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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K-1
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) April 11, 2000
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MCI WORLDCOM, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Georgia 0-11258 58-1521612
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
500 Clinton Center Drive, Clinton, Mississippi 39056
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (601) 460-5600
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N/A
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(Former Name or Former Address, If Changed Since Last Report)
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TABLE OF CONTENTS
ITEM 5. OTHER EVENTS...................................................... 2
FORWARD-LOOKING STATEMENTS.............................................. 3
THE MERGER (information from the MCI WorldCom S-4, as defined below).... 4
The Merger Agreement.................................................. 4
Arrangements with Sprint Stockholders................................. 21
Tracking Stock Matters................................................ 37
Description of MCI WorldCom Capital Stock............................. 43
Corporate Governance.................................................. 54
Risk Factors Related to the Merger.................................... 62
SPRINT CORPORATION (information from the Sprint 10-K and/or Proxy
Statement, as defined below).......................................... 65
Sprint FON Group...................................................... 67
Sprint ION............................................................ 68
Sprint PCS Group...................................................... 69
Regulatory Developments............................................... 71
Patents, Trademarks, and Licenses..................................... 73
Employee Relations.................................................... 74
Properties............................................................ 74
Legal Proceedings..................................................... 74
Submission of Matters to a Vote of Security Holders................... 74
Executive Officers of Sprint.......................................... 75
Market for Sprint's Common Equity and Related Stockholder Matters..... 75
Accounting and Financial Disclosure................................... 75
Executive Compensation................................................ 77
ITEM 7. FINANCIAL STATEMENTS, FINANCIAL INFORMATION AND EXHIBITS.......... 84
EXHIBIT INDEX........................................................... 84
Item 5. Other Events.
The following sets forth certain information regarding the MCI WorldCom,
Inc./Sprint Corporation merger, as well as the management and shareholders of
MCI WorldCom, Inc., a Georgia corporation ("MCI WorldCom") and Sprint
Corporation, a Kansas corporation, ("Sprint").
MCI WorldCom has announced that it has entered into an agreement and plan
of merger dated as of October 4, 1999, which was amended and restated on March
8, 2000, between MCI WorldCom and Sprint and is incorporated herein by
reference. Under the terms of the merger agreement, Sprint will merge with and
into MCI WorldCom, which would change its name to WorldCom, Inc. ("WorldCom").
Sprint is a diversified telecommunications company, providing long
distance, local and wireless communications services. Sprint's business is
organized in two groups: the Sprint PCS group and Sprint FON group. Sprint built
and operates the United States' first nationwide all-digital, fiber-optic
network and is a leader in advanced data communications services. In 1999 Sprint
had $20 billion in annual revenues and serves more than 20 million business and
residential customers.
Under the merger agreement, each outstanding share of Sprint's FON common
stock will be exchanged for $76.00 of MCI WorldCom Common Stock, subject to a
collar. In addition, each share of Sprint's PCS common stock will be exchanged
for one share of a new MCI WorldCom PCS tracking stock and 0.116025 shares of
MCI WorldCom Common Stock. The terms of the MCI WorldCom PCS tracking stock will
be virtually identical to the terms of Sprint's PCS common stock and will be
designed to track the performance of the PCS business of the surviving company
in the merger. Holders of the shares of the other classes or series of Sprint
capital stock will receive one share of a class or series of MCI WorldCom's
capital stock with virtually identical terms, which will be established in
connection with the merger, for each share of Sprint capital stock that they
own. Sprint will redeem for cash each outstanding share of the Sprint first and
second series preferred stock before completion of the merger. The merger,
valued at approximately $129 billion, will be accounted for as a purchase and
will be tax-free to Sprint stockholders.
The actual number of shares of MCI WorldCom Common Stock to be exchanged
for each share of Sprint's FON common stock will be determined based on the
average trading prices of MCI WorldCom Common Stock prior to the closing, but
will not
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be less than 1.4100 shares (if MCI WorldCom's average stock price equals or
exceeds $53.9007) or more than 1.8342 shares (if MCI WorldCom's average stock
price equals or is less than $41.4350).
Consummation of the merger is subject to various conditions set forth in
the merger agreement, including the adoption of the merger agreement by
stockholders of Sprint, the approval of the merger by shareholders of MCI
WorldCom, the approval of the issuance of MCI WorldCom capital stock in the
merger by shareholders of MCI WorldCom, certain U.S. and foreign regulatory
approvals and other customary conditions. Special meetings of the shareholders
of MCI WorldCom and Sprint have been called for April 28, 2000 to vote on the
merger proposals. It is anticipated that the merger will close in the second
half of 2000. Additionally, if the merger is consummated, the integration and
consolidation of Sprint will require substantive management and financial
resources and involve a number of significant risks, including potential
difficulties in assimilating technologies and services of Sprint and in
achieving anticipated synergies and cost reductions.
The foregoing descriptions of the merger and the transactions contemplated
thereby do not purport to be complete and are qualified in their entirety by
reference to such agreement, a copy of which is incorporated as an exhibit to
this Current Report on Form 8-K and incorporated herein by reference.
THE FOLLOWING INFORMATION WAS PREVIOUSLY REPORTED IN MCI WORLDCOM'S
REGISTRATION STATEMENT ON FORM S-4, FILE NO. 333-90421 (THE "MCI WORLDCOM S-4"),
FILED MARCH 9, 2000, SPRINT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1999, FILE NO. 1-04721 (THE "SPRINT 10-K"), AND/OR SPRINT'S
PROXY STATEMENT ON SCHEDULE 14A (THE "SPRINT PROXY STATEMENT"), FILED MARCH 9,
2000, AND HAS NOT BEEN UPDATED TO REFLECT CHANGES SINCE THEIR RESPECTIVE DATES.
TO THE EXTENT THAT ANY OF THE FOLLOWING INFORMATION DIFFERS FROM INFORMATION
REPORTED IN THE MCI WORLDCOM S-4, THE SPRINT 10-K, OR THE SPRINT PROXY
STATEMENT, THOSE DOCUMENTS SHALL CONTROL.
FORWARD-LOOKING STATEMENTS
Statements in this Current Report on Form 8-K that are not historical facts
are hereby identified as "forward-looking statements" for the purpose of the
safe harbor provided by section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act") and section 27A of the Securities Act of 1933 (the "Securities
Act"). Such forward-looking statements, including those relating to the future
business prospects, revenues and income, in each case relating to MCI WorldCom
and Sprint, wherever they occur in this Current Report on Form 8-K, including
those listed below under "The Merger--Risk Factors Related to the Merger--This
Current Report on Form 8-K contains forward-looking statements which may differ
materially from future results of MCI WorldCom and/or Sprint" are necessarily
estimates reflecting the best judgment of the senior management of MCI WorldCom
and Sprint and involve a number of risks and uncertainties that could cause
actual results to differ materially from those suggested by the forward-looking
statements. Such forward-looking statements should, therefore, be considered in
light of various important factors, including those set forth in this Current
Report on Form 8-K.
Important factors that could cause actual results to differ materially from
estimates or projections contained in the forward-looking statements include the
factors discussed under "The Merger--Risk Factors Related to the Merger" herein
and the following: (1) the ability to integrate the operations of MCI WorldCom
and Sprint, including their respective products and services; (2) the effects of
vigorous competition in the markets in which MCI WorldCom and Sprint operate;
(3) the impact of technological change on MCI WorldCom's and Sprint's
businesses, new entrants and alternative technologies in their respective
businesses and their dependence on the availability of transmission facilities;
(4) uncertainties associated with the success of other acquisitions of MCI
WorldCom and the integration of these other acquisitions; (5) risks of
international business; (6) regulatory risks, including the impact of the
Telecommunications Act of 1996; (7) contingent liabilities; (8) the impact of
competitive services and pricing in both MCI WorldCom's and Sprint's markets;
(9) risks associated with debt service requirements and interest rate
fluctuation; (10) MCI WorldCom's degree of financial leverage; and (11) other
risks referenced from time to time in MCI WorldCom's and Sprint'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
Current Report on Form 8-K.
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THE MERGER
THE FOLLOWING INFORMATION WAS PREVIOUSLY REPORTED IN THE MCI WORLDCOM S-4
AND HAS NOT BEEN UPDATED TO REFLECT CHANGES SINCE DECEMBER 31, 1999. TO THE
EXTENT THAT ANY OF THE FOLLOWING INFORMATION DIFFERS FROM INFORMATION REPORTED
IN THE MCI WORLDCOM S-4, THAT DOCUMENT SHALL CONTROL.
THE MERGER AGREEMENT
Form of the Sprint Merger
Subject to the terms and conditions of the Sprint merger agreement and in
accordance with Georgia law and Kansas law, at the effective time of the merger,
Sprint will be merged with and into MCI WorldCom, which will survive the merger,
and will continue its corporate existence under Georgia law. The combined
company will be referred to as WorldCom.
Merger Consideration
Sprint FON Common Stock
At the completion of the merger, holders of Sprint FON common stock will
receive the following:
o Series 1 FON Common Stock. Each outstanding share of Sprint series 1
FON common stock will be converted into the right to receive a number
of shares of WorldCom common stock equal to the FON exchange ratio,
rounded to the nearest 1/10,000, which will be determined by dividing:
-- $76 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
such other source as MCI WorldCom and Sprint agree in writing),
for the 15 trading days randomly selected by MCI WorldCom and
Sprint together from the 30 consecutive trading days ending on
the third trading day immediately before the completion of the
merger.
However, the FON exchange ratio will not be less than 1.4100 or greater
than 1.8342.
o Series 3 FON Common Stock. Each outstanding share of Sprint series 3
FON common stock will be converted into the right to receive a number
of shares of WorldCom common stock equal to the FON exchange ratio
described under "--Series 1 FON Common Stock" above, rounded to the
nearest 1/10,000.
Sprint PCS Common Stock
At the completion of the merger, holders of Sprint PCS common stock will
receive the following:
o Series 1 PCS Common Stock. Each outstanding share of Sprint series 1
PCS common stock will be converted into the right to receive:
-- one share of WorldCom series 1 PCS common stock and
-- 0.116025 shares of WorldCom common stock.
o Series 2 PCS Common Stock. Each outstanding share of Sprint series 2
PCS common stock will be converted into the right to receive:
-- one share of WorldCom series 2 PCS common stock and
-- 0.116025 shares of WorldCom series 2 common stock.
o Series 3 PCS Common Stock. Each outstanding share of Sprint series 3
PCS common stock will be converted into the right to receive:
-- one share of WorldCom series 1 PCS common stock and
-- 0.116025 shares of WorldCom common stock.
The series of WorldCom PCS group common stock are being created in
connection with the merger.
Sprint FT/DT Class A Stock
At the completion of the merger, holders of Sprint class A common stock
will receive the following:
o a number of shares of WorldCom common stock equal to (1) the FON
exchange ratio multiplied by the number of shares of Sprint FON common
stock represented by the shares of Sprint class A common stock at the
completion of the merger, plus (2) 0.116025 multiplied by the number
of shares of Sprint PCS common stock represented by the shares of
Sprint class A common stock at the completion of the merger and
o a number of shares of WorldCom series 1 PCS common stock equal to the
number of shares of Sprint PCS common stock represented by the shares
of Sprint class A common stock at the completion of the merger.
At the completion of the merger, holders of Sprint class A common stock--
series DT will receive the following:
o a number of shares of WorldCom common stock equal to (1) the FON
exchange ratio multiplied by the number of shares of Sprint FON common
stock represented by the shares of Sprint class A common stock--series
DT at the completion of the merger, plus (2) 0.116025 multiplied by
the number of shares of Sprint PCS common stock represented by the
shares of Sprint class A common stock--series DT at the completion of
the merger and
o a number of shares of WorldCom series 1 PCS common stock equal to the
number of shares of Sprint PCS common stock represented by the shares
of Sprint class A common stock--series DT at the completion of the
merger.
Sprint Preferred Stock
At the completion of the merger, holders of Sprint preferred stock will
receive the following:
o First Series Preferred Stock. Each share of Sprint first series
preferred stock that is outstanding will be redeemed by Sprint for
$42.50 per share in cash before the Sprint special meeting.
o Second Series Preferred Stock. Each share of Sprint second series
preferred stock that is outstanding will be redeemed by Sprint for
$50.00 per share in cash before the Sprint special meeting.
o Fifth Series Preferred Stock. Each outstanding share of Sprint fifth
series preferred stock will be converted into the right to receive one
share of WorldCom series 5 preferred stock.
o Seventh Series Preferred Stock. Each outstanding share of Sprint
seventh series preferred stock will be converted into the right to
receive one share of WorldCom series 7 preferred stock. For a
description of the conversion rights of the WorldCom series 7
preferred stock, see "Description of MCI WorldCom Capital Stock--
Preferred Stock--Amended Worldcom Articles of Incorporation--WorldCom
Series 7 Preferred Stock; Preferred Inter-Group Interest--Conversion
Rights".
The WorldCom series 5 and series 7 preferred stock described above are
being created in connection with the merger.
Adjustment of FON and PCS Exchange Ratios
The FON exchange ratio, which will be determined shortly before completion
of the merger, and the PCS exchange ratio, which is 0.116025, will be
appropriately adjusted to reflect any stock split, stock dividend,
recapitalization, subdivision, reclassification, combination, exchange of shares
or similar transaction relating to the outstanding MCI WorldCom common stock if:
o MCI WorldCom changes or establishes a record date for changing the
number of shares of MCI WorldCom common stock issued and outstanding
before the completion of the merger as a result of any of those
transactions and
o the record date for any of these transactions occurs before the
completion of the merger.
As a result, the FON exchange ratio and the PCS exchange ratio have been
adjusted to reflect MCI WorldCom's three-for-two stock split in the form of a
50% stock dividend which was distributed on December 30, 1999 and the PCS
exchange ratio has been further adjusted to reflect Sprint's two-for-one stock
split of its Sprint PCS common stock in the form of a stock dividend which was
distributed on February 4, 2000.
In addition, the FON exchange ratio and the PCS exchange ratio will be
appropriately adjusted to reflect any dividend or distribution if MCI WorldCom
pays, or establishes a record date for payment of, a dividend on, or makes any
other distribution in respect of, MCI WorldCom common stock.
Fractional Shares
Sprint FON common stockholders and Sprint PCS common stockholders will
receive cash for any fractional shares which they might 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.
Sprint Treasury Stock; Sprint Stock Held by MCI WorldCom; Inter-Group
Interest
At the completion of the merger, each share of Sprint capital stock issued
and owned or held by Sprint or MCI WorldCom will by virtue of the merger be
canceled and retired. No stock of MCI WorldCom or other consideration will be
delivered for those shares in the merger. However, the Sprint FON group's
inter-group interest, warrant inter-group interest and preferred inter-group
interest in the Sprint PCS group will become virtually identical corresponding
interests of the WorldCom group in the WorldCom PCS group. See "Tracking Stock
Matters--Inter-Group Interest--The Various Interests in the Economic Performance
of the PCS Group; Definition of Inter-Group Interest".
Effective Time of the Merger
The effective time of the merger will be the later of the time of the
filing of a certificate of merger with the Kansas Secretary of State and the
filing of a certificate of merger with the Georgia Secretary of State or a later
time if agreed upon by MCI WorldCom and Sprint and specified in the certificates
of merger. The filing of the certificates of merger will occur as soon as
practicable following the closing of the merger.
Listing of WorldCom Capital Stock
Before the completion of the merger, MCI WorldCom has agreed to use its
reasonable best efforts to have the shares of WorldCom common stock and WorldCom
series 1 PCS common stock issuable to applicable Sprint stockholders in the
merger approved for quotation on The Nasdaq National Market, subject to official
notice of issuance.
Delisting and Deregistration of Sprint Capital Stock
If the Sprint merger is completed, Sprint series 1 FON common stock and
Sprint series 1 PCS common stock will be delisted from the New York Stock
Exchange, and will be deregistered under the Securities Exchange Act of 1934. In
addition, upon redemption by Sprint, the Sprint first series and second series
preferred stock will be delisted from the New York Stock Exchange and will be
deregistered under the Exchange Act.
Regulatory Matters
Federal Communications Commission
Under the Communications Act of 1934, the Federal Communications Commission
must approve, before the completion of the merger, the transfer of control to
MCI WorldCom of Sprint and those subsidiaries of Sprint that hold FCC licenses
and authorizations. The FCC must determine whether MCI WorldCom is qualified to
control such licenses and authorizations and whether the transfer is consistent
with the public interest, convenience and necessity. MCI WorldCom and Sprint
filed transfer of control applications with the FCC in November 1999.
United States Antitrust
Under the Hart-Scott-Rodino Act, and the rules promulgated thereunder by
the Federal Trade Commission, the merger may not be completed until
notifications have been given and information furnished to the FTC and to the
Antitrust Division of the U.S. Department of Justice and the specified waiting
period has been terminated or has expired. MCI WorldCom and Sprint each filed
notification and report forms under the Hart-Scott-Rodino Act with the FTC and
the Antitrust Division. On November 10, 1999, the Antitrust Division requested
additional information from MCI WorldCom and Sprint. MCI WorldCom and Sprint are
currently working to respond to this request as promptly as practicable. The
waiting period under the Hart-Scott-Rodino-Act will expire twenty days after MCI
WorldCom and Sprint have complied with the request, unless such waiting period
is terminated earlier. At any time before or after completion of the merger, the
Antitrust Division could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin
completion of the merger or seeking divestiture of substantial assets of MCI
WorldCom or Sprint. The merger also is subject to review under state antitrust
laws and could be the subject of challenges by private parties under the
antitrust laws.
State Regulatory Approvals
Various subsidiaries of Sprint hold licenses and service authorizations
issued by state public utility commissions. Approximately 26 state commissions
must review the transfer of control of these licenses and authorizations to MCI
WorldCom. MCI WorldCom and Sprint believe that the merger complies with
applicable state standards for approval.
Foreign Regulatory Reviews
MCI WorldCom and Sprint each conduct business in member states of the
European Union. Member state competition authorities exercise jurisdiction over
transactions that fall below the thresholds set forth in European merger
regulation 4064/89 (which grants exclusive jurisdiction to the European
Commission), but above thresholds set forth in their individual national laws.
Such national thresholds are typically based on worldwide sales and sales in the
individual member states. The national authorities will review the merger to
determine whether it is compatible with their national laws on merger control.
If a national authority concludes that the transaction is incompatible with
applicable law, it could withhold its approval or condition its approval upon
the receipt of undertakings by the parties, including the divestiture of assets
or businesses.
Transactions which exceed the thresholds set forth in European merger
regulation 4064/89 fall within the exclusive jurisdiction of the European
Commission and will be assessed to determine if they create a position of
dominance which is restrictive of competition. Similar to the position that
prevails in the member states, the European Commission can withhold its approval
or condition its approval on undertakings of the parties including the
divestiture of assets or businesses.
The merger is currently being reviewed by the European Commission, which is
investigating the effects of the merger on competition in the European Union.
The European Commission has announced that its review is focusing on issues
related to the Internet, international voice telecommunications services and
global telecommunications services. The European Commission's review is expected
to be completed in early July 2000.
MCI WorldCom and Sprint each conduct business in Brazil. MCI WorldCom owns
an indirect controlling interest in Empresa Brasileira de Telecomunicacoes
S.A.--Embratel, which holds a concession to provide fixed long-distance
telephony services and authorizations to provide additional telecommunications
services in Brazil. Sprint has an ownership interest in Intelig Telecomunicacoes
Ltda., which holds an authorization to provide fixed long-distance telephony
services in competition with Embratel. In these circumstances, the merger is
notifiable to the Brazilian telecommunications and antitrust authorities, ANATEL
and CADE, pursuant to Articles 2 and 54, ss. 3 of Law No. 8,884/94. The
authorities will review the transaction to determine whether it is compatible
with the Brazilian antitrust law as well as the General Telecommunications Law
(GTL)--Law 9.472/97 and the General Grant Plan (GGP)--Decree 2.534/98. If ANATEL
and/or CADE conclude that the transaction is incompatible with applicable law,
they could withhold their approval or condition approval on undertakings by the
parties, including the divestiture of overlapping assets or operations in
Brazil. On October 26, 1999, the required notifications were filed with
ANATEL/CADE. A decision is anticipated within several months.
MCI WorldCom and Sprint are not aware of any other foreign governmental
approvals or actions that would be required for completion of the merger.
However, MCI WorldCom and Sprint conduct business in a number of other foreign
countries, some of which have voluntary and/or post-merger notification
procedures. If any other approval or action is required, MCI WorldCom and Sprint
currently contemplate that such approval or action will be sought.
Litigation
Eight purported stockholder class action suits relating to the merger were
filed in state courts in Kansas and New York against Sprint and members of the
Sprint board of directors. Plaintiffs in these actions allege, among other
things, that the Sprint director defendants have breached their fiduciary duties
to Sprint stockholders by failing to maximize stockholder value in connection
with entering into the Sprint merger agreement and by agreeing to provisions in
the Sprint merger agreement. Plaintiffs generally seek injunctive relief,
damages, costs and attorneys' fees. Sprint believes that the claims are without
merit and intends to defend these actions vigorously. Six of the suits were
dismissed without prejudice in February 2000. Plaintiffs in the remaining two
cases have agreed to dismissal, and the documents necessary to dismiss those
cases have been filed with the court. The dismissal will become final following
a court hearing.
Accounting Treatment
The Sprint merger is expected to be accounted for using purchase accounting with
MCI WorldCom being deemed to have acquired Sprint.
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 closing
conditions, the following:
o holders of shares of MCI WorldCom common stock and MCI WorldCom series
B preferred stock, voting together as a single group, representing a
majority of all the votes entitled to be cast at the MCI WorldCom
special meeting having approved the merger agreement
o holders of shares of Sprint common stock and Sprint preferred stock,
voting together as a single group, representing a majority of all the
votes entitled to be cast at the Sprint special meeting having voted
to adopt the merger agreement
o the waiting period applicable to the merger under the
Hart-Scott-Rodino Act having expired or been terminated; provided,
however, that this provision will not be available to any party whose
failure to fulfill its obligations under the merger agreement shall
have been the cause of or shall have resulted in the failure to obtain
such expiration or termination
o all approvals for the merger from the Federal Communications
Commission and state public utility commissions having been obtained,
except where the failure to obtain such approvals would not,
individually or in the aggregate, reasonably be expected to materially
impair MCI WorldCom's and Sprint's ability to achieve the overall
benefits expected to be realized from the completion of the merger;
provided, however, that this provision will not be available to any
party whose failure to fulfill its obligations under the merger
agreement shall have been the cause of or shall have resulted in such
failure
o any required clearance of the merger by European Commission antitrust
authorities having been obtained; provided, however, that this
provision will not be available to any party whose failure to fulfill
its obligations under the merger agreement shall have been the cause
of or shall have resulted in the failure to obtain such clearance
o no laws being adopted or promulgated and no temporary restraining
order, preliminary or permanent injunction or other order issued by
any court or other governmental entity of competent jurisdiction being
in effect having the effect of making the merger illegal or otherwise
prohibiting the completion of the merger; provided, however, that this
provision will not be available to any party whose failure to fulfill
its obligations under the merger agreement shall have been the cause
of or shall have resulted in such order or injunction
o the shares of WorldCom common stock and WorldCom series 1 PCS common
stock issuable to Sprint stockholders in the merger having been
approved for quotation on The Nasdaq National Market, subject to
official notice of issuance and
o the registration statement on Form S-4 having been declared effective
by the Securities and Exchange Commission under the Securities Act and
not being the subject of any stop order or threatened or pending
proceedings seeking a stop order.
In addition, each party's obligation to effect the merger is further
subject to the satisfaction or waiver of the following additional conditions:
o the representations and warranties regarding the capital structure of
the other party set forth in the merger agreement being true and
correct in all material respects on the date of the merger agreement
and on the date on which the merger is to be completed as if made as
of such time or, if such representations and warranties expressly
relate to an earlier date, then as of such date
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o the other representations and warranties of the other party set forth
in the merger agreement being true and correct on the date of the
merger agreement and on the date on which the merger is to be
completed as if made as of such time or, if such representations and
warranties expressly relate to an earlier date, then as of such date,
except where the failure of these representations and warranties to be
so true and correct, without giving effect to any limitation as to
"materiality" or "material adverse effect", individually or in the
aggregate, does not have, and is not reasonably likely to have, a
material adverse effect on the party making the representations and
warranties
o the other party to the merger agreement having performed or complied
in all material respects with all material agreements and covenants
required to be performed by it or complied with under the merger
agreement on or before the date on which the merger is to be completed
o with respect only to Sprint's obligation to effect the merger, Sprint
having received from King & Spalding on the date on which the
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, in each case dated as of such respective date,
to the effect that: (1) the merger will qualify as a reorganization
within the meaning of section 368(a) of the Internal Revenue Code, (2)
MCI WorldCom and Sprint will each be a "party" to that reorganization
within the meaning of section 368(b) of the Internal Revenue Code, and
(3) the WorldCom group common stock and WorldCom PCS group common
stock received in the merger by Sprint common stockholders is property
permitted to be received under section 354 of the Internal Revenue
Code without the recognition of gain
o with respect only to MCI WorldCom's obligation to effect the merger,
MCI WorldCom having received from Cravath, Swaine & Moore on the date
on which the 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, in each case dated as of such
respective date, to the effect that: (1) the merger will qualify as a
reorganization within the meaning of section 368(a) of the Internal
Revenue Code, (2) MCI WorldCom and Sprint will each be a "party" to
that reorganization within the meaning of section 368(b) of the
Internal Revenue Code, and (3) the issuance of WorldCom group common
stock and WorldCom PCS group common stock to Sprint common
stockholders in the merger will not result in MCI WorldCom recognizing
an amount of income or gain or being subject to an amount of tax, in
each case that individually or in the aggregate is reasonably likely
to have a material adverse effect on MCI WorldCom
o with respect only to Sprint's obligation to effect the merger, there
not having been any material adverse change in MCI WorldCom since the
date of the merger agreement and
o with respect only to MCI WorldCom's obligation to effect the merger,
there not having been any material adverse change in Sprint since the
date of the merger agreement.
Each of the conditions listed in the previous two paragraphs is waivable by
the party or parties whose obligations to complete the merger are so
conditioned, except to the extent the condition must be satisfied in order to
comply with applicable law.
The merger agreement provides that a "material adverse change" or "material
adverse effect" means, when used with respect to Sprint or MCI WorldCom, any
adverse change, circumstance or effect that, individually or in the aggregate
with all other adverse changes, circumstances and effects, is or is reasonably
likely to be materially adverse to the business, financial condition or results
of operations of Sprint and its subsidiaries, taken as a whole, or MCI WorldCom
and its subsidiaries, taken as a whole, other than any change, circumstance or
effect:
o relating to or resulting from the economy or securities markets in
general
o relating to or resulting from the industries in which MCI WorldCom or
Sprint operate and not uniquely relating to MCI WorldCom or Sprint or
o resulting from the announcement or existence of the merger agreement
and the transactions contemplated by the merger agreement.
No Solicitation
In the merger agreement, each of MCI WorldCom and Sprint has agreed that it
will not, nor will it permit any of its subsidiaries to, nor will 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:
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o solicit, initiate or knowingly encourage (including by way of
furnishing information), or knowingly take any other action to
facilitate, the making of any competing proposal, as described below
or
o participate in any discussions or negotiations regarding any competing
proposal;
provided, however, that if, at any time during the period beginning on
December 4, 1999 and ending on the date the vote required to be obtained
from such party's stockholders in connection with the merger has been
obtained, such party's board of directors, in the exercise of its fiduciary
duties, determines in good faith, after consultation with outside counsel,
that to do otherwise would not be in the best interests of its
stockholders, then such party and its representatives may, in response to a
superior proposal, as described below, which did not result from a breach
of such provision, and subject to providing prior or contemporaneous notice
of its decision to take such action to the other party:
o furnish under a customary confidentiality agreement information about
such party and its subsidiaries to any person making a superior
proposal and/or
o participate in discussions or negotiations regarding such superior
proposal.
The merger agreement provides that:
o the term "competing proposal", when used in connection with a proposal
for either party, means any bona fide proposal or offer from any
person relating to any direct or indirect acquisition or purchase of
20% or more of the assets of such party and its subsidiaries, taken as
a whole, or 20% or more of the combined voting power of the shares of
common stock of such party, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more
of the combined voting power of the shares of common stock of such
party, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving such party or any of its subsidiaries in which the other
party thereto or its stockholders will own 20% or more of the combined
voting power of the parent entity resulting from any such transaction,
other than the transactions contemplated by the merger agreement
o the term "superior proposal", when used in connection with a superior
proposal for Sprint, means (1) any proposal made by a third party
relating to any direct or indirect acquisition or purchase of 50% or
more of the assets of Sprint and its subsidiaries, taken as a whole,
or 50% or more of the combined voting power of the shares of Sprint
common stock, any tender offer or exchange offer that if consummated
would result in any person beneficially owning 50% or more of the
combined voting power of the shares of Sprint common stock or any
merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Sprint or
any of its subsidiaries in which the other party thereto or its
stockholders will own 40% or more of the combined voting power of the
parent entity resulting from any such transaction and (2) otherwise on
terms which the Sprint board of directors determines in its good faith
judgment (based on the advice of a financial advisor of nationally
recognized reputation), taking into account the person making the
proposal and the legal, financial, regulatory and other aspects of the
proposal deemed appropriate by the Sprint board of directors, (A)
would be more favorable than the merger to Sprint's stockholders taken
as a whole, (B) is reasonably capable of being completed, and (C) for
which financing, to the extent required, is then committed or is
reasonably capable of being obtained by such third party and
o the term "superior proposal", when used in connection with a superior
proposal for MCI WorldCom, means (1) (A) any proposal made by a third
party relating to any direct or indirect acquisition or purchase of
50% or more of the assets of MCI WorldCom and its subsidiaries, taken
as a whole, or 50% or more of the combined voting power of the shares
of MCI WorldCom common stock, any tender offer or exchange offer that
if consummated would result in any person beneficially owning 50% or
more of the combined voting power of the shares of MCI WorldCom common
stock, or (B) any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving MCI WorldCom or any of its subsidiaries in which the other
party thereto or its shareholders will own 50% or more of the combined
voting power of the shares of the parent entity resulting from any
such transaction and representatives of such other party shall
represent a majority of the board of directors of such parent entity,
and (2) otherwise on terms which the MCI WorldCom board of directors
determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation), taking into
account the person making the proposal and the legal, financial,
regulatory and other aspects of the proposal deemed appropriate by the
MCI WorldCom board of directors, (A) would be more favorable than the
merger to MCI WorldCom's shareholders taken as a whole, (B) is
reasonably capable of being completed and (C) for which financing, to
the extent required, is then committed or is reasonably capable of
being obtained by such third party.
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None of the board of directors of MCI WorldCom or Sprint or any committee
thereof will:
o withdraw, or propose publicly to withdraw, in a manner adverse to the
other party, the approval or recommendation by such board of directors
or such committee of the merger or the merger agreement
o modify, or propose publicly to modify, in a manner adverse to the
other party, the approval or recommendation of such board of directors
or such committee of the merger or the merger agreement
o approve or recommend, or propose publicly to approve or recommend, any
competing proposal or
o approve or recommend, or propose to approve or recommend, or execute
or enter into, any letter of intent, agreement in principle, merger
agreement, acquisition agreement, option agreement or other similar
agreement or propose publicly or agree to do any of the foregoing
related to any competing proposal;
provided, however, that at any time during the period beginning on December 4,
1999 and ending on the date the vote required to be obtained from such party's
stockholders in connection with the merger has been obtained, in response to a
superior proposal which did not result from a breach of the "no solicitation"
provisions described above, if such party's board of directors, in the exercise
of its fiduciary duties, determines in good faith, after consultation with
outside counsel, that to do otherwise would not be in the best interests of its
stockholders, such party's board of directors may:
o modify or propose publicly to modify, in a manner adverse to the other
party, the approval or recommendation of the merger or the merger
agreement by such party's board of directors and/or
o terminate the merger agreement (and concurrently with or after such
termination, if it so chooses, cause such party to enter into any
acquisition agreement with respect to any superior proposal), but only
at a time that is (1) during the period beginning on December 4, 1999
and ending on the date the vote required to be obtained from such
party's stockholders in connection with the merger has been obtained
and (2) after the fourth business day (or the second calendar day in
the case of a material amendment to a superior proposal) after such
party's receipt of written notice advising it that such other party's
board of directors is prepared to accept a superior proposal (or any
material amendment), specifying the material terms and conditions of
such superior proposal (or any material amendment) and identifying the
person making such superior proposal (or any material amendment).
The merger agreement also provides that each party will promptly advise the
other of any competing proposal or any inquiry or request for information
relating to that competing proposal, the material terms and conditions of such
competing proposal or request and the identity of the person making such
competing proposal or request. Each party will promptly keep the other
reasonably informed of the status (including amendments) of any competing
proposal or request.
Termination
The merger agreement may be terminated at any time before the completion of
the merger, whether before or after the stockholder approvals have been obtained
at the special meetings:
1. by mutual written consent of MCI WorldCom and Sprint
2. by MCI WorldCom or Sprint, if the merger has not been completed by
December 31, 2000; provided, however, that this right to terminate the
merger agreement will not be available to any party whose failure to
fulfill its obligations under the merger agreement shall have been the
cause of or shall have resulted in the failure of the merger to be
completed by December 31, 2000
3. by MCI WorldCom or Sprint, if the MCI WorldCom shareholders have not
approved the merger agreement at an MCI WorldCom shareholders meeting
or at any adjournment or postponement of any such meeting
4. by MCI WorldCom or Sprint, if the Sprint stockholders have not adopted
the merger agreement at a Sprint stockholders meeting or at any
adjournment or postponement of any such meeting
5. by MCI WorldCom or Sprint, if (1) any governmental entity issues an
order, decree or ruling or takes any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the merger agreement and such order, decree, ruling or
other action has become final and nonappealable, or (2) any
governmental entity has failed to issue an order, decree or ruling or
take any other action, in each case which is necessary to fulfill the
conditions to the merger described in the third, fourth and fifth
bullet points under the first paragraph of "--Conditions
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to the Completion of the Merger" and such denial of a request to issue
such order, decree, ruling or take such other action shall have become
final and nonappealable; provided, however, that the right to
terminate the merger agreement under this provision will not be
available to any party whose failure to comply with its obligations
under the merger agreement has caused or resulted in such action or
inaction
6. by MCI WorldCom or Sprint, if the other party has breached or failed
to perform 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 a condition described in
the first, second or third bullet points under the second paragraph of
"--Conditions to the Completion of the Merger" and has not been or
cannot be cured within 45 calendar days of receiving notice from the
other party of the breach or failure to perform
7. by Sprint, at any time during the period beginning on December 4, 1999
and ending on the date the vote of holders of Sprint capital stock
required to adopt the merger agreement has been obtained, in response
to a superior proposal which did not otherwise result from a breach by
Sprint of the provisions of the merger, if Sprint has complied with
the notice requirements and has paid the termination fee
8. by MCI WorldCom, at any time during the period beginning on December
4, 1999 and ending on the date the votes of holders of MCI WorldCom
capital stock required to approve the merger agreement have been
obtained, in response to a superior proposal which did not otherwise
result from a breach by MCI WorldCom of the provisions of the merger
agreement, if MCI WorldCom has complied with the notice requirements
and has paid the termination fee
9. by MCI WorldCom, if Sprint modifies or proposes publicly to modify, in
a manner adverse to MCI WorldCom, the approval or recommendation of
the merger or the merger agreement by the Sprint board of directors or
10. by Sprint, if MCI WorldCom modifies or proposes publicly to modify, in
a manner adverse to Sprint, the approval or recommendation of the
merger or the merger agreement by the MCI WorldCom board of directors.
Termination Fees
MCI WorldCom
MCI WorldCom must pay Sprint a $2.5 billion termination fee if:
1. at any time before the date the votes of holders of MCI WorldCom
capital stock required to approve the merger agreement have been
obtained, MCI WorldCom or its shareholders receive a competing
proposal or a third party publicly announces an intention to make a
competing proposal for MCI WorldCom and MCI WorldCom or Sprint then
terminates the merger agreement for the reason described in paragraph
2 (without an MCI WorldCom special meeting having occurred) or the
reason described in paragraph 3 above under "--Termination"
2. MCI WorldCom terminates the merger agreement for the reason described
in paragraph 8 above under "--Termination" or
3. Sprint terminates the merger agreement for the reason described in
paragraph 10 above under "--Termination";
provided, however, that no termination fee will be payable under the
situations described in paragraph 1 or 3 above unless, within 12 months of
termination of the merger agreement, MCI WorldCom enters into a definitive
agreement concerning, or approves or completes (A) any proposal made by a
third party relating to any direct or indirect acquisition or purchase of
50% or more of the assets of MCI WorldCom and its subsidiaries, taken as a
whole, or 50% or more of the combined voting power of the shares of MCI
WorldCom common stock, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 50% or more of
the combined voting power of the shares of MCI WorldCom common stock, or
(B) any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving MCI WorldCom or
any of its subsidiaries in which the other party thereto or its
shareholders will own 50% or more of the combined voting power of the
shares of the parent entity resulting from any such transaction and
representatives of such other party shall represent a majority of the board
of directors of such parent entity.
Sprint
Sprint must pay MCI WorldCom a $2.5 billion termination fee if:
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1. at any time before the date the vote of holders of Sprint capital
stock required to adopt the merger agreement has been obtained, Sprint
or its stockholders receive a competing proposal or a third party
publicly announces an intention to make a competing proposal for
Sprint and MCI WorldCom or Sprint then terminates the merger agreement
for the reason described in paragraph 2 (without a Sprint special
meeting having occurred) or the reason described in paragraph 4 above
under "--Termination"
2. Sprint terminates the merger agreement for the reason described in
paragraph 7 above under "--Termination" or
3. MCI WorldCom terminates the merger agreement for the reason described
in paragraph 9 above under "--Termination";
provided, however, that no termination fee will be payable under the
situations described in paragraph 1 or 3 above unless, within 12 months of
termination of the merger agreement, Sprint enters into a definitive
agreement concerning, or approves or completes (A) any proposal made by a
third party relating to any direct or indirect acquisition or purchase of
50% or more of the assets of Sprint and its subsidiaries, taken as a whole,
or 50% or more of the combined voting power of the shares of Sprint common
stock, any tender offer or exchange offer that if consummated would result
in any person beneficially owning 50% or more of the combined voting power
of the shares of Sprint common stock or (B) any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Sprint or any of its subsidiaries in which the other
party thereto or its stockholders will own 40% or more of the combined
voting power of the parent entity resulting from any such transaction.
The merger agreement further provides that if MCI WorldCom or Sprint fails
to pay any termination fee due, it must pay the costs and expenses in connection
with any action taken to collect payment, together with interest on the amount
of the termination fee.
Conduct of Business Pending the Merger
Sprint
Under the merger agreement, Sprint has agreed that, from the date of the
merger agreement until the completion of the merger, except (1) to the extent
MCI WorldCom shall otherwise consent in writing, which consent shall not be
unreasonably withheld or delayed, or (2) to the extent not reasonably
practicable in light of the announcement or existence of the merger agreement
and the transactions contemplated by the merger agreement, it will and will
cause its subsidiaries taken as a whole to carry on its business in the usual,
regular and ordinary course in all material respects, in substantially the same
manner as conducted before the date of the merger agreement, and shall use all
reasonable efforts to maintain its rights and franchises and preserve its
relationships with customers, suppliers and others having business dealings with
it with the objective to minimize the impairment of its ongoing business.
In addition, Sprint has agreed that, from the date of the merger agreement
until the completion of the merger, subject to certain exceptions and except to
the extent MCI WorldCom shall otherwise consent in writing, which consent shall
not be unreasonably withheld or delayed, neither it nor any of its subsidiaries
may:
o declare or pay any dividends on or make other distributions in respect
of any of its capital stock, other than (1) the declaration and
payment of regular quarterly cash dividends not in excess of $0.125
per share of Sprint FON common stock, and any corresponding cash
dividends on shares held by holders of Sprint class A common stock or
Sprint class A common stock--series DT, and regular dividends required
by the terms of the Sprint preferred stock and (2) dividends by a
wholly owned subsidiary of Sprint to its parent
o split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock
except for any such transaction by a wholly owned subsidiary of Sprint
which remains a wholly owned subsidiary of Sprint after the completion
of such transaction
o repurchase, redeem or otherwise acquire any shares of its capital
stock or any securities convertible into or exercisable for any shares
of its capital stock except for the purchase by Sprint of its common
stock in the ordinary course of business consistent with past practice
in connection with Sprint's benefit plans and certain other exceptions
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o issue, deliver or sell, or authorize or propose the issuance, delivery
or sale of, any shares of its capital stock, any other voting
securities or any securities convertible into or exercisable for, or
any rights, warrants or options to acquire, any such securities, other
than the issuance of Sprint common stock (and associated Sprint
preferred stock purchase rights) upon exercise of stock options or in
connection with rights under other stock-based benefit plans, the
issuance of Sprint capital stock upon the conversion of other Sprint
securities, issuances by a wholly owned subsidiary of Sprint of
capital stock to such subsidiary's parent, issuances in accordance
with Sprint's rights agreement, issuances of stock options in
connection with regular option grants by Sprint or issuances of stock
options for new hires or issuances of restricted stock, in each case
in the ordinary course of business consistent with past practice under
Sprint's benefit plans, the issuance of shares of Sprint capital stock
pursuant to purchase rights or preemptive rights held by Sprint
stockholders under the terms of the instruments or agreements in
effect on the date of the merger agreement or the issuance of Sprint
capital stock pursuant to acquisitions permitted by the merger
agreement
o amend the articles of incorporation or bylaws of Sprint
o acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any person,
other than acquisitions of assets used in the operation of the
business of Sprint and its subsidiaries in the ordinary course of
business consistent with past practice, internal reorganizations or
consolidations involving existing Sprint subsidiaries or the creation
of new Sprint subsidiaries, so long as such permitted activities could
not reasonably be expected to result in (1) any of the conditions to
the merger not being satisfied or (2) a material delay in the
satisfaction of any of the conditions to the merger
o sell, lease, encumber or otherwise dispose of, or agree to sell,
lease, encumber or otherwise dispose of, any of its assets, other than
in the ordinary course of business consistent with past practice and,
in any event, which are not material, individually or in the
aggregate, to Sprint and its subsidiaries taken as a whole, or
internal reorganizations or consolidations involving existing Sprint
subsidiaries
o 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 Sprint 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 short-term borrowings, senior bank or similar bank financing or,
subject to prior consultation with MCI WorldCom, any other
indebtedness incurred by Sprint or any of its subsidiaries with a
maturity date not to exceed five years from the date of its original
issuance incurred in the ordinary course of business consistent with
past practice or intercompany indebtedness between Sprint and any of
its wholly owned subsidiaries or between such wholly owned
subsidiaries
o make any loans or advances to any other person other than employee
loans or advances made by Sprint in the ordinary course of business
consistent with past practice and loans or advances made between
Sprint and any of its wholly owned subsidiaries or between such wholly
owned subsidiaries
o make any investments in any person other than investments in wholly
owned subsidiaries and investments in the ordinary course of business
consistent with past practice and, in any event, which are not
material, individually or in the aggregate, to Sprint
o enter into any new material line of business outside its core
businesses, as defined in Sprint's articles of incorporation
o make or agree to make any new capital expenditures other than capital
expenditures made or agreed to be made in the ordinary course of
business not in excess of specified amounts agreed to by MCI WorldCom
and Sprint
o take any action that would prevent or impede the merger from
qualifying as a reorganization under section 368 of the Internal
Revenue Code
o take any action that would, or that could reasonably be expected to,
result in (1) any of the conditions to the merger not being satisfied
or (2) a material delay in the satisfaction of any of the conditions
to the merger
o change Sprint's fiscal year or, subject to certain exceptions, make
any material change in its methods of accounting in effect at December
31, 1998
o take any action that would cause the representations and warranties in
the merger agreement to no longer be true or
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o authorize, commit or agree to take any of the foregoing actions.
MCI WorldCom
Under the merger agreement, MCI WorldCom has agreed that, from the date of
the merger agreement until the completion of the merger, except (1) to the
extent Sprint shall otherwise consent in writing, which consent shall not be
unreasonably withheld or delayed, or (2) to the extent not reasonably
practicable in light of the announcement or existence of the merger agreement
and the transactions contemplated by the merger agreement, it will and will
cause its subsidiaries taken as a whole to carry on its business in the usual,
regular and ordinary course in all material respects, in substantially the same
manner as conducted before the date of the merger agreement, and shall use all
reasonable efforts to maintain its rights and franchises and preserve its
relationships with customers, suppliers and others having business dealings with
it with the objective to minimize the impairment of its ongoing business.
In addition, MCI WorldCom has agreed that, from the date of the merger
agreement until the completion of the merger, subject to certain exceptions and
except to the extent Sprint shall otherwise consent in writing, which consent
shall not be unreasonably withheld or delayed, neither it nor any of its
subsidiaries will:
o repurchase, redeem or otherwise acquire any shares of its capital
stock or any securities convertible into or exercisable for MCI
WorldCom capital stock except for the purchase by MCI WorldCom of MCI
WorldCom capital stock (and associated MCI WorldCom preferred stock
purchase rights) in the ordinary course of business consistent with
past practice in connection with share options, share incentive
schemes, profit sharing schemes or other MCI WorldCom benefit plans or
repurchases of MCI WorldCom common stock in open market or privately
negotiated transactions
o acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or all or a substantial
portion of the assets of any business or any other person, in any
event (1) with a value in excess of an amount equal to 20% of the
market capitalization of MCI WorldCom for any one acquisition and 30%
thereof for all acquisitions before the completion of the merger, or
(2) that could reasonably be expected to result in any of the
conditions to the merger not being satisfied or a material delay in
the satisfaction of any of the conditions to the merger
o enter into any new material line of business outside its existing core
businesses
o sell, lease, encumber or otherwise dispose of all or substantially all
of any material line of business for MCI WorldCom and its subsidiaries
taken as a whole
o take any action that would prevent or impede the merger from
qualifying as a reorganization under section 368 of the Internal
Revenue Code
o take any action that would, or that could reasonably be expected to,
result in (1) any of the conditions to the merger not being satisfied
or (2) a material delay in the satisfaction of any of the conditions
to the merger
o take any action that would cause the representations and warranties in
the merger agreement to no longer be true or
o authorize, commit or agree to take any of the foregoing actions.
Amendment; Extension and Waiver
Subject to applicable law:
o the merger agreement may be amended by the parties in writing at any
time, except that after the merger agreement has been adopted by
Sprint stockholders or approved by MCI WorldCom shareholders, no
amendment which by law or in accordance with the rules of The Nasdaq
National Market or the New York Stock Exchange requires further
approval by Sprint stockholders or MCI WorldCom shareholders shall be
made without such further approval and
o at any time prior to the completion of the merger, a party may, by
written instrument signed on behalf of such party, extend the time for
performance of any of the obligations or acts of the other party to
the merger agreement, waive any inaccuracies in the representations
and warranties of the other party contained in the merger agreement or
in any related document and waive compliance by the other party with
any agreement or condition in the merger agreement.
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Expenses
Whether or not the merger is completed, all fees and expenses incurred in
connection with the merger, the merger agreement and the transactions
contemplated by the merger agreement, including the solicitation of stockholder
approval, will be paid by the party incurring such fees or expenses, except that
MCI WorldCom and Sprint will share equally the expenses incurred in connection
with filing, printing and mailing of the proxy statement/prospectus and the
registration statement of which it is a part, including Securities and Exchange
Commission filing fees, and the filing fees for the premerger notification and
report forms under the Hart-Scott-Rodino Act and for any filings with the
European Commission.
Representations and Warranties
The merger agreement contains customary representations and warranties of
MCI WorldCom and Sprint relating to, among other things:
o corporate organization and similar corporate matters
o subsidiaries
o capital structure
o authorization, execution, delivery, performance and enforceability of,
and required consents, approvals, orders and authorizations of
governmental authorities relating to, the merger agreement and related
matters
o documents filed with the Securities and Exchange Commission, the
accuracy of information contained in those documents and the absence
of undisclosed liabilities
o the accuracy of information supplied in connection with the proxy
statement/prospectus and the registration statement of which it is a
part
o absence of material changes or events
o compliance with applicable laws
o with respect to Sprint only, absence of changes in Sprint's benefit
plans
o matters relating to the Employee Retirement Income Security Act of
1974 and employment agreements
o filing of tax returns and payment of taxes
o required stockholder vote
o satisfaction of state takeover statutes' requirements in Georgia and
Kansas
o engagement and payment of fees of brokers, investment bankers, finders
and financial advisors
o receipt of fairness opinions from financial advisors
o intellectual property and year 2000 matters
o outstanding and pending litigation and
o no amendment of the rights agreements.
Other Agreements
Each of MCI WorldCom and Sprint has agreed to use its reasonable best
efforts to:
o take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws
and regulations to complete the merger
o obtain and maintain all approvals, consents, waivers, registrations,
permits, authorizations, clearances and other confirmations required
to be obtained from any third party and/or any governmental entity
that are reasonably necessary to complete the merger
o cooperate in all respects with each other in connection with any
filing or submission and in connection with any investigation or other
inquiry, including any proceeding initiated by a private party
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o promptly inform the other party of any communication received by such
party from, or given by such party to, the FCC, state public utility
commissions, the Antitrust Division or any other governmental entity
and any material communication received or given in connection with
any proceeding by a private party
o permit the other party to review any communications given by it to,
and consult with each other in advance to the extent practicable of
any meeting or conference with, the FCC, state public utility
commissions, the Antitrust Division or any such other governmental
entity or, in connection with a proceeding by a private party, with
any other person
o to the extent permitted by the FCC, state public utility commissions,
the Antitrust Division or such other applicable governmental entity or
other person, give the other party the opportunity to attend and
participate in such meetings and conferences
o contest and resist any administrative or judicial action or
proceeding, including any proceeding by a private party, that is
instituted, or threatened to be instituted, challenging any
transaction contemplated by the merger agreement or any statute, rule,
regulation, executive order, decree, injunction or administrative
order that is enacted, entered, promulgated or enforced by a
governmental entity which would make the merger illegal or would
otherwise prohibit or materially impair or delay the completion of the
merger and
o have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order that is in effect and that prohibits,
prevents or restricts the completion of the merger and to have any
statute, rule, regulation, executive order, decree, injunction or
administrative order repealed, rescinded or made inapplicable.
The merger agreement provides that neither MCI WorldCom nor Sprint is
required to agree to or effect any divestiture or take any other action if doing
so would, individually or in the aggregate, reasonably be expected to materially
impair the parties' ability to achieve the overall benefits expected to be
realized from the completion of the merger.
Amendments to the MCI WorldCom Articles of Incorporation
The merger agreement provides that the articles of incorporation of MCI
WorldCom, as in effect immediately before the merger, a copy of which is
attached hereto as Exhibit 2.2 and incorporated by reference, will be amended
upon completion of the merger to reflect the form of the amended WorldCom
articles of incorporation that is incorporated herein by reference and is
attached hereto as Exhibit 2.2 to this Current Report on Form 8-K.
Amendments to the MCI WorldCom Bylaws
The merger agreement provides that the MCI WorldCom bylaws, a copy of which
is attached hereto as Exhibit 2.3 and incorporated by reference, as in effect
immediately before the merger, will be amended upon completion of the merger to
reflect the form of the amended WorldCom bylaws that is incorporated herein by
reference and is attached hereto as Exhibit 2.3 to this Current Report on
Form 8-K.
Corporate Governance and Capital Structure Matters
In addition, the merger agreement provides that upon completion of the
merger:
o the board of directors of WorldCom, as the surviving corporation, will
be constituted as described below under "The Merger--The Merger
Agreement--Interests of Sprint Directors and Executive Officers in the
Merger--Board of Directors"
o WorldCom will adopt tracking stock policies virtually identical to the
current Sprint tracking stock policies as described below under "The
Merger--Tracking Stock Matters"
o WorldCom will assume the Sprint tax sharing agreement and
o the WorldCom rights agreement will be modified to account for the
creation of the WorldCom PCS group common stock.
Material Contracts Between MCI WorldCom and Sprint
Service Agreements
MCI WorldCom and Sprint 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 Sprint and
its subsidiaries aggregating approximately $536 million in fiscal year 1999,
approximately $513 million in fiscal year 1998 and approximately $474 million in
fiscal year 1997.
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Interim Commercial Arrangements
Memorandum of Understanding; Further Negotiations are Ongoing. On October
4, 1999, MCI WorldCom and Sprint entered into a memorandum of understanding that
sets forth material terms for three commercial agreements entered into between
them. These agreements are referred to as the "commercial agreements" and are
designed to:
o enable Sprint to purchase MCI WorldCom's international communications
products and services, in an agreement referred to as the "global
services agreement"
o provide for the purchase by the parties of local access and transport
services from each other, in an agreement referred to as the "local
telecommunications services agreement" and
o allow MCI WorldCom to offer Sprint's PCS services, in an agreement
referred to as the "PCS agreement".
After MCI WorldCom and Sprint signed the merger agreement, they began
negotiations to agree on the terms of more detailed comprehensive agreements.
Negotiations could result in material changes to the terms of the memorandum of
understanding.
Global Services Agreement. Under the global services agreement, MCI
WorldCom will provide to Sprint international and global telecommunications
services that are currently offered to others by MCI WorldCom to enable Sprint
to resell such services to its customers or utilize such services on its own
behalf.
The international and global products subject to the global service
agreement will include, among other things, voice products, data products, IP
products, systems solutions and international private lines. Sprint will resell
and repackage these MCI WorldCom products and services and will coordinate
directly with customers for the provision of these products and services.
Sprint will determine which services to offer its customers. The
arrangements in the global services agreement are not exclusive and there are no
minimum volume commitments by Sprint. MCI WorldCom will not restrict the terms,
conditions or pricing under which Sprint will provide or resell the service to
its customers.
The services will be provided to Sprint under MCI WorldCom's standard terms
and conditions, including its tariffs, unless otherwise agreed by Sprint and MCI
WorldCom. MCI WorldCom will provide Sprint with customer service and sales
support similar to the support that it provides itself and other resellers. All
service or product orders between MCI WorldCom and Sprint will be priced at
direct cost, which includes cost of capital and excludes any sales cost.
The term of the global services agreement is three years. MCI WorldCom and
Sprint will cooperate in a transition of customers following the termination of
the agreement. The global services agreement will contain standard default
language as well as additional early termination provisions linked to several
events that result in the termination of the merger agreement.
No portion of the memorandum of understanding or the global services
agreement that would violate any existing obligation of Sprint will be effective
until the existing obligation of Sprint has been terminated. The parties'
obligations are contingent upon each party obtaining and maintaining all
required approvals, consents, licenses and other requirements necessary to
perform their obligations.
Local Telecommunications Services Agreement. The local telecommunications
services agreement provides for the purchase by the parties of local access and
transport services. Local access and transport services are services offered by
local telecommunications carriers that enable a long distance carrier that is
carrying a telephone call to complete the call on the local carrier's network,
which is referred to as "terminating access", or that enable a long distance
carrier to accept onto its network calls that originate on the local carrier's
network, which is referred to as "originating access".
Under the local telecommunications services agreement, Sprint purchases
terminating access from MCI WorldCom in order to take advantage of MCI
WorldCom's more extensive local network and its agreements for terminating
access with various local carriers. The parties expect that the volume of
terminating Sprint telephone calls when combined with the volume of terminating
MCI WorldCom telephone calls will result in a lower price per telephone call
than either company could obtain separately. The parties may also agree that
Sprint will sell originating access to MCI WorldCom in the form of digital
subscriber line multiple access facilities, which will enable the companies to
combine their digital subscriber line volumes in a manner that leads to lower
costs than if each company had purchased the facilities separately. Entering
into agreements to provide given volumes of traffic to a carrier in order to
take advantage of a carrier's existing available telephone call carrying
capacity is a common practice in the telecommunications industry.
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The price for the services is similar to that for other carriers
transporting the same kind of traffic with similar volumes. The agreement is not
exclusive and contains no volume commitments. The term of the agreement is 36
months. However, the term for providing specific facilities for a given form of
access may have a different term depending on existing agreements with other
carriers, network needs and traffic volume forecasts. In addition, the local
telecommunications services agreement contains standard default and termination
provisions as well as additional early termination provisions linked to several
events that result in the termination of the merger agreement. The local
telecommunications services agreement provides that if it is terminated, the
parties have a reasonable time to make other arrangements for acquiring the
necessary access services from other carriers in order to minimize any
disruptions to customers.
PCS Agreement. Under the PCS agreement, MCI WorldCom may offer WorldCom-
branded handsets and WorldCom-branded PCS service using the Sprint PCS network
in those parts of the United States agreed upon by the parties in the definitive
agreement.
The WorldCom-branded PCS service will be the same as the Sprint PCS service
that the Sprint PCS group makes generally available to its consumer and business
end users. MCI WorldCom will pay all direct costs of rebranding the Sprint PCS
service to WorldCom-branded PCS service.
The WorldCom PCS rate plans will be established by MCI WorldCom in its sole
discretion. MCI WorldCom may bundle the WorldCom PCS service with any other
WorldCom-branded service or product and may provide promotional discounts,
subject to MCI WorldCom funding such discounts. MCI WorldCom will market the
WorldCom-branded PCS service at its expense.
The PCS agreement will terminate on December 31, 2000, unless otherwise
extended. The PCS agreement will contain standard default and termination
provisions as well as additional early termination provisions linked to several
events that result in the termination of the merger agreement. Upon termination
of the PCS agreement, MCI WorldCom will retain the end user accounts produced by
MCI WorldCom during the agreement.
Other Agreements
As of the date of the MCI WorldCom S-4, neither MCI WorldCom nor Sprint 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 Sprint 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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Interests of Sprint Directors and Executive Officers in the Merger
Directors and executive officers of Sprint have interests in the merger as
directors or executive officers that are different from, or in addition to, the
interests of Sprint stockholders generally. These additional interests relate
to, among other things, the effect of the merger on 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.
Board of Directors
MCI WorldCom and Sprint have agreed that the WorldCom board of directors,
at the completion of the merger, will consist of 16 members, 6 of whom will
initially be designated by Sprint from among the existing directors of Sprint.
Ownership of Sprint Capital Stock; Stock Options
On December 14, 1999, the Sprint board of directors authorized a
two-for-one stock split of its Sprint PCS common stock in the form of a stock
dividend which was distributed on February 4, 2000. All numbers of Sprint PCS
common shares and options in the following discussion have been retroactively
restated to reflect this stock split.
As of December 31, 1999, directors and executive officers of Sprint
beneficially owned:
o an aggregate of 4,570,719 shares of Sprint series 1 FON common stock
(or approximately 0.6% of the then outstanding Sprint FON common
stock) and
o an aggregate of 2,772,876 shares of Sprint series 1 PCS common stock
(or approximately 0.3% of the then outstanding Sprint PCS common
stock), in each case excluding shares of Sprint series 1 FON common
stock and Sprint series 1 PCS common stock that may be acquired upon
the exercise of outstanding options.
As of December 31, 1999, directors and executive officers of Sprint held:
o options to purchase an aggregate of 16,476,285 shares of Sprint series
1 FON common stock, of which 3,591,745 were exercisable and
o options to purchase an aggregate of 8,704,810 shares of Sprint series
1 PCS common stock, of which 1,964,469 were exercisable.
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Most of Sprint's stock option plans provide that options outstanding for a
year at the time of the Sprint special meeting will become fully vested, if not
previously vested, and exercisable upon the adoption by the Sprint stockholders
of the merger agreement, although some options held by directors of Sprint would
not become fully vested and exercisable until completion of the merger. As of
December 31, 1999, options to purchase 10,313,124 shares of Sprint series 1 FON
common stock and 5,725,158 shares of Sprint series 1 PCS common stock held by
directors and executive officers would vest early upon the adoption by the
Sprint stockholders of the merger agreement, unless otherwise agreed to by the
individual directors and executive officers.
As of December 31, 1999, the following executive officers owned the number
of shares of Sprint FON common stock, Sprint PCS common stock and options to
purchase shares of Sprint FON common stock and Sprint PCS common stock shown in
the table below. Assuming:
o completion of the merger
o their continued employment until the completion of the merger
o no change in their share and option ownership and
o a FON exchange ratio of 1.8342,
the executive officers would own the number of shares of WorldCom common stock
and WorldCom series 1 PCS common stock and hold options to purchase the number
of shares of WorldCom common stock and WorldCom series 1 PCS common stock shown
in the table below:
<TABLE>
<CAPTION>
William T. Ronald T. Kevin B. Arthur B. Andrew J.
Esrey LeMay Brauer Krause Sukawaty
----- ----- ------ ------ --------
<S> <C> <C> <C> <C> <C>
Shares of Sprint FON common stock.................. 2,132,868 910,314 28,741 329,002 180
Shares of Sprint PCS common stock.................. 1,170,336 530,952 15,650 115,246 111,630
Options for Sprint FON common stock................ 7,485,582 3,849,666 413,716 780,209 27,242
Options for Sprint PCS common stock................ 3,646,350 1,864,984 207,606 438,328 508,616
Maximum shares of WorldCom common stock............ 4,047,894 1,731,300 54,531 616,826 13,281
Shares of WorldCom series 1 PCS common stock....... 1,170,336 530,952 15,650 115,246 111,630
Maximum options for WorldCom common stock.......... 14,153,123 7,277,443 782,926 1,481,917 108,981
Options for WorldCom series 1 PCS common stock..... 3,646,350 1,864,984 207,606 438,328 508,616
</TABLE>
As of December 31, 1999, executive officers held an aggregate of 604,622
restricted shares of Sprint FON common stock and 302,312 restricted shares of
Sprint PCS common stock awarded under Sprint's long-term incentive compensation
plan or Sprint's 1990 restricted stock plan or received upon exercise of stock
options. Each of these plans provides that the restrictions will lapse on the
shares of restricted stock outstanding for a year at the time of adoption by the
Sprint stockholders of the merger agreement. As of December 31, 1999, the
restricted stock held by the executive officers had been outstanding for a year
and therefore the restrictions will lapse on all of these shares upon the
adoption by Sprint stockholders of the merger agreement.
Employment Agreements
MCI WorldCom has guaranteed minimum salaries and minimum short-term
incentive compensation opportunities of Mr. Esrey and Mr. LeMay for three years
following the closing of the merger. The minimum salary for each individual will
be the amount of the salary paid to him in 1999, which was $1,000,000 for Mr.
Esrey and $883,400 for Mr. LeMay; the minimum short-term incentive compensation
opportunity for each will be the 1999 opportunity, which is approximately
$1,600,000 for Mr. Esrey and $935,000 for Mr. LeMay.
Sprint has contingency employment agreements with Messrs. Esrey, LeMay,
Krause and Sukawaty and two other executive officers. These agreements are
intended to assure these executive officers of continued employment for a period
of three years following any event that constitutes a change in control of
Sprint. If the employment of any of these executive officers is involuntarily
terminated other than for "cause" or any of these executive officers terminates
his employment for "good reason"
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within the three-year period following a "change in control" of Sprint, as such
terms are defined in each of the contingency employment agreements, such
executives will receive the following benefits:
o the executive will continue to receive monthly salary payments for 35
months, or until the executive officer reaches age 65 if this occurs
earlier. The current annual salaries set are $1,000,000 for Mr. Esrey,
$902,400 for Mr. LeMay, $435,500 for Mr. Krause, $501,400 for Mr.
Sukawaty and $3,680,816 for all executive officers covered by these
agreements as a group
o the executive will receive three payments each equal to the highest
short-term plus the highest long-term incentive compensation awards
received during the three years preceding termination, paid on the
13th, 25th and 35th months following termination. For the last three
years, the highest of these awards was $4,381,342 for Mr. Esrey,
$2,336,639 for Mr. LeMay, $1,049,011 for Mr. Krause, $927,773 for Mr.
Sukawaty and $10,651,716 for all executive officers covered by these
agreements as a group
o the executive will receive 35 months, or until the executive is
reemployed, whichever is shorter, of life, disability, medical and
dental insurance coverage
o under Sprint's pension plan, retirement benefits will be determined
assuming three years of additional credited service and the usual
actuarial reduction for retiring prior to age 65 will not be imposed
o post-retirement medical benefits will be provided
o for purposes of the Sprint key management benefit plan, the executive
will be deemed to have remained a key executive, as defined in the
plan, until age 60, and will therefore be entitled to the maximum
benefit equal to 300% of the participant's highest annual salary
during the five-year period before termination
o the executive will receive any amount of company contributions under
Sprint's savings plan that are not yet vested at termination
o to the extent the executive is entitled to enhanced pension benefits
under individual pension supplemental agreements that are earned upon
the completion of additional years of service, the executive will
receive the maximum enhancement even though he has not completed those
years at the time of termination and
o if any payment under the contingency employment agreement results in
the executive officer being subject to the excise tax payable under
section 4999 of the Internal Revenue Code, such executive officer will
receive additional payments so that the executive officer receives the
same net after-tax benefit as the executive officer would have
received had no excise tax been applicable.
The contingency employment agreements permit the affected executive officer
to elect to receive as a lump sum the present value of those amounts described
above in the first two items. If the employment of these executive officers is
terminated within three years after the completion of the merger, under
circumstances giving rise to the benefits described above, these executive
officers would receive, upon the making of such an election, an estimated lump
sum severance payment in the amount of $13,936,000 for Mr. Esrey, $8,397,000 for
Mr. LeMay, $3,849,000 for Mr. Krause, $3,708,000 for Mr. Sukawaty and an
aggregate amount of $37,146,000 for all executive officers covered by these
agreements as a group.
All but five of Sprint's executive officers have signed non-competition
agreements that provide that the executive will not associate with a competitor
of Sprint for an 18-month period following termination of employment. The
restriction on competition does not apply if, within one year following a change
in control of Sprint, the employer terminates the executive officer's employment
without cause or the executive officer terminates employment upon constructive
discharge. In addition, the agreements provide that each executive officer will
receive 18 months of compensation and benefits following an involuntary
termination of employment.
Options; Other Equity Based Compensation and Employee Benefits
For a description of the treatment in the merger of options to acquire
shares of Sprint stock, other equity based compensation and employee benefits
that are also applicable to directors and executive officers of Sprint, see
"--Sprint Employee Benefits Matters" and "--Effect on Awards Outstanding Under
Sprint Stock Plans".
Indemnification; Directors' and Officers' Insurance
Under the merger agreement, MCI WorldCom has agreed that it will assume the
same obligations with respect to indemnification of directors or officers of
Sprint or its subsidiaries as were contained in the articles of incorporation or
bylaws of Sprint or its subsidiaries and any indemnification or other agreements
at the date of signing the merger agreement. In addition, MCI WorldCom will
maintain the directors' and officers' liability insurance policies currently
maintained by Sprint on terms no less favorable than those of such policies for
a period of at least six years following the merger except that MCI WorldCom is
not required to spend an amount more than 200% of the annual premiums currently
paid by Sprint in any one year.
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Retention Arrangements
On December 14, 1999, the Sprint board of directors authorized a
two-for-one stock split of its Sprint PCS common stock in the form of a stock
dividend which was distributed on February 4, 2000. All numbers of Sprint PCS
options in the following discussion have been retroactively restated to reflect
this stock split.
In connection with the merger, Sprint made a special grant of stock options
to selected officers and director-level employees designed to retain these
individuals following the Sprint special meeting. These grants are in addition
to the annual grants under Sprint's 1990 Stock Option Plan. The shares
underlying options for the special grant are as follows: for Mr. Esrey, 216,000
shares of Sprint FON common stock and 216,000 shares of Sprint PCS common stock;
for Mr. LeMay, 135,000 shares of Sprint FON common stock and 134,000 shares of
Sprint PCS common stock; and for Mr. Krause, 54,000 shares of Sprint FON common
stock and 54,000 shares of Sprint PCS common stock. The exercise prices for the
Sprint FON common stock options and the Sprint PCS common stock options are
$61.94 and $54.25 per share, the fair market value of the underlying stocks on
the grant date, January 24, 2000. For a description of other retention
arrangements that are applicable to the directors and officers of Sprint, see
"--Sprint Employee Benefit Matters."
Sprint Employee Benefits Matters
During the one-year period following the completion of the merger, MCI
WorldCom will maintain employee benefit plans, programs and policies for the
employees of Sprint and its subsidiaries which, in the aggregate, are
substantially comparable to the plans, programs and policies provided by Sprint
before the completion of the merger, other than Sprint's employee stock purchase
plan. During this one-year period, salaries and wages will not be reduced by MCI
WorldCom except upon violations of MCI WorldCom's applicable policies or upon
the failure to satisfy any generally applicable performance standards for
similarly situated MCI WorldCom employees. Participants' accounts under all
unfunded Sprint plans which are designed to track the performance of Sprint
capital stock will be converted at the completion of the merger so as to track
WorldCom capital stock in the same manner that Sprint capital stock is converted
into WorldCom capital stock under the merger agreement.
During the second one-year period following the completion of the merger,
employees of Sprint and its subsidiaries will be eligible to participate in
employee benefit plans, programs and policies which, in the aggregate, are
substantially comparable to those maintained for similarly situated employees of
MCI WorldCom. Employees of Sprint and its subsidiaries will receive past service
credit under each applicable MCI WorldCom plan in which they become eligible to
participate following the completion of the merger.
MCI WorldCom will waive any active employment requirement and pre-existing
limitation under any MCI WorldCom employee benefit plan made available to Sprint
employees after the completion of the merger to the extent waived under the
corresponding Sprint plan before the completion of the merger. MCI WorldCom has
also agreed to recognize the dollar amount of all expenses incurred by each
employee of Sprint or its subsidiaries for purposes of satisfying any co-
payment, co-insurance and deductible requirements for the year in which such
individual becomes eligible under the relevant welfare benefit plans in which
they will be eligible to participate from and after the completion of the merger
and any such co-payment, co-insurance or deductible requirements for such year
will be no greater than under the applicable Sprint plan.
Any Sprint employee who is involuntarily terminated without cause in
connection with the merger at any time within one year following the completion
of the merger will receive severance benefits under or consistent with Sprint's
existing severance policies.
Sprint may, in its discretion:
o make an offer in calendar year 2000 to its eligible employees to
purchase shares of Sprint FON common stock and Sprint PCS common stock
under Sprint's employee stock purchase plan, which offer will be in
accordance with the provisions of Sprint's employee stock purchase
plan in the ordinary course of business consistent with past practice
o issue shares of Sprint FON common stock required by Sprint's automatic
dividend reinvestment plan
o issue Sprint FON common stock and Sprint PCS common stock to the
Sprint retirement savings plan, the Sprint retirement savings plan for
bargaining unit employees, and the Centel retirement savings plan for
bargaining unit employees, in each case consistent with the
requirements of the plan as they currently exist
o issue shares of Sprint FON common stock and Sprint PCS common stock
under Sprint's special award stock plan in accordance with past
practice, not to exceed 5,000 shares in the aggregate for each of
Sprint FON common stock and Sprint PCS common stock and
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o issue shares of Sprint FON common stock and Sprint PCS common stock
pursuant to Sprint's 1997 long-term stock incentive program and
management incentive stock option plan.
The merger agreement provides that Sprint will create an employee retention
pool of up to $100 million which may be used to implement cash retention
incentives for specified Sprint employees before the closing, to be paid 50% at
the closing and 50% six months after the closing, or upon their termination
without cause during the six-month period. The participants eligible for this
pool will be Sprint employees who are not recipients of retention stock options,
except with the consent of MCI WorldCom. The merger agreement also provides that
further details of this pool including, but not limited to, increasing the
amount above $100 million, will be determined by Sprint as soon as practicable
after the execution of the merger agreement, and will be subject to the approval
of MCI WorldCom.
Effect on Awards Outstanding Under Sprint Stock Plans
Under the merger agreement, upon completion of the merger, MCI WorldCom
will assume each stock option plan of Sprint. Under the merger agreement,
immediately before the merger, each outstanding option to acquire shares of
Sprint common stock under such plans will be amended and converted, on the same
terms and conditions as were applicable under such stock option as follows:
o each Sprint stock option to acquire Sprint FON common stock will be
converted into an option to acquire the number of shares of WorldCom
common stock equal to the number of shares of Sprint FON common stock
originally subject to such option multiplied by the FON exchange
ratio, rounded up to the nearest whole share, at an exercise price per
share equal to the exercise price for the shares of Sprint FON common
stock originally subject to such Sprint option divided by the FON
exchange ratio, rounded up to the nearest whole cent, and
o each Sprint stock option to acquire Sprint PCS common stock will be
converted into an option to acquire an equivalent number of shares of
WorldCom series 1 PCS common stock at the same exercise price as the
exercise price for such Sprint PCS common stock, plus an amount of
WorldCom common stock, for no additional consideration, equal to the
number of shares of Sprint PCS common stock originally subject to such
option multiplied by the PCS exchange ratio, which is 0.116025, and
rounded up to the nearest whole share.
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Litigation
Eight purported stockholder class action suits relating to the merger were
filed in state courts in Kansas and New York against Sprint and members of the
Sprint board of directors. Plaintiffs in these actions allege, among other
things, that the Sprint director defendants have breached their fiduciary duties
to Sprint stockholders by failing to maximize stockholder value in connection
with entering into the merger agreement and by agreeing to provisions in the
merger agreement. Plaintiffs generally seek injunctive relief, damages, costs
and attorneys' fees. Sprint believes that the claims are without merit and
intends to defend these actions vigorously. Six of the suits were dismissed
without prejudice in February 2000. Plaintiffs in the remaining two cases have
agreed to dismissal, and the documents necessary to dismiss those cases have
been filed with the court. The dismissal will become final following a court
hearing.
Accounting Treatment
The merger is expected to be accounted for using purchase accounting with
MCI WorldCom being deemed to have acquired Sprint.
ARRANGEMENTS WITH SPRINT STOCKHOLDERS
France Telecom and Deutsche Telekom
France Telecom and Deutsche Telekom own shares representing a combined
approximate 20% voting interest in Sprint.
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On October 8, 1999 and February 1, 2000, France Telecom and Deutsche
Telekom each made filings on Schedule 13D with the Securities and Exchange
Commission indicating that, although in the near term they may retain their
aggregate voting power in Sprint at 20%, in the longer term neither of them
intended as of the filing date to remain a stockholder of Sprint. France Telecom
and Deutsche Telekom also indicated in these filings that, should the merger be
completed and should they elect not to exercise appraisal rights, neither
intended as of the date of the filing to remain a stockholder of the surviving
corporation in the merger.
Summary of Securities Held
France Telecom and Deutsche Telekom currently own shares of Sprint series 3
FON common stock, Sprint series 3 PCS common stock and either Sprint class A
common stock (in France Telecom's case) or Sprint class A common stock--series
DT (in Deutsche Telekom's case). We refer to these two series of Sprint class A
stock as "Sprint FT/DT class A stock". We refer to all of the classes and series
of Sprint capital stock owned by France Telecom and Deutsche Telekom as "Sprint
FT/DT stock". In the merger, France Telecom and Deutsche Telekom will receive
WorldCom capital stock for their Sprint capital stock as described above under
"The Merger--The Merger Agreement--Merger Consideration".
Based on the number of outstanding shares of Sprint capital stock, MCI
WorldCom capital stock and an assumed FON exchange ratio of 1.6170, in each case
on the Sprint record date, and assuming that the shares of WorldCom series 1 PCS
common stock have 1.154 votes per share (the average market price of a share of
Sprint series 1 PCS commons stock divided by the average market price of a share
of MCI WorldCom common stock on the Sprint record date) and based on the current
holdings of France Telecom and Deutsche Telekom, these investors will own shares
of WorldCom capital stock after the merger that represent voting power of
approximately 4.18% and 4.22%, respectively, of WorldCom's total voting power.
Rights of France Telecom and Deutsche Telekom Contained in Sprint's
Articles of Incorporation
Sprint FT/DT Class A Stock Represents Equity in the Sprint FON Group and
the Sprint PCS Group. Sprint's articles of incorporation provide that each share
of Sprint FT/DT class A stock represents, among other things, an equity interest
in the Sprint FON group and an equity interest in the Sprint PCS group. As of
December 31, 1999, each share of Sprint FT/DT class A stock entitled the holder
to have one share of Sprint series 3 FON common stock and one-half of a share of
Sprint series 3 PCS common stock issued to the holder.
Voting. The Sprint series 3 FON common stock and the Sprint series 3 PCS
common stock have most of the same voting rights as the publicly traded Sprint
series 1 FON common stock and Sprint series 1 PCS common stock, respectively. In
addition, these shares are voted together, and together with the Sprint FT/DT
class A stock, to elect directors to the Sprint board of directors.
Board Representation. France Telecom and Deutsche Telekom, through their
ownership of Sprint FT/DT stock are generally entitled to representation on
Sprint's board of directors equal to the percent of Sprint's voting power that
they own, rounded up or down to the nearest whole number of directors, and are
entitled to elect a minimum of two directors generally so long as they own or
have the right to acquire shares representing an aggregate of at least 10% of
Sprint's total voting power. A total of three directors on the current Sprint
board of directors are elected by the holders of Sprint FT/DT stock. Holders of
Sprint FT/DT stock are also collectively entitled (with limited exceptions) to
one representative on each committee of Sprint's board of directors.
We refer to the percentage of shares that France Telecom and Deutsche
Telekom own and have the right to acquire together as their "ownership
percentage".
Under the Sprint master transfer agreement, on the date that the terms of
France Telecom's and Deutsche Telekom's investment in Sprint will change, which
we refer to as the "initial FT/DT investment changes", each of France Telecom
and Deutsche Telekom will cause its designees on the Sprint board of directors
to resign. The proposed amendments to the Sprint articles of incorporation and
Sprint bylaws to be voted upon at the Sprint special meeting eliminate these
investors' rights to representation on the Sprint board of directors. See
"--Sprint Master Transfer Agreement."
Dividends and Liquidation. For information about the dividend, liquidation
and other terms of the Sprint FT/DT stock, see "Description of MCI WorldCom
Capital Stock--Common Stock--Amended WorldCom Articles of Incorporation".
Conversion of Sprint FT/DT Stock. Under certain circumstances and subject
to certain exceptions as described below, shares of Sprint FT/DT stock will
automatically convert into shares of Sprint series 1 FON common stock and Sprint
series 1 PCS common stock. A conversion of this kind would leave France Telecom
and Deutsche Telekom in substantially the same economic position but would
deprive them of their special rights as holders of Sprint FT/DT stock, including
the right to elect a director or directors to the Sprint board of directors and
the disapproval rights described below. The circumstances triggering an
automatic conversion include:
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o reduction in the ownership percentage below specified levels for
enumerated periods of time
o material breach by France Telecom or Deutsche Telekom of specified
provisions of their investment agreements with Sprint
o material breach by France Telecom or Deutsche Telekom of specified
provisions of the Global One joint venture agreement
o occurrence of a change of control of Sprint
o failure of France Telecom and Deutsche Telekom to maintain required
relative ownership interests with respect to their ownership of Sprint
FT/DT stock (see "--Equity Purchase Rights--Ownership Ratios") and
o unauthorized transfers of Sprint FT/DT stock.
We use the term "change of control of Sprint" to mean:
o a decision by the board of directors to sell control of Sprint or not
to oppose a third party tender offer for its voting securities
representing more than 35% of the total voting power of Sprint or
o a change in the identity of a majority of Sprint's board of directors
due to
-- a proxy contest, or the threat to engage in a proxy contest, or
the election of directors by the holders of Sprint's preferred
stock, if any, or
-- any unsolicited tender, exchange or other purchase offer that has
not been approved by a majority of the Sprint independent
directors.
Neither a strategic merger involving Sprint, such as the merger, nor any
transaction between Sprint and France Telecom and/or Deutsche Telekom is deemed
to be a change of control of Sprint.
Transfer Restrictions
The stockholders' agreement among Sprint, France Telecom and Deutsche
Telekom provides that France Telecom and Deutsche Telekom may not transfer any
equity interests in Sprint until January 31, 2001, subject to the exceptions
identified in the stockholders' agreement. The stockholders' agreement also
provides for other transfer restrictions thereafter.
However, France Telecom and Deutsche Telekom's shares of Sprint series 3
PCS common stock that were acquired after February 1999, when Sprint completed
the initial public offering of the Sprint PCS common stock, are not subject to
any restrictions on transfer before January 31, 2001, except the following,
which also apply to all other shares of Sprint FT/DT stock:
o until the aggregate ownership percentage of France Telecom and
Deutsche Telekom is less than 3.5% of the total voting power of
Sprint, France Telecom and Deutsche Telekom may not transfer any of
their Sprint shares to a holder of more than 5% of the voting power of
Sprint, after giving effect to such transfer, other than in an
underwritten public offering
o in connection with a public offering of their shares of Sprint FT/DT
stock, neither France Telecom nor Deutsche Telekom may to the best of
its knowledge (1) sell more than 2% of the outstanding voting power of
Sprint to any person or group that, before such sale, owned 3% or more
of the voting power of Sprint, (2) sell more than 5% of the
outstanding voting power of Sprint to any person or group or (3) sell
to a person or group required under section 13(d) of the Exchange Act
to file a Schedule 13D with respect to Sprint or to a person or group
who, as a result of such sale, would become a Schedule 13D filer and
o in general, during any time when the aggregate ownership percentage of
France Telecom and Deutsche Telekom is greater than 5%, but less than
9%, these investors may not transfer shares of Sprint FT/DT stock
representing more than 1% of the voting power of Sprint to any one
person or group in any transaction or series of transactions, except
in connection with an underwritten public offering, and may not
transfer shares, other than in a public offering, to any major
competitor of Sprint.
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Approximately 6.5% of the total number of shares of Sprint series 3 PCS
common stock held by France Telecom and Deutsche Telekom as of December 31,
1999, after giving effect to the two-for-one stock split of Sprint PCS common
stock which was effected on February 4, 2000, were acquired after February 1999.
These shares represent approximately 4.0% of the Sprint PCS common stock that
France Telecom and Deutsche Telekom own or have the right to acquire by virtue
of their ownership of Sprint FT/DT class A stock.
Under the Sprint master transfer agreement, on the date of the initial
FT/DT investment changes, France Telecom and Deutsche Telekom will no longer be
subject to the transfer restrictions provided in the stockholders' agreement,
except that they will be prohibited from selling shares of Sprint FON common
stock during the period from 60 days before the expected completion of the
merger until the actual completion of the merger. In addition, France Telecom
and Deutsche Telekom will be permitted to sell, upon the completion of the
merger, shares of WorldCom PCS group common stock and, upon the earlier of 45
days following the completion of the merger and January 31, 2001, they will be
permitted to sell shares of WorldCom group common stock. France Telecom and
Deutsche Telekom are required to advise WorldCom in advance regarding any sales
of WorldCom capital stock prior to December 31, 2001 other than those of less
than $50 million for each of France Telecom and Deutsche Telekom in any rolling
four-week period.
Disapproval Rights
Pursuant to Sprint's articles of incorporation and the stockholders'
agreement, if Sprint takes any of the actions set forth in the next paragraph
before January 31, 2001 and the action is disapproved by France Telecom and
Deutsche Telekom, the transfer restrictions on France Telecom and Deutsche
Telekom's shares will terminate, except that the restrictions on transfers to
large holders will continue.
The actions which, if taken notwithstanding disapproval by France Telecom
and Deutsche Telekom, trigger termination of the transfer restrictions are:
o subject to various exceptions, divestitures by Sprint of assets with a
fair market value in excess of 20% of Sprint's market capitalization
o subject to various exceptions, Sprint's acquisition of either (1)
telecommunications, information technology and related businesses for
a cost exceeding 20% of Sprint's market capitalization or (2) other
types of businesses that have a cost exceeding 5% of Sprint's market
capitalization
o Sprint's issuance of any securities with class voting rights and
disapproval rights as extensive as or more extensive than the rights
granted to the holders of Sprint FT/DT stock
o the declaration of extraordinary cash dividends or cash distributions
to stockholders during any one year in excess of 5% of Sprint's market
capitalization and
o Sprint's issuance of securities representing 30% or more of its total
voting power, except that transfer restrictions do not terminate in
this case if France Telecom and Deutsche Telekom exercise their equity
purchase rights as described in "--Equity Purchase Rights".
France Telecom and Deutsche Telekom may also disapprove certain changes to
Sprint's governing documents and certain fundamental business transactions
proposed to be effected by Sprint, including:
o any merger or other business combination involving Sprint that results
in a change of control of Sprint, unless the surviving corporation
expressly assumes Sprint's obligations to the holders of Sprint FT/DT
stock with respect to the assets of Sprint related to its long
distance business and the provisions of the registration rights
agreement and agrees to be bound by the rights of France Telecom,
Deutsche Telekom and their affiliates to control the Global One joint
venture following certain occurrences and
o any merger or other business combination involving Sprint that does
not result in a change of control of Sprint, unless Sprint survives as
the parent entity, or the surviving corporation expressly assumes
Sprint's obligations to the holders of Sprint FT/DT stock.
Until January 31, 2006, any action taken or transaction entered into by
Sprint that would result in, or is taken for the purpose of encouraging or
facilitating, certain competitors of France Telecom, Deutsche Telekom or the
Global One joint venture owning 10% or more of the outstanding voting power of
Sprint may not be undertaken if it is disapproved by the holders of Sprint FT/DT
stock, unless it is a strategic merger such as the merger.
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Under the Sprint master transfer agreement, on the date of the initial
FT/DT investment changes the foregoing rights will be terminated. See "--Sprint
Master Transfer Agreement".
Rights with Respect to Sprint's Long Distance Assets
The sale of a cumulative amount of 5% or more of the fair market value of
Sprint's long distance assets may not be consummated by Sprint if it is
disapproved by the holders of Sprint FT/DT stock and the sale occurs before the
earliest of:
o January 31, 2001
o the date on which section 310 of the Communications Act no longer
prohibits the ownership by France Telecom and Deutsche Telekom of the
long distance assets
o the date on which France Telecom and Deutsche Telekom elect to accept
Sprint's offer to sell all of its interest in the Global One joint
venture following a change of control of Sprint and
o the date on which Sprint and subsidiaries of Sprint exercise their
right to sell all of their Global One joint venture interests to
France Telecom and Deutsche Telekom following a change of control of
Sprint.
Until January 31, 2006, if Sprint disposes of a portion of its long
distance assets and the disposition, together with all other similar
dispositions since July 31, 1995, has a value equal to 30% or more of the value
of Sprint's long distance assets on the date of the disposition, then France
Telecom and Deutsche Telekom have a right of first offer with respect to the
assets of which Sprint proposes to dispose, unless this right of first offer has
otherwise terminated.
Under the Sprint master transfer agreement, on the date of the initial
FT/DT investment changes the foregoing rights will be terminated. See "--Sprint
Master Transfer Agreement".
Change of Control Provisions
If Sprint decides to (1) sell all or substantially all of its assets or (2)
sell control of Sprint in a way that results in a 35% or larger stockholder in
the resulting entity, France Telecom and Deutsche Telekom may participate in
that process on a basis no less favorable than that granted any other
participant. If a third party makes a tender offer for not less than 35% of the
voting power of Sprint and the terms of such tender offer do not permit France
Telecom and Deutsche Telekom to sell an equal or greater percentage of their
shares of Sprint FT/DT stock as Sprint's other stockholders are collectively
permitted to sell, then upon the purchase by such third party in the tender
offer of 35% or more of the voting power of Sprint, the holders of Sprint FT/DT
stock may require Sprint to purchase at the tender offer price the capital stock
that such holders were unable to tender on the same basis as Sprint's other
stockholders, unless the holders of Sprint FT/DT stock may receive publicly
traded securities or cash in a business combination transaction required to be
effected within 90 days after the close of the tender offer.
In the case of a change of control of Sprint, France Telecom and Deutsche
Telekom obtain rights giving them greater control over the Global One joint
venture. If Sprint decides to (1) sell all or substantially all of its assets or
(2) sell control of Sprint in a way that results in a 35% or larger stockholder
in the resulting entity, France Telecom and Deutsche Telekom generally may sell
their shares of Sprint FT/DT stock in the proposed transaction free of any
transfer restriction, except for transfers to large holders, and if Sprint
decides to (a) sell all or substantially all of its assets or (b) sell control
of Sprint in a way that results in a 35% or larger stockholder in the resulting
entity, the standstill provisions affecting France Telecom and Deutsche Telekom
will terminate.
Under the Sprint master transfer agreement, on the date of the initial
FT/DT investment changes the foregoing rights will be terminated. See "--Sprint
Master Transfer Agreement".
Equity Purchase Rights
Under their stockholders' agreement with Sprint, France Telecom and
Deutsche Telekom have the right to acquire additional shares when Sprint issues
voting stock. These rights, referred to as "equity purchase rights", enable
these investors to maintain their voting power in Sprint at the level in effect
immediately before Sprint issues the new voting stock. Since making their
investments, France Telecom and Deutsche Telekom have generally maintained a 20%
voting interest in Sprint. Their equity purchase rights apply to any issuance,
including shares issued when options or warrants are exercised, or when any
Sprint convertible security is converted into Sprint common stock.
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Shares of Sprint FT/DT stock owned by France Telecom and Deutsche Telekom
automatically convert to shares of Sprint series 1 FON common stock or Sprint
series 1 PCS common stock when sold to third parties. Equity purchase rights do
not apply when Sprint issues shares as a result of a conversion triggered by a
sale by either France Telecom or Deutsche Telekom.
Issuances of Sprint FON Common Stock. So long as the ownership percentage
of France Telecom and Deutsche Telekom collectively equals 10% or greater, when
Sprint issues new shares of Sprint FON common stock or other voting securities
to any third party, each of France Telecom and Deutsche Telekom is permitted,
subject to restrictions, to maintain its proportionate ownership of Sprint's
voting power (based on its ownership percentage) by purchasing additional shares
of Sprint series 3 FON common stock from Sprint. The purchase price for these
new shares is generally the average price paid by the third party.
