Exh. 1
EXECUTION COPY
RIGHTS AGREEMENT
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WORLDCOM, INC.
and
THE BANK OF NEW YORK
Rights Agent
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Dated as of March 7, 2002
TABLE OF CONTENTS
Page
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Section 1. Certain Definitions..............................................1
Section 2. Appointment of Rights Agent......................................6
Section 3. Issuance of Right Certificates...................................6
Section 4. Form of Right Certificates.......................................8
Section 5. Countersignature and Registration................................9
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates...................................................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights...10
Section 8. Cancellation of Right Certificates..............................11
Section 9. Reservation and Availability of Shares of Preferred Stock.......12
Section 10. Preferred Stock Record Date.....................................12
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights........................................................13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares......20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earnings
Power.........................................................21
Section 14. Fractional Rights and Fractional Shares.........................23
Section 15. Rights of Action................................................24
Section 16. Agreement of Right Holders......................................25
Section 17. Right Certificate Holder Not Deemed a Shareholder...............25
Section 18. Concerning the Rights Agent.....................................25
Section 19. Merger or Consolidation or Change of Name of Rights Agent.......26
Section 20. Duties of Rights Agent..........................................26
Section 21. Change of Rights Agent..........................................28
Section 22. Issuance of New Right Certificates..............................29
Section 23. Redemption and Termination......................................29
Section 24. Exchange........................................................31
Section 25. Notice of Proposed Actions......................................32
Section 26. Notices.........................................................33
Section 27. Supplements and Amendments......................................33
Section 28. Successors......................................................34
Section 29. Benefits of This Agreement......................................34
Section 30. Severability....................................................34
Section 31. Governing Law...................................................34
Section 32. Counterparts....................................................35
Section 33. Descriptive Headings............................................35
Section 34. Administration..................................................35
Exhibit A Form of WorldCom Right Certificate
Exhibit B Form of MCI Right Certificate
Exhibit C Summary of Preferred Stock Purchase Rights
RIGHTS AGREEMENT
This Agreement, dated as of March 7, 2002 is entered into between
WorldCom, Inc., a Georgia corporation (the "Company") and The Bank of New York,
a New York banking corporation (the "Rights Agent", which term shall include
any successor Rights Agent hereunder).
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company has authorized and
declared a dividend distribution of (i) one preferred share purchase right
("WorldCom Right"), representing the right to purchase one one-thousandth of a
share of Series 4 Junior Participating Preferred Stock (the "Series 4 Preferred
Stock") having the rights, powers and preferences set forth in the Company's
Articles of Incorporation, as amended (the "Articles of Incorporation"), for
each share of WorldCom Group Stock (as defined below) outstanding on the Close
of business on March 18, 2002 (the "Record Date") and (ii) one preferred share
purchase right ("MCI Right", together with the WorldCom Right, the "Rights"),
representing the right to purchase one one-thousandth of a share of Series 5
Junior Participating Preferred Stock (the "Series 5 Preferred Stock") having
the rights, powers and preferences set forth in the Articles of Incorporation,
for each share of MCI Group Stock (as defined below) outstanding on the Close
of business on the Record Date;
WHEREAS, the Board of Directors of the Company has further
authorized and directed the issuance of one Right with respect to each
additional share of Common Stock (as defined below) which shall be issued and
become outstanding between the Record Date and the earlier to occur of the Close
of business on the Distribution Date (as such term is defined in Section 3
hereof) and the Close of business on the Expiration Date;
WHEREAS, the Company desires to appoint the Rights Agent to act as
provided herein, and the Rights Agent is willing to so act; and
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" means any Person (as hereinafter defined)
who or which, together with all Affiliates (as hereinafter defined) and
Associates (as hereinafter defined) of such Person, without the Prior Written
Approval of the Company (as hereinafter defined), shall be the Beneficial Owner
(as hereinafter defined) of securities of the Company constituting 15% or more
of the Voting Power (as hereinafter defined) of the Company or was such a
Beneficial Owner at any time after the date hereof, whether or not such Person
continues to be the Beneficial Owner of securities representing 15% or more of
the Voting Power of the Company, but shall not include (i) the Company, any
Subsidiary (as hereinafter defined) of the Company, any employee benefit plan
or compensation arrangement of the Company or any
Subsidiary of the Company, or any entity holding securities of the Company to
the extent organized, appointed or established by the Company or any Subsidiary
of the Company for or pursuant to the terms of any such employee benefit plan
or compensation arrangement or (ii) any Person who or which, together with all
Affiliates and Associates of such Person, inadvertently may become the
Beneficial Owner of securities of the Company representing 15% or more of the
Voting Power of the Company or otherwise becomes such a Beneficial Owner
without a plan or intention to acquire control of the Company, so long as such
Person, individually or together with the Affiliates and Associates of such
Person, promptly enters into, and delivers to the Company, an irrevocable
commitment promptly to divest, and thereafter promptly divests (without
exercising or retaining any power, including voting, with respect to such
securities), sufficient securities of the Company so that such Person, together
with all Affiliates and Associates of such Person, ceases to be the Beneficial
Owner of 15% or more of the Voting Power of the Company. Notwithstanding the
foregoing, (x) no Person shall become an "Acquiring Person" as the result of an
acquisition of voting securities of the Company by the Company which, by
reducing the amount of such securities outstanding, increases the proportionate
voting power of such securities beneficially owned by such Person to 15% or
more of the Voting Power; provided, however, that if a Person becomes the
Beneficial Owner of securities constituting 15% or more of the Voting Power by
reason of purchases by the Company and shall, after such purchases by the
Company, become the Beneficial Owner of any additional voting securities of the
Company without the Prior Written Approval of the Company, then such Person
shall be deemed to be an Acquiring Person; and (y) no Person shall become an
"Acquiring Person" as the result of a change in the current market price (as
defined in Section 11(f) hereof) of either WorldCom Group Stock or MCI Group
Stock that, increases the proportionate voting power of such securities
beneficially owned by such Person to 15% or more of the Voting Power; provided,
however, that if a Person becomes the Beneficial Owner of securities
constituting 15% or more of the Voting Power by reason of a change in the
current market price of either WorldCom Group Stock or MCI Group Stock and
shall, after such change in the current market price, become the Beneficial
Owner of any additional voting securities of the Company without the Prior
Written Approval of the Company, then such Person shall be deemed to be an
Acquiring Person.
(b) "Affiliate" and "Associate" have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date hereof.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own", any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on the date hereof;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with
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respect to a bona fide public offering of securities), or upon the
exercise of conversion rights, exchange rights, rights (other than these
Rights), warrants or options, or otherwise, provided, however, that a
Person shall not be deemed the "Beneficial Owner" of securities tendered
pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for payment or exchange; or (B) the
right to vote pursuant to any agreement, arrangement or understanding,
provided, however, that a Person shall not be deemed the "Beneficial
Owner" of any security under this clause (B) if the agreement,
arrangement or understanding to vote such security (1) arises solely from
a revocable proxy or consent given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations under the Exchange Act and (2) is not
also then reportable by such Person on Schedule 13D under the Exchange
Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for
the purpose of acquiring, holding, voting (except pursuant to a revocable
proxy or consent as described in clause (B) of subparagraph (ii) of this
paragraph (c)) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership
to the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, means the number of
such securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(d) "Board of Directors" means the Board of Directors of the
Company as constituted from time to time.
(e) "Business Day" means 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.
(f) "Close of business" on any given date means 5:00 P.M., Clinton,
Mississippi time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Clinton, Mississippi time, on the next
succeeding Business Day.
(g) "Common Stock", when used in reference to the Company, means
WorldCom Group Stock and/or MCI Group Stock as the context requires. "Common
Stock" when used with reference to any Person other than the Company means the
capital stock with the greatest Voting Power of such Person or the equity
securities or other equity interest having power to control or direct the
management of such Person or, if such Person is a Subsidiary of another Person,
of the Person which ultimately controls such first-mentioned Person and which
has issued and outstanding such capital stock, equity securities or equity
interests.
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(h) "common stock equivalent" has the meaning set forth in Section
11(c) hereof.
(i) "current market price" has the meaning set forth in Section
11(f) hereof.
(j) "Distribution Date" has the meaning set forth in Section 3
hereof.
(k) "equivalent preferred stock" has the meaning set forth in
Section 11(d) hereof.
(l) "Exchange Ratio" has the meaning set forth in Section 24(a)
hereof.
(m) "Expiration Date" has the meaning set forth in Section 7(a)
hereof.
(n) "Final Expiration Date" has the meaning set forth in Section
7(a) hereof.
(o) "Independent Director" means a member of the Board of Directors
of the Company, (i) who is not, and during the past three years has not been,
an officer or employee of the Company, and (ii) who is not (A) an Acquiring
Person or an Affiliate or Associate of an Acquiring Person or (B) a Person who
shall have made a proposal to the Company or its shareholders, or taken any
other action that, if effective, could cause such Person to become an Acquiring
Person hereunder, or an Affiliate or Associate of any such Person.
(p) "MCI Group Stock" means WorldCom, Inc.--MCI Group Common Stock,
a series of Common Stock having a par value of $.01 per share.
(q) "MCI Right" has the meaning set forth in the preamble to this
Agreement.
(r) "MCI Right Certificate" has the meaning set forth in Section
3(a) hereof.
(s) "number of Adjustment Shares" has the meaning set forth in
Section 11(b) hereof.
(t) "Person" means any individual, firm, corporation, partnership
or other entity, and shall include any successor (by merger or otherwise) of
any such entity.
(u) "Preferred Stock" means the Series 4 Preferred Stock and/or the
Series 5 Preferred Stock, as the context requires.
(v) "Principal Party" has the meaning set forth in Section 13(b)
hereof.
(w) "Prior Written Approval of the Company" means prior express
written consent of the Company to the actions in question, executed on behalf
of the Company by a duly authorized officer of the Company following express
approval by action of at least a majority of the Independent Directors.
(x) "Purchase Price" means the Series 4 Purchase Price and/or the
Series 5 Purchase Price, as the context requires.
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(y) "Record Date" has the meaning set forth in the preamble to this
Agreement.
(z) "Redemption Price" has the meaning set forth in Section 23(a)
hereof.
(aa) "Registrar" has the meaning set forth in Section 5(a) hereof.
(bb) "Right Certificates" has the meaning set forth in Section 3(a)
hereof.
