SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 28, 1998
LEVEL 3 COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-15658 47-0210602
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
3555 Farnam Street
Omaha, NE 68131
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (402) 536-3624
(Former name or former address, if changed from last report)
ITEM 5. OTHER EVENTS
On May 28, 1998, the Board of Directors of Level 3
Communications, Inc. (the "Company") declared a dividend
distribution of one Right for each outstanding share of common
stock, par value $.01 per share (the "Common Stock"), of the
Company. The dividend is payable to stockholders of record at
the close of business on June 10, 1998 (the "Record Date") and
with respect to the Common Stock issued thereafter until the
Distribution Date (defined below) and, in certain circumstances,
with respect to the Common Stock issued after the Distribution
Date. Except as set forth below, each Right, when it becomes
exercisable, entitles the registered holder to purchase from the
Company a unit consisting initially of one one-thousandth of a
share (a "Unit") of Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Preferred Stock"), of the
Company, at a Purchase Price of $490 per Unit, subject to
adjustment (the "Purchase Price"). The description and terms
of the Rights are set forth in a Rights Agreement (the "Rights
Agreement"), dated as of May 29, 1998, between the Company and
Norwest Bank Minnesota, N.A., as Rights Agent.
Initially, the Rights will be attached to all certificates
representing shares of Common Stock then outstanding, and no
separate certificates evidencing the Rights ("Rights
Certificates") will be distributed. The Rights will separate
from the Common Stock and a Distribution Date will occur upon the
earlier of (i) ten (10) days (or such later date as the Board of
Directors shall determine) following public disclosure that a
person or group of affiliated or associated persons has become an
"Acquiring Person" (as defined below), or (ii) ten (10)
business days (or such later date as the Board shall determine)
following the commencement of a tender offer or exchange offer
that would result in a person or group becoming an "Acquiring
Person". Except as set forth below, an "Acquiring Person" is
a person or group of affiliated or associated persons who has
acquired beneficial ownership of 15% or more of the outstanding
shares of Common Stock. The term "Acquiring Person" excludes
(i) the Company, (ii) any subsidiary of the Company, (iii) any
employee benefit plan of the Company or any subsidiary of the
Company, and (iv) any person or entity organized, appointed or
established by the Company for or pursuant to the terms of any
such plan.
Until the occurrence of the Distribution Date, (i) the
Rights will be evidenced by the Common Stock certificates and
will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after the
Record Date will contain a notation incorporating the Rights
Agreement by reference, and (iii) the surrender for transfer of
any certificates for Common Stock outstanding will also
constitute the transfer of the Rights associated with the Common
Stock represented by such certificate. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event (as defined below) that, upon
any exercise of Rights, a number of Rights be exercised so that
only whole shares of Preferred Stock will be issued.
As soon as practicable after the occurrence of the
Distribution Date, Rights Certificates will be mailed to holders
of record of the Common Stock as of the close of business on the
Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except in certain
circumstances specified in the Rights Agreement or as otherwise
determined by the Board of Directors, only shares of Common Stock
issued prior to the Distribution Date will be issued with Rights.
The Rights are not exercisable until the occurrence of the
Distribution Date and until the Rights no longer are redeemable.
The Rights will expire at the close of business on June 10, 2008,
unless extended or earlier redeemed by the Company as described
below.
In the event that, at any time following the Distribution
Date, a person becomes the beneficial owner of more than 15% of
the then outstanding shares of Common Stock (except pursuant to
an offer for all outstanding shares of Common Stock at a price
and on terms determined to be fair to, and in the best interests
of, the stockholders by at least a majority of the Continuing
Directors (as defined below)), becomes an Acquiring Person, each
holder of a Right will thereafter have the right to receive, upon
exercise of the Right, Common Stock (or, in certain
circumstances, cash, property or other securities of the Company)
having a value equal to two times the exercise price of the
Right. A "Continuing Director" is a member of the Board of
Directors who is not an Acquiring Person, an affiliate or
associate of an Acquiring Person or a representative or nominee
of an Acquiring Person. Notwithstanding any of the foregoing,
following the occurrence of the event set forth in this
paragraph, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person will be null and void and nontransferable
and any holder of any such right (including any purported
transferee or subsequent holder) will be unable to exercise or
transfer any such right. For example, at an exercise price of
$490 per Right, each Right not owned by an Acquiring Person (or
by certain related parties) following an event set forth in the
preceding paragraph would entitle its holder to purchase $980
worth of Common Stock (or other consideration, as noted above)
for $490. Assuming that the Common Stock had a per share value
of $70 at such time, the holder of each valid Right would be
entitled to purchase fourteen (14) shares of Common Stock for
$490.