Issuances of Sprint PCS Common Stock. If Sprint issues Sprint series 1 PCS
common stock or Sprint series 2 PCS common stock, France Telecom and Deutsche
Telekom are permitted to purchase shares of Sprint series 3 PCS common stock. In
this case, France Telecom and Deutsche Telekom have up to two years to exercise
these rights. If they exercise these rights during the 45-day period after the
event triggering these rights, the purchase price equals the market price of a
share of Sprint series 1 PCS common stock on the date of the issuance giving
rise to their rights. If they do not exercise these rights during this 45-day
period, then the purchase price per share equals the higher of (1) the market
price of a share of Sprint series 1 PCS common stock on the date of the issuance
giving rise to the equity purchase right and (2) the market price of a share of
Sprint series 1 PCS common stock on the date of exercise of the equity purchase
right.
Issuance of Sprint FON Common Stock or Sprint PCS Common Stock Upon
Exercise of Employee Benefit Plan Options. When France Telecom and Deutsche
Telekom exercise equity purchase rights as a result of Sprint's issuance of
shares of Sprint FON common stock or Sprint PCS common stock pursuant to
employee benefit plans, contracts or other employee arrangements, the purchase
price equals:
o if the employee arrangement was not in existence on or before April
26, 1996, the market price per share of the Sprint series 1 FON common
stock or the Sprint series 1 PCS common stock, as applicable, on the
date of the issuance giving rise to equity purchase rights or
o if the employee arrangement was in existence on or before April 26,
1996, a price per share equal to the average price that France Telecom
and Deutsche Telekom have paid for their shares of Sprint FON common
stock and Sprint PCS common stock. The average price includes a price
that these investors are deemed to have paid for the shares of Sprint
FON common stock and Sprint PCS common stock underlying their shares
of Sprint FT/DT class A stock. The deemed price is based on a fraction
of the actual price that was paid for the share of Sprint FT/DT class
A stock. The fraction is determined, generally, by the relative market
prices of the Sprint series 1 FON common stock and the Sprint series 1
PCS common stock in the ten trading days after November 23, 1998, the
date of the Sprint PCS restructuring.
For employee arrangements in existence on or before April 26, 1996, these
provisions effectively enable France Telecom and Deutsche Telekom to purchase
shares upon exercise of equity purchase rights at a price less than market
value. This ability is eliminated on the date of the initial FT/DT investment
changes pursuant to the Sprint master transfer agreement.
Issuances of Other Kinds of Shares. If equity purchase rights are exercised
due to Sprint's issuance of voting securities other than Sprint FON common stock
or Sprint PCS common stock, France Telecom and Deutsche Telekom must purchase
shares of both of these classes so that they retain the proportion of each class
owned at the time. The purchase price per share for these shares is the market
price of a share of Sprint series 1 FON common stock or Sprint series 1 PCS
common stock, as applicable, on the date of the issuance that gave rise to
equity purchase rights.
Limitation on Class of Shares That May Be Purchased. In general, if equity
purchase rights are triggered by an issuance of Sprint FON common stock, only
Sprint series 3 FON common stock may be purchased upon exercise of these rights.
Similarly, if equity purchase rights are triggered by an issuance of Sprint PCS
common stock, only Sprint series 3 PCS common stock may be purchased upon
exercise of these rights. However, Sprint series 3 FON common stock may be
purchased, subject to conditions, when Sprint issues (1) regular-vote Sprint PCS
common stock or regular-vote Sprint seventh series preferred stock as a result
of a cable holder transferring or converting its low-voting shares or (2) Sprint
PCS common stock as a result of the exercise of the Sprint PCS warrants. In this
case, the purchase price of the Sprint series 3 FON common stock for France
Telecom and Deutsche Telekom equals the then-current market price of a share of
Sprint series 1 FON common stock. The maximum amount of Sprint series 3 FON
common stock which may be purchased under these circumstances, either in a
single purchase or in the aggregate through purchases over time, is $300
million.
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Method of Payment. Generally, if the purchase price for shares acquired
upon exercise of equity purchase rights is less than $200 million, then payment
is made in cash. Any portion of the purchase price that exceeds $200 million is
payable in installments, with a note issued to Sprint to evidence the promise to
pay.
Automatic Exercises; Other Special Equity Purchase Rights. If the
percentage of overall voting power of Sprint represented by France Telecom's and
Deutsche Telekom's shares falls below 20%, the stockholders' agreement provides
in specified instances for the automatic exercise of equity purchase rights and
issuance to France Telecom and Deutsche Telekom of shares of Sprint FT/DT stock
which they are entitled to purchase pursuant to these rights.
Special equity purchase rights apply if the ownership percentage of France
Telecom and Deutsche Telekom is diluted to less than 10% as a result of a
transaction resulting in the issuance of 30% or more of the voting power of
Sprint or, until January 31, 2006, if a major competitor of France Telecom or
Deutsche Telekom obtains securities representing 20% or more of the voting power
of Sprint as a result of a strategic merger.
Ability to Purchase Outside Equity Purchase Rights. If France Telecom and
Deutsche Telekom are diluted due to an issuance by Sprint, they are permitted to
purchase shares in the open market as an alternative to purchasing shares from
Sprint to maintain their voting percentage interest in Sprint. However, pursuant
to their standstill agreement with Sprint, France Telecom and Deutsche Telekom
in the aggregate are not permitted to increase their overall voting power in
Sprint above 20%.
Record Date Blackout Purchases. If anti-fraud rules prohibit France Telecom
and Deutsche Telekom from purchasing shares of Sprint FON common stock or Sprint
PCS common stock from third parties in the open market during a ten trading day
period beginning on the ninth trading day before a record date for either a
meeting of Sprint's stockholders or the payment of dividends with respect to
Sprint FT/DT stock, then the holders of Sprint FT/DT stock (subject to
conditions) have limited additional rights to purchase Sprint series 3 FON
common stock and/or Sprint series 3 PCS common stock from Sprint in order to
increase their beneficial ownership to 20% of Sprint's total voting power.
Automatic Exercise of Equity Purchase Rights with Respect to Conversions.
As long as France Telecom and Deutsche Telekom may exercise their equity
purchase rights, they must exercise their rights to purchase from Sprint shares
of Sprint series 3 PCS common stock upon, and simultaneously with, any issuance
of regular-vote Sprint series 1 PCS common stock resulting from the conversion
of low-vote Sprint series 2 PCS common stock, but only when this type of
issuance occurs during a period beginning on the fifth day prior to a record
date relating to a vote of Sprint's stockholders or the payment of dividends to
Sprint's stockholders and ending on the day following the record date. This
provision also applies upon transfers of Sprint seventh series preferred stock.
This provision terminates with respect to any holder of Sprint FT/DT stock upon
delivery by that holder to Sprint of a notice to that effect.
Exclusionary Tender Offers. France Telecom and Deutsche Telekom have
protections if the Sprint board determines not to oppose a tender offer by a
person, other than France Telecom, Deutsche Telekom or their respective
affiliates, for not less than 35% of the voting power of Sprint which does not
permit the holder of Sprint FT/DT stock to sell an equal or greater percentage
of their shares as the other holders of Sprint capital stock are permitted to
sell. We refer to this kind of tender offer as an "exclusionary tender offer".
Upon the purchase of securities representing not less than 35% of Sprint's
voting power in an exclusionary tender offer, France Telecom and Deutsche
Telekom may sell to Sprint all but not less than all of the shares that they
were unable to tender on the same basis as the other Sprint stockholders, at the
same price per share that was paid in the tender offer. France Telecom and
Deutsche Telekom do not have these rights, however, if, at the termination of
the period during which tenders may be made into the tender offer, they may
receive, in exchange for all the shares of each class and/or series of Sprint
FT/DT stock corresponding to the classes and/or series of stock subject to the
tender offer, publicly-traded securities with an aggregate fair market value,
and/or cash in an amount, not less than the aggregate price per share of the
Sprint series 1 FON common stock and/or Sprint series 1 PCS common stock, as the
case may be, paid pursuant to the tender offer in a back-end transaction
required to be effected within 90 days after the close of the tender offer.
Ownership Ratios. France Telecom and Deutsche Telekom have agreed that
o the ratio of (1) the overall voting power of Sprint held by France
Telecom or Deutsche Telekom to (2) the overall voting power of the
other will not be greater than 3 to 2
o the ratio of (1) the overall voting power of Sprint represented by the
shares of Sprint series 3 FON common stock together with shares of
Sprint FON common stock issuable with respect to the Sprint FT/DT
class A stock of either France Telecom or Deutsche Telekom to (2) the
overall voting power represented by the corresponding shares held by
the other will not be greater than 4 to 1 and
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o the ratio of (1) the overall voting power of Sprint represented by the
shares of Sprint series 3 PCS common stock together with shares of
Sprint PCS common stock issuable with respect to the Sprint FT/DT
class A stock of either France Telecom or Deutsche Telekom to (2) the
overall voting power represented by the corresponding shares held by
the other will not be greater than 4 to 1.
Under both the stockholders' agreement and the Sprint articles of
incorporation, France Telecom and Deutsche Telekom have agreed that if any ratio
set forth immediately above is exceeded for more than 60 days after notice is
provided, then each share of Sprint FT/DT stock outstanding will automatically
convert into the applicable number of shares of Sprint series 1 FON common stock
or Sprint series 1 PCS common stock, as the case may be, and the rights of
France Telecom and Deutsche Telekom to elect directors and exercise disapproval
rights and the right of France Telecom and Deutsche Telekom to participate in a
proposed change of control of Sprint terminate.
Under the Sprint master transfer agreement, on the date of the completion
of the merger, the foregoing equity purchase rights will be terminated. In
addition, the provisions relating to relative ownership ratios will be
eliminated on the date of the initial FT/DT investment changes. See "--Sprint
Master Transfer Agreement."
Standstill Agreement
Sprint, France Telecom and Deutsche Telekom have entered into a standstill
agreement. If the merger occurs, WorldCom will assume all of Sprint's
obligations under the standstill agreement and each of WorldCom, France Telecom
and Deutsche Telekom will have rights and obligations that are virtually
identical to the rights and obligations summarized in this section.
Pursuant to the standstill agreement, each of France Telecom and Deutsche
Telekom has agreed that, before July 31, 2010, it will not directly or
indirectly acquire, offer to acquire, or agree to acquire, by purchase or
otherwise, beneficial ownership of any Sprint capital stock such that the Sprint
capital stock beneficially owned in the aggregate by France Telecom and Deutsche
Telekom and their respective affiliates and associates would represent in the
aggregate more than 20% of the votes represented by the outstanding Sprint
capital stock.
In addition, each of France Telecom and Deutsche Telekom has agreed that,
before July 31, 2010, it will not directly or indirectly acquire, offer to
acquire, or agree to acquire, by purchase or otherwise, beneficial ownership of
any Sprint FON common stock or Sprint PCS common stock such that the Sprint FON
common stock or the Sprint PCS common stock, as the case may be, beneficially
owned in the aggregate by France Telecom and Deutsche Telekom and their
respective affiliates and associates, including the Sprint FON common stock and
the Sprint PCS common stock underlying the Sprint FT/DT class A stock, would
represent in the aggregate more than 33% of the votes represented by the
outstanding Sprint FON common stock or Sprint PCS common stock, including as
outstanding the shares of Sprint FON common stock and Sprint PCS common stock
underlying the Sprint FT/DT class A stock.
After July 31, 2010, the 20% limitation on the ownership of outstanding
Sprint capital stock increases to 30%, as long as the ownership does not exceed
80% of the foreign ownership limitation. "Foreign ownership limitation" means
the maximum aggregate percentage of the Sprint capital stock that may be owned
of record or voted by aliens under section 310(b)(4) of the Communications Act
of 1934, without this ownership or voting resulting in the possible loss, or
possible failure to secure the renewal or reinstatement, of any license or
franchise of any governmental authority held by Sprint or any of its affiliates
to conduct any portion of the business of Sprint or the affiliate, as the
maximum aggregate percentage may be increased from time to time by amendments to
section 310 of the Communications Act or by actions of the FCC.
France Telecom and Deutsche Telekom and their respective affiliates
generally may, subject to the Sprint rights plan, increase their beneficial
ownership beyond the applicable percentage limitations to the extent required to
match the percentage ownership of Sprint capital stock owned by any other
stockholder; provided that the beneficial ownership of France Telecom and
Deutsche Telekom and their respective affiliates does not exceed 33% of the
voting power represented by either the outstanding Sprint FON common stock or
the outstanding Sprint PCS common stock or 80% of the foreign ownership
limitation.
In addition, neither France Telecom nor Deutsche Telekom violate the
beneficial ownership restrictions if their beneficial ownership of Sprint
capital stock exceeds the applicable percentage limitations:
o due to an acquisition of Sprint capital stock by Sprint, unless France
Telecom and Deutsche Telekom have previously been notified of this
acquisition
o due to purchases by France Telecom and Deutsche Telekom of Sprint
capital stock in reliance on information regarding the number of
shares outstanding of Sprint capital stock provided by Sprint to
France Telecom and
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Deutsche Telekom, unless France Telecom and Deutsche Telekom have
previously been notified that this information is incorrect
o in general, if the limitation was exceeded inadvertently, by no more
than 0.5%, and the acquisitions which resulted in France Telecom,
Deutsche Telekom and their respective affiliates and associates
exceeding the percentage limitation were undertaken in good faith
o as a result of any readjustment in the relative voting power of Sprint
FON common stock and Sprint PCS common stock in accordance with the
terms of Sprint's articles of incorporation or
o as a result of a redemption or conversion of any Sprint PCS common
stock pursuant to Sprint's articles of incorporation.
Pursuant to the Sprint master transfer agreement, on the date of the
initial FT/DT investment changes the standstill agreement will be amended to
provide that the standstill agreement will terminate on July 31, 2005. In
addition, France Telecom and Deutsche Telekom will have the right to require
Sprint to enter into a separate standstill agreement with each investor, on the
same terms as the existing standstill agreement.
Registration Rights Agreement
France Telecom and Deutsche Telekom, as holders of Sprint FT/DT stock, have
entered into a registration rights agreement with Sprint. If the merger occurs,
WorldCom will assume all of Sprint's obligations under the registration rights
agreement and each of WorldCom, France Telecom and Deutsche Telekom will have
rights and obligations that are virtually identical to the rights and
obligations described in this section.
Demand Registrations. France Telecom and Deutsche Telekom have the right to
require Sprint to register their shares for sale under the Securities Act.
Except for sales after the merger permitted under Rule 145 under the Securities
Act, registration is necessary in order for these investors to complete a public
offering of their shares.
The holders of a majority of the Sprint FT/DT stock may demand one
registration in any 12 month period, up to a maximum of ten registrations.
Sprint is responsible for the registration expenses in connection with the first
seven of these registrations. The holders of the Sprint FT/DT stock requesting
registration are responsible for the registration expenses in connection with
the remaining three registrations.
Piggyback Registration. France Telecom or Deutsche Telekom have the right
to require Sprint to register their shares, subject to exceptions and
limitations, when Sprint is registering shares for sale on its own behalf or for
sale by another stockholder. These rights do not apply to registrations on Forms
S-4 or S-8, registrations in connection with an exchange offer, or offerings
solely to Sprint's existing stockholders or pursuant to dividend reinvestment
plans or dividend reinvestment and stock purchase plans.
Limitations. Sprint is not required to effect any registration unless the
market value of the stock requested to be registered exceeds $200 million,
unless the registration relates to shares of Sprint series 3 PCS common stock
that were acquired after the completion of the initial public offering of Sprint
PCS common stock. If a request is made to register these shares of Sprint series
3 PCS common stock, (1) the aggregate market value of these shares must exceed
$100 million on the date of delivery of the request for registration and (2) the
registration must involve the lesser of (A) shares with an aggregate market
value of at least $200 million on the date of delivery of the request for
registration and (B) all of the shares of Sprint series 3 PCS common stock owned
by France Telecom and Deutsche Telekom.
Demand Registration Priorities. In general, where France Telecom and
Deutsche Telekom have demanded that Sprint register some of their shares, the
underwriter for an underwritten offering may decide that it must cut back the
total number of shares to be sold in the offering. This would happen if the
shares to be sold in the offering by France Telecom and Deutsche Telekom,
together with shares to be sold in the offering by Sprint or other Sprint
stockholders, exceeds the number that can be sold within a price range
acceptable to France Telecom and Deutsche Telekom.
If Sprint or other Sprint investors are also selling shares in an
underwritten offering where the underwriter determines to cut back the total
number of shares offered, then the rule for deciding which shares to be sold in
the offering have priority is the following:
o the shares to be sold by France Telecom and Deutsche Telekom have
first priority
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o any shares to be sold by the cable holders have second priority
o any shares to be sold by Sprint have third priority or, in some cases,
second priority along with the cable holders' shares and
o shares to be sold by any other investors of Sprint have last priority.
Sprint has the option to move its priority to an equal status with that of
France Telecom and Deutsche Telekom. During the cable holders' preference
period, which is the period beginning May 22, 1999 and ending on the earlier of
(1) the date upon which the cable holders have completed registered public
offerings of their Sprint PCS common stock with an aggregate public offering
price of $2 billion or (2) May 22, 2000, it is possible that the cable holders'
shares will also have equal priority with that of France Telecom and Deutsche
Telekom. At other times, the cable holders would be next in priority to that of
Sprint and France Telecom and Deutsche Telekom. Other investors with
registration rights, if any, would have priorities behind these.
If Sprint elects the option to have an equal priority with France Telecom
and Deutsche Telekom, and the underwriters in fact cut back the number of shares
to be offered, as described above, then the registration will not count toward
the maximum of ten registrations provided to France Telecom and Deutsche Telekom
under the registration rights agreement.
In general, France Telecom and Deutsche Telekom will not have first
priority when exercising piggyback registration rights. If the cable holders are
exercising piggyback registration rights in the same offering, the number of
shares that they will be entitled to have registered will be reduced on a pro
rata basis with France Telecom and Deutsche Telekom, except that during the
cable holders' preference period, they will have first priority when exercising
piggyback registration rights.
Notwithstanding these priorities, if at any time Sprint proposes to effect
a registration as described in this section and France Telecom and Deutsche
Telekom may dispose of their securities pursuant to Rule 144(k) (or any
successor provision) under the Securities Act, the priorities described above
will be changed so that the securities proposed to be included by France Telecom
and Deutsche Telekom have the lowest priority of all securities proposed to be
registered in this registration.
Other Provisions. The registration rights agreement contains other
provisions addressing Sprint's ability to effect other public offerings near the
effectiveness of demand or incidental registrations, the filing of all reports
required to be filed by Sprint under the Securities Act and the Exchange Act,
and indemnification and contribution provisions.
Under the Sprint master transfer agreement, on the date of the initial
FT/DT investment changes, the registration rights agreement will be amended as
follows:
o demand registrations will be permitted every six months
o France Telecom's and Deutsche Telekom's demand registration rights
will extend to registrations of their Sprint shares in connection with
sales of securities of these investors that are convertible into or
exchangeable for the Sprint shares, or "derivative securities"
o additional indemnity provisions relating to registrations in
connection with offerings of derivative securities will be added and
o France Telecom and Deutsche Telekom will have the right after the time
of the initial FT/DT investment changes to require Sprint to enter
into a separate registration rights agreement with each investor, on
the same terms as the existing registration rights agreement.
Sprint Master Transfer Agreement
Sprint, France Telecom, Deutsche Telekom, entities related to these parties
and the entities comprising the Global One joint venture have entered into the
Sprint master transfer agreement. This agreement covers, among other things, the
sale of Sprint's interest in Global One and changes to be made to the terms of
France Telecom's and Deutsche Telekom's investments in Sprint. Global One is an
international joint venture owned by Sprint, France Telecom and Deutsche Telekom
that provides international voice and data services to large companies in over
65 countries including the United States.
The initial FT/DT investment changes will occur as described below on the
date of the Sprint special meeting. Additional changes will take effect upon
completion of the merger, in which these investors will receive the same classes
and series of WorldCom capital stock as will be received by Sprint's public
shareholders. Under the Sprint master transfer agreement, if the
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Sprint special meeting has not occurred by December 31, 2000, the initial FT/DT
investment changes will take effect on that date. In addition, the initial FT/DT
investment changes will take effect if at any time the merger agreement is
terminated.
Sale of Interest in Global One. On February 22, 2000, Sprint completed the
sale of its interests in the Global One joint venture for a purchase price of
$1.127 billion. Global One also repaid all loans made to it by Sprint in the
aggregate principal amount of $276 million.
Effective as of January 21, 2000, France Telecom and Deutsche Telekom began
managing the daily operations of Global One without Sprint's participation.
Sprint's representatives have resigned from all governing boards of Global One.
Sprint's funding obligations to Global One terminated on January 1, 2000. As of
February 22, 2000, Sprint may provide Global One's services to existing
customers under current contracts pursuant to agreed to arrangements for the
shorter of two years or the life of a customer's contracts in existence on
January 21, 2000. In addition, Sprint has the right to sell Global One services
to existing and new customers for at least one year after February 22, 2000
pursuant to a distribution agreement which was signed as of January 21, 2000. In
addition, Global One will provide certain support services to Sprint's
customers.
Voting Agreement and Proxy. Pursuant to the Sprint master transfer
agreement, France Telecom and Deutsche Telekom have agreed to vote, and have
granted to senior executives of Sprint a proxy to vote, the shares of Sprint
capital stock held by them in favor of adoption of the merger agreement and the
other matters to be voted upon at the Sprint special meeting.
Elimination of Special Rights of France Telecom and Deutsche Telekom as
Stockholders of Sprint. At the time of the initial FT/DT investment changes,
each of France Telecom and Deutsche Telekom will cause its designees on the
Sprint board of directors to resign and, assuming that the proposed amendments
to the Sprint articles of incorporation and Sprint bylaws are approved, will no
longer have the right to designate directors. If the proposed amendments to the
Sprint articles of incorporation and Sprint bylaws are not approved, France
Telecom and Deutsche Telekom will continue to have the right to designate
directors, but will be permitted to designate only independent directors.
Independent directors are, among other things, not officers of Sprint, France
Telecom or Deutsche Telekom. The other changes to the terms of France Telecom's
and Deutsche Telekom's investments in Sprint will take effect at the time of the
initial FT/DT investment changes. Under the proposed amendments, France Telecom
and Deutsche Telekom:
o would have the right to convert any of their shares into the publicly
traded classes and series of Sprint capital stock;
o would no longer be entitled to vote their shares as a separate class
on amendments to the Sprint bylaws; and
o would no longer have disapproval rights with respect to Sprint's long
distance assets, amendments to the Sprint articles of incorporation,
Sprint bylaws and Sprint rights agreement that would adversely affect
their rights, issuances by Sprint of capital stock or debt
securities with super voting rights and any action by Sprint before
January 31, 2006 that would result in, or is taken for the purpose of
encouraging or facilitating, certain competitors of France Telecom,
Deutsche Telekom or the Global One joint venture owning 10% or more of
the outstanding voting power of Sprint.
The proposed amendments to the Sprint articles of incorporation also
delete numerous provisions contained in the current Sprint articles of
incorporation which, if triggered, would cause the shares held by France Telecom
and Deutsche Telekom to convert into shares of Sprint series 1 FON common stock
and Sprint series 1 PCS common stock.
Elimination of Noncompetition Arrangements and Exclusivity Provisions. All
noncompetition arrangements and exclusivity provisions between Sprint and the
other parties to the Sprint master transfer agreement have been eliminated as of
January 21, 2000, except that Sprint has agreed for a period ending on February
22, 2001 that it will not offer specified products and services to customers of
France Telecom, Deutsche Telekom or Global One if such products or services
compete with the products and services provided under a customer contract
identified before January 21, 2000.
Amended Stockholders' Agreement. At the time of the initial FT/DT
investment changes, the stockholders' agreement among France Telecom, Deutsche
Telekom and Sprint will be amended to:
o eliminate general restrictions on the transfer of Sprint securities
owned by France Telecom and Deutsche Telekom (other than transfers to
large holders), other than the requirement to consult in advance with
Sprint for any transfers by either France Telecom or Deutsche Telekom
in excess of $25 million in any rolling four-week period
o eliminate the right of first purchase on behalf of Sprint with respect
to sales of Sprint securities owned by France Telecom and Deutsche
Telekom
o eliminate the right of first purchase on behalf of France Telecom and
Deutsche Telekom with respect to sales of long distance assets by
Sprint
o eliminate France Telecom's and Deutsche Telekom's right to participate
as a bidder in a change of control of Sprint
o eliminate the provisions providing for the redemption of Sprint
securities held by France Telecom and Deutsche Telekom in an
exclusionary tender offer
o modify France Telecom and Deutsche Telekom's equity purchase rights to
eliminate France Telecom's and Deutsche Telekom's ability to purchase
Sprint securities at a discount to market price and
o eliminate France Telecom and Deutsche Telekom's right to purchase
additional Sprint securities in the event of a major competitor
transaction.
As of the completion of the merger, the stockholders' agreement, as assumed
by WorldCom, will be further amended to:
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o eliminate all transfer restrictions on the WorldCom securities owned
by France Telecom and Deutsche Telekom, other than the requirement
until December 31, 2001 to consult in advance with WorldCom for any
transfers by either France Telecom or Deutsche Telekom in excess of
$50 million in any rolling four-week period and
o eliminate all of France Telecom and Deutsche Telekom's equity purchase
rights.
The Cable Holders
In November 1998, Sprint issued shares of Sprint series 2 PCS common stock
to Tele-Communications, Inc., Comcast Corporation and Cox Communications, Inc.
and a number of their affiliates in exchange for their interests in joint
ventures that form a part of the existing Sprint PCS group. In March 1999,
Tele-Communications, Inc. transferred its shares of Sprint series 2 PCS common
stock to a trust. We refer to that trust, Comcast Corporation, Cox
Communications, Inc., as well as their affiliates that currently hold shares of
Sprint series 2 PCS common stock, collectively as the "cable holders".
The cable holders have various rights and obligations under agreements with
Sprint, which will be assumed by WorldCom upon completion of the merger. Under
the Sprint articles of incorporation, after the merger each cable holder will
have the right to convert all of its shares of WorldCom series 2 PCS common
stock and WorldCom series 2 common stock into an equivalent number of shares of
WorldCom series 1 PCS common stock and WorldCom common stock, respectively. This
right will be exercisable for 90 days after the merger.
Equity Purchase Rights
The cable holders that hold Sprint PCS common stock have rights to purchase
additional shares of Sprint series 2 PCS common stock from Sprint. If the merger
is completed, the cable holders will have equity purchase rights with respect to
WorldCom that are comparable to those described in this section. These rights
are summarized below:
o If Sprint issues shares of Sprint PCS common stock in exchange for
cash, then each cable holder has the right to purchase from Sprint
enough shares of Sprint series 2 PCS common stock for the cable holder
to avoid any reduction in its percentage economic interest in the
Sprint PCS group, as in effect immediately before the issuance. The
price per share would equal the purchase price paid for the shares of
Sprint PCS common stock that gave rise to the equity purchase right,
net of any underwriting discounts if they were issued in a public
offering.
o If Sprint issues, in exchange for cash, options, warrants or other
securities that are convertible into shares of Sprint PCS common
stock, then each cable holder has the right to purchase from Sprint
enough of the same kind of options, warrants or other securities for
the cable holder to avoid any reduction in its percentage economic
interest in the Sprint PCS group, as in effect immediately before the
issuance. The purchase price for each unit would equal the purchase
price paid for the units that gave rise to the equity purchase right,
net of any underwriting discounts if they were issued in a public
offering.
o If the Sprint FON group contributes cash or other assets to the Sprint
PCS group in exchange for an increase in the Sprint FON group's inter-
group interest, then each cable holder has the right to purchase from
Sprint enough shares of Sprint series 2 PCS common stock to avoid any
reduction in its percentage economic interest in the Sprint PCS group,
as in effect immediately before the contribution. The purchase price
for the Sprint series 2 PCS common stock would be based on the per
unit price used by the Sprint board of directors or its capital stock
committee in determining the appropriate adjustment to the Sprint FON
group's inter- group interest as a result of the contribution.
o If the Sprint FON group contributes to the Sprint PCS group cash or
other assets in exchange for an inter-group interest that is
convertible into or exchangeable for an inter-group interest in the
Sprint PCS group, then each cable holder has the right to purchase
from Sprint enough securities having generally the same terms as that
inter-group interest to avoid any reduction in its percentage economic
interest in the Sprint PCS group, as in effect immediately before the
contribution. The purchase price per share would be based on the
corresponding per unit price used by the Sprint board of directors or
its capital stock committee in determining the appropriate adjustment
to the Sprint FON group's inter-group interest as a result of the
contribution.
The cable holders will not have any equity purchase right with respect to
shares of Sprint PCS common stock issued pursuant to the following:
o exercises of the warrants
o conversion of the Sprint seventh series preferred stock
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o qualified or non-qualified employee and director benefit plans,
arrangements or contracts (including stock purchase plans)
o dividend reinvestment plans or
o conversion rights under capital stock of Sprint outstanding as of May
26, 1998.
The equity purchase rights of a cable holder will terminate at the same
time as the standstill agreement discussed below between Sprint and that cable
holder terminates.
If a cable holder does not exercise equity purchase rights, or purchases
fewer securities than it is entitled to purchase upon an exercise, then that
cable holder will be entitled to purchase, in open market purchases or otherwise
from a third party, a number of shares of Sprint series 1 PCS common stock equal
to the number of shares of Sprint series 2 common stock that the cable holder
had the right to purchase but did not purchase. In cases where an issuance of
convertible securities gave rise to the equity purchase right, the right in this
paragraph is adjusted so that the number of shares of Sprint series 1 PCS common
stock that can be purchased is equal to the number of shares underlying the
convertible security.
Standstill Agreement
Sprint has entered into a standstill agreement with each cable holder. If
the merger occurs, WorldCom will assume all of Sprint's obligations under these
standstill agreements, and WorldCom and each cable holder will have rights and
obligations that are comparable to the rights and obligations summarized in this
section.
General. Each cable holder has agreed that before November 23, 2008, it
will not acquire any Sprint voting securities if, as a result, the cable holder
would own shares with more than 1.5% of the voting power of all Sprint capital
stock, assuming for this purpose that all shares of Sprint series 2 PCS common
stock have the same voting rights as the Sprint series 1 PCS common stock. Each
cable holder has also agreed that it will cause its affiliates not to purchase
shares that would cause the affiliate, together with the cable holder, to
violate this provision.
Under this provision, each cable holder is currently prohibited from
purchasing any Sprint voting securities except as provided below. The above
provisions of the standstill agreements do not prohibit the cable holders from:
o exercising their equity purchase rights
o acquiring additional shares of Sprint series 2 PCS common stock upon
conversion of shares of the Sprint seventh series preferred stock or
o acquiring additional shares of Sprint series 2 PCS common stock upon
exercise of the Sprint PCS warrants.
In addition, the cable holders have agreed to not propose, participate in
or assist others in any:
o acquisition of Sprint voting securities or other equity interests in
Sprint that would result in breach of the restriction on purchase
described above
o tender offer for Sprint voting securities
o merger, consolidation, share exchange or business combination
involving Sprint or any material portion of its business or any
purchase of all or any substantial part of the assets of Sprint or any
material portion of its business
o recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to Sprint or any material
portion of its business or
o solicitation of proxies under the Exchange Act.
Nothing will prevent any cable holder, however, from selling, transferring,
tendering or otherwise disposing of shares of capital stock of Sprint to any
person at any time or from voting on, tendering into or receiving the benefit of
any transaction described in the second, third and fourth items above, in the
same manner as any other non-initiating holder of publicly traded common stock
of Sprint.
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The cable holders have also agreed in general, and subject to exceptions,
not to take the following actions, which are referred to as "prohibited
actions":
o propose any matter for submission to a vote of stockholders of Sprint
or any of its affiliates
o form, join or participate in a group, as defined under the Exchange
Act, with respect to any Sprint voting securities, except as may arise
from the exercise of rights and performance of duties contemplated by
the agreements executed in connection with the November 1998 Sprint
PCS restructuring
o grant any proxy with respect to any Sprint voting securities to any
person not designated by Sprint
o deposit any Sprint voting securities in a voting trust or subject any
Sprint voting securities to any similar arrangement
o execute any written stockholder consent with respect to Sprint voting
securities
o take any other action to seek to affect the control of the management
or the Sprint board of directors or any of Sprint's affiliates
o enter into any discussions, negotiations, arrangements or
understandings with any person with respect to any of the foregoing,
or advise, assist, encourage or seek to persuade others to take any
action with respect to any of the foregoing
o disclose to any person any intention, plan or arrangement inconsistent
with the foregoing or form any such intention which would result in
the cable holder being required to make any disclosure in any filing
with a governmental authority or being required by applicable law to
make a public announcement with respect thereto or
o request Sprint to amend or waive any provision of their respective
standstill agreement, Sprint's rights agreement or Sprint's articles
of incorporation or bylaws.
The cable holders are permitted to take certain actions, as described in
the following paragraph, if they disagree with a covered proposal, defined
below, made by Sprint to its stockholders:
o either alone or with others, solicit proxies with respect to Sprint in
response or opposition to the covered proposal
o make a proposal opposing the covered proposal for submission to a vote
of Sprint stockholders
o form, join in or participate in a group, as defined under the Exchange
Act, with respect to any Sprint voting securities for the sole purpose
of responding to or opposing the covered proposal
o grant a proxy with respect to any Sprint voting securities to any
person with specific instructions from the cable holder as to the
voting of the Sprint voting securities with respect to the covered
proposal and
o subject any Sprint voting securities to an arrangement or agreement
with respect to the voting of the Sprint voting securities on the
covered proposal.
A covered proposal means a proposal by Sprint to its stockholders:
o for a merger or similar transaction
o to modify or amend either Sprint's articles of incorporation or the
provisions of Sprint's bylaws relating to its capital stock committee
in a manner that would adversely affect the rights of the holders of
Sprint series 1 PCS common stock or Sprint series 2 PCS common stock
o for the issuance of Sprint voting securities
o for the sale of substantially all assets or a dissolution or
liquidation of Sprint or
o for any other matter that would require approval of the holders of
Sprint PCS common stock, voting as a separate class.
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Subject to the following paragraph, each cable holder may issue press
releases and make other public communications to the financial community and to
its stockholders and make other public statements made in the ordinary course of
business relating to its investment in Sprint, in each case as it reasonably
deems appropriate and customary. Before making a press release or other
communication, each cable holder will use reasonable efforts to consult with
Sprint in good faith regarding the form and content of the communication, and
will use reasonable efforts to coordinate the communication with any decisions
reached by Sprint with respect to disclosures relating to the matters.
Notwithstanding the prior paragraph, unless required by applicable law or
permitted by the provisions relating to rejected covered proposals above, the
cable holder may not make any press release, public announcement or other public
communication with respect to a prohibited action without the prior written
consent of the Chairman of Sprint or by a resolution of a majority of the
directors of Sprint. Each cable holder is permitted to make public
communications that are required by law, except for public communications
required as a result of, or relating to, activities undertaken by the cable
holder in violation of the standstill agreement. Nothing in this or the prior
paragraph will prevent the taking of any actions relating to a covered proposal
described above.
Transfers to Affiliates or Associates. Each cable holder may transfer
shares of capital stock of Sprint to its affiliates only if, before the
transfer, the transferee delivers to Sprint a signed standstill agreement in the
form of the standstill agreement executed by the cable holder. If and to the
extent that the cable holder elects to transfer shares of Sprint series 2 PCS
common stock to one of its associates without the shares automatically
converting into shares of Sprint series 1 PCS common stock, the cable holder may
effect the transfer only if, before the transfer, the transferee executes and
delivers to Sprint a standstill agreement in the form of the standstill
agreement executed by the cable holder.
Permitted Activities. Nothing in the standstill agreements will prevent any
cable holder from (1) selling, transferring, tendering or otherwise disposing of
shares of capital stock of Sprint to any person at any time or from voting on,
tendering into or receiving the benefit of transactions in the same manner as
any other noninitiating holder of Sprint voting securities, or (2) taking any
actions necessary or appropriate for the cable holder to exercise their rights
under any of their other agreements with Sprint.
Termination. The standstill agreements terminate:
o upon the consent of each party in writing
o upon a change of control of Sprint, which will not occur as a result
of the merger
o if the cable holder's Sprint securities no longer represent more than
one and one half percent (1.5%) of the total Sprint voting power,
assuming for this purpose that all shares of Sprint series 2 PCS
common stock have the same voting rights as the shares of Sprint
series 1 PCS common stock or
o upon the occurrence of other events.
As to a holder that is an affiliate or an associate of a cable holder and
that has executed a standstill agreement, the agreement will terminate, in
addition to the above circumstances, when the holder ceases to be an affiliate
(or associate, as applicable) of a cable holder and all shares of Sprint series
2 PCS common stock held by the party have converted to Sprint series 1 PCS
common stock.
Registration Rights Agreement
Sprint and the cable holders have entered into a registration rights
agreement. Pursuant to the registration rights agreement, Sprint has agreed to
register the shares of Sprint PCS group common stock issued to the cable holders
for sale under the Securities Act, as described below. If the merger occurs,
WorldCom will assume all of Sprint's obligations under the registration rights
agreement and WorldCom and each cable holder will have rights and obligations
that are comparable to the rights and obligations summarized in this section.
Registration rights can be exercised by any of the following persons with
respect to each cable holder. The following are referred to as that cable
holder's "stockholder group":
o the cable holder
o any affiliates of the cable holder who own registrable securities
(defined below) and
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o any other entity:
-- to which all or a portion of the registrable securities are
transferred by any entity that was, immediately before the
transfer, a member of the cable holder's stockholder group
-- that continues to hold the registrable securities
-- to which the transferring member of the stockholder group has
assigned any of its registration rights in accordance with the
registration rights agreement and
-- who has executed a registration rights agreement in connection
with the transfer of the registrable securities.
There are three stockholder groups: one for each cable holder.
The term "registrable securities" means, generally:
o Sprint PCS group common stock owned by a stockholder group
o securities that are issuable with respect to the shares referred to in
the item above and
o "derivative securities", meaning any registrable securities that
underlie any cable holder securities, the value of which relates to or
is based upon registrable securities, to the extent that the
registrable securities require registration by Sprint.
Registrable securities, once acquired by a member of a stockholder group,
cease to be registrable securities when they are disposed of in accordance with
a registration statement that has become effective under the Securities Act and
in other circumstances.
Demand Registration Rights. The cable holders may require Sprint to
register under the Securities Act all or a portion of their registrable
securities for offer or sale, including the offer or sale of registrable
securities upon issuance or settlement of any derivative security. This is
referred to as a "demand registration".
Number of Demand Registrations. The TCI stockholder group is entitled to
six demand registrations, the Cox stockholder group is entitled to four demand
registrations and the Comcast stockholder group is entitled to three demand
registrations. In addition, each stockholder group is entitled to one demand
registration to be used in connection with the delivery or sale of registrable
securities upon settlement of a derivative security. In general, a demand
registration must request the registration of at least $200 million of Sprint
PCS common stock, before any underwriting or brokerage discounts and
commissions, subject to various exceptions.
Timing of Demand Registrations. Pursuant to the registration rights
agreement, Sprint may be required to effect demand registrations every three
months for an initial period and thereafter every six months as described below.
Following the effectiveness of a registration statement filed pursuant to a
demand registration, Sprint will not be required to file a registration
statement pursuant to a demand registration until:
o before the stockholder groups have sold registrable securities and/or
derivative securities having an aggregate offering price of $2
billion, excluding transfers solely between or among the stockholders
of the cable holders and their affiliates, the three month anniversary
of the date of the applicable demand notice which satisfied the
minimum amount and
o thereafter, the six month anniversary of the date of the applicable
demand notice.
Road Show Participation. In connection with demand registrations, the cable
holders have the right under most circumstances to require Sprint management to
cooperate with selling efforts, including cooperating with customary due
diligence investigations and participating in marketing the offered securities
in road show presentations.
Underwriters; Limitation in Underwritten Offerings. In any demand
registration for an underwritten offering other than an offering of derivative
securities, a co-lead joint "book running" underwriter will be selected by each
of Sprint and the sellers of 50% or more of the securities to be sold by
stockholder groups exercising demand registration rights.
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If the book running managing underwriters of any underwritten public
offering determine that the number of shares to be offered exceeds the number
that could be sold without having an adverse effect on the offering (including
the price at which the registrable securities may be sold), then the number of
shares to be offered will be reduced to an amount recommended by the co-lead
joint book running underwriters. Any required reductions will be made:
o first, from the securities proposed to be sold by persons who are not
part of a stockholder group other than France Telecom or Deutsche
Telekom
o second, from securities proposed to be registered pursuant to
incidental registration rights held by France Telecom and Deutsche
Telekom (together with securities being offered for the account of
Sprint)
o third, from securities proposed to be registered by members of
stockholder groups registering shares pursuant to their incidental
registration rights and
o last, from the shares to be registered by stockholder groups
initiating the demand registration.
Piggyback Registration Rights. The cable holders have piggyback
registration rights, meaning that they have the right to request that their
shares be included in an offering of Sprint PCS common stock that is initiated
by Sprint or another Sprint stockholder. This does not apply to:
o registration statements filed by Sprint relating to shares issued in a
merger, consolidation, acquisition or similar transaction
o registration statements on Form S-8 or
o registration statements filed in connection with an exchange offer or
any offering of securities solely to Sprint's existing stockholders or
otherwise pursuant to a dividend reinvestment plan, stock purchase
plan or other employee benefit plan.
Special Priority as to Third Party Demands. We refer to the "priority
period" as the period ending on the earlier of (1) the date upon which the
stockholder groups have sold registrable securities with an aggregate offering
price of at least $2 billion or (2) May 22, 2000. During the priority period, if
Sprint proposes to register securities for its own account due to another
stockholder exercising demand registration rights (other than France Telecom or
Deutsche Telekom), each stockholder group will be entitled to exercise a right
to one of its demand registrations. If this right is exercised, the demand
registration proceeds as with any other demand registration by a stockholder
group, meaning that the cable holder shares would have priority over all others,
and the demand registration by the other stockholder is treated as though it had
not occurred.
TRACKING STOCK MATTERS
Inter-Group Interest
As of December 31, 1999, the total number of shares of Sprint PCS common
stock intended to track the performance of the Sprint PCS group was
approximately 953,490,500 (adjusted to reflect Sprint's two-for-one stock split
of its Sprint PCS common stock in the form of a stock dividend which was
distributed on February 4, 2000). Some of these shares are not issued, but are
held by the Sprint FON Group in the form of an inter-group interest, discussed
below.
Although the Sprint PCS group will be re-named the WorldCom PCS group in
the merger, the merger will not affect the total number of shares that are
designed to reflect the economic performance of this group. The total number of
shares will have increased to some extent before the merger occurs as Sprint
continues to issue shares of Sprint PCS common stock upon exercise of employee
stock options or for other reasons.
The Various Interests in the Economic Performance of the PCS Group;
Definition of Inter-Group Interest
Immediately after the merger, assuming that the number of existing shares
designed to reflect the performance of the WorldCom PCS group does not change
from the number on December 31, 1999, these shares will consist of:
o the cable holders' shares of WorldCom series 2 PCS common stock,
representing approximately 45.6% of the total
o the WorldCom series 1 PCS common stock, representing approximately
54.4% of the total and
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. the WorldCom group's "inter-group interest", representing less than
0.1% of the total.
"Inter-group interest" is the term used for the WorldCom group's ownership
of the WorldCom PCS group. It is similar to the WorldCom group holding shares of
WorldCom PCS group common stock. MCI WorldCom expects the inter-group interest
to be eliminated over time as certain employee stock options are exercised for,
and shares of convertible preferred stock are converted into, shares of WorldCom
PCS group common stock. The WorldCom group's inter-group interest may, however,
increase in the future.
The WorldCom PCS group will not acquire an inter-group interest in the
WorldCom group.
Assuming the number of shares intended to track the performance of the
Sprint PCS group as of December 31, 1999 (after giving effect to Sprint's two-
for-one stock split of its Sprint PCS common stock) does not change, the
WorldCom group will have an inter-group interest in the WorldCom PCS group
representing less than 0.1% of these shares at the time of the merger. The
WorldCom group will also own a warrant inter-group interest, with the same terms
as the warrants that are held by the cable holders, to acquire an additional
inter-group interest in the WorldCom PCS group. As of December 31, 1999 (after
adjusting to reflect Sprint's two-for-one stock split of its Sprint PCS common
stock), this warrant inter-group interest entitled the Sprint FON group to
acquire the equivalent of 24,905,662 additional shares in inter-group interest,
representing 2.6% of the total shares intended to track the performance of the
Sprint PCS group. Since value cannot be created by WorldCom effectively issuing
equity securities to itself, the WorldCom PCS group will not increase equity for
the warrant inter-group interest, nor will the WorldCom group create an
inter-group interest investment account. The warrant inter-group interest may be
exercised at any time. Upon exercise, an inter-group interest equivalent to each
share of Sprint PCS common stock may be acquired by the Sprint FON group for
$12.01, subject to adjustment. The warrant inter-group interest will be
reflected in determining diluted earnings per share for the WorldCom PCS group,
if dilutive.
In addition, the WorldCom group will own a preferred inter-group interest
that is convertible into an additional inter-group interest in the WorldCom PCS
group. The terms on which this preferred inter-group interest will be
convertible will be the same as those of the WorldCom series 7 preferred stock,
which will be held by the cable holders. As of December 31, 1999, the preferred
inter-group interest entitled the Sprint FON group to acquire an inter-group
interest equivalent to 18,149,496 shares of Sprint PCS common stock,
representing 1.9% of the total shares intended to track the performance of the
Sprint PCS group (adjusted to reflect Sprint's two-for-one stock split of its
Sprint PCS common stock). The preferred inter-group interest is convertible at
any time. Upon conversion, an inter-group interest equivalent to each share of
Sprint PCS common stock may be acquired by the Sprint FON group without payment
of additional consideration based on a conversion price of $15.3733, subject to
adjustment. See "Description of MCI WorldCom Capital Stock--Warrants" and "--
Preferred Stock--Amended WorldCom Articles of Incorporation--WorldCom Series 7
Preferred Stock; Preferred Inter-Group Interest". Upon exercise or conversion,
the warrant inter-group interest and preferred inter-group interest will not
reflect the shares of WorldCom group common stock that will be issuable on
exercise and conversion of the warrants and the WorldCom series 7 preferred
stock.
No Vote
An inter-group interest in the WorldCom PCS group, because it represents an
interest between two business groups within WorldCom, will not be represented by
outstanding shares of WorldCom PCS group common stock and, accordingly, will not
be voted on any matter, including any matter requiring the vote of the holders
of WorldCom PCS group common stock as a separate class. However, the market
value attributable to any inter-group interest should be reflected in the market
value of the WorldCom group common stock, which in turn would affect the
aggregate voting power represented by the WorldCom group common stock on any
matter on which holders of WorldCom group common stock and WorldCom PCS group
common stock vote together as a single group. See "Comparison of Rights of MCI
WorldCom Shareholders and Sprint Stockholders--Voting Rights".
Potential Increase or Decrease
In accordance with the amended WorldCom articles of incorporation,
transfers of businesses or assets from the WorldCom group to the WorldCom PCS
group that are designated by the WorldCom board of directors to be treated as an
equity contribution by the WorldCom group to the WorldCom PCS group will result
in an increase in the WorldCom group's inter-group interest in the WorldCom PCS
group.
The inter-group interest may also decrease. For example, the WorldCom board
of directors may also determine to sell WorldCom PCS common stock, in public
offerings or private transactions, out of the inter-group interest. This would
reduce the inter-group interest, and the cash received for those shares would be
allocated to the WorldCom group.
The Tracking Stock Policies and the Capital Stock Committee
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At or before the completion of the merger, the WorldCom board of directors
will adopt and intends to follow the tracking stock policies that have been
adopted by the Sprint board of directors. This discussion summarizes the
material terms of the tracking stock policies.
General
The WorldCom board of directors will resolve all material matters as to
which the holders of WorldCom group common stock and the holders of WorldCom PCS
group common stock may have potentially divergent interests. The WorldCom board
of directors, or the capital stock committee of the WorldCom board of directors
acting on its behalf, will resolve these matters in a manner that it determines
to be in the best interests of WorldCom and all of its common stockholders,
after giving fair consideration to the potentially divergent interests and all
other relevant interests of the holders of the separate classes of the WorldCom
group common stock and the WorldCom PCS group common stock. Pursuant to the
tracking stock policies, the relationship between the WorldCom group and the
WorldCom PCS group and the means by which the terms of any material transaction
between them will be determined will be governed by a process of fair dealing.
The WorldCom board of directors will not recommend any transaction that would
result in a change in control or any strategic merger without first determining
that the terms of such transaction are fair to holders of WorldCom PCS group
common stock, taken as a separate class, and the holders of the WorldCom group
common stock, taken as a separate class.
Capital Stock Committee
The amended WorldCom bylaws will include provisions establishing a capital
stock committee. The WorldCom board of directors will delegate to the capital
stock committee the authority to, and the capital stock committee will,
interpret, make determinations under, and oversee the implementation of the
tracking stock policies. All material commercial transactions between the
WorldCom group and the WorldCom PCS group, including any transaction that
results in a change in the size of any inter-group interest held by the WorldCom
group in the WorldCom PCS group, will be on commercially reasonable terms and
will be subject to the review and approval of the capital stock committee. If
such review occurs before the transaction is undertaken and such transaction is
disapproved, the transaction will not proceed. If such review occurs after such
transaction is undertaken and such transaction is disapproved, appropriate
actions will be taken to reinstate the pre-existing circumstances to the fullest
extent practicable. In making any and all determinations in connection with the
tracking stock policies, either directly or by appropriate delegation of
authority, the members of the WorldCom board of directors and the capital stock
committee will act in a fiduciary capacity and pursuant to legal guidance
concerning their respective obligations under applicable law. The tracking stock
policies will provide that the capital stock committee will have the authority
to engage the services of accountants, investment bankers, appraisers, attorneys
and other service providers to assist it in discharging its duties.
Each member of the capital stock committee will be an independent director.
Pursuant to the amended WorldCom bylaws, the capital stock committee will
have the powers, authority and responsibilities as the WorldCom board of
directors may delegate to it in connection with the adoption of general policies
governing the relationship between business groups or otherwise, including but
not limited to:
o the business and financial relationships between the WorldCom group
and the WorldCom PCS group
o dividends in respect of, and transactions by WorldCom or the WorldCom
group in, shares of WorldCom PCS group common stock and
o any other matters arising in connection with the relationships or
transactions described in the previous two items.
The amended WorldCom articles of incorporation will provide that the
provisions of the amended WorldCom bylaws regarding the capital stock committee
will not be amended before November 23, 2002 by the WorldCom board of directors
without the affirmative vote of holders of (1) a majority of the votes
represented by the outstanding shares of WorldCom group common stock and
WorldCom PCS group common stock, voting together as a single class, and (2) a
majority of the votes represented by the outstanding shares of WorldCom PCS
group common stock, voting as a separate class.
Scope of the WorldCom PCS Group; Allocation of Business Opportunities and
Operations
The amended WorldCom articles of incorporation will set forth the entities
that will initially comprise the WorldCom PCS group. The tracking stock policies
will provide that any business conducted by WorldCom for offering or providing
(1) domestic wireless mobile telephony services and (2) any other domestic PCS
services will be allocated to the WorldCom PCS group. In addition, the tracking
stock policies will provide that all acquisitions of domestic PCS licenses will
be allocated to the WorldCom PCS group. To the extent such businesses or
licenses are acquired by the WorldCom group, the WorldCom board of
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directors will arrange for an allocation or transfer of such assets to the
WorldCom PCS group as soon as reasonably practicable at a price equivalent to
the fair market value of such businesses or licenses. However, in no event will
such allocation or transfer be required at a time that would adversely affect
the availability of pooling-of-interests accounting. These provisions of the
tracking stock policies will not preclude the formation of commercially
reasonable contracts or other arrangements between the WorldCom PCS group and
the WorldCom group or any other group that may be created in the future for
sales agency, resale or any other arrangement for businesses conducted by either
the WorldCom group or the WorldCom PCS group. Except as provided above, the
WorldCom board of directors may allocate business opportunities and operations
to the WorldCom group, the WorldCom PCS group or to any other group as it
considers in the best interests of WorldCom and its shareholders as a whole.
For these purposes:
. "domestic wireless mobile telephony services" means communications
services provided through the use of a wireless connection from the
user to a domestic terrestrial telecommunications network that is
capable of and generally utilized by WorldCom for handing-off calls
from one wireless cell to another and from one wireless sector within
a cell to another and which is intended to allow the continuation of a
user's single conversation, without interruption, as the user travels
between cells and/or sectors within such network
. "domestic" means geographically within the United States or the
District of Columbia, Puerto Rico and the U.S. Virgin Islands
. "domestic PCS license" means a license within domestic areas, granted
by the FCC or other applicable authority, to use the electromagnetic
spectrum between 1850MHz and 1910MHz and between 1930MHz and 1990MHz,
or such other electromagnetic spectrum as may be allocated by the FCC
in exchange for the surrender of licenses to operate in these
frequency ranges and
. "domestic PCS services" means any services offered or provided within
a domestic geographic area under a domestic PCS license.
Relationship Between Groups; Long Distance Pricing
All material commercial transactions between the WorldCom group and the
WorldCom PCS group will be on commercially reasonable terms and will be subject
to the review and approval of the capital stock committee. With respect to
pricing of long distance services (whether from one calling area to another, or
within a calling area) purchased by the WorldCom PCS group for purposes of
enabling WorldCom PCS group customers to complete wireless calls (whether billed
separately or as part of other charges), services will be provided at the best
price offered by the WorldCom group to third parties in similar situations when
taking into account all relevant factors, such as volumes, peak/off-peak usage
and length of commitment. Although the WorldCom PCS group will not be prohibited
from purchasing long distance services from other companies, MCI WorldCom does
not expect that the WorldCom PCS group will do so. Any purchase of long distance
services would require compliance with the tracking stock policies. See "--
General." The WorldCom PCS group will be permitted to acquire private line
capacity from the WorldCom group to self-provision long distance services to
the extent that such self-provisioning can be accomplished on terms more
favorable to the WorldCom PCS group, and will be at the best price offered by
the WorldCom group to third parties in similar situations, when taking into
account all relevant factors.
Transfers of assets from the WorldCom group to the WorldCom PCS group that
are designated by the WorldCom board of directors to be treated as an equity
contribution by the WorldCom group to the WorldCom PCS group will result in an
increase in the inter-group interest held by the WorldCom group in the WorldCom
PCS group.
Pursuant to the tracking stock policies, the WorldCom PCS group will not
acquire an inter-group interest in the WorldCom group or in any other group.
Transfers of assets from the WorldCom PCS group to the WorldCom group will not
be treated as creating an inter-group interest of the WorldCom PCS group in the
WorldCom group, but may be treated as a reduction of any existing inter-group
interest of the WorldCom group in the WorldCom PCS group, but not below zero.
All other transfers of assets between one group and another group, not
designated by the WorldCom board of directors as equity transfers and not
pursuant to a contract for the provision of goods or services between the
groups, will be accompanied by:
. the transfer by the transferee group to the transferor group of other
assets
. the creation of inter-group debt owed by the transferee group to the
transferor group or
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o the reduction of inter-group debt owed by the transferor group to the
transferee group, in each case in an amount having a fair market
value, in the judgment of the WorldCom board of directors, equivalent
to the fair market value of the assets transferred by the transferor
group.
Notwithstanding the above, the tracking stock policies will provide that
neither the WorldCom group nor any other group will acquire in one transaction
or in a series of related transactions a significant portion of the assets of
the WorldCom PCS group without receiving the consent of the holders of a
majority of the outstanding shares of WorldCom PCS group common stock, voting as
a separate class, and the consent of the holders of a majority of the
outstanding shares of WorldCom group common stock or stock of such other group,
voting as a separate class. A "significant portion of the assets of the WorldCom
PCS group" is defined as more than 33% of the assets of the WorldCom PCS group,
based on the fair market value of the assets, both tangible and intangible, of
the WorldCom PCS group as of the time that the proposed transaction is approved
by the WorldCom board of directors.
Any inter-group transaction that results in a change in the size of any
inter-group interest held by the WorldCom group or any other group in the
WorldCom PCS group will be subject to the review and approval of the capital
stock committee. If such review occurs before such transaction is undertaken and
such transaction is disapproved, the transaction will not proceed. If such
review occurs after such transaction is undertaken and such transaction is
disapproved, appropriate actions will be taken to reinstate the pre-existing
circumstances to the fullest extent practicable.
The tracking stock policies will provide that WorldCom will not engage in
any transactions, including mergers, consolidations, recapitalizations or
similar transactions, that have the effect of circumventing the rights of the
holders of WorldCom PCS group common stock with respect to the time restriction
and the benefit of the premium payable or procedure to ensure fairness on
WorldCom's exercise of its right to convert outstanding shares of WorldCom PCS
group common stock to WorldCom group common stock, which the WorldCom board of
directors may do anytime after November 23, 2001, or the benefit of the
provisions of the amended WorldCom articles of incorporation limiting
redemptions of the WorldCom PCS group common stock in exchange for shares of a
subsidiary--a "spin off" of the WorldCom PCS group--until November 23, 2000,
unless approved by the holders of a majority of the outstanding shares of
WorldCom PCS group common stock, voting as a separate class. These provisions
will not apply to any transaction involving a third party, the terms of which
have been determined in advance by either the WorldCom board of directors or the
capital stock committee to be fair to holders of WorldCom PCS group common
stock, taken as a separate class, and holders of WorldCom group common stock,
taken as a separate class. The tracking stock policies will also provide that
WorldCom will not acquire a number of shares of WorldCom series 1 PCS common
stock such that, immediately after the acquisition, the number of shares
outstanding is less than approximately 313.6 million.
Allocation of Federal and State Income Taxes
Federal and state income taxes incurred by WorldCom which are determined on
a consolidated, combined or unitary basis will be allocated between the groups
in accordance with a tax sharing agreement to be assumed by WorldCom in the
merger. These allocations will be based principally on the taxable income and
tax credits contributed by each group. Such allocations to or from the WorldCom
PCS group are intended to reflect its actual incremental cumulative effect,
positive or negative, on WorldCom's federal and state taxable income and related
tax liability and tax credit position, subject to adjustment. Tax benefits that
cannot be used by a group generating those benefits but can be used on a
consolidated basis will be credited to the group that generated such benefits.
Accordingly, the amounts of taxes payable or refundable, which will be allocated
to each group, may not necessarily be the same as that which would have been
payable or refundable had the group filed a separate income tax return. WorldCom
expects that significant payments pursuant to the tax sharing agreement will be
made from the WorldCom group to the WorldCom PCS group in the near future, in
light of the substantial operating losses that the WorldCom PCS group is
expected to incur during this time. Tax sharing payments between the groups will
be accrued as of the end of the tax period to which they relate.
The tax sharing agreement includes a procedure pursuant to which tax
sharing payments to or from the WorldCom PCS group will be calculated excluding
the effect of any cumulative combined net loss or credit of (1) all new
businesses directly or indirectly acquired by the Sprint FON group after May 26,
1998 (or the WorldCom group after the merger) individually having an acquisition
cost in excess of $500 million, taking into account the amount of any
liabilities assumed by the acquiror or to which the acquired business is
subject, and (2) all other groups except to the extent that another group
reflects one or more profitable core business(es) of the WorldCom group that
exists on the date of creation of the WorldCom group. We refer to this as the
"stacking procedure".
The initial tax sharing agreement, including the stacking procedure,
applies to tax years ending on or before December 31, 2001, and shall not be
modified, suspended or rescinded, nor will additions or exceptions be made to
the tax sharing agreement,
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for such periods. For subsequent periods, the WorldCom board of directors will
adopt a tax sharing arrangement that will be designed to allocate WorldCom's tax
benefits and burdens fairly between the WorldCom PCS group and the WorldCom
group. WorldCom expects that tax benefits that cannot be used by a group
generating those benefits but can be used on a consolidated basis will continue
to result in payments to the group that generated such benefits based on the
value of such benefits to WorldCom on a consolidated basis. In addition,
WorldCom expects that tax benefits, if any, pertaining to tax loss or tax credit
carry forwards generated by a group but not utilized as of the expiration of the
initial tax sharing agreement will continue to result in payments to the group
that generated such benefits based on the value of such benefits to WorldCom on
a consolidated basis when such tax benefits are utilized. WorldCom has not
determined whether or not it will continue to utilize the stacking procedure for
tax years ending after December 31, 2001.
Allocation of Group Financing
Loans from WorldCom or any member of the WorldCom group to any member of
the WorldCom PCS group will be made at interest rates and on other terms and
conditions substantially equivalent to the interest rates and other terms and
conditions that the WorldCom PCS group would be able to obtain from third
parties, including the public markets, as a direct or indirect wholly owned
subsidiary of WorldCom, but without the benefit of any guaranty by WorldCom or
any member of the WorldCom group. This policy contemplates that these loans will
be made on the basis set forth above regardless of the interest rates and other
terms and conditions on which WorldCom or members of the WorldCom group may have
acquired the subject funds. The provisions of this policy will only apply before
December 31, 2001 and will not be modified, suspended or rescinded, nor will any
exception be made to such provisions, before December 31, 2001. WorldCom
currently does not expect that the tracking stock policies provision regarding
allocation of debt expense will be amended in any material way after December
31, 2001.
Dividend Policy
The WorldCom board of directors will periodically consider appropriate
dividend policies and practices relating to future dividends on the WorldCom
group common stock and the WorldCom PCS group common stock. The WorldCom board
of directors does not expect to declare any dividends on the WorldCom group
common stock or the WorldCom PCS group common stock in the foreseeable future.
For a discussion of the dividend provisions that will be included in the
tracking stock policies, see "Description of MCI WorldCom Capital Stock--Common
Stock--Amended WorldCom Articles of Incorporation--Dividend Rights and
Restrictions".
Policies May Be Modified or Rescinded at Any Time
Unless otherwise provided above, the tracking stock policies may be
modified, suspended or rescinded, and additional policies may be adopted, or
exceptions made to such policies in connection with particular facts and
circumstances, all as the WorldCom board of directors may determine consistent
with its fiduciary duties to WorldCom and all its common shareholders at any
time with or without the approval of WorldCom's shareholders, although MCI
WorldCom has no present intention to change the tracking stock policies after
the merger. Any determination of the WorldCom board of directors to modify,
suspend or rescind such policies, or to make exceptions thereto or adopt
additional policies, including any such decision that would have disparate
impacts upon holders of WorldCom group common stock and WorldCom PCS group
common stock, would be made by the WorldCom board of directors in a manner
consistent with its fiduciary duties to WorldCom and all of its common
shareholders after giving fair consideration to the potentially divergent
interests and all other relevant interests of the holders of the separate
classes of common stock of WorldCom, including the holders of WorldCom group
common stock and the holders of WorldCom PCS group common stock.
Future Inter-Group Interest
The WorldCom group may have a small inter-group interest in the WorldCom
PCS group, and will have a warrant inter-group interest and a preferred
inter-group interest. Under the tracking stock policies, however, the WorldCom
board of directors could determine to contribute cash, businesses or other
property of the WorldCom group, as additional equity, to the WorldCom PCS group.
The WorldCom board of directors could also from time to time purchase shares of
WorldCom PCS group common stock in the open market with cash or other property
of the WorldCom group. In such event, the WorldCom group would hold a larger
inter-group interest, representing an interest in the common equity value of
WorldCom attributable to the WorldCom PCS group.
The tracking stock policies will provide that the WorldCom PCS group cannot
have an inter-group interest in the WorldCom group, and the amended WorldCom
articles of incorporation do not make provision for that kind of inter-group
interest. In similarly restricting the Sprint PCS group from creating an inter-
group interest in the Sprint FON group, the Sprint board of directors determined
that, because of the disparity in the relative sizes, based upon asset values,
between the two groups and the effects that an interest in the Sprint FON group
could have on the value of the Sprint PCS common stock, an inter-group interest
held by the Sprint PCS group in the Sprint FON group could adversely affect the
ability of the Sprint PCS common stock to reflect the separate performance of
the Sprint PCS group.
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If an inter-group interest exists and additional shares of WorldCom PCS
group common stock are subsequently issued by WorldCom, the WorldCom board of
directors would determine:
o the number of shares of WorldCom PCS group common stock issued for the
account of the WorldCom group with respect to the inter-group
interest, the net proceeds of which will be reflected entirely in the
financial statements of the WorldCom group and
o the number of shares of WorldCom PCS group common stock issued for the
account of the WorldCom PCS group as an additional equity interest in
the WorldCom PCS group, the net proceeds of which will be reflected
entirely in the financial statements of the WorldCom PCS group.
As additional shares of WorldCom PCS group common stock are issued for the
account of the WorldCom group, the inter-group interest would decrease. After
all shares of WorldCom PCS group common stock issuable with respect to the
inter-group interest are issued, shares of WorldCom PCS group common stock could
no longer be issued for the account of the WorldCom group without incurring an
inter-group debt owed by the WorldCom group.
If an inter-group interest exists and the WorldCom PCS group common stock
is issued as a distribution on the WorldCom group common stock, the distribution
would be treated as a distribution of shares issuable with respect to the
inter-group interest, and, as a result, the inter-group interest would decrease.
If an inter-group interest exists and WorldCom repurchases shares of
WorldCom PCS group common stock with cash or property of the WorldCom group, the
inter-group interest of the WorldCom group would increase accordingly. However,
if the cash for the repurchase of shares of WorldCom PCS group common stock came
from the WorldCom PCS group, there would be no increase in the inter-group
interest.
DESCRIPTION OF MCI WORLDCOM CAPITAL STOCK
The following is a summary of the material terms of (1) the capital stock
of MCI WorldCom under its existing articles of incorporation, bylaws and rights
agreement and (2) the capital stock of WorldCom under its amended articles of
incorporation, bylaws and rights agreement which will be in effect immediately
after the merger is completed. The following also summarizes relevant provisions
of the Georgia Business Corporation Code, which we refer to as Georgia law. The
terms of the existing MCI WorldCom articles of incorporation, the amended
WorldCom articles of incorporation, the existing MCI WorldCom bylaws, the
amended WorldCom bylaws, the existing MCI WorldCom rights agreement and the
amended WorldCom rights agreement, as well as the terms of Georgia law, are more
detailed than the general information provided below.
General
Existing MCI WorldCom Articles of Incorporation
Under the existing MCI WorldCom articles of incorporation, 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.
Amended WorldCom Articles of Incorporation
Under the amended WorldCom articles of incorporation, the authorized
capital stock of WorldCom will consist of 10,000,000,000 shares of common stock,
divided into several classes or series having various par values, and 75,000,000
shares of preferred stock, par value $.01 per share, divided into several
series.
Common Stock
Existing MCI WorldCom Articles of Incorporation
The existing MCI WorldCom articles of incorporation provide for one class
of common stock, par value $.01 per share. All of the outstanding shares of MCI
WorldCom common stock are fully paid and nonassessable. As of December 31, 1999,
2,849,743,843 shares of MCI WorldCom common stock were outstanding.
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Voting Rights. Each holder of MCI WorldCom common stock is entitled to cast
one vote for each share held of record, voting together with holders of MCI
WorldCom series B preferred stock, on all matters submitted to a vote of
shareholders, including the election of directors. Holders of MCI WorldCom
common stock have no cumulative voting rights.
Dividends. Holders of MCI WorldCom common stock are entitled to receive
dividends or other distributions when, as and if declared by the MCI WorldCom
board of directors. The right of the MCI WorldCom board of directors to declare
dividends, however, is subject to the rights of any holders of MCI WorldCom
preferred stock 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 existing
MCI WorldCom articles of incorporation.
Preemptive and Other Rights. Holders of MCI WorldCom 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 MCI WorldCom 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 MCI WorldCom 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. This could protect
the continuity of MCI WorldCom's management and possibly deprive shareholders of
an opportunity to sell their shares of MCI WorldCom 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.
Listing. MCI WorldCom common stock is quoted on The Nasdaq National Market
under the symbol "WCOM".
Amended WorldCom Articles of Incorporation
General. Under the amended WorldCom articles of incorporation, the common
stock of WorldCom will consist of two classes: the WorldCom group common stock
and the WorldCom PCS group common stock. Each class of the common stock of
WorldCom will be divided into multiple series with various par values, as shown
in the table below.
<TABLE>
<CAPTION>
Series and Par Referred to In
Value and Number of This Proxy
Authorized Statement/ Holders at the Time
Class Shares Prospectus As of the Merger Listing
----- ------ ------------- ------------- -------
<S> <C> <C> <C> <C>
WorldCom Group Common WorldCom group
Stock common stock
Common Stock, par WorldCom Public, The Nasdaq
value $.01 per share, common stock France Telecom, National Market
8,220,000,000 shares Deutsche Telekom
Common Stock, WorldCom Cable holders N/A
Series 2, par value series 2
$.01 per share, common stock
50,000,000 shares
WorldCom PCS Group WorldCom PCS
Common Stock group common
stock
PCS Common Stock, WorldCom Public, The Nasdaq
Series 1, par value series 1 PCS France Telecom, National Market (1)
$1.00 per share, common stock Deutsche Telekom
1,310,000,000 shares
PCS Common Stock, WorldCom Cable holders N/A
Series 2, par value series 2 PCS
</TABLE>
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$1.00 per share, common stock
420,000,000 shares
- -----------
N/A--not applicable
(1) Sprint series 1 PCS common stock is listed on the New York Stock Exchange.
MCI WorldCom expects that the WorldCom series 1 PCS common stock issued in
the merger will be quoted on The Nasdaq National Market.
"Tracking" Stocks. MCI WorldCom intends that the WorldCom group common
stock will be designed to reflect the performance of the WorldCom group and that
the WorldCom PCS group common stock will be designed to reflect the performance
of the WorldCom PCS group.
Common Stock Structure Similar to Sprint's. After the merger, WorldCom's
capital structure will be virtually identical to Sprint's current structure,
except that France Telecom and Deutsche Telekom will not hold special classes or
series of WorldCom capital stock. Except to the extent that there are
differences between Kansas law and Georgia law, which are believed to be
immaterial:
o WorldCom common stock will be virtually identical to the existing MCI
WorldCom common stock
o the WorldCom series 2 common stock will be virtually identical to the
Sprint series 2 FON common stock and
o each series of WorldCom PCS group common stock will be virtually
identical to the corresponding series of Sprint PCS common stock.
Conversion of WorldCom Series 2 PCS Common Stock. The WorldCom series 2 PCS
common stock issued in the merger will automatically convert into WorldCom
series 1 PCS common stock when it is transferred by a cable holder to a person
who is not a cable holder or an affiliate of the cable holders. For 90 days
following the completion of the merger, each cable holder will have the right to
convert all of its shares of WorldCom series 2 PCS common stock and WorldCom
series 2 common stock into an equivalent number of shares of WorldCom series 1
PCS common stock and WorldCom common stock, respectively. Thereafter, in
connection with a future merger or consolidation involving WorldCom, all
remaining holders will have the same right to convert each share of WorldCom
series 2 PCS stock and/or WorldCom series 2 common stock into the consideration
received for each share of WorldCom series 1 PCS stock and/or WorldCom common
stock, respectively. The WorldCom series 2 PCS common stock also will
automatically convert into WorldCom series 1 PCS common stock when the total
number of votes represented by the outstanding shares of WorldCom series 2 PCS
common stock, calculated as though the WorldCom series 2 PCS common stock has
the same vote per share as the WorldCom series 1 PCS common stock, is below 1%
of the total outstanding voting power of the WorldCom capital stock for more
than 90 consecutive days.
WorldCom Series 2 Common Stock. As is the case with the Sprint series 2 FON
common stock, the WorldCom series 2 common stock will be held only by the cable
holders. WorldCom series 2 common stock will be convertible into WorldCom common
stock under the same circumstances in which WorldCom series 2 PCS common stock
will be convertible into WorldCom series 1 PCS common stock, as described in the
preceding paragraph.
Voting Rights. The voting rights of the WorldCom group common stock will be
virtually identical to the voting rights of the Sprint FON common stock and the
voting rights of the WorldCom PCS group common stock will be virtually identical
to the voting rights of the Sprint PCS common stock. See "Corporate
Governance--Voting Rights."
Dividend Rights and Restrictions. Dividends on the WorldCom group common
stock and the WorldCom PCS group common stock will be paid when, as and if
declared by the WorldCom board of directors. It is not anticipated that any
dividends on the WorldCom group common stock or the WorldCom PCS group common
stock will be declared in the foreseeable future.
The WorldCom board of directors may declare dividends on the WorldCom group
common stock and not the WorldCom PCS group common stock, or it may declare
dividends on the WorldCom PCS group common stock and not the WorldCom group
common stock. The WorldCom board of directors may also declare dividends on both
the WorldCom group common stock and the WorldCom PCS group common stock, in
equal or unequal amounts, without regard to dividends previously paid or the
then-relative voting power per share of the WorldCom group common stock and the
WorldCom PCS group common stock.
If the WorldCom board of directors declares a dividend on one series of the
WorldCom group common stock, it must declare the same dividend on both series of
WorldCom group common stock. If the WorldCom board of directors declares a
dividend on one series of the WorldCom PCS group common stock, it must declare
the same dividend on both series of WorldCom PCS group common stock.
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Dividends on the WorldCom group common stock and the WorldCom PCS group
common stock may be declared and paid only out of net income or surplus of
WorldCom. Net losses of either the WorldCom group or the WorldCom PCS group, and
dividends and distributions on, or repurchases of, WorldCom group common stock
or WorldCom PCS group common stock, will reduce funds legally available for the
payment of dividends on both classes of common stock. WorldCom's board of
directors may declare dividends on either class of common stock to be paid out
of the property or assets of either business group.
The MCI WorldCom board of directors will adopt, before the completion of
the merger, tracking stock policies identical to those of Sprint. The tracking
stock policies will require that:
o dividends on the WorldCom group common stock may be paid only out of
the lesser of (1) the funds of WorldCom legally available for the
payment of dividends and (2) the WorldCom group available dividend
amount, which is similar to the amount of assets that would be
available for the payment of dividends on the WorldCom group common
stock if the WorldCom group were a separate company and
o dividends on the WorldCom PCS group common stock may be paid only out
of the lesser of (1) the funds of WorldCom legally available for the
payment of dividends and (2) the WorldCom PCS group available dividend
amount, which is similar to the amount of assets that would be
available for the payment of dividends on the WorldCom PCS group
common stock if the WorldCom PCS group were a separate company.
Under the tracking stock policies, the WorldCom board of directors will not
be permitted to declare a dividend or distribution consisting of shares of
WorldCom group common stock on the WorldCom PCS group common stock. The WorldCom
board of directors may only declare a dividend or distribution of shares of
WorldCom PCS group common stock on the WorldCom group common stock if the shares
to be issued represent an inter-group interest of the WorldCom group in the
WorldCom PCS group.
Before any dividends on any class of common stock of WorldCom may be paid
or declared and set apart for payment, WorldCom must pay or declare and set
apart for payment full cumulative dividends on all outstanding series of
WorldCom preferred stock.
If WorldCom fails to purchase the WorldCom series 5 preferred stock upon
tender by the holders, it is precluded from declaring or paying dividends on any
class of common stock until it has deposited the funds necessary for the
purchase of the WorldCom series 5 preferred stock.
Upon the issuance of a new series of WorldCom preferred stock, the WorldCom
board of directors may provide for other dividend restrictions on the common
stock that are applicable to that series of WorldCom preferred stock.
Redemption of Common Stock. The amended WorldCom articles of incorporation
will permit the redemption of shares of WorldCom group common stock and WorldCom
PCS group common stock held by aliens, as such term is defined in the
Communications Act, if necessary to comply with the foreign ownership
limitations set forth in section 310 of the Communications Act. The provisions
permit WorldCom group common stock and WorldCom PCS group common stock to be
redeemed at a price equal to the fair market value of the shares, except that
the redemption price in respect of shares purchased by any alien within one year
of the redemption date would not, unless otherwise determined by the WorldCom
board of directors, exceed the purchase price paid for those shares by the
alien.
Conversion of the WorldCom PCS Group Common Stock at the Option of
WorldCom. At any time after November 23, 2001, the WorldCom board of directors
may convert all of the shares of WorldCom series 1 PCS common stock into shares
of WorldCom common stock. If and when this conversion takes place, the WorldCom
board of directors must convert the WorldCom series 2 PCS common stock into
WorldCom series 2 common stock.
If the conversion takes place before November 23, 2002, each share of
WorldCom series 1 PCS common stock will convert into the number of shares of
WorldCom common stock equal to 110% of the ratio of the average closing price of
one share of WorldCom series 1 PCS common stock to the average closing price of
one share of WorldCom common stock computed as of the fifth trading day before
the date that notice of conversion is sent to holders of WorldCom PCS group
common stock. WorldCom must compute this ratio over a 60-trading day period if
the 20-trading day period normally used to determine the average closing price
is less than 90% of the ratio as determined over a 60-day trading day period.
If the conversion takes place on or after November 23, 2002, the WorldCom
board of directors will determine the conversion ratio, subject to the
requirement that under the tracking stock policies, the WorldCom board of
directors must make independent determinations as to the fairness of the
conversion ratio to the holders of the WorldCom group common stock, taken as a
separate class, and to the holders of the WorldCom PCS group common stock, taken
as a separate class. MCI WorldCom
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believes that any determination made by its board of directors as to the
fairness of the conversion ratio would be made taking into account the relative
values (each calculated using the same basis) of the WorldCom group common stock
and the WorldCom PCS group common stock, and would not include a control premium
for the WorldCom PCS group common stock (such as the premium being paid in the
merger).
Mandatory Dividend, Redemption or Conversion of WorldCom PCS Group Common
Stock Upon Certain Dispositions of Assets. If WorldCom disposes of all of the
assets of the WorldCom PCS group, or if it disposes of at least 80% of the
assets of the WorldCom PCS group on a then-current market value basis, it must
use the net proceeds to pay a dividend on the WorldCom PCS group common stock or
redeem the WorldCom PCS group common stock, or it must convert the WorldCom PCS
group common stock into WorldCom group common stock. There are exceptions to
this rule; for example, WorldCom will not have to pay a dividend on the WorldCom
PCS group common stock, redeem the WorldCom PCS group common stock or convert
the WorldCom PCS group common stock into WorldCom group common stock when it
receives, in exchange for the assets, primarily equity securities of an entity
engaged, or proposing to engage, in a business similar or complementary to the
business of the WorldCom PCS group.
If the board of directors determines to convert the WorldCom PCS group
common stock into WorldCom group common stock, WorldCom will convert each share
of WorldCom PCS group common stock into a number of shares of WorldCom group
common stock at a ratio equal to 110% of the average of the high and low
reported sale prices of one share of WorldCom series 1 PCS common stock to the
average of the high and low reported sale prices of one share of WorldCom common
stock computed over a 10-trading day period beginning on the sixteenth trading
day after the completion of the asset disposition. Appropriate adjustments are
made if an ex-dividend date or an effective date for a subdivision or
combination of the relevant shares occurs during the measurement period.
If the WorldCom board of directors instead determines to pay a dividend on
the WorldCom PCS group common stock or redeem the WorldCom PCS group common
stock, WorldCom will distribute to holders of WorldCom PCS group common stock
cash or securities, other than common equity securities of WorldCom, or other
property, or a combination of cash and securities and other property, equal to
the fair value of the net proceeds after deducting amounts necessary to pay
transaction costs, taxes on the disposition, liabilities of the WorldCom PCS
group, and any amount corresponding to any inter-group interest that the
WorldCom group holds in the WorldCom PCS group. If the payment of the dividend
or redemption price occurs before November 23, 2001, the WorldCom board of
directors may also convert each share of WorldCom PCS group common stock
remaining outstanding into shares of WorldCom group common stock on the same
basis as the conversion of WorldCom PCS group common stock into WorldCom group
common stock after November 23, 2001 and before November 23, 2002 described
above under "-- Conversion of the WorldCom PCS Group Common Stock at the Option
of WorldCom". The conversion of WorldCom PCS group common stock into WorldCom
group common stock can occur under these circumstances only if the conversion
date occurs prior to the first anniversary of the payment of the dividend or
redemption price.
Redemption of the WorldCom PCS Group Common Stock in Exchange for Stock of
a Subsidiary. WorldCom may redeem all of the outstanding shares of WorldCom PCS
group common stock in exchange for the outstanding shares of common stock of one
or more wholly owned subsidiaries that hold all of the assets and liabilities
attributed to the WorldCom PCS group if the following conditions are met:
o holders of shares of WorldCom series 2 PCS common stock must receive
shares of common stock of such subsidiary that have equivalent voting
power on a per share basis to shares received by holders of WorldCom
series 1 PCS common stock
o the redemption must be approved by the affirmative vote of holders of
a majority of the shares of WorldCom PCS group common stock, voting
together as a single class, if the redemption occurs before November
23, 2000 and
o either the redemption must be tax free to holders of WorldCom PCS
group common stock or an arrangement must exist such that holders of
WorldCom PCS group common stock, net of related taxes, are in a
position substantially equivalent economically to the position they
would be in if the redemption were tax free.
Liquidation Rights. In the event of the liquidation of WorldCom, the prior
rights of creditors and the aggregate liquidation preference of any WorldCom
preferred stock then outstanding must first be satisfied. Holders of WorldCom
group common stock and WorldCom PCS group common stock will be entitled to share
in the remaining assets of WorldCom in accordance with the per share liquidation
units attributable to each class or series of common stock. Holders of WorldCom
group common stock would have no special claim to the assets attributed to the
WorldCom group, and holders of WorldCom PCS group common stock would have no
special claim to the assets attributed to the WorldCom PCS group. The
liquidation units attributable to each class of common stock are as follows:
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o each share of WorldCom group common stock is attributed a number of
liquidation units (rounded to the nearest 1/10,000) equal to 1.0 (the
Sprint FON common stock liquidation unit per share provided in the
amendments to the Sprint articles of incorporation) divided by the FON
exchange ratio and
o each share of WorldCom PCS group common stock is attributed a number
of liquidation units (rounded to the nearest 1/10,000) equal to 0.2046
(the Sprint PCS common stock liquidation unit per share provided in
the amendments to the Sprint articles of incorporation).
The number of liquidation units for each share of WorldCom group common
stock and each share of WorldCom PCS group common stock will be adjusted for
stock splits, reverse stock splits and other corporate events affecting the
WorldCom group common stock or the WorldCom PCS group common stock.
Preemptive Rights. Under the amended WorldCom articles of incorporation, no
holder of shares of WorldCom group common stock, WorldCom PCS group common stock
or any other capital stock of WorldCom is entitled to preemptive rights, other
than the equity purchase rights of the cable holders as described under
"Arrangements with Sprint Stockholders--The Cable Holders--Equity Purchase
Rights."
Determinations by the WorldCom Board of Directors. Any determination made
by the WorldCom board of directors under any of the provisions described under
"Description of MCI WorldCom Capital Stock" will be final and binding on all
shareholders of WorldCom, except as may be otherwise required by law.
Preferred Stock
Existing MCI WorldCom Articles of Incorporation
The MCI WorldCom 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:
o the designation and number of shares
o 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
o the voting rights, if any
o the voluntary and involuntary liquidation preferences
o the conversion or exchange privileges, if any, applicable to that
series
o the redemption price or prices and the other terms of redemption, if
any, applicable to that series and
o 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 stock 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.
The above information regarding preferred stock will not be affected by the
merger.
As of December 31, 1999, the MCI WorldCom board of directors had designated
shares of the following series of MCI WorldCom preferred stock:
o 94,992 shares of MCI WorldCom series A 8% cumulative convertible
preferred stock, of which no shares were outstanding
o 15,000,000 shares of MCI WorldCom series B convertible preferred
stock, of which 11,096,807 shares were outstanding
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o 3,750,000 shares of MCI WorldCom series C $2.25 cumulative convertible
exchangeable preferred stock, of which no shares were
outstanding--these shares were issued on October 1, 1999 upon the
completion of MCI WorldCom's acquisition of SkyTel Communications,
Inc. and were redeemed by MCI WorldCom for $50.75 in cash on January
14, 2000 and
o 5,000,000 shares of MCI WorldCom series 3 junior participating
preferred stock, of which no shares were outstanding--these shares
were designated in connection with the adoption of the existing MCI
WorldCom rights agreement.
Series B Preferred Stock
Dividends. 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 MCI WorldCom 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 MCI WorldCom 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 MCI WorldCom 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 MCI WorldCom series B preferred stock an amount of cash per
share of MCI WorldCom series B preferred stock equal to the extraordinary cash
dividend that would have been paid in respect of that share if the holder had
converted his or her share of MCI WorldCom series B preferred stock 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 MCI WorldCom common stock basis, 10% of the average
daily closing price of the common stock over that 12-month period.
Voting Rights. Holders of MCI WorldCom 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. Holders of MCI WorldCom
series B preferred stock and holders of MCI WorldCom common stock vote together
as a single class, unless otherwise provided by law or the existing MCI WorldCom
articles of incorporation. The approval of at least a majority of the votes
entitled to be cast by holders of issued and outstanding shares of MCI WorldCom
series B preferred stock is required to adversely change the rights, preferences
or privileges of MCI WorldCom 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, MCI WorldCom 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 MCI WorldCom series B preferred stock.
Conversion Rights. Holders of MCI WorldCom series B preferred stock have
the right to convert any or all of their shares, at any time, into shares of MCI
WorldCom common stock at a rate of 0.1460868 shares of MCI WorldCom common stock
for each share of MCI WorldCom 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 MCI WorldCom series B preferred stock
surrendered for conversion, which will be payable in cash or, at the option of
MCI WorldCom, in shares of MCI WorldCom common stock, based on their 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 MCI WorldCom
series B preferred stock 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 MCI WorldCom common stock, based on their fair market value.
Adjustment for Consolidation or Merger. In order to protect the interests
of holders of MCI WorldCom series B preferred stock, the existing MCI WorldCom
articles of incorporation provide for customary adjustments of the conversion
price, redemption price and related terms in the case of those mergers,
consolidations or other capital transactions where holders of MCI WorldCom
common stock receive cash, stock, securities or other property in respect of or
in exchange for their shares of MCI WorldCom common stock. No such adjustment
will be required in connection with the merger.
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Liquidation Rights. In the event of any liquidation, dissolution or winding
up of MCI WorldCom, holders of MCI WorldCom series B preferred stock are
entitled to receive a liquidation preference for each share out of the assets of
MCI WorldCom in an amount equal to the sum of $1.00 plus all accrued and unpaid
dividends.
Amended WorldCom Articles of Incorporation
Under the amended WorldCom articles of incorporation, the MCI WorldCom
series B preferred stock and the MCI WorldCom series 3 preferred stock will
remain authorized with identical terms. In addition, the following additional
series of preferred stock will be authorized:
o 95 shares of WorldCom series 5 preferred stock, par value $.01 per
share
o 300,000 shares of WorldCom series 7 preferred stock, convertible, par
value $.01 per share and
o 1,250,000 shares of WorldCom series 8 junior participating preferred
stock, par value $.01 per share--these shares will be designated in
connection with the amended WorldCom rights agreement.
WorldCom Series 5 Preferred Stock
Designation. The official designation of the WorldCom series 5 preferred
stock will be "Series 5 Preferred Stock".
Dividends. Holders of WorldCom series 5 preferred stock will be entitled to
receive when, as and if declared by the WorldCom board of directors, out of
funds legally available for payment, cumulative cash dividends at an annual rate
of 6.0% of the stated value, or $6,000 per share, payable quarterly.
Rank. The WorldCom series 5 preferred stock will rank on a parity with the
WorldCom series B preferred stock.
Voting Rights; Ability to Appoint Directors. Holders of WorldCom series 5
preferred stock will be entitled to one vote per share, generally voting
together as a single class with the holders of all other classes and series of
WorldCom capital stock.
If no dividends or less than full cumulative dividends on the WorldCom
series 5 preferred stock have been paid for four consecutive dividend periods,
or if unpaid dividends have cumulated to an amount equal to full cumulative
dividends for six quarterly dividend periods, then the holders of the WorldCom
series 5 preferred stock will have voting power, as a class, to elect the
smallest number of directors to the WorldCom board of directors that constitutes
a majority of the directors to be elected. This right to elect a majority of
directors will continue until full cumulative dividends for all past quarterly
dividend periods and for the current quarterly dividend period have been paid or
declared and set aside for payment.
Non-Convertible. The WorldCom series 5 preferred stock will not be
convertible into or exchangeable for stock of any other class or classes of
WorldCom capital stock.
Liquidation Rights. In any liquidation, dissolution or winding up of
WorldCom, holders of the WorldCom series 5 preferred stock will be entitled to
receive out of the assets of WorldCom available for distribution to
shareholders, before any distribution of the assets shall be made to the holders
of any WorldCom common stock, the sum of $100,000 per share, plus an amount
equal to cumulative accrued and unpaid dividends to the date of distribution.
Repurchase by WorldCom. The holders of the WorldCom series 5 preferred
stock may tender all, but not less than all, of their shares to WorldCom for
purchase at a price per share equal to $100,000 per share plus accrued dividends
to the date of repurchase. Holders must provide written notice of any tender at
least six months before the tender is to be completed.
Redemption. If the holders have not tendered all shares of WorldCom series
5 preferred stock to WorldCom for purchase pursuant to the provisions described
above before March 14, 2003, then WorldCom will redeem all of the outstanding
shares for an amount equal to $100,000 per share plus accrued dividends to the
date of repurchase.
Listing. The WorldCom series 5 preferred stock will not be listed on any
exchange or quotation service.
WorldCom Series 7 Preferred Stock; Preferred Inter-Group Interest
Designation; Authorized Shares. The official designation of the WorldCom
series 7 preferred stock will be "Series 7 Preferred Stock--Convertible".
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Dividends. Holders of WorldCom series 7 preferred stock will be entitled to
receive, when, as and if declared by the WorldCom board of directors out of
funds of WorldCom legally available for payment, cumulative cash dividends
payable quarterly at the rate of $6.73 per share. Dividends will be cumulative
whether or not in any dividend period there are funds of WorldCom legally
available for the payment of dividends. Holders of WorldCom series 7 preferred
stock will be entitled to receive full accumulated cash dividends for all
quarterly dividend periods before any dividends on WorldCom common stock or any
other stock of WorldCom that is junior to the WorldCom series 7 preferred stock
as to dividends can be paid or declared.