(cc) "Rights" has the meaning set forth in the preamble to this
Agreement.
(dd) "Rights Agent" has the meaning set forth in the preamble to
this Agreement.
(ee) "Section 11(b) Event" has the meaning set forth in Section
11(b) hereof.
(ff) "Section 13 Event" means an event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(gg) "Series 4 Preferred Stock" has the meaning set forth in the
preamble to this Agreement.
(hh) "Series 5 Preferred Stock" has the meaning set forth in the
preamble to this Agreement.
(ii) "Series 4 Purchase Price" has the meaning in Section 7(b)
hereof.
(jj) "Series 5 Purchase Price" has the meaning in Section 7(b)
hereof.
(kk) "Stock Acquisition Date" means the earlier of (i) the first
date of public announcement by the Company or an Acquiring Person that a Person
has become an Acquiring Person, or (ii) the date on which the Company first has
notice, direct or indirect, or otherwise determines that a Person has become an
Acquiring Person.
(ll) "Subsidiary" means, with respect to any Person, any other
Person of which securities or other ownership interests having ordinary Voting
Power, in the absence of contingencies, to elect a majority of the board of
directors (or other persons performing similar functions) of such other Person
are at the time directly or indirectly owned by such Person or one or more of
such Person's Subsidiaries, except that "Subsidiary" when used with reference
to the Company shall mean any Person of which either a majority of the Voting
Power of the voting equity securities or a majority of the equity interests is
owned, directly or indirectly, by the Company.
(mm) "Summary of Rights" means the Summary of Preferred Stock
Purchase Rights in substantially the form of Exhibit C hereto.
(nn) "Trading Day" has the meaning set forth in Section 11(f)
hereof.
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(oo) "Voting Power" means the voting power of all securities of a
Person then outstanding generally entitled to vote for the election of
directors of the Person (or, where appropriate, for the election of persons
performing similar functions).
(pp) "WorldCom Group Stock" means WorldCom, Inc.--WorldCom Group
Common Stock, a series of Common Stock having a par value of $.01 per share.
(qq) "WorldCom Right" has the meaning set forth in the preamble to
this Agreement.
(rr) "WorldCom Right Certificate" has the meaning set forth in
Section 3(a) hereof.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. The Company shall promptly send written notice to the
Rights Agent of any such appointment. In the event the Company appoints one or
more Co-Rights Agents, the respective duties of the Rights Agents and any
Co-Rights Agents shall be as the Company shall determine.
SECTION 3. ISSUANCE OF RIGHT CERTIFICATES.
(a) Until the earlier of (i) the Close of business on the tenth
Business Day after the Stock Acquisition Date or (ii) the Close of business on
the tenth Business Day (or such later date as may be determined by action of
the Board of Directors but in no event later than the tenth Business Day after
such time as any Person becomes an Acquiring Person) after the date that a
tender or exchange offer by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan or compensation arrangement of the
Company or of any Subsidiary of the Company, or any entity holding securities
of the Company to the extent organized, appointed or established by the Company
or any Subsidiary of the Company for or pursuant to the terms of any such
employee benefit plan or compensation arrangement) is first published or sent
or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, without the Prior Written Approval of the
Company, which tender or exchange offer would result in any Person becoming the
Beneficial Owner of Voting Power aggregating 15% or more of the outstanding
Voting Power (including any such date which is after the date of this Agreement
and prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (y) each WorldCom Right and each MCI
Right will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificates representing shares of WorldCom Group Stock and
MCI Group Stock, respectively, registered in the names of the holders of
WorldCom Group Stock and MCI Group Stock, respectively (which certificates for
WorldCom Group Stock and MCI Group Stock shall be deemed also to be WorldCom
Right Certificates and MCI Right Certificates, respectively), and not by
separate Right Certificates, as more fully set forth below, and (z) the
WorldCom Rights
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(and the right to receive certificates therefor) will be transferable only in
connection with the transfer of the underlying shares of WorldCom Group Stock
and the MCI Rights (and the right to receive certificates therefor) will be
transferable only in connection with the transfer of the underlying shares of
MCI Group Stock, as more fully set forth below. As soon as practicable after
the Company has notified the Rights Agent of the occurrence of the Distribution
Date, the Company shall prepare and execute, and the Rights Agent shall
countersign and send, by first-class, insured, postage prepaid mail, to each
record holder of Common Stock as of the Close of business on the Distribution
Date, at the address of such holder shown on the records of the Company, a
right certificate, in substantially the form of Exhibit A hereto (the "WorldCom
Right Certificate"), evidencing one WorldCom Right for each share of WorldCom
Group Stock so held, subject to adjustment as provided herein, and a right
certificate, in substantially the form of Exhibit B hereto (the "MCI Right
Certificate", together with the WorldCom Right Certificate, the "Right
Certificates"), evidencing one MCI Right for each share of MCI Group Stock so
held, subject to adjustment as provided herein. As of and after the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of the Summary of Rights by first-class,
postage-prepaid mail, to each record holder of Common Stock as of the Close of
business on the Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for shares of Common Stock
outstanding as of the Record Date, until the Distribution Date (or the earlier
redemption, expiration or termination of the Rights), the Rights will be
evidenced by such certificates for the Common Stock registered in the names of
the holders of the Common Stock and the registered holders of the Common Stock
shall also be registered holders of the associated Rights. Until the
Distribution Date (or the earlier redemption, expiration or termination of the
Rights), the surrender for transfer of any of the certificates for the Common
Stock outstanding in respect of which Rights have been issued shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
(c) Certificates for the Common Stock issued after the Record Date
but prior to the earlier of the Distribution Date or the redemption, expiration
or termination of the Rights shall be deemed also to be certificates for Rights
and shall have impressed, printed or written on, or otherwise affixed to them
the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement dated as of March
7, 2002 between WorldCom, Inc. (the "Company") and The Bank of New
York, as Rights Agent (the "Rights Agreement"), as it may from time
to time be supplemented or amended, the terms of which are
incorporated herein by reference and a copy of which is on file at
the principal executive offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights
may expire or may be redeemed, exchanged or be evidenced by
separate certificates and no longer be evidenced by this
certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement without charge promptly
after receipt of a
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written request therefor. Under certain circumstances, Rights
issued to or held by Acquiring Persons or their Affiliates or
Associates (as defined in the Rights Agreement) and any subsequent
holder of such Rights may become null and void.
With respect to such certificates containing the foregoing legend,
until the Distribution Date (or the earlier redemption, expiration or
termination of the Rights), the Rights associated with Common Stock represented
by such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any of such certificates shall also constitute the
transfer of the Rights associated with Common Stock represented by such
certificates.
In the event that the Company purchases or acquires any Common
Stock after the Record Date but prior to the Distribution Date, any Rights
associated with such Common Stock shall be deemed cancelled and retired so that
the Company shall not be entitled to exercise any Rights associated with shares
of Common Stock that are no longer outstanding.
SECTION 4. FORM OF RIGHT CERTIFICATES.
(a) The Right Certificates (and the forms of election to purchase
shares and of assignment to be printed on the reverse thereof) shall be in
substantially the same form as Exhibit A hereto for the WorldCom Rights and
Exhibit B hereto for the MCI Rights and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any
applicable law, rule or regulation or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
customary usage. Subject to the provisions of Section 11 and Section 22 hereof,
the Right Certificates, whenever issued, shall be dated as of the Record Date,
and on their face shall entitle the holders thereof to purchase such number of
one one-thousandths of a share of Preferred Stock as shall be set forth therein
at the price per one one-thousandth of a share as set forth therein, but the
number and identity of such shares and the Purchase Price shall be and remain
subject to adjustment as provided in Sections 11, 13 and 22 hereof.
(b) Any Right Certificate issued pursuant to Section 3(a) hereof
that represents Rights beneficially owned by an Acquiring Person or any
Associate or Affiliate thereof and any Right Certificate issued at any time
upon the transfer of any Rights to an Acquiring Person or any Associate or
Affiliate thereof or to any nominee of such Acquiring Person, Associate or
Affiliate, and any Right Certificate issued pursuant to Section 6 hereof,
Section 11 hereof or Section 22 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Right Certificate were issued to a
Person who was an Acquiring Person or an Affiliate or an Associate
of an Acquiring Person. This Right Certificate and the Rights
represented hereby are void in the circumstances specified in
Section 7(e) of the Rights Agreement.
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The failure to print the foregoing legend on any such Right
Certificate or any defect therein shall not affect in any manner whatsoever the
application or interpretation of the provisions of Section 7(e) hereof.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be countersigned manually or by
facsimile signature by the Rights Agent or the registrar or co-registrar for
the Common Stock (the "Registrar") and shall not be valid for any purpose
unless so countersigned. In case any officer of the Company whose manual or
facsimile signature is affixed to the Right Certificates shall cease to be such
officer of the Company before countersignature by the Rights Agent or the
Registrar and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent or the Registrar, issued
and delivered with the same force and effect as though the person who signed
such Right Certificates had not ceased to be such officer of the Company. Any
Right Certificate may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its stockholder services office or such other office
designated for such purpose, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights
evidenced on its face by each of the Right Certificates, the certificate number
of each of the Right Certificates and the date of each of the Right
Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject
to the provisions of Section 14 hereof, at any time after the Close of business
on the Distribution Date, and at or prior to the Close of business on the
Expiration Date (as such term is defined in Section 7(a) hereof), any Right
Certificate or Right Certificates may be transferred, split up, combined or
exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of shares of Preferred Stock as the
Right Certificate or Right Certificates surrendered then entitled such holder
to purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate shall make such request in writing delivered to
the Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the
stockholder services office of the Rights Agent or such office designated for
such purpose. Thereupon, the Rights Agent shall countersign and deliver to the
Person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
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Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right Certificate,
if mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the stockholder services office of the
Rights Agent or such office designated for such purpose, together with payment
of the applicable Purchase Price for each one one-thousandth of a share of
Series 4 Preferred Stock, in the case of a WorldCom Right, and one
one-thousandth of a share of Series 5 Preferred Stock, in the case of a MCI
Right, as to which the Rights are exercised, at or prior to the Close of
business on the Expiration Date. The "Expiration Date", as used in this
Agreement, shall be the earliest of (i) the Final Expiration Date (as defined
below), (ii) the time at which the Rights are redeemed as provided in Section
23 hereof, or (iii) the time at which the Rights are exchanged as provided in
Section 24 hereof. The "Final Expiration Date," as used in this Agreement,
shall be March 18, 2012.
