-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A3T4rtUubkxspoBVboNGogICU4MTzzPoZmdpmuVCzkjkc+mQut1/4rankArEw+fA 9YvCBzb4A0iebRG1N0htlg== 0000893750-01-500127.txt : 20010608 0000893750-01-500127.hdr.sgml : 20010608 ACCESSION NUMBER: 0000893750-01-500127 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20010607 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010607 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLDCOM INC/GA// CENTRAL INDEX KEY: 0000723527 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 581521612 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10415 FILM NUMBER: 1656123 BUSINESS ADDRESS: STREET 1: 500 CLINTON CENTER DRIVE CITY: CLINTON STATE: MS ZIP: 39056 BUSINESS PHONE: 6014605600 FORMER COMPANY: FORMER CONFORMED NAME: MCI WORLDCOM INC DATE OF NAME CHANGE: 19980914 FORMER COMPANY: FORMER CONFORMED NAME: WORLDCOM INC /GA/ DATE OF NAME CHANGE: 19970127 FORMER COMPANY: FORMER CONFORMED NAME: LDDS COMMUNICATIONS INC /GA/ DATE OF NAME CHANGE: 19930916 8-K 1 form8_k.txt FORM 8-K - CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) June 7, 2001 WorldCom, Inc. - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Georgia - ------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 0-11258 58-1521612 - ------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 500 Clinton Center Drive, Clinton, Mississippi 39056 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (601) 460-5600 - ------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) N/A - ------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Item 5. Other Events. On June 7, 2001, at the annual meeting of shareholders of WorldCom, Inc. ("WorldCom"), held at 500 Clinton Center Drive, Clinton, Mississippi, our shareholders approved a proposal to amend WorldCom's charter to effect a recapitalization that replaces our existing common stock with two new series of common stock that are intended to reflect, or track, the performance of our WorldCom group businesses and MCI group businesses, respectively. The WorldCom group stock is intended to track the separate performance of our data, Internet, international and commercial voice businesses. The MCI group stock is intended to track the performance of our consumer, small business, wholesale long distance, wireless messaging and dial-up Internet access businesses. Our shareholders also approved related proposals (1) amending the fair price provisions of our charter to reflect the tracking stock structure and (2) adopting the MCI Group 2001 Employee Stock Purchase Plan. As authorized by our board of directors and approved by our shareholders, we filed on June 7, 2001 an amendment to our articles of incorporation effecting the change of each share of our existing common stock into one share of WorldCom group stock and 1/25 of a share of MCI group stock. Both stocks are listed on the Nasdaq National Market: the WorldCom group stock trades under the symbol "WCOM" and the MCI group stock trades under the symbol "MCIT." On June 7, 2001, our board of directors approved, and WorldCom executed and delivered, a Restated Rights Agreement between WorldCom and The Bank of New York as Rights Agent, and declared a dividend on each share of WorldCom group stock of a right to purchase 1/1000 of a share of series 4 preferred stock at a purchase price described in the Restated Rights Agreement, and a dividend on each share of MCI group stock of a right to purchase 1/1000 of a share of series 5 preferred stock at a purchase price described in the Restated Rights Agreement. The dividend distribution was made on June 7, 2001 to shareholders of record on that date. A summary of the terms of the rights and the related series of preferred stock is set forth under "Rights Plan" in the description of the WorldCom group stock and the MCI group stock excerpted from our Registration Statement on Form S-4, as amended (No. 333-52920), which description is filed as an exhibit hereto. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (c) Exhibits See attached Exhibit Index. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WORLDCOM, INC. Date: June 7, 2001 By: /s/ Scott D. Sullivan ----------------------------- Name: Scott D. Sullivan Title: Chief Financial Officer 3 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.1 Restated ByLaws of WorldCom, Inc. 4.1 Articles of Amendment to the Second Amended and Restated Articles of Incorporation of WorldCom, Inc. (amending former Article Four by deleting the text thereof and substituting new Article Four). 4.2 Articles of Amendment to the Second Amended and Restated Articles of Incorporation of WorldCom, Inc. (amending former Article Eleven by deleting the text thereof and substituting new Article Eleven). 4.3 Second Amended and Restated Articles of Incorporation of WorldCom, Inc. (including preferred stock designations), as amended as of May 1, 2000. 4.4 Restated Rights Agreement dated as of June 7, 2001, between WorldCom and The Bank of New York, which includes the form of Certificate of Designations, setting forth the terms of the Series 4 Junior Participating Preferred Stock, par value $.01 per share, and the Series 5 Junior Participating Preferred Stock, par value $.01 per share, as Exhibit A, and the form of Rights Certificates as Exhibits B and C. 99.1 Press Release. 99.2 Description of WorldCom Inc.-WorldCom group common stock and WorldCom Inc.-MCI group common stock excerpted from WorldCom's Registration Statement on Form S-4, as amended (No. 333-52920). 99.3 Risk Factors related to the new tracking stock structure and to the businesses attributed to each of the WorldCom group and the MCI group excerpted from WorldCom's Registration Statement on Form S-4, as amended (No. 333-52920). 4 EX-3.1 2 exh3_1.txt RESTATED BYLAWS EXHIBIT 3.1 RESTATED BYLAWS OF WORLDCOM, INC. (a Georgia Corporation) ARTICLE I OFFICES The principal office of the corporation shall be located in Clinton, Mississippi. The principal books of the corporation shall be kept at such principal office, with necessary books and records being kept at such other place or places as the Board of Directors may from time to time determine. The registered office of the corporation required by the Georgia Business Corporation Code shall be located within the State of Georgia. The corporation may have such other offices, either within or without the State of Georgia, as the Board of Directors may designate or as the business of the corporation may require from time to time. ARTICLE II SHAREHOLDERS Section 1. Annual Meeting. The annual meeting of the shareholders shall be held on the date and time fixed by the Board of Directors for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting. Section 2. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Board of Directors or President, and shall be called by the President at the written request of the holders of not less than forty percent (40%) of all the votes entitled to be cast on any issue to be considered at the meeting (subject to any requirements or limitations imposed by the corporation's Articles of Incorporation, by these Bylaws or by law), which written request must describe the purpose or purposes for which the special meeting is to be held (which must be a proper subject for action by the corporation's shareholders) and further comply with the provisions of Section 11 of this Article II. Section 3. Place of Meeting. Meetings of the shareholders shall be held at such place as may be designated by the Board of Directors and stated in the notice of meeting. Section 4. Notice of Meeting. Written notice stating the place, date and time of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall, unless otherwise prescribed by statute, be delivered to each shareholder of record entitled to vote at such meeting not less than ten (10) days or more than sixty (60) days before the date of the meeting. Section 5. Record Date. In order that the corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other action, the Board of Directors may fix, in advance, a record date, which shall not be more than seventy (70) days before the date of such meeting or action. If no record date is fixed, (i) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day before the day on which the first notice is given to such shareholders, and (ii) the record date for determining shareholders for any other purpose shall be at the close of business on the day which the Board of Directors authorizes the action. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting, unless the Board of Directors fixes a new record date. The Board of Directors is required to fix a new record date if the meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting. Section 6. Voting Record. The officer or agent having charge of the stock transfer books for shares of the corporation shall make a complete record of the shareholders entitled to vote at each meeting of shareholders or any adjournment thereof, arranged by voting group in alphabetical order, with the address of and the number of shares held by each. Such record shall be made available for inspection by any shareholder at the time and place of the meeting. Such record may also be copied by any shareholder, at such shareholder's expense, if (i) the demand is made in good faith and for a proper purpose that is reasonably relevant to such shareholder's legitimate interest as a shareholder, (ii) the shareholder describes with reasonable particularity such shareholder's purpose and the records such shareholder desires to inspect, (iii) the records are directly connected with this purpose, and (iv) the records are to be used only for the stated purpose. Section 7. Quorum. The holders of shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum exists with respect to that matter. Unless the Articles of Incorporation or the Georgia Business Corporation Code, as amended from time to time, provide otherwise, the holders of a majority of the votes entitled to be cast on a matter by the voting group constitute a quorum of that voting group for action on that matter. Once a share is represented for any purpose at a meeting, the holder is deemed present for quorum purposes for the remainder of the meeting, unless a new record date is or must be set for an adjournment of such meeting. Section 8. Proxies. At all meetings of shareholders, a shareholder may vote in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact or by a transmission permitted by law filed in accordance with the procedure established for the meeting. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. The appointment of a proxy is revocable by the shareholder, unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. 2 Section 9. Voting of Shares. Except as otherwise provided in the Articles of Incorporation, directors shall be elected by a vote of the holders of common stock of the corporation, voting together as a single class. Directors shall be elected by a plurality of the votes cast by shareholders entitled to vote in the election at a meeting at which a quorum is present. Shareholder action on all other matters shall be approved if the votes cast in favor of the action exceed the votes cast in opposition to such action, unless otherwise provided by law or the Articles of Incorporation. If two or more groups are entitled to vote separately on a matter, action on a matter is taken only when approved by each voting group. Each outstanding share of the capital stock having voting power shall be entitled to the number of votes specified in the Articles of Incorporation with respect to each matter submitted to a vote at a meeting of shareholders. Section 10. Adjournment. When a meeting of shareholders is adjourned to another date, time or place, notice need not be given of the adjourned meeting if the new date, time and place are announced at the meeting before the adjournment; provided, however, that if a new record date is or must be fixed under the Georgia Business Corporation Code, as amended from time to time, or these Bylaws, a notice of the adjourned meeting must be given to shareholders as of the new record date. At the adjourned meeting the shareholders may transact any business which might have been transacted had a quorum been present at the time originally designated for the meeting. Section 11. Advance Notice of Nominations and Shareholder Proposals. All nominations of individuals for election to the Board of Directors and proposals of business to be considered at any meeting of the shareholders shall be made as set forth in this Section 11. (a) Annual Meeting of Shareholders. (1) Nominations of individuals for election to the Board of Directors and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (i) pursuant to the corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or a committee appointed by the Board of Directors, or (iii) by any shareholder of the corporation who was a shareholder of record both at the time of giving of notice provided for in this Section 11 and at the time of the meeting, who is entitled to vote at the meeting and who complied with the notice and other requirements set forth in this Section 11. (2) For nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a)(1) of this Section 11, the shareholder must have given timely notice thereof in writing to the Secretary as hereinafter provided and, in the case of other business, such other business must otherwise be a proper subject for action by the corporation's shareholders. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the corporation and received not less than one hundred twenty (120) days nor more than one hundred fifty (150) days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than sixty (60) days from such anniversary date, notice by the shareholder to be timely must be so delivered and received not earlier than the 150th day prior to such annual meeting and not later than the close of business on the later of the 120th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such shareholder's notice shall set forth (i) as to each person whom the shareholder proposes to nominate for election or 3 reelection as a director (a) the name, age, business and residential addresses, and principal occupation or employment of each proposed nominee, (b) the class and number of shares of capital stock of the corporation that are beneficially owned by such nominee on the date of such notice, (c) a description of all arrangements or understandings between the shareholder and each nominee and the name of any other person or persons pursuant to which the nomination or nominations are to be made by the shareholder, (d) all other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any successor provision, and (e) the written consent of each proposed nominee to being named as a nominee in the proxy statement and to serve as a director of the corporation if so elected; (ii) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (x) the name and address of such shareholder, as they appear on the corporation's books, and of such beneficial owner, (y) the class and number of shares of stock of the corporation which are owned beneficially and of record by such shareholder and such beneficial owner, and (z) a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or to propose such other business. The corporation may require any proposed nominee to furnish any information, in addition to that furnished pursuant to clause (i) above, it may reasonably require to determine the eligibility of the proposed nominee to serve as a director of the corporation. (3) Notwithstanding anything in the second sentence of paragraph (a)(2) of this Section 11 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least one hundred thirty (130) days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this Section 11(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to and received by the Secretary at the principal executive offices of the corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the corporation. (b) Special Meetings of Shareholders. Only such business shall be conducted, and only such proposals shall be acted upon, at a special meeting of shareholders as shall have been brought before such meeting pursuant to the corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected (i) by or at the direction of the Board of Directors or a committee appointed by the Board of Directors, or (ii) provided that the notice of the special meeting states that the purpose or one of the purposes of the special meeting is to elect directors at such special meeting, by any shareholder of the corporation who is a shareholder of record both at the time of giving of notice provided for in this Section 11 and at the time of the meeting, who is entitled to vote at the meeting and who complied with the notice and other requirements set forth in this Section 11. In the event the corporation calls a special meeting of shareholders for the purpose of electing one or 4 more directors to the Board of Directors, any shareholder may nominate a person or persons (as the case may be) for election to such position as specified in the corporation's notice of meeting, if a notice containing the same information as would be required under Section 11(a)(2) of this Article II for an annual meeting is delivered to and received by the Secretary at the principal executive offices of the corporation not earlier than the 150th day prior to such special meeting and not later than the close of business on the later of the 120th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and/or of the nominees proposed by the Board of Directors or a committee appointed by the Board of Directors to be elected at such meeting. Proposals of business other than the nomination of persons for election to the Board of Directors may be considered at a special meeting requested by shareholders in accordance with Section 2 of this Article II only if the shareholders give a notice containing the same information as would be required under Section 11(a)(2) of this Article II for an annual meeting at the time such shareholders requested the meeting. (c) General. (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 11 shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 11. The Board of Directors may reject any nomination or shareholder proposal submitted for consideration at any meeting of shareholders which is not made in accordance with the provisions of this Section 11 or which is not a proper subject for shareholder action in accordance with provisions of applicable law. Alternatively, if the Board of Directors fails to consider the validity of any nomination or shareholder proposal, the presiding officer of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the provisions of this Section 11 and is a proper subject for shareholder action in accordance with provisions of applicable law and, if any proposed nomination or business is not in compliance with this Section 11 or not a proper subject for shareholder action, to declare that such defective nomination or proposal be disregarded. This provision shall not prevent the consideration and approval or disapproval at the meeting of reports of officers, directors and committees of the Board of Directors, but, in connection with such reports, no new business shall be acted upon at the meeting unless stated, submitted and received as herein provided. (2) For purposes of this Section 11, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, Reuters or comparable news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act or any successor provision. In no event shall the public announcement of a postponement or adjournment of a meeting commence a new time period for the giving of a shareholder's notice pursuant to this Section 11. (3) Notwithstanding the foregoing provisions of this Section 11, a shareholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 11. Nothing in this Section 11 shall be deemed to affect any rights of shareholders to request inclusion of proposals in, or the corporation's right to omit proposals from, the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or any successor provision. 5 ARTICLE III BOARD OF DIRECTORS Section 1. Rights, Powers Duties, Rules and Procedures. The powers of the corporation shall be exercised, its business conducted and managed, and its property controlled under the direction of the Board of Directors. Except to the extent prohibited by law, the Board of Directors shall have the right (which, to the extent exercised, shall be exclusive) to establish the rights, powers, duties, rules and procedures that from time to time shall govern the Board of Directors and each of its members, including, without limitation, the vote required for any action by the Board of Directors, and that from time to time shall affect the directors' power to manage the business and affairs of the corporation. Except to the extent required by law, no Bylaw shall be adopted by shareholders which shall impair or impede the implementation of the foregoing Section 2. Number, Tenure and Qualifications. The number of directors of the corporation shall be not less than three (3); the number thereof to be determined from time to time by the Board of Directors. Each director shall hold office until the next annual meeting of shareholders following his election or appointment and until his successor shall have been elected and qualified or until his earlier resignation, removal from office, or death. A director need not be a resident of the State of Georgia or a shareholder of the corporation. Section 3. Nomination. Nominations for the election of directors shall be made as provided in Section 11 of Article II of these Bylaws. Section 4. Regular Meetings. A regular meeting of the Board of Directors shall be held without notice other than this Bylaw immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place for the holding of additional regular meetings without notice other than such resolution. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the President or a majority of directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place as the place for holding any special meeting of the Board of Directors so called. Section 6. Chairman of the Board. The Chairman of the Board shall be chosen from among the members of the Board of Directors. If requested to do so, the Chairman of the Board shall preside at all meetings of the Board of Directors and shareholders. The Chairman of the Board shall perform such other duties as from time to time may be assigned by the Board of Directors. Section 7. Telephonic Meetings. Meetings of the Board of Directors may be conducted by conference telephone or similar communications equipment by means of which all persons participating can hear each other, and participation in such a meeting shall constitute presence in person at such meeting. Section 8. Notice of Meeting. Notice of any special meeting shall be given at least 6 one (1) day prior thereto. Notice is not required prior to any regular meeting of the Board of Directors. Any director may waive notice of any meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 9. Adjournment. When a meeting of the Board of Directors is adjourned to another time or place, notice need not be given of the adjourned meeting if the new time and place are fixed at the meeting at which the adjournment is taken and if the period of adjournment does not exceed one (1) month in any one adjournment. At the adjourned meeting the Board of Directors may transact any business which might have been transacted had a quorum been present at the time originally designated for the meeting. Section 10. Quorum and Voting. A quorum of the Board of Directors consists of a majority of the number of directors fixed pursuant to these Bylaws. The affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, except as otherwise may be specifically provided by law, by the Articles of Incorporation or by these Bylaws. Section 11. Action without a Meeting. Any action required or permitted to be taken by the Board of Directors at a meeting may be taken without a meeting if all members of the Board consent thereto in writing, setting forth the action so taken, and there is an affirmative vote of the number of directors which would be necessary to authorize or take such action at a meeting, evidenced in writing. The writing or writings are to be filed with the minutes of the proceedings of the Board. Section 12. Vacancies. Any vacancy occurring on the Board of Directors created by an increase in the number of directors by action of the shareholders shall be filled by the shareholders in the same manner as at an annual election. The Board of Directors shall fill any vacancy occurring on the Board created by an increase in the number of directors by action of the Board or the removal or resignation of a director as set forth in Sections 14 and 15 of this Article III, except such vacancy shall be filled pursuant to the Articles of Incorporation to the extent the Articles of Incorporation provide that a class of shareholders may fill a vacancy created by the removal or resignation of a director elected by that class. A director elected to fill a vacancy shall hold office for the unexpired term of his predecessor. Section 13. Compensation. By resolution of the Board of Directors, each director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a stated salary as director, or a fixed sum for attendance at each meeting of the Board of Directors, or both, payable in cash or securities of the corporation. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 14. Removal. Any or all of the directors may be removed with or without cause by majority vote of the shares represented at a meeting of the shareholders at which a quorum is present. 7 Section 15. Resignation. A director may resign at any time by delivering written notice to the corporation, the Chairman of the Board, the Board of Directors or the President. A resignation is effective when the notice is delivered unless the notice specifies a later effective date. ARTICLE IV OFFICERS Section 1. Number. The officers of the corporation shall be a President and a Secretary, each of whom shall be elected by the Board of Directors. The Board may also elect or appoint a Chairman of the Board, one or more Vice Presidents (with or without a modified title such as "Senior," "Executive," or "Assistant"), an Assistant Secretary, a Treasurer, an Assistant Treasurer and such other officers and assistant officers as may be deemed necessary. One person may hold any number of such offices, except the President may not hold the office of Senior Vice President, Vice President, Secretary or Assistant Secretary, and the Secretary and Treasurer shall not hold the office of Assistant Secretary and Assistant Treasurer, respectively. Section 2. Election and Term of Office. The officers of the corporation shall be elected from time to time by the Board of Directors, as it deems advisable. Each officer shall hold office until his successor shall have been duly elected and qualified, or until his death, or until he shall resign or shall have been removed in the manner hereinafter provided. Section 3. Removal. The Board of Directors may remove any officer or agent of the corporation at any time with or without cause. Removal of an officer or agent shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create any contract rights. Section 4. Resignation. Any officer may resign at any time by delivering notice to the corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date. If a resignation is made effective at a later date and the corporation accepts the future effective date, the Board of Directors may fill the pending vacancy before the effective date if it provides that the successor does not take office until the effective date. An officer's resignation does not affect the corporation's contract rights, if any, with the officer. Section 5. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. In the event of an absence of any officer of the corporation, or for any other reason which the Board of Directors may deem sufficient, the Board may delegate for the time being the powers or duties, or any of them, of such officer to any other officer or director, in connection with these Bylaws. Section 6. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation. 8 Section 7. President. The President shall be the chief executive officer of the corporation and, subject to the control of the Board of Directors, shall be primarily responsible for the general management of the business affairs of the corporation and for implementing the policies and directives of the Board of Directors, shall in general supervise and control all of the business and affairs of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect, shall have authority to make contracts on behalf of the corporation in the ordinary course of business of the corporation, shall preside at all meetings of the Board of Directors and shareholders if requested to do so and shall perform such other duties as from time to time may be assigned by the Board of Directors. Section 8. The Vice Presidents. The Vice Presidents shall assist the President in the management of the business. During the absence or disability of the President, the Vice Presidents in the order designated by the President or the Board of Directors, or in the absence of any designation, then in the order of their election, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall perform such other duties as from time to time may be assigned to them by the President. Section 9. The Secretary. The Secretary shall: (a) keep the minutes of the proceedings of the shareholders, the Board of Directors and the standing committees in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents, the execution of which on behalf of the corporation under its seal is duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign, with the President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors or the President. Section 10. The Treasurer. The Treasurer shall be the chief financial officer of the corporation and shall have custody of all valuables. The Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for monies due and payable to the corporation from any source whatsoever, and deposit all such monies in the corporation's account(s); and (c) in general perform all of the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the President. Section 11. Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries may sign with the President certificates for shares of the corporation, the issuance of which shall have been authorized by a resolution of the Board of Directors. The Assistant Treasurers shall, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties as shall be assigned to them by the Secretary or the Treasurer, respectively, or the President. 9 ARTICLE V CERTIFICATES FOR SHARES AND THEIR TRANSFER Section 1. Certificates for Shares. Shares may be issued by the corporation by the delivery of certificates representing such shares and in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President and by the Secretary or an Assistant Secretary. The signature of such officers upon a certificate may be facsimiles. Each certificate for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number and class of shares, the designation of the series, if any, the certificate represents, and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled, and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed, or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the President or the Board of Directors may prescribe. Section 2. Shares without Certificates. Shares of common stock of the corporation need not be represented by certificates. The Board of Directors of the corporation may authorize the issuance of some or all of the shares of any or all of the corporation's other classes or series of stock without certificates. Any such authorization shall not affect shares already represented by certificates until such certificated shares are surrendered to the corporation. Within a reasonable time after the issue or transfer of shares without certificates, the corporation shall send to the holder thereof a written statement which includes: (1) the name of the corporation and that it is organized under the laws of the State of Georgia; (2) the name of the person to whom the shares are issued; (3) the number and class and designation of the series, if any, of the shares; and (4) any restrictions on the transfer or registration of transfer of such shares. Section 3. Transfer of Shares. Transfers of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of his authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or a transfer agent or registrar, and on surrender for cancellation of the certificate for such shares, if a certificate representing such shares shall have been issued. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. ARTICLE VI FISCAL YEAR The fiscal year of the corporation shall be determined and fixed by the Board of Directors. 10 ARTICLE VII CORPORATE SEAL The Board of Directors of the corporation may adopt a corporate seal for the corporation and when so adopted and impressed on the margin hereof or the margin of the minutes of the meeting at which the seal is adopted, the same shall be and constitute the corporate seal of this corporation, but unless and until such action be taken by the Board of Directors, this corporation shall have no corporate seal. In the event that no corporate seal is adopted, or if it is inconvenient to use such seal at any time, the signature of the corporation followed by the word "Seal" enclosed in parentheses shall be deemed the seal of the corporation, but the absence of such seal on any instrument, or its addition thereto, shall not affect its character or validity or legal effect in any respect. ARTICLE VIII WAIVER OF NOTICE Whenever any notice is required to be given to any shareholder or director of the corporation pursuant to law or under the provisions of the Articles of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice delivered to the corporation and filed in the corporation's minutes or corporate records, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. A shareholder's or director's attendance at, or participation in, a meeting shall constitute waiver of notice and consent to the consideration of matters not described in any notice as set forth in the Georgia Business Corporation Code, as amended from time to time. Neither the business to be transacted at, nor the purpose of, any meeting of the shareholders or directors is required to be specified in any waiver of notice. ARTICLE IX COMMITTEES Section 1. Appointment. The Board of Directors, by resolution adopted by a majority of all the directors in office when the action is taken, may designate one or more of its members to constitute a committee. The designation of a committee and the delegation of authority thereto shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed by law. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disabled member at any meeting of the committee. Section 2. Tenure. The members of a committee serve at the pleasure of the Board of Directors, which may at any time, for any or no reason, remove any individual committee member, increase or decrease the number of members of a committee, or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his removal, resignation or death. The Board of Directors may fill any vacancy on a committee created by 11 removal, resignation, death or an increase in the number of members of the committee. Section 3. Authority. All duly delegated committees may exercise such power and authority in the management of the business and affairs of the corporation as specified by resolution of the Board of Directors and to the extent allowed by applicable law, the Articles of Incorporation and these Bylaws and may have power to authorize the seal of the corporation to be affixed to all papers which may require it. Section 4. Executive Committee. The Board of Directors may appoint an Executive Committee which, to the extent permitted by law, shall have and may exercise when the Board of Directors is not in session all powers of the Board of Directors regarding the supervision of the management of the business and affairs of the corporation. The Executive Committee shall be chaired by the President of the corporation. ARTICLE X INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 1. Definitions and References. Terms used in this Article shall have the meanings assigned such terms in Part 5 of Article 8 of the Georgia Business Corporation Code. Whenever in these Bylaws reference is made to the Georgia Business Corporation Code generally or to a specific provision of the Georgia Business Corporation Code, such reference shall be deemed to refer to the Georgia Business Corporation Code or such provision as amended from time to time or any successor provision. Section 2. Indemnification of and Advancement of Expenses to Directors. The corporation shall indemnify and advance expenses to its directors to the fullest extent permitted under, and in accordance with, the corporation's Articles of Incorporation and the applicable provisions of Part 5 of Article 8 of the Georgia Business Corporation Code. Section 3. Mandatory Indemnification of Officers. The corporation shall indemnify and advance expenses to its officers who are not directors to the same extent as to directors under Section 2 of this Article X. Section 4. Permissive Indemnification of Employees and Agents. The corporation may, to the extent and on such conditions as may be authorized by the Board of Directors, indemnify and advance expenses to its employees and agents who are not directors to the fullest extent permitted under, and in accordance with, Section 14-2-857 of the Georgia Business Corporation Code. Section 5. Advancement of Expenses of Officers, Employees and Agents. No advancement or reimbursement of expenses to officers, employees or agents in accordance with Sections 3 or 4 of this Article X shall be made unless the proposed indemnitee furnishes the corporation a written affirmation of his good faith belief that he has met the standard of conduct set forth in the corporation's Articles of Incorporation with respect to directors, and he furnishes the 12 corporation a written undertaking, executed personally or on his behalf, to repay any advances if it is ultimately determined that he is not entitled to indemnification under this Article X or Part 5 of Article 8 of the Georgia Business Corporation Code. Section 6. Liability Insurance. The corporation may purchase and maintain insurance on behalf of an individual who is a director, officer, employee or agent of the corporation or who, while a director, officer, employee or agent of the corporation, serves at the corporation's request as a director, officer, partner, trustee, employee or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity against liability asserted against or incurred by him in that capacity or arising from his status as a director, officer, employee, or agent, whether or not the corporation would have power to indemnify or advance expenses to him against the same liability under this Article X or under Part 5 of Article 8 of the Georgia Business Corporation Code. Section 7. Contract Rights. The right to indemnification and advancement of expenses conferred hereunder to directors and officers shall be a contract right and shall not be affected adversely to any director or officer by any amendment of these Bylaws with respect to any action or inaction occurring prior to such amendment; provided, however, that this provision shall not confer upon any indemnitee or potential indemnitee (in his capacity as such) the right to consent or object to any subsequent amendment of these Bylaws. Section 8. Nonexclusivity. The rights of a director or officer hereunder shall be in addition to any other rights with respect to indemnification, advancement of expenses or otherwise that he may have under contract or the Georgia Business Corporation Code or otherwise. Section 9. Amendments. No amendment, modification or rescission of this Article X, or any provision hereof, the effect of which would diminish the rights to indemnification or advancement of expenses as set forth herein shall be effective as to any director or officer of the corporation with respect to any action taken or omitted by such person prior to such amendment, modification or rescission. Section 10. Severability. To the extent that the provisions of this Article X are held to be inconsistent with the provisions of Part 5 of Article 8 of the Georgia Business Corporation Code, such provisions of such Code shall govern. In the event that any of the provisions of this Article X (including any provision within a single section, subsection, division or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, the remaining provisions of this Article X shall remain enforceable to the fullest extent permitted by law. ARTICLE XI AMENDMENTS The Bylaws of the corporation may be altered, amended or repealed, and new Bylaws may be adopted, by the shareholders at any annual or special meeting of the shareholders or by the Board of Directors at any regular or special meeting of the Board of Directors; provided, however, 13 that, the notice of such meeting shall specify that amendments to the Bylaws will be considered at such meeting and shall summarize the proposed amendments; and provided further, that the Bylaws may not be altered, amended or repealed by the Board of Directors to the extent: (1) the Articles of Incorporation or applicable law reserve the power to alter, amend or repeal a particular Bylaw exclusively to the shareholders, in whole or in part; or (2) the shareholders in altering, amending or repealing a particular Bylaw provide expressly that the Board of Directors may not alter, amend or repeal that Bylaw. ARTICLE XII ARTICLES OF INCORPORATION In the event that any provision of these Bylaws is inconsistent or in conflict with any provision contained in the corporation's Articles of Incorporation (including any amendment thereto setting forth the preferences, limitations and rights of any series or class of the corporation's preferred stock) the provision contained in the Articles of Incorporation shall govern. 14 EX-4.1 3 exh4_1.txt EXHIBIT 4.1 EXHIBIT 4.1 ARTICLES OF AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF WORLDCOM, INC. 1. The name of the Corporation is WorldCom, Inc. 2. Effective the date hereof, Section A of Article Four of the Second Amended and Restated Articles of Incorporation of the Corporation, as amended, is hereby amended by deleting the text thereof and substituting therefor the text of the amendment attached hereto as Exhibit A. 3. All other provisions of the Second Amended and Restated Articles of Incorporation, as previously amended, shall remain in full force and effect. 4. The provisions of Section A of Article Four of the Second Amended and Restated Articles of Incorporation, as amended, were duly approved by the shareholders of the Corporation in accordance with the provisions of Section 14-2-1003 of the Georgia Business Corporation Code on the 7th day of June, 2001. 5. The provisions of Section A of Article Four of the Second Amended and Restated Articles of Incorporation, as amended, were duly adopted and authorized by the Board of Directors of the Corporation on October 31, 2000. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its duly authorized officer, this 7th day of June, 2001. WORLDCOM, INC. By: /s/ Bernard J. Ebbers --------------------- Name: Bernard J. Ebbers Title: President EXHIBIT A (A) Common Stock. There shall be two series of common stock created, having the number of shares and the voting powers, preferences, designations, rights, qualifications, limitations or restrictions set forth below: (i) WorldCom Stock. One series of common stock of the Corporation is hereby created and designated as "WorldCom, Inc.--WorldCom Group Common Stock" ("WorldCom Stock") consisting of 4.85 billion shares. (ii) MCI Stock. One series of common stock of the Corporation is hereby created and designated as "WorldCom, Inc.--MCI Group Common Stock" ("MCI Stock") consisting of 150 million shares. (iii) Upon the date on which this Section A of Article 4 shall become effective, and without any further action on the part of the Corporation or its stockholders, each share of the Corporation's common stock, par value $0.01 per share, that is issued and outstanding shall be changed into one share of WorldCom Stock and 1/25 (0.04) of a share of MCI Stock. (iv) For the purpose of making "lawful and adequate provision" to implement the existing right of the holders of the Company's Series B Convertible Preferred Stock to acquire and receive upon the conversion of the Series B Convertible Preferred Stock such shares of stock issuable with respect to or in exchange for each outstanding share of the Company's "Common Stock" (as such term is defined in Exhibit B to these Second Amended and Restated Articles of Incorporation) as would have been received upon conversion of the Series B Convertible Preferred Stock at the "Conversion Rate" (as such term is defined in Section 5(a) of said Exhibit B) then in effect, all references to a share of "Common Stock" of the Company in Section 5 and Section 7 of Exhibit B shall be deemed, from and after the date on which this Section A of Article 4 shall become effective, to refer to one share of WorldCom Stock and 0.04 of a share of MCI Stock (or such other number and designation of shares as may then be applicable following lawful adjustment pursuant to Section 6 of Exhibit B). Section 1. Distributions and Share Dividends. Subject to the prior and superior or other rights of the holders of the preferred stock or any other shares of the Corporation and subject to the limitations provided for below in this Section 1, distributions and share dividends may be declared and paid upon either series of common stock, as the board of directors may determine and with the effect provided for in these Second Amended and Restated Articles of Incorporation. (A) Distributions on WorldCom Stock. Distributions on WorldCom Stock may be declared and paid only out of the lesser of: (i) the funds legally available for that purpose; and (ii) the WorldCom Group Available Distribution Amount. 2 (B) Distributions on MCI Stock. Distributions on MCI Stock may be declared and paid only out of the lesser of: (i) the funds legally available for that purpose; and (ii) the MCI Group Available Distribution Amount. (C) Additional Limitations on Distributions and Share Dividends. The board of directors may declare and pay share dividends of WorldCom Stock and MCI Stock (or distributions of Convertible Securities convertible into or exchangeable or exercisable for shares of WorldCom Stock or MCI Stock) or distributions of assets (including securities) or properties attributed to the WorldCom Group or the MCI Group on shares of common stock only as follows or as permitted by Section 4: (i) on shares of WorldCom Stock-share dividends of WorldCom Stock (or distributions of Convertible Securities convertible into or exchangeable or exercisable for shares of WorldCom Stock) or distributions of assets (including securities) or properties attributed to the WorldCom Group; (ii) on shares of MCI Stock-share dividends of MCI Stock (or distributions of Convertible Securities convertible into or exchangeable or exercisable for shares of MCI Stock) or distributions of assets (including securities) or properties attributed to the MCI Group. (iii) on shares of MCI Stock-share dividends of WorldCom Stock (or distributions of Convertible Securities convertible into or exchangeable or exercisable for shares of WorldCom Stock), but only if (x) the MCI Group is a Holder Group holding an Inter-Group Interest in the WorldCom Group and (y) the sum of: (1) the number of shares of WorldCom Stock to be so issued (or the number of such shares that would be issuable upon conversion, exchange or exercise of any Convertible Securities to be so issued); and (2) the number of shares of WorldCom Stock that are issuable upon conversion, exchange or exercise of any Convertible Securities then outstanding that are attributed as a liability to, or an equity interest in, the MCI Group is less than or equal to the Number of Shares Issuable with Respect to the Inter-Group Interest in the WorldCom Group held by the MCI Group; (iv) on shares of WorldCom Stock-share dividends of MCI Stock (or distributions of Convertible Securities convertible into or exchangeable or exercisable for shares of MCI Stock), but only if (x) the WorldCom Group is a Holder Group holding an Inter-Group Interest in the MCI Group and (y) the sum of: (1) the number of shares of MCI Stock to be so issued (or the number of such shares that would be issuable upon conversion, exchange or exercise of any Convertible Securities to be so issued); and 3 (2) the number of shares of MCI Stock that are issuable upon conversion, exchange or exercise of any Convertible Securities then outstanding that are attributed as a liability to, or an equity interest in, the WorldCom Group is less than or equal to the Number of Shares issuable with Respect to the Inter-Group Interest in the MCI Group held by the WorldCom Group; (v) on shares of MCI Stock-distributions of assets (including securities) or properties attributed as an asset to the WorldCom Group, but only if the number or amount of such assets (including securities) or properties to be so paid is less than or equal to the product of: (1) the number or amount of such assets (including securities) or properties to be paid concurrently to holders of outstanding WorldCom Stock; and (2) a fraction (which may be greater than one), the numerator of which is equal to the Number of Shares Issuable with Respect to the Inter-Group Interest in the WorldCom Group held by the MCI Group and the denominator of which is equal to the number of outstanding shares of WorldCom Stock, in each case, on the record date for such distribution; and (vi) on shares of WorldCom Stock-distributions of assets (including securities) or properties attributed as an asset to the MCI Group, but only if the number or amount of such assets (including securities) or properties to be so paid is less than or equal to the product of: (1) the number or amount of such assets (including securities) or properties to be paid concurrently to holders of outstanding MCI Stock; and (2) a fraction (which may be greater than one), the numerator of which is equal to the Number of Shares Issuable with Respect to the Inter-Group Interest in the MCI Group held by the WorldCom Group and the denominator of which is equal to the number of outstanding shares of MCI Stock, in each case, on the record date for such distribution. For purposes of this Section l(C), any outstanding Convertible Securities that are convertible into or exchangeable or exercisable for any other Convertible Securities which are themselves convertible into or exchangeable or exercisable for any series of common stock (or other Convertible Securities that are so convertible, exchangeable or exercisable) shall be deemed to have been converted, exchanged or exercised in full for such Convertible Securities. (D) Discrimination Between Series of Common Stock. The board of directors, subject to the provisions of this Section 1, may at any time declare and pay distributions and share dividends exclusively on WorldCom Stock or exclusively on MCI Stock, in equal or unequal amounts, notwithstanding the relationship between the Available Distribution Amount with respect to either Group, the amount of distributions and share dividends previously declared or paid on either series, the respective voting or liquidation rights of either series or other factor. 4 Section 2. Voting Rights. (A) General. Except as otherwise provided by law, by the terms of any outstanding preferred stock or by any provision in these Second Amended and Restated Articles of Incorporation allocating the power to vote on a specified matter to other shareholders or in a different manner, the common stock shall together have unlimited voting rights. Both series of common stock shall vote on all matters together as a single voting group, except as otherwise provided by law or by any provision in these Second Amended and Restated Articles of Incorporation. (B) Number of Votes for Each Series of Common Stock. On each matter to be voted on by the holders of each series of common stock voting together as a single voting group, the number of votes per share of each series shall be as follows: (i) each outstanding share of WorldCom Stock shall have one vote; and (ii) each outstanding share of MCI Stock shall have a number of votes (including a fraction of one vote) equal to the quotient, rounded to the nearest 1/10,000 (.0001), of (1) the average Market Value of one share of MCI Stock during the 20-Trading Day period ending on the tenth Trading Day prior to the record date for determining the shareholders entitled to vote, divided by (2) the average Market Value of one share of WorldCom Stock during such 20-Trading Day period. Notwithstanding the foregoing provisions of this Section 2(B), if shares of only one series of common stock are outstanding on the record date for determining the holders of common stock entitled to vote on any matter, then each share of that series shall be entitled to one vote and, if either series of common stock is entitled to vote as a separate voting group with respect to any matter, each share of that series shall, for the purpose of such vote, be entitled to one vote on such matter. Section 3. Liquidation Rights. (A) General. In the event of any voluntary or involuntary dissolution of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and after making provision for any outstanding preferred stock and any other shares prior and superior to common stock as to payments upon dissolution (regardless of the Group to which such shares are attributed), the holders of WorldCom Stock and MCI Stock shall be entitled to receive the net assets of the Corporation remaining for distribution to holders of the common stock (regardless of the Group to which such assets are then attributed) in an amount determined on a per share basis in proportion to the liquidation units per share of such series. For purposes of this Section 3, neither (x) the voluntary sale, lease, exchange or other disposition of all or substantially all of the property or assets of the Corporation; (y) a merger of the Corporation or a share exchange by the Corporation with one or more other corporations (whether or not the Corporation is the corporation surviving such merger or the acquiring company in such share exchange); nor (z) any transaction or event pursuant to Section 4 shall be deemed a voluntary or involuntary dissolution of the Corporation. 