Rank. The WorldCom series 7 preferred stock will rank junior as to
dividends and upon liquidation to shares of the WorldCom series 5 preferred
stock, the WorldCom series B preferred stock and any WorldCom preferred stock
that will be designated as senior to the WorldCom series 7 preferred stock as to
dividends or upon liquidation. The WorldCom series 7 preferred stock will have a
preference as to dividends and upon liquidation over WorldCom common stock and
any other kind of WorldCom capital stock that will rank junior to the WorldCom
series 7 preferred stock as to dividends or upon liquidation.
Voting Rights. Each outstanding share of the WorldCom series 7 preferred
stock will be entitled to a number of votes equal to the number of votes that
could be cast by the holder of that number of shares of the series of WorldCom
PCS group common stock into which the share of WorldCom series 7 preferred stock
could be converted.
Except as described below, holders of WorldCom series 7 preferred stock
will be entitled to vote on all matters on which the holders of WorldCom common
stock will be entitled to vote, except as otherwise required by law. Holders of
WorldCom series 7 preferred stock will vote together as a single class with the
holders of all other classes or series of WorldCom capital stock. A two-thirds
vote of all shares of WorldCom series 7 preferred stock that are entitled to
vote will be necessary in order to change any of the provisions of the WorldCom
articles of incorporation, including any certificate of designation or any
similar document relating to any series of WorldCom preferred stock, in a way
that would materially and adversely affect the voting powers, preferences,
rights, powers or privileges, qualifications, limitations and restrictions of
the WorldCom series 7 preferred stock. However, neither of the following will
require this special two-thirds vote:
o the creation, issuance or increase in the amount of authorized shares
of any series of WorldCom preferred stock or
o the consummation of any transaction in which the voting powers,
preferences, rights, powers or privileges, qualifications, limitations
and restrictions of the WorldCom series 7 preferred stock are
preserved.
Conversion Rights. The WorldCom series 7 preferred stock will be
convertible at any time at the option of the holder into:
o shares of WorldCom series 2 PCS common stock plus, for no additional
consideration, shares of WorldCom series 2 common stock, if the holder
is a cable holder or an affiliate of a cable holder or
o shares of WorldCom series 1 PCS common stock plus, for no additional
consideration, shares of WorldCom common stock, if the holder is not a
cable holder or an affiliate of a cable holder.
Shares of WorldCom series 7 preferred stock initially will be convertible
into an aggregate of 16,039,790 shares of WorldCom PCS group common stock and,
for no additional consideration, an aggregate of 1,861,017 shares of WorldCom
group common stock. The number of shares of WorldCom PCS group common stock
issuable upon conversion of shares of WorldCom series 7 preferred stock will be
determined by dividing the aggregate liquidation preference of the shares
surrendered for conversion by an initial conversion price of $15.3733. Cash will
be issued in lieu of fractional shares.
Conversion Price Adjustments. The WorldCom series 7 preferred stock
conversion price will be subject to adjustment upon the occurrence of certain
events, including:
o the payment by WorldCom of dividends, or the making of other
distributions, with respect to WorldCom PCS group common stock payable
in shares of WorldCom PCS group common stock
o subdivisions, combinations and reclassifications of WorldCom PCS group
common stock
o the issuance of rights allowing holders of WorldCom PCS group common
stock to purchase shares of WorldCom PCS group common stock for a
price per share that is less than the then-current market price of
WorldCom series 1 PCS common stock and
o the distribution to the holders of WorldCom PCS group common stock of
any of WorldCom's assets, debt securities or any rights or warrants to
purchase securities, excluding cash dividends on the WorldCom PCS
group common stock that do not exceed specified levels.
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If WorldCom consolidates with, merges with or into, or sells all or
substantially all of its property and assets to another person, each share of
WorldCom series 7 preferred stock thereafter will entitle its holder to receive
upon conversion of his or her shares of WorldCom series 7 preferred stock the
number of shares of capital stock or other securities or property which the
holder of a number of shares of WorldCom PCS group common stock into which the
share of WorldCom series 7 preferred stock would have been convertible
immediately before the transaction would have been entitled to receive in the
transaction.
Liquidation Rights. After payments to holders of senior securities, in a
liquidation, dissolution or winding up of WorldCom the holders of WorldCom
series 7 preferred stock will be entitled to receive out of the assets of
WorldCom available for distribution to shareholders, before any distribution of
the assets is made to the holders of WorldCom common stock or any other stock
ranking junior to the WorldCom series 7 preferred stock upon liquidation, a
$1,000 per share liquidation preference, plus accumulated and unpaid dividends,
whether or not declared.
Redemption. If not converted by the holder or earlier redeemed by WorldCom
as provided below, the WorldCom series 7 preferred stock will become mandatorily
redeemable on November 23, 2008 at the redemption price of $1,000 for each share
outstanding, plus an amount in cash equal to all accrued but unpaid dividends.
Before this obligation is discharged:
o dividends on any remaining outstanding shares of WorldCom series 7
preferred stock will continue to accrue and be added to the dividend
payable to the holder and
o WorldCom may not declare or pay any dividend or make any distribution
on any equal or junior stock.
Subject to a limited number of exceptions, shares of WorldCom series 7
preferred stock will not be redeemable before November 23, 2001. WorldCom may at
its option redeem the WorldCom series 7 preferred stock, in whole or in part,
after November 23, 2001 at a price equal to the liquidation preference per share
plus any accumulated and unpaid dividends, whether or not declared. If less than
all the outstanding WorldCom series 7 preferred stock is to be redeemed, the
shares to be redeemed will be selected pro rata as nearly as practicable or by
lot, or by such other method as may be determined by the WorldCom board of
directors to be equitable, without regard to whether the shares to be redeemed
are convertible into WorldCom series 1 PCS common stock or WorldCom series 2 PCS
common stock.
Listing. The WorldCom series 7 preferred stock will not be listed on any
exchange or quotation system.
Preferred Inter-Group Interest. The preferred inter-group interest will
have terms equivalent to the WorldCom series 7 preferred stock, as summarized
above and as will be set forth in the amended WorldCom articles of incorporation
relating to the WorldCom series 7 preferred stock. WorldCom will effect any
changes to the preferred inter-group interest as may be necessary to reflect any
changes to the terms, rights, powers and privileges of the WorldCom series 7
preferred stock.
Provisions Applicable to All Series of WorldCom Preferred Stock
No dividend will be permitted to be declared on any series of WorldCom
preferred stock unless dividends have been declared or paid on all shares of
WorldCom preferred stock that:
o are entitled to cumulative dividends and
o rank equally as to dividends with the series in question.
Preemptive Rights; Sinking Funds. No holder of WorldCom preferred stock
will have any preemptive rights. No series of WorldCom preferred stock will be
subject to any sinking fund or other obligation of WorldCom to set aside funds
in order to redeem shares.
Special Voting Rights of the WorldCom Preferred Stock. Under the amended
WorldCom articles of incorporation, the WorldCom preferred stock will be
entitled to vote as a class with respect to matters affecting preferences of the
WorldCom preferred stock or creating prior ranking stock.
Warrants
In connection with the November 1998 Sprint PCS restructuring, Sprint
issued warrants to acquire shares of Sprint PCS common stock to the cable
holders and their affiliates and also reserved for the Sprint FON group a
warrant inter- group interest to acquire additional inter-group interests in the
Sprint PCS group that has terms equivalent to the warrants issued to the cable
holders. Upon completion of the merger, WorldCom will assume these warrants.
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The Warrants
The warrants will be freely transferable by the cable holders. Subject to
adjustment, as described below, each warrant will be exercisable for a share of
WorldCom PCS group common stock at any time before November 23, 2003 at an
initial exercise price of approximately $12.01. A total of 24,905,662 shares of
WorldCom PCS group common stock and 2,889,680 shares of WorldCom group common
stock will be issuable upon exercise of the warrants.
Each warrant will represent the right to purchase:
o one share of WorldCom series 2 PCS common stock, plus, for no
additional consideration, 0.116025 shares of WorldCom series 2 common
stock, if the holder of the warrant is a cable holder or an affiliate
of a cable holder or
o one share of WorldCom series 1 PCS common stock, plus, for no
additional consideration, 0.116025 shares of WorldCom common stock, if
the holder is not a cable holder or an affiliate of a cable holder.
The exercise price for the warrants may be paid in cash or by requesting
that WorldCom withhold a number of shares of WorldCom PCS group common stock
issuable upon exercise of the warrants equal in value, at the then-current
market price, to the exercise price.
Exercise Price Adjustments. The exercise price and the number of shares of
WorldCom PCS group common stock issuable upon exercise of the warrants will be
subject to adjustment on the occurrence of certain events, including:
o the payment by WorldCom of dividends, or the making of other
distributions, with respect to WorldCom PCS group common stock payable
in shares of WorldCom PCS group common stock
o subdivisions, combinations and reclassifications of the WorldCom PCS
group common stock
o the issuance of rights allowing holders of WorldCom PCS group common
stock to purchase shares of WorldCom PCS group common stock, or
securities convertible into WorldCom PCS group common stock, for a
price per share that is less than the then-current market price of
WorldCom series 1 PCS common stock and
o the distribution to holders of WorldCom PCS group common stock of any
of WorldCom's assets, debt securities or any rights to purchase
securities, excluding cash dividends on the WorldCom PCS group common
stock that do not exceed specified levels.
If WorldCom consolidates or merges with, or sells all or substantially all
of its property and assets to, another person, each holder of a warrant will be
entitled to receive upon exercise of his or her warrant the number of shares of
capital stock or other securities or property which the holder of a number of
shares of WorldCom PCS group common stock for which the warrant could have been
exercised immediately before the transaction would have been entitled to
receive.
Conversion of the WorldCom PCS Group Common Stock. If the WorldCom PCS
group common stock is converted by WorldCom, then after the conversion holders
of outstanding warrants will be entitled to receive upon exercise of their
warrants, in lieu of shares of WorldCom PCS group common stock, the kind and
amount of shares of stock and other securities and property receivable in the
conversion by a holder of the number of shares of WorldCom PCS group common
stock for which the warrant could have been exercised immediately before the
effective date of the conversion.
Dividends; Voting; Other Rights. Holders of unexercised warrants will not
be entitled to receive dividends or other distributions with respect to the
WorldCom PCS group common stock, receive notice of any meeting of the
shareholders of WorldCom, consent to any action of the shareholders of WorldCom,
receive notice of any other shareholder meeting, or exercise any other rights as
shareholders of WorldCom. Any warrants that are not exercised on or prior to
November 23, 2003 will terminate.
Listing. The warrants will not be listed on any exchange or quotation
system.
Warrant Inter-Group Interest
The WorldCom group will have an inter-group interest in the WorldCom PCS
group that will have terms equivalent to the warrants, which we refer to as the
warrant inter-group interest.
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WorldCom will authorize and reserve for issuance the number of shares of
WorldCom series 1 PCS common stock and WorldCom series 2 PCS common stock that
may be issuable upon the exercise of all outstanding warrants and the conversion
of the warrant inter-group interest.
Transfer Agent
The transfer agent and registrar for the MCI WorldCom common stock is, and
the transfer agent for the WorldCom group common stock, WorldCom PCS group
common stock and WorldCom preferred stock will be, The Bank of New York, 101
Barclay Street--12W, New York, New York 10286.
Anti-Takeover Considerations
Georgia law and the amended WorldCom articles of incorporation and bylaws
will contain a number of provisions which may have the effect of discouraging
transactions that involve an actual or threatened change of control. For a
description of the provisions, see "Corporate Governance--Number and Election of
Directors", "--Removal of Directors", "--Amendments to Articles of
Incorporation", "--Amendments to Bylaws", "--Rights Plans", "--State
Anti-Takeover Statutes" and "--Business Combination Restrictions".
CORPORATE GOVERNANCE
Voting Rights
MCI WorldCom
Each holder of MCI WorldCom common stock may 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 MCI WorldCom common stock have no cumulative
voting rights.
Each holder of MCI WorldCom series B preferred stock may cast one vote per
share on all matters submitted to a vote of the shareholders, including the
election of directors. Holders of MCI WorldCom series B preferred stock and
holders of MCI WorldCom common stock vote together as a single class on all
matters presented to MCI WorldCom shareholders for their action, except as
provided by law and by the next sentence. The approval of at least a majority of
the votes entitled to be cast by holders of outstanding shares of MCI WorldCom
series B preferred stock voting as a class is required to amend, alter or repeal
the preferences, special rights or other powers or terms of MCI WorldCom series
B preferred stock so as to adversely affect the rights, preferences or
privileges of MCI WorldCom series B preferred stock.
Sprint
Holders of Sprint FON common stock, Sprint PCS common stock, Sprint FT/DT
class A stock, Sprint first series preferred stock, Sprint second series
preferred stock, Sprint fifth series preferred stock and Sprint seventh series
preferred stock vote together as a single class on most matters. For these
votes, holders have the following numbers of votes per share:
o Sprint series 1 FON common stock, Sprint series 3 FON common stock,
Sprint first series preferred stock, Sprint second series preferred
stock and Sprint fifth series preferred stock have one vote per share
o Sprint series 1 PCS common stock and Sprint series 3 PCS common stock
have a vote per share, which we refer to as the "PCS vote per share",
that equals the average closing price of a share of Sprint series 1 PCS
common stock divided by that of a share of Sprint series 1 FON common
stock calculated over the 20 trading days ending with the tenth trading
day before the record date for determining the stockholders entitled to
vote
o Sprint series 2 FON common stock, if any such shares are outstanding,
has 1/10th of one vote per share
o Sprint series 2 PCS common stock has 1/10th of the PCS vote per share
and
o Sprint FT/DT class A stock has a vote per share equal to the number of
votes represented by the Sprint FON common stock and the Sprint PCS
common stock underlying a share of Sprint FT/DT class A stock.
The relative voting power of Sprint FON common stock and Sprint series 1
PCS common stock fluctuate in relation to the relative market values of Sprint
series 1 FON common stock and Sprint series 1 PCS common stock.
Sprint FON Common Stock and Sprint FT/DT Class A Stock Voting as a Class.
On each matter to be voted on by holders of Sprint FON common stock and Sprint
FT/DT class A stock voting together as a single class, each series of Sprint FON
common stock has one vote per share, and Sprint FT/DT class A stock has a number
of votes per share equal to the votes possessed by the shares, or fraction of a
share, of Sprint series 3 FON common stock underlying each share of Sprint FT/DT
class A stock.
Sprint PCS Common Stock and Sprint FT/DT Class A Stock Voting as a Class.
On each matter to be voted on by holders of Sprint PCS common stock and Sprint
FT/DT class A stock voting together as a single class, each series of Sprint PCS
common stock has one vote per share, and Sprint FT/DT class A stock has a number
of votes per share equal to the votes possessed by the shares, or fraction of a
share, of Sprint series 3 PCS common stock underlying each share of Sprint FT/DT
class A stock.
Sprint FON Common Stock Voting as a Class. On each matter to be voted on by
holders of Sprint FON common stock voting as a separate class, all series have
one vote per share. If a particular series of Sprint FON common stock, such as
Sprint series 1 FON common stock, is voting as a separate series, each share is
entitled to one vote.
Sprint PCS Common Stock Voting as a Class. On each matter to be voted on by
holders of Sprint PCS common stock voting as a separate class, all series have
one vote per share. If a particular series of Sprint PCS common stock, such as
Sprint series 1 PCS common stock, is voting as a separate series, each share is
entitled to one vote.
Sprint FT/DT Stock Voting as a Class. On each matter to be voted on by
holders of Sprint FT/DT stock voting as a separate class, each share of Sprint
series 3 FON common stock has one vote, each share of Sprint series 3 PCS common
stock will have the PCS vote per share, and each share of Sprint FT/DT class A
stock has a number of votes per share equal to the sum of the votes possessed by
the shares, or fraction of a share, of Sprint series 3 FON common stock and
Sprint series 3 PCS common stock underlying each share of Sprint FT/DT class A
stock.
Non-Sprint FT/DT Stock Voting as a Class. On each matter to be voted on by
the holders of Sprint series 1 FON common stock, Sprint series 2 FON common
stock, Sprint series 1 PCS common stock and Sprint series 2 PCS common stock
voting as a separate class, each share of Sprint series 1 FON common stock is
entitled to one vote per share, each share of Sprint series 2 FON common stock
is entitled to 1/10th of one vote per share, each share of Sprint series 1 PCS
common stock is entitled to the PCS vote per share and each share of Sprint
series 2 PCS common stock is entitled to 1/10th of the PCS vote per share.
Matters Requiring Class Votes. The Sprint articles of incorporation provide
that the affirmative vote of holders of a majority of the voting power
represented by the outstanding Sprint FON common stock and Sprint FT/DT class A
stock voting together as a single class is required to adopt any amendment to
the Sprint articles of incorporation that would:
o increase or decrease the number of authorized shares of Sprint FON
common stock
o increase or decrease the par value of shares of Sprint FON common stock
or
o change the powers, preference or special rights of the shares of Sprint
FON common stock so as to affect them adversely.
The Sprint articles of incorporation also provide that the affirmative vote
of holders of a majority of the voting power represented by the outstanding
Sprint PCS common stock and Sprint FT/DT class A stock voting together as a
single class is required:
o to adopt any amendment to the Sprint articles of incorporation that
would:
-- increase or decrease the number of authorized shares of Sprint PCS
common stock
-- increase or decrease the par value of shares of Sprint PCS common
stock or
-- change the powers, preference or special rights of the shares of
Sprint PCS common stock so as to affect them adversely
o to amend the provisions of the Sprint bylaws relating to the capital
stock committee before November 23, 2002 or
o to approve the redemption of Sprint PCS common stock in exchange for
stock of a subsidiary of Sprint before November 23, 2000. This kind of
transaction is sometimes referred to as a "spin-off".
The tracking stock policies adopted by the Sprint board of directors
provide that the consent of holders of a majority of the outstanding shares of
Sprint PCS common stock, voting as a separate class, and the consent of the
holders of a majority of the outstanding shares of Sprint FON common stock,
voting as a separate class, is required to approve any acquisition by the Sprint
FON group of more than 33% of the assets of the Sprint PCS group.
Special Adjustment in Voting Power of the Sprint FT/DT Stock. Under the
Sprint articles of incorporation, if there is an increase in the per share vote
of any Sprint voting securities due to the transfer of the voting securities,
and the increase occurs on or after the tenth trading day preceding a record
date for purposes of determining the stockholders entitled to vote or to receive
the payment of a dividend, then the per share vote of the Sprint FT/DT stock
will be increased. The vote per share will be increased so that the percentage
of voting power of Sprint represented by the shares of Sprint FT/DT stock held
by each holder of Sprint FT/DT stock will not be diluted as a result of the
increase in votes due to the transfer of voting securities until the day
immediately following the date of the stockholders meeting or the date of the
dividend payment. An adjustment of this kind could be triggered, for example,
when Sprint series 2 PCS common stock is transferred by a cable holder to a
person who is not an affiliate of the cable holder. In this kind of transfer,
the Sprint series 2 PCS common stock is automatically converted into Sprint
series 1 PCS common stock, which has a higher per share vote.
Special Voting Rights of the Sprint FT/DT Stock. Under the Sprint articles
of incorporation, holders of Sprint FT/DT stock have class voting rights,
including the right to elect their own directors to the Sprint board of
directors and to disapprove specific transactions. See "Arrangements with Sprint
Stockholders--France Telecom and Deutsche Telekom--Rights of France Telecom and
Deutsche Telekom Contained in Sprint's Articles of Incorporation-- Board
Representation", "--Disapproval Rights" and "--Rights with Respect to Sprint's
Long Distance Assets".
WorldCom
The voting rights applicable to the WorldCom group common stock, WorldCom
PCS group common stock, WorldCom series 5 preferred stock and WorldCom series 7
preferred stock will be the same as described above under "--Voting Rights--
Sprint". The voting rights applicable to the MCI WorldCom series B preferred
stock will be the same as described above under "--Voting Rights--MCI WorldCom".
Number and Election of Directors
MCI WorldCom
Under Georgia law, directors are elected at each annual shareholders
meeting, unless the articles of incorporation or a bylaw adopted by the
shareholders provide that their terms are staggered. The articles of
incorporation may authorize the election of directors by one or more classes or
series of shares. The articles of incorporation or bylaws also may allow the
shareholders or the board of directors to fix or change the number of directors.
However, under Georgia law, a decrease in the number of directors will not
shorten an incumbent director's term.
The existing 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, the MCI WorldCom board of directors has 16 members. Neither
the existing MCI WorldCom articles of incorporation nor the existing MCI
WorldCom bylaws provide for a staggered board of directors.
The existing MCI WorldCom bylaws provide that directors are elected by a
plurality of the votes cast by shareholders entitled to vote in the election at
a meeting at which a quorum is present. No class or series of MCI WorldCom
shares may elect any director solely by vote of such class or series.
Under Georgia law, shareholders do not have cumulative voting rights for
the election of directors unless the articles of incorporation so provide. The
existing MCI WorldCom articles of incorporation do not provide for cumulative
voting.
Sprint
Under Kansas law, directors are elected at each annual meeting of
stockholders. The articles of incorporation may authorize the election of
directors by one or more classes or series of shares and the articles of
incorporation or bylaws may provide for staggered terms for directors.
The Sprint articles of incorporation and bylaws provide that the number of
directors may be fixed by the Sprint board of directors, but cannot be less than
10 or more than 20 members, unless increased to more than 20 to enable holders
of Sprint FT/DT stock or Sprint preferred stock to elect additional directors,
as described below. Currently, the Sprint board of directors has 12 members.
The Sprint articles of incorporation and bylaws provide for a staggered
board of directors, consisting of three classes of directors, with respect to
the directors elected by holders of Sprint capital stock, but not with respect
to directors elected by holders of either Sprint FT/DT stock or Sprint preferred
stock voting separately by class or series. Under the Sprint articles of
incorporation and bylaws, at each annual meeting of stockholders, the successors
of the class of directors whose term expires at the meeting are elected to hold
office for a three-year term, which expires at the annual meeting of
stockholders held in the third year following the year of their election. If the
number of directors, other than directors elected by holders of either Sprint
FT/DT stock, or Sprint preferred stock voting separately by class or series,
changes, any increase or decrease is apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible.
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Holders of Sprint FT/DT stock may elect a number of directors to the Sprint
board of directors. All other Sprint directors are elected by holders of Sprint
series 1 FON common stock, Sprint series 1 PCS common stock, Sprint series 2 PCS
common stock, Sprint first series preferred stock, Sprint second series
preferred stock, Sprint fifth series preferred stock and Sprint seventh series
preferred stock, voting together as a single class.
If a director elected by holders of any class or series of Sprint preferred
stock having the right, voting separately by class or series, to elect
directors, referred to as a Sprint preferred stock director, is an alien, or
after election becomes an alien, the effect of which would be that the number of
aliens then serving on the Sprint board of directors, including this Sprint
preferred stock director, would constitute more than the maximum number of
aliens permitted on the Sprint board of directors under section 310 of the
Communications Act, then the total number of directors will automatically
increase by the smallest number necessary to enable holders of Sprint FT/DT
stock, and the directors elected by holders of Sprint FT/DT stock in the case of
vacancies, to elect aliens as directors to the fullest extent that these holders
are entitled to elect directors without violating the requirements of section
310 of the Communications Act.
If a Sprint preferred stock director is not an independent director, or
after election ceases to be an independent director, the effect of which would
be that the independent directors then serving on the Sprint board of directors
would not constitute a majority of the Sprint board of directors, then the total
number of directors will automatically increase by the smallest number necessary
so that the number of directors then serving on the Sprint board of directors
who are not independent directors, including this Sprint preferred stock
director and any vacancies which holders of Sprint FT/DT stock have a right to
fill, constitute less than a majority of the Sprint board of directors.
If at any time six quarterly dividends payable on Sprint first series
preferred stock and/or Sprint second series preferred stock are in arrears, the
number of directors on the Sprint board of directors will be increased by two
and holders of all of the Sprint preferred stock, voting together as a single
class, may elect these additional directors to serve until all dividends in
arrears have been paid.
If no dividends or less than full cumulative dividends on the Sprint fifth
series preferred stock are paid for each of four consecutive dividend periods,
or if arrearages in the payment of dividends on this stock cumulate up to an
amount equal to the full cumulative dividends on this stock for six quarterly
dividend periods, then holders of Sprint fifth series preferred stock may,
acting alone at all meetings held for the election of Sprint directors, elect
the smallest number constituting a majority of the directors then to be elected.
This ability terminates when full cumulative dividends for all past quarterly
dividend periods and the current quarterly dividend period are paid or declared
and set apart for payment.
Under Kansas law, stockholders do not have cumulative voting rights for the
election of directors unless the articles of incorporation so provide. The
Sprint articles of incorporation do not provide for cumulative voting rights for
the election of directors.
WorldCom
After the merger, the number and election of WorldCom directors will be
governed by the provisions described above under "--Number and Election of
Directors--MCI WorldCom", except for two differences. First, the WorldCom board
of directors will initially consist of 10 directors designated by MCI WorldCom
and 6 directors designated by Sprint. Second, in certain circumstances, holders
of WorldCom series 5 preferred stock will have the right to elect a majority of
the directors then to be elected.
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 bylaws
approved by the shareholders specifically regulate the filling of any such
vacancies. However, if the vacant directorship was held by a director elected by
a voting group, only holders of shares of that voting group or the remaining
directors elected by that voting group are entitled to vote to fill such
vacancy. A director elected to fill a vacancy is elected for the unexpired term
of his or her predecessor in office. However, the term of a director elected by
the board to fill a vacancy created by an increase in the number of directors
only continues until the next election of directors by shareholders and until
his or her successor is elected and qualified.
The existing MCI WorldCom bylaws provide that any vacancy on the MCI
WorldCom board of directors caused by an increase in the number of directors by
action of the shareholders will be filled by the shareholders in the same manner
as at an annual meeting. Any vacancy created by an increase in the number of
directors by action of the board of directors or by the removal or resignation
of a director will be filled by the affirmative vote of a majority of the
remaining directors, except that a class of shareholders may fill a vacancy
created by the removal or resignation of a director elected by that class.
Currently, no directors are elected by a separate class or series of shares of
MCI WorldCom capital stock.
Sprint
Under Kansas law, unless the articles of incorporation or bylaws provide
otherwise, vacancies on the board of directors may be filled by a majority of
the directors then in office. However, if the vacant directorship was held by a
director elected by a voting group, then such vacancy may be filled by a
majority of the remaining directors elected by that voting group. If at the time
of filling any vacancy, the directors then in office constitute less than a
majority of the whole board, as constituted immediately before the creation of
the vacancies, the district court, upon application of any stockholder or
stockholders holding at least 10% of the total number of shares outstanding
entitled to vote for such directors, may order an election to be held to fill
any such vacancies by the stockholders.
The Sprint articles of incorporation provide that any vacancy on the Sprint
board of directors may be filled by the affirmative vote of a majority of the
directors elected by the same class or classes of stockholders that would be
entitled to elect a director to fill such vacancy if the annual meeting of
stockholders were held on the date on which the vacancy occurred. So long as any
Sprint FT/DT stock is outstanding, a vacancy that would be filled by holders of
Sprint capital stock, other than holders of Sprint FT/DT stock, may not be
filled with a person who, upon his or her election, would not be an independent
director or would be an alien, as the case may be, if the effect of such
election would be that less than a majority of the Sprint board of directors
following such election would be independent directors, or that the number of
aliens who would then be serving on the Sprint board of directors would
constitute more than the maximum number of aliens permitted on the Sprint board
of directors under section 310 of the Communications Act.
Any additional director of any class elected to fill a vacancy resulting
from an increase in the number of directors of such class will hold office for a
term that will coincide with the remaining term of the directors of that class
and until his or her successor has been elected and qualified. A decrease in the
number of directors will not shorten the term of any incumbent director, except
that if (1) terms of the directors elected by holders of Sprint FT/DT stock
terminate because all outstanding shares of Sprint FT/DT stock convert into
Sprint series 1 FON common stock and Sprint series 1 PCS common stock, as
applicable, or (2) the number of directors that holders of Sprint FT/DT stock
may elect decreases in accordance with the terms of the Sprint articles of
incorporation, then in either case the terms of the incumbent directors elected
by holders of FT/DT stock will cease immediately. A director elected to fill a
vacancy not resulting from an increase in the number of directors will serve for
the remainder of the full term of such director's predecessor and until his or
her successor has been elected and qualified.
WorldCom
The provisions described above under "--Vacancies on the Board of
Directors--MCI WorldCom" will apply to filling vacancies on the WorldCom board
of directors.
Removal of Directors
MCI WorldCom
Georgia law provides that one or more directors may be removed with or
without cause by a majority of the votes entitled to be cast, unless:
o the articles of incorporation or a bylaw adopted by the shareholders
provides that directors may be removed only for cause
o the directors have staggered terms, in which case directors may be
removed only for cause, unless the articles of incorporation or a
bylaw adopted by the shareholders provides otherwise or
o a director is elected by a particular voting group of shareholders, in
which case that director may be removed only by the requisite vote of
that voting group.
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In addition, if cumulative voting is authorized, a director may not be
removed if the number of votes sufficient to elect him or her under cumulative
voting is voted against his or her removal. The existing MCI WorldCom articles
of incorporation do not authorize cumulative voting.
Georgia law also provides that a director may be removed by shareholders
only at a meeting called for the purpose of removing the director, and the
meeting notice must state that the purpose of the meeting is the removal of the
director.
The existing MCI WorldCom 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 has the authority to elect a director,
any or all MCI WorldCom directors may be removed with or without cause by a
majority vote of shares of MCI WorldCom capital stock.
Sprint
Kansas law provides that both the entire board of directors and an
individual director may be removed with or without cause by holders of a
majority of the shares then entitled to vote at an election, unless:
o the board of directors is staggered, in which case the directors may
only be removed for cause, unless otherwise provided in the articles
of incorporation
o the corporation has cumulative voting, in which case no director may
be removed without cause if the votes cast against his or her removal
would be sufficient to elect the director if cumulatively voted at an
election of the class of directors of which the director is a part,
although the Sprint articles of incorporation do not authorize
cumulative voting, or
o if holders of any class or series are entitled to elect one or more
directors, in which case only holders of the outstanding shares of
that class or series may vote on the removal of those directors for
cause.
The Sprint articles of incorporation generally provide that a director,
other than a director elected by holders of Sprint FT/DT stock or Sprint
preferred stock having the right, voting separately by class or series, to elect
directors, may be removed only for cause by a majority of the votes represented
by shares of the class or classes of stockholders that were entitled to elect
the director. A director elected by holders of Sprint FT/DT stock may be
removed:
o with or without cause by a majority of the votes represented by shares
of Sprint FT/DT stock or
o with cause by the affirmative vote of holders of two-thirds of the
votes represented by shares of Sprint capital stock entitled to
general voting power, voting together as a single class.
If a director, other than a director elected by holders of Sprint FT/DT
stock, who was not, at the time of his election to the Sprint board of
directors, an alien and who subsequently becomes an alien, the effect of which
would be that the number of aliens then serving on the Sprint board of
directors, including this director, would constitute more than the maximum
number of aliens permitted on the Sprint board of directors under section 310 of
the Communications Act, then this director must automatically be removed from
the Sprint board of directors upon his or her change in status.
So long as any Sprint FT/DT stock is outstanding, if an independent
director elected by holders of Sprint capital stock, other than a director
elected by holders of Sprint FT/DT stock or Sprint preferred stock having the
right, voting separately by class or series, to elect directors, subsequently
ceases to be an independent director, the effect of which would be that the
independent directors then serving on the Sprint board of directors would not
constitute a majority of the Sprint board of directors, then this director will
automatically be removed from the Sprint board of directors upon his or her
change in status.
WorldCom
After the merger, the provisions described above under "--Removal of
Directors--MCI WorldCom" will apply to the removal of directors from the
WorldCom board of directors.
Amendments to Articles of Incorporation
MCI WorldCom
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Under Georgia law, the MCI WorldCom board of directors may only make
relatively technical amendments to the existing MCI WorldCom articles of
incorporation without shareholder approval, except that the MCI WorldCom board
of directors may amend the MCI WorldCom articles of incorporation to create and
establish the rights and preferences of additional classes or series of stock
because this is permitted by the MCI WorldCom articles of incorporation.
Otherwise, the affirmative vote of a majority of the votes entitled to be cast
on an 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. Unless a shareholder vote on the amendment is not required under
Georgia law, holders of the outstanding shares of a class are entitled to vote
as a separate class on a proposed amendment that would:
o increase or decrease the aggregate number of authorized shares of such
class
o effect an exchange or reclassification of all or part of the shares of
the class into shares of another class, or an exchange or
reclassification of all or part of the shares of another class into
shares of the class
o change the designation, rights, preferences or limitations of all or
part of the shares of the class
o alter or change the powers, preferences or special rights of the
shares of the class so as to affect them adversely or
o cancel, redeem, or repurchase all or part of the shares of the class.
If any proposed amendment requiring shareholder approval would affect any
series of a class of shares in one or more of the ways set forth above, but
would not effect the entire class, then only the shares of the series so
affected by the amendment shall be entitled to vote as a separate voting group
on the amendment.
Neither the existing MCI WorldCom articles of incorporation provides for
nor has the MCI WorldCom board of directors authorized a super-majority
percentage of any voting group for the amendment of the existing MCI WorldCom
articles of incorporation.
Sprint
Under Kansas law, an amendment to the articles of incorporation of a
corporation requires the approval and recommendation of the board of directors,
the approval of holders of a majority of the outstanding stock entitled to vote
upon the proposed amendment and a majority of the outstanding stock of each
class entitled to vote upon the proposed amendment as a class. Holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would:
o increase or decrease the aggregate number of authorized shares of such
class
o increase or decrease the par value of the shares of such class or
o 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 are considered a separate class.
The Sprint articles of incorporation may be amended in accordance with
Kansas law, except that provisions of the Sprint articles of incorporation
regarding holders of Sprint FT/DT stock may be amended in any manner that would
not adversely alter or change the powers, preferences or rights of holders of
shares of Sprint capital stock (other than Sprint FT/DT stock) by the Sprint
board of directors with the affirmative vote of holders of at least two-thirds
of the votes represented by the outstanding shares of Sprint FT/DT stock, voting
as a single class, and without the affirmative vote of holders of shares of the
other classes and series of Sprint capital stock. In addition, provisions of the
Sprint bylaws that affect holders of Sprint FT/DT stock may not be affected by
the adoption of any provisions to the Sprint articles of incorporation without
the affirmative vote of holders of record of a majority of the votes represented
by the shares of Sprint FT/DT stock then outstanding.
WorldCom
After the merger, the provisions described above under "--Amendments to
Articles of Incorporation--MCI WorldCom" will apply to amendments to the
WorldCom articles of incorporation.
Amendments to Bylaws
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MCI WorldCom
Georgia law provides that, unless a corporation's articles of
incorporation, applicable law or a particular bylaw approved by shareholders
provides otherwise, either the directors or shareholders may amend the bylaws.
The existing MCI WorldCom bylaws allow the directors or shareholders to amend or
repeal the bylaws, and neither the articles of incorporation nor the bylaws
restrict the authority of either the shareholders or the directors to amend or
repeal the bylaws, except that shareholders may not adopt bylaw amendments that
restrict the power of the board of directors to manage the corporation.
Sprint
Under Kansas law, unless otherwise provided in the articles of
incorporation, the power to adopt, amend or repeal the bylaws is vested in the
board of directors. However, this power is subject to the right of the
stockholders to adopt, amend and repeal the bylaws.
The Sprint articles of incorporation and bylaws permit the Sprint board of
directors to adopt, amend or repeal the bylaws, except that:
o provisions of the Sprint bylaws that affect holders of Sprint FT/DT
class A stock may not be amended or otherwise affected, including by
the adoption of any amendments to the Sprint articles of
incorporation, without the affirmative vote of holders of record of a
majority of the votes represented by the shares of Sprint FT/DT class
A stock then outstanding and
o before November 23, 2002, the section of the Sprint bylaws that
addresses the capital stock committee of the Sprint board of directors
may not be amended or otherwise affected, including by the adoption of
any provisions to the Sprint articles of incorporation, without the
affirmative vote of holders of record of (1) a majority of the votes
represented by the shares of Sprint PCS common stock (and any shares
of Sprint FT/DT class A stock to the extent they represent an equity
interest in the Sprint PCS group) then outstanding, voting together as
a single class, and (2) a majority of the votes represented by the
shares of Sprint capital stock, voting together as a single class.
WorldCom
After the merger, the provisions described above under "--Amendments to
Bylaws--MCI WorldCom" will apply to amendments to the WorldCom bylaws, except
that the WorldCom articles of incorporation and bylaws will include provisions
regarding amending the WorldCom bylaws in a manner affecting the WorldCom
capital stock committee that are virtually identical to those relating to the
Sprint capital stock committee that are described above under "--Amendments to
Bylaws--Sprint".
Action by Written Consent
MCI WorldCom
Georgia law provides that any action required or permitted to be taken at a
shareholders' meeting may be taken without a meeting if the action is taken by
all the shareholders entitled to vote on the action, or, if so provided in the
articles of incorporation, by persons who would be entitled to vote at a meeting
shares having the voting power to cast not less than the minimum number of votes
that would be necessary to authorize the action at a meeting at which all
shareholders entitled to vote were present and voted. The action must be
evidenced by one or more written consents describing the action taken, signed by
shareholders entitled to take action without a meeting.
The existing 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, action without a shareholders' meeting requires the written
consent of all of MCI WorldCom shareholders entitled to vote on the action.
Sprint
Kansas law provides that, unless otherwise provided in the articles of
incorporation, any action that could be taken by the stockholders at a meeting
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action taken, is signed by all holders of
outstanding stock entitled to vote on the action. The Sprint articles of
incorporation do not provide otherwise.
WorldCom
The provisions regarding the rights of holders of WorldCom capital stock to
act by written consent will be identical to those rights of holders of MCI
WorldCom capital stock that are described above under "--Action by Written
Consent--MCI WorldCom".
Notice of Shareholder Action
MCI WorldCom
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 MCI
WorldCom 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, and 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.
In order for a shareholder to bring other business before an annual
meeting, timely notice must be given to and received by MCI WorldCom within the
time limits described above. 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.
Sprint
The Sprint bylaws require that for nominations for the election of
directors, a stockholder must give advance written notice of his or her nominee
to Sprint's secretary not less than 50 days nor more than 75 days prior to the
stockholders' meeting. If less than 65 days' notice of the stockholders' meeting
is given, the stockholder's notice must be received no later than the close of
business on the 15th day following the day on which notice of the stockholders'
meeting was mailed or made public.
In addition, for business to be properly brought before a stockholders'
meeting, other than a separate meeting of holders of Sprint FT/DT stock, a
stockholder must give advance written notice of his or her proposed business to
Sprint's secretary not less than 50 days nor more than 75 days prior to the
stockholders' meeting. If less than 65 days' notice of the stockholders' meeting
is given, the stockholder's notice must be received no later than the close of
business on the 15th day following the day on which notice of the stockholders'
meeting was mailed or made public.
WorldCom
The provisions described above under "--Notice of Shareholder Action--MCI
WorldCom" will govern the rights of holders of WorldCom capital stock regarding
notice of shareholder action.
Special Meetings of Shareholders
MCI WorldCom
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.
Sprint
Under Kansas law, a special meeting of stockholders may be called by the
board of directors or by other persons authorized to do so by the articles of
incorporation or the bylaws. The Sprint bylaws provide that a special meeting of
holders of any one or more classes of Sprint capital stock may be called at any
time by the chairman, the president or the board of directors, and will be
called by the chairman, the president or the secretary upon the written request
of holders of a majority of the outstanding shares of stock of such class or
classes entitled to vote. Pursuant to Sprint's bylaws, notice of the time, place
and purpose of special meetings must be mailed to each stockholder at least 20
days before the date of the special meeting.
WorldCom
The provisions described above under "--Special Meetings of Shareholders--
MCI WorldCom" will govern the rights of holders of WorldCom capital stock
regarding special meetings.
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 action
taken, or any failure to take action, as a director. But no provision in the
articles of incorporation can eliminate or limit the monetary liability of a
director for:
o misappropriation of corporate business opportunities
o acts or omissions which involve intentional misconduct or a knowing
violation of law
o unlawful distributions or
o any transaction in which the director receives an improper personal
benefit.
The existing MCI WorldCom articles of incorporation limit the personal liability
of directors for monetary damages to the fullest extent permissible under
Georgia law.
Sprint
Kansas law provides that the articles of incorporation may limit or
eliminate the personal liability of directors for monetary damages for breach of
a fiduciary duty as a director, except for:
o breaches of the director's duty of loyalty to the corporation or its
stockholders
o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law
o unlawful dividends, stock purchases or redemptions or
o any transaction from which the director derived an improper personal
benefit.
The Sprint articles of incorporation limit the personal liability of
directors for monetary damages to the fullest extent permissible under Kansas
law.
WorldCom
The provisions described above under "--Limitation of Personal Liability of
Directors--MCI WorldCom" will apply to the provisions in the amended WorldCom
articles of incorporation regarding limitation of the personal liability of
WorldCom's directors.
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 if that individual acted in good faith and
the individual reasonably believed:
o in the case of conduct in his or her official capacity, that such
conduct was in the best interests of the corporation
o in all other cases, that such conduct was at least not opposed to the
best interests of the corporation and
o in the case of any criminal proceeding, that there was no reasonable
cause to believe his or her conduct was unlawful.
A corporation may not indemnify a director under Georgia law:
o in connection with a proceeding by or in the right of the corporation,
except for reasonable expenses incurred in connection with the
proceeding if it is determined that the director has met the standard of
conduct above or
o in connection with any other proceeding with respect to conduct for
which the director was adjudged liable on the basis that he or she
received an improper personal benefit.
Before a corporation may indemnify a director under Georgia law, a
determination must be made that the director has met the relevant standard of
conduct described above. This determination must be made:
o by the board of directors by the majority vote of a quorum of
disinterested directors
o by the majority vote of a committee consisting of two or more
disinterested directors appointed by such a vote
o by special legal counsel that is selected by a vote of the disinterested
directors or a committee thereof in the manner set forth above, or if
there are fewer than two disinterested directors, by special legal
counsel that is selected by the entire board of directors or
o 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 the
determination.
Under Georgia law, a disinterested director is a director who is not a
party to the proceeding with respect to which indemnification is sought and does
not have a relationship with the director seeking indemnification which
relationship would reasonably be expected to exert influence on the director's
judgment with respect to the determination being made.
In addition, a corporation is authorized under Georgia law to indemnify a
director made a party to a proceeding without regard to the limitations above if
such indemnification has been authorized by the articles of incorporation or a
bylaw, contract or resolution approved by a majority of the shareholders
entitled to vote. Shares owned or voted under the control of a director who at
the time does not qualify as a disinterested director that would be covered by
the authorization may not be voted on the authorization. But the corporation may
not authorize indemnification for a director adjudged liable of any of the acts
or omissions described above under "--Limitation of Personal Liability of
Directors--MCI WorldCom".
Georgia law also provides that, to the extent that a director has been wholly
successful on the merits or otherwise in defense of any proceeding, the
corporation shall indemnify the director against reasonable expenses incurred in
connection with any such proceeding. A corporation may also advance funds to pay
for reasonable expenses incurred by a director in defending a proceeding before
the final disposition of the proceeding if the director affirms in writing his
or her good faith belief that he or she has met the standard of conduct for
indemnification and the director undertakes in writing to repay any funds
advanced if it is ultimately determined that the director is not entitled to
indemnification. Georgia law also provides that 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--MCI WorldCom". A person who is both an officer and a director is
treated, for indemnification purposes, as a director.
The existing MCI WorldCom articles of incorporation and bylaws authorize
indemnification to the fullest extent permitted by Georgia law, including the
additional shareholder approved indemnification provisions described above.
Sprint
Under Kansas law, a corporation may indemnify a director or officer who is or
was a party, or is threatened to be made a party, to any suit or proceeding
because the person is or was a director or officer of the corporation against
liability incurred in connection with the proceeding if such person acted in
good faith and in a manner reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal proceeding,
had no reasonable cause to believe the conduct was unlawful.
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.
Kansas law provides that any indemnification of 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:
o by the majority vote of the directors who are not parties to such
proceeding, even though less than a quorum
o if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion or
o by the stockholders.
Kansas law also provides that 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, the director or officer must be
indemnified against expenses actually and reasonably incurred in connection with
any claim. A corporation may also advance payment for expenses incurred by a
director or officer defending a proceeding before the final disposition of the
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.
The Sprint bylaws provide that (1) Sprint will indemnify its directors and
officers to the fullest extent allowed by law and (2) the indemnification and
rights granted under the bylaws shall not be deemed exclusive of any other
indemnification, rights or limitations of liability under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, and that they
shall continue although such person has ceased to be a director or officer of
Sprint.
WorldCom
The provisions described above under "--Indemnification of Directors and
Officers--MCI WorldCom" will govern the indemnification of WorldCom's directors
and officers.
Dividends
MCI WorldCom
Georgia law provides that the board of directors may authorize and the
corporation may make any distributions to its shareholders subject to
restrictions in the articles of incorporation; provided that no distribution may
be made if, after giving it effect:
o the corporation would not be able to pay its debts as they become due or
o the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed to satisfy the
preferential rights upon dissolution of the shareholders whose
preferential rights are superior to those receiving the distribution.
The right of the MCI WorldCom board of directors to declare dividends on
its common stock is subject to the rights of holders of MCI WorldCom preferred
stock and the availability of sufficient funds under Georgia law to make
distributions to its shareholders.
Sprint
Kansas law provides that the board of directors may authorize and pay
dividends so long as such dividends come out of the corporation's surplus or, in
the case where there is no surplus, from the corporation's net profits from the
current or preceding fiscal year. Dividends may not be paid out of 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.
The Sprint articles of incorporation provide that dividends may be declared
and paid on Sprint FON common stock, Sprint PCS common stock and Sprint FT/DT
class A stock out of the funds of Sprint legally available for this purpose.
However, the Sprint tracking stock policies affect Sprint's ability to declare
dividends, and the Sprint articles of incorporation also limit Sprint's ability
to make share distributions.
WorldCom
The rights of holders of WorldCom capital stock regarding dividends will be
governed by Georgia law, as described above under "--Dividends--MCI WorldCom",
and as described in detail above under "Description of MCI WorldCom Capital
Stock--Common Stock--Amended WorldCom Articles of Incorporation--Dividend Rights
and Restrictions" and "--Preferred Stock".
Appraisal Rights
MCI WorldCom
Georgia law provides that a shareholder is entitled to dissent from, and
obtain payment of the fair value of his or her shares in the event of, any of
the following corporate actions:
o a plan of merger, if (1) approval of the merger by shareholders is
required and the shareholder is entitled to vote on the merger or (2)
the corporation is a subsidiary that is merged with its parent that owns
at least 90% of the outstanding shares of the subsidiary
o a share exchange, if the shareholder is entitled to vote on the exchange
o a sale or exchange of all or substantially all of the assets of a
corporation if a shareholder vote is required, except for a sale
pursuant to a court order or a sale for cash in which all the proceeds
will be distributed to the shareholders within one year after the sale
o an amendment of the articles of incorporation that materially and
adversely affects the rights of a dissenter's shares or
o any other action taken pursuant to a shareholder vote to the extent that
Georgia law, the articles of incorporation, bylaws or a resolution of
the board of directors provides that shareholders are entitled to
dissent and obtain payment for their shares.
In no event, however, will a shareholder be entitled to dissenters' rights
under Georgia law for shares of any class or series which are listed on a
national securities exchange or held of record by more than 2,000 shareholders,
unless:
o in the case of a merger or share exchange, shareholders are required to
accept for their shares anything except shares of the surviving
corporation or another 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 cash payments in lieu of fractional shares or
o the articles of incorporation or a resolution of the board of directors
approving the transaction provides otherwise.
Sprint
Kansas law provides that a stockholder of a Kansas 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 certain mergers, except that, unless the articles
of incorporation otherwise provide, this right to demand an appraisal does not
apply to holders of shares of any class or series of stock which are either:
o 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. or
o held of record by not less than 2,000 holders.
In addition, appraisal rights shall not apply to any of the shares of stock
of the corporation surviving a merger if the merger did not require approval of
the stockholders of that corporation.
Appraisal rights are available for holders of shares of any class or series
of stock of a Kansas corporation if holders are required by the terms of the
merger or consolidation agreement to accept in exchange for their stock anything
except:
o stock or stock and cash in lieu of fractional shares of the corporation
surviving or resulting from the merger or consolidation
o stock or stock and cash in lieu of fractional shares of any other
corporation which, at the effective time of the merger or consolidation,
will be listed on a national securities exchange or held of record by at
least 2,000 holders or
o a combination of the above.
WorldCom
The dissenters' rights of WorldCom shareholders will be governed by Georgia
law, as described above under "--Appraisal Rights--MCI WorldCom".
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. The existing MCI WorldCom articles of
incorporation do not provide for preemptive rights, although they do not
prohibit MCI WorldCom from granting, contractually or otherwise, the right to
purchase additional securities of MCI WorldCom.
Sprint
Kansas 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 articles of incorporation. While the Sprint
articles of incorporation do not provide for preemptive rights, they also do not
prohibit Sprint from granting, contractually or otherwise, the right to purchase
additional securities of Sprint. As previously discussed, Sprint has granted
contractual equity purchase rights to France Telecom, Deutsche Telekom and the
cable holders. See "Arrangements with Sprint Stockholders--France Telecom and
Deutsche Telekom--Equity Purchase Rights" and "--The Cable Holders--Equity
Purchase Rights".
WorldCom
The provisions described above under "--Preemptive Rights--MCI WorldCom"
will apply to WorldCom and the amended WorldCom articles of incorporation, and
the equity purchase rights granted to the cable holders described above under
"--Preemptive Rights--Sprint" will be assumed by WorldCom upon completion of the
merger.
Special Redemption Provisions
MCI WorldCom
The existing MCI WorldCom 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 common carrier radio
licenses. These provisions are intended to cause MCI WorldCom to remain in
compliance with the Communications Act, 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.
Sprint
The Sprint articles of incorporation permit the redemption of shares of
Sprint series 1 FON common stock, Sprint series 2 FON common stock, Sprint
series 1 PCS common stock, Sprint series 2 PCS common stock and, in some cases,
Sprint FT/DT stock, held by aliens, as such term is defined in the
Communications Act, if necessary to comply with the foreign ownership
limitations set forth in section 310 of the Communications Act. The provisions
permit Sprint series 1 FON common stock, Sprint series 2 FON common stock,
Sprint series 1 PCS common stock, Sprint series 2 PCS common stock and, in some
cases, Sprint FT/DT stock to be redeemed at a price equal to the fair market
value of the shares, except that the redemption price in respect of shares
purchased by any alien within one year of the redemption date would not, unless
otherwise determined by the Sprint board of directors, exceed the purchase price
paid for those shares by the alien.
WorldCom
For a description of the special redemption provisions relating to WorldCom
capital stock after the merger, see "Description of MCI WorldCom Capital Stock--
Common Stock--Amended WorldCom Articles of Incorporation--Redemption of Common
Stock".
Rights Plans
MCI WorldCom
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 terms and conditions
of the existing MCI WorldCom rights agreement.
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 two-thirds of 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.
The MCI WorldCom rights will not become exercisable until the earlier of:
o 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
o 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
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o 10 business days 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 owner 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, the flip-in or flip-over features of
the MCI WorldCom rights or, at the discretion of the MCI WorldCom board of
directors, the exchange features of the MCI WorldCom 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 an MCI WorldCom right, except for such person or
group, will have the right to acquire, upon exercise of the MCI WorldCom right,
instead of two-thirds 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 MCI WorldCom 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 MCI WorldCom 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 MCI WorldCom 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 MCI WorldCom 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 MCI WorldCom 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 MCI WorldCom 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
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 MCI WorldCom 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 MCI WorldCom right.
Redemption of Rights. At any time before the earlier to occur of:
o 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
o 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", will terminate upon redemption, and at such time, the
holders of the MCI WorldCom rights will have the right to receive only the
redemption price for each MCI WorldCom 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 existing MCI WorldCom 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:
o 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
o 10%.
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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 existing MCI WorldCom rights agreement, of the voting power of the MCI
WorldCom voting stock, the MCI WorldCom board of directors may not adopt
amendments to the existing MCI WorldCom rights agreement that adversely affect
the interests of holders of the MCI WorldCom rights. Furthermore, once the MCI
WorldCom 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
MCI WorldCom 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 MCI WorldCom rights or extends the final expiration date.
Anti-takeover Effects. The MCI WorldCom rights have anti-takeover effects.
Once the MCI WorldCom rights have become exercisable, the MCI WorldCom rights
will cause substantial dilution to a person or group that attempts to acquire or
merge with MCI WorldCom in most cases. Accordingly, the existence of the MCI
WorldCom rights may deter potential acquirors from making a takeover proposal or
tender offer. The MCI WorldCom 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 MCI WorldCom rights as described above and since a
transaction approved by the MCI WorldCom board of directors would not cause the
MCI WorldCom 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 MCI WorldCom series 3 preferred stock so that the value of two-
thirds of one one-thousandth of a share of MCI WorldCom series 3 preferred stock
approximates the value of one share of MCI WorldCom common stock. Shares of MCI
WorldCom series 3 preferred stock may only be purchased after the MCI WorldCom
rights have become exercisable, and each share of the MCI WorldCom series 3
preferred stock:
o is nonredeemable and junior to all other series of preferred stock,
unless otherwise provided in the terms of those series of preferred
stock
o will have a preferential dividend in an amount equal to the greater of
$10.00 or 1,500 times any dividend declared on each share of common
stock
o in the event of liquidation, will entitle its holder to receive a
preferred liquidation payment equal to the greater of $1,000 or 1,500
times the payment made per share of common stock
o will have 1,500 votes, voting together with the common stock and any
other capital stock with general voting rights and
o 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 1,500 times the amount and type of consideration
received per share of common stock.
The rights of the MCI WorldCom series 3 preferred stock as to dividends,
liquidation and voting, and in the event of mergers and consolidations, are
protected by customary antidilution provisions.
Sprint
Sprint has adopted a rights plan pursuant to a rights agreement with UMB
Bank as rights agent. The following description of the Sprint rights plan is
subject in its entirety to the terms and conditions of the actual Sprint rights
plan.
Exercisability of Rights. The Sprint rights plan provides for the issuance
of one-half of a FON right in connection with each share of any series of Sprint
FON common stock and one-half of a PCS right, as adjusted for the two- for-one
stock split of Sprint PCS common stock which was effected on February 4, 2000,
in connection with each share of any series of Sprint PCS common stock. It also
designates rights that are attached to each share of the Sprint FT/DT class A
stock.
The FON and PCS rights detach from the Sprint FON common stock and the
Sprint PCS common stock and become exercisable only if, in a transaction not
approved by the Sprint board of directors, a person or entity acquires voting
securities
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representing 15% or more of Sprint's voting power or announces a tender offer
for 15% or more of Sprint's voting power. Once the rights detach and become
exercisable, unless subsequently redeemed:
o each FON right entitles its holder to purchase one one-thousandth of a
share of Sprint sixth series junior participating preferred stock for
an exercise price of $275, subject to adjustment
o each PCS right entitles its holder to purchase one one-thousandth of a
share of Sprint eighth series junior participating preferred stock for
an exercise price of $150, subject to adjustment and
o each right attached to a share of Sprint FT/DT class A stock entitles
its holder to purchase, (1) for an exercise price of $137.50, one-half
of one one-thousandth of a share of Sprint sixth series junior
participating preferred stock for each share of Sprint FON common
stock underlying each share of Sprint FT/DT class A stock, and (2) for
an exercise price of $37.50, one-quarter of one one-thousandth of a
share of Sprint eighth series junior participating preferred stock for
each one-half of a share of Sprint PCS common stock underlying each
share of Sprint FT/DT class A stock, subject to adjustment.
"Flip In" Feature. If a person or group acquires shares representing 15% or
more of Sprint's voting power, except in a "qualifying offer", each holder of a
FON right and each holder of a PCS right will receive, upon exercise, Sprint FON
common stock and Sprint PCS common stock, respectively, having a value equal to
two times the then-current exercise price of the FON right or PCS right. In
addition, each holder of rights attached to Sprint FT/DT class A stock will
receive, upon exercise, both Sprint FON common stock and Sprint PCS common stock
each having a value equal to two times the then-current exercise prices of the
right for Sprint sixth series junior participating preferred stock and Sprint
eighth series junior participating preferred stock, respectively. Once the
rights become exercisable, all rights owned by the acquiring person will be null
and void. A "qualifying offer" is an offer for outstanding shares of common
stock which a majority of the independent directors of Sprint determines to be
fair to the stockholders and otherwise in the best interests of Sprint and its
stockholders.
"Exchange" Feature. At any time after any person or group acquires shares
representing 15% or more of Sprint's voting power, except in a qualifying offer,
and before that person or group acquires 50% of Sprint's voting power, the
Sprint board of directors may exchange one-half of a FON right for one share of
Sprint FON common stock, one-half of a PCS right for one share of Sprint PCS
common stock, and one right that is attached to the Sprint FT/DT class A stock
for one share each of Sprint FON common stock and one-half of a share of Sprint
PCS common stock.
"Flip Over" Feature. If Sprint is involved in a merger or other business
combination transaction after the rights become exercisable, then each right
will entitle its holder to purchase, for the exercise price of the right, a
number of the acquiring or surviving corporation's shares of common stock having
a market value equal to twice the exercise price of the right. Similarly, if
Sprint sells or transfers 50% or more of its assets or earning power after the
rights become exercisable, then the exercise price of each right will entitle
its holder to purchase, for the right's exercise price, a number of the
acquiring company's shares of common stock having a market value equal to two
times the exercise price of the right.
Redemption of Rights. Sprint may redeem the rights for $.01 per right at
any time until ten business days following a public announcement that a person
or group has acquired shares representing 15% or more of Sprint's voting power
or, in the case of France Telecom or Deutsche Telekom, that they have acquired
an amount in excess of the shares permitted to be acquired by them under their
standstill agreement with Sprint.
Termination of Rights. If not previously exercised, the terms of the rights
will expire on June 25, 2007, unless earlier redeemed by Sprint or unless
extended by amending the Sprint rights plan.
WorldCom
Amendment of MCI WorldCom Rights Plan. In the merger agreement, MCI
WorldCom has agreed to modify the terms of its rights agreement at the
completion of the merger in a manner to take into account the creation of
WorldCom PCS group common stock.
Series 8 Preferred Stock. In connection with the amendment of the MCI
WorldCom rights agreement, as described above, the WorldCom board of directors
will authorize 1,250,000 shares of preferred stock designated as WorldCom series
8 junior participating preferred stock, which will relate to WorldCom rights
issued in respect of WorldCom PCS group common stock.
Shares of WorldCom series 8 preferred stock may only be purchased after the
WorldCom rights issued under the WorldCom rights agreement have become
exercisable, and each share of WorldCom series 8 preferred stock:
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o will be nonredeemable and junior to all other series of preferred
stock, unless otherwise provided in the terms of those series of
preferred stock
o will be entitled to a minimum preferential quarterly dividend in an
amount equal to the greater of $100 per share and 1,000 times the per
share amount of all dividends declared on WorldCom PCS group common
stock
o in the event of liquidation, will entitle its holder to receive a
preferred liquidation payment equal to the greater of $1,000 and 1,000
times the payment made to each share of WorldCom PCS group common
stock
o will have 1,000 times the highest number of votes per share of the
WorldCom PCS group common stock, voting together with the WorldCom
series 1 PCS common stock and
o in the event of any merger, consolidation or other transaction in
which shares of WorldCom PCS group common stock are converted or
exchanged, will be entitled to receive 1,000 times the amount received
per share of WorldCom PCS group common stock.
The rights of the holders of WorldCom series 8 preferred stock as to
dividends, liquidation and voting will be protected by customary antidilution
provisions.
Extraordinary Corporate Transactions
MCI WorldCom
Under Georgia law, a sale or other disposition of all or substantially all
of the corporation's assets, a merger, a share exchange or a dissolution of the
corporation must be adopted by the MCI WorldCom board of directors. In addition,
shareholders must approve such transactions by a majority of all votes entitled
to be cast thereon, except in limited circumstances. Approval of the
shareholders of the surviving corporation in a merger or the acquiring
corporation in a share exchange is not required if:
o the plan of merger or share exchange does not amend in any respect the
articles of incorporation
o each shareholder of the surviving corporation whose shares were
outstanding before the merger or share exchange will hold identical
shares after the merger or share exchange
o the number and types of shares outstanding after the merger or share
exchange, plus the amount of shares issuable as a result of the merger
or share exchange, will not exceed the total number and types of
shares of the surviving corporation authorized by its articles of
incorporation immediately prior to the merger or share exchange or
o the corporation owns 90% of each class of outstanding stock of the
other corporation, in which case approval of shareholders of either
corporation is not required for a merger.
Sprint
Under Kansas law, mergers or consolidations and sales or exchanges of all
or substantially all of a corporation's assets require approval of the board of
directors. In addition, approval by a majority of the outstanding stock of the
corporation entitled to vote on the matter is required, except in limited
circumstances. Unless required by the articles of incorporation, a vote of the
stockholders of a surviving corporation is not required to approve a merger if:
o the merger agreement does not amend in any respect the articles of
incorporation
o each share of the corporation outstanding immediately prior to the
merger remains an identical outstanding share of the surviving
corporation after the merger
o the corporation does not issue shares of common stock in the merger
that exceed 20% of its outstanding shares of common stock immediately
prior to the merger or
o the corporation owns 90% of each class of outstanding stock of the
other corporation, in which case approval of stockholders of either
corporation is not required.
WorldCom
The provisions described above under "--Extraordinary Corporate
Transactions--MCI WorldCom" will apply with respect to the rights of the holders
of WorldCom capital stock to approve the sale or other disposition of all or
substantially all of the assets of WorldCom, a merger, a share exchange or a
dissolution of WorldCom.
State Anti-Takeover Statutes
MCI WorldCom
Business Combination Statute. Georgia law contains a "business combination
statute", which allows a domestic corporation to adopt a bylaw that prohibits
"business combinations" with "interested shareholders" occurring within five
years of the date a person first becomes an interested shareholder, unless
special approval of the transaction is obtained. For purposes of this statute,
"business combination" includes mergers, sales of 10% or more of the
corporation's net assets and qualified issuances of securities, all involving
the corporation and any interested shareholder. An "interested shareholder"
means a person or entity that is the beneficial owner of 10% or more of the
voting power of the corporation's voting stock, or a person or entity that is an
affiliate of the corporation and, at any time within the two-year period
immediately prior to the date in question, was the beneficial owner of 10% or
more of the voting power of the corporation's voting stock.
Any business combination with an interested shareholder within five years
of the date this shareholder first became an interested shareholder is
prohibited, unless the interested shareholder obtains approval in one of three
ways:
o prior to the person becoming an interested shareholder, the
corporation's board of directors must have approved the business
combination or the transaction which resulted in the shareholder
becoming an interested shareholder
o the interested shareholder must acquire at least 90% of the
corporation's outstanding voting stock, other than shares owned by
officers, directors and their affiliates and associates, in the same
transaction which resulted in the person becoming an interested
shareholder or
o subsequent to becoming an interested shareholder, the person acquires
additional shares resulting in ownership of at least 90% of the
outstanding shares, other than shares owned by officers, directors and
their affiliates and associates, and obtains the approval of the
business combination by the holders of a majority of the shares
entitled to vote thereon, excluding the shares beneficially owed by
(1) the interested shareholder, (2) officers, directors and their
affiliates and associates, (3) the corporation's subsidiaries and (4)
qualified employee stock plans.
The business combination restrictions of this statute do not apply if a
shareholder:
o becomes an interested shareholder inadvertently
o as soon as practicable divests shares so that the shareholder ceases
to be an interested shareholder or
o would not, at any time within the five-year period immediately prior
to a business combination between the corporation and this
shareholder, have been an interested shareholder but for the
inadvertent acquisition.
Because MCI WorldCom has not adopted any bylaws to opt in to Georgia's
business combination statute, this statute does not apply to MCI WorldCom.
Instead, the MCI WorldCom articles contain provisions governing some types of
business combinations.
Fair Price Statute. Georgia law also contains a "fair price statute", which
permits a corporation to adopt a bylaw requiring special approval by its board
of directors and/or shareholders for "business combinations" unless fair price
criteria are met. Generally, for purposes of this statute, "business
combinations" include mergers, sales of 10% or more of the corporation's assets
out of the ordinary course of business, liquidations, and qualified issuances of
securities involving the corporation and any "interested shareholder". An
"interested shareholder" has the same meaning as under Georgia's business
combination statute.
To satisfy Georgia's fair price statute, a business combination with an
interested shareholder must meet one of three criteria:
o the transaction must be approved unanimously by the "continuing
directors" (which includes directors who served as directors
immediately prior to the date the interested shareholder first became
an interested shareholder and who are not affiliates or associates of
the interested shareholder), provided, that these continuing directors
constitute at least three members of the board of directors at the
time of this approval
o the transaction must be recommended by at least two-thirds of the
continuing directors and approved by a majority of the votes entitled
to be cast by holders of voting shares, excluding shares beneficially
owned by the interested shareholder who is or whose affiliate is a
party to the business combination or
o the terms of the transaction must meet statutory fair pricing criteria
and certain other tests intended to assure that all shareholders
receive a fair price and equivalent consideration for their shares
regardless of when they sell to the interested shareholder.
Because MCI WorldCom has not adopted any bylaw to opt into Georgia's fair
price statute, this statute does not apply to MCI WorldCom.
WorldCom
Georgia law contains a business combination statute and a fair price
statute. After the merger, because WorldCom will not adopt any bylaws to opt in
to either Georgia's business combination statute or fair price statute, these
statutes will not apply to WorldCom.
Business Combination Restrictions
MCI WorldCom
The existing MCI WorldCom articles of incorporation 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 MCI WorldCom capital stock entitled to
vote generally in the election of directors, voting as a single voting group, as
a condition to consummate a "business transaction", as described below,
involving MCI WorldCom and a "related person", as described below, or in which a
related person has an interest, unless:
o 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 or, 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 is
sufficient to approve the transaction so long as at least three
continuing directors serve on the board of directors at the time of
the unanimous vote and
o the minimum price and other requirements are met.
A "business transaction" means:
o any merger, share exchange or consolidation involving MCI WorldCom or
any of its subsidiaries
o any sale, lease, exchange, transfer or other disposition by MCI
WorldCom or any of its subsidiaries of more than 20% of its assets
o 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
o 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
o 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 existing MCI WorldCom articles of incorporation
o 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
o any liquidation, spin off, split off, split up or dissolution of MCI
WorldCom or
o 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" generally means a person or entity that, together with
its affiliates and associates, beneficially owns 10% or more of MCI WorldCom's
outstanding voting stock.
A "continuing director" means a director of MCI WorldCom who either:
o was a member of the board of directors on September 15, 1993 or
o became a MCI WorldCom director after that date, and whose election, or
nomination for election, 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
MCI WorldCom shareholder, is not considered a continuing director.
WorldCom
After the merger, the provisions described above under "--Business
Combination Restrictions--MCI WorldCom" will apply to the rights of holders of
WorldCom capital stock with regard to the consummation of a "business
transaction".
RISK FACTORS RELATING TO THE MERGER
o Sprint FON common stockholders may receive WorldCom group common stock in
the merger with an initial value less than $76. If the average trading
price of MCI WorldCom common stock used to calculate the FON exchange ratio
is less than $41.4350, the FON exchange ratio will be fixed at 1.8342. If
this occurs, and the price of MCI WorldCom common stock at the completion
of the merger is less than $41.4350, the initial value of the WorldCom
group common stock to be received by Sprint FON common stockholders will be
less than $76.
In addition, the price of MCI WorldCom common stock at the completion of
the merger could be lower than the average trading price used to determine
the FON exchange ratio. Therefore, even if the average trading price used
to determine the FON exchange ratio is greater than $41.4350, Sprint FON
common stockholders could also receive WorldCom group common stock with an
initial value of less than $76.
The price of MCI WorldCom common stock at the completion of the merger may
vary from the respective prices on the date of this Current Report on Form
8-K, the date of the special meetings and the date on which the FON
exchange ratio is determined. These variances may be due to a number of
factors, including:
-- changes in the business, operations or prospects of MCI WorldCom or
Sprint
-- market assessments of the likelihood that the merger will be completed
and the timing of the completion of the merger
-- the effect of any conditions or restrictions imposed on or proposed
with respect to the combined company by regulatory agencies due to the
merger
-- general market and economic conditions and other factors or
-- the prospects of post-merger operations.
In addition, the stock market has experienced significant price and volume
fluctuations. These market fluctuations could have a material adverse
effect on the market price of the MCI WorldCom common stock before the
merger.
o The FON exchange ratio could be significantly different from what it would
be if determined before the special meetings. Because the FON exchange
ratio will not be determined until the third trading day before the
completion of the merger, shareholders must decide whether or not to
approve or adopt the merger agreement before knowing the actual FON
exchange ratio. Changes in the price of MCI WorldCom common stock between
the date of this Current Report on Form 8-K and the completion of the
merger may cause the actual FON exchange ratio to differ significantly from
the FON exchange ratio that would have existed if it had been calculated on
or before the special meetings.
o The fixed PCS exchange ratio may result in Sprint PCS common stockholders
receiving WorldCom group common stock in the merger that is worth less at
the completion of the merger than on the date of this Current Report on
Form 8-K.
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Holders of Sprint PCS common stock will receive a fixed fraction of a share
of WorldCom group common stock in the merger for each share of Sprint PCS
common stock they hold. Any decrease in the price of MCI WorldCom common
stock before the completion of the merger will directly reduce the value of
the WorldCom group common stock to be received by Sprint PCS common
stockholders in the merger. The price of MCI WorldCom common stock at the
completion of the merger may be lower than the price on the date of this
Current Report on Form 8-K for a number of reasons discussed above in the
first risk factor. Many of these reasons are beyond our control.
o The failure to successfully integrate MCI WorldCom and Sprint by managing
the significant challenges of that integration may result in WorldCom not
achieving the anticipated potential benefits of the merger. MCI WorldCom
and Sprint will face significant challenges in consolidating functions,
integrating their organizations, procedures, operations and product lines
in a timely and efficient manner, and retaining key MCI WorldCom and Sprint
personnel. The integration of MCI WorldCom and Sprint will be complex and
time-consuming. The consolidation of operations will require substantial
attention from management. The diversion of management attention and any
difficulties encountered in the transition and integration process could
have a material adverse effect on the revenues, level of expenses and
operating results of WorldCom.
o The merger is subject to the receipt of consents and approvals from various
government entities, which may jeopardize or delay completion of the merger
or reduce the anticipated benefits of the merger. Completion of the merger
is conditioned upon filings with, and the receipt of required consents,
orders, approvals or clearances from various governmental agencies, both
foreign and domestic, including the FTC, the Antitrust Division, European
antitrust authorities, the Federal Communications Commission and state
public utility or service commissions. These consents, orders, approvals
and clearances may impose conditions on or require divestitures relating to
the divisions, operations or assets of MCI WorldCom or Sprint. Such
conditions or divestitures may jeopardize or delay completion of the merger
or may reduce the anticipated benefits of the merger. The merger agreement
provides that neither MCI WorldCom nor Sprint is required to agree to any
such condition or divestiture that individually or in the aggregate would
reasonably be expected to materially impair MCI WorldCom's or Sprint's
ability to achieve the overall benefits expected to be realized from the
completion of the merger.
o Holders of different classes of WorldCom capital stock may have competing
interests resulting in one class benefiting over the other. After
completion of the merger, potential conflicts of interest may arise between
holders of WorldCom group common stock and holders of WorldCom PCS group
common stock with respect to, among other things, the payment of dividends,
formulation of policies affecting the two business groups, conversion of
WorldCom PCS group common stock into WorldCom group common stock, asset
dispositions and operational and financial decisions of the WorldCom board
of directors. After the merger, each of the members of the WorldCom board
of directors is expected to have a greater economic interest in the
WorldCom group than in the WorldCom PCS group, and these disproportionate
ownership interests could give rise to potential claims of conflicts of
interests when directors address decisions having different implications
for these different classes.
o Events at one business group could adversely affect the other group and the
market price of its securities, because both WorldCom group common stock
and WorldCom PCS group common stock will be stock of a single corporation.
After the merger, the WorldCom group and the WorldCom PCS group will be
part of one legal entity that is responsible for all of the liabilities for
both groups. WorldCom group common stock will not represent a direct legal
interest in the assets and liabilities of the WorldCom group, and WorldCom
PCS group common stock will not represent a direct legal interest in the
assets and liabilities of the WorldCom PCS group. Rather, both kinds of
shares will be common stock of WorldCom. Holders of the WorldCom group
common stock and holders of the WorldCom PCS group common stock will
therefore be subject to the risks associated with an investment in WorldCom
as a whole. For example, events that adversely affect the results or
financial condition of the WorldCom PCS group could have a material adverse
effect on the market price of WorldCom group common stock.
o The market price of WorldCom group common stock and WorldCom PCS group
common stock may not accurately reflect the performance of these groups.
There can be no assurance that WorldCom group common stock or WorldCom PCS
group common stock will accurately "track" the performance of a particular
business group. As a result, there is a risk that the market may assign
values to WorldCom group common stock or WorldCom PCS group common stock
that are not based on the reported financial performance of that business
group.
o The WorldCom PCS group will likely continue to experience operating losses
and negative cash flow from operations. MCI WorldCom expects that, after
the merger, the WorldCom PCS group will continue to build its network and
expand its customer base, causing it to continue to incur significant
operating losses and to generate significant negative cash flow from
operating activities for the next 9 to 18 months, which could adversely
affect the results and financial condition of
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WorldCom as a whole. There can be no assurance that the WorldCom PCS group
will achieve or sustain operating profitability or positive cash flow from
operating activities in the future.
o The WorldCom PCS group's continuing need for significant capital could
adversely affect the earnings and cash flow for the WorldCom PCS group. The
operation and expansion of the WorldCom PCS group's network and marketing
and distribution efforts will continue to require substantial capital.
Substantial additional capital may be required for, among other things:
-- unforeseen delays or costs, engineering design changes and
technological and other risks relating to continued buildout of the
PCS network
-- regulatory changes relating to the requirements for network buildout
-- PCS licenses or system acquisitions and
-- system development and acquisition or buildout of additional network
capacity required by call volumes in markets already served.
o Future sales of substantial amounts of WorldCom capital stock could
adversely affect the market prices of WorldCom capital stock. After the
merger, sales of substantial amounts of WorldCom group common stock or
WorldCom PCS group common stock in the public market by significant
shareholders, or the public perception that these sales might occur, could
adversely affect the market prices of these shares and WorldCom's ability
to raise capital through public offerings or other sales of its capital
stock. After the merger, the holders of shares of WorldCom series 2 common
stock and WorldCom series 2 PCS common stock, which we refer to as the
"cable holders", will be able to sell these shares freely. In addition,
France Telecom and Deutsche Telekom will be permitted, at any time
following the merger, to sell their shares of WorldCom PCS group common
stock and, after the earlier of 45 days following the completion of the
merger and January 31, 2001, to sell their shares of WorldCom group common
stock. France Telecom and Deutsche Telekom are required to advise WorldCom
in advance regarding any significant sales of WorldCom capital stock before
December 31, 2001.
Based on the number of outstanding shares of Sprint capital stock, MCI
WorldCom capital stock, the MCI WorldCom common stock price and an assumed
FON exchange ratio of 1.6170, in each case as of the Sprint record date,
these investors, based on their current holdings, will own shares
representing approximately 7.75% of WorldCom group common stock and
approximately 51.37% of WorldCom PCS group common stock. Each of these
investors will have registration rights, subject to various conditions,
that will permit them to require WorldCom to register for sale any or all
of their shares of WorldCom capital stock at any time, subject to various
exceptions, and to participate in public offerings of their shares. These
registration rights are assignable by these investors to third parties at
any time.
France Telecom and Deutsche Telekom have publicly disclosed that they do
not intend to remain long-term investors in Sprint or WorldCom.
Tele-Communications, Inc., one of the cable holders, transferred its shares
of Sprint series 2 PCS common stock to a trust in connection with its
merger with AT&T. Under a settlement agreement with the Department of
Justice, the trust is required to divest all of its shares of Sprint series
2 PCS common stock on or before May 2004, and must divest approximately
half of its shares by May 2002. There is no limit on the number of shares
that may be sold by the trust in any given period. This trust arrangement,
together with (1) the transferability after the merger of the shares of
WorldCom capital stock held by the cable holders, France Telecom and
Deutsche Telekom, (2) the significant registration rights of these
investors and (3) the public disclosure by France Telecom and Deutsche
Telekom described above, increase the likelihood that sales of substantial
amounts of WorldCom group common stock and WorldCom PCS group common stock
into the public market will occur or be perceived as likely to occur.
o Tracking stock policies generally may be changed by WorldCom without
shareholder approval and any such changes may affect adversely the rights
of holders of one or more classes of WorldCom capital stock. The tracking
stock policies described in this Current Report on Form 8-K will govern the
relationship between the WorldCom group and the WorldCom PCS group and
other "tracking stock" matters. Provisions of the tracking stock policies
relating to tax matters and provisions regarding the allocation of debt
expense may not be modified, suspended or rescinded, nor may additions or
exceptions be made to these provisions, before December 31, 2001. The
remaining policies may be modified, suspended or rescinded, or additions or
exceptions made to them, at any time in the sole discretion of the WorldCom
board of directors without approval of the shareholders, although there is
no present intention to do so. The WorldCom board of directors may also
adopt additional policies depending upon the circumstances. Any
determination of the WorldCom board of directors to modify, suspend or
rescind these policies, or to make exceptions or adopt additional policies,
including any decision that would have different effects on holders of
WorldCom group common stock and the WorldCom PCS group common stock, would
be made by the WorldCom board of directors in a manner consistent with its
fiduciary
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duties to WorldCom and all of its common shareholders after giving fair
consideration to the potentially divergent interests and all other relevant
interests of the holders of the separate classes of common stock of
WorldCom, including the holders of WorldCom group common stock and the
holders of WorldCom PCS group common stock. See "Tracking Stock Matters--
The Tracking Stock Policies and the Capital Stock Committee."
o It is possible that the merger will be taxable to holders of Sprint fifth
series preferred stock. The U.S. federal income tax consequences applicable
to a holder of Sprint fifth series preferred stock will depend on whether
the WorldCom series 5 preferred stock received in the merger by holders of
such Sprint preferred stock is classified as stock for U.S. federal income
tax purposes. Because of the short period of time between the completion
date of the merger and the mandatory redemption date of the WorldCom series
5 preferred stock, MCI WorldCom's counsel cannot render an opinion as to
the proper U.S. federal income tax classification of the WorldCom series 5
preferred stock. If the WorldCom series 5 preferred stock is not classified
as stock for U.S. federal income tax purposes, the merger will be taxable
to holders of Sprint fifth series preferred stock.
o This Current Report on Form 8-K contains forward-looking statements which
may differ materially from future results of MCI WorldCom and/or Sprint.
The forward-looking statements concerning MCI WorldCom and Sprint within
the meaning of the Private Securities Litigation Reform Act of 1995 relate
to:
-- their financial condition
-- their results of operations
-- their business plans
-- their business strategies, operating efficiencies or synergies,
competitive positions, growth opportunities for existing services and
products
-- the plans and objectives of their management
-- markets for stock of MCI WorldCom and Sprint
-- 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 and
-- other matters.
SPRINT CORPORATION
THE FOLLOWING INFORMATION WAS PREVIOUSLY REPORTED IN THE SPRINT 10-K (SEC
FILE NO. 1-104721) AND/OR THE SPRINT PROXY STATEMENT AND HAS NOT BEEN UPDATED TO
REFLECT CHANGES SINCE DECEMBER 31, 1999. TO THE EXTENT THAT ANY OF THE FOLLOWING
INFORMATION DIFFERS FROM INFORMATION REPORTED IN THE SPRINT 10-K OR THE SPRINT
PROXY STATEMENT, THOSE DOCUMENTS SHALL CONTROL.
Sprint Corporation, incorporated in 1938 under the laws of Kansas, is
mainly a holding company.
In October 1999, Sprint announced a definitive merger agreement with MCI
WorldCom. Under the agreement, each share of Sprint FON stock will be exchanged
for $76 of MCI WorldCom common stock, subject to a collar. In addition, each
share of Sprint PCS stock will be exchanged for one share of a new WorldCom PCS
tracking stock and 0.116025 shares of MCI WorldCom common stock. The terms of
the WorldCom PCS tracking stock will be equivalent to those of Sprint's PCS
common stock and will track the performance of the company's personal
communication services (PCS) business. The merger is subject to the approvals of
Sprint and MCI WorldCom shareholders as well as approvals from the Federal
Communications Commission (FCC), the Justice Department, various state
government bodies and foreign antitrust authorities. The companies anticipate
that the merger will close in the second half of 2000.
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In November 1998, Sprint's shareholders approved the formation of the FON
Group and the PCS Group and the creation of the FON stock and the PCS stock. In
addition, Sprint purchased the remaining ownership interests in Sprint Spectrum
Holding Company, L.P. and PhillieCo, L.P. (together, Sprint PCS), other than a
minority interest in Cox Communications PCS, L.P. (Cox PCS). Sprint acquired
these ownership interests from Tele-Communications, Inc. (TCI), Comcast
Corporation and Cox Communications, Inc. (the Cable Partners). In exchange,
Sprint issued the Cable Partners special low-vote PCS shares and warrants to
acquire additional PCS shares. Sprint also issued the Cable Partners shares of a
new class of preferred stock convertible into PCS shares. The purchase of the
Cable Partners' interests is referred to as the PCS Restructuring. In the 1999
second quarter, Cox Communications, Inc. exercised a put option requiring Sprint
to purchase the remaining 40.8% interest in Cox PCS. Sprint issued additional
low vote PCS shares in exchange for this interest.
Also in November 1998, Sprint reclassified each of its publicly traded
common shares into one share of FON stock and 1/2 share of PCS stock. This
recapitalization was tax-free to shareholders. Each Class A common share owned
by France Telecom S.A. (FT) and Deutsche Telekom AG (DT) was reclassified to
represent an equity interest in the FON Group and the PCS Group that entitles FT
and DT to one share of FON stock and 1/2 share of PCS stock. These transactions
are referred to as the Recapitalization.
The PCS stock is intended to reflect the performance of Sprint's domestic
wireless PCS operations. These operations are referred to as the PCS Group.
The FON stock is intended to reflect the performance of all of Sprint's
other operations. These operations are referred to as the FON Group and include
the following:
o Core businesses
o Long distance division
o Local division
o Product distribution and directory publishing businesses
o Activities to develop and deploy Sprint ION(SM), Integrated On-Demand
Network
o Other strategic ventures.
Characteristics of Tracking Stock
FON and PCS shareholders are subject to the risks related to all of
Sprint's businesses, assets and liabilities. Owning FON or PCS shares does not
represent a direct legal interest in the assets and liabilities of the Groups.
Rather, shareholders remain invested in Sprint and continue to vote as a single
voting class for Board member elections (other than Class A directors elected by
FT and DT) and most other company matters.
The vote per share of the PCS stock is different from the vote of the FON
stock. The FON stock has one vote per share. The vote of the PCS stock is based
on the market price of a share of PCS stock relative to the market price of a
share of FON stock for a period of time prior to the record date for a
shareholders meeting. The shares of PCS stock held by the Cable Partners have
1/10 of the vote per share of the publicly traded PCS stock. The shares held by
the Cable Partners convert into full voting PCS stock upon sale to the public.
For 90 days after the merger, each Cable Partner will have the right to convert
all of its shares of WorldCom series 2 PCS common stock and WorldCom series 2
common stock into an equivalent number of shares of WorldCom series 1 PCS common
stock and WorldCom common stock, respectively.
The price of the FON stock may not accurately reflect the performance of
the FON Group and the price of the PCS stock may not accurately reflect the
performance of the PCS Group. Events affecting the results of one Group could
adversely affect the results and stock price of the other Group. Net losses of
either Group, and dividends or distributions on, or repurchases of, one stock
will reduce Sprint funds legally available for dividends on both stocks. Debt
incurred by either Group could affect the credit rating of Sprint as a whole and
increase borrowing costs for both Groups.
Holders of one of the stocks may have different or conflicting interests
from the holders of the other stock. For example, conflicts could arise with
respect to decisions by the Sprint Board to (1) convert the outstanding shares
of PCS stock into shares of FON stock, (2) sell assets of a Group, either to the
other Group or to a third party, (3) transfer assets from one Group to the other
Group, (4) formulate public policy positions which could have an unequal effect
on the interests of the FON Group and the PCS Group, and (5) make operational
and financial decisions with respect to one Group that could be considered to be
detrimental to the other Group. Material conflicts are addressed in accordance
with the Tracking Stock Policies adopted by the
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Sprint Board. In addition, the Board has appointed a committee of its members
(the Capital Stock Committee) to interpret and oversee the implementation of
these policies.
Transfers of assets from the FON Group to the PCS Group treated as an
equity contribution will result in an increase in the intergroup interest of the
FON Group in the PCS Group. This interest is similar to the FON Group holding
PCS stock. A transfer of funds from the PCS Group to the FON Group would
decrease the intergroup interest. An intergroup interest of the PCS Group in the
FON Group cannot be created.
SPRINT FON GROUP
GENERAL OVERVIEW OF THE SPRINT FON GROUP
The main activities of the FON Group include its core businesses,
consisting of domestic and international long distance communications, local
exchange communications, and product distribution and directory publishing
activities. The FON Group also includes results from Sprint ION(SM), and other
ventures, including Sprint's investment in EarthLink.
Core Businesses--Long Distance Division
General
The FON Group's long distance division (LDD) is the nation's third-largest
long distance phone company. LDD operates a nationwide, all-digital long
distance communications network that uses fiber-optic and electronic technology.
LDD primarily provides domestic and international voice, video and data
communications services. It consists mainly of Sprint Communications Company
L.P. (the Limited Partnership).
LDD's financial performance for 1999, 1998 and 1997 is summarized as
follows:
1999 1998 1997
---- ---- ----
(millions)
Net operating revenues $10,567 $9,658 $8,684
------- ------ ------
Operating income (/1/) $1,634 $1,367 $1,025
------ ------ ------
(/1/) Includes nonrecurring litigation charges of $20 million in 1997.
Competition
The division competes with AT&T, MCI WorldCom and other telecommunications
providers in all segments of the long distance communications market. AT&T
continues to have the largest market share of the domestic long distance
communications market. The Regional Bell Operating Companies (RBOCS) are
beginning to obtain authorization to provide in-region long distance service,
which is expected to heighten competition. Competition in long distance is based
on price and pricing plans, the types of services offered, customer service, and
communications quality, reliability and availability.
Strategy
In order to achieve profitable market share growth in an increasingly
competitive long distance communications environment, LDD intends to leverage
its principal strategic assets: its national brand, innovative marketing and
pricing plans, its reputation for superior customer service, its state-of-the-
art technology, and offerings available from other FON Group operating entities
and the PCS Group. LDD will focus on expanding its presence in the high-growth
data communications markets and intends to become the provider of choice for
delivery of end-to-end service to companies with complex distributed computing
environments. The FON Group continues to deploy network and systems
infrastructure which provides reliability, cost effectiveness and technological
improvements. In order to create integrated product offerings for its customers,
the FON Group is solidifying the linkage of its long distance division with
Sprint's other operations such as the local division and the PCS Group. The long
distance division is also entering local markets of the RBOCS through resale and
unbundled network element (UNE) offerings of the RBOCS. These local products
will be primarily marketed in connection with long distance products to
customers who desire a single voice service provider but do not need advanced
services. The long distance division also supports Sprint ION(SM) activities.
Core Businesses--Local Division
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General
The local division (LTD) consists of regulated local phone companies
serving more than 8 million access lines in 18 states. LTD provides local phone
services, access by phone customers and other carriers to LTD's local network,
sales of telecommunications equipment, and long distance services within certain
regional calling areas, or LATAs.
LTD's financial performance for 1999, 1998 and 1997 is summarized as
follows:
1999 1998 1997
---- ---- ----
(millions)
Net operating revenues (/1/) $5,650 $5,372 $5,294
------ ------ ------
Operating income $1,500 $1,407 $1,392
------ ------ ------
(/1/)Beginning in July 1997, Sprint changed its transfer pricing for
certain transactions between FON Group entities to more accurately reflect
market pricing.
AT&T is LTD's largest customer for network access services. The division's
net operating revenues from services (mainly network access services) provided
to AT&T were 11% in 1999 and 13% in 1998 and 1997. Revenues from AT&T were 4% of
the FON Group's revenues in 1999 and 5% in 1998 and 1997.
Competition
Because LTD operations are largely in secondary and tertiary markets,
competition in its markets is occurring more gradually. There is already some
competition in urban areas served by LTD and for business customers located in
all areas. There continues to be significant competition for intraLATA toll. The
merger of AT&T and TCI may accelerate competition in the areas served by LTD by
enabling AT&T to bypass the local phone company and reach local customers
through the cable of TCI. In addition, wireless services will continue to grow
as an alternative to wireline services as a means of reaching local customers.
Strategy
To continue to build on its successful track record, LTD has embarked on a
growth strategy whereby it will aggressively market Sprint's entire product
portfolio to its local customers as well as its core product line of advanced
network features and data products. LTD also supports the FON Group's
initiatives with Sprint ION(SM). See "Sprint 10N--Strategy" for more details.
Core Businesses--Product Distribution and Directory Publishing Businesses
The product distribution business provides wholesale distribution services
of telecommunications products. The directory publishing business publishes and
markets white and yellow page phone directories.
The financial performance for the product distribution and directory
publishing businesses for 1999, 1998 and 1997 is summarized as follows:
1999 1998 1997
---- ---- ----
(millions)
Net operating revenues(/1/) $1,731 $1,683 $1,454
------ ------ ------
Operating income(/1/) $242 $231 $179
---- ---- ----
(/1/)Beginning in July 1997, Sprint changed its transfer pricing for
certain transactions between FON Group entities to more accurately
reflect market pricing.