(b) The purchase price ("Series 4 Purchase Price") for each one
one-thousandth of a share of Series 4 Preferred Stock pursuant to the exercise
of a WorldCom Right shall initially be equal to $60.00. The purchase price
("Series 5 Purchase Price") for each one one-thousandth of a share of Series 5
Preferred Stock pursuant to the exercise of a MCI Right shall initially be
equal to $40.00. The Purchase Price shall be subject to adjustment from time to
time as provided in Sections 11 and 13 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate, with the form of election
to purchase duly executed, accompanied by payment of the Purchase Price for
each one one-thousandth of a share of Preferred Stock to be purchased and an
amount equal to any applicable transfer tax required to be paid by the holder
of the Rights pursuant hereto in accordance with Section 9 hereof by certified
check, bank draft or money order payable to the order of the Company or the
Rights Agent, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon (i) promptly either (A) requisition from any transfer agent of the
shares of Preferred Stock (or make available, if the Rights Agent is the
transfer agent) certificates for the number of shares of Preferred Stock to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company, in its sole discretion,
shall have elected to deposit the shares of Preferred Stock issuable upon
exercise of the Rights hereunder into a depositary, requisition from the
depositary agent depositary receipts representing such number of one
one-thousandths of a share of Preferred Stock as are to be purchased (in which
case certificates for
10
the shares of Preferred Stock represented by such receipts shall be deposited
by the transfer agent with the depositary agent) and the Company will direct
the depositary agent to comply with all such requests, (ii) promptly after
receipt of such certificates or depositary receipts cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, (iii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section
14 hereof, (iv) after receipt of any such cash, promptly deliver such cash to
or upon the order of the registered holder of such Right Certificate, (v) when
appropriate, requisition from the Company the amount of cash or securities
issuable upon exercise of a Right pursuant to the adjustment provisions of
Section 11 or the exchange provisions of Section 24, and (vi) after receipt of
any such cash or securities, promptly deliver such cash or securities to or
upon the order of the registered holder of such Right Certificate, of any such
cash or securities.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent to the registered holder of such Right Certificate
or to his duly authorized assigns, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
upon the first occurrence of a Section 11(b) Event or a Section 13 Event, any
Rights that are or were at any time on or after the earlier of the Stock
Acquisition Date or the Distribution Date beneficially owned by an Acquiring
Person or any Associate or Affiliate of an Acquiring Person shall become void
with respect to the rights provided under Section 11(b), Section 13(a) and
Section 24 hereof and any holder of such Rights shall thereafter have no right
to exercise such Rights under the provisions of Section 11(b) and Section 13(a)
hereof, or to receive any Common Stock in exchange therefor pursuant to the
provisions of Section 24 hereof.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless the certificate contained in the
appropriate form of election to purchase set forth on the reverse side of the
Right Certificate surrendered for such exercise shall have been properly
completed and duly executed by the registered holder thereof and the Company
shall have been provided with such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Company.
11
SECTION 9. RESERVATION AND AVAILABILITY OF SHARES OF PREFERRED
STOCK.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock or its authorized and issued shares of Preferred Stock held in
its treasury, the number of shares of Preferred Stock that will be sufficient
to permit the exercise in full of all outstanding Rights and, after the
occurrence of a Section 11(b) Event or a Section 13 Event, shall so reserve and
keep available a sufficient number of shares of Preferred Stock, Common Stock
and/or other securities which may be required to permit the exercise in full of
the Rights pursuant to this Agreement.
(b) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock and/or
other securities delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares or other securities (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares or securities.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the first occurrence of an event which would establish
the Distribution Date, a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the Expiration Date The Company will also take such action as may be
appropriate under the "blue sky laws" of the various states.
(d) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any shares of Preferred Stock and/or other securities upon the exercise
of Rights. The Company shall not, however, be required to pay any transfer tax
which may be payable in respect of any transfer involved in the transfer or
delivery of Right Certificates or the issuance or delivery of certificates or
depositary receipts for Preferred Stock and/or other securities in a name other
than that of the registered holder of the Right Certificate evidencing Rights
surrendered for exercise, nor shall the Company be required to issue or deliver
any certificates or depositary receipts for shares of Preferred Stock and/or
other securities upon the exercise of any Rights until any such tax shall have
been paid (any such tax being payable by the holder of such Right Certificate
at the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
SECTION 10. PREFERRED STOCK RECORD DATE. Each Person (other than
the Company) in whose name any certificate for Series 4 Preferred Stock or
Series 5 Preferred Stock (or other securities) is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
the Preferred Stock (or other securities) represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
other securities) transfer books of the Company are closed,
12
such Person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next succeeding Business Day on which
the Preferred Stock (or other securities) transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Right Certificate shall not be entitled to any rights of a shareholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR
NUMBER OF RIGHTS. The Series 4 Purchase Price or the Series 5 Purchase Price,
as the case may be, the number and identity of shares covered by each WorldCom
Right or MCI Right, as the case may be, and the number of WorldCom Rights or
MCI Rights, as the case may be, outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a) In the event the Company shall at any time after the date of
this Agreement (i) declare a dividend on the Series 4 Preferred Stock or Series
5 Preferred Stock, as the case may be, payable in shares of Series 4 Preferred
Stock or Series 5 Preferred Stock, as the case may be, (ii) subdivide the
outstanding Series 4 Preferred Stock or Series 5 Preferred Stock, as the case
may be, (iii) combine the outstanding Series 4 Preferred Stock or Series 5
Preferred Stock, as the case may be, into a smaller number of shares or (iv)
issue any shares of its capital stock in a reclassification of the Series 4
Preferred Stock or Series 5 Preferred Stock, as the case may be (including any
such reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11, the Series 4 Purchase Price or Series 5 Purchase
Price, as the case may be, in effect at the time of the record date for such
dividend or the time of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock, including
Preferred Stock, issuable upon exercise of a WorldCom Right or MCI Right, as
the case may be, shall be proportionately adjusted so that the holder of any
WorldCom Right or MCI Right, as the case may be, exercised after such time,
upon payment of the aggregate consideration such holder would have had to pay
to exercise such WorldCom Right or MCI Right, as the case may be, prior to such
time, shall be entitled to receive the aggregate number and kind of shares of
capital stock, including Preferred Stock, which, if such WorldCom Right or MCI
Right, as the case may be, had been exercised immediately prior to such date
and at a time when the Preferred Stock transfer books of the Company were open,
he would have owned upon such exercise and been entitled to receive by virtue
of such dividend, subdivision, combination or reclassification.
(b) In the event any Person shall become an Acquiring Person
("Section 11(b) Event"), then proper provision shall be made so that each
holder of a Right, subject to Section 7(e) and Section 24 hereof and except as
provided below, shall after the later of the occurrence of such event and the
effective date of an appropriate registration statement pursuant to Section 9
hereof, have a right to receive, upon exercise thereof at the then current
Purchase Price, multiplied by the then number of one one-thousandths of a share
of Preferred Stock for which a Right is then exercisable, in accordance with
the terms of this Agreement, in lieu of shares of Preferred Stock, such number
of shares of WorldCom Group Stock or MCI Group Stock, as the case may be, as
shall equal the result obtained by (y) multiplying the then current Series 4
13
Purchase Price or Series 5 Purchase Price, as the case may be, by the then
number of one one-thousandths of a share of Series 4 Preferred Stock or Series
5 Preferred Stock, as the case may be, for which a Right is then exercisable
and dividing that product by (z) 50% of the current market price per one share
of WorldCom Group Stock or MCI Group Stock, as the case may be (determined
pursuant to Section 11(f) hereof on the date of the occurrence of the Section
11(b) Event) (such number of shares being referred to as the "number of
Adjustment Shares").
(c) In the event that there shall not be sufficient shares of
WorldCom Group Stock or MCI Group Stock, as the case may be, issued but not
outstanding or authorized but unissued to permit the exercise in full of the
Rights in accordance with the foregoing Section 11(b), and the Rights become so
exercisable, notwithstanding any other provision of this Agreement, to the
extent necessary and permitted by applicable law and any agreements or
instruments in effect on the date hereof to which the Company is a party, each
Right shall thereafter represent the right to receive, upon exercise thereof at
the then current Series 4 Purchase Price or the Series 5 Purchase Price, as the
case may be, multiplied by the then number of one one-thousandths of a share of
Series 4 Preferred Stock or Series 5 Preferred Stock, as the case may be, for
which a Right is then exercisable, in accordance with the terms of this
Agreement, a number of shares, or units of shares, of (y) WorldCom Group Stock
or MCI Group Stock, as the case may be, and (z) preferred stock (or other
equity securities) of the Company, including, but not limited to Preferred
Stock, equal in the aggregate to the number of Adjustment Shares where the
Board of Directors by action of at least a majority of the Independent
Directors shall have in good faith deemed such shares or units, other than the
shares of Common Stock, to have at least the same value and voting rights as
the Common Stock (a "common stock equivalent"); provided, however, if there are
unavailable sufficient shares (or fractions of shares) of WorldCom Group Stock
or MCI Group Stock, as the case may be, and/or common stock equivalents, then
the Company shall take all such action as may be necessary to authorize
additional shares of WorldCom Group Stock or MCI Group Stock, as the case may
be, or common stock equivalents for issuance upon exercise of the Rights,
including the calling of a meeting of shareholders; and provided, further, that
if the Company is unable to cause sufficient shares of WorldCom Group Stock or
MCI Group Stock, as the case may be, and/or common stock equivalents to be
available for issuance upon exercise in full of the Rights, then the Company,
to the extent necessary and permitted by applicable law and any agreements or
instruments in effect on the date thereof to which it is a party, shall make
provision to pay an amount in cash equal to twice the Series 4 Purchase Price
or Series 5 Purchase Price (as adjusted pursuant to this Section 11), as the
case may be, in lieu of issuing shares of WorldCom Group Stock or MCI Group
Stock, as the case may be, and/or common stock equivalents. To the extent that
the Company determines that some action needs to be taken pursuant to this
Section 11(c), the Board of Directors by action of at least a majority of the
Independent Directors may suspend the exercisability of the Rights for a period
of up to sixty (60) days following the date on which the Section 11(b) Event
shall have occurred, in order to decide the appropriate form of distribution to
be made pursuant to this Section 11(c) and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended.
