SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
August 10, 1998
(Date of earliest event reported)
USN COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-23683 36-3947804
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
10 South Riverside Plaza, Suite 401, Chicago, Illinois 60606
(Address of Principal Offices, including zip code)
(312) 906-3600
(Registrant's telephone number, including area code)
Item 5. Other Events
On August 10, 1998, the Board of Directors of the Registrant
declared a dividend distribution of one right (a "Right") for each
outstanding share of the Registrant's Common Stock, $.01 par value per
share ("Common Stock"), to stockholders of record at the close of business
on August 24, 1998 (the "Record Date"). The Board of Directors of the
Registrant also authorized the issuance of one Right for each share of
Common Stock issued after the Record Date and prior to the earliest of the
Distribution Date (as defined below), the redemption, exchange or
expiration of the Rights. If and when the Rights become exercisable, each
Right entitles the registered holder to purchase from the Registrant one
one-hundredth of a share of Series A Junior Participating Preferred Stock
(the "Preferred Stock"), at a purchase price of $50 per Right (the
"Purchase Price"), subject to adjustment as provided in the Rights
Agreement (as defined below). The description and terms of the Rights are
set forth in a Rights Agreement, dated as of August 10, 1998 (the "Rights
Agreement"), between the Registrant and Harris Trust and Savings Bank, as
Rights Agent.
Upon payment of the dividend at the close of business on the
Record Date, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates
(as defined below) will be distributed. The Rights will separate from the
Common Stock upon the earliest of (i) 10 days following a public
announcement that a person or group (an "Acquiring Person"), together with
persons affiliated or associated with it, has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the outstanding
shares of Common Stock (the "Stock Acquisition Date"), subject to certain
exceptions, or (ii) 10 business days (or such later date as the Board of
Directors of the Registrant shall determine) following the commencement of
a tender offer or exchange offer that would result in a person or group
beneficially owning 15% or more of such outstanding shares of Common Stock
(the earliest of such dates, the "Distribution Date").
Until the Distribution Date (or earlier redemption or expiration
of the Rights), (i) the Rights will be transferred with and only with the
Common Stock (except in connection with redemption of the Rights), (ii) new
Common Stock certificates issued after the Record Date upon transfer,
replacement or new issuance of Common Stock 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.
The Rights will first become exercisable on the Distribution Date
and will expire at the close of business on August 24, 2008 (the "Final
Expiration Date"), unless earlier redeemed or exchanged by the Registrant
as described below. Notwithstanding the foregoing, the Rights will not be
exercisable after the occurrence of a Triggering Event (defined below)
until the Registrant's right of redemption has expired.
As soon as practicable after the Distribution Date, separate
certificates evidencing the Rights (the "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, such separate Rights Certificates
alone will evidence the Rights. Except for shares of Common Stock issued
or sold after the Distribution Date pursuant to the exercise of stock
options or under any employee benefit plan or arrangement granted or
awarded prior to the Distribution Date, or the exercise, conversion or
exchange of securities issued by the Registrant, and except as otherwise
determined by the Board of Directors, only shares of Common Stock issued
prior to the Distribution Date will be issued with Rights.
In the event that any person shall become an Acquiring Person
(except pursuant to an offer for all outstanding shares of Common Stock
which the independent directors determine to be fair to and otherwise in
the best interest of the Registrant and its stockholders after receiving
advice from one or more investment banking firms (a "Qualifying Offer"))
(such event is referred to herein as a "Triggering Event"), then the Rights
will "flip-in" and entitle each holder of a Right, except as provided
below, to purchase, upon exercise at the then-current Purchase Price, that
number of shares of Common Stock having a market value of two times such
Purchase Price.
Any Rights beneficially owned at any time on or after the earlier
of the Distribution Date and the Stock Acquisition Date by an Acquiring
Person or an affiliate or associate of an Acquiring Person (whether or not
such ownership is subsequently transferred) will become null and void upon
the occurrence of a Triggering Event, and any holder of such Rights will
have no right to exercise such Rights.
In the event that, following a Triggering Event, the Registrant
is acquired in a merger or other business combination in which the Common
Stock does not remain outstanding or is changed (other than a merger
following a Qualifying Offer) or 50% of the assets or earning power of the
Registrant and its Subsidiaries (as defined in the Rights Agreement) (taken
as a whole) is sold or otherwise transferred to any person (other than the
Registrant or any Subsidiary of the Registrant) in one transaction or a
series of related transactions, the Rights will "flip-over" and entitle
each holder of a Right, except as provided in the preceding paragraph, to
purchase, upon exercise of the Right at the then-current Purchase Price,
that number of shares of common stock of the acquiring company (or, in
certain circumstances, one of its affiliates) which at the time of such
transaction would have a market value of two times such Purchase Price.
The Purchase Price is subject to adjustment from time to time to
prevent dilution upon the occurrence of certain events.
At any time until the earlier of (i) fifteen days following the
Stock Acquisition Date and (ii) the Final Expiration Date, the Registrant
may redeem the Rights in whole, but not in part, at a price of $0.01 per
Right, subject to adjustments. The Registrant may, at its option, pay the
redemption price in cash, shares of Common Stock (based on the current
market price of the Common Stock at the time of redemption) or any other
form of consideration deemed appropriate by the Board of Directors of the
Registrant.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Registrant, 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
Registrant, 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 Registrant or for common stock of the
acquiring company as set forth above.
