, each SkyTel Stock Option outstanding at the
Effective Time shall be converted into an option relating to WorldCom Common
Stock following the Effective Time so as to substitute WorldCom Common Stock
for SkyTel Common Stock purchasable thereunder (subject to the adjustments
required by this Section 5.06 after giving effect to the Merger). Prior to the
Effective Time, WorldCom shall take all necessary actions (including, if
required to comply with Section 162(m) of the Code (and the regulations
thereunder) or applicable law or rule of Nasdaq, obtaining the approval of its
shareholders at the next regularly scheduled annual meeting of WorldCom
following the Effective Time) for the conversion of SkyTel Stock Options,
including the reservation, issuance and listing of WorldCom Common Stock in a
number at least equal to the number of shares of WorldCom Common Stock that
will be subject to the Adjusted Options.
(d) As soon as practicable following the Effective Time, WorldCom shall
prepare and file with the SEC a registration statement on Form S-8 (or another
appropriate form) registering a number of shares of WorldCom Common Stock equal
to the number of shares subject to the Adjusted Options. Such registration
statement shall be kept effective (and the current status of the prospectus or
prospectuses required thereby shall be maintained)
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at least for so long as any Adjusted Options or any unsettled awards granted
under the SkyTel Stock Plans after the Effective Time, may remain outstanding.
(e) As soon as practicable after the Effective Time, WorldCom shall deliver
to the holders of the SkyTel Stock Options appropriate notices setting forth
such holders' rights pursuant to the respective SkyTel Stock Plans and the
agreements evidencing the grants of such SkyTel Stock Options and that such
SkyTel Stock Options and agreements shall be assumed by WorldCom and shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 5.06 after giving effect to the Merger).
(f) Except as otherwise expressly provided in this Section 5.06 and except
to the extent required under the respective terms of the SkyTel Stock Options,
all restrictions or limitations on transfer and vesting with respect to the
SkyTel Stock Options awarded under the SkyTel Stock Plans or any other plan,
program or arrangement of SkyTel or any of its Subsidiaries, to the extent that
such restrictions or limitations shall not have already lapsed, and all other
terms thereof, shall remain in full force and effect with respect to such
options after giving effect to the Merger and the assumption by WorldCom as set
forth above.
(g) At the Effective Time, by virtue of the Merger and without the need for
any further corporate action, each Warrant outstanding immediately prior to the
Effective Time shall be automatically converted into an option or warrant to
acquire, on the same terms and conditions as were applicable under such
Warrant, the number of shares of WorldCom Common Stock (rounded down to the
nearest whole share) determined by multiplying the number of shares of SkyTel
Common Stock subject to such Warrant by the Exchange Ratio, at a price per
share of WorldCom Common Stock equal to (A) the aggregate exercise price for
the shares of SkyTel Common Stock otherwise purchasable pursuant to such
Warrant divided by (B) the aggregate number of shares of WorldCom Common Stock
deemed purchasable pursuant to such Warrant; provided, however, that such
exercise price shall be rounded up to the nearest whole cent. SkyTel shall use
its reasonable best efforts to cause each Non-Employee Option and Warrant set
forth in Section 5.06(g) of the SkyTel Disclosure Schedule to be amended prior
to the Effective Time so as to comply with this Section 5.06(g).
Section 5.07. Employee Benefit Plans; Existing Agreements. (a) Subject to
Section 5.07(c), during the six-month period following the Effective Time (the
"Transition Period"), WorldCom shall cause the Surviving Corporation to either
maintain the benefit programs provided by SkyTel and its Subsidiaries before
the Effective Time or replace all or any such programs with programs maintained
for similarly situated employees of WorldCom, provided that the aggregate level
of benefits provided during the Transition Period shall be substantially
similar to the aggregate level of benefits provided by SkyTel and its
Subsidiaries before the Effective Time. For a period of no less than 18 months
after the Transition Period, the Surviving Corporation shall provide, or cause
to be provided, benefits to employees of SkyTel and its Subsidiaries that are
no less favorable in the aggregate than the aggregate benefits provided to
similarly situated employees of WorldCom. To the extent that any plan of
WorldCom or any of its Affiliates (a "WorldCom Plan") becomes applicable to any
employee or former employee of SkyTel or its Subsidiaries, WorldCom shall
grant, or cause to be granted, to such employees or former employees credit for
their service with SkyTel and its Subsidiaries (and any of their predecessors)
for the purpose of determining eligibility to participate and nonforfeitability
of benefits under such WorldCom Plan and for purposes of benefit accrual under
vacation and severance pay plans (but only to the extent such service was
credited under similar plans of SkyTel and its Subsidiaries).
(b) With respect to any welfare benefit plan of WorldCom or its Affiliates
made available to individuals who immediately prior to the Closing Date were
employees of SkyTel or any of its Subsidiaries, WorldCom shall, or shall cause
the Surviving Corporation to, waive any waiting periods, pre-existing condition
exclusions and actively-at-work requirements to the extent such provisions were
inapplicable immediately before such plan was made available and provide that
any expenses incurred on or before the date such plan was made available by any
such individual or such individual's covered dependents shall be taken into
account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions.
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(c) SkyTel shall take such actions as are necessary to prohibit any
additional offerings of SkyTel Stock Options under the 1993 Employee Stock
Purchase Plan after the Effective Time.
(d) Section 5.07(d) of the SkyTel Disclosure Schedule sets forth specific
agreements of the parties with respect to employee matters and is incorporated
herein by reference.
Section 5.08. Indemnification, Exculpation and Insurance. (a) WorldCom and
Sub agree that all rights to indemnification and exculpation from liabilities
for acts or omissions occurring at or prior to the Effective Time (and rights
for advancement of expenses) now existing in favor of the current or former
directors or officers of SkyTel and its subsidiaries as provided in their
respective certificates of incorporation or by-laws (or comparable
organizational documents) and any indemnification or other agreements of SkyTel
as in effect on the date hereof shall be assumed by the Surviving Corporation
and WorldCom in the Merger, without further action, as of the Effective Time
and shall survive the Merger and shall continue in full force and effect in
accordance with their terms.
(b) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, WorldCom shall cause proper
provision to be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 5.08.
(c) For six years after the Effective Time, WorldCom shall maintain in
effect (i) SkyTel's current directors' and officers' liability insurance
covering acts or omissions occurring prior to the Effective Time covering each
person currently covered by SkyTel's directors' and officers' liability
insurance policy and (ii) SkyTel's current fiduciary liability insurance
policies covering acts or omissions occurring prior to the Effective Time for
employees who serve or have served as fiduciaries under or with respect to any
SkyTel Benefit Plans, in each case on terms with respect to such coverage and
amounts no less favorable than those of each such policy in effect on the date
hereof; provided that WorldCom may substitute therefor policies of WorldCom
with respect to coverage and amount no less favorable to such directors,
officers or fiduciaries; provided however, that in no event shall WorldCom be
required to pay aggregate premiums for insurance under this Section 5.08(c) in
excess of 200% of the amount of the aggregate premiums paid by SkyTel in 1998
on an annualized basis for such purpose, provided that WorldCom shall
nevertheless be obligated to provide such coverage as may be obtained for such
200% amount.
(d) The provisions of this Section 5.08 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
Section 5.09. Fees and Expenses. (a) Except as provided in this Section
5.09, all fees and expenses incurred in connection with the Merger, this
Agreement, the Option Agreement and the transactions contemplated hereby and
thereby shall be paid by the party incurring such fees or expenses, whether or
not the Merger is consummated, except that each of WorldCom and SkyTel shall
bear and pay one-half of (1) the costs and expenses incurred in connection with
the filing, printing and mailing of the Form S-4 and the SkyTel Proxy Statement
(including SEC filing fees) and (2) the filing fees for the premerger
notification and report forms under the HSR Act.
(b) In the event that (1) a Takeover Proposal shall have been made to SkyTel
or shall have been made directly to the stockholders of SkyTel generally or
shall have otherwise become publicly known or any person shall have publicly
announced an intention (whether or not conditional) to make a Takeover Proposal
and thereafter this Agreement is terminated by either WorldCom or SkyTel
pursuant to Section 7.01(b)(i) or (ii) or (2) this Agreement is terminated (x)
by SkyTel pursuant to Section 7.01(f) or (y) by WorldCom pursuant to Section
7.01(d), then SkyTel shall promptly, but in no event later than the date of
such termination, pay
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WorldCom a fee equal to $25 million (the "Termination Fee"), payable by wire
transfer of same day funds; provided, however, that no Termination Fee shall be
payable to WorldCom pursuant to clause (1) of this paragraph (b) or pursuant to
a termination by WorldCom pursuant to Section 7.01(d) unless and until within
12 months of such termination SkyTel or any of its Subsidiaries enters into any
Acquisition Agreement with respect to, or consummates, any Takeover Proposal
(for purposes of the foregoing proviso the term "Takeover Proposal" shall have
the meaning set forth in Section 4.02 except that references to "15%" therein
shall be deemed to be references to "30%"), in which event the Termination Fee
shall be payable upon the first to occur of such events. SkyTel acknowledges
that the agreements contained in this Section 5.09(b) are an integral part of
the transactions contemplated by this Agreement, and that, without these
agreements, WorldCom would not enter into this Agreement; accordingly, if
SkyTel fails promptly to pay the amount due pursuant to this Section 5.09(b),
and, in order to obtain such payment, WorldCom commences a suit which results
in a judgment against SkyTel for the fee set forth in this Section 5.09(b),
SkyTel shall pay to WorldCom its costs and expenses (including attorneys' fees
and expenses) in connection with such suit, together with interest on the
amount of the fee at the prime rate of NationsBank, N.A. in effect on the date
such payment was required to be made.
Section 5.10. Public Announcements. WorldCom and SkyTel will consult with
each other before issuing, and provide each other the opportunity to review,
comment upon and concur with, any press release or other public statements with
respect to the transactions contemplated by this Agreement, including the
Merger, and shall not issue any such press release or make any such public
statement prior to such consultation, except as either party may determine is
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange or national trading system. The parties
agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
Section 5.11. Affiliates. As soon as practicable after the date hereof,
SkyTel shall deliver to WorldCom a letter identifying all persons who are, at
the time this Agreement is submitted for adoption by the stockholders of
SkyTel, "affiliates" of SkyTel for purposes of Rule 145 under the Securities
Act and Topic 2.E., "risk sharing and pooling-of-interests", of the SEC rules
and regulations for purposes of qualifying the Merger for pooling of interests
accounting treatment. SkyTel shall use reasonable efforts to cause each such
person to deliver to WorldCom as of the Closing Date, a written agreement
substantially in the form attached as Exhibit A hereto. WorldCom shall use
reasonable efforts to cause all persons who are "affiliates" of WorldCom for
purposes of qualifying the Merger for pooling of interests accounting treatment
under Opinion 16 of the Accounting Principles Board and applicable SEC rules
and regulations to comply with the fourth paragraph of Exhibit B hereto.
Section 5.12. Nasdaq Quotation. WorldCom shall use reasonable efforts to
cause the WorldCom Common Stock issuable in the Merger to be approved for
quotation on Nasdaq, subject to official notice of issuance, as promptly as
practicable after the date hereof, and in any event prior to the Closing Date.
WorldCom shall use reasonable efforts to cause the WorldCom Convertible
Exchangeable Preferred Stock to be listed on a national securities exchange or
approved for quotation on Nasdaq, subject to official notice of issuance, on or
prior to the Closing Date.
Section 5.13. Tax Treatment. Each of WorldCom and SkyTel shall use
reasonable efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368 of the Code and to obtain the opinions of counsel
referred to in Sections 6.02(c) and 6.03(c), including the execution of the
letters of representation referred to therein.
Section 5.14. Pooling of Interests. Each of SkyTel and WorldCom shall use
reasonable efforts to cause the transactions contemplated by this Agreement,
including the Merger, and the Option Agreement to be accounted for as a pooling
of interests under Opinion 16 of the Accounting Principles Board and applicable
SEC rules and regulations, and each of SkyTel and WorldCom agrees that it shall
voluntarily take no action that would cause such accounting treatment not to be
obtained.
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Section 5.15. Further Assurances. SkyTel shall deliver, or shall cause to be
delivered, if required by the terms of any note, indenture, credit agreement,
warrant or other financing instrument or preferred stock, as promptly as
possible after the date hereof but in no event less than 15 days prior to the
Effective Time, any notice of the Merger or the transactions contemplated by
this Agreement.
Section 5.16. Rights Agreement. The Board of Directors of SkyTel shall take
all further action (in addition to that referred to in Section 3.01(t))
reasonably requested in writing by WorldCom in order to render the Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement and the Option Agreement to the extent provided herein. Except as
provided above with respect to the Merger and the other transactions
contemplated by this Agreement and the Option Agreement and except as set forth
in Section 4.01(a) of the SkyTel Disclosure Schedule, the Board of Directors of
SkyTel shall not, without the consent of WorldCom (a) amend the Rights
Agreement or (b) take any action with respect to, or make any determination
under, the Rights Agreement, including a redemption of the rights or any action
to facilitate a Takeover Proposal.
Section 5.17. Transfer Taxes. All stock transfer, real estate transfer,
documentary, stamp, recording and other similar taxes (including interest,
penalties and additions to any such taxes) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by SkyTel.
ARTICLE VI
Conditions Precedent
Section 6.01. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) SkyTel Stockholder Approval. The SkyTel Stockholder Approval shall
have been obtained.
(b) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) Governmental Approvals. All consents, approvals or orders of
authorization of, or actions by the FCC shall have been obtained.
(d) No Litigation. No judgment, order, decree, statute, law, ordinance,
rule or regulation, entered, enacted, promulgated, enforced or issued by
any court or other Governmental Entity of competent jurisdiction or other
legal restraint or prohibition (collectively, "Restraints") shall be in
effect, and there shall not be pending any suit, action or proceeding by
any Governmental Entity (i) preventing the consummation of the Merger or
(ii) which otherwise is reasonably likely to have a Material Adverse Effect
on SkyTel or WorldCom, as applicable; provided, however, that each of the
parties shall have used its reasonable efforts to prevent the entry of any
such Restraints and to appeal as promptly as possible any such Restraints
that may be entered.
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(f) Nasdaq Quotation. The shares of WorldCom Common Stock issuable to
SkyTel's stockholders as contemplated by this Agreement shall have been
approved for quotation on Nasdaq, subject to official notice of issuance.
(g) Pooling Letters. Each of WorldCom and SkyTel shall have received
letters, dated as of the Closing Date, in each case addressed to WorldCom
and SkyTel, from Arthur Andersen LLP stating in substance that pooling of
interests accounting is appropriate for the Merger under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations.
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Section 6.02. Conditions to Obligations of WorldCom and Sub. The obligation
of WorldCom and Sub to effect the Merger is further subject to satisfaction or
waiver of the following conditions:
(a) Representations and Warranties. The representations and warranties
of SkyTel set forth herein qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all
material respects, as of the date hereof and as of the Closing Date, as if
made at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such date).
(b) Performance of Obligations of SkyTel. SkyTel shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date.
(c) Tax Opinions. WorldCom shall have received from Cravath, Swaine &
Moore, counsel to WorldCom, on the date on which the Form S-4 is declared
effective by the SEC and on the Closing Date, an opinion, in each case
dated as of such respective date and stating that: (i) the Merger will
qualify for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and (ii) SkyTel, WorldCom and Sub
will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code. The issuance of such opinion shall be
conditioned upon the receipt by such tax counsel of customary
representation letters from each of WorldCom and SkyTel in substantially
the same form as Exhibits B and C, respectively. The opinion shall be in
substantially the same form as Exhibit D.
Section 6.03. Conditions to Obligations of SkyTel. The obligation of SkyTel
to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of WorldCom and Sub set forth herein qualified as to materiality shall be
true and correct, and those not so qualified shall be true and correct in
all material respects, as of the date hereof and as of the Closing Date, as
if made at and as of such time (except to the extent expressly made as of
an earlier date, in which case as of such date).
(b) Performance of Obligations of WorldCom and Sub. WorldCom and Sub
shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date.
(c) Tax Opinions. SkyTel shall have received from Jones, Day, Reavis &
Pogue, counsel to SkyTel, on the date on which the Form S-4 is declared
effective by the SEC and on the Closing Date, an opinion, in each case
dated as of such respective date and stating that: (i) the Merger will
qualify for Federal income tax purposes as a "reorganization" within the
meaning of Section 368(a) of the Code and (ii) SkyTel, WorldCom and Sub
will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code. The issuance of such opinion shall be
conditioned upon the receipt by such tax counsel of representation letters
from each of SkyTel and WorldCom in substantially the same form as Exhibits
C and D, respectively. The opinion shall be in substantially the same form
as Exhibit E.
Section 6.04. Frustration of Closing Conditions. Neither WorldCom, Sub nor
SkyTel may rely on the failure of any condition set forth in Section 6.01, 6.02
or 6.03, as the case may be, to be satisfied if such failure was caused by such
party's failure to use its reasonable best efforts to consummate the Merger and
the other transactions contemplated by this Agreement, as required by and
subject to Section 5.05.
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ARTICLE VII
Termination, Amendment and Waiver
Section 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the SkyTel Stockholder
Approval:
(a) by mutual written consent of WorldCom and SkyTel;
(b) by either WorldCom or SkyTel:
(i) if the Merger shall not have been consummated by February 28,
2000; provided, however, that if on such date the condition to the
Closing set forth in Section 6.01(c) shall not have been satisfied,
then either WorldCom or SkyTel may cause such date to be extended to
May 28, 2000, upon delivery of written notice to the other party;
provided further, however, that the right to terminate this Agreement
pursuant to this Section 7.01(b)(i) shall not be available to any party
whose failure to perform any of its obligations under this Agreement
results in the failure of the Merger to be consummated by such time;
(ii) if the SkyTel Stockholder Approval shall not have been obtained
at a SkyTel Stockholders Meeting duly convened therefor or at any
adjournment or postponement thereof; or
(iii) if any Restraint having any of the effects set forth in
Section 6.01(d) shall be in effect and shall have become final and
nonappealable; provided that the party seeking to terminate this
Agreement pursuant to this Section 7.01(b)(iii) shall have used
reasonable best efforts to prevent the entry of and to remove such
Restraint;
(c) by WorldCom, if SkyTel shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure to
perform (A) would give rise to the failure of a condition set forth in
Section 6.02(a) or (b), and (B) has not been or is incapable of being cured
by SkyTel within 30 calendar days after its receipt of written notice from
WorldCom;
(d) by WorldCom, if SkyTel or any of its directors or officers shall
participate in discussions or negotiations in breach of Section 4.02;
(e) by SkyTel, if WorldCom shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure to
perform (A) would give rise to the failure of a condition set forth in
Section 6.03(a) or (b), and (B) has not been or is incapable of being cured
by WorldCom within 30 calendar days after its receipt of written notice
from SkyTel; or
(f) by SkyTel in accordance with Section 4.02(b); provided that, in
order for the termination of this Agreement pursuant to this paragraph (f)
to be deemed effective, SkyTel shall have complied with all provisions of
Section 4.02, including the notice provisions therein, and with applicable
requirements, including the payment of the Termination Fee, of Section
5.09(b).
Section 7.02. Effect of Termination. In the event of termination of this
Agreement by either SkyTel or WorldCom as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of WorldCom or SkyTel, other than the provisions of
Section 3.01(p), Section 3.02(l), the last sentence of Section 5.04, Section
5.09, this Section 7.02 and Article VIII, which provisions survive such
termination, and except to the extent that such termination results from the
willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
Section 7.03. Amendment. This Agreement may be amended by the parties at any
time before or after SkyTel Stockholder Approval; provided, however, that after
any such approval, there shall not be made any amendment that by law requires
further approval by the stockholders of SkyTel or the approval of the
shareholders of WorldCom without the further approval of such stockholders or
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
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Section 7.04. Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 7.03, waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
Section 7.05. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver pursuant to
Section 7.04 shall, in order to be effective, require, in the case of WorldCom
or SkyTel, action by its Board of Directors or, with respect to any amendment
to this Agreement, the duly authorized committee of its Board of Directors to
the extent permitted by law.
ARTICLE VIII
General Provisions
Section 8.01. Nonsurvival of Representations and Warranties. None of the
representations, warranties, covenants or agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
Section 8.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to WorldCom or Sub, to
10777 Sunset Office Drive
Suite 330
St. Louis, MO 63127
Telecopy No.: Separately supplied
Attention:P. Bruce Borghardt, Esq.
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Telecopy No.: Separately supplied
Attention:Robert A. Kindler, Esq.
Robert I. Townsend, III, Esq.;
and
A-31
<PAGE>
(b) if to SkyTel, to
200 South Lamar Street
Jackson, MS 39201
Telecopy No.: Separately supplied
Attention:Leonard Kriss, Esq.
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, NY 10022
Telecopy No.: Separately supplied
Attention:Robert A. Profusek, Esq.
Section 8.03. Definitions. For purposes of this Agreement:
(a) an "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person, where "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise;
(b) "Business Day" means any day other than Saturday, Sunday or any
other day on which banks are legally permitted to be closed in New York;
(c) "Knowledge" of any person that is not an individual means, with
respect to any specific matter, the knowledge of such person's executive
officers and other officers having primary responsibility for such matter,
in each case obtained in the conduct of their duties in the ordinary course
without special inquiry;
(d) "Material Adverse Change" or "Material Adverse Effect" means, when
used in connection with SkyTel or WorldCom, any change, effect, event,
occurrence or state of facts (i) that is materially adverse to the
business, financial condition or results of operations of such party (or
the Surviving Corporation when used with respect to SkyTel) and its
Subsidiaries, taken as a whole, or (ii) preventing or materially delaying
the consummation of the Merger, other than any change, effect, event,
occurrence or state of facts (x) relating to the economy in general or (y)
relating to the industries in which such party operates in general and not
specifically relating to such party;
(e) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(f) "Significant Subsidiary" means a Subsidiary that would constitute a
"significant subsidiary" within the meaning of Rule 1-02 of Regulation S-X
of the Securities Act; and
(g) a "Subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person.
Section 8.04. Interpretation. When a reference is made in this Agreement to
an Article, Section or Exhibit, such reference shall be to an Article or
Section of, or an Exhibit to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. All terms defined
in this Agreement shall have the defined meanings when used in any certificate
A-32
<PAGE>
or other document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term. Any agreement, instrument
or statute defined or referred to herein or in any agreement or instrument that
is referred to herein means such agreement, instrument or statute as from time
to time amended, modified or supplemented, including (in the case of agreements
or instruments) by waiver or consent and (in the case of statutes) by
succession of comparable successor statutes and references to all attachments
thereto and instruments incorporated therein. References to a person are also
to its permitted successors and assigns. Terms used herein that are defined
under GAAP are used herein as so defined.
Section 8.05. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
Section 8.06. Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein), the Option
Agreement and the Confidentiality Agreement (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement and (b) except for the provisions of Article II, Section 5.06 and
Section 5.08, are not intended to confer upon any person other than the parties
any rights or remedies.
Section 8.07. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
Section 8.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of
the preceding sentence shall be void. Subject to the preceding two sentences,
this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
Section 8.09. Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any Federal court located in the State of Delaware or any
Delaware state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated by this Agreement, (b) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, and (c) agrees that it will not bring
any action relating to this Agreement or any of the transactions contemplated
by this Agreement in any court other than a Federal court sitting in the State
of Delaware or a Delaware state court.
Section 8.10. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
A-33
<PAGE>
In Witness Whereof, WorldCom, Sub and SkyTel have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
MCI WorldCom, Inc.,
/s/ Bernard J. Ebbers
by _________________________________
Name:Bernard J. Ebbers
Title:President and Chief
Executive Officer
SkyTel Communications, Inc.,
/s/ John T. Stupka
by _________________________________
Name:John T. Stupka
Title:President and Chief
Executive Officer
Empire Merger Inc.,
/s/ Bernard J. Ebbers
by _________________________________
Name:Bernard J. Ebbers
Title:President and Chief
Executive Officer
A-34
<PAGE>
ANNEX I
TO THE MERGER AGREEMENT
Index of Defined Terms
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Accounting Rules........................................................... A-8
Acquisition Agreement...................................................... A-21
Adjusted Option............................................................ A-24
Affiliate.................................................................. A-32
Agreement.................................................................. A-1
Applicable Period.......................................................... A-20
Business Day............................................................... A-32
Certificate of Merger...................................................... A-2
Certificates............................................................... A-3
Closing.................................................................... A-1
Closing Date............................................................... A-1
Code....................................................................... A-1
Common Stock Merger Consideration.......................................... A-2
Communications Act......................................................... A-7
Confidentiality Agreement.................................................. A-23
Convertible Debentures..................................................... A-6
Convertible Exchangeable Preferred Stock................................... A-1
DGCL....................................................................... A-1
Effective Time............................................................. A-2
ERISA...................................................................... A-10
Exchange Act............................................................... A-7
Exchange Agent............................................................. A-3
Exchange Ratio............................................................. A-2
FCC........................................................................ A-7
Form S-4................................................................... A-8
GAAP....................................................................... A-8
Governmental Entity........................................................ A-7
HSR Act.................................................................... A-7
Intellectual Property Rights............................................... A-12
Knowledge.................................................................. A-32
Liens...................................................................... A-6
Material Adverse Change.................................................... A-32
Material Adverse Effect.................................................... A-32
Merger..................................................................... A-1
Merger Consideration....................................................... A-3
Nasdaq..................................................................... A-2
Notice of Superior Proposal................................................ A-21
Option Agreement........................................................... A-1
Parachute Gross-Up Payment................................................. A-11
person..................................................................... A-32
Preferred Stock Merger Consideration....................................... A-3
PUCs....................................................................... A-8
Restraints................................................................. A-28
Rights..................................................................... A-6
Rights Agreement........................................................... A-6
SEC........................................................................ A-7
</TABLE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Securities Act............................................................. A-8
Series C Preferred Stock................................................... A-6
Significant Subsidiary..................................................... A-32
SkyTel..................................................................... A-1
SkyTel Benefit Plans....................................................... A-10
SkyTel Common Stock........................................................ A-1
SkyTel Consolidated Group.................................................. A-12
SkyTel Disclosure Schedule................................................. A-5
SkyTel Filed SEC Documents................................................. A-8
SkyTel 1998 10-K........................................................... A-6
SkyTel Permits............................................................. A-9
SkyTel Preferred Stock..................................................... A-6
SkyTel Proxy Statement..................................................... A-7
SkyTel SEC Documents....................................................... A-8
SkyTel Stock Options....................................................... A-6
SkyTel Stock Plans......................................................... A-6
SkyTel Stockholder Approval................................................ A-12
SkyTel Stockholders Meeting................................................ A-22
Sub........................................................................ A-1
Sub Common Stock........................................................... A-14
Subsidiary................................................................. A-32
Superior Proposal.......................................................... A-21
Surviving Corporation...................................................... A-1
Takeover Proposal.......................................................... A-20
taxes...................................................................... A-11
Termination Fee............................................................ A-27
Transition Period.......................................................... A-25
Warrants................................................................... A-6
WorldCom................................................................... A-1
WorldCom Common Stock...................................................... A-1
WorldCom Consolidated Group................................................ A-17
WorldCom Convertible Exchangeable Preferred Stock.......................... A-1
WorldCom Filed SEC Documents............................................... A-16
WorldCom Permits........................................................... A-16
WorldCom Plan.............................................................. A-25
WorldCom Preferred Stock................................................... A-14
WorldCom SEC Documents..................................................... A-15
WorldCom Series A Preferred................................................ A-13
WorldCom Series B Preferred................................................ A-14
WorldCom Series 3 Preferred................................................ A-14
WorldCom Stock Plans....................................................... A-14
WorldCom Stock Options..................................................... A-14
WorldCom Warrants.......................................................... A-14
Year 2000 Compliant........................................................ A-13
</TABLE>
A-35
<PAGE>
EXHIBIT A
TO THE MERGER AGREEMENT
Form of Affiliate Letter
Dear Sirs:
The undersigned, a holder of shares of Common Stock, par value $.01 per
share ("SkyTel Common Stock"), of SkyTel Communications, Inc., a Delaware
corporation ("SkyTel"), is entitled to receive in connection with the merger of
SkyTel (the "Merger") with and into a subsidiary of MCI WorldCom, Inc., a
Georgia corporation ("WorldCom"), securities of WorldCom, as the parent of the
surviving corporation in the Merger (the "WorldCom Securities"). The
undersigned acknowledges that the undersigned may be deemed an "affiliate" of
SkyTel within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), by the Securities
and Exchange Commission (the "SEC") and may be deemed an "affiliate" of SkyTel
for purposes of qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles Board and applicable
SEC rules and regulations, although nothing contained herein should be
construed as an admission of either such fact.
If in fact the undersigned were an affiliate under the Securities Act, the
undersigned's ability to sell, assign, transfer, hedge or reduce the
undersigned's risk relating to any of the WorldCom Securities received by the
undersigned in exchange for any shares of SkyTel Common Stock in connection
with the Merger may be restricted unless such transaction is registered under
the Securities Act or an exemption from such registration is available. The
undersigned understands that such exemptions are limited and the undersigned
has obtained or will obtain advice of counsel as to the nature and conditions
of such exemptions, including information with respect to the applicability to
the sale of such securities of Rules 144 and 145(d) promulgated under the
Securities Act. The undersigned understands that WorldCom will not be required
to maintain the effectiveness of any registration statement under the
Securities Act for the purposes of resale of WorldCom Securities by the
undersigned except to the extent provided in the Merger Agreement.
The undersigned hereby represents to and covenants with WorldCom that the
undersigned will not sell, assign, transfer, hedge or reduce the undersigned's
risk relating to any of the WorldCom Securities received by the undersigned in
exchange for shares of SkyTel Common Stock in connection with the Merger except
(i) pursuant to an effective registration statement under the Securities Act,
(ii) in conformity with the volume and other limitations of Rule 145 or (iii)
in a transaction which, in the opinion of counsel to WorldCom or your counsel
(provided that such counsel is a member of a nationally recognized law firm) or
as described in a "no-action" or interpretive letter from the Staff of the SEC
specifically issued with respect to a transaction to be engaged in by the
undersigned, is not required to be registered under the Securities Act;
provided, however, that in any such case, such sale, assignment or transfer
shall only be permitted if, in the opinion of counsel of WorldCom, such
transaction would not have, directly or indirectly, any adverse consequences
for WorldCom with respect to the treatment of the Merger for tax purposes.
The undersigned hereby further represents to and covenants with WorldCom
that the undersigned has not, within the preceding 30 days, sold, transferred
or otherwise disposed of, hedged or reduced the undersigned's risk relating to
any shares of SkyTel Common Stock held by the undersigned and that the
undersigned will not sell, transfer or otherwise dispose of, hedge or reduce
the undersigned's risk relating to any WorldCom Securities received by the
undersigned in connection with the Merger until after such time as results
covering at least 30 days of post-Merger combined operations of SkyTel and
WorldCom have been published by WorldCom, in the form of a quarterly earnings
report, an effective registration statement filed with the SEC, a report to the
SEC on Form 10-K, 10-Q or 8-K, or any other public filing or announcement which
includes such combined results of operations, except as would not otherwise
reasonably be expected to adversely affect the qualification of the Merger as a
pooling-of-interests.
A-36
<PAGE>
In the event of a sale or other disposition by the undersigned of WorldCom
Securities pursuant to Rule 145(d), the undersigned will supply WorldCom with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto and an opinion of counsel or no-action letter referred to above.
The undersigned understands that WorldCom may instruct its transfer agent to
withhold the transfer of any WorldCom Securities disposed of by the
undersigned, but that (provided such transfer is not prohibited by any other
provision of this letter agreement) upon receipt of such evidence of
compliance, WorldCom shall cause the transfer agent to effectuate the transfer
of the WorldCom Securities sold as indicated in such letter.
WorldCom covenants that it will take all such actions as may be reasonably
available to it to permit the sale or other disposition of WorldCom Securities
by the undersigned under Rule 145 in accordance with the terms thereof.
The undersigned acknowledges and agrees that the legend set forth below will
be placed on certificates representing WorldCom Securities received by the
undersigned in connection with the Merger or held by a transferee thereof,
which legend will be removed by delivery of substitute certificates upon
receipt of an opinion in form and substance reasonably satisfactory to WorldCom
from independent counsel reasonably satisfactory to WorldCom to the effect that
such legend is no longer required for purposes of the Securities Act.