The Board of Directors by action of at least a majority of the Independent
Directors may, but shall not be required to, establish procedures to allocate
the right to receive Common Stock and common stock equivalents
14
upon exercise of the Rights among holders of Rights, which such allocation may
be, but is not required to be, pro-rata.
(d) If the Company shall fix a record date for the issuance of
rights or warrants to all holders of Series 4 Preferred Stock or Series 5
Preferred Stock, as the case may be, entitling them (for a period expiring
within 90 calendar days after such record date) to subscribe for or purchase
Series 4 Preferred Stock or Series 5 Preferred Stock, as the case may be (or
securities having the same or more favorable rights, privileges and preferences
as the Series 4 Preferred Stock or Series 5 Preferred Stock, as the case may be
("equivalent preferred stock")) or securities convertible into Series 4
Preferred Stock or Series 5 Preferred Stock, as the case may be, or equivalent
preferred stock, at a price per share of Series 4 Preferred Stock or Series 5
Preferred Stock, as the case may be, or per share of equivalent preferred stock
or having a conversion or exercise price per share, as the case may be, less
than the current market price (as defined in Section 11(f) hereof) per share of
Series 4 Preferred Stock or Series 5 Preferred Stock, as the case may be, on
such record date, the Series 4 Purchase Price or Series 5 Purchase Price, as
the case may be, to be in effect after such record date shall be determined by
multiplying the Series 4 Purchase Price or Series 5 Purchase Price, as the case
may be, in effect immediately prior to such date by a fraction, the numerator
of which shall be the number of shares of Series 4 Preferred Stock or Series 5
Preferred Stock, as the case may be, outstanding on such record date plus the
number of shares of Series 4 Preferred Stock or Series 5 Preferred Stock, as
the case may be, which the aggregate offering price of the total number of
shares of Series 4 Preferred Stock or Series 5 Preferred Stock, as the case may
be, or equivalent preferred stock to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price, and the denominator of which shall be the number
of shares of Series 4 Preferred Stock or Series 5 Preferred Stock, as the case
may be, outstanding on such record date plus the number of additional shares of
Series 4 Preferred Stock or Series 5 Preferred Stock, as the case may be,
and/or equivalent preferred stock to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible). In case such 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 in good faith by a majority of the
Independent Directors, whose determination shall be described in a statement
filed with the Rights Agent. Shares of Series 4 Preferred Stock or Series 5
Preferred Stock, as the case may be, owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights or warrants are not so issued,
the Series 4 Purchase Price or Series 5 Purchase Price, as the case may be,
shall be adjusted to be the Series 4 Purchase Price or Series 5 Purchase Price,
as the case may be, which would then be in effect if such record date had not
been fixed.
(e) If the Company shall fix a record date for the making of a
distribution to all holders of Series 4 Preferred Stock or Series 5 Preferred
Stock, as the case may be, (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation) of evidences of indebtedness, cash (other than a regular
periodic cash dividend out of earnings or retained earnings of the Company),
assets (other than a dividend payable in Preferred Stock, but including any
dividend payable in stock other than Preferred Stock) or convertible
securities, subscription rights or warrants (excluding those
15
referred to in Section 11(d) hereof), the Series 4 Purchase Price or Series 5
Purchase Price, as the case may be, to be in effect after such record date
shall be determined by multiplying the Series 4 Purchase Price or Series 5
Purchase Price, as the case may be, in effect immediately prior to such record
date by a fraction, the numerator of which shall be the current market price
(as defined in Section 11(f) hereof) for one share of Series 4 Preferred Stock
or Series 5 Preferred Stock, as the case may be, on such record date less the
amount of cash or the fair market value (as determined in good faith by a
majority of the Independent Directors, whose determination shall be described
in a statement filed with the Rights Agent) of the portion of the assets or
evidences of indebtedness so to be distributed or of such convertible
securities, subscription rights or warrants applicable to one share of Series 4
Preferred Stock or Series 5 Preferred Stock, as the case may be, and the
denominator of which shall be such current market price for one share of Series
4 Preferred Stock or Series 5 Preferred Stock, as the case may be. Such
adjustments shall be made successively whenever such a record date is fixed;
and in the event that such distribution is not so made, the Series 4 Purchase
Price or Series 5 Purchase Price, as the case may be, shall again be adjusted
to be the Series 4 Purchase Price or Series 5 Purchase Price, as the case may
be, which would then be in effect if such record date had not been fixed.
(f) (i) For the purpose of any computation hereunder, the "current
market price" of any security (a "Security" for purposes of this Section
11(f)(i)) on any date shall be deemed to be the average of the daily closing
prices per share of such Security for the 30 consecutive Trading Days (as
hereinafter defined) immediately prior to such date; provided, however, that in
the event that the current market price per share of such Security is
determined during a period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in shares
of such Security or securities convertible into shares of such Security or (B)
any subdivision, combination or reclassification of such Security, and prior to
the expiration of 30 Trading Days after the ex-dividend date for such dividend
or distribution or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current market price" shall
be appropriately adjusted to reflect the current market price per share
equivalent of such Security. The closing price for each day shall be 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 New York Stock
Exchange or, if the Security is not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading 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, as reported by the Nasdaq National Market
System, or if the Security is not listed or admitted to trading on any national
securities exchange or included in the Nasdaq National Market System, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by Nasdaq or such other system then in use, or, if on any such date
the 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 by a majority of the Independent Directors. If
on any such date no market maker is making a market in the Security, the fair
value of such Security on such date as determined in good faith by a majority
of the Independent Directors shall be used. The term "Trading Day"
16
shall mean a day on which the principal national securities exchange on which
the Security is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on any
national securities exchange a day on which the Nasdaq National Market System
is open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange or included in the
Nasdaq National Market System, a Business Day. If the Security is not publicly
held or not so listed or traded, "current market price" shall mean the fair
value as determined in good faith by a majority of the Independent Directors,
whose determination shall be described in a statement filed with the Rights
Agent.
(ii) For the purpose of any computation hereunder, the "current
market price" per share (or one one-thousandth of a share) of Preferred Stock
shall be determined in the same manner as set forth above for the Common Stock
in clause (i) of this Section 11(f) (other than the last sentence thereof). If
the current market price per share (or one one-thousandth of a share) of
Preferred Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner described
in clause (i) of this Section 11(f), the "current market price" per share of
Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as
such number may be appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the current market
price per share of the WorldCom Group Stock or MCI Group Stock, as the case may
be, and the "current market price" per one one-thousandth of a share of Series
4 Preferred Stock or Series 5 Preferred Stock, as the case may be, shall be
equal to the current market price per share of the WorldCom Group Stock or MCI
Group Stock, as the case may be, (as appropriately adjusted). If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or traded,
"current market price" per share shall mean the fair value per share as
determined in good faith by a majority of the Independent Directors, whose
determination shall be described in a statement filed with the Rights Agent.
(g) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of this
Section 11(g) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest ten-thousandth of a
share, as the case may be. Notwithstanding the first sentence of this Section
11(g), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three years from the date of the transaction which mandates
such adjustment or (ii) the Expiration Date.
(h) In the event that at any time, as a result of an adjustment
made pursuant to Section 11(a) or (b) hereof, the holder of any Right shall be
entitled to receive upon exercise of such Right any shares of capital stock of
the Company other than shares of Preferred Stock, thereafter the number of such
other shares so receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares contained in this
Section 11 and the provisions of Sections 7, 9, 10, 13 and 14 hereof with
respect to the shares of Preferred Stock shall apply on like terms to any such
other shares.
17
(i) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of
a share of Preferred Stock or other capital stock of the Company purchasable
from time to time hereunder upon exercise of the Rights, all subject to further
adjustment of the Purchase Price.
(j) Unless the Company shall have exercised its election as
provided in Section 11(k) hereof, upon each adjustment of the Series 4 Purchase
Price or Series 5 Purchase Price, as the case may be, as a result of the
calculations made in Section 11(d) and (e) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Purchase Price, that number of one
one-thousandths of a share of Series 4 Preferred Stock or Series 5 Preferred
Stock (calculated to the nearest hundred-thousandth), as the case may be,
obtained by (i) multiplying (A) the number of one one-thousandths of a share of
Series 4 Preferred Stock or Series 5 Preferred Stock covered by a WorldCom
Right or MCI Right, as the case may be, immediately prior to the adjustment by
(B) the Series 4 Purchase Price or Series 5 Purchase Price, as the case may be,
in effect immediately prior to such adjustment of the Series 4 Purchase Price
or Series 5 Purchase Price, as the case may be, and (ii) dividing the product
so obtained by the Series 4 Purchase Price or Series 5 Purchase Price, as the
case may be, in effect immediately after such adjustment of the Series 4
Purchase Price or Series 5 Purchase Price, as the case may be.
(k) The Company may elect on or after the date of any adjustment of
the Series 4 Purchase Price or Series 5 Purchase Price, as the case may be, to
adjust the number of WorldCom Rights or MCI Rights, as the case may be, in
substitution for any adjustment in the number of shares of Series 4 Preferred
Stock or Series 5 Preferred Stock, as the case may be, purchasable upon the
exercise of a WorldCom Right or MCI Right, as the case may be. Each of the
Rights outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one one-thousandths of a share of Preferred Stock
for which such Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest hundred-thousandth)
obtained by dividing the Series 4 Purchase Price or the Series 5 Purchase
Price, as the case may be, in effect immediately prior to adjustment of the
Series 4 Purchase Price or Series 5 Purchase Price, as the case may be, by the
Series 4 Purchase Price or Series 5 Purchase Price, as the case may be, in
effect immediately after adjustment of the Series 4 Purchase Price or Series 5
Purchase Price, as the case may be. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(k), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by
18
the Company, new Right Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.
(l) Irrespective of any adjustment or change in the Purchase Price
or the number of shares of Preferred Stock issuable upon the exercise of the
Rights, the Right Certificates theretofore and thereafter issued may continue
to express the Purchase Price and the number of shares which were expressed in
the initial Right Certificates issued hereunder.