In the event that, at any time following the date on which
there has been public disclosure that, or of facts indicating
that, a person has become an Acquiring Person (the "Stock
Acquisition Date"), (i) the Company is acquired in a merger or
other business combination transaction in which the Company is
not the surviving corporation (other than a merger which follows
an offer described in the preceding paragraph), or (ii) 50% or
more of the Company's assets or earning power is sold, mortgaged
or transferred, each holder of a Right (except Rights which
previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise
price of the Right. There is an exception for a merger that is
approved by the Continuing Directors at a price which is fair to,
and otherwise in the best interests of, the stockholders and in
which all stockholders of the Company receive equal
consideration. The events set forth in this paragraph and in the
preceding paragraph are referred to as the "Triggering Events."
The Purchase Price payable, and the number of Units of
Preferred Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) if holders of the Preferred Stock are
granted certain rights or warrants to subscribe for Preferred
Stock or convertible securities at less than the current market
price of the Preferred Stock, or (iii) upon the distribution to
holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to
above).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments amount to at least
1% of the Purchase Price. No fractional Units will be issued
and, in lieu thereof, an adjustment in cash will be made based on
the market price of the Preferred Stock on the last trading date
prior to the date of exercise.
Because of the nature of the Preferred Stock's dividend,
liquidation and voting rights, the value of the one one-
thousandth interest in a share of Preferred Stock purchasable
upon exercise of each Right should approximate the value of one
share of Common Stock. Shares of Preferred Stock purchasable
upon exercise of the Rights will not be redeemable. Each share
of Preferred Stock will be entitled to a quarterly dividend
payment of 1000 times the dividend declared per share of Common
Stock. In the event of liquidation, each share of Preferred
Stock will be entitled to an aggregate payment of 1000 times the
aggregate payment made per share of Common Stock. Each share of
Preferred Stock will have 1000 votes, voting together with the
shares of Common Stock. These rights are protected by customary
antidilution provisions.
At any time until ten days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in
part, at a price (the "Redemption Price") of $.01 per Right
(payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors) by resolution of the Board
of Directors (provided that following a Stock Acquisition Date
such resolution is approved by a majority of the Continuing
Directors and only if the Continuing Directors constitute a
majority of the directors then in office). The redemption of the
Rights may be made effective at such time on such basis with such
conditions as the Board of Directors in its sole discretion may
establish. Immediately upon such action of the Board of
Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends.
While the distribution of the Rights will not be taxable to
stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other
consideration) of the Company or for common stock of the
acquiring company as set forth above.
Other than those provisions relating to the principal
economic terms of the Rights, any of the provisions of the Rights
Agreement may be amended by resolution of the Company's Board of
Directors (provided that following a Stock Acquisition Date such
resolution is approved by a majority of the Continuing Directors
and only if the Continuing Directors constitute a majority of the
directors then in office) prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement may
be amended by resolution of the Company's Board of Directors
(provided that following a Stock Acquisition Date such resolution
is approved by a majority of the Continuing Directors and only if
the Continuing Directors constitute a majority of the directors
then in office) in order to cure any ambiguity, to make changes
which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person or its
affiliates or associates), or to shorten or lengthen any time
period under the Rights Agreement; provided, however, that no
amendment to adjust the time period governing redemption shall be
made at such time as the Rights are not redeemable.
The Rights Agreement, which includes as Exhibit B the form
of Rights Certificate, is filed as Exhibit 4.1 hereto. This
summary description of the Rights is qualified in its entirety by
reference to the Rights Agreement, which is incorporated herein
by reference.
On May 29, 1998, Level 3 issued a press release relating to
the adoption of the Rights Agreement. This press release is
filed as Exhibit 99.1 to this Current Report and incorporated
herein by reference as if set forth in full.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of business acquired
None.
(b) Pro forma financial information
None.
(c) Exhibits
4.1 Rights Agreement, dated as of May 29, 1998, between
Level 3 Communications, Inc. and Norwest Bank
Minnesota, N.A., as Rights Agent, which includes the
Form of Certificate of Designation, Preferences and
Rights of Series A Junior Participating Preferred Stock
of Level 3 Communications, Inc., as Exhibit A, the Form
of Rights Certificate, as Exhibit B and the Summary of
Rights to Purchase Preferred Stock, as Exhibit C.
(Incorporated by reference to Exhibit 1 to the
Registrant's Registration Statement on Form 8-A filed
with respect to the Rights to Purchase Series A Junior
Participating Preferred Stock, par value $.01 per
share).