There will be placed on the certificates for WorldCom Securities issued to
the undersigned, or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is being accounted for as a pooling of
interests, in a transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies. The shares have not been acquired by the
holder with a view to, or for resale in connection with, any distribution
thereof within the meaning of the Securities Act of 1933. The shares may
not be sold, pledged or otherwise transferred (i) until such time as
WorldCom, Inc. shall have published financial results covering at least 30
days of combined operations after the Effective Time and (ii) except in
accordance with an exemption from the registration requirements of the
Securities Act of 1933."
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of WorldCom
Securities and (ii) the receipt by WorldCom of this letter is an inducement to
WorldCom's obligations to consummate the Merger.
Very truly yours,
Dated:
A-37
<PAGE>
ANNEX I
TO EXHIBIT A
[Name] [Date]
On , the undersigned sold the securities of MCI WORLDCOM, Inc., a
Georgia corporation ("WorldCom"), described below in the space provided for
that purpose (the "Securities"). The Securities were received by the
undersigned in connection with the merger of SkyTel Communications, Inc., a
Delaware corporation, with and into a subsidiary of WorldCom.
Based upon the most recent report or statement filed by WorldCom with the
Securities and Exchange Commission, the Securities sold by the undersigned were
within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities
Act").
The undersigned hereby represents that the Securities were sold in "brokers'
transactions" within the meaning of Section 4(4) of the Securities Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than to the broker who executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of the Securities.]
A-38
<PAGE>
EXHIBIT B
TO THE MERGER AGREEMENT
SkyTel Communications, Inc.
[Effective Date]
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, NY 10022
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections 6.02(c)
and 6.03(c) of the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of May 28, 1999, among SkyTel Communications, Inc., a Delaware corporation
("SkyTel"), MCI WORLDCOM, Inc., a Georgia corporation ("WorldCom"), and Empire
Merger Inc., a Delaware corporation and a wholly owned subsidiary of WorldCom
(the "Sub"), and in connection with the filing with the Securities and Exchange
Commission (the "SEC") of the registration statement on Form S-4 (the
"Registration Statement"), which includes the Proxy Statement Prospectus of
SkyTel and WorldCom, each as amended or supplemented through the date hereof,
the undersigned certifies and represents on behalf of SkyTel and as to SkyTel,
after due inquiry and investigation, as follows (any capitalized term used but
not defined herein shall have the meaning given to such term in the Merger
Agreement):
1. The facts relating to the contemplated merger of SkyTel with and into
Sub (the "Merger") as described in the Registration Statement and the
documents described in the Registration Statement are, insofar as such
facts pertain to SkyTel, true, correct and complete in all material
respects. The Merger will be consummated in accordance with the Merger
Agreement.
2. The formula set forth in the Merger Agreement pursuant to which each
issued and outstanding share of common stock, par value $.01 per share, of
SkyTel (the "SkyTel Common Stock"), other than such shares owned directly
by SkyTel, WorldCom or Sub, will be converted into shares of common stock,
par value $.01 per share, of WorldCom ("WorldCom Common Stock") and each
share of $2.25 Cumulative Convertible Exchangeable Preferred Stock, par
value $.01 per share, of SkyTel (the "Convertible Exchangeable Preferred
Stock") other than such shares owned directly by SkyTel, WorldCom or Sub,
will be converted into one share of $2.25 Cumulative Convertible
Exchangeable Preferred Stock, par value $.01 per share, of WorldCom ("the
WorldCom Convertible Exchangeable Preferred Stock") is the result of arm's
length bargaining.
3. Cash payments to be made to holders of SkyTel Common Stock in lieu of
fractional shares of WorldCom Common Stock that would otherwise be issued
to such holders in the Merger will be made for the purpose of saving
WorldCom the expense and inconvenience of issuing and transferring
fractional shares of WorldCom Common Stock, and do not represent separately
bargained for consideration. The total cash consideration that will be paid
in the Merger to holders of SkyTel Common Stock in lieu of fractional
shares of WorldCom Common Stock is not expected to exceed one percent of
the total consideration that will be issued in the Merger to shareholders
of SkyTel in exchange for their shares of SkyTel Common Stock.
4. (i) Neither SkyTel nor any corporation related to SkyTel has acquired
or has any present plan or intention to acquire directly or indirectly any
stock of SkyTel in contemplation of the Merger, or otherwise as part of a
plan of which the Merger is a part.
A-39
<PAGE>
(ii) For purposes of this representation letter, a corporation shall be
treated as related to SkyTel if such corporation is related to SkyTel
within the meaning of Treasury Regulation Section 1.368-1(e)(3).
5. Except as otherwise specifically contemplated under the Merger
Agreement, SkyTel and holders of SkyTel Common Stock and Convertible
Exchangeable Preferred Stock will each pay their respective expenses, if
any, incurred in connection with the Merger, and will not pay the expenses
of WorldCom or Sub incurred in connection with the Merger. SkyTel has not
agreed to assume, nor will it directly or indirectly assume, any expense or
other liability, whether fixed or contingent, of any holder of SkyTel
Common Stock or Convertible Exchangeable Preferred Stock. Except to the
extent specifically contemplated under the Merger Agreement, SkyTel has not
entered into any arrangement pursuant to which WorldCom or Sub has agreed
to assume, directly or indirectly, any expense or other liability, whether
fixed or contingent, of SkyTel or any of its Subsidiaries or any holder of
any stock of SkyTel.
6. At the Effective Time, SkyTel will hold at least 90% of the fair
market value of its net assets and at least 70% of the fair market value of
its gross assets held immediately prior to the Effective Time. For purposes
of this representation, amounts paid to stockholders who receive cash or
other property (including cash in lieu of fractional shares of WorldCom
Common Stock) in connection with the Merger, assets of SkyTel used to pay
its reorganization expenses and all redemptions and distributions made by
SkyTel (other than dividends made in the ordinary course of business)
immediately preceding, or in contemplation of, the Merger will be included
as assets held by SkyTel immediately prior to the Effective Time.
7. Except as otherwise contemplated under the Merger Agreement, SkyTel
has not made and does not plan or intend to make any distributions (other
than dividends made in the ordinary course of business) prior to, in
contemplation of, or otherwise in connection with, the Merger.
8. In connection with the Merger, SkyTel Common Stock will be converted
solely into WorldCom Common Stock (except for cash paid in lieu of
fractional shares of WorldCom Common Stock) and Convertible Exchangeable
Preferred Stock will be converted solely into WorldCom Convertible
Exchangeable Preferred Stock. For purposes of this representation, SkyTel
Common Stock and Convertible Exchangeable Preferred Stock redeemed for cash
or other property furnished directly or indirectly by WorldCom will be
considered as acquired by WorldCom for other than WorldCom Common Stock and
WorldCom Convertible Exchangeable Preferred Stock. Further, except as
otherwise contemplated under the Merger Agreement, no liabilities of SkyTel
or any of its Subsidiaries or any of the holders of SkyTel Common Stock or
Convertible Exchangeable Preferred Stock will be assumed by WorldCom, nor
will any of the SkyTel Common Stock or Convertible Exchangeable Preferred
Stock acquired by WorldCom in connection with the Merger be subject to any
liabilities.
9. SkyTel is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
10. Prior to the Merger, SkyTel will not take, and to the best knowledge
of the management of SkyTel there is no present plan or intention by
stockholders of SkyTel to take, any position on any Federal, state or local
income or franchise tax return, or to take any other tax reporting
position, that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
11. None of the compensation received by any stockholder-employee of
SkyTel in respect of periods at or prior to the Effective Time represents
separate consideration for any of its SkyTel Common Stock or its
Convertible Exchangeable Preferred Stock. None of the WorldCom Common Stock
or WorldCom Convertible Exchangeable Preferred Stock that will be received
by stockholder-employees of SkyTel in the Merger represents separately
bargained for consideration which is allocable to any employment agreement
or arrangement. The compensation paid to any stockholder-employees will be
for services actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's-length for similar services.
12. There is no intercorporate indebtedness existing between WorldCom
(or any of its Subsidiaries, including Sub) and SkyTel (or any of its
Subsidiaries).
A-40
<PAGE>
13. SkyTel is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
14. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement represent the entire
understanding of SkyTel, WorldCom and Sub with respect to the Merger.
15. No assets of SkyTel have been sold, transferred or otherwise
disposed of which would prevent Sub, or WorldCom's "qualified group" of
corporations (as defined in Treasury Regulation Section 1.368-1(d)(4)(ii))
from continuing the "historic business" of SkyTel or from using a
significant portion of the "historic business assets" of SkyTel in a
business following the Merger (as such terms are defined in Treasury
Regulation Section 1.368-1(d)).
16. The fair market value of the assets of SkyTel exceeds the sum of its
liabilities, plus the amount of liabilities, if any, to which such assets
are subject, and the liabilities of SkyTel and the liabilities to which its
assets are subject were incurred by SkyTel in the ordinary course of its
business.
17. No holders of SkyTel Common Stock or Convertible Exchangeable
Preferred Stock have dissenter's rights under the provisions of any
Federal, state, local, foreign or provincial laws.
18. The undersigned is authorized to make all the representations set
forth herein on behalf of SkyTel.
The undersigned acknowledges that (i) your opinion will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your opinion will be subject to certain limitations
and qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any of such covenants or
obligations are not satisfied in all material respects.
The undersigned acknowledges that your opinion will not address any tax
consequences of the Merger or any action taken in connection therewith except
as expressly set forth in such opinion.
Very truly yours,
SkyTel Communications, Inc.,
by _________________________________
Name:
Title:
A-41
<PAGE>
EXHIBIT C
TO THE MERGER AGREEMENT
MCI WORLDCOM, Inc.
[Effective Date]
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, NY 10022
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections 6.02(c)
and 6.03(c) of the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of May 28, 1999, among SkyTel Communications, Inc., a Delaware corporation
("SkyTel"), MCI WorldCom, Inc., a Georgia corporation ("WorldCom"), and Empire
Merger Inc., a Delaware corporation and a wholly owned subsidiary of WorldCom
(the "Sub"), and in connection with the filing with the Securities and Exchange
Commission (the "SEC") of the registration statement on Form S-4 (the
"Registration Statement"), which includes the Proxy Statement Prospectus of
SkyTel and WorldCom, each as amended or supplemented through the date hereof,
the undersigned certifies and represents on behalf of WorldCom and Sub and as
to WorldCom and Sub, after due inquiry and investigation, as follows (any
capitalized term used but not defined herein shall have the meaning given to
such term in the Merger Agreement):
1. The facts relating to the contemplated merger of SkyTel with and into
Sub (the "Merger") as described in the Registration Statement and the
documents described in the Registration Statement are, insofar as such
facts pertain to WorldCom and Sub, true, correct and complete in all
material respects. The Merger will be consummated in accordance with the
Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which each
issued and outstanding share of common stock, par value $.01 per share, of
SkyTel (the "SkyTel Common Stock"), other than such shares owned directly
by SkyTel, WorldCom or Sub, will be converted into shares of common stock,
par value $.01 per share, of WorldCom ("WorldCom Common Stock") and each
share of $2.25 Cumulative Convertible Exchangeable Preferred Stock, par
value $.01 per share, of SkyTel (the "Convertible Exchangeable Preferred
Stock"), other than such shares owned directly by SkyTel, WorldCom, or Sub,
will be converted into one share of $2.25 Cumulative Convertible
Exchangeable Preferred Stock, par value $0.01 per share, of WorldCom ("the
WorldCom Convertible Exchangeable Preferred Stock") is the result of arm's
length bargaining.
3. (i) Neither WorldCom nor any corporation that is related to WorldCom
has any plan or intention, following the Merger, to reacquire, or to cause
any corporation that is related to WorldCom to acquire, directly or
indirectly, any WorldCom Common Stock or WorldCom Convertible Exchangeable
Preferred Stock.
(ii) For purposes of this representation letter, a corporation shall be
treated as related to WorldCom if such corporation is related to WorldCom
within the meaning of Treasury Regulation Section 1.368-1(e)(3).
4. WorldCom has no plan or intention to make any distributions after the
Merger to holders of WorldCom Common Stock or WorldCom Convertible
Exchangeable Preferred Stock (other than dividends made in the ordinary
course of business) that would, alone or in conjunction with any other
transaction, violate the continuity of interest requirement of Treasury
Regulation Section 1.368-1(e).
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<PAGE>
5. Neither WorldCom nor Sub (nor any other Subsidiary of WorldCom) has
acquired or, except as a result of the Merger, will acquire, or has owned
in the past three years, any stock of SkyTel.
6. Cash payments to be made to holders of SkyTel Common Stock in lieu of
fractional shares of WorldCom Common Stock that would otherwise be issued
to such holders in the Merger will be made for the purpose of saving
WorldCom the expense and inconvenience of issuing and transferring
fractional shares of WorldCom Common Stock, and do not represent separately
bargained for consideration. The total cash consideration that will be paid
in the Merger to holders of SkyTel Common Stock in lieu of fractional
shares of WorldCom Common Stock is not expected to exceed one percent of
the total consideration that will be issued in the Merger to shareholders
of SkyTel in exchange for their shares of SkyTel Common Stock.
7. Prior to the Merger, WorldCom will own all the issued and outstanding
stock of Sub and Sub will have outstanding no warrant or option or any
other agreement pursuant to which any person may acquire any share of Sub
stock. No stock of Sub will be issued in the Merger. WorldCom has no plan
or intention to sell, transfer or dispose of any Sub stock or to cause Sub
to issue additional shares of its stock that would result in WorldCom
owning less than all the stock of Sub after the Merger.
8. WorldCom has no plan or intention, following the Merger, to liquidate
the Surviving Corporation, to merge the Surviving Corporation with and into
another corporation, to sell or otherwise dispose of any of the stock of
the Surviving Corporation, to cause the Surviving Corporation to distribute
to WorldCom or any of its Subsidiaries any assets of the Surviving
Corporation or any of its Subsidiaries or the proceeds of any borrowings
incurred by the Surviving Corporation or any of its Subsidiaries, or to
cause the Surviving Corporation to sell or otherwise dispose of any of the
assets held by SkyTel or any of its Subsidiaries at the time of the Merger,
except for dispositions of such assets in the ordinary course of business
and transfers described in Section 368(a)(2)(C) of the Code or Treasury
Regulation Section 1.368-2(k).
9. Assuming that, at the Effective Time, SkyTel holds at least 90
percent of the fair market value of its net assets and at least 70 percent
of the fair market value of its gross assets held immediately prior to the
Effective Time, then following the Merger, the Surviving Corporation will
hold at least 90% of the fair market value of the net assets and at least
70% of the fair market value of the gross assets that were held by SkyTel
immediately prior to the Effective Time. For purposes of this
representation, amounts paid to stockholders who receive cash or other
property (including cash in lieu of fractional shares of WorldCom Common
Stock) in connection with the Merger, assets of SkyTel used to pay its
reorganization expenses and all redemptions and distributions made by
SkyTel (other than dividends made in the ordinary course of business)
immediately preceding, or in contemplation of, the Merger will be included
as assets held by SkyTel immediately prior to the Effective Time.
10. Except as otherwise specifically contemplated under the Merger
Agreement, WorldCom and Sub will each pay their respective expenses, if
any, incurred in connection with the Merger and will not pay the expenses
of SkyTel and holders of SkyTel Common Stock and Convertible Exchangeable
Preferred Stock. Except to the extent specifically contemplated under the
Merger Agreement, neither WorldCom nor Sub has paid (directly or
indirectly) or has agreed to assume any expenses or other liabilities,
whether fixed or contingent, incurred or to be incurred by SkyTel or any of
its Subsidiaries or any stockholder of SkyTel in connection with or as part
of the Merger or any related transactions.
11. Following the Merger, WorldCom will cause the Surviving Corporation,
or WorldCom's "qualified group" of corporations (as defined in Treasury
Regulation Section 1.368-1(d)(4)(ii)), to continue SkyTel's "historic
business" or to use a significant portion of SkyTel's "historic business
assets" in a business (as such terms are defined in Treasury Regulation
Section 1.368-1(d)).
12. The WorldCom Convertible Exchangeable Preferred Stock shall have
terms that are identical to Convertible Exchangeable Preferred Stock
(except that (x) the issuer thereof shall be WorldCom rather than SkyTel
and (y) Convertible Exchangeable Preferred Stock shall become convertible
into WorldCom Common Stock as required by Section 9(l) of the Certificate
of Designation for Convertible Exchangeable Preferred Stock).
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<PAGE>
13. Neither WorldCom nor Sub is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
14. Neither WorldCom nor Sub will take, or cause the Surviving
Corporation to take, any position on any Federal, state or local income or
franchise tax return, or take any other tax reporting position, that is
inconsistent with the treatment of the Merger as a "reorganization" within
the meaning of Section 368(a) of the Code.
15. None of the compensation to be received by any stockholder-employee
of SkyTel in respect of periods after the Effective Time represents
separate consideration for any of its SkyTel Common Stock or its
Convertible Exchangeable Preferred Stock. None of the WorldCom Common Stock
or WorldCom Convertible Exchangeable Preferred Stock that will be received
by any stockholder-employee of SkyTel in the Merger represents separately
bargained for consideration which is allocable to any employment agreement
or arrangement. The compensation paid to any stockholder-employees will be
for services actually rendered and will be commensurate with the amounts
paid to third parties bargaining at arm's-length for similar services.
16. There is no intercorporate indebtedness existing between WorldCom
(or any of its Subsidiaries, including Sub) and SkyTel (or any of its
Subsidiaries).
17. Neither WorldCom nor Sub is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
18. In connection with the Merger, SkyTel Common Stock will be converted
solely into WorldCom Common Stock (except for cash paid in lieu of
fractional shares of WorldCom Common Stock) and Convertible Exchangeable
Preferred Stock will be converted solely into WorldCom Convertible
Exchangeable Preferred Stock. For purposes of this representation, SkyTel
Common Stock and Convertible Exchangeable Preferred Stock redeemed for cash
or other property furnished directly or indirectly by WorldCom will be
considered as acquired by WorldCom for other than WorldCom Common Stock and
WorldCom Convertible Exchangeable Preferred Stock. Further, except as
otherwise contemplated under the Merger Agreement, no liabilities of SkyTel
or any of its Subsidiaries or any of the holders of SkyTel Common Stock or
Convertible Exchangeable Preferred Stock will be assumed by WorldCom, nor
will any of the SkyTel Common Stock or Convertible Exchangeable Preferred
Stock acquired by WorldCom in connection with the Merger be subject to any
liabilities.
19. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement represent the entire
understanding of WorldCom, Sub and SkyTel with respect to the Merger.
20. Sub is a corporation newly formed for the purpose of participating
in the Merger and at no time prior to the Merger has had assets (other than
nominal assets contributed upon the formation of Sub, which assets will be
held by SkyTel following the Merger) or business operations.
21. The Merger is being undertaken for purposes of enhancing the
business of WorldCom and for other good and valid business purposes of
WorldCom.
22. The undersigned is authorized to make all the representations set
forth herein on behalf of WorldCom and Sub.
The undersigned acknowledges that (i) your opinion will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your opinion will be subject to certain limitations
and qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any of such covenants or
obligations are not satisfied in all material respects.
A-44
<PAGE>
The undersigned acknowledges that your opinion will not address any tax
consequences of the Merger or any action taken in connection therewith except
as expressly set forth in such opinion.
Very truly yours,
MCI WorldCom, Inc.,
by _________________________________
Name:
Title:
A-45
<PAGE>
EXHIBIT D
TO THE MERGER AGREEMENT
[Letterhead of
Cravath, Swaine & Moore]
[Effective Date]
Merger Agreement
dated May 28, 1999,
Among MCI WORLDCOM, Inc., Empire Merger Inc.
and SkyTel Communications, Inc.
Ladies and Gentlemen:
We have acted as special tax counsel for MCI WorldCom, Inc., a Georgia
corporation ("WorldCom"), in connection with the proposed merger (the "Merger")
of SkyTel Communications, Inc., a Delaware corporation ("SkyTel"), with and
into Empire Merger Inc., a Delaware corporation and wholly owned subsidiary of
WorldCom ("Sub"), pursuant to a Merger Agreement, dated May 28, 1999 (the
"Merger Agreement"), among WorldCom, Sub and SkyTel. In the Merger, each issued
and outstanding share of SkyTel's common stock, par value $.01 ("SkyTel Common
Stock"), other than any such shares owned directly by SkyTel, WorldCom or Sub,
will be converted into common stock, par value $.01 per share, of WorldCom
("WorldCom Common Stock") and each issued and outstanding share of SkyTel's
$2.25 cumulative convertible exchangeable preferred stock, par value $.01 per
share, other than shares owned directly by SkyTel, WorldCom or Sub, will be
converted into one share of $2.25 Cumulative Convertible Exchangeable Preferred
Stock, par value $.01 per share, of WorldCom.
In that connection, you have requested our opinion regarding the material
U.S. Federal income tax consequences of the Merger. In providing our opinion,
we have examined the Merger Agreement, the registration statement on Form S-4
(the "Registration Statement"), which includes the Information
Statement/Prospectus of SkyTel and WorldCom, as filed with the Securities and
Exchange Commission, and such other documents and corporate records as we have
deemed necessary or appropriate for purposes of our opinion. In addition, we
have assumed that (i) the Merger will be consummated in the manner contemplated
by the Registration Statement and in accordance with the provisions of the
Merger Agreement, (ii) the statements concerning the Merger set forth in the
Merger Agreement and the Registration Statement are true, correct and complete,
(iii) the representations made to us by SkyTel and WorldCom in their respective
letters to us each dated as of the date hereof, and delivered to us for
purposes of this opinion are true, correct and complete (such letters, the
"Representation Letters"), and (iv) any representations made in the
Representation Letters or in the Merger Agreement "to the best knowledge of" or
similarly qualified are true, correct and complete without such qualification.
If any of the above-described assumptions are untrue for any reason or if the
Merger is consummated in a manner that is inconsistent with the manner in which
it is described in the Merger Agreement or the Registration Statement, our
opinions as expressed below may be adversely affected and may not be relied
upon.
Based upon the foregoing, we are of opinion that, for U.S. Federal income
tax purposes, (i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and (ii) SkyTel, WorldCom and Sub will each be a party to such
reorganization within the meaning of Section 368(b) of the Code.
Our opinions are limited to the tax matters specifically covered hereby, and
we have not been asked to address, nor have we addressed, any other tax
consequences of the Merger or any other transactions. Our opinions are based
upon current statutory, regulatory and judicial authority, any of which may be
changed at any time with retroactive effect. We disclaim any undertaking to
advise you of any subsequent changes of the matters stated, represented or
assumed herein or any subsequent changes in applicable law, regulations or
interpretations thereof.
A-46
<PAGE>
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
reference to us in the Proxy Statement/Prospectus under the caption "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER." In giving such consent, we do
not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
This opinion is being provided solely for the benefit of WorldCom. No other
person or party shall be entitled to rely on this opinion.
Very truly yours,
A-47
<PAGE>
EXHIBIT E
TO THE MERGER AGREEMENT
[Letterhead of
Jones, Day, Reavis & Pogue]
[Effective Date]
Ladies & Gentlemen:
We have acted as counsel to SkyTel Communications, Inc., a Delaware
corporation ("SkyTel"), in connection with the proposed merger of SkyTel with
and into Empire Merger Inc., a Delaware corporation ("Sub") and a wholly owned
subsidiary of MCI WorldCom, Inc., a Georgia corporation ("WorldCom"), pursuant
to the Agreement and Plan of Merger, dated as of May 28, 1999 (the "Merger
Agreement"), by and among WorldCom, Sub, and SkyTel. In the Merger, each issued
and outstanding share of SkyTel's common stock, par value $.01 per share, other
than any shares owned directly by SkyTel, WorldCom or Sub, will be converted
into common stock, par value $.01 per share, of WorldCom and each issued and
outstanding share of the SkyTel's $2.25 cumulative convertible exchangeable
preferred stock, par value $.01 per share, other than any shares owned directly
by SkyTel, WorldCom or Sub, will be converted into one share of $2.25
Cumulative Convertible Exchangeable Preferred Stock, par value $.01 per share,
of WorldCom. This opinion is being delivered pursuant to Section 6.03(c) of the
Merger Agreement. Capitalized terms used but not defined herein shall have the
same meanings ascribed to such terms in the Merger Agreement.
In rendering our opinion, we have reviewed and relied upon (i) the Merger
Agreement, (ii) the registration statement on Form S-4 (the "Registration
Statement"), which includes the Information Statement/Prospectus of SkyTel and
WorldCom, as filed with the Securities and Exchange Commission, and (iii) such
other documents, records, instruments and information as we have deemed
necessary or appropriate for purposes of our opinion.
In addition, we have assumed, with your consent, that (i) SkyTel will merge
with and into Sub, with Sub being the surviving entity (ii) the Merger will be
effected in accordance with the Merger Agreement and in the manner contemplated
by the Registration Statement and will qualify as a merger under the General
Corporation Law of the State of Delaware, (iii) all the provisions of the
Merger Agreement will be complied with, (iv) the representations of SkyTel and
WorldCom set forth in their respective letters (the "Representation Letters")
to us each dated as of the date hereof, and delivered to us for purposes of
this opinion are true and correct on and as of the date hereof, and (v) any
representations made in the Representation Letters or in the Merger Agreement
that are qualified by reference to the knowledge of the representor are true,
correct, and complete without such qualification.
Our opinion is based upon the current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), the existing, temporary and currently
proposed Treasury Regulations promulgated thereunder, existing administrative
rulings and practices of the Internal Revenue Service, and existing judicial
decisions, all of which are subject to change at any time. It should be noted
that future legislative, judicial or administrative actions, decisions or
interpretations, which may be retroactive in effect, could materially affect
our opinion.
Based upon and subject to the foregoing, as well as the limitations and
qualifications set forth below, it is our opinion that:
1. The Merger will qualify for federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the Code.
2. SkyTel, WorldCom and Sub will each be a party to such reorganization
within the meaning of Section 368(b) of the Code.
We have not considered and do not express any opinion as to any federal
income tax consequences of the Merger other than those expressly stated above.
We have also not considered and do not express any opinion with respect to the
tax consequences of the Merger under any state, local or foreign tax law.
A-48
<PAGE>
An opinion of counsel is not binding on the Internal Revenue Service or the
courts, and there can be no assurance that the Internal Revenue Service or a
court will not take a contrary position with respect to the conclusions set
forth above.
The opinions expressed in this letter take into account laws,
interpretations of laws, and facts known to us as of the date of this letter.
We undertake no responsibility to advise you of changes in laws or
interpretations of laws or facts that come to our attention after that time.
This opinion is being furnished to you solely for your use and benefit in
connection with the Merger and is not intended to be relied upon by other
persons in any manner or for any purpose.
Very truly yours,
A-49
<PAGE>
ANNEX B
Stock Option Agreement dated as of May 28, 1999 (the "Agreement"), by and
between SkyTel Communications, Inc., a Delaware corporation ("Issuer"), and MCI
WorldCom, Inc., a Georgia corporation ("Grantee").
RECITALS
A. Grantee, Empire Merger Inc., a wholly owned Subsidiary of Grantee
("Sub"), and Issuer have entered into an Agreement and Plan of Merger dated as
of the date hereof (the "Merger Agreement"; defined terms used but not defined
herein have the meanings set forth in the Merger Agreement), providing for,
among other things, the Merger of Issuer with and into Sub, with Sub as the
surviving corporation in the Merger and becoming a wholly owned Subsidiary of
Grantee; and
B. As a condition and inducement to Grantee's willingness to enter into the
Merger Agreement, Grantee has requested that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below).
Now, Therefore, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 7,500,000 (as adjusted as set forth herein) shares (the "Option
Shares") of common stock, par value $.01 per share ("Issuer Common Stock"), of
Issuer at a purchase price of $21.23 (as adjusted as set forth herein) per
Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option, with respect to
any or all of the Option Shares at any time or times, subject to the provisions
of Section 2(c), after the occurrence of any event as a result of which Grantee
is entitled to receive the Termination Fee pursuant to Section 5.09(b) of the
Merger Agreement (a "Purchase Event"); provided, however, that (i) except as
provided in the last sentence of this Section 2(a), the Option will terminate
and be of no further force and effect upon the earliest to occur of (A) the
Effective Time, (B) 12 months after the first occurrence of a Purchase Event,
and (C) termination of the Merger Agreement in accordance with its terms prior
to the occurrence of a Purchase Event, unless, in the case of clause (C),
Grantee has the right to receive a Termination Fee following such termination
upon the occurrence of certain events, in which case the Option will not
terminate until the later of (x) six months following the time such Termination
Fee becomes payable and (y) the expiration of the period in which Grantee has
such right to receive a Termination Fee, and (ii) any purchase of Option Shares
upon exercise of the Option will be subject to compliance with the HSR Act and
the obtaining or making of any consents, approvals, orders, notifications,
filings or authorizations, the failure of which to have obtained or made would
have the effect of making the issuance of Option Shares to Grantee illegal (the
"Regulatory Approvals"). Notwithstanding the termination of the Option, Grantee
will be entitled to purchase the Option Shares if it has exercised the Option
in accordance with the terms hereof prior to the termination of the Option and
the termination of the Option will not affect any rights hereunder which by
their terms do not terminate or expire prior to or as of such termination.
(b) In the event that Grantee is entitled to and wishes to exercise the
Option, it will send to Issuer a written notice (an "Exercise Notice"; the date
of which being herein referred to as the "Notice Date") to that effect which
Exercise Notice also specifies the number of Option Shares, if any, Grantee
wishes to purchase pursuant to this Section 2(b), the number of Option Shares,
if any, with respect to which Grantee wishes to exercise its Cash- Out Right
(as defined herein) pursuant to Section 6(c), the denominations of the
certificate or certificates evidencing the Option Shares which Grantee wishes
to purchase pursuant to this Section 2(b) and a date (an "Option Closing
Date"), subject to the following sentence, not earlier than three business days
nor later than 20 business days from the Notice Date for the closing of such
purchase (an "Option Closing"). Any
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<PAGE>
Option Closing will be at an agreed location and time in New York, New York on
the applicable Option Closing Date or at such later date as may be necessary so
as to comply with Section 2(a)(ii).
(c) Notwithstanding anything to the contrary contained herein, any exercise
of the Option and purchase of Option Shares shall be subject to compliance with
applicable laws and regulations, which may prohibit the purchase of all the
Option Shares specified in the Exercise Notice without first obtaining or
making certain Regulatory Approvals. In such event, if the Option is otherwise
exercisable and Grantee wishes to exercise the Option, the Option may be
exercised in accordance with Section 2(b) and Grantee shall acquire the maximum
number of Option Shares specified in the Exercise Notice that Grantee is then
permitted to acquire under the applicable laws and regulations, and if Grantee
thereafter obtains the Regulatory Approvals to acquire the remaining balance of
the Option Shares specified in the Exercise Notice, then Grantee shall be
entitled to acquire such remaining balance. Issuer agrees to use its reasonable
efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory Approval
required for the purchase of any Option Shares will not be issued or granted or
(ii) such Regulatory Approval has not been issued or granted within six months
of the date of the Exercise Notice, Grantee shall have the right to exercise
its Cash-Out Right pursuant to Section 6(c) with respect to the Option Shares
for which such Regulatory Approval will not be issued or granted or has not
been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option Closing, Grantee
will pay to Issuer in immediately available funds by wire transfer to a bank
account designated in writing by Issuer an amount equal to the Purchase Price
multiplied by the number of Option Shares to be purchased at such Option
Closing.
(b) At any Option Closing, simultaneously with the delivery of immediately
available funds as provided in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased at
such Option Closing, which Option Shares will be free and clear of all Liens.
If at the time of issuance of Option Shares pursuant to an exercise of the
Option hereunder, Issuer shall have outstanding any securities similar to
rights under a stockholder rights plan, then each Option Share issued pursuant
to such exercise will also represent such a corresponding right with terms
substantially the same as and at least as favorable to Grantee as are provided
under any such stockholder rights plan then in effect.
(c) Certificates for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read
substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT DATED AS OF MAY 28, 1999, A COPY OF WHICH MAY BE OBTAINED
FROM THE SECRETARY OF SKYTEL COMMUNICATIONS, INC. AT ITS PRINCIPAL
EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have
been registered pursuant to the Securities Act, such Option Shares have been
sold in reliance on and in accordance with Rule 144 under the Securities Act or
Grantee has delivered to Issuer a copy of a letter from the staff of the SEC,
or an opinion of counsel in form and substance reasonably satisfactory to
Issuer and its counsel, to the effect that such legend is not required for
purposes of the Securities Act and (ii) the reference to restrictions pursuant
to this Agreement in the above legend will be removed by delivery of substitute
certificate(s) without such reference if the Option Shares evidenced by
certificate(s) containing such reference have been sold or transferred in
compliance with the provisions of this Agreement under circumstances that do
not require the retention of such reference.