(m) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the shares of
Common Stock or other securities and below one one-thousandth of the then par
value, if any, of the Preferred Stock, issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of such Preferred Stock, Common Stock or
other securities at such adjusted Purchase Price. If upon any exercise of the
Rights, a holder is to receive a combination of Common Stock and common stock
equivalents, a portion of the consideration paid upon such exercise, equal to
at least the then par value of a share of Common Stock of the Company, shall be
allocated as the payment for each share of Common Stock of the Company so
received.
(n) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the shares of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the shares of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall deliver to such
holder a due ββββ or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
(o) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment a majority of the Independent
Directors shall determine to be advisable in order that any (i) consolidation
or subdivision of the Preferred Stock, (ii) issuance wholly for cash of any
Preferred Stock at less than the then current market price, (iii) issuance
wholly for cash of Preferred Stock or securities which by their terms are
convertible into or exchangeable for Preferred Stock, (iv) stock dividends or
(v) issuance of rights, options or warrants referred to hereinabove in this
Section 11, hereafter made by the Company to the holders of its Preferred
Stock, shall not be taxable to such shareholders.
19
(p) In the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the WorldCom Group Stock or MCI Group Stock, as the case may be,
payable in shares of WorldCom Group Stock or MCI Group Stock, as the case may
be, or (ii) effect a subdivision, combination or consolidation of the WorldCom
Group Stock or MCI Group Stock, as the case may be (by reclassification or
otherwise than by payment of dividends in shares of WorldCom Group Stock or MCI
Group Stock, as the case may be), into a greater or lesser number of shares of
WorldCom Group Stock or MCI Group Stock, as the case may be, then in any such
case (y) the number of one one-thousandths of a share of Series 4 Preferred
Stock or Series 5 Preferred Stock, as the case may be, purchasable after such
event upon proper exercise of each Right shall be determined by multiplying the
number of one one-thousandths of a share of Series 4 Preferred Stock or Series
5 Preferred Stock, as the case may be, so purchasable immediately prior to such
event by a fraction, the numerator of which is the number of shares of WorldCom
Group Stock or MCI Group Stock, as the case may be, outstanding immediately
before such event and the denominator of which is the number of shares of
WorldCom Group Stock or MCI Group Stock, as the case may be, outstanding
immediately after such event, and (z) each share of WorldCom Group Stock or MCI
Group Stock, as the case may be, outstanding immediately after such event shall
have issued with respect to it that number of Rights which each share of
WorldCom Group Stock or MCI Group Stock, as the case may be, outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(p) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or
consolidation is effected.
(q) The Company covenants and agrees that it shall not, at any time
after the Distribution Date and so long as the Rights have not been redeemed
pursuant to Section 23 hereof or exchanged pursuant to Section 24 hereof, (i)
consolidate with, (ii) merge with or into, or (iii) sell or transfer, in one or
more transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to, any other Person, if at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.
(r) The Company covenants and agrees that, after the Stock
Acquisition Date, it will not, except as permitted by Sections 23 and 24
hereof, take any action the purpose or effect of which is to diminish
substantially or otherwise eliminate the benefits intended to be afforded by
the Rights.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Sections 11 or 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock and the Common Stock a copy of such certificate and (c) include
a brief summary thereof in a mailing to each holder of a WorldCom Right
Certificate or MCI Right Certificate in accordance with Section 26 hereof, or
disclose a brief summary in a filing under the Securities Exchange Act of 1934,
as amended. The Rights Agent shall be fully protected in
20
relying on any such certificate and on any adjustments therein contained.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNINGS POWER.
(a) In the event that, directly or indirectly, following the
Distribution Date, (x) the Company shall consolidate with, or merge with and
into, any other Person, (y) any Person shall consolidate with or merge with and
into the Company, and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the
Company shall sell, or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one or more transactions, assets or
earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person other than
to the Company or one or more of its wholly owned Subsidiaries, then, and in
each such case, proper provision shall be made so that (i) each holder of a
Right, subject to Section 7(e) hereof, shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price
multiplied by the then number of one one-thousandths of a share of Preferred
Stock for which a Right is then exercisable (or if a Section 11(b) Event has
occurred prior to the first occurrence of a Section 13 Event, multiplying the
number of such one one-thousandths of a share for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(b) Event by the
Purchase Price in effect immediately prior to such first occurrence) in
accordance with the terms of this Agreement, in lieu of Preferred Stock, such
number of shares of freely tradeable Common Stock of the Principal Party (as
hereinafter defined), free and clear of liens, rights of call or first refusal,
encumbrances or other adverse claims, as shall be equal to the result obtained
by (A) multiplying the then current Series 4 Purchase Price or the Series 5
Purchase Price, as the case may be, by the number of one one-thousandths of a
share of Series 4 Preferred Stock or Series 5 Preferred Stock for which a Right
is then exercisable (or if a Section 11(b) Event has occurred prior to the
first occurrence of a Section 13 Event, multiplying the number of such one
one-thousandths of a share for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(b) Event by the Purchase Price in
effect immediately prior to such first occurrence), and dividing that product
by (B) 50% of the current market price per share of the Common Stock of such
Principal Party (determined in the manner described in Section 11(f) hereof) on
the date of consummation of such consolidation, merger, sale or transfer; (ii)
the Principal Party shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof, except for the provisions of
11(b), shall apply to such Principal Party; and (iv) such Principal Party shall
take such steps (including, but not limited to, the authorization and
reservation of a sufficient number of shares of its Common Stock to permit
exercise of all outstanding Rights in accordance with this Section 13(a)) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the shares of its Common Stock thereafter deliverable upon
the exercise of the Rights.
(b) "Principal Party" shall mean:
21
(i) in the case of any transaction described in clause (x) or (y)
of the first sentence of Section 13(a) hereof, the Person that is the
issuer of any securities into which shares of Common Stock of the Company
are converted in such merger or consolidation, and if no securities are
so issued, the Person, including the Company, that is the other party to
the merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a) hereof, the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions; provided, however, that in
any case described in clause (i) or (ii) in this Section 13(b), (x) if
the Common Stock of such Person is not at such time and has not been
continuously over the preceding 12-month period registered under Section
12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary or Affiliate of another Person, "Principal Party" shall refer
to such other Person; (y) in case such Person is a Subsidiary, directly
or indirectly, or Affiliate of more than one Person, the Common Stocks of
all of which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Common Stock
having the greatest aggregate market value, and (z) in case such Person
is, or is owned directly or indirectly by, a partnership or joint venture
formed by two or more Persons that are not owned, directly or indirectly,
by the same Person, the rules set forth in (x) and (y) above shall apply
to each of the chains of ownership having an interest in such joint
venture as if such party were a "Subsidiary" of both or all of such joint
venturers and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their
direct or indirect interests in such Person bear to the total of such
interests.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of shares of its authorized Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and each
Principal Party and each other Person who may become a Principal Party as a
result of such consolidation, merger, sale or transfer shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of any consolidation, merger, sale
or transfer of assets mentioned in paragraph (a) of this Section 13, the
Principal Party will:
(i) prepare and file a registration statement under the Securities
Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, will use its best efforts
to cause such registration statement to become effective as soon as
practicable after such filing and will use its best efforts to cause such
registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the
Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the "blue sky
laws" of such jurisdictions as may be necessary or appropriate; and
22
(iii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that comply
in all respects with the requirements for registration on Form 10 under
the Exchange Act.
The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(b) Event, the Rights that have not theretofore been exercised shall
thereafter also become exercisable in the manner described in Section 13(a)
hereof.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Right Certificates that evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be 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 New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, as reported by the Nasdaq National Market
System or, if the Rights are not listed or admitted to trading on any national
securities exchange or included in the Nasdaq National Market System, the last
quoted price, or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are 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 Rights selected by a
majority of the Independent Directors. If on any such date no such market maker
is making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by a majority of the Independent Directors shall be
used.
(b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). Fractions of shares of Preferred Stock in integral
multiples of one one-thousandth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which
23
they are entitled as beneficial owners of the shares of Preferred Stock
represented by such depositary receipts. In lieu of fractional shares of
Preferred Stock that are not integral multiples of one one-thousandth of a
share of Preferred Stock, the Company may pay to the registered holders of
Right Certificates at the time such Right Certificates are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one one-thousandths of a share of Preferred Stock. For purposes of
this Section 14(b), the current market value of one one-thousandth of a share
of Preferred Stock shall be one one-thousandth of the closing price of a share
of Preferred Stock (as determined pursuant to Section 11(f)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of one of the transactions or events
specified in Section 11 hereof giving rise to the right to receive common stock
equivalents (other than Preferred Stock) or other securities upon the exercise
of a Right, the Company shall not be required to issue fractions of shares or
units of such common stock equivalents or other securities upon exercise of the
Rights or to distribute certificates which evidence fractional shares of such
common stock equivalents or other securities. In lieu of fractional shares or
units of such common stock equivalents or other securities, the Company may pay
to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the current market value of a share or unit of such common stock equivalent or
other securities. For purposes of this Section 14(c), the current market value
shall be determined in the manner set forth in Section 11(f) hereof for the
Trading Day immediately prior to the date of such exercise and, if such common
stock equivalent is not traded, each such common stock equivalent shall have
the value of one one-thousandth of a share of Preferred Stock.
(d) Except as otherwise expressly provided in this Section 14, the
holder of a Right by the acceptance of the Right expressly waives his right to
receive any fractional Rights or any fractional share upon exercise of Rights.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of
this Agreement, except for rights of action given to the Rights Agent under
Section 18 or Section 20 hereof, are vested in the respective registered
holders of the Right Certificates (and, prior to the Distribution Date, the
registered holders of Common Stock); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Stock), without
the consent of the Rights Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of the Common Stock), may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations
of any Person subject to this Agreement. Holders of Rights shall be entitled to
recover the reasonable costs and expenses, including attorneys' fees, incurred
by them in any action to enforce the provisions of this Agreement.
24
SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the stockholder services office of the Rights Agent or such office designated
for such purpose, duly endorsed or accompanied by a proper instrument of
transfer; and
(c) the Company and the Rights Agent may deem and treat the Person
in whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Stock Certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificate or the associated Common Stock
Certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of Preferred Stock, Common
Stock or any other securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of
any Right Certificate, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting shareholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses, counsel fees and other
disbursements incurred in the administration and execution of this Agreement
and the exercise and performance of its duties hereunder. The Company also
agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability. The provisions of this Section 18(a) shall survive the expiration of
the Rights and the termination of this Agreement.