At any time prior to the Distribution Date, the Registrant may,
without the approval of any holder of the Rights, supplement or amend any
provision of the Rights Agreement. Thereafter, the Rights Agreement may be
amended in certain respects, including to shorten or lengthen any time
period thereunder and in a manner that does not adversely affect the Rights
holders (other than an Acquiring Person).
As of July 31, 1998, there were 23,483,519 shares of Common Stock
outstanding. Each outstanding share of Common Stock on the Record Date
will receive one Right. Until the Distribution Date, the Registrant will
issue one Right with each share of Common Stock that shall become
outstanding so that all such shares will have attached Rights. One million
shares of Preferred Stock have been reserved for issuance upon exercise of
the Rights.
The Rights have certain antitakeover effects. The Rights will
cause substantial dilution to a person or group that attempts to acquire
the Registrant on terms not approved by the Registrant's Board of
Directors. The Rights should not interfere with any merger or other
business combination approved by the Board of Directors of the Registrant
since the Board of Directors may, subject to the limitations discussed
above at its option, at any time until fifteen days following the Stock
Acquisition Date, redeem all, but not less than all, of the then
outstanding Rights at the applicable redemption price.
The foregoing summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement (which includes as Exhibit A the Form of Rights Certificate).
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits. The following documents are filed as exhibits to this
current report.
4.1. Rights Agreement, dated as of August 10, 1998, between the
Registrant and Harris Trust and Savings Bank, as Rights Agent,
(filed as Exhibit 4.1 to the Company's Registration Statement on
Form 8-A filed on August 14, 1998 which is incorporated by
reference herein) which includes as Exhibit A thereto the Form of
Rights Certificate.
99 Press release of the Company relating to the adoption of the
Company's Rights Agreement.
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 hereto duly authorized.
August 14, 1998 USN COMMUNICATIONS, INC.
(Registrant)
By: /s/ Thomas A. Monson
--------------------------------
Name: Thomas A. Monson
Title: Vice President, General
Counsel and Secretary
Exhibit Index
Exhibit Description Page
4.1 Rights Agreement, dated as of August 10, 1998 N/A
between the Registrant and Harris Trust and
Savings Bank, as Rights Agent, (filed as Exhibit
4.1 to the Company's Registration Statement on
Form 8-A filed on August 14, 1998 which is
incorporated by reference herein) which includes
as Exhibit A thereto the Form of Rights
Certificate.
99 Press release of the Company relating to N/A
the renewal of the Company's Rights Agreement.
NEWS RELEASE
Powerful Connections For America(TM)
Investor Contact: Debra O'Shea
Director, Investor Relations
312-906-3774
Media Contact: Kathy Mattson
Corporate Communications
312-906-3575
USN COMMUNICATIONS, INC. ADOPTS STOCKHOLDER
RIGHTS PLAN
CHICAGO, August 10, 1998 - USN Communications, Inc. (Nasdaq: USNC) (the
"Company"), announced today that its Board of Directors adopted a
Stockholder Rights Plan pursuant to which rights will be distributed as a
dividend at the rate of one Right for each share of common stock, par value
$0.01 per share, of the Company held by stockholders of record as of the
close of business on August 24, 1998. The Rights Plan is designed to deter
coercive takeover tactics including the accumulation of shares in the open
market or through private transactions and to prevent an acquirer from
gaining control of the Company without offering a fair price to all of the
Company's stockholders. The Rights will expire on August 24, 2008.
Each Right initially will entitle stockholders to buy one unit of a share
of preferred stock for $50.00. The Rights will be exercisable only if a
person or group acquires beneficial ownership of 15% or more of the
Company's common stock or commences a tender or exchange offer upon
consummation of which such person or group would beneficially own 15% or
more of the Company's common stock.
If any person becomes the beneficial owner of 15% or more of the Company's
common stock, other than pursuant to a tender or exchange offer for all
outstanding shares of the Company approved by a majority of the independent
directors not affiliated with a 15%-or-more stockholder, then each Right
not owned by a 15%-or-more stockholder or related parties will entitle its
holder to purchase, at the Right's then current exercise price, shares of
the Company's 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 then current exercise price. In addition, if, after any
person becomes a 15%-or- more stockholder, USN Communications, Inc. is
involved in a merger or other business combination transaction with another
person in which the Company does not survive or in which its common stock
is changed or exchanged, or sells 50% 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 then current exercise
price.
The Company will generally be entitled to redeem the Rights at $0.01 per
Right at any time until 15 days (subject to extension) following a public
announcement that a 15% position has been acquired.
Details of the Stockholder Rights Plan are outlined in a letter which will
be mailed to all stockholders.
Certain of the statements made in this press release are forward-looking in
nature. Actual results may differ materially from those projected in
forward-looking statements. USN believes that its primary risk factors
include, but are not limited to: the number and size of competitors in its
markets; law and regulatory policy; dependence on technology and third
parties, including provisioning and billing systems and services; and the
mix of products and services offered in its target markets. Additional
information concerning these and other potential important factors can be
found in USN's SEC filings. USN undertakes no obligation to update publicly
any forward-looking statements whether as a result of new information,
future events or otherwise. Any statements should be evaluated in light of
these important factors.
USN Communications is one of the largest and fastest growing independent
competitive local exchange carriers. The company delivers "powerful
connections" for small to medium-sized businesses by integrating a complete
range of communications services, including local, long-distance, cellular
and Internet, supported by unparalleled customer service. USN was founded
in 1994, has 50 offices located throughout the Midwest, Northeast and
Mid-Atlantic and currently provides telecommunications service in more than
45 states.
For more information on USN Communications, visit the company's Web site
located on the Internet at WWW.USNCOMM.COM.
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