SPRINT ION(SM)
Sprint is developing and deploying new integrated communications services,
referred to as Sprint ION. Sprint ION extends Sprint's existing network
capabilities to the customer and enables Sprint to provide the network
infrastructure to meet customers'
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demands for advanced services including integrated voice, data, Internet and
video. It is also expected to be the foundation for Sprint to provide advanced
services in the competitive local service market. Sprint will use various
advanced services last mile technologies including dedicated access, Digital
Subscriber Line (xDSL), and Multipoint Multichannel Distribution Services
(MMDS).
The financial performance for Sprint ION for 1999, 1998 and 1997 is
summarized as follows:
1999 1998 1997
---- ---- ----
(millions)
Net operating expenses $358 $143 $5
---- ---- --
Strategy
This integrated services capability is expected to generate increased
demand for Sprint's products and services, and at the same time reduce the costs
to provide those services.
Sprint ION intends to rely largely on the long distance division's
transmission infrastructure, Sprint's MMDS capabilities and, to a lesser extent,
on the transmission infrastructure of the local division. Sprint will evaluate
whether facilities should be built, leased or acquired where they currently do
not exist. Because a great amount of future investment will be related to
specific customer contracts, Sprint expects to manage its investment in Sprint
ION consistent with customer demand.
Other Ventures
The "other ventures" segment includes the operating results of the cable TV
service operations of the broadband fixed wireless companies after their 1999
acquisition dates.
This segment also includes the FON Group's investments in EarthLink, Inc.,
an Internet service provider; Call-Net, a long distance provider in Canada
operating under the Sprint brand name; and certain other telecommunications
investments and ventures. All of the investments and ventures are accounted for
on the equity basis.
The financial performance of the operations of other ventures for 1999,
1998 and 1997 is summarized as follows:
1999 1998 1997
---- ---- ----
(millions)
Net operating revenues $20 $-- $--
--- --- ---
Operating expenses $68 $40 $84
--- --- ---
Operating loss $(48) $(40) $(84)
----- ----- -----
Equity in losses of affiliates $(89) $(51) $(10)
----- ----- -----
Operating expenses in 1998 and 1997 mainly relate to the FON Group's
offering of Internet services. In June 1998, the FON Group completed the
strategic alliance to combine its Internet business with EarthLink. As part of
the alliance, EarthLink obtained the FON Group's Sprint Internet Passport
customers and took over the day-to-day operations of those services. In
exchange, the FON Group acquired an equity interest in EarthLink.
This segment previously included the FON Group's investment in Global One.
In January 2000, Sprint reached a definitive agreement with FT and DT to sell
its interest in Global One. The sale was completed in February 2000. Sprint's
equity share of the results of Global One has been reported as a discontinued
operation in Sprint's earnings for all periods presented.
SPRINT PCS GROUP
General Overview of the Sprint PCS Group
The PCS Group includes Sprint's domestic wireless PCS operations. It
operates a 100% digital PCS wireless network in the United States, with licenses
to provide service nationwide using a single frequency and a single technology.
At year-end 1999, the PCS Group, together with affiliates, operated PCS systems
in over 360 metropolitan markets, including the 50 largest U.S.
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metropolitan areas. The PCS Group has licenses to serve more than 270 million
people in all 50 states, Puerto Rico and the U.S. Virgin Islands. The PCS
Group's service, including affiliates, now reaches nearly 190 million people.
The PCS Group provides nationwide service through:
o operating its own digital network in major U.S. metropolitan areas,
o affiliating with other companies, mainly in and around smaller U.S.
metropolitan areas,
o roaming on other providers' analog cellular networks using dual-
band/dual-mode handsets, and
o roaming on other providers' digital PCS networks that use code
division multiple access (CDMA).
The financial performance for the PCS Group for 1999, 1998 and 1997 is
summarized as follows:
1999 1998 1997
---- ---- ----
(millions)
Net operating revenues (/1/) $ 3,180 $ 1,225 $--
------- ------- -------
Operating loss (/1/),(/2/) $(3,237) $(2,570) $ (19)
------- ------- -------
Other partners' loss in Sprint PCS $-- $ 1,251 $--
------- ------- -------
Equity in loss of Sprint PCS $-- $-- $ (660)
------- ------- -------
(/1/)The PCS Group's 1998 results of operations included SprintCom's
operating results as well as Sprint PCS' operating results on a
consolidated basis for the entire year. Before 1998, Sprint's investment
in Sprint PCS was accounted for using the equity method.
(/2/)Includes a nonrecurring charge to write-off $179 million of acquired
in- process research and development costs related to the PCS
Restructuring in 1998.
License Coverage
The PCS Group holds licenses covering 276 million Pops (one person residing
in a license area equals one Pop).
Competition
Each of the markets in which the PCS Group competes is served by other
two-way wireless service providers, including cellular and PCS operators and
resellers. A majority of the markets will have five or more commercial mobile
radio service (CMRS) providers and each of the top 50 metropolitan markets have
at least one other PCS competitor in addition to two cellular incumbents. Many
of these competitors have been operating for a number of years and currently
service a significant subscriber base.
Strategy
The business objective of the PCS Group is to expand network coverage and
increase market penetration by aggressively marketing competitively priced PCS
products and services under the Sprint and Sprint PCS brand names, offering
enhanced services and seeking to provide superior customer service. The
principal elements of the PCS Group's strategy for achieving these goals are:
o Operating a nationwide digital wireless network
o Leveraging Sprint's national brand
o Utilizing state-of-the-art CDMA technology
o Delivering superior value to its customers
o Growing customer base using multiple distribution channels
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o Continuing to expand coverage
REGULATORY DEVELOPMENTS
Sprint FON Group
Competitive Local Service
The Telecommunications Act of 1996 (Telecom Act) was designed to promote
competition in all aspects of telecommunications. It eliminated legal and
regulatory barriers to entry into local phone markets. It also required
incumbent local phone companies, among other things, to allow local resale at
wholesale rates, negotiate interconnection agreements, provide nondiscriminatory
access to unbundled network elements and allow collocation of interconnection
equipment by competitors. Sprint has obtained interconnection and collocation
agreements with a number of incumbent local telephone carriers, and is rolling
out Sprint ION in cities across the nation.
Sprint is also rolling out resold and UNE based local services obtained
from other local phone companies under the Telecom Act. This rollout of local
services obtained from other local phone companies will occur in major areas
across the nation not served by the LTD.
In January 1999, the Supreme Court affirmed the FCC's authority to
establish rules and prices relating to interconnection and unbundling of the
incumbent local phone companies' networks. The FCC subsequently reaffirmed in
large part the list of network elements incumbents are required to provide on an
unbundled basis, and strengthened collocation requirements. It also took steps
to speed the deployment of advanced technologies such as xDSL.
RBOC Long Distance Entry
The Telecom Act also allows RBOCs to provide in-region long distance
service once they obtain state certification of compliance with a competitive
"checklist," have a facilities-based competitor, and obtain a FCC ruling that
the provision of in-region long distance service is in the public interest. One
RBOC, Bell Atlantic, obtained FCC authorization to provide in-region long
distance service in New York in December 1999; RBOCs may gain such authorization
in the near future in other states. The entry of the RBOCs into the long
distance market will impact competition, but the extent of the impact will
depend upon factors such as the RBOCs' competitive ability, the appeal of the
RBOC brand to different market segments, and the response of competitors. Some
of the impact on Sprint may be offset by wholesale revenues from those RBOCs
which choose to resell Sprint services.
Customer Service Slamming
The Telecom Act also established liability for the unauthorized switch of a
consumer's telephone service from one carrier to another (slamming). In late
1998, the FCC adopted new rules intended to prevent slamming and to compensate
victims of slamming; these rules were stayed by the Court of Appeals, and the
FCC is currently considering an industry proposal that would streamline the
process for adjudicating alleged slams.
Mergers
As a result of increasing competitive pressures, a number of carriers have
combined or proposed to combine. Sprint and MCI WorldCom filed a merger
application with the FCC (November 1999) and with the European Commission
(January 2000); Sprint and MCI WorldCom are also continuing to provide the
Department of Justice with information supporting the proposed merger. SBC
completed its merger with Ameritech in 1999; the Bell Atlantic-GTE proposed
merger remains pending before the FCC. In 1999, AT&T completed its merger with
TCI, and announced its pending merger with MediaOne. AT&T is expected to use its
newly acquired cable facilities to provide competitive local telephone services.
Universal Services Requirements
The FCC continued to address issues related to Universal Service and access
charge reform. It increased the amount of money available to schools and
libraries under the "e-rate" program; adopted a computer model designed to
calculate "high cost" universal service subsidies (and to replace high cost
subsidies implicit in interstate access charges with explicit contributions);
and continued to shift certain non-traffic sensitive costs from usage-sensitive
to flat-rated access charges. Sprint's long distance and local divisions both
benefit from cost-based access charges. In addition, the shift in costs from
usage-sensitive to flat-rated access charges has contributed to sharp decreases
in long distance usage rate charges.
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The FCC and many states have established "universal service" programs to
ensure affordable, quality local telecommunications services for all Americans.
The FON Group's assessment to fund these programs is typically a percentage of
end- user revenues. The FON Group's 1999 results contained assessments for 1999.
Currently, management cannot predict the extent of the FON Group's future
federal and state universal service assessments, or its ability to recover its
contributions from the universal service fund.
Communications Assistance for Law Enforcement Act
The Communications Assistance for Law Enforcement Act (CALEA) was enacted
in 1994 to preserve electronic surveillance capabilities authorized by federal
and state law. CALEA requires local telecommunications companies to meet certain
"assistance capability requirements" by the end of June 2000 where circuit-
switching is used and by September 2001 where packet-switching is used. Where
circuit-switched technology was installed before 1995, reimbursement for
hardware and software upgrades to facilitate CALEA compliance was authorized.
The U.S. Department of Justice has published guidelines concerning what is
required for it to support, at the FCC, petitions for extension of the CALEA
enforcement deadlines. LTD uses circuit-switching for the bulk of its traffic
and most LTD switches were installed before 1995 and qualify for reimbursement
if upgrades are required by the Justice Department. Sprint ION uses packet
switching for its local operations. In the case of Sprint ION, CALEA compliance
capabilities are not currently available from equipment and software vendors
involved in Sprint ION's deployment. Sprint believes it will be in compliance
with CALEA by the appropriate deadlines for local circuit-switched equipment.
Sprint ION will apply for an extension for the local packet-based services to
allow for development of required hardware and software.
Sprint PCS Group
The FCC sets rules, regulations and policies to, among other things:
o grant licenses for PCS frequencies and license renewals,
o rule on assignments and transfers of control of PCS licenses,
o govern the interconnection of PCS networks with other wireless and
wireline carriers,
o establish access and universal service funding provisions,
o impose fines and forfeitures for violations of any of the FCC's rules,
and
o regulate the technical standards of PCS networks.
The FCC currently prohibits a single entity from having a combined
attributable interest (20% or greater interest in any license) in broadband PCS,
cellular and specialized mobile radio licenses totaling more than 45 megahertz
(MHz) in any geographic area except that in rural service areas no licensee may
have an attributable interest in more than 55 MHz of commercial mobile radio
service (CMRS) spectrum.
PCS License Transfers and Assignments
The FCC must approve any substantial changes in ownership or control of a
PCS license. Noncontrolling interests in an entity that holds a PCS license or
operates PCS networks generally may be bought or sold without prior FCC
approval. In addition, a recent FCC order requires only post-consummation
notification of certain pro forma assignments or transfers of control.
PCS License Conditions
All PCS licenses are granted for 10-year terms if the FCC's buildout
requirements are followed. Based on those requirements, all 30 MHz broadband
major trading area licensees must build networks offering coverage to 1/3 of the
population within five years and 2/3 within 10 years. All 10 MHz broadband PCS
licensees must build networks offering coverage to at least 1/4 of the
population within five years or make a showing of "substantial service" within
that five-year period. Licenses may be revoked if the rules are violated.
PCS licenses may be renewed for additional 10-year terms. Renewal
applications are not subject to auctions. However, third parties may oppose
renewal applications and/or file competing applications.
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Other FCC Requirements
Broadband PCS providers cannot unreasonably restrict or prohibit other
companies from reselling their services. They also cannot unreasonably
discriminate against resellers. CMRS resale obligations will expire in 2002.
Local phone companies must program their networks to allow customers to
change service providers without changing phone numbers. This is referred to as
service provider number portability. CMRS providers are currently required to
deliver calls from their networks to ported numbers anywhere in the country. By
November 24, 2002, CMRS providers must be able to offer their own customers
number portability in their switches in the 100 largest metropolitan areas. They
must also be able to support nationwide roaming.
Broadband PCS and other CMRS providers may provide wireless local loop and
other fixed services that would directly compete with the wireline services of
local phone companies. Broadband PCS and other CMRS providers must implement
enhanced emergency 911 capabilities to be completed in phases by October 2001.
Communications Assistance for Law Enforcement Act
CALEA was enacted in 1994 to preserve electronic surveillance capabilities
authorized by federal and state law. CALEA requires telecommunications carriers
to meet certain "assistance capability requirements" by the end of June 2000. In
1997, telecommunications industry standard-setting organizations agreed to a
joint standard to implement CALEA's capability requirements. The PCS Group
believes it will be in compliance with CALEA requirements.
Other Federal Regulations
Wireless systems must comply with certain FCC and Federal Aviation
Administration regulations about the siting, lighting and construction of
transmitter towers and antennas. In addition, certain FCC environmental
regulations may cause certain cell site locations to come under National
Environmental Policy Act (NEPA) regulation. NEPA requires carriers to meet
certain land use and radio frequency standards.
Universal Service Requirements
The FCC and many states have established "universal service" programs to
ensure affordable, quality telecommunications services for all Americans. The
PCS Group's "contribution" to these programs is typically a percentage of
end-user revenues. The PCS Group's 1999 results contained assessments for 1999.
Currently, management cannot predict the extent of the PCS Group's future
federal and state universal service assessments, or its ability to recover its
contributions from the universal service fund.
Environmental Compliance
Sprint's environmental compliance and remediation expenditures mainly
result from the operation of standby power generators for its telecommunications
equipment. The expenditures arise in connection with standards compliance,
permits or occasional remediation, which are usually related to generators,
batteries or fuel storage. Sprint has been identified as a potentially
responsible party at a site relating to discontinued power generation
operations. Sprint's environmental compliance and remediation expenditures have
not been material to its financial statements or to its operations and are not
expected to have any future material adverse effects on the FON Group or the PCS
Group.
PATENTS, TRADEMARKS AND LICENSES
Sprint owns numerous patents, patent applications, service marks and
trademarks in the United States and other countries. Sprint expects to apply for
and develop trademarks, service marks and patents for the benefit of the Groups
in the ordinary course of business. Sprint is a registered trademark of Sprint
and Sprint PCS is a registered service mark of Sprint. Sprint is also licensed
under domestic and foreign patents and trademarks owned by others. In total,
these patents, patent applications, trademarks, service marks and licenses are
of material importance to the business. Generally, Sprint's trademarks,
trademark licenses and service marks have no limitation on duration; Sprint's
patents and licensed patents have remaining lives generally ranging from one to
17 years.
Pursuant to certain of the PCS Group's third party supplier contracts, the
PCS Group has certain rights to use third party supplier trademarks in
connection with the buildout, marketing and operation of its network.
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EMPLOYEE RELATIONS
At year-end 1999, Sprint had approximately 77,600 employees. Approximately
10,600 FON Group employees were represented by unions. During 1999, Sprint had
no material work stoppages caused by labor controversies.
PROPERTIES
Sprint's gross property, plant and equipment totaled $37.1 billion at
year-end 1999, of which $15.8 billion relates to the FON Group's local
communications services, $9.8 billion relates to the FON Group's long distance
communications services, $9.4 billion relates to the PCS Group's PCS wireless
services and the remainder relates to the FON Group's product distribution and
directory publishing businesses' properties, Sprint ION properties and general
support assets.
The FON Group's gross property, plant and equipment totaled $27.7 billion
at year-end 1999. These properties mainly consist of land, buildings, digital
fiber-optic network, switching equipment, microwave radio and cable and wire
facilities. Sprint leases certain switching equipment and several general office
facilities. The LDD has been granted easements, rights-of-way and
rights-of-occupancy, mainly by railroads and other private landowners, for its
fiber-optic network.
The product distribution and directory publishing businesses' properties
mainly consist of office and warehouse facilities to support the business units
in the distribution of telecommunications products and publication of telephone
directories.
The PCS Group's properties consist of leased and owned office space for its
corporate operations, network monitoring personnel, customer care centers and
retail stores. The PCS Group leases space for base station towers and switch
sites for its PCS network. At year-end 1999, the PCS Group had under lease (or
options to lease) approximately 14,400 cell sites.
Sprint owns its corporate headquarters building and is in the process of
building a $1 billion corporate campus in the greater Kansas City metropolitan
area.
Gross property, plant and equipment totaling $14.3 billion for the FON
Group is either pledged as security for first mortgage bonds and certain notes
or is restricted for use as mortgaged property.
LEGAL PROCEEDINGS
Eight purported class action suits were filed by shareholders in connection
with the proposed merger of Sprint into MCI WorldCom. The suits allege that
Sprint's directors breached their fiduciary duties, and certain other duties, to
shareholders by entering into the merger agreement with MCI WorldCom and seek
various relief, including injunction of the merger, requiring Sprint to conduct
an auction for the sale of the company and awarding compensatory damages and
costs. Six lawsuits were filed in Johnson County, Kansas District Court and two
lawsuits were filed in the Supreme Court of New York. The six lawsuits filed in
Kansas were dismissed without prejudice in February 2000. Plaintiffs in the
remaining two cases have agreed to dismissal and the documents necessary to
dismiss those cases have been filed with the court. The dismissal will become
final following a court hearing.
The PCS Group has been involved in legal proceedings in various states
concerning the suspension of the processing or approval of permits for wireless
telecommunications towers, the denial of applications for permits and other
issues arising in connection with tower siting. There can be no assurance that
such litigation and similar actions taken by others seeking to block the
construction of individual cell sites of the PCS Group's network will not, in
the aggregate, significantly delay expansion of the PCS Group's network
coverage.
Sprint is involved in various other legal proceedings incidental to the
conduct of its business. While it is not possible to determine the ultimate
disposition of each of these proceedings, Sprint believes that the outcome of
such proceedings, individually or in the aggregate, will not have a material
adverse effect on Sprint's, the FON Group's or the PCS Group's financial
conditions or results of operations.
EXECUTIVE OFFICERS OF SPRINT
74
<PAGE>
<TABLE>
<CAPTION>
Office Name Age
- ------ ---- ---
<S> <C> <C>
Chairman and Chief Executive Officer William T. Esrey (/1/) 60
President and Chief Operating Officer Ronald T. LeMay (/2/) 54
President--Local Telecommunications Division Michael B. Fuller (/3/) 55
President--Sprint PCS Andrew J. Sukawaty (/4/) 44
President--Sprint International John E. Berndt (/5/) 59
President--National Integrated Services and
Sprint Business Kevin E. Brauer (/6/) 49
Executive Vice President--General Counsel and
External Affairs J. Richard Devlin (/7/) 49
Executive Vice President--Chief Financial Officer Arthur B. Krause (/8/) 58
Senior Vice President and Treasurer Gene M. Betts (/9/) 47
Senior Vice President--One Sprint Strategic
Development Arthur A. Kurtze (/10/) 55
Senior Vice President--Federal External Affairs Vonya B. McCann (/11/) 45
Senior Vice President and Controller John P. Meyer (/12/) 49
Senior Vice President--Strategic Planning and
Corporate Development Theodore H. Schell (/13/)
55
Senior Vice President--Human Resources I. Benjamin Watson (/14/)
51
Senior Vice President--Consumer Market Strategy
and Communications Thomas E. Weigman (/15/) 52
Vice President--Secretary Don A. Jensen (/16/) 64
</TABLE>
(/1/)Mr. Esrey was elected Chairman in 1990. He was elected Chief Executive
Officer and a member of the Board of Directors in 1985.
(/2/)Mr. LeMay was first elected President and Chief Operating Officer in
1996. From July 1997 to October 1997, he served as Chairman and Chief
Executive Officer of Waste Management, Inc., a provider of comprehensive
waste management services. He was re-elected President and Chief Operating
Officer of Sprint effective October 1997. From 1995 to 1996 Mr. LeMay
served as Vice Chairman of Sprint. He also served as Chief Executive
Officer of Sprint Spectrum Holding Company from 1995 to 1996. From 1989 to
1995, he served as President and Chief Operating Officer--Long Distance
Division. Mr. LeMay served on Sprint's Board of Directors from 1993 until
he went to work for Waste Management, Inc. He was re-elected to Sprint's
Board of Directors in December 1997.
(/3/)Mr. Fuller was elected President--Local Telecommunications Division in
1996. From 1990 to 1996, he served as President of United Telephone--
Midwest Group, an operating group of subsidiaries of Sprint.
(/4/)Mr. Sukawaty was elected President--Sprint PCS in 1998. He was
appointed Chief Executive Officer of Sprint Spectrum Holding Company in
September 1996. Prior to joining Sprint Spectrum Holding Company, Mr.
Sukawaty was Chief Executive Officer of NTL, the British diversified
broadcast transmission and communications company, since 1994.
(/5/)Mr. Berndt was elected President--Sprint International in 1998. Before
that, Mr. Berndt was President of Fluor Daniel Telecommunications since
January 1997. He was President--Multimedia Ventures and Technologies for
AT&T and Lucent Technologies from 1995 to 1996. From 1993 to 1995, Mr.
Berndt was President of New Business Development for AT&T.
(/6/)Mr. Brauer became President--National Integrated Services and Sprint
Business in July 1999. He had served as President--National Integrated
Services since 1997. From 1994 to 1997, he was President of Sprint
Business.
(/7/)Mr. Devlin was elected Executive Vice President--General Counsel and
External Affairs in 1989.
(/8/)Mr. Krause was elected Executive Vice President--Chief Financial
Officer in 1988.
(/9/)Mr. Betts was elected Senior Vice President in 1990. He was elected
Treasurer in December 1998.
(/10/)Mr. Kurtze was appointed Senior Vice President--One Sprint Strategic
Development in February 1999. He had served as Chief Operating Officer of
Sprint Spectrum Holding Company since 1995. Prior to joining Sprint
Spectrum Holding Company, Mr. Kurtze was Senior Vice President--Operations
for Sprint's Local Division since 1993.
(/11/)Ms. McCann was elected Senior Vice President--Federal External
Affairs in October 1999. Prior to joining Sprint, Ms. McCann served in the
U.S. Department of State as Ambassador and Deputy Assistant Secretary for
International
75
<PAGE>
Communications and Information Policy since 1994. Ms. McCann also served as
Principal Deputy Assistant Secretary of State for Economic and Business
Affairs since 1997.
(/12/)Mr. Meyer was elected Senior Vice President--Controller in 1993.
(/13/)Mr. Schell was elected Senior Vice President--Strategic Planning and
Corporate Development in 1990.
(/14/)Mr. Watson was elected Senior Vice President--Human Resources in
1993.
(/15/)Mr. Weigman was appointed Senior Vice President--Consumer Market
Strategy and Communications in February 1999. He had served as
President--Consumer Services Group of Sprint's Long Distance Division since
1995. From 1993 to 1995, he served as President--Multimedia/Strategic
Services of the Long Distance Division.
(/16/)Mr. Jensen was elected Vice President--Secretary in 1975.
There are no known family relationships between any of the persons named
above or between any of these persons and any outside directors of Sprint.
Officers are elected annually.
76
<PAGE>
EXECUTIVE COMPENSATION
The following was previously reported in, and accordingly is derived from,
Sprint's Current Reports on Form 8-K.
The Sprint Employee Stock Purchase Plan (the "Sprint ESSP")
Summary of the Sprint ESSP
The following is a discussion of the Sprint employees stock purchase plan
and the proposed amendments to the plan to be submitted for stockholder approval
at the Sprint special meeting.
In 1988, Sprint stockholders approved the Sprint ESPP. In 1994 and 1998,
Sprint stockholders approved amendments to the Sprint ESPP increasing the number
of shares of Sprint common stock reserved for issuance under the plan and making
others changes to the plan. Since the November 1998 Sprint PCS restructuring,
both Sprint FON common stock and Sprint PCS common stock have been issued under
the Sprint ESPP.
At its meeting on December 14, 1999, the Sprint board of directors approved
amendments making various changes to the Sprint ESPP and increasing the number
of shares authorized for issuance under the plan. The Sprint board of directors
recommended that the Sprint ESPP, as so amended, be submitted to Sprint
stockholders at the Sprint special meeting for their approval. If approved by
Sprint stockholders, the amended Sprint ESPP will be effective for the 2000
offering and any subsequent offerings, although the plan will terminate upon the
merger of Sprint into MCI WorldCom.
On December 14, 1999, the Sprint board of directors authorized a
two-for-one stock split of its Sprint PCS common stock in the form of a stock
dividend which was distributed on February 4, 2000. All Sprint PCS group common
shares and options have been retroactively restated to reflect this stock split.
Under the Sprint ESPP, the Sprint board of directors is authorized to offer to
all eligible employees of Sprint and its subsidiaries the right to elect to
purchase shares of Sprint FON common stock or Sprint PCS common stock at the
prices set forth in the next paragraph. The plan allows participants to allocate
a percentage of compensation to be used to purchase shares of Sprint FON common
stock, Sprint PCS common stock, or both. More
77
<PAGE>
specifically, participants may choose to purchase 100% Sprint FON common stock
or 100% Sprint PCS common stock, or any combination of Sprint FON common stock
and Sprint PCS common stock in 10% increments totaling 100%.
The price of shares purchased under each offering will be 85% of the
average market price of Sprint FON common stock or Sprint PCS common stock on
the date of grant or the date of exercise of the option, whichever is lower.
Average market price is defined by the Sprint ESPP as the average of the high
and low prices for composite transactions as published by major newspapers.
The maximum number of shares which any employee may purchase in an offering
is limited by the fact that the value of the stock to be purchased may not
accrue at a rate which exceeds $25,000 in any calendar year. For example, if the
market prices on the grant date are $69 for Sprint FON common stock and $47 for
Sprint PCS common stock, then the maximum number of shares of Sprint FON common
stock that any employee could purchase in the 2000 offering, if all of the
employee's contributions were used to purchase Sprint FON common stock, would be
362 shares. Conversely, if all of the employee's contributions were used to
purchase Sprint PCS common stock, the employee could purchase a maximum of 531
shares. If the total number of shares which are to be granted on the date of
grant for an offering exceeds the shares available, the available shares will be
allocated among participating employees.
Following termination of the 1999 offering, which will be concluded at the
end of June 2000, approximately 12.8 million shares of Sprint FON common stock
and 8.8 million shares of Sprint PCS common stock will be available for future
offerings under the plan if the amendments to the plan are approved. It is
anticipated that this will only be a sufficient number of shares of Sprint PCS
common stock for the 2000 offering. While there is no specified date of
termination of the plan, its duration is limited by the maximum number of shares
that may be sold pursuant to the plan.
Awards Under the Sprint ESPP
While it is not possible to determine the number of shares that may be
purchased by each participant in the plan, the maximum number of shares which an
employee may purchase in an offering is limited in the manner described above.
Set forth below are the number of shares of Sprint FON common stock and
Sprint PCS common stock that were purchased in the 1998 offering, which ended on
June 30, 1999, by the persons and groups identified below.
<TABLE>
<CAPTION>
Number of shares
underlying options
elected
-------
Name and Position FON(1)(2) PCS(2)(3)
--------- ---------
<S> <C> <C>
William T. Esrey....................................................... 712 356
Chairman and Chief Executive Officer
Kevin E. Brauer........................................................ 712 354
President--National Integrated Services
Arthur B. Krause....................................................... 712 354
Executive Vice President--Chief Financial Officer
Ronald T. LeMay........................................................ 0 0
President and Chief Operating Officer
Andrew J. Sukawaty..................................................... 0(4) 0(4)
President--Sprint PCS
All current executive officers as a group.............................. 7,484 3,730
All current directors who are not executive officers as a
group......................................................... 0(5) 0(5)
All employees who are not executive officers as a group................ 2,854,053 1,406,886
</TABLE>
(1) Purchases are shown after adjustment for the two-for-one stock split
of Sprint FON common stock in the second quarter of 1999.
(2) Purchases are shown after adjustment for the November 1998 Sprint PCS
restructuring.
(3) Purchases are shown after adjustment for the two-for-one stock split
of Sprint PCS common stock.
(4) Mr. Sukawaty was not eligible to participate in the 1998 offering. (5)
Outside directors cannot participate in the Sprint ESPP.
Tax Aspects of the Plan
78
<PAGE>
The Sprint ESPP is an "employee stock purchase plan" under section 423 of
the Internal Revenue Code. Options issued under the plan will qualify for
special tax treatment such that no income is recognized at the time the option
is granted and the recognition of gain is deferred until stock is disposed of.
If stock is disposed of after being held for the required period, which is one
year from date of purchase and two years from the date of the grant of the
option, the employee will recognize ordinary income to the extent of the excess
of the fair market value of the stock on the grant date or the date of
disposition, whichever is less, over the initial option price. Any further gain
is a capital gain. Any loss is treated as a capital loss. There will be no tax
effect on Sprint under these circumstances.
If the stock is sold before the requisite holding period expires, the
employee must recognize additional ordinary income. This ordinary income is
reported as wages on the employee's Form W-2. The amount to be treated as
ordinary income is the difference between the fair market value on the date of
exercise of the option and the option price. Any further gain is a capital gain.
If the selling price is less than the value of the stock at the time of
exercise, the ordinary income amount remains the same and a capital loss is
recognized. The early disposition of the stock entitles Sprint to a deduction to
the extent that any gain to the employee is treated as ordinary income.
Summary Compensation Table
The following table reflects the cash and non-cash compensation for
services in all capacities to Sprint by the named executive officers:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Awards
------------------- ------
Name and Restricted Securities
Principal Other Annual Stock Underlying
Position Year Salary (1) Bonus (1) Compensation Award(s) (2) Options (3)
- -------- ------------------------- ------------ ------------ -----------
FON PCS
<S> <C> <C> <C> <C> <C> <C> <C>
William T. Esrey 1999 $1,000,000 $1,381,698 $ 74,428(5) $ 0 1,713,260 760,186
Chairman and 1998 1,000,000 851,351 75,986 0 1,444,820 722,412
Chief Executive 1997 1,000,000 0 73,134 0 5,072,366 2,536,186
Officer
Kevin Brauer 1999 371,854 604,810 10,119 0 149,477 75,486
President- 1998 339,851 425,845 6,696 0 154,834 77,418
National
Integrated 1997 306,871 172,850 4,857 242,500 79,950 39,976
Services and
Sprint
Business
Arthur B. Krause 1999 426,069 324,712 7,447 0 390,119 134,842
Executive Vice 1998 415,076 371,216 8,866 0 154,834 77,418
President-Chief 1997 401,852 192,642 2,840 0 129,216 64,608
Financial
Officer
Ronald T. LeMay 1999 883,400 807,429 10,550 0 870,802 375,548
President and 1998 808,801 562,501 65,566 0 977,736 488,874
Chief Operating 1997 602,966 0 9,944 8,896,817 3,207,092 1,603,552
Officer
Andrew J. Sukawaty (6) 1999 477,879 720,273 4,623 0 27,242 458,218
President- 1998 67,740 30,963 0 0 0 316,862(7)
Sprint PCS
<CAPTION>
Payouts
-------
Name and
Principal LTIP All Other
Position Payouts Compensation
- -------- ------- ------------
<S> <C> <C>
William T. Esrey $ 0 $ 61,099
Chairman and 2,199,644 52,000
Chief Executive 1,221,064 38,880
Officer
Kevin Brauer 0 16,633
President- 481,312 14,122
National
Integrated 267,755 6,348
Services and
Sprint
Business
Arthur B. Krause 0 50,344
Executive Vice 532,799 46,053
President-Chief 304,057 23,491
Financial
Officer
Ronald T. LeMay 0 3,532
President and 1,061,710 3,740
Chief Operating 574,008 8,395
Officer
Andrew J. Sukawaty (6) 4,262,353(7) 9,718
President- 2,494,520(7) 0
Sprint PCS
</TABLE>
(1) Includes all amounts earned for the respective years, even if deferred
under Sprint's Executive Deferred Compensation Plan. All bonuses were
paid under Sprint's short-term incentive plans.
(2) As of December 31, 1999, the named executive officers held restricted
shares of Sprint FON common stock and Sprint PCS common stock as set
forth in the following table. The market value of the shares is based
on a value of $67.3125 per share for Sprint FON common stock and $51.25
per share for Sprint PCS common stock (the closing prices at December
31, 1999). The closing price and number of shares for Sprint PCS common
stock are shown after adjustment for the two-for-one stock split in the
first quarter of 2000. Each of the named executive officers has the
right to vote and receive dividends on the restricted shares.
79
<PAGE>
<TABLE>
<CAPTION>
Sprint FON Sprint PCS
common stock common stock
------------ ------------
Number of Number of
shares Value shares Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Mr. Esrey..................................... 185,296 $12,472,737 92,648 $4,748,210
Mr. Brauer.................................... 10,000 673,125 5,000 256,250
Mr. Krause.................................... 0 0 0 0
Mr. LeMay..................................... 320,000 21,540,000 160,000 8,200,000
Mr. Sukawaty.................................. 0 0 0 0
</TABLE>
(3) Reflects the conversion of options for Sprint's common stock before the
1998 Sprint PCS restructuring into independently exercisable options
for Sprint FON common stock and Sprint PCS common stock. Also reflects
the two-for-one stock splits of Sprint FON common stock in the second
quarter of 1999 and Sprint PCS common stock in the first quarter of
2000.
(4) Consists of amounts for 1999 (a) contributed by Sprint under the Sprint
Retirement Savings Plan and (b) representing the portion of interest
credits on deferred compensation accounts under Sprint's Executive
Deferred Compensation Plan that are at above-market rates, as follows:
(5) Includes the cost to Sprint of providing tax and financial services of
$15,000 and automobile allowance of $18,000. (6) Mr. Sukawaty became
President-Sprint PCS in December 1998. (7) Amounts paid in the form of
Sprint PCS common stock as replacement of units vesting under the
Sprint Spectrum Long-term Incentive Plan. As part of the November 1998
PCS restructuring, the Sprint Spectrum Long-term Incentive Plan was
terminated and replaced with a package consisting of options and shares
of Sprint PCS common stock.
<TABLE>
<CAPTION>
Above-
Savings Plan Market
Contribution Earnings
------------ --------
<S> <C> <C>
Mr. Esrey.............................................................. $4,800 $56,299
Mr. Brauer............................................................. 4,800 11,833
Mr. Krause............................................................. 4,800 45,544
Mr. LeMay.............................................................. 3,532 0
Mr. Sukawaty........................................................... 9,600 118
</TABLE>
Option Grants
The following tables summarize options granted to the named executive
officers under Sprint's stock option plans during 1999. The amounts shown as
potential realizable values on these options are based on arbitrarily assumed
annualized rates of appreciation in the price of Sprint common stock of five
percent and ten percent over the term of the options, as set forth in SEC rules.
The named executive officers will realize no gain on these options without an
increase in the price of Sprint common stock that will benefit all shareholders
proportionately.
Unless otherwise indicated, each option listed below has a reload feature.
Vesting is accelerated in the event of an employee's death or permanent
disability. In addition, if an option has been outstanding for at least one
year, vesting is accelerated upon a change in control or an employee's normal
retirement at age 65 or older. A change in control is deemed to occur if (1)
Deutsche Telecom and France Telecom acquire additional stock of Sprint that
would result in their owning 35% or more of the voting power of Sprint stock,
(2) someone acquires 20% or more of the outstanding stock of Sprint, (3) there
is a change of a majority of the Directors within a two-year period, or (4)
Sprint's stockholders approve a merger in which Sprint is not the surviving
entity. No stock appreciation rights were granted during 1999.
Option Grants in Last Fiscal Year
Sprint FON Common Stock Options
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Potential Realizable
% of Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Exercise Price Appreciation for
Underlying Employees Or Base Option Term (1)
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
Options In Fiscal Price Expiration
Name Granted Year (per share) Date 0% 5% 10%
---- ------- ---- ----------- ---- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
William T. Esrey........... 480,000(3) 2.8% $38.98 2/8/09 $0 $11,768,191 $29,822,906
84,580(4) 0.5% 38.98 2/8/09 0 2,073,653 5,255,045
162,578(5) 1.0% 38.98 2/8/09 0 3,985,935 10,101,142
134,330(6) 0.8% 42.97 2/11/04 0 1,581,905 3,492,357
51,786(6) 0.3% 42.97 2/17/05 0 754,383 1,710,691
172,790(6) 1.0% 42.97 2/12/06 0 3,005,801 6,998,551
57,112(6) 0.3% 42.97 2/11/07 0 1,165,396 2,788,576
128,154(6) 0.8% 47.31 2/11/07 0 2,663,294 6,285,442
81,402(6) 0.5% 47.31 7/12/04 0 1,035,227 2,280,420
119,948(6) 0.7% 47.31 2/12/06 0 2,104,854 4,834,987
33,746(6) 0.2% 47.31 2/11/07 0 701,309 1,655,107
139,029(6) 0.8% 47.31 2/9/08 0 3,359,997 8,150,786
67,805(6) 0.4% 47.31 2/9/08 0 1,638,684 3,975,171
Kevin Brauer............... 120,000(3) 0.7% 38.98 2/8/09 0 2,942,048 7,455,726
20,668(4) 0.1% 38.98 2/8/09 0 506,719 1,284,125
8,809(6) 0.1% 68.97 7/12/04 0 150,533 328,672
Arthur B. Krause........... 120,000(3) 0.7% 38.98 2/8/09 0 2,942,048 7,455,726
20,668(4) 0.1% 38.98 2/8/09 0 506,719 1,284,125
38,916(5) 0.2% 38.98 2/8/09 0 954,106 2,417,892
78,046(6) 0.5% 40.42 2/16/00 0 163,943 328,186
14,382(6) 0.1% 40.42 3/9/03 0 128,598 277,618
37,809(6) 0.2% 49.94 7/12/04 0 499,520 1,098,399
35,612(6) 0.2% 49.94 2/17/05 0 537,301 1,200,124
11,921(6) 0.1% 49.94 2/12/06 0 218,074 500,011
12,023(6) 0.1% 49.94 2/11/07 0 260,842 614,440
20,742(6) 0.1% 49.94 2/9/08 0 523,876 1,268,408
Ronald T. LeMay............ 300,000(3) 1.8% 38.98 2/8/09 0 7,355,119 18,639,316
47,798(4) 0.3% 38.98 2/8/09 0 1,171,867 2,969,740
95,006(5) 0.6% 38.98 2/8/09 0 2,329,268 5,902,823
134,646(6) 0.8% 39.48 2/9/08 0 2,962,015 7,311,402
23,460(6) 0.1% 39.48 3/9/03 0 208,084 449,875
73,964(6) 0.4% 39.48 2/16/00 0 160,401 321,537
52(6) 0.0% 49.42 3/15/05 0 867 1,965
85,580(6) 0.5% 51.03 7/12/04 0 1,205,847 2,664,416
21,394(6) 0.1% 51.03 2/17/05 0 342,835 769,527
25,674(6) 0.2% 51.03 2/12/06 0 496,294 1,143,634
23,497(6) 0.1% 51.03 2/11/07 0 536,644 1,270,590
39,731(6) 0.2% 51.03 2/9/08 0 1,053,332 2,563,635
Andrew J. Sukawaty......... 15,000(3) 0.1% 38.98 2/8/09 0 367,756 931,966
2,986(4) 0.0% 38.98 2/8/09 0 73,208 185,523
9,256(5) 0.1% 38.98 2/8/09 0 226,930 575,085
<CAPTION>
Sprint PCS Common Stock Options
Potential Realizable
% of Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Exercise Price Appreciation for
Underlying Employees Or Base Option Term(1)
Options In Fiscal Price Expiration
Name Granted(2) Year (per share)(2) Date 0% 5% 10%
---- ---------- ---- -------------- ---- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
William T. Esrey............ 240,000(3) 1.1% $15.59 2/8/09 $0 $2,353,638 $5,964,581
47,566(4) 0.2% 15.59 2/8/09 0 466,471 1,182,130
91,428(5) 0.4% 15.59 2/8/09 0 896,618 2,272,207
24,534(6) 0.1% 16.17 2/11/07 0 188,418 450,849
59,830(6) 0.3% 16.17 2/11/04 0 265,176 585,426
75,518(6) 0.3% 16.17 2/12/06 0 494,424 1,151,192
98,646(6) 0.5% 16.17 2/12/06 0 645,846 1,503,754
24,534(6) 0.1% 16.17 2/11/07 0 188,418 450,849
23,488(6) 0.1% 16.17 2/17/05 0 128,776 292,020
23,030(6) 0.1% 30.64 2/11/07 0 309,822 731,133
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15,042(6) 0.1% 30.64 7/12/04 0 123,888 272,902
24,582(6) 0.1% 30.64 2/9/08 0 384,592 932,885
11,988(6) 0.1% 30.64 2/9/08 0 187,630 455,158
Kevin Brauer................ 60,000(3) 0.3% 15.59 2/8/09 0 588,410 1,491,145
11,622(4) 0.1% 15.59 2/8/09 0 113,975 288,835
3,864(6) 0.0% 51.97 7/12/04 0 49,755 108,633
Arthur B. Krause............ 60,000(3) 0.3% 15.59 2/8/09 0 588,410 1,491,145
11,622(4) 0.1% 15.59 2/8/09 0 113,975 288,835
21,886(5) 0.1% 15.59 2/8/09 0 214,632 543,920
34,860(6) 0.2% 15.14 2/16/00 0 27,428 54,907
6,474(6) 0.0% 15.14 3/9/03 0 21,683 46,809
Ronald T. LeMay............. 150,000(3) 0.7% 15.59 2/8/09 0 1,471,024 3,727,863
26,880(4) 0.1% 15.59 2/8/09 0 263,607 668,033
53,428(5) 0.2% 15.59 2/8/09 0 523,959 1,327,815
10,164(6) 0.0% 13.09 3/9/03 0 29,896 64,635
32,044(6) 0.1% 13.09 2/16/00 0 23,045 46,195
57,636(6) 0.3% 13.09 2/9/08 0 420,462 1,037,863
26(6) 0.0% 22.38 3/15/05 0 196 445
18,336(6) 0.1% 28.02 7/12/04 0 141,837 313,400
4,582(6) 0.0% 28.02 2/17/05 0 40,310 90,480
5,498(6) 0.0% 28.02 2/12/06 0 58,346 134,451
5,032(6) 0.0% 28.02 2/11/07 0 63,093 149,382
8,440(6) 0.0% 28.02 2/9/08 0 122,841 298,974
Andrew J. Sukawaty.......... 157,000(3) 0.7% 15.59 2/8/09 0 1,539,672 3,901,830
34,856(4) 0.2% 15.59 2/8/09 0 341,827 866,256
108,032(5) 0.5% 15.59 2/8/09 0 1,059,451 2,684,857
89,060(6) 0.4% 50.41 6/30/07 0 1,982,242 4,682,356
69,270(6) 0.3% 50.41 2/8/09 0 1,953,352 4,825,739
</TABLE>
(1) The dollar amounts in these columns are the result of calculations at
the five percent and ten percent rates set by the SEC and are not
intended to forecast future appreciation of Sprint common stock.
(2) Reflects adjustment for the two-for-one stock split of Sprint PCS
common stock.
(3) Twenty-five percent of this option became exercisable on February 8,
2000, and an additional 25% will become exercisable on February 8 of
each of the three successive years.
(4) This option becomes exercisable on December 31, 2001.
(5) This option was granted under the Management Incentive Stock Option
Plan (MISOP). Under the MISOP, the optionee elected to receive options
in lieu of receiving a portion of his bonus under the management
incentive compensation plans. The MISOP benefits Sprint by reducing the
cash bonus paid to the executive. It further increases the percentage
of compensation tied to stock ownership, in keeping with Sprint's
philosophy to more closely align stockholder and employee interests.
This option became exercisable on December 31, 1999.
(6) This option is a reload option. A reload option is an option granted
when an optionee exercises a stock option and makes payment of the
purchase price using shares of previously owned Sprint FON common stock
or Sprint PCS common stock. A reload option grant is for the number of
shares utilized in payment of the purchase price and tax withholding,
if any. The option price for a reload option is equal to the market
price of Sprint FON common stock or Sprint PCS common stock on the date
the reload option is granted. A reload option becomes exercisable one
year from the date the original option was exercised and does not have
a reload feature.
Option Exercises and Fiscal Year-End Values
The following tables summarize the net value realized on the exercise of
options in 1999, and the value of the outstanding options at December 31, 1999,
for the named executive officers.
Aggregated Option Exercises in 1999
and Year-end Option Values
Sprint FON Common Stock
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In the Money Options
December 31, 1999 At December 31, 1999(2)
----------------- -----------------------
Shares Acquired Value
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
----------- ----------- ------------------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William T. Esrey........... 1,991,414 $55,480,276 1,186,440 6,299,142 $45,149,109 $251,476,495
Kevin Brauer............... 46,129 2,138,941 107,265 306,451 5,023,741 10,593,918
Arthur B. Krause........... 362,316 11,605,416 242,927 537,282 11,412,030 16,495,957
Ronald T. LeMay............ 720,576 15,701,165 616,630 3,233,036 23,289,716 125,987,066
Andrew J. Sukawaty......... 0 0 9,256 17,986 260,180 505,575
<CAPTION>
Sprint PCS Common Stock(3)
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In the Money Options
December 31, 1999 At December 31, 1999(2)
----------------- -----------------------
Shares Acquired Value
on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
----------- -----------
<S> <C> <C> <C> <C> <C> <C>
William T. Esrey........... 995,710 $19,043,913 603,362 3,042,988 $25,922,926 $130,288,387
Kevin Brauer............... 23,066 763,762 53,632 153,974 2,466,523 6,025,380
Arthur B. Krause........... 72,720 905,058 232,332 205,996 10,642,044 8,157,461
Ronald T. LeMay............ 360,292 6,021,043 314,244 1,550,740 13,439,444 66,485,056
Andrew J. Sukawaty......... 266,464 10,491,748 0 508,616 0 13,409,786
</TABLE>
(1) The value realized upon exercise of an option is the difference between
the fair market value of the shares of Sprint FON common stock and
Sprint PCS common stock received upon the exercise, valued on the
exercise date, and the exercise price paid.
(2) The value of unexercised, in-the-money options is the difference
between the exercise price of the options and the fair market value, at
December 31, 1999, of Sprint FON common stock ($67.09375) and Sprint
PCS common stock ($50.40625).
(3) Reflects adjustment for the two-for-one stock split of Sprint PCS
common stock.
Pension Plans
Under the Sprint Retirement Pension Plan, eligible employees generally
accrue for each year of service a retirement benefit equal to 1.5% of career
average compensation, subject to limitations under the Internal Revenue Code. In
addition, the named executive officers participate in a supplemental retirement
plan that provides additional benefits. Assuming each of the named executive
officers continues to work at Sprint until age 65, and that his pensionable
compensation for years after 1999 will be his 1999 pensionable compensation, the
named executive officers would receive an estimated annual pension benefit,
expressed as an annuity for life, as follows: Mr. Esrey-- $1,294,700, Mr.
Brauer--$299,800, Mr. Krause--$415,000, Mr. LeMay--$680,700, and Mr.
Sukawaty--$489,300.
In addition, Sprint has a key management benefit plan that permits a
participant to elect a supplemental retirement benefit.
Employment Contracts
Sprint has contingency employment agreements with Messrs. Esrey, Krause,
LeMay, and Sukawaty that provide for separation pay and benefits if employment
is involuntarily terminated following a change in control. In addition, each
named executive officer has signed a non-competition agreement with Sprint.
Sprint has a key management benefit plan providing for a survivor benefit
in the event of the death of a participant or, in the alternative, a
supplemental retirement benefit. Under the plan, if a participant dies before
retirement, the participant's beneficiary will receive ten annual payments each
equal to 25% of the participant's highest annual salary during the five-year
period immediately before the time of death. If a participant dies after
retiring or becoming permanently disabled, the participant's beneficiary will
receive a benefit equal to 300% (or a reduced percentage if the participant
retires before age 60) of the participant's highest annual salary during the
five-year period immediately before the time of retirement or disability,
payable either in a lump sum or in installments at the election of the
participant. At least 13 months before retirement, a participant may elect a
supplemental retirement benefit in lieu of all or a portion of the survivor
benefit. The supplemental retirement benefit will be the actuarial equivalent of
the survivor benefit. Each named executive officer is a participant in the plan.
Compensation Committee Interlocks and Insider Participation
83
<PAGE>
Dubose Ausley is a member of the organization, compensation and nominating
committee of the Sprint Board. He also is chairman of the law firm of Ausley &
McMullen, which provided legal services to certain affiliates of Sprint in 1999
for which it billed $232,787.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) None.
(b) None.
(c) Exhibits.
See Exhibit Index.
EXHIBIT INDEX
Exhibit No. Description of Exhibit
2.1 Amended and Restated Agreement and Plan of Merger,
dated as of March 8, 2000 between MCI WorldCom, Inc.
and Sprint Corporation
2.2 Third Amended and Restated Articles of Incorporation
of WorldCom
2.3 Restated Bylaws of WorldCom
84
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized
MCI WORLDCOM, Inc.
By:/s/ Scott D. Sullivan
---------------------------
Scott D. Sullivan
Chief Financial Officer
Date: April 11, 2000
85
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 8, 2000
BETWEEN
MCI WORLDCOM, INC.
and
SPRINT CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I THE MERGER
<TABLE>
<C> <S> <C>
1.1 The Merger.......................................................... 1-1
1.2 Closing............................................................. 1-1
1.3 Effective Time...................................................... 1-2
1.4 Effects of the Merger............................................... 1-2
1.5 Articles of Incorporation........................................... 1-2
1.6 Bylaws.............................................................. 1-2
1.7 Certain Surviving Corporation Matters............................... 1-2
1.8 Effect on Capital Stock............................................. 1-2
ARTICLE II EXCHANGE OF CERTIFICATES
2.1 Exchange Agent...................................................... 1-6
2.2 Exchange Procedures................................................. 1-6
2.3 Distributions with Respect to Unexchanged Shares.................... 1-7
2.4 No Further Ownership Rights in Sprint Capital Stock................. 1-7
2.5 No Fractional Shares of MCI WorldCom Capital Stock.................. 1-7
2.6 No Liability........................................................ 1-7
2.7 Lost Certificates................................................... 1-8
2.8 Withholding Rights.................................................. 1-8
2.9 Stock Transfer Books................................................ 1-8
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Sprint............................ 1-8
(a) Organization, Standing and Power................................ 1-8
(b) Capital Structure............................................... 1-9
(c) Authority; No Conflicts......................................... 1-10
(d) Reports and Financial Statements................................ 1-11
(e) Information Supplied............................................ 1-11
(f) Litigation...................................................... 1-11
(g) Compliance with Applicable Laws................................. 1-12
(h) State Takeover Statutes; Approvals.............................. 1-12
(i) Intellectual Property; Year 2000................................ 1-12
(j) Absence of Certain Changes or Events............................ 1-13
(k) Vote Required................................................... 1-13
(l) Sprint Rights Agreement......................................... 1-13
(m) Brokers or Finders.............................................. 1-13
(n) Opinion of Financial Advisor.................................... 1-13
(o) Absence of Changes in Sprint's Benefit Plans.................... 1-14
(p) ERISA Compliance; No Parachute Payments......................... 1-14
(q) Taxes........................................................... 1-15
3.2 Representations and Warranties of MCI WorldCom...................... 1-16
(a) Organization, Standing and Power................................ 1-16
(b) Capital Structure............................................... 1-16
(c) Authority; No Conflicts......................................... 1-17
(d) Reports and Financial Statements................................ 1-17
(e) Information Supplied............................................ 1-18
(f) Litigation...................................................... 1-18
(g) Compliance with Applicable Laws................................. 1-18
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
(h) State Takeover Statutes; Approvals....................................................... 1-18
(i) Intellectual Property; Year 2000......................................................... 1-19
(j) Absence of Certain Changes or Events..................................................... 1-19
(k) Vote Required............................................................................ 1-20
(l) MCI WorldCom Rights Agreement............................................................ 1-20
(m) Brokers or Finders....................................................................... 1-20
(n) Opinion of Financial Advisor............................................................. 1-20
(o) ERISA Compliance......................................................................... 1-20
(p) Taxes.................................................................................... 1-21
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of Sprint.......................................................................... 1-22
(a) Ordinary Course.......................................................................... 1-22
(b) Dividends; Changes in Share Capital...................................................... 1-22
(c) Issuance of Securities................................................................... 1-22
(d) Governing Documents...................................................................... 1-23
(e) No Acquisitions.......................................................................... 1-23
(f) No Dispositions.......................................................................... 1-23
(g) Indebtedness; Investments................................................................ 1-23
(h) New Line of Business; Capital Expenditures............................................... 1-24
(i) Tax-Free Qualification................................................................... 1-24
(j) Other Actions............................................................................ 1-24
(k) Accounting Methods....................................................................... 1-24
(l) Representations and Warranties........................................................... 1-24
(m) Authorization of the Foregoing........................................................... 1-24
4.2 Covenants of MCI WorldCom.................................................................... 1-24
(a) Ordinary Course.......................................................................... 1-24
(b) Dividends; Changes in Share Capital...................................................... 1-24
(c) No Acquisitions.......................................................................... 1-25
(d) No Dispositions.......................................................................... 1-25
(e) Tax-Free Qualification................................................................... 1-25
(f) Other Actions............................................................................ 1-25
(g) Representations and Warranties........................................................... 1-25
(h) Authorization of the Foregoing........................................................... 1-25
4.3 Control of Other Party's Business............................................................ 1-25
4.4 FT/DT Arrangements........................................................................... 1-25
ARTICLE V ADDITIONAL AGREEMENTS
5.1 Preparation of the Form S-4 and the Joint Proxy Statement/Prospectus; Stockholders Meetings.. 1-26
5.2 Access to Information........................................................................ 1-27
5.3 Reasonable Best Efforts...................................................................... 1-27
5.4 No Solicitation by Sprint.................................................................... 1-29
5.5 No Solicitation by MCI WorldCom.............................................................. 1-30
5.6 Sprint Stock Options......................................................................... 1-32
5.7 Employee Matters............................................................................. 1-33
5.8 Fees and Expenses............................................................................ 1-34
5.9 Indemnification, Exculpation and Insurance................................................... 1-35
5.10 Sprint Rights Agreement...................................................................... 1-36
5.11 MCI WorldCom Rights Agreement................................................................ 1-36
5.12 Public Announcements......................................................................... 1-36
5.13 Listing...................................................................................... 1-36
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
5.14 Redemption of Sprint First Series Preferred Stock and Sprint Second Series Preferred Stock.. 1-36
5.15 Affiliate Letter............................................................................ 1-36
5.16 Tax Treatment............................................................................... 1-36
5.17 Assumption Agreement and Supplemental Indentures............................................ 1-37
5.18 Other Actions............................................................................... 1-37
ARTICLE VI CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger.................................. 1-37
(a) Stockholder Approvals................................................................... 1-37
(b) No Injunctions or Restraints; Illegality................................................ 1-37
(c) FCC and Public Utility Commission Approvals............................................. 1-37
(d) HSR Act................................................................................. 1-37
(e) EU Antitrust............................................................................ 1-38
(f) Nasdaq Listing.......................................................................... 1-38
(g) Effectiveness of the Form S-4........................................................... 1-38
6.2 Additional Conditions to Obligations of MCI WorldCom........................................ 1-38
(a) Representations and Warranties.......................................................... 1-38
(b) Performance of Obligations of Sprint.................................................... 1-38
(c) Tax Opinion............................................................................. 1-38
(d) No Material Adverse Change.............................................................. 1-39
6.3 Additional Conditions to Obligations of Sprint.............................................. 1-39
(a) Representations and Warranties.......................................................... 1-39
(b) Performance of Obligations of MCI WorldCom.............................................. 1-39
(c) Tax Opinion............................................................................. 1-39
(d) No Material Adverse Change.............................................................. 1-39
ARTICLE VII TERMINATION AND AMENDMENT
7.1 Termination................................................................................. 1-39
7.2 Effect of Termination....................................................................... 1-40
7.3 Amendment................................................................................... 1-41
7.4 Extension; Waiver; Consent.................................................................. 1-41
ARTICLE VIII GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements.................................. 1-41
8.2 Notices..................................................................................... 1-41
8.3 Interpretation.............................................................................. 1-42
8.4 Counterparts................................................................................ 1-42
8.5 Entire Agreement; No Third Party Beneficiaries.............................................. 1-42
8.6 Governing Law............................................................................... 1-43
8.7 Severability................................................................................ 1-43
8.8 Assignment.................................................................................. 1-43
8.9 Submission to Jurisdiction; Waivers......................................................... 1-43
8.10 Enforcement................................................................................. 1-43
8.11 Definitions................................................................................. 1-43
Exhibit A Amendments to Articles of Incorporation of MCI WorldCom
Exhibit B Amendments to Bylaws of MCI WorldCom
Annex 1 Certain Matters Relating to Surviving Corporation
Appendix 1 Form of MCI WorldCom Tax Opinion
Appendix 2 Form of Sprint Tax Opinion
Appendix 3 Form of MCI WorldCom Representations Letter
Appendix 4 Form of Sprint Representations Letter
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of March 8, 2000
(this "Agreement"), between MCI WORLDCOM, INC., a Georgia corporation ("MCI
WorldCom"), and SPRINT CORPORATION, a Kansas corporation ("Sprint").
WITNESSETH:
WHEREAS, MCI WorldCom and Sprint entered into an Agreement and Plan of
Merger, dated as of October 4, 1999 (the "Original Merger Agreement"), and they
now desire to amend and restate the Original Merger Agreement (it being
understood that all references to "the date hereof" or "the date of this
Agreement" refer to October 4, 1999);
WHEREAS, the respective Boards of Directors of MCI WorldCom and Sprint have
each determined that the merger of Sprint with and into MCI WorldCom (the
"Merger") is in the best interests of their respective stockholders, such
Boards of Directors have adopted resolutions approving the Merger and
recommending that their respective stockholders adopt and approve this
Agreement, and the Board of Directors of Sprint has also determined that the
terms of the Merger are fair to holders of Sprint FON Stock, taken as a
separate class, and holders of Sprint PCS Stock, taken as a separate class,
upon the terms and subject to the conditions set forth in this Agreement,
pursuant to which each outstanding share of capital stock of Sprint issued and
outstanding immediately prior to the Effective Time, other than shares owned or
held by MCI WorldCom or Sprint and other than Dissenting Shares, will be
converted into the right to receive the applicable Merger Consideration as set
forth in Section 1.8;
WHEREAS, MCI WorldCom and Sprint desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated hereby and also to prescribe various conditions to the
transactions contemplated hereby;
WHEREAS, MCI WorldCom and Sprint intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations promulgated thereunder; and
WHEREAS, Sprint has entered into or is entering into the MTA Transaction
Documents with France Telecom S.A. ("FT"), Deutsche Telekom A.G. ("DT") and
certain other parties thereto relating to the interest of Sprint and its
Subsidiaries in the Global One joint venture and the investment by FT and DT
and certain of their Subsidiaries in Sprint.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
The Merger
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Kansas General Corporation Code (the
"KGCC") and the Georgia Business Corporation Code (the "GBCC"), Sprint shall be
merged with and into MCI WorldCom at the Effective Time. Following the Merger,
the separate corporate existence of Sprint shall cease and MCI WorldCom shall
continue as the surviving corporation (the "Surviving Corporation").
1.2 Closing. The closing of the Merger (the "Closing") will take place at
10:00 a.m., New York City time, on the second Business Day after the
satisfaction or (subject to applicable law) waiver of the conditions (excluding
conditions that, by their terms, cannot be satisfied until the Closing Date)
set forth in Article VI (the "Closing Date"), unless another time or date is
agreed to in writing by the parties hereto. The Closing shall be held at the
offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New
York, New York, 10019, unless another place is agreed to in writing by the
parties hereto.
1-1
<PAGE>
1.3 Effective Time. As soon as practicable following the Closing, the
parties shall (a) (i) file a certificate of merger (the "Kansas Certificate of
Merger") in such form as is required by and executed in accordance with the
relevant provisions of the KGCC and (ii) make all other filings or recordings
required under the KGCC, and (b) (i) file a certificate of merger (the "Georgia
Certificate of Merger") in such form as is required by and executed in
accordance with the relevant provisions of the GBCC and (ii) make all other
filings or recordings required under the GBCC. The Merger shall become
effective upon the later to occur of the filing of (i) the Kansas Certificate
of Merger with the Kansas Secretary of State and (ii) the Georgia Certificate
of Merger with the Georgia Secretary of State, or at such subsequent time as
MCI WorldCom and Sprint shall agree and be specified in the Kansas Certificate
of Merger and the Georgia Certificate of Merger (the date and time the Merger
becomes effective being the "Effective Time").
1.4 Effects of the Merger. At and after the Effective Time, the Merger will
have the effects set forth in the KGCC and GBCC. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of Sprint shall be
vested in the Surviving Corporation, and all debts, liabilities and duties of
Sprint shall become the debts, liabilities and duties of the Surviving
Corporation. Without limiting the generality of the foregoing, at the Effective
Time, the Surviving Corporation hereby expressly assumes all of Sprint's
obligations in respect of the rights of the other parties granted pursuant to
the Amended and Restated Stockholders' Agreement dated as of November 23, 1998,
as amended (as amended by the MTA), the Amended and Restated Registration
Rights Agreement dated as of November 23, 1998, as amended (as amended by the
MTA), the Amended and Restated Standstill Agreement dated as of November 23,
1998 (as amended by the MTA), in each case between Sprint, FT, DT and certain
other parties thereto, the Qualified Subsidiary Standstill Agreement dated
December 29, 1999 (as amended by the MTA) between Sprint and a Subsidiary of
DT, and the MTA Transaction Documents.
1.5 Articles of Incorporation. The articles of incorporation of MCI
WorldCom, as in effect immediately prior to the Effective Time, shall be
amended as of the Effective Time as set forth in Exhibit A hereto and, as so
amended, such articles of incorporation shall be the articles of incorporation
of the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
1.6 Bylaws. The Bylaws of MCI WorldCom, as in effect immediately prior to
the Effective Time, shall be amended as of the Effective Time as set forth in
Exhibit B hereto and, as so amended, such Bylaws shall be the Bylaws of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law.
1.7 Certain Surviving Corporation Matters. MCI WorldCom and Sprint shall
cause the matters set forth in Annex 1 hereto regarding the Surviving
Corporation to be effected as of the Effective Time.
1.8 Effect on Capital Stock.
(a) As contemplated by Exhibit A, at the Effective Time, the articles of
incorporation of MCI WorldCom will be amended to provide for the creation of
the following series of capital stock of:
(i) Common Stock, Series 2, par value $0.01 per share (the "MCI WorldCom
Series 2 Common Stock");
(ii) PCS Common Stock, Series 1, par value $1.00 per share (the "MCI
WorldCom Series 1 PCS Stock");
(iii) PCS Common Stock, Series 2, par value $1.00 per share (the "MCI
WorldCom Series 2 PCS Stock" and, together with the MCI WorldCom Series 1
PCS Stock, the "MCI WorldCom PCS Stock");
(iv) Series 5 Preferred Stock, par value $0.01 per share (the "MCI
WorldCom Series 5 Preferred Stock");
1-2
<PAGE>
(v) Series 7 Preferred Stock, par value $0.01 per share (the "MCI
WorldCom Series 7 Preferred Stock"); and
(vi) Series 8 Junior Participating Preferred Stock, par value $0.01 per
share.
The foregoing series of capital stock, together with the series and classes
of capital stock of MCI WorldCom authorized as of the date hereof, are hereby
collectively referred to as "MCI WorldCom Capital Stock".
(b) At the Effective Time by virtue of the Merger and without any action on
the part of the holder thereof (in each of the following cases other than such
shares owned or held by MCI WorldCom or Sprint, which shall automatically be
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor, and other than Dissenting Shares):
(i) each share of Old Class A Common Stock, par value $2.50 per share, of
Sprint ("Sprint Series FT Common Stock") issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive
(collectively, the "Series FT Merger Consideration"):
(A) that number of shares of common stock, par value $0.01 per share, of
MCI WorldCom ("MCI WorldCom Common Stock") equal to the sum of
(x) the Number Of Shares Issuable With Respect To The Old Class A
Equity Interest In The FON Group (as defined in Sprint's articles of
incorporation) represented by such share of Sprint Series FT Common
Stock immediately prior to the Effective Time times the FON Exchange
Ratio and
(y) the Number Of Shares Issuable With Respect To The Old Class A
Equity Interest In The PCS Group (as defined in Sprint's articles of
incorporation) represented by such share of Sprint Series FT Common
Stock immediately prior to the Effective Time times the PCS Exchange
Ratio,
and
(B) that number of shares of MCI WorldCom Series 1 PCS Stock equal to
the Number Of Shares Issuable With Respect To The Old Class A Equity
Interest In The PCS Group (as defined in Sprint's articles of
incorporation) represented by such share of Sprint Series FT Common Stock
immediately prior to the Effective Time;
(ii) each share of Class A Common Stock, Series DT, par value $2.50 per
share, of Sprint ("Sprint Series DT Common Stock" and, together with the Sprint
Series FT Common Stock, the "Sprint Class A Common Stock") issued and
outstanding immediately prior to the Effective Time will be converted into the
right to receive (collectively, the "Series DT Merger Consideration"):
(A) that number of shares of MCI WorldCom Common Stock equal to the sum
of
(x) the Number Of Shares Issuable With Respect To The Class A--
Series DT Equity Interest In The FON Group (as defined in Sprint's
articles of incorporation) represented by such share of Sprint Series
DT Common Stock immediately prior to the Effective Time times the FON
Exchange Ratio and
(y) the Number Of Shares Issuable With Respect To The Class A--
Series DT Equity Interest In The PCS Group (as defined in Sprint's
articles of incorporation) represented by such share of Sprint Series
DT Common Stock immediately prior to the Effective Time times the PCS
Exchange Ratio,
and
(B) that number of shares of MCI WorldCom Series 1 PCS Stock equal to
the Number Of Shares Issuable With Respect To The Class A--Series DT Equity
Interest In The PCS Group (as defined in Sprint's articles of
incorporation) represented by such share of Sprint Series DT Common Stock
immediately prior to the Effective Time;
1-3
<PAGE>
(iii) each share of Series 1 FON Stock, par value $2.00 per share, of
Sprint ("Sprint Series 1 FON Stock") issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive
that number of shares of MCI WorldCom Common Stock equal to the FON
Exchange Ratio (the "Series 1 FON Merger Consideration");
(iv) each share of Series 3 FON Stock, par value $2.00 per share, of
Sprint ("Sprint Series 3 FON Stock" and, together with the Sprint Series 1
FON Stock and the Series 2 FON Stock, par value $2.00 per share, of Sprint
("Sprint Series 2 FON Stock"), the "Sprint FON Stock"), issued and
outstanding immediately prior to the Effective Time will be converted into
the right to receive a number of shares of MCI WorldCom Common Stock equal
to the FON Exchange Ratio (the "Series 3 FON Merger Consideration");
(v) each share of Series 1 PCS Stock, par value $1.00 per share, of
Sprint ("Sprint Series 1 PCS Stock") issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive (A)
one share of MCI WorldCom Series 1 PCS Stock and (B) that number of shares
of MCI WorldCom Common Stock equal to the PCS Exchange Ratio (collectively,
the "Series 1 PCS Merger Consideration");
(vi) each share of Series 2 PCS Stock, par value $1.00 per share, of
Sprint ("Sprint Series 2 PCS Stock") issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive (A)
one share of MCI WorldCom Series 2 PCS Stock and (B) a number of shares of
MCI WorldCom Series 2 Common Stock equal to the PCS Exchange Ratio
(collectively, the "Series 2 PCS Merger Consideration");
(vii) each share of Series 3 PCS Stock, par value $1.00 per share, of
Sprint ("Sprint Series 3 PCS Stock" and, together with the Sprint Series 1
PCS Stock and the Sprint Series 2 PCS Stock, the "Sprint PCS Stock") issued
and outstanding immediately prior to the Effective Time will be converted
into the right to receive (A) one share of MCI WorldCom Series 1 PCS Stock
and (B) a number of shares of MCI WorldCom Common Stock equal to the PCS
Exchange Ratio (collectively, the "Series 3 PCS Merger Consideration" and,
together with the Series 1 PCS Merger Consideration and the Series 2 PCS
Merger Consideration, the "PCS Stock Merger Consideration");
(viii) each share of Preferred Stock-First Series, Convertible, without
par value, of Sprint ("Sprint First Series Preferred Stock") shall be
redeemed by Sprint prior to the Effective Time pursuant to Section 5.14;
(ix) each share of Preferred Stock-Second Series, Convertible, without
par value, of Sprint ("Sprint Second Series Preferred Stock") shall be
redeemed by Sprint prior to the Effective Time pursuant to Section 5.14;
(x) each share of Preferred Stock-Fifth Series, without par value, of
Sprint ("Sprint Fifth Series Preferred Stock") issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive one share of MCI WorldCom Series 5 Preferred Stock (the "Fifth
Series Preferred Merger Consideration"); and
(xi) each share of Preferred Stock-Seventh Series, Convertible, without
par value, of Sprint ("Sprint Seventh Series Preferred Stock" and, together
with the Sprint First Series Preferred Stock, the Sprint Second Series
Preferred Stock and the Sprint Fifth Series Preferred Stock, the "Sprint
Preferred Stock") issued and outstanding immediately prior to the Effective
Time will be converted into the right to receive one share of MCI WorldCom
Series 7 Preferred Stock (the "Seventh Series Preferred Merger
Consideration").
The Sprint Class A Common Stock, the Sprint FON Stock and the Sprint PCS
Stock are referred to herein collectively as the "Sprint Common Stock". The
Sprint Common Stock and the Sprint Preferred Stock are referred to herein
collectively as the "Sprint Capital Stock". Shares of Sprint Capital Stock that
are convertible by the holders thereof or by Sprint into a different class or
series of Sprint Capital Stock pursuant to the terms of Sprint's articles of
incorporation are referred to herein collectively as the "Sprint Conversion
Securities".
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The Series 1 FON Merger Consideration and the Series 3 FON Merger
Consideration are referred to herein collectively as the "FON Stock Merger
Consideration". The Fifth Series Preferred Merger Consideration and the Seventh
Series Preferred Merger Consideration are referred to collectively herein as
the "Preferred Stock Merger Consideration". The Series FT Merger Consideration,
the Series DT Merger Consideration, the FON Stock Merger Consideration, the PCS
Stock Merger Consideration and the Preferred Stock Merger Consideration are
referred to herein collectively as the "Merger Consideration".
(c) As a result of the Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Sprint Capital Stock
shall cease to be outstanding and shall be canceled and retired and shall cease
to exist, and each holder of a certificate which immediately prior to the
Effective Time represented any such shares of Sprint Capital Stock (a
"Certificate") shall thereafter cease to have any rights with respect to such
shares of Sprint Capital Stock, except the right to receive the applicable
Merger Consideration and any cash in lieu of fractional shares of applicable
MCI WorldCom Capital Stock to be issued in consideration therefor and any
dividends or other distributions to which holders of Sprint Capital Stock
become entitled all in accordance with Article II upon the surrender of such
certificate.
(d) Each share of Sprint Capital Stock issued and owned or held by MCI
WorldCom or Sprint at the Effective Time shall, by virtue of the Merger, cease
to be outstanding and shall be canceled and retired and no stock of MCI
WorldCom or other consideration shall be delivered in exchange therefor.
(e) (i) Notwithstanding anything in this Agreement to the contrary and
unless provided for by applicable law, shares of Sprint Series FT Common Stock,
Sprint Series DT Common Stock, Sprint Series 3 FON Stock, Sprint Series 2 PCS
Stock, Sprint Series 3 PCS Stock, Sprint Fifth Series Preferred Stock and
Sprint Seventh Series Preferred Stock that are issued and outstanding
immediately prior to the Effective Time and that are owned by stockholders who
have properly perfected their rights of appraisal within the meaning of Section
17-6712 of the KGCC (the "Sprint Dissenting Shares") shall not be converted
into the right to receive the Series FT Merger Consideration, the Series DT
Merger Consideration, the Series 3 FON Merger Consideration, the Series 2 PCS
Merger Consideration, the Series 3 PCS Merger Consideration, the Fifth Series
Preferred Merger Consideration and the Seventh Series Preferred Merger
Consideration, respectively, unless and until such stockholders shall have
failed to perfect their right of payment under applicable law, but, instead,
the holders thereof shall be entitled to payment of the appraised value of such
Sprint Dissenting Shares in accordance with Section 17-6712 of the KGCC. If any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost such right of appraisal, each share of Sprint Series FT Common Stock,
Sprint Series DT Common Stock, Sprint Series 3 FON Stock, Sprint Series 2 PCS
Stock, Sprint Series 3 PCS Stock, Sprint Fifth Series Preferred Stock and
Sprint Seventh Series Preferred Stock held by such stockholder shall thereupon
be deemed to have been converted into the right to receive and become
exchangeable for, at the Effective Time, the Series FT Merger Consideration,
the Series DT Merger Consideration, the Series 3 FON Merger Consideration, the
Series 2 PCS Merger Consideration, the Series 3 PCS Merger Consideration, the
Fifth Series Preferred Merger Consideration and the Seventh Series Preferred
Merger Consideration, respectively, in the manner provided for in Section
1.8(b).
(ii) Sprint shall give MCI WorldCom (A) prompt notice of any objections
filed pursuant to Section 17-6712 of the KGCC received by Sprint, withdrawals
of such objections and any other instruments served in connection with such
objections pursuant to the KGCC and received by Sprint and (B) the opportunity
to direct all negotiations and proceedings with respect to objections under the
KGCC consistent with the obligations of Sprint thereunder. Sprint shall not,
except with the prior written consent of MCI WorldCom, (x) make any payment
with respect to any such objection, (y) offer to settle or settle any such
objection or (z) waive any failure to timely deliver a written objection in
accordance with the KGCC.
(f) (i) Notwithstanding anything in this Agreement to the contrary and
unless provided for by applicable law, holders of shares of MCI WorldCom Series
B Preferred Stock that are issued and outstanding immediately prior to the
Effective Time and that are owned by stockholders who have properly perfected
their rights of
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appraisal within the meaning of Section 14-2-1301 et seq. of the GBCC (the "MCI
WorldCom Dissenting Shares") shall be entitled to payment of the fair value of
such MCI WorldCom Dissenting Shares determined in accordance with Section 14-2-
1301 et seq. of the GBCC. If any such holder shall have failed to perfect or
shall have effectively withdrawn or lost such right of appraisal, each share of
MCI WorldCom Series B Preferred Stock held by such stockholder shall thereupon
be deemed to remain issued and outstanding and unchanged as a validly issued,
fully paid and nonassessable share of capital stock of the Surviving
Corporation.
(ii) MCI WorldCom shall give Sprint (A) prompt notice of MCI WorldCom's
receipt of any notice of intent to demand payment pursuant to Section 14-2-1301
et seq. of the GBCC, withdrawals of such notice and any other instruments
served in connection with such notice pursuant to the GBCC and received by MCI
WorldCom and (B) the opportunity to direct all negotiations and proceedings
with respect to such notice under the GBCC consistent with the obligations of
MCI WorldCom thereunder.
ARTICLE II
Exchange of Certificates
2.1 Exchange Agent. Prior to the Effective Time, MCI WorldCom shall appoint
The Bank of New York or another commercial bank or trust company reasonably
satisfactory to Sprint to act as exchange agent hereunder for the purpose of
exchanging Certificates for the applicable Merger Consideration (the "Exchange
Agent"). At or prior to the Effective Time, MCI WorldCom shall deposit with the
Exchange Agent, in trust for the benefit of holders of shares of Sprint Capital
Stock, certificates representing the applicable MCI WorldCom Capital Stock
issuable pursuant to Section 1.8 in exchange for outstanding shares of Sprint
Capital Stock in the Merger pursuant to Section 1.8. MCI WorldCom agrees to
make available to the Exchange Agent from time to time as needed, cash
sufficient to pay cash in lieu of fractional shares pursuant to Section 2.5 and
any dividends and other distributions pursuant to Section 2.3.
2.2 Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of a Certificate (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 which letter shall be in such form and have such other provisions as
MCI WorldCom may reasonably specify and (ii) instructions for effecting the
surrender of such Certificates in exchange for the applicable Merger
Consideration. Upon surrender of a Certificate to the Exchange Agent together
with such letter of transmittal, duly executed and completed in accordance with
the instructions thereto, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate, if it is a
Certificate for Sprint Capital Stock shall be entitled to receive in exchange
therefor (A) one or more shares of applicable MCI WorldCom Capital Stock
representing, in the aggregate, the whole number of shares that such holder has
the right to receive pursuant to Section 1.8, and (B) a check in the amount
equal to the cash that such holder has the right to receive pursuant to the
provisions of this Article II including cash in lieu of any fractional shares
of applicable MCI WorldCom Capital Stock pursuant to Section 2.5 and any
dividends or other distributions pursuant to Section 2.3, and in each case the
Certificate so surrendered shall forthwith be canceled. No interest will be
paid or will accrue on any cash payable pursuant to Section 2.3 or Section 2.5.
In the event of a transfer of ownership of Sprint Capital Stock which is not
registered in the transfer records of Sprint, one or more shares of applicable
MCI WorldCom Capital Stock evidencing, in the aggregate, the proper number of
shares of applicable MCI WorldCom Capital Stock and a check in the proper
amount of cash in lieu of any fractional shares of applicable MCI WorldCom
Capital Stock pursuant to Section 2.5 and any dividends or other distributions
to which such holder is entitled pursuant to Section 2.3, may be issued with
respect to such Sprint Capital Stock to such a transferee if the Certificate
representing such shares of Sprint Capital Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid.
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2.3 Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made with respect to shares of MCI WorldCom Capital
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 MCI WorldCom
Capital Stock that such holder would be entitled to receive upon surrender of
such Certificate and no cash payment in lieu of fractional shares of MCI
WorldCom Capital Stock shall be paid to any such holder pursuant to Section 2.5
until such holder shall surrender such Certificate in accordance with Section
2.2. Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to such holder of shares of MCI WorldCom
Capital Stock issuable in exchange therefor, without interest, (a) promptly
after the time of such surrender, the amount of any cash payable in lieu of
fractional shares of MCI WorldCom Capital Stock to which such holder is
entitled pursuant to Section 2.5 and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of MCI WorldCom Capital Stock and (b) 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 a payment
date subsequent to such surrender payable with respect to such shares of MCI
WorldCom Capital Stock.
2.4 No Further Ownership Rights in Sprint Capital Stock. All shares of MCI
WorldCom Capital Stock issued and cash paid upon conversion of shares of Sprint
Capital Stock in accordance with the terms of Article I and this Article II
(including any cash paid pursuant to Section 2.3 or 2.5) shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to the
shares of Sprint Capital Stock, 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 Sprint on such shares of Sprint Capital 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 Sprint
Capital Stock which were outstanding immediately prior to the 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.
2.5 No Fractional Shares of MCI WorldCom Capital Stock. (a) No certificates
or scrip or shares of MCI WorldCom Capital Stock representing fractional shares
of MCI WorldCom Capital Stock shall be issued upon the surrender for exchange
of Certificates and such fractional share interests will not entitle the owner
thereof to vote or to have any rights of a shareholder of MCI WorldCom or a
holder of shares of MCI WorldCom Capital Stock.
(b) Notwithstanding any other provision of this Agreement, each holder of
shares of Sprint Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of applicable MCI
WorldCom Capital Stock (after taking into account all Certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to the product of (i) such fractional part of a share of
applicable MCI WorldCom Capital Stock multiplied by (ii) the per share closing
price of applicable MCI WorldCom Common Stock quoted on Nasdaq on the Closing
Date. The fractional share interests of MCI WorldCom Capital Stock will be
aggregated, and no recordholder of Sprint Capital Stock will receive cash in an
amount equal to or greater than the value of one full share of MCI WorldCom
Capital Stock determined as of the Effective Time.
2.6 No Liability. None of Sprint, MCI WorldCom, the Surviving Corporation 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 applicable MCI WorldCom Capital 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 MCI WorldCom Capital 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, be delivered to MCI WorldCom, upon demand, and any holders of Sprint
Capital Stock who
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have not theretofore complied with the provisions of this Article II shall
thereafter look only to MCI WorldCom for satisfaction of their claims for such
Merger Consideration, dividends or distributions in respect thereof or such
cash.
2.7 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 the
Surviving Corporation, the posting by such Person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange
Agent will deliver in exchange for such lost, stolen or destroyed Certificate
the applicable Merger Consideration with respect to the shares of Sprint
Capital Stock formerly represented thereby, any cash in lieu of fractional
shares of MCI WorldCom Capital Stock, and unpaid dividends and distributions on
shares of MCI WorldCom Capital Stock deliverable in respect thereof, pursuant
to this Agreement.
2.8 Withholding Rights. The Surviving Corporation shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Sprint Capital Stock such amounts as it is
required to deduct and withhold with respect to the making of such payment
under the Code and the rules and regulations promulgated thereunder, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by the Surviving Corporation such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Sprint Capital Stock in respect of which such deduction and
withholding was made by the Surviving Corporation.
2.9 Stock Transfer Books. At the close of business, New York City time, on
the day the Effective Time occurs, the stock transfer books of Sprint shall be
closed and there shall be no further registration of transfers of shares of
Sprint Capital Stock thereafter on the records of Sprint. From and after the
Effective Time, the holders of Certificates shall cease to have any rights with
respect to such shares of Sprint Capital Stock formerly represented thereby,
except as otherwise provided herein or by law. On or after the Effective Time,
any Certificates presented to the Exchange Agent or MCI WorldCom for any reason
shall be converted into the Merger Consideration with respect to the shares of
Sprint Capital Stock formerly represented thereby, any cash in lieu of
fractional shares of MCI WorldCom Capital Stock to which the holders thereof
are entitled pursuant to Section 2.5 and any dividends or other distributions
to which the holders thereof are entitled pursuant to Section 2.3.
ARTICLE III
Representations and Warranties
3.1 Representations and Warranties of Sprint. Except as disclosed in the
Sprint SEC Reports filed and publicly available prior to the date of this
Agreement (the "Sprint Filed SEC Reports") or as set forth in the Sprint
Disclosure Schedule delivered by Sprint to MCI WorldCom prior to the execution
of this Agreement (the "Sprint Disclosure Schedule"), Sprint represents and
warrants to MCI WorldCom as follows:
(a) Organization, Standing and Power. Each of Sprint and its Significant
Subsidiaries is a corporation or other legal entity duly organized or formed,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite corporate, partnership or
similar power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary other than in such jurisdictions where the failure so to qualify or
to be in good standing is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Sprint. The copies of the
articles of incorporation and by-laws of Sprint which were previously furnished
to MCI WorldCom are true, complete and correct copies of such documents as in
effect on the date of this Agreement.
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(b) Capital Structure. (i) As of September 30, 1999, the authorized capital
stock of Sprint consisted of (A) 100,000,000 shares of Sprint Series FT Common
Stock, of which 43,118,018 shares were outstanding, (B) 100,000,000 shares of
Sprint Series DT Common Stock, of which 43,118,018 shares were outstanding, (C)
2,500,000,000 shares of Sprint Series 1 FON Stock, of which 696,949,268 shares
were outstanding, (D) 500,000,000 shares of Sprint Series 2 FON Stock, of which
no shares were outstanding, (E) 1,200,000,000 shares of Sprint Series 3 FON
Stock, of which 88,111,036 shares were outstanding, (F) 1,250,000,000 shares of
Sprint Series 1 PCS Stock, of which 198,422,792 shares were outstanding, (G)
500,000,000 shares of Sprint Series 2 PCS Stock, of which 219,393,844 shares
were outstanding, (H) 600,000,000 shares of Sprint Series 3 PCS Stock, of which
13,089,418 shares were outstanding, and (I) 20,000,000 shares of Preferred
Stock, without par value, of which (I) 1,742,853 shares have been designated as
Sprint First Series Preferred Stock, of which 36,150 shares were outstanding,
(II) 8,758,472 shares have been designated as Sprint Second Series Preferred
Stock, of which 219,045 shares were outstanding, (III) 95 shares have been
designated as Sprint Fifth Series Preferred Stock, of which 95 shares were
outstanding, (IV) 1,500,000 shares of Preferred Stock-Sixth Series, Junior
Participating, without par value, have been designated and reserved for
issuance upon exercise of the rights (the "Sprint Rights") distributed to
holders of Sprint FON Stock and Sprint Class A Common Stock pursuant to the
Rights Agreement dated as of November 23, 1998, between Sprint and UMB Bank,
N.A., as rights agent (the "Sprint Rights Agreement"), (V) 1,250,000 shares of
Preferred Stock-Eighth Series, Junior Participating, without par value, have
been designated and reserved for issuance upon exercise of the Sprint Rights
distributed to holders of Sprint PCS Stock and Sprint Class A Common Stock
pursuant to the Sprint Rights Agreement and (VI) 300,000 shares have been
designated as Sprint Seventh Series Preferred Stock, of which 246,766 shares
were outstanding. As of September 30, 1999, 2,409,990 shares of Sprint Series 1
FON Stock and 67,927 shares of Sprint Series 1 PCS Stock were held by Sprint in
its treasury. Since September 30, 1999 to the date of this Agreement, there
have been no issuances of shares of the capital stock of Sprint or any other
securities of Sprint other than issuances of shares (and accompanying Sprint
Rights) pursuant to options or rights outstanding as of September 30, 1999
under the Benefit Plans of Sprint or pursuant to the conversion of the Sprint
Conversion Securities. All issued and outstanding shares of the capital stock
of Sprint are duly authorized, validly issued, fully paid and nonassessable,
and no class of capital stock is entitled to preemptive rights. There were
outstanding as of September 30, 1999 no options, warrants or other rights to
acquire capital stock from Sprint other than (v) shares of Sprint Capital Stock
issuable upon conversion of the Sprint Conversion Securities, (w) 12,452,831
shares of Sprint Series 2 PCS Stock reserved for future issuance upon the
exercise of warrants ("Warrants") issued pursuant to the terms of the Warrant
Agreements, each dated as of November 23, 1998 between Sprint, on the one hand,
and Cox Teleport Partners, Inc., Cox Communications, Inc., Comcast Telephony
Services Holdings, Inc., TCI Wireless Holdings, Inc. and TCI Spectrum
Investment, Inc., on the other hand, (x) the Sprint Rights, (y) options
representing in the aggregate the right to purchase 54,628,805 shares of Sprint
FON Stock and 21,525,703 shares of Sprint PCS Stock under Sprint's 1985 Stock
Option Plan, Sprint's 1990 Stock Option Plan, Sprint's Management Incentive
Stock Option Plan, Sprint's 1997 Long-Term Stock Incentive Program, Sprint's
Long-Term Incentive Compensation Plan, the Amended and Restated Centel Director
Stock Option Plan and the Amended and Restated Centel Stock Option Plan
(collectively with Sprint's 1990 Restricted Stock Plan, the "Sprint Stock
Option Plans"), and (z) rights to purchase shares of Sprint Common Stock under
Sprint's Employees Stock Purchase Plan. Sprint has delivered to MCI WorldCom a
complete and correct list, as of September 30, 1999, of the number of shares of
Sprint Common Stock subject to outstanding stock option or other rights to
purchase or receive Sprint Common Stock granted under (i) the Sprint Stock
Option Plans (collectively, "Sprint Stock Options") and (ii) the Warrants and
the exercise prices thereof. No options or warrants or other rights to acquire
capital stock from Sprint have been issued or granted since September 30, 1999
to the date of this Agreement.
(ii) As of the date of this Agreement, no bonds, debentures, notes or other
indebtedness of Sprint having the right to vote on any matters on which
stockholders may vote ("Sprint Voting Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 3.1(b) and as
contemplated by Section 5.6, as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments, agreements,
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arrangements or undertakings of any kind to which Sprint or any of its
Subsidiaries is a party or by which any of them is bound obligating Sprint or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of Sprint or any of its Subsidiaries or obligating Sprint or any of
its Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. As of the date of this Agreement, there are no outstanding
obligations of Sprint or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Sprint or any of its
Subsidiaries.
(iv) Exhibit 21 to Sprint's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 (the "Sprint 1998 10-K"), sets forth each Significant
Subsidiary of Sprint as of the date hereof. As of the date hereof, all the
outstanding shares of capital stock of, or other equity interests in, each
Significant Subsidiary of Sprint have been validly issued and are fully paid
and nonassessable and are owned directly or indirectly by Sprint, 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, Sprint does not
beneficially own directly or indirectly any capital stock, membership interest,
partnership interest, joint venture interest or other equity interest in any
Person which constitutes a Material Investment.
(c) Authority; No Conflicts. (i) Sprint has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject in the case of the consummation of the Merger to
the adoption of this Agreement by the Required Sprint Vote. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Sprint, subject to the adoption of this Agreement by the
Required Sprint Vote. This Agreement has been duly executed and delivered by
Sprint and constitutes a valid and binding agreement of Sprint, enforceable
against it in accordance with its terms.