25
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Right
Certificate or certificate for Preferred Stock, Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business or stock
transfer business of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case at
the time such successor Rights Agent shall succeed to the agency created by
this Agreement, any of the Right Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature
of the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
26
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the President
or any Vice President and by the Treasurer or any Assistant Treasurer or the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Sections 11 or 13 hereof or responsible for the manner, method or amount of any
such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice to the Rights Agent of any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Preferred Stock or other securities to be issued pursuant to this Agreement
or any Right Certificate or as to whether any shares of Preferred Stock or
other securities will, when issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer or for
any delay in acting while waiting for those instructions.
27
(h) The Rights Agent and any stockholder, director, officer,
employee, agent or representative of the Rights Agent may buy, sell or deal in
any of the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not the Rights Agent under this Agreement. Nothing herein
shall preclude the Rights Agent from acting in any other capacity for the
Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
default, neglect or misconduct, provided reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1, clause 2
and/or, in the case of the certificate attached to the form of election to
purchase, clause 3 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first consulting
with the Company.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock and Preferred Stock by registered or
certified mail. The Company may remove the Rights Agent or any successor Rights
Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common
Stock and Preferred Stock by registered or certified mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by
the Company), then the registered holder of any Right Certificate or the Rights
Agent may apply to any court of competent jurisdiction for the appointment of a
new Rights Agent. Any successor Rights Agent, whether appointed by the Company
or by such a court, shall be (a) a corporation organized and doing business
under the laws of the United States or of any state, in good standing, having
an office in the States of New York or Mississippi, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject
to supervision or examination by federal or state authority and which has at
the time of its appointment as Rights Agent a combined capital and surplus of
at
28
least $25,000,000, or (b) an affiliate of a corporation described in clause (a)
of this sentence. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. The
Company shall file notice of such appointment in writing with the predecessor
Rights Agent and each transfer agent of the Common Stock and Preferred Stock,
and through a filing made by the Company pursuant to the Securities Exchange
Act of 1934, as amended. Failure to give any notice provided for this Section
21, however, or any defect therein, shall not affect the legality or validity
of the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by a majority of the Independent Directors to
reflect any adjustment or change in the Purchase Price and the number or kind
or class of shares of stock or other securities or property purchasable under
the Right Certificates made in accordance with the provisions of this
Agreement.
In addition, in connection with the issuance or sale of Common
Stock following the Distribution Date and prior to the redemption, exchange or
expiration of the Rights, the Company (a) shall with respect to shares of
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee benefit plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by a majority of the
Independent Directors, issue Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Right Certificates shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Right Certificates would be issued, and (ii) no Right
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
SECTION 23. REDEMPTION AND TERMINATION.
(a) A majority of the Independent Directors may, at its option, at
any time prior to the earlier of (i) the Close of business on the Stock
Acquisition Date or (ii) the Close of business on the Final Expiration Date,
elect to redeem all but not less than all of the then outstanding Rights at a
redemption price of $.01 per Right, as appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"). The redemption of the Rights may be made effective at such time, on
such basis and with such conditions as a majority of the Independent Directors
in its sole discretion may establish.
29
(b) Immediately upon the action of a majority of the Independent
Directors electing to redeem the Rights, evidence of which shall be promptly
filed with the Rights Agent, or, when appropriate, immediately upon the time of
satisfaction of such conditions as a majority of the Independent Directors may
have established, and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public disclosure of any such redemption; provided, however, that
the failure to give, or any defect in, any such disclosure shall not affect the
validity of such redemption. Within 10 days after the action of a majority of
the Independent Directors ordering the redemption of the Rights, the Company
shall give notice of such redemption to the Rights Agent and the holders of the
then outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common Stock. Any notice that is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
(c) Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23, Section 24 hereof and other
than in connection with the purchase of Common Stock prior to the Distribution
Date.
(d) It is understood that the TIDE Committee (as provided below) of
the Board of Directors shall review and evaluate this Agreement to determine
whether the maintenance of this Agreement continues to be in the interests of
the Company, its shareholders and any other relevant constituencies of the
Company, at least once every three years, or sooner than that if any Person
shall have made a proposal to the Company or its shareholders, or taken any
other action that, if effective, could cause such Person to become an Acquiring
Person hereunder, unless a majority of the members of the TIDE Committee shall
determine that such review and evaluation are not appropriate after giving due
regard to all relevant circumstances. Following each such review, the TIDE
Committee will communicate its conclusions to the full Board of Directors,
including any recommendation in light thereof as to whether this Agreement
should be modified or the Rights should be terminated. The TIDE Committee shall
be comprised of Independent Directors selected by the Board of Directors.
(e) The TIDE Committee (and Independent Directors, when considering
the termination of, or any supplement or amendment to the Rights requiring
Independent Directors) shall have the power to set their own agenda and to
retain at the expense of the Company their choice of legal counsel, investment
banker and/or other advisors. The TIDE Committee (and the Independent Directors
when considering the termination of, or amendments or supplements to, the
Rights, as described above) shall have the authority to review all information
of the Company and to consider any and all factors they deem relevant to an
evaluation of whether to maintain or modify this Agreement or terminate the
Rights.
30
SECTION 24. EXCHANGE.
(a) The Board of Directors of the Company by action of a majority of
the Independent Directors may, at its option, at any time after any Person
becomes an Acquiring Person, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 7(e) hereof) for shares of Common Stock at
an exchange ratio of one share of WorldCom Group Stock per WorldCom Right and
one share of MCI Group Stock per MCI Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan or
compensation arrangement of the Company or any such Subsidiary, or any entity
holding securities of the Company to the extent organized, appointed or
established by the Company or any such Subsidiary for or pursuant to the terms
of any such employee benefit plan or compensation arrangement), together with
all Affiliates and Associates of such Person, becomes the Beneficial Owner of
50% or more of the Voting Power of the Company.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of WorldCom Group Stock
or MCI Group Stock, as the case may be, equal to the number of such Rights held
by such holder multiplied by the Exchange Ratio. The Company promptly shall give
public notice of any such exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Company promptly shall mail a notice of any such exchange to the Rights
Agent and all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice that is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange of Common Stock for Rights will be effected and, in the event of
any partial exchange, the number of Rights that will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or equivalent preferred stock, as such
term is defined in Section 11(d) hereof) for Common Stock exchangeable for
Rights, at the initial rate of one one-thousandth of a share of Preferred Stock
(or equivalent preferred stock) for each share of WorldCom Group Stock or MCI
Group Stock, as the case may be, as appropriately adjusted to reflect
adjustments in the voting rights of the Preferred Stock pursuant to the terms
thereof, so that the fraction of a share of Preferred Stock delivered in lieu of
each share of WorldCom Group Stock or MCI Group Stock, as the case may be, shall
have the same voting rights as one share of WorldCom Group Stock or MCI Group
Stock, as the case may be.
31
(d) In the event that there shall not be sufficient shares of Common
Stock or Preferred Stock (or equivalent preferred stock) issued but not
outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take all such
action as may be necessary to authorize additional shares of Common Stock or
Preferred Stock (or equivalent preferred stock) for issuance upon exchange of
the Rights.
(e) The Company shall not be required to issue fractions of Common
Stock or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of such fractional shares of Common Stock, the Company shall pay
to the registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole share of
WorldCom Group Stock or MCI Group Stock, as the case may be. For the purposes of
this paragraph (e), the current market value of a whole share of Common Stock
shall be the closing price of a share of Common Stock (as determined pursuant to
the second sentence of Section 11(f)(i) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.
SECTION 25. NOTICE OF PROPOSED ACTIONS.
(a) In case the Company shall propose at any time after the
Distribution Date (i) to pay any dividend payable in stock of any class to the
holders of its Preferred Stock or to make any other distribution to the holders
of its Preferred Stock (other than a regular periodic cash dividend out of
earnings or retained earnings of the Company), or (ii) to offer to the holders
of its Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any other class or
any other securities, rights or options, or (iii) to effect any reclassification
of its Preferred Stock (other than a reclassification involving only the
subdivision of outstanding shares of Preferred Stock), or (iv) to effect any
consolidation or merger into or with, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sales or other
transfer), in one or more transactions, of 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to, any other
Person, or (v) to effect the liquidation, dissolution or winding up of the
Company, or (vi) to declare or pay any dividend on the Common Stock payable in
Common Stock or to effect a subdivision, combination or consolidation of the
Common Stock (by reclassification or otherwise than by payment of dividends in
Common Stock), then, in each such case, the Company shall give to the Rights
Agent and to each holder of a Right, in accordance with Section 26 hereof, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the date
on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the Common Stock and/or Preferred Stock,
if any such date is to be fixed. Such notice shall be so given in the case of
any action covered by clauses (i) or (ii) above at least ten days prior to the
record date for determining holders of the Preferred Stock for purposes of such
action, and in the case of any such other action, at least ten days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of Preferred Stock, whichever shall be the earlier. The failure
to give notice required
32
by this Section 25 or any defect therein shall not affect the legality or
validity of the action taken by the Company or the vote upon any such action.
(b) In case a Section 11(b) Event shall occur, then the Company
shall as soon as practicable thereafter give to the Rights Agent and to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which shall specify the event and the consequences
of the event to holders of Rights under Section 11(b) hereof.
SECTION 26. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
WorldCom, Inc.