5 (B) Liquidation Units for Each Series of Common Stock. The liquidation units per share of each series of common stock shall be as follows: (i) each share of WorldCom Stock shall have one liquidation unit; and (ii) each share of MCI Stock shall have 1/25 of one liquidation unit. provided that, if the Corporation shall in any manner subdivide (by stock split, reclassification or otherwise) or combine (by reverse stock split, reclassification or otherwise) the outstanding shares of either series of common stock, or declare and pay a share dividend of either series of common stock to holders of such series, the per share liquidation units of the series of common stock, as adjusted from time to time, shall be appropriately adjusted, as determined by the board of directors, so as to avoid any dilution in the aggregate, relative liquidation rights of the shares of either series of common stock. Section 4. Special Distributions on, and Conversion or Redemption of, WorldCom Stock and MCI Stock. (A) Special Distributions on, and Conversion or Redemption of, WorldCom Stock if a Disposition of All or Substantially All Assets of the WorldCom Group Occurs. (i) In the event of the Disposition, in one transaction or a series of related transactions (other than in one or a series of Excluded Transactions), by the Corporation and/or its subsidiaries of all or substantially all of the businesses, assets, properties and liabilities attributed to the WorldCom Group, the Corporation shall, on or prior to the 120th Trading Day after the Disposition Date, as determined by the board of directors in its sole discretion: (1) provided that there are funds legally available for the purpose: (a) subject to compliance with Section 1, pay to the holders of the shares of WorldCom Stock a distribution pro rata in accordance with the number of shares of WorldCom Stock held by each such holder in cash and/or securities or other property having a Fair Value as of the Disposition Date in the aggregate equal to the product of: (x) the Outstanding Interest Fraction with respect to WorldCom Stock as of the record date for determining holders entitled to receive such distribution; and (y) the Fair Value as of the Disposition Date of the Net Proceeds of such Disposition; or (b) (I) subject to the last sentence of this Section 4(A)(i), if such Disposition involves all (not merely substantially all) of the businesses, assets, properties and liabilities attributed to the WorldCom Group, redeem or exchange as of the Redemption Date, determined as provided by Section 4(G)(iii)(2), all outstanding shares of WorldCom Stock in 6 exchange for, on a pro rata basis, cash and/or securities (other than shares of a series of common stock) or other property having a Fair Value as of the Disposition Date in the aggregate equal to the product of: (x) the Outstanding Interest Fraction with respect to WorldCom Stock as of the record date for determining holders entitled to receive such distribution; and (y) the Fair Value of the Disposition Date of the Net Proceeds of such Disposition; or (II) subject to the last sentence of this Section 4(A)(i), if such Disposition involves substantially all (but not all) of the businesses, assets, properties and liabilities attributed to the WorldCom Group, redeem or exchange as of the Redemption Date, determined as provided by Section 4(G)(iv)(2), the number of whole shares of WorldCom Stock equal to the lesser of: (x) the number of shares of WorldCom Stock outstanding; and (y) such number of shares of WorldCom Stock as have in the aggregate an average Market Value during the period of ten consecutive Trading Days beginning on the 51st Trading Day immediately succeeding the Disposition Date closest to the product of: (AA) the Outstanding Interest Fraction with respect to WorldCom Stock as of the record date for determining such shares selected for redemption or exchange; and (BB) the Fair Value as of the Disposition Date of the Net Proceeds of such Disposition, in exchange for, on a pro rata basis, cash and/or securities (other than shares of a series of the Corporation's common stock) or other property having a Fair Value as of the Disposition Date in the aggregate equal to such product; or (2) declare that each outstanding share of MCI Stock shall be converted as of the Conversion Date, determined as provided by Section 4(G)(v)(2), into a number of fully paid and nonassessable shares of WorldCom Stock, equal to the ratio, rounded to the nearest 1/10,000 (.0001), of the average Market Value of one share of MCI Stock over the period of ten consecutive Trading Days beginning on the 51st Trading Day following the Disposition Date to the average Market Value of one share of WorldCom Stock during such ten-Trading Day period. Notwithstanding the foregoing provisions of this Section 4(A)(i), the Corporation shall redeem or exchange shares of WorldCom Stock as provided by Section 4(A)(i)(1)(b)(I) or (II) only if the 7 amount to be paid in redemption or exchange of such stock is less than or equal to the WorldCom Group Available Distribution Amount as of the Redemption Date. (ii) For purposes of this Section 4(A): (1) as of any date, "substantially all of the businesses, assets, properties and liabilities" attributed to the WorldCom Group shall mean a portion of such businesses, assets, properties and liabilities that represents at least 80% of the Fair Value of the businesses, assets, properties and liabilities attributed to the WorldCom Group as of such date; (2) in the case of a Disposition of the businesses, assets, properties and liabilities attributed to the WorldCom Group in a series of related transactions, such Disposition shall not be deemed to have been consummated until the consummation of the last of such transactions; and (3) the board of directors may pay any distribution or redemption price referred to in Section 4(A)(i)(1) in cash, securities (other than shares of a series of the Corporation's common stock) or other property, regardless of the form or nature of the proceeds of the Disposition. (iii) After the payment of any distribution or redemption price with respect to the WorldCom Stock as provided for by Section 4(A)(i)(l), the board of directors may declare that each share of WorldCom Stock remaining outstanding shall be converted as of a Conversion Date, determined as provided by Section 4(G)(v)(2), into a number of fully paid and nonassessable shares of MCI Stock equal to the ratio, rounded to the nearest 1/10,000 (.0001), of the average Market Value of one share of WorldCom Stock during the period of 20 consecutive Trading Days ending on the fifth Trading Day immediately preceding the date of the notice of such conversion required by Section 4(G)(v) to the average Market Value of one share of MCI Stock during such 20-Trading Day period. (B) Special Distributions on, and Conversion and Redemption of, MCI Stock If a Disposition of All or Substantially All Assets of the MCI Group Occurs. (i) In the event of the Disposition, in one transaction or a series of related transactions (other than in one or a series of Excluded Transactions), by the Corporation and/or its subsidiaries of all or substantially all of the businesses, assets, properties and liabilities attributed to the MCI Group, the Corporation shall, on or prior to the 120th Trading Day after the Disposition Date, as determined by the board of directors in its sole discretion: (1) provided that there are funds legally available for the purpose: (a) subject to compliance with Section 1, pay to the holders of the shares of MCI Stock a distribution pro rata in accordance with the number of shares of MCI Stock held by each such holder, in 8 cash and/or securities or other property having a Fair Value as of the Disposition Date in the aggregate equal to the product of: (x) the Outstanding Interest Fraction with respect to MCI Stock as of the record date for determining holders entitled to receive such distribution; and (y) the Fair Value as of the Disposition Date of the Net Proceeds of such Disposition; or (b) (I) subject to the last sentence of this Section 4(B)(i), if such Disposition involves all (not merely substantially all) of the businesses, assets, properties and liabilities attributed to the MCI Group, redeem or exchange as of the Redemption Date, determined as provided by Section 4(G)(iii)(2), all outstanding shares of MCI Stock in exchange for, on a pro rata basis, cash and/or securities (other than shares of a series of common stock) or other property having a Fair Value as of the Disposition Date in the aggregate equal to the product of: (x) the Outstanding Interest Fraction with respect to MCI Stock as of such Redemption Date; and (y) the Fair Value as of the Disposition Date of the Net Proceeds of such Disposition; or (II) subject to the last sentence of this Section 4(B)(i), if such Disposition involves substantially all (but not all) of the businesses, assets, properties and liabilities attributed to the MCI Group, redeem or exchange as of the Redemption Date, determined as provided by Section 4(G)(iv)(2), the number of whole shares of MCI Stock equal to the lesser of: (x) the number of shares of MCI Stock outstanding; and (y) such number of MCI Stock as have in the aggregate an average Market Value during the period of ten consecutive Trading Days beginning on the 51st Trading Day immediately succeeding the Disposition Date closest to the product of: (AA) the Outstanding Interest Fraction with respect to MCI Stock as of the record date for determining such shares selected for redemption or exchange; and (BB) the Fair Value as of the Disposition Date of the Net Proceeds of such Disposition, 9 in exchange for, on a pro rata basis, cash and/or securities (other than shares of a series of the Corporation's common stock) or other property having a Fair Value as of the Disposition Date in the aggregate equal to such product; or (2) declare that each outstanding share of MCI Stock shall be converted as of the Conversion Date, determined as provided by Section 4(G)(v)(2), into a number of fully paid and nonassessable shares of WorldCom Stock equal to 110% (if the disposition is consummated within three years of the date of the Initial Issuance Date or 100% thereafter), of the ratio, rounded to the nearest 1/10,000 (.0001), of the average Market Value of one share of MCI Stock over the period of ten consecutive Trading Days beginning on the 51st Trading Day following the Disposition Date to the average Market Value of one share of WorldCom Stock during such ten-Trading Day period. Notwithstanding the foregoing provisions of this Section 4(B)(i), the Corporation shall redeem or exchange shares of MCI Stock as provided by Section 4(B)(i)(1)(b)(I) or (II) only if the amount to be paid in redemption or exchange of such stock is less than or equal to the MCI Group Available Distribution Amount as of the Redemption Date. (ii) For purposes of this Section 4(B): (1) as of any date, "substantially all of the businesses, assets, properties and liabilities" attributed to the MCI Group shall mean a portion of such businesses, assets, properties and liabilities that represents at least 80% of the Fair Value of the businesses, assets, properties and liabilities attributed to the MCI Group as of such date; (2) in the case of a Disposition of the businesses, assets, properties and liabilities attributed to the MCI Group in a series of related transactions, such Disposition shall not be deemed to have been consummated until the consummation of the last of such transactions; and (3) the board of directors may pay any distribution or redemption price referred to in Section 4(B)(i)(1) in cash, securities (other than shares of a series of the Corporation's common stock) or other property, regardless of the form or nature of the proceeds of the Disposition. (C) Conversion of MCI Stock at Corporation's Option At Any Time or if a Tax Event Occurs. (i) The Board of Directors may at any time declare that each outstanding share of MCI Stock shall be converted, as of the Conversion Date, determined as provided by Section 4(G)(v)(2), into a number of fully paid and nonassessable shares of WorldCom Stock, equal to the applicable percentage set forth in the following sentence of the ratio, rounded to the nearest 1/10,000 (.0001), of the average Market Value of one share of MCI Stock over the period of 20 consecutive Trading Days ending on the fifth Trading Day immediately preceding the date of the notice of conversion required by Section 4(G)(v) to the average Market Value of one share of WorldCom Stock during 10 such 20-Trading Day period. The applicable percentage referred to in the preceding sentence shall equal: (1) prior to the third anniversary of the Initial Issuance Date, 110%; and (2) on or after the third anniversary of the Initial Issuance Date, 100%. (ii) If a Tax Event occurs, the board of directors may at any time declare that each outstanding share of MCI Stock shall be converted, as of the Conversion Date, determined as provided by Section 4(G)(v)(2), into a number of fully paid and nonassessable shares of WorldCom Stock equal to 100% of the ratio, rounded to the nearest 1/10,000 (.0001), of the average Market Value of one share of MCI Stock over the period of 20 consecutive Trading Days ending on the fifth Trading Day immediately preceding the date of the notice of conversion required by Section 4(G)(v) to the average Market Value of one share of WorldCom Stock or Additional Group Stock, as applicable, during such 20-Trading Day period. (D) Redemption of WorldCom Stock for WorldCom Subsidiary Stock. At any time at which all of the businesses, assets, properties and liabilities attributed to the WorldCom Group (and no other businesses, assets, properties or liabilities of the Corporation or any subsidiary thereof) are held directly or indirectly by one or more wholly owned subsidiaries of the Corporation (each, a "WorldCom Subsidiary"), the board of directors may, subject to the satisfaction of such conditions that it determines are appropriate, provided that there are funds legally available for the purpose: (i) if neither Group holds an Inter-Group Interest in the other Group, redeem or exchange all of the outstanding shares of WorldCom Stock, on a Redemption Date of which notice is delivered in accordance with Section 4(G)(vi), in exchange for all of the shares of common stock of each WorldCom Subsidiary as will be outstanding immediately following such exchange of shares; such shares of common stock of each WorldCom Subsidiary shall be delivered to the holders of shares of WorldCom Stock on the Redemption Date either directly or indirectly through the delivery of shares of another WorldCom Subsidiary that owns directly or indirectly all such shares, and shall be divided among the holders of WorldCom Stock pro rata in accordance with the number of shares of WorldCom Stock held by each such holder on such Redemption Date; each share of common stock of such WorldCom Subsidiary shall be, upon such delivery, fully paid and nonassessable; (ii) if the MCI Group holds an Inter-Group Interest in the WorldCom Group, redeem or exchange all of the outstanding shares of WorldCom Stock, on a Redemption Date of which notice is delivered in accordance with Section 4(G)(vi), in exchange for the number of shares of common stock of each WorldCom Subsidiary equal to the product of: (x) the Outstanding Interest Fraction with respect to WorldCom Stock; and 11 (y) the number of shares of common stock of such WorldCom Subsidiary as will be outstanding immediately following such exchange of shares; such shares of common stock of each WorldCom Subsidiary shall be delivered to the holders of shares of WorldCom Stock on the Redemption Date either directly or indirectly through the delivery of shares of another WorldCom Subsidiary that owns directly or indirectly all such shares, and shall be divided among the holders of WorldCom Stock pro rata in accordance with the number of shares of WorldCom Stock held by each such holder on such Redemption Date; each share of common stock of such WorldCom Subsidiary shall be, upon such delivery, fully paid and nonassessable; or (iii) if the WorldCom Group holds an Inter-Group Interest in the MCI Group, either: (1) redeem or exchange all of the outstanding shares of WorldCom Stock, on a Redemption Date of which notice is delivered in accordance with Section 4(G)(vi), in exchange for: (a) all of the shares of common stock of each WorldCom Subsidiary as will be outstanding immediately following such exchange of shares; and (b) with respect to the MCI Group, a number of shares of MCI Stock equal to the related Number of Shares Issuable with Respect to the Inter-Group Interest in the MCI Group held by the WorldCom Group; such shares of common stock of each WorldCom Subsidiary shall be delivered to the holders of shares of WorldCom Stock on the Redemption Date either directly or indirectly through the delivery of shares of another WorldCom Subsidiary that owns directly or indirectly all such shares, and the shares of common stock of each WorldCom Subsidiary and the shares of MCI Stock equal to the related Number of Shares Issuable with Respect to the Inter-Group Interest in the MCI Group held by the WorldCom Group shall be divided among the holders of WorldCom Stock pro rata in accordance with the number of shares of WorldCom Stock held by each such holder on such Redemption Date; each share of common stock of each WorldCom Subsidiary and share of MCI Stock in respect of such Number of Shares Issuable with Respect to the Inter-Group Interest shall be, upon such delivery, fully paid and nonassessable; or (2) (a) redeem or exchange all of the outstanding shares of WorldCom Stock as contemplated by clause (1)(a) above and (b) issue to one or more of the WorldCom Subsidiaries a number of shares of MCI Stock equal to the Number of Shares Issuable with Respect to the Inter-Group Interest in the MCI Group held by the WorldCom Group. (E) Redemption of MCI Stock for MCI Subsidiary Stock. At any time at which all of the businesses, assets, properties and liabilities attributed to the MCI Group (and no other businesses, assets, properties or liabilities of the Corporation or any subsidiary thereof) are held directly or indirectly by one or more wholly owned subsidiaries of the Corporation (each, a 12 "MCI Subsidiary"), the Board of Directors may, subject to the satisfaction of such conditions that it determines are appropriate, provided that there are funds legally available for the purpose: (i) if neither Group holds an Inter-Group Interest in the other Group, redeem or exchange all of the outstanding shares of MCI Stock, on a Redemption Date of which notice is delivered in accordance with Section 4(G)(vi), in exchange for all of the shares of common stock of each MCI Subsidiary as will be outstanding immediately following such exchange of shares; such shares of common stock of each MCI Subsidiary shall be delivered to the holders of shares of MCI Stock on the Redemption Date either directly or indirectly through the delivery of shares of another MCI Subsidiary that owns directly or indirectly all such shares, and shall be divided among the holders of MCI Stock pro rata in accordance with the number of shares of MCI Stock held by each such holder on such Redemption Date; each share of common stock of such MCI Subsidiary shall be, upon such delivery, fully paid and nonassessable; (ii) if the WorldCom Group holds an Inter-Group Interest in the MCI Group, redeem or exchange all of the outstanding shares of MCI Stock, on a Redemption Date of which notice is delivered in accordance with Section 4(G)(vi), in exchange for the number of shares of common stock of each MCI Subsidiary equal to the product of: (x) the Outstanding Interest Fraction with respect to MCI Stock; and (y) the number of shares of common stock of such MCI Subsidiary as will be outstanding immediately following such exchange of shares; such shares of common stock of each MCI Subsidiary shall be delivered to the holders of shares of MCI Stock on the Redemption Date either directly or indirectly through the delivery of shares of another MCI Subsidiary that owns directly or indirectly all such shares, and shall be divided among the holders of MCI Stock pro rata in accordance with the number of shares of MCI Stock held by each such holder on such Redemption Date; each share of common stock of such MCI Subsidiary shall be, upon such delivery, fully paid and nonassessable; or (iii) if the MCI Group holds an Inter-Group Interest in the WorldCom Group, either: (1) redeem or exchange all of the outstanding shares of MCI Stock, on a Redemption Date of which notice is delivered in accordance with Section 4(G)(vi), in exchange for: (a) all of the shares of common stock of each MCI Subsidiary as will be outstanding immediately following such exchange of shares; and (b) with respect to the WorldCom Group, a number of shares of WorldCom Stock equal to the related Number of Shares Issuable with Respect to the Inter-Group Interest in the WorldCom Group held by the MCI Group; 13 such shares of common stock of each MCI Subsidiary shall be delivered to the holders of shares of MCI Stock on the Redemption Date either directly or indirectly through the delivery of shares of another MCI Subsidiary that owns directly or indirectly all such shares, and the shares of common stock of each MCI Subsidiary and the shares of common stock of each series equal to the related Number of Shares Issuable with Respect to the Inter-Group Interest in the WorldCom Group held by the MCI Group shall be divided among the holders of MCI Stock pro rata in accordance with the number of shares of MCI Stock held by each such holder on such Redemption Date; each share of common stock of each MCI Subsidiary and share of common stock in respect of such Number of Shares Issuable with Respect to the Inter-Group Interest shall be, upon such delivery, fully paid and nonassessable; or (2) (a) redeem or exchange all of the outstanding shares of MCI Stock as contemplated by clause (1)(a) above and (b) issue to one or more of the MCI Subsidiaries a number of shares of WorldCom Stock equal to the Number of Shares Issuable with Respect to the Inter-Group Interest in the WorldCom Group held by the MCI Group. (F) Treatment of Convertible Securities. After any Redemption Date or Conversion Date on which all outstanding shares of either WorldCom Stock or MCI Stock are redeemed or converted, any share of any series of common stock of the Corporation that is to be issued on exchange, conversion or exercise of any Convertible Securities shall, immediately upon such exchange, conversion or exercise and without any notice from or to, or any other action on the part of, the Corporation or its board of directors or the holder of such Convertible Security: (i) in the event the shares of such series of common stock outstanding on such Redemption Date were redeemed pursuant to Section 4(A)(i)(1)(b)(I), Section 4(B)(i)(1)(b)(I), Section 4(D) or Section 4(E), be redeemed, to the extent of funds legally available therefor, for $.01 per share in cash for each share of such series of common stock that otherwise would be issued upon such exchange, conversion or exercise; or (ii) in the event the shares of such series of common stock outstanding on such Conversion Date were converted into shares of another series of common stock pursuant to Section 4(A)(i)(2), Section 4(A)(iii), Section 4(B)(i)(2) or Section 4(C), be converted into the amount of cash and/or the number of shares of the kind of capital stock and/or other securities or property of the Corporation that shares of such series of common stock would have received had such shares been converted and outstanding on such Conversion Date. The provisions of the immediately preceding sentence of this Section 4 shall not apply to the extent that other adjustments or alternative provisions in respect of such conversion, exchange or redemption of a series of common stock are otherwise made or applied pursuant to the provisions of such Convertible Securities. (G) Notice and Other Provisions. (i) Not later than the 45th Trading Day following the Disposition Date referred to in Section 4(A)(i) (in the case of WorldCom Stock) or 14 Section 4(B)(i) (in the case of MCI Stock), the Corporation shall announce publicly by press release: (1) the Net Proceeds of such Disposition; (2) the number of shares outstanding of the series of common stock relating to the Group subject to such Disposition; (3) the number of shares of such series of common stock into or for which Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof; and (4) if applicable for the Group subject to such Disposition, the Outstanding Interest Fraction for the series of common stock relating to such Group on the date of such notice. Not earlier than the 61st Trading Day and not later than the 65th Trading Day following the Disposition Date, the Corporation shall announce publicly by press release which of the actions specified in Section 4(A)(i) or Section 4(B)(i), as the case may be, it has irrevocably determined to take in respect of such Disposition. (ii) If the Corporation determines to pay a distribution pursuant to Section 4(A)(i)(1)(a) (in the case of WorldCom Stock) or Section 4(B)(i)(1)(a) (in the case of MCI Stock), the Corporation shall, not later than the 65th Trading Day following the Disposition Date, cause notice to be given to each holder of shares of the series of common stock relating to the Group subject to such Disposition and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of such series of common stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities), setting forth: (1) the record date for determining holders entitled to receive such distribution, which shall be not earlier than the tenth Trading Day and not later than the 20th Trading Day following the date of such notice; (2) the anticipated payment date of such distribution (which shall not be more than 120 Trading Days following the Disposition Date); (3) the type of property to be paid as such distribution in respect of the outstanding shares of such series of common stock; (4) the Net Proceeds of such Disposition; (5) if applicable for the Group subject to such Disposition, the Outstanding Interest Fraction for the series of common stock relating to such Group on the date of such notice; 15 (6) the number of outstanding shares of such series of common stock and the number of shares of such series of common stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof; and (7) in the case of notice to be given to holders of Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be entitled to receive such distribution only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the record date referred to in clause (1) of this sentence. (iii) If the Corporation determines to undertake a redemption pursuant to Section 4(A)(i)(1)(b)(I) (in the case of WorldCom Stock) or Section 4(B)(i)(1)(b)(I) (in the case of MCI Stock), the Corporation shall, not earlier than the 45th Trading Day and not later than the 35th Trading Day prior to the Redemption Date, cause notice to be given to each holder of shares of the series of common stock relating to the Group subject to the Disposition referred to in such Section and to each holder of Convertible Securities convertible into or exchangeable or exercisable for shares of such series of common stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities), setting forth: (1) a statement that all shares of such series of common stock outstanding on the Redemption Date shall be redeemed; (2) the Redemption Date (which shall not be more than 120 Trading Days following the Disposition Date); (3) the type of property in which the redemption price for the shares of such series of common stock to be redeemed is to be paid; (4) the Net Proceeds of such Disposition; (5) if applicable for the Group subject to such Disposition, the Outstanding Interest Fraction for the series of common stock relating to such Group on the date of such notice; (6) the place or places where certificates for shares of such series of common stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of cash and/or securities or other property; (7) the number of outstanding shares of such series of common stock and the number of shares of such series of common stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof; (8) in the case of notice to be given to holders of Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be 16 entitled to participate in such redemption only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the Redemption Date referred to in clause (1) of this sentence and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this Section 4 if such holder thereafter converts, exchanges or exercises such Convertible Securities; and (9) a statement to the effect that, except as otherwise provided by Section 4(G)(x), distributions on shares of such series of common stock shall cease to be paid as of such Redemption Date. (iv) If the Corporation determines to undertake a redemption pursuant to Section 4(A)(i)(1)(b)(II) (in the case of WorldCom Stock) or Section 4(B)(i)(1)(b)(II) (in the case of MCI Stock), the Corporation shall, not later than the 65th Trading Day following the Disposition Date referred to in such Section, cause notice to be given to each holder of shares of the series of common stock relating to the Group subject to such Disposition and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of such series of common stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities) setting forth: (1) a date not earlier than the tenth Trading Day and not later than the 20th Trading Day following the date of such notice on which shares of such series of common stock shall be selected for redemption; (2) the anticipated Redemption Date (which shall not be more than 120 Trading Days following the Disposition Date); (3) the type of property in which the redemption price for the shares of such series of common stock to be redeemed is to be paid; (4) the Net Proceeds of such Disposition; (5) if applicable for the Group subject to such Disposition, the Outstanding Interest Fraction for the series of common stock relating to such Group on the date of such notice; (6) the number of outstanding shares of such series of common stock and the number of shares of such series of common stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof; (7) in the case of notice to be given to holders of Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be eligible to participate in such selection for redemption only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the record date referred to in clause (1) of this sentence, and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of 17 such Convertible Securities or, if applicable, this Section 4 if such holder thereafter converts, exchanges or exercises such Convertible Securities; and (8) a statement that the Corporation will not be required to register a transfer of any shares of such series of common stock for a period of 15 Trading Days next preceding the date referred to in clause (1) of this sentence. Promptly following the date referred to in clause (1) of the preceding sentence, the Corporation shall cause a notice to be given to each holder of record of shares of such series of common stock to be redeemed setting forth: (1) the number of shares of such series of common stock held by such holder to be redeemed; (2) a statement that such shares of such series of common stock shall be redeemed; (3) the Redemption Date; (4) the kind and per share amount of cash and/or securities or other property to be received by such holder with respect to each share of such series of common stock to be redeemed, including details as to the calculation thereof; (5) the place or places where certificates for shares of such series of common stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of such cash and/or securities or other property; (6) if applicable, a statement to the effect that the shares being redeemed may no longer be transferred on the transfer books of the Corporation after the Redemption Date; and (7) a statement to the effect that, subject to Section 4(G)(x), dividends on such shares of such series of common stock shall cease to be paid as of the Redemption Date. (v) If the Corporation determines to convert WorldCom Stock or MCI Stock into the other series of common stock pursuant to Section 4(A)(iii) (in the case of WorldCom Stock) or Section 4(A)(i)(2), Section 4(B)(i)(2), Section 4(B)(iii) or Section 4(C) (in the case of MCI Stock), the Corporation shall, not earlier than the 45th Trading Day and not later than the 35th Trading Day prior to the Conversion Date, cause notice to be given to each holder of shares of the series of common stock to be so converted and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of such series of common stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities) setting forth: 18 (1) a statement that all outstanding shares of such series of common stock shall be converted; (2) the Conversion Date (which, in the case of a conversion after a Disposition, shall not be more than 120 Trading Days following the Disposition Date); (3) the number of shares of the series of common stock to be received with respect to each share of such series of common stock, including details as to the calculation thereof; (4) the place or places where certificates for shares of such series of common stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of certificates for shares of such series of common stock; (5) the number of outstanding shares of such series of common stock and the number of shares of such series of common stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof; (6) a statement to the effect that, subject to Section 4(G)(x), dividends on shares of such series of common stock shall cease to be paid as of such Conversion Date; and (7) in the case of notice to holders of such Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be entitled to receive shares of such series of common stock upon such conversion only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to such Conversion Date and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this Section 4 if such holder thereafter converts, exchanges or exercises such Convertible Securities. (vi) If the Corporation determines to redeem shares of WorldCom Stock pursuant to Section 4(D) or MCI Stock pursuant to Section 4(E), the Corporation shall, not earlier than the 35th Trading Day and not later than the 45th Trading Day prior to the Redemption Date, cause notice to be given to each holder of shares of such series of common stock to be redeemed and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of such series of common stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities), setting forth: (1) a statement that all shares of such series of common stock outstanding on the Redemption Date shall be redeemed in exchange for shares of common stock of each WorldCom Subsidiary or MCI Subsidiary, as applicable (and, if such redemption is pursuant to Section 4(D)(iii)(1) or Section 4(D)(iv)(l) (in the case of WorldCom Stock) or pursuant to Section 4(E)(iii)(1) or Section 19 4(E)(iv)(l) (in the case of MCI Stock), shares of the series of common stock specified in such Sections); (2) if such redemption is conditioned upon the satisfaction of one or more conditions on or prior to the Redemption Date, a description of such conditions and whether such conditions may be waived by the Corporation or another Person; (3) the Redemption Date; (4) if applicable for the series of common stock subject to such redemption, the Outstanding Interest Fraction for such series of common stock on the date of such notice; (5) the place or places where certificates for shares of the series of common stock to be redeemed, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of certificates for shares of common stock of each WorldCom Subsidiary or MCI Subsidiary, as applicable (and, if such redemption is pursuant to Section 4(D)(iii)(1) or Section 4(D)(iv)(1) (in the case of WorldCom Stock) or pursuant to Section 4(E)(iii)(1) or Section 4(E)(iv)(1) (in the case of MCI Stock), shares of the series of common stock specified in such Sections); (6) a statement to the effect that, subject to Section 4(G)(x), dividends on shares of such series of common stock shall cease to be paid as of such Redemption Date; (7) the number of outstanding shares of such series of common stock and the number of shares of such series of common stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price thereof; and (8) in the case of notice to holders of Convertible Securities, a statement to the effect that a holder of Convertible Securities shall be entitled to receive shares of common stock of each WorldCom Subsidiary or MCI Subsidiary, as applicable (and, if such redemption is pursuant to Section 4(D)(iii)(1) or Section 4(D)(iv)(1) (in the case of a redemption of WorldCom Stock) or pursuant to Section 4(E)(iii)(1) or Section 4(E)(iv)(1) (in the case of a redemption of MCI Stock), shares of the series of common stock specified in such Sections), upon redemption only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to the Redemption Date and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this Section 4, if such holder thereafter converts, exchanges or exercises such Convertible Securities. (vii) Any notice required to be given each holder of shares of common stock or Convertible Securities pursuant to this Section 4(G) shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the 20 transfer books of the Corporation or the Corporation's transfer agent or registrar on the record date fixed for such notice. Neither the failure to mail any notice required by this Section 4(G) to any particular holder of the common stock or of Convertible Securities nor any defect therein shall affect the sufficiency thereof with respect to any other holder of outstanding shares of the common stock or of Convertible Securities or the validity of any such redemption or conversion. (viii) If less than all of the outstanding shares of either series of common stock are to be redeemed pursuant to Section 4(A)(i)(1)(b)(II) (in the case of WorldCom Stock) or Section 4(B)(i)(1)(b)(Il) (in the case of MCI Stock), the shares to be redeemed by the Corporation shall be selected from among the holders of shares of such series of common stock outstanding at the close of business on the record date for such redemption on a pro rata basis among all such holders or by lot or by such other method as may be determined by the Board of Directors to be equitable. (ix) The Corporation shall not be required to issue or deliver fractional shares of any capital stock or of any other securities to any holder of either series of common stock upon any dividend or other distribution, redemption or conversion pursuant to this Section 4. If more than one share of a series of common stock shall be held at the same time by the same holder, the Corporation may aggregate the number of shares of any capital stock that shall be issuable or any other securities or property that shall be distributable in respect of such series to such holder upon any dividend or other distribution, redemption or conversion (including any fractional shares). If there are fractional shares of any capital stock or of any other securities remaining to be issued or distributed to the holders of any series of common stock, the Corporation shall, if such fractional shares are not issued or distributed to the holder, pay cash in respect of such fractional shares in an amount equal to the Fair Value thereof (without interest). (x) No adjustments in respect of dividends shall be made upon the redemption or conversion of shares of either series of common stock; provided, however, that if the Redemption Date or Conversion Date, as the case may be, with respect to shares of either series of common stock shall be subsequent to the record date for the payment of a dividend or other distribution thereon or with respect thereto, the holders of such series of common stock at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on or with respect to such shares on the date set for payment of such dividend or other distribution, in each case without interest, notwithstanding the subsequent conversion or redemption of such shares. (xi) Before any holder of shares of either series of common stock shall be entitled to receive any cash payment and/or certificates or instruments representing shares of any capital stock and/or other securities or property to be distributed to such holder with respect to such series of common stock pursuant to this Section 4, such holder shall surrender at such place as the Corporation shall specify certificates for such shares of the common stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement). The Corporation shall as soon as practicable after receipt of certificates representing such shares of the common stock deliver to the person for whose account such shares of the common stock were so surrendered, or to such person's 21 nominee or nominees, the cash and/or the certificates or instruments representing the number of whole shares of the kind of capital stock and/or other securities or property to which such person shall be entitled as aforesaid, together with any payment in respect of fractional shares contemplated by Section 4(G)(ix), in each case without interest. If less than all of the shares of either series of common stock represented by any one certificate are to be redeemed, the Corporation shall issue and deliver a new certificate for the shares of such series of common stock not redeemed. (xii) From and after any applicable Redemption Date or Conversion Date, as the case may be, all rights of a holder of shares of either series of common stock that were converted or redeemed shall cease except for the right, upon surrender of the certificates representing such shares of the common stock as required by Section 4(G)(xi), to receive the certificates representing shares of the kind and amount of capital stock and/or other securities or property for which such shares were redeemed or converted, together with any payment in respect of fractional shares contemplated by Section 4(G)(ix) and rights to dividends as provided in Section 4(G)(x), in each case without interest. No holder of a certificate that immediately prior to the applicable Redemption Date or Conversion Date represented shares of a series of common stock shall be entitled to receive any dividend or other distribution or interest payment with respect to shares of any kind of capital stock or other security or instrument for which such series of common stock was redeemed or converted until the surrender as required by this Section 4 of such certificate in exchange for a certificate or certificates or instrument or instruments representing such capital stock or other security. Upon such surrender, there shall be paid to the holder the amount of any dividends or other distributions (without interest) which theretofore became payable on any class or series of capital stock of the Corporation as of a record date after the Conversion Date, but that were not paid by reason of the foregoing, with respect to the number of whole shares of the kind of capital stock represented by the certificate or certificates issued upon such surrender. From and after a Redemption Date or Conversion Date, the Corporation shall be entitled, however, to treat the certificates for a series of common stock that have not yet been surrendered for conversion as evidencing the ownership of the number of whole shares of the kind or kinds of capital stock of the Corporation for which the shares of such series of common stock represented by such certificates shall have been converted, notwithstanding the failure to surrender such certificates. (xiii) The Corporation shall pay any and all documentary, stamp or similar issue or transfer taxes that may be payable in respect of the issuance or delivery of any shares of capital stock and/or other securities upon redemption or conversion of shares of any series of common stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance or delivery of any shares of capital stock and/or other securities in a name other than that in which the shares of such series of common stock so redeemed or converted were registered, and no such issuance or delivery shall be made unless the person requesting such issuance or delivery has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid. 22 (xiv) The board of directors may establish such rules and requirements to facilitate the effectuation of the transactions contemplated by this Section 4 as the Board of Directors shall determine to be appropriate. Section 5. Inter-Group Interest and Related Transfers Between and Among Groups. (A) Changes in Inter-Group Interest. The Number of Shares Issuable with Respect to the Inter-Group Interest in any Issuer Group held by any Holder Group shall from time to time be: (i) adjusted, if before such adjustment such number is greater than zero, as determined by the board of directors to be appropriate to reflect equitably any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of the series of common stock related to such Issuer Group; (ii) decreased (but to not less than zero), if before such adjustment such number is greater than zero, by action of the board of directors by: (1) such the number of shares of the series of common stock related to such Issuer Group issued or sold by the Corporation that, immediately prior to such issuance or sale, was included in the Number of Shares Issuable with Respect to the Inter-Group Interest in such Issuer Group held by such Holder Group; (2) the number of shares of such series of common stock issued upon the conversion, exchange or exercise of any Convertible Securities that, immediately prior to the issuance or sale of such Convertible Securities, were included in the Number of Shares Issuable with Respect to the Inter-Group Interest in such Issuer Group held by such Holder Group; (3) the number of shares of such series of common stock issued by the Corporation as a share dividend or in connection with any reclassification or exchange of shares, including an exchange offer, to holders of the series of common stock related to such Holder Group; (4) the number of shares of such series of common stock issued upon the conversion, exchange or exercise of any Convertible Securities issued by the Corporation as a distribution or in connection with any reclassification or exchange of shares, including an exchange offer, to holders of the series of common stock related to such Holder Group; (5) the number of shares (rounded, if necessary, to the nearest whole number) of such series of common stock equal to the product of (x) the number of shares of such series of common stock redeemed or exchanged pursuant to Section 4(A)(i)(l)(b)(I) or (II) or Section 4(B)(i)(1)(b)(I) or (II) and (y) a fraction (which may be greater than one), the numerator of which is the Number of Shares Issuable with Respect to the Inter-Group Interest in such Issuer Group held by 23 such Holder Group, and the denominator of which is the number of shares of series of common stock outstanding, in each case, on the record date for determining such shares selected for such redemption or exchange; and (6) the number of shares (rounded, if necessary, to the nearest whole number) of such series of common stock equal to the quotient of (x) the aggregate Fair Value as of the date of transfer of (i) businesses, assets (including cash) or properties transferred from such Issuer Group to such Holder Group or (ii) liabilities transferred from such Holder Group to such Issuer Group, in either case, for the purpose of reducing the Number of Shares Issuable with Respect to the Inter-Group Interest in such Issuer Group held by such Holder Group, divided by (y) the average Market Value of one share of the series of common stock related to such Issuer Group during the period of 20 consecutive Trading Days ending on the date of such contribution or transfer, (iii) increased by action of the Board of Directors by: (1) the number of outstanding shares of the series of common stock related to such Issuer Group repurchased by the Corporation for consideration that was attributed as an asset as provided by Section 7(O) or 7(CC) to such Holder Group; (2) the number of shares of such series of common stock equal to the product of (x) the quotient of (i) the number of shares of such series of common stock issued by the Corporation as a share dividend or in connection with any reclassification to holders of such series of common stock divided by (ii) the number of shares of such series of common stock outstanding on the record date for such share dividend or reclassification and (y) the Number of Shares Issuable with Respect to the Inter-Group Interest in such Issuer Group on such record date; (3) the number of shares of such series of common stock into or for which Convertible Securities attributed as a liability to, or equity interest in, such Issuer Group are deemed converted, exchanged or exercised by such Holder Group pursuant to Section 5(C); and (4) the number of shares (rounded to the nearest whole number) of such series of common stock equal to the quotient of (x) the aggregate Fair Value as of the date of (i) contribution of businesses, assets (including cash) or properties transferred from such Holder Group to such Issuer Group or (ii) transfer of liabilities from such Issuer Group to such Holder Group, in consideration of an increase in the Number of Shares Issuable with Respect to the Inter-Group Interest in such Issuer Group held by such Holder Group, divided by (y) the average Market Value of one share of the series of common stock related to such Issuer Group during the period of 20 consecutive Trading Days ending on the date of such contribution or transfer; 24 (iv) increased or decreased under such other circumstances as the board of directors determines appropriate to reflect the economic substance of any other event or circumstance; provided that, in each case, the adjustment shall be made in a manner that is fair and equitable to holders of common stock and intended to reflect the relative economic interest in one Group held by the other Group. (B) Reattribution Upon Certain Distributions. (i) If the Corporation shall make a distribution with respect to shares of either series of common stock (payable in consideration other than securities of the Corporation), effective on the payment date of such distribution, the Holder Group holding an Inter-Group Interest in the Issuer Group in respect of which such distribution has been paid shall be attributed as an asset an amount of assets or properties, previously attributed to such Issuer Group, of the same kind as were paid in such distribution, as have a Fair Value on the record date for such distribution equal to the product of: (1) the Fair Value on such record date of the aggregate distribution to holders of shares of such series of common stock; and (2) a fraction (which may be greater than one), the numerator of which is equal to the Number of Shares Issuable with Respect to the Inter-Group Interest in such Issuer Group held by such Holder Group and the denominator of which is equal to the number of outstanding shares of the series of common stock related to such Issuer Group, in each case, on the record date for such distribution. (ii) If the Corporation shall make a distribution with respect to shares of either series of common stock payable in securities of the Corporation that are attributed to the related Issuer Group as a liability of, or an equity interest in, such Issuer Group, the Holder Group holding an Inter-Group Interest in such Issuer Group shall be attributed as assets the number or amount of such securities equivalent to such liability or equity interest that is equal to the product of: (x) the number or amount of securities so distributed to holders of outstanding shares of the series of common stock related to such Issuer Group; and (y) a fraction (which may be greater than one), the numerator of which is equal to the Number of Shares Issuable with Respect to the Inter-Group Interest in such Issuer Group held by such Holder Group and the denominator of which is equal to the number of outstanding shares of the series of common stock related to such Issuer Group, in each case, on the record date for such dividend or other distribution; and, to the extent interest is or distributions are paid on the securities so distributed, the Holder Group shall be attributed at the time of such payment a corresponding ratable amount of the kind of assets paid as such interest or distributions as would have been paid in respect of such securities so deemed to be held by such Holder Group if such securities were outstanding. 25 (C) Deemed Conversion of Certain Convertible Securities Held by the Holder Group. To the extent Convertible Securities are paid as a distribution to the holders of either series of common stock, the Corporation may (in addition to making an adjustment pursuant to Section 5(B)(ii)) when at any time such Convertible Securities are convertible into or exchangeable or exercisable for shares of such series of common stock, treat such Convertible Securities as converted, exchanged or exercised for purposes of determining the increase in the Number of Shares Issuable with Respect to the Inter-Group Interest in such Issuer Group pursuant to Section 5(A)(iii)(3), and must do so to the extent such Convertible Securities are mandatorily converted, exchanged or exercised (and to the extent the terms of such Convertible Securities require payment of consideration for such conversion, exchange or exercise, such Holder Group shall then no longer be attributed as an asset an amount of the kind of assets or properties required to be paid as such consideration for the amount of Convertible Securities deemed converted, exchanged or exercised (and such Issuer Group shall be attributed such assets or properties)), in which case, from and after such time, the shares of common stock into or for which such Convertible Securities were so considered converted, exchanged or exercised shall be deemed held by such Holder Group and such Convertible Securities shall no longer be deemed to be held by such Holder Group. A statement setting forth the election to effectuate any such deemed conversion, exchange or exercise of Convertible Securities and the assets or properties, if any, to be attributed to the other Group in consideration of such conversion, exchange or exercise shall be filed in the records of the actions of the board of directors and, upon such filing, such deemed conversion, exchange or exercise shall be effectuated. (D) Permitted Inter-Group Interests. Either Group may hold an Inter-Group Interest in the other Group; provided that neither Group may hold an Inter-Group Interest in the other Group if, immediately after the creation of such Inter-Group Interest, the Groups would hold Inter-Group Interests in each other. Section 6. Application of the Provisions of Section A of Article 4. (A) Certain Determinations by the Board of Directors. The board of directors shall make such determinations with respect to (a) the businesses, assets, properties and liabilities to be attributed to the WorldCom Group and the MCI Group, (b) the application of the provisions of these Second Amended and Restated Articles of Incorporation to transactions to be engaged in by the Corporation and (c) the voting powers, preferences, designations, rights, qualifications, limitations or restrictions of either series of common stock or of the holders thereof, as may be or become necessary or appropriate to the exercise of, or to give effect to, such voting powers, preferences, designations, rights, qualifications, limitations or restrictions, including, without limiting the foregoing, the determinations referred to in this Section 6. A record of any such determination shall be filed with the records of the actions of the board of directors. (i) Upon any acquisition by the Corporation or its subsidiaries of any businesses, assets or properties, or any assumption of liabilities, outside of the ordinary course of business of either Group, the board of directors shall determine whether such businesses, assets, properties and liabilities (or an interest therein) shall be for the benefit of the WorldCom Group or the MCI Group or both and, accordingly, shall be attributed to such Group or Groups, in accordance with Section 7(O) or 7(CC), as the case may be. 26 (ii) Upon any issuance of shares of any series of common stock at a time when the Number of Shares Issuable with Respect to the Inter-Group Interest in the Issuer Group related to such series is greater than zero, the Board of Directors shall determine, based on the use of the proceeds of such issuance and any other relevant factors, whether all or any part of the shares of such series so issued shall reduce such Number of Shares Issuable with Respect to the Inter-Group Interest. (iii) Upon any issuance by the Corporation or any subsidiary thereof of any Convertible Securities that are convertible into or exchangeable or exercisable for shares of either series of common stock, if at the time such Convertible Securities are issued the Number of Shares Issuable with Respect to the Inter-Group Interest in the Issuer Group related to such series is greater than zero, the board of directors shall determine, based on the use of the proceeds of such issuance and any other relevant factors, whether, upon conversion, exchange or exercise thereof, the issuance of shares of such series of common stock pursuant thereto shall, in whole or in part, reduce such Number of Shares Issuable with Respect to the Inter-Group Interest. (iv) Upon any issuance of any shares of preferred stock (or stock other than common stock) of any series, the board of directors shall attribute, based on the use of proceeds of such issuance of shares of preferred stock (or stock other than common stock) in the business of either Group and any other relevant factors, the shares so issued entirely to the WorldCom Group, entirely to the MCI Group, or partly to both Groups, in such proportion as the Board of Directors shall determine. (v) Upon any redemption or repurchase by the Corporation or any subsidiary thereof of shares of preferred stock (or stock other than common stock) of any class or series or of other securities or debt obligations of the Corporation, the board of directors shall determine, based on the property used to redeem or purchase such shares, other securities or debt obligations, which, if any, of such shares, other securities or debt obligations redeemed or repurchased shall be attributed to the WorldCom Group, to the MCI Group, or both, and, accordingly, how many of the shares of such series or class of preferred stock (or stock other than common stock) or of such other securities, or how much of such debt obligations, that remain outstanding, if any, are thereafter attributed to each Group. (vi) Upon any transfer to either Group of businesses, assets, properties or liabilities attributed to either Group to the other Group, the consideration therefor to be attributed to the transferring Group in exchange therefor, including, without limitation, cash, securities or other property of such other Group or, if permitted by Section 5(D), a decrease or an increase in the Number of Shares of Shares Issuable with Respect to the Inter-Group Interest in such other Group, as described in Section 5(A)(ii)(6) or Section 5(A)(iii)(4). (B) Certain Determinations Not Required. Notwithstanding the foregoing provisions of this Section 6 or any other provision in these Second Amended and Restated Articles of Incorporation, at any time when there are not outstanding more than one series of 27 common stock (or Convertible Securities convertible into or exchangeable or exercisable for more than one series of common stock), the Corporation need not: (i) attribute any of the businesses, assets, properties or liabilities of the Corporation or any of its subsidiaries to the WorldCom Group or the MCI Group; or (ii) make any determination required in connection therewith, nor shall the board of directors be required to make any of the determinations otherwise required by this Section A of Article 4, and in such circumstances the holders of the shares of WorldCom Stock and MCI Stock outstanding, as the case may be, shall (unless otherwise specifically provided in these Second Amended and Restated Articles of Incorporation) be entitled to all the voting powers, preferences, designations, rights, qualifications, limitations or restrictions of common stock of the Corporation. (C) Board Determinations Binding. Any determinations made in good faith by the board of directors of the Corporation under any provision of this Section 6 or otherwise in furtherance of the application of this Article 4A shall be final and binding on all shareholders. Section 7. Certain Definitions and Rules of Interpretation. As used in this Section A of Article 4, the following terms shall have the following meanings (with terms defined in the singular having comparable meaning when used in the plural and vice versa), unless the context otherwise requires. For purposes of this Section A of Article 4, the WorldCom Stock, when issued, shall be considered issued in respect of or related to the WorldCom Group, and the MCI Stock, when issued, shall be considered issued in respect of or related to the MCI Group. As used in this Section 7, a "contribution" or "transfer" of businesses, assets, properties or liabilities from one Group to the other shall refer to the reattribution of such businesses, assets, properties or liabilities from the contributing or transferring Group to the other Group and correlative phrases shall have correlative meanings. (A) "Available Distribution Amount" shall mean, as the context requires, a reference to the WorldCom Group Available Distribution Amount and MCI Group Available Distribution Amount. (B) "Conversion Date" shall mean the date fixed by the board of directors as the effective date for the conversion of shares of WorldCom Stock into shares of MCI Stock or shares of MCI Stock into shares of WorldCom Stock, as shall be set forth in the notice to holders of shares of the series of common stock subject to such conversion and to holders of any Convertible Securities that are convertible into or exchangeable or exercisable for shares of the series of common stock subject to such conversion requirements pursuant to Section 4(G)(v). (C) "Convertible Securities" shall mean, at any time, any securities of the Corporation or of any subsidiary thereof (other than shares of common stock), including warrants and options, outstanding at such time that by their terms are convertible into or exchangeable or exercisable for or evidence the right to acquire any shares of any series of common stock, whether convertible, exchangeable or exercisable at such time or a later time or only upon the 28 occurrence of certain events, but in respect of antidilution provisions of such securities only upon the effectiveness thereof. (D) "Disposition" shall mean a sale, conveyance, assignment or other disposition (whether by merger, share exchange, sale or contribution of assets or stock or otherwise) of businesses, assets (including stock, other securities and goodwill), properties or liabilities. (E) "Disposition Date," with respect to the WorldCom Group or the MCI Group, shall mean the date of consummation of the Disposition of such Group referred to in Section 4(A)(i) or Section 4(C)(i), as applicable. (F) "Distribution" shall mean a direct or indirect transfer of money or other property (except its own shares or rights to acquire its own shares) or incurrence of indebtedness by the Corporation to or for the benefit of its shareholders in respect of any of its shares. A distribution may be in the form of: (i) a declaration or payment of a dividend; (ii) a purchase, redemption, or other acquisition of shares; (iii) a distribution of indebtedness, or otherwise; provided that for purposes of this Section A of Article 4 a distribution shall not include (x) payments made pursuant to Section 3 or (y) for purposes of Section l(C)(v) and I(C)(vi), a repurchase of shares of common stock. (G) "Excluded Transaction" shall mean, with respect to the WorldCom Group or the MCI Group, as applicable: (i) the Disposition by the Corporation of all or substantially all of its businesses, assets, properties and liabilities in one transaction or a series of related transactions in connection with the dissolution of the Corporation and the distribution of assets to shareholders as referred to in Section 3; (ii) the Disposition of the businesses, assets, properties and liabilities of such Group as contemplated by Section 4(D) or 4(E) or otherwise (x) to all holders of shares of the series of common stock related to such Group, divided among such holders on a pro rata basis in accordance with the number of shares of common stock of such series outstanding or (y) if the Number of Shares Issuable with Respect to the Inter-Group Interest in such Group is greater than zero, to all holders of shares of the series of common stock related to such Group and the Corporation or subsidiaries thereof, divided among such holders and the Corporation or subsidiaries thereof on a pro rata basis in accordance with the number of shares of common stock of such series outstanding and the Number of Shares Issuable with Respect to the Inter-Group Interest in such Group; (iii) the Disposition to any person or entity controlled (as determined by the board of directors) by the Corporation; (iv) the Disposition in connection with a Related Business Transaction in respect of such Group; or (v) a Disposition conditioned upon the approval of the holders of common stock related to such Group, voting as a separate voting group. 