(ii) The execution and delivery of this Agreement do not or will not, as the
case may be, and the consummation of the Merger and the other transactions
contemplated hereby will not, subject to the adoption of this Agreement by the
Required Sprint Vote, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, amendment, cancelation or acceleration
of any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest, charge or other encumbrance on any assets (any
such conflict, violation, default, right of termination, amendment, cancelation
or acceleration, loss or creation, a "Violation") pursuant to: (A) any
provision of the articles of incorporation or by-laws of Sprint or the
governing documents of any Subsidiary of Sprint, or (B) except as is not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on Sprint and subject to obtaining or making the consents, approvals,
orders, authorizations, registrations, declarations and filings referred to in
paragraph (iii) below, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Sprint or any Subsidiary of Sprint
or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any supranational, national, state, municipal or
local government, any instrumentality, subdivision, court, administrative
agency or commission or other authority thereof, or any quasi-governmental or
private body exercising any regulatory, taxing, importing or other governmental
or quasi-governmental authority, including the European Union (a "Governmental
Entity"), is required by or with respect to Sprint or any Subsidiary of Sprint
in connection with the execution and delivery of this Agreement by Sprint or
the consummation of the Merger and the other transactions contemplated hereby,
except for those required under or in relation to (A) the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act") and Council Regulation (EEC) No. 4064/89
("Regulation 4064/89"), (B) the Communications Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the
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"Communications Act"), and any other rules, regulations, practices and policies
promulgated by the Federal Communications Commission ("FCC"), (C) state
securities or "blue sky" laws (the "Blue Sky Laws"), (D) the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), (E) the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "Exchange Act"), (F) the KGCC
with respect to the filing of the Kansas Certificate of Merger and the GBCC
with respect to the filing of the Georgia Certificate of Merger, (G) laws,
rules, regulations, practices and orders of any state public service
commissions ("PUCs"), foreign telecommunications regulatory agencies or similar
state or foreign regulatory bodies, (H) rules and regulations of the New York
Stock Exchange, Inc. ("NYSE"), (I) antitrust or other competition laws of other
jurisdictions, and (J) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or obtain
is not reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on Sprint. Consents, approvals, orders, authorizations,
registrations, declarations and filings required under or in relation to any of
the foregoing clauses (A) through (G) and clause (I) are hereinafter referred
to as "Required Consents".
(d) Reports and Financial Statements. Sprint has filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the Securities and Exchange Commission (the "SEC") since January 1, 1998
(collectively, including all exhibits thereto, the "Sprint SEC Reports"). No
Significant Subsidiary of Sprint is required to file any form, report or other
document with the SEC. None of the Sprint SEC Reports when filed contained any
untrue statement of a material fact or omitted to state a 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. Each of
the financial statements (including the related notes) included in the Sprint
SEC Reports presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of
Sprint and its Subsidiaries as of the respective dates or for the respective
periods set forth therein, all in conformity with United States generally
accepted accounting principles ("U.S. GAAP") consistently applied during the
periods involved except as otherwise noted therein, and subject, in the case of
the unaudited interim financial statements, to normal and recurring year-end
adjustments. All of such Sprint SEC Reports, as of their respective dates (and
as of the date of any amendment to the respective Sprint SEC Report), complied
as to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act.
(e) Information Supplied. (i) None of the information supplied or to be
supplied by Sprint for inclusion or incorporation by reference in (A) the Form
S-4 to be filed with the SEC by MCI WorldCom in connection with the issuance of
the MCI WorldCom Capital Stock in the Merger 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 not misleading and (B) the Joint
Proxy Statement/Prospectus included in the Form S-4 related to the Sprint
Stockholders Meeting and the MCI WorldCom Shareholders Meeting and the MCI
WorldCom Capital Stock to be issued in the Merger will, on the date it is first
mailed to Sprint stockholders or MCI WorldCom shareholders or at the time of
the Sprint Stockholders Meeting or the MCI WorldCom Shareholders 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 were made, not
misleading. The Joint Proxy Statement/Prospectus will comply as to form in all
material respects with the requirements of the Exchange Act.
(ii) Notwithstanding the foregoing provisions of this Section 3.1(e), no
representation or warranty is made by Sprint with respect to statements made or
incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by MCI WorldCom for
inclusion or incorporation by reference therein.
(f) Litigation. There is no suit, action, proceeding, claim or investigation
pending or, to the Knowledge of Sprint, threatened against or affecting Sprint
or any of its Subsidiaries that is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Sprint nor is there any
judgment, decree, injunction,
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rule or order of any Governmental Entity or arbitrator outstanding against
Sprint or any of its Subsidiaries having, or that is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Sprint.
(g) Compliance with Applicable Laws. Sprint 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 Sprint and its Subsidiaries taken as a whole (the "Sprint
Permits"), except where the failure to have any such Sprint Permits is not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on Sprint. Sprint and its Subsidiaries are in compliance with the terms
of the Sprint Permits and all applicable statutes, laws, ordinances, rules and
regulations, except where the failure so to comply is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Sprint.
Subject to obtaining the Required Consents, the Merger, in and of itself, would
not cause the revocation or cancelation of any Sprint Permit that is reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
Sprint.
(h) State Takeover Statutes; Approvals. Each of the Board of Directors of
Sprint (including the disinterested directors thereof) and the Capital Stock
Committee of such Board of Directors has approved and recommended the terms of
this Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement and such approval of the Board of Directors of
Sprint constitutes approval of the Merger and the other transactions
contemplated by this Agreement by the Board of Directors of Sprint to the
extent applicable under the provisions of Section 17-1286 et seq. and Section
17-12,100 et seq. of the KGCC and Article Seventh of Sprint's articles of
incorporation and represents all the action necessary to ensure that Section
17-1286 et seq. and Section 17-12,100 et seq. of the KGCC and Article Seventh
of Sprint's articles of incorporation do not apply to MCI WorldCom in
connection with the Merger and the other transactions contemplated by this
Agreement. No other Kansas or Georgia state takeover statute is applicable to
Sprint in connection with this Agreement, the Merger or the other transactions
contemplated hereby. Other than those that have been made prior to the date
hereof, no approval or determination of the Board of Directors of Sprint or any
committee thereof is required with respect to any class or series of Sprint
Capital Stock or under Sprint's articles of incorporation, Bylaws or governance
policies to approve this Agreement or any of the transactions contemplated
hereby.
(i) Intellectual Property; Year 2000. (i) Sprint 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 Sprint 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 reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Sprint.
(ii) To the Knowledge of Sprint, neither Sprint 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 reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect on Sprint. To the
Knowledge of Sprint, neither Sprint 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 that Sprint 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 reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on Sprint. To the Knowledge of Sprint, no other
Person has interfered with, infringed upon, misappropriated or otherwise come
into conflict with any Intellectual Property Rights of Sprint or any of its
Subsidiaries, except for any such interference, infringement, misappropriation
or other conflict which is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Sprint.
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(iii) As of the date of this Agreement, Sprint and its Subsidiaries have
undertaken a concerted effort to ensure that all of the computer software,
computer firmware, computer hardware, and other similar or related items of
automated, computerized, and/or software system(s) that are to be used or
relied on by Sprint or any of its Subsidiaries in the conduct of their
respective businesses will not malfunction, will not cease to function, will
not generate incorrect data, and will not provide incorrect results when
processing, providing and/or receiving (i) date-related data into and between
the years 1999 and 2000 and (ii) date-related data in connection with any valid
date in the twentieth and twenty-first centuries. As of the date of this
Agreement, Sprint reasonably believes that such effort will be successful.
(j) Absence of Certain Changes or Events. Except for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby, since
June 30, 1999, Sprint and its Subsidiaries have conducted their business only
in the ordinary course, and there has not been (i) any Material Adverse Change
in Sprint, (ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
Sprint's capital stock, other than regular quarterly cash dividends of $0.125
per share of Sprint FON Stock and a corresponding cash dividend on the Class A
Common Stock and dividends payable on Sprint Preferred Stock in accordance with
their terms as of the date of this Agreement, (iii) any split, combination or
reclassification of any of Sprint'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 Sprint's capital stock, (iv) (A) any granting
by Sprint or any of its Subsidiaries to any current or former director,
executive officer or other key employee of Sprint or its Subsidiaries of any
increase in compensation, bonus or other benefits, except for normal increases
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 Sprint Filed SEC Reports,
(B) any granting by Sprint or any of its Subsidiaries to any such current or
former director, executive officer or key employee of any increase in severance
or termination pay or (C) any entry by Sprint or any of its Subsidiaries into,
or any amendment of, any employment, deferred compensation, consulting,
severance, termination or indemnification agreement with any such current or
former director, executive officer or key employee, other than in the ordinary
course of business consistent with past practice, (v) except insofar as may be
required by a change in U.S. GAAP, any change in accounting methods, principles
or practices by Sprint materially affecting its consolidated financial position
or consolidated results of operations or (vi) except insofar as MCI WorldCom
has given its consent, which consent shall not be unreasonably withheld or
delayed, any tax election (or settlement or compromise of any material income
tax liability) that is reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on Sprint.
(k) Vote Required. The affirmative vote of the holders of shares
representing a majority of the total voting power of Sprint Common Stock and
Sprint Preferred Stock entitled to vote at the Sprint Stockholders Meeting to
adopt this Agreement voting together as a single class (the "Required Sprint
Vote") is the only vote or approval of the holders of any class or series of
capital stock of Sprint necessary to adopt this Agreement and to approve the
transactions contemplated hereby.
(l) Sprint Rights Agreement. No amendment to the Sprint Rights Agreement is
required to be made by Sprint in connection with the approval, execution or
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
(m) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person on behalf of Sprint is or will be entitled to
any broker's or finder's fee or any other similar commission or fee in
connection with any of the transactions contemplated by this Agreement, except
Warburg Dillon Read LLC, whose fees and expenses will be paid by Sprint in
accordance with Sprint's agreement with such firm, based upon arrangements made
by or on behalf of Sprint and previously disclosed to MCI WorldCom.
(n) Opinion of Financial Advisor. Sprint has received the opinion of Warburg
Dillon Read LLC, dated the date of this Agreement, to the effect that, as of
the date hereof, (i) the FON Exchange Ratio was fair, from a financial point of
view, to the holders of each series of Sprint FON Stock, (ii) the consideration
to be received
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by holders of each series of Sprint Common Stock in the Merger was fair, from a
financial point of view, to the holders of such series and (iii) the Merger
Consideration applicable to the Sprint Common Stock was fair, from a financial
point of view, to the holders of Sprint Common Stock taken as a whole, a copy
of which opinion has been made available to MCI WorldCom.
(o) Absence of Changes in Sprint's Benefit Plans. Except as expressly
permitted by this Agreement, since the date of the most recent audited
financial statements included in the Sprint Filed SEC Reports, there has not
been any adoption or amendment in any material respect by Sprint or any of its
Subsidiaries of any of Sprint's Benefit Plans, or any material change in any
actuarial or other assumption used to calculate funding obligations with
respect to any Sprint pension plans, or any material change in the manner in
which contributions to any Sprint pension plans are made or the basis on which
such contributions are determined other than a change required under the terms
of such plans as in effect on the date hereof or as required by applicable law.
(p) ERISA Compliance; No Parachute Payments. (i) With respect to Sprint's
Benefit Plans, no liability has been incurred and to the Knowledge of Sprint
there exists no condition or circumstances in connection with which Sprint or
any of its Subsidiaries could be subject to any liability that is reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
Sprint, in each case under the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), the Code or any other applicable law.
(ii) Each of Sprint's Benefit Plans has been administered in accordance with
its terms, except for any failures so to administer any such Benefit Plan that
are not reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on Sprint. Sprint, its Subsidiaries and all Sprint's 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 are not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on Sprint.
(iii) None of Sprint or any of its Subsidiaries sponsors or contributes to
any of Sprint's Benefit Plans that is subject to Title IV of ERISA.
(iv) Sprint and its Subsidiaries are in compliance with all Federal, state,
local and foreign requirements regarding employment, except for any failures to
comply that are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on Sprint. As of the date of this Agreement,
there is no labor dispute, strike or work stoppage against Sprint or any of its
Subsidiaries pending or, to the Knowledge of Sprint, threatened which may
interfere with the respective business activities of Sprint or any of its
Subsidiaries, except where such dispute, strike or work stoppage is not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on Sprint. As of the date of this Agreement, to the Knowledge of Sprint,
none of Sprint, 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 Sprint or any of
its Subsidiaries, and there is no action, charge or complaint against Sprint or
any of its Subsidiaries by the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing, in each case except where
such practices, actions, charges or complaints are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Sprint.
(v) No employee of Sprint 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 of Sprint's Benefit Plans as a result of the
transactions contemplated by this Agreement. No amount payable, or economic
benefit provided, by Sprint 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. No Person is entitled to
receive any additional payment from Sprint or its Subsidiaries or any other
Person in the event that the excise tax of Section 4999 of the Code is imposed
on such Person.
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(q) Taxes. (i) (A) Each of Sprint and its Subsidiaries and each Sprint
Consolidated Group has timely filed or has caused to be timely filed all
material tax returns and reports required to be filed by it or requests for
extensions to file such returns or reports have been timely filed, granted and
have not expired, (B) all tax returns and reports filed by Sprint and each of
its Subsidiaries and each Sprint Consolidated Group are complete and accurate
in all respects and (C) Sprint and each of its Subsidiaries and each Sprint
Consolidated Group has paid (or Sprint or another member of such Sprint
Consolidated Group has paid on its behalf) all taxes shown as due on such
returns and reports, and the reserve for current taxes shown on the most recent
financial statements contained in the Sprint Filed SEC Reports (in addition to
any reserve for deferred taxes established to reflect timing differences
between book and tax income) is adequate to cover all taxes payable by Sprint
and its Subsidiaries and each Sprint Consolidated Group for all taxable periods
and portions thereof through the date of such financial statements, except for
any such failure to file, incompleteness or inaccuracy, failure to pay, or
inadequacy of such reserve, that is not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on Sprint.
(ii) No deficiencies for any taxes have been proposed, asserted or assessed
in writing against Sprint or any of its Subsidiaries or any Sprint Consolidated
Group that are not adequately reserved for, except for deficiencies that are
not reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on Sprint, and no requests for waivers of the time to assess any
such taxes have been granted or are pending (other than with respect to years
that are currently under examination by the Internal Revenue Service or other
applicable taxing authorities). The statute of limitations on assessment or
collection of any Federal taxes due from Sprint and its Subsidiaries has
expired for all taxable years of Sprint and each of its Subsidiaries through
1985. The Federal income tax returns of Sprint and each of its Subsidiaries
have been examined by and settled with the Internal Revenue Service for all
years through 1987.
(iii) Neither Sprint nor any of its Subsidiaries has taken or has agreed to
take any action or has any Knowledge 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 Sprint nor any of its Subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code (A) in the two years prior to
the date of this Agreement or (B) 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) Sprint does not believe that it is a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code,
although it has not determined or established whether it will be a United
States real property holding corporation in the future.
(vi) Sprint has "nexus" for state tax law purposes in Kansas and
Pennsylvania.
(vii) As used in this Agreement, "taxes" shall include all (A) Federal,
state, local or foreign income tax, property, sales, excise or other taxes or
similar governmental charges, including any interest, penalties or additions
with respect thereto, (B) liability for the payment of the amounts described in
clause (A) as a result of being a member of an affiliated, consolidated,
combined or unitary group, and (C) liability for the payment of any amounts as
a result of being a 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 (A) or (B).
(viii) As used in this Agreement, "Sprint Consolidated Group" means any
affiliated group within the meaning of Section 1504(a) of the Code, in which
Sprint (or any Subsidiary of Sprint) is or has ever been a member or any group
of corporations with which Sprint files, has filed or is or was required to
file an affiliated, consolidated, combined, unitary or aggregate tax return.
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3.2 Representations and Warranties of MCI WorldCom. Except as disclosed in
the MCI WorldCom SEC Reports filed and publicly available prior to the date of
this Agreement (the "MCI WorldCom Filed SEC Reports") or as set forth in the
MCI WorldCom Disclosure Schedule delivered by MCI WorldCom to Sprint prior to
the execution of this Agreement (the "MCI WorldCom Disclosure Schedule"), MCI
WorldCom represents and warrants to Sprint as follows:
(a) Organization, Standing and Power. Each of MCI WorldCom and its
Significant Subsidiaries is a corporation or other legal entity duly organized
or formed, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate,
partnership or similar power and authority to own, lease and operate its
properties and to carry on its business as now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the failure so
to qualify or to be in good standing is not reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect on MCI WorldCom. The copies
of the articles of incorporation and by-laws of MCI WorldCom which were
previously furnished to Sprint are true, complete and correct copies of such
documents as in effect on the date of this Agreement.
(b) Capital Structure. (i) As of September 30, 1999, the authorized capital
stock of MCI WorldCom consisted of (A) 5,000,000,000 shares of MCI WorldCom
Common Stock of which 1,880,219,054 shares were outstanding and (B) 50,000,000
shares of Preferred Stock, par value $0.01 per share, of which (1) 94,992
shares have been designated as Series A 8% Cumulative Convertible Preferred
Stock, of which no shares were outstanding, (2) 15,000,000 shares have been
designated Series B Convertible Preferred Stock ("MCI WorldCom Series B
Preferred Stock"), of which 11,190,244 shares were outstanding, (3) 3,750,000
shares have been designated Series C $2.25 Cumulative Convertible Exchangeable
Preferred Stock ("MCI WorldCom Series C Preferred Stock"), of which no shares
were outstanding, and (4) 5,000,000 shares have been designated Series 3 Junior
Participating Preferred Stock and reserved for issuance upon exercise of the
rights (the "MCI WorldCom Rights") distributed to holders of MCI WorldCom
Common Stock pursuant to the Rights Agreement dated as of August 25, 1996, as
amended, between MCI WorldCom and The Bank of New York, as rights agent (the
"MCI WorldCom Rights Agreement"). As of September 30, 1999, 4,510,211 shares of
MCI WorldCom Common Stock were held by MCI WorldCom in its treasury. Since
September 30, 1999 to the date of this Agreement, there have been no issuances
of shares of the capital stock of MCI WorldCom or any other securities of MCI
WorldCom other than issuances of shares (and accompanying MCI WorldCom Rights)
pursuant to options or rights outstanding as of September 30, 1999 under the
Benefit Plans of MCI WorldCom or pursuant to MCI WorldCom's acquisition of
SkyTel Communications, Inc. All issued and outstanding shares of the capital
stock of MCI WorldCom are duly authorized, validly issued, fully paid and
nonassessable, and no class of capital stock is entitled to preemptive rights.
There were outstanding as of September 30, 1999 no options, warrants or other
rights to acquire capital stock from MCI WorldCom other than pursuant to MCI
WorldCom's pending acquisitions as of such date. MCI WorldCom's Benefit Plans
and MCI WorldCom's convertible preferred stock. No options or warrants or other
rights to acquire capital stock from MCI WorldCom have been issued or granted
since September 30, 1999 to the date of this Agreement other than pursuant to
MCI WorldCom's acquisition of SkyTel Communications, Inc. or pursuant to MCI
WorldCom's Benefit Plans. The shares of MCI WorldCom Capital Stock to be issued
pursuant to this Agreement, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable, and no Person
will have any preemptive right, subscription right or other purchase right in
respect thereof other than pursuant to agreements with Sprint or any of its
Subsidiaries as in effect on the date hereof.
(ii) As of the date of this Agreement, no bonds, debentures, notes or other
indebtedness of MCI WorldCom having the right to vote on any matters on which
shareholders may vote ("MCI WorldCom Voting Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 3.2(b), as of the date
of this Agreement, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which MCI
WorldCom or any of its Subsidiaries is a party or by which any of them is bound
obligating
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MCI WorldCom or any of its Subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other
voting securities of MCI WorldCom or any of its Subsidiaries or obligating MCI
WorldCom or any of its Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking. As of the date of this Agreement, there are no outstanding
obligations of MCI WorldCom or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of MCI WorldCom or any of its
Subsidiaries.
(iv) Exhibit 21 to MCI WorldCom's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 (the "MCI WorldCom 1998 10-K"), sets forth each
Significant Subsidiary of MCI WorldCom as of the date hereof. As of the date
hereof, all the outstanding shares of capital stock of, or other equity
interests in, each Significant Subsidiary of MCI WorldCom have been validly
issued and are fully paid and nonassessable and are owned directly or
indirectly by MCI WorldCom, free and clear of all 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, MCI WorldCom
does not beneficially own directly or indirectly any capital stock, membership
interest, partnership interest, joint venture interest or other equity interest
in any Person which constitutes a Material Investment.
(c) Authority; No Conflicts. (i) MCI WorldCom has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby, subject in the case of the approval of this
Agreement and the MCI WorldCom Stock Issuance to obtaining the Required MCI
WorldCom Vote. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of MCI WorldCom, subject to the
approval of this Agreement and the MCI WorldCom Stock Issuance by the Required
MCI WorldCom Vote. This Agreement has been duly executed and delivered by MCI
WorldCom and constitutes a valid and binding agreement of MCI WorldCom,
enforceable against it in accordance with its terms.
(ii) The execution and delivery of this Agreement do not or will not, as the
case may be, and the consummation of the Merger and the other transactions
contemplated hereby will not, subject to the approval of this Agreement and the
MCI WorldCom Stock Issuance by the Required MCI WorldCom Vote, conflict with,
or result in, a Violation pursuant to: (A) any provision of the articles of
incorporation or by-laws of MCI WorldCom or the governing documents of any
Subsidiary of MCI WorldCom, or (B) except as is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on MCI
WorldCom and subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in
paragraph (iii) below, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to MCI WorldCom or any Subsidiary of
MCI WorldCom or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to MCI WorldCom or any Subsidiary of MCI WorldCom in connection with
the execution and delivery of this Agreement by MCI WorldCom or the
consummation of the Merger and the other transactions contemplated hereby,
except for (A) those required under or in relation to the rules and regulations
of Nasdaq, (B) the Required Consents and (C) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
make or obtain is not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on MCI WorldCom.
(d) Reports and Financial Statements. MCI WorldCom has filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC since January 1, 1998 (collectively, including all exhibits
thereto, the "MCI WorldCom SEC Reports"). No Significant Subsidiary of MCI
WorldCom is required to file any form, report or other document with the SEC.
None of the MCI WorldCom SEC Reports when filed contained any untrue statement
of a material fact or omitted to state a 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. Each of the financial
statements (including the related notes) included in the MCI WorldCom SEC
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Reports presents fairly, in all material respects, the consolidated financial
position and consolidated results of operations and cash flows of MCI WorldCom
and its Subsidiaries as of the respective dates or for the respective periods
set forth therein, all in conformity with U.S. GAAP consistently applied during
the periods involved except as otherwise noted therein, and subject, in the
case of the unaudited interim financial statements, to normal and recurring
year-end adjustments. All of such MCI WorldCom SEC Reports, as of their
respective dates (and as of the date of any amendment to the respective MCI
WorldCom SEC Report), complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act.
(e) Information Supplied. (i) None of the information supplied or to be
supplied by MCI WorldCom for inclusion or incorporation by reference in (A) 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 not misleading, and (B) the Joint Proxy Statement/Prospectus will, on
the date it is first mailed to Sprint stockholders or MCI WorldCom shareholders
or at the time of the Sprint Stockholders Meeting or the MCI WorldCom
Shareholders 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
were made, not misleading. The Form S-4 and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
requirements of the Securities Act and the Exchange Act.
(ii) Notwithstanding the foregoing provisions of this Section 3.2(e), no
representation or warranty is made by MCI WorldCom with respect to statements
made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by Sprint for inclusion or
incorporation by reference therein.
(f) Litigation. There is no suit, action, proceeding, claim or investigation
pending or, to the Knowledge of MCI WorldCom, threatened against or affecting
MCI WorldCom or any of its Subsidiaries that is reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect on MCI WorldCom nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against MCI WorldCom or any of its
Subsidiaries having, or that is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on MCI WorldCom.
(g) Compliance with Applicable Laws. MCI 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 MCI WorldCom and its Subsidiaries taken as a whole (the "MCI
WorldCom Permits"), except where the failure to have any such MCI WorldCom
Permits is not reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on MCI WorldCom. MCI WorldCom and its Subsidiaries are
in compliance with the terms of the MCI WorldCom Permits and all applicable
statutes, laws, ordinances, rules and regulations, except where the failure so
to comply is not reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on MCI WorldCom. Subject to obtaining the Required
Consents, the Merger, in and of itself, would not cause the revocation or
cancelation of any MCI WorldCom Permit that is reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect on MCI WorldCom.
(h) State Takeover Statutes; Approvals. The Board of Directors of MCI
WorldCom has approved and recommended the terms of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby
(including the amendments to MCI WorldCom's articles of incorporation
contemplated hereby) and such approval of the Board of Directors of MCI
WorldCom constitutes approval of the Merger and the other transactions
contemplated hereby (including the amendments to MCI WorldCom's articles of
incorporation contemplated hereby) by the Board of Directors of MCI WorldCom to
the extent applicable under Article Eleven of MCI WorldCom's articles of
incorporation and represents all the action necessary to ensure that Article
Eleven of MCI WorldCom's articles of incorporation does not apply to Sprint in
connection with the Merger and the other transactions contemplated hereby. No
Georgia or Kansas state takeover statute
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(including Section 14-2-1110 et seq. and Section 14-2-1131 et seq. of the GBCC)
is applicable to MCI WorldCom in connection with this Agreement, the Merger or
the other transactions contemplated by this Agreement. Other than those that
have been made prior to the date hereof, no approval or determination of the
Board of Directors of MCI WorldCom or any committee thereof is required with
respect to any class or series of MCI WorldCom Capital Stock or under MCI
WorldCom's articles of incorporation or by-laws to approve this Agreement or
any of the transactions contemplated hereby.
(i) Intellectual Property; Year 2000. (i) MCI WorldCom and its Subsidiaries
own, or are validly licensed or otherwise have the right to use, all
Intellectual Property Rights used in the business of MCI WorldCom 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 reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on MCI
WorldCom.
(ii) To the Knowledge of MCI WorldCom, neither MCI WorldCom 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 reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
MCI WorldCom. To the Knowledge of MCI WorldCom, neither MCI WorldCom 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 that MCI WorldCom 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 reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
MCI WorldCom. To the Knowledge of MCI WorldCom, no other Person has interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights of MCI WorldCom or any of its Subsidiaries, except
for any such interference, infringement, misappropriation or other conflict
which is not reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on MCI WorldCom.
(iii) As of the date of this Agreement, MCI WorldCom and its Subsidiaries
have undertaken a concerted effort to ensure that all of the computer software,
computer firmware, computer hardware, and other similar or related items of
automated, computerized, and/or software system(s) that are to be used or
relied on by MCI WorldCom or any of its Subsidiaries in the conduct of their
respective businesses will not malfunction, will not cease to function, will
not generate incorrect data, and will not provide incorrect results when
processing, providing and/or receiving (i) date/related data into and between
the years 1999 and 2000 and (ii) date-related data in connection with any valid
date in the twentieth and twenty-first centuries. As of the date of this
Agreement, MCI WorldCom reasonably believes that such effort will be
successful.
(j) Absence of Certain Changes or Events. Except for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby, since
June 30, 1999, MCI WorldCom and its Subsidiaries have conducted their business
only in the ordinary course, and there has not been (i) any Material Adverse
Change in MCI WorldCom, (ii) until the date of this Agreement, any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of MCI WorldCom's capital stock,
other than dividends payable on MCI WorldCom's preferred stock in accordance
with their terms as of the date of this Agreement, (iii) until the date of this
Agreement, any split, combination or reclassification of any of MCI WorldCom'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 MCI
WorldCom's capital stock, (iv) until the date of this Agreement, except insofar
as may be required by a change in U.S. GAAP, any change in accounting methods,
principles or practices by MCI WorldCom materially affecting its consolidated
financial position or consolidated results of operations or (v) until the date
of this Agreement, except insofar as Sprint has given its consent, which
consent shall not be unreasonably withheld or delayed, any tax election (or
settlement or compromise of any material income tax liability) that is
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on MCI WorldCom.
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(k) Vote Required. The affirmative vote (the "Required MCI WorldCom Vote")
of (i) holders of shares of MCI WorldCom Common Stock and MCI WorldCom Series B
Preferred Stock representing a majority of all the votes entitled to be cast at
a meeting of the holders of outstanding shares of capital stock of MCI
WorldCom, voting as a single voting group, is the only vote of the holders of
any class or series of MCI WorldCom capital stock necessary to approve the
Merger (which would include the amendment to MCI WorldCom's articles of
incorporation contemplated hereby) and (ii) a majority of the total votes cast
by the holders of shares of MCI WorldCom Common Stock is the only vote of the
holders of any class or series of capital stock of MCI WorldCom necessary to
approve, in accordance with the applicable rules of Nasdaq, the issuance (the
"MCI WorldCom Stock Issuance") of MCI WorldCom Capital Stock pursuant to the
Merger.
(l) MCI WorldCom Rights Agreement. No amendment to the MCI WorldCom Rights
Agreement is required to be made by MCI WorldCom in connection with the
approval, execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
(m) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person on behalf of MCI WorldCom is or will be
entitled to any broker's or finder's fee or any other similar commission or fee
in connection with any of the transactions contemplated by this Agreement,
except Salomon Smith Barney Inc., whose fees and expenses will be paid by MCI
WorldCom in accordance with MCI WorldCom's agreement with such firm, based upon
arrangements made by or on behalf of MCI WorldCom and previously disclosed to
Sprint.
(n) Opinion of Financial Advisor. MCI WorldCom has received the opinion of
Salomon Smith Barney Inc., dated the date of this Agreement, to the effect
that, as of the date hereof, the FON Exchange Ratio and the PCS Stock Merger
Consideration were fair, from a financial point of view, to MCI WorldCom, a
copy of which opinion has been made available to Sprint.
(o) ERISA Compliance. (i) With respect to MCI WorldCom's Benefit Plans, no
liability has been incurred and to the Knowledge of MCI WorldCom there exists
no condition or circumstances in connection with which MCI WorldCom or any of
its Subsidiaries could be subject to any liability that is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on MCI
WorldCom, in each case under ERISA, the Code or any other applicable law.
(ii) Each of MCI WorldCom's Benefit Plans has been administered in
accordance with its terms, except for any failures so to administer any such
Benefit Plan that are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on MCI WorldCom. MCI WorldCom, its
Subsidiaries and all MCI WorldCom's 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 are not reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect on MCI WorldCom.
(iii) None of MCI WorldCom or any of its Subsidiaries sponsors or
contributes to any of MCI WorldCom's Benefit Plans that is subject to Title IV
of ERISA.
(iv) MCI WorldCom and its Subsidiaries are in compliance with all Federal,
state, local and foreign requirements regarding employment, except for any
failures to comply that are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on MCI WorldCom. As of the date of
this Agreement, there is no labor dispute, strike or work stoppage against MCI
WorldCom or any of its Subsidiaries pending or, to the Knowledge of MCI
WorldCom, threatened which may interfere with the respective business
activities of MCI WorldCom or any of its Subsidiaries, except where such
dispute, strike or work stoppage is not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on MCI WorldCom. As of the
date of this Agreement, to the Knowledge of MCI WorldCom, none of MCI WorldCom,
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 MCI WorldCom or any of its Subsidiaries, and
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there is no action, charge or complaint against MCI WorldCom or any of its
Subsidiaries by the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing, in each case except where
such practices, actions, charges or complaints are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on MCI
WorldCom.
(v) No employee of MCI WorldCom 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 of MCI WorldCom's Benefit Plans as a result of the
transactions contemplated by this Agreement, except to the extent that such
benefits, acceleration or vesting are not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on MCI WorldCom. No amount
payable, or economic benefit provided, by MCI WorldCom 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 to the extent that, if such payment or benefit was an "excess
parachute payment", such payment or benefit is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on MCI
WorldCom. No Person is entitled to receive any additional payment from MCI
WorldCom or its Subsidiaries or any other Person in the event that the excise
tax of Section 4999 of the Code is imposed on such Person, except to the extent
that any such additional payment is not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on MCI WorldCom.
(p) Taxes. (i) (A) Each of MCI WorldCom and its Subsidiaries and each MCI
WorldCom Consolidated Group has timely filed or has caused to be timely filed
all material tax returns and reports required to be filed by it or requests for
extensions to file such returns or reports have been timely filed, granted and
have not expired, (B) all tax returns and reports filed by MCI WorldCom and
each of its Subsidiaries and each MCI WorldCom Consolidated Group are complete
and accurate in all respects and (C) MCI WorldCom and each of its Subsidiaries
and each MCI WorldCom Consolidated Group has paid (or MCI WorldCom or another
member of such MCI WorldCom Consolidated Group has paid on its behalf) all
taxes shown as due on such returns and reports, and the reserve for current
taxes shown on the most recent financial statements contained in the MCI
WorldCom Filed SEC Reports (in addition to any reserve for deferred taxes
established to reflect timing differences between book and tax income) is
adequate to cover all taxes payable by MCI WorldCom and its Subsidiaries and
each MCI WorldCom Consolidated Group for all taxable periods and portions
thereof through the date of such financial statements, except for any such
failure to file, incompleteness or inaccuracy, failure to pay, or inadequacy of
such reserve, that is not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on MCI WorldCom.
(ii) No deficiencies for any taxes have been proposed, asserted or assessed
in writing against MCI WorldCom or any of its Subsidiaries or any MCI WorldCom
Consolidated Group that are not adequately reserved for, except for
deficiencies that are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on MCI WorldCom and no requests for waivers
of time to assess any such taxes have been granted or are pending (other than
with respect to years that are currently under examination by the Internal
Revenue Service or other applicable taxing authorities). The statute of
limitations on assessment or collection of any Federal taxes due from MCI
WorldCom and its Subsidiaries has expired for all taxable years of MCI WorldCom
and each of its Subsidiaries through 1987. The Federal income tax returns of
MCI WorldCom and each of its Subsidiaries have been examined by and settled
with the Internal Revenue Services for all years through 1987.
(iii) Neither MCI WorldCom nor any of its Subsidiaries has taken or has
agreed to take any action or has any Knowledge 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 MCI WorldCom nor any of its Subsidiaries has constituted either
a "distributing corporation" or a "controlled corporation" (within the meaning
of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code (A) in the two years prior to
the date of this Agreement or (B) 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.
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(v) MCI WorldCom does not believe that it is a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code,
although it has not determined or established whether it will be a United
States real property holding corporation in the future.
(vi) As used in this Agreement, "MCI WorldCom Consolidated Group" means any
affiliated group within the meaning of Section 1504(a) of the Code, in which
MCI WorldCom (or any Subsidiary of MCI WorldCom) is or has ever been a member
or any group of corporations with which MCI WorldCom files, has filed or is or
was required to file an affiliated, consolidated, combined, unitary or
aggregate tax return.
ARTICLE IV
Covenants Relating to Conduct of Business
4.1 Covenants of Sprint. During the period from the date of this Agreement
and continuing until the Effective Time, Sprint agrees as to itself and its
Subsidiaries that (except as expressly contemplated, permitted or required by
this Agreement or as otherwise indicated on the Sprint Disclosure Schedule or
to the extent that MCI WorldCom shall otherwise consent in writing, which
consent shall not be unreasonably withheld or delayed):
(a) Ordinary Course. Except to the extent not reasonably practicable in
light of the announcement or existence of this Agreement and the transactions
contemplated hereby, Sprint shall, and shall cause its Subsidiaries taken as a
whole to, carry on its business in the usual, regular and ordinary course in
all material respects, in substantially the same manner as heretofore
conducted, and shall use all reasonable efforts to maintain its rights and
franchises and preserve its relationships with customers, suppliers and others
having business dealings with it with the objective to minimize the impairment
of its ongoing business; provided, however, that no action by Sprint or its
Subsidiaries with respect to matters specifically addressed by any other
provisions of this Section 4.1 or Section 4.1 of the Sprint Disclosure Schedule
shall be deemed a breach of this Section 4.1(a) unless such action would
constitute a breach of one or more of such other provisions.
(b) Dividends; Changes in Share Capital. Sprint shall not, and shall not
permit any of its Subsidiaries to, and shall not propose to, (i) declare or pay
any dividends on or make other distributions in respect of any of its capital
stock, except (A) Sprint may continue the declaration and payment of regular
quarterly cash dividends not in excess of $0.125 per share of Sprint FON Stock
(and any corresponding cash dividends on shares held by the Class A Holders)
and regular dividends required by the terms of the Sprint Preferred Stock as in
effect on the date hereof, in each case with usual record and payment dates for
such dividends in accordance with Sprint's past practice and (B) dividends by
wholly owned Subsidiaries of Sprint to its parent, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, except for any such transaction by a wholly
owned Subsidiary of Sprint which remains a wholly owned Subsidiary after
consummation of such transaction, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock except for the purchase from
time to time by Sprint of Sprint Common Stock (and the associated Sprint
Rights) in the ordinary course of business consistent with past practice in
connection with the Sprint Benefit Plans and the terms of the Sprint Conversion
Shares as in effect on the date hereof and except for the redemption of the
Sprint First Series Preferred Stock and Sprint Second Series Preferred Stock
pursuant to Section 5.14.
(c) Issuance of Securities. Sprint shall not, and shall not permit any of
its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class,
any Sprint Voting Debt or any securities convertible into or exercisable for,
or any rights, warrants or options to acquire, any such shares or Sprint Voting
Debt, or enter into any agreement with respect to any of the foregoing, other
than (i) the issuance of Sprint Common Stock (and the associated Sprint Rights)
upon the exercise of stock options or in connection with rights under other
stock-based benefits plans, to the extent such
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options or rights are outstanding on the date hereof in accordance with their
present terms or upon the exercise of the stock options issued pursuant to
clause (vi) below, (ii) the issuance of Sprint Capital Stock upon the
conversion of Sprint Conversion Securities pursuant to the terms thereof as in
effect on the date hereof, (iii) the issuance of Sprint PCS Stock pursuant to
the exercise of Warrants pursuant to the terms of the Warrant Agreements as in
effect on the date hereof, (iv) issuances by a wholly owned Subsidiary of
Sprint of capital stock to such Subsidiary's parent, (v) issuances in
accordance with the Sprint Rights Agreement, (vi) issuances of stock options in
connection with regular option grants by Sprint or issuances of stock options
for new hires or issuances of restricted stock, in each case in the ordinary
course of business and consistent with past practice pursuant to the Sprint
Benefit Plans, (vii) the issuance of shares of Sprint Capital Stock pursuant to
purchase rights or preemptive rights held by stockholders of Sprint under the
terms of the instruments or agreements as in effect on the date hereof pursuant
to which such shares were issued, (viii) the issuance of Sprint Capital Stock
pursuant to acquisitions permitted under Section 4.1(e) hereof or under Section
4.1 of the Sprint Disclosure Schedule or (ix) as provided in Section 5.7 of the
Sprint Disclosure Schedule.
(d) Governing Documents. Except to the extent required to comply with their
respective obligations hereunder, required by law or required by the rules and
regulations of the NYSE, Sprint shall not amend its articles of incorporation
or by-laws.
(e) No Acquisitions. Sprint shall not, and shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets; provided, however, that the
foregoing shall not prohibit (i) acquisitions of assets used in the operations
of the business of Sprint and its Subsidiaries in the ordinary course of
business consistent with past practice, (ii) internal reorganizations or
consolidations involving existing Subsidiaries of Sprint or (iii) the creation
of new Subsidiaries of Sprint organized to conduct or continue activities
otherwise permitted by this Agreement, so long as any action otherwise
permitted by this proviso could not reasonably be expected to result in (A) any
of the conditions to the Merger set forth in Article VI not being satisfied or
(B) a material delay in the satisfaction of any such conditions.
(f) No Dispositions. Other than (i) in the ordinary course of business
consistent with past practice and, in any event, which are not material,
individually or in the aggregate, to Sprint and its Subsidiaries taken as a
whole or (ii) internal reorganizations or consolidations involving existing
Subsidiaries of Sprint, Sprint shall not, and shall not permit any of its
Subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree to
sell, lease, encumber or otherwise dispose of (including by way of a spin-off
or similar transaction), any of its assets.
(g) Indebtedness; Investments. Sprint shall not, and shall not permit any of
its Subsidiaries to, (i) 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 Sprint 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 (other than any wholly owned Subsidiary) or enter into any
arrangement having the economic effect of any of the foregoing, except for (A)
short-term borrowings, senior bank or similar bank financing or, subject to
prior consultation with MCI WorldCom, any other indebtedness incurred by Sprint
or any of its Subsidiaries with a maturity date not to exceed five years from
the date of its original issuance (provided that the consummation of this
Agreement or any of the transactions contemplated hereby shall not give rise
to, cause or result in, a default or event of default under the agreement or
instrument governing any such indebtedness or, an obligation to pay any amount
thereunder solely as a result of the consummation of this Agreement or any of
the transactions contemplated hereby) incurred in the ordinary course of
business consistent with past practice (or to refund existing or maturing
indebtedness) and (B) intercompany indebtedness between Sprint and any of its
wholly owned Subsidiaries or between such wholly owned Subsidiaries, (ii) make
any loans or advances to any other Person, other than (A) employee loans or
advances made by Sprint in the ordinary course of business consistent with past
practice and (B) loans or
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advances made between Sprint and any of its wholly owned Subsidiaries or
between such wholly owned Subsidiaries, or (iii) investments in any Person
other than (A) investments in wholly owned Subsidiaries and (B) investments in
the ordinary course of business consistent with past practice and, in any
event, which are not material, individually or in the aggregate, to Sprint.
(h) New Line of Business; Capital Expenditures. Sprint shall not, and shall
not permit any of its Subsidiaries to, (i) enter into any new material line of
business outside its Core Businesses (as defined in Sprint's articles of
incorporation) or (ii) incur or commit to any capital expenditures other than
capital expenditures incurred or committed to in the ordinary course of
business and which are not in excess of the amounts set forth in Section 4.1(h)
of the Sprint Disclosure Schedule.
(i) Tax-Free Qualification. Sprint shall not, and shall not permit any of
its Subsidiaries to, take any action that would prevent or impede the Merger
from qualifying as a reorganization under Section 368 of the Code.
(j) Other Actions. Sprint shall not, and shall not permit any of its
Subsidiaries to, take any action that would, or that could reasonably be
expected to, result in (i) any of the conditions to the Merger set forth in
Article VI not being satisfied or (ii) a material delay in the satisfaction of
any such conditions.
(k) Accounting Methods. Except as disclosed in the Sprint Filed SEC Reports,
or as required by a Governmental Entity, Sprint shall not make any material
change in its methods of accounting in effect at December 31, 1998, except as
required by changes in U.S. GAAP as concurred in by Sprint's independent
auditors. Sprint shall not change its fiscal year.
(l) Representations and Warranties. Sprint shall not take any action that
would cause the representations and warranties set forth in Section 3.1(j) to
no longer be true and correct.
(m) Authorization of the Foregoing. Sprint shall not, and shall not permit
any of its Subsidiaries to, authorize, commit or agree to take any of the
foregoing actions.
4.2 Covenants of MCI WorldCom. During the period from the date of this
Agreement and continuing until the Effective Time, MCI WorldCom agrees as to
itself and its Subsidiaries that (except as expressly contemplated, permitted
or required by this Agreement or as otherwise indicated on the MCI WorldCom
Disclosure Schedule or to the extent that Sprint shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed):
(a) Ordinary Course. Except to the extent not reasonably practicable in
light of the announcement or existence of this Agreement and the transactions
contemplated hereby, MCI WorldCom shall, and shall cause its Subsidiaries taken
as a whole to, carry on its business in the usual, regular and ordinary course
in all material respects, in substantially the same manner as heretofore
conducted, and shall use all reasonable efforts to maintain its rights and
franchises and preserve its relationships with customers, suppliers and others
having business dealings with it with the objective to minimize the impairment
of its ongoing business; provided, however, that no action by MCI WorldCom or
its Subsidiaries with respect to matters specifically addressed by any other
provisions of this Section 4.2 shall be deemed a breach of this Section 4.2(a)
unless such action would constitute a breach of one or more of such other
provisions.
(b) Dividends; Changes in Share Capital. MCI WorldCom shall not, and shall
not permit any of its Subsidiaries to, and shall not propose to, repurchase,
redeem or otherwise acquire any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock except for
the purchase from time to time by MCI WorldCom of MCI WorldCom Capital Stock
(and the associated MCI WorldCom Rights) in the ordinary course of business
consistent with past practice in connection with share options, share incentive
schemes, profit sharing schemes or other benefit plans of MCI WorldCom or
repurchases of shares of MCI WorldCom Common Stock in open market or privately
negotiated transactions. In the event MCI WorldCom
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changes (or establishes a record date for changing) the number of shares of MCI
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 MCI WorldCom Common Stock and the record date
therefor shall be prior to the Effective Time, the applicable Merger
Consideration shall be appropriately adjusted to reflect such stock split,
stock dividend, recapitalization, subdivision, reclassification, combination,
exchange of shares or similar transaction. In addition, in the event MCI
WorldCom pays (or establishes a record date for payment of) any dividend on, or
makes any other distribution in respect of, MCI WorldCom Common Stock, the
applicable Merger Consideration shall be appropriately adjusted to reflect such
dividend or distribution. Without limiting the foregoing, the issuance of MCI
WorldCom Rights pursuant to the MCI WorldCom Rights Agreement in respect of
each share of MCI WorldCom PCS Stock shall not cause, or result in, any
adjustment pursuant to this Section 4.2(b).
(c) No Acquisitions. MCI WorldCom shall not, and shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or all or a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof, in any event (i) with a value in excess of an amount equal to
20% of the market capitalization of MCI WorldCom, for any one acquisition and
30% thereof for all acquisitions before the Closing, in each case as determined
on the date of its entering into an agreement therefor or (ii) that could
reasonably be expected to result in (A) any of the conditions to the Merger set
forth in Article VI not being satisfied or (B) a material delay in the
satisfaction of any such conditions. MCI WorldCom shall not, and shall not
permit any of its Subsidiaries to, enter into any new material line of business
outside its existing core businesses.
(d) No Dispositions. MCI WorldCom shall not, and shall not permit any of its
Subsidiaries to, sell, lease, encumber or otherwise dispose of all or
substantially all of any material line of business for MCI WorldCom and its
Subsidiaries taken as a whole.
(e) Tax-Free Qualification. MCI WorldCom shall not and shall not permit any
of its Subsidiaries to, take any action that would prevent or impede the Merger
from qualifying as a reorganization under Section 368 of the Code.
(f) Other Actions. MCI WorldCom shall not, and shall not permit any of its
Subsidiaries to, take any action that would, or could reasonably be expected
to, result in (i) any of the conditions to the Merger set forth in Article VI
not being satisfied or (ii) a material delay in the satisfaction of such
conditions.
(g) Representations and Warranties. MCI WorldCom shall not take any action
that would cause the representations and warranties set forth in Section
3.2(j)(i) to no longer be true and correct.
(h) Authorization of the Foregoing. MCI WorldCom shall not, and shall not
permit any of its Subsidiaries to, authorize, commit or agree to take, any of
the foregoing actions.
4.3 Control of Other Party's Business. Nothing contained in this Agreement
shall give Sprint, directly or indirectly, the right to control or direct MCI
WorldCom's operations prior to the Effective Time. Nothing contained in this
Agreement shall give MCI WorldCom, directly or indirectly, the right to control
or direct Sprint's operations prior to the Effective Time. Prior to the
Effective Time, each of Sprint and MCI WorldCom shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its respective operations.
4.4 FT/DT Arrangements. Notwithstanding anything in this Agreement to the
contrary:
(a) MCI WorldCom expressly consents and agrees to (i) the execution and
delivery by Sprint, Sprint Global Venture, Inc. ("SGVI") and any other
Subsidiary of Sprint of (A) the Master Transfer Agreement dated as of January
21, 2000 (the "MTA") between and among FT, DT, NAB Nordamerika Beteiligungs
Holding GmbH,
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Atlas Telecommunications S.A., Sprint, SGVI and the JV Entities which are
parties thereto and (B) the agreements contemplated by, or to be executed and
delivered pursuant to, the MTA (together with the MTA, the "MTA Transaction
Documents"), and (ii) the performance by Sprint, SGVI and any other Subsidiary
of Sprint of their obligations thereunder and the consummation by Sprint, SGVI
and any other Subsidiary of Sprint of the transactions contemplated thereby.
(b) MCI WorldCom agrees that neither the execution and delivery of the MTA
Transaction Documents nor the performance of the obligations thereunder or the
consummation of the transactions contemplated thereby will constitute a breach
of this Agreement or be included in determining whether a Material Adverse
Effect on Sprint or a Material Adverse Change in Sprint has occurred for any
purpose of this Agreement.
(c) Sprint shall not, and shall not permit any of its Subsidiaries to,
amend, modify or waive any of the provisions of the MTA Transaction Documents
in any material respect without the consent of MCI WorldCom (which consent
shall not be unreasonably withheld or delayed). Sprint shall consult
immediately with MCI WorldCom regarding any communication or advisory from FT
or DT under Section 5.06(b) of the MTA.
ARTICLE V
Additional Agreements
5.1 Preparation of the Form S-4 and the Joint Proxy Statement/Prospectus;
Stockholders Meetings. (a) As promptly as practicable following the date
hereof, MCI WorldCom and Sprint shall jointly prepare and file with the SEC
preliminary proxy materials and any amendments or supplements thereto which
shall constitute the joint proxy statement/prospectus (such proxy
statement/prospectus, and any amendments or supplements thereto, the "Joint
Proxy Statement/Prospectus") and MCI WorldCom shall prepare and file with the
SEC the Registration Statement on Form S-4 with respect to the issuance of MCI
WorldCom Capital Stock in the Merger (the "Form S-4") in which the Joint Proxy
Statement/Prospectus will be included as a prospectus. The Form S-4 and the
Joint Proxy Statement/Prospectus shall comply as to form in all material
respects with the applicable provisions of the Securities Act and the Exchange
Act. Each of MCI WorldCom and Sprint shall use all reasonable efforts to have
the Form S-4 declared effective under the Securities Act as promptly as
practicable after filing with the SEC and to keep the Form S-4 effective as
long as is necessary to consummate the Merger. The parties shall promptly
provide copies to and consult with each other and prepare written responses
with respect to any written comments received from the SEC with respect to the
Form S-4 and the Joint Proxy Statement/Prospectus and promptly advise the other
party of any oral comments received from the SEC. MCI WorldCom agrees that none
of the information supplied or to be supplied by MCI WorldCom for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing thereof and at the time
of the Sprint Stockholders Meeting or the MCI WorldCom Shareholders Meeting,
will contain an untrue statement of a material fact or omit to state a 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.
Sprint agrees that none of the information supplied or to be supplied by Sprint
for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the Sprint Stockholders Meeting or the MCI
WorldCom Shareholders Meeting, will contain an untrue statement of a material
fact or omit to state a 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. For purposes of the foregoing, it is
understood and agreed that information concerning or related to MCI WorldCom
and the MCI WorldCom Shareholders Meeting will be deemed to have been supplied
by MCI WorldCom and information concerning or related to Sprint and the Sprint
Stockholders Meeting shall be deemed to have been supplied by Sprint. No
amendment or supplement to the information supplied by Sprint for inclusion in
the Joint Proxy Statement/Prospectus shall be made without the approval of
Sprint, which approval shall not be unreasonably withheld or delayed.
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(b) Sprint shall, as promptly as practicable following the execution of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Sprint Stockholders Meeting") for the purpose of obtaining
the Required Sprint Vote with respect to the transactions contemplated by this
Agreement, shall use its reasonable best efforts, subject to Section 5.4, to
solicit the adoption of this Agreement by the Required Sprint Vote and, subject
to Section 5.4, the Board of Directors of Sprint shall recommend adoption of
this Agreement by the stockholders of Sprint. Without limiting the generality
of the foregoing but subject to its rights pursuant to Sections 5.4 and 7.1(e),
Sprint agrees that its obligations pursuant to the first sentence of this
Section 5.1(b) shall not be affected by the commencement, public proposal,
public disclosure or communication to Sprint of any Sprint Acquisition
Proposal.
(c) MCI WorldCom shall, as promptly as practicable following the execution
of this Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "MCI WorldCom Shareholders Meeting") for the purpose of
obtaining the Required MCI WorldCom Vote with respect to the transactions
contemplated by this Agreement, shall use its reasonable best efforts, subject
to Section 5.5, to solicit the approval of this Agreement by the Required MCI
WorldCom Vote and, subject to Section 5.5, the Board of Directors of MCI
WorldCom shall recommend the approval of this Agreement by the shareholders of
MCI WorldCom. Without limiting the generality of the foregoing but subject to
its rights pursuant to Sections 5.5 and 7.1(f), MCI WorldCom agrees that its
obligations pursuant to the first sentence of this Section 5.1(c) shall not be
affected by the commencement, public proposal, public disclosure or
communication to MCI WorldCom of any MCI WorldCom Acquisition Proposal.
(d) The Sprint Stockholders Meeting and the MCI WorldCom Shareholders
Meeting shall take place on the same date, to the extent practicable; provided
that, notwithstanding anything in this Agreement, neither such meeting shall
take place earlier than the 121st day following the date of this Agreement.
5.2 Access to Information. Upon reasonable notice, each of MCI WorldCom and
Sprint shall, and shall cause its 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 its
properties, books, contracts, commitments and records and, during such period,
each of MCI WorldCom and Sprint shall, and shall cause its Subsidiaries to,
furnish promptly to the other party consistent with its legal obligations, all
other information concerning its business, properties and personnel as such
other party may reasonably request; provided, however, that each of MCI
WorldCom and Sprint may restrict the foregoing access to the extent that (i) a
Governmental Entity requires either party or any of its Subsidiaries to
restrict access to any properties or information reasonably related to any such
contract on the basis of applicable laws and regulations with respect to
national security matters or (ii) in the reasonable judgment of such party, any
law, treaty, rule or regulation of any Governmental Entity applicable to such
party requires it or its Subsidiaries to restrict access to any properties or
information. The parties will hold any such information in confidence to the
extent required by, and in accordance with, the provisions of the letter dated
September 22, 1999, between Sprint and MCI WorldCom (the "Confidentiality
Agreement"). Any investigation by MCI WorldCom or Sprint shall not affect the
representations and warranties of Sprint or MCI WorldCom, as the case may be.
5.3 Reasonable Best Efforts. (a) Subject to the terms and conditions of this
Agreement, each party hereto will use its reasonable best efforts to (i) take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the Merger and the other transactions contemplated by this Agreement
as soon as practicable after the date hereof and (ii) obtain and maintain all
approvals, consents, waivers, registrations, permits, authorizations,
clearances and other confirmations required to be obtained from any third party
and/or any Governmental Entity that are reasonably necessary to consummate the
Merger and the transactions contemplated hereby (each a "Required Approval").
In furtherance and not in limitation of the foregoing, each party hereto agrees
to make, as promptly as practicable, to the extent it has not already done so,
(i) an appropriate filing of a Notification and Report Form pursuant to the HSR
Act with respect to the transactions contemplated hereby (which filing shall be
made in any event within five Business Days of the date hereof), (ii)
appropriate filings with the FCC and PUCs with
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respect to the transactions contemplated hereby, (iii) appropriate filings with
the European Commission in accordance with applicable competition, merger
control, antitrust or similar laws within the time periods specified
thereunder, and (iv) all necessary filings with other Governmental Entities
relating to the Merger, and, in each case, to supply as promptly as practicable
any additional information and documentary material that may be requested
pursuant to such laws and to use reasonable best efforts to cause the
expiration or termination of the applicable waiting periods under the HSR Act
and the receipt of Required Approvals under such other laws as soon as
practicable. Notwithstanding the foregoing, nothing in this Section 5.3 shall
require, or be deemed to require, (i) MCI WorldCom or Sprint to agree to or
effect any divestiture or take any other action if doing so would, individually
or in the aggregate, reasonably be expected to materially impair the parties'
ability to achieve the overall benefits expected, as of the date hereof, to be
realized from the consummation of the Merger or (ii) MCI WorldCom or Sprint to
agree to or effect any divestiture or take any other action that is not
conditional on the consummation of the Merger.
(b) Each of MCI WorldCom and Sprint shall, in connection with the efforts
referenced in Section 5.3(a) to obtain all Required Approvals, use its
reasonable best efforts to (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party; (ii) promptly inform the other party of any communication received by
such party from, or given by such party to, the FCC, PUCs, the Antitrust
Division of the Department of Justice (the "DOJ") or any other Governmental
Entity and of any material communication received or given in connection with
any proceeding by a private party, in each case regarding any of the
transactions contemplated hereby, and (iii) permit the other party to review
any communications given by it to, and consult with each other in advance to
the extent practicable of any meeting or conference with, the FCC, PUCs, the
DOJ or any such other Governmental Entity or, in connection with any proceeding
by a private party, with any other Person, and to the extent permitted by the
FCC, PUCs, the DOJ or such other applicable Governmental Entity or other
Person, give the other party the opportunity to attend and participate in such
meetings and conferences.
(c) In furtherance and not in limitation of the covenants of the parties
contained in Sections 5.3(a) and 5.3(b), if any administrative or judicial
action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law, or if any
statute, rule, regulation, executive order, decree, injunction or
administrative order is enacted, entered, promulgated or enforced by a
Governmental Entity which would make the Merger or the transactions
contemplated hereby illegal or would otherwise prohibit or materially impair or
delay the consummation of the Merger or the transactions contemplated hereby,
each of MCI WorldCom and Sprint shall cooperate in all respects with each other
and use its respective reasonable best efforts to contest and resist any such
action or proceeding and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the Merger or the transactions contemplated by this Agreement
and to have such statute, rule, regulation, executive order, decree, injunction
or administrative order repealed, rescinded or made inapplicable.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 5.3 shall limit a party's right to terminate this Agreement
pursuant to Section 7.1(b) or 7.1(c) so long as such party has up to then
complied in all respects with its obligations under this Section 5.3. For
purposes of this Agreement, "Regulatory Law" means the Sherman Act, as amended,
the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, the Federal Communications Act, as amended, Regulation 4064/89 and all
other Federal, state and foreign, if any, statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines and other laws that are designed
or intended to regulate mergers, acquisitions or other business combinations.
(d) Sprint and its Board of Directors shall, if any state takeover statute
or similar statute becomes applicable to this Agreement, the Merger or any
other transactions contemplated hereby or thereby, take all action reasonably
necessary to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated hereby or thereby and
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otherwise to minimize the effect of such statute or regulation on this
Agreement, the Merger and the other transactions contemplated hereby.
(e) MCI WorldCom and its Board of Directors shall, if any state takeover
statute or similar statute becomes applicable to this Agreement, the Merger or
any other transactions contemplated hereby, to the extent legally permissible
take all action reasonably necessary to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise to minimize the
effect of such statute or regulation on this Agreement, the Merger and the
other transactions contemplated hereby.
5.4 No Solicitation by Sprint. (a) Sprint 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
knowingly encourage (including by way of furnishing information), or knowingly
take any other action to facilitate, the making of any proposal that
constitutes a Sprint Competing Proposal or (ii) participate in any discussions
or negotiations regarding any Sprint Competing Proposal; provided, however,
that if, at any time during the period commencing on the 61st day after the
date hereof and ending on the date the Required Sprint Vote is obtained (the
"Sprint Applicable Period"), the Board of Directors of Sprint, in the exercise
of its fiduciary duties, determines in good faith, after consultation with
outside counsel, that to do otherwise would not be in the best interests of
Sprint's stockholders, Sprint and its representatives may, in response to a
Sprint Superior Proposal which did not result from a breach of this Section
5.4(a), and subject to providing prior or contemporaneous notice of its
decision to take such action to MCI WorldCom, (x) furnish information with
respect to Sprint and its Subsidiaries to any Person making a Sprint Superior
Proposal pursuant to a customary confidentiality agreement (as determined by
Sprint after consultation with its outside counsel) and (y) participate in
discussions or negotiations regarding such Sprint Superior Proposal. This
Section 5.4 is subject to Section 5.4 of the Sprint Disclosure Schedule. For
purposes of this Agreement, "Sprint Competing Proposal" means any bona fide
proposal or offer from any Person relating to any direct or indirect
acquisition or purchase of 20% or more of the assets of Sprint and its
Subsidiaries, taken as a whole, or 20% or more of the combined voting power of
the shares of Sprint Common Stock, any tender offer or exchange offer that if
consummated would result in any Person beneficially owning 20% or more of the
combined voting power of the shares of Sprint Common Stock, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Sprint or any of its Subsidiaries in which the
other party thereto or its stockholders will own 20% or more of the combined
voting power of the parent entity resulting from any such transaction, other
than the transactions contemplated by this Agreement. For purposes of this
Agreement, a "Sprint Superior Proposal" means (i) any proposal made by a third
party relating to any direct or indirect acquisition or purchase of 50% or more
of the assets of Sprint and its Subsidiaries, taken as a whole, or 50% or more
of the combined voting power of the shares of Sprint Common Stock, any tender
offer or exchange offer that if consummated would result in any Person
beneficially owning 50% or more of the combined voting power of the shares of
Sprint Common Stock or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Sprint or any of its Subsidiaries in which the other party thereto or its
stockholders will own 40% or more of the combined voting power of the parent
entity resulting from any such transaction and (ii) otherwise on terms which
the Board of Directors of Sprint determines in its good faith judgment (based
on the advice of a financial advisor of nationally recognized reputation),
taking into account the Person making the proposal and the legal, financial,
regulatory and other aspects of the proposal deemed appropriate by the Board of
Directors of Sprint, (x) would be more favorable than the Merger to Sprint's
stockholders taken as a whole, (y) is reasonably capable of being completed and
(z) for which financing, to the extent required, is then committed or is
reasonably capable of being obtained by such third party.
(b) Neither the Board of Directors of Sprint nor any committee thereof shall
(i) withdraw, or propose publicly to withdraw, in a manner adverse to MCI
WorldCom, the approval or recommendation by such Board of Directors or such
committee of the Merger or this Agreement, (ii) subject to Section 5.4(d),
modify, or
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propose publicly to modify, in a manner adverse to MCI WorldCom, the approval
or recommendation by such Board of Directors or such committee of the Merger or
this Agreement, (iii) approve or recommend, or propose publicly to approve or
recommend, any Sprint Competing Proposal or (iv) approve or recommend, or
propose to approve or recommend, or execute or enter into, any letter of
intent, agreement in principle, merger agreement, acquisition agreement, option
agreement or other similar agreement or propose publicly or agree to do any of
the foregoing (each, a "Sprint Acquisition Agreement") related to any Sprint
Competing Proposal. Notwithstanding the foregoing, during the Sprint Applicable
Period, in response to a Sprint Superior Proposal which did not result from a
breach of Section 5.4(a), if the Board of Directors of Sprint, in the exercise
of its fiduciary duties, determines in good faith, after consultation with
outside counsel, that to do otherwise would not be in the best interests of
Sprint's stockholders, the Board of Directors of Sprint may (x) modify or
propose publicly to modify, in a manner adverse to MCI WorldCom, the approval
or recommendation of the Merger or this Agreement by the Board of Directors of
Sprint and/or (y) terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause Sprint to enter into any Sprint
Acquisition Agreement with respect to any Sprint Superior Proposal), but, in
the case of clause (y), only at a time that is during the Sprint Applicable
Period and is after the fourth Business Day (or the second calendar day in the
case of a material amendment to a Sprint Superior Proposal) following MCI
WorldCom's receipt of written notice advising MCI WorldCom that the Board of
Directors of Sprint is prepared to accept a Sprint Superior Proposal (or any
material amendment thereto), specifying the material terms and conditions of
such Sprint Superior Proposal (or any material amendment thereto) and
identifying the Person making such Sprint Superior Proposal (or any material
amendment thereto).
(c) In addition to the obligations of Sprint set forth in paragraphs (a) and
(b) of this Section 5.4, Sprint shall promptly advise MCI WorldCom of any
Sprint Competing Proposal or any inquiry or request for information relating
thereto, the material terms and conditions of such request or Sprint Competing
Proposal and the identity of the Person making such request or Sprint Competing
Proposal. Sprint will promptly keep MCI WorldCom reasonably informed of the
status (including amendments) of any such request or Sprint Competing Proposal.
(d) Nothing contained in this Section 5.4 shall prohibit Sprint from taking
and disclosing to its stockholders a position contemplated by Rule 14d-9 or
14e-2 promulgated under the Exchange Act or from making any disclosure to
Sprint's stockholders if, in the good faith judgment of the Board of Directors
of Sprint, after consultation with outside counsel, failure so to disclose
would be inconsistent with its obligations under applicable law; provided,
however, that, subject to Section 5.4(b), neither Sprint nor its Board of
Directors nor any committee thereof shall withdraw, or propose publicly to
withdraw, its position with respect to this Agreement or the Merger or approve
or recommend, or propose publicly to approve or recommend, a Sprint Competing
Proposal.
5.5 No Solicitation by MCI WorldCom. (a) MCI WorldCom 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 knowingly encourage (including by way of furnishing
information), or knowingly take any other action to facilitate, the making of
any proposal that constitutes an MCI WorldCom Competing Proposal or (ii)
participate in any discussions or negotiations regarding any MCI WorldCom
Competing Proposal; provided, however, that if, at any time during the period
commencing on the 61st day after the date hereof and ending on the date
Required MCI WorldCom Vote is obtained (the "MCI WorldCom Applicable Period"),
the Board of Directors of MCI WorldCom, in the exercise of its fiduciary
duties, determines in good faith, after consultation with outside counsel, that
to do otherwise would not be in the best interests of MCI WorldCom's
shareholders, MCI WorldCom and its representatives may, in response to an MCI
WorldCom Superior Proposal which did not result from a breach of this Section
5.5(a), and subject to providing prior or contemporaneous notice of its
decision to take such action to Sprint, (x) furnish information with respect to
MCI WorldCom and its Subsidiaries to any Person making an MCI WorldCom Superior
Proposal pursuant to a customary confidentiality agreement (as determined by
MCI
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WorldCom after consultation with its outside counsel) and (y) participate in
discussions or negotiations regarding such MCI WorldCom Superior Proposal. For
purposes of this Agreement, "MCI WorldCom Competing Proposal" means any bona
fide proposal or offer from any Person relating to any direct or indirect
acquisition or purchase of 20% or more of the assets of MCI WorldCom and its
Subsidiaries, taken as a whole, or 20% or more of the combined voting power of
the shares of MCI WorldCom Common Stock, any tender offer or exchange offer
that if consummated would result in any Person beneficially owning 20% or more
of the combined voting power of the shares of MCI WorldCom Common Stock, or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving MCI WorldCom or any of its
Subsidiaries in which the other party thereto or its shareholders will own 20%
or more of the combined voting power of the shares of the parent entity
resulting from any such transaction, other than the transactions contemplated
by this Agreement. For purposes of this Agreement, an "MCI WorldCom Superior
Proposal" means (i) (A) any proposal made by a third party relating to any
direct or indirect acquisition or purchase of 50% or more of the assets of MCI
WorldCom and its Subsidiaries, taken as a whole, or 50% or more of the combined
voting power of the shares of MCI WorldCom Common Stock, any tender offer or
exchange offer that if consummated would result in any Person beneficially
owning 50% or more of the combined voting power of the shares of MCI WorldCom
Common Stock, or (B) any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving MCI
WorldCom or any of its Subsidiaries in which (1) the other party thereto or its
shareholders will own 50% or more of the combined voting power of the shares of
the parent entity resulting from any such transaction and (2) representatives
of such other party shall represent a majority of the Board of Directors of
such parent entity, and (ii) otherwise on terms which the Board of Directors of
MCI WorldCom determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation), taking into account the
Person making the proposal and the legal, financial, regulatory and other
aspects of the proposal deemed appropriate by the Board of Directors of MCI
WorldCom, (x) would be more favorable than the Merger to MCI WorldCom's
shareholders taken as a whole, (y) is reasonably capable of being completed and
(z) for which financing, to the extent required, is then committed or is
reasonably capable of being obtained by such third party.
(b) Neither the Board of Directors of MCI WorldCom nor any committee thereof
shall (i) withdraw, or propose publicly to withdraw, in a manner adverse to
Sprint, the approval or recommendation by such Board of Directors or such
committee of the Merger or this Agreement, (ii) subject to Section 5.5(d),
modify, or propose publicly to modify, in a manner adverse to Sprint, the
approval or recommendation by such Board of Directors or such committee of the
Merger or this Agreement, (iii) approve or recommend, or propose publicly to
approve or recommend, any MCI WorldCom Competing Proposal or (iv) approve or
recommend, or propose to approve or recommend, or execute or enter into, any
letter of intent, agreement in principle, merger agreement, acquisition
agreement, option agreement or other similar agreement or propose publicly or
agree to do any of the foregoing (each, an "MCI WorldCom Acquisition
Agreement") related to any MCI WorldCom Competing Proposal. Notwithstanding the
foregoing, during the MCI WorldCom Applicable Period, in response to an MCI
WorldCom Superior Proposal which did not result from a breach of Section
5.5(a), if the Board of Directors of MCI WorldCom, in the exercise of its
fiduciary duties, determines in good faith, after consultation with outside
counsel, that to do otherwise would not be in the best interests of MCI
WorldCom's shareholders, the Board of Directors of MCI WorldCom may (x) modify
or propose publicly to modify, in a manner adverse to Sprint, the approval or
recommendation of the Merger or this Agreement by the Board of Directors of MCI
WorldCom and/or (y) terminate this Agreement (and concurrently with or after
such termination, if it so chooses, cause MCI WorldCom to enter into any MCI
WorldCom Acquisition Agreement with respect to any MCI WorldCom Superior
Proposal), but, in the case of clause (y), only at a time that is during the
MCI WorldCom Applicable Period and is after the fourth Business Day (or the
second calendar day in the case of a material amendment to an MCI WorldCom
Superior Proposal) following Sprint's receipt of written notice advising Sprint
that the Board of Directors of MCI WorldCom is prepared to accept an MCI
WorldCom Superior Proposal (or any material amendment thereto), specifying the
material terms and conditions of such MCI WorldCom Superior Proposal (or any
material amendment thereto) and identifying the Person making such MCI WorldCom
Superior Proposal (or any material amendment thereto).
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(c) In addition to the obligations of MCI WorldCom set forth in paragraphs
(a) and (b) of this Section 5.5, MCI WorldCom shall promptly advise Sprint of
any MCI WorldCom Competing Proposal or any inquiry or request for information
relating thereto, the material terms and conditions of such request or MCI
WorldCom Competing Proposal and the identity of the Person making such request
or MCI WorldCom Competing Proposal. MCI WorldCom will promptly keep Sprint
reasonably informed of the status (including amendments) of any such request
or MCI WorldCom Competing Proposal.
(d) Nothing contained in this Section 5.5 shall prohibit MCI WorldCom from
taking and disclosing to its shareholders a position contemplated by Rule 14d-
9 or 14e-2 promulgated under the Exchange Act or from making any disclosure to
MCI WorldCom's shareholders if, in the good faith judgment of the Board of
Directors of MCI WorldCom, after consultation with outside counsel, failure so
to disclose would be inconsistent with its obligations under applicable law;
provided, however, that, subject to Section 5.5(b), neither MCI WorldCom nor
its Board of Directors nor any committee thereof shall withdraw, or propose
publicly to withdraw, its position with respect to this Agreement or the
Merger or approve or recommend, or propose publicly to approve or recommend,
an MCI WorldCom Competing Proposal.
5.6 Sprint Stock Options. (a) As soon as practicable following the date of
this Agreement, the Board of Directors of Sprint (or, if appropriate, any
committee administering the Sprint Stock Option 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 Sprint Stock Options (each, as
so adjusted, an "Adjusted Option"), whether vested or unvested, as
necessary to provide that, at the Effective Time, each Sprint Stock Option
outstanding immediately prior to the Effective Time shall be amended and
converted, on the same terms and conditions as were applicable under such
Sprint Stock Option, as follows:
(A) each Sprint Stock Option to acquire shares of Sprint FON Stock
will be converted into an option to acquire the number of shares of MCI
WorldCom Common Stock determined by multiplying the number of shares of
Sprint FON Stock subject to such Sprint Stock Option by the FON
Exchange Ratio (rounded up to the nearest whole share) at an exercise
price determined by dividing the exercise price set forth in such
Sprint Stock Option by the FON Exchange Ratio (rounded up to the
nearest whole cent); and
(B) each Sprint Stock Option to acquire shares of any class of
Sprint PCS Stock will be converted into an option to acquire:
(x) an equivalent number of shares of MCI WorldCom Series 1 PCS
Stock at the same exercise price as the exercise price for such
Sprint PCS Stock plus
(y) an amount of MCI WorldCom Common Stock for no additional
consideration equal to the number of shares of such Sprint PCS Stock
subject to such Sprint Stock Option multiplied by the PCS Exchange
Ratio, (rounded up to the nearest whole share) (the "MCI WorldCom
Common Stock Option Shares"), where such option shall automatically
be exercised (as part of the exercise of the option to acquire MCI
WorldCom Series 1 PCS Stock described in the preceding clause (x))
for a number of shares of MCI WorldCom Common Stock each time that
such option to acquire MCI WorldCom Series 1 PCS Stock is exercised,
and where the number of shares of MCI WorldCom Common Stock to be
acquired upon such exercise shall:
(1) equal "Z" (rounded up to the nearest whole share), where
"Z" equals (i) the number of shares of MCI WorldCom Series 1 PCS
Stock to be acquired pursuant to such exercise of such option
multiplied by (ii) the PCS Exchange Ratio; or
(2) equal the number of shares of MCI WorldCom Common Stock
which remain subject to such option, if such exercise is for all
the shares of MCI WorldCom Series 1 PCS Stock which remain
subject to such option;
provided, however, that the maximum number of shares of MCI WorldCom
Common Stock issuable pursuant to all such exercises of an Adjusted
Option described in this Section
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5.6(a)(i)(B) shall not in the aggregate exceed the number of MCI
WorldCom Common Stock Option Shares; and
(ii) make such other changes to the Sprint Stock Option Plans as MCI
WorldCom and Sprint may agree are appropriate to give effect to the Merger.
(b) The adjustments provided in this Section 5.6 with respect to any Sprint
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) Prior to the Effective Time, MCI 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
MCI WorldCom following the Effective Time) to assume as of the Effective Time
all obligations undertaken by, or on behalf of, Sprint under Section 5.6(a)
and to adopt at the Effective Time the Sprint Stock Option Plans and each
Adjusted Option and to take all other action called for in this Section 5.6,
including the reservation, issuance and listing of MCI WorldCom Capital Stock
in a number at least equal to the number of shares of MCI WorldCom Common
Stock that will be subject to the Adjusted Options.
(d) As soon as practicable following the Effective Time, MCI 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 MCI 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) at least for
so long as any Adjusted Options or any unsettled awards granted under the
Sprint Stock Option Plans after the Effective Time may remain outstanding.
(e) As soon as practicable after the Effective Time, MCI WorldCom shall
deliver to the holders of the Sprint Stock Options appropriate notices setting
forth such holders' rights pursuant to the respective Sprint Stock Option
Plans and the agreements evidencing the grants of such Sprint Stock Options
and that such Sprint Stock Options and agreements shall be assumed by MCI
WorldCom and shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 5.6 after giving effect
to the Merger).
(f) Except as otherwise expressly provided in this Section 5.6 and except
to the extent required under the respective terms of the Sprint Stock Options,
all restrictions or limitations on transfer and vesting with respect to the
Sprint Stock Options awarded under the Sprint Stock Option Plans or any other
plan, program or arrangement of Sprint 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 MCI WorldCom as set forth above.
5.7 Employee Matters. (a) During the one-year period following the
Effective Time (the "Transition Period"), MCI WorldCom shall maintain employee
benefit plans, programs and policies for the employees of Sprint and its
Subsidiaries which, in the aggregate, are substantially comparable to the
employee benefit plans, programs and policies provided by Sprint and its
Subsidiaries before the Effective Time (other than Sprint's Employees Stock
Purchase Plan). Furthermore, no employee of Sprint or a Subsidiary of Sprint
shall have his or her base hourly rate of pay, base salary or bonus
opportunity reduced during the Transition Period except to the extent such
reduction is called for as a result of a violation of MCI WorldCom's generally
applicable policies or a failure to satisfy MCI WorldCom's generally
applicable performance standards for similarly situated MCI WorldCom
employees. The participant accounts in each unfunded plan, program or policy
of Sprint and each Subsidiary of Sprint which are designed to track the
performance of Sprint Capital Stock but which only pay benefits in cash shall
be converted at the Effective Time to accounts which track the performance of
the corresponding MCI WorldCom Capital Stock based upon the principles set
forth in this Agreement for converting Sprint Capital Stock to MCI WorldCom
Capital Stock except that there shall be no rounding up or down as part of
such conversions.
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(b) During the one-year period following the Transition Period, the
employees of Sprint and each Subsidiary of Sprint shall be eligible to
participate in employee benefit plans, programs and policies which, in the
aggregate, are substantially comparable to the employee benefit plans, programs
and policies maintained by MCI WorldCom for similarly situated employees. Each
employee of Sprint and each Subsidiary of Sprint shall receive full credit
under each applicable MCI WorldCom plan, program or policy for his or her
service as an employee of Sprint and any Subsidiary of Sprint on the same basis
that he or she would have received such credit if such service had been
completed as an employee of MCI WorldCom for purposes of satisfying any service
requirement to participate in such plan, program or policy (including any plan,
program or policy which provides post-retirement medical benefits) and any
service requirement to receive a non-forfeitable interest in the benefits under
such plan, program or policy. Furthermore, if any such MCI WorldCom plan,
program or policy has any active employment requirements, pre-existing
condition requirements, co-pay, coinsurance or deductible requirements in
effect for a year and an employee of Sprint or a Subsidiary of Sprint had
satisfied (or had made payments towards satisfying) such requirements for a
part of such year as a participant in a Sprint plan, program or policy, such
employee shall receive full credit for satisfying (or for payments made towards
satisfying) such requirements in the MCI WorldCom plan, program or policy for
such year when he or she begins to participate in such plan, program or policy
and any such co-pay, coinsurance or deductible requirements for such year under
the MCI WorldCom plan, program or policy shall be no greater than the co-pay,
coinsurance or deductible requirement under the Sprint plan, program or policy
for such year.
(c) MCI WorldCom and Sprint will implement the provisions relating to Sprint
employee matters set forth in Section 5.7 of the Sprint Disclosure Schedule.
5.8 Fees and Expenses. (a) Whether or not the Merger is consummated, all
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses, except
Expenses incurred in connection with the filing, printing and mailing of the
Form S-4 and the Joint Proxy Statement/Prospectus (including SEC filing fees)
and the filing fees for the premerger notification and report forms under the
HSR Act and for filings with the European Commission, which shall be shared
equally by MCI WorldCom and Sprint. As used in this Agreement, "Expenses"
includes all out-of-pocket expenses (including all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing of the Form Su-4 and
the Joint Proxy Statement/Prospectus and the solicitation of stockholder
approvals and all other matters related to the transactions contemplated
hereby.
(b) If (1) prior to the date the Required Sprint Vote is obtained a Sprint
Competing Proposal shall have been made to Sprint or any of its Subsidiaries or
shall have been made directly to the stockholders of Sprint generally or any
Person shall have publicly announced an intention (whether or not conditional)
to make a Sprint Competing Proposal and thereafter this Agreement is terminated
by either MCI WorldCom or Sprint pursuant to Section 7.1(b) without a Sprint
Stockholders Meeting having occurred or 7.1(d)(i) or (2) this Agreement is
terminated (i) by Sprint pursuant to Section 7.1(e) or (ii) by MCI WorldCom
pursuant to Section 7.1(j), then Sprint shall promptly, but in no event later
than the date of such termination, pay MCI WorldCom a fee equal to $2.5 billion
(the "Termination Fee"), payable by wire transfer of same day funds; provided,
however, that no Termination Fee shall be payable to MCI WorldCom pursuant to
clause (1) or (2)(ii) of this paragraph (b) unless and until within 12 months
of such termination Sprint or any of its Subsidiaries enters into any Sprint
Acquisition Agreement with respect to, or approves or consummates, any Sprint
Competing Proposal (for the purposes of the foregoing proviso the term "Sprint
Competing Proposal" shall mean a Sprint Superior Proposal pursuant to clause
(i) (without giving effect to clause (ii)) of the definition thereof in Section
5.4(a), in which event the Termination Fee shall be payable upon the first to
occur of such events. Sprint acknowledges that the agreements contained in this
Section 5.8(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, MCI WorldCom would not enter
into this Agreement; accordingly, if Sprint fails promptly to pay the amount
due pursuant to this Section 5.8(b), and, in
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order to obtain such payment, MCI WorldCom commences a suit which results in a
judgment against Sprint for the fee set forth in this Section 5.8(b), Sprint
shall pay to MCI 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 Citibank, N.A. in effect on the date such payment
was required to be made.
(c) If (1) prior to the date the Required MCI WorldCom Vote is obtained an
MCI WorldCom Competing Proposal shall have been made to MCI WorldCom or any of
its Subsidiaries or shall have been made directly to the shareholders of MCI
WorldCom generally or any Person shall have publicly announced an intention
(whether or not conditional) to make an MCI WorldCom Competing Proposal and
thereafter this Agreement is terminated by either MCI WorldCom or Sprint
pursuant to Section 7.1(b) without an MCI WorldCom Shareholders Meeting having
occurred or 7.1(d)(ii) or (2) this Agreement is terminated (i) by MCI WorldCom
pursuant to Section 7.1(f) or (ii) by Sprint pursuant to Section 7.1(i), then
MCI WorldCom shall promptly, but in no event later than the date of such
termination, pay Sprint the Termination Fee, payable by wire transfer of same
day funds; provided, however, that no Termination Fee shall be payable to
Sprint pursuant to clause (1) or (2)(ii) of this paragraph (c) unless and until
within 12 months of such termination MCI WorldCom or any of its Subsidiaries
enters into any MCI WorldCom Acquisition Agreement with respect to, or approves
or consummates, any MCI WorldCom Competing Proposal (for the purposes of the
foregoing proviso the term "MCI WorldCom Competing Proposal" shall mean an MCI
WorldCom Superior Proposal pursuant to clause (i) (without giving effect to
clause (ii)) of the definition thereof in Section 5.5(a), in which event the
Termination Fee shall be payable upon the first to occur of such events. MCI
WorldCom acknowledges that the agreements contained in this Section 5.8(c) are
an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Sprint would not enter into this Agreement;
accordingly, if MCI WorldCom fails promptly to pay the amount due pursuant to
this Section 5.8(c), and, in order to obtain such payment, Sprint commences a
suit which results in a judgment against MCI WorldCom for the fee set forth in
this Section 5.8(c), MCI WorldCom shall pay to Sprint 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 Citibank, N.A. in
effect on the date such payment was required to be made.
5.9 Indemnification, Exculpation and Insurance. (a) MCI WorldCom agrees that
all rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time now existing in favor of
the current or former directors or officers of Sprint and its Subsidiaries as
provided in their respective articles of incorporation or by-laws (or
comparable organizational documents) and any indemnification agreements of
Sprint, the existence of which does not constitute a breach of this Agreement,
shall be assumed by MCI WorldCom, as the Surviving Corporation 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 MCI WorldCom 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, proper provision will be made so that
the successors and assigns of MCI WorldCom assume the obligations set forth in
this Section 5.9.
(c) For six years after the Effective Time, MCI WorldCom shall maintain in
effect Sprint's current directors' and officers' liability insurance covering
acts or omissions occurring prior to the Effective Time with respect to those
Persons who are currently covered by Sprint's directors' and officers'
liability insurance policy on terms with respect to such coverage and amount no
less favorable than those of such policy in effect on the date hereof;
provided, however, that in no event shall MCI WorldCom be required to expend in
any one year an amount in excess of 200% of the annual premiums currently paid
by Sprint for such insurance; and, provided, further, that if the annual
premiums of such insurance coverage exceed such amount, MCI WorldCom shall be
obligated to obtain a policy with the greatest coverage available for such
amount.
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5.10 Sprint Rights Agreement. The Board of Directors of Sprint shall take
all action to the extent necessary (including amending the Sprint Rights
Agreement) in order to render the Sprint Rights inapplicable to the Merger and
the other transactions contemplated by this Agreement. Except in connection
with the foregoing sentence or, with respect to a Sprint Superior Proposal,
concurrently with or after a termination of this Agreement by Sprint in
accordance with Section 5.4(b), the Board of Directors of Sprint shall not,
without the prior written consent of MCI WorldCom, (a) amend the Sprint Rights
Agreement or (b) take any action with respect to, or make any determination
under, the Sprint Rights Agreement, including a redemption of the Sprint
Rights, in each case in order to facilitate a Sprint Competing Proposal.
5.11 MCI WorldCom Rights Agreement. The Board of Directors of MCI WorldCom
shall take all action to the extent necessary (including amending the MCI
WorldCom Rights Agreement) in order to render the MCI WorldCom Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement. Except in connection with the foregoing sentence or, with respect to
an MCI WorldCom Superior Proposal, concurrently with or after a termination of
this Agreement by MCI WorldCom in accordance with Section 5.5(b), the Board of
Directors of MCI WorldCom shall not, without the prior written consent of
Sprint, (a) amend the MCI WorldCom Rights Agreement or (b) take any action with
respect to, or make any determination under, the MCI WorldCom Rights Agreement,
including a redemption of the MCI WorldCom Rights, in each case in order to
facilitate an MCI WorldCom Competing Proposal. Notwithstanding the foregoing,
MCI WorldCom may amend the MCI WorldCom Rights Agreement to effect a
transaction permitted by Section 4.2(c) of this Agreement.
5.12 Public Announcements. Sprint and MCI WorldCom shall use all reasonable
efforts to develop a joint communications plan and each party shall use all
reasonable efforts (i) to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
5.13 Listing. MCI WorldCom shall use its reasonable best efforts to cause
the shares of MCI WorldCom Common Stock and MCI WorldCom Series 1 PCS Stock to
be issued in the Merger to be approved for quotation on Nasdaq, subject to
official notice of issuance.
5.14 Redemption of Sprint First Series Preferred Stock and Sprint Second
Series Preferred Stock. Prior to the Effective Time, Sprint shall have redeemed
all the issued and outstanding shares of Sprint First Series Preferred Stock
and Sprint Second Series Preferred Stock in accordance with the terms of
Sprint's articles of incorporation.
5.15 Affiliate Letter. On or prior to the date of the Sprint Stockholders
Meeting, Sprint will deliver to MCI WorldCom a letter (the "Sprint Affiliate
Letter") identifying all Persons who are, or may be, "affiliates" of Sprint for
purposes of Rule 145 under the Securities Act ("Rule 145"). On or prior to the
Closing Date, Sprint will use its reasonable efforts to deliver on behalf of
each Person identified as an "affiliate" in the Sprint Affiliate Letter a
written agreement in connection with restrictions on affiliates under Rule 145.
5.16 Tax Treatment. Each of MCI WorldCom and Sprint 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 6.2(c) and 6.3(c), including the execution of the
letters of representation referred to therein updated as necessary. Sprint and
MCI WorldCom and their respective Subsidiaries shall treat the MCI WorldCom
Common Stock, MCI WorldCom PCS Stock and MCI WorldCom
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Series 2 Common Stock (together, the "MCI WorldCom Relevant Stock") received in
the Merger by holders of Sprint Common Stock as property permitted to be
received under Section 354 of the Code without the recognition of gain. Each of
Sprint and MCI WorldCom covenants and agrees to, and agrees to cause its
affiliates to, vigorously and in good faith defend all challenges to the
treatment of the reorganization as described in this Section 5.16, including
any such challenge to the treatment of the MCI WorldCom Relevant Stock as
property permitted to be received under Section 354 of the Code without the
recognition of gain. Each of Sprint and MCI WorldCom agrees that if it becomes
aware of any such fact or circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization described in Section 368(a) of the
Code, including any such fact or circumstance that is reasonably likely to
prevent the MCI WorldCom Relevant Stock from being treated as property
permitted to be received under Section 354 of the Code without the recognition
of gain, it will promptly notify the other party in writing.
5.17 Assumption Agreement and Supplemental Indentures. Prior to or at the
Effective Time, MCI WorldCom will execute and deliver (a) a written instrument
to Sprint evidencing its obligation to deliver to each holder of a warrant
granted pursuant to one of the Warrant Agreements other securities, cash or
other assets as such holder may be entitled to purchase and the other
obligations under the applicable Warrant Agreement, and (b) a supplemental
indenture to each of the trustees with respect to the indentures named in
Section 5.17 of the Sprint Disclosure Schedule, in form satisfactory to each
such trustee, as required under such indentures.
5.18 Other Actions. Sprint will use reasonable efforts to cooperate with any
request by MCI WorldCom to transfer certain assets of Sprint to any Subsidiary
of Sprint, so long as such transfer(s) (a) would be permitted by applicable
regulations, laws and contracts, (b) would not, individually or in the
aggregate, adversely affect Sprint and (c) would be executed by Sprint at any
time (as determined by Sprint) prior to the Effective Time.
ARTICLE VI
Conditions Precedent
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligations of Sprint and MCI WorldCom to effect the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. (i) Sprint shall have obtained the Required
Sprint Vote and (ii) MCI WorldCom shall have obtained the Required MCI WorldCom
Vote.
(b) No Injunctions or Restraints; Illegality. No Laws shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other Governmental
Entity of competent jurisdiction shall be in effect, having the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger;
provided, however, that the provisions of this Section 6.1(b) shall not be
available to any party whose failure to fulfill its obligations pursuant to
Section 5.3 shall have been the cause of, or shall have resulted in, such order
or injunction.
(c) FCC and Public Utility Commission Approvals. All approvals for the
Merger from the FCC and from the PUCs shall have been obtained other than those
the failure of which to be obtained would not, individually or in the
aggregate, reasonably be expected to materially impair the parties' ability to
achieve the overall benefits expected, as of the date hereof, to be realized
from the consummation of the Merger; provided, however, that the provisions of
this Section 6.1(c) shall not be available to any party whose failure to
fulfill its obligations pursuant to Section 5.3 shall have been the cause of,
or shall have resulted in, such failure.
(d) 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;
provided, however, that the provisions of this Section
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6.1(d) shall not be available to any party whose failure to fulfill its
obligations pursuant to Section 5.3 shall have been the cause of, or shall have
resulted in, the failure to obtain such termination or expiration.
(e) EU Antitrust. To the extent that such a decision is required by
Regulation 4064/89, MCI WorldCom and Sprint shall have received in respect of
the Merger and any matters arising therefrom: confirmation by way of a decision
from the Commission of the European Union under Regulation 4064/89 (with or
without the initiation of proceedings under Article 6(1)(c) thereof) that the
Merger and any matters arising therefrom are compatible with the common market;
provided, however, that the provisions of this Section 6.1(e) shall not be
available to any party whose failure to fulfill its obligations pursuant to
Section 5.3 shall have been the cause of, or shall have resulted in, the
failure to obtain such confirmation.