βββ βββββββ ββββββ βββββ
βββββββ, βββββββββββ βββββ
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
The Bank of New York
ββ βββββββ ββββββ, βββ βββββ
βββ ββββ, ββ βββββ
Attention: Stock Transfer Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by mail, postage prepaid, or electronically,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Subject to the ultimate
sentence of this Section 27, the Company may from time to time supplement or
amend this Agreement without the approval of any holders of Right Certificates
in order (a) to cure any ambiguity, (b) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (c) to shorten or lengthen any time period hereunder, (d)
increase or decrease the Purchase Price, or (e) to change or supplement the
provisions hereunder in any manner which the Company may deem necessary or
desirable which shall not adversely affect the interests of the holders of Right
Certificates (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, however, that from and after such time as any
Person becomes an Acquiring Person, this Agreement shall not be amended in any
manner which would adversely affect the interests of the holders of Rights;
provided further that this Agreement may not be supplemented or amended to
lengthen pursuant to clause (c) of this sentence, (A) the time period relating
to the when the Rights may be redeemed at such time as
33
the Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, and/or the benefits to, the holders of the Rights; provided further that the
Company shall have the right to make any changes unilaterally necessary to
facilitate the appointment of a successor Rights Agent, which such changes shall
be set forth in a writing by the Company or by the Company and such successor
Rights Agent. Without limiting the foregoing, the Company may at any time prior
to such time as any Person becomes an Acquiring Person amend this Agreement to
lower the thresholds set forth in Sections 1(a) and 3(a) hereof from 15% to not
less than the greater of (i) any percentage greater than the largest percentage
of the Voting Power of the Company then known by the Company to be beneficially
owned by any Person (other than the Company, any Subsidiary of the Company, or
any employee benefit plan or compensation arrangement of the Company or any
Subsidiary of the Company, and any entity holding securities of the Company to
the extent organized, appointed or established by the Company or any such
Subsidiary for or pursuant to the terms of any such employee benefit plan or
compensation arrangement) together with all Affiliates or Associates of such
Person and (ii) 10%. Upon the delivery of a certificate from an appropriate
officer of the Company that states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Purchase Price, the Expiration Date or the number of shares of
Preferred Stock for which a Right is exercisable without the prior approval of a
majority of the Independent Directors.
SECTION 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Stock) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Stock).
SECTION 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
It is the intent of the parties hereto to enforce the remainder of the terms,
provisions, covenants and restrictions of this Agreement to the maximum extent
permitted by law.
SECTION 31. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Georgia and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State, provided, however that the rights and
obligations of the Rights Agent shall be governed by the laws of the State of
New York.
34
SECTION 32. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 33. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
SECTION 34. ADMINISTRATION. The Board of Directors of the Company
acting through a majority of the Independent Directors shall have the exclusive
power and authority to administer and interpret the provisions of this Agreement
and to exercise all rights and powers specifically granted to the Board of
Directors or the Company or as may be necessary or advisable in the
administration of this Agreement. All such actions, calculations, determinations
and interpretations which are done or made in good faith shall be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other Persons and shall not subject the Board of Directors to any
liability to the holders of the Rights.
35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the day and year first above written.
WORLDCOM, INC.
By: /s/ βββββββ β. ββββββ
-------------------------------
Name: βββββββ β. ββββββ
Title: President
THE BANK OF NEW YORK, as Rights Agent
By: /s/ βββββββ ββββββ
-------------------------------
Name: βββββββ ββββββ
Title: Vice President
36
EXHIBIT A
[Form of Right Certificate]
Certificate No. R- _________ ______ Rights
NOT EXERCISABLE AFTER THE EXPIRATION DATE. AT THE OPTION OF THE COMPANY, THE
RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT OR EXCHANGE FOR WORLDCOM
GROUP STOCK, UNDER THE CIRCUMSTANCES AND ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. [THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE WERE ISSUED TO A
PERSON WHO WAS AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN
ACQUIRING PERSON. THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY ARE
VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]*
Right Certificate
WORLDCOM, INC.
This certifies that __________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of March 7, 2002 (the "Rights Agreement") between
WorldCom, Inc., a Georgia corporation (the "Company"), and The Bank of New York,
a New York banking corporation (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 p.m. Clinton, Mississippi time on the
Expiration Date, as that term is defined in the Rights Agreement, at the
stockholder services office (or such office designated for such purpose) of the
Rights Agent, or its successor as Rights Agent, one one-thousandth of a fully
paid, nonassessable share of the Series 4 Junior Participating Preferred Stock,
par value $.01 per share ("Preferred Stock"), of the Company, at a purchase
price equal to $_______ per one one-thousandth of a share (the "Purchase Price")
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of shares which may be purchased upon exercise of
each Right) and the Purchase Price set forth above are the number and Purchase
Price as of ______________________ based on the shares of Preferred Stock of the
Company as constituted at such date.
The Purchase Price and the number of shares of Preferred Stock that
may be purchased upon the exercise of each of the Rights evidenced by this Right
Certificate are subject
----------
* The portion of the legend in brackets shall be inserted only if
applicable.
A-1
to modification and adjustment upon the happening of certain events as provided
in the Rights Agreement.
This Right Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the Company and the above-mentioned office
of the Rights Agent and are also available upon written request to the Company.
This Right Certificate, with or without other Right Certificates,
upon surrender at the stockholder services office (or such office designated for
such purpose) of the Rights Agent, may be exchanged for another Right
Certificate or Right Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of shares of Preferred
Stock as the Rights evidenced by the Right Certificate or Right Certificates
surrendered shall have entitled such holder to purchase. If this Right
Certificate shall be exercised in part, the holder shall be entitled to receive,
upon surrender hereof, another Right Certificate or Right Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right on or prior to the Stock Acquisition Date (as
defined in the Rights Agreement). In addition, subject to the provisions of the
Rights Agreement, each Right evidenced by this Certificate may be exchanged by
the Company at its option for one share of WorldCom Group Stock following the
Stock Acquisition Date and prior to the time an Acquiring Person, as that term
is defined in the Rights Agreement, owns 50% or more of the Voting Power, as
that term is defined in the Rights Agreement, of the Company.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts). In lieu of
fractions of a share, a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Rights evidenced by this Right Certificate shall
have been exercised as provided in the Rights Agreement.
A-2
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of __________ ____, _____.
Attest: WORLDCOM, INC.
By: _______________________________ By: ________________________________
Name: Name:
Title: Title:
Countersigned:
THE BANK OF NEW YORK, as Rights Agent
By: _______________________________
Authorized signatory
A-3
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED __________________ hereby sells, assigns and
transfers unto ____________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ____________________ Attorney to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated:__________
________________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Right Certificate)
Signature Guaranteed:
Signatures must be guaranteed by a member or a participant in the
Securities Transfer Agent Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program.
A-4
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Right Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ______________
____________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Right Certificate)
A-5
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To WorldCom, Inc.:
The undersigned hereby irrevocably elects to exercise
_____________________ Rights represented by this Right Certificate to purchase
the shares of Preferred Stock issuable upon the exercise of such Rights and
requests that certificates for such shares be issued in the name of:
Name: ____________________________________________
Address: ____________________________________________
____________________________________________
Social security
or taxpayer identification
number: _______________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Name: ____________________________________________
Address: ____________________________________________
____________________________________________
Social security
or taxpayer identification
number: _______________________________
Dated: ________________
____________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Right Certificate)
Signature Guaranteed:
Signatures must be guaranteed by a member or a participant in the
Securities Transfer Agent Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program.
A-6
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(3) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Right Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _____________
____________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Right Certificate)
NOTICE
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the form of
Assignment or the form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored as described in Section
7(e) of the Rights Agreement.
A-7
EXHIBIT B
[Form of Right Certificate]
Certificate No. R- _________ ______ Rights
NOT EXERCISABLE AFTER THE EXPIRATION DATE. AT THE OPTION OF THE COMPANY, THE
RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT OR EXCHANGE FOR MCI GROUP
STOCK, UNDER THE CIRCUMSTANCES AND ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. [THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE WERE ISSUED TO A
PERSON WHO WAS AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN
ACQUIRING PERSON. THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY ARE
VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]*
Right Certificate
WORLDCOM, INC.
This certifies that __________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of March 7, 2002 (the "Rights Agreement") between
WorldCom, Inc., a Georgia corporation (the "Company"), and The Bank of New York,
a New York banking corporation (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 p.m. Clinton, Mississippi time on the
Expiration Date, as that term is defined in the Rights Agreement, at the
stockholder services office (or such office designated for such purpose) of the
Rights Agent, or its successor as Rights Agent, one one-thousandth of a fully
paid, nonassessable share of the Series 5 Junior Participating Preferred Stock,
par value $.01 per share ("Preferred Stock"), of the Company, at a purchase
price equal to $______ per one one-thousandth of a share (the "Purchase Price")
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of shares which may be purchased upon exercise of
each Right) and the Purchase Price set forth above are the number and Purchase
Price as of ______________________ based on the shares of Preferred Stock of the
Company as constituted at such date.
----------
* The portion of the legend in brackets shall be inserted only if
applicable.
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The Purchase Price and the number of shares of Preferred Stock that
may be purchased upon the exercise of each of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events as provided in the Rights Agreement.
This Right Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the Company and the above-mentioned office
of the Rights Agent and are also available upon written request to the Company.
This Right Certificate, with or without other Right Certificates,
upon surrender at the stockholder services office (or such office designated for
such purpose) of the Rights Agent, may be exchanged for another Right
Certificate or Right Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of shares of Preferred
Stock as the Rights evidenced by the Right Certificate or Right Certificates
surrendered shall have entitled such holder to purchase. If this Right
Certificate shall be exercised in part, the holder shall be entitled to receive,
upon surrender hereof, another Right Certificate or Right Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right on or prior to the Stock Acquisition Date (as
defined in the Rights Agreement). In addition, subject to the provisions of the
Rights Agreement, each Right evidenced by this Certificate may be exchanged by
the Company at its option for one share of the Company's MCI Group Common Stock,
par value $.01 per share, following the Stock Acquisition Date and prior to the
time an Acquiring Person, as that term is defined in the Rights Agreement, owns
50% or more of the Voting Power, as that term is defined in the Rights
Agreement, of the Company.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts). In lieu of
fractions of a share, a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or
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subscription rights, or otherwise, until the Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of __________ ____, _____.
Attest: WORLDCOM, INC.
By: _______________________________ By: ________________________________
Name: Name:
Title: Title:
Countersigned:
THE BANK OF NEW YORK, as Rights Agent
By: ________________________________
Authorized signatory
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[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ___________________________________ hereby sells,
assigns and transfers unto __________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ____________________ Attorney to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated:__________
____________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Right Certificate)
Signature Guaranteed:
Signatures must be guaranteed by a member or a participant in the
Securities Transfer Agent Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program.
B-4
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Right Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ______________
____________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Right Certificate)
B-5
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To WorldCom, Inc.:
The undersigned hereby irrevocably elects to exercise
_____________________ Rights represented by this Right Certificate to purchase
the shares of Preferred Stock issuable upon the exercise of such Rights and
requests that certificates for such shares be issued in the name of:
Name: ____________________________________________
Address: ____________________________________________
____________________________________________
Social security
or taxpayer identification
number: _______________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Name: ____________________________________________
Address: ____________________________________________
____________________________________________
Social security
or taxpayer identification
number: _______________________________
Dated: ________________
____________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Right Certificate)
Signature Guaranteed:
Signatures must be guaranteed by a member or a participant in the
Securities Transfer Agent Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program.