29 (H) "Fair Value" shall mean: (i) in the case of equity securities or debt securities of a class or series that has previously been Publicly Traded for a period of at least 15 months, the Market Value thereof (if such Market Value, as so defined, can be determined); (ii) in the case of an equity security or debt security that has not been Publicly Traded for at least 15 months or the Market Value of which cannot be determined, the fair value per share of stock or per other unit of such security, on a fully distributed basis, as determined by an independent investment banking firm experienced in the valuation of securities selected in good faith by the board of directors, or, if no such investment banking firm is, as determined in the good faith judgment of the board of directors, available to make such determination, in good faith by the board of directors; (iii) in the case of cash denominated in U.S. dollars, the face amount thereof and in the case of cash denominated in other than U.S. dollars, the face amount thereof converted into U.S. dollars at the rate published in The Wall Street Journal on the date for the determination of Fair Value or, if not so published, at such rate as shall be determined in good faith by the board of directors based upon such information as the board of directors shall in good faith determine to be appropriate; and (iv) in the case of property other than securities or cash, the "Fair Value" thereof shall be determined in good faith by the board of directors based upon such appraisals, valuation reports or opinions of such experts as the board of directors shall in good faith determine to be appropriate. Any such determination of Fair Value shall be described in a statement filed with the records of the actions of the board of directors. (I) "Group" shall mean, as of any date, the WorldCom Group or the MCI Group. (J) "Holder Group" shall mean any Group which holds or, as a result of the issuance of Convertible Securities, may hold an Inter-Group Interest in the other Group. (K) "Initial Issuance Date" shall mean the date of first issuance of WorldCom Stock and MCI Stock. (L) "Inter-Group Interest" shall mean, as of any date, the Number of Shares Issuable with Respect to the Inter-Group Interest in either Issuer Group that are held or permitted to be held, as applicable, as of such date by the other Holder Group. (M) "Issuer Group" shall mean any Group in which the other Group holds or, as a result of the issuance of Convertible Securities, may hold an Inter-Group Interest. (N) "Market Value" shall mean, with respect to a share of any class or series of capital stock of the Corporation on any day, 30 (i) average of the high and low reported sales prices of a share of such class or series on such Trading Day, as reported on the Nasdaq National Market; or (ii) in case no such reported sale takes place on such Trading Day, the average of the reported closing bid and asked prices regular way of a share of such class or series on such Trading Day, as reported on the Nasdaq National Market; or (iii) if the shares of such class or series are not listed or admitted to trading on the Nasdaq National Market on such Trading Day, on the principal national securities exchange in the United States on which the shares of such class or series are listed or admitted to trading; or (iv) if the shares of such class or series are not listed or admitted to trading on any national securities exchange or quoted on the Nasdaq National Market on such Trading Day, the average of the closing bid and asked prices of a share of such class or series in the over-the-counter market on such Trading Day, as furnished by any New York Stock Exchange member firm selected from time to time by the Corporation; or (v) if such closing bid and asked prices are not made available by any such Nasdaq National Market broker/dealer on such Trading Day, the Fair Value of a share of such class or series as set forth in clause (ii) of the definition of Fair Value; provided that, for purposes of determining the market value of a share of any class or series of capital stock for any period: (x) the "Market Value" of a share of capital stock on any day prior to any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution (other than any dividend or distribution contemplated by clause (y)(2) of this sentence) paid or to be paid with respect to such capital stock shall be reduced by the Fair Value of the per share amount of such dividend or distribution; and (y) the "Market Value" of any share of capital stock on any day prior to: (1) the effective date of any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of outstanding shares of such class or series of capital stock occurring during such period; or (2) any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution with respect to such capital stock to be made in shares of such class or series of capital stock or Convertible Securities that are convertible, exchangeable or exercisable for such class or series of capital stock; shall be appropriately adjusted, as determined by the board of directors, to reflect such subdivision, combination, dividend or distribution. 31 (O) "MCI Group" shall mean, as of any date: (i) the interest of the Corporation and any of its subsidiaries on such date in all of the businesses, assets, properties and liabilities reflected in the combined financial statements of the MCI Group as of September 30, 2000, which were publicly filed by the Corporation with the Securities and Exchange Commission in Registration Statement on Form S-4, as amended (File No. 333-52920); (ii) the interest of the Corporation or any of its subsidiaries in any business, asset or property acquired and any liabilities assumed by the Corporation or any of its subsidiaries and attributed to the MCI Group, as determined by the board of directors as contemplated by Section 6(A); (iii) all businesses, assets, properties and liabilities transferred to the MCI Group from the WorldCom Group (other than in a transaction pursuant to clause (v) or (vi) of this Section 7(O)) pursuant to transactions in the ordinary course of business of the MCI Group and the WorldCom Group or otherwise as the board of directors may have directed as permitted by these Second Amended and Restated Articles of Incorporation; (iv) a proportionate undivided interest in each and every business, asset, property and liability attributed to the WorldCom Group equal to the Inter-Group Interest in the WorldCom Group held by the MCI Group as of such date; (v) all businesses, assets, properties and liabilities transferred to the MCI Group from the WorldCom Group in connection with an increase in the Inter-Group Interest in the MCI Group held by the WorldCom Group; (vi) all businesses, assets, properties and liabilities transferred to the MCI Group from the WorldCom Group in connection with a decrease in the Inter-Group Interest in the WorldCom Group held by the MCI Group; (vii) any assets (including securities) or properties attributed to the MCI Group pursuant to Section 5(B) or Section 5(C); and (viii) all net income and net losses arising in respect of the foregoing and proceeds of the Disposition thereof; provided that from and after any transfer of any businesses, assets, properties or liabilities from the MCI Group to the WorldCom Group as permitted by these Second Amended and Restated Articles of Incorporation, the MCI Group shall no longer include such businesses, assets, properties or liabilities so contributed or transferred (other than as reflected, to the extent applicable, in respect of such a transfer by the Inter-Group Interest in the WorldCom Group held by the MCI Group). (P) "MCI Group Available Distribution Amount" shall mean, on any date the product of: (i) the Outstanding Interest Fraction with respect to MCI Stock; and 32 (ii) the lesser of: (x) any amount in excess of the minimum amount necessary to pay debts attributed to the MCI Group as they become due in the usual course of business; and (y) the total assets attributed to the MCI Group, less the sum of its total liabilities plus (unless these Second Amended and Restated Articles of Incorporation provide otherwise) the amount that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shares of stock attributed to the MCI Group superior to the MCI Stock. Notwithstanding the foregoing provisions of this Section 7(P), and consistent with Section 6(B), at any time when there are not outstanding both: (i) one or more shares of MCI Stock or Convertible Securities convertible into or exchangeable or exercisable for MCI Stock; and (ii) one or more shares of WorldCom Stock or Convertible Securities convertible into or exchangeable or exercisable for WorldCom Stock, the "Available Distribution Amount," on any calculation date during such time period, with respect to the MCI Stock or the WorldCom Stock (depending on which of such series of common stock or Convertible Securities convertible into or exchangeable or exercisable for such series of common stock is outstanding), shall mean the amount available for the payment of dividends on such common stock in accordance with law. (Q) "Net Proceeds" shall mean, as of any date with respect to any Disposition of any of the businesses, assets, properties and liabilities attributed to either the WorldCom Group or the MCI Group, an amount, if any, equal to what remains of the gross proceeds of such Disposition after payment of, or reasonable provision is made as determined by the board of directors for: (i) any taxes the Corporation estimates will be payable by the Corporation (or which the Corporation estimates would have been payable but for the utilization of tax benefits attributable to the other Group) in respect of such Disposition or in respect of any resulting dividend or redemption pursuant to Section 4(A)(i)(l)(a), Section 4(A)(i)(1)(b), Section 4(B)(i)(1)(a) or Section 4(B)(i)(l)(b); (ii) any transaction costs, including, without limitation, any legal, investment banking and accounting fees and expenses; and (iii) any liabilities (contingent or otherwise) of or attributed to such Group, including, without limitation, any liabilities for deferred taxes or any indemnity or guarantee obligations of the Corporation incurred in connection with the Disposition or otherwise, and any liabilities for future purchase price adjustments and any preferential 33 amounts plus any accumulated and unpaid dividends in respect of the preferred stock attributed to such Group. For purposes of this definition, any businesses, properties and assets attributed to the Group, the businesses, assets, properties and liabilities of which are subject to such Disposition, remaining after such Disposition shall constitute "reasonable provision" for such amount of taxes, costs and liabilities (contingent or otherwise) as the Board of Directors determines can be expected to be supported by such businesses, properties and assets. (R) "Number of Shares Issuable with Respect to the Inter-Group Interest" shall mean with respect to any Issuer Group, a number of shares of the series of common stock related to such Issuer Group that are deemed to be held by a Holder Group. The Number of Shares Issuable with Respect to the Inter-Group Interest with respect to the WorldCom Stock and MCI Stock shall initially each be zero and in each case shall be adjusted, increased or decreased from time to time pursuant to Section 5. (S) "Outstanding Interest Fraction" shall mean, as of any date with respect to WorldCom Stock or MCI Stock, the fraction (which may simplify to 1/1), the numerator of which shall be the number of outstanding shares of such series of common stock on such date and the denominator of which shall be the sum of the number of outstanding shares of such series of common stock on such date and the Number of Shares Issuable with Respect to the Inter-Group Interest in the Group related to such series of common stock on such date. A statement setting forth the Outstanding Interest Fraction for any series of common stock as of the record date for the payment of any distribution or share dividend on any series of common stock shall be filed by the secretary of the Corporation in the records of the actions of the board of directors not later than ten days after such date. (T) "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, government or agency or political subdivision thereof, or other entity, whether acting in an individual, fiduciary or other capacity. (U) "Publicly Traded" shall mean, with respect to any security: (i) registered under Section 12 of the Securities Exchange Act of 1934, as amended (or any successor provision of law); and (ii) listed for trading on the New York Stock Exchange or the American Stock Exchange (or any national securities exchange registered under Section 7 of the Securities Exchange Act of 1934, as amended (or any successor provision of law), that is the successor to either such exchange) or quoted in the Nasdaq National Market (or any successor market system). (V) "Redemption Date" shall mean the date fixed by the board of directors as the effective date for a redemption of shares of any series of common stock, as set forth in a notice to holders thereof required pursuant to Section 4(G)(iii), Section 4(G)(iv) or Section 4(G)(vi). 34 (W) "Related Business Transaction" shall mean any Disposition of all or substantially all of the businesses, assets, properties and liabilities attributed to the WorldCom Group or the MCI Group, as the case may be, in a transaction or series of related transactions that result in the Corporation, one or more of its Subsidiaries or the holders of common stock receiving in consideration of such businesses, assets, properties and liabilities primarily equity securities (including, without limitation, capital stock, debt securities convertible into or exchangeable for equity securities or interests in a general or limited partnership or limited liability company, without regard to the voting power or other management or governance rights associated therewith) of any entity which: (i) acquires such assets or properties or succeeds (by merger, formation of a joint venture or otherwise) to the business conducted with such assets or properties or controls such acquiror or successor; and (ii) the board of directors determines is primarily engaged or proposes to engage primarily in one or more businesses similar or complementary to the businesses conducted by such Group prior to such Disposition. (X) "Share dividend" shall have the meaning contained in the Georgia Business Corporation Code, as in effect on the Initial Issuance Date. (Y) "Subsidiary" shall mean, with respect to any Person, any corporation, limited liability company or partnership 50% or more of whose outstanding voting securities or membership or partnership interests, as the case may be, are, directly or indirectly, owned by such Person. (Z) "Substantially all of the businesses, assets, properties and liabilities" shall have the meaning specified in Section 4(A)(ii) or Section 4(B)(ii), as applicable. (AA) "Tax Event" shall mean receipt by the Corporation of an opinion of its tax counsel to the effect that, as a result of any amendment to, clarification of, or change or proposed change in, the laws (or any interpretation or application of the laws) of the United States or any political subdivision or taxing authority thereof or therein (including, but not limited to, the enactment of any legislation, the publication of any judicial or regulatory decision, determination or pronouncement or any announced proposed change in law by an applicable legislative committee or the chair thereof), regardless of whether such amendment, clarification, change or proposed change is issued to or in connection with a proceeding involving the Corporation, the WorldCom Group or the MCI Group and whether or not subject to appeal, there is more than an insubstantial risk that: (i) for tax purposes, any issuance of WorldCom Stock or MCI Stock would be treated as a sale or other taxable disposition by the Corporation or any of its subsidiaries of any of the assets, operations or relevant subsidiaries to which the WorldCom Stock or MCI Stock relates; (ii) the issuance or existence of WorldCom Stock or MCI Stock would subject the Corporation, its subsidiaries or affiliates, or any of their respective successors or shareholders to the imposition of tax or to other adverse tax consequences; or 35 (iii) for tax purposes, either WorldCom Stock or MCI Stock is not or, at any time in the future will not be, treated solely as common stock of the Corporation. For purposes of rendering such opinion, tax counsel shall assume that any legislative or administrative proposals will be adopted or enacted as proposed. (BB) "Trading Day" shall mean each weekday other than any day on which the relevant series of common stock is not traded on any national securities exchange or quoted on the Nasdaq National Market or otherwise in the over-the-counter market. (CC) "WorldCom Group" shall mean, as of any date: (i) the interest of the Corporation and any of its subsidiaries on such date in all of the businesses, assets, properties and liabilities of the Corporation and any of its subsidiaries (and any successor companies), other than any businesses, assets, properties and liabilities attributed in accordance with these Second Amended and Restated Articles of Incorporation to the MCI Group pursuant to Section 7(O)(i); (ii) the interest of the Corporation or any of its subsidiaries in any business, asset or property acquired and any liabilities assumed by the Corporation or any of its subsidiaries and attributed to the WorldCom Group, as determined by the board of directors as contemplated by Section 6(A); (iii) all businesses, assets, properties and liabilities transferred to the WorldCom Group from the MCI Group (other than in a transaction pursuant to clause (v) and (vi) of this Section 7(CC)) pursuant to transactions in the ordinary course of business of the WorldCom Group and the MCI Group or otherwise as the board of directors may have directed as permitted by these Second Amended and Restated Articles of Incorporation; (iv) a proportionate undivided interest in each and every business, asset, property and liability attributed to the MCI Group equal to the Inter-Group Interest in the MCI Group held by the WorldCom Group as of such date; (v) all businesses, assets, properties and liabilities transferred to the WorldCom Group from the MCI Group in connection with an increase in the Inter-Group Interest in the WorldCom Group held by the MCI Group; (vi) all businesses, assets, properties and liabilities transferred to the WorldCom Group from the MCI Group in connection with a decrease in the Inter-Group Interest in the MCI Group held by the WorldCom Group; (vii) any assets (including securities) or properties attributed to the WorldCom Group pursuant to Section 5(B) or Section 5(C); and (viii) all net income and net losses arising in respect of the foregoing and proceeds of the Disposition thereof; 36 provided that from and after any transfer of any businesses, assets, properties or liabilities from the WorldCom Group to the MCI Group as permitted by these Second Amended and Restated Articles of Incorporation, the WorldCom Group shall no longer include such businesses, assets, properties or liabilities so contributed or transferred (other than as reflected, to the extent applicable, in respect of such a transfer by the Inter-Group Interest in the MCI Group held by the WorldCom Group). (DD) "WorldCom Group Available Distribution Amount" shall mean, on any date, the product of: (i) the Outstanding Interest Fraction with respect to WorldCom Stock; and (ii) the lesser of: (x) any amount in excess of the minimum amount necessary for the WorldCom Group to pay debts attributed to the WorldCom Group as they become due in the usual course of business; and (y) the total assets attributed to the WorldCom Group, less the sum of its total liabilities plus (unless these Second Amended and Restated Articles of Incorporation provide otherwise) the amount that would be needed if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shares of stock attributed to the WorldCom Group superior to the WorldCom Stock. Notwithstanding the foregoing provisions of this Section 7(DD), and consistent with Section 6(B), at any time when there are not outstanding both: (i) one or more shares of WorldCom Stock or Convertible Securities convertible into or exchangeable or exercisable for WorldCom Stock; and (ii) one or more shares of MCI Stock or Convertible Series convertible into or exchangeable or exercisable for MCI Stock, the "Available Distribution Amount," on any calculation date during such time period, with respect to the WorldCom Stock or the MCI Stock (depending on which of such series of common stock or Convertible Securities convertible into or exchangeable or exercisable for such series of common stock is outstanding), shall mean the amount available for the payment of dividends on such common stock in accordance with law. Section 8. Severability of Provisions. If any term of any provision with respect to voting powers, preferences, designations, rights, qualifications, limitations or restrictions of the WorldCom Stock or the MCI Stock set forth in this Section A of Article 4 (as it may be amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other terms and provisions with respect to voting powers, preferences, designations, rights, qualifications, limitations or restrictions of the WorldCom Stock or the MCI Stock set forth in this Section A of Article 4 (as it may be amended from time to time) which can be given effect without the invalid, unlawful or unenforceable voting powers, 37 preferences, designations, rights, qualifications, limitations or restrictions of such series shall, nevertheless, remain in full force and effect, and no term of such series of common stock herein set forth shall be deemed dependent upon any other terms with respect to such voting powers, preferences, designations, rights, qualifications, limitations or restrictions of the WorldCom Stock or the MCI Stock unless so expressed herein. 38 EX-4.2 4 exh4_2.txt ARTICLES OF AMENDMENT EXHIBIT 4.2 ARTICLES OF AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF WORLDCOM, INC. 1. The name of the Corporation is WorldCom, Inc. 2. Effective the date hereof, Article Eleven of the Second Amended and Restated Articles of Incorporation of the Corporation, as amended, is hereby amended by deleting the text thereof and substituting therefor the text of the amendments attached hereto as Exhibit A. 3. All other provisions of the Second Amended and Restated Articles of Incorporation, as previously amended, shall remain in full force and effect. 4. The provisions of Article Eleven of the Second Amended and Restated Articles of Incorporation, as amended, were duly approved by the shareholders of the Corporation in accordance with the provisions of Section 14-2-1003 of the Georgia Business Corporation Code on the 7th day of June, 2001. 5. The provisions of Article Eleven of the Second Amended and Restated Articles of Incorporation, as amended, were duly adopted and authorized by the Board of Directors of the Corporation on October 31, 2000. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its duly authorized officer, this 7th day of June, 2001. WORLDCOM, INC. By: /s/ Bernard J. Ebbers --------------------------- Name: Bernard J. Ebbers Title: President Exhibit A ELEVEN (a) In addition to the requirements of the provisions of any series of preferred stock which may be outstanding, and whether or not a vote of the shareholders is otherwise required, the affirmative vote of the holders of not less than seventy percent (70%) of the voting power of the Corporation's Voting Stock shall be required for the approval or authorization of any Business Transaction with a Related Person, or any Business Transaction in which a Related Person has an interest (other than only a proportionate interest as a shareholder of the corporation); provided, however, that the seventy percent (70%) voting requirement shall not be applicable if (i) the Business Transaction is Duly Approved by the Continuing Directors, or (ii) all of the following conditions are satisfied: (i) the aggregate amount of cash and the fair market value of the property, securities or other consideration to be received per share, (on the date of effectiveness of such Business Transaction) for a particular class or series of a class if there is more than one series in a class, by holders of capital stock of the Corporation (other than such Related Person) in connection with such Business Transaction is at least equal in value to such Related Person's Highest Stock Purchase Price for such class or series; (ii) the consideration to be received by holders of capital stock of the Corporation in connection with such Business Transaction is in (a) cash, or (b) if the majority of the shares of any particular class or series of stock of the Corporation as to which the Related Person is the Beneficial Owner shall have been acquired for a consideration in a form other than cash, in the same form of consideration used by the Related Person to acquire the largest number of shares of such class or series of stock; (iii) after such Related Person has become a Related Person and prior to the consummation of such Business Transaction, such Related Person shall not have become the Beneficial Owner of any additional shares of capital stock of the Corporation or securities convertible into capital stock of the Corporation, except (i) as a part of the transaction which resulted in such Related Person becoming a Related Person or (ii) as a result of a pro rata stock dividend or stock split; (iv) prior to the consummation of such Business Transaction, such Related Person shall not have, directly or indirectly, except as Duly Approved by the Continuing Directors (i) received the benefit (other than only a proportionate benefit as a shareholder of the corporation) of any loans, advances, guarantees, pledges or other financial assistance or tax credits or tax advantages provided by the Corporation or any of its subsidiaries, (ii) caused any material change in the Corporation's business or equity capital structure, including, without limitation, the issuance of shares of capital stock of the Corporation, or other securities convertible into or exercisable for such shares, or (iii) caused the Corporation to fail to declare and pay at the regular date therefor quarterly cash dividends on the outstanding capital stock of the Corporation entitled to receive dividends, on a per share basis at least equal to the cash dividends being paid thereon by the corporation immediately prior to the date on which the Related Person became a Related Person; and (v) a proxy or information statement describing the proposed Business Transaction and complying with the requirements of the Securities Exchange Act of 1934, as amended (the "Act"), and the rules and regulations thereunder (or any subsequent provisions replacing the Act or such rules or regulations) shall be mailed to shareholders of the Corporation at least thirty (30) days prior to the consummation of such Business Transaction (whether or not such proxy or information statement is required to be mailed pursuant to the Act and such rules and regulations or subsequent provisions). (b) For the purpose of this Article ELEVEN: (i) The term "Affiliate", used to indicate a relationship to a specified person, shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person. (ii) The term "Associate", used to indicate a relationship with a specified person, shall mean (A) any corporation, partnership or other organization of which such specified person is an officer or partner, (B) any trust or other estate in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar fiduciary capacity, (C) any relative or spouse of such specified person who has the same home as such specified person or who is a director or officer of the corporation or any of its subsidiaries, and (D) any person who is a director, officer or partner of such specified person or of any corporation (other than the corporation or any wholly-owned subsidiary of the corporation), partnership or other entity which is an Affiliate of such specified person. (iii) The term "Beneficial Owner" shall be defined by reference to Rule 13d-3 under the Act as in effect on September 15, 1993; provided, however, that any individual, corporation, partnership, group, association or other person or entity which has the right to acquire any capital stock of the corporation having voting power at any time in the future, whether such right is contingent or absolute, pursuant to any agreement, arrangement or understanding or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed the Beneficial Owner of such capital stock. (iv) The term "Business Transaction" shall mean: (A) any merger, share exchange or consolidation involving the Corporation or a subsidiary of the Corporation; (B) any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transactions), including, without limitation, a mortgage, pledge or any other security device of all or any Substantial Part of the 3 assets either of the Corporation or of a subsidiary of the Corporation; (C) any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transactions) of all or any Substantial Part of the assets of any entity to the Corporation or a subsidiary of the Corporation; (D) the issuance, sale, exchange, transfer or other disposition (in one transaction or a series of related transactions) by the Corporation or a subsidiary of the Corporation of any securities of the Corporation or any subsidiary of the Corporation in exchange for cash, securities or other property, or a combination thereof, having an aggregate fair market value of $15 million or more; (E) any merger, share exchange or consolidation of the Corporation with any of its subsidiaries or any similar transaction in which the Corporation is not the survivor and the charter or certificate or articles of incorporation of the consolidated or surviving Corporation do not contain provisions substantially similar to those in this Article ELEVEN; (F) any recapitalization or reorganization of the Corporation or any reclassification of the securities of the Corporation (including, without limitation, any reverse stock split) or other transaction that would have the effect of increasing the voting power of a Related Person or reducing the number of shares of each class of voting securities outstanding; (G) any liquidation, spin-off, split-off, split-up or dissolution of the Corporation; and (H) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Transaction or having a similar purpose or effect. (v) The term "Continuing Director" shall mean a director who either was a member of the Board of Directors of the Corporation on September 15, 1993, or who became a director of the Corporation subsequent to such date and whose election or nomination for election by the Corporation's shareholders was Duly Approved by the Continuing Directors then on the Board, either by a specific vote or by approval of the proxy statement issued by the Corporation on behalf of the Board of Directors in which such person is named as nominee for director; provided, however, that in no event shall a director be considered a "Continuing Director" if such director is a Related Person and the Business Transaction to be voted upon is with such Related Person or is one in which such Related Person has an interest (other than only a proportionate interest as a shareholder of the Corporation). (vi) The term "Duly Approved by the Continuing Directors" shall mean an action approved by the vote of at least a majority of the Continuing Directors then on the Board; provided, however, that if the votes of such Continuing Directors in favor of such action would be insufficient to constitute an act of the Board of Directors (if a vote by the entire Board of Directors were to have been taken), then such term shall mean an action approved by the unanimous vote of the Continuing Directors so long as there are at least three (3) Continuing Directors on the Board of Directors at the time of such unanimous vote. (vii) The term "Fair Market Value", in the case of stock, means the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock 4 Exchange Listed Stocks, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith. (viii) The term "Highest Stock Purchase Price" with respect to shares of a particular class, or series of a class if there are more than one series in a class, shall mean the greatest of the following: (A) the highest amount of consideration paid by a Related Person for a share of such class or series of capital stock of the Corporation (including any brokerage commissions, transfer taxes and soliciting dealers' fees) in the transaction which resulted in such Related Person becoming a Related Person or within two years prior to the first public announcement of the Business Transaction (the "Announcement Date"), whichever is higher; provided, however, that the Highest Stock Purchase Price calculated under this subsection (A) shall be appropriately adjusted to reflect the occurrence of any reclassification, recapitalization, stock-split, reverse stock-split or other similar corporate readjustment in the number or kind of outstanding shares of capital stock of the Corporation between the last date upon which such Related Person paid the Highest Stock Purchase Price up to the effective date of the merger, share exchange or consolidation or the date of distribution to shareholders of the Corporation of the proceeds from the sale of substantially all of the assets of the Corporation referred to in subparagraph (i) of Section (a)(ii) of this Article Eleven; (B) the Fair Market Value per share of ^such classes^ or series of stock of the Corporation on the Announcement Date; (C) the Fair Market Value per share of ^such classes^ or series of stock of the Corporation on the date that the Related Person becomes a Related Person; (D) if applicable, the Fair Market Value per share determined pursuant to subsection (b)(viii)(B) or (C) of this Article ELEVEN, whichever is higher, multiplied by the ratio of (i) the highest price per share (including any brokerage commissions, transfer taxes or soliciting dealers' fees and adjusted for any subsequent stock dividends, splits, combinations, recapitalizations, reclassifications or other such reorganizations) paid to acquire any shares of such ^ classes^ or series Beneficially Owned by the Related Person within the two years prior to the Announcement Date, to (ii) the Fair Market Value per share (adjusted for any subsequent stock dividends, 5 splits, combinations, recapitalizations, reclassifications or other such reorganizations) of shares of such ^classes^ or series on the first day in the two-year period ending on the Announcement Date on which such shares Beneficially Owned by the Related Person were acquired; or (E) the amount per share of any preferential payment to which holders of shares of such ^classes^ or series are entitled in the event of a liquidation, dissolution or winding up of the Corporation. (ix) ^The phrase "property, securities or other consideration to be received", for the purpose of subparagraph (i) of Section (a)(ii) of this Article ELEVEN and in the event of a merger in which the corporation is the surviving corporation, shall include, without limitation, common stock of the Corporation retained by its shareholders (other than such Related Person). (x) The term "Related Person" shall mean and include (A) any individual, corporation, partnership, group, association or other person or entity which, together with its Affiliates and Associates, is the Beneficial Owner of not less than ten percent (10%) of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote or was the Beneficial Owner of not less than ten percent (10%) of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote (x) at the time the definitive agreement providing for the Business Transaction (including any amendment thereof) was entered into, (y) at the time resolution approving the Business Transaction was adopted by the Board of Directors of the Corporation, or (z) as of the record date for the determination of shareholders entitled to notice of and to vote on or consent to the Business Transaction, and (B) any Affiliate or Associate of any such individual, corporation, partnership, group, association or other person or entity; provided, however, and notwithstanding any thing in the foregoing to the contrary, that the term "Related Person" shall not include the Corporation, a more than 90% owned subsidiary of the Corporation, any employee stock ownership or other employee benefit plan of either the Corporation or any more than 90% owned subsidiary of the Corporation, or any trustee of or fiduciary with respect to any such plan when acting in such capacity. (xi) The term "Substantial Part" shall mean more than twenty percent (20%) of the total assets of the entity in question, as reflected on the most recent consolidated balance sheet of such entity existing at the time the shareholders of the Corporation would be required to approve or authorize the Business Transaction involving the assets constituting any such Substantial Part. (xii) The term "Voting Stock" shall mean all outstanding shares of capital stock of the Corporation whose holders are present at a meeting of shareholders, in person or by proxy, and which entitle their holders to vote generally in the election of directors, and considered for the purpose of this Article ELEVEN as one class. 6 (c) For the purpose of this Article ELEVEN, so long as Continuing Directors constitute at least two-thirds (2/3) of the entire Board of Directors of the Corporation, the Board of Directors shall have the power to make a good faith determination, on the basis of information known to them, of (i) the number of shares of Voting Stock of which any person is the Beneficial Owner, (ii) whether a person is a Related Person or is an Affiliate or Associate of another, (iii) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of Beneficial Owner herein, (iv) whether the assets subject to any Business Transaction constitute a Substantial Part, (v) whether any Business Transaction is with a Related Person or is one in which a Related Person has an interest (other than only a proportionate interest as a shareholder of the corporation), (vi) whether a Related Person has, directly or indirectly, received the benefits or caused any of the changes referred to in subparagraph (iv) of clause (ii) of Section (a) of this Article ELEVEN, (vii) the fair market value of any consideration to be received in a Business Transaction and (viii) such other matters with respect to which a determination is required under this Article ELEVEN; and such determination by the Board of Directors shall be conclusive and binding for all purposes of this Article ELEVEN. (d) Nothing contained in this Article ELEVEN shall be construed to relieve any Related Person of any fiduciary obligation imposed by law. (e) The fact that any Business Transaction complies with the provisions of Section (a) of this Article ELEVEN shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Transaction or recommend its adoption or approval to the shareholders of the corporation. (f) Notwithstanding any other provisions of these Second Amended and Restated Articles of Incorporation or the Bylaws of the corporation (and notwithstanding that a lesser percentage may be permitted by law), the provisions of this Article ELEVEN may not be repealed or amended, directly or indirectly in any respect, unless such action is approved by the affirmative vote of the holders of not less than seventy percent (70%) of the voting power of the Corporation's Voting Stock. 7 EX-4.3 5 exh4_3.txt ARTICLES OF AMENDMENT EXHIBIT 4.3 ARTICLES OF AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF MCI WORLDCOM, INC. ----------------------------------------------- 1. The name of the corporation is MCI WORLDCOM, Inc. (the "Corporation"). 2. Effective the date hereof, Article One of the Corporation's Second Amended and Restated Articles of Incorporation, as amended, is amended, in its entirety, to read as follows: ONE The name of this corporation is WorldCom, Inc. This corporation is referred to hereinafter as the "Corporation." 3. All other provisions of the Second Amended and Restated Articles of Incorporation, as previously amended, shall remain in full force and effect. 4. The foregoing amendment was approved and adopted on April 28, 2000 by the Board of Directors of the Corporation in accordance with the provisions of Section 14-2-1002 of the Georgia Business Corporation Code. Shareholder action was not required. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its duly authorized officer as of May 1, 2000. MCI WORLDCOM, INC. By: /s/ Bernard J. Ebbers ------------------------------------- Bernard J. Ebbers, President ARTICLES OF AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF MCI WORLDCOM, INC. -------------------------------------------------------- 1. The name of the corporation is MCI WORLDCOM, Inc. (the "Corporation"). 2. Effective the date hereof, the Corporation's Second Amended and Restated Articles of Incorporation, as amended, is further amended to add a new Article Seven A to read in its entirety as follows: SEVEN A A series of the class of authorized preferred stock, par value $.01 per share, of the Corporation is hereby created having the designation and number of shares thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof, as are set forth on Exhibit D. 3. All other provisions of the Second Amended and Restated Articles of Incorporation, as previously amended, shall remain in full force and effect. 4. The foregoing amendment was approved and duly adopted by the Board of Directors of the Corporation on September 9, 1999, in accordance with the provisions of Sections 14-2-602 and 14-2-1002 of the Georgia Business Corporation Code. Shareholder action was not required. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its duly authorized officer this 1st day of October, 1999. MCI WORLDCOM, INC. By: /s/ Bernard J. Ebbers --------------------------------- Bernard J. Ebbers, President ARTICLES OF AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF MCI WORLDCOM, INC. -------------------------------------------------------- 1. The name of the corporation is MCI WORLDCOM, Inc. (the "Corporation"). 2. Effective the date hereof, Section A of Article Four of the Corporation's Second Amended and Restated Articles of Incorporation is amended, in its entirety, to read as follows: A. Common Stock. The authorized voting common stock of the Corporation is five billion (5,000,000,000) shares, par value $.01 per share. 3. Effective the date hereof, Section 1 of Exhibit C of the Second Amended and Restated Articles of Incorporation is amended, in its entirety, to read as follows: Section 1. Designation and Amount. There shall be a series of the Preferred Stock which shall be designated as the "Series 3 Junior Participating Preferred Stock," par value $.01 per share, and the number of shares constituting such series shall be 5,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series 3 Junior Participating Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Company. 4. All other provisions of the Second Amended and Restated Articles of Incorporation, as previously amended, shall remain in full force and effect. 5. The amendment in Article 2, above, was duly approved by the shareholders of the Corporation in accordance with the provisions of Section 14-2-1003 of the Georgia Business Corporation Code and adopted on May 20, 1999. 6. The amendment in Article 3, above, was approved and adopted by the Board of Directors of the Corporation in accordance with the provisions of Section 14-2-1002 of the Georgia Business Corporation Code. Shareholder action was not required. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its duly authorized officer this 20th day of May, 1999. MCI WORLDCOM, INC. By: /s/ Bernard J. Ebbers -------------------------------- Bernard J. Ebbers, President ARTICLES OF AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF WORLDCOM, INC. 1. The name of the corporation is WorldCom, Inc. (the "Corporation"). 2. Effective the date hereof, Article One of the Corporation's Second Amended and Restated Articles of Incorporation is amended, in its entirety, to read as follows: ONE The name of this corporation is MCI WORLDCOM, Inc. This corporation is referred to hereinafter as the "Corporation." 3. All other provisions of the Second Amended and Restated Articles of Incorporation shall remain in full force and effect. 4. The foregoing amendment was approved and adopted by the Board of Directors of the Corporation in accordance with the provisions of Section 14-2-1002 of the Georgia Business Corporation Code. Shareholder action was not required. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its duly authorized officer this 14th day of September, 1998. WORLDCOM, INC. /s/ Bernard J. Ebbers ----------------------------------- Bernard J. Ebbers, President SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF WORLDCOM, INC. ONE The name of this corporation is WORLDCOM, INC. This corporation is referred to hereinafter as the "Corporation." TWO The Corporation shall have perpetual duration. THREE The Corporation has been organized as a corporation for profit pursuant to the Georgia Business Corporation Code, for the purpose of engaging in any lawful activities whatsoever. FOUR A. Common Stock. The authorized voting common stock of the Corporation is two billion five hundred million (2,500,000,000) shares, par value $.01 per share. B. Preferred Stock. The authorized preferred stock of the Corporation is fifty million (50,000,000) shares, par value $.01 per share. The Corporation, acting by its board of directors, without action by the shareholders, may, from time to time by resolution and upon the filing of such certificate or articles of amendment as may be required by the Georgia Business Corporation Code as then in effect, authorize the issuance of shares of preferred stock in one or more series, determine the preferences, limitations and relative rights of the class or of any series within the class, and designate the number of shares within that series. FIVE A series of the class of authorized preferred stock, par value $.01 per share, of the Corporation is hereby created having the designation and number of shares thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof, as are set forth on Exhibit A. SIX A series of the class of authorized preferred stock, par value $.01 per share, of the Corporation is hereby created having the designation and number of shares thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof, as are set forth on Exhibit B. SEVEN A series of the class of authorized preferred stock, par value $.01 per share, of the Corporation is hereby created having the designation and number of shares thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof, as are set forth on Exhibit C. EIGHT Subject to the provisions of Article THIRTEEN, each share of common stock of the Corporation shall have unlimited voting rights and shall be entitled to receive the net assets of the Corporation upon dissolution, except as express1y provided herein. The preferred stock of the Corporation shall have such voting rights as are set forth in Exhibits A, B or C hereto or in the certificate or articles of amendment filed to authorize the issuance of shares of preferred stock in one of more series and as are provided by law. NINE Shareholders shall not have the preemptive right to acquire unissued shares of the Corporation. TEN No director of the Corporation shall be liable to the Corporation or to its shareholders for monetary damages for breach of duty of care or other duty as a director, except for liability (i) for any appropriation, in violation of his duties, of any business opportunity of the Corporation; (ii) for acts or omissions which involve intentional misconduct or a knowing violation of the law; (iii) for the types of liability set forth in section 14-2-832 of the Revised Georgia Business Corporation Code; or (iv) for any transaction from which the director received an improper personal benefit. If the Georgia Business Corporation Code is amended to authorize corporate action further limiting the personal liability of directors, then the liability of a director of the Corporation shall be limited to the fullest extent permitted by the Georgia Business Corporation Code, as so amended. Any repeal or modification of the foregoing paragraph by the shareholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing immediately prior to the time of such repeal or modification. ELEVEN (a) In addition to the requirements of the provisions of any series of preferred stock which may be outstanding, and whether or not a vote of the shareholders is otherwise required, the affirmative vote of the holders of not less than seventy percent (70%) of the Voting Stock shall be required for the approval or authorization of any Business Transaction with a Related Person, or any Business Transaction in which a Related Person has an interest (other than only a proportionate interest as a shareholder of the corporation); provided, however, that the seventy percent (70%) voting requirement shall not be applicable if (i) the Business Transaction is Duly Approved by the Continuing Directors, or (ii) all of the following conditions are satisfied: -2- (i) the aggregate amount of cash and the fair market value of the property, securities or other consideration to be received per share (on the date of effectiveness of such Business Transaction) by holders of capital stock of the corporation (other than such Related Person) in connection with such Business Transaction is at least equal in value to such Related Person's Highest Stock Price; (ii) the consideration to be received by holders of capital stock of the Corporation in connection with such Business Transaction is in (a) cash, or (b) if the majority of the shares of any particular class or series of stock of the Corporation as to which the Related Person is the Beneficial Owner shall have been acquired for a consideration in a form other than cash, in the same form of Consideration used by the Related Person to acquire the largest number of shares of such class or series of stock; (iii) after such Related Person has become a Related Person and prior to the consummation of such Business Transaction, such Related Person shall not have become the Beneficial Owner of any additional shares of capital stock of the Corporation or securities convertible into capital stock of the Corporation, except (i) as a part of the transaction which resulted in such Related Person becoming a Related Person or (ii) as a result of a pro rata stock dividend or stock split; (iv) prior to the consummation of such Business Transaction, such Related Person shall not have, directly or indirectly, except as Duly Approved by the Continuing Directors (i) received the benefit (other than only a proportionate benefit as a shareholder of the corporation) of any loans, advances, guarantees, pledges or other financial assistance or tax credits or tax advantages provided by the Corporation or any of its subsidiaries, (ii) caused any material change in the Corporation's business or equity capital structure, including, without limitation, the issuance of shares of capital stock of the Corporation, or other securities convertible into or exercisable for such shares, or (iii) caused the Corporation to fail to declare and pay at the regular date therefor quarterly cash dividends on the outstanding capital stock of the Corporation entitled to receive dividends, on a per share basis at least equal to the cash dividends being paid thereon by the Corporation immediately prior to the date on which the Related Person became a Related Person; and (v) a proxy or information statement describing the proposed Business Transaction and complying with the requirements of the Securities Exchange Act of 1934, as amended (the "Act"), and the rules and regulations thereunder (or any subsequent provisions replacing the Act or such rules or regulations) shall be mailed to shareholders of the Corporation at least thirty (30) days prior to the consummation of such Business Transaction (whether or not such proxy or information statement is required to be mailed pursuant to the Act and such rules and regulations or subsequent provisions). -3- (b) For the purpose of this Article ELEVEN: (i) The term "Affiliate", used to indicate a relationship to a specified person, shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person. (ii) The term "Associate", used to indicate a relationship with a specified person, shall mean (A) any corporation, partnership or other organization of which such specified person is an officer or partner, (B) any trust or other estate in which such specified person has a substantial beneficial interest or as to which such specified person serves as trustee or in a similar fiduciary capacity, (C) any relative or spouse of such specified person who has the same home as such specified person or who is a director or officer of the corporation or any of its subsidiaries, and (D) any person who is a director, officer or partner of such specified person or of any corporation (other than the corporation or any wholly-owned subsidiary of the corporation), partnership or other entity which is an Affiliate of such specified person. (iii) The term "Beneficial Owner" shall be defined by reference to Rule 13d-3 under the Act as in effect on September 15, 1993; provided, however, that any individual, corporation, partnership, group, association or other person or entity which has the right to acquire any capital stock of the corporation having voting power at any time in the future, whether such right is contingent or absolute, pursuant to any agreement, arrangement or understanding or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed the Beneficial Owner of such capital stock. (iv) The term "Business Transaction" shall mean: (A) any merger, share exchange or consolidation involving the Corporation or a subsidiary of the Corporation; (B) any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transactions), including, without limitation, a mortgage, pledge or any other security device of all or any Substantial Part of the assets either of the Corporation or of a subsidiary of the Corporation; (C) any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transactions) of all or any Substantial Part of the assets of any entity to the Corporation or a subsidiary of the Corporation; (D) the issuance, sale, exchange, transfer or other disposition (in one transaction or a series of related transactions) by the Corporation or a subsidiary of the Corporation of any securities of the Corporation or any subsidiary of the Corporation in exchange for cash, securities or other property, or a combination thereof, having an aggregate fair market value of $15 million or more; (E) any merger, share exchange or consolidation of the Corporation with any of its subsidiaries or any similar transaction in which the Corporation is not the survivor and the charter or certificate or articles of incorporation of the consolidated or surviving Corporation do not contain provisions substantially similar to those in this Article ELEVEN; (F) any recapitalization or reorganization of the Corporation or any reclassification of the securities of the Corporation (including, without limitation, any reverse stock split) or other transaction that would have the effect of increasing the voting power of a Related Person or reducing the number of shares of each class of voting securities outstanding; (G) any liquidation, spin-off, split-off, split-up or dissolution of the Corporation; and (H) any agreement, contract or other arrangement -4- providing for any of the transactions described in this definition of Business Transaction or having a similar purpose or effect. (v) The term "Continuing Director" shall mean a director who either was a member of the Board of Directors of the Corporation on September 15, 1993, or who became a director of the Corporation subsequent to such date and whose election or nomination for election by the Corporation's shareholders was Duly Approved by the Continuing Directors then on the Board, either by a specific vote or by approval of the proxy statement issued by the Corporation on behalf of the Board of Directors in which such person is named as nominee for director; provided, however, that in no event shall a director be considered a "Continuing Director" if such director is a Related Person and the Business Transaction to be voted upon is with such Related Person or is one in which such Related Person has an interest (other than only a proportionate interest as a shareholder of the Corporation). (vi) The term "Duly Approved by the Continuing Directors" shall mean an action approved by the vote of at least a majority of the Continuing Directors then on the Board; provided, however, that if the votes of such Continuing Directors in favor of such action would be insufficient to constitute an act of the Board of Directors (if a vote by the entire Board of Directors were to have been taken), then such term shall mean an action approved by the unanimous vote of the Continuing Directors so long as there are at least three (3) Continuing Directors on the Board of Directors at the time of such unanimous vote. (vii) The term "Fair Market Value", in the case of stock, means the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not on such Exchange, on the principal United States securities exchange registered under the Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith. (viii) The term "Highest Stock Purchase Price" shall mean the greatest of the following: (A) the highest amount of consideration paid by a Related Person for a share of capital stock of the Corporation (including any brokerage commissions, transfer taxes and soliciting dealers' fees) in the transaction which resulted in such Related Person becoming a Related Person or within two years prior to the first public announcement of the Business Transaction (the "Announcement Date"), whichever is higher; provided, however, that the Highest Stock Purchase Price calculated under this subsection (A) shall be appropriately adjusted to reflect the occurrence of any reclassification, recapitalization, stock-split, reverse stock-split or other similar corporate readjustment in the number of outstanding shares of capital stock of the -5- Corporation between the last date upon which such Related Person paid the Highest Stock Purchase Price up to the effective date of the merger, share exchange or consolidation or the date of distribution to shareholders of the Corporation of the proceeds from the sale of substantially all of the assets of the Corporation referred to in subparagraph (i) of Section (a)(ii) of this Article ELEVEN; (B) the Fair Market Value per share of the respective classes and series of stock of the Corporation on the Announcement Date; (C) the Fair Market Value per share of the respective classes and series of stock of the Corporation on the date that the Related Person becomes a Related Person; (D) if applicable, the Fair Market Value per share determined pursuant to subsection (b)(viii)(B) or (C) of this Article ELEVEN, whichever is higher, multiplied by the ratio of (i) the highest price per share (including any brokerage commissions, transfer taxes or soliciting dealers' fees and adjusted for any subsequent stock dividends, splits, combinations, recapitalizations, reclassifications or other such reorganizations) paid to acquire any shares of such respective classes and series Beneficially owned by the Related Person within the two years prior to the Announcement Date, to (ii) the Fair market value per share (adjusted for any subsequent stock dividends, splits, combinations, recapitalizations, reclassifications or other such reorganizations) of shares of such respective classes and series on the first day in the two-year period ending on the Announcement Date on which such shares Beneficially owned by the Related Person were acquired; or (E) the amount per share of any preferential payment to which holders of shares of such respective classes and series are entitled in the event of a liquidation, dissolution or winding up of the Corporation. (ix) The term "Preferred Stock" shall mean each class or series of capital stock which may from time to time be authorized in or by these Second Amended and Restated Articles of Incorporation (as amended from time to time) which is not designated as "Common Stock." (x) The phrase "property, securities or other consideration to be received", for the purpose of subparagraph (i) of Section (a)(ii) of this Article ELEVEN and in the event of a merger in which the corporation is the surviving corporation, shall include, without limitation, common stock of the Corporation retained by its shareholders (other than such Related Person). (xi) The term "Related Person" shall mean and include (A) any individual, corporation, partnership, group, association or other person or entity which, together with its Affiliates and Associates, is the Beneficial Owner of not less than ten percent (10%) of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote or was the Beneficial Owner of not less