(f) Nasdaq Listing. The shares of MCI WorldCom Common Stock and MCI WorldCom
Series 1 PCS Stock to be issued in the Merger shall have been approved for
quotation on Nasdaq, subject to official notice of issuance.
(g) Effectiveness of the Form S-4. The Form S-4 shall have been declared
effective by the SEC under the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
6.2 Additional Conditions to Obligations of MCI WorldCom. Other than as set
forth in the Sprint Disclosure Schedule, the obligations of MCI WorldCom to
effect the Merger are subject to the satisfaction of, or waiver by MCI
WorldCom, on or prior to the Closing Date of the following additional
conditions:
(a) Representations and Warranties. (i) Each of the representations and
warranties (other than as set forth in Section 3.1(b)(i), (ii) and (iii)) of
Sprint set forth in this Agreement shall be true and correct on the date of
this Agreement, 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), except for changes expressly permitted under Article IV and except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect" set forth therein), individually or in the aggregate,
does not have, and is not reasonably likely to have, a Material Adverse Effect
on Sprint, and (ii) the representations and warranties of Sprint set forth in
Section 3.1(b)(i), (ii) and (iii) shall be true and correct in all material
respects on the date of this Agreement, 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), except for changes expressly permitted
under Article IV. MCI WorldCom shall have received a certificate of the chief
executive officer and the chief financial officer of Sprint to such effect.
(b) Performance of Obligations of Sprint. Sprint shall have performed or
complied in all material respects with all material agreements and covenants
required to be performed by it or complied with under this Agreement at or
prior to the Closing Date. MCI WorldCom shall have received a certificate of
the chief executive officer and the chief financial officer of Sprint to such
effect.
(c) Tax Opinion. MCI WorldCom shall have received from Cravath, Swaine &
Moore, counsel to MCI WorldCom, on the date on which the Form S-4 is declared
effective by the SEC and on the Closing Date, a written opinion dated as of
such date stating that: (i) the Merger will qualify as a "reorganization"
within the meaning of Section 368(a) of the Code, (ii) MCI WorldCom and Sprint
will each be a "party" to that reorganization within the meaning of Section
368(b) of the Code and (iii) the issuance of the MCI WorldCom Relevant Stock to
the holders of the Sprint Common Stock in the Merger will not result in MCI
WorldCom's recognizing an amount of income or gain or being subject to an
amount of tax, in each case that individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on MCI WorldCom. In
rendering such opinions, counsel to MCI WorldCom shall be entitled to rely upon
representations of officers of MCI WorldCom and Sprint substantially in the
form of Appendices 3 and 4, respectively, and updated as necessary. The
opinions shall be in substantially the same form as Appendix 1.
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(d) No Material Adverse Change. Since the date of this Agreement, there
shall not have been any Material Adverse Change in Sprint.
6.3 Additional Conditions to Obligations of Sprint. The obligations of
Sprint to effect the Merger are subject to the satisfaction of, or waiver by
Sprint, on or prior to the Closing Date of the following additional conditions:
(a) Representations and Warranties. (i) Each of the representations and
warranties (other than as set forth in Section 3.2(b)(i), (ii) and (iii)) of
MCI WorldCom set forth in this Agreement shall be true and correct on the date
of this Agreement 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), except for changes expressly permitted under Article IV and except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect" set forth therein), individually or in the aggregate,
does not have, and is not reasonably likely to have, a Material Adverse Effect
on MCI WorldCom, and (ii) the representations and warranties of MCI WorldCom
set forth in Section 3.2(b)(i), (ii) and (iii) shall be true and correct in all
material respects on the date of this Agreement, 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). Sprint shall have received a
certificate of the chief executive officer and the chief financial officer of
MCI WorldCom to such effect.
(b) Performance of Obligations of MCI WorldCom. MCI WorldCom shall have
performed or complied in all material respects with all material agreements and
covenants required to be performed by it or complied with under this Agreement
at or prior to the Closing Date. Sprint shall have received a certificate of
the chief executive officer and the chief financial officer of MCI WorldCom to
such effect.
(c) Tax Opinion. Sprint shall have received from King & Spalding, counsel to
Sprint, on the date on which the Form S-4 is declared effective by the SEC and
on the Closing Date, a written opinion dated as of such date stating that: (i)
the Merger will qualify as a "reorganization" within the meaning of Section
368(a) of the Code, (ii) Sprint and MCI WorldCom will each be a "party" to that
reorganization within the meaning of Section 368(b) of the Code and (iii) the
MCI WorldCom Relevant Stock received in the Merger by holders of Sprint Common
Stock is property permitted to be received under Section 354 of the Code
without the recognition of gain. In rendering such opinions, counsel to Sprint
shall be entitled to rely upon representations of officers of MCI WorldCom and
Sprint substantially in the form of Appendices 3 and 4, respectively, and
updated as necessary. The opinions shall be in substantially the same form as
Appendix 2.
(d) No Material Adverse Change. Since the date of this Agreement, there
shall not have been any Material Adverse Change in MCI WorldCom.
ARTICLE VII
Termination and Amendment
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, and except as provided below, whether before or
after approval of the matters presented in connection with the Merger by the
stockholders of Sprint or MCI WorldCom:
(a) By mutual written consent of MCI WorldCom and Sprint, by action of their
respective Boards of Directors;
(b) By either Sprint or MCI WorldCom if the Effective Time shall not have
occurred on or before December 31, 2000 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 7.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this
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Agreement (including Section 5.3) has caused, or resulted in, the failure of
the Effective Time to occur on or before the Termination Date;
(c) By either Sprint or MCI WorldCom if any Governmental Entity (i) shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement, and such order, decree, ruling or other action shall have
become final and nonappealable or (ii) shall have failed to issue an order,
decree or ruling or to take any other action (which order, decree, ruling or
other action the parties shall have used their reasonable best efforts to
obtain, in accordance with Section 5.3), in each case (i) and (ii) which is
necessary to fulfill the conditions set forth in Sections 6.1(c), (d) and (e),
as applicable, and such denial of a request to issue such order, decree, ruling
or take such other action shall have become final and nonappealable; provided,
however, that the right to terminate this Agreement under this Section 7.1(c)
shall not be available to any party whose failure to comply with Section 5.3
has caused or resulted in such action or inaction;
(d) By either Sprint or MCI WorldCom if (i) the approval by the stockholders
of Sprint required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the Required Sprint Vote at a duly
held Sprint Stockholders Meeting or at any adjournment or postponement thereof
or (ii) the approval by the shareholders of MCI WorldCom required for the
consummation of the Merger shall not have been obtained by reason of the
failure to obtain the Required MCI WorldCom Vote at a duly held MCI WorldCom
Shareholders Meeting or at any adjournment or postponement thereof;
(e) By Sprint in accordance with Section 5.4(b); provided that, in order for
the termination of this Agreement pursuant to this paragraph (e) to be deemed
effective, Sprint shall have complied with the notice provisions of Section 5.4
and shall have paid the Termination Fee in accordance with Section 5.8(b);
(f) By MCI WorldCom in accordance with Section 5.5(b); provided that, in
order for the termination of this Agreement pursuant to this paragraph (f) to
be deemed effective, MCI WorldCom shall have complied with the notice
provisions of Section 5.5 and shall have paid the Termination Fee in accordance
with Section 5.8(c);
(g) By Sprint, if MCI WorldCom shall have breached or failed to perform 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 6.3(a) or (b) and (B) has not been
or is incapable of being cured by MCI WorldCom within 45 calendar days after
its receipt of written notice thereof from Sprint;
(h) By MCI WorldCom, if Sprint shall have breached or failed to perform 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 6.2(a) or (b) and (B) has not been
or is incapable of being cured by Sprint within 45 calendar days after its
receipt of written notice thereof from MCI WorldCom;
(i) By Sprint, in the event that MCI WorldCom takes any action set forth in
Section 5.5(b)(x); or
(j) By MCI WorldCom, in the event that Sprint takes any action set forth in
Section 5.4(b)(x).
Notwithstanding anything else contained in this Agreement, the right to
terminate this Agreement under this Section 7.1 shall not be available to any
party (a) that is in material breach of its obligations hereunder or (b) whose
failure to fulfill its obligations or to comply with its covenants under this
Agreement has been the cause of, or resulted in, the failure to satisfy any
condition to the obligations of either party hereunder.
7.2 Effect of Termination. In the event of termination of this Agreement by
either Sprint or MCI WorldCom as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of MCI WorldCom or Sprint or their respective directors or officers except with
respect to Section 3.1(m), Section 3.2(m), the second sentence of Section 5.2,
Section 5.8, this Section 7.2
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and Article VIII. Termination of this Agreement will not relieve a breaching
party from liability for any willful and material breach by such party of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.
7.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Sprint and MCI WorldCom, but, after any such approval,
no amendment shall be made which by law or in accordance with the rules of any
relevant stock exchange requires further approval by such stockholders without
such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
7.4 Extension; Waiver; Consent. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with or give a consent under any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension, waiver or consent shall be valid only if set forth in a written
instrument signed on behalf of such party in its sole discretion. 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 those rights.
ARTICLE VIII
General Provisions
8.1 Non-Survival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and other agreements in this Agreement
or in any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants and
other agreements, shall survive the Effective Time, except for those covenants
and agreements contained herein that by their terms apply or are to be
performed in whole or in part after the Effective Time and this Article VIII.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)
on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the tenth Business Day following
the date of mailing if delivered by registered or certified mail, return
receipt requested, postage prepaid. All notices hereunder shall be delivered as
set forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(a) if to MCI WorldCom, to
MCI WORLDCOM, Inc
1801 Pennsylvania Avenue, NW
Washington, DC 20006
Attention: Michael Salsbury, Esq.
Facsimile No.: 202-887-3353
MCI WORLDCOM, Inc
10777 Sunset Office Drive, Suite 330
St. Louis, MO 63127
Attention: P. Bruce Borghardt, Esq.
Facsimile No.: 314-909-4101
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with a copy to
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Robert A. Kindler, Esq.
Robert I. Townsend, III, Esq.
Facsimile No.: 212-474-3700
(b) if to Sprint, to
Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, KS 66205
Attention: J. Richard Devlin, Esq.
Facsimile No.: 913-624-8426
Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, KS 66205
Attention: Fred L. Sgroi, Esq.
Facsimile No.: 913-624-8361
with a copy to
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Bruce N. Hawthorne, Esq.
C. William Baxley, Esq.
Facsimile No.: 404-572-5146
8.3 Interpretation. When a reference is made in this Agreement to Sections,
exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents,
glossary of defined terms 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".
8.4 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 party, it being understood that both
parties need not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries. (a) This Agreement and
the Confidentiality Agreement constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, other than
Section 5.9 (which is intended to be for the benefit of the Persons covered
thereby and may be enforced by such Persons) or as provided in Section 5.7 of
the Sprint Disclosure Schedule.
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8.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, except that the Merger
shall be governed by the laws of the State of Kansas and the laws of the State
of Georgia.
8.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy,
all other terms 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 in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
8.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior
written consent of the other party, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors and
assigns.
8.9 Submission to Jurisdiction; Waivers. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Delaware state
court or any Federal court located in the State of Delaware in the event any
dispute arises out of or under or relates to this Agreement or any of the
transactions contemplated hereby and agrees, to the extent that such party is
not resident in the State of Delaware, to irrevocably appoint CSC The United
States Corporation Company as its agent for service of process, (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, (c) agrees that it will
not bring any action, suit or proceeding arising out of or under or relating
to this Agreement or any of the transactions contemplated hereby, in any court
other than any Delaware state court or any Federal court located in the State
of Delaware and (d) waives any right to trial by jury with respect to any
action, suit or proceeding arising out of or under or relating to this
Agreement or any of the transactions contemplated hereby. Each of the parties
hereto hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of or under or
relating to this Agreement or any of the transactions contemplated hereby in
any Delaware state court or any Federal court located in the State of
Delaware, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient
forum.
8.10 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the
parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.11 Definitions. As used in this Agreement:
(a) "Benefit Plans" means, with respect to any Person, each employee
benefit plan, program, arrangement and contract (including any "employee
benefit plan" (as defined in ERISA) and any bonus, deferred compensation,
stock bonus, stock purchase, restricted stock, stock option, employment,
termination, stay agreement or bonus, change in control and severance plan,
program, arrangement and contract) all of the foregoing in effect on the date
of this Agreement, to which such Person is a party, which is maintained or
contributed to by such Person, or with respect to which such Person could
incur material liability under Section 4069, 4201 or 4212(c) of ERISA.
(b) "Board of Directors" means the Board of Directors of any specified
Person or any committee thereof.
(c) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York.
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(d) "Class A Holder" has the meaning ascribed thereto in Sprint's articles
of incorporation.
(e) "Knowledge" of any Person that is not an individual means, with respect
to any specific matter, the actual knowledge of such Person's executive
officers and other officers having primary responsibility for such matter.
(f) "Material Adverse Effect" or "Material Adverse Change" means, with
respect to any entity, any adverse change, circumstance or effect that,
individually or in the aggregate with all other adverse changes, circumstances
and effects, is or is reasonably likely to be materially adverse to the
business, financial condition or results of operations of such entity and its
Subsidiaries taken as a whole, other than any change, circumstance or effect
(i) relating to or resulting from the economy or securities markets in general,
(ii) relating to or resulting from the industries in which MCI WorldCom or
Sprint operate and not uniquely relating to MCI WorldCom or Sprint or (iii)
resulting from the announcement or the existence of this Agreement and the
transactions contemplated hereby.
(g) "Material Investment" means (a) as to Sprint, any Person which Sprint
directly or indirectly holds the stock of, or other ownership interest in,
provided that the lesser of the fair market value and the book value of such
stock or interest exceeds $250 million, excluding any Person that is a wholly
owned Subsidiary of Sprint; and (b) as to MCI WorldCom, any Person which MCI
WorldCom directly or indirectly holds the stock of, or other ownership interest
in, provided that the lesser of the fair market value and the book value of
such stock or interest exceeds $250 million, excluding any Person that is a
wholly owned Subsidiary of MCI WorldCom.
(h) "the other party" means, with respect to Sprint, MCI WorldCom and means,
with respect to MCI WorldCom, Sprint.
(i) "Person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
(j) "Significant Subsidiary" has the meaning ascribed thereto in Rule 1-
02(w) of Regulation S-X of the SEC.
(k) "Subsidiary" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, (i) of which
such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by
such party or any Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(l) "FON Exchange Ratio" means the quotient (rounded to the nearest
1/10,000) determined by dividing $76 by the Average Price; provided that the
FON Exchange Ratio shall not be less than 1.4100 or greater than 1.8342 (it
being understood and agreed that such numbers have been adjusted from the
0.9400 and 1.2228 numbers, respectively, contained in the Original Merger
Agreement to reflect MCI WorldCom's three-for-two stock split in the form of a
50% stock dividend which was distributed on December 30, 1999 (the "December
1999 MCI WorldCom Stock Split") and that no further adjustment will be made to
the FON Exchange Ratio to reflect the December 1999 MCI WorldCom Stock Split).
(m) "PCS Exchange Ratio" means 0.116025 (it being understood and agreed that
such number has been adjusted from the 0.1547 number contained in the Original
Merger Agreement to reflect both the December 1999 MCI WorldCom Stock Split and
Sprint's two-for-one stock split of its Sprint PCS Stock in the form of a stock
dividend which was distributed on February 4, 2000 (the "February PCS Stock
Split") and that no further adjustment will be made to the PCS Exchange Ratio
to reflect the December 1999 MCI WorldCom Stock Split or the February PCS Stock
Split).
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(n) "Average Price" means 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 ("Nasdaq"),
as reported by Bloomberg Financial Markets (or such other source as the parties
shall agree in writing), for the 15 trading days randomly selected by lot by
MCI WorldCom and Sprint together from the 30 consecutive trading days ending on
the third trading day immediately preceding the Effective Time.
IN WITNESS WHEREOF, MCI WorldCom and Sprint 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
Sprint Corporation,
/s/ William T. Esrey
by __________________________________
Name: William T. Esrey
Title: Chairman and Chief
Executive Officer
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<PAGE>
ANNEX 1 TO
THE MERGER AGREEMENT
CERTAIN MATTERS RELATING TO SURVIVING CORPORATION
Board of Directors
The Board of Directors of the Surviving Corporation will initially consist
of 16 members, 10 of whom shall be initially designated by MCI WorldCom and 6
of whom shall be initially designated by Sprint.
Prior to the Effective Time, each party will designate in writing the
individual directors that it is entitled to designate to the Board of Directors
as provided above.
Tracking Stock Policies; Tax Sharing Agreement
As of the Effective Time, MCI WorldCom shall adopt Tracking Stock Policies
identical to the Sprint Tracking Stock Policies as in effect on the date hereof
and will assume the related Tax Sharing Agreement dated as of November 23,
1998.
MCI WorldCom agrees that, at the Closing, no other policies shall have been
adopted by MCI WorldCom which are inconsistent with such Tracking Stock
Policies or otherwise impair the relative position of the holders of capital
stock as set forth in such Tracking Stock Policies.
MCI WorldCom Shareholder Rights Plan
As of the Effective Time, MCI WorldCom shall modify the terms of the MCI
WorldCom shareholder rights plan in a manner to take into account the creation
of the PCS stock.
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EXHIBIT 2.2
THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF WORLDCOM, INC.
One
The name of the Corporation is WorldCom, Inc. (the "Corporation").
Two
The Corporation shall have perpetual duration.
Three
The Corporation has been organized as a corporation for profit pursuant to
the Georgia Business Corporation Code (the "GBCC"), for the purpose of engaging
in any lawful activities whatsoever.
Four
No holder of shares of capital stock of any class or series of the
Corporation or holder of any security or obligation convertible or exchangeable
into, or exchangeable for, shares of capital stock of any class or series of
the Corporation shall have any preemptive right whatsoever to subscribe for,
purchase or otherwise acquire shares of capital stock of any class or series of
the Corporation, whether now or hereafter authorized; provided that this
provision shall not (a) prohibit the Corporation from granting, contractually
or otherwise, to any such holder the right to purchase additional securities of
the Corporation or (b) otherwise limit or modify any rights of any such holder
pursuant to any such contract or other grant.
Five
Section 1. Amendment of Bylaws. The Board of Directors is expressly
authorized and empowered, in the manner provided in the Bylaws, to adopt,
amend, alter, repeal or supersede the Bylaws in any respect to the full extent
permitted by the GBCC that is not inconsistent with the laws of the GBCC or
these Articles of Incorporation; provided that prior to November 23, 2002,
ARTICLE IX, Section 5 of the Bylaws may not be amended, altered, repealed,
superseded or made inoperative or ineffective by the adoption of other
provisions to the Bylaws or these Articles of Incorporation (any such action, a
"CP Covered Bylaws Amendment") without the affirmative vote of the holders of
record of (a) a majority of the votes represented by the shares of PCS Group
Common Stock then outstanding, voting together as a single class, and (b) a
majority of the votes represented by the shares of Corporation Common Stock,
voting together as a single class, at any annual or special meeting of
shareholders, the notice of which shall have specified or summarized the
proposed CP Covered Bylaws Amendment.
Section 2. Definitions. Certain capitalized terms used in this ARTICLE FIVE
without definition have the meanings set forth in ARTICLE SIX, Section 10.
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Six
Section 1. Authorized Shares; Representation of Equity Value.
1.1. Authorized Shares. The total number of shares of capital stock which
may be issued by the Corporation is 10,000,000,000, and the designation of each
class or series, the number of authorized shares of each class or series and
the par value of the shares of each class or series, are as follows:
<TABLE>
<CAPTION>
Par Value
Designation Class Series No. of Shares Per Share
----------- ---------------- ------------------- ------------- ---------
<S> <C> <C> <C> <C>
"Common Stock".......... Common Stock 8,220,000,000 $0.01
"Series 2 Common
Stock"................. Common Stock Series 2 50,000,000 $0.01
"Series 1 PCS Stock".... PCS Common Stock Series 1 1,310,000,000 $1.00
"Series 2 PCS Stock".... PCS Common Stock Series 2 420,000,000 $1.00
"Preferred Stock"....... Preferred Stock See Section 9 below 75,000,000 $0.01
</TABLE>
The Corporation may designate from time to time (a) classes of common stock
and/or preferred stock and (b) series of common stock and/or preferred stock.
1.2. Representation of Equity Value. The aggregate common equity value of
the Corporation and each Business Group shall, at any time, be represented as
follows:
(a) The total common equity value of the Corporation shall be represented by
the sum of the outstanding shares of (i) the WorldCom Group Common Stock and
(ii) the PCS Group Common Stock.
(b) The total common equity value of the WorldCom Group shall be represented
by the outstanding shares of the WorldCom Group Common Stock and the total
common equity value of the PCS Group shall be represented by the sum of (i) the
outstanding shares of the PCS Group Common Stock and (ii) the Number Of Shares
Issuable With Respect To The WorldCom Group Intergroup Interest.
Section 2. General Provisions Relating to All Stock.
2.1. Cumulative Voting. Shareholders of the Corporation shall not be
entitled to cumulative voting of their shares in the elections of Directors.
2.2. Redemption of Shares Held by Aliens. Notwithstanding any other
provision of these Articles of Incorporation to the contrary, outstanding
shares of Corporation Common Stock Beneficially Owned by Aliens may be redeemed
by the Corporation, by action duly taken by the Board of Directors to the
extent necessary or advisable, in the judgment of the Board of Directors, for
the Corporation or any of its Subsidiaries to comply with the requirements of
Section 310.
The terms and conditions of such redemption shall be as follows, subject in
any case to any other rights of a particular Alien or of the Corporation
pursuant to any contract or agreement between such Alien and the Corporation:
(a) except as provided in Section 2.2(f), the redemption price of the shares
to be redeemed pursuant to this Section 2.2 shall be equal to the Market Price
of such shares on the third Business Day prior to the date notice of such
redemption is given pursuant to Section 2.2(d); provided that, except as
provided in Section 2.2(f), such redemption price as to any Alien who purchased
such shares of Corporation Common Stock after November 21, 1995 and within one
year prior to the Redemption Date shall not (unless otherwise determined by the
Board of Directors) exceed the purchase price paid by such Alien for such
shares;
(b) the redemption price of such shares may be paid in cash, Redemption
Securities or any combination thereof;
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(c) if less than all of the shares Beneficially Owned by Aliens are to be
redeemed, the shares to be redeemed shall be selected in such manner as shall
be determined by the Board of Directors, which may include selection first of
the most recently purchased shares thereof, selection by lot or selection in
any other manner determined by the Board of Directors to be equitable;
(d) the Corporation shall give notice of the Redemption Date at least 30
days prior to the Redemption Date to the record holders of the shares selected
to be redeemed (unless waived in writing by any such holder) by delivering a
written notice by first class mail, postage pre-paid, to the holders of record
of the shares selected to be redeemed, addressed to such holders at their last
address as shown upon the stock transfer books of the Corporation (each such
notice of redemption specifying the date fixed for redemption, the redemption
price, the place or places of payment and that payment will be made upon
presentation and surrender of the stock certificates representing such shares);
provided that the Redemption Date may be the date on which written notice shall
be given to record holders if the cash or Redemption Securities (or a
combination thereof) necessary to effect the redemption shall have been
deposited in trust for the benefit of such record holders and subject to
immediate withdrawal by them upon surrender of the stock certificates for their
shares to be redeemed;
(e) on the Redemption Date, unless the Corporation shall have defaulted in
paying or setting aside for payment the cash or Redemption Securities (or a
combination thereof) payable upon such redemption, any and all rights of Aliens
in respect of shares so redeemed (including without limitation any rights to
vote or participate in dividends), shall cease and terminate, and from and
after such Redemption Date such Aliens shall be entitled only to receive the
cash or Redemption Securities (or a combination thereof) payable upon
redemption of the shares to be redeemed; and
(f) such other terms and conditions as the Board of Directors shall
determine to be equitable; provided that, if (i) any shares of Series 2 PCS
Stock or Series 2 Common Stock are redeemed pursuant to this Section 2.2 or
(ii) any shares of Series 1 PCS Stock or Common Stock received by FT, DT or any
of their Affiliates in the Merger (including any shares of Series 1 PCS Stock
or Common Stock received by FT, DT or any of their Affiliates as a result of a
stock-split, stock dividend or similar distribution with respect to such stock)
are redeemed pursuant to this Section 2.2, then in each case the redemption
price per share of any such stock so redeemed shall be equal to the Market
Price of a share of Series 1 PCS Stock or Common Stock, as the case may be, on
the Redemption Date.
Any notice that is mailed as herein provided shall be conclusively presumed
to have been duly given, whether or not the holder of shares to be redeemed
received such notice.
2.3. Beneficial Ownership Inquiry. (a) The Corporation may by written notice
require a Person that is a holder of record of Corporation Common Stock or that
the Corporation knows to have, or has reasonable cause to believe has,
Beneficial Ownership of Corporation Common Stock, to certify that, to the
knowledge of such Person:
(i) no Corporation Common Stock as to which such Person has record ownership
or Beneficial Ownership is Beneficially Owned by Aliens; or
(ii) the number and class or series of shares of Corporation Common Stock
owned of record or Beneficially Owned by such Person that are owned of record
or Beneficially Owned by Persons that are Aliens are as set forth in such
certificate.
(b) With respect to any Corporation Common Stock identified by such Person
in response to Section 2.3(a)(ii) above, the Corporation may require such
Person to provide such further information as the Corporation may reasonably
require in order to implement the provisions of Section 2.2.
(c) For purposes of applying Section 2.2 with respect to any Corporation
Common Stock, if any Person fails to provide the certificate or other
information to which the Corporation is entitled pursuant to this Section 2.3,
the Corporation in its sole discretion may presume that the Corporation Common
Stock in question is, or is not, Beneficially Owned by Aliens.
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2.4. Factual Determinations. The Board of Directors shall have the power and
duty to construe and apply the provisions of Sections 2.2 and 2.3 and to make
all determinations necessary or desirable to implement such provisions,
including but not limited to: (a) the number of shares of Corporation Common
Stock that are Beneficially Owned by any Person; (b) whether a Person is an
Alien; (c) the application of any other definition of these Articles of
Incorporation to the given facts; and (d) any other matter relating to the
applicability or effect of Section 2.2.
Section 3. Voting Powers.
3.1. General. Except as otherwise provided by law or as expressly set forth
in ARTICLE FIVE or in this ARTICLE SIX, each share of Corporation Common Stock
shall be entitled to vote, as provided in Section 3.2, on all matters in
respect of which the holders of Corporation Common Stock are entitled to vote,
and, except as otherwise provided by the terms of any outstanding series of
Preferred Stock, the holders of Corporation Common Stock shall vote together
with the holders of all other classes or series of capital stock which have
general voting power on all such matters as a single class; provided, however,
that:
(a) holders of WorldCom Group Common Stock, voting separately as a class in
accordance with Section 3.2(b), shall be entitled to vote upon a proposed
amendment to these Articles of Incorporation if such amendment would (i)
increase or decrease the aggregate number of authorized shares of WorldCom
Group Common Stock, (ii) increase or decrease the par value of the shares of
WorldCom Group Common Stock or (iii) alter or change the powers, preferences or
special rights of the shares of WorldCom Group Common Stock so as to affect
them adversely; and
(b) holders of PCS Group Common Stock, voting separately as a class in
accordance with Section 3.2(c), shall be entitled to vote upon a proposed
amendment to these Articles of Incorporation if such amendment would (i)
increase or decrease the aggregate number of authorized shares of PCS Group
Common Stock, (ii) increase or decrease the par value of shares of PCS Group
Common Stock or (iii) alter or change the powers, preferences or special rights
of the shares of PCS Group Common Stock so as to affect them adversely.
The Board of Directors is authorized to adopt resolutions requiring the
approval of any class or series of capital stock, alone or together with any
other class or series of capital stock, as a condition precedent, or condition
subsequent, to the approval, adoption, authorization or consummation of any
action, transaction or any other matter by or involving the Corporation, and no
provision contained in the these Articles of Incorporation shall be interpreted
to limit or restrict such authority in any way.
3.2. Number of Votes. (a) On each matter to be voted on by the holders of
Corporation Common Stock, voting together as a single class:
(i) each outstanding share of Common Stock is entitled to one vote;
(ii) each outstanding share of Series 1 PCS Stock is entitled to a number of
votes (which, at any time, may be more or less than one whole vote and may
include a fraction of one vote) (the "PCS Per Share Vote") equal to (x) if the
record date for determining shareholders entitled to vote is within 30 Trading
Days from the Effective Time, the number of votes determined by multiplying one
by a fraction the numerator of which is the Market Value of one share of Series
1 PCS Stock on the record date and the denominator of which is the Market Value
of one share of Common Stock on the record date and (y) if the record date for
determining shareholders entitled to vote is after 30 Trading Days from the
Effective Time, the number of votes determined by multiplying one by the ratio
of the Average Trading Price of one share of Series 1 PCS Stock to the Average
Trading Price of one share of Common Stock computed as of the tenth Trading Day
preceding the record date for determining the shareholders entitled to vote,
expressed as a decimal fraction rounded to the nearest three decimal places;
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(iii) each outstanding share of Series 2 PCS Stock is entitled to a number
of votes (which, at any time, may be more or less than one whole vote and may
include a fraction of one vote) equal to ten percent of the applicable PCS Per
Share Vote as determined in accordance with Section 3.2(a)(ii); and
(iv) each outstanding share of Series 2 Common Stock is entitled to ten
percent of one vote.
(b) On each matter to be voted on by the holders of WorldCom Group Common
Stock, voting separately as a class, each outstanding share of Common Stock and
Series 2 Common Stock is entitled to one vote.
(c) On each matter to be voted on by the holders of PCS Group Common Stock,
voting separately as a class, each outstanding share of Series 1 PCS Stock and
Series 2 PCS Stock is entitled to one vote.
(d) In addition to the foregoing provisions of this Section 3, (i) if shares
of only one class of Corporation Common Stock of the same series is outstanding
on the record date for determining the holders of Corporation Common Stock
entitled to vote on any matter, then each share of that class and series shall
be entitled to one vote and (ii) if any class or any series of Corporation
Common Stock votes as a single class with respect to any matter, each share of
that class or series shall, for purposes of such vote, be entitled to one vote
on such matter.
Section 4. Liquidation Rights. If any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation occurs, then after payment or
provision for payment of the debts and other liabilities of the Corporation,
including the liquidation preferences of any series of Preferred Stock, the
holders of Corporation Common Stock shall be entitled to receive the remaining
assets of the Corporation, regardless of the Business Group to which such
assets are attributed in accordance with ARTICLE SIX, Section 10, divided among
such holders in accordance with the per share "Liquidation Units" attributable
to each such class or series of stock as follows:
(a) each share of Common Stock and Series 2 Common Stock is hereby
attributed a number of "Liquidation Units" (rounded to the nearest 1/10,000)
equal to 1.0 divided by the FON Exchange Ratio; and
(b) each share of PCS Group Common Stock is hereby attributed a number of
"Liquidation Units" (rounded to the nearest 1/10,000) equal to 0.2046.
The per share "Liquidation Units" of each such class or series of
Corporation Common Stock are subject to adjustment as determined by the Board
of Directors to be appropriate to reflect equitably (i) any subdivision (by
stock split or otherwise) or combination (by reverse stock split or otherwise)
of such class or series of Corporation Common Stock or (ii) any dividend or
other distribution of shares of such class or series of Corporation Common
Stock to holders of shares of such class or series of Corporation Common Stock.
Neither the merger nor consolidation of the Corporation, nor the Transfer of
all or part of its assets, shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 4. Notwithstanding the foregoing, any transaction or series of
related transactions which results in the distribution of all or substantially
all the assets of the PCS Group (excluding any portion of such assets retained
by the Corporation or distributed to holders of WorldCom Group Common Stock in
respect of the WorldCom Group Intergroup Interest Fraction) to the holders of
the outstanding PCS Group Common Stock by way of the distribution of equity
interests in one or more entities that collectively hold, directly or
indirectly, all or substantially all of the assets of the PCS Group (including,
without limitation, the PCS Group Subsidiary) shall not constitute a voluntary
or involuntary liquidation, dissolution or winding up of the Corporation for
purposes of this Section 4 but shall be subject to ARTICLE SIX, Section 7.2.
Section 5. Dividends. Dividends payable in cash shall be declared and paid
only out of net income or surplus of the Corporation and may be declared and
paid upon each class and series of Corporation Common
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Stock, upon the terms with respect to each such class and series, and subject
to the limitations provided for in this Section 5 and in ARTICLE SIX, Section
9, as the Board of Directors may determine.
5.1. Generally. Dividends payable in cash on Corporation Common Stock may be
declared and paid only out of the funds of the Corporation legally available
therefor.
5.1.1. The holders of the Common Stock shall be entitled to receive, when
and if declared by the Board of Directors in accordance with this Section 5.1,
dividends in respect of the Common Stock equivalent on a per share basis to
those payable on the Series 2 Common Stock. Dividends on the Common Stock shall
be payable on the same date fixed for the payment of the corresponding dividend
on shares of Series 2 Common Stock and shall be in an amount per share equal to
the full per share amount of any cash dividend paid on shares of Series 2
Common Stock, plus the full per share amount (payable in kind) of any non-cash
dividend paid on shares of Series 2 Common Stock; provided that if the
Corporation shall declare and pay any dividend on shares of Series 2 Common
Stock payable in shares of Series 2 Common Stock or Series 2 PCS Stock, or in
options, warrants or rights to acquire shares of Series 2 Common Stock or
Series 2 PCS Stock, or in securities convertible into or exchangeable or
exercisable for shares of Series 2 Common Stock or Series 2 PCS Stock, then in
each case, the Corporation shall declare and pay, at the same time that it
declares and pays any such dividend, an equivalent dividend per share on the
Common Stock payable in shares of Common Stock or Series 1 PCS Stock,
respectively, or equivalent corresponding options, warrants or rights to
acquire shares of Common Stock or Series 1 PCS Stock, respectively, or
equivalent corresponding securities convertible into or exchangeable or
exercisable for shares of Common Stock or Series 1 PCS Stock, respectively.
5.1.2. The holders of shares of Series 2 Common Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 2 Common Stock equivalent on a
per share basis to those payable on the Common Stock. Dividends on the Series 2
Common Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Common Stock and shall be in an amount per
share equal to the full per share amount of any cash dividend paid on shares of
Common Stock, plus the full per share amount (payable in kind) of any non-cash
dividend paid on shares of Common Stock; provided that if the Corporation shall
declare and pay any dividend on shares of Common Stock payable in shares of
Common Stock or Series 1 PCS Stock, or in options, warrants or rights to
acquire shares of Common Stock or Series 1 PCS Stock, or in securities
convertible into or exchangeable or exercisable for shares of Common Stock or
Series 1 PCS Stock, then in each case, the Corporation shall declare and pay,
at the same time that it declares and pays any such dividend, an equivalent
dividend per share on the Series 2 Common Stock payable in shares of Series 2
Common Stock or Series 2 PCS Stock, respectively, or equivalent corresponding
options, warrants or rights to acquire shares of Series 2 Common Stock or
Series 2 PCS Stock, respectively, or equivalent corresponding securities
convertible into or exchangeable or exercisable for shares of Series 2 Common
Stock or Series 2 PCS Stock, respectively.
5.1.3. The holders of shares of Series 1 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 1 PCS Stock equivalent on a per
share basis to those payable on the Series 2 PCS Stock. Dividends on the Series
1 PCS Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 2 PCS Stock and shall be in an
amount per share equal to the full per share amount of any cash dividend paid
on shares of Series 2 PCS Stock, plus the full per share amount (payable in
kind) of any non-cash dividend paid on shares of Series 2 PCS Stock; provided
that if the Corporation shall declare and pay any dividend on shares of Series
2 PCS Stock payable in shares of Series 2 PCS Stock, or in options, warrants or
rights to acquire shares of Series 2 PCS Stock, or in securities convertible
into or exchangeable or exercisable for shares of Series 2 PCS Stock, then in
each case, the Corporation shall declare and pay, at the same time that it
declares and pays any such dividend, an equivalent dividend per share on the
Series 1 PCS Stock payable in shares of Series 1 PCS Stock, or equivalent
corresponding options, warrants or rights to acquire shares of Series 1 PCS
Stock, or equivalent corresponding securities convertible into or exchangeable
or exercisable for shares of Series 1 PCS Stock.
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5.1.4. The holders of shares of Series 2 PCS Stock shall be entitled to
receive, when and if declared by the Board of Directors in accordance with this
Section 5.1, dividends in respect of the Series 2 PCS Stock equivalent on a per
share basis to those payable on the Series 1 PCS Stock. Dividends on the Series
2 PCS Stock shall be payable on the same date fixed for the payment of the
corresponding dividend on shares of Series 1 PCS Stock and shall be in an
amount per share equal to the full per share amount of any cash dividend paid
on shares of Series 1 PCS Stock, plus the full per share amount (payable in
kind) of any non-cash dividend paid on shares of Series 1 PCS Stock; provided
that if the Corporation shall declare and pay any dividend on shares of Series
1 PCS Stock payable in shares of Series 1 PCS Stock, or in options, warrants or
rights to acquire shares of Series 1 PCS Stock, or in securities convertible
into or exchangeable or exercisable for shares of Series 1 PCS Stock, then in
each case, the Corporation shall declare and pay, at the same time that it
declares and pays any such dividend, an equivalent dividend per share on the
Series 2 PCS Stock payable in shares of Series 2 PCS Stock, or equivalent
corresponding options, warrants or rights to acquire shares of Series 2 PCS
Stock, or equivalent corresponding securities convertible into or exchangeable
or exercisable for shares of Series 2 PCS Stock.
5.2. Separate Declaration of Dividends. The Board of Directors, in
accordance with the applicable provisions of Section 5.1, may at any time
declare and pay dividends (a) exclusively on the WorldCom Group Common Stock,
(b) exclusively on the PCS Group Common Stock or (c) on the WorldCom Group
Common Stock, on the one hand, and the PCS Group Common Stock, on the other, in
equal or unequal per share amounts, notwithstanding the amount of dividends
previously declared on each class or series of stock, the respective voting or
liquidation rights of each class or series of stock or any other factor.
5.3. Share Distributions. Subject to this Section 5 and except as permitted
by ARTICLE SIX, Sections 7.1 and 7.2, the Board of Directors may declare and
pay dividends or distributions of shares of Corporation Common Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of Corporation Common Stock) on shares of Corporation Common Stock or
shares of Preferred Stock only as follows:
(a) dividends or distributions of shares of (i) Common Stock (or Convertible
Securities convertible into or exchangeable or exercisable for shares of Common
Stock) and (ii) Series 2 Common Stock (or Convertible Securities convertible
into or exchangeable or exercisable for shares of Series 2 Common Stock) on
shares of (A) Common Stock and (B) Series 2 Common Stock, respectively, as well
as on WorldCom Group Preferred Stock;
(b) dividends or distributions of shares of (i) Series 1 PCS Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of Series 1 PCS Stock) and (ii) Series 2 PCS Stock (or Convertible
Securities convertible into or exchangeable or exercisable for Shares of Series
2 PCS Stock) on shares of (A) Series 1 PCS Stock and (B) Series 2 PCS Stock,
respectively, as well as on PCS Group Preferred Stock;
(c) dividends or distributions of shares of (i) Series 1 PCS Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of Series 1 PCS Stock) and (ii) Series 2 PCS Stock (or Convertible
Securities convertible into or exchangeable or exercisable for shares of Series
2 PCS Stock) on (A) shares of (x) Common Stock and (y) Series 2 Common Stock,
respectively, or (B) shares of WorldCom Group Preferred Stock, but in any such
case only if immediately prior to such dividend or distribution the Number Of
Shares Issuable With Respect To The WorldCom Group Intergroup Interest is
greater than or equal to the sum of (1) the amount of any decrease in the
Number Of Shares Issuable With Respect To The WorldCom Group Intergroup
Interest required by paragraph (b) of the definition of such term in ARTICLE
SIX, Section 10 as a result of such dividend or distribution and (2) the number
of shares of PCS Group Common Stock issuable upon conversion, exchange or
exercise of any Convertible Securities to be so issued or any other outstanding
Convertible Securities that have been issued as a dividend or other
distribution (including in connection with any reclassification or exchange of
shares) to holders of WorldCom Group Common Stock or shares of WorldCom Group
Preferred Stock; and
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(d) dividends or distributions of shares of PCS Group Preferred Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of PCS Group Preferred Stock) on shares of WorldCom Group Common Stock
or shares of WorldCom Group Preferred Stock, but in any such case only if
immediately prior to such dividend or distribution the Number Of Shares
Issuable With Respect To The WorldCom Group Intergroup Interest is greater than
or equal to the sum of (1) the amount of any decrease in the Number Of Shares
Issuable With Respect To The WorldCom Group Intergroup Interest required by
paragraph (b) of the definition of such term in ARTICLE SIX, Section 10 as a
result of such dividend or distribution and (2) the number of shares of PCS
Group Common Stock issuable upon conversion, exchange or exercise of any
Convertible Securities that have been issued as a dividend or other
distribution (including in connection with any reclassification or exchange of
shares) to holders of WorldCom Group Common Stock or shares of WorldCom Group
Preferred Stock.
For purposes of this Section 5.3, any outstanding Convertible Securities
that are convertible into or exchangeable or exercisable for any other
Convertible Securities which are themselves convertible into or exchangeable or
exercisable for WorldCom Group Common Stock (or other Convertible Securities
that are so convertible, exchangeable or exercisable) or PCS Group Common Stock
(or other Convertible Securities that are so convertible, exchangeable or
exercisable) shall be deemed to have been converted, exchanged or exercised in
full for such Convertible Securities.
Section 6. No Dilution or Impairment; Certain Tender Offers.
6.1. No Dilution or Impairment. (a) No reclassification, subdivision or
combination of the outstanding shares of Series 2 Common Stock shall be
effected directly or indirectly (including, without limitation, any
reclassification, subdivision or combination effected pursuant to a
consolidation, merger or liquidation) unless at the same time the Common Stock
is reclassified, subdivided or combined on an equal per share basis so that the
holders of the Common Stock (i) are entitled, in the aggregate, to a number of
Votes representing the same percentage of the Voting Power of the Corporation
relative to the Series 2 Common Stock as were represented by the shares of
Common Stock outstanding immediately prior to such reclassification,
subdivision or combination and (ii) maintain all of the rights associated with
the Common Stock set forth in these Articles of Incorporation, including,
without limitation, the right to receive dividends and other distributions
(including liquidating and other distributions) that are equivalent to those
payable per share in respect of shares of Series 2 Common Stock, subject to the
limitations, restrictions and conditions on such rights contained herein.
(b) No reclassification, subdivision or combination of the outstanding
shares of Common Stock shall be effected directly or indirectly (including,
without limitation, any reclassification, subdivision or combination effected
pursuant to a consolidation, merger or liquidation) unless at the same time the
Series 2 Common Stock is reclassified, subdivided or combined on an equal per
share basis so that the holders of the Series 2 Common Stock (i) are entitled,
in the aggregate, to a number of Votes representing the same percentage of the
Voting Power of the Corporation relative to the Common Stock as were
represented by the shares of Series 2 Common Stock outstanding immediately
prior to such reclassification, subdivision or combination and (ii) maintain
all of the rights associated with the Series 2 Common Stock set forth in these
Articles of Incorporation, including without limitation the right to receive
dividends and other distributions (including liquidating and other
distributions) that are equivalent to those payable per share in respect of
shares of Common Stock, subject to the limitations, restrictions and conditions
on such rights contained herein.
(c) No reclassification, subdivision or combination of the outstanding
shares of Series 2 PCS Stock shall be effected directly or indirectly
(including, without limitation, any reclassification, subdivision or
combination effected pursuant to a consolidation, merger or liquidation) unless
at the same time the Series 1 PCS Stock is reclassified, subdivided or combined
on an equal per share basis so that the holders of the Series 1 PCS Stock (i)
are entitled, in the aggregate, to a number of Votes representing the same
percentage of the Voting Power of the Corporation relative to the Series 2 PCS
Stock as were represented by the shares of Series 1 PCS Stock outstanding
immediately prior to such reclassification, subdivision or combination and (ii)
maintain all of the
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rights associated with the Series 1 PCS Stock set forth in these Articles of
Incorporation, including without limitation the right to receive dividends and
other distributions (including liquidating and other distributions) that are
equivalent to those payable per share in respect of shares of Series 2 PCS
Stock, subject to the limitations, restrictions and conditions on such rights
contained herein.
(d) No reclassification, subdivision or combination of the outstanding
shares of Series 1 PCS Stock shall be effected directly or indirectly
(including, without limitation, any reclassification, subdivision or
combination effected pursuant to a consolidation, merger or liquidation) unless
at the same time the Series 2 PCS Stock is reclassified, subdivided or combined
on an equal per share basis so that the holders of the Series 2 PCS Stock (i)
are entitled, in the aggregate, to a number of Votes representing the same
percentage of the Voting Power of the Corporation relative to the Series 1 PCS
Stock as were represented by the shares of Series 2 PCS Stock outstanding
immediately prior to such reclassification, subdivision or combination and (ii)
maintain all of the rights associated with the Series 2 PCS Stock set forth in
these Articles of Incorporation, including without limitation the right to
receive dividends and other distributions (including liquidating and other
distributions) that are equivalent to those payable per share in respect of
shares of Series 1 PCS Stock, subject to the limitations, restrictions and
conditions on such rights contained herein.
(e) Without limiting the generality of the foregoing, in the case of any
consolidation or merger of the Corporation with or into any other entity (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of the Common Stock or Series 1 PCS Stock) or any
reclassification of the Common Stock or Series 1 PCS Stock into any other form
of capital stock of the Corporation, whether in whole or in part, each holder
of Series 2 Common Stock or Series 2 PCS Stock, as the case may be, shall,
after such consolidation, merger or reclassification, have the right (but not
the obligation), by notice delivered to the Corporation or any successor
thereto within 90 days after the consummation of such consolidation, merger or
reclassification, to convert each share of Series 2 Common Stock or Series 2
PCS Stock, as the case may be, held by such holder into the kind and amount of
shares of stock and other securities and property which such holder would have
been entitled to receive upon such consolidation, merger, or reclassification
if such holder had converted its shares of Series 2 Common Stock or Series 2
PCS Stock into Common Stock or Series 1 PCS Stock, respectively, immediately
prior to such consolidation, merger or reclassification. The Corporation shall
not effect, directly or indirectly, any such reclassification, subdivision or
combination of outstanding shares of Common Stock or Series 1 PCS Stock unless
it delivers to the holders of Series 2 Common Stock and Series 2 PCS Stock
written notice of its intent to take such action at least ten Business Days
before taking such action.
6.2. Exclusionary Tender Offers. If the Board of Directors shall determine
not to oppose a tender offer by a Person other than a Cable Holder for Voting
Securities of the Corporation representing not less than 35 percent of the
Voting Power of the Corporation, and the terms of such tender offer do not
permit the holders of Series 2 PCS Stock to sell an equal or greater percentage
of their shares as the holders of Series 1 PCS Stock are permitted to sell
taking into account any proration, then each holder of Series 2 PCS Stock shall
have the right (but not the obligation) to deliver to the Corporation a written
notice requesting conversion of certain shares of Series 2 PCS Stock designated
by such holder of Series 2 PCS Stock into Series 1 PCS Stock, upon which
delivery each share of Series 2 PCS Stock so designated in such notice shall
automatically convert (without the payment of any consideration) into one duly
issued, fully paid and nonassessable share of Series 1 PCS Stock; provided that
(i) unless the Series 2 PCS Stock shall have otherwise been converted into
Series 1 PCS Stock pursuant to ARTICLE SIX, Section 7.5 upon or prior to the
consummation or abandonment of the transaction contemplated by such tender
offer, immediately following the consummation of such transaction or the
delivery by the Corporation to each holder of Series 2 PCS Stock of a notice
that such transaction has been abandoned, each share of Series 1 PCS Stock held
by a holder of Series 2 PCS Stock shall automatically reconvert (without the
payment of any consideration) into one duly issued, fully paid and
nonassessable share of Series 2 PCS Stock, and (ii) only those shares of Series
2 PCS Stock related to shares of Series 1 PCS Stock that were not so
reconverted shall be deemed for any purpose under these Articles of
Incorporation to have been converted into Series 1 PCS Stock, pursuant to this
Section 6.2 and the Series 2 PCS Stock so reconverted shall be deemed to have
been at all times outstanding shares of Series 2 PCS Stock; provided that if
the
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Series 2 PCS Stock has been converted into or redeemed for Series 2 Common
Stock pursuant to ARTICLE SIX, Section 7, then the terms "Series 2 Common
Stock" and "Common Stock" shall be deemed to replace the terms "Series 2 PCS
Stock" and "Series 1 PCS Stock," respectively, in this Section 6.2.
6.3. Issuer Tender Offers. The Corporation shall not conduct an issuer
tender offer (as defined on November 23, 1998 in Rule 13e-4 under the Exchange
Act) with respect to the Series 1 PCS Stock or the Common Stock unless (i) such
tender offer provides for the participation of the holders of Series 2 PCS
Stock, on the one hand, or Series 2 Common Stock, on the other hand, on an
equal basis with the Series 1 PCS Stock or the Common Stock, respectively, and
(ii) the Corporation accepts for repurchase the number of shares tendered by
the holders of Series 1 PCS Stock and Series 2 PCS Stock, on the one hand, or
Common Stock and Series 2 Common Stock, on the other, in proportion to the
number of shares of each such class and series tendered; provided that the
terms of this Section 6.3 shall not prevent the Corporation from administering
in good faith an "odd-lot" program in connection with such issuer tender offer
and shall not apply to customary
acquisitions of Corporation Common Stock made by the Corporation on the open
market for purposes of maintaining stock option plans of the Corporation.
Section 7. Conversion or Redemption of PCS Group Common Stock. Except as
otherwise provided in ARTICLE SIX, Sections 2.2 and 6.2, shares of PCS Group
Common Stock are (i) subject to conversion or redemption, as the case may be,
upon the terms provided in this Section 7 with respect to each class and
(ii) otherwise not subject to conversion or redemption.
7.1. Conversion or Redemption of PCS Group Common Stock. (a) If the
Corporation and/or its Subsidiaries makes a Disposition, in one transaction or
a series of related transactions, of all or substantially all of the properties
and assets attributed to the PCS Group to one or more persons or entities
(other than (i) the Disposition by the Corporation of all or substantially all
of its properties and assets in one transaction or a series of related
transactions in connection with the dissolution or the liquidation and winding
up of the Corporation and the distribution of assets to shareholders pursuant
to Section 4, (ii) the redemption of the PCS Group Common Stock for the stock
of the PCS Group Subsidiary pursuant to Section 7.2, (iii) to any person or
entity controlled (as determined by the Board of Directors) by the Corporation
or (iv) pursuant to a Related Business Transaction), then the Corporation
shall, on or prior to the 85th Trading Day after the date of consummation of
such Disposition (the "PCS Group Disposition Date"), either (I) pay a dividend
on the PCS Group Common Stock or (II) redeem some or all of the PCS Group
Common Stock or convert PCS Group Common Stock into Common Stock and Series 2
Common Stock, as applicable (or another class or series of common stock of the
Corporation), in accordance with the following subparagraphs (1) and (2) of
this paragraph (a) and, to the extent applicable, in accordance with Section
7.4, as the Board of Directors shall have selected among such alternatives:
(1) provided that there are funds of the Corporation legally available
therefor:
(A) pay to the holders of the shares of PCS Group Common Stock a dividend,
as the Board of Directors shall have declared in accordance with ARTICLE SIX,
Section 5.1, in cash and/or in securities (other than a dividend of Corporation
Common Stock or other common equity securities of the Corporation) or other
property having a Fair Value as of the PCS Group Disposition Date in the
aggregate equal to the product of the Outstanding PCS Fraction as of the record
date for determining holders entitled to receive such dividend multiplied by
the Fair Value of the Net Proceeds of such Disposition; or
(B) (i) subject to the last sentence of this paragraph (a), if such
Disposition involves all (not merely substantially all) of the properties and
assets attributed to the PCS Group, redeem as of the Redemption Date provided
by Section 7.4(c) all outstanding shares of PCS Group Common Stock in exchange
for cash and/or securities (other than Corporation Common Stock or other common
equity securities of the Corporation) or other property having a Fair Value as
of the PCS Group Disposition Date in the aggregate equal to the product of the
Outstanding PCS Fraction as of such Redemption Date multiplied by the Fair
Value of the Net Proceeds of such Disposition (such aggregate amount to be
allocated to shares of Series 1 PCS Stock and Series 2 PCS
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Stock in the ratio of the number of shares of each such series outstanding to
the other series (so that the amount of consideration paid for the redemption
of each share of Series 1 PCS Stock and Series 2 PCS Stock is the same)); or
(ii) subject to the last sentence of this paragraph (a), if such Disposition
involves substantially all (but not all) of the properties and assets
attributed to the PCS Group, redeem as of the Redemption Date provided by
Section 7.4(d) the number of whole shares of PCS Group Common Stock (which may
be all of such shares outstanding) as have in the aggregate an average Market
Value during the period of ten consecutive Trading Days beginning on the
sixteenth Trading Day immediately succeeding the PCS Group Disposition Date
closest to the product of the Outstanding PCS Fraction as of the date such
shares are selected for redemption multiplied by the Fair Value as of the PCS
Group Disposition Date of the Net Proceeds of such Disposition, in exchange for
cash and/or securities (other than Corporation Common Stock or other common
equity securities of the Corporation) or other property having a Fair Value in
the aggregate equal to such product (such aggregate amount to be allocated to
shares of Series 1 PCS Stock and Series 2 PCS Stock in the ratio of the number
of shares of each such series outstanding to the other series (so that the
amount of consideration paid for the redemption of each share of Series 1 PCS
Stock and Series 2 PCS Stock is the same)); or
(2) convert each outstanding share of Series 1 PCS Stock and Series 2 PCS
Stock as of the Conversion Date provided by Section 7.4(e) into a number of
fully paid and nonassessable shares of Common Stock and Series 2 Common Stock,
respectively (or, if the Common Stock is not Publicly Traded at such time and
shares of another class or series of common stock of the Corporation (other
than PCS Group Common Stock) are then Publicly Traded, of such other class or
series of common stock as has the largest Total Market Capitalization as of the
close of business on the Trading Day immediately preceding the date of the
notice of such conversion required by Section 7.4(e)) equal to 110% of the
ratio, expressed as a decimal fraction rounded to the nearest five decimal
places, of the average Market Value of one share of Series 1 PCS Stock over the
period of ten consecutive Trading Days beginning on the sixteenth Trading Day
following the PCS Group Disposition Date to the average Market Value of one
share of Common Stock (or such other class or series of common stock) over the
same ten Trading Day period.
Notwithstanding the foregoing provisions of this paragraph (a), the
Corporation may redeem PCS Group Common Stock as provided by subparagraph
(1)(B)(i) or (1)(B)(ii) of this paragraph (a) only if the amount to be paid in
redemption of such stock is less than or equal to the sum of (i) the amount
available for the payment of dividends on such shares to be redeemed in
accordance with ARTICLE SIX, Section 5 measured as of the Redemption Date and
(ii) the amount determined to be capital in respect of the shares to be
redeemed in accordance with applicable corporation law as of the Redemption
Date.
(b) For purposes of this Section 7.1:
(i) as of any date, "substantially all of the properties and assets"
attributed to the PCS Group means a portion of such properties and assets that
represents at least 80% of the Fair Value of the properties and assets
attributed to the PCS Group as of such date;
(ii) in the case of a Disposition of the properties and assets attributed to
the PCS Group in a series of related transactions, such Disposition shall not
be deemed to have been consummated until the consummation of the last of such
transactions; and
(iii) the Board of Directors may pay any dividend or redemption price
referred to in Section 7.1(a) in cash, securities (other than Corporation
Common Stock or other common equity securities of the Corporation) or other
property, regardless of the form or nature of the proceeds of the Disposition;
provided that if such payment is made in Voting Securities (other than
Corporation Common Stock or other common equity securities of the Corporation)
of the Corporation or another entity, holders of Series 2 PCS Stock shall
receive Voting Securities with Voting Power equivalent on a per share basis to
such shares received by holders of Series 1 PCS Stock.
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(c) If the payment of the dividend or the redemption price with respect to
the PCS Group Common Stock provided for by Section 7.1(a)(1) occurs prior to
November 23, 2001, then the Board of Directors may convert each share of Series
1 PCS Stock and Series 2 PCS Stock remaining outstanding, but only as of a
Conversion Date (determined as provided by Section 7.4(e) hereof) prior to the
first anniversary of the payment of such dividend or redemption price, into a
number of fully paid and nonassessable shares of Common Stock and Series 2
Common Stock, respectively (or, if the Common Stock is not Publicly Traded at
such time and shares of any other class or series of common stock of the
Corporation (other than PCS Group Common Stock) are then Publicly Traded, of
such other class or series of common stock as has the largest Total Market
Capitalization as of the close of business on the Trading Day immediately
preceding the date of the notice of such conversion required by Section 7.4(e))
equal to 110% of the Optional Conversion Ratio as of the fifth Trading Day
prior to the date of the notice of such conversion required by Section 7.4(e).
(d) At any time following November 23, 2001, the Board of Directors may
convert each outstanding share of Series 1 PCS Stock and Series 2 PCS Stock, as
of the Conversion Date provided by Section 7.4(e), into the
number of fully paid and nonassessable shares of Common Stock and Series 2
Common Stock, respectively (or, if the Common Stock is not Publicly Traded at
such time and shares of any other class or series of common stock of the
Corporation (other than PCS Group Common Stock) are then Publicly Traded, of
such other class or series of common stock as has the largest Total Market
Capitalization as of the close of business on the Trading Day immediately
preceding the date of the notice of conversion required by Section 7.4(e))
equal to, on the Conversion Date, (i) if following November 23, 2001, but prior
to November 23, 2002, 110% of the Optional Conversion Ratio as of the fifth
Trading Day prior to the date of the notice of such conversion required by
Section 7.4(e), or (ii) if on or after November 23, 2002, at such conversion
ratio (if any) as the Board of Directors determines to be fair to holders of
the PCS Group Common Stock, taken as a separate class, and holders of WorldCom
Group Common Stock, taken as a separate class.
7.2. Redemption of PCS Group Common Stock for Subsidiary Stock. At any time
the Board of Directors may redeem all of the outstanding shares of PCS Group
Common Stock, on a Redemption Date of which notice is delivered in accordance
with Section 7.4(f), in exchange for the number of shares of common stock of
one or more wholly-owned subsidiaries of the Corporation (collectively, the
"PCS Group Subsidiary") that collectively hold directly or indirectly all of
the assets and liabilities attributed to the PCS Group (and no other assets or
liabilities of the Corporation or any subsidiary thereof) equal to the product
of the Outstanding PCS Fraction and the number of shares of common stock of
such PCS Group Subsidiary to be outstanding immediately following such exchange
of shares (including any shares of such PCS Group Subsidiary which will be
retained by the Corporation in respect of the WorldCom Group Intergroup
Interest Fraction), such PCS Group Subsidiary shares to be delivered to the
holders of shares of PCS Group Common Stock on the Redemption Date and to be
divided among the holders of PCS Group Common Stock pro rata in accordance with
the number of shares of PCS Group Common Stock held by each on such Redemption
Date, each of which shares of common stock of such PCS Group Subsidiary shall
be, upon such delivery, fully paid and nonassessable; provided, however, that
(a) no such redemption pursuant to this Section 7.2 may occur prior to
November 23, 2000, unless such redemption is approved by the affirmative vote
of the holders of a majority of shares of PCS Group Common Stock, voting
separately as a class in accordance with ARTICLE SIX, Section 3.2(c); and
(b) holders of shares of Series 2 PCS Stock outstanding immediately prior to
the Redemption Date shall receive on a per share basis, pursuant to such
redemption, shares of common stock of such PCS Group Subsidiary with Voting
Power equivalent on a per share basis to such shares received by holders of
Series 1 PCS Stock;
and provided further that no such redemption pursuant to this Section 7.2 may
occur unless (i) the redemption is tax-free to the holders of PCS Group Common
Stock or (ii) such other arrangement exists for the benefit of the holders of
PCS Group Common Stock redeemed such that, net of all taxes related to such
redemption and
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to such other arrangement itself which are realized by such Shareholders, such
Shareholders will be in a position that is substantially equivalent
economically to the position such Shareholders would be in after a tax-free
distribution described in the immediately preceding clause (i).
7.3. Treatment of Convertible Securities. After any Conversion Date or
Redemption Date on which all outstanding shares of any class or series of PCS
Group Common Stock are converted or redeemed, any share of such class or series
of PCS Group Common Stock that is issued on conversion, exchange or exercise of
any Convertible Securities shall, immediately upon issuance pursuant to such
conversion, exchange or exercise and without any notice from or to, or any
other action on the part of, the Corporation or its Board of Directors or the
holder of such Convertible Security:
(a) if the shares of such class or series of PCS Group Common Stock
outstanding on such Conversion Date were converted into shares of another class
or series of Corporation Common Stock (or another class or series of common
stock of the Corporation) pursuant to subparagraph (a)(2) or paragraph (c) or
(d) of Section 7.1, be converted into the amount of cash and/or the number of
shares of the kind of capital stock
and/or other securities or property of the Corporation that the number of
shares of such class or series of PCS Group Common Stock issued upon such
conversion, exchange or exercise would have received had such shares been
outstanding on such Conversion Date; or
(b) if the shares of such class or series of PCS Group Common Stock
outstanding on such Redemption Date were redeemed pursuant to Section
7.1(a)(1)(B) or Section 7.2, be redeemed, to the extent of funds of the
Corporation legally available therefor, for $0.01 per share in cash for each
share of such class or series of PCS Group Common Stock issued upon such
conversion, exchange or exercise.
The provisions of this Section 7.3 shall not apply to the extent that other
adjustments in respect of such conversion, exchange or redemption of a class or
series of PCS Group Common Stock are otherwise made pursuant to the provisions
of such Convertible Securities.
7.4. Notice and Other Provisions. (a) Not later than the tenth Trading Day
following the consummation of a Disposition referred to in Section 7.1(a), the
Corporation shall announce publicly by press release (i) the Net Proceeds of
such Disposition, (ii) the number of shares outstanding of the PCS Group Common
Stock and (iii) the number of shares of PCS Group Common Stock into or for
which Convertible Securities are then convertible, exchangeable or exercisable
and the conversion, exchange or exercise price thereof. Not earlier than the
26th Trading Day and not later than the 30th Trading Day following the
consummation of such Disposition, the Corporation shall announce publicly by
press release which of the actions specified in Section 7.1(a) it has
irrevocably determined to take in respect of such Disposition.
(b) If the Corporation determines to pay a dividend on shares of PCS Group
Common Stock pursuant to Section 7.1(a)(1)(A), the Corporation shall, not later
than the 30th Trading Day following the consummation of the Disposition
referred to in such Section, cause notice to be given to each holder of PCS
Group Common Stock and to each holder of Convertible Securities that are
convertible into or exchangeable or exercisable for shares of PCS Group Common
Stock (unless alternate provision for such notice to the holders of such
Convertible Securities is made pursuant to the terms of such Convertible
Securities), setting forth (i) the record date for determining holders entitled
to receive such dividend, which shall be not earlier than the 40th Trading Day
and not later than the 50th Trading Day following the consummation of such
Disposition, (ii) the anticipated payment date of such dividend (which shall
not be more than 85 Trading Days following the consummation of such
Disposition), (iii) the kind of shares of capital stock, cash and/or other
securities or property to be paid as such dividend in respect of the
outstanding shares of PCS Group Common Stock, (iv) the Net Proceeds of such
Disposition, (v) the Outstanding PCS Fraction on the date of such notice, (vi)
the number of outstanding shares of PCS Group Common Stock and the number of
shares of PCS Group Common Stock into or for which outstanding Convertible
Securities are then convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof and (vii) in the case of notice
to be given to holders of Convertible Securities, a statement to the effect
that a holder of such Convertible Securities shall be entitled to
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receive such dividend only if such holder properly converts, exchanges or
exercises such Convertible Securities on or prior to the record date referred
to in clause (i) of this sentence. Such notice shall be sent by first-class
mail, postage prepaid, to each such holder at such holder's address as the same
appears on the stock transfer books of the Corporation.
(c) If the Corporation determines to redeem PCS Group Common Stock pursuant
to Section 7.1(a)(1)(B)(i), the Corporation shall, not earlier than the 45th
Trading Day and not later than the 35th Trading Day prior to the Redemption
Date, cause notice to be given to each holder of shares of PCS Group Common
Stock and to each holder of Convertible Securities convertible into or
exchangeable or exercisable for shares of PCS Group Common Stock (unless
alternate provision for such notice to the holders of such Convertible
Securities is made pursuant to the terms of such Convertible Securities),
setting forth (i) a statement that all shares of PCS Group Common Stock
outstanding on the Redemption Date shall be redeemed, (ii) the Redemption Date
(which shall not be more than 85 Trading Days following the consummation of
such Disposition), (iii) the kind of shares of capital stock, cash and/or other
securities or property in which the redemption price for the shares to be
redeemed is to be paid, (iv) the Net Proceeds of such Disposition, (v) the
Outstanding PCS Fraction on the date of such notice, (vi) the place or places
where stock certificates for shares of PCS Group Common Stock, properly
endorsed or assigned for transfer (unless the Corporation waives such
requirement), are to be surrendered for delivery of cash and/or securities or
other property, (vii) the number of outstanding shares of PCS Group Common
Stock and the number of shares of PCS Group Common Stock into or for which such
outstanding Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof, (viii) in
the case of notice to be given to holders of Convertible Securities, a
statement to the effect that a holder of such Convertible Securities shall be
entitled to participate in such redemption only if such holder properly
converts, exchanges or exercises such Convertible Securities on or prior to the
Redemption Date referred to in clause (ii) of this sentence and a statement as
to what, if anything, such holder will be entitled to receive pursuant to the
terms of such Convertible Securities or, if applicable, this Section 7 if such
holder thereafter converts, exchanges or exercises such Convertible Securities
and (ix) a statement to the effect that, except as otherwise provided by
paragraph (i) of this Section 7.4, dividends on such shares of PCS Group Common
Stock shall cease to be paid as of such Redemption Date. Such notice shall be
sent by first-class mail, postage prepaid, to each such holder at such holder's
address as the same appears on the stock transfer books of the Corporation.
(d) If the Corporation determines to redeem PCS Group Common Stock pursuant
to Section 7.1(a)(1)(B)(ii), the Corporation shall, not later than the 30th
Trading Day following the consummation of the Disposition referred to in such
subparagraph, cause notice to be given to each holder of shares of PCS Group
Common Stock and to each holder of Convertible Securities that are convertible
into or exchangeable or exercisable for shares of PCS Group Common Stock
(unless alternate provision for such notice to the holders of such Convertible
Securities is made pursuant to the terms of such Convertible Securities)
setting forth (i) a date, not earlier than the 40th Trading Day and not later
than the 50th Trading Day following the consummation of the Disposition in
respect of which such redemption is to be made, on which shares of PCS Group
Common Stock shall be selected for redemption, (ii) the anticipated Redemption
Date (which shall not be more than 85 Trading Days following the consummation
of such Disposition), (iii) the kind of shares of capital stock, cash and/or
other securities or property in which the redemption price for the shares to be
redeemed is to be paid, (iv) the Net Proceeds of such Disposition, (v) the
Outstanding PCS Fraction on the date of such notice, (vi) the number of shares
of PCS Group Common Stock outstanding and the number of shares of PCS Group
Common Stock into or for which outstanding Convertible Securities are then
convertible, exchangeable or exercisable and the conversion, exchange or
exercise price thereof, (vii) in the case of notice to be given to holders of
Convertible Securities, a statement to the effect that a holder of such
Convertible Securities shall be eligible to participate in such selection for
redemption only if such holder properly converts, exchanges or exercises such
Convertible Securities on or prior to the record date referred to in clause (i)
of this sentence, and a statement as to what, if anything, such holder will be
entitled to receive pursuant to the terms of such Convertible Securities or, if
applicable, this Section 7 if such holder thereafter converts, exchanges or
exercises such Convertible Securities and (viii) a statement that the
Corporation will not be required to register
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a transfer of any shares of PCS Group Common Stock for a period of 15 Trading
Days next preceding the date referred to in clause (i) of this sentence.
Promptly following the date referred to in clause (i) of the preceding
sentence, but not earlier than 40 Trading Days nor later than 50 Trading Days
following the consummation of such Disposition, the Corporation shall cause a
notice to be given to each holder of record of shares of PCS Group Common Stock
to be redeemed setting forth (i) the number of shares of PCS Group Common Stock
held by such holder to be redeemed, (ii) a statement that such shares of PCS
Group Common Stock shall be redeemed, (iii) the Redemption Date, (iv) the kind
and per share amount of cash and/or securities or other property to be received
by such holder with respect to each share of PCS Group Common Stock to be
redeemed, including details as to the calculation thereof, (v) the place or
places where stock certificates for shares of PCS Group Common Stock, properly
endorsed or assigned for transfer (unless the Corporation shall waive such
requirement), are to be surrendered for delivery of such cash and/or securities
or other property, (vi) if applicable, a statement to the effect that the
shares being redeemed may no longer be transferred on the stock transfer books
of the Corporation after the Redemption Date and (vii) a statement to the
effect that, subject to paragraph (i) of this Section 7.4, dividends on such
shares of PCS Group Common Stock shall cease to be paid as of the Redemption
Date. Such notices shall be sent by first-class mail, postage prepaid, to each
such holder at such holder's address as the same appears on the stock transfer
books of the Corporation.
(e) If the Corporation determines to convert the PCS Group Common Stock
pursuant to Section 7.1(a)(2), Section 7.1(c) or Section 7.1(d), as the case
may be, the Corporation shall, not earlier than the 45th Trading Day and not
later than the 35th Trading Day prior to the Conversion Date, cause notice to
be given to each holder of shares of PCS Group Common Stock and to each holder
of Convertible Securities that are convertible into or exchangeable or
exercisable for shares of PCS Group Common Stock (unless alternate provision
for such notice to the holders of such Convertible Securities is made pursuant
to the terms of such Convertible Securities) setting forth (i) a statement that
all outstanding shares of PCS Group Common Stock shall be converted, (ii) the
Conversion Date (which, in the case of a conversion after a Disposition, shall
not be more than 85 Trading Days following the consummation of such
Disposition), (iii) the per share number of shares of Common Stock (or Series 2
Common Stock, if applicable) or another class or series of common stock of the
Corporation, as the case may be, to be received with respect to each share of
PCS Group Common Stock, including details as to the calculation thereof, (iv)
the place or places where stock certificates for shares of PCS Group Common
Stock, properly endorsed or assigned for transfer (unless the Corporation shall
waive such requirement), are to be surrendered for delivery of stock
certificates for shares of Common Stock (or Series 2 Common Stock, if
applicable) or another class or series of common stock of the Corporation, as
the case may be, (v) the number of outstanding shares of PCS Group Common Stock
and the number of shares of PCS Group Common Stock into or for which
outstanding Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof, (vi) a
statement to the effect that, subject to paragraph (i) of this Section 7.4,
dividends on such shares of PCS Group Common Stock shall cease to be paid as of
such Conversion Date and (vii) in the case of notice to holders of such
Convertible Securities, a statement to the effect that a holder of such
Convertible Securities shall be entitled to receive shares of common stock upon
such conversion only if such holder properly converts, exchanges or exercises
such Convertible Securities on or prior to such Conversion Date and a statement
as to what, if anything, such holder will be entitled to receive pursuant to
the terms of such Convertible Securities or, if applicable, this Section 7.4 if
such holder thereafter converts, exchanges or exercises such Convertible
Securities. Such notice shall be sent by first-class mail, postage prepaid, to
each such holder at such holder's address as the same appears on the stock
transfer books of the Corporation.
(f) If the Corporation determines to redeem shares of PCS Group Common Stock
pursuant to Section 7.2, the Corporation shall cause notice to be given to each
holder of shares of PCS Group Common Stock to be redeemed and to each holder of
Convertible Securities that are convertible into or exchangeable or exercisable
for shares of such class of PCS Group Common Stock (unless alternate provision
for such notice to the holders of such Convertible Securities is made pursuant
to the terms of such Convertible Securities), setting forth (i) a statement
that all shares of PCS Group Common Stock outstanding on the Redemption Date
shall be redeemed in exchange for shares of common stock of the PCS Group
Subsidiary, (ii) the Redemption Date, (iii) the
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Outstanding PCS Fraction on the date of such notice, (iv) the place or places
where stock certificates for shares of PCS Group Common Stock to be redeemed,
properly endorsed or assigned for transfer (unless the Corporation shall waive
such requirement), are to be surrendered for delivery of stock certificates for
shares of the PCS Group Subsidiaries, (v) a statement to the effect that,
subject to paragraph (i) of this Section 7.4, dividends on such shares of PCS
Group Common Stock shall cease to be paid as of such Redemption Date, (vi) the
number of shares of PCS Group Common Stock outstanding and the number of shares
of PCS Group Common Stock into or for which outstanding Convertible Securities
are then convertible, exchangeable or exercisable and the conversion, exchange
or exercise price thereof and (vii) in the case of notice to holders of
Convertible Securities, a statement to the effect that a holder of Convertible
Securities shall be entitled to receive shares of common stock of the PCS Group
Subsidiary upon redemption only if such holder properly converts, exchanges or
exercises such Convertible Securities on or prior to the Redemption Date and a
statement as to what, if anything, such holder will be entitled to receive
pursuant to the terms of such Convertible Securities or, if applicable, this
Section 7 if such holder thereafter converts, exchanges or exercises such
Convertible Securities. Such notice shall be sent by first-class mail, postage
prepaid, not less than 30 Trading Days nor more than 45 Trading Days prior to
the Redemption Date to each such holder at such holder's address as the same
appears on the stock transfer books of the Corporation. If any shares of Series
2 PCS Stock are outstanding immediately prior to the Redemption Date, then the
notice provided to each holder of Series 2 PCS Stock pursuant to this Section
7.4(f) will also indicate that such holders of shares of Series 2 PCS Stock
outstanding immediately prior to the Redemption Date shall receive on a per
share basis, pursuant to such redemption, shares of common stock of such PCS
Group Subsidiary with Voting Power equivalent to such shares received by
holders of Series 1 PCS Stock.
(g) If less than all of the outstanding shares of PCS Group Common Stock are
to be redeemed pursuant to Section 7.1(a)(1), then the shares to be redeemed by
the Corporation shall be selected from among the holders of shares of PCS Group
Common Stock outstanding at the close of business on the record date for such
redemption on a pro rata basis among each class or series of PCS Group Common
Stock (including pro rata among all holders of Series 2 PCS Stock) or, if
Series 2 PCS Stock is no longer outstanding, by lot or such other method as may
be determined by the Board of Directors of the Corporation to be equitable.
(h) The Corporation shall not be required to issue or deliver fractional
shares of any capital stock or of any other securities to any holder of PCS
Group Common Stock upon any conversion, redemption, dividend or other
distribution pursuant to this Section 7. If more than one share of PCS Group
Common Stock shall be held at the same time by the same holder, the Corporation
may aggregate the number of shares of any capital stock that shall be issuable
or any other securities or property that shall be distributable to such holder
upon any conversion, redemption, dividend or other distribution (including any
fractional shares). If there are fractional shares of any capital stock or of
any other securities remaining to be issued or distributed to the holders of
PCS Group Common Stock, the Corporation shall, if such fractional shares are
not issued or distributed to the holder, pay cash in respect of such fractional
shares in an amount equal to the Fair Value thereof on the fifth Trading Day
prior to the date such payment is to be made (without interest). For purposes
of the preceding sentence only, "Fair Value" of any fractional share means (i)
in the case of any fraction of a share of capital stock of the Corporation, the
product of such fraction and the Market Value of one share of such capital
stock and (ii) in the case of any other fractional security, such value as is
determined by the Board of Directors.
(i) No adjustments in respect of dividends shall be made upon the conversion
or redemption of any shares of PCS Group Common Stock; provided, however, that
if the Conversion Date or Redemption Date, as the case may be, with respect to
any shares of PCS Group Common Stock shall be subsequent to the record date for
the payment of a dividend or other distribution thereon or with respect
thereto, the holders of such shares of PCS Group Common Stock at the close of
business on such record date shall be entitled to receive the dividend or other
distribution payable on or with respect to such shares on the date set for
payment of such dividend or other distribution, in each case without interest,
notwithstanding the subsequent conversion or redemption of such shares.
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(j) Before any holder of PCS Group Common Stock shall be entitled to receive
any cash payment and/or certificates or instruments representing shares of any
capital stock and/or other securities or property to be distributed to such
holder with respect to such shares of PCS Group Common Stock pursuant to this
Section 7, such holder shall surrender at such place as the Corporation shall
specify stock certificates for such shares of PCS Group Common Stock, properly
endorsed or assigned for transfer (unless the Corporation shall waive such
requirement). The Corporation shall as soon as practicable after receipt of
stock certificates representing such shares of PCS Group Common Stock deliver
to the person for whose account such shares of PCS Group Common Stock were so
surrendered, or to such person's nominee or nominees, the cash and/or the
certificates or instruments representing the number of whole shares of the kind
of capital stock and/or other securities or property to which such person shall
be entitled as aforesaid, together with any payment in respect of fractional
shares contemplated by Section 7.4(h), in each case without interest. If less
than all of the shares of PCS Group Common Stock represented by any one stock
certificate are to be redeemed or converted, then the Corporation shall issue
and deliver a new stock certificate for the shares of PCS Group Common Stock
not redeemed.
(k) From and after any applicable Conversion Date or Redemption Date, as the
case may be, all rights of a holder of shares of PCS Group Common Stock that
were converted or redeemed shall cease except for the right, upon surrender of
the stock certificates representing such shares of PCS Group Common Stock as
required by Section 7.4(j), to receive the cash and/or the certificates or
instruments representing shares of the kind of capital stock and/or other
securities or property for which such shares were converted or redeemed,
together with any payment in respect of fractional shares contemplated by
Section 7.4(h) and rights to dividends as provided in Section 7.4(i), in each
case without interest. Subject to the next sentence, any holder of a stock
certificate that immediately prior to the applicable Conversion Date or
Redemption Date represented shares of PCS Group Common Stock shall not be
entitled to receive any dividend or other distribution or interest payment with
respect to shares of any kind of capital stock or other security or instrument
for which PCS Group Common Stock was converted or redeemed until the surrender
as required by this Section 7 of such stock certificate in exchange for a
certificate or certificates or instrument or instruments representing such
capital stock or other security. Upon such surrender, there shall be paid to
the holder the amount of any dividends or other distributions (without
interest) which theretofore became payable on any class of capital stock of the
Corporation as of a record date after the Conversion Date or Redemption Date,
but that were not paid by reason of the foregoing, with respect to the number
of whole shares of the kind of capital stock represented by the stock
certificate or certificates issued upon such surrender. From and after a
Conversion Date or Redemption Date, the Corporation shall, however, be entitled
to treat the stock certificates for PCS Group Common Stock that have not yet
been surrendered for conversion or redemption as evidencing the ownership of
the number of whole shares of the kind or kinds of capital stock of the
Corporation for which the shares of PCS Group Common Stock represented by such
stock certificates shall have been converted or redeemed, notwithstanding the
failure to surrender such stock certificates.
(l) The Corporation shall pay any and all documentary, stamp or similar
issue or transfer taxes that may be payable in respect of the issuance or
delivery of any shares of capital stock and/or other securities upon conversion
or redemption of shares of PCS Group Common Stock pursuant to this Section 7.
The Corporation shall not, however, be required to pay any tax that may be
payable in respect of any transfer involved in the issuance or delivery of any
shares of capital stock and/or other securities in a name other than that in
which the shares of PCS Group Common Stock so converted or redeemed were
registered, and no such issuance or delivery shall be made unless and until the
person requesting such issuance or delivery has paid to the Corporation the
amount of any such tax or has established to the satisfaction of the
Corporation that such tax has been paid.
(m) Neither the failure to mail any notice required by this Section 7.4 to
any holder of PCS Group Common Stock or of Convertible Securities nor any
defect therein shall affect the sufficiency of any notice given to any other
holder of outstanding shares of PCS Group Common Stock or of Convertible
Securities or the validity of any such conversion or redemption.
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(n) The Board of Directors may establish such rules and requirements to
facilitate the effectuation of the transactions contemplated by this Section 7
as the Board of Directors shall determine to be appropriate.
7.5 Automatic Conversion of Series 2 PCS Stock and Series 2 Common Stock.
7.5.1. Below One Percent Voting Power. If the total number of Converted
Votes represented by the aggregate number of issued and outstanding shares of
Series 2 PCS Stock or Series 2 Common Stock, as the case may be, is below one
percent of the outstanding Voting Power of the Corporation for more than 90
consecutive days, then each outstanding share of Series 2 PCS Stock or Series 2
Common Stock will automatically convert (without the payment of any
consideration) into one duly issued, fully paid and nonassessable share of
Series 1 PCS Stock or Common Stock, respectively, such conversion to take place
on the 90th day following the Conversion Trigger Date.
7.5.2. Certain Transfers. Upon any Transfer of shares of Series 2 PCS Stock
or Series 2 Common Stock, as the case may be (other than a Transfer to a Cable
Holder) each such share so Transferred shall automatically convert (without the
payment of any consideration) into one duly issued, fully paid and
nonassessable share of Series 1 PCS Group Common Stock or Common Stock,
respectively, as of the date of such Transfer.
7.5.3. Exchange of Stock Certificates; Effect of Automatic Conversion of All
Series 2 PCS Stock. (a) Immediately upon the conversion of shares of Series 2
PCS Stock (or, if applicable, Series 2 Common Stock) into shares of Series 1
PCS Stock (or, if applicable, Common Stock), pursuant to this Section 7 (such
shares so converted hereinafter referred to as the "Converted Series Shares"),
the rights of the holders of such Converted Series Shares, as such, shall cease
and the holders thereof shall be treated for all purposes as having become the
record owners of the shares of Series 1 PCS Group Common Stock or Common Stock,
as the case may be, issuable upon such conversion (the "Newly Issued Shares");
provided that such Persons shall be entitled to receive when paid any dividends
declared on the Converted Series Shares as of a record date preceding the time
the Converted Series Shares were converted (the "Series Conversion Time") and
unpaid as of the Series Conversion Time. If the stock transfer books of the
Corporation shall be closed at the Series Conversion Time, such Person or
Persons shall be deemed to have become such holder or holders of record of the
Newly Issued Shares at the opening of business on the next succeeding day on
which such stock transfer books are open.
(b) As promptly as practicable after the Series Conversion Time, upon the
delivery to the Corporation of the stock certificates formerly representing
Converted Series Shares, the Corporation shall deliver or cause to be
delivered, to or upon the written order of the record holder of such stock
certificates, a stock certificate or certificates representing the number of
duly issued, fully paid and nonassessable Newly Issued Shares into which the
Converted Series Shares formerly represented by such stock certificates have
been converted in accordance with the provisions of this Section 7.5.
(c) The Corporation shall pay any and all documentary, stamp or similar
issue or transfer taxes that may be payable in respect of the issue or delivery
of Newly Issued Shares upon the conversion of Converted Series Shares pursuant
to this Section 7.5; provided that the Corporation shall not be required to pay
any tax which may be payable in respect of any registration of Transfer
involved in the issue or delivery of Newly Issued Shares in a name other than
that of the registered holder of shares converted or to be converted, and no
such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(d) The Corporation shall at all times reserve and keep available, out of
the aggregate of its authorized but unissued Series 1 PCS Stock, authorized but
unissued Common Stock, issued Series 1 PCS Stock held in its treasury and
issued Common Stock held in its treasury, for the purpose of effecting the
conversion of the Series 2 PCS Stock or Series 2 Common Stock, as the case may
be, contemplated hereby, the full number of shares of Series 1 PCS Stock and
Common Stock then deliverable upon the conversion of all outstanding shares of
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Series 2 PCS Stock or Series 2 Common Stock, as the case may be, and the full
number of shares of Series 2 PCS Stock the Cable Holders are permitted to
acquire under the Restructuring Agreement and the Cable Holder Standstill
Agreements.
Section 8. Application of the Provisions of ARTICLE SIX.
8.1. Certain Determinations of the Board of Directors. In addition to the
determinations regarding Preferred Stock to be made by the Board of Directors
as provided by Section 9.2, the Board of Directors shall make such
determinations (i) with respect to the assets and liabilities to be attributed
to the Business Groups (in accordance with the definitions of "PCS Group" and
"WorldCom Group" set forth in ARTICLE SIX, Section 10), (ii) with respect to
the application of the provisions of this ARTICLE SIX to transactions to be
engaged in by the Corporation and (iii) as may be or become necessary or
appropriate to the exercise of the powers, preferences and relative,
participating, optional and other special rights of the classes or series of
Corporation Common Stock, including, without limiting the foregoing, the
determinations referred to in the following paragraphs (a), (b), (c) and (d) of
this Section 8.1. A record of any such determination shall be filed with the
Secretary of the Corporation to be kept with the records of the actions of the
Board of Directors.
(a) Upon any acquisition by the Corporation or its Subsidiaries of any
assets or business, or any assumption of liabilities, outside of the ordinary
course of business of the WorldCom Group or the PCS Group, as the case may be,
the Board of Directors shall determine whether such assets, business and
liabilities (or an interest therein) shall be for the benefit of the WorldCom
Group or the PCS Group or that an interest therein shall be partly for the
benefit of the WorldCom Group and partly for the benefit of the PCS Group and,
accordingly, shall be attributed to the WorldCom Group or the PCS Group, or
partly to each, in accordance with the definitions of "PCS Group," "WorldCom
Group," and "Number Of Shares Issuable With Respect To The WorldCom Group
Intergroup Interest" set forth in ARTICLE SIX, Section 10.
(b) Upon any issuance of any shares of PCS Group Common Stock at a time when
the Number Of Shares Issuable With Respect To The WorldCom Group Intergroup
Interest is more than zero, the Board of Directors shall determine, based on
the use of the proceeds of such issuance and any other relevant factors,
whether all or any part of the shares of PCS Group Common Stock so issued
should reduce the Number Of Shares Issuable With Respect To The WorldCom Group
Intergroup Interest and the Number Of Shares Issuable With Respect To The
WorldCom Group Intergroup Interest shall be adjusted accordingly.
(c) Upon any issuance by the Corporation or any Subsidiary thereof of any
Convertible Securities that are convertible into or exchangeable or exercisable
for shares of PCS Group Common Stock, if at the time such Convertible
Securities are issued the Number Of Shares Issuable With Respect To The
WorldCom Group Intergroup Interest is greater than zero, the Board of Directors
shall determine whether, upon conversion, exchange or exercise thereof, the
issuance of shares of PCS Group Common Stock pursuant thereto shall, in whole
or in part, reduce the Number Of Shares Issuable With Respect To The WorldCom
Group Intergroup Interest, taking into consideration the use of the proceeds of
such issuance of Convertible Securities in the business of the WorldCom Group
or the PCS Group and any other relevant factors.
(d) Upon any redemption or repurchase by the Corporation or any Subsidiary
thereof of shares of any Preferred Stock of any class or series or of other
securities or debt obligations of the Corporation, if some of such shares,
other securities or debt obligations were attributed to the WorldCom Group and
some of such shares, other securities or debt obligations were attributed to
the PCS Group, the Board of Directors shall determine which, if any, of such
shares, other securities or debt obligations redeemed or repurchased shall be
attributed to the WorldCom Group and which, if any, of such shares, other
securities or debt obligations shall be attributed to the PCS Group and,
accordingly, how many of the shares of such series of Preferred Stock or of
such other securities, or how much of such debt obligations, that remain
outstanding, if any, continue to be attributed to the WorldCom Group or to the
PCS Group.
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8.2. Sources of Dividends and Distributions; Uses of Proceeds of Share
Issuances. Notwithstanding the attribution of properties or assets of the
Corporation to the WorldCom Group or the PCS Group as provided in the
definitions of such terms in ARTICLE SIX, Section 10, the Board of Directors
(i) may cause dividends or distributions or other payments to the holders of
any class or series of Corporation Common Stock or any class or series of
Preferred Stock to be made out of the properties or assets attributed to any
Business Group, subject, however, to any contrary term of any class or series
of Preferred Stock fixed in accordance with ARTICLE SIX, Section 9, and (ii)
may cause the proceeds of issuance of any shares of Corporation Common Stock or
any class or series of Preferred Stock, to whichever Business Group attributed
in accordance with ARTICLE SIX, Section 10, to be used in the business of, and
to be attributed to, either the WorldCom Group or the PCS Group in accordance
with the definitions of "PCS Group," "WorldCom Group," and "Number Of Shares
Issuable With Respect To The WorldCom Group Intergroup Interest" in ARTICLE
SIX, Section 10.
8.3. Certain Determinations Not Required. Notwithstanding the foregoing
provisions of this Section 8, the provisions of ARTICLE SIX, Section 10 or any
other provision of this ARTICLE SIX, at any time when there are not outstanding
both (i) one or more shares of WorldCom Group Common Stock or Convertible
Securities convertible into or exchangeable or exercisable for WorldCom Group
Common Stock and (ii) one or more shares of PCS Group Common Stock or
Convertible Securities convertible into or exchangeable or exercisable for PCS
Group Common Stock, the Board of Directors need not (A) attribute any of the
assets or liabilities of the Corporation or any of its Subsidiaries to the
WorldCom Group or the PCS Group, (B) make any determination required in
connection therewith or (C) make any of the determinations otherwise required
by this ARTICLE SIX, and in such circumstances the holders of the shares of
WorldCom Group Common Stock or PCS Group Common Stock outstanding, as the case
may be, shall (unless otherwise specifically provided by these Articles of
Incorporation) be entitled to all the voting powers, preferences, optional or
other special rights of such classes of Corporation Common Stock without
differentiation between the WorldCom Group Common Stock and the PCS Group
Common Stock and any provision of this ARTICLE SIX to the contrary shall no
longer be in effect or operative and the Board of Directors may cause these
Articles of Incorporation to be amended as permitted by law to delete such
provisions as are no longer operative or of further effect.