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<PAGE>
4. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
Authorized Stock. Issuer has taken all necessary corporate and other
action to authorize and reserve and, subject to the expiration or
termination of any required waiting period under the HSR Act and any other
Regulatory Approvals, to permit it to issue, and, at all times from the
date hereof until the obligation to deliver Option Shares upon the exercise
of the Option terminates, shall have reserved for issuance, upon exercise
of the Option, shares of Issuer Common Stock necessary for Grantee to
exercise the Option, and Issuer will take all necessary corporate action to
authorize and reserve for issuance all additional shares of Issuer Common
Stock or other securities which may be issued pursuant to Section 6 upon
exercise of the Option. The shares of Issuer Common Stock to be issued upon
due exercise of the Option, including all additional shares of Issuer
Common Stock or other securities which may be issuable upon exercise of the
Option or any other securities which may be issued pursuant to Section 6,
upon issuance pursuant hereto, will be duly and validly issued, fully paid
and nonassessable, and will be delivered free and clear of all Liens,
including without limitation any preemptive rights of any stockholder of
Issuer.
5. Representations and Warranties of Grantee. Grantee hereby represents and
warrants to Issuer that:
Purchase Not for Distribution. Any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be transferred or
otherwise disposed of except in a transaction registered, or exempt from
registration, under the Securities Act.
6. Adjustment upon Changes in Capitalization, Etc. (a) In the event of any
change in Issuer Common Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, exchange of shares, or similar transaction, the
type and number of shares or securities subject to the Option, and the Purchase
Price thereof, will be adjusted appropriately, and proper provision will be
made in the agreements governing such transaction, so that Grantee will receive
upon exercise of the Option the number and class of shares or other securities
or property that Grantee would have received in respect of Issuer Common Stock
if the Option had been exercised immediately prior to such event or the record
date therefor, as applicable. Subject to Section 1, and without limiting the
parties' relative rights and obligations under the Merger Agreement, if any
additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to (i) any option, warrant, or other right
outstanding as of the date of this Agreement pursuant to which the Issuer has
an obligation to issue additional shares of Issuer Common Stock or (ii) an
event described in the first sentence of this Section 6(a)) or if the number of
outstanding shares of Issuer Common Stock is reduced, the number of shares of
Issuer Common Stock subject to the Option will be adjusted so that it equals
the same percentage of the aggregate number of shares of Issuer Common Stock
issued and outstanding after giving effect to such issuance as immediately
prior to such issuance, in each case without giving effect to any shares
subject to or issued pursuant to the Option.
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that Issuer enters into an agreement (i) to
consolidate with or merge into any Person, other than Grantee or one of its
Subsidiaries, and Issuer will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any Person, other than Grantee or
one of its Subsidiaries, to merge into Issuer and Issuer will be the continuing
or surviving corporation, but in connection with such merger, the shares of
Issuer Common Stock outstanding immediately prior to the consummation of such
merger will be changed into or exchanged for stock or other securities of
Issuer or any other Person or cash or any other property, or the shares of
Issuer Common Stock outstanding immediately prior to the consummation of such
merger will, after such merger, represent less than 50% of the outstanding
voting securities of the surviving company, or (iii) to sell or otherwise
transfer all or substantially all of its assets to any Person, other than
Grantee or one of its Subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option will,
upon the consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option with identical
terms appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in
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respect of Issuer Common Stock if the Option had been exercised immediately
prior to such consolidation, merger, sale, or transfer, or the record date
therefor, as applicable and make any other necessary adjustments.
(c) If, at any time during the period commencing on a Purchase Event and
ending on the termination of the Option in accordance with Section 2, Grantee
sends to Issuer an Exercise Notice indicating Grantee's election to exercise
its right (the "Cash-Out Right") pursuant to this Section 6(c), then Issuer
shall pay to Grantee, on the Option Closing Date, in exchange for the
cancellation of the Option with respect to such number of Option Shares as
Grantee specifies in the Exercise Notice, an amount in cash equal to such
number of Option Shares multiplied by the difference between (i) the average
closing price, for the 10 trading days commencing on the 12th trading day
immediately preceding the Notice Date, per share of Issuer Common Stock as
reported on The Nasdaq National Market (or, if not listed on The Nasdaq
National Market, as reported on any other national securities exchange or
national securities quotation system on which the Issuer Common Stock is listed
or quoted, as reported in The Wall Street Journal (Northeast edition), or, if
not reported thereby, any other authoritative source) (the "Closing Price") and
(ii) the Purchase Price. Notwithstanding the termination of the Option, Grantee
will be entitled to exercise its rights under this Section 6(c) if it has
exercised such rights in accordance with the terms hereof prior to the
termination of the Option.
7. Registration Rights. Issuer will, if requested by Grantee at any time and
from time to time within two years of the exercise of the Option, as
expeditiously as possible prepare and file up to three registration statements
under the Securities Act if such registration is necessary in order to permit
the sale or other disposition of any or all shares of securities that have been
acquired by or are issuable to Grantee upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Grantee, including a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer will use its reasonable
efforts to qualify such shares or other securities under any applicable state
securities laws. Grantee agrees to use reasonable efforts to cause, and to
cause any underwriters of any sale or other disposition to cause, any sale or
other disposition pursuant to such registration statement to be effected on a
widely distributed basis so that upon consummation thereof no purchaser or
transferee will own beneficially more than 4.9% of the then-outstanding voting
power of Issuer. Issuer will use reasonable efforts to cause each such
registration statement to become effective, to obtain all consents or waivers
of other parties which are required therefor, and to keep such registration
statement effective for such period not in excess of 180 calendar days from the
day such registration statement first becomes effective as may be reasonably
necessary to effect such sale or other disposition. The obligations of Issuer
hereunder to file a registration statement and to maintain its effectiveness
may be suspended for up to 60 calendar days in the aggregate if the Board of
Directors of Issuer shall have determined that the filing of such registration
statement or the maintenance of its effectiveness would require premature
disclosure of material nonpublic information that would materially and
adversely affect Issuer or otherwise interfere with or adversely affect any
pending or proposed offering of securities of Issuer or any other material
transaction involving Issuer. Any registration statement prepared and filed
under this Section 7, and any sale covered thereby, will be at Issuer's expense
except for underwriting discounts or commissions, brokers' fees and the fees
and disbursements of Grantee's counsel related thereto. Grantee will provide
all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If, during the time periods
referred to in the first sentence of this Section 7, Issuer effects a
registration under the Securities Act of Issuer Common Stock for its own
account or for any other stockholders of Issuer (other than on Form S-4 or Form
S-8, or any successor form), it will allow Grantee the right to participate in
such registration, and such participation will not affect the obligation of
Issuer to effect demand registration statements for Grantee under this Section
7; provided that, if the managing underwriters of such offering advise Issuer
in writing that in their opinion the number of shares of Issuer Common Stock
requested to be included in such registration exceeds the number which can be
sold in such offering, Issuer will include the shares requested to be included
therein by Grantee pro rata with the shares intended to be included therein by
Issuer. In connection with any registration pursuant to this Section 7, Issuer
and Grantee will provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification, and
contribution in connection with such registration.
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8. Limitation on Profit. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as defined below) plus
any Termination Fee paid to Grantee pursuant to Section 5.09(b) of the Merger
Agreement exceed in the aggregate $43.75 million and, if the total amount that
otherwise would be received by Grantee would exceed such amount, the Grantee,
at its sole election, shall either (i) reduce the number of shares of Issuer
Common Stock subject to the Option, (ii) deliver to the Issuer for cancellation
Option Shares previously purchased by Grantee against the refund of the
Purchase Price therefore, (iii) pay cash to the Issuer or (iv) any combination
thereof, so that Grantee's actually realized Total Profit, when aggregated with
such Termination Fee so paid to Grantee, shall not exceed $43.75 million after
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of Option Shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) that, together
with any Termination Fee theretofore paid to Grantee, would exceed $43.75
million; provided, that nothing in this sentence shall restrict any exercise of
the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant to
Issuer's repurchase of the Option (or any portion thereof) pursuant to Section
6(c), (ii)(x) the net cash amounts or the fair market value of any property
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, but in no case less than the fair market value of such
Option Shares, less (y) the Grantee's purchase price of such Option Shares, and
(iii) the net cash amounts received by Grantee on the transfer (in accordance
with Section 12(g) hereof) of the Option (or any portion thereof) to any
unaffiliated party.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Option Shares as to which Grantee may propose to exercise the Option
shall be the Total Profit determined as of the date of such proposal assuming
for such purpose that the Option were exercised on such date for such number of
Option Shares and assuming that such Option Shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold for
cash at the closing market price on The Nasdaq National Market for the Issuer
Common Stock as of the close of business on the preceding trading day (less
customary brokerage commissions.)
9. Transfers. The Option Shares may not be sold, assigned, transferred, or
otherwise disposed of except (i) in an underwritten public offering as provided
in Section 7 or (ii) to any purchaser or transferee who would not, to the
knowledge of Grantee after reasonable inquiry immediately following such sale,
assignment, transfer or disposal, beneficially own more than 4.9% of the then-
outstanding voting power of the Issuer; provided, however, that Grantee shall
be permitted to sell any Option Shares if such sale is made pursuant to a
tender or exchange offer that has been approved or recommended by a majority of
the members of the Board of Directors of Issuer (which majority shall include a
majority of directors who were directors as of the date hereof).
10. Quotation. If Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on The Nasdaq National Market (or
any other national securities exchange or national securities quotation
system), Issuer, upon the request of Grantee, will promptly file an application
to list the shares of Issuer Common Stock or other securities to be acquired
upon exercise of the Option on The Nasdaq National Market (or any such other
national securities exchange or national securities quotation system) and will
use reasonable efforts to obtain approval of such listing as promptly as
practicable.
11. Loss or Mutilation. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered
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will constitute an additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed, or mutilated shall at
any time be enforceable by anyone.
12. Miscellaneous. (a) Expenses. Except as otherwise provided in this
Agreement or in the Merger Agreement, each of the parties hereto will bear and
pay all costs and expenses incurred by it or on its behalf in connection with
the transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
(b) Amendment. This Agreement may not be amended, except by an instrument in
writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement, the
Merger Agreement (including the documents and instruments attached thereto as
exhibits or schedules or delivered in connection therewith) and the
Confidentiality Agreement (i) constitute the entire agreement, and supersede
all prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter of this Agreement, and (ii) except
as provided in Section 8.06 of the Merger Agreement, are not intended to confer
upon any Person other than the parties any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement shall be sent in the manner and to the
addresses set forth in the Merger Agreement.
(g) Assignment. Neither this Agreement, the Option nor any of the rights,
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by Issuer or Grantee
without the prior written consent of the other, except that Grantee may assign,
in its sole discretion, any of or all its rights, interests and obligations
under this Agreement to any direct or indirect wholly owned Subsidiary of
Grantee, but no such assignment shall relieve Grantee of any of its obligations
hereunder. Any assignment or delegation in violation of the preceding sentence
will be void. Subject to the first and second sentences of this Section 12(g),
this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
(h) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee will execute and deliver all other documents and
instruments and take all other actions that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
(i) Enforcement. The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties will be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any Federal court located in the State of Delaware or in
Delaware state court, the foregoing being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (i) consents to submit itself to the personal jurisdiction of any
Federal court located in the State of Delaware or any Delaware state court in
the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and
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(iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than
a Federal court sitting in the State of Delaware or a Delaware state court.
(j) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
In Witness Whereof, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
SkyTel Communications, Inc.,
/s/ John T. Stupka
by _________________________________
Name: John T. Stupka
Title:President and Chief
Executive Officer
MCI WorldCom, Inc.,
/s/ Bernard J. Ebbers
by _________________________________
Name: Bernard J. Ebbers
Title: President and Chief
Executive Officer
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ANNEX C
May 28, 1999
The Board of Directors
SkyTel Communications, Inc.
200 South Lamar Street
Jackson, Mississippi 39201
Dear Members of the Board:
We understand that SkyTel Communications, Inc. (the "Company") is
considering a transaction whereby the Company will be merged (the "Merger")
with and into a wholly owned subsidiary of MCI Worldcom, Inc. ("MCI Worldcom")
pursuant to the terms of an Agreement and Plan of Merger (the "Merger
Agreement"). Pursuant to the terms of the Merger Agreement, among other things,
subject to certain exceptions specified in the Merger Agreement, (i) each
issued and outstanding share of the common stock of the Company ("Company
Common Stock"), par value of $.01 per share, will be converted into the right
to receive a number of shares (the "Common Stock Exchange Ratio") of common
stock, par value of $.01 per share, of MCI Worldcom ("MCI Worldcom Common
Stock") determined by dividing $20.00 by the weighted average trading price of
the MCI Worldcom common stock for the 20 consecutive trading days ending with
the third trading day immediately preceding the Effective Time, provided that
the Common Stock Exchange Ratio shall not be less than 0.25 or greater than
0.2778, and (ii) each issued and outstanding share of the Company's $2.25
Cumulative Convertible Exchangeable Preferred Stock ("Company Preferred Stock")
will be converted into an identical series of preferred stock of MCI Worldcom,
subject to certain changes specified in the Merger Agreement (the "Preferred
Stock Consideration"). The terms and conditions of the Merger are more fully
set forth in the Merger Agreement.
You have requested our opinion as to the fairness, from a financial point of
view, of (i) the Common Stock Exchange Ratio to the holders of Company Common
Stock and (ii) the Preferred Stock Consideration to the holders of Company
Preferred Stock.
Warburg Dillon Read LLC ("WDR") has acted as financial advisor to the
Company in connection with the Merger and will receive a fee upon the
consummation thereof. In the past, WDR and its predecessors have provided
investment banking services to the Company and received customary compensation
for the rendering of such services. In the ordinary course of business, WDR and
affiliates may have traded securities of the Company or MCI Worldcom for their
own accounts and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion does not address the Company's underlying business decision to
effect the Merger or constitute a recommendation to any shareholder of the
Company as to how such shareholder should vote with respect to the Merger. With
your consent, we have not been asked to, nor do we, offer any opinion as to the
terms of the Merger Agreement or the form of the Merger. In rendering this
opinion, we have assumed, with your consent, that the final executed form of
the Merger Agreement does not differ in any material respect from the draft
that we have examined, and that MCI Worldcom and the Company will comply with
all the material terms of the Merger Agreement.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company and MCI Worldcom; (ii) reviewed certain internal
financial information and other data relating to the business and financial
prospects of the Company, including prospective financial information prepared
by management of the Company, that were provided to us by the Company and not
publicly available; (iii) reviewed certain internal financial information and
other data relating to the business and financial prospects of MCI Worldcom,
including prospective financial information prepared by the management of MCI
Worldcom and not publicly available; (iv) conducted discussions with members of
the senior managements of the Company and MCI Worldcom; (v) reviewed publicly
available financial and stock market data with respect to certain other
companies in lines of business we believe to be generally
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comparable to those of MCI Worldcom and the Company; (vi) compared the
financial terms of the Merger with the publicly available financial terms of
certain other transactions; (vii) considered certain pro forma effects of the
Merger on MCI Worldcom's financial statements; (viii) reviewed drafts of the
Merger Agreement; (ix) conducted such other financial studies, analyses, and
investigations, and considered such other information as we deemed necessary or
appropriate; and (x) reviewed historical prices and trading volumes for the
equity securities of the Company and MCI Worldcom.
In connection with our review, with your consent, we have not assumed any
responsibility for independent verification for any of the information reviewed
by us for the purpose of this opinion and have, with your consent, relied on
its being complete and accurate in all material respects. In addition, with
your consent, we have not made or received any independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of the
Company or MCI Worldcom, nor have we been furnished with any such evaluation or
appraisal. With respect to the prospective financial information referred to
above, we have assumed, with your consent, that they have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of each company as to the future performance of
their respective companies. Our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as the date
hereof, (i) the Common Stock Exchange Ratio is fair, from a financial point of
view, to the holders of the Company Common Stock and (ii) the Preferred Stock
Consideration is fair, from a financial point of view, to the holders of the
Company Preferred Stock.
Very truly yours,
Warburg Dillon Read LLC
/s/ F. Davis Terry, Jr. /s/ Brian Hanson
By: _________________________________ By: _________________________________
F. Davis Terry, Jr. Brian Hanson
Managing Director Managing Director
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 14-2-202(b)(4) of the Georgia Business Corporation Code (the "GBCC")
provides that a corporation's articles of incorporation may include a provision
that eliminates or limits the personal liability of directors for monetary
damages to the corporation or its shareholders for any action taken, or any
failure to take any action, as a director, provided, however, that the Section
does not permit a corporation to eliminate or limit the liability of a director
for appropriating, in violation of his or her duties, any business opportunity
of the corporation, for acts or omissions including intentional misconduct or a
knowing violation of law, receiving from any transaction an improper personal
benefit, or voting for or assenting to an unlawful distribution (whether as a
dividend, stock repurchase or redemption, or otherwise) as provided in Section
14-2-832 of the GBCC. Section 14-2-202(b)(4) also does not eliminate or limit
the rights of MCI WorldCom or any shareholder to seek an injunction or other
nonmonetary relief in the event of a breach of a director's duty to the
corporation and its shareholders. Additionally, Section 14-2-202(b)(4) applies
only to claims against a director arising out of his or her role as a director,
and does not relieve a director from liability arising from his or her role as
an officer or in any other capacity.
The provisions of Article Ten of MCI WorldCom's Second Amended and Restated
Articles of Incorporation, as amended, are similar in all substantive respects
to those contained in Section 14-2-202(b)(4) of the GBCC as outlined above.
Article Ten further provides that the liability of directors of MCI WorldCom
shall be limited to the fullest extent permitted by amendments to Georgia law.
Sections 14-2-850 to 14-2-859, inclusive, of the GBCC govern the
indemnification of directors, officers, employees, and agents. Section 14-2-851
of the GBCC permits indemnification of a director of MCI WorldCom for liability
incurred by him or her in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (including, subject to certain
limitations, civil actions brought as derivative actions by or in the right of
MCI WorldCom) in which he or she is made a party by reason of being a director
of MCI WorldCom and of directors who, at the request of MCI WorldCom, act as
directors, officers, partners, trustees, employees or agents of another foreign
or domestic corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise. The Section permits indemnification if the director
acted in good faith and reasonably believed (a) in the case of conduct in his
or her official capacity, that such conduct was in the best interests of the
corporation, (b) in all other cases other than a criminal proceeding, that such
conduct was at least not opposed to the best interests of the corporation, and
(c) in the case of a criminal proceeding, that he or she had no reasonable
cause to believe his or her conduct was unlawful. If the required standard of
conduct is met, indemnification may include judgments, settlements, penalties,
fines or reasonable expenses (including attorneys' fees) incurred with respect
to a proceeding.
A Georgia corporation may not indemnify a director under Section 14-2-851:
(i) in connection with a proceeding by or in the right of the corporation,
except for reasonable expenses incurred by such director in connection with the
proceeding provided it is determined that such director met the relevant
standard of conduct set forth above, or (ii) in connection with any proceeding
with respect to conduct for which such director was adjudged liable on the
basis that he or she received an improper personal benefit, whether or not
involving action in his or her official capacity.
Prior to indemnifying a director under Section 14-2-851 of the GBCC, a
determination must be made that the director has met the relevant standard of
conduct. Such determination must be made under Section 14-2-855 of the GBCC by:
(i) a majority vote of a quorum consisting of disinterested directors (ii) a
duly designated committee of disinterested directors; (iii) duly selected
special legal counsel; or (iv) a vote of the shareholders, excluding shares
owned by or voted under the control of directors who do not qualify as
disinterested directors.
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Section 14-2-856 of the GBCC provides that a Georgia corporation may, before
final disposition of a proceeding, advance funds to pay for or reimburse the
reasonable expenses incurred by a director who is a party to a proceeding
because he or she is a director, provided that such director delivers to the
corporation a written affirmation of his or her good faith belief that he or
she met the relevant standard of conduct described in Section 14-2-851 of the
GBCC, and a written undertaking by the director to repay any funds advanced if
it is ultimately determined that such director was not entitled to such
indemnification. Section 14-2-852 of the GBCC provides that directors who are
successful with respect to any claim brought against them, which claim is
brought because they are or were directors of MCI WorldCom, are entitled to
mandatory indemnification against reasonable expenses incurred in connection
therewith.
The GBCC also allows a Georgia corporation to indemnify directors made a
party to a proceeding without regard to the above-referenced limitations, if
authorized by the articles of incorporation or a bylaw, contract, or resolution
duly adopted by a vote of the shareholders of the corporation by a majority of
votes entitled to be cast, excluding shares owned or voted under the control of
the director or directors who are not disinterested, and to advance funds to
pay for or reimburse reasonable expenses incurred in the defense thereof,
subject to restrictions similar to the restrictions described in the preceding
paragraph; provided, however, that the corporation may not indemnify a director
adjudged liable (1) for any appropriation, in violation of his or her duties,
of any business opportunity of MCI WorldCom, (2) for acts or omissions which
involve intentional misconduct or a knowing violation of law, (3) for unlawful
distributions under Section 14-2-832 of the GBCC, or (4) for any transaction in
which the director obtained an improper personal benefit.
Section 14-2-857 of the GBCC provides that an officer of MCI WorldCom (but
not an employee or agent generally) who is not a director has the mandatory
right of indemnification granted to directors under Section 14-2-852, subject
to the same limitations as described above. In addition, MCI WorldCom may, as
provided by either MCI WorldCom's Second Amended and Restated Articles of
Incorporation, as amended, MCI WorldCom's Restated Bylaws, general or specific
actions by its board of directors, or by contract, indemnify and advance
expenses to an officer, employee or agent who is not a director to the extent
that such indemnification is consistent with public policy.
The indemnification provisions of Article X of MCI WorldCom's Restated
Bylaws and Article Twelve of MCI WorldCom's Second Amended and Restated
Articles of Incorporation, as amended, are consistent with the foregoing
provisions of the GBCC. However, MCI WorldCom's Second Amended and Restated
Articles of Incorporation, as amended, prohibit indemnification of a director
who did not believe in good faith that his or her actions were in, or not
opposed, MCI WorldCom's best interests, or to have improperly received a
personal benefit, or in the case of a criminal proceeding, if such director had
reasonable cause his or her conduct was unlawful, or in the case of a
proceeding by or in the right of MCI WorldCom, to which such director was
adjudged liable to MCI WorldCom, unless a court shall determine that the
director is fairly and reasonably entitled to indemnification in view of all
the circumstances. MCI WorldCom's Restated Bylaws extend the indemnification
available to officers under the GBCC to employees and agents.
Item 21(a). Exhibits.
See Exhibit Index.
Item 21(b). Financial Statement Schedules.
All financial statement schedules of MCI WorldCom and SkyTel which are
required to be included herein are included in the Annual Report of MCI
WorldCom on Form 10-K for the fiscal year ended December 31, 1999 or the Annual
Report on Form 10-K of SkyTel for the fiscal year ended December 31, 1999,
respectively, which are incorporated herein by reference.
Item 22. Undertakings.
(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
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provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(4) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers and sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs 5(a)(i) and 5(a)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d)of the Exchange
Act that are incorporated by reference in the registration statement.
II-3
<PAGE>
(b) That for the purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(6) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(7) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (6) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(8) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indentures Act in accordance with
the rules and regulations prescribed by the Commission under Section 305(b)(2)
of the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Clinton, State of
Mississippi, on August 26, 1999.
MCI WORLDCOM, Inc.
/s/ Scott D. Sullivan
By: _________________________________
Scott D. Sullivan
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Bernard J. Ebbers, Scott D. Sullivan and Charles T. Cannada, and each of them
(with full power to each of them to act alone), his or her true and lawful
attorneys in fact and agents for him or her and on his or her behalf and in his
or her name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits and any and all other documents
filed with respect thereto, with the Securities and Exchange Commission (or any
other governmental or regulatory authority), granting unto said attorneys, and
each of them, full power and authority to do and to perform each and every act
and thing requisite and necessary to be done in and about the premises in order
to effectuate the same as fully to all intents and purposes as he or she might
or could do if personally present, hereby ratifying and confirming all that
said attorneys in fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Clifford L. Alexander, Jr. Director August 26, 1999
_________________________________
Clifford L. Alexander, Jr.
/s/ James C. Allen Director August 26, 1999
_________________________________
James C. Allen
/s/ Judith Areen Director August 26, 1999
_________________________________
Judith Areen
/s/ Carl J. Aycock Director August 26, 1999
_________________________________
Carl J. Aycock
/s/ Max E. Bobbitt Director August 26, 1999
_________________________________
Max E. Bobbitt
/s/ Bernard J. Ebbers Director, President and August 26, 1999
_________________________________ Chief Executive Officer
Bernard J. Ebbers (Principal Executive
Officer)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Francesco Galesi Director August 26, 1999
_________________________________
Francesco Galesi
/s/ Stiles A. Kellett, Jr. Director August 26, 1999
_________________________________
Stiles A. Kellett, Jr.
/s/ Gordon S. Macklin Director August 26, 1999
_________________________________
Gordon S. Macklin
/s/ John A. Porter Director August 26, 1999
_________________________________
John A. Porter
/s/ Timothy F. Price Director August 26, 1999
_________________________________
Timothy F. Price
/s/ Bert C. Roberts, Jr. Chairman of the Board August 26, 1999
_________________________________
Bert C. Roberts, Jr.
/s/ John W. Sidgmore Director August 26, 1999
_________________________________
John W. Sidgmore
/s/ Scott D. Sullivan Director and Chief Financial August 26, 1999
_________________________________ Officer (Principal
Scott D. Sullivan Financial Officer and
Principal Accounting
Officer)
/s/ Lawrence C. Tucker Director August 26, 1999
_________________________________
Lawrence C. Tucker
/s/ Juan Villalonga Director August 26, 1999
_________________________________
Juan Villalonga
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- ----------- ---
<C> <S> <C>
2.1* Agreement and Plan of Merger by and among MCI WORLDCOM, Inc.
("MCI WorldCom"), SkyTel Communications, Inc. ("SkyTel") and
Empire Merger Inc. dated as of May 28, 1999 (attached as Annex A
to the Proxy Statement/Prospectus included in this Registration
Statement)
2.2 Stock Option Agreement by and between MCI WorldCom and SkyTel
dated as of May 28, 1999 (attached as Annex B to the Proxy
Statement/Prospectus included in this Registration Statement)
2.3* Agreement and Plan of Merger dated as of November 9, 1997 among
MCI WorldCom, TC Investments Corp. and MCI Communications
Corporation (incorporated by reference to Exhibit 2.1 to MCI
WorldCom's Current Report on Form 8-K dated November 9, 1997
(filed November 12, 1997) (File No. 0-11258))
2.4* Agreement dated as of November 9, 1997 among British
Telecommunications plc, MCI WorldCom and MCI Communications
Corporation (incorporated by reference to Exhibit 99.1 to MCI
WorldCom's Current Report on Form 8-K dated November 9, 1997
(filed November 12, 1997) (File No. 0-11258))
2.5* Agreement and Plan of Merger, dated as of September 7, 1997, by
and among H&R Block, Inc., H&R Block Group, Inc., CompuServe
Corporation, MCI WorldCom, and Walnut Acquisition Company,
L.L.C. (incorporated herein by reference to Exhibit 2.1 to MCI
WorldCom's Current Report on Form 8-K dated September 7, 1997
(filed September 17, 1997) (File No. 0-11258))
2.6* Purchase and Sale Agreement by and among America Online, Inc.,
ANS Communications, Inc. and MCI WorldCom, dated as of September
7, 1997 (incorporated herein by reference to Exhibit 2.4 to MCI
WorldCom's Current Report on Form 8-K dated September 7, 1997
(File No. 0-11258))
2.7* Amended and Restated Agreement and Plan of Merger dated as of
October 1, 1997 by and among MCI WorldCom, BV Acquisition, Inc.
and Brooks Fiber Properties, Inc. (incorporated herein by
reference to Exhibit 2.1 to MCI WorldCom's Registration
Statement on Form S-4 (File No. 333-43253))
4.1 Second Amended and Restated Articles of Incorporation of MCI
WorldCom (including preferred stock designations), as amended as
of May 20, 1999 (incorporated herein by reference to Exhibit 4.1
of MCI WorldCom's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1999 (filed August 16, 1999))
(File No. 0-11258)
4.2 Form of Articles of Amendment to Second Amended and Restated
Articles of Incorporation, as amended, of MCI WorldCom
containing the terms of the Series C $2.25 Cumulative
Convertible Exchangeable Preferred Stock, to be in effect as of
the effective time of the merger
4.3 Restated Bylaws of MCI WorldCom (incorporated herein by
reference to Exhibit 3.2 to MCI WorldCom's Current Report on
Form 8-K dated September 14, 1998) (filed September 29, 1998))
(File No. 0-11258))
4.4 Rights Agreement dated as of August 25, 1996 between MCI
WorldCom and The Bank of New York, which includes the form of
Certificate of Designations, setting forth the terms of the
Series 3 Junior Participating Preferred Stock, par value $.01
per share, as Exhibit A, the form of Rights Certificate as
Exhibit B and the Summary of Preferred Stock Purchase Rights as
Exhibit C (incorporated herein by reference to Exhibit 4 to MCI
WorldCom's Current Report on Form 8-K dated August 26, 1996 (as
amended) (filed August 26, 1996 (File No. 0-11258))
4.5 Amendment No. 1 To Rights Agreement dated as of May 22, 1997 by
and between MCI WorldCom and The Bank of New York, as Rights
Agent (incorporated herein by reference to Exhibit 4.2 to
WorldCom's Current Report on Form 8-K dated May 22, 1997 (filed
June 6, 1997) (File No. 0-11258))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- ----------- ---
<C> <S> <C>
4.6 Form of Indenture between MCI WorldCom and a trustee to be
designated later relating to 4.5% Convertible Subordinated
Debentures due 2003.
5.1 Legality Opinion of MCI WorldCom Counsel
8.1 Tax Opinion of Jones, Day, Reavis & Pogue
12.1 Computation of Ratio of Earnings to Combined Fixed Charges and
Preference Dividends
12.2 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of KPMG LLP
23.4 Consent of Arthur Andersen LLP
23.5 Consent of PricewaterhouseCoopers LLP
23.6 Consent of PricewaterhouseCoopers
23.7 Consent of MCI WorldCom Counsel (included in Exhibit 5.1)
23.8 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 8.1)
23.9 Consent of Warburg Dillon Read LLC
24.1 Power of Attorney (included in Signature Page)
99.1 Form of Proxy Card for SkyTel Special Meeting
</TABLE>
* MCI WorldCom hereby agrees to furnish supplementally a copy of any omitted
schedules to this Agreement to the Securities and Exchange Commission upon
its request.
<PAGE>
EXHIBIT 4.2
ARTICLES OF AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF
INCORPORATION OF MCI WORLDCOM, INC.
1.
The name of the corporation is MCI WORLDCOM, Inc. (the "Corporation").
2.
Effective the date hereof, a new Article Seven A to the Corporation's
Second Amended and Restated Articles of Incorporation, as amended, is hereby
approved and adopted in accordance with the provisions of Section 14-2-602 of
the Official Code of Georgia Annotated (the "Code") to read as follows:
SEVEN A
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 D.
3.
All other provisions of the Second Amended and Restated Articles of
Incorporation, as previously amended, shall remain in full force and effect.
4.
The foregoing amendment was approved and duly adopted by the Board of
Directors of the Corporation in accordance with the provisions of Sections
14-2-602 and 14-2-1002 of the Code. Shareholder action was not required.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed by its duly authorized officer this ____ day of
____________, 1999.
MCI WORLDCOM, INC.
By:_____________________________
Bernard J. Ebbers, President
<PAGE>
EXHIBIT D
SERIES C $2.25 CUMULATIVE CONVERTIBLE
EXCHANGEABLE PREFERRED STOCK
___________________
SECTION 1. Designation. There is hereby created a series of preferred
-----------
stock, $.01 par value per share, of MCI WORLDCOM, Inc. (the "Corporation") to be
known as "Series C $2.25 Cumulative Convertible Exchangeable Preferred Stock"
(the "Series C Preferred Stock").
SECTION 2. Number of Shares. The number of shares of Series C
----------------
Preferred Stock authorized for issuance is 3,750,000.
SECTION 3. Stated Capital. The amount to be represented in stated
--------------
capital at all times for each share of Series C Preferred Stock shall be $.01.