than ten percent (10%) of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote (x) at the time the definitive agreement providing for the Business Transaction (including any amendment thereof) was entered into, (Y) at the time a resolution approving the Business -6- Transaction was adopted by the Board of Directors of the Corporation, or (z) as of the record date for the determination of shareholders entitled to notice of and to vote on or consent to the Business Transaction, and (B) any Affiliate or Associate of any such individual, Corporation, partnership, group, association or other person or entity; provided, however, and notwithstanding anything in the foregoing to the contrary, that the term "Related Person" shall not include the Corporation, a more than 90% owned subsidiary of the Corporation, any employee stock ownership or other employee benefit plan of either the Corporation or any more than 90% owned subsidiary of the Corporation, or any trustee of or fiduciary with respect to any such plan when acting in such capacity. (xii) The term "Substantial Part" shall mean more than twenty percent (20%) of the total assets of the entity in question, as reflected on the most recent consolidated balance sheet of such entity existing at the time the shareholders of the Corporation would be required to approve or authorize the Business Transaction involving the assets constituting any such Substantial Part. (xiii) The term "Voting Stock" shall mean all outstanding shares of capital stock of the Corporation whose holders are present at a meeting of shareholders, in person or by proxy, and which entitle their holders to vote generally in the election of directors, and considered for the purpose of this Article ELEVEN as one class. (c) For the purpose of this Article ELEVEN, so long as Continuing Directors constitute at least two-thirds (2/3) of the entire Board of Directors of the Corporation, the Board of Directors shall have the power to make a good faith determination, on the basis of information known to them, of (i) the number of shares of Voting Stock of which any person is the Beneficial Owner, (ii) whether a person is a Related Person or is an Affiliate or Associate of another, (iii) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of Beneficial Owner herein, (iv) whether the assets subject to any Business Transaction constitute a Substantial Part, (v) whether any Business Transaction is with a Related Person or is one in which a Related Person has an interest (other than only a proportionate interest as a shareholder of the Corporation), (vi) whether a Related Person has, directly or indirectly, received the benefits or caused any of the changes referred to in subparagraph (iv) of clause (ii) of Section (a) of this Article ELEVEN, (vii) the fair market value of any consideration to be received in a Business Transaction and (viii) such other matters with respect to which a determination is required under this Article ELEVEN; and such determination by the Board of Directors shall be conclusive and binding for all purposes of this Article ELEVEN. (d) Nothing contained in this Article ELEVEN shall be construed to relieve any Related Person of any fiduciary obligation imposed by law. (e) The fact that any Business Transaction complies with the provisions of Section (a) of this Article ELEVEN shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Transaction or recommend its adoption or approval to the shareholders of the corporation. -7- (f) Notwithstanding any other provisions of these Second Amended and Restated Articles of Incorporation or the Bylaws of the corporation (and notwithstanding that a lesser percentage may be permitted by law), the provisions of this Article ELEVEN may not be repealed or amended, directly or indirectly in any respect, unless such action is approved by the affirmative vote of the holders of not less than seventy percent (70%) of the Voting Stock. TWELVE The Corporation shall indemnify a director against reasonable expenses and liability incurred by him, and shall advance expenses upon receipt from the director of the written affirmation and repayment authorization required by section 14-2-853 of the Georgia Business Corporation code, provided, however, that the Corporation shall not indemnify a director for any liability incurred by a director if he failed to act in a manner he believed in good faith to be in or not opposed to the best interests of the Corporation, or to have improperly received a personal benefit or, in the case of any criminal proceeding, if he had reasonable cause to believe his conduct was unlawful, or in the case of a proceeding by or in the right of the Corporation, in which he was adjudged liable to the Corporation, unless a court shall determine that the director is fairly and reasonably entitled to indemnification in view of all the circumstances, in which case the director shall be indemnified for reasonable expenses incurred. THIRTEEN (a) For purposes of this Article THIRTEEN, the following terms shall have the respective meanings specified below: (i) "Act" shall have the meaning set forth in paragraph (a)(ii)(v) of Article ELEVEN of these Second Amended and Restated Articles of Incorporation. (ii) "Beneficial owner" shall have the meaning set forth in paragraph (b)(iii) of Article ELEVEN of these Second Amended and. Restated Articles of Incorporation. (iii) "Closing Price" of a share of stock on any day means the highest closing sales price or bid quotation on the National Association of Securities Dealers, Inc. Automated Quotation System (including the National Market System) or any comparable system then in use, or if the class or series in question is quoted on a United States securities exchange registered under the Act, the reported closing sales price or, in case no such sale takes place, the average of the reported closing bid and asked price on such exchange, or, if no such prices or quotations are available, the fair market value on the day in question as determined by the Board of Directors in good faith. (iv) "Communications Act" shall mean the Communications Act of 1934, 47 U.S.C. 151 et seq., as amended. (v) "Communications Laws" shall mean the Communications Act and the regulations promulgated by the Federal Communications Commission pursuant thereto, including any amendments thereof or successor or replacement provisions thereto. -8- (vi) "Fair Market Value" of a share of stock shall mean the average Closing Price for such share for each of the forty-five (45) most recent days during which shares of stock of such class or series shall have been traded preceding the day on which notice of redemption shall have been given pursuant to paragraph (iv) of Section (e) of this Article THIRTEEN; provided, however, that if shares of stock of such class or series are not traded on any securities exchange or in the over-the-counter market, "Fair Market Value" shall be determined by the Board of Directors in good faith; and provided, further, however, that "Fair Market Value" as to any stockholder who purchases any stock subject to redemption within one hundred twenty (120) days prior to a Redemption Date shall not (unless otherwise determined by the Board of Directors) exceed the purchase price paid for such shares. (vii) "Foreign Citizen" shall mean any of the following: (A) any alien; (B) any foreign government; (C) any representative of an alien or a foreign government; or (D) any corporation organized under the laws of any country other than the United States; and (E) any other Person falling within a class of Persons identified from time to time in the Communications Laws, including without limitation Section 310 of the Communications Act, as being within a class of Persons whose ownership of stock of a corporation holding station licenses referenced in Title III of the Communications Act is limited to a maximum percentage. (viii) "Permitted Percentage" shall mean twenty percent (20%), or such other percentage as may from time to time be specified by the Communications Laws as the maximum percentage of capital stock of a corporation holding licenses referenced in Section 310 of the Communications Act that may be owned by Foreign Citizens. (ix) "Person" shall mean an individual, partnership, corporation, trust or other entity. (x) "Redemption Date" shall mean the date fixed by the Board of Directors for the redemption of any shares of stock of the Corporation pursuant to Section (e) of this Article THIRTEEN. (xi) "Redemption Securities" shall mean any debt or equity securities of the Corporation, any Subsidiary or any other corporation, or any combination thereof, having such terms and conditions as shall be approved by the Board of Directors and which, together with any cash to be paid as part of the redemption price, in the opinion of any nationally recognized investment banking firm selected by the Board of Directors (which may be a firm which provides other investment banking, brokerage or other services to the Corporation), has a value, at the time notice of redemption is given pursuant to paragraph (d) of Section 5 of this Article THIRTEEN, at least equal to the Fair Market -9- Value of the shares to be redeemed pursuant to this Article THIRTEEN (assuming, in the case of Redemption Securities to be publicly traded, such Redemption Securities were fully distributed and subject only to normal trading activity). (b) It is the policy of the Corporation that Foreign Citizens should own of record or Beneficially Own, directly or indirectly, individually or in the aggregate, no more than the Permitted Percentage of its from time to time outstanding shares of capital stock. If at any time Foreign Citizens, directly or indirectly, individually or in the aggregate, become the record owners or the Beneficial owners of more than the Permitted Percentage of the capital stock of the Corporation, then the Corporation shall have the power to take the actions prescribed in this Section (b) through Section (f) of this Article THIRTEEN. The provisions of this Article THIRTEEN are intended to assure that the Corporation remains in continuous compliance with the citizenship requirements of the Communications Laws. Any amendments to the Communications Laws relating to the citizenship of station license holders or their shareholders are deemed to be incorporated herein by reference. To the extent necessary to enable the Corporation to submit any proof of direct or indirect citizenship required by law or by contract with the United States government (or any agency thereof), the corporation may require the record holders and the Beneficial owners of capital stock to confirm their direct or indirect citizenship status from time to time, and dividends payable with respect to stock held by such record holder or owner by such Beneficial owner may, in the discretion of the Board of Directors, be withheld until confirmation of such citizenship status is received. The Board of Directors is authorized to take such actions or make such interpretations as it may deem necessary or advisable in order to implement the policy set forth in this Section (b) including, without limitation, causing any transfer, or attempted transfer, of any shares of stock of the Corporation, the effect of which would be to cause one or more Foreign Citizens to own of record or Beneficially Own more than the Permitted Percentage of the Corporation's capital stock, to be ineffective as against the Corporation, and not registering (or permitting its transfer agent to register) such transfer or purported transfer on the stock transfer records of the Corporation. In addition, neither the Corporation (even if the transfer agent shall have recognized such transfer) nor its transfer agent shall be required to recognize the transferee or purported transferee thereof as a shareholder of the Corporation for any purpose whatsoever except to the extent necessary to effect any remedy available to the Corporation under this Article THIRTEEN. A citizenship certificate may be required from all transferees (and from any recipient upon original issuance) of capital stock of the Corporation and, if such transferee (or recipient) is acting as a fiduciary or nominee for a record owner or a Beneficial Owner, such Beneficial Owner or record owner, and registration of transfer (or original issuance) may be denied upon refusal to furnish such certificate. (a) If on any date (including any record date) the number of shares of capital stock that is owned of record or Beneficially Owned, directly or indirectly, by Foreign Citizens is in excess of the Permitted Percentage of all outstanding capital stock of the Corporation (such number of shares herein referred to as the "Excess Shares"), the Corporation shall identify a number of shares owned of record or Beneficially Owned, directly or indirectly, by Foreign Citizens equal to the number of Excess Shares. The determination of the Corporation as to those shares that constitute the Excess Shares shall be conclusive. Shares deemed to constitute such Excess Shares (so long as such excess exists) shall not be accorded any voting rights and shall not be deemed to be outstanding for purposes of determining the vote required on any matter -10- properly brought before the shareholders of the Corporation for a vote thereon. The Corporation shall (so long as such excess exists) withhold the payment of dividends and the sharing in any other distribution (upon liquidation or otherwise) in respect of the Excess Shares. At such time as the Permitted Percentage is no longer exceeded, full voting rights shall be restored to any shares previously deemed to be Excess Shares and any dividends or distribution with respect thereto that have been withheld, without interest thereon, shall be due and paid solely to the record holders of such shares at the time the Permitted Percentage is no longer exceeded. (b) Subject to the provisions of any resolution of the Board of Directors creating any series of preferred stock or any other class of stock which has a preference over common stock with regard to dividends or upon liquidation, and subject to the procedures in the series of preferred stock of the Corporation referenced in Articles FIVE, SIX and SEVEN hereof, the Excess Shares shall be subject to redemption at any time by the Corporation by action of the Board of Directors. The terms and conditions of such redemption shall be as follows: (i) the redemption price of the shares to be redeemed pursuant to this Article THIRTEEN shall be equal to the Fair Market Value of such shares or such other redemption price as required by pertinent state or federal law pursuant to which the redemption is required; (ii) the redemption price of such shares may be paid in cash, Redemption Securities or any combination thereof; (iii) if less than all the Excess Shares are to be redeemed, the shares to be redeemed shall be selected in such manner as set forth in Section (c) of this Article THIRTEEN or as otherwise determined by the Board of Directors; (iv) at least thirty (30) days' written notice of the Redemption Date shall be given to the record holders of the Excess Shares selected to be redeemed (unless waived in writing by any such holder) provided that the Redemption Date may be the date on which written notice shall be given to record holders if the cash or Redemption Securities necessary to effect the redemption shall have been deposited in trust for the benefit of such record holders and subject to immediate withdrawal by them upon surrender of the stock certificates for Excess Shares to be redeemed; (v) from and after the Redemption Date or such earlier date as mandated by pertinent state or federal law, any and all rights of whatever nature, which may be held by the record holder of Excess Shares selected for redemption (including without limitation any rights to vote or participate in dividends declared on stock of the same class or series as such shares), shall cease and terminate and they shall thenceforth be entitled only to receive the cash or Redemption Securities payable upon redemption; and (vi) such redemption shall be upon such other terms and conditions as the Board of Directors shall determine. (c) In determining the direct or indirect citizenship of owners of record or Beneficial Owners or their transferees of its capital stock, the Corporation may rely on the stock transfer records of the Corporation and the citizenship certificates given by Beneficial Owners or -11- owners of record or their transferees or any recipients (in the case of original issuance) (in each case whether such certificates have been given on their own behalf or on behalf of others) to prove the citizenship of such owners of record, Beneficial Owners, transferees or recipients of such capital stock. The determination of the direct or indirect citizenship of owners of record, Beneficial owners and their transferees of such capital stock may also be subject to proof in such other way or ways as the Corporation may deem reasonable. The Corporation may at any time require proof of citizenship, in addition to the citizenship certificates, of the record owner or Beneficial Owner or proposed transferees of shares of the Corporation's capital stock, and the payment of dividends may be withheld, and any application for transfer of ownership on the stock transfer records of the Corporation may be refused, until such additional proof is submitted. (d) Each provision of this Article THIRTEEN is intended to be severable from every other provision. If any provision contained in this Article THIRTEEN is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of any other provision of this Article THIRTEEN shall not be affected, and this Article THIRTEEN shall be construed as if the provision held to be invalid, illegal or unenforceable had never been contained therein. -12- The provisions of Article FOUR, Section A of these Second Amended and Restated Articles of Incorporation were duly approved by the shareholders of the Corporation in accordance with the provisions of Sections 14-2-1007 and 14-2-1003 of the Georgia Business Corporation Code on the 20th day of December, 1996. These Second Amended and Restated Articles of Incorporation were duly adopted and authorized by the Board of Directors of the Company on November 20, 1996. IN WITNESS WHEREOF, WORLDCOM, INC. has caused its duly authorized officer to execute these Second Amended and Restated Articles of Incorporation as of this 30th day of December, 1996. WORLDCOM, INC. By: /s/ Bernard J. Ebbers ------------------------------------- Name: Bernard J. Ebbers Title: President and Chief Executive Officer ATTEST: /s/ Scott D. Sullivan - ------------------------- Name: Scott D. Sullivan Title: Secretary STATE OF MISSISSIPPI ) ) SS. CITY OF JACKSON ) I, Deborah A. Blackwell, a notary public, do hereby certify that on this 30th day of December, 1996, personally appeared before me Bernard J. Ebbers who, being by me first duly sworn, declared that he is the President of WorldCom, Inc., that he signed the foregoing document as President of the corporation, and that the statements therein contained are true. [SEAL] /s/ Deborah A. Blackwell ----------------------------- Notary Public My Commission Expires: 10-4-97 -13- Series A 8% Cumulative Convertible Preferred Stock 1. Designation. The designation of this Series shall be Series A 8% Cumulative Convertible Preferred Stock. The number of shares of this Series shall be 94,992. The liquidation value of shares of this Series shall be $3,350.00 per share. 2. Dividends (a) The holders of shares of this Series shall be entitled to receive, when, as and if declared by the Board of Directors of WorldCom, Inc. (the "Company") out of funds legally available therefor, cumulative preferential dividends from the issue date of such shares, at the rate per share of $268.00 per annum or $67.00 per quarter, and no more, payable quarterly for each share of this Series, payable in arrears on each February 28, May 31, August 31 and November 30, respectively (each such date being hereinafter referred to as a "Dividend Payment Date") or, if any Dividend Payment Date is not a business day, then the Dividend Payment Date shall be the next succeeding business day; provided, however, that with respect to any dividend period during which a redemption occurs, the Company may, at its option, declare accrued dividends to, and pay such dividends on, the redemption date, in which case such dividends would be payable on the redemption date in shares of the Common Stock of the Company, par value $.0l per share (the "Common Stock"), to the holders of the shares of this Series as of the record date for such dividend payment and such accrued dividends would not be included in the calculation of the related Call Price (as hereinafter defined). Each dividend on the shares of this Series shall be payable to holders of record as they appear on the stock books of the Company on such record dates as shall be fixed by the Board of Directors. The first dividend payment of $67.00 shall be for the period from the date of issuance of shares of this Series to and including February 27, 1997 and shall be payable on February 28, 1997. Dividends (or amounts equal to accrued and unpaid dividends) payable on the shares of this Series for any period other than a quarterly dividend period shall be computed on the basis of a 360-day year of twelve 30day months. At the election of the Board of Directors of the Company, dividends may be paid in cash or in shares of Common Stock. In the event the Board of Directors of the Company elects to pay a dividend in shares of Common Stock, the number of shares of Common Stock to be issued on the Dividend Payment Date will be determined by dividing the total dividend to be paid on each share of this Series by 90% of the average of the average of the high and low sales prices of the Common Stock as reported on the Nasdaq National Market for each of the ten consecutive Trading Days (as hereinafter defined) immediately preceding the fifth business day preceding the record date for such dividend. Dividends on the shares of this Series shall accrue (whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared) on a daily basis from the previous Dividend Payment Date, except that the first dividend shall accrue from the date of issuance of the shares of this Series. Dividends accumulate to the extent they are not paid on the Dividend Payment Date for the quarter for which they accrue ("Accumulated Unpaid Dividends"). Accumulated Unpaid Dividends shall not bear interest. (b) No dividend whatsoever shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any shares of this Series or Parity Stock (as hereinafter defined) for any dividend period unless all dividends for all past dividend periods have been declared and paid upon, or declared and a sufficient sum set apart for the payment of such dividends upon, all shares of this Series and Parity Stock outstanding other than the Exchange Preferred (as hereinafter defined). (c) Unless full cumulative dividends on all outstanding shares of this Series and (to the extent that the amount thereof shall have become determinable) any outstanding shares of Parity Stock due for all past dividend periods shall have been declared and paid, or declared and a sufficient sum for the payment thereof set apart, then, subject to the rights of holders of shares of previously issued series of Preferred Stock: (i) no dividend (other than a dividend payable solely in Junior Stock (as hereinafter defined)) shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any shares of Junior Stock; (ii) no other distribution shall be made upon any shares of Junior Stock; (iii) no shares of Junior Stock or any other series of Preferred Stock shall be purchased, redeemed or otherwise acquired for cash or other property of the Company (excluding shares of Junior Stock or Exchange Preferred) by the Company or by any Subsidiary; and (iv) no monies shall be paid into or set apart or made available for a sinking or other like fund for the purchase, redemption or other acquisition for value of any shares of Junior Stock by the Company or any Subsidiary. (d) Any dividend payment made on shares of this Series shall be distributed pro rata to the holders entitled thereto and be credited first against the earliest accrued but unpaid dividend due with respect to shares of this Series. 3. Voting Rights. (a) The holders of shares of this Series shall have the right with the holders of Common Stock to vote in the election of directors of the Company and upon each other matter coming before any meeting of the shareholders of the Company on the basis of ten votes for each such share held. The holders of shares of this Series and the holders of Common Stock shall vote together as a single class except as otherwise set forth herein or as otherwise provided by law or by the Second Amended and Restated Articles of Incorporation of the Company. (b) The approval of more than two-thirds of the votes entitled to be cast by the holders of the outstanding shares of this Series (voting separately as a class), shall be required for the adoption of any amendment to the Second Amended and Restated Articles of Incorporation that materially adversely changes the rights, preferences or privileges of the shares of this Series. (c) The holders of the outstanding shares of this Series shall also have the right, voting together with the holders of any other outstanding shares of Voting Preferred Stock (as hereinafter defined) as a separate voting group, to elect two members of the Board of Directors of the Company at any time six or more quarterly dividends on any shares of Voting Preferred Stock shall be in arrears and unpaid, in whole or in part, whether or not declared and whether or not any funds shall be or have been legally available for payment -2- thereof. For this purpose, "Voting Preferred Stock" shall mean the shares of this Series and each other series of Preferred Stock which shall have substantially similar voting rights (including voting as one voting group with other shares of Voting Preferred Stock) with respect to the election of directors upon substantially similar arrearages of dividends. In such event, the number of Directors of the Company shall be increased by two, and, unless a regular meeting of the shareholders of the Company is to be held within 60 days thereof for the purpose of electing Directors, within 30 days thereafter, the Company shall call a special meeting of the holders of the outstanding shares of Voting Preferred Stock for the purpose of electing such Directors to take place at the time specified in the notice of the meeting, to be not more than 60 days after such holders become so entitled to elect two Directors and not less than 10 days nor more than 50 days after the date on which such notice is mailed. If such special meeting shall not have been so called by the Company, or such regular meeting shall not be so held, a special meeting may be called for such purpose at the expense of the Company by the holders of not less than 10% of the outstanding shares of any series of Voting Preferred Stock; and notice of any such special meeting shall be given by the person or persons calling the same to the holders of the outstanding shares of the Voting Preferred Stock by first-class mail, postage prepaid, at their last address as shall appear on the stock transfer records of the Company. At any such special meeting the holders of the outstanding shares of Voting Preferred Stock (voting separately as a class with each share having one vote) shall elect two members of the Board of Directors of the Company. If a regular meeting of the shareholders of the Company for the purpose of electing Directors is to be held within 60 days after the time the holders of the outstanding shares of Voting Preferred Stock become so entitled to elect two Directors, then the holders of the outstanding shares of Voting Preferred Stock shall be given notice thereof in the same manner as other shareholders of the Company entitled to vote thereat; and at such regular meeting, the holders of the outstanding shares of Voting Preferred Stock (voting separately as a class with each share having one vote) shall elect two members of the Board of Directors. The right of the holders of the Voting Preferred Stock (voting separately as a class) to elect two members of the Board of Directors of the Company shall continue until such time as no dividends on any outstanding shares of Voting Preferred Stock are in arrears and unpaid, in whole or in part, at which time (i) the voting power of the holders of the outstanding shares of Voting Preferred Stock so to elect two Directors shall cease, but always subject to the same provisions of this subparagraph (c) for the vesting of such voting power upon the occurrence of each and every like arrearage of dividends, and (ii) the term of office of each member of the Board of Directors who was elected pursuant to this subparagraph (c) shall automatically expire. 4. Redemptions and Conversions. (a) Mandatory Conversion. On May 31, 1999 (the "Mandatory Conversion Date"), each outstanding share of this Series shall convert automatically (the "Mandatory Conversion") into shares of Common Stock at the Common Equivalent Rate (as hereinafter defined) in effect on the Mandatory Conversion Date and the right to receive, out of funds legally available therefor, an amount equal to all accrued and unpaid dividends on such share of this Series to the Mandatory Conversion Date, whether or not declared (payable in cash or in shares of Common Stock on the same basis as that used to determine dividends), subject to the right of the Company to redeem the shares of this Series on or after the Initial Redemption Date (as hereinafter defined) and prior to the Mandatory Conversion Date, as described below, and subject to the conversion of the shares of this Series at the option of the holder at any time -3- prior to the Mandatory Conversion Date. Notwithstanding the foregoing, if the Mandatory Conversion Date occurs after a record date for a quarterly dividend and before the corresponding Dividend Payment Date, such dividend shall be paid, out of funds legally available therefor, on the Dividend Payment Date rather than on the Mandatory Conversion Date. The Common Equivalent Rate is initially four-hundred and twenty shares of Common Stock for each share of this Series. Dividends on the shares of this Series shall cease to accrue and such shares shall cease to be outstanding on the Mandatory Conversion Date. The Company shall make such arrangements as it deems appropriate for the issuance of certificates representing shares of Common Stock and for the payment (in cash or in shares of Common Stock, at the election of the Board of Directors of the Company) in respect of such accrued and unpaid dividends, if any, or cash in lieu of fractional shares, if any, in exchange for and contingent upon surrender of certificates representing the shares of this Series, provided that the Company shall give the holders of the shares of this Series such notice of any such actions as the Company deems appropriate and upon such surrender such holder, shall be entitled to receive such dividends declared and paid on such shares of Common Stock subsequent to the Mandatory Conversion Date. Amounts payable in cash in respect of the shares of this series or in respect of such shares of Common Stock shall not bear interest. (b) Redemption by the Company. (i) Right to Redeem. Shares of this Series are not redeemable by the Company prior to May 31, 1998 (the "Initial Redemption Date"). At any time and from time to time on or after the Initial Redemption Date and prior to the Mandatory Conversion Date, the Company shall have the right to redeem, in whole or in part, the outstanding shares of this Series. Upon any such redemption, the Company shall deliver to the holders of shares of this Series, in accordance with the provisions of these Articles of Amendment in exchange for each share so redeemed, a number of shares of Common Stock equal to (A) the Call Price (as hereinafter defined) in effect on the date of redemption, divided by (B) the Current Market Price (as hereinafter defined) of the Common Stock determined as of the date which is one trading day prior to the public announcement of the redemption. The Call Price of each share of this Series is an amount equal to the sum of (X) $3,417.00 on and after the Initial Redemption Date through August 30, 1998, $3,400.25 on and after August 31, 1998 through November 29, 1998, $3,383.50 on and after November 30, 1998 through February 27, 1999, $3,366.75 on and after February 28, 1999 through April 29, 1999 and $3,350.00 on and after April 30, 1999 until the Mandatory Conversion Date plus (Y) all accrued and unpaid dividends thereon to the date fixed for redemption. Notwithstanding the foregoing, if the date fixed for redemption occurs after a record date for a quarterly dividend and prior to the corresponding Dividend Payment Date, such dividend shall be paid, out of funds legally available therefor, on the Dividend Payment Date and the Call Price shall not include the amount of the dividend to be so paid. Dividends on the shares of this Series shall cease to accrue and such shares shall cease to be outstanding on the date fixed for redemption. A public announcement of any call for redemption shall be made prior to the mailing of the notice of such call to holders of shares of this Series as described below. If fewer than all the outstanding shares of this Series are to be redeemed, shares to be redeemed shall be selected by the Company from outstanding shares of this Series not previously redeemed by lot or pro rata (as nearly as may be practicable) or by any other method determined by the Board of Directors of the Company in its sole discretion to be fair and proper. -4- (ii) Current Market Price. As used in this subparagraph (b), the term "Current Market Price" per share of the Common Stock on any date of determination means the lesser of (X) the average of the average of the high and low sales prices of the Common Stock as reported on the Nasdaq National Market or any national securities exchange upon which the Common Stock is then listed, for each of the ten consecutive Trading Dates ending on and including such date of determination and (Y) the Closing Price (as hereinafter defined) of the Common Stock for such date of determination; provided, however, that, with respect to any redemption of shares of this Series if any event that results in an adjustment of the Common Equivalent Rate occurs during the period beginning on the first day of such ten-day period and ending on the applicable redemption date, the Current Market Price as determined pursuant to the foregoing shall be appropriately adjusted to reflect the occurrence of such event. (iii) Notice of Redemption. The Company shall provide notice of any redemption of the shares of this Series to holders of record of the shares of this Series to be called for redemption not less than 15 nor more than 60 days prior to the date fixed for such redemption. Such notice shall be provided by mailing notice of such redemption first class postage prepaid, to each holder of record of shares of this Series to be redeemed, at such holder's address as it appears on the stock register of the Company; provided, however, that neither failure to give such notice nor any defect therein shall affect the validity of the proceeding for the redemption of any shares of this Series to be redeemed. Each such notice shall state, as appropriate, the following and may contain such other information as the Company deems advisable: (A) the redemption date; (B) that all outstanding shares of this Series are to be redeemed or, in the case of a call for redemption of fewer than all outstanding shares of this Series, the number of such shares held by such holder to be redeemed; (C) the Call Price, the number of shares of Common Stock deliverable upon redemption of each share of this Series to be redeemed and the Current Market Price used to calculate such number of shares of Common Stock; (D) the place or places where certificates for such shares are to be surrendered for redemption; and (E) that dividends on the shares of this Series to be redeemed shall cease to accrue on such redemption date (except as otherwise provided herein). (iv) Deposit of Shares and Funds. The Company's obligation to deliver shares of Common Stock and provide funds upon redemption in accordance with this paragraph 4 shall be deemed fulfilled if, on or before a redemption date, the Company shall irrevocably deposit, with a bank or trust company, or an affiliate of a bank or trust company, having an office or agency in New York City and having a capital and surplus of at least -5- $50,000,000, or shall set aside or make other reasonable provision for the issuance of, such number of shares of Common Stock as are required to be delivered by the Company pursuant to this paragraph 4 upon the occurrence of the related redemption (and for the payment of cash in lieu of the issuance of fractional share amounts and accrued and unpaid dividends payable in cash, if any, on the shares to be redeemed as and to the extent provided by this paragraph 4). Any interest accrued on such funds shall be paid to the Company from time to time. Any shares of Common Stock or funds so deposited and unclaimed at the end of two years from such redemption date shall be repaid and released to the Company, after which the holder or holders of such shares of this Series so called for redemption shall look only to the Company for delivery of such shares of Common Stock or funds. (v) Surrender of Certificates; Status. Each holder of shares of this Series to be redeemed shall surrender the certificates evidencing such shares (properly endorsed or assigned for transfer, if the Board of Directors of the Company shall so require and the notice shall so state) to the Company at the place designated in the notice of such redemption and shall thereupon be entitled to receive certificates evidencing shares of Common Stock and to receive any funds or shares of Common Stock payable pursuant to this paragraph (4) following such surrender and following the date of such redemption. In case fewer than all the shares represented by any such surrendered certificate are called for redemption, a new certificate shall be issued at the expense of the Company representing the unredeemed shares. If such notice of redemption shall have been given, and if on the date fixed for redemption shares of Common Stock and funds necessary for the redemption shall have been irrevocably either set aside by the Company separate and apart from its other funds or assets in trust for the account of the holders of the shares to be redeemed or converted (and so as to be and continue to be available therefor) or deposited with a bank or a trust company or an affiliate thereof as provided herein or the Company shall have made other reasonable provision therefor, then, notwithstanding that the certificates evidencing any shares of this Series so called for redemption or subject to conversion shall not have been surrendered, the shares represented thereby so called for redemption shall be deemed no longer outstanding, dividends with respect to the shares so called for redemption shall cease to accrue on the date fixed for redemption (except that holders of shares of this series at the close of business on a record date for any payment of dividends shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares following such record date and prior to such Dividend Payment Date) and all rights with respect to the shares so called for redemption shall forthwith after such date cease and terminate, except for the rights of the holders to receive the shares of Common Stock and funds, if any, payable pursuant to this paragraph (4) without interest upon surrender of their certificates therefor. Holders of shares of this Series that are redeemed shall not be entitled to receive dividends declared and paid on such shares of Common Stock, and such shares of Common Stock shall not be entitled to vote, until such shares of Common Stock are issued upon the surrender of the certificates representing such shares of this Series and upon such surrender such holders shall be entitled to receive such dividends declared and paid on such shares of Common Stock subsequent to such redemption date. (c) Conversion at Option of Holder. Shares of this series are convertible, in whole or in part, at the option of the holder thereof, at any time prior to the Mandatory Conversion Date, unless previously redeemed, into shares of Common Stock at a rate of 344.274 shares of Common Stock for each share of this Series (the "Optional Conversion Rate") -6- (equivalent to a conversion price of $9.73 per share of Common Stock). The right to convert shares of this series called for redemption shall terminate at the close of business on the redemption date. Conversion of shares of this Series may be effected by delivering certificates evidencing such shares, together with written notice of conversion and a proper assignment of such certificates to the Company or in blank, to the office or agency to be maintained by the Company for that purpose (and, if applicable, payment by the Company of an amount, out of funds legally available therefor (in cash or in shares of Common Stock, at the election of the Company), equal to the dividend payable on such shares), and otherwise in accordance with conversion procedures established by the Company. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the foregoing requirements shall have been satisfied. The conversion shall be at the Optional Conversion Rate in effect at such time and on such date. Holders of shares of this Series at the close of business on a record date for any payment of dividends shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion of such shares following such record date and prior to such Dividend Payment Date. The Company shall make no other payment or allowance for unpaid dividends, whether or not in arrears, on converted shares of this Series or for dividends or distributions on the shares of Common Stock issued upon such conversion. (d) Common Equivalent Rate and Optional Conversion Rate Adjustments. The Common Equivalent Rate and the optional conversion Rate also shall be subject to adjustment from time to time as provided below in this paragraph. (i) If the Company shall: (A) pay a dividend or make a distribution with respect to its Common Stock in shares of such stock, (B) subdivide or split its outstanding shares of Common Stock into a greater number of shares, (C) combine its outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of its shares of Common Stock any shares of Common Stock of the Company, then, in any such event, the Common Equivalent Rate and the Optional Conversion Rate in effect immediately prior to such event shall each be adjusted so that the holder of any shares of this Series shall thereafter be entitled to receive, upon Mandatory Conversion or upon conversion at the option of the holder, the number of shares of Common Stock of the Company which such holder would have owned or been entitled to receive immediately following any event described above had such shares of this Series been converted immediately prior to such event or any record date with respect thereto. Such adjustment shall become effective at the opening of -7- business on the business day next following the record date for determination of shareholders entitled to receive such dividend or distribution in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, split, combination or reclassification. Such adjustment shall be made successively. (ii) If the Company shall, after the date hereof, issue rights or warrants to all holders of its Common Stock entitling them (for a period not exceeding forty-five days from the date of such issuance) to subscribe for or purchase shares of Common Stock at a price per share less than the current market price of the Common Stock, then in each case the Common Equivalent Rate and Optional Conversion Rate shall each be adjusted by multiplying the Common Equivalent Rate and the Optional Conversion Rate, in effect immediately prior to the date of issuance of such rights or warrants, by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, immediately prior to such issuance, plus the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights or warrants, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, immediately prior to such issuance, plus the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered for subscription or purchase pursuant to such rights or warrants would purchase at such current market price (determined by multiplying such total number of shares by the exercise price of such rights or warrants and dividing the product so obtained by such current market price). Such adjustment shall become effective at the opening of business on the business day next following the record date for the determination of shareholders entitled to receive such rights or warrants. To the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the Common Equivalent Rate shall be readjusted to the Common Equivalent Rate which would then be in effect had the adjustments been made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock actually delivered. Such adjustment shall be made successively. (iii) If the Company shall pay a dividend or make a distribution to all holders of its Common Stock of evidences of its indebtedness, securities of a Subsidiary or other assets -8- (excluding any dividends or distributions referred to in clause (i) above or any cash dividends other than Extraordinary Cash Distributions (as hereinafter defined)) or shall issue to all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (other than those referred to in clause (ii) above), then in each such case, the Common Equivalent Rate and the Optional Conversion Rate shall each be adjusted by multiplying the Common Equivalent Rate and the Optional Conversion Rate in effect on the record date mentioned below, by a fraction of which the numerator shall be the current market price per share of the Common Stock on the record date for the determination of shareholders entitled to receive such dividend or distribution, and of which the denominator shall be such current market price per share of Common Stock less the fair market value (as determined by the Board of Directors of the Company, whose good faith determination shall be conclusive, and described in a resolution adopted with respect thereto) as of such record date of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants applicable to one share of Common Stock. Such adjustment shall become effective on the opening of business on the business day next following the record date for the determination of shareholders entitled to receive such dividend or distribution. Such adjustment shall be made successively. (iv) Any shares of Common Stock issuable in payment of a dividend shall be deemed to have been issued immediately prior to the close of business on the record date for such dividend for purposes of calculating the number of outstanding shares of Common Stock under clause (ii) above. For purposes of any computation under clause (ii) and (iii) above, the current market price per share of Common Stock at any date shall be deemed to be the average of the daily Closing Prices for the thirty consecutive Trading Dates preceding the date in question; provided, however, if any event that results in an adjustment of the Common Equivalent Rate occurs during such thirty-day period, the current market price as determined pursuant to the foregoing shall be appropriately adjusted to reflect the occurrence of such event. (v) The Company shall also be entitled to make upward adjustments in the Common Equivalent Rate, the Optional Conversion Rate and the Call Price, as the Board of -9- Directors in its good faith discretion shall determine to be advisable, in order that any stock dividends, subdivisions of shares, distribution of rights to purchase stock or securities, or distribution of securities convertible into or exchangeable for stock (or any transaction which could be treated as any of the foregoing transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as amended) hereafter made by the Company to its shareholders shall not be taxable. (vi) In any case in which clause (iii) above shall require that an adjustment as a result of any event become effective at the opening of business on the business day next following a record date and the date fixed for conversion pursuant to subparagraph (4)(c) or redemption pursuant to subparagraph w(b) occurs after such record date, but before the occurrence of such event, the Company may in its sole discretion, elect to defer, until after the occurrence of such event, issuing to the holder of any converted or redeemed shares of this series the additional shares of Common Stock issuable upon such conversion or redemption over the shares of Common Stock issuable before giving effect to such adjustment. (vii) All adjustments to the Common Equivalent Rate and the Optional Conversion Rate shall be calculated to the nearest 1/1000th of a share of Common Stock (or if there is not a nearest 1/1000th of a share to the next lower 1/1000th of a share). No adjustment in the Common Equivalent Rate and the Optional Conversion Rate shall be required unless such adjustment would require an increase or decrease of at least one percent therein; provided, however, that any adjustments which by reason of this subparagraph are not required to be made shall be carried forward and taken into account in any subsequent adjustments. (e) Adjustment for Consolidation or Merger. In case of any consolidation or merger to which the Company is a party (other than a merger or consolidation in which the Company is the continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consolidation remains unchanged), or in case of any sale or transfer to another corporation of the property of the Company as an entirety or substantially as an entirety, or in case of any statutory exchange of securities with another corporation (other than in connection with a merger or acquisition), proper provision shall be made so that each share of this Series shall, after consummation of such transaction, be subject to (i) conversion at the option of the holder into the kind and amount of securities, cash or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock into which such share of this Series might have been converted immediately prior to -10- consummation of such transaction, (ii) conversion on the Mandatory Conversion Date into the kind and amount of securities, cash or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock into which such share of this Series would have been converted if the conversion on the Mandatory Conversion Date had occurred immediately prior to the date of consummation of such transaction, and (iii) redemption on any redemption date in exchange for the kind and amount of securities, cash or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock that would have been issuable at the Call Price in effect on such redemption date upon a redemption of such shares immediately prior to the consummation of such transaction, assuming that the public announcement of such redemption had been made on the last possible date permitted by the terms of this Series and applicable law; assuming in each case that such holder of shares of this Series failed to exercise rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon consummation of such transaction (provided that if the kind or amount of securities, cash or other property receivable upon consummation of such transaction is not the same for each non-electing share, then the kind and amount of securities, cash or other property receivable upon consummation of such transaction for each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). The kind and amount of securities into which the shares of this Series shall be convertible after the consummation of such transaction shall be subject to adjustment as described in the immediately preceding subparagraph 4(d) following the date of consummation of such transaction. The Company shall not, without the affirmative vote of more than the holders of two-thirds of all the outstanding shares of this Series, become a party to any such transaction unless the terms thereof are consistent with the foregoing. (f) Notice of Adjustments. Whenever the Common Equivalent Rate and optional Conversion Rate are adjusted as herein provided, the Company shall: (i) forthwith compute the adjusted Common Equivalent Rate and Optional Conversion Rate in accordance herewith and prepare a certificate signed by an officer of the Company setting forth the adjusted Common Equivalent Rate and the Optional Conversion Rate, the method of calculation thereof in reasonable detail and the facts requiring such adjustment and upon which such adjustment is based, which certificate shall be conclusive, final and binding evidence of the correctness of the adjustment, and file such certificate forthwith with the transfer agent for the shares of this Series and the Common Stock; and (ii) mail a notice to the holders of the outstanding shares of this Series stating that the Common Equivalent Rate and the Optional Conversion Rate have been adjusted, the facts requiring such adjustment and upon which such adjustment is based and setting forth the adjusted Common Equivalent Rate and Optional Conversion Rate, such notice to be mailed at or prior to the time the Company mails an interim statement to its shareholders covering the fiscal quarter during which the facts requiring such adjustment occurred, but in any event within 45 days of the end of such fiscal quarter. (g) Notices. In case, at any time while any of the shares of this series are outstanding: -11- (i) the Company shall declare a dividend (or any other distribution) on its Common Stock, excluding any cash dividends; or (ii) the Company shall authorize the issuance to all holders of its Common Stock of rights or warrants to subscribe for or purchase shares of its Common Stock or of any other subscription rights or warrants; or (iii) the Company shall authorize any reclassification of the Common Stock of the Company (other than a subdivision or combination thereof) or of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required (except for a merger of the Company into a Subsidiary solely for the purpose of changing the corporate domicile of the Company to another state of the United States and in connection with which there is no substantive change in the rights or privileges of any securities of the Company other than changes resulting from differences in the corporate statutes of the then existing and the new state of domicile), or of the sale or transfer of all or substantially all of the assets of the Company; or (iv) there shall be commenced the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of the shares of this Series, and shall cause to be mailed to the holders of shares of this Series at their last addresses as they shall appear on the stock register, at least 10 days before the date hereinafter specified (or the earlier of the dates hereinafter specified, in the event that more than one date is specified), a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (B) the date on which any such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property (including cash), if any, deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. The failure to give or receive the notice required by this subparagraph (g) or any defect therein shall not affect the legality or validity of any such dividend, distribution, right or warrant or other action. (h) Effective Date of Conversions and Redemptions. The person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon any conversion or redemption shall be deemed to have become on the date of any such conversion or redemption the holder or holders of record of the shares represented thereby; provided, however, that any such surrender on any date when the stock transfer books of the Company shall be closed shall constitute the person or persons in whose name or names the certificate or certificates for such shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding business day on which such stock transfer books are open. -12- (i) No Fractional Shares. No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the redemption or conversion of any shares of this Series or in respect of any dividend paid in shares of Common Stock. In lieu of any fractional share otherwise issuable in respect of all the shares of this Series of any holder which are redeemed or converted on any redemption date or upon Mandatory conversion or any optional Conversion or in respect of any dividend paid in shares of Common Stock, the Company shall, at the election of the Company, either (i) sell such fractional share, as agent for the person entitled thereto, and distribute the proceeds of such sale, net of any discounts, commissions, fees or expenses associated with such sale, to such person, all in accordance with applicable rules under the Securities Act of 1933, as amended, or (ii) pay to the person entitled thereto an amount in cash equal to the current value of such fraction, calculated to the nearest one-hundredth (1/100) of a share, to be computed (x) if the shares of this Series are listed on any national securities exchange or the Nasdaq National Market, on the basis of the last sales price (or the quoted closing bid price if there shall have been no sales) of the shares of this Series on such exchange or the Nasdaq National Market (as the case may be) on the date of any such conversion or redemption or the date of payment of any such dividend, or (y) if the shares of this Series are not so listed, on the basis of the mean between the closing bid and asked prices for the shares of this Series on the date of any such conversion or redemption or the date of payment of any such dividend, as reported by Nasdaq, or its successor, or (z) if the shares of this Series are not so listed and if there are no such closing bid and asked prices, on the basis of the fair market value per share as determined in good faith by the Board of Directors. (j) Reissuance. Shares of this Series that have been issued and reacquired in any manner, including shares purchased, exchanged, redeemed or converted, shall not be reissued as part of this Series and shall (upon compliance with any applicable provisions of the laws of the State of Georgia) have the status of authorized and unissued shares of the Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of Preferred Stock. (k) Definitions. As used herein: (i) the term "business day" shall mean 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 or are closed because of a banking moratorium or otherwise; (ii) the term "Capital Stock" means any capital stock of any class or series (however designated) of the Company; (iii) the term "Closing Price" on any day shall mean the closing sale price regular way on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way, in each case on the Nasdaq National Market or, if the Common Stock is not listed or admitted to trading on the Nasdaq National Market then on the principal national securities exchange on which the Common Stock is listed or admitted to trading (which shall be the national securities exchange on which the greatest number of shares of Common Stock has been traded during the five consecutive Trading Dates ending on and -13- including the date of determination), or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the average of the closing bid and asked prices of the Common Stock on the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or if not so available as determined in good faith by the Board of Directors, on the basis of such relevant factors as it in good faith considers appropriate; (iv) the term "Exchange Preferred" means the Series B Convertible Preferred Stock of the Company. (v) the term "Extraordinary Cash Distributions" means, with respect to any cash dividend or distribution paid on any date, the amount, if any, by which all cash dividends and cash distributions on the Common Stock paid during the consecutive 12-month period ending on and including such date (other than cash dividends and cash distributions for which an adjustment to the Common Equivalent Rate and the Optional Conversion Rate was previously made) exceeds, on a per share of Common Stock basis, 10% of the average daily Closing Price of the Common Stock over such 12-month period; (vi) the term "Junior Stock" means any Capital Stock ranking as to dividends or as to rights in liquidation, dissolution or winding up of the affairs of the Company junior to the shares of this Series; (vii) the term "Parity Stock" means any Capital Stock ranking as to dividends or as to rights in liquidation, dissolution or winding up the affairs of the Company equally with the shares of this Series; (viii) the term "Subsidiary" means any corporation a majority of the outstanding Voting Stock of which is owned, directly or indirectly, by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries. For this purpose, the term "Voting Stock" means stock of any class or classes (however designated) having ordinary voting power for the election of a majority of the members of the board of directors (or other governing body) of such corporation, other than stock having such powers only by reason of the happening of a contingency; (ix) the term "Trading Date" shall mean a date on which the Nasdaq National Market (or any successor thereto) is open for the transaction of business. (l) Payment of Taxes. The Company shall pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on the redemption or conversion of shares of this Series pursuant to this paragraph 4; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any registration of transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the registered holder of shares of this Series redeemed or converted or to be redeemed or converted, and no such issue or delivery shall be made unless and -14- until the person requesting such issue has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid. (m) Reservation of Common Stock. The Company shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock and/or its issued Common Stock held in its treasury, for the purpose of effecting any Mandatory Conversion of the shares of this Series or any conversion of the shares of this Series at the option of the holder, the full number of shares of Common Stock then deliverable upon any such conversion of all outstanding shares of this Series. 