8.4. Emergency Use of Business Group Assets. Notwithstanding the foregoing
provisions of this Section 8 or any other provision of ARTICLE SIX, the Board
of Directors may transfer assets or properties from one Business Group to
another on such other basis as the Board of Directors shall determine,
consistent with its fiduciary duties to the Corporation and the holders of all
classes and series of the Corporation Common Stock; provided that the Board of
Directors determines (i) that such transfer on such basis should be made to
prevent or mitigate material adverse consequences that would fundamentally
affect the transferee Business Group, (ii) that the benefit of such transfer on
such basis to the transferee Business Group is to materially exceed any adverse
effect of such transfer to the transferor Business Group, and (iii) that such
transfer on such basis is in the best interest of the Corporation as a whole
after giving fair consideration to the potentially divergent interests of the
holders of the separate classes of Corporation Common Stock.
8.5. Board Determinations Binding. Subject to applicable law, any
determinations made in good faith by the Board of Directors of the Corporation
under any provision of this Section 8 or otherwise in furtherance of the
application of this ARTICLE SIX shall be final and binding on all shareholders.
Section 9. Preferred Stock.
9.1. General. The Preferred Stock may be issued from time to time in one or
more series, each of such series to have such voting powers (full or limited or
without voting powers) designation, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof as are stated and expressed herein, or in a resolution or
resolutions providing for the issue of such series adopted by the Board of
Directors as hereinafter provided.
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9.2. Designation Powers of Board of Directors. The Corporation, acting
through its Board of Directors, without action by the shareholders, may, from
time to time by resolution and upon the filing of such certificate or articles
of amendment as may be required by the GBCC as then in effect, and subject to
the provisions of this ARTICLE SIX, create one or more series of Preferred
Stock and, with respect to each series, fix or alter as permitted by law, by
resolution or resolutions providing for the issue of such series (including,
without limitation, the Series B Preferred Stock, the Third Series, the Fifth
Series, the Seventh Series and the Eighth Series):
(a) the number of shares to constitute such series and the distinctive
designation thereof;
(b) the dividend rate on the shares of such series, the dividend payment
dates, the periods in respect of which dividends are payable ("dividend
periods"), whether such dividends shall be cumulative, and if cumulative, the
date or dates from which dividends shall accumulate;
(c) whether or not the shares of such series shall be redeemable, and, if
redeemable, on what terms, including the redemption prices which the shares of
such series shall be entitled to receive upon the redemption thereof;
(d) whether or not the shares of such series shall be subject to the
operation of retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement and, if such retirement or sinking
fund or funds be established, the annual amount thereof and the terms and
provisions relative to the operation thereof;
(e) whether or not the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other series
of the same or any other class or classes of stock of the Corporation and the
conversion price or prices or rate or rates, or the rate or rates at which such
exchange may be made, with such adjustments, if any, as shall be stated and
expressed or provided in such resolution or resolutions;
(f) the voting power, if any, of the shares of such series; and
(g) such other terms, conditions, special rights and protective provisions
as the Board of Directors may deem advisable.
9.3. General Rules as to Dividends. Except as expressly set forth in Section
9.9.4, no dividend shall be declared and set apart for payment on any series of
Preferred Stock in respect of any dividend period unless there shall likewise
be or have been paid, or declared and set apart for payment, on all shares of
Preferred Stock of each other series entitled to cumulative dividends at the
time outstanding which rank equally as to dividends with the series in
question, dividends ratably in accordance with the sums which would be payable
on the said shares through the end of the last preceding dividend period if all
dividends were declared and paid in full.
9.4. General Rules as to Liquidation. If upon any dissolution of the
Corporation, the assets of the Corporation distributable among the holders of
any one or more series of Preferred Stock which are (i) entitled to a
preference over the holders of the Corporation Common Stock upon such
dissolution, and (ii) rank equally in connection with any such distribution,
shall be insufficient to pay in full the preferential amount to which the
holders of such shares shall be entitled, then such assets, or the proceeds
thereof, shall be distributed among the holders of each such series of the
Preferred Stock ratably in accordance with the sums which would be payable on
such distribution if all sums payable were discharged in full.
9.5. General Rules as to Redemption. In the event that the Preferred Stock
of any series shall be redeemable, then, at the option of the Board of
Directors, the Corporation may at such time or times as may be specified by the
Board of Directors as provided in ARTICLE SIX, Section 9.2(c) redeem all, or
any number less than all, of the outstanding shares of such series at the
redemption price thereof and on the other terms fixed herein or by the Board of
Directors as provided in ARTICLE SIX, Section 9.2(c).
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9.6. Intentionally Omitted.
9.7. Attribution of Preferred Stock to Groups. As of the Effective Time, the
outstanding shares of Third Series, Fifth Series and Series B Preferred Stock
shall be attributed entirely to the WorldCom Group and the outstanding shares
of the Seventh Series and Eighth Series shall be attributed entirely to the PCS
Group. Upon any issuance of any shares of Preferred Stock of any series after
the Effective Time, the Board of Directors shall attribute for purposes of this
ARTICLE SIX the shares so issued entirely to the WorldCom Group or entirely to
the PCS Group or partly to the WorldCom Group and partly to the PCS Group in
such proportion as the Board of Directors shall determine and, further, in case
of the issuance of shares of Preferred Stock that are exchangeable or
exercisable for PCS Group Common Stock, if at the time such shares of Preferred
Stock are issued the Number Of Shares Issuable With Respect To The WorldCom
Group Intergroup Interest shall be greater than zero, then the Board of
Directors shall also determine what portion (which may be some, all or none) of
such shares of Preferred Stock shall reduce the Number Of Shares Issuable With
Respect To The WorldCom Group Intergroup Interest, taking into consideration
the use of the proceeds of such issuance of shares of Preferred Stock in the
business of the WorldCom Group or the PCS Group and any other relevant factors.
Upon any redemption or repurchase of shares of Preferred Stock, the Board of
Directors shall determine the proper attribution thereof in accordance with
ARTICLE SIX, Section 8.1(d). Notwithstanding any such attribution of shares of
Preferred Stock to the WorldCom Group or the PCS Group, any dividends or
distributions or other payments which are made by the Corporation on such
shares of Preferred Stock may be made, and as required by the preferences and
relative, participating, optional or other special rights thereof shall be
made, out of any of the properties or assets of the Corporation, regardless of
the Business Group to which such properties or assets are attributed in
accordance with the definitions of "WorldCom Group" and "PCS Group" set forth
in ARTICLE SIX, Section 10, except as otherwise provided by the resolution of
the Board of Directors fixing the preferences and relative, participating,
optional or other special rights of a series of Preferred Stock.
9.8. Series B Convertible Preferred Stock.
9.8.1. Designation; Amount and Rank. There shall be 15,000,000 shares of
Preferred Stock designated as Series B Preferred Stock. The Series B Preferred
Stock, with respect to dividend rights and rights upon liquidation, winding up
and dissolution, rank:
(a) senior to the Third Series, Seventh Series, Eighth Series and to all
classes of Corporation Common Stock and to each other class of capital stock or
series of Preferred Stock established hereafter by the Board of Directors, the
terms of which do not expressly provide that it ranks senior to, or on a parity
with, the Series B Preferred Stock as to dividend rights or rights upon
liquidation, winding up and dissolution;
(b) on a parity with the Fifth Series and each other class of capital stock
or series of Preferred Stock established hereafter by the Board of Directors,
the terms of which expressly provide that such class or series will rank on a
parity with the Series B Preferred Stock as to dividend rights or rights upon
liquidation, winding up and dissolution; and
(c) junior to each other class of capital stock or series of Preferred Stock
established hereafter by the Board of Directors, the terms of which expressly
provide that such class or series will rank senior to the Series B Preferred
Stock as to dividend rights or rights upon liquidation, winding up and
dissolution.
9.8.2. Dividends. (a) The holders of Series B Preferred Stock shall be
entitled to receive, when and as declared, out of the funds legally available
for that purpose, dividends per share of Series B Preferred Stock at the rate
of $0.0775 per annum, payable when and as the Board of Directors may determine,
in cash, before any dividends shall be set apart for or paid upon the
Corporation Common Stock or any stock ranking as to dividends junior to the
Series B Preferred Stock (collectively, and for purposes only of this Section
9.8, "Junior Stock") in any year. All dividends declared upon Series B
Preferred Stock shall be declared pro rata per share and shall be payable to
holders of record as they appear on the stock transfer books of the Corporation
on such
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record dates as shall be fixed by the Board of Directors. The Board of
Directors shall not be required to declare any dividends on the Series B
Preferred Stock and the failure to declare any such dividends shall not
constitute a default or otherwise vest the holders of Series B Preferred Stock
with any right, other than the right to receive amounts in respect of accrued
but unpaid dividends pursuant to Sections 9.8.3, 9.8.5 and 9.8.7 hereof.
(b) Dividends on the Series B Preferred Stock shall be cumulative and shall
accrue on a daily basis, whether or not in any fiscal year there shall be net
profits or surplus available for the payment of dividends in such fiscal year,
so that if in any fiscal year or years, dividends in whole or in part are not
paid upon the Series B Preferred Stock, unpaid dividends shall accumulate as
against the holders of the Junior Stock. Accrued but unpaid dividends shall not
bear interest.
(c) Dividends (or amounts equal to accrued and unpaid dividends) payable on
the shares of Series B Preferred Stock shall be computed on the basis of a 360-
day year of twelve 30-day months.
(d) The Corporation shall not set apart for or pay upon the Corporation
Common Stock any Extraordinary Cash Dividend unless, at the same time, the
Corporation shall have set apart for or paid upon all shares of Series B
Preferred Stock an amount of cash per share of Series B Preferred Stock equal
to the Extraordinary Cash Dividend that would have been paid in respect of such
share if the holder of such share had converted such share into shares of
Corporation Common Stock pursuant to Section 9.8.5 immediately prior to the
record date for such Extraordinary Cash Dividend.
"Extraordinary Cash Dividend" means, with respect to any cash dividend or
distribution paid on any date, the amount, if any, by which all cash dividends
and cash distributions on the Corporation Common Stock paid during the
consecutive 12-month period ending on and including such date exceeds, on a per
share of Corporation Common Stock basis, 10% of the average daily closing price
of the Corporation Common Stock over such 12-month period.
9.8.3. Liquidation, Dissolution or Winding Up. (a) Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (i) to the holders of Junior Stock unless, prior
thereto, the holders of the Series B Preferred Stock shall have received $1.00
per share, plus an amount equal to unpaid dividends thereon, including accrued
dividends, whether or not declared, to the date of such payment and subject to
the payment in full of all amounts required to be distributed to the holders of
any other Preferred Stock of the Corporation ranking on liquidation prior and
in preference to the Series B Preferred Stock (such stock, for purposes only of
this Section 9.8, "Senior Stock") or (ii) to the holders of stock ranking on a
parity, either as to dividends or upon liquidation, with the Series B Preferred
Stock, except distributions made ratably on the Series B Preferred Stock and
all other such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation. In the event the
assets of the Corporation available for distribution to the holders of the
shares of the Series B Preferred Stock upon any dissolution, liquidation or
winding up of the Corporation shall be insufficient to pay in full the
liquidation payments payable to the holders of outstanding shares of the Series
B Preferred Stock and the holders of any shares ranking on a parity with the
Series B Preferred Stock, then the holders of all such shares of the Series B
Preferred Stock shall share ratably in such distribution of assets in
accordance with the amount which would be payable on such distribution if the
amounts to which the holders of outstanding shares of the Series B Preferred
Stock and the holders of outstanding shares of such shares of parity stock are
entitled were paid in full.
(b) The merger or consolidation of the Corporation into or with another
company, the merger or consolidation of any other company into or with the
Corporation, or the sale, conveyance, mortgage, pledge or lease of all or
substantially all the assets of the Corporation shall not be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
Section 9.8.3.
9.8.4. Voting. (a) Each issued and outstanding share of Series B Preferred
Stock shall be entitled to one vote per share with respect to any and all
matters presented to the shareholders of the Corporation for their action or
consideration. Except as provided by law and by the provisions of 9.8.4(b)
below, holders of Series B
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Preferred Stock shall vote together with the holders of all other classes or
series of capital stock that have general voting power on all such matters as a
single class.
(b) The Corporation shall not amend, alter or repeal the preferences,
special rights or other powers or terms of the Series B Preferred Stock so as
to affect adversely the Series B Preferred Stock, without the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding aggregate number of shares of Series B Preferred Stock, given in
writing or by vote at a meeting, consenting or voting , as the case may be,
separately as a class. For this purpose, the authorization or issuance of any
series of preferred stock with preference or priority over, or being on a
parity with the Series B Preferred Stock as to the right to receive either
dividends or amounts distributable upon liquidation, dissolution or winding up
of the Corporation shall not be deemed to affect adversely the Series B
Preferred Stock.
9.8.5. Optional Conversion. (a) Each share of Series B Preferred Stock may
be converted at any time, unless previously redeemed, at the option of the
holder thereof, in the manner hereinafter provided, into fully paid and
nonassessable shares of Common Stock at the rate of 0.1460868 shares (or an
effective initial conversion price of $6.845 per share of Common Stock) of
Common Stock for each share of Series B Preferred Stock surrendered for
conversion, or at such other rate as may then be effective following adjustment
pursuant to Section 9.8.6 hereof (the "Series B Conversion Rate").
(b) The Corporation shall not issue fractions of shares of Common Stock upon
conversion of Series B Preferred Stock or scrip in lieu thereof. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 9.8.5(b), be issuable upon conversion of any Series B Preferred Stock,
the Corporation shall in lieu thereof at the election of the Corporation,
either (i) sell such fractional share, as agent for the person entitled
thereto, and distribute the proceeds of such sale, net of any discounts,
commissions, fees or expenses associated with such sale, to such person, all in
accordance with all applicable rules under the Securities Act, or (ii) pay to
the person entitled thereto an amount in cash equal to the current value of
such fraction, calculated to the nearest one-hundredth (1/100) of a share, to
be computed (A) if the Common Stock is listed on any national securities
exchange or NASDAQ, on the basis of the last sales price (or the quoted closing
bid price if there shall have been no sales) of the Common Stock on such
exchange or NASDAQ (as the case may be) on the date of conversion, (B) if the
Common Stock is not so listed, on the basis of the mean between the closing bid
and asked prices for the Common Stock on the date of conversion as reported by
NASDAQ, or its successor, or (C) if the Common Stock is not so listed and if
there are no such closing bid and asked prices, on the basis of the fair market
value per share as determined by the Board of Directors.
(c) In order to exercise the conversion privilege, the holder of any Series
B Preferred Stock to be converted shall surrender his, her or its stock
certificate or certificates therefore to the principal office of the transfer
agent for the Series B Preferred Stock (or if no transfer agent be at the time
appointed, then to the Corporation at its principal office), and shall give
written notice to the Corporation at such office that the holder elects to
convert the Series B Preferred Stock represented by such stock certificates, or
any number thereof. Such notice shall also state the name or names (with
address) in which the certificate or certificates for shares of Common Stock
that shall be issuable on such conversion shall be issued. If so required by
the Corporation, stock certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation. The date of receipt by the transfer agent
(or by the Corporation if the Corporation serves as its own transfer agent) of
the stock certificates and notice shall be the conversion date (the "Series B
Conversion Date"). As soon as practicable after receipt of such notice and the
surrender of the stock certificate or certificates for Series B Preferred Stock
as aforesaid, the Corporation shall cause to be issued and delivered to such
holder, or on such holder's written order, a stock certificate or certificates
for the number of full shares of Common Stock issuable on such conversion in
accordance with the provisions hereof and cash as provided in Section 9.8.5(b)
in respect of any fraction of a share of Common Stock otherwise issuable upon
such conversion.
(d) The Corporation shall at all times when the Series B Preferred Stock
shall be outstanding reserve and keep available out of its authorized but
unissued stock, for the purposes of effecting the conversion of the
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Series B Preferred Stock, such number of its duly authorized shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding Series B Preferred Stock.
(e) Shares of Series B Preferred Stock may not be converted after the close
of business on the Business Day preceding the date fixed for redemption of such
shares pursuant to Section 9.8.7.
(f) Upon any such conversion, the Corporation shall pay, out of funds
legally available therefor, to the person entitled thereto an amount equal to
all accrued but unpaid dividends to, but not including, the Series B Conversion
Date in respect of the shares of Series B Preferred Stock surrendered for
conversion, which amount shall be payable, at the election of the Corporation,
in cash or shares of Common Stock. In the event the Corporation elects to pay
such amount in shares of Common Stock, the number of shares of Common Stock to
be issued in respect of unpaid dividends on each share of Series B Preferred
Stock surrendered for conversion shall, subject to Section 9.8.5(b), be
determined by dividing (x) the total amount of accrued but unpaid dividends to
be paid on each such share of Series B Preferred Stock by (y) the Fair Market
Value of a share of Common Stock. For purposes hereof, the term "Fair Market
Value" shall mean:
(i) if the Common Stock is listed on any national securities exchange or
NASDAQ, the average of the last sales price (or the quoted closing bid price if
there shall have been no sales) of the Common Stock on such exchange or NASDAQ
(as the case may be) for a period of 30 Trading Days prior to the Series B
Conversion Date;
(ii) if the Common Stock is not so listed, on the basis of the average of
the mean between the closing bid and asked prices for the Common Stock for each
day in the 30 Trading Day period prior to the Series B Conversion Date, as
reported by NASDAQ, or its successor; or
(iii) if the Common Stock is not so listed and if there are no such closing
bid and asked prices, on the basis of the fair market value per share as
determined by the Board of Directors.
(g) All shares of Series B Preferred Stock which shall have been surrendered
for conversion as herein provided shall no longer be deemed to be outstanding
and all rights with respect to such shares, including the rights, if any, to
receive notices and to vote, shall forthwith cease and terminate except only
the right of the holder thereof to receive shares of Common Stock in exchange
therefor and payment of any accrued and unpaid dividends thereon. Any shares of
Series B Preferred Stock so converted shall be retired and cancelled and shall
not be reissued, and the Corporation may from time to time take such
appropriate action as may be necessary to reduce the authorized Series B
Preferred Stock accordingly.
9.8.6. Adjustment Provisions. (a) In case the Corporation shall at any time
(i) subdivide (whether by stock dividend, stock split or otherwise) its
outstanding shares of Common Stock into a greater number of shares or (ii)
combine its outstanding shares of Common Stock into a smaller number of shares,
the Series B Conversion Rate in effect immediately prior thereto shall be
proportionately adjusted so that the holder of any shares of Series B Preferred
Stock thereafter surrendered for conversion shall be entitled to receive the
number of shares of capital stock of the Corporation which the holder would
have owned or have been entitled to receive after the happening of any of the
events described above, had such shares of Series B Preferred Stock been
converted immediately prior to the happening of such event. The adjustment made
pursuant to this Section 9.8.6(a) shall become effective immediately after the
effective date of the event requiring such adjustment and shall be made by the
Board of Directors, whose judgment shall be final, binding and conclusive
absent manifest error.
(b) If any capital reorganization or reclassification of the capital stock
of the Corporation, or consolidation or merger of the Corporation with another
company, or the sale of all or substantially all of its assets to another
company shall be effected in such a way that holders of Common Stock shall be
entitled to receive stock, securities, cash or other property with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made
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whereby the holders of the Series B Preferred Stock shall have the right to
acquire and receive upon conversion of the Series B Preferred Stock, which
right shall be prior to the rights of the holders of Junior Stock (but after
and subject to the rights of holders of Senior Stock, if any), such shares of
stock, securities, cash or other property issuable or payable (as part of the
reorganization, reclassification, consolidation, merger or sale) with respect
to or in exchange for such number of outstanding shares of Common Stock as
would have been received upon conversion of the Series B Preferred Stock at the
Series B Conversion Rate then in effect. The Corporation will not effect any
such consolidation, merger or sale, unless prior to the consummation thereof
the successor company (if other than the Corporation) resulting from such
consolidation or merger or the company purchasing such assets shall assume by
written instrument mailed or delivered to the holders of the Series B Preferred
Stock at the last address of each such holder appearing on the stock transfer
books of the Corporation, the obligation to deliver to each such holder such
shares of stock, securities, cash or other property as, in accordance with the
foregoing provisions, such holder may be entitled to purchase.
(c) In the event that:
(i) the Corporation shall declare any dividend upon its Common Stock payable
in stock or make any special dividend or other distribution to the holders of
its Common Stock;
(ii) there shall be any capital reorganization or reclassification of the
capital stock of the Corporation, including any subdivision or combination of
its outstanding shares of Common Stock, or consolidation or merger of the
Corporation with, or sale of all or substantially all of its assets to, another
company; or
(iii) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; then, in accordance with such event, the
Corporation shall give to the holders of the Series B Preferred Stock:
(A) at least twenty (20) days prior written notice of the date on which the
books of the Corporation shall close or a record shall be taken for such
dividend or distribution or for determining rights to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up; and
(B) in the case of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, at least twenty (20) days
prior written notice of the date when the same shall take place.
A notice in accordance with the foregoing clause (A) shall also specify, in the
case of any such dividend or distribution, the date on which the holders of
Common Stock shall be entitled thereto, and a notice in accordance with the
foregoing clause (B) shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Each
such written notice shall be sent by mail, first class, postage prepaid,
addressed to the holders of the Series B Preferred Stock at the address of each
such holder as shown on the books of the Corporation.
(d) If any event occurs as to which, in the opinion of the Board of
Directors, the provisions of this Section 9.8.6 are not strictly applicable or
if strictly applicable would not fairly protect the rights of the holders of
the Series B Preferred Stock in accordance with the essential intent and
principles of such provisions, then the Board of Directors shall make an
adjustment in the application of such provisions, in accordance with such
essential intent and principles, so as to protect such rights as aforesaid, but
in no event shall any adjustment have the effect of decreasing the Series B
Conversion Rate as otherwise determined pursuant to any of the provisions of
this Section 9.8.6 except in the case of a combination of shares of a type
contemplated in Section 9.8.6(a) and then in no event to a rate less than the
Series B Conversion Rate as adjusted pursuant to Section 9.8.6(a).
(e) Whenever the Series B Conversion Rate shall be adjusted pursuant to this
Section 9.8.6, the Corporation shall forthwith file at each office designated
for the conversion of Series B Preferred Stock a
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statement, signed by the Chairman of the Board, the President, any Vice
President or Treasurer of the Corporation, showing in reasonable detail the
facts requiring such adjustment and the Series B Conversion Rate that will be
effective after such adjustment. The Corporation shall also cause a notice
setting forth any such adjustments to be sent by mail, first class, postage
prepaid, to each record holder of Series B Preferred Stock at his or its
address appearing on the stock register. If such notice relates to an
adjustment resulting from an event referred to in Section 9.8.6(c), such notice
shall be included as part of the notice required to be mailed and published
under the provisions of Section 9.8.6(c) hereof.
9.8.7. Redemption. The Corporation shall have the right to redeem shares of
Series B Preferred Stock pursuant to the following provisions:
(a) The Corporation shall not have any right to redeem shares of the Series
B Preferred Stock prior to September 30, 2001. Thereafter, the Corporation
shall have the right, at its sole option and election, out of funds legally
available therefor, to redeem the shares of Series B Preferred Stock, in whole
or in part, at any time and from time to time at a redemption price of $1.00
per share plus an amount equal to all accrued and unpaid dividends thereon (the
"Series B Redemption Price"), whether or not declared, to the redemption date;
provided that any amount due in respect of all or any portion of the Series B
Redemption Price, including accrued dividends, may be paid in cash or shares of
Common Stock as determined by the Board of Directors. In the event the Board of
Directors elects to pay any portion of the Series B Redemption Price in shares
of Common Stock, the number of shares of Common Stock to be issued shall be
determined in accordance with the provisions of Section 9.8.5(f).
(b) If less than all of the Series B Preferred Stock at the time outstanding
is to be redeemed, the shares so to be redeemed shall be selected by lot, pro
rata or in such other manner as the Board of Directors may determine to be fair
and proper.
(c) Notice of any redemption of the Series B Preferred Stock (including
notice of whether such redemption shall be paid in cash or shares of Common
Stock) shall be mailed at least 30 days, but not more than 60 days, prior to
the date fixed for redemption to each holder of Series B Preferred Stock to be
redeemed, at such holder's address as it appears on the stock transfer books of
the Corporation. In order to facilitate the redemption of the Series B
Preferred Stock, the Board of Directors may fix a record date for the
determination of holders of Series B Preferred Stock to be redeemed, or may
cause the stock transfer books of the Corporation to be closed for the transfer
of the Series B Preferred Stock, not more than 60 days prior to the date fixed
for such redemption.
(d) On the redemption date specified in the notice given pursuant to Section
9.8.7(c), the Corporation shall, and at any time after such notice shall have
been mailed and before such redemption date the Corporation may, deposit for
the pro rata benefit of the holders of the shares of the Series B Preferred
Stock so called for redemption, funds in an amount equal to the portion of the
Series B Redemption Price, if any, to be paid in cash with a bank or trust
company in the Borough of Manhattan, the City of New York, having a capital and
surplus of at least $50,000,000. Any monies so deposited by the Corporation and
unclaimed at the end of one (1) year from the date designated for such
redemption shall revert to the general funds of the Corporation. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof to such holder and
such holder shall look only to the Corporation for the payment of the Series B
Redemption Price. Any interest accrued on funds so deposited pursuant to this
9.8.7(d) shall be paid from time to time to the Corporation for its own
account.
(e) Upon the deposit of funds pursuant to Section 9.8.7(d) in respect of
shares of the Series B Preferred Stock called for redemption, or, in the event
that the Board of Directors elects to pay all or part of the Series B
Redemption Price in shares of Common Stock, on the date fixed for redemption,
notwithstanding that any stock certificates for such shares shall not have been
surrendered for cancellation, the shares represented thereby shall no longer be
deemed outstanding, the rights to receive dividends thereon shall cease to
accrue from and after
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the date of redemption designated in the notice of redemption and all rights of
the holders of the shares of the Series B Preferred Stock called for redemption
shall cease and terminate, excepting only the right to receive the Series B
Redemption Price therefor and the right to convert such shares into shares of
Common Stock until the close of business on the Business Day preceding the
redemption date, as provided in Section 9.8.5.
9.8.8. Reissuance. Shares of Series B Preferred Stock that have been issued
and reacquired in any manner including shares purchased, exchanged, redeemed or
converted shall not be reissued as shares of Series B Preferred Stock and shall
upon compliance with any applicable provisions of the laws of the State of
Georgia have the status of authorized and unissued shares of the Preferred
Stock undesignated as to series and may be redesignated and reissued as part of
any series of Preferred Stock.
9.9. Series 3 Junior Participating Preferred Stock.
9.9.1. Designation and Amount. There shall be 1,500,000 shares of Preferred
Stock designated as Third Series.
9.9.2. Dividends. (a) Subject to the prior and superior rights of the
holders of any shares of any other series of Preferred Stock, or any similar
stock ranking prior and superior to the shares of the Third Series with respect
to dividends, the holders of shares of the Third Series, in preference to the
holders of Common Stock and any shares of stock of the Corporation junior as to
dividend rights to the Third Series, entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash, on January 1, April 1, July 1 and
October 1 in each year (each such date being referred to herein as a "Third
Series Quarterly Dividend Payment Date") in an amount (rounded to the nearest
cent) equal to the greater of (a) $10.00 and (b) the product of the WorldCom
Group Multiple (as defined below) times the aggregate per share amount of all
cash dividends, plus the product of the WorldCom Group Multiple times the
aggregate per share amount (payable in cash, based upon the fair market value
at the time the noncash dividend or other distribution is declared as
determined in good faith by the Board of Directors) of all noncash dividends or
other distributions other than a dividend payable in shares of WorldCom Group
Common Stock, or a subdivision of the outstanding shares of WorldCom Group
Common Stock (by reclassification or otherwise), declared (but not withdrawn)
on the WorldCom Group Common Stock since the immediately preceding Third Series
Quarterly Dividend Payment Date, or, with respect to the first Third Series
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of the Third Series.
(b) As used herein, the WorldCom Group Multiple shall initially be 1,500. In
the event the Corporation shall (i) declare any dividend on WorldCom Group
Common Stock payable in shares of such stock, (ii) subdivide the outstanding
WorldCom Group Common Stock, or (iii) combine the outstanding WorldCom Group
Common Stock into a smaller number of shares, then in each such case the
WorldCom Group Multiple shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of WorldCom Group
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of WorldCom Group Common Stock that were
outstanding immediately prior to such event.
(c) The Corporation shall declare a dividend or distribution on the Third
Series as provided above in paragraph (a) of this Section 9.9.2 immediately
after it declares a dividend or distribution on the WorldCom Group Common Stock
(other than a dividend payable in shares of WorldCom Group Common Stock);
provided, however, that in the event no dividend or distribution shall have
been declared on the WorldCom Group Common Stock during the period between any
Third Series Quarterly Dividend Payment Date and the next subsequent Third
Series Quarterly Dividend Payment Date, the minimum quarterly dividend of
$100.00 on the Third Series shall nevertheless be payable on such subsequent
Third Series Quarterly Dividend Payment Date.
(d) Dividends shall begin to accrue and be cumulative on outstanding shares
of Third Series from the Third Series Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Third Series,
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unless the date of issue of such shares of Third Series is prior to the record
date for the first Third Series Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Third Series Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Third Series entitled to receive a quarterly dividend and
before such Third Series Quarterly Dividend Payment Date, in either of which
cases such dividends shall begin to accrue and be cumulative from such Third
Series Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
cumulate but shall not bear interest. Dividends paid on the shares of Third
Series in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a share-by-
share basis among all such shares at the time outstanding.
9.9.3. Voting Rights. The holders of the shares of the Third Series shall be
entitled to exercise such voting rights with the holders of Common Stock,
without distinction as to class, at any annual or special meeting of
shareholders for the election of directors and on any other matter submitted to
a vote of the shareholders at such meeting. Except as otherwise provided
herein, in these Articles of Incorporation, in any articles of amendment to
these Articles of Incorporation establishing a series of Preferred Stock or any
similar stock or otherwise required by law, the holders of the shares of the
Third Series and the holders of Common Stock shall vote together as one class
on all matters submitted to a vote of shareholders of the Corporation. Except
as prescribed by law and in addition to the rights provided for in this ARTICLE
SIX, at any annual or special meeting of shareholders, each share of the Third
Series shall be entitled to a number of votes equal to the product of the
WorldCom Group Multiple then in effect times the highest number of votes that
any share of WorldCom Group Common Stock entitles its holder to vote at such
meeting.
9.9.4. Certain Restrictions. (a) Whenever quarterly dividends or other
dividends or distributions payable on the shares of the Third Series as
provided in Section 9.9.2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of the
Third Series outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends (except a dividend payable in WorldCom Group
Common Stock and/or any other stock of the Corporation ranking junior (either
as to dividend rights or rights upon liquidation, dissolution or winding up) to
the Third Series)) on, make any other distributions on, or redeem or purchase
or otherwise acquire for consideration any shares of stock of the Corporation
ranking junior (either as to dividend rights or rights upon liquidation,
dissolution or winding up) to the Third Series;
(ii) declare or pay dividends on or make any other distribution on any
shares of stock of the Corporation on a parity (either as to dividend rights or
rights upon liquidation, dissolution or winding up) with the Third Series,
except dividends paid ratably on the shares of the Third Series and all such
parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
(iii) except as permitted in Section 9.9.4(a)(iv) below, redeem or purchase
or otherwise acquire for consideration any shares of stock of the Corporation
ranking on a parity (either as to dividends or upon dissolution, liquidation or
winding up) with the shares of the Third Series, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares of such parity
stock in exchange for shares of stock of the Corporation ranking junior (either
as to dividend rights or rights upon liquidation, dissolution or winding up) to
the Third Series; or
(iv) purchase or otherwise acquire for consideration any shares of the Third
Series, or any shares of stock of the Corporation ranking on a parity (either
as to dividend rights or rights upon liquidation, dissolution or winding up),
except in accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
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(b) The Corporation shall not permit any Subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section
9.9.4, purchase or otherwise acquire such shares at such time and in such
manner.
9.9.5. Reacquired Shares. Any shares of the Third Series purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall
upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein, in these Articles of
Incorporation, in any articles of amendment to these Articles of Incorporation
establishing a series of Preferred Stock or any similar stock or as otherwise
required by law.
9.9.6. Liquidation, Dissolution or Winding Up. (a) In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of the shares of the Third Series shall be entitled to
receive, in preference to the holders of any shares of stock of the Corporation
ranking junior (as to rights upon liquidation, dissolution or winding up) to
the Third Series, the greater of (i) $1,000.00 per share, plus accrued and
unpaid dividends to the date of distribution, whether or not earned or declared
and (ii) an amount per share equal to the product of the WorldCom Group
Multiple then in effect times the aggregate amount to be distributed per share
to holders of WorldCom Group Common Stock.
(b) In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of stock ranking on a parity (as to
rights upon liquidation, dissolution or winding up) with the Third Series shall
not receive any distributions except for distributions made ratably on the
Third Series and all other such parity stock in proportion to the total amounts
to which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.
9.9.7. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of WorldCom Group Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
the Third Series shall at the same time be similarly exchanged or changed in an
amount per share equal to the product of the WorldCom Group Multiple then in
effect times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of WorldCom Group Common Stock is changed or exchanged.
9.9.8. Rank. The shares of the Third Series shall rank:
(a) senior to all classes of Corporation Common Stock and to each other
class of capital stock or series of Preferred Stock established hereafter by
the Board of Directors, the terms of which do not expressly provide that it
ranks senior to, or on a parity with, the Third Series as to dividend rights or
rights upon liquidation, winding up and dissolution;
(b) on a parity with the Eighth Series and each other class of capital stock
or series of Preferred Stock established hereafter by the Board of Directors,
the terms of which expressly provide that such class or series will rank on a
parity with the Third Series as to dividend rights or rights upon liquidation,
winding up and dissolution; and
(c) junior to the Series B Preferred Stock, Fifth Series, Seventh Series and
each other class of capital stock or series of Preferred Stock established
hereafter by the Board of Directors, the terms of which expressly provide that
such class or series will rank senior to the Third Series as to dividend rights
or rights upon liquidation, winding up and dissolution.
9.9.9. Fractional Shares. Shares of the Third Series may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of shares of the Third Series.
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9.10. Series 5 Preferred Stock.
9.10.1. Designation; Amount; Stated Value. There shall be 95 shares of
Preferred Stock designated as Fifth Series.
9.10.2. Dividends. The rate of dividends upon shares of the Fifth Series
(which shall be cumulative from the date of issue) and the time of payment
thereof shall be 6.00% of the stated value of $100,000 per share per annum,
payable quarterly on the last days of January, April, July and October in each
year.
9.10.3. Rank. The Fifth Series will, with respect to dividend rights and
rights upon liquidation, winding up and dissolution, rank:
(a) senior to the Third Series, Seventh Series, Eighth Series and to all
classes of Corporation Common Stock and to each other class of capital stock or
series of Preferred Stock established hereafter by the Board of Directors, the
terms of which do not expressly provide that it ranks senior to, or on a parity
with, the Fifth Series as to dividend rights or rights upon liquidation,
winding up and dissolution;
(b) on a parity with the Series B Preferred Stock and with all other classes
of capital stock or series of Preferred Stock established hereafter by the
Board of Directors, the terms of which expressly provide that such class or
series will rank on a parity with the Fifth Series as to dividend rights or
rights upon liquidation, winding up and dissolution; and
(c) junior to each other class of capital stock or series of Preferred Stock
established hereafter by the Board of Directors, the terms of which expressly
provide that such class or series will rank senior to the Fifth Series as to
dividend rights or rights upon liquidation, winding up and dissolution.
9.10.4. Voting Rights. Holders of shares of the Fifth Series will be
entitled to one vote for each share held and will be entitled to exercise such
voting rights together as a class with the holders of capital stock that have
general voting power on all such matters. If no dividends or less than full
cumulative dividends on shares of the Fifth Series shall have been paid for
each of four consecutive dividend periods, or if arrearages in the payment of
dividends on shares of the Fifth Series shall have cumulated to an amount equal
to full cumulative dividends on shares of the Fifth Series for six quarterly
dividend periods, the holders of shares of the Fifth Series shall, at all
meetings held for the election of Directors until full cumulative dividends for
all past quarterly dividend periods and the current quarterly dividend period
on shares of the Fifth Series shall have been paid or declared and set apart
for payment, possess voting power, acting alone, to elect the smallest number
of Directors constituting a majority of the Directors then to be elected. The
Corporation will promptly take all such action as shall be necessary to permit
such election to occur promptly after such arrearage occurs.
9.10.5. Non-Convertible. Shares of the Fifth Series shall not be convertible
into or exchangeable for stock of any other class or classes of the
Corporation.
9.10.6. Repurchase by the Corporation. Upon six months' prior written
notice, the holders of shares of the Fifth Series may tender all and not less
than all of the shares of the Fifth Series to the Corporation for purchase at a
price per share equal to the stated value of $100,000 per share plus accrued
dividends to the date of repurchase by the Corporation (the "Fifth Series
Purchase Price"). Upon such proper tender of all shares of the Fifth Series by
the holders, the Corporation shall purchase the shares of the Fifth Series at
the Fifth Series Purchase Price.
9.10.7. Tender Procedures. Shares of the Fifth Series will not be deemed
tendered unless and until the stock certificate or certificates therefor have
been received by the Corporation or the bank or trust company designated for
the purpose and, if payment upon acceptance of tender thereof is to be made
other than to the record holders, such stock certificate or certificates have
been duly endorsed and are in proper form for transfer, with all transfer taxes
due in respect thereof paid or provided for.
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9.10.8. Redemption. If the holders have not tendered the shares of the Fifth
Series to the Corporation for purchase pursuant to Sections 9.10.6 and 9.10.7
by March 14, 2003, then the Corporation shall redeem all of the outstanding
shares of the Fifth Series at the Fifth Series Purchase Price on a date set
forth in written notice to the holders as the redemption date (the "Fifth
Series Redemption Date"). The Corporation shall give notice of such redemption
not less than thirty (30) days prior to the Fifth Series Redemption Date, by
mail to the holders of record of the outstanding shares at their respective
addresses then appearing on the books of the Corporation. At any time before
the Fifth Series Redemption Date, the Corporation may deposit in trust the
funds necessary for such redemption with a bank or trust company to be
designated in the notice of redemption, doing business in the City of Chicago
and State of Illinois or in the City and State of New York, and having capital,
surplus and undivided profits aggregating $25,000,000. In the event such
deposit is made so that the deposited funds shall be forthwith available to the
holders of the shares to be redeemed upon surrender of the stock certificates
evidencing such shares, then, upon the giving of the notice of such redemption,
as hereinabove provided, or upon the earlier delivery to such bank or trust
company of irrevocable authorization and direction so to give such notice, all
shares with respect to the redemption of which such deposit shall have been
made and the giving of such notice effected shall, whether or not the stock
certificates for such shares shall be surrendered for cancellation, be deemed
to be no longer outstanding for any purpose and all rights with respect to such
shares shall thereupon cease and terminate, except only the right of the
holders of the stock certificates for such shares to receive, out of the funds
so deposited in trust, from and after the time of such deposit, the amount
payable upon the redemption thereof, without interest.
9.10.9. Cancelled Shares. Shares of the Fifth Series, purchased upon tender
or redeemed as herein provided, shall be cancelled and upon such cancellation
shall be deemed to be authorized and unissued shares of Preferred Stock,
without par value, of the Corporation but shall not be reissued as shares of
the same or any theretofore outstanding series.
9.10.10. Default. Default by the Corporation in complying with the
provisions of Section 9.10.6 or 9.10.8 shall preclude the declaration or the
payment of dividends or the making of any other distribution whatsoever upon
the Corporation Common Stock (other than a distribution in shares of its
Corporation Common Stock) until the Corporation shall have cured such default
by depositing the funds necessary therefor in the manner and upon the terms
herein provided. The holders of shares of the Fifth Series shall not be
entitled to apply to any court of law or equity for a money judgment or remedy
on account of any such default other than to restrain the Corporation from the
actions specified above upon the Corporation Common Stock until such default
shall have been cured.
9.10.11. Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Corporation, the holders of the Fifth Series will be entitled
to receive out of the assets of the Corporation available for distribution to
shareholders, before any distribution of the assets shall be made to the
holders of Corporation Common Stock, the stated value of $100,000 per share,
plus an amount equal to cumulative accrued and unpaid dividends to the date of
distribution to holders of shares of the Fifth Series. If upon any liquidation,
dissolution or winding up of the Corporation the amounts payable with respect
to the Fifth Series and any other series of Preferred Stock on a parity with
the Fifth Series are not paid in full, the holders of shares of the Fifth
Series and such parity stock will share ratably in any distribution of assets
in proportion to the full preferential amounts to which they are entitled.
9.11. Series 7 Preferred Stock.
9.11.1. Designation; Amount; Rank. There shall be 300,000 shares of
Preferred Stock designated as Seventh Series. The Seventh Series will, with
respect to dividend rights and rights upon liquidation, winding up and
dissolution, rank:
(a) senior to the Third Series, the Eighth Series, to all classes of
Corporation Common Stock and to each other class of capital stock or series of
Preferred Stock established hereafter by the Board of Directors, the terms of
which do not expressly provide that it ranks senior to, or on a parity with,
the Seventh Series as to dividend rights or rights upon liquidation, winding up
and dissolution;
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(b) on a parity with all other classes of capital stock or series of
Preferred Stock established hereafter by the Board of Directors, the terms of
which expressly provide that such class or series will rank on a parity with
the Seventh Series as to dividend rights or rights upon liquidation, winding up
and dissolution; and
(c) junior to the Series B Preferred Stock, the Fifth Series and to each
other class of capital stock or series of Preferred Stock established hereafter
by the Board of Directors, the terms of which expressly provide that such class
or series will rank senior to the Seventh Series as to dividend rights or
rights upon liquidation, winding up and dissolution.
9.11.2. Dividends. Holders of record of shares of the Seventh Series will be
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available for the payment of dividends, cumulative cash dividends
("Seventh Series Dividends") payable at the rate of $6.73 per share quarterly
in arrears on each September 30, December 31, March 31 and June 30 (each a
"Seventh Series Dividend Payment Date") or, if any such date is not a Business
Day, the Seventh Series Preferred Dividends due on such Seventh Series Dividend
Payment Date shall be paid on the next succeeding Business Day. Seventh Series
Preferred Dividends shall be cumulative and shall accumulate from the date of
original issuance of shares of the Seventh Series. Seventh Series Preferred
Dividends shall be payable to holders of record as they appear on the stock
register of the Corporation, net of any amounts required to be withheld for or
with respect to taxes, on such record dates, not more than 60 days preceding
the payment date thereof, as shall be fixed by the Board of Directors. Seventh
Series Preferred Dividends payable for any period less than a full quarterly
dividend period shall be computed on the basis of a 360-day year of twelve 30-
day months and the actual number of days elapsed in any period less than one
month. Seventh Series Preferred Dividends shall accrue on a daily basis whether
or not there are funds of the Corporation legally available for the payment of
such dividends and whether or not such Seventh Series Preferred Dividends are
declared. Accrued but unpaid Seventh Series Preferred Dividends shall
accumulate as of the Seventh Series Dividend Payment Date on which they first
become payable, but no interest shall accrue on accumulated but unpaid Seventh
Series Preferred Dividends. Before any dividends on the Corporation Common
Stock or any other stock of the Corporation ranking junior to the Seventh
Series as to dividends shall be paid or declared and set apart for payment, the
holders of shares of the Seventh Series shall be entitled to receive the full
accumulated cash dividends for all quarterly dividend periods ending on or
before the date on which any dividend on any such class or series of stock
ranking junior to the Seventh Series as to dividends is declared or is to be
paid.
9.11.3. Conversion. (a) Each holder of shares of Seventh Series may at such
holder's option at any time convert any or all of such holder's shares of
Seventh Series into (i) if such holder is a Cable Holder, shares of Series 2
PCS Stock and Series 2 Common Stock, and (ii) if such holder is not a Cable
Holder, shares of Series 1 PCS Stock and Common Stock. All references herein to
shares of Series 2 PCS Stock and Series 2 Common Stock issuable upon conversion
of shares of Seventh Series shall be deemed to refer to shares of Series 1 PCS
Stock and Common Stock, respectively, if the holder of such Seventh Series is
not a Cable Holder. Shares of Seventh Series shall be convertible into a number
of fully paid and nonassessable whole shares of (i) Series 2 PCS Stock as is
equal to the aggregate Seventh Series Liquidation Preference of the shares of
Seventh Series surrendered for conversion divided by the Seventh Series Initial
Conversion Price (as adjusted from time to time, the "Seventh Series Conversion
Price") and (ii) Series 2 Common Stock as is equal to 0.116025 (the "Common
Stock Conversion Rate") times the number of shares of Series 2 PCS Stock
received in connection with (i) immediately above. In case of the redemption of
any shares of the Seventh Series, such right of conversion shall cease and
terminate as to the shares duly called for redemption at the close of business
on the date fixed for redemption, unless the Corporation defaults in the
payment of the redemption price plus all accrued and unpaid dividends. If the
Corporation defaults with respect to such payment, the right to convert the
shares designated for redemption shall terminate at the close of business on
the business day next preceding the date that such default is cured. Upon
conversion the Corporation shall make no payment or adjustment on account of
dividends accrued or in arrears on the Seventh Series surrendered for
conversion.
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(b) Holders of shares of Seventh Series at the close of business on a
record date for any payment of declared Seventh Series Preferred Dividends
shall be entitled to receive the Seventh Series Preferred Dividends payable on
those shares of Seventh Series on the corresponding Seventh Series Dividend
Payment Date notwithstanding the conversion pursuant to this section of those
shares of Seventh Series following such record date and before the close of
business on such Seventh Series Dividend Payment Date. Except as provided in
the preceding sentence, upon any conversion of shares of Seventh Series, the
Corporation shall make no payment of or allowance of unpaid Seventh Series
Preferred Dividends, whether or not in arrears, on such shares of Seventh
Series, or for previously declared dividends or distributions on the shares of
Series 2 PCS Stock issued upon conversion.
(c) Conversion of shares of Seventh Series may be effected by delivering
stock certificates evidencing such shares of Seventh Series, together with
written notice of conversion stating the number of shares to be converted and
a proper assignment of such stock certificates to the Corporation or in blank,
to the office of the transfer agent for the Seventh Series or to any other
office or agency maintained by the Corporation for that purpose and otherwise
in accordance with conversion procedures established by the Corporation. Each
conversion shall be deemed to have been effected immediately before the close
of business on the date on which the foregoing requirements shall have been
satisfied. The Corporation shall as promptly as practicable after any
conversion pursuant to this section issue and deliver to the converting holder
a stock certificate or certificates representing the number of whole shares of
Series 2 PCS Stock and Series 2 Common Stock into which such shares of Seventh
Series were converted. Upon conversion of less than the entire number of the
shares of Seventh Series represented by any stock certificate, the Corporation
shall issue and deliver to the converting holder a new stock certificate
representing the number of shares of Seventh Series not converted. The
Corporation shall effect such conversion as soon as practicable; provided that
the Corporation shall not be required to convert shares of Seventh Series, and
no surrender of shares of Seventh Series shall be effective for that purpose,
while the stock transfer books of the Corporation for the Series 2 PCS Stock
or Series 2 Common Stock are closed for any reason, but the surrender of
shares of Seventh Series for conversion during any period while such books are
so closed shall become effective for conversion immediately upon the reopening
of such books, as if the conversion had been made on the date such shares of
Seventh Series were surrendered, and at the Seventh Series Conversion Price in
effect on the date of such surrender.
(d) No fraction of a share of Series 2 Common Stock or Series 2 PCS Stock
shall be issued upon any conversion. In lieu of the fraction of a share to
which the holder of shares of the Seventh Series surrendered for conversion
would otherwise be entitled, such holder shall receive, as soon as practicable
after the date of conversion, an amount in cash equal to the same fraction of
the market value of a full share of Series 1 PCS Stock or Common Stock, as
applicable. For the purposes of this subparagraph, the market value of a share
of Series 1 PCS Stock or Common Stock shall be the Closing Price of such a
share on the day immediately preceding the date upon which such shares of
Seventh Series are surrendered for conversion.
(e) The Seventh Series Conversion Price in effect at any time shall be
subject to adjustment as follows:
(i) If the Corporation shall: (A) pay a dividend on the PCS Group Common
Stock in shares of PCS Group Common Stock; (B) subdivide the outstanding
shares of PCS Group Common Stock into a greater number of shares; (C) combine
the outstanding shares of PCS Group Common Stock into a smaller number of
shares; (D) pay a dividend on the PCS Group Common Stock in shares of its
capital stock (other than PCS Group Common Stock); or (E) issue any shares of
its capital stock by reclassification of the shares of PCS Group Common Stock
(other than any reclassification by way of merger or binding share exchange
that is subject to Section 9.11.3(e)(viii)), then the Seventh Series
Conversion Price in effect at the time of the record date for such dividend or
of the effective date of such subdivision, combination or reclassification
shall be proportionately adjusted so that if the holder elects to convert
shares of Seventh Series after such time, the holder thereof shall be entitled
to receive the aggregate number of shares of PCS Group Common Stock which, if
such conversion had occurred immediately prior to such time, he would have
owned upon such conversion and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. Such
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adjustment shall be made successively whenever any event listed above shall
occur. Subject to Section 9.11.3(e)(vi) for a dividend or distribution, the
adjustment shall become effective immediately after the record date for the
dividend or distribution, and for a subdivision, combination or
reclassification, the adjustment shall become effective immediately after the
effective date of the subdivision, combination or reclassification.
(ii) If the Corporation shall issue rights or warrants to the holders of the
PCS Group Common Stock entitling them (for a period expiring within 45 days
after the record date for the determination of shareholders entitled to receive
such rights or warrants) to subscribe for or purchase shares of PCS Group
Common Stock (or PCS Convertible Securities) at a price per share (or having a
conversion price per share, after adding thereto an allocable portion of the
Seventh Series Conversion Price of the right or warrant to purchase such PCS
Convertible Securities, computed on the basis of the maximum number of shares
of PCS Group Common Stock issuable upon conversion of such PCS Convertible
Securities) less than the Current Market Price per share on the Determination
Date, the Seventh Series Conversion Price shall be adjusted by multiplying the
Seventh Series Conversion Price in effect immediately prior to such record date
by a fraction, of which the numerator shall be the number of shares of PCS
Group Common Stock outstanding on such record date plus the number of shares
which the aggregate offering price of the total number of shares of PCS Group
Common Stock so offered (or the aggregate initial conversion price of the PCS
Convertible Securities so offered, after adding thereto the aggregate
conversion price of the rights or warrants to purchase such PCS Convertible
Securities) to holders of PCS Group Common Stock (and to holders of PCS
Convertible Securities referred to in the following paragraph if the
distribution to which this paragraph (ii) applies is also being made to such
holders) would purchase at such Current Market Price, and of which the
denominator shall be the number of shares of PCS Group Common Stock outstanding
on such record date plus the number of additional shares of PCS Group Common
Stock so offered for subscription or purchase (or into which the PCS
Convertible Securities so offered are initially convertible). The adjustment
contemplated by this paragraph (ii) shall be made successively whenever any
such rights or warrants are issued and shall become effective immediately after
the close of business on such record date; however, to the extent that shares
of PCS Group Common Stock (or PCS Convertible Securities) have not been issued
when such rights or warrants expire (or, in the case of rights or warrants to
purchase PCS Convertible Securities which have been exercised, if all of the
shares of PCS Group Common Stock issuable upon conversion of such PCS
Convertible Securities have not been issued prior to the expiration of the
conversion right thereof), the Seventh Series Conversion Price shall be
readjusted to the Seventh Series Conversion Price which would then be in effect
had the adjustments made upon the issuance of such rights or warrants been made
upon the basis of delivery of only the number of shares (or PCS Convertible
Securities) actually issued upon the exercise of such rights or warrants (or
the conversion of such PCS Convertible Securities).
For purposes of this paragraph (ii) the number of shares of PCS Group Common
Stock outstanding on any record date shall be deemed to include the maximum
number of shares of PCS Group Common Stock the issuance of which would be
necessary to effect the full exercise, exchange or conversion of all PCS
Convertible Securities outstanding on such record date which are then
exercisable, exchangeable or convertible at a price (before giving effect to
any adjustment to such price for the distribution to which this paragraph (ii)
is being applied) equal to or less than the Current Market Price per share of
PCS Group Common Stock on the applicable Determination Date, if all of such PCS
Convertible Securities were deemed to have been exercised, exchanged or
converted immediately prior to the opening of business on such record date. In
case any subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined by the Board of Directors.
(iii) If the Corporation shall distribute to the holders of PCS Group Common
Stock evidences of its indebtedness or assets or subscription rights or
warrants (excluding (x) dividends or distributions referred to in Section
9.11.3(e)(i) and distributions of rights or warrants referred to in Section
9.11.3(e)(ii) and (y) cash dividends or other cash distributions, unless such
cash dividends or cash distributions are PCS Extraordinary Cash Dividends), the
Seventh Series Conversion Price shall be adjusted by multiplying the Seventh
Series Conversion Price in effect immediately prior to the record date for the
determination of shareholders entitled to
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receive such distribution by a fraction, of which the numerator shall be the
number of shares of PCS Group Common Stock outstanding on such record date
multiplied by the Current Market Price on the Determination Date, less the fair
market value (as determined by the Board of Directors) on such record date of
the evidences of indebtedness, assets (including PCS Extraordinary Cash
Dividends), subscription rights or warrants to be distributed to the holders of
PCS Group Common Stock (and to the holders of PCS Convertible Securities
referred to below if the distribution to which this paragraph (iii) applies is
also being made to such holders), and of which the denominator shall be the
number of shares of PCS Group Common Stock outstanding on such record date
multiplied by such Current Market Price. For purposes of this paragraph (iii),
the number of shares of PCS Group Common Stock outstanding on any record date
shall be deemed to include the maximum number of shares of PCS Group Common
Stock the issuance of which would be necessary to effect the full exercise,
exchange or conversion of all PCS Convertible Securities outstanding on such
record date which are then exercisable, exchangeable or convertible at a price
(before giving effect to any adjustment to such price for the distribution to
which this paragraph (iii) is being applied) equal to or less than the Current
Market Price per share of PCS Group Common Stock on the applicable
Determination Date, if all of such PCS Convertible Securities were deemed to
have been exercised, exchanged or converted immediately prior to the opening of
business on such record date.
For purposes of this paragraph (iii), the term "PCS Extraordinary Cash
Dividend" means any cash dividend with respect to the PCS Group Common Stock
the amount of which, together with the aggregate amount of cash dividends on
the PCS Group Common Stock to be aggregated with such cash dividend in
accordance with the following provisions of this paragraph, equals or exceeds
the threshold percentage set forth below in the following sentence. If, upon
the date prior to the Ex-Dividend Date with respect to a cash dividend on the
PCS Group Common Stock, the aggregate of the amount of such cash dividend
together with the amounts of all cash dividends on the PCS Group Common Stock
with Ex-Dividend Dates occurring in the 365 consecutive day period ending on
the date prior to the Ex-Dividend Date with respect to the cash dividend to
which this provision is being applied (other than any such other cash dividends
with Ex-Dividend Dates occurring in such period for which a prior adjustment to
the Seventh Series Conversion Price was previously made under this paragraph
(iii)) equals or exceeds on a per share basis 5% of the average of the Closing
Prices during the period beginning on the date after the first such Ex-Dividend
Date in such period and ending on the date prior to the Ex-Dividend Date with
respect to the cash dividend to which this provision is being applied (except
that if no other cash dividend has had an Ex-Dividend Date occurring in such
period, the period for calculating the average of the Closing Prices shall be
the period commencing 365 days prior to the date immediately prior to the Ex-
Dividend Date with respect to the cash dividend to which this provision is
being applied), such cash dividend together with each other cash dividend with
an Ex-Dividend Date occurring in such 365-day period that is aggregated with
such cash dividend in accordance with this paragraph shall be deemed to be a
PCS Extraordinary Cash Dividend.
The adjustment pursuant to the foregoing provisions of this paragraph (iii)
shall be made successively whenever any distribution to which this paragraph
(iii) applies is made, and shall become effective immediately after the record
date for the determination of shareholders entitled to receive the
distribution.
(iv) If this Section 9.11.3(e) requires adjustments to the Seventh Series
Conversion Price under more than one of clause (D) of the first sentence of
paragraph (i), paragraph (ii) or paragraph (iii), and the record dates for the
distribution giving rise to such adjustments shall occur on the same date, then
such adjustments shall be made by applying, first, the provisions of paragraph
(i), second the provisions of paragraph (iii) and, third, the provisions of
paragraph (ii).
(v) No adjustment in the Seventh Series Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent thereof; provided, however, that any adjustments which by reason of
this paragraph (v) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 9.11.3(e) shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be.
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(vi) In any case in which this Section 9.11.3(e) shall require that an
adjustment in the Seventh Series Conversion Price be made effective as of the
record date for a specified event, the Corporation may elect to defer until the
occurrence of such event (x) issuing to the holder of shares of the Seventh
Series the PCS Group Common Stock, if any, issuable upon such conversion over
and above the shares of PCS Group Common Stock, if any, issuable upon such
conversion on the basis of the Seventh Series Conversion Price in effect prior
to such adjustment, if the Seventh Series is converted after such record date,
and (y) paying to the holder cash or its check in lieu of any fractional
interest to which the holder would be entitled pursuant to Section 9.11.3(d);
provided, however, that the Corporation shall deliver to the holder a due bill
or other appropriate instrument evidencing the holder's right to receive such
additional PCS Group Common Stock and such cash upon the occurrence of the
event requiring such adjustment.
(vii) If the Corporation consolidates with or merges into, or transfers
(other than by mortgage or pledge) its properties and assets substantially as
an entirety to, another Person or the Corporation is a party to a merger or
binding share exchange which reclassifies or changes its outstanding PCS Group
Common Stock, or the PCS Group Common Stock is converted into another class or
series of capital stock of the Corporation, the Corporation (or its successor
in such transaction) or the transferee of such properties and assets shall make
appropriate provision so that the holder's stock certificate representing
shares of the Seventh Series shall thereafter be convertible, upon the terms
and conditions specified in the stock certificates, for the kind and amount of
securities, cash or other assets receivable upon such transaction by a holder
of the number of shares of PCS Group Common Stock purchasable upon conversion
of the holder's Seventh Series immediately before the effective date of such
transaction (assuming, to the extent applicable, that such holder of PCS Group
Common Stock failed to exercise any rights of election with respect thereto,
and received per share the kind and amount of securities, cash or other assets
received per share of PCS Group Common Stock by a plurality of the nonelecting
shares of PCS Group Common Stock); and in any such case, if necessary, the
provisions set forth in this Section 9.11.3(e) with respect to the rights and
interests thereafter of the holder of the Seventh Series shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be, to any such
other securities or assets thereafter deliverable on the conversion of the
holder's Seventh Series. The subdivision or combination of the PCS Group Common
Stock at any time outstanding into a greater or lesser number of shares of PCS
Group Common Stock shall not be deemed to be a reclassification of the PCS
Group Common Stock for the purposes of this subsection. The Corporation shall
not effect any such consolidation, merger, transfer or binding share exchange
unless prior to or simultaneously with the consummation thereof the successor
(if other than the Corporation) resulting from such consolidation or merger or
the Person purchasing such assets or other appropriate Person shall assume, by
written instrument, the obligation to deliver to the holders of the Seventh
Series such securities, cash or other assets as, in accordance with the
foregoing provisions, the holder may be entitled to purchase and the other
obligations under this Section 9.11. The Corporation may make such reductions
in the Conversion Price, in addition to those required by paragraphs (i), (ii)
and (iii) of this Section 9.11.3(e), as it shall in its sole discretion
determine to be advisable.
(viii) Subject to Section 9.11.3(e)(v) and to the remaining provisions of
this Section 9.11.3(e)(viii), in the event that a holder of Seventh Series
would be entitled to receive upon conversion thereof pursuant to this Section
9.11.3(e) any Redeemable Capital Stock and the Corporation redeems, exchanges
or otherwise acquires all of the outstanding shares or other units of such
Redeemable Capital Stock (such event being a "Redemption Event"), then, from
and after the effective date of such Redemption Event, the holders of shares of
Seventh Series then outstanding shall be entitled to receive upon conversion of
such shares, in lieu of shares or units of such Redeemable Capital Stock, the
kind and amount of shares of stock and other securities and property receivable
upon the Redemption Event by a holder of the number of shares or units of such
Redeemable Capital Stock into which such shares of Seventh Series could have
been converted immediately prior to the effective date of such Redemption Event
(assuming, to the extent applicable, that such holder failed to exercise any
rights of election with respect thereto and received per share or unit of such
Redeemable Capital Stock the kind and amount of stock and other securities and
property received per share or unit by a plurality of the non-electing shares
or units of such Redeemable Capital Stock), and (from and after the effective
date of such Redemption Event) the holders of the Seventh Series shall have no
other conversion rights under these provisions with respect to such Redeemable
Capital Stock.
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Notwithstanding the foregoing, if the redemption price for the shares of
such Redeemable Capital Stock is paid in whole or in part in Redemption
Securities, and the Mirror Preferred Stock Condition is met, the Seventh Series
shall not be convertible into such Redemption Securities and, from and after
the applicable redemption date, the holders of any shares of Seventh Series
that have not been exchanged for Mirror Preferred Stock and Exchange Preferred
Stock shall have no conversion rights under these provisions except for any
conversion right that may have existed immediately prior to the effective date
of the Redemption Event with respect to any shares of stock (including the PCS
Group Common Stock) or other securities or property other than the Redeemable
Capital Stock so redeemed. The Corporation shall use all commercially
reasonable efforts to ensure that the Mirror Preferred Stock Condition is
satisfied. The "Mirror Preferred Stock Condition" will be satisfied in
connection with a redemption of any Redeemable Capital Stock into which the
Seventh Series is then convertible if appropriate provision is made so that the
holders of the Seventh Series have the right to exchange their shares of
Seventh Series on the effective date of the Redemption Event for Exchange
Preferred Stock of the Corporation and Mirror Preferred Stock of the issuer of
the Redemption Securities. The sum of the initial liquidation preferences of
the shares of Exchange Preferred Stock and Mirror Preferred Stock delivered in
exchange for a share of Seventh Series will equal the Seventh Series
Liquidation Preference on the effective date of the Redemption Event. The
Mirror Preferred Stock will have an aggregate initial liquidation preference
equal to the product of the aggregate Seventh Series Liquidation Preference of
the shares of Seventh Series exchanged therefor and the quotient of (x) the
product of the amount of shares of the Redeemable Capital Stock for which each
share of Seventh Series is then convertible to be redeemed (determined
immediately prior to the effective date of the Redemption Event) and the
average of the daily Closing Prices of the Redeemable Capital Stock for the
period of ten consecutive Trading Days ending on the third Trading Day prior to
the effective date of the Redemption Event, divided by (y) the sum of the
amount determined pursuant to clause (x), plus the fair value of the shares of
stock or other securities or property (other than the Redeemable Capital Stock
being redeemed) that would have been receivable by a holder of Seventh Series
upon conversion thereof immediately prior to the effective date of the
Redemption Event (such fair value to be determined in the case of stock or
other securities with a Closing Price in the same manner as provided in clause
(x) and otherwise by the Board of Directors in the exercise of its judgment).
The shares of Exchange Preferred Stock will have an aggregate initial
liquidation preference equal to the difference between the aggregate Seventh
Series Liquidation Preference of the shares of Seventh Series exchanged
therefor and the aggregate initial liquidation preference of the Mirror
Preferred Stock. No shares of Exchange Preferred Stock will be issued in
exchange for the Seventh Series if the shares of Exchange Preferred Stock would
have no liquidation preference as a result of the above formula.
(ix) If the Corporation effects a PCS Spin Off, the Corporation shall make
appropriate provision so that the holders of the Seventh Series have the right
to exchange their shares of Seventh Series on the effective date of the PCS
Spin Off for Exchange Preferred Stock of the Corporation and Mirror Preferred
Stock of the issuer of the PCS Spin Off Securities. The sum of the initial
liquidation preference of the shares of Exchange Preferred Stock and Mirror
Preferred Stock delivered in exchange for a share of Seventh Series will equal
the Seventh Series Liquidation Preference of a share of Seventh Series on the
effective date of the PCS Spin Off. The Mirror Preferred Stock will have an
aggregate liquidation preference equal to the product of the aggregate Seventh
Series Liquidation Preference of the shares of Seventh Series exchanged
therefor and the quotient of (x) the product of the number (or fraction) of PCS
Spin Off Securities that would have been receivable upon such PCS Spin Off by a
holder of the number of shares of PCS Group Common Stock issuable upon
conversion of a share of Seventh Series immediately prior to the effective date
of the PCS Spin Off and the average of the daily Closing Prices of the PCS Spin
Off Securities for the period of ten consecutive Trading Days commencing on the
tenth Trading Day following the effective date of the PCS Spin Off, divided by
(y) the sum of the amount determined pursuant to clause (x), plus the fair
value of the shares of PCS Group Common Stock and other securities or property
(other than PCS Spin Off Securities) that would have been receivable by a
holder of a share of Seventh Series in the PCS Spin Off following conversion
thereof immediately prior to the effective date of the PCS Spin Off (such fair
value to be determined in the case of PCS Group Common Stock or other
securities with a Closing Price in the same manner as provided in clause (x)
and otherwise by the Board of Directors in the exercise of its judgment). The
shares of Exchange Preferred
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Stock will have an aggregate initial liquidation preference equal to the
difference between the aggregate Seventh Series Liquidation Preference of the
shares of Seventh Series exchanged therefor and the aggregate initial
liquidation preference of the Mirror Preferred Stock. No shares of Exchange
Preferred Stock will be issued in exchange for the Seventh Series if the shares
of Exchange Preferred Stock would have no liquidation preference as a result of
the above formula. From and after the effective date of such PCS Spin Off, the
holders of any shares of Seventh Series that have not been exchanged for Mirror
Preferred Stock and Exchange Preferred Stock as provided above shall have no
conversion rights under these provisions with respect to such PCS Spin Off
Securities.
(f) With respect to the WorldCom Group Common Stock to be issued in
accordance with ARTICLE SIX, Section 9.11.3(a)(ii), the Board of Directors will
adjust the Common Stock Conversion Rate so that the amount of WorldCom Group
Common Stock to be so issued will not be diluted as a result of the events
described in Section 9.11.3(e), if such events were to occur with respect to
the WorldCom Group Common Stock.
(g) The Corporation shall pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of shares of
Corporation Common Stock on the conversion of Seventh Series; provided,
however, that the Corporation shall not be required to pay any tax that may be
payable in respect of any registration of transfer involved in the issue or
delivery of shares of Corporation Common Stock in a name other than that of the
registered holder of Seventh Series converted or to be converted, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
9.11.4. Liquidation Rights. Subject to prior payment of preferred amounts to
which any Senior Stock is entitled, in the event of any liquidation,
dissolution or winding up of the Corporation the holders of the Seventh Series
will be entitled to receive out of the assets of the Corporation available for
distribution to shareholders, before any distribution of the assets shall be
made to the holders of the Corporation Common Stock or any other Junior Stock,
the sum of $1,000 per share (the "Seventh Series Liquidation Preference"), plus
in each case any accumulated and unpaid dividends (whether or not declared), to
the date of final distribution. If upon any liquidation, dissolution or winding
up of the Corporation the amounts payable with respect to the Seventh Series
and any other Parity Stock are not paid in full, the holders of the Seventh
Series and such Parity Stock will share ratably in any distribution of assets
in proportion to the full preferential amounts to which they are entitled.
After payment of the full amount of the liquidating distribution to which they
are entitled, the holders of Seventh Series shall not be entitled to any
further participation in any distribution of assets by the Corporation. A
consolidation or merger of the Corporation with or into one or more other
corporations (whether or not the Corporation is the corporation surviving such
consolidation or merger), or a sale, lease or exchange of all or substantially
all of the assets of the Corporation shall not be deemed to be a voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation. Notice
of a liquidation, dissolution or winding up of the Corporation shall be filed
at each office or agency maintained for the purpose of conversion of the
Seventh Series, and shall be mailed to the holders of Seventh Series at their
last addresses as they shall appear on the stock register of the Corporation,
at least 20 Business Days before any such action, stating the date on which any
such action is expected to become effective. The failure to give or receive the
notice required by this Section 9.11.4 or any defect therein shall not affect
the legality or validity of any such action.
9.11.5. Redemption. (a) General. Except as provided below and in Section
9.11.5(h), the Seventh Series shall not be redeemed by the Corporation prior to
November 23, 2001. The Corporation may at its option redeem the Seventh Series
in whole or in part after November 23, 2001, at any time or from time to time,
upon at least thirty days' prior notice, at a redemption price equal to the
Seventh Series Liquidation Preference per share of Seventh Series, plus any
accumulated and unpaid dividends (whether or not declared) up to but excluding
such redemption date. In connection with a PCS Spin Off or a Redemption Event,
the Corporation may, at its option, redeem the Seventh Series in whole after
November 23, 2000, and before November 23, 2001, upon at least thirty days
prior notice, at a redemption price equal to the Seventh Series Premium Price
per share of Seventh Series, plus any accumulated and unpaid dividends (whether
or not
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declared) up to but excluding such redemption date, which redemption shall be
deemed effective immediately prior to the consummation of the PCS Spin Off or
the Redemption Event. If less than all the outstanding Seventh Series is to be
redeemed, the shares to be redeemed shall be selected pro rata as nearly as
practicable or by lot, or by such other method as may be determined by the
Board of Directors to be equitable, without regard to whether the shares to be
redeemed are convertible into Common Stock and Series 1 PCS Stock, on the one
hand, or Series 2 Common Stock and Series 2 PCS Stock, on the other hand.
Shares of Seventh Series so redeemed shall be cancelled and upon such
cancellation shall be deemed to be authorized and unissued shares of Preferred
Stock, without par value, of the Corporation but shall not be reissued as
shares of Seventh Series.
(b) Mandatory Redemption. To the extent permitted by law, the Corporation
shall redeem, on November 23, 2008 (or, if such day is not a Business Day, on
the first Business Day thereafter) (subject to extension as provided in the
last sentence of this Section 9.11.5(b), the "Mandatory Redemption Date"), all
remaining shares of Seventh Series then outstanding, at the redemption price of
$1,000 for each share outstanding, plus an amount in cash equal to all accrued
but unpaid dividends thereon to the Mandatory Redemption Date. Prior to
authorizing or making such redemption with respect to the Seventh Series, the
Corporation, by resolution of the Board of Directors, shall, to the extent of
funds legally available therefor, declare a dividend on the Seventh Series
payable on the Mandatory Redemption Date in an amount equal to any accrued and
unpaid dividends on the Seventh Series as of such date and, if the Corporation
does not have sufficient legally available funds to declare and pay all
dividends accrued at the time of such redemption, any remaining accrued but
unpaid dividends shall be added to the redemption price. After paying any
accrued and unpaid dividends pursuant to the foregoing sentence, if the funds
of the Corporation legally available for redemption of shares of the Seventh
Series then required to be redeemed are insufficient to redeem the total number
of such shares then outstanding, those funds which are legally available shall
be used to redeem the maximum possible number of shares of the Seventh Series.
At any time and from time to time thereafter, when additional funds of the
Corporation are legally available to discharge its obligation to redeem all of
the outstanding shares of Seventh Series required to be redeemed pursuant to
this section (the "Mandatory Redemption Obligation"), such funds shall be
immediately used to discharge such Mandatory Redemption Obligation until the
balance of such shares have been redeemed. If and so long as the Mandatory
Redemption Obligation shall not be fully discharged, (i) dividends on any
remaining outstanding shares of Seventh Series shall continue to accrue and be
added to the dividend payable pursuant to the second preceding sentence and
(ii) the Corporation shall not declare or pay any dividend or make any
distribution on any Parity Stock or Junior Stock. With respect to any Exchange
Preferred Stock or Mirror Preferred Stock, the Mandatory Redemption Date shall
be the later to occur of (A) November 23, 2008, and (B) the fifth anniversary
of the date of issuance of such Exchange Preferred Stock or Mirror Preferred
Stock.
(c) Notice. The Corporation will provide notice of any redemption of shares
of Seventh Series to holders of record of the Seventh Series to be redeemed not
less than 30 nor more than 60 days prior to the date fixed for such redemption.
Such notice shall be provided by first-class mail postage prepaid, to each
holder of record of the Seventh Series to be redeemed, at such holder's address
as it appears on the stock transfer books of the Corporation. Each such mailed
notice shall state, as appropriate, the following:
(i) the redemption date;
(ii) the number of shares of Seventh Series to be redeemed and, if fewer
than all the shares held by any 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 stock certificates for such shares are to be
surrendered for redemption;
(v) the amount of full cumulative dividends per share of Seventh Series to
be redeemed accrued and unpaid up to but excluding such redemption date, and
that dividends on shares of Seventh Series to be
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redeemed will cease to accrue on such redemption date unless the Corporation
shall default in payment of the redemption price plus such full cumulative
dividends accrued and unpaid thereon;
(vi) the name and location of any bank or trust company with which the
Corporation will deposit redemption funds pursuant to subsection (e) below;
(vii) the then effective Seventh Series Conversion Price (as determined
under Section 9.11.3); and
(viii) that the right of holders to convert shares of Seventh Series to be
redeemed will terminate at the close of business on the Business Day next
preceding the date fixed for redemption (unless the Corporation shall default
in the payment of the redemption price and such full cumulative dividends
accrued and unpaid thereon).
Any notice that is mailed as set forth above shall be conclusively presumed to
have been duly given, whether or not the holder of shares of Seventh Series
receives such notice, and failure to give such notice by mail, or any defect in
such notice, to the holders of any shares designated for redemption shall not
affect the validity of the proceedings for the redemption of any other shares
of Seventh Series.
(d) Mechanics of Redemption. Upon surrender in accordance with the aforesaid
notice of the stock certificate for any shares so redeemed (duly endorsed or
accompanied by appropriate instruments of transfer if so required by the
Corporation), the holders of record of such shares shall be entitled to receive
the redemption price, without interest, plus full cumulative dividends thereon
accrued and unpaid up to but excluding such redemption date out of funds
legally available therefor. If fewer than all the shares represented by any
such stock certificate are redeemed, a new stock certificate representing the
unredeemed shares shall be issued without cost to the holder thereof.
(e) Redemption Funds. On the date of any redemption being made pursuant to
this Section, the Corporation shall, and at any time after notice of such
redemption shall have been mailed and before the date of redemption the
Corporation may, deposit for the benefit of the holders of shares of Seventh
Series to be redeemed the funds necessary for such redemption with a bank or
trust company in the City of New York having a capital and surplus of at least
$1 billion, with instructions to such bank or trust company to pay the full
redemption amounts as provided herein to the holders of shares of Seventh
Series upon surrender of stock certificates for such shares; provided, however,
that the making of such deposit shall not release the Corporation from any of
its obligations hereunder. Any moneys so deposited by the Corporation and
unclaimed at the end of two years from the date designated for such redemption
shall revert to the general funds of the Corporation and, upon demand, such
bank or trust company shall pay over to the Corporation such unclaimed amounts
and thereupon such bank or trust company shall be relieved of all
responsibility in respect thereof and any holder of shares of Seventh Series so
redeemed shall look only to the Corporation for the payment of the full
redemption amounts, as provided herein.
(f) Rights After Redemption. Notice of redemption having been given as
aforesaid, upon the deposit pursuant to Section 9.11.5(e) of the full
redemption amounts as provided herein in respect of all shares of Seventh
Series then to be redeemed, notwithstanding that any stock certificates for
such shares shall not have been surrendered in accordance with Section
9.11.5(d), from and after the date of redemption designated in the notice of
redemption: (i) the shares represented thereby shall no longer be deemed
outstanding; (ii) the rights to receive dividends thereon shall cease to
accrue; and (iii) all rights of the holders of such shares of Seventh Series
shall cease and terminate, excepting only the right to receive the full
redemption amounts as provided herein without interest thereon. If the funds
deposited are not sufficient for redemption of the shares of the Seventh Series
that were to be redeemed, then no stock certificates evidencing such shares
shall be deemed surrendered and such shares shall remain outstanding and the
rights of holders of shares of Seventh Series shall continue to be those of
holders of shares of the Seventh Series.
(g) Restrictions on Redemption and Purchase. Notwithstanding any provision
of this Section 9.11.5(g) to the contrary, in the event that any quarterly
dividend payable on the Seventh Series shall be in arrears and
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until all such dividends in arrears shall have been paid or declared and set
apart for payment, the Corporation shall not redeem any shares of Parity Stock
or Junior Stock unless all outstanding shares of Seventh Series are
simultaneously redeemed and shall not purchase or otherwise acquire any shares
of Seventh Series or any Parity Stock or Junior Stock except (i) by conversion
into or exchange for stock ranking junior as to dividends or (ii) in accordance
with a purchase or exchange offer made by the Corporation to all holders of
record of Seventh Series and such Parity Stock upon the same terms as to
holders of any series and, in the case of offers relating to more than one
series, upon such terms as between such series as the Board of Directors or, to
the extent permitted by applicable law, any authorized committee thereof, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series of stock, will result in fair and
equitable treatment as between such series, which determination shall be
conclusive.
(h) The Corporation shall redeem the Seventh Series in whole or in part in
accordance with and to the extent required by Section 6.6 of the Restructuring
Agreement. With respect to any such redemption, (i) the provisions of Section
9.11.5(c) and Section 9.11.5(e) shall not apply and (ii) the restriction on
rights in Section 9.11.5(f) shall apply.
9.11.6. Advance Notice of Certain Transactions. If the Corporation: (i)
takes any action which would require any adjustment to the Seventh Series
Conversion Price, the Common Stock Conversion Rate or the number of shares
issuable upon a conversion of the Seventh Series; (ii) is a party to a
consolidation, merger or binding share exchange, or transfers all or
substantially all of its assets to another person or entity, and any
shareholders of the Corporation must approve the transaction; or (iii)
voluntarily or involuntarily dissolves, liquidates or winds-up, then, in any
such event, the Corporation shall give to the holders of the Seventh Series, at
least 10 days prior to any record date or other date set for definitive action
if there shall be no record date, a notice stating the record date for and the
anticipated effective date of such action or event and, if applicable, whether
the Corporation will adjust the Seventh Series Conversion Price, the Common
Stock Conversion Rate or the number of shares issuable upon a conversion of the
Seventh Series. Notwithstanding the foregoing, notice shall be given no later
than the time any required notice of such action or event is given to the
holders of PCS Group Common Stock or WorldCom Group Common Stock.
9.11.7. Reservation of Shares. The Corporation shall at all times keep
available and reserved for the purpose of issuance upon conversion of shares of
Seventh Series the number of shares of its Common Stock, Series 2 Common Stock,
Series 1 PCS Stock and Series 2 PCS Stock required for conversion of the
outstanding and any reserved shares of the Seventh Series. The Corporation
shall take all corporate and other actions necessary to ensure that all shares
of Corporation Common Stock issuable on conversion of Seventh Series will upon
issuance be duly and validly authorized and issued, fully paid and
nonassessable.
9.11.8. Certain Protective Provisions. If at any time the full cumulative
dividends on shares of the Seventh Series have not been paid or declared and
set aside for payment for the current and all past quarterly dividend periods,
the Corporation (a) will not declare, or pay, or set apart for payment any
dividends or make any distribution, on any class or series of Parity Stock or
Junior Stock, (b) will not redeem, purchase or otherwise acquire, or permit any
subsidiary to purchase or otherwise acquire, any shares of any class or series
of Parity Stock or Junior Stock; provided that notwithstanding the foregoing,
the Corporation may at any time redeem, purchase or otherwise acquire shares of
Junior Stock in exchange for, or out of the net cash proceeds from the
substantially simultaneous sale of, other shares of Junior Stock, and (c) will
not redeem pursuant to redemption rights in the terms of such stock any Parity
Stock unless at the same time it redeems all the shares of the Seventh Series.
9.11.9. Voting Rights. Except as otherwise required by law, each outstanding
share of the Seventh Series shall be entitled to vote on all matters in respect
of which the holders of Corporation Common Stock are entitled to vote, and the
holders of the Seventh Series shall vote together with the holders of all other
classes or series of capital stock that have general voting power on all such
matters as a single class; provided, however, that the affirmative vote or
consent of two-thirds of the votes to which the holders of the outstanding
shares of
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the Seventh Series are entitled shall be necessary for authorizing, effecting
or validating the amendment, alteration or repeal of any or the provisions of
these Articles of Incorporation or of any amendment hereto (including any
certificate of designation or any similar document relating to any series of
Preferred Stock) which would materially and adversely affect the voting powers,
preferences, rights, powers or privileges, qualifications, limitations and
restrictions of the Seventh Series; provided, however, that neither (a) the
creation, issuance, or increase in the amount of authorized shares of any
series of Preferred Stock nor (b) the consummation of any transaction described
in Section 9.11.3 in which the voting powers, preferences, rights, powers or
privileges, qualifications, limitations and restrictions of the Seventh Series
are addressed as contemplated by such Section 9.11.3 will (in either such case)
be deemed to materially and adversely affect such voting powers, preferences,
rights, powers or privileges, qualifications, limitations and restrictions of
the Seventh Series.
On each matter to be voted on by the holders of the Seventh Series, each
outstanding share of the Seventh Series is entitled to a number of votes equal
to the number of votes that could be cast with respect to such matter by the
holder of that number of shares of WorldCom Group Common Stock and PCS Group
Common Stock into which such share of Seventh Series could be converted if the
requirements for conversion under Section 9.11.3(c) had been satisfied by such
voting party on the record date for determining the shareholders of the
Corporation who are entitled to vote with respect to such matter.
9.12. Series 8 Junior Participating Preferred Stock.
9.12.1. Designation and Amount. There shall be 1,250,000 shares of Preferred
Stock designated as Eighth Series.
9.12.2. Dividends.
(a) Subject to the prior and superior rights of the holders of any shares of
any other series of Preferred Stock, or any similar stock ranking prior and
superior to the shares of the Eighth Series with respect to dividends, the
holders of shares of the Eighth Series, in preference to the holders of
Corporation Common Stock and any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the shares of the
Eighth Series (for purpose only of this Section 9.12 and collectively with the
Corporation Common Stock, "Junior Stock"), shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash, on January 1, April 1, July 1
and October 1 in each year (each such date being referred to herein as a
"Eighth Series Quarterly Dividend Payment Date") in an amount (rounded to the
nearest cent) equal to the greater of (a) $100.00 and (b) the product of the
PCS Group Multiple (as defined below) times the aggregate per share amount of
all cash dividends, plus the product of the PCS Group Multiple times the
aggregate per share amount (payable in cash, based upon the fair market value
at the time the noncash dividend or other distribution is declared as
determined in good faith by the Board of Directors) of all non-cash dividends
or other distributions other than a dividend payable in shares of PCS Group
Common Stock, or a subdivision of the outstanding shares of PCS Group Common
Stock (by reclassification or otherwise), declared (but not withdrawn) on the
PCS Group Common Stock since the immediately preceding Eighth Series Quarterly
Dividend Payment Date, or, with respect to the first Eighth Series Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of the Eighth Series.
(b) As used herein, the PCS Group Multiple shall initially be 1,000. In the
event the Corporation shall (i) declare any dividend on PCS Group Common Stock
payable in shares of PCS Group Common Stock, (ii) subdivide the outstanding PCS
Group Common Stock, or (iii) combine the outstanding PCS Group Common Stock
into a smaller number of shares, then in each such case the PCS Group Multiple
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of PCS Group Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of PCS
Group Common Stock that were outstanding immediately prior to such event.
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(c) The Corporation shall declare a dividend or distribution on the Eighth
Series as provided above in paragraph (a) of this Section 9.12.2 immediately
after it declares a dividend or distribution on the PCS Group Common Stock
(other than a dividend payable in shares of PCS Group Common Stock); provided,
however, that in the event no dividend or distribution shall have been declared
on the PCS Group Common Stock during the period between any Eighth Series
Quarterly Dividend Payment Date and the next subsequent Eighth Series Quarterly
Dividend Payment Date, the minimum quarterly dividend of $100.00 on the Eighth
Series shall nevertheless be payable on such subsequent Eighth Series Quarterly
Dividend Payment Date.
(d) Dividends shall begin to accrue and are cumulative on outstanding shares
of Eighth Series from the Eighth Series Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Eighth Series, unless the date of
issue of such shares of Eighth Series is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Eighth Series Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Eighth Series
entitled to receive a quarterly dividend and before such Eighth Series
Quarterly Dividend Payment Date, in either of which cases such dividends shall
begin to accrue and be cumulative from such Eighth Series Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall cumulate but shall not bear
interest. Dividends paid on the shares of Eighth Series in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding.
9.12.3. Voting Rights. Except as prescribed by law and in addition to the
rights provided for in this ARTICLE SIX, the holders of the shares of the
Eighth Series shall be entitled to vote at any annual or special meeting of the
shareholders, for each share of Eighth Series, a number of votes equal to the
product of the PCS Group Multiple then in effect times the highest number of
votes that each share of PCS Group Common Stock entitles its holder to vote at
such meeting of shareholders. The holders of the shares of the Eighth Series
shall be entitled to exercise such voting rights with the holders of Series 1
PCS Stock, without distinction as to class, at any annual or special meeting of
shareholders for the election of directors and on any other matter submitted to
a vote of the shareholders at such meeting. Except as otherwise provided
herein, in these Articles of Incorporation, in any articles of amendment to
these Articles of Incorporation establishing a series of Preferred Stock or any
similar stock or otherwise required by law, the holders of the shares of the
Eighth Series and the holders of Corporation Common Stock shall vote together
as a single class on all matters submitted to a vote of shareholders of the
Corporation.
9.12.4. Certain Restrictions. (a) Whenever quarterly dividends or other
dividends or distributions payable on the shares of the Eighth Series as
provided in Section 9.12.2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of the
Eighth Series outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends (except a dividend payable in PCS Group Common
Stock and/or any other Junior Stock) on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of Junior
Stock;
(ii) declare or pay dividends on or make any other distribution on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) (for purposes only of this Section
9.12, "Parity Stock") with the shares of the Eighth Series, except dividends
paid ratably on the shares of the Eighth Series and all such Parity Stock on
which dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration any shares
of Parity Stock; provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of such Parity Stock in exchange for shares of
Junior Stock; or
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(iv) purchase or otherwise acquire for consideration any shares of the
Eighth Series, or any shares of Parity Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any Subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under Section 9.12.4(a), purchase or
otherwise acquire such shares at such time and in such manner.
9.12.5. Reacquired Shares. Any shares of the Eighth Series purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall
upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth in these Articles of
Incorporation, in any articles of amendment to these Articles of Incorporation
establishing a series of Preferred Stock or any similar stock or as otherwise
required by law.
9.12.6. Liquidation, Dissolution or Winding Up. (a) In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of the shares of the Eighth Series shall be entitled
to receive, in preference to the holders of Junior Stock, the greater of (a)
$1,000.00 per share, plus accrued dividends to the date of distribution,
whether or not earned or declared, and (b) an amount per share equal to the
product of the PCS Group Multiple then in effect times the aggregate amount to
be distributed per share to holders of PCS Group Common Stock.
(b) In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of Parity Stock shall not receive
any distributions except for distributions made ratably on the Eighth Series
and all other such Parity Stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up.
9.12.7. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of PCS Group Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
the Eighth Series shall at the same time be similarly exchanged or changed in
an amount per share equal to the product of the PCS Group Multiple then in
effect times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of PCS Group Common Stock is changed or exchanged.
9.12.8. Ranking. The shares of the Eighth Series shall rank junior to all
other series of Preferred Stock as to the payment of dividends and the
distribution of assets, unless the terms of any such series shall provide
otherwise. The shares of the Eighth Series shall rank on a parity with the
Third Series as to the payment of dividends and the distribution of assets.
Nothing herein shall preclude the Board of Directors from creating any
additional series of Preferred Stock or any Parity Stock.
9.12.9. Fractional Shares. Shares of the Eighth Series may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of shares of the Eighth Series.
Section 10. Definitions. For purposes of ARTICLE FIVE and ARTICLE SIX of
these Articles of Incorporation, the following terms have the following
meanings (with terms defined in the singular having comparable meaning when
used in the plural and vice versa), unless the context otherwise requires. As
used in this Section 10, a "contribution" or "transfer" of assets or properties
from one Business Group to another
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refers to the reattribution of such assets or properties from the contributing
or transferring Business Group to the other Business Group and correlative
phrases have correlative meanings.
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by, or is under common Control with, such Person.
"Alien" means "aliens," "their representatives," "a foreign government or
representatives thereof" or "any corporation organized under the laws of a
foreign country" as such terms are used in Section 310(b)(4) of the
Communications Act of 1934, as amended, or as hereafter may be amended, or any
successor provision of law.
"Applicable Law" means all applicable provisions of all (a) constitutions,
treaties, statutes, laws (including common law), rules, regulations, ordinances
or codes of any Governmental Authority and (b) orders, decisions, injunctions,
judgments, awards and decrees of any Governmental Authority.
"Articles of Incorporation" means the Third Amended and Restated Articles of
Incorporation of the Corporation, as amended or supplemented from time to time.
"Associate" has the meaning ascribed to such term in Rule 12b-2 under the
Exchange Act.
"Average Trading Price" of a share of any class or series of capital stock
of the Corporation on any day means the average Closing Price of such capital
stock determined over the 20 Trading Days immediately preceding the date of
such determination; provided that for purposes of this definition only, in
determining the "Closing Price" of a share of any class or series of capital
stock for such 20 Trading Day period, (i) the "Closing Price" of a share of
capital stock on any day prior to any "ex-dividend" date or any similar date
occurring during such period for any dividend or distribution (other than any
dividend or distribution contemplated by clause (ii)(B) of this definition)
paid or to be paid with respect to such capital stock shall be reduced by the
Fair Value of the per share amount of such dividend or distribution and (ii)
the "Closing Price" of any share of capital stock on any day prior to (A) the
effective date of any subdivision (by stock split or otherwise) or combination
(by reverse stock split or otherwise) of outstanding shares of such class of
capital stock occurring during such period or (B) any "ex-dividend" date or any
similar date occurring during such period for any dividend or distribution with
respect to such capital stock to be made in shares of such class or series of
capital stock or Convertible Securities that are convertible, exchangeable or
exercisable for such class or series of capital stock, shall be appropriately
adjusted, as determined by the Board of Directors, to reflect such subdivision,
combination, dividend or distribution.