99.1 Press Release, dated May 29, 1998 related to the
adoption of the Rights Agreement.
SIGNATURES
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.
/s/ NEIL J. ECKSTEIN
-------------------------------
Vice President
June 9, 1998
Exhibit 99.1
For Immediate Release
PRESS RELEASE
Contacts:
News Media: Josh Howell Investors: Julie Stangl
402/943-1309 402/943-1310
Steve Ingish
402/943-1337
LEVEL 3 COMMUNICATIONS, INC. ADOPTS STOCKHOLDER RIGHTS PLAN
OMAHA, NEBRASKA, May 29, 1998 - Level 3 Communications, Inc.
(Nasdaq:LVLT) announced today that its Board of Directors has
adopted a Stockholder Rights Plan in which preferred stock
purchase rights will be distributed as a dividend at the rate of
one Right for each share of the Company's Common Stock held as of
the close of business on June 10, 1998. The Rights will expire
on June 10, 2008.
The Rights are intended to enable all of the Company's
stockholders to realize the long-term value of their investment
in the Company. The Rights will not prevent a takeover, but
should encourage anyone seeking to acquire the Company to
negotiate with the Board prior to attempting a takeover.
In a letter being sent to stockholders, James Q. Crowe, president
and chief executive officer of Level 3 Communications, Inc., said
the Rights Plan is intended to protect the interests of the
Company's stockholders in the event the Company is confronted
with coercive or unfair takeover tactics. He noted that such
tactics include "offers that do not treat all stockholders
equally, the acquisition in the open market or otherwise of
shares constituting control without offering fair value to all
stockholders, or other coercive or unfair takeover tactics that
could impair the Board's ability to represent stockholders'
interests fully."
Crowe stressed, however, that the Rights Plan "is not intended to
prevent an acquisition of the Company on terms that your Board
considers favorable and fair to, and in the best interests of,
all stockholders, and will not do so. The Rights Plan is
designed to deal with the serious problem of unilateral actions
by hostile acquirers which are calculated to deprive the
Company's Board of Directors and its stockholders of their
ability to determine the destiny of the Company."
Each Right will entitle stockholders, in certain circumstances,
to buy one one-thousandth of a newly issued share of Series A
Junior Participating Preferred Stock of the Company at an
exercise price of $490. The Rights generally will be exercisable
and transferable apart from the Common Stock only if a person or
group acquires beneficial ownership of 15 percent or more of the
Common Stock or commences a tender or exchange offer upon
consummation of which such person or group would beneficially own
15 percent or more of the Common Stock.
If any person becomes the beneficial owner of 15 percent or more
of the Company's Common Stock other than pursuant to an offer for
all shares which is fair to and otherwise in the best interests
of the Company and its stockholders, then each Right not owned by
a 15 percent or more shareholder or certain related parties will
entitle its holder to purchase, at the Right's then-current
exercise price, shares of Common Stock (or, in certain
circumstances as determined by the Board, cash, other property,
or other securities) having a value of twice the Right's exercise
price. In addition, if, after any person has become a 15 percent
or more stockholder, the Company is involved in a merger or other
business combination transaction with another person in which its
Common Stock is changed or converted, or sells 50 percent or more
of its assets or earning power to another person, each Right will
entitle its holder to purchase, at the Right's then-current
exercise price, shares of common stock of such other person
having a value of twice the Right's exercise price.
The Company will generally be entitled to redeem the Rights at
$.01 per Right at any time until the tenth day following public
disclosure that a person or group has become the beneficial owner
of 15 percent or more of the Company's Common Stock.
Details of the Stockholder Rights Plan are outlined in a summary
of the Rights Plan, which will be mailed to stockholders.
About Level 3 Communications
Level 3 is a communications and information services company
building an advanced Internet Protocol (IP) technology based
network across the U.S. that is expected to be completed in
phases by 2001. To provide service in the interim, Level 3 has
signed an agreement to lease capacity on a national network over
which it will be able to offer advanced IP-based services in
selected cities beginning in the third quarter of 1998. Level 3
will be the first company to combine both local and long distance
IP technology based networks connecting customers end-to-end
across the U.S. The company will focus primarily on the business
market using its network to provide a full range of
communications services -- including local, long distance and
data transmission as well as other enhanced services and Internet
access services. Plans also call for the company to expand
internationally. Level 3's common stock is traded on the Nasdaq
National Market under the symbol LVLT. Its World Wide Web
address is www.L3.com.