5. Liquidation Rights. (a) In the event of the liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, the holders of shares of this Series then outstanding, after payment or provision for payment of the debts and other liabilities of the Company and the payment or provision for payment of any distribution on any shares of the Company having a preference and a priority over the shares of this Series on liquidation, and before any distribution to the holders of the Common Stock, or any other stock ranking junior to the shares of this Series with respect to distributions upon liquidation, dissolution or winding up, shall be entitled to be paid out of the assets of the Company available for distribution to its shareholders, an amount per share of this Series equal to the greater of (i) the sum of (a) the liquidation value set forth in paragraph (1) above and (b) all accrued and unpaid dividends thereon to the date of liquidation, dissolution or winding up and (ii) the value of the shares of Common Stock into which such shares of this Series are convertible on the date of such liquidation, dissolution or winding up, before any payment shall be made or any assets distributed to the holders of any shares of the Company ranking junior to the shares of this Series upon liquidation. In the event the assets of the Company available for distribution to the holders of the shares of this Series upon any dissolution, liquidation or winding up of the Company shall be insufficient to pay in full the liquidation payments payable to the holders of outstanding shares of this Series and any shares of Parity Stock, then the holders of all such shares of this Series shall share ratably in such distribution of assets in accordance with the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of this Series and the holders of outstanding shares of such shares of Parity Stock are entitled were paid in full. Except as provided in this paragraph 5, holders of this Series shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Company. (b) For the purposes of this paragraph 5, none of the following shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Company: (i) the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company; (ii) the consolidation or merger of the Company with or into one or more other corporations, or other associations; -15- (iii) the consolidation or merger of one or more corporations or other associations with or into the Company; or (iv) the participation by the Company in a share exchange. 6. Definition. As used herein, the term "Common Stock" shall mean any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. However, shares of Common Stock issuable upon conversion of shares of this Series shall include only shares of the class designated as Common Stock as of the original date of issuance of shares of this Series, or shares of the Company of any class or classes resulting from any reclassification or reclassification thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from such reclassification bears to the total number of shares of all classes resulting from all such reclassification. 7. No Preemptive Rights. The holders of shares of this Series shall have no preemptive rights, including preemptive rights with respect to any shares of Capital Stock or other securities of the Company convertible into or carrying rights or options to purchase any such shares. -16- EXHIBIT B Series B Convertible Preferred Stock 1. Designation and Amount. The shares of such series shall be designated "Series B Convertible Preferred Stock" (the "Series B Preferred Stock"), and the number of shares constituting such series shall be 15,000,000. 2. Dividends. (a) The holders of Series B Preferred Stock shall be entitled to receive, when and as declared, out of the funds legally available for that purpose, dividends per share of Series B Preferred Stock at the rate of 7.75 cents per annum, payable when and as the Board of Directors (the "Board of Directors") of WorldCom, Inc. (the "Company") may determine, in cash, before any dividends shall be set apart for or paid upon the common stock of the Company, par value $.01 per share (the "Common Stock"), or any stock ranking as to dividends junior to the Series B Preferred Stock (such stock being referred to hereinafter collectively as "Junior Stock") in any year. All dividends declared upon Series B Preferred Stock shall be declared pro rata per share and shall be payable to holders of record as they appear on the stock books of the Company on such record dates as shall be fixed by the Board of Directors. Notwithstanding the foregoing, the Company may declare, set apart and pay dividends on shares of the Company's Series A 8% Cumulative Convertible Preferred Stock (the "Series A Preferred Stock") whether or not dividends have been declared, set apart or paid on the shares of Series B Preferred Stock. The Board of Directors shall not be required to declare any dividends on the Series B Preferred Stock and the failure to declare any such dividends shall not constitute a default or otherwise vest the holders of Series B Preferred Stock with any right, other than the right to receive amounts in respect of accrued but unpaid dividends pursuant to Sections 3, 5 and 7 hereof. (b) Dividends on the Series B Preferred Stock shall be cumulative and shall accrue on a daily basis, whether or not in any fiscal year there shall be net profits or surplus available for the payment of dividends in such fiscal year, so that if in any fiscal year or years, dividends in whole or in part are not paid upon the Series B Preferred Stock, unpaid dividends shall accumulate as against the holders of the Junior Stock. Accrued but unpaid dividends shall not bear interest. (c) Dividends (or amounts equal to accrued and unpaid dividends) payable on the shares of Series B Preferred Stock shall be computed on the basis of a 360-day year of twelve 30-day months. (d) The Company shall not set apart for or pay upon the Common Stock any Extraordinary Cash Dividend unless, at the same time, the Company shall have set apart for or paid upon all shares of Series B Preferred Stock an amount of cash per share of Series B Preferred Stock equal to the Extraordinary Cash Dividend that would have been paid in respect of such share if the holder of such share had converted such share into shares of Common Stock pursuant to Section 5 immediately prior to the record date for such Extraordinary Cash Dividend. For purposes of this paragraph 2(d), "Extraordinary Cash Dividend" shall mean, with respect to any cash dividend or distribution paid on any date, the amount, if any, by which all cash dividends and cash distributions on the Common Stock paid during the consecutive 12-month period ending on and including such date exceeds, on a per share of Common Stock basis, 10% of the average daily closing price of the Common Stock over such 12-month period. 3. Liquidation, Dissolution or Winding Up. (a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, no distribution shall be made (i) to the holders of Junior Stock unless, prior thereto, the holders of the Series B Preferred Stock shall have received $1.00 per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment and subject to the payment in full of all amounts required to be distributed to the holders of any other Preferred Stock of the Company ranking on liquidation prior and in preference to the Series B Preferred Stock (such Preferred Stock being referred to hereinafter as "Senior Preferred Stock") or (ii) to the holders of stock ranking on a parity, either as to dividends or upon liquidation with the Series B Preferred Stock, except distributions made ratably on the Series B Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation. In the event the assets of the Company available for distribution to the holders of the shares of the Series B Preferred Stock upon any dissolution, liquidation or winding up of the Company shall be insufficient to pay in full the liquidation payments payable to the holders of outstanding shares of the Series B Preferred Stock and the holders of any shares of stock ranking on a parity with the Series B Preferred Stock, then the holders of all such shares of the Series B Preferred Stock shall share ratably in such distribution of assets in accordance with the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of the Series B Preferred Stock and the holders of outstanding shares of such shares of parity stock are entitled were paid in full. The Series A Preferred Stock shall rank on a parity with the Series B Preferred Stock for purposes of this paragraph 3(a). (b) The merger or consolidation of the Company into or with another company, the merger or consolidation of any other company into or with the Company, or the sale, conveyance, mortgage, pledge or lease of all or substantially all the assets of the Company shall not be deemed to be a liquidation, dissolution or winding up of the Company for purposes of this Section 3. 4. Voting. (a) Each issued and outstanding share of Series B Preferred Stock shall be entitled to one vote per share with respect to any and all matters presented to the shareholders of the Company for their action or consideration. Except as provided by law and by the provisions of paragraph 4(b) below, holders of Series B Preferred Stock shall vote together with the holders of Common Stock as a single class. (b) The Company shall not amend, alter or repeal the preferences, special rights or other powers or terms of the Series B Preferred Stock so as to affect adversely the Series B Preferred Stock, without the written consent or affirmative vote of the holders of at least a majority of the then outstanding aggregate number of shares of Series B Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class. -2- For this purpose, the authorization or issuance of any series of preferred stock with preference or priority over, or being on a parity with the Series B Preferred Stock as to the right to receive either dividends or amounts distributable upon liquidation, dissolution or winding up of the Company shall not be deemed to affect adversely the Series B Preferred Stock. 5. Optional Conversion. (a) Each share of Series B Preferred Stock may be converted at any time, unless previously redeemed, at the option of the holder thereof, in the manner hereinafter provided, into fully paid and nonassessable shares of Common Stock at the rate of 0.0973912 shares (or an effective initial conversion price of $10.268 per share of Common Stock) of Common Stock for each one share of Series B Preferred Stock surrendered for conversion, or at such other rate as may then be effective following adjustment pursuant to Section 6 hereof (the "Conversion Rate"). (b) The Company shall not issue fractions of shares of Common Stock upon conversion of Series B Preferred Stock or scrip in lieu thereof. If any fraction of a share of Common Stock would, except for the provisions of this paragraph 5(b), be issuable upon conversion of any Series B Preferred Stock, the Company shall in lieu thereof at the election of the Company, either (i) sell such fractional share, as agent for the person entitled thereto, and distribute the proceeds of such sale, net of any discounts, commissions, fees or expenses associated with such sale, to such person, all in accordance with all applicable rules under the Securities Act of 1933, as amended, or (ii) pay to the person entitled thereto an amount in cash equal to the current value of such fraction, calculated to the nearest one-hundredth (1/100) of a share, to be computed (x) if the Common Stock is listed on any national securities exchange or the Nasdaq National Market, on the basis of the last sales price (or the quoted closing bid price if there shall have been no sales) of the Common Stock on such exchange or the Nasdaq National market (as the case may be) on the date of conversion, or (y) if the Common Stock is not so listed, on the basis of the mean between the closing bid and asked prices for the Common Stock on the date of conversion as reported by Nasdaq, or its successor, or (z) if the Common Stock is not so listed and if there are no such closing bid and asked prices, on the basis of the fair market value per share as determined by the Board of Directors. (c) In order to exercise the conversion privilege, the holder of any Series B Preferred Stock to be converted shall surrender his, her or its certificate or certificates therefor to the principal office of the transfer agent for the Series B Preferred Stock (or if no transfer agent be at the time appointed, then the Company at its principal office), and shall give written notice to the Company at such office that the holder elects to convert the Series B Preferred Stock represented by such certificates, or any number thereof. Such notice shall also state the name or names (with address) in which the certificate or certificates for shares of Common Stock that shall be issuable on such conversion shall be issued. If so required by the Company, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Company. The date of receipt by the transfer agent (or by the Company if the Company serves as its own transfer agent) of the certificates and notice shall be the conversion date (the "Conversion Date"). As soon as practicable after receipt of such notice and the surrender of the certificate or certificates for Series B Preferred Stock as aforesaid, the Company shall cause to be issued and delivered at such office to such holder, or on -3- such holder's written order, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and cash as provided in paragraph 5(b) in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion. (d) The Company shall at all times when the Series B Preferred Stock shall be outstanding reserve and keep available out of its authorized but unissued stock, for the purposes of effecting the conversion of the Series B Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B Preferred Stock. (e) Shares of Series B Preferred Stock may not be converted after the close of business on the business day preceding the date fixed for redemption of such shares pursuant to Section 7. (f) Upon any such conversion, the Company shall pay, out of funds legally available therefor, to the person entitled thereto an amount equal to all accrued but unpaid dividends to, but not including, the Conversion Date in respect of the shares of Series B Preferred Stock surrendered for conversion, which amount shall be payable, at the election of the Company, in cash or shares of Common Stock. In the event the Company elects to pay such amount in shares of Common Stock, the number of shares of Common Stock to be issued in respect of unpaid dividends on each share of Series B Preferred Stock surrendered for conversion shall, subject to paragraph 5(b), be determined by dividing (x) the total amount of accrued but unpaid dividends to be paid on each such share of Series B Preferred Stock by (y) the Fair Market Value of a share of Common Stock. For purposes hereof, the term "Fair Market Value" shall mean (i) if the Common Stock is listed on any national securities exchange or the Nasdaq National Market, the average of the last sales price (or the quoted closing bid price if there shall have been no sales) of the Common Stock on such exchange or the Nasdaq National Market (as the case may be) for a period of 30 trading days prior to the Conversion Date, or (ii) if the Common Stock is not so listed, on the basis of the average of the mean between the closing bid and asked prices for the Common Stock for each day in the 30 trading day period prior to the Conversion Date, as reported by Nasdaq, or its successor, or (iii) if the Common Stock is not so listed and if there are no such closing bid and asked prices, on the basis of the fair market value per share as determined by the Board of Directors. (g) All shares of Series B Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall forthwith cease and terminate except only the right of the holder thereof to receive shares of Common Stock in exchange therefor and payment of any accrued and unpaid dividends thereon. Any shares of Series B Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Company may from time to time take such appropriate action as may be necessary to reduce the authorized Series B Preferred Stock accordingly. -4- 6. Adjustment Provisions. (a) In case the Company shall at any time (x) subdivide (whether by stock dividend, stock split or otherwise) its outstanding shares of Common Stock into a greater number of shares or (y) combine its outstanding shares of Common Stock into a smaller number of shares, the Conversion Rate in effect immediately prior thereto shall be proportionately adjusted so that the holder of any shares of Series B Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of capital stock of the Company which the holder would have owned or have been entitled to receive after the happening of any of the events described above, had such shares of Series B Preferred Stock been converted immediately prior to the happening of such event. In case the Company shall at any time prior to March 23, 1999 subdivide (whether by stock dividend, stock split or otherwise) its outstanding shares of Common Stock into a greater number of shares (each a "Subdivision"), the voting rights of each share of Series B Preferred Stock shall be adjusted to provide that the percentage of the aggregate voting power of the Common Stock represented by the Series B Preferred Stock, shall be the same as such percentage immediately prior to such Subdivision, with the holder of each share of Series B Preferred Stock being entitled to the number of votes proportionate to such adjustment. The adjustment made pursuant to this paragraph 6(a) shall become effective immediately after the effective date of the event requiring such adjustment and shall be made by the Board of Directors of the Company, whose judgment shall be final, binding and conclusive absent manifest error. Such adjustment made pursuant to this paragraph 6(a) shall become effective immediately after the effective date of the event requiring such adjustment. (b) If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another company, or the sale of all or substantially all of its assets to another company shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the holders of the Series B Preferred Stock shall have the right to acquire and receive upon conversion of the Series B Preferred Stock, which right shall be prior to the rights of the holders of Junior Stock (but after and subject to the rights of holders of Senior Preferred Stock, if any, and on parity with the rights of holders of Series A Preferred Stock), such shares of stock, securities, cash or other property issuable or payable (as part of the reorganization, reclassification, consolidation, merger or sale) with respect to or in exchange for such number of outstanding shares of the Company's Common Stock as would have been received upon conversion of the Series B Preferred Stock at the Conversion Rate then in effect. The Company will not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor company (if other than the Company) resulting from such consolidation or merger or the Company purchasing such assets shall assume by written instrument mailed or delivered to the holders of the Series B Preferred Stock at the last address of each such holder appearing on the books of the Company, the obligation to deliver to each such holder such shares of stock, securities, cash or other property as, in accordance with the foregoing provisions, such holder may be entitled to purchase. -5- (c) In the event that: (1) the Company shall declare any dividend upon its common stock payable in stock or make any special dividend or other distribution to the holders of its Common Stock; or (2) there shall be any capital reorganization or reclassification of the capital stock of the Company, including any subdivision or combination of its outstanding shares of Common Stock, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another company, or (3) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in accordance with such event, the Company shall give to the holders of the Series B Preferred Stock: (i) at least twenty (20) days prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend or distribution or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up; and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, at least twenty (20) days prior written notice of the date when the same shall take place. A notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend or distribution, the date on which the holders of Common Stock shall be entitled thereto, and a notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. Each such written notice shall be sent by mail, first class, postage prepaid, addressed to the holders of the Series B Preferred Stock at the address of each such holder as shown on the books of the Company. (d) If any event occurs as to which, in the opinion of the Board of Directors of the Company, the provisions of this Section 6 are not strictly applicable or if strictly applicable would not fairly protect the rights of the holders of the Series B Preferred stock in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such rights as aforesaid, but in no event shall any adjustment have the effect of decreasing the Conversion Rate as otherwise determined pursuant to any of the provisions of this Section 6 except in the case of a combination of shares of a type contemplated in paragraph 6(a) and then in no event to a rate less than the Conversion Rate as adjusted pursuant to paragraph 6(a). -6- (e) Whenever the Conversion Rate shall be adjusted pursuant to this Section 6, the Company shall forthwith file at each office designated for the conversion of Series B Preferred Stock, a statement, signed by the Chairman of the Board, the President, any Vice President or Treasurer of the Company, showing in reasonable detail the facts requiring such adjustment and the Conversion Rate that will be effective after such adjustment. The Company shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to each record holder of Series B Preferred Stock at his or its address appearing on the stock register. If such notice relates to an adjustment resulting from an event referred to in paragraph 6(c), such notice shall be included as part of the notice required to be mailed and published under the provisions of paragraph 6(c) hereof. 7. Redemption. The Company shall have the right to redeem shares of Series B Preferred Stock pursuant to the following provisions: (a) The Company shall not have any right to redeem shares of the Series B Preferred stock prior to September 30, 2001. Thereafter, the Company shall have the right, at its sole option and election, out of funds legally available therefor, to redeem the shares of Series B Preferred Stock, in whole or in part, at any time and from time to time at a redemption price of $1.00 per share plus an amount equal to all accrued and unpaid dividends thereon (the "Redemotion Price"), whether or not declared, to the redemption date; provided, that any amount due in respect of all or any portion of the Redemption Price, including accrued dividends, may be paid in cash or shares of Common Stock as determined by the Board of Directors. In the event the Board of Directors elects to pay any portion of the Redemption Price in shares of Common Stock, the number of shares of Common Stock to be issued shall be determined in accordance with the provisions of paragraph 5(f). (b) If less than all of the Series B Preferred Stock at the time outstanding is to be redeemed, the shares so to be redeemed shall be selected by lot, pro-rata or in such other manner as the Board of Directors may determine to be fair and proper. (c) Notice of any redemption of the Series B Preferred Stock (including notice of whether such redemption shall be paid in cash or shares of Common Stock) shall be mailed at least 30 days, but not more than 60 days prior to the date fixed for redemption to each holder of Series B Preferred Stock to be redeemed, at such holder's address as it appears on the books of the Company. In order to facilitate the redemption of the Series B Preferred Stock, the Board of Directors may fix a record date for the determination of holders of Series B Preferred Stock to be redeemed, or may cause the transfer books of the Company to be closed for the transfer of the Series B Preferred Stock, not more than 60 days prior to the date fixed for such redemption. (d) On the redemption date specified in the notice given pursuant to paragraph 7(c), the Company shall, and at any time after such notice shall have been mailed and before such redemption date the Company may, deposit for the pro-rata benefit of the holders of the shares of the Series B Preferred Stock so called for redemption, funds in an amount equal to the portion of the Redemption Price, if any, to be paid in cash with a bank or trust company in the Borough of Manhattan, The City of New York, having a capital and surplus of at least -7- $50,000,000. Any monies so deposited by the Company and unclaimed at the end of one (1) year from the date designated for such redemption shall revert to the general funds of the Company. After such reversion, any such bank or trust company shall, upon demand, pay over to the Company such unclaimed amounts and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof to such holder and such holder shall look only to the Company for the payment of the redemption price. Any interest accrued on funds so deposited pursuant to this paragraph 7(d) shall be paid from time to time to the company for its own account. (e) Upon the deposit of funds pursuant to paragraph 7(d) in respect of shares of the Series B Preferred Stock called for redemption, or, in the event that the Board of Directors elects to pay all or part of the Redemption Price in shares of Common Stock, on the date fixed for redemption, notwithstanding that any certificates for such shares shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed outstanding, the rights to receive dividends thereon shall cease to accrue from and after the date of redemption designated in the notice of redemption and all rights of the holders of the shares of the Series B Preferred Stock called for redemption shall cease and terminate, excepting only the right to receive the Redemption Price therefor and the right to convert such shares into shares of Common Stock until the close of business on the business day preceding the redemption date, as provided in Section 5. 8. Reissuance. Shares of this Series that have been issued and reacquired in any manner including shares purchased, exchanged, redeemed or converted shall not be reissued as part of this Series and shall upon compliance with any applicable provisions of the laws of the State of Georgia have the status of authorized and unissued shares of the Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of Preferred Stock. -8- EXHIBIT C Series 3 Junior Participating Preferred Stock Section 1. Designation and Amount. There shall be a series of the Preferred Stock which shall be designated as the "Series 3 Junior Participating Preferred Stock," par value $.01 per share, and the number of shares constituting such series shall be 2,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series 3 Junior Participating Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Company. Section 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of preferred stock of the Company ranking prior and superior to the Series 3 Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series 3 Junior Participating Preferred Stock, in preference to the holders of shares of Common Stock, par value $.01 per share of the Company (the "Common Stock"), and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on any regular quarterly dividend payment date as shall be established by the Board of Directors (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series 3 Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10.00 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series 3 Junior Participating Preferred Stock. In the event the Company shall at any time after August 25, 1996 (the "Rights Declaration Date") declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series 3 Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Company shall declare a dividend or distribution on the Series 3 Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series 3 Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series 3 Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series 3 Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series 3 Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may, in accordance with applicable law, fix a record date for the determination of holders of shares of Series 3 Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than such number of days prior to the date fixed for the payment thereof as may be allowed by applicable law. Section 3. Voting Rights. The holders of shares of Series 3 Junior Participating Preferred Stock shall have the following voting rights: (A) Each share of Series 3 Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Company. In the event the Company shall at any time after the Rights Declaration Date declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes to which holders of shares of Series 3 Junior Participating Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in the Company's Second Amended and Restated Articles of Incorporation, as amended, or by law, the holders of shares of series 3 Junior -2- Participating Preferred Stock, the holders of shares of common stock, and the holders of shares of any other capital stock of the Company having general voting rights, shall vote together as one class on all matters submitted to a vote of stockholders of the Company. (C) Except as otherwise set forth herein or in the company's Second Amended and Restated Articles of Incorporation, as amended, and except as otherwise provided by law, holders of Series 3 Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever dividends or distributions payable on the Series 3 Junior Participating Preferred stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series 3 Junior Participating Preferred Stock outstanding shall have been paid in full, the Company shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series 3 Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series 3 Junior Participating Preferred Stock, except dividends paid ratably on the Series 3 Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) except as permitted in Section 4(A)(iv) below, redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series 3 Junior Participating Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series 3 Junior Participating Preferred Stock; and (iv) purchase or otherwise acquire for consideration any shares of Series 3 Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series 3 Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. -3- (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series 3 Junior Participating Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. The Company shall cause all such shares upon their cancellation to be authorized but unissued shares of Preferred Stock which may be reissued as part of a new series of Preferred Stock, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock of the Company ranking prior and superior to the Series 3 Junior Participating Preferred Stock with respect to liquidation, upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series 3 Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series 3 Junior Participating Preferred Stock shall have received $1,000.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series 3 Liquidation Preference"). Following the payment of the full amount of the Series 3 Liquidation Preference, no additional distributions shall be made to the holders of shares of Series 3 Junior Participating Preferred Stock, unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series 3 Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock dividends, and subdivisions, combinations and consolidations with respect to the Common Stock) (such number in clause (ii) being referred to as the "Adjustment Number"). Following the payment of the full amount of the Series 3 Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series 3 Junior Participating Preferred Stock and Common Stock, respectively, holders of Series 3 Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Series 3 Junior Participating Preferred Stock and Common Stock, on a per share basis, respectively. (B) in the event there are not sufficient assets available to permit payment in full of the Series 3 Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series 3 Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. -4- (C) In the event the Company shall at any time after the Rights Declaration Date declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, merger, etc. In case the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series 3 Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company shall at any time after the Rights Declaration Date declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series 3 Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event. Section 8. Redemption. The shares of Series 3 Junior Participating Preferred Stock shall not be redeemable. Section 9. Ranking. The Series 3 Junior Participating Preferred Stock shall rank junior to all other series of the Company's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 10. Fractional Shares. Series 3 Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series 3 Junior Participating Preferred Stock. -5- EXHIBIT D SERIES C $2.25 CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK SECTION 1. Designation. There is hereby created a series of preferred stock, $.01 par value per share, of MCI WORLDCOM, Inc. (the "Corporation") to be known as "Series C $2.25 Cumulative Convertible Exchangeable Preferred Stock" (the "Series C Preferred Stock"). SECTION 2. Number of Shares. The number of shares of Series C Preferred Stock authorized for issuance is 3,750,000. SECTION 3. Stated Capital. The amount to be represented in stated capital at all times for each share of Series C Preferred Stock shall be $.01. SECTION 4. Dividends. (a) (i) The holders of shares of Series C Preferred Stock shall be entitled to receive dividends at the rate of $2.25 per annum per share of Series C Preferred Stock, which shall be fully cumulative and shall accrue without interest. Dividends shall be payable in cash quarterly on January 15, April 15, July 15, and October 15 of each year (commencing on January 15, 2000) (and, in the case of any accrued but unpaid dividends, at such additional times and for such interim periods, if any, as determined by the Board of Directors), except that if any such date is a Saturday, Sunday or legal holiday then such dividend shall be payable on the next day that is not a Saturday, Sunday or legal holiday on which banks in the State of New York are permitted to be closed (a "Business Day"), to holders of record as they appear on the stock books of the transfer agent for the Corporation (the "Transfer Agent") on the applicable record date, which shall be not more than 60 nor less than 10 days preceding the payment date for such dividends, as are fixed by the Board of Directors, but only when, as and if declared by the Board of Directors out of funds at the time legally available for the payment of dividends. The amount of dividends payable per share of Series C Preferred Stock for each quarterly dividend period shall be computed by dividing the annual dividend amount per share by four. The amount of dividends payable for any period that is shorter or longer than a full quarterly dividend period shall be computed on the basis of a 360-day year of twelve 30-day months. Holders of shares of Series C Preferred Stock shall not be entitled to receive any dividends, whether payable in cash, property or stock, which are in excess of the cumulative dividends provided for herein. (ii) Notwithstanding Section 4(a)(i) above, (A) if the quarterly dividend payable on October 15, 1999 to the holders of $2.25 Cumulative Convertible Exchangeable Preferred Stock, par value $.01 per share ("SkyTel Preferred Stock"), of SkyTel Communications, Inc., a Delaware corporation ("SkyTel"), shall have been declared, then the first quarterly dividend of the Series C Preferred Stock payable on January 15, 2000 shall be equal to $0.5625 per share of Series C Preferred Stock, and (B) if the quarterly dividend payable to the holders of SkyTel Preferred Stock on October 15, 1999 shall not have been declared, then the first quarterly dividend of the Series C Preferred Stock payable on January 15, 2000 shall be equal to $1.125 per share of Series C Preferred Stock. Thereafter, dividends shall accrue as set forth in Section 4(a)(i). (b) No dividends or other distributions, other than dividends payable solely in shares of the Corporation's Common Stock, par value $.01 per share (the "Common Stock") or other capital stock of the Corporation ranking junior to the Series C Preferred Stock as to dividends (collectively, "Junior Dividend Stock") and rights to acquire the foregoing, shall be paid or declared and set apart for payment on any shares of Junior Dividend Stock, and no purchase, redemption or other acquisition shall be made by the Corporation of any shares of Junior Dividend Stock, unless and until all accrued and unpaid dividends on the Series C Preferred Stock shall have been paid or declared and set apart for payment. (c) No dividends, other than dividends payable solely in shares of Junior Dividend Stock and rights to acquire the foregoing, shall be paid or declared and set apart for payment on any class or series of the Corporation's capital stock ranking, as to dividends on a parity with the Series C Preferred Stock (collectively, "Parity Dividend Stock") for any period and no purchase, redemption or other acquisition shall be made by the Corporation of any shares of Parity Dividend Stock unless and until full cumulative dividends have been, or contemporaneously are, paid or declared and set apart for such payment on the Series C Preferred Stock for all dividend payment periods terminating on or prior to the date of payment of such dividends on the Parity Dividend Stock. When dividends are not paid in full upon the Series C Preferred Stock and the Parity Dividend Stock (other than the Corporation's Series B Convertible Preferred Stock, par value $.01 per share (the "Series B Preferred Stock")), all dividends paid or declared and set aside for payment upon shares of Series C Preferred Stock and such other Parity Dividend Stock shall be paid or declared and set aside for payment pro rata so that the amount of dividends paid or declared and set aside for payment per share on the Series C Preferred Stock and such other Parity Dividend Stock shall in all cases bear to each other the same ratio that accrued and unpaid dividends per share on the shares of Series C Preferred Stock and such other Parity Dividend Stock bear to each other. Except as limited by the previous sentence, the Series B Preferred Stock shall be Parity Dividend Stock for all purposes herein. (d) The restrictions contained in this Section 4 shall not be deemed to restrict repurchases of capital stock of the Corporation from employees or consultants pursuant to employee stock option plans and the conversion of capital stock of the Corporation into, or the exchange of capital stock of the Corporation for, Junior Dividend Stock. (e) Holders of shares of Series C Preferred Stock called for redemption on a redemption date falling between a dividend payment record date and the associated dividend payment date shall, in lieu of receiving such dividend on the dividend payment date fixed therefor, receive such dividend payment together with all other accrued and unpaid dividends on the date fixed for redemption (unless such holders convert such shares to Common Stock pursuant to Section 9 hereof). (f) Any reference to "distribution" contained in this Section 4 shall not be deemed to include any stock dividend or distributions made in connection with any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. -2- SECTION 5. Liquidation Preference. (a) In the event of a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of shares of Series C Preferred Stock shall be entitled to receive out of the assets of the Corporation, whether such assets are stated capital or surplus of any nature, an amount equal to the dividends accrued and unpaid thereon to the date of final distribution to such holders, whether or not declared, without interest, and a sum equal to $50.00 per share, and no more, before any payment shall be made or any assets distributed to the holders of Common Stock or any other class or series of capital stock ranking junior to the Series C Preferred Stock as to a liquidation, dissolution or winding up of the Corporation ("Junior Liquidation Stock"). No full preferential payment on account of any liquidation, dissolution or winding up of the Corporation shall be made to the holders of any class or series of capital stock ranking on parity with the Series C Preferred Stock in the event of a liquidation, dissolution or winding up of the Corporation ("Parity Liquidation Stock") unless there shall likewise be paid at the same time to the holders of the Series C Preferred Stock the full amounts to which the holders of all outstanding shares of Series C Preferred Stock are entitled with respect to such distribution. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of Series C Preferred Stock and any shares of Parity Liquidation Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of Series C Preferred Stock and of any shares of Parity Liquidation Stock ratably in accordance with the full respective preferential amounts that would be payable on such shares of Series C Preferred Stock and such shares of Parity Liquidation Stock if all amounts payable thereon were paid in full. Neither a consolidation or merger of the Corporation with another entity nor a sale or transfer of all or part of the Corporation's assets for cash, securities or other property will be considered a liquidation, dissolution or winding up of the Corporation. The Series B Preferred Stock shall be Parity Liquidation Stock for purposes of this Section 5(a). (b) Written notice of any liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when the place or places where the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage prepaid, not less than 30 days prior to any payment date stated therein, to the holders of record of the Series C Preferred Stock at their respective addresses as the same shall appear on the stock books of the Transfer Agent. SECTION 6. Voting Rights. (a) Except as herein provided or as otherwise required by law, holders of Series C Preferred Stock shall have no voting rights. Whenever, at any time or times, dividends payable on the shares of Series C Preferred Stock at the time outstanding shall be cumulatively in arrears for such number of dividend periods that shall in the aggregate contain not less than 540 days, the holders of all outstanding shares of Series C Preferred Stock and any shares of Parity Dividend Stock upon which like voting rights have been conferred and are exercisable (the Series C Preferred Stock and any such Parity Dividend Stock, collectively for purposes of this Section 6, the "Defaulted Preferred Stock"), shall be entitled to elect two directors of the Corporation at the Corporation's next annual meeting of shareholders and at each subsequent annual meeting of shareholders; provided, however, the shares of Defaulted Preferred Stock shall be entitled to exercise their voting rights at a special meeting of the holders of shares of Defaulted Preferred Stock as set forth in paragraphs (b) and (c) of this Section 6. At elections for such directors, each holder of Series C Preferred Stock shall be -3- entitled to one vote for each share held (the holders of shares of any other series of Defaulted Preferred Stock ranking on such a parity being entitled to such number of votes, if any, for each share of stock held as may be granted to them). Upon the vesting of such right of the holders of Defaulted Preferred Stock, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of outstanding Defaulted Preferred Stock as hereinafter set forth. The right of holders of Defaulted Preferred Stock, voting separately as a class without regard to series, to elect members of the Board of Directors as aforesaid shall continue until such time as all dividends accumulated and unpaid on Defaulted Preferred Stock shall have been paid or declared and funds set aside for payment in full, at which time such right shall terminate, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned. (b) Whenever such voting right shall have vested, such right may be exercised initially either at a special meeting of the holders of shares of Defaulted Preferred Stock called as hereinafter provided, or at any annual meeting of shareholders held for the purpose of electing directors, and thereafter at such meeting or by the written consent of such holders pursuant to Section 14-2-704 of the Georgia Business Corporation Code. (c) At any time when such voting right shall have vested in the holders of shares of Defaulted Preferred Stock entitled to vote thereon, and if such right shall not already have been initially exercised, an officer of the Corporation shall, upon the written request of 10% of the holders of record of shares of such Defaulted Preferred Stock then outstanding, addressed to the Secretary of the Corporation, call a special meeting of holders of shares of such Defaulted Preferred Stock. Such meeting shall be held at the earliest practicable date upon the notice required for special meetings of shareholders at the place for holding annual meetings of shareholders of the Corporation or, if none, at a place designated by the Secretary of the Corporation. If such meeting shall not be called by the proper officers of the Corporation within 30 days after the personal service of such written request upon the Secretary of the Corporation, or within 30 days after mailing the same within the United States, by registered mail, addressed to the Secretary of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the holders of record of 10% of the shares of Defaulted Preferred Stock then outstanding may designate in writing any person to call such meeting at the expense of the Corporation, and such meeting may be called by such person so designated upon the notice required for special meetings of shareholders and shall be held at the same place as is elsewhere provided in this paragraph. Any holder of shares of Defaulted Preferred Stock then outstanding that would be entitled to vote at such meeting shall have access to the stock books of the Transfer Agent for the purpose of causing a meeting of shareholders to be called pursuant to the provisions of this paragraph. Notwithstanding the provisions of this paragraph, however, no such special meeting shall be called or held during a period within 45 days immediately preceding the date fixed for the next annual meeting of shareholders. (d) Subject to the provisions hereof, the directors elected pursuant to this Section shall serve until the next annual meeting or until their respective successors shall be elected and qualified. Any director elected by the holders of Defaulted Preferred Stock may be removed by, and shall not be removed otherwise than by, the vote of the holders of a majority of the outstanding shares of the Defaulted Preferred Stock who were entitled to participate in such -4- election of directors, voting as a separate class without regard to series, at a meeting called for such purpose or by written consent as permitted by law and the Articles of Incorporation and Bylaws of the Corporation. If the office of any director elected by the holders of Defaulted Preferred Stock, voting as a class, without regard to series, becomes vacant by reason of death, resignation, retirement, disqualification or removal from office or otherwise, the remaining director elected by the holders of Defaulted Preferred Stock, voting as a class, without regard to series, may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred upon any termination of the right of the holders of Defaulted Preferred Stock to vote for directors as herein provided, the term of office of all directors then in office elected by the holders of Defaulted Preferred Stock, voting as a class, without regard to series, shall terminate immediately. Whenever the terms of office of the directors elected by the holders of Defaulted Preferred Stock, voting as a class, without regard to series, shall so terminate and the special voting powers vested in the holders of Defaulted Preferred Stock shall have expired, the number of directors shall be such number as may be provided for in the Bylaws irrespective of any increase made pursuant to the provisions of this Section 6. (e) So long as any shares of the Series C Preferred Stock remain outstanding and in addition to any other vote required by law, the vote or consent of the holders of at least a majority of the shares of Series C Preferred Stock then outstanding given in person or by proxy either in writing (as permitted by law and the Articles of Incorporation and Bylaws of the Corporation) or at any special or annual meeting, shall be necessary to permit, effect or validate any one or more of the following: (i) the creation or issuance, or any increase in the authorized number of shares of any class or series of stock ranking prior to the Series C Preferred Stock either as to dividends ("Senior Dividend Stock") or upon liquidation, dissolution or winding up of the Corporation ("Senior Liquidation Stock"), or any security convertible into or exercisable or exchangeable for Senior Dividend Stock or Senior Liquidation Stock; or (ii) the amendment, alteration or repeal of any of the provisions of the Articles of Incorporation of the Corporation (including this Exhibit D) that would adversely affect any right, preference, privilege or voting power of the Series C Preferred Stock; provided, however, that any increase in the amount of authorized preferred stock or the creation and issuance of other series of Parity Dividend Stock, Parity Liquidation Stock, Junior Dividend Stock or Junior Liquidation Stock shall not be deemed to affect adversely such rights, preferences or voting powers. SECTION 7. Optional Redemption. (a) The Corporation at its option may redeem shares of Series C Preferred Stock out of funds legally available for the purpose, in whole or in part, at any time, at the redemption prices per share referred to below in effect on the date fixed for redemption (the "Redemption Date") during the period beginning on October 15 of the years shown below, plus an amount equal to the dividends accrued and unpaid on the shares of Series C Preferred Stock to be redeemed, whether or not declared, to the Redemption Date: -5- If Redeemed During The 12-Month Period Beginning October 15, Redemption Price Per Share ------------------------------- -------------------------- 1998.................................... $51.00 1999.................................... $50.75 2000.................................... $50.50 2001.................................... $50.25 2002 and thereafter..................... $50.00 (b) In the event the Corporation shall redeem shares of Series C Preferred Stock, a notice of such redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock books of the Transfer Agent. Each such notice shall state: (i) the Redemption Date; (ii) the number of shares of Series C Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; (v) that payment will be made upon presentation and surrender of certificates evidencing such Series C Preferred Stock; (vi) the then current conversion price and the date on which the right to convert such shares of Series C Preferred Stock will expire; (vii) that dividends on the shares to be redeemed shall cease to accrue following such Redemption Date; (viii) that such redemption is at the option of the Corporation; and (ix) that dividends accrued to and including the Redemption Date will be paid as specified in said notice. Notice having been mailed as aforesaid, on and after the Redemption Date, unless the Corporation shall be in default in providing money for the payment of the redemption price (including an amount equal to any accrued and unpaid dividends to and including the Redemption Date), (x) dividends on the shares of the Series C Preferred Stock so called for redemption shall cease to accrue, (y) said shares shall be deemed no longer outstanding, and (z) all rights of the holders thereof as shareholders of the Corporation (except the right to receive from the Corporation the monies payable upon redemption, without interest thereon, upon surrender of the certificates evidencing such shares) shall cease. The Corporation's obligation to provide monies in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Redemption Date, the Corporation shall deposit with a bank or trust company having an office or agency in the Borough of Manhattan, City of New York, and having a capital and surplus of at least $50,000,000, the principal amount of funds necessary for such redemption, in trust for the account of the holders of the shares to be redeemed (and so as to be and continue to be available therefor), with irrevocable instructions and authority to such bank or trust company that such funds be applied to the redemption of the shares of Series C Preferred Stock so called for redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of three years from such Redemption Date shall be released or repaid to the Corporation, after which, subject to any applicable laws relating to escheat or unclaimed property, the holder or holders of such shares of Series C Preferred Stock so called for redemption shall look only to the Corporation for payment of the redemption price. -6- Upon surrender in accordance with said notice of the certificates for any such shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the applicable redemption price aforesaid. If fewer than all the outstanding shares of Series C Preferred Stock are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding shares of Series C Preferred Stock not previously called for redemption by lot or pro rata or by any other equitable method determined by the Board of Directors in its sole discretion. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. Notwithstanding the foregoing, if the Corporation's notice of redemption has been given pursuant to this Section 7 and any holder of shares of Series C Preferred Stock shall, prior to the close of business on the third Business Day preceding the Redemption Date, give written notice to the Corporation pursuant to this Section 7(b) hereof of the conversion of any or all of the shares to be redeemed held by such holder (accompanied by a certificate or certificates for such shares, duly endorsed or assigned to the Corporation), then the conversion of such shares to be redeemed shall become effective as provided in Section 9. (c) The election by the Corporation to redeem shares of Series C Preferred Stock pursuant to Section 7(b) hereof shall become irrevocable only on the relevant Redemption Date. SECTION 8. Exchange. (a) In addition to the optional redemption rights of the Corporation as set forth in Section 7 above, the Corporation shall have the right to exchange the Series C Preferred Stock in whole, but not in part, on any dividend payment date for the Corporation's 4.5% Convertible Subordinated Debentures due 2003 (the "Debentures") to be issued substantially in the form set forth in the indenture (the "Debenture Indenture") filed as an exhibit to the Corporation's Registration Statement on Form S-4, Registration No. 333-85919, filed with the Securities and Exchange Commission on August 26, 1999. (b) No such exchange shall be made unless all dividends accrued and payable on the Series C Preferred Stock have been paid or declared and such amount set aside for their payment prior to the date fixed for such exchange (the "Exchange Date"). Holders of outstanding shares of Series C Preferred Stock will be entitled to receive $50.00 principal amount of Debentures in exchange for each share of series C Preferred Stock held by them at the time of exchange; provided that the Debentures will be issuable in denominations of $1,000.00 and integral multiples thereof. If the exchange results in an amount of Debentures that is not an integral multiple of $1,000.00, the amount exceeding the closest integral multiple of $1,000.00 will be paid in cash by the Corporation. (c) Notice of such exchange of shares of Series C Preferred Stock shall be mailed at least 30 days but not more than 60 days prior to the Exchange Date to each holder of Series C Preferred Stock, at such holder's address as it appears on the books of the Corporation. The notice shall specify the Exchange Date and the place where certificates for shares of Series C Preferred Stock are to be surrendered for Debentures and shall state that dividends on Series C Preferred Stock will cease to accrue on the Exchange Date. -7- (d) Prior to giving notice of intention to exchange pursuant to subsection 8(c) above, the Corporation and a bank or trust company selected by the Corporation shall execute and deliver an indenture substantially in the form of the Debenture Indenture with such changes as may be required by law, stock exchange rule, or usage that do not materially and adversely affect the rights of the holders of the Debentures (the "Indenture"). Prior to any exchange of shares of Series C Preferred Stock pursuant to subsection 8(a) above, any amendments or supplements to the Indenture which materially and adversely affect the rights of the holders of the Debentures shall be consented to by the holders of more than 50 percent of the then outstanding shares of Series C Preferred Stock. A copy of the Indenture may be inspected by the holders of any shares of Series C Preferred Stock at the offices of the Corporation during normal business hours. The Corporation will not give notice of its intention to exchange pursuant to subsection 8(c) above unless it shall file at the office or agency of the Corporation maintained for the exchange of shares of Series C Preferred Stock an opinion of counsel that the Indenture has been duly authorized, executed and delivered by the Corporation, has been duly qualified under the Trust Indenture Act of 1939 (or that such qualification is not necessary) and constitutes a valid and binding instrument enforceable against the Corporation in accordance with its terms (subject to bankruptcy, insolvency, reorganization or other laws of general applicability relating to or affecting creditors, rights and to the general principles of equity; and subject to such other qualifications as are then customarily contained in opinions of counsel experienced in such matters); and to the effect that the Debentures have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered in exchange for the shares of Series C Preferred Stock, will constitute valid and binding obligations of the Corporation entitled to the benefits of the Indenture (subject as aforesaid); and that under the laws of the State of Georgia, the Debentures will be treated as on a parity with the indebtedness of the Corporation to its general unsecured creditors, except to the extent subordinated in the Indenture; and that the exchange of Debentures for the Series C Preferred Stock will not violate the laws of the State of Georgia; and that neither the execution and delivery of the Indenture or the Debentures nor compliance with the terms, conditions or provisions of such instruments will result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument, known to such counsel, to which the Corporation or any of its subsidiaries is a party or by which it or any of them is bound, or any decree, judgment, order, rule or regulations known to counsel, of any court or governmental agency or body having jurisdiction over the Corporation and such subsidiaries or any of their property; and that issuance of the Debentures in exchange for the shares of Series C Preferred Stock is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). (e) If on the Exchange Date the Corporation has taken all action required to authorize the issuance of the Debentures in exchange for the Series C Preferred Stock, then, notwithstanding that the certificates for such shares have not been surrendered for cancellation, from and after the Exchange Date, all of the shares of Series C Preferred Stock shall no longer be deemed outstanding and all rights relating to such shares shall terminate, except only the right to receive dividends accrued and unpaid to the Exchange Date and, upon surrender of certificates therefor, the right to receive the Debentures, and the person or persons entitled to receive the Debentures issuable upon the exchange shall be treated for all purposes as the registered holder or holders of such Debentures. Upon due surrender of a certificate representing shares of Series -8- C Preferred Stock, the holder thereof shall receive the principal amount of Debentures to which such holder is thereby entitled plus any amounts of cash which may be due hereunder. (f) The election of the Corporation to exchange the Series C Preferred Stock for the Debentures shall become irrevocable only on the Exchange Date. SECTION 9. Conversion at Option of Holder. (a) Each share of Series C Preferred Stock may be converted, at any time and at the option of the holder, into fully paid, non-assessable shares of Common Stock of the Corporation on and subject to the terms and conditions of this Section 9. (b) The number of shares of Common Stock issuable upon conversion of each share of the Series C Preferred Stock shall be equal to the quotient obtained by dividing (i) $50.00 by (ii) the Conversion Price (as hereinafter defined) in effect on the date of conversion (calculated as to each conversion to the nearest 1/100th of a share). The Conversion Price shall initially equal (i) $45.00 divided by (ii) the exchange ratio applicable to the common stock, par value $.01 per share, of SkyTel, in the merger of SkyTel with and into Empire Merger Inc., a wholly owned subsidiary of the Corporation; provided, however, that such Conversion Price shall be adjusted and readjusted from time to time as provided in this Section 9 and, as so adjusted and readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by this Section 9. (c) Except as may be provided by the Board of Directors, upon conversion of the Series C Preferred Stock, the Corporation is not obligated to make any payment or adjustment with respect to dividends accrued on the Series C Preferred Stock through the date of conversion unless the holder of the shares of Series C Preferred Stock being converted was the record holder of such shares on the record date for the payment of such dividends. (d) Upon surrender to the Corporation at the office of the Transfer Agent or such other place or places, if any, as the Board of Directors may determine, of certificates duly endorsed to the Corporation or in blank for shares of Series C Preferred Stock to be converted together with appropriate evidence of the payment of any transfer or similar tax, if required, and written instructions to the Corporation requesting conversion of such shares and specifying the name and address of the person, corporation, firm or other entity to whom such shares of Common Stock are to be issued, the Corporation shall issue (i) the number of full shares of Common Stock issuable upon conversion thereof as of the time of such surrender and as promptly as practicable thereafter will deliver certificates for such shares of Common Stock, and (ii) cash for any remaining fraction of a share of Common Stock in an amount equaling the Current Market Price (as hereinafter defined) on the date such shares are tendered for conversion. Upon surrender of a certificate representing shares of Series C Preferred Stock to be converted in part, in addition to the foregoing, the Corporation shall also issue to such holder a new certificate representing any unconverted shares of Series C Preferred Stock represented by the certificate surrendered for conversion. -9- (e) The Corporation shall pay all documentary, stamp, or similar issue or transfer tax due on the issue of shares of Common Stock issuable upon conversion of the Series C Preferred Stock; provided, however, that the holder of shares of Series C Preferred Stock so converted shall pay any such tax which is due because such shares are to be issued in the name other than that of such holder. (f) The Conversion Price in effect at any time shall be adjusted as follows: (i) If the Corporation shall, at any time or from time to time, effect a subdivision of the outstanding Common Stock, the Conversion Price in effect immediately before such subdivision shall be proportionately decreased and, conversely, if the Corporation shall, at any time or from time to time, effect a combination of the outstanding Common Stock, the Conversion Price in effect immediately before such combination shall be proportionately increased. Any adjustment under this subsection shall become effective at the close of business on the record date fixed for the applicable subdivision or combination. (ii) In the event the Corporation shall, at any time or from time to time, make or issue to all holders of shares of Common Stock (or fix a record date for the determination of holders of Common Stock entitled to receive) a dividend or other distribution payable in shares of Common Stock, then the Conversion Price then in effect shall be decreased as of the time of such issuance (or, in the event such a record date shall have been fixed, as of the close of business on such record date) in accordance with the following formula: O ----- C* = C x O + N where: C* = the adjusted Conversion Price. C = the current Conversion Price. O = the number of shares of Common Stock outstanding immediately prior to the applicable issuance (or the close of business on the record date). N = The number of additional shares of Common Stock issued in payment of such dividend of distribution. (iii) In the event the Corporation shall, at any time or from time to time, issue or sell (or be deemed pursuant to Section 9(g) hereto to have issued or sold) to all holders of shares of Common Stock any shares of Common Stock for a consideration per -10- share that is less than the Current Market Price immediately prior to such issuance or sale (or deemed issuance or sale), then the Conversion Price then in effect shall be decreased as of the time of such issuance or sale (or deemed issuance or sale) in accordance with the following formula: NxP --- C* = C x O + M ----- O+N where: C* = the adjusted Conversion Price. C = the current Conversion Price. O = the number of shares of Common Stock outstanding on the date of the applicable issuance or sale (or deemed issuance or sale). N = the number of additional shares of Common Stock issued or sold (or deemed issued or sold). P = the aggregate consideration per share received and/or to be received for each additional share of Common Stock issued or sold (or deemed issued or sold). M = the Current Market Price per share of Common Stock. (g) For purposes of determining the adjusted Conversion Price under Section 9(f), the following principles shall be applicable: (i) If the Corporation in any manner grants to all holders of shares of Common Stock any rights or options (collectively, "Options") to subscribe for or to purchase Common Stock or other securities convertible into or exercisable or exchangeable for Common Stock (collectively, "Convertible Securities") and the aggregate consideration payable with respect to the issuance of such options and with respect to the later conversion, exercise or exchange thereof for Common Stock is less than the Current Market Price in effect immediately prior to the granting of such options, then the maximum number of shares of Common Stock issuable upon the exercise of such options (and, if appropriate, upon the subsequent conversion, exercise or exchange of such Convertible Securities) shall be deemed to be outstanding and such Options shall be deemed to have been issued and sold for an aggregate consideration per share determined by dividing (A) the aggregate amount received or receivable by the Corporation as consideration for the granting of such options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of all such options (and, if appropriate, the minimum aggregate amount of -11- additional consideration payable upon the conversion, exercise or exchange of such Convertible Securities), by (B) the maximum number of shares of Common Stock issuable upon the exercise of all such Options (and, if appropriate, upon the conversion, exercise or exchange of such Convertible Securities). No further adjustment of the Conversion Price shall be made when Common Stock or Convertible Securities are issued upon the exercise of such options or when Common Stock is issued upon the conversion, exercise or exchange of such Convertible Securities. (ii) If the Corporation in any manner issues to all holders of shares of Common Stock any rights to subscribe for or to purchase Convertible Securities and the aggregate consideration for which Common Stock is issuable upon the conversion, exercise or exchange of such Convertible Securities is less than the Current Market Price in effect immediately prior to the issuance of such Convertible Securities, then the maximum number of shares of Common Stock issuable upon tile conversion, exercise or exchange of such Convertible Securities shall be deemed to be outstanding and such Convertible Securities shall be deemed to have been issued and sold for an aggregate consideration per share determined by dividing (A) the aggregate amount received or receivable by the Corporation as consideration for the issuance of such Convertible Securities, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the conversion, exercise or exchange of all such Convertible Securities, by (B) the maximum number of shares of Common Stock issuable upon the conversion, exercise or exchange of such Convertible Securities. No further adjustment of the Conversion Price shall be made when Common Stock is issued upon the conversion, exercise or exchange of such Convertible Securities. (iii) If the purchase price provided for in any Options, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable for common Stock change at any time, and such change is not due solely to the operation of anti-dilution provisions similar in nature to those set forth in this Section 9, then the Conversion Price in effect at the time of such change shall be readjusted to the Conversion Price which would have been in effect at such time had such options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. (iv) Upon the expiration of any Option or the termination of any right to convert, exercise or exchange any Convertible Securities without the conversion, exercise or exchange of any such Option or right, the Conversion Price then in effect hereunder will be adjusted to the Conversion Price which would have been in effect at the time of such expiration or termination had such option or Convertible Security, to the extent outstanding immediately prior to such expiration or termination, never been issued. (v) If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Corporation therefor. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration -12- other than cash received by the Corporation will be the fair value of such consideration, as determined in good faith by the Board of Directors. (vi) If Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold together with other stock or securities or other assets of the Corporation for a consideration that covers both, the consideration received by the Corporation for any Common Stock, Options or Convertible Securities shall be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such Common Stock, Options or Convertible Securities, as the case may be. (vii) Anything herein to the contrary notwithstanding, no adjustment will be made to the Conversion Price by reason of (A) the issuance of Common Stock, Options or Convertible Securities to employees or directors of the Corporation pursuant to employee benefit plans or otherwise, or the issuance of Common Stock upon the conversion, exercise or exchange thereof, (B) the issuance of Common Stock upon the conversion, exercise or exchange of options or Convertible Securities issued and outstanding on the date these Articles of Amendment are filed with the Secretary of State of the State of Georgia, (C) the issuance of any securities pursuant to and in accordance with the Rights Agreement dated August 25, 1996 between the Corporation and The Bank of New York, as amended (or any successor agreement), or (D) the issuance of Common Stock upon the conversion of the Series C Preferred Stock. (h) For purposes of this Exhibit D, the term "Current Market Price" per share of Common Stock on any date shall be deemed to be the average daily Closing Prices of the Common Stock for the 30 consecutive trading days commencing 45 trading days before such date. The "Closing Price" for each trading day shall be the last reported sales price regular way or, in case no sale takes place on such day, the average of the closing hid and asked prices regular way on such day, in either case as reported on the principal national securities exchange (which for this purpose shall include The Nasdaq National Market system ("NASDAQ/NMS")) on which the Common Stock is listed or admitted for trading, or if not listed or admitted to trading on any national securities exchange, the average of the high bid and low asked prices on such day as reported by the National Association of Securities Dealers, Inc. through the National Association of Securities Dealers Automated Quotation system ("NASDAQ"), or if the National Association of Securities Dealers, Inc. through NASDAQ shall not have reported any bid and asked prices for the Common Stock on such day, the average of the hid and asked prices for such day as furnished by any New York Stock Exchange member firm selected from time to time by the Corporation for such purpose, or if no such bid and asked prices can be obtained from any such firm, the fair market value of one share of the Common Stock on such day as determined in good faith by the Board of Directors. (i) No adjustment in the Conversion Price need be made unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price; provided, however, that any adjustments that are not made shall he carried forward and taken into account in any subsequent adjustment. All calculations under this Section 9 shall be made either to the nearest cent or to the nearest 1/100th of a share. -13- (j) No adjustment need be made for a change in the par value of the Common Stock. (k) Whenever the Conversion Price is adjusted, the Corporation shall promptly mail to holders of Series C Preferred Stock a notice of adjustment briefly stating the facts requiring the adjustment and the manner of computing it. (l) In case of any consolidation or merger of the Corporation with any other entity (other than a wholly-owned subsidiary of the Corporation), or in the case of any sale or transfer of all or substantially all of the assets of the Corporation, or in the case of any share exchange pursuant to which all of the outstanding shares of Common Stock are converted into other securities or property, the Corporation shall make appropriate provision or cause appropriate provision to be made so that holders of each share of Series C Preferred Stock then outstanding shall have the right thereafter to convert such share of Series C Preferred Stock into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock into which such share of Series C Preferred Stock might have been converted immediately prior to the effective date of such consolidation, merger, sale, transfer or share exchange. If in connection with any such consolidation, merger, sale, transfer or share exchange, each holder of shares of Common Stock is entitled to elect to receive either securities, cash or other assets upon completion of such transaction, the Corporation shall provide or cause to be provided to each holder of Series C Preferred Stock the right to elect to receive the securities, cash or other assets into which the Series C Preferred Stock held by such holder shall be convertible after completion of any such transaction on the same terms and subject to the same conditions applicable to holders of the Common Stock (including, without limitation, notice of the right to elect, limitations on the period in which such election shall be made and the effect of failing to exercise the election). The Corporation shall not effect any such transaction unless the provisions of this paragraph have been fulfilled. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges. (m) The Corporation shall reserve and at all times keep available, free from preemptive rights, out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series C Preferred Stock, such number of its shares of duly authorized Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series C Preferred Stock. SECTION 10. Redemption Upon Fundamental Change. (a) If a Fundamental Change (as defined in paragraph (c) of this Section 10) occurs, each holder of Series C Preferred Stock shall have the right, at the holder's option, to require the Corporation to repurchase all of such holder's Series C Preferred Stock, or any portion thereof that has an aggregate liquidation value that is a multiple of $50.00, on the date (the "Repurchase Date") selected by the Corporation that is not less than ten nor more than 20 days after the Final Surrender Date (as defined in paragraph (b) of this Section 10), at a price per share equal to $50.00, plus an amount equal to accrued and unpaid dividends to the Repurchase Date. The Corporation may, at its option, pay all or any portion of the repurchase price upon a Fundamental Change in shares of Common Stock of the Corporation or any successor corporation. For purposes of calculating the number of shares of common stock issuable upon such redemption, the value of any such -14- common stock shall be equal to the average of the Closing Prices of such common stock for the five Trading Dates ending on the third Trading Date immediately preceding the Repurchase Date. Payment may not be made in shares of common stock unless such shares (i) have been, or will be, registered on or prior to the Final Surrender Date (as defined in paragraph (b) of this Section 10) under the Securities Act or are freely tradable pursuant to an exemption thereunder and (ii) are listed on a United States national securities exchange or quoted through the NASDAQ/NMS at the time of payment. (b) Within 30 days after the occurrence of a Fundamental Change, the Corporation must mail to all holders of record of the Series C Preferred Stock a notice containing the information set out in paragraph (b) of Section 7, except that, for purposes of this Section 10 only, instead of stating that such redemption is at the option of the Corporation, the notice shall describe the occurrence of such Fundamental Change and of the repurchase right arising as a result thereof. The Corporation must cause a copy of such notice to be published in a daily newspaper of national circulation (which shall be The Wall Street Journal, if then in circulation). At least two Business Days prior to the Repurchase Date, the Corporation must publish a similar notice stating whether and to what extent the repurchase price will be paid in cash or shares of common stock. To exercise the repurchase right, a holder of Series C Preferred Stock must surrender, on or before the date that is, subject to any contrary requirements of applicable law, 60 days after the date of mailing of the applicable notice (the "Final Surrender Date"), the certificates representing the Series C Preferred Stock with respect to which the right is being exercised, duly endorsed for transfer to the Corporation, together with a written notice of election. (c) The term "Fundamental Change" shall mean either of the following: (i) a "Person" or "Group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becoming, in one transaction or a series of related transactions, the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of Voting Shares (as defined in this paragraph (c)) of the Corporation entitled to exercise more than 50% of the total voting power of all outstanding Voting Shares of the Corporation (including any Voting Shares that are not then outstanding of which such person or Group is deemed the beneficial owner); or (ii) any consolidation of the Corporation with, or merger of the Corporation into, any other entity, any merger of another entity into the Corporation, or any sale, lease or transfer of all or substantially all of the assets of the Corporation to another entity (other than a merger (a) that results in the holders of Common Stock of the Corporation immediately prior to giving effect to such transaction owning shares of capital stock of the surviving corporation in such transaction representing in excess of 40% of the total voting power of all shares of capital stock of such surviving corporation entitled to vote generally in the election of directors and (b) in which the shares of the surviving corporation held by such holders are, or immediately upon issuance will be, listed on a national securities exchange or quoted through the NASDAQ/NMS and are not subject to any right of repurchase by the issuer thereof or any third party and are not otherwise subject to any encumbrance as a result of such transaction, provided, that the -15- surviving corporation (x) amends its charter or certificate of incorporation to include the Series C Preferred Stock and its terms as set forth herein or (y) if the Series C Preferred Stock has been exchanged for the Debentures, assumes or guarantees the Corporation's obligations under the Debentures); provided, however, that a Fundamental Change shall not occur if either (i) for any five Trading Dates during the ten Trading Days immediately preceding either the public announcement by the Corporation of such transaction or the consummation of such transaction, the Closing Price of the Common Stock is at least equal to 105% of the conversion price in effect on such trading days or (ii) at least 90% of the consideration (excluding cash payments for fractional shares) in such transaction or transactions to the holders of Common Stock consists of shares of common stock that are, or immediately upon issuance will be, listed on a national securities exchange or quoted through the NASDAQ/NMS, and as a result of such transaction or transactions, the Series C Preferred Stock becomes convertible into such common stock. (d) An election by a holder of Series C Preferred Stock to have the Corporation redeem shares of Series C Preferred Stock pursuant to subsection 10(a) shall become irrevocable at the close of business on the Repurchase Date. (e) The Corporation agrees that it will not complete any Fundamental Change described in subsection 10(c) unless proper provision has been made to satisfy its obligations under this Section 10. For purposes of this Section 10, "Voting Shares" is defined to mean all outstanding shares of any class or classes (however designated) of capital stock entitled to vote generally in the election of members of the Board of Directors. SECTION 11. Limitation and Rights Upon Insolvency. Notwithstanding any other provision of this Exhibit D, the Corporation shall not be required to pay any dividend on, or to pay any amount in respect of any redemption of, the Series C Preferred stock at a time when immediately after making such payment the Corporation is or would be rendered insolvent (as defined by applicable law), provided that the obligation of the Corporation to make any such payment shall not be extinguished in the event the foregoing limitation applies. SECTION 12. Shares to be Retired. Any share of Series C Preferred Stock converted, redeemed or otherwise acquired by the Corporation shall be retired and canceled and shall upon cancellation be restored to the status of authorized but unissued shares of preferred stock, subject to reissuance by the Board of Directors as Series C Preferred Stock or as shares of preferred stock of one or more other series. SECTION 13. Record Holders. The Corporation and the Transfer Agent may deem and treat the record holder of any shares of Series C Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary. SECTION 14. Notice. Except as may otherwise be provided for herein, all notices referred to herein shall be in writing, and all notices hereunder shall be deemed to have been given upon, the earlier of receipt of such notice or three Business Days after the mailing of -16- such notice if sent by registered mail (unless first-class mail shall be specifically permitted for such notice under the terms of these Articles of Incorporation) with postage prepaid, addressed: if to the Corporation, to its offices at 500 Clinton Center Drive, Clinton, Mississippi 39056, Attention: Corporate Secretary, or to an agent of the Corporation designated as permitted by this Articles of Incorporation or, if to any holder of the Series C Preferred Stock, to such holder at the address of such holder of the Series C Preferred Stock as listed in the stock record books of the Corporation (which may include the records of the Transfer Agent); or to such other address as the Corporation or holder, as the case may be, shall have designated by notice similarly given. -17- EX-4.4 6 exh4_4.txt RESTATED RIGHTS AGREEMENT EXHIBIT 4.4 RESTATED RIGHTS AGREEMENT ---------- WORLDCOM, INC. and THE BANK OF NEW YORK Rights Agent ---------- Dated as of June 7, 2001 Table of Contents Page Section 1. Certain Definitions............................................2 Section 2. Appointment of Rights Agent....................................6 Section 3. Issue of Right Certificates....................................6 Section 4. Form of Right Certificates.....................................8 Section 5. Countersignature and Registration..............................8 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......................................................9 Section 8. Cancellation and Destruction 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.............................................20 Section 14. Fractional Rights and Fractional Shares.......................22 Section 15. Rights of Action..............................................24 Section 16. Agreement of Right Holders....................................24 Section 17. Right Certificate Holder Not Deemed a Stockholder.............25 Section 18. Concerning the Rights Agent...................................25 Section 19. Merger or Consolidation or Change of Name of Rights Agent..................................................25 Section 20. Duties of Rights Agent........................................26 Section 21. Change of Rights Agent........................................28 Section 22. Issuance of New Right Certificates............................28 Section 23. Redemption and Termination....................................29 Section 24. Exchange......................................................30 Section 25. Notice of Proposed Actions....................................31 Section 26. Notices.......................................................32 Section 27. Supplements and Amendments....................................32 Section 28. Successors....................................................33 Section 29. Benefits of This Agreement....................................33 Section 30. Severability..................................................33 Section 31. Governing Law.................................................33 Section 32. Counterparts..................................................33 Section 33. Descriptive Headings..........................................33 RESTATED RIGHTS AGREEMENT This Agreement, dated as of June 7, 2001 is entered into between WorldCom, Inc., a Georgia corporation (the "Company") and The Bank of New York (the "Rights Agent", which term shall include any successor Rights Agent hereunder). W I T N E S S E T H WHEREAS, the Company and the Rights Agent entered into a Rights Agreement dated as of August 25, 1996, which was amended on May 22, 1997, ("Existing Rights Agreement"); WHEREAS, the Board of Directors of the Company has approved and recommended to its shareholders a recapitalization proposal that would create two new series of common stock (the "Recapitalization Proposal"); 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 having the rights, powers and preferences set forth in the form of Articles of Amendment attached hereto as Exhibit A, for each share of WorldCom Group Stock issued at the Effective 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 having the rights, powers and preferences set forth in the form of Articles of Amendment attached hereto as Exhibit A, for each share of MCI Group Stock issued at the Effective Date; WHEREAS, the Board of Directors of the Company has further authorized and directed the issuance of one Right with respect to each share of Common Stock (as defined below) which shall be issued and become outstanding between the Effective Date and the Distribution Date (as such term is defined in Section 3 hereof); WHEREAS, the Company desires to appoint the Rights Agent to act as provided herein, and the Rights Agent is willing to so act; and WHEREAS, in order to consummate the Recapitalization Proposal, the Existing Rights Agreement shall be amended and restated as provided hereby and as of the date hereof, the preferred share purchase right issued under the Existing Rights Agreement shall be changed into the Rights issued under this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree that, as of the date hereof, the Existing Rights Agreement shall be and hereby is amended and restated in its entirety to read 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 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 deliver 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. 2 (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 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. 3 (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 (as hereinafter defined) 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. (h) "Distribution Date" has the meaning set forth in Section 3 hereof. (i) "Effective Date" means the date upon which the Recapitalization Proposal is consummated. (j) "Existing Common Stock" means Common Stock, par value $.01 per share, of the Company issued and outstanding prior to the consummation of the Recapitalization Proposal. (k) "Expiration Date" has the meaning set forth in Section 7(a) hereof. (l) "Final Expiration Date" has the meaning set forth in Section 7(a) hereof. (m) "Holder" has the meaning set out in the WorldCom Option Agreement. (n) "MCI Group Stock" means WorldCom, Inc.--MCI Group Common Stock, a series of Common Stock having a par value of $.01 per share. (o) "MCI Right" has the meaning set forth in the preamble to this Agreement. (p) "MCI Right Certificate" has the meaning set forth in Section 3(a) hereof. (q) "Person" means any individual, firm, corporation, partnership or other entity, and shall include any successor (by merger or otherwise) of any such entity. (r) "Preferred Stock" means the Series 4 Preferred Stock and/or the Series 5 Preferred Stock, as the context requires. (s) "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 members of the Board of Directors then in office. (t) "Purchase Price" means the Series 4 Purchase Price and/or the Series 5 Purchase Price, as the context requires. (u) "Redemption Price" has the meaning set forth in Section 23(a) hereof. 4 (v) "Right Certificates" has the meaning set forth in Section 3(a) hereof. (w) "Rights" has the meaning set forth in the preamble to this Agreement. (x) "Section 11(b) Event" has the meaning set forth in Section 11(b) hereof. (y) "Section 13 Event" means an event described in clauses (x), (y) or (z) of Section 13(a) hereof. (z) "Series 4 Preferred Stock" means the Series 4 Junior Participating Preferred Stock, $.01 par value, of the Company having the rights and preferences set forth in the form of Articles of Amendment attached hereto as Exhibit A. (aa) "Series 5 Preferred Stock" means the Series 5 Junior Participating Preferred Stock, $.01 par value, of the Company having the rights and preferences set forth in the form of Articles of Amendment attached hereto as Exhibit A. (bb) "Series 4 Purchase Price" has the meaning in Section 7(b) hereof. (cc) "Series 5 Purchase Price" has the meaning in Section 7(b) hereof. (dd) "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. (ee) "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. (ff) "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). (gg) "WorldCom Group Stock" means WorldCom, Inc.--WorldCom Group Common Stock, a series of Common Stock having a par value of $.01 per share. (hh) "WorldCom Right" has the meaning set forth in the preamble to this Agreement. (ii) "WorldCom Right Certificate" has the meaning set forth in Section 3(a) hereof. 5 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. Issue 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 Rights Certificates, respectively) and not by separate Right Certificates, as more fully set forth below, and (z) the WorldCom Rights (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 B 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 C 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, 6 subject to adjustment as provided herein. As of and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (b) 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 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 Restated Rights Agreement dated as of June 7, 2001 between WorldCom, Inc. (the "Company") and The Bank of New York (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 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 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 which are no longer outstanding. 7 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 B hereto for the WorldCom Rights and Exhibit C 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 Effective 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. 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 8 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. 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 9 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 September 6, 2001. The Final Expiration Date of this Agreement shall not be extended beyond September 6, 2001, unless such extension has been approved by the affirmative vote of the holders of a majority of the votes entitled to be cast with respect thereto by all voting groups entitled to vote thereon, voting as a single class, at a meeting at which a quorum of such shareholders is represented. (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 $160.00 multiplied by a fraction, the numerator of which is the opening price of WorldCom Group Stock on the first day such stock is traded after the consummation of the Recapitalization Proposal and the denominator of which is the closing price of Existing Common Stock on the last day of trading prior to the consummation of the Recapitalization Proposal. 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 the difference between $160.00 and the Series 4 Purchase Price. 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. The opening price shall be the first 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 by the National Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") National Market System. The closing price 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 by the Nasdaq National Market System. (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 promptly (i) 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 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 10 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 and Destruction 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, or shall, at the written request of the Company, destroy such cancelled Right Certificates, and in such case shall deliver a certificate of destruction thereof 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, such person shall be deemed to have become the record holder of such shares on, and such 12 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 stockholder 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 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 13 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 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 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 stockholders; 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 its members then in office 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 may, but shall not be required to, establish procedures to allocate the right to receive Common Stock and common stock equivalents 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 14 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 Board of 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 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 fair market value (as determined in good faith by a majority of the Board of Directors, whose determination shall be described in a 15 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 Board of 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 Board of Directors shall be used. The term "Trading Day" 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 Board of Directors, whose determination shall be described in a statement filed with the Rights Agent. 16 (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 the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. (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 Section 11(a) through (e) hereof, inclusive, 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. (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 17 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 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. 18 (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 bill 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 Board of 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 stockholders. (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 19 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 prior to the Distribution Date, disclose a brief summary in a filing under the Securities Exchange Act of 1934, as amended. The Rights Agent shall be fully protected in 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 20 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: (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" 21 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 (iii) will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which 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 which 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 which evidence fractional Rights. In lieu of such fractional Rights, there shall 22 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 Board of 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 Board of 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 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 23 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. 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 24 (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 Stockholder. 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 stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (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 and 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. (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 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 25 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. (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 26 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. (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. 27 (k) If, with respect to any Rights 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 of 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, and to the holders of the Right Certificates by first-class 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, and to the holders of the Right Certificates by first-class mail or, prior to the Distribution Date, through any filing made by the Company pursuant to the Securities Exchange Act of 1934, as amended. 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 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. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and Preferred Stock, and mail a notice thereof in writing to the registered holders of the Right Certificates or, prior to the Distribution Date, through any 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 Board of Directors then in office to reflect any adjustment or change in the Purchase Price 28 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 the Board of Directors of the Company, 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 Board of Directors then in office of the Company 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 by the Board of Directors may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. (b) Immediately upon the action of a majority of the Board of Directors then in office electing to redeem the Rights, evidence of which shall be promptly filed with the Rights Agent, or, when appropriate, immediately upon the time or satisfaction of such conditions as the Board of 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 the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to 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 which 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 29 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. Section 24. Exchange. (a) The Board of Directors of the Company 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 all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which 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 which 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. 30 (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 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 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. 31 (b) In case a Section 11(b) Event shall occur, then the Company shall as soon as practicable thereafter give 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. 500 Clinton Center Drive Clinton, Mississippi 39056 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 101 Barclay Street, 12 West New York, New York 10286 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 first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. Supplements and Amendments. 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 time when the Rights may be redeemed at such time as 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 32 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 which 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. 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 or corporation 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. 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. 33 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written. Attest: WORLDCOM, INC. By: /s/ Stephanie Q. Scott By: /s/ Scott D. Sullivan ------------------------------ --------------------------------- Name: Stephanie Q. Scott Name: Scott D. Sullivan Title: Vice President- Title: Chief Financial Officer Financial Reporting Attest: THE BANK OF NEW YORK By: /s/ James Dimino By: /s/ Jeffrey Grosse ------------------------------ --------------------------------- Name: James Dimino Name: Jeffrey Grosse Title: Vice President Title: Vice President 34 EXHIBIT A WORLDCOM, INC. FORM OF ARTICLES OF AMENDMENT DESIGNATING THE RIGHTS OF SERIES 4 JUNIOR PARTICIPATING PREFERRED STOCK And SERIES 5 JUNIOR PARTICIPATING PREFERRED STOCK RESOLUTIONS OF THE BOARD OF DIRECTORS OF WORLDCOM, INC. ESTABLISHING AND DESIGNATING A SERIES OF PREFERRED STOCK AND FIXING AND DETERMINING THE RELATIVE RIGHTS AND PREFERENCES THEREOF WHEREAS, pursuant to the provisions of Section 14-2-602 of the Georgia Business Corporation Code and the authority expressly granted to and vested in the Board of Directors of the Company by Article Four of the Amended and Restated Articles of Incorporation, as amended, of the Company, the Company is authorized to issue its Series 4 Junior Participating Preferred Stock and its Series 5 Junior Participating Preferred Stock; WHEREAS, the designations, preferences, limitations and relative, participating, optional or other special rights of the Series 4 Junior Participating Preferred Stock and Series 5 Junior Participating Preferred Stock, and the qualifications, limitations or restrictions thereof, are set out in the form of Articles of Amendment of the Company submitted to this meeting; NOW, THEREFORE, BE IT RESOLVED, that subject to the execution of the Rights Agreement by the parties thereto the Articles of Amendment of the Company, in substantially the form submitted to this meeting (and, by this resolution, ordered annexed to the minutes of this meeting), authorizing and setting forth the rights and preferences of the Series 4 Junior Participating Preferred Stock and Series 5 Junior Participating Preferred Stock, are hereby approved and adopted, and that the appropriate officers of the Company be, and they hereby are, authorized and directed for and on behalf of the Company to complete, execute and file such Articles of Amendment with the Secretary of State of Georgia, and to do and perform any and all other necessary and proper acts incident thereto. A-1 ARTICLES OF AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF WORLDCOM, INC. Pursuant to the provisions of Section 14-2-602 of the Georgia Business Corporation Code, the undersigned, on behalf of WorldCom, Inc. (the "Corporation"), hereby submits the following information: 1. The name of the Corporation is WorldCom, Inc. 2. Effective the date hereof, the Corporation's Second Amended and Restated Articles of Incorporation, as amended, is further amended to add a new Article Seven B and a new Article Seven C to read in their entirety as follows: "SEVEN B A series of the class of authorized preferred stock, par value $.01 per share, of the Corporation is hereby created having the designation and number of shares thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof, as are set forth on Exhibit E." "SEVEN C A series of the class of authorized preferred stock, par value $.01 per share, of the Corporation is hereby created having the designation and number of shares thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof, as are set forth on Exhibit F." 3. The foregoing amendment to the Second Amended and Restated Articles of Incorporation, as amended, was duly adopted and authorized by the Board of Directors of the Corporation on June 7, 2001. Shareholders' approval was not required pursuant to Section 14-2-1002 of the Georgia Business Corporation Code. A-2 IN WITNESS WHEREOF, the Corporation has caused its duly authorized officer to execute these Articles of Amendment as of this 7th day of June, 2001. WORLDCOM, INC. By ------------------------------- Name: Bernard J. Ebbers Title: President A-3 EXHIBIT E Series 4 Junior Participating Preferred Stock Section 1. Designation and Amount. There shall be a series of the Preferred Stock which shall be designated as the "Series 4 Junior Participating Preferred Stock," par value $.01 per share, and the number of shares constituting such series shall be 4,850,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series 4 Junior Participating Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Company. Section 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of preferred stock of the Company ranking prior and superior to the Series 4 Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series 4 Junior Participating Preferred Stock, in preference to the holders of shares of WorldCom, Inc.--WorldCom Group Common Stock, par value $.01 per share, of the Company (the "WorldCom Stock"), WorldCom, Inc.--MCI Group Common Stock, par value $.01 per share, of the Company ("MCI Stock"; together with the WorldCom Stock, the "Common Stock") and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on any regular quarterly dividend payment date as shall be established by the Board of Directors (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series 4 Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $10.00 or (ii) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of WorldCom Stock or a subdivision of the outstanding shares of WorldCom Stock (by reclassification or otherwise), declared on the WorldCom Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series 4 Junior Participating Preferred Stock. In the event the Company shall at any time after the date upon which the recapitalization proposal providing for the exchange of each outstanding share of the Company's common stock, par value $.01 per share, for (x) one share of WorldCom Stock and (y) 1/25 of a share of MCI Stock is consummated (the "Effective Date") declare or pay any dividend on the WorldCom Stock payable in shares of WorldCom Stock, or effect a subdivision or combination or consolidation of the outstanding shares of WorldCom Stock (by reclassification or otherwise than by payment of a dividend in shares of WorldCom Stock) into a greater or lesser number of shares of WorldCom Stock, then in each such case the amount to which holders of shares of Series 4 Junior A-4 Participating Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of WorldCom Stock outstanding immediately after such event and the denominator of which is the number of shares of WorldCom Stock that were outstanding immediately prior to such event. (B) The Company shall declare a dividend or distribution on the Series 4 Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the WorldCom Stock (other than a dividend payable in shares of WorldCom Stock); provided that, in the event no dividend or distribution shall have been declared on the WorldCom Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series 4 Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series 4 Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series 4 Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series 4 Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may, in accordance with applicable law, fix a record date for the determination of holders of shares of Series 4 Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than such number of days prior to the date fixed for the payment thereof as may be allowed by applicable law. Section 3. Voting Rights. The holders of shares of Series 4 Junior Participating Preferred Stock shall have the following voting rights: (A) Each share of Series 4 Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Company. In the event the Company shall at any time after the Effective Date declare or pay any dividend on the WorldCom Stock payable in shares of WorldCom Stock, or effect a subdivision or combination or consolidation of the outstanding shares of WorldCom Stock (by reclassification or otherwise than by payment of a dividend in shares of WorldCom Stock) into a greater or lesser number of shares of WorldCom A-5 Stock, then in each such case the number of votes to which holders of shares of Series 4 Junior Participating Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of WorldCom Stock outstanding immediately after such event and the denominator of which is the number of shares of WorldCom Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in the Company's Amended and Restated Articles of Incorporation, as amended, or by law, the holders of shares of Series 4 Junior Participating Preferred Stock, the holders of Series 5 Junior Participating Preferred Stock, the holders of shares of WorldCom Stock, the holders of MCI Stock, and the holders of shares of any other capital stock of the Company having general voting rights, shall vote together as one class on all matters submitted to a vote of stockholders of the Company. (C) Except as otherwise set forth herein or in the Company's Amended and Restated Articles of Incorporation, as amended, and except as otherwise provided by law, holders of Series 4 Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of WorldCom Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever dividends or distributions payable on the Series 4 Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series 4 Junior Participating Preferred Stock outstanding shall have been paid in full, the Company shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series 4 Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series 4 Junior Participating Preferred Stock, except dividends paid ratably on the Series 4 Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) except as permitted in Section 4(A)(iv) below, redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series 4 Junior Participating Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in A-6 exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series 4 Junior Participating Preferred Stock; and (iv) purchase or otherwise acquire for consideration any shares of Series 4 Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series 4 Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series 4 Junior Participating Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. The Company shall cause all such shares upon their cancellation to be authorized but unissued shares of Preferred Stock which may be reissued as part of a new series of Preferred Stock, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock of the Company ranking prior and superior to the Series 4 Junior Participating Preferred Stock with respect to liquidation, upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series 4 Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series 4 Junior Participating Preferred Stock shall have received the greater of (a) $1,000.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment and (b) an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed to the holders of shares of WorldCom Stock (the "Series 4 Liquidation Preference") and (ii) to the holders of shares of stock ranking on a parity upon liquidation, dissolution or winding up with the Series 4 Preferred Stock, except distributions made ratably on the Series 4 Preferred Stock and all such parity stock in proportion to the total amounts which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. Following the payment of the full amount of the Series 4 Liquidation Preference, no additional distributions shall be A-7 made to the holders of shares of Series 4 Junior Participating Preferred Stock, unless, prior thereto, the holders of shares of WorldCom Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (x) the Series 4 Liquidation Preference by (y) 1,000 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock dividends, and subdivisions, combinations and consolidations with respect to the WorldCom Stock) (such number in clause (y) being referred to as the "Adjustment Number"). Following the payment of the full amount of the Series 4 Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series 4 Junior Participating Preferred Stock and WorldCom Stock, respectively, holders of Series 4 Junior Participating Preferred Stock and holders of shares of WorldCom Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Series 4 Junior Participating Preferred Stock and WorldCom Stock, on a per share basis, respectively. (B) In the event there are not sufficient assets available to permit payment in full of the Series 4 Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series 4 Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of WorldCom Stock. (C) In the event the Company shall at any time after the Effective Date declare or pay any dividend on WorldCom Stock payable in shares of WorldCom Stock, or effect a subdivision or combination or consolidation of the outstanding shares of WorldCom Stock (by reclassification or otherwise than by payment of a dividend in shares of WorldCom Stock) into a greater or lesser number of shares of WorldCom Stock, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of WorldCom Stock outstanding immediately after such event and the denominator of which is the number of shares of WorldCom Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of WorldCom Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series 4 Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of WorldCom Stock is changed or exchanged. In the event the Company shall at any time after the Effective Date declare or pay any dividend on WorldCom Stock payable in shares of WorldCom Stock, or effect a subdivision or combination or consolidation of the outstanding shares of WorldCom Stock (by A-8 reclassification or otherwise than by payment of a dividend in shares of WorldCom Stock) into a greater or lesser number of shares of WorldCom Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series 4 Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of WorldCom Stock outstanding immediately after such event and the denominator of which is the number of shares of WorldCom Stock that are outstanding immediately prior to such event. Section 8. Redemption. The shares of Series 4 Junior Participating Preferred Stock shall not be redeemable. Section 9. Ranking. Series 4 Junior Participating Preferred Stock shall rank on parity with the Series 5 Junior Participating Preferred Stock and junior to all other series of the Company's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 10. Fractional Shares. Series 4 Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series 4 Junior Participating Preferred Stock. A-9 EXHIBIT F Series 5 Junior Participating Preferred Stock Section 1. Designation and Amount. There shall be a series of the Preferred Stock which shall be designated as the "Series 5 Junior Participating Preferred Stock," par value $.01 per share, and the number of shares constituting such series shall be 150,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series 5 Junior Participating Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Company. Section 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of preferred stock of the Company ranking prior and superior to the Series 5 Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series 5 Junior Participating Preferred Stock, in preference to the holders of shares of WorldCom, Inc.--WorldCom Group Common Stock, par value $.01 per share, of the Company (the "WorldCom Stock"), WorldCom, Inc.