"Beneficial Owner" (including, with its correlative meanings, "Beneficially
Own", "Beneficial Ownership" and "Beneficially Owned"), with respect to any
securities, means any Person which:
(a) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to acquire (whether such right is exercisable immediately
or only after the passage of time) such securities pursuant to any agreement,
arrangement or understanding (whether or not in writing), including, without
limitation, upon the exercise of conversion rights, exchange rights, warrants
or options, or otherwise;
(b) has, or any of whose Affiliates or Associates has, directly or
indirectly, the right to vote or dispose of (whether such right is exercisable
immediately or only after the passage of time) or has "beneficial ownership" of
(as determined pursuant to Rule 13d-3 under the Exchange Act but including all
such securities which a Person has the right to acquire beneficial ownership of
whether or not such right is exercisable within the 60-day period specified
therein) such securities, including pursuant to any agreement, arrangement or
understanding (whether or not in writing); or
(c) has, or any of whose Affiliates or Associates has, any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting or disposing of any securities which are
Beneficially Owned, directly or indirectly, by any other Person (or any
Affiliate thereof);
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provided that prior to the conversion thereof (other than during the 90-day
period following the Conversion Trigger Date set forth in ARTICLE SIX, Section
7.5.5), a holder of Series 2 PCS Stock or Series 2 Common Stock shall not be
deemed to Beneficially Own the shares of Series 1 PCS Stock or Common Stock
issuable upon conversion thereof; provided, further that any shares of Series
1 PCS Stock and Common Stock held by one of FT or DT or its Affiliates or
Associates shall not also be deemed to be Beneficially Owned by the other of
FT or DT or its Affiliates or Associates.
"Board of Directors" means the board of directors of the Corporation.
"Business Day" means any day other than a day on which commercial banks in
the City of New York are required or authorized by law to be closed.
"Business Group" means, as of any date, the WorldCom Group or the PCS
Group, as the case may be.
"Bylaws" means the Restated Bylaws of the Corporation, as amended or
supplemented from time to time.
"Cable Holder" means any of:
(a) Tele-Communications, Inc., a Delaware corporation, Comcast Corporation,
a Pennsylvania corporation, or Cox Communications, Inc., a Delaware
corporation;
(b) any Affiliate of an entity identified in clause (a) of this definition;
(c) any successor (by operation of law or otherwise) of an entity
identified in clauses (a) or (b) of this definition so long as such successor
remains an Affiliate of an entity identified in clause (a) or (b);
(d) any entity controlled by two or more entities identified in clauses (a)
through (c) of this definition or this clause (d) even if such entity is not
considered an Affiliate of any individual entity so identified; and
(e) for purposes of ARTICLE SIX, Section 7.5.2 only, with respect to any
Transfer of shares of Series 2 PCS Stock, the transferee of such shares if (i)
at the time of such Transfer, the transferor was a Cable Holder under any of
clauses (a) through (d) of this definition, (ii) after giving effect to such
Transfer, the transferee was an Associate of the transferor, (iii) immediately
prior to such Transfer, the transferee was identified in writing by the
transferor as a "Cable Holder" under this clause (e), and (iv) the transferor
and transferee satisfied the conditions set forth in Section 2.4 of the
applicable Cable Holder Standstill Agreement.
"Cable Holder Standstill Agreements" means the Standstill Agreements, dated
as of May 26, 1998, by and between Sprint and each of certain Cable Holders,
and any Standstill Agreements in the form thereof entered into from time to
time between Sprint and certain transferee Affiliates and Associates of such
Cable Holders.
"Closing Price" means, with respect to a security on any day, the last sale
price, regular way, or in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the NYSE or, if such
security is not listed or admitted to trading on such exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
security is listed or admitted to trading or, if the security is not listed or
admitted to trading on any national securities exchange, the last quoted sale
price on NASDAQ or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System or such
other system then in use, or, if on any such date such security is not quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the security
selected in good faith by the Board of Directors. If the security is not
publicly held or so listed or publicly traded, "Closing Price" means the Fair
Market Value of such security.
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"Common Stock" has the meaning set forth in the "Designation" column in
ARTICLE SIX, Section 1.1.
"Control" means, with respect to a Person or Group, any of the following:
(a) ownership by such Person or Group of Votes entitling it to exercise in
the aggregate more than 35 percent of the Voting Power of the entity in
question; or
(b) possession by such Person or Group of the power, directly or
indirectly, (i) to elect a majority of the board of directors (or equivalent
governing body) of the entity in question; or (ii) to direct or cause the
direction of the management and policies of or with respect to the entity in
question, whether through ownership of securities, by contract or otherwise.
"Conversion Date" means the date fixed by the Board of Directors as the
effective date for the conversion of shares of PCS Group Common Stock into
shares of WorldCom Group Common Stock as shall be set forth in the notice to
holders of shares of PCS Group Common Stock and to holders of any Convertible
Securities that are convertible into or exchangeable or exercisable for shares
of PCS Group Common Stock required pursuant to ARTICLE SIX, Section 7.4(e).
"Converted Series Shares" has the meaning set forth in ARTICLE SIX, Section
7.5.3.
"Converted Votes" means, on any particular day, (i) in the case of a share
of Series 2 PCS Stock, the applicable PCS Per Share Vote a share of Series 1
PCS Group Common Stock would have had if the computation described in Section
3.2(a)(ii) had occurred on such day and (ii) in the case of a share of Series
2 Common Stock, one vote per share.
"Convertible Securities" at any time means any securities of the
Corporation or of any Subsidiary thereof (other than shares of Corporation
Common Stock), including warrants and options, outstanding at such time that
by their terms are convertible into or exchangeable or exercisable for or
evidence the right to acquire any shares of any class or series of Corporation
Common Stock, whether convertible, exchangeable or exercisable at such time or
a later time or only upon the occurrence of certain events, pursuant to
antidilution provisions of such securities or otherwise.
"Corporation" has the meaning set forth in ARTICLE ONE.
"Corporation Common Stock" means the Common Stock, the Series 2 Common
Stock, the Series 1 PCS Stock and the Series 2 PCS Stock.
"Current Market Price", on the Determination Date for any issuance of
rights or warrants or any distribution in respect of which the Current Market
Price is being calculated, means the average of the daily Closing Prices of
the Series 1 PCS Stock for the shortest of:
(a) the period of 30 consecutive Trading Days commencing 45 Trading Days
before such Determination Date;
(b) the period commencing on the date next succeeding the first public
announcement of the issuance of rights or warrants or the distribution in
respect of which the Current Market price is being calculated and ending on
the last full Trading Day before such Determination Date; and
(c) the period, if any, commencing on the date next succeeding the Ex-
Dividend Date with respect to the next preceding issuance of rights or
warrants or distribution for which an adjustment is required by the provisions
of clause (D) of the first sentence of ARTICLE SIX, Section 9.11.3(e)(i),
Section 9.11.3(e)(ii) or Section 9.11.3(e)(iii), and ending on the last full
Trading Day before such Determination Date.
If the record date for an issuance of rights or warrants or a distribution
for which an adjustment is required by the provisions of ARTICLE SIX, Section
9.11.3(e)(i)(D), Section 9.11.3(e)(ii) or Section 9.11.3(e)(iii) (the
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"Preceding Adjustment Event") precedes the record date for the issuance or
distribution in respect of which the Current Market Price is being calculated
and the Ex-Dividend Date for such Preceding Adjustment Event is on or after the
Determination Date for the issuance or distribution in respect of which the
Current Market Price is being calculated, then the Current Market Price shall
be adjusted by deducting therefrom the fair market value (on the record date
for the issuance or distribution in respect of which the Current Market Price
is being calculated), as determined in good faith by the Board of Directors, of
the capital stock, rights, warrants, assets or evidences of indebtedness issued
or distributed in respect of each share of Series 1 PCS Stock in such Preceding
Adjustment Event. Further, in the event that the Ex-Dividend Date (or in the
case of a subdivision, combination or reclassification, the effective date with
respect thereto) with respect to a dividend, subdivision, combination or
reclassification to which clauses (A), (B), (C) or (D) of the first sentence of
ARTICLE SIX, Section 9.11.3(e)(i) applies occurs during the period applicable
for calculating the Current Market Price, then the Current Market Price shall
be calculated for such period in a manner determined in good faith by the Board
of Directors to reflect the impact of such dividend, subdivision, combination
or reclassification on the Closing Prices of the Series 1 PCS Stock during such
period.
For purposes of ARTICLE SIX, Section 9.11, the Current Market Price of a
share of Series 2 PCS Stock as of any Determination Date shall be the Current
Market Price of a share of Series 1 PCS Stock as of such Determination Date.
"Determination Date" for any issuance of rights or warrants or any
distribution to which ARTICLE SIX, Section 9.11.3(e)(i) or 9.11.3(e)(ii)
applies, means the earlier of (a) the record date for the determination of
shareholders entitled to receive the rights or warrants or the distribution to
which such Section applies and (b) the Ex-Dividend Date for such right,
warrants or distribution.
"Director" means a member of the Board of Directors.
"Disposition" means a sale, transfer, assignment or other disposition
(whether by merger, consolidation, sale or contribution of assets or stock or
otherwise) of properties or assets.
"DT" means Deutsche Telekom AG, an Aktiengesellschaft formed under the laws
of Germany.
"Effective Time" has the meaning set forth in the Merger Agreement.
"Eighth Series" means the Series 8 Junior Participating Preferred Stock of
the Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Exchange Preferred Stock" means a series of convertible preferred stock of
the Corporation having terms, conditions, designations, dividend rights, voting
powers, rights on liquidation and other preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof that are identical, or as nearly so as is
practicable in the judgment of the Board of Directors, to those of the Seventh
Series for which such Exchange Preferred Stock is exchanged, except that (a)
the liquidation preference will be determined as provided in ARTICLE SIX,
Section 9.11.3(e)(vii) or Section 9.11.3(e)(viii), as applicable, (b) the
running of any time periods pursuant to the terms of the Seventh Series shall
be tacked to the corresponding time periods in the Exchange Preferred Stock and
(c) the Exchange Preferred Stock will not be convertible into, and the holders
will have no conversion rights thereunder with respect to, (i) in the case of a
redemption of Redeemable Capital Stock, the Redeemable Capital Stock redeemed,
or the Redemption Securities issued, in the Redemption Event, and (ii) in the
case of a PCS Spin Off, the PCS Spin Off Securities.
"Ex-Dividend Date" shall mean the date on which "ex-dividend" trading
commences for a dividend, an issuance of rights or warrants or a distribution
to which any of ARTICLE SIX, Section 9.11.3(e)(i), Section 9.11.3(e)(ii) or
Section 9.11.3(e)(iii) applies in the over-the-counter market or on the
principal exchange on which the Series 1 PCS Stock is then quoted or listed.
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"Fair Market Value" means, with respect to any asset, shares or other
property, the cash price at which a willing seller would sell and a willing
buyer would buy such asset, shares or other property in an arm's-length
negotiated transaction without undue time restraints, as determined in good
faith by a majority of the Board of Directors.
"Fair Value" means, in the case of equity securities or debt securities of a
class that has previously been Publicly Traded for a period of at least 15
months, the Market Value thereof (if such value, as so defined, can be
determined) or, in the case of an equity security or debt security that has not
been Publicly Traded for at least such period, means the fair value per share
of stock or per other unit of such other security, on a fully distributed
basis, as determined by an independent investment banking firm experienced in
the valuation of securities selected in good faith by the Board of Directors;
provided, however, that in the case of property other than securities, the
"Fair Value" thereof shall be determined in good faith by the Board of
Directors based upon such appraisals or valuation reports of such independent
experts as the Board of Directors shall in good faith determine to be
appropriate in accordance with good business practice. Any such determination
of Fair Value shall be described in a statement filed with the records of the
actions of the Board of Directors.
"FCC" means the United States Federal Communications Commission.
"Fifth Series" means the Series 5 Preferred Stock of the Corporation.
"FON Exchange Ratio" has the meaning set forth in the Merger Agreement.
"FT" means France Telecom SA, a societe anonyme formed under the laws of
France.
"GBCC" has the meaning set forth in ARTICLE THREE.
"Governmental Authority" means any federation, nation, state, sovereign, or
government, any federal, supranational, regional, state or local political
subdivision, any governmental or administrative body, instrumentality,
department or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission or other similar dispute resolving panel or body,
and any other entity exercising executive, legislative, judicial, regulatory or
administrative functions of a government.
"Group" means any group within the meaning of Section 13(d)(3) of the
Exchange Act.
"Lien" means any mortgage, pledge, security interest, adverse claim,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
similar Applicable Law of any jurisdiction) or any other type of preferential
arrangement for the purpose, or having the effect, of protecting a creditor
against loss or securing the payment or performance of an obligation.
"Market Price" means with respect to a security on any date, the Closing
Price of such security on the Trading Day immediately prior to such date. The
Market Price shall be deemed to be equal to, (a) in the case of a share of
Series 2 Common Stock, the Market Price of a share of Common Stock and (b) in
the case of a share of Series 2 PCS Stock, the Market Price of a share of
Series 1 PCS Stock. The Market Price of (i) any options, warrants, rights or
other securities convertible into or exchangeable or exercisable for Series 2
Common Stock shall be equal to the Market Price of options, warrants, rights or
other securities convertible into or exchangeable or exercisable for Common
Stock upon the same terms and otherwise containing the same terms as such
options, warrants, rights or other securities convertible into or exchangeable
or exercisable for Series 2 Common Stock and (ii) any options, warrants, rights
or other securities convertible into or exchangeable or exercisable for Series
2 PCS Stock shall be equal to the Market Price of options, warrants, rights or
other securities convertible into or exchangeable or exercisable for Series 1
PCS Stock upon the same terms and otherwise containing the same terms as such
options, warrants, rights or other securities convertible into or exchangeable
or exercisable for Series 2 PCS Stock.
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"Market Value" of a share of any class or series of capital stock of the
Corporation on any day means the average of the high and low reported sales
prices regular way of a share of such class or series on such day (if such day
is a Trading Day, and if such day is not a Trading Day, on the Trading Day
immediately preceding such day) or, in case no such reported sale takes place
on such Trading Day, the average of the reported closing bid and ask prices of
a share of such class or series on such Trading Day, in either case as reported
on the NYSE Composite Tape or, if the shares of such class or series are not
listed or admitted to trading on such exchange on such Trading Day, on the
principal national securities exchange in the United States on which the shares
of such class or series are listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange on such Trading Day, on
NASDAQ or, if the shares of such class or series are not listed or admitted to
trading on any national securities exchange or quoted on NASDAQ on such Trading
Day, the average of the closing bid and asked prices of a share of such class
or series in the over-the-counter market on such Trading Day as furnished by
any NYSE member firm selected from time to time by the Board of Directors or,
if such closing bid and asked prices are not made available by any such NYSE
member firm on such Trading Day, the Fair Value of a share of such class or
series; provided that, for purposes of determining the Market Value of a share
of any class or series of capital stock for any period:
(i) the "Market Value" of a share of capital stock on any day prior to any
"ex-dividend" date or any similar date occurring during such period for any
dividend or distribution (other than any dividend or distribution contemplated
by clause (ii)(B) of this definition) paid or to be paid with respect to such
capital stock shall be reduced by the Fair Value of the per share amount of
such dividend or distribution; and
(ii) the "Market Value" of any share of capital stock on any day prior to
(A) the effective date of any subdivision (by stock split or otherwise) or
combination (by reverse stock split or otherwise) of outstanding shares of such
class of capital stock occurring during such period or (B) any "ex-dividend"
date or any similar date occurring during such period for any dividend or
distribution with respect to such capital stock to be made in shares of such
class or series of capital stock or Convertible Securities that are
convertible, exchangeable or exercisable for such class or series of capital
stock shall be appropriately adjusted, as determined by the Board of Directors,
to reflect such subdivision, combination, dividend or distribution.
"MCI WorldCom" means MCI WORLDCOM, Inc., a Georgia corporation.
"Merger" means the merger of Sprint with and into MCI WorldCom, as provided
for by the Merger Agreement.
"Merger Agreement" means the Amended and Restated Agreement and Plan of
Merger dated as of March 8, 2000, by and between MCI WorldCom and Sprint.
"Mirror Preferred Stock" means convertible preferred stock issued by (a) in
the case of a redemption of Redeemable Capital Stock, the issuer of the
applicable Redemption Securities and (b) in the case of a PCS Spin Off, the
issuer of the applicable PCS Spin Off Securities and having terms,
designations, conditions, dividend rights, voting powers, rights on liquidation
and other preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof that are
identical, or as nearly so as is practicable in the judgment of the Board of
Directors, to those of the Seventh Series for which such Mirror Preferred Stock
is exchanged, except that (i) the liquidation preference will be determined as
provided in ARTICLE SIX, Section 9.11.3(e)(vii) or Section 9.11.3(e)(viii), as
applicable, (ii) the running of any time periods pursuant to the terms of the
Seventh Series shall be tacked to the corresponding time periods in the Mirror
Preferred Stock and (iii) the Mirror Preferred Stock shall be convertible into
the kind and amount of Redemption Securities or PCS Spin Off Securities, as
applicable, and other securities and property that the holder of a share of
Seventh Series in respect of which such Mirror Preferred Stock is issued
pursuant to the terms hereof would have received (A) in the case of the
redemption of Redeemable Capital Stock, upon such redemption had such share of
Seventh Series been converted immediately prior to the effective date of the
Redemption Event and (B) in the case of a PCS Spin Off, in such PCS Spin Off
had such share of Seventh Series been converted immediately prior to the record
date for such PCS Spin Off.
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"NASDAQ" means The Nasdaq National Market.
"Net Proceeds" means, as of any date with respect to any Disposition of any
of the properties and assets attributed to the PCS Group, an amount, if any,
equal to what remains of the gross proceeds of such Disposition after payment
of, or reasonable provision is made as determined by the Board of Directors
for, (A) any taxes payable by the Corporation (or which would have been payable
but for the utilization of tax benefits attributable to the WorldCom Group) in
respect of such Disposition or in respect of any resulting dividend or
redemption pursuant to ARTICLE SIX, Section 7.1(a)(1)(A) or (B), (B) any
transaction costs, including, without limitation, any legal, investment banking
and accounting fees and expenses and (C) any liabilities (contingent or
otherwise) of or attributed to the PCS Group, including, without limitation,
any liabilities for deferred taxes or any indemnity or guarantee obligations of
the Corporation incurred in connection with the Disposition or otherwise, and
any liabilities for future purchase price adjustments and any preferential
amounts plus any accumulated and unpaid dividends in respect of Preferred Stock
attributed to the PCS Group. For purposes of this definition, any properties
and assets attributed to the PCS Group remaining after such Disposition shall
constitute "reasonable provision" for such amount of taxes, costs and
liabilities (contingent or otherwise) as the Board of Directors determines can
be expected to be supported by such properties and assets.
"Newly Issued Shares" has the meaning set forth in ARTICLE SIX, Section
7.5.3.
"NYSE" means the New York Stock Exchange, Inc.
"Number Of Shares Issuable With Respect To The WorldCom Group Intergroup
Interest" means, as of the Effective Time, a number, determined at the
Effective Time, equal to the "Number of Shares Issuable With Respect To The FON
Group Intergroup Interest", as such term was defined in the Sprint Articles;
provided, however that such number shall from time to time thereafter be:
(a) adjusted, as determined by the Board of Directors to be appropriate to
reflect equitably any subdivision (by stock split or otherwise) or combination
(by reverse stock split or otherwise) of the PCS Group Common Stock or any
dividend or other distribution of shares of PCS Group Common Stock to holders
of shares of PCS Group Common Stock or any reclassification of PCS Group Common
Stock;
(b) decreased (but to not less than zero), if before such decrease such
number is greater than zero, by action of the Board of Directors by (i) the
number of shares of PCS Group Common Stock issued or sold by the Corporation
that, immediately prior to such issuance or sale, were included (as determined
by the Board of Directors pursuant to paragraph (c) of this definition) in the
Number Of Shares Issuable With Respect To The WorldCom Group Intergroup
Interest, (ii) the number of shares of PCS Group Common Stock issued upon
conversion, exchange or exercise of Convertible Securities that, immediately
prior to the issuance or sale of such Convertible Securities, were included in
the Number Of Shares Issuable With Respect To The WorldCom Group Intergroup
Interest, (iii) the number of shares of PCS Group Common Stock issued by the
Corporation as a dividend or other distribution (including in connection with
any reclassification or exchange of shares) to holders of WorldCom Group Common
Stock or shares of WorldCom Group Preferred Stock, as the case may be, (iv) the
number of shares of PCS Group Common Stock issued upon the conversion, exchange
or exercise of any Convertible Securities issued by the Corporation as a
dividend or other distribution (including in connection with any
reclassification or exchange of shares) to holders of WorldCom Group Common
Stock or shares of WorldCom Group Preferred Stock, as the case may be, (v) the
quotient of (A) the aggregate Fair Value of any PCS Group Preferred Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of PCS Group Preferred Stock) issued by the Corporation as a dividend or
other distribution (including in connection with any classification or exchange
of shares) to holders of WorldCom Group Common Stock or WorldCom Group
Preferred Stock, as the case may be, divided by (B) the Market Value of one
share of PCS Group Common Stock as of the date of issuance of such PCS Group
Preferred Stock (or Convertible Securities) or (vi) the number (rounded, if
necessary, to the nearest whole number) equal to the quotient of (A) the
aggregate Fair Value as of the date of contribution of properties or assets
(including cash) transferred from the PCS Group to the WorldCom Group in
consideration for a reduction in the Number
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Of Shares Issuable With Respect To The WorldCom Group Intergroup Interest
divided by (B) the Market Value of one share of PCS Group Common Stock as of
the date of such transfer; and
(c) increased by (i) the number of outstanding shares of PCS Group Common
Stock repurchased by the Corporation for consideration that had been attributed
to the WorldCom Group, (ii) the number (rounded, if necessary, to the nearest
whole number) equal to the quotient of (A) the Fair Value of properties or
assets (including cash) theretofore attributed to the WorldCom Group that are
contributed, by action of the Board of Directors, to the PCS Group in
consideration of an increase in the Number Of Shares Issuable With Respect To
The WorldCom Group Intergroup Interest, divided by (B) the Market Value of one
share of PCS Group Common Stock as of the date of such contribution and (iii)
the number of shares of PCS Group Common Stock into or for which Convertible
Securities are deemed converted, exchanged or exercised pursuant to the
penultimate sentence of the definition of "WorldCom Group";
provided, further, that the Board of Directors may make such subsequent changes
to the calculations made pursuant to subparagraphs (a), (b) and (c) immediately
above as may be required for purposes of accurately determining such number.
"Optional Conversion Ratio" as of any date means the ratio of the Average
Trading Price of a share of Series 1 PCS Stock to the Average Trading Price of
a share of Common Stock; provided that such ratio would be determined over a
60-Trading Day period if the 20-Trading Day period normally used to determine
the Average Trading Price is less than 90% of such ratio as determined over a
60-Trading Day period.
"Outstanding PCS Fraction," as of any date, means the fraction the numerator
of which shall be the number of shares of PCS Group Common Stock outstanding on
such date and the denominator of which shall
be the sum of (a) the number of shares of PCS Group Common Stock outstanding on
such date and (b) the Number Of Shares Issuable With Respect To The WorldCom
Group Intergroup Interest on such date. A statement setting forth the
Outstanding PCS Fraction as of the record date for the payment of any dividend
or distribution on PCS Group Common Stock and as of the end of each fiscal
quarter of the Corporation shall be filed by the Secretary of the Corporation
in the records of the actions of the Board of Directors not later than fifteen
Business Days after such date.
"PCS" means a radio communications system of the type authorized under the
rules for broadband personal communications services designated as Subpart E of
Part 24 of the FCC's rules or similar Applicable Laws of any other country,
including the network, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"PCS Group Common Stock" means the Series 1 PCS Stock and the Series 2 PCS
Stock.
"PCS Convertible Securities" means any or all options, warrants, securities
and rights which are convertible into or exercisable or exchangeable for PCS
Group Common Stock at the option of the holder thereof, or which otherwise
entitle the holder thereof to subscribe for, purchase or otherwise acquire PCS
Group Common Stock.
"PCS Exchange Ratio" has the meaning set forth in the Merger Agreement.
"PCS Group" means as of any date from and after November 23, 1998:
(a) the interest on such date of the Corporation and any of its Subsidiaries
in any of the following Persons or any of their respective Subsidiaries
(including any successor thereto by merger, consolidation or sale of all or
substantially all of its assets, whether or not in connection with a Related
Business Transaction) (the "PCS Group Companies") and the corresponding
interests in their respective assets and liabilities and the businesses
conducted by such entities: SWV Six, Inc.; SWV One, Inc.; SWV Two, Inc.; SWV
Three, Inc.; SWV Four, Inc.; SWV Seven, Inc.; SWV Eight, Inc.; SWV One
Telephony Partnership; SWV Two Telephony Partnership; SWV Three Telephony
Partnership; Sprint Enterprises, L.P.; MinorCo, L.P.; Sprint Spectrum Holding
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Company, L.P.; American PCS, L.P.; Cox Communications PCS, L.P.; NewTelco,
L.P.; Sprint Spectrum L.P.; American Personal Communications Holdings, Inc.;
American PCS Communications, LLC; APC PCS, LLC; APC Realty and Equipment
Company, LLC; Sprint Spectrum Finance Corporation; Sprint Spectrum Equipment
Company, L.P.; Sprint Spectrum Realty Company, L.P.; WirelessCo, L.P.; SWV
Five, Inc.; PhillieCo Partners I, L.P.; PhillieCo Partners II, L.P.; PhillieCo
Sub, L.P.; PhillieCo., L.P.; PhillieCo Equipment & Realty Company, L.P.;
SprintCom, Inc.; SprintCom Equipment Company L.P.; PCS Leasing Co., L.P.; Cox
PCS Assets, L.L.C.; and Cox PCS License, L.L.C.; and any other Person
attributed to the "PCS Group" as such term was defined in the Sprint Articles.
(b) all assets and liabilities of the Corporation and its subsidiaries
attributed by the Board of Directors to the PCS Group, whether or not such
assets or liabilities are or were also assets or liabilities of any of the PCS
Group Companies;
(c) all properties and assets transferred to the PCS Group from the WorldCom
Group (other than a transaction pursuant to paragraph (d) of this definition)
after November 23, 1998 pursuant to transactions in the ordinary course of
business of both the WorldCom Group and the PCS Group or otherwise as the Board
of Directors may have directed as permitted by this ARTICLE SIX;
(d) all properties and assets transferred to the PCS Group from the WorldCom
Group in connection with an increase in the Number Of Shares Issuable With
Respect To The WorldCom Group Intergroup Interest; and
(e) the interest of the Corporation or any of its Subsidiaries in any
business or asset acquired and any liabilities assumed by the Corporation or
any of its Subsidiaries outside of the ordinary course of business and
attributed to the PCS Group, as determined by the Board of Directors as
contemplated by ARTICLE SIX, Section 8.1(a); provided that:
(i) from and after the payment date of any dividend or other distribution
with respect to shares of PCS Group Common Stock (other than a dividend or
other distribution payable in shares of PCS Group Common Stock, with respect to
which adjustment shall be made as provided in the definition of "Number Of
Shares Issuable In Respect Of The WorldCom Group Intergroup Interest," or in
securities of the Corporation attributed to the PCS Group, for which provision
shall be made as set forth in clause (ii) of this proviso), the PCS Group shall
no longer include an amount of assets or properties previously attributed to
the PCS Group of the same kind as so paid in such dividend or other
distribution with respect of shares of PCS Group Common Stock as have a Fair
Value on the record date for such dividend or distribution equal to the product
of (A) the Fair Value on such record date of the aggregate of such dividend or
distribution to holders of shares of PCS Group Common Stock declared and (B) a
fraction the numerator of which is equal to the WorldCom Group Intergroup
Interest Fraction in effect on the record date for such dividend or
distribution and the denominator of which is equal to the Outstanding PCS
Fraction in effect on the record date for such dividend or distribution (and in
such eventuality such assets as are no longer included in the PCS Group shall
be attributed to the WorldCom Group in accordance with the definition of
"WorldCom Group"); and
(ii) if the Corporation shall pay a dividend or make some other distribution
with respect to shares of PCS Group Common Stock payable in securities of the
Corporation that are attributed to the PCS Group for purposes of this ARTICLE
SIX (other than PCS Group Common Stock), there shall be excluded from the PCS
Group an interest in the PCS Group equivalent to the number or amount of such
securities that is equal to the product of the number or amount of securities
so distributed to holders of PCS Group Common Stock multiplied by the fraction
specified in clause (i)(B) of this proviso (determined as of the record date
for such distribution) (and such interest in the PCS Group shall be attributed
to the WorldCom Group) and, to the extent interest is or dividends are paid on
the securities so distributed, the PCS Group shall no longer include a
corresponding ratable amount of the kind of assets paid as such interest or
dividends as would have been paid in respect of the securities equivalent to
such interest in the PCS Group deemed held by the WorldCom Group if the
securities equivalent to such interest were outstanding (and in such
eventuality such assets as are no longer included in the PCS Group shall be
attributed to the WorldCom Group in accordance with the definition of "WorldCom
Group").
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The Corporation may also, to the extent a dividend or distribution on the
PCS Group Common Stock has been paid in Convertible Securities that are
convertible into or exchangeable or exercisable for PCS Group Common Stock,
cause such Convertible Securities as are deemed to be held by the WorldCom
Group in accordance with the third-to-last sentence of the definition of
"WorldCom Group" and clause (ii) of the proviso to the immediately preceding
sentence to be deemed to be converted, exchanged or exercised as provided in
the penultimate sentence of the definition of "WorldCom Group," in which case
such Convertible Securities shall no longer be deemed to be held by the
WorldCom Group.
"PCS Group Disposition Date" has the meaning set forth in ARTICLE SIX,
Section 7.1(a).
"PCS Group Preferred Stock" means Preferred Stock to the extent attributed
to the PCS Group in accordance with ARTICLE SIX, Section 9.
"PCS Group Subsidiary" has the meaning set forth in ARTICLE SIX, Section
7.2.
"PCS Per Share Vote" has the meaning set forth in ARTICLE SIX, Section 3.2.
"PCS Spin Off" means the distribution of stock of a Subsidiary of the
Corporation as a dividend to all holders of PCS Group Common Stock.
"PCS Spin Off Securities" means stock of a Subsidiary of the Corporation
that is distributed to holders of PCS Group Common Stock in a PCS Spin Off.
"Person" means an individual, a partnership, an association, a joint
venture, a corporation, a business, a trust, any entity organized or existing
under applicable law, an unincorporated organization or any Governmental
Authority.
"Preferred Stock" has the meaning set forth in the "Designation" column in
ARTICLE SIX, Section 1.1.
"Publicly Traded" with respect to any security means (a) registered under
Section 12 of the Exchange Act (or any successor provision of law), and (b)
listed for trading on the NYSE or the American Stock Exchange (or any national
securities exchange registered under Section 7 of the Exchange Act (or any
successor provision of law), that is the successor to either such exchange) or
quoted on NASDAQ (or any successor system).
"Recapitalization" means the reclassification of, among other things,
certain outstanding shares of Sprint capital stock to be effected pursuant to
the terms set forth in the Restructuring Agreement.
"Record date" means such date as from time to time fixed by the Board of
Directors with respect to the receipt of dividends, the receipt of a
redemption price upon redemption or the taking of any action or exercise of
any voting rights.
"Redeemable Capital Stock" means a class or series of capital stock of the
Corporation that provides by its terms a right in favor of the Corporation to
call, redeem, exchange or otherwise acquire all of the outstanding shares or
units of such class or series.
"Redemption Date" means the date fixed by the Board of Directors for the
redemption of (a) any shares of capital stock of the Corporation pursuant to
ARTICLE SIX, Section 2.2 or (b) shares of PCS Group Common Stock as shall be
set forth in the notice to holders of shares of PCS Group Common Stock and to
holders of any Convertible Securities that are convertible into or
exchangeable or exercisable for shares of PCS Group Common Stock required
pursuant to ARTICLE SIX, Section 7.4.
"Redemption Securities" means any debt or equity securities of the
Corporation, any of its Subsidiaries, or any combination thereof having such
terms and conditions as shall be approved by the Board of Directors and which,
together with any cash to be paid as part of the redemption price pursuant to
ARTICLE SIX,
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Section 2.2(b), in the opinion of an investment banking firm of recognized
national standing selected by the Board of Directors (which may be a firm which
provides other investment banking, brokerage or other services to the
Corporation), have a Market Price, at the time notice of redemption is given
pursuant to ARTICLE SIX, Section 2.2(d), at least equal to the redemption price
required to be paid by ARTICLE SIX, Section 2.2(a).
"Related Business Transaction" means any Disposition of all or substantially
all the properties and assets attributed to the PCS Group in a transaction or
series of related transactions that result in the Corporation receiving in
consideration of such properties and assets primarily equity securities
(including, without limitation, capital stock, debt securities convertible into
or exchangeable for equity securities or interests in a general or limited
partnership or limited liability company, without regard to the voting power or
other management or governance rights associated therewith) of any entity which
(a) acquires such properties or assets or succeeds (by merger, formation of a
joint venture or otherwise) to the business conducted with such properties or
assets or controls such acquiror or successor and (b) which the Board of
Directors determines is primarily engaged or proposes to engage primarily in
one or more businesses similar or complementary to the businesses conducted by
such Business Group prior to such Disposition.
"Restructuring Agreement" means the Restructuring and Merger Agreement dated
as of May 26, 1998, by and among certain Cable Holders, Sprint and the other
parties listed therein, as amended or supplemented from time to time.
"SEC" means the United States Securities and Exchange Commission.
"Section 310" means Section 310 of the Communications Act of 1934, as
amended.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
"Series B Preferred Stock" means the Series B Convertible Preferred Stock of
the Corporation.
"Series 1 PCS Stock" has the meaning set forth in the "Designation" column
in ARTICLE SIX, Section 1.1.
"Series 2 Common Stock" has the meaning set forth in the "Designation"
column in ARTICLE SIX, Section 1.1.
"Series 2 PCS Stock" has the meaning set forth in the "Designation" column
in ARTICLE SIX, Section 1.1.
"Seventh Series" means the Series 7 Preferred Stock of the Corporation.
"Seventh Series Initial Conversion Price" means $15.3733.
"Seventh Series Premium Price", which shall be measured as of the effective
date of the redemption referred to in ARTICLE SIX, Section 9.11.5(a), means the
greater of (a) 110% of the Seventh Series Liquidation Preference and (b) 110%
of the product of (i) the number of shares of PCS Group Common Stock (or other
securities) into which a share of Seventh Series is convertible as of such
redemption date and (ii) the average of the Closing Prices for the Series 1 PCS
Stock (or, if the Seventh Series is then convertible into a different publicly
traded security of the Corporation, then the average of the Closing Prices of
such publicly traded security) for the 30 consecutive Trading Days ending on
the 5th Trading Day prior to such redemption date.
"Shares" means (a) shares of Corporation Common Stock, Preferred Stock or
any other Voting Securities of the Corporation, (b) securities of the
Corporation convertible into Voting Securities of the Corporation and (c)
options, warrants or other rights to acquire such Voting Securities.
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"Sprint" means Sprint Corporation, a Kansas corporation, prior to the
Effective Time of the Merger.
"Sprint Articles" means the Amended and Restated Articles of Incorporation
of Sprint immediately prior to the Effective Time.
"Subsidiary" means, with respect to any Person (the "Parent"), any other
Person in which the Parent, one or more direct or indirect Subsidiaries of the
Parent, or the Parent and one or more of its direct or indirect Subsidiaries
(a) have the ability, through ownership of securities individually or as a
group, ordinarily, in the absence of contingencies, to elect a majority of the
directors (or individuals performing similar functions) of such other Person,
and (b) own more than 50% of the equity interests.
"Third Series" means the Series 3 Junior Participating Preferred Stock of
the Corporation.
"Total Market Capitalization" of any class or series of common stock on any
date means the product of (a) the Market Value of one share of such class or
series of common stock on such date and (b) the number of shares of such class
or series of common stock outstanding on such date.
"Trading Day" means, with respect to any security, any day on which the
principal national securities exchange on which such security is listed or
admitted to trading or NASDAQ, if such security is listed or admitted to
trading thereon, is open for the transaction of business (unless such trading
shall have been suspended for the entire day) or, if such security is not
listed or admitted to trading on any national securities exchange or NASDAQ,
any day other than a Saturday, Sunday, or a day on which banking institutions
in the State of New York are authorized or obligated by law or executive order
to close.
"Transfer" means any act pursuant to which, directly or indirectly, the
ownership of the assets or securities in question is sold, transferred,
conveyed, delivered or otherwise disposed, but shall not include (a) any grant
of Liens or (b) any conversion or exchange of any security of the Corporation
pursuant to a merger or other business combination involving the Corporation.
"Vote" means, with respect to any entity, the ability to cast a vote at a
shareholders', members' or comparable meeting of such entity with respect to
the election of directors, managers or other members of such entity's governing
body, or the ability to cast a general partnership or comparable vote; provided
that with respect to the Corporation, the term "Vote" means the ability to
exercise general voting power (as opposed to the exercise of special voting or
disapproval rights) with respect to matters other than the election of
directors at a meeting of the shareholders of the Corporation.
"Voting Power" means, with respect to any entity as at any date, the
aggregate number of Votes outstanding as at such date in respect of such
entity.
"Voting Securities" means, with respect to an entity, any capital stock or
debt securities of such entity if the holders thereof are ordinarily, in the
absence of contingencies, entitled to a Vote, even though the right to such
Vote has been suspended by the happening of such a contingency, and in the case
of the Corporation, shall include, without limitation, the Corporation Common
Stock.
"WorldCom Group" means, as of any date from and after the Effective Time:
(a) the interest of the Corporation or any of its Subsidiaries on such date
in all of the assets, liabilities and businesses of the Corporation or any of
its Subsidiaries (and any successor companies), other than any assets,
liabilities and businesses attributed in accordance with this Section 10 to the
PCS Group;
(b) a proportionate undivided interest in each and every business, asset and
liability attributed to the PCS Group equal to the WorldCom Group Intergroup
Interest Fraction as of such date;
(c) all properties and assets transferred to the WorldCom Group from the PCS
Group (other than pursuant to paragraph (d) or (f) of this definition) after
November 23, 1998 pursuant to transactions in the ordinary course of business
of both the WorldCom Group and the PCS Group or otherwise as the Board of
Directors may have directed as permitted by this ARTICLE SIX;
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(d) all properties and assets transferred to the WorldCom Group from the PCS
Group in connection with a reduction of the Number Of Shares Issuable With
Respect To The WorldCom Group Intergroup Interest;
(e) the interest of the Corporation or any of its Subsidiaries in any
business or asset acquired and any liabilities assumed by the Corporation or
any of its Subsidiaries outside the ordinary course of business and attributed
to the WorldCom Group, as determined by the Board of Directors as contemplated
by ARTICLE SIX, Section 8.1(a); and
(f) from and after the payment date of any dividend or other distribution
with respect to shares of PCS Group Common Stock (other than a dividend or
other distribution payable in shares of PCS Group Common Stock, with respect to
which adjustment shall be made as provided in the definition of "Number Of
Shares Issuable With Respect Of The WorldCom Group Intergroup Interest", or in
securities of the Corporation attributed to the PCS Group, for which provision
shall be made as set forth in the third to last sentence of this definition),
an amount of assets or properties previously attributed to the PCS Group of the
same kind as were paid in such dividend or other distribution with respect to
shares of PCS Group Common Stock as have a Fair Value on the record date for
such dividend or distribution equal to the product of (i) the Fair Value on
such record date of such dividend or distribution to holders of shares of PCS
Group Common Stock declared on a per share basis and (ii) the Number Of Shares
Issuable With Respect To The WorldCom Group Intergroup Interest (determined as
of the record date for such dividend or distribution);
provided that from and after any transfer of any assets or properties from the
WorldCom Group to the PCS Group, the WorldCom Group shall no longer include
such assets or properties so transferred (other than as reflected in respect of
such a transfer by the WorldCom Group Intergroup Interest Fraction, as provided
by paragraph (b) of this definition).
If the Corporation shall pay a dividend or make some other distribution with
respect to shares of PCS Group Common Stock payable in securities of the
Corporation that are attributed to the PCS Group for purposes of this ARTICLE
SIX (other than PCS Group Common Stock), the WorldCom Group shall be deemed to
hold an interest in the PCS Group equivalent to the number or amount of such
securities that is equal to the product of the number or amount of securities
so distributed to holders of PCS Group Common Stock on a per share basis
multiplied by the Number Of Shares Issuable With Respect To The WorldCom Group
Intergroup Interest (determined as of the record date for such distribution)
and, to the extent interest is or dividends are paid on the securities so
distributed, the WorldCom Group shall include, and there shall be transferred
thereto out of the PCS Group, a corresponding ratable amount of the kind of
assets paid as such interest or dividends as would have been paid in respect of
such securities so deemed to be held by the WorldCom Group if such securities
were outstanding.
The Corporation may also, to the extent the securities so paid as a dividend
or other distribution to the holders of PCS Group Common Stock are Convertible
Securities and at the time are convertible into or exchangeable or exercisable
for shares of PCS Group Common Stock, treat such Convertible Securities as are
so deemed to be held by the WorldCom Group to be deemed to be converted,
exchanged or exercised, and shall do so to the extent such Convertible
Securities are mandatorily converted, exchanged or exercised (and to the extent
the terms of such Convertible Securities require payment of consideration for
such conversion, exchange or exercise, the WorldCom Group shall then no longer
include an amount of the kind of properties or assets required to be paid as
such consideration for the amount of Convertible Securities deemed converted,
exchanged or exercised (and such properties or assets shall be attributed to
the PCS Group)), in which case, from and after such time, the securities into
or for which such Convertible Securities so deemed to be held by the WorldCom
Group were so considered converted, exchanged or exercised shall be deemed held
by the WorldCom Group (as provided in clause (iii) of paragraph (c) of the
definition of "Number Of Shares Issuable With Respect To The WorldCom Group
Intergroup Interest") and such Convertible Securities shall no longer be deemed
to be held by the WorldCom Group. A statement setting forth the election to
effectuate any such deemed conversion, exchange or exercise of Convertible
Securities so deemed to be held by the WorldCom
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Group and the properties or assets, if any, to be attributed to the PCS Group
in consideration of such conversion, exchange or exercise (if any) shall be
filed in the records of the actions of the Board of Directors and, upon such
filing, such deemed conversion, exchange or exercise shall be effectuated.
"WorldCom Group Common Stock" means the Common Stock and the Series 2 Common
Stock.
"WorldCom Group Intergroup Interest Fraction" as of any date means a
fraction the numerator of which is the Number Of Shares Issuable With Respect
To The WorldCom Group Intergroup Interest on such date and the denominator of
which is the sum of (a) such Number Of Shares Issuable With Respect To The
WorldCom Group Intergroup Interest and (b) the aggregate number of shares of
PCS Group Common Stock outstanding on such date. A statement setting forth the
WorldCom Group Intergroup Interest Fraction as of the record date for any
dividend or distribution on the PCS Group Common Stock, as of the end of each
fiscal quarter of the Corporation and as of any date otherwise required under
these Articles or by the Board of Directors shall be filed by the Secretary of
the Corporation in the records of the Board of Directors not later than fifteen
Business Days after such date.
"WorldCom Group Preferred Stock" means Preferred Stock to the extent
attributed to the WorldCom Group in accordance with ARTICLE SIX, Section 9.
Seven
(a) In addition to the requirements of the provisions of any series of
Preferred Stock which may be outstanding, and whether or not a vote of the
shareholders is otherwise required, the affirmative vote of the holders of not
less than seventy percent (70%) of the Voting Stock shall be required for the
approval or authorization of any Business Transaction with a Related Person, or
any Business Transaction in which a Related Person has an interest (other than
only a proportionate interest as a shareholder of the corporation); provided,
however, that the seventy percent (70%) voting requirement shall not be
applicable if (i) the Business Transaction is Duly Approved by the Continuing
Directors or (ii) all of the following conditions are satisfied:
(A) the aggregate amount of cash and the fair market value of the property,
securities or other consideration to be received per share (on the date of
effectiveness of such Business Transaction) by holders of capital stock of the
Corporation (other than such Related Person) in connection with such Business
Transaction is at least equal in value to such Related Person's Highest Stock
Price;
(B) the consideration to be received by holders of capital stock of the
Corporation in connection with such Business Transaction is in (1) cash, or (2)
if the majority of the shares of any particular class or series of stock of the
Corporation as to which the Related Person is the Beneficial Owner shall have
been acquired for a consideration in a form other than cash, in the same form
of Consideration used by the Related Person to acquire the largest number of
shares of such class or series of stock;
(C) after such Related Person has become a Related Person and prior to the
consummation of such Business Transaction, such Related Person shall not have
become the Beneficial Owner of any additional shares of capital stock of the
Corporation or securities convertible into capital stock of the Corporation,
except (1) as a part of the transaction which resulted in such Related Person
becoming a Related Person or (2) as a result of a pro rata stock dividend or
stock split;
(D) prior to the consummation of such Business Transaction, such Related
Person shall not have, directly or indirectly, except as Duly Approved by the
Continuing Directors (1) received the benefit (other than only a proportionate
benefit as a shareholder of the Corporation) of any loans, advances,
guarantees, pledges or other financial assistance or tax credits or tax
advantages provided by the Corporation or any of its Subsidiaries, (2) caused
any material change in the Corporation's business or equity capital structure,
including, without limitation, the issuance of shares of capital stock of the
Corporation, or other securities convertible into or
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exercisable for such shares, or (3) caused the Corporation to fail to declare
and pay at the regular date therefor quarterly cash dividends on the
outstanding capital stock of the Corporation entitled to receive dividends, on
a per share basis at least equal to the cash dividends being paid thereon by
the Corporation immediately prior to the date on which the Related Person
became a Related Person and (4) a proxy or information statement describing the
proposed Business Transaction and complying with the requirements of the
Exchange Act, and the rules and regulations thereunder (or any subsequent
provisions replacing the Exchange Act or such rules or regulations) shall be
mailed to shareholders of the Corporation at least thirty (30) days prior to
the consummation of such Business Transaction (whether or not such proxy or
information statement is required to be mailed pursuant to the Exchange Act and
such rules and regulations or subsequent provisions).
(b) For the purpose of this ARTICLE SEVEN:
"Affiliate" means a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such specified Person.
"Associate" means (i) any corporation, partnership or other organization of
which such specified person is an officer or partner, (ii) any trust or other
estate in which such specified person has a substantial beneficial interest or
as to which such specified person serves as trustee or in a similar fiduciary
capacity, (iii) any relative or spouse of such specified person who has the
same home as such specified person or who is a director or officer of the
Corporation or any of its Subsidiaries, and (iv) any person who is a director,
officer or partner of such specified person or of any corporation (other than
the Corporation or any wholly-owned Subsidiary of the Corporation), partnership
or other entity which is an Affiliate of such specified person.
"Beneficial Owner" shall be defined by reference to Rule 13d-3 under the
Exchange Act as in effect on September 15, 1993; provided, however, that any
individual, corporation, partnership, group, association or other person or
entity which has the right to acquire any capital stock of the Corporation
having voting power at any time in the future, whether such right is contingent
or absolute, pursuant to any agreement, arrangement or understanding or upon
exercise of conversion rights, warrants or options, or otherwise, shall be
deemed the Beneficial Owner of such capital stock.
"Board of Directors" means the board of directors of the Corporation.
"Business Transaction" means: (i) any merger, share exchange or
consolidation involving the Corporation or a Subsidiary of the Corporation;
(ii) any sale, lease, exchange, transfer or other disposition (in one
transaction or a series of related transactions), including, without
limitation, a mortgage, pledge or any other security device of all or any
Substantial Part of the assets either of the Corporation or of a Subsidiary of
the Corporation; (iii) any sale, lease, exchange, transfer or other disposition
(in one transaction or a series of related transactions) of all or any
Substantial Part of the assets of any entity to the Corporation or a Subsidiary
of the Corporation; (iv) the issuance, sale, exchange, transfer or other
disposition (in one transaction or a series of related transactions) by the
Corporation or a Subsidiary of the Corporation of any securities of the
Corporation or any Subsidiary of the Corporation in exchange for cash,
securities or other property, or a combination thereof, having an aggregate
fair market value of $15 million or more; (v) any merger, share exchange or
consolidation of the Corporation with any of its Subsidiaries or any similar
transaction in which the Corporation is not the survivor and the charter or
certificate or articles of incorporation of the consolidated or surviving
corporation do not contain provisions substantially similar to those in this
ARTICLE SEVEN; (vi) any recapitalization or reorganization of the Corporation
or any reclassification of the securities of the Corporation (including,
without limitation, any reverse stock split) or other transaction that would
have the effect of increasing the voting power of a Related Person or reducing
the number of shares of each class of voting securities outstanding; (vii) any
liquidation, spin-off, split-off, split-up or dissolution of the Corporation;
and (viii) any agreement, contract or other arrangement providing for any of
the transactions described in this definition of Business Transaction or having
a similar purpose or effect.
"Continuing Director" means a director who either was a member of the Board
of Directors on September 15, 1993, or who became a director of the Corporation
subsequent to such date and whose election or nomination for election by the
Corporation's shareholders was Duly Approved by the Continuing Directors then
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on the Board of Directors, either by a specific vote or by approval of the
proxy statement issued by the Corporation on behalf of the Board of Directors
in which such person is named as nominee for director; provided, however, that
in no event shall a director be considered a "Continuing Director" if such
director is a Related Person and the Business Transaction to be voted upon is
with such Related Person or is one in which such Related Person has an interest
(other than only a proportionate interest as a shareholder of the Corporation).
"Duly Approved by the Continuing Directors" means an action approved by the
vote of at least a majority of the Continuing Directors then on the Board;
provided, however, that if the votes of such Continuing Directors in favor of
such action would be insufficient to constitute an act of the Board of
Directors (if a vote by the entire Board of Directors were to have been taken),
then such term shall mean an action approved by the unanimous vote of the
Continuing Directors so long as there are at least three (3) Continuing
Directors on the Board of Directors at the time of such unanimous vote.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the United States Securities and Exchange
Commission promulgated thereunder.
"Fair Market Value", in the case of stock, means the highest closing sale
price during the 30-day period immediately preceding the date in question of a
share of such stock on the Composite Tape for New York Stock Exchange-Listed
Stocks, or, if such stock is not on such exchange, on the principal United
States securities exchange registered under the Exchange Act on which such
stock is listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then in use,
or if no such quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of the Continuing
Directors in good faith.
"Governmental Authority" means any federation, nation, state, sovereign, or
government, any federal, supranational, regional, state or local political
subdivision, any governmental or administrative body, instrumentality,
department or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission or other similar dispute resolving panel or body,
and any other entity exercising executive, legislative, judicial, regulatory or
administrative functions of a government.
"Highest Stock Purchase Price" means the greatest of the following:
(i) the highest amount of consideration paid by a Related Person for a share
of capital stock of the Corporation (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) in the transaction which resulted
in such Related Person becoming a Related Person or within two years prior to
the first public announcement of the Business Transaction (the "Announcement
Date"), whichever is higher; provided, however, that the Highest Stock Purchase
Price calculated under this subsection (i) shall be appropriately adjusted to
reflect the occurrence of any reclassification, recapitalization, stock-split,
reverse stock-split or other similar corporate readjustment in the number of
outstanding shares of capital stock of the Corporation between the last date
upon which such Related Person paid the Highest Stock Purchase Price up to the
effective date of the merger, share exchange or consolidation or the date of
distribution to shareholders of the Corporation of the proceeds from the sale
of substantially all of the assets of the Corporation referred to in ARTICLE
SEVEN, Section (a)(ii)(A);
(ii) the Fair Market Value per share of the respective classes and series of
stock of the Corporation on the Announcement Date;
(iii) the Fair Market Value per share of the respective classes and series
of stock of the Corporation on the date that the Related Person becomes a
Related Person;
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(iv) if applicable, the Fair Market Value per share determined pursuant to
clause (ii) or (iii) of this definition, whichever is higher, multiplied by the
ratio of (1) the highest price per share (including any brokerage commissions,
transfer taxes or soliciting dealers' fees and adjusted for any subsequent
stock dividends, splits, combinations, recapitalizations, reclassifications or
other such reorganizations) paid to acquire any shares of such respective
classes and series Beneficially Owned by the Related Person within the two
years prior to the Announcement Date, to (2) the Fair Market Value per share
(adjusted for any subsequent stock dividends, splits, combinations,
recapitalizations, reclassifications or other such reorganizations) of shares
of such respective classes and series on the first day in the two-year period
ending on the Announcement Date on which such shares Beneficially Owned by the
Related Person were acquired; or
(v) the amount per share of any preferential payment to which holders of
shares of such respective classes and series are entitled in the event of a
liquidation, dissolution or winding up of the Corporation.
"Person" means an individual, a partnership, an association, a joint
venture, a corporation, a business, a trust, any entity organized or existing
under applicable law, an unincorporated organization or any Governmental
Authority.
"Preferred Stock" means each class or series of capital stock which may from
time to time be authorized in or by these Articles of Incorporation which is
not designated as "Common Stock."
The phrase "property, securities or other consideration to be received", for
the purpose of subparagraph (i) of ARTICLE SEVEN, Section (a)(ii) and in the
event of a merger in which the corporation is the surviving corporation, shall
include, without limitation, common stock of the Corporation retained by its
shareholders (other than such Related Person).
The term "Related Person" means and includes (i) any individual,
corporation, partnership, group, association or other person or entity which,
together with its Affiliates and Associates, is the Beneficial Owner of not
less than ten percent (10%) of the voting power of the issued and outstanding
capital stock of the Corporation entitled to vote or was the Beneficial Owner
of not less than ten percent (10%) of the voting power of the issued and
outstanding capital stock of the Corporation entitled to vote (A) at the time
the definitive agreement providing for the Business Transaction (including any
amendment thereof) was entered into, (B) at the time a resolution approving the
Business Transaction was adopted by the Board of Directors or (C) as of the
record date for the determination of shareholders entitled to notice of and to
vote on or consent to the Business Transaction, and (ii) any Affiliate or
Associate of any such individual, corporation, partnership, group, association
or other person or entity; provided, however, and notwithstanding any thing in
the foregoing to the contrary, the term "Related Person" shall not include the
Corporation, a more than 90% owned Subsidiary of the Corporation, any employee
stock ownership or other employee benefit plan of either the Corporation or any
more than 90% owned Subsidiary of the Corporation, or any trustee of or
fiduciary with respect to any such plan when acting in such capacity.
"Substantial Part" means more than twenty percent (20%) of the total assets
of the entity in question, as reflected on the most recent consolidated balance
sheet of such entity existing at the time the shareholders of the Corporation
would be required to approve or authorize the Business Transaction involving
the assets constituting any such Substantial Part.
"Voting Stock" shall mean all outstanding shares of capital stock of the
Corporation whose holders are present at a meeting of shareholders, in person
or by proxy, and which entitle their holders to vote generally in the election
of directors, and considered for the purpose of this ARTICLE SEVEN as one
class.
(c) For the purpose of this ARTICLE SEVEN, so long as Continuing Directors
constitute at least two-thirds ( 2/3) of the entire Board of Directors, the
Board of Directors shall have the power to make a good faith determination, on
the basis of information known to them, of (i) the number of shares of Voting
Stock of which any Person is the Beneficial Owner, (ii) whether a Person is a
Related Person or is an Affiliate or Associate of
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another, (iii) whether a Person has an agreement, arrangement or understanding
with another as to the matters referred to in the definition of Beneficial
Owner herein, (iv) whether the assets subject to any Business Transaction
constitute a Substantial Part, (v) whether any Business Transaction is with a
Related Person or is one in which a Related Person has an interest (other than
only a proportionate interest as a shareholder of the Corporation), (vi)
whether a Related Person has, directly or indirectly, received the benefits or
caused any of the changes referred to in subparagraph (D) of ARTICLE SEVEN,
Section (a)(ii), (vii) the fair market value of any consideration to be
received in a Business Transaction and (viii) such other matters with respect
to which a determination is required under this ARTICLE SEVEN; and such
determination by the Board of Directors shall be conclusive and binding for all
purposes of this ARTICLE SEVEN.
(d) Nothing contained in this ARTICLE SEVEN shall be construed to relieve
any Related Person of any fiduciary obligation imposed by law.
(e) The fact that any Business Transaction complies with the provisions of
Section (a) of this ARTICLE SEVEN shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board of Directors, or any
member thereof, to approve such Business Transaction or recommend its adoption
of approval to the shareholders of the Corporation.
(f) Notwithstanding any other provisions of these Articles of Incorporation
or the Bylaws of the Corporation (and notwithstanding that a lesser percentage
may be permitted by law), the provisions of this ARTICLE SEVEN may not be
repealed or amended, directly or indirectly in any respect, unless such action
is approved by the affirmative vote of the holders of not less than seventy
percent (70%) of the Voting Stock.
Eight
No director of the Corporation shall be liable to the Corporation or to its
shareholders for monetary damages for breach of duty of care or other duty as a
director, except for liability (i) for any appropriation, in violation of his
duties, of any business opportunity of the Corporation; (ii) for acts or
omissions which involve intentional misconduct or a knowing violation of the
law; (iii) for the types of liability set forth in section 14-2-832 of the
GBCC; or (iv) for any transaction from which the director received an improper
personal benefit. If the GBCC is amended to authorize corporate action further
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be limited to the fullest extent permitted by the
GBCC, as so amended. Any repeal or modification of the foregoing paragraph by
the shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing immediately prior to the
time of such repeal or modification.
Nine
The Corporation shall indemnify a director against reasonable expenses and
liability incurred by him, and shall advance expenses upon receipt from the
director of the written affirmation and repayment authorization required by
section 14-2-853 of the GBCC, provided, however, that the Corporation shall not
indemnify a director for any liability incurred by a director if he failed to
act in a manner he believed in good faith to be in or not opposed to the best
interests of the Corporation, or to have improperly received a personal benefit
or, in the case of any criminal proceeding, if he had reasonable cause to
believe his conduct was unlawful, or in the case of a proceeding by or in the
right of the Corporation, in which he was adjudged liable to the Corporation,
unless a court shall determine that the director is fairly and reasonably
entitled to indemnification in view of all the circumstances, in which case the
director shall be indemnified for reasonable expenses incurred.
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EXHIBIT 2.3
RESTATED BYLAWS
OF
WORLDCOM, INC.
(a Georgia Corporation)
ARTICLE I
Offices
The principal office of the corporation shall be located in Clinton,
Mississippi. The principal books of the corporation shall be kept at such
principal office, with necessary books and records being kept at such other
place or places as the Board of Directors may from time to time determine. The
registered office of the corporation required by the Georgia Business
Corporation Code shall be located within the State of Georgia. The corporation
may have such other offices, either within or without the State of Georgia, as
the Board of Directors may designate or as the business of the corporation may
require from time to time.
ARTICLE II
Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders shall be
held on the date and time fixed by the Board of Directors for the purpose of
electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. A special meeting of the holders of any one or
more classes of the capital stock of the corporation entitled to vote as a
class or classes with respect to any matter, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the Board of Directors
or President, and shall be called by the President at the written request of
the holders of not less than forty percent (40%) of the shares of stock of such
class or classes issued and outstanding and entitled to be cast on any issue to
be considered at the meeting (subject to any requirements or limitations
imposed by the corporation's Articles of Incorporation, by these Bylaws or by
law), which written request must describe the purpose or purposes for which the
special meeting is to be held (which must be a proper subject for action by the
corporation's shareholders) and further comply with the provisions of Section
11 of this Article II.
Section 3. Place of Meeting. Meetings of the shareholders shall be held at
such place as may be designated by the Board of Directors and stated in the
notice of meeting.
Section 4. Notice of Meeting. Written notice stating the place, date and
time of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered to each shareholder of record entitled to vote at such meeting not
less than ten (10) days or more than sixty (60) days before the date of the
meeting.
Section 5. Record Date. In order that the corporation may determine the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other action, the Board of Directors may fix, in advance, a
record date, which shall not be more than seventy (70) days before the date of
such meeting or action. If no record date is fixed, (i) the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day before the day on
which the first notice is given to such shareholders and (ii) the record date
for determining shareholders for any other purpose shall be at the close of
business on the day which the Board of Directors authorizes the action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any
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adjournment of the meeting, unless the Board of Directors fixes a new record
date. The Board of Directors is required to fix a new record date if the
meeting is adjourned to a date more than one hundred twenty (120) days after
the date fixed for the original meeting.
Section 6. Voting Record. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make a complete record of
the shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged by voting group in alphabetical order, with the
address of and the number of shares held by each. Such record shall be made
available for inspection by any shareholder at the time and place of the
meeting. Such record may also be copied by any shareholder, at his expense, if
(i) the demand is made in good faith and for a proper purpose that is
reasonably relevant to his legitimate interest as a shareholder, (ii) the
shareholder describes with reasonable particularity his purpose and the records
he desires to inspect, (iii) the records are directly connected to his purpose
and (iv) the records are to be used only for the stated purpose.
Section 7. Quorum. The holders of shares entitled to vote as a separate
voting group may take action on a matter at a meeting only if a quorum exists
with respect to that matter. Unless the Articles of Incorporation or the
Georgia Business Corporation Code, as amended from time to time, provide
otherwise, the holders of a majority of the votes entitled to be cast on a
matter by the voting group constitute a quorum of that voting group for action
on that matter. Once a share is represented for any purpose at a meeting, the
holder is deemed present for quorum purposes for the remainder of the meeting,
unless a new record date is or must be set for an adjournment of such meeting.
Section 8. Proxies. At all meetings of shareholders, a shareholder may vote
in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact or by a transmission permitted by law filed in
accordance with the procedure established for the meeting. Such proxy shall be
filed with the Secretary of the corporation before or at the time of the
meeting. No proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy. The appointment of a proxy
is revocable by the shareholder, unless the appointment form conspicuously
states that it is irrevocable and the appointment is coupled with an interest.
Section 9. Voting of Shares. Except as otherwise provided in the Articles of
Incorporation, directors shall be elected by a vote of the holders of common
stock of the corporation, voting together as a single class. Directors shall be
elected by a plurality of the votes cast by shareholders entitled to vote in
the election at a meeting at which a quorum is present. Shareholder action on
all other matters shall be approved if the votes cast in favor of the action
exceed the votes cast in opposition to such action, unless otherwise provided
by law or the Articles of Incorporation. If two or more groups are entitled to
vote separately on a matter, action on a matter is taken only when approved by
each voting group. Each outstanding share of the capital stock having voting
power shall be entitled to the number of votes specified in the Articles of
Incorporation with respect to each matter submitted to a vote at a meeting of
shareholders.
Section 10. Adjournment. When a meeting of shareholders is adjourned to
another date, time or place, notice need not be given of the adjourned meeting
if the new date, time and place are announced at the meeting before the
adjournment; provided, however, that if a new record date is or must be fixed
under the Georgia Business Corporation Code, as amended from time to time, or
these Bylaws, a notice of the adjourned meeting must be given to shareholders
as of the new record date. At the adjourned meeting the shareholders may
transact any business which might have been transacted had a quorum been
present at the time originally designated for the meeting.
Section 11. Advance Notice of Nominations and Shareholder Proposals. All
nominations of individuals for election to the Board of Directors and proposals
of business to be considered at any meeting of the shareholders shall be made
as set forth in this Section 11.
(a) Annual Meeting of Shareholders. (i) Nominations of individuals for
election to the Board of Directors and the proposal of business to be
considered by the shareholders may be made at an annual meeting of shareholders
(A) pursuant to the corporation's notice of meeting, (B) by or at the direction
of the Board of
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Directors or a committee appointed by the Board of Directors or (C) by any
shareholder of the corporation who was a shareholder of record both at the time
of giving of notice provided for in this Section 11 and at the time of the
meeting, who is entitled to vote at the meeting and who complied with the
notice and other requirements set forth in this Section 11.
(ii) For nominations or other business to be properly brought before an
annual meeting by a shareholder pursuant to clause (C) of Section 11(a)(i), the
shareholder must have given timely notice thereof in writing to the Secretary
as hereinafter provided and, in the case of other business, such other business
must otherwise be a proper subject for action by the corporation's
shareholders. To be timely, a shareholder's notice shall be delivered to the
Secretary at the principal executive offices of the corporation and received
not less than one hundred twenty (120) days nor more than one hundred fifty
(150) days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than thirty (30) days or delayed by more than sixty
(60) days from such anniversary date, notice by the shareholder to be timely
must be so delivered and received not earlier than the 150th day prior to such
annual meeting and not later than the close of business on the later of the
120th day prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first made. Such
shareholder's notice shall set forth: (A) as to each person whom the
shareholder proposes to nominate for election or reelection as a director, (1)
the name, age, business and residential addresses, and principal occupation or
employment of each proposed nominee, (2) the class and number of shares of
capital stock of the corporation that are beneficially owned by such nominee on
the date of such notice, (3) a description of all arrangements or
understandings between the shareholder and each nominee and the name of any
other person or persons pursuant to which the nomination or nominations are to
be made by the shareholder, (4) all other information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision, and (5) the written consent of each proposed nominee
to being named as a nominee in the proxy statement and to serve as a director
of the corporation if so elected; (B) as to any other business that the
shareholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
shareholder and of the beneficial owner, if any, on whose behalf the proposal
is made; and (C) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, (1) the name
and address of such shareholder, as they appear on the corporation's books, and
of such beneficial owner, (2) the class and number of shares of stock of the
corporation which are owned beneficially and of record by such shareholder and
such beneficial owner and (3) a representation that the shareholder intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice or to propose such other business. The corporation may
require any proposed nominee to furnish any information, in addition to that
furnished pursuant to clause (A) of this Section 11(a)(ii) above, it may
reasonably require to determine the eligibility of the proposed nominee to
serve as a director of the corporation.
(iii) Notwithstanding anything in the second sentence of paragraph (a)(ii)
of this Section 11 to the contrary, in the event that the number of directors
to be elected to the Board of Directors is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the corporation at least one hundred
thirty (130) days prior to the first anniversary of the preceding year's annual
meeting, a shareholder's notice required by this Section 11(a) shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to and received by the
Secretary at the principal executive offices of the corporation not later than
the close of business on the tenth day following the day on which such public
announcement is first made by the corporation.
(b) Special Meetings of Shareholders. Only such business shall be conducted,
and only such proposals shall be acted upon, at a special meeting of
shareholders as shall have been brought before such meeting pursuant to the
corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of shareholders at which
directors are to be elected (i) by or at the direction
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of the Board of Directors or a committee appointed by the Board of Directors or
(ii) provided that the notice of the special meeting states that the purpose or
one of the purposes of the special meeting is to elect directors at such
special meeting, by any shareholder of the corporation who is a shareholder of
record both at the time of giving of notice provided for in this Section 11 and
at the time of the meeting, who is entitled to vote at the meeting and who
complied with the notice and other requirements set forth in this Section 11.
In the event the corporation calls a special meeting of shareholders for the
purpose of electing one or more directors to the Board of Directors, any such
shareholder may nominate a person or persons (as the case may be) for election
to such position as specified in the corporation's notice of meeting, if a
notice containing the same information as would be required under Section
11(a)(ii) of this Article II for an annual meeting is delivered to and received
by the Secretary at the principal executive offices of the corporation not
earlier than the 150th day prior to such special meeting and not later than the
close of business on the later of the 120th day prior to such special meeting
or the tenth day following the day on which public announcement is first made
of the date of the special meeting and/or of the nominees proposed by the Board
of Directors or a committee appointed by the Board of Directors to be elected
at such meeting. Proposals of business other than the nomination of persons for
election to the Board of Directors may be considered at a special meeting
requested by shareholders in accordance with Section 2 of this Article II only
if the shareholders give a notice containing the same information as would be
required under Section 11(a)(ii) of this Article II for an annual meeting at
the time such shareholders requested the meeting.
(c) General. (i) Only such persons who are nominated in accordance with the
procedures set forth in this Section 11 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of shareholders as shall
have been brought before the meeting in accordance with the procedures set
forth in this Section 11. The Board of Directors may reject any nomination or
shareholder proposal submitted for consideration at any meeting of shareholders
which is not made in accordance with the provisions of this Section 11 or which
is not a proper subject for shareholder action in accordance with provisions of
applicable law. Alternatively, if the Board of Directors fails to consider the
validity of any nomination or shareholder proposal, the presiding officer of
the meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made in accordance
with the provisions of this Section 11 and is a proper subject for shareholder
action in accordance with provisions of applicable law and, if any proposed
nomination or business is not in compliance with this Section 11 or not a
proper subject for shareholder action, to declare that such defective
nomination or proposal be disregarded. This provision shall not prevent the
consideration and approval or disapproval at the meeting of reports of
officers, directors and committees of the Board of Directors, but, in
connection with such reports, no new business shall be acted upon at the
meeting unless stated, submitted and received as herein provided.
(ii) For purposes of this Section 11, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press, Reuters or comparable news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the Exchange Act or any successor provision. In
no event shall the public announcement of a postponement or adjournment of a
meeting commence a new time period for the giving of a shareholder's notice
pursuant to this Section 11.
(iii) Notwithstanding the foregoing provisions of this Section 11, a
shareholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 11. Nothing in this Section 11 shall be
deemed to affect any rights of shareholders to request inclusion of proposals
in, or the corporation's right to omit proposals from, the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or any successor
provision.
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ARTICLE III
Board of Directors
Section 1. Rights, Powers, Duties, Rules and Procedures. The powers of the
corporation shall be exercised, its business conducted and managed, and its
property controlled under the direction of the Board of Directors.
Except to the extent prohibited by law, the Board of Directors shall have
the right (which, to the extent exercised, shall be exclusive) to establish the
rights, powers, duties, rules and procedures that from time to time shall
govern the Board of Directors and each of its members, including, without
limitation, the vote required for any action by the Board of Directors, and
that from time to time shall affect the directors' power to manage the business
and affairs of the corporation. Except to the extent required by law, no Bylaw
shall be adopted by shareholders which shall impair or impede the
implementation of the foregoing.
Section 2. Number, Tenure and Qualifications. The number of directors of the
corporation shall be not less than three (3); the number thereof to be
determined from time to time by the Board of Directors. Each director shall
hold office until the next annual meeting of shareholders following his
election or appointment and until his successor shall have been elected and
qualified or until his earlier resignation, removal from office, or death. A
director need not be a resident of the State of Georgia or a shareholder of the
corporation.
Section 3. Nomination. Nominations for the election of directors shall be
made as provided in Section 11 of Article II of these Bylaws.
Section 4. Regular Meetings. A regular meeting of the Board of Directors
shall be held without notice other than this Bylaw immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place for the holding of additional
regular meetings without notice other than such resolution.
Section 5. Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the Chairman of the Board, the President or a
majority of directors. The person or persons authorized to call special
meetings of the Board of Directors may fix any place as the place for holding
any special meeting of the Board of Directors so called.
Section 6. Chairman of the Board. The Chairman of the Board shall be chosen
from among the members of the Board of Directors. If requested to do so, the
Chairman of the Board shall preside at all meetings of the Board of Directors
and shareholders. The Chairman of the Board shall perform such other duties as
from time to time may be assigned by the Board of Directors.
Section 7. Telephonic Meetings. Meetings of the Board of Directors may be
conducted by conference telephone or similar communications equipment by means
of which all persons participating can hear each other, and participation in
such a meeting shall constitute presence in person at such meeting.
Section 8. Notice of Meeting. Notice of any special meeting of the Board of
Directors shall be given at least one (1) day prior thereto. Notice is not
required prior to any regular meeting of the Board of Directors. Any director
may waive notice of any meeting. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
Section 9. Adjournment. When a meeting of the Board of Directors is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the new time and place are fixed at the meeting at
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which the adjournment is taken and if the period of adjournment does not exceed
one (1) month in any one adjournment. At the adjourned meeting the Board of
Directors may transact any business which might have been transacted had a
quorum been present at the time originally designated for the meeting.
Section 10. Quorum and Voting. A quorum of the Board of Directors consists
of a majority of the number of directors fixed pursuant to these Bylaws. The
affirmative vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors, except as
otherwise may be specifically provided by law, by the Articles of Incorporation
or by these Bylaws.
Section 11. Action Without a Meeting. Any action required or permitted to be
taken by the Board of Directors at a meeting may be taken without a meeting if
all members of the Board of Directors consent thereto in writing, setting forth
the action so taken, and there is an affirmative vote of the number of
directors which would be necessary to authorize or take such action at a
meeting, evidenced in writing. The writing or writings are to be filed with the
minutes of the proceedings of the Board of Directors.
Section 12. Vacancies. Any vacancy occurring on the Board of Directors
created by an increase in the number of directors by action of the shareholders
shall be filled by the shareholders in the same manner as at an annual
election. The Board of Directors shall fill any vacancy occurring on the Board
of Directors created by an increase in the number of directors by action of the
Board of Directors or the removal or resignation of a director as set forth in
Sections 14 and 15 of this Article III, except to the extent the Articles of
Incorporation provide that a class of shareholders may fill a vacancy created
by the removal or resignation of a director elected by that class. A director
elected to fill a vacancy shall hold office for the unexpired term of his
predecessor.
Section 13. Compensation. By resolution of the Board of Directors, each
director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director, or a fixed sum
for attendance at each meeting of the Board of Directors, or both, payable in
cash or securities of the corporation. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 14. Removal. A director (other than a director elected by the
holders of any class or series of preferred stock of the corporation having the
right, voting separately by class or series, to elect directors) may be removed
with or without cause. No director removed for cause may be reinstated for so
long as the cause for removal continues to exist. Removal with or without cause
may be effected only by a majority of the votes of the shares represented at a
meeting of the shareholders at which a quorum is present.
Section 15. Resignation. A director may resign at any time by delivering
written notice to the corporation, the Chairman of the Board, the Board of
Directors or the President. A resignation is effective when the notice is
delivered unless the notice specifies a later effective date.
ARTICLE IV
Officers
Section 1. Number. The officers of the corporation shall be a President and
a Secretary, each of whom shall be elected by the Board of Directors. The Board
may also elect or appoint a Chairman of the Board, one or more Vice Presidents
(with or without a modified title such as "Senior", "Executive" or
"Assistant"), an Assistant Secretary, a Treasurer, an Assistant Treasurer and
such other officers and assistant officers as may be deemed necessary. One
person may hold any number of such offices, except the President may not hold
the office of Senior Vice President, Vice President, Secretary or Assistant
Secretary, and the Secretary and Treasurer shall not hold the office of
Assistant Secretary and Assistant Treasurer, respectively.
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Section 2. Election and Term of Office. The officers of the corporation
shall be elected from time to time by the Board of Directors, as it deems
advisable. Each officer shall hold office until his successor shall have been
duly elected and qualified, or until his death, or until he shall resign or
shall have been removed in the manner hereinafter provided.
Section 3. Removal. The Board of Directors may remove any officer or agent
of the corporation at any time with or without cause. Removal of an officer or
agent shall be without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an officer or agent shall not of itself
create any contract rights.
Section 4. Resignation. Any officer may resign at any time by delivering
notice to the corporation. A resignation is effective when the notice is
delivered unless the notice specifies a later effective date. If a resignation
is made effective at a later date and the corporation accepts the future
effective date, the Board of Directors may fill the pending vacancy before the
effective date if it provides that the successor does not take office until the
effective date. An officer's resignation does not affect the corporation's
contract rights, if any, with the officer.
Section 5. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification, or otherwise, may be filled by the Board of
Directors for the unexpired portion of the term. In the event of an absence of
any officer of the corporation, or for any other reason which the Board of
Directors may deem sufficient, the Board may delegate for the time being the
powers or duties, or any of them, of such officer to any other officer or
director, in connection with these Bylaws.
Section 6. Salaries. The salaries of the officers shall be fixed from time
to time by the Board of Directors, and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
Section 7. President. The President shall be the chief executive officer of
the corporation and, subject to the control of the Board of Directors, shall be
primarily responsible for the general management of the business affairs of the
corporation and for implementing the policies and directives of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect, shall have authority to make
contracts on behalf of the corporation in the ordinary course of business of
the corporation, shall preside at all meetings of the Board of Directors and
shareholders if requested to do so and shall perform such other duties as from
time to time may be assigned by the Board of Directors.
Section 8. The Vice Presidents. The Vice Presidents shall assist the
President in the management of the business. During the absence or disability
of the President, the Vice Presidents in the order designated by the President
or the Board of Directors, or in the absence of any designation, then in the
order of their election, shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the President. The Vice Presidents shall perform such other duties as from
time to time may be assigned to them by the President.
Section 9. The Secretary. The Secretary shall: (i) keep the minutes of the
proceedings of the shareholders, the Board of Directors and the standing
committees in one or more books provided for that purpose; (ii) see that all
notices are duly given in accordance with the provisions of these Bylaws or as
required by law; (iii) be custodian of the corporate records and of the seal of
the corporation and see that the seal of the corporation is affixed to all
documents, the execution of which on behalf of the corporation under its seal
is duly authorized; (iv) keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (v)
sign, with the President, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (vi) have general charge of the stock transfer books of the
corporation; and (vii) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors or the President.
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Section 10. The Treasurer. The Treasurer shall be the chief financial
officer of the corporation and shall have custody of all valuables. The
Treasurer shall: (i) have charge and custody of and be responsible for all
funds and securities of the corporation; (ii) receive and give receipts for
monies due and payable to the corporation from any source whatsoever, and
deposit all such monies in the corporation's account(s); and (iii) in general
perform all of the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the President.
Section 11. Assistant Secretaries and Assistant Treasurers. The Assistant
Secretaries may sign with the President certificates for shares of the
corporation, the issuance of which shall have been authorized by a resolution
of the Board of Directors. The Assistant Treasurers shall, if required by the
Board of Directors, give bonds for the faithful discharge of their duties in
such sums and with such sureties as the Board of Directors shall determine. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or the President.
ARTICLE V
Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Shares may be issued by the corporation
by the delivery of certificates representing such shares and in such form as
shall be determined by the Board of Directors. Such certificates shall be
signed by the President and by the Secretary or an Assistant Secretary. The
signature of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar,
other than the corporation itself or one of its employees. Each certificate for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number and class of shares, the designation of the series, if any, the
certificate represents, and date of issue, shall be entered on the stock
transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled, and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except that in case of a lost, destroyed, or
mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the corporation as the President or the Board of Directors may
prescribe.
Section 2. Shares Without Certificates. Shares of common stock of the
corporation need not be represented by certificates. The Board of Directors of
the corporation may authorize the issuance of some or all of the shares of any
or all of the corporation's other classes or series of stock without
certificates. Any such authorization shall not affect shares already
represented by certificates until such certificated shares are surrendered to
the corporation. Within a reasonable time after the issue or transfer of shares
without certificates, the corporation shall send to the holder thereof a
written statement which includes: (i) the name of the corporation and that it
is organized under the laws of the State of Georgia; (ii) the name of the
person to whom the shares are issued; (iii) the number and class and
designation of the series, if any, of the shares; and (iv) any restrictions on
the transfer or registration of transfer of such shares.
Section 3. Transfer of Shares. Transfers of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper
evidence of his authority to transfer, or by his attorney thereunto authorized
by power of attorney duly executed and filed with the Secretary of the
corporation or a transfer agent or registrar, and on surrender for cancelation
of the certificate for such shares, if a certificate representing such shares
shall have been issued. The person in whose name shares stand on the books of
the corporation shall be deemed by the corporation to be the owner thereof for
all purposes.
ARTICLE VI
Fiscal Year
The fiscal year of the corporation shall be determined and fixed by the
Board of Directors.
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ARTICLE VII
Corporate Seal
The Board of Directors of the corporation may adopt a corporate seal for the
corporation and when so adopted and impressed on the margin hereof or the
margin of the minutes of the meeting at which the seal is adopted, the same
shall be and constitute the corporate seal of this corporation, but unless and
until such action be taken by the Board of Directors, this corporation shall
have no corporate seal. In the event that no corporate seal is adopted, or if
it is inconvenient to use such seal at any time, the signature of the
corporation followed by the word "Seal" enclosed in parentheses shall be deemed
the seal of the corporation, but the absence of such seal on any instrument, or
its addition thereto, shall not affect its character or validity or legal
effect in any respect.
ARTICLE VIII
Waiver of Notice
Whenever any notice is required to be given to any shareholder or director
of the corporation pursuant to law or under the provisions of the Articles of
Incorporation or these Bylaws, a waiver thereof in writing signed by the person
or persons entitled to such notice delivered to the corporation and filed in
the corporation's minutes or corporate records, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice. A
shareholder's or director's attendance at, or participation in, a meeting shall
constitute waiver of notice and consent to the consideration of matters not
described in any notice as set forth in the Georgia Business Corporation Code,
as amended from time to time. Neither the business to be transacted at, nor the
purpose of, any meeting of the shareholders or directors is required to be
specified in any waiver of notice.
ARTICLE IX
Committees
Section 1. Appointment. The Board of Directors, by resolution adopted by a
majority of all the directors in office when the action is taken, may designate
one or more of its members to constitute a committee. The designation of a
committee and the delegation of authority thereto shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed by
law. The Board of Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or disabled member at any
meeting of the committee.
Section 2. Tenure. The members of a committee serve at the pleasure of the
Board of Directors, which may at any time, for any or no reason, remove any
individual committee member, increase or decrease the number of members of a
committee, or, except for the Capital Stock Committee which may only be
terminated in accordance with the provisions of Article IX, Section 5,
terminate the existence of a committee. The membership of a committee member
shall terminate on the date of his removal, resignation or death. The Board of
Directors may fill any vacancy on a committee created by removal, resignation,
death or an increase in the number of members of the committee.
Section 3. Authority. All duly delegated committees may exercise such power
and authority in the management of the business and affairs of the corporation
as specified by resolution of the Board of Directors and to the extent allowed
by applicable law, the Articles of Incorporation and these Bylaws and may have
power to authorize the seal of the corporation to be affixed to all papers
which may require it.
Section 4. Executive Committee. The Board of Directors may appoint an
Executive Committee which, to the extent permitted by law, shall have and may
exercise when the Board of Directors is not in session all powers of the Board
of Directors regarding the supervision of the management of the business and
affairs of the corporation. The Executive Committee shall be chaired by the
President of the corporation.
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Section 5. Capital Stock Committee. The Board of Directors shall form a
Capital Stock Committee which may not be terminated by the Board of Directors
prior to November 23, 2002. Each member of the Capital Stock Committee shall be
an Independent Director (as defined below). The Capital Stock Committee shall
have and may exercise such powers, authority and responsibilities as may be
delegated by the Board of Directors in connection with the adoption of general
policies governing the relationship between business groups or otherwise,
including such powers, authority and responsibilities as are delegated by the
Board of Directors with respect to, among other things: (i) the business and
financial relationships between the WorldCom Group (or any business or
subsidiary allocated thereto) and the WorldCom PCS Group (or any business or
subsidiary allocated thereto); (ii) dividends in respect of, and transactions
by the Corporation or the WorldCom Group (or any business or subsidiary
allocated thereto) in, shares of WorldCom PCS Group Common Stock; and (iii) any
matters arising in connection therewith.
"Independent Director" means any member of the Board of Directors who (i) is
not an officer or employee of the corporation or any of its Subsidiaries, (ii)
is not a former officer of the corporation or any of its Subsidiaries, (iii)
does not, in addition to such person's role as a director, act on a regular
basis, either individually or as a member or representative of an organization,
as a professional adviser, legal counsel or consultant to the corporation or
any of its Subsidiaries, if, in the opinion of the Nominating Committee of the
Board of Directors of the corporation (the "Nominating Committee") or the Board
of Directors if a Nominating Committee is not in existence, such relationship
is material to the corporation or the organization so represented or such
person and (iv) does not represent, and is not a member of the immediate family
of, a person who would not satisfy the requirements of the preceding clauses
(i), (ii) and (iii) of this sentence. A person who has been or is a partner,
officer or director of an organization that has customary commercial,
industrial, banking or underwriting relationships with the corporation or any
of its Subsidiaries that are carried on in the ordinary course of business on
an arms-length basis and who otherwise satisfies the requirements set forth in
clauses (i), (ii), (iii) and (iv) of the first sentence of this definition, may
qualify as an Independent Director, unless, in the opinion of the Nominating
Committee or the Board of Directors if a Nominating Committee is not in
existence, such person is not independent of the management of the corporation
or any of its Subsidiaries or the relationship would interfere with the
exercise of independent judgment as a member of the Board of Directors. A
person who otherwise satisfies the requirements set forth in clauses (i), (ii),
(iii) and (iv) of the first sentence of this definition and who, in addition to
fulfilling the customary director's role, also provides additional services
directly for the Board of Directors and is separately compensated therefor,
would nonetheless qualify as an Independent Director.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Articles of Incorporation.
Section 6. Rules and Procedures. Any committee of the corporation shall have
the right (which, to the extent exercised shall be exclusive) to establish
rules and procedures that from time to time shall govern such committee and
each of its members.
ARTICLE X
Indemnification of Officers and Directors
Section 1. Definitions and References. Terms used in this Article shall have
the meanings assigned such terms in Part 5 of Article 8 of the Georgia Business
Corporation Code. Whenever in these Bylaws reference is made to the Georgia
Business Corporation Code generally or to a specific provision of the Georgia
Business Corporation Code, such reference shall be deemed to refer to the
Georgia Business Corporation Code or such provision as amended from time to
time or any successor provision.
Section 2. Indemnification of and Advancement of Expenses to Directors. The
corporation shall indemnify and advance expenses to its directors to the
fullest extent permitted under, and in accordance with, the corporation's
Articles of Incorporation and the applicable provisions of Part 5 of Article 8
of the Georgia Business Corporation Code.
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Section 3. Mandatory Indemnification of Officers. The corporation shall
indemnify and advance expenses to its officers who are not directors to the
same extent as to directors under Section 2 of this Article X.
Section 4. Permissive Indemnification of Employees and Agents. The
corporation may, to the extent and on such conditions as may be authorized by
the Board of Directors, indemnify and advance expenses to its employees and
agents who are not directors to the fullest extent permitted under, and in
accordance with, Section 14-2-857 of the Georgia Business Corporation Code.
Section 5. Advancement of Expenses of Officers, Employees and Agents. No
advancement or reimbursement of expenses to officers, employees or agents in
accordance with Sections 3 or 4 of this Article X shall be made unless the
proposed indemnitee furnishes the corporation a written affirmation of his good
faith belief that he has met the standard of conduct set forth in the
corporation's Articles of Incorporation with respect to directors, and he
furnishes the corporation a written undertaking, executed personally or on his
behalf, to repay any advances if it is ultimately determined that he is not
entitled to indemnification under this Article X or Part 5 of Article 8 of the
Georgia Business Corporation Code.
Section 6. Liability Insurance. The corporation may purchase and maintain
insurance on behalf of an individual who is a director, officer, employee or
agent of the corporation or who, while a director, officer, employee or agent
of the corporation, serves at the corporation's request as a director, officer,
partner, trustee, employee or agent of another domestic or foreign corporation,
partnership, joint venture, trust, employee benefit plan, or other entity
against liability asserted against or incurred by him in that capacity or
arising from his status as a director, officer, employee, or agent, whether or
not the corporation would have power to indemnify or advance expenses to him
against the same liability under this Article X or under Part 5 of Article 8 of
the Georgia Business Corporation Code.
Section 7. Contract Rights. The right to indemnification and advancement of
expenses conferred hereunder to directors and officers shall be a contract
right and shall not be affected adversely to any director or officer by any
amendment of these Bylaws with respect to any action or inaction occurring
prior to such amendment; provided, however, that this provision shall not
confer upon any indemnitee or potential indemnitee (in his capacity as such)
the right to consent or object to any subsequent amendment of these Bylaws.
Section 8. Nonexclusivity, Etc. The rights of a director or officer
hereunder shall be in addition to any other rights with respect to
indemnification, advancement of expenses or otherwise that he may have under
contract or the Georgia Business Corporation Code or otherwise.
Section 9. Amendments. No amendment, modification or rescission of this
Article X, or any provision hereof, the effect of which would diminish the
rights to indemnification or advancement of expenses as set forth herein shall
be effective as to any director or officer of the corporation with respect to
any action taken or omitted by such person prior to such amendment,
modification or rescission.
Section 10. Severability. To the extent that the provisions of this Article
X are held to be inconsistent with the provisions of Part 5 of Article 8 of the
Georgia Business Corporation Code, such provisions of such Code shall govern.
In the event that any of the provisions of this Article X (including any
provision within a single section, subsection, division or sentence) is held by
a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions of this Article X shall remain
enforceable to the fullest extent permitted by law.
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ARTICLE XI
Amendments
The Bylaws of the corporation may be altered, amended or repealed, and new
Bylaws may be adopted, by the shareholders at any annual or special meeting of
the shareholders or by the Board of Directors at any regular or special meeting
of the Board of Directors; provided, however, that the notice of such meeting
shall specify that amendments to the Bylaws will be considered at such meeting
and shall summarize the proposed amendments; and provided further that the
Bylaws may not be altered, amended or repealed by the Board of Directors to the
extent: (i) the Articles of Incorporation or applicable law reserve the power
to alter, amend or repeal a particular Bylaw exclusively to the shareholders,
in whole or in part; or (ii) the shareholders in altering, amending or
repealing a particular Bylaw provide expressly that the Board of Directors may
not alter, amend or repeal that Bylaw.
ARTICLE XII
Articles of Incorporation
In the event that any provision of these Bylaws is inconsistent or in
conflict with any provision contained in the corporation's Articles of
Incorporation (including any amendment thereto setting forth the preferences,
limitations and rights of any series or class of the corporation's preferred
stock), the provision contained in the Articles of Incorporation shall govern.
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