SECTION 4. Dividends. (a) (i) The holders of shares of Series C
---------
Preferred Stock shall be entitled to receive dividends at the rate of $2.25 per
annum per share of Series C Preferred Stock, which shall be fully cumulative and
shall accrue without interest. Dividends shall be payable in cash quarterly on
January 15, April 15, July 15, and October 15 of each year (commencing on
January 15, 2000) (and, in the case of any accrued but unpaid dividends, at such
additional times and for such interim periods, if any, as determined by the
Board of Directors), except that if any such date is a Saturday, Sunday or legal
holiday then such dividend shall be payable on the next day that is not a
Saturday, Sunday or legal holiday on which banks in the State of New York are
permitted to be closed (a "Business Day"), to holders of record as they appear
on the stock books of the transfer agent for the Corporation (the "Transfer
Agent") on the applicable record date, which shall be not more than 60 nor less
than 10 days preceding the payment date for such dividends, as are fixed by the
Board of Directors, but only when, as and if declared by the Board of Directors
out of funds at the time legally available for the payment of dividends. The
amount of dividends payable per share of Series C Preferred Stock for each
quarterly dividend period shall be computed by dividing the annual dividend
amount per share by four. The amount of dividends payable for any period that
is shorter or longer than a full quarterly dividend period shall be computed on
the basis of a 360-day year of twelve 30-day months. Holders of shares of
Series C Preferred Stock shall not be entitled to receive any dividends, whether
payable in cash, property or stock, which are in excess of the cumulative
dividends provided for herein.
(ii) Notwithstanding Section 4(a)(i) above, (A) if the quarterly
dividend payable on October 15, 1999 to the holders of $2.25 Cumulative
Convertible Exchangeable Preferred Stock, par value $.01 per share ("SkyTel
Preferred Stock"), of SkyTel
3
<PAGE>
Communications, Inc., a Delaware corporation ("SkyTel"), shall have been
declared, then the first quarterly dividend of the Series C Preferred Stock
payable on January 15, 2000 shall be equal to $0.5625 per share of Series C
Preferred Stock, and (B) if the quarterly dividend payable to the holders of
SkyTel Preferred Stock on October 15, 1999 shall not have been declared, then
the first quarterly dividend of the Series C Preferred Stock payable on January
15, 2000 shall be equal to $1.125 per share of Series C Preferred Stock.
Thereafter, dividends shall accrue as set forth in Section 4(a)(i).
(b) No dividends or other distributions, other than dividends payable
solely in shares of the Corporation's Common Stock, par value $.01 per share
(the "Common Stock") or other capital stock of the Corporation ranking junior to
the Series C Preferred Stock as to dividends (collectively, "Junior Dividend
Stock") and rights to acquire the foregoing, shall be paid or declared and set
apart for payment on any shares of Junior Dividend Stock, and no purchase,
redemption or other acquisition shall be made by the Corporation of any shares
of Junior Dividend Stock, unless and until all accrued and unpaid dividends on
the Series C Preferred Stock shall have been paid or declared and set apart for
payment.
(c) No dividends, other than dividends payable solely in shares of
Junior Dividend Stock and rights to acquire the foregoing, shall be paid or
declared and set apart for payment on any class or series of the Corporation's
capital stock ranking, as to dividends on a parity with the Series C Preferred
Stock (collectively, "Parity Dividend Stock") for any period and no purchase,
redemption or other acquisition shall be made by the Corporation of any shares
of Parity Dividend Stock unless and until full cumulative dividends have been,
or contemporaneously are, paid or declared and set apart for such payment on the
Series C Preferred Stock for all dividend payment periods terminating on or
prior to the date of payment of such dividends on the Parity Dividend Stock.
When dividends are not paid in full upon the Series C Preferred Stock and the
Parity Dividend Stock (other than the Corporation's Series B Convertible
Preferred Stock, par value $.01 per share (the "Series B Preferred Stock")), all
dividends paid or declared and set aside for payment upon shares of Series C
Preferred Stock and such other Parity Dividend Stock shall be paid or declared
and set aside for payment pro rata so that the amount of dividends paid or
declared and set aside for payment per share on the Series C Preferred Stock and
such other Parity Dividend Stock shall in all cases bear to each other the same
ratio that accrued and unpaid dividends per share on the shares of Series C
Preferred Stock and such other Parity Dividend Stock bear to each other. Except
as limited by the previous sentence, the Series B Preferred Stock shall be
Parity Dividend Stock for all purposes herein.
(d) The restrictions contained in this Section 4 shall not be deemed
to restrict repurchases of capital stock of the Corporation from employees or
consultants pursuant to employee stock option plans and the conversion of
capital stock of the Corporation into, or the exchange of capital stock of the
Corporation for, Junior Dividend Stock.
(e) Holders of shares of Series C Preferred Stock called for
redemption on a redemption date falling between a dividend payment record date
and the associated dividend payment date shall, in lieu of receiving such
dividend on the dividend payment date fixed therefor, receive such dividend
payment together with all other accrued and unpaid dividends on the date fixed
for redemption (unless such holders convert such shares to Common Stock pursuant
to Section 9 hereof).
4
<PAGE>
(f) Any reference to "distribution" contained in this Section 4 shall
not be deemed to include any stock dividend or distributions made in connection
with any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary.
SECTION 5. Liquidation Preference. (a) In the event of a
----------------------
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of shares of Series C Preferred Stock shall be entitled
to receive out of the assets of the Corporation, whether such assets are stated
capital or surplus of any nature, an amount equal to the dividends accrued and
unpaid thereon to the date of final distribution to such holders, whether or not
declared, without interest, and a sum equal to $50.00 per share, and no more,
before any payment shall be made or any assets distributed to the holders of
Common Stock or any other class or series of capital stock ranking junior to the
Series C Preferred Stock as to a liquidation, dissolution or winding up of the
Corporation ("Junior Liquidation Stock"). No full preferential payment on
account of any liquidation, dissolution or winding up of the Corporation shall
be made to the holders of any class or series of capital stock ranking on parity
with the Series C Preferred Stock in the event of a liquidation, dissolution or
winding up of the Corporation ("Parity Liquidation Stock") unless there shall
likewise be paid at the same time to the holders of the Series C Preferred Stock
the full amounts to which the holders of all outstanding shares of Series C
Preferred Stock are entitled with respect to such distribution. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of the shares
of Series C Preferred Stock and any shares of Parity Liquidation Stock shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments, then such assets, or the proceeds thereof, shall be distributed among
the holders of shares of Series C Preferred Stock and of any shares of Parity
Liquidation Stock ratably in accordance with the full respective preferential
amounts that would be payable on such shares of Series C Preferred Stock and
such shares of Parity Liquidation Stock if all amounts payable thereon were paid
in full. Neither a consolidation or merger of the Corporation with another
entity nor a sale or transfer of all or part of the Corporation's assets for
cash, securities or other property will be considered a liquidation, dissolution
or winding up of the Corporation. The Series B Preferred Stock shall be Parity
Liquidation Stock for purposes of this Section 5(a).
(b) Written notice of any liquidation, dissolution or winding up of
the Corporation, stating the payment date or dates when the place or places
where the amounts distributable in such circumstances shall be payable, shall be
given by first class mail, postage prepaid, not less than 30 days prior to any
payment date stated therein, to the holders of record of the Series C Preferred
Stock at their respective addresses as the same shall appear on the stock books
of the Transfer Agent.
SECTION 6. Voting Rights. (a) Except as herein provided or as
-------------
otherwise required by law, holders of Series C Preferred Stock shall have no
voting rights. Whenever, at any time or times, dividends payable on the shares
of Series C Preferred Stock at the time outstanding shall be cumulatively in
arrears for such number of dividend periods that shall in the aggregate contain
not less than 540 days, the holders of all outstanding shares of Series C
Preferred Stock and any shares of Parity Dividend Stock upon which like voting
rights have been conferred and are exercisable (the Series C Preferred Stock and
any such Parity Dividend Stock, collectively for purposes of this Section 6, the
"Defaulted Preferred Stock"), shall be entitled to
5
<PAGE>
elect two directors of the Corporation at the Corporation's next annual meeting
of shareholders and at each subsequent annual meeting of shareholders; provided,
--------
however, the shares of Defaulted Preferred Stock shall be entitled to exercise
- -------
their voting rights at a special meeting of the holders of shares of Defaulted
Preferred Stock as set forth in paragraphs (b) and (c) of this Section 6. At
elections for such directors, each holder of Series C Preferred Stock shall be
entitled to one vote for each share held (the holders of shares of any other
series of Defaulted Preferred Stock ranking on such a parity being entitled to
such number of votes, if any, for each share of stock held as may be granted to
them). Upon the vesting of such right of the holders of Defaulted Preferred
Stock, the maximum authorized number of members of the Board of Directors shall
automatically be increased by two and the two vacancies so created shall be
filled by vote of the holders of outstanding Defaulted Preferred Stock as
hereinafter set forth. The right of holders of Defaulted Preferred Stock, voting
separately as a class without regard to series, to elect members of the Board of
Directors as aforesaid shall continue until such time as all dividends
accumulated and unpaid on Defaulted Preferred Stock shall have been paid or
declared and funds set aside for payment in full, at which time such right shall
terminate, except as herein or by law expressly provided, subject to revesting
in the event of each and every subsequent default of the character above
mentioned.
(b) Whenever such voting right shall have vested, such right may be
exercised initially either at a special meeting of the holders of shares of
Defaulted Preferred Stock called as hereinafter provided, or at any annual
meeting of shareholders held for the purpose of electing directors, and
thereafter at such meeting or by the written consent of such holders pursuant to
Section 14-2-704 of the Georgia Business Corporation Code.
(c) At any time when such voting right shall have vested in the
holders of shares of Defaulted Preferred Stock entitled to vote thereon, and if
such right shall not already have been initially exercised, an officer of the
Corporation shall, upon the written request of 10% of the holders of record of
shares of such Defaulted Preferred Stock then outstanding, addressed to the
Secretary of the Corporation, call a special meeting of holders of shares of
such Defaulted Preferred Stock. Such meeting shall be held at the earliest
practicable date upon the notice required for special meetings of shareholders
at the place for holding annual meetings of shareholders of the Corporation or,
if none, at a place designated by the Secretary of the Corporation. If such
meeting shall not be called by the proper officers of the Corporation within 30
days after the personal service of such written request upon the Secretary of
the Corporation, or within 30 days after mailing the same within the United
States, by registered mail, addressed to the Secretary of the Corporation at its
principal office (such mailing to be evidenced by the registry receipt issued by
the postal authorities), then the holders of record of 10% of the shares of
Defaulted Preferred Stock then outstanding may designate in writing any person
to call such meeting at the expense of the Corporation, and such meeting may be
called by such person so designated upon the notice required for special
meetings of shareholders and shall be held at the same place as is elsewhere
provided in this paragraph. Any holder of shares of Defaulted Preferred Stock
then outstanding that would be entitled to vote at such meeting shall have
access to the stock books of the Transfer Agent for the purpose of causing a
meeting of shareholders to be called pursuant to the provisions of this
paragraph. Notwithstanding the provisions of this
6
<PAGE>
paragraph, however, no such special meeting shall be called or held during a
period within 45 days immediately preceding the date fixed for the next annual
meeting of shareholders.
(d) Subject to the provisions hereof, the directors elected pursuant
to this Section shall serve until the next annual meeting or until their
respective successors shall be elected and qualified. Any director elected by
the holders of Defaulted Preferred Stock may be removed by, and shall not be
removed otherwise than by, the vote of the holders of a majority of the
outstanding shares of the Defaulted Preferred Stock who were entitled to
participate in such election of directors, voting as a separate class without
regard to series, at a meeting called for such purpose or by written consent as
permitted by law and the Articles of Incorporation and Bylaws of the
Corporation. If the office of any director elected by the holders of Defaulted
Preferred Stock, voting as a class, without regard to series, becomes vacant by
reason of death, resignation, retirement, disqualification or removal from
office or otherwise, the remaining director elected by the holders of Defaulted
Preferred Stock, voting as a class, without regard to series, may choose a
successor who shall hold office for the unexpired term in respect of which such
vacancy occurred. Upon any termination of the right of the holders of Defaulted
Preferred Stock to vote for directors as herein provided, the term of office of
all directors then in office elected by the holders of Defaulted Preferred
Stock, voting as a class, without regard to series, shall terminate immediately.
Whenever the terms of office of the directors elected by the holders of
Defaulted Preferred Stock, voting as a class, without regard to series, shall so
terminate and the special voting powers vested in the holders of Defaulted
Preferred Stock shall have expired, the number of directors shall be such number
as may be provided for in the Bylaws irrespective of any increase made pursuant
to the provisions of this Section 6.
(e) So long as any shares of the Series C Preferred Stock remain
outstanding and in addition to any other vote required by law, the vote or
consent of the holders of at least a majority of the shares of Series C
Preferred Stock then outstanding given in person or by proxy either in writing
(as permitted by law and the Articles of Incorporation and Bylaws of the
Corporation) or at any special or annual meeting, shall be necessary to permit,
effect or validate any one or more of the following:
(i) the creation or issuance, or any increase in the authorized
number of shares of any class or series of stock ranking prior to the
Series C Preferred Stock either as to dividends ("Senior Dividend Stock")
or upon liquidation, dissolution or winding up of the Corporation ("Senior
Liquidation Stock"), or any security convertible into or exercisable or
exchangeable for Senior Dividend Stock or Senior Liquidation Stock; or
(ii) the amendment, alteration or repeal of any of the provisions
of the Articles of Incorporation of the Corporation (including this Exhibit
D) that would adversely affect any right, preference, privilege or voting
power of the Series C Preferred Stock; provided, however, that any increase
-------- -------
in the amount of authorized preferred stock or the creation and issuance of
other series of Parity Dividend Stock, Parity Liquidation Stock, Junior
Dividend Stock or Junior Liquidation Stock shall not be deemed to affect
adversely such rights, preferences or voting powers.
7
<PAGE>
SECTION 7. Optional Redemption. (a) The Corporation at its option
-------------------
may redeem shares of Series C Preferred Stock out of funds legally available for
the purpose, in whole or in part, at any time, at the redemption prices per
share referred to below in effect on the date fixed for redemption (the
"Redemption Date") during the period beginning on October 15 of the years shown
below, plus an amount equal to the dividends accrued and unpaid on the shares of
Series C Preferred Stock to be redeemed, whether or not declared, to the
Redemption Date:
If Redeemed During The 12-Month
Period Beginning October 15, Redemption Price Per Share
- --------------------------------- --------------------------
1998................... $51.00
1999................... $50.75
2000................... $50.50
2001................... $50.25
2002 and thereafter.... $50.00
(b) In the event the Corporation shall redeem shares of Series C
Preferred Stock, a notice of such redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each holder of record of the shares to be redeemed, at such
holder's address as the same appears on the stock books of the Transfer Agent.
Each such notice shall state: (i) the Redemption Date; (ii) the number of
shares of Series C Preferred Stock to be redeemed and, if less than all the
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the redemption price; (iv) the place or places
where certificates for such shares are to be surrendered for payment of the
redemption price; (v) that payment will be made upon presentation and surrender
of certificates evidencing such Series C Preferred Stock; (vi) the then current
conversion price and the date on which the right to convert such shares of
Series C Preferred Stock will expire; (vii) that dividends on the shares to be
redeemed shall cease to accrue following such Redemption Date; (viii) that such
redemption is at the option of the Corporation; and (ix) that dividends accrued
to and including the Redemption Date will be paid as specified in said notice.
Notice having been mailed as aforesaid, on and after the Redemption Date, unless
the Corporation shall be in default in providing money for the payment of the
redemption price (including an amount equal to any accrued and unpaid dividends
to and including the Redemption Date), (x) dividends on the shares of the Series
C Preferred Stock so called for redemption shall cease to accrue, (y) said
shares shall be deemed no longer outstanding, and (z) all rights of the holders
thereof as shareholders of the Corporation (except the right to receive from the
Corporation the monies payable upon redemption, without interest thereon, upon
surrender of the certificates evidencing such shares) shall cease. The
Corporation's obligation to provide monies in accordance with the preceding
sentence shall be deemed fulfilled if, on or before the Redemption Date, the
Corporation shall deposit with a bank or trust company having an office or
agency in the Borough of Manhattan, City of New York, and having a capital and
surplus of at least $50,000,000, the principal amount of funds necessary for
such redemption, in trust for the account of the holders of the shares to be
redeemed (and so as to be and continue to be available therefor), with
irrevocable instructions and authority to such bank or trust company
8
<PAGE>
that such funds be applied to the redemption of the shares of Series C Preferred
Stock so called for redemption. Any interest accrued on such funds shall be paid
to the Corporation from time to time. Any funds so deposited and unclaimed at
the end of three years from such Redemption Date shall be released or repaid to
the Corporation, after which, subject to any applicable laws relating to escheat
or unclaimed property, the holder or holders of such shares of Series C
Preferred Stock so called for redemption shall look only to the Corporation for
payment of the redemption price.
Upon surrender in accordance with said notice of the certificates for
any such shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the applicable redemption price
aforesaid. If fewer than all the outstanding shares of Series C Preferred Stock
are to be redeemed, shares to be redeemed shall be selected by the Corporation
from outstanding shares of Series C Preferred Stock not previously called for
redemption by lot or pro rata or by any other equitable method determined by the
Board of Directors in its sole discretion. If fewer than all the shares
represented by any certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder thereof.
Notwithstanding the foregoing, if the Corporation's notice of
redemption has been given pursuant to this Section 7 and any holder of shares of
Series C Preferred Stock shall, prior to the close of business on the third
Business Day preceding the Redemption Date, give written notice to the
Corporation pursuant to this Section 7(b) hereof of the conversion of any or all
of the shares to be redeemed held by such holder (accompanied by a certificate
or certificates for such shares, duly endorsed or assigned to the Corporation),
then the conversion of such shares to be redeemed shall become effective as
provided in Section 9.
(c) The election by the Corporation to redeem shares of Series C
Preferred Stock pursuant to Section 7(b) hereof shall become irrevocable only on
the relevant Redemption Date.
SECTION 8. Exchange. (a) In addition to the optional redemption
--------
rights of the Corporation as set forth in Section 7 above, the Corporation shall
have the right to exchange the Series C Preferred Stock in whole, but not in
part, on any dividend payment date for the Corporation's 4.5% Convertible
Subordinated Debentures due 2003 (the "Debentures") to be issued substantially
in the form set forth in the indenture (the "Debenture Indenture") [filed as an
exhibit to the Corporation's Registration Statement on Form S-4, Registration
No. 333-__________, filed with the Securities and Exchange Commission on August
17, 1999.
(b) No such exchange shall be made unless all dividends accrued and
payable on the Series C Preferred Stock have been paid or declared and such
amount set aside for their payment prior to the date fixed for such exchange
(the "Exchange Date"). Holders of outstanding shares of Series C Preferred
Stock will be entitled to receive $50.00 principal amount of Debentures in
exchange for each share of Series C Preferred Stock held by them at the time of
exchange; provided that the Debentures will be issuable in denominations of
--------
$1,000.00 and integral multiples thereof. If the exchange results in an amount
of Debentures that is not an
9
<PAGE>
integral multiple of $1,000.00, the amount exceeding the closest integral
multiple of $1,000.00 will be paid in cash by the Corporation.
(c) Notice of such exchange of shares of Series C Preferred Stock
shall be mailed at least 30 days but not more than 60 days prior to the Exchange
Date to each holder of Series C Preferred Stock, at such holder's address as it
appears on the books of the Corporation. The notice shall specify the Exchange
Date and the place where certificates for shares of Series C Preferred Stock are
to be surrendered for Debentures and shall state that dividends on Series C
Preferred Stock will cease to accrue on the Exchange Date.
(d) Prior to giving notice of intention to exchange pursuant to
subsection 8(c) above, the Corporation and a bank or trust company selected by
the Corporation shall execute and deliver an indenture substantially in the form
of the Debenture Indenture with such changes as may be required by law, stock
exchange rule, or usage that do not materially and adversely affect the rights
of the holders of the Debentures (the "Indenture"). Prior to any exchange of
shares of Series C Preferred Stock pursuant to subsection 8(a) above, any
amendments or supplements to the Indenture which materially and adversely affect
the rights of the holders of the Debentures shall be consented to by the holders
of more than 50 percent of the then outstanding shares of Series C Preferred
Stock. A copy of the Indenture may be inspected by the holders of any shares of
Series C Preferred Stock at the offices of the Corporation during normal
business hours. The Corporation will not give notice of its intention to
exchange pursuant to subsection 8(c) above unless it shall file at the office or
agency of the Corporation maintained for the exchange of shares of Series C
Preferred Stock an opinion of counsel that the Indenture has been duly
authorized, executed and delivered by the Corporation, has been duly qualified
under the Trust Indenture Act of 1939 (or that such qualification is not
necessary) and constitutes a valid and binding instrument enforceable against
the Corporation in accordance with its terms (subject to bankruptcy, insolvency,
reorganization or other laws of general applicability relating to or affecting
creditors' rights and to the general principles of equity; and subject to such
other qualifications as are then customarily contained in opinions of counsel
experienced in such matters); and to the effect that the Debentures have been
duly authorized and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered in exchange for the shares of Series C
Preferred Stock, will constitute valid and binding obligations of the
Corporation entitled to the benefits of the Indenture (subject as aforesaid);
and that under the laws of the State of Georgia, the Debentures will be treated
as on a parity with the indebtedness of the Corporation to its general unsecured
creditors, except to the extent subordinated in the Indenture; and that the
exchange of Debentures for the Series C Preferred Stock will not violate the
laws of the State of Georgia; and that neither the execution and delivery of the
Indenture or the Debentures nor compliance with the terms, conditions or
provisions of such instruments will result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust or other agreement or instrument, known to such counsel,
to which the Corporation or any of its subsidiaries is a party or by which it or
any of them is bound, or any decree, judgment, order, rule or regulations known
to counsel, of any court or governmental agency or body having jurisdiction over
the Corporation and such subsidiaries or any of their property; and that
issuance of the Debentures in exchange for the shares of Series C
10
<PAGE>
Preferred Stock is exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act").
(e) If on the Exchange Date the Corporation has taken all action
required to authorize the issuance of the Debentures in exchange for the Series
C Preferred Stock, then, notwithstanding that the certificates for such shares
have not been surrendered for cancellation, from and after the Exchange Date,
all of the shares of Series C Preferred Stock shall no longer be deemed
outstanding and all rights relating to such shares shall terminate, except only
the right to receive dividends accrued and unpaid to the Exchange Date and, upon
surrender of certificates therefor, the right to receive the Debentures, and the
person or persons entitled to receive the Debentures issuable upon the exchange
shall be treated for all purposes as the registered holder or holders of such
Debentures. Upon due surrender of a certificate representing shares of Series C
Preferred Stock, the holder thereof shall receive the principal amount of
Debentures to which such holder is thereby entitled plus any amounts of cash
which may be due hereunder.
(f) The election of the Corporation to exchange the Series C Preferred
Stock for the Debentures shall become irrevocable only on the Exchange Date.
SECTION 9. Conversion at Option of Holder. (a) Each share of Series
------------------------------
C Preferred Stock may be converted, at any time and at the option of the holder,
into fully paid, non-assessable shares of Common Stock of the Corporation on and
subject to the terms and conditions of this Section 9.
(b) The number of shares of Common Stock issuable upon conversion of
each share of the Series C Preferred Stock shall be equal to the quotient
obtained by dividing (i) $50.00 by (ii) the Conversion Price (as hereinafter
defined) in effect on the date of conversion (calculated as to each conversion
to the nearest 1/100th of a share). The Conversion Price shall initially equal
(i) $45.00 divided by (ii) the exchange ratio applicable to the common stock,
par value $.01 per share, of SkyTel, in the merger of SkyTel with and into
Empire Merger Inc., a wholly owned subsidiary of the Corporation; provided,
--------
however, that such Conversion Price shall be adjusted and readjusted from time
- -------
to time as provided in this Section 9 and, as so adjusted and readjusted, shall
remain in effect until a further adjustment or readjustment thereof is required
by this Section 9.
(c) Except as may be provided by the Board of Directors, upon
conversion of the Series C Preferred Stock, the Corporation is not obligated to
make any payment or adjustment with respect to dividends accrued on the Series C
Preferred Stock through the date of conversion unless the holder of the shares
of Series C Preferred Stock being converted was the record holder of such shares
on the record date for the payment of such dividends.
(d) Upon surrender to the Corporation at the office of the Transfer
Agent or such other place or places, if any, as the Board of Directors may
determine, of certificates duly endorsed to the Corporation or in blank for
shares of Series C Preferred Stock to be converted together with appropriate
evidence of the payment of any transfer or similar tax, if required, and written
instructions to the Corporation requesting conversion of such shares and
specifying the name and address of the person, corporation, firm or other entity
to whom such shares of
11
<PAGE>
Common Stock are to be issued, the Corporation shall issue (i) the number of
full shares of Common Stock issuable upon conversion thereof as of the time of
such surrender and as promptly as practicable thereafter will deliver
certificates for such shares of Common Stock, and (ii) cash for any remaining
fraction of a share of Common Stock in an amount equaling the Current Market
Price (as hereinafter defined) on the date such shares are tendered for
conversion. Upon surrender of a certificate representing shares of Series C
Preferred Stock to be converted in part, in addition to the foregoing, the
Corporation shall also issue to such holder a new certificate representing any
unconverted shares of Series C Preferred Stock represented by the certificate
surrendered for conversion.
(e) The Corporation shall pay all documentary, stamp, or similar issue
or transfer tax due on the issue of shares of Common Stock issuable upon
conversion of the Series C Preferred Stock; provided, however, that the holder
-------- -------
of shares of Series C Preferred Stock so converted shall pay any such tax which
is due because such shares are to be issued in the name other than that of such
holder.
(f) The Conversion Price in effect at any time shall be adjusted as
follows:
(i) If the Corporation shall, at any time or from time to time,
effect a subdivision of the outstanding Common Stock, the Conversion Price
in effect immediately before such subdivision shall be proportionately
decreased and, conversely, if the Corporation shall, at any time or from
time to time, effect a combination of the outstanding Common Stock, the
Conversion Price in effect immediately before such combination shall be
proportionately increased. Any adjustment under this subsection shall
become effective at the close of business on the record date fixed for the
applicable subdivision or combination.
(ii) In the event the Corporation shall, at any time or from time
to time, make or issue to all holders of shares of Common Stock (or fix a
record date for the determination of holders of Common Stock entitled to
receive) a dividend or other distribution payable in shares of Common
Stock, then the Conversion Price then in effect shall be decreased as of
the time of such issuance (or, in the event such a record date shall have
been fixed, as of the close of business on such record date) in accordance
with the following formula:
O
-------
C* = C x O + N
where:
C* = the adjusted Conversion Price.
C = the current Conversion Price.
O = the number of shares of Common Stock outstanding immediately
prior to the applicable issuance (or the close of business on
the record date).
12
<PAGE>
N = the number of additional shares of Common Stock issued in
payment of such dividend of distribution.
(iii) In the event the Corporation shall, at any time or from
time to time, issue or sell (or be deemed pursuant to Section 9(g) hereto
to have issued or sold) to all holders of shares of Common Stock any shares
of Common Stock for a consideration per share that is less than the Current
Market Price immediately prior to such issuance or sale (or deemed issuance
or sale), then the Conversion Price then in effect shall be decreased as of
the time of such issuance or sale (or deemed issuance or sale) in
accordance with the following formula:
NxP
---
C* = C x O + M
-------
O+N
where:
C* = the adjusted Conversion Price.
C = the current Conversion Price.
O = the number of shares of Common Stock outstanding on the date of
the applicable issuance or sale (or deemed issuance or sale).
N = the number of additional shares of Common Stock issued or sold
(or deemed issued or sold).
P = the aggregate consideration per share received and/or to be
received for each additional share of Common Stock issued or
sold (or deemed issued or sold).
M = the Current Market Price per share of Common Stock.
(g) For purposes of determining the adjusted Conversion Price under
Section 9(f), the following principles shall be applicable:
(i) If the Corporation in any manner grants to all holders of
shares of Common Stock any rights or options (collectively, "Options") to
subscribe for or to purchase Common Stock or other securities convertible
into or exercisable or exchangeable for Common Stock (collectively,
"Convertible Securities") and the aggregate consideration payable with
respect to the issuance of such Options and with respect to the later
conversion, exercise or exchange thereof for Common Stock is less than the
Current Market Price in effect immediately prior to the granting of such
Options, then the maximum number of shares of Common Stock issuable upon
the exercise of such Options (and, if appropriate, upon the subsequent
conversion, exercise or exchange of such Convertible Securities) shall be
deemed to be outstanding and such Options shall
13
<PAGE>
be deemed to have been issued and sold for an aggregate consideration per
share determined by dividing (A) the aggregate amount received or
receivable by the Corporation as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options (and, if
appropriate, the minimum aggregate amount of additional consideration
payable upon the conversion, exercise or exchange of such Convertible
Securities), by (B) the maximum number of shares of Common Stock issuable
upon the exercise of all such Options (and, if appropriate, upon the
conversion, exercise or exchange of such Convertible Securities). No
further adjustment of the Conversion Price shall be made when Common Stock
or Convertible Securities are issued upon the exercise of such Options or
when Common Stock is issued upon the conversion, exercise or exchange of
such Convertible Securities.
(ii) If the Corporation in any manner issues to all holders of
shares of Common Stock any rights to subscribe for or to purchase
Convertible Securities and the aggregate consideration for which Common
Stock is issuable upon the conversion, exercise or exchange of such
Convertible Securities is less than the Current Market Price in effect
immediately prior to the issuance of such Convertible Securities, then the
maximum number of shares of Common Stock issuable upon the conversion,
exercise or exchange of such Convertible Securities shall be deemed to be
outstanding and such Convertible Securities shall be deemed to have been
issued and sold for an aggregate consideration per share determined by
dividing (A) the aggregate amount received or receivable by the Corporation
as consideration for the issuance of such Convertible Securities, plus the
minimum aggregate amount of additional consideration payable to the
Corporation upon the conversion, exercise or exchange of all such
Convertible Securities, by (B) the maximum number of shares of Common Stock
issuable upon the conversion, exercise or exchange of such Convertible
Securities. No further adjustment of the Conversion Price shall be made
when Common Stock is issued upon the conversion, exercise or exchange of
such Convertible Securities.
(iii) If the purchase price provided for in any Options, the
additional consideration, if any, payable upon the conversion or exchange
of any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock change at
any time, and such change is not due solely to the operation of anti-
dilution provisions similar in nature to those set forth in this Section 9,
then the Conversion Price in effect at the time of such change shall be
readjusted to the Conversion Price which would have been in effect at such
time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued
or sold.
(iv) Upon the expiration of any Option or the termination of any
right to convert, exercise or exchange any Convertible Securities without
the conversion, exercise or exchange of any such Option or right, the
Conversion Price then in effect hereunder will be adjusted to the
Conversion Price which would have been in effect at the
14
<PAGE>
time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(v) If any Common Stock, Options or Convertible Securities are
issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net amount
received by the Corporation therefor. In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than
cash, the amount of such consideration other than cash received by the
Corporation will be the fair value of such consideration, as determined in
good faith by the Board of Directors.
(vi) If Common Stock, Options or Convertible Securities are
issued or sold or deemed to have been issued or sold together with other
stock or securities or other assets of the Corporation for a consideration
that covers both, the consideration received by the Corporation for any
Common Stock, Options or Convertible Securities shall be computed as the
portion of the consideration so received that may be reasonably determined
in good faith by the Board of Directors to be allocable to such Common
Stock, Options or Convertible Securities, as the case may be.
(vii) Anything herein to the contrary notwithstanding, no
adjustment will be made to the Conversion Price by reason of (A) the
issuance of Common Stock, Options or Convertible Securities to employees or
directors of the Corporation pursuant to employee benefit plans or
otherwise, or the issuance of Common Stock upon the conversion, exercise or
exchange thereof, (B) the issuance of Common Stock upon the conversion,
exercise or exchange of Options or Convertible Securities issued and
outstanding on the date these Articles of Amendment are filed with the
Secretary of State of the State of Georgia, (C) the issuance of any
securities pursuant to and in accordance with the Rights Agreement dated
August 25, 1996 between the Corporation and The Bank of New York, as
amended (or any successor agreement), or (D) the issuance of Common Stock
upon the conversion of the Series C Preferred Stock.