--MCI Group Common Stock, par value $.01 per share, of the Company ("MCI Stock"; together with the WorldCom Stock, the "Common Stock") and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on any regular quarterly dividend payment date as shall be established by the Board of Directors (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series 5 Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $10.00 or (ii) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of MCI Stock or a subdivision of the outstanding shares of MCI Stock (by reclassification or otherwise), declared on the MCI Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series 5 Junior Participating Preferred Stock. In the event the Company shall at any time after the date upon which the recapitalization proposal providing for the exchange of each outstanding share of the Company's common stock, par value $.01 per share, for (x) one share of WorldCom Stock and (y) 1/25 of a share of MCI Stock is consummated (the "Effective Date") declare or pay any dividend on the MCI Stock payable in shares of MCI Stock, or effect a subdivision or combination or consolidation of the outstanding shares of MCI Stock (by reclassification or otherwise than by payment of a dividend in shares of MCI Stock) into a greater or lesser number of shares of MCI Stock, then in each such case the amount to which holders of shares of A-10 Series 5 Junior Participating Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of MCI Stock outstanding immediately after such event and the denominator of which is the number of shares of MCI Stock that were outstanding immediately prior to such event. (B) The Company shall declare a dividend or distribution on the Series 5 Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the MCI Stock (other than a dividend payable in shares of MCI Stock); provided that, in the event no dividend or distribution shall have been declared on the MCI Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series 5 Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series 5 Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series 5 Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series 5 Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may, in accordance with applicable law, fix a record date for the determination of holders of shares of Series 5 Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than such number of days prior to the date fixed for the payment thereof as may be allowed by applicable law. Section 3. Voting Rights. The holders of shares of Series 5 Junior Participating Preferred Stock shall have the following voting rights: (A) Each share of Series 5 Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters upon which the holders of the MCI Stock of the Company are entitled to vote. In the event the Company shall at any time after the Effective Date declare or pay any dividend on the MCI Stock payable in shares of MCI Stock, or effect a subdivision or combination or consolidation of the outstanding shares of MCI Stock (by reclassification or otherwise than by payment of a dividend in shares of WorldCom Stock) into a greater or lesser number of shares of MCI Stock, then in each A-11 such case the number of votes to which holders of shares of Series 5 Junior Participating Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of MCI Stock outstanding immediately after such event and the denominator of which is the number of shares of MCI Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in the Company's Amended and Restated Articles of Incorporation, as amended, or by law, the holders of shares of Series 5 Junior Participating Preferred Stock, the holders of Series 4 Junior Participating Preferred Stock, the holders of shares of WorldCom Stock, the holders of MCI Stock, and the holders of shares of any other capital stock of the Company having general voting rights, shall vote together as one class on all matters submitted to a vote of stockholders of the Company. (C) Except as otherwise set forth herein or in the Company's Amended and Restated Articles of Incorporation, as amended, and except as otherwise provided by law, holders of Series 5 Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of MCI Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever dividends or distributions payable on the Series 5 Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series 5 Junior Participating Preferred Stock outstanding shall have been paid in full, the Company shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series 5 Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series 5 Junior Participating Preferred Stock, except dividends paid ratably on the Series 5 Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) except as permitted in Section 4(A)(iv) below, redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series 5 Junior Participating Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in A-12 exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series 5 Junior Participating Preferred Stock; and (iv) purchase or otherwise acquire for consideration any shares of Series 5 Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series 5 Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series 5 Junior Participating Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. The Company shall cause all such shares upon their cancellation to be authorized but unissued shares of Preferred Stock which may be reissued as part of a new series of Preferred Stock, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock of the Company ranking prior and superior to the Series 5 Junior Participating Preferred Stock with respect to liquidation, upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution shall be made to (i) the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series 5 Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series 5 Junior Participating Preferred Stock shall have received the greater of (a) $1,000.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment and (b) an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of MCI Stock (the "Series 5 Liquidation Preference") and (ii) to the holders of shares of stock ranking on a parity upon liquidation, dissolution or winding up with the Series 5 Preferred Stock, except distributions made ratably on the Series 5 Preferred Stock and all such parity stock in proportion to the total amounts to which holders of all such shares are entitled upon such liquidation, dissolution or winding up. Following the payment of the full amount of the Series 5 Liquidation Preference, no additional distributions shall be A-13 made to the holders of shares of Series 5 Junior Participating Preferred Stock, unless, prior thereto, the holders of shares of MCI Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (x) the Series 5 Liquidation Preference by (y) 1,000 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock dividends, and subdivisions, combinations and consolidations with respect to the MCI Stock) (such number in clause (y) being referred to as the "Adjustment Number"). Following the payment of the full amount of the Series 5 Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series 5 Junior Participating Preferred Stock and MCI Stock, respectively, holders of Series 5 Junior Participating Preferred Stock and holders of shares of MCI Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Series 5 Junior Participating Preferred Stock and MCI Stock, on a per share basis, respectively. (B) In the event there are not sufficient assets available to permit payment in full of the Series 5 Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series 5 Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of MCI Stock. (C) In the event the Company shall at any time after the Effective Date declare or pay any dividend on MCI Stock payable in shares of MCI Stock, or effect a subdivision or combination or consolidation of the outstanding shares of MCI Stock (by reclassification or otherwise than by payment of a dividend in shares of MCI Stock) into a greater or lesser number of shares of MCI Stock, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of MCI Stock outstanding immediately after such event and the denominator of which is the number of shares of MCI Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of MCI Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series 5 Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of MCI Stock is changed or exchanged. In the event the Company shall at any time after the Effective Date declare or pay any dividend on MCI Stock payable in shares of MCI Stock, or effect a subdivision or combination or consolidation of the outstanding shares of MCI Stock (by reclassification or otherwise than by payment of a dividend in shares of MCI Stock) into a greater or lesser number of shares of MCI A-14 Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series 5 Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of MCI Stock outstanding immediately after such event and the denominator of which is the number of shares of MCI Stock that are outstanding immediately prior to such event. Section 8. Redemption; Conversion. The shares of Series 5 Junior Participating Preferred Stock shall not be redeemable. In the event of any conversion of MCI Stock into WorldCom Stock pursuant to Section 4(C) of the Certificate of Incorporation, the Series 5 Junior Participating Preferred Stock shall be converted into the Series 4 Junior Participating Preferred Stock in the same manner, and at the same conversion ratio, as the conversion of the MCI Stock. Section 9. Ranking. Series 5 Junior Participating Preferred Stock shall rank on parity with the Series 4 Junior Participating Preferred Stock and junior to all other series of the Company's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 10. Fractional Shares. Series 5 Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series 5 Junior Participating Preferred Stock." A-15 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 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 June 7, 2001 (the "Rights Agreement") between WorldCom, Inc., a Georgia corporation (the "Company"), and The Bank of New York (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 $160.00 multiplied by a fraction, the numerator of which is the opening price of the Company's WorldCom Group Common Stock, par value $.01 per share ("WorldCom Group Stock") on the first day such stock is traded after the consummation of the Recapitalization Proposal (as defined in the Rights Agreement) and the denominator of which is the closing price of the Existing Common Stock (as defined in the Rights Agreement) on the last day of trading prior to the consummation of the Recapitalization Proposal 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 - ---------------- * The portion of the legend in brackets shall be inserted only if applicable. B-1 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 which 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 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 stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions B-2 affecting stockholders (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. 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 By: -------------------------- Authorized signature B-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. 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. 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 [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 June 7, 2001 (the "Rights Agreement") between WorldCom, Inc., a Georgia corporation (the "Company"), and The Bank of New York (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 the difference between $160.00 and the Series 4 Purchase Price (as defined in the Rights Agreement) 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 - -------------------- * The portion of the legend in brackets shall be inserted only if applicable. C-1 ______________________ 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 which 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. C-2 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 stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (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. 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 By: -------------------------- Authorized signature C-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. C-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) C-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. C-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. 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. C-7 EX-99.1 7 exh99_1.txt PRESS RELEASE EXHIBIT 99.1 CONTACTS: Media Investors - ----- --------- Claire Hassett Scott Hamilton 1-800-644-NEWS 601-460-5111 WORLDCOM, INC. ANNOUNCES TRACKING STOCK ISSUANCE CLINTON, MS, June 7, 2001 - WorldCom, Inc. (Nasdaq: WCOM), the leading global data & Internet communications provider, today announced that its proposal to create two tracking stocks has been approved by shareholders. After the Nasdaq National Market closes today, each share of the Company's existing common stock will be changed into one share of WorldCom Group stock (Nasdaq: WCOM) and 1/25 of a share of MCI Group stock (Nasdaq: MCIT). The tracking stocks will begin trading on the Nasdaq National Market on June 8, 2001. "Realigning WorldCom's structure in this way will enable the respective businesses to achieve greater management and resource focus to execute business strategies that work most effectively for each," said Bernard J. Ebbers, WorldCom president and chief executive officer. "At the same time, the new structure is designed to create greater shareholder value by providing two distinct, clear and compelling investment opportunities, while serving customer needs with a more efficient operation." The Company intends to pay a quarterly dividend of $0.60 per share on the MCI Group stock. The Company does not intend to pay dividends on the WorldCom Group stock in the foreseeable future. WorldCom Group stock will reflect the performance of the Company's high-growth data, Internet and international operations, as well as commercial voice services, and MCI Group stock will reflect the performance of its high-cash flow consumer, small business, wholesale long distance, wireless messaging and dial-up Internet access operations. About WorldCom Group WorldCom owns and operates the industry's most extensive, state-of-the-art global facilities-based communications networks, providing unmatched reach and scale. With its networks, integrated sales efforts and prudent capital investments, the WorldCom Group had revenues of $22.8 billion last year. Of that total, data, Internet and international operations represent a $16 billion high-growth revenue stream. The international business consists of revenue streams generated outside of the U.S., with revenues approximating $6 billion in 2000, operations in more than 65 countries and local networks in more than 20 cities across Europe, Latin America and Asia-Pacific. Additionally, business voice generated revenues of more than $7 billion in 2000. WorldCom intends to continue to expand its market leadership in data and Internet, which had year-over-year growth rates of 34 percent, and international services which recorded a 34 percent revenue increase last year. WorldCom will continue aggressive growth initiatives to capture significant market share in global Internet Protocol-Virtual Private Networks (IP-VPNs), hosting and other emerging growth markets by offering a full complement of e-business enabling communications services for enterprises worldwide. WorldCom also plans to expand its current global Internet and high-speed data networks further into Europe and Asia-Pacific to provide business customers in these rapidly growing regions the reliability, performance and scale they need as their operations and communications needs expand. WorldCom will expand its presence in the highly fragmented hosting market with the addition of a controlling interest in Digex, a leading managed hosting provider, through its proposed acquisition of Intermedia. Intermedia shareholders are scheduled to vote on the transaction on June 19, 2001. Assuming approval, the stock transaction is expected to close by July 1. About MCI Group MCI Group stock will provide investors with dividend income and will track the Company's high-cash flow businesses. With revenues of more than $16.3 billion in 2000, MCI Group will focus on providing shareholders with an income-oriented investment opportunity linked to some of the Company's most established enterprises. As one of the largest providers of consumer long distance services, MCI will leverage its globally recognized brand, marketing channels and broad consumer product offerings. About WorldCom, Inc. WorldCom, Inc. (Nasdaq: WCOM) is a preeminent global communications company for the digital generation, generation d, operating in more than 65 countries with 2000 revenues exceeding $39 billion. WorldCom provides the innovative technologies and services that are the foundation for business in the 21st century. For more information, go to http://www.worldcom.com. EX-99.2 8 exh99_2.txt DESCRIPTION OF STOCK EXHIBIT 99.2 Description of WorldCom Group Stock and MCI Group Stock We have summarized below the material terms of WorldCom group stock and MCI group stock, the terms of which will be contained in the articles of amendment to be adopted by our board of directors. Actions by Our Board of Directors Without Shareholder Approval, No Separate Boards of Directors for the Groups Under our charter as amended by our articles of amendment, our board of directors will be able to take actions with respect to the WorldCom group and the MCI group and WorldCom group stock and MCI group stock without shareholder approval so long as those actions are taken on the terms and conditions set forth in our charter. Neither the WorldCom group nor the MCI group will have a separate board of directors to represent solely the interests of holders of WorldCom group stock or MCI group stock. As described under "-Voting Rights," the holders of WorldCom group stock and the holders of MCI group stock will generally vote together as a single voting group on all matters on which holders of common stock are entitled to vote. This includes the election of directors of WorldCom. If we decide to take other actions with respect to WorldCom group stock or MCI group stock or the WorldCom group or the MCI group that are not on the terms and conditions in our articles of amendment, we would be required to obtain shareholder approval of an amendment to our charter. In instances listed under "-Voting Rights," approval of this type of an amendment would require both the approval of the holders of WorldCom group stock and MCI group stock, voting together as a single voting group, and the approval of the holders of any series of common stock whose rights were affected by the amendment, voting as a separate voting group. The actions that our board of directors may take without shareholder approval, discussed in more detail below, include decisions to: o issue additional shares of WorldCom group stock and MCI group stock so long as those additional shares are authorized shares under our charter; o pay dividends on a series of common stock, subject to the limitations set forth in the charter; o convert MCI group stock into WorldCom group stock on the terms set forth in the charter; o redeem a series of common stock in exchange for stock of one or more wholly owned subsidiaries holding all of the assets and liabilities attributed to the related group; o dispose of assets attributed to the WorldCom group or the MCI group, except as otherwise required by Georgia law; o if we dispose of 80% or more of the assets attributed to a group, pay a special dividend on, or redeem shares of, the series of common stock related to that group or convert the MCI group stock into shares of WorldCom group stock; or o take actions that require an increase or decrease in the number of shares of MCI group stock reserved for the WorldCom group or the number of shares of WorldCorn group stock reserved for the MCI group. Authorized and Outstanding Shares Our Current Capital Structure Our current charter authorizes us to issue 5,050,000,000 shares of stock, consisting of 5,000,000,000 shares of common stock and 50,000,000 shares of preferred stock. Of the 50,000,000 shares of preferred stock, our board has designated: o 94,992 as Series A Preferred Stock, o 15,000,000 as Series B Preferred Stock, o 3,750,000 as Series C Preferred Stock, and o 5,000,000 as Series 3 Preferred Stock. As of April 16, 200l, 2,894,429,875 billion shares of our existing common stock (including treasury shares) and 10,338,265 shares of preferred stock were issued and outstanding. Our Proposed Capital Structure The articles of amendment will authorize us to issue 5.05 billion shares of stock as follows: o 4.85 billion shares as "WorldCom, Inc.-WorldCom Group Common Stock;" o 150 million shares as "WorldCom, Inc.-MCI Group Common Stock"; and o 50 million shares of preferred stock in series, par value $.01 per share (of which the shares described above and an additional 4.85 million shares of Series 4 Preferred Stock and 150,000 shares of Series 5 Preferred Stock will have been designated by our board of directors). As a result of the tracking stock proposal, assuming the number of shares of existing common stock then outstanding on April 16, 2001, 2,894,429,875 shares of WorldCom group stock and 115,777,195 shares of MCI group stock will be issued and outstanding. In addition, 320,227,746 shares of WorldCom group stock and 6,304 shares of MCI group stock will be reserved for issuance upon the exercise of outstanding options and warrants, the conversion of outstanding convertible securities and otherwise. Issuances of Common Stock Without Shareholder Approval After the implementation of the tracking stock proposal, our board of directors may issue authorized but unissued shares of WorldCom group stock and MCI group stock from time to time for any proper corporate purpose. Our board of directors will have the authority under our charter, as amended by our articles of amendment, to issue additional shares of MCI group stock or WorldCom group stock without a vote of our shareholders, except as may be required by Georgia law, the NASDAQ listing rules or the rules of any stock exchange on which any series of outstanding common stock may then be listed. Attribution of Proceeds of Issuances of Common Stock If we issue shares of a series of common stock for cash or other property, such as in an acquisition, the proceeds of that issuance, including property acquired in an acquisition, will be attributed to the group in respect of which that series of common stock has been issued; provided, however, that no property will be attributed to the MCI group for issuance of any MCI group stock in connection with the Intermedia merger. If there are shares of series of stock related to that group reserved for another group or for issuance to the holders of the series of stock related to that other group, our board of directors will decide at the time of the issuance whether any portion of the proceeds should be attributed to the group for which those reserved shares have been reserved. 2 Dividends Dividends on our existing common stock are limited to the funds we legally have available for distributions under Georgia law, subject to the prior payment of dividends on any preferred stock. Our articles of amendment provide that dividends on WorldCom group stock or MCI group stock will be limited to the lesser of: o the funds we legally have available for distributions under Georgia law; and o the available distribution amount for the WorldCom group or the MCI group, as the case may be. The available distribution amount for a particular group is the same amount that would be legally available for the payment of dividends on the series of stock related to that group if that group were a separate company under Georgia law. The available distribution amount for the relevant group is the lesser of: o any amount in excess of the minimum amount necessary to pay debts attributed to that group as they become due in the usual course of business; and o the total assets attributed to that group less the sum of the total liabilities attributed to that group plus the amount that would be needed to satisfy the preferential rights upon dissolution of shares of stock, if any, attributed to that group that are superior to the series of stock related to that group. Under Georgia law, the amount of funds we legally have available for distributions is determined on the basis of our entire company, and not only the respective groups. As a result, the amount of legally available funds will reflect the amount of: o any net losses of each group; o any distributions on WorldCom group stock, MCI group stock or any preferred stock; and o any repurchases of WorldCom group stock, MCI group stock or any preferred stock. Payment of dividends on WorldCom group stock or MCI group stock also may be restricted by loan agreements, indentures and other agreements or obligations entered into by us from time to time. Voting Rights Currently, the holders of our existing common stock are entitled to one vote per share on all matters submitted to shareholders. The holders of WorldCom group stock and the holders of MCI group stock will be entitled to vote on any matter on which our shareholders are, by Georgia law, by Nasdaq listing rules or by the provisions of our charter or our bylaws or as determined by our board of directors, entitled to vote. The holders of WorldCom group stock and the holders of MCI group stock will vote together as a single voting group on each matter on which holders of common stock are generally entitled to vote, except as described below. On all matters as to which all series of common stock will vote together as a single voting group: o each share of WorldCom group stock will have one vote; and 3 o each share of MCI group stock will have a number of votes, which may be a fraction of one vote, equal to the average market value of one share of MCI group stock divided by the average market value of one share of WorldCom group stock. We will calculate the average market values during the 20-day trading period ending on the tenth trading day prior to the record date for determining the holders entitled to vote. Accordingly, the relative per share voting rights of WorldCom group stock and MCI group stock will fluctuate depending on changes in the relative market values of shares of the series of common stock. Upon implementation of the tracking stock proposal, we expect that WorldCom group stock will retain a substantial majority of the total voting power of WorldCom because we expect that initially the total market value of the outstanding shares of WorldCom group stock will be substantially greater than the total market value of the outstanding shares of MCI group stock. We will set forth the number of outstanding shares of WorldCom group stock and MCI group stock in our annual report on Form 10-K and our quarterly reports on Form 10-Q filed under the Securities Exchange Act of 1934. We will disclose in any proxy statement for a shareholders' meeting the number of outstanding shares and per share voting rights of WorldCom group stock and MCI group stock. If shares of only one series of common stock are outstanding, each share of that series will have one vote. If any series of common stock is entitled to vote as a separate voting group with respect to any matter, each share of that series will, for purpose of that vote, have one vote on that matter. The holders of WorldCom group stock and the holders of MCI group stock will not have any rights to vote separately as a voting group on any matter coming before our shareholders, except in the limited circumstances provided under Georgia law described below or by NASDAQ listing rules, our charter or our bylaws. Our board of directors could also decide, in its sole discretion, to condition the taking of any action upon the approval of a series of common stock, voting as a separate voting group. The holders of the outstanding shares of a series are entitled to vote as a separate voting group on a proposed amendment to our charter if the amendment would: o effect an exchange or reclassification of all or part of the shares of the series into shares of the other series; o effect an exchange or reclassification, or create the right of exchange, of all or part of the shares of the other series into shares of the series; o change the designation, rights, preferences or limitations of all or part of the shares of the series; o change the shares of all or part of the series into a different number of shares of the same series; o create a new series of shares having rights or preferences with respect to distributions or to dissolution that are prior, superior or substantially equal to the shares of the series; o increase the rights, preferences or number of authorized shares of any series that, after giving effect to the amendment, have rights or preferences with respect to distributions or to dissolution that are prior, superior or substantially equal to the shares of the series; or o cancel, redeem or repurchase all or part of the shares of the series. If the holders of shares of a series would otherwise be entitled to vote as a separate voting group on a proposed charter amendment, but the amendment would affect the other series of common stock in the same or a substantially similar way, the holders of all the affected series would vote together on the amendment as a single voting group. 4 The following illustrations demonstrate the calculation of the number of votes to which each share of MCI group stock would be entitled on all matters on which the holders of WorldCom group stock and the holders of MCI group stock vote together as a single voting group. The values for the shares used in these and the other illustrations included in this proxy statement and prospectus are for illustrative purposes only and are not intended to be indicative of actual or future trading values. If: o 3 billion shares of WorldCom group stock and 120 million shares of MCI group stock were outstanding; o the average market value for the 20-trading day valuation period for MCI group stock was $50 per share; and o the average market value for the 20-trading day valuation period for WorldCom group stock was $40 per share; then each share of WorldCom group stock would have one vote and each share of MCI group stock would have 1.25 votes based on the following calculation: average market value of MCI group stock $50 per share ----------------------- = ------------- = 1.25 votes per share average market value of $40 per share of MCI group stock WorldCom group stock As a result, the shares of WorldCom group stock would represent 3 billion votes, which would equal 95.24% of our total voting power, and the shares of MCI group stock would represent 150 million votes, which would equal 4.76% of our total voting power. These amounts are calculated as follows: 1 vote per share of x 3 billion shares of = 3 billion votes for WorldCom group stock WorldCom group stock WorldCom group stock 1.25 votes per share 120 million shares = 150 million votes for of MCI group stock of MCI group stock MCI group stock 3 billion votes for WorldCom group stock 95.24% of total voting power ---------------------------------------- = held by WorldCom group stock 150 million votes for MCI group stock + 3 billion votes for WorldCom group stock 150 million votes for MCI group stock 4.76% of total voting power ------------------------------------- = held by MCI group 150 million votes for MCI group stock + 3 billion votes for WorldCom group stock Conversion and Redemption Our charter does not provide for either mandatory or optional conversion or redemption of our existing common stock. The articles of amendment will permit the conversion or redemption of WorldCom group stock and MCI group stock as described below. 5 Conversion of MCI Group Stock at Our Option at Any Time Our board of directors may at any time, without shareholder approval, convert each share of MCI group stock into a number of shares of WorldCom group stock equal to a percentage, set forth below under "-Conversion Ratios," of the ratio of the average market value of one share of MCI group stock to the average market value of one share of WorldCom group stock. Except as described below under "Mandatory Dividend, Redemption or Conversion of Stock if Disposition of Group Assets Occurs," our board of directors may not convert shares of WorldCom group stock into shares of MCI group stock without shareholder approval. Conversion Ratios. The percentage of the ratio of the average market values will be as follows: o during the first three years after the implementation of the tracking stock proposal-110%; and o beginning on the third anniversary of implementation of the tracking stock proposal-100%. The premium described above that is provided upon any conversion of MCI group stock is intended for the protection of the holders of that series of stock since a decision by us to convert that stock may be made without the consent of the holders of MCI group stock. The elimination of the premium after the first three years the MCI group stock is outstanding is intended to allow us greater flexibility in using these provisions over time. Provisions similar to these, with comparable declining premiums, are included in the terms of tracking stocks of other public companies that have issued tracking stock. Accordingly, we believe these premiums are necessary in order for us to be able to balance our need to maintain flexibility in our capital structure and the desire of holders of MCI group stock to have a level of certainty regarding the underlying businesses that their security is intended to track. Calculation Periods. We will calculate the average market values during the 20-trading day period ending on the fifth trading day prior to the date we begin to mail the conversion notice to holders. Tax Event. If at any time there is more than an insubstantial risk of the adverse income tax consequences described below, the percentage of the ratio of the average market values will be 100%. This means that the holders of the MCI group stock to be converted will not receive any premium in a conversion that is effected under such circumstances. Our board of directors may exercise our conversion rights at any time without a premium if we receive an opinion of our tax counsel to the effect that, as a result of any amendment to, clarification of, or change or proposed change in, the laws, or interpretation or application of the laws, of the United States or any political subdivision or taxing authority of or in the United States, including: o the enactment of any legislation; o the publication of any judicial or regulatory decision, determination or pronouncement; or o any announced proposed change in law by an applicable legislative committee or the chairperson of an applicable legislative committee, regardless of whether the amendment, clarification, change or proposed change is issued to or in connection with a proceeding involving us and regardless of whether the amendment, clarification, change or proposed change is subject to appeal, there is more than an insubstantial risk that: o for tax purposes, any issuance of WorldCom group stock or MCI group stock would be treated as a sale or other taxable disposition by us or any of our subsidiaries of any of the assets, operations or relevant subsidiaries to which WorldCom group stock or MCI group stock relates; 6 o the issuance or existence of WorldCom group stock or MCI group stock would subject us, our subsidiaries or affiliates, or our or their successors or shareholders to tax or other adverse tax consequences; or o for tax purposes, either WorldCom group stock or MCI group stock is not, or at any time in the future will not be, treated solely as common stock of WorldCom. For purposes of rendering this opinion, tax counsel will assume that any legislative or administrative proposals will be adopted or enacted as proposed. Purposes of Optional Conversion Provisions; Shareholder Considerations. These provisions allow us the flexibility to recapitalize WorldCom group stock and MCI group stock into one series of common stock that would, after the recapitalization, represent an equity interest in the combined businesses of the WorldCom group and the MCI group. The optional conversion could be exercised at any future time if our board of directors determines that an equity structure consisting of these two series of stock was no longer in the best interests of WorldCom. Our board of directors may decide to convert MCI group stock into WorldCom group stock if the equity capital markets were to use the same criteria in valuing MCI group stock as they use to value WorldCom group stock. For example, if WorldCom group stock were to be valued primarily on the basis of an earnings per share multiple and dividends, rather than multiples of cash flow, and if the performance of the underlying businesses were expected to be similarly based on those criteria, then our board of directors may be more likely to consider converting MCI group stock into WorldCom group stock and eliminate the separate series. A conversion could be exercised, however, at a time that is disadvantageous to the holders of the series of stock related to one group. Conversion would be based upon the relative market values of WorldCom group stock and MCI group stock. Many factors could affect the market values of WorldCom group stock and MCI group stock, including: o our results of operations and those of each of the groups, o trading volume, and o general economic and market conditions. Market values also could be affected by decisions by our board of directors or our management that investors perceive to affect differently the series of stock related to one group compared to the series of stock related to the other group. These decisions could include: o changes to our tracking stock policies, o transfers of assets and liabilities between groups, o allocations of corporate opportunities, and o financing resources between the groups and changes in dividend policies. The following illustration demonstrates the calculation of the number of shares issuable upon conversion of MCI group stock into shares of WorldCom group stock at our option during the first three years after the implementation of the tracking stock proposal. The values for the shares are for illustrative purposes only and are not intended to be indicative of actual or future trading values. If: o there is not more than an insubstantial risk of adverse income tax consequences; 7 o 3 billion shares of WorldCom group stock and 120 million shares of MCI group stock were outstanding immediately prior to the conversion; o the average market value of one share of MCI group stock over the 20-trading day valuation period was $50 per share; and o the average market value of one share of WorldCom group stock over the 20-trading day valuation period was $40 per share then each share of MCI group stock could be converted into 1.375 shares of WorldCom group stock based on the following calculation: average market value of MCI group stock 110% X --------------------------- = average market value of WorldCom group stock $50 per share 1.1 X --------------------------- = 1.375 shares $40 per share Redemption in Exchange for Stock of Subsidiary Our board of directors may at any time, without shareholder approval, redeem on a pro rata basis all of the outstanding shares of WorldCom group stock or MCI group stock in exchange for shares of the common stock of one or more of our wholly owned subsidiaries that own all of the assets and liabilities attributed to the relevant group. These provisions give us increased flexibility with respect to splitting off the assets attributed to one of the groups by allowing us to transfer all of the assets attributed to that group to one or more wholly owned subsidiaries and redeeming the related series of common stock with the stock of those subsidiaries. As a result of this redemption, the holders of WorldCom group stock and the holders of MCI group stock would hold securities of separate legal entities operating in distinct lines of business, and would no longer have an interest in WorldCom, Inc. as a whole. We currently do not have any intention of redeeming the WorldCom group stock or the MCI group stock for the assets of the relevant group. A redemption, however, could be authorized by our board of directors at any time in the future if it determines that an equity structure comprised of WorldCom group stock and MCI group stock is no longer in the best interests of WorldCom. We may redeem shares of WorldCom group stock or MCI group stock for subsidiary stock only if we have funds legally available for distribution under Georgia law. Mandatory Dividend, Redemption or Conversion of Stock if Disposition of Group Assets Occurs If we dispose of 80% or more of the then fair value of the properties and assets attributed to either the WorldCom group or the MCI group in a transaction or series of related transactions, our board of directors is required to take action that returns the value of the net proceeds of those assets to the holders of the stock related to that group. That action could take the form of a special dividend, a redemption of shares or a conversion into WorldCom group stock. There are exceptions, however, to this requirement that are described below under "-Exceptions to the Mandatory Dividend, Redemption and Conversion Requirement if a Disposition Occurs." 8 If no exception applies, our board of directors will elect, without shareholder approval, to do one of the following: o pay a special dividend to the holders of shares of the stock related to that group in cash and/or securities or other property having a fair value equal to the net proceeds of the disposition; o if the disposition involves: o 100% of the properties and assets attributed to that group, redeem all outstanding shares of the stock series related to that group in exchange for cash and/or securities or other property having a fair value equal to the net proceeds of the disposition; o 80% or more but less than 100% of the then fair market value of the properties and assets attributed to that group, redeem a number of whole shares of the stock related to that group in exchange for cash and/or securities or other property having a fair value equal to the net proceeds of the disposition; the number of shares so redeemed will have in the aggregate an average market value, during the period of ten consecutive trading days beginning on the 51st trading day following the disposition date, closest to the net proceeds of the disposition; or o convert each outstanding share of MCI group stock into a number of shares of WorldCom group stock equal to 110%, in the case of the sale of assets attributed to the MCI group, or 100% in the case of the sale of assets attributed to the WorldCom group, of the ratio of the average market value of one share of the MCI group stock to the average market value of one share of the WorldCom group stock. However, if, in the case of the sales of assets attributed to the MCI group, the disposition is consummated after the third anniversary of the implementation of the tracking stock proposal, the number of shares to be issued as a result of a conversion will equal 100% of the applicable ratio. We will calculate the average market values during the ten-trading day period beginning on the 51st trading day following the disposition date. If we dispose of 80% or more of the then fair value of the properties and assets attributed to the WorldCom group and distribute the net proceeds of the disposition by means of a special dividend or redemption as described in the preceding paragraph, we may at any time thereafter convert each outstanding share of WorldCom group stock into a number of shares of MCI group stock equal to the ratio of the average market value of one share of WorldCom group stock to the average market value of one share of MCI group stock. We may only pay a special dividend or redeem shares of WorldCom group stock or MCI group stock if we have funds for distributions under Georgia law and the amount to be paid to holders is less than or equal to the available distribution amount for the group. We will pay the special dividend or complete the redemption or conversion on or prior to the 120th trading day following the disposition date. The "net proceeds" of a disposition means an amount equal to what remains of the gross proceeds of the disposition after any payment of, or reasonable provision is made as determined by our board of directors for: o any taxes we estimate will be payable by us, or which we estimate would have been payable but for the utilization of tax benefits attributable to another group, in respect of the disposition or in respect of any resulting dividend or redemption; o any transaction costs, including, without limitation, any legal, investment banking and accounting fees and expenses; and o any liabilities attributed to the group whose assets are disposed of, including, without limitation: o any liabilities for deferred taxes; o any indemnity or guarantee obligations incurred in connection with the disposition or otherwise; 9 o any liabilities for future purchase price adjustments; and o any preferential amounts plus any accumulated and unpaid dividends in respect of any preferred stock attributed to that group. We may elect to pay the special dividend or redemption price either in: o the same form as the proceeds of the disposition were received; or o any other combination of cash, securities or other property that our board of directors or, in the case of securities that have not been publicly traded for a period of at least 15 months, an independent investment banking firm, determines will have a total market value of not less than the fair value of -the net proceeds. The factors our board of directors will consider when it is required to choose among paying a special dividend, redeeming shares or converting shares of MCI group stock into WorldCom group stock will depend upon all of the facts and circumstances at the time. Generally, if we dispose of 80% or more of the properties and assets attributed to a group, we probably would redeem the series of common stock related to that group and exercise our conversion option with respect to the remaining shares of that series because the scope or scale of the remaining properties and assets attributed to the group would likely not provide a reasonable basis for a tracking stock for that group. We may wish to convert the MCI group stock into the WorldCom group stock, even at the applicable premium, if it was then desirable for us to retain the proceeds of the sale for our remaining businesses. However, the likely taxability of an asset sale and dividend or redemption at both the corporate and shareholder levels makes it unlikely that we would dispose of any substantial amount of properties or assets in this manner. The following illustrations demonstrate the application of the provisions requiting a mandatory special dividend, redemption or conversion if a disposition occurs prior to the third anniversary of the implementation of the tracking stock. The values for the shares are for illustrative purposes only and are not intended to be indicative of actual or future trading values. If: o 120 million shares of MCI group stock were outstanding; o the net proceeds of the sale of more than 80% but less than 100% of the properties and assets attributed to the MCI group equals $5.4 billion; o the average market value of MCI group stock during the ten-trading day valuation period was $50 per share; and o the average market value of WorldCom group stock during the ten-trading day valuation period was $40 per share; then we could do any one of the following: (1) pay a special dividend to the holders of MCI group stock equal to: net proceeds ----------------------------------- = number of outstanding shares of MCI group stock 10 $5.4 billion ---------------------- = $45 per share 120 million shares (2) redeem for $50 per share a number of shares of MCI group stock equal to: net proceeds ------------------------- = average market value of MCI group stock $5.4 billion ------------------------- = 108 million shares $50 per shares (3) convert each outstanding share of MCI group stock into a number of shares of WorldCom group stock equal to: average market value of MCI group stock 110% X ------------------------------ = average market value of WorldCom group stock 1.1 X $50 per share ------------------------------ = 1.375 shares $40 per share Exceptions to the Mandatory Dividend, Redemption or Conversion Requirement if a Disposition Occurs. We are not required to take any of the above actions for any disposition of 80% or more of the properties and assets attributed to either group in a transaction or series of related transactions that results in our receiving for those properties and assets primarily equity securities of any entity that: o acquires those properties or assets or succeeds to the business conducted with those properties or assets or that controls the acquirer or successor; and o is primarily engaged or proposes to engage primarily in one or more businesses similar or complementary to the businesses conducted by that group prior to the disposition, as determined by our board of directors. The purpose of this exception is to enable us technically to "dispose" of properties or assets of a group to other entities engaged or proposing to engage in businesses similar or complementary to those of that group without requiring a special dividend on, or a redemption or conversion of, the series of stock related to that group, so long as we receive an equity interest in that entity. We are not required to control that entity, whether by ownership or contract provisions. In addition, we are not required to effect a special dividend, redemption or conversion if a disposition is: o of 80% or more of our properties and assets in one transaction or a series of related transactions in connection with our dissolution and the distribution of our assets to shareholders; o on a pro rata basis, such as in a split-off; 11 o made to any person or entity controlled by us, as determined by our board of directors; or o a disposition conditioned upon the affirmative vote of a majority of the votes entitled to be cast by the holders of the stock related to that group, voting as a separate voting group. Notices if Disposition of Group Assets Occurs. Not later than the 45th trading day after the disposition date, we will announce publicly by press release: o the net proceeds of the disposition; o the number of shares outstanding of the series of common stock related to the group to which the disposed assets were attributed; o the number of shares of that series of common stock into or for which convertible securities are then convertible, exchangeable or exercisable and the conversion, exchange or exercise price of those convertible securities; and o if applicable, the outstanding shares fraction on the date of the notice. Not earlier than the 61st trading day and not later than the 65th trading day after the disposition date, we will announce publicly by press release whether we will pay a special dividend or redeem shares of stock with the net proceeds of the disposition or convert the MCI group stock into WorldCom group stock. We will mail to each holder of shares of the series of stock related to the group to which the disposed assets were attributed the additional notices and other information required by our articles of amendment. Disposition of Less than 80% of the Assets. If we dispose of less than 80% of the properties and assets attributed to either the WorldCom group or the MCI group in a transaction or series of transactions, we will attribute the proceeds to the group to which the disposed assets were attributed. We will use those proceeds: o in the business of that group; o for distribution to the holders of the series of stock related to that group; or o to buy back shares of the series of stock related to that group in the open market. We may use those proceeds in the business of another group only if we reattribute to the group to which the disposed assets and proceeds were originally attributed consideration with an equivalent fair value. Selection of Shares for Redemption If fewer than all of the outstanding shares of a series of stock are to be redeemed, we will redeem those shares proportionately from among the holders of outstanding shares of that series of stock or by a method as may be determined by our board of directors to be equitable. Fractional Interests; Transfer Taxes We are not required to issue fractional shares of any capital stock or any fractional securities to any holder of either series of stock upon any conversion, redemption, dividend or other distribution described above. If a fraction is not issued to a holder, we will pay cash instead of that fraction. We will pay all documentary, stamp or similar issue or transfer taxes that may be payable in respect of the issue or delivery of any shares of capital stock and/or other securities to the holders of record on redemption or conversion of shares. 12 Liquidation Rights Currently, in the event of our dissolution, the holders of existing common stock are entitled to share equally in our net assets after payment or provision for payment of our debts and other liabilities and the payment of full preferential amounts to which the holders of any preferred stock are entitled. Under our articles of amendment, in the event of our dissolution, the holders of WorldCom group stock, the holders of MCI group stock and the holders of any additional series of common stock that is subsequently created will be entitled to receive our assets on a per share basis in proportion to the liquidation units per share of that series. Similar to our existing common stock, however, holders of WorldCom group stock and MCI group stock will be entitled to receive our assets only after payment or provision for payment of the debts and other liabilities of WorldCom and full preferential amounts to which holders of any preferred stock are entitled. In the event of our dissolution, no holder of either series of common stock will have any special right to receive specific assets attributed to the related group. The liquidation rights of the series of common stock will be as follows: o each outstanding share of WorldCom group stock will have one liquidation unit; and o each outstanding share of MCI group stock will have 1/25 of one liquidation unit. The number of liquidation units to which each share of WorldCom group stock and MCI group stock is entitled will not be changed without the approval of the holders of each series of common stock voting as a separate voting group, except in the limited circumstances described below. As a result, the liquidation rights of the holders of the respective series of common stock may not bear any relationship to the relative market values, the relative voting rights of the series of common stock or the relative value of the assets attributed to the groups. If we subdivide or combine the outstanding shares of a series of common stock or declare a dividend or other distribution of shares of a series of common stock to holders of that series of common stock, the number of liquidation units of the other series of common stock will be appropriately adjusted. Our board of directors will make this adjustment to avoid any dilution in the relative liquidation rights of any series of common stock. Neither a merger or share exchange of WorldCom into or with any other corporation, nor any sale, lease, exchange or other disposition of 80% or more of our assets, will, alone, cause the dissolution of WorldCom for purposes of these liquidation provisions. Shares Reserved for Another Group or for Issuance to the Holders of the Series of Stock Related to that Group The articles of amendment will allow us to reserve shares of stock related to one group for the other group or for issuance to the holders of the other series of common stock. For example, if one group transfers assets to the other group we may reserve shares related to the other group instead of transferring cash or other assets in exchange for these assets or incurring indebtedness to the transferor group. Any common stock related to one group that we reserve for the other group or for issuance to the holders of the other series of common stock are not outstanding shares and are not entitled to vote until we actually issue them. At any time that there are shares of stock related to one group reserved for the other group or for issuance to the holders of the other series of common stock, we will use what we refer to as the outstanding shares fraction to allocate to the other group any dividend or redemption payment made to the holders of the other stock. In addition, if at the time of any split off of a group by means of redemption of the stock related to that group for shares of one or more wholly owned subsidiaries, there are shares of stock related to the other group reserved for the split group or for issuance to the holders of stock related to the split group, we will distribute the reserved shares of stock to the split group or the holders of the stock related to the split group. 