B-6
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(3) after due inquiry and to the best knowledge of the undersigned,
it [ ] did [ ] did not acquire the Rights evidenced by this Right Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _____________
________________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Right Certificate)
NOTICE
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the form of
Assignment or the form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored as described in Section
7(e) of the Rights Agreement.
B-7
EXHIBIT C
WORLDCOM, INC.
Summary of Preferred Stock
Purchase Rights
On March 7, 2002, the Board of Directors of WorldCom, Inc. (the
"Company") declared a dividend of (i) one preferred share purchase right (a
"WorldCom Right") for each outstanding share of WorldCom, Inc.--WorldCom Group
Common Stock, par value $.01 per share (the "WorldCom Group Stock"), and (ii)
one preferred share purchase right (a "MCI Right", together with the WorldCom
Right, the "Rights") for each outstanding share of WorldCom, Inc.--MCI Group
Common Stock, par value $.01 per share (the "MCI Group Stock", together with the
WorldCom Group Stock, the "Common Stock"). The dividend distribution is payable
on March 18, 2002 (the "Record Date") to the shareholders of record on that
date. Each WorldCom Right entitles the registered holder to purchase from the
Company one one-thousandth of a share of Series 4 Junior Participating Preferred
Stock, par value $.01 per share (the "Series 4 Preferred Stock") of the Company
at a price of $60.00 per one one-thousandth of a share of Series 4 Preferred
Stock (the "Series 4 Purchase Price"), subject to adjustment. Each MCI Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series 5 Junior Participating Preferred Stock, par value $.01 per
share (the "Series 5 Preferred Stock", and together with the Series 4 Preferred
Stock, the "Preferred Stock") of the Company at a price of $40.00 per one
one-thousandth of a share of Series 5 Preferred Stock (the "Series 5 Purchase
Price"), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement dated as of March 7, 2002, as the same may be
amended from time to time (the "Rights Agreement"), between the Company and The
Bank of New York, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) the close of business on the tenth
business day following the date of public announcement or the date on which the
Company first has notice or determines that a person or group of affiliated or
associated persons (an "Acquiring Person") (other than the Company, any
subsidiary of the Company or any employee benefit plan of the Company) has
acquired, or obtained the right to acquire, 15% or more of the outstanding
shares of voting stock of the Company without the prior express written consent
of the Company executed on behalf of the Company by a duly authorized officer of
the Company following express approval by action of at least a majority of the
Independent Directors (the "Stock Acquisition Date") or (ii) the close of
business on the tenth business day (or such later date as may be determined by
action of the Board of Directors but not later than the Stock Acquisition Date)
following the commencement of a tender offer or exchange offer, without the
prior written consent of the Company, by a person (other than the Company, any
subsidiary of the Company or an employee benefit plan of the Company) which,
upon consummation, would result in such party's control of 15% or more of the
Company's voting stock (the earlier of the dates in clause (i) or (ii) above
being called the "Distribution Date"), each Right will be evidenced by the
appropriate Common Stock Certificate. For purposes of the Rights Ageement, the
"Independent Directors" are those directors of the Company who are not, and
during the past three years have
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not been, an officer or employee of the Company, are not an Acquiring Person or
a person who would have become an Acquiring Person upon the effectiveness of a
proposal to the Company or its shareholders or upon the completion of any other
action taken by such person, and who do not have an affiliation or association
with an Acquiring Person or any such other person who would become an Acquiring
Person.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the WorldCom Rights will be
transferred with and only with the underlying WorldCom Group Stock and the MCI
Rights will be transferred with and only with the underlying MCI Group Stock.
Until the Distribution Date (or earlier redemption, exchange or expiration of
the Rights), new Common Stock certificates issued after the Record Date upon
transfer or new issuances of Common Stock will contain a notation incorporating
the Rights Agreement by reference. Until the Distribution Date (or earlier
redemption, exchange or expiration of the Rights), the surrender for transfer of
any certificates for shares of Common Stock outstanding as of the Record Date,
even without such notation or a copy of this Summary of Rights, will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the WorldCom Rights
("WorldCom Right Certificates") and separate certificates evidencing the MCI
Rights ("MCI Right Certificates") will be mailed to holders of record of the
WorldCom Group Stock and MCI Group Stock, as the case may be, as of the close of
business on the Distribution Date and such separate certificates alone will then
evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire, if not previously exercised, on March 18, 2012 (the "Final
Expiration Date"), unless the Final Expiration Date is extended or unless the
Rights are earlier redeemed or exchanged by the Company.
The Purchase Price payable, and the number of shares of Preferred
Stock, or other securities or property issuable, upon exercise of the WorldCom
Rights or MCI Rights, as the case may be, 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) upon
the grant to holders of the Preferred Stock of certain rights or warrants to
subscribe for or purchase Preferred Stock at a price, or securities convertible
into Preferred Stock with a conversion price, less than the then-current market
price of the Series 4 Preferred Stock or Series 5 Preferred Stock, as the case
may be, or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular periodic cash dividends
or dividends payable in Preferred Stock) or of subscription rights or warrants
(other than those referred to above).
The number of outstanding Rights, and the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of each
WorldCom Right or MCI Right, as the case may be, are also subject to adjustment
in the event of a stock split of the WorldCom Group Stock or MCI Group Stock, or
a stock dividend on the WorldCom Group Stock or MCI Group Stock payable in
shares of WorldCom Group Stock or MCI Group Stock, as the case may be, or
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subdivisions, consolidations or combinations of the WorldCom Group Stock or MCI
Group Stock occurring, in any such case, prior to the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights
will not be redeemable and will be junior to any other series of preferred
stock the Company may issue (unless otherwise provided in the terms of such
stock). Each share of Preferred Stock will have a preferential dividend in an
amount equal to 1,000 times any dividend declared on each share of WorldCom
Group Stock or MCI Group Stock, as the case may be. In the event of
liquidation, the holders of the Preferred Stock will receive a preferred
liquidation payment equal to the greater of $1,000 and 1,000 times the payment
made per share of WorldCom Group Stock or MCI Group Stock, as the case may be.
Each share of Series 4 Preferred Stock will have 1,000 votes, on all matters
upon which the holders of WorldCom Group Stock are entitled to vote. Each share
of Series 5 Preferred Stock will have 1,000 votes on all matters upon which
holders of the MCI Group Stock are entitled to vote. In the event of any
merger, consolidation or other transaction in which shares of WorldCom Group
Stock or MCI Group Stock, as the case may be, are converted or exchanged, each
share of Series 4 Preferred Stock or Series 5 Preferred Stock will be entitled
to receive 1,000 times the amount and type of consideration received per share
of WorldCom Group Stock or MCI Group Stock, as the case may be. The rights of
the Preferred Stock as to dividends, liquidation and voting, and in the event
of mergers and consolidations, are protected by customary antidilution
provisions.
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
Series 4 Preferred Stock purchasable upon exercise of each WorldCom Right should
approximate the value of one share of WorldCom Group Stock and the value of the
one one-thousandth interest in a share of Series 5 Preferred Stock purchasable
upon exercise of each MCI Right should approximate the value of one share of MCI
Group Stock.
If any person or group (other than the Company, any subsidiary of
the Company or any employee benefit plan of the Company) acquires 15% or more of
the Company's outstanding voting stock without the prior written consent of at
least a majority of the Independent Directors, each Right, except those held by
such persons, would entitle each holder of a Right to acquire such number of
shares of WorldCom Group Stock or MCI Group Stock, as the case may be, as shall
equal the result obtained by multiplying the then current Series 4 Purchase
Price or Series 5 Purchase Price, as the case may be, by the number of one
one-thousandths of a share of Series 4 Preferred Stock or Series 5 Preferred
Stock for which a WorldCom Right or MCI Right, as the case may be, is then
exercisable and dividing that product by 50% of the then current per-share
market price of WorldCom Group Stock or MCI Group Stock, as the case may be.
If any person or group (other than the Company, any subsidiary of
the Company or any employee benefit plan of the Company) acquires more than 15%
but less than 50% of the Company voting stock without the prior written consent
of at least a majority of the Independent Directors, each WorldCom Right,
except those held by such persons, may be exchanged by the Board of Directors
for one share of WorldCom Group Stock and each MCI Right, except those
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held by such persons, may be exchanged by the Board of Directors for one share
of MCI Group Stock.
If the Company were acquired in a merger or other business
combination transaction where the Company is not the surviving corporation or
where Company Common Stock is exchanged or changed or 50% or more of the
Company's assets or earnings power is sold in one or several transactions
without the prior written consent of at least a majority of the Independent
Directors, each Right would entitle the holders thereof (except for the
Acquiring Person) to receive such number of shares of the acquiring company's
common stock as shall be equal to the result obtained by multiplying the then
current Series 4 Purchase Price or the Series 5 Purchase Price by the number of
one one-thousandths of a share of Series 4 Preferred Stock or Series 5
Preferred Stock, as the case may be, for which a Right is then exercisable and
dividing that product by 50% of the then current market price per share of the
common stock of the acquiring company on the date of such merger or other
business combination transaction.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), and in lieu thereof an adjustment in cash
will be made based on the market price of the Preferred Stock on the last
trading day prior to the date of exercise.
At any time prior to the time an Acquiring Person becomes such, a
majority of the Independent Directors may elect to redeem the Rights in whole,
but not in part, at a price of $.01 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Independent Directors in their sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The terms of the Rights may be amended by action of at least a
majority of the Independent Directors without the consent of the holders of the
Rights, including an amendment to lower certain thresholds described above to
not less than the greater of (i) any percentage greater than the largest
percentage of the voting power of all securities of the Company then known to
the Company to be beneficially owned by any person or group of affiliated or
associated persons (other than an excepted person) and (ii) 10%, except that
from and after such time as any person or group of affiliated or associated
persons becomes an Acquiring Person no such amendment may adversely affect the
interests of the holders of the Rights.
A committee of Independent Directors will review the Rights
Agreement at least every three years and, if a majority of the members of the
committee deems it appropriate, may recommend a modification or termination of
the Rights Agreement.
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Until a Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, as the same may
be amended from time to time, which is hereby incorporated herein by reference.
C-5