(h) For purposes of this Exhibit D, the term "Current Market Price"
per share of Common Stock on any date shall be deemed to be the average daily
Closing Prices of the Common Stock for the 30 consecutive trading days
commencing 45 trading days before such date. The "Closing Price" for each
trading day shall be the last reported sales price regular way or, in case no
sale takes place on such day, the average of the closing bid and asked prices
regular way on such day, in either case as reported on the principal national
securities exchange (which for this purpose shall include The Nasdaq National
Market System ("NASDAQ/NMS")) on which the Common Stock is listed or admitted
for trading, or if not listed or admitted to trading on any national securities
exchange, the average of the high bid and low asked prices on such day as
reported by the National Association of Securities Dealers, Inc. through the
National Association of Securities Dealers Automated Quotation system
("NASDAQ"), or if the National Association of Securities Dealers, Inc. through
NASDAQ shall not have reported any bid and asked prices for the Common Stock on
such day, the average of the bid and asked prices for such day as furnished by
any New York Stock Exchange member firm selected from time to time by
15
<PAGE>
the Corporation for such purpose, or if no such bid and asked prices can be
obtained from any such firm, the fair market value of one share of the Common
Stock on such day as determined in good faith by the Board of Directors.
(i) No adjustment in the Conversion Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the
Conversion Price; provided, however, that any adjustments that are not made
-------- -------
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 9 shall be made either to the nearest cent
or to the nearest 1/100th of a share.
(j) No adjustment need be made for a change in the par value of the
Common Stock.
(k) Whenever the Conversion Price is adjusted, the Corporation shall
promptly mail to holders of Series C Preferred Stock a notice of adjustment
briefly stating the facts requiring the adjustment and the manner of computing
it.
(l) In case of any consolidation or merger of the Corporation with any
other entity (other than a wholly-owned subsidiary of the Corporation), or in
the case of any sale or transfer of all or substantially all of the assets of
the Corporation, or in the case of any share exchange pursuant to which all of
the outstanding shares of Common Stock are converted into other securities or
property, the Corporation shall make appropriate provision or cause appropriate
provision to be made so that holders of each share of Series C Preferred Stock
then outstanding shall have the right thereafter to convert such share of Series
C Preferred Stock into the kind and amount of shares of stock and other
securities and property receivable upon such consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
into which such share of Series C Preferred Stock might have been converted
immediately prior to the effective date of such consolidation, merger, sale,
transfer or share exchange. If in connection with any such consolidation,
merger, sale, transfer or share exchange, each holder of shares of Common Stock
is entitled to elect to receive either securities, cash or other assets upon
completion of such transaction, the Corporation shall provide or cause to be
provided to each holder of Series C Preferred Stock the right to elect to
receive the securities, cash or other assets into which the Series C Preferred
Stock held by such holder shall be convertible after completion of any such
transaction on the same terms and subject to the same conditions applicable to
holders of the Common Stock (including, without limitation, notice of the right
to elect, limitations on the period in which such election shall be made and the
effect of failing to exercise the election). The Corporation shall not effect
any such transaction unless the provisions of this paragraph have been
fulfilled. The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers or share exchanges.
(m) The Corporation shall reserve and at all times keep available,
free from preemptive rights, out of its authorized but unissued stock, for the
purpose of effecting the conversion of the Series C Preferred Stock, such number
of its shares of duly authorized Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series C
Preferred Stock.
16
<PAGE>
SECTION 10. Redemption Upon Fundamental Change. (a) If a Fundamental
----------------------------------
Change (as defined in paragraph (c) of this Section 10) occurs, each holder of
Series C Preferred Stock shall have the right, at the holder's option, to
require the Corporation to repurchase all of such holder's Series C Preferred
Stock, or any portion thereof that has an aggregate liquidation value that is a
multiple of $50.00, on the date (the "Repurchase Date") selected by the
Corporation that is not less than ten nor more than 20 days after the Final
Surrender Date (as defined in paragraph (b) of this Section 10), at a price per
share equal to $50.00, plus an amount equal to accrued and unpaid dividends to
the Repurchase Date. The Corporation may, at its option, pay all or any portion
of the repurchase price upon a Fundamental Change in shares of Common Stock of
the Corporation or any successor corporation. For purposes of calculating the
number of shares of common stock issuable upon such redemption, the value of any
such common stock shall be equal to the average of the Closing Prices of such
common stock for the five Trading Dates ending on the third Trading Date
immediately preceding the Repurchase Date. Payment may not be made in shares of
common stock unless such shares (i) have been, or will be, registered on or
prior to the Final Surrender Date (as defined in paragraph (b) of this Section
10) under the Securities Act or are freely tradable pursuant to an exemption
thereunder and (ii) are listed on a United States national securities exchange
or quoted through the NASDAQ/NMS at the time of payment.
(b) Within 30 days after the occurrence of a Fundamental Change, the
Corporation must mail to all holders of record of the Series C Preferred Stock a
notice containing the information set out in paragraph (b) of Section 7, except
that, for purposes of this Section 10 only, instead of stating that such
redemption is at the option of the Corporation, the notice shall describe the
occurrence of such Fundamental Change and of the repurchase right arising as a
result thereof. The Corporation must cause a copy of such notice to be
published in a daily newspaper of national circulation (which shall be The Wall
Street Journal, if then in circulation). At least two Business Days prior to
the Repurchase Date, the Corporation must publish a similar notice stating
whether and to what extent the repurchase price will be paid in cash or shares
of common stock. To exercise the repurchase right, a holder of Series C
Preferred Stock must surrender, on or before the date that is, subject to any
contrary requirements of applicable law, 60 days after the date of mailing of
the applicable notice (the "Final Surrender Date"), the certificates
representing the Series C Preferred Stock with respect to which the right is
being exercised, duly endorsed for transfer to the Corporation, together with a
written notice of election.
(c) The term "Fundamental Change" shall mean either of the following:
(i) a "person" or "Group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) becoming, in one transaction or a series of related
transactions, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of Voting Shares (as defined in this paragraph (c)) of the
Corporation entitled to exercise more than 50% of the total voting power of
all outstanding Voting Shares of the Corporation (including any Voting
Shares that are not then outstanding of which such person or Group is
deemed the beneficial owner); or
17
<PAGE>
EXHIBIT 4.6
- --------------------------------------------------------------------------------
MCI WORLDCOM, INC.
AND
________________________
Trustee
_______________
Indenture
Dated as of __________
____________
4.5% Convertible Subordinated Debentures
due 2003
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE........................ 3
SECTION 1.1. Definitions................................................... 3
SECTION 1.2. Other Definitions............................................. 6
SECTION 1.3. Incorporation by Reference of Trust Indenture Act............. 6
SECTION 1.4. Rules of Construction......................................... 7
ARTICLE 2 THE DEBENTURES.................................................... 8
SECTION 2.1. Form and Dating............................................... 8
SECTION 2.2. Execution and Authentication.................................. 8
SECTION 2.3. Registrar, Paying Agent and Conversion Agent.................. 8
SECTION 2.4. Paying Agent to Hold Money in Trust........................... 9
SECTION 2.5. Debentureholder Lists......................................... 9
SECTION 2.6. Transfer and Exchange......................................... 9
SECTION 2.7. Replacement Debentures........................................ 9
SECTION 2.8. Outstanding Debentures........................................ 10
SECTION 2.9. Treasury Debentures........................................... 10
SECTION 2.10. Temporary Debentures......................................... 10
SECTION 2.11. Cancellation................................................. 10
SECTION 2.12. Defaulted Interest........................................... 10
ARTICLE 3 REDEMPTION........................................................ 12
SECTION 3.1. Notice to Trustee............................................. 12
SECTION 3.2. Selection of Debentures to be Redeemed........................ 12
SECTION 3.3. Notice of Redemption.......................................... 12
SECTION 3.4. Effect of Notice of Redemption................................ 13
SECTION 3.5. Deposit of Redemption Price................................... 13
SECTION 3.6. Debentures Redeemed in Part................................... 13
ARTICLE 4 CONVERSION........................................................ 13
SECTION 4.1. Conversion Privilege.......................................... 13
SECTION 4.2. Conversion Procedure.......................................... 13
SECTION 4.3. Fractional Shares............................................. 14
SECTION 4.4. Taxes on Conversion........................................... 14
SECTION 4.5. Company to Provide Stock...................................... 14
SECTION 4.6. Adjustment of Conversion Price................................ 14
SECTION 4.7. No Adjustment................................................. 16
SECTION 4.8. Equivalent Adjustments........................................ 16
SECTION 4.9. Adjustments for Tax Purposes.................................. 17
SECTION 4.10. Notice of Adjustment......................................... 17
SECTION 4.11. Notice of Certain Transactions............................... 17
SECTION 4.12. Effect of Reclassifications, Consolidations, Mergers
or Sales on Conversion Privilege........................................... 17
SECTION 4.13. Trustee's Disclaimer......................................... 18
SECTION 4.14. Voluntary Reduction.......................................... 18
ARTICLE 5 SUBORDINATION..................................................... 19
SECTION 5.1. Debentures Subordinated to Senior Indebtedness................ 19
SECTION 5.2. Debentures Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation, Reorganization, etc. of
the Company................................................................ 19
SECTION 5.3. Debentureholders to be Subrogated to Right of Holders
of Senior Indebtedness..................................................... 20
SECTION 5.4. Obligations of the Company Unconditional...................... 20
SECTION 5.5. Company Not to Make Payment with Respect to the
Debentures in Certain Circumstances........................................ 21
SECTION 5.6. Trustee Entitled to Assume Payments Not Prohibited
in Absence of Notice....................................................... 22
SECTION 5.7. Application by Trustee of Monies Deposited with It............ 22
SECTION 5.8. Subordination Rights Not Impaired by Acts or
Omissions of Company or Holders of Senior Indebtedness..................... 22
-i-
<PAGE>
CROSS-REFERENCE TABLE
Indenture
TIA Section Section
(S) 310 (a)(1).............. 9.10
(a)(2)..................... 9.10
(a)(3)..................... N.A.
(a)(4)..................... N.A.
(a)(5)..................... 9.10
(b)........................ 9.8; 9.10
(c)........................ N.A.
(S) 311 (a)................. 9.11
(b)........................ 9.11
(c)........................ N.A.
(S) 312 (a)................. 2.5
(b)........................ 12.3
(c)........................ 12.3
(S) 313 (a)................. 9.6
(b)(1)..................... N.A.
(b)(2)..................... 9.6
(c)........................ 9.6; 12.2
(d)........................ 9.6
(S) 314 (a)................. 6.2; 6.5; 12.3
(b)........................ N.A.
(c)(1)..................... 12.4(a)
(c)(2)..................... 12.4(a)
(c)(3)..................... N.A.
(d)........................ N.A.
(e)........................ 12.4(b)
(f)........................ N.A.
(S) 315 (a)................. 9.1(b)
(b)........................ 9.5; 12.2
(c)........................ 9.1(a)
(d)........................ 9.1(c)
(e)........................ 8.11
(S) 316 (a)(last sentence).. 2.9
(a)(1)(A).................. 8.5
(a)(1)(B).................. 8.4
(a)(2)..................... N.A.
(b)........................ 8.7
(c)........................ 12.5
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(S) 317 (a)(1).............. 8.8
(a)(2)..................... 8.9
(b)........................ 2.4
(S) 318 (a)................. 12.1
_______________
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
ii
<PAGE>
INDENTURE dated as of ______________________ between MCI WORLDCOM,
INC., a Georgia corporation (the "Company"), and ____________________, as
Trustee (the "Trustee").
Both parties agree as follows for the benefit of the other and for the
equal and ratable benefit of the registered holders of the Company's 4.5%
Convertible Subordinated Debentures due 2003.
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or Conversion Agent.
"Associate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as such Rule is in
effect on the date of this Indenture.
"Bank Credit Facilities" means (i) the Amended and Restated Facility A
Revolving Credit Agreement among the Company, NationsBank, N.A., NationsBanc
Montgomery Securities LLC, Bank of America NT & SA, Barclay Banks PLC, the Chase
Manhattan Bank, Citibank, N.A., Morgan Guaranty Trust Company of New York, and
Royal Bank of Canada and the lenders named therein dated as of August 6, 1998,
and (ii) the Amended and Restated 364-Day Revolving Credit Agreement and Term
Loan Agreement by and among the Company and Bank of America, N.A., Bank of
America Securities LLC, Barclays Bank PLC, The Chase Manhattan Bank, Citibank,
N.A., Morgan Guaranty Trust Company of New York, and Royal Bank of Canada and
the lenders named therein dated as of August 5, 1999, and as the same may be
further amended, supplemented or replaced from time to time.
"Bank Debt" means any and all amounts payable under or in respect of
the Bank Credit Facilities or any related agreement, including principal,
premium (if any), interest (including, without limitation, any interest accruing
subsequent to the filing of a petition or other action concerning bankruptcy or
other similar proceeding, whether or not constituting an allowed claim in any
such proceedings), fees, charges, expenses, reimbursement obligations,
guarantees and all other amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or
any authorized committee of the Board of Directors.
"Business Day" means a day that is not a Legal Holiday.
"Capitalized Lease Obligation" means indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles
and the amount of such indebtedness shall be the capitalized amount of such
obligations determined in accordance with such principles.
"Common Stock" means the common stock of the Company as it exists on
the date of this Indenture or as it may be constituted from time to time.
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<PAGE>
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Debentures" means the 4.5 % Convertible Subordinated Debentures due
2003 of the Company.
"default" means any event which is, or after notice or passage of
time, or both, would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Debt and (ii) any
other Senior Indebtedness issued or incurred in a single transaction in which
such Senior Indebtedness has an aggregate principal amount then outstanding of
$10,000,000 or more.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" or "Debentureholder" means the person in whose name a
Debenture is registered on the Registrar's books.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"NASDAQ National Market System" means The National Market System of
the National Association of Securities Dealers, Inc. Automated Quotation System.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Chief Financial Officer, the Treasurer, the Secretary or the
Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company;
provided, however, that for purposes of Section 6.5 "Officers' Certificate"
means a certificate signed by the principal executive officer, principal
financial officer or principal accounting officer of the Company.
"Opinion of Counsel" means a written opinion from outside legal
counsel who is acceptable to the Trustee.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Preferred Stock" means the 3,750,000 shares of Series C $2.25
Cumulative Convertible Exchangeable Preferred Stock of the Company as more fully
described in the Registration Statement.
"principal" of a debt security, including the Debentures, means the
principal of the security plus, when appropriate, the premium, if any, on the
security.
"redemption date," when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption pursuant to this Indenture,
as set forth in the form of Debenture annexed as Exhibit A hereto.
"redemption price," when used with respect to any Debenture to be
redeemed, means the price fixed for such redemption pursuant to this Indenture,
as set forth in the form of Debenture annexed as Exhibit A hereto.
"Registration Statement" means the Registration Statement on Form S-4
of the Company relating to the merger of SkyTel Communications, Inc., a Delaware
corporation, with a wholly owned subsidiary of the Company.
"SEC" or "Commission" means the Securities and Exchange Commission.
4
<PAGE>
"Senior Indebtedness" means (a) the principal of and premium, if any,
and interest (including, without limitation, any interest accruing subsequent to
the filing of a petition or other action concerning bankruptcy or other similar
proceedings, whether or not constituting an allowed claim in any such
proceedings) on the following, whether presently outstanding or hereafter
incurred or created: all indebtedness or obligations of the Company (i) for
money borrowed (other than that evidenced by the Debentures), including any
intercompany loans made to the Company by any of its subsidiaries, and (ii)
which is evidenced by a note, bond, debenture or similar instrument (including a
purchase money mortgage); (b) all obligations constituting Bank Debt; (c) all
obligations of the Company (i) for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (ii) under
interest rate swaps, caps, collars, options and similar arrangements and (iii)
under any foreign exchange contract, currency swap agreement, futures contract,
currency option contract, or other foreign currency hedge; (d) all obligations
for the payment of money relating to a Capitalized Lease Obligation; (e) any
liabilities of others described in the preceding clauses (a), (b), (c) and (d)
which the Company has guaranteed or which are otherwise its legal liability; and
(f) renewals, extensions, refundings, restructurings, amendments and
modifications of any such indebtedness or guarantee. Notwithstanding anything
to the contrary in this Indenture or the Debentures, "Senior Indebtedness" shall
not include (a) any indebtedness or guarantee of the Company which by its terms
or the terms of the instrument creating or evidencing it is not superior in
right of payment to the Debentures and (b) accounts payable or any other
indebtedness to trade creditors created or assumed by the Company in the
ordinary course of business, each of which shall rank pari passu with the
Debentures.
"Subsidiary" means any corporation of which at least a majority of the
outstanding capital stock having voting power under ordinary circumstances to
elect directors of such corporation shall at the time be held, directly or
indirectly, by the Company, by the Company and one or more Subsidiaries or by
one or more Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 and as in effect on the date of this Indenture,
except as provided in Section 11.3 hereof, and except to the extent any
amendment to the Trust Indenture Act expressly provides for application of the
Trust Indenture Act as in effect on another date.
"trading day" means any day on which the New York Stock Exchange is
open for
trading.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means the successor.
"Trust Officer" means any officer within the Corporate Trust
Department (or any successor group) of the Trustee, including without limitation
any Vice President, Assistant Vice President, any trust officer, any Assistant
Secretary or any other officer customarily performing functions similar to those
performed by any of the above-designated officers who shall, in any case, be
responsible for the administration of this Indenture or have familiarity with
it, and also means, with respect to a particular corporate matter, any other
officer of the Trustee to whom corporate trust matters are referred because of
his knowledge of and familiarity with the particular subject.
5
<PAGE>
SECTION 1.2. Other Definitions.
<TABLE>
<CAPTION>
Term Defined in
Section
<S> <C>
"Bankruptcy Law"..................................................... 8.1
"Conversion Agent"................................................... 2.3
"Custodian".......................................................... 8.1
"Event of Default"................................................... 8.1
"Final Surrender Date"............................................... 6.10
"Fundamental Change"................................................. 6.10
"Fundamental Change 6.10
Purchase Date".................................................
"Fundamental Change 6.10
Purchase Notice"...............................................
"Fundamental Change 6.10
Purchase Price"................................................
"Legal Holiday"...................................................... 12.7
"Paying Agent"....................................................... 2.3
"Registrar".......................................................... 2.3
"U.S. Government Obligations"........................................ 10.1
"Voting Shares"...................................................... 6.10
</TABLE>
<TABLE>
<CAPTION>
SECTION 1.3. Incorporation by Reference of Trust Indenture Act.
<S> <C> <C>
</TABLE>
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Debentures.
"indenture security holder" means a Debentureholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Debentures.
All other terms used in this Indenture that are defined in the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
6
<PAGE>
SECTION 1.4. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect
on the date hereof, and any other reference in this Indenture to "generally
accepted accounting principles" refers to generally accepted accounting
principles in effect on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein", "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
7
<PAGE>
ARTICLE 2
THE DEBENTURES
SECTION 2.1. Form and Dating .
The Debentures and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A, which is incorporated in and made
part of this Indenture. The Debentures may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Company is subject or usage. The Company shall approve the form of the
Debentures and any notation, legend or endorsement on them. Each Debenture
shall be dated the date of its authentication.
SECTION 2.2. Execution and Authentication.
Two Officers shall sign the Debentures for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Debentures.
If an Officer whose signature is on a Debenture no longer holds that
office at the time the Trustee authenticates the Debenture, the Debenture shall
be valid nevertheless.
A Debenture shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Debenture. The
signature shall be conclusive evidence that the Debenture has been authenticated
under this Indenture.
The Trustee shall authenticate the Debentures for original issue in
the aggregate principal amount equal to (i) the number of shares of Preferred
Stock so exchanged, (ii) multiplied by $50 per share, upon a written order or
orders of the Company signed by two Officers or by an Officer and an Assistant
Treasurer or Assistant Secretary of the Company (a "Company Order"). The
Company Order shall specify the amount of the Debentures to be authenticated and
the date on which the original issue of the Debentures is to be authenticated.
The aggregate principal amount of the Debentures outstanding at any time may not
exceed $187,500,000 except as provided in Section 2.7.
The Trustee shall act as the initial authenticating agent.
Thereafter, the Trustee may appoint an authenticating agent acceptable to the
Company to authenticate the Debentures. An authenticating agent may
authenticate the Debentures whenever the Trustee may do so. Each reference in
this Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with the
Company or an Affiliate of the Company.
The Debentures shall be initially issuable only in registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 2.3. Registrar, Paying Agent and Conversion Agent.
The Company shall maintain an office or agency where the Debentures
may be presented for registration of transfer or for exchange ("Registrar"), an
office or agency where the Debentures may be presented for payment ("Paying
Agent"), an office or agency where the Debentures may be presented for
conversion ("Conversion Agent") and an office or agency where notices and
demands to or upon the Company in respect of the Debentures and this Indenture
may be served. The Registrar shall keep a register of the Debentures and of
their transfer and exchange. The Company may have one or more co-Registrars,
one or more additional Paying Agents and one or more additional Conversion
Agents. The term "Registrar" includes any co-Registrar, the term "Paying Agent"
includes any additional Paying Agent and the term "Conversion Agent" includes
any additional Conversion Agent. Except for purposes of Section 6.4 and Article
10, the Company or any Affiliate of the Company may act as Paying Agent.
8
<PAGE>
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any Agent not a party to this
Indenture. If the Company fails to maintain a Registrar, Paying Agent,
Conversion Agent or agent for service of notices and demands, or fails to give
the foregoing notice, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar, Paying Agent,
Conversion Agent and agent for service of notices and demands.
SECTION 2.4. Paying Agent to Hold Money in Trust.
On or prior to each due date of the principal of or interest on any of
the Debentures, the Company shall deposit with the Paying Agent a sum sufficient
to pay such principal or interest so becoming due. Subject to Section 5.7, the
Paying Agent shall hold in trust for the benefit of the Debentureholders or the
Trustee all money held by the Paying Agent for the payment of principal of or
interest on the Debentures, and shall notify the Trustee of any default by the
Company (or any other obligor on the Debentures) in making any such payment. If
the Company or an Affiliate of the Company acts as Paying Agent, it shall on or
before each due date of the principal of or interest on any of the Debentures
segregate the money and hold it as a separate trust fund. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
the Trustee may at any time during the continuance of any default, upon written
request to a Paying Agent, require such Paying Agent to forthwith pay to the
Trustee all sums so held in trust by such Paying Agent. Upon doing so, the
Paying Agent (other than the Company) shall have no further liability for the
money.
SECTION 2.5. Debentureholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Debentureholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee on or before each semi-annual interest payment date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of the Debentureholders.
SECTION 2.6. Transfer and Exchange.
When a Debenture is presented to the Registrar with a request to
register a transfer thereof, the Registrar shall register the transfer as
requested and when the Debentures are presented to the Registrar with a request
to exchange them for an equal principal amount of the Debentures of other
authorized denominations, the Registrar shall make the exchange as requested;
provided that every Debenture presented or surrendered for registration of
transfer or exchange shall be duly endorsed or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar
duly executed by the Holder thereof or his attorney duly authorized in writing.
To permit registration of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate the Debentures at the Registrar's request. Any
exchange or transfer shall be without charge, except that the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto, but this provision shall not
apply to any exchange pursuant to Section 2.10, 3.6, 6.13 or 11.5.
SECTION 2.7. Replacement Debentures.
If a mutilated Debenture is surrendered to the Trustee, or if the
Holder of a Debenture claims that the Debenture has been lost, destroyed or
wrongfully taken, and neither the Company nor the Trustee has received notice
that such Debenture has been acquired by a bona fide purchaser, the Company
shall issue and the Trustee shall authenticate a replacement Debenture if the
requirements of Section 8-405 of the New York Uniform Commercial Code, as then
in effect, are met, and there shall have been delivered to the Company and the
Trustee evidence to their satisfaction of the loss, destruction or theft of any
Debenture if such is the case. An indemnity bond may be required that is
sufficient in the judgment of the Company and the Trustee to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Debenture is replaced. The Company may
9
<PAGE>
charge for its expenses in replacing a Debenture. Every replacement Debenture is
an additional obligation of the Company.
SECTION 2.8. Outstanding Debentures.
The Debentures outstanding at any time are all of the Debentures
authenticated by the Trustee, except for those canceled by it, those delivered
to it for cancellation and those described in this Section 2.8 as not
outstanding.
If a Debenture is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Debenture is held by a bona fide purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on a redemption date or maturity date money sufficient to pay the
principal of and accrued interest on the Debentures payable on that date, then
on and after that date such Debentures cease to be outstanding and interest on
them ceases to accrue.
Subject to the restrictions contained in Section 2.9, a Debenture does
not cease to be outstanding because the Company or an Affiliate of the Company
holds the Debenture.
SECTION 2.9. Treasury Debentures.
In determining whether the Holders of the required principal amount of
the Debentures have concurred in any notice, direction, waiver or consent, the
Debentures owned by the Company or any other obligor on the Debentures or by any
Affiliate of the Company or of such other obligor shall be disregarded, except
that for purposes of determining whether the Trustee shall be protected in
relying on any such notice, direction, waiver or consent, only the Debentures
which the Trustee knows are so owned shall be so disregarded. The Debentures so
owned which have been pledged in good faith shall not be disregarded if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to the Debentures and that the pledgee is not the Company or
any other obligor upon the Debentures or any Affiliate of the Company or of such
other obligor.
SECTION 2.10. Temporary Debentures.
Until definitive Debentures are ready for delivery, the Company may
prepare and, upon the order of the Company, the Trustee shall authenticate and
deliver temporary Debentures. Temporary Debentures shall be substantially in the
form of definitive Debentures but may have variations that the Company with the
consent of the Trustee considers appropriate for temporary Debentures. Without
unreasonable delay, the Company shall prepare and the Trustee shall authenticate
and deliver definitive Debentures in exchange for temporary Debentures.
SECTION 2.11. Cancellation.
The Company at any time may deliver Debentures to the Trustee for
cancellation. The Registrar, the Paying Agent and the Conversion Agent shall
forward to the Trustee any Debentures surrendered to them for transfer,
exchange, payment or conversion. The Trustee and no one else shall cancel all
Debentures surrendered for transfer, exchange, payment (including redemption),
conversion or cancellation and shall dispose of cancelled Debentures as the
Company shall direct. The Company may not issue new Debentures to replace
Debentures it has paid or delivered to the Trustee for cancellation or which
have been converted.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Debentures, it
shall pay the defaulted interest to the persons who are Debentureholders on a
subsequent special record date, and such term as used in this Section 2.12 with
respect to the payment of any defaulted interest, shall mean the 15th day next
preceding the special payment date fixed by the Company, whether or not such day
is a Business Day. At least 15 days before the
10
<PAGE>
special record date, the Company shall mail to each Debentureholder and the
Trustee a notice that states the special record date, the special payment date
and the amount of defaulted interest to be paid.
11
<PAGE>
ARTICLE 3
REDEMPTION
SECTION 3.1. Notice to Trustee.
If the Company wants to redeem the Debentures pursuant to paragraph 5
of the Debentures, it shall notify the Trustee at least 60 days prior to the
redemption date as fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee) of the redemption date and the principal amount of
the Debentures to be redeemed.
SECTION 3.2. Selection of Debentures to be Redeemed.
If less than all of the Debentures are to be redeemed, the Trustee
shall, not more than 60 days prior to the redemption date, select the Debentures
to be redeemed pro rata or by lot, as the Trustee in its discretion shall
determine. The Trustee shall make the selection from the Debentures outstanding
and not previously called for redemption. The Debentures in denominations of
$1,000 may only be redeemed in whole. The Trustee may select for redemption
portions (equal to $1,000 or any multiple thereof) of the principal of the
Debentures that have denominations larger than $1,000. Provisions of this
Indenture that apply to Debentures called for redemption also apply to portions
of the Debentures called for redemption.
SECTION 3.3. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption by first class mail to each Holder
of the Debentures to be redeemed.
The notice shall identify the Debentures to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the then current conversion price;
(4) the name and address of the Paying Agent and the Conversion Agent;
(5) that the Debentures called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(6) that the right to convert Debentures called for redemption shall
terminate at the close of business on the third Business Day immediately
preceding the redemption date;
(7) that Holders who wish to convert the Debentures must satisfy the
requirements in paragraph 8 of the Debentures;
(8) that, unless the Company defaults in making the redemption
payment, interest on the Debentures called for redemption ceases to accrue
on and after the redemption date and the only remaining right of the Holder
is to receive payment of the redemption price upon surrender to the Paying
Agent of the Debentures; and
(9) if any Debenture is being redeemed in part, the portion of the
principal amount of such Debenture to be redeemed and that, after the
redemption date, upon surrender of such Debenture, a new Debenture or
Debentures in principal amount equal to the unredeemed portion thereof will
be issued.
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At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed, the Debentures called for
redemption become due and payable on the redemption date, subject to the
provisions of Section 4.1, and at the redemption price. Upon surrender to the
Paying Agent, such Debentures shall be paid at the redemption price, plus
accrued interest to the redemption date.
SECTION 3.5. Deposit of Redemption Price.
On or prior to the redemption date, the Company shall deposit with the
Paying Agent (or if the Company is its own Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest on all Debentures to be redeemed on that date, other than the
Debentures or portions thereof called for redemption on that date which have
been delivered by the Company to the Trustee for cancellation. The Paying Agent
shall return to the Company any money not required for that purpose because of
the conversion of the Debentures or otherwise.
SECTION 3.6. Debentures Redeemed in Part.
Upon surrender of a Debenture that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for and deliver to the Holder a
new Debenture equal in principal amount to the unredeemed portion of the
Debenture surrendered.
ARTICLE 4
CONVERSION
SECTION 4.1. Conversion Privilege.
A Holder of a Debenture may convert it into Common Stock of the
Company at any time prior to maturity at the conversion price then in effect,
except that, with respect to any Debenture called for redemption, such
conversion right shall terminate at the close of business on the third Business
Day immediately preceding the redemption date (unless the Company shall default
in making the redemption payment then due, in which case the conversion right
shall terminate on the date such default is cured). The number of shares of
Common Stock issuable upon conversion of a Debenture is determined by dividing
the principal amount converted by the conversion price in effect on the
conversion date.
The initial conversion price is stated in paragraph 8 of the
Debentures and is subject to adjustment as provided in this Article 4.
A Holder may convert a portion of a Debenture equal to $1,000 or any
integral multiple thereof. Provisions of this Indenture that apply to
conversion of all of a Debenture also apply to conversion of a portion of it.
SECTION 4.2. Conversion Procedure.
To convert a Debenture, a Holder must satisfy the requirements in
paragraph 8 of the Debentures. The date on which the Holder satisfies all of
those requirements is the conversion date. As soon as practicable after the
conversion date, the Company shall deliver to the Holder through the Conversion
Agent a certificate for the number of whole shares of Common Stock issuable upon
the conversion and a check for any fractional share. The person in whose name
the certificate is registered shall become the stockholder of record on the
conversion date and, as of such date, such person's rights as a Debentureholder
shall cease.
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Holders of the Debentures at the close of business on an interest
payment record date will be entitled to receive the interest payable on such
Debentures on the corresponding interest payment date notwithstanding the
conversion thereof or the Company's default on payment of the interest due on
such interest payment date. However, the Debentures surrendered for conversion
during the period from the close of business on any interest payment record date
to the opening of business on the corresponding interest payment date (except
Debentures called for redemption on a redemption date during such period) must
be accompanied by payment of an amount equal to the interest payable on such
Debentures on such interest payment date. Any Holder of the Debentures on an
interest payment record date who (or whose transferee) converts the Debentures
on an interest payment date will receive the interest payment on such Debentures
by the Company on such date, and the converting holder need not include payment
in the amount of such interest upon surrender of the Debentures for conversion.
Except as provided above, no payment or adjustment will be made on account of
accrued interest upon conversion of the Debentures.
If a Holder converts more than one Debenture at the same time, the
number of whole shares issuable upon the conversion shall be based on the total
principal amount of the Debentures converted.
Upon surrender of a Debenture that is converted in part, the Trustee
shall authenticate for the Holder a new Debenture equal in principal amount to
the unconverted portion of the Debenture surrendered.
SECTION 4.3. Fractional Shares.
The Company will not issue fractional shares of Common Stock upon
conversion of the Debentures. In lieu thereof, the Company will pay an amount
in cash based upon the current market price of the Common Stock on the trading
day prior to the date of conversion, determined as provided in Section 4.6(d).
SECTION 4.4. Taxes on Conversion.
The issuance of certificates for shares of Common Stock upon the
conversion of any Debenture shall be made without a service charge to the
converting Debentureholder for such certificates, but the holder will be
required to pay any tax or governmental charge in respect of such transaction,
and such certificates shall be issued in the respective names of, or in such
names as may be directed by, the Holder or Holders of the Debenture converted;
provided, however, that in the event that certificates for shares of Common
Stock are to be issued in a name other than the name of the Holder of the
Debenture converted, such Debenture, when surrendered for conversion, shall be
accompanied by an instrument of transfer, in form satisfactory to the Company,
duly executed by the registered Holder thereof or his duly authorized attorney;
and provided further, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder of the
Debenture converted, and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid or is
not applicable.
SECTION 4.5. Company to Provide Stock.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, solely for
the purpose of issuance upon conversion of the Debentures as herein provided, a
sufficient number of shares of Common Stock to permit the conversion of all
outstanding Debentures.
All shares of Common Stock which may be issued upon conversion of the
Debentures shall be duly authorized, validly issued, fully paid and non-
assessable when so issued.
SECTION 4.6. Adjustment of Conversion Price.
The conversion price (herein called the "Conversion Price") shall be
subject to adjustment from time to time as follows:
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(a) In case the Company shall (1) pay a dividend in shares of Common
Stock to holders of Common Stock, (2) make a distribution in shares of
Common Stock to holders of Common Stock, (3) split or otherwise subdivide
its outstanding shares of Common Stock into a greater number of shares of
Common Stock or (4) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, the Conversion Price in effect
immediately prior to such action shall be adjusted so that the Holder of
any Debenture thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock which he would have owned
immediately following such action had such Debentures been converted
immediately prior thereto. An adjustment made pursuant to this subsection
(a) shall become effective immediately after the record date in the case of
a dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.
(b) In case the Company shall issue rights, options or warrants to all
or substantially all holders of Common Stock entitling them (for a period
commencing no earlier than the record date for the determination of holders
of Common Stock entitled to receive such rights, options or warrants and
expiring not more than 45 days after such record date) to subscribe for or
purchase shares of Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share less than the current
market price (as determined pursuant to subsection (d) below) of the Common
Stock on such record date, the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to such record date by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding on such record date, plus the number of shares of Common Stock
which the aggregate offering price of the offered shares of Common Stock
(or the aggregate conversion price of the convertible securities so
offered) would purchase at such current market price, and of which the
denominator shall be the number of shares of Common Stock outstanding on
such record date plus the number of additional shares of Common Stock
offered (or into which the convertible securities so offered are
convertible). Such adjustments shall become effective immediately after
such record date. If at the end of the period during which such warrants
or rights are exercisable not all warrants or rights shall have been
exercised, the adjusted conversion price shall be immediately readjusted to
what it would have been based on the number of additional shares of Common
Stock actually issued (or the number of shares of Common Stock issuable
upon conversion of convertible securities actually issued).
(c) In case the Company shall distribute to all holders of Common
Stock shares of any class of stock other than Common Stock, evidences of
indebtedness or other assets (other than dividends or cash distributions
payable out of consolidated net income or retained earnings), or shall
distribute to all or substantially all holders of Common Stock rights or
warrants to subscribe for securities (other than those referred to in
subsection (b) above), then in each such case the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the date of such
distribution by a fraction of which the numerator shall be the current
market price (determined as provided in subsection (d) below) of the Common
Stock on the record date mentioned below less the then fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive evidence of such fair market value) of the portion of the assets
so distributed or of such subscription rights or warrants applicable to one
share of Common Stock, and of which the denominator shall be such current
market price of the Common Stock. Such adjustment shall become effective
immediately after the record date for the determination of the holders of
Common Stock entitled to receive such distribution. Notwithstanding the
foregoing, in the event that the Company shall distribute rights or
warrants (other than those referred to in subsection (b) above) ("Rights")
pro rata to holders of Common Stock, the Company may, in lieu of making any
adjustment pursuant to this Section 4.6, make proper provision so that each
holder of a Debenture who converts such Debenture (or any portion thereof)
after the record date for such distribution and prior to the expiration or
redemption of the Rights shall be entitled to receive upon such conversion,
in addition to the shares of Common Stock issuable upon such conversion
(the "Conversion Shares"), a number of Rights to be determined as follows:
(i) if such conversion occurs on or prior to the date for the distribution
to the holders of Rights of separate certificates evidencing such Rights
(the "Distribution Date"), the same number of Rights to which a holder of a
number of shares of Common Stock equal to the number of Conversion Shares
is entitled at the time of such conversion in accordance with the terms and
provisions of and applicable to the Rights; and (ii) if such conversion
occurs
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after the Distribution Date, the same number of Rights to which a holder of
the number of shares of Common Stock into which the principal amount of the
Debenture so converted was convertible immediately prior to the
Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(d) The current market price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for thirty
consecutive trading days commencing 45 trading days before the day in
question. The closing price for each day shall be the last reported sales
price regular way or, in case no such reported sale takes place on such
date, the average of the reported closing bid and asked prices regular way,
in either case on the New York Stock Exchange Composite Tape, or if the
Common Stock is not listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Common Stock is listed
or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, the closing sales price of the Common Stock
as quoted by the NASDAQ National Market System, or in case no reported sale
takes place, the average of the closing bid and asked prices as quoted by
the NASDAQ National Market System or any comparable system, or if the
Common Stock is not quoted on the NASDAQ National Market System or any
comparable system, the closing sales price or, in case no reported sale
takes place, the average of the closing bid and asked prices, as furnished
by any two members of the National Association of Securities Dealers, Inc.
selected from time to time by the Company for that purpose.
(e) In any case in which this Section 4.6 shall require that an
adjustment be made immediately following a record date established for
purposes of Section 4.6, the Company may elect to defer (but only until
five Business Days following the filing by the Company with the Trustee of
the certificate described in Section 4.10 below) issuing to the holder of
any Debenture converted after such record date the shares of Common Stock
and other capital stock of the Company issuable upon such conversion over
and above the shares of Common Stock and other capital stock of the Company
issuable upon such conversion only on the basis of the Conversion Price
prior to adjustment; and, in lieu of the shares the issuance of which is so
deferred, the Company shall issue or cause its transfer agents to issue due
bills or other appropriate evidence of the right to receive such shares.
SECTION 4.7. No Adjustment.
No adjustment in the Conversion Price shall be required until
cumulative adjustments amount to a change in the Conversion Price of 1% or more
as last adjusted; provided, however, that any adjustments which by reason of
this Section 4.7 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Article
4 shall be made to the nearest cent or to the nearest one-hundredth of a share,
as the case may be. No adjustment to the Conversion Price shall be made for
cash or dividend distributions paid out of consolidated net income or retained
earnings.
No adjustment need be made for a transaction referred to in Section
4.6 if all Debentureholders are entitled to participate in the transaction on a
basis and with notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction.
No adjustment need be made for rights to purchase Common Stock or
issuances of Common Stock pursuant to a Company plan for reinvestment of
dividends or interest.
No adjustment need be made for a change in the par value or a change
to no par value of the Common Stock.
To the extent that the Debentures become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
SECTION 4.8. Equivalent Adjustments.
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In the event that, as a result of an adjustment made pursuant to
Section 4.6 above, the holder of any Debenture thereafter surrendered for
conversion shall become entitled to receive any shares of capital stock of the
Company other than shares of its Common Stock, thereafter the Conversion Price
of such other shares so receivable upon conversion of any Debentures shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock
contained in this Article 4.
SECTION 4.9. Adjustments for Tax Purposes.
The Company may make such reductions in the Conversion Price, in
addition to acquired by paragraphs (a), (b) and (c) of Section 4.6 above, as it
considers to be advisable that any event treated for Federal income tax purposes
as a dividend of stock or stock shall not be taxable to the recipients thereof.
SECTION 4.10. Notice of Adjustment.
Whenever the Conversion Price is adjusted, the Company shall promptly
mail to Debentureholders a notice of the adjustment and file with the Trustee an
Officers' Certificate briefly stating the facts requiring the adjustment and the
manner of computing it. The certificate will be conclusive evidence of the
correctness of such adjustment.
SECTION 4.11. Notice of Certain Transactions.
In the event that:
(1) the Company takes any action which would require an adjustment in
the Conversion Price,
(2) the Company consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation and stockholders of
the Company must approve the transaction, or
(3) there is a dissolution or liquidation of the Company,
Holders of a Debenture may wish to convert such Debenture into shares of Common
Stock prior to the record date for or the effective date of the transaction so
that he may receive the rights, warrants, securities or assets which a holder of
shares of Common Stock on that date may receive. Therefore, the Company shall
mail to Debentureholders and the Trustee a notice stating the proposed record or
effective date, as the case may be. The Company shall mail the notice at least
10 days before such date; however, failure to mail such notice or any defect
therein shall affect the validity of any transaction referred to in clause (1),
(2) or (3) of this Section 4.11.
SECTION 4.12. Effect of Reclassifications, Consolidations, Mergers or Sales on
Conversion Privilege.
If any of the following shall occur, namely: (i) any reclassification
or change of outstanding shares of Common Stock issuable upon conversion of
Debentures (other than a change in name, or par value, or from par value to no
par value, or from no par value to par value, or as a result of a subdivision or
combination), (ii) any reorganization, consolidation or merger to which the
Company is a party other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification of, or change
(other than a change in name, or par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of Common Stock or (iii) any sale, lease or
transfer of all or substantially all of the property or business of the Company
as an entirety, then the Company, or such successor or purchasing corporation,
as the case may be, shall, as a condition precedent to such reclassification,
change, consolidation, merger, sale, lease or transfer, execute and deliver to
the Trustee a supplemental indenture providing that the Holder of each Debenture
then outstanding shall have the right to convert such Debenture into the kind
and amount of shares of stock and other securities and property (including cash)
receivable upon such reclassification, change, reorganization, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock,
or fraction thereof, deliverable upon conversion of such Debenture immediately
prior to such reclassification,
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change, reorganization, consolidation, merger, sale, lease or transfer. Such
supplemental indenture shall provide for adjustments of the Conversion Price
which shall be as nearly equivalent as may be practicable to the adjustments of
the Conversion Price provided for in this Article 4. The foregoing, however,
shall not in any way affect the right a holder of a Debenture may otherwise
have, pursuant to clause (ii) of the last sentence of subsection (c) of Section
4.6, to receive Rights upon conversion of a Debenture. If, in the case of any
such reorganization, consolidation, merger, sale, lease or transfer the stock or
other securities and property (including cash) receivable thereupon by a holder
of Common Stock includes shares of stock or other securities and property of a
corporation other than the successor or purchasing corporation, as the case may
be, in such reorganization, consolidation, merger, sale, lease or transfer, then
such supplemental indenture shall also be executed by such other corporation and
shall contain such additional provisions to protect the interests of the Holders
of the Debentures as the Board of Directors of the Company shall reasonably
consider necessary by reason of the foregoing. The provision of this Section
4.12 shall similarly apply to successive reorganizations, consolidations,
mergers, sales, leases or transfers.
In the event the Company shall execute a supplemental indenture
pursuant to this Section 4.12, the Company shall promptly file with the Trustee
an Officers' Certificate briefly stating the reasons therefor, the kind or
amount of shares of stock or securities or property (including cash) receivable
by Holders of the Debentures upon the conversion of their Debentures after any
such reclassification, change, reorganization, consolidation, merger, sale,
lease or transfer, any adjustment to be made with respect thereto and that all
conditions precedent have been complied with.
SECTION 4.13. Trustee's Disclaimer.
The Trustee has no duty to determine when an adjustment under this
Article 4 should be made, how it should be made or what such adjustment should
be, but may accept as conclusive evidence of the correctness of any such
adjustment, and shall be protected in relying upon, the Officers' Certificate
with respect thereto which the Company is obligated to file with the Trustee
pursuant to Section 4.10. The Trustee makes no representation as to the
validity or value of any securities or assets issued upon conversion of
Debentures, and the Trustee shall not be responsible for the Company's failure
to comply with any provisions of this Article 4.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 4.12, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 4.12.
SECTION 4.14. Voluntary Reduction.
The Company from time to time may reduce the Conversion Price by any
amount for any period of time if the period is at least 20 days or such longer
period as may be required by law and if the reduction is irrevocable during the
period; provided, that in no event may the Conversion Price be less than the par
value of a share of Common Stock.
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ARTICLE 5
SUBORDINATION
SECTION 5.1. Debentures Subordinated to Senior Indebtedness.
The Company, for itself, its successors and assigns, covenants and
agrees, and each Holder of a Debenture, by his acceptance thereof, likewise
covenants and agrees, that the indebtedness evidenced by the Debentures,
including the payment of the principal thereof and interest thereon, shall be
subordinate and junior in right of payment, to the extent and in the manner set
forth in this Article 5, to the prior payment in full of all Senior
Indebtedness, and that each holder of Senior Indebtedness whether now
outstanding or hereafter created, incurred, assumed or guaranteed shall be
deemed to have acquired Senior Indebtedness in reliance upon the covenants and
provisions contained in this Indenture and the Debentures. The Debentures shall
not be superior in right of payment to the payment of the Company's obligations
under (i) the Supplemental Indenture No. 3 to the Junior Subordinated Indenture
dated as of November 12, 1998, among the Company, MCI Communications Corporation
and Wilmington Trust Company, (ii) the Supplement No. 1 to the Guarantee
Agreement dated as of November 12, 1998 among the Company, MCI Communications
Corporation and Wilmington Trust Company, (iii) the Trust Agreement Guarantee
dated as of November 12, 1998, among Wilmington Trust Company, the
administrative trustee thereto, MCI Communications Corporation and the Company
and (iv) the Expense Agreement Guarantee dated as of November 12, 1998, between
the Company and MCI Capital I, a Delaware business trust, but shall rank pari
passu in all respects with such obligation(s). All Debentures of this issue
rank as to payment of principal and interest equally and ratably, without
priority one over the other. The provisions of this Article 5 are made for the
benefit of all holders of Senior Indebtedness and any such holder may proceed to
enforce such provisions.
Notwithstanding anything contained in this Indenture or the Debentures
to the contrary, all the provisions of this Indenture and the Debentures shall
be subject to the provisions of this Article 5, so far as they may be applicable
thereto.
SECTION 5.2. Debentures Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation, Reorganization, etc. of the
Company.
Upon any payment or distribution of the assets of the Company of any
kind or character, whether in cash, property or securities (including any
collateral at any time securing the Debentures), to creditors upon any
dissolution, winding-up, total or partial liquidation, or reorganization of the
Company (whether voluntary or involuntary, or in bankruptcy, insolvency,
reorganization, liquidation, receivership proceedings, or upon an assignment for
the benefit of creditors, or any other marshaling of the assets and liabilities
of the Company, or otherwise), then in such event:
(a) all Senior Indebtedness shall first be paid in full (including
principal thereof and interest thereon) in cash, or have provision made for
such payment, before any payment is made on account of the principal of or
interest on the indebtedness evidenced by the Debentures, or any deposit is
made pursuant to Section 6.4;
(b) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted, or securities of
the Company or any other company, trust or corporation provided for by a
plan or reorganization or readjustment, junior, or the payment of which is
otherwise subordinate, at least to the extent provided in this Article 5
with respect to the Debentures, to the payment of all Senior Indebtedness
at the time outstanding and to the payment of all securities issued in
exchange therefor to the holders of the Senior Indebtedness at the time
outstanding), to which the Holders or the Trustee on behalf of the Holders
would be entitled except for the provisions of this Article 5, shall be
paid or delivered by any debtor, Custodian or other person making such
payment or distribution, directly to the holders of the Senior Indebtedness
or their representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any of
such Senior Indebtedness may have been issued,
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ratably according to the aggregate amounts remaining unpaid on account of
the principal of and interest on the Senior Indebtedness held or
represented by each, for application to payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in
full after giving effect to any concurrent payment or distribution, or
provision therefor, to the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing provisions of
this Section 5.2, any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted, or securities of
the Company or any other company, trust or corporation provided for by a
plan of reorganization or readjustment, junior, or the payment of which is
otherwise subordinate, at least to the extent provided for in this Article
5 with respect to the Debentures, to the payment of all Senior Indebtedness
at the time outstanding and to the payment of all securities issued in
exchange therefor to the holders of Senior Indebtedness at the time
outstanding), shall be received by the Trustee or the Holders before all
Senior Indebtedness is paid in full, or provision made for its payment,
such payment or distribution (subject to the provisions of Sections 5.6 and
5.7) shall be held in trust for the benefit of, and shall be immediately
paid or delivered by the Trustee or such Holders, as the case may be, to
the holders of Senior Indebtedness remaining unpaid or unprovided for, or
their representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any of
such Senior Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the principal of and
interest on the Senior Indebtedness held or represented by each, for
application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full after giving
effect to any concurrent payment or distribution, or provision therefor, to
the holders of such Senior Indebtedness.
The Company shall give prompt notice to the Trustee of any
dissolution, winding-up, liquidation or reorganization of the Company.
Upon any distribution of assets of the Company referred to in this
Article 5, the Trustee, subject to the provisions of Sections 9.1 and 9.2, and
the Holders shall be entitled to rely upon any order or decree by any court of
competent jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceeding is pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the Holders, for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 5.
SECTION 5.3. Debentureholders to be Subrogated to Right of Holders of Senior
Indebtedness.
Subject to the prior payment in full of all Senior Indebtedness then
due, the Holders shall be subrogated (equally and ratably with the holders of
all subordinated indebtedness of the Company which by its terms is not superior
in right or payment to the Debentures and ranks on a parity with the Debentures)
to the rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until the principal of and interest on the Debentures shall be paid in full, and
for purposes of such subrogation, no payments or distributions to the holders of
Senior Indebtedness of assets, whether in cash, property or securities,
distributable to the holders of Senior Indebtedness under the provisions hereof
to which the Holders would be entitled except for the provisions of this Article
5, and no payment pursuant to the provisions of this Article 5 to the holders of
Senior Indebtedness by the Holders shall, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the Holders, be deemed to be
a payment by the Company to or on account of Senior Indebtedness, it being
understood that the provisions of this Article 5 are, and are intended, solely
for the purpose of defining the relative rights of the Holders, on the one hand,
and the holders of Senior Indebtedness, on the other hand.
SECTION 5.4. Obligations of the Company Unconditional.
Nothing contained in this Article 5 or elsewhere in this Indenture or
in any Debenture is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of
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and interest on the Debentures, as and when the same shall become due and
payable in accordance with the terms of the Debentures, or to affect the
relative rights of the Holders and other creditors of the Company other than the
holders of Senior Indebtedness, nor shall anything herein or therein prevent the
Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon the happening of an Event of Default under this Indenture,
subject to the provisions of Article 8, and the rights, if any, under this
Article 5 of the holders of Senior Indebtedness in respect of assets, whether in
cash, property or securities, of the Company received upon the exercise of any
such remedy.
SECTION 5.5. Company Not to Make Payment with Respect to the Debentures in
Certain Circumstances.
(a) Upon the happening of a default in payment (whether at maturity or
at a date fixed for prepayment or by acceleration or otherwise) of the principal
of or interest on any Senior Indebtedness, as such default is defined under any
such Senior Indebtedness or in any agreement pursuant to which any Senior
Indebtedness has been issued, then, unless and until the amount of such Senior
Indebtedness then due shall have been paid in full or provision made therefor in
a manner satisfactory to the holders of such Senior Indebtedness, or such
default shall have been cured or waived or shall have ceased to exist, the
Company shall not pay principal of, premium, if any, or interest on the
Debentures or make any deposit pursuant to Section 6.4 or 10.01 and shall not
repurchase, redeem or otherwise retire any Debentures (collectively, "pay the
Debentures"); provided, however, that the Company may pay the Debentures without
regard to the foregoing if the Company and the Trustee receive written notice
approving such payment from the representative of each outstanding class of
Designated Senior Indebtedness and the Company certifies to the Trustee that
such representatives relate to all outstanding classes of Designated Senior
Indebtedness.
(b) Upon the happening and during the continuance of any default under
the Bank Credit Facilities (other than a default in payment of principal or
interest thereunder as provided in Section 5.5(a)), which, after the giving of
notice or the passage of time, or both, would constitute an event of default
which would permit the holder or holders of the Bank Debt to accelerate the
maturity thereof (other than a default of the type specified in Section 5.5(a)
above), and after written notice of such default has been given to the Company
and the Trustee by the holder or holders of such Bank Debt or their
representative or representatives, or upon written notice thereof given to the
Company by the holder or holders of such Bank Debt or their representative or
representatives and given to the Trustee by the Company, then, unless and until
such default shall have been cured or waived or shall have ceased to exist, or
provision shall have been made for the payment, in a manner satisfactory to the
holder or holders of such Bank Debt, of all such Bank Debt which would be due in
the event of the acceleration of the maturity thereof, the Company shall not pay
the Debentures.
(c) In the event that, notwithstanding the foregoing provision of this
Section 5.5, any payment on account of principal of or interest on the
Debentures shall be made by or on behalf of the Company and received by the
Trustee, any Holder or any Paying Agent (or, if the Company is acting as its own
Paying Agent, money for any such payment shall be segregated and held in trust),
after the happening of a default of the type specified in Section 5.5(a) or (b)
above, then, unless and until the amount of such Senior Indebtedness (in the
case of a default under Section 5.5(a)) or Bank Debt (in the case of a default
under Section 5.5(b)) then due shall have been paid in full, or provision made
therefor or such default shall have been cured or waived, such payment (subject,
in each case, to the provision of Sections 5.6 and 5.7) shall be held in trust
for the benefit of, and shall be immediately paid over to, the holders of Senior
Indebtedness (in the case of a default under Section 5.5(a)) or Bank Debt (in
the case of a default under Section 5.5(b)) or their representative or
representatives or the trustee or trustees under any indenture under which any
instruments evidencing any of such indebtedness may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the principal
of and interest on the Senior Indebtedness (in the case of a default under
Section 5.5(a)) or Bank Debt (in the case of a default under Section 5.5(b))
held or represented by each, for application to the payment of all such
indebtedness remaining unpaid to the extent necessary to pay all such
indebtedness in accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the benefit of the holders of such
indebtedness. The Company shall give prompt written notice to the Trustee of
any default under any Senior Indebtedness (in the case of a default under
Section 5.5(a)) or Bank Debt (in the case of a default under Section 5.5(b)) or
under any agreement pursuant to which such indebtedness may have been issued.
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SECTION 5.6. Trustee Entitled to Assume Payments Not Prohibited in Absence of
Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee, unless and until the Trustee shall have received notice thereof
from the Company or from the holder or holders of Senior Indebtedness or from
their representative or representatives; and, prior to the receipt of any such
notice, the Trustee, subject to the provisions of Sections 9.1 and 9.2, shall be
entitled to assume conclusively that no such facts exist.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Senior
Indebtedness (or a representative of such holder) to establish that such notice
has been given by a holder of Senior Indebtedness or a representative of any
such holder. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any person as a holder
of Senior Indebtedness to participate in any payment or distribution pursuant to
this Article 5, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
each person under this Article 5, and if such evidence is not furnished, the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
SECTION 5.7. Application by Trustee of Monies Deposited with It.
Money or U.S. Government Obligations deposited in trust with the
Trustee pursuant to and in accordance with this Article 5 and Sections 6.4 and
10.1 shall be for the sole benefit of Debentureholders and shall thereafter not
be subject to the subordination provisions of this Article 5. Otherwise, any
deposit of monies by the Company with the Trustee or any Paying Agent (whether
or not in trust) for the payment of the principal of or interest on any
Debentures shall be subject to the provisions of Sections 5.1, 5.2, 5.3 and 5.5;
except that, if two Business Days prior to the date on which by the terms of
this Indenture any such monies may become payable for any purpose (including,
without limitation, the payment of either the principal of or interest on any
Debenture), the Trustee shall not have received with respect to such monies the
notice provided for in Section 5.6, then the Trustee or any Paying Agent shall
have full power and authority to receive such monies and to apply such monies to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such date. This
Section 5.7 shall be construed solely for the benefit of the Trustee and the
Paying Agent and shall not otherwise affect the rights that holders of Senior
Indebtedness may have to recover any such payments from the Holders in
accordance with the provisions of this Article 5.
SECTION 5.8. Subordination Rights Not Impaired by Acts or Omissions of Company
or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness
to enforce subordination, as herein provided, shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have or
be otherwise charged with. The holders of any Senior Indebtedness may extend,
renew, modify or amend the terms of such Senior Indebtedness or any security
therefor and release, sell or exchange such security and otherwise deal freely
with the Company, all without affecting the liabilities and obligations of the
parties to this Indenture or the Holders. No provision in any supplemental
indenture which affects the superior position of the holders of the Senior
Indebtedness shall be effective against the holders of the Senior Indebtedness
unless the holders of such Senior Indebtedness (required pursuant to the terms
of such Senior Indebtedness to give such consent) have consented thereto.
SECTION 5.9. Debentureholders Authorize Trustee to Effectuate Subordination of
Debentures.
Without purporting to limit the authority of the Trustee as may be
appropriate in other circumstances, each Holder of any Debenture by his
acceptance thereof, irrevocably authorizes and expressly directs the Trustee on
his behalf to take such action as may be necessary or appropriate to effectuate
the subordination
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provided in this Article 5 and appoints the Trustee his attorney-in-fact for
such purpose, including, in the event of any dissolution, winding-up or
liquidation or reorganization under Bankruptcy Law of the Company (whether in
bankruptcy, insolvency or receivership proceedings or otherwise), the timely
filing of a claim for the unpaid balance of its or his Debentures in the form
required in such proceedings, and the causing of such claim to be approved. If
the Trustee does not file a proper claim or proof of debt in the form required
in such proceedings prior to 30 days before the expiration of the time to file
such claims or proofs, then any of the holders of Senior Indebtedness have the
right to demand, sue for, collect, receive and receipt for, the payments and
distributions in respect of the Debentures which are required to be paid or
delivered to the holders of Senior Indebtedness as provided in this Article 5,
and to file and prove all claims therefor and to take all such other action in
the name of the Holders or otherwise, as any such holder of Senior Indebtedness
or such holder's representative may determine to be necessary or appropriate for
the enforcement of the provisions of this Article 5.
SECTION 5.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee, in its individual capacity, shall be entitled to all of
the rights set forth in this Article 5 in respect of any Senior Indebtedness at
any time held by it to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall be construed to deprive the
Trustee of any of its rights as such holder.
SECTION 5.11. Article 5 Not to Prevent Events of Default.
The failure to make a payment on account of the principal of or
interest on the Debentures by reason of any provision in this Article 5 shall
not be construed as preventing the occurrence of an Event of Default under
Section 8.1.
SECTION 5.12. No Fiduciary Duty Created to Holders of Senior Indebtedness.
Notwithstanding any other provision in this Article 5, the Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness by virtue of the provisions of this Article 5.
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ARTICLE 6
COVENANTS
SECTION 6.1. Payment of Debentures.
The Company shall pay the principal of and interest on the Debentures
on the dates and in the manner provided in the Debentures and this Indenture.
An installment of principal or interest shall be considered paid on the date it
is due if the Paying Agent (other than the Company or an Affiliate of the
Company) holds on that date money designated for and sufficient to pay the
installment. The Company shall pay interest on overdue principal at the rate
borne by the Debentures per annum; it shall pay interest on overdue installments
of interest at the same rate to the extent lawful.
SECTION 6.2. SEC Reports.
The Company shall file all reports and other information and documents
which it is required to file with the SEC pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and within 15
days after it files them with the SEC, the Company shall file copies of all such
reports, information and other documents with the Trustee. The Company will
cause any quarterly and annual reports which it mails to its stockholders to be
mailed to the Holders of the Debentures.
If the Company is not subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, the Company will prepare, for the first three
quarters of each fiscal year, quarterly financial statements substantially
equivalent to the financial statements required to be included in a report on
Form 10-Q under the Exchange Act. The Company will also prepare, on an annual
basis, complete audited consolidated financial statements including, but not
limited to, a balance sheet, a statement of income and retained earnings, a
statement of changes in financial position and all appropriate notes. All such
financial statements will be prepared in accordance with generally accepted
accounting principles consistently applied, except for changes with which the
Company's independent accountants concur, and except that quarterly statements
may be subject to year-end adjustments. The Company will cause a copy of such
financial statements to be filed with the Trustee and mailed to the Holders of
the Debentures within 50 days after the close of each of the first three
quarters of each fiscal year and within 95 days after the close of each fiscal
year. The Company will also comply with the other provisions of TIA (S) 314(a).
SECTION 6.3. Waiver of Usury Defense.
The Company agrees that it will not assert, plead (as a defense or
otherwise) or in any manner whatsoever claim (and will actively resist any
attempt to compel it to assert, plead or claim) in any action, suit or
proceeding that the interest rate on the Debentures violates present or future
usury or other laws relating to the interest payable on any indebtedness and
will not otherwise avail itself (and will actively resist any attempt to compel
it to avail itself) of the benefits or advantages of any such laws.
SECTION 6.4. Liquidation.
Subject to the provisions of Article 5, so far as they may be
applicable hereto, the Board of Directors or the stockholders of the Company may
not adopt a plan of liquidation which plan provides for, contemplates or the
effectuation of which is preceded by (a) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company otherwise
than substantially as an entirety (Article 7 of this Indenture being the Article
which governs any such sale, lease, conveyance or other disposition
substantially as an entirety), and (b) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and of
the remaining assets of the Company to the holders of the capital stock of the
Company, unless the Company shall in connection with the adoption of such plan
make provision for, or agree that prior to making any liquidating distributions
it will make provision for, the satisfaction of the Company's obligations
hereunder and under the Debentures as to the payment of the principal and
interest. The Company shall be deemed to make provision for such payments only
if (1) the Company irrevocably deposits in trust with the Trustee money or U.S.
Government Obligations
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maturing as to principal and interest in such amounts and at such times as are
sufficient, without consideration of any reinvestment of such interest, to pay
the principal of and interest on the Debentures then outstanding to maturity and
to pay all other sums payable by it hereunder, or (2) there is an express
assumption of the due and punctual payment of the Company's obligations
hereunder and under the Debentures and the performance and observance of all
covenants and conditions to be performed by the Company hereunder, by the
execution and delivery of a supplemental indenture in form satisfactory to the
Trustee by a person who acquires, or will acquire (otherwise than pursuant to a
lease) a portion of the assets of the Company, and which person will have assets
(immediately after the acquisition) and aggregate earnings (for such person's
four full fiscal quarters immediately preceding such acquisition) equal to not
less than the assets of the Company (immediately preceding such acquisition) and
the aggregate earnings of the Company (for its four full fiscal quarters
immediately preceding the acquisition), respectively, and which is a corporation
organized under the laws of the United States, any State thereof or the District
of Columbia; provided, however, that Company shall not make any liquidating
distribution until after the Company shall have certified to the Trustee with an
Officers' Certificate at least five days prior to the making of any liquidating
distribution that it has complied with the provisions of this Section 6.4.
SECTION 6.5. Compliance Certificates.
The Company shall deliver to the Trustee within 120 days after the end
of each fiscal year of the Company, an Officers' Certificate as to the signer's
knowledge of the Company's compliance with all conditions and covenants on its
part contained in this Indenture and stating whether or not the signer knows of
any default or Event of Default. If such signer knows of such a default or
Event of Default, the Certificate shall describe the default or Event of Default
and the efforts to remedy the same. For the purposes of this Section 6.5,
compliance shall be determined without regard to any grace period or requirement
of notice provided pursuant to the terms of this Indenture. The Certificate
need not comply with Section 12.4 hereof.
SECTION 6.6. Notice of Defaults.
In the event that indebtedness of the Company in an aggregate amount
in excess of $10,000,000 is declared due and payable before its maturity because
of the occurrence of any default under such indebtedness, the Company will
promptly give written notice to the Trustee of such declaration or of the
occurrence of any event which, with the giving of notice or the passage of time,
or both, would entitle the holder or holders of such indebtedness to declare
such indebtedness due and payable before its maturity.
SECTION 6.7. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges levied or imposed upon the Company, directly or by reason
of its ownership of any Subsidiary or upon the income, profits or property of
the Company; and (2) all material lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a lien upon the property of the
Company; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which adequate provision has been made.
SECTION 6.8. Corporate Existence.
Subject to Section 6.4 and Article 7, the Company will do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate existence and rights (charter and statutory); provided, however, that
the Company shall not be required to preserve any right if the Board of
Directors shall determine that the preservation is no longer desirable in the
conduct of the Company's business and that the loss thereof is not, and will not
be, adverse in any material respect to the Holders.
SECTION 6.9. Maintenance of Properties.
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Subject to Section 6.4, the Company will cause all material properties
owned, leased or licensed in the conduct of its business to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof and thereto, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times
while any Debentures are outstanding; provided, however, that nothing in this
Section 6.9 shall prevent the Company from discontinuing the maintenance of any
such properties if, in the judgment of the Board of Directors, such
discontinuance is desirable in the conduct of the Company's business and is not,
and will not be, adverse in any material respect to the Holders.
SECTION 6.10. Purchase of the Debentures at Option of the Holder Upon
Fundamental Change.
(a) If at any time that the Debentures remain outstanding there shall
have occurred a Fundamental Change (as hereinafter defined), each Holder of the
Debentures shall have the right to require the Company to purchase all of such
Holders' Debentures or any portion thereof that is an integral multiple of
$1,000, at a purchase price (the "Fundamental Change Purchase Price") equal to
the principal amount thereof plus accrued interest to the Final Surrender Date
(as hereinafter defined), as of the date selected by the Company that is not
less than ten nor more than 20 days after the Final Surrender Date (the
"Fundamental Change Purchase Date"), subject to the Company's ability to pay the
Fundamental Change Purchase Price under the terms of its then-existing Bank
Credit Facilities or other agreements relating to borrowings which constitute
Senior Indebtedness, and subject to satisfaction by or on behalf of the Holder
of the requirements set forth in subsection (c) of this Section 6.10. The term
"Final Surrender Date" shall mean the date that is 60 days after the date of
mailing the notice of Fundamental Change as described in subsection (b) of this
Section 6.10.
The Fundamental Change Purchase Price shall be payable, at the option
of the Company, in cash or marketable shares of Common Stock of the Company or
any successor corporation based on its then fair market value, or a combination
thereof, subject to the requirements set forth in subsection (d) of this Section
6.10.
The term "Fundamental Change" shall mean either of the following:
(1) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becoming, in one transaction or a
series of related transactions, the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) of Voting Shares of the
Company entitled to exercise more than 50% of the total voting
power of all outstanding Voting Shares of the Company (including
any Voting Shares that are not then outstanding of which such
person or group is deemed the beneficial owner); or
(2) any consolidation of the Company with, or merger of the Company
into, any other person, any merger of another person into the
Company, or any sale, lease or transfer of all or substantially
all of the assets of the Company to another person (other than a
merger (A) which results in the holders of Common Stock of the
Company immediately prior to giving effect to such transaction
owning shares of capital stock of the surviving corporation in
such transaction representing in excess of 40% of the total voting
power of all shares of capital stock of such surviving corporation
entitled to vote generally in the election of directors and (B) in
which the shares of the surviving corporation held by such holders
are, or immediately upon issuance will be, listed on a national
securities exchange or quoted on the NASDAQ National Market System
and are not subject to any right of repurchase by the issuer
thereof or any third party and are not otherwise subject to any
encumbrance as a result of such transaction, provided, that the
surviving corporation assumes or guarantees the Company's
obligations under the Debentures); provided, however, that a
Fundamental Change shall not occur if either (A) for any five
trading days during the 10 trading days immediately preceding
either the public announcement by the Company of such transaction
or the consummation of such transaction, the last sale price of
the Common Stock is equal to at least 105% of the conversion price
in effect on such trading days, or (B) at least 90% of the
consideration (excluding cash payments for fractional shares) in
such transaction or transactions to the
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holders of Common Stock consists of shares of common stock that
are, or immediately upon issuance will be, listed on a national
securities exchange or quoted on the NASDAQ National Market
System, and as a result of such transaction or transactions, the
Debentures become convertible into such common stock.
For purposes of the foregoing, the term "Voting Shares" shall mean all
outstanding shares of any class or classes (however designated) of capital stock
entitled to vote generally in the election of members of the Board of Directors.
(b) Within 30 days after the occurrence of a Fundamental Change, the
Company shall mail a written notice of Fundamental Change by first-class mail to
the Trustee and to each Holder (and to beneficial owners as required by
applicable law) and shall cause a copy of such notice to be published in a daily
newspaper of national circulation (which shall be The Wall Street Journal unless
it is not then so circulated). The notice shall include the form of a
Fundamental Change Purchase Notice (as defined below) to be completed by the
Holder and shall state:
(1) the date of such Fundamental Change and, briefly, the events
causing such Fundamental Change;
(2) the date by which the Fundamental Change Purchase Notice pursuant
to this Section 6.10 must be given;
(3) the Fundamental Change Purchase Date;
(4) the Fundamental Change Purchase Price;
(5) that the Fundamental Change Purchase Price is payable in cash or
shares of marketable common stock of the Company or any successor
corporation based on its fair market value, or a combination thereof,
as may be determined by the Company and set forth in a supplemental
notice to be provided at least two Business Days prior to the Final
Surrender Date pursuant to Section 6.10(d);
(6) briefly, the conversion rights of the Debentures including,
without limitation, whether the lenders under the Company's Bank
Credit Facilities will permit the payment of the Fundamental Change
Purchase Price;
(7) the name and address of the Paying Agent and the Conversion Agent;
(8) the Conversion Price then in effect and any adjustments thereto
arising out of such Fundamental Change;
(9) that Debentures as to which a Fundamental Change Purchase Notice
has been given may be converted into Common Stock only to the extent
that the Fundamental Change Purchase Notice has been withdrawn in
accordance with the terms of this Indenture;
(10) the procedures that the Holder must follow to exercise rights
under this Section 6.10;
(11) the procedures for withdrawing a Fundamental Change Purchase
Notice, including a form of notice of withdrawal; and
(12) that the Holder must satisfy the requirements set forth in the
Debentures in order to convert the Debentures.
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(c) A Holder may exercise its rights specified in subsection (a) of
this Section 6.10 upon delivery of a written notice of the exercise of such
rights (a "Fundamental Change Purchase Notice") to the Paying Agent at any time
prior to the close of business on the Final Surrender Date, stating:
(1) the certificate number of each Debenture that the Holder will
deliver to be purchased;
(2) the portion of the principal amount of each Debenture that the
Holder will deliver to be purchased, which portion must be $1,000 or
an integral multiple thereof; and
(3) that such Debenture shall be purchased pursuant to the terms and
conditions specified in this Indenture.
The delivery of such Debenture to the Paying Agent prior to or on the
Final Surrender Date (together with all necessary endorsements) at the office of
the Paying Agent shall be a condition to the receipt by the Holder of the
Fundamental Change Purchase Price therefor; provided, however, that such
Fundamental Change Purchase Price shall be so paid pursuant to this Section 6.10
only if the Debenture so delivered to the Paying Agent shall conform in all
respects to the description thereof set forth in the related Fundamental Change
Purchase Notice.
The Company shall purchase from the Holder thereof, pursuant to this
Section 6.10, a portion of a Debenture if the principal amount of such portion
is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that
apply to the purchase of all of a Debenture pursuant to Sections 6.10 through
6.15 also apply to the purchase of such portion of such Debenture.
Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Fundamental Change Purchase Notice contemplated by this
Section 6.10(c) shall have the right to withdraw such Fundamental Change
Purchase Notice in whole or in a portion thereof that is $1,000 or in an
integral multiple thereof at any time prior to the close of business on the
Final Surrender Date by delivery of a written notice of withdrawal to the Paying
Agent in accordance with Section 6.11.
The Paying Agent shall promptly notify the Company of the receipt by
it of any Fundamental Change Purchase Notice or written withdrawal thereof.
(d) At least two Business Days prior to the Final Surrender Date, the
Company shall mail and cause to be published a supplemental notice of
Fundamental Change in similar form and manner as set forth in Section 6.10(b)
hereof, which supplemental notice shall also state whether and to what extent
the Fundamental Change Purchase Price will be paid in cash or equivalent shares
of common stock of the Company or any successor corporation. For purposes of
calculating the number of shares of common stock issuable upon such redemption,
the value of any such common stock will be equal to the average of the closing
prices of such common stock for the five trading days ending on the third
trading day immediately preceding the Final Surrender Date. Payment may not be
made in shares of common stock unless such shares have been, or will be no later
than the Fundamental Change Purchase Date, registered under the Securities Act
or are freely tradeable pursuant to an exemption thereunder and are listed on a
United States national securities exchange or quoted on the NASDAQ National
Market System at the time of payment.
SECTION 6.11. Effect of Fundamental Change Purchase Notice.
Upon receipt by the Paying Agent of the Fundamental Change Purchase
Notice specified in Section 6.10(c) and delivery to the Paying Agent of the
Debenture in respect of which such Fundamental Change Purchase Notice was given,
the Holder of such Debenture shall (unless such Fundamental Change Purchase
Notice is withdrawn as specified below) thereafter be entitled to receive solely
the Fundamental Change Purchase Price with respect to such Debenture. Such
Fundamental Change Purchase Price shall be paid to such Holder promptly
following the Fundamental Change Purchase Date with respect to such Debenture
(provided the conditions in Section 6.10(c) have been satisfied). Debentures in
respect of which a Fundamental Change Purchase Notice has been given by the
Holder thereof may not be converted into shares of Common Stock on or after the
date of the
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delivery of such Fundamental Change Purchase Notice unless such Fundamental
Change Purchase Notice has first been validly withdrawn.
A Fundamental Change Purchase Notice may be withdrawn by means of a
written notice of withdrawal delivered to the office of the Paying Agent at any
time prior to the close of business on the Final Surrender Date to which it
relates, specifying:
(1) the certificate number of each Debenture in respect of which such
notice of withdrawal is being submitted,
(2) the principal amount of the Debenture or portion thereof with
respect to which such notice of withdrawal is being submitted, and
(3) the principal amount, if any, of such Debenture that remains
subject to the original Fundamental Change Purchase Notice and that
has been or will be delivered for purchase by the Company.
There shall be no purchase of any Debentures pursuant to Section 6.10
if there has occurred (prior to, on or after, as the case may be, the giving, by
the Holders of such Debentures, of the required Fundamental Change Purchase
Notice) and is continuing an Event of Default (other than a default in the
payment of the Fundamental Change Purchase Price with respect to such
Debentures).
SECTION 6.12. Deposit of Fundamental Change Purchase Price.
On or before the Business Day prior to a Fundamental Change Purchase
Date, the Company shall deposit with the Trustee or with the Paying Agent (or,
if the Company is acting as the Paying Agent, shall segregate and hold in trust
as provided in Section 2.4) an amount of cash or shares of marketable common
stock of the Company or any successor corporation, in the manner provided in
Section 6.10(d), sufficient to pay the aggregate Fundamental Change Purchase
Price of all the Debentures or portions thereof that are to be purchased as of
such Fundamental Change Purchase Date. The manner in which the deposit required
by this Section 6.12 is made by the Company shall be at the option of the
Company, provided that any deposit of cash shall be made in a manner such that
the Trustee or the Paying Agent shall have immediately available funds on the
Business Day prior to the Fundamental Change Purchase Date.
If the Paying Agent holds, in accordance with the terms hereof, cash
or shares of marketable common stock of the Company or any successor
corporation, in the manner provided in Section 6.10(d), sufficient to pay the
Fundamental Change Purchase Price of any Debenture properly tendered for
redemption and not subsequently withdrawn, then, on and after the Fundamental
Change Purchase Date, such Debenture will cease to be outstanding and interest
on such Debenture will cease to accrue and will be deemed paid, and all other
rights of the Holder in respect thereof shall terminate (other than the right to
receive the Fundamental Change Purchase Price).
SECTION 6.13. Debentures Purchased in Part.
Any Debenture that is to be purchased only in part shall be
surrendered at the office of the Paying Agent (with, if the Company or the
Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing), and the Company
shall execute and the Trustee shall authenticate and deliver to the Holder of
such Debenture, without service charge, a new Debenture or Debentures, of such
authorized denomination or denominations as may be requested by such Holder, in
aggregate principal amount equal to, and in exchange for, the portion of the
principal amount of the Debenture so surrendered that is not purchased.
SECTION 6.14. Compliance with Securities Laws upon Purchase of any Debentures
.
In connection with any offer to purchase or purchase of any Debentures
under Section 6.10 hereof (provided that such offer or purchase constitutes an
"issuer tender offer" for purposes of Rule 13e-4 (which term, as
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used herein, includes any successor provision thereto) at the time of such offer
or purchase), the Company shall (i) comply with Rule 13e-4 and Rule 14e-1 under
the Exchange Act, (ii) file the related Schedule 13E-4 (or any successor
Schedule, form or report) under the Exchange Act, and (iii) otherwise comply
with all Federal and state securities laws so as to permit the rights of the
Holders and obligations of the Company under Sections 6.10 through 6.13 to be
exercised in the time and in the manner specified therein.
SECTION 6.15. Repayment to the Company.
Subject to the provisions of Section 5.7 to the extent that the
aggregate amount of cash or marketable stock deposited by the Company pursuant
to Section 6.12 exceeds the aggregate Fundamental Change Purchase Price of the
Debentures or portions thereof to be purchased, then promptly after the Business
Day following the Fundamental Change Purchase Date the Trustee or the Paying
Agent, as the case may be, shall return any such excess to the Company.
ARTICLE 7
SUCCESSOR CORPORATION
SECTION 7.1. When Company May Merge, etc.
The Company shall not consolidate with or merge with or into, or sell,
lease, convey, transfer or otherwise dispose of all or substantially all of its
assets to, any person unless:
(a) either the Company shall be the resulting or surviving entity or
such person is a corporation organized and existing under the laws of the
United States, a State thereof or the District of Columbia; provided,
however, that this subsection (a) shall not apply in the event of a
transaction constituting a Fundamental Change;
(b) such person expressly assumes by supplemental indenture executed
and delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Debentures and this Indenture (in
which case all such obligations of the Company shall terminate); and
(c) immediately before and immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of
the Company as a result of such transaction as having been incurred by the
Company at the time of such transaction, no default or Event of Default
shall have occurred and be continuing.
The Company shall deliver to the Trustee prior to the proposed
transaction an Officers' Certificate and an Opinion of Counsel, each of which
shall comply with Section 12.4 shall state that such consolidation, merger or
transfer and such supplemental indenture comply with this Article 7 and that all
conditions precedent herein provided for relating to such transaction have been
complied with.
SECTION 7.2. Successor Corporation Substituted.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company in accordance with Section 7.1,
the successor corporation formed by such consolidation or into which the Company
is merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor corporation had been named as the
Company herein.
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ARTICLE 8
DEFAULT AND REMEDIES
SECTION 8.1. Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any Debenture
when the same becomes due and payable (whether or not such payment shall be
prohibited by the provisions of Article 5) and the default continues for a
period of 30 days;
(2) the Company defaults in the payment of the principal of or
premium, if any, of any Debenture when the same becomes due and payable at
maturity, upon redemption or otherwise, including, without limitation, the
failure by the Company to redeem the Debentures upon a Fundamental Change
(whether or not such payment shall be prohibited by the provisions of
Article 5);
(3) the Company fails to comply with any of its other covenants or
agreements contained in the Debentures or this Indenture, including,
without limitation, failure by the Company to redeem or repurchase the
Debentures at such times and in such manner as may be required by this
Indenture (whether or not such payment shall be prohibited by the
provisions of Article 5) and the default continues for the period and after
the notice specified below;
(4) the Company shall fail to pay at maturity or at a date fixed for
prepayment or by acceleration (provided, however, such acceleration is not
withdrawn, cancelled or otherwise annulled within 10 days following the
occurrence of such acceleration) principal of, premium, if any, or interest
under any bond, debenture, note or other evidence of indebtedness for money
borrowed or under any mortgage, indenture or other instrument under which
there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or under any guarantee of
payment by the Company of indebtedness for money borrowed, whether such
indebtedness or guarantee now exists or shall hereafter be created;
provided, however, no such Event of Default shall exist under this Section
8.1(4) unless the aggregate amount (which is due and unpaid whether by
reason of maturity or at a date fixed for prepayment or by acceleration,
provided, however, such acceleration is not withdrawn, cancelled or
otherwise annulled within 10 days following the occurrence of such
acceleration) of such principal, premium, if any, and interest is in excess
of $10,000,000;
(5) the Company or any Subsidiary pursuant to or within the meaning of
any Bankruptcy Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property; or
(D) makes a general assignment for the benefit of its creditors;
or
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary in an
involuntary case or proceeding;
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(B) appoints a Custodian of the Company or any Subsidiary or for
all or substantially all of the property of any of them; or
(C) orders the liquidation of the Company or any Subsidiary;
and in each case the order or decree remains unstayed and in effect for 60
days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator or similar official under
any Bankruptcy Law.
A default under clause (3) is not an Event of Default until the
Trustee notifies the Company or the Holders of at least 25 % in principal amount
of the Debentures then outstanding notify the Company and the Trustee, of the
default, and the Company does not cure the default within 30 days after receipt
of such notice. The notice given pursuant to this Section 8.1 must specify the
default, demand that it be remedied and state that the notice is a "Notice of
Default". When a default is cured, it ceases.
Subject to the provisions of Sections 9.1 and 9.2, the Trustee shall
not be charged with knowledge of any Event of Default unless written notice
thereof shall have been given to a Trust Officer at the corporate trust office
of the Trustee by the Company, the Paying Agent, any Holder or an agent of any
Holder.
SECTION 8.2. Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 8.1(5) or (6)) occurs and is continuing, the Trustee may, by notice to
the Company, or the Holders of at least 25% in principal amount of the
Debentures then outstanding may, by notice to the Company and the Trustee, and
the Trustee shall, upon the request of such Holders, declare all unpaid
principal of and accrued interest to the date of acceleration on the Debentures
then outstanding (if not then due and payable) to be due and payable upon any
such declaration, and the same shall become and be immediately due and payable.
If an Event of Default specified in Section 8.1(5) or (6) occurs, all unpaid
principal of and accrued interest on the Debentures then outstanding shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Debentureholder. The Holders of a
majority in principal amount of the Debentures then outstanding by notice to the
Trustee may rescind and annul an acceleration and its consequences if (i) all
existing Events of Default, other than the nonpayment of the principal of and
accrued interest on the Debentures which has become due solely by such
declaration of acceleration, have been cured or waived; (ii) to the extent the
payment of such interest is lawful, interest on overdue installments of interest
and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid; (iii) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction; and (iv) all payments
due to the Trustee and any predecessor Trustee under Section 9.7 have been made.
Anything herein contained to the contrary notwithstanding, in the event of any
acceleration pursuant to this Section 8.2, the Company shall not be obligated to
pay any premium which it would have had to pay if it had then elected to redeem
the Debentures pursuant to paragraph 5 of the Debentures, except in the case of
any Event of Default occurring by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding payment of the premium which it would have had to pay if it had then
elected to redeem the Debentures pursuant to paragraph 5 of the Debentures, in
which case an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law.
SECTION 8.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of or interest on the Debentures or to enforce the
performance of any provision of the Debentures or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Debentures or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Debentureholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute
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a waiver of or acquiescence in the Event of Default. No remedy is exclusive of
any other remedy. All available remedies are cumulative to the extent permitted
by law.
SECTION 8.4. Waiver of Defaults and Events of Default.
Subject to Sections 8.7 and 11.2, the Holders of a majority in
principal amount of the Debentures then outstanding by notice to the Trustee may
waive an existing default or Event of Default and its consequences, except a
default in the payment of the principal of or interest on any Debenture as
specified in clauses (1) and (2) of Section 8.1 or a failure by the Company to
convert any Debenture into Common Stock in accordance with Article 4. When a
default or Event of Default is waived, it is cured and ceases.
SECTION 8.5. Control by Majority.
The Holders of a majority in principal amount of the Debentures then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of another Debentureholder, or that may involve the
Trustee in personal liability; provided that the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction.
SECTION 8.6. Limitation on Suits.
A Debentureholder may not pursue any remedy with respect to this
Indenture or the Debentures (except actions for payment of overdue principal or
premium, if any, or interest or for the conversion of the Debentures pursuant to
Article 4) unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the Debentures
then outstanding Debentures make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Debentures then outstanding.
A Debentureholder may not use this Indenture to prejudice the rights
of another Debentureholder or to obtain a preference or priority over such other
Debentureholder.
SECTION 8.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Debenture to receive payment of the principal of and interest on
the Debenture, on or after the respective due dates expressed in the Debenture,
or to bring suit for the enforcement of any such payment on or after such
respective dates, or to convert the Debenture in accordance with the terms
hereof, is absolute and unconditional and shall not be impaired or affected
without the consent of the Holder.
SECTION 8.8. Collection Suit by Trustee.
If an Event of Default in the payment of principal or interest
specified in Section 8.1(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust
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against the Company or another obligor on the Debentures for the whole amount of
principal and accrued interest remaining unpaid, together with interest on
overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per annum
borne by the Debentures and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 8.9. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Debentureholders allowed in any judicial proceedings relative to the Company (or
any other obligor on the Debentures), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceeding is hereby authorized by each
Debentureholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Debentureholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 9.7, and to the
extent that such payment for the reasonable compensation, expenses,
disbursements and advances in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
which the Debentureholders may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or the Trustee to authorize or accept or adopt on behalf
of any Debentureholder any plan of reorganization, arrangement, adjustment or
composition affecting the Debentures or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Debentureholder in
any such proceeding.
SECTION 8.10. Priorities.
If the Trustee collects any money pursuant to this Article 8, it shall
pay out the money in the following order:
First, to the Trustee for amounts due under Section 9.7;
Second, to the holders of Senior Indebtedness to the extent required
by Article 5;
Third, to Debentureholders for amounts due and unpaid on the
Debentures for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Debentures for principal and interest, respectively; and
Fourth, to the Company.
The Trustee may fix a record date and payment date for any payment to
the Debentureholders pursuant to this Section 8.10.
SECTION 8.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defense made by the party litigant.
This Section 8.11 does not apply to a suit made by the Trustee, a suit by a
Holder pursuant to Section 8.7, or a suit by Holders of more than 10% in
principal amount of the Debentures then outstanding.
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ARTICLE 9
TRUSTEE
SECTION 9.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill, in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties as are specifically set
forth in this Indenture and no others; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. The
Trustee, however, shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section 9.1;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 8.5.
(d) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability, expense or fee.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 9.1.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 9.2. Rights of Trustee.
Subject to Section 9.1:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, which shall conform to Section
12.4(b). The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such Certificate or Opinion.
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(c) The Trustee may act through its agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law that shall be full and complete authorization
and protection in respect of any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
SECTION 9.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Debentures and may otherwise deal with the Company or an
affiliate of the Company with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 9.10 and 9.11.
SECTION 9.4. Trustee's Disclaimer '.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Debentures, it shall not be accountable for the Company's
use of the proceeds from the Debentures, and it shall not be responsible for any
statement in the Debentures other than its certificate of authentication.
SECTION 9.5. Notice of Default or Events of Default.
If a default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Debentureholder notice
of the default or Event of Default within 90 days after it occurs. Except in
the case of a default or an Event of Default in payment of the principal of or
premium, if any, or interest on any Debenture, the Trustee may withhold the
notice if the Trustee in good faith determines that withholding the notice is in
the interest of Debentureholders.
SECTION 9.6. Reports by Trustee to Holders.
If such report is required by TIA (S) 313, within 60 days after each
May 15 beginning with the May 15 following the date of this Indenture, the
Trustee shall mail to each Debentureholder a brief report dated as of such May
15 that complies with TIA (S) 313(a). The Trustee also shall comply with TIA
(S) 313(b)(2) and (c).
A copy of each report at the time of its mailing to the
Debentureholders shall be mailed to the Company and filed with the SEC and each
stock exchange, if any, on which the securities are listed. The Company shall
notify the Trustee whenever the Debentures become listed on any stock exchange
and any changes in the stock exchanges on which the Debentures are listed.
SECTION 9.7. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust). The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it. Such expenses may
include the reasonable compensation, disbursements and expenses of Trustee's
agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss, liability or expense incurred by it in connection with its
duties under this Indenture or any action or failure to act as authorized or
within the discretion or rights or powers conferred upon the Trustee hereunder.
The Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The Company shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the
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Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its written consent.
The Company need not reimburse the Trustee for any expense or
indemnify it against any loss or liability incurred by it through its negligence
or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a senior claim to which the Debentures are hereby made
subordinate on all money or property held or collected by the Trustee, except
such money or property held in trust to pay the principal of and interest on
particular Debentures. The obligations of the Company under this Section 9.7 to
compensate or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien prior to that of
the Debentures upon all property and funds held or collected by the Trustee as
such except funds held in trust for the benefit of the Holders of particular
Debentures. The obligation of the Company under this Section 9.7 shall survive
the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 8.1(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 9.8. Replacement of Trustee.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Debentures then outstanding may remove the
Trustee by so notifying the Trustee and may appoint a successor Trustee with the
Company's written consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 9.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 45 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of 10% in principal amount of the Debentures then outstanding may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 9.10, any Debentureholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee and be released from its obligations (exclusive of any
liabilities Trustee may have incurred while acting as Trustee) hereunder, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Debentureholder.
Notwithstanding replacement of the Trustee pursuant to this Section
9.8, the Company's obligations under Section 9.7 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 9.9. Successor Trustee by Merger, etc.
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If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee, provided such transferee corporation
shall qualify and be eligible under Section 9.10.
SECTION 9.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of paragraphs (1), (2) and (5) of TIA (S) 310. If at any time the
Trustee shall cease to satisfy any such requirements, it shall resign
immediately in the manner and with the effect specified in this Article 10. The
Trustee shall be subject to the provisions of TIA (S) 310(b). Nothing herein
shall prevent the Trustee from filing with the SEC the application referred to
in the penultimate paragraph of TIA (S) 310(b).
SECTION 9.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 10
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 10.1. Termination of Company's Obligation.
The Company may terminate all of its obligations under the Debentures
and this Indenture (except those obligations referred to in the immediately
succeeding paragraph) if all of the Debentures previously authenticated and
delivered (other than destroyed, lost or stolen Debentures which have been
replaced or paid or Debentures for whose payment money has theretofore been held
in trust and thereafter repaid to the Company, as provided in Section 10.3) have
been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if the Company irrevocably deposits in trust with
the Trustee money or U.S. Government Obligations maturing as to principal and
interest in such amounts and at such times as are sufficient without
consideration of any reinvestment of such interest, to pay the principal of and
interest on the Debentures then outstanding to maturity or to the date fixed for
redemption and to pay all other sums payable by it hereunder. The Company may
make an irrevocable deposit pursuant to this Section 10.1 only if at such time
it is not prohibited from doing so under the provisions of Article 5 and the
Company shall have delivered to the Trustee and any such Paying Agent an
Officers' Certificate to that effect and that all other conditions to such
deposit have been complied with.
The Company's obligations in paragraph 13 of the Debentures, in
Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.11, 6.1, 6.3, 9.7, 9.8 and 10.4, and in
Article 4 shall survive until the Debentures are no longer outstanding.
Thereafter, the Company's obligations in such paragraph 13 and in Section 9.7
shall survive.
After such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Debentures and this Indenture, except for those surviving obligations specified
above.
"U.S. Government Obligations" means direct non-callable obligations
of, or non-callable obligations guaranteed by, the United States of America for
the payment of which guarantee or obligation the full faith and credit of the
United States is pledged.
SECTION 10.2. Application of Trust Money.
The Trustee or the Paying Agent shall hold in trust, for the benefit
of the Holders, money or U.S. Government Obligations deposited with it pursuant
to Section 10.1, and shall apply the deposited money and the
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money from U.S. Government Obligations in accordance with this Indenture to the
payment of the principal of and interest on the Debentures. Money and U.S.
Government Obligations so held in trust shall not be subject to the
subordination provisions of Article 5.
SECTION 10.3. Repayment to Company.
Subject to Section 10.1, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess money or U.S. Government
Obligations held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal or interest that remains
unclaimed for two years after a right to such money has matured; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such payment, may at the expense of the Company cause to be published once
in a newspaper of general circulation in the City of New York or mail to each
Holder entitled to such money notice that such money remains unclaimed and that
after a date specified therein, which shall be at least 30 days from the date of
such publication or mailing, any unclaimed balance of such money then remaining
will be repaid to the Company. After payment to the Company, Debentureholders
entitled to money must look to the Company for payment as general creditors
unless otherwise prohibited by law.
SECTION 10.4. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 10.1 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Debentures
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 10.1 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
10.1; provided, however, that if the Company has made any payment of the
principal of or interest on any Debentures because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Debentures to receive any such payment from the money or U.S. Government
Obligations held by the Trustee or the Paying Agent.
39
<PAGE>
ARTICLE 11
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 11.1. Without Consent of Holders.
The Company and the Trustee may amend or supplement this Indenture or
the Debentures without notice to or consent of any Debentureholder:
(1) to comply with Sections 6.4 and 7.1;
(2) to provide for uncertificated Debentures in addition to or in
place of certificated Debentures;
(3) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not adversely affect the rights of any
Debentureholder; or
(4) to comply with the provisions of the TIA.
SECTION 11.2. With Consent of Holders.
The Company and the Trustee may amend or supplement this Indenture or
the Debentures without notice to any Debentureholder but with the written
consent of the Holders of 66 2/3% of the Debentures then outstanding. The
Holders of a majority in principal amount of the Debentures then outstanding may
waive compliance in a particular instance by the Company with any provision of
this Indenture or the Debentures without notice to any Debentureholder. Subject
to Section 11.4, without the written consent of each Debentureholder affected,
however, an amendment, supplement or waiver, including a waiver pursuant to
Section 8.4, may not:
(1) extend the stated maturity of the Debentures;
(2) reduce the rate of or extend the time for payment of interest on
the Debentures;
(3) reduce the principal amount or premium, if any, on the
Debentures;
(4) impair the rights of any Holder of the Debentures to institute
suit for payment thereof;
(5) change the currency in which the Debentures are payable;
(6) impair the right of any Holder to convert the Debentures into
cash, securities or other assets;
(7) modify the subordination provisions set forth herein in a manner
adverse to the Holders of the Debentures;
(8) impair the rights of Holders to cause the Company to repurchase
the Debentures upon a Fundamental Change;
(9) reduce the percentage of Debentures, the Holders of which must
consent to any such modification.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
40
<PAGE>
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amendment, supplement or waiver.
An amendment under this Section 11.2 may not make any change that
adversely affects the rights under Article 5 of any holder of an issue of Senior
Indebtedness unless the holders of that issue, pursuant to its terms, consent to
the change.
SECTION 11.3. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Debentures
shall comply with the TIA as in effect at the date of such amendment or
supplement.
SECTION 11.4. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Debenture or portion of a Debenture that evidences the same debt as
the consenting Holder's Debenture, even if notation of the consent is not made
on any Debenture. However, any such Holder or subsequent Holder may revoke the
consent as to his Debenture or portion of a Debenture if the Trustee receives
the notice of revocation before the date the amendment, supplement or waiver
becomes effective.
After an amendment, supplement or waiver becomes effective, it shall
bind every Debentureholder, unless it makes a change described in any of clauses
(1) through (8) of Section 11.2. In that case the amendment, supplement or
waiver shall bind each Holder of a Debenture who has consented to it and every
subsequent Holder of a Debenture or portion of a Debenture that evidences the
same debt as the consenting Holder's Debenture.
SECTION 11.5. Notation On or Exchange of Debentures.
If an amendment, supplement or waiver changes the terms of a
Debenture, the Trustee may require the Holder of the Debenture to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Debenture
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Debenture
shall issue and the Trustee shall authenticate a new Debenture that reflects the
changed terms.
SECTION 11.6. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplement authorized pursuant
to this Article 11 if the amendment or supplement does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may but need not sign it. In signing or refusing to sign such amendment
or supplement, the Trustee shall be entitled to receive and, subject to Section
9.1 shall be fully protected in relying upon, an Opinion of Counsel stating that
such amendment or supplement is authorized or permitted by this Indenture. The
Company may not sign an amendment or supplement until the Board of Directors
approves it.
41
<PAGE>
ARTICLE 12
MISCELLANEOUS
SECTION 12.1. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by any of Sections 310 to 317, inclusive, of the TIA through
operation of Section 318(c) thereof, such imposed duties shall control.
SECTION 12.2. Notices.
Any notice or communication shall be given in writing and delivered in
person or mailed by certified or registered mail, return receipt requested,
addressed as follows:
if to the Company:
MCI WORLDCOM, Inc.
500 Clinton Center Drive
Clinton, Mississippi 39056
Attention:
if to the Trustee:
[ ]
Such notices or communications shall be effective when received.
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Debentureholder shall be
mailed by first-class mail to him at his address shown on the register kept by
the Registrar.
Failure to mail a notice or communication to a Debentureholder or any
defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication to a Debentureholder is mailed
in the manner provided above, it is duly given, whether or not the addressee
receives it.
SECTION 12.3. Communications by Holders with Other Holders.
The Debentureholders may communicate pursuant to TIA (S) 312(b) with other
Debentureholders with respect to their rights under this Indenture or the
Debentures. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA (S) 312(c).
SECTION 12.4. Certificate and Opinion as to Conditions Precedent.
(a) Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee
at the request of the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent (including any covenants compliance
with which constitutes a condition precedent), if any, provided for in
this Indenture relating to the proposed action have been complied
with; and
42
<PAGE>
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent (including any covenants
compliance with which constitutes a condition precedent) have been
complied with.
(b) Each Officers' Certificate and Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Indenture (other
than annual certificates provided pursuant to Section 6.5 hereof) shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an Opinion of Counsel
may rely on an Officers' Certificate or certificates of public
officials.
SECTION 12.5. Record Date for Vote or Consent of Debentureholders.
The Company (or, in the event deposits have been made pursuant to
Sections 6.4 or 10.1, the Trustee) may set a record date for purposes of
determining the identity of the Debentureholders entitled to vote or consent to
any action by vote or consent authorized or permitted under this Indenture,
which record date shall be the later of 10 days prior to the first solicitation
of such vote or consent or the date of the most recent list of Debentureholders
furnished to the Trustee pursuant to Section 2.5 hereof prior to such
solicitation. If a record date is fixed, those persons who were Holders of the
Debentures at such record date (or their duly designated proxies), and only
those persons, shall be entitled to take such action by vote or consent or to
revoke any vote or consent previously given, whether or not such persons
continue to be Holders after such record date.
SECTION 12.6. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or the Paying Agent may make reasonable rules for its
functions.
SECTION 12.7. Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which state or
Federally chartered banking institutions in New York, New York or the city and
state where the Trustee's corporate trust operations are located, which
initially are New York, New York, are not required to be open. If a payment date
is a Legal Holiday at a place of payment, payment may be made at that place on
the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 12.8. Governing Law.
The laws of the State of New York shall govern this Indenture and the
Debentures without regard to principles of conflicts of law.
SECTION 12.9. No Adverse Interpretation of Other Agreements.
43
<PAGE>
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 12.10. No Recourse Against Others.
All liability described in paragraph l7 of the Debentures of any
director, officer, employee or stockholder, as such, of the Company is waived
and released.
SECTION 12.11. Successors.
All agreements of the Company in this Indenture and the Debentures
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 12.12. Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent the same agreement.
SECTION 12.13. Separability.
In case any provision in this Indenture or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.14. Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
44
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
as of the _____ day of _______________.
MCI WORLDCOM, INC.
By:
----------------------------------------------
Name:
Title:
[SEAL]
Attest:
- ---------------------------------------
Secretary
[ ]
----------------------------
as Trustee
By:
Title:
[SEAL]
Attest:
- ---------------------------------------
Name:
Title:
45
<PAGE>
EXHIBIT A
[FACE OF DEBENTURE]
Number
MCI WORLDCOM, INC.
4.5 % Convertible Subordinated Debentures due 2003
MCI WORLDCOM, INC., a Georgia corporation, promises to pay to
or registered assigns the principal sum of Dollars on October 15, 2003.
Interest Payment Dates: and
Record Dates: and
Additional provisions of this Debenture are set forth on the other
side of this Debenture.
Dated:
MCI WORLDCOM, INC.
By:
Name:
Title:
[SEAL]
Attest:
By:
Secretary
Certificate of Authentication:
This is one of the Debentures referred
to in the within mentioned Indenture.
,
as Trustee,
By:
Authorized Signatory
A-1
<PAGE>
[REVERSE SIDE]
MCI WORLDCOM, INC.
4.5 % Convertible Subordinated Debentures due 2003
1. Interest.
MCI WORLDCOM, Inc., a Georgia corporation (the "Company"), promises to
pay interest on the principal amount of this Debenture at the rate per annum
shown above. The Company shall pay interest semi-annually on April 15 and
October 15 of each year, commencing on the earlier of April 15 or October 15
following the date of first issuance of this Debenture. Interest on this
Debenture will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of first issuance of the
Debentures under the Indenture (as defined below); provided that, if there is no
existing default in the payment of interest, and if this Debenture is
authenticated between a record date referred to on the face hereof and the next
succeeding interest payment date, interest shall accrue from such interest
payment date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment.
The Company will pay interest on this Debenture (except defaulted
interest) to the person who is the registered holder of this Debenture at the
close of business on the April 1 and October 1 next preceding the interest
payment date. The holder must surrender this Debenture to the Paying Agent to
collect payment of principal. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Company, however, may pay principal
and interest by its check payable in such money. It may mail an interest check
to the holder's registered address.
3. Paying Agent, Registrar and Conversion Agent.
Initially, (the "Trustee") will act as Paying Agent,
Registrar and Conversion Agent. The Company may change any Paying Agent,
Registrar or Conversion Agent without notice to the holder. The Company or any
of its Subsidiaries may act as Paying Agent, Registrar or Conversion Agent.
4. Indenture, Limitations.
This Debenture is one of a duly authorized issue of Debentures of the
Company designated as its 4.5% Convertible Subordinated Debentures due 2003 (the
"Debentures"), issued under an Indenture dated as of (the "Indenture"),
between the Company and the Trustee. The terms of this Debenture include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb), as amended by the
Trust Indenture Reform Act of 1990 and as in effect on the date of the
Indenture. This Debenture is subject to all such terms, and the holder of this
Debenture is referred to the Indenture and said Act for a statement of them. The
Debentures are subordinated unsecured obligations of the Company limited to up
to $____________.
5. Optional Redemption.
The Debentures may be redeemed, at the Company's option, in whole or
in part at the following redemption prices (expressed as percentages of
principal amount), plus accrued interest to the date fixed for redemption, if
redeemed during the 12-month period beginning October 15 of the year indicated:
<TABLE>
<CAPTION>
Year Redemption Price
- ---------------------------------------------------------- ----------------
<S> <C>
1998 102.0%
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
1999 101.5%
2000 101.0%
2001 100.5%
2002 and thereafter 100.0%
</TABLE>
6. Notice of Redemption.
Notice of redemption will be mailed by first class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
record to be redeemed at his registered address. Debentures in denominations
larger than $1,000 may be redeemed in part, but only in whole multiples of
$1,000. On and after the redemption date, subject to the deposit with the
Paying Agent of funds sufficient to pay the redemption price, interest ceases to
accrue on the Debentures or portions of them called for redemption.
7. Purchase of at Option of Holder Upon a Fundamental Change.
At the option of the Holder and subject to the terms and conditions of
the Indenture, the Company shall become obligated to purchase all or any part
specified by the Holder (so long as the principal amount of such part is $1,000
or an integral multiple thereof) of the Debentures held by such Holder on the
date that is not less than ten nor more than 20 days after the Final Surrender
Date as defined in the Indenture. The repurchase price shall be payable, at the
option of the Company, in cash or equivalent shares of common stock based on
recent trading prices, as provided in the Indenture, or a combination thereof.
The Holder shall have the right to withdraw any Fundamental Change Purchase
Notice by delivering a written notice of withdrawal to the Paying Agent in
accordance with the term of the Indenture. The obligation of the Company to pay
the Fundamental Change Purchase Price will be subject to the terms of its then-
existing Bank Credit Facilities or other agreements relating to borrowings which
constitute Senior Indebtedness.
8. Conversion.
A Holder of a Debenture may convert it into shares of Common Stock of
the Company at any time prior to maturity, except that if the Debenture is
called for redemption, the conversion right will terminate at the close of
business on the third Business Day immediately preceding the redemption date.
The initial conversion price is (i) $45.00 divided by (ii) the exchange ratio in
the merger of SkyTel Communications, Inc. with and into a wholly owned
subsidiary of MCI WORLDCOM, Inc. per share, subject to adjustment under certain
circumstances. The number of shares issuable upon conversion of a Debenture is
determined by dividing the principal amount converted by the conversion price in
effect on the conversion date. Upon conversion, no adjustment for interest or
dividends will be made. No fractional shares will be issued upon conversion; in
lieu thereof, an amount will be paid in cash based upon the current market price
(as defined) of the Common Stock on the last trading day prior to the date of
conversion.
To convert a Debenture, a Holder must (a) complete and sign the
conversion notice set forth below, (b) surrender the Debenture to a Conversion
Agent, (c) furnish appropriate endorsements or transfer documents if required by
the Registrar or the Conversion Agent and (d) pay any transfer or similar tax,
if required. If a Holder surrenders a Debenture for conversion during the
period from the close of business on any interest payment record date to the
opening of business on the corresponding interest payment date (except if the
Debenture is called for redemption on a redemption date during such period), the
Debenture must be accompanied by payment of an amount equal to the interest
payable on such interest payment date on the principal amount of the Debenture
or portion thereof then converted. A Holder may convert a portion of a
Debenture equal to $1,000 or any integral multiple thereof.
A Debenture in respect of which a Holder had delivered a Fundamental
Change Purchase Notice exercising the option of such Holder to require the
Company to purchase such Debenture may be converted only if the notice of
exercise is withdrawn as provided above and in accordance with the terms of the
Indenture.
9. Subordination.
A-3
<PAGE>
The indebtedness evidenced by the Debentures is, to the extent and in
the manner provided in the Indenture, subordinate and junior in right of payment
to the prior payment in full of all Senior Indebtedness of the Company, as
defined in the Indenture. Senior Indebtedness must be paid before any payment
may be made to any Holder of the Debentures. Any Holder by accepting this
Debenture agrees to and shall be bound by such subordination provisions and
authorizes the Trustee to give them effect.
In addition to all other rights of Senior Indebtedness described in
the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any terms of any instrument relating to the
Senior Indebtedness or any extension or renewal of the Senior Indebtedness.
10. Denominations, Transfer, Exchange.
The Debentures are in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000. A Holder may register the transfer
of or exchange Debentures in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes or other governmental charges that may
be imposed by law or permitted by the Indenture.
11. Persons Deemed Owners.
The registered holder of a Debenture may be treated as the owner
of it for all purposes.
12. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent will pay the money back to the
Company at its request. After that, Holders entitled to money must look to the
Company for payment.
13. Amendment, Supplement, Waiver.
Subject to certain exceptions, the Indenture or the Debentures may be
amended or supplemented with the consent of the Holders of 66 2/3% in
principal amount of the Debentures then outstanding and any past default or
compliance with any provision may be waived in a particular instance with the
consent of the Holders of a majority in principal amount of the Debentures then
outstanding. Without the consent of or notice to any Holder, the Company and
the Trustee may amend or supplement the Indenture or the Debentures to, among
other things, provide for uncertificated Debentures in addition to or in place
of certificated Debentures, or to cure any ambiguity, defect or inconsistency or
make any other change that does not adversely affect the rights of any Holder.
14. Successor Corporation.
When a successor corporation assumes all the obligations of its
predecessor under the Debentures and the Indenture, the predecessor corporation
will be released from those obligations.
15. Defaults and Remedies.
An Event of Default is: default for 30 days in payment of interest on
the Debentures; default in payment of principal or premium, if any, on the
Debenture; failure by the Company for 30 days after notice to it to comply with
any of its other agreements in the Indenture or the Debentures; certain events
of bankruptcy or insolvency of the Company or any of its Subsidiaries; and
certain defaults on other indebtedness. If an Event of Default (other than as a
result of certain events of bankruptcy or insolvency), occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the Debentures
then outstanding may declare all unpaid principal of and accrued interest to the
date of acceleration on the Debentures then outstanding to be due and payable
immediately, all as and to the extent provided in the Indenture. If an Event of
Default occurs as a result of
A-4
<PAGE>
certain events of bankruptcy or insolvency, all unpaid principal of and accrued
interest on the Debentures then outstanding shall become due and payable
immediately without any declaration or other act on the part of the Trustee or
any Holder, all as and to the extent provided in the Indenture. Holders may not
enforce the Indenture or the Debentures except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Debentures. Subject to certain limitations, Holders of a
majority in principal amount of the Debentures then outstanding may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interests. The Company is required to file periodic reports with the Trustee as
to the absence of default.
16. Trustee Dealings with the Company.
______________________ , the Trustee under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or an Affiliate of the Company, and may
otherwise deal with the Company or an Affiliate of the Company, as if it were
not the Trustee.
17. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Debentures or the Indenture or for any claim based on, in respect or by reason
of, such obligations or their creation. The Holder of this Debenture by
accepting this Debenture waives and releases all such liability. The waiver and
release are part of the consideration for the issue of this Debenture.
18. Discharge Prior to Maturity.
If the Company deposits with the Trustee or the Paying Agent money or
U.S. Government Obligations sufficient to pay the principal of and interest on
the Debentures to maturity, the Company will be discharged from the Indenture
except for certain Sections thereof.
19. Authentication.
This Debenture shall not be valid until the Trustee or an
authenticating agent signs the certificate of authentication on the other side
of this Debenture.
20. Abbreviations and Definitions.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
All capitalized terms used in this Debenture and not specifically
defined herein are defined in the Indenture and are used herein as so defined.
21. Indenture to Control.
In the case of any conflict between the provisions of this Debenture
and the Indenture, the provisions of the Indenture shall control.
The Company will furnish to any Holder, upon written request and
without charge, a copy of the Indenture. Requests may be made to: MCI WORLDCOM,
Inc., 500 Clinton Center Drive, Clinton, Mississippi 39056, Attention:
Secretary.
A-5
<PAGE>
<TABLE>
<CAPTION>
ASSIGNMENT FORM CONVERSION NOTICE
<S> <C>
To Assign this Debenture, fill in the To convert this Debenture into Common Stock of the
form below: Company, check the box:
I or we assign and transfer this [ ]
Debenture to
[ ]
(Insert assignee's soc. sec. or tax To convert only part of this Debenture, state the
I.D. no.) amount:
[ ]
If you want the stock certificate made out in another
person's name, fill in the form below:
[ ]
(Print or type assignee's name,
address and zip code)
and irrevocably appoint (Insert the other person's soc. sec. or tax I.D. no.)
agent to transfer this Debenture on
the books of the Company. The Agent
may substitute another to act for
him.
(Print or type other person's name, address and zip
code)
Your Signature: * Your Signature: *
(Sign exactly as your name appears on (Sign exactly as your name appears on the other side
the other side of this Debenture) of this Debenture)
* *
(Sign exactly as your name appears on (Sign exactly as your name appears on the other side
the other side of this Debenture) of this Debenture)
Date: Date:
*Signature guaranteed by: *Signature guaranteed by:
By: By:
</TABLE>
<PAGE>
<TABLE>
<S> <C>
*The signature must be guaranteed by *The signature must be guaranteed by a bank, a trust
a bank, a trust company or a member company or a member firm of the New York Stock
firm of the New York Stock Exchange. Exchange.
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased by the Company
pursuant to Section 6.10 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Debenture purchased by
the Company pursuant to Section 6.10 of the Indenture, state the amount: $
Date:
(Sign exactly as your name appears on
the other side of this Debenture)
Print Name:
<PAGE>
EXHIBIT 5.1
August 26, 1999
Board of Directors of
MCI WORLDCOM, Inc.
500 Clinton Center Drive
Clinton, Mississippi 39056
Ladies and Gentlemen:
I am General Counsel -- Corporate Development of MCI WORLDCOM, Inc., a
Georgia corporation (the "Company"), and am familiar with the Registration
Statement on Form S-4 (the "Registration Statement") to be filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the merger (the
"Merger") of SkyTel Communications, Inc., a Delaware corporation ("SkyTel"),
with and into a wholly-owned subsidiary of the Company ("Merger Sub"), and to
the registration under the Securities Act of (A)(i) a maximum of 19,034,902
shares of the common stock, par value $.01 per share (the "MCI WorldCom Common
Stock"), and associated preferred stock purchase rights of the Company and (ii)
3,750,000 shares of Series C $2.25 Cumulative Convertible Exchangeable Preferred
Stock, par value $0.01 per share ("MCI WorldCom Preferred Stock"), of the
Company which are issuable, or to be reserved for issuance, in the Merger,
including 1,157,500 shares of MCI WorldCom Common Stock and associated preferred
stock purchase rights issuable in respect of SkyTel common stock issuable upon
conversion of SkyTel preferred stock and 988,185 shares of MCI WorldCom Common
Stock and associated preferred stock purchase rights issuable in respect of
SkyTel common stock issuable upon exercise of SkyTel employee stock options or
pursuant to SkyTel employee benefit plans; and (B) $187,500,000 principal amount
of 4.5% Convertible Subordinated Debentures due 2003 (the "Debentures") issuable
upon exchange of the MCI WorldCom Preferred Stock, including such indeterminate
number shares of MCI WorldCom Common Stock and associated preferred stock
purchase rights issuable upon conversion of the MCI WorldCom Preferred Stock or
the Debentures to be issued pursuant to the Merger to the holders of the common
and preferred stock of SkyTel.
In connection herewith, I have examined and relied without investigation as
to matters of fact upon the Registration Statement, including the proxy
statement/prospectus contained therein, the Second Amended and Restated Articles
of Incorporation, as amended, and the Restated Bylaws of the Company,
certificates, statements and results of inquiries of public officials and
officers and representatives of the Company, and such other documents, corporate
records, opinions and instruments as I have deemed necessary or appropriate to
enable me to render the opinions expressed below. I have assumed the
genuineness of all signatures appearing on documents examined by me, the legal
competence and capacity of each person that executed documents, the authenticity
of documents submitted to me as originals and the conformity to authentic
original documents of all documents submitted to me as certified or photostatic
copies. I have also assumed the due authorization, execution and delivery of
all documents.
Based upon the foregoing, in reliance thereon and subject to the
exceptions, qualifications and limitations stated herein and the effectiveness
of the Registration Statement under the Securities Act, I am of the following
opinions:
1. The Company is a corporation validly existing under the laws of the
State of Georgia.
2. When the conditions to consummation of transactions contemplated by the
Agreement and Plan of Merger, dated as of May 28, 1999, by and among the
Company, SkyTel and Merger Sub (the "Merger Agreement") shall have been
satisfied or waived and the shares of MCI WorldCom Common Stock and MCI
WorldCom Preferred Stock to be issued in connection with the Merger shall
have been issued in accordance with the terms of the Merger Agreement,
then:
<PAGE>
(a) the shares of MCI WorldCom Common Stock and MCI WorldCom Preferred
Stock issuable in the Merger will be validly issued, fully paid and
non-assessable;
(b) the shares of MCI WorldCom Common Stock issuable upon conversion of
the MCI WorldCom Preferred Stock or the Debentures have been duly and
validly authorized and, when issued, will be validly issued, fully
paid and non-assessable; and
(c) the Debentures issuable upon exchange of the MCI WorldCom Preferred
Stock, when executed, authenticated and delivered will be valid and
binding obligations of the Company enforceable in accordance with
their terms, except to the extent that enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws relating to or affecting the rights
and remedies of creditors generally and by general principles of
equity including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible
unavailability of specific performance, injunctive relief or other
equitable remedies, regardless of whether enforceability is considered
in a proceeding in equity or at law.
This opinion is not rendered with respect to any laws other than the latest
codification of the Georgia Business Corporation Code (the "GBCC") available to
me. I note that the Merger Agreement provides that it shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws and that the form of the Debentures and the related form of indenture
provide that they shall be governed by the laws of the State of New York,
without regard to principles of conflicts of laws. In rendering the opinions
expressed herein I have assumed that such matters are governed exclusively by
the GBCC and I express no opinion as to which law any court construing the
Merger Agreement, the Debentures or the related indenture would apply. This
opinion has not been prepared by an attorney admitted to practice in Delaware,
Georgia or New York.
I hereby consent to the filing of this opinion as Exhibit 5.1 to the
aforesaid Registration Statement. I also consent to your filing copies of this
opinion as an exhibit to the Registration Statement with agencies of such states
as you deem necessary in the course of complying with the laws of such states
regarding the offering and sale of the securities referred to herein In giving
this consent, I do not admit that I am in the category of persons whose consent
is required under Section 7 of the Securities Act or the rules and regulations
of the Commission.
Very truly yours,
/s/ P. Bruce Borghardt
----------------------------------------
P. Bruce Borghardt
General Counsel -- Corporate Development
<PAGE>
Exhibit 8.1
[Letterhead of Jones, Day, Reavis & Pogue ]
August 26, 1999
Ladies and Gentlemen:
We have acted as counsel for SkyTel Communications, Inc., a Delaware
corporation ("SkyTel"), in connection with the proposed merger (the "Merger") of
SkyTel with and into Empire Merger Inc., a Delaware corporation ("Sub") and a
wholly owned subsidiary of MCI WORLDCOM, Inc., a Georgia corporation
("WorldCom"), pursuant to an Agreement and Plan of Merger dated as of May 28,
1999 (the "Merger Agreement"), by and among WorldCom, Sub and SkyTel and as
described in the registration statement on Form S-4 (the "Registration
Statement"), which includes the Proxy Statement/Prospectus of SkyTel and
WorldCom, as filed with the Securities and Exchange Commission (the "SEC") on
August 26, 1999.
In that connection, you have requested our opinion regarding certain
Federal income tax consequences of the Merger. For purposes of our opinion, we
have relied upon, and have assumed without having independently verified, the
completeness, truth, and accuracy of the Merger Agreement, the Registration
Statement, and the representations to be made by SkyTel and WorldCom in their
respective letters (the "Representation Letters") in the forms attached as
Exhibits B and C of the Merger Agreement, at all times up to and including the
Closing Date. We have further assumed that any representations to be made in
the Representation Letters or in the Merger Agreement "to the best knowledge of"
or similarly qualified are true, correct and complete, and will continue to be
true, correct and complete at all times up to and including the Closing Date, in
each case without such qualification. If any of the above-described assumptions
are untrue for any reason or if the Merger is consummated in a manner that is
inconsistent with the manner in which it is described in the Merger Agreement or
the Registration Statement, our opinion as expressed below may be adversely
affected and may not be relied upon.
The opinion expressed herein is based upon the current provisions of
the Internal Revenue Code of 1986, as amended, current regulations and proposed
regulations thereunder, current published administrative rulings and procedures
of the Internal Revenue Service, and judicial decisions published to date, all
of which are subject to change at any time. It should be noted that future
legislative, judicial or administrative actions, decisions or interpretations,
which may be retroactive in effect, could materially affect our opinion.
Based upon the foregoing, we are of the opinion that the discussion
contained in the Registration Statement under the caption "Certain Federal
Income Tax Consequences" represents an accurate summary of the material Federal
income tax consequences of the Merger.
We express no opinion on any issue relating to Federal income tax
consequences other than those described under the caption "Certain Federal
Income Tax Consequences." We have not been asked to address, nor have we
addressed, any other consequences of the Merger or any other transactions. We
are furnishing this opinion in connection with the filing of the Registration
<PAGE>
Statement with the SEC, and this opinion is not to be used, circulated, quoted
or otherwise referred to for any other purpose without our express written
permission.
We consent to the filing of this opinion as Exhibit 8.1 to the
Registration Statement and to the reference to our firm name therein. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules or regulations of the SEC promulgated thereunder.
Very truly yours,
/s/ Jones, Day, Reavis & Pogue
2
<PAGE>
Exhibit 12.1
MCI WORLDCOM, INC.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERENCE DIVIDENDS
(IN MILLIONS)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------ Six Months Ended
1994 1995 1996 1997 1998 June 30, 1999
---- ------ ------- ------ ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income (loss)
from continuing
operations............. $(51) $ 428 $(2,103) $ 663 $(1,664) $2,799
Minority interests in
losses of consolidated
affiliates............. -- -- -- -- -- (20)
Fixed charges, net of
capitalized interest
and preference
dividends.............. 60 272 274 442 716 562
---- ------ ------- ------ ------- ------
Earnings............... $ 9 $ 700 $(1,829) $1,105 $ (948) $3,341
==== ====== ======= ====== ======= ======
Fixed Charges:
Interest cost........... $ 49 $ 258 $ 262 $ 483 $ 873 $ 639
Amortization of
financing costs........ 2 3 2 -- 10 8
Interest factor of rent
expense................ 10 16 19 47 78 66
Preference dividends.... 45 53 2 42 51 51
---- ------ ------- ------ ------- ------
Fixed charges.......... $106 $ 330 $ 285 $ 572 $ 1,012 $ 764
==== ====== ======= ====== ======= ======
Deficiency of earnings
to combined fixed
charges and preference
dividends.............. $(97) $ -- $(2,114) $ -- $(1,960) $ --
==== ====== ======= ====== ======= ======
Ratio of earnings to
combined fixed charges
and preference
dividends.............. -- 2.12:1 -- 1.93:1 -- 4.37:1
==== ====== ======= ====== ======= ======
</TABLE>
<PAGE>
Exhibit 12.2
MCI WORLDCOM, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------ Six Months Ended
1994 1995 1996 1997 1998 June 30, 1999
---- ------ ------- ------ ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income (loss)
from continuing
operations............. $(51) $ 428 $(2,103) $ 663 $(1,664) $2,799
Minority interests in
losses of consolidated
affiliates............. -- -- -- -- -- (20)
Fixed charges, net of
capitalized interest... 60 272 274 442 716 562
---- ------ ------- ------ ------- ------
Earnings............... $ 9 $ 700 $(1,829) $1,105 $ (948) $3,341
==== ====== ======= ====== ======= ======
Fixed Charges:
Interest cost........... $ 49 $ 258 $ 262 $ 483 $ 873 $ 639
Amortization of
financing costs........ 2 3 2 -- 10 8
Interest factor of rent
expense................ 10 16 19 47 78 66
---- ------ ------- ------ ------- ------
Fixed charges.......... $ 61 $ 277 $ 283 $ 530 $ 961 $ 713
==== ====== ======= ====== ======= ======
Deficiency of earnings
to fixed charges ...... $(52) $ -- $(2,112) $ -- $(1,909) $ --
==== ====== ======= ====== ======= ======
Ratio of earnings to
fixed charges ......... -- 2.53:1 -- 2.08:1 -- 4.69:1
==== ====== ======= ====== ======= ======
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4, to be filed on or around
August 26, 1999, of our report dated February 10, 1999, included in MCI
WORLDCOM, Inc.'s Form 10-K for the year ended December 31, 1998, and to all
references to our Firm included in this registration statement.
Arthur Andersen LLP
Jackson, Mississippi,
August 26, 1999.
<PAGE>
Exhibit 23.2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4, to be filed on or around
August 25, 1999, of our report dated February 17, 1999 included in SkyTel
Communications, Inc.'s Form 10-K for the year ended December 31, 1998 and to
all references to our Firm included in this registration statement.
Arthur Andersen LLP
Jackson, Mississippi,
August 25, 1999.
<PAGE>
Exhibit 23.3
Independent Auditors' Consent
The Board of Directors and Shareholders
MCI WORLDCOM, Inc.
We consent to incorporation by reference in the registration statement on
Form S-4 of MCI WORLDCOM, Inc. of our report dated February 18, 1998, relating
to the consolidated balance sheet of Brooks Fiber Properties, Inc. and
subsidiaries as of December 31, 1997, and the related consolidated statements
of operations, changes in shareholders' equity, and cash flows for each of the
years in the two-year period ended December 31, 1997, which report appears in
MCI WORLDCOM, Inc.'s Form 10-K for the year ended December 31, 1998 and to the
reference to our firm in this registration statement under the heading
"Experts."
KPMG LLP
St. Louis, Missouri
August 25, 1999
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4, to be filed on or around
August 26, 1999, of our reports dated February 20, 1997, on the Consolidated
Financial Statements of MFS Communications Company, Inc. included in MCI
WORLDCOM, Inc.'s Current Report on Form 8-K dated August 25, 1996, as amended
by Form 8-K/A filed on December 19, 1997, and to all references to our Firm
included in this registration statement.
Arthur Andersen LLP
Omaha, Nebraska,
August 26, 1999
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-4 of MCI WORLDCOM, Inc. of our report dated April 9, 1998
related to the consolidated financial statements of MCI Communications
Corporation as of December 31, 1997 and 1996 and for the three years ended
December 31, 1997, which appears in MCI WORLDCOM, Inc.'s Current Report on Form
8-K/A-3 dated November 9, 1997 (filed May 28, 1998). We also consent to the
references to us under the headings "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Washington, D.C.
August 25, 1999
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of our report dated
February 4, 1999, included in SkyTel Communications, Inc.'s Annual Report on
Form 10-K/A (filed on June 30, 1999) for the year ended December 31, 1998 and
to all references to our Firm included in this Registration Statement.
PricewaterhouseCoopers
/s/ Mario Salazar Erdmann, C.P.
Mario Salazar Erdmann, C.P.
Mexico, D.F. August 25, 1999.
<PAGE>
EXHIBIT 23.9
CONSENT OF WARBURG DILLON READ LLC
We hereby consent to the use of Annex C containing our opinion letter dated
May 28, 1999 to the Board of Directors of Skytel Communications, Inc. (the
"Company") in the Proxy Statement/Prospectus constituting a part of the
Registration Statement on Form S-4 relating to the proposed combination of the
Company and MCI Worldcom, Inc. and to the references to our firm in such Proxy
Statement/Prospectus. In giving this consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
WARBURG DILLON READ LLC
/s/ F. Davis Terry, Jr.
By___________________________________
F. Davis Terry, Jr.
/s/ Kevin Knight
By___________________________________
Kevin Knight
<PAGE>
THE BOARD OF DIRECTORS OF SKYTEL COMMUNICATIONS, INC. RECOMMENDS A VOTE FOR THE
FOLLOWING PROPOSAL
Please mark [X]
your vote as
indicate in
this example
1. ADOPTION OF AN AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENT") AMONG
SKYTEL COMMUNICATIONS, INC., A DELAWARE CORPORATION, MCI WORLDCOM, INC., A
GEORGIA CORPORATION, AND EMPIRE MERGER INC., A DELAWARE CORPORATION AND A
WHOLLY OWNED SUBSIDIARY OF MCI WORLDCOM, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THIS PROXY WILL BE VOTED "FOR" ADOPTION OF THE MERGER AGREEMENT IF NO CHOICE IS
SPECIFIED.
[IF VOTING VIA THE INTERNET OR TELEPHONE, PLEASE FOLLOW INSTRUCTIONS BELOW.]
Will attend meeting [ ]
Change of Address [ ]
----------------------
----------------------
----------------------
Signature________________________Signature________________________Date_________
Note:Please sign as name appears above. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
[VOTE BY TELEPHONE OR INTERNET]
[QUICK *** EASY *** IMMEDIATE]
YOUR VOTE IS IMPORTANT!- YOU CAN VOTE IN ONE OF THREE WAYS:
1. TO VOTE BY PHONE: Call toll free 1-800-840-1208 on a touch tone telephone
24 hours a day-7 days a week
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in the
lower right hand corner of this form
[To vote as the Board of Directors recommends on the proposal, press 1]
When asked, please confirm by Pressing 1.
Proposal - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0
When asked, please confirm by Pressing 1.
or
--
2. VOTE BY INTERNET: Follow the instructions at our Website
Address:http://www.eproxy.com/skyt
or
--
3. VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in the
enclosed envelope.
NOTE: If you vote by Internet or Telephone, THERE IS NO NEED TO MAIL
BACK your Proxy Card.
THANK YOU FOR VOTING.
<PAGE>
SKYTEL COMMUNICATIONS, INC.
This Proxy is Solicited on Behalf of the Board of Directors of
SkyTel Communications, Inc. for use at the Special Meeting of
Stockholders to be held on September 29, 1999
The undersigned holder of shares of common stock, par value $0.01 per
share, of SkyTel Communications, Inc. ("SkyTel") hereby appoints Leonard G.
Kriss and Robert Kaiser and each of them, as proxies of the undersigned, with
full power of substitution and resubstituion, to represent and vote as set forth
herein all of the shares of common stock of SkyTel held of record by the
undersigned on August 19, 1999 at the Special Meeting of Stockholders to be held
on September 29, 1999, starting at 10:00 a.m., Central time, at the Capital
Club, 125 South Congress Street, Capital Towers Building, 19th Floor, Jackson,
Mississippi 39201, and at any and all postponements and adjournments thereof
(the "Special Meeting").
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSAL SET FORTH ON THE OTHER SIDE OF THIS PROXY AND OTHERWISE
IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTER WHICH MAY PROPERLY
COME BEFORE THE SPECIAL MEETING.
(Continued, and to be dated and signed, on the reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
You can vote in one of three ways:
1. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
or
--
2. Call toll free 1-800-840-1208 on a Touch Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
or
--
3. Vote by Internet at our Internet Address: http://www.eproxy.com/skyt
PLEASE VOTE