13 The outstanding shares fraction indicates the relationship between the number of shares of a series of common stock held by the public and the number of shares reserved for the other group or for issuance to the holders of the other series of common stock. It is calculated by dividing the number of shares of a series of common stock issued to the public by the sum of the number of shares of that series of stock issued to the public plus the number of shares of that series of stock then reserved for the other group or for issuance to the holders of the other series of common stock. The outstanding shares fraction will equal 1.0 at any time that there are no shares of a series of common stock reserved for the other group or for issuance to the holders of the other series of common stock. Immediately after the implementation of the tracking stock proposal, there will be no shares of MCI group stock or WorldCom group stock reserved for the other group or for issuance to the holders of the other series of common stock. The following illustration demonstrates the calculation of the outstanding shares fraction. If: o 120 million shares of MCI group stock were outstanding; and o 30 million shares of MCI group stock were reserved for the WorldCom group or for issuance to the holders of WorldCom group stock; then the outstanding shares fraction with respect to the MCI group stock would equal 4/5 based on the following calculation: Number of shares of MCI group stock outstanding ------------------------------------------- = Number of shares of MCI group stock outstanding + Number of reserved shares of MCI group stock 120 million shares ------------------------------------------- = 4/5 120 million shares + 30 million shares The number of shares of a series of common stock reserved for the other group or for issuance to the holders of the other series of common stock would be increased, without shareholder approval, to reflect: o share dividends on that series of common stock; o reclassifications of that series of common stock resulting in a greater number of shares of that series of common stock outstanding; o purchases of that series of common stock with assets attributed to the other group; o transfers to the group related to that series of common stock of assets attributed to the other group; and o transfers to the other group of liabilities attributed to the group related to that series of common stock. The number of shares of a series of common stock reserved for the other group or for issuance to the holders of the other series of common stock would be decreased, without shareholder approval, to reflect: o sales of that series of common stock for the account of the other group; 14 o share dividends of that series of common stock to the holders of the other common stock; o the issuance of that series of common stock when convertible securities are converted if those shares of stock were reserved for the other group or for issuance to the holders of the other series of common stock; o the issuance of that series of common stock when securities convertible into that stock and issued as a distribution to the holders of the other series of common stock are converted; o reclassifications of that series of common stock resulting in a smaller number of shares of that series of common stock outstanding; o the redemption of shares of that series of common stock as described under "Mandatory Dividend, Redemption or Conversion of Stock if Disposition of Group Assets Occurs" above; o transfers to the other group of assets attributed to the group related to that series of common stock; and o transfers to that group of liabilities attributed to the other group. Our board of directors could, without shareholder approval, also increase or decrease the number of shares of a series of common stock reserved for the other group or for issuance to the holders of the other series of common stock under other circumstances as our board of directors determines appropriate to reflect the economic substance of any other event or circumstance. Determinations by Our Board of Directors Any determinations made in good faith by our board of directors with respect to a series of common stock will be final and binding on all of our shareholders. Preemptive Rights The holders of any series of common stock will not have any preemptive rights. Anti-Takeover Provisions of Georgia Law, Our Charter and Bylaws The following discussion concerns material provisions of Georgia law, our charter and bylaws and our restated rights agreement that could be viewed as having the effect of discouraging an attempt to obtain control of WorldCom, Inc. Number and Election of Directors Our existing bylaws provide that the number of members of the board of directors is fixed by the board of directors, but cannot be less than three. Currently, our board of directors has 12 members. Neither our existing articles of incorporation nor our existing bylaws provide for a staggered board of directors. Our existing bylaws provide that directors are elected by a plurality of the votes cast by shareholders entitled to vote in the election at a meeting at which a quorum is present. No class or series of our shares may elect any director solely by vote of that class or series. Currently, however, no directors are elected by a separate class or series. Our existing articles of incorporation do not provide for cumulative voting. Vacancies on the Board of Directors Our existing bylaws provide that any vacancy on our board of directors caused by an increase in the number of directors by action of the shareholders will be filled by the shareholders in the same manner as at an annual meeting. Any vacancy created by an increase in the number of directors by action of the board of directors or 15 by the removal or resignation of a director will be filled by the affirmative vote of a majority of the remaining directors, except that a class of shareholders may fill a vacancy created by the removal or resignation of a director elected by that class. Currently, no directors are elected by a separate class or series of shares of our capital stock. Shareholder Nominations and Proposals Under our bylaws, in order for a shareholder to nominate a candidate for director, timely notice of the nomination must be given to and received by us in advance of the meeting. Ordinarily, notice must be given and received not less than 120 nor more than 150 days before the first anniversary of the preceding year's annual meeting. However, if the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from that anniversary date, then notice must be given by the shareholder and received by not earlier than 150 days before the annual meeting and not later than the close of business on the later of the 120th day before the annual meeting or the 10th day following the day on which public announcement of the meeting is first made. In some cases, notice may be delivered and received later if the number of directors to be elected to our board of directors is increased. The shareholder submitting the notice of nomination must describe various matters as specified in the bylaws, including the name, age and address of each proposed nominee, his or her occupation, and the class and number of shares held by the nominee. In the case of special meetings of shareholders, the only business that will be conducted, and the only proposals that will be acted upon, will be those that are brought pursuant to our notice of meeting. Nominations for persons for election to the board of directors at a special meeting for which the election of directors is a stated purpose in the notice of meeting may be made by any shareholder who complies with the notice and other requirements of the bylaws. If we call a special meeting of shareholders to elect one or more directors, any shareholder may nominate a candidate, if notice from the shareholder is given and received not earlier than 150 days before the special meeting and not later than the close of business on the later of the 120th day before the special meeting or the 10th day following the day on which public announcement of the meeting and/or of the nominees proposed by us is first made. The notice from the shareholder must also include the same information described above. In order for a shareholder to bring other business before an annual meeting, timely notice must be given to and received by us within the time limits described above. The shareholder's notice must include: o a description of the proposed business, which must be a proper subject for action by the shareholders, o the reasons for conducting the business, and o other matters specified in the bylaws. Proposals of other business may be considered at a special meeting requested in accordance with the bylaws only if the requesting shareholder gives and we receive a notice containing the same information as required for an annual meeting at the time the meeting is requested. Rights Plan Under our current rights agreement, each share of our existing common stock has associated with it one preferred stock purchase right. Each of these rights entitles its holders to purchase at a purchase price of $160, subject to adjustment, two-thirds of 1/1000 of a share of our Series 3 preferred stock under the circumstances provided for in our current rights agreement. Our board of directors reviewed our rights plan in connection with the tracking stock proposal and a shareholder proposal approved at the 2000 annual meeting which requested that our board consider the adoption of a bylaw amendment requiring shareholder approval of rights plans. As a result of this review, our board determined to amend our existing rights plan to reflect the creation of the tracking stocks, but otherwise to wait until closer to the September 6, 2001 scheduled expiration of our rights plan to take any further action regarding rights plans. 16 Our board of directors will designate shares of our preferred stock as Series 4 Preferred Stock and Series 5 Preferred Stock in connection with the restated rights agreement. As a result, instead of rights currently applicable to our existing common stock: o each share of WorldCom group stock will have associated with it a right to purchase 1/1000 of a share of series 4 preferred stock at a purchase price described below; and o each share of MCI group stock will have associated with it a right to purchase 1/1000 of a share of series 5 preferred stock at a purchase price described below. The purchase price of the series 4 preferred stock will be equal to $160 multiplied by a fraction the numerator of which is the opening price of the WorldCom group stock on the Nasdaq National Market on the first day that stock is traded after the recapitalization, and the denominator of which is the closing trading price of our existing common stock on the last day immediately prior to the recapitalization. The purchase price of the series 5 preferred stock will equal the difference between $160 and the series 4 preferred stock purchase price. The rights will not become exercisable until the earlier of: o 10 business days following a public announcement that a person or group has become an "acquiring person"; o 10 business days after we first determine that a person or group has become an acquiring person; or o 10 business days, or a later date as may be determined by our board of directors, following the commencement of, or the announcement of an intention to commence, a tender offer or exchange offer that would result in a person or group becoming an acquiring person. Under our current rights agreement and the restated rights agreement, a person becomes an "acquiring person" if the person, alone or together with a group, acquires beneficial ownership of 15% or more of the total voting power of all of our voting stock. For these purposes, the voting power of a person or group will be determined at any time and from time to time as if the day on which the determination is made is the record date for a vote of shareholders. The restated rights agreement contains provisions designed to prevent the inadvertent triggering of the rights. For example, it gives a person who inadvertently acquired 15% or more of the total voting power of all of our voting stock and does not have any intention of changing or influencing the control of WorldCom the opportunity to sell a sufficient number of shares so that the acquisition would not trigger the rights. In addition, the rights will not be triggered and a divestiture of shares will not be required by: o our repurchase of shares of voting stock, or o any change in the market values of either series of common stock which could raise the proportion of voting power held by a person to over the applicable 15% threshold. However, any person who exceeds the threshold as a result of our stock repurchases or any changes in the market values will trigger the rights if the person subsequently acquires any additional shares of voting stock. Additionally, at any time a person or a group becomes an acquiring person, the flip-in or flip-over features of our rights or, at the discretion of the board of directors, the exchange features of our rights, may be exercised by any holder, except for the acquiring person. A summary description of each of these features follows: "Flip In" Feature. In the event a person or group becomes an acquiring person, each holder of a WorldCom group stock right or MCI group stock right, except for the acquiring person, will have the right to acquire, upon exercise of the right, instead of one ten-thousandth of a share of our Series 4 Preferred Stock or Series 17 5 Preferred Stock, shares of our WorldCom group stock or MCI group stock, having a value equal to twice the exercise price of the right. "Exchange" Feature. After the rights have been triggered, our board of directors may, at its option, exchange the rights, other than rights owned by an acquiring person, at an exchange ratio of one share of WorldCom group stock per WorldCom group right and one share of MCI group stock per MCI group right. "Flip Over" Feature. In the event we are acquired in a merger or other business combination transaction or 50% or more of our assets or earning power, are sold, each holder of a right, except for an acquiring person, will have the right to receive, upon exercise of the right, the number of shares of the acquiring company's capital stock with the greatest voting power having a value equal to twice the exercise price of the right. Redemption of Rights. At any time before the earlier to occur of: o public disclosure that a person or group has become an acquiring person, or o our determination that a person or group has become an acquiring person, our board of directors may redeem all of the rights at a redemption price of $0.01 per right, subject to adjustment. The right to exercise the rights will terminate upon redemption, and at that time, the holders of the rights will have the right to receive only the redemption price for each right held. Amendment of Rights. At any time before a person or group becomes an acquiring person, the terms of the restated rights agreement may be amended by our board of directors without the consent of the holders of the rights, including an amendment to lower the trigger thresholds to not less than the greater of: o any percentage greater than the largest percentage of the voting power of all our voting stock then known to us to be beneficially owned by any person or group, and o 10% of the voting power of all of our voting stock. However, if at any time after a person or group becomes an acquiring person, or acquires a lower percentage as may be amended in the restated rights agreement, of the voting power of our voting stock, our board of directors may not adopt amendments to the restated rights agreement that adversely affect the interests of holders of the rights. Furthermore, once the rights are no longer redeemable, our board of directors may not adopt any amendment that would lengthen the time period during which the rights are redeemable. Termination of Rights. If not previously exercised, the rights will expire on September 6, 2001, unless we earlier redeem or exchange the rights or extend the final expiration date. Anti-takeover Effects. The rights have anti-takeover effects. Once the rights become exercisable, the rights will cause substantial dilution to a person or group that attempts to acquire or merge with us. Accordingly, the existence of the rights may deter potential acquirors from making a takeover proposal or tender offer. Our rights should not interfere with any merger or other business combination approved by our board of directors since we may redeem our rights as described above and since a transaction approved by our board of directors would not cause the rights to become exercisable. Series 4 Preferred Stock. In connection with the creation of the WorldCom group rights, as described above, the WorldCom board of directors authorized the issuance of 4.85 million shares of preferred stock as series 4 junior participating preferred stock. WorldCom has designed the dividend, liquidation, voting and redemption features of the WorldCom series 4 preferred stock so that the value of 1/1000 of a share of WorldCom series 4 preferred stock approximates the value of one share of WorldCom group common stock. Shares of WorldCom series 4 preferred stock may only be 18 purchased after the WorldCom group rights have become exercisable, and each share of the WorldCom series 4 preferred stock: o is nonredeemable and junior to all other series of preferred stock, except the series 5 preferred stock and unless otherwise provided in the terms of those series of preferred stock; o will have a preferential dividend in an amount equal to the greater of $10 or 1,000 times any dividend declared on each share of WorldCom group stock; o in the event of liquidation, will entitle its holder to receive a preferred liquidation payment equal to the greater of $1,000 or 1,000 times the payment made per share of WorldCom group stock; o will have 1,000 votes, voting together with the common stock and any other capital stock with general voting rights; and o in the event of any merger, consolidation or other transaction in which shares of WorldCom group stock are converted or exchanged, will be entitled to receive 1,000 times the amount and type of consideration received per share of WorldCom group stock. The rights of the WorldCom series 4 preferred stock as to dividends, liquidation and voting, and in the event of mergers and consolidations, are protected by customary anti-dilution provisions. Series 5 Preferred Stock. In connection with the creation of the MCI group rights, as described above, the WorldCom board of directors authorized the issuance of 150,000 shares of preferred stock as series 5 junior participating preferred stock. WorldCom designed the dividend, liquidation, voting and redemption features of the WorldCom series 5 preferred stock so that the value of 1/1000 of a share of WorldCom series 5 preferred stock approximates the value of one share of MCI group stock. Shares of WorldCom series 5 preferred stock may only be purchased after the MCI rights have become exercisable, and each share of the WorldCom series 5 preferred stock: o is nonredeemable and junior to all other series of preferred stock, except the series 4 preferred stock and unless otherwise provided in the terms of those series of preferred stock; o will have a preferential dividend in an amount equal to the greater of $10 or 1,000 times any dividend declared on each share of MCI group stock; o in the event of liquidation, will entitle its holder to receive a preferred liquidation payment equal to the greater of $1,000 or 1,000 times the payment made per share of MCI group stock; o will have 1,000 votes, voting together with the common stock and any other capital stock with general voting rights; and o in the event of any merger, consolidation or other transaction in which shares of MCI group stock are converted or exchanged, will be entitled to receive 1,000 times the amount and type of consideration received per share of MCI group stock. The rights of the WorldCom series 5 preferred stock as to dividends, liquidation and voting, and in the event of mergers and consolidations, are protected by customary anti-dilution provisions. Business Combination Restrictions Our existing articles of incorporation contain a provision, which will be amended by Proposal 2, that requires the approval by the holders of at least 70% of the outstanding shares of our capital stock whose holders are present at a meeting of shareholders and which entitle their holders to vote generally in the election of directors, 19 voting as a single voting group, as a condition to consummate a "business transaction", as described below, involving WorldCom and a "related person", as described below, or in which a related person has an interest, unless: o the business transaction is approved by at least a majority of our "continuing directors" as described below, then serving on the board of directors or, if the votes of those continuing directors would have been insufficient to constitute an act of the board of directors, then the unanimous vote of the continuing directors is sufficient to approve the transaction so long as at least three continuing directors serve on the board of directors at the time of the unanimous vote; or o minimum price and other requirements are met. A "business transaction" means: o any merger, share exchange or consolidation involving us or any of our subsidiaries; o any sale, lease, exchange, transfer or other disposition by us or any of our subsidiaries of more than 20% of its assets; o any sale, lease, exchange, transfer or other disposition of more than 20% of the assets of an entity to us or a subsidiary of us; o the issuance, sale, exchange, transfer or other disposition by us or a subsidiary of us of any securities of us or any subsidiary of us in exchange for cash, securities or other property having an aggregate fair market value of $15 million or more; o any merger, share exchange or consolidation of us with any subsidiary of us in which we are not the surviving corporation and the charter of the surviving corporation does not contain provisions similar to the business combination restrictions in the existing articles of incorporation; o any recapitalization or reorganization of us or reclassification of our securities which would have the effect of increasing the voting power of a related person or reducing the number of shares of each class of voting securities outstanding; o any liquidation, spin-off, split-off, split-up or dissolution of us; or o any agreement, contract or other arrangement providing for any of the business transactions described above or having a similar purpose or effect. A "related person" generally means a person or entity that, together with its affiliates and associates, beneficially owns 10% or more of the voting power of our outstanding voting stock. A "continuing director" means a director who either: o was a member of the board of directors on September 15, 1993; or o became a director after that date, and whose election, or nomination for election, was approved by at least a majority of the continuing directors then on the board of directors; provided that any director who is a related person with an interest in the business transaction to be voted upon, other than a proportionate interest as a shareholder, is not considered a continuing director. EX-99.3 9 exh99_3.txt RISK FACTORS EXHIBIT 99.3 RISK FACTORS You should carefully consider the following risks and other information contained in this proxy statement and prospectus before deciding to vote in favor of the tracking stock proposal or the proposals to amend the fair price provisions of our charter. RISKS RELATING TO OUR NEW TRACKING STOCK CAPITAL STRUCTURE Risks Relating to Both Series of Stock The market prices of WorldCom group stock and MCI group stock may not reflect the separate performance of the groups The market price of WorldCom group stock may not reflect the separate performance of our non-MCI businesses. Similarly, the market price of MCI group stock may not reflect the separate performance of our MCI businesses. The market price of either or both series of common stock could simply reflect the performance of WorldCom as a whole, or the market price could move independently of the performance of the businesses of the related group. Investors may discount the value of WorldCom group stock and MCI group stock because they are part of a common enterprise rather than stand-alone entities. The market prices of WorldCom group stock and MCI group stock could be adversely affected by factors that do not affect traditional common stock The complex nature of the terms of the two series of stock may adversely affect the market prices of the two series of stock The complex nature of the terms of WorldCom group stock and MCI group stock, such as the convertibility of each stock, and the potential difficulties investors may have in understanding these terms, may adversely affect the market prices of WorldCom group stock and MCI group stock. As a result, the combined market values of WorldCom group stock and MCI group stock after the recapitalization may not equal or exceed the market value of our existing common stock. The market price of one series of stock could be adversely affected by events involving the other group or the performance of the other series of stock Events, such as earnings announcements or announcements of new products or services, acquisitions or dispositions that the market does not view favorably and thus adversely affect the market price of one series of stock, may adversely affect the market price of the other series of stock. Because both series are common stock of WorldCom, an adverse market reaction to one series of stock may, by association, cause an adverse reaction to the other series of stock. This could occur even if the triggering event was not material to WorldCom as a whole. The market prices of the WorldCom group stock and MCI group stock may be volatile and fluctuate substantially Market reaction to the establishment of the tracking stocks is unpredictable, and stock prices of telecommunications service providers have been volatile. To the extent the market price of either or both series of common stock track the performance of more focused groups of businesses than those of WorldCom as a whole, the market prices of these stocks may be more volatile than the market price of WorldCom's existing common stock has been to date. This volatility may be in response to any of the following factors, some of which are beyond the control of the management of each of the WorldCom and MCI groups: o variations in WorldCom group's or MCI group's quarterly operating results; o changes in financial estimates or investment recommendations by securities analysts relating to the WorldCom group and/or MCI group stocks generally; o changes in market valuations of other telecommunications services companies engaged in similar lines of business; and o the potential for future sales or issuances of WorldCom group and MCI group stocks. Because there has been no prior market for either the WorldCom group stock or the MCI group stock, the value of the stock you receive could be less than the value of the existing stock Because there has been no prior market for the WorldCom group stock or the MCI group stock, the market prices of a share of WorldCom group stock and 1/25 of a share of MCI group stock could be less than the market value of a share of our existing common stock prior to the distribution. You will be subject to all of the risks of an investment in WorldCom as a whole, even if you own only one series of stock The holders of WorldCom group stock and the holders of MCI group stock will be shareholders of a single company, WorldCom. Financial effects arising from one group that affect WorldCom's consolidated results of operations or financial condition could, if significant, affect the results of operations or financial condition of the other group. The WorldCom group and the MCI group will not be separate legal entities and as such cannot own assets or enter into legally binding agreements. The issuance of WorldCom group stock and MCI group stock and the attribution of assets, liabilities and shareholders' equity to the WorldCom group or the MCI group will not affect ownership of our assets or responsibility for our liabilities or those of our subsidiaries. We could be required to use assets attributed to one group to pay the liabilities attributed to the other group The assets we attribute to one group could be subject to the liabilities attributed to the other group, even if those liabilities arise from lawsuits, contracts or indebtedness that we attribute to the other group. No provision of our charter prevents us from using the assets attributed to one group to satisfy the liabilities attributed to the other group. Net losses from one group could adversely affect the other group's ability to pay dividends Net losses of either the WorldCom group or the MCI group and dividends paid on shares of WorldCom group stock, MCI group stock and our preferred stock will reduce the dividends we can pay on each series of common stock under Georgia law. Financial effects from one group could adversely affect the other group's borrowing costs If WorldCom or any of its subsidiaries were to incur significant indebtedness on behalf of one group, including indebtedness incurred or assumed in connection with an acquisition or investment, it could affect the credit rating of WorldCom and its subsidiaries. This, in turn, could increase the borrowing costs of the companies in the other group and WorldCom as a whole. Our board of directors may change our tracking stock policy statement to the detriment of one group without shareholder approval Our board of directors may at any time change, or make exceptions to, the policies set forth in our tracking stock policy statement with respect to the allocation of corporate opportunities, financing arrangements, taxes, debt, interest and other matters, or may adopt additional policies, without shareholder approval. A decision to change, or make exceptions to, these policies or adopt additional policies could disadvantage the holders of one series of common stock relative to the holders of the other series of common stock. 2 Holders of WorldCom group stock and MCI group stock will not have shareholder rights associated with traditional common stock There will be no board of directors that owes any separate duties to the holders of either series of stock Neither the WorldCom group nor the MCI group will have a separate board of directors to represent solely the interests of the holders of WorldCom group stock or MCI group stock. Consequently, there will be no board of directors that owes any separate duties to the holders of either series of stock and the board will act in the best interests of WorldCom as a whole, which may be detrimental to the interests of the holders of one series of stock. Holders of WorldCom group stock and MCI group stock may not have any remedies if any action by directors or officers has an adverse effect on the series of stock related to their group Shareholders may not have any remedies if any action or decision of our directors or officers has an adverse effect on the holders of one series of common stock compared to the other series of common stock. Although we are not aware of any Georgia court adjudicating such an action in the context of our anticipated capital structure, recent cases in Delaware involving tracking stocks have indicated that decisions by directors or officers involving treatment of tracking stock shareholders should be judged under the business judgment rule unless self-interest is shown. The business judgment rule provides that a director or officer will be deemed to have satisfied his or her fiduciary duties to WorldCom if that person acts in a manner he or she believes in good faith to be in the best interests of WorldCom as a whole, not of either group. As a result, in some circumstances, our directors or officers may even be required to make a decision that is adverse to the holders of one series of common stock. A Georgia court hearing a case involving this type of a challenge may decide to apply principles of Georgia law that are different from the principles of Delaware law that are discussed above, or may develop new principles of law. Holders of the series of stock related to one group may not be entitled to vote on a sale of all or substantially all of the assets attributed to that group, and may not be able to block a transaction they believe is unfair Georgia law requires shareholder approval only for a sale or other disposition of all or substantially all of the assets of the entire company. If either group represents less than substantially all of the assets of WorldCom as a whole, our board of directors could, without shareholder approval, approve sales and other dispositions of any amount, including all or substantially all, of the assets attributed to that group. Initially, the assets attributed to the MCI group will not represent substantially all of the assets of the entire company and therefore our board could sell the assets attributed to the MCI group without shareholder approval. In exercising its discretion, our board of directors is not required to select the option that would result in the distribution with the highest value to the holders of the series of stock related to the group to which we have attributed the assets being sold or with the smallest effect on the series of stock related to the other group. In addition, under Georgia law, our board of directors could decline to sell the assets attributed to a group, despite the request of a majority of the holders of the series of stock related to that group. Transfers of cash, other assets or liabilities between the WorldCom group and the MCI group could cause a loss in value to one series of stock Under our tracking stock policy statement, our board of directors may decide to transfer cash, other assets or liabilities between groups, except as otherwise described herein, at fair value as determined by the board of directors. If the fair value determination is not equitable or the financial markets do not view a transfer as fair to both groups, then one series of stock may suffer a loss in value. 3 Conflicts of interest may arise between holders of WorldCom group stock and holders of MCI group stock that may be resolved adversely to either group, which may suffer a loss in value The existence of separate series of common stock could give rise to occasions in which the interests of the holders of WorldCom group stock and the holders of MCI group stock diverge, conflict or appear to diverge or conflict. Our board of directors will resolve conflicts of interest between the two groups in favor of WorldCom as a whole. Operational and financial decisions could favor one group over the other Because our board of directors owes a duty only to WorldCom as a whole, and not to either of the WorldCom group or the MCI group, our board of directors could from time to time, without shareholder approval, make operational and financial decisions or implement policies that adversely affect the businesses attributed to either group. These decisions could include: o allocation of financing opportunities in the public markets; o allocation of business opportunities, resources and personnel; and o transfers of funds, assets or liabilities between groups and other inter-group transactions. In each case, the opportunity, resources or personnel allocated, or funds, assets or liabilities transferred, to one group may be equally or more suitable for the other group. Furthermore, any decision may benefit the businesses of one group more than the businesses of the other. For example, the decision to borrow funds for companies in one group may adversely affect the ability of companies in the other group to obtain funds sufficient to implement their growth strategies or may increase the cost of those funds. Proceeds of a merger may be allocated disproportionately between the two series of stock Our board of directors will determine how consideration to be received in a merger involving WorldCom will be allocated between the holders of WorldCom group stock and the holders of MCI group stock. In doing so, our board of directors could allocate the proceeds in a manner not proportionate to the market capitalizations of the two series of stock. If this were perceived as unfair by the investment community, the holders of one series could be adversely affected. Our board of directors may pay more or less dividends on the series of stock related to one group than if that group were a separate company Our board of directors has the authority to declare and pay dividends on WorldCom group stock and MCI group stock in any legal amount. Our board of directors could, in its sole discretion, declare and pay dividends exclusively on WorldCom group stock, exclusively on MCI group stock, or on both, in equal or unequal amounts. It is not currently contemplated that we will pay dividends on the WorldCom group stock. Our board of directors could pay more dividends on the series of stock related to one group than would be financially prudent if that group were a stand-alone corporation. Conversion of one series stock into the other series will change the nature of your investment, could dilute your economic interest in WorldCom and could result in a loss in value Our board of directors could, without shareholder approval, convert shares of MCI group stock into shares of WorldCom group stock or, in more limited circumstances discussed herein, shares of WorldCom group stock into shares of MCI group stock, at some or no premium. A conversion would preclude the holders of both series of common stock from retaining their investment in a security that is intended to reflect separately the performance of the related group. 4 If you own shares of the series of stock into which the other series is being converted and the conversion is at a premium, it is likely that your shares would suffer a loss in value because your economic interest in WorldCom would be diluted. In addition, if you own shares of the series of stock into which the other series is being converted and that other series is considered over-valued, the holders of shares of the series being converted would receive more shares of your series of stock than they should and you would suffer a loss in value in addition to any loss resulting from dilution of your economic interest. Conversely, if you own shares of the series of stock being converted and these shares are considered under-valued, you would not receive as many shares of the other series of stock as you should and would suffer a loss in value. Your loss would increase if the other series of stock was also considered over-valued. Decisions by directors and officers that affect market prices could decrease relative voting power of a series of stock and the number of shares received in a conversion The relative voting power per share of each series of common stock and the number of shares of one series of common stock issuable upon the conversion of the other series of common stock will vary depending upon the relative market prices of WorldCom group stock and MCI group stock. The market price of either or both series of common stock could be adversely affected by market reaction to decisions by our board of directors or our management that investors perceive to disadvantage one series of common stock. If our board of directors causes a separation of one group from WorldCom, either or both series of stock may suffer a loss in value Our board of directors may, without shareholder approval, declare that all outstanding shares of either series of common stock will be exchanged for shares of one or more wholly owned subsidiaries of WorldCom that own all of the assets and liabilities attributed to that group. Such an exchange would result in two independent companies: one that owned all of the assets and liabilities of the WorldCom group and one that owned all the assets and liabilities of the MCI group. After this type of exchange, shareholders of a group would no longer benefit from the assets allocated to the other group. If our board of directors chooses to exchange shares of one series of common stock: o the market value of the subsidiary shares received in that exchange could be or become less than the market value of the series of common stock exchanged; and/or o the market value of WorldCom's remaining series of common stock could decrease from its market value before the exchange. The market value of the subsidiary shares and/or our remaining series of common stock may decrease in part because the subsidiary and/or our remaining businesses may no longer benefit from the advantages of doing business under common ownership with the other group. Specifically, the MCI group or the WorldCom group would no longer be able to take advantage of the strategic and operational benefits of shared managerial expertise, synergies relating to technology and purchasing arrangements, cost savings in corporate overhead and enhanced access to capital markets. In addition, the WorldCom group has been attributed all tradenames, including the MCI tradename and other related MCI tradenames. If an exchange for either series of common stock were effected, the company holding the MCI assets would not own any rights to the MCI tradenames, unless the company holding the WorldCom assets agreed to license the tradenames to the MCI company. Holders of one series of common stock may receive less consideration upon a sale of the assets attributed to their group than if their group were a separate company If we sell 80% or more of the properties and assets attributed to either group, our board of directors must, subject to some exceptions: o distribute to the holders of the stock related to that group by special dividend or redemption an amount equal to their proportionate interest in the net proceeds of the sale; or 5 o convert the outstanding shares of the MCI group into a number of shares of the WorldCom group, based on the average market values of the two series of common stock during a ten-trading day period after the sale. If the group to which the sold assets were attributed were a separate, independent company and its shares were acquired by another person, some of the costs of that sale, including corporate level taxes, might not be payable in connection with that acquisition. As a result, shareholders of a separate, independent company might receive a greater amount than the net proceeds that would be received by the holders of the stock related to that group. In addition, we cannot assure you that the net proceeds per share of the stock related to that group will be equal to or more than the market value per share of the series of common stock prior to or after announcement of a sale. If WorldCom were to be liquidated, amounts distributed to holders of each series will not bear any relationship to the value of the assets attributed to the groups The liquidation rights of the holders of the respective series of common stock are fixed. As a result, liquidation rights of the two series of stock will not bear any relationship to the relative market values, the relative voting rights of the series of common stock or the relative value of the assets attributed to the groups. For example, each share of MCI group stock will be entitled to an amount equal to 1/25 of the amount to which each share of WorldCom group stock will be entitled. As a result, holders of MCI group stock may receive less than they would if there were only one series of WorldCom common stock outstanding. Stock ownership could cause directors and officers to favor one group over the other Our directors and officers will initially own more shares, including shares subject to stock options, of WorldCom group stock than MCI group stock. As a policy, our board of directors will periodically monitor the ownership of shares of WorldCom group stock and shares of MCI group stock by our directors and senior officers and our option grants to them so that their interests are generally aligned with the two series of common stock and with their duty to act in the best interests of WorldCom and our shareholders as a whole. However, because the actual value of their interests in the WorldCom group stock and MCI group stock is anticipated to vary significantly, it is possible that they could favor one group over the other due to their stock and option holdings. Groups may compete with each other to the detriment of their businesses There is no board policy prohibiting competition between the groups. Any price or other competition between the groups could be detrimental to the businesses of either or both of the groups. Because it might be possible for an acquiror to obtain control of WorldCom by purchasing shares of only one of the tracking stocks, shareholders of both series may not share in any takeover premium A potential acquiror could acquire control of WorldCom by acquiring shares of common stock having a majority of the voting power of all shares of common stock outstanding. A majority of the voting power could be obtained by acquiring a sufficient number of shares of both series of common stock or, if one series of common stock has a majority of the voting power, only shares of that series. We expect that initially the WorldCom group stock will have a substantial majority of the voting power. As a result, initially, it might be possible for an acquiror to obtain control by purchasing only shares of WorldCom group stock. Either common stock might not be included in stock market indices, which could result in a decline of the market price of that stock We do not anticipate that the MCI group stock initially will be included in any stock market index. As a result, holders of a substantial number of shares of our existing common stock that are required to own only stocks included in an index will be required to sell immediately the MCI group stock received by them in the recapitalization. Further, we cannot assure you that the WorldCom group stock will continue to be included in any 6 particular index or that the weighting in an index of the WorldCom group stock will be the same as our existing common stock. Either of these circumstances could adversely affect the market price of the series of common stock. Provisions governing common stock could discourage a change of control and the payment of a premium for shareholders' shares Our articles of incorporation contain provisions which could prevent shareholders from profiting from an increase in the market value of their shares as a result of a change in control of WorldCom by delaying or preventing a change in control. Our articles of incorporation contain a provision that requires the approval by the holders of at least 70% of the outstanding shares of our capital stock whose holders are present at a meeting of shareholders and entitled to vote generally in the election of directors, voting as a single group, as a condition to consummate specified business transactions unless the board of directors approves the transaction and minimum price requirements are met. In addition, if Proposal 2 is not approved but Proposal 1 is implemented, our existing fair price provisions could discourage a takeover because a person seeking to take over the company might have to pay the highest price paid for one series of common stock to holders of both series of common stock. The existence of two series of common stock could also present complexities and could pose obstacles, financial and otherwise, to an acquiring person. For example, it will be impossible to obtain control of the assets attributed to the MCI group without acquiring control of WorldCom as a whole. Because this could be prohibitively expensive, it is unlikely that the MCI stock will have any takeover premium priced factored into its trading price. If the Internal Revenue Service asserts that the receipt of tracking stock is taxable, you could have a taxable gain or taxable income While we believe that no income, gain or loss will be recognized by you for federal income tax purposes as a result of the tracking stock proposal, except for any cash received instead of fractional shares of MCI group stock, there are no court decisions or other authorities bearing directly on the effect of the features of the MCI group stock and the WorldCom group stock. In addition, the Internal Revenue Service announced that it will not issue rulings on the characterization of stock with characteristics similar to the MCI group stock and the WorldCom group stock. It is possible, therefore, that the Internal Revenue Service could successfully assert that the receipt of the MCI group stock or the WorldCom group stock as well as the subsequent conversion of one series of our common stock into the other series of common stock could be taxable to you and/or to us. Legislative proposals could have adverse tax consequences for us or for holders of MCI group stock or WorldCom group stock The Clinton Administration Budget Proposals in 1999 and 2000 proposed legislation that would have adversely affected holders of tracking stock such as MCI group stock and WorldCom group stock. Although Congress did not act on either proposal and the recent Bush Administration Budget Proposal contains no such similar provision, it is impossible to predict whether any proposals relating to tracking stock will be made in the future, and to what extent Congress would act upon any such proposals. Under the amended charter, we may convert the MCI group stock into shares of WorldCom group stock at any time if there is more than an insubstantial risk of adverse U.S. federal income tax law developments, and upon any such conversion, you will not be entitled to the 10% premium that generally accompanies conversions at our option during the first three years after the implementation of the tracking stock proposal. We may not be able to pay a dividend on either the WorldCom group stock or the MCI group stock We do not anticipate declaring a dividend on the WorldCom group stock and we currently intend to pay a quarterly dividend of $0.60 per share on MCI group stock. The payment of dividends on MCI group stock will be a business decision to be made by our board of directors from time to time based primarily upon the results of operations, financial condition and capital requirements of the companies in the MCI group and of WorldCom as a 7 whole, and such other factors as our board of directors considers relevant. Georgia law limits the amount of dividends that we can pay on all series of common stock to funds legally available for distributions. Our charter further limits the amount of dividends we can pay on the series of stock related to either group to the lesser of funds available for distributions under Georgia law and the available distribution amount for the applicable group. The available distribution amount for a group is the same amount that would be legally available for the payment of dividends on the series of stock related to that group if that group were a separate company under Georgia law. Moreover, we cannot assure you we will have any funds available to pay dividends. Risks Relating to WorldCom Group Stock Only In circumstances where a separate series vote is required, holders of MCI group stock can block action If Georgia law, Nasdaq National Market rules, our charter, our bylaws or our board of directors requires a separate vote on a matter by the holders of MCI group stock, those holders could prevent approval of the matter, even if the holders of a majority of the total number of votes cast or entitled to be cast, voting together as one voting group, were to vote in favor of it. Risks Relating to MCI Group Stock Only Shareholders that own only MCI group stock may not have sufficient voting power to protect their interests The holders of WorldCom group stock, to the extent they vote the same way, will control the outcome of a vote because WorldCom group stock will retain a substantial majority of the combined voting power of WorldCom group stock and MCI group stock. This will be true even if the matter involves a divergence from or conflict with the interests of the holders of WorldCom group stock and the holders of MCI group stock. These matters may include mergers and other extraordinary transactions. This control results because both series of stock will generally vote as a single voting group, except in limited circumstances requiring a vote of a single series voting as a separate voting group. RISKS RELATING TO THE BUSINESSES ATTRIBUTED TO THE WORLDCOM GROUP If our technology became obsolete our business would suffer The market for data and voice communications and Internet access and related products is characterized by rapidly changing technology, evolving industry standards, emerging competition and frequent new product and service introductions. We cannot assure you that we will successfully identify new product and service opportunities and develop and bring new products and services to market in a timely manner. We are also at risk from fundamental changes in the way data and voice communications, including Internet access services, are marketed and delivered. Our pursuit of necessary technological advances may require substantial time and expense, and we cannot assure you that we will succeed in adapting our communications services business to alternate access devices, conduits and protocols. Political, regulatory and economic risks in international markets pose numerous risks to our international operations Because we derive substantial revenue from international operations, our business is subject to risks inherent in international operations, including: o unexpected changes in regulatory requirements, export and import restrictions, tariffs and other trade barriers; o challenges in staffing and managing foreign operations; o employment laws and practices in foreign countries; 8 o longer payment cycles and problems collecting accounts receivable; o fluctuations in currency exchange rates and imposition of currency exchange controls; o foreign taxation of earnings and payments received by us from our subsidiaries and affiliates; o potential inflation in the foreign countries where we conduct operations; o differences in technology standards; o exposure to different legal standards; and o political, economic and social conditions in the foreign countries where we conduct operations. We operate internationally through a variety of channels and entities, including wholly-owned subsidiaries, joint ventures and operating agreements with local telecommunications companies. Each of these presents risks. For example, some countries have foreign ownership limitations with respect to companies that provide telecommunications services within their borders. These restrictions require us to partner with one or more local companies if we want to participate in the market. In these settings, our ability to control or direct the operations of the local entity is limited, either contractually or statutorily, by our obligations to our local partners. Although most of the foreign countries where we operate are liberalizing their telecommunications market, whether as a result of domestic legislation or by virtue of international commitments, there are no guarantees as to the timing or continuation of these initiatives. For example, more than 70 countries have bound themselves to undertake liberalizing measures in their telecommunications market pursuant to treaty commitments under the World Trade Organization. We cannot assure you, however, that such liberalizing measures will be implemented in a timely manner or at all. Moreover, if there is a failure to implement those liberalizing measures, there may not be adequate or effective recourse against the foreign government for such failure. While we have a growing concentration of Internet-related services, the rate of development and adoption of the Internet has been slower outside the United States. Laws in the United States and foreign countries regarding the Internet and related data privacy issues are largely unsettled, but are becoming an increasing focus for lawmakers. Changes in these laws could require us to expend significant resources to comply or could limit our business. Furthermore, the application of multiple sets of laws and regulations may subject us to regulation, taxation, enforcement or other liability in unexpected ways, which could make it more expensive to conduct our business or limit our ability to conduct business. Regulation of the Internet may also adversely impact our customers' businesses, which could lead to reduced demand for our services. We compete with an increasing number of communications providers, some of whom have greater resources. Our failure to compete effectively against the new competitors or otherwise could result in the loss of customers, revenues and profitability Virtually every aspect of the telecommunications industry is extremely competitive. Moreover, a continuing trend toward business combinations and alliances in the telecommunications industry may create significant new competitors to us. We compete domestically with the following companies, some of which have significantly greater financial, personnel and other resources: o traditional phone companies, such as Verizon Communications and SBC Communications, which dominate local telephone service in a particular region and are now permitted to offer long distance and other services in a number of states and could gain approval to offer long distance and other services in a number of other states as well; 9 o other telecommunications companies that offer a broad range of telecommunication services, such as AT&T, Cable & Wireless, Genuity, Global Crossing, Level 3, Qwest, Sprint and Williams; and o equipment vendors and consulting companies such as Cisco, Accenture and IBM. Overseas, we compete with the incumbent telephone companies, some of which still have special regulatory status and the exclusive rights to provide services, and virtually all of which historically dominated their local, domestic long distance and international services business. These companies have numerous advantages including existing facilities, customer loyalty, and substantial financial resources. We may be dependent upon obtaining facilities from these incumbent telephone companies. We also compete with other service providers, many of which are affiliated with incumbent telephone companies in other countries. Typically, we must devote extensive resources to obtain regulatory approvals necessary to operate overseas, and then to obtain access to and interconnection with the incumbent's network on a non-discriminatory basis. We may also be subject to additional competition due to the development of new technologies and increased availability of domestic and international transmission capacity. We also compete in offering data communications and Internet-based services, including web hosting, Internet access and related services. This is also an extremely competitive business and we expect that competition will intensify in the future. If we do not implement sophisticated information and billing systems, we may not be able to achieve desired operating efficiencies Sophisticated information and billing systems are vital to our growth and ability to monitor costs, bill customers, fulfill customer orders and achieve operating efficiencies. Our plans for further developing and enhancing our existing information and billing system for the businesses attributed to the WorldCom group rely primarily on the delivery of products and services by third party vendors. We may not be able to develop new business, identify revenues and expenses, service customers, collect revenues or develop and maintain an adequate work force if any of the following occur: o vendors fail to deliver proposed products and services in a timely and effective manner or at acceptable costs; o we fail to adequately identify all of our information and processing needs; o our related processing or information systems fail; or o we fail to integrate our systems with those of our major customers. Price competition may adversely affect the WorldCom group's operating results Prices for data communications have fallen historically and prices for commercial voice communications have fallen due to advanced technology, increased competition and deregulation. We expect both trends to continue. Accordingly, we cannot predict to what extent we may need to reduce our prices to remain competitive. The extent to which the business, financial condition, results of operations and cash flow of these businesses could be adversely affected will depend on the pace at which these industry-wide changes continue and our ability to create new and innovative services to differentiate our offerings, enhance customer retention and grow market share. 10 RISKS RELATING TO THE BUSINESSES ATTRIBUTED TO THE MCI GROUP The MCI group has not been attributed the MCI tradename. The loss of use of the MCI tradename by the MCI businesses would harm the group's results The WorldCom group has been assigned all tradenames, including the MCI tradename and other related MCI tradenames, and the MCI group is allocated a charge for the use of the MCI tradenames. If we terminate this arrangement or let it expire, the MCI group will no longer have access to the MCI tradenames for marketing purposes. We compete with an increasing number of communications providers. Our failure to compete effectively against these new competitors or otherwise could result in the loss of current and potential customers, revenue and profitability The telecommunications industry is extremely competitive, which has resulted in downward pressure on revenues and profitability. We compete with the following companies, some of which have significantly greater financial, personnel and other resources: o traditional phone companies, such as Verizon Communications and SBC Communications, which are now permitted to offer long distance voice services in a number of states and could gain approval to offer long distance voice services in a number of other states as well; and o other telecommunications companies that offer retail and wholesale communications services, including AT&T Qwest, Excel and Sprint. We may also be subject to additional competitive pressures from the development of new technologies and increased availability of transmission capacity. The telecommunications industry is in a period of rapid technological evolution, marked by the introduction of new product and service offerings and increasing satellite, wireless and fiber optic transmission capacity for services similar to those provided by us. We cannot predict which of many possible future product and service offerings will be important to maintain our competitive position or what expenditures will be required to develop and provide these products and services. Price competition may continue to adversely affect MCI group's operating results Prices for voice communications have fallen because of the introduction of more efficient networks and advanced technology, competition from wireless communications and other competing technologies and deregulation. We expect these trends to continue and we cannot predict to what extent we may need to continue to reduce our prices in the future to remain competitive. In addition, we cannot assure you that we will be able to achieve increased traffic volumes to sustain our current revenue levels. The extent to which the business, financial condition, results of operations and cash flow of our consumer long distance voice business could be adversely affected will depend on the pace at which these industry-wide changes continue and our ability to create new and innovative services to differentiate our offerings, enhance customer retention and grow market share. If our technology became obsolete our business would suffer The telecommunications industry is subject to rapid and significant changes in technology. The effect on the businesses attributed to the MCI group of technology changes, including changes relating to emerging wireline and wireless transmission, voice over the Internet and switching technologies, cannot be predicted. -----END PRIVACY-ENHANCED MESSAGE-----