| Item 1.01 | Entry into a Material Definitive Agreement. |
The information set forth under Item 3.03 below is incorporated by reference into this Item 1.01.
| Item 3.03 | Material Modification to Rights of Security Holders. |
As of November 20, 2020, Lumen Technologies* (the “Company” or “Lumen”) entered into that certain First Amendment to be effective as of December 1, 2020 (the “First Amendment”) to the Company’s Amended and Restated Section 382 Rights Agreement, dated as of May 9, 2019 (the “Restated Plan”), between the Company and Computershare Trust Company, N.A., as rights agent.
The First Amendment, which was unanimously approved by Lumen’s Board of Directors, (1) extends the expiration date of the Restated Plan from December 1, 2020 to December 1, 2023, (2) provides for early termination of the Restated Plan if the Company fails to obtain shareholder approval of the First Amendment by December 1, 2021, (3) removes certain procedural requirements governing additional acquisitions of the Company’s common stock by STT Crossing Ltd. and its affiliates and (4) otherwise retains all other terms and provisions of the Restated Plan, including certain other specified early termination events and the rights’ $28 per unit purchase price.
The First Amendment extended the Restated Plan’s expiration date through December 1, 2023 to protect the Company’s federal net operating loss carryforwards (“NOLs”) of approximately $6.2 billion as of December 31, 2019, which for U.S. federal income tax purposes can be used to offset future taxable income. Despite the extension of the expiration date, the Company cannot provide assurance as to whether, when or in what amounts it will be able to use its NOL carryforwards. The Restated Plan, as amended by the First Amendment, serves only as a deterrent through the threat of dilution, not a prohibition, to share accumulations that could result in the occurrence of an “ownership change” as defined under Section 382 of the Internal Revenue Code. Any such “ownership change” would substantially limit the Company’s ability to use its NOL carryforwards to reduce anticipated future tax payments.
The Restated Plan was approved by the shareholders at the Company’s 2019 Annual Meeting of Shareholders by approximately 90% of the votes cast. The Company intends to submit the First Amendment for approval by the Company’s shareholders at the Company’s 2021 Annual Meeting of Shareholders. As noted above, if shareholder approval of the First Amendment is not obtained by December 1, 2021, the Restated Plan, as amended by the First Amendment, will terminate on such date.
The foregoing summary description of the First Amendment is intended to provide a general description only, does not purport to be complete and is qualified in its entirety by reference to the complete text of the First Amendment, a copy of which is filed as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated herein by reference. The Restated Plan is filed as Exhibit 4.2 to this Current Report on Form 8-K and is incorporated herein by reference.
On November 25, 2020, the Company issued a press release announcing the extension of the Restated Plan pursuant to the First Amendment. The full text of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K.
Forward-Looking Statements
Except for historical and factual information, the matters set forth in this Current Report on Form 8-K identified by words such as “will,” “should,” “expects,” “anticipates,” “believes,” “plans,” “intends,” and similar expressions are forward-looking statements as defined by the federal securities laws, and are subject to the “safe harbor” protections thereunder. These forward-looking statements are not guarantees of future results and are based on current expectations only, and are subject to various uncertainties. Actual events and results may differ materially from those anticipated by us in those statements for several reasons, including those discussed in Exhibit 99.1. We may change our intentions or plans discussed in our forward-looking statements without notice at